Mountain Fuel Supply Co. v. Johnson

• Decision Date: 20 December 1978
• Docket Number: Nos. 77-1410 and 77-1432,s. 77-1410 and 77-1432
• Citation: 586 F.2d 1375
• Parties: MOUNTAIN FUEL SUPPLY COMPANY, a Utah Corporation, Plaintiff-Appellee and Cross-Appellant, v. Reland JOHNSON, Defendant, and Johnson Oil Company, Inc., Defendant-Appellant and Cross-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1375

586 F.2d 1375

MOUNTAIN FUEL SUPPLY COMPANY, a Utah Corporation Plaintiff-Appellee and Cross-Appellant, v. Reland JOHNSON, Defendant and Johnson Oil Company, Inc., Defendant-Appellant and Cross-Appellee.

Nos. 77-1410 and 77-1432.

United States Court of Appeals Tenth Circuit.

Submitted Sept. 29, 1978.

Decided Nov. 22, 1978.

Rehearing Denied Dec. 20, 1978.

Robert S. Campbell, Jr., Salt Lake City, Utah (Duane R. Smith, Salt Lake City, Utah, on the brief), of Watkiss & Campbell, Salt Lake City, Utah, for plaintiff-appellee and cross-appellant Mountain Fuel.

Dan S. Bushnell, Salt Lake City, Utah (Joseph C. Rust, Salt Lake City, Utah, on the brief), of Kirton, McConkie, Boyer & Boyle, Salt Lake City, Utah, for defendant-appellant and cross-appellee Johnson Oil Co., Inc.

Before SETH, Chief Judge, and BARRETT and DOYLE, Circuit Judges.

BARRETT, Circuit Judge.

This complex litigation originated on June 28, 1974, when plaintiff, cross-appellant here, Mountain Fuel Supply Company, a Utah corporation (Mountain Fuel) filed its complaint against defendants, appellants here, Reland Johnson and Johnson Oil Company, Inc., a Utah corporation (Johnson Oil) in the state District Court of Davis County, Utah. All parties are residents of the State of Utah. The cause was removed to the United States District Court for the District of Utah, Northern Division, after Johnson filed an Answer and Counterclaim and petitioned for removal on January 6, 1975. Following extensive pleading and discovery the cause was tried to a jury which, on June 23, 1976, returned a general verdict in favor of Johnson on its counterclaim. It awarded Johnson $65,000.00 in compensatory damages and $110,000.00 in punitive damages. Upon motion by Mountain Fuel, the court struck the award of punitive damages. Judgment was entered awarding Johnson damages in amount of $65,000.00. Both parties appeal.

After this appeal was docketed and calendared, this Court, Sua sponte, requested that the respective parties brief the question of this Court's subject matter jurisdiction. We assumed that in view of the lack of diversity of citizenship between the parties, this action was one arising under federal law within the meaning of 28 U.S.C.A. § 1331 justifying its removal from state court to federal district court pursuant to 28 U.S.C.A. § 1441. Our concern was whether the appeal falls within the jurisdiction of this Court or the exclusive jurisdiction of the Temporary Emergency Court of Appeals (TECA). We shall focus on the appellate jurisdictional issue which we believe to be dispositive.

The Mountain Fuel complaint filed in the state court and removed to the federal district court alleges, in summary, that: on July 15, 1970, Mountain Fuel entered into a written agreement with Johnson whereby Mountain Fuel agreed to sell and Johnson agreed to buy all condensate which it owned, controlled or produced from the Dry Piney Field in Sublette County, Wyoming commencing August 1, 1970, to July 1, 1971, and thereafter until terminated upon thirty-day notice, at the tank truck loading racks of said unit at an amount equal to "the per barrel price posted on date of delivery by Pan American Petroleum Corporation (AMOCO) for Southwestern Wyoming crude oil of forty (40) degrees to forty-four (44) degrees a. p. i. gravity, plus five cents (5cents) per barrel, which posted price on the date hereof is Three Dollars and Twenty-Eight Cents ($3.28) per barrel of forty-two (42) gallons" (R., Vol. V, p. 9); that thereafter nugget crude oil was substituted for condensate by agreement of the parties; On "August 17, 1973, the Cost of Living Council of the United States issued its 'Phase IV' oil regulations, a copy of which is attached and incorporated herein by reference. That on or about December 19, 1973, the Cost of Living Council issued further regulations governing the price ceiling on oil, a copy of which, as published in the Federal Register, is hereto attached and incorporated herein by reference." (Emphasis supplied.) (R., Vol. V, p. 5); on November 16, 1973, Mountain Fuel notified Johnson by letter that in view of the Phase IV price controls it would, effective December 1, 1973, charge the ceiling price of $4.65 per barrel and that, in addition, under applicable federal regulations, it would charge the applicable AMOCO field posted price of $5.83 plus 3cents or $5.86 per barrel of that referred to in the regulations as "new" or "released old" oil; thereafter Mountain Fuel delivered to Johnson oil billed at $128,652.57 in accordance with the pricing arrangements established by the federal price ceiling regulations; Johnson has refused to pay the principal sum of $40,585.00; Mountain Fuel prayed for judgment in principal sum of $40,585.50, interest at the rate of 7 percent per annum and costs.

Johnson filed an Answer and Counterclaim in the state court proceeding. The Answer acknowledged receipt of the Mountain Fuel letter of November 16, 1973, setting forth proposed changes under the Federal Energy Office Regulations to which it agreed, but specifically denied that it had agreed to pay any increased price for oil or that Mountain Fuel had in fact any "new oil" or "released old oil" at its disposal. Certain affirmative defenses were pleaded. In its Counterclaim, Johnson alleged that Mountain Fuel: breached the agreement of July 15, 1970, in violation of the Emergency Petroleum Allocation Act of 1973 and the regulations promulgated thereunder; refused to supply crude oil as provided under the agreement and sold the oil to Allied Chemical Company; and interfered with the business relationship between Johnson and Allied Chemical Company, resulting in a violation of the Emergency Petroleum Act of 1973 and the regulations promulgated thereunder. Johnson prayed for $70,000.00 compensatory damages, $5,000.00 as civil penalties under the regulations promulgated pursuant to the Emergency Petroleum Allocation Act of 1973, costs and other relief. Johnson thereafter filed an Amended Answer and Counterclaim in the state court. In addition to violations charged in derogation of the Emergency Petroleum Allocation Act of 1973 and the regulations promulgated pursuant thereto, Johnson alleged overcharges in violation of the Economic Stabilization Act of 1970, and other causes. The prayer of the Amended Answer and Counterclaim was for dismissal of Mountain Fuel's complaint, award to Johnson of $200,000.00 as damages on its First Cause of Action, together with $600,000.00 as civil penalty provided by the Economic Stabilization Act of 1970, $105,000.00 as damages for the Second Cause of Action, together with $762,500.00 as civil penalty provided by the Economic Stabilization Act of 1970, the sum of $80,000.00 as damages for the Third Cause of Action, attorneys fees, and costs.

The substantive issues posed by the allegations contained in the pleadings filed by the parties in the state court as of January 5, 1975, when Johnson filed its Petition for Removal to the federal district court included: the applicability of the amounts (prices) Mountain Fuel was entitled to charge Johnson and the sums Johnson owed based on the validity of regulations promulgated pursuant to the Emergency Petroleum Allocation Act of 1973 which purport to alter or affect the initial agreement, the interpretation of the contract-agreement in light of the "applicable" price posted by AMOCO plus 3cents per barrel, known as the "posted price"; a subsequent offer submitted to Mountain Fuel to purchase the oil at a higher price known as "The Cowboy Contract Price of April 1, 1973"; the "ceiling price" regulation established by the Cost of Living Council under the Economic Stabilization Act of 1970 (ESA), § 210(a), 12 U.S.C.A. § 1904 Note and the Emergency Petroleum Allocation Act of 1973 (EPAA), 15 U.S.C.A. § 751, Et seq., relating to interpretation and price of "new oil" and "released old oil" at Mountain Fuel's disposal for sale; whether Mountain Fuel's refusal to supply crude oil to Johnson from and after April 1, 1974, was a breach of contract in violation of the EPAA of 1973 and the regulations promulgated thereunder; and whether Mountain Fuel overcharged Johnson for oil alleged to be "new oil" in violation of § 210 of the ESA of 1970.

15 U.S.C.A. § 754(a)(1) of the EPAA of 1973 incorporates by reference §§ 205-211 of the ESA of 1970 and all regulations promulgated thereunder.

12 U.S.C.A. § 1904 Note (Supp.1977) of the ESA of 1970 provides in § 211(a):

The district courts of the United States shall have exclusive jurisdiction of cases or controversies arising under this title, or under regulations or orders issued thereunder, notwithstanding the amount in controversy; except that nothing in this subsection or in subsection (h) of this section affects the power of any court of competent jurisdiction to consider, hear, and determine any issue by way of defense (other than a defense based on the constitutionality of this title or the validity of action taken by any agency under this title) raised in any proceeding before such court. If in any such proceeding an issue by way of defense is raised based on the constitutionality of this title or the validity of agency action under this title, the case shall be subject to removal by either party to a district court of the United States in accordance with the applicable provisions of Chapter 89 of Title 28, United States Code (Chapter 89 of Title 28). (Emphasis supplied.)

Following removal and prior to commencement of the trial before the jury, Johnson stipulated that it owed Mountain Fuel the sum of $19,629.50. This disposed of the claim on Mountain Fuel's complaint. The case was then tried and it went to the jury on Johnson's counterclaim. The trial court, upon motion set aside the jury verdict of $110,000.00 for punitive damages in favor of Johnson and against Mountain Fuel. Judgment was then entered on behalf of Johnson representing the verdict award of...