New Orleans Public Service, Inc. v. United Gas Pipe Line Co., 82-3194

• Decision Date: 08 November 1982
• Docket Number: No. 82-3194,82-3194
• Citation: 690 F.2d 1203
• Parties: NEW ORLEANS PUBLIC SERVICE, INC., Plaintiff, Ernest Morial, et al., Movants-Appellants, v. UNITED GAS PIPE LINE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1203

690 F.2d 1203

NEW ORLEANS PUBLIC SERVICE, INC., Plaintiff Ernest Morial, et al., Movants-Appellants, v. UNITED GAS PIPE LINE COMPANY, Defendant-Appellee.

No. 82-3194.

United States Court of Appeals Fifth Circuit.

Nov. 8, 1982.

McGlinchey, Stafford & Mintz, Donald R. Mintz, Constance Charles Willems, New Orleans, La., for movants-appellants.

Lemle, Kelleher, Kohlmeyer & Matthews, C. Murphy Moss, Jr., Robert G. McIver, Victoria L. Knight, New Orleans, La., James M. Costan, Kevin W. McLean, Douglas Knox Bemis, Jr., W. DeVier Pierson, Washington, D. C., for defendant-appellee.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before GOLDBERG, WILLIAMS and GARWOOD, Circuit Judges.

JERRE S. WILLIAMS, Circuit Judge:

Consumers and certain city officials bring this appeal from a district court order denying their motion under Fed.R.Civ.P. 24(a) and (b) for leave to intervene in this lawsuit. We find that the consumers have no right to intervene. However, we reverse the decision denying intervention to the government officials, and remand.

I. BACKGROUND

New Orleans Public Service, Inc., (NOPSI), is a private corporation holding a franchise agreement with the City of New Orleans to supply public utility service to the Parish of Orleans. NOPSI provides both natural gas and electricity to its customers. In July 1952, NOPSI executed a contract with the United Gas Pipe Line Co. (United) for the purchase of natural gas that NOPSI would use both for direct resale to its gas customers (resale gas) and as fuel in its electric power plants (power plant gas). Only the power plant gas under the contract is involved in this dispute.

The 1952 Contract set a sale price for the power plant gas. Both parties performed under the Contract without serious difficulty until 1975. A few months before the 1952 Contract was due to expire in 1975, United and NOPSI executed a letter agreement for the continued supply of power plant gas. This 1975 Letter Agreement changed the price and the method of price determination provided in the prior contract. ¹ The 1975 Letter Agreement was amended on two occasions in 1978 to alter some provisions of the contract for deliveries effective August 1, 1978.

Acting under the terms of the 1975 Letter Agreement, on March 3, 1981, United proposed a "redetermined rate" on power plant gas, a polite euphemism for a price increase, covering gas deliveries effective May 3, 1981. NOPSI protested the new rates and United amended certain provisions of its March, 1981 proposal. United submitted a final proposal to NOPSI on April 9, 1981.

NOPSI asserts that it initially considered the proposed redetermined price to be merely a power play, and United granted NOPSI two extensions of time to consider the proposals. United informed NOPSI, though, that if it did not accept the proposed price of $3.60 to $4.00 per mcf, United would charge the full market price for its gas. ² United estimated the market price at $6.00 to $8.00 per mcf. NOPSI officials believed that United's power play was an illegal form of economic coercion, but their discussions and correspondence with United generated more heat than light. NOPSI's management eventually submitted to the new rate, but only under an express protest that the redetermined rate was impermissible under state law. NOPSI signed the agreements in mid-May, 1981, and filed suit in Louisiana court on May 26, 1981. United, invoking diversity jurisdiction, petitioned for removal to federal district court on June 1, 1981. The dispute covers the validity of the NOPSI-United agreements, the proper rate for power plant gas, and the method of refund, if any.

This appeal, however, does not touch the merits of this dispute. Shortly after the suit was removed to federal court, the mayor of the City of New Orleans moved for leave to intervene in the controversy, pursuant to Fed.R.Civ.P. 24(a) and 24(b). His original claim was as representative of a proposed class of NOPSI's ratepayers. He later amended his motion to include various private electric ratepayers and several members of the New Orleans City Council. Some of the moving parties had paid enough in claimed overcharges on electric bills since the May, 1981, rate redetermination to meet the $10,000 jurisdictional amount in diversity cases. 28 U.S.C. 1332(a). The federal district judge referred the motion to a magistrate, who accepted briefs and held hearings on the matter.

The magistrate ruled that the consumer members of the proposed class, either individually or as a class, had no right to intervene in the action. He further found that the governmental parties had a right to intervene permissively, pursuant to Fed.R.Civ.P. 24(b). The district judge overturned the order of the magistrate in part, holding that neither the consumers nor the government officials could intervene. The district court also denied a stay of proceedings pending an appeal. The attempted intervenors then plugged their appeal into the Circuit, pursuant to 28 U.S.C. § 1291.

We agree with both the magistrate and the district judge that the consumers have no proper claim to intervention as of right under Rule 24(a). Further, we find that the denial to the consumers of permissive intervention under Rule 24(b) was not an abuse of discretion. The mayor and members of the City Council are in a different situation, however. They have a statutory mandate to oversee the operations of public utilities within New Orleans, such as NOPSI. La.Const., art. 6, §§ 4, 6; State ex rel. Guste v. Council of the City of New Orleans, 309 So.2d 290, 292 (La.1975). We hold that the denial of their intervention was both erroneous under the requirements of 24(a), intervention as of right, and an abuse of discretion under Rule 24(b), permissive intervention.

II. GOVERNMENTAL OFFICIALS AS PARTIES

We find that the government officials have both a statutory right and a clear interest in making a contribution to the disposition of this case. We therefore find that the district court erred in denying the government parties leave to intervene as of right, and, in any event, the denial of leave for permissive intervention was an abuse of discretion.

A. Intervention as of Right

Intervention as of right in the federal courts is covered by Fed.R.Civ.P. 24(a). ³ This Circuit has developed a four-pronged framework for interpreting motions for intervention as of right. Howse v. S/V "Canada Goose I", 641 F.2d 317, 320 (5th Cir. 1981); International Tank Terminals Ltd. v. M/A Acadia Forest, 579 F.2d 964, 967 (5th Cir. 1978). First, the application for intervention must be timely. Second, the applicant must have an interest relating to the subject matter of the litigation. Third, the applicant must be so situated that the outcome of the case may, as a practical matter, impair or impede the applicant's ability to protect that interest. Finally, the interest must be one not adequately represented by existing parties.

Examining intervention as of right, we find that each of the four necessary factors for intervention is present. Howse, supra at 320. First, the motion to intervene was timely, having been made approximately one month after the original federal lawsuit was filed. Second, the members of the City Council have an interest relating to this transaction. Under the city's home rule charter, the New Orleans City Council operates in place of the Louisiana Public Service Commission in regulating the rates of public utilities within the City of New Orleans. La.Const., art. 6, §§ 4, 6; State ex rel. Guste v. Council of the City of New Orleans, supra. The members of the City Council apparently have entered this action pursuant in part at least to a June 18, 1981, motion which in turn resulted in a September 17, 1981, resolution of the New Orleans City Council authorizing intervention to protect the public interest.

Federal courts are not bound to permit governmental parties to intervene in private suits whenever the agency purports to protect the public interest. The agency, for example, may be seeking to protect a public interest already present before the court or governed by a different government agency. See, e.g., United States v. Local 638, Enterprise Ass'n of Steam, Hot Water, Hydraulic Sprinkler, Pneumatic Tube, Compressed Air, Ice Machine, Air Conditioner and General Pipefitters, 347 F.Supp. 164 (S.D.N.Y.1972) (city permitted to intervene in civil rights suit against unions only upon a showing that plaintiff U. S. Department of Justice was not representing city residents' interests adequately). Yet even these limits are not meant to discourage state or local government intervention as parens patriae. See Nuesse v. Camp, 385 F.2d 694, 700 (D.C.Cir.1967) (state banking commissioner granted right to intervene despite presence of federal officials as parties).

In this dispute the City officials are the only government parties seeking to intervene, and they have a statutory obligation to oversee NOPSI's fiscal and public responsibilities. The City Council acts as the regulator of NOPSI's rates. It will have the obligation in the future to determine whether NOPSI's recovery, if any, is sufficient to recover whatever overcharges may have passed through to consumers as a result of the disputed portions of the NOPSI-United Letter Agreement.

Determining the proper redetermined rate for power plant gas in a federal court while excluding the rate regulators would cause needless duplication of the same basic factual testimony. The 100% pass-through of the price increase makes clear the effect that the contract in question will have on rates in the future. In this dispute, the government's interests are sufficient to permit intervention as of right. See Cascade Natural Gas Corp. v. El Paso Natural Gas Co., 386 U.S. 129, 87 S.Ct. 932, 17 L.Ed.2d 814 (1967) (State of California permitted intervention as of right in antitrust action involving local gas...