Reeves v. Simon

• Decision Date: 24 March 1975
• Docket Number: No. 9-18.,9-18.
• Citation: 507 F.2d 455
• Parties: Gordon REEVES, d/b/a Gordon Reeves Chevron Station, and Edward McCullough, Plaintiffs-Appellees, v. William E. SIMON, Director, Federal Energy Office, and Donald C. Alexander, Commissioner of Internal Revenue, Defendants-Appellants.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

507 F.2d 455

Gordon REEVES, d/b/a Gordon Reeves Chevron Station, and Edward McCullough, Plaintiffs-Appellees, v. William E. SIMON, Director, Federal Energy Office, and Donald C. Alexander, Commissioner of Internal Revenue, Defendants-Appellants.

No. 9-18.

Temporary Emergency Court of Appeals.

November 27, 1974.

Certiorari Denied March 24, 1975.

Allen W. Hausman, Dept. of Justice, Washington, D.C. (Carla A. Hills, Asst. Atty. Gen., New York City, and Stanley D. Rose, Dept. of Justice, Washington, D. C., with him on the brief), for defendants-appellants.

Michael J. Meehan, Robertson, Molloy, Ficket & Jones, Tucson, Ariz., for plaintiffs-appellees.

Before CARTER, HASTIE and CHRISTENSEN, Judges.

Certiorari Denied March 24, 1975. See 95 S.Ct. 1426.

CARTER, Judge.

This is an appeal from the order of the United States District Court for the District of Arizona, enjoining the Federal Energy Office (FEO) from enforcing certain of its regulations with respect to retail fuel allocation, and denying the FEO's motion for summary judgment against plaintiff-appellee, Gordon Reeves. The district court held that 10 C.F.R. Chapter II, Part 210, Subsection 210.62(b) of the Mandatory Petroleum Price & Allocation Regulations, which prohibited retail gasoline service stations from limiting sales of all or part of their monthly gasoline allocation to their regular customers to the exclusion of other motorists, was invalid, arbitrary, discriminatory and without a rational basis, and its adoption invalid for failure to comply with Administrative Procedure Act (hereafter APA) and Emergency Petroleum Allocation Act (hereafter EPAA) procedural requirements. The FEO disputes the validity of this holding in all respects. We reverse.

FACTS

Gordon Reeves is sole proprietor of an independent Chevron-branded retail service station located on the main thoroughfare of a residential neighborhood in Tucson, Arizona. His primary source of income is derived from the sale of gasoline and the provision of repair services and accessory sales.

The October, 1973, embargo of crude oil and petroleum products by the Arab nations produced shortages of all petroleum products, including gasoline. When gasoline supplies began to get short, Reeves experienced severe difficulties, with two primary results: 1) long lines of customers (many making very small quantity purchases) forced him and his employees to spend virtually full time during most of the day at the gas pumps, thereby neglecting service work. Accessory sales and repair service thus were greatly diminished due to the long delays; 2) the long delays and lengthy lines for gasoline sales so disrupted operations that normal and longstanding customer relationships were jeopardized.

To combat the situation, Reeves divided his daily gasoline supply in half, conducting "open sale" to any member of the general public in the morning and, when one-half of the gasoline had been used, making the remaining half available to established customers in the afternoon.

In January and February of 1974 the long lines at service stations caused many other service station owners to curtail the days and hours of gasoline sales and impose restrictions on the amount of gasoline sold to individual motorists, causing instances of violence and the inability of many non-"regular" customers to obtain any gasoline at all. In response to this virtual crisis situation, the FEO added subsection (b) to § 210.62.¹ This subsection provided:

"(b) No supplier shall engage in any form of discrimination among purchasers of any allocated product. For purposes of this paragraph discrimination means extending any preference or sales treatment which has the effect of frustrating or impairing the objective, purposes and intent of the chapter or of the Act, and includes but is not limited to refusal by a retail marketer of motor gasoline or diesel fuel to furnish or sell an allocated product due to the absence of a prior selling relationship with the purchaser or establishment of a new volume purchase arrangement where customers of retailers agree in advance to purchase in excess of normal amounts . . . and thereby receive preferential treatment." (Emphasis added)

The subsection was made effective immediately and was not sent to the Attorney General or the FTC for comment as to its possible anti-competitive effect.

I COMPLIANCE WITH § 553(d) OF THE ADMINISTRATIVE PROCEDURE ACT

Section 553(d) of the APA, 5 U.S.C. § 553(d), provides in pertinent part:

"The required publication or service of a substantive rule shall be made not less than 30 days before its effective date, except . . .

(2) interpretative rules and statements of policy; or

(3) as otherwise provided by the agency for good cause found and published with the rule."

Reeves contends that the amendment to § 210.62 was a substantive change in the law and was not merely "interpretative." Further, he contends that the FEO based its failure to give 30-day notice on § 553(d)(2) of the APA and therefore cannot now justify its action on the good cause exception of § 553(d) (3). We reject both contentions.

In promulgating § 210.62(b), the FEO indicated its decision to dispense with the 30-day notice period with the following language:

"This amendment is issued today in an effort to end the growing practice of sellers providing preferential treatment to customers on the basis of longstanding relationships or for any other reason. The FEO has noted a serious alteration in established business practices—particularly with respect to gasoline and diesel fuel retail sales—which result in certain purchasers being served, while other are wholly excluded.

"The amendment to § 210.62 concerning `normal business practices' is addressed to this situation as well as to other preferential sales devices. Sellers whose normal business practice has been to serve the public may not modify that practice to sell only to `regular customers' or otherwise discriminate among purchasers of an allocated product. . . .

"Because the purpose of these amendments is to provide immediate guidance and information with respect to the mandatory petroleum allocation and price regulations, the Federal Energy Office finds that normal rule-making procedure is impracticable and that good cause exists for making these amendments effective in less than 30 days." (Emphasis added).

The FEO thus believed that the amendment was necessary to combat "a serious alteration in established business practices," in violation of original § 210.62. The new subsection (b) could properly be seen to be "interpretative" of what was meant by "normal business practices." In that case, there would have been no need for the FEO to explain its decision to dispense with the 30-day notice requirement. Clearly, then, by indicating that normal rulemaking procedures were "impracticable" and that "good cause exists" due to the need for "immediate guidance", the FEO intended from the outset to comply with the provisions of § 553(b) (B)² and (d) (3) (good cause).

We are satisfied that there was in fact "good cause" to find that 30-day notice was "impracticable, unnecessary, or contrary to the public interest" within the meaning of § 553(b)(B). Like DeRieux, et al. v. Five Smiths, Inc., Em.App., 499 F.2d 1321 (1974), cert. denied, sub nom. Five Smiths, Inc. v. Holloway, ___ U.S. ___, 95 S.Ct. 176, 41 L.Ed.2d 141. (1974), "this conclusion is based upon facts so obvious that they may be judicially noticed." Id. at 1332. The gasoline shortage was a temporary, but highly disruptive, national emergency. The long lines and violence required immediate action. Some purchasers were being served, while others were totally excluded. Under these circumstances, we find that the promulgation of § 210.62(b), with accompanying statement of good cause for dispensing with the 30-day notice requirement, was in conformance with the APA.

II COMPLIANCE WITH § 6(c)(3) OF THE EMERGENCY PETROLEUM ALLOCATION ACT

In Section 4(a) of the Emergency Petroleum Allocation Act of 1973, Congress directed the President to exercise the authority delegated to him by the Act by issuing "a regulation providing for the mandatory allocation of crude oil, residual fuel oil, and each refined petroleum product, in amounts specified in . . . and at prices specified in . . . such regulation." A precise timetable and specific procedures were established, including, in § 6(c) (3), that:

"The regulation promulgated under section 4(a) of this Act shall be forwarded on or before the date of its promulgation to the Attorney General and to the Federal Trade Commission, who shall, at least seven days prior to the effective date of such regulation, report to the President with respect to whether such regulation would tend to create or maintain anticompetitive practices or situations inconsistent with the antitrust laws, and propose any alternative which would avoid or overcome such effects while achieving the purposes of this Act."

In issuing the initial allocation and price regulation, the FEO duly complied with each of the foregoing requirements. Reeves, however, contends that the FEO was also required to submit all substantive amendments to the Attorney General and the FTC, and that § 210.62(b), having not been so forwarded, was thereby invalid. We disagree.

The detailed and specific manner for issuing the allocation and price regulation contained in the EPAA cannot reasonably be interpreted to apply to any FEO action but the initial promulgation of the § 4(a) mandated regulation. After the initial promulgation, the established rulemaking procedures of the APA were to control. This is made evident by the incorporation in § 5(a)(1) of the EPAA of §§ 205 through 211 of the Economic Stabilization Act. Section 207 of that Act makes the rulemaking provisions of § 553 of the APA applicable to the FEO.

This interpretation of § 6(c) (3) is also supported by the legislative history of the EPAA. The ...