386 U.S. 129 (1967), 4, Cascade Natural Gas Corp. v. El Paso Natural Gas Co.

Docket Nº:No. 4
Citation:386 U.S. 129, 87 S.Ct. 932, 17 L.Ed.2d 814
Party Name:Cascade Natural Gas Corp. v. El Paso Natural Gas Co.
Case Date:February 27, 1967
Court:United States Supreme Court
 
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Page 129

386 U.S. 129 (1967)

87 S.Ct. 932, 17 L.Ed.2d 814

Cascade Natural Gas Corp.

v.

El Paso Natural Gas Co.

No. 4

United States Supreme Court

Feb. 27, 1967

Argued January 12, 1967

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF UTAH

Syllabus

Almost three years ago, this Court directed the District Court to order "without delay" that appellee El Paso Natural Gas Co. divest itself of the Pacific Northwest Pipeline Corp., whose acquisition by El Paso was found to have violated § 7 of the Clayton Act. United States v. El Paso Natural Gas Co., 376 U.S. 651, 662. Following remand, leave was unsuccessfully sought under Rule 24(a) of the Federal Rules of Civil Procedure to intervene in the divestiture proceedings by various parties, including appellants, the State of California, where El Paso sells most of its gas; Southern California Edison, a large industrial natural gas user in California, and Cascade Natural Gas, a distributor in Oregon and Washington, whose sole supplier of natural gas was Pacific Northwest. Rule 24(a)(3) then provided for intervention of right when the applicant is "so situated" as to be "adversely affected by . . . disposition of property" under court control. Amended Rule 24(a)(2), which became effective after the intervention motions were denied, provides for intervention of right

when the applicant claims an interest relating to the property . . . and he is so situated that the disposition of the action may, as a practical matter, impair or impede his ability to protect that interest

unless it is adequately represented by existing parties. The District Court thereafter approved a divestiture plan whereby a New Company would be formed by El Paso to receive the properties and assets which El Paso received from Pacific Northwest. Appellants, claiming that the conditions under which the New Company would be established would fail to create a competitive pipeline in keeping with this Court's mandate, appealed from the District Court's denial of their motions to intervene.

Held:

1. The District Court erred in denying appellants the right to intervene in the divestiture proceedings. Pp. 133-136.

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(a) The category under old Rule 24(a)(3) of "so situated" as to be "adversely affected," by disposition of property was not limited exclusively to those with an interest in property. Pp. 133-135.

(b) Protection of California interests in a competitive system was "at the heart of our mandate" directing divestiture (cf. Missouri-Kansas Pipe Line Co. v. United States, 312 U.S. 502, 506). Both the State of California and Southern California Edison qualified as intervenors of right under old Rule 24(a)(3). P. 135.

(c) Since the entire merits of the case must be reopened to give those parties an opportunity to be heard as of right as intervenors, the new Rule 24(a)(2), which is applicable to "further proceedings" in pending actions, is broad enough to include Cascade as an intervenor as of right, since it has "an interest," not otherwise adequately represented, in the "transaction which is the subject of this action." Pp. 135-136.

2. Though the Attorney General has the right to settle litigation, such "settlement" cannot circumscribe the execution of this Court's mandate. P. 136.

3. The following guidelines are suggested for the new decree:

(a) The New Company's gas reserves must not be proportionately less to the existing reserves than those which Pacific Northwest had when it was independent, and reserves developed after the merger must, after thorough hearings, be equitably divided between El Paso and the New Company. Pp. 136-137.

(b) The terms of gas acquisition contracts should be negotiated by the New Company, after full opportunity to evaluate their advisability, under such restrictions as the Natural Gas Act may impose. Pp. 137-138.

(c) The competitive position of the New Company and its financial viability must be comparable to that which Pacific Northwest enjoyed before the illegal merger obliterated it. P. 138.

(d) The severance of the illegal combination, whether by sale to outside interests or otherwise, must be swiftly made, and effected in such a manner as to ensure that the New Company's stock does not end up under control of El Paso interests. Pp. 138-142.

4. A District Judge different from the one who heard the case before shall be assigned to hear the case on remand. Pp. 142-143.

Reversed and remanded.

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DOUGLAS, J., lead opinion

[87 S.Ct. 935] MR. JUSTICE DOUGLAS delivered the opinion of the Court.

When this case was here the last time,1 we held that the acquisition of Pacific Northwest Pipeline Corporation by El Paso Natural Gas Company violated § 7 of the Clayton Act, and we directed the District Court "to order divestiture without delay." United States v. El Paso Natural Gas Co., 376 U.S. 651, 662. That was on April 6, 1964. It is now nearly three years later, and, as we shall see, no divestiture in any meaningful sense has been directed. The United States, now an appellee, maintains that the issues respecting divestiture are not

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before us. The threshold question does indeed involve another matter. Appellants were denied intervention by the District Court, and came here by way of appeal, 32 Stat. 823, 15 U.S.C. § 29. We noted probable jurisdiction. 382 U.S. 970.

I

The initial question concerning intervention turns on a construction of Rule 24(a) of the Federal Rules of Civil Procedure, entitled "Intervention of Right." At the time the District Court ruled on the motions, that Rule provided, in relevant part,

Upon timely application anyone shall be permitted to intervene in an action . . . (3) when the applicant is so situated as to be adversely affected by . . . disposition of property which is in the custody or subject to the control or disposition of the court or an officer thereof.

As amended effective July 1, 1966, subsequent to the time these motions to intervene were denied, Rule 24(a)(2) provides that there may be intervention of right

when the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action may, as a practical matter, impair or impede his ability to protect that interest, unless the applicant's interest is adequately represented by existing parties.

California, one of the appellants, is a State where El Paso sells most of its gas, and its purpose in intervening was to assure that Pacific Northwest, illegally merged with El Paso, or its successor, would be restored as an effective competitor in California. As we noted in the prior opinion, Pacific Northwest had been "a substantial factor in the California market at the time it was acquired by El Paso." 376 U.S. at 658. It was to restore that "competitive factor" that divestiture was ordered. Id. at 658-662. Southern California Edison, another

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appellant, is a large industrial user of natural gas purchasing from El Paso sources and desirous of retaining competition in California. Cascade Natural Gas is a distributor in Oregon and Washington, and its sole supplier of natural gas was Pacific Northwest, and will be the New Company created under the divestiture plan. Cascade maintains that there has been a grossly unfair division of gas reserves between El Paso and the New Company, particularly in the southwest field known as the San Juan Basin. Moreover, the District Court approved contracts between El Paso and the New Company for delivery of gas both from Canada and from the San Juan Basin, and allowed El Paso, unilaterally and without application to the Federal Power Commission, to saddle new and allegedly onerous prices and other conditions on the New Company. Moreover, the stock of West Coast Transmission Co., Ltd., was ordered sold for the benefit of El Paso. Pacific Northwest had owned about a fourth of West Coast Transmission's stock, and that ownership [87 S.Ct. 936] gave Pacific Northwest, it is said, special insight into and access to the Canadian gas supply. These factors, implicating the ability of Pacific Northwest to perform in the future, give Cascade, it is argued, standing to intervene.

Under old Rule 24(a)(3), those "adversely affected" by a disposition of property would usually be those who have an interest in the property.2 But we cannot read it to mean exclusively that group.

Rule 24(a)(3) was not merely a restatement of existing federal practice at law and in equity. If it had been, there would be force in the argument that the rigidity of the older cases remains unaltered, restricting intervention as of right very narrowly, as, for example, where there is a fund in court to which a third party asserts

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a right that would be lost absent intervention. Credits Commutation Co. v. United States, 177 U.S. 311, 316; Central Trust Co. v. Chicago, R.I. & P. R. Co., 218 F. 336, 339. But the Advisory Committee stated that Rule 24 "amplifies and restates the present federal practice at law and in equity." We therefore know that some elasticity was injected,3 and the question is, how much. As stated by the Court of Appeals for the Second Circuit in the Central Trust Co. case, "It is not always easy to draw the line." Ibid.

In Missouri-Kansas Pipe Line Co. v. United States, 312 U.S. 502, a consent decree was entered in an antitrust suit, designed to protect Panhandle from Columbia which had acquired domination of the former to stifle

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its competition. The decree sought to assure opportunities for competition by Panhandle. A security holder of Panhandle sought to intervene on Panhandle's behalf when the consent decree was reopened, and was denied that right. We reversed, noting at the outset that

the circumstances under which interested outsiders should be allowed to become participants in a litigation is, barring very special circumstances, a matter for...

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