Brennan Petroleum P. Co., Inc. v. Pasco Petroleum Co., Inc.

• Decision Date: 11 February 1974
• Docket Number: Civ. No. 74-48 Phx. WPC.
• Citation: 373 F. Supp. 1312
• Parties: BRENNAN PETROLEUM PRODUCTS CO., INC., an Arizona corporation, Plaintiff, v. PASCO PETROLEUM CO., INC., an Arizona corporation et al., Defendants.
• Court: U.S. District Court — District of Arizona

373 F. Supp. 1312

BRENNAN PETROLEUM PRODUCTS CO., INC., an Arizona corporation, Plaintiff, v. PASCO PETROLEUM CO., INC., an Arizona corporation et al., Defendants.

Civ. No. 74-48 Phx. WPC.

United States District Court, D. Arizona.

February 11, 1974.

Kenneth R. Reed of Martori, Meyer, Hendricks & Victor, Phoenix, Ariz., for plaintiff.

Donald D. Meyers of Meyers & Curtis, Phoenix, Ariz., for defendants.

OPINION^* AND ORDER

COPPLE, District Judge.

This is an action by a motor gasoline retailer against its supplier for violations of the Sherman, Clayton and Emergency Petroleum Allocation Acts. Jurisdiction is predicated on 15 U.S.C. §§ 1, 2, 15, 25; 28 U.S.C. §§ 1331, 1337 (1970); Emergency Petroleum Act of 1973, Pub.L.No. 93-159, § 5, 87 Stat. 627 ("Emergency Act"); Economic Stabilization Act of 1970, as amended, Pub.L. No. 92-210, §§ 210, 211, 85 Stat. 743 (1971) ("Economic Act").

Plaintiff moved for a preliminary injunction under count one of the first amended complaint. Cory's Gasoline Stations, Inc. moved to intervene as party plaintiff and for similar relief. Defendants moved to quash the temporary restraining order and order to show cause issued upon the filing of the original complaint, and to quash accelerated depositions and a subpoena duces tecum. All the above matters came on for hearing on January 31, 1974. They were taken under advisement and the Court proceeded to hear evidence on the injunctive issue.

Facts

The request for an injunction in this case is limited to allocation questions under the Emergency Act and Federal Energy Office (FEO) regulations. The material facts are undisputed. Pasco is a supplier to Brennan and Cory's of motor gasoline, and was during the 1972 base period established by the FEO regulations. All three are nonbranded independent marketers within the terms of the Act and regulations. The individual defendants are all officers and/or directors of Pasco.

Pasco's sole source of motor gasoline is Shell Oil Co.¹ Commencing in February 1973 Shell began limiting (allocating) its deliveries of gasoline to Pasco, who in turn rationed its supply to its customers. In January 1974 Shell allocated and delivered to Pasco some 94 percent² of the amount of gasoline it had delivered during January 1972. Up to the time the temporary restraining order issued, Pasco refused to deliver to Brennan in January 1974 more than 70 percent of the amount it had sold to Brennan in January 1972. A similar condition prevailed with regard to Cory's. On January 15, 1974, the FEO Mandatory Petroleum Products Allocation Program became effective. 39 Fed.Reg. No. 10, pt. III (January 15, 1974) (to be codified in 10 C.F.R. § 205.1 et seq.).

Pasco sells its gasoline to three defined classes: (1) independent retailers who market under their own trade names, (2) independent owners who market under Pasco's name, and (3) Pasco-owned and -operated stations flying the Pasco name. From 1972 to the time of suit, Pasco closed 27 retail stations and opened eight new ones. Defendant's Exhibit A.³ In addition, it acquired three stations each from companies called Shepherd Bros. and U-Pump, which it now operates as wholly-owned. Pasco had supplied these two companies with at least part of their requirements in 1972. During the same period it took on as customers two newly opened stations independently owned and operated by persons named Eads and Walton.

From 1972 to the time of suit Brennan closed two of its four stations. It continued to supply a wholesale customer in Gilbert, Arizona. While Cory's had twelve stations during the same period, only two were in Maricopa County⁴ and both were open at the time of suit. Both retailers had laid off employees and were operating their stations at reduced time and day schedules, depending on the availability of gasoline and on marketing decisions.

At the time of hearing, neither Cory's nor Brennan had applied to the FEO for a resolution of its problem. Additional facts will be recited as it becomes necessary to the discussion.

Jurisdiction

Pasco challenges the subject-matter jurisdiction of the court, or in the alternative urges that plaintiff should be required to exhaust administrative remedies as a matter of absention policy. While the court has jurisdiction generally under the antitrust laws, the injunctive relief sought specifically relies on the regulations under the Emergency Act,⁵ which adopted by reference the judicial and administrative procedures of the Economic Act. Emergency Act § 5(a)(1).

It is defendants' position that sections 207-211 of the Economic Act evince a congressional intention that administrative bodies be given the first opportunity to resolve disputes in these sometimes complex economic areas. See City of New York v. New York Telephone Co., 468 F.2d 1401 (Temp.Em.Ct.App.1972); cf. McKart v. United States, 395 U.S. 185, 89 S.Ct. 1657, 23 L.Ed.2d 194 (1969). There is no doubt that where the attack is upon the regulatory program itself, as in New York Telephone where the matter was under submission to the price commission, it is appropriate for the court to stay its hand. See also Economic Act § 211(c), (d) (no injunction against enforcement generally shall issue except on final judgment).

Section 210 of the Act is a specific grant of jurisdiction over private disputes arising under it, without regard to the administrative procedures. McGuire Shaft & Tunnel Corp. v. Local No. 1791, UMW, 475 F.2d 1209 (Temp. Em.Ct.App.), cert. denied, 412 U.S. 958, 93 S.Ct. 3008, 37 L.Ed.2d 1009 (1973). It provides declaratory, injunctive and compensatory relief limited only by section 211(c), (d).

That finding is amply supported by the legislative history of both acts. The Senate had originally proposed that the Emergency Act include a specific right of action for private parties with disputes over petroleum allocation. The House proposed, and the conference adopted, the remedial provisions of the Economic Act. The relief provided by section 210 is identical in all material respects with the Senate proposal. The only reasonable inference is that the conference believed it had accomplished the Senate purpose. See Conf.Rep.No. 93-628, 93d Cong., 1st Sess., in 1973 2 U.S.Code Cong. & Admin.News 2688, 2707-2708.

This action under section 210 is intended to be brought by private persons against other private persons. The government will not bring such action nor be the subject of one.

Any person suffering legal wrong . . . may seek all appropriate relief . . . ."

S.Rep.No.92-507, 92d Cong., 1st Sess., in 1971 2 U.S.Code Cong. & Admin. News 2283, 2291. See also H.R.Rep. No.93-531, supra note 4, at 2583 ("private actions are permitted"). The Economic Act therefore provides two methods by which the act and regulations may be enforced: through the administrative process by orders and other sanctions with appeal allowed to the courts (sections 207-208, 211), and a separate private remedy directly in the district courts for injunctive and trebledamage relief (section 210). The court has subject-matter jurisdiction of all counts of the complaint.⁶

Defendants further urge the Court to exercise its discretion to refuse jurisdiction or stay its hand pending application of the expertise of the FEO to the allocation problem. Where matters are committed to agency discretion, or the rules or subject-matter expertise are uniquely within an administrative body's competence, traditional doctrine dictates judicial abstention. McKart v. United States, supra, 395 U.S. at 193-200, 89 S.Ct. 1657; see Alabama Pub. Serv. Comm. v. Southern Ry., 341 U.S. 341, 71 S.Ct. 762, 95 L.Ed. 1002 (1951); Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941).

The FEO has power to issue remedial orders to cure violations of the act and regulations. FEO Reg. 205.2, 39 Fed. Reg. 1925 (Jan. 15, 1974) (to be codified at 10 C.F.R. § 205.2).⁷ Brennan and Cory's could have petitioned for a determination that Pasco was in violation. 10 C.F.R. §§ 205.9, .82. There is no assurance in the regulations that a swift initial decision would be forthcoming, however. See Id. § 205.9(e); cf. id. §§ 205.81-.86. If, as defendants have suggested, an "interpretation" were requested, there are no time limits at all. Id. § 205.101.

On the other hand, FEO recognizes the dual relief afforded under the act by repeating that a private party may file an action under Economic Act § 210. 10 C.F.R. § 210.83.

As the discussion below will show, there are no special matters requiring agency discretion here. The relief sought is limited to a determination of the proper allocation fractions used by Pasco. The parties have stipulated that there are no priority questions under Id. § 211.103. Because Pasco is not a refiner or first supplier of product within the state there are no questions of state set-aside or regional adjustment. The limited question posed is whether Pasco properly assigned additional volumes over 1972 by defining certain users as "new customers" pursuant to id. § 211.13. Congress anticipated just such actions as this when it provided limited defenses in Emergency Act § 6. As Congress noted at the Economic Act's passage, such suits as this are "a traditional method by which violators of regulations may be discovered and other would-be violators may be deterred." S.Rep.No.92-507, supra, at 2291.

The regulations are fairly clear, as are the two acts, and the Court finds no reason to exercise its equitable discretion to abstain in favor of a prior agency determination.

Injunctive Prerequisites

Before the Court will issue a preliminary injunction, it must be demonstrated (1) that there is a real threat of irreparable harm to the applicant that is not remediable by damages, (2) that such harm weighs more heavily in the balance than likely injury to the enjoined party, (3) that plaintiff is likely to succeed on the merits, and (4) that there is no public policy adverse to...