Skelly Oil Co v. Phillips Petroleum Co

• Citation: 94 L.Ed. 1194,339 U.S. 667,70 S.Ct. 876
• Decision Date: 05 June 1950
• Docket Number: No. 221,221
• Parties: SKELLY OIL CO. et al. v. PHILLIPS PETROLEUM CO
• Court: U.S. Supreme Court

339 U.S. 667

70 S.Ct. 876

94 L.Ed. 1194

SKELLY OIL CO. et al.

v PHILLIPS PETROLEUM CO.

No. 221.

Argued Dec. 9, 1949.

Decided June 5, 1950.

Mr. Charles L. Black, Austin, Tex., for petitioners.

Mr. Harry D. Turner, Oklahoma City, Okl., for respondent.

[Argument of Counsel from page 668 intentionally omitted] Mr. Justice FRANKFURTER delivered the opinion of the Court.

In 1945, Michigan-Wisconsin Pipe Line Company sought from the Federal Power Commission a certificate of public convenience and necessity, required by § 7(c) of the Natural Gas Act, 52 Stat. 825, as amended, 15 U.S.C. § 717f(c), 15 U.S.C.A. § 717f(c), for the construction and operation of a pipe line to carry natural gas from Texas to Michigan and Wisconsin. A prerequisite for such a certificate is adequate reserves of gas. To obtain these reserves Michigan-Wisconsin entered into an agreement with Phillips Petroleum Company on December 11, 1945, whereby the latter undertook to make available gas from the Hugoton Gas Field, sprawling over Kansas, Oklahoma and Texas, which it produced or purchased from others. Phillips had contracted with petitioners, Skelly Oil Company, Stanolind Oil and Gas Company, and Magnolia Petroleum Company, to purchase gas produced by them in the Hugoton Field for resale to Michigan-Wisconsin. Each contract provided that 'in the event Michigan-Wisconsin Pipe Line Company shall fail to secure from the Federal Power Commission on or before (October 1, 1946) a certificate of public convenience and necessity for the construction and operation of its pipe line, Seller (a petitioner) shall have the right to terminate this contract by written notice to Buyer (Phillips) delivered to Buyer at any time after December 1, 1946, but before the issuance of such certificate.' The legal significance of this provision is at the core of this litigation.

The Federal Power Commission, in response to the application of Michigan-Wisconsin, on November 30, 1946, ordered that 'A certificate of public convenience and necessity be and it is hereby issued to applicant (Michigan-Wisconsin), upon the terms and conditions of this order,' listing among the conditions that there be no transporta- tion or sale of natural gas by means of the sanctioned facilities until all necessary authorizations were obtained from the State of Wisconsin and the communities proposed to be served, that Michigan-Wisconsin should have the approval of the Securities and Exchange Commission for its plan of financing, that the applicant should file for the approval of the Commission a schedule of reasonable rates, and that the sanctioned facilities should not be used for the transportation of gas to Detroit and Ann Arbor except with due regard for the rights and duties of Panhandle Eastern Pipe Line Company, which had intervened before the Federal Power Commission, in its established service for resale in these areas, such rights and duties to be set forth in a supplemental order. It was also provided that Michigan-Wisconsin should have fifteen days from the issue of the supplemental order to notify the Commission whether the certificate 'as herein issued is acceptable to it.' Finally, the Commission's order provided that for purposes of computing the time within which applications for rehearing could be filed, 'the date of issuance of this order shall be deemed to be the date of issuance of the opinions, or of the supplemental order referred to herein, whichever may be later.' 5 F.P.C. 953, 954, 956.

News of the Commission's action was released on November 30, 1946, but the actual content of the order was not made public until December 2, 1946. Petitioners severally, on December 2, 1946, gave notice to Phillips of termination of their contracts on the ground that Michigan-Wisconsin had not received a certificate of public convenience and necessity. Thereupon Michigan-Wisconsin and Phillips brought suit against petitioners in the District Court for the Northern District of Oklahoma. Alleging that a certificate of public convenience and necessity, 'within the meaning of said Natural Gas Act and said contracts' had been issued prior to petitioners' at- tempt at termination of the contracts, they invoked the Federal Declaratory Judgment Act for a declaration that the contracts were still 'in effect and binding upon the parties thereto.' Motions by petitioners to have Michigan-Wisconsin dropped as a party plaintiff were sustained, but motions to dismiss the complaint for want of jurisdiction were denied. The case then went to the merits, and the District Court decreed that the contracts between Phillips and petitioners have not been 'effectively terminated and that each of such contracts remain (sic) in full force and effect.' The Court of Appeals for the Tenth Circuit affirmed, 174 F.2d 89, and we brought the case here, 338 U.S. 846, 70 S.Ct. 88, because it raises in sharp form the question whether a suit like this 'arises under the Constitution, laws or treaties of the United States,' 28 U.S.C. § 1331, 28 U.S.C.A. § 1331, so as to enable District Courts to give declaratory relief under the Declaratory Judgment Act. 48 Stat. 955, as amended, now 28 U.S.C. § 2201, 28 U.S.C.A. § 2201.

'(T)he operation of the Declaratory Judgment Act is procedural only.' Aetna Life Ins. Co. of Hartford, Conn. v. Haworth, 300 U.S. 227, 240, 57 S.Ct. 461, 463, 81 L.Ed. 617, 108 A.L.R. 1000. Congress enlarged the range of remedies available in the federal courts but did not extend their jurisdiction. When concerned as we are with the power of the inferior federal courts to entertain litigation within the restricted area to which the Constitution and Acts of Congress confine them, 'jurisdiction' means the kinds of issues which give right of entrance to federal courts. Jurisdiction in this sense was not altered by the Declaratory Judgment Act. Prior to that Act, a federal court would entertain a suit on a contract only if the plaintiff asked for an immediately enforceable remedy like money damages or an injunction, but such relief could only be given if the requisites of jurisdiction, in the sense of a federal right or diversity, provided foundation for resort to the federal courts. The Declaratory Judgment Act allowed relief to be given by way of recognizing the plain- tiff's right even though no immediate enforcement of it was asked. But the requirements of jurisdiction—the limited subject matters which alone Congress had authorized the District Courts to adjudicate—were not impliedly repealed or modified. See Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 300, 63 S.Ct. 1070, 1074, 87 L.Ed. 1407; Colegrove v. Green, 328 U.S. 549, 551 552, 66 S.Ct. 1198, 1199, 90 L.Ed. 1432.

If Phillips sought damages from petitioners or specific performance of their contracts, it could not bring suit in a United States District Court on the theory that it was asserting a federal right. And for the simple reason that such a suit would 'arise' under the State law governing the contracts. Whatever federal claim Phillips may be able to urge would in any event be injected into the case only in anticipation of a defense to be asserted by petitioners. 'Not every question of federal law emerging in a suit is proof that a federal law is the basis of the suit.' Gully v. First National Bank in Meridian, 299 U.S. 109, 115, 57 S.Ct. 96, 99, 81 L.Ed. 70; compare 28 U.S.C. § 1257, 28 U.S.C.A. § 1257, with 28 U.S.C. § 1331, 28 U.S.C.A. § 1331. Ever since Metcalf v. City of Watertown, 128 U.S. 586, 589, 9 S.Ct. 173, 174, 32 L.Ed. 543, it has been settled doctrine that where a suit is brought in the federal courts 'upon the sole ground that the determination of the suit depends upon some question of a federal nature, it must appear, at the outset, from the declaration or the bill of the party suing, that the suit is of that character.' But 'a suggestion of one party that the other will or may set up a claim under the Constitution or laws of the United States does not make the suit one arising under that Constitution or those laws.' State of Tennessee v. Union & Planters' Bank, 152 U.S. 454, 464, 14 S.Ct. 654, 657, 38 L.Ed. 511. The plaintiff's claim itself must present a federal question 'unaided by anything alleged in anticipation of avoidance of defenses which it is thought the defendant may interpose.' Taylor v. Anderson, 234 U.S. 74, 75—76, 34 S.Ct. 724, 58 L.Ed. 1218; Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 43, 53 L.Ed. 126.

These decisions reflect the current of jurisdictional legislation since the Act of March 3, 1875, 18 Stat. 470, first entrusted to the lower federal courts wide jurisdiction in cases 'arising under this Constitution, the Laws of the United States, and Treaties.' U.S.Const. Art. III, § 2. 'The change is in accordance with the general policy of these acts, manifest upon their face, and often recognized by this court, to contract the jurisdiction of the circuit courts (which became the District Courts) of the United States.' State of Tennessee v. Union & Planters' Bank, supra, 152 U.S. at page 462, 14 S.Ct. at page 657. See also State of Arkansas v. Kansas & Texas Coal Co., 183 U.S. 185, 188, 22 S.Ct. 47, 48, 46 L.Ed. 144, and Gully v. First National Bank in Meridian, supra, 299 U.S. at pages 112—114, 57 S.Ct. at pages 97, 98. With exceptions not now relevant, Congress has narrowed the opportunities for entrance into the federal courts, and this Court has been more careful than in earlier days in enforcing these jurisdictional limitations. See Gully v. First National Bank in Meridian, supra, 299 U.S. at page 113, 57 S.Ct. at pages 97, 98.

To be observant of these restrictions is not to indulge in formalism or sterile technicality. It would turn into the federal courts a vast current of litigation indubitably arising under State law, in the sense that the right to be vindicated was State-created, if a suit for a declaration of rights could be brought into the...