91 F.R.D. 26 (N.D.Tex. 1981), C. A. CA-3-78-1302-G, Exxon Corp. v. Department of Energy
|Docket Nº:||Civ. A. CA-3-78-1302-G.|
|Citation:||91 F.R.D. 26|
|Opinion Judge:||PATRICK E. HIGGINBOTHAM, District Judge.|
|Party Name:||EXXON CORPORATION, Plaintiff, v. DEPARTMENT OF ENERGY, and Wayne E. Gifford, Deputy Regional Administrator, Region VI, Defendants, and United States of America, Counterclaimant.|
|Attorney:||Barbara Finney, Jon E. King, Exxon Corp., Houston, Tex., Fulbright & Jaworski by David J. Beck, J. Todd Shields, Sheila J. Lee, Houston, Tex., for Exxon Corp. Barbara Allen Babcock, Asst. Atty. Gen., Civ. Div., Washington, D. C., Kenneth J. Mighell, U.S. Atty., by Judith A. Shepherd, Asst. U.S. A...|
|Case Date:||May 21, 1981|
|Court:||United States District Courts, 5th Circuit, Northern District of Texas|
Oil corporation brought action against Department of Energy and deputy regional director seeking declaratory and injunctive relief, and the Department and the deputy regional director filed counterclaim. On motions seeking discovery, the District Court, Patrick E. Higginbotham, J., held that: (1) oil corporation was entitled to discovery to complete administrative record compiled by the Department in administrative proceedings concerning alleged violation by the corporation of agency's mandatory petroleum price regulations by discontinuing acceptance of credit cards; (2) oil corporation sufficiently alleged ambiguity in " normal business practices" regulation to justify contemporaneous construction discovery to support its position that the Department acted arbitrarily, capriciously and without authority in applying such regulation to its termination of credit card program; and (3) oil corporation was entitled to discovery as to whether the Department complied with requirements of Administrative Procedure Act.
This is an action for declaratory and injunctive relief brought by Exxon Corporation against the Department of Energy (" DOE" ) 1 and Wayne E. Gifford, Deputy Regional Director of Region VI of the Federal Energy Administration (" FEA" ). Gifford is sued solely in his official capacity. Exxon seeks (1) judicial review of a " Remedial Order" issued by the FEA on April 26, 1977 and later amended in a final " Decision and Order" issued by the DOE's Office of Hearings and Appeals on October 2, 1978; (2) a declaratory judgment concerning the meaning and validity of 10 C.F.R. ss 210.62(a), (c) and Ruling 1974-10 (39 Fed.Reg. 15140, May 1, 1974); (3) permanent injunctive relief against enforcement at the April 26, 1977 Remedial Order, as amended; and (4) a determination whether Exxon's constitutional claims are substantial and should be certified to the Temporary Emergency Court of Appeals (" TECA" ). The ultimate issue in this case is the validity of the DOE's ruling that Exxon violated the agency's Mandatory Petroleum Price Regulations by discontinuing acceptance of Bank Americard and Master Charge credit cards (" Bankcards" ) on September 1, 1974. At this juncture, however, the question presented is whether Exxon shall be entitled to any discovery before disposition of the merits on DOE's Motion for Summary Judgment, and if so, what the proper scope of discovery should be in this case.2
In the fall of 1973, as part of the federal government's Phase IV Economic Stabilization
Program, the Cost of Living Council promulgated regulations limiting the prices which a supplier of petroleum products could charge retailers and consumers. See 38 Fed.Reg. 27290 (1973) (modifying 6 C.F.R. s 150.359). The regulations restricted the price a supplier could charge any class of purchasers for specified petroleum products to the price charged such purchasers on a base date (May 15, 1973) plus any increased product costs since that base date. Id. at s 150.355, et seq.3 Subsequent to Exxon's discontinuance of Bankcards on September 2, 1974, the base price was interpreted to include the manner and form of any consideration received for the sale of covered petroleum products and the time in which payment must be made. See Atlantic Richfield Company, 3 FEA Par. 80,522 (December 12, 1975). According to the DOE, the Phase IV price regulations required suppliers to maintain all customary price differentials, including credit terms in effect on May 15, 1973. The substance of these regulations was incorporated into the new Mandatory Petroleum Allocation and Price Regulations, 10 C.F.R. ss 200-212, 39 Fed.Reg. 1924 (Jan. 15, 1974) under the authority of the Emergency Petroleum Allocation Act of 1973 (" EPAA" ), 15 U.S.C. s 751 et seq.4
In addition to the price rules, the agency issued regulations on January 14, 1974 requiring the maintenance of " normal business practices." 10 C.F.R. s 210.62. These included a prohibition against imposing more stringent credit terms or payment schedules than those in effect during the base period. Sections 210.62(a) and (c) of the " normal business practices" regulation are central to this litigation and provide in pertinent part:
s 210.62 Normal Business Practices
(a) Suppliers will deal with purchasers of an allocated product according to normal business practices in effect during the base period specified in Part 211 for that allocated product and no supplier may modify any normal business practices so as to result in the circumvention of any provision of this Chapter.... Credit terms other than those associated with seasonal credit programs are included as part of the May 15, 1973 price charged to a class of purchaser under Part 212 of this Chapter.... No supplier may require or impose more stringent credit terms or payment schedules on purchasers than those in effect for that class of purchaser during the base period (for seasonal credit), or on May 15, 1973 (for other credit terms). 39 Fed.Reg. 5311 (February 12, 1974), amending 10 C.F.R. s 210.62, published at 39 Fed.Reg. 1924, 1931 (January 15, 1974).
(c) Any practice which constitutes a means to obtain a price higher than is permitted by the regulations in this chapter or to impose terms or conditions not customarily imposed upon the sale of an allocated product is a violation of these regulations. Such practices include ... the failure to provide the same services ... previously sold.
The agency further addressed the inter-relatedness of credit terms and the base price in Ruling 1974-10, 39 Fed.Reg. 15140, May 1, 1974. In pertinent part, that Ruling stated:
Thus, the May 15, 1973 price includes both the price per gallon of gasoline and the time within which that price had to be paid, i. e., the credit terms that prevailed on that date. The imposition of more stringent credit terms by a refiner would constitute an impermissible increase in the May 15, 1973 price because it would reduce the time within which payment had to be made. The cost of credit for the period between deliveries which was incurred by firm A would, if the terms could not be altered, have to be paid by firm B.
Firm A could change its credit practices with respect to firm B only if it first applied to the FEO, and made a showing as to why the change was necessary, and if the FEO authorized the change, as well as an appropriate adjustment to firm A's May 15, 1973 price.
From the outset of this controversy, the agency has maintained that these regulations and rules prohibited Exxon from modifying any normal business practice in effect on May 15, 1973, or from imposing more stringent credit terms than those in effect on that date, without prior approval from the agency and a corresponding adjustment, if necessary, to the firm's May 15, 1973 price.
Agency regulations in effect in April of 1977 provided for a multi-step enforcement and administrative review process to facilitate compliance with the agency's regulations.5 Subpart O of 10 C.F.R. s 205 sets forth the enforcement procedures and the method by which a firm subject to administrative action can challenge such actions. Pursuant to 10 C.F.R. s 205.190(b), the agency may commence a proceeding to insure compliance with agency regulations by serving a Notice of Probable Violation (" NOPV" ). The recipient of an NOPV may respond in writing and may request a conference with DOE to discuss the NOPV. s 205.191(c). After receipt of a reply, if any, or expiration of the 10 day reply period, the agency may issue a Remedial Order setting forth the factual and legal grounds supporting a determination that a violation of agency regulations has occurred. 10 C.F.R. s 205.192. Remedies which can be ordered in a Remedial Order include restitution, price rollbacks and assessment of interest. C.F.R. s 205.195(a).
A party may appeal a Remedial Order to the Office of Hearings and Appeals. 10 C.F.R. ss 205.191, 295.196(b). During the administrative appeal from a Remedial Order, an appellant may raise all of its factual and legal defenses to the allegations contained in the Remedial Order. 10 C.F.R. s 205.105(a). Appellate consideration culminates in issuance of a final Decision and Order, affirming, modifying or vacating the Remedial Order.6
Agency enforcement capability was bolstered by civil penalty provisions. The penalty applicable to this lawsuit was set forth in Section 208 of the Economic Stabilization Act, 12 U.S.C. s 1904 note, incorporated by reference into the EPAA, s 5(a), 15 U.S.C. s 754(a)(1).7 It provided that " any person
who violates any provision of this chapter or any order issued pursuant thereto shall be subject to a civil penalty of not more than $2,500 for each violation." 10 C.F.R. s 205.202(c)(1), superceded by 10...
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