Gulf Oil Corp. v. Corporation Commission , 147 F. Supp. 640 ( 1956 )

WALLACE, District Judge.

The plaintiff, Gulf Oil Corporation, a Pennsylvania corporation, (herein referred to as “Gulf”) brings this action against the Corporation Commission of the State of Oklahoma, Ray C. Jones, Wilburn Cartwright, and Harold Freeman, as Members of said Corporation Commission and as Individuals (herein referred to as “Commission”) to enjoin an order entered by the Commission on or about June 29, 1956, requiring purchasers of crude oil produced in Oklahoma to purchase the full allowable fixed by the Commission for oil wells from which the purchasers take oil, unless the Commission specifically grants permission to take a lesser amount.¹ At the time of hearing the court took under advisement defendant’s motion to dismiss; and, for the convenience of the parties permitted the introduction of evidence going toward the merits of the case.

The complainant urges that this court has jurisdiction by virtue of complete diversity of citizenship and because of requisite amount; ² and, has called upon this three-judge court inasmuch as injunctive relief against the enforcement of a state law is requested.³ The defendants concede that the bare jurisdictional requirements of the relied upon statutes exist, but challenge this court’s right to consider this cause on its merits' due to plaintiff’s failure to exhaust all administrative remedies and further because of the lack of equity jurisdiction.

There is no substance to defendants’ assertion that Gulf has failed to exhaust all necessary administrative remedies prior to the filing of this complaint. Admittedly, Gulf has neither specifically requested the Commission to grant a special exemption as available under the terms of the controverted Paragraph 26 of the Market Demand Order, nor taken a direct appeal from this order of the Commission to the State Supreme Court. However, no such special request by Gulf was needed to exhaust its administrative remedy. Although the controverted order contains a provision that exemptions from the order’s terms may be obtained, Gulf has no special cause to claim exemption other than the fact that it is an interstate purchaser. And, on August 21, 1956, at a Commission hearing, Gulf pointed out this interstate condition and requested that purchasers falling in such category be exempted as a class. Subsequently, the order was issued omitting any such exception. Thus, the Commission unmistakably indicated it intended to affect interstate purchasers as well as local purchasers by such order, and, Gulf claims no other special right entitling it to relief.

The Oklahoma law is amply clear that a party aggrieved has the right to directly appeal to the Oklahoma Supreme Court from a contested order, such as the one in view, without first moving for a new trial or pursuing other special provisions for relief;⁴ and, that such an appeal is judicial in character and not administrative.⁵ Thus, in those cases wherein the federal court does have jurisdiction no claim can properly lie that the administrative remedy has not been exhausted, since any consideration by the Oklahoma court is at such juncture judicial and not administrative in nature.⁶

We now turn to the more serious question of whether equity jurisdiction lies.

The defendants urge that the instant case falls clearly within the purview of that doctrine which requires deference by the federal judiciary to local forums thus granting local processes the opportunity to resolve the controversy without a needless calling into play of federal constitutional problems.⁷ Gulf, although recognizing the doctrine of abstention asserts that the case before us is not one calling for the application of such doctrine inasmuch as the contested order shows on its face that judged by federal constitutional principles the order invades the exclusive province of federal authority.⁸ Specifically, Gulf argues that the Commission has attempted to regulate the volume of crude oil purchases in interstate commerce contrary to the Interstate Commerce Clause of the Constitution, art. 1, § 8, cl. 8, and the Due Process Clause of the Fourteenth Amendment; and, that the Commission’s attempted action is not -merely the invalid exercise of an admitted power, but is an attempted assertion of authority expressly and wholly denied by federal law.

In urging equity jurisdiction Gulf principally relies upon the cases of Texoma Natural Gas Co. v. Railroad Commission of Texas,⁹ and Thompson v. Consolidated Gas Utilities Corporation.¹⁰ In both these cases three-judge courts granted injunctive relief against the enforcement of local orders. In the Texoma Natural Gas Company case the court held that the Texas Act, Vernon’s Ann. Civ.St. art. 6049a, requiring both common and private pipe line carriers to purchase gas without discrimination between producers was an unconstitutional taking of private property for public use without just compensation; and, that in addition there was an unconstitutional interference with and burden upon interstate commerce. And, in the Thompson case, the law under attack was found constitutionally deficient inasmuch as it was enacted solely to compel private pipe line owners to furnish a market to those who had no pipe line connections. However, two pivotal features distinguish the Texoma Natural Gas Company case from the one before us. There, the plaintiffs were private pipe line carriers who were solely devoted to serving their own privately owned wells and had not dedicated their property to public use. Moreover, while the litigated act purported to conserve oil and gas as natural resources of the state, it was conceded that the pipe line operations therein did not result in waste. And, in the Thompson case it was obvious from the face of the order that the exercised authority was neither related to the prevention of waste nor the protection of correlative rights in connection with undue drainage.

In the instant case, Gulf, under Oklahoma law, is a common carrier and common purchaser and is under a public duty, as any other common carrier, to furnish adequate facilities.¹¹ It is in relation to this duty along with the state’s legitimate interest in ratable taking (and conservation) that the countenance of the questioned order must be judged.

Unquestionably, the transactions covered by the controverted order bear some real relationship to interstate commerce. However, such does not alter the fact that the subject matter of this order is of a dominant local character and involves local law.¹² Significantly local authorities, in the absence of a clearly defined pre-emption to the federal government, have the right to affect interstate commerce in the absence of placing an unreasonable burden thereon; and, this order cannot be deemed invalid on its face merely because interstate commerce is touched.¹³ Moreover, the doctrine of abstention is not precluded from application merely because the constitutional issue arises in connection with the commerce clause.¹⁴ As recognized in Gulf’s own brief, for this court to exercise its jurisdiction it must appear from the face of the contested order itself that there has been an attempt by local officials to exercise a federally pre-empted power, as distinguished from a mere invalid or abusive use of legally possessed state authority. And, the mere statement of this test seems conclusive as to the need of this court to defer to the local forums in the instant suit. In this case it is impossible to separate the claims of constitutional infringement from questions involving interpretation of Oklahoma law; and, the order even if ultimately held invalid under the Oklahoma law, by all reasonable standards is rationally related to express authority held by the Commission to protect correlative rights, and cannot be deemed merely an attempt to usurp authority in a field exclusively delegated to the federal government.¹⁵

The most recent application of the doctrine of abstention, embracing facts analogous to the instant case, is found in two companion Kansas cases.¹⁶ In these cases Sinclair Pipe' Line Company and Sinclair Crude Oil Company asked the Federal District Court of Kansas to pass upon the constitutionality of an order issued by the Kansas Corporation Commission prohibiting the sale of a portion of an interstate pipe line system. In urging jurisdiction the plaintiffs therein argued that the Kansas Conservation Law did not pretend to confer authority upon the Commission to regulate the sale of interstate pipe line systems, or any parts thereof, and that if the local law so attempted it was in conflict with the Federal Constitution. However, even in the face of such allegations the three-judge court of Kansas refused to accept jurisdiction inasmuch as a “definitive ruling on the state law might make unnecessary the determination of the federal constitutional questions”; and the court quoted from Public Utilities Commission v. United Fuel Gas Company wherein the Supreme Court noted that “Where the disposition of a doubtful question of local law might terminate the entire controversy and thus make it unnecessary to decide a substantial constitutional question, considerations of equity justify a rule of abstention.” ¹⁷ In addition, the Kansas court recognized that the Kansas procedure provided a speedy method of obtaining review.¹⁸

The logic of the Sinclair cases, is equally applicable here. A speedy method of review is available through Oklahoma forums;¹⁹ and, a resort to such avenues may entirely eliminate the grave constitutional issues now asserted. Obviously, if the state authorities do not properly protect rights of the plaintiff springing from the Federal Constitution, Gulf can assert such rights directly to the United States Supreme Court from the Supreme Court of Oklahoma.

The defendants’ Motion to Dismiss is hereby sustained.

1 . The contested order is the last provision of the oil allowable order for the months of July-August, 1956, entered on or about June 29, 1956, which provides : “It is therefore ordered by the Corporation Commission of Oklahoma as follows: * * * 26. That all takers and/or purchasers of crude oil in Oklahoma shall take the full amount of oil allowed by this order unless relieved therefrom by this Commission after notice and hearing as provided by law.”

2 . See 28 U.S.C.A. § 1331.

3 . See 28 U.S.C.A. § 2281.

4 . See Holzbierlein v. State, 1946, 197 Okl. 509, 172 P.2d 1007; Republic Natural Gas Company v. State, 1947, 198 Okl. 350, 180 P.2d 1009; and, Mee v. Corporation Commission, Okl.1956, 293 P.2d 593.

5 . See Sterling Refining Company v. Walker, 1933, 165 Okl. 45, 25 P.2d 312; and, Art. IX, § 20, Okl.Const.

6 . Bacon v. Rutland R. Co., 1914, 232 U.S. 134, 34 S.Ct. 283, 58 L.Ed. 538.

7 . This doctrine of “abstention” for equitable reasons was applied in Alabama Public Service Comm. v. Southern Ry. Co., 1951, 341 U.S. 341, 71 S.Ct. 762, 95 L.Ed. 1002. Also, see Public Service Comm. of Utah v. Wycoff Co., Inc., 1952, 344 U.S. 237, 73 S.Ct. 236, 97 L.Ed. 291; and Railroad Commission of Texas v. Pullman Co., 1946, 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971.

8 . See Public Utilities Commission of Ohio v. United Fuel Gas Co., 1943, 317 U.S. 456, 63 S.Ct. 369, 87 L.Ed. 396.

9 . D.C.Tex.1932, 59 F.2d 750.

10 . 1936, 300 U.S. 55, 57 S.Ct. 364, 81 L.Ed. 510.

11 . See in particular 52 Okl.Stat. § 56.

12 . It is apparent that to prevent discriminatory and inequitable taking a state must be able to have some regulation over the taking along with the production, and have some control over the taker as well as the operator. And, as observed in the dissenting opinion in Republic Natural Gas Co. v. State of Oklahoma, 1947, 334 U.S. 62, 95, 68 S.Ct. 972, 990, 92 L.Ed. 1212, the authority of the state does not spring exclusively from the interest to preserve the natural resources but “It stems rather from the basic aim and authority of any government which seeks to protect the rights of its citizens and to secure a just accommodation of them when they clash.”

13 . “The Commerce Clause gives to the Congress a power over interstate commerce which is both paramount and broad in scope. But due regard for state legislative functions has long required that this power be treated as not exclusive. [Citing authority] * * * It is now well settled that a state may regulate matters of local concern over which federal authority has not been exercised, even though the regulation has some impact on interstate commerce. * * * ” Cities Service Gas Co. v. Peerless Oil & Gas Co., 1950, 340 U.S. 179, 186, 71 S.Ct. 215, 219, 95 L.Ed. 190.

14 . Railroad Commission of Texas v. Pullman Company, footnote 7, supra; Natural Gas Pipeline Company v. Slattery, 1937, 302 U.S. 300, 58 S.Ct. 199, 82 L.Ed. 276; Spector Motor Service v. McLaughlin, 1944, 323 U.S. 101, 65 S.Ct. 152, 89 L.Ed. 101.

15 . Thus distinguish our suit from Public Utilities Commission of Ohio v. United Fuel Gas Co., footnote 8, supra, at pages 469, 463, 63 S.Ct. at pages 376, 373, wherein the court ruled that “the orders of the state Commission are on their face plainly invalid” because in conflict with the federal natural gas act; and “no state court ruling on local law could settle the federal questions that necessarily remain”.

16 . These cases are Sinclair Pipe Line Company v. Snyder (Sinclair Crude Oil Company v. State Corporation Commission of State of Kansas), D.C.Kan.1956, 147 F.Supp. 632.

17 . Footnote 8, supra, 317 U.S. at page 463, 63 S.Ct. at page 373.

18 . Cf. language of Burford v. Sun Oil Company, 1942, 319 U.S. 315, 325.

19 . Under 52 Okl.Stat. § 112 any person affected by a Commission order may at any time apply for repeal, amendment, or modification; and, such application is to be given expeditious hearing. If the requested relief is denied, then a direct appeal lies to the Oklahoma Supreme Court.