Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-95-05053/USCOURTS-ca10-95-05053-0/pdf.json

Parties Involved:
Empire Gas Corporation
Appellee
Williams Pipe Line Company
Appellant

Document Text:

PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

WILLIAMS PIPE LINE COMPANY, a 

Delaware corporation, 

Plaintiff-Appellant, 

vs. 

) 

) 

) 

) 

) 

) 

) 

EMPIRE GAS CORPORATION, a Missouri ) 

corporation, ) 

Defendant-Appellee. 

) 

) 

FILED 

United States Court of Ap'~~ 

Tenth Circuit 

F f.B 1 4 1996 

PATRICK FISHZa 

Clerit 

No. 95-5053 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF OKLAHOMA 

(D.C. No. 94-C-83-K) 

Submitted on the briefs:* 

C. Kevin Morrison, John T. Schmidt and Randolph L. Jones, Jr., 

Conner & Winters, Tulsa, Oklahoma, for Plaintiff-Appellant. 

Steven G. Emerson, Thomas H. Davis, Watson & Marshall L.C., Kansas 

City, Missouri and Jerry Truster, Tulsa, Oklahoma, for 

Defendant-Appellee. 

Before BALDOCK, BRORBY, and KELLY, Circuit Judges. 

BALDOCK, Circuit Judge. 

Under the Interstate Commerce Act, pipeline common carriers 

are required to establish rates and practices related to the 

transportation they provide, and file a tariff containing the 

* After examining the briefs and appellate record, this panel 

has determined unanimously to honor the parties' request for a 

decision on the briefs without oral argument. See Fed. R. App. P. 

34(f); lOth Cir. R. 34.1.9. The case is therefore ordered 

submitted without oral argument. 

Appellate Case: 95-5053 Document: 01019277283 Date Filed: 02/14/1996 Page: 1 
rates and practices with the Federal Energy Regulatory Commission 

( 11 FERC 11 ). 49 U.S.C. §§ 7155, 7172(b), 10501(a), 10701(a) (1) (2), 

10762(a). A filed tariff rate or practice 11 governs the legal 

relationship between11 a carrier and its shippers, unless 

subsequently invalidated. See Maislin Indus .. U.S. v. Primary 

Steel. Inc., 497 U.S. 116, 126, 128 (1990). FERC is empowered 11 0n 

its own initiative or on complaint 11 to invalidate a tariff 

practice if it determines the practice is unreasonable or 

discriminatory. 49 U.S.C. §§ 10701(a); 10704(f}; 10741(a); see 

also 18 C.F.R. §§ 385.206, 385.207 (filing complaint or petition 

with regulatory agency) . The court can invalidate a tariff 

practice if it determines the practice is contrary to public 

policy. See Southwestern Sugar & Molasses Co. v. River Terminals 

Corp., 360 U.S. 411, 416-21 (1959). 

Under the doctrine of primary jurisdiction, a court presented 

with a question whether a tariff practice is contrary to public 

policy. should, in certain circumstances, refer the matter to the 

pertinent regulatory agency to allow the agency to make the 

initial determination. See id. at 420-21; United States v. 

Western Pac. R.R. Co., 352 U.S. 59, 63-65 (1956). In the instant 

case, the district court invalidated on public policy grounds a 

tariff indemnity provision filed with FERC by Plaintiff Williams 

Pipe Line Company ( 11Williams 11 ). We conclude the district court 

should not have itself determined the validity of the provision in 

the first instance, but should have stayed proceedings and 

referred the initial determination to FERC under the doctrine of 

2 

Appellate Case: 95-5053 Document: 01019277283 Date Filed: 02/14/1996 Page: 2 
primary jurisdiction.1 

I. 

Williams operates a system of interstate pipelines for the 

transportation of liquid petroleum products, including propane, 

throughout the midwestern United States. Defendant Empire Gas 

Corporation ("Empire") is a large retail distributor of propane. 

Empire consigned propane to Williams, which Williams transported 

through its pipelines to its delivery terminal in Carthage, 

Missouri. Federal regulations required Williams to inject the 

propane with an odorant once the fuel reached the delivery 

terminal. Williams injected the propane with the odorant ethyl 

mercaptan. Empire then delivered the propane from Williams' 

delivery terminal to Empire's customers. 

In 1989, two of Empire's customers, Donna Pipes and Mae Cook, 

were injured in a propane explosion at Ms. Pipes' mobile home in 

Monett, Missouri. In 1991, Ms. Pipes filed suit against Empire 

and Williams in Missouri state court; Ms. Cook threatened to sue. 

In her suit, Pipes asserted numerous breaches of duties owed to 

her and specificially brought claims against Empire and Williams 

for negligence, products liability, breach of implied warranty, 

and negligence per se. Pipes sought compensatory and punitive 

damages in excess of $2,000,000. 

In November 1991, Williams served a demand for defense and 

indemnity on Empire pursuant to the following tariff indemnity 

provision, which it had filed with FERC: 

1 

[Empire] agree[s] ... to indemnify, hold harmless and 

Williams' motion to file a supplemental appendix is granted. 

3 

Appellate Case: 95-5053 Document: 01019277283 Date Filed: 02/14/1996 Page: 3 
defend [Williams] from and against any and all claims 

and liabilities based on or arising out of the selection 

or use of ethyl mercaptan or other odorant designated by 

[Empire] as an odorant of propane, including any claim 

against [Williams] for product liabil~ty, negligence, 

breach of -warranty or other fault. 

Empire refused Williams' demand. Williams subsequently settled 

Pipes' claims and Cook's potential claims against it for a total 

of $375,000. Empire conceded that the settlement amount was 

reasonable. 

After settling with Pipes and Cook, Williams brought the 

instant indemnification action against Empire in federal district 

court. Williams maintained that it was entitled to 

indemnification under its tariff indemnity provision.2 Williams 

contended that its tariff indemnity provision constituted a 

binding contract, which Empire breached by refusing to defend and 

indemnify Williams against Pipes' claims. Williams sought 

$375,000 for settlement monies paid and over $50,000 for expenses 

and attorney's fees incurred in defending the Pipes' suit. 

Empire moved for summary judgment, or, in the alternative, 

stay pending referral of the matter to FERC under the doctrine of 

primary jurisdiction. Empire asserted that FERC had "uniformly" 

held unreasonable indemnity provisions like Williams' that purport 

to indemnify a pipeline carrier for its own negligence. Empire 

2 Williams also sought indemnification under common law and 

restitution theories. Williams does not appeal the district 

court's grant of summary judgment in favor of Empire on these 

claims. 

4 

Appellate Case: 95-5053 Document: 01019277283 Date Filed: 02/14/1996 Page: 4 
maintained, therefore, that Williams' indemnity provision was void 

as against public policy.3 

Williams responded with a motion for partial summary 

judgment. In response to Empire's arguments, Williams contended 

that it was not negligent in any respect and that it was seeking 

indemnity for Empire's conduct under the tariff indemnity 

provision. Williams maintained, therefore, that any public policy 

against indemnification for one's own negligence was inapplicable 

to the instant case. Williams noted that Empire had asserted no 

other affirmative defenses to the enforcement of its tariff 

indemnity provision. Accordingly, because Empire conceded that 

the amount of the settlement was reasonable, Williams maintained 

it was entitled to partial summary judgment as to the $375,000 

settlement monies, leaving for trial only the issue regarding the 

attorney's fees and costs. 

The district court granted Empire's motion for summary 

judgment and denied Williams' motion for partial summary judgment. 

The court noted that whether Williams' was actually negligent was 

irrelevant. Rather, the court indicated that "[t]he issue 

is interpretation of [tariff] language, not evidentiary proof of 

fault." 

The court focused on the terms of the tariff indemnity 

provision, which purported to indemnify Williams "against any and 

3 Empire also contended that Williams' tariff indemnity 

provision violated 49 U.S.C. § 1074l(a) because it accorded 

Williams discretion to seek indemnity from one shipper and not 

another under similar circumstances. The district court did not 

reach this issue, however, and neither do we. Empire is free to 

assert this argument before FERC in proceedings, if any, the 

parties pursue on remand. 

5 

Appellate Case: 95-5053 Document: 01019277283 Date Filed: 02/14/1996 Page: 5 
all claims" asserted against it, including claims for its own 

negligence. The court concluded that "[t]he tariff as written 

falls within that group which FERC has disapproved"- -i.e., 

provisions that seek to indemnify a pipeline carrier for its own 

negligence. The court therefore invalidated Williams' tariff 

indemnity provision. The court noted that the doctrine of primary 

jurisdiction was not implicated because FERC had already expressed 

"its view of this type of indemnity provision." This appeal 

followed. 

II. 

On appeal, Williams 

invalidating its tariff 

argues that the court erred by 

indemnity provision. Specifically, 

was not negligent in any 

any FERC policy against 

Williams maintains that because it 

respect in the instant case, 

self-indemnification-for-negligence clauses is simply irrelevant. 

Williams contends that its indemnity provision does not "seek 

indemnity for [Williams'] own negligence, but rather for any 

claims arising out of its shippers' decision regarding the 

selection of odorant to be used." Empire responds that the tariff 

indemnity provision is invalid because FERC disfavors 

self-indemnification-for-negligence clauses. 

"We review the grant or denial of summary judgment de novo, 

applying the same legal standard used by the district court 

pursuant to Fed. R. Civ. P. 56(c) ." 

50 F.3d 793, '796 (lOth Cir. 

Wolf v. Prudential Ins. 

1995). Summary judgment 

Co., 

is 

appropriate if there are no genuine issues of material fact and 

the moving party is entitled to judgment as a matter of law. Fed. 

6 

Appellate Case: 95-5053 Document: 01019277283 Date Filed: 02/14/1996 Page: 6 
R. Civ. P. 56(c). 

A. 

In essence, the parties dispute the vali.dity of the tariff 

indemnity provision. Williams contends the tariff indemnity 

provision is valid because FERC's policy against 

self-indemnification-for-negligence clauses is inapplicable 

because Williams was not negligent. Empire argues that the tariff 

indemnity provision is invalid because FERC has "uniformly" 

invalidated self-indemnification-for-negligence clauses. 

Accordingly, the issue before us is whether Williams' tariff 

indemnity provision is invalid in whole or part as against public 

policy. 

The question whether a tariff provision is contrary to public 

policy implicates the doctrine of primary jurisdiction. See 

Southwestern Sugar, 360 U.S. at 420-21. Although Empire asserted 

the doctrine of primary jurisdiction before the district court, 

neither party has raised it on appeal. Nonetheless, because the 

doctrine of primary jurisdiction "exists for the proper 

distribution of power between judicial and administrative bodies 

and not for the convenience of the parties," Fontan-de-Maldonado 

v. Lineas Aereas Costarricenses, S.A., 936 F.2d 630, 632 (1st Cir. 

1991) (quotation omitted) , we may examine whether it applies sua 

sponte. United States v. Western Pac. R.R. Co., 352 U.S. 59, 63 

(1956); see also Mical Communications, Inc. v. Sprint Telemedia, 

Inc., 1 F.3d 1031,' 1037-1040 (lOth Cir. 1993). 

7 

Appellate Case: 95-5053 Document: 01019277283 Date Filed: 02/14/1996 Page: 7 
B. 

"The doctrine of primary jurisdiction . is concerned with 

promoting proper relationships between the courts and 

administrative agencies charged with particular regulatory 

duties." Western Pac. R.R. Co., 352 U.S. at 63. In essence, the 

doctrine represents a determination that administrative agencies 

are better equipped than the courts to handle particular 

questions, and that referral of appropriate questions to an agency 

ensures desirable uniformity of results. See id. at 64-65. Put 

more concretely, 

The doctrine of primary jurisdiction allows a federal 

court to refer a matter extending beyond the 

"conventional experiences of judges" or "falling within 

the realm of administrative discretion" to an 

administrative agency with more specialized experience, 

expertise, and insight. Specifically, courts apply 

primary jurisdiction to cases involving technical and 

intricate questions of fact and policy that Congress has 

assigned to a specific agency. 

National Communications Ass'n, Inc. v. American Tel. and Tel. Co., 

46 F.3d 220, 223 (2d Cir. 1995) (citing Far East Conference v. 

United States, 342 U.S. 570, 574 (1952)). 

The Supreme Court has clarified that the courts invoke the 

doctrine of primary jurisdiction when its twin purposes are 

served. Western Pac. R.R. Co., 352 U.S. at 64. The purposes of 

the doctrine are to: (1) ensure desirable uniformity in 

determinations of certain administrative questions, and (2) 

promote resort to agency experience and expertise where the court 

is presented witn a question outside its conventional experience. 

Id. at 64. 

Uniformity and consistency in the regulation of business 

entrusted to a particular agency are secured, and the 

8 

Appellate Case: 95-5053 Document: 01019277283 Date Filed: 02/14/1996 Page: 8 
limited functions of review by the judiciary are more 

rationally exercised, by preliminary resort for 

ascertaining and interpreting the circumstances 

underlying legal issues to agencies that are better 

equipped than courts by specializat~on, by insight 

gained through experience, and by more flexible 

procedure. 

Id. at 64-65; see also Mical Communications, 1 F.3d at 1038 

(doctrine of primary jurisdiction implicated where issue is not 

within conventional experience of courts, where issue requires 

administrative discretion, or where resort to agency determination 

ensures uniformity). Thus, while the court is ultimately the 

appropriate body to declare a tariff practice void as against 

public policy, Southwestern Sugar, 360 U.S. at 420, it should 

nonetheless refer the initial determination to the regulatory 

agency where it may benefit from the agency's expertise and 

insight, and to ensure uniformity. Western Pac. R.R. Co., 352 

U.S. at 64; see also Southwestern Sugar, 360 U.S. at 420-22 

(referring issue whether towboat tariff exculpatory clause 

violated public policy to the Interstate Commerce Commission under 

primary jurisdiction); Fontan-de-Maldonado, 936 F.2d at 631 

(referring issue whether airline tariff exculpatory clause 

violated public policy to the Department of Transportation under 

primary jurisdiction) . 

On the other hand, the Court has made clear that there is no 

need "to refer the matter of construction to the [agency] if that 

body has already construed the particular tariff at issue or has 

clarified the factors underlying it." Western Pac. R.R. Co., 352 

U.S. at 69; see also Fontan-de-Maldonado, 936 F.2d at 631 ("Of 

course, if the agency has already announced its views, there is no 

9 

Appellate Case: 95-5053 Document: 01019277283 Date Filed: 02/14/1996 Page: 9 
need to apply the doctrine."). Whenever the doctrine applies, 

"the judicial process is suspended pending referral of such issues 

to the administrative body for its views." Western Pac. R.R. Co., 

352 u.s. at 64. 

III. 

We conclude that the determination whether the instant tariff 

indemnity provision violates public policy requires agency 

expertise and that uniformity will be best ensured by referring 

the matter to FERC. A pipeline carrier's allocation of legal 

responsibility to its shippers for selection of a propane odorant 

may involve cost-allocation and technical factors unique to the 

pipeline industry, which are outside the conventional experience 

of this court. See Nader v. Allegheny Airlines, Inc., 426 U.S. 

290, 305 (1976) (determination whether tariff provision is valid 

oftentimes involves "informed evaluation of the economics or 

technology of the regulated industry"). Although FERC has 

generally articulated a policy to reject tariff provisions 

exculpating a pipeline from its own negligence, ~' Pacific 

Interstate Offshore Co., 62 FERC ,! 61,260, 1993 WL 74247, at *6 

(1993); Texas Eastern Transmission Corp., 57 FERC ,! 61,368, 1991 

WL 297914, at *3 (1991); Sea Robin Pipeline Co., 46 FERC ,! 61,061, 

1989 WL 260395, at *2 (1989), neither the parties nor our research 

has disclosed a case where FERC has applied that policy to 

invalidate the type of tariff indemnity provision before us. It 

may be that different economic and technical considerations lend 

validity to the sort of clause before us involving selection of a 

propane odorant. Compare Dixie Pipeline Company, 41 FERC ,! 

10 

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62,149, 1987 WL 118431, at *1 (1987) and Dixie Pipeline Company, 

41 FERC ,r 62,190, 1987 WL 118723 (1987) (related proceeding) 

(concluding that broad exculpatory provision involving odorant 

selection "may be unjust, unreasonable, unduly discriminatory or 

otherwise unlawful," but apparently terminating lawfulness 

investigation when carrier withdrew provision) , with Enron Liquids 

Pipeline Co., 42 FERC ,I 62,014, 1988 WL 243540, at *1 (1988) 

(accepting broad odorant-selection-exculpatory-provision for 

filing with the exception that the carrier include a clause 

relieving shippers of liability for "claims for loss of or damage 

to product transported or handled."). It is therefore unclear 

whether FERC would invalidate Williams' tariff indemnity 

provision. 

Even if we were sure that FERC would invalidate the portion 

of Williams' tariff indemnity provision indemnifying it against 

claims for negligence, we are not convinced FERC would throw the 

baby out with the wash, like the district court did. The district 

court invalidated Williams' tariff indemnity provision in its 

entirety based on the portion indemnifying Williams against claims 

for negligence. Contrary to the district court, however, FERC has 

typically not invalidated an entire tariff indemnity provision 

because one portion purported to indemnify a carrier against 

claims for its own negligence. See, ~, Pacific Interstate 

Offshore Co., 62 FERC ,r 61,260, 1993 WL 74247, at *6 (1993) 

(requiring carrier to amend tariff indemnity clause to exclude 

indemnification for its own negligence, but leaving rest of 

provision intact); Sea Robin Pipeline Co., 46 FERC ,r 61,061, 1989 

11 

Appellate Case: 95-5053 Document: 01019277283 Date Filed: 02/14/1996 Page: 11 
WL 260395, at *2 ( 19 89) (rejecting only portion of tariff 

provision indemnifying carrier for its own negligenc~). Thus, it 

is unclear what practice FERC would presqribe, considering the 

specialized factors it is required to note, 49 u.s.c. 

§§ 10704 (2) (A) I (B) I if it did declare Williams' practice 

unreasonable, either in whole or part.4 

The bottom line is that we are simply not equipped on the 

record before us, without a solid background understanding of 

economic and technical facets of the pipeline industry, to ~eclare 

the instant indemnity provision void as against public policy. We 

cannot determine whether FERC would consider Williams' tariff 

indemnity provision unreasonable or discriminatory or otherwise 

invalid in whole or part. Likewise, we cannot determine what 

practice FERC would prescribe if it declared Williams' provision 

invalid in whole or part. Before invalidating a tariff indemnity 

clause on public policy grounds, which could have potentially far 

reaching effects in the pipeline industry, we deem it prudent to 

refer the matter to FERC for initial consideration. This course 

ens·ures uniformity and obtains the benefit of FERC' s expertise and 

4 If FERC determines that a particular tariff practice is 

unreasonable or discriminatory it may prescribe the practice to be 

followed. 49 U.S.C. § 10704(a) (1). In prescribing the practice 

to be followed, FERC must consider a host of complex factors, 

including, inter alia, the effect of the prescribed practice on 

"the movement of traffic by that carrier," and the carrier's need 

for sufficient revenues "under honest, economical, and efficient 

management, to let the carrier provide that transportation or 

service." Id. at §§ 10704 (2) (A), (B). 

12 

Appellate Case: 95-5053 Document: 01019277283 Date Filed: 02/14/1996 Page: 12 
insight in this area.5 

We therefore REMAND to the district court with instructions 

to vacate its judgment, stay proceedings, an~ refer the matter to 

FERC to allow the parties to seek FERC's ruling as to whether 

Williams' tariff indemnity provision is valid, either in whole or 

part.6 

REMANDED for further proceedings consistent with this 

opinion. 

5 Contrary to Williams' argument in its brief, FERC 

consideration of the instant tariff indemnity provision upon 

referral by the district court would not be time-barred. See. 

e.g .. 18 C.F.R. §§ 385.206 (containing no statute of limitations 

for complaint or petition for declaratory judgment filed with 

regulatory agency) . 

6 Because FERC's determination whether Williams' tariff 

indemnity clause is valid will control the outcome of the case, we 

do not reach Williams' arguments that the district court erred in 

denying its motion for partial summary judgment. After FERC 

declares its view of the tariff indemnity provision, the parties 

are free to pursue further proceedings, if any, in the district 

court that are consistent with this opinion. Depending of course 

on FERC's resolution, we note that in further proceedings, if any, 

the district court should not consider Williams' settlement with 

Pipes and Cook as.an admission of negligence on its part. See 

Oklahoma Natural Gas Co. v. Mid-Continent Casualty Co., 268 F.2d 

508, 512 (lOth Cir. 1959) (" [T]he mere settlement of a claim for 

personal injuries does not itself establish liability for the 

accident out of which the injuries arose."). 

13 

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