Eastern States Petroleum & Chem. Corp. v. Seaton
| Decision Date | 15 August 1958 |
| Docket Number | Civ. A. No. 1621-58. |
| Parties | EASTERN STATES PETROLEUM & CHEMICAL CORPORATION, Plaintiff, v. Fred A. SEATON et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
Donald MacGuineas, Department of Justice, Washington, D. C., for defendants.
Plaintiff seeks to enjoin the cancellation of two Government procurement contracts and any discrimination in the future in its sales to the Government because of its importation of oil above its allotted quota under the Voluntary Oil Import Program. The facts giving rise to this request for relief are as follows:
On April 23, 1957, pursuant to Section 7 of the Trade Agreements Extension Act of 1955,1 the Director of the Office of Defense Mobilization advised the President that he had reason to believe crude oil was being imported into the United States in such quantities as to threaten to impair the national security. The President, in agreement that there was reason for such belief, established, on June 26, 1957, the Special Committee to Investigate Oil Imports. A month later this Special Committee reported to the President its conclusions that a quota system should be adopted with respect to the importation of crude oil and recommended specific quotas for individual oil importers, including plaintiff. That same day, July 29, 1957, the President approved the recommendations of the Special Committee and directed that they be put into effect immediately.
The circumstances leading to the quota imposed upon the plaintiff date back to March 20, 1957 when the Office of Defense Mobilization requested of the plaintiff (and all other oil importers) forecasts of its oil imports for the last half of that year. Plaintiff replied that it expected to import 10,000 barrels per day in July and August and 22,500 barrels per day for the remainder of the year. These figures were based upon two oil import contracts which plaintiff had with Mid-Eastern suppliers: the first, an agreement to purchase 22,500 barrels per day of Kuwait oil;2 the second, to buy 4,500 barrels per day of Wafra oil.3 The oil bought under the second contract, however, was not refined in this country but was unloaded at Houston, Texas, and immediately reshipped to a Japanese purchaser. For this reason plaintiff did not include Wafra oil in its estimate.
On July 1, 1957, the Office of Defense Mobilization asked plaintiff to confirm the estimates originally submitted in March. The following day, by telegram, over the name of the Senior Vice-President of plaintiff corporation, the figures provided on March 20 were stated to be still accurate.
Based upon these estimates, plaintiff's quota was adjudged to be 18,300 barrels per day. The day following the President's directive, on July 30, hours after the receipt by plaintiff of its quota allotment under the program, plaintiff wired the Office of Defense Mobilization that its telegram of July 2 was, by inadvertence, incorrect. Plaintiff asked for a revision of its quota to include the 4,500 barrels per day of Wafra oil which was, through clerical error, omitted in its July 2 response. The contract with their Japanese buyer had expired June 30 and could not be renegotiated.4
On September 17, 1957, plaintiff was given a hearing before defendant Carson, Administrator of the Voluntary Oil Import Program, on the issue of revision of its quota. Defendant Carson refused plaintiff's request, saying in part: "An exercise of my limited authority to alleviate inequities would, I believe, be justified only in the event of a showing by the petitioner that it has made vigorous efforts to find a foreign market for the crude or to be relieved of its contractual obligation."
Plaintiff alleges, through affidavits, that it then contacted its foreign supplier under the Wafra contract and asked to be relieved of its obligation and was refused. Plaintiff attempted to find another foreign purchaser but here, too, it was unsuccessful.5
Plaintiff sought a rehearing of its case but this was denied. It continued throughout the latter half of 1957 and the first quarter of 1958 to contact Administrator Carson and other officials in the program seeking an adjustment of this matter.
Then, on March 27, 1958, the President attached sanctions to non-compliance by Executive Order 10761, 23 Fed.Reg. 2067, U.S.Code Congressional and Administrative News 1958, p. 587. Under this order, the heads of all executive departments were directed to apply the provisions of the Buy American Act of 19336 to non-complying imported crude oil. The purchase of petroleum or petroleum products containing non-complying crude oil by the various executive departments and agencies of the Government was prohibited. This order was made effective thirty days from its issuance.
On May 15, 1958, plaintiff appeared before Roland A. Whealy, Acting Administrator in Carson's absence, and A. Bruce Wright, the Administrator's counsel, and again presented its case for relief. Again relief was denied and plaintiff appealed to Acting Secretary of the Interior Chilson who affirmed the Administrator's decision on June 18, 1958.
During this period, plaintiff imported oil at the following rate:7
1957 Barrels per day
July ........................ 12,400
August ...................... 24,000
September ................... 25,900
October ..................... 35,000
November .................... 27,000
December .................... 24,700
1958
January ..................... 25,800
February .................... 17,800
March ....................... 28,700
April ....................... 32,600
May ......................... 27,300
June ........................ 27,000
July ........................ 27,000
August ...................... 27,000
Commencing April 26, 1958, plaintiff attempted to comply with the decreed quotas8 by importing at its contractual commitments and placing all oil above the quota limit in bonded storage in accordance with rules which had been promulgated by the Administrator. This was done until the latter part of July when, having utilized all available storage facilities, plaintiff was no longer able to import at its desired amount and still comply. Since that time plaintiff has been in non-compliance with the program.9
As a result of this non-compliance, plaintiff alleges it is threatened with irreparable injury: the loss of two large contracts under which it has been and will continue to sell oil to the Government; the loss of future Government contracts; and ramifications of Executive Order 10761 which may affect its sales to private oil purchasers in the United States.
On June 21, 1958, plaintiff filed its complaint alleging irregularities in the administrative procedure relative to publication and a fair hearing; lack of proper procedure in the imposition of the Voluntary Import Quota Program, since the President did not specifically make a finding of a threat to national security; improper delegation of legislative power to the executive; the imposition of sanctions via the Buy American Act contrary to that statute; and the arbitrary fixing of its quota by the Administrator.
Plaintiff's suit for injunction, however, filed at the same time, and presently before this Court, seeks only to prevent the carrying out by Government officials of the sanctions imposed by Executive Order 10761.
This motion was first heard before another judge of this court who denied the injunction and dismissed the complaint for failing to state a cause of action, 163 F.Supp. 797.
The Court of Appeals for the District of Columbia reversed, stating, "Because appellant tendered the issue of arbitrary action by appellees in implementing the Voluntary Oil Import Program by sufficient allegation in its complaint, the complaint states a claim upon which relief could be granted and should not have been dismissed.
"It is therefore ordered by the court that this case be * * * remanded to the District Court * * * to afford appellees an opportunity, in opposition to the motion for preliminary injunction, to controvert the allegations of arbitrary action; then to promptly hold a hearing for the purpose of determining whether a preliminary injunction, pending trial, is warranted."
In deciding, therefore, whether to grant the injunction prayed for, the Court has examined the arbitrariness of the Administrator's action in accordance with the Court of Appeals' mandate to determine whether "there is enough to substantiate plaintiff's claims so as to move the court in the exercise of a sound discretion to intervene by its process"10 pending trial of main action.
The Court has concluded, for the reasons stated below, that the injunction should not be granted.
Plaintiff's contention of arbitrary action on the part of the Administrator rests on the validity of two propositions: (a) that plaintiff's telegram of July 2, 1958, was the result of a clerical error, and (b) the contract for Wafra oil was a planned import until 1959 which could not be avoided without serious monetary loss.
To substantiate the clerical error theory, plaintiff has submitted the affidavit of Duncan Neblett, Senior Vice-President of the firm, above whose signature the telegram was sent. His affidavit recites merely the conclusion, "Through clerical error, plaintiff's estimated importation of 4,500 barrels per day * * * was omitted." There has also been submitted to the Court a copy of a letter written by Richard Kahle, president of Eastern States Refining and Chemical Corporation, written on September 16, 1957 and addressed to Administrator Carson, which explains the origin of the error in somewhat more detail.
According to this letter, plaintiff, when it submitted its original estimates of imports in March, mentioned to the Office of Defense Mobilization its two contracts and stated...
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