Younger v. Jensen

• Decision Date: 31 January 1980
• Citation: 605 P.2d 813,161 Cal.Rptr. 905,26 Cal.3d 397
• Parties: , 605 P.2d 813, 1980-1 Trade Cases P 63,172 Evelle J. YOUNGER, Attorney General of the State of California, Plaintiff and Appellant, v. John JENSEN et al., Defendants and Respondents. L.A. 31024.
• Court: California Supreme Court

Page 905

161 Cal.Rptr. 905

26 Cal.3d 397, 605 P.2d 813, 1980-1 Trade Cases P 63,172

Evelle J. YOUNGER, Attorney General of the State of California, Plaintiff and Appellant, v. John JENSEN et al., Defendants and Respondents.

L.A. 31024.

Supreme Court of California.

Jan. 31, 1980.

Rehearing Denied March 13, 1980.

[605 P.2d 815] Evelle J. Younger, Atty. Gen., Warren J. Abbott, Robert H. O'Brien, Asst. Attys. Gen., and Linda L. Tedeschi, Deputy Atty. Gen., for plaintiff and appellant

Manatt, Phelps, Rothenberg & Tunney, Manatt, Phelps, Rothenberg, Manley & Tunney, Alan I. Rothenberg, Julia J. Rider, McCutchen, Black, Verleger & Shea, Jack D. Fudge, Michael L. Hickok, Ward L. Benshoof, Los Angeles, and Robert L. Norris, for defendants and respondents.

Hughes, Hubbard & Reed, Norbert A. Schlei, Ronald C. Redcay, David A. Lombardero, Los Angeles, Otis Pratt Pearsall, John A. Donovan, Philip H. Curtis, Ronald J. Tabak, Kenneth R. Dickerson, New York City, James R. Coffee, Dallas, Tex., Donald A. Bright and Edward E. Vaill, Los Angeles, as amici curiae on behalf of defendants and respondents.

NEWMAN, Justice.

The California Attorney General has appealed from orders that deny two petitions for enforcement of subpenas to give evidence at an investigation into possible antitrust violations affecting California in the marketing of natural gas that originates at Prudhoe Bay, Alaska.

The principal issues are (1) the authorized scope of the State's investigation, and (2) whether federal law preempts the investigation. Also at issue is whether the Attorney General is collaterally estopped by a federal court injunction that on preemptive grounds forbids investigatory proceedings that appear similar.

Government Code § 11180 empowers the Attorney General to investigate any subject under his Department's jurisdiction. ¹ His power may be delegated to deputies ( § 11182) and includes the right to subpena witnesses and documentary evidence ( § 11181). If a subpena is disobeyed he may petition the superior court for enforcement. ( §§ 11186, 11187.) After order to show cause and opportunity for hearing the court must require compliance "(i)f it appears . . . that the subpena was regularly issued . . . ." ( § 11188.)

On January 19, 1976, the incumbent Attorney General delegated to certain deputies authority "to conduct an investigation into the ownership, production, sale and distribution of Prudhoe Bay, Alaska, natural gas insofar as it affects the State of California, to determine the existence, nature, and scope of violations of the federal and state antitrust laws pertaining to price fixing, monopolization, division of markets, and restraint of trade, and to hold hearings, issue subpenas, inspect books and records, take testimony, hear complaints, and administer oaths in connection therewith . . .." Investigation was prompted by a request of the Public Utilities Commission (PUC) for the Attorney General's opinion on possible antitrust violations arising out of two funding agreements the PUC had approved between certain California utilities and certain producers of Prudhoe Bay gas. Under one agreement Pacific Lighting Gas Development Co. (PLGD), an affiliate of Southern California Gas Co., agreed with Atlantic Richfield Co. (ARCO) to assume loan payments in exchange for rights to 60% Of ARCO's gas reserves at Prudhoe Bay. In the other agreement Pacific Gas & Electric Co. (PG&E) agreed to assume similar payments in exchange for 30% Of the Prudhoe Bay gas production of Exxon Corporation over a 20-year period. Both agreements contained "most favored nation" clauses providing that gas should be purchased at prices not less than the highest price paid any producer by any buyer for Prudhoe Bay gas to be delivered in the lower 48 states. PUC's question was whether those clauses would give rise to antitrust violations.

Replying by letter on January 2, 1976, the Attorney General opined not only that the most-favored-nation clauses might be contracts On December 31, 1975, the Federal Power Commission (FPC) ² withdrew its authorization to include the gas pipelines' rate bases advance payments made to gas producers. (See Public Serv. Com., State of N.Y. v. Federal Power Com. (D.C. Cir. 1975) 167 U.S.App.D.C. 100, 511 F.2d 338 (conditioning the continuation of rate-based treatment of advance payments on further investigation of cost-effectiveness).) The two California funding agreements were then terminated by the parties, whereupon the PUC rescinded its approval of the PLGD-ARCO agreement on January 27, 1976, the PG&E-Exxon agreement on April 13, 1976.

in restraint of trade but also that known facts indicated the need for further investigation of other possible antitrust violations in connection with sales of Alaska gas in California including price-fixing agreements among producers, monopolization, and division of the California market. The letter urged the PUC to investigate and offered the Attorney General's cooperation.

1 The Attorney General instituted his investigation in the spring of 1976 by serving subpenas on the four parties to the agreements, requiring that documents be produced and that representatives testify. Responses were deemed inadequate, and accordingly he commenced the enforcement proceedings now before us ( §§ 11186-11187) one against Exxon, the other against PLGD and its secretary, John Jensen. ³ The matter was heard by the trial court, which on April 19, 1977 denied enforcement in both proceedings on the sole ground that the Attorney General's investigation was preempted by federal regulation of interstate distribution of natural gas, particularly under laws conferring jurisdiction on the FPC (see 15 U.S.C. § 717 et seq.). The Attorney General's appeals present identical issues and thus were consolidated.

AUTHORIZED SCOPE OF INVESTIGATION

The issue posed by the trial court's order is not the validity of hypothetical steps California might take to enforce its antitrust laws but rather the power of the state's chief law officer to investigate possible violation of law. Defendants were subpenaed pursuant to his delegation of authority "to conduct an investigation into the ownership, production, sale and distribution of Prudhoe Bay, Alaska, natural gas insofar as it affects the State of California, to determine the existence, nature, and scope of violations of the federal and state antitrust laws pertaining to price fixing, monopolization, division of markets, and restraint of trade." That clearly was within his over-all authority to investigate "matters relating to . . . subjects under (his) jurisdiction" ( § 11180; see footnote 1, Ante, page 2 and Shively v. Stewart (1966) 65 Cal.2d 475, 479, 55 Cal.Rptr. 217, 421 P.2d 65). Possible antitrust violations are, of course, subjects under his jurisdiction. (See, e. g., Bus. & Prof.Code §§ 16750, 16752-16754.5, 16760.)

Because his investigative power extends to "matters relating to" antitrust violations it does not depend on any predetermination that violations actually or even probably have taken place. The breadth of the power was recognized in Brovelli v. Superior Court (1961) 56 Cal.2d 524, 15 Cal.Rptr. 630, 364 P.2d 462, which upheld "an investigation commenced by the Attorney The investigation here could be undertaken to inquire not only into the existence of violations but also into questions of California's jurisdiction over them. (See Oklahoma Press Publishing Co. v. Walling (1946) 327 U.S. 186, 215-217, 66 S.Ct. 494, 90 L.Ed. 614.) Obviously there is an overlap between coverages of the Sherman Act (15 U.S.C. § 1 et seq.) and state antitrust laws that prohibit substantially the same conduct, such as California's Cartwright Act (Bus. & Prof.Code § 16700 et seq.) ⁴ Neither the Sherman Act nor the federal prohibition of undue burdens on interstate commerce (U.S.Const., art. I, § 8, cl. 3) prevents those state laws from reaching transactions that have interstate aspects but significantly affect state interests. (Speegle v. Board of Fire Underwriters (1946) 29 Cal.2d 34, 51, 172 P.2d 867; R. E. Spriggs v. Adolph Coors Co. (1974) 37 Cal.App.3d 653, 659, 112 Cal.Rptr. 585.) ⁵ Accordingly, the coordination of federal and state antitrust enforcement has become a prime example of "cooperative federalism". (Rubin, Rethinking State Antitrust Enforcement (1974) 26 U.Fla.L.Rev. 653, 680; see too Mosk, State Antitrust Enforcement and Coordination with Federal Enforcement (1962) 21 A.B.A. Antitrust Section 358; Fellmeth and Papageorge, A treatise on State Antitrust Law and Enforcement (1978) 7-18.)

General to determine whether the Cartwright Act or the Unfair Practices Act was being violated by the concrete block industry" (Id., at p. 526, 15 Cal.Rptr. at p. 631, 364 P.2d at p. 463). Noting that mere investigation requires neither the filing of charges nor any formal proceedings, this court stated: "As has been said by the United States Supreme Court, the power to make administrative inquiry is not derived from a judicial function but is more analogous to the power of a grand jury, which does not depend on a case or controversy in order to get evidence but can investigate 'merely on suspicion that the law is being violated, or even just because it wants assurance that it is not.' (United States v. Morton Salt Co., 338 U.S. 632, 642-643, 70 S.Ct. 357, 94 L.Ed. 401.)" (56 Cal.2d at p. 529, 15 Cal.Rptr. at p. 633, 364 P.2d at p. 465.)

The present investigation has both interstate and intra-California aspects. Though dealing with gas to be imported from another state, defendants' actions are being investigated for possibly illegal impact on the marketing of that gas in California. Thus while conducting the investigation the Attorney General properly may be concerned not only with the possibilities of prosecution in California courts but also with formulations of enforcement policy in cooperation with federal authorities and with recommendations for remedial...