Montana-Dakota Utilities Co. v. Northwestern Public Service Co.
Montana-Dakota Utilities Co. v. Northwestern Public Service Co.
Opinion of the Court
delivered the opinion of the Court.
Petitioner and respondent are public electric utilities companies engaged in interstate commerce. Petitioner’s predecessor and respondent were under the same management through interlocking directorships and joint of
Petitioner sued in United States District Court and asserted jurisdiction on the ground that the case “arises under the Constitution or laws of the United States”
Petitioner was successful in the District Court, which found the contracts void for fraud and the rates and charges established therein unreasonable. The court also determined what would have been reasonable rates and charges for the period in question and gave judgment for the difference between its conception of reasonable charges and the actual charges, amounting to over three-quarters of a million dollars.
The judgment was reversed by the Court of Appeals for the Eighth Circuit on the ground that the District Court was without jurisdiction.
Petitioner’s complaint, in substance, alleges existence of the interlocking directorship, contends that such relationship was used fraudulently to deprive it of its federally conferred right to reasonable rates and charges, and demands reparations. We think there was power in the District Court to decide whether the claims so grounded constitute a cause of action maintainable in federal court and, if so, whether it is sustained on the facts. We think a direction to dismiss for want of jurisdiction was error and that it should not stand as a precedent.
However, it is clear that the reason underlying the Court of Appeals’ decision was that no federal cause of action was established. If this was correct, we should sustain
The petitioner's problem is to avoid Scylla without being drawn into Charybdis. If its cause of action arises from fraud and deceit, it is a common-law action of which a federal court has no jurisdiction, there being no diversity in citizenship of these parties. But if it arises from being charged rates in excess of those permitted by the Power Act, it is confronted with the exclusive powers of the Commission to determine what those rates are to be. Hence, it is necessary to bring the case into court, not as a fraud action, but as one to enforce the Power Act, using the allegations of fraud to escape the limitations of the Power Commission remedies.
I.
Petitioner identifies as the source of its cause of action the Federal Power Act’s requirement of reasonable electric utility rates,
Petitioner gives its case a different cast by alleging that by fraudulent abuse of the interlocking relationship
But the problem is whether it is open to the courts to determine what the reasonable rates during the past should have been. The petitioner, in contending that they are so empowered, and the District Court, in undertaking to exercise that power, both regard reasonableness as a justiciable legal right rather than a criterion for administrative application in determining a lawful rate. Statutory reasonableness is an abstract quality represented by an area rather than a pinpoint. It allows a substantial spread between what is unreasonable because too low and what is unreasonable because too high. To reduce the abstract concept of reasonableness to concrete expression in dollars and cents is the function of the Commission. It is not the disembodied “reasonableness” but that standard when embodied in a rate which the Commission accepts or determines that governs the rights of buyer and seller. A court may think a different level more reasonable. But the prescription of the statute is a standard for the Commission to apply and, independently of Commission action, creates no right which courts may enforce.
Petitioner cannot separate what Congress has joined together. It cannot litigate in a judicial forum its general right to a reasonable rate, ignoring the qualification that it shall be made specific only by exercise of the Commission’s judgment, in which there is some considerable element of discretion. It can claim no rate as a legal right that is other than the filed rate, whether fixed or merely accepted by the Commission, and not even a court can authorize commerce in the commodity on other terms.
We hold that the right to a reasonable rate is the right to the rate which the Commission files or fixes, and that,
II.
The petitioner here contends that its case is different by reason of its allegations of fraud. Those, the evidence that supports them, and the findings are exceedingly general, and it is not entirely clear whether, in addition to the claim that constructive fraud may be inferred from the intercorporate relationship, specific acts of deceit are found. Nor does it appear to have been thought that the difference between constructive and actual fraud mattered.
If the petitioner’s grievance arises from active fraud and deceit, it gains nothing from the Federal Act. Such an action would have been maintainable if no Federal Power Act had been enacted. Before the Act, petitioner would have had no statutory right to a reasonable rate, but it did have a common-law right not to be defrauded into paying an excessive or unreasonable one. The Federal Act adds nothing to fraud as an actionable wrong, and, therefore, to find a cause of action of this character would only be to dismiss it for want of diversity.
But petitioner’s case appears to have rested more heavily and perhaps entirely on constructive fraud presumed from the intercorporate relationship. The Act vests in the Commission power to authorize an interlocking directorate, which otherwise is prohibited, “upon due showing . . . that neither public nor private interests will be adversely affected thereby.”
We need not decide what action the Commission is empowered to take if it believes that a fraud has been committed on itself, for it has taken no action which gives rise to or affects this controversy.
III.
The entire Court is agreed that the judgment rendered by the District Court cannot stand and all agree that it cannot adjudicate the issues that plaintiff tendered to it. We disagree only as to the consequences of the disability. The majority believe the federal court should dismiss the complaint. A minority urges that we should direct the District Court to refer issues to the Federal Power Commission.
It is true that in some cases the Court has directed lower federal courts to stay their hands pending reference to an administrative body of a subsidiary question. Smith v. Hoboken R. Co., 328 U. S. 123; Thompson v. Texas Mexican R. Co., 328 U. S. 134; General American Tank Car Corp. v. El Dorado Terminal Co., 308 U. S. 422. But in all those cases the plaintiff below concededly stated a federally cognizable cause of action, to which the referred issue was subsidiary. In no instance have we directed a court to retain a case in which it could not determine a single one of its vital issues. Here the issue of reasonableness of the charges is not one clearly severable from the issues of liability, for the acts charged do not amount to
If the court is presented with a case it can decide but some issue is within the competence of an administrative body, in an independent proceeding, to decide, comity and avoidance of conflict as well as other considerations make it proper to refer that issue. But we know of no case where the court has ordered reference of an issue which the administrative body would not itself have jurisdiction to determine in a proceeding for that purpose. The fact that the Congress withheld from the Commission power to grant reparations
It is urged that this leaves petitioner without a remedy under the Power Act. We agree. In that respect, petitioner is no worse off after losing its lawsuit than its customers are if it wins. Unless we are to assume that this company failed to include its buying costs in its selling rates, we must assume that any unreasonable amounts it paid suppliers it collected from consumers. Indeed, this is the assumption made by the Commission in its brief as amicus curiae here.
The judgment below is affirmed upon the ground that the petitioner has not established a cause of action.
It is so ordered.
41 Stat. 1063, 49 Stat. 838, 62 Stat. 275, 16 U. S. C. §§ 791a-825r.
28 U. S. C. § 1331.
28 U. S. C. § 1337.
Not reported.
Section 205 (a) of the Act, 49 Stat. 851, 16 U. S. C. § 824d (a), states that: “All rates and charges . . . and all rules and regulations affecting or pertaining to such rates or charges shall be just and reasonable, and any such rate or charge that is not just and reasonable is hereby declared to be unlawful.”
§ 206 (a), 49 Stat. 852, 16 U. S. C. § 824e (a).
§ 305, 49 Stat. 856, 16 U. S. C. § 825d (b).
S. Rep. No. 621, 74th Cong., 1st Sess. 20.
Brief for the Federal Power Commission as amicus curiae, pp. 13-14.
Id., pp. 14-17.
Dissenting Opinion
The plaintiff, Montana-Dakota Utilities Company, petitioner here, is the successor in interest to several utility companies which distributed electric energy in North and South Dakota. The defendant, Northwestern Public Service Company, served the region to the south of Montana-Dakota’s territory. Both corporations have been subject to the Federal Power Act since its enactment in 1935. 49 Stat. 847, 16 U. S. C. § 824 et seq. The controversy arises out of relations between the two enterprises prior to 1945. The facts which raise the question whether the Federal District Court had jurisdiction to entertain the suit may be briefly summarized.
After January 1,1935, all but one of Montana-Dakota’s directors were directors of Northwestern, and all of Montana-Dakota’s officers were officers of the other company. These interlocking arrangements received formal authorization by the Federal Power Commission, as required by § 305 (b) of the Act. 16 U. S. C. § 825d (b). At different times between 1935 and 1945 contracts were made between the two corporations for the sale of electric energy. All such agreements have to be filed with the Commission, § 205 (c), 16 U. S. C. § 824d (c), but the legality of rates so filed is not conditioned upon the Com
The defendant moved to dismiss the complaint for want of jurisdiction in that it failed to state a claim under federal law. The motion was denied, 73 F. Supp. 149, and the case went to trial. The District Court found unfair dealing in the circumstances of the interlocking relationship and resulting unreasonableness in the rates, and gave judgment for the plaintiff in the sum of $779,958.30, principal and interest.
The Court of Appeals for the Eighth Circuit reversed. It held that the Federal Power Commission “had jurisdiction and was the proper tribunal in the first instance” to determine the reasonableness of the rates and the bearing of fraud practiced on the Commission in securing permission for the interlocking arrangements and the resulting subversion of rights under the Federal Power Act. The court found that “The Commission can, no doubt, correct its own mistakes,” but it did not specify
Section 317 of the Federal Power Act in its present form confers on the district courts of the United States “exclusive jurisdiction of violations of this Act or the rules, regulations, and orders thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by, or to enjoin any violation of, this Act or any rule, regulation, or order thereunder.” 49 Stat. 862, 16 U. S. C. § 825p. There can be no doubt, therefore, that if the complaint, fairly construed in light of the successful determination of the issues, seeks to enforce a duty which the Federal Power Act recognizes, the District Court properly entertained the suit under the jurisdictional provisions of the Act, reinforcing, as they do, the general jurisdictional provisions governing the district courts. See Act of March 3, 1911, § 24 First, Eighth, 36 Stat. 1091, 1092, 28 U. S. C. §§ 1331, 1337.
The Federal Power Act directs that
“All rates and charges made, demanded, or received by any public utility for or in connection with the transmission or sale of electric energy subject to the jurisdiction of the Commission, and all rules and regulations affecting or pertaining to such rates or charges shall be just and reasonable, and any such rate or charge that is not just and reasonable is hereby declared to be unlawful.” § 205 (a), 49 Stat. 851, 16 U. S. C. § 824d (a).
We face at the outset the contention that this section confers on the Federal Power Commission authority to award reparations for unreasonable rates collected in the
But the case before us is very different. Montana-Dakota does not assert merely that the rates fixed and filed for it by the defendant were unreasonable. Montana-Dakota claimed and introduced evidence to show that some contracts required by the Act to be filed were not filed at all; that others were filed months late; and that some were not the bona fide contracts obtained by arm’s length negotiation that on their face they appeared to be, but instead were “conceived and put into operation by the defendant and its aforesaid directors and officers for the purpose of exacting large charges from [Montana-Dakota] for the purpose, among other things, of offsetting charges of [Montana-Dakota] for electrical energy gen
We are not here concerned with the complaint insofar as it sets forth a common-law cause of action based on misuse of powers by the directors of a controlled corporation. Such an action by itself of course cannot be brought in a federal court in the absence of diversity of citizenship between the parties. But this does not preclude the same circumstances from giving rise to a cause of action that has its roots in the Federal Power Act. As such the controversy does fall within the jurisdiction of a federal court. The essence of this cause of action is that the Federal Power Act imposed on Northwestern the duty to charge and pay reasonable rates in its transactions with Montana-Dakota; and that while under the Act rates appropriately filed are, when unchallenged, the legal rates and deemed to be reasonable, in the circumstances here alleged the schedules and contracts filed were not complete or timely or bona fide. Since it was coercively controlled, Montana-Dakota could neither file rates that were truly reasonable nor protest unreasonable rates filed on its behalf.
The Court of Appeals apparently closed the door of the District Court to this suit on the assumption that relief could be had from the Federal Power Commission for the damage flowing from violation of the Federal Power Act. Of course a court would not grant relief, at least in the
But we do not find that the Federal Power Act provides administrative remedies to meet the situation before us. We have seen that that Act does not authorize the Commission to award reparations to those subjected to unreasonable rates. The Act likewise does not afford to the Commission the authority conferred on administrative agencies under other regulatory statutes to award damages to those injured by violations of the Act. Compare Act of February 4, 1887, § 9, 24 Stat. 382, 49 U. S. C. § 9; Act of August 15, 1921, § 309 (e), 42 Stat. 166, 7 U. S. C. § 210 (e). The Power Act, it is true, does give the Commission authority to look into past rates in order to determine whether the Act has been violated. § 307 (a), 49 Stat. 856, 16 U. S. C. § 825f (a). See Atlantic Coast Line R. Co. v. Florida, 295 U. S. 301, 312. But such an inquiry cannot be made the basis for an administrative award of damages to the victims of the violations. Again, the Commission may, as the Government suggests, have power under the omnibus provisions of § 309 to vacate its approval of a rate when approval has been obtained by fraud. 49 Stat. 858, 16 U. S. C. § 825h. But this does not authorize the Commission to fix rate orders retrospectively. The Commission may establish rates only
If the Commission can neither fix rates retrospectively nor award damages, it clearly can afford no adequate remedy to Montana-Dakota. Vacating its acquiescence in the interlocking directorate or in the schedules filed by Northwestern might prevent Northwestern from asserting the approval of the federal agency in an action brought against it under State law; but it would not provide a basis for recovery by the injured party or impose any certain liability on the wrongdoer. We are bound to conclude that the Court of Appeals was in error in thinking that an adequate administrative remedy existed and precluded courts from granting relief.
But we cannot agree that the inability of the Federal Power Commission to grant relief requires that courts be similarly disabled. Courts, unlike administrative agencies, are organs with historic antecedents which bring with them well-defined powers. They do not require explicit statutory authorization for familiar remedies to enforce statutory obligations. Texas & N. O. R. Co. v. Brotherhood of Clerks, 281 U. S. 548; Virginian R. Co. v. System Federation, 300 U. S. 515; Deckert v. Independence Shares Corp., 311 U. S. 282. A duty declared by Congress does not evaporate for want of a formulated sanction. When Congress has “left the matter at large for judicial determination,” our function is to decide what remedies are appropriate in the light of the statutory language and purpose and of the traditional modes by which courts compel performance of legal obligations. See Board of Comm’rs v. United States, 308 U. S. 343, 351. If civil liability is appropriate to effectuate the purposes of a statute, courts are not denied this traditional remedy because it is not specifically authorized. Texas & Pac. R. Co. v. Rigsby, 241 U. S. 33; Steele v. Louisville & N. R. Co., 323 U. S. 192; Tunstall v. Brotherhood of Locomotive
That civil liability is an appropriate remedy in the situation before us is attested alike by the words of the statute, by the force of familiar principles of liability, and by practical considerations in carrying out legislative objectives.
The Power Act is explicit that any “rate or charge that is not just and reasonable is hereby declared to be unlawful.” § 205 (a), 49 Stat. 851,16 U. S. C. § 824d (a). The aim of Congress would be needlessly aborted if this “definite statutory prohibition of conduct” did not impose civil liability in a situation not covered by administrative remedies merely because no judicial relief was explicitly authorized. Compare Texas & N. O. R. Co. v. Brotherhood of Clerks, supra, at 568. The right of civil recovery by persons compelled to pay unreasonable or discriminatory rates to common carriers is one of the oldest forms of relief in our law. Western Union Tel. Co. v. Call Publishing Co., 181 U. S. 92. To enforce a remedy for collection of unreasonable charges in the situation before us, therefore, would recognize deeply-rooted law; to deny it would be inconsistent with long-established judicial practice. The experience of the Commission indicates that the statute itself, by virtue of the positive duties it commands, under normal circumstances is very largely its own sanction.
We could attribute such a purpose to Congress only if to allow civil relief in the situation before us would interfere with the administrative remedies contemplated under the Act, or impose on courts alien responsibilities or duties they are not equipped to fulfill. No such consequence is remotely involved in utilizing this age-old remedy. The statute is based on the assumption that unlawful rates will ordinarily be promptly corrected at the initiative of injured parties permitted to resort to the Commission for prospective relief. § 306, 49 Stat. 856, 16 U. S. C. § 825e. That procedure is not available when the wrong asserted is that the defendant corporation has established unlawful schedules by fraudulent domination of the utility with which it transacts business. To grant judicial relief for such a wrong will not interfere with the remedial procedure to which the Act confines corporations which are their own masters.
Nor will it transfer to the courts responsibility for deciding questions which should properly be presented to the Power Commission. In a variety of situations we have
We think, therefore, that a cause of action within the jurisdiction of the district courts is stated by a complaint charging a distributor of electric energy at wholesale in interstate commerce (1) with buying or selling at unreasonable rates, (2) with failure to comply with procedural requirements of the Federal Power Act, and (3) with preventing others from resorting to the remedies afforded by that Act. In such cases the district court should stay proceedings and request determination by the Federal Power Commission of matters within the Commission’s special competence. It is within the Commission’s domain to rule whether filed rates should not,
The objections raised to this procedure have apparently not been considered substantial by the Federal Power Commission, the body primarily charged with administration of the Act.
Because we conclude that the District Court, while correct in refusing to dismiss the complaint, should have asked the Federal Power Commission to determine matters peculiarly within its competence and report its finding to that court, we think the case should be remanded to that court for further proceedings not inconsistent with this opinion. We do not, of course, intimate any opinion as to the sufficiency of the evidence to support the conclusion that the filed rates in this case should not be deemed lawful. Nor would we restrict any appropriate use the Commission might wish to make of evidence adduced at the trial.
Data supplied by the Commission show that rate reductions proposed by utilities invariably become effective as filed. More than half of the rate increases likewise become effective automatically as filed. Those which are suspended by the Commission are as a general rule withdrawn, modified, or approved after informal conferences between the parties and the Commission’s staff.
In its brief here the Commission urged adoption of substantially the ground set forth in this opinion.
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