United States v. Tobins

• Citation: 512 F. Supp. 308
• Decision Date: 20 April 1981
• Docket Number: Civ. A. No. 80-2064-K.
• Parties: UNITED STATES of America and John McCarthy, Auditor, U. S. Department of Energy, Petitioners, v. Marshall TOBINS, President Weston Petroleum, Inc., Respondent.
• Court: U.S. District Court — District of Massachusetts

512 F. Supp. 308

UNITED STATES of America and John McCarthy, Auditor, U. S. Department of Energy, Petitioners, v. Marshall TOBINS, President Weston Petroleum, Inc., Respondent.

Civ. A. No. 80-2064-K.

United States District Court, D. Massachusetts.

April 20, 1981.

Carolyn S. Grace, Asst. U. S. Atty., Boston, Mass., for petitioners.

Segal, Moragn & McMahon, Terry Philip Segal, Boston, Mass., DiSalle & Staudinger, Susan A. Goltz, Washington, D. C., for respondent.

Memorandum

KEETON, District Judge.

This is an action to enforce an administrative subpoena issued by the United States Department of Energy ("DOE"), in the course of an audit of a reseller of petroleum products. Petitioners brought this proceeding under section 13 of the Federal Energy Administration Act of 1974, 15 U.S.C. § 772; section 645 of the Department of Energy Organization Act, 42 U.S.C. § 7255; and section 206 of the Economic Stabilization Act of 1970, 12 U.S.C. § 1904 note, as incorporated by 15 U.S.C. § 754(a)(1).¹ Jurisdiction is based upon section 13(e)(2) of the Federal Energy Administration Act of 1974, 15 U.S.C. § 772(e)(2); section 502 of the Department of Energy Organization Act, 42 U.S.C. § 7192; and sections 206 and 211 of the Economic Stabilization Act of 1970, 12 U.S.C. § 1904 note, as incorporated by 15 U.S.C. § 754(a)(1).²

For reasons set forth below, the petition for enforcement is denied. The court's findings and conclusions are set forth in Parts II and III of this opinion.

I.

Petitioners allege that they seek to obtain from respondent information regarding price, cost, purchase, sale, volume and other data to determine compliance with DOE's mandatory petroleum allocation and price regulations, 10 C.F.R. §§ 205, 210, 211, and 212; that respondent refused to provide such records to DOE because of respondent's belief that production is barred by DOE's audit policy, set forth in 43 Fed.Reg. 27777 (June 27, 1978); and that on April 17, 1980, petitioner McCarthy personally served on respondent a subpoena issued in accordance with DOE Regulations, 10 C.F.R. § 205.8, requiring respondent to appear before petitioner at a specified time and place and to bring with him for examination the books, papers, records, and other data described in the subpoena. A Request for Review and Rescission of Subpoena was timely filed by respondent on April 23, 1980 and was denied by letter dated April 30, 1980.

Upon respondent's refusal to comply with DOE's subpoena, petitioners brought this action. Petitioners pray that the court direct compliance with the subpoena and award costs and such other and further relief as is just and proper. Following the entry of a show cause order, respondent challenged the subpoena on grounds that its issuance exceeds DOE's lawful authority and violates respondent's Fourth Amendment rights. Respondent contends that the audit (and the subpoena issued pursuant to the audit) is unlawful because it was initiated in violation of the agency's published statement of policy.

By Memorandum and Order of January 8, 1981, the court denied petitioners' motion for judgment on the pleadings. Petitioners filed a motion for reconsideration of this order, to which respondent filed a memorandum in opposition. At a hearing on January 29, 1981, following arguments, the parties were afforded an opportunity to present evidence. The only evidence offered was a Stipulation of Undisputed Facts, and both parties rested. The parties were given the opportunity to file further memoranda. No further submissions having been filed, the court proceeds to address the merits of the controversy, including the contentions raised in the petition for reconsideration.

II.

1. For the periods encompassed by the subpoena, Weston Petroleum, Inc. was subject to the mandatory petroleum allocation and price regulations set forth in 10 C.F.R. §§ 210-212. Stipulation ¶ 1.

2. Respondent is a reseller of petroleum products within the meaning of 10 C.F.R. § 212.31.

3. Petitioners are duly authorized to administer and enforce the provisions of the mandatory petroleum allocation and price regulations. Stipulation ¶ 3.

4. On April 17, 1980, an administrative subpoena duces tecum and ad testificandum was issued by an authorized agent of petitioners and proper service was effected upon respondents. Stipulation ¶ 4.

5. The testimony and materials requested pursuant to the subpoena were reasonably related to respondent's compliance with the mandatory petroleum allocation and price regulations and would be necessary to petitioner in order to determine whether respondent had complied with those regulations. Stipulation ¶ 4.

6. On June 27, 1978, DOE caused the following Statement of Policy to be published in the Federal Register:

It is the policy of the Economic Regulatory Administration (ERA) not to commence any price regulation audits after June 30, 1978, at: (1) Any resellers, reseller-retailers or retailers (as defined in 10 C.F.R. 212.31) of petroleum products other than propane ... except on suspicion of a willful violation of the price regulations, by reason of complaints or other credible indications of significant violations, or if an exception or other special relief from the price regulations has been afforded....

43 Fed.Reg. 27777, 27782 (June 27, 1978).

7. In the "Discussion" preceding the above statement of policy, DOE stated that:

The ERA is aware of the particular difficulties that may be faced by certain small firms in complying with price regulations and of the responsibility to allocate its own resources to those audit areas having the greatest enforcement potential. Therefore, the ERA has, within the past year, redirected its efforts toward larger firms having a potential for greater recoveries of overcharges.

43 Fed.Reg. 27779 (June 27, 1978).

8. DOE's "Discussion" noted that the House Committee on Interstate and Foreign Commerce, in its report on Department of Energy Civilian Programs Authorization Act for Fiscal Year 1979, H.R.Rep. No.95-1166, Part 2, 95th Cong., 2d Sess. 63 (1978), approved DOE's new audit policies, stating: "The Committee is heartened by the recent efforts ... to use cost/benefit analysis in establishing workload priorities, in order to reduce the audit emphasis on small firms." 43 Fed.Reg. 27779-80 (June 27, 1978).

9. The Federal Register notice accompanying the policy statement also contained the following statement:

Reasons for the Policy. The ERA views this policy as striking a reasonable balance between two competing considerations — the enforcement of price regulations and the granting of certainty to firms as to the extent of their civil liability.

* * * * * *

This policy relieves all of approximately 21,600 resellers of petroleum products from undergoing new audits after June 30, 1978, except for the reasons stated in the policy.

43 Fed.Reg. 27780 (June 27, 1978).

10. In a letter dated May 3, 1978, from David J. Bardin, Administrator, DOE Economic Regulatory Administration, to J. Bennett Johnston, Chairman, Subcommittee on Energy Conservation and Regulation, U. S. Senate Committee on Energy and Natural Resources, Bardin stated:

I am deeply concerned by your Subcommittee staff's proposal that the Committee cut $2 million from the Compliance and Enforcement budget for FY 1979. We fully agree that we should redirect our resources away from small cases to the more significant violations. Indeed, we have started that shift .... In preparing our FY 1979 budget and in planning the distribution of our personnel resources for FY 1979, we contemplated a substantial reduction in the number of audits of small firms. We have developed a new policy on small cases .... We have already begun the redeployment of our personnel resources to bring them in line with our small firm policy and to provide for a more economical approach to enforcement audits with more emphasis on significant violations.

(Reprinted in part at 43 Fed.Reg. 27780.)

III.

Section 13(e)(2) of the Federal Energy Administration Act of 1974, 15 U.S.C. § 772(e)(2), provides that:

Any appropriate United States district court may, in case of contumacy or refusal to obey a subpena issued pursuant to this section, issue an order requiring the party to whom such subpena is directed to appear and to give testimony touching on the matter in question, or to produce any matter described in paragraph (1) of this subsection, ....

(Emphasis supplied.)³ The contentions of the parties present two issues concerning the court's role under this statute: first, whether in a subpoena enforcement proceeding the court has the power to "review" DOE's exercise of its subpoena power at all; and second, whether the court may in its discretion consider DOE's compliance with its audit policy in deciding whether to enforce the subpoena against respondents.

A.

As a threshold matter, petitioners contend, citing Federal Trade Commission v. Standard Oil Company of California ("SOCAL"), ___ U.S. ___, 101 S.Ct. 488, 66 L.Ed.2d 416 (1980) that respondents cannot at this stage of the proceedings obtain review of DOE's decision to subpoena respondent's records. This contention is without merit.

In SOCAL, during the pendency of adjudicative administrative proceedings against it, the respondent brought an action against the agency seeking an order declaring the administrative complaint unlawful, alleging that the agency had issued the complaint without the statutorily required "reason to believe" that respondent had violated the law. Applying the requirement, imposed by section 10(c) of the Administrative Procedure Act, 5 U.S.C. § 704, that absent a statutory exception only "final agency action" is subject to judicial review, the Court in SOCAL held that the decision to issue the complaint was not immediately reviewable. Rather, the Court held that because the issuance of a "complaint averring reason to believe is a step toward, and will merge in, the agency's decision on the merits,...