United States v. Empire Gas Corp.

• Decision Date: 08 December 1976
• Docket Number: No. 8-3.,8-3.
• Citation: 547 F.2d 1147
• Parties: UNITED STATES of America et al., Petitioners-Appellees, v. EMPIRE GAS CORPORATION et al., Respondents-Appellants.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

547 F.2d 1147

UNITED STATES of America et al., Petitioners-Appellees, v. EMPIRE GAS CORPORATION et al., Respondents-Appellants.

No. 8-3.

Temporary Emergency Court of Appeals.

Argued November 11, 1976.

Decided December 8, 1976.

Certiorari Denied March 7, 1977.

Donald H. Loudon, Morris, Larson, King, Stamper & Bold, Kansas City, Mo., with whom Harry A. Morris and Steven G. Emerson, Kansas City, Mo., were on brief for respondents-appellants; Gibbs, Roper, Loots & Williams, Milwaukee, Wis., of counsel, on brief.

Barrie L. Goldstein, Atty., Dept. of Justice, Washington, D.C., with whom Rex E. Lee, Asst. Atty. Gen. and Stanley D. Rose, Atty., Dept. of Justice, Washington, D.C., were on brief for petitioners-appellees.

Before CHRISTENSEN, INGRAHAM and ESTES, Judges.

Certiorari Denied March 7, 1977. See 97 S.Ct. 1326.

ESTES, Judge.

This is an appeal from an August 9, 1976 order of the District Court for the Western District of Missouri enforcing 61 subpoenas issued by the Federal Energy Administration (FEA) to a retail marketer of propane, Empire Gas Corporation (Empire), and 60 of its subsidiaries (appellants). Empire and its approximately 300 subsidiaries are subject to FEA's Mandatory Petroleum Allocation and Price Regulations, 10 C.F.R. Parts 210, 211 and 212.

The FEA began an audit of appellants' books and records in October, 1974, to determine whether there was compliance with FEA's regulations during the period February through October, 1974. On or about January 15, 1975, the audit was suspended at the request of appellants. In order to obtain documents and information for completion of the pending audit, the FEA issued to Empire and its subsidiaries the 61 subpoenas, the enforcement of which is at issue here.

In the interim between the initial audit and the subsequent issuance of the present subpoenas, Empire submitted, on September 2, 1975, to the General Counsel of FEA a Request for Interpretation of 10 C.F.R. Part 212, Subpart F, regarding the meaning of the FEA pricing regulations affecting its sales designated Record on Appeal (D.R.) at 232. On May 28, 1976, the FEA issued an interpretation to Empire "which does not support Empire's position," and Empire appealed that interpretation (D.R. 241). On October 1, 1976, the appeal was denied.

In October, 1975, the FEA issued subpoenas directing the appellants to appear, testify, and produce various books, records, and documents relating to the prices charged by appellants. Pursuant to 10 C.F.R. § 205(h)(1), Empire filed with FEA a motion to quash or suspend the above-mentioned subpoenas, which motion was denied. Appellants continued to refuse to comply with the subpoenas.

On January 29, 1976, the United States of America brought this action on behalf of the FEA for enforcement of the subpoenas.

On August 9, 1976, the district court found that the subpoenas were enforceable; denied appellants' motion to certify constitutional issues to this court pursuant to § 211(c) of the Economic Stabilization Act of 1970, as amended, 12 U.S.C. § 1904 note (ESA), as incorporated by reference in § 5(a) of the Emergency Petroleum Allocation Act of 1973, as amended, 15 U.S.C. § 751, et seq. (EPAA); and ordered the appellants to appear and give testimony before the appellees. The court further ordered that the appellants "make available for inspection and copying at the headquarters of Empire Gas Corporation all documents, records, and materials required by the subpoenas." (D.R. at 263).

On August 13, 1976, the appellants filed motions, inter alia, requesting a stay of the district court order of August 9, 1976; and on September 1, 1976, appellants filed a Motion to Modify the Court's Order enforcing the administrative subpoenas. On September 3, 1976, the court denied appellants' August 13 motions and, without ruling on the Motion to Modify, ordered the appellants to comply with the subpoenas by September 18, 1976. This court granted the stay on September 22, 1976.

The appellants base their resistance to enforcement of the subpoenas on three contentions: (1) that the subpoenas were issued to determine compliance with FEA regulations, 10 C.F.R. Parts 210, 211 and 212, which regulations are arbitrary, vague, and unconstitutional; (2) that the district court erred in not modifying the scope of the subpoenas to preclude reexamination by the FEA of records previously made available to the FEA; and (3) that the transfer of functions from the FEA, its administrator, officers and agents, to the Federal Energy Office (FEO), its administrator, officers and agents, was invalid, unauthorized, and unconstitutional, resulting in the expiration of the authorization for the subpoenas and, hence, termination of this subpoena enforcement action.

Laws, Regulations and Rulings Involved

The pertinent provisions of the statutes and regulations and FEA rulings involved are summarized, as follows:

A. Statutory Provisions Involved

Two statutes, the EPAA and the Federal Energy Administration Act of 1974, 15 U.S.C. § 762, et seq. (FEAA), authorize the FEA to obtain data and information from parties subject to regulations issued pursuant to their mandates.¹

Sections 13(b) and (e) of the FEAA, 15 U.S.C. §§ 772(b) and (e), specifically authorize the Administrator of the FEA to collect information and to issue subpoenas to compel the appearance of witnesses or the production of documents and records:

§ 13(b), 15 U.S.C. § 772(b) — All persons owning or operating facilities or business premises who are engaged in any phase of energy supply or major energy consumption shall make available to the Administrator such information and periodic reports, records, documents, and other data, relating to the purposes of this Act, including full identification of all data and projections as to source, time, and methodology of development, as the Administrator may prescribe by regulation or orders as necessary or appropriate for the proper exercise of functions under this Act.

* * * * * *

§ 13(e)(1), 15 U.S.C. § 772(e)(1) — The Administrator, or any of his duly authorized agents, shall have the power to require by subpoena the attendance and testimony of witnesses, and the production of all information, documents, reports, answers, records, accounts, papers, and other data and documentary evidence which the Administrator is authorized to obtain pursuant to this section. Emphasis added.

Section 13(e)(2) of the FEAA, 15 U.S.C. § 772(e)(2), also provides that the agency may seek judicial enforcement of its subpoenas in any appropriate United States district court:

(2) Any appropriate United States district court may, in case of contumacy or refusal to obey a subpoena issued pursuant to this section, issue an order requiring the party to whom such subpoena is directed to appear before the Administration and to give testimony touching on the matter in question, or to produce any matter described in paragraph (1) of this subsection, and any failure to obey such order of this court may be punished by such court as a contempt thereof.

Similarly, the EPAA provides authority to issue subpoenas and to obtain judicial enforcement thereof. Section 5(a)(1) of the EPAA incorporates by reference Section 206 of the ESA, 12 U.S.C. § 1904 note, which states:

The head of an agency exercising authority under this title, or his duly authorized agent, shall have authority, for any purpose related to this title, to sign and issue subpoenas for the attendance and testimony of witnesses and the production of relevant books, papers, and other documents, and to administer oaths. Witnesses summoned under the provisions of this section shall be paid the same fees and mileage as are paid to witnesses in the courts of the United States. In case of refusal to obey a subpoena served upon any person under the provisions of this section, the head of the agency authorizing such subpoenas, or his delegate, may request the Attorney General to seek the aid of the district court of the United States for any district in which such person is found to compel such person, after notice, to appear and give testimony, or to appear and produce documents before the agency.

B. FEA Pricing Regulations

The present petroleum pricing regulations of the FEA originated from the mandatory petroleum pricing program of the Cost of Living Council (CLC) and were established during Phase IV of the Economic Stabilization Program. In January, 1974, the FEA, pursuant to Executive Order 11748, 38 F.R. 33575 (December 6, 1973), adopted without substantial change the CLC's Phase IV price regulations respecting crude oil and petroleum products. 39 F.R. 1924, et seq. (January 15, 1974). Section 212.93 of the original FEA price regulations was derived from § 150.359 of the CLC regulations and sets forth the price rule governing sales of petroleum products, including propane, by resellers and retailers like Empire and its subsidiaries.

The original § 212.93 of the FEA's regulations required that the maximum lawful price for a covered product be determined by taking the weighted average price at which the seller firm lawfully priced the covered product in transactions with the class of purchaser involved on May 15, 1973, and adding an amount which reflected, on a dollar-for-dollar basis, any increased product costs which the firm had incurred since that date. 10 C.F.R. § 212.93(a). These increased product costs were required to be spread equally across all of that product which the firm had in inventory and applied equally to all purchasers for the purpose of determining the seller's maximum lawful selling price. Increased product costs which a firm was unable to pass through to its customers in a given month could be accumulated (or "banked") and passed through in future months. 10 C.F.R. § 212.93(e). Also, the selling price could be increased to reflect certain nonproduct cost increases of the seller. 10 C.F.R. § 212.93(b).

Since January 15, 1974, § 212.93 has...