Atlantic Richfield Co. v. DEPT. OF ENERGY

• Decision Date: 29 June 1981
• Docket Number: No. 2-32.,2-32.
• Citation: 655 F.2d 227
• Parties: ATLANTIC RICHFIELD COMPANY, Plaintiff-Appellant, v. DEPARTMENT OF ENERGY, Charles W. Duncan, Jr., The United States of America and Waterbury Petroleum Products, Defendants-Appellees.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

655 F.2d 227

ATLANTIC RICHFIELD COMPANY, Plaintiff-Appellant, v. DEPARTMENT OF ENERGY, Charles W. Duncan, Jr., The United States of America and Waterbury Petroleum Products, Defendants-Appellees.

No. 2-32.

Temporary Emergency Court of Appeals.

Argued April 10, 1981.

Decided June 29, 1981.

Carter LaPrade, Thompson, Weir & Barclay, New Haven, Conn., with whom Sara R. Stadler, New Haven, Conn., of the same firm; and Richard Gaines, Atlantic Richfield Company, Philadelphia, Pennsylvania, were on the brief for the plaintiff-appellant.

Peter Aron, Dept. of Energy, Takoma Park, Md., with whom Thomas H. Kemp, Washington, D. C., of the same agency, was on the brief for the defendants-appellees.

Alan Neigher, Westport, Conn., was on the brief for the defendants-appellees (Waterbury Petroleum Products).

Before GIGNOUX, BONSAL and WEIGEL, Judges.

WEIGEL, Judge.

Appellant, Atlantic Richfield Company Arco, plaintiff below, appeals from the district court's entry of summary judgment against it and in favor of defendants, Waterbury Petroleum Products WPP, the Department of Energy DOE, and related federal defendants, on all counts of Arco's complaint. Arco also appeals from the district court's denial of Arco's own motion for summary judgment on Count I of its complaint. Count I of Arco's complaint sought to set aside a Remedial Order issued by the DOE. The Remedial Order requires Arco to refund to WPP overcharges on gasoline Arco sold to WPP during the period from January 1974 through August 1975. The remaining counts of Arco's complaint, II-V, dealt with $36,000 paid by Arco to WPP when WPP released certain contractual claims against Arco. Under a number of legal theories Arco sought either to have that sum deducted from the amount it had been ordered to refund to WPP, or to have WPP return it to Arco.

The principal issue before us is whether the DOE properly determined that WPP should have been classified for pricing purposes as a distributor rather than as a retailer.

WPP has been a marketer of Arco products since 1947. In 1969, WPP signed a Commission Distributor Agreement CDA with Arco under which WPP received commissions for distributing Arco gasoline. WPP also owned two or three service stations in Waterbury, Connecticut. Two of WPP's stations, the Whip-It Service Station on Eagle St. and Whip-It Tire Shoppes on Meriden Rd., signed contract dealer agreements with Arco, in 1969 and 1970 respectively. Under these contract dealer agreements Arco was to be paid the Dealer Tank Wagon DTW price, i. e., the price charged to retail dealers. WPP had delivered gasoline to these stations after pickup at an Arco facility in New Haven, Connecticut. WPP received commissions on the gasoline it delivered to its own stations. The net effect of the CDA and the contract dealer agreements was that WPP received a discount off the DTW price for the gasoline sold to its own stations.

WPP also received commissions on gasoline it distributed to approximately 133 "commercial accounts." In 1972, approximately 93% of the 2,883,367 gallons of gasoline provided to WPP was sold to WPP's retail stations. The remaining 7% appears to have been sold to the commercial accounts serviced by WPP.

Arco attempted to terminate the Commission Distributor Agreement CDA as of the end of 1973. WPP protested that Arco had not given it the 90 day notice of termination required by the CDA. This controversy was "resolved" by a letter agreement, dated March 5, 1974, which provided that: Arco was to continue supplying WPP with 2,883,367 gallons of gasoline per year; Arco was to deliver all the gasoline to WPP's bulk storage tanks, located at the same address as the Eagle St. station; Arco was to pay WPP $36,000, representing a percentage of the commissions WPP would have received had it continued to earn commissions on the sale of gasoline to the Meriden Rd. station; and WPP was to give Arco a release of all its claims with respect to any agreement between WPP and Arco. Two releases were subsequently signed. One released WPP's Commission Distributor Agreement, the other the contract dealer agreement between Arco and the Meriden Rd. station.

Arco charged DTW dealer tank wagon prices for the gasoline it delivered to WPP from January 1, 1974 until mid-August 1975. WPP continued to sell this gasoline through its own service stations, and to service its commercial accounts. In 1976, WPP filed a complaint with the Federal Energy Administration FEA¹ alleging that the Mandatory Petroleum Price Regulations contained in 10 C.F.R. § 212.83(a)² required Arco to charge WPP a lower price.

The complaint proceeded through various stages of the administrative process. In 1977, the FEA issued a Remedial Order RO which found that Arco had overcharged WPP and required refund of the overcharges. Arco's administrative appeal was denied by the DOE. Arco then filed suit in the district court, which upheld the RO. Arco now appeals here.

10 C.F.R. Part 212 contains Mandatory Petroleum Price Regulations issued pursuant to the Emergency Petroleum Allocation Act EPAA, 15 U.S.C. § 751 et seq. 10 C.F.R. § 212.83(a) provides that "a refiner may not charge to any class of purchaser a price for a covered product in excess of the maximum allowable price ...." A class of purchasers consists of "purchasers to whom a person has charged a comparable price for comparable property or service pursuant to customary price differentials between those purchasers and other purchasers." 10 C.F.R. § 212.31. The maximum allowable price for each class of purchaser is based on the price charged to that class of purchaser on May 15, 1973. See 10 C.F.R. § 212.82. FEA's Ruling 1975-2, 40 Fed.Reg. 10,655 (March 7, 1975) explains how the "class of purchaser" is to be determined. That ruling is discussed below.

After termination of the Commission Distributor Agreement, Arco classified WPP in its retailer, or contract dealer, class of purchaser. WPP and the DOE contend that WPP belonged in Arco's distributor class of purchaser. The RO required Arco to recalculate prices, utilizing its rates for distributors, and to refund the amount overcharged.

The principal question before us is whether there was substantial evidence to support the DOE's classification of WPP as a distributor. This court should not overturn an order of the DOE unless we determine that "such order is in excess of the agency's authority, or is based upon findings which are not supported by substantial evidence." Section 211(d)(1) of the Economic Stabilization Act ESA, located at 12 U.S.C. § 1904 note, and incorporated by reference into the Emergency Petroleum Allocation Act EPAA, 15 U.S.C. § 751 et seq. by 15 U.S.C. § 754(a)(1).

Arco argues that the DOE should have classified WPP as a retailer because WPP sold over 90% of its gasoline through its own retail service stations. Arco also contends (1) that the DOE lacked authority to abrogate Arco's letter agreement of March 5, 1974 with WPP and (2) that the DOE could not retroactively impose the requirements of Ruling 1975-2 (40 Fed.Reg. 10,655 (March 7, 1975)), on March 5, 1974, agreement. Arco further contends (3) that the DOE applied an irrelevant classification in determining WPP's "class of purchaser."

Finally, Arco contends that even if the DOE could properly classify WPP as a "distributor," the $36,000 Arco paid WPP in connection with the March 5, 1974, "settlement" agreement should be offset against the refund Arco owes WPP or returned to Arco.

A. RE SUMMARY JUDGMENT ON COUNT I

1. DOE Regulations Can Override Contracts

Arco argues that the DOE cannot invalidate Arco's March 5, 1974, "settlement" agreement with WPP, which, Arco contends, required WPP to pay DTW (i. e., retailer) prices as distinguished from the distributor prices ordered by the RO. However, that agreement does not specify the price to be paid for the gasoline. Nevertheless, Arco argues that because the agreement released Arco from any obligation to pay commissions to WPP, it meant that WPP had to pay the DTW price specified in the 1969 contract dealer agreement for the Eagle St. station. However, the parties to the Eagle St. contract dealer agreement were Arco and Whip-It Service Station. WPP was not the buyer under that agreement. Furthermore, under the 1974 agreement WPP bought some gasoline that was not sold at the Eagle St. service station. Thus it is not clear (although it may be implied) that the agreement provided for WPP to pay DTW prices.

Even if the agreement expressly provided for WPP to pay DTW prices, Arco still could not charge WPP more than the maximum price allowable under the applicable regulations. Parties cannot contract to buy and sell gasoline at more than the maximum allowable price. See 10 C.F.R. § 212.10(a), (b) (seller may not charge a price in excess of the maximum price, buyer may not knowingly pay a price in excess of the maximum price). Thus, if the DTW price was in excess of the maximum allowable price that Arco could charge WPP, as the DOE found, then a contract provision for DTW prices could not stand.

2. Arco Did Not Raise Its Retroactivity Argument Before the Administrative Agency

Arco argues that the DOE had no authority retroactively to apply Ruling 1975-2 to Arco's settlement agreement of March 5, 1974. However, Arco did not raise this argument before the DOE. In fact, Arco itself relied on Ruling 1975-2 in its administrative appeal of the RO. Accordingly, this court will not consider Arco's retroactivity argument.³ See Unemployment Compensation Commission v. Aragon, 329 U.S. 143, 155, 67 S.Ct. 245, 251, 91 L.Ed. 136 (1946) (the "reviewing court usurps the agency's function when it sets aside the administrative determination upon a ground not theretofore presented and deprives the agency of an opportunity to consider the matter, make its ruling, and state the reasons for its action"); Safir v. Kreps, 551 F.2d 447, 452 (D.C.Cir.1977) (a party "is not free to raise points...