McClellan v. Montana-Dakota Utilities Co.

• Decision Date: 05 March 1952
• Docket Number: Civ. No. 3518.
• Citation: 104 F. Supp. 46
• Parties: McCLELLAN et al. v. MONTANA-DAKOTA UTILITIES CO.
• Court: U.S. District Court — District of Minnesota

104 F. Supp. 46

McCLELLAN et al. v. MONTANA-DAKOTA UTILITIES CO.

Civ. No. 3518.

United States District Court D. Minnesota, Fourth Division.

March 5, 1952.

Guthrie, Darling & Shattuck and Milo V. Olson, of Los Angeles, Cal., John J. McKasy, of Minneapolis, Minn., for plaintiffs.

Faegre & Benson and Armin M. Johnson, of Minneapolis, Minn., for defendant.

JOYCE, District Judge.

Defendant moves for summary judgment herein on the ground that there is no genuine issue as to any material fact and that defendant is entitled to judgment as a matter of law; or, in the alternative, if summary judgment is not granted, that the court ascertain what material facts are controverted.

The complaint alleges that Capital Gas Corporation, hereinafter referred to as plaintiff, is a Montana corporation owning or controlling during the period 1930 until 1940 gas properties and production capable of producing in excess of 200,000,000 cubic feet of gas per day, open flow production, approximately one-third of which it would have been authorized by the United States Government to produce, and for which it had customers. Defendant is a corporation organized under the laws of the State of Delaware, with principal place of business at Minneapolis, Minnesota, and is engaged in the transportation of natural gas in interstate commerce. It allegedly owns and operates an integrated and interconnected pipeline system located in the states of Montana and North and South Dakota. Gas transported through its lines is distributed for public consumption in the three states named for domestic and commercial purposes. During the above period the gas which plaintiff claims to have had for sale required shipment and transportation through defendant's pipeline. The bulk of it was available from Government lands in the vicinity of defendant's pipelines and its gathering branches.

The controversy herein arises over defendant's alleged failure and refusal to transport plaintiff's gas at a reasonable and non-discriminatory rate over its pipeline system. Plaintiff alleges that said pipeline was constructed some time prior to 1930 upon rights of way across Government lands under permits granted by the Secretary of the Interior pursuant to the provisions of the Leasing Act of February 25, 1920, 30 U.S.C.A. § 185, and that by the terms of said Act defendant was a common carrier under a duty to transport gas at reasonable and non-discriminatory rates for plaintiff and others who had gas to ship. It is further charged that defendant refused until some time in 1933 to transport gas at any rate, at which time it offered to transport gas at a rate so unreasonable and discriminatory as to be unusable by plaintiff, and continued its refusal to file a reasonable rate until April 2, 1949. For the purpose of convenience the rate filed by defendant in 1933 shall hereafter be designated as Rate 3-G. During this period and until June 21, 1938, it is alleged there was no administrative agency that had jurisdiction to fix the rates demanded and charged by a common carrier of natural gas.

It is further alleged that by virtue of the failure and refusal of defendant to transport gas at a reasonable and non-discriminatory rate plaintiff could not produce gas from its lands and during the period 1930 to 1940, as a direct result of such unlawful refusal, plaintiff lost all its assets consisting of gas-producing lands, wells and leases, and operating agreements on gas-producing lands in the reasonable value of $3,000,000. In addition plaintiff alleges, inconsistently with a prior allegation, that such wrongful and unlawful acts resulted in its inability to produce and sell 40,000,000 cubic feet of gas per day, for which it claims to have had customers, to its damage in the reasonable sum of $10,000,000. Said refusal is alleged to have been in restraint of trade and violative of the Sherman Anti-Trust Act, wherefore plaintiff prays that his damages be trebled in accordance with the provisions of Section 4 of the Clayton Act. 15 U.S. C.A. § 15.

In addition to being violative of the Anti-Trust Act, it is alleged that said acts are in violation of the Leasing Act of 1920 and of the Natural Gas Act, 15 U.S.C.A. § 717c. The Natural Gas Act became effective on June 21, 1938 and gave the Federal Power Commission jurisdiction over the transportation and sale of natural gas in interstate commerce and over the rates and charges therefor, 15 U.S.C.A. § 717 et seq. The Act provided that every natural gas company file with the Commission a schedule showing all rates and charges for any transportation or sale subject to its jurisdiction. Pursuant to this requirement, on or about August 29, 1938, defendant filed the rate for transportation of gas, hereinafter referred to as Rate 4-G. On December 6, 1941, proceedings were instituted before the Federal Power Commission to test these rates 3-G and 4-G, but plaintiff was not a party to these proceedings. They resulted in a determination by the Commission in 1946 that defendant's applying for and obtaining permits under the Leasing Act obligated it to maintain and operate its pipeline as a common carrier and to establish and publish reasonable and non-discriminatory rates, and that rates 3-G and 4-G were unjust, unreasonable and discriminatory. The decision of the Commission was subsequently affirmed August 4, 1948 in Montana-Dakota Utilities Co. v. Federal Power Commission, 8 Cir., 169 F.2d 392, and a new rate was thereafter filed by defendant on April 2, 1949.

The complaint is redundant in its allegations and anticipatory of all the defenses that might be raised against it. It is a chronological narration of the events, transactions and the interminable litigation by plaintiff and others preceding the bringing of this controversy into this court. Such further facts as are necessary will be stated as the need arises but I believe that the aforesaid allegations are sufficiently stated for the present purposes and substantially set out the position of plaintiff with respect to the rights and damages he claims. Previously, on February 5, 1951, the court denied a motion to dismiss because it then felt that the record did not show to a certainty that plaintiff would be entitled to no relief under any state of facts which could be proved in support of the claims pleaded, but it did not foreclose itself from further consideration of the issues raised after the record had been augmented. Since that time and on the present motion for summary judgment the record has been supplemented by affidavits from both parties, by voluminous depositions and discovery evidence. In addition, the court is aided by a pronouncement since made by the Supreme Court of the United States, which it feels is largely determinative of the issues here.

The substance of plaintiff's position is that it had no remedy against defendant for the claims here made until it was ultimately determined that the defendant's demanded rates, 3-G and 4-G, were unlawful because unreasonable and discriminatory, and a new rate was fixed by the Federal Power Commission. Now having secured such a determination, it claims the right to proceed with its action for damages and asks the court to take judicial notice that the rates declared to be unlawful in 1946 or 1948 would have been unlawful in the period during which the losses occurred, and so to instruct the jury, which can then in the words of plaintiff's counsel, "speculate, conjecture or ascertain what probably would have been a reasonable rate" for the period involved by considering relevant data concerning the costs of operating the pipeline, maintenance costs, etc. From there they can then go on to ascertain what damages the plaintiff has suffered.

I do not think this argument is tenable. Assuming, arguendo, that plaintiff though not a party has the benefit of the proceedings and decision of the Federal Power Commission, we then run squarely into several propositions of law that prevent the operation of such a theory.

First, the Natural Gas Act provides in Section 5(a) that the jurisdiction of the Commission to fix rates is limited to those "to be thereafter observed and in force". 15 U.S.C.A. § 717d(a). In Hope Natural Gas Co. v. Federal Power Commission, 4 Cir., 134 F.2d 287, the Federal Power Commission, while fixing rates to become effective on July 1, 1942, found that the rates charged by Hope from June 30, 1939 to that date were unjust, unreasonable and unlawful. It stated that this finding was made on the request of the City of Cleveland and "as an aid to state regulation." With respect to the power of the Commission to take such action, the court of appeals said, 134 F.2d at page 309:

"The fundamental difference between quasi-legislative and quasi-judicial power is that the one is concerned primarily with prescribing regulations for the future, the other with determining rights in the light of what has occurred in the past. Cf. Baer Bros. Mercantile Co. v. Denver & R. G. R. Co., 233 U.S. 479, 486, 34 S.Ct. 641, 58 L.Ed. 1055. The Natural Gas Act shows clearly that it was the intention of Congress to give the Commission quasi-legislative power, i. e. regulatory power as to future rates; but there is no indication of any intention to clothe it with judicial or quasi-judicial powers with respect to past charges or practices, such as was vested in the Interstate Commerce Commission by section 9 of the Interstate Commerce Act. 49 U.S.C.A. § 9. As the Commission itself says, it was not given authority to fix rates for the past or to award reparations on account of past rates. If it was not given the power to fix past rates, or award reparations based upon their unreasonableness, it certainly was given no power to do the same thing indirectly by making findings of fact as to past rates to be given effect in rate proceedings before state commissions. No intention on the part of Congress to vest any such unusual power in a commission

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