a common carrier to grant rebates to individual shippers by any device whatsoever, or to discriminate in favor of any shipper directly or indirectly. In 1941 the United States brought a complaint against appellees and several other major oil companies and their common carrier pipeline subsidiaries claiming that the pipelines were granting illegal transportation rebates to their shipper-owners under the guise of paying dividends. Although the Government charged that no dividends at all could lawfully be granted in the same year in which a shipper- owner sent products over a pipeline, the suit was settled in late 1941 by a consent decree containing a provision which allowed a shipper-owner to receive a dividend equal to "its share of 7 percentum (7%) of the valuation" of the common carrier pipeline's property. Any dividend in excess of this figure, however, was forbidden. That provision of the decree is before us for interpretation today. From 1941 to 1957 appellees computed allowable dividends by taking 7% of the valuation of pipeline property and then giving each owner a proportion of this sum equal to the percentage of stock it owned. In 1957, however, the Government brought this suit against appellees claiming that the pipelines were giving, and the shipper-owners were receiving, dividends in excess of those allowed by the decree. The Government did not contest the valuation figures used, but argued, despite the language of the decree, that only a part of 7% of the valuation could actually be made available as dividends to stockholders. The total allowable "dividends," it claimed, would have to be shared between stockholders and creditors. The stockholder's (shipper-owner's) "share" of the carrier valuation, so the argument ran, was to be the proportion which stock-investment in the carrier bore to the carriers total invested capital (including debt owed to third persons). Seven percent stockholder-dividends could only be computed out of this "share" of the sum, and could then be distributed to each shipper-owner in proportion to its individual stock interest. Only in this way the Government contended could the consent decree's aim of preventing disguised rebates be accomplished. For only in this way would dividends be limited to a "fair" sum: 7% of the current value of what each owner had invested in its subsidiary. The trial court rejected the Government's interpretation, and the United States brought a direct appeal under 32 Stat. 823, as amended, 15 U.S.C. § 29, 49 U.S.C. § 45. On consideration of the language and the history of this decree we agree with the trial court. If the decree had meant to limit dividends to 7% of the current value of a parent company's actual investment in a subsidiary, as the Government claims, one can hardly think of less appropriate language in which to couch the restriction. Admittedly, by reading the word "share" to refer to a proportion of total capitalization rather than to the percentage of stock owned by a parent company, the language can be made to support the United States' contention. But that is surely a strained construction, and cannot be reconciled with the consistent reading given to the decree, by both the United States and appellees, from the date it was entered until 1957-about 16 years. In 1942, less than a year after the decree was issued, the United States consented to a supplemental order affecting one of the pipeline companies. This order approved a plan of recapitalization for the pipeline which would at least have been highly suspect under the reading the Government today gives the decree. Significantly the supplemental order, which was agreed to by the official who had represented the Government in drafting the original decree, expressly stated that the plan did not violate that judgment. There are also other indications that the Government's interpretation of the decree did not, originally, differ from the one appellees urge today. For example the 1941 decree required annual reports from each pipeline showing total earnings available to owners or stockholders and actual dividends paid. For 16 years the reports made by the pipelines indicated that the dividends were not computed on the basis of 7% of the current value of the owners' investment but on the total valuation of the carriers' properties. For that 16 years the Government accepted this interpretation without challenge. Yet today it renounces this long-standing 1 This consent decree is discussed in detail in Hearings, Antitrust Subcommittee of the House Committee on the Judiciary, 85th Cong., 1st Sess., Part I. 2 Assuming a carrier has an I. C. C. "valuation" of $10,000,000, $2.000,000 of which represents stock investments of $1,000,000 by each of two shipper oil companies, and $8,000,000 of which represents debt because of money borrowed by the carrier from others, on the appellee-companies' interpretation of the decree, each of the two shipper-owners would be entitled to "dividends" of one-half ($1,000,000/$2,000,000) of 7% of $10,000,000 or $350,000. On the Government's new interpretation instead, each shipper-owner's "share" would be one-tenth ($1,000,000/$10,000,000) of 7% of $10,000,000 or $70,000, this being 7% of each one's actual investment of $1,000,000 in the company. acquiescence and claims that the decree imposed limits it had not previously sought to enforce. The Government contends that the interpretation it now offers would more nearly effectuate "the basic purpose of the Elkins and Interstate Commerce Acts that carriers are to treat all shippers alike." This may be true. But it does not warrant our substantially changing the terms of a decree to which the parties consented without any adjudication of the issues. And we agree with the District Court that accepting the Government's present interpretation would do just that. Cf. Hughes v. United States, 342 U.S. 353. We do not decide the case on any question of laches or estoppel, nor do we comment on any possible modifications of the decree which might appropriately be made under Clause X of the judgment, which continues the jurisdiction of the District Court. We merely hold that where the language of a consent decree in its normal meaning supports an interpretation; where that interpretation has been adhered to over many years by all parties, including those government officials who drew up and administered the decree from the start; and where the trial court concludes that this interpretation is in fact the one the parties intended, we will not reject it simply because another reading might seem more consistent with the Government's reasons for entering into the agreement in the first place. Accordingly, the judgment below is MR. JUSTICE DOUGLAS dissents. Affirmed. MR. JUSTICE CLARK and MR. JUSTICE HARLAN took no part in the consideration or decision of this case. [Emphasis added.] The consent decree reads: "[A]ll parties hereto [have] severally consented to the entry of this final judgment herein without trial or adjudication of any issue of fact or law herein and without admission by any party in respect of any such issue and in final settlement of all claims herein in issue. Cf. Fawcus Machine Co. v. United States, 282 U.S. 375, 378; "contemporaneous construction by those charged with the administration of the act. are... entitled to respectful consideration, and will not be overruled except for weighty reasons.' APPENDIX E FURTHER INFORMATION ON THE EFFORTS OF NONOWNERS TO CONNECT TO OR SHIP ON THE EXPLORER PIPELINE During his testimony Mr. Meyer Kopolow, President of Marine Petroleum Company of St. Louis, Missouri, not only described his own difficulties in seeking to connect to and ship on the Explorer Pipeline, but also stated that he understood at least three other companies, which he named, had expressed interest in doing the same without success. Accordingly, on July 13, 1972 Chairman Smith directed identical letters to the following three individuals: Mr. Hugh Watson, President, Martin Oil Company, 914 West Main Street, Carbondale, Illinois 62901. President, Triangle Refineries, Post Office Box 3367, Houston, Texas 77001. Mr. Samuel Goldstein, President, Apex Oil Company, 111 South Merimec Avenue, St. Louis, Missouri 63105. The text of Chairman's letter follows: The Small Business Subcommittee on Special Small Business Problems which I chair recently held hearings on the anticompetitive impact of oil companyowned petroleum pipelines. Among other things, these hearings produced a good deal of evidence that these joint venture lines are operated, by and large, solely for the benefit of their shipper owners, and do not provide equal access to non-owners. One of our witnesses, Meyer Kopolow, President of Marine Petroleum Company in St. Louis, testified, under subpoena, to this effect, regarding his efforts to secure a connection with and to ship on the Explorer Pipeline. Under questioning, Mr. Kopolow indicated that your company has also tried for some time to secure a connection with Explorer without success. To assist us in our continuing inquiry I would appreciate your answering the following questions. 1. Do you now or have you ever shipped product on the Explorer Pipeline. If so, have you shipped in your own name? If you have shipped in another company's name, please identify that company. 2. Have you ever made a request to be connected with or otherwise to ship on Explorer? If yes, when did you first make the request? Have you made more than one such request? If so, please advise how many such requests were made? What, if any, response have you had? 3. If your experience suggests that Explorer is not interested in your business, would you comment on the reasons for this attitude? 4. Can you tell us of any other companies which have had difficulty in seeking to ship on Explorer or any other joint venture pipeline? We will be glad to treat the source of this information as confidential, if you so request. 5. Have you ever shipped on the Williams Brothers Pipeline or any other independent pipelines? If so, please describe in general your experience in making such shipments. Do joint venture lines offer the same services to shippers that independent lines do? If not, please describe the differences, including any differences to entry conditions such as minimum tender and minimum batches. I order that we may proceed promptly with our inquiry, please provide responses to these questions together with any additional relevant comments by no later than Wednesday, July 26th. Thank you for your cooperation. NEAL SMITH, Chairman, Subcommittee on Special Small Business Problems. (A55) 82-172-72-18 The reactions of these three individuals on behalf of their companies follows: 1. Response of Martin Oil Company of Carbondale, Illinois. MARTIN OIL CO., INC., Carbondale, Ill., July 24, 1972. Hon. NEAL SMITH, House of Representatives, DEAR CONGRESSMAN SMITH: Your letter of July 13, 1972, asked several questions about the Explorer Pipeline. I do not feel qualified to give you very good answers to the questions because we have not actually tried or wanted to ship via pipeline. I will try, however, to answer your questions as you asked them. 1. We have not shipped product on the Explorer Pipeline either under our name or any other company's name. 2. We have not made a formal request to be connected to the Explorer Pipeline even though our St. Louis Terminal is just a few hundred yards away from terminals that are connected to the Explorer Pipeline. We have not made a formal request because our supplier was not in a position to put material into this pipeline. 3. I have no direct experience which tells me that the Explorer is not interested in my business, but from conversations with others who have tried to get on the Explorer Pipeline, I know they are not interested in business other than their own. 4. I have no concrete information relative to other companies. 5. We have not used William Brothers Pipeline or any other independent pipeline, as our terminals are on the Ohio and Mississippi Rivers, and until the Explorer was built next door, we had no reason to consider pipelines. As I said in the beginning, I do not feel qualified to talk about pipelines. I feel there are others in the business who would give you the type of information you need. Chairman, Subcommittee on Special Small Business Problems, Rayburn House Office Building, Washington, D.C. DEAR MR. SMITHI: Reply is made to your letter of July 13 addressed to me at Houston. In answer to the questions outlined in your letter, I wish to advise: 1. We have not shipped any product on Explorer Pipeline; neither have we shipped any product through another company name. 2. We had several discussions with Explorer Pipeline with regard to tying our terminal into their pipeline. We did not make any formal request for a tie-in. It was our understanding we would have to commit a definite thru-put over a period of time and since our requirements for our terminal at St. Louis were not definite enough, we really did not pursue the matter further. 3. Explorer Pipeline is interested in shipping product for our account provided we have a destination to receive the product. They could, of course, ship product for our account from Gulf Coast origins and consign it to Williams Brothers destinations. At present, we do not have such requirements. 4. I do not know of any other companies that have experienced difficulty in seeking to ship on Explorer or any other joint venture pipeline. 5. Triangle has not shipped product on the Williams Brothers Pipeline. Triangle has shipped product over the Plantation Pipeline and our experience with them has been very satisfactory. It is my opinion that joint venture lines do offer the same service to shippers that independent lines do. It is also my opinion that minimum tenders and minimum batches are usually predicated on the line size. If we can be of any further help, please advise. On any future correspondence, you may address me at the Kerr-McGee Building, Oklahoma City, Oklahoma 73102. Sincerely, (Emphasis added.) J. H. BARKSDALE, 3. Reaction of Apex Oil Company. Mr. Samuel Goldstein, President of Apex Oil Company, chose not to respond, despite two follow-up telephone calls by the subcommittee staff. Mr. Goldstein did acknowledge, however, that Apex had indeed been interested in connecting to and shipping on Explorer. More significantly, Mr. Goldstein confirmed that in about mid-July-a month after our subcommittee hearing and many months after its last contact with Apex-Explorer initiated a new contact with Apex for the purpose of renewing their negotiations. Mr. Goldstein indicated that nothing may come of these renewed negotiations, not because of a lack of good faith on Explorer's part, but because of Apex' present inability to secure supplies. In any event, Mr. Goldstein saw nothing to be gained by resonding to that Chairman's letter. CONCLUSIONS While none of the companies contacted expressly confirmed that they had ever "formally requested" a connection from Explorer, much less that Explorer had discouraged such a request, each of their reactions to the Chairman's letter tends to confirm that Explorer has in fact so discouraged them. Mr. Watson of Martin Oil replied that he did not make a "formal request because our supplier was not in a position to put material into this pipeline”— a statement that emphasizes the continuing advantage to the owner-shippers who designed Explorer's route. Further, Mr. Watson stated frankly that "from conversations with others who have tried to get on the Explorer Pipeline (which he would not identify, despite the Chairman's assurance of confidentiality), I know they are not interested in business other than their own." (Emphasis added.) Even though Triangle Refineries is a subsidiary of Kerr-McGee-one of the largest independents" and an integrated company with considerable market power of its own-its president did indicate Triangle did not make a “formal request," because of the throughput agreement required. Because of its special status as a "nearly major" oil company, Kerr-McGee's expressions of satisfaction with joint venture pipelines are less than compelling. Perhaps most revealing was the reaction of Mr. Goldstein of Apex Oil who declined to respond in writing. It is clearly to be inferred from this reaction that Apex was and continues to be interested in connecting to and shipping on Explorer. Other sources have expressed the view that Explorer's action in unilaterally renewing negotiations with Apex reflects a desire to assure this subcommittee and responsible agencies that it is indeed interested in non-owner shipping business. While Explorer's action may also support an inference that it was not so interested in the past and may still not be genuinely so interested, the subcommittee is pleased by this development and suggests that now is the time for all nonowners interested in shipping on Explorer to renew their requests and test Explorer's sincerity. Despite the Apex development, the subcommittee's experience with these three non-owners, and especially with Marine Petroleum, also suggests that both the ICC and the Justice Department should closely scrutinize Explorer's operations. |