Pan American Petroleum Corporation v. Texaco, Inc v. Superior Court of Delaware In and For New Castle County, s. 80

• Decision Date: 29 May 1961
• Docket Number: Nos. 80,81,s. 80
• Citation: 81 S.Ct. 1303,366 U.S. 656,6 L.Ed.2d 584
• Parties: PAN AMERICAN PETROLEUM CORPORATION, Petitioner, v. . TEXACO, INC., Petitioner, v. SUPERIOR COURT OF the State of DELAWARE IN AND FOR NEW CASTLE COUNTY et al
• Court: U.S. Supreme Court

366 U.S. 656

81 S.Ct. 1303

6 L.Ed.2d 584

PAN AMERICAN PETROLEUM CORPORATION, Petitioner,

v SUPERIOR COURT OF the State of DELAWARE IN AND FOR NEW

CASTLE COUNTY et al.

TEXACO, INC., Petitioner,

v. SUPERIOR COURT OF the State of DELAWARE IN AND FOR NEW

CASTLE COUNTY et al.

Nos. 80, 81.

Argued April 18, and 19, 1961.

Decided May 29, 1961.

Mr. Byron M. Gray, Topeka, Kan., for petitioner in No. 80.

Mr. Paul F. Schlicher, New York City, for petitioner in No. 81.

Mr. Charles V. Wheeler, Oklahoma City, Okl., for respondent, Cities Service Gas Co. in both cases.

Mr. Justice FRANKFURTER delivered the opinion of the Court.

This case presents for review the judgment of the Supreme Court of Delaware denying a petition for a writ of prohibition to prevent further proceedings before the Superior Court of the State of Delaware, in and for New Castle County, in actions by Cities Service Gas Company against petitioners involving contracts for the sale of natural gas by petitioners to Cities Service. The claim of petitioners is that the Natural Gas Act, 52 Stat. 821, as amended, 15 U.S.C. § 717 et seq., 15 U.S.C.A. § 717 et seq., has deprived state courts of jurisdiction over the subject matter of these cases. The sole question, both below and here, is whether the state courts had jurisdiction.¹ The impor- tance of the problems thereby raised justified their disposition here, so we granted the petition for certiorari. 363 U.S. 818, 80 S.Ct. 1258, 4 L.Ed.2d 1516.

Cities Service is a natural gas pipeline company. Petitioners are producers of natural gas. Cities Service purchases natural gas from petitioners and transports it through its pipelines, in interstate commerce, for sale to local distributing companies. During the period 1949—1951 Cities Service entered into contracts for the purchase of natural gas produced by petitioners from the Hugoton field in Kansas. In each instance the price agreed upon was less than eleven cents per thousand cubic feet (Mcf) measured on a pressure base of 14.65 pounds per square inch absolute (psia).

On December 2, 1953, the Corporation Commission of the State of Kansas promulgated an order, to take effect on January 1, 1954, fixing a minimum price of eleven cents per Mcf on a pressure base of 14.65 psia for gas taken from the Kansas Hugoton Field. The effect of this order was to require Cities Service to pay petitioners at a higher rate than those specified in the pre-existing contracts. Cities Service brought suit in the Kansas courts to obtain judicial review of the order.

On January 21, 1954, Cities Service advised each of the petitioners by letter of the Kansas minimum-rate order and of its suit for judicial review of that order, adding the following:

'Pending final judicial determination of the said Order and beginning January 1, 1954, Cities Service Gas Company intends to pay for all gas purchased by it in the Kansas Hugoton Field in strict compliance with the terms and conditions of the said Order.

Such compliance with said Order by this Company, however, is made to avoid the penalties and actions provided by the Kansas statutes for a violation thereof, and the payments made to you in compliance with said Order pending its final judicial determination are to be considered and accepted by you as involuntary payments on our part, without prj udice to our rights in said litigation, and in no event as an acquiescence by us in the validity of said Order.

'In the event the said Order is finally judicially modified or declared to be invalid in whole or in part, as a result of which you have been overpaid for gas purchased during the interim aforesaid, Cities Service Gas Company will expect you to refund to it the amount of said overpayment.'

Thereafter, each voucher check sent by Cities Service to petitioners in payment for gas purchased bore a notation stating that it was tendered 'subject to provisions' of the January 21, 1954, letter. Petitioners cashed these checks without objection to the conditions of their tender. Petitioner Pan American Petroleum Corporation (formerly Stanolind) wrote in reply to the Cities Service letter of January 21:

'We construe the last paragraph of said letter to mean that Cities will expect Stanolind to refund to it the amount of over-payments, if any, without any interest thereon should the said Order of December 2, 1953 be finally judicially modified or declared to be invalid in whole or in part by an adjudication which would be binding and controlling on Stanolind. We will, therefore, accept payments on this basis.'

Petitioner Texaco, Inc., acknowledged receipt of Cities Service's payment of February 25, 1954, by a letter dated March 2, 1954, without objection to the conditions of payment.

On June 7, 1954, this Court, in Phillips Petroleum Co. v. State of Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035, held that the jurisdiction of the Federal Power Commission extended to 'the rates of all wholesales of natural gas in interstate commerce, whether by a pipeline company or not and whether occurring before, during, or after transmission by an interstate pipeline company.' 347 U.S. at page 682, 74 S.Ct. at page 799. Following the Phillips decision, the Commission, in accordance with the provisions of the Natural Gas Act, on July 16, 1954, issued an order requiring independent producers to file with the Commission rate schedules setting forth the terms and conditions of service and all rates and charges for transportation or sales effective on June 7, 1954. 'Rate schedule' was defined to mean 'the basic contract and all supplements or agreements amendatory thereof, effective and applicable on and after June 7, 1954 * * *.' 18 CFR, 1960 Cum.Supp., § 154.93. In compliance with the Commission's directive, petitioner Texaco filed the basic contract between it and Cities Service, an amendatory letter, sample billing statements, the Kansas minimum-rate order, and the Cities Service letter of January 21, 1954. Petitioner Pan American filed its basic contract with Cities Service, a number of supplemental letters and agreements (not including the letter of January 21, 1954), a sample billing, and the Kansas order. With reference to that order, Pan American explained that it had been upheld by a court of competent jurisdiction and that therefore the gas sales contract had 'in effect' been 'amended thereby.'

On December 8, 1956, the Supreme Court of Kansas sustained the validity of the Kansas Corporation Commission's minimum-rate order, Cities Service Gas Co. v. State Corporation Comm., 180 Kan. 454, 304 P.2d 528, but on January 20, 1958, that decision was reversed here, Cities Service Gas Co. v. State Corporation Comm., 355 U.S. 391, 78 S.Ct. 381, 2 L.Ed.2d 355.

In complaints filed in the Superior Court of Delaware in June of 1958, Cities Service set forth the original contracts between the parties, the Kansas minimum-rate order and its bearing on the contractually determined prices, the letter of January 21, 1954, the voucher checks, other relevant correspondence, and this Court's reversal of the Kansas Supreme Court's decision upholding the order's validity. On the basis of these allegations Cities Service sued for overcharges by Texaco in the sum of $412,995.95 and Pan American of $10,324,468.67, paid under compulsion of the Kansas order for a § purchased at rates higher than those stipulated by contract. After intermediate procedural steps, the defendants moved for summary judgments, which were denied. There followed this petition for a writ of prohibition, attacking the jurisdiction of the Superior Court to entertain the actions brought by Cities Service.

The Supreme Court of Delaware sustained the jurisdiction of the Superior Court over these causes, stating that the claims of Cities Service 'are not founded upon any liability created by the Natural Gas Act, but upon a private contract deriving its force from state law.' (Emphasis in the original.) Columbian Fuel Corp. v. Superior Court, 52 Del. —-, 158 A.2d 478, 482.

'It is certainly true that the adjudication of these claims does entail an examination of the provisions of the Natural Gas Act, the regulations of the Commission, and the applicable federal decisions. But these have been brought into the cases by way of defense to complaints which, on their face, are based on nothing more than contracts to refund amounts measured by the contract or 'filed' rate and the rate fixed by the Kansas order. The general rule is that in such a case the plaintiff's suit is not one arising under federal law. * * *' 52 Del. at page —-, 158 A.2d at page 483.

The argument against this conclusion runs as follows. Under the Natural Gas Act the prices to be paid for natural gas sold wholesale in interstate commerce must be in accordance with the rates filed with the Federal Power Commission. Since the suits instituted by Cities Service involve rates so filed, they must either be to enforce a filed rate or to challenge a filed rate. If the former, they are subject to § 22 of the Act, which provides, for present purposes, that 'The District Courts of the United States * * * shall have exclusive jurisdiction of violations of this (statute) 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 (statute) or any rule, regulation, or order thereunder.' 52 Stat. 833, 15 U.S.C. § 717u, 15 U.S.C.A. § 717u. If the latter, they lie within the purview of § 19 of the Act, which provides for review of Commission orders in the United States Courts of Appeals. 52 Stat. 831, 15 U.S.C. § 717r, 15 U.S.C.A. § 717r. In either case, the state courts are deprived of jurisdiction.

But questions of exclusive federal jurisdiction and ouster of jurisdiction of state courts are, under existing jurisdictional legislation, not determined by ultimate substantive issues of federal law. The answers depend on...