Case Name: PETROLEUM EXPLORATION, Inc., v. PUBLIC SERVICE COMMISSION OF KENTUCKY
Court: United States District Court for the Eastern District of Kentucky
Jurisdiction: United States
Decision Date: 1937-11-06
Citations: 21 F. Supp. 254
Docket Number: No. 1205
Parties: PETROLEUM EXPLORATION, Inc., v. PUBLIC SERVICE COMMISSION OF KENTUCKY.
Judges: Before HICKS, Circuit Judge, and HAMILTON and FORD, District Judges.
Reporter: Federal Supplement
Volume: 21
Pages: 254–259

Head Matter:
PETROLEUM EXPLORATION, Inc., v. PUBLIC SERVICE COMMISSION OF KENTUCKY.
No. 1205.
District Court, E. D. Kentucky, at Frankfort.
Nov. 6, 1937.
E. C. O’Rear and Allen Prewitt, both of Frankfort, Ky., and W. J. Brennan, of Sistersville, W. Va., for complainant.
Hubert Meredith, Atty. Gen., and J. W. Jones, Asst. Atty. Gen., for defendant.
Before HICKS, Circuit Judge, and HAMILTON and FORD, District Judges.
Motion for stay denied 58 S.Ct. 527, 82 L.Ed. —.

Opinion:
FORD, District Judge.
This is an action in equity filed by Petroleum Exploration, a corporation doing business in Kentucky, but organized and existing under the laws of the state of Maine, to enjoin the Public Service Commission of Kentucky from enforcing, or attempting to enforce, compliance with an order of the commission, pursuant to which the commission proposes to inaugurate an investigation of the rates charged by complainant for gas transported by its pipe lines from its gas fields in Eastern Kentucky to the corporate limits of various Kentucky municipalities and there sold and delivered to certain public utility corporations.
The order complained of required the complainant to produce, at a public hearing before the commission, evidence showing conclusively the fairness and reasonableness of its rates and charges, a complete statement of all contracts and working arrangements with its subsidiary corporations, if any, and to make available, for examination by the commission's representatives, all its books, accounts, rec-cords, correspondence, and memoranda.
At the time fixed for the hearing, the complainant appeared and offered a plea challenging the commission's jurisdiction. The commission overruled the plea and made an order fixing a later date for the proposed hearing and investigation. Before that time arrived, the complainant filed with the commission an application for a rehearing on the jurisdictional question, together with an amended and supplemental plea which, on account of the institution of this action, has not been acted upon.
In addition to alleging diversity of citizenship and the value of the matter in controversy, required to sustain federal jurisdiction under section 24 (1) of the Judicial Code, as amended (28 U.S.C.A. § 41 (1), the bill further alleges, in substance, that the complainant, in transporting and selling its gas under contract to certain public utility corporations, is engaged merely in an ordinary private commercial enterprise, that it is not a public utility, and is not subject, and cannot be made subject, to the regulatory jurisdiction of the commission by any law which would be valid under the State or Federal Constitution. It charges that the obvious purpose of the commission is to attempt, without right or authority of law, to lower some or all of the rates fixed under its existing contracts, and that the order, made with that end in view, is repugnant to the contract clause of the Federal Constitution (article 1, § 10), and is in violation of the due process and equal protection clauses of the Fourteenth Amendment.
The case is submitted upon complainant's motion for a temporary injunction to restrain enforcement of the order of the commission. Permanent injunction is the ultimate relief sought.
Injunctive relief is an extraordinary remedy and "the mere fact that a law is unconstitutional does not entitle a party to relief by injunction against proceedings in compliance therewith, but it must appear that he has no adequate remedy by the ordinary processes of the law, or that the case falls under some recognized head of equity jurisdiction." Cruickshank v. Bidwell, 176 U.S. 73, 80, 20 S.Ct. 280, 283, 44 L.Ed. 377.
In State Corporation Commission of Kansas et al. v. Wichita Gas Company, 290 U.S. 561, 54 S.Ct. 321, 324, 78 L.Ed. 500, it was asserted that a certain order of the State Corporation Commission of Kansas, made as a preliminary step toward ascertaining and fixing reasonable rates to be charged by a public utility, was repugnant to the Federal Constitution, and temporary and permanent injunction was sought. The court, in denying injunctive relief, said: "We need not decide whether these provisions are repugnant to the Constitution or whether they are otherwise invalid. The invalidity of such an order is not of itself ground for injunction. Unless necessary to protect rights against injuries otherwise irremediable, injunction should not be granted."
It is further alleged, in the bill, in substance, that the expense necessary to be incurred by the complainant in order tó make the showing required by the commission would be approximately $25,000 and for the recovery of such expenditure, if made, the complainant would have no remedy and its great loss thereby suffered would be irreparable. It is to prevent such claimed irreparable injury that complainant asserts the right to equitable relief in this action.
The act of the General Assembly of Kentucky, creating the "Public Service Commission of Kentucky," and fixing and defining its powers and functions (1934 Acts, c. 145 § 4 (b), Kentucky Statutes § 3952-13), provides: "The commission may compel obedience to its lawful orders by mandamus or injunction or other proper proceedings in the Franklin Circuit Court of this Commonwealth, or any other court of competent jurisdiction," and further (section 9 [Ky.St. § 3952-61]), after prescribing penalties to be imposed upon utilities for neglect, or refusal to obey "any lawful requirement or order made by the commission," the act provides:' "Whenever any utility is subject to a penalty under this Act the commission shall certify the facts to the Commission Counsel who shall institute and prosecute an action for recovery of such principal amount due and the penalty."
It thus appears that the commission can do nothing more than institute mandamus proceedings against the complainant in a court of the state to compel observance of its order or certify facts to the commission counsel upon which he may base' an action in the state court to recover the prescribed penalties. In either event, sole authority for making the commission's orders coercively effective rests with the court in which such action may be instituted.
It is not shown by the bill that any court proceeding is pending or threatened. Should the commission, however, apply to the court for mandamus to enforce compliance with its order or should the commission counsel institute a proceeding to recover the prescribed penalties, all questions as to the power or jurisdiction of the commission, the regularity of its proceeding, and all questions of constitutional right or statutory authority would then be open for examination and determination by the state court. If the complainant's contention that its rights, guaranteed under the Federal Constitution, would be infringed by enforcement of the order against it, be properly set up in such action and denied by the highest court of the state, adequate provision is made for review of the action of the state court by the Supreme Court of the United States. Judicial Code § 237, as amended, 28 U.S.C.A. § 344; Matthews v. Rodgers, 284 U.S. 521, 526, 52 S.Ct. 217, 220, 76 L.Ed. 447.
In Federal Trade Commission v. Claire Company, 274 U.S. 160, 47 S.Ct. 553, 556, 71 L.Ed. 978, certain corporations challenged the constitutional validity of orders of the Federal Trade Commission requiring them to furnish monthly reports of the cost of production, balance sheets and other voluminous information relating to the business in which the complainant corporations were engaged, and sought by injunction to restrain the commission from enforcing or attempting to enforce the challenged orders. The court said:
"There was nothing which the Commission could have done to secure enforcement of the challenged orders except to request the Attorney General to institute proceedings for a mandamus or supply him with the necessary facts for an action to enforce the incurred forfeitures. If, exercising his discretion, he had instituted either proceeding, the defendant therein would have been fully heard, and could have adequately and effectively presented every ground of objection sought to be presented now. Consequently the trial court should have refused to entertain the bill in equity for an injunction.
"Until the Attorney General acts, the defendants can not suffer, and, when he does act, they can promptly. answer and have full opportunity to contest the legality of any prejudicial proceeding against them. That right being adequate, they were not in a position to ask relief by injunction."
Since the commission is powerless to coerce observance of the challenged order by inflicting penalties for disobedience or otherwise, and it is not shown that complainant's business or property rights are in any way threatened by any arbitrary ac tion of the Commission, obviously, notwithstanding the commission's order, the complainant may passively stand upon its claimed constitutional rights, and, whejn necessary, may assert them in defense of any enforcement proceedings instituted in the courts without, in the meantime, suffering any injury or damage or being compelled to incur any expense whatever. Boise Artesian Water Co. v. Boise City, 213 U.S. 276, 29 S.Ct. 426, 53 L.Ed. 796.
Equity jurisdiction to grant injunctive relief should be exercised only where, "in a case reasonably free from doubt," it is shown that "intervention is essential in order effectually to protect property rights against injuries otherwise irremediable." Cavanaugh v. Looney et al., 248 U.S. 453, 456, 39 S.Ct. 142, 143, 63 L.Ed. 354.
The defendant filed an answer to the bill on the merits without raising the question as to equity jurisdiction. It is pointed out, however, in Federal Trade Commission v. Claire Company, supra, that acquiescence of the parties is not enough to justify the court in assuming jurisdiction, and the want of equity jurisdiction, if obvious, may and should be objected to by the court, sua sponte. Twist v. Prairie Oil Company, 274 U.S. 684, 690, 47 S.Ct. 755, 757, 71 L.Ed. 1297; Singer Sewing Machine Co. v. Benedict, 229 U.S. 481, 33 S.Ct. 942, 57 L.Ed. 1288.
By stipulation, the case having also been submitted for final determination, the application for a permanent injunction should be likewise denied, and the bill dismissed for want of equity.
The parties having stipulated that the ruling of the court upon the motion for temporary injunction should be treated as final disposition of the case, the bill should be dismissed.