United Gas, which is incorporated in Delaware, reimbursed Mobile Gas for the amount it paid to the city for the gas deliveries made to Ideal Cement and Scott Paper, and then filed suit in federal court based upon diversity jurisdiction for recovery of that amount from Ideal Cement and Scott Paper.

In a concurring opinion, Justice Douglas indicated that the ordinance was a tax on intrastate activities and he would reverse the court of appeals decision on that basis.

[3] That case holds that federal courts should not adjudicate the constitutionality of an ambiguous state statute fairly open to interpretation until courts in that state have been afforded a reasonable opportunity to rule on the proper statutory construction.

The Supreme Court in that case held that the Natural Gas Act of 1938 (NGA) did not authorize the abrogation of contracts, so the new rate schedule could not change the rate for the gas for the cement plant.

This case, along with Federal Power Commission v. Sierra Pacific Power Co. (1956)[7] established the Mobile-Sierra doctrine in U.S. administrative law, which holds that an electricity or natural gas supply rate established resulting from a freely negotiated contract is presumed to be "just and reasonable" and thus acceptable under the NGA or Federal Power Act.