Cascade Natural Gas Corporation v. El Paso Natural Gas Co People of State of California v. El Paso Natural Gas Co Southern California Edison Co v. El Paso Natural Gas Co, s. 4

• Decision Date: 27 February 1967
• Docket Number: Nos. 4,5,24,s. 4
• Citation: 17 L.Ed.2d 814,386 U.S. 129,87 S.Ct. 932
• Parties: CASCADE NATURAL GAS CORPORATION, Appellant, v. EL PASO NATURAL GAS CO. et al. PEOPLE OF the STATE OF CALIFORNIA, Appellant, v. EL PASO NATURAL GAS CO. et al. SOUTHERN CALIFORNIA EDISON CO., Appellant, v. EL PASO NATURAL GAS CO. et al
• Court: U.S. Supreme Court

386 U.S. 129

87 S.Ct. 932

17 L.Ed.2d 814

CASCADE NATURAL GAS CORPORATION, Appellant,

v EL PASO NATURAL GAS CO. et al.

PEOPLE OF the STATE OF CALIFORNIA, Appellant,

v. EL PASO NATURAL GAS CO. et al.

SOUTHERN CALIFORNIA EDISON CO., Appellant,

v. EL PASO NATURAL GAS CO. et al.

Nos. 4, 5, 24.

Argued Jan. 12, 1967.

Decided Feb. 27, 1967.

[Syllabus from pages 129-131 intentionally omitted] William M. Bennett, San Francisco, Cal., Rollin E. Woodbury, Los Angeles, Cal., and Richard B. Hooper, Seattle, Wash., for appellants.

Daniel Friedman, Deputy Sol. Gen., and Gregory A. Harrison, San Francisco, Cal., for appellees.

Richard W. Sabin, Salem, Ore., for State of Oregon, as amicus curiae, by special leave of Court.

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, 84 S.Ct. 1044, 1050, 12 L.Ed.2d 12. 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 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, 86 S.Ct. 528, 15 L.Ed.2d 463.

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, 84 S.Ct., at 1048. It was to restore that 'competitive factor' that divestiture was ordered. Id., at 658—662, 84 S.Ct., at 1048—1050. Southern California Edison, another appellants, 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 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 a right that would be lost absent intervention. Credits Commutation Co. v. United States, 177 U.S. 311, 316, 20 S.Ct. 636, 638, 44 L.Ed. 782; Central Trust Co. of New York v. Chicago, R.I. & P.R. Co., 2 Cir., 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, 665, 61 S.Ct. 666, 85 L.Ed. 975, a consent decree was entered in an antitrust suit, designed to protect Panhandle from Columbia which had acquired domination of the former to stifle 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 the nisi prius court. But where the enforcement of a public law also demands distinct safeguarding of private interests by giving them a formal status in the decree, the power to enforce rights thus sanctioned is not left to the public authorities not put in the keeping of the district court's discretion.' Id., at 506, 61 S.Ct., at 668.

We noted that Panhandle's economic independence was 'at the heart of the controversy.' Ibid. In the present case protection of California interests in a competitive system was at the heart of our mandate directing divestiture. For it was the absorption of Pacific Northwest by El Paso that stifled that competition and disadvantaged the California interests. It was indeed their interests, as part of the public interest in a competitive system, that our mandate was designed to protect. In that sense the present case is very close to Pipe Line Co. Apart from that but in the spirit of Pipe Line Co. we think that California and Southern California Edison qualify as intervenors under Rule 24(a)(3). Certainly these two appellants are 'so situated' geographically as to be 'adversely affected' within the meaning of Rule 24(a)(3) by a merger that reduces the competitive factor in natural gas available to Californians. We conclude that it was error to deny them intervention. We need not decide whether Cascade could have intervened as of right under that Rule. For there is now in effect a new version of Rule 24(a) which in subsection (2) recognizes as a proper element in intervention 'an interest' in the 'transaction which is the subject of the action.' This Rule applies to 'further proceedings' in pending actions. 383 U.S. 1031. Since the entire merits of the case must be reopened to give California and Southern California Edison an opportunity to be heard as of right as intervenors, we conclude that the new Rule 24(a)(2) is broad enough to include Cascade also; and as we shall see the 'existing parties' have fallen far short of representing its interests. We therefore reverse the District Court in each of these appeals and remand with directions to allow each appellant to intervene as of right, to vacate the order of divestiture and to have de novo hearings on the type of divestiture we envisioned and made plain in our opinion in 376 U.S. 651, 84 S.Ct. 1044.

II.

The necessity for new hearings needs a word of explanation.

The United States on oral argument stated that the decree to which it agreed and which it urges us to approve was made in 'settlement' of the litigation. We do not question the authority of the Attorney General to settle suits after, as well as before, they reach here. The Department of Justice, however, by stipulation or otherwise has no authority to circumscribe the power of the courts to see that our mandate is carried out. No one, except this Court, has authority to alter or modify our mandate. United States v. E. I. du Pont De Nemours & Co., 366 U.S. 316, 325, 81 S.Ct. 1243, 1249, 6 L.Ed.2d 318. Our direction was that the District Court provide for 'divestiture without delay.' That mandate in the context of the opinion plainly meant that Pacific Northwest or a new company be at once restored to a position where it could compete with El Paso in the California market.

We do not undertake to write the decree. But we do suggest guidelines that should be followed:

Gas Reserves. The gas reserves granted the New Company must be no less in relation to present existing reserves than Pacific Northwest had when it was independent; and the new gas reserves developed since the merger must be equitably divided between El Paso and the New Company. We are told by the intervenors that El Paso gets the new...