Texasgulf Inc. v. United Gas Pipe Line Co.

• Decision Date: 12 February 1979
• Docket Number: Civ. A. No. 71-2253.
• Citation: 471 F. Supp. 594
• Parties: TEXASGULF INC., Plaintiff, v. UNITED GAS PIPE LINE COMPANY, Defendant, Texas Gas Transmission Corporation, Intervenor.
• Court: U.S. District Court — District of Columbia

471 F. Supp. 594

TEXASGULF INC., Plaintiff, v. UNITED GAS PIPE LINE COMPANY, Defendant Texas Gas Transmission Corporation, Intervenor.

Civ. A. No. 71-2253.

United States District Court, District of Columbia.

February 12, 1979.

James J. Bierbower, John T. Miller, Jr., Washington, D. C., for plaintiff.

W. DeVier Pierson, Peter J. Levin, James M. Costan, Paul Ryberg, Jr., Washington, D. C., for defendant.

MEMORANDUM OPINION

GESELL, District Judge.

This civil action, in three separate counts, seeks damages for breach of contract, negligent misrepresentation and breach of fiduciary duty. Counterclaims have been filed. Various motions addressed to these pleadings are now before the Court, having been fully briefed and argued.

United contracted in 1967 to deliver natural gas to Texasgulf to meet the requirements of a sulphur mine then being constructed by the latter in Louisiana. Subsequently, nationwide shortages of gas developed and, beginning in 1970, United curtailed deliveries to Texasgulf and certain other direct sale customers under plans set out in tariffs filed by United with the federal regulatory authority now known as the Federal Energy Regulatory Commission ("FERC"). This suit concerns in large part the interplay of these tariffs with United's contractual obligation to deliver gas to Texasgulf, with various alleged misrepresentations made by United in 1967 to induce Texasgulf to enter into the aforementioned contract, and with events claimed to have been within United's control leading to the curtailment. Extensive proceedings, denominated "Phase III," are currently underway before the FERC that consider these and comparable issues. Similar issues have arisen under numerous pipeline supply contracts of United and other pipelines as a result of the nationwide shortage of natural gas which has developed. See generally Monsanto Co. v. FPC, 149 U.S.App.D.C. 396, 463 F.2d 799 (1972); Mississippi Power & Light Co. v. United Gas Pipe Line Co., 532 F.2d 412 (5th Cir. 1976), cert. denied 429 U.S. 1094, 97 S.Ct. 1109, 51 L.Ed.2d 541 (1977); FERC Order of August 9, 1978 re: Docket Nos. RP 71-29 et al. (Phase III).

Count I

United has moved for summary judgment on all of plaintiff's claims, or in the alternative, for the Court to stay its hand pending referral of the issues to the FERC and completion of the Phase III proceedings. As to Count I, the breach of contract claim seeking damages due to curtailment, material issues of fact remain in dispute and summary judgment must and will be denied.

A stay pending referral is, on the other hand, entirely appropriate under Count I and will be ordered. The primary jurisdiction of the FERC to determine the scope, effect, and validity of United's tariffs and curtailment plans cannot be reasonably questioned. In addition, several considerations dictate the instant referral as a legitimate exercise of the Court's discretionary authority. The FERC is the most knowledgeable and effective forum to determine the meaning, scope and exculpatory effect, if any, of the curtailment plans which it has approved and of the "without liability" Sections 12.1 and 12.3 in United's various tariffs. Proceedings before the FERC are currently underway involving these very issues, in which both United and Texasgulf are active participants. Importantly, these issues are being determined on the assumption that United would otherwise be liable to Texasgulf under traditional state law principles. In addition, several of the factors which led to the various curtailment orders are going to be reviewed. Therefore, the outcome of the FERC's proceedings will determine in large part, if not entirely, the proper resolution of this case. Moreover, whatever factual conclusions the FERC reaches will benefit any subsequent judicial proceeding, because of the agency's expertise and familiarity with the natural gas industry. Other federal courts have deferred to the FERC's primary jurisdiction in comparable circumstances, see Mississippi Power & Light Co. v. United Gas Pipe Line Co., supra, and the instant referral will encourage consistency in the results of the variety of litigations that have raised similar contract issues. In the end, the matter will have been expedited and expense saved.

Count II

The plaintiff styles its second count as a claim for negligent misrepresentation.¹ According to this count, the defendant "negligently and carelessly misrepresented" the extent of its existent gas reserves to plaintiff Texasgulf prior to signing the 1967 contract, even though the defendant "knew, or should have known" at the time that the representations "were not adequate." The plaintiff alleges both actual and reasonable reliance upon these representations.

The sole statement upon which Texasgulf allegedly relied in this regard was apparently made on April 13, 1967—some six months before final execution of the 1967 contract—by Mr. Tom Ross, a United representative, to two Texasgulf employees. According to the deposition testimony of Texasgulf's Mr. Staffa, Mr. Ross "assured us that United could fulfill the contract for the life of the mine based upon the reserves that they had on the pipeline at that time."²

The parties apparently agree that Louisiana law controls with respect to all aspects of Count II. The Court finds that no cause of action sounding in negligent misrepresentation has been recognized under Louisiana law. It seems that the Supreme Court of Louisiana has never been presented with the question of whether Louisiana recognizes such a cause of action. See Devore v. Hobart Mfg. Co., 359 So.2d 1108, 1111 (La.App.1978). The most recent state appellate level decision to address the issue, however, specifically declined to adopt the cause of action. Id., 359 So.2d at 1110-1111. This opinion comported with prior state court decisions expounding on the nature of a cause of action for fraud. See Polusky v. Allstate Petroleum, Inc., 180 So.2d 815, 819 (La.App.1965); Cotton States Chem. Co. v. Larrison Enterprises, Inc., 342 So.2d 1212, 1214 (La.App.1977). The two state court cases cited by the plaintiff, White v. Lamar Realty, Inc., 303 So.2d 598, 601 (La.App.1974), and Davis v. Davis, 353 So.2d 1060, 1064-65 (La.App.1977), are not sufficient authority for this Court to find such a cause of action, since neither case did anything more than suggest that such a legal claim might exist in the real estate brokerage context. See also Comm'r v. Estate of Bosch, 387 U.S. 456, 465, 87 S.Ct. 1776, 18 L.Ed.2d 886 (1967). The other case relied upon by the plaintiff, Delta Refrigeration Co. v. Upjohn Co., 432 F.Supp. 124 (W.D.La.1977), aff'd without opinion, 575 F.2d 879 (5th Cir. 1978), is simply inapposite; it rested upon a theory of express warranty.

Were it so inclined, the Court would be particularly unwilling to find that a cause of action for negligent misrepresentation exists where involved is an arm's-length commercial transaction between two corporations where no special duty of care can be said to have arisen. As noted by one commentator, the majority of the few jurisdictions which recognize the cause of action limit it to situations in which the misrepresentation is made by a speaker who in the course of his business or profession supplies information for the guidance of others in their business transactions. Hill, Damages for Innocent Misrepresentation, 73 Colum.L. Rev. 679, 685-88 (1973). Accordingly, summary judgment on this count must be granted to the defendant.

Count III

Count III of plaintiff's Complaint alleges that the defendant breached a fiduciary duty owed to plaintiff. Plaintiff's theory is that, by "virtue of defendant United's exclusive control over the dedicated gas reserves that underlay defendant United's ability to deliver gas pursuant to the contract, defendant United assumed a fiduciary duty to plaintiff Texasgulf to maintain and increase its gas reserves." It is further alleged that the defendant violated this duty by failing "to acquire additional gas reserves" and by releasing to third parties "gas reserves already dedicated to its system when it was unwise and imprudent to do so."

Again, Louisiana law concededly controls. That law, however, does not establish a fiduciary relationship merely because a seller possesses "exclusive control" over the res to be sold to the purchaser. Neither side has cited any Louisiana case where a fiduciary duty arose in circumstances analogous to those here presented. The plaintiff draws several inferences from Louisiana Civil Code Articles 1901, 1907 and 1908; but this Court will not read into these general provisions a cause of action which does not satisfy the fiduciary relationship prerequisites specifically set out in State v. Hagerty, 251 La. 477, 205 So.2d 369, 374-75 (1967), cert. denied 391 U.S. 935, 88 S.Ct. 1848, 20 L.Ed.2d 855 (1968). See also Klotz v. Gertrude Gardner, Inc., 293 So.2d 601, 603 (La.App.1974); Clinkenbeard v. Central Southwest Oil Corp., 526 F.2d 649, 653-54 (5th Cir. 1976).

Under those standards, a fiduciary relationship arises only when the business transacted by the claimed fiduciary, "or the money or property which he handles, is not his own or for his own benefit, but for the benefit of another person . . .." State v. Hagerty, supra, 205 So.2d at 375. Texasgulf makes no allegation and has been unable to show either that United's gas reserves were "owned" by Texasgulf prior to delivery or that the business in which United was engaged during the relevant time period was not for its own benefit, but rather for Texasgulf's benefit. Nothing more has been alleged or shown than that the two parties, after long, arduous, and hard-fought negotiations, entered in 1967 into an arm's-length agreement. Texasgulf also apparently concedes that United never expressly assumed any fiduciary duty. Consequently, the defendant is entitled to summary judgment on Count III.

Dismissal of Count III does not, however,...