Isla Petroleum Corp. v. Dept. of Consumer Affairs, Civ. No. 86-0730 (Jaf)

• Court: United States District Courts. 1st Circuit. District of Puerto Rico
• Writing for the Court: FUSTE
• Citation: 640 F. Supp. 474
• Parties: ISLA PETROLEUM CORPORATION and Gasolinas De Puerto Rico Corporation, Plaintiffs, v. DEPARTMENT OF CONSUMER AFFAIRS and Pedro Ortiz Alvarez, Secretary of the Department of Consumer Affairs, Defendants. PHILLIPS PUERTO RICO CORE, INC., Plaintiff, v. Pedro ORTIZ ALVAREZ, Secretary of the Department of Consumer Affairs, Defendant. TEXACO PUERTO RICO, INC., Plaintiff, v. Pedro ORTIZ ALVAREZ, in his official capacity as Secretary of the Department of Consumer Affairs and/or the Department of Consumer Affairs and/or the Commonwealth of Puerto Rico, through Héctor Rivera Cruz, Secretary of Justice, in representation of Mr. Pedro Ortiz and the Department of Consumer Affairs, Defendants. CIA. PETROLERA CARIBE, INC., Plaintiff, v. Pedro ORTIZ ALVAREZ, in his official capacity as Secretary, Department of Consumer Affairs and/or Department of Consumer Affairs, Defendants. The SHELL COMPANY (PUERTO RICO) LIMITED and Mobil Oil Caribe, Inc., Plaintiffs, v. Pedro ORTIZ ALVAREZ, in his official capacity as Secretary, Department of Consumer Affairs, and/or Department of Consumer Affairs, Defendants. ESSO STANDARD OIL CO. (P.R.), Plaintiff, v. Pedro ORTIZ ALVAREZ, in his official capacity as Secretary, Department of Consumer Affairs, and/or Department of Consumer Affairs, Defendants. CARIBBEAN GULF REFINING CORPORATION, Plaintiff, v. Pedro ORTIZ ALVAREZ, as Secretary of the Department of Consumer Affairs of the Commonwealth of Puerto Rico, Defendant. TENOCO OIL CO., INC. and Distribuidora De Gasolina El Coqui, Inc., Plaintiffs, v. DEPARTMENT OF CONSUMER AFFAIRS and Pedro Ortiz Alvarez, Secretary of the Department of Consumer Affairs, Defendants.
• Decision Date: 10 June 1986
• Docket Number: 86-0717 (Jaf) and 86-0681 (Jaf).,86-0721 (Jaf),Civ. No. 86-0730 (Jaf),86-0718 (Jaf),86-0719 (Jaf),86-0720 (Jaf),86-0714 (Jaf)

640 F. Supp. 474

ISLA PETROLEUM CORPORATION and Gasolinas De Puerto Rico Corporation, Plaintiffs,
v.
DEPARTMENT OF CONSUMER AFFAIRS and Pedro Ortiz Alvarez, Secretary of the Department of Consumer Affairs, Defendants.
PHILLIPS PUERTO RICO CORE, INC., Plaintiff,
v.
Pedro ORTIZ ALVAREZ, Secretary of the Department of Consumer Affairs, Defendant.
TEXACO PUERTO RICO, INC., Plaintiff,
v.
Pedro ORTIZ ALVAREZ, in his official capacity as Secretary of the Department of Consumer Affairs and/or the Department of Consumer Affairs and/or the Commonwealth of Puerto Rico, through Héctor Rivera Cruz, Secretary of Justice, in representation of Mr. Pedro Ortiz and the Department of Consumer Affairs, Defendants.
CIA. PETROLERA CARIBE, INC., Plaintiff,
v.
Pedro ORTIZ ALVAREZ, in his official capacity as Secretary, Department of Consumer Affairs and/or Department of Consumer Affairs, Defendants.
The SHELL COMPANY (PUERTO RICO) LIMITED and Mobil Oil Caribe, Inc., Plaintiffs,
v.
Pedro ORTIZ ALVAREZ, in his official capacity as Secretary, Department of Consumer Affairs, and/or Department of Consumer Affairs, Defendants.
ESSO STANDARD OIL CO. (P.R.), Plaintiff,
v.
Pedro ORTIZ ALVAREZ, in his official capacity as Secretary, Department of

[640 F. Supp. 475]

Consumer Affairs, and/or Department of Consumer Affairs, Defendants.
CARIBBEAN GULF REFINING CORPORATION, Plaintiff,
v.
Pedro ORTIZ ALVAREZ, as Secretary of the Department of Consumer Affairs of the Commonwealth of Puerto Rico, Defendant.
TENOCO OIL CO., INC. and Distribuidora De Gasolina El Coqui, Inc., Plaintiffs,
v.
DEPARTMENT OF CONSUMER AFFAIRS and Pedro Ortiz Alvarez, Secretary of the Department of Consumer Affairs, Defendants

Civ. Nos. 86-0730 (Jaf), 86-0721 (Jaf), 86-0720 (Jaf), 86-0714 (Jaf), 86-0719 (Jaf), 86-0718 (Jaf), 86-0717 (Jaf) and 86-0681 (Jaf).

United States District Court, D. Puerto Rico.

June 4, 1986.

On Motion for Stay Pending Appeal June 10, 1986.

640 F. Supp. 476

COPYRIGHT MATERIAL OMITTED

640 F. Supp. 477

Alvaro R. Calderón, Hato Rey, P.R., Maggie Correa-Avilés, Arturo J. Garcia Solá, McConnell Valdes Kelley Sifre Griggs & Ruiz-Suria, William Estrella, Rodriguez, Lebron & Estrella, San Juan, P.R., Celso E. López, Carlos F. López, Santurce, P.R., José R. González Irizarry, Ana Matilde Nin, McConnell Valdes Kelley Sifre Griggs & Ruiz-Suria, San Juan, P.R., Jaime Sifre Rodríguez, Luis Sánchez-Betances, Cepeda, Sanchez-Betances & Sifre, Hato Rey, P.R., Emilio Pena Fonseca, Noel S. González, Sweeting, Gonzalez & Cestero, San Juan, P.R., Dominguez & Totti, Carlos Romero Barceló, Hato Rey, P.R., Lopez Lay & Vizcarra, Santurce, P.R., for plaintiffs

Dennis Simonpietri, Marcos Ramírez Lavandero, Ramirez & Ramirez, Hato Rey, P.R., for defendants.

MEMORANDUM OPINION AND ORDER

FUSTE, District Judge.

These are eight consolidated cases filed by gasoline refineries and wholesalers against the Secretary of the Puerto Rico Department of Consumer Affairs, hereinafter referred to as the Secretary and DACO, respectively. The various cases request declaratory judgment pursuant to Fed.R.Civ.P. 57 and 28 U.S.C. Sec. 2201, and injunctive relief pursuant to Fed.R. Civ.P. 65. Some plaintiffs claim violations

640 F. Supp. 478

to 42 U.S.C. Sec. 1983¹ and relief is requested accordingly. It is claimed that certain orders fixing gross margins of profit and establishing a tax antipass-through provision at a given level of the industry, entered by the defendant Secretary of DACO after March 18, 1986 are tantamount to a deprivation under color of state law of plaintiffs' civil and constitutional rights secured by the fifth and/or the fourteenth amendments, United States Constitution. It is further claimed that the orders under attack are unconstitutional acts of deprivation of property without due process of law and, thus, are confiscatory in character. The margin-fixing/regulatory orders relate to the sale of gasoline at the wholesale level.² The challenged state action coincides in time with the enactment of Law No. 5, of March 18, 1986, 13 L.P.R.A. Sec. 4030C, which law imposed an additional excise tax on the importation of crude oil on a per-barrel basis. The excise tax, variable in amount depending on the price of crude oil, is a legitimate exercise of Puerto Rico's fiscal autonomy. Law of Federal Relations art. 3 (1917), 1 L.P.R.A. Sec. 3. The excise tax is not under attack; however, the same has been ordered to be absorbed by those plaintiffs which are gasoline wholesalers.³ One of the margin-fixing/regulatory orders, the first of two orders issued on April 23, 1986, contains an antipass-through provision whereby the excise tax is to be charged against the allegedly exorbitant income of the gasoline wholesalers. The antipass-through provision assumes that the ultimate price paid by consumers at the gasoline pumps shall not be increased by reason of the excise tax

Plaintiffs claim that the mentioned price control order containing the antipass-through provision, and two additional orders of April 23 and May 20, 1986, are invalid for the reasons already mentioned. These two orders determine gross margins of profit at 8.6 cents per gallon for wholesalers and 17.7 cents per gallon for retailers. Specifically, the May 20 order fixes margins of 8.6 cents and 3.6 cents per gallon for wholesalers, depending on whether they are "big" companies or "small" companies, as defined in the order under Class 1 and Class 2. In addition, it is claimed that the field of gasoline price regulation is preempted by federal policy, embodied in existing federal law, of an unregulated market. The plaintiffs reinstate their arguments of taking of property without due process of law through confiscatory orders, deprivation of equal protection rights, nullity of the regulations for failure to accomplish a legitimate statutory purpose and for vagueness. The substantive due process violations as alleged are compounded by claims of procedural due process violations that, seen in the context of the regulatory scheme, equate to substantive due process violations. It is alleged that the orders are null and void for the Secretary of DACO's failure to comply, for their issuance, with statutory requirements, nullity of the orders because of their retroactive character, arbitrariness, and capriciousness of the Secretary's actions, and gross constitutional deprivations under color of state law impermissible under the constitutional system of government.⁴

640 F. Supp. 479

Jurisdiction has been pleaded under 28 U.S.C. Secs. 1331 and 1343. We find that the pleadings in the consolidated cases raise substantial federal question under the Constitution and laws of the United States and, therefore, jurisdiction is present.

The Puerto Rico Manufacturers' Association (PRMA), a prominent, non-partisan entity in this jurisdiction, has been allowed to appear as amicus curiae. PRMA's position is against the regulatory scheme. Preemption is alleged to be present.

The court declined to permit a limited number of consumers to file their permissive intervention under Fed.R.Civ.P. 24(b). Said consumers appealed our refusal to allow them to intervene. Appellate emergency relief was denied by the United States Court of Appeals for the First Circuit on May 21, 1986, Misc. No. 86-8022.

Based on our analysis of the testimony and evidence received at trial, we hereby ENTER our Findings of Fact as required by Fed.R.Civ.P. 52. We note for the record that a large portion of the documentary evidence was received in Spanish. We dispensed of the strict application of the local rule regarding translation of documents in order to expedite and have the matter heard and resolved.

FINDINGS OF FACT

The Parties

The gasoline business in Puerto Rico is best defined as a three-level business composed of the refineries, the wholesalers, and the retailers. There are two refineries in Puerto Rico at the present time, one operated by Phillips Puerto Rico Core, Inc. (PHILLIPS), and the other operated by Caribbean Gulf Refining Corporation (CARECO). PHILLIPS only refines gasoline so as to make it available to the next level of distribution, the wholesaler. CARECO operates as a refinery and as a wholesaler of gasoline.⁵ Plaintiffs are properly identified as follows:

(a) Isla Petroleum Corporation (ISLA) and Gasolinas de Puerto Rico Corporation (GASOLINAS) are corporations organized and existing under and by virtue of the laws of the Commonwealth of Puerto Rico. They operate in the Puerto Rico market since 1981. ISLA is engaged in the business of wholesale distribution of gasoline to its dealers throughout Puerto Rico. GASOLINAS is engaged in the business of retail sales and wholesale distribution of gasoline throughout Puerto Rico through its stations and dealers.

(b) Phillips Puerto Rico Core, Inc. (PHILLIPS) is a corporation duly organized and existing and authorized to do business in the Commonwealth of Puerto Rico, which operates a petrochemical plant in Guayama, Puerto Rico, where it uses naphtha, a petroleum derivative, as a raw material to produce various petrochemicals. Gasoline is indirectly generated during PHILLIPS' petrochemical manufacturing process, and PHILLIPS sells the gasoline in Puerto Rico to wholesalers which, in turn, distribute it to the retailers.

(c) Texaco Puerto Rico, Inc. (TEXACO) is a corporation organized and existing under and by virtue of the laws of one of the States of the Union and/or the Commonwealth of Puerto Rico. Said corporation is a gasoline wholesaler which, in turn, supplies its network of retailers who operate gasoline service stations.

(d) Cia. Petrolera Caribe, Inc. (CARIBE) is a corporation organized and existing

640 F. Supp. 480

under and by virtue of the laws of the Commonwealth of Puerto Rico since 1976. CARIBE is involved in the wholesale of gasoline to its network of retailers who operate gasoline service stations in Puerto Rico.

(e) The Shell Company (Puerto Rico) Ltd. (SHELL) is a corporation

...