City of Texarkana v. Arkansas Louisiana Gas Co.
306 U.S. 188 (1939)

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U.S. Supreme Court

City of Texarkana v. Arkansas Louisiana Gas Co., 306 U.S. 188 (1939)

City of Texarkana v. Arkansas Louisiana Gas Co.

No. 294

Argued January 4, 5, 1939

Decided February 6, 1939

306 U.S. 188

Syllabus

1. A franchise granted to a utility company by the City of Texarkana, Texas, contained a section (§ IX) providing that, if the company should "be finally compelled to, or should voluntarily, place in any rates" for the adjacent City of Texarkana, Arkansas, less than those fixed by the franchise, then such lower rates should apply also in the Texas city and the company "shall not be authorized or permitted to charge and collect any higher rate."

Held:

(1) The section was not invalid as a delegation or abdication of the power of the Texas city under its charter to regulate the business and fix the rates of public utilities. P. 306 U. S. 196.

(2) By the law of Texas, the section was binding on the utility company although, because of the reserved power to raise or lower the rates, not binding on the municipality. P. 306 U. S. 197.

Grant of the franchise is consideration for the undertaking of the utility to maintain the prescribed rates until they are altered by the exercise of the reserved power of the municipality to regulate the rates. P. 306 U. S. 200.

(3) Earlier decisions of this Court to the effect that, under the law of Texas, a municipality could not validly make a rate contract with a public utility because inconsistent with its reserved power to regulate rates are inapplicable, because (a) the state supreme

Page 306 U. S. 189

court, in a subsequent decision, has indicated that the contract and regulatory powers may be exercised concurrently, and (b) the charter of the municipality here involved specifically empowers it to enter into franchise agreements with rate regulation reserved. P. 306 U. S. 201.

(4) When the utility voluntarily put into effect in the Arkansas city rates lower than those granted by the franchise, then the consumers in the Texas city were immediately entitled to the lower rate. P. 306 U. S. 202.

(5) Where a rate order applicable in the Arkansas city was challenged by the utility, the latter is not "finally compelled" to "place in" the rate until entry of the final order of a court making the rate effective; but when such final order is entered, the Texas consumers are entitled to have the lowered rate applied to their consumption for the same period of time that it is enjoyed by the Arkansas consumers. P. 306 U. S. 202.

(6) A supplemental petition seeking to give the Texas consumers the benefit of a lower rate which had been decreed for the Arkansas city, but from which decree an appeal by the company was pending, was premature. P. 306 U. S. 203.

(7) Upon remand of this case to the District Court for further proceedings, leave should be granted -- the Arkansas rate case having finally been determined -- to file a supplemental petition to bring to date the controversy over the refund of charges by the company. P. 306 U. S. 203.

(8) Section IX is not invalid as vague, indefinite, and obscure. P. 306 U. S. 204.

(9) Section VIII-A of the franchise, relative to notice of application for increase or decrease in rates, is, by its terms, inapplicable to the power of the city to increase rates. P. 306 U. S. 197.

2. Questions of the validity and construction of a franchise granted under state law to a utility company are to be determined by the federal court in accordance with the law of the State. P. 306 U. S. 198.

3. This Court relies upon the trial court for aid in the examination and interpretation of the local law. P. 306 U. S. 198.

4. A respondent in certiorari here may urge affirmance of the judgment of the Circuit Court of Appeals on a ground assigned by him on his appeal to that court as requiring judgment in his favor, but which it did not pass upon. P. 306 U. S. 198.

5. Where there is a good cause of action stated in the original bill, a supplemental bill setting up facts subsequently occurring which justify other or further relief is proper. P. 306 U. S. 203.

Page 306 U. S. 190

6. That the rates stipulated in a binding contract between a utility and a municipality are inadequate is not a defense to their enforcement. P. 306 U. S. 204.

97 F.2d 5 reversed.

Certiorari, 305 U.S. 584, to review a decree which, upon appeal from the District Court in a suit brought by the city against the utility company, reversed and remanded with instructions to dismiss the bill.

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