Earl Warren: Number 80, Pan American Petroleum Corporation, Petitioner, versus Superior Court of the State of Delaware in and for New Castle County et al., and Number 81, Texaco, Incorporated, Petitioner, versus Superior Court of the State of Delaware in and for New Castle County. Mr. Gray.
Byron M. Gray: Mr. Chief Justice, may it please the Court. There are two petitions consolidated here. I will make the direct argument for Pan American, and Mr. Paul Schlicher will make the direct argument for Texaco, and I will make the rebuttal for both petitioners. These appeals involve the rate paid on sales of natural gas made subject to the jurisdiction of the Federal Power Commission under the Natural Gas Act. The actions originated in a state court. Now, the Natural Gas Act, as Your Honors know is a complete regulatory act and particularly, is applied to these actions. Section 4 of the Act provides for a complete rate filing with the Federal Power Commission. It provides that all rates and charges must beyond the file of that Commission. Section 19 provides a very complete review, procedure and everything, and the review jurisdiction is placed in the various United States Courts of Appeals. Section 22 provides for the enforcement of the rights and duties and obligations created by that Act. So, the question here is whether or not a state court has jurisdictions of an action involving natural gas rates required by the Act to be on file with the Commission. The facts of the -- these actions have to go back beyond January 1, 1954 because the contracts that are involved were entered before that date and for -- for less than eleven-cents per thousand cubic feet. But on January 1, 1954, the so-called Kansas eleven-cent minimum rate order was entered by the Kansas Corporation Commission. It became effective on that date and required that eleven-cents, in order to meet the conservation requirements of the Kansas statute to prevent waste of gas, that eleven-cents would be the minimum rate that could be charged. Now, the Cities Service, the respondent here, advised these petitioners that it would comply with the Kansas order and pay the eleven-cents, but it was doing so under the compulsion of the order and would expect its -- its money refunded back to the contract rates in the event the Kansas order were ultimately declared to be invalid. And for five or six months that was the status. And then on the sixth day and the seventh day of June 1954, this Court decided Phillips versus Wisconsin, wherein for the first time, the industry and these parties came aware of the fact that producers of gas that the wellhead independent producers were natural gas companies within the meaning of the Act. And therefore, of course, it required to file their rates and take all of the other actions that the Act requires of natural gas companies. The Federal Power Commission responded to the Wisconsin case by implementing Section 4 of the Act setting forth the requirements for filing and required that the parties file the rate, in effect, on June 7, 1954 as their initial rate filing under Section 4 (c). Now, Section 4 (c) of the Act requires that schedules showing all rates and charges be filed and will file with the Federal Power Commission that I stated. Responding the order of 74 -- 174 and in conformities to that order and the requirement of that order that the rate, in effect, on June 7, 1954 be filed as initial rate of filing under Section 4 (c). These petitioners filed what the Commission's order required them to file, the contract, any documents supplementary of the contract and one of this is the Kansas eleven-cent order. And the Order 174 also required that they file a billing statement showing the billing as it was being made on June 7, 1954. These parties filed the billing showing the eleven-cent rate. Thereafter, now, I should say that no objection was made to this rate tender, although the cities, people were served at that time with copies of the tender as made and were perfectly aware of the fact that it was eleven-cent tender and in fact will paying the eleven-cent. Since then, and as I will point out, subsequently, continued to pay it after the Commission had accepted it. After these filing, the Federal Power Commission admits and its record show that it considered the rate tender of these petitioners. I should say that Pan American did not file this refund letter, but they considered the rate filing. This document file construed it to be a rate filing of eleven-cents, set forth in their records that they voted to accept it, and the records show, on page 639 of this record, the schedule as they set out, and it says at the top summary of independent producer rate filing and these contracts over it decide price June 7, 1954 eleven-cents, eleven-cents. Thereafter, immediately following that, the Commission notified the -- then the Standard Oil & Gas Company, now the Pan American, "This is to advise you that the rate filings listed at the bottom of this letter have been accepted for filing." Now, there you have a complete compliance with the Act itself, the filing of the tender of the rate, its acceptance, and you had no actions at all by cities, no actions under Section 19 of the Act to seek any review of what the Commission had done, instead of that, they continued to pay the eleven-cents and did so for more than three years.
John M. Harlan II: Was that filing followed by Section 4 (c)?
Byron M. Gray: No, it was not. It was -- it was the first filing. Section 4 (c) requires an original and initial filing. And as I shall point out later, it must essentially also require what the Commission here did, a consideration of the rate filing and its acceptance in filing with the Commission. And I shall discuss that later.
John M. Harlan II: Only in respect of it being acted upon.
Byron M. Gray: In respect of it becoming effective, I believe.
Charles E. Whittaker: Did that filing or those filings, on their face, show that they were conditional or subject to modification to the extent of the possibilities that would occur in the event of a declaration of invalidity of the Kansas order?
Byron M. Gray: The Pan American filing, and that's what I'm talking about now, did not. It might be argued that the Texaco filing did because, ultimately, Texaco filed a refund letter, and Mr. Schlicher will discuss that phase of it, Your Honor.
Charles E. Whittaker: Well, didn't Pan Am also file a copy of the letter?
Byron M. Gray: No.
Charles E. Whittaker: It did not?
Byron M. Gray: It did not. And there was no objection on the part of Cites at -- whatsoever with the filing that Pan American made, although they were served with copies of it, of notice. And furthermore, Your Honor, as I point out whatever was the compulsion of the eleven-cent payment during the few months prior to the filing, it may have been under the compulsion of the Kansas eleven-cent order for those four or five months. But subsequently, it was under the compulsion of the fact was the rate on file, in the files of the Federal Power Commission, and that month begin the compulsion thereafter. And they continued to pay eleven-cents for three years and more, as I shall point out. But my point at this point is this, when the Commission accepted and placed eleven-cents in its files as the filed rate, that withhold jurisdiction of the Federal Power Commission and the Natural Gas Act attached to that rate. And all of the requirements of the Act (Inaudible) and every right and liability, it really wasn't developed by the Act from the moment of Federal Power Commission took that eleven-cents and said, “This is the rate in effect on June 7, 1954.” And if anyone wanted to do anything about it, the Act provided the remedy in Section 19 of judicial review not in the state court, not even in the Federal District Court but in a Circuit Court of Appeals, and they took no such action, and that's my point there. Well --
John M. Harlan II: (Inaudible)
Byron M. Gray: Yes.
John M. Harlan II: (Inaudible)
Byron M. Gray: They could've done what they did in the Magnolia case. They could've objected to the file. They -- they could have said, “You -- you should include this refund letter.” They -- they could have said, “We are contesting the validity of the Kansas eleven-cent order, and we don't leave it or to be accepted as a part of this rate tender are considered as evidentiary of what is the rate,” but they took no action. They were in default.
John M. Harlan II: (Inaudible)
Byron M. Gray: Nothing -- nothing in --
John M. Harlan II: (Inaudible)
Byron M. Gray: -- nothing in the filing of Pan American to show any condition whatsoever, nothing.
Charles E. Whittaker: (Inaudible)
Byron M. Gray: Yes.
Charles E. Whittaker: (Inaudible)
Byron M. Gray: The -- the statement showed eleven-cent payment. That's what the statement is showing.
Charles E. Whittaker: (Inaudible)
Byron M. Gray: The contract offer seven-cent rate. The Kansas order which was treated as supplemental of the contract ought from eleven-cent rate. The billing statement showed eleven-cents being paid on that date, the order of the Federal Power Commission Order Number 174 required that there'd be file as the initial rate filing, the rate, in effect, on June 7, 1954, and this was tendered as needing the requirements of that order. And my point is that if there's any meaning to Section 19, then was the time for anyone who was claiming that the Kansas order should not be considered as evidentiary of the rate been in effect. That was the time for them to raise their voice. Now, you have those cases arise. And I don't want to get too far into this, but here's -- if you will remember quite recently in 1960, you have before you the case of Texas Gas Transmission Company versus Shell. And I think you have to go back to the Circuit Court, but that was a Section 19 (b) case, and it involves this very order, 174 that required initial filing. But there -- there was an escalation or what you call a "favored-nation" clause, and the question was whether it's been triggered or not. And that Shell or the producer had offered for filing a rate higher than the contract seemed to call for because it was contended that the escalation clause had been triggered by some other contract, and I'm sure you remember that case, by some of the contract. Well, the Commission didn't just accept what they offered. They exercised their jurisdiction to determine whether or not to accept what was offered, and they didn't accept it because it didn't appear on the face of things, how the rate got to be twelve point something cents instead of nine point something cents.
Charles E. Whittaker: (Inaudible)
Byron M. Gray: Yes. And it was bridged. It was bridged by the tender, of what or anything, anyone then knew was a perfectly valid Kansas eleven-cent order. Now, I'm coming to the invalidation of that order some three years later. But as far as the Commission goes, at that time, if it had jurisdiction to accept any rate whatsoever, eleven-cents or any other rate, if it had jurisdiction, it exercises it. And anyone who didn't like what it did was certainly called upon the Act then or Section 19 doesn't mean anything. Now, that's my point there. It may -- I've been wrong, but it was honestly wrong if it was wrong and, of course, mistakes in law, as you heard here in criminal law even sometimes work hardships. But if it one mistake on anybody part, it was an honest mistake, but the record and the history of the Magnolia case shows that Cities knew very well what to do because there, it did the very thing and it might have done here, contested the rate tender when it was made. But it didn't do it here, and I say that the eleven-cent acceptance filing became final. But in all events, on January 20, 1958, this Court held, in effect, that the Natural Gas Act so far preempted the field of rates as it applies to producers that the wellhead producing gas for resale and the interstate commerce as to preempt the State and take away any power that the State might have had and declare the Kansas eleven-cent order in that. Now, Cities will claim that it's been held to be invalid to have an issue. Well, I don't want to get in to that argument, but I don't think it makes any real difference. But at all the events, it was declared invalid. Now, for three years, these parties had been paying eleven-cents not by a virtue of the Kansas order. They've been paying by virtue of the fact that it was the rate on -- filed under the 4 (c) of the Act.
Charles E. Whittaker: (Inaudible)
Byron M. Gray: Yes, yes, that's true.
Charles E. Whittaker: (Inaudible)
Byron M. Gray: I think you have to consider this. It may have been so conditioned, and Mr. Schlicher will discuss this more than I will, but it may have been so conditioned. But, the -- the record shows clearly what the Commission's action was. It considered the rate to be eleven-cents, and that's the rate, the records of the Commission show that it accepted and filed. So I can't think that -- that that letter being filed or not being filed made any overwhelming difference. It might have influenced the Commission to accept the matter down for hearing on its motion, and I've heard the parties argue about it but it didn't -- so far as I know, do that, although I hate to discuss Mr. Schlicher's particular facts. But that's -- that would be my view of it, that the important thing is they exercise their jurisdiction to file a rate, and they filed eleven-cent rate, they did it in both cases, and I think that ends the matter in my certain appeal under Section 19. But in any event, after the Kansas order was declared invalid, Cities brought these actions in the trial court in Delaware State Court, and they brought them upon these refund -- so called -- what they called refund letters or involuntary payment letters that you might choose to call them, the common-law action. In their first petition, they didn't say anything at all about the gas being sold for resale in interstate commerce which is a rather considerable jurisdictional fact that they're ommiting. Well, after some parrying around and filing various motions one thing and another, the fact began to emerge that -- that this gas was sold for resale in interstate commerce. But for whatever reason, Cities then amended their complaint and it seems to me this just demolishes their argument that they will properly, in the State Court general jurisdiction with the common-law action, because I almost have to raise this amendment that they put in because its jurisdictional and supplies the jurisdictional fact. They said in their amendment, “Plaintiff owns and operates an interstate gas pipeline system. During all times, material, herein, plaintiff has been and is now engaged generally in the business of purchasing natural gas for transportation and sale in interstate commerce for resale,” that's almost the words of the statute, "for ultimate public consumption for domestic, commercial, industrial or any other use and furtherance, whereof, the contract referred to in paragraph 3 about what's entered into." Well, promptly after that, of course, there was a motion on the part of defendants for summary judgment on the jurisdictional question. I -- I don't want to go now too much into the ruling of the trial court because it doesn't make too much difference here, but it reasoned in -- in effect that it could wiped out the Kansas eleven-cent order automatically and retroactively and -- and reach back and do for the Federal Power Commission what the Federal Power Commission didn't do for itself, and then come out with the rate that it thought the Federal Power Commission could come out, and it ultimately reached a rather odd conclusion that there was no inconsistency in exercising state court jurisdiction as a -- of a common-law claim as long as the rate involved would be the same whether it was a filed rate or the rate under the contract. Now, that makes appeal this Court, but it just doesn't appeal to me. But that was in about the reasoning. The -- strangely enough, after it was apparent, the trial court was going right ahead and entered judgments in these matters. Of course, the party didn't want these large judgments entered against them one way or another. And they proceeded these petitioners to the Supreme Court of Delaware to get a writ of prohibition to prevent the trial court proceeding to exercise the jurisdiction in these cases. The Supreme Court of Delaware, well, I didn't use the same words as the trial court got to the same end and in very much the same way. They said and I'm -- I'll quote very little from it, but it will give you the general rationale of how the Supreme Court looked at it. They said both parties agreed that as to the period after July 16, 1954, the only legal rate is the filed rate, not even a court can authorize commerce, and they come out other terms reporting the Montana-Dakota case of this Court. The question then becomes, what rate was legally filed. Then they say, “However, since the Kansas order was void, the only lawful filed rate is the contract rate unaffected by the Kansas order.” So, no, that was the -- that was the trial court, that was the trial court that said that. The Supreme Court of Delaware held as long as the exercise of jurisdiction by the trial court would not be inconsistent with the filed rate with the Natural Gas Act but it was alright for them to go ahead and exercise jurisdiction. And they, in effect, held that the action of the FPC, in accepting the eleven-cent tender was a nullity. They said, “Defendants duly filed the documents required,” that was required by -- by 174, the order of the Federal Power Commission. These documents included copies of the contract with Cities, copies of the Kansas price order and statement showing that the price to Cities on June 7, 1954 was eleven-cents at this specified pressure. The Commission duly convened and voted to accept them for filing, now this is Supreme Court of Delaware. Then they say, “Being void, the unilateral filing of the order is part of the rates schedule was a nullity.” They held that "informed at least" they said and that's the words of the Supreme Court of Delaware. Informed at least the action is based upon the refund contracts. Now, despite of the fact that they have said that the Commission met and voted and accepted for filing a eleven-cent rate despite of the fact that they recite all of these matters that are jurisdictional to the Federal Power Commission. They hold that the Natural Gas Act did not prevent the state court from exercising jurisdiction in this action on this refund contract (Inaudible) Now, without to be nothing more or less than a collateral tax upon the action of the Commission and upon that eleven-cent rate, it either must be an attempt to gain a review as you would do under Section 19 of the Act or it must be treated as an action to enforce to file rate which would be a Section 22 action or perhaps both. Perhaps, they try to do in the state court what they would have to have gone to the Circuit Court of Appeals and review actions to do and then having established what the file rate is, if -- when pay it they go into a Federal District Court because Section 22 of the Act says that exclusive jurisdiction of actions to enforce any right, to enforce any right created by the Act or liability shall be in the federal district courts. Now, the subject matter of these actions whether it's in the state court or whether it's in the federal court or wherever it is, the subject matter and obviously, the price to be paid for this gas that was sold subject to jurisdiction under the Federal Power Commission. That's got to be the subject matter. And they're simply cannot be concurrent causes of action, one, based on the contract and one, based on the filed rate. Now, in the Montana-Dakota case involving the power electric -- power statute that are identical to these statutes, this Court said that the rate at its own file in the Federal Power Commission is the rate that's almost pay -- it -- is the only rate, anyone can pay, and that is true whether it has been fixed or merely accepted for filing by the Federal Power Commission, and that must be the controlling law if there is to be any sense at all to our regulatory statutes. What -- through the Delaware court and what the -- through -- both Delaware courts on and it's in fact, I think, throwing off certain of our trial -- federal courts have decisions in such cases as the Mobile case. Now, Mobile went up under the review statutes, and that's something you all overlooked, as all of these cases that the Cities cite went up under Section 19 as review statutes. And in Mobile, this Court said that the Act left the parties free to contract as to their rates, but it didn't say and make them effective outside the scope of the Federal Power. Now, I didn't say that, and I can tell you why it seems to me they couldn't have said that. What this Court have said that the intent of Congress was to take away, preempt Kansas State's rights to deal with these rates and turn them over to private parties entirely without any standards to make them effective contract, for them effective suing court on them entirely outside the scope of the Federal Power. That raises constitutional questions, I don't want to discuss here, and I'm not going to discuss, because you can see them as clearly as I can. But, that is what you would have to say to hold with Cities, is that these parties can enter into a -- contracts, make it effective without filing, sue on it in the state court, wholly outside of the Act.
Charles E. Whittaker: Mr. Gray.
Byron M. Gray: Yes?
Charles E. Whittaker: (Inaudible) assume that it's true that primary jurisdiction was in the Federal Power Commission.
Byron M. Gray: Yes.
Charles E. Whittaker: Yet, if there are no facts or discretions to be exercised and the question emerging is but one of law, then under Mr. Justice Brandies' opinion in the Great Northern case could not accord to general and common-law jurisdiction even this Court adjudicated?
Byron M. Gray: If the -- in the -- in the Great Northern case, they are adjudicating what was the filed rate under statutory actions to enforce the filed rate, and my answer would be if they were doing that and it came around. But the -- the state court can't adjudicate what is the filed rate because Section 22 says exclusive jurisdiction there. Exclusive is in the federal district courts. But my answer is that if it were an action to determine or enforce the filed rate and there was no administrative finding require, then the answer would be yes, but that action would have to be in a Federal District Court. It simply cannot be a loose jurisdiction wondering overall of the state courts of general jurisdiction in this land to upset what the Federal Power Commission has done. And it wasn't the intent of Congress. And I don't want to impose on Mr. Schlicher's time.
Felix Frankfurter: The Great Northern case came up on the federal court?
Byron M. Gray: I think that came up in the state court, but --
Felix Frankfurter: Well, then your -- then your answer -- that's what I thought, so I haven't looked it up.
Byron M. Gray: But the interstate commerce --
Felix Frankfurter: (Voice Overlap) it must be in any event of federal court that isn't true, isn't it?
Byron M. Gray: Well, you have different statutes. As you will recall, Your Honor, the Interstate Commerce Act particularly reserves state court jurisdiction. Whereas, the Federal Power Act, they particularly and exclusively get to the federal courts.
Felix Frankfurter: (Inaudible)
Byron M. Gray: What?
Felix Frankfurter: Is there a -- is there a state jurisdiction (Voice Overlap)
Byron M. Gray: To -- to enforce tariff -- to enforce tariff rates.
Felix Frankfurter: (Inaudible)
Byron M. Gray: Yes.
Earl Warren: Mr. Schlicher.
Paul F. Schlicher: May it please the Court. I first intended to argue the point that the theory -- the jurisdictional theory of the Delaware State Courts that they had concurrent jurisdiction with the federal courts actually usurps the exclusive jurisdiction, the exclusive power of the Federal Courts of Appeals under Section 19 (b) of the Natural Gas Act to review orders of the Federal Power Commission, modify those rate orders and set them aside.
Potter Stewart: Mr. Schlicher, just --
Paul F. Schlicher: Yes, sir.
Potter Stewart: -- at the outset, you don't need to answer this question now, just sometime later or in rebuttal, but this case basically is -- put in the simplest terms, is one of jurisdiction, the jurisdiction of the --
Paul F. Schlicher: Correct.
Potter Stewart: -- courts of Delaware --
Paul F. Schlicher: Yes, sir.
Potter Stewart: -- to entertain this lawsuit. You're claiming that the state courts have no such jurisdictions. Is it your position that the -- that therefore the respondents are -- have no remedy anywhere or do you suggest that somewhere in the federal court or in the -- or in the Federal Power Commission in this case with this alleged claim that they have if they have a remedy somewhere?
Paul F. Schlicher: It is the position of Texaco that they had a remedy --
Potter Stewart: Had.
Paul F. Schlicher: -- that they had slept on their rights, and you can't help this people anywhere.
Potter Stewart: Nowhere because they -- as you began you said the -- this is the matter of all of which the state courts have no jurisdiction but -- but, of course, the federal courts do, but this -- now, the federal courts don't, because of what, of limitations or (Voice Overlap) --
Paul F. Schlicher: In effect --
Potter Stewart: -- took time in any event.
Paul F. Schlicher: Well, the Natural Gas --
Potter Stewart: (Voice Overlap) --
Paul F. Schlicher: -- the Natural Gas Act itself creates two different kinds of court actions with respect to natural gas rates. The first one is Section 19. If a rate is established, as Mrs. -- Mr. Gray has explained, and if once accepted and filed by the Commission under your Montana-Dakota decision, I don't think there's any question but what it then becomes the federal rate, the filed rate, the effective filed rate. Now, if the Commission made an error, if their action was not void, then, of course, that rate becomes final unless it is properly challenged and the only way it can be challenged is the -- the course through Section 19 (a) where you petition the Commission for review, and if that's denied on to Section 19 (b) and in the Tacoma opinion of this Court, City of Tacoma against taxpayers of Tacoma, the -- were Section 313 (b) of the Federal Power Act which is in all material, respects and wording, the -- identical with Section 19 (b). There, this Court made plain that the only way that you could review orders or the only Court that had the power to review orders of the Federal Power Commission was the Courts of Appeals.
Felix Frankfurter: Is there a controversy between you and the respondents that if this were a proceeding for the review of an order by the Federal Power Commission, the state court would have no jurisdiction, put that general proposition, is there -- is there conflict? The answer to that is no.
Paul F. Schlicher: Yes, that the state courts have no jurisdiction of any rate matter. Once a rate has been --
Felix Frankfurter: Do --
Paul F. Schlicher: -- filed and accepted.
Felix Frankfurter: Do the respondents say, this is an action to review an order of the state of the Federal Power Commission, and they have a right to bring such a reviewing order in the state court, do they claim that?
Paul F. Schlicher: The respondents are the Delaware court or the Delaware courts which already had -- it has that power.
Felix Frankfurter: (Voice Overlap) yes, but here, the respondent, I don't make my question clear, do they concede your general proposition that this is a proceeding to review an order of the Federal Power Commission?
Paul F. Schlicher: No, they don't. Cities is not.
Felix Frankfurter: (Voice Overlap) but what's the use of arguing the abstract question?
Paul F. Schlicher: Because the Delaware courts, the decision which we are contesting actually did that, Your Honor.
Felix Frankfurter: I understand that -- that's what you have to argue that this is such a reviewing order not that if it is --
Paul F. Schlicher: No.
Felix Frankfurter: -- of course the state court is ousted.
Paul F. Schlicher: No sir, that is not my point. My point is this, that in order to retain jurisdiction, the Delaware courts themselves had to set aside or modify an order of the Power Commission -- of the Federal Power Commission, and that is why they usurp the powers of the -- of the Federal Courts of Appeal.
Felix Frankfurter: But that's what -- that's what you have to prove, the other side contest that. And the court didn't go on that ground.
Paul F. Schlicher: Alright, sir.
Felix Frankfurter: They didn't -- didn't involve that.
Paul F. Schlicher: Well, we certainly know this. We certainly know that the Delaware --
Felix Frankfurter: I'm not challenging that you may prove that in -- necessarily, what is involved is a review of the Federal Power Commission, but they -- that abstraction question that they came to do, doesn't require it at all, does it?
Paul F. Schlicher: To me, it doesn't.
Felix Frankfurter: Well, it doesn't to anybody. They did it to the Court of -- the Supreme Court of Delaware. They said it wasn't such a thing.
Paul F. Schlicher: Well, when the -- when the Supreme Court of Delaware, their basic mistake was when they went on the form of the action and when they said that the form of action determines whether or not the state court or the federal district courts will have jurisdiction to enforce a rate order under Section 22 of the Natural Gas Act, that was wrong. The whole interpretation of the Act and the only orderly interpretation of the Act would be that if any action, no matter what its form, whether it's a common-law or otherwise, if it has the purpose or it has the effect of enforcing a duty or liability created under Natural Gas Act, then automatically, the Act takes over.
Felix Frankfurter: I'm merely inviting, you've established on the fact in this case, that (Inaudible) I'm inviting you to establish the fact that, in fact, this does what you just said it does.
Paul F. Schlicher: Well, I -- I think that it's more a question of law to this -- to this extent that once a -- a rate becomes a filed rate, an effective filed rate, then it, certainly, immediately, creates certain liabilities and duties or the Act does.
William O. Douglas: I sought that the refund suit was covered a period prior to the effective date of the rate.
Paul F. Schlicher: Part of it does, Your Honor, but we are now practically arguing all the time since June 7th, 1954 when the Commission assume jurisdiction over the producers' rights.
Felix Frankfurter: Well, they couldn't (Voice Overlap) --
William O. Douglas: But the rate became effective -- sometime the filed rate became effective in 1957, wasn't it?
Paul F. Schlicher: It became effective in 19 -- no, as of June 7th, 1954.
William O. Douglas: Filed in 1957 with a retroactive (Inaudible)?
Paul F. Schlicher: Oh, no, no. I think you're referring to Cities' so called refund letter which --
William O. Douglas: Well, does --
Paul F. Schlicher: -- is an entirely different point. I was trying to finish answering this. I should -- I like to go ahead with this first, if I may.
Felix Frankfurter: I'm -- partly -- partly I have in mind what Justice Douglas has been asking.
Paul F. Schlicher: Well, I hope to get to that conditional rate. I think -- I think I can explain that probably more quickly and should do it first. The Commission -- when Texaco filed the so-called refund letter which is nothing more than a unilateral statement by Cities that it intended to pays this Kansas minimum price order of eleven-cents involuntarily. The Commission accepted this letter for filing as a part of Texaco's rate schedule. The letter order of acceptance of the Commission is shown at page 155 of the record, and that letter orders says that "Any provisions contained in this document which provide for automatic adjustments and charges may not operate to change the rates being charge June 7th, 1954," which was certainly the eleven-cent rate, no one denies that, "until a change in rate has been filed pursuant to Section 4 (d)," and that is exactly what the Mobile case says cannot be done. Now, no such notice has ever been filed to effect that change with respect to this particular letter. Moreover, the Commission added that the acceptance of the Cities' letter as Supplement Number 4 of Texaco's rate schedule would not, and I quote, “be deemed as recognition of any claimed contractual right or obligation associated therewith. Thus, the Commission specifically denied the very contractual right which Cities now claims established the automatic change in rate. To get back to the Section 22 question --
William O. Douglas: Was that -- there was no such letter in the Pan American (Voice Overlap) --
Paul F. Schlicher: There was a letter, they were never requested to file it, and they never filed it. The Commission asked us to file it. After we filed it, then they wrote this letter saying they interpret it to have no automatic effect.
William O. Douglas: There was no such letter in the Pan American case?
Paul F. Schlicher: There was a letter written to Pan American the same date, January 21, 1954 that --
William O. Douglas: Is that in the record?
Paul F. Schlicher: -- was never filed.
William O. Douglas: Is not that -- by the Commission?
Paul F. Schlicher: It was never filed with the Commission or accepted by it.
William O. Douglas: I'm talking about the letter from the Federal Power Commission to Pan American, was there similar to the letter to you in Texaco on August 29th, 1957, was there such a letter?
Paul F. Schlicher: I don't know, Your Honor, I don't know those facts in Pan American. So that when the filed rate became the federal rate, it created this duty on the part of Texaco to charge only the filed rate, no more, no less. It also became a liability or Texaco became liable if it did undercharge or it did overcharge to immediately either make the -- collect the under charge or refund the over charge. Now -- so there were liabilities and duties created by the filing of the rate, and that is why we say that if it has the effect, if any action, whether it be a count based on common-law theories or no matter what it is, if it has its purpose or its effect of enforcing any of these liabilities or duties, then automatically, Section 22 takes over and the jurisdiction is in the federal courts. This has to be, this has to be for this reason, that if there are no common-law, there are no excuses, no common-law defenses to the filed rate, it could well be that a suit brought in a Federal District Court which must file the rate to be what the Commission actually accepted and filed could be in a different letter. Then the same suit brought in a state court, where a -- common-law defenses are available and whereas these Delaware courts did found that the rate should have been the contract rate. They didn't even look at what the Commission did. They ignored the action of the Commission, and it's the action of the Commission that makes the filed rate, and that's the whole point.
Felix Frankfurter: Well, what the court -- what the (Inaudible) court said in effect? It is argued by you and your associate that form can make no differences.
Paul F. Schlicher: Correct.
Felix Frankfurter: Form can make all of the difference in the world with reference to federal jurisdiction, as in Gully case proved once and for all. If you can pray -- if you can pray the complaint whereby you do not reveal that a federal defense whereby you do not rest on a federal claim, but the federal claim comes in by a way of defense, then the Gully case prove, you can state a cause of action. I'm not saying this is the Gully case, but you have to take care of the Gully case. It doesn't do to make this generality a form, never makes a difference in federal jurisdiction. It makes a great deal of difference of great deal of the time.
Paul F. Schlicher: If that applies, then you're going to have two different courts, one, state court and a federal court by -- in different great levels. It -- it cannot be avoided.
Felix Frankfurter: No, it -- it would be avoided because if the defense comes in and the state court rules against the proper defense, then you come here from the state court. The question here is whether -- may be initiated not where finally maybe determined.
Paul F. Schlicher: In these very suits, Cities has brought an action in the Federal District Court on the same sales. Oh, my time is up, sir.
Earl Warren: Mr. Wheeler.
Charles V. Wheeler: Mr. Chief Justice, may it please the Court. The petitioners here have spent a large part of their argument as they have in their oral argument in their briefs in discussing matters which go to the judgment which should be rendered in the trial court when these cases are tried on their merits. Now, those matters will not aid in determining whether or not the Superior Court of New Castle County has jurisdiction to try these cases. When petitioners argue the merits of their filed rate defenses, they are confusing the jurisdictional question with the wholly unrelated matter as to what the judgment should be. This Court may discuss this confusion in Montana-Dakota, which I cite because it had been cited by the petitioners. There, this Court explained that if the plaintiffs complaint states the cause of action which invokes the jurisdiction of the trial court, then the mere statement of that claim invokes that jurisdiction to determine whether the claim is meritorious or not. Thus, the single question here in this appeal from an order denying a writ of provision is whether or not the state court has jurisdiction. This, I think, requires a careful examination of the cases as they pin below because it is our feet that this is the critical test. The fatal weakness of petitioners' position is their refusal to deal with the cases as they are. These cases were not brought to enforce a filed rate. They were not brought to resolve a dispute as to what the filed rate was. They were not brought to collateral or to attack a filed rate. These cases were brought to enforce common-law rights, and liabilities which came into being when this Court held at the Kansas minimum price order was void. I think it will be helpful for me to explain in detail what the complaints alleged because they relate all of the facts upon which we rely. The complaints filed against each of the petitioners is substantially identical, restated in narrative form, they tell they relate these facts. Cities Service Gas Company is a natural gas company engaged in this business as an interstate gas pipeline company, the petitioners or producers of natural gas. In 1949 and in 1950, Cities entered in long term contracts for the purchase of gas produced in the Kansas Hugoton Field from these petitioners. Those contracts fixed prices for the purchase of the gas had approximately eight cents per Mcf. After those contracts had been being performed for four and five years, respectively, the Kansas Corporation Commission on December 2nd, 1953 entered its minimum price order purporting to fix a minimum price of eleven-cents per Mcf for all gas produced in the Kansas Hugoton Field. Upon the entry of that order, Cities commenced an action to review it challenging it as being invalid. After that action had been commenced but before Cities made its first payment in compliance with the order, Cities wrote a letter to each of the petitioners, the January 21 letter to which Mr. Gray referred. In that letter, Cities explained that it had commenced an action for the judicial review of the validity of that order, and that while that litigation was pending, it would pay the eleven-cent price in compliance with the order. But that those payments were to be made by Cities and to be accepted by the producers as the involuntary compliance with the order. And the January 21 letter conclude, “In the event the order is finally judicially modified or declared to be invalid in whole or in part, Cities Service Gas Company will expect you to refund to it the amount of any over payments.” Immediately upon receipt of that letter, the petitioner Pan American answered in which it restated the terms of the letter generally as we had stated it and concluded saying, “We will therefore accept the payments on this basis.” Thereafter, for 47 months, Cities made payments monthly for all gas purchase from each of the petitioners by monthly check. And on each of those checks, there was subscribed an endorsement in which it was said these payments are made subject to the terms and the conditions of the January 21, 1954 letter. I think that is significant especially in view of Mr. Gray's suggestion that the payments were pursuant to a Federal Power Commission filed rate schedule. In other words, those payments by those checks with that endorsement on them used continuously from the first payment after January 1954 until this Court's decision on January 20, 1958 holding that the Kansas price order was void.
Felix Frankfurter: During what period of the -- of the 47-48 months, whatever it was, was there a federal power rate enforced?
Charles V. Wheeler: Commencing first on -- as of June 7, 1954.
Felix Frankfurter: And when did the -- when did your claim begin to arise?
Charles V. Wheeler: On January 1, 1954.
Felix Frankfurter: So that they were coterminous? I -- I missed the date.
Charles V. Wheeler: Our -- my claim begins on January 1, 1954.
Felix Frankfurter: (Voice Overlap) --
Charles V. Wheeler: In other words, we have a six months period in which is there no claim -- no one can claim that there is any claim with that.
Felix Frankfurter: After -- after June, after there was a federal rate. It could --
Speaker: (Inaudible)
Charles V. Wheeler: No, sir. The -- the controversy involves all the period from January 1, 1954.
Speaker: (Inaudible)
Charles V. Wheeler: Yes.
Speaker: (Inaudible)
Charles V. Wheeler: Yes. Of course -- excuse me.
Speaker: Is that here?
Charles V. Wheeler: Yes. This -- there is a single case pending against each petitioner. It makes a claim for refund for payments made during the whole period, January 1, 1954 through the date of the decision of this Court in holding the order void.
Charles E. Whittaker: Well, very briefly, what defense is asserted as to do six months period?
Charles V. Wheeler: Oh, there were no -- the defense is that -- are specifically to that six months period. They -- collectively, the defendants plead some 19 separate misstated offenses, and they go to the whole claim, and they include all sorts of common-law defenses, the statute of limitations, common-law defense of acquiescence and estoppel, voluntary payments. They claim that the contract for refund is not supported for -- by a lack of consideration, those sort of common-law defenses. There are great many of them.
Felix Frankfurter: Mr. Wheeler, may I ask you this. How could the federal rates was enforced, could any arrangement be made for an alteration in the up or down of the rates?
Charles V. Wheeler: After the effective date of June 7, 1954.
Felix Frankfurter: Yes.
Charles V. Wheeler: Of course, there's a procedure under the natural scope.
Felix Frankfurter: Well, I mean, private -- I -- yes, I understand, apart from the procedure provided by the Act.
Charles V. Wheeler: I think not.
Felix Frankfurter: Not. Therefore, any suit, but you have to (Inaudible) that any suit for a different rate in the filed rate subject to all the (Inaudible) taken under the Federal Power Act, no matter -- what -- in what guide, in what (Inaudible) of -- of legal pleading, you may come into court? Would a court -- any court had to take judicial notice if what you are suing for is something that would undermine its governing rate?
Charles V. Wheeler: I think not, Your Honor. I think, perhaps, if the filed rate was inconsistent with the common-law claims that you made, that it would be a good defense, but I --
Felix Frankfurter: If you -- if you acquired, if you plead without making a disclosure as to what the rates are, would the court be charged with the duty of finding out what the rate is? Because they'll throw you out of court on the face of the pleading and not waiting for the -- and not bring it under the Gully case?
Charles V. Wheeler: I think not, Your Honor.
Felix Frankfurter: On the Gully case, couldn't the Court have found out what the law was if you are going to find the -- the complaints there?
Charles V. Wheeler: Yes, I think so.
Felix Frankfurter: Do you rest under Gully case doctrine and that kind of a thing or (Inaudible)?
Charles V. Wheeler: I think that -- I think that determines the -- that doctrine determines the jurisdiction of the state court, and I think further, of course, that our claims are meritorious.
Felix Frankfurter: Well, that's a different question.
Charles V. Wheeler: Which I concede to be a different question.
Felix Frankfurter: Alright, I don't mean to interrupt you but you do -- it is -- if you -- if you prevail, and to get whether the -- does the Delaware case cited from Gully doctrine?
Charles V. Wheeler: I beg your pardon?
Felix Frankfurter: Does the Delaware decision cite in Gully case?
Charles V. Wheeler: I believe that it does, yes, sir, Your Honor.
Felix Frankfurter: Well, but that is -- that is what the fighting is about here, isn't it, whether the Gully case doctrine applies or not? In other words, whether if you do not disclose on the face of your complaint that you are speaking of deposit from the filed rate, you establish the jurisdiction of the state court and all the rest is subject to the merits and the litigation on the merits have you mention -- appeal here, the state court disregard federal law?
Charles V. Wheeler: I think that's correct. I believe that I was in the point of describing the facts which are those alleged in our complaint.
Potter Stewart: And you are the point of saying that this was a 47-month period --
Charles V. Wheeler: Yes, sir.
Potter Stewart: -- for which you are suing beginning January 1st, 1954 and ending, when? I didn't understand that.
Charles V. Wheeler: On January 20, 1958. In other words, on the date of this Court's decision, we seek making payments under the Kansas minimum price order.
Potter Stewart: I see. And then -- and then what did you pay thereafter?
Charles V. Wheeler: After that, we paid the contract price which is approximately eight cents.
Potter Stewart: You didn't pay eleven-cents, is that it?
Charles V. Wheeler: No, sir.
Potter Stewart: I see.
William J. Brennan, Jr.: There's been no change then in rate?
Charles V. Wheeler: None whatsoever.
Charles E. Whittaker: (Inaudible)
Charles V. Wheeler: I don't think it would be fair to say that they had accepted it in full. They have certainly accepted the money. I think they preserve the right to continue to claim that they get the eleven-cents under the Kansas minimum price. This brings us -- of course, having explained how the payments were made to the decision of this Court rendered on January 20, 1958 in which this Court held that the Kansas order was void. And also brings us past to the point that we, thereupon, seize making payments at the eleven-cent price and made a demand upon each petitioner for a refund of the difference between the amounts of money which we had paid them under the void order and the amounts which we're dealing under the contract price. Upon their refusal to make those demanded refunds, we commenced these actions in the Delaware State Court, making allegations which related in more formal terms exacts the exact statement of facts, as I have made. The concluding paragraph in each complaint set forth Cities three alternative common-law theories of recovery. We claim that there was a contract to refund made by the January 21, 1954 letter and the acceptance of payments made subject to. And then, of course, in the case of Pan American, who had answered our letter, we included the claim that that answer we will, therefore, agree to accept payments on this basis made a written contract to refund. The second theory of our recovery was the theory -- the common-law doctrine of restitution for -- of moneys which had been paid under a judgment or an order which is later reversed. And the third was the common-law doctrine of unadjusted ratio. Now, those are the complaints as they were alleged. The petitioners' answers, as I previously suggested, included some 19 separately stated defenses.
Felix Frankfurter: Would you forgive me for interrupting --
Charles V. Wheeler: Yes.
Felix Frankfurter: -- again? Where in the complaint did you refer me to the (Inaudible) Where in the complaint is there any reference as what the valid -- of valid rate was or wasn't?
Charles V. Wheeler: Oh, there was no allegation with respect to that.
Felix Frankfurter: Any allegation that bore on that?
Charles V. Wheeler: None whatsoever.
Felix Frankfurter: Thank you.
Charles V. Wheeler: The --
Charles E. Whittaker: (Inaudible)
Charles V. Wheeler: That's exactly correct, Your Honor. Of course, we had a great deal of help. The Fifth Circuit had recently decided Natural Gas Pipeline Company of America versus Harrington which involved refund to payments under the Oklahoma order, and we had a pretty good guide as to the cause of action which could be sustained. We follow that as precisely as it could. As has been suggested, the Natural Gas Act got into this case wholly by way of defense. Texaco pleaded it and their fifth separate defense. There, they alleged that they had an eleven-cent filed rate because of the effect of the Kansas minimum price order and of their filing of a copy of it. And Pan American as its third separate defense, claim that the Cities' recovery was barred because they had a filed rate of eleven-cents on -- because they had filed a copy of the minimum price order. I think that it would be well to mention the amendment because as I understand that is the single claim which the petitioners make here that that changed it all the effect of our common-law causes of action. Of course, it is perfect obviously from an examination of the amendment in which we allege that this was interstate gas. We were simply coming within the terms of this Court's judgment holding that the Kansas minimum price order was void as to such things. There is the suggestion in the briefs, it has not been mentioned or laid back in some way Cities' answer briefs in response to petitioners' briefs in support of motions for summary judgment in some way changed our common-law causes of action. I think a brief examination of those briefs and the setting in which they were filed will dispel any feeling with respect to that. You understand that the petitioners' filed motions for summary judgment which were not directed at the jurisdictional issue at all, but simply claim that there filed rates were good defenses. We responded, they then filed a brief in support of those motions for summary judgment relying upon the doctrine of Montana-Dakota that there could be deviation for -- from the filed rate, and that therefore, the filed rate was going to be a meritorious defense. We responded, of course, by recognizing this Court's decision in Montana-Dakota but pointing out that our common-law causes of action, which we had asserted, were perfectly consistent with and perfectly compatible with the petitioners' filed rate. Now, this, I think, fully describes the cases as they now end in the Delaware Superior Court and to which the petitioners would have this Court apply the provisions of Section 22 of the Natural Gas Act.
Potter Stewart: Mr. Wheeler, on the basis of what you told us as to the statement of the case, do you think it will still be -- that -- that the -- that the petitioners will still be completely free in the Delaware courts to raise the defense of the filed rate on the merits?
Charles V. Wheeler: Oh, yes.
Potter Stewart: And that the Delaware court, do you think the Delaware court is prejudged or judged that issue one way or the other?
Charles V. Wheeler: Only -- I don't think it prejudged it, except to the extent that they -- that the Delaware trial court has overruled there motion for summary judgment.
Potter Stewart: Well --
Charles V. Wheeler: Did that answer your question?
Potter Stewart: Well, but didn't it go -- in doing so didn't at least one of the courts say that they could just disregard the filed rate?
Charles V. Wheeler: Oh, no, I don't -- I do not understand that completely.
Potter Stewart: Oh, there were nullity or whatever they're (Voice Overlap) --
Charles V. Wheeler: No, I think what the Delaware court did hold has had the Tenth Circuit and the Third Circuit was that the Kansas minimum price order, because this Court had held it was void that that order was a nullity whether it was filed in the files of the Federal Power Commission or -- or not. I think that -- that is the holding.
Felix Frankfurter: But Mr. Wheeler, should the -- should the Delaware court or any Delaware court, should the Delaware Supreme Court finally say you can't raise that question? That in itself should be a basis for coming to this. If -- If the Delaware court excluded the petitioners from defending, by standing on the federal rates, that in -- that denial or that exclusion itself is a denial of a federal right.
Charles V. Wheeler: Oh, yes.
Felix Frankfurter: I think the answer to -- that's the conclusive answer to Justice Stewart's question.
Potter Stewart: That might -- yes. That might give you a ground for asking us to grant certiorari. But my only question is, how did they pass on that already?
Charles V. Wheeler: Well --
Potter Stewart: How could they said it's not a good defense?
Charles V. Wheeler: Oh, I -- the Delaware trial court has overruled the petitioners' motion for summary judgment. And in doing so, they have held that the Kansas minimum price order, in their view, is a nullity whether filed or not. Now, of course, the order overruling the motion for new -- for summary judgment is not an appealable order, either under the Delaware practice or in the federal courts. And so that ruling -- there has never been an order of any court which decided that in a posture from which there could be taken an appeal. That --
William J. Brennan, Jr.: And that issue was not before the Supreme Court on the writ -- application for (Voice Overlap) --
Charles V. Wheeler: Not -- no, sir, it was not.
Felix Frankfurter: And therefore isn't here.
Charles V. Wheeler: That's correct.
Felix Frankfurter: And therefore isn't here.
Charles V. Wheeler: That's right. It's not here.
Potter Stewart: It's only a matter of jurisdiction before the (Inaudible)
Charles V. Wheeler: That's correct, yes.
Potter Stewart: By reason of the fact that a writ of prohibition, and that's all there could be there?
Charles V. Wheeler: That's right. I would not like to leave this evening without making particular the point that in my argument tomorrow, I will show that petitioners do not have a good defense of this case when it is tried on its merits. And that petitioners filed rates are the contract rates, wholly unaffected and unmodified by the (Voice Overlap)
Potter Stewart: But why -- why do we have to do that?
Felix Frankfurter: Why do you do that?
Charles V. Wheeler: Well, I don't think -- the only reason it's significant at all is because they make the argument
Felix Frankfurter: So far as you (Inaudible) you must answer every argument that could be irrelevant.
Charles V. Wheeler: Well, of course, I -- has state the hazard to (Inaudible) I was wrong in it being irrelevant.[Laughter]
Potter Stewart: Well, the fact is you began by saying there are two separate problems and of course, there are ones in jurisdiction and the -- of the state court, the other is in the merits but they are not, as you suggested, as they often or not completely separated. They are somewhat in meshed, aren't they, here, in these cases?
Charles V. Wheeler: I don't -- I don't think they are meshed except as -- as the petitioners' seek to enmeshed them by -- by our view of jurisdictional questions with the others. I think they are clearly set forth.
Potter Stewart: That they can be --
Charles V. Wheeler: Yes.
Potter Stewart: -- is that it?
Charles V. Wheeler: I don't think it makes any difference that -- whether -- whether -- I don't think I have to show that I am going to win in the Delaware Superior Court for the Delaware Superior Court to have jurisdiction over my case.
Felix Frankfurter: More so that you can win here (Inaudible)
Charles V. Wheeler: That's correct, sir. I take it that it's recess time, Your Honor.
Earl Warren: Yes, it's -- it's 4:30 now.