Arkansas Louisiana Gas Company v. Hall

• Decision Date: 02 July 1981
• Docket Number: No. 78-1789,78-1789
• Citation: 453 U.S. 571,69 L.Ed.2d 856,101 S.Ct. 2925
• Parties: ARKANSAS LOUISIANA GAS COMPANY, Petitioner, v. Frank J. HALL et al
• Court: U.S. Supreme Court

453 U.S. 571

101 S.Ct. 2925

69 L.Ed.2d 856

ARKANSAS LOUISIANA GAS COMPANY, Petitioner,

v Frank J. HALL et al.

No. 78-1789.

Argued April 20, 1981.

Decided July 2, 1981.

Syllabus

In 1952, respondent natural gas producers and petitioner entered into a contract under which respondents agreed to sell petitioner natural gas from a certain gas field in Louisiana. The contract contained a fixed price schedule and a "favored nations clause," which provided that if petitioner purchased gas from the gas field from another party at a higher rate than it was paying respondents, then respondents would be entitled to a higher price for their sales to petitioner. In 1954, respondents filed the contract and their rates with the Federal Power Commission (now the Federal Energy Regulatory Commission) and obtained from it a certificate authorizing the sale of gas at the specified contract rates. In 1961, petitioner purchased certain leases in the same gas field from the United States and began producing gas on its leasehold. In 1974, respondents filed an action in a Louisiana state court, contending that petitioner's lease payments to the United States had triggered the favored nations clause. Because petitioner had not increased its payments to respondents as required by that clause, respondents sought as damages an amount equal to the difference between the price they actually were paid in the intervening years and the price they would have been paid had that clause gone into effect. Although finding that the clause had been triggered, the trial court held that the "filed rate doctrine," which prohibits a federally regulated seller of natural gas from charging rates higher than those filed with the Commission pursuant to the Natural Gas Act, precluded an award of damages for the period prior to 1972 (the time during which respondents were subject to the Commission's jurisdiction). The intermediate appellate court affirmed, but the Louisiana Supreme Court reversed, holding that respondents were entitled to damages for the period between 1961 and 1972 notwithstanding the filed rate doctrine. The court reasoned that petitioner's failure to inform respondents of the lease payments to the United States had prevented respondents from filing rate increases with the Commission, and that if they had done so the increases would have been approved.

Held: The filed rate doctrine prohibits the award of damages for petitioner's breach during the period that respondents were subject to the Commission's jurisdiction. Pp. 576-585.

(a) The Natural Gas Act bars a regulated seller of natural gas from collecting a rate other than the one filed with the Commission and prevents the Commission itself from imposing a rate increase for gas already sold. Here, the Louisiana Supreme Court's ruling amounts to nothing less than the award of a retroactive rate increase based on speculation about what the Commission might have done had it been faced with the facts of this case. This is precisely what the filed rate doctrine forbids. It would undermine the congressional scheme of uniform rate regulation to allow a state court to award as damages a rate never filed with the Commission and thus never found to be reasonable within the meaning of the Act. Pp. 576-579.

(b) Congress has granted exclusive authority over rate regulation to the Commission, and, in so doing, withheld the authority to grant retroactive rate increases or to permit collection of a rate other than the one on file. It would be inconsistent with this purpose to permit a state court to do through a breach-of-contract action what the Commission may not do. Under the filed rate doctrine, the Commission alone is empowered to approve the higher rate respondents might have filed with it, and until it has done so, no rate other than the one on file may be charged. The court below thus has usurped a function that Congress has assigned to a federal regulatory body. Cf.Chicago & North Western Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 101 S.Ct. 1124, 67 L.Ed.2d 258. This the Supremacy Clause will not permit. Pp. 579-582.

(c) Under the filed rate doctrine, when there is a conflict between the filed rate and the contract rate, the filed rate prevails. P. 582.

(d) Permitting the state court to award what amounts to a retroactive right to collect a rate in excess of the filed rate "only accentuates the danger of conflict," and no appeal to equitable principles can justify such usurpation of federal authority. Pp. 583584.

La., 368 So.2d 984, affirmed in part, vacated in part, and remanded.

Reuben Goldberg, Washington, D. C., for petitioner.

James Fleet Howell, Baton Rouge, La., for respondents.

Justice MARSHALL delivered the opinion of the Court.

The "filed rate doctrine" prohibits a federally regulated seller of natural gas from charging rates higher than those filed with the Federal Energy Regulatory Commission pursuant to the Natural Gas Act, 52 Stat. 821, as amended, 15 U.S.C. § 717 et seq. (1976 ed. and Supp. III). The question before us is whether that doctrine forbids a state court to calculate damages in a breach-of-contract action based on an assumption that had a higher rate been filed, the Commission would have approved it.

I

Respondents are producers of natural gas, and petitioner Arkansas Louisiana Gas Co. (Arkla) is a customer who buys their gas. In 1952, respondents ¹ and Arkla entered into a contract under which respondents agreed to sell Arkla natural gas from the Sligo Gas Field in Louisiana. The contract contained a fixed price schedule and a "favored nations clause." The favored nations clause provided that if Arkla purchased Sligo Field natural gas from another party at a rate higher than the one it was paying respondents, then respondents would be entitled to a higher price for their sales to Arkla.² In 1954, respondents filed with the Federal Power Commission (now the Federal Energy Regulatory Commission) ³ the contract and their rates and obtained from the Commission a certificate authorizing the sale of gas at the rates specified in the contract.

In September 1961, Arkla purchased certain leases in the Sligo Field from the United States and began producing gas on its leasehold. In 1974, respondents filed this state-court action contending that Arkla's lease payments to the United States had triggered the favored nations clause. Because Arkla had not increased its payments to respondents as required by the clause, respondents sought as damages an amount equal to the difference between the price they actually were paid in the intervening years and the price they would have been paid had the favored nations clause gone into effect.

In its answer, Arkla denied that its lease payments were purchases of gas within the meaning of the favored nations clause. Arkla subsequently amended its answer to allege in addition that the Commission had primary jurisdiction over the issues in contention. Arkla also sought a Commission ruling that its lease payments had not triggered the favored nations clause. The Commission did not act immediately, and the case proceeded to trial. The state trial court found that Arkla's payments had triggered the favored nations clause, but nonetheless held that the filed rate doctrine pre- cluded an award of damages for the period prior to 1972. The intermediate appellate court affirmed, 359 So.2d 255 (1978), and both parties sought leave to appeal. The Supreme Court of Louisiana denied Arkla's petition for appeal, 362 So.2d 1120 (1978), and Arkla sought certiorari in this Court on the question whether the interpretation of the favored nations clause should have been referred to the Commission. We denied the petition. 444 U.S. 878, 100 S.Ct. 166, 62 L.Ed.2d 108 (1979).

While Arkla's petition for certiorari was pending the Supreme Court of Louisiana granted respondents' petition for review and reversed the intermediate court on the measure of damages. 368 So.2d 984 (1979). The court held that respondents were entitled to damages for the period between 1961 and 1972 notwithstanding the filed rate doctrine. The court reasoned that Arkla's failure to inform respondents of the lease payments to the United States had prevented respondents from filing rate increases with the Commission, and that had respondents filed rate increases with the Commission, the rate increases would have been approved. Id., at 991. After the decision by the Supreme Court of Louisiana, the Commission in May 1979 finally declined to exercise primary jurisdiction over the case, holding that the interpretation of the favored nations clause raised no matters on which the Commission had particular expertise. Arkansas Louisiana Gas Co. v. Hall, 7 FERC ¶ 61,175, p. 61,321.⁴ The Commis- sion did, however, state: "It is our opinion that the Louisiana Supreme Court's award of damages for the 1961-1972 period violates the filed rate doctrine." Id., at 61,325, n. 18.⁵ Under that doctrine, no regulated seller is legally entitled to collect a rate in excess of the one filed with the Commission for a particular period. See infra, at 576-579. We granted Arkla's subsequent petition for certiorari challenging the judgment of the Louisiana Supreme Court. 449 U.S. 1109, 101 S.Ct. 916, 66 L.Ed.2d 838 (1981).⁶

II

Sections 4(c) and 4(d) of the Natural Gas Act, 52 Stat. 822-823, 15 U.S.C. §§ 717c(c) and 717c(d), require sellers of natural gas in interstate commerce to file their rates with the Commission. Under § 4(a) of the Act, 52 Stat. 822, 15 U.S.C. § 717c(a), the rates that a regulated gas company files with the Commission for sale and transportation of natural gas are lawful only if they are "just and reasonable." No court may substitute its own judgment on reasonableness for the judgment of the Commission. The authority to decide whether the rates are reasonable is vested by § 4 of the Act solely in the Commission, see FPC v. Hope Natural Gas Co., 320 U.S. 591, 611, 64 S.Ct. 281,...