468 F.Supp. 383 (D.Mass. 1979), Civ. A. 76-4096, Quincy Oil, Inc. v. Federal Energy Administration

Docket Nº:Civ. A. 76-4096
Citation:468 F.Supp. 383
Party Name:Quincy Oil, Inc. v. Federal Energy Administration
Case Date:April 02, 1979
Court:United States District Courts, 1st Circuit, District of Massachusetts

Page 383

468 F.Supp. 383 (D.Mass. 1979)

QUINCY OIL, INC., Plaintiff,



Civ. A. No. 76-4096-C.

United States District Court, D. Massachusetts.

April 2, 1979

Timothy H. Gailey, Hale & Dorr, David S. Mortensen, Boston, Mass., for plaintiff.

Cynthia S. Bogorad, Bonnie S. Blair, Spiegel & McDiarmid, Washington, D. C., Edward A. Roster, Roster & Antine, Taunton, Mass., for intervenor, Taunton Municipal Lighting Plant.

Carolyn Grace, Asst. U.S. Atty., Boston, Mass., Mark J. Kreitman, Ellen P. Spangler, U.S. Dept. of Energy, Regulatory Litigation Div., Washington, D. C., for defendant.


CAFFREY, Chief Judge.

This is a civil action for declaratory judgment and injunctive relief brought by Quincy Oil, Inc. (Quincy) against the Federal Energy Administration (FEA), now the Department of Energy (DOE). Plaintiff, Quincy, seeks judicial review of orders of the DOE. The agency found that Quincy

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had violated the mandatory Petroleum Price Regulations with respect to sales of No. 6 fuel oil by Quincy to Taunton Municipal Lighting Plant (Taunton) during the period November 1, 1973 through May 31, 1976 1 and ordered Quincy to refund approximately $400,000 in overcharges. It denied exceptional relief from that finding. Quincy also challenges the validity of FEA Ruling 1977-5 which DOE relied on in its final Order and Decision of March 31, 1977. The parties filed certain discovery motions which were referred to the magistrate.

The matter is now before the Court on DOE's appeal from a portion of the discovery order issued by the magistrate on October 23, 1978. The magistrate denied DOE's request for a protective order and allowed Quincy to depose the decisionmaker who issued the notice of probable violation (NOPV) which lead to the administrative order which found Quincy in violation of the petroleum price regulations. The magistrate ordered DOE to file forthwith the complete administrative record. He also allowed Quincy's request for production of documents generated during the investigative stage of the proceedings but denied Quincy's request for unofficial agency statements.

The case filed is burdened with several memoranda submitted by each of the parties. After hearing, I now affirm in part and reverse in part the magistrate's order.

An explication of the applicable regulatory law, factual background and administrative proceedings to date assists the Court in determining the scope of discovery, if any, to be ordered.

Pursuant to the authority of the Economic Stabilization Act of 1970 (ESA), 12 U.S.C.A. s 1904, and the Emergency Petroleum Allocation Act of 1973 (EPAA), 15 U.S.C.A. s 751 Et seq., the FEA promulgated regulations establishing the maximum allowable price which a reseller of refined petroleum products may charge. The basic rule, subject to exceptions not here relevant, is that:

A seller may not charge a price for any item subject to this subpart which exceeds the weighted average price at which the item was lawfully priced by the seller in Transactions with the class of purchaser concerned on May 15, 1973, plus an amount which reflects on a dollar-for-dollar basis, increased costs on the item.

10 C.F.R. s 212.93(a) (emphasis added). The term "transaction" is defined in the regulations as occurring "at the time and place when a binding contract is entered into between the parties," 10 C.F.R. s 212.31, a definition originally adopted in 1973 by the Cost of Living Council (CLC) and later adopted by the FEA. Gulf Oil Corp. v. Schlesinger, 465 F.Supp. 913 (1979).

In March, 1977 the FEA issued Ruling 1977-5 purporting to clarify the proper meaning and application of the definition of transaction. The Ruling provides that, when a contract has a variable price term:

(T)hat such a . . . contract is merely a general sales agreement which, because of its lack of a fixed price that would reflect market level prices on the date the contract was entered into, cannot be regarded as a "binding contract" for purposes of the definition of "transaction" and the computation of May 15, 1973, selling prices. Within the framework of such a general sales agreement, one or more subsidiary contracts occur, and they are presumed to have been entered into on the date the price becomes fixed with respect to a particular delivery. At that time a fixed price is specified with respect to a particular delivery pursuant to the terms of a general sales contract, a "binding contract" arises for purposes of the definition of "transaction."

42 Fed.Reg. 15306.

In April, 1972, Quincy entered into a variable-price contract to supply No. 6 fuel oil to Taunton for a one-year period which extended from May 1, 1972 through April 30, 1973. The contract contained a clause which conferred authority on Taunton unilaterally

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to extend the supply contract for an additional 90 days beyond April 30, 1973 at the same price. On April 23, 1973, Quincy and Taunton entered into another variable-price contract in which Quincy agreed to supply No. 6 fuel oil to Taunton for the period May 1, 1973 through April 20, 1974. Taunton exercised its 90-day option under the April, 1972 contract, and Quincy continued to make deliveries at prices established under the terms of the old contract until July 31, 1973. Deliveries under the new contract did not commence until August 1, 1973.

On January 13, 1976, after an audit of Quincy's books and records, the FEA issued a NOPV to Quincy, which alleged that...

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