Petition — Empire Gas Corp. v. United States

JAN 5

Supreme Court, U. S,

“s~ FILED

1977

MICHAEL RODAK, JR., CLER

In the Supreme Court of the United States

OCTOBER TERM, 1976

BIS: stonesnseston ' 76 - 2) 3 6

UNITED STATES OF AMERICA, et al.,

Respondents,

vs.

EMPIRE GAS CORPORATION, et al.,

Petitioners.

PETITION FOR A WRIT OF CERTIORARI TO THE

TEMPORARY EMERGENCY COURT OF APPEALS

OF THE UNITED STATES

SHERIDAN MORGAN

Harry A. Morris

Dona.Lp H. Loupon

STEVEN G. EMERSON

Morris, LARSON, KING, STAMPER

& Bop

Suite 400, Two Crown Center

2420 Pershing Road

Kansas City, Missouri 64108

(816) 421-6767

Attorneys for Petitioners

Of Counsel:

Grsss, Roper, Loots & WILLIAMS

757 North Broadway

Milwaukee, Wisconsin 63202

E. L. Menpennatt, Inc., 924 Cherry Street, Kansas City, Mo. 64106, (816) 421-3030

———d

|

SS ——

AS ES SS OY —

TABLE CF CONTENTS

II TI giccceecencecctnceccsnivnncveseseociovonsetasonescuenssonsssonsass 1

Jurisdiction .................. sicasbaicaakibendepddidiiaiiahiss cancsuiibiauiciatisia 2

nr CauIIIIIIIET sce tia ciosiantisoniiltisicabenblieanlianebneianediecs 2

Constitutional, Statutory and Regulatory Provisions

STITT nha chininlcssinciesiedsilncioadaieniaeiahiannniiaie teesudililandiaedeaaiiastiliba 2

I OIE oscil diceeianecileiensbaliiatieie 9

I Ge SE TIED dcscecnnsscsnstitnnissnssnenivonpinetiieminnsinn 12

1. In Judicial Proceedings to Enforce Administra-

tive Subpoenaes Issued Solely to Determine

Compliance With Specified Regulations, Lower

Courts Are Misconstruing Decisions of This

Court As Preventing the Subpoenaed Party

From Interposing the Defense That the Specified

Regulations Are Arbitrary and Deny the Due

Process Guaranteed by the Fifth Amendment. 12

2. This Court Should Decide Whether It Is Consti-

tutional for the Executive to Transfer All of the

Existing Functions of an Administrative Agency

to an Executive Office, Without Prior Legisla-

tive Authorization, When the Statutory Author-

ity for That Administrative Agency Expires .... 20

I cS SRT = APR, TNs DO OTOP 24

ORT TE AT NR ROT TTT 25

Appendix A—Opinion of the Temporary Emergency

Court of Appeals of the United States 0000000000000... A-1

Appendix B—Decision and Order of the United States

District Court of the Western District of Missouri.... B—1

Appendix C—Order of the United States District Court

for the Western District of Missouri ................000000000... C-1

Appendix D—Executive Order No. 11930 (July 30,

SUIT ss-sidics lee iota lia aie labaapaebachoatsbieidadgiaiaaehinaeaabianlakaconiaddaudaelbasitads D-1

II

Index to Citations

CASES

Adams v. Federal Trade Commission, 296 F.2d 861 (8th

Cir. 1961), cert. denied 369 U.S. 864, 82 S.Ct. 1029 ..... 12

Endicott Johnson Corp. v. Perkins, 317 U.S. 501, 63

I i as 15

Fleming v. Mohawk Wrecking & Lumber Co., 331 U.S.

Rf BS, RRR REET eo 21, 22, 23

Myers v. Bethlehem Corp., 303 U.S. 41, 58 S.Ct. 459

RATERS ER Eee Ae oes rede a A ee OO 15

Oklahoma Press Publishing Co. v. Walling, 327 U.S.

BOG, GE BIE. GG (IG) onncescivneessnscssesccccecsee 12, 15, 17, 18, 19

Securities and Exchange Commission v. Wall Street

Transcript Corp., 442 F.2d 1371 (2d Cir. 1976) ............ 12

Shasta Minerals & Chemical Co. v. Securities and Ex-

change Commission, 328 F.2d 285 (10th Cir. 1964) . 13

United States, et al. v. Empire Gas Corporation, et al.,

419 F. Supp. 34 (W. D., Mo. 1976) ...................... cesses 1

United States, et al. v. Empire Gas Corporation, et al.,

aba EC

United States v. Feaster, 376 F.2d 147 (5th Cir. 1967),

cert. denied 389 U.S. 920, 88 S.Ct. 237 _..00000 12

UNITED STATES CONSTITUTION

Article I, Section 8, Clause 18 ...... insiealniiieatiiaiiadiiieatiatat ac 2

Article II, Section 2, Clause 2 ................. OR DAT AT MO 3

EE OF cnccsisedeisncnsbntcsioied leblaiadadbeciceniitthimeenbeidblinausies 3

STATUJTES

Energy Petroleum Allocation Act:

ee oT CD Tee EE 3,6

I ee 6, 20, 21, 22

Ill

Economic Stabilization Act:

BD Ts BD picesisorsiccinstittnantpssniccntcoriianscnapstemmnensventunnsed 2, 3, 8

Federal Energy Administration Act:

I aac clcitataanigeenbabelannemoniel 8, 20

15 U.S.C. §763 (a) .....-...--ecreccessessenesssessessnessnsesessneensennes 8, 20

I I eta iceatiieeraitsunmnaniananentioentoniiinneiia 6,7

CII as cep stressiieitigeepentoninonteidiianentine 6,7

15 U.S.C. §772(e) (2) .............. iaslaiticainseiieignsbosaslaninldibened’ 7

Judiciary and Judicial Procedure:

I a tials cdaltnmnninitt 2

I i saanieinitdinenetciadiiontnnesanesine 9

Federal Administrative Regulations:

I a ais cnc stomsentieeninweeTonionn 6

I a ccictlhinsininininsacelonn 6

a ce acinbintnintpnoclnmnenen 5, 6

I ca aenatnialintane 3

10 CPR. §212.31 ...............ccsecsessssoescossnseesessensensenssnsensese 4

IIE CII isciccsssnasvinseesestnaiesmenieseeentmmeuntessevahednensie 4

SE eee 4

Executive Orders:

ean 21

Sa a I on a sicsasnmenbnnnniocetonnenennvel 9, 20

Other Authorities:

Cost of Living Council Order No. 47, 39 F.R. 24... 3

104 Congressional Record Senate 10862 (daily ed.

ARR EEE 20

In the Supreme Court of the United States

OCTOBER TERM, 1976

UNITED STATES OF AMERICA, et al.,

Respondents,

vs.

EMPIRE GAS CORPORATION, et al.,

Petitioners.

PETITION FOR A WRIT OF CERTIORARI TO THE

TEMPORARY EMERGENCY COURT OF APPEALS

OF THE UNITED STATES

Empire Gas Corporation, et al., Petitioners, respect-

fully pray that a Writ of Certiorari issue to review the

Opinion of the Temporary Emergency Court of Appeals of

the United States entered in this proceeding on December

8, 1976, which affirmed an Order of the United States

District Court for the Western District of Missouri issued

August 9, 1976.

OPINIONS BELOW

The Opinion of the Temporary Emergency Court of

Appeals of the United States, affirming the Order of the

United States District Court for the Western District of

Missouri, is as yet unreported and is set forth as Appendix

A. The Decision and Order of the United States District

Court for the Western District of Missouri is reported at

419 F.Supp. 34 and appears as Appendix B.

JURISDICTION

On December 8, 1976, the Temporary Emergency

Court of Appeals of the United States entered its Opinion

(A-1). This Petition for Certiorari has been filed less

than 30 days from the date aforesaid. Jurisdiction of this

Court is invoked under 28 U.S.C. §1254(1) and §211(g)

of the Economic Stabilization Act, as amended, 12 U.S.C.

§1904 note.

QUESTIONS PRESENTED

1. Whether, in a judicial proceeding to enforce ad-

ministrative subpoenas issued solely to determine com-

pliance with specified regulations, the subpoenaed party

can interpose as an appropriate defense that the specified

regulations are arbitrary and deny the due process guaran-

teed by the Fifth Amendment.

2. Whether it is constitutional for the executive io

transfer, without prior legislative authorization, all the

existing functions of a legislatively-created administrative

agency to an executive office when the statutory authority

for the administrative agency has expired.

CONSTITUTIONAL, STATUTORY AND

REGULATORY PROVISIONS

INVOLVED

Article I, Section 8, Clause 18 provides that the Con-

gress shall have the power:

To make all Laws which shall be necessary and

proper for carrying into Execution the foregoing

Powers, and all other Powers vested by this Consti-

tution in the Government of the United States, or in

any Department or Officer thereof.

3

Article II, Section 2, Clause 2 provides that the Presi-

dent:

* * * shall nominate, and by and with the Ad-

vice and Consent of the Senate, shall appoint * * *

all other Officers of the United States, whose Appoint-

ments are not herein otherwise provided for, and

which shall be established by Law; but the Congress

may by Law vest the Appointment of such inferior

Officers, as they think proper, in the President alone,

in the Courts of Law, or in the Heads of Departments.

The Fifth Amendment to the Constitution of the

United States provides in pertinent part as follows:

“No person shall .. . be deprived of life, liberty, or

property, without due process of law. . .”

The regulations in issue, 10 C.F.R. Parts 210, 211 and

212, control the pricing and allocation of crude oil and

refined petroleum products. The regulations have been

promulgated pursuant to the Emergency Petroleum Allo-

cation Act of 1973, as amended, 15 U.S.C. §751, et seq.;

the Economic Stabilization Act of 1970, as amended, 12

U.S.C. §1904 note; and the Cost of Living Council Order

No. 47, 39 F.R. 24.

The specific provisions in question establish general

price and allocation rules and define the entities to which

the regulations apply. The challenged regulations are as

follows:

10 C.F.R. §212.10, which establishes Mandatory Petro-

leum Price Regulations and which sets forth “general

rules”:

“(a) No firm (including an individual) may

charge a price for any covered product which exceeds

the maximum price at which that product is per-

4

mitted to be sold to the class of purchaser concerned

under this part.” {Emphasis added]

10 C.F.R. §212.93, which sets forth the “price rule”

governing “sellers’’:

“(a) A seller may not charge a price for any

item subject to this subpart [F] which exceeds the

weighted average price at which the item was law-

fully priced by the seller in transactions with the class

of purchasers concerned on May 15, 1973, plus an

amount which reflects on a dollar-for-dollar basis in-

creased costs for the item.” [Emphasis added}

10 C.F.R. §212.91, which establishes the “applicability”

of the subpart regulating “resellers” and “retailers”:

“This subpart {Subpart F—Resellers and Re-

tailers] applies to each sale of a covered product

(other than the first sale of crude oil} by resellers,

reseller-retailers, and retailers, and to each sale of

crude oil (other than the first sale) by a refiner.”

{Emphasis added!

10 C.F.R. §212.31, which defines the terms “resellers,

reseller-retailers, and retailers”:

“ ‘Reseller’ means a firm (other than refiner or

retailer) or that part of such a firm which carries on

the trade of business of purchasing covered products,

and reselling them without substantially changing

their form to purchaseis other than ultimate con-

sumers. |Emphasis added |

‘Reseller-retailer’ means a firm (other than a

refiner) or that part of such a firm which carries

on the functions of both a reseller and retailer. [Em-

phasis added]

‘Retailer’ means a firm (other than a refiner or

reseller) or that part of such a firm ~..ich carries on

the trade or business of purchasing covered products

and reselling them to ultimate consumers without

substantially changing their form.” [Emphasis added]

10 C.F.R. §211.51 defines the term “firm”:

“*Firm’ means any association, company, corpora-

tion, estate, individual, joint-venture, partnership, or

sole proprietorship or any other entity however orga-

nized including charitable, educational, or other elee-

mosynary institutions, and the Federal government

including corporations, departments, Federal agencies,

and other instrumentalities, and State and local gov-

ernments. The FEO may, in regulations and forms

issued in this part, treat as a firm: (1) A parent and

the consolidated and unconsolidated entities (if any)

which it directly or indirectly controls, (2) a parent

and its consolidated entities, (3) an unconsolidated

entity, or (4) any part of a firm. [Emphasis added}

‘Parent’ means a firm which is not directly or

indirectly controlled by another firm.

‘Parent and its consolidated entities,’ means a

parent and those firms, if any, directly or indirectly

controlled by the parent which are consolidated with

the parent for purposes of financial statements pre-

pared in accordance with generally accepted account-

ing principles. An individual shall be deemed to con-

trol a firm which is directly or indirectly controlled

by him or by his father, mother, spouse, children or

grandchildren.

‘Unconsolidated entity’ means a firm directly or

indirectly controlled by a parent but not consolidated

with the parent for purposes of financial statements

prepared in accordance with generally accepted ac-

counting principles. An unconsolidated entity in-

cludes any firm consolidated with the unconsolidated

entity for purposes of financial statements prepared

in accordance with generally accepted accounting

principles. * * *”

10 C.F.R. §211.10 establishes a method of determining

the priority of classes of persons to whom a “supplier”

must allocate its product. Section 10(a)(2) defines a

“supplier” as follows:

“For purposes of defining a supplier in this part,

a firm shall mean the parent and the consolidated and

unconsolidated entities (if any) which it directly or

indirectly controls.”

10 C.F.R. §211.51 also defines “supplier”, but in the

following terms:

“e

‘Supplier’ means any firm or any part or sub-

sidiary of any firm other than the Department of De-

fense which presently, during the base period, or during

any period between the base period and the present,

supplies, sells, transfers or otherwise furnishes (as

by consignment) any allocated product or crude oil to

wholesale purchasers or end-users, including, but not

limited to, refiners, natural gas processing plants or

fractionating plants, importers, resellers, jobbers, and

retailers.” [Emphasis added]

Two statutes, the Emergency Petroleum Allocation Act

of 1973, as amended (EPAA), 15 U.S.C. 751 et seq., and

the Federal Energy Administration Act of 1974, 15 U.S.C.

761, et seq. (FEAA), authorize the FEA to obtain data and

information from parties subject to regulations issued

pursuant to their mandates. Sections 13(b) and (e) of the

FEAA, 15 U.S.C. 772(b) and (e), authorize the Ad-

ministrator of the FEA to collect information and to issue

subpoenas to compel the appearance of witnesses or the

production of decuments and records:

7

“813(b), 15 U.S.C. 772(b)—All persons owing or op-

erating facilities or business premises who are engaged

in any phase of energy supply or major energy con-

sumption shall make available to the Administrator

such information and periodic reports, records, docu-

ments, and other data, relating to the purposes of this

Act, including full identification of all data and projec-

tions as to source, tame, and methodology of develop-

ment, as the Administrator may prescribe by regula-

tion or orders as necessary or appropriate for the proper

exercise of functions under this Act.

§13(e) (1), 15 U.S.C. 772(e)—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, docu-

menis, reports, answers, records, accounts, papers, and

other data and documentary evidence which the Ad-

ministrator is authorized to obtain pursuant to this

section.” s

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 is-

sued 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 touch-

ing 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.

8

Similarly, the EPAA provides authority to issue sub-

poenas and to obtain judicial enforcement thereof. Sec-

tion 5(a) (1) of the EPAA incorporates by reference Section

206 of the Economic Stabilization Act of 1970, 12 U.S.C.

$1904 note (ESA), 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, pa-

pers, and other documents, and to administer oaths.

Witnesses summoned under the provisions of this sec-

tion 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.”

The Federal Energy Administration Act of 1974, 15

U.S.C. 761, et seq. (FEAA) provides in Section 3, 15 U.S.C.

$762 that:

“There is hereby established an independent

agency in the executive branch to be known as the

Federal Energy Administration, . .”

Section 4 of the FEAA, 15 U.S.C. §763(a) provides for

appointment of the Administrator of the FEA, by and with

the advice and consent of the Senate:

“There shall be at the head of the Administration

an Administrator (hereinafter in this chapter referred

9

to as the ‘Administrator’) who shall be appointed by

the President, by and with the advice and consent of

the Senate.”

Section 30 of the FEAA, Pub. L. 93-275, provided for

the termination date of the Act as follows:

“This Act shall terminate June 30, 1976.”

Executive Order No. 11930, 41 F.R. 32399, which

transferred the functions of the Federal Energy Adminis-

tration to the Federal Energy Office, is set forth as Ap-

pendix D because of its length.

STATEMENT OF THE CASE

The facts relevant to the questions presented by this

Petition are uncontroverted and therefore may be intro-

duced to the Court in a summary fashion.

Empire Gas Corporation (hereinafter Empire) is a

retailer marketer of propane which, along with its approxi-

mately three hundred retail subsidiaries, is subject to the

Mandatory Petroleum Allocation and Price Regulations,

10 C.F.R. Parts 210, 211 and 212, promulgated by the

Federal Energy Administration (hereinafter FEA).

The FEA began an audit of the Petitioners’ books

and records in October, 1974, to determine whether there

had been compliance by Empire and its subsidiaries with

FEA’s price and allocation regulations during the period

February through October 1974. On or about January

15, 1975, the audit was suspended at the request of Empire.

In order to obtain documents and information for com-

pletion of the pending audit, the FEA isued sixty-one

subpoenas to Empire and sixty of its subsidiaries in Octo-

10

ber 1975. The subpoenas directed the Petitioners to ap-

pear, testify and produce various books, records, and docu-

ments relating to the prices charged by the Petitioners.

Pursuant to 10 C.F.R. §205.8(h) (1), Empire filed with

the FEA a motion to quash or suspend the above-mentioned

subpoenas, which motion was denied.

The Petitioners did not comply with the subpoenas

and on January 29, 1976, the United States of America

brought this action on behalf of the FEA in the United

States District Court for the Western District of Missouri

for enforcement of the subpoenas. The Petition for En-

forcement of the subpoenas states that the purpose of

the subpoenas is to determine compliance with the FEA

regulations contained in 10 C.F.R. Parts 210, 211 and 212.

Federal jurisdiction was founded upon Sections 206 and

211 of the Economic Stabilization Act of 1970, as amended,

incorporated by Section 5(a)(1) of the Emergency Petro-

leum Allocation Act of 1973, and upon Section 13(e) (2)

of the Federal Energy Administration Act of 1974.

The Petitioners base their resistance to enforcement of

the subpoenas on the contentions: (1) that the subpoenas

were issued solely to determine compliance with FEA regu-

lations, 10 C.F.R. Parts 210, 211 and 212, which regulations

are arbitrary, vague, and unconstitutional; and (2) that

the transfer of functions frorm the FEA, its administrator,

officers and agents, to the Federal Energy Office (FEO),

its administrator, officers and agents, was invalid, unau-

thorized and unconstitutional, resulting in the expiration

of the authorization for the subpoenas and, hence, required

termination of this subpoena enforcement action. The

Petitioners also contended on appeal that the District Court

erred in not modifying the scope of the subpoenas to

preclude reexamination by the FEA of records previously

ll

made available to the FEA, but the Petitioners do not

seek review of the Temporary Emergency Court of Ap-

peals’ disposition of that issue.

On August 9, 1976, the District Court found that the

subpoenas were enforceable; ordered that the Petitioners

appear and give testimony before the FEA; and ordered

that the Petitioners make all documents, records, and ma-

terial required by the subpoenas available to the FEA

at the headquarters of Empire.

On August 13, 1976, the Petitioners filed a motion to

vacate the District Court’s August 9, 1976, Order, or in the

alternative, to substitute parties. This motion was based

on the contention that the statute granting the FEA au-

thority to carry out its functions had expired and that

the Executive Order No. 11930 dated July 30, 1976, purport-

ing to transfer all FEA functions to the Federal Energy

Office, was unconstitutional and that, as a result of the

unauthorized transfer, the subpoena enforcement action

was moot. On August 13, 1976, the Petitioners also filed

a motion requesting the District Court to stay its Order.

On September 3, 1976, the District Court denied both the

motions filed on August 13, 1976, and ordered the Petition-

ers to comply with the subpoenas by September 18, 1976.

Notice of Appeal to the Temporary Emergency Court

of Appeals had been filed by the Petitioners on August

30, 1976, and on September 7, 1976, the Petitioners filed

an Application for Stay of the District Court’s Order with

the Temporary Emergency Court of Appeals. On Septem-

ber 22, 1976, the Temporary Emergency Court of Appeals

stayed the District Court’s Order until a ruling on the

merits of Empire’s appeal could be issued. On December

8, 1976, the Temporary Emergency Court of Appeals af-

firmed the District Court’s Order enforcing the subpoenas.

12

REASONS FOR GRANTING THE WRIT

1. In Judicial Proceedings to Enforce Administrative

Subpoenas Issued Solely to Determine Compliance

With Specified Regulations, Lower Courts Are Mis-

construing Decisions of This Court to Prevent

the Subpoenaed Party From Interposing the De-

fense That the Specified Regulations Are Arbitrary

and Deny the Due Process Guaranteed by the

Fifth Amendment.

The growth in the number and scope of investigative

activities of administrative agencies over the past four

decades has resulted in a dramatic increase in the number

of administrative subpoenas issued annually. Although

the enforcement of an administrative subpoena is a judicial

proceeding in which the subpoenaed party may make “ ‘ap-

propriate defense’ surrounded by every safeguard of judi-

cial restraint” [Oklahoma Press Publishing Co. v. Wall-

ing, 327 U.S. 186, 66 S.Ct. 494 (1946) ], the tendency among

lower courts has been to treat the enforcement of admin-

istrative subpoenas as summary proceedings in which the

only relevant questions are whether the inquiry is within

the agency’s authority, the demand is not too indefinite,

and the information sought is reasonably relevant to a

proper subject of inquiry. E.g., Securities and Exchange

Commission v. Wall Street Transcript Corp., 422 F.2d 1371

(2d Cir. 1970); Adams v. Federal Trade Commission, 296

F.2d 861 (8th Cir. 1961), cert. denied 369 U.S. 864, 82

S.Ct. 1029; United States v. Feaster, 376 F.2d 147 (5th

Cir. 1967), cert. denied 389 U.S. 920, 88 S.Ct. 237.

The types of “appropriate defenses” available to sub-

poenaed persons have been judicially narrowed to exclude

the contention that the regulations which are sought to

13

be enforced by the subpoenas are unconstitutional, with

the result that a party whose records have been subpoenaed

solely to determine compliance with unconstitutional regu-

lations must bear the burden of producing the records

and thereafter being subjected to possible administrative

charges for violation of the suspect regulations before being

allowed to challenge those regulations.

The Petitioners do not believe that this Court has

sanctioned any restriction of appropriate defenses or that

the extreme case of arbitrary action such as the admitted

harassment in Shasta Minerals & Chemical Co. v. Secu-

rities & Exchange Commission, 328 F.2d 285 (10th Cir.

1964), offers the only example of an appropriate defense

in an enforcement proceeding.

The history of the proceedings in this case illustrates

the unavailability of judicial relief for a party which has

been served with administrative subpoenas that, while

otherwise proper, seek records to determine compliance

with arbitrary and unconstitutional regulations.

On January 29, 1976, the Respondents filed a Petition

for Enforcement of sixty-one administrative subpoenas

that had been served upon the Petitioners. The Petition

for Enforcement, which was filed in the District Court,

states that the FEA is “attempting to obtain information

from [Empire] to determine compliance with Federal En-

ergy Administration Regulations 10 C.F.R. Parts 210, 211,

212...” These regulations establish the regulatory scheme

for the pricing and allocation of crude oil and refined pe-

troleum products, including propane, the product distrib-

uted by Empire and its subsidiaries. These regulations set

forth affirmative price and allocation rules governing the

conduct of “firms,” “sellers,” “retailers,” “reseller-retail-

ers,” and so forth, and in the subpoena enforcement pro-

ceedings, Empire contended that there was no objective

14

way of applying these vague rules to a complex business

entity such as Empire and its subsidiaries, with the result

that application of the regulations was left to the arbitrary

power of the FEA. Empire contended that all or any por-

tion of a complex business such as Empire and its sub-

sidiaries could be arbitrarily characterized as a “firm,” a

“seller,” a “reseller,” or “reseller-retailer’’ and so forth at

the whim of the FEA; that the FEA could treat Empire

and its subsidiaries as one business entity at one time and,

under the same regulation, as separate entities at another

time; and that Empire and its subsidiaries could be deemed

to be one “firm” under one regulation and, at the same

time, a congregation of separate “firms’’ under another reg-

ulation. Further, Empire contended that, because there

was no objective way of determining how to apply the

regulations, Empire and its subsidiaries were unable to con-

form their price and allocation policies to the mandates of

the regulations with any assurance that, in a retrospective

audit, the FEA would agree with Empire’s interpretation

of the regulations.

Empire contended that the inherent vagueness and

arbitrariness in the regulations invalidated the regulations

on Fifth Amendment due process grounds and hence invali-

dated the subpoenas, the only purpose of which was to

determine compliance with the regulations.

This defense does not claim that Empire and its

subsidiaries were immune from regulation; in fact, Empire

has consistently admitted that it is subject to the jurisdic-

tion of the FEA. Nor does this defense contest the FEA’s

subpoena power, or any of the procedural attributes of

the subpoenas. The crux of Empire’s tendered defense

has been the belief that in a judicial proceeding to enforce

administrative subpoenas issued solely to determine com-

pliance with specified regulations, it is an “appropriate

15

defense” that the specified regulations are arbitrary and

deny the due process of law guaranteed by the Fifth

Amendment of the United States.

The District Court, citing Oklahoma Press Publishing

Co., supra, as controlling authority, held that “determina-

tion of the .. . validity of agency regulations is not a

a condition precedent to enforcement of an agency

subpoena.” (B-6).

The Temporary Emergency Court of Appeals, pre-

sented with the same arguments on appeal, affirmed the

District Court, holding that “a court need not determine

that the regulatory scheme is valid and constitutional prior

to issuing an order enforcing an agency subpoena.” (A-

8). Again, Oklahoma Press Publishing Co., supra, was

discussed as the controlling decision of this Court, along

with its predecessors, Endicott Johnson Corp. v. Perkins,

317 U.S. 501, 63 S.Ct. 339 (1943) and Myers v. Bethlehem

Shipbuilding Corp., 303 U.S. 41, 58 S.Ct. 459 (1938). The

Temporary Emergency Court of Appeals did not discuss

the merits of Empire’s contentions that the regulations in-

volved were unconstitutional.

The Petitioners contend that the opinions below, and

cases in other district courts and circuit courts of appeal,

have consistently misconstrued the teaching of Oklahoma

Press Publishing Co. and that this misconstruction has re-

sulted in an abdication, in subpoena enforcement proceed-

ings, of the judiciary’s historic role as a curb on the arbi-

trary exercise of administrative power.

Oklahoma Press Publishing Co., supra, the touchstone

for all subsequent decisions involving judicial enforcement

of administrative subpoenas, involved a proceeding brought

by the administrator of the Wage and Hour Division of

the Department of Labor to enforce subpoenas duces tecum

16

issued to the Oklahoma Press Publishing Company to deter-

mine whether the newspaper was violating the Fair Labor

Standards Act. Five separate but related issues were de-

cided in the case. First, whether the First Amendment

prevented wage and hour regulatie: »f newspapers and

thus destroyed the statutory basis authorizing the sub-

poenas. Second, whether that Act contained unconstitu-

tional classifications which invalidated the Act and thus

the subpoenas based thereon. Third, whether the Fourth

Amendment prohibition against unreasonable searches and

seizures prevented Congress from authorizing “fishing ex-

peditions” into a corporation's books and records in order

to secure evidence of violations of the Act, without a prior

charge or complaint of violation. Fourth, whether Con-

gress, in spite of the apparently explicit language au-

thorizing subpoenas, had actually intended to grant the

administrator the authority to subpoena corporate records

without first determining that the subpoenaed party was

subject to the provisions of the Act. Fifth, whether a

court can order enforcement of an administrative subpoena

without determining that there is “probable cause” to be-

lieve that the subpoenaed party is subject to the provisions

of the Act.

These five specific questions concerned three general

issues: whether a determination that the Act was constitu-

tional was a prerequisite to enforcement of the subpoenas;

whether the Fourth Amendment limits or prohibits ad-

ministrative subpoena of corporate records; and whether

the Congress had the power and intended to grant the

Administrator the authority to subpoena corporate records

without first determining that there was “coverage,” that

is, that the subpoenaed party was, in fact, subject to the

provisions of the Act.

17

The main portion of the Court’s opinion deals with

resolving the questions contained in the latter two general

issues. Specifically, the Court held that despite some am-

biguous language in the legislative history, the Fair Labor

Standards Act clearly granted the Administrator the power

to issue subpoenas to determine compliance with the Act

and that the power to determine compliance necessarily

included the power to determine, by subpoenaing informa-

tion, the threshold question of whether a business was

subject to the Act. Oklahoma Press Publishing Co., supra

at 66 S.Ct. 506 and note 47. Secondly, the Court held

that the investigative subpoena authority which had been

granted the Administrator did not contravene the prohibi-

tions contained in the Fourth Amendment.

Neither of these holdings compel the conclusion that

a subpoenaed party cannot challenge the constitutionality

of an act or regulation with which compliance is to be

determined.

In fact, the holding in Oklahoma Press Publishing

Co. that “[i]t is enough that the investigation be for a

lawfully authorized purpose, within the power of Congress

to command” |supra at 505] and that the Administrator

“shall not act arbitrarily or in excess of his statutory

authority” [supra at 509], is predicated on the Court’s

explicit conclusion and holding that the Act’s regulation

of the newspaper was not unconstitutional as a violation

of the First Amendment. Rather than hold that Oklahoma

Press Publishing Company’s attack on the constitutionality

of the Act was improper or premature, the Court explic-

itly ruled upon that issue prior to considering the other

two general issues, holding that the Act was constitutional.

Unless this portion of the Court’s opinion is regarded as

surplusage, it must be regarded as authority for the Peti-

tioners’ contention that when administrative subpoenas is-

18

sued solely to determine compliance with specified regu-

lations are sought to be judicially enforced, it is an “appro-

priate defense” that these regulations are unconstitutional.

Nonetheless, lower courts have consistently refused

to examine the merits of a constitutional challenge to

the underlying statutes or regulations in a subpoena en-

forcement proceeding. The misreading by lower courts of

Oklahoma Press Publishing Co., is typified by the logic

employed by the Temporary Emergency Court of Appeals

in this case. After summarizing its view of this Court’s

holding in Oklahoma Press Publishing Co., the Temporary

Emergency Court of Appeals stated that:

“(t]he Court, in language now regarded as estab-

lishing the legal standard to be applied in subpoena

enforcement proceedings, held that ‘[i]t is enough

that the investigation be for a lawfully authorized

purpose within the power of Congress to command.’

327 U.S. at 209. In the instant case, the appellants

[Empire] have admitted that they are subject to the

FEA’s Mandatory Petroleum Allocation and Price Reg-

ulations. (Brief at 3.) Accordingly, the subpoenas

were issued for a lawful purpose and are entitled

to enforcement.” (A-9).

This logic, currently governing the decisions of the

lower courts, means that so long as the subpoenaed party

is or may be “covered” by the act or regulation sought

to be enforced, and the subpoenas are otherwise proper,

they will be enforced even if they are issued only to

determine compliance with acts or regulations that are

unconstitutional on their face, or even admitted by the

agency to be unconstitutional and unenforceable.

Of course, the courts cannot assume that the rule-

making power will be abused; however, where such abuse

19

is demonstrated, the judiciary is duty-bound to inquire

into the underlying facts and deny any bureaucratic excess.

For years the lower courts have used Oklahoma Press

Publishing Co. as their guide in enforcing administrative

subpoenas. However, in the thirty years since that case

was decided, the lower courts have distorted its teaching

to prevent interposing the type of defense which the Peti-

tioners herein assert.

The Courts below have ignored the merits of consti-

tutional challenges and have said, in effect, that if adminis-

trative agencies have the subpoena power, all subpoenas

issued thereunder must be enforced. On the belief that

justice delayed is justice denied, the Petitioners submit that

the enforcement proceeding is an appropriate stage in which

to test the constitutionality of the regulations. The parties

are before the court, the legal issues are squarely framed,

and a decision in favor of the opponent of the regulations

will obviate the need for the subpoenaed party to bear

the onerous and costly burden of complying with subpoenas

which later become a legal nullity. The Petitioners sub-

mit that if the FEA regulations herein are constitutional

no adverse affect will result from a judicial examination

of them in the instant proceeding.

The Petitioners present a substantial question of con-

stitutional law which has wide application to proceedings

involving federal agencies, persons regulated by those

agencies and the federal judiciary. The importance of

the question is whether the scone of judicial inquiry in ad-

ministrative subpoena enforcement proceedings is per-

functory or substantial. All persons subject to administra-

tive subpoenas need to know what constitutes an “ap-

propriate defense” and this case squarely presents that

issue.

20

2. This Court Should Decide Whether It Is Consti-

tutional for the Executive to Transfer, Without

Prior Legislative Authorization, All the Existing

Functions of a Legislatively-Created Administra-

tive Agency to an Executive Office When the Stat-

utory Authority for the Administrative Agency

Has Expired.

The FEA was created by Congress as an independent

agency. 15 U.S.C. §762. The Administrator of the FEA

was appointed by the President, by and with the advice

and consent of the Senate. 15 U.S.C. §763(a); 104 Cong.

Rec. S 10862 (daily ed. June 18, 1974). The above entitled

action was commenced by an officer of the FEA. On

July 30, 1976, the legislation which created and authorized

the FEA to fulfill its designated functions expired. 15

U.S.C. $$761 et seq.

On July 30, 1976, the President issued Executive Order

No. 11930 purporting to transfer all of the functions of

the FEA, its Administrator, officers and agents, to the

Federal Energy Office and its Administrator, officer and

agents. Such a transfer presumably was intended to en-

compass the continued prosecution of the above-entitled

action. Executive Order No. 11930, Section 9(a), 41 F.R.

32399. The Executive Order provided that the Adminis-

trator of the FEO is to be appointed by the President

but not subject to Senate confirmation. Executive Order

No. 11930, Section 1, 41 F.R. 32399.

In the courts below, the Petitioners contended that

such a transfer of functions was invalid, unauthorized and

unconstitutional, because in order for the President to

transfer the functions of an independent agency created

by statute, and powers of its Administrator, appointed

by the President and confirmed by the Senate, to an entity

within the Executive Office and its Administrator, ap-

21

pointed solely by the President, specific enabling legislation

making a determination that pending judicial subpoena

enforcement proceedings may be continued must exist.

Fleming v. Mohawk Wrecking & Lumber Co., 331 US.

111, 118, 67 S.Ct. 1129, 1133 (1947). There is no such

enabling legislation within the FEAA which authorizes

the President to effect such a transfer. 15 U.S.C. §§761

et seq.

The Petitioners based their contentions on the case

of Fleming v. Mohawk Wrecking & Lumber Co., 331 US.

111, 67 S.Ct. 1129 (1947), which presented the question

whether a successor administrator appointed by Executive

Order No. 9809, 11 Fed. Reg. 14281, had the authority

to enforce administrative subpoenas issued by his predeces-

sor who had been appointed by the President and con-

firmed by the Senate. The Executive Order also trans-

ferred the functions of an independent agency to an entity

within the Executive Office. The Court through Justice

Douglas stated that:

“We need not decide whether under the . . . Act the

President had authority to transfer functions of an

officer who need be confirmed by the Senate to one

appointed by the President without Senate confirma-

tion. For §2 of that Act provides:

‘(That) in carrying out the purposes of this title

the President is authorized to utilize, . . ., agencies,

. . Offices, or officers now existing by law, to

transfer any duties or powers from one existing

department, . . . agency, office or officer to an-

other, .. .’

The authority to ‘utilize .. . offices, or officers now

existing by law’ is sufficient to sustain the transfer

of functions under the Executive Order. . .”

22

The transfer of function in Fleming was deemed proper

because the President had complied with the specific en-

abling legislation authorizing a transfer from an Adminis-

trator confirmed by the Senate to an Administrator ap-

pointed by the President, but in this case there is no

similar enabling legislation. 15 U.S.C. §§761 et seq.

The question left open in Fleming, whether the execu-

tive can transfer, without prior legislative authorization,

the functions of an officer, appointed by the President

with confirmation by the Senate, to one appointed by

the President without Senate confirmation arises in this

case because the prosecution of the agency’s subpoena

enforcement proceedings was continued by the President’s

appointed officer when the statutory authority for the

administrative agency had expired and no prior legislative

authorization existed for the transfer of the functions of

the legislatively created agency to an executive office.

If the Executive may, without any prior legislative

authorization, continue the existence and functions of a

legislatively created administrative agency upon expiration

of its authorizing legislation by merely “transferring” it

into the Executive Office, then the recognized distinction

between the legislative and executive functions as estab-

lished in Articles I and II of the Constitution will have

fallen victim to the usurpation and abuse of power by

the Executive. The Petitioners submit that congressional

authorization for such a transfer is mandatory. If the

Executive can merely “transfer” the functions of expiring

administrative agencies to the Executive Office without

prior legislative authorization and approval, then the Ex-

ecutive has gone beyond the Constitutional limits placed

upon the proper exercise of Executive power. Such actions

by the Executive result in inroads being made upon

23

the doctrine of separation of powers as guaranteed by

the Constitution and it is the duty of this Court to act

as a safeguard against such actions. Otherwise, the Execu-

tive would have the power to continue in existence, within

the Executive Office, expired agencies merely by executive

decree.

To allow the Executive access to such power creates

a situation wherein the Executive Branch will make in-

roads upon the traditional functions of the Legislative

Branch, that of conceiving, structuring, and most im-

portantly, regulating administrative agencies which are

designed to serve the public good. Executive usurpation

of this legislative function impairs the separation of powers

which acts as the cornerstone of the democratic system, and

has the potential to do irreparable harm to the public wel-

fare. This Court must ascertain whether access to such

power, a power which has the ultimate potential to do

harm to the public welfare, should be allowed.

Additionally, it is desirable for the Court to occa-

sionally delineate standards which clarify and solidify the

distinction between the legislative and executive functions.

A question of interpretation of the recognized distinction

between the legislative and executive functions is pre-

sented here. The Petitioners assert that this case presents

one of those occasions where this Court should speak to

and clarify such a distinction.

These questions, having been left unanswered by this

Court in the Fleming case and being important primary

Constitutional questions, should be answered.

24

CONCLUSION

For these reasons, a Writ of Certiorari should issue

to review the Opinion of the Temporary Emergency Court

of Appeals.

Respectfully submitted,

SHERIDAN MORGAN

Harry A. Morris

DoNnALD H. Loupon

STEVEN G. EMERSON

Morris, LARSON, Kinc, STAMPER

& Boip

Suite 400, Two Crown Center

2420 Pershing Road

Kansas City, Missouri 64108

(816) 421-6767

Attorneys for Petitioners

Of Counsel:

Grisss, Roper, Loots & WILLIAMS

757 North Broadway

Milwaukee, Wisconsin 63202

CERTIFICATE OF SERVICE

I, Sheridan Morgan, a member of the Bar of the Su-

preme Court of the United States, hereby certify that pur-

suant to Fule 33.2(a) of the Rules of the Supreme Court

of the United States I have served the foregoing Petition

for Writ of Certiorari on counsel for Respondents, by de-

positing same in the United States mail, postage prepaid,

on January 4, 1977, addressed to Robert H. Bork, Solici-

tor General, Department of Justice, Washington, D.C. 20530

and upon Rex E. Lee, Assistant Attorney General, and

Barrie L. Goldstein, Attorney, Department of Justice, Wash- -

ington, D.C. 20530, counsel for Respondents.

SHERIDAN MorGAN

APPENDIX

APPENDIX A

TEMPORARY EMERGENCY COURT OF APPEALS

OF THE UNITED STATES

No. 8-3

UNITED STATES OF AMERICA, et al.,

Petitioners-Appellees,

v.

Empire GAs CORPORATION, et al.,

Respondents-Appellants.

Appeal from the United States District Court

for the Western District of Missouri

(No. 76-CV-64-W-4)

(Argued November 11, 1976 Decided December 8, 1976)

Before CHRISTENSEN, INGRAHAM, and Estes, Judges.

EsTEs, Judge.

This is an appeal from an August 9, 1976 order of the

District Court for the Western District of Missouri en-

forcing 61 subpoenas issued by the Federal Energy Ad-

ministration (FEA) to a retail marketer of propane, Em-

pire Gas Corporation (Empire), and 60 of its subsidiaries

(appellants). Empire and its approximately 300 sub-

sidiaries are subject to FEA’s Mandatory Petroleum Allo-

cation and Price Regulations, 10 C.F.R. Parts 210, 211 and

212.

A-2

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 Feb-

ruary through October, 1974. On or about January 15,

1975, the audit was suspended at the request of appellants.

In order to obtain aocuments and information for com-

pletion 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 sub-

sequent issuance of the present subpoenas, Empire sub-

mitted, on September 2, 1975, to the General Counsel of

FEA a Reguest 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 Ap-

peal (D.R.) at 232]. On May 28, 1976, the FEA issued

an interpretation to Empire “which does not support Em-

pire’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 sub-

poenas.

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

A-3

(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 seg. (EPAA); and

ordered the appellants to appear and give testimony before

the appellees. The court further ordered that the appel-

lants “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 Mo-

tion to Modify the Court’s Order enforcing the administra-

tive 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 « ‘th

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 sub-

poenas were issued to determine compliance with FEA

regulations, 10 C.F.R. Parts 210, 211 and 212, which regula-

tions are arbi rary, 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 administra-

tor, officers and agents, to the Federal Energy Office

(FEO), its administrator, officers and agents, was invalid,

unauthorized, and unconstitutional, resulting in the expira-

tion of the authorization for the subpoenas and, hence,

termination of this subpoena cnforcement action.

A-4

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 Ad-

ministration 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 man-

dates.’

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 op-

erating facilities or business premises who are engaged

in any phase of energy supply or major energy con-

sumption shall make available to the Administrator

such information and periodic reports, records, docu-

ments, 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)—The administrator, or

any of his duly authorized agents, shall have the power

to require by subpoena the attendance and testimony

1. The procedures for implementing FEA’s statutory author-

ity to collect data and information by subpoena are set forth

in FEA’s procedural regulations at 10 C.F_R. 205.8.

ee

A-5

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 enforce-

ment 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 requir-

ing the party to whom such subpoena is directed to

appear before the Administration and to give testi-

mony touching on the matter in question, or to produce

any matter described in paragraph (1) of this subsec-

tion, 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 sub-

poenas 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 sec-

ti.a 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

A-6

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 presez.t petroleum pricing regulations of the FEA

orginated from tne 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

A-7

could be accumulated (or “Lanked”) and passed through

in future months. 10 C.F.R. § 212.93(e). Also, the sell-

ing 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 been amended

several times. For example, in April, 1974, FEA amended

$ 212.93(b) to permit retailers like Empire to increase the

selling prices for propane in order to reflect certain non-

product cost increases. 39 F.R. 12019 (April 2, 1974).

Furthermore, in November, 1974, FEA established a 10

percent limit on the amount of “banked costs” which may

be used for price increases in a single month. 39 F.R.

39259 (November 6, 1974). In addition, FEA implemented

a change in December, 1974, in the pricing of propane

by permitting unequal application among classes of pur-

chasers of increased product costs.

C. FEA Ruling

On March 7, 1975, FEA issued Ruling 1975-2, 3 CCH

Energy Management % 16,042, entitled “application of the

Term ‘Class of Purchaser’ under FEA Petroleum Price

Regulations,” 40 F.R. 10655. Ruling 1975-2 interprets the

manner in which the class of purchaser doctrine, initially

established by the CLC and carried forward by the FEA,

is to be applied. Under this ruling, the doctrine applies

to all sales of covered products by resellers, like Empire,

whose price must be based on the prices they charged

various classes of purchasers for a particular product on

May 15, 1973.*

2. “By way oi explanation and numerous examples, FEA’s

Ruling 1975-2 provided extensive and necessary clarification of

the application of the CLC/FEA class of purchaser doctrine to

the myriad transactions which can arise in the sale of crude oil

and petroleum products. Consequently, the guidance contained

in Ruling 1975-2 is applicable to sales made by Empire under

the CLC/FEA regulations and the information which the FEA

needs to complete its audit of Empire is in large measure deter-

mined by that Ruling.” Appellees’ (Government's) Brief, pp. 6-7.

A-8

I. The District Court Properly Enforced the Subpoenas

Issued to Determine Compliance with the FEA’s

Mandatory Allocation and Pricing Regulations.

A. The appellants’ contention that the FEA pricing

and allocation regulations contained in 10 C.F.R. Parts

2!9, 211, and 212 for the pricing and allocation of crude

oil and refined petroleum products, including propane, are

unconstitutional because they are arbitrary, vague and

ambiguous does not constitute a valid defense in this sub-

poena enforcement proceeding. At page 15 of their brief,

appellants state:

The crux of Appellants’ objections is simple: ap-

plication of the substantive regulations contained in

10 C.F.R. Parts 210, 211 and 212 is left to the

arbitrary power of the FEA because there is no ob-

jective way, given the illusory definitions of “firm”,

“supplier”, “retailer”, etc. contained therein, of ap-

plying the price and allocation rules to complex busi-

ness entities such as Empire and its subsidiaries,

Appellees correctly respond that appellants cannot re-

sist enforcement of the subpoenas solely on the ground

of alleged unconstitutionality of regulations which the

appeliees can not determine were violated until they have

examined the subpoenaed information.

As the cases discussed below illustrate, a court need

not determine that the regulatory scheme is valid and

cor:stitutional prior to issuing an order enforcing an agency

subpoena.

In Oklahoma Press Publishing Company v. Walling,

327 U.S. 186, 66 S.Ct. 494 (1945), the Supreme Court re-

jected the petitioners’ argument that the Administrator

of the Wage and Hour Division of the Department of

Labor could not enforce a subpoena without a prior ad-

A-9

judication that the act in question covered the petitioners’

activities. The acceptance of the petitioners’ contention

“would stop much if not all of investigation at the threshold

of inquiry... .” 327 U.S. at 213. The Court, in language

now regarded as establishing the legal standard to be

applied in subpoena enforcement proceedings, held that

“lijt is enough that the investigation be for a lawfully

authorized purpose within the power of Congress to com-

mand.” 327 U.S. at 209. In the instant case, the appel-

lants have admitted that they are subject to the FEA’s

Mandatory Petroleum Allocation and Price Regulations.

(Brief at 3.) Accordingly, the subpoenas were issued for

a lawful purpose and are entitled to enforcement.

The validity of a subpoena issued by the Secretary

of Labor in administrative proceedings under the Walsh-

Healey Public Contracts Act was disputed in Endicott

Johnson Corp. v. Perkins, 317 U.S. 501 (1943). The cor-

poration resisted enforcement of the subpoena based, inter

alia, on the allegedly “arbitrary, artificial, unreasonable,

discriminatory, and capricious” (317 U.S. at 507) nature

of a ruling by Secretary Perkins that the Act applied to

petitioner. The Court rejected the argument and held:

Nor was the District Court authorized to decide the

question of coverage itself. The evidence sought by

the subpoena was not plainly incompetent or irrelevant

to any lawful purpose of the Secretary in the dis-

charge of her duties under the Act, and it was the

duty of the District Court to order its production for

the Secretary’s consideration. The Secretary may take

the same view of the evidence that the District Court

did, or she may not. The consequence of the action

of the District Court was to disable the Secretary

from rendering a complete decision on the alleged

violation as Congress had directed her to do... .

{317 U.S. at 509, emphasis added }

A-10

The Supreme Court dismissed petitioner’s assertions re-

lating to “the meaning of the contract and the Act as

implemented by administrative rulings in existence at the

time of the making and performance of the contract ...”

(317 U.S. at 509 note 11), by stating:

The petitioner has advanced many matters that are

entitled to hearing and consideration in its defense

against the administrative complaint, but they are not

of a kind that can be accepted as a defense against

the subpoena. | Emphasis added; id.]

The similarity between the arguments appellants urge

we accept and those rejected by the Supreme Court in

Endicott Johnson is apparent. The district court correctly

held that the “determination of the applicability or validity

of agency regulations is not a condition precedent to

enforcement of an agency subpoena. Indeed, to find other-

wise would .. . permit regulated parties an end run attack

upon regulation whenever they found themselves broken

at the center.” (D.R. 260-261 )*

In Myers v. Bethlenem Corporation, 303 U.S. 41, 58

S.Ct. 459 (1938), petitioner sought to enjoin the National

Labor Relations Board from holding a hearing for the

alleged reason that the Board lacked jurisdiction over it.

The petitioner argued that it should not be subjected to

a futile, expensive, and vexing hearing. As the district

court noted below, the Supreme Court held that the peti-

tioner’s contention of irreparable damage was

at war with the long settled rule of judicial adminis-

tration that no one is entitled to judicial relief for

3. This is only the commencement of administrative pro-

cedures which must be exhausted prior to agency determination

of violations of the Mandatory Allocation and Price Regulations.

See City of New York v. New York Telephone Co., 468 F.2d 1401,

1402 (TECA 1972).

A-11

a supposed or threatened injury until the prescribed

administrative remedy has been exhausted. ... Ob-

viously, the rule . . . cannot be circumvented by as-

serting that the charge on which the complaint rests

is groundless and that the mere holding of the pre-

scribed administrative hearing would result in irrep-

arable damage. Lawsuits also often prove to have

been groundless; but no way has been discovered of

relieving a defendant from the necessity of a trial

to establish the fact. [303 U.S. at 50.]

In fact, the only case cited by the appellants in which

the subpoenas were held to be unenforceable was Shasta

Minerals & Chemical Co. v. Securities & Exchange Com-

mission, 328 F.2d 285 (10 Cir. 1964). The unrebutted af-

fidavits which the Shasta appellants submitted to the dis-

trict court described systematic persecution and harass-

ment by the S.E.C. Shasta held that it was an appropriate

exercise of judicial review, since the agency admitted the

truth of the affidavits for purposes of a motion for sum-

mary judgment, to determine whether the S.E.C. was act-

ing arbitrarily or outside the scope of its authority. 328

F.2d at 288. No element of harassment is present in this

case, so Shasta is clearly distinguishable.

Section 307 of Davis on Administrative Law, cited

by appellants (Brief p. 6), deals with the privilege against

self-incrimination in subpoena enforcement proceedings,

and it does not support the contention that it is a pre-

requisite to enforceability of these subpoenas that the regu-

latory scheme with which the appellants must comply

be determined valid. Rather, it is stated in Section 307

that “a corporation . .. enjoy[s] no privilege against self

incrimination and that [its] representatives similarly en-

joy no privilege against self incrimination with respect

to the records of the organization . . .,” supported by Wilson

A-12

v. United States, 221 U.S. 361, 31 S.Ct. 538, 55 L.Ed. 771

(1911). Justification for this rule is stated in United States

v. White, 322 U.S. 694, at 701, 64 S.Ct. 1248, at 1252:

Basically, the production of the records of any or-

ganization, whether it be incorporated or not, arises

out of the inherent and necessary power of the federal

and state governinents to enforce their laws, with

the privilege against self-incrimination being limited

to its historic function of protecting only the natural

individual from compulsory incrimination through his

own testimony or personal records. [Emphasis added]

The appellants contend that enforcement of the sub-

poenas prior to a judicial determination of the validity

of the FEA’s Mandatory Allocation and Pricing Regulations

will deny them effective relief. The substance of this

contention is at page 19 of the appellants’ brief:

[They] anticipate that the appellees will respond to

the above arguments by claiming that the objections

are premature because no Notice of Probable Viola-

tion or Remedial Order has as yet been issued. How-

ever, no effective relief can be granted against the

burden of complying with unconstitutional FEA sub-

poenas unless the constitutional issues are decided pri-

or to compliance. The issues are clearly framed, the

Appellants face immediate hardship, and the resolution

of these issues will have sufficient immediate impact

to satisfy any ripeness test posed by the court. No

relief from the burden of the subpoenas can be granted

to the Appellants if, after producing all their records

for audit, it is determined that the regulations are

invalid. Conversely, if the regulations are valid, no

harm will inure to the FEA by being required to

wait somewhat longer for the records, given that the

information on the records themselves will not change.

A-13

To defer the resolution of these issues is to deny

the Appellants effective relief. Moreover, the Appel-

lants are obligated to raise their constitutional objec-

tions at the earliest available stage lest the objections

be waived.

This argument must be rejected. If the FEA deter-

mines that the appellants have violated the Mandatory

Allocation and Price Regulations after examination of the

subpoenaed information, the apr llants will have an oppor-

tunity first to challenge those regulations in the administra-

tive forum and later to seek judicial review.

The district court correctly stated: “It is, of course,

significant that the applicability of the regulations to re-

spondents cannot be determined until the information

sought by subpoena is made available to the FEA investi-

gators.” (D.R. at 258-259)

Il. The District Court Properly Refused to Modify the

Scope of the Subpoenas.

Appellants contend that the district court erred in

not modifying the scope of the subpoenas to preclude re-

examination of documents and records previously made

available in connection with the FEA audit commenced

October 29, 1974. Administrative subpoenas should be

enforced if the information sought is relevant. United

States v. Morton Salt, 338 U.S. 632, 641-643 (1949); Endicott

Johnson v. Perkins, supra, at 509; 1 Davis, Administrative

Law Treatise, § 306, pp. 188-189 (1958). The information

sought relates to the appellants’ prices, costs, sales, pur-

chases and receipts and is unquestionably relevant. The

district court properly concluded (D.R. p. 259) that

respondents’ |appellants’] assertion of the burden in-

herent in providing the subpoenaed documents and

A-14

the resulting interruption of Empire’s business opera-

tions fails to demonstrate a deprivation of due process

of law, particularly in view of petitioners’ [appellees’]

willingness to make inspection of the documents at

Empire’s headquarters and make copies of any ma-

terials necessary for completion of the audit. Thus,

respondents have failed to raise a substantial constitu-

tional issue sufficient to require certification to the

Temporary Emergency Court of Appeals and this

Court has jurisdiction to determine enforceability of

the subpoenas. See Delaware Valley Apartment House

Owners Ass’n v. United States, 350 F.Supp. 1144, 1149-

50 (E.D.Pa. 1973), aff'd 482 F.2d 1400 (TECA 1973).

Although the retail price reports of all appellants were

made available in the course of the October 29, 1974,

audit, the FEA focused only on the December part of

the audit containing daily log sheets of 32 Empire sub-

sidiaries. (Stipulation filed May 17, 1976; D.R. 199). Ap-

pellants maintain that this duplication of production of

documents imposes an unnecessary burden, but they admit

in their brief at p. 25 that “no specific evidence is con-

tained in the record as to the precise degree of overlap.”

Appellants heve not shown that the information sought

by the subpoenas is unnecessarily duplicative; and the

contention that they should be modified is denied.

III. The Administrator of the FEA Had Authority for Is-

suance and Judicial Enforcement of the Subpoenas,

Correctly Enforced by the District Court.

Appellants’ assertion that the temporary expiration‘

of the FEAA on Julv 30, 1976, bota rendered the sub-

4. The FEAA, which provided for the existence of the FEA

and its Administrator, expired on July 30, 1976. Due to the

expiration, the President issued Executive Order No. 11930, 41

(Footnote continued on following page)

A-15

poenas unauthorized and removed the authority of the

FEA Administrator to continue the subpoena enforcement

action must be denied for the reasons discussed below.

First, the general saving statute, 1 U.S.C. 109,° is applicable

(Continued from previous page)

F.R. 32399 (August 3, 1976), on July 30, 1976, establishing a

Federal Energy Office (FEO) within the Executive Office of

the President. Pursuant to Section 6 of Executive Order 11930,

the Administrator of the newly-created FEO was given all of

the authority of the defunct Administrator of the FEA. That

authority included the power vested in the President by the

EPAA. See, Executive Order No. 11790, 31 F.R. 23185 (June

27, 1974). On August 14, 1976, the Energy Conservation and

Production Act, P.L. 94-385, 2 CCH Energy Management § 10,450,

was signed as a lew. Section 112(a) of the Energy Conservation

and Production Act extends the FEAA through December 31,

1977, and Section 112(b) of the act provides that the extension

should be effective as of July 30, 1976. As a result, the Presi-

dent terminated the FEO in Executive Order No. 11933, 41 F.R.

36641 (August 31, 1976).

5. This statute provides in pertinent part:

§ 109. Repeal of statutes as affecting existing liabilities.

The repeal of any statute shall not have the effect to

release or extinguish any penalty, forfeiture, or liability in-

curred under such statute, unless the repealing Act shall

so expressly provide, and such statute shall be treated as

still remaining in force for the purpose of sustaining any

proper action or prosecution for the enforcement of such

penalty, forfeiture, or liability. The expiration of a tem-

porary statute shail not have the effect to release or ex-

tinguish any penalty, forfeiture, or liability incurred under

such statute, unless the temporary statute shall so expressly

provide, and such statute shall be treated as still remaining

in force for the purpose of sustaining any proper action or

prosecution for the enforcement of such penalty, forfeiture,

or liability.

The Energy Policy and Conservation Act (EPCA), P.L. 94-163,

December 22, 1975, amends and extends the EPAA through Sep-

tember 30, 1981; therafter, the district courts and this court will

have continuing jurisdiction over actions within the meaning of

the general saving statute, 1 U.S.C. § 109, and the new saving

statute, EPAA § 18, as amended by the EPCA. The amended

saving statute, EPAA § 18, added by EPCA § 461, explicitly

provides:

{sJuch expiration shall not affect any action or pending pro-

ceedings, administrative, civil, or criminal, not finally de-

termined on such date [September 30, 1981], nor any ad-

ministrative, civil, or criminal action or proceeding, whether

or not pending, based upon any act committed or liability

incurred prior to such expiration date.

A-16

to the case sub judice. Interpreting Allen v. Grand Central

Aircraft Company, 347 U.S. 535 (1953), this court, in United

States v. State of California, 504 F.2d 750, 754 (TECA

1974), cert. denied, 421 U.S. 1015 (1975), stated:

[T]he “precise object of the general savings statute

is to prevent the expiration of a temporary statute

from cutting off appropriate measures to enforce the

expired statute in relation to violations of it, or of

regulations issued under it, occurring before its expira-

tion.” 347 U.S. at 554-555, 74 S.Ct. at 756 [emphasis

added].

Thus, actions in the nature of pending enforcement

proceedings survive the expiration of the ESA; and by

the same reasoning, such actions survive the expiration

of the FEAA. Accord, Tasty Baking Company v. Cost

of Living Council, 529 F.2d 1005, 1009-11 (TECA 1975).

Cf. People of State of California, State Lands Com’n v.

Simon, 504 F.2d 530 (TECA 1974).

The instant subpoena enforcement action was insti-

tuted on January 20, 1976, a date when the FEAA was

in effect; and it survives as a pending enforcement pro-

ceeding initiated prior to the expiration of the FEAA,

which act survives any termination by virtue of the sav-

ing provision in ESA Section 218. Tasty Baking Company

v. Cost of Living Council, 529 F.2d at 1010-11.

Second, the President has the power to “delegate all

or any portion of the authority granted to him under

this Act to such officers, departments, or agencies of the

United States ... as he deems apprepriate.” EPAA § 5(b).

That Presidential authority includes the subpoena enforce-

ment power contained in Section 206 of the ESA. Thus,

the congressional grant within the EPAA of power to

delegate enabled the President to establish the FEO and

A-17

to grant its Administrator su)poena enforcement authority

identical to that previously given the Administrator of

the FEA by the provisions of FEAA Sections 13(e) (1)

and 13(e) (2).

Third, the legislative history reflects that Congress

intended for the FEA to continue its functions in an unin-

terrupted fashion. According to the conference committee

on the Energy Conservation and Production Act:

The conferees completed their work on this legis-

lation on July 30, 1976. Because the conference report

could not be filed and acted upon by both Houses

and presented to the President before the expiration

of the Agency, the conferees added language to the

bill to make the extension retroactive. It is the intent

of the conferees that this retroactive provision have

the effect of permitting the organic Act to continue

uninterrupted. Further, it is the intent of the con-

ferees that the Agency, its functions (including pend-

ing regulatory matters), appointments and other per-

sonnel matters, prior obligations and programs, shall

be deemed to have continued uninterrupted despite the

brief period between July 30, 1976 and the effective

date of this legislation.

The conferees are aware inat, because of the neces-

sity to continue existing energy programs, the Presi-

dent issued Executive Order No. 11930 on July 30th

establishing a Federal Energy Office (FEO) in the

Executive Office of the President. The conferees do

not intend to suggest that action taken during the

hiatus period by the FEO and consonant with the

procedures required by the FEA Act would be invali-

dated by this Act. [Conf. Rep. No. 94-1119, 94th

Cong., 2d Sess., p. 68 (1976); emphasis added; U.S.

A-18

Code Cong. & Ad. News Pamphiet No. 8, p. 3199

at 3216]

Appellants mistakenly rely upon Fleming v. Mohawk

Wrecking and Lumber Company, 331 U.S. 111, 91 L.Ed.

1375 (1946). There the Supreme Court held that the Presi-

dent had authority to transfer subpoena enforcement power

from the Federal Works Administrator, an officer ap-

pointed by the President and confirmed by the Senate,

to the Temporary Controls Administrator, a juridical crea-

tion of the President. The Court recognized that it would

be inconsistent to require ‘an officer, previously confirmed

by the Senate” to be “once more confirmed in order to

exercise the powers transferred to him by the President.”

331 U.S. at 118. The Court considered congressional intent:

Any doubts on this score would, moreover, be removed

by the recognition by Congress in a recent appropria-

tion of the status of the Temporary Controls Admin-

istrator. That recognition was an acceptance or rati-

fication by Congress of the President’s action in Execu-

tive Order No. 9809... . [331 U.S. at 118-119]

The situation in the case before this court is not unlike

that in Fleming. The President was given specific au-

thority to grant subpoena enforcement power to the Ad-

ministrator of the FEO, an individual who was confirmed

by the Senate, and the Congress ratified his action in

enacting the Energy Conservation and Production Act, P.L.

94-385 (August 14, 1976), 2 CCH Energy Management

{| 10,450.

Even if there were any validity to appellants’ asser-

tion that the FEA Administrator’s authority to enforce

the subpoenas did not continue, the appellants overlook

the authorization of delegation of subpoena power granted

A-19

by ESA Section 206 as incorporated by EPAA Section

5(a) (1), which provides in pertinent part:

§ 206. Subpoena power.

The head of an agency exercising authority under

this title, or his duly authorized agent, shall have

authority, for any purposes related to this title, to

sign and issue subpoenas for the attendance and testi-

mony of witnesses and the production of relevant

books, papers, and other documents. ... 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 subpoena, or his delegatee,

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.

Clearly, appellees relied upon this section of the statute

in their Petition for Enforcement (D.R. at 1), and plainly

this is an independent basis for the Administrator’s con-

tinued exercise of subpoena enforcement authority.

The order of the district court appealed from is AF-

FIRMED.

APPENDIX B

OPINION OF THE UNITED STATES DISTRICT

COURT FOR THE WESTERN DISTRICT

OF MISSOURI

UNITED STATES of America et al., Petitioners,

V.

EMPIRE GAS CORPORATION et al., Respondents.

No. 76 CV-64-W-4

United States District Court, W. D. Missouri, W. D.

Filed: Aug. 9, 1976.

ORDER

ELMO B. HUNTER, District Judge.

This is an action to enforce sixty-one subpoenas issued

by the Federal Energy Administration (FEA) to Empire

Gas Corporation (Empire) and sixty of its subsidiaries in

order to complete an audit pursuant to FEA’s regulatory

scheme. Empire, a retail marketer of propane operating

approximately 300 subsidiaries located in several states, is

subject to FEA’s Mandatory Petroleum Allocation and

Price Regulations (10 C.F.R. §§ 210, 211 and 212).

Jurisdiction is alleged under Sections 206 and 211 of

the Economic Stabilization Act of 1970, as amended, 12

U.S.C. § 1904 note, incorporated by reference in Section

5(a)(1) of the Emergency Petroleum Allocation Act of

1973, as amended, 15 U.S.C. §§ 751 et seq. (1973), and upon

Section 13(e)(2) of the Federal Energy Administration

Act of 1974, 15 U.S.C. §§ 761 et seq., and regulations prom-

ulgated thereunder.

B-2

The subpoenas here in issue, served in October 1975,

direct respondents to appear, testify, and produce various

documents and records. Empire’s subsequent motion to

quash or suspend service of the subpoenas, filed with FEA’s

regional office, was denied. Empire continued to refuse

compliance with the subpoenas and, on January 20, 1976,

FEA brought this action for enforcement.

On April 29, 1976, the parties entered into a stipula-

tion whereby counsel for Empire accepted service of the

subpoena issued to Empire’s parent corporation, as well as

the subpoenas directed to sixty subsidiaries. On May 3,

1976, this Court ordered respondents to show cause why

FEA’s subpoenas should not be enforced, and return to

that Order was filed May 12, 1976. At the hearing con-

ducted on May 14, 1976, both parties presented evidence

and respondents submitted a trial brief. Following peti-

tioner’s brief responding to respondents’ contentions, filed

on July 26, 1976, respondents filed a Motion to Certify

Constitutional Issues to the Temporary Emergency Court

of Appeals pursuant to § 211(c) of the Economic Stabiliza-

tion Act of 1970, as incorporated by reference in § 5(a) (1)

of the Emergency Petroleum Allocation Act of 1973.

Jurisdiction

The first issue to be determined herein is the jurisdic-

tion of this Court to entertain the claims raised by the

parties. Section 13(b) and (e) of the Federal Energy

Administration Act, 15 U.S.C. § 772(b), (e), clearly autho-

rize the Administrator of FEA or authorized agents to

collect information and issue subpoenas, and Section 13(e)

(2) of the Act, 15 U.S.C. § 772(e) (2) further provides:

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 requir-

B-3

ing the party to whom such subpoena is directed to

appear before the Administration and to give testi-

mony touching on the matter in question, or to pro-

duce any matter described in paragraph (1) of this

subsection, and any failure to obey such order of the

court may be punished by such court as a contempt

thereof.

A further provision for judicial review, however, com-

plicates the jurisdictional issue. Section 5(a)(1) of the

Emergency Petroleum Allocation Act, as amended, 15

U.S.C. § 754(a) (1) (1973), incorporates by reference and

applies to FEA’s actions the judicial review provisions of

Section 211 of the Economic Stabilization Act of 1970, 12

U.S.C. § 1904 note. Section 211 creates a Temporary

Emergency Court of Appeals with powers and jurisdiction

of a Circuit Court of Appeals for the purposes of litigation

brought under the Emergency Petroleum Allocation Act.

Further, Section 211(c) limits the jurisdiction of United

States District Courts as follows:

In any action commenced under this title in any

district court of the United States in which the court

determines that a substantial constitutional issue

exists, the court shali certify such issue to the Tem-

porary Emergency Court of Appeals. Upon such cer-

tification, the Temporary Emergency Court of Appeals

shall determine the appropriate manner of disposition

which may include a determination that the entire

action be sent to it for consideration or it may, on the

issues certified, give binding instructions and remand

the action to the certifying court for further disposi-

tion. (emphasis supplied )

Thus, if respondents have raised a substantial constitu-

tional issue in their opposition to the enforcement of FEA’s

B-4

subpoenas, this Court must certify such issue to the Tem-

porary Emergency Court of Appeals.

Upon careful review of the record and evidence pre-

sented in this case, however, this Court has determined

that no substantial constitutional issue exists. Respon-

dents have challenged enforcement of the subpoenas on the

ground that the regulations on which they are based are

ambiguous and arbitrary as applied, and that compliance

with the subpoenas would be unduly burdensome, thus

depriving respondents of due process of law. These con-

stitutional arguments are without merit for the following

reasons. First, this Court finds no ambiguity in the terms

“firm,” “seller,” “reseller,” and “retailer” as employed in

the regulations, and further finds that FEA’s Interpreta-

tion of May 28, 1976, removes any doubt which Empire

may have entertained concerning the application of the

regulations to its business operations.’

Moreover, the facts fail to support respondents’ alle-

gation of arbitrary or inconsistent application of FEA regu-

lations to Empire and its subsidiaries; rather, the Court

finds that although the investigation by FEA into possible

price violations by Empire and its 300 subsidiaries has

been interrupted and delayed over the course of two years,

the evidence reveals neither arbitrary nor inconsistent ap-

plication of the regulations. As for respondents’ assertion

that the regulations permit arbitrary application by FEA,

it is of course significant that the applicability of the

regulations to respondents cannot be determined until the

information sought by subpoena is made available to the

FEA investigators. In other words, the application of the

1. In addition, the Court notes that although Empire has

appealed through agency procedures certain of the issues dealt

with in the FEA Interpretation, the appeal contains no claim of

ambiguity in the regulations or inability to ascertain how the

terminology of the regulations should be applied.

B-5

definition of a “firm” to Empire—the basis of respondents’

constitutional attack on the regulations—can be determined

only on the basis of information which at all times has

been available to Empire and its subsidiaries and. access

to which respondents attempt to deny petitioners.

Finally, respondents’ assertion of the burden inherent

in providing the subpoenaed documents and the resulting

interruption in Empire’s business operations fails to demon-

strate a deprivation of due process of law, particularly

in view of petitioners’ willingness to make inspection of

the documents at Empire’s headquarters and make copies

of any materials necessary for completion of the audit.

Thus, respondents have failed to raise a substantial consti-

tutional issue sufficient to require certification to the Tem-

porary Emergency Court of Appeals and this Court has

jurisdiction to determine enforceability of the subpoenas.

See Delaware Valley Apartment House Owners Ass’n v.

United States, 350 F.Supp. 1144, 1149-50 (E.D.Pa.1973),

aff'd 482 F.2d 1400 (Em.App.1973).

Enforceability of Subpoenas

The power of the FEA to subpoena documents in

the course of its investigations is a broad one, and it

is sufficient for enforceability of its subpoenas that the

inquiry is within the agency’s authority, the demand is

not too indefinite, and the information sought is reasonably

relevant to a proper subject of inquiry. United States

v. Morton Salt Co., 358 U.S. 632, 70 S.Ct. 357, 94 L.Ed.

401 (1950); Oklahoma Press Publishing Co. v. Walling,

327 U.S. 186, 66 S.Ct. 494, 90 L.Ed. 614 (1946); Civil Aero-

nautics Board v. Hermann, 353 U.S. 322, 77 S.Ct. 804,

1 L.Ed.2d 852 (1957); Adams v. Federal Trade Commission,

296 F.2d 861 (8th Cir. 1961), cert. denied 369 U.S. 864,

82 S.Ct. 1029, 8 L.Ed.2d 83. These requirements clearly

B-6

were met by the subpoenas sought to be enforced in this

action.

Nevertheless, respondents have attempted to assert

the alleged arbitrariness in the FEA regulatory scheme

as a defense to enforceability of the subpoenas. The

futility of this argument, however, is illustrated by the

United States Supreme Court’s holding in Oklahoma Press

Publishing Co. v. Walling, 327 U.S. at 214, 66 S.Ct. at

508, where subpoenas of the Federal Trade Commission

were enforced despite a challenge on the ground that peti-

tioner was not covered by the Fair Labor Standards Act.

The Court stated:

We think, therefore, that the Courts of Appeals

were correct in the view that Congress has authorized

the Administrator, rather than the District Courts in

the first instance, to determine the question of cov-

erage in the preliminary investigation of possibly exist-

ing violations; in doing so to exercise his subpoena

power for securing evidence upon that question, by

seeking the production of petitioners’ relevant books,

records and papers; and, in case of refusal to obey

his subpoena, issued according to the statute’s authori-

zation, to have the aid of the District Court in enforc-

ing it. No constitutional provision forbids Congress

to do this.

Thus, determination of the applicability or validity

of agency regulations is not a condition precedent to en-

forcement of an agency subpoena. Indeed, to find other-

wise would disable the agency from rendering a complete

decision on an alleged violation as Congress has directed,

and would permit regulated parties an end run attack

upon regulation whenever they found themselves blocked

at the center. Such interference by the courts in every

B-7

instance with agency proceedings is neither advisable nor

permissible.’

It is further important to note at this point that this

action arises after a delay of approximately one year in

the audit necessary for FEA to initiate the compliance

process. There has, as yet, beew no determination of pric-

ing violations by Empire or its subsidiaries, no remedial

order issued by FEA, nor any administrative appeal by

Empire challenging the validity of the remedial order.

Only by compliance with the subpoenas may Empire’s

status be determined, and only after exhaustion of avail-

able administrative remedies in the event of a violation

will Empire’s compliance with the FEA regulations be

an appropriate subject for judicial review. See Adams

2. The enforceability of the subpoenas despite challenge to

the regulations is further indicated by specific statutory provision.

The judicial review section of the Economic Stabilization Act of

1970, incorporated by reference and made applicable to the

Emergency Petroleum Price Allocation Act, provides:

The Temporary Emergency Court of Appeals, and the

Supreme Court upon review of judgments and orders of the

Temporary Emergency Court of Appeals, shall have exclusive

jurisdiction to determine the constitutional validity of any

provision of this title or of any regulation or order issued

under this title. Except as provided in this section, no court,

Federal or State, shall have jurisdiction or power to consider

the constitutional validity of any provision of this title or

of any such regulation or order, or to stay, restrain, enjoin,

or set aside, in whole or in part, any »rovision of this title

authorizing the issuance of such regulations or orders, or any

provision of any such regulation o: order, or to restrain or

enjoin the enforcement of any such provision.

Therefore, respondents’ claim that FEA’s subpoenas are unen-

forceable due to constitutional infirmities in the price regulations

does not require that this Court refuse enforcement of the sub-

poenas on constitutional grounds. See Refiners Ass’n v. Dunlop,

486 F.2d 1388 (Em.App.1973); United States v. Ohio, 487 F.2d

936 (Em.App.1973); see also Delaware Valley Apartment House

Owners Ass'n v. United States, 350 F.Supp. 1144, 1149-50 (E.D.

Pa.1973), aff'd 482 F.2d 1400 (Em.App.1973). Nothing in the

statute indicates an intention to deprive the District Courts of

their power to enforce agency subpoenas, and such an intention

will not be inferred.

B-8

v. Federal Trade Commission, 296 F.2d 861, 864 (8th Cir.

1961), cert. denied 369 U.S. 864, 82 S.Ct. 1029, 8 L.Ed.2d

83 (1962); Myers v. Bethlehem Shipbuilding Corp., 303

U.S. 41, 58 S.Ct. 459, 82 L.Ed. 638 (1937).

Thus, the only remaining determination for this

Court is whether the agency abused its discretion in issuing

the subpoenas to Empire and its subsidiaries. No abuse

of discretion is revealed by the evidence in this case.

Rather, the information sought by subpoena is necessary

to completion of the audit pursuant to the regu-

latory scheme, and the issuance of the subpoenas, under

the circumstances, was neither premature nor unreason-

able. Neither is this a case where sensitive constitutional

rights are implicated upon compliance with the subpoena,

nor is there any element of harassment where, as here,

the subpoena was issued and enforced according to law.

See Oklahoma Press Publishing Co. v. Walling, 327 U.S.

at 217, 66 S.Ct. 494. Finding no abuse of discretion in

the issuance of the subpoenas, this Court has determined

that the subpoenas are enforceable.

For all the foregoing reasons, therefore, it is

ORDERED that respondents’ Motion to Certify Con-

stitutional Issues to the Temporary Emergency Court of

Appeals is denied. It is further

ORDERED that respondents appear before petitioners

and give testimony as required by the subpoenas, and

that respondents make available for inspection and copying

at the headquarters of Empire Gas Company all documents,

records, and materials required by the subpoenas.

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APPENDIX C

ORDER OF THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF MISSOURI,

WESTERN DIVISION

No. 76 CV-64-W-4

UNITED STATES OF AMERICA, et al.,

Petitioners,

Vs.

EMPIRE GAS CORPORATION, et al.,

Respondents.

ORDER

(Filed: September 3, 1976)

On August 13, 1976, respondents filed their Motion

to Vacate Order and Dismiss, or in the Alternative to

Substitute Parties and their Motion for Stay of this Court’s

Order Requiring Respondents to Give Testimony and Pro-

duce Documents Required by Subpoenas. In order to af-

ford the parties the full opportunity to brief the issues

raised in those motions, the Court sua sponte entered an

Order on August 16, 1976, staying the Court’s Order and

Judgment of August 9, 1976, pending disposition of those

motions. As the parties have fully submitted their sugges-

tions and briefs in support of their respective positions

with regard to respondent’s pending motions, those motions

are now properly before the Court for its determination.

In their Motion to Vacate or to Substitute Parties,

filed August 13, 1976, respondents argue that as the Fed-

eral Energy Administration Act expired July 30, 1976,

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the Federal Energy Administration was no longer in ex-

istence and thus without authority to enforce the subpoenas

which have been in question in these proceedings. Further,

respondents urge that Executive Order No. 11930, issued

by the President on July 30, 1976, was ineffective to trans-

fer the functions of the FEA to the FEO and its Adminis-

istrator.

Subsequent to the filing of respondents’ motion, the

President signed into law the Energy Conservation and

Production Act. That Act, signed on August 14, 1976,

provides in §112 for the extension of the Federal Energy

Administration Act of 1974 to December 31, 1977. Section

112 provides:

(a) The second sentence of section 30 of the Federal

Energy Administration Act of 1974 is amended to read

as follows: “This Act shall terminate December 31,

1977.

(b) The amendment made by subsection (a) to sec-

tion 30 of the Federal Energy Administration Act of

1974 shall take effect on July 30, 1976.

On August 27, 1976, respondents filed additional sug-

gestions in support of their motion to vacate the Court’s

Order and Judgment of August 9, 1976. Therein they

contend that despite the language of §112(b), the FEA

lost authority to continue enforcement of the subpoenas

at issue in this cause and that the FEA must now seek

to issue new subpoenas, which the Court assumes respon-

dents would in due course oppose and contest.

After careful consideration of the respondents’ argu-

ments in support of their Motion to Vacate, the Court finds

that motion to be without merit. The Court is persuaded

that Congress had the authority to and intended to continue

the powers and functions of the FEA uninterrupted from

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July 30, 1976, until the termination date of the Act as

set forth in §112(a) of the Energy Conservation and Pro-

duction Act. The Conference Report on that Act states

in pertinent part:

It is the intent of the conferees that this retroactive

provision [§112(b)] have the effect of permitting the

organic Act to continue uninterrupted. Further, it

is the intent of the conferees that the Agency [FEA],

its functions (including pending regulatory matters),

appointments and other personnel matters, prior obli-

gations and programs, shall be deemed to have con-

tinued uninterrupted despite the brief period between

July 30th, 1976, and the effective date of this legisla-

tion. (Emphasis added).

As the Court remains unpersuaded by the matters raised

in respondents’ Motion to Vacate and Substitute and their

suggestions in support thereof, that Motion will be denied.

The Court’s Order and Judgment of August 9, 1976, will

not be vacated and respondents will be ordered to comply

with that Judgment within fifteen (15) days of this date.

Remaining for the Court’s consideration and disposi-

tion is respondents’ Motion for Stay of this Court’s Order

Requiring Respondents to Give Testimony and Produce

Documents Required by Subpoenas filed August 13, 1976.

Upon consideration of the respondents’ arguments made

in support of their application for a stay pending appeal,

this Court, in the exercise of its discretion, has determined

that the motion for stay should be denied. First, the

Court is not convinced that respondents will suffer irrepar-

able injury should they be required to comply with the

Court’s Order and Judgment and the subpoenas pending

appeal. Second, the Court is of the view that respondents

are not likely to prevail upon appeal. In that respect,

C-4

the Court has reconsidered the matters and issues raised

in this proceeding and remains convinced that its findings

and ruling expressed in the Court’s Order and Judgment

of August 9, 1976, are correct. Further, the Court is unper-

suaded that a granting of a stay wow/d be in the public

interest. Accordingly, the respondents’ Motion for Stay

Pending Appeal will be denied.

For the foregoing reasons, it is therefore

ORDERED that respondents’ Motion to Vacate Order

and Dismiss, or in the Alternative to Substitute Parties

be, and the same is hereby denied, and it is further

ORDERED that respondents’ Motion for Stay of this

Court’s Order Requiring Respondents to Give Testimony

and Produce Documents Required by Subpoenas be, and

the same is hereby, denied, and it is further

ORDERED that respondents comply with the Court’s

Order and Judgment of August 9, 1976, within fifteen

(15) days of the date of this Order.

/s/ Elmo B. Hunter

United States District Judge

D-1

APPENDIX D

EXECUTIVE ORDER NO. 11930

Performance by the Federal Energy Office of Energy

Functions of the Federal Energy Administration

By virtue of the authority vested in me by the Con-

stitution and statutes of the United States of America,

including the Energy Policy and Conservation Act (89

Stat. 871, 42 U. S. C. 6201 et seq.), the Emergency Pe-

troleum Allocation Act of 1973, as amended (15 U.S. C.

751 et seq.), the Energy Supply and Environmental Co-

ordination Act of 1974 (88 Stat. 246, 15 U. S. C. 791 et

seq.), the Defense Production Act of 1950, as amended

(50 U. S. C. App. 2061 et seq.), the Energy Reorganiza-

tion Act of 1974 (88 Stat. 1233, 42 U. S. C. 5801 et seq.),

Section 202 of the Budget and Accounting Procedures Act

of 1950 (31 U. S. C. 581c), Section 232 of the Trade Ex-

pansion Act of 1962, as amended (19 U.S. C. 1862), Section

301 of Title 5 of the United States Code, and Section

3301 of Title 5 of the United States Code, and consistent

with the provisions of 5 CFR 351.301, and as President

of the United States of America, it is hereby ordered

as follows:

Sec. 1. There is hereby established in the Executive ©

Office of the President a Federal Energy Office, which

shall be under the immediate supervision and direction

of an Administrator of the Federal Energy Office, herein-

after referred to as the Administrator, who shall be ap-

pointed by the President. The Administrator shall be

compensated at the rate now or hereafter prescribed by

law for level II of the Executive Schedule.

D-2

Sec. 2. Within the framework of the Energy Re-

sources Council, the Administrator shall advise the Presi-

dent with respect to the establishment and integration

of domestic and foreign policies relating to the production,

conservation, use, control, distribution, and allocation of

energy and, with respect to all other energy matters, and

shall perform such other functions as may be delegated

to him pursuant to law.

Sec. 3. There shall be in the Federal Energy Office

the following officers each of whom shall be appointed

by the President and each of whom shall receive compensa-

tion at the rate now or hereafter prescribed by law for

that level of the Executive Schedule indicated: Two

deputy administrators (level III); six assistant administra-

tors (level IV); a general counsel (level IV); and a director

of intergovernmental, regional and special relations

(level V).

Sec. 4. The Administrator is hereby designated, pur-

suant to section 14 of the Energy Supply and Environ-

mental Coordination Act of 1974, as the Federal Energy

Administrator for purposes of the Energy Supply and En-

vironmental Coordination Act of 1974, and section 119 of

the Clean Air Act, as amended (42 U.S. C. 1857).

Sec. 5. The Federal Energy Office established by this

order is designated the agency to carry out all functions

vested in the Administrator of the Federal Energy Ad-

ministration under the Energy Policy and Conservation

Act.

Sec. 6. There is hereby delegated to the Administra-

tor all the authority that was delegated to the Administra-

tor of the Federal Energy Administration pursuant to Ex-

ecutive Order No. 11790 of June 25, 1974 and Executive

Order No. 11912 of April 13, 1976.

D-3

Sec. 7. The Administrator is designated a member

of the Energy Resources Council established by the Energy

Reorganization Act of 1974 and Executive Order No. 11814

of October 11, 1974, as amended, and shall perform the

functions assigned by the President and by the Chairman

of the Council, who is the Secretary of Commerce, to

the Administrator of the Federal Energy Administration.

Sec. 8. The Administrator shall exercise the functions

of the Administrator of the Federal Energy Administration

under Proclamation No. 3279, as amended.

Sec. 9. (a) All orders, rules, regulations, rulings, in-

terpretations, or other directives issued or pending, all

rule making, judicial or administrative proceedings com-

menced or pending, all voluntary agreements, plans of

action, and all other actions commenced or taken by, under

the authority of or ratified by the Administrator of the

Federal Energy Administration prior to the effective date

of this order that would be valid under the authority

delegated or transferred by this order, are hereby con-

tinued, confirmed, ratified and made effective under this

order and shall remain in full force and effect, unless

or until altered, amended, or revoked by the Administra-

tor or by such competent authority as he may specify.

(b) All personnel, property, records, contracts, obli-

gations, cooperati ‘e agreements, rights, and unexpended

balances of appropriations, allocations, and other funds

employed, used, held, available, or to be made available,

‘n connection with functions of the Administrator of the

Federal Energy Administration are hereby transferred to

the Federal Energy Office.

(c) The Administrator is authorized to exercise the

authority of the President under the Defense Production

Act of 1950, as amended, to establish not more than eight

D-4

positions and to appoint individuals to such positions com-

pensated at the rate now or hereafter prescribed by law

for level V of the Executive Schedule.

(d) All individuals who, immediately prior to the

effective date of this order, are serving in or have been

nominated to positions under the Federal Energy Adminis-

tration Act of 1974, which correspond to the positions

established in the Federal Energy Office by sections 1

and 3 of this order are, on the effective date of this order,

appointed to the positions established in the Federal Energy

Office by sections 1 and 3 of this order.

(e) All individuals appointed to and serving in posi-

tions in grades GS-16, 17 and 18 pursuant to the Federal

Energy Administration Act of 1974, which appointments

have been approved es to classification and qualifications

by the Civil Service Commission, shall be continued in

such grade unless any such position is determined by the

Civil Service Commission to involve responsibilities sub-

stantially less than those responsibilities involved when

originally established pursuant to the Federal Energy Ad-

ministration Act of 1974. Continuation in such grades

shall also be subject to allotment by the Civil Service

Commission of available positions in grades GS-16, 17 and

18. The Civil Service Commission shall discharge its re-

sponsibilities with respect to the allotment of positions

in grades GS-16, 17 and 18 by providing, consistent with

law, the efficiency of the Civil Service, and the provisions

of this order, for the allotment of sufficient positions in

grades GS-16, 17 and 18 to carry out the first sentence

of this subsection (e) and to provide for such additional

positions as the Administrator and the Civil Service Com-

mission deem necessary.

(f) Nothing in the order shall affect rights to reem-

ployment under the provisions of section 5(a)(1)(B) of

D-5

the Emergency Petroleum Allocation Act of 1973, as

amended, or section 212(g) of the Economic Stabilization

Act of 1970, as amended... Any employee transferred pur-

suant to subsection (b) of this section having a right to

reemployment under the provisions of section 28 of the

Federal Energy Administration Act of 1974 shall retain

that right during the period of his employment with the

Federal Energy Office established by this order. Any

employee of the Federal government appointed, without

a break in service of one or more work days, to any

position in the Federal Energy Office established by this

order shall have the rights of reemployment provided by

subpart B of Part 352 of title 5 of the Code of Federal

Regulations.

Sec. 10. The Administrator shall, before promulgating

proposed rules, regulations, or policies affecting the quality

of the environment, provide a period of not less than

five working days from receipt of notice of the proposed

action during which the Administrator of the Environ-

mental Protection Agency may provide written comments

concerning the impact of such rules, regulations, or policies

on the quality of the environment. Such comments shall

be published along with public notice of the proposed

action. The review required by this section may be waived

for a period of 14 days if there is an emergency situation

which, in the judgment of the Administrator, requires

immediate action.

Sec. 11. The Administrator of General Services shall

provide, on a reimbursable basis, such administrative sup-

port as may be needed by the Federal Energy Office.

All departments and agencies of the Executive branch

shall, to the extent permitted by law, provide assistance

and information to the Administrator of the Federal Energy

Office.

D-6

Sec. 12. This order shall become effective on July

31, 1976.

Gerald R. Ford

July 30, 1976.