Ashland Oil, Inc. v. United States Department of Energy

• Decision Date: 03 April 1985
• Docket Number: 10-55.,TECA No. 10-53
• Citation: 760 F.2d 298
• Parties: ASHLAND OIL, INC., Plaintiff-Appellant, v. The UNITED STATES DEPARTMENT OF ENERGY, Donald Hodel, Secretary of Energy, and Cotton Petroleum Corporation, Defendants-Appellees. ASHLAND OIL, INC., Plaintiff-Appellant, v. COTTON PETROLEUM CORPORATION, Defendant-Appellee.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

760 F.2d 298

ASHLAND OIL, INC., Plaintiff-Appellant, v. The UNITED STATES DEPARTMENT OF ENERGY, Donald Hodel, Secretary of Energy, and Cotton Petroleum Corporation, Defendants-Appellees.

ASHLAND OIL, INC., Plaintiff-Appellant, v. COTTON PETROLEUM CORPORATION, Defendant-Appellee.

TECA Nos. 10-53, 10-55.

Temporary Emergency Court of Appeals.

Argued September 27, 1984.

Decided April 3, 1985.

Patricia N. Blair, Ginsburg, Feldman & Bress, Chartered, Washington, D.C., with whom Fred W. Drogula, Linda B. Blair, of the same firm; John I. Imel, Moyers, Martin, Conway, Santee & Imel, Tulsa, Okl., were on the brief for plaintiff-appellant.

Marcia K. Sowles, with whom Thomas C. Newkirk, Larry P. Ellsworth, Dept. of Energy, Washington, D.C.; Stephen E. Hart, Daniel F. Shea, Dept. of Justice, Washington, D.C., were on the brief for defendant-appellee, U.S. Dept. of Energy.

Thomas P. Humphrey, Davis, Graham & Stubbs, Washington, D.C., with whom Jeffrey H. Howard, Kenneth R. Christoffersen of the same firm; James L. Kincaid, Conner, Winters, Ballaine, Barry & McGowan, Tulsa, Okl., were on the brief for defendant-appellee, Cotton Petroleum Corp.

Before PECK, DAUGHERTY, and THORNBERRY, Judges.

THORNBERRY, Judge.

This is an appeal by plaintiff, Ashland Oil, Inc. (Ashland) from the district court's dismissal of two consolidated cases. In Ashland Oil, Inc. v. United States Department of Energy and Cotton Petroleum Corp., Ashland sought to overturn or modify a prior settlement agreement between the DOE and Cotton. The district court dismissed this action because Ashland failed to exhaust administrative remedies. We affirm for the reasons stated in New York Petroleum Corp. v. Ashland Oil, Inc., 757 F.2d 288 (TECA 1985) (reh'g denied and reh'g en banc denied, March 4, 1985).

In Ashland Oil, Inc. v. Cotton Petroleum Corp., Ashland sought to recover damages resulting from overcharges in the price of crude oil. The district court dismissed the action. We affirm in part and reverse and remand in part.

BACKGROUND

During the period in which the federal government controlled the price of domestically produced crude oil, the Federal Energy Administration¹ determined that Cotton Petroleum Corporation (Cotton) had misclassified crude oil from its North Gooses Lake Unit, resulting in overcharges to Ashland from November 1, 1973 through December 31, 1975. In August 1977, the DOE issued a remedial order directing Cotton to refund $714,677.90 to Ashland and Northwestern Refining Company,² the first purchasers of the overpriced crude oil. Cotton appealed the remedial order to the Office of Hearings and Appeals (OHA) within the DOE. Ashland received notice of the remedial order and of Cotton's subsequent appeal of the order. Following a hearing in which Ashland declined to participate, the OHA denied Cotton's appeal.

In April 1979 Cotton filed suit against the DOE in federal court challenging the remedial order. The DOE counterclaimed to enforce the order. Ashland was not a party to the action and never sought to participate in any fashion. In June 1983 the DOE and Cotton reported to the district court that an agreement in principle had been reached to settle the lawsuit. Subsequently a final agreement was executed by the parties, and on September 9, 1983, the district court signed the settlement and dismissed Cotton's complaint and the DOE's counterclaim with prejudice. Ashland was aware of the settlement negotiations at least as early as June 1983.

Under the court-approved settlement agreement, Cotton was to pay $1,104,165.00 plus interest into a separate escrow account within eighteen months. The funds were to be distributed in accordance with the DOE's regulations for distribution of such refunds. 10 C.F.R. §§ 205.280 et seq. These regulations, known as Subpart V regulations, provide for publication of a proposed decision and order by the DOE, receipt of public comments, and issuance of a final decision and order. Following issuance of the final decision, any person entitled to a refund may file an application for refund. Decisions by the DOE to grant or deny an application are subject to judicial review.

In December 1983 Cotton paid $1,156,493.14 to the DOE for distribution under Subpart V. The Economic Regulatory Administration of the DOE commenced the Subpart V proceeding by petitioning the OHA for the implementation of special refund procedures. Public notice of this petition and of refund procedures proposed to be used in the proceeding were published in the Federal Register. 49 Fed.Reg. 2941 (Jan. 24, 1984); 49 Fed.Reg. 6542 (Feb. 22, 1984). In the February 22 notice the OHA stated its tentative conclusion that the kind of crude oil pricing violations alleged against Cotton were, for the period after November 1, 1974 (the effective date of the entitlements program), unlikely to have caused injury to the refiner who purchased the crude oil. This conclusion was based on the automatic operation of the entitlements program in spreading the cost effects of any such overcharges among all refiners. Nevertheless, the OHA explicitly proposed to permit such refiners to submit claims in the refund procedure and demonstrate their injury. With respect to crude oil sales before November 1, 1974, the OHA noted specifically that a purchasing refiner would be required to demonstrate only that it had not passed on the overcharges to its customers in order to receive refunds. Ashland filed comments in which it objected to the entire proceeding. No decisions on any claims have been issued at this time.

THE LAWSUITS

On July 8, 1983, Ashland filed suit against the DOE and Cotton seeking to overturn or modify the settlement agreement. In that suit, Civil Action No. 83-C-588-B (hereinafter "Ashland v. DOE & Cotton"), Ashland alleged that it was a violation by the DOE of section 209 of the Economic Stabilization Act of 1970 (ESA)³ and by Cotton of sections 209 and 210 of the ESA for the DOE to direct Cotton to pay the amount of the crude oil overcharges covered by the remedial order to any entity or person other than Ashland.

On the same day, Ashland filed Civil Action No. 83-C-587-C against Cotton (hereinafter "Ashland v. Cotton") for damages arising from the same 1973-1975 transactions that were the subject of the remedial order. Ashland sought damages under four separate counts. Specifically, in Count I, Ashland sought damages under ESA section 210 in the amount of the overcharges. In Count II, Ashland sought treble damages and attorney's fees under ESA section 210(b), alleging that the overcharges "were willful, intentional and a reckless disregard of the requirements of DOE regulations." In Count III, Ashland sought to enforce the original remedial order, and in Count IV, Ashland asserted a common law "action for debt." This private action was consolidated with Ashland's action against the DOE and Cotton.

In Ashland v. DOE and Cotton, the defendants moved to dismiss the action, alleging that Ashland had failed to exhaust administrative remedies, that the action was not ripe, and that Ashland lacked standing to challenge the settlement. On March 21, 1984, the district court dismissed the suit on ripeness and exhaustion grounds. Cotton moved to dismiss all of the counts in Ashland v. Cotton, claiming that they either were barred by the applicable statutes of limitation or failed to state claims for which relief could be granted. The district court did not reach any of the grounds urged by Cotton and, instead, dismissed the case on April 23, 1984, on the ground that the outcome of the pending Subpart V proceeding might "serve to moot the issues raised in the law suit." Ashland appeals the dismissal of each suit.

DISCUSSION

Ashland v. DOE & Cotton

It is undisputed that an administrative procedure to determine the proper recipients of the Cotton settlement funds is underway and not yet final. Ashland concedes that it has not exhausted administrative remedies but argues that nevertheless the district court erred in dismissing the suit because Ashland's claims fall within exceptions to the exhaustion doctrine.

a. Agency action in excess of authority

Ashland argues that a party need not exhaust administrative remedies when its claim is that the agency has acted in excess of its statutory authority. It contends further that the DOE acted in excess of its authority in instituting the Subpart V proceedings. Ashland argues that the DOE's duty is to make restitution to injured parties and that it has no discretion to institute Subpart V proceedings when there are readily identifiable injured parties. Further, Ashland contends that by issuing the remedial order directing Cotton to pay the refund money to Ashland, the DOE identified Ashland as the sole party injured by Cotton's overcharges.

Assuming that Ashland has correctly stated the law, we nevertheless must reject its argument because it has misstated a crucial fact. The remedial order issued against Cotton merely identified Ashland as the first purchaser of the crude oil; it did not purport to identify "injured parties" and certainly did not identify Ashland as an injured party. There has been no factual inquiry as to who was injured by Cotton's overcharges. Instead, one of the purposes of the pending Subpart V proceeding is to make precisely that determination. The DOE did not act in excess of its authority in instituting the Subpart V proceeding.

b. Futility

Ashland argues next that it need not exhaust administrative remedies regarding its claim to the escrowed funds because such an exercise would be futile. Ashland relies on case law holding that where an agency has already decided the outcome of a matter, the pursuit of administrative remedies is deemed futile and exhaustion may not be required. In its complaint Ashland alleged that DOE has made an "internal policy decision" not to permit any first purchaser refined to recover in Subpart V proceedings and thus Ashland's...