Nader v. Sawhill, DC-31.

• Decision Date: 11 April 1975
• Docket Number: No. DC-31.,DC-31.
• Citation: 514 F.2d 1064
• Parties: Ralph NADER and Carl Nash, Plaintiffs-Appellants and Lefrak Organization, Inc., Intervenor-Appellant, v. John C. SAWHILL et al., Defendants-Appellees.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

514 F.2d 1064

Ralph NADER and Carl Nash, Plaintiffs-Appellants and Lefrak Organization, Inc., Intervenor-Appellant, v. John C. SAWHILL et al., Defendants-Appellees.

No. DC-31.

Temporary Emergency Court of Appeals.

April 11, 1975.

Alfred L. Singer, Washington, D. C. (Alan B. Morrison, Washington, D. C., with him on the brief), for appellants.

Stanley R. Wolfe, Philadelphia, Pa. (David Berger, P.A., Philadelphia, Pa., of counsel), for intervenor-appellant.

C. Max Vassanelli, Dept. of Justice (Carla A. Hills, Asst. Atty. Gen., New York City, Stanley D. Rose, Washington, D. C., on the brief), for appellees.

Before TAMM, Chief Judge and HASTIE and ANDERSON, Judges.

TAMM, Chief Judge:

Plaintiffs-appellants Ralph Nader and Carl Nash initiated this action in the District Court for the District of Columbia, challenging the Cost of Living Council's (CLC) December 19, 1973 one dollar per barrel increase to the allowable price of "old" crude oil. District Court Judge Gesell held that CLC's decision was founded upon a rational basis, was not procedurally infirm, and accordingly, granted summary judgment for CLC's successor, defendant-appellee Federal Energy Administration (FEA). We affirm.

On December 19, 1973, CLC, without a hearing, amended its Phase IV price regulation covering domestic crude petroleum to permit an immediate one dollar per barrel increase to the maximum ceiling price charged for "old" oil. 38 Fed. Reg. 34985-86 (Dec. 21, 1973). CLC articulated two basic reasons for its action. First, it maintained that the increase was in furtherance of its stated policy to "monitor the ceiling prices on domestic crude petroleum and . . . to make periodic upward adjustments in the ceiling price toward the higher world prices for crude petroleum." Id. at 34985. After briefly describing the situation confronting it—a "very wide spread between domestic crude prices and world crude prices," and a two to four dollar spread between the price of "old" and "new" domestic crude within its two-tier pricing system of regulation—CLC advised that "spreads of this magnitude are potentially de-stabilizing and cannot long be maintained." Id. Second, CLC observed that while the increase "can be expected to generate only marginal increments to crude supply in the short run, . . . it will create additional incentive for the petroleum industry to pursue further research and developments efforts, new exploration and new technology to augment our energy resources." Id. In closing, CLC specifically found that "because the purpose of these amendments is to provide immediate guidance and information with respect to the decisions of CLC, . . . publication in accordance with normal rulemaking procedures is impracticable and . . . good cause exists for making these amendments effective in less than 30 days."¹ FEA, CLC's successor with respect to its energy authority under the Economic Stabilization Act,² has adopted the regulation as amended by CLC. See 6 C.F.R. § 150.353 (1974).

On July 9, 1974, appellants filed this action in district court, seeking declaratory and injunctive relief.³ Appellants broadly attacked CLC's amendment of the regulation and FEA's subsequent adoption of it as "arbitrary, capricious, an abuse of discretion, in excess of statutory authority, without observance of procedure required by law, and otherwise not in accordance with law, within the meaning of 5 U.S.C. § 706(2) . . .." Nader v. Sawhill, Civil No. 74-1025, complaint, ¶ 23 (D.D.C., filed July 9, 1974), J.A. 9. To bolster their allegations, appellants submitted copies of CLC memoranda utilized in its decision to amend the regulation.⁴ Relying upon these memoranda, appellants asserted that CLC's reasons for the price increase were insufficient because

(i) the price spreads referred to in the statement of reasons posed no significant threat to any national interest cognizable by the CLC under the Economic Stabilization Act, and (ii) even if such a national interest was threatened by said price spreads, it could have been protected by the taking of other actions that would have been more efficacious and far less injurious to plaintiffs and other consumers than the price increase . . ..

Nader v. Sawhill, supra, Civil No. 74-1025, Complaint, ¶ 23(a), J.A. 9-10. Lastly, appellants argued that CLC's amendment and FEA's adoption of it were procedurally defective because of the absence of formal hearings and prior notice or opportunity for public comment. Id. at 10.

To rebut appellants' assertions, extensive expository affidavits were filed by CLC's former Director, John T. Dunlop, its former General Counsel, William N. Walker and FEA's Deputy Assistant Administrator for Policy Integration and Evaluation, Bert M. Concklin.⁵ The affidavits reiterated the reasons originally announced by CLC when it issued the amendment to the regulation and detailed the economic considerations supporting those reasons. For example, former Director Dunlop, noting the portentous prospect of decontrol in light of the price spread between domestic oil and foreign oil, explained that "the severe consequences of a `one-shot' increase in crude oil prices at the end of controls, which would contribute to the inflationary spiral, were hoped to be avoided by a step-by-step process whereby small increases would be spread out over a period of time." J.A. 34. Additionally, he observed that CLC "had reason to believe that the increase in the ceiling price of old oil would serve to improve crude supplies," which was of "continuing concern" to CLC in view of our country's vulnerable reliance upon imported petroleum. J.A. 35-36. Beyond these two basic reasons, Mr. Dunlop also noted CLC's concern that the growing price spread increased the temptation "for producers to `cheat' the system." J.A. 35. Concerning CLC's departure from normal rulemaking procedures, Mr. Dunlop confirmed CLC's determination that the decision

had to be made promptly and without advance notice of the price change. For in addition to the need for immediate action to provide production incentives to domestic producers in view of the Arab oil embargo, to have given crude producers thirty-days notice of a price advance would quite naturally have affected adversely sales and deliveries during this difficult period of supply.

J.A. 39. The remaining affidavits were in full accord with and complemented Mr. Dunlop's explanation.

On cross-motions for summary judgment, Judge Gesell held that:

There is clearly a rational basis for the conclusions conscientiously and deliberately arrived at and it is of no consequence that others could have reached a different decision or decided to follow a different approach based on a different economic analysis. . . . The knowledge of past regulatory efforts and their purpose and effect and shifts in supplies affecting the price structure were all properly weighed and the standards governing the action under 203(a) of the Economic Stabilization Act were given proper consideration.

Nader v. Sawhill, 387 F.Supp. 1208 (D.D.C., 1974), J.A. 105-06. As to the procedural challenge, Judge Gesell held that, under decisions of this court, Mr. Dunlop's and Mr. Walker's explanations of the situation sufficed to meet the requirements of section 207 of the Economic Stabilization Act and 5 U.S.C. § 553, in that "an emergency matter was presented which required immediate action and hearings were not possible." Id. at 1209, J.A. 106-07. Thus, summary judgment was granted in favor of FEA, and the complaint was dismissed.

Appellants' arguments on appeal are essentially those previously presented to the district court. They again argue that the decision to increase the price of "old" domestic crude was arbitrary and capricious, 12 U.S.C. § 1904 (note) § 211(d)(1) (Supp. III, 1973) —an abuse of agency discretion, 5 U.S.C. § 706(2)(A) (1970). Initially, we note that the Supreme Court has most recently reaffirmed its characterization of this standard, which governs our review here, as "a narrow one":

A reviewing court must "consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment. . . . Although this inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one. The court is not empowered to substitute its judgment for that of the agency." Citizens to Preserve Overton Park v. Volpe, supra, 401 U.S. at 416, 91 S.Ct. at 824. The agency must articulate a "rational connection between the facts found and the choice made." Burlington Truck Lines v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 246, 9 L.Ed.2d 207.

Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285, 95 S.Ct. 438, 42 L.Ed.2d 447 (1974).⁶ Given the record before us, we are constrained to agree with the district court that there is a sufficiently rational basis for the price increase to withstand our review.

While the decision to implement the price increase may not have evolved from the type or quantum of economic analysis that appellants would require, our examination of the record reveals that economic considerations were in fact studied, alternatives weighed, and consequences debated. See, e. g., J.A. 13-18, 31-38, 97-99. Although we cannot characterize the record as replete with complex economic analysis, we think that it is sufficient to pass muster under the rubric of "arbitrary and capricious". In view of the very real prospect of decontrol, it was not irrational for CLC to seek to "close the spread" between the price of "old" domestic crude and world prices. Reams of economic analysis are certainly not necessary to appreciate the inflationary impact of a sizable "one-shot" increase in the price of a commodity as ubiquitous and indispensable as petroleum. J.A. 101-102. We also think that CLC's second reason for the increase, to provide additional incentive for the private sector to augment...