Panhandle Eastern Pipe Line Co v. Federal Power Commission

• Citation: 65 S.Ct. 821,324 U.S. 635,89 L.Ed. 1241
• Decision Date: 02 April 1945
• Docket Number: No. 296,296
• Parties: PANHANDLE EASTERN PIPE LINE CO. et al. v. FEDERAL POWER COMMISSION et al
• Court: United States Supreme Court

324 U.S. 635

65 S.Ct. 821

89 L.Ed. 1241

PANHANDLE EASTERN PIPE LINE CO. et al.

v FEDERAL POWER COMMISSION et al.

No. 296.

Argued Jan. 29, 1945.

Decided April 2, 1945.

As Amended on Denial of Rehearing April 30, 1945.

Messrs. John S. L. Yost, of Washington, D.C., and Ira Lloyd Letts, of Providence, R. I., for petitioner.

Messrs. Chester T. Lane and Charles V. Shannon, both of Washington, D.C., for respondents.

[Argument of Counsel from page 636 intentionally omitted] Mr. Justice DOUGLAS delivered the opinion of the Court.

Panhandle Eastern Pipe Line Co. (whom we will call Panhandle Eastern) owns properties which constitute a natural gas production, transportation, and marketing system.¹ The system extends from gas fields in Texas, Oklahoma and Kansas through Missouri, Illinois, Indiana and Ohio and into Michigan.² The City of Detroit and the County of Wayne, Michigan, filed a complaint with the Federal Power Commission alleging that Panhandle Eastern's rates on gas sold to a distributing company in Michigan for resale there were unjust and unreasonable. The Commission on its own motion instituted an investigation under the Natural Gas Act of 1938, 52 Stat. 821, 15 U.S.C. § 717, 15 U.S.C.A. § 717, of all of the interstate wholesale rates of Panhandle Eastern.³ Following extended hearings the Commission entered an interim order, here under review, finding petitioner's interstate wholesale rates to be excessive and requiring petitioner to reduce them on and after November 1, 1942, as to reflect, when applied to petitioner's 1941 transportation and sales a reduction of not less than $5,094,384 per annum below the 1941 consolidated gross operating revenues of $17,789,573. See 45 P.U.R. (N.S.) 203, 223. That order was affirmed by the Circuit Court of Appeals for the Eighth Circuit, one judge dissenting in part. 143 F.2d 488. The case is here on a petition for a writ of certiorari which we granted limited to the two questions which we will discuss. But before we reach them we must dispose of a challenge made by the City of Cleveland, as amicus curiae, to the jurisdiction of the Circuit Court of Appeals for the Eighth Circuit over the subject matter of this litigation. Panhandle Eastern sought review in that court of the Commission's order under § 19(b) of the Act which so far as material here provides:

'Any party to a proceeding under this chapter aggrieved by an order issued by the Commission in such proceeding may obtain a review of such order in the circuit court of appeals of the United States for any circuit wherein the natural-gas company to which the order relates is located or has its principal place of business, or in the United States Court of Appeals for the District of Columbia * * *.'

The petition for review stated that petitioner had its principal place of business in Kansas City, Missouri. That was not denied by the Commission and at no time prior to the entry of the judgment affirming the Commission's order was the jurisdiction of the Circuit Court of Appeals challenged. After the judgment of affirmance had been entered, however, the City of Cleveland filed a motion in the Circuit court of Appeals for leave to intervene and challenged the jurisdiction of that court on the ground that petitioner did not have its principal place of business in that circuit. The same objection is pressed here.

If the objection is to the jurisdiction of the court, it does not come too late. Industrial Addition Ass'n v. Commissioner of Internal Revenue, 323 U.S. 310, 65 S.Ct. 289. But we think it goes to venue not to jurisdiction. We read § 19(b) to invest all intermediate federal courts with the power to review orders of the Commission, provided, however, that if a Circuit Court of Appeals, rather than the Court of Appeals for the District of Columbia, is chosen, the parties may object that the particular circuit lacks the specified qualifications. Venue relates to the convenience of litigants. Neirbo Co. v. Bethlehem Shipbuilding Corporation, 308 U.S. 165, 60 S.Ct. 153, 84 L.Ed. 167, 128 A.L.R. 1437. The provisions of § 19(b) plainly are of that character. Review in the Court of Appeals for the District of Columbia where the Commission must maintain its principal office and hold its general sessions (46 Stat. 797, 16 U.S.C. § 792, 16 U.S.C.A. § 792) is convenient for the Commission. Review in any circuit where the natural gas company is located or has its principal place of business is designed to serve the convenience of the company. The general grant of authority in § 19(b) to all the courts of appeal suggest that the question of which one should exercise the power in a particular case is a question of venue. None of the respondents objected at any time to the venue of the court below. The right to have a case heard in the court of proper venue may be lost unless seasonably asserted. Industrial Addition Ass'n v. Commissioner, supra. It may be waived by any party, including the government. Peoria & P.U. Ry. Co. v. United States, 263 U.S. 528, 535, 536, 44 S.Ct. 194, 197, 68 L.Ed. 427; Industrial Addition Ass'n v. Commissioner, supra. The objection of the City of Cleveland which came after judgment had been rendered came too late. Cf. United States v. California Co-op Canneries, 279 U.S. 553, 556, 49 S.Ct. 423, 424, 73 L.Ed. 838. Hence, we need not decide whether the suit was brought in the proper circuit.

Segregation of the Regulated and Unregulated Business. Panhandle Eastern makes direct industrial sales as well as sales to distributing companies for resale. The Commission made no segregation or separation of the properties used in these two classes of business. Nor did it make an allocation of costs between the regulated and unregulated phases of the business as it did in Colorado Interstate Gas Co. v. Federal Power Commission (Canadian River Gas Co. v. Federal Power Commission), 324 U.S. 581, 65 S.Ct. 829, and Colorado-Wyoming Gas Co. v. Federal Power Commission, 324 U.S 626, 65 S.Ct. 850. The reasons which the Commission advanced for its failure to make any allocation are so crucial to the disposition of the case that we quote from the opinion:

'Upon the record before us, we consider it unnecessary to make an allocation of the respondents' business as between sales for resale and direct sales. The direct sales are made to nineteen industrial customers on an interruptible basis and at prices fixed in competition with other fuels.

'According to respondents' own evidence, no capacity has ever been constructed or provided in their gas plant for these direct industrial customers. It is equally clear that deliveries are made to them only when there is available excess off-peak capacity not required by the other wholesale customers. As evidence of this fact, in 1941 the volume of gas sold to the direct industrial customers amounted to 13.2 per cent of the total system sales, whereas on the system peak day of the 1941-1942 winter the direct industrial sales constituted only 2.69 per cent of the total deliveries, due to interruptions and curtailments brought about by the necessity for meeting the wholesale customer requirements.

'Testimony of respondents' witnesses discloses that only $128,848 of the entire investment in plant (less than one-sixth of one per cent) is used exclusively in the service of the direct industrials. Moreover, the respondents themselves treat their entire business as a unit and make no segregation of costs or profits on their books as between the two classes of sales. Indeed, Panhandle Eastern's president testified quite clearly on cross-examination that any attempt to allocate would be 'theoretical,' 'unrealistic,' and 'not practical' because of the unified character of the business.

'Deliveries to the direct industrials are made only when the plant is not fully used in serving the requirements of the wholesale business, and are curtailed or interrupted when the capacity is required by the wholesale customers. It is apparent that the incidental direct industrial business is in reality a by-product of the wholesale business, comparable to the respondents' gasoline extraction business. All parties are agreed that the expenses and revenues in connection with the sale of gasoline extracted from the natural gas should be treated as an integral part of the respondents' entire operations. Thus, it is manifest from the evidence that the direct industrial sales are purely incidental to the main or principal enterprise, viz.: the wholesale business of the respondents.' 45 P.U.R., N.S., p. 218.

Petitioner contends that these reasons do not justify the failure of the Commission to make a formal allocation either of the property or the costs between the regulated and unregulated business. It says that the direct sales are beyond the jurisdiction of the Commission even though they are comparatively small. It asserts that the fact that the direct sales are on an interruptible basis merely emphasizes the relatively small amount of the cost of construction and operation attributable to such sales. It says that no waiver of the statutory right to have the direct sales free from regulation can be inferred and that in any event the Commission's jurisdiction cannot be enlarged by waiver. And it contends that the Commission's finding that the direct industrial business is 'in reality a by-product of the wholesale business' is not supported in reason or in fact.

We agree that the Commission must make a separation of the regulated and unregulated business when if fixes the interstate wholesale rates of a company whose activities embrace both. Otherwise the profits or losses, as the case may be, of the unregulated business would be assigned to the regulated business and the Commission would transgress the jurisdictional lines which Congress wrote into the Act.⁴ The Commission recognizes this necessity. As it stated in Re Cities Service Gas Co., 50 P.U.R.(N.S.) 65, 89: 'The company's facilities and...