United Gas Pipe Line Co. v. Ideal Cement Co., 369 U.S. 134 (1962)
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Scribd Government DocsUnited Gas Pipe Line Co. v. Ideal Cement Co., 369 U.S. 134 (1962)
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Scribd Government Docs369 U.S.
134
82 S.Ct. 676
7 L.Ed.2d 623
UNITED GAS PIPE LINE COMPANY, Appellant,
v.
IDEAL CEMENT COMPANY et al.
No. 61.
Argued Dec. 13, 1961.
Decided March 19, 1962.
E. Dixie Beggs, Pensacola, Fla., for appellant.
James Lawrence White, New York City, for appellee, Ideal Cement
Company.
Submitted on brief by Mr. S. P. Gaillard, Jr., Mobile, Ala., and Mr. Hardy
B. Smith, Mobile, Ala., for appellee, Scott Paper Company.
Charles S. Rhyne, Washington, D.C., for City of Mobile, Alabama, as
amicus curiae, by special leave of Court.
PER CURIAM.
This is an appeal from the Court of Appeals' reversal of a summary judgment
entered for the appellant in the United States District Court for the Southern
District of Alabama. The suit, based on diversity of citizenship, sought
contractual reimbursement of taxes paid to the City of Mobile relative to sales
of natural gas to the appellees. They defended on the ground that the contracts
contemplated reimbursement only of valid tax payments, and that the License
Code of the City of Mobile, 1, par. 193 (1955), under which the tax was
exacted and paid, was invalid under the Commerce Clause of the United States
Constitution. The Court of Appeals sustained this contention, by interpreting
both the primary and enforcement provisions of the License Code and its
surrounding state legislation as operating not to tax a separable local portion of
interstate commerce but as a means of licensing appellant's right of entry into
the City from without the State. 282 F.2d 574, 580. We postponed
determination of our jurisdiction to consideration of the merits, 366 U.S. 916,
81 S.Ct. 1093, 6 L.Ed.2d 240 and now find that the case is properly here under
28 U.S.C. 1254(2), 28 U.S.C.A. 1254(2).
2
The interpretation of state law by the Court of Appeals, in an opinion by its
Alabama member, was rendered in advance of construction of the License Code
by the courts of the State, which alone, of course, can define its authoritative
meaning. We ought not, certainly on this record, either accept the Court of
Appeals' construction or, on an independent consideration, reject what the
Alabama Supreme Court may later definitively approve. The availability of
appropriate declaratory-judgment proceedings under Ala.Code, Tit. 7, 156
168 (1940), avoids this unsatisfactory dilemma. Wise judicial administration in
this case counsels that decision of the federal question be deferred until the
potentially controlling state-law issue is authoritatively put to rest. See Leiter
Minerals, Inc., v. United States, 352 U.S. 220, 228229, 77 S.Ct. 287, 1
L.Ed.2d 267. Accordingly, the judgment of the Court of Appeals is vacated to
permit a construction of the License Code of the City of Mobile, so far as
relevant to this litigation, to be sought with every expedition in the state courts.
It is so ordered.
Judgment vacated.
Mr. Justice WHITTAKER took no part in the disposition of this case.
Mr. Justice DOUGLAS.
This case should be disposed of here; the long-drawn-out litigation* foisted on
the parties by the Court is needless. No matter how the local ordinance is
construed the tax is constitutional.
Congress under the Natural Gas Act, as amended, 15 U.S.C.A. 717 et seq.,
would have the authority prevent interstate pipelines from delivering any gas
for industrial use. Federal Power Comm. v. Transcontinental Gas Pipe Line
Corp., 365 U.S. 1, 81 S.Ct. 435, 5 L.Ed.2d 377. Yet once the interstate
movement commences, the line between permissible and impermissible local
regulation is no longer a puzzle.
United is an interstate pipeline company that brings natural gas into Alabama
and supplies it in the City of Mobile to a distributor, Mobile Gas. United
delivers gas to Mobile Gas at three stations not for resale, but for delivery to
appellees under contracts between appellant and appellees. The gas, when
delivered to Mobile Gas, is at a lower pressure than when it enters the State.
When Mobile Gas delivers it to the industrial customers here involved, the gas
is at a still lower pressure. The case is therefore on all fours with East Ohio Gas
Co. v. Tax Comm., 283 U.S. 465, 51 S.Ct. 499, 75 L.Ed. 1171. In speaking of
the delivery of gas at a reduced pressure within Ohio by an interstate carrier,
the Court said that the gas was then
9
'divided into the many thousand relatively tiny streams that enter the small
service lines connecting such mains with the pipes on the consumers' premises.
So segregated the gas in such service lines and pipes remains in readiness or
moves forward to serve as needed. The treatment and division of the large
compressed volume of gas is like the breaking of an original package, after
shipment in interstate commerce, in order that its contents may be treated,
prepared for sale, and sold at retail. * * * It follows that the furnishing of gas to
consumers in Ohio municipalities by means of distribution plants to supply the
gas suitably for the service for which it is intended is not interstate commerce,
but a business of purely local concern exclusively within the jurisdiction of the
state.' Id., at 471, 51 S.Ct. at 501.
10
Here too the package is broken on delivery of the gas intrastate to Mobile Gas,
the distributor, at a reduced pressure.
11
It matters not that the City of Mobile calls the tax levied here a 'license tax.' In
Interstate Oil Pipe Line Co. v. Stone, 337 U.S. 662, 69 S.Ct. 1264, 93 L.Ed.
1613, Mississippi levied a 'privilege' tax on the gross receipts of a pipeline that
was bringing oil from Mississippi fields to loading racks in that State, where
the oil was pumped into railroad cars for shipment out of state.
12
Mr. Justice Rutledge, speaking for himself and three others, said:
13
'Since all the activities upon which the tax is imposed are carried on in
Mississippi, there is no due process objection to the tax. The tax does not
discriminate against interstate commerce in favor of competing intrastate
commerce of like character. The nature of the subject of taxation makes
apportionment unnecessary; there is no attempt to tax interstate activity carried
on outside Mississippi's borders. No other state can repeat the tax. For these
reasons the commerce clause does not invalidate this tax.' Id., at 667 668, 69
S.Ct. at 1266.
14
Mr. Justice Burton, who also joined in the judgment, approved the tax for the
following reason: 'I concur in the judgment solely on the ground that the tax
imposed by the State of Mississippi was a tax on the privilege of operating a
pipe line for transporting oil in Mississippi in intrastate commerce and that, as
such, it was a valid tax.' Id., at 668, 69 S.Ct. at 1267.
15
In Southern Natural Gas Corp. v. Alabama, 301 U.S. 148, 57 S.Ct. 696, 81
L.Ed. 970, an interstate pipeline company made deliveries in Alabama to three
distributors and one industrial user. These activities were held to be local, on
which a nondiscriminatory franchise tax could be levied. In Panhandle Eastern
Pipe Line Co. v. Public Service Comm., 332 U.S. 507, 514, 68 S.Ct. 190, 196,
92 L.Ed. 128, direct sales by interstate pipelines to local consumers (as
distinguished from deliveries to local distributing companies for resale) were
held to be subject to state regulation. Speaking of the Natural Gas Act, we said:
16
'Congress, it is true, occupied a field. But it was meticulous to take in only
territory which this Court had held the states could not reach. That area did not
include direct consumer sales, whether for industrial or other uses. Those sales
had been regulated by the states and the regulation had been repeatedly
sustained. In no instance reaching this Court had it been stricken down.' Id., at
519, 68 S.Ct. at 196.
17
The 'license tax' in the present case, if it be such, is only a tax on a wholly
intrastate activity, to witthe delivery of gas to the local distributor for
delivery to local consumers.
18
This conclusion is more in the tradition of our cases than was Panhandle
Eastern Pipe Line Co. v. Michigan Public Service Comm., 341 U.S. 329, 71
S.Ct. 777, 95 L.Ed. 993, where a State was allowed to exact from an interstate
pipeline company a certificate of public convenience and necessity to make
direct deliveries of gas to industrial consumers. The Court said that 'the sale and
distribution of gas to local consumers' was a transaction 'essentially local' and
was 'subject to state regulation without infringement of the Commerce Clause.'
Id., at 333, 71 S.Ct. 777, 779. The sales there proposed were to be made
directly from the pipeline to the industrial users. Here the gas first goes to the
local distributor, which in turn reduces the pressure and makes delivery to the
industrial customers. The local nature of the transaction is more apparent and
less complicated than it was in the Panhandle case.
19
I would reverse the judgment below and hold the tax valid.
20
Mr. Justice HARLAN, dissenting.
21
In my opinion none of the considerations underlying the doctrine of federal
judicial abstention (see Harrison v. N.A.A.C.P., 360 U.S. 167, 176177, 79
S.Ct. 1025, 3 L.Ed.2d 1152) call for its application here. There is no reasonable
likelihood that a prior state construction of this License Code would either
change the complexion of the constitutional issue or avoid the necessity of its
eventual adjudication by this Court.
22
Even were this local enactment to be construed by the state courts to require a
license of the appellant as a pre-condition of engaging in the distribution of
natural gas within the City of Mobile, that of itself would not ordain the answer
to the constitutional question. See Southern Natural Gas Corp. v. Alabama, 301
U.S. 148, 57 S.Ct. 696; East Ohio Gas Co. v. Tax Comm., 283 U.S. 465, 51
S.Ct. 499, 75 L.Ed. 1171; see also Illinois Natural Gas Co. v. Central Illinois
Pub. Serv. Co., 314 U.S. 498, 506, 62 S.Ct. 384, 86 L.Ed. 371. Cf.
Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450, 79 S.Ct.
357, 3 L.Ed.2d 421. Nor can I see how such a state adjudication would serve to
illumine the nature of United's activities in Mobile.
23
As I view matters, nothing useful is to be accomplished by remitting the parties
to the state courts, and I would adjudicate the constitutional issue now.
The practice of remitting parties who sue in court to an administrative remedy
(see, e.g., Pennsylvania R. Co. v. United States, 363 U.S. 202, 80 S.Ct. 1131, 4
L.Ed.2d 1165) or of remitting those who sue in a federal court to a state court
(Clay v. Sun Insurance Office, 363 U.S. 207, 80 S.Ct. 1222, 4 L.Ed.2d 1170;
Clark, Federal Procedural Reform and States' Rights, 40 Tex.L.Rev. 211)
places a financial burden on litigants, which can be afforded only by those who
can take the cost as a tax deduction or get reimbursement through increased
rates. For a case where the parties at the end of 14 years were still litigating a
$7,000 (approx.) claim after starting in one court, being shunted to an agency,
and then ending in a different court, see Pennsylvania R. Co. v. United States,
supra.
In Gardner, The Administrative Process, Legal Institutions Today and
Tomorrow (1959), pp. 139140, it was said:
'Anyone who considers judicial review of agency action must allow about a
year if he has access to direct review by a court of appeals and about two years
if he must file in a district court and then carry the controversy to the court of
appeals. If a certiorari question should develop which would warrant Supreme
Court review, another year should be added. If the result of the review should
be to require further agency proceedings, yet another year or so must be added.
Except for the litigant who advantages by delay, not many administrative issues
warrant an investment of time such as this. In probably a majority of the
circumstances, it would be sounder business practice to adjust at once to the
agency decision and go on from there, rather than to endure several years of
uncertainty in order to try to improve the result.
'The matter of expense is closely related to that of delay. It is not possible to be
precise, and surely it is not polite to mention money. Yet none can discuss
realistically judicial review unless he recognizes that an issue of average
complexity cannot adequately be carried to the courts except at a cost which
will range upward from $5,000.' See also Landis, Report on Regulatory
Agencies to the President-Elect (1960), pp. 513.
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