Sunshine Gas Co. v. United States Dept. of Energy, Civ. A. No. CA-4-80-205.

• Decision Date: 14 April 1981
• Docket Number: Civ. A. No. CA-4-80-205.
• Citation: 524 F. Supp. 834
• Parties: SUNSHINE GAS COMPANY, v. UNITED STATES DEPARTMENT OF ENERGY, et al., and United States of America.
• Court: U.S. District Court — Northern District of Texas

524 F. Supp. 834

SUNSHINE GAS COMPANY, v. UNITED STATES DEPARTMENT OF ENERGY, et al., and United States of America.

Civ. A. No. CA-4-80-205.

United States District Court, N. D. Texas, Fort Worth Division.

April 13, 1981.

As Amended April 14, 1981.

COPYRIGHT MATERIAL OMITTED

Cantey, Hanger, Gooch, Munn, & Collins, Cecil E. Munn, Ralph H. Duggins, III, and Stephen L. Tatum, Fort Worth, Tex., for plaintiff.

Kenneth J. Mighell, U. S. Atty., Anthony W. Vaughn, Asst. U. S. Atty., Fort Worth, Tex., David M. Glass, Dept. of Justice, Ellen Rosenberg-Blatt, Dept. of Energy, Washington, D. C., for defendant.

MEMORANDUM OPINION

BELEW, District Judge.

Plaintiff, Sunshine Gas Company, a Texas corporation with its principal place of business in North Carolina, seeks judicial review and a permanent restraining order to prevent enforcement of a special report order (SRO) issued by the Department of Energy, 10 C.F.R. § 205.8(b)(2).¹ As part of an ongoing investigation of an undisclosed principal subject, the Energy Department suspects Sunshine Gas as one in a group of interlocking companies engaged in the practice of inter-company sales of petroleum or petroleum products, 10 C.F.R. § 205.201(a). These sales allegedly exceed the maximum prices permitted under the Department of Energy's mandatory petroleum price and allocation regulations, 10 C.F.R. § 212.10.

In order to verify their suspicions, the Department of Energy commenced an investigation and through the issuance of a SRO, sought (1) all records pertaining to the ownership or control of the company during the period January 1, 1974 until May 15, 1980, including but not limited to: stock transfer ledgers, voting trust agreements, franchise tax records, 10-K and 10-Q reports, P-5 reports, and articles of incorporation, and (2) all records which state or local governments require of the company reflecting production, purchase, sale, taxation, or transportation of petroleum or petroleum products, interspersed from August, 1974 until April, 1980, including but not limited to: P-1, P-2, P-3, and T-1 reports filed with the Texas Railroad Commission.

Sunshine Gas refused to comply with the SRO, and unsuccessfully appealed through the Department of Energy. It next brought suit in federal court, seeking judicial invalidation. The United States Government, as a necessary party, § 209 Economic Stabilization Act of 1970, as amended, 12 U.S.C. § 1904 note, and § 5(a)(1) Emergency Petroleum Allocation Act of 1973, as amended, 15 U.S.C. § 751, et seq., counterclaimed asserting the SRO was valid and prayed for its enforcement, 10 C.F.R. § 205(8)(3).

Jurisdiction

This Court has jurisdiction by the authority of § 206 and § 211 of the Economic Stabilization Act of 1970, as amended, 12 U.S.C. § 1904 note, incorporated by § 5(a)(1) of the Emergency Petroleum Allocation Act of 1973, as amended, 15 U.S.C. § 751 et seq.; § 13(e)(2) of the Federal Energy Administration Act of 1974, 15 U.S.C. § 761 et seq.; §§ 645 and 705 of the Department of Energy Organization Act, and 10 C.F.R § 205.8 and § 205.201.

Plaintiff's Complaint

Sunshine Gas contends (1) the Department of Energy lacks jurisdiction, (2) there is no pending investigation by the Department of Energy against it, (3) the information sought by the SRO has no relevance to any legitimate purpose and (4) harassment. It prays for judicial review of the SRO, a permanent injunction restraining enforcement, and costs.

Defendant's Answer

On information and belief, the Department of Energy suspects Sunshine Gas of engaging in the buying and selling of petroleum or petroleum products, and of interlocking sales and purchases of such goods in excess of that allowed by law. The Department of Energy asserts, as essential, the use of the SRO in order to "smoke out" these violations. It therefore prays for dismissal of said action, with prejudice and costs.

Issue of Law

The single dominant issue: is the Department of Energy required, as a matter of law, to give Plaintiff Sunshine Gas more than a general statement of purpose regarding the reason for its investigation.

Discussion

The Court is aware that its role in enforcing an administrative subpoena is a narrow and limited performance. Oklahoma Press Publishing v. Walling, 327 U.S. 186, 217 n.57, 66 S.Ct. 494, 507 n.57, 90 L.Ed. 614 (1946); Endicott Johnson v. Perkins, 317 U.S. 501, 509, 63 S.Ct. 339, 343, 87 L.Ed. 424 (1943); F.T.C. v. Anderson, 631 F.2d 741, 744 (D.C.Cir.1979); F.T.C. v. Texaco, 555 F.2d 862, 871-72 (D.C.Cir.) (en banc), cert. denied, 431 U.S. 974, 97 S.Ct. 2939, 53 L.Ed.2d 1072 (1977); F.T.C. v. Rockefeller, 441 F.Supp. 234, 240 (S.D.N.Y.1977). It is confined to determining (1) whether the subpoena was issued for a lawfully authorized purpose and (2) whether it seeks information relevant to the agency's inquiry. If these questions are resolved in the affirmative, the subpoena is valid and must be enforced. United States v. LaSalle National Bank, 437 U.S. 298, 313, 98 S.Ct. 2357, 2365, 57 L.Ed.2d 221 (1978); United States v. Powell, 379 U.S. 48, 57, 85 S.Ct. 248, 254, 13 L.Ed.2d 112 (1964), Oklahoma Press Publishing Co. v. Walling, supra, 327 U.S. at 209, 66 S.Ct. at 505; Endicott Johnson v. Perkins, supra, 317 U.S. at 509, 63 S.Ct. at 343; United States v. First City National Bank of El Paso, 598 F.2d 594, 602 (Em. App.1979); United States v. Empire Gas Corp., 547 F.2d 1147, 1151-52 (Em.App. 1976); cf. United States v. Bell, 564 F.2d 953, 959 (Em.App.1977) (where the Emergency Court of Appeals, upon the Fifth Circuit's advice, deleted the last two requirements: (3) the agency does not possess the information, and (4) the required administrative steps have been followed). However, this does not render meaningless the adversary hearing to which the party is entitled before enforcement is ordered. United States v. Powell, supra, 379 U.S. at 58, 85 S.Ct. at 255. This Court does not sit as a mere rubber stamp, authorizing unwarranted and unjustified random investigations of companies suspected of violations. Such posture would effectively undermine the concept of judicial supervision of administrative subpoenas.

"... unless the district court measures the Secretary's subpoena against the two statutory standards and declines to enforce the subpoena if it is in excess of the Secretary's statutory power, the enforcement proceeding will become an empty form; and the court a rubber stamp. This result could not be reconciled with the policy of the statute. The system of judicial enforcement is designed to provide a meaningful day in court for one resisting an administrative subpoena."

United States v. Security State Bank and Trust, 473 F.2d 638, 642 (5th Cir. 1973); Accord F.T.C. v. Texaco, Inc., supra, 555 F.2d at 903; NLRB v. Northern Trust Co., 148 F.2d 24, 29 (7th Cir.) cert. denied, 326 U.S. 731, 66 S.Ct. 38, 90 L.Ed. 435 (1945). Moreover, when a court is asked to enforce an administrative subpoena, its process is invoked. The court then has a duty to prevent any abuse of that process, and does so by a thorough investigation. For example, it should pose the question: has the subpoena been issued for an improper purpose? United States v. Powell, supra, 379 U.S. at 58, 85 S.Ct. at 255; United States v. First National Bank of N.J., 616 F.2d 668, 674 (3rd Cir. 1980); Securities and Exchange Commission v. Howatt, 525 F.2d 226, 229 (1st Cir. 1975); United States v. Roundtree, 420 F.2d 845, 849 (5th Cir. 1969) (quoting Powell, supra).

Two issues need to be resolved in this dispute: does the Department of Energy have jurisdiction over Sunshine Gas, (and) should it be ordered to state a more specific reason for its SRO? The first issue is easily resolved. This Court respects the doctrine the agency, rather than the Court, should in the first instance determine the question of coverage in a preliminary investigation into possible violations. In other words, Oklahoma Press and its progeny hold that in subpoena enforcement proceedings, the Court should not entertain challenges to the subpoena power based on jurisdictional questions. Oklahoma Press Publishing Co. v. Walling, supra, 327 U.S. at 214, 66 S.Ct. at 508; Endicott Johnson Corp. v. Perkins, supra, 317 U.S. at 509, 63 S.Ct. at 343; I.C.C. v. Gould, 629 F.2d 847, 852 (3rd Cir. 1980); United States v. Wickland, 619 F.2d 75, 78 (Em.App.1980); C.A.B. v. Deutsche Lufthansa Aktiengesellschaft, 591 F.2d 951, 952 (D.C.Cir.1979); F.T.C. v. Texaco, supra, 555 F.2d at 879; F.T.C. v. Gibson, 460 F.2d 605, 608 (5th Cir. 1972); State Fair of Texas v. U. S. Consumer, Etc., 481 F.Supp. 1070, 1075 (N.D.Tex.1979). It is the second issue—enforcement of the SRO—which this Court now turns and directly addresses.

As stated earlier, a District Court should thoroughly examine the purposes underlying enforceable subpoenas. The United States Supreme Court reinforces this view. "A governmental investigation into corporate matters may be of such a sweeping nature and so unrelated to the matter properly under inquiry as to exceed the investigatory power." United States v. Morton Salt Co., 338 U.S. 632, 652, 70 S.Ct. 357, 369, 94 L.Ed. 401 (1948). Therefore, compliance will be ordered if and only if, "... the inquiry is with the authority of the agency, and the demand is not too indefinite and the information sought is reasonably relevant." United States v. Morton Salt Co., supra, 338 U.S. at 652, 70 S.Ct. at 369; F.T.C. v. Anderson, supra, 631 F.2d at 745; F.T.C. v. Texaco, Inc., supra, 555 F.2d at 872; Montship Lines, Ltd. v. Federal Maritime Board, 295 F.2d 147 (D.C.Cir. 1961); F.T.C. v. Stanley H. Kaplan Educational Center, Ltd., 433 F.Supp. 989, 992 (D.Mass.1977). "The gist of the protection is in the requirement, expressed in terms, that the disclosure sought shall not be unreasonable." Oklahoma Press Publishing Co. v. Walling, supra, 327 U.S. at 208, 66 S.Ct. at 505. But the determinative element is relevance. And the standard in regards to an...