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UNITED GAS PIPE LINE CO. v. MEMPHIS LIGHT

decided*fn*: December 8, 1958.

UNITED GAS PIPE LINE CO
v.
MEMPHIS LIGHT, GAS AND WATER DIVISION ET AL.



CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT.

Warren, Black, Frankfurter, Douglas, Harlan, Brennan, Whittaker, Stewart; Clark took no part in consideration or decision of these cases

Author: Harlan

[ 358 U.S. Page 104]

 MR. JUSTICE HARLAN delivered the opinion of the Court.

We review a judgment of the Court of Appeals for the District of Columbia Circuit which directed the Federal Power Commission to reject certain rate schedules for

[ 358 U.S. Page 105]

     natural gas filed with it by petitioner United Gas Pipe Line Company (United) under § 4 (d) of the Natural Gas Act of 1938, 52 Stat. 821, as amended, 15 U. S. C. § 717 et seq.

United, a regulated natural gas pipeline company, supplies gas to Texas Gas Transmission Corporation (Texas Gas), Southern Natural Gas Company (Southern Gas), and Mississippi Valley Gas Company (Mississippi),*fn1 under a number of long-term service agreements made and filed with the Commission prior to September 30, 1955, each of which contains the following pricing provision:*fn2

"All gas delivered hereunder shall be paid for by Buyer under Seller's Rate Schedule [the appropriate rate schedule designation is inserted here], or any effective superseding rate schedules, on file with the Federal Power Commission. This agreement in all respects shall be subject to the applicable provisions of such rate schedules and to the General Terms and Conditions attached thereto and filed with the Federal Power Commission which are by reference made a part hereof." (Italics supplied.)

[ 358 U.S. Page 106]

     On September 30, 1955, United, proceeding under § 4 (d) of the Natural Gas Act, filed with the Commission new rate schedules, together with supporting data, increasing its prices for gas as of November 1, 1955, by amounts estimated to yield total additional annual revenues of $9,978,000 from sales under the agreements here involved and from other sales also subject to the Commission's jurisdiction. Exercising its powers under § 4 (e) of the Act, the Commission ordered a hearing as to the propriety of the new rates, and, except as to those relating to sales of gas for resale for industrial use only, suspended their effectiveness from November 1, 1955, to April 1, 1956, the maximum period of suspension authorized by the statute.*fn3 Thereafter Texas Gas, Southern Gas, Mississippi,

[ 358 U.S. Page 107]

     Memphis, and others claiming an interest in the proceedings were permitted to intervene, and on February 6, 1956, the Commission commenced the taking of evidence as to the lawfulness of United's new rates under the "just and reasonable" standard of § 4 (e).

On February 27, 1956, this Court announced its decision in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332, in which it was held that United could not escape a contract obligation to furnish Mobile with natural gas at a single specified price for a term of

[ 358 U.S. Page 108]

     years by unilaterally filing an increased rate schedule under § 4 (d) of the Natural Gas Act. Following that decision the respondents in the present case for the first time moved the Commission to reject United's new rate schedules, claiming that their filing constituted an attempt on the part of United to change unilaterally the terms of its service agreements with Texas Gas, Southern, and Mississippi, and that such an attempt ran afoul of our decision in Mobile. Construing these agreements as in effect constituting undertakings by the purchasers to pay United's "going" rates, as established from time to time in accordance with the procedures prescribed by the Natural Gas Act, the Commission refused to reject United's filings. It distinguished Mobile on the ground that the contract there involved specified a single fixed rate for the gas to be supplied under it which United was contractually foreclosed from changing without the agreement of the purchaser. 16 F. P. C. 19, 15 P. U. R. 3d 279.

The Court of Appeals reversed. Accepting for the purposes of its decision the Commission's interpretation of United's service agreements, the Court of Appeals held that nonetheless the Commission lacked "jurisdiction" to consider under § 4 (e) the lawfulness of United's new rate schedules. The court regarded Mobile as establishing that § 4 (e) applies only to rate changes whose specific amount has been mutually agreed upon between a seller and purchaser, and that where a purchaser has not so agreed, a rate change can be effected only by action of the Commission under § 5 (a) of the Act.*fn4 Since the rates

[ 358 U.S. Page 109]

     set forth in United's new schedules had not been agreed to by its customers, the Court of Appeals therefore held that the Commission had no jurisdiction to proceed under § 4 (e) to examine them, and that accordingly United's filings under § 4 (d) should have been rejected. 102 U. S. App. D.C. 77, 250 F.2d 402. We granted certiorari because of the claim that the Court of Appeals misinterpreted our decision in Mobile, and on ...


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