UTAH COMM'N v. EL PASO GAS CO.(1969)
In United States v. El Paso Natural Gas Co., 376 U.S. 651 (1964), this Court ordered that appellee El Paso Natural Gas Co. divest itself of Pacific Northwest Pipeline Co., which El Paso was held to have acquired in violation of 7 of the Clayton Act. On remand the Government and El Paso entered into a consent decree that would have transferred the illegally acquired assets to a New Company. In Cascade Natural Gas Corp. v. El Paso Natural Gas Co., 386 U.S. 129 (1967), the Court set the consent decree aside as being contrary to the divestiture mandate, which was designed to restore competition in the California market, and suggested guidelines for an appropriate decree. The District Court on the second remand then chose Colorado Interstate Gas Co. as the applicant "best qualified to make New Company a serious competitor" in the California market. El Paso was to receive 5,000,000 shares of New Company nonvoting preferred stock convertible into common stock after five years. New Company was to assume Northwest Division's pro-rata share (about $170,000,000) of El Paso's system-wide bond and debenture indebtedness. The District Court awarded the New Company 21.8% of the San Juan Basin gas reserves which it said was "no less in relation to present existing reserves" than Northwest had when it was independent, and also gave the New Company more than 50% of the net additions to the reserves developed since the merger, though concededly the New Company's total reserves will not meet the old Northwest's existing requirements and those of a California project. Appellant filed a jurisdictional statement in this Court presenting the question whether the District Court's decree comported with this Court's mandate, but later moved to dismiss its appeal under Rule 60. The motion to dismiss was supported by a number of appellees and opposed by an amicus curiae and a "consumer spokesman," and the Court ordered oral [395 U.S. 464, 465] argument as to whether there had been compliance with its mandate. Held:
Vernon B. Romney, Attorney General of Utah, argued the cause and filed a brief for appellant.
Leon M. Payne argued the cause and filed a brief for appellee El Paso Natural Gas Co. Richard B. Hooper argued the cause for appellees Cascade Natural Gas Corp. et al. With him on the brief were Robert L. Simpson, John W. Chapman, Robert M. Robson, Attorney General of Idaho, Larry D. Ripley, Robert Y. Thornton, Attorney General of Oregon, Richard W. Sabin, Slade Gorton, Attorney General of Washington, and Robert E. Simpson. John F. Sonnett argued the cause for appellee Colorado Interstate Corp. With him on the brief were Raymond L. Falls, Jr., and H. Richard Schumacher. Iver E. Skjeie, Deputy Attorney General, argued the cause for appellee the State of California. With him on the brief was Thomas C. Lynch, Attorney General. Solicitor General [395 U.S. 464, 466] Griswold argued the cause and filed a memorandum for the United States, at the invitation of the Court. William M. Bennett argued the cause and filed a brief pro se.
Briefs of amici curiae were filed by David K. Watkiss and James D. McKinney, Jr., for the Colonial Group, and by John J. Flynn and I. Daniel Stewart, pro se.
MR. CHIEF JUSTICE WARREN delivered the opinion of the Court.
This is before us on appellant's motion to dismiss its appeal under Rule 60. Ordinarily parties may by consensus agree to dismissal of any appeal pending before this Court. 1 However, there is an exception where the dismissal implicates a mandate we have entered in a cause. 2 Our mandate is involved here. We therefore ordered oral argument at which all parties concerned were afforded an opportunity to be heard on the question whether there had been compliance with the mandate. 394 U.S. 970 . At the oral argument a number of appellees supported appellant's motion. They included the United States, the State of California, El Paso Natural Gas Company, Cascade Natural Gas Corporation, Intermountain Gas Company, Northwest Natural Gas Company, the Washington [395 U.S. 464, 467] Water Power Company, Washington Natural Gas Company, Idaho Public Utilities Commission, Public Utility Commissioner of Oregon, Washington Utilities and Transportation Commission, Colorado Interstate Corporation, Southern California Gas Company, and Southern Counties Gas Company of California. The motion was opposed by John J. Flynn and I. Daniel Stewart, by brief amicus curiae, and by William M. Bennett, who appeared for the State of California when the case was last here, Cascade Natural Gas Corp. v. El Paso Natural Gas Co., 386 U.S. 129, 131 (1967), and now presents himself, and argued orally, as "consumer spokesman."
This is a Clayton Act 7 case, 38 Stat. 731, 15 U.S.C. 18, in which the acquisition of the stock and assets of Pacific Northwest Pipeline Corporation by El Paso Natural Gas Company raised the "ultimate issue" whether "the acquisition substantially lessened competition in the sale of natural gas in California." United States v. El Paso Natural Gas Co., 376 U.S. 651, 652 . We ordered divestiture "without delay." Id., at 662. That was in 1964. The United States later agreed to settle the case. As to that we said:
Under the plan approved by the District Court, El Paso receives 5,000,000 shares of New Company nonvoting preferred stock, convertible into common stock at the end of five years. What the conversion ratio will be is not known; but, it is said, there will be provisions to restrict El Paso control over the New Company. The New Company also assumes approximately $170,000,000 of El Paso's system-wide bond and debenture indebtedness, an amount designated the Northwest Division's pro-rata share of that indebtedness.
Utah's jurisdictional statement, which she now moves to dismiss, was filed here November 25, 1968. That jurisdictional statement presents the question whether the decree entered below satisfies our mandate. It is the filing of that jurisdictional statement that brings the question here. See United States v. du Pont & Co., 366 U.S. 316 . In fact, in its jurisdictional statement, Utah urged that the decree does not meet the requirements of [395 U.S. 464, 469] du Pont. We thus need not decide whether the papers filed by amicus curiae or Mr. Bennett properly presented the question of compliance. We find that the decree of the District Court does not comply with our mandate: it does not apportion the gas reserves between El Paso and New Company in a manner consistent with the purpose of the mandate, and it does not provide for complete divestiture. We therefore vacate the judgment and remand the case for further proceedings.
The District Court awarded 21.8% of the San Juan Basin reserves to the New Company saying that was "no less in relation to present existing reserves" than Northwest had when it was independent. The District Court also gave the New Company more than 50% of the net additions to the reserves developed since the merger. Concededly the total reserves of the New Company will not be sufficient to meet the old Northwest's existing requirements and those of a California project. [395 U.S. 464, 470]
This attempt to paralyze competition in the California market started years ago; the Clayton Act suit was filed in 1957. The record up to the entry of the present decree shows, as the District Court found, that delay has strengthened El Paso's position. First, the delay has strengthened El Paso's hold on the California market, making it more and more difficult for a new out-of-state supplier to enter. Second, an additional out-of-state supplier has entered the California market during this 12-year period, taking what well might have been the place of the old Northwest Company had not its competition been stifled. Third, permits for new pipelines from Texas to California are now pending before the Federal Power Commission.
The purpose of our mandate was to restore competition in the California market. An allocation of gas reserves should be made which is "equitable" with that purpose in mind. The position of the New Company must be strengthened and the leverage of El Paso not increased. That is to say an allocation of gas reserves - particularly those in the San Juan Basin - must be made to rectify, if possible, the manner in which El Paso has used the illegal merger to strengthen its position in the California market. The object of the allocation of gas reserves must be to place New Company in the same relative competitive position vis-a-vis El Paso in the California market as that which Pacific Northwest enjoyed immediately prior to the illegal merger.
A reallocation of gas reserves under this standard may permit an applicant other than Colorado Interstate Corporation to acquire New Company and make it a competitive force in California. Thus, the District Court is directed to effect this reallocation of gas reserves, and, in light of the reallocation, to reopen consideration of which applicant should acquire New Company. Such [395 U.S. 464, 471] consideration should, of course, include whether an award to a particular applicant will have any anti-competitive effects either in the California market or in other markets.
The reason advanced for allowing El Paso to take a stock interest in the New Company rather than cash is to reduce its income tax burden. We have emphasized [395 U.S. 464, 472] that the pinch on private interests is not relevant to fashioning an antitrust decree, as the public interest is our sole concern. United States v. du Pont & Co., supra, at 326.
The same reasoning is applicable to the present case. Retention by El Paso and its stockholders of the preferred stock is perpetuation to a degree of the illegal intercorporate community. Assumption of $170,000,000 of El Paso's indebtedness helps keep the two companies in league. The severance of all managerial and all financial connections between El Paso and the New Company must be complete for the decree to satisfy our mandate. Only a cash sale will satisfy the rudiments of complete divestiture.
We vacate the judgment of the District Court and remand the cause for proceedings in conformity with this opinion.
[ Footnote 2 ] It was said by counsel for eight appellees at oral argument: "[W]e do not question this Court's authority to re-examine its mandate and compliance with it. We do urge, however, that your review be confined to the question whether the mandate has been carried out upon the record before this court."
MR. JUSTICE HARLAN, whom MR. JUSTICE STEWART joins, dissenting.
The action taken by the Court today will be dismaying to all who are accustomed to regard this institution as a court of law.
All semblance of judicial procedure has been discarded in the headstrong effort to reach a result that four members of this Court believe desirable. In violation of the Court's rules, the majority asserts the power to dispose of this case according to its own notions, despite the fact that all the parties participating in the lower court proceedings are satisfied that the District Court's decree is in the public interest. The majority seeks to justify this extraordinary step on the ground that District Judge [395 U.S. 464, 473] Chilson's painstaking opinion of over 30 pages is in violation of the mandate issued in Cascade Natural Gas Corp. v. El Paso Natural Gas Co., 386 U.S. 129 (1967), although (1) we have heard no oral argument directed to this question 1 and (2) we have not ordered the interested parties to file full briefs on this issue. Actually, as will appear, what the Court has done is to substitute, sua sponte, a new mandate for its old one. I cannot possibly subscribe to such an abuse of the judicial process.
Moreover, even if the impropriety of the Court's precipitate course is swallowed, it seems to me clear that the District Court's decision in the present case did not violate any prior mandate this Court has entered in this long and complicated litigation. 2 Rather than frustrating [395 U.S. 464, 474] Cascade's command that "a new company be at once restored to a position where it could compete with El Paso in the California market," 386 U.S., at 136 , Judge Chilson's decree adopted the solution which, so far as one can now tell, most effectively realized the goals of 7 of the Clayton Act. Indeed, it is unlikely that as a result of the Court's order today, California's natural gas consumers will ever obtain the benefits of competition that this lawsuit was intended to achieve when it was initiated by the Department of Justice in 1957.
The majority, however, refuses to permit Utah to dismiss its appeal, despite the command of Rule 60 of the rules of this Court:
In handing down this ipse dixit, the Court not only overlooks the teachings of more than a century of judicial [395 U.S. 464, 476] practice, but also undermines the basic policies which support Rule 60. The rule is not a mere technicality but is predicated upon the classical view that it is the function of this Court to decide controversies between parties only when they cannot be settled by the litigants in any other way. See Marbury v. Madison, 1 Cranch 137 (1803). On this view of the judicial process, it is difficult to perceive why the Court should feel constrained to enforce its mandate when the parties have subsequently agreed, in a completely voluntary and bona fide way, that a different solution will better accommodate their interests. We have labor enough in deciding those pressing disputes which the parties are unable to resolve; there is no need to "do justice" when no litigant is complaining that a wrong has been committed. Nor will it do to say, as the Court seems to suggest, that antitrust decrees, being affected with a public interest, as they surely are, are always subject to sua sponte enforcement by the Court. "Enforcement" of the laws of the United States is the province of the Executive Branch. It is no more a proper function of this Court to thwart the Department of Justice when it decides to terminate an antitrust litigation than it is to order this department of the Executive Branch to commence an antitrust case which some members of this Court may feel should be brought. 4
Although the Court's decision to police its own mandates sua sponte thus offends fundamental conceptions [395 U.S. 464, 477] of the judicial process, I do not mean to suggest that this Court lacks the constitutional power to act in the way it has done. Cf. Continental Co. v. United States, 259 U.S. 156, 165 -166 (1922). The Court does have a legitimate interest in maintaining the integrity of its mandates within the entire judicial system and it may be argued that the lower courts will not conscientiously effectuate our decisions unless all know that the Court will act when it learns of abuses. Yet, although this argument may be enough to establish the constitutionality of a practice in which this Court sits as an investigatory body with a roving commission to travel the length and breadth of this land policing its mandates, Rule 60 indicates that such an extraordinary departure from traditional judicial norms has never been thought necessary to insure the integrity of our mandates. Even during periods of history in which there was a greater risk that lower courts would seek to frustrate our decisions, it has been considered sufficient to rely upon the parties to bring violations of a mandate to our attention either by prosecuting a second appeal or by petitioning for a writ of mandamus. 5
I see no reason why we should turn our back on such basic traditions at this late date. Moreover, if we are to take such drastic action, surely we should not do so in an ad hoc manner, under the pressures of the closing days of the Term. Rather, if we are to change Rule 60, we should do so in an appropriate rule-making proceeding, in which the arguments on both sides of the question may be canvassed with the dispassionate neutrality that is appropriate. [395 U.S. 464, 478]
For all of these reasons, I would grant Utah's motion to dismiss its appeal and put an end to this 12-year-old lawsuit. 6
Despite the inadequate briefing, however, enough emerges from the record to suggest that, far from disobeying Cascade's mandate, Judge Chilson made a decision which may well be the only one which realistically promises to fulfill the purposes of the Clayton Act.
The District Court found that "time is of the essence" if the New Company is to compete successfully in the California market. 291 F. Supp. 3, 28. Judge Chilson's analysis of the competitive situation existing today powerfully supports his conclusion that the chances of successful entry are becoming more remote with every passing year. The District Court noted that when this lawsuit began in 1957, El Paso was the only out-of-state supplier in the California market; in contrast, two additional strong companies have entered the State in the past decade. Moreover:
Despite the fact that the Clayton Act may well be the loser, the majority prolongs this lawsuit for two reasons. First, it is said that the District Court violated Cascade's requirement that "[t]he gas reserves granted the New [395 U.S. 464, 481] Company must be no less in relation to present existing reserves than Pacific Northwest had when it was independent; and the new gas reserves developed since the merger must be equitably divided between El Paso and the New Company." 386 U.S., at 136 -137. But the Court's own discussion of this question unmistakably demonstrates that Judge Chilson fully complied with this branch of Cascade's mandate. The Court cannot and does not deny that Judge Chilson granted reserves to the New Company which are "`no less in relation to present existing reserves' than Northwest had when it was independent." See ante, at 469. The only question that remains is whether the District Court decreed an "equitable" division of gas resources discovered since the merger. The answer to this question also seems quite easy, since the Court does not deny that Judge Chilson granted New Company about 50% of these reserves, which is much more than its proportionate share of the assets.
Although this equal division seems more than equitable to the New Company, the majority fastens on the fact that even with this distribution of resources, the New Company will not be assured of sufficient gas both to meet the anticipated demand of New Company's present customers in the Pacific Northwest and to satisfy the requirements of its potential customers in the California market. This indeed would be a source of concern if it were found that New Company could not practically obtain additional gas resources if it decides to compete in California. But Judge Chilson concluded that just the opposite situation obtains; the District Court found that the New Company "can obtain the reserves necessary to compete in the California market." 291 F. Supp., at 20. The Court, however, ignores this finding completely and does not even attempt to show how, given this fact, New Company's equal share of reserves can [395 U.S. 464, 482] in any sense be called "inequitable." Indeed, it is perfectly clear that the Court, under the guise of enforcing its mandate, is really creating a new, and more stringent, standard by which to test this divestiture. But surely this is completely illegitimate in a case where no party has challenged the legality of the District Court's decision, and where, at the most, the issue is the lower court's compliance with our previous mandate.
The Court's second ground for claiming disobedience with Cascade's command is equally untenable. It is said that Cascade ordered "complete divestiture" without delay and we are told that no divestiture can be complete unless there is a cash sale. Since the trial court did not order a cash sale, the majority finds that Cascade's mandate has not been obeyed.
There are several things wrong with this line of argument. First, Cascade expressly states that a cash sale is not required under the standards it sets down:
I pass, then, to consider whether the divestiture plan before us violates our mandate in permitting El Paso [395 U.S. 464, 483] domination of its competitor. While this standard is a rather vague one, MR. JUSTICE DOUGLAS, speaking for the Court in Cascade, gave it specific content by explaining why the proposed terms of divestiture then under review were unsatisfactory. This explanation is of the highest importance in determining whether Judge Chilson's decree contravened Cascade's command and it must be considered with care. MR. JUSTICE DOUGLAS began his analysis by noting that the decree had taken some steps to insulate the New Company from El Paso control since it did bar El Paso officers, directors, and owners of more than one-half of one percent of El Paso stock from buying into New Company at the public offering. The Court, however, found this limitation insufficient because:
It may be that, on appeal, even these stringent conditions may not be found to have fully satisfied the purposes of the Clayton Act. A decision of this question would of course require an analysis of the financial structure of El Paso in order to determine whether it was possible for the Company or its owners to evade the conditions imposed upon them. But it is surely impossible to hold on this record that Judge Chilson's decree is a violation of the mandate issued in Cascade when the present divestiture plan manifests a conscientious effort to comply with all of the suggestions advanced [395 U.S. 464, 485] by the Court in that opinion. 8 Indeed, the majority today does not even attempt to make such a claim. Instead, it ignores the fact that the District Court carefully framed conditions to assure the New Company's independence. At no point in its brief opinion does the Court analyze this aspect of Judge Chilson's decree, contenting itself with the cryptic comment that "it is said . . . [that] there will be provisions to restrict El Paso control over the New Company." Ante, at 468.
What eventuates today evidences a course of unjudicial action that transcends even that which marked the last appearance of the case in this Court. See the dissenting opinion of STEWART, J., in Cascade, 386 U.S. 129, 143 .
I respectfully dissent.
[ Footnote 1 ] The Court's opinion incorrectly states that we "ordered oral argument at which all parties concerned were afforded an opportunity to be heard on the question whether there had been compliance with the mandate." Ante, at 466. The complete text of the Court's order directing a hearing unequivocally shows that the parties were requested to address themselves only to the motion filed by the State of Utah requesting permission to dismiss its appeal and that the parties were not asked to argue the merits of the appeal:
[ Footnote 2 ] See Cascade Natural Gas Corp. v. El Paso Natural Gas Co., supra; United States v. El Paso Natural Gas Co., 376 U.S. 651 (1964); cf. California v. Federal Power Commission, 369 U.S. 482 (1962).
[ Footnote 3 ] Rule 29 provided:
Rule 29, with minor amendments, was a part of the Court's rules until July 1, 1954, when it was replaced by the present Rule 60.
[ Footnote 4 ] It is of course perfectly appropriate for a court to make an independent judgment as to the merits of an antitrust consent decree which the parties submit for approval. See, e. g., United States v. Pan American World Airways, Inc., 1959 Trade Cas. § 69,300, at 75,138 (D.C. S. D. N. Y.). For in the consent decree context, the parties are requesting affirmative action from the judiciary in order to resolve their dispute, while in the situation we confront, none of the parties are requesting further judicial relief.
[ Footnote 5 ] See In re Potts, 166 U.S. 263 (1897); cf. In re Sanford Fork & Tool Co., 160 U.S. 247 (1895); Ex parte The Union Steamboat Co., 178 U.S. 317 (1900).
[ Footnote 6 ] The Court does not decide whether the papers opposing Utah's motion to dismiss which were presented by John J. Flynn and I. Daniel Stewart, as amicus curiae, and those tendered by William M. Bennett, as "consumer spokesman," may be properly considered at this late stage in the proceedings. Since the Court does not reach this question, I do not believe it appropriate to state my views on the matter; nor have I believed it proper to consider in any way the arguments made by Messrs. Flynn, Stewart, and Bennett.
[ Footnote 7 ] These conditions were approved by the District Court on November 7, 1968, in an order approving the Implementing Documents filed by the appropriate parties pursuant to Judge Chilson's decision naming CIG as the successful applicant. The Implementing Documents are a part of the record in this case.
In addition to the restrictions mentioned in the text, the District Court also forbade El Paso's officers and directors as well as their associates, from owning more than one-tenth of one percent of New Company stock for the next 10 years; moreover, El Paso and its affiliates are forbidden to acquire any New Company or CIG stock at any time in the future. Steps have also been taken to assure that El Paso will have no officers or directors in common with New Company or CIG.
[ Footnote 8 ] The Court relies heavily on United States v. du Pont & Co., 366 U.S. 316 (1961), to support its claim that Cascade's mandate has been breached. But du Pont only holds that the District Court must assure itself that "the intercorporate community of interest which we found to violate the law" must be dissolved by divestiture. 366 U.S., at 331 . Nothing in du Pont suggests, let alone holds, that a cash sale is the only way to accomplish this objective. Like Cascade, du Pont established no per se rule in this area. [395 U.S. 464, 486]