North Carolina Natural Gas Corp. v. United States

• Decision Date: 27 November 1961
• Docket Number: Civ. A. No. 2360.
• Citation: 200 F. Supp. 745
• Parties: NORTH CAROLINA NATURAL GAS CORPORATION, Plaintiff, v. UNITED STATES of America and Interstate Commerce Commission, Defendants.
• Court: U.S. District Court — District of Delaware

200 F. Supp. 745

NORTH CAROLINA NATURAL GAS CORPORATION, Plaintiff, v. UNITED STATES of America and Interstate Commerce Commission, Defendants.

Civ. A. No. 2360.

United States District Court D. Delaware, at Wilmington.

November 27, 1961.

James M. Tunnell, Jr., and George T. Coulson (Morris, Nichols, Arsht & Tunnell) Wilmington, Del., and William J. Grove (Dow, Lohnes & Albertson) Washington, D. C., for plaintiff,

Leonard G. Hagner, U. S. Atty., Wilmington, Del., for defendant the United States.

H. Neil Garson, Washington, D. C., Assoc. Gen. Counsel for Interstate Commerce Commission.

Joseph L. Lenihan, Louisville, Ky., for Louisville & Nashville Railroad Co., et al., intervenors, and on the Briefs for Clinchfield Railroad Co., Atlantic Coast Line Railroad Co., Norfolk & Western Railway Co., Seaboard Airline Railroad Co., Piedmont & Northern Ry. Co., The Chesapeake & Ohio Ry. Co., The Cincinnati, New Orleans & Texas Ry. Company, Interstate Railroad Company, Southern Ry. Co., and Carolina Power & Light Co.

Henry J. Karison, and Earl E. Eisenhart, Jr., Washington, D. C., for Southern Ry. Co., intervenor.

Homer S. Carpenter (Rice, Carpenter & Carraway) Washington, D. C., for Property Owners Committee and Assoc. of Coal Mine Operators, intervenor.

Charles F. Rouse, Raleigh, N. C., for Carolina Power & Light Co., intervenor.

GOODRICH, Circuit Judge, and RODNEY and LEAHY, Senior District Judges.

LEAHY, Senior District Judge.

North Carolina Natural Gas Corporation filed suit under § 17(9) of the Interstate Commerce Act, 49 U.S.C.A. § 17(9), to review certain orders of the Interstate Commerce Commission. This Court has jurisdiction under the Act and under 28 U.S.C. §§ 1336, 2284, 2321-2325, and the complaint is properly before this Court under 28 U.S.C. § 1398 in that plaintiff is a Delaware corporation.

The orders of the ICC complained of failed to hold unlawful certain Tariffs providing special reduced rail transportation rates on bituminous fine coal from points of origin in Kentucky, Tennessee, West Virginia and Virginia to various destination points in the South including North Carolina. The legal challenge is to the Tariffs which provide preferred rates — agreed upon by the shipper-transporter and assignee — of 25¢ per ton per carload less to a consignee who, in the 12-month period ending the last day of the second month preceding delivery, has received a prescribed aggregate minimum volume. Such rates are less than the regularly published rates applicable to a consignee who has not received such minimum volume. The complaint avers the special reduced rates were calculated to enable delivered cost of bituminous coal to compete with natural gas in the Carolina territory.

Plaintiff, North Carolina Natural Gas, has since October 1, 1959, distributed and sold natural gas to domestic, commercial and industrial consumers within the service area; and has distributed and sold wholesale to other private and municipal distribution companies. Southern Freight Tariff Bureau filed the challenged Tariffs¹ which were not rejected by the Commission and the rates established were permitted to become effective on March 1, 1960, as legally filed rates.

The administrative process commenced on January 27, 1960 when the railroads, here involved, acting through the Southern Freight Tariff Bureau, filed with the ICC Freight Tariff 903.² On March 1, 1960 specifically, on February 18, 1960 four railroads³ petitioned the Commission to suspend the effective date of the rates and to enter upon an investigation as to the lawfulness under § 15(7) of the Act, 49 U.S.C.A. § 15(7). The objection questioned the competitive necessity for some of the reductions. Atlantic Coast Line Railroad Company and four other railroads⁴ filed reply on February 24, 1960 to petition for suspension. It stated the reduced rates were necessary if the railroads were to retain the business of moving coal to certain electrical generating plants in the Carolina area.

Upon consideration of the petition for suspension and the reply, the ICC, through its Board of Suspension, issued its February 25, 1960 order instituting an investigation into the lawfulness of the rates. The rates were not suspended,⁵ and protestants appealed the action⁶ of the Suspension Board to Division 2 of the ICC. On February 29, 1960, Division 2 sustained the action of the Suspension Board in refusing to suspend the rates and in instituting an investigation of them.⁷ The rates therefore became effective March 1, 1960.

On August 25, 1960 the railroads then petitioned the ICC to discontinue the investigation, stating that "after further consideration of the competitive conditions existing in Carolina territory they the railroads are convinced that the volume and multiple-car rate reductions on fine coal presently in effect but under investigation are warranted." It was after this that plaintiff, North Carolina Natural Gas, claiming to be adversely affected by the February 25, 1960 action of the Commission, on September 23, 1960 filed with the ICC a motion to expunge the filed Tariffs and to terminate the proceedings in Docket No. 33360 as to the Tariffs and rates contained therein. ICC, Division 2, by order on January 10, 1961, denied plaintiff's motion holding "The matters submitted in support thereof do not constitute substantial and material grounds to warrant granting said Motion;" and the ICC ordered "that said Motion be, and it is hereby overruled." Then by an order of April 27, 1961, issued May 4, 1961, the ICC denied plaintiff's Petition for Reconsideration "for the reason that upon consideration of the decisions of this Commission in Coal from Kentucky, Virginia and West Virgina, to Virginia, 308 ICC 99, and Coal to New York Harbor Area, 311 ICC 355, sufficient and material grounds have not been presented to warrant a conclusion, without hearing, that the Tariffs assailed herein are unlawful per se." (Emphasis added.)

Plaintiff seeks an injunction against the alleged unlawful agreed upon reduced rail transportation Tariffs and rates which, plaintiff avers, irreparably injures and will continue to injure it unless such Tariffs are restrained. Unless the injunctive process issues, plaintiff further avers, a designed purpose of the coal producers, rail carriers and coal consuming electric power companies will be accomplished, and plaintiff's continued sale of natural gas to Carolina Power and Light Company, for example, will not be made because such sales will thus have been rendered uneconomical. Certain other parties (Louisville & Nashville Railroad Company, Clinchfield Railroad Company, Southern Railway Company, The Cincinnati, New Orleans and Texas Railway Company, Interstate Railroad Company, Carolina Power and Light Company, Property Owners Committee and Association of Coal Mine Operators, and others) were allowed to appear and intervene in the case at bar.

Plaintiff's arguments for equitable relief are cast in the orthodox mold, viz.: irreparable harm will result from the ICC orders; the sought injunction will cause no injury or damage to others; continued effectiveness of the filed Tariffs and rates will cause sales of natural gas to Carolina Power and Light Company to be uneconomical to plaintiff and destroy contractual arrangements entered by that company with plaintiff, with the resultant destruction of plaintiff as a competitor; and, finally, permitting the Tariffs to remain effective "is not in the public interest." In addition, plaintiff argues 1. it has no adequate remedy at law, and 2. it has exhausted its administrative remedies.

Plaintiff argues the reduced rates contained in the filed Tariffs are in violation of § 2 of the Interstate Commerce Act, 49 U.S.C.A. § 2; the law prior to and independent of the Act, and the law subsequent to the Act, require all shippers and consignees to be charged an equal rate; the ICC itself has held volume rates unlawful; and that the agreed upon volume reduced rates in SFTB Tariff 903, SFA ICC S-96 and SFTB Tariff 903-A, SFA ICC S-133 are, in addition, in violation of the Elkins Act, 49 U.S. C.A. § 41(1). The ICC and the Intervenors resist the issuance of an injunction and have moved to dismiss the complaint because of 1. failure to exhaust administrative remedies; 2. lack of standing to sue; and 3. lack of jurisdiction of this court to give the remedy sought in the complaint.

1. The sole issue before the court is whether the present record, consisting mainly of the proceedings before the ICC, justifies utilization of the injunctive process. An examination has been had of the record before the ICC. The Interstate Commerce Act provides two methods of challenging the lawfulness of carrier-made rates: 1. said carrier rates may be attacked by filing a formal complaint with the ICC under 49 U.S.C.A. § 13(1); or 2. the Commission on its own motion, with or without a complaint, may investigate carrier-made rates under 49 U.S.C.A. § 15(7).⁸ Regardless of which procedural path is followed—§§ 13(1) or 15(7) of the Act— the Commission cannot enter any orders as to challenged rates unless it follows the mandate of § 15(1) of the Act which requires a full hearing.⁹ For example, (a) before the ICC may find the challenged rates produce unjust and unreasonable charges in violation of § 1(5) of the Act; or (b) the rates violate § 1 (6); or (c) the rates produce unjust discrimination contrary to §§ 2 and 3; or (d) violate the tariff publishing provisions of § 6(1), the Commission pursuant to § 15(1) of the Act must conduct a full hearing.¹⁰

2. The Commission has no power to do what plaintiff wants done, i. e., to make a summary finding that the rates, involved here, are unlawful per se and require cancellation. Plaintiff must follow the statutory scheme under § 13 (1) of the Act if the lawfulness of the March 1, 1960 rates are to be challenged.

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