Allied Paper Inc. v. United Gas Pipe Line Co., DC-45

• Citation: 561 F.2d 821
• Decision Date: 18 August 1977
• Docket Number: DC-46.,No. DC-45,DC-45
• Parties: ALLIED PAPER INCORPORATED, Plaintiff-Appellant, v. UNITED GAS PIPE LINE COMPANY, Defendant-Appellee, and United States of America et al., Defendants-Appellees. ALLIED PAPER INCORPORATED, Plaintiff-Appellee, v. UNITED GAS PIPE LINE COMPANY, Defendant-Appellant, and United States of America et al., Defendants-Appellees.
• Court: U.S. Temporary Emergency Court of Appeals

561 F.2d 821

ALLIED PAPER INCORPORATED, Plaintiff-Appellant, v. UNITED GAS PIPE LINE COMPANY, Defendant-Appellee, and United States of America et al., Defendants-Appellees.

ALLIED PAPER INCORPORATED, Plaintiff-Appellee, v. UNITED GAS PIPE LINE COMPANY, Defendant-Appellant, and United States of America et al., Defendants-Appellees.

Nos. DC-45, DC-46.

Temporary Emergency Court of Appeals.

Argued July 19, 1977.

Decided August 18, 1977.

S. White Rhyne, Jr., Mullin, Connor & Rhyne, Washington, D. C., with whom Nathaniel F. Emmons, Washington, D. C., and Arthur A. Munisteri, New York City, were on the brief for plaintiff-appellant.

Knox Bemis, Pierson, Semmes, Crolius & Finley, Washington, D. C., with whom W. DeVier Pierson, David J. Hill and James M. Costan, Washington, D. C., and William B. Cassin and Phillip D. Endom, Houston, Tex., of counsel, were on the brief for defendant-appellee.

Before ANDERSON, INGRAHAM and GRANT, JJ.

ROBERT P. ANDERSON, Judge:

It is generally undisputed by the parties that on May 14, 1964 Allied Paper Inc. (Allied), a corporation organized under the laws of Delaware and a manufacturer of wood pulp in Alabama, and United Gas Pipe Line Co. (United), also a Delaware corporation, a public utility company which operates a pipeline between Texas and Alabama for the transmission of natural gas, entered into a written understanding under the terms of which United was to sell and Allied was to purchase the amount of natural gas needed to operate Allied's pulp mill in Jackson, Alabama. The agreement was to remain operative until January 1, 1983. The monthly rate to be charged by United and paid by Allied varied with the amount of gas consumed by Allied and included an adjustment up or down according to United's weighted average cost for gas in the Jackson, Alabama, area depending upon whether that cost exceeded or was less than a fixed rate or sum stated in the price clause of the agreement which was Article XIV(A) therein.

This provision for price, however, was not to remain operative for the life of the agreement but was to be reconsidered in a little over eight years viz., on January 1, 1973. Article XIV(B) delineated the procedure for determining the new monthly rate for the ensuing five years, that is January 1, 1973 through December 31, 1978. This required United to submit to Allied, "in writing for agreement thereto a monthly rate for gas deliverable," at least 90 days prior to January 1, 1973. After having received notice of this proposed rate,¹ Allied had a duty to inform United, before the commencement of the rate period, whether the newly proposed rate was agreeable to Allied. If Allied did not agree to the new rate proposed by United, the agreement would automatically terminate, except that Allied could elect to pay the new rate to United for such reasonable period as Allied would require to convert its plant from natural gas to a different kind of fuel.

Allied rejected both proposals on the ground that neither was in accordance with the Article (B) provision for proposing new price terms and the rate was objectionable because it was an increase in price in violation of Phase II regulations. United replied on December 22, 1972, by pointing out that rejecting the proposals would cause immediate termination of the contract and by threatening to cease deliveries if Allied did not accept one of the proposals. United stated that if Allied rejected both proposals, it would apply to the Federal Power Commission (FPC) for permission to terminate service. On December 29, 1972, Allied accepted Proposal A. In an accompanying letter, however, Allied renewed its previously stated objections² and argued that because the proposals were not in accordance with Article XIV(B) United had not complied with its obligation to present a new monthly rate. Allied agreed, however, to pay the Proposal A price of 80¢ per Mcf each month from January 1, 1973 until the Price Commission or a court having jurisdiction, decreed otherwise.

On December 29, 1972 Allied commenced a suit in the state courts of Alabama, asserting that United's Proposal A was not in accordance with Article XIV(B) of their agreement, and it sought a declaration that Article XIV(A) remained in effect and demanded a return of all sums paid under protest in excess of that rate. United counter-claimed in the Alabama state court action for the value of the gas provided after January 1, 1973. It asserted that the agreement with Allied terminated on January 1, 1973 because Allied did not effectively accept Proposal A. United applied to the FPC for permission to terminate its service of supplying natural gas to Allied, but United's petition was denied.

Prior to proposing the new rates contained in Proposals A and B above described, United applied for and received a letter from the Price Commission stating that under 6 C.F.R. § 300.308, United could "selfcertify" the increases and thereby put them into effect without Commission approval. Allied (and other customers of United) applied to the Cost of Living Council (COLC) for a determination of the legality of United's rate increases. The COLC, however, refused to rule on the merits of Allied's application and declined to intervene in the dispute.

Thereafter, on August 24, 1973, Allied instituted the present action in the federal court under § 210 of the Economic Stabilization Act. During the last months of 1972, Allied had paid on the average approximately 30¢ Mcf. This price term expired at the end of 1972 and the Proposal A price term imposed by United increased the rate to 80¢ Mcf. Allied asserted in the federal action that this increase was not cost justified and, therefore, violated the Phase II regulations. Allied sought a declaration that the Article XIV (A) rate was the maximum chargeable under Phase II in that it provided for a direct pass-through of United's increased costs. In Allied's opinion, the cost increases provided for in Article XIV (A) were the extent of those permissible under Phase II as cost justified. Allied also claimed damages for the amount that United's 80¢ rate exceeded the Phase II price and asserted that United could not lawfully charge more than the Phase II price for the five-year term of the agreement. Furthermore, Allied alleged that United's price increase constituted an intentional violation of the Act entitling it to treble damages and attorneys' fees under § 210(b).

The action was designated on the docket of the United States District Court for the District of Columbia as Civil 1662-73. On April 22, 1974 the district court dismissed the case because of the failure by Allied to exhaust administrative remedies. That judgment was appealed to this court which reversed the holding on the ground that the plaintiff had done all that it could to invoke action by the relevant administrative bodies and, on their refusal to pass upon the issues, it became the task of the district court to hear and adjudicate them. Air Products & Chemicals, Inc. v. United Gas Pipe Line Co., 503 F.2d 1060 (Em.App.1974). Thereafter a plethora of preliminary motions, including motions by both parties for summary judgment were filed and argued by the parties. It is not necessary to recite the arguments and dispositions made of these motions at this stage of an unnecessarily long, drawn out case, except to mention the essential rulings by the district court, which, in effect, formulated the issues presented to and argued to this court. These rulings are, first, that United could not, on January 1, 1973, raise the price to be paid by Allied for natural gas from 30¢ Mcf to 80¢ Mcf without proof of cost justification; and, second, that the President's Executive Order # 11695 issued January 11, 1973 made invalid United's demand for an increase in the price Allied was required to pay to it for natural gas on and after January 1, 1973, under United's interpretation of their agreement, and constituted a renegotiation of the price "dependent for its operation on the termination of the Economic Stabilization Program" prohibited under § 3(d) of the Executive Order. The district court further held that on the basis of these determinations United could not lawfully charge a greater sum than that which was operative at the end of 1972, increased solely by cost justified amounts, which would remain applicable for the five-year agreement term ending January 1, 1978.

As a consequence of these holdings and in view of the pendency of the action between the same parties in the state courts of Alabama, for a declaration of whether Allied's response to United's offer in Proposal A created a contract, the United States District Court was of the opinion that the federal proceeding should be stayed pending the resolution of the issue before the Alabama state courts.

Allied appealed the stay order to this court on the ground that for the purpose of the § 210 claim the question whether a contract existed between the parties was a federal question. United has moved to dismiss the appeal from the stay order on the assertion that the stay order was not an appealable final order under 28 U.S.C. § 1291. United also cross-appealed from the district court's determination that Phase II regulations under the Stabilization Act fixed the lawful price for natural gas deliveries to Allied from January 1, 1973 to January 1, 1978, for the reason that the mandatory controls under Phase II terminated on January 11, 1973. Allied has moved to dismiss United's cross-appeal on its claim that the district court ruling that Phase II governed the maximum price chargeable for the five-year term of the contract, was not a final appealable decision under § 1291.

This court has jurisdiction to maintain the appeal from the stay order as a final decision under the collateral order doctrine enunciated in Cohen v. Beneficial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). United's cross-appeal from the district court...