AMENDED ORDER OF DISMISSAL
SPEARS, Chief Judge.
On this 16th day of February, 1977 the Court heard -oral arguments by all parties upon the motion of the defendants to dismiss the indictment. For the reasons stated herein the Court bases this Order not only on particular grounds for dismissal set forth by the defendants, but also upon the totality of the circumstances surrounding this prosecution.
Defendants who are certificated interstate airline carriers were the subjects of a two-count indictment returned in this Division on February 14,1975, for alleged violations of the Sherman Act in conspiring to prevent and exclude Southwest Airlines, Inc., an intrastate air carrier from doing business in Texas.
The respective positions of the Government and of the defendants have been exhaustively briefed and have been examined by the Court prior to argument. Seven principal grounds are presented by the motion to dismiss. As briefly as is possible, they may be summarized as follows:
1. The Court is without anti-trust jurisdiction over the competitive practices raised by the indictment, in that the Federal Aviation Act confers exclusive jurisdiction and pervasive regulatory authority upon the Civil Aeronautics Board with respect to such practices.
2. Under Section 414 of the Act, 49 U.S.C 1384, approval by the CAB of certain agreements among defendants and other CAB-certificated carriers which embrace the competitive practices challenged in this case relieved defendants from operation of the anti-trust laws and rendered them immune from prosecution.
3. Under the First Amendment, defendants’ efforts to obtain administrative and judicial relief from the CAB and the Courts, in proceedings raising important issues of public policy concerning the power of the CAB to prevent intrastate air carriers from illegally burdening and engaging in interstate commerce, placed defendants beyond the reach of the anti'trust laws and are not subject to penalties.
4. Court decisions regarding transactions regulated by federal agencies, but less pervasively regulated than defendants’ transactions, which refer matters to the agencies for initial decision under the doctrine of
primary jurisdiction,
suggests dismissal of the instant indictment as an
a fortiori matter.
5. The indictment is impermissibly vague and fails to charge the essential facts as required by Rule 7(c), F.R.C.P., and further is a deliberate failure to present the Grand Jury with exculpatory information regarding the regulated character of the airline industry and the limited reach of the Sherman Act; such failure' having the effect of misleading the grand jury and depriving it of its independence.
6. The Government’s use before the second grand jury of their attorneys’ own unsworn summaries and paraphrases of testimony presented by witnesses who appeared only before the first grand jury, violated the rules of this Court; unfairly manipulated the grand jury, deprived it of its independence, and tainted the indictment.
7. Burton S. Kolko, former chief of the CAB Agreements Division was ethically barred from accepting employment with the Anti-Trust Division and from accepting assignment to conduct grand jury proceedings in this case concerning the same matters he had considered and decided at the CAB, and on which he had recommended official decisions to the CAB. He was ineligible to participate in the grand jury proceedings in any capacity, was an unauthorized person before the grand jury, and his appearance in the grand jury room vitiates the indictment.
The first four grounds relate to jurisdictional objections to the prosecution. As set forth in the briefs and argued, they interpose statutory, constitutional and decisional reasons why the conduct complained of by the Government is not subject to criminal prosecution. These jurisdictional challenges are most directly presented by the defendants’ reliance upon Section 414 of the Federal Aviation Act which expressly relieves from the operation of the anti-trust laws “any person affected by any order made under Sections 1378, 1379, or 1382” of Title 49, United States Code. Thus, the Federal Aviation Act undertakes to immunize carriers from actions or conduct which were it not for such protection would be subject to the impact of the Sherman Act and the attendant consequences of violation thereof.
The exemption thus afforded interstate air carriers enables them with impunity to enter into interline agreements which may in effect injure an intrastate
carrier such as Southwest, or conceivably put it out of business. This statute has been the subject of numerous decisions,
and its validity is in nowise under attack. Whether the exemption it affords may be excessively broad is a matter solely for congressional review.
Whether the actions of the defendants as charged in the indictment are each and all cloaked with the statutory immunity is hotly disputed.
It becomes unnecessary, however, to further pursue this and the other jurisdictional attacks upon the indictment, as it is quite clear that it must be stricken due to impermissible conduct engaged in by the prosecution staff.
Mr. Burton S. Kolko was Chief of the Agreements Division of the Civil Aeronautics Board during all of the time when the allegedly illegal actions of the defendants were taking place. Among his duties was to examine, pass upon, approve or disapprove and make recommendations of all intercarrier agreements which were submitted to the CAB for its approval as required by law. Agreements which under the Government’s point of view were part and parcel of the alleged conspiracy to injure Southwest were directly considered by Mr. Kolko and his staff, and reports thereon made to the Board. About the time that the second grand jury investigation of the defendants’ activities was about to begin, Mr. Kolko left the employ of the CAB and beeame an employee of the anti-trust division for what he has stated as personal reasons to enhance his legal career. He was sworn in as a member of that staff, and almost immediately thereafter on April 10, 1974 Thomas E. Kauper, Assistant Attorney General in charge of the anti-trust division directed him by letter to proceed to this District to assist and prosecute in the on-going investigation of air transportation, including grand jury proceedings. Upon reaching San Antonio Mr. Kolko filed this letter with the Clerk of Court and executed the required oath of office. Thereafter, he spent the greater part of three days in the grand jury room while proceedings were under way to present this second grand jury with the Government’s evidence. According to Mr. Kolko, he was present as an “observer”, during which he did not participate in the case.
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AMENDED ORDER OF DISMISSAL
SPEARS, Chief Judge.
On this 16th day of February, 1977 the Court heard -oral arguments by all parties upon the motion of the defendants to dismiss the indictment. For the reasons stated herein the Court bases this Order not only on particular grounds for dismissal set forth by the defendants, but also upon the totality of the circumstances surrounding this prosecution.
Defendants who are certificated interstate airline carriers were the subjects of a two-count indictment returned in this Division on February 14,1975, for alleged violations of the Sherman Act in conspiring to prevent and exclude Southwest Airlines, Inc., an intrastate air carrier from doing business in Texas.
The respective positions of the Government and of the defendants have been exhaustively briefed and have been examined by the Court prior to argument. Seven principal grounds are presented by the motion to dismiss. As briefly as is possible, they may be summarized as follows:
1. The Court is without anti-trust jurisdiction over the competitive practices raised by the indictment, in that the Federal Aviation Act confers exclusive jurisdiction and pervasive regulatory authority upon the Civil Aeronautics Board with respect to such practices.
2. Under Section 414 of the Act, 49 U.S.C 1384, approval by the CAB of certain agreements among defendants and other CAB-certificated carriers which embrace the competitive practices challenged in this case relieved defendants from operation of the anti-trust laws and rendered them immune from prosecution.
3. Under the First Amendment, defendants’ efforts to obtain administrative and judicial relief from the CAB and the Courts, in proceedings raising important issues of public policy concerning the power of the CAB to prevent intrastate air carriers from illegally burdening and engaging in interstate commerce, placed defendants beyond the reach of the anti'trust laws and are not subject to penalties.
4. Court decisions regarding transactions regulated by federal agencies, but less pervasively regulated than defendants’ transactions, which refer matters to the agencies for initial decision under the doctrine of
primary jurisdiction,
suggests dismissal of the instant indictment as an
a fortiori matter.
5. The indictment is impermissibly vague and fails to charge the essential facts as required by Rule 7(c), F.R.C.P., and further is a deliberate failure to present the Grand Jury with exculpatory information regarding the regulated character of the airline industry and the limited reach of the Sherman Act; such failure' having the effect of misleading the grand jury and depriving it of its independence.
6. The Government’s use before the second grand jury of their attorneys’ own unsworn summaries and paraphrases of testimony presented by witnesses who appeared only before the first grand jury, violated the rules of this Court; unfairly manipulated the grand jury, deprived it of its independence, and tainted the indictment.
7. Burton S. Kolko, former chief of the CAB Agreements Division was ethically barred from accepting employment with the Anti-Trust Division and from accepting assignment to conduct grand jury proceedings in this case concerning the same matters he had considered and decided at the CAB, and on which he had recommended official decisions to the CAB. He was ineligible to participate in the grand jury proceedings in any capacity, was an unauthorized person before the grand jury, and his appearance in the grand jury room vitiates the indictment.
The first four grounds relate to jurisdictional objections to the prosecution. As set forth in the briefs and argued, they interpose statutory, constitutional and decisional reasons why the conduct complained of by the Government is not subject to criminal prosecution. These jurisdictional challenges are most directly presented by the defendants’ reliance upon Section 414 of the Federal Aviation Act which expressly relieves from the operation of the anti-trust laws “any person affected by any order made under Sections 1378, 1379, or 1382” of Title 49, United States Code. Thus, the Federal Aviation Act undertakes to immunize carriers from actions or conduct which were it not for such protection would be subject to the impact of the Sherman Act and the attendant consequences of violation thereof.
The exemption thus afforded interstate air carriers enables them with impunity to enter into interline agreements which may in effect injure an intrastate
carrier such as Southwest, or conceivably put it out of business. This statute has been the subject of numerous decisions,
and its validity is in nowise under attack. Whether the exemption it affords may be excessively broad is a matter solely for congressional review.
Whether the actions of the defendants as charged in the indictment are each and all cloaked with the statutory immunity is hotly disputed.
It becomes unnecessary, however, to further pursue this and the other jurisdictional attacks upon the indictment, as it is quite clear that it must be stricken due to impermissible conduct engaged in by the prosecution staff.
Mr. Burton S. Kolko was Chief of the Agreements Division of the Civil Aeronautics Board during all of the time when the allegedly illegal actions of the defendants were taking place. Among his duties was to examine, pass upon, approve or disapprove and make recommendations of all intercarrier agreements which were submitted to the CAB for its approval as required by law. Agreements which under the Government’s point of view were part and parcel of the alleged conspiracy to injure Southwest were directly considered by Mr. Kolko and his staff, and reports thereon made to the Board. About the time that the second grand jury investigation of the defendants’ activities was about to begin, Mr. Kolko left the employ of the CAB and beeame an employee of the anti-trust division for what he has stated as personal reasons to enhance his legal career. He was sworn in as a member of that staff, and almost immediately thereafter on April 10, 1974 Thomas E. Kauper, Assistant Attorney General in charge of the anti-trust division directed him by letter to proceed to this District to assist and prosecute in the on-going investigation of air transportation, including grand jury proceedings. Upon reaching San Antonio Mr. Kolko filed this letter with the Clerk of Court and executed the required oath of office. Thereafter, he spent the greater part of three days in the grand jury room while proceedings were under way to present this second grand jury with the Government’s evidence. According to Mr. Kolko, he was present as an “observer”, during which he did not participate in the case. He stated that his assignment to the San Antonio Grand Jury proceedings was to acquaint him with grand jury procedure of which he was totally unfamiliar, in order that he might undertake the presentation of a case to a California grand jury. Nevertheless, the Assistant Attorney General in commissioning Mr. Kolko to attend upon this San Antonio grand jury expressly directed him to assist in the investigation and prosecution of all proceedings growing out of those proceedings involving defendants. As such it is reasonable to expect that these prosecutorial duties would be carried out as specified. The law makes no provision for an “observer” in a grand jury room. So, if in fact, as Mr. Kolko and the anti-trust staff assert, he was present in the capacity of an observer, he was an unauthorized person. The Fifth Circuit has held that the participation of an unauthorized person in an investigation before a grand jury is unlawful, whether that participation be great or small; that it is not necessary that it be corrupt, or that unfair means were used.
Latham v. United States,
226 F. 420, 424 (5 Cir. 1915). The very presence of an unauthorized person is
condemned and is held ground per se for abating the indictment without proof of actual prejudice.
United States v. Amazon Industrial Chemical Corp.,
55 F.2d 254, 261-262 (D.Md.1931). As stated in the earlier case of
United States v. Edgerton,
80 F. 374 (D.Mont.1897), no inquiry is required into the effect of the presence of such an ineligible person. In
United States
v.
Borys,
169 F.Supp. 366, 367 (D.Alaska 1959), the rule is that the appearance of an unauthorized person is a sufficient ground for setting aside an indictment without a showing of prejudice. As stated by one court,
United States v. Bowdach,
324 F.Supp. 123, 124 (S.D.Fla. 1971), it is a hard and fast rule which allows for no exceptions.
■ This Court, however, in the instant cause is presented with additional reasons for application of the rule against unauthorized persons. Although there may have been no intention of wrong-doing, it is indeed strange to find a former high CAB official who had passed upon many of the matters under investigation, to be present in a grand jury room where those very matters are under consideration, irrespective of the capacity in which he presented himself. It is without dispute that the court reporter had been instructed not to record anything which took place in the grand jury room except the testimony of live witnesses. Thus, it is unknown how Mr. Kolko was introduced to the grand jury. Mr. Philipps, the chief prosecutor who introduced him does not remember what he himself stated. Whether or not Mr. Kolko was known to the grand jury as a former CAB official cannot be ascertained.
Although Mr. Kolko had been given a copy of the fact memorandum prepared by the staff, covering what had taken place before the first grand jury, and upon deposition stated he expressed his surprise and chagrin in learning that one or more of the matters which he had passed upon while at the CAB were in fact under investigation by the grand jury, nothing whatever was done to rectify the situation prior to, during, or following Mr. Kolko’s appearances in the grand jury room. One of the members of the anti-trust staff, Mr. Coburn, acknowledged upon deposition that he knew. Mr. Kolko as the chief of the Agreements Division of CAB and was well-acquainted with him. Neither Mr. Kolko, nor Mr. Philipps, nor Mr. Coburn, nor Assistant Attorney General Kauper, nor anyone else appears to have recognized any impropriety in placing Mr. Kolko before the grand jury in this proceeding. The courts have expressed a deep concern, and rightly so, that government attorneys be subject to exacting standards which negate conflicts of interest, and more so that their conduct may not suggest even an appearance of impropriety.
The defendants were indicted by a second grand jury impaneled to investigate the alleged misconduct of defendants, following upon an eighteen-month investigation by the original grand jury, which was dismissed after a failure to return an indictment. It is without dispute that the indicting jury was . given summarized and excerpted testimony from the prosecutor concerning evidence presented to the original body. Only the extent thereof is controversial. Just what summaries and excerpted testimony were actually made and presented to the second grand jury is unknown, and will remain so because none were taken down by the court reporter in accordance with instructions given by the prosecutor. It is virtually beyond contradiction in the law that this mode of procedure will not be tolerated. In the cause before this court, the prohibition against such procedure is of particular significance for several reasons. First, this court in a proceeding known as
In Re May 1972 San Antonio Grand Jury,
reported at 366 F.Supp. 522 (1973), held that a second grand jury is capable of evaluating testimony received by another grand jury only if it sees the efforts of the prior grand jury
in toto.
In so holding this Court cited the opinion of Chief Judge Thomsen in
In Re Grand Jury Investigation of the Banana Industry,
214 F.Supp. 856 (D.Md.1963), another anti-trust case, in which Judge Thomsen condemned, such practice as lending convenience to the prosecutor at the expense of a fair grand jury investigation.
The salutary rationale is plain in Judge Thomsen’s concern that a second grand jury render itá' verdict upon testimony it has heard in full, not from selected versions submitted by the prosecutor; that if any part of the testimony of the witness is to be read to another grand jury, the entire testimony should be so read in its complete unedited form, and then only when the witness is unavailable, for recall. This Court in its May 1972 Grand Jury opinion agreed with Judge Thomsen that it could be potentially unfair and prejudicial to allow the government to select portions of the grand jury testimony for, transfer, or to simply allow summaries of testimony to be transferred.
It was not possible that the anti-trust staff was unfamiliar with the decisions discussed above, and unlikely that it was unfamiliar with the same rule of law as generally understood. The record reflects that lead counsel Philipps was served a memorandum by hand citing this Court’s decision
In Re May 1972 San Antonio Grand Jury
and warned of the impropriety in any selected’ presentation of portions of prior grand jury testimony — and that some ten days later the prosecutors disregarded the memorandum and proceeded with the presentation of their summaries. In so doing they also chose to disregard this Court’s decision on the subject and that of Chief Judge Thomsen. It appears to be the Government’s position that just as long as it presents additional live witnesses to a second grand jury, it is free to disregard the rule, and to summarize and excerpt whatever it may choose to pick from the record of the original jury. Another excuse made before the Court is that the entire record of the first grand jury proceeding was placed upon a table.in the room, and the grand jury invited to examine it. Still another excuse offered by the prosecutor is that of a
de minimis
approach — that all of such excerpts and summaries were minimal and therefore not improper. This attempt to avoid responsibility in presentation of evidence to the grand jury is without merit. What effect, if any, these, departures from prescribed procedure had upon the decision to indict is unknown, and will remain so. The minds of the grand jurors cannot be looked into for the answer. The record cannot be examined because none exists, except of the testimony given by such live witnesses as were brought into the room.
Finally, the defendants attack the indictment as being impermissibly vague and failing to charge an offense. This two-count indictment is couched in the most general terms, “complete with the generic language of the Sherman Act”, as stated by the defendants.
This was pointed out to
the Court at the arraignment and omnibus hearing, and as a result the Government filed its Bill of Particulars. However, citing
Russell v. United States,
369 U.S. 749,
770, 82 S.Ct. 1038, 1050, 8 L.Ed.2d 240 (1962), the defendants still insisting upon the insufficiency of the indictment observe: “It is a settled rule that a bill of particulars cannot save an invalid indictment”. Any close examination of the indictment strongly suggests that it fails to set forth the specific acts and particular facts constituting the alleged offenses, and thus failed to state the essential elements of the crime which is charged.
Yet another reason for the alleged inadequacy of the indictments appears in the defendants’ contention that it is clear from the face of the instrument that the grand jury was never informed of the immunization afforded interstate air carriers when their activities fall under the provisions of Section 414 of the Federal Aviation Act. This presents the interesting inquiry of how the grand jury could have possibly made a fair appraisal of the defendants’ conduct as to criminality, when it was never informed that airline agreements and acts within the purview of the statutes enumerated in Section 414 of the Act are exempt by statute from prosecution. This is exculpatory information which the grand jury was entitled to have before it in order to determine whether the defendants had committed a crime.
No basis existed to indict these carriers under the Sherman Act if their conduct is immune by virtue of acts performed pursuant to Section 414. In its attempt to deal with this question, the Government asserts correctly that it is not required to inform the grand jury of possible defenses to be asserted at trial, nor to negative them. Defendants make the distinction that per se there can be no criminality in conduct which is made immune by statute. Whether the acts and conduct of the defendants, were performed pursuant to the-'immunization afforded by the Federal Aviation Act, thus becomes a matter for grand jury determination. Yet if the elements of immunity are unknown to the grand jury, if the very existence of a statute conferring immunity is not disclosed, it is obviously unable to obtain the complete picture to which it is entitled for a proper decision.
The indictment is replete with generalities and omissions. For example, paragraphs 13(a) and 19(a) charge the defendants and alleged co-conspirators with the use of “tactics” to impede and delay Southwest, but such tactics are not identified. It appears from the subsequent Bill of Particulars that various litigation, both administrative and judicial, and lobbying activities engaged in by defendants constitute improper conduct which presumably was brought to the grand jury’s attention as acts in furtherance of the alleged conspiracy; however, the indictment makes no mention of lobbying or litigation, whether illegal or otherwise.
During oral argument it was brought to the attention of the Court that the antitrust division on February 3, 1977 had obtained an indictment in the District of Columbia against Pan-American World Airways, Inc. and others, filed as Criminal No. 77-00073,
an examination of which reveals.
an utter contrast, between the instant indictment and the charges of Sherman Act violations in that cause. Whether or not the Pan-American indictment may be valid
is unimportant; what is significant is that it is specific in its content, describing regulation by the Civil Aeronautics Board of certain aspects of international air trans
portation, the extent of permissible price-fixing among airlines, the importance of interline agreements, and most significantly it sets forth the immunity afforded by Section 414 of the Act with respect to agreements which would otherwise be subject to Sherman Act violation. In particular under the paragraph designated “Offense Charged” the indictment accuses defendants of refraining from disclosing the existence of a certain agreement to the CAB, and refraining from obtaining the approval of that agency to establish and implement such agreement, understanding and concert of action between the defendants.
Were the details set out in the above indictment present in any measure in the indictment under consideration, with its references to Section 414 and its immunizing effect upon what would otherwise be Sherman Act violations, that would in the Court’s mind fairly serve the defendants with knowledge of what the Government is charging, as well as letting the grand jury know what it should consider in determining whether or not the acts so charged fell within the scope of Section 414 and the three sections of the Aviation Act enumerated therein. Although the lack of specificity in the Braniff-Texas International indictment, together with the apparent failure of the government prosecutors to disclose the possibility of immunity under Section 414 may justify dismissal, it is unnecessary to strike the indictment on these grounds.
It is the opinion of the Court and the Court so finds that the conduct of the antitrust staff in presenting unsworn summaries and excerpts to the grand jury of testimony obtained from witnesses who testified before the first grand jury, and its accompanying failure to read from the transcript
in toto
the testimony received from such witnesses, taken in conjunction with the fact that no record was made by the court reporter of the summarized, excerpted and paraphrased testimony, constitutes an independent ground invalidating the indictment. The Court is further of the opinion and so finds that the employment, assignment, and appearance as an observer or as a prosecutor of Mr. Burton S. Kolko before the grand jury under the circumstances surrounding his former employment as a Civil Aeronautics Board official, constituted him an unauthorized person in the grand jury room during proceedings held in this case, and is an independent ground sufficient to vitiate the indictment.
In addition to the above express reasons for invalidating the indictment, the Court is
of the opinion and finds that under a totality of the circumstances surrounding and attendant upon this prosecution, the indictment should be set aside.
It is accordingly ORDERED that the indictment of Braniff Airways, Inc. and Texas International Airways, Inc. returned by the grand jury in this cause, be and the same is hereby in all things DISMISSED.