Appendix — Morial v. United Gas Pipe Line Co.
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G4 4 4B fcc sper: om vs
NO. |, gep 10 1988
2 ee L. STEVAS,
In the CLERK
Supreme Court of the United States
OCTOBER TERM, 1984
ERNEST N. MORIAL, ET AL
and the Class they Represent,
Petitioners
vs.
UNITED GAS PIPE LINE COMPANY,
Respondent
ON PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
PETITION FOR WRIT OF CERTIORARI
VOLUME II—APPENDICES
DONALD R. MINTZ
CONSTANCE CHARLES WILLEMS
(Counsel of Record)
ELLIS B. MUROV
GENE W. LAFITTE
WINTHROP G. GARDNER
McGLINCHEY, STAFFORD, MINTZ,
CELLINI & LANG
643 Magazine Street
New Orleans, Louisiana 70130
Telephone: (504) 586-1200
Counsel for Petitioners
A B Letter Service, Inc., 327 Chartres St., New Orleans, La. (504) 581-5555
i
TABLE OF CONTENTS
PAGE
APPENDIX ‘“A’’—Minute Entry, Livaudais,
Magistrate, Allowing Ernest N. Moriai Et Al
Leave to Intervene Permissively (E.D.La.)
Ge TBS yCta e ay er A-l
APPENDIX ‘“‘B’’—Judgment, Mitchell, Judge,
Granting Review of November 6, 1981 Order;
Affirming Denial of Intervention of Right
and Reversing Granting of Leave for
Permissive Intervention (E.D.La.) (Feb.
ER RES RGNS! S ce ER a A-3
APPENDIX “‘C’’—Opinion by Goldberg, Williams
and Garwood, Circuit Judges, Fifth Circuit
Court of Appeals Granting Leave to Intervene
of Right and Permissively (Nov. 8, 1982)....... A-5
APPENDIX ‘D’’—Order Denying Rehearing En
Banc and Granting Rehearing for Limited Purpose
Fifth Circuit Court of Appeals Denying
Intervention as of Right and Granting
Permissive Intervention (12/27/82), and Order
on Granting of Rehearing En Banc, Fifth
Circuit Court of Appeals (Feb. 23, 1983)....... A-31
APPENDIX “E’’—Order Vacating Hearing Case
En Banc, Fifth Circuit Court of Appeals
SE erie a .... A-B5
APPENDIX ‘‘F’’—Order Denying Petition for
Rehearing and Suggestion for Rehearing
En Banc, Fifth Circuit Court of Appeals
I en kb nv y sce ses A-37
APPENDIX ‘“‘G’’—Order Granting Renewed
Suggestion for Rehearing En Banc, Fifth
Circuit Court of Appeals (Oct. 26, 1983)....... A-39
APPENDIX ‘‘H’’—En Banc Opinion Denying
ntervention as of Right and Permissively
; City Officials and Class, Fifth Circuit
ourt of Appeals (May 21, 1984)............. A-44
ii
APPENDIX “I’’—Order Denying Petition for
Rehearing of City Officials and Class, Fifth
Circuit Court of Appeals (June 21, 1984)....... A-91
APPENDIX “J’’—Judgment by Judge Connolly in
the Civil District Court for the Parish of
Orleans, State of Louisiana (August 24, 1984). . A-93
A-1
APPENDIX “A”
MINUTE ENTRY
LIVAUDAIS, M.
NOVEMBER 4, 1981
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CIVIL ACTION
NO. 81-2199
SECTION: “‘F’”’ (5)
NEW ORLEANS PUBLIC SERVICE, INC.
versus
UNITED GAS PIPELINE ZOMPANY
HEARING ON MOTION
PRESENT:
MS. CONSTANCE C. WILLEMS
HARRY McCALL, JR., ESQ.
C. MURPHY MOSS, ESQ.
MOTION:
(1) OF ERNEST N. MORIAL ET AL FOR
LEAVE TO INTERVENE.
___CONTINUED TO:
___NO OPPOSITION -_1 OPPOSITION
ORDERED
___DISMISSED AS MOOT.
A-2
_1 DENIED—Pursuant to Rule 24(a) F.R.C.P.
_1GRAN*ED IN PART—Pursuant to Rule 24(b)
F.R.C.P. Applicants, Ernest Morial, Joseph I. Giarrusso,
Sidney J. Barthelemy, Bryan Wagner, James M. Singleton,
Mike Early, Lambert Boissiere and Phillip C. Ciaccio are
granted ieave to intervene herein individually, not as a
class.
/S/ Signed
MARCEL LIVAUDAIS, JR.
United States Magistrate
CLERK TO NOTIFY COUNSEL
OF RECORD
DATE OF ENTRY NOV. 6 1981
A-3
APPENDIX “B”
MINUTE ENTRY
MITCHELL, J.
FEBRUARY 16, 1982
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CIVIL ACTION
NO. 81-2199
SECTION: “F”’
NEW ORLEANS PUBLIC SERVICE, INC.
VERSUS
UNITED GAS PIPELINE CC MPANY
This matter was submitted to this Court at an earlier
date. After careful consideration of the applicable law, and
of the briefs and arguments of counsel, the Court now rules:
IT IS ORDERED, ADJUDGED AND DECREED
that the motion of Applicants for Intervention, Ernest N.
Morial, et al, Individually and as representatives of a class,
for review of the Magistrate’s November 6, 1981 order and
the motion of defendant, United Gas Pipeline Company, for
review of the Magistrate’s November 6, 1981 order are
hereby GRANTED.
IT IS FURTHER ORDERED, ADJUDGED AND
DECREED that that part of the Magistrate’s November 6,
1981 order denying intervention of right is AFFIRMED;
that part granting leave for permissive intervention by
Ernest Morial, et al, as individuals is REVERSED.!
! To be entitled to intervention of right F.R.C.P. 24(a) provides
A-4
/S/ Signed
UNITED STATES DISTRICT JUDGE
(Footnote 1 continued)
that the applicant must claim ‘‘an interest relating to the property or
transaction which is the subject of the action and he is so situated that
the disposition of the action may as a practical matter impair or impede
his ability to protect that interest,’ and he must show that his interest
will not be adequately represented by existing parties. None of the ap-
plicants for intervention herein however have a direct, legall:’ protected
interest in this contract action between the two parties to the contract.
Diaz v. Southern Drilling Corp., 427 F.2d 277 (CA5-1970); U.S. v. Perry
County Bd. of Educ., 567 F.2d 277 (CA5-1978). The contract here in
dispute does not contemplate a benefit to third parties such as to make
it a stipulation pour autrui conferring rights upon the applicants. Allen
& Currey Mfg. Co., Ltd. v. Shreveport Water Works Co., 113 La.1091,
37 So.980 (1905); City of Shreveport v. Gulf Oil Corp., 431 FS 1 (WD
La.1975), aff'd. per curiam 551 F.2d 93 (CA5-1977). Further, the ap-
plicants have not overcome the presumption that New Orleans Public
Service, Inc. can adequately represent existing mutual interests. Ord-
nance Container Corp. v. Sperry Rand Corp., 478 F.2d 844 (CA5-1973);
Martin v. Kalvar Corp., 411 F.2d 552 (CA 5-1969); Florida Power and
Light Co. v. Belcher Oil Co., 82 F.R.D. 78 (SD Fla. 1979).
Furthermore an applicant for intervention cannot be allowed to per-
missively intervene pursuant to F.R.C.P. 24(b) where he has failed to
show independent grounds for the exercise of this Court’s jurisdiction.
Smith Petroleum Service, Inc. v. Monsanto Chemical Co., 420 F.2d 1103,
1113 (CA5-1970); Clanton v. Orleans Parish School Board, 72 F.R.D. 164
(ED La. 1976). Though the applicants herein are diverse as to United,
the claim presented represents separate interests and not an undivided
one such that each individual claim may be cumulated to meet the
$10,000 minimum requirement. Zahn v. International Paper Co., 414
U.S. 293 (1973). Also no Federal Question is presented by allegation of
private rights of action under the Natural Gas Act, 15 USC §§717 et seq.
Clark v. Gulf Oil Corp., 570 F.2d 1138 (CA3-1977), cert. denied, 435 U.S.
970 (1978); City of Gainesville v. Florida Power & Light Co., 488 FS 1258
(SD Fla.1980). Furthermore the individually named city officials are not
members of a regulatory agency charged with administering either state
contractual rights or the Natural Gas Act thus this Court would not be
construing policy without the participation of responsible parties.
F.R.C.P. 24(b). No other basis for this Court’s jurisdiction has been
seriously presented.
A-5
APPENDIX “C”’
NEW ORLEANS PUBLIC SERVICE, INC.,
Plaintiff,
Ernest Morial, et al.,
Movants-Appellants,
v.
UNITED GAS PIPE LINE COMPANY,
Defendant-Appellee.
No. 82-3194.
United States Court of Appeals,
Fifth Circuit.
Nov. 8, 1982.
McGlinchey, Stafford & Mintz, Donald R. Mintz,
Constance Charles Willems, New Orleans, La., for
movants-appellants.
Lemle, Kelleher, Kohlmeyer & Matthews, C. Murphy
Moss, Jr., Robert G. McIver, Victoria L. Knight, New
Orleans, La., James M. Costan, Kevin W. McLean,
Douglas Knox Bemis, Jr., W. DeVier Pierson, Washington,
D.C., for defendant-appellee.
Appeal from the United States District Court for the
Eastern District of Louisiana.
Before GOLDBERG, WILLIAMS and GARWOOD,
Circuit Judges.
A-6
JERRE S. WILLIAMS, Circuit Judge:
Consumers and certain city officials bring this ap-
peal from a district court order denying their motion under
Fed.R.Civ.P. 24(a) and (b) for leave to intervene in this
lawsuit. We find that the consumers have no right to in-
tervene. However, we reverse the decision denying in-
tervention to the government officials, and remand.
I. BACKGROUND
New Orleans Public Service, Inc., (NOPSI), is a
private corporation holding a franchise agreement with the
City of New Orleans to supply public utility service to the
Parish of Orleans. NOPSI provides both natural gas and
electricity to its customers. In July 1952, NOPSI executed
a contract with the United Gas Pipe Line Co. (United) for
the purchase of natural gas that NOPSI would use both for
airect resale to its gas customers (resale gas) and as fuel in
its electric power plants (power plant gas). Only the power
plant gas under the contract is involved in this dispute.
The 1952 Contract set a sale price for the power plant
gas. Both parties performed under the Contract without
serious difficulty until 1975. A few months before the 1952
Contract was due to expire in 1975, United and NOPSI ex-
ecuted a letter agreement for the continued supply of power
plant gas. This 1975 Letter Agreement changed the price
and the method of price determination provided in the prior
contract.! The 1975 Letter Agreement was amended on
Subpart 4A.2 of the 1975 Letter Agreement, the ‘‘redetermina-
tion clause,” provides as follows:
A-7
two occasions in 1978 to alter some provisions of the con-
tract for deliveries effective August 1, 1978.
Acting under the terms of the 1975 Letter Agree-
ment, on March 3, 1981, United proposed a ‘‘redetermined
rate’’ on power plant gas, a polite euphemism for a price in-
crease, covering gas deliveries effective May 3, 1981.
NOPSI protested the new rates and United amended cer-
tain provisions of its March, 1981 proposal. United submit-
ted a final proposal to NOPSI on April 9, 1981.
NOPSI asserts that it initially considered the pro-
posed redetermined price to be merely a power play, and
United granted NOPSI two extensions of time to consider
the proposals. United informed NOPSI, though, that if it
did not accept the proposed price of $3.60 to $4.00 per mcf,
United would charge the full market price for its gas.”
(Footnote 1 continued)
Effective on or after June 1, 1976 at 7 a.m., Seller shall
have the right to periodically institute a redetermined rate.
The initial redetermined rate, or any redetermined rate that
may be established thereafter pursuant to the terms and
conditions herein stated, shall remain in effect for a period of
at least twelve (12) months from the date such redetermined
rate is instituted.
Seller shall give Buyer not less than sixty (60) days’ writ-
ten notice of the redetermined monthly rate to be instituted
by Seller for gas delivered hereunder and Buyer shall notify
Seller within thirty (30) days of the date such redetermined
rate is to be instituted whether Buyer agrees to such rate
and desires to continue purchasing gas from Seller subject
thereto. In the event Buyer does not agree to such redeter:
mined rate, Buyer shall cease taking gas on the date such re-
jected redetermined rate was to be instituted.
2 United could not close the valves on power plant gas deliveries
without FERC authorization, 15 U.S.C. § 717f(b), but could charge a
“fair market price’’ for its deliveries.
A-8
United estimated the market price at $6.00 to $8.00 per mcf.
NOPSI officials believed that United’s power play was an il-
legal form of economic coercion, but their discussions and
correspondence with United generated more heat than light.
NOPSI’s management eventually submitted to the new rate,
but only under an express protest that the redetermined rate
was impermissible under state law. NOPSI signed the
agreements in mid-May, 1981, and filed suit in Louisiana
court on May 26, 1981. United, invoking diversity jurisdic-
tion, petitioned for removal to federal district court on June
1, 1981. The dispute covers the validity of the NOPSI-United
agreements, the proper rate for power plant gas, and the
method of refund, if any.
This appeal, however, does not touch the merits of this
dispute. Shortly after the suit was removed to federal court,
the mayor of the City of New Orleans moved for leave to in-
tervene in the controversy, pursuant to Fed.R.Civ.P. 24(a) and
24(b). His original claim was as representative of a proposed
class of NOPSI’s ratepayers. He later amended his motion
to include various private electric ratepayers and several
members of the New Orleans City Council. Some of the mov-
ing parties had paid enough in claimed overcharges on elec-
tric bills since the May, 1981, rate redetermination to meet
the $10,000 jurisdictional amount in diversity cases. 28 U.S.C.
1332(a). The federal district judge referred the motion to a
magistrate, who accepted briefs and held hearings on the
matter.
The magistrate ruled that the consumer members of
the proposed class, either individually or as a class, had no
right to intervene in the action. He further found that the
governmental parties had a right to intervene permissively,
pursuant to Fed.R.Civ.P. 24(b). The district judge overturn-
ed the order of the magistrate in part, holding that neither
A-9
the consumers nor the government officials could in-
tervene. The district court also denied a stay of pro-
ceedings pending an appeal. The attempted intervenors
then plugged their appeal into the Circuit, pursuant to 28
U.S.C. § 1291.
We agree with both the magistrate and the district
judge that the consumers have no proper claim to interven-
tion as of right under Rule 24(a). Further, we find that the
denial to the consumers of permissive intervention under
Rule 24(b) was not an abuse of discretion. The mayor and
members of the City Council are in a different situation,
however. They have a statutory mandate to oversee the
operations of public utilities within New Orleans, such as
NOPSI. La.Const., art. 6, §§ 4, 6; State ex rel. Guste v.
Council of the City of New Orleans, 309 So.2d 290, 292
(La.1975). We hold that the denial of their intervention was
both erroneous under the requirements of 24(a), interven-
tion as of right, and an abuse of discretion under Rule 24(b),
permissive intervention.
II. GOVERNMENTAL OFFICIALS AS PARTIES
We find that the government officials have both a
statutory right and a clear interest in making a contribu-
tion to the disposition of this case. We therefore find that
the district court erred in denying the government parties
leave to intervene as of right, and, in any event, the denial
of leave for permissive intervention was an abuse of
discretion.
A. Intervention as of Right
Intervention as of right in the federal courts is
A-10
covered by Fed.R.Civ.P. 24(a).2 This Circuit has developed
a four-pronged framework for interpreting motions for in-
tervention as of right. Howse v. S/V ‘‘Canada Goose I”’, 641
F.2d 317, 320 (5th Cir. 1981); International Tank Terminals
Ltd. v. M/A Acadia Forest, 579 F.2d 964, 967 (5th Cir.
1978). First, the application for intervention must be time-
ly. Second, the applicant must have an interest relating to
the subject matter of the litigation. Third, the applicant
must be so situated that the outcome of the case may, as
a practical matter, impair or impede the applicant’s ability
to protect that interest. Finally, the interest must be one
not adequately represented by existing parties.
Examining intervention as of right, we find that each
of the four necessary factors for intervention is present.
Howse, supra at 320. First, the motion to intervene was
timely, having been made approximately one month after
the original federal lawsuit was tiled. Second, the members
of the City Council have an interest relating to this transac-
tion. Under the city’s home rule charter, the New Orleans
City Council operates in place of the Louisiana Public Ser-
vice Commission in regulating the rates of public utilities
within the City of New Orleans. La.Const., art. 6, §§ 4, 6;
State ex rel. Guste v. Council of the City of New Orleans,
supra. The members of the City Council apparently have
3 Rule 24(a) provides:
Intervention of Right. Upon timely application anyone shall
be permitted to intervene in an action: (1) when a statute of
the United States confers an unconditional right to in-
tervene; or (2) when the applicant claims an interest relating
to the property or transaction which is the subject of the ac-
tion and he is so situated that the disposition of the action
may as a practical matter impair or impede his ability to pro-
tect that interest, unless the applicant’s interest is adequate-
ly represented by existing parties.
A-11
entered this action pursuant in part at least to a June 18,
1981, motion which in turn resulted in a September 17,
1981, resolution of the New Orleans City Council authoriz-
ing intervention to protect the public interest.
Federal courts are not bound to permit governmental
parties to intervene in private suits whenever the agency
purports to protect the public interest. The agency, for ex-
ample, may be seeking to protect a public interest already
present before the court or governed by a different govern-
ment agency. See, e.g., United States v. Local 638, Enter-
prise Ass’n of Steam, Hot Water, Hydraulic Sprinkler,
Pneumatic Tube, Compressed Air, Ice Machine, Air Condi-
tioner and General Pipefitters, 347 F.Supp. 164
(S.D.N.Y.1972) (city permitted to intervene in civil rights
suit against unions only upon a showing that plaintiff U.S.
Department of Justice was not representing city residents’
interests adequately). Yet even these limits are not meant
to discourage state or local government intervention as
parens patriae. See Nuesse v. Camp, 385 F.2d 694, 700
(D.C.Cir.1967) (state banking commissioner granted right
to intervene despite presence of federal officials as parties).
In this dispute the City officials are the only govern-
ment parties seeking to intervene, and they have a
statutory obligation to oversee NOPSI’s fiscal and public
responsibilities. The City Council acts as the regulator of
NOPSI’s rates. It will have the obligation in the future to
determine whether NOPSI’s recovery, if any, is sufficient
to recover whatever overcharges may have passed through
to consumers as a result oi the disputed portions of the
NOPSI-United Letter Agreement.
Determining the proper redetermined rate for power
plant gas in a federal court while excluding the rate
A-12
regulators would cause needless duplication of the same
basic factual testimony. The 100% pass-through of the
price increase makes clear the effect that the contract in
question will have on rates in the future. In this dispute,
the government’s interests are sufficient to permit in-
tervention as of right. See Cascade Natural Gas Corp. v. El
Paso Natural Gas Co., 386 U.S. 129, 87 S.Ct. 932, 17
L.Ed.2d 814 (1967) (State of California permitted interven-
tion as of right in antitrust action involving local gas
supplier).
The third requirement for intervention as of right,
that the potential intervenor be so situated that an adverse
decision will impair his rights, is satisfied here as well. If
NOPSI does not pursue this lawsuit adequately or fully, it
might not establish its full legal rights vis a vis United. In
the absence of the City Council in the case, it would only be
later when the Council sits to determine the proper fuel
cost allowance to be passed through to consumers that it
would discover whether NOPSI had obtained all that it was
entitled to legally. At that point, seeking additional
recovery for the benefit of consumers would be an onerous
burden. United would be exempt from further action under
the principle of res judicata. NOPSI’s shareholders would
resist any charge-back against NOPSI’s corporate assets.
Further, any charges that lowered earnings to NOPSI’s
shareholders would result in a higher cost of capital. It
would also raise issues relating to the well-established fair
return on investment requirement. See, e.g., United Gas
Public Service Co. v. State of Texas, 303 U.S. 123, 142, 158
S.Ct. 483, 492, 82 L.Ed. 702, reh’g denied, 303 U.S. 625, 58
S.Ct. 483, 82 L.Ed. 702 (1938). Higher bond interest ex-
penses or lower stock prices ultimately would reflect in
higher electric bills, just the opposite of what the City
Council intends.
A-13
Fourth, intervention as of right requires an interest
that is not represented sufficiently by the parties. The in-
terest at stake here is the regulator’s interest, which is ex-
ercised on behalf of the public. Although NOPSI correctly
represents that it is seeking ratepayer recovery, NOPSI’s
authority to do so comes from its franchise agreement from
the New Orleans City Council. But the City Council is
undertaking to insure that its regulatory interests are ade-
quately represented. It cannot be said that the regulator's
interests and the interests of the regulated are identical.
This is one of the classic governmental confrontations. The
regulators have independent interests in this litigation that
NOPSI does not represent. The Council members have a
right to believe that the case will be resolved more ac-
curately and more quickly with their presence, thus keep-
ing the cost of litigation down, and ultimately electric rates
down as well.
We hold that the New Orleans City Council has the
right to intervene under Fed.R.Civ.P. 24(a).
B. Permissive Intervention
An alternative basis for the City Council’s motion for
intervention is Fed.R.Civ.P. 24(b), Permissive Interven-
tion, which is set forth in the margin.4 Since we find a
4 Rule 24(b) provides:
Permissive Intervention. Upon timely application anyone
may be permitted to intervene in an action: (1) when a
statute of the United States confers a conditional right to in-
tervene; or (2) when an applicant's claim or defense and the
main action have a question of law or fact in common. When
a party to an action relies for ground of claim or defense
upon any statute or executive order administered by a
federal or state governmental officer or agency or upon any
A-14
right to intervene under Rule 24(a), we discuss permissive
intervention only briefly as a means of forestalling a possi-
ble assertion by United that the issue would be settled in
its favor by a revesal of our holding on intervention as of
right.
Rule 24(b)(1) is not applicable here since the basis of
the City Council’s regulatory authority is state rather than
federal law. Rule 24(b)(2) requires, as a threshold considera-
tion, a common question of law or fact with the main
dispute. The determination is not discretionary; it is a
question of law. Stallworth v. Monsanto Co., 558 F.2d 257,
269 (5th Cir. 1977). The government parties are asking to
participate in the analysis of the same contract that has
created the initial NOPSI-United dispute. There can be no
question but that the government parties are presenting
similar questions to those in the main suit. The only issue
remaining is whether permitting intervention will further
the efficient resolution of this controversy.
We fail to see how the City’s intervention wil!
substantially complicate the federal court proceedings. The
district court has procedural tools at its disposal to limit
duplicative arguments or wasteful testimony. Intervention
will, though, help to eliminate future litigation by settling
related legal claims simultaneously. Nor will intervention
prejudice the rights of the existing parties. Since the
(Footnote 4 continued)
regulation, order, requirement, or agreement issued or made
pursuant to the statute or executive order, the officer or
agency upon timely application may be permitted to in-
tervene in the action. In exercising its discretion the court
shall consider whether the intervention will unduly delay or
prejudice the adjudication of the rights of the original
parties.
A-15
government rate regulators will need to determine the
reasonableness of any recovery and the method of any refund
to consumers, government intervention will not take away
any rights from NOPSI or United. United will continue to
defend the underlying contract dispute as it would in the
absence of additional parties. NOPSI’s discretion to fashion
its claims and propose recovery procedures is limited by the
supervisory powers of its rate regulators. The City Council’s
intervention does not limit NOPSI’s authority to pursue this
suit; rather, it merely accelerates the public sector review of
claims that eventually will require public scrutiny in any
event.
The chief advantage of government intervention is that
it will heighten protection of the public’s interests in this
litigation. This will minimize any future protests that con-
sumers otherwise might have against the City Council for
failure properly to carry out its governmental regulatory
responsibilities. See White v. Louisiana Public Service
Comm’n, 259 La. 363, 250 So.2d 368, 371 (1971) (private sec-
tor action against PSC on allegations of arbitrary and
capricious actions); 45 La.Stat.Ann. § 1192 (West 1951) (per-
mitting judicial reviews of PSC actions). See generally
Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402,
91 SCt. 814, 28 L.Ed.2d 136 (1971); Natural Resources
Defense Council, Inc. v. EPA, 489 F.2d 390 (5th Cir. 1974),
rev ‘d on other grounds sub. nom. Train v. Natural Resources
Defense Council, Inc., 421 U.S. 60, 95 S.C. 1470, 43 L.Ed.2d
731 (1975). We hold today that it constituted an abuse of
discretion on the facts of this case to deny a motion for leave
to intervene by the government authorities with rate
regulatory responsibilities affecting both the underlying
dispute and an existing party to the suit.°
> The government parties satisfy subject matter jurisdictional
A-16
III. CONSUMER INTERVENTION
A. Who pays the bills?
The remaining members of the proposed class are
various consumers of electricity in the Parish of Crleans.
Some of these are named consumers who claim to have paid
over $10,000 each in alleged overcharges for power plant
gas, in an apparent effort to invoke independent diversity
jurisdiction.® Other named consumers and the unnamed
members of the proposed class are NOPSI customers who
do not necessarily pay enough for electricity to meet the
jurisdictional amount. Although we are not unsympathetic
(Footnote 5 continued)
requirements under the diversity provision, 28 U.S.C. § 1332. We
therefore need not reach the question of whether independent grounds
for subject matter jurisdiction are necessary to examine the claims of
parties intervening under Rule 24(b). At least some cases suggest such
a requirement. Smith Petroleum Service, Inc. v. Monsanto Chemical Co.,
420 F.2d 1103, 1113 (5th Cir. 1970) (dictum); Humble Oil & Refining Co.
v. Sun Oil Co., 190 F.2d 191, 197 (5th Cir. 1951) cert. denied, 342 U.S.
920, 72 S.Ct. 367, 96 L.Ed.2d 687 (interpreting pre-1966 version of cur-
rent Rule 24(b)); Clanton v. Orleans Parish School Board, 72 F.R.D. 164
(E.D.La.1976) (citing pre-1966 authority). Yet in Cascade Natural Gas
Corp. v. El Paso Natural Gas Co., 386 U.S. 129, 87 S.Ct. 932, 17 L.Ed.2d
814 (1967), the Supreme Court recognized that the current, 1966 version
of Rule 24 expands the opportunities for intervention. Jd. at 133-34, 87
S.Ct. at 935-936. In that case, the Court permitted the State of Califor-
nia to intervene in an antitrust action involving a major gas supplier to
the State. Yet in cases where jurisdiction depends on factors other than
the very nature of the claim, the jurisdictional requirements may require
a court to draw the line somewhere on parties seeking to intervene. ‘It
is not always easy to draw the line,” Jd. at 134, 87 S.Ct. at 936, quoting
Central Trust Co. of New York v. Chicago, R. I. & P. R. Co., 218 F. 336,
339 (2d Cir. 1914).
6 Since we find no grounds for permitting consumer intervention
in this case, we need not reach the question of whether an independent
ground for subject matter jurisdiction is necessary under Rule 24(b). See
note 5, supra.
A-17
to the issues that the consumers raise, we do not find them
sufficient to support a motion to intervene under either
Rule 24(a) or 24(b).
The consumers present a number of claims in sup-
port of their motion to intervene. Central to all of them,
however, is their contention that they have more to lose
than NOPSI in the resolution of the contract dispute. The
consumers point out that NOPSI is not at risk as to any of
the additional costs of power plant gas. Under current rate
structures, 100% of the cost increase of power plant gas is
passed through to the consumer through electric rate
adjustments.
NOPSI’s rate structure for electricity, while perhaps
complicated in its specifics, is clear on its face. Each mon-
thly consumer bill includes both a basic charge for the
amount of electricity used and a fuel cost adjustment,
which reimburses NOPSI for the cost of power plant gas
under the United contract. Any increase in the cost of
power plant gas is added to the fuel cost adjustment, sub-
ject to the periodic review of the government regulators.
The consumers assert that their financial stake in the out-
come of this suit, stemming from NOPSI’s ability to pass
through the entire cost increase in power plant gas, com-
pels a finding of intervention as of right. We do not agree.
B. Who’s got the power?
Intervention as a matter of right under Rule 24(a) re-
quires four factors to be met, as this Court set out in
Howse v. S/V “Canada Goose I", supra. As noted above,
failure to meet any one of these requirements negates the
right to intervene.
A-18
1. Timely application.—First, the application for in-
tervention must be timely. There was a timely application
for intervention in this case. Move to intervene was made
shortly after the filing of suit, during the preliminary
stages of discovery.
2. Related interest.—Next, the applicant must have
an interest relating to the property or transaction which is
the subject of the action. We conclude that the consumers
do not have the requisite interest. The consumers make a
number of contentions on this point. First, they claim to be
third party beneficiaries of the United contract. They
claim, as a matter of Louisiana law, that they are
beneficiaries of a stipulation pour autrui under the NOPSI-
United agreement. Article 1890 of the Louisiana Civil Code
provides:
A person may also, in his own name, make some
advantage for a third person the condition or con-
sideration of a commutative contract, or onerous
donation; and if such third person consents to
avail himself of the advantage stipulated in his
favor, the contract can not be revoked.
The consumers are not in a position to claim the ad-
vantage of a stipulation pour autrui. First, under Louisiana
law a stipulation pour autrui is valid only if the benefit to
the third party is a condition of or consideration to the con-
tract. There is every indication that NOPSI entered into its
agreements with United in the ordinary course of its
business, not with the express intention of conferring a
pecuniary benefit upon the customers. City of Shreveport
v. Gulf Oil Corp., 431 F.Supp. 1, 4 (W.D.La.1975), aff'd per
curiam, 551 F.2d 93 (5th Cir. 1977). Furthermore, a stipula-
tion pour autrui is void for uncertainty under Louisiana law
A-19
if the declared benefit to the third party is not fixed. Miller
v. Crusel, 135 La. 649, 65 So. 873 (1914). The consumers
evidently assert a fixed benefit was assigned when the con-
tracts were prepared. There is no evidence to show that this
was a formal assignment, or even that a benefit to the con-
sumers resulted. There is no way to ascertain the rate con-
sumers would have paid for gas without this contract; it
therefore cannot be gainsaid that the third party berefit is
fixed. Finally, while it is possible that the consumers have
enjoyed a benefit from the bulk contracting power of
NOPSI over the years, such benefit is a mere incident of be-
ing a direct customer of NOPSI, not of any formal third
party beneficiary relationship.
The consumers’ next claim is that the United-NOPSI
agreements amount to a cost-plus contract in favor of the
consumers. They then infer a right to intervene on the
analogous notion that a buyer under a pre-existing cost-
plus contract may have standing to bring suit for viola-
tions of the antitrust laws. They rely upon the United
States Supreme Court’s analysis in Hanover Shoe, Inc. v.
United Shoe Machinery Corp., 392 U.S. 481, 88 S.Ct. 2224,
20 L.Ed.2d 1231 (1968). In Hanover Shoe, the antitrust
defendants contended that the plaintiff wholesalers had no
injury, since they had merely incorporated the illegal over-
charges into their resale price. They claimed that any cause
of action was in the hands of consumers, who were not pre-
sent in the iitigation. The Court rejected this argument, fin-
ding that the direct buyer and not the ultimate purchaser
has standing to sue in antitrust. It reasoned that a con-
trary result would place an unreasonable burden on private
antitrust enforcement. However, the Hanover Shoe Court
recognized a possible exception where the wholesaler is
merely a conduit for a consumer under a cost-plus contract.
In such a case, the Court noted that the proper party to the
A-20
suit might be the ultimate purchaser rather than the mid-
dleman. /d. at 494, 88 S.Ct. at 2232. But see Donson Stores,
Inc. v. American Bakeries Co., 58 F.R.D. 481, 483
(S.D.N.Y.1973) (interpreting Hanover Shoe) (consumer
class has no right to intervene in private antitrust action
against baking companies, despite showing that baked
goods are sold through retailers on a cost-plus basis). The
consumers asking intervention in this case contend that
this exception noted in the Hanover Shoe dictum covers
their right to intervene.
We must short-circuit the consumers’ attempt to
stretch this exception to cover their position. First, there is
no policy consideration encouraging private enforcement of
private contract disputes as there is behind the antitrust
laws. Second, this case differs from a typical commercial
suit in that the ‘‘wholesaler” here, NOPSI, is also obligated
to serve in the public interest and thus in the interests of
its customers, and to protect those interests adequatelv.
NOPSI is seeking recovery for itself to keep its rates down
and please its regulator. But it is also seeking recovery for
its ratepayers. Absent a showing that the combined forces
of NOPSI and the City Council are not fulfilling this second
or public duty, we cannot find the consumers’ interest
unrepresented, as they might be in an antitrust framework.
Next, the consumers contend that they have an
economic interest in the litigation sufficient to confer a
right to intervene. There are several problems with such a
claim. The consumers offer no specific showing that
economic injury is certain upon an outcome of the case un-
favorable to their interests. While it is likely that electric
rates have gone up as a result of United's alleged improper
actions and might go up further in the future, it is also
possible that rates would have gone up even more if the
A-21
consumers had been the ultimate sufferers of another
method of contracting for power plant gas. The record
shows that when the contested redetermined rate for power
plant gas rose to between $3.60 and $4.00 per mcf, the open
market price was $6.00 to $8.00 per mcf. The consumers
make no showing that the economic injury was real.
Other federal courts, on occasion, have permitted in-
tervention based in part on economic interests. Courts per-
mitting intervention for economic interests generally have
found additional factors for their decision, however. For ex-
ample, the court in Ford Motor Co. v. Bisanz Bros., 249
F.2d 22, 28 (8th Cir. 1957), allowed Ford to intervene in an
injunction proceeding that would have severed Ford's only
rail link to one of its manufacturing plants. Even though
Ford could not show that the existing parties to the dispute
owed Ford any duty to keep the rail link intact, the court
found that as a practical matter Ford would be bound by
the result and suffer a permanent deprivation of an “‘essen-
tial’’ economic interest. The court found that the ‘practical
necessities” created an absolute right to intervene under
Rule 24(a). Id.
In Shultz v. United Steelworkers of America, 312
F.Supp. 538 (W.D.Pa.1970), a union member sought to in-
tervene in a challenge of the union election that named him
district director. The court permitted intervention by fin-
ding a property interest in employment. Similarly, in New
York Public Interest Research Group, Inc. v. Regents of
University of State of New York, 516 F.2d 350 (2d Cir.
1975), pharmacists were permitted to intervene in a case
evaluating regulations of the pharmacy profession. The Se-
cond Circuit found that the pharmacists’ interests in the
continued health of their profession, coupled with the
economic impact the rules would have on them, justified
A-22
intervention. Jd. at 352. Yet in these and similar cases,
courts at least have identified the source, if not the exact
strength, of the declared interest.
We acknowledge that the consumers will pay for the
majority of, if not the entire, increase in the cost of gas.
This financial burden makes consumers justifiably in-
terested in the progress of this litigation. Yet the con-
sumers created a governmental regulatory body to protect
their interests in their dealings with the ‘‘natural monopo-
ly’’ of NOPSI. See Otter Tail Power Co. v. United States,
410 U.S. 366, 389, 93 S.Ct. 1022, 1035, 35 L.Ed.2d 359
(1973) (Stewart, J., dissenting); L. Sullivan, Antitrust § 239
at 744 & n.1 (1977). NOPSI’s business dealings are imbued
with a public duty, and government regulators supervise
NOPSI’s performance of that duty. The regulator, the City
Council, by its motion to intervene has shown a strong
desire to protect the consumer economic interests which lie
behind the NOPSI-United dispute. Absent a showing that
the regulating body is ill-equipped or unwilling to protect
the consumers’ economic interests, we find no satisfactory
justification for direct consumer intervention on grounds
of their possible financial burden.’
This is not a situation where the consumers attack
the actions of the regulatory body. This case is one large
step removed. It is a private contract dispute between a
private sector utility and a natural gas supplier. Even the
regulator is only indirectly involved since it has no power
to deal with the terms of the contract as such. The con-
sumers are even further removed.
" See Environmental Defense Fund, Inc. v. Higginson, 631 F.2d
738, 740 (D.C.Cir.1979) (where governmental parties already present in
casé, private parties must make more than a minimal showing of inade-
quate representation).
A-23
By denying the consumers their right to participate
directly in this contract dispute, we do not foreclose any
future challenge to the rate regulator’s actions, if such a
challenge would be appropriate. Office of Communication
of the United Church of Christ v. FCC, 359 F.2d 994
(D.C.Cir.1966) (public interest challenge of administrative
action); Scenic Hudson Preservation Conference v. FPC,
354 F.2d 608 (2d Cir. 1965) cert. denied, 384 U.S. 941, 86
S.Ct. 1462, 16 L.Ed.2d 540 (1966) (same). But such an ac-
tion necessarily is overhasty before the rate regulators
have had an opportunity to intervene on behalf of the
public interest. Mississippi Valley Gas Co. v. FERC, 659
F.2d 488, 497 (5th Cir. 1981) (requirements of ripeness for
review of agency action).
Finally, the consumers claim a right to intervene bas-
ed on the Natural Gas Act, 15 U.S.C. § 717-717w. It is true
that the Federal Energy Regulatory Commission (FERC)
may permit consumer interests to intervene in agency pro-
ceedings under the Natural Gas Act.8 However, the case
8 18 C.F.R. § 1.8 (1982) provides in part:
(b) Who may petition. A petition to intervene may be filed by
any person claiming a right to intervene or an interest of
such nature that intervention is necessary or appropriate to
the administration of the statute under which the proceeding
is brought. Such right or interest may be:
(1) A right conferred by statute of the United States.
(2) An interest which may be directly affected and
which is not adequately represented by existing par-
ties and as to which petitioners may be bound by the
Commission's action in the proceeding (the following
may have such an interest: Consumers served by the
applicant, defendant, or respondent; holders of
securities of the applicant, defendant, or respondent;
and competitors of the applicant, defendant, or
respondent).
A-24
before this Court is not subject to the agency’s jurisdiction.
The merits of the case turn on a proper rate for power plant
gas, a rate over which the FERC has no jurisdiction. The
fact that some issues under the Natural Gas Act may arise
in the suit is not sufficient to confer a right to intervene.
The consideration of standing in a federal court differs
from that of an administrative agency, because an “‘agen-
cy’s responsibility for implementation of statutory pur-
poses justifies a wider discretion, in determining what ac-
tions to entertain, than is allowed to the courts by either
the Constitution or the common law.” Ecee, Inc. v. FERC,
645 F.2d 339, 349-50 (5th Cir. 1981) (examining standing to
protest in FERC proceedings). Furthermore, there is no im-
plied private right of action under the Natural Gas Act.
Pennzoil Co. v. FERC, 645 F.2d 360, 384 n.49 (5th Cir.
1981), cert. denied, 454 U.S. 1142, 102 S.Ct. 1000, 71
L.Ed.2d 293 (1982).
3. Disposition Will Not Impair Consumer Rights.—
The third requirement for intervention as of right is that
the consumers must be so situated that an adverse decision
would impair their own rights. Such is not the case here.
NOPSI has made vigorous representations in district court
that any recovery they make in this action will be passed
through in its entirety to the consumers. NOPSI share-
holders will not share in any part of the recovery, if there
(Footnote 8 continued)
(3) Any other interest of such nature that petitioner’s
participation may be in the public interest.
a
Subsection (b)(2) provides authority for a consumer right of in-
tervention not unlike the requirements of Fed.R.Civ.P. 24(a), while
subsection (b)(3) allows for a permissive right to intervene similar to
Rule 24(b). We need not reach the question of whether these regulations
should be interpreted more broadly than the corresponding Rules of
Civil Procedure, since the substantive dispute at bar does not involve
issues falling under FERC jurisdiction.
A-25
is one. The consumers have presented no evidence that a
decision in this case in their absence would impair their
rights. NOPSI has the financial resources to pursue this
lawsuit aggressively. It apparently has been doing so up to
this point, even if it is assumed it is not directly at stake
financially.
In this case, however, NOPSI does have a pesonal
financial stake in defending the lawsuit vigorously. The
company is closely regulated by government authorities,
and it is permitted to charge only rates that are reasonable
and in the public interest. It has a duty to minimize the
ultimate ccost to the consumer, whether that cost is hidden
in the basic electric rates or explicit through a cost sur-
charge. If NOPSI does not defend this lawsuit vigorously,
the governmental rate regulators will not permit NOPSI to
recover the costs of defense from consumers. 45
La.Rev.Stat. § 1176.2 Furthermore, future rate increases
and fuel adjustment pass-throughs could be diminished to
reflect NOPSI’s failure to pursue the most cost-effective
course on behalf of its customers.
Even if NOPSI were not to defend this lawsuit
vigorously, the intervention of the City Council puts before
the court the regulatory body charged with representing
9 45 La.Rev.Stat. § 1176 (West 1951) provides in part:
‘The commission and any parochial or municipal body hav-
ing similar powers in the fixing of just and reasonable rates
charged or to be charged by public utilities...shall have the
power to disallow as an operating expense of any public utili-
ty such part of the amount so paid by it under any such con-
tract or agreement as the commission or parochial or
municipal body may find, after hearing, to be unjust or
unreasonable....”’
ry)
A-26
the interests of consumers. The consumers would also have
the right to challenge the adequacy of that representation
in later proceedings before the City Council. It will properly
be the role of the City Council, not that of the federal
courts, initially to determine whether NOPSI is meeting its
enfranchised duty to provide cost-effective electric service.
The New Orleans City Council has by its intervention
undertaken to insure that any disposition of this federal
court case will not impair consumer rights.
4. Overlapping of Parties’ Interests.—The final re-
quirement for intervention as of right is that the intervenor
must have an interest that is not represented adequately
by the existing parties. The consumers fail in this showing,
as well. The consumers are not attempting to show any
greater interest than their general interest as consumers.
The consumer interest is already being represented in this
litigation by NOPSI and by the City Council. The represen-
tation by NOPSI and the City Council together is protec-
tion of the consumer interest. The consumers have made no
showing that NOPSI and the City Council will fall short of
adequate representation of their interests especially since
they have the later right to challenge the adequacy of that
representation. We affirm the denial of intervention as of
right to the consumers.
C. Consumer Permissive Intervention.
The consumers urge additionally that they should be
permitted to intervene permissively under Fed.R.Civ.P.
24(b). We find no abuse of discretion in the district court
denying permissive intervention.
Rule 24(b)(2) requires a threshold determination that
‘the applicant’s claim or defense and the main action have
A-27
a question of law or fact in common.”’ Fed.R.Civ.P. 24(b)(2);
Howse v. S/V “Canada Goose I”’, supra at 322; Stallworth
v. Monsanto Co., 558 F.2d 257, 269 (5th Cir. 1977). If this
requirement is met, then the district court may exercise its
discretion in determining whether to permit intervention.
We do find that the consumers pose similar questions of
law and fact with the main action. Indeed, they seek the
same basic recovery that NOPSI is seeking on their behalf.
Yet, examining the trial judge’s discretion, we do not find
it patently unreasonable that he denied a consumer class
leave to intervene.
The central question in examining a motion for per-
missive intervention is whether or not such intervention
would further the interests of justice, the rights of the par-
ties, and efficient judicial administration. In this case, the
common interests are being represented by both NOPSI
and the City Council. The trial judge properly exhibited
concern about the costs to judicial economy of permitting
unnecessary parties to join the litigation. His conclusion
evidences his belief that the parties to the contract were
capable of resolving their contract disputes without the in-
tervention of the buyer’s customers. We add that with the
intervention of the City Council any doubts about the
representation of the somewhat remote interests of the con-
sumers are removed.
We find no error in the denial of intervention to con-
sumers as of right, and no abuse of discretion in the denial
of permissive intervention. Since a denial of permissive in-
tervention, absent an abuse of discretion in the district
court, is not an appealable order, we therefore must dismiss
the appeal as it pertains to the consumers and Rule 24(b)
permissive intervention. Woolen v. Surtran Taxicabs, Inc.,
684 F.2d 324 (5th Cir. 1982); Weiser v. White, 505 F.2d 912
A-28
(5th Cir. 1975), cert. denied, 421 U.S. 993, 95 S.Ct. 1998, 44
L.Ed.2d 482 (1975).
IV. CONCLUSIONS
We hold that the public officials and agencies have a
right to intervene under Fed.R.Civ.P. 24(a). In addition, the
denial of their motion to intervene permissively under Rule
24(b) was an abuse of discretion. However, we affirm the
denial of the private consumers’ attempt to intervene as of
right under Rule 24(a). And, finding no abuse of discretion
in denial of the consumers’ request for permissive interven-
tion, Rule 24(b), we dismiss that portion of the appeal.
THEREFORE, AFFIRMED IN PART, DISMISS-
ED IN PART, REVERSED IN PART AND
REMANDED.
GARWOOD, Circuit Judge, specially concurring:
I join in so much of the majority opinion as affirms
the denial of the consumers’ attempted intervention as of
right under Rule 24(a) and as holds there was no abuse of
discretion in denying their request for permissive interven-
tion under Rule 24(b). I likewise join in that portion of the
majority opinion holding that it was an abuse of discretion
to deny the city officials’ requested permissive interven-
tion under Rule 24(b). I therefore find it unnecessary to
reach the question of whether the city officials were entit]-
ed to intervene as of right under Rule 24(a), although I have
serious doubts whether the requisite legally protectable in-
terest has been shown.
As I understand it, the city officials seek to intervene
only to assert rights having their exclusive source in the
A-29
contract between NOPSI and United. Normally, only those
who are parties to a contract, or those holding under them,
or third-party beneficiaries, possess any of the substantive
rights arising from the contract. We have held, correctly I
believe, that none of those seeking intervention are third-
party beneficiaries. And none of them claims to be a party
to the contract or to hold any of NOPSI’s rights under the
contract. Accordingly, this case is quite unlike one where
those seeking intervention do so for the purpose of asser-
ting a right grounded in statute or in some general rule of
law, a right whose existence does not depend on the agree-
ment of the parties to the lawsuit and which the parties to
the lawsuit lack legal power to abrogate. One may be allow-
ed to intervene to complain of or prevent a statutory viola-
tion, for example, even though his injury may be more
remote and indirect than that of the existing party plaintiff
or even though the existing plaintiff is the only one
authorized to institute the suit. But that is not this case.
I do not understand the appellants to contend, for example,
that it would be illegal for NOPSI and United to have
voluntarily agreed to the price which United claims they
did so agree to, or for NOPSI and United to now so agree,
should they wish to. There is no claim of conspiracy or im-
proper collusion between NOPSI and United.
Nevertheless, NOPSI and the City have a special
relationship. As the majority points out, the City has the
duty to regulate NOPSI’s electric rates, and in doing so to
disallow as an operating expense, otherwise recoverable
through NOPSI’s charges for electricity, fuel costs found
to be unjust or unreasonable. While this protects the City
to a large exter:t, it also reflects the City’s particular in-
terest in NOPSI’s acquisition of fuel at reasonable costs.
This alone, however, would not necessarily mean that in-
tervention should be granted, for the city officials do not
A-30
suggest that NOPSI has no right to contract for fuel
without their permission.* The City’s regulatory right,
however, is NOPSI’s risk. If NOPSI fails to prevail in this
case to the extent the City believes it should, NOPSI faces
the prospect that in subsequent proceedings with the City
it will have to “swallow” all increased fuel costs. Perhaps
NOPSI has the right to run that risk. But it has chosen not
to do so. It has supported the City’s intervention. In one
proceeding, with all parties bound, NOPSI’s rights can be
determined, thus serving the interests of judicial economy
and preventing possibly inconsistent results. Intervention
by the city officials does not significantly prejudice United,
for NOPSI remains in the suit and no rights are asserted
against United which could not be and are not being fully
asserted against it by NOPSI. If the intervention of the ci-
ty officials prejudices any party’s rights, it is NOPSI
which is prejudiced in its ability to enforce, defend and set-
tle its rights under the contract. But NOPSI has supported
the intervention.
* Nor, would I suppose that the City’s and its citizens’ general
economic interest in NOPSI’s financial health, which would ultimately
tend to be reflected in NOPSI’s rates due to cost of capital considera-
tions, allows the City to intervene in any suit to which NOPSI is a party
and which may have a material effect on its balance sheet.
A-31
APPENDIX “D”’
NEW ORLEANS PUBLIC SERVICE, INC.,
Plaintiff,
Ernest Morial, et al.,
Movants-Appellants,
v.
UNITED GAS PIPE LINE COMPANY,
Defendant-Appellee.
No. 82-3194.
United States Court of Appeals,
Fifth Circuit.
Dec. 27, 1982.
Opinion on Granting of Rehearing En Banc
Feb. 23, 1983.
McGlinchey, Stafford & Mintz, Donald R. Mintz,
Constance Charles Willems, New Orleans, La., for
movants-appellants.
Lemle, Kelleher, Kohlmeyer & Matthews, C. Murphy
Moss, Jr., Robert G. McIver, Victoria L. Knight, New
Orleans, La., James M. Costan, Kevin W. McLean,
Douglas Knox Bemis, Jr., W. DeVier Pierson, Washington,
D.C., for defendant-appellee.
A-32
Appeal from the United States District Court for the
Eastern District of Louisiana.
ON PETITIONS FOR REHEARING AND
SUGGESTIONS FOR REHEARING EN BANC
Before GOLDBERG, WILLIAMS and GARWOOD,
Circuit Judges.
JERRE S. WILLIAMS, Circuit Judge:
No member of this panel and no Judge in regular ac-
tive service on the Court having requested that the Court
be polled on rehearing en banc (Rule 35, Federal Rules of
Appellate Procedure; Local Fifth Circuit Rule 16), the sug-
gestions for rehearing en banc are DENIED.
The petition of defendant-appellee United Gas Pipe
Line Company for rehearing is GRANTED for the limited
purpose set out below.
The petition for rehearing brings to our attention the
fact that by vote of the citizens of the City of New Orleans,
the New Orleans City Council ceased to have the power to
regulate the rates of public utilities within the City of New
Orleans as of January 1, 1982. We, therefore, withdraw our
holding that the ‘‘public officials and agencies have a right
to intervene under F.R.Civ.P. 24(a)’’ as stated in the Con-
clusion of our original opinion, New Orleans Public Service,
Inc. v. United Gas Pipe Line Co., 690 F.2d 1203, at 1215
(5th Cir.1982). We also withdraw that portion of the opi-
nion designated II A, which considers intervention as a
matter of right by the public officials.
We emphasize that we do not withdraw our holding
ef
A-33
that it was an abuse of discretion for the district court to
deny the motion of the members of the City Council to in-
tervene permissively under Rule 24(b). That portion of our
opinion, designated II B, stands unchanged except for in-
cidental references to the rate making power of the New
Orleans City Council. We reaffirm the holding that the
members of the City Council are proper parties to this pro-
ceeding by virtue of their motion for permissive
intervention.
Treating suggestions for rehearing en banc as mo-
tions for rehearing by the panel, they are DENIED except
as stated above.
GARWOOD, Circuit Judge, dissenting:
I respectfully dissent from so much of the majority
opinion on rehearing as holds that it was an abuse of discre-
tion to deny the city officials’ requested permissive in-
tervention under Rule 24(b). As relief is sought only under
the private contract between NOPSI and United, and the
contract creates no rights in third parties, the city has no
rights to enforce against United in this suit. And since the
Louisiana Public Service Commission (which does not seek
to intervene), and not the city, has all the rate and other
relevant regulatory authority over NOPSI, as we have now
been made aware, intervention by the city will not
significantly promote dispute resolution economy or pre-
vent the possibility of inconsistent results. Accordingly, in
my opinion denial of permissive intervention by the city of-
ficials was not an abuse of discretion.
A-34
ON PETITION FOR REHEARING AND
SUGGESTION FOR REHEARING EN BANC
2-23-83
Before CLARK, Chief Judge, BROWN,
GOLDBERG, GEE, REBIN, REAVLEY, POLITZ, RAN-
DALL, TATE, JOHNSON, WILLIAMS, GARWOOD,
JOLLY and HIGGINBOTHAM, Circuit Judges.
BY THE COURT:
A member of the Court in active service having re-
quested a poll on the application for rehearing en banc and
a majority of the judges in active service having voted in
favor of granting a rehearing en banc,
IT IS ORDERED that the cause shall be reheard by
the Court en banc with oral argument on a date hereafter
to be fixed. The Clerk will specify a briefing schedule for
the filing of supplemental briefs.
A-35
APPENDIX “E”
NEW ORLEANS PUBLIC SERVICE, INC.,
Plaintiff,
Ernest Morial, et al.,
Movants-Appellants,
v.
UNITED GAS PIPE LINE COMPANY,
Defendant-Appellee.
No. 82-3194.
United States Court of Appeals,
Fifth Circuit.
June 2, 1983.
McGlinchey, Stafford & Mintz, Donald R. Mintz,
Constance Charles Willems, New Orleans, La., for
movants-appellants.
Lemle, Kelleher, Kohlmeyer & Matthews, C. Murphy
Moss, Jr., Robert G. McIver, Victoria L. Knight, New
Orleans, La., James M. Costan, Kevin W. McLean,
Douglas Knox Bemis, ./r., W. DeVier Pierson, Washington,
D.C., for defendant-appellee.
Appeal from the United States District Court for the
Eastern District of Louisiana; Lansing L. Mitchell, Judge.
A-36
Before BROWN, GEE, REAVLEY, POLITZ, RAN-
DALL, JOHNSON, WILLIAMS, GARWOOD and HIG-
GINBOTHAM, Circuit Judges.
BY THE COURT:
Of the 13 judges constituting all of the judges in ac-
tive service and participating in the poll which put the case
en banc, four are now disqualified. To avoid any doubts the
remaining nine judges were repolled. As those voting to
put the case en banc were less than seven and did not con-
stitute as required a “‘majority of the circuit judges of the
circuit who are in regular active service’ 28 U.S.C. § 46(c)
the previous order putting the case en banc is VACATED,
694 F.2d 421, the setting of the case for oral argument for
June 6, 1983 is cancelled and the panel’s opinion, 690 F.2d
1203, is reinstated.
ee
A-37
APPENDIX “FP”
NEW ORLEANS PUBLIC SERVICE, INC.,
Plaintiff,
Ernest Morial, et al.,
Movants-Appellants,
v.
UNITED GAS PIPE LINE COMPANY,
Defendant-Appellee.
No. 82-3194.
United States Court of Appeals,
Fifth Circuit.
June 8, 1983.
Appeal from the United States District Court for the
Eastern District of Louisiana.
ON PETITION FOR REHEARING AND
SUGGESTION FOR REHEARING EN BANC
(Opinion November 8, 1982, 5 Cir., 1982, 690 F.2d 1203).
Before GOLDBERG, WILLIAMS and GARWOOD,
Circuit Judges.
PER CURIAM:
The Petition for Rehearing is DENIED, and a ma-
jority of the Circuit Judges who are in regular active
A-38
service not having voted in favor of it, (Rule 35 Federal
Rules of Appellate Procedure; Local Fifth Circuit Rule 16)
the Suggestion for Rehearing En Banc is also
DENIED.
A-39
APPENDIX “G”’
NEW ORLEANS PUBLIC SERVICE, INC.,
Plaintiff,
and
Ernest N. Morial, et al.,
Individually and as Representatives of a Class,
Applicants for Intervention-Appellants,
v.
UNITED GAS PIPE LINE COMPANY,
Defendant-Appellee.
No. 82-3194.
United States Court of Appeals,
Fifth Circuit.
Oct. 26, 1983.
Public utility brought suit against gas company in
dispute over validity of agreement between utility and
company, proper rate for power plant gas, and method of
refunding overcharges. On motion of consumers and cer-
tain city officials to intervene, the United States District
Court for the Eastern District of Louisiana, Lansing L.
Mitchell, J., entered order denying motion, and appeals
were taken. The Court of Appeals, 690 F.2d 1203, affirmed
in part, dismissed in part, reversed in part, and remanded.
On petitions for rehearing and suggestions for rehearing en
banc, the Court of Appeals, 694 F.2d 421, first denied sug-
gestions for rehearing en banc, and granted petition for
A-40
rehearing for limited purposes, and then reconsidered ac-
tion and entered order reciting that poll had been taken and
majority of judges in regular active service on the Court
had voted in favor of granting rehearing en banc.
Thereafter, the Court of Appeals, 707 F.2d 834, determined
that four of the judges in active service who participated in
poll which put case en banc were disqualified and, upon
repolling, majority of judges voted against granting
rehearing en banc, and thus vacated prior order. On renew-
ed suggestion for rehearing en banc, the Court of Appeals,
Clark, Chief Judge, held that status of certain circuit
judges as direct rate-payers of utility and therefore
members of putative class and potential parties to action
did not disqualify them from participating in poll of the
Court of Appeals on petition for rehearing en banc, at least
where class had not been certified but only claimed, and
certification issue would not be involved in en banc rehear-
ing, but remained to be decided by the district court; accor-
dingly rehearing en banc would be granted.
Rehearing en banc ordered.
McGlinchey, Stafford & Mintz, Donald R. Mintz,
Constance Charles Willems, New Orleans, La., for ap-
plicants for intervention-appellants.
Lemle, Kelleher, Kohlmeyer & Matthews, C. Murphy
Moss, Jr., Robert G. McIver, Victoria L. Knight, New
Orleans, La., James M. Costan, Kevin W. McLean,
Douglas Knox Bemis, Jr., W. DeVier Pierson, Washington,
D.C., for defendant-appellee.
Appeal from the United States District Court for the
Eastern District of Louisiana.
A-41
ORDER GRANTING RENEWED SUGGESTION
FOR REHEARING EN BANC
CLARK, Chief Judge:
Because of the unique procedural turns this appeal
has taken since the panel opinion was published on
November 8, 1982 (690 F.2d 1203), the developments that
lead to today’s order are detailed below:
On December 27, 1982, the panel announced that no
judge in regular active service on the court had requested
a poll of the court on the petition for rehearing en banc and
that the suggestion for rehearing en banc was denied.
Judge Garwood dissented. 694 F.2d 421.
On February 23, 1983, this action was reconsidered
and an order was entered reciting that a poll had been
taken and a majority of the judges in regular active service
on the court had voted in favor of granting rehearing en
banc.
On June 2, 1983, four days prior to scheduled oral
argument before the en banc court, the court vacated the
grant of rehearing en banc. 707 F.2d 834. The reason for this
action was the belated realization by four judges in regular
active service on the court that as direct ratepayers of New
Orleans Public Service, Inc., they were members of a
putative class and therefore potential parties to this action.
All four judges determined to disqualify themselves and
suspend their votes in the en banc poll until advice could be
sought on the propriety of their participation in this cause
from the Advisory Committee on Codes of Conduct of the
Judicial Conference of the United States. A letter was
dispatched to that Committee detailing the status of the
A-42
judges and the posture of the cause. Pertinent extracts
from the Committee’s response are set out below:
The Committee interpreted your inquiry as
related to the necessity of disqualification on the
part of four judges. As direct bill-payers, the
judges felt that they could be considered
members of a claimed class party to the litigation.
It appears from your letter that the class has not
been certified but has merely been claimed. It fur-
ther appears that the matter to be reheard en
banc involves only the right of the mayor and city
council to intervene, that the question of whether
the applicants for intervention do represent a
class has yet to be decided by the district court,
and that establishment of the class will not be in-
volved in the en banc rehearing.
Where the utility is a party, the ratepayer status
of a judge is not disqualifying. If a judge is a
member of a class which has been declared, and
the class is a party to the litigation in which the
judge is considering participation, that judge
would be disqualified. Canon 3C(1)(d)ii).
In light of the Committee’s advice, the four judges
who previously disqualified themselves have determined to
withdraw their disqualifications and reinstate their
previous votes. It is therefore unnecessary to discuss the
issue raised by the renewed suggestion for rehearing en
banc concerning whether disqualified judges are to be
counted as judges in regular active service of the court for
purposes of determining whether a majority of judges have
voted for rehearing en banc. See Hall v. FERC, 700 F.2d
218 (5th Cir.1983) (Clark, C.J., dissenting); Arnold v.
Eastern Airlines, 681 F.2d 186 (4th Cir.1983).
A-43
A majority of judges in regular active service of the
court having voted in favor of rehearing the cause en banc,
it is ordered that the cause be reheard by the court en banc
with oral argument on a date hereafter to be fixed. Any par-
ty who wishes to supplement the briefs previously filed
with matters which have developed subsequent to their fil-
ing may submit a letter memorandum to the clerk of court,
with thirteen copies, not later than December 20, 1983.
A-44
APPENDIX ‘“‘H”’
NEW ORLEANS PUBLIC SERVICE, INC.,
Plaintiff,
aud
Ernest N. Morial, et al.,
Individually and as Representatives of a Class,
Applicants for Intervention-Appellants,
v.
UNITED GAS PIPE LINE COMPANY,
Defendant-Appellee.
No. 82-3194.
United States Court of Appeals,
Fifth Circuit.
May 21, 1984
Appeal from the United States District Court for the
Eastern District of Louisiana.
Before CLARK, Chief Judge, BROWN,
GOLDBERG, GEE, RUBIN, REAVLEY, POLITZ, RAN-
DALL, TATE, JOHNSON, WILLIAMS, GARWOOD,
JOLLY, HIGGINBOTHAM and DAVIS, Circuit Judges.*
GARWOOD, Circuit Judge:
* Judge Goidberg, a senior judge of this circuit, is participating
as a member of the panel initially deciding the appeal now subject to en
banc review. 28 U.S.C. § 46ic).
*
A-45
This diversity case brings to our en banc considera-
tion questions pertaining to the entitlement of third parties
to intervene as plaintiffs in a contract action brought by a
local electric utility against its major fuel supplier. The
district court denied all requested intervention. The deci-
sion of the panel, as modified on rehearing, though declin-
ing to disturb both the denial of intervention to the elec-
tricity consumers and the determination that officials of
the city which franchised the electric utility were not entitl-
ed to intervene as of right, held that the district court abus-
ed its discretion in denying the city officials permissive in-
tervention. 690 F.2d 1203, modified on rehearing, 694 F.2d
421 (5th Cir.1982). This court en banc, disagreeing with the
latter determination, now holds that the city officials were
properly denied intervention.
CONTEXT FACTS
_NOPSI and United
New Orleans Public Service, Inc. (““NOPSI’’), a Loui-
siana corporation, plaintiff in this action, is an investor-
owned utility providing natural gas and electricity to
residential, business, industrial and other end use con-
sumers in New Orleans, Louisiana. NOPSI is a subsidiary
of Middle South Utilities, Inc., a much larger concern hav-
ing other electric utility subsidiaries in the region. United
Gas Pipe Line Company (‘‘United’’), defendant below and
appellee here, a Delaware corporation headquartered in
Teas, owns and operates an interstate natural gas
transmission system, and transports and sells natural gas
in interstate commerce in Texas, Louisiana, and other
states to gas distribution concerns which resell the gas to
local residential and other gas consumers. United also sells
directly to industrial customers which use the gas in their
A-46
Own operations, and to other interstate pipeline systems.
NOPSI purchases gas from United both for resale to its
gas consumer customers (‘Resale Gas’’), and for NOPSI’s
own use as boiler fuel to generate the electricity which
NOPSI sells to its electricity consumer customers (‘‘Power
Plant Gas’’). Though initially NOPSI’s purchases from
United of both Power Plant Gas and Resale Gas were
covered by a single contract, subsequently the Power Plant
Gas came to be covered by a separate contract between
those parties. The instant litigation relates solely to the
Power Plant Gas contract, particularly its pricing
provisions.
United is a principal supplier—perhaps the principal
supplier—of boiler fuel used in NOPSI’s three electric
generation plants. NOPSI acquires some Power Plant Gas
from suppliers other than United, but these sources ap-
parently are not able to furnish more than a fraction of
NOPSI's total fuel requirements.! NOPSI’s plants, or at
least the two larger ones, are also capable of burning all
grades of fuel oil, and NOPSI has from time to time used
fuel oil for the boiler fuel in these plants, when it was
cheaper than gas and when gas deliveries were curtailed.
However, NOPSI prefers to use gas, as it is cleaner and
more efficient.
In 1952 NOPSI aad United entered into a contract
for NOPSI to purchase from United, during a term
' This fraction appears to be in the neighborhood of one sixth at
peak summer loads, though larger during the winter when the re-
quirements are about halved. NOPSI also from time to time “imports”
or “‘exports”’ electricity from or to other electric utilities in the region
which are also subsidiaries of Middle South Utilities, Inc. See also
Metropolitan New Orleans Chcpter of the Louisiana Consumer's
League, Inc. v. Council of the City of New Orleans, 423 So.2d 1213.
1216-17 (La.App.1982). cert. denied, 430 So.2d 77 (La.1983).
(i
A-47
expiring on June 1, 1975, all NOPSI’s Resale Gas, and
Power Plant Gas to the extent of all the fuel requirements
of NOPSI'’s electric power plants.” The contract contained
provisions for maximum daily amounts of Power Plant
Gas, and of all gas, which United would be required to
deliver, as well as provisions for increasing these max-
imums, and in general allowing NOPSI tc acquire its power
plant fuel elsewhere to the extent that United would not
meet requested deliveries over the maximums. A clause
was also included generally providing for ratable curtail-
ment, first of Power Plant Gas and then of Resale gas, “‘in
the event a shortage of gas renders Seller unable to supply
the full gas requirements of all its customers, including
Buyer....’’ Power Plant Gas was priced at 13 cents per thou-
sand cubic feet (mcf) until 1960, with provision for in-
creases at five-year intervals thereafter, to be determined
by negotiation based on United’s estimated increased
costs. Resale Gas was priced according to rate schedules
filed and to be filed with the Louisiana Public Service Com-
mission (initially listing 19 cents per mcf for ‘‘domestic”’
gas). When the contract was executed the gas all came from
2 The contract's initial ‘“‘whereas”’ clause states:
“WHEREAS, Buyer owns and operates distribution lines
and facilities in the Parish of Orleans, Louisiana, and two
steam electric power plants in said Parish known as Buyer's
Market Street and Industrial Canal Stations, and desires to
purchase from Seller gas for resale and distribution through
said distribution lines and facilities to Buyer's residential,
commercial and industrial consumers in the Parish of
Orlears, Louisiana, and for the fuel requirements of said two
power plants and any additional such plant or plants that
Buyer may construct and operate in said Parish of
Orleans..."
Our description of the terms of this and subsequent contracts is given
as part of the general background of this litigation and is not intended
to be complete and precise in all details.
A-48
a Louisiana intrastate system then operated by United,
and was hence not subject to federal regulation under the
Natural Gas Act. Thereafter, United apparently caused
this system to become a part of its interstate system. As
a result, in 1973 the Federal Power Commission (‘‘FPC,”’
now the Federal Energy Regulatury Commission,
‘““FERC’”’) granted United a ‘‘certificate’’ under the Natural
Gas Act covering its furnishing of gas to NOPSI and the
price at which United sold NOPSI Resale Gas became and
remains regulated by that federal agency. However, the
price of United’s Power Plant Gas sales to NOPSI is not
and was not regulated under either federal or state law.?
° The Natural Gas Act, 15 U.S.C. § 717 et seg., provides for the
regulation of the transportation of natural gas in interstate commerce,
o: the sale in interstate commerce of natural gas ‘for resale,’ and of
companies engaged in such transportation or sale. 15 U.S.C. §§ 717(b),
717a(6). Under the Act, sales of gas in interstate commerce for resale,
such as United’s sales of Resale Gas to NOPSI, must be at “just and
reasonable”’ prices and are subject to FERC rate regulation. 15 U.S.C.
§§ 717c, 717d. State regulation of such interstate sales for resale is for-
bidden. Missouri ex rel. Barrett v. Kansas Natural Gas Co., 265 U.S.
298, 44 S.Ct. 544, 68 L.Ed. 1027 (1924). But the Natural Gas Act does
not speak to, or authorize FERC rate regulation respecting, the price at
which gas is sold in not-for-resale or ‘‘direct’’ sales, such as United's sale
of Power Plant Gas to NOPSI; and the states are free to provide rate
regulation of such “‘direct’’ sales, even those in interstate commerce.
Pennsylvania Gas Co. v. Public Serv. Comm'n, 252 U.S. 23, 40 S.Ct. 279,
64 L.Ed. 434 (1920); Panhandle Eastern Pipe Line Co. v. Public Serv.
Comm'n, 332 U.S. 507, 68 S.Ct. 190, 92 L.Ed. 128 (1947). See also Cities
Service Gas Company v. United States, 500 F.2d 448, 205 Ct.Cl. 16
(1974). Louisiana, nevertheless, does not regulate such ‘‘direct”’ sales,
whether intrastate or interstate. LSA-R.S. 45:1163. The Natural Gas
Act does provide, however, that the furnishing of gas in interstate com-
merce, including that to ‘‘direct’’ sales (as well as resale) customers,
must be pursuant to a FERC certificate cf public convenience and
necessity, and that no portion of such service can be abandoned without
prior FERC approval. 15 U.S.C. § 717f(b) & (c). See FPC v. Louisiana
Power & Light Co., 406 U.S. 621, 92 S.Ct. 1827, 32 L.Ed.2d 369 (1972).
While United's transformation of its Louisiana intrastate system
into an interstate one has been subject to attack in other proceedings.
A-49
The 1952 contract was amended on at least one occa-
sion, a 1965 amendment having increased the price of
Power Plant Gas to 23 cents per mcf.
On January 31, 1975 United and NOPSI entered into
two separate agreements. One, a ‘‘Service Agreement,”
pertained only to Resale Gas, expressly superseded and
canceled the 1952 agreement so far as it covered Resale
Gas, and was to ‘“‘become effective on such date as allowed
by the Federal Power Coramission”’ and to remain in effect
until June 1, 1985.4 The other, that pertinent here, was a
January 31, 1975 letter agreement dealing with Power
Plant Gas. This letter states that it is an “interim agree-
ment with respect to Power Plant Gas.” It recites that the
1952 contract, as amended, will expire on June 1, 1975, has
been replaced as to Resale Gas by the Service Agreement,
and will not be renewed as to Power Plant Gas. The letter
(Footnote 3 continued)
see FPC v. Louisiana Power & Light Co., supra, all here concerned ad-
mit, at least for purposes of this litigation, that United’s seles to NOPSI
of Resale Gas are, and of Power Plant Gas are not, subject to FERC rate
regulation, that neither is subject to any direct state or municipal
regulation, and that United's furnishing to NOPSI of each kind of gas
is subject to the abandonment requirements of the Natural Gas Act (15
U.S.C. § 717f(b)). Moreover, while United’s various gas curtailments,
commencing in the early 1970's, including those ‘‘authorized"’ by the
FPC, have sparked considerable litigation between United and various
of its customers, including NOPSI, see State of Louisiana v. FPC, 503
F.2d 844 (5th Cir.1974); City of New Orleans v. United Gas Pipe Line
Company, 390 F.Supp. 861 (E.D.La.1974), such controversies are not in-
volved in the present litigation.
* The Service Agreement provides that the price of gas sold
thereunder was that “xe i by United's current rate schedule, or any ef-
fective superseding. schedule, on file with the FPC, and that it was
subject to the Generai ferms and Conditions of the rate schedule as filed
with the FPC. The Service Agreement also stated a Maximum Daily
Quantity of gas which United was obligated to deliver and NOPSI to
take thereunder.
A-56
then makes essentially two sets of substantive provisions.
First, it amends parts of the 1952 contract so far as it per-
tains to Power Plant Gas sold from January 1, 1975 until
its June 1, 1975 expiration, principally by fixing the price
during that period at United’s Weighted Average Cost of
Gas (““WACOG,”’ apparently then about 50 cents per mcf).
The second set of provisions are those with which we are
concerned. They deal with the sale of Power Plant Gas after
June 1, 1975, when the 1952 agreement expires. In this con-
nection, it is recognized that United may apply to the FPC
for abandonment of its Power Plant Gas service to NOPSI
“effective on or after June 1, 1975,” and the “parties agree
that any controversy over whether Power Plant Gas ser-
vice should continue after the expiration of the [1952] Con-
tract will be resolved solely in the abandonment pro-
ceedings before the Federal Power Commission.’’ No
obligation is imposed on NOPSI to take Power Plant Gas
after June 1, 1975. United is authorized, without liability to
NOPSI, to curtail deliveries after June 1, 1975 ‘“‘pursuant
to Seller’s Impairment of Deliveries provisions from time
to time in effect under Seller’s Federal Power Commission
Gas Tariff.’
Paragraph 4 of the 1975 letter agreement deals with
the price of Power Plant Gas delivered from June 1, 1975
‘until Seller is authorized to abandon Power Plant Gas ser-
vice.’’ Under paragraph 4A1, this price is initially fixed at
61.84 cents per mcf in excess of United’s WACOG for each
respective billing month.® That price was to remain in
> Provision is made for a possible penalty payment by United to
NOPSI in the event United’s deliveries to NOPSI during the period
June 1, 1975 to June 1, 1976 total less than United's deliveries to NOP-
SI from January 1, 1975 to June 1, 1975.
6 This was actually expressed as $1.0125 per mcf, plus or minus
the amount by which United’s WACOG for the billing month exceeded
A-51
effect until June 1, 1976, or the date on which United in-
stituted a ‘“‘redetermined rate,’’ whichever was later. The
present controversy particularly relates to paragraph 4A2
of the 1975 letter, providing that United could, at any time
or times after June 1, 1976, unilaterally ‘“‘institute a
redetermined rate,’’ to remain in effect not less than one
year, by giving NOPSI sixty days’ notice of the specified
new rate. If NOPSI did not within thirty days notify
United that it agreed to that rate, then NOPSI would
‘‘cease taking gas on the date such rej»cted redetermined
rate was to be instituted.”
The WACOG plus 61.84 cent per mcf price remained
in effect until the January 31, 1975 letter agreement was
amended by another letter agreement dated August 22,
1978.’ This amendment apparently came about because
the price of available fuel oil dropped below that of
United’s Power Plant Gas on an equivalent Btu basis, and
NOPSI accordingly reduced its Power Plant Gas purchases
from United and began burning fuel oil instead.® The
August 1978 amendment modified paragraph 4A1 of the
(Footnote 6 continued)
or was less than its July 1974 WACOG. As the July 1974 WACOG was
39.41 cents per mcf, the effect was a price per mcf equal to whatever
United’s WACOG was from time to time, plus 61.84 cents ($1.0125
minus .3941).
7 This agreement recites that the 1952 contract had expired June
1, 1975 and that the January 31, 1975 letter constituted the parties’
agreement as to the price of Power Plant Gas delivered after the 1952
contract’s expiration.
8 On United's inquiry concerning the reduction, NOPSI respond-
ed that fuel oil was cheaper and it was going to buy the lowest cost fuel.
The NOPSI vice president concerned also stated that NOPSI’s objec-
tive in those 1978 negotiations was “‘to arrive at a price that we could
justify to our regulatory body that we were doing the besi we could for
our customers insofar as the impact that the fuel costs have on the cost
of electricity to them.”
A-52
1975 agreement, dealing with the price of Power Plant Gas
sold after June 1, 1975, by providing that, from August 1,
1978 ‘‘until Seller is authorized [by FERC] to abandon
Power Plant Gas Service,’’ the price for Power Plant Gas
furnished each month would be the cost to NOPSI of the
#6 fuel oil with equivalent Btu content used that month as
boiler fuel at NOPSI’s Michoud electric generating station.
However, the price per mcf would in no event be greater
than 71.84 cents, nor less than 51.84 cents, in excess of
United’s WACOG for the same month. It was also provid-
ed that no ‘‘redetermined rate’’ would be put in effect prior
to August 1, 1979. A November 1978 amendment increas-
ed the maximum and decreased the minimum price, each by
five cents per mcf, so that the maximum became 76.84
cents, and the minimum 46.84 cents, in excess of United’s
WACOG for the billing month. Within that range, the price
remained the price of NOPSI’s fuel oil, on a Btu equivalent
basis, as provided in the August 1978 agreement.2
This Power Plant Gas price formula continued in ef-
fect, and there were no further amendments to the i975
agreement, until on March 3, 1981 United sent NOPSI a
notice, pursuant to paragraph 4A2 of the 1975 agreement,
of a ‘‘redetermined price’’ of Power Plant Gas to take effect
May 3, 1981, thus precipitating the present litigation. This
“‘redetermined rate’’ provided for a price equal to United’s
WACOG for the month in question plus 91 cents per mcf
for minimum quantities nominated in advance by NOPSI,
generally on a take-or-pay basis. For gas in excess of the
minimum, the price would be the current regional #6 fuel oil
price on an equivalent Btu basis but not less than 61 cents
9 The November 1978 agreement made no other changes, and ap-
parently left in effect the ‘‘redetermined price’’ provisions of paragraph
4A2 of the 1975 letter agreement as modified by the August 1978
agreement.
A-53
per mcf, nor more than $1.06 per mcf, in excess of United's
WACOG for the month.!9 NOPSI calculated that this
would produce an average increase over the ensuing year of
about 25 cents per mcf, or 7.5 percent, in the cost of Power
Plant Gas purchased from United.!! NOPSI protested the
increase and negotiations ensued. After granting NOPSI
additional time to respond and making certain technical
modifications NOPSI had requested, United informed
NOPSI by letter of April 27, 1981 that if NOPSI did not
accept the ‘“‘redetermined rate’ by May 19, 1981 ‘“‘United
will charge NOPSI the fair market value for any gas taken
by NOPSI on and after May 3 inasmuch as no contractual
or other understanding would exist as to price.”
On May 18, 1981 NOPSI signed the United letter
agreements providing for the ‘“‘redetermined rate,” con-
temporaneously informing United that NOPSI was doing
so with reservation of rights and because United’s April 27
letter had said United would otherwise charge fair market
value.
10 The method of calculating United’s WACOG was also changed
to United’s advantage to the extent of approximately four cents per
mcf, and provision was made for future adjustments, based on changes
in the Producer Price Index for Finished Goods, in the $1.06 and 91 cent
figures. United also would have the right to institute ‘‘redetermined
rates’’ ater May 1982.
11 These prices were apparently below the then current fuel oil
prices, so that the 91 cent and $1.06 (over United’s WACOG) maximums
would likely be applicable. The estimate of increase, however, proved
somewhat conservative. When the ‘‘redetermined rate’ went into effect
May 3, 1981 it appears to have increased the cost of United’s Power
Plant Gas from $3.5967 to $3.9558 per mcf. Fuel oil cost to NOPSI,
relative to the cost of United’s Power Plant Gas, varied: in June 1981
the cost of such gas was about 3.5 percent less than the fuel oil on a Btu
equivalent basis; in April 1981 the gas cost was some 2.5 percent more
than the fuel oil cost.
A-54
Proceedings Below
On May 26, 1981 NOPSI instituted the present
litigation by filing suit against United.12 NOPSI’s com-
plaint outlined the history of its relations with United, in-
cluding the 1952 contract, which it alleged ‘‘terminated on
1 June 1975,” and the January 31, 1975 letter agreement
and its August and November 1978 modifications.!° It
alleges that on “January 31, 1975 United and NOPSI
entered into a letter agreement for the purpose of
definitively determining the rate or price per thousand
cubic feet (Mcf) NOPSI would pay and United would
receive for all Power Plant Gas delivered by United on and
after 1 June 1975 and until United obtained FPC abandon-
ment authorization,’’ and quotes paragraph 4A1 of the
1975 letter providing for a price fixed at United’s billing
month WACOG plus 61.48 cents per mcf. It further alleges
that in the August and November 1978 letters ‘“‘NOPSI
and United agreed upon a price to be paid by NOPSI for
Power Plant gas ‘... until Seller [United] is authorized by
the Federal Energy Regulatory Commission (formerly the
Federal Power Commission) to abandon Power Plant Gas
service’ as therein provided.”’
The complaint states that NOPSI agreed to United's
1981 redetermined rate ‘‘under the duress” of United’s
“threat” by its April 27, 1981 letter to charge “‘fair market
value” for the Power Plant Gas and United’s subsequent
oral statement ‘‘that it would contend that a fair market
12 The suit was filed in state court and promptly removed by
United to federal court on grounds of diversity of citizenship.
13 Copies of the 1975 and 1978 letter agreements were attached
to the complaint.
A-55
value for Power Plant Gas on and after May 3, 1981 would
be $6.00 to $8.00 per Mcf,’’ which would be more than dou-
ble what NOPSI paid United for Power Plant Gas in
1980.14
It also alleges that the provision of paragraph 4A2 of
the 1975 agreement authorizing United to institute a
‘‘redetermined rate’’ is ‘‘invalid and unenforceable because
the redetermined rate therein provided for is an uncertain
price, being neither fixed nor determinable by some objec-
tive criterion or by agreement,’’ and hence violates
specified articles of the Louisiana Civil Code.!5 According-
ly, it is claimed that the price provision of paragraph 4A1
14 NOPSI did not claim that United expressly or impliedly
threatened to suspend or curtail Power Plant Gas (or Resale Gas)
deliveries or to seek FERC permission to abandon. Indeed NOPSI alleg-
ed that ‘‘United has never applied for’’ or been granted such permission.
The duress, as NOPSI stated in its answers to requests for admission,
was that “if United had carried out its threat (to charge $6 to $8 per mcf
if NOPSI did not agree to the “‘redetermined rate’’] NOPSI would have
found it necessary to immediately approximately double its electric
rates or run the risk of a great financial loss should the courts hold that
United’s threatened increase was valid...”
15 The articles cited are LSA-C.C. articles 1764 subd. A, par. 1 (‘‘a
price is essential to the contract of sale’’), 2439 (for a contract of sale
there must be “‘the thing sold, the price and the consent’’}, 2456 (sale
perfected between parties ‘‘as soon as there exists an agreement for the
object and for the price thereof’), 2464 (‘‘the price of the sale must be
certain...fixed and determined by the parties”), and 2465 (price may be
left to arbitration, but if arbitrator unable or unwilling to estimate
“there exists no sale’). The complaint further alleges, ‘in the alter-
native, and only in the event’”’ that the provision authorizing United to
institute a “‘redetermined rate”’ is not invalid under the cited articles,
that it is invalid because its unlimited and unilateral character “without
providing for consultation with NOPSI”’ violates “the requirements of
equity” of LSA-C.C. articles 1964 (‘‘equity’’ may “supply...incidents”’ to
a contract) and 1965 (‘‘when the law of the land, and that which the par-
ties have made for themselves by their contract, are silent,’’ courts will
determine “incidents to a contract” according to the principles of the
golden rule and against one enriching himself ‘“‘at the expense of
another’’).
A-56
of the 1975 agreement, as modified by the August and
November 1978 agreements, is controlling. 16 The only
relief sought is declaratory judgment in four respects: (1)
that NOPSI’s consent to the 1981 redetermined rate ‘‘is
void as having been procured by duress”’; (2) that the provi-
sion of paragraph 4A2 of the 1975 agreement (and the
similar provision in paragraph 4 of the August 1978 agree-
ment) authorizing unilateral price redetermination by
United ‘‘are void and unenforceable’’; (3) that ‘‘the price at
which defendant is obligated to sell and NOPSI to buy
Power Plant Gas until United is authorized by the Federal
Energy Regulatory Commission to abandon Power Plant
Gas Service to NOPSI is that specified in Paragraph 4A1
of the letter agreement of January 31, 1975’’ as amended
by the August and Noven ber 1978 letter agreements; and
(4) that any payments by NOPSI to United for Power Plant
Gas under the “‘redetermined rate”’ instituted as of May 3,
1981 ‘“‘be refunded to NOPSI”’ to the extent they exceed
the amounts payable under the price provisions of
paragraph 4A 1 of the 1975 letter agreement as amended by
the August and November 1978 agreements.
United filed its answer on June 16, admitting the
basic facts alleged in NOPSI’s complaint and taking the
position that United engaged in no duress respecting NOR
SI’s agreement to the 1981 redetermined rate and that
NOPSI was bound thereby; that with respect to a redeter-
mined rate NOPSI had the choice of agreeing to it, or of
ceasing to take Power Plant Gas from United, or of purchas-
ing such gas from United at its fair market value; that the
price redetermination provision of paragraph 4A2 of the
16 Namely, the price tied to NOPSI’s Btu equivalent #6 fuel oil
costs, but not less than 46.84 cents, nor more than 76.84 cents, in excess
of United’s WACOG for the billing month.
A-57
1975 agreement (as amended by the August 1978 agree-
ment) was valid; and that NOPSI was barred by laches,
waiver and estoppel from contending otherwise. !7
On August 26, 1981 Ernest Morial moved to in-
tervene in the litigation ‘‘as a party plaintiff,’ individually
and as representative of the class of NOPSI electric
customers.!8 No action was taken on this motion. On Oc-
tober 6, 1981 an amended motion was filed seeking in-
tervention ‘‘as party plaintiffs herein’’ under Rule 24(a),
Fed.R.Civ.P., on behalf of Morial, several other persons
and businesses, and the City of New Orleans, in each case
individually and as representatives of the class composed
of all NOPSI electric rate payers. The then tendered
amended petition in intervention recites that the in-
tervenors are NOPSI electricity customers, that ‘‘the City
of New Orleans, acting through its City Council, is, in addi-
tion to being a purchaser of electricity, a rate regulatory
body, and, through its City Council, establishes NOPSI’s
17 At the same time, United also filed a counterclaim against
NOPSI which additionally took the positions: that in the event the court
determined that NOPSI’s agreement to the 1981 redetermined rate was
not binding, then United should have judgment against NOPSI for the
excess of the fair market value of Power Plant Gas taken by NOPSI
from United since May 3, 1981 over what NOPSI had paid therefor (the
redetermined rate); and that in the event that the court determined that
not only was NOPSI’s 1981 agreement not binding on it but also that
the price redetermination provision of paragraph 4A2 of the 1975 agree-
ment was invalid and not binding on NOPSI, then United should have
judgment against NOPSI for the excess of the fair market value when
delivered of Power Plant Gas taken by NOPSI from United since June
1, 1975 over what NOPSI had paid United therefor. NOPSI filed its
answer to the counterclaim on July 6, 1981.
18 Though not stated in the motion or accompanying papers,
Morial was and is the Mayor of New Orleans. When the motion was filed
some preliminary discovery had already taken place, including oral
depositions of United and NOPSI officers and interrogatories from each
party to the other.
A-58
,
rates,’ and that “‘the increased cost of power plant gas,
which NOPSI uses to generate electricity, is charged to In-
tervenors in the form of increased fuel adjustment charges.
Intervenors are thus paying the most significant portion of
the increased cost of power plant gas."19 The amended
19 Generally, about 60 percent of the cost of electricity to NOPSI
consumers is represented by the cost to NOPSI of the boiler fuel used
in its electric generating plants.
Under Louisiana law electric utilities such as NOPSI, and the
rates they charge their consumer customers, are regulated by the Loui-
siana Public Service Commission (the ‘‘Commission”’), except that home-
rule cities, such as New Orleans, perform this regulatory function within
their borders, unless the city voters approve transfer of that function to
the Commission. LSA- Const. Art. 4 § 21(B) & (C). See State ex rel. Guste
v. Council of City of New Orleans, 309 So.2d 290, 292-93 (La.1975). The
1922 ordinance under which NOPSI holds its franchise from the City of
New Orleans provides that NOPSI is “authorized to charge and collect
such fair and reasonable rates for electrical energy furnished and
delivered in the City of New Orleans as may be established by the City
of New Orleans and or other regulatory authority in accordance with
law.’’ By virtue of an election held November 28, 1981, pursuant to an
ordinance adopted by the City on July 23, 1981, effective January 1,
1982, all the City’s rate and other regulatory authority over NOPSI (and
certain other utilities) was transferred to the Commission so that, as the
ordinance states, the City shall ‘‘no longer have any powers of supervi-
sion, regulation and control over gas, heat, power and electric public
utilities.”’
The City and the Commission, during their respective periods of
regulating NOPSI’s rates, approved its electricity rate schedules con-
taining a ‘‘fuel adjustment clause’’ by which NOPSI has been generally
authorized to increase its electric charges every month to the extent of
(but without a profit margin on) increases in its boiler fuel and purchas-
ed power costs incurred in the second preceding month, with this item
separately identified on the customer's bill. We understand that the
Commission holds monthly hearings on the cost figures used in these
computations. The City Council apparently did not hold such hearings
as a matter of course, but did ‘‘audit NOPSI's records on an ongoing
basis to protect against overcharges” in this connection. See
Metropolitan New Orleans Chapter of the Louisiana Consumer's
League, Inc. v. Council of the City of New Orleans, 423 So.2d 1213, 1217
(La.App.1982), cert. denied, 430 So.2d 77 (La.1983). Plainly, under Loui-
siana law neither the City nor the Commission is required to authorize
A-59
petition in intervention expressly adopts the allegations of
(Footnote 19 continued)
use or continued use of ‘‘fuel adjustment” clauses in filed rate schedules,
such clauses being simply a procedural device employed by the
regulatory authority in carrying out its rate-fixing function.
Under LSA-R.S. 45:1176, the Commission and any ‘municipal
body having similar powers in the fixing of just and reasonable
rates...charged by public utilities, shall investigate the reasonableness
and justness of all contracts, agreements and charges entered into or
paid by such public utilities...and shall have the power to disallow as an
operating expense of any public utility such part of the amount so
paid...as the commission...or municipal body may find, after hearing, to
be unjust or unreasonable and designed for the purpose of concealing,
abstracting or dissipating the net earnings of the public utility.”” See
Central La. Elec. Co. v. Louisiana Pub. Serv. Comm'n, 373 So.2d 123
(La.1979); Sout Cent. Bell Tel. v. Louisiana Pub. serv. Comm'n, 373
So.2d 478, 484 (La.1979) (recognizing ‘‘the Commission’s authority to
regulate the industry as an efficient enterprise, rather than as a lux-
urious one...’’).
We understand that Commission rules authorize any party ‘‘ac-
tually in interest,”’ local officials and ‘‘every civic and trade organiza-
tion,” including consumer groups, to appear and participate in rate pro-
ceedings. While the Commission at one time amended these rules so it
could deny such parties intervenor status (apparently necessary for ap-
peal to the courts from Commission orders), this amendment was held
invalid on procedural grounds, Louisiana Consumers’ League, Inc. v.
Louisiana Pub. Serv. Comm'n, 351 So.2d 128 (La.1977), and we are in-
formed that the previous rule, authorizing intervention, remains in
force. Under LSA-R.S. 45:1192, an appeal may be filed within three
months after a Commission order, and Louisiana courts have entertain-
ed appeals by rate payers from Commission rate orders. See, e.g.,
Monochem, Inc. v. Louisiana Pub. Serv. Comm'n, 172 So.2d 670
(La.1965); Louisiana Power & Light Co. v. Louisiana Pub. Serv.
Comm'n, 369 So.2d 1054 (La.1979).
With Commission-sanctioned security, a utility may effectuate an
increased rate before its approval by the Commission, but if the rate is
not ultimately approved refund must be made, as it must also if a
Commission-approved rate is implemented and later overturned on
court appeal. LSA-Const. Art. 4 § 21(D); LSA-R.S. 45:1163.1. However,
where a utility recovers from a supplier excess charges paid in respect
to periods when a utility’s rates were Commission approved and un-
challenged in court, it is unclear whether the Commission can order the
utility to make a true refund to the rate payers. The Commission has
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NOPSI's complaint, but does not otherwise allege any
substantive claim or ground for relief. It also seeks precise-
ly the same relief as sought in NOPSI's complaint, with the
sole exception of requesting that the refunds which NOP-
SI's complaint seeks from United be paid ‘‘to NOPSI and
the [rate payer] Class jointly” (instead of just to NOPSI).
In a supporting memorandum filed with the amend-
ed petition in intervention, the intervenors claimed the
right to intervene because the contract between NOPSI
and United was a stipulation pour autrui, or third-party
beneficiary contract, in their favor, and because they paid,
through electricity charges paid to NOPSI, the amounts
received by United from NOPSI in excess of what United
was entitled to be paid under its contract with NOPSI.
They also asserted NOPSI’s representation was inade-
quate because NOPSI requested that the refund sought
from United be paid to NOPSI, rather than to NOPSI and
the rate payers, but did not allege that NOPSI was in collu-
sion with United or had not vigorously pursued its suit
against United or would not do so.
United opposed the intervention. The amended mo-
tion to intervene was heard by the magistrate, who, by a
(Footnote 19 continued)
apparently done so in at least one instance, but there is authority that
it lacks this power. See City of New Orleans v. United Gas Pipe Line Co..,
438 So.2d 264 (La.App.), writs denied, 442 So.2d 463 (La.1983). Cf Loui-
siana Power & Light Co. v. Louisiana Pub. Serv. Comm'n, 377 So.2d
1023, 1027-29 (La.1979).
The City and the Commission, while each regulated NOPSI's
rates, have apparently allowed NOPSI's increased fuel costs resulting
from United's May 3, 1981 price increase to ‘‘pass through” in the form
of higher electric rates, seemingly without any regulatory action being
attempted by the regulatory bodies themselves or third parties to pre-
vent, minimize or condition this.
A-61
November 6, 1981 minute entry, allowed Morial (the
Mayor), and the seven individual intervenors who compris-
ed the New Orleans City Council, to permissively intervene
under Rule 24(b) “‘individually, not as a class.”’ All other re-
quested intervention was denied. United and the in-
tervenors each sought review in the district court. Follow-
ing a December 1981 hearing, the district court in
February 1982 denied all intervention.2° It ruled, inter
alia, that the contract was not a third-party beneficiary
contract under Louisiana law, that ‘‘none of the applicants
for intervention...have a direct, legally protected interest in
this contract action between the two parties to the con-
tract,” and that the applicants had not overcome the
presumption of adequate representation by NOPSI. This
appeal by the applicants for intervention followed.
Previous Consideration by This Court
On original submission, a panel of this court held
that the rate payers were not entitled to intervene as of
right and that the district court did not abuse its discretion
in denying them permissive intervention. 690 F.2d 1203.
However, the panel further held that the individuals who
20 NOPSI made neither formal consent nor opposition to the at-
tempted intervention, and did not seek to appeal either the magistrate’s
order or that of the district court. At the December hearing, NOPSI did
not oppose the intervention, stated “‘we welcome’’ the intervenors into
the litigation, and advised the court that NOPSI intended to prosecute
its suit against United and that “if we make any recovery at all, then
the amount of recovery will be credited or refunded to the rate payer.”
When specifically questioned by the district court in the latter connec-
tion, NOPSI reiterated its position and advised thai its recovery would
be “subject to the jurisdiction of the City Council, they will direct
whether it will be credited or refunded.” Although the district court did
not rule at that time, it expressed its concern that if intervention were
allowed, “‘you are going to complicate litigation” and “you are going to
have the most gosh awful jumbled mess you ever saw in this thing.”
A-€2
were City officials ‘Mayor Morial and the Council
members) were entitled to intervene as of right, because of
the City’s assumed status as NOPSI’s rate regulatory
authority, and also that the district court abused its discre-
tion in denying them permissive intervention. Jd. On
rehearing, the panel, in December 1982, due to the informa-
tion that all the City’s relevant regulatory authority over
NOPSI had been transferred to the Louisiana Public Ser-
vice Commission (see note 19, supra), partially granted
United’s motion for rehearing and unanimously held that
the City officials were not . «titled to intervene as of right,
but, one judge dissenting, adhered to its previous holding
that they were entitled to permissive intervention. 694
F.2d 421. At the same time, intervenors’ petitions for panel
and for en banc rehearing were wholly denied. Jd. United
then filed a second petition for en banc rehearing, directed
to the panel’s opinion on rehearing, but no such petition
was filed by intervenors. Thereafter, this court ordered the
case reheard en banc, id. at 422, but in June 1983 that order
was withdrawn when four judges recused themselves
because of their status as NOPSI rate payers. 707 F.2d
834. Advice having been received from the Advisory Com-
mittee on Codes of Conduct of the Judicial Conference of
the United States that recusal was unnecessary in that, in-
ter alia, ‘“‘the matter to be reheard en banc involves only the
right of the mayor and city council to intervene”’ and there
had been no ruling respecting rate payer class certification
or representation, the judges concerned withdrew their dis-
qualifications and the order directing the case to be reheard
en banc was reinstated. 719 F.2d 733.
We accordingly determine that the questions prin-
cipally before us are those pertaining to the entitlement of
the City officials to intervene.
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DISCUSSION
Intervention of Right
Respecting intervention under Rule 24(a)(2),
Fed.R.Civ.P.,21 we adhere to the statement in /nterna-
tional Tank Terminals, Ltd. v. M/V Acadia Forest, 579 F.2d
964, 967 (5th Cir.1978):
“It is well-settled that to intervene as of right
each of the four requirements of the rule must be
met: (1) the application for intervention must be
timely; (2) the applicant must have an interest
relating to the property or transaction which is
the subject of the action; (3) the applicant must be
so situated that the disposition of the action may,
as a practical matter, impair or impede his ability
to protect that interest; (4) the applicant's in-
terest must be inadequately represented by the
existing parties to the suit.”
Interest of Applicant
Here our focus is on the second requirement, that the
applicant for intervention have an interest relating to the
transaction which forms the subject matter of the action.
“1 Rule 24(a) provides:
“(a) Intervention of Right. Upon timely application
anyone shall be permitted to intervene in an action: (1) when
a statute of the United States confers an unconditional right
to intervene; or (2) when the applicant claims an interest
relating to the property or transaction which is the subject
of the action and he is so situated that the disposition of the
action may as a practical matter impair or impede his ability
to protect that interest, unless the applicant's interest is
adequately represented by existing parties.”
It is undisputed that clause (1) is wholly inapplicable here.
A-64
What kind of interest is required? We have recognized that
the 1966 amendments to Rule 24(a) eliminated the former
general requirement that the applicant be legally bound by
the result of the action, substituting the more flexible and
practical criteria of the third requirement in the rule’s cur-
rent version. Otherwise, however, the kind of interest
necessary was not affected. See Diuz v. Southern Drilling
Corp., 427 F.2d 1118, 1124 (5th Cir.), cert. denied sub nom..,
Trefina A.G. v. United States, 400 U.S. 878, 91 S.Ct. 118,
27 L.Ed.2d 115 (1970)); Hobson v. Hansen, 44 F.R.D. 18, 24
(D.D.C.1968) (‘‘while one’s interest need no longer be
decisively affected before intervention will be allowed,
there is nothing in the new rule or in its attendant commen-
tary to indicate that it effected a change in the kind of in-
terest required”’).22 Nor is it necessary that ‘‘the interest
has to be of a legal nature identical to that of the claims
asserted in the main action.”’ Diaz at 1124. Nevertheless,
as we stated in Diaz, ‘intervention [of right] still requires
a ‘direct, substantial, legally protectable interest in the
proceedings’.”’ Id. (quoting Hobson). Although we have
described it as ‘‘a somewhat narrow reading of the term ‘in-
terest’,’’ United States v. Perry County Board of Educa-
tion, 567 F.2d 277, 279 (5th Cir.1978), we have never
departed from, and have in several cases reiterated, the
“direct, substantial, legally protectabale’’ definition of the
required interest. Id. See Piambino v. Bailey, 610 F.2d
1306, 1321 (5th Cir.), cet. denied, 449 U.S. 1011, 101 S.Ct.
568, 66 L.Ed.2d 469 (1980); Howse v. S/V “‘Canada Goose
I,”’ 641 F.2d 317, 320-21 (5th Cir.1981). Several other cir-
cuits likewise employ this definition of the interest re-
quired. See Westlands Water Dist. v. United States,700
“<See also 3B Moore’s Federal Practice € 24.07[2] (1982) (‘‘The
liberalization of Rule 24(a) was not aimed at revising the nature of the
applicant's interest...’’).
A-65
F.2d 561, 563 (9th Cir.1983) (‘‘...this interest is not a legally
protectable interest that can support EDF's intervention
as a party in a suit involving rights under contracts to
which it is not a party.”’); Dilks v. Aloha Airlines, Inc., 642
F.2d 1155, 1157 (9th Cir.1981) (per curiam) (“‘direct, non-
contingent, substantial and legally protectable”’ interest);
Heyman v. Exchange National Bank of Chicago, 615 F.2d
1190, 1193 (7th Cir.1980) (‘‘direct, substantial, [and] legally
protectable’ "’ interest); Wade v. Goldschmidt, 673 F.2d
182, 185 (7th Cir.1982) (‘‘a direct, significant legally protec-
table interest’); Athens Lumber Co., Inc. v. Federal Elec-
tion Comm’n, 690 F.2d 1364, 1366 (11th Cir.1982) (°
‘direct, substantial, legally protectable interest’ ”’). The
Supreme Court in Donaldson v. United States, 400 U.S.
517, 531, 91 S.Ct. 534, 542, 27 L.Ed.2d 580 (1971), stated
that the applicant’s interest had to be ‘‘a significantly pro-
tectable interest.’’ It is apparent that the Supreme Court in
Donaldson used “‘protectable”’ in the sense of legally pro-
tectable, and it is difficult to conceive of any other sense in
which the Court might have been employing ‘‘protectable’’
in that context.
By requiring that the applicant’s interest be not only
“direct” and “substantial,” but also “legally protectable,”’
it is plain that something more than an economic interest
is necessary. What is required is that the interest be one
which the substantive law recognizes as belonging to or be-
ing owned by the applicant. This is reflected by the require-
ment that the claim the applicant seeks intervention in
order to assert be a claim as to which the applicant is the
real party in interest. The real party in interest require-
ment of Rule 17(a), Fed.R.Civ.P., “‘applies to intervenors as
well as plaintiffs,” as does also the rule that ‘‘a party has
no standing to assert a right if it is not his own.’’ United
States v. 936.71 Acres of Land, 418 F.2d 551, 556 (5th Cir.
A-66
1969).23 Accord Piambino, 610 F.2d at 1321. As we stated
in United States v. 936.71 Acres of Land:
‘*...1t is elementary that,
‘ “The ‘‘real party in interest’”’ is the party who,
by substantive law, possesses the right sought to
be enforced, and not necessarily the person who
will ultimately benefit from the recovery.’ Barron
and Holtzoff, Federal Practice and Procedure, §
482 (Wright ed. 1961).” 418 F.2d at 556.24
See also In re Penn Central Commercial Paper Litigation,
62 F.R.D. 341, 346 (S.D.N.Y.1974), aff'd without op., 515
F.2d 505 (2d Cir.1975) (‘‘...an interest, to satisfy the re-
quirements of Rule 24(a)(2)...must be based on a right
which belongs to the proposed intervenor rather than to an
existing party...’’). Cf, Heyman v. Exchange National Bank
of Chicago, 615 F.2d 1190, 1193 (7th Cir.1980) (inter-
vention requires ‘‘ ‘a right to maintain a claim for the relief
sought’ ”’).
Analogously, intervention has been held subject to
the prudential standing requirement that ‘‘the presence of
“3 See also Wright & Miller, Federal Practice and Procedure; Civil
§ 1543 at 646 (‘‘...the real party in interest requirement...must be
satisfied for purposes of asserting...a claim by an intervenor”); 3A
Moore’s Federal Practice { 17.07 at 17-77 (1982) (‘Rule 17(a) applies
to...intervenors...’’ (footnote omitted)).
24 Accord Wright & Miller, Federal Practice and Procedure: Civil
§ 1542 at 639 (‘...the real party in interest principle is a means to iden-
tify the person who possesses the right sought to be enforced”’); id. §
1543 at 644 (‘‘...the action will not necessarily be brought in the name
of the person who will ultimately benefit from the recovery”’). See also
3A Moore's Federal Practice ¢ 17.07 at 17-65 (1982) (‘‘...the true meaning
of real party in interest may be summarized as follows: An action shall
be prosecuted in the name of the party who, by the substantive law, has
the right sought to be enforced.”’ (footnote omitted)).
A-67
harm toa party does not permit him to assert the rights of
third parties in order to obtain redress for himself.”
DuPree v. United States, 559 F.2d 1151, 1153 (9th
Cir.1977). For this proposition, DuPree cites Warth uv.
Seldin, 422 U.S. 490, 509, 95 S.Ct. 2197, 2210, 45 L.Ed.2d
343 (1975), where the Supreme Court applied ‘‘the pruden-
tial standing rule that normally bars litigants from asser-
ting the rights or legal interests of others in order to obtain
relief from injury to themselves.’ See also id. at 499, 95
S.Ct. at 2205; Valley Forge College v. Americans United,
454 U.S. 464, 474-75, 102 S.Ct. 752, 759-60, 70 L.Ed.2d 700
(1982).
In public law cases where statutory or constitutional
violations are asserted as a basis for recovery, it has been
said that standing is present when the complainant suffers
injury and “‘the interest sought to be protected by the com-
plainant is arguably within the zone of interests to be pro-
tected or regulated by the statute or constitutional
guarantee in question.”” Data Processing Service v. Camp,
397 U.S. 150, 153, 90 S.Ct. 827, 830, 25 L.Ed.2d 184 (1970).
As a recognized text has observed, this zone of interest
standing test in public law cases ‘‘is somewhat analogous
to the Rule 17(a) standard that the party possess a substan-
tive right under the applicable law....’’ Wright & Miller,
Federal Practice and Procedure: Civil § 1542 at 642. In a
sense, a party within the zone of interests protected by a
statute may possess a type of substantive right not to have
the statute violated.
Appellants, relying on Trbovich v. United Mine
Workers of America, 404 U.S. 528, 92 S.Ct. 630, 30 L.Ed.2d
686 (1972), urge that the foregoing principles are inap-
plicable to intervention under Rule 24(a)(2), because
Trbovich authorized intervention under circumstances
A-68
where the intervenor could not have initiated the suit.
Trbovich involved an action brought by the Secretary of
Labor against a union under the Labor-Management
Reporting and Disclosure Act of 1959 (““LMRDA”’) to set
aside an election of union officers on the ground that the
election was held in a manner that violated the LMRDA.
The suit arose from a complaint made by union member
Trbovich to the Secretary, the LMRDA authorizing such
complaints, after exhaustion of internal union remedies,
and requiring the Secretary to investigate and, if finding
probable cause to believe an LMRDA violation had occur-
red, to bring suit to set the election aside. The Supreme
Court held that Trbovich was entitled to intervene in the
Secretary’s suit, for limited purposes, despite the fact that
he could not have brought such a suit himself because the
LMRDA provided that with respect to elections already
conducted the “remedy” set out in the LMRDA was
exclusive.
Trbovich, however, cannot be read to allow Rule
24(a)(2) intervention for the purpose of asserting the
substantive rights of others, or as recognizing for that pur-
pose an interest based on a substantive right not belonging
to the intervenor. The substantive rights being litigated in
Trbovich were the rights to have the union’s elections con-
ducted in conformity with the LMRDA. Clearly, the in-
terest of members, such as Trbovich, in having their
union’s elections so conducted was within the zone of in-
terests protected by the LMRDA’s substantive provisions
regulating such elections. Indeed, the Trbovich Court ex-
pressly stated that the LMRDA ‘“‘gives the individual
union members certain rights against their union’”’ and that
“those rights,’’ along with public rights, were being enforc-
ed in the Secretary’s action. Jd. at 538-39, 92 S.Ct. at
636-37. Only the procedural ‘‘reinedy,’’ not the substantive
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right, was curtailed by the exclusivity provision of the
LMRDA. The Supreme Court refused to give a broad
reading to that provision, limiting it to the initiation of suit
and the specification of claimed LMRDA violations.2°
It is, of course, often a difficult matter to determine
the zone of interests protected or regulated by a constitu-
tional provision or statute of general application. But the
case before us does not involve such a public law question.
Here the suit is on the contract between NOPSI and United
and the dispute concerns the contract price for the Power
Plant Gas. Relief is not sought by the City officials (or
NOPSI) against United on the basis of the Natural Gas
Act26 or any asserted power to regulate or approve NOP-
SI’s purchase of or contracts for Power Plant Gas (or
*° The distinction, implicit in Trbovich, between the ability to in-
voke a procedural remedy and the possession of a substantive right is
somewhat analogous to the distinction between the concepts of real par-
ty in interest and capacity. See Wright & Miller, Federal Practice and
Procedure: Civil § 1542 at 639:
‘*...the real party in interest principle is a means to identify
the person who possesses the right sought to be enforced...
By way of contrast, capacity is conceived to be a party’s per-
sonal right to litigate in a federal court.... Thus it is possible
for a person to be the real party in interest and yet lack
capacity to sue....””
26 Moreover, the Natural Gas Act does not regulate the price of
Power Plant Gas, and, while it prohibits abandonment of certificated
deliveries, abandonment is not claimed here. See note 3, supra. See also
Pennzoil Co. v. Federal Energy Regulatory Com'n, 645 F.2d 360, 387
(5th Cir. 1981), cert. denied, 454 U.S. 1142, 102 S.Ct. 1000, 71 L.Ed.2d
293 (1982) (‘‘...the appropriate contract law to apply is the law that
would govern the parties’ dealings were there no regulation at all of the
contract’s subject matter’’); Cities Service Gas Company v. United
States, 500 F.2d 448, 205 Ct.Cl. 16 (1974). And, it has been held there
is no private cause of action under the Natural Gas Act. See Pennzoil
Co., 645 F.2d at 384 n. 49; Clark v. Gulf Oil Corp., 570 F.2d 1138 (3d
Cir.1977), cert. denied, 435 U.S. 970, 98 S.Ct. 1611, 56 L.Ed.2d 62 (1978).
A-70
United’s sale or contracts for sale of such gas).2/ Recovery
is not sought from United on the basis that the price it
charged was one to which United and NOPSI could not
have lawfully agreed or resulted from violation of positive
law.28 Rather, NOPSI and the City officials, whose sole
allegation of substantive grounds of entitlement to relief is
their adoption of NOPSI’s complaint, seek recovery from
United on the basis that United has charged NOPSI more
than NOPSI has validly agreed to pay and that United is
bound to the price specified in paragraph 4A1 of the 1975
agreement, as modified by the August and November 1978
agreements. Other than the City’s now lapsed regulatory
role and the claim of third-party beneficiary rights under
el As previously observed, see note 3, supra, Louisiana does not
regulate pipeline sales of Power Plant Gas. LSA-R.S. 45:1163. Although
NOPSI’s electricity business is subject to rate and other general govern-
mental regulatory authority, and the application for intervention alleg-
ed the City’s regulatory authority over NOPSI’s electric rates, by the
time the district court acted on the intervention all such authority had
been transferred from the City to the Louisiana Public Service Commis-
sion. See note 19, supra.
28 This case is thus properly distinguished from Cascade Natural
Gas Corp. v. El Paso Natural Gas Co., 386 U.S. 129, 87 S.Ct. 932, 17
L.Ed.2d 814 (1967), in which the State of California was permitted to in-
tervene as of right in an antitrust action involving a gas supplier to that
state. It has been held that a state has substantive rights to be free of
antitrust injury to its general economy. Georgia ». Pennsylvania R.R.
Co., 324 U.S. 439, 65 S.Ct. 716, 89 L.Ed. 1051 (1945). We also observe
that Cascade predates Donaldson v. United States, 400 U.S. 517, 531,
91 S.Ct. 534, 542, 27 L.Ed.2d 580 (1971), in which, as discussed in the
text, supra, the Court held that intervention under Rule 24(a)(2) required
a ‘‘significantly protectable’’ interest. Of course, in the present case
various Louisiana Civil Code provisions are involved (see note 15, supra),
but only in the sense that they provide the overall legal framework
governing what is essential to any binding contract and how such con-
tracts are interpreted and enforced generally; they do not purport to
positively prohibit or make affirmatively illegal any agreement or at-
tempted agreement. It is plain that these articles do not create substan-
tive rights or zones of interest beyond the parties to the purported
agreement or those who would possess rights under the agreement were
it enforceable.
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the NOPSI-United contract, the only ‘‘interest’’ asserted
as a basis for intervention is a purely economic interest. We
hold that an economic interest alone is insufficient, as a
legally protectable interest is required for intervention
under Rule 24(a)(2), and such intervention is improper
where the intervenor does not itself possess the only
substantive legal right it seeks to assert in the action. Ac-
cordingly, we turn to the third-party beneficiary question.
Third-Party Beneficiary Contract
Louisiana law, as all concede, governs the question 01
who possesses substantive legal rights under the NOPSI-
United contract.29 Generally speaking, only the parties to
a contract, those holding under them (e.g., by succession,
assignment or subrogation, none of which are claimed
here), and third-party beneficiaries (and those holding
under them) have substantive rights under private
contracts.22 Here, the only basis on which it is claimed
29 However, as this is a suit in federal court, federal law governs
the requirements for intervention, standing and real party in interest
status, including the character of interest which is necessary for such
purposes. See Wright & Miller, Federal Practice and Procedure: Civil §§
1544, 1905; 3A Moore’s Federal Practice { 17.07 at 17-73 (1982); Piam-
bino, 610 F.2d at 1321.
30 See Logan v. Hollier, 424 So.2d 1279, 1281-82 (La.App.1982)
(quoting with approval from Crowley v. Hermitage Health and Life Ins.
Co., 391 So.2d 53, 55 (La.App.1980)):
‘ “The general rule is that parties to a contract may
stipulate only for themselves. As a result, a third person not
a party to a contract lacks the relationship necessary to sue
for recovery of any of the contractual benefits. Nevertheless,
there is an exception recognizing that contracting parties
may agree between themselves that a third person not a par-
ty to their contract may derive benefit from it. This is the
stipulation pour autrui and it allows the third party, for
whose benefit the advantage is stipulated, an action to en-
force the stipulation.’ ” (Footnotes omitted.)
A-72
that anyone other than NOPSI and United has substantive
rights under the contract is the assertion that it is a third-
party beneficiary contract, a stipulation pour autrui under
Louisiana law.?! The panel held that the NOPSI-United
contract was not a stipulation pour autrui. We agree, for
the reasons stated by the panel and others to be noted.
Louisiana law is settled that for there to be a stipula-
tion pour autrui there must be not only a third-party ad-
vantage, but “‘the benefit derived from the contract by the
third party may not merely be incidental to the contract.”’
HMC Management Corp. v. New Orleans Basketball Clud,
375 So.2d 700, 708 (La.App.1979), writs denied, 378 So.2d
1384 (La.1980); Logan v. Hollier, 699 F.2d 758, 759 (5th Cir.
1983) (per curiam); English v. National Collegiate Athletic
Ass’n, 439 So.2d 1218, 1223 (La.App.), writs denied, 441
So.2d 747 (La.1983); Crowley v. Hermitage Health and Life
Ins. Co., 391 So.2d 53, 55 (La.App.1980); Logan v. Hollier,
424 So.2d 1279, 1282 (La.App.1982). Rather, the third-
party benefit must form ‘‘the condition or consideration”’
(Footnote 30 continued)
See also LSA-C.C. art. 1901 (contracts ‘‘have the effect of laws on those
who have made them” (emphasis added)).
31 See LSA-C.C.:
“Art. 1890. A person may also, in his own name, make some ad-
vantage for a third person the condition or consideration of a com-
mutative contract, or onerous donation; and if such third person con-
sents to avail himself of the advantage stipulated in his favor, the con-
tract can not be revoked.
‘Art. 1902. But a contract, in which anything is stipulated for the
benefit of a third person, who has signified his assent to accept it, can
not be revoked as to the advantage stipulated in his favor without his
consent.”
A:73
of the contract in order for it to be a stipulation pour autrui.
City of Shreveport v. Gulf Oil Corp., 431 F.Supp. 1, 4
(W.D.La.1975), aff'd, 551 F.2d 93 (5th Cir.1977) (per
curiam) (‘‘Affirmed on the basis of the District Court’s opi-
nion...’’); HMC Management, 375 So.2d at 708; Logan v.
Hollier, 699 F.2d 758, 759 (5th Cir.1983) (per curiam).
Moreover, a stipulation pour autrui will be found ‘‘only
when the contract clearly contemplates the benefit to the
third person as its ‘condition or consideration’.’’ City of
Shreveport, 431 F.Supp. at 4 (emphasis added); C.H.
Leavell & Co. v. Glantz Contracting Corporation of Loui-
siana, Inc., 322 F.Supp. 779, 783 (E.D.La.1971). See also
Fontenot v. Marquette Casualty Co., 258 La. 671, 247
So.2d 572, 579 (1971) (‘‘In Louisiana contracts for the
benefit of others...must be in writing and clearly express
that intent.’’); Logan v. Hollier, 699 F.2d 758, 759 (5th
Cir.1983) (per curiam) (same); Crowley, 391 So.2d at 55 (the
agreement must “clearly express the intent to benefit
another”); Logan v. Hollier, 424 So.2d 1279, 1282
(La.App.1982) (same); Hertz Equipment Rental Corp. uv.
Homer Knost Construction Company, Inc., 273 So.2d 685,
688 (La.App.1973) (agreement must “‘clearly manifest an
intention to confer a benefit upon a third party”); HMC
Management, 375 So.2d at 708 (same).
There may be some uncertainty whether the required
clear intent must be reflected by express provisions or may
arise by implication. The language in Fontenot and some of
the other cases above-cited indicates that an express provi-
sion is required. On the other hand, in Allen & Curry Mfg.
Co., Ltd. v. Shreveport Waterworks Co., 113 La. 1091, 37
So. 980 (1905), the Louisiana Supreme Court remarked,
‘‘We do not agree entirely with” the view of ‘‘counsel for
defendant...that there cannot be a stipulation pour autrui
in the absence of express words to that effect,’’ and went
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on to state that ‘‘the intention of the parties” controlled in
this respect and ‘‘must be gathered...from reading the con-
tract, as a whole, in the light of the circumstances under
which it was entered into.’’ Jd. 37 So. at 984. However, the
Court then observed:
‘But inasmuch as people usually stipulate for
themselves, and not for third persons, a strong
presumption obtains in any given case that such
was their intention; and we do not’* agree with
counse. for defendant to this extent—that the im-
plication to overcome that presumption must be
so strong as to amount practically to an express
declaration.
e
‘‘As furnishing instances where the implication
was very strong, yet not strong enough to induce
the courts to recognize a stipulation pour autrui,
And, later in the opinion the Court, discussing certain deci-
sions finding third-party beneficiary status, criticized them
in part because they ‘impose by implication a liability
which, if intended by the parties to be a part of their con-
tract, would most indubitably have been made the subject
of an express clause.’’ Jd. at 988.
Whether the requirement be for an express declara-
tion or an extremely strong implication, it is evident that
the NOPSI-United contract cannot be said to clearly con-
template the conferring of a benefit on third persons as its
°< The “not” at this place in the quoted language is obviously a
printer's error. Clearly, the Court was agreeing with the proposition
stated.
A-75
condition or consideration. Not only is there no indication
of such intention,?% but, as the panel stated, ‘‘[t]here is
every indication that NOPSI entered into its agreements
with United in the ordinary course of its business, not with
the express intention of conferring a pecuniary benefit
upon the customers.”’ 690 F.2d at 1211.
We also observe that under the contract United is
obligated to deliver gas only to NOPSI, and is neither
obligated nor authorized to deliver to any third party.
Likewise, United is neither obligated nor authorized to
deliver at times or in quantities not specified by NOPSI.
Nor are United's obligations to any extent conditioned on
the joinder of any third party with NOPSI respecting re-
quests for gas or other matters (except that FERC consent
is required for abandonment). Only NOPSI is obligated to
United for payment. On the other hand, full performance
by United does not to any extent discharge any third-party
legal obligations of NOPSI. Though NOPSI has legal
obligations to third parties respecting the sale and delivery
of electricity, none of such legal obligations is even partial-
ly discharged or reduced by United's fulfillment of its con-
tractual obligations (the delivery of gas to NOPSI at the
agreed price and at the times and in the quantities re-
quested by NOPSI). NOPSI is not even legally obligated
33 The reference in the initial ‘‘whereas” clause of the 1952 con-
tract to NOPSI’s desire to purchase gas for resale to its customers in
New Orleans, see note 2, supra, provides no such indication. In the first
place, this language refers only to Resale Gas, not to the Power Plant
Gas at issue here, concerning which the clause makes no reference to
NOPSI'’s customers. Moreover, the obvious purpose of the clause was
merely to distinguish between the two types of gas for regulatory pur-
poses. Nor do we believe that a contract recital merely reflecting a pur-
chaser's intention to resell the purchased product reflects an intention
that benefit to the purchaser's customers be a condition or consideration
of the contract. Finally, the 1952 contract has clearly long since expired.
A-76
to itself generate the electricity it is required to sell, and
while as a practical matter doubtless virtually all is
generated by NOPSI, by no means is all so generated by
plants using gas purchased from United as boiler fuel. The
contract does not require NOPSI to purchase a specified
quantity of gas from United, nor to use all gas available
from United before using other sources of boiler fuel.
Where the promisor's performance is to be made to,
and is subject to the control of, the promisee, the Louisiana
courts have refused to find a stipulation pour autrui despite
the fact that the promisor and promisee may have con-
templated that the promisor’s performance would as a
practical matter enable or facilitate the promisee’s perfor-
mance of is obligations to a third party. See Fontenot v.
Marquette Casualty Co., 258 La. 671, 247 So.2d 572, 579
(1971) (reinsurance contract); Oswalt v. Irby Const. Co., 424
So.2d 348, 354 (La. App.1982) (agreement of grantee in
right-of-way deed, where grantor reserved right to grow
crops in right-of-way, to pay grantor for any future damage
to crops on submittal of bill by grantor, was not stipulation
pour autrui in favor of grantor’s lessee; distinguishing
cases in which promisor’s agreement to pay is not stated in
terms of payment to promisee of claims submitted by pro-
misee); Crowley v. Hermitage Health and Life Ins. Co., 391
So.2d 53 (La.App.1980) (health and accident insurance
policy in which employer is insured, providing for benefits
in the event of employee work-related injury to be paid to
employer or persons furnishing services to employee, is not
stipulation pour autrui in favor of employee injured on job).
Even when the payments may be directly to the third par-
ty, but require the claim of the promisee, a stipulation pour
autrui has not been found. Logan v. Hollier, 424 So.2d
1279, 1282 (La.App.1982); Logan v. Hollier, 699 F.2d 758,
759 (5th Cir.1983) (per curiam).
A-77
The Louisiana approach appears to be consistent
with the general common law rule in this regard, which
would plainly consider the NOPSI-United agreement not to
be a third-party beneficiary contract.34
“34 See 4 Corbin on Contracts § 779D at 45-46 (1951):
“Jin any case where A is under a contractual duty to C the
performance of which requires labor or materials, and B pro-
mises A to supply to him such labor or material; C has no ac-
tion against B on this promise. In such cases the perfor-
mance promised by B does not in itself discharge A's duty
to C or in any other way affect the legal relations of C. It
may, indeed, tend toward C's getting what A owes him, since
it supplies A with the money or material that will erable A
to perform, but such a result requires the intervening volun-
tary action of A. B's performance may take place in full
without C’s ever getting any performance by A or receiving
any benefit whatever. In such cases, therefore, C is called an
‘incidental’ beneficiary and is held to have no right. It would
be possible for A to make his contract with B in such terms
as to show that A was making it for C's benefit and intended
C to have an enforceable right. C would be a donee of the
right though not of the promised performance. But in fact
such contracts are never so worded.’ (Footnotes omitted.)
Louisiana appears to follow this rule. See Police Jury v. Alexan-
dria Gravel Co., 146 La. 1, 83 So. 316, 217 (1919). See also Allen & Currey
Mfg. Co. v. Shreveport Waterworks Co., 113 La. 1091, 37 So. 980, 986
(1905):
‘The materials and labor contracted for by the builder who
is constructing a house for me under contract are intended
to be used on my house for my benefit, but the contracts for
this labor and these materials are not for that reason my con-
tracts, and I have not an action thereon.”
The minority common law view to the contrary, see CF Industries v.
Transcontinental Gas Pipe Line Corp. 448 F.Supp. 475, 481-82
(W.D.N.C.1978) (applying North Carolina law and relying on Gorrell v.
Greensboro Water Supply Co., 124 N.C. 328, 32 S.E. 720 (1899)), appears
to have been specifically rejected by the Louisiana Supreme Court in
Allen & Currey Mfg. Co., 37 So. at 988 (rejecting Gorrell and related
cases).
A-78
Finally, we note that under Louisiana law a stipula-
tion pour autrui cannot be altered to the disadvantage of
the third-party beneficiary without his consent. See note
31, supra. The price of Power Plant Gas sold under the 1952
agreement was increased on at least two occasions (in 1965
and 1975), and the 1975 agreement maximum price was in-
creased in August 1978 and again in November 1978, all
apparently without any third-party permission. We think it
highly unlikely that either NOPSI or United would have in-
tended to disable themselves from amending such vital pro-
visions of their contract without the consent of third par-
ties. The City of New Orleans had no such regulatory
power, nor did any other public body. Had the parties in-
tended to confer such a benefit on the City or its officials
such “‘would most indubitably have been made the subject
of an express clause.’’ Cf. Allen & Currey Mfg. Co. v.
Shreveport Waterworks Co., 113 La. 1091, 37 So. 980, 988
(1905).
For the foregoing reasons, we hold that. the NOPSI-
United agreement is not a stipulation pour autrui, and that
accordingly the City officials are not third-party
beneficiaries.
Conclusion, Intervention of Right
As the NOPSI-United contract is not a stipulation
pour autrui and as the City officials assert no other basis
for a legally protectabie interest or for possession of the
substantive legal right—enforceinent of the contract—
which they seek to assert by intervention, their entitlement
to intervene under Rule 24(a)(2) rests only on an economic
interest. As we have noted, this alone is not sufficient.
The City and is officials do have an economic interest
A-79
in, for example, a holding that the escalation clause in the
contract is too indefinite and that NOPSI did not validly
agree to United’s May 3 price increase. Though the City
(and, later, the Public Service Commission) was not legally
required to automatically allow NOPSI to currently pass
through its thus increased costs (see note 19, supra), had
NOPSI been unable to recover these costs through higher
rates its financial position might in time have become so
impaired as to increase its cost of capital or force it out of
business, with higher electric rates or other equally severe
economic harm to the City being the ultimate result in any
event. This consideration was noted by the panel. 690 F.2d
at 1208-09. However, such economic harm is not materially
different than that which would have ensued if, for exam-
ple, the May 3 price had been specified in the November
1978 agreement, as NOPSI and United clearly had the
right to do without City approval. The risk of economic
harm to the City essentially arises from the regulatory
‘‘gap’’ which generally leaves NOPSI free to contract as it
wishes for is boiler fuel, subject only to the constraints of
regulation over other aspects of its business, principally its
electric rates. This leaves the City at risk of NOPSI’s pay-
ing or agreeing to pay ‘‘too much’”’ for boiler fuel. The
reason that risk poses some economic danger is that
utilities must generally either recover their costs (plus a
profit) through their rates or eventually go out of business.
Boiler fue! costs are not unique in this respect. Power plant
and line construction and repair costs must equally be thus
recovered, as well as other costs, including those arising
from liability to third parties for personal injury or proper-
ty damage in accidents, insurance costs and costs of raising
capital. So long as the utility’s operation of its business in
these fields is not controlled by relevant regulation, the ci-
ty which the utility serves is economically at some risk in
respect to the utility’s actions in these areas. But that fact
A-80
does not entitle the city’s officials to intervention under
rule 24(a)(2) in every personal injury, plant construction or
maintenance contract or bond underwriting suit involving
the utility and a third party, even though the increased
costs which the utility has incurred, or will incur or fail to
recoup if the litigation goes against it, have been or will
necessarily ultimately be reflected in increased local utility
rates,35
We accordingly hold that the City officials were pro-
perly denied intervention as of right because they lacked
the character of interest required by Rule 24(a)(2).
Permissive Intervention
The district court also denied the City officials per-
missive intervention under Rule 24(b)(2).36 Permissive
9° Of course, as we have observed, a different question might be
presented if the third-party suit involved some public statutory prohibi-
tion of general application, such as, for example, violation of the an-
titrust laws, cf. Hanover Shoe v. United Shoe Mach. Corp., 392 U.S. 481,
494, 88 S.Ct. 2224, 2232, 20 L.Ed.2d 1231 (1968) (suggesting that an
overcharged buyer under “‘a pre-existing ‘cost-plus’ contract” might
have an action against those who increased his seller's costs in violation
of the antitrust laws), or of a statute which limited the charges that
could be made to a utility for fuel or required their prior regulatory ap-
proval or the like. Naturally, we do not speak to such questions, the
answers to which would involve analysis of the particular statutory pro-
hibitions in issue.
36 Rule 24(b) provides:
‘(b) Permissive Intervention. Upon timely application
anyone may be permitted to intervene in an action: (1) when
a statute of tle United States confers a conditional right to
intervene; or (2) when an applicant's claim or defense and the
main action have a question of law or fact in common. When
a party to an action relies for ground of claim or defense
upon any statute or executive order administered by a
federal or state governmental officer or agency or upon any
A-81
intervention ‘“‘is wholly discretionary with the [district]
court...even though there is a common question of law or
fact, or the requirements of Rule 24(b) are otherwise
satisfied.’”” Wright & Miller, Federal Practice and Pro-
cedure: Civil § 1913 at 551. Accordingly, when we are asked
to review a denial of permissive intervention, the question
on appeal is not whether “‘the factors which render per-
missive intervention appropriate under Federal Rule of
Civil Procedure 24(b) were present,”’ but is rather ‘‘whether
the trial court committed a clear abuse of discretion in de-
nying the motion.” Korioth v. Briscoe, 523 F.2d 1271, 1278
(5th Cir.1975). See also, e.g., Athens Lumber Co., Inc. v.
Federal Election Comm'n, 690 F.2d 1364, 1367 (11th
Cir.1982) (‘‘may be reviewed only for a clear abuse of discre-
tion’’); United States Postal Service v. Brennan, 579 F.2d
188, 192 (2d Cir.1978) (‘‘the decision of the trial court may
only be disturbed for clear abuse of discretion....The trial
court’s discretion is very broad...’’); May v. Commissioner
of Internal Revenue, 553 F.2d 1207, 1208 (9th Cir.1977) (per
curiam) (“‘appealable only where there is a clear abuse of
discretion’’).°’ We adhere to this standard of review, which
(Footnote 36 continued)
regulation, order, requirement or agreement issued or made
pursuant to the statute or executive order, the officer or
agency upon timely application may be permitted to interene
in the action. In exercising its discretion the court shall con-
sider whether the intervention will unduly delay or prejudice
the adjudication of the rights of the original parties.”’
It is undisputed that clause (1) is wholly inapplicable here. Likewise the
second sentence of the rule is inapplicable, particularly after the transfer
of regulatory jurisdiction to the Louisiana Public Service Commission.
37 The references to “clear” abuse stem from Allen Calculators,
Inc. v. National Cash Reg. Co., 322 U.S. 137, 142, 64 S.Ct. 905, 908, 88
L.Ed. 1188 (1944), where the Court stated concerning denial of per-
missive intervention, “{t]he exercise of discretion in a matter of this sort
is not reviewable by an appellate court unless clear abuse is shown....”’
A-82
is indeed most restrictive. Able counsel have called atten-
tion to no prior decision of this court reversing a denial of
permissive intervention solely because the district court
abused its discretion. Indeed, such a decision by any
federal appellate court is so unusual as to be almost
unique.°8 We find no such extraordinary circumstances
here as would justify our determining that the district
court clearly abused its discretion.
In reversing the district court’s denial of permissive
intervention to the City officials, the panel on original sub-
mission stressed the City’s rate regulatory authority over
NOPSI (unaware of the transfer of that authority to the
Public Service Commission), stating that ‘‘the government
rate regulators will need to determine [presumably in NOP-
SI rate proceedings] the reasonableness of any recovery [by
NOPSI] and the method of any refund to consumers”’: that
the “City Council’s intervention...nierely accelerates the
public sector review of claims that eventually will require
public scrutiny in any event’ and ‘will minimize any
future protests that consumers otherwise might have
against the City Council for failure to carry out its
38 in United States Postal Service v. Brennan, 579 F.2d 188, 192
(2d Cir.1978), the second circuit remarked, ‘‘...we have not found a single
case in which a denial of permissive intervention under Rule 24(b) was
reversed solely for an abuse of discretion. We see no reason to start with
this case.” In Korioth v. Briscoe, 523 F.2d 1271, 1278 n. 24 (5th
Cir.1975), this court, in declining to reverse a denial of requested per-
missive intervention, quoted the following from Wright & Miller,
Federal Practice and Procedure: Civil § 1923 at 631-32: ‘‘...there ap-
parently is not a single case in which an appellate court has reversed
solely because of an abuse of discretion in denying permissive interven-
tion.’ However, the 1983 pocket part to the referenced text states (sec-
tion 1923 at 413): “‘There now appears one case in which the appellate
court has reversed soiely because of an abuse of discretion in denying
permissive intervention.” The decision cited is Crumble v. Blumthal, 549
F.2d 462, 468-69 (7th Cir.1977). In Crumble the seventh circuit applied
an ‘‘abuse of discretion” standard, but did not speak of ‘‘clear’’ abuse.
A-83
governmental regulatory responsibilities’; and, that per-
missive intervention should have been allowed ‘‘by the
government authorities with rate regulatory respon-
sibilities affecting both the underlying dispute and an ex-
isting party to the suit.” 690 F.2d at 1210. Whatever the
strength of these considerations in the context of the
assumptions on which they rested,29 they are wholly inap-
plicable in view of the transfer of all the City’s rate and
other relevant regulatory authority to the Public Service
Commission, which has not sought intervention.
In acting on a request for permissive intervention, it
is proper to consider, among other things, ‘whether the in-
tervenors’ interests are adequately represented by other
parties’ and whether they ‘‘will significantly contribute to
full development of the underlying factual issues in the
suit.’’ See Spangler v. Pasadena City Bd. of Ed., 552 F.2d
1326, 1329 (9th Cir.1977); United States Postal Service v.
Brennan, 579 F.2d 188, 191-92 (2d Cir.1978).4° See also
Hoots v. Commonwealth, 672 F.2d 1133, 1136 (3d Cir.1982)
(adequacy of representation).
In the present case, both the City officials and NOP-
SI seek exactly the same relief, on exactly the same
grounds, from and as against United. There is neither in-
dication nor assertion that NOPSI has been or will be in
39 In their respective submissions to the panel, neither United nor
the applicants for interventior ‘who had not. focused on the City’s posi-
tion) had made it apparent that the City’s regulatory authority had been
transferred to the Public Service Commission.
40 Other factors mentioned include the ‘nature and extent of in-
tervenors’ interest,” Spangler; Brennan, and “their standing to raise
relevant legal issues.” Spengler. Here, though there is a real economic
interest, the interest is not a legally protectable one, and the City of-
ficials do not have standing to raise relevant legal issues.
A-84
any way remiss or inadequate in pursuing these claims
against United, or that there is any character of collusion
between NOPSI and United.4! Under these circumstances,
NOPSI’s representation is presumed to be adequate. Ord-
nance Container Corp. v. Sperry Rand Corp., 478 F.2d 844,
845-46 (5th Cir. 1973); International Tank Terminals, Ltd.
uv. M/V Acadia Forest, 579 F.2d 964, 967-68 (5th Cir.1978):
Martin v. Kalvar Corp., 411 F.2d 552, 553 (5th Cir.1969). In
Commonwealth of Virginia v. Westinghouse Elec. Corp.,
542 F.2d 214 (4th Cir. 1976), the court considered the ap-
piication of the Commonwealth of Virginia to intervene as
plaintiff in a suit by an electric utility serving the state
against its supplier of nuclear fuel for breach of the supply
contract. The fourth circuit held the denial of intervention
was proper since there was no showing that the utility,
which had the same ultimate objective as the state (enforc-
ing the contract), was in collusion with its supplier or had
inadequately pressed its suit. It was hence deemed an
41 NOPSI has ample incentive to vigorously pursue this litiga-
tion. It has no assurance that, should it lose, it will be allowed to “pass
through”’ the (or all of the) higher costs. See South Cent. Bell Tel. v.
Louisiana Pub. Serv. Comm'n, 373 So.2d 478, 484 (La.1979) (recognizing
‘‘the Commission’s authority to regulate the industry as an efficient
enterprise, rather than as a luxurious one...”); Baton Rouge Water
Works Co. v. Louisiana Pub. Serv. Comm'n, 342 So.2d 609 (La.), cert.
denied, 434 U.S. 827, 98 S.Ct. 105, 54 L.Ed.2d 86 (1977) (broad discre-
tion of Public Service Commission in fixing rate of return); LSA-R.S.
45:1176 (Public Service Commission’s power to “investigate the
reasonableness and justness of all contracts, agreements and charges
entered into or paid by”’ public utilities subject to its regulatory power
to fix ‘‘just and reasonable rates’’). Moreover, higher charges by NOPSI
for electricity will tend to reduce NOPSI's electric sales (without in-
creasing its unit margin, if the charges only relate to increased costs and
include no profit or overhead element). These are exactly the same incen-
tives as those which are deemed adequate to allow a utility to make its
own decisions in such matters as purchasing fuel, plant construction and
the like. There is no reason to suppose they are less adequate here.
A-85
adequate representative. 42 Commonwealth of Virginia was
cited with approval on that point by this court in Jnterna-
tional Tank Terminals, Ltd., 579 F.2d at 967. The same
result was reached in the analogous case of Florida Power
& Light Co. v. Belcher Oil Co., 82 F.R.D. 78, 81 (S.D.Fla.
1979) (electric utility customers denied intervention sought
under Rules 24(a) and (b) in utility’s suit against fuel oil
supplier for overcharges; utility held to be adequate
representative).
Moreover, the City officials advance no basis for or
theory of recovery against United not advanced by NOPSI,
and there is no suggestion that the City officials intend to
make any contribution to development of the relevant facts
in the suit which NOPSI will not make, or that the officials
are in any respect in a better position to dw so than NOPSI.
The effect on the existing parties is also to be con-
sidered. When the intervention is for all purposes with full
party rights—and that is all that was sought below or has
been urged on appeal—the control of the original parties
over their own lawsuit is significantly diminished, at least
where, as here, an essentially single, indivisible claim forms
the only subject matter of the suit. See Wright & Miller,
Federal Practice and Procedure: Civil § 1920 at 611
(‘Unless conditions have been imposed, the intervenor is
treated as if he were an original party and has equal stan-
ding with the original parties.’’). NOPSI and United clearly
42 Adequate representation was the only ground considered by
the appellate court. Though the court was reviewing denial of interven-
tion sought under Rule 24(a)(2), it did so under an abuse of discretion
standard. See 542 F.2d at 216 (‘The test on review is whether the
district judge abused his discretion in denying the motion for
intervention.”’).
A-86
had the power to settle their differences without the per-
mission of the City officials, if suit had not been filed. Yet.
if the City officials are granted the intervention they seek
they could prevent any settlement between NOPSI and
United, or prevent those parties from simply accepting a
judgment of the district court by allowing it to become
final without appeal. Where the intervenors do not have a
legally protectable interest, are adequately represented by
an existing party and will not add to the relevant factual
development of the case, the position of amicus may be con-
sidered more appropriate than an intervention with full
party status, if, as here, such intervention may materially
diminish the original parties’ rights. Cf. Brewer v. Republic
Steel Corp., 513 F.2d 1222, 1225 (6th Cir.1975); Piedmont
Paper Products v. American Financia! Corp., 89 F.R.D. 41,
44-45 (S.D. Ohio 1980).
We are unable to find that the district court clearly
abused its discretion in denying the City officials per-
missive intervention, and we accordingly dismiss the ap-
peal in that respect. Woolen v. Surtran Taxicabs, Inc., 684
F.2d 324 (5th Cir.1982).
CONCLUSION
We hold that |the City officials are not entitled to in-
tervene as of right/under Rule 24(a), and that the district
court did not clearly abuse is discretion in denying them
permissive intervention under Rule 24(b). As previously
noted, the panel ruled that the rate payers were not entitled
to intervention as of right and that the district court did
not abuse its discretion in denying them permissive in-
tervention. Those rulings as to the rate payers are correct,
for under the circumstances here the legal principles set out
in this en banc opinion respecting the City officials are also
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fully applicable to the rate payers, and we so hold. According-
ly, the district court’s judgment is affirmed insofar as it
denied intervention of right; in all other respects, the appeal
is dismissed.
AFFIRMED IN PART; DISMISSED IN PART.
JERRE S. WILLIAMS, Circuit Judge, with whom
GOLDBERG, ALVIN B. RUBIN, TATE and JOHNSON,
Circuit Judges, join, dissenting:
This is not just a little breach of contract case between
two corporations. This litigation will inescapably decide how
much the citizens of the City of New Orleans will pay their
enfranchised monopoly, New Orleans Public Service, Inc., for
their electric power. Because the majority of the Court holds
it is no abuse of discretion to deny the Mayor and City Coun-
cil of New Orleans participation in this lawsuit although it
is vital to the well being of the city’s citizens, I find it
necessary to dissent. The majority holding strikes a serious
blow against the heralded modern development in law pro-
tecting the rights of consumers by allowing them to par-
ticipate in administrative and judicial decisions for which
they ultimately pay the full price out of their own pockets.
The majority opinion presents the factual posture of
this case with commendable thoroughness. Further, I am in
full agreement of that carefully reasoned portion of the opi-
nion which holds that the Mayor and City Council of New
Orleans, are not entitled to intervention as a matter of right.
When the city yielded its ratemaking functions to the state
Public Utilities Commission, see opinion for the Court note
19, it yielded is claim to compulsory intervention in this case.
The panel so held. 694 F.2d 412 (5th Cir.1982).
A-88
I accept the proposition set out in the opinion for the
Court that it is unusual to upset a denial of permissive in-
tervention by the district court. But that is no justification
for abdicating the power of review we are charged to exer-
cise. A denial of permissive intervention is subject to our
review on the claim that the district court abused its discre-
tion. Further, I concede that the standard to be applied is
one of ‘‘clear abuse’. Allen Calculators, Inc. v. National
Cash Register Co., 322 U.S. 137, 142, 64 S.Ct. 905, 908, 88
L.Ed. 1188 (1944); Korioth v. Briscoe, 523 F.2d 1271, 1278
(5th Cir.1975); but c.f, Crumble v. Blumthal, 549 F.2d 462,
468 (7th Cir.1977). If there is yet a dearth of decisional law
on what constitutes a ‘‘clear abuse of discretion’’ as to an
issue of permissive intervention, it is time that some be
made. This is a superb case in which to do it.
In presenting this dissent, I rely largely upon the
consideration of this issue found in the panel decision of the
Court, New Orleans Public Service, Inc. v. United Gas Pipe
Line Co., 690 F.2d 1203, 1209 (1982). I add by way of em-
phasis only a brief analysis to reemphasize why the failure
to allow the Mayor and the City Council to intervene was
a clear abuse of discretion by the district court.
The controlling rule is Fed.R.Civ.P. 24(b). The
negative aspect of the rule admonishes the Court in exercis-
ing its discretion to ‘‘consider whether the intervention will
unduly delay or prejudice the adjudication of the rights of
the original parties.”’ There is no showing in this case that
allowing the Mayor and City Council to intervene would
create substantial prejudice to the parties. The panel opi-
nion recognized that creating a large class of consumers
and allowing them to intervene would bring about a level
of interference which would bring the stated negative con-
cern clearly into play. And that is why the panel refused to
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find an abuse of discretion in the failure to certify a class
of consumers.
Allowing the city through its governing body to in-
tervene is a wholly different matter. The Mayor and City
Council of New Orleans are the elected representatives of
the people of New Orleans. They can properly serve as the
representatives of the consumers in New Orleans without
unduly complicating the judicial proceedings. The interests
of the citizens of New Orleans in this case, acting through
their elected representatives, should not be brushed aside.
Only by ignoring the realities of the situation can inex-
orable and insensitive logic lead to the denial of interven-
tion in this case.
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