Isla Pet. Corp. v. PR Dept. of Cons. Affairs

• Decision Date: 29 December 1986
• Docket Number: No. 1-16.,1-16.
• Citation: 811 F.2d 1511
• Parties: ISLA PETROLEUM CORPORATION, et al., Plaintiffs-Appellees, v. PUERTO RICO DEPARTMENT OF CONSUMER AFFAIRS, et al., Defendants-Appellants.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

811 F.2d 1511

ISLA PETROLEUM CORPORATION, et al., Plaintiffs-Appellees, v. PUERTO RICO DEPARTMENT OF CONSUMER AFFAIRS, et al., Defendants-Appellants.

No. 1-16.

Temporary Emergency Court of Appeals.

Argued October 10, 1986.

Decided December 29, 1986.

Lynn R. Coleman and Douglas G. Robinson, Skadden, Arps, Slate, Meagher & Flom, Washington, D.C., were on the brief, for defendants-appellants.

Rafael Perez-Bachs, Ana Matilde Nin, Nestor Mendez-Gomez, Maggie Correa-Aviles, McConnell, Valdes, Kelley, Sifre, Griggs & Ruiz-Suria, San Juan, Puerto Rico, were on the brief, for plaintiffs-appellees The Shell Co., Ltd., Mobil Oil Caribe, Inc. and Phillips Puerto Rico Core, Inc., along with Noel S. Gonzalez-Miranda and Mario L. Paniagua, Sweeting, Gonzalez & Cestero, San Juan, Puerto Rico, on the brief, for plaintiff-appellee Caribbean Gulf Refining Corporation and Igor Dominguez, William Estrella Law Offices, Old San Juan, Puerto Rico, on the brief for plaintiff-appellee Texaco Puerto Rico, Inc.

Jaime Sifre-Rodriguez and Luis Sanchez Betances, Cepeda, Sanchez-Betances & Sifre, Hato Rey, Puerto Rico, along with Donald B. Craven, Mark L. Evans, and James P. Tuite, Miller & Chevalier, Chartered, Washington, D.C., on the brief, for plaintiff-appellee Esso Standard Oil Co., P.R.

Alvaro R. Calderon, Jr., Hato Rey, Puerto Rico, was on the brief for plaintiffs-appellees Isla Petroleum Corp. and Gasolinas De Puerto Rico Corp.

Daniel Joseph and Thomas A. Lorenzen, Akin, Gump, Strauss, Hauer & Feld, Washington, D.C., for amicus curiae American Petroleum Institute.

Before CHRISTENSEN^*, ESTES, and JAMESON, Judges.

JAMESON, Judge:

Defendants-appellants, Puerto Rico Department of Consumer Affairs (DACO), et al., have appealed from an order of the United States District Court for the District of Puerto Rico, enjoining them from implementing or enforcing orders fixing prices or profit margins in the gasoline wholesale or retail business, except in accord with federal law as described in the court's opinion.¹ Eight actions, filed by appellees, gasoline refiners and wholesalers, were consolidated for trial. The district court held, inter alia, that three orders, issued by DACO pursuant to a Puerto Rico statute, P.R. Laws Ann. tit. 23, § 734, and DACO's Regulation 45, were "preempted by the federal Congressional delegated purpose to let the market forces be the sovereign in this field." 640 F.Supp. at 515.² We affirm.

I. Background

In 1942, the Puerto Rico Legislature enacted what is now 23 Puerto Rico Laws Annotated § 734. Section 734 purports to grant authority to regulate prices and profit margins of staple commodities which include gasoline. In 1973, the Puerto Rico legislature vested the authority granted by section 734 in the newly created DACO. P.R. Laws Ann. tit. 3, §§ 341-341v. Pursuant to this authority DACO and its predecessors regulated the price of gasoline and other petroleum products from 1953 to 1973.

Upon the enactment of the Emergency Petroleum Allocation Act (EPAA), 15 U.S.C. §§ 751-760h (as amended), DACO suspended its regulatory authority over gasoline prices and profit margins. In 1975, expecting the EPAA to expire on August 31, 1975, DACO issued Price Regulation 45 which would restore its price controls upon expiration of the EPAA. However, in 1975 Congress enacted the Energy Policy and Conservation Act (EPCA), 42 U.S.C. §§ 6201-6422, which extended federal price control authority to September 30, 1981. See 15 U.S.C. § 760g. DACO then amended Price Regulations 45 to provide that the price regulation authority would not become effective until "the Federal Price Controls are lifted over the articles here regulated...." Federal price control authority expired on September 30, 1981.

In 1986, DACO issued a series of orders pursuant to Price Regulation 45 which are the subject of this appeal. The first order, issued March 26, 1986, emphasized a requirement contained in Article 3 of Regulation 45 that DACO be given advance notice of price increases. The second order, issued April 23, 1986, froze gasoline prices at March 31, 1986 levels. The third order, issued May 20, 1986, lifted the freeze on gasoline prices. It divided wholesalers into two groups — minor (Group 1) and major (Group 2). Group 1 wholesalers would be allowed to sell to retailers at a profit of 8.6 cents per gallon, and Group 2 at a profit of 3.6 cents per gallon. DACO issued all of these orders pursuant to Regulation 45, Article 4, which purports to give DACO authority to fix prices and profit margins on the sale of gasoline in Puerto Rico.

In May, 1986, appellees, several oil companies, filed complaints in these actions, seeking declaratory and injunctive relief. The appelles alleged, inter alia, that federal law pre-empts DACO's authority to regulate gasoline prices and profit margins. The district court held that DACO's authority is pre-empted by a Congressional decision to leave the determination of gasoline prices to market forces. Specifically, the court found that the provisions of the EPCA which phased out the President's price control authority evidenced a Congressional intent to preclude any government regulation of gasoline prices. Consequently, the court held that Regulation 45 and the orders issued pursuant thereto were unconstitutional. The court issued an injunction enjoining DACO from "further implementing or enforcing orders fixing prices or margins of profit in the gasoline wholesale and retail business other than in accord with federal law as described in its opinion." The sole issue for this court's consideration is whether the EPAA as amended by the EPCA pre-empts DACO's authority to regulate gasoline prices and profit margins.

II. Jurisdiction

In a supplemental brief appellants contend that this court does not have jurisdiction over the entire pre-emption holding. We disagree.

The jurisdiction of this court over EPAA issues is governed by section 5(a) of the EPAA. Section 5(a)(1) incorporates section 211(b)(2) of the Economic Stabilization Act Amendments of 1971 (ESA), Pub.L. 92-210, 85 Stat. 743 (1971).³ Section 211(b)(2) gives this court "exclusive jurisdiction of all appeals from the district courts of the United States in cases and controversies arising under the ESA or under regulations or orders issued thereunder."⁴ The courts have interpreted the incorporation of section 211(b)(2) of the ESA in section 5(a)(1) of the EPAA to mean that this court has exclusive appellate jurisdiction of all claims arising under either the ESA or the EPAA. See Atlantic Richfield Co. v. Department of Energy, 769 F.2d 771 (D.C. Cir.1984); Mobil Oil Corp. v. Tully, 639 F.2d 912 (2d Cir.1981); Coastal States Marketing, Inc. v. New England Petroleum Corp., 604 F.2d 179 (2d Cir.1979). An issue arising under either of these two acts is one which involves the construction, applicability or effect of the acts or the regulations promulgated under the acts. Atlantic Richfield Corp. v. Department of Energy, 769 F.2d at 778-79; Mobil Oil Corp. v. Tully, 639 F.2d at 915-16. Here the district court concluded that DACO's price controls are pre-empted by the EPAA. Review of the district court's determination necessarily involves the construction, applicability and effect of the EPAA. We, therefore, have exclusive jurisdiction to review the district court's determination of the pre-emption issue. In deciding this issue our task is to determine Congressional intent in enacting the various provisions of the EPAA. To determine this intent we may look not only to the circumstances surrounding the enactment and amendment of the EPAA, but also to other legislative sources which might shed light on Congressional intent with respect to enactment of the EPAA.

III. Pre-emptive Issue

A. Congressional Intent

As noted above, the primary task in deciding a pre-emption issue is to determine Congressional intent. Wardair Canada, Inc. v. Florida Dep't. of Revenue, ___ U.S. ___, ___, 106 S.Ct. 2369, 2370, 91 L.Ed.2d 1 (1986); Louisiana Pub. Serv. Comm'n v. FCC, ___ U.S. ___, ___, 106 S.Ct. 1890, 1894, 90 L.Ed.2d 369 (1986). In Louisiana Public Service Commission v. FCC, the Supreme Court summarized the circumstances under which pre-emption has been held to occur.

Pre-emption occurs when Congress, in enacting a federal statute, expresses a clear intent to pre-empt state law, Jones v. Rath Packing Co., 430 U.S. 519 97 S.Ct. 1305, 51 L.Ed.2d 604 (1977), when there is outright or actual conflict between federal and state law, e.g., Free v. Bland, 369 U.S. 663 82 S.Ct. 1089, 8 L.Ed.2d 180 (1962), where compliance with both federal and state law is in effect physically impossible, Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132 83 S.Ct. 1210, 10 L.Ed.2d 248 (1963), where there is implicit in federal law a barrier to state regulation, Shaw v. Delta Air Lines, Inc., 463 U.S. 85 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983), where Congress has legislated comprehensively, thus occupying an entire field of regulation and leaving no room for the states to supplement federal law, Rice v. Sante Fe Elevator Corp., 331 U.S. 218 67 S.Ct. 1146, 91 L.Ed. 1447 (1947), or where the state law stands as an obstacle to the accomplishment and execution of the full objectives of Congress. Hines v. Davidowitz, 312 U.S. 52 61 S.Ct. 399, 85 L.Ed. 581 (1941).

___ U.S. at ___, 106 S.Ct. at 1894.

This case is somewhat unusual in that the claimed pre-emption results from the absence rather than the presence of federal authority. The Supreme Court, however, has held that pre-emption can occur under these circumstances. In the recent case of Transcontinental Gas Pipe Line Corp. v. State Oil and Gas Board, 474 U.S. 409, 106 S.Ct. 709, 717, 88 L.Ed.2d 732 (1986) the Court said: "A federal decision to forgo regulation in a given area may imply an authoritative federal determination that the area is best left un regulated and in that event would have as much pre-emptive force as a decision to ...