Standard Oil Co. v. Federal Energy Administration, C76-1279
| Decision Date | 20 January 1978 |
| Docket Number | C77-187 and C77-406.,C77-82,C77-168,C77-92,No. C76-1279,C77-11,C76-1344,C76-1288,C76-1279 |
| Citation | 453 F. Supp. 203 |
| Parties | STANDARD OIL COMPANY, Plaintiff, v. FEDERAL ENERGY ADMINISTRATION and John F. O'Leary, Administrator, Federal Energy Administration, Defendants. SUN OIL COMPANY OF PENNSYLVANIA, Plaintiff, v. FEDERAL ENERGY ADMINISTRATION and John F. O'Leary, Administrator, Defendants. MOBIL OIL CO., Plaintiff, v. FEDERAL ENERGY ADMINISTRATION and John F. O'Leary, Administrator, Defendants. TEXACO, INC., Plaintiff, v. John F. O'LEARY, Administrator and Federal Energy Administration, Defendants. GULF OIL CO., Plaintiff, v. John F. O'LEARY, Administrator and Federal Energy Administration, Defendants. SHELL OIL CO., Plaintiff, v. FEDERAL ENERGY ADMINISTRATION et al., Defendants. AMOCO OIL CO., Plaintiff, v. John F. O'LEARY, Administrator, Federal Energy Administration, Defendants. ATLANTIC RICHFIELD CO., Plaintiff, v. FEDERAL ENERGY ADMINISTRATION and John F. O'Leary, Administrator, Federal Energy Administration, Defendants. EXXON CORPORATION, Plaintiff, v. John F. O'LEARY, Administrator of the Federal Energy Administration and Federal Energy Administration, Defendants. |
| Court | U.S. District Court — Northern District of Ohio |
Charles F. Clarke, David A. Nelson, Geoffrey K. Barnes, Squire, Sanders & Dempsey, Cleveland, Ohio, for plaintiff in No. C76-1279.
Alan S. Novins, Lobel, Novins & Lamont, Washington, D. C., on brief, for amicus curiae in all cases.
Barbara Allen Babcock, Asst. Atty. Gen., Washington, D. C., for defendants in Nos. C76-1279, C77-82, C77-92, C77-168, C77-187 and C77-406.
James W. Garvin, Jr., Dennis G. Linder, U. S. Dept. of Justice, Washington, D. C., for defendants in No. C76-1279.
Andrew J. Kilcarr, Washington, D. C., Thomas R. Trowbridge, III, Donovan Leisure Newton & Irvine, New York City, Arthur F. Zalud, Thompson, Hine & Flory, Cleveland, Ohio, for plaintiff in No. C76-1344.
Irving Jaffe, Acting Asst. Atty. Gen., Dept. of Justice, Washington, D. C., for defendants in No. C76-1344.
William H. Allen, James Baller, Robert D. Daniel, Covington & Burling, Washington, D. C., Wm. Smith, Calfee, Halter & Griswold, Cleveland, Ohio, Edward J. Ciechon, C. Steven LeBaron, Sun Oil Company, Philadelphia, Pa., for plaintiff in No. C76-1288.
Stanley D. Rose, Dept. of Justice, Washington, D. C., for defendants in C76-1288, C77-82, C77-92 and C77-168.
Frederick M. Coleman, U. S. Atty., Cleveland, Ohio, for defendants in No. C76-1288, C76-1344 and C77-168.
Smith Warder, Arter & Hadden, Richard A. Dean, Cleveland, Ohio, William R. Slye, New York City, for plaintiff in No. C77-11.
John M. Cronquist, Wentworth J. Marshall, Jr., Cronquist, Smith & Marshall, Cleveland, Ohio, Catherine C. McCulley, Houston, Tex., for plaintiff in No. C77-82.
D. D. Weisberger, Asst. U. S. Atty., Cleveland, Ohio, for defendants in Nos. C76-1288, C76-1344, C77-82, C77-92, C77-187 and C77-406 C. Max Vassanelli, Dept. of Justice, Washington, D. C., for defendants in Nos. C76-1279, C76-1288, C77-82, C77-92, C77-168 and C77-406.
Wm. Simon, Wm. E. Wickens, Richard A. Kleine, Howrey & Simon, Washington, D. C., Baker, Hostetler & Patterson, Wayne C. Dabb, Jr., Richard F. Stevens, Cleveland, Ohio, for plaintiff in No. C77-92.
Louis Paisley, Weston, Hurd, Fallon, Paisley & Howley, Cleveland, Ohio, for plaintiff in No. C77-168.
Sterling Newell, Jr., Spieth, Bell, McCurdy & Newell, Cleveland, Ohio, Joseph A. Ball, Ball, Hunt, Hart, Brown & Baerwitz, Long Beach, Cal., Richard C. Morse, Atlantic Richfield Co., Legal Div., Los Angeles, Cal., for plaintiff in No. C77-187.
Donald B. Craven, A. Theodore Giattina, Miller & Chevalier, Washington, D. C., Michael R. Gallagher, Alan M. Petrov, Gallagher, Sharp, Fulton, Norman & Mollison, Cleveland, Ohio, Dillard W. Baker, Barbara Finney, Exxon Company, U. S. A., Houston, Tex., for plaintiff in No. C77-406.
Gerald D. Freed, Dept. of Justice, Washington, D. C., for defendants in No. C77-406.
On July 21, 1977, this court issued an order denying the defendants' motions to dismiss the actions filed by each of the petroleum refiner plaintiffs. That earlier decision, which is reported, contains a detailed discussion of the procedural history of each of the nine cases up to July 21, 1977. See Standard Oil Company, et al. v. F. E. A., 440 F.Supp. 329, 331 (N.D.Ohio, 1977) hereinafter cited as "Standard Oil I". The court shall not repeat the procedural history delineated in its previous Memorandum of Opinion.
In Standard Oil I this court concluded that it sustained jurisdiction to determine three purely legal questions common to the complaints filed by all nine refiner plaintiffs. Those issues were:
On July 27, 1977 the court ordained a schedule for filing cross-motions for summary judgment on the merits of the three above-delineated legal issues, along with a schedule for filing documentary materials, and argumentative memoranda. The parties complied with that schedule, and today the court rules on their respective summary judgment motions.
The FEA's regulations evolved from rules originally promulgated by the Cost of Living Council ("CLC") under President Nixon's Economic Stabilization Program.
The program began with Executive Order 11615, 36 Fed.Reg. 15727 (August 17, 1971), which froze prices and wages at levels existing during the 30-day period ending August 14, 1971. During the next 18 months the federal government endeavored to stop inflation with mandatory price controls, applied to the nation's economy. In January 1973 the government instituted "Phase III," which attacked inflation through a system of self-administered voluntary restraints, and federally promulgated wage and price guidelines which were designed to compress inflation to an annual rate of two and one-half percent.5
At this time domestic crude oil production was declining, and the nation was becoming increasingly dependent on foreign crude. Foreign producers were raising their prices, and prices for home heating oil and other refined petroleum products were on the rise. On March 6, 1973, the CLC issued "Special Rule No. 1," reintroducing mandatory price controls for refiners that had annual sales of $250 million or more.6 Special Rule No. 1 imposed a profit margin limitation and established a pre-notification procedure for companies that sought to increase prices more than one and one-half percent above their base prices. Base prices were defined as prices in effect during a specified historical base period.
On June 13, 1973, President Nixon issued an executive order imposing a new 60-day freeze on the prices of most commodities and services.7
In July of 1973 the CLC published proposed rules for "Phase IV" price controls to become effective at the end of the 60-day freeze. Special rules — to be included in Subpart L of the regulations — were proposed for the petroleum industry.8 Under the proposed rules, maximum lawful prices for refined petroleum products would consist of three elements:
"Base price" was defined as:
". . . the price the manufacturer charged for that product (reflecting any applicable customary price differential) on May 15, 1973."10
The Phase IV proposal retained the base price concept inherent in earlier Special Rule No. 1 — i. e., the use of base price fixed as of an historical point in time. Increased costs incurred subsequent to the base period could be added, under the proposal, to the base price to determine the maximum lawful price. Unlike Special Rule No. 1, the proposed Phase IV regulations would have permitted the recovery of increased costs of imports and domestic crude oil, i. e., product costs, without pre-notification. "Other allowable costs" would have continued to be subject to the pre-notification requirement, and all increased costs would have been subject to the profit margin limitation.
The CLC furnished no explicit notice that its proposed regulations required the various cost elements to be recovered in any particular order when selling prices were less than the lawful maximum. On its face, the proposal appears to have focused solely on the establishment of a maximum price which could not lawfully be exceeded.
On August 10, 1973 the CLC extended the price freeze for petroleum and petroleum products for one week, with the explanation that the CLC needed a week to consider the comments received on the proposed Subpart L regulations, review the methods by which the CLC's policy decisions would be implemented, and write the regulations in final form.11 When Dr. John T. Dunlop, Chairman of the CLC, announced this one week extension he stressed that:
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