United States v. Champlin Refining Company/Opinion of the Court

Section 1 of the Interstate Commerce Act provides that 'common carriers' engaged in the 'transportation' of oil or other commodities shall be subject to the regulatory requirements specified in other sections of the statute. In an earlier proceeding, this Court found that Champlin, as owner of a pipe line, was a 'common carrier' within the meaning of § 1; and on the record there presented the Court upheld an I.C.C. order under § 19a(a)-(e) of the Act requiring the company to submit valuation data, maps, charts and other documents pertaining to its operations. Champlin Refining Co. v. United States, 1946, 329 U.S. 29, 67 S.Ct. 1, 91 L.Ed. 22. The present proceeding involves a subsequent I.C.C. order directing Champlin (1) to file annual, periodic and special reports, and to institute and maintain a uniform system of accounts applicable to pipe lines, both under § 20 of the Act; and (2) to publish and file schedules showing the rates and charges for interstate transportation of refined petroleum products, pursuant to § 6.

A specially constituted three-judge District Court, with one member dissenting, refused to enforce the order on the ground that Champlin, at least for the purposes of §§ 6 and 20, is not within the class of carriers intended to be regulated by the Act. It held further that to impose the requirements of § 6 on Champlin would be to take its property without due process in violation of the Fifth Amendment. D.C., 95 F.Supp. 170. The Government and the Commission appealed, 28 U.S.C. §§ 1253, 2101(e), 2325.

The facts here are substantially the same as in the earlier case. Champlin owns and operates a pipe line running from its refinery at Enid, Oklahoma, to terminals at Hutchinson, Kansas; Superior, Nebraska; and Rock Rapids, Iowa-a distance of 516 miles. It uses the pipe line solely to carry its own refined petroleum products, such as gasoline and kerosene. No other refiner has connections with the line, and none has ever shipped products through it. The line does not connect with any other pipe line. Champlin has storage facilities at each of its three terminals. Jobbers purchasing Champlin products supply their own transportation from the storage tanks to their bulk depots.

Since the first case, there has been a change in Champlin's method of quoting prices. At the time of the earlier proceeding, the price was computed as f.o.b. the Enid refinery, plus a differential equal to the through rail rate from Enid to the purchaser's destination minus the charges for local transportation between the nearest pipe-line terminal and the destination. However, Champlin made frequent and substantial departures from this formula in order to meet competitive prices at various locations. In May 1948, the company began quoting prices as f.o.b. the respective terminals, a policy which is still in effect. But as before, adjustments are made so that delivered prices to jobbers will be competitive with those offered by other refiners.

On the basis of these and other facts, the Government contends (1) that there are no significant factual differences between this and the prior case, and therefore Champlin is barred by collateral estoppel from relitigating the holding of this Court that it is a 'common carrier' engaged in 'transportation' within the meaning of § 1 of the Act; (2) that since the definition of 'common carrier' in § 1 applies to §§ 6 and 20 as well as to § 19a, the Court's prior holding per se establishes the validity of the present order; (3) that even if estoppel does not apply, the facts are adequate under the statute to support the Commission's order; (4) that the alleged constitutional question is frivolous.

Champlin claims (1) that factual changes remove this case from the realm of collateral estoppel; (2) that the Court specifically reserved the statutory issue presented by this case, namely whether the I.C.C. may convert a private carrier into a common carrier for hire; and (3) that the lower court was correct in holding that the Act violates the Fifth Amendment if construed to authorize the I.C.C.'s order.

We agree with the Government that there have been no significant factual changes in Champlin's operations since the prior case. The practice of quoting prices f.o.b. Enid made it superficially more obvious that transportation charges were being collected, a point which the Court brought out. 329 U.S. at page 34, 67 S.Ct. 3. And the record indicates that the change to an f.o.b. terminal formula resulted in minor alterations in the pattern of relative delivered prices at various locations. But Champlin is still transporting, and unless it has launched on a calculated plan of bankruptcy, its prices on the average are necessarily intended to cover transportation costs as well as other costs. Champlin further points out that it has constructed ethyl plants at two of its pipe-line terminals and is there processing some 20 percent of its products. It claims that this change makes the pipe line a part of 'manufacturing' facilities and thus brings the company within the Uncle Sam rule, which excepted a class of gathering lines from the coverage of the Act. The Pipe Line Cases (U.S. v. Ohio Oil Co.), 1914, 234 U.S. 548, 562, 34 S.Ct. 956, 959, 58 L.Ed. 1459. But a Champlin officer testified in this case that the company has 'always done some blending and treating' of its products at the terminals; and 80 percent of the products are still transported in their final form. Hence, there is no justification for reconsidering this Court's refusal to 'expand the actual holding' of the Uncle Sam case (The Pipeline Cases) supra, to include Champlin, and its ruling that Champlin was a 'common carrier' as defined by § 1 of the Act.

However, we disagree with the Government's contention that the prior holding disposes of all the statutory issues in this case. To be sure, the literal terms of the statute lend some weight to the Government's argument. Section 1(1) provides that 'The provisions of this part' shall apply to 'common carriers' as defined, the word 'part' referring to §§ 1-27 inclusive. Section 19a, under which the earlier order was issued, applies to 'every common carrier subject to the provisions of this part'. Section 20 applies to 'carriers', which is defined in subparagraph (8) as 'common carrier(s) subject to this chapter'; and § 6 applies to 'every common carrier subject to the provisions of this chapter'. Hence, the Commission's jurisdiction to issue orders under any of these sections is determined by a decision that a company is a 'common carrier' under § 1. The Government in effect argues, however, that a decision as to jurisdiction also settles the merits, that facts adequate to support a specific valuation order under § 19a are also adequate to support an order under §§ 6 and 20. But this is the very conclusion which this Court necessarily rejected in Champlin I. In that case, it was Champlin which argued that an interpretation encompassing it within § 1 would convert a private pipe line into a public utility and require it to become a common carrier in fact. But the Court stated that 'our conclusion rests on no such basis and affords no such implication * *  * (The contention) is too premature and hypothetical to warrant consideration *  *  * .' 329 U.S. at page 35, 67 S.Ct. at page 3. In holding merely that Champlin could be required to submit information as a 'common carrier' under the Act, the Court plainly indicated that the application of more rigorous sanctions would be reserved for treatment as an independent statutory issue on a proper record.

The reasons for this approach were suggested in Valvoline Oil Co. v. United States, 1939, 308 U.S. 141, 146, 60 S.Ct. 160, 162, 84 L.Ed. 151. Collection of information has a significance independent from the imposition of regulations, whether or not such regulations ever come forth. Valuation and cost data from companies not subject to rate making may add to the statistical reliability of standards imposed on those companies which are. 'Publicity alone may give effective remedy to abuses, if any there be.' 308 U.S. at page 146, 60 S.Ct. at page 163. Disclosure may alter the future course of a company otherwise disposed to indulge in activities which the statute condemns. Disclosure provides the basis for prompt action should a future change in circumstances make full-scale regulation appropriate. Finally, reports may bring to light new abuses and thus provide the groundwork for future statutory amendments. We assume that the Congress which passed the Interstate Commerce Act was well aware of these benefits. We conclude, as before, that the Congress did not mean to eschew them by omitting a general provision empowering the Commission to collect pertinent data from all interstate pipe lines.

The prior holding, therefore, supports that part of the Commission's order involving § 20 of the Act. The requirement of annual and special reports cannot be differentiated from a request for maps, charts and valuation data. The requirement that Champlin maintain a uniform system of accounts is somewhat more burdensome, but we think its independent value as a measuring rod for companies fully regulated under the Act is clearly sufficient to justify the Commission's requesting so much as is pertinent.

At the same time, we find it hard to conclude, despite the generality of the statutory terms used, that Congress intended to apply the sanctions of § 6-imposing the duty of serving the public at regulated rates-on all private pipe lines merely because they cross state lines. The statute cannot be divorced from the circumstances existing at the time it was passed, and from the evil which Congress sought to correct and prevent. The circumstances and the evil are well-known. Pipe lines were few in number and heavily concentrated under the control of one company, Standard Oil. That company, through the ownership of subsidiaries and affiliates, had 'made itself master of the only practicable oil transportation between the oil fields east of California and the Atlantic Ocean and carried much the greater part of the oil between those points. * *  * Availing itself of its monopoly of the means of transportation (it) refused through its subordinates to carry any oil unless the same was sold to it or to them *  *  * on terms more or less dictated by itself.' The Pipe Line Cases, supra, 234 U.S. at page 559, 34 S.Ct. at page 958. Small independent producers-who lacked the resources to construct their own lines, or whose output was so small that a pipe line built to carry that output alone would be economically unfeasible-were in a desperate competitive position. There is little doubt, from the legislative history, that the Act was passed to eliminate the competitive advantage which existing or future integrated companies might possess from exclusive ownership of a pipe line.

This evil could not have been reached by bringing within the coverage of the Act only those pipe lines who were common carriers for hire in the common-law sense. Attempts so to limit the Act's scope were made during the course of congressional debates. Senator Lodge, sponsor of the principal amendment, rendered the obvious answer that such an alteration would 'absolutely destroy (the proposal) * *  * so far as its effectiveness is concerned.' 40 Cong.Rec. 7000 (1906). Hence the bill as finally enacted was clearly intended 'to bring within its scope pipe lines that although not technically common carriers yet were carrying all oil offered, if only the offerers would sell at their price.' The Pipe Line Cases, supra, 334 U.S. at page 560, 34 S.Ct. at page 958. And see Valvoline Oil Co. v. United States, supra. We may also assume for purposes of argument-no such facts ever having been before this Court-that the generality of the term 'all pipe-lines' was meant to impose full regulation on integrated producer pipe lines who exploit a competitive advantage simply by refusing to deal with independent producers having no comparably cheap method of reaching consuming markets. But it would be strange to suppose that Congress, in adopting a term broad enough to cover all competitive imbalances which might arise, intended that the Commission should make common carriers for hire out of private pipe lines whose services were unused, unsought after, and unneeded by independent producers, and whose presence fosters competition in markets heavily blanketed by large 'majors.' Such a step would at best be pointless; it might well subvert the chief purpose of the Act.

Yet on the record before us, this is precisely what the Commission is attempting to do. Unlike the crude-oil gathering lines of Valvoline, which carried the products of over 3,800 independent owners and operators, Champlin's refined-products line carries only its own. The Government concedes that the order under § 6 carries a necessary implication that Champlin may now be forced to devote its pipe line, at least partially, to public use. Nevertheless, the Commission has not only failed to disclose circumstances which the Act was passed to correct, but has either assumed or made findings to the contrary. In addition to findings previously referred to, the Commission stated as follows:

'Only about 1.98 percent of the total gasoline consumed in (Champlin's marketing) area is moved through the pipe line and sold from respondent's terminal storage facilities. * *  * The total capacity of the common-carrier lines into the Nebraska market is about 13 times that of the Champlin line and about 10 times that of the latter into the Iowa market. The common-carrier pipe-line capacity available to refineries in Oklahoma and Kansas aggregates 172,800 barrels a day (in contrast to Champlin's capacity of 9,800 barrels), and respondent's pipeline is the smallest of any common-carrier or private pipe line operating in this territory. Apparently, common-carrier pipe-line transportation is available to any small refiner in this area desiring such transportation.

'So far as appears, no other pipe-line company has threatened to force * *  * a connection (with Champlin's), and because of the ample common-carrier pipe-line facilities available, as revealed by respondent, no refinery would be likely to interest itself in such a connection.' 274 I.C.C. 412-413, 415 (1949). (Emphasis supplied.)

The court below, in its Findings of Fact, concluded that 'Champlin does not have a monopoly or any power to establish a monopoly either in the transportation of petroleum products into the trade territory or in the sale of petroleum products therein.' D.C. 1950, 95 F.Supp. 170. It further found that 'Champlin * *  * is a small company in comparison with companies with which it competes in the area reached by its pipe line *  *  * Champlin's acts create competition.' Ibid. See also Chairman Splawn, dissenting from the Commission report. 274 I.C.C. 416. The Government seeks to rebuild its case by pointing to small refiners who are closer to Champlin's pipe line than to any other, and by stressing the expense of building long connecting lines. But there is no evidence that any of these refiners wish to market outside their immediate area. And in any event, it is not the function of this Court to rescue the Commission by making findings de novo which the Commission itself was unable or unwilling to make. We hold that on this record the Commission's order, insofar as it concerns § 6, goes beyond what Congress contemplated when it passed the Act.

The judgment below will be modified by striking out those portions setting aside the Commission's order in Cause No. 29912, Champlin Refining Company Accounts and Reports, and as modified, it is affirmed.

So ordered.

Modified and affirmed.

Mr. Justice FRANKFURTER, while joining the Court's opinion, would overrule the earlier Champlin decision, 329 U.S. 29, 67 S.Ct. 1, 91 L.Ed. 22, on the ground set forth in the dissent in that case.

Mr. Justice DOUGLAS, with whom Mr. Justice REED and Mr. Justice BURTON concur, concurring in part and dissenting in part.