Condor Operating Company v. Sawhill

• Decision Date: 19 May 1975
• Docket Number: 5-11.,No. 5-10,5-10
• Citation: 514 F.2d 351
• Parties: CONDOR OPERATING COMPANY and its joint venturers et al., Plaintiffs-Appellees, v. John C. SAWHILL, Administrator, Federal Energy Administration, and Federal Energy Administration, Defendants-Appellants.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

514 F.2d 351

CONDOR OPERATING COMPANY and its joint venturers et al., Plaintiffs-Appellees, v. John C. SAWHILL, Administrator, Federal Energy Administration, and Federal Energy Administration, Defendants-Appellants.

Nos. 5-10, 5-11.

Temporary Emergency Court of Appeals of the United States.

February 7, 1975.

Certiorari Denied May 19, 1975.

COPYRIGHT MATERIAL OMITTED

William M. Kerr, Midland, Tex. (Ted M. Kerr and Kerr, FitzGerald & Kerr, Midland, Tex., with him on the brief) for plaintiffs-appellees.

Marvin L. Coan, Atty., Dept. of Justice, Washington, D. C. (Carla A. Hills, Asst. Atty. Gen., and Stanley D. Rose, Atty., Dept. of Justice, with him on the brief) for defendants-appellants.

Before CHRISTENSEN, ESTES and JOHNSON, Judges.

Certiorari Denied May 19, 1975. See 95 S.Ct. 1975.

CHRISTENSEN, Judge.

This case was initiated in the district court by a complaint praying for a temporary restraining order and preliminary and permanent injunctions to prevent enforcement by the Federal Energy Administration (FEA)¹ of a Remedial Order requiring Condor Operating Company and its joint venturers, plaintiffs-appellees herein (Condor), to sell certain crude oil production to Phillips Petroleum Corporation (Phillips).² It was alleged that the Remedial Order was invalid because Condor had not violated the provisions of section 211.63(a)³ of Title 10, Code of Federal Regulations, upon which it was based and, if it had, that the regulation would have unconstitutionally deprived Condor of property without just compensation and without due process of law.

The trial court granted the preliminary injunction ordering defendants to refrain from interferring with Condor's taking its oil production in kind upon a determination that Condor was in compliance with § 211.63(a), concluded that the Remedial Order was invalid, and certified to this court the constitutional question⁴ of whether the government was empowered to require an owner of property to sell its property to another private party, in view of Fifth Amendment protections.⁵

We stayed the injunction below pending our decision on the merits. It was also decided that in addition to the certified constitutional question all other matters presented to the district court in support of and in opposition to the application for preliminary injunction ripe for appellate review would be considered.⁶ Contemporaneously the defendants filed notice of appeal from the district court's order granting the preliminary injunction.

I. THE PROPRIETY OF OUR EXERCISE OF JURISDICTION BY VIRTUE OF THE CERTIFICATION.

The lower court granted the requested preliminary injunction upon its determination that a proper interpretation of the language of § 211.63(a) itself rendered the Remedial Order invalid. While the point has not been raised directly by any party, we have felt obliged sua sponte to inquire into our own jurisdiction and the propriety of its exercise. We were given pause by reference in Condor's reply brief to "the principle of judicial self restraint in avoiding constitutional issue holdings if the merits of the case can fairly be determined without doing so," and its suggestion that the constitutional issue can be so avoided here by upholding the lower court's decision on non-constitutional grounds.

The problem lies deeper, for if there were no substantial constitutional issue properly before the trial court in view of its complete resolution of the application for a preliminary injunction on non-constitutional grounds, it could be questioned under ordinary circumstances whether that issue should have been certified to us at that stage or that the non-constitutional issues should have been hung upon such a certification here. Cf. Shapp v. Simon, 510 F.2d 379 (Em. App.1975); National Petroleum Refiners Association v. Dunlop, 486 F.2d 1388 (Em.App.1973). See also District of Columbia v. Little, 339 U.S. 1, 70 S.Ct. 468, 94 L.Ed. 599 (1950).

The purported appeal by the defendants from the order in question does not ameliorate the problem. They had no appeal as of right from the interlocutory order; they had obtained from the district court no certification for the usual interlocutory appeal, nor had they filed application with this court for leave to so appeal within the time prescribed by § 211(d)(2) of the Economic Stabilization Act with reference to 28 U.S.C. § 1292(b). Thus our jurisdiction rests entirely upon special certification of the constitutional issue by virtue of § 211(c) of the Economic Stabilization Act, supra.

Nonetheless, we have concluded that the latter certification justifies our consideration not only of relevant non-constitutional problems but, to the extent that it thereafter remained significant, the constitutional issue as well. This conclusion has been reached by reason of the pendant nature of the non-constitutional issues, cf. Alle v. Medrano, 416 U.S. 802, 94 S.Ct. 2191, 40 L.Ed.2d 566 (1974), the completeness of the record bearing upon all issues relating to the preliminary injunction, the likelihood that if avoided now they must come back to us later in the same case, because the interpretative questions are so enmeshed here with the constitutional issue as to make complete disposition in order, and the desirability for prompt resolution in light of circumstances hereinafter discussed. See Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 72 S.Ct. 863, 96 L.Ed. 1153 (1952); District of Columbia v. Little, 339 U.S. 1, 4 n.1, 70 S.Ct. 468, 94 L.Ed. 599 (1950), supra; In re Brown, 439 F.2d 47 (3d Cir. 1971); Board of Managers of Ark. Tr. Sch. for Boys v. George, 377 F.2d 228 (8th Cir.), cert. denied, 389 U.S. 845, 88 S.Ct. 105, 19 L.Ed.2d 114 (1967).

II. THE CONFLICTING POSITIONS OF THE PARTIES.

Condor and its associated venturers are the owners of undivided interests in certain oil and gas leases in Ector County, Texas, with two other parties, one of which is Phillips. The operating agreement among them has provided since 1948 that the respective working interest owners shall have the right of taking in kind or selling to others their proportionate shares of the oil produced from the leases, a common provision in the industry. The operating agreement permits, but does not require, one working interest owner to sell its share of the production to another working interest owner, a situation Condor says is somewhat unique; most lease agreements, they say, are followed by purchase agreements between the producer and another purchaser, i. e., pipeline or refinery. In this case Phillips is a refiner. We do not see this as a differentiation significant here.

Over a period of many years and continuing until after December 1, 1973, Condor and its predecessors in interest sold their share of production to Phillips under Division Orders. See Thompson v. Thompson, 149 Tex. 632, 236 S.W.2d 779 (1951). Then determining that its profits would be higher if it refined its own crude oil, Condor began to take its production in kind, thus precipitating the present controversy.

The FEA, as part of its attempt to carry out the purposes of the Emergency Petroleum Allocation Act during the energy crises, promulgated the regulation in question, designed to prevent during the operation of the program, with limited exceptions not applicable here, the alteration of any supplier/purchaser relationship which existed on December 1, 1973, except upon the consent of both parties.⁷ The Remedial Order was issued against Condor to prevent it from altering the disposition of its working interest and thus depriving Phillips of that source of supply.

Condor contends that it did not violate the regulation because in view of its right (option) to take its own crude oil production in kind it never had a binding agreement to sell it, Phillips had none to buy it, and at all times Condor has been entitled at its election to take its production in kind; that Phillips will continue to have available to it any crude oil which Condor may elect to sell rather than to utilize itself, and that if the Remedial Order should be held authorized by the regulation both would be unconstitutional because they would command a private citizen to make or produce and then sell private property to another private citizen in violation of due process rights guaranteed by the Fifth Amendment. It is insisted, nonetheless, that the trial court properly construed § 211.63(a) as meaning that Condor is required to sell to Phillips only that crude oil which it would be willing to "sell" to someone, and that it has the continuing "consent" of Phillips under the option provided in the operating agreement to take all or any part of its crude oil in kind, to be refined and marketed as it has arranged to do.

Defendants-appellants contend here, as they did below, that the district court erred in determining that the plaintiffs could, under the operating agreement, exercise their contractual option and take their share of crude oil production in kind notwithstanding § 211.63(a); that the preexisting option conflicts with a legitimate exercise of federal regulatory powers; that the amendment of the regulation prior to any change in the supplier/purchaser relationship rendered clear beyond question that it was that relationship in effect under contracts for sales or purchases on December 1, 1973, rather than merely the foundational contracts which were to remain in effect for the duration of the program; that those relationships could not be altered simply by the exercise of options in existing contracts but required the consent of both parties after the December 1, 1973 freeze, and that plaintiffs are attempting improperly to gain the benefit of exemptions under subdivisions (1) and (3) of § 211.63(a) in the absence of requisite foundational circumstances.⁸ The defendants-appellants contend finally that there is no substantial constitutional question.

A proper resolution of the issues requires more than...