California v. Lo-Vaca Gathering Company

PETITIONER: California
RESPONDENT: Lo-Vaca Gathering Company
LOCATION: Longshore and Warehouse Union

DOCKET NO.: 46
DECIDED BY: Warren Court (1962-1965)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 379 US 366 (1965)
ARGUED: Nov 17, 1964 / Nov 18, 1964
DECIDED: Jan 18, 1965

Facts of the case

Question

Media for California v. Lo-Vaca Gathering Company

Audio Transcription for Oral Argument - November 17, 1964 in California v. Lo-Vaca Gathering Company

Audio Transcription for Oral Argument - November 18, 1964 in California v. Lo-Vaca Gathering Company

Earl Warren:

-- 47 and 48.

Mr. Solomon, you may continue with your argument.

Richard A. Solomon:

May it please the Court.

As I made clear yesterday all of the gas purchases involved in this case like all of the other gas purchases that El Paso makes from producers or intermediate pipelines go into its regular system and are used primarily for sales in interstate commerce for resale.

The only sense in which these sales are restricted for intrastate or for internal use by El Paso is that, the contracts between El Paso and the sellers purport to saw a tribute to gas.

And the majority of the Fifth Circuit below believed this process which they called contractual segregation was sufficient to remove these sales from the jurisdiction of this Commission but I think what we think is the correct law is summed up shortly and succinctly as probably as it could be done in the dissenting opinion of Judge Reeves.

And I'm referring to page 376 of the short Volume 2 of the appendix.

And what Judge Reeves said there was, whether gas is transported in interstate commerce, I'm reading from the first full paragraph on that page, whether gas is transported in the interstate commerce or is sold in interstate commerce for resale depends not on what the party say about the transaction but what is done with the gas.

This Court referring to the Fifth Circuit so held in Deep South Oil Company and its companion case Shell Oil Company, both of which were referred to on our briefs.

In decisions of analogous question, the Supreme Court has continually disregarded contracts, which give a fictional construction to business transactions, and then he cites a series of cases, which we also discuss in our brief.

As said in Connecticut Company versus the Power Commission, 324 U.S. 515 and 529, federal jurisdiction was to follow the flow of electric energy, and engineering, and scientific rather than a legalistic or governmental test.

And I might just add that this language was used by this Court only last year in the Colton case.

Now basically, this is our argument.

Jurisdiction in both the gas and power fields --

Potter Stewart:

What case last year in this Court, you just said --

Richard A. Solomon:

It was called Federal Power Commission against Southern California Edison.

And it appears at 376 U.S. 209, Footnote 5.

This was the case involving whether the ga -- whether the power from Boulder Dam --

Potter Stewart:

Yes, yes --

Richard A. Solomon:

-- is in engineering.

There are number instances where this has been so held by the lower courts in this Court.

This is really the first time to our knowledge where any lower court has held that this type of contractual segregation is permissible.

For example, in the Deep -- in the Shell Oil case which I mentioned a second ago, their sale was made by producers in Texas to a Texas company which processed the gas, which was casinghead gas, to extract natural gasoline and other products and then sold what was left to another company which send it in to interstate commerce.

And it was argued that that was both a local sale and that it was not a sale for resale since the contract provided that the purpose of this sale was for manufacturer at the second plant.

But the Fifth Circuit simply said that the legal determination of the question rests not on the parties' use of the word manufacture but upon the actual disposition of the gas.

Now, Judge Reeves also said in the same opinion that careful consideration of the cases upon which the lower court relied and upon which my opponents here rely permit a finding -- none of them permit a finding of “nonjurisdictional” status solely on the language of the contract in each case.

In addition to the language purporting to restrict the use of gas or electricity, there was also an actual flow of gas or electricity from the “nonjurisdictional” seller into the particular restricted use.

And with the brief time I have left, I'd like to discuss what I think are the two principal props for the lower court's opinion and why he was -- why it was wrong.

I think this whole device which was new with El Paso here and which is by no means something which was common in the gas industry up to this time of the sale.

I think this whole idea stems from some language that this Court included in the United States v. PUC of California at 345 U.S.