Federal Power Commission v. Interstate Natural Gas Company Public Service Commission of Missouri/Concurrence Black

by Hugo Black

United States Supreme Court

336 U.S. 577

Federal Power Commission  v.  Interstate Natural Gas Company Public Service Commission of Missouri

 Argued: and Submitted Jan. 11, 1949. --- Decided: April 18, 1949

Mr. Justice BLACK, concurring in part and dissenting in part.

I concur in reversal of the judgment of the Court of Appeals, but dissent from the directions given that court for disposition of the impounded funds. In the first place I think those directions rest on erroneous legal principles. Secondly, without precise definition of issues or standards, the directions impose an almost impossible task on the Court of Appeals, a task which is bound to dissipate a large part of the funds in diverse, protracted, involved and confused litigation. Furthermore, I see little assurance that the fund's remnant at the end of this litigation could ever reach the consumers who are in my judgment the equitable and legal beneficiaries of the funds.

Acting pursuant to the Natural Gas Act, ^[1] the Federal Power Commission ordered the Interstate Natural Gas Company to reduce its rates to certain wholesale pipe-line companies. Challenging this order as illegal, the wholesale companies sought and obtained from a District Court an injunction against enforcement of the rate reduction order. By reason of the injunction the pipe-line companies were compelled to continue to pay the higher gas rates. But the court required the Natural Gas Company to make monthly payment into court of amounts equal to the rate reduction. For more than four years these funds have been collected and paid into court. When this case was submitted, the total amount collected was in excess of two and a half million dollars. The rate reduction order was sustained by this Court ^[2] and consequently Interstate is not entitled to and asserts no claim to the fund. The wholesale pipe-line companies claim it on the ground that but for the injunction they would have obtained the gas at the lower rate. ^[3] The Federal Power Commission and certain state agencies here contend that since the purpose of the Natural Gas Act was to provide benefits to the ultimate consumers the total impounded funds should be distributed to the consumers.

First. I agree with the Court that the aim of the Federal Act was to protect ultimate consumers of gas from excessive charges. To protect the ultimate consumer, however, the Act went no further than to fix the interstate rates of producers and wholesalers. Congress intended that these federal rate reductions would lower the costs of gas to local retailers, thus enabling state and local agencies to fix lower consumer rates on the federally fixed lower wholesale rates. Consequently, where courts leave the Act's scheme free to function, ultimate consumers of gas get no benefits from the federally reduced producer rates until and unless state or local authorities fix reduced rates for companies whose sales fall within their respective jurisdictions. Under such circumstances rate relationships and cost consequences as between consumers and dealers under state jurisdiction would raise questions of state law only. But here, the normal consequences of the valid federal rate reduction were not allowed to take place. The injunction placed an insuperable obstacle to state reduction of wholesale or retail rates on the basis of the federal rate reduction order. Thus the court's stay blocked the congressional mechanism intended to produce lower consumer rates. Central States Electric Co. v. Muscatine, 324 U.S. 138, 149, 65 S.Ct. 565, 570, 89 L.Ed. 801 (dissenting opinion). Furthermore, no practical remedy is available in the state courts or state or federal regulatory agencies to determine retroactively what is a proper distribution of the impounded funds. The judicial stay therefore effectually frustrated the congressional purpose to provide a timely opportunity for state or national regulatory agencies to accord consumers the Act's benefits. Consequently, rights in the fund as between ultimate consumers and the pipe-line companies must be determined under the new situation created by the federal court.

Second. Different from the Court, I think that distribution of the fund in this new situation is wholly a matter of federal law and that the fund should be distributed without a futile effort to determine the extent consumer rates might have been reduced by state or national regulatory agencies had they been left free to act on the reduced rate cost of gas. It was a federal court acting under authority of federal law that created the fund. And having deprived consumers of an opportunity to get the reduced rates Congress intended them to have as the result of an integrated federal-state course of conduct, it became the duty of the federal court to administer this fund under federal rules that would as nearly as possible afford these congressionally intended benefits to consumers. Nothing short of this will accord with the congressional purpose or with equitable principles by which the court must be governed in administering the fund. Inland Steel Co. v. United States, 306 U.S. 153, 59 S.Ct. 415, 83 L.Ed. 557; United States v. Morgan, 307 U.S. 183, 59 S.Ct. 795, 83 L.Ed. 1211.

All ga the wholesale price of which was affected by the Commission's order had its ultimate price to the consumer fixed by law or by agreement of parties. ^[4] In neither event can it be assumed that the price paid failed to give the seller a reasonable value. Under such circumstances, where rates were fixed by law or contract on the basis of the high wholesale rate, neither statutes nor equitable principles require the Court of Appeals to seek standards of reasonableness different from those under which gas merchants voluntarily had already sold their product to retailers and consumers. All regulatory statutes permit utilities to complain of unreasonable rates, and the failure of these utilities to prosecute claims for excess rates until this windfall was in sight should bar them from making retroactive claims now. And of course, where the price was fixed by voluntary contracts, the court should not be required to re-examine those contracts on the naive assumption that consumers took an unconscionable advantage of the pipe-line companies.

My belief is that under the circumstances here the only way even partially to carry out the purpose of Congress to afford consumer relief is by distributing this fund to the consumers. This itself will impose a tedious, onerous, and perhaps expensive burden on the court and the consumers. Such a burden, however, is one of the prices to be paid for the practice of judicial suspension of rate orders. But the burden in distribution to consumers would be small in comparison to that imposed by requiring the court in 1949 and 1950 to make expensive and extensive explorations to speculate on what rates state administrative agencies would have found reasonable in separate years from 1943 to 1947. ^[5] Neither the procedure I suggest nor that adopted by the Court can achieve with scientific accuracy the result that would have followed had the court not suspended the rate reduction order. But under the Court's plan to require the Court of Appeals to reconstruct hypothetical rate situations in several states a major part of the funds might be dissipated in a costly but vain search for an unattainable goal. ^[6] Consumers at least can get a substantial part of the funds under the procedure I suggest. ^[7] Nor can I see any possible intrusion into state functions by following such a course.

Neither state laws nor state courts are responsible for the tangled situation here. I cannot see where it could p ssibly offend the states or encroach on their power for the federal court to distribute these funds to the very state people the federal law was passed to protect. And the state representatives here arguing for the distribution of this fund to the ultimate consumers, citizens of their states, are apparently unable to detect in distribution to these consumers any invasion of state rights by the federal courts.

This seems an appropriate time to reverse Central States Electric Co. v. Muscatine, 324 U.S. 138, 65 S.Ct. 565, 89 L.Ed. 801. I regret to see that holding survive even in part.

Mr. Justice MURPHY and Mr. Justice RUTLEDGE join in this opinion.

Notes

1. 52 Stat. 821, 15 U.S.C. § 717, 15 U.S.C.A. § 717.
2. Interstate Natural Gas Co. v. Federal Power Commission, 331 U.S. 682, 67 S.Ct. 1482, 91 L.Ed. 1742.
3. One pipe-line company claims to have passed on the rate reduction to its customers which if proved would put it in an entirely different category.
4. As the Court points out, industrial purchasers' rates may not have been fixed by law but by contracts.
5. How is this reasonableness to be determined, on the fair value theory, the reproduction cost theory, or some other theory? And how many more years would it take the Court to complete the several extensive inquiries required to reach its conclusions as to reasonableness of the prices charged by the several companies in the several states where they sold gas? See McCart v. Indianapolis Water Co., 302 U.S. 419, 428-439, 58 S.Ct. 324, 328 333, 82 L.Ed. 336 (dissenting opinion).
6. It is interesting to note the unchallenged assertion in the Government brief that although in Central States Electric Co. v. Muscatine, 324 U.S. 138, 65 S.Ct. 565, 89 L.Ed. 801, 'this Court required that the way be left open for the ultimate consumers to utilize the remedies, if any, provided by local law, no such proceeding has been brought.' The illusion that state relief is somehow available to the consumers here seems to persist despite the realities that consumers in the Central States case, similarly situated to the consumers here, have not received a dime from the 'available' state remedies.
7. Apprehension is expressed in this Court that the procedure I suggest would result in making the producing company the residuary beneficiary of funds not claimed by consumers. Such an apprehension is not justified since the Court of Appeals can direct any unclaimed consumer funds to be distributed to whatever company might show a superior equity.