Court Opinion

ID: 8903589
Source: CourtListenerOpinion
Date Created: 2022-11-27 01:30:27.865549+00
Date Added: 2024-06-11T17:08:01.208209
License: Public Domain

ALDISERT, Circuit Judge,
dissenting.
With the majority, I agree that the Commission properly construed Gulf’s daily delivery obligation under the contract. My disagreement with the majority, however, while tracking a narrow compass, requires a different result. I believe that Gulf’s petition for review should be granted to the extent that it argues that the Federal Power Commission erred in refusing to defer its decision on the questions submitted to the arbitrator until it received the decision of the board of arbitrators.1
My starting point is the strong federal policy favoring enforcement of arbitration when the parties have mutually agreed to so resolve contract interpretation disputes. Thus, in cases arising under the Federal Arbitration Act, 9 U.S.C. §§ 1-14, it has been determined that “any doubts as to the construction of the Act ought to be resolved in line with its liberal policy of promoting arbitration both to accord with the original intention of the parties and to help ease the current congestion of court calendars. Such policy has been consistently reiterated by the federal courts and we think it deserves to be heartily endorsed.” Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402, 410 (2d Cir. 1959) (citations omitted).
*615Coexistent with this congressionally-de-elared public policy is the root source of arbitration, the law of contracts, which directs that once parties have covenanted that arbitration shall be the method of resolving disputes, the parties should be held to that arbitration agreement. Gulf and Texas Eastern entered into a bargain relating to the delivery of natural gas. That bargain was reduced to a written contract containing a clear arbitration clause providing that “[a]ny dispute arising between Seller and Buyer out of this Agreement shall be determined by a board of three arbitrators . . . .” The Commission has conceded that the certificate issued by the FPC “accepted the contract with its arbitration provision”2 Thus, we not only have parties to the contract agreeing that disputes over contract interpretation shall be first submitted to arbitration, but we have a situation where the Commission has approved that method as a first step to dispute resolution.
The Commission nevertheless concluded that because this proceeding involves “a matter of importance to the public,” it, and not the arbitrators, should first decide the three issues submitted by Gulf to arbitration.3 In American Safety Equipment Corp. v. J. P. Maguire & Co., 391 F.2d 821, 825-29 (2d Cir. 1968), perhaps the strongest support for the Commission’s position, the arbitration agreement at issue was itself attacked as “an instrument of illegality”. Id. at 827. Determining that such a claim under the antitrust laws was not merely a private matter, the court concluded that the antitrust claims raised were not appropriate *616for arbitration due to “the pervasive public interest in the enforcement of the antitrust laws, and the nature of the claims that arise in such cases.” Id. at 827-28. At first glance, this reasoning appears to support the Commission’s conclusion in the present case, that because the delivery of natural gas involves a matter of importance to the public, it should not defer its action until the arbitrators have acted.
But this argument ignores the unique procedures available in the case before us. Unlike the circumstances in American Safety, here a federal agency which proposes to circumvent the arbitration forum had the opportunity to intervene before there was any performance under the agreement. When it issued a certificate of public convenience to Gulf, the Commission had the authority to approve or reject the contract between Gulf and Texas Eastern in whole or in part. If the delivery of natural gas is, in the Commission’s words, “a matter of importance to the public,” and if “[wjhether or not Gulf is living up to its contract and to its certificate is a matter of deep concern to the Commission in meeting its responsibility under the Natural Gas Act,” then the Commission had an obligation to reject that portion of the contract calling for arbitration of disputes between the parties to the contract at the time the contract was submitted to it for approval. Dictates of sound reason and fair justice demand that it should have asserted that position to the parties at the time the contract was submitted as the basis for the certificate.
Simply put, the Commission cannot have it both ways. It cannot approve a contract as the basis of a certificate in the public interest and later, after performance by the parties, abrogate crucial portions of the approved contract ostensibly in the same public interest. Although cloaked with much authority, the Commission has no power to rewrite a contract it has approved.
The arbitration clause clearly called for “interpretation of a contract of the parties concerning the sale and delivery of natural gas in interstate commerce.” If such a clause is an anathema to the FPC, it should reject any contract containing such a provision. It did not. It approved the contract containing this clause. Having approved the contract with the arbitration clause, the FPC cannot later say that deferring to this procedure would be “unconscionable”. Rather, the reverse would seem to be true. To me it is unconscionable for any federal agency to renege on any contractual procedure it has previously approved, and upon which it has issued a certificate of public necessity.
Thus, just as our mightiest corporations and industries — entities which greatly affect the public interest — are bound by arbitration clauses in labor and commercial matters, here the parties and the FPC are bound to the arbitration clause under the dictates of both federal policy and the contract language. The Commission’s apparent position that it possesses specialized knowledge gained from experience in the regulation of industry, e. g., Texas Gas Corp. v. Shell Oil Co., 363 U.S. 263, 80 S.Ct. 1122, 4 L.Ed.2d 1208 (1960); Michigan Consolidated Gas Co. v. Panhandle Eastern Pipeline Co., 226 F.2d 60 (6th Cir. 1955), cert. denied, 350 U.S. 987, 76 S.Ct. 473, 100 L.Ed. 853 (1956), which knowledge entitles its interpretation of contract provisions dealing with natural gas to greater weight than that of a court or a board of arbitrators,4 is of no avail. It misses what I consider to be the controlling issue at bar: it is not whose interpretation of the contract provisions ultimately prevails; rather, it is whether the parties and the Commission should be bound by their agreement as to the procedure for the initial resolution of interpretation conflicts. The Commission’s reliance on Sunray Mid-Continent Oil Co. v. F. P. C., 364 U.S. 137, 80 S.Ct. 1392, 4 *617L.Ed.2d 1623 (1970), and Sun Oil Co. v. F. P. C., 364 U.S. 170, 80 S.Ct. 1388, 4 L.Ed. 1639 (1960), is, in my view, irrelevant because these cases deal with the interpretation, not the procedure for initial interpretation. Only after the arbitrators’ decision is reached should the Commission, and ultimately the courts, be permitted to decide any possible conflict between the legal precept that “[i]t is the arbitrator’s construction which was bargained for,” United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 599, 80 S.Ct. 1358, 1362, 4 L.Ed.2d 1424 (1960), and the FPC contention that because the three matters submitted to arbitration are matters requiring special expert knowledge, the arbitrators’ interpretation will not be honored.
If the Commission wishes to commit its expert knowledge to the interpretation of all contractual provisions dealing with the distribution of natural gas, then, as a matter of policy, it should refuse to approve contracts between producers and distributors that contain arbitration provisions. But once it has given its approval, as it did here, it cannot blithely turn its face against the overriding important federal policy favoring arbitration.
Accordingly, I dissent from the denial of the petition to review the Commission’s order.

. As stated by the Commission, there are before the arbitrators three questions:
(1) whether Gulfs obligation for delivery of gas to Texas Eastern is limited to gas produced in the vicinity of the delivery points, (2) whether Gulf by reason of the mistakes as to gas reserves in West Delta Block 27 is excused from delivering the DCQ as provided in the contract, and (3) whether the failure of the Department of the Interior to hold regular general offshore Louisiana lease sales constituted an act of force majeure to relieve Gulf of its obligations.
Opinion No. 780 at 296A.

. Opinion No. 780 at 297A.

. The Commission’s discussion on this subject follows:
Gulf argues that because the Commission certificated the 1964 contract between Gulf and Texas Eastern, including the arbitration provision (Article XI), the question of the nature and extent of Gulfs obligations under the contract is properly before the arbitration board and is not within the primary jurisdiction of the Commission and therefore in a proper and reasonable exercise of its jurisdiction the Commission should reserve its ruling in the instant proceeding until such time as it received the benefit of the arbitrators’ decision. In the opinion of the Commission this is not an appropriate case in which to defer decision.
There are before the arbitrators three questions: (1) whether Gulfs obligation for delivery of gas to Texas Eastern is limited to gas produced in the vicinity of the delivery points, (2) whether Gulf by reason of the mistakes as to gas reserves in West Delta Block 27 is excused from delivering the DCQ as provided in the contract, and (3) whether the failure of the Department of the Interior to hold regular general offshore Louisiana lease sales constituted an act of force maj-eure to relieve Gulf of its obligations. These are largely technical matters relating to Gulfs service under its certificate. Thus the effect of designating a delivery point and defining what might be its vicinity, the effect of a mistake as to gas reserves and the effect of a moratorium on offshore leases on the ability of Gulf to deliver gas are matters peculiarly within the subject matter of this Commission’s authority. In Michigan Consolidated Gas Co. v. Panhandle Eastern Pipeline Co., 226 F.2d 60 (CA6-1955), certiorari denied, 350 U.S. 987, 76 S.Ct. 473, 100 L.Ed. 853 (1956), cited by Gulf, the Court said that intricate problems of service and problems of changing industrial conditions and growing needs of natural gas do not lend themselves in-the first instance to hearing before a court and require the expertise of the Commission. The court contrasts these matters with the usual questions of law and fact which a court is authorized to handle and which require no special expert knowledge. The questions here belong in the first category and are properly considered by the Commission prior to submission to an arbitration board or a court. While our certificate accepted the contract with its arbitration provision, this did not mean that questions within the peculiar competence of the Commission must be first put before the board but rather the contractual matters that a court would handle.
Furthermore, this proceeding involves a matter of importance to the public. Whether or not Gulf is living up to its contract and to its certificate is a matter of deep concern to this Commission in mectmg its responsibilities under the Natural Gas Act. To defer further action until a board of arbitration issues an interpretation of the contract of the parties in a matter concerning the sale and delivery of gas in interstate commerce would at this juncture be unconscionable action on our part.
Opinion No. 780 at 295A-97A.

. Indeed, an inference can be drawn from the Commission’s brief that the Commission be-heves it should have exclusive, virtually non-reviewable authority in this respect.