Skelly Oil Co. v. Phillips Petroleum Co.,
339 U.S. 667 (1950)

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U.S. Supreme Court

Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667 (1950)

Skelly Oil Co. v. Phillips Petroleum Co.

No. 221

Argued December 9, 1949

Decided June 5, 1950

339 U.S. 667


Respondent oil company had contracts with three producers to purchase gas for resale to a pipeline company which had applied to the Federal Power Commission for a certificate of public convenience and necessity under the Natural Gas Act. Each contract provided for termination by the producer upon notice to the respondent at any time after December 1, 1946, "but before the issuance of such certificate." On November 30, 1946, the Commission ordered that a certificate of public convenience and necessity be issued to the pipeline company, upon specified terms and conditions. The order was not made public until December 2, 1946, on which day the producers severally notified respondent of the termination of their contracts. Alleging that a certificate of public convenience and necessity, "within the meaning of said Natural Gas Act and said contracts," had been issued prior to the attempt to terminate the contracts, respondent sued the three producers in the Federal District Court under the Declaratory Judgment Act for a declaration that the contracts were still "in effect and binding upon the parties thereto." The decree of the District Court that the contracts had not been effectively terminated, and were still in full force and effect, was affirmed by the Court of Appeals.


1. The matter in controversy as to which the respondent asked for a declaratory judgment is not one that "arises under" the laws of the United States, and since,.as to two of the defendant producers, there was no diversity of citizenship, the proceedings against them should have been dismissed for want of jurisdiction. Pp. 339 U. S. 671-674.

(a) By the Declaratory Judgment Act, Congress enlarged the range of remedies available in the federal courts, but did not extend their jurisdiction. Pp. 339 U. S. 671-672.

(b) Where the existence of a federal question is the basis of federal jurisdiction, such a federal question must be presented

Page 339 U. S. 668

by the plaintiff's claim itself, unaided by allegations in anticipation of defenses which might be interposed. P. 339 U. S. 672.

2. There being diversity of citizenship in the case of the third producer defendant, the District Court had jurisdiction of the suit as to it. P. 339 U. S. 674.

(a) There being diversity of citizenship between respondent and this defendant, and the venue being properly laid in the State where the suit was brought, the case was properly in the District Court. P. 339 U. S. 674.

(b) That the declaratory remedy which may be given by the federal court may not be available in the state courts is immaterial. P. 339 U. S. 674.

3. As to the third producer defendant, the judgment of the Court of Appeals is vacated and the cause is remanded in order that the Court of Appeals, either itself or by sending the case back to the District Court, may further explore the issues through ways that may be appropriate. Pp. 339 U. S. 674-679.

In a suit under the Federal Declaratory Judgment Act, the District Court decreed that the contracts between respondent and petitioners had not been terminated and remained in full force and effect. The Court of Appeals affirmed. 174 F.2d 89. This Court granted certiorari. 338 U.S. 846. As to one of the petitioners, the judgment is vacated and the cause remanded; as to the other two petitioners, the judgment is reversed with directions that the cause be dismissed. P. 679.

Page 339 U. S. 669

Primary Holding

If a declaratory action cannot be heard in federal court without relying on the Declaratory Judgment Act, the federal court cannot hear the case on that basis.


Phillips Oil Company agreed to provide natural gas to Skelly Oil Company. The parties arranged in their contract that the oil transmission would not begin until a certificate had been obtained from the Federal Power Commission. It was eventually issued with certain qualifications, but Skelly did not find out promptly that it had been issued, and it notified Phillips that it was terminating the contract. Using the Federal Declaratory Judgment Act, Phillips sued Skelly in federal court to establish that the proper certificate had been issued and that the contract should be enforced. It prevailed in the lower courts, but Skelly argued on appeal that the Declaratory Judgment Act was not an independently adequate basis for establishing jurisdiction.



  • Felix Frankfurter
  • Hugo Lafayette Black
  • Stanley Forman Reed
  • Robert Houghwout Jackson
  • Tom C. Clark
  • Sherman Minton

The Declaratory Judgment Act was meant only to expand the range of remedies that would be available in federal court, rather than expanding the scope of its jurisdiction. It is a procedural rather than a substantive measure. Federal courts otherwise could hear contract claims only if the plaintiff sought money damages or an injunction, which are remedies that may be immediately enforced, and it could hear these claims only if diversity jurisdiction or a federal question were present. The purpose of the Declaratory Judgment Act was to provide a way to assert a plaintiff's rights even if it did not need to be immediately enforced.

This law did not provide additional grounds for jurisdiction beyond diversity and federal questions. If this plaintiff were seeking a different type of remedy, such as damages or specific performance, it would not be able to have its case heard in a federal court, and any federal question would arise only in anticipation of a defense. To be presented in a federal court, a claim must contain a federal question that is not related to an anticipated defense. Expanding the scope of federal jurisdiction as the plaintiff suggests would subject federal courts to the unnecessary burden of hearing far more cases than they were meant to hear.


  • Frederick Moore Vinson (Author)
  • Harold Hitz Burton

The interpretation of this contract hinges on the interpretation of a federal statute and the action of a federal regulatory agency, so it is difficult to see why no federal question is involved in the case.


  • William Orville Douglas (Author)

Case Commentary

Expanding the scope of federal jurisdiction to all actions involving the Declaratory Judgment Act would force federal courts to consider issues that they would not have sufficient knowledge of local matters to resolve. It also would greatly undermine judicial efficiency.

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