CF Industries, Inc. v. Transcontinental Gas Pipe Line Corp.

614 F.2d 33, 1980 WL 579563
CourtCourt of Appeals for the Fourth Circuit
DecidedJanuary 8, 1980
DocketNos. 79-1359, 79-1366
StatusPublished
Cited by2 cases

This text of 614 F.2d 33 (CF Industries, Inc. v. Transcontinental Gas Pipe Line Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
CF Industries, Inc. v. Transcontinental Gas Pipe Line Corp., 614 F.2d 33, 1980 WL 579563 (4th Cir. 1980).

Opinion

FIELD, Senior Circuit Judge:

Transcontinental Gas Pipe Line Corporation (TRANSCO) has moved this court for an order referring certain underlying issues involved in this litigation to the Federal Energy Regulatory Commission (Commission) and for a stay of the appeals pending the Commission’s determination of such issues.

TRANSCO is engaged in the sale of natural gas in interstate commerce pursuant to certificates of public convenience and necessity issued under the Natural Gas Act of 1938, 15 U.S.C. § 717, et seq., by the Commission and its predecessor, the Federal Power Commission.1 TRANSCO’s transmission system extends from its sources of natural gas supply in the Gulf states through the southeastern United States into Pennsylvania, New Jersey and its termini in the metropolitan area of New York. CF Industries, Inc. (CF) and Farmers Chemical Association, Inc. (FCA) own and operate a fertilizer plant in Tunis, North Carolina. The plant is designed to use natural gas for processing purposes and for plant boiler fuel, and is served by the North Carolina Natural Gas Corporation (NCNG), which is the retail distributor of natural gas in the Tunis area. NCNG is supplied with gas at wholesale by TRANSCO under certificates issued by the Commission and pursuant to a service agreement and tariffs on file with the Commission which have been approved by it pursuant to regulations issued under the Act.

TRANSCO experienced shortages in natural gas supplies in the areas of its traditional sources and began curtailing deliveries from its pipeline system in 1971. These curtailments were made under tariff provisions approved or ordered by the Commission or the courts. In December of 1975 curtailments on TRANSCO’s system reached the point that NCNG found it necessary to curtail its deliveries to the Tunis plant. CF and FCA instituted suit against TRANSCO on May 18, 1977, in the United States District Court for the Western District of North Carolina. In the original and amended complaints CF and FCA alleged the following causes of action:

(1) the breach by TRANSCO of its contract to deliver to NCNG certain quantities of natural gas on an uninterrupted basis to be used at plaintiffs’ Tunis plant;
(2) negligent performance of that contract by TRANSCO resulting in foreseeable injury to the plaintiffs’ operation;
(3) fraud on the part of TRANSCO incident to the negotiations between it and FCA during the period from 1965 to 1969 relative to the location and construction of the Tunis plant; and
(4) violation by TRANSCO of North Carolina’s Monopolies, Trusts and Consumer Protection Act. N.C.G.S. § 75-1.1.

Contending that the complaint raised a number of issues falling within the expertise of the Commission and having an impact upon its regulatory responsibility, TRANSCO twice filed motions in the district court requesting that these issues be referred to the Commission so that it might exercise its primary jurisdiction on such issues. TRANSCO’s initial motion was denied by an order and opinion of the district court on May 15, 1978. CF Industries, Inc. v. Transcontinental, etc., 452 F.Supp. 358 (W.D.N.C.1978). TRANSCO’s second motion was denied by order entered in the district court on October 6, 1978. The district court declined to certify these orders for an immediate appeal under 28 U.S.C. § 1292(b), and the case proceeded to trial before a jury which determined that CF and FCA were entitled to recover damages from TRANSCO in the amount of $23,815,636.80.2 Judgment was entered upon the jury verdict and these appeals followed.

On February 28, 1979, TRANSCO filed with the Commission a petition for the Institution of a Proceeding and for a Declara[35]*35tory Order, FERC Docket No. TC79-8. The petition requested, among other things, that the Commission conduct an investigation into the facts and circumstances which resulted in a shortage of gas on TRANSCO’s system; the effect of TRANSCO’s gas tariff curtailment provisions and service agreements (including its service agreement with NCNG) and the Commission’s orders, rules and regulations on TRANSCO’s liability for reduced deliveries of gas to its customers; and the effect of an award of damages for curtailment of service on the Commission’s ability to allocate the gas supply on TRANS-CO’s system without undue discrimination or preference. This proceeding is presently pending before the Commission. In filing its motion in this court for an order of reference to the Commission, TRANSCO suggests that it is logical for us to seek and obtain the guidance and determination of the Commission upon the underlying issues before giving consideration to the entire appeal.

In Miss. Power & Light Co. v. United Gas Pipe Line, 532 F.2d 412 (1976), the Fifth Circuit had occasion to consider the question of a reference to the Commission in a similar controversy, and in an exhaustive and well-reasoned opinion, reviewed the doctrine of primary jurisdiction which “has evolved as a means of reconciling the functions of administrative agencies with the judicial function of the courts.” Id., at 417. Based upon its review and analysis of the doctrine, the court concluded:

In this litigation, referral is particularly appropriate. While the Federal Power Commission’s jurisdiction is somewhat limited, the Natural Gas Act, as interpreted by the courts, has provided the Commission with the statutory basis for pervasive regulation of the curtailment question. * * * The Commission is presently involved in resolving issues which have a direct impact on civil litigation involving curtailment plans. The advisability of invoking primary jurisdiction is greatest when the issue is already before the agency. * * * The Commission, moreover, is reviewing in some detail the facts and circumstances that resulted in the present shortage in order to determine what is a fair, equitable, permanent curtailment plan. Indeed, this court has already stated in a similar action that referral to the FPC is preferred. (Citations omitted).

Id., at 419, 420. We are in accord with the conclusion reached by the Fifth Circuit that deference to the primary jurisdiction of the Commission is particularly appropriate in the complex area of natural gas curtailment. We recognized the unique expertise of the Commission in Commonwealth of Va. v. Tenneco, Inc., 538 F.2d 1026 (1976), where we observed:

FPC is a far more appropriate body than a district court to make such a determination [requiring a balancing of the conflicting needs and interests of all of the consumers of a natural gas supplier]. As operators of interstate pipelines, defendants serve customers in states other than Virginia outside the geographic jurisdiction of the district court; FPC, on the other hand, has nationwide jurisdiction. Moreover, FPC has more expertise in matters relating to the natural gas industry than does a federal court of general jurisdiction.

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614 F.2d 33, 1980 WL 579563, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cf-industries-inc-v-transcontinental-gas-pipe-line-corp-ca4-1980.