STATE OF MINN., ETC. v. Standard Oil Co.(Indiana)
| Decision Date | 18 June 1981 |
| Docket Number | Civ. No. 4-80-461. |
| Citation | 516 F. Supp. 682 |
| Parties | STATE OF MINNESOTA, by its Attorney General Warren SPANNAUS, and State of New York by its Attorney General, Robert Abrams, and its Energy Commissioner James L. Larocca, Plaintiffs, v. STANDARD OIL COMPANY (INDIANA), United States Department of Energy, James S. Edwards, Secretary, United States Department of Energy, Avrom Landesman, Acting Special Counsel for Compliance, Office of the Special Counsel, Department of Energy, Defendants. |
| Court | U.S. District Court — District of Minnesota |
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Warren R. Spannaus, Atty. Gen., Jerome L. Getz, Deputy Atty. Gen., William P. Marshall, and Brad P. Engdahl, Sp. Asst. Attys. Gen., St. Paul, Minn., for plaintiff State of Minnesota.
Robert Abrams, Atty. Gen., Melvin P. Leventhal, Paulann M. Caplovitz, and Kenneth Robinson, Asst. Attys. Gen., New York City, for plaintiff State of New York.
Dale I. Larson, Robins, Zelle, Larson & Kaplan, Minneapolis, Minn., Thomas A. Gottschalk, Stephen A. Herman, David G. Norrell, and Glenn Summers, Kirkland & Ellis, Washington, D.C., and M. J. Keating, Chicago, Ill., for defendant Standard Oil Company (Indiana).
Frank W. Krogh, Barry J. Sheingold, Janet M. Richmond, and Janice Alperin, U.S. Dept. of Energy, Washington, D. C., for federal defendants.
On September 5, 1980, plaintiffs State of Minnesota and State of New York (States) filed in this Court a four count complaint. The complaint alleges that defendant Standard Oil Company of Indiana (Standard) failed to comply with the federal petroleum price and allocation regulations, thereby overcharging the plaintiffs for petroleum products. The complaint also alleges that Standard and the Department of Energy (DOE) entered into an unlawful consent order. The challenged consent order purports to resolve all claims or disputes between Standard and the DOE for the period of March 6, 1973, through December 31, 1979. The matter is now before the Court on motions by Standard and the DOE to dismiss Counts II, III, and IV of the complaint, the three counts that challenge the validity of the Consent Order. For the reasons stated herein, the motions are granted.
The facts relevant to these motions are not complex. Basically, these motions require an analysis of the legal effect of two documents — the Standard Oil Consent Order and the complaint.
The DOE has been charged by Congress with the duty to enforce the federal petroleum price and allocation regulations. As part of the enforcement program, the DOE began an audit of Standard's compliance with the regulations. The period covered by the audit begins in 1973. During the course of the audit, the DOE took numerous administrative actions, including the issuance of notices of probable violations, the issuance of one proposed remedial order, and the filing of a lawsuit. Standard and the DOE entered into settlement negotiations, and in early 1980 a settlement of all enforcement disputes arising out of the audit was finalized with the issuance of a Consent Order. The Consent Order "settles and finally resolves all claims and disputes against Standard by DOE for the period of March 6, 1973, through December 31, 1979 ...." (Consent Order ¶ 101.)
In Count I of the complaint, the States allege that they have purchased petroleum products from Standard and that, upon information and belief, Standard has failed to comply with the applicable price and allocation regulations, thereby overcharging Minnesota and New York. This count is not included in the present motions to dismiss.
In Count II the States aver that the DOE regulations at 10 C.F.R. § 210.92(a) require each firm subject to the petroleum price and allocation regulations to maintain and preserve records sufficient to demonstrate that the firm is in compliance with such regulations. The States also aver that paragraph 411 of the Consent Order1 relieves Standard of its obligation to comply with the record-keeping requirements of the Federal petroleum price and allocation regulations for the period covered by the Consent Order. The States allege that this clause of the Consent Order permits Standard to destroy the records it has relating to the time period covered by the Consent Order and that the States need these records in order to demonstrate injury in the private action under Count I. The States allege that this clause of the Consent Order is in excess of the DOE's statutory authority, in violation of the DOE's regulations, an infringement on the plaintiffs' private right of action against Standard, and constitutes arbitrary and capricious action. On the day the plaintiffs filed their complaint, they obtained a temporary order from the United States Magistrate prohibiting the destruction of documents maintained by Standard pursuant to 10 C.F.R. § 210.92 pending a hearing on a preliminary injunction. On September 17, 1980, the parties entered into a stipulation superseding the Order of the United States Magistrate. In the stipulation, Standard agreed that it would maintain for the duration of this lawsuit all records it had accumulated in connection with the petroleum regulations.
In Count III of the complaint, the plaintiffs aver that in paragraph 409 of the Consent Order,2 the DOE "agreed in advance not to participate voluntarily in a manner that would be adverse to Standard in any administrative or judicial proceeding relating to Standard's compliance with the applicable petroleum price and allocation regulations during the period covered by the Consent Order." Complaint ¶ 41. The plaintiffs also aver that in paragraph 412 of the Consent Order,3 the DOE agreed in advance to claim every exemption or privilege permitted by law to preclude release of information relating to Standard's compliance with the petroleum regulations. The plaintiffs allege that these two paragraphs of the Consent Order exceed the DOE's statutory authority, violate the DOE's regulations, is contrary to law, and constitute arbitrary and capricious action and an abuse of discretion.
Count IV is somewhat broader than Counts II and III in that it attacks the entire Consent Order rather than specific portions of it. In Count IV, the plaintiffs set forth four ways in which they believe that the DOE exceeded its authority and abused its discretion by issuing the Consent Order. First, the plaintiffs allege upon information and belief that the DOE has not audited Standard beyond December of 1976. The plaintiffs allege that the DOE is not authorized or permitted to settle compliance matters for periods that have not been audited. Second, the plaintiffs allege that under 10 C.F.R. § 205.199J(a), the DOE may issue a consent order to "resolve an outstanding compliance investigation or proceeding," and that the DOE exceeded its authority by resolving not only pending proceedings but also all potential proceedings arising from the period of time covered by the Standard Oil Consent Order. Third, the plaintiffs argue that 10 C.F.R. § 205.119J(a) requires that consent orders set forth the relevant facts that form the basis for the order. The plaintiffs argue that the Standard Oil Consent Order is defective in that it fails to set forth a sufficient factual basis. Finally, the plaintiffs argue that the DOE has used remedies in the Consent Order that are not permitted under the applicable law. They assert that the only permissible remedy for violation of the pricing regulations is restitution, and that most payments by Standard will be for purposes other than restitution. The plaintiffs assert that these four features demonstrate that, in entering into the Consent Order, the DOE acted in excess of its statutory and regulatory authority and in a manner that was contrary to law, arbitrary, capricious, and an abuse of discretion.
The defendants have moved to dismiss Counts II, III, and IV. The defendants contend that the Consent Order is not subject to judicial review because it is committed to agency discretion by law, and also that the plaintiffs lack standing to challenge the Consent Order.
Congress created a dual mechanism for enforcement of the petroleum price and allocation regulations: a private right of action and administrative enforcement by the applicable agency. The private right of action is based on section 210 of the Economic Stabilization Act of 1970 (ESA), 12 U.S.C. § 1904 (note), as incorporated by reference in the Emergency Petroleum Allocation Act (EPAA), 15 U.S.C. § 754(a)(1) and the Department of Energy Organization Act (DOE Act), 42 U.S.C. § 7192(a). Section 210 provides:
(a) Any person suffering legal wrong because of any act or practice arising out of this title, or any order or regulation issued pursuant thereto, may bring an action in a district court of the United States, without regard to the amount in controversy, for appropriate relief, including an action for a declaratory judgment, writ of injunction (subject to the limitations in section 211), and/or damages.
Count I of the plaintiffs' complaint is brought under section 210. The DOE is the administrative agency designated to enforce the regulations for the federal government. ESA § 209, 12 U.S.C. § 1904 (note); DOE Act §§ 201, 301, 503, 42 U.S.C. §§ 7131, 7151, 7193. While the private right of action aims at punishing violators and compensating victims, the purpose of the administrative remedy is to insure compliance with the regulations on a national scale. Bulzan v. Atlantic Richfield Co., 620 F.2d 278, 282 (Temp.Emer.Ct.App.1980).
Section 211 of the ESA provides detailed procedures for judicial review of agency action. Subsection (a) provides:
The district courts of the United States shall have exclusive original jurisdiction of cases or controversies arising under this title, or under regulations or orders issued thereunder, notwithstanding the amount in controversy...
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