Petitioners Reply Brief — Shell Oil Co. v. Federal Power Commission (No. 399)

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SHELL OIL COMPANY,

Petitioner,

FEDERAL POWER COMMISSION, TEXAS GAS TRANS.

MISSION CORPORATION and LOUISVILLE GAS &

BLE THE COMPANY:

Ri sponde nts,

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE THIRD CIRCUIT.

REPLY OF PETITIONER TO RESPONDENTS’

BRIEFS IN OPPOSITION.

Oniver LL. Stone.

SOOO ROC AL Building.

AO West 50th Street,

New York ZO. New York.

GiorGk CO Senor Nnperarer. IR.

Shell Building,

Of Counsel: New Orleans 13. Louisiana.

Wirtiam FL RENNEY, Attorneys for Petitioner,

3965 RO CLA. Building,

40 West 50th Street,

New York 20, New York

Wittras Wo Westerrinep., JrR.,

Shell Building,

New Orleans 15, Louisiana.

‘iisicsmaccaiiaas nance one a

INDEX.

Tse oF CasEs.

Phillips Petroleum Co. vo Wisconsim, 3847 U.S. 672

(1954)

Lake v. LeJeune, 226 La. 48, 74 So. 2d S89

Louis Werner Sawmill Co. v. O'Shee, 35 So. 919 at

9? 1

Morgan’s La. & T.R. & S. S. Co. v. Stewart, 119 La.

302, 44 So. 138, 143 (1907)...

Wampler v. Wampler, 239 La. 215, 118 sso. 2d 423

CR mc dissomepssaeasis See Ren ee

Propper v. Clark, 337 U. %. 4772......0.. 200... 00000000.

Thompson v. Maqnolia, 3909 U.S. 478. ...

Commissioner v. Sunnen, 333 U.S. 591.0...

MISCELLANFOUS.

38 C. J.S., Modern Ciril Law, p. 940.....................

PAGE

No. 399.

IN THE

Supreme Court of the Anited States

Ocroser Term, 1961.

SHELL O1. Company,

Petitioner,

FEvERAL Power Commission, Texas Gas TRANSMISSION

CORPORATION and LovisvitLe Gas & ELEctric Company,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI 70 THE UNITED STATES

COURT OF APPEALS FOR THE THIED CIRCUIT.

REPLY OF PETITIONER TO RESPONDENTS’

BRIEFS IN OPPOSITION.

Respondents attempt to belittle the general importance

of this case by ignoring the circumstance that the question

of enforceability, in the posture of this proceeding, of neces-

sity involve. a conflict of laws question as to what law gov-

erns the enforceability of a rate schedule on file with the

Federal Power Commission. In view of the Phillips deci-

sion® and its artermath of the vast aumber of privately

negotiated gas sales contracts which Lave been and will

continue to be filed as ‘trate schedules’’, it is unrealistic to

contend, as do respondents, that the question of what law

goveris construction and enforceability of such ‘‘rate

schedules’’, is not of general importance.

* Phillips Potroloum Co. v. Wisconsin, 847 U.S. 672 (1954).

2

The Court of Appeals saw fit to rely upon ‘‘general con-

tract doctrine’? which, in the light in which the case was

briefed and argued to it, was but a characterization by the

court of the federal substantive law concept which it felt

should govern. True, the court said, but without citation of

a single authority, that ‘‘Louisiana law, in this instance at

least, does not differ from general contract doctrine’’. Thus

the court assumed, without coming to grips with the prob-

lem, that Louisiana law was the same as general contract

doctrine. Respondents claim that the court below actually

applied Louisiana law.*’

Assuming, arguendo, that the court below reached its

conelusion by specifically applying Louisiana law, its con-

clusion is in conflict with the settled statutory and judicial

law of Louisiana and should not be permitted to stand. If

it does, it will create unnecessary friction between State and

Federal judiciaries.

Respondents, though they accuse us of being confused

as to the law of Louisiana in that we, they say, are incapable

of distinguishing between sale and contract to sell, demon-

strate their own complete misconception of the Louisiana

doctrine of suspensive condition. Respondents argue, in

effect, that if a contract ‘of sale*’ is subject to a suspensive

condition, it can none the less be valid as a ‘‘contraet to

sell’’.

Respondents are under a serious misapprehension as to

the suspensive condition ina sale and in a contract to sell.**

* Br. for Government, p. 10; Br. for Texas Gas & Louisville.

p. 14.) In this latter brief it is said (p. 14) that the court below

‘under Loutstana law specifically” held the Atlantic contract to be

enforceable.

** Respondents speak of the right to recover damages. That

nusses the tssve of whether there was an euforceable contract. to

buy gas. Further, we deny that in Louisiana an action for damages

would lie. Lows Werner Sawmill Co. v. O'Shee, 35 So. 919 at 921;

Lake v. LeJeune, 226 La. 48, 74 So. 2d 899.

°

3

The Louisiana law is crystal clear that in either one, ie., a

sale or a contract to sell, fixed price is an absolute essential

to enforceability. If in a purported sale the price is not

fixed but is subject to uncertainty as to its fixing, the sale

is of no effect until the price is fixed. If the document is

a purported contract to sell (as the Atlantic contract was),

but is subject to uncertainty as to the fixing of the price.

it is of no effect as a contract to sell, unless and until the

price is actually fixed. LSA-C.C. Arts. 2462, 2456 and

2021, and the authorities discnssed in our petition, leave

no doubt about this.

Respondents impute to us an argument we have never

made, and then set about to destroy it. They in effect say

that we say that if the Atlantic contract did not constitute

a sale for 1953-1958 until price was fixed, it did not con-

stitute a contract to sell. We have said no such thing. On

the contrary, we have said that the Atlantic contract pur-

ported to be a contract to sell gas in the future and it was

not enforceable as a contract to sell gas until the price was

actually fixed (obviously it was not enforceable as a sale

either).

Respondents have apparently read LSA-C.C. Art. 2021

and concluded tliat the requirement to meet and discuss

price or to submit the matter to arbitration is an ‘‘obliga-

tion’’ and is not subject to a suspensive condition. But

the point which they completely overlook is that the term

‘‘obligation’’ as used in Article 2021 and in ti Civil Law,

is synonymous with contract.*. That Article is not speaking

* The term *‘obligations’’ as used in the Louisiana Civil Code is

synonymous with contract. Morgan's La. & T. Rod 8. 8. Co. \.

Stewart, 119 La. 392, 44 So. 138, 143 61907): ‘Civil obligations

_ are of two kinds: (1) ..., (2) Such as arise from the consent

of the parties who are bound by them which are called contracts or

conventional obligations.’” See also 58 C..S.. Modern Civil Law.

p. 840. **The law of obligation has a broader meaning in the civil

law than insthe common law in that ‘it signifies rights as well as

duties. Py

4

of the promises that may be made by either party to a

contract ‘but rather of the contract itself that is made to

depend on an uncertain event. If, as in this 2ase, the con-

tract is a ‘‘promise to sell’’ it cannot be effective or enforce-

able as a promise to sell in the absence of a price. Here

the naming of the price, the missing essential element of

the promise to sell, is referred to the future and it is made

to depend on an uncertain event. Thus the promise to sell

is subject to a suspensive condition and cannot come into

effect until the condition is satisfied. Although admittedly

the parties promised tu meet an? discuss price at or before

a specified time, and even to submit the price to arbitration

if one party timely invoked it, yet the fixing of price was

an ‘‘uncertain event’’ because ueither the meeting of the

parties nor the arbitrators was certain to result in fixed

price.®

In summary, if the price, whether in a sale or contract

to sell, is left to future negotiations, or to arbitration, the

sale or contract to sell (whatever it purports to be) is

subject to a suspensive condition and is of no effect what-

ever, and gives rise to no enforceable rights, until the condi-

tion is satisfied and the price is actually fixed. See the

authorities cited in our petition and also: Wampler v.

Wampler, 239 La. 315, 118 So. 2d 423 (1960).

Petitioner is quite serious in urging the propriety of

this Court directing the court below to hold this case in

abeyance pending determination by the Louisiana court

of the single issue of Louisiana law on which, petitioner

* Texas Gas and Louisville say that it is not the law of Louisiana

that a price mechanism must be immune from every possible frustra-

tion, even by causes beyond the whim or caprice of the parties.

They fail to recognize that the feature which makes a contract sub-

ject to a suspensive condition is not that the condition is uncertain

because of the whim or caprice of the parties but simply because it

ts uncertain for whatever reason.

5

submits, this case depends. It is true, as we readily recog-

nized in our petition, that in Propper v. Clark, 337 U.S.

472, this Court said that the federal courts cannot allow

difficulty of an issue of state law to deter them from

deciding the case, when the issue cemes to them in diversity

and federal question cases—matters expressly charged to

them by Congress.

The rationale of the Propper case. however, emphasizes

the propriety of referral to the state court here. Our

request is supported by Thompson v. Magnolia, 309 U.S.

478. In Propper, this Court said of referral to state courts:

‘‘This suggested procedure has been followed in

order to avoid a decision on a Federal constitutional

issue ... and where the only issue in the case was

one of state law, although Federal jurisdiction was

based on the Bankruptey Act, 11 U. S. C. A. 41

et seq. Thompson 7. Magnolia Petroleum Co., 309

U.S. 478, 60 S. Ct. 626, 84 L. Fd. 876.”’

In Thompson v. Magnolia, the Court directed its trustee to

file suit in the state court. Here suit in the state court is

already pending, anc there is every assurance that it will,

go to final determination as it presents to the state court,

not a request for an advisory opinion, but a demand for

$117,584.85, which petitioner sincerely believes is due it

under its contract with Texas Gas for deliveries prior to

June 7, 1954.

The only real resistance to the request for abstention

offered in the Government’s brief is the statement (p. 16):

‘“‘Tf certiorari is denied, settled doctrines wonld

dictate that the decision in this case would be binding

in the Louisiana action.’’

Apart from the fact that this does not seem the appropriate

place to raise the plea of res judicata concerning another

6

case pending before a different court, the authorities cited

in support of that statement do not bear it out. In fact,

one of the cited cases, Commissioner v. Sumnen, 333 U. S.

591, destroys the position asserted. Here the issue is the

price of gas on June 7, 1954 when the Commission first

assumed jurisdiction, whereas in the state court proceed-

ing petitioner sues for the price of gas sold prior to June 7,

1954. Involved in the Sunnen case was tax on income under

a patent contract. The Court held that a decision by the

Board of Tax Appeals with respect to tax :iability on

income from a patent license contract was not binding in

a subsequent case involving a different tax year, but pre-

senting complete identity of facts, issues and parties.

For the reasons herein and in the petition for certiorari,

it is respectfully submitted that the petition should he

granted. |

Respectfully submitted,

Onrver L. Stone,

Georce C. ScHOENBERGER, JR.

Attorneys for Petitioner

Of Counsel:

Wiruram F. Kenney,

Wrui1am W. WESTERFIELD, JR.

October 17, 1961.