Elf Aquitaine, Inc. v. Placid Oil Company

• Decision Date: 27 December 1985
• Docket Number: Civ. A. No. 85-182 MMS to 85-185 MMS.
• Citation: 624 F. Supp. 994
• Parties: ELF AQUITAINE, INC., a Delaware corporation, Plaintiff, v. PLACID OIL COMPANY, a Delaware corporation, Defendant. ELF AQUITAINE, INC., a Delaware corporation, Plaintiff, v. SUN PRODUCTION COMPANY, a Delaware corporation, Defendant. ELF AQUITAINE, INC., a Delaware corporation, Plaintiff, v. PLACID REFINING COMPANY, a Delaware corporation, Defendant. ELF AQUITAINE, INC., a Delaware corporation, Plaintiff, v. MURPHY OIL USA, INC., a Delaware corporation, Defendant.
• Court: U.S. District Court — District of Delaware

624 F. Supp. 994

ELF AQUITAINE, INC., a Delaware corporation, Plaintiff, v. PLACID OIL COMPANY, a Delaware corporation, Defendant.

ELF AQUITAINE, INC., a Delaware corporation, Plaintiff, v. SUN PRODUCTION COMPANY, a Delaware corporation, Defendant.

ELF AQUITAINE, INC., a Delaware corporation, Plaintiff, v. PLACID REFINING COMPANY, a Delaware corporation, Defendant.

ELF AQUITAINE, INC., a Delaware corporation, Plaintiff, v. MURPHY OIL USA, INC., a Delaware corporation, Defendant.

Civ. A. Nos. 85-182 MMS to 85-185 MMS.

United States District Court, D. Delaware.

December 27, 1985.

Stephen E. Herrmann, of Richards, Layton & Finger, Wilmington, Del. (John P. Mathis, Randolph Q. McManus, and Christopher J. Braun, of Baker & Botts, Washington, D.C., of counsel), for plaintiffs.

John H. Small, and Norman L. Pernick, of Prickett, Jones, Elliott, Kristol & Schnee, Wilmington, Del. (Allen Weed, and Mark M. Petzinger, of Shank, Irwin & Conant, Dallas, Tex., of counsel), for defendants Placid Oil Co. and Placid Refining Co.

William O. LaMotte, III, of Morris, Nichols, Arsht & Tunnell, Wilmington, Del. (James Baller, and Barbara I. Berschler, of Baller & Hammett, P.C., Washington, D.C., of counsel), for defendant Sun Production Co.

Lawrence C. Ashby, of Ashby, McKelvie & Geddes, Wilmington, Del., (David A. Holzworth, M. Bradford Moody, and C. Fairly Spillman, of Akin, Gump, Strauss, Hauer & Feld, Washington, D.C., of counsel), for defendant Murphy Oil USA, Inc.

OPINION

MURRAY M. SCHWARTZ, Chief Judge.

Plaintiff Elf Aquitaine, Inc. ("Elf") brought separate suits in this Court against four purchasers of its crude oil, alleging that they failed to pay the full amounts due under the agreements of sale. Presently before the Court are motions filed by defendants to dismiss the complaints for lack of subject-matter jurisdiction and for failure to state a claim upon which relief can be granted under the Delaware statute of limitations.¹ For the reasons expressed below, the Court will dismiss the complaint in each case for lack of subject-matter jurisdiction.

Facts

Elf and each of the defendants are Delaware corporations. Elf entered into agreements with defendants for the sale of crude oil produced from Elf's interests in various oil fields. Complaint at ¶ 6.² The agreements specified that the price for each barrel of oil delivered would be a benchmark market price, based on Elf's "posted price per barrel (42 U.S. standard gallons) for like grade, gravity and quality of oil produced in the same field or area to which applicable and in effect on the day of the date of delivery." Id. at ¶ 8.

During the relevant period the price for oil was subject to the Department of Energy ("DOE") Mandatory Petroleum Allocation and Price Regulations, 10 C.F.R. Part 212 (revoked). These regulations were promulgated pursuant to the Emergency Petroleum Allocation Act of 1973, 87 Stat. 628, 15 U.S.C. § 751 et seq. (1982). In general, the regulations, which set ceiling prices at which producers could sell their oil, precluded Elf from charging the market price called for in its agreements.

The Tertiary Incentive Program ("TIP") was an exception to the general price control scheme. See 10 C.F.R. § 212.78 (1980) (revoked). TIP was established to encourage producers to undertake more expensive enhanced recovery projects, which otherwise would be uneconomical under price controls. See 44 Fed.Reg. 51148 (Aug. 30, 1979). The TIP regulations authorized a qualified producer to sell crude oil, otherwise subject to price controls, at the market price in order to recoup up to 75 percent of the allowed expenses it had incurred and paid in connection with the establishment or expansion of a "qualified tertiary enhanced recovery project." 10 C.F.R. § 212.78(a)-(c) (1980) (revoked). The producer was required to certify to the purchaser that the oil qualified under TIP. Id. § 212.131(a)(4). Crude oil originally sold under price controls could be recertified as tertiary incentive crude oil within two months after its production and sale. Id. § 212.131(a)(6).

On January 28, 1981, the President issued Executive Order 12287, immediately exempting petroleum products from price and allocation controls adopted pursuant to the Emergency Petroleum Allocation Act. See Executive Order No. 12,287, 46 Fed. Reg. 9909 (Jan. 30, 1981). Crude oil sold during December 1980 and January 1981 could be certified or recertified retroactively as tertiary incentive crude oil in accordance with 19 C.F.R. 212.131 during the two-month period following the month in which the oil was sold if the oil would have otherwise qualified prior to the Executive Order. DOE Ruling 1981-1, 46 Fed.Reg. 12945, 12947 (question no. 5) (Feb. 19, 1981). See Union Oil Co. v. DOE, 688 F.2d 797 (TECA 1982), cert. denied, 459 U.S. 1202, 103 S.Ct. 1186, 75 L.Ed.2d 433 (1983) (upholding ruling).³

The crude oil at issue in these cases was originally sold in December 1980 and January 1981 as controlled oil, and later recertified as tertiary incentive crude oil. Elf invoiced the additional amounts to each of the defendants, but they have refused to make payment. In each of the instant suits, Elf seeks to recover the amount allegedly due it as tertiary incentive revenue: the difference between the contract amounts and the controlled price amounts.⁴

Subject-Matter Jurisdiction

The parties in these actions are all Delaware corporations. Hence, diversity is lacking and subject-matter jurisdiction must be by means of federal-question jurisdiction. In its complaint, Elf alleges three statutory bases for federal subject-matter jurisdiction: 28 U.S.C. § 1331; Section 211(a) of the Economic Stabilization Act of 1970; and 12 U.S.C. § 1904 (note).⁵ Elf contends these provisions confer jurisdiction "because the rights and obligations of the Plaintiff and Defendant under their agreements with respect to the sale of crude oil were subject to the regulations of the Department of Energy under the Mandatory Petroleum Allocation and Price Regulations, promulgated pursuant to the Emergency Petroleum Allocation Act of 1973, 15 U.S.C. § 751(b)." Complaint at ¶ 1.

1. 28 U.S.C. § 1331

Under 28 U.S.C. § 1331, federal-question jurisdiction extends to "all civil actions arising under the Constitution, laws, or treaties of the United States." The complaint makes no reference to the Constitution or treaties; at issue here is whether this is an action "arising under" federal law.

As the Supreme Court recently discussed, the "arising under" phrase has resisted precise definition since the first version of Section 1331 was enacted in 1875. See Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 8-9 103 S.Ct. 2841, 2845-46, 77 L.Ed.2d 420 (1983); see also Trent Realty Associates v. First Federal Savings & Loan Ass'n, 657 F.2d 29, 32 (3d Cir.1981); 13B C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3562 (1984). It is clear, however, that Section 1331 federal jurisdiction will not arise if the claim does not satisfy the "well-pleaded complaint" rule. See Franchise Tax Board, 463 U.S. at 9-12, 103 S.Ct. at 2846-48; Trent Realty, 657 F.2d at 33.

Well-Pleaded Complaint Rule

Under the well-pleaded complaint rule, whether a case arises under the laws of the United States for the purposes of Section 1331 "must be determined from what necessarily appears in the plaintiff's statement of his own claim ... unaided by anything alleged in anticipation of avoidance of defenses which it is thought the defendant may interpose." Franchise Tax Board, 463 U.S. at 10, 103 S.Ct. at 2846 (quoting Taylor v. Anderson, 234 U.S. 74, 75-76, 34 S.Ct. 724, 725, 58 L.Ed. 1218 (1914)). The complaint must establish "either that federal law creates the cause of action or that the plaintiff's right to relief reasonably depends on resolution of a substantial question of federal law." Id. at 27-28, 103 S.Ct. at 2856. Absent that, jurisdiction is not conferred by Section 1331 "even if the defense is anticipated in the plaintiff's complaint, and even if both parties admit that the defense is the only question truly at issue in the case." Id. at 14, 103 S.Ct. at 2849; see Louisville and Nashville R.R. v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 43, 53 L.Ed. 126 (1908) (jurisdiction lacking over breach of contract action in which Constitution allegedly invalidated anticipated federal defense); see also Pan American Petroleum Corp. v. Superior Court, 366 U.S. 656, 81 S.Ct. 1303, 6 L.Ed.2d 584 (1961) (state-court jurisdiction existed for contract overcharge actions although provisions of Natural Gas Act would certainly be examined by way of defense).

In this case, Elf acknowledges that federal law does not create its breach of contract cause of action. It claims that federal subject-matter jurisdiction exists under the "substantial question" alternative outlined in Franchise Tax Board. Elf argues that, absent its compliance with the TIP regulations, it could not demand a contract price in excess of the price ceilings. Thus, its rights to the contract price are "inextricably tied to Elf's participation in, and compliance with, the DOE's Tertiary Incentive Program." Brief in Opposition at 14.

Plaintiff's argument is unavailing. Reference to federal regulations is not needed to state this breach of contract claim. Only if the price control regulations are cited by the purchasers as a defense to Elf's contract claim for the market price will Elf need to show that the oil was exempt under TIP.⁶ Compliance with the TIP regulations is not an essential element of its affirmative case. See Phillips Petroleum Co. v. Texaco Inc., 415 U.S. 125, 94 S.Ct. 1002, 39 L.Ed.2d 209 (1974) (per curiam) (no § 1331 jurisdiction where effect of federal energy statutes only to overcome a potential defense to state-law quantum meruit action); Lindy v. Lynn, 501 F.2d 1367, 1369 (3d Cir.1974) (federal regulation of contract does not mean that all aspects...