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PANAMA REFINING CO. ET AL. v. RYAN ET AL. AMAZON PETROLEUM CORP. ET AL. V. RYAN ET AL.

decided: January 7, 1935.

PANAMA REFINING CO. ET AL
v.
RYAN ET AL.

AMAZON PETROLEUM CORP. ET AL
v.
RYAN ET AL.



CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIFTH CIRCUIT.

Hughes, Van Devanter, McReynolds, Brandeis, Sutherland, Butler, Stone, Roberts, Cardozo

Author: Hughes

[ 293 U.S. Page 405]

MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.

On July 11, 1933, the President, by Executive Order, prohibited "the transportation in interstate and foreign commerce of petroleum and the products thereof produced or withdrawn from storage in excess of the amount permitted to be produced or withdrawn from storage by any State law or valid regulation or order prescribed thereunder, by any board, commission, officer, or other duly

[ 293 U.S. Page 406]

     authorized agency of a State."*fn1 This action was based on § 9 (c) of Title I of the National Industrial Recovery Act of June 16, 1933, 48 Stat. 195, 200, 15 U. S. C. Tit. I, § 709 (c). That section provides:

"Sec. 9 . . .

"(c) The President is authorized to prohibit the transportation in interstate and foreign commerce of petroleum and the products thereof produced or withdrawn from storage in excess of the amount permitted to be produced or withdrawn from storage by any state law or valid regulation or order prescribed thereunder, by any board, commission, officer, or other duly authorized agency of a State. Any violation of any order of the President issued under the provisions of this subsection shall be punishable by fine of not to exceed $1,000, or imprisonment for not to exceed six months, or both."

On July 14, 1933, the President, by Executive Order, authorized the Secretary of the Interior to exercise all the powers vested in the President "for the purpose of enforcing

[ 293 U.S. Page 407]

     Section 9 (c) of said act and said order" of July 11, 1933, "including full authority to designate and appoint such agents and to set up such boards and agencies as he may see fit, and to promulgate such rules and regulations as he may deem necessary."*fn2 That order was made under § 10 (a) of the National Industrial Recovery Act, 48 Stat. 200, 15 U. S. C. 710 (a), authorizing the President "to prescribe such rules and regulations as may be necessary to carry out the purposes" of Title I of the National Industrial Recovery Act and providing that "any violation of any such rule or regulation shall be punishable by fine of not to exceed $500, or imprisonment for not to exceed six months, or both."

On July 15, 1933, the Secretary of the Interior issued regulations to carry out the President's orders of July 11 and 14, 1933. These regulations were amended by orders

[ 293 U.S. Page 408]

     of July 25, 1933, and August 21, 1933, prior to the commencement of these suits. Regulation IV provided, in substance, that every producer of petroleum should file a monthly statement under oath, beginning August 15, 1933, with the Division of Investigations of the Department of the Interior, giving information with respect to the residence and post-office address of the producer, the location of his producing properties and wells, the allowable production as prescribed by state authority, the amount of daily production, all deliveries of petroleum, and declaring that no part of the petroleum or products produced and shipped had been produced or withdrawn from storage in excess of the amount permitted by state authority. Regulation V required every purchaser, shipper (other than a producer), and refiner of petroleum, including processors, similarly to file a monthly statement under oath, giving information as to residence and post-office address, the place and date of receipt, the parties from whom and the amount of petroleum received and the amount held in storage, the disposition of the petroleum, particulars as to deliveries, and declaring, to the best of the affiant's information and belief, that none of the petroleum so handled had been produced or withdrawn from storage in excess of that allowed by state authority. Regulation VII provided that all persons embraced within the terms of § 9 (c) of the Act, and the Executive Orders and regulations issued thereunder, should keep "available for inspection by the Division of Investigations of the Department of the Interior adequate books and records of all transactions involving the production and transportation of petroleum and the products thereof."

On August 19, 1933, the President, by Executive Order, stating that his action was taken under Title I of the National Industrial Recovery Act, approved a "Code of

[ 293 U.S. Page 409]

     Fair Competition for the Petroleum Industry."*fn3 By a further Executive Order of August 28, 1933, the President designated the Secretary of the Interior as Administrator, and the Department of the Interior as the Federal Agency, to exercise on behalf of the President all the powers vested in him under that Act and Code. Section 3 (f) of Title I of the National Industrial Recovery Act provides that when a code of fair competition has been approved or prescribed by the President under that title, "any violation of any provision thereof in any transaction in or affecting interstate or foreign commerce shall

[ 293 U.S. Page 410]

     be a misdemeanor, punishable by fine of not more than $500 for each offense, each day of said violation to be deemed a separate offense."

This "Petroleum Code" (in its original form and as officially printed) provided in § 3 of Article III relating to "Production," for estimates of "required production of crude oil to balance consumer demand for petroleum products" to be made at intervals by the Federal Agency. This "required production" was to be "equitably allocated" among the several States. These estimates and allocations, when approved by the President, were to be deemed to be "the net reasonable market demand," and the allocations were to be recommended "as the operating schedules for the producing States and for the industry." By § 4 of Article III, the subdivision, with respect to producing properties, of the production allocated to each State, was to be made within the State. The second paragraph of that section further provided:

"If any subdivision into quotas of production allocated to any State shall be made within a State any production by any person, as person is defined in Article I, Section 3 of this code, in excess of any such quota assigned to him, shall be deemed an unfair trade practice and in violation of this code."

By an Executive Order of September 13, 1933, modifying certain provisions of the Petroleum Code, this second paragraph of § 4 of Article III was eliminated. It was reinstated by Executive Order of September 25, 1934.

These suits were brought in October, 1933.

In No. 135, the Panama Refining Company, as owner of an oil refining plant in Texas, and its co-plaintiff, a producer having oil and gas leases in Texas, sued to restrain the defendants, who were federal officials, from enforcing Regulations IV, V and VII prescribed by the Secretary of the Interior under § 9 (c) of the National Industrial

[ 293 U.S. Page 411]

     Recovery Act. Plaintiffs attacked the validity of § 9 (c) as an unconstitutional delegation to the President of legislative power and as transcending the authority of the Congress under the commerce clause. The regulations, and the attempts to enforce them by coming upon the properties of the plaintiffs, gauging their tanks, digging up pipe lines, and otherwise, were also assailed under the Fourth and Fifth Amendments of the Constitution.

In No. 260, the Amazon Petroleum Corporation, and its co-plaintiffs, all being oil producers in Texas and owning separate properties, sued to enjoin the Railroad Commission of that State, its members and other state officers, and the other defendants who were federal officials, from enforcing the state and federal restrictions upon the production and disposition of oil. The bill alleged that the legislation of the State and the orders of its commission in curtailing production violated the Fourteenth Amendment of the Federal Constitution. As to the federal requirements, the bill not only attacked § 9 (c) of the National Industrial Recovery Act, and the regulations of the Secretary of the Interior thereunder, upon substantially the same grounds as those set forth in the bill of the Panama Refining Company, but also challenged the validity of provisions of the Petroleum Code. While a number of these provisions were set out in the bill, the contest on the trial related to the limitation of production through the allocation of quotas pursuant to § 4 of Article III of the Code.

As the case involved the constitutional validity of orders of the state commission and an interlocutory injunction was sought, a court of three judges was convened under § 266 of the Judicial Code (28 U. S. C. 380). That court decided that the cause of action against the federal officials was not one within § 266 but was for the consideration of the District Judge alone. The parties agreed that the causes of action should be severed and that each cause

[ 293 U.S. Page 412]

     should be submitted to the tribunal having jurisdiction of it. Hearing was had both on the applications for interlocutory injunction and upon the merits. The court of three judges, sustaining the state orders, denied injunction and dismissed the bill as against the state authorities. 5 F.Supp. 633, 634, 639.

In both cases against the federal officials, that of the Panama Refining Co. and that of the Amazon Petroleum Corp., heard by the District Judge, a permanent injunction was granted. 5 F.Supp. 639. In the case of the Amazon Petroleum Corp., the court specifically enjoined the defendants from enforcing § 4 of Article III of the Petroleum Code, both plaintiffs and defendants, and the court, being unaware of the amendment of September 13, 1933.

The Circuit Court of Appeals reversed the decrees against the federal officials and directed that the bills be dismissed. 71 F.2d 1, 8. The cases come here on writs of certiorari granted on October 8, 1934.

First. The controversy with respect to the provision of § 4 of Article III of the Petroleum Code was initiated and proceeded in the courts below upon a false assumption. That assumption was that this section still contained the paragraph (eliminated by the Executive Order of September 13, 1933) by which production in excess of assigned quotas was made an unfair practice and a violation of the Code. Whatever the cause of the failure to give appropriate public notice of the change in the section, with the result that the persons affected, the prosecuting authorities, and the courts, were alike ignorant of the alteration, the fact is that the attack in this respect was upon a provision which did not exist. The Government's announcement that, by reason of the elimination of this paragraph, the Government "cannot, and therefore it does not intend to, prosecute petitioners or other producers of oil in Texas, criminally or otherwise,

[ 293 U.S. Page 413]

     for exceeding, at any time prior to September 25, 1934, the quotas of production assigned to them under the laws of Texas," but that if "petitioners, or other producers, produce in excess of such quotas after September 25, 1934, the Government intends to prosecute them," cannot avail to import into the present case the amended provision of that date.*fn4 The case is not one where a subsequent law is applicable to a pending suit and controls its disposition.*fn5 When this suit was brought, and when it was heard, there was no cause of action for the injunction sought with respect to the provision of § 4 of Article III of the Code; as to that, there was no basis for real controversy. See California v. San Pablo, 149 U.S. 308, 314; United States v. Alaska Steamship Co., 253 U.S. 113, 116; Barker Co. v. Painters' Union, 281 U.S. 462. If the Government undertakes to enforce the new provision, the petitioners, as well as others, will have an opportunity to present their grievance, which can then be considered, as it should be, in the light of the facts as they will then appear.

For this reason, we pass to the other questions presented and we express no opinion as to the interpretation or validity of the provisions of the Petroleum Code.

Second. Regulations IV, V and VII, issued by the Secretary of the Interior prior to these suits, have since been amended. But the amended regulations continue substantially

[ 293 U.S. Page 414]

     the earlier requirements, and expand them. They present the same constitutional questions, and the cases as to these are not moot. Southern Pacific Co. v. Interstate Commerce Comm'n, 219 U.S. 433, 452; Southern Pacific Terminal Co. v. Interstate Commerce Comm'n, 219 U.S. 498, 514-516; McGrain v. Daugherty, 273 U.S. 135, 181, 182.

The original regulations of July 15, 1933, as amended July 25, 1933, and August 21, 1933, were issued to enforce the Executive Orders of July 11 and July 14, 1933. The Executive Order of July 11, 1933, was made under § 9 (c) of the National Industrial Recovery Act, and the Executive Order of July 14, 1933, under § 10 (a) of that Act, authorizing the Secretary of the Interior to promulgate regulations, was for the purpose of enforcing § 9 (c) and the Executive Order of July 11, 1933. The amended regulations have been issued for the same purpose. The fundamental question as to these regulations thus turns upon the validity of § 9 (c) and the executive orders to carry it out.

Third. The statute provides that any violation of any order of the President issued under § 9 (c) shall be punishable by fine of not to exceed $1,000, or imprisonment for not to exceed six months, or both. We think that these penalties would attach to each violation, and in this view the plaintiffs were entitled to invoke the equitable jurisdiction to restrain enforcement, if the statute and the executive orders were found to be invalid. Philadelphia Co. v. Stimson, 223 U.S. 605, 620, 621; Terrace v. Thompson, 263 U.S. 197, 214-216; Hygrade Provision Co. v. Sherman, 266 U.S. 497, 499, 500.

Fourth. Section 9 (c) is assailed upon the ground that it is an unconstitutional delegation of legislative power. The section purports to authorize the President to pass a prohibitory law. The subject to which this authority relates is defined. It is the transportation in interstate and

[ 293 U.S. Page 415]

     foreign commerce of petroleum and petroleum products which are produced or withdrawn from storage in excess of the amount permitted by state authority. Assuming for the present purpose, without deciding, that the Congress has power to interdict the transportation of that excess in interstate and foreign commerce, the question whether that transportation shall be prohibited by law is obviously one of legislative policy. Accordingly, we look to the statute to see whether the Congress has declared a policy with respect to that subject; whether the Congress has set up a ...


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