CASCADE NAT. GAS v. EL PASO NAT. GAS

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Argument of William M. Bennett

Chief Justice Earl Warren: Number 4, Cascade Natural Gas Corporation versus El Paso Natural Gas Company, et al., Number 5, People of the State of California, appellant versus El Paso Natural Gas Company, et al., and Number 24, Southern Pacific -- Southern California Edison Company, appellant versus El Paso Natural Gas Company.

Commissioner Bennett.

Mr. William M. Bennett: Yes.

Mr. Chief Justice and members of the Court.

This case has a long history to it and that it's necessary to go into it to understand why we are here today.

It was in November 8, 1956 that there was an agreement between El Paso and Pacific to exchange stock and it was on May 1, 1957 to that exchange agreement was completed.

It took a mere seven months to do that.

And on July 22, 1957, the United States Government filed a complaint charging that that stock acquisition violated Section 7 of the Clayton Act.

Now despite warnings from the Department of Justice in the State of California that this merger proceeding should be halted.

Nonetheless, the EL Paso Company and Pacific Northwest went to the Federal Power Commission and asked that this merger be approved and it was approved.

Now, that was on December 31, 1959.

There was an appeal from that in a California versus the Federal Power Commission.

This Court set aside the approval by the Federal Power Commission saying that the trial in Utah should have preceded first.

Now the trial in Utah went forward, Judge Ritter found there was no violation of Section 7.

It came to this Court and this Court found that there was a violation of Section 7.

Now, we are here under the Doctrine of the General Motors case that this Court having given a mandate to Judge Ritter to the best without delay has not left the mandate of this Court and we are here as a proper party in a proper way urging that the divestiture be set aside at once.

Now, that the divestiture plan requires three years before El Paso will writ itself of Pacific Northwest and this is after they go to Federal Power Commission and seek a certificate of approval from that agency.

And this is hardly a divestiture without delay.

Furthermore, El Paso is not making a complete divestiture.

It is keeping certain properties of its own favorable to itself and is giving Pacific Northwest properties less favorable to that company.

For example, it is keeping the West Coast Transmission stock which is a valuable asset which should be given a Pacific Northwest but El Paso seeks to retain it.

California sort to intervene or deny this for other appellants here and we are here as we say under the theory of the General Motors case that this Court has the right to review the judgment below.

Now, when you said that this should be done without delay, we do not concede that a certificate proceeding like the Power Commission and other three years to rid itself of Pacific Northwest is in keeping with the concept without a delay?

Justice Potter Stewart: Mr. Bennett, what we have is a consent type --

Mr. William M. Bennett: Pardon, Your Honor?

Justice Potter Stewart: Is the decree below entered by consent?

Mr. William M. Bennett: There was a stipulation between the United States of America and El Paso that a decree for the divestiture would be filed, the party will have 30 days to object and it would be signed and that is what was done.

But this was after the Supreme Court of the United States in USA versus El Paso found that Section 7 had been violated.

This was not a consent decree.

This was a decree for divestiture after the Government had won the case and it was agreed to by the Government.

Justice Potter Stewart: Well, does that -- does that have any relevance to your position here?

Mr. William M. Bennett: Yes, it does in this sense.

The Government opposed the El Paso plan for divestiture from the outset of the case.

If proposed originally that this matter be disposed of by selling the properties of specific Northwest Pipe Line outright to third party purchasers and it even brought forward three prospective purchasers whom it said were competent, qualified, willing, and able to buy the properties.

And the judge was not interested in disposing the properties in that way.

And it seems to me that one quick and clean in simple way to divest these properties and divest them completely is to sell to competent, qualified, third party purchasers.

Justice Potter Stewart: But this is the -- this litigation was brought by the United States?

Mr. William M. Bennett: Yes, it was.

Justice Potter Stewart: And it has expressed to tell for entering or by consenting to this form of --

Mr. William M. Bennett: Yes, it is.

Justice Potter Stewart: -- that satisfied that this is the disposition of any inputs that it had?

Mr. William M. Bennett: Well, at purports to say it's satisfied and that it meets the mandate of this Court.

But the question that you gentleman have to resolve is whether or not Pacific has now reconstituted is so competitive as it once was as still to be able to compete for the California Gas --

Justice Potter Stewart: Of course, the United States in fact there are last position had decided to give up the whole litigation.

Could have they done it?

Mr. William M. Bennett: He may not go back to the District Court to have the --

Justice Potter Stewart: It dismissed the proceeding?

Mr. William M. Bennett: No, you had given a mandate.

You had said divest without delay.

The United States Attorney had the obligation as to the District Court to see that that was done.

In this Court upon its own motion, that case I presume or upon the matter being brought back in a proper way by someone such as California or one of these parties would have ordered that divestiture occurred.

Because you said it du Pont case it does not good to win a lawsuit and then have the remedy follow through.

Justice Byron R. White: Of course, in the du Pont case, United States is not satisfied with what they're doing there.

Mr. William M. Bennett: That is correct.

Justice Byron R. White: I'm just wondering.

Notwithstanding, we entered the mandate as you did that you said, you don't think the United States could give up the whole litigation?

Mr. William M. Bennett: I think they could attempt to give up the whole litigation or I think they could attempt to give away the victory which in our judgment they did here.

And I think if things suspect to this Court and to us today and for you gentlemen to determine whether or not you meant what you said, when you said that Pacific was a competitive for the California market that it have the gas reserves so to do, that it have aggressive management and that it would undoubtedly compete for the golden --

Justice Byron R. White: Now, are you -- are you in the case of intervenor?

Mr. William M. Bennett: I'm in the case as a would be intervenor who was denied and I have appealed from the order of Judge Ritter denying intervention on behalf of the State of California.

Justice Byron R. White: Don't we have to cite that question before we reach the question you now argue?

Mr. William M. Bennett: That is whether or not, we're entitled to everything --

Justice Byron R. White: Whether or not entitled to become a party of this lawsuit so that it is not entirely the Government could control.

Mr. William M. Bennett: Well, if you read the General Motors case, you will find there that they -- that you cited the Continental case which point out that when you give a mandate.

It must be scrupulously obeyed and if it is not and if it is brought to your attention in any proper way, and note you did not say by a proper party, you said a proper way that then you would have jurisdiction to take the thing over and see that your mandate was obeyed.

Or you could it on your own motion whether anybody else put it up to you or not.

Its you --

Justice Tom C. Clark: But your -- you got to show surely first that the -- your denial of intervention was error on the part of the Court.

You're not here as an amicus.

You're here as a party claims that they have right to contest the decree despite the Government's agreement with it.

That's that your first question, isn't it?

If you have no right to intervene, you have everything you say to decide the point.

Mr. William M. Bennett: That is correct, Your Honor.

And that depends upon whether or not the representation of the Government was adequate and if our view that it was not adequate as in correction --

Justice Tom C. Clark: So why don't you address yourself to the intervention question for this?

Mr. William M. Bennett: Well, aside from the history of it, Your Honors.

We think that California was entitled to intervene simply because of the facts that the representation of the public interest by the Government abruptly seized.

The case was tried upon the theory that the El Paso divestiture plan was deficient and the Government so specify, its so argued, its so briefed, it put in a proposed decree on its own which called for an outright sale the third parties.

Now at that point, if you agree with us that the Government seized to represent the public interest which would include California and would include the mandate of this Court then we have a right because of the inadequacy of the representation to become a party to protect our interest on the interest in this case so far as California is concerned as the gas consuming public and the necessity of our competition for the natural gas pipeline market of California.

Justice Tom C. Clark: Well, the Government didn't withdraw from case.

It didn't withdraw from the divestiture decree.

It negotiated.

It ended up with the result that it was satisfied with, now are you charging the Government was acting in bad faith somewhat?

Mr. William M. Bennett: I don't think we have to use words such as bad faith or malfeasance or neglect of duty.

A man can make a mistake honestly and a government official such as myself can make a mistake honestly.

But if it's a mistake then redress must be held.

Now, what was the mistake here?

When this was argued in 1962 in California versus the Federal Power Commission, the Solicitor General standing before you said, that they were seeking out there in Utah, complete divestiture.

That's what the complaint asked for.

That meant that you have to give back to the new company as you constituted it, sufficient gas reserves as it once had to be competitive to the California market.

That you have to return to it, the West Coast Transmission stock which it owned, which was with value of asset to it.

That you had to leave alone the gathering charge in the San Juan Basin rather than increasing it and that El Paso when you said divest must divest completely all that it take in Pacific Northwest and not keep the favorable proper producing property which it has done in this case.

And in 20 minutes, I can't go into particulars of that.

But that's the kind of divestiture decree which came out.

Now, I'm not charging any malfeasance or fraudulent conduct upon the part of the Government.

I'm saying if the Government failed to follow the mandate of this Court, and to follow the language of United States of America versus El Paso Natural Gas Company where you said there was a necessity for competition that the acquisition of the Pacific tended to lessen that tenancy.

And you said, put it back in a position where it can still compete for the California Market.

Now that so constituted today that it's less competitive than it was, and it was independent, you're mandate is not been met and the Government as you said in the General Motors case has won the lawsuit but lost the cause ultimately and that's what is happening here.

Justice Potter Stewart: Is that what you say, gives you a right to intervene?

Mr. William M. Bennett: Yes, because the Government failed to follow what your mandate which made their -- the result inadequate because of the inadequate insistence upon a decree meeting your mandate.

And therefore, the inadequacy comes out quite apparently and if it were not for California and these parties.

This case wouldn't be back here today.

It means if we can't come back here under the Doctrine of the General Motors case that anything could have been done below even perpetuating the unlawful merger here and unless somebody spoke back to this Court.

There's nothing you can do about according to the Government's theory.

Chief Justice Earl Warren: We'll recess now.

Mr. William M. Bennett: Your Honors, in the approximately four minutes remaining.

I'd like to point this out.

That you said in du Pont that where you had formulated a judgment and remanded to the District Court that you have plenary power to supervised that judgment and that if it were brought back to your attention in a proper way.

You had jurisdiction to take the cause over if the decree were not issue as you had contemplated it should be.

Now of course, it's our position the decree does not meet the mandate of this Court.

It's our position we're here in a proper way.

It's our position that we don't need to reach the question of intervention under Rule 24 that we're here under the Doctrine of Continental and du Pont.

But if we do have to come before this Court as party, we maintain that we were entitled to intervene because when the Government abandoned its antitrust position before Judge Ritter and went for the decree of El Paso Natural Gas Company at that moment, the representation of the public interests, the mandate of this Court, the interest of the United States of America and the consumers of California that interest became inadequate and somebody was entitled to represent those parties in a particular California was entitled to representation, therefore, its gas consumers.

Now, we have to wait throughout the trial until such time as the Government switched positions before we knew that the representation was inadequate.

And when they use the word “inadequate” or “failure to meet the mandate” whatever term you wish to style it, it was not, what this Court said you want it done when you said restore Pacific to a competitive position for the California market.

Justice Byron R. White: (Inaudible)

Mr. William M. Bennett: The Attorney General of the California has authorized me to come back and represent the State of California and he's paying for my travel expenses.

Although, I heard in the radio last night that the new administration in California has cutoff all travel expenses for out-of-state visits.

So, I'm here as a lawyer without a staff, without a Petroleum Engineer even a bookkeeper.

This case is --

Justice Byron R. White: (Inaudible)

Mr. William M. Bennett: I appear on behalf of the State of California pursuant to the authority of Attorney General of the State of California.

That was confirmed by telephone call to me -- from me to him just before I left.

There's no question about that.

There has -- the Attorney General was reelect -- the Attorney, same Attorney General but other significant changes in our state.

Justice Byron R. White: (Inaudible)

Mr. William M. Bennett: Well, I presume I can get back by Greyhound bus if no other way.

And as I see the Court is aware there have been difficulties in this case before as California is position is concerned and I can't talk about the merits of the decree.

But the decree as agreed to by the Government sets up a new corporation weaker than Pacific was when it was independent.

It is nothing but a delaying tactic.

It will take two or more years to get through the Federal Power Commission and then and only then does the stock exchange at El Paso proposed attempt to be done with its own shareholders and if that fails a public offering.

And against that, merely think of the fact that the Government at one time said, the best way to dispose of this and to make it independent is an outright sale to third parties.

And this selling in an existing pipeline is something like selling in existing bank.

There will be no difficulty in doing that and this Court then has to be very specific in its instructions to Judge Ritter and I prefer you send it to a Master as to what he must do and as to how he must do it.

And there's must be some time limitations put upon it because I question very much that I will be back before Judge Ritter if this is remanded for further proceedings, I think this Court has a challenge presented to it by the violator of the Clayton Act, El Paso as to whether or not your mandate is to be respected or as to whether or not there version of what compliance that your mandate means.

There's a clear challenge here as I view it and I think the Court is being tests as to whether or not we've won the case but lost the cause.

And I think you have it within your power to enunciate quite clearly if Judge Ritter with some strict guidelines and limitations as to what he must do if you dissented there.

You see there is so many unanswered questions in this case because we were not allowed to intervene.

Questions about gas reserves, capital structure, why they're keeping the West Coast Transmission stock which was a valuable assets to the new company.

Why the new company only has $250.00 of working capital?

Why it has a capital structure 75% debt and 25% equity.

All of these things were resolved in chambers or by the Government but nobody else was allowed to participate and the Government in its brief concedes this is a complex difficult question.

But it's gotten to be difficult complex situation at is because El Paso persisted despite repeated warnings in violating the Clayton Act.

And this violation of the Clayton Act has being going on now since 1956 and it goes on as I stand here today.

And the California market requires and the west requires that you restore Pacific to what it wants once when it was able to compete with El Paso for the California Gas market and even made negotiations of Edison to bring gas to Southern California.

And when that occurred, El Paso came in and made a very much better attractive lower offer just to keep Pacific out of California Gas market.

El Paso has selected the management of this company for example.

El Paso is picking the best assets for itself.

El Paso is presenting to the Federal Power Commission, the case on behalf of a new company.

It's financing it.

It's preparing it.

It's presenting it.

Now, compare that against a group of fires wherever they maybe I'm no expert in finance who would bid for this company and would go in before the Power Commission and make an adversary showing against El Paso.

The same attorneys, the same people that put this merger together are now presenting the application of a new pipeline company to the Federal Power Commission.

Let's not calculate it to suit the best public interest as I see it.

It will be at least five years before this merger is concluded unless this Court directs that some prompt action be taken.

And the best way I know of doing it is to do as the Government once said in its proposed decree which was lodged but not filed for some reason, invite deeds from interested third parties.

Now, I'm intruding upon Mr. Hooper's time, if unless the Court has any questions, I will conclude.

Thank you, Your Honors.

Chief Justice Earl Warren: Mr. Woodbury.

Argument of Rollin E. Woodbury

Mr. Rollin E. Woodbury: Mr. Chief Justice, may it please the Court.

The interest of Southern California, the Edison Company, in this proceeding has recognized in the Government's brief on page 40.

Is that verging the restoration of a new company after the divestiture as it effective competitor for the California market, pursuant to the mandate of this Court?

It may be recalled that it's in 1964 decision ordering divestiture as this Court pointed out and I quote, “Edison search for a burned supply of natural gas in California when it had El Paso Gas only on an interrupt basis.

Illustrates what effect Pacific Northwest had merely as a potential competitor in the California market.”

I might state the situation with the respect of the kind of service which we have through El Paso has not change from that situation that it existed at the time.

This Court further observed after referring to the enormous gas reserves among others which Pacific Northwest had in the San Juan Basin in which was the principal area where the competition for gas supplies between Pacific Northwest in El Paso took place before the illegal merger.

This Court said, have Pacific Northwest remained independent, there can be no doubt it would have sought to exploit its formidable geographical position vis-à-vis California.

Now the real substantive question as we see it before this Court is whether a plan of divestiture which was characterized by the District Court judge who signed the decree by the statement and I quote, “You see what this plan proposes is a division of the country, a division of the market, a division of the reserves one area to new company and another area to El Paso that is what the root of this plan is” and that's found at 976 of the record whether that kind of a decree complies with this Court's mandate ordering divestiture to dissolve the merger which it had determined to be violative of the anti-competitive -- of the antitrust laws because of its anticompetitive effects.

Now, on February 4, 1965, the date of the last hearing on divestiture other than the hearings that came after the stipulated judgment that followed sometime thereafter.

This root of the El Paso scheme was also recognized by the Government where Government counsel stated in part as follows.

“This Company that is being set up under the El Paso proposal is if I may use the word, ‘straitjacketed' to serve the Northwest markets.

It is not in any position to serve the California markets with respect to an expansion program to the California markets.

The Company is not as strong as the company had been before.

It is not as likely to be able to serve the California markets as Pacific Northwest was at the time of acquisition in this case.”

That's at the record 1355 to 1356.

Now, there is absolutely no difference whatsoever between the divestiture arrangement embodied in the decree signed by the District Court and the divestiture plan as previously proposed by El Paso.

In this regard that would in any way change the appropriateness of the characterizations which I have quoted as describing the decree.

The question concerning -- concerned with the appropriate manner of the disposition of the stock in the new company as to which the Government secured a minor alternation in El Paso's proposed plan.

Obviously, relates only to the issue of the company's will to compete.

In contrast, the abandoned issues concerning the disposition of assets and the physical properties and the restoration of contract rights that existed at the time of the merger, those relates to the ability of the company to compete for the California market.

Now, no arrangement with respect to the spin off of the stock in the new company, however successful in establishing an independent will to compete for the California market could cure the debilitating effects and weaknesses imposed upon the new company.

With respect to the -- its ability to compete by the issues which were abandoned and which we submit were not capable of being withdrawn or abandoned without sacrificing this Court's mandate.

Now, those is -- now, those important issues included the following.

First, the failure of the divestiture decree to allocate any portion of the gas reserves acquired in the San Juan Basin and after the illegal merger to the new company, such gas being bought the cheapest in cost at the wellhead and the closest to California.

The position of the Government all during the divestiture hearings was at the – such that the new company's position was less favorable by between 640 billion and one and a half trillion cubic feet of gas in the San Juan Basin.

And those figures were developed on the basis of data from El Paso own witnesses and El Paso's own records.

Justice William J. Brennan: Mr. Woodbury, are you going to argue the intervention to us?

Mr. Rollin E. Woodbury: I'll be happy to direct my -- to state my position Mr. Justice --

Justice William J. Brennan: I'm just wondering if you don't have to resolve that before we get to the merits of --

Mr. Rollin E. Woodbury: I don't believe we do, Your Honor, and let me state why.

First, I should like to say that it is our position that we were improperly denied intervention because we think that we were would be bound under the judgment as within the scope of expediting act as it has been construed and we think properly construed by the courts -- the Ford versus Bisanz case.

And we think --

Justice William J. Brennan: Well, that's an argument that you're entitle of right --

Mr. Rollin E. Woodbury: Yes.

Yes, sir.

Yes, sir.

Justice William J. Brennan: Not discretionary interventions --

Mr. Rollin E. Woodbury: Yes, sir.

Justice William J. Brennan: -- as you see it.

Mr. Rollin E. Woodbury: That's correct, Your Honor.

And the -- and the -- I would also call attention to the fact that on page 57, the Government -- we believe grants that Edison have an interest in the proceeding were -- they say, were not happy to represented and of course we contend we were not.

They would support a claim of intervention of right that appears on page 57.

We --

Justice William J. Brennan: Were you in the original case?

Mr. Rollin E. Woodbury: Sir?

Justice William J. Brennan: Are you in the original case?

Mr. Rollin E. Woodbury: No, sir.

We are application to intervene came after we heard for the first time of the extraordinary development when the issues concerning the ability to compete in California were completely abandoned and that occurred after the divestiture here.

Secondly Mr. Justice Brennan, we of course think that we were not adequately represented from the time that the Government abandoned these positions and stipulated and that -- from that time on it would have been in no position --

Justice William J. Brennan: Well, may I ask Mr. Woodbury, am I right, the question of adequacy of representation goes to discretionary intervention does it rather than to universal division of rights?

Mr. Rollin E. Woodbury: I believe it was my recollection, Your Honor, that it went to both.

Justice William J. Brennan: When it goes both, I see.

Mr. Rollin E. Woodbury: Yes, sir.

But let me say this and this I think is the more important point from our standpoint or -- and I think from the Court standpoint and that is that while it -- we do not think that the question of intervention need necessarily be determined first or we do not think that if it is determined first, this Court should stop there because we believe that we're dealing here with a mandate of this Court.

Now, the Government takes the position in El Paso does as I understand it that that didn't make any difference.

But we may -- we think it makes a very real difference that this is a mandate of this Court that cannot that the Government cannot be deal with in anyway it sees fit.

Now, let me just post before the Court, a hypothetical question which I think may focused the importance of this position and I think it is quite important to Your Honors as well as to us.

Let's assume if you will a case where -- this Court had issued a mandate ordering divestiture without delay as in this case.

Let's assume further that the parties are denied -- applications for intervention both permissive and as of right are made and they're denied.

And for the purpose of my hypothetical case, let us assume they're denied properly which we do not think is this case.

Let's further assume that the Government thereafter stipulates to a judgment in good faith with any malfeasance but let's further assume it's a judgment which violates the mandate of this Court.

Justice William J. Brennan: Let -- let's assume as I suggest to Mr. Bennett, they stipulate for the dismissal of the litigation.

Mr. Rollin E. Woodbury: I do not believe they could have do that Mr. Justice Brennan.

Justice William J. Brennan: Why?

Mr. Rollin E. Woodbury: Because the mandate of this Court would then clearly be frustrate.

This Court has ordered divestiture without delay.

It is no warrant --

Justice William J. Brennan: But for example, we may decide, issues here which nevertheless result in a settlement between the parties on a different basis.

Mr. Rollin E. Woodbury: Well, in the antitrust field Your Honor and in view of the responsibilities which this Court refers to quite at length in du Pont.

The extraordinary responsibilities are not going to allow a single judge to decide these antitrust matters because of their broad public importance.

Justice William J. Brennan: But there of course the Government was still insisting that there was a public interest of require indication.

Mr. Rollin E. Woodbury: Precisely.

Precisely.

But here under the case that I put to you we have a -- we have a decree which under the assumption violates what this Court intends to have taken out.

And until we have to the effect of this Court intended because of a stipulated judgment.

Now certainly, this Court's interpretation in du Pont of the holding in Continental is that this Court can't be circumscribed by any stipulation of the Government.

That's the -- that's the footnote in the Continental -- in the du Pont case --

Justice William J. Brennan: I guess I put it there.

Mr. Rollin E. Woodbury: Well, I'm glad you did Your Honor because I think it is significant.

I think that in this kind of a situation that makes a very real difference and further if I may say so, I do not believe that this Court should stop at deciding the question of intervention because what it ordered if it meant what it said in this case, when it ordered divestiture without delay.

If all you decide here today is that we should have been permitted to intervene and nothing more and you send this case back there's going to be lot longer hearings and we're probably going to be back up here again and that's unnecessary I submit.

If this Court at this time spells out with enough particularity that it cannot be misunderstood as it was in this case in our opinion what this Court once done.

And certainly, we do not believe that this Court is powerless to see that its mandate is carried out.

That's fundamentally the difference procedurally between our position and that of the Government as we see it.

In fact --

Justice William O. Douglas: I wonder how you get to this Court to make that argument unless you (Inaudible)?

Mr. Rollin E. Woodbury: Well, Your Honor --

Justice William O. Douglas: You were not in the original case as I recall --

Mr. Rollin E. Woodbury: No, sir.

No, sir.

But it seems to --

Justice William O. Douglas: I guess even California would go to amicus in the original case.

Mr. Rollin E. Woodbury: I -- I think that's right, Your Honor.

But let me say this, if that's what the Court meant in Continental and du Pont that you have to have a party who had been admittedly intervened.

They didn't have to say in any proper way.

They said in this way.

Now, they -- they point out not only that if the matters brought to this Court's attention in any proper way.

They also say they could do it on their own motion.

And we just think it is ridiculous to suggest and we don't think there's any legal sophistry that will justify a conclusion in soundness that this Court could be rendered powerless to see that its mandate was carried out by a stipulated judgment made and under my assumption by a mistake that violated the mandate of this Court.

We just don't believe that either should be or is the law under Continental and du Pont.

Now, return to the things which were abandoned.

The important issue if it were abandoned in this case.

Justice William O. Douglas: Unless there is some intervention here this decree will -- is unreviewable.

Mr. Rollin E. Woodbury: Yes, sir.

And I think that's a fair statement of the Government's position and the El Paso's position in this case, what we are saying is, even if what I said in my hypothetical case, Mr. Justice Douglas, was that even if you assume that intervention was properly denied.

We don't believe under Continental and du Pont that this Court is powerless and it is bound by a stipulated judgment entered into by the Government which violates its mandate.

Justice William O. Douglas: But we say -- what was the language we use in the mandate?

Was it the --

Mr. Rollin E. Woodbury: Ordered you divestiture without delay.

Justice William O. Douglas: Without delay.

Mr. Rollin E. Woodbury: Yes, sir.

Yes, sir.

Justice William O. Douglas: And how much delay has there been?

Mr. Rollin E. Woodbury: Well that was in 1964, of course this case started as Mr. Bennett pointed out about 10 years ago.

And as he pointed out --

Justice William O. Douglas: Our mandate was dated 1964?

Mr. Rollin E. Woodbury: 1964.

Yes, sir.

The requirement is correct.

Now, what about the other abandoned issues?

The failure of divestiture -- of the divestiture decree to restore the new company to the proceeds of the West Coast Transmission Company Stock which was owned by Pacific Northwest before the merger.

They are going to give the proceeds to El Paso and in the connection, El Paso you'll find in their brief and in the Government's brief in reference to the recently negotiated Canadian gas contract which increases the price of gas significantly that they purport -- intend to imposed on the new company.

Now, that isn't going to help the new company compete in California.

Although, it may very well enhance the value of the West Coast Transmission Company Stock which under this decree goes to El Paso and not the Pacific Northwest that owned it before the merger.

They made unilateral changes in this decree and the contracts.

Every one of them to the disadvantaged of the new company and will render the new comany less able to compete for the California market.

They also gave no allocations whatsoever of a tax law's carry over benefit of more than $50 million which El Paso got because of Pacific Northwest tax situation and which they used to their benefit in the net about of about $28 million are shown by this record.

Now all of these items --

Justice Hugo L. Black: Can you claim that you have the right to litigate?

Mr. Rollin E. Woodbury: Sir?

Justice Hugo L. Black: Can you claim that you have the right to litigate (Inaudible)?

Mr. Rollin E. Woodbury: Well grant -- if we were permitted intervention Your Honor, we would claim that we would have a right to litigate the propriety of requiring as the Government contended all through the divestiture hearings.

The propriety of contending that the ability of this new company -- the decree should be such as to restore its ability to compete for the California market in a position at least the strong as was the old company at the time the illegal merger.

Justice Hugo L. Black: Do you claim the right to litigate to decide whether the decree would be (Inaudible)?

Mr. Rollin E. Woodbury: Conform to the --

Justice Hugo L. Black: (Inaudible)

Mr. Rollin E. Woodbury: Conforms to the mandate of this Court.

Justice Hugo L. Black: Suppose, they just inform the mandate of the court with no right to litigate at all, (Inaudible) position to stay in, a reason of the Government to stand its position?

Mr. Rollin E. Woodbury: Well, I would think Your Honor, if we're permitted to intervene that the -- that we would to be permitted to litigate all of the questions and issues involved in reestablishing a new company that was as strong as and able to compete for the California market as was the old company.

I may be missing the import of your question but --

Justice Hugo L. Black: Well, then (Inaudible) would then indicate to the Government's position to litigate the (Inaudible).

What -- what do you have to litigate then if you were allowed to litigate it?

Mr. Rollin E. Woodbury: Well I would think, we would have the right to litigate --

Justice Hugo L. Black: Do you claim that this decree has to be followed by (Inaudible)?

Mr. Rollin E. Woodbury: I would think so.

Justice Hugo L. Black: No chance to change it?

Mr. Rollin E. Woodbury: Well, I claim.

Of course, that the matter was originally sent down to the Court that in -- would order divestiture without delay.

Now, I think that if this Court would do what I think it should in at this time and specify what factor should be applied in this allegation and how the matter should be disposed of.

I think we could then be entitled to litigate the -- all of the issues that would be involved in assuring our position as to how that mandate should be complied with.

Justice Hugo L. Black: But the divestiture must be out at all means?

Mr. Rollin E. Woodbury: I think so until this Court's mandate would change.

Yes, sir.

Yes, sir.

The Government vigorously urged all of these points all during the divestiture case and the record in the case is the void of any explanation to this extraordinary abandonment of these issues.

And I intended to discuss them but I will simply say to you gentlemen, that the reasons which are given the explanation if they may be called at which are given for the first time now in this brief by the Government.

If you read them, I'm sure you will not be persuaded as we are not that they are sound explanations and the important thing is everything they talked about here, they had available to them, the data, the arguments, the evidence at the time they file their brief after divestiture hearings and there's nothing new in this brief just to give any explanation as to why they change their positions.

We submit that this decree does not conform with this Court's mandate.

We submit that the judge have a completely incorrect understanding of which -- of what this Court ordered when it decided that a division of the country or division of the market in antitrust case.

A division of the market, one area to El Paso, one area to the new company couldn't be what this Court intended and we submit therefore that this Court is not neither powerless to insist that its mandate be followed but they certainly should do so.

Thank you, Your Honor.

Chief Justice Earl Warren: Mr. Hooper.

Argument of Richard B. Hooper

Mr. Richard B. Hooper: Mr. Chief Justice, members of the Court.

The case of a Cascade Metro Gas Company application, the first got started on October 7, 1965 with an application believed to intervene in a procedure for divestiture of the Pacific Northwest Pipe Line Division the El Paso Metro Gas Company and the District Court of Salt Lake City.

The -- ten days -- well, ten days later a proposal presented by El Paso for divestiture was filed and served in hearings commenced two days later and there -- there were number of other intervenors, commissions, private parties, applicants for intervention I should correctly say.

Now the court ordered that all would be interveners file memoranda of evidence, law and argument supporting their contention on intervention.

Now approximately 20 intervenors -- potential intervenors, Cascade Metro Gas Company alone, complied with the court's order, nevertheless, when the court reached the decision on intervention.

It denied intervention to all parties by a form order which stated in part that no evidence written oral had been supported -- had been submitted in support of the application for intervention.

And subsequently that court adopted as its decision on intervention, the brief of El Paso filed an opposition to the applications for intervention.

Based upon that, Cascade Natural Gas Corporation filed notice of appeal at the termination of hearings and then approximately the same time that the Government filed a vigorous, well written brief in opposition to the El Paso proposal if anything to a greater extent then to -- then to then the extent to it Cascade itself objective.

Now, Cascade Natural Gas Corporation is what may be termed a growth company in the Pacific Northwest distributing natural gas in 1963 and that, correction, yes, 1963 to 1962 communities.

Three more added in early 1964 and had assets at that time of approximately of $43 million Rose Plant.

It had 40,000 customers by mid 1964 and it was completely and utterly dependent upon a supply of gas which had it -- it had obtained originally form Pacific Northwest Pipeline Corporation under long term contracts which were the basis for very extensive financing to the extent then of above $28 million and which were assumed by El Paso when the merger occurred.

Cascade Natural Gas Corporation then did not have and it does not today, have any other source of gas.

It must be dependent entirely on the makeup of the new company which is to be the product of the decree of divestiture as finally approved by this Court.

To Cascade, the fundamental issue in this case is simply this.

Is El Paso to be permitted to retain the fruits of its initial and continued violation of the antitrust laws?

Whether to answer to this --

Justice Potter Stewart: You -- I'm sorry about that.

Mr. Richard B. Hooper: Now, whether to answer to this is to be arrived at by allowing interested parties to intervene and present critical evidence concerning the various provisions of this decree or whether it is to be decided by the exercise of the plenary power of this Court.

Certainly, we feel that the questions that been left unanswered by the decree as it now stands and which will have a vital and adverse effect upon Cascade Natural Gas Corporation to a very considerable degree -- degree and to all customers in the Pacific Northwest to varying the degrees that must be disposed of.

Now --

Justice Potter Stewart: Physically, I have with that statement if what's involved in this appeal is simply this that your appeal, unless I'm mistaken tell me if I am as well as the other two appeals, are appeals from denials and motions to intervene.

And really the issue as I therefore see it is whether or not the Court is through action denying the motion to intervene --

Mr. Richard B. Hooper: That may it please --

Justice Potter Stewart: -- which involves to subsections about (a) whether or not you had a right to intervene and if not, (b) whether you had a --the Court had discretion to allow to intervene in subsection 1 under (b), whether or not if so he had used that discretion.

And it seems to me those are the issues before us rather than ones you stated.

If you tell me why I'm wrong.

Mr. Richard B. Hooper: Yes.

I'll answer your question Your Honor this way.

We feel there are two distinct approaches to this problem.

One is via the question of whether the Court below erred in denying intervention to all parties without regard to their making a prima facie case which I might add was never refuted by any evidence submitted in connection therewith.

And the second point is that we are the three in that -- the three applicants, the three appellants are before the Court this day properly by virtue of the expediting act.

This is an appeal directly to this Court and under the -- under Mr. Taft -- Mr. Justice Taft's decision in the Continental case affirmed and relied upon in the du Pont case.

You have it within your power to look at this decree critically.

Justice William J. Brennan: But may I ask I have Chief Justice Taft's opinion in the Continental case.

Do I correctly read this as a case in which you certainly said what you have been relying on mainly that this Court can as plenary power where the compliance so if would be attempted in the decree in any proper way brought forward attention.

That's what I think you're relying on this instant.

But in that instance, the initial suit which was United States versus Redding (ph) Company resulted in the proceeding in the District Court that was what was sent for the District Court into our mandate.

And then the intervenor of Continental Insurance Company was an intervenor and no one seems to have challenged the Continental and the other intervenors the right to intervene or any event they were allowed to intervene, and then they brought the decree as intervenors in the District Court proceeding here.

But your situation as you stand here in any event is that you've been denied intervention in the District Court and can you read Continental as saying that you're entitled to be here merely because Chief Justice Taft said in any proper way when you're not going to allow to intercede there?

Mr. Richard B. Hooper: That's exactly the way we read it, Your Honor.

Justice William J. Brennan: But I might correct this for the facts of Continental?

Mr. Richard B. Hooper: Yes.

Justice William J. Brennan: And of course --

Mr. Richard B. Hooper: And that the party appealing in that case was an intervenor --

Justice William J. Brennan: It has been in the District Courts.

Mr. Richard B. Hooper: Yes.

Justice William J. Brennan: And the course in du Pont, the United States is the (Voice Overlap) brought the decree back here, wasn't it?

And didn't what we say in the du Pont really go to the question once we have the case properly here because a party entitled to bring it here had voted here that then we were free to enter whatever we thought was required by the mandate in the previous sit.

Does it go beyond that?

Mr. Richard B. Hooper: We feel it does, Your Honor.

Justice William J. Brennan: You think it does.

Mr. Richard B. Hooper: We feel that Mr. -- that Mr. Justice Taft's opinion in that case really throws in almost as an afterthought.

The idea that it must be brought before the Court in a proper way and he does not as Mr. Woodbury has pointed out state that it must be brought by a party.

Justice William J. Brennan: Well, I may ask this if you're right about this, does it follow that any citizen of the United States unhappy with this decree's post Cascade and California and Edison were content but some citizen of California was upset about it, that he come up here and has this thing to say that the District Court have not complied with our mandate?

Mr. Richard B. Hooper: I think that to answer that question, we must consider the context of this case.

We're dealing with a public service company, the public utility in the first instance with divestiture with that has or perhaps even today does delivered 50% of the gas in the entire country that it is --

Justice William J. Brennan: Well, let me put it this way.

I recall we have case to a couple of years ago some town, Copeland or something like that.

They were not parties to this.

But suppose they were unhappy because they thought the supply the were going to get for their municipal power is going to cost them or now and everyone else is content with what happen with this Court and they came up here and ask this to look at this decree?

Mr. Richard B. Hooper: I think that might be disposed of Your Honor by this Court's refusal to note probable jurisdiction in the event of a denial of intervention to such a party and subsequent appeal to this Court.

Now, this Court has not seen to fit to do so.

This Court has said as far as we are concern today, these parties are properly before this Court.

We want to hear them.

Justice William J. Brennan: On what question?

Mr. Richard B. Hooper: If --

Justice William J. Brennan: If he illustrate --

Mr. Richard B. Hooper: -- on the question of that --

Justice William J. Brennan: --from a denial of motion to intervene.

Mr. Richard B. Hooper: Yes, Your Honor.

And thereafter when we knew the terms of the proposed decree, we file the supplemental jurisdictional statement drawing the Court's attention to its plenary power.

So that by that we feel that this question is properly before the --

Justice William J. Brennan: But at the very least, if we agree with you.

We are going beyond anything we have done yet?

Mr. Richard B. Hooper: But you are not going beyond --

Justice William J. Brennan: Now, we are going beyond --

Mr. Richard B. Hooper: -- the decisions require not in this Court.

Justice William J. Brennan: -- the situations in Continental certainly, aren't we?

Mr. Richard B. Hooper: We think this case cries out for such action.

Justice Potter Stewart: You would read the Chief Justice Taft's, if you would expand Chief Justice Taft's word without properly brought before this Court to properly or improperly, is that right?

Mr. Richard B. Hooper: No, sir.

Justice Potter Stewart: And it isn't a question here from -- isn't the decisions from which you have an appeal here which is before us for argument today.

The question of whether or not you should have been allowed to intervene in the District Court proceeding?

Mr. Richard B. Hooper: That is one of the two questions.

Justice Potter Stewart: I thought that was the only order from which an appeal have been taken?

Mr. Richard B. Hooper: Yes.

That is true with respect to intervention but when they -- this Court noted probable jurisdiction.

It said, “These people are properly before this Court.

If we are properly before this Court in any matter whatsoever, we can suggest, recommend to this Court that if exercise plenary power with respect to a former order of this Court and that I think -- that is our dual position and if you will.

Justice Potter Stewart: I thought that the point in Continental was sort of the Court there without dealing with the person who -- parties who had intervened, not merely those who had tried to intervene tell itself not bound by the bare assignments of error, is that right?

And if the Court on his owned his motion, one had considerably the proper limits of the decree.

Mr. Richard B. Hooper: I -- I believe that is an element in the case but I think that supports our position.

Justice Potter Stewart: That's what I thought here.

Mr. Richard B. Hooper: Once this case is before the Court on this type and my new -- we restrict our proposition to this type of case where there is a prior order of divestiture and the question is as the mandate of this Court improperly carried out.

Now, consider it if you will for just a moment.

The alternate -- the alternative is that regardless of what the Government sees fit to do in a case of this kind on hearings to carry out the order of this Court.

The Court is powerless to do anything about it.

Now, I -- now, we submit that this simply should not be the rule of law.

Justice Byron R. White: I take it you make this argument if instead of noting the problem with jurisdiction we have postponed?

Suppose our action in bringing it here have been postponed jurisdiction instead of noting it.

Would you make a different argument, are you?

Mr. Richard B. Hooper: No, sir.

We wouldn't.

And if we wouldn -- we would argue exactly the same way so long as we before this Court is all --

Justice Byron R. White: As long as we -- said we'll hear you one of that --

Mr. Richard B. Hooper: Yes, sir.

Justice Byron R. White: --to answer that.

Mr. Richard B. Hooper: That -- that's our position.

Now just a brief word if you will about the -- about this decree, all the way through this decree after the final execution of it, the final issuance of it is the product of El Paso with one exception.

The -- the Government forced a concession on the question of spin off that the Government made it -- made a substantial concession itself throughout the hearings.

The Government argued for a sale, outright sale.

The Government conceded that.

The Government abandoned all other controversies which it -- all other considerations which have said were important.

Now, to Cascade the matter of vital importance is does this decree reconstitute a company with a reserve position of the Old Pacific Northwest Pipe Line Corporation and we submit it falls far short of doing so.

It -- it will create substitute a marginal company for a company that had five greater reserves and deliverability like in El Paso itself.

Not even capable of providing for the foreseeable growth in the Pacific Northwest let alone capable of providing any gas to the State of California.

Thank you.

Chief Justice Earl Warren: Mr. Sabin.

Argument of Richard W. Sabin

Mr. Richard W. Sabin: Mr. Chief Justice, may it please the Court.

I'm before the Court today as amicus curiae we've already filed the brief.

That brief contains what we believe to be a statement of the equities involved in the lower court decree which amicus before you today and --

Chief Justice Earl Warren: Would you speak a little louder please.

Mr. Richard W. Sabin: Yes, Your Honor.

Excuse me.

At this time, I would like to address myself to the question of what course of action the Court might have follow in order to finally dispose of the litigation which is before you.

As you all I'm sure this Court is now before you for the -- this case is now before you for the third time.

Criminal consumer interest standpoint as well as to comply with the mandate of this Court issued in the last time around.

We deemed it essential that this matter be finally resolved.

In our brief, we suggested that a master to be appointed.

At this point, I would like to even withdraw that suggestion since it would appear if a master is appointed.

He would have to report somebody in further extend the duration of this case.

And as I say it is not our view that it is in the best interest of the consumers Pacific Northwest.

It is our view that to effectuate the final decree you got to do it yourselves, you got to provide firmly and finally directions to the lower court as to what shall be done.

We think the first step is the creation of a new amnesty.

Now I don't, at this point wished to write-off the existing entity provided for by the decree of the lower court as a potential success or an interest.

However, in the method of divestiture provided by the lower court does not in our opinion provide the creation of an independent entity within the contemplation of the Court's prior opinion.

In other words, we don't believe that is it what you contemplate, it may be satisfactory for our needs but not for the needs of the mandate.

Mr. Bennett is concern with the -- of will and ability to compete.

We are not as much concerned with the will to compete up in Oregon as we are ability because it has the ability to compete, it has the ability to serve its own markets which is now serving and that's us.

Now, there is one suggestion that the lower court made of record it's at page 1,222 and that suggestion is that an adversary party to El Paso should be created which could be heard in the lower court.

That suggestion has great merit in our view since if adversary appears in the Court which is capable financially of examining into these asset questions.

You should then be able to have reasonable resolution of fair and equitable distribution of the assets between the two companies.

That makes the divestiture help you.

The next case of the decree which we have urged upon you is to accept that division of debt which is proposed by our El Paso.

That means a $180 million worth of long-term debt would be absorbed by the new company.

But to reject without qualification, the provisions suggested or contained in the lower court decree that this new entity which is to succeed to the assets pay an extra or premium price on those bonds.

In other words, they intend to raise the interest rates on those bonds.

I see no justification for that and it's definitely at the expense of the consumers who did not consummate this merger.

The next step would be the specific division of assets.

Now that's the third part that is largely covered in our brief.

We think that you should spell it out just as we have, just as other appellants have in briefs.

So there can be no mistake in the lower court.

What you're talking about is apparently there was last time.

This would include not only division of assets but we're estimating pre-merger in their corporate dealings between the two corporations.

There were two of them in particular which are concerned to us.

One of them is simple to orderly start that's the King's Gate Gas proposition.

Here there is the assumed as common gathering systems as it now exist must be divided.

Now, that division because of the dispute in the Court should be prescribed specifically to include change in the contract as it was part of the merger to incorporate all pre or post merger additions and extensions of the common gathering system.

Now, if a new company is created which becomes an adversary in the lower court, if you accept that premise, then it will be necessary also to lay down to definite guidelines for the Court, the lower court.

In -- in our view, there can be only one rational rule of distribution of assets and that's restoration of the pre-merger status quo, alright.

It was found by you that the merger destroyed competition.

If anything less than pre-merger status quo is now created.

There can be hardly be competition of this -- at the same level as it was at the time of the merger.

Another general rule which we advocate here and I can not really say that there's any precedent.

There may be some direction but there are no cases on this.

And that is the principle that no wrongdoer should be allowed to profit from his own wrong.

Now this means, if you give full effect to any simple concept if you use it, you have use it in a du Pont but I intend it abrogating extension of it to see that El Paso in selling the assets and the -- that's what will abrogate the sale of assets.

In selling them, it should have no pecuniary gain from the profit.

This rule is I say is without precedent, although, I think you can find trends in that direction in your case.

However if implemented, it means that mergers or a merger applicants or those who contemplate merger from this day forward will have to look nor how much they can gain even if they got caught but whether not only will they be deprived of the property acquired by merger but also of the profits which they have gained during the course of the merger.

In this case we're talking about capital gains.

I think the current value for tax part -- purposes of the El Paso properties to be the best is to according to the El Paso exhibit in the lower court is a $187 million.

The book value of the equity portion not after allowance for $180 million of bonds is $63 million.

The market value according to the transcript, I'm sorry I lost the page, but the transcript indicates the market value currently is a $107 million.

Now that means there's approximately $43 or $45 million of profit, just based on the book.

Let alone for tax purposes which El Paso will have to arrive by reason of its wrongdoing.

We urge that when you provide, if you're willing to provide for sale of these assets.

The El Paso not be permitted to reach those ill-gotten gains.

This will give long term protection to the consumers not only in Oregon but throughout the nation.

Finally, I would like to address myself to the question of Federal Power Commission jurisdiction.

As amicus, I think I'm agree -- entitled to agree with the other side everything on it.

The other side seems divided.

Oregon is in full to support of the El Paso contention of the Federal Power Commission has no jurisdiction.

Once you have ordered of the divestiture and prescribe the terms of it or proved the terms as the case may be their Federal Power Commission has no jurisdictions to alter those terms.

It must issue a certificate of convenience and necessity in accordance of the terms of decree.

Thereafter, it can be free to look into under corporate dealings, prices, rates, whatever.

So, we cannot at this stage, let for protection to the Federal Power Commission and this is another reason why we think that you must protect this.

We can't let the Federal Power Commission.

The Government takes an opposite view in its brief.

And perhaps others will take opposite views if the matter does reach the Federal Power Commission without a definitive statement by this Court on that question.

Justice Byron R. White: What happens to this $45 million, would you suggest if you did follow?

Mr. Richard W. Sabin: If you follow the plan I'm advocating.

Justice Byron R. White: Yes.

Mr. Richard W. Sabin: In effect would depend upon the manner of sale of the assets.

If you had a stock sale in effect, it would work as a premium on the sale stock by a new company.

In other words, the stock of the new company placed on the market would be valued at approximately a $107 million according to record is probably substantially more than that now.

The book equity is $63 million and so the purchaser on the market will have paid in the full value to the corporation and the corporate treasury will reflect then, I would presume in accounting they call it paid-in surplus for the difference between the book value of $63 million and the dollars received a $107 million --

Justice Byron R. White: If it's some benefits found?

Mr. Richard W. Sabin: It's an indirect benefit but there is one.

Justice Byron R. White: What is it?

Mr. Richard W. Sabin: Well, you have a financially strong pipeline company as the immediate benefit.

The secondary method is the not only capability of striking facilities and so on but the warrant of immediate upward pressure on rates.

Thank you.

Chief Justice Earl Warren: Mr. Friedman.

Argument of Daniel M. Friedman

Mr. Daniel M. Friedman: Mr. Chief Justice and may it please the Court.

The issue we think in these appeals is not whether this decree is a good decree, a bad decree, whether the Government should have insisted on something more.

We think the question here is basically a very different question and thus more important question.

We think the question is simply whether or not these people were properly denied intervention and the answer --

Justice Potter Stewart: Further -- further question if we read Continental correctly, if I read Continental correctly that if the case is here, as it is apparently is as we noted jurisdiction of whether the Court on this motion couldn't consider these matters.

Mr. Daniel M. Friedman: Mr. Justice, I would like to suggest that the Continental situation, we think was a very different question.

There was no doubt in Continental that the case was properly there.

Justice Potter Stewart: Is there any question of what this case is properly here whatever is here?

Mr. Daniel M. Friedman: Well, I would suggest -- yes, Mr. Justice.

We suggest in our brief that if the Court agrees with us that intervention was properly denied here.

The appropriate disposition would be to dismiss these appeals.

Justice Potter Stewart: But the case is that -- the case is properly here to consider that question --

Mr. Daniel M. Friedman: The case is properly here to consider the questions, we think --

Justice Potter Stewart: Or another case being properly here doesn't Continental --

Mr. Daniel M. Friedman: I -- I don't think so Mr. Justice.

When you say the case is properly here.

I think it has to be Continental has to be read in the light of the problem as Your Honor indicated whether or not in the Continental situation, the Court could consider questions going beyond the assignments of error and the Court said --

Justice Potter Stewart: But what's the question here whether if there's --

Mr. Daniel M. Friedman: Well, I would -- well, I would disagree Mr. Justice.

Let me explain --

Justice Potter Stewart: It depends what case you're talking about here.

Mr. Daniel M. Friedman: Yes, if it seems that this is as charged Mr. Justice, if intervention was properly denied in this case, if these appellants were properly told, they had no interest and we're not in this case.

Then it seems to me there's no case here before this Court.

Justice Tom C. Clark: But if we reach that point first that if since the thing is here for the -- for adjudication, I read the Continental as meaning that we could under our own motion?

Mr. Daniel M. Friedman: Well, I don't think so Mr. Justice because I think there's no case --

Justice Tom C. Clark: Well, maybe we should on own our motion then?

Mr. Daniel M. Friedman: Well, I --

Justice Tom C. Clark: But they have new precedent?

Mr. Daniel M. Friedman: I would think not Mr. Justice because it seems to me as far as the parties to this case are concerned and the only parties thus far the United States in El Paso.

There is no dispute between them.

They have settled this case.

Justice Byron R. White: But suppose Mr. Friedman, we take your view that we have to first to decide that they should whether they should been allowed to intervene.

Now we conclude that the District Court was in error as to one of our -- anyone of them --

Mr. Daniel M. Friedman: Yes.

Justice Byron R. White: Now, then what's the answer to Mr. Justice Douglas' question?

Mr. Daniel M. Friedman: Well, I would --

Justice Byron R. White: Now, if we decide that it should have intervened, may we then under the Continental in our motion to say, well, the Government had no right in light of our mandate makes the deal it did.

Mr. Daniel M. Friedman: I -- I would think as a matter of power the Court would have that power.

We have suggested in our brief that because of the complexities of this problem.

If the Court should hold intervention was improperly denied the case should be remanded to the District Court to consider it.

But our point is that alleged to reach that conclusion unless you overcome this preliminary hearing.

We just think there's no case --

Justice Byron R. White: You know -- any question of intervention raised in the Continental principle?

Mr. Daniel M. Friedman: I don't know --

Justice Byron R. White: If I read the opinion.

It appears --

Mr. Daniel M. Friedman: It's a very --

Justice Byron R. White: -- whether they were --

Mr. Daniel M. Friedman: It's a very cryptic question.

It appears -- I don't know whether there are any questions that bondholders apparently had been permitted to intervene in the District Court in their appeal.

Now, we -- our submission here today is if the District Court properly did deny intervention under the applicable standards of a federal rule and that the theory upon were intervention is here sought and a theory which I may know parenthetically that is set out in our brief.

The Court's consistently have rejected would have very grave consequences for antitrust enforcement because of the importance of the consent judgment in antitrust procedures.

Now, the critical standards are set forth of course in Rule 24 which is set forth at Paragraph 3.

And I'd like to discuss in this order.

First, I'd like to discuss the contention of client intervention as of right and in discussing, I can --

Justice Byron R. White: May I contest -- well, excuse me Mr. Friedman.

Mr. Daniel M. Friedman: Yes.

Justice Byron R. White: If -- if that so, there's somebody -- if we decide somebody should have been allowed in and we may do then as you said as a matter of power.

At page 57, that's the significance of this sentence in the brief, Edison, at least Edison not California Cascade as a purchaser of natural gas in the California market well and you have and the State of California as a representative of such a person have standing the challenge of restraint upon competition in that market is that a concession that they should have allowed that?

Mr. Daniel M. Friedman: No, no, no Mr. Justice.

All it was suggesting is that --

Justice Potter Stewart: I didn't think it was.

Mr. Daniel M. Friedman: No, no, we said they had --

Justice Potter Stewart: You would want me to read it that way.

Mr. Daniel M. Friedman: No, all we were attempting to do was to contrast that the position of California in the state and consulting California Edison which would have been standing to maintain a treble-damage suit with the standing of Cascade that we don't believe would have such thing.

Now, I shall attempt to -- I shall discuss this first in terms of intervention as of right under the old rule because that is we think the rule that governed and then I will turn to the amendments of the rule and explained why under either rule we don't think either of this party should have been allowed to intervene.

And secondly, because of the somewhat different position apparently taken by Southern California Edison and California on the one hand as people who are interested in the ability of the new company to compete in California and Cascade on the other hand which seems to echo that argument, they also suggest the possible injury to itself as a purchase of natural gas I think would be appropriate to take up these two considerations separately.

And I think it would be helpful in my discussion if I could first deal with the question of intervention and when I get into the question intervention and touch on the show why the Attorney General's representation of the interest involved here was adequate I shall take up and discuss the various attacks that have been made upon the decree.

Now, let me first turn to Southern California Edison and California's claim to intervention as of right.

As the rule existed before its amendment last summer, the two possible provisions that may be relevant to subparagraph 2 and subparagraph 3.

Subparagraph 2 permits intervention where the applicant may is or may be bound by the judgment and were the representation of its right where the existing party is inadequate.

I will, if I may pass for the minute the question, the adequacy of representation which I will discuss under the new rule.

But let me come to the question of bound.

We think it's very clear that under this Court's decision of the Sam Fox case a few terms ago, these people were not bound by this judgment because the teaching of Sam Fox says, that as the rule uses the word bound means bound in the res judicata sense and that you are not bound by the judgment, even though the practical effect of the judgment would be to make it more difficult for you to prevail in your action.

Indeed, one of the reasons for the revision of the rule was a recognition by the revisers that it was rather difficult for many people to comply with.

Now, the other sub provision of the rule states that you may intervene as of right where the applicant is so situated to be adversely affected by the disposition of the property within the control of the court.

Now, we can see that in this case there is property within the control of the court within the meaning of that rule, the assets to be divested.

But here we think their argument fails because they don't have any kind of interest in this property and again, it's well settled that in order to satisfy the standards for intervention as of right under subsection 3 you've got to have some kind of a property interest in the property under control of the court.

They have no interest.

These people have no interest in the assets to be divested.

What they have is a possible course of action against the El Paso for a violation of Section 7 of the Clayton Act and that again has been well said although it's not enough.

Now the amended rule which was effective July 1, 1966 was changed to eliminate both the requirement of the parties be bound and that there be property within the control of the court.

The rule now state what the standards that there's intervention as of right where the applicant claims an interest relating to the property or transaction.

And he is so situated at the disposition of the action may as a practical matter impair or impede feasibility to protect that but this rule has not changed the requirement that but he also must show that he was -- interest was not adequately represented by the existing parties.

Now in this order adopting this rule, it set an effect the court set in effective date of July 1, 1966 and set it will be of course applicable to future proceedings and in addition to all further proceedings in actions then pending unless so to apply would result would work in justice.

Now, when the rule speaks of further proceedings, it seems to me it meant proceedings after the rule was adopted.

There were no proceedings in the District Court after this rule was adopted.

Indeed, this rule was adopted approximately six months after this Court had noted probable jurisdiction.

Justice Tom C. Clark: You mean you think pertaining there in the amendment relates to pending --

Mr. Daniel M. Friedman: To the pending proceedings.

Justice Tom C. Clark: Where do the case may be after that?

Mr. Daniel M. Friedman: Yes, I think -- and Mr. Justice I also point out that this Court of course is reviewing the propriety of the ruling of the District Court denying intervention.

And therefore it seems to as appropriate to test it by the standards which were in existence at that time.

And also--

Justice Tom C. Clark: You don't imply a concession with the amended rule applied when the District Court was on?

Mr. Daniel M. Friedman: Oh no Mr. Justice, that's about I'm coming to that because that's my very next point that even assuming the amended rule does apply intervention with nevertheless correctly denied because as I have mentioned under the amended rule they have to show that their interest was not adequately represented by the existing parties.

Now, the interest that California or in Southern California Edison are seeking to assert in this through this intervention with the identical interest that the attorney general is vindicating that is the correction of the violations and the restoration of Pacific Northwest as an effective competitor in this area.

And we think that both as a matter of law and in fact the attorney general's representation of that interest was an adequate lone.

This Court is frequently --

Justice Hugo L. Black: Suppose it was not?

Mr. Daniel M. Friedman: If it were not Mr. Justice?

Justice Hugo L. Black: Yes.

Mr. Daniel M. Friedman: Well, if it were not if the representation was not adequate then we would say they have made a case for intervention that's what the rule says.

Justice Hugo L. Black: Well, what if they had not make the case also if the case is here but assume that the court's decision is suppose to be obeyed and it is also limited.

But prove inadequate representation at that time, why could this Court not consider that is not necessary?

Mr. Daniel M. Friedman: Well, I think Mr. Justice -- well first let me just say that as I'll come to a moment, we don't think that they have shown that this is inadequate representation in fact --

Justice Hugo L. Black: And I suppose to -- you wanted to dispose of before you have (Inaudible)?

Mr. Daniel M. Friedman: But that -- that's correct Mr. Justice.

It seems to me because this goes to the very essence of the settlement process that this goes to the basic question that seems to as to whether the Attorney General can be charged with inadequately representing the public interest because he settles the case on terms that people who may be effective by the settlement don't think it was adequate --

Justice Hugo L. Black: Suppose it were not to be obtained until -- for someone else?

This Court is also concerned with dispositions they made.

There are other people interested in sub, however ordinarily they would not care of that.

But the person who was on the record did not adequately represent the problem and that came before this Court and assumed the proper mandates.

Why should the court not have a right to enforce to take such steps that were necessary to see that its procedures carried out?

Mr. Daniel M. Friedman: Well I think, Mr. Justice, the answer is that under our adversary system of litigation the basic control of litigation is with the parties.

This Court in issuing its mandates attempts to it as resolving the controversies between the parties.

Justice Hugo L. Black: You would say that goes to the extent that the court is without power even when it's brought (Inaudible) because without the power they let it on decree to (Inaudible) of the party?

Mr. Daniel M. Friedman: Well, to be -- there's no controversy between the parties anymore Mr. Justice.

Justice Hugo L. Black: So I would -- And I think the controversies he knows what it is but call somebody else.

Mr. Daniel M. Friedman: Well, I --

Justice Hugo L. Black: I find it investigated in the -- but failure to carry out the proceeding.

Mr. Daniel M. Friedman: I -- I don't think with all due respect, Mr. Justice that, under our system if the party set it's controversy there's any way that the third party who was entered thereby can challenge that except by doing one of two things either becoming a party to the case and appealing it or bringing his own lawsuit.

But I don't think that there is any way that they might be described as rowing commissions with people who are adversely affected by decrees which they don't like to seek judicial review of it.

Justice Hugo L. Black: What if he arose the confusion of rolling evidence if the court will take to protect its own decree.

When somebody that full support of one person or another, how cane he raised this question and charges that this proceeding is not a charge to the envy of the public?

Mr. Daniel M. Friedman: Well, I think Mr. Justice when you say properly before the Court, I think for him to be here properly before this Court so that this Court can re-examine the question of compliance that that requires that somehow he'd be in the case properly and we think these people --

Justice Potter Stewart: Well that goes so far I gather, Mr. Friedman, that it does that in this litigation after your victory here you could have dismissed the whole lawsuit.

Mr. Daniel M. Friedman: Well, I would suppose, I don't think we would have done it Mr. Justice --

Justice Potter Stewart: I'm not suggesting it I'm – doesn't your argument goes so far as to say even though you're here and of course that's the only reason that you bring the lawsuit is in the public interest.

Yet the United States for whatever reason applied but on entirely good faith they decided didn't want the decree and dismiss of the lawsuit.

Mr. Daniel M. Friedman: I would suppose if for whatever reasons we conclude it was in the public interest we would have the power to do that.

Justice Hugo L. Black: Where does the question finally comes back.

Mr. Daniel M. Friedman: Sorry, I don't understand your question Mr. Justice.

Justice Hugo L. Black: When will this question finally end?

The charge here, by people who are here bought it, trying to get a lead that the Government has thrown the public interest out, calling it to our attention nobody litigate like in the court below.

What they want and firmly is that it litigate even court below as someone other than the Government may claim that (Inaudible) against.

Mr. Daniel M. Friedman: And our answer to that Mr. Justice is that under our system they cannot be heard to complain that the Government is settling a case has thrown away the public interest.

Justice Hugo L. Black: (Voice Overlap) right to complain in this Court give us all from us were saying something -- something even though they may not witness.

Mr. Daniel M. Friedman: Well, I -- with all due respect Mr. Justice, I don't think so -- I don't think this Court unless these people were properly parties in this case unless they were entitled to get into this case when the Court speaks of a case being properly here, I think that's what it means.

Someone would stand to challenge the judgment below has brought the case here and we don't think these people have standing.

Justice Hugo L. Black: As long as that as their statement down the shadow was absolutely true opposite and this Court concede that the decree in its order to be taken out.

Not any interest between the Government but neither to the public?

Mr. Daniel M. Friedman: Well, Mr. Justice --

Justice Hugo L. Black: This Government had an end?

Mr. Daniel M. Friedman: Let me say Mr. Justice in dealing with the question, it seems to me in that case if there was a claim of bad faith, malfeasance, nonfeasance, it seems to me they would then make out a claim for intervention.

And that would be the way to remedy it if this Court would then hold that they have been improperly denied intervention.

If for --

Justice Hugo L. Black: -- big brother doing bad faith, I'd have been adjudicated by this Court.

The public has the right to ask --

Mr. Daniel M. Friedman: I -- I think Mr. Justice with all due respect it does make a great deal of difference whether the claim is that the Government is acting in bad faith or the claim is only that the Attorney General made a mistake in settling the case on a particular term.

I'd like to avert to what this Court said in the Sam Fox case where it said that sound public policy, I'm sorry, Sam policy would strongly lead us to decline appellants invitation to asses the wisdom of the court's judgment in negotiating and accepting the 1960 consent decree at least in the absence of any claim of bad faith or malfeasance on the part of the Government.

Now, I think this Court has many times recognized --

Justice Hugo L. Black: Well, what if now they stated to form a unit?

Mr. Daniel M. Friedman: I think it's a failure to perform a duty in this sense that the Government had failed to take into consideration certain things.

It seems to me it's not a claim that the Government settled the case on two narrow terms.

Justice Hugo L. Black: Didn't you say all -- do you say give that to public as it have been adjudicated by this Court.

Mr. Daniel M. Friedman: Well, we denied that of course Mr. --

Justice Hugo L. Black: Why did you deny it?

If you ever get -- if you don't want to get the way you have to get to it.

Mr. Daniel M. Friedman: Well, we say we don't want to -- as you said we don't want to get to that point because we think they haven't made a sufficient showing on the basis of their claim to entitle them to intervene.

But their whole claim is -- their whole claim is that the Attorney General has inadequately represented the public.

Now, what does this claim rests on?

This claim rests on the contention that we shouldn't have settled the case on these terms, we should have asked for something more in the way of relief.

Justice Hugo L. Black: If you said it would have given up divestiture.

Mr. Daniel M. Friedman: We have not given up divestiture, Mr. Justice Black.

I --

Justice Hugo L. Black: Even on all (Inaudible)?

Mr. Daniel M. Friedman: No.

No, Mr. Justice let me tell it's precisely what is this divestiture decree provides.

They talk about giving up as though there have been no divestiture.

Under this decree, El Paso gives to this new company all of the properties that it originally acquired in the merger.

All of the properties plus additions and improvements to those properties which El Paso made during the period they had controlled the property.

The value of which is estimated at $100 million.

This is not a case of a token divestiture.

This is a very complete divestiture.

They talked about the gas reserves.

Their complaint about the gas reserves is not that El Paso is keeping any of the reserves it got from Pacific Northwest.

The complaint is that El Paso is not giving to Pacific Northwest a share of the additional reserves that El Paso acquired during the period it had control of Pacific Northwest.

The record shows --

Justice Byron R. White: Well Mr. Friedman, if there've been divestiture that the du Pont sends, there's not been that here does it?

Mr. Daniel M. Friedman: There will be ultimately.

Justice Byron R. White: Well --

Mr. Daniel M. Friedman: There will be ultimately.

Du Pont --

Justice Byron R. White: Well, I don't know enough for the record but I thought Mr. Bennett told us that they can't be ultimately.

I gather he said there's something deadly about strings on management, strings on markets and --

Mr. Daniel M. Friedman: These are just a couple of quotations I think that he was referring from the District Court there is complete divestiture.

Let me explain what du Pont thought.

Justice Byron R. White: But why is this -- why isn't this complete as it was in the du Pont sense?

Mr. Daniel M. Friedman: I believe, I think it is Mr. Justice.

Justice Byron R. White: Oh, you do think of it?

Mr. Daniel M. Friedman: We think it is.

We think that we've given back everything in the way of the properties to which they are entitled and there's a complete severance of stock control.

The plan is originally proposed by El Paso which the Government objected.

The principal objection we had to that plan was that El Paso proposed to distribute the stock of the new company to the existing El Paso shareholders.

In other words, what El Paso proposed to do was to create -- establish a new company and I might mention the new company has been created and of course the new company cannot act until it has been certificated by the Federal Power Commission.

The new company has been created and the Federal Power Commission proceedings have been stayed pending the determination of this appeal.

El Paso originally proposed to turn over to the new company these assets to take the stock of the new company and then to distribute that stock with certain minor exceptions to its own shareholders.

We vigorously opposed this because we said this would not ensure a separation of the community of interest between the two companies.

Since they advise this merger as this Court held in its previous decision was that it for the possible competition of Pacific Northwest to serve the California law, we didn't think it would be a fair plan under which any strings were attached.

Now, there were lengthy hearings and proceedings in this case the record here of the divestiture phase occupies by printed volumes and we concede that during the course of those proceedings, we oppose a plan on a number of grounds.

After the record was closed, we studied it further.

And El Paso came in with a proposed amended plan which was compromised.

El Paso ceded to us on what we thought was a principal defect of a plan that is the failure to ensure separation between the stockholders of the new and the old company.

They proposed a so-called Redding Decree, named after the old Redding case.

Under which the stockholders of El Paso wish to acquire stock of the new company would have to give up their El Paso stock.

And the provision is that 80% have to agree to this for tax purposes and if they're unable to get that then El Paso would undertake to sell all the stock of the new company to -- through a public offering.

In addition --

Chief Justice Earl Warren: What is your answer to the argument to the commissioner that these two companies, El Paso and the new company are not going to relate the adversary relationship and if they are creating a new company in a way that will not afford the benefits to these intervenors?

Mr. Daniel M. Friedman: Well, I --

Chief Justice Earl Warren: But they are entitled to under the decree as we rendered.

Mr. Daniel M. Friedman: I have three answers to that if I may Mr. Chief Justice.

First, at the insistence of the staff of the Federal Power Commission, the new company has now retained independent counsel to represent it before that Commission, that's the first.

Secondly, the Department of Justice fully considered that the qualifications of the new principle executive offices of the company, Mr. Clark, the new Chief Executive officer was fully examined before the District Court at the hearing and we were satisfied that he is a completely independent man and he was asked specifically in response to a question whether when the company is established, he would be a -- once he got established they would consider competing in all markets including California and he said yes.

So that's two things.

Third, we think the separation of the stock as we have proposed it does create an independent entity.

This is a company that is -- will be free from the control of El Paso.

Now it's admittedly -- it's going to take time.

It's going to take time because these are very complex matters.

This is not just divesting a bakery or a shoe manufacturer, this is a regulated industry where before you can recreate the new company you have to meet the standards of the Federal Power Act and this is a complicated thing.

But, the important --

Justice Byron R. White: There's something you said about the El Paso financing on these operations at this time. How about that?

Mr. Daniel M. Friedman: Well, I -- obviously, since the new company is not going to have any assets to speak of until it's divestiture El Paso will have to finance the preparation of the certificate application in some.

But as I say, they have now obtained independent counsel they were obtained by the new management, the existing management of the new company.

Now in addition to that, it seems to me there's another very important thing which is Cascades particularly talks and the other companies talk about the alleged inadequacy of the reserves the new company.

But before the Federal Power Commission will grant a certificate of public convenience and necessity to this new company, it's going to be satisfied that the reserves meet the statutory standard.

If these reserves are inadequate this Federal Power Commission is not going to certificate --

Justice Byron R. White: Rather it -- but El Paso has enough reserves that what the new companies will gather inadequate that is El Paso required to provide?

Mr. Daniel M. Friedman: No, Mr. Justice, El Paso --

Justice Byron R. White: Well then what happen?

Mr. Daniel M. Friedman: Well then I --

Justice Byron R. White: Suppose the Commission decides finally that the inadequate.

Mr. Daniel M. Friedman: The -- it would then -- the burden will then be upon the new company to get some additional reserves.

And in this case they have to then go back to the District Court.

Justice Byron R. White: But is there something -- did you say there's something about these reserves which El Paso applied by reason of its acquisition of the companies?

Mr. Daniel M. Friedman: New Companies?

Justice Byron R. White: Yes.

Mr. Daniel M. Friedman: All the reserves, all the reserves that El Paso acquired as a result of the merger are being turned back.

In addition to that, El Paso is giving the new company some reserves in the rocky mountain area that El Paso acquired.

In addition to that --

Justice Byron R. White: Acquired after the acquisition?

Mr. Daniel M. Friedman: After the acquisition.

In addition to that, El Paso is giving the new company a gas contract for Canadian gas which at the time of the acquisition was in negotiation but had not yet been finally determined.

The fight over reserves is not on any claim that El Paso is not giving back to the new company everything it's got.

The claim is that the new company should get something more than it should get.

Justice Byron R. White: Well, it's a suggestion that if the acquisition had not occurred, the reserves to El Paso since acquired might have been acquired by the acquired company?

Mr. Daniel M. Friedman: That is the claim Mr. Justice.

That is the claim and then let me explain why although the Government originally espouse that position after further study of it retreated from it.

We studied the thing and looking back to the situation at the time of the merger.

At that point the Pacific Northwest had almost signed a contract for this large supply of Canadian gas.

At that time also, Pacific Northwest was unable to use all of these gas.

Pacific Northwest was in a difficult financial position at that point it was doubtful whether it would have the funds fully to develop all of these reserves and it seem to us there was a very serious question.

In the light of this whether in fact it can fairly be said that Pacific Northwest would have acquired these reserves.

Well when we examines this and the record indicates we talk in enormous amounts -- enormous figures of course when we deal with natural gas.

They are turning back, giving to the new company roughly seven and a half trillion cubic feet of gas by way of reserves which is 1.7 trillion more than Pacific Northwest had at the time of the acquisition.

Now, if I may, I'd like to come back for a minute to what we think is the important question here which is this whole question of the right of the Attorney General to settle the case where he thinks he's federal off to settle the case than to fight the scene to litigation.

Of course it's --

Justice Hugo L. Black: I was wondering when did the Government change its position as to the advocacy of the divestiture and why?

Mr. Daniel M. Friedman: Well, we changed it Mr. Justice, all I can tell you is this, we changed it some time between the 23rd of February 1965 which is one of the proceedings we closed in District Court and the 24th of March, I'm sorry, the 24th of May roughly three months later when we filed this stipulation.

Now, let me explain what happened, when the Attorney General had to decide at this point whether to continue to press further for litigation or to accept this settlement of El Paso, they had a number of considerations to take into account.

First of all, we had concluded perhaps we in error but it was our conclusion that the District Judge had evinced great sympathy for the El Paso plan.

And we were concerned that if we continue to fight this thing, a probable outcome was that the District Judge would adopt the El Paso proposed decree which of course far less favorable from our point of view than the decree that El Paso ultimately gave us.

If he did the District Court would have do that it would mean one or two things, either the possibility of an appeal to this Court would still further delay in accomplishing prompt divestiture and the uncertainty is to whether or not this Court would reverse bearing in mind the District Court's large expression or just leaving the case there with a lesser decree than we had obtained.

In addition to that, the parties, El Paso yielded to us on what we considered to be the most serious defect in the plan.

That is the failure to assure complete separation of the new company in El Paso.

Justice Hugo L. Black: Complete separation you say?

Mr. Daniel M. Friedman: Complete separation, that is the separation of the stock interest of the two companies.

Justice Hugo L. Black: Well at that time they have made a stipulation that it has already been decreed by this Court, hasn't it?

Mr. Daniel M. Friedman: No, no, not the stock separation Mr. Justice, the question, this Court has decreed that there was to be divestiture by El Paso of Pacific Northwest.

This Court --

Justice Hugo L. Black: Immediately, without delay?

Mr. Daniel M. Friedman: That's correct, without delay.

This Court had never faced the question whether a divestiture by which El Paso distributed the stock of Pacific Northwest to its stockholders was continued a controlling relationship so significant as to amount to a failure divested.

That's the point on which they had ceded to us.

That's the point on which they ceded to us.

They put a -- they made a modification in the decree which we believed protected against any possibility that the new company would be reluctant to complete vigorously against El Paso because of the common stock ownership.

And finally, I would say Mr. Justice that in examining these various proposals that it made in reexamining our opposition quite frankly, we concluded that there was some more equities to El Paso's position than we had realized and perhaps some of our opposition that we had taken in the District Court upon further analysis wouldn't stand up.

I mean, for example that the fact of the amount of the reserves, the very substantial $100 million in addition to the El Paso are given.

And it seemed to us on balance, on balance that the Attorney General concluded that the public interest in achieving prompt divestiture would be better served in this case by accepting this compromise than by continuing to press for litigation with its uncertainties where there's a possible even greater to life.

And of course, this is the kind of a decision, the Attorney General always has to make when the years considering whether to settle the case.

On the one hand, one of the likelihood of getting a substantially better result if he litigates; two, what is the likely hood that if you litigate you won't do as well?

You have to consider particularly in this case the time situation that there will be further delays if he pressed the matter and of course there is no settlement in an antitrust case that satisfies everybody.

Someone is always unhappy.

Every time there's a settlement --

Justice Hugo L. Black: This is not a settlement of an antitrust case.

Mr. Daniel M. Friedman: This is a not a --

Justice Hugo L. Black: This is a settlement where that one side charges that the other is not trying to bring about a complete division to this court order.

That's the issue.

Justice John M. Harlan: I didn't understand that -- I understood actually the question that (Inaudible).

There's no claim that it is here of bad faith or incompetence on the part of the Government.

The only plan that they misapprehended but what is remanded with this Court, it seems to me you say (Inaudible)?

Mr. Daniel M. Friedman: There's no claim of bad faith here.

The only claim is that the basically the claim --

Justice Hugo L. Black: What they charged is if you're not doing what we told you.

Mr. Daniel M. Friedman: That -- would they charge Mr. -- they charge --

Justice Hugo L. Black: I'm not talking about bad faith.

I don't care about all those adjectives.

What is in issue here between you and them?

They say you have succumbed to some kind of settlement which is not complete divestiture?

Now why shouldn't that be tried out?

Mr. Daniel M. Friedman: Because Mr. Justice we think that even after this Court has decreed divestiture, the Government and the other side have the authority to settle a case on the --

Justice Hugo L. Black: You mean to do something lesser -- if that's what you mean, well (Inaudible)?

Mr. Daniel M. Friedman: No, Mr. Justice, what --

Justice Hugo L. Black: What you're claiming is the right not to bring it back?

Mr. Daniel M. Friedman: No, Mr. Justice.

Justice Hugo L. Black: Divestiture is it?

Mr. Daniel M. Friedman: No, Mr. Justice.

We --

Justice Hugo L. Black: Is that what you're claiming?

Mr. Daniel M. Friedman: No, Mr. Justice, we -- the Court's opinion only directed to divestiture and we think that this settlement does accomplish divestiture.

Justice Hugo L. Black: Well, that's the issue of fact.

That they have sought the right to have to determine why should they have the right to have it determined?

Mr. Daniel M. Friedman: Because -- I think because Mr. Justice in the whole rubric of government litigation and particularly the antitrust litigation even after a judgment of this Court, the Attorney General does have the authority to settle a case upon --

Justice Hugo L. Black: Well, not just settle a case, there's a big broad term.

What the settlement they claim you have made herein whether rightly or wrongly, they claim wrongly is that you have settled in a way that defeats the object of this Court to bring about a complete divestiture.

Mr. Daniel M. Friedman: But Mr. Justice --

Justice Hugo L. Black: And you say that's not correct.

Mr. Daniel M. Friedman: We say Mr. Justice this that you say this is not a settlement, this is not a settlement in a sense of a consent judgment where the case is settled before there is been any taking of testimony but this is a case in which after the finding of violation has been established, and this Court entered decree of divested, the Government did work out with the defendant, did settle with the defendant the terms and the extent of such divestiture.

Now, divestiture is a --

Justice Hugo L. Black: Now, what is divestiture except divestiture?

Mr. Daniel M. Friedman: Well, we think divestiture means divesting the property acquired and I try to urge upon the Court that there have been such divestiture.

Justice Hugo L. Black: Well, that's the issue of fact and they say that hasn't been -- that's not true and you say, well, whether it's true or not makes --

Mr. Daniel M. Friedman: Well, I -- I attempt now (Voice Overlap).

Justice Hugo L. Black: You don't settle the case?

I attempted to suggest Mr. Justice that the reason I gave the description of what the settlement negotiations involved, and the basis on which we settled I attempted to do that to show the factors which led the Attorney General into settling the case.

Justice Potter Stewart: Mr. Freidman, there isn't really an issue of fact as to whether or not there has been a divestiture provided, is there?

Mr. Daniel M. Friedman: Oh!

No, it is divest --

Justice Potter Stewart: They don't say there hasn't been divestiture.

Mr. Daniel M. Friedman: No, they say -- they haven't been divested enough.

Justice Potter Stewart: In a right way?

Mr. Daniel M. Friedman: In the right way.

Justice Potter Stewart: But there's been divestiture?

Mr. Daniel M. Friedman: Of course.

Justice Hugo L. Black: It's not enough.

Justice Potter Stewart: We're planning a divestiture --

Justice Hugo L. Black: It's not the right way.

It's not enough.

Mr. Daniel M. Friedman: Well, they say both.

Justice Hugo L. Black: (Voice Overlap) complete divestiture.

Mr. Daniel M. Friedman: They say both Mr. Justice.

And let me point out something about the settlement of these cases.

The consent judgment of course as this Court insures, whereas a very important tool of antitrust enforcement.

Our statistics show that roughly 70% in the recent years of all antitrust cases have been settled.

This is because of the fact that we do unfortunately have limited resources.

We're just not able to fight every case to the full.

Justice Tom C. Clark: You settle all of those -- I suppose all 70% before they ever get to this case?

Mr. Daniel M. Friedman: That's right but -- but the point I want to make --

Justice Tom C. Clark: No, but you don't -- heretofore settled any case after this Court has said he should do it?

Mr. Daniel M. Friedman: I don't -- I don't know if we have but we have Mr. Justice -- we have Mr. Justice settled cases after the District Court has found violation.

We've had a number of situations we cite two of the minority briefs, two Section 7 cases in which after the District Court have found violation of parties then work out a settlement.

Now, I am sure in that kind of a case --

Justice Hugo L. Black: That wouldn't be like this, would it?

In here, divestiture has been ordered.

Mr. Daniel M. Friedman: Well, there are two it seems to me that the normal remedy is divestiture.

And I think in those cases as in this case that all of the some people who are not happy with the terms that the Government's decree.

And it seems to us if every time people come in even after this Court has ordered divestiture and say to the District Court they don't think the settlement is a good one.

They think the Government should settle for more and if that's enough to allow them to intervene Mr. Justice, I suggest it would be conducive, a very serious delay.

Justice Hugo L. Black: I don't think any question in event would indicate in such position as that.

Mr. Daniel M. Friedman: No, but what I am suggesting Mr. Justice is if the claim that the Attorney General has settled on terms that do not adequately ensure the objective of the suit --

Justice Hugo L. Black: Think about of divestiture.

Mr. Daniel M. Friedman: If that claim is sufficient it seems to me, I don't see why under similar reasoning, people couldn't come in where there hasn't been a decree of divesture just a finding of violation and say well obviously in the Section 7 case, divestiture is the appropriate remedy on a price fixing case.

Certain type of injunctive relief is the appropriate remedy and the Attorney General has settled for less than that particular type of relief and it seems to me in that situation --

Justice Hugo L. Black: It would probably be so frivolous that the Court has not passed any attention at all.

Mr. Daniel M. Friedman: But Mr. --

Justice Hugo L. Black: Well, this is so far from frivolous that the Government found in keeping having the facts determined.

Mr. Daniel M. Friedman: No -- no, Mr. Justice.

We're not trying to keep from having the facts determined.

We just don't think that in this kind of a situation, people who are claiming that the Government isn't adequately performing its task with no claim of malfeasance and impropriety.

People just in effect of saying --

Justice Hugo L. Black: Well, do you think malfeasance is an absolute before anything can be done?

Mr. Daniel M. Friedman: Well, I -- Mr.

Justice Hugo L. Black: Suppose they are right and you have settled on the basis which does not bring about complete divestiture?

Mr. Daniel M. Friedman: Well, --

Justice Hugo L. Black: Why shouldn't the Court have some way to get it?

Mr. Daniel M. Friedman: I -- I think with all due respect Mr. Justice this is the prerogative of the Attorney General, to settle a government antitrust case upon the --

Justice Hugo L. Black: That is if they give the case away?

Mr. Daniel M. Friedman: It if -- suppose -- I don't believe the Attorney General -- there might be a reason Mr. Justice why a particular case -- it would seem -- it would seem to outsiders that the case have been given away yet to those familiar, to those making the policy judgment it would seem appropriate to settle the case.

Justice Hugo L. Black: Well, then the best way to do that would be to try it out, wouldn't it?

Mr. Daniel M. Friedman: Well, these -- no, Mr. Justice --

Justice Hugo L. Black: But they're serious enough to justify it.

Mr. Daniel M. Friedman: I -- I think Mr. Justice the seriousness is basically the claim that the Attorney General didn't go far enough in this case when --

Justice Hugo L. Black: That the Attorney General didn't bring about a complete divestiture?

Mr. Daniel M. Friedman: Well that they --

Justice Hugo L. Black: The courts in two terms?

Mr. Daniel M. Friedman: -- they don't put it in terms of a complete divestiture.

They say, he didn't provide a divestiture that would ensure that the new company would be reestablished on a vigorous independent entity.

Justice Hugo L. Black: On an independent basis.

Mr. Daniel M. Friedman: On an independent --

Justice Hugo L. Black: So that would not be a complete divestiture, would it?

Mr. Daniel M. Friedman: That would not be an effective divestiture perhaps.

Now, that is their claim and our answer to that it seems to me is --

Justice Hugo L. Black: Would there be enough evidence in the record for us to determine that one way or the other or would that have to be determined by sending back to the Court, that's the question I asked to one of the counsels some time ago.

Mr. Daniel M. Friedman: Well, I would think that it seems to us as far as we're concerned we think this judgment does provide adequate --

Justice Hugo L. Black: Do you think that's because you think the Attorney General has done it and that's all that it understood.

Suppose that one didn't have that belief?

Mr. Daniel M. Friedman: No, Mr. Justice I of course would have to concede that other people might disagree and as I suggest in any settlement, in any settlement that they disagree --

Justice Hugo L. Black: But this is not any settlement, this is this settlement that we've ordered the divestiture and it seems to me a genuine bona fide claim that the Attorney General has agreed to something less than the divestiture.

Mr. Daniel M. Friedman: Well, we -- all I can say to that Mr. Justice is that in this context, the claim that the Attorney General has agreed to less than a complete divestiture we don't think that's enough, that's enough to bring these people within the standard of the rule that they must show that the representation of their interest by the existing parties is inadequate.

We just suggest that that's repeatedly been held that adequacy of representation in this context requires something more than the claim that the case was settled on the wrong basis.

That we think under well settled practice is basically the function of the Attorney General.

It's within his discretion to make that determination.

Chief Justice Earl Warren: Well, I understood Mr. Freidman that they contended that after this Court had directed a prompt and a complete divestiture that the Attorney General made this agreement that El Paso without taking into consideration factors that they believe should and must be taken into consideration and that in addition to that both the Attorney General and the Court refused to let those fact be developed in the Court.

Mr. Daniel M. Friedman: Well my answer --

Chief Justice Earl Warren: Is that -- am I wrong in that?

Mr. Daniel M. Friedman: This is -- this is their contention Mr. Chief Justice.

Chief Justice Earl Warren: I beg your pardon?

Mr. Daniel M. Friedman: That is their contention.

Chief Justice Earl Warren: Yes.

Mr. Daniel M. Friedman: Our answer is that the Attorney General did take these facts into consideration but he concluded that on balance, rather than try to press for a stronger decree it was in the public interest to give something less than that in this case.

To accept a decree which corrected what we thought was the major defect in where the other contentions which we had pressed upon further study didn't seem to us to call for further litigation.

Chief Justice Earl Warren: Well, could he then have said well on further reflection I think that divestiture is not required so therefore I agree to something less than divestiture although this Court has decree.

Mr. Daniel M. Friedman: Well, I --

Chief Justice Earl Warren: Could he do that?

Mr. Daniel M. Friedman: -- I would suppose as a matter of power, he could do that, I am sure he wouldn't do that but --

Chief Justice Earl Warren: Well --

Mr. Daniel M. Friedman: But --

Chief Justice Earl Warren: -- he might if you say he could even dismiss the action.

Mr. Daniel M. Friedman: Well, I think --

Chief Justice Earl Warren: Get rid of it entirely.

Mr. Daniel M. Friedman: I think it's that --

Chief Justice Earl Warren: He could do the one, he could do the other, couldn't he?

Mr. Daniel M. Friedman: He -- he could but Mr. Justice -- Mr. Chief Justice it seems to me that what we're dealing with here is not a decree to provide no divestiture.

We think this decree provides very substantial divestiture and the question is --

Chief Justice Earl Warren: Complete?

Mr. Daniel M. Friedman: We think it's complete.

It's complete divestiture in terms of this case, yes.

We as the -- as our representative told the court, we think this decree will result in creating a new independent company that will be a viable effective competitor in both its own area and in serving the California area.

Now as I say I practically concede that some people may think we didn't go far enough this is true in any case but this is not a case where there has been a failure of divestiture.

That there is no basis for this claim at all.

The claim basically it seems to me is basically is that these people rather than the Attorney General should have the final decision on what kind of a decree the Government should accept in termination of a case in which divestiture was would and we think basically that is the function of the Attorney General and that these people cannot bring themselves within the rule governing intervention by claiming that the Attorney General made a mistake or didn't do an adequate job on the basis of which he settled the case.

Justice Hugo L. Black: Or rather go back, contention was that the Court rather than the Attorney General should have the final say as to whether or not there has been complete divestiture.

I thought that was what they were raising.

Mr. Daniel M. Friedman: Well, but that in turn -- that argument in turn necessarily means that the Attorney General has no authority in this case to settle it.

Justice Hugo L. Black: Well, he has no authority.

It might mean that he has no authority to frustrate the order of the court.

Mr. Daniel M. Friedman: Well, Mr. Justice, he would have no authority to settle because if these people were intervenors obviously this case could not have been settled on this basis.

Justice Hugo L. Black: But could he settle without the consent of the Court?

Mr. Daniel M. Friedman: No, of course not Mr. Justice and the Court approved this.

The court approved this settlement.

Justice Hugo L. Black: You have to be finding to let the objective say anything about it.

Mr. Daniel M. Friedman: Well, he listened to them -- objectives.

He -- he stated before the final decree permitted them to be heard and some of them were heard.

Thank you, Your Honor.

Chief Justice Earl Warren: Mr. Harrison.

Argument of Gregory A. Harrison

Mr. Gregory A. Harrison: Mr. Chief Justice and may it please the Court.

Some very harsh things have been said about the stipulation in this decree by the three appellants the more there's denying intervention.

I think that in all fairness it should be noted that in the court below, there were some 20 applicants for intervention and that some 10 or 12 of them supported this decree in every respect.

I have the -- so I suggest that perhaps the decree is a matter of opinion.

And because only these three appellants appear before this Court does not mean that there are others who would have been on the other side of their appeal.

And when I say appeal, I would of course concur with the Solicitor General that the personal appeal from the decree.

There was no needed appeal from the order denying intervention.

And 20 such applications were denied.

Among others and the application for intervention was denied the Public Utilities Commission of the State of California of which one of the appellants is a member.

The Public Utilities Commission of the State of California support this decree and I am think it's in the interest of the state of California, contrary to Mr. Woodbury's criticism and contrary to the Commissioner's criticism.

We find no appeal to support from the two bars of natural gas in California and so it is possible to some of these criticisms are not entirely fair.

I would like to now speak for a moment about El Paso.

It would appear from all what is said before as though El Paso had a delightful time in this litigation.

The fact is of course there were two parties and El Paso lost the suit and El Paso was ordered to divest.

That was in April of 1964.

They've recalled El Paso was called upon by the Attorney General to present a plan of divestiture.

It was said to be the duty of El Paso to do so and it did present such a plan.

It was on conversation discussion and negotiation to the Attorney General for a period of some four or five months.

In the course of which, I will show you they were compelled to make concessions.

They proceeded to solicit the consent of $785 million holders of debt of their company to consent to the division of the property so that the debt could be realigned.

And they secured those consents, 100 of them with the knowledge, acquiescence and consent of the Attorney General.

The Attorney General represented to the District Court twice in that period that El Paso was proceeding in good faith to develop a plan of complete divestiture and every time that I say divestiture, may it please this Court, I mean complete divestiture.

And on both occasions, the Attorney General told the Court that El Paso was proceeding in all good faith than there was reason to believe that the parties could present a stipulated decree.

Finally in October, they all had the consent.

They thought they had a decree and they presented this to the Court.

Justice Potter Stewart: Mr. Harrison, I don't think any question of good faith has been raised here at all.

Mr. Gregory A. Harrison: Very well, Your Honor.

However, may I say Your Honor, I'd like to indicate that El Paso feels that it was not likely dealt with that this was not a favorable result for El Paso that El Paso did not come off well as some of these parties would suggest.

And so I am suggesting that concessions were made all the way along the line in trading with the Attorney General in the hope of getting them agreed divestiture and then finally and for the first time on December the 2nd, the Attorney General announced our position.

And the position we announce was the ground set forth the other day which were picked up for petitions for intervention theretofore filed and subsequently the company was compelled to yield on what it considered to be the major issue in the case.

Could it sustain its position in the Court or would the Attorney General that in view of the wide distribution of its stock, it could be permitted to distributive stock in one form or another to its shareholders.

The counsel is in error.

The Solicitor General is in error in one respect only.

We did not propose the Redding (ph) answer.

It was forced in our throats by the Attorney General.

And we accepted it under protest.

But we did accept it for one reason that relying upon the power of the Attorney General to bind the United States in the settlement, we could bring him in to this litigation.

And after all, it is not in the interest of El Paso to be forever in Court and I suggest to this Court the question here is not whether one intervenor shall be before you criticizing this decree, the question is whether 20 intervenors, each one of which has this great or better right than anyone who appeared here today to intervene and express his views should be heard from also.

And this thing will develop into a series of disputes between various interests, various markets, various purchasers, various states and the end of the litigation will not be early or soon.

And it was that which was the purpose of this settlement as far as El Paso was concerned.

Now, when El Paso made this agreement, when it yielded its position with respect to the distribution of the stock, it received something in return it has said, it received a concession as to the four or five points which the Government had been urging and which El Paso felt were totally lacking in legal or factual basis or substance.

And that therefore, they gave much and got little but let it be noted that no one of these matters which was in dispute involved a question of whether or not El Paso would diverse all of the properties which it had acquired.

And no claim when analyzed can reasonably be made that an attempt to withhold any so-called fruit or benefit of the acquisition.

The plan which was proposed and so far as the property is concerned accepted, involved a transfer of $265 million in net utility plant.

It involved a division of debt so that the new company $180 million only $145 million in first mortgage.

We were criticized for being able to make this deal with all of the bondholders and debenture holders what we thought was the minimum cost of one-eighth of one percent and now arrive at the present day with an interest rate of four and seven-eights percent on the average which on the hold, may it please this Court, is a pretty good.

It certainly couldn't be approved upon if we had to start over again.

We transferred all of the properties and assets which we had acquired by way of pipeline to the new company.

We transferred to the new company all of the extensions and betterments constructed by El Paso at the cost of $50 million not one dollar of which came from Pacific Northwest.

We transferred a gasoline plant at the cost of $9.5 million and not one dollar of that came from Pacific Northwest.

We transferred $7.5 million -- trillion cubic feet of reserves which was three trillion in excess of what we acquired from Pacific Northwest and one and seven-tenths trillion more even after having served the Northwest Public during that entire period of time.

Now, as -- some remark was made here, surely thoughtlessly without the record before the person who made the statement.

They would not divest in West Coast Transmission stock, well of course we are.

We have to divest it within a year.

And we would have divested it before this but by this appeal and we submit you that all that we said is that we retain the proceeds.

Well, I assume that we are going to bring -- permit obtain the proceeds of the divestiture.

At least, I didn't know that divestiture here meant confiscation and so divestiture is not involved in that at all.

It's simply a question of whether a company adequately capitalized already should receive more capital in the form of their proceeds in the divested stock.

And we submit no case was ever made.

No claim ever made that the new company is not adequately financed to perform its service in the northwest that it would be certificated by the Federal Power Commission and it's ever so much more powerful and able to compete for future increments of gas in California than Pacific Northwest ever was.

Justice Byron R. White: Mr. Harrison, by opposing do you refer to that $45 million that the Attorney General's argument is talking about?

Do you retain oppose it, I am not quite --

Mr. Gregory A. Harrison: Well, the fact of the matter is that the West Coast Transmission stock was acquired from Pacific Southwest.

Justice Byron R. White: Yes.

Mr. Gregory A. Harrison: It is ordered to be divested.

It will be sold for whatever the market price is at a loss because the company El Paso paid more for it in the purchase that is now worth.

Justice Byron R. White: What then does the $45 million item that --

Mr. Gregory A. Harrison: May it please the Court.

I am sorry I don't know of any such figure, the only place where I remember $45 million is the money that El Paso spent in developing the gas reserves of Pacific Southwest in San Juan and not one dollar of that's coming back and not one dollar of that came after Pacific Southwest.

Barely the truth of the matter is, may it please the Court, that it's just as necessary for El Paso to serve the Northwest as it is for the Northwest to be served.

It has a duty to serve northwest and it cannot depart from that duty.

It also has the duty to serve the certificated markets of California in the Southwest and it must fulfill those duties.

And it must require and retain to have the reserves on hand to perform their contracts and to have end El Paso throughout this period of merger has extensively acquired reserves and that's why it is able to give back to Pacific South and Pacific Northwest not only what it had but three trillion more cubic feet of gas being all of the sources owned by El Paso in the rocky mountain area and connected to the pipeline system, all of its access and sources and in Canada and in addition 285 billion cubic feet acquired by them to San Juan Basin which the gentleman speak in here (Inaudible).

And so we stand here today with both of the companies, the new company and the old company with exactly the same deliverability of gas for its respective markets 14 years with exactly the same rate of interest for the debt of all companies which I assure it was less than the interest rates of today and with the capitalization which I has been approved of the bondholders or the debenture holders by giving their consents to this reorganization.

And so I can link my statement for today by saying, may it please this Court, there has been complete, there has been complete diversity.

But beyond that, if these people with the most remote connection with the entire problem can raise this issue before this Court then I assure you that all of a 100 customers of El Paso, all of the thousands consumers of consumers in Southern California along with Mr. Woodbury's plant, the buyers in California and the people of other markets are likewise entitled to intervene to attempt to try before this case in this proceeding what shall be done with the disputes of the gas reserves between different markets, different purchasers and different interests and I submit that is unrelated to the purpose of this decree which is divestiture and not settlement of all of the reserve problems in the national gas industry of the west.

Chief Justice Earl Warren: There is some time left.

Who is going to –-

Rebuttal of Rollin E. Woodbury

Mr. Rollin E. Woodbury: In fact, I will, Your Honor.

Chief Justice Earl Warren: You may Mr. Woodbury.

Justice Byron R. White: Mr. Woodbury are you going to tell us what was divested, I'm hearing a lot of things that are being divested, now what's left for El Paso?

Mr. Rollin E. Woodbury: If Your Honor please.

The main thrust of our contention with respect to non-divestiture is the question of gas reserves.

El Paso proposes to reconstitute and I use this word deliberately because this is taken out of the opinion that this Court handed down on the Cheyanne case that divestiture means restitution and El Paso proposes to set up a company with vast new demands for gas which had developed over the period of this violation of the antitrust laws that has in the San Juan alone one half of the relative reserves that it had relative to Canadian reserves at the time of the acquisition by El Paso of the stock.

Justice Byron R. White: Permitted by present demand as today's demand that the Congress to this reports?

So they have certain reserves time of this?

Mr. Rollin E. Woodbury: It is a relative concept yes.

Justice Byron R. White: That is as of today?

But what the status quo --

Mr. Rollin E. Woodbury: At that time, at that time, the Pacific Northwest Pipeline had 1.95 times the reserves in San Juan that it had in Canada.

Now, El Paso proposes to create a new company marginal that will meet FPC minimum standards with almost complete dependence upon Canadian reserves and El Paso was in the Federal Power Commission today seeking new reserves to serve the Pacific Northwest not to serve California and it has the authority to tell the district court judge and now us that it is creating a viable new entity which you people, which this Court found had been destroyed by the violation that is able to compete in California.

Justice Byron R. White: You said there had 1.95 times the Canadian reserve at the time of merger.

Mr. Rollin E. Woodbury: In the San Juan Basin alone.

Justice Byron R. White: Right in the San Juan Basin.

Mr. Rollin E. Woodbury: Yes.

Justice Byron R. White: Now, this present plan leaves them what?

Mr. Rollin E. Woodbury: It leaves them with roughly one-third in the from Canada, one-third from San Juan, and one-third from the rocky mountain area based upon the figures which El Paso submitted in the District Court hearing.

Justice Byron R. White: But this one third is relative to the increase demand for gas?

Mr. Rollin E. Woodbury: It -- it's a relative manner.

We -- we're not able on the record on this case to compare the size of the reserves in terms of thousands of cubic feet because there's a difference of method of measurement in the long period of as to last, so we have to approach it on the relative basis.

And Pacific Northwest Pipe Line which build its line, mind you from San Juan to the Pacific Northwest and still expected as this Court found to be a viable competitor in California with dedicated reserves in the San Juan El Paso now says that we'll give you back what you had then and maybe a little bit more from fields that -- from wells which Pacific was developing at that time and that's it.

Justice Byron R. White: To put Pacific Northwest where it would be today if the merger had never happened in terms of reserves.

They got to give them a lot more of reserve --

Mr. Rollin E. Woodbury: That is our position.

For example in the several years about four years following the acquisition of the stock, El Paso brought in a whole new formation below the fields where Pacific Northwest had been exploring and developing.

And the figure is the neighborhood of four trillion cubic feet and they do not propose to turn this over to the new company.

Now, I would like to address myself for one moment to the Government's contention about very grave consequences if these applicants are not permitted in.

I draw Your Honors' attention again to this -- to the nature of this case.

We're dealing with a public service company that customers are public service companies completely dependent upon the outcome of this litigation as to their future.

They built their organizations.

They've incurred their debt.

They've marketed securities and they have acquired customers in the expectation that their supplier will be a company that has vast surplus gas reserves.

This Court found that Pacific Northwest Pipeline was such a company and we know that El Paso is such a company.

Now, in order to restore that competitive position, the reserve situation alone must be modified.

In addition, El Paso seeks to retain certain other benefits.

Thank you.

Chief Justice Earl Warren: We'll adjourn.