Source: http://openjurist.org/341/us/246
Timestamp: 2013-05-20 01:27:40
Document Index: 395578557

Matched Legal Cases: ['§ 824', '§ 824', '§ 305', '§ 825', '§ 825', '§ 205', '§ 824', '§ 824', '§ 825', '§ 825', '§ 24', '§ 1331', '§ 1331', '§ 205', '§ 824', '§ 824', '§ 9', '§ 9', '§ 9', '§ 309', '§ 210', '§ 210', '§ 307', '§ 825', '§ 825', '§ 309', '§ 825', '§ 825', '§ 206', '§ 824', '§ 824', '§ 205', '§ 824', '§ 824', '§ 824', '§ 824']

341 US 246 Montana-Dakota Utilities Co v. Northwestern Public Service Co | OpenJurist
341 U.S. 246 - Montana-Dakota Utilities Co v. Northwestern Public Service Co	Home341 us 246 montana-dakota utilities co v. northwestern public service co
341 US 246 Montana-Dakota Utilities Co v. Northwestern Public Service Co 341 U.S. 246
Petitioner and respondent are public electric utilities companies engaged in interstate commerce. Petitioner's predecessor and respondent were under the same management through interlocking directorships and joint officers. During that relationship the two interchanged electric energy, shared expenses, and made a number of intercompany contracts establishing rates and charges, which contracts were filed with and accepted by the Federal Power Commissoin. These contract rates and charges are at the root of this controversy. Petitioner charges that during the period 1935—1945, its predecessor paid respondent unreasonably high prices for what respondent furnished it, and that it received unreasonably low rates for what it provided respondent. That advantage, it is alleged, was fraudulent and unlawful and was due to the interlocking directorate, which prevented protest to the Commission to have reasonable rates and charges established pursuant to the provisions of the Federal Power Act.1
Petitioner sued in United States District Court and asserted jurisdiction on the ground that the case 'arises under the Constitution, or laws of the United States'2 and, more particularly, under a 'law regulating commerce,'3 specifically the Federal Power Act.
Petitioner identifies as the source of its cause of action the Federal Power Act's requirement of reasonable electric utility rates,6 which, it contends, creates its legal right to rates which a court may deem reasonable, even if different from those accepted by the Federal Power Commission. It is admitted, however, that a utility could not institute a suit in a federal court to recover a portion of past rates which it simply alleges were unreasonable. It would be out of court for failure to exhaust administrative remedies, for, at any time in the past, it could have applied for and secured a review and, perhaps, a reduction of the rates by the Commission.7
But petitioner's case appears to have rested more heavily and perhaps entirely on constructive fraud presumed from the intercorporate relationship. The Act vests in the Commission power to authorize an interlocking directorate, which otherwise is prohibited, 'upon due showing * * * that neither public nor private interests will be adversely affected thereby.'8 The relationship here concerned had received Commission approval. The effect of the approval is to exempt the relationship from the ban of the Act and remove from it any presumption of fraud that might be thought to arise from its mere existence. It would be a strange contradiction between judicial and administrative policies if a relationship which the Commission has declared will not adversely affect public or private interests were regarded by courts as enough to create a presumption of fraud. Perhaps, in the absence of the Commission's approval, such relationship would be sufficient to raise the presumption under state law, but it cannot do so where the federal supervising authority has expressly approved the arrangement.
If the court is presented with a case it can decide but some issue is within the competence of an administrative body, in an independent proceeding, to decide, comity and avoidance of conflict as well as other considerations make it proper to refer that issue. But we know of no case where the court has ordered reference of an issue which the administrative body would not itself have jurisdiction to determine in a proceeding for that purpose. The fact that the Congress withheld from the Commission power to grant reparations9 does not require courts to entertain proceedings they cannot themselves decide in order indirectly to obtain Commission action which Congress did not allow to be taken directly. There is no indication in the Power Act that that was Congress' intent.
The plaintiff, Montana-Dakota Utilities Company, petitioner here, is the successor in interest to several utility companies which distributed electric energy in North and South Dakota. The defendant, Northwestern Public Service Company, served the region to the south of Montana-Dakota's territory. Both corporations have been subject to the Federal Power Act since its enactment in 1935. 49 Stat. 847, 16 U.S.C. § 824 et seq., 16 U.S.C.A. § 824 et seq. The controversy arises out of relations between the two enterprises prior to 1945. The facts which raise the question whether the Federal District Court had jurisdiction to entertain the suit may be briefly summarized.
After January 1, 1935, all but one of Montana-Dakota's directors were directors of Northwestern, and all of Montana-Dakota's officers were officers of the other company. These interlocking arrangements received formal authorization by the Federal Power Commission, as required by § 305(b) of the Act. 16 U.S.C. § 825d(b), 16 U.S.C.A. § 825d(b). At different times between 1935 and 1945 contracts were made between the two corporations for the sale of electric energy. All such agreements have to be filed with the Commission, § 205(c), 16 U.S.C. § 824d(c), 16 U.S.C.A. § 824d(c), but the legality of rates so filed is not conditioned upon the Commission's approval. Unless they are challenged, either by an interested party or on the Commission's initiative, the filed rates become the legal rates. Montana-Dakota now claims, in essence, that for a decade Northwestern, by virtue of its control, deprived Montana-Dakota of the rights which that corporation enjoyed uner the Federal Power Act and prevented it from contemporaneously asserting them before the Federal Power Commission. Montana-Dakota was prevented from filing what would have been the lawful rates because Northwestern, as the dominus of Montana-Dakota, filed rates for that company that were less than the reasonable rates to be exacted under the Federal Power Act rates which would have been determined by arm's length dealing between the two companies. Having secured freedom of action and thereby the power to assert its rights, Montana-Dakota brought this suit in the United States District Court for the District of South Dakota to recoup the losses which it claims were thus imposed on it.
Section 317 of the Federal Power Act in its present form confers on the district courts of the United States 'exclusive jurisdiction of violations of this Act or the rules, regulations, and orders thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by, or to enjoin any violation of, this Act or any rule, regulation, or order thereunder.' 49 Stat. 862, 16 U.S.C. § 825p, 16 U.S.C.A. § 825p. There can be no doubt, therefore, that if the complaint, fairly construed in light of the successful determination of the issues, seeks to enforce a duty which the Federal Power Act recognizes, the District Court properly entertained the suit under the jurisdictional provisions of the Act, reinforcing, as they do, the general jurisdictional provisions governing the district courts. See Act of March 3, 1911, § 24(1), (8), 36 Stat. 1091, 1092, 28 U.S.C. §§ 1331, 1337, 28 U.S.C.A. §§ 1331, 1337.
The Federal Power Act directs that 'All rates and charges made, demanded, or received by any public utility for or in connection with the transmission or sale of electric energy subject to the jurisdiction of the Commission, and all rules and regulations affecting or pertaining to such rates or charges shall be just and reasonable, and any such rate or charge that is not just and reasonable is hereby declared to be unlawful.' § 205(a), 49 Stat. 851, 16 U.S.C. § 824d(a), 16 U.S.C.A. § 824d(a).
The Court of Appeals apparently closed the door of the District Court to this suit on the assumption that relief could be had from the Federal Power Commission for the damage flowing from violation of the Federal Power Act. Of course a court would not grant relief, at least in the first instance, if an adequate administrative remedy were available. It is fundamental to federal regulatory legislation that 'no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted.' Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50—51, 58 S.Ct. 459, 463, 82 L.Ed. 638. This principle is particularly relevant to rate regulation. Texas & Pac. R. Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51 L.Ed. 553; Mitchell Coal & Coke Co. v. Pennsylvania R. Co., 230 U.S. 247, 33 S.Ct. 916, 57 L.Ed. 1472; Armour & Co. v. Alton R. Co., 312 U.S. 195, 61 S.Ct. 498, 85 L.Ed. 771. Compare Great Northern R. Co. v. Merchants Elevator Co., 259 U.S. 285, 42 S.Ct. 477, 66 L.Ed. 943.
But we do not find that the Federal Power Act provides administrative remedies to meet the situation before us. We have seen that that Act does not authorize the Commission to award reparations to those subjected to unreasonable rates. The Act likewise does not afford to the Commission the authority conferred on administrative agencies under other regulatory statutes to award damages to those injured by violations of the Act. Compare Act of February 4, 1887, § 9, 24 Stat. 382, 49 U.S.C. § 9, 49 U.S.C.A. § 9; Act of August 15, 1921, § 309(e), 42 Stat. 166, 7 U.S.C. § 210(e), 7 U.S.C.A. § 210(e). The Power Act, it is true, does give the Commission authority to look into past rates in order to determine whether the Act has been violated. § 307(a), 49 Stat. 856, 16 U.S.C. § 825f(a), 16 U.S.C.A. § 825f(a). See Atlantic Coast Line R. Co., v. State of Florida, 295 U.S. 301, 312, 55 S.Ct. 713, 717, 79 L.Ed. 1451. But such an inquiry cannot be made the basis for an administrative award of damages to the victims of the violations. Again, the Commission may, as the Government suggests, have power under the omnibus provisions of § 309 to vacate its approval of a rate when approval has been obtained by fraud. 49 Stat. 858, 16 U.S.C. § 825h, 16 U.S.C.A. § 825h. But this does not authorize the Commission to fix rate orders retrospectively. The Commission may establish rates only 'to be thereafter observed and in force.' § 206(a), 49 Stat. 852, 16 U.S.C. § 824e(a), 16 U.S.C.A. § 824e(a).
The Power Act is explicit that any 'rate or charge that is not just and reasonable is hereby declared to be unlawful.' § 205(a), 49 Stat. 851, 16 U.S.C. § 824d(a), 16 U.S.C.A. § 824d(a). The aim of Congress would be needlessly aborted if this 'definite statutory prohibition of conduct' did not impose civil liability in a situation not covered by administrative remedies merely because no judicial relief was explicitly authorized. Compare Texas & N.O.R. Co. v. Brotherhood of Ry. & S.S. Clerks, supra, 281 U.S. at page 568, 50 S.Ct. at page 433. The right of civil recovery by persons compelled to pay unreasonable or discriminatory rates to common carriers is one of the oldest forms of relief in our law. Western Union Tel. Co. v. Call Publishing Co., 181 U.S. 92, 21 S.Ct. 561, 45 L.Ed. 765. To enforce a remedy for collection of unreasonable charges in the situation before us, therefore, would recognize deeply-rooted law; to deny it would be inconsistent with long-established judicial practice. The experience of the Commission indicates that the statute itself, by virtue of the positive duties it commands, under normal circumstances is very largely its own sanction.1 Want of explicitness in providing a familiar remedy for the rare case of disobedience should not be construed a denial of it.
The objections raised to this procedure have apparently not been considered substantial by the Federal Power Commission, the body primarily charged with administration of the Act.2 We do not think they should prevail. The function of the District Court is not simply to serve as a facade behind which the Commission is enabled to accomplish indirectly what it cannot do directly. Certain issues of fact—the completeness of disclosure, for instance, or the loyalties of the directors—are properly for the court. Action by the court may similarly be required in determining the appropriate disposition of the fund. See Federal Power Comm. v. Interstate Natural Gas Co., 336 U.S. 577, 66 S.Ct. 775, 93 L.Ed. 895; Interstate Natural Gas Co. v. Federal Power Comm., 5 Cir., 181 F.2d 833. Recovery by Montana-Dakota need not be a windfall to that company. Many changes in costs charged utilities are not reflected in prices they may collect. Compare St. Louis & O'Fallon R. Co. v. United States, 279 U.S. 461, 488, 505—509, 49 S.Ct. 384, 388, 395, 396, 73 L.Ed. 798 (Mr. Justice Brandeis, dissenting). To the extent that Montana-Dakota has passed on its loss to its customers, they may be permitted recovery from it on well-established principles of unjust enrichment. And even if the effect of awarding relief is ultimately to benefit Montana-Dakota, it certainly has a better claim to the exacted funds than Northwestern. The procedure here outlined is not unlike that which the Court employed in United States v. Morgan, supra, where a similar demand was made on the resourcefulness of law to find a remedy to meet an unusual situation. Such a remedy not only defeats unjust enrichment as between private parties. This is accomplished in the public interest of effectuating the Federal Power Act.
Section 205(a) of the Act, 49 Stat. 851, 16 U.S.C. § 824d(a), 16 U.S.C.A. § 824d(a), states that: 'All rates and charges * * * and all rules and regulations affecting or pertaining to such rates or charges shall be just and reasonable, and any such rate or charge that is not just and reasonable is hereby declared to be unlawful.'
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