United Gas Pipe Line Company v. Memphis Light, Gas & Water Division

PETITIONER:United Gas Pipe Line Company
RESPONDENT:Memphis Light, Gas & Water Division
LOCATION:Union Station

DOCKET NO.: 23
DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the District of Columbia Circuit

CITATION: 358 US 103 (1958)
ARGUED: Oct 20, 1958 / Oct 21, 1958
DECIDED: Dec 08, 1958

Facts of the case

Question

  • Oral Argument – October 20, 1958
  • Audio Transcription for Oral Argument – October 20, 1958 in United Gas Pipe Line Company v. Memphis Light, Gas & Water Division

    Audio Transcription for Oral Argument – October 21, 1958 in United Gas Pipe Line Company v. Memphis Light, Gas & Water Division

    Earl Warren:

    Numbers 23, 25 and 26.

    Mr. Morrow, you may continue your argument.

    George E. Morrow:

    Mr. Chief Justice and may it please the Court.

    Yesterday there was a question from the bench to the effect can Natural Gas Companies change their rates by any means to their customers without the customer’s consent under our theory of this matter.

    And the answer of which I gave was “No,” in solely in the reference of Section 4 of the Act.

    Now, it is of course quite clear that Natural Gas Companies can change their rights — their rates without their customer’s consent even their contract rates anytime that they can convince the Commission that they deserve an increase in proceedings under Section 5 (a) of the Act.

    That is the remedy which this Court said in the Mobile case was always available to a Natural Gas Company, whose rates were too low to enable it, to carry on its public service functions properly.

    Now, the answer to that question leads me into maybe putting my last chapter first as it were so that I can explain to the Court just what we are driving at, just what the system of regulation under Section 4 and 5 of the Act was intended to be by Congress as we see it.

    I think it becomes clear from what I’ve already said just now, that the only issue in this case is whether United should have filed under or should have applied for a rate increase under Section 5 of the Act instead of as it did under Section 4 of the Act.

    There’s no question that if United had a need for a rate increase that it could get it.

    The only question is whether it could get it under Section 5 or under Section 4.

    Now, what’s the difference?

    What’s the practical difference between these two procedures?

    Well, Section 5 of the Act is an administrative procedure whereby the Federal Power Commission in its role as the protector of the consumer interest, the public interest investigates the rate of a Natural Gas Company to determine whether that rate conforms to the public interest.

    And if the rate does not conform to the public interest, then the Federal Power Commission issues an order at the conclusion of the proceedings which modifies the rate to make it conform.

    And the new rate thus modified goes into effect from and after the date of the final order in the proceedings.

    Now, the principal difference under Section 4 has to do with the refund procedure.

    Under Section 4 of the Act the Commission also exercises the same rate review power which it exercised under Section 5, but it — and — and it’s reviewing the existing rates of Natural Gas Companies.

    The only difference —

    Potter Stewart:

    No, you’re talk about the factual difference, it does not matter (Inaudible) what is the difference if any in time making (Inaudible) for proceeding exercises.

    George E. Morrow:

    That’s exactly what I’m getting to Your Honor, right now.

    The difference is the time when the rate goes into effect.

    Under a Section 4 proceeding, if the Commission suspends the rate, then it goes into effect five months later.

    At least it goes into provisional effect.

    It’s a sort of a pendente lite effect because at the end of the proceedings, the Commission again, after having fully considered the rate, again issues its order might find the rate to conform to the public interest.

    But there, its order had made retroactive by this refund procedure, because if the rate which is filed is higher than it ought to be according to the Commission’s final order, then the excess has to be scrapped off and refunded to the customer.

    So, that the effect is that you’ve only had one rate in effect all the time.

    So, the difference between — practical difference between Section 5 and Section 4, is that the rate goes into effect earlier in a Section 4 proceeding.

    It’s what you might call a quicker proceeding and Section 5 the slower proceeding.

    Potter Stewart:

    How long does the effect (Inaudible)?

    George E. Morrow:

    Your Honor has again gotten right to the point ahead on me.

    Section 5 proceedings historically have taken a long time.

    The Commission in its brief cites horrible examples up to five years or six years in which it has taken, but I submit Your Honor that Section 5 proceedings need not take that long.

    You see, as Chairman Kuykendall of the Commission has pointed out since the decision in the lower court, if a Section 5 proceeding is being used — well, let me put it this way, up to this time, Section 5 proceedings have only being used to decrease the rates of Natural Gas Companies.

    So, that the decreased rate does not go into effect until the end of the Section 5 proceeding.

    Well, quite obviously, the Natural Gas Company is not anxious for the proceeding to end.

    As — as Mr. Kuykendall, Chairman of the Commission said the pipelines have been running away from the Commission in these five-day proceedings up to now.

    And he points out that there might be — that it might be possible to process them in a very much shorter time where the pipeline company wants an increase and is running with the Commission cooperating with the Commission staff in every way and working to get the — the proceedings to a conclusion.

    Nevertheless, even in that sort of a situation, the chances are that a Section 5 proceeding, the rate is still the slower proceeding of the two, the rate goes into effect later.

    Now, this brings me down to — to really what we’re aiming at.

    What we are asking is what we think Congress intended was nothing more than a fair break to the Natural Gas Company and the distributor company.

    We expect — we — we think that Congress intended to put them on the same procedural level.

    Here’s what I mean by that.

    Up until this time, Section 5 (a) has always been the proceeding by which a customer can get a decrease in rate.

    Section 5 (a) specifically provides that a Natural Gas Company which thinks it’s rates are too high can go to the Commission and — in effect, this what happen – happens.

    The company goes to the Commission and says, “Mr. Commission, we are bound by a long-term contract without natural gas supplier and these rates we think are too high.

    They’re not in the public interest.

    Won’t you Mr. Commission exercise your regulatory jurisdiction, investigate these rates and if you find that too high, won’t you give us relief in the public interest regardless of our contracts because you’ve got the paramount power over those in the public interest.”

    Now under a Section 5 proceeding as illuminated by the Mobile case, the Natural Gas Company which wants an increase can do exactly the same thing.

    It also goes to the Commission and says, “Mr. Commission, we are bound by our long-term contracts with our customers” and may I pause to say that there’s nothing involved in this case except long-term contracts, but all of the United jurisdictional contracts are long-term contracts.

    “We are bound by our long-term contracts to our jurisdictional costumers.

    We think we deserve an increase but our customer won’t agree to that increase.

    Now, won’t you Mr. Commission” says the pipeline, “Won’t you investigate our present existing rates and if you find that they are so low, that they are not — that they interfere with our ability to carry out our public utility function, won’t you grant us the right to increase those rates,” filed under Section 4.

    Now, you see in that way, for the first time, the public — that the Natural Gas Pipeline Company and the distributor company are placed on exactly the same procedural point.

    The distributor company’s right to a decrease is just as great, just as firm as the — in — in a case where it deserves it as the Natural Gas Company’s right to an increase is in the case where the Natural Gas Company deserves it.

    So all this does, this proceeding that we think United should have taken, all it does is to put the pipelines on the same procedural plane with the distributor, the distributor who directly serves the consumer, the consumer, who is the darling of Congress.

    The consumer who’s protection was the primary purpose of the Natural Gas Act.

    That’s all we are asking this Court to decide in this case.

    That when there has been no agreed upon increase between the pipeline and its contract costumers, they go under Section 5.

    When there has been no agreed upon decrease, between the pipeline and its contract costumer, the customer goes in under Section 5.

    George E. Morrow:

    Now, that — that makes everything in the Act fall into place.

    It gives everything a reasonableness.

    For instance, let’s take the same thing over to Section 4.

    There, Congress has an effect said, “Let the utilities see if they can work it out first.”

    Now, if the two utility companies can get together on a rate increase, if the pipeline can convince its costumer that it’s entitled to a rate increase and the costumer agrees to it, then you’ve got an agreed upon rate.

    Then the pipeline can file that new agreed upon rate with the Commission under Section 4 in the quicker proceeding.

    Or by the same token, if the costumer convinced the pipeline that the pipeline’s rate is too high, then you agree upon a lower rate.

    And the lower rate goes into effect under Section 4 in the quicker procedure.

    Now, this makes sense.

    Supposing that the Congress accept the Commissions (Inaudible) and they made adjusting their rates under Section 4 is certainly a refund for the — would they be arguing now that nevertheless, the suppliers can only operate under Section 5 or —

    George E. Morrow:

    Within a non-agreed upon increase, yes Your Honor because if that happened, it would simply put the industrial rates in the same category with all other rates and I’ve been talking about all the other rates up till now.

    Now, let’s see what sense that makes in terms of the Congressional intent.

    Here you have a situation where you have two public utilities dealing with each other, the pipeline and the distributor.

    Now, Congress says that if these two public utilities can get together and agree upon a rate which they as between themselves think is reasonable and then file that rate with the Commission, isn’t there a — a reasonable warrant or basis or at least temporary presumption that that rate is reasonable?

    And therefore, isn’t it appropriate to allow the new rate to go into effect under barn so it’s in effect while the Commission acting in it’s capacity as protector of the public interest, the third party in interest to those contracts investigates this new completed contract to see whether it serves the public as it should.

    On the other hand, suppose the two utility companies, the parties directly involved in the rate have not been able to get together on what they consider is a reasonable rate then isn’t it reasonable that the new rates sought — whether the higher rates sought by the pipeline or the lower rate sought by the costumer, the distributor, isn’t it reasonable that the new rate should have to prove itself as it were in the course of the Commission proceedings before the Commission order makes it effective?

    The whole Act begins to take form and shape and all we’re asking, I repeat once more, is an even break for the distributor and the pipeline.

    The distributor under this theory has the same rights to a decrease as — as the pipeline does to an increase and this gives him correlative remedies to go along with those correlative rights, to a non–agreed upon right, correlative remedies under Section 4 to an agreed upon right.

    Now, the question is raised about the ex parte rates and I like to quote from the Court’s opinion just what was said in Mobile about this business of ex parte rates because a great deal has been said in the Commission’s — well, in all the briefs about it and I think that they have completely misunderstood the impact of what the Court said.

    The Court was saying in Section, it was discussing in Section 4, the fact that the Natural Gas Act did not change the contractual powers of Natural Gas Companies, did not interfere with or changed the rate making or rate changing powers of Natural Gas Companies and it followed that up by this sentence which is found in page 343 of the opinion.

    The obvious implication is that except as specifically limited by the Act, the rate making powers of Natural Gas Companies would be no different from those they would possess in the absence of the Act, it’s in the (Inaudible), to establish ex parte and change at will rates offered to prospective customers or to fix by contract and change only by mutual agreement the rate agreed upon with a particular customer.

    Now, which one of those alternatives do we fall under in this Court?

    May it please the Court there is not a single prospective customer in the picture in this case.

    Every single customer is a long-term contract customer of United.

    Therefore, we are obviously within the second alternative where United has no right to file an ex parte rate to us, but must fix by contract and change only by mutual agreement the rate which is agreed upon with these particular customers.

    The Court also said, oh, and — and let me pause there to say that it seemed to appear from the argument of opposing counsel that what we were trying to do was to demolish the Commission’s regulations.

    Now, I grant that I said what Mr. Carson quoted me as saying that under the — in the light of the Mobile decision, there might need to be some modifications of the Commission’s regulations, but those are minor.

    We have no quarrel with the general scope intent in purpose of the Commission’s regulations as explained by General Rankin.

    Now, we do have quarrel with the message there set forth in the briefs but if you will recall, General Rankin said that the only purpose of the regulations was to take these sheets of contracts and he showed how thick it was, a lot of different complicated contracts which United had with all its customers and reduced it down to this much contract to put all of the contractual arrangements between the parties into a uniform format prescribed by the Commission and that was the only purpose of the regulation.

    And that was the purpose that the Commission said at the time that promulgated the regulations as their only purpose and we quote them at 86 of our brief, “A presiding examiner’s statement which was adopted in toto by the Commission.”

    George E. Morrow:

    It said the Commission’s purpose in promulgating Order Number 144, which of course promulgated these regulations, was precisely as it stated in its explanatory opinion therewith that the proposed amendment of the general rules and regulations was for the sole purpose of achieving uniformity and simplicity with respect to form, composition and filing of schedules of rights and charges for the transportation and sale for resale of Natural Gas in Interstate Commerce.

    It was solely a matter of form, and as a matter of form, we have no quarrel with it at all.

    It was a splendid idea to get all of these complicated contracts down to a simple uniform format.

    So, the — the Commission’s argument which it attempts to launch from its regulations on the basis of its regulations just simply won’t stand up in the light of which the Commission has already said about those regulations.

    It’s clear that actually what has happened in this case is this.

    In the Mobile case, the Commission came to the Court saying United has a right to file this unilateral change in its contract because the Natural Gas Act, Section 4 of the Natural Gas Act by providing a rate changing procedure confers upon at that right.

    That was the Commission’s argument in Mobile.

    And this Court said, “No, it’s no such thing.

    Section 4 is not a rate changing procedure”.

    Section 4 provides not for proposals.

    The scope of the Commission’s review power under Section 4 is the same as it is under Section 5 to review the existing rates of Natural Gas Company and to make it crystal clear, the Court pointed out in Mobile that Section 4 provides no more than, let’s see, provides no more than that otherwise valid rates, and if I may, here it’s on page 339, it starts right at the bottom of 339.

    In short, Section 4 (d) on its face indicates no more than that otherwise valid changes cannot be put into effect without giving the required notice to the Commission.

    Now, how does it change yet to be an otherwise valid change, it’s between these two utility companies, very simple.

    Let’s — let’s take for instance just to make it concrete, United and Mississippi Valley, United’s customer company.

    Prior to the filing of the rate in this case by United, it had a long-term contract with Mississippi Valley and Mississippi was purchasing gas from it at a certain, specific, well understood, agreed upon price.

    Now, obviously, the price was the very heart of that contract.

    It was integral part of the contract and they were purchasing gas at a price which had been contracted for and agreed upon.

    Now, United wants to substitute a new rate for the rate which they have agreed upon and have been observing for several years.

    How can it make that substituted rate valid?

    There’s only one way.

    United has got to find somewhere, somehow an agreement on the part of its co-contractor to pay the substitute rate.

    And that’s why at the outset of this case of my argument here, I dwelt upon the fact that there has been no agreement on the part of Mississippi Valley, Texas Gas, Southern Natural, any other customer of United to pay the rate which United filed in this case.

    The rate is not an otherwise valid rate.

    The rate is nothing more than a proposal on the part of United which draws the Commission into the vortex of the rate controversy between these two public utility companies and that’s the rate, I mean, that’s under the contract as construed by United.

    Actually, you might say our ultimate position in this case goes even deeper than that and that is that with effective superseding rate schedules provision cannot contain and cannot be interpreted to contain all of the tremendous volumes of significance which has been implied into it and inferred into it by the parties to this case and for that argument, I will turn it over to Mr. Goldberg.

    Thank you.

    Earl Warren:

    Mr. Goldberg.

    Reuben Goldberg:

    Mr. Chief Justice, may it please the Court.

    At the outset, I want to reemphasize, if I may, for a moment what Mr. Morrow has just said.

    I want to reemphasize that Mississippi, a contract purchaser of Natural Gas from United Gas Pipeline Company has a contract with United for the purchase of Natural Gas for a specified term of years at a specified price.

    Reuben Goldberg:

    The fact that the price is specified in the contract by reference to another document, a rate schedule in accordance with a format prescribed by the Commission’s regulations to provide an easy means for the public of locating the rates involved and for the staff of the Commission in locating it, does not make that rate, we submit, any less a specified contract rate.

    The rates specified by reference to the rate schedule is every bit as binding upon United and upon Mississippi as was the price in the Mobile contract.

    The petitioners say, however, that there is a material difference between the Mobile contract, and the contract with Mississippi, and the contracts it has with the other pipeline petitioners in this case.

    The difference they argue lies in this effective superseding rate schedule provisions that innocent little phrase.

    That provision they say, implies an agreement on a rate change procedure a reservation by United of its right unilaterally to file a change in the contract rate.

    And they say, “That’s all we need under the Mobile decision to make the filing a valid filing eligible for filing under Section 4 (d) of the Act,” but we submit the provision does not mean what they claim for it.

    The provision as the words given its ordinary made make clear, it’s only explicit recognition that in a regulated industry the rate agreed upon by the parties is subject to the paramount power of the Commission to review it and to modify it while it is contrary to the public interest.

    The legal effect of that language, is to make certain that when the Commission in the exercise of its paramount power reviews the rate and determines that it is either too high or too low depending what the case maybe that the seller and the buyer are both equally bound to continue to buy and sell gas under that contract under that new rate.

    Thus, if the Court please —

    That — that would be so in quite in respect of this clause, isn’t it?

    Reuben Goldberg:

    I am not getting right to that if I may get it in to — in the order my argument will take only a moment.

    The Mississippi’s contract we say is therefore, exactly like the contract in the Mobile case, because what is explicitly stated in the effective superseding rate schedules provision was implicit in the Mobile contract.

    As the Court recognized in Mobile, the Commission has the power, the paramount power to review that rate and to change it.

    And under the law, United would be obligated to sell at that rate and Mobile would be obligated to purchase at that rate because that modified rate under the law is therefore the effective superseding rate precisely what the provision in the contracts here involved talks about.

    Now, the petitioners contend that this construction that we put on that language reduces it to surplusage because they say, if you construe with the way you argue, it only says what the law is, but the provision not only says what the law is.

    It prevents a claim of illegality or impossibility that might be otherwise have been advanced by either of the parties if a rate ensued out of the exercise of the Commission’s paramount power that perhaps they didn’t care for.

    And it’s not an uncommon thing to find in contracts provisions that do no more than state what the law is because they serve the very useful purpose of precluding contentions that might otherwise be advanced and a provision that serves such as purpose we submit is not surplusage.

    I would venture to say, and certainly my experience is pretty limited in that respect, but I would venture to say that if we can have a dollar for every contract that there is in this country that contains a provision that does nothing more than state what the law is for the very purpose I’ve indicated, I think we have a pretty large sum of money perhaps even large enough to make dent in the National Debt.

    We submit that you can read that language in the contract over and over again and it’ll be searched in vain for evidence of an agreement on a rate change procedure or a reservation on the part of United unilaterally to file a rate change in the contract rate.

    There isn’t any reference in the provision to Section 4 (d).

    There’s no reference of the provision to Section 5 (a).

    There is no reference in that provision to anything that connotes a rate change procedure.

    The petitioners recognized this.

    They don’t say that the provision expresses an agreement on a rate changing procedure.

    They say it is to be implied and I assume that means that the provision is ambiguous and needs construction and this is a reasonable implication of the provision.

    We think it is neither to be reasonably implied nor found when it takes at least a paragraph to state what they claim for this little phrase.

    There’s nothing in the language that that purports to say what is effective to change a rate.

    There’s nothing in it that even suggests under what circumstances a change can be made and there’s certainly no agreement in it to pay any rate whatsoever or even an agreement that the mere act of filing will make the rate that United filed effective on the face of it.

    We find in the agreement in the provision only an agreement to pay the effective and I emphasize effective, superseding rate and I emphasize effective because that provision is a limitation.

    It’s a condition upon an obligation to pay any different rate.

    Reuben Goldberg:

    We know in the Mobile case that rates are not effective superseding rate simply because the pipeline company has filed it to the Commission.

    In that case, United had filed a rate, the Commission had accepted it, it was treated by United and the Commission is effective, and Mobile even paid it, but this Court held that the filing was nullity.

    It was not an effective superseding rate because the Commission had exceeded its authority in accepting that filing since it was not an agreed upon change and United had exceeded its power to file it because it was not of that character.

    And United is keenly aware of the lack of resemblance of the effective superseding rate schedules provision to this agreement on a rate change procedure or even a reservation of the right to file rates.

    And they’re keenly aware of the rule of contract construction that says that a contact is to be construed more strongly against the draftsman and of course for draftsman of the contract, its creator, its author is United.

    Felix Frankfurter:

    Would it make any difference to your argument that instead of the phrase as founded the service agreement which you’re addressing yourself, the word were these, under settled rate schedules or any rate that maybe subsequently filed with the Federal Power Commission, would that make a difference to your argument?

    Reuben Goldberg:

    I — I think so if I have — have in mind the revision of the provision.

    I think that the —

    Felix Frankfurter:

    (Voice Overlap)

    Reuben Goldberg:

    — provision was only be eliminate —

    Felix Frankfurter:

    — any rates that maybe subsequently filed with the Federal Power Commission, would that make a difference to you?

    Reuben Goldberg:

    I think so if I understand the revision.

    I think the revision was to exclude from the language that’s on page 9 of our brief the word “effective”.

    Yes, I think so.

    I think it would probably make a difference.

    Felix Frankfurter:

    Well, but wouldn’t the law —

    Reuben Goldberg:

    Because we —

    Felix Frankfurter:

    Wouldn’t it be effective to be in there by force of law?

    No rates can be — no rate is determined unless it’s effective according to the determination by the Commission.

    Reuben Goldberg:

    But Mr. Justice Frankfurter, that provision would then be susceptible of the interpretation that the purchaser had agreed to pay whatever rate United filed and that was the rate —

    Felix Frankfurter:

    He could agree to that.

    Reuben Goldberg:

    I don’t understand why not.

    Felix Frankfurter:

    He could not agree to that because of the controlling power of the Commission determined the public interest.

    Reuben Goldberg:

    But he can agree to a new rate.

    Now, even though United and the purchaser agree on the rate, it does not mean that the Commission is precluded from reviewing and modifying it.

    That’s where —

    Felix Frankfurter:

    That’s what they mean by effective.

    Effective means that which the regulatory body determines eventually is the legally and plausible rate.

    Reuben Goldberg:

    That’s exactly our contention that the inclusion of the word “effective” has reference only to rates that achieve their effectiveness through the exercise by the Commission of its paramount review policy.

    Felix Frankfurter:

    But my question to you is, whether effectiveness isn’t necessarily qualify in every agreement between parties?

    Felix Frankfurter:

    So, no amount of agreement that leaves out the word “effective” can leave out the power of the Commission to determine what count —

    Reuben Goldberg:

    With that, we thoroughly agree.

    We certainly —

    Felix Frankfurter:

    Whether effective doesn’t need to add or subtract because of law does that.

    Reuben Goldberg:

    Mr. Justice Frankfurter if I understand that I have some trouble with that, may I try to explain my difficulty?

    Felix Frankfurter:

    You take care of my difficulty [Laughter]

    Reuben Goldberg:

    I certainly — I certainly would — would hope — of my being here is — is pointless.

    As we read Mobile, the Natural Gas Company and its customers have complete freedom to initially enter into contracts and to negotiate new rates.

    Now, as we read Mobile when the pipeline company has that kind of a rate, it may file it under Section 4 (d).

    That rate is made effective by its own action as the Court said in Mobile as we read the case by giving to the Commission the notice required by the notification procedure.

    Now, the Commission may decide to do nothing about it and then they may charge it or it may suspend it.

    Now, as we see it that agreed upon rate if it is permitted to become effective, of course may then be charged.

    If it is suspended, its provision would become effective at the end of the suspension period and then again maybe charged by the pipeline company.

    Felix Frankfurter:

    Unless in the meantime the Commission disposes of it —

    Reuben Goldberg:

    Oh yes.

    If — if the Commission and the interim period has concluded the proceeding, it never really becomes the rate that they charge.

    They charge only the rate that the Commission determines at the conclusion of the proceeding.

    Now, I — I think I see now what Your Honor was getting at that despite the agreement of the parties, effective superseding always means that which the Commission accepts for filing and permits to become effective by its authority under the Act.

    Felix Frankfurter:

    Can it mean anything else?

    Reuben Goldberg:

    I think not.

    I think —

    Felix Frankfurter:

    Alright.

    Reuben Goldberg:

    I certainly, would have to agree that it could mean anything else having come through to the same point by my own exposition.

    Felix Frankfurter:

    That means whether effective is there or not, effective depends on what the Commission does or doesn’t do but not by the agreement of the problem.

    Reuben Goldberg:

    I — I see Mr. Justice Frankfurter’s point that even if it were agreement to pay any superseding rate, it would have to be an effective superseding rate that could be charged.

    But the point I was trying to make was, that if the word “effective” had been left out, you could possibly interpret that as meaning that it is at least an agreement as between the parties by the purchaser to pay what is tendered to the Commission vis-a-vis the parties without bringing in the Commission’s authority.

    Now, if I may, as I was saying, United is keenly aware of the lack of resemblance of this provision to an agreement on a rate change procedure and it is keenly aware of the provision of the — the rule of contract and construction that says a contract is to be interpreted most strongly against the party drafting it which as I said was in this case United.

    It therefore tries to raise the provision to the stature of the term of art in the industry which it says was accepted as evidencing an agreement on a rate change procedure.

    There’s simply nothing to this.

    This is an act of rationalization.

    Reuben Goldberg:

    Prior to Mobile and our motions to reject, it was not thought, it was never suggested that the power to change rates was derived from the contracts or any provision of contract between the pipeline company and their customers.

    In fact, the argument in Mobile was that power was derived from the Act and that it existed regardless of what there was in contract against it.

    The Act was considered to be the source of the authority.

    The contract argument was a development of Mobile and of our motions to reject and was advanced to meet those developments.

    And we submit, that United has turned to the contracts for escape for Mobile and this little effective superseding rate schedules provisions has been selected as the candidate most likely to succeed as the provision in their opinion more susceptible to interpretation of the view they tried to put upon it.

    The provision is of course no term of argument.

    If it were, we would expect to find it in each of the contracts in the industry in precisely those terms, but the Commission itself concedes, and I believe the concession appears at pages 111 of its brief, that the contract language varies as between one Natural Gas Company and its customers and another Natural Gas Company and its customers and we have printed as Appendix A to our brief.

    The provisions from the formal contract that Texas Gas Transmission Corporation uses which is one of the pipeline petitioners in this case, and that appendix discloses immediately that they employ an — an entirely different set of words for what I might call their effective superseding rate schedules provision.

    And additionally, it discloses that they did include an express reservation to change rates under certain specified conditions and the specified conditions were when certain increases incur when increases incurred in certain specified taxes.

    Unless these contracts are held to mean what they say, the publication provision of Section 4 (c) of the Act which says that the contracts need to be published, so that they’re available to the public and people may know what’s in them, we submit would be frustrated.

    In interpreting this contract and considering it, we cannot lose sight of a fact that it wasn’t drafted by an amateur.

    It was drafted by United which Mr. Carson yesterday described as one of the largest pipeline companies in the country.

    We think perhaps it is the largest.

    It has all sorts of resources at its command, including rate experts and the most skillful of counsel.

    The drafting of rate contracts for United, of rate schedules, of tariffs is a day in and day out occurrence.

    And when United sets out to draft the provision reserving the right to file a change in rates United knows how to do it and we don’t have to infer that.

    We have the contemporaneous evidence in this record as to the meaning and intent of the contract.

    The only contemporaneous evidence I might say which shows that United never regarded the effect of superseding rate schedules provision as a reservation of a right to file changes and never intended it to perform that function.

    Let me briefly describe that history.

    As Mr. Carlson told you yesterday, United had brought the Commission for about four years in and out of the courts challenging the validity of the regulations, which incidentally it now embraces and the most wonderful thing that ever came down to pipeline.

    United finally, in 1952, decided that it would comply with the Commission’s regulations.

    So, in accordance with those regulations it prepared a propose tariff.

    Now, the regulations say that in the tariff you’re supposed to have the proposed form of contract you will use for the purchase and sale of gas.

    United therefore, drafted a proposed form of contract included it in the tariff.

    The proposed form of contract included the effective superseding rate schedules provision that we have before us today and additionally, as we set out at page 57 of our brief, I think it is, it’s at page 57 yes, included a provision expressly reserving the right to file changes in rates.

    If I may take just a moment to read it, “the rate established by seller,” United said, “are designed to reflect seller’s cost of rendering service to provide a fair rate of return to seller.”

    In the event of an increase in seller’s cost, or of any change which would result in the rate of seller providing less than a fair rate of return, seller shall have the right to revise its rates to reflect such change.

    Such revised rates shall be charge only after they have them filed to the Federal Power Commission and become effective in accordance with its rules and regulations.

    Now, unhappily perhaps the United, it included this very same provision in the general terms and conditions of the tariff.

    The Commission’s regulations expressly state you may not include that kind of a provision in the general terms and conditions.

    Reuben Goldberg:

    The regulations say, you may include that kind of provision in your form of your contract only.

    The Commission therefore, rejected the propose tariff concluding the form of contract and returned it to United pointing out that they had never accepted a tariff which included the provision but what that they having accepted forms of contracts that included such provisions as authorized by the regulations.

    The United was extremely anxious by this time after filing to the Commission for four years to have its tariff accepted as rapidly as possible.

    And United was laboring under the impression that the Commission would require a rephrasing of the provision before it would even approve it for inclusion in its form of contract.

    Rather than incur the additional delay that they thought might develop, they struck the provision not only from the general terms and conditions, but they struck the provision from the form of contract as well.

    And the form of contract which was approved without this provision became the executed contracts for the purchase and sale of gas that we have before us in this very case.

    And now, faced by Mobile, faced by our motions to reject, United seeks to read in that — into that effect a superseding provision a wholly different provision which of its own volition it had deleted.

    Even if United were able to hurdle this contemporaneous evidence of their intent, there is yet another hurdle before that.

    I’d — I’d like to refer the Court for a moment to this little pamphlet which is the appendix to United’s brief at page 16A.

    I’m particularly, interested in the middle portion of the middle proviso, which says and I’m going to skip a few words that refer to another section that are not material here, “a Natural Gas Company may state in the service agreement that it is or will be its privileges under certain specified conditions to propose to the Commission a modification, change or substitution of the then effective rate or charge.”

    And incidentally, may I interpolate here for a moment to say the reference to certain specified conditions has reference to various components of costs involved in serving — in selling gas that may go up and down if the case maybe, taxes, cost the gas purchase and so on.

    Now, United was on notice as to what it had to do to reserve its right to file rates.

    And the provision that it voluntarily deleted was in response to this permission that the Commission was giving them in the rules and regulations.

    Now, the effective superseding rate schedule provision doesn’t even begin to come close to meeting the requirements of this regulation.

    It does not even remotely specify any terms or conditions under which it would be United’s right to file changes in rates.

    And if it were to be interpreted as United now contends, it would be unlawful under these regulations as the Commission’s recent decision in the Houston case which we cite and discuss at page 62 of our brief, makes very clear.

    In that case, there was a new pipeline company that had been certificated.

    Houston, Texas Gas and Oil will take gas down to Florida.

    In accordance with its right and under the Commission’s regulations, it undertook to prepare its tariff and there again, it included a proposed form of agreement.

    The Commissioner rejected it and let me read just quickly the language used by the Commission in rejecting it and I quote, this is at page 62 of our brief, “In the form of service agreement, no changes for the filing of changes are set forth while Section 154.38 (d) (3),” I interpolate the section we were just looking at, “of the Commission’s regulation, requires that the service agreements set forth, the specified conditions under which a change my be filed.”

    Accordingly, the Commission said, “The present language of the form of service agreement is not allowable and revised tariff sheet should be filed enumerating the conditions, if any, under which rate changes may be proposed.”

    This provision would have to be rejected for the very same purpose.

    And to interpret it as they would contend, just flies in the face of that provision and the contemporaneous evidence.

    If there is any lingering doubt that the effective superseding rate schedules provision was not intended to perform the function that the petitioner is now claim for it, we submit that doubt is dispelled when the unconscionable results that are produced by petitioner’s interpretation are considered when applied to sales, for resale, for industrial use only, which have heretofore been referred to.

    Such sales are particularly important to Mississippi as they are to many other distributors.

    For example, as we indicate in our brief, and United does not deny this, Willmut Oil and Gas, another contract customer of United, purchases gas under United’s rate schedule, which it has provided the sales, for resale, for industrial use only, 45% of its volume of sales is that type of a sale for industrial use.

    And the United only answer is, “Well, it’s only to one customer.”

    Whether it’s to one customer or 10 customers, however, 45% is an important part of that utility’s sales.

    In the case of the distributors of gas in the Pacific Northwest, as the amicus brief of the Attorney General of the State of Washington makes claim, 68% of the sales made by the distributors in that case, for industrial use are purchased under contracts of this non-suspendable, non–refundable type.

    And Mississippi, for the period involved in this case, its purchases of gas from United or sales, for resale, for industrial use only, represent the 65%.

    Reuben Goldberg:

    And let me pause here to say that in the answering briefs, we have been vigorously challenged as to the accuracy of our 65% and I might say to the Court that that 65% was computed for me at my request by responsible official of Mississippi Valley Gas Company.

    And it’s obvious to me, although, I can’t for the light of me analyze all of the figures that have been thrown at me in those answering briefs and where they come from.

    It is clear that they are talking about some percentage in another period not involved in this case when they say the percentage is only 20%.

    Well, let me make this point, whether 20% or 65%, the point is that it is significant either at 20% or at 65%.

    Let me, for a moment, before I get too deeply into an explanation of the significance of these sales, repeat in part what Mr. Morrow has pointed out.

    Except for sales, for resale, for industrial use only, the Commission has the power to suspend new rates, and if the proceeding is not concluded at the end of five months, they become effective subject to refund on motion of the Natural Gas Company.

    When the Commission concludes its proceedings, they can make it retroactive.

    But with respect to sales, for resale, for industrial use only, the Commission has no power of suspension and it has held that it is completely without power of refund.

    Those new rates are non-suspendable, non-refundable.

    They come — they become effective 30 days after filing.

    Now, let’s see the consequence of that.

    Felix Frankfurter:

    Would you mind stating in a word what the policy of Congress was in that provision of the Act?

    Reuben Goldberg:

    Mr. Justice Frankfurter I don’t think that I — I can.

    I would like to explain why I don’t think I can.

    Felix Frankfurter:

    Don’t take your time (Inaudible).

    Reuben Goldberg:

    Well, I simply want — I simply want to say that there’s just a jury of legislate — legislative information.

    It seems to have suddenly come in at the end of the legislative debates and I don’t think anyone can really say what in the world caused that?

    I know when I was with the Commission, we wrestled with it, and I think perhaps they’re still wrestling with it over there.

    Felix Frankfurter:

    Anyhow it is the policy of Congress?

    Reuben Goldberg:

    Oh, yes.

    Yes, I — I would certainly have to say that.

    Now, but the significance of it is — is that they are contending, Mr. Justice Frankfurter, that a purchaser of its own volition agreed to enter into a contract that granted to its supplier the power to impose, to exact, and to retain at will whatever United, under petitioner’s interpretation of their contracts chose to file.

    Now, let me bring it right back to the case at hand.

    The increase filed for that class of sale was about $650,000 in round number out of the total increase to Mississippi Valley of about, let us say, $900,000.

    Now, under petitioner’s interpretation, that filing maybe made, it goes into effect 30 days after it’s filed because the Commission is without power to suspend it, and they can charge it and collect it for as long as that proceeding is pending.

    And when that proceeding is over and the Commission says, “United, you had no right to charge that rate.

    It was excessive all through that period and you’re not to make that charge to the future.”

    And Mississippi then says, “United, how about giving me my money back” and United says, “Sorry, we pocket that.”

    The Commission has held it has no power of refund.

    Now, we submit that no responsible officer of Mississippi, the board of directors of Mississippi, no responsible officer of any distribution company would enter into a contract for the purchase of gas, which is essential to its economic wellbeing, which is essential to its ability to sell gas to domestic customers at rates within their reach, to grant to their supplier the power at will in their unfettered discretion to file any rate they choose and to collect it from the date 30 days after filing.

    Reuben Goldberg:

    And even this prospective relief is illusory because, again, in its unfettered discretion, as soon as the Commission has issued its order saying that the rates of the past were unreasonable and they should be reduced for the future, United can again come forward with a new rate increase for this class of service and it becomes effective within 30 days.

    In this very case, during the pendency of these proceedings, United has filed three additional rate increases unilaterally for this type of service and United has been collecting it under its interpretation.

    Now, we submit that it’s just simply inconceivable and unreasonable to interpret the provision as an agreement by Mississippi to confer such a power on its supplier.

    Mississippi denies and we have denied it repeatedly that we ever intended to come to such an agreement.

    Let me take a moment to explain the significance of —

    William O. Douglas:

    Is there anything in the entire administrative practice before the Commission to choose to rely on this problem?

    Reuben Goldberg:

    As to why there is no power is suspended —

    William O. Douglas:

    Either — pointing either way, either for the position asserted by the Commission at the present time or in favor of the groups.

    Felix Frankfurter:

    As to the interpretation of the context to this.

    Reuben Goldberg:

    No.

    William O. Douglas:

    As to the interpretation of Section 4.

    Reuben Goldberg:

    Oh, on this —

    William O. Douglas:

    Is this the first case of the Commission is ruled, made a specific ruling?

    Reuben Goldberg:

    This is the first case I think that the Commission ruled at the moment.

    William O. Douglas:

    Is this the — is this marked change in — in procedure before the Commission?

    Is this a new ruling or does this follow old precedents?

    Reuben Goldberg:

    Oh, under — this — this power of lack of refund power, I’m not sure that — yes, let me put that thing.

    William O. Douglas:

    The ruling of the Commission in its construction of Section 4 in this case, is that —

    Reuben Goldberg:

    That’s a — that’s a —

    William O. Douglas:

    Is that the —

    Reuben Goldberg:

    That’s a new one.

    William O. Douglas:

    That’s —

    Reuben Goldberg:

    That’s a new one.

    That was a construct — well — well, if — it did — I was going to — I was just about to say that it didn’t construe Section 4, but it construed the contracts, but actually, it had to do both.

    It turned to the contracts and said this is an agreement on a rate-changing procedure, and then it turned to (Voice Overlap) —

    William O. Douglas:

    I know what — I know to give.

    I know what to give.

    But I say is this first time they ruled that way?

    Reuben Goldberg:

    Yes.

    William O. Douglas:

    Or are there any contrary rulings in earlier years, since the change of Commission policy, this hearing the Commission policy?

    Reuben Goldberg:

    The first time — the first time it was brought up.

    I’ve been trying to go but Mobile came along and this problem in our case was the first one arising after Mobile.

    I think we were the first, perhaps not the first, but the first decision that came down on the motion to reject.

    Hugo L. Black:

    Do you cite the holding of the Commission in connection with inability to get refund?

    Reuben Goldberg:

    Yes.

    Hugo L. Black:

    What is it?

    Reuben Goldberg:

    That they made that decision in the Mobile case, I think it’s in 64 of our brief.

    Hugo L. Black:

    It’s at what?

    Reuben Goldberg:

    At page 64 of our brief, Footnote 35.

    Incidentally, that was the order in the Mobile case which came up to this Court and we’ll review again in the Mobile case.

    Let me take just a few minutes to point out the Commission in its brief spends a great deal of time parading all sorts of public goblins and calamities before the Court in an effort to secure a reversal of the decision below.

    But we have given chapter and verse on the actual experience of the industry since the decision of the court below, and that actual experience completely contradicts the Commission’s speculations which incidentally are completely undocumented.

    One thing we pointed out, for example, when the Commission raised the specter of inability of the pipeline companies to raise capital, we said why?

    Here is evidence that these pipeline companies, since the Memphis decision, since the decision of the court below, have been able to raise capital.

    They have received a very favorable reception of the market, in some cases, even more favorable than the reception that they received prior to the decision of the court below.

    And the Commission is unable to deny that.

    It conceived in its answering brief that that’s the fact, but what is the Commission’s answer?

    The Commission says, “Well, in every one of those cases, there were some special factor that accounted to the favorable reception.”

    In other words, when the news is bad, blame it on the decision of the court below, but when the news is good, shrug it off, blame it on something else.

    The decision of the court below had nothing to do with it.

    We submit that the decision of the court below is completely right.

    It helps restore that stability of supply arrangement, that order of chaos, which this industry needs to be a healthy industry.

    Thank you very much.

    Earl Warren:

    Mr. Solicitor General, would you mind addressing yourself to this last point that counsel has taken up, namely, the — as I understood it yesterday, it was your argument and the argument of Mr. Carson that all this would do would be to give the opportunity to the Commission to study the situation and that later there would be a refund of any access that they found to be beyond the public interest.

    Now, would you — would you mind telling me if I — if I understood you correctly yesterday or whether there are some circumstances where there will not be any refunds in the event the Commission finds that the new filings where not in a public interest.

    J. Lee Rankin:

    I will make it very clear that there are cases where under the Act, it is impossible as the Commission construes it to make refunds and those are the limited cases of less than 2% that involved industrial rates.

    To that extent, there is no provision in the Act as the Commission construes it for a refund of those rates that are not properly although initiated they are — they are found later to be unlawful.

    Now, our brief shows that the claim of the Mississippi Valley is not correct as to the amount of gas that it buys on industrial basis when it claims 67%.

    We point out that there is some 27% in one year and it’s down to 6% but there still is a fact that as to the 2% of the regulated rates or jurisdictional rates in the country, there is no provision for refund.

    Earl Warren:

    Yes.

    J. Lee Rankin:

    Now, they don’t call your attention, however, to the fact that they have a provision for automatic escalation as to everyone of these contracts in Mississippi Valley so that if the rate is raised to them, they pass it on immediately under their contract to the industry customer purchaser.

    Now that doesn’t protect the consumer, I want that clearly understood.

    The consumer doesn’t get it back, but it does put them and that’s — if they have been frank about that, they would have shown the Court that there is obvious reason why they wouldn’t care too much what the — the rate whether or not their new rates were filed as long as they had a provision for automatic escalation in their contract.

    Now, I was trying to point out yesterday that although there is no provision for that refund, the industrial buyer buys at a cheaper rate so that he can figure that even though I pay an increased rate, I still get it a lot cheaper than I — if I bought the susependable rate which is also available to him in Pacific Northwest.

    I don’t know that is available in all cases.

    I didn’t examine that as I tried to tell the Court but I know in Pacific Northwest, it was available.

    They had both rates available to industrial buyers and they deliberately bought the cheaper rate because it was — they took the chance and they were still better off on the increase and if they bought the suspendable rate where they would get the refund.

    Felix Frankfurter:

    To gain that figure yesterday Mr. Solicitor, 2%, do I understand that to be the total gas consumed subject to regulation by the Federal Power Commission of that close to, whatever it is only 2% is non-recoverable becomes non- sustainable.

    J. Lee Rankin:

    That’s right.

    Felix Frankfurter:

    Is that what you’re saying?

    J. Lee Rankin:

    That is correct.

    Felix Frankfurter:

    But the total volume of gas subject to regulation was consumed and subject to regulation, only 2% falls under this non-recoverability.

    J. Lee Rankin:

    That’s right.

    I’ve checked that carefully.

    Now, of course, the Commission has asked that it be given that power even as to that 2% and it has asked to repeal it over the years.

    Congress has seen fit not and the history indicates that these are short term contracts and that the Congress at the time in speaking about it, felt that it was not a particular problem.

    We set up that legislative history but the Commission has still felt well, even 2% we ought to try to care of but we haven’t been able to persuade the —

    Felix Frankfurter:

    Under all the — this 2% are — are the class of large consumers?

    J. Lee Rankin:

    Well they’re well able to take care of themselves.

    Felix Frankfurter:

    All right.

    J. Lee Rankin:

    They’re powerful industry people generally, they make individual contracts, they’re usually for short term and they have stand-by provisions for oil or coal or other provisions because most of them are uninterruptible that is the service can be stopped in order to take care of people at home and —

    Felix Frankfurter:

    But as —

    J. Lee Rankin:

    — so forth.

    Felix Frankfurter:

    — but as your own statement indicates, they’re well able to take care of themselves at the expense of the consumer and I take it the Commission wants that power in order to protect the consumer indirectly.

    J. Lee Rankin:

    Well, I think they could do a better job myself.

    I think that they would have to look at what they say to the Congress in order to say exactly but they have asked it time after time Congress seem fit not grant it.

    Hugo L. Black:

    Who gets the refund of the others?

    J. Lee Rankin:

    The refund goes back to the customers, disposed of it.

    It goes back to distribution company and as I said to the service station —

    Hugo L. Black:

    Does the law require that?

    J. Lee Rankin:

    The law requires it.

    Hugo L. Black:

    The distribution — distribution company does it go back to the person who buys the gas?

    J. Lee Rankin:

    I can assure you that it does.

    Hugo L. Black:

    Has it even done it?

    J. Lee Rankin:

    I — I have been advised that there are cases where it has.

    Felix Frankfurter:

    This Court had given you trouble on that subject?[Laughter]

    J. Lee Rankin:

    That’s right.

    You asked me that before in the City Service case and I answered the best I could.

    Felix Frankfurter:

    Alright.

    J. Lee Rankin:

    I — I know it goes back to distribution companies because the Commission orders it and sees that it does.

    Whether it goes back to the consumer is something else and I can’t assure it.

    Felix Frankfurter:

    A difficult problem with —

    J. Lee Rankin:

    That’s right.

    Now, I would like to call attention to the Houston case.

    It’s been referred to particularly this Houston case as an example of where it’s inconsistent with our position and that is not correct.

    We treat that on page 26 of our brief in the Footnote and we point out specifically that the problem was this.

    The service agreement is required by the regulations to be set out in the form — a form to be set out in the tariff schedule and in this they have some language to the effect that it would be as the buyer and seller have agreed upon the rates and which are set forth here in below.

    So there was the form and it said has set forth here in below.

    Now, the reason the Commission wouldn’t prove that was that they construed it would give the buyer to the seller the opportunity to have a different provision for everyone of their service agreements because of the saying which are set forth here in below.

    And they specifically said they couldn’t do that because it would take away this principle they were fighting for and have held for all the way through in this terms and service agreements program where the — the rates for certain class of service and area are to be uniform and without any preference and discrimination.

    Earl Warren:

    Mr. Carson.

    Ralph M. Carson:

    Mr. Chief Justice and may it please the Court.

    By way of correction of an inadvertence yesterday and for the record, let me say that the docket number of the 10-year Section 5 (a) proceeding in our case which has just been completed is G1142 and not 1428.

    The facts are as I otherwise stated.

    And before I go too far from the Chief Justice’s question, let me by way of supplement to what the Solicitor General has said with all of which we agree, say that as shown in our reply brief, only 1.8% of all United Gas Pipeline’s jurisdictional sales go or sale or resale for industrial use only.

    Now that is another term of argument, if the Court please, because it’s the language of Congress.

    Direct industrial sales are not subject to regulation.

    Sales or resale only are subject to regulation and the Non-suspendability Clause applies in Section 4 — in Section 4 to sale or resale for industrial use only what is usually called in the tariffs an I-rate meaning industrial rate or interruptible rate.

    They aren’t guaranteed of both amendments and for that to get a lower price and they buy in large volume and their large-volume usage usually what they call a volumetric rate not always, of course.

    But – now the trick in the statistics is this as our reply brief shows that many of these distributors buy it from us and other pipelines on a g-rate, a full commodity and demand schedule with a specified regular billing demand and supply and in off-peak periods they divert some of that consumer gas to industrial use.

    Ralph M. Carson:

    Now, that’s not the sale by us or resale for industrial use only therefore, it’s not a non-suspendable sale, it’s a suspendable sale.

    So, counsel can tell you “Oh, we resell, it’s a great percentage of our gas for industrial use.”

    They don’t buy it from us for resale for industrial use and it’s a great deal of the gas that they sell in industries is suspendable as to increased rates.

    Earl Warren:

    Mr. Carson, would it make any difference in your position whether your figures were right or — or the respondent’s figures were right?

    Ralph M. Carson:

    Yes, insofar as extended as a legal volume (Voice Overlap) —

    Earl Warren:

    The legal principle.

    Ralph M. Carson:

    The legal principle I would like to address myself to as a matter of Congressional policy sir.

    Now a question was asked to Mr. Goldberg, what the Congressional history was?

    And he said it was so slight that it didn’t matter as I understood him.

    On the contrary, I cited in our brief this question was carefully considered.

    William O. Douglas:

    Is your reply brief (Inaudible)

    Ralph M. Carson:

    No sir, it’s on our main brief and I did not put forth the quotations and I do not think I should take rebuttal time to read the quotations, but I can assure Your Honors that in 81 Congressional Record part 6, page 6727, Congress related — referred to the industrial sales as based on the short term character of the contracts to which General Rankin referred and at a subsequent page which would be as a subsequent to that the introducer of the bill, Mr. Lee, described the construction of transmission systems and the necessity of getting industrial contracts and subsequently in the same part, he said, “This practice of the Commission’s has permitted the Natural Gas Companies to compete for industrial fuel business and that produced revenues which have resulted in much lower schedules of natural gas rates to the householder then the rates would have been had the industrial sales have not been made” and then at pages 1844-45 in specific answered to Congressman Pettengill in connection with the suspendability point and the natural monopoly of electricity, Mr. Pettengill said, “And he’s not competition the best regulator price there is?”

    And the witness said, “I think so, I think that is true to Mr. Pettengill.”

    And you’ll find them in the Senate record that gas — that gas was regarded as regulated in competition by coal and by oil.

    That’s the reason, Your Honors for this determined policy of Congress which has not been changed.

    Earl Warren:

    That is not quoted in your brief.

    Ralph M. Carson:

    It is cited in our brief but not quoted in extense Your Honor, but the history is there as a determined policy of Congress and may I just add in connection with the escalated cost as to which General Rankin calls attention.

    Your Honors, bear in mind that these users of industrial non-suspendable gas had protected themselves on distribution and their customers have accepted the protection knowing the non-suspendability.

    By a provision or rate increases to the consumer, if the rate goes up to the distributor, that means that the existing mechanism of rate filings has been understood by all concerned to permit increases under Section 4.

    Another example (Voice Overlap) —

    Hugo L. Black:

    Are any of these purchasers or resales to industrial users offered any resistance to the effective superseding rate of this —

    Ralph M. Carson:

    No sir.

    Hugo L. Black:

    How do they explain that?

    Ralph M. Carson:

    Well, I suppose the availability of competing fields on a standby basis is always there.

    They get lower rates.

    General Rankin was entirely right yesterday in giving you the figures in the Pacific Northwest in Washington where the increased rate was less than the general rate.

    And the reason is I think really that everybody has recognized as the Commission opinion says that this method of change under the effective superseding rate schedule language is an effective method accepted by everyone.

    When Justice Douglas asked if there have been rulings on this problem, I think the answer was literally correct.

    The Mobile case hadn’t been decided and there hadn’t been a motion made to reject a filing on what we deem in this application of the Mobile case.

    But this effective superseding rate schedule language is in use not only in our contracts, but in the contracts of nine other companies whose names I have here alone and has been in use since 1945 and prior as is shown in the citations on page 53 in our brief to the Commission record at no doubt at the time when Mr. Goldberg as he said was with the Commission.

    Ralph M. Carson:

    And universally, these filings have been acted on, recognized and received as a medium of rate change.

    Felix Frankfurter:

    Are you saying if I understand, you correct that this phrase that I was about to ask you what is the phrase, as I understand your (Inaudible) this phrase is found in contract in 1945 —

    Ralph M. Carson:

    Yes sir.

    Felix Frankfurter:

    — and filings have been made under it since 1945 before Commission.

    Ralph M. Carson:

    Continuously and rate increases acted upon accepted both of course as to reasonableness or accepted as the propriety of filing uniformly.

    Felix Frankfurter:

    Well, that’s all we have here now with the prior to the filing.

    Ralph M. Carson:

    For prior to the filing it’s what we have here now.

    Of course the proceeding under the suspension of the order of the Court of Appeals and I am gratified to be able to perform on Court that the proceeding on this filing 9547 and that’s on the subsequent filing which I warned the Court that increased costs required is coming into a completion and unless this Court’s affirmance to the decision below throws the proceeding out, the work will not have been wasted.

    But at page 53 of our brief, we have given all those citations and the prior history of the Commission.

    Now, I was slightly surprised to hear counsel argue to the Court that the filings of fact below were wrong.

    He argued contemporaneous evidence.

    He argued construction by conduct and other matters which must lead to our brief.

    All those matters have been determined by the Commission and all those matters as I think have been accepted by the court below, because I think that counsel was in error in telling Mr. Justice Stewart that the court below had not reached this point.

    I think at page 257, no that’s not the correct page.

    I will refer to page 405 of 250, F.2d where the Commission’s findings that the —

    Earl Warren:

    It is in the record?

    Ralph M. Carson:

    Yes, Your Honor.

    It is in the record.

    It’s in my Appendix.

    J. Lee Rankin:

    Beginning of page 267

    Ralph M. Carson:

    It’s at page 267.

    Thank you, Mr. General Rankin page 267 of the record.

    The Commission found that the phrase so on did provide the consent and that was an accurate quotation to the Commission’s finding.

    Then the Court says, in effect of the Commission’s position is that the contractual consent to the act of filing is sufficient for Section 4 (d).

    I respectfully suggest that is a misstatement of what the Commission held as just quote.

    Then the Court goes on, “Correct though the Commission’s statement that the parties intent maybe, it does not answer the question and go on, it goes on to the point of law which it was deemed erroneously.

    This Court has decided in the Mobile case.

    At page 269 of the record, there is also a statement by the court below towards the bottom of the page, albeit some of those customers may have consented to the act of filing.

    Now, it seemed to me that when Mr. Goldberg told Justice Frankfurter that the effective superseding orders did not detract from the validity of the contract and the contract as restated by him without those would have permitted to find he had considered a way this case and I think necessarily so.

    I leave to our brief the fact pages 17 to 18 of our brief every word effective, superseding on file comes from the statute or the regulations which are binding on us.

    Ralph M. Carson:

    I’m interested in the suggestion that perhaps they’re’ not wholly valid but Your Honors have not been told to what extent they’re not wholly valid.

    But in any event, those words are terms of art and they take with them a great deal of history and Your Honors look back to the beginning of the filings — the beginning of this book, you will see in the early rate schedules, stamped at the top the word “superseded.”

    One of the words in the regulations showing this has been taken away and the new schedule has taken its place which the Mississippi Valley among others has agreed to pay according to the new rate.

    I called your attention to the fact also that the court in as pointed out in the brief I’m glad to say of Texas Gas and Southern Natural who concurred with us in the interpretation of this contract, the Mississippi Valley contract service agreement among others having the effective superseding rate schedule language has also the sentence which Your Honors attention has not been called early, I regret I must sit down but I refer to the bottom of the page 112.

    Earl Warren:

    Very well.