TAUNTON MUN. LIGHT. PLANT v. Department of Energy

• Decision Date: 05 January 1982
• Docket Number: No. 1-8,1-9.,1-8
• Citation: 669 F.2d 710
• Parties: TAUNTON MUNICIPAL LIGHTING PLANT, Plaintiff-Appellant, v. DEPARTMENT OF ENERGY, et al., Defendants-Appellees. TAUNTON MUNICIPAL LIGHTING PLANT, Plaintiff-Appellant, v. QUINCY OIL, INC., et al., Defendants-Appellees.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

669 F.2d 710

TAUNTON MUNICIPAL LIGHTING PLANT, Plaintiff-Appellant, v. DEPARTMENT OF ENERGY, et al., Defendants-Appellees.

TAUNTON MUNICIPAL LIGHTING PLANT, Plaintiff-Appellant, v. QUINCY OIL, INC., et al., Defendants-Appellees.

Nos. 1-8, 1-9.

Temporary Emergency Court of Appeals.

Argued October 29, 1981.

Decided January 5, 1982.

Philip M. Cronin, Boston, Mass., with whom Roger D. Matthews and Catherine J. Norman, Withington, Cross, Park & Groden, Boston, Mass., and Edward A. Roster, Roster & Antine, Taunton, Mass., were on the brief for the appellant, Taunton Municipal Lighting Plant.

David S. Mortensen, Boston, Mass., with whom Timothy H. Gailey and Barbara L. Moore, Hale & Dorr, Boston, Mass., were on the brief for appellee, Quincy Oil, Inc.

Floyd I. Robinson, Washington, D. C., with whom David Engels, Dept. of Energy, Washington, D. C., and Edward F. Harrington, U. S. Atty. and Donald R. Anderson, Asst. U. S. Atty., Boston, Mass., were on the brief for the appellees, Dept. of Energy, et al.

Before GIGNOUX, MAXWELL and WEIGEL, JJ.

WEIGEL, Judge.

Before the Court are appeals from judgments of the United States District Court for the District of Massachusetts in two related cases involving application of the Mandatory Petroleum Price Regulations ("MPPR"), 10 C.F.R. § 212.91 et seq., to the variable-price contracts between Taunton Municipal Lighting Plant ("Taunton") and Quincy Oil, Inc. ("Quincy"). 498 F.Supp. 396, 503 F.Supp. 235. In the first action, Taunton Municipal Lighting Plant v. Department of Energy, et al., C-79-0829, the district court upheld the Department of Energy's ("DOE") withdrawal of a Remedial Order to Quincy and the validity of Ruling 1979-1. 44 Fed.Reg. 24046 (1979). In the second action, Taunton Municipal Lighting Plant v. Quincy Oil, Inc., et al., C-78-2233, the district court held that the amount Quincy charged Taunton for oil was in compliance with the MPPR, 10 C.F.R. 212.93. The three principal issues on appeal are (1) whether Quincy violated the MPPR by calculating its maximum lawful selling price to Taunton based upon the price specified in the variable-price contract entered between the parties on April 23, 1973; (2) whether Ruling 1979-1 was valid, and thus a proper ground for DOE's withdrawal of the Remedial Order to Quincy; and (3) whether the district court erred in restricting the filing of further papers pending the determination of summary judgment motions in each case.

Background

The factual background of the dispute between Taunton, Quincy, and DOE is fully set forth in earlier decisions. See, Quincy Oil, Inc. v. Federal Energy Administration, 468 F.Supp. 383 (D.Mass.1979), and 472 F.Supp. 1233 (D.Mass.1979), aff'd, 620 F.2d 890 (Em.App.1980); Taunton Municipal Lighting Plant v. Department of Energy, 472 F.Supp. 1231 (D.Mass.1979), aff'd, 620 F.2d 896 (Em.App.1980). The dispute centers on which is the proper base price — the price actually charged or the contract price — for calculating the maximum lawful selling price of oil by Quincy to Taunton.

The parties entered into two contracts for the supply of oil. The first was negotiated in April 1972, to run from May 1, 1972 through April 30, 1973, with an option for a ninety-day extension ("the 1972 contract").¹ The second was entered into on April 23, 1973, and was to run from May 1, 1973 through April 30, 1974 ("the 1973 contract").

In the fall of 1973, the MPPR were promulgated, establishing the maximum allowable price which a reseller of petroleum products could charge. The base price was to be calculated by reference to May 15, 1973. The price charged Taunton for oil on May 15, 1973, under the ninety-day extension of the 1972 contract, was $4.3196 per barrel. The price established in the 1973 contract was $4.8196 per barrel. In calculating its maximum lawful selling price, Quincy used the higher price established in the 1973 contract.

In 1976, the Federal Energy Administration ("FEA", predecessor of DOE) issued a Remedial Order against Quincy in which it claimed that Quincy had overcharged Taunton by basing its maximum selling price on the price specified in the 1973 contract, rather than the price actually charged for oil delivered on May 15, 1973, pursuant to the extended 1972 contract. The Remedial Order was affirmed on administrative review. The affirmance was predicated primarily on Ruling 1977-5, 42 Fed.Reg. 15302 (1977). Quincy sued for judicial review. While that action was pending, DOE issued Ruling 1979-1, which concluded, inter alia, that Ruling 1977-5 was erroneous in pertinent respects. DOE thereafter withdrew the Remedial Order. Quincy's action for judicial review of the Remedial Order was then dismissed for mootness and the dismissal was affirmed by this court. Quincy Oil v. FEA, supra, 620 F.2d 890.

During the pendency of that action, Taunton filed two suits: one against Quincy, alleging that it overcharged for oil, and another against DOE, alleging that it improperly withdrew the Remedial Order and invalidly issued Ruling 1979-1. Quincy filed a motion for partial summary judgment against Taunton in the first action; Taunton filed a motion for summary judgment against DOE in the second action. Finding that the motions amounted to cross motions "as a practical matter," the district court ordered that no additional papers be filed until the validity of Ruling 1979-1 was determined. The district court then ruled that Ruling 1977-5 was invalid, Ruling 1979-1 was valid, and granted Quincy's motion for summary judgment. The appeals now before us are from judgments dismissing both actions.

Calculating Base Price Under the MPPR

The basic rule for establishing the maximum allowable price which can be charged under the MPPR is found in 10 C.F.R. § 212.93(a):

A seller may not charge a price for any item subject to this subpart which exceeds the weighted average price at which the item was lawfully priced by the seller in transactions with the class of purchaser concerned on May 15, 1973, plus an amount which reflects on a dollar-for-dollar basis, increased costs on the item. (Emphasis added.)

The critical term, then, for determining the appropriate base price under the regulations is "transaction"; it is this term which isolates and identifies the commercial events occurring on or most recently prior to May 15, 1973, in order to hold prices to levels established by the market at that time. The definition of "transaction" is contained in 10 C.F.R. § 212.31:

Transaction means an arms-length sale or lease between unrelated persons which are not members of a controlled group (as defined in 26 U.S.C. 1563(a)) and is considered to occur at the time and place when a binding contract is entered into between the parties. (Emphasis added.)

Where no transaction occurred on May 15, 1973, with a particular class of purchaser, imputed price rules are used to determine a transaction price for that class. As stated in 10 C.F.R. § 212.93(d):

... If no transaction occurred on May 15, 1973, the most recent day preceding May 15, 1973, when a transaction occurred shall be used for purposes of applying the price rule.

Before turning to the rulings issued by FEA, and later DOE, purporting to clarify the proper meaning and application of the term "transaction," it is instructive to consider, first, the plain language of the regulations themselves. Under 10 C.F.R. § 212.31, a transaction occurs "at the time and place when a binding contract is entered into between the parties." (Emphasis added.) The reference is not to the time of actual delivery of oil, nor to the price actually charged on May 15, 1973. Rather, the reference is to the time of contracting. Thus, a contract entered into on May 15, 1973 (or on the most recent date prior to May 15, 1973), is the relevant "transaction" for determining the base price. To define transaction in this way is consistent with the purpose of the price control regulations, i.e., accurately to reflect market levels on, or near, May 15, 1973. As explained in Ruling 1977-5:

... the definition of `transaction' as occurring at the time a binding contract is entered into also reflects an effort to exclude, insofar as possible, prices in shipments or deliveries of products which occurred on or before May 15, 1973, but which were made pursuant to old, fixed price contracts, and which were therefore not thought to be reasonably representative of May 15, 1973 market prices.

42 Fed.Reg. 15302.

It is also important to note that the regulation makes no distinction between fixed-price and variable-price contracts. Contrary to Taunton's argument that the definition of "transaction," as applied to sales of oil under variable-price contracts, is deemed to be the time that a definite price is fixed for a particular delivery, the regulation defines "transaction" only in terms of "when a binding contract is entered into." A variable-price is a "binding contract".

Thus the first step in determining the maximum lawful selling price is to ascertain the "time and place when a binding contract is entered". It is then necessary to identify, relative to May 15, 1973, the contract entered into between the parties on, or most recently prior to, May 15, 1973. Quincy identified the contract entered into on April 23, 1973, as the relevant contract for determining its maximum lawful selling price. Taunton argues that Quincy should have used the price charged on May 15, 1973, pursuant to the extended 1972 contract. We affirm the district court's holding that the relevant binding contract for "transaction" purposes under 10 C.F.R. § 212.93(a) is the variable-price contract signed by Quincy and Taunton on April 23, 1973.

The regulations clearly state that if no transaction occurred on May 15, 1973, i.e., if no binding contract was entered into between the parties on that date, then "the most recent day preceding May 15, 1973, when a transaction occurred shall be used for purposes of applying the price rule."...