Mobil Oil Corp. v. FTC, 75 Civ. 2748 (JMC).

• Decision Date: 01 March 1977
• Docket Number: No. 75 Civ. 2748 (JMC).,75 Civ. 2748 (JMC).
• Citation: 430 F. Supp. 855
• Parties: MOBIL OIL CORPORATION et al., Plaintiffs, v. FEDERAL TRADE COMMISSION et al., Defendants.
• Court: U.S. District Court — Southern District of New York

430 F. Supp. 855

MOBIL OIL CORPORATION et al., Plaintiffs, v. FEDERAL TRADE COMMISSION et al., Defendants.

No. 75 Civ. 2748 (JMC).

United States District Court, S. D. New York.

March 1, 1977.

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Donovan, Leisure, Newton & Irvine, New York City (Andrew J. Kilcarr, Washington, D. C., and Thomas R. Trowbridge, III, New York City, of counsel), and Charles F. Rice, New York City, for plaintiff Mobil Oil Corp. Jesse P. Luton, Jr., and John E. Bailey, Houston, Tex., for plaintiff Gulf Oil Corp.

Howrey, Simon, Baker & Murchison, Washington, D. C. (J. Wallace Adair and Keith E. Pugh, Jr., Washington, D. C., of counsel), and George S. Wolbert, S. R. Vandivort, and A. M. Minotti, Houston, Tex., for plaintiff Shell Oil Co.

Pillsbury, Madison & Sutro, San Francisco, Cal. (Turner H. McBaine, Wallace L. Kaapcke and Richard W. Odgers, San Francisco, Cal., of counsel), for plaintiff Standard Oil Co. of California.

Robert B. Fiske, Jr., U. S. Atty., for the Southern District of New York, New York City (Nathaniel L. Gerber, Asst. U. S. Atty., New York City, of counsel), for defendants.

OPINION

CANNELLA, District Judge:

Plaintiffs' motion for summary judgment is granted. Defendants' motions to dismiss the complaint and, alternatively, for summary judgment are denied.

On July 18, 1973, the Federal Trade Commission ("FTC" or "Commission") issued a complaint, In the Matter of Exxon Corp., et al., Docket No. 8934 (hereinafter this administrative proceeding will be referred to as Exxon), charging the plaintiffs herein and four other major oil companies with violations of Section 5 of the Federal Trade Commission Act, 15 U.S.C. ? 45. The respondents in Exxon are charged with combining to monopolize the refining of crude oil into petroleum products, maintaining monopoly power over the refining process, and restraining trade and maintaining a noncompetitive market structure in this industry. The Commission also is challenging certain alleged practices including joint ventures in transport and in onshore and offshore lease bidding. By way of relief, Commission counsel stated that they were seeking substantial divestiture of the pipelines and refinery capacity owned by the Exxon respondents.¹ Specifically, the proposed relief includes:

(1) The divestiture of 40 to 60 percent of respondents' refinery capacity in the relevant market and the establishment of 10 to 13 new firms;

(2) The divestiture of all crude and produce pipelines which connect directly to the new firms and are owned and operated by the refining department of the parent; and

(3) The transfer to the new firms of fractional ownership shares in connecting joint venture pipelines.²

Soon after the commencement of the action, the Exxon respondents moved to require complaint counsel to file an environmental impact statement ("EIS") exploring the environmental consequences of the proposed relief. In support of their joint motion, the Exxon respondents argued that the requested relief would constitute "major Federal action significantly affecting the quality of the human environment" within the meaning of Section 102(2)(C) of the National Environmental Policy Act of 1969 ("NEPA"), 42 U.S.C. ? 4332(2)(C).³

On February 5, 1975, the administrative law judge denied the motion to require an EIS as well as a motion for immediate certification to the Commission. In so acting, he placed primary reliance upon an FTC rule⁴ exempting law enforcement proceedings instituted by the Commission from the requirements of ? 102(2)(C). On February 25, 1975, the Exxon respondents' request to file an interlocutory appeal from the denial of their motion was denied by the administrative law judge. They then petitioned for extraordinary review by the Commission, which was denied on April 29, 1975.

On June 6, 1975, four of the eight Exxon respondents brought the instant action seeking to enforce FTC compliance with the requirements of ? 102(2)(C) of NEPA. Plaintiffs have moved for summary judgment on their claims that complaint counsel are required by ? 102(2)(C) of NEPA to file an EIS and that ? 1.82(d) of the FTC's Rules of Practice is void as being in conflict with NEPA. In response to this motion the defendants have cross-moved for dismissal pursuant to Rule 12(b) of the Federal Rules of Civil Procedure on the grounds that the plaintiffs lack standing, that their suit is premature and that their complaint fails to state a claim upon which relief can be granted and, alternatively, for summary judgment. Based upon the Court's finding that the Commission's institution of the Exxon proceeding constitutes a "major Federal action significantly affecting the quality of the human environment," 42 U.S.C. ? 4332(2)(C), the Court concludes that plaintiffs herein are entitled to summary judgment.

STANDING

The threshold issue in this case is whether plaintiffs have standing to challenge the FTC's institution of an enforcement proceeding against them without first having filed an environmental impact statement.

Whether a litigant has standing to seek judicial determination of his claims has been litigated on numerous occasions before the United States Supreme Court. In a recent opinion, the Court stated:

This inquiry involves both constitutional limitations on federal-court jurisdiction and prudential limitations on its exercise. E. g., Barrows v. Jackson, 346 U.S. 249, 255-256, 73 S.Ct. 1031, 1034-1035, 97 L.Ed. 1586 (1953). . . .

In its constitutional dimension, standing imports justiciability: whether the plaintiff has made out a "case or controversy" between himself and the defendant within the meaning of Art. III. This is the threshold question in every federal case, determining the power of the court to entertain the suit. As an aspect of justiciability, the standing question is whether the plaintiff has "alleged such a personal stake in the outcome of the controversy" as to warrant his invocation of federal-court jurisdiction and to justify exercise of the court's remedial powers on his behalf. Baker v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 703, 7 L.Ed.2d 663 (1962).

Warth v. Seldin, 422 U.S. 490, 498-99, 95 S.Ct. 2197, 2205, 45 L.Ed.2d 343 (1975).

When the litigant claims that he is "a person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute," 5 U.S.C. ? 702, the standing test has been articulated as whether the complainant has suffered "injury in fact" to an interest "arguably within the zone of interests to be protected or regulated" by that statute.⁵Association of Data Processing Serv. Orgs. v. Camp, 397 U.S. 150, 153, 90 S.Ct. 827, 830, 25 L.Ed.2d 184 (1970);⁶accord, Evans v. Hills, 537 F.2d 589, 590-92 (2d Cir. 1976) (en banc). But see K. Davis, Administrative Law of the Seventies ? 22.02-11 (1976). Although the injury in fact in Data Processing was economic, the Court recognized that this "interest, at times, may reflect `aesthetic, conservational, and recreational' as well as economic values." 397 U.S. at 154, 90 S.Ct. at 830; accord, United States v. SCRAP, 412 U.S. 669, 686-87, 93 S.Ct. 2405, 37 L.Ed.2d 254 (1973); Sierra Club v. Morton, 405 U.S. 727, 733-34, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1972).

The interests sought to be protected by NEPA may be gleaned from the statute's declaration of purpose:

To declare a national policy which will encourage productive and enjoyable harmony between man and his environment; to promote efforts which will prevent or eliminate damage to the environment and biosphere and stimulate the health and welfare of man; to enrich the understanding of the ecological systems and natural resources important to the Nation . . ..

42 U.S.C. ? 4321. Accordingly, plaintiffs have standing to bring this action only if they have alleged?€”and can prove ?€” environmental injury in fact.

Such injury was alleged in United States v. SCRAP, supra, wherein environmental organizations sought to enjoin the enforcement of an Interstate Commerce Commission order that would allow railroads to collect a surcharge. They argued, as do the plaintiffs herein, that the agency's failure to file an EIS rendered its action unlawful. The allegations of the environmental organizations that their members used the natural resources in the Washington metropolitan area for recreation and "that this use was disturbed by the adverse environmental impact caused by the nonuse of recyclable goods brought about by a rate increase on those commodities," 412 U.S. at 685, 93 S.Ct. at 2415, were found sufficient to confer standing on the groups to challenge the rate increase.⁷

In the instant action, plaintiffs allege that the relief requested by the FTC in the enforcement proceeding would result in unnecessary depletion of our nation's natural resources. As oil companies, dependent upon these resources, plaintiffs would thereby suffer injury in fact. The injury alleged is thus both economic (without the necessary supply of resources, the companies might suffer reduced revenues) and environmental (by virtue of their status as oil companies, plaintiffs have a stake in our nation's environment).

Additionally, plaintiffs allege that the proposed divestiture of a substantial percentage of their refineries and pipelines would have a polluting effect on the environment. It is claimed, for example, that various aspects of a refinery's operations, including?€”"the sulfur content of the crude oil refined, the percentage of capacity at which it is operated and the means of transportation used for crude oil and refined product" ?€” directly affect the environment.⁸ A relationship thus established between the environment and a particular refinery, it would follow that any change in operations inevitably would have an environmental impact.

The FTC also is challenging the number of processing arrangements and exchange agreements among the major oil companies. It is...