CASCADE NAT. GAS CORP. V. EL PASO NAT. GAS CO., 386 U. S. 129 (1967)

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U.S. Supreme Court

Cascade Nat. Gas Corp. v. El Paso Nat. Gas Co., 386 U.S. 129 (1967)

Cascade Natural Gas Corp. v. El Paso Natural Gas Co.

No. 4

Argued January 12, 1967

Decided February 27, 1967*

386 U.S. 129


Almost three years ago, this Court directed the District Court to order "without delay" that appellee El Paso Natural Gas Co. divest itself of the Pacific Northwest Pipeline Corp., whose acquisition by El Paso was found to have violated § 7 of the Clayton Act. United States v. El Paso Natural Gas Co., 376 U. S. 651, 376 U. S. 662. Following remand, leave was unsuccessfully sought under Rule 24(a) of the Federal Rules of Civil Procedure to intervene in the divestiture proceedings by various parties, including appellants, the State of California, where El Paso sells most of its gas; Southern California Edison, a large industrial natural gas user in California, and Cascade Natural Gas, a distributor in Oregon and Washington, whose sole supplier of natural gas was Pacific Northwest. Rule 24(a)(3) then provided for intervention of right when the applicant is "so situated" as to be "adversely affected by . . . disposition of property" under court control. Amended Rule 24(a)(2), which became effective after the intervention motions were denied, provides for intervention of right

"when the applicant claims an interest relating to the property . . . and he is so situated that the disposition of the action may, as a practical matter, impair or impede his ability to protect that interest"

unless it is adequately represented by existing parties. The District Court thereafter approved a divestiture plan whereby a New Company would be formed by El Paso to receive the properties and assets which El Paso received from Pacific Northwest. Appellants, claiming that the conditions under which the New Company would be established would fail to create a competitive pipeline in keeping with this Court's mandate, appealed from the District Court's denial of their motions to intervene.


1. The District Court erred in denying appellants the right to intervene in the divestiture proceedings. Pp. 386 U. S. 133-136.

Page 386 U. S. 130

(a) The category under old Rule 24(a)(3) of "so situated" as to be "adversely affected," by disposition of property was not limited exclusively to those with an interest in property. Pp. 386 U. S. 133-135.

(b) Protection of California interests in a competitive system was "at the heart of our mandate" directing divestiture (cf. Missouri-Kansas Pipe Line Co. v. United States, 312 U. S. 502, 312 U. S. 506). Both the State of California and Southern California Edison qualified as intervenors of right under old Rule 24(a)(3). P. 386 U. S. 135.

(c) Since the entire merits of the case must be reopened to give those parties an opportunity to be heard as of right as intervenors, the new Rule 24(a)(2), which is applicable to "further proceedings" in pending actions, is broad enough to include Cascade as an intervenor as of right, since it has "an interest," not otherwise adequately represented, in the "transaction which is the subject of this action." Pp. 386 U. S. 135-136.

2. Though the Attorney General has the right to settle litigation, such "settlement" cannot circumscribe the execution of this Court's mandate. P. 386 U. S. 136.

3. The following guidelines are suggested for the new decree:

(a) The New Company's gas reserves must not be proportionately less to the existing reserves than those which Pacific Northwest had when it was independent, and reserves developed after the merger must, after thorough hearings, be equitably divided between El Paso and the New Company. Pp. 386 U. S. 136-137.

(b) The terms of gas acquisition contracts should be negotiated by the New Company, after full opportunity to evaluate their advisability, under such restrictions as the Natural Gas Act may impose. Pp. 386 U. S. 137-138.

(c) The competitive position of the New Company and its financial viability must be comparable to that which Pacific Northwest enjoyed before the illegal merger obliterated it. P. 386 U. S. 138.

(d) The severance of the illegal combination, whether by sale to outside interests or otherwise, must be swiftly made, and effected in such a manner as to ensure that the New Company's stock does not end up under control of El Paso interests. Pp. 386 U. S. 138-142.

4. A District Judge different from the one who heard the case before shall be assigned to hear the case on remand. Pp. 386 U. S. 142-143.

Reversed and remanded.

Page 386 U. S. 131

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