Gulf Oil Corp. v. U.S. Dept. of Energy

Decision Date24 August 1981
Docket NumberNo. 80-2096,80-2096
Citation663 F.2d 296,214 U.S.App.D.C. 119
Parties, Energy Mgt. P 26,332 GULF OIL CORPORATION, et al. v. UNITED STATES DEPARTMENT OF ENERGY, et al., Appellants.
CourtU.S. Court of Appeals — District of Columbia Circuit

Michael T. Scott, Atty., Dept. of Justice, Washington, D. C., with whom Dennis G. Linder, Atty., Dept. of Justice, and Nancy C. Crisman, Atty., Dept. of Energy, Washington, D. C., were on brief for appellants.

Donald B. Craven, Washington, D. C., with whom Mark L. Evans, Craig Miller and James P. Tuite, Washington, D. C., were on brief for appellee, Gulf Oil Corp.

Richard H. Porter, Washington, D. C., with whom Steven H. Brose and Samuel T. Perkins, Washington, D. C., were on brief for appellee, Atlantic Richfield Co.

Roland W. Selman and Nina H. Questal, Washington, D. C., were on brief for appellee, Chevron, U.S.A., Inc.

Before ROBINSON, Chief Judge, and WALD and GINSBURG, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

Opinion concurring in the judgment filed by Circuit Judge GINSBURG.

WALD, Circuit Judge:

This case raises a difficult question in a troubling and unusual context: whether a district court may intervene in an ongoing administrative adjudicatory proceeding to expand discovery into an alleged pattern of wrongdoing by agency officials that could affect the outcome of the proceeding. The alleged wrongdoing consisted of the destruction of documents of arguable relevance to the administrative proceeding, and prohibited ex parte communications between the hearing officer and enforcement personnel. Because our decision to vacate the district court's order rests on a peculiar sequence of events, we begin by narrating these events in some detail.

A. The Crude Cluster Proceedings

The proceedings before us concern alleged violations by seven major crude oil producers 1 of mandatory crude oil pricing regulations 2 issued by DOE and its predecessors 3 pursuant to the Emergency Petroleum Allocation Act of 1973 (EPAA). 4

In 1977 Congress transferred to the newly created Department of Energy (DOE) the functions then exercised by the FEA and its Administrator. 5 Pursuant to § 206 of the Department of Energy Organization Act (the Act), 42 U.S.C. § 7136, the Secretary of Energy delegated to the Economic Regulatory Administration (ERA) the regulation and enforcement functions concerning, inter alia, mandatory petroleum allocation and pricing. 6 Soon thereafter the Secretary established within ERA the Office of Special Counsel for Compliance (OSC) and charged it with prosecuting individual enforcement actions. 7 OSC was specifically directed "to conduct an accelerated audit, investigation, and enforcement effort with respect to (the 34 major refiners), with the primary mission to complete the audits of at least the largest 15 refiners within 2 years and take appropriate enforcement action." 8

On May 1, 1979, in one of its most significant enforcement actions to date, OSC issued seven proposed remedial orders 9 (PROs) alleging that major producers of crude oil were guilty between September 1973 and March 1979 of charging prices 1.7 billion dollars in excess of what the Mandatory Petroleum Price Regulations permitted. 10

Under the EPAA regulations allegedly violated, the crude oil producers must determine the first sale price of crude oil on the basis of the production from a property during a specified base period.... "(P)roperty" is defined as the right to produce crude oil which arises from a lease or a fee interest.... 11

Each PRO contains allegations that the producers misclassified "properties" from which crude oil was produced. 12 In defense, the producers argue that the EPAA regulations, and in particular the definition of "property," are ambiguous on their face, and have a history of tortuous agency interpretation and application. 13 The producers assert that they should not be (indeed, they cannot be) penalized for failing to adhere to regulations whose precise meaning has neither been intelligently defined nor even agreed upon by agency personnel themselves. 14

This alleged inherent ambiguity in the basic definition of "property" constitutes the producers' major defense to the allegations contained in the proposed remedial orders. Therefore, the several crude oil producers, sometimes acting in concert and sometimes separately, have sought extensive discovery before OHA of the agency's 15 contemporaneous construction of its regulations and of agency documents relating to the issuance of the PROs. 16

1. The Two Incidents of Document Destruction 17

The producers sought extensive discovery into two incidents of alleged document destruction that came to their attention in 1979 and 1980. The first incident concerned a file reorganization conducted between August 8 and 15, 1979, by OSC's Crude Production Audit Division (CPAD) after the producers had filed for discovery of CPAD's audit files. Neil Tonken, Deputy Solicitor to the Special Counsel in charge of the crude cluster enforcement proceedings, and Leigh Manasevit, an Assistant Solicitor, conducted an internal investigation of this incident immediately after learning of it. Although Tonken, in a letter to the parties informing them of the August document destruction incident, 18 concluded that most of the documents destroyed were duplicates, and that those which could not be replaced-buck slips, rough drafts of documents later formalized, newspaper articles and cartoons-were on the whole insignificant, the producers sought discovery into this incident. 19 OHA restricted such discovery to a single deposition of the individual with "principal knowledge" of the August document destruction incident, to be conducted by one party only. 20

The second clearly more serious incident involved the alleged destruction in either late 1978 or early 1979 of an issues paper used by CPAD auditors in detailing and discussing interpretative problems confronting them. 21 Tonken and Manasevit learned of this incident from an interview with Ron Rosapep, the CPAD auditor who had conducted the August file reorganization and the one selected by Tonken to be deposed as having "principal knowledge" of those events. The most damaging version of the second incident of document destruction is recounted in an October 26, 1979 memorandum from Tonken and Manasevit to Special Counsel Paul Bloom. In May 1979, Rosapep heard rumors that an order had been given to destroy all copies of the issues paper, rumors that were corroborated later that month when Rosapep met with Harry Bayne, Chief Counsel of CPAD.

Rosapep asked if he could keep his copy at his home, and Bayne replied that he could not because they would go into his home and get it. Rosapep told Manasevit that in this statement Bayne was referring to the crude oil producers' acquiring the position paper through discovery and that it was clear to Rosapep that Bayne did not want that to occur. Rosapep advised Manasevit that he stated to Bayne that the effort to destroy the document would not be successful because there were too many copies of it in existence and it would be impossible to locate them all. Bayne replied that, regardless of this problem, Carl Corrallo had ordered that the documents were to be destroyed. Rosapep did not destroy his copy, however, but instead went to John Wesner (Deputy Director of CPAD), and asked whether, in fact, he was required to destroy it. According to Rosapep, Wesner said that that had been the order but that Dean Cooper, of the Solicitor's Office, had told him it was no longer operative. 22

In the weeks that followed the disclosure of these events, three in-house investigations were conducted within DOE. However, the producers were not informed of the issues paper incident, as they had been informed of the August incident.

Tonken and Manasevit conducted the first of these internal investigations. The Solicitor, Carl Corrallo, denied to both Manasevit and Tonken ever giving such an order to destroy the issues paper, but conceded that he may have directed the participants in a December 1978 meeting concerning the issues paper to destroy their copies. 23 In their October 26 memorandum to Paul Bloom, Tonken and Manasevit concluded that "the entire matter of document destruction discussed herein must be referred to the Department of Justice for evaluation and appropriate action." 24

Special Counsel Paul Bloom then proceeded to conduct an independent investigation of these two incidents, interviewing Rosapep, Corrallo and Jimmy Mayberry, the Director of CPAD. 25 Bloom met with two attorneys of the Public Integrity Division of the Justice Department, who, when apprised of the facts as told by Bloom, declined to accept the matter for investigation of possible misconduct. 26 Bloom also talked about these matters to the DOE Assistant General Counsel for Standards of Conduct. 27 In a lengthy memorandum dated January 16, 1980, Bloom disclosed to the Director of OHA, Melvin Goldstein, the results of his in-house investigation. 28 He concluded there had been no order to destroy copies of the issues paper. In fact, many copies were and are still in existence. Instead, Corrallo had given only an order to "limit distribution" of the issues paper, so as to prevent the producers from successfully relying upon "erroneous and unauthorized interpretative advice from CPAD auditors," as they had done in the past. 29 Bloom contended that the questions raised in the Tonken memorandum were not relevant to the crude cluster proceedings before OHA, that the whole matter has been "fully and independently" examined and found to be "totally innocuous," and that "OHA should accord no consideration whatever to the materials privately presented to you by Tonken and Manasevit." 30

Two months after Special Counsel Bloom was informed by the Tonken memorandum of the two separate incidents of...

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