Eastern Shore Natural Gas Co. v. Stauffer Chemical Co.

• Decision Date: 06 November 1972
• Citation: 298 A.2d 322
• Court: Supreme Court of Delaware
• Parties: EASTERN SHORE NATURAL GAS COMPANY, a Delaware corporation, Plaintiff Below, Appellant, v. STAUFFER CHEMICAL COMPANY, a Delaware corporation, Defendant Below, Appellee, and Hoechst Polymer Corporation, a Delaware corporation, Intervenor Below, Appellee.

Page 322

298 A.2d 322

EASTERN SHORE NATURAL GAS COMPANY, a Delaware corporation, Plaintiff Below, Appellant, v. STAUFFER CHEMICAL COMPANY, a Delaware corporation, Defendant

Below, Appellee,

and

Hoechst Polymer Corporation, a Delaware corporation,

Intervenor Below, Appellee.

Supreme Court of Delaware.

Nov. 6, 1972.

Upon appeal from Chancery Court.

John J. Schmittinger, of Schmittinger & Rodriguez, Dover, for plaintiff below, appellant.

Januar D. Bove, Jr. and John R. Bowman, of Connolly, Bove & Lodge, Wilmington, for defendant below, appellee.

David A. Drexler, of Morris, Nichols, Arsht & Tunnell, Wilmington, for intervenor below, appellee.

Before WOLCOTT, Chief Justice, and CAREY and HERRMANN, Associate Justices.

HERRMANN, Justice:

This is an appeal from the Chancery Court's denial of the motion of the plaintiff, Eastern Shore Natural Gas Company (hereinafter 'Eastern'), for a preliminary injunction restraining the defendant Stauffer Chemical Company (hereinafter 'Stauffer') from redelivering natural gas, sold to it by Eastern under contract, to the intervening defendant Hoechst Polymer Corporation (hereinafter Hoechst) in violation of the contract. The appeal also lies to the granting of Stauffer's motion to dismiss the action.

I.

The opinion of the Chancery Court appears at 285 A.2d 826. The statement of facts contained therein is sufficient for present purposes, with the following (1) modification and (2) addition: (1) The contract did not specify 'the amounts of gas to be delivered each day' to Stauffer (285 A.2d at 827); rather, it was a gas supply contract specifying a minimum and a maximum daily quantity. (2) Shortly after the filing of this action, Stauffer filed with the Federal Power Commission a petition for a declaratory order 'in order to terminate a controversy and remove uncertainty * * * regarding the lawfulness of certain deliveries of natural gas' to Hoechst and Eastern filed with the Commission an application to abandon service to Stauffer. The petition and the application are pending before the Commission.

II.

We take up first the dismissal of the action.

In this connection, the Chancery Court stated: '(T)he defendant's motion to dismiss will be granted on the ground of lack of jurisdiction. The order to be entered, however, shall recognize plaintiff's right to transfer this case to a court of competent jurisdiction under the provisions of 10 Del.C. § 1901.' (285 A.2d at 829)

The opinion below does not state specifically the basis for the Court's ruling of lack of jurisdiction. From the context of the opinion, however, the basis must be assumed to have been either the doctrine of primary administrative jurisdiction of the Federal Power Commission, or the exclusive jurisdiction of the United States District Court, or the absence of equity jurisdiction. In any case, we think it was error to dismiss the action.

The doctrine of primary administrative jurisdiction permits a court to avail itself of the expertise of an administrative agency having special competence in the matter at hand. As stated in United States v. Western Pacific RR, 352 U.S. 59, 63--64, 77 S.Ct. 161, 165, 1 L.Ed.2d 126 (1956):

"Primary jurisdiction,' * * * applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed with the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views.'

And as stated in Webb v. Diamond State Telephone Company, Del.Ch., 237 A.2d 143, 145 (1967):

'The doctrine of primary jurisdiction * * * comes into play when a claim is originally cognizable in a court of law or equity but referral to an agency competent to rule preliminarily on issues which fall within its regulatory powers is authorized. In such situations, proceedings before a court are merely suspended pending referral of appropriate issues to such an administrative body. See Best v. Humboldt Placer Mining Co., 371 U.S. 334, 83 S.Ct. 379, 9 L.Ed.2d 350, and United States v. The Philadelphia National Bank, 374 U.S. 321, 83 S.Ct. 1715, 10 L.Ed.2d 915.'

As indicated, the doctrine of primary administrative jurisdiction contemplates the suspension of the judicial proceedings, rather than a dismissal thereof, pending the action of the administrative agency. It is in the nature of a temporary abstention in deference to the expertise of the administrative agency. By such retention of jurisdiction and non-committal 'referral' attitude toward the administrative agency, the court has the benefit of the views of the agency, while at the same time avoiding any suggestion of abdication of the jurisdiction of the court. Compare Pottock v. Continental Can Co., Del.Ch., 210 A.2d 295 (1965). The doctrine of primary administrative jurisdiction is to be distinguished from the rule of exhaustion of administrative remedies, requiring that a claim be initiated before an administrative agency prior to judicial review. United States v. Western Pacific Railroad Co., 352 U.S. 59, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956); K. Davis, Administrative Law Treatise, § 20.01 (1958).

Accordingly, application of the doctrine of primary administrative jurisdiction should have led to a stay, rather than a dismissal of this action.

The Chancery Court indicated that Stauffer relied upon the Natural Gas Act (15 U.S.C. Ch. 15B) in support of the Federal Power Commission's primary administrative jurisdiction; that Stauffer contended that, under 15 U.S.C. § 717u, the Commission 'must first rule on such alleged violation(s)' of the Act (285 A.2d at 828).

Stauffer disclaims that statement of its position, pointing out that Title 15, U.S.C. § 717u does not deal with the doctrine of primary administrative jurisdiction, a judge-made rule; that it deals, rather, with the exclusive jurisdiction of the federal district courts over violations of the Natural Gas Act. Relying upon 15 U.S.C. § 717u, ^* Stauffer now contends that the United States District Court has exclusive jurisdiction over this action.

The determination of whether a cause of action is based on federal law is made from the face of the complaint, the answer...