Opposition Brief — Jupiter Corp. v. Federal Power Commission

4

When the matter was brought to the Commission’s

attention by Phillips-Kerr-McGee (J.A. 329), the Com-

mission, in its Order of ‘April 3, 1968 (Pet. App. 1a,

J.A. 373), rejected petitioner’s argument and ordered

payment by it at the 18.5 cent per Mef rate set by the -

Commission in 1965. Petitioner’s petition for rehear-

ing of that Order (J.A. 394) was denied by the Com-.

mission’s Order of May 24, 1968 (Pet. App. I4a, J.A.

419), which repeated that petitioner was obligated to ,

restrict itself to a margin of 1 cent per Mef.- _

Petitioner still refused to comply with the Commis-. -

sion’s Orders.” The matter was again brought to the

Commission’s attention (J.A. 423, 431), and the Com-

mission then issued its Order of December | 13, 1968.

(Pet. App. 19a, J.A. 441).

In this Order the Commission again reviewed the. *

history of this case (Pet. App. 19a-22a, J.A. 441-44),

noted the Commission’s prior rejection of petitioner’s —

arguments but that petitioner continued to ignore the

Commission’s Orders requiring payment of 18.5 cents

per Mef to Phillips-Kerr-MeGee even though no stay

of ‘these Orders had been sought by petitioner (Pet.

App. 29a-23a, J.A. 444-45), entered the formal finding

that ‘The Jupiter Corporation has flouted the terms

of the Commission’s order of April 3, 1968” (Pet. App! ,

‘O8a, J. A. 450), and concluded that, in order for the

* Petitioner filed its petition to review the Commission’s April -

3 and May 24 Orders on July 23, 1968. Despite the express pro-

vision in §19(¢) of the Natural Gas Act, 15 U.S.C. § 717r¢e), that

the commencement of review proceedings ‘‘shall not, unless spe-

cifically ordered by the court, operate as a stay of the Commis-

sion’s order,”’ petitioner, without even seeking a stay) simply re-

fused to comply with the Commission’s April 3 and May 24 Orders.

It was only after the issuance of the December 13 Order that

petitioner sought a stay, which was denied by the court of sh oneas :

on February 6, 1969.

5

integrity of that Order to be maintained, it would have

to take action directed to Tennessee as well as peti-

tioner. (Pet. App. 23a, J.A. 445). The Commission

then, in formal ordering paragraphs, reaffirmed peti-

tioner’s preexisting obligation to pay Phillips-Kerr-

McGee at the 18.5 cent per Mef rate and ordered that

in the future, in light of petitioner’s intransigence,

‘Tennessee was to pay 18.5 cents per Mef directly to

Phillips-Kerr-McGee on petitioner’s account. (Pet.

App. 29a-30a, J.A. 450-51). Petitioner’s contentions

as to the invalidity of the December 13 Order were re-

jected by the Commission’s Order of January 22, 1969,

denying rehearing. ( Pet. App. 34a, J.A. 455).

The court of appeals affirmed all of the Commis-

sion’s Orders. It found that the 18.5 cent per Mef

rate, about which petitioner was complaining, was

valid and did not violate the rule of the Mobile case

(United Gas Pipeline Co. vy. Mobile Gas Service Corp.,

850 U.S. 332 (1956) ), as contended by petitioner. The

enforcement Order of December 13, 1968, the court

held, was authorized by Section 16 of the Natural Gas —

. Act, 15 U.S.C. §7170—which empowers the Commis-

sion to issue such orders ‘tas it may find necessary or

appropriate to carry out the provisions’? of the Aet—

in light of the long history of petitioner’s refusal to

comply with final and effective Commission Orders,

ARGUMENT

The Commission has been struggling since 1962,

when it instituted its investigation of petitioner's 5 rates

(see J.A. 283), effectively to regulate petitioner under

the Natural Gas Act. Sinee 1962 the Commission,

‘time and time again, has considered and rejected peti-

tioner’s arguments that its ‘‘spread”’ is beyond Com-

mission control and that petitioner cannot lawfully be

i ee

required to pay Phillips-Kerr-McGee at an 18.5 cent

per Mef rate. The court of appeals, in a very careful

and detailed opinion, considered and rejected all of peti-

tioner’s claims and upheld the Commission. Further

review by this Court is not warranted.

This case involves no important or novel legal prin-

ciples. It raises no issues that are of substantial sig-

nificance beyond the confines of this case. It presents

a unique factual situation that is unlikely to be re-

peated. The court of appeals decision does not con-

flict with any decision of any other court of appeals

and, contrary to petitioner’s argument, the decision

below presents no conflict with any prior decision of

this Court.

Petitioner, in seeking the intervention of this Court,

asserts (a) that the court of appeals erred in deciding

whether the contract between petitioner and Phillips-

Kerr-McGee called for payment by petitioner at less

than the 18.5 cent per Mcf rate set by the Commission

because, petitioner claims, this issue had not been de-

cided by the Commission and (b) that the Commis-

sion’s Order of December 13, 1968, violated Section |

19(a) of the Natural Gas Act, 15 U.S.C. § 717r(a);-

and the filed rate doctrine,and constituted a deprivation.

of petitioner’s property without due process of law.

There is no merit in either contention.

1. Throughout this proeceeding—both before the

Commission and in the court of appeals—petitioner

has argued, invoking United Gas Pipeline Co. v. Mobile °

Gas Service Corp., 350 U.S. 332 (1956), that it may

not be required to pay at the 18.5 cent per Mef rate

set by the Commission because, it claims, its contract

provides for payment at a lesser rate. (E.y., Pet.

App. 52a-53a). Its argument has been that its con-

th ae A cei a cal at Ne flee caal OO te ES

7

tractual ‘‘spread’’ of 2.4 cents per Mef cannot be regu-

lated by the Commission, in light of Mobile, because

any reduction ordered by the Commission in the amount

petitioner receives from Tennessee necessarily reduces,

by the same amount, the price it is contractually obli-

gated to pay Phillips-Kerr-McGee.

Contrary to petitioner’s current assertion, the aed

is clear that this argument was considered and rejected

by the Commission and, therefore, that there was no

bar to the court’s consideration of this issue. <As the

court of appeals noted (Pet. App. B3a), the Hearing

Examiner in the proceeding leading to the Commis-

sion’s 1966 rate Order, reviewed the underiying con-

tracts and determined that the contracts, properly in-

terpreted, did not support petitioner’s claim. (J.A.

202-06).* As the court of appeals further noted (Pet.

App. 56a-57a), petitioner thereafter conceded, in its

settlement proposals, that reformation of its contract

would be required in order for it to recover any

amounts from Phillips-Kerr-MecGee, in addition to the

‘‘spread”’ ordered by the Commission, as payment for

the asserted nonjurisdictional services performed by |

petitioner. (J.A. 235-36, 242). .

In its Order of April 3, the Commission, as peti-

tioner points out (Pet., pp. 8-9), acknowledged that it

would not resolve the contractual issue between the

parties as to whether petitioner was entitled to any

compensation for its asserted nonjurisdictional sery-

ices. The record is clear, however, that this reference

is only. to petitioner’s contract reformation claim and

* On the merits, the court upheld the Examiner’s reading of thé

underlying contracts, which were included in the administrative

record certified to the court of appeals and relevant portions of

which were included*by thé parties in the Joint Appendix béfore

the court of appeals., (See J.A. 12-26).

: Aes gk o

8

that the Commission rejected on the merits petitioner’s

argument that its contract prevented the regulation of

its *tspread.’? As the court of appeals stated:

** {T]he Commission has conceded nothing but the

possibility that Jupiter [petitioner] has an equi-

table claim, disputed by PKM_ [Phillips-Kerr-

McGee], for the reformation of its contract to re-

quire payment by PKM for nonjurisdictional serv-

ices now that their cost is no longer being absorbed

in an excessive charge to Tennessee. The Commis-

sion has never conceded that Jupiter is entitled un-

der the contract as written to recoup any reductions

in the spread chargeable to Tennessee from PKM.

Indeed, the Commission scarcely had reason or

occasion to do so. Jupiter’s contractual argument

was rejected by the examiner in the rate proceed-

ings, and its settlement proposals stated in bold-

faced type that reformation of its contract was

required to enable it to collect payment for con-

densate services. Jupiter-paid the 18.5 cent rate

for nearly a year before filing its suit, based on

its present theory of the contract, in the Cook

County Court. When Jupiter finally made its

position on, the. contract somewhat more explicit

in its petition for rehearing of the April 3 Order,

the Commission rejected it in the opinign denying

rehearing.” (Pet. App. 56a-57a, emphasis in

original). 7

Petitioner’s claim that the Commission did not re-

solve the basic contractual issue is further belied by

the December 13 Order, where the Commission stated:

“{L]f Jupiter were entitled to reformation of its

contract with Phillips-Kerr-MeGee in order to

establish some payinent for the remaining minor

nonjurisdictional services it performed for, Phil-

lips-Kerr-McGee, that reformation would have to

be done in a court of equity, outside the scope of

the contract on file with us as a rate schedule.”’

(Pet. App. 22a, J.A. 444).

9

Again, the Commission’s January 22 Order expressly

rejected petitioner’s contractual argument: —

‘“Jupiter’s argument as to the Commission’s

power to control the ‘spread’ charged under its

contract is the same argument which Jupiter,has

made, unsuccessfully, several times before. We

need go no further than to point out, again, that

the contract between Jupiter and Phillips-Kerr-

McGee is on file with this Commission,as the con-

tractual support’ for Phillips-Kerr-MeGee’s rate

schedule covering the sale of natural gas to Jupiter

and is subject to our jurisdiction as such. - Jupiter

may not evade its obligation to pay the filed rate by

offsetting other contract claims against such juris-

dictional rates.’’ (Pet. App. 36a, J.A. 457).

In short, contrary to petitioner’s current assertion,

the Commission explicitly held that it had reviewed

the contract between the parties and again rejected

petitioner’s Mobile argument that the contract pre-

vented regulation of petitioner’s ‘“‘spread.’’, The only

‘contract dispute’’ (Pet., p. 8) that the Commission

did not decide was whether contract reformation might

give petitioner some claim for compensation for ‘‘minor

nonjurisdictional services’? (Pet. App. 22a, J.A. 444),

an issue not presented in these proceedings and plainly '

left open by the court of appeals. (Pet. App. 63a).

Finally, it must be pointed out that thg—court of

appeals did not dee¢ide the Mobile ae la sponte.”

5FPC vy. Colorado Interstate Gas Co., 348 U.S. 492 (1955), is

of no help to petitioner. That-case holds that the Commission may

not be reversed on the basis. of an objection that had’ not been

urged before the Commission in an application for rehearing. The

teaching of that case, if at all relevant here, would be to preclude

petitioner from raising the Mobile issue in the court of appeals

‘in seeking to reverse the Commission, and to permit the court to

affirm the Commission without even reaching the issue. Cclorado

Interstate does not preclude affirmance of the Commission on any

ground that has record support, which the Commission’s and the

court’s contract interpretation clearly has.

10

This issue was specifically raised by petitioner, which

now—after the court of appeals has rejected its argu-

ment—incredibly takes the position ‘that the court

should not have decided the very issue that petitioner

invited it to decide. Having played -with fire, how-

ever, petitioner cannot now complain that it has been

burned.

. (a) Petitioner’s claim that the Commission’s De-

cember 13 Order constituted a modification of its prior

Orders, in violation of Section 19(a) of the Natural!

Gas Act, was properly rejected by the court of appea's

(Pet. App. 58a-59a), and we will not burden. this Court

with any further argument on this point.

(b). Petitioner’s claim that the December 13 Order

violated the filed rate doctrine was apparently viewed

by the court of appeals as so lacking in merit as not

even to warrant discussion. The fact is that that Order

does not change the parties’ basie contractual rights

and duties. The amount of petitioner’s ‘‘spread’’ is

not affected. The Order simply alters the method and

manner .of payfnent, not the rates themselves. In

fact, not only was there no violation of the filed rate

doctrine, but adoption of the Order was necessitated

by the doctrine—to require compliance by petitioner

with thé Commission- -approved filed rate applicable to

the sale of natural gas to petitioner.

(c) Finally, there is absolutely no“basis for peti-

tioner’s attempt to invoke the due process clause. The

most that due process can require iS that a person

subject to regulation by an agency be given the oppor-

tunity to seek judicial protection against unlawful and

arbitrary agency actien. The Natural Gas Act af-

forded petitioner this opportunity, petitioner in fact

il

sought judicial relief from the Commission’s action,

and the court determined

that petitioner was not en-

titled to any relief. The due process clause was plainly

satisfied, an@ none of ‘the

to the contrary.

cases cited by petitioner is

CONCLUSION

For the foregoing reasons, the petition for writ of

certiorari should be denied.

Boe

Respectfully submitted, ©

Of Counsel:

CovINGTON & BuRLING

888 Sixteenth Street, N. W.

Washington, D. C. 20006

Howarp C. WESTWoop

HERBERT DYM~ ~

888 Sixteenth Street, N. W.

Washington, D. C. 20006

Attorneys for

Phillips Petroleum Company .

and Kerr-McGee Corporation

KENNETH HEADY

JOHN R. REBMAN

Phillips Petroleum Company

Bartlesville, Oklahoma 74003

Attorneys for

Phillips Petroleum Company

WILLARD P. Scorr

DERRILL Copy

Kerr-McGee Corporation

Kerr-McGee Building

Oklahoma City, Oklahoma 73102

Attorneys for

?

, Kerr-McGee Corporation

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