Brief for Respondent — Shell Oil Co. v. Federal Power Commission (No. 399)

ee

IN THE

Supreme Court of the nitey States

“ee en " (Gthce-tunrece Court, U.S

fhe ct. Fs FILED

——

Octroper Tern, 1961.

No. 399.

SHELL OIL COMPANY,

Petitioner,

r,

FEDERAL POWER COMMISSION, TEXAS GAS TRANS-

MISSION CORPORATION and LOUISVILLE GAS

& ELECTRIC COMPANY,

Respondents.

ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE THIRD CIRCUTT.

BRIEF OF TEXAS GAS TRANSMISSION CORPO-

RATION AND LOUISVILLE GAS & ELECTRIC

COM?ANY IN OPPOSITION TO PETITION FOR

WRIT OF CERTIORARI.

Matnias F. Correa,

x0 Pine Street,

New York 5. New York,

Counsel for Teras Gas Trans-

misston Corporation.

Gavin H. Cocuran,

713-723 Kentucky Home Life Building,

Louisville 2. Kentucky,

Counsel for Lowsville Gas

& Elective Company.

Artuur L. Corsin,

Yale Station.

New Haven, Connecticut,

CHARLES F. DETMAR. JR.,

IMMANUEL Kony,

S80 Pine Street,

New York 5, New York,

Of Counsel.

Yetober 11, 1961

Oprxions BeLow

JURISDICTION

QvuEsTIONS PRESENTED

STATEMENT OF THE CASE

TABLE OF CONTENTS.

Pewee cece cee eres esecccer sees s ee eseseesenrecccceece

ARGUMENT:

I.

IIT,

ConcLusion

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Because this case presents no question of gen-

eral importance, Petitioner misstates the

decision below and asks this Court to pass

upon a specious issue

Assuming Louisiana law governs, the court

below correctly applied that law to the issue

nee

Shell’s request that this ease be held in abey-

ance pending a decision (if any) in an action

in a Louisiana Court commenced by Shell

after the decision below+is wholly without

Nec et a ees |

Even if the court below erred as to Louisiana

law, Louisiana law is in any event not govern-

ing on the issue of enforteability

PAGE

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9

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13

15

3

TABLE OF AUTHORITIES.

CASES.

American Houses v. Schneider, 211 F. 2d 881 (3d

Cir. 1954) .......... PsP UNAS ee ls 7 res lea ICE OP RE a

Bank of America v. Parnell, 352 U.S. 29................0

Barber Asphalt Paving Co, v. St. Louis Cypress

Company, 121 La, 142, 46 So. 193 (1908)................

Campbell Soup Co. v. Wentz, 172: F. 2d 80 (3d Cir.

REAR een Rentrree eee een rip SER Re on RMON =

Clearfield Trust Co. v. United States, 318 U.S. 363

Stephen L. Guice & Co. v. Perkowski, 12 So. 2d 692

SR RII, sais rmeeexssacecasscin caine stvenaanncsncepennidandcalhil

Hamilton Co, v. Medical Arts Bldg. Co., 135 So. 94

AS ee. 2 RU aD Seetrameaen enero ate ame ver en erenTee

Kentucky River Mills v. Jackson, 206 F. 2d 111 (6th

Cir. 1953), cert. denied, 346 U.S. 887.......................

Lake v. LeJeune, 226 Ta. 48, 74 So. 2d 899 (1954)...

Moore v. Burdine, 174 So. 279 (La. App. 1937)........

Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672

Praaet 6. CONGR, re Wx TR Be aescestieis sn tcceeansemencareenes

Tenney Engineering, Inc. v. United Electrical Work-

ere, 200 ©. 2a Sa0 CE City. TOS} oon nnn ns...

Thompson v. Magnolia, 309 U.S. 478..................-..000-

Union Tank Car Co. y. Louisiana Oil Refining Corp.,

R76 Tim, SAD, BGS Boek, DEE CTD a csiisesn ssn ceceicnnaccnsvases

United States v. County of Allegheny, 322 U.S. 174

STATUTEs.

G2 Bint. Fas, SOU Bh . SER sess aes cocci erenioncs

Federal Arbitration Act, 9 U. S. C. §$1 et seq.........

Natural Gas Act, 15 U.S. C. §717r (b)........................

La. Civil Code:

Art. 10 Piecksivadves tis iveacssbiuvecticbinesuecs thre elueseleuadessunieessuecns

PAGE

26,

ill

PAGE

Arts. 2084-35 ae Rep Pett ck Re? 24

Art. 2043. : 7 ore aero aries 24

rn eel eee eae 23

Art. 2665 ..... Pee eiea eee tama nee aee es Mercer ence es as oenae reas 16

I aot eieisipecc asus ae acta ren od i oars 24

Otrmern AUTHORITIES.

2 Beale, Conflict of Laws &832.4 (1985)... 000. 28

Comment, Certainty of Promise in the Law of Sale,

WO Tek, Be, Wee. TG CI asc ncscccsetseciccnicescns aa 20, 22

Goodrich, Conflict of Laws §$110, 154 (3d ed. 1949) 28

Goodrich, Yielding Place to New: Rest Versus Mo-

tion in the Conflict of Laws, 50 Colum. L. Rev.

a at eas 28

29 Halsbury, Laws of England, Sale of Goods §§12,

GE ___, Rae icaiertrne nrc es nmr teu nmereneeeny renee renert 24

Hebert and Lazarus, Some Problems Regarding

Price in the Louisiana Law of Sales, 4 la, I. Rev.

ED caine terete tearisvecck Cacopaceceneeek neues 19, 20, 21, 22

Note of the Commissioners on Uniform State Laws

under §1 of the Uniform Sales Act........00.00000........ 24

Note, Specific Performance—Sale and Contract to

Sell Distinguished, 4 La: L. Rev. 684 (1942)........ 23

Restatement, Conflict of Laws §§382, 346 (1934)... 28

Smith, Ciril Code and Related Subjects (Particular

Contracts), 16 La. I. Rev. 242 (1936).................... 20, 21.

3 Williston, Contracts {666 (rev. ed. 1936).............. 24

IN THE

Supreme Court of the United States

Ocroser Term, 1961.

No. 399.

SHELL Ort Company,

Petitioner,

Vv.

FepERAL Power Commission, Texas Gas TRANSMISSION CoR-

PORATION and LovuisvitLeE Gas & Exvectric Company,

Respone ents.

ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE THIRD CIRCUIT.

BRIEF OF TEXAS GAS TRANSMISSION CORPO-

RATION AND LOUISVILLE GAS & ELECTRIC

COMPANY IN OPPOSITION TO PETITION FOR

WRIT OF CERTIORARI.

Opinions Below.

The opinion of the Court of Appeals (Appendix A to

the Petition) is reported at 292 F. 2d 149. The opinion

of this Court reversing a previous decision in favor of Peti-

tioner by the Court of Appeals, and remanding, is reported

at 363 U. S. 263°. The order of the Federal Power Com-

* The previous opiniom of the Court of Appeals is reported at

263 F. 2d 223.

2

mission (‘‘Commission’’) (R. 2116-25)* appears at 18 F. P.

C'. 617, 22 P. UL R. 3d 94; its denial of rehearing (R. 2149-54)

is reported at 19 F. P. C. 74, 22 P. U. R. 3d 101.

Jurisdiction.

Jurisdiction is invoked by Petitioner under 28 U.S. C.

§ 1254(1) and § 19(b) of the Natural Gas Act, 15 U.S. C.

§ 717r(b).

Questions Presented.

Petitioner’s version of the ‘‘Questions Presented”’ is

based—and de;,ends—on a misstatement of the decision

of the Court of Appeals. The Court of Appeals did not,

as Petitioner would have this Court believe, resolve the

issue before it ‘‘on the basis of federal substantive law

(which it characterized as ‘general contract doctrine’, infra,

p. A-7) rather than on the basis of the law of Louisiana’”’

(Petition, p. 2). What the Court of Appeals did do was

to hold that both under Louisiana law and under general

contract doctrine (which it did nof confine to, or identify

as, ‘‘federal substantive law’’) a 1943 long-term gas pur-

chase eontract contained an enforceable method for deter-

* Record references (other than to the opinion of the Court of

Appeals printed as Appendix A to the Petition) are to the pages

of the original record before the Commission. Those page numbers

are prominently shown in the Joint Appendix in the eourt below

filed with the Petition. Citations to an ‘‘Item”’ refer to certain

documents filed with the Commission introduced in evidence through

incorporation by reference. ‘‘Ex.’’ is used to designate exhibits

physically put into evidence. Record references are limited to the

place in the record where the document or its pertinent provision

appears. Generally, the portions of the record which were printed

do not include the transcript page at which the document was

offered in evidence.

3

mining price thereunder for the five-year period from 1953

to 1953.*

The questions presented are:

1. Did the court below err in holding that under Louisi-

ana law (which Petitioner claims is applicable) the 1948

gas purchase contract contained an enforceable method for

determining price for the five-year period from 1953. to

1958?

2. If—and only if-—the court below erred in holding

that the contract contained an enforceable method for

determining price under Louisiana law, was Lovisiana law

appheable or was either the law of another jurisdiction or

federal law applicable to the question of enforceability

(Petitioner claiming only that the contract was unenforee-

able under Louisiana law)? }

r

3. Assuming Louisiana law governs, should federal

court action be held in abeyance to await a decision (if

there ever is one) in an action filed by Petitioner in July

1961 (after the decision below by the Court of Appeals

against Petitioner) in the Civil District Court for the Par-

ish of Orleans, State of Louisiana, which action Petitioner

states involves the same issue of enforceability decided by

the Court of Appeals ??*

Statement of the Case.

In its *‘Statement’’, as in its ‘‘Questions Presented”,

Petitioner, Shell Oil Company (**Shell’*), seeks to create an

* The Court of Appeals did not—as Petitioner intimates—base

its opinion on, nor did it even mention, the fact that the 1943 con-

tract was filed with the Federal Power Commission as a ‘'rate

schedule’’ (Petition, pp. 2, 9-11).

** \ fourth question, to which Respondents would address them-

selves in the event certiorari were granted but believe unnecessary

to argue in this brief, is: Even if the 1943 contract were unen-

forceable, is this material to the case?

issue where there is none—by obfuscation of the decisiou

of the Court of Appeals and of the narrow questions decided

by that court. Understandably, Shell has also failed to

state what the Supreme Court has already decided in this

case—which is the only way of determining what is no

longer open to argument. A restatement of the case is

therefore necessary.

The ultimate issue in this case is the rate payable under

a 1951 contract (‘‘Shell contract’’) (Item A, R. 227-46) for

the sale of gas by S!: I], an independent producer of gas, to

Texas Gas Transmission Corporation (‘‘Texas Gas’’)*,

an interstate gas pipeline company, which contract-was filed

with the Commission by Shell as a gas rate schedule as

required by the Commission’s regulations issued pursuant

to the decision of this Court in Phillips Petroleum Co. v.

Wisconsin, 347 U. S. 672. Shell’s contention is that under a

favored-nation clause in the Shell contract there was an

automatic increase in the stated contract price when price

was redetermined in 1954 between Texas Gas and another

supplier, The Atlantic Refining Company (‘‘Atlantic’’).

The order of the Commission, attacked by Shell, determined

that the effective rate under the Shell contract was the

stated contract price and that a price increase had not been

triggered under the favored-nation provision in that con-

tract (R. 2116 e¢i seq.).°*

The Contracts.

The favorcd-nation provision in the Shell contract, which

was executed in 1951, reads, in pertinent part, as follows:

* The original party to the Shell contract was a subsidiary of

Texas Gas, Louisiana Natural Gas Corporation, which was later

merged into Texas Gas. ‘‘Texas Gas’’ will be used throughout this

brief to refer to both the parent and subsidiary.

** Texas Gas intervened in these proceedings as the purchaser

under the rate schedule and Louisville Gas & Electric Company

(‘*Touisville’’), a consumer of Texas Gas, intervened because a

decision in favor of Shell would have an adverse effect upon the

oublie served by Louisville.

‘Tf at any time after December 31, 1951, Buyer

shall enter into a contract providing for the purchase

by it of gas produced from a field or fields located,

and delivered to Buyer, within a radius of fifty (50)

miles of any point of delivery provided hereunder,

Buyer shall forthwith notify Seller of such fact, and

if the price per one thousand (1000) cubic feet at

any time payable under such other contract is higher

than the price payable hereunder, ‘each price payable

hereunder which is less than the price pa at

the same time under such other contracf*shall be

immediately increased so that it will equal the price

payable under such other contract’? (Item A, R.

239-40).

When Texas Gas entered into the Shell contract, it was a

party to a gas purchase contract (‘‘ Atlantic contract’’) with

Atlantic (Item E, R. 267-79) which had been entered into

in 1943 by Defense Plant Corporation, an instrumentality

of the United States Government, Texas Gas’ assignor.*

The Atlantic contract provides for a fixed price during the

first five-year period under the contract and, for the remain-

ing four five-year periods, it stipulates that:

‘‘(b) At the end of the first five-year period,

Buyer and Seller are to reach an agreement as to

the price for gas sold and delivered under this con-

tract during the second five-year period. The price

to be paid during such second five-year period is to

be agreed upon at the beginning of such period after

a survey of prevailing prices for gas being sold in

similar quantities in the southwestern part of

Louisiana.

* Texas Gas purchased the pipeline operated by the Government

corporation and on May 11, 1949 became the assignee of the

Government’s rights and obligations under the Atlantic contract

(Item H, R. 287).

‘*(c) During succeeding five-year periods, prices

to be paid will be determined at the beginning of

each period in the same manner as provided for in

paragraph (b) above.

‘*(d) In the event that ‘the parties are unable

to agree upon the price to be paid for gas after the

first five-year period, in accordance with the arrange-

ments set forth in paragraphs (b) and (c) above,

such determination shall be submitted to arbitration

in accordance with Condition XI1’’ (Item H, R. 271).

Condition XII provides as follows for redetermination

_of price by arbitration in the event that the parties are

unable to redetermine price fur ay five-year period pur-

suant to the foregoing provisions:

ee

. such question o1r dispute shall be referred for

settlement to three arbitrators, one appointed by

Seller, one appointed by Buyer, and the third

appointed by the two others so chosen. The party

desiring such arbitration shall notify the other and

in such notice shall name an arbitrator, the arbitrator

to be appointed by the otber party shall be named

within ten (10) days after receipt of such notice of

arbitration, and an additional arbitrator shall, within

ten (1U) days of the appointment of the second arbi-

trator, be selected by the two (2) arbitrators thereto-

fore appointed, but if one of said parties shall have

failed to appoint an arbitrator within the time pro-

vided herein, it is expressly understood and agreed

that the sole arbitrator shall arbitrate the question

alone. If arbitrucor[s] shall have been appointed by

the respective parties and Shall have failed ¢o select

the third arbitrator within the above stated time, the

third arbitrator shall be appointed by the senior

Judge of the 5th Federal Judicial Circuit upon appli-

cation therefor by either of said parties to the arbi-

tration.

‘‘The matter in question or dispute shall be

submitted in writing to the arbitrators immediately

upon the completion of their appointment, and the

parties shall do all things necessary to make proper

submission thereof according to the character of the

question or dispute involved, or as required by the

arbitrators. The decision in writing signed by a

majority of the arbitrators shall be final and con-

clusive witn respect to the matter submitted and the

parties hereto agree to accept and abide by the

same.’’ (R. 276-77)

Pursuant to the price redetermination provisions in the

Atlantic contract, Texas Gas and Atlantic redetermined the

price for the five-year period beginning September 1, 1953

without need of arbitration (Exs. 5-7, R. 124-29). This price

was recorded in a brief letter agreement dated February

17, 1954 which specifically stated that such price redeter-

mination was in accordance with the 1943 contract (Ex. 9,

R. 132).°

* The entire text of this letter agreement for the redetermina-

tion of price was as follows:

‘‘Under date of September 1, 1943, Defense Plant Cor-

poration, as Buyer, entered into a gas purchase contract

with The Atlantic Refining Company, as Seller, for the pur-

chase of gas produced from Seller’s leases in the North

Tepetate pool of Acadia Parish, Louisiana, which contract

was subsequently amended February 16, 1949. Louisiana

Natural Gas Corporation purchased the pipeline operated

by Defense Plant Corporation and the aforesaid contract

with The Atlantic Refining Company was assigned to Loui-

siana Natural Gas Corporation.

‘‘In accordance with Paragraph III of said contract, it

is hereby agreed that the price to be paid by Louisiana

Natural Gas Corporetion to The Atlantic Refining Company

for gas sold and delivered under such contract between

September 1, 1953 and August 31, 1958, both inclusive,

shall be 12.2 cents net for each 1,000 cubic feet at a pressure

base of 15.025 psia of gas received at the central point or

points set forth in the original contract, regardless of

whether such gas is delivered to a government plant or not;

and, in addition, Buyer shall reimburse Se'ler for all State

severance taxes, or similar taxes, which Seller is obligated —

to pay and has paid to the State of Louisiana on such gas.’’

8

The Decision of the Supreme Court.

The order of the Commission (R. 2116 et seq.), deter-

mining that the effective rate under the Shell contract was

the stated contract price and that no price increase had been

triggered under the favored-nation clause, was reversed by

the Court of Appeals. 263 F. 2d 223. This Court granted

certiorari (361 U. S. 811), unanimously reversed the deci-

sion of the Court of Appeals and remanded. 363 U,S. 263.

This Court, in rejecting Shell’s arguments, stated inter

alia:

‘‘The question to be decided is: did the parties

to the Shell contract mean that an agreement of the

nature of the Atlantic letter agreement of February

17, 1954, should constitute the ‘enter[ing] into a con-

tract [by ‘fexas Gas] providing for the purchase by

it of gas ...’? We first consider the nature of the

letter agreement. The pricing provisions of the

Atlantic contract specify a price for the first five-

year period, and provide that prices for the four

succeeding five-year periods should be determined

by agreement of the parties, or failing such agree-

ment, by arbitration.® In either case the determina-

tion is to be made ‘after a survey of prevailing prices

for gas being sold in similar quantities in the south-

western part of Louisiana.’

‘*8 For purposes of its decision the Court of Appea!s

‘assumed without deciding that the Atlantic contract of

1943 did in fact impose a binding agreement-to-agree on

the price for gas in each of the contract’s last four five-

year periods.’ 263 F. 2d at 226. We proceed on the

same assumption in reviewing the interpretation of the

‘favored nation’ clause in the Shell contract.

‘‘Shell urges that the let 2r agreement is in

actuality an entirely new contract which incorporates

by inferential reference the terms of the 1943 con-

tract. There is nothing in the letter agreement or

otherwise in the record to substantiate this con-

9

tention. On the contrary, the letter agreement

affirmatively states that the action was taken ‘in

accordance with’ the 1943 contract.®

‘*9 [The Supreme Court’s footnote omitted. ]

‘|, ..fenter[ing] into a contract providing for the

purchase of gas’ meant to the parties the making

of a full-fledged contract containing all the terms

defining the complete relationship.

‘e# * * In deciding which increases do and which

do not trigger this ‘favored nation’ clause we would

be making an irrational distinction. were we to focus

upon the mechanics chosen in the Atlantic contract

and conclude that the Shell clause was activated by

a post-1951 price determination under the Atlantic

contract, although it would not have been activated

by price increases pursuant to a more mathematically

precise formula. In its essential respects the Atlan-

tic price adjustment was no different from the latter,

for the Atlantic adjustment was required under a

pre-existing contract, and Texas Gas was powerless

to prevent it.

‘‘We therefore hold that the Court of Appeals

erred in its interpretation of the ‘favored nation’

clause and that the Commission correctly construed

it as not effecting an increase in price by reason of

the lettcr agreement.’’ (363 U.S. at 270-76).

is Court remanded to the Court of Appeals solely to

7

give that court an opportunity to consider one of Shell’s

arguments which the Court of Appeals had stated in its

opinid

ration

when

tract]

n it found unnecessary to consider because of the

ale which it adopted. This was the argument ‘‘that

the second five-year period [under the Atlantic con-

came to an end on August 31, 1953, neither Atlantic

10,

nor Texas Gas was under any® enforceable obligation to

continue the prior relationship and therefore when on

February 17, 1954, Texas Gas signed the letter agreement

it was not acting pursuant to any pre-existing obligation”’

(363 U. S. at 276). This Court stated, however, that the

Court of Appeals should address itself to this argument

only if it first found the argument to be material to the

case.°*

* Wherever italicization appears in a quotation in this brief, 1

has been added.

** The following is the full opinion of this Court [with foot

notes omitted] respecting the remand:

‘‘There remains for mention an argument of Shell whic

the Court of Appeals found unnecessary to consider becaus

of the rationale which it adopted. This is the contentio

that the 1943 Atlantic agreement did not provide for a fixec

and determined price beyond the first five-year period, s

that under applicable state law enforceability was suspendec

until the contract price for a particular succeeding five

year term was supplied by agreement or arbitration. Fro

this premise it is argued that when the second five-yea

period came to an end on August 31, 1953, neither Atlanti

nor Texas Gas was under any enforceable obligation t

continue the prior relationship and therefore when on Feb

ruary 17, 1954, Texas Gas signed the letter agreement it wa

not acting pursuant to any pre-existing obligation but wa

exercising its free choice to enter what was in effect a nev

contract. In its petition for writ of certiorari the Commis

sion argued that not only was there no doubt about th

enforceability of the Atlantic contract but that the issue i

immaterial bec. ise the parties to that contract treated th

contract as binding and that it is not for Shell, a strange

to the contract, to say that it was not legally enforceable

However, the Commis..va suggested that should we revers

the decision of the Court of Appeals, premised as it is upor

the assumption that the 1943 Atlantic contract imposed

binding obligation for its entire stated term, and if we con

sidered the question of enforceability to be material, w

should remand the issue of enforceability to the Court o

Appeals for its decision. Shell has maintained in this og

that the issue of enforceability is matcrial but, in view of

the Commission’s statement, has argued neither that issue

nor the issue of enforceability. We agree that it is appro-

priate that the Court of Appeals address itself to the

enforceability issue, if it is material, but under the circum-

stances we think the Court of Appeals should first decide

11

The Decision of the Court of Appeals.

Acting under the terms of the remand by the Supreme

Court, the Court of Appeals decided, first, that the enforce-

ability issue was material (Petition, p. A-2). The Court

of Appeals then held that the Atlantic contract was enforce-

able—under contract law generally and under Louist-

ana law specifically. It found that the contract ‘‘does con-

tain a valid, workable price-fixing standard’’ and ‘‘the

definite procedure and obligation to accede to it by which

the needed prices are to be fixed’’ (Petition, p. A-7). In

view of this holding, the court decided that it was unneces-

sary to indulge in an ‘‘abstract discussion’’ of conflicts of

law. The court stated:

‘‘Much is said in the case on the question of

whether Louisiana law governs enforceability of the

contract but under our conception of the controverted

document, Louisiana law, in this instance at least,

does not differ from general contract doctrine. There-

fore, abstract discussion of whether Louisiana law

controls the enforceability of the Atlantic pact is not

called for. Circumstances considered, the Atlantic-

Texas Gas agreement does contain a valid, workable

price-fixing standard. We would be ignoring this

and descend to quibbling were we to hold otherwise.’’

(Petition, p. A-7).

In reaching its conclusion, the Court of Appeals

pointed out that the 25-year continuity of the 1943 Atlantic

contract, ‘‘a full dress instrnment’’, is clearly expressed.

the question of materiality. We therefore reverse the judg-

ment of the Court of Appeals and remand for further pro-

ceedings consistent with this opinion.’’ (363 U. S. at 276-77)

12

The contract’s ‘‘intent to have binding prices for the

indicated gas throughout its term is evident.’’ (Petition,

- p. A-5).

The Court of Appeals then turned to the arbitration

clause in the Atlantic contract as the mechanism by which.

the contract is made enforceable for the second and subse-

quent five-year periods thereunder. The court stated that

the intent of the parties was ‘‘plainly that if arbitration be,

necessary to arrive at a price the prescribed method will\

produce the contemplated price. And the mechanics of

the stated procedure follow through acceptably to that

end.’’ (Petition p. A-6).

The court below noted, first, ‘‘that the certainty of

arbitration 1s properly conceded by Shell’’ (Petition, p.

A-5). There being no question as to the enforceability

of the arbitration clause, the court next described the ©

arbitration procedures established by that clause—pro-

cedures which make it impossible for any one party to

prevent or defeat arbitration (Petition, pp. A-5, A-6).

Finally, the court noted that the decision of the arbitrators

is expressly made ‘‘final and conclusive’’ and binding upon

the parties (Petition, p. A-6). In accordance with the

intent of the parties to the contract, ‘‘there is present the

definite procedure and obligation to accede to it by which

the needed prices are to be fixed’’ (Petition, p. A-7).

13

ARGUMENT.

I.

Because this case presents no question of general

importance, Petitioner misstates the decision below

and asks this Court to pass upon a specious issue.

When this case was previously before this Court, there

was presented by the Commission, Texas Gas and Louisville

an important, question of the scope of review of federal

administrativé determinations. “This Court, while deter-

mining that the scope of review questior need not be

reached because the Commission had decided the case on

principles of general contract law, nevertheless made it

clear that the motivating force for granting certiorari was

the administrative law question and not the contract law

questions.* In its present posture, not only does this case

not present any question of administrative law or other

question of general importance, but the case is presented

after a remand by this Court on the very narrow question

of the enforceability of a subsidiary contract. Consider-

ing the purely commercial nature of this private dispute

between Shell and Texas Gas** and considering the fact as

_-* The Court stated: ‘‘We granted the separate petitions for

certiorari ... being particularly moved to do so by the contention

made in both petitions that the Court of Appeals exceeded the appro-

priate scope of judicial review of the Commission’s determination. ”’

363 U.S. at 268.

**Despite the fact thet an administrative law question involving

administrative expertise was presented fo this Court in the prior

petitions in this case, it was Shell’s position in opposing the grant

of certiorari that: .

‘*’ . . [T]his is not a ease of general importance but, in

reality, is nothing more than a contract dispute between

Shell and Texas Gas involving a privately negotiated con-

tract in a unique situation which has already been to the

[continued on next page]

14

quoted by the court below that ‘‘the certainty of arbitra-

tion is properly conceded by Shell’’ (Petition, p. A-5), it

is apparent that there is no question presented here which

merits the attention of this Court.

In mute recognition that the decision below raises

no issue which merits the attention of this Court, Shell

has sought to fabricate an issue by misstating the opin-

ion below—and now urges this fabricated issue as its main

argument for the grant of certiorari.

Shell states:

‘‘The decision below stands as authority for the

proposition that federal substantive law, or some

nebulovs general common law, rather than the law

of the State of performance, governs the enforce-

ability of a contract on file with the Commission as

a rate schedule. This precise issue—although of

far-reaching importance—has not been, but should

be, resolved by this Court.’’ (Petition, p. 11).

In fact, the decision below stands for no such authority

and raises no such issue. The court below held that under

Louisiana law specifically and under contract law gen-

erally the 1943 Atlantic contract contained an enforce-

able method for determining price for the five-year period

from 1953 to 1958 (see pp. 11-12, supra). The court

below never mentioned federal substantive law. Indeed,

the court below never mentioned—because it was irrele-

vant to its opinion—that the Atlantic contract was on file

with the Commission as a rate schedule.

decisioral level three times and in which Texas Gas, with the

aid of the Commission, is merely seeking another decision

more to its liking.’’ (Brief in Opposition, Nos. 167 and 170,

October Term 1959, pp. 17-18).

Since no administrative Jaw question is now involved, these words

are truly applicable to Shell’s present petition.

‘

15

Significantly, the only contentions which Petitioner (and

not the Court of Appeals) cites—and attempts to refute—

for the applicability of federal law have nothing to do with

the fact that the Atlantic contract was filed with the Com-

mission as a rate schedule, but relate, instead, to the par-

ticular terms and circumstances of that contract: (1) the

contention that the Federal Arbitration Act is applicable

to the enforceability of the arbitration clause and (2) the

contention that federal law is applicable because the

original party to the Atlantic contract was a federal agency

which assigned its rights under the contract to Texas Gas

(Petition, pp. 10-11, fns. 6,7). See pp. 26-28, emfra.

Respondents have always contended that regardless of

what law governed—whether Louisiana law, whether the

law of some other state, or whether federal law—the

Atlantic contract was unquestionably binding as to the

five-year period starting in 1953—particularly in light of

the conceded enforceability of the arbitration clause. This

is also the clear holding of the Court of Appeals.

Il.

Assuming Louisiana law governs, the court below

correctly applied that law to the issue of enforce-

ability.

~ Shell, in its futile attempt to find some conflict between

Louisiana law and the decision below, persists in arguing

issues which are not germane to the decision below or to

the issue remanded by this Court. The issue is not whether

the Atlantic contract was effective as a ‘‘sale’’ under

Louisiana law (Petition, pp. 13-21). The only issue (other

than materiality) before the Court of Appeals was whether

16

@

Texas Gas or Atlantic was under ‘‘any enforceable obliga-

tion to continue the prior relationship’’ at the end of the

second five-year term or whether Texas Gas was ‘‘acting

pursuant to any pre-existing obligation’’ in redetermining

price under the Atlantic contract. 363 U.S. at 276. If the

1943 Atlantic contract contained an enforceable price-

fixing mecharism applicable to the 1953-1958 period, Shell

. must lose. Every other issue in the case has already been

decided adversely to Shell by the opinion of this Court.

The existence of an ‘‘enforceable obligation to continue

the prior relationship’’ of the parties at the end of the

second five-year period of the Atlantic contract is readily

demonstrated by Shell’s concession as to the enforceability

of the arbitration clause and by those parts of Shell’s own

Louisiana authorities which it persists in ignoring.

Shell does not dispute the enforceability of the Atlantic

arbitration clause under Louisiana or any other law; indeed,

it has conceded it (Petition, p. A-5). See La. Civil Code,

Art. 2465. With this concession of enforceability, given

the nature of the arbitration clause and its context, there

is nothing left for Shell to argue under the law of any

jurisdiction. Shell’s only answer to this is the following

non-sequitur:

‘‘Neither a purported sale nor a purported contract

to sell is enforceable or of any legal effect [under

Louisiana law] until the price is fixed, and that is

true even though the contract contains an enforceable -

arbitration clause.’’ (Petition, p. 13)

What Shell chooses to ignore, among other things, is that

when it grants—as it must—the enforceability of the arbi-

tration clause, it concedes what is here at issue: an enforce-

able method of fixing price under the 1943 Atlantic contract

and an ‘‘enforceable obligation [of the parties] to continue

o

17

the prior relationship’’ (363 U.S. at 276) at the expiration

of the contract’s second five-year term.

This is made doubly clear both by the pricing provisions

of the Atlantic contract in general and by the specific pro-

visions of the arbitration clause in particular. The arbitra-

tion clause is one of the many provisions of the 1943

Atlantic contract designed to the common end of providing

for continuity of supply of gas over the life of the entire

contract. In carrying out the objective of ensuring a firm

long-term commitment to sell and purchase gas, the price

provisions in the Atlantic contract make it dead certain

that neither party has the right or power to prevent the

price from being determined.

After the first five years, the contract specifically pro-

vides a mechanism to insure that price will be determined,

the terms of which are mandatory and not optional. The

contract first states that ‘‘ Buyer agrees to pay for the gas

received hereunder a price computed as follows:’’— and

then goes on to provide in mandatory terms that for the

second five-year period the parties ‘‘are to reach an agree-

ment as to the price for gas sold and delivered under this

contract’’, and that ‘‘The price * * * is to be agreed upon

at the beginning of such period after a survey of prevailing

prices for gas being sold in similar quantities in the south-

western part of Louisiana.’’ For succeeding iive-year

periods, ‘‘prices to be paid will be determined at the begin-

ning of each period in the same manner’’ (Item E, R.

270-71).

The pricing provisions of the 1943 Atlantic contract do .

not stop at the requirement that the parties ‘‘are to reach

agreement’’. To forestall any possibility of an impasse at

that point, the Atlantic contract goes on to impose a bilat-

eral obligation requiring that, if the parties are unable to

agree, ‘‘such determination shall be submitted to arbitra-

_—_—

tion’’ in accordance with the well-drawn and self-operating

arbitration provision (item EH, R. 271, 276-77).

Under the arbitration procedure, each party is to

appoint an arbitrator. If either party fails to do so within

a specified time, the arbitrator appointed by the other party

‘‘shall crbitrate the question alone’’. The two arbitrators

selected by the parties ‘‘shall’’ appoint a third arbitrator.

If they fail to do so within a specified time, the third arbitra-

tor ‘‘shall be appointed’’ by the senior Judge of the Fifth

Circuit upon application of either party. Neither party,

by act or omission to act, can halt or frustrate the arbitra-

tion proceeding. (Item EK, R. 276.)

The intention to be bound by the arbitration machinery

is also reflected in the following provisions:

‘‘The matter in question or dispute shall be sub-

mitted in writing to the arbitrators immediately

upon the completion of their appointment, and the

parties shall do all things necessary to make proper

submission thereof according to the character of the

question or dispute involved, or as required by the

arbitrators. The decision in writing signed by a

majority of the arbitrators shall be final and conclu-

sive with respect to the matter submitted and the

parties hereto agree to accept and abtde by the

same’’ (Item KH, R. 276-77).

Furthermore, the Atlantic contract supplies a method .

of insuring continuity even when the price may be in dis-

pute—such as during the period while the price-fixing

mechanism is in operation. It provides that ‘‘Buyer shall

not be considered to be in default hereunder if, in case of a

bona fide dispute with respect to any portion of its bill,

payment of the portion thereof not in dispute is made’’

(Iten HE, R. 275).

19

All this is ignored by Shell. Instead, Shell resorts to

an exercise in obfuscation as to Louisiana law—none of

which has anything to do with the fact that the concededly

enforeeable arbitration clause demands an _ affirmative

answer to the question on which the Court of Appeals was

passing: Was Atlantic or Texas Gas under ‘‘any enforce-

able obligation to continue the prior relationship”’ at the

end of the second five-year period under the contract?

For the most part, Shell argues the irrelevant question

whether under Louisiana law the 1943 Atlantic contract

was effective as a ‘sale’? (or ‘contract of sale’’, which

means ‘‘sale’’ under Louisiana law) prior to the fixing

of price or whether under a ‘‘contract to sell’? the remedy

of specific performance is available prior to the fixing of

price or the mecting of some other condition (Petition, pp.

13-21). It is with this that the quoted passages of Shell’s

statutory and other authorities deal—not with the question

of the enforceability of the price-fixing mechanism in the

1943 Atlantic contract.

The very authorities on which Shell itself relies—in

passages which Shell fails to quote—demonstrate that under

Louisiana law the Atlantic arbitration provisions would

be held to be fully binding and that, therefore, the 1943

Atlantic contract to sell would continue to be binding. The

law review article on which Shell places the greatest weight,

Hebert and Lazarus, Some Problems Regarding Price in

the Louisiana Law of Sales, 4 La. L. Rev. 378 (1942),

expressly makes this clear. In a part of that article which

Shell never refers to it is stated:

“Tt is true that one of the parties may refuse

to comply with his obligation of appointing the esti-

mator and thus has it within his power to nullify

the agreement; but the contract is nonetheless bind- |

ing, even though it cannot be effective as a sale

20

until and unless the parties have named the arbi-

trators and they have fixed the price. That the

contract is ineffective if the parties only agree to

designate the experts afterwards, is true only to

the extent that there is no sale. However, the con-

tract ts binding upon the parties to the extent that

should either one refuse to comply with his obligation

to appoint the appraiser, which is an obligation to

do, he will subject himself to damages for the breach

thereof,

‘<The rule announced in the Werner case should

therefore be qualified by the foregoing. What was

evidently intended was that the sale was unenforce-

able as such, but that the obligation to name the

experts was nevertheless binding’’ (4 La. L. Rev.

at 460-01; see also pp. 380, 385, 387, 412, 418).®

Of course, the rule referred to in this law review article

would apply a fortiori to the self-executing terms contained

in the Atlantic arbitration provision, under which the

parties specifically eliminated any need to seek judicial

assistance or vindication in the process of appointing the

arbitrators. This is shown in the case of Lake v. LeJeune,

226 La. 48, 74 So. 2d 899 (1954), which is cited by Shell

(Petition, p. 21). In the Lake case, the court clearly stated ,

that the touchstone for judicial enforcement of a provision

for the appointment of appraisers was whether or not ‘‘any

one of the [parties] has the power to refuse to appoint.’’

See 74 So. 2d at 901-02.°* Since the Atlantic arbitration

*To the same effect: Comment, Certainty of Promise in the

Law of Sale, 30 Tul. L. Rev. 568, 569-70 (1956); Smith, Civil

Code and Related Subjects (Particular Contracts), 16 La. L. Rev.

242, 243 (1956).

** The Lake case involved an action for specific enforcement

where the plaintiff was seeking to obtain title to real property.

For the reasons stated above, the Atlantic contract would be spe-

cifically enforced to the extent necessary. Moreover, even when

Louisiana courts would not decree that particular remedy, they

21

provision specifically prevents either party from having

‘‘the power to refuse to appoint’’, that provision meets

the requirements of the J 2ke case.*

There is nothing mysterious or peculiar to the law of

Louisiana about this test or this result. In Louisiana, as

elsewhere, the Atlantic arbitration machinery is enforce-

able because its self-executing provisions effectively remove

fixing of price from the whim, caprice or control of the

parties. Seé Hebert and Lazarus, supra, 4 La. L. Rev. at

410, 412, 418. However, Shell’s argument essentially is

that a price arbitration provision must be immune from

every possibility of frustration, even though beyond the

control of the parties (Petition, pp. 15-16). This extreme

contention is wholly at war with the classic and universal

test that a promise is obligatory when, as Hebert and Laz-

arus recognize, it is independent of the whim or caprice

of the parties.

It is, of course, true that if neither party appointed an

arbitrator, there would be no arbitration (Petition, pp.

15-16). But this is no different from stating that both

parties to a contract may, by agreement, abrogate or ter-

minate its provisions. Until the contract is terminated or

abrugated by agreement of both parties, however, the con-

tract continues as a valid and binding instrument.

Shell, though not disputing that at least the arbitration

clause in the Atlantic contract is enforceable, raises the

will enforee agreements to arbitrate by way of damages. See

Smith, Civil Code and Related Subjects (Particular Contracts),

16 La. L. Rey. 242 (1956) ; see also the passage quoted at pp. 19-20,

supra, from the Hebert and Lazarus article.

* Shell wholly misstates the Lake case as involving a provision

whereby ‘‘either party alone could designate the appraisers’’ (Peti-

tion, p. 21). It is crystal-clear that that case did not involve a

provision where each party had the separate and independent right

to name the sole arbitrator in the event that the other party refused

to name one. Otherwise, the court would not have said that ‘‘any

one of the [parties] has the power to refuse to appoint.’’

22

entirely faise issue, by confusing sales and contracts to

sell, of wher there is still something wrong with the

contract under Louisiana law. Its whole premise is that,

if there is a ‘‘suspensive’’ condition to the sale, the Louisi-

ana courts somehow would not enforce any part of the

1943 Atlantie contract—even though they would enforce the

price-fixing mechanism (Petition, pp. 13, 15, 18, 20-21, A-5).

Apart from the fact that this is obviously a contradiction,

Shell misses the whole point that, even though there may

be a ‘‘condition’’ of some kind to the sale of gas under

the Atlantic contract for subsequent five-year periods,” the

condition itself in this case is fully obligatory (which indeed

Shell admits when it concedes that arbitration is enforce-

able) and therefore does not affect the obligatory nature

of the contract to sell. See Comment, Certainty of Promise

in the Law of Sale, 30 Tul. L. Rev. 568, 569-70 (1956).

Shell’s self-contradictory argument as to Louisiana law,

based on the confusion of ‘‘sale’’ and ‘‘contract to sell’’,

is not only irrelevant to the issue decided by the Court of

Appeals; it is also expressly contradicted by the Louisiana

authorities. It is contradicted not only by the already

quoted passage from the Hebert and Lazarus article, upon

which Shell relies so heavily,** but also, inter alia, by the

* Actually, due to the nature of the 1943 Atlantic contract,

sales would continue and title would pass even during arbitration

or price renegotiation. Among other things, there is provision for |

interim payment of the amount not in dispute so as to ensure an

uninterrupted flow of gas (Item E, R. 275).

** Oddly enough, Shell itself points out the difference between

a ‘‘sale’’ and a contract or promise ‘‘to sell’’, and also notes that

‘‘eontract of sale’’ is used in Louisiana to mean a ‘‘sale’’ (see

Petition, pp. 13-14). .Due to this usage, many references in the

Louisiana cases to ‘‘eontract’’ relate only to the ‘‘sale’’ and not to

the ‘‘contract to sell’’. The whole piece of glue with which Shell

seeks to put together its argument that ‘‘sale’’ and ‘‘contract to

sell’? may be used interchangeably is a footnote in the Hebert and

Lazarus law review article, in which the authors state that a con-

tract to sell in the futu.:: and a contract of a present sale are

23

following Louisiana authorities, including the Barber

Asphalt case which is the principal decision cited by Shell

(Petition, pp. 17-19):

‘‘Tf it was a sale, it would transfer the ownership;

because a sale is a transfer of ownership, and it is

ncthing else. * * * When a sale is made under a sus-

pensive condition, there is no sale until the condi-

tion bas been fulfilled. There is merely a conxtract

that there shall be a sale when the evndition is ful-

filled.’’ Barber Asphalt Paving Co. v. St. Louis

Cypress Company, 121 La. 142, 46 So. 193, 197 (1908).

‘“But the perfection of the contract so as to fix

responsibility. of the. parties to it, in the event of its

final execution or non-execution, is one thing, while

the actual pdssing of the title of the thing, the object

of the contract, under conditions suspensive in their

nature, is another.’’ IHamilton Co. v. Medical Arts

Bldg. Co., 135 So. 94, 96-97 (La. App. 1931).

“‘TIt may be that a contract by which property is

acquired for a consideration to be paid 'n money may

(technically considered) not be a sale as defined by

the Code, but tt does not necessarily follow that such

a contract is void because it cannot be classed as a

sale.”’ Union Tank Car Co. v. Louisiana Oil Refin-

ing Corp., 178 La. 940, 152 So. 571, 572 (1933).

See also Note, Specific Performance—Sale and Con-

tract to Sell Distinguished, 4 La. L. Rev. 634, 636-37 (1942).°

governed by the same rules (see Petition, p. 13, n. 9; see 4 La. L.

Rev. at 381, n. 15). However, the article itself shows that the

authors did not mean what Shell says, and contradicts the whole

thesis of Shell’s argument, because it makes the very distinction

which Shell seeks to avoid. This is shown in the passages which

Shell omits (see pp. 19-20, supra).

' *The differences which Shell persistently ignores are made

plain in an ariicle of the Louisiana Code which Shell quotes (Peti-

tion, p. 14), Article 2462, which merely provides that a ‘‘ promise

to sell’’ so far amounts to a ‘‘sale’’ giving the right to ‘‘specific

[continued on next page]

24

Shell’s request that this case be held in abeyance

pending a decision (if any) in.an action in a Louisiana

court commenced by Shell after the decision below

is wholly without merit.

Finding no conflict between the decision of the court

below and the decision of any Louisiana court, Shell urges

this Court to hold the entire case in abeyance because, Shell

claims, there is a chance of a Lovisiana court in the future

‘‘nossibly arriving at a concrary conclusion’’ (Petition, p.

22). In support of this strange argument, Shell states

that, after the adverse decision of the court below, it com-

menced an action in ike Civil District Court for the Parish

of Orleans, State of Louisiana, wherein the issue here

involved ‘‘will be among those’’ to which ‘the state court

will apply Louisiana law (Petition, pp. 21-22).

This argument is on its face so preposterous that we can

scarcely believe that Shell advances it seriously. Shell

cannot wish into being a conflicting Louisiana decision which

does not exist. The bringing of an action in a Louisiana

performance’’ when there is consent to the price. In any jurisdic-

tion, the distinction between a sale and the contract to sell is most

fundamental. See, e.g., 29 Halsbury, Laws of England, Sale of

Goods §§12, 13 (3d ed. 1960), and the Note of the Commissioners

on Uniform State Laws under §1 of the Uniform Sales Act. The

obligatory nature of conditions is brought out in the articles of

the Louisiana Code, specifying ‘‘casual’’, ‘‘mixed’’ and ‘‘potesta-

tive’’ conditions (Arts. 2022-25, 2034-35). A ‘‘suspensive’’ con-

dition merely holds up transfer of title (Arts. 2471 and 2043).

Even a ‘‘potestative’’ condition, which is in the control of one of

the parties, is binding when there is a duty to fulfill it. See Art.

2035; Stephen L. Guice & Co. v. Perkowski, 12 Sv. 2d 692, 695

(La. App. 1943). Thus, conditions attach to performance or

consequences and do not prevent a contract from being binding.

See 3 Williston, Contracts §666 (rev. ed. 1936) (‘‘What it is which

conditions qualify’’).

25

court by Shell, after Shell lost in the court below, does not

change this fact. Were this not so, every party, after

litigating a case in the federal courts and after losing before

the Court of Appeals on a question of state law, would be

encouraged to commence an action in the state courts and

then apply to this Court to stay federal court proceedings

while the matter is 1 -litigated in a state court.

While nothing more need be said on this point, it may

be noted that not only is there no decision by the Louisiana

court—there could, if this case were stayed, be nc assur-

ance that there would be a decision or as to the grounds for

any decisici:. One thing, however, appears certain and that

is that there would be no conflicting decision. Louisiana

law is clear on the question here at issue—despite Shell’s

attempt to confuse that question and to make Louisiana

law sound both complex and illogical (see pp. 15-23, supra).-

Even in a case—unlike this one—where there is a

real possibility of a serious conflict betwéen state and

federal courts and where the matter of state law is novel

and difficult, the federa! courts do not hesitate to reach a

decision. This is made amply clear by the decision of this

Court in Propper v. Clark, 337 U. S. 472, 489-92. After

analyzing the whole problem of references to state courts,

this Court stated that ‘‘in the absence of special circum-

stances’’, the submission of issues to a state court ‘‘is not

to be used to impede the normal course of action where fed-

eral courts have been granted jurisdiction of the contro-

versy’’ (337 U. S. at 492).*

* The case of Thompson v. Magnolia, 309 U. S. 478, cited by

Shell (Petition, pp. 23-24), is wholly inapplicable. In the Magnolia

ease, unlike here there was a conflict between the Eighth Circuit

and the Seventh Circuit as to the obviously difficult question of state

law there involved (309 U.S. at 481, 484). In the Magnolia case,

the bankruptey court was direc.ed to order the trustee in bank-

ruptey to file plenary proceedings to determine title in a state

litigation necessarily complete in itself. There, unlike here, the

[continued on next page]

26

IV.

Even if the court below erred as to Louisiana law,

Louisiana law is in any event not governing on the issue

of enforceability.

Shell’s attack on the decision below is based solely on

some purported anomaly of Louisiana law. The Petition

does not question the correctness of the decision under the

law of any other jurisdiction or under contract doctrine

generally.

As we have shown, Shell’s contention that the court

below misapplied Louisiana law is without merit. How-

ever, even if the court below erred as to Louisiana law,

this is irrelevant. Shell’s theory of why Louisiana law

goverus is in error, and this is an added reason, although

none is needed, why its position is untenable.

Contrary to Shell’s view, federal law would govern the

matter of the enforceability of the Atlantic contract and

its price-fixing provisions. On the specific question of

whether the Atlantic “arbitration provision would be

enforceable and the manner of its enforcement, should there

be any occasion prior to the arbitrators’ decision to seek

judicial assistance for its self-operating provisions, the

Federal Arbitration Act would apply (9 U. S. C. §§$1-14).

That Act makes arbitration provisions fully ‘‘valid, irre-

vocable and enforceable’’ (9 U.S. C.§2). The Act expressly

court through the trustee in bankruptcy had control of the issues

to be raised in the state court proceeding. There, unlike here,

the court could be sure there would be a decision by the state court

on the very issue which it wished decided. There, unlike here,

there was no possibility of a conflict with the state court on issues

on which it was not intended to have the state court pass. Also,

unlike the instant case which involves the price of gas in interstate

commerce, the question referred in the Magnolia case related to a

purely intrastate matter.

27

provides that it covers ‘‘any contract evidencing trans-

actions involving commerce’’ (9 U.S. C. §2). See Tenney

Engineering, Inc. v. United Electrical Workers, 207 F. 2d

450, 494 (3d Cir. 1953). The Atlantic contract is a contract

evidencing a transaction involving ‘‘commerce’’ under the

decision of this Court in Phillips Petroleum Co. v. Wis-

consin, 347 U. S. 672, and the arbitration clause is there-

fore governed by and fully enforceable under the lederal

Arbitration Act. See Kentucky River Mills v. Jackson,

206 F. 2d 111, 117 (6th Cir. 1953), cert. denied, 336 U. S.

887.

Among other reasons why federal law and the Federal

Arbitration Act would determine the obligations of the

Atlantic contract is that the Defense Plant Corporation,

an instrumentality of the Government, was originally a

party to the contract. It is established doctrine that, when

the United States Government is a party to a contract, the

rights and duties of the parties are fixed by federal law.

Clearfield Trust Co. v. United States, 318 U. S. 363. See

also United States v. County of Allegheny, 322 U. S. 174.

When Texas Gas became a party to the Atlantic contract

by assignment, it succeeded, as assignor, to the rights and

duties of the Government under the contract and federal

law continued to govern (Items E-H, R. 267, 280-83, 286-87).

American Houses v. Schneider, 211 F. 2d 881, 882-83 (3d

Cir. 1954). Sea also Bank of America v. Parnell, 352 U.S.

29, 34.

But even if we assumed, arguendo, both (1) that there

was any merit to Shell’s argument as to the result of

applying Louisiana law and (2) that federal law is inap-

plicable, this would not help Shell. If federal law does not

apply, the law of Louisiana still would not govern. In

that event, the law of the District of Columbia would apply.

That is the jurisdiction in which the Atlantic contract was

28

executed by the purchaser and thereby became binding,

the contract having been earlier executed by the seller in

Texas (Item E, R. 279). The authorities (including those

of Louisiana) are generally in accord that the place of

making of a contract controls the kind of question raised

here, namely, whether an obligation is legally binding.*

EK. g., Restatement, Conflict of Laws §§ 332, 346 (1934) ;

2 Beale, Conflict of Laws §332.4 (1935) ; Goodrich, Conflict

of Laws §§110, 154 (3d ed 1949); Goodrich, Yielding Place

to New: Rest Versus Motion in the Conflict of Laws, 50

Colum. L. Rev. 881, 896-97 (1950); Moore v. Burdine, 174

So. 279, 281 (La. App. 1937); Campbell Soup Co. v. Wentz,

172 F. 2d 80, 81 (3d Cir. 1948). See also Art. 10, La. Civ.

Code.

Conclusion.

Shell has had more than its day in court. This case

has been to the decisional level a total of five times. Shell

* Shell is apparently contending, among other things, that

Louisiana law is applicable because it is ‘‘the place where all mate-

rial factors attending the Atlantic contract take place’’ (Petition,

p. 12). Even if such an approach were justified, it would not result

in the application of Louisiana law. Not only is Louisiana not the

place of execution by either party or delivery of the contract, both

obviously ‘‘material factors attending the Atlantic contract’’, but,

in addition, Atlantic supplies an interconnected interstate pipeline

system with gas. Moreover, the parties who executed the Atlantic

contract in 1943—who were not Louisiana corporations, who did

not have their principal offices in Louisiana, who did not execute

the contract in Louisiana and who did not deliver the contract in

Louisiana—certainly had no intention that Louisiana law or some

purported anomaly of Louisiana law would govern the Atlantic

contract or nullify the obligation to supply gas for the life of the

contract (Item E, R. 267, 278, 279).

29

is now asking this Court for a sixth decision on issues which

are purely commercial and private in nature. We submit

that this Court should finally put this litigation to rest and

deny the petition for a writ of certiorari.

Respectfully submitted,

~

Maruias F. Correa,

80 Pine Street, —

New York 5, New York,

Counsel for Texas Gas

Transmission Corporation

Gavin H. Cocnray,

713-723 Kentucky Home Life Building,

Louisville 2, Kentucky,

Counsel for Louisville Gas

€ Electric Company.

ArtTuHuR L. Corin,

Yale Station,

New Haven, Connecticut»

Cuares F. Detmar, JR.,

IMMANUEL Kogy,

80 Pine Street,

New York 5, New York,

Of Counsel.

October 11, 1961