Petition — Shore v. Longview Refining Co.

Supreme Court brief1977

Ask Donna

What actually matters in this document.

Text

eee

se + "gee

> se Supreme Cour, UG ©.

W FILED sf‘

7671863 ]] sw ie wn

In THE MICHAEL RODAK, JR., CLERK

Sapreme Court of the United States

OcTOBER TERM, 1976

No. A-843

W. R. (BILL) SHORE,d/b/a SHORE OL. PRODUCTS, ET AL

Petitioners,

LONGVIEW )REF/NING COMPANY and CRYSTAL OIL ComMPANY,

Respondents,

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

FIF1H CIRCUIT

JACK N. Price

Price & WILLIAMS

305 Fast 11th Street

Suite L-7

Austin, Texas 78701

(512) 474-1563

ATTORNEYS FOR PETITIONERS.

— — aor

TABLE OF CONTENTS

TABLE OF CASES... ee ce ceceecceeceeeey Coseeeces arf

GPSS GEM cece wee e ieee eedecreneeeess own 2

7. | ll Ae Tee eee eT EEE EET TERT LE 2

eee SEE. wc cc hee sed ce peensseceeee 2

STATUTES INVOLVED. ....... cece cesereresccees 6

Pemeeeers Ge Cee CRB c cc ccscepeesecsccsseak of 8

REASONS FOR GRANTING THE WRIT..............-- 13

1. The trial court correctly held that the

overcharges by Respondents were willful... 13

(a) The trial court used correct standards

to determine the question of willfulness.. 19

(b) The lower court is incorrect in its

holding that an overcharge must have been

made with the specific intention of

charging a price which the Respondents

knew wae in excess of the ceiling price

allowing under the applicable regulation... 28

there must be "clear and convincing proof

that an overcharge was willful"........... 30

2. The trial court correctly determined that

Respondent Longview Refining Company

violated the price "freeze" order......... 31

3. The trial court correctly determined that

Respondents overcharged Petitioners under

pricing regulations which followed the

“SOO” GR cc cece ceo eee snereesecuseees 43

(a) Failure to make an effort to follow

the pricing regulations constitutes a

Bees SE 6 6 See + 664405 96S4S 6 0 Eek Ke 44

(b) The trial court correctly ruled that

Respondents are not entitled to consoli-

date operations for pricing purposes..... 49

ing that "reseller" has two different

definitions, one of which is to ignored,

while the other requires consolidation of

retail subsidiaries in determining a

ae a kok Swe Web 60 Ce Kae dw eR eESe 70

(id) The trial court made a proper deter-

mination of "classes" and "base price"

for purposes of application of the

ge ee ae ee 85

(e) The lower court is incorrect in its

holding that Petitioners failed to take

into account the refiners incentive

factor and erred in calculating the over-

charge by using the current month as the

MONCH GE WMROOUROUONS 6 cc cc ccecssteeseececs 93

(1) Month of measurement..............0.- 94

(2) Refiner's incentive factor........... 96

There is no necessity and no legal re-

quirement for joinder of the adminis-

trative agency, which would serve only

to delay disposition of the case......... 100

CRE s See redeSeoeesceresrcosecesceseennss 102

Gees GF GP OG csc bac esecceresceveess 106

APPENDIX

TABLE OF CASES

Page

American Surety Co. of New York v.

Sullivan, 7 F.2d 605, 606 (2nd

tt ssh eee ech ee eb eS eecee ee eoesess 20

Barr v. WUI/TAS, Inc., 66 F.R.D. 109

ES a 22

Burden v. U.S., 486 F.2d 302 (10th Cir.,

1973) cert. den., 416 U.S. 904 (1974)..... 22

Esso Eastern Inc., Houston, Texas., Case

ie seb eneeeeceeeeee sec es eeeeeees 81

Esso Standard Oil S.A. Ltd., Coral Gables,

Florida, (Case No. FEE-1025)Par 20,748,

page 20,963, Energy Management 1974

i Pec cc cag oneeeeeeees eee eceees 81

Esso Standard Oil S.A. Ltd., Exxon Corp.,

New York (Case No. FEA 20,300, Energy

Management 1974 Transfer Binder).......... 80

Fields v. U.S., 164 F.2d 97, 99(1947)........ 21

Getty Oil Co. (Eastern Operation), Inc.,

Skelly Oil Co., N.Y., N.Y. (Case No.

FEE-1101) Par 83,041, page 83,106,

Energy Management 1975 Decisions.......... 82

Harrington v. U.S., 504 F.2d 1306, 1316

jt ee cece eee eaneceseeeeoveces 22

Kalb v. U.S., 505 F.2d 506, 511

th Mi ec cee ee eb ee eeeeeecevccoas 22

Manning v. University of Notre Dame, 484

ne CM. BUD cc ccccceeeeereeeee 19

McBride v. U.S., 225 F.2d 249 (Sth Cir.1955). 21

iii

Monday v. U.S., 421 F.2d 1210 (7th Cir.1970).

Newsome v. U.S., 431 F.2d 742 (5th Cir.1970).

Pacific National Ins. Co. v. U.S., 422 F.2d

26, 33 (9th Cir.,1970) cert. den., 398

2 3 fC. RR ren per ee

U.S. v. Allen, 317 F.2d 777 (2nd Cir.1963)...

U.S. v. Byrd, 352 F.2d 570 (2nd Cir. 1965)...

U.S. v. Couming, 445 F.2d 555, 556 (9th

sa ead hate iden’ chu Haseena see Keks

U.S. v. Futura, Inc., 339 F.Supp. 163

Ces ee |} Pee TET TTT EEC O TTT Tee

U.S. v. Gulf, 408 F.Supp. 450(W.D.Pa.1975)...

U.S. v. Hull, 346 F.2d 875 (2nd Cir.1965)....

TEXTS CITED

BeGen’S EG DESCCAOROTT, GER Be cccccsreccocecs

Crystal Oil Company Annual Report, 1973......

Economic Stabilization Act of 1970, Pub.L.

92-210, 85 Stat, 743; Pub.L. 93-28,

ee nse Ses ocac Gude oe aa eb One eee eee kecs

Economic Stabilization Act of 1970,

Gs EE re ee ea eee

Economic Stabilization Act of 1970,

Pe NS. 6 06 oes Wbe4 60.0664 b6 68 00088830

Economic Stabilization Act of 1970,

ee ee ee eee Oe

Economic Stabilization Act of 1970,

ECE ede en aeened ead awkeeeee cess ae

Emergency Petroleum Allocation Act of 1973

P.L. 93-159,E.0. 11748 F.R. 33577......... 2

Executive Order No. 11723, 38 F.R. 15763,

Se aed. Es GEE Bi ceccceeceunecceees 32

Executive Order No. 11723, 38 F.R. 15763,

See en Bee ws WEOD Bk occéedeveesaecrneees 32

Executive Order No. 11723, 38 F.R. 15763,

June 15, 1973, Section 8........eceeeeeeee 32

Mandatory Petroleum Allocation Regulations,

8 PPT eT eT ETE ETE ETL TC ETE TTT 10

mouse Bepert of Gec. ZIG, BBR... cccccceccseses 16

Senate Report on Sec. 210, ESA............. ——

10 C.F7.R. Chapter II, Section 212.31........>. 5

10 C.F.R. Chapter II, Section 212.82(a)...... 44

10 C.F.R. Chapter II, Section 210.82(f)...... 45

10 C.F.R. Chapter II, Section 212.82 (f)(1).. 91

10 C.F.R. Chapter II, Sec. 212.82 (f)(2)(i).. 45

10 C.F.R. Chapter II, Sec. 212.83(c)(1)(i)... 46

10 C.F.R. Chapter II, Sec. 212.83 (c)(2)..... 44

10 C.F.R. Chapter 12, Gece. BIR9.86...cccccsveces 97

10 C.F.R. Chapter 12, Sec. 212.91... ccccscces 70

Be Woche GG, Gree 6b v6 oe cache ce ei vetseeeeas 22

oe Ockke Dew COORURED FB, BOVE cc ccccccescéeseces 48

a Sole ees. Se ea, Ss bs hho oe6 eee oeees 80

Part 212, Chapter II, Title 10 Code of

Pe TEE s ccc ceeceeseeecsce eens i oe

In THE

Supreme Court of the United States

Octoser Term. 1976

No. A-843

W. R. (Bitt) SHore. da SHORE Ow Propucts. £T AL

Petitioners,

Loncview REFINING COMPANY and Crystac Ort Company.

Respondents,

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

FIFTH CIRCUIT

TO THE HONORABLE SUPREME COURT OF THE

UNITED STATES:

Petitioners pray iuat a writ of

certiorari issue to review the judgment and

opinion of the Temporary Emergency Court of

Appeals of the United States entered in this

action on February 15, 1977, reversing the

judgment of the district court awarding damages

to the Petitioners for illegal overcharges in

violation of the Economic Stabilization Act of

1970, as amended (Stablization Act), Pub.L. 92-

210, 85 Stat. 743; Pub.L. 93-28, 87 stat. 27,

E.O. 11748, 38 F.R. 33575., and the Emergency

Petroleum Allocation Act of 1973, as amended

(Allocation Act), P.L. 93-159, E.O. 11748, 38

F.R. 33577 and regulations thereunder.

OPINIONS BELOW

The opinion of the Temporary

Emergency Court of Appeals is unreported and is

reproduced in Appendix A. The judgment and

the findings of fact and conclusions of law of the

district court are unreported, and are

reproduced in Appendices C and D, respectively.

JURISDICTION

The final judgment of the Temporary

Emergency Court of Appeals was entered on

February 15, 1977. The Court of Appeals denied

Petitioners Petition for Rehearing on March 23,

1977. The jurisdiction of this Court is invoked

under 28 U.S.C. § 1254(1).

QUESTIONS PRESENTED

After trial before the court, the United

States District Court for the Eastern District of

Texas, Tyler Division, found that the

Respondent Longview Refining Company violated

the price "freeze" order, 1.e., Executive Order

No. 11723, 38 F.R. 15763, June 15, 1973, and

that the Respondents Longview and Cryst

overcharged the Petitioners under pricing

regulations following the freeze order. The

Temporary Emergency Court of Appeals reversed

and remanded for further proceedings. The

questions presented are:

1. (a) Whether the Temporary

Emergency Court of Appeals

correctly held that the trial court

applied incorrect standards in

determining that the overcharges

by the Respondents were willful .

(b) Whether the Temporary

Emergency Court of Appeals

correctly held that to be willful

an overcharge "must have been

made with the specific intention of

charging a price which the

defendent knew was in excess of

the ceiling price allowable under

the applicable pricing laws and

regulations".

Emergency Court of Appeals

correctly held that there "must be

clear and convincing proof that

an overcharge was willful.

Whether the Temporary Emergency Court of

Appeals correctly held that the overcharges

during the "freeze" period were not

determined by correct standards and must

be relitigated.

(a) Whether the Temporary Emergency

Court of Appeals is correct in holding

that the failure of a defendent to

perform the calculations under the

pricing formula constitutes no legal

wrong.

(b) Whether the Temporary Emergency

Court of Appeals correctly held that in

testing the overcharge under the

pricing formula defendants are entitled

to consolidate certain of their

operations for pricing purposes.

Court of Appeals correctly held that

"reseller" has two different definitions

in the regulations under the allocation

EE To ee

act and that one definition (in subpart

B, 10 C.F.R. § 212.31) is not to be

considered while the other definition

(in subpart F, 10 C.F.R. 212.91) is to

be considered in defining "refiner"

(under subpart E, 10 C.F.R. 212.81,

et. seq.).

(d) Whether the Temporary Emergency

Court of Appeals correctly held that

the trial court did not make proper

determination of "class(es)" and "base

price" for purpose of application of the

pricing formula.

(e) Whether the Temporary Emergency

Court of Appeals correctly held that

the plaintiffs' calculations of the

overcharges, on which the trial court

relied, failed to take into account the

refiner's incentive factor and

erroneously figured the overcharges

by using the current month as the

month of measurement.

Whether the Temporary Emergency Court of

Appeals was correct in ordering the joinder

of the Federal Energy Administration upon

the remand for retrial.

STATUTES INVOLVED

The Economic Stabilization Act of 1970

as amended (Stablization Act) Pub.L. 92-210 85

Stat. 743; Pub.L. 93-28, 87 Stat. 27; und the

Emergency Petroleum Allocation Act of 1973 as

amended (Allocation Act) P.L. 93-159 ; O

11748, 38 F.R. 33577 and the vedelutions

promulgated thereunder are directly involved in

this case. The pertinent portions of the

Economic Stabilization Act (which were adopted in

Sec. 5 (a) of the Allocation Act) are:

"(a) Any person suffering legal wrong

because of any act or practice arising

out of this title, or any order or

regulation issued pursuant thereto

may bring an action in a district co m

of the United States, without poe, 2

the amount in controversy, for

appropriate relief, including an action

aor a declaratory judgment, writ of

injunction (subject to the limitations in

Sec. 211), and/or damages. (b) In

any action brought under subsection

(a) against any person renting

property or selling goods or services

who is found to have overcharged the

OO ——— s—SSCiCS

plaintiff reasonable attorney's fees and

costs, plus whichever of the following

sums is greater:

(1) an amount not more than

three times the amount of

the overcharge upon which

the action is based, or

(2) not less than $100 or more

than $1000; except that in

any case where the

defendant establishes that

the overcharge was not

intentional and resulted from

a bona fide error

notwithstanding the

maintenance of procedures

reasonably adapted to the

avoidance of such error the

liability of the defendant

shall be limited to the

amount of the overcharge;"

The regulations pertaining to the

questions presented in this case are contained in

Appendix A to the opinion of the Temporary

Emergency Court of Appeals, or in 10 cl athe

Part 212 to which regulations specific reference

will be made in the text of this petition.

STATEMENT OF THE CASE

Petitioners, at pertinent times, have

been in the business of purchasing gasoline and

diesel fuel directly from one or more refineries

and reselling the gasoline to or through service

Station facilities for retail distribution to

customers. All have been purchasers of gasoline

and/or diesel fuel from the Respondent Longview

Refining Company for varying periods of time.

Longview Refining Company is a

domestic corporation which owns and operates a

refinery in Longview. Texas. Prior to its

acquisition by Respondent Crystal Oil Company

of Shreveport, Louisiana, the stock of Longview

Refining Company was privately held. Longview

Refining Company became a wholly-owned

Subsidiary of Crystal Oil Company, effective

November 1, 1973.

Crystal Oil Company owns all of the

outstanding corporate stock of the following

corporations (in addition to Longview Refining

Company): Berry Petroleum Corporation, Crystal

Service Corporation; Crystal Resources

Incorporated; Crystal Indonesia Oil Corporation;

Mercury Discount Corporation; Tulsa il

Corporation; Crystal Petroleum ‘wxupor *on;

’

Stone's Enterprises, Incorporated; Stone's

Independent Oil Distributors, Incorporated;

Stone's Independent Oil Company; Panhandle

Towing Company; High Octane Terminal

Company; Joe E. Hutchison Distributing

Company; High Octane Terminal Company; Joe E.

Hutchison Distributing Company; Adobe Refining

Company; Crystal-Princeton Refining Company;

Crystal Sharjah Oil Company; and Crystal-Rico

Company.

The Crystal subsidiaries are located in

various parts of the United States and overseas,

and service different market areas. Some of the

companies are engaged in refining, while others

are engaged in retail distribution, crude oil

production, and non-petroleum _ industry

activities

Phase IV pricing regulations were

ushered in by Presidential Proclamation or

Executive Order establishing a "freeze" period,

effective June 13, 1973. The "freeze" period was

due to expire on August 12, 1973, but was

extended to August 19, 1973. On August

19, 1973, the "freeze" period was superseded by

regulations promulgated pursuant to the Economic

Stabilization Act of 1970. The Phase IV price

I , ee

regulations were originally codified in Part 150,

but subsequently recodified in Part 212 of

Chapter II of Title 10 of the Code of Federal

Regulations. Mandatory Petroleum Allocation

Regulations enacted pursuant to the Emergency

Petroleum Allocation Act of 1973 were codified in

Part 211, and administrative procedures

applicable thereto were set forth in Part 205.

During the "freeze" period of the

Phase IV regulations and for approximately two

and one-half months after the effective date of

the pricing regulations under Phase IV,

Longview Refining Company was a privately-

owned, wholly independent corporation. After

the "freeze" period, while the stock of the

Longview Refining Company was still privately

held, Longview enacted opprice increases

purporting to be in accord with the Phase IV

regulations and the pricing formula contained

therein. After the acquisition of the stock of the

Longview Refining Company by the Crystal Oil

Company on November 1, 1973, a series of price

increases ensued, which drastically altered the

pricing structure of gasoline and diesel, and

detrimentally affected the operations of the

Petitioners, certain of whom were ultimately

forced out of business.

The net result of these pricing

practices was to reduce purchases by the

Petitioners. Prior to the acquisition of Longview

by Crystal, Petitioners historically purchased

approximately 30% of the output of Longview

Refining Company. After the acquisition

Petitioners' purchases were reduced _ to

approximately 9.4% of the output. This reduction

was in accord with the apparent design of

Crystal to divert the supply of Longview

Refining to its own retail distribution system.

Substantial overcharges resulting from

the series of price increases instituted after

Crystal's acquisition of Longview were admitted

by Crystal's representatives, publicly, (letter

dated March 8, 1974, filed with the Federal

Energy Office, R. 538-39), and in testimony (R.

539, et. seq.). Initially, there was no effort

whatsoever to follow the formula specified in the

pricing regulations. Effective about March,

1974, well after suit was filed (and after the

alleged period of overcharges) Respondents did

purport to commence following the formula, but

failed to consider the large accumulated

overcharge originating January, 1974, and prior

thereto, in the application of the formula. As of

April, 1974, the Respondents were ostensibly

following the formula, without carrying forward

the accumulated overcharge, to the operations of

Longview Refining Company as a Separate entity.

(See Cross-examination of Mr. Burns, R. 538

et. seq., and discussion, infra. ). Shortly

before trial, Respondents advised that they had

revised their position, and were applying the

formula to Crystal and certain of its subsidiaries

on a consolidated basis. Through this process

Respondents took the position that the

overcharge had been eliminated. (This occurred

well after the end of the period of overcharge

alleged by Petitioners, i.e., February 28, 1974.)

Petitioners’ suit presented for

determination questions as to the validity of the

"freeze" price charged by Longview Refining

Company during the period June 15, 1973

through August 19, 1973, and the price emrenes

enacted by Longview Refining Company after the

ettective date of the pricing regulations. After

judgment in Petitioners’ favor, Respondents'

appeal produced the opinion by judge Estes of

the T.E.C.A., which gives rise to the questions

here presented.

REASONS FOR GRANTING THE WRIT

h. The trial court correctly held that the

overcharges by Respondents willful.

The Economic Stabilization Act, Pub.L.

92-210, 85 Stat. 743, Pub.L. 93-28, 87 Stat. 27

provides in Section 210(a) that any person

suffering legal wrong because of any act or

practice arising out of this title or any order or

regulations issued pursuant thereto, may bring

an action in a district court of the United States,

without regard to the amount in controversy, for

appropriate relief, including an action for

declaratory judgment, writ of injunction and/or

damages. Section (b) provides that in any action

brought under Subsection (a) against any person

selling goods who is found to have overcharged a

plaintiff, the court may, in its discretion award

the plaintiff reasonable attorney's fees and costs,

plus whichever the following sums is greater:

(1) An amount not more than three

times the amount of the

overcharge upon which the action

is based, or

(2) Not less than $100.00 nor more

than $1,000.00 expect that in any

case where’ the defendant

establishes that the overcharge

was not intentional and resulted

from a_ bona _ fide error

notwithstanding the maintenance

of procedures reasonably adapted

to the avoidance of such error,

the liability of the defendant shall

be limited to the amount of the

overcharge.

Section 210 (which was adopted by

Section 5(a) of the Allocation Act) further

provides that where the overcharge is not willful

within the meaning of Sec. 208(a) no action for

the overcharge may be brought unless the

plaintiff has first presented to the seller a claim

for refund and has not received payment for the

overcharge within ninety days. Sec. 208(a)

gives no definition of willful, buy simply states

that whoever willfully violates any order or

regulation shall be fined not more than $5,000.00

for each violation.

The proper definition of "willful"

within the context of a civil suit for recovery of

overcharges is a question of considerable

importance.

The Economic Stabilization Act, the

Emergency Petroleum Allocation Act, and the

Mandatory Petroleum Price Regulations constitute

a complex and pervasive system for the

regulation of one of the nation's largest

industries. The industry is so large and so

complex that effective centralized enforcement of

the price regulations governing it is impossible.

Congress recognized this fact, and enacted Sec.

210 to deal with the problem. The Congressional

purpose was to provide for private action by

those firms with the most direct interest in

effective enforcement and the most immediate

knowledge of any violation. As stated in the

Senate report on Sec. 210:

"Section 210 provides a traditional

method by which violators of

regulations may be discovered

and other would-be viclators may

be deterred. This can be

accomplished by authorizing a

me hag suffering a legal wrong to

ring a treble damage action

against a violator. (S. Rep. 92-

507, Nov. 20, 1971, to accompany

S. 2891)."

The House report is even more specific:

"The Committee, in line with the

Administration's emphatic request

for voluntary surveillance to

assure compliance with price and

rent regulations and orders,

— this section so that it

would serve not only to provide a

strong deterrent to those who

would willfully violate this Act.

{ H — i 92-714, December

, , Oo accompan H.R.

11309) ." sities

Thus, Congress (by enacting Section

210 and incorporating it into the Emergency

Petroleum Allocation Act) attempted to enlist the

numerous purchasers of petroleum products as

"private attorneys general" to assist in

discharging the responsibility of enforcement.

Congress obviously was aware that

mistakes might occur in a firm's attempt to

adhere to a complex set of regulations. To

protect against precipitous suits resulting from

unintentional overcharges it included a

requirement of notice and ninety-day waiting

period in Sec. 210. Just as obviously, it was not

the intention of Congress to clog the vital

process of private enforcement with a

superfluous and unnecessary notice requirement

- ~

when such notice would accomplish nothing.

Therefore, the willfulmess exception was

adopted.

The opinion of the lower court places

strictures upon the proof of willfulness which

thwart the will of Congress and are at variance

with both civil and criminal definitions of the

term. It reaches the conclusion that pricing

decisions entirely made without reference to the

regulations and consistently and consciously

adhered to by the Petitioners can not be the

basis for an allegation of "willful" overcharge,

even though such_ decisions’ result’ in

overcharges. The self-enforcing nature of the

regulations envisioned by Congress is thus

undermined, and the ability of purchasers of

petroleum products to recover overcharges

inflicted upon them is substantially weakened, if

not altogether stifled.

The purpose of the ninety-day notice

provision was to provide an opportunity for a

seller to correct an honest mistake. In cases

where it is clear that the seller will not correct

the mistake, the ninety-day waiting period is an

unnecessary and unreasonable burden.

Notice is a useless and _ dilatory

exercise in cases where the supplier has

indicated its determination to continue charging

the price which it has been charging. The lower

court is correct when it notes that the act

contains no provision which would "excuse failure

to present a claim for refund simply upon a

conclusion that it would have been futile"

(Footnote 17, page 12, Appendix A). But where

the futility is born of the sellers persistence in

its pricing decisions, and those decisions result

in overcharge, the willfulness exception should

be satisfied. An action should be considered

willful if it is intentional, the result of a fixed

and deliberate decision, and unlikely to change.

The trial court stated in Conclusion of

Law 14 (App. D) that the civil meaning of

willfulness is applicable. Having so stated, the

trial court then formulated the test for

willfulness applicable to the present case:

"...Thus, in the framework of

this case, an overcharge is willful

where it is deliberate, or where it

is the natural and probable

consequence of actions of the

defendants which are voluntary

and intentional or which are in

reckless disregard of the

applicable regulations, as opposed

to being the result of a bona fide

error notwithstanding the main

tenance of procedures reasonay

adapted to the avoidance of suc

error.” (C.L. 14, App. D,

emphasis supplied).

When the wording and intent of Sec.

210 are considered, it is apparent that this

quotation embodies the correct standards for the

"willfulness" determination and it matters not

whether the test is denominated "civil" or

"criminal".

(a) The trial court used correct standards

to determine the question of

willfulness.

The lower court held, because Sec.

210(b) refers for the meaning of "willful" to

Section 208(a), the term must be construed in its

"criminal sense," a contention suppported by

dictum in Manning v. University of Notre Dame,

484 F.2d 501 (Em.App. 1972). But the court

ignored the standards actually used by the trial

court, and did not evaluate whether those

standards. satisfied the criminal definition

(worse, the court added standards not

contemplated under a criminal definition, which

are discussed in the next two sections of this

petition).

Even in the criminal law, a definition

of willfulnmess as deliberate and _ intentional

conduct is approved. It is commonplace that

"{i]gnorance of the law, which everyone is bound

to know, excuses no man. A mistake in point of

law is in criminal cases, no sort of defense."

Black's Law Dictionary, 4th Ed. at 881, citing

Blackstone. It is just as axiomatic that a

defendant in a criminal case is presumed to

intend the natural and probable consequences of

his actions. Thus, an act may be deemed to be

willful in the criminal law if the actor intends the

result which actually occurs, i.e., if that result

is not accidental or involuntary. This position

was articulated by Judge Learned Hand in the

often-cited case of American Surety Company of

New Yor’ v. Sullivan, 7 F.2nd 605, 606 (2nd

Cir. ,1925):

"The word ‘'willful', even in

criminal statutes, means no more

than that the person charged with

the duty knows what he is doing.

It does not mean that, in

addition, he must suppose that he

is breaking the law (Emphasis

supplied).

For over half a century, Judge Hand's

definition of "willfulness", which is directly

contrary to the lower court's definition, has been

followed in innumerable cases construing the term

as used in federai criminal statutes. See, e.g.,

Fields v. United States, 164 F.2d 97, 99

(D.C.Cir., 1947) (Contempt of congressional

committee); MeBride v. United States, F.2d 249,

254 (5th Cir.,1955) (falsification of narcotics

records); United States v. Couming, 445 F.2d

555, 556 (9th Cir.,1971) (selective service).

Accord, United States v. Allen, 317 F.2d 777

(2nd Cir. ,1963); United States v. Hull, 346 F.2d

875 (2nd Cir. ,1965); United States v. Byrd, 352

F.2d 570 (2nd Cir.,1965). In these cases, the

court frequently looked to the specific purpose of

the statute which it was construing before

settling on the American Surety meaning of

"\ illfulness", as opposed to another definition.

The purpose of Sec. 210 mandates an

expansive interpretation of "willfulness". The

fact that this word has been given the same

meaning in a criminal (Section 208(a)) and a civil

(Section 210(b)) provision should provide

evidence that the word does not import into the

statute any "specific intent" or “evil motive"

test, for such a test is unheard of in the civil

law.

In the analogous case of the civil

penalty imposed pursuant to 26 U.S.C. § 6672 for

"willfully" failing to collect withholding taxes, it

has been held that the term means a voluntary,

conscious and intentional failure to withhold, and

that no bad motive or intent to defraud need be

shown. Harrington v. United States, 504 F.2d

1306, 1316 (Ist Cir.,1974); Kalb v. United

States, 505 F.2d 506, 511 (2nd Cir. ,1974);

Burden v. United States, 486 F.2d 302 (10th

Cir. ,1973), cert. denied, 416 U.S. 904 (1974),

Newsome v. United States, 431 F.2d 742, 745

(Sth Cir.,1970); Pacific National Ins. Co. v.

United States, 422 F.2d 26, 33 (9th Cir. ,1970),

cert. denied, 398 U.S. 937 (1970); Monday v.

United States, 421 F.2d 1210, 1215-1216 (7th

Cir. ,1970). No contrary instance has been found

in which the word "willful" in a civil statute

connotes a specific intent or bad motive.

A broad definition of the criminal

meaning of the word "willful" was adopted by the

only other court to consider this question in the

context of a suit for overcharges. In Barr v.

WUI/TAS, Inc., 66 F.R.D. 109 (S.D.N.Y.,1975),

Judge MacMahon, a district judge well seasoned

in criminal trials, held that:

"While it is true that 'the term

willful overcharge must not be

construed in the criminal sense’,

this does not mean as defendant

Suggests, that defendant must

have Specifically intended to

Violate this’ particular law or even

that it must have been aware

that its conduct was against the

law. Willful, when construed in

the ciminal sense, simply means

that defendant must have Known

what it was doing, that it acted

voluntarily, deliberately and on

purpose, and not because of

mistake, accident, carelessness or

other innocent — reason.”

(Emphasis supplied).

This is merely a paraphrase of the standards

used by the trial court in tne present case.

The cases cited by the lower court do

not support its contention that willfulness in an

overcharge case must connote a specific intent to

violate the law.

In Manning, supra, the lower court

held that an overcharge made before the

imposition of price controls, although relating to

a service to be performed after that imposition,

could not be considered willful. The defendants

rebutted a charge of willfulness by immediately

offering to refund the alleged overcharge. The

Manning case can therefore be explained far more

clearly as a specialized example of inadvertence

or accident that as a case establishing any broad

definition of willfulness.

Futura! and Gulf? were criminal cases

interpreting Section 208(a) of the Economic

Stabilization Act. In Futura, the court held that

a landlord who had made an obvious effort to

persuade his tenants to help him circumvent the

law had acted willfully within the meaning of

Section 208. In Gulf, the court held that

willfulness was a question of fact which could not

be addressed on a motion to dismiss. Neither

case held that willfulness could not exist in a

case where it was shown that the defendant

intended to charge the price which in fact was

charged, at a time when the charging of the

price was unlawful.

1 U. S. v. Futura, Inc.

(N.D-FISTST nc., 339 F.Supp 163

U. S. v. Gualf

(W.D.Pa— i975). — , 408 F.Supp. 450

In view of the foregoing

considerations, it is clear that there is ample

support in the legislative history and applicable

judicial precedent for an interpetation of the

word "willful" which would comport with the

‘standards used by the trial court, even when

those standards are judged under criminal law.

The word "willful", as used in the Act, was not

intended to require specific knowledge by the

seller that the price charged exceeded the price

that would result from proper application of the

pricing formula, or proof that the seller acted

with an evil purpose or bad motive. In the

typical price overcharge case, a willful act is one

which results in the plaintiff being charged the

price which defendant intended to charge him,

which price is at that time unlawful. A willful

overcharge, as held by the trial court, is cne

which:

"is deliberate, or...is the natural

and probable consequence of

actions...which are voluntary and

intentional or which are in

reckless disregard of the

applicable regulations, as opposed

to being a bona fide error

notwithstanding the maintenance

of procedures reasonably adopted

to the avoidance of such error."

Further evidencing the fact that the

overcharge was willful, under any test, is the

court's Finding of Fact No. 24 (App. D):

"24. The overcharge was

willfully made, defendants having

pen eo and intentionally

manipulate eee of the

formula, wi which they

evidenced thorough familiarity,

from the time that Mr. Burns and

the attorneys began collaborating

regarding calculations, for the

evident purpose of preventing

recoupment of overcharges

through proper application of the

formula. Under the

circumstances, it is clear that any

request for refund on the part of

the plaintiffs, prior to suit,

would have been ignored by

defendants."

Respondents displayed a thorough

knowiedge of the applicable regulations, but

wholly failed to follow those regulations and

failed to maintain "procedures reasonably adapted

to the avoidance" of error, a consideration of

diminished materiality since Respondents

deliberately imposed and persisted in deliberately

maintaining the overcharges. The overcharges

were not the result of a "bona fide error", such

as innocent miscalculation, but were the

intentional actions of the Respondents. The trial

court's determination of willfulness is based upon

its conclusion that the overcharges were

deliberate, and were the natural and probable

consequences of actions which were voluntary

and intentional and in reckless disregard of the

applicable regulations. Under these findings, a

verdict of "guilty" of a crime requiring scienter

would be upheld, for it is settled that a

defendant must be presumed to know the law,

and must also be presumed to intend the natural

and probable consequences of his actions.

Therefore, a deliberate overcharge, or an

overcharge which is the natural consequence of

voluntary, intentional acts by the Defendants, or

acts in reckless disregard of the pricing

regulations, is willful under criminal standards.

In this respect, the lower court's indication that

the trial court based the finding of willfulness on

simple negligence is incorrect and is rebutted by

both the trial court's findings and the record,

which make it clear that Respondents were guilty

of much more than simple negligence.

In the final analysis, it must be determined

whether the risk of a conscious decision to

charge a given price will fall upon the seller,

who chooses to charge that price, or upon the

innocent purchaser. The Congressional intent

dictates that the risk should fall upon the seller.

The result reached by the lower court means that

a seller can either ignore or abuse the

regulations, and argue that it was acting in good

faith, and without "evil motive", i.e., specific

intent to charge an unlawful price, and so escape

penalty and/or suit without notice. This

determination will inevitably lead to subversion of

the regulatory scheme, and will eviscerate the

clear intent of Congress.

(b) The lower court is incorrect in its

holding that an overcharge must have

aoe pene with the specific intention

0 chargin a price which the

Respondents knew was in excess of the

ceiling price allowable under applicable

pricing laws and regulations.

In holding that to be willful an

overcharge "must have been made with the

specific intent of charging a price which the

defendant knew was in excess of the ceiling price

allowable under the applicable pricing law and

regulations" the lower court ingnores existing

criminal law and adds an element to a Plaintiff's

burden of proof which will virtually eliminate the

imposition of penalties for overcharges. This

language provides an invitation to sellers to

totally disregard pricing regulations. It gives

validity to a plea of “ignorance” as a complete

defense to penalties. It disregards’ the

presumption that a defendant is held responsible

for natural and probable consequences of his

actions. The Respondents were aware of the

applicable regulations and the duties imposed

upon them from the outset, but chose to ignore

those duties. This court's opinion may well

provide a haven for them and others who totally

ignore, or make no bona fide effort to comply

with the regulations, for they will be able to

plead that they did not know that their prices

exceeded that which is authorized since they

made no attempt to determine the ceiling price.

This incongruous result obviously is not in

accord with criminal law, nor the regulations

governing pricing, which have consistently,

through all amendments, made it clear that the

base price (both during the freeze period and

after) and any additions to base price must be

determined in accord with the terms of the

regulations. Under the regulations, no price in

excess of the base price is authorized except

when calculated in accord with the pricing

formula. (See discussion infra.) But the lower

court's opinion allows the seller to charge any

price it desires without penalty, so long as it

does not know that the price exceeds the

allowable ceiling price. The seller is, in effect,

encouraged to ignore the regulations in setting

his price, and thus escape knowledge of his

overcharges and, hence, the penalty. Surely

this illogical and inequitable result can not

stand.

Brat that an overcharge Wes Walrul”

The lower court added a standard of

proof that is not encompassed by the Economic

Stabilization Act, the Emergency Petroleum

Allocation Act, or the regulations thereunder, in

making the observation that there "must be clear

and convincing proof that an overcharge was

willful". There is no justification for adding to

the civil burden of proof. The fact that the civil

tribunal is called upon to apply a criminal

definition of willful does no mean that the burden

of proof is changed. In order to invoke the

"clear and convincing" standard in a civil case,

and thereby depart from the ordinary civil

standard a basis’ either in_ statute or

administrative regulation must be found. There

is none in this case. There is no warrant for

changing the burden of proof by judicial fiat.

The definition of willfulness in the

context of the pricing and allocation regulations

is of utmost importance. The Congressional

intent in providing self-regulatory features is

subserved by an unrealistic (and unauthorized)

definition of willfulness and an equally unrealistic

(and unauthorized) burden of proof. The lower

court's opinion is not in accord with established

legal principles or the language of the Acts in

question or the intent of those who enacted them.

The opinion will undoubtedly hamper private

enforcement and provide encouragement to those

who make no bona fide effort to comply with

pricing regulations. It is respectfully submitted

that a matter of this importance deserves the

attention of this Court.

- The trial court correctly determined

that Respondent Longview Refining

Company violated the price ‘treeze

order.

Executive Order No. 11723, 38 F.R.

15763, June 15, 1973, provides in Section 1:

"Effective 9:00 EST, June 13,

1973, no seller may charge to any

class of purchaser, and no

purchaser may pay a price for

any commodity or service which

exceeds the freeze price charged

for the same or a_ similar

commodity or service in

transactions with the same class

of purchasers during the freeze

os period. This order shall

e effective for a maximum of

| days from the date hereof,

until 11:59 P.M. EST, August 12,

1973. It is not unlawful to charge

or pay a price less than the

freeze price and the lower prices

are encouraged."

Section 2 of the Order provides that

each seller shall prepare a list of freeze prices

and maintain a copy available for public

inspection during normal business hours. In

addition, the calculations and supporting data

are required to be maintained by the seller, to be

made available on request to representatives of

the Economic Stabilization Program.

Section 8 of the Order contains the

following definitions:

"'Preeze Price' means the highest

price at or above which at least

10% of the commodities or services

concerned were priced by the

seller, and transactions with the

class of purchaser concerned

during the freeze phase period.

In computing the freeze price, a

seller may not exclude any

temporary special sale, deal or

allowance in effect during the

freeze phase period.

"Class of purchaser' means all

those purchasers to whom a Seller

nas charged a comparabie price

for comparable commodities or

services during the freeze base

period pursuant fo customary

price differentials between those

purchasers and other purchasers.

‘'Preeze base price’ means (a) the

period June lst to June 8, 1973,

or (b) in the case of a seller who

had no transactions during that

period, the nearest preceding

seven-day period in which he haa

a transaction.

"'Transaction' means an

armslength sale between unrelated

persons, and is considered to

occur at the time of shipment in

the case of commodities, and in

the time of performance in the

case of services." (Emphasis

supplied).

From May 25, 1973 through

approximately June 7, 1973, the prices in effect

at Longview Refining for all customers were

.1600 cents for regular gasoline, .1800 cents for

premium gasoline, and .1500 cents for diesel

fuel. (P. Ex. 1, p. 1) As of June 7, 1973, the

prices were changed, making the prices .1725

cents for regular gasoline, .1925 cents for ethyl

gasoline, and .1625 cents for diesel fuel. (P.

Ex. 2, p. 4; price book information obtained from

Respondent Longview Refining).

Longview Refining maintained a multi-

price level, i.e., charged different prices to

different customers, until the enactment of the

price increase’ effective May 25, 1973.

Thereafter, and at all times during the freeze

period, all customers were charged the same

prices. (However, Respondents claim an early,

i.e., June 4th price increase to American

Petrofina, which was retroactively invoked).

There was no distinction in customers as to

price, and no separate classes for pricing

purposes within the meaning of Section 8. (R.3

30-31, P. Ex. 2).

; 3 "R" refers to the two volumes of the

Record of Proceedings", which contains a

transcript of the trial testimony.

Longview Refining Company did not

sell at least 10% of the gasoline and diesel fuel

sold during the period June lst through June

8th, at the higher prices of .1725 cents for the

Executive Price Freeze Order was announced) a

debit memorandum was issued raising prices to

American Petrofina to the level of .1725 for

regular gasoline, .1925 for premium gasoline, and

.1625 for diesel fuel, retroactive through June 4,

1973. (R. 452).

French Peterson, who was the

President of Longview Refining Company,

testified repeatedly that on June 6, 1973, he had

given instructions to "Reba" and "Buck"

(employees of Longview Refining Company) to

raise prices to all customers. (R. 439, R. 477,

and R. 400). Peterson candidly admitted, "I was

afraid we were going to have a freeze," (R. 430)

" ..and I might add, counsellor, if you expect a

freeze to come, you better get all you can,

becuase you can always cut your prices after the

freeze goes off; otherwise you might go out of

business." (R. 456). "...1 wanted a price |

could live with if it were frozen". (R. 456).

Mrs. Reba Morrow testified that she

received a phone call from Mr. Peterson

instructing her to put the increased price in

effect for all customers at the same time. (R.

473). She did not recall whether the date was

the 4th, 5th, or 6th of June. (R. 472-3). She

Stated that despite daily working with prices,

invoicing, and manifests, it was not detected that

American Petrofina's price was not raised until

the 16th of June. (R. 473-5). She could offer

no explanation as to why all customers were

being charged one price and American Petrofina

being charged another price, nor could she

explain why the fact was not detected earlier

than June 16th. (R. 474).

Considering all purchasers during the

period June lst through June sth ,4 the

4 Although the Executive "freeze" Order

speaks in terms of a period of June lst to June

8th, 1973, (Sec. 8(a)), or a "preceding seven-

day period (Sec.(b)), interpretative

commentary of the Cost of Living Council

embodied in question and answer form is as

follows:

"Q Is the freeze base period of the first seven

days in June or the first eight days in

June?

A The freeze base period is the first eight

days in June 1973; June lst through June

8th. If no transaction occurred during that

period, the nearest preceding seven-day

period in which a transaction occurred is

used as the freeze base period."

retroactive billings to American Petrofina through

June 4th, are necessary in order to assure that

at least 10% of the total purchases were at the

increased prices. Backbilling American Petrofina

to June 6th will not suffice.

Inconsistency in Respondents’ position

was evident. According to French Peterson, a

call was made on June 6th giving instructions to

raise the price to all customers immediately, but

there was not mention of placing the price

increase in effect earlier (on June 4th) for

American Petrofina (alone). Accepting the

contention of clerical error, and putting in effect

the price increase for American Petrofina the

same day as the increase became effective for

other customers, i.e., on June 6th, the result of

10% of total sales at the higher prices is not

achieved. It is obvious, therefore, that even if

there was bona fide clerical error in failing to

put the increase in effect originally, when the

oversight was detected on June 16, the benefit of

hindsight was deliberately used in order to

retroactively "back-bill" through June 4, thus

4 (cont) Accordingly, the computations

were made on the basis of an eight-day period.

achieving sufficient sales at the highest prices to

justify the "freeze" charges at the higher levels.

Accordingly, it is apparent (and the

trial court correctly held) that the retroactive

billing through June 4th was a device used to

achieve justification for charging the increased

prices during the freeze period.

Even if this were not true, under the

definition of "transaction" contained in Section 8

of the "Freeze" Order, the prices that must

control are those which are actually charges at

the time of the sales in question, and not

subsequent additions through retroactive billings

or debit memos. Otherwise, the door would be

open to fraud, for there would be no practical

way to distinguish between a genuine billing

error and a device to achieve higher prices.

Therefore, the Respondent Longview

Refining Company made illegal overcharges

during the freeze period, which, based upon

gallons of regular, premium and diesel purchased

by the Petitioners, as shown on Page 2 of

P.Ex. 2, amount to $73,027.59. This figure was

not challenged by the Respondents, despite

which the lower court picyunishly observed that

the trial court's finding of the overcharge was

not sufficiently definite because it did not

allocate the overcharge to each Petitioner, which

is simply a matter of mechanical calculation (with

J. C. Bell excluded because he could not furnish

his purchase figures). This certainly does not

constitute a basis for reversal of the trial court's

findings with respect to the freeze period

overcharge.

It is also clear, as_ particularly

evidence by the testimony of French Peterson,

that the overcharge was willful and an evasion of

the order, entitling the Petitioners to the

assessment of penalties. Mr. Peterson stated

that the instruction was given to raise prices to

all customers at the same time. Yet, three days

after the "freeze" order became effective,

American Petrofina was "back-billed" so that its

prices were retroactively raised effective two

days before the price increase to other

9 In this same view, the lower court

observes that the regulations under which the

trial court decided the case was not "in effect" at

all times during the overcharge period. But the

— does not point out an instance where a

change in the regulations is pertinent to the

uestions under consideration. The observation,

therefore, is meaningless and superfluous.

is apparent that the trial court was justified in

finding a willful evasion of the order, even under

the unauthorized tests laid down by the lower

court. At the time of back-billing, Peterson

knew that the higher price would not be

authorized unless the price increase was made

retroactive to June 4th. The evidence of

manipulation is "clear and convincing".

Petitioners did not discover’ the

overcharge during the freeze period until after

Suit was instituted and during the course of

discovery. Respondents denied the overcharge

from the time the issue was first raised, and still

deny it. Any extra-judicial request for refund

of the concealed overcharge would not only have

been impossible prior to suit, but obviously

would have been futile if made, and would be

futile now if this case were abated to allow such a

demand. The transparent sham, which justified

the finding of a willful overcharge, compels the

finding that a demand for refund would have

been useless.

The lower court based reversal of the

trial court's freeze period overcharge

determination on the trial court's application of a

civil standard of willfulness, and failure to find

individual overcharges with respect to each

Petitioner. In light of the discussion of

willfulness in the first portion of this application,

and the evidence which justified the finding of

willful, knowledgeable manipulation, it is evident

that the "willful" point does not justify reversal,

and failure to allocate the overcharges to each

Petitioner clearly does not require retrial.

The lower court also noted

Respondents' contention that American Petrofina

was in a separate "class", but did not assign this

as a basis for reversal. Clearly no "class"

question is involved in the freeze period

overcharge. As the lower court conceded, albeit

in a footnote (No. 22, page 19, App. ) on

May 25, 1973, Longview Refining began charging

all customers the same prices, and Respondents'

attorneys stated in a letter that "since June

[Longview has] had only one class of gasoline

purchasers". P.Ex.6, Ex. P. 118. The "freeze"

went into effect in June and the freeze

measurement period was in June, so the "freeze"

obviously concerned only one class consisting of

all purchasers.

7 The lower court's observation that

Mr. Peterson testified that Petrofina's price

increase was to have been effective June 4, 1973,

is not supported by the record. Instead,

Mr. Peterson testified repeatedly that the order

to increase price to all customers had been given

on June 6 (which date will not serve to justify

the higher pricing). This treatment of the facts

is akin to Mr. Peterson's back-billing with

hindsight knowledge of the Presidential "freeze"

Proclamation. The lower court's observation in

the last part of its opinion that the testimony of

American Petrofina should be obtained is,

therefore, wholly without purpose or legal effect.

In summary, the Court should have

sustained the trial court's finding of overcharge

during the freeze period, for the evidence

clearly sustains the court's finding, and no

useful purpose would be served in relitigating

that which has_ already been _ properly

determined. It is undisputed in this record that

the freeze period overcharge was not, and could

not have been discovered except through

discovery pursuant to this litigation.

The law does not require a

meaningless, futile gesture, (presuit notification)

and certainly does not require an act which

would have been impossible, as in the present

situation. Therefore, even disregarding the

question of willfulness, no presuit notification

was necessary, and the trial court's finding of

the freeze price overcharge should have been

sustained. The finding of willfulness also should

have been sustained for the facts compel a

finding of willfulmess under any construction of

the term and there is no need for reversal simply

because the trial court did not find the amount of

Petitioners' individual purchases or individual

overcharges in any sum certain. The record

clearly demonstrates the total overcharge as to

all Petitioners, and the reSpective amounts of

their purchases (with the exception of J. C.

Bell, who failed to prove his purchases and

therefore was not included in the overcharge

calculation). It requires simply a mechanical

calculation to determine the respective share of

the damages attributable to each Petitioner. This

certainly is not a basis for requiring a new trial

of the "freeze" overcharge. The opinion of the

lower court clearly should be reversed on this

issue.

a The trial court correctly determined

that Respondents overcharged

Petitioners under pricing regulations

which followed the "freeze" order.

(a) Failure to make an effort to follow

the pricing regulations

constitutes a legal wrong.

After August 19, 1973, refiners were

required to determine their pricing pursuant to a

formula specified in 212.83(c)(2) of 10 C.F.R.

Chapter II, and its predecessor Part 150.355.

Through the application of the formula

a refiner is permitted to determine the increment

per unit, (i.e., the amount per gallon) of

increased cost per particular product (gasoline,

diesel, etc.) accruing after May 15, 1973, and

add such increment ot the base price of the

product, i.e., the respective prices charged to

each class of customers for the particular

product as of May 15, 1973. The resulting price

is the price for the particular product to the

repsective class of customer for the "current

month", i.e., the month for which the price is

established.

Section 212.82(a) provides that a

refiner may not charge to any class of purchaser

a price in excess of the base price except to the

extent permitted pursuant to the provisions of

Paragraphs (c) through (k), the reference being

to the pricing formula and rules relating thereto.

Section 212.82(f) says that the base price is the

weighted average price at which the item was

lawfully priced in transactions with the class of

purchaser concerned, on May 15, 1973, plus

increased product cost incurred between the

month of measurement and the month of May,

1973, and measured pursuant to the provisions of

Sec. 212.83 (which contains the formula for

allocating increased cost and determining the

increment of increased cost which may be lawfully

added to the May 15, 1973 base price).

Section 212.82(f) also provides:

"In computing the base price, a

firm may not’ exclude any

temporary special sale, deal, or

7 in effect on May 15,

1973.

Section 212.82(f)(2)(i) provides in

pertinent part:

"In computing base prices for

special products, a refiner may

not increase its May 15, 1973

selling price to each class of

purchaser more than once in any

calendar month to reflect the

increased product cost allowable

pursuant to the provisions of

Sec. 212.83 the adjustment

apeceee in Paragraph (f)(2)(ii)

of this section or the incentive

factor permitted pursuant to Sec.

212.84 but may implement the

increase on any day during that

month."

Section 212.83(c)(1)(i) provides:

"Special products: [gasoline and

diesel fuel are included in the

definition of special products] In

computing base prices for sales of

special product, a refiner may

increase its May 15, 1973 selling

prices to each class of purchaser

once each calendar month,

beginning with November, 1973,

by an amount to reflect the

increased product cost

attributable to sales of that

special roduct, using the

differential between the month of

measurement and the month of

May, 1973, provided that the

amount of increased cost used in

computing a base price is

calculated by use of the general

ey ay 1) - of ths ~pection - r

(Emphasis supplied). ~

The intent of the pricing regulations

is to hold prices to the May 15, 1973 level

adjusted on a month to month basis (not more

than once each month) to allow the "pass

through" of permissible increased cost

to be determined in accordance with the

formula. The formula is simply a method by

which the refiner determines an increment to be

added to the May 15, 1973 base price which will

allow him to recover his additional crude cost

incurred in prior months. An increase over the

May 15, 1973 price is permissible only through

application of the formula. The wording of the

regulation clearly mandates that no increase is to

be permitted if the formula is not used. Since

the Respondents made no bona fide effort to

follow the formula during the overcharge period

(as illustrated by discussion of the evidence,

infra) the entire amount charged in excess of

base price is “overcharge”. The trial court

leniently allowed the overcharges to be decreased

by proper calculation of the formula.

But despite the clear wording of the

regulations, the lower court stated that the

failure of a defendant to perform the mechanical

calculations under the formula in arriving at the

price charged for covered products does not in

and of itself result in an overcharge. The literal

application of this proposition will provide

additional comfort to violators. The statement is

true only where the base price is charged.

Section 212.82(a) provides that a refiner may not

charge any class of purchaser a price in excess

of the base price except to the extent permitted

pursuant to the provisions of Paragraphs (c)

through (k), the reference being to the pricing

formula and rules relating thereto. The same

provision was found in Section 150.355(b) as

amended in 39 F.R. 809 (January 3, 1974). The

meaning is Clear, i.e., that in order to justify an

increase over base price, the defendant must

make a bona fide good faith effort to determine

allowable increased cost pursuant to the formula.

It has not been suggested that a defendant must

be held to be the insurer of the accuracy of his

calculations, but there is no authority, and no

excuse for deliberately ignoring, (or manipu-

lating) the formula (as Respondents have done).

{f, as the lower court holds, a defendant

may ignore the formula, though he knows he is

supposed to calculate prices in accord with it,

and be given the benefit of a "no legal wrong"

finding in the fortuitous event that the price

charged does not exceed that which is permitted,

then it is only logical that he must accept the

danger that the price will exceed the maximum

permissible and, since he willfully ignored the

formula, be held to have willfully affixed an

improper price. The lower court's opinion is to

the contrary, for it holds that the overcharge is

willful only where the seller knows his price is in

excess of the permissible ceiling price. Thus,

the would-be violators are given the best of all

possible worlds, while buyers must suffer from

an illogical and inconsistent opinion.

(b) The trial court correctly ruled that

Respondents are not entitled to

consolidate operations for pricing

purposes.

When Mr. Sanders, the certified public

accountant retained by Petitioners, first

endeavored to ascertain the validity of the

Respondents' pricing, he visited the offices of

Crystal Oil Company in Shreveport. (R. 15) He

was introduced to Mr. Leeseman, who was

identified as Manager of Refining for Crystal Oil

Company. Mr. Sanders asked to see _ the

calculations that Crystal had made in order to

determine the price under Phase IV regulations.

Mr. Sanders then gave this testimony (R. 16):

"Q What was Mr. Leeseman's response?

A Said he didn't have any.

Q Did he say whether or not they had

followed or reviewed the formula that

was applicable at that time for pricing?

A He said he had read it but didn't

understand it and made no attempt to

apply It.

Q_ Did he give you any explanation as to

how the prices that were in effect at

that time or the price changes that had

occured came about?

A Yes. He said that Mr. Morgan

supplied him a figure which he said

would be the price of crude in that

month or his estimate of the price of

crude in that month, and they divided

that by 42, and that's what they added

to the price.

Q_ Was that ge well the extent of the

conversation that you had with Mr.

Leeseman about what had been done at

that particular point in time?

A Yes. He gave me a sheet, showed me

how he had arrived at the price he had

arrived at, and then we went to

Longview." (Emphasis supplied).

The sheet referred to appears at

Page 4 of P.Ex. 6. The sheet shows” an

effective price schedule at various dates, and

three price increases occurring during the month

of December (1973). None of these prices were,

or could have been, arrived at through

application of the formula contained in the

pricing regulations, as is made abundantly clear

by the record. The testimony concerning Mr.

Leeseman's representations relating to the failure

to follow the formula was not disputed or denied

by the Respondents.

Mr. Donald Burns, accountant for the

Respondents, also testified with relation to

Respondents’ actions in regard to pricing. He

stated that after consultation with Mr. Houghton,

one of the attorneys for the Respondents, "We

determined that we could legally - scratch that -

we determined that a consolidated basis was the

proper basis to perform the calculations." (R.

482) However, though this determination was

made around March, the consolidated basis was

not actually used until July or August. (R. 482)

Mr. Burns conceded that it was

required that the formula be used to make

changes from the May 15, 1973 base price. (R.

527). It is clear from cross examination,

however, that the formula was never used by

Respondents to establish prices. Prices for

December 1973 and January 1974 were established

through Mr. Leeseman's' method, _ already

described. (R. 527) Mr. Burns then determined

that the formula had not been applied

"properly," and stated "the first time I applied

the formula as I determined it was for February."

(R. 528) At that time, however, the formula

calculations were made by Mr. Burns individually

for each subsidiary (e.g., individually for each

subsidiary (e.g., individually for Longview

Refining Company), as opposed to being made on

a consolidated basis. (R. 528). And though, as

noted earlier, Mr. Burns and Mr. Houghton

determined that Crystal could "legally" determine

the formulz a consolidated basis as of March,

the consoliaeted basis was not actually used in

calculations until July or August. No explanation

appears in the record as to what, if any,

calculations were used in March, April, May or

June.

Even though Mr. Burns purported to

make individual calculations in February, he did

not take into account the admittedly large

accumulated overcharge. Witness the following

testimony: (R. 539, et. seq.)

I would like to read then to you the

first re of that letter (from

Tom Houghton, attorney for

Respondents, to the Federal Energy

Office, dated March 8, 1974.). It says

"Longview Refining Company of

Longview, Texas, a _ wholly-owned

subsidiary of our client Crystal Oil

Company, of Shreveport, Louisiana,

during the months of December 1973

and January 1974 incurred overcharges

to wholesale purchasers of gasoline and

diesel fuel as a result of overestimates

of the cost of crude to be run durin

those months. The exact amount o

aggregate ee during the

eriod has not yet been determined,

ecause final billings by crude

suppliers have not been received.

However, it seems likely that amount

will be quite substantial.’ All right,

did you make those ~ealculations to

show what that overcharge wag?

I made those calculations—based on

incorrect assumptions.

Ard that incorrect assumption being

that you should apply the formula on

the basis of Longview’ Refining

Company individually.

That is one of them, yes.

That's just one of them. What---?

That's the major. We changed several

interpretations as we went along.

Oo F- AD LY

To eliminate the overcharge?

No, because of a different

interpretation of the formula.

Now, how much was the overcharge as

you calculated it to be, regardless of

whether on incorrect assumptions or

not, Mr. Burns.

At what point in time?

Sir?

At what point in time?

pe a the time of this letter, March 8,

I don't recall. It was probably in the

neighborhood of ive undred

thousand.

That was just for gasoline, wasn't it?

The five hundred thousand or so?

I believe so, yes, gasoline.

Another hundred thousand or so for

diesel, wasn't it?

That's correct.

About six hundred ninety-two

thousand altogether according to your

calculations at that time, wasn't it, Mr.

Burns?

It might have been. I don't know

exactly.

Do you recall this language in the same

letter that appears on the second

page, the third paragraph of the leter,

In view of this threat and in order to

avoid exposure to double recoupment,

Longview both has refused to make

refund to any party for the December

and January overcharges and _ is

presently determining its price under

the formula so that the amount of

overcharges for those months will not \

be recoupled in future months pendin

official investigation by the Federa

Energy Office. Do you remember that?

Yes.

So that in your future calculations as

they applied to Longview Refining

Company you did not take into account

the G factor represented by this

ee $692,000 in overcharges,

you?

I took in the G factor that occurred

after January 31. The portion of the

G factor that occured prior to January

31 I excluded.

And that would _ include _ the

approximately $692 ,000.00 in

overcharges?

vu)

A If that was a correct figure.

If that's a correct figure?

A Yes. or.”

Further compounding and complicating

this picture were Mr. Burns' admissions that

though he has made numerous calculations on one

basis or the other, from and after February,

1974, none of such calculations can be tied to any

price increase or any price charged by Longview

Refining. Witness the following testimony: (R.

927, et. seq.)

"Q@ All right. To get this amended base

price--in other words, to make your

change from May 15, 1973, you are

required to use the formula, aren't

you:

A That is correct.

When did Longview Refining Company

or Crystal ever first start using the

formula on any basis?

A The first that I am aware of is

December. There may have been one

before that.

December, 1973?

That is correct.

Sir, didn't you join the company in

December of 1973?

December 26.

And didn't you for a month or more

work and try to find out what had

been done and then try to set up the

company on the formula?

That's right.

And wasn't it, in fact, the first of

February before you ever got the

formula in application?

No sir.

Isn't that what you told us heretofore,

Mr. Burns, Mr. Sanders and I?

No. As a matter of fact, what I told

Mr. Sanders and you is that they did

not apply the formula propery and

that the first time I applied the formula

as I determined it was for February.

When you did that, when you first

applied it for February, you did it on

the basis of Longview’ Refinin

Company as a _ separate individua

entity, did you not?

That's correct.

And you were doing the same for

Adobe and Berry and the Other

refining subsidiaries.

At the time it was just Adobe and

Berry. Crystal Princeton was not in

operation at that time.

So you couldn't even have consolidated

Crystal Princeton at that time, could

you?

No...

All right, sir. Would you now tell me

then for the record what supporting

documents or data do you have

showing how the price here shown to

be in effect on December lst, 1973,

was arrived at?

I have nothing.

The second price that shows to be

effective on December lst which was

retroactive from December 4, 1973,

what do you have to show how that

price was arrived at?

I believe ~~ alread have Mr.

Leeseman's calculations of that price.

The sheet that Mr. Sanders identified

in one of his exhibits?

That's correct.

You have seen that sheet, have you

not?

I have.

It does not in any way, shape, form or

fashion purport to apply the formula

does it sir?

It purports to apply the formula as Mr.

Leesemen interpreted it at that

time.... aa? erat

Now show me what you have then to

support the price that was first

notified to be effective December 20,

1973, and then on December 3lst,

1973, deferred to January lst, 1974.

I was not involved in that price

increase, and we could not locate any

documents for it, but Mr. Leeseman, I[

understand, prepared those

calculations, and he’s no longer with

the company .

And you are unable to locate any

supporting entries to show that the

formula was applied?

6 The reference is to the sheet identified by

. Sanders, which had no relation whatever to

the formula, a fact admitted by Mr. Leeseman.

O » AD YF

On any basis, whether consolidated or

individual or any basis? .

I do not know that it did not exist.

What do you have then to < - the

price increase of January 3rd, 1974,

which was noticed on

January 2nd, 1974? What supporting

documents do you have to show

application of the formula for that

price increase?

Once again, I was not involved with

that price increase.

Do you have anything? Do you know

of anything?

No, I don't know of anything.

Have you ever seen anything?

I may have. I don't recall.

What do you have then to support the

price increase of February 5th, 1974?

I could not find that in the records in

my calculations. This is a price

ecrease, and it was done -- €

calculations for it were done in

Houston by Tom Houghton and myself.

T could not locate them.

THE COURT: How do you spell that

last name?

THE WITNESS: H-o-u-g-h-t-o-n.

THE COURT: Oh, Mr. Houghton here?

THE WITNESS: That's Mr. Houghton

in the courtroom.

You and Mr. Houghton did that, but

you can't find the backup to show what

was done or how it was done?

No, I have stacks and stacks of files,

but [ couldn't find it, no, sir.

What do you have to support the price

increase as of March 9, 1974?

I would like to make one thing clear at

this point. [I did not set the price. I

merely advised on them.

Do you have anything to. show,

though, what calculations were done,

how the formula was applied ---?

I have quite a few stacks of work

papers, yes, sir. They will not tie

airectly to this, because I did not set

e prices.

Are you referring now to _ those

computer runs that you showed us?

Not for the March 9th, no, sir.

Were there any computer runs for the

March 9th price increase?

5D 2» © PF

No.

You say you have some work papers

relating to the March 9th _ price

increase, but they will not tie to the

price increase. Is that correct?

That is correct...

Goin to the price increase of

April 15, 1974, what supporting

documents or data do you have to show

the application of the formula to arrive

at that price?

I have a whole file full of work papers

Supporting each of these calculations.

Well, sir, do you have one that shows

the April 15, '74 price?

My calculations will not tie to those

prices.

You have some work papers but they

will not tie to the prices?

Tnat's correct.

Because you did not set the prices?

That is correct.

All right, sir. Do you know who else

has any work papers that would

support that and show application of

the formula to arrive at that price?

O » © PY

No, sir, the prices were set as a result

of oral conversations, and they were

not done on a Calculated basis --

scratch that -- they were done on the

basis of my Calculations. I made

estimates in my Calculations. These

estimates were adjusted.

Who adjusted them?

Mr. Morgan.

Mr. Morgan’ didn't necessarily,

though, go by the figures that you

may have arrived at through your

calculations and your endeavors to

apply the formula, did he?

He went by my calculations, adjusting

the wrong assumptions that I made.

He took them and adjusted your

agree and ee at some price.

Those prices will not tle to your

calculations’ ea

That's correct.

Is that the sum and substance of it?

That is.

Is that true then for that next price,

May 4th?

Yes, it is. I believe that starts with

computer runs. I believe my computer

runs go to that.

Q The few computer runs which you

showed us, in addition to Mr.

Leeseman's sheet as being a backup,

didn't start until May then, 1974. Is

that correct?

A I believe I have before then, but May

is the first ones I could locate. I'm

not certain as to what day they

started.

Q Well, would this same process remain

true right up to this good day, Mr.

Burns, for setting prices?

A Except that we're doin it

consolidated, yes" (Emphasis

Supplied).

In summary, Mr. Burns testified that

when he joined Crystal Oil Company on December

26, 1973, he determined that the formula had not

been applied properly (by Mr. Lesseman). Mr.

Burns first made calculations for the month of

February, 1974, for Longview Refining Company

as a separate entity. There was a large

overcharge (in excess of $600,000.00) which he

disregarded. These calculations were

subsequently abrogated by calculations on a

"consolidated" basis commencing in July or

August, 1974, which purported to wipe out the

overcharge. Compounding this tale of knowing

disregard and manipulation of the regulations is

the unabashed testimony that no calculations

known to exist will tie to any price set by

Respondents during the pertinent peries, not

even these calculations required to be filed with

the Federal Energy Office. This is because Mr.

Morgan, president of Crystal, would correct Mr.

Burns' "assumptions" and set the price at some

figure which would not tie to the calculations.

The only prices ever charged by Respondents

after the inception of the regulations which were

tied to any supporting documents are those

shown on Page 4 of P.Ex. 6, being Mr.

Leeseman's price figures which were admitted by

Mr. Leeseman as having no relation to the

formula.

The "consolidated" approach to the

formula was first employed in July or August,

well after the overcharge period, but is used to

"eliminate" the overcharge. There is no

explanation of the method of setting prices in the

interim period between February and July or

August. The overcharge-eliminating consolidated

prices still does not tie to formula calculations

because prices have been left to Ue ultimate

determination and control of Mr. Morgan.

The entities, i.e., subsidiaries of

Crystal Oil Company, consolidated for price

calculation purpose are Longview’ Refining

Company, Berry Refining Company, Adobe

Refining Company, Crystal Princeton Refining

Company, High Octane Terminal Company,

Crystal Petroleum Company, Tulsa Oil Company,

and Stone Independent Disbributors. (R. 483).

Longview, Berry, Adobe, and Crystal Princeton

are refiners. High octane, a blending company,

was also considered a refiner. The remaining

companies-Crystal Petroleum, Tulsa, and Stone--

are retailers. All other subsidiaries of Crystal

Oil Company were ignored in the consolidation,

as was Crystal Oil Company, the parent.

(Crystal Oil Company is engaged in production,

supply and distribution. It does not operate

gasoline stations, and is not engaged in

refining.) (R. 525)

Through the _ consolidation, the

Respondents took costs applicable to all

consolidated companies back to August, 1973,

averaged such costs, arrived at an allocation

factor, and apportioned costs between all the

companies. (R. 547) The incongruity of this

approach is illustrated by the fact that Longview

Refining Company was not owned by Crystal Oil

Company on August 1, 1973, not being acquired

until November 1, 1973. (R. 547). Adobe

Refining Company also was acquired after

August, i.e., om November 30, 1973. The

financial statement of Crystal Oil Company shows

that Crystal-Princeton was acquired on

December 14, 1973, but did not begin refining

operations until July, 1974, well after the

overcharge period. (R. 548) Therefore, three

refineries packaged in the consolidation were

acquired by Crystal Oil Company well after the

pricing regulations went into effect, and after

overcharges had been incurred, and one was not

in operation until after all overcharges during

the pertinent period.

"Refiner" is defined as a "firm" other

than a reseller or retailer. Sec. 212.31. A "firm"

may be treated by the F.E.O. as a parent and

consolidated entities, or a parent and a

consolidated or unconsolidated entity, or an

unconsolidated entity, or “any part of a firm."

Sec. 212.31. In this overcharge case, the court,

of course, exercised the same power and function

as the F.E.0O., and was certainly justified on the

facts and circumstances described above, in

treating Longview Refining as an “unconsolidated

entity" and"part" of a firm as a separate firm for

pricing purposes. (The consolidation of the

retail subsidiaries is examined in more detail in

the next section of this petition).

The lower court ignored the power of

the trial court to determine that the consolidated

calculations were improper, and the abundant

evidence supporting that decision, and held that

consolidation must be employed. But the trial

court is left without direction, in the event that

the decision to test the overcharge on a

"consolidated" basis is maintained. The opinion

states that the refiners were not consolidated to

the extent "permissible" by the trial court, and

that facts regarding acquisition and operation of

the various companies must be taken into account

in calculating Respondents' ceiling price on a

consolidated basis. The lower court does not

state the extent to which consolidation is

permissible, nor does it state what facts

regarding acquisition and operation of the

various companies must be taken into account, or

how those facts will affect consolidation.

Based on the trial court's finding that

the Respondents totally failed to follow the

formula, as the regulations require,

all charges in excess of May 15, 1973, base price

are overcharges. Accordingly, Petitioners

should be entitled to recover these charges in

excess of the May 15, 1973 base price on all sales

to Petitioners through the period ending

February 27, 1974 (being the period covered by

the Petitioners’ proof). The trial court declined

to award this amount, but, instead, based its

award on calculations made by Mr. Sanders which

applied the formula to Longview Refining's

operations.

It is obvious that the overcharge is

willful. Respondents did not attempt to

consistently follow and apply the formula, with

which they were thoroughly familiar. Instead

they vacillated for the sole purpose of avoiding

the effect of their exorbitant overcharges, and

set prices which were not determined by the

formula on any basis, consolidated or

unconsolidated. Any request for refund on the

part of the Petitioners would obviously have been

ignored by Respondents. This is apparent from

the Respondents' efforts to manipulate the

formula so as to avoid repayment of the

overcharges, and their persistence in the

position that nothing is due the Petitioners.

Accordingly, the trial court was correct in

holding that the violation was willful, and that

application for refund was not necessary.

holdin that “reseller™ has two

different definitions, one of which is

be ignored, while the other requires

consolidation of retail subsidiaries in

determining a refiner’s price. -

The pivotal consideration in

Respondents’ asserted basis for including the

retail subsidiaries in the consolidation was their

failure to meet the definition of "reseller" in

subpart F of Sec. 212.91, a position which the

lower court adopted.

"Refiner" is defined in Section 212.31

as "a firm (other than a reseller or retailer) or

that part of such firm which refines cuvered

products of blends and substantially changes

covered products or refines liquid hydrocarbons

from oil and gas field gases, or recovers liquified

petroleum gases incident to petroleum refining

and sells those products to resellers, retailers,

reseller-retailer?, or ultimate consumers.

"Refiner" includes any owner of _ covered

products which contracts to have those covered

products refined and then sells the refined

covered products to resellers, retailers, reseller-

retailers, or ultimate consumers."

The definition of "firm" contained in

Sec. 212.31 is as follows:

"Firm' means any association,

company, corporation,’ estate,

individual, joint venture,

partnership, or sole

proprietorship or any other

entity, however organized,

including charitable, educational,

or other eleemosyna

institutions, and the federa

government, including

corporations, departments,

federal agencies, and _ other

instrumentalities, and state and

local governments. The F.E.O.

may, in regulations and forms

issued in this part, treat as a

firm: (1) a parent and a

consolidated and unconsolidated

entities (if any) whicn it directly

or indirectly controls, (2) parent

and its consolidated entities, (3)

an unconsolidated entity or (4)

any part of a firm."

It is therefore clear that any "part" of a firm may

be treated separately for pricing purposes, and

this includes separately incorporated subsidiaries

wholly-owned by a holding company. It is

equally clear that it is the intent of the

regulations, as evidenced by the definition of

"refiner" as a firm other than a reseller or

retailer, to consider refiners separately for

pricing purposes. Subpart F of the regulations

sets forth the pricing rules regarding resellers

and retailers, and the separate treatment

accorded them leads to a preliminary conclusion

that the consolidation of the retail operations

attempted by Respondents is not proper. Section

212.91, Subpart F, on which both the lower court

and Respondents relied for the consolidation of

the retailers provides:

"This subpart applies to each sale of a

covered product (other than the first

sale of crude petroleum) by resellers,

reseller-retailers, and to each sale of

crude petroleum (other than the first

sale) by a refiner. For purposes of

this subpart 'reseller' includes any

entity of a refiner which is engaged in

the business of purchasing and

reselling covered products, provided

that the entity does not purchase more

than five percent of such covered

products from the refiner including

any entities which it directly or

indirectly controls, and _ provided

further that the entity has historically

and consistently exercised the

exclusive price authority with respect

to sales by the entity."

"Reseller" is also defined in Sec.

212.31 as "a firm (other than a

refiner or retailer) or that part of such a firm

which carries on the trade or business of

purchasing covered products, and reselling them

without substantially changing their form to

purchasers other than ultimate consumers." The

same section defines "reseller-retailer" as "a firm

(other than a refiner) or that part of such a firm

which carries on the functions of both a reseller

and retailer."

"Retailer" is defined in Sec. 212.31 as

"a firm (other than a refiner or reseller) or that

part of such a firm which carries on the trade of

business of purchasing covered products and

reselling them to ultimate consumers without

substantially changing their form."

It is clear from these definitions that

"reseller" refers to those performing middleman

functions (e.g., jobbers), i.e., those who buy

from refiners and resell to purchasers other than

ultimate consumers. Sec. 212.91 allows the

F.E.O. to treat certain subsidiaries performing

as jobbers as part of the parent refiners. This

has no application to the present case.

Subpart F lays down pricing rules

applicable to resellers, reseller-retailers and

retailers which are entirely separate from those

applicable to refiners. Sec. 212.91 says that for

purposes of pricing under Subpart F, the term

"reseller" includes any entity of a refiner which

(1) purchases less than five percent of its

covered products from the refiner or its

controlled entities, and (2) historically and

consistently exercises exclusive price authority

with respect to its sales. If the reseller does not

meet these two requirements, presumably (for it

is not expressly stated) the reseller entity will

be considered part of the refiner for pricing

purposes. But this provides no authority

whatever for determining the prices of a retailer

under the rules in Subpart E, applicable to

refiners, rather than under Subpart F,

applicable to retailérs. The case at hand deals

only with retailers, not resellers. Had those who

drafted the regulations intended the exclusionary

provision to apply to retailers, or even reseller-

retailers, they certainly would have said so.

There is no reason, logic, or authority for

holding that the term "reseller" in Sec. 212.91

has no relation to the definition of reseller

contained in Sec. 212.31. (which contains the

general definitions applicable to the regulations).

Nor is there any basis for broadening the term

reseller, as used in the exclusion in Sec. 212.91

to include retailers, where "retailer" has an

entirely different definition.

Crystal Petroleum Company, Tulsa Oil

Corporation, and Stone's Independent Oil

Distributors, Incorporated, the non-refiner

companies with which Respondents consolidated

all refining operations, are all retailers. (R. 549

and Crystal Oil Company Annual Report, 1973).

The record fails to reveal any basis for treating

them as "resellers," i.e., firms which purchase

covered products and resell them _ without

substantially changing their form to purchasers

other than ultimate consumers. But the record

(e.g., Mr. Burns' reference to them as

"retailers") and public disclosure, i.e., the

annual reports by Crystal Oil Company, show

that the named subsidiaries are retailers.

Witness the following excerpts from the 1973

Annual Report relating to retail operations:

"CRYSTAL PETROLEUM COMPANY

"During the past year’ Crystal

Petroleum Company moved to develop

its profit potential. Improvements

were made in financial management with

tight control on _ receivables and

payables. Changes in the method of

transmitting funds from stations to our

central banks have greatly expedited

the flow of cash available for

operations. A_ detailed study was

completed on unprofitable stations and

a systematic, organized program was

instituted to shut down and lease the

most unprofitable ones. Some of these

Stations may be reopened by the

Company in the future. The operatin

personnel has been reduced an

efficiency improved. The retail market

improved steadily through the last six

months of the year, however, costs for

roduct increased in this area at a

aster rate than could be absorbed at

the retail level. The product suppl

situation has improved and Crysta

Petroleum is not having the difficulties

experienced by many independents in

keeping the stations supplied with

gasoline. With the shutdown of these

unprofitable stations, stable market

conditions, and improved management,

Crystal Petroleum should improve its

profit position in 1974.

"JOE E. HUTCHISON DISTRIBUTING

COMPANY

"The management of Joe E. Hutchison

Distributing Company was consolidated

with Crystal Petroleum Company on

September 1, 1973. This consolidation

places all retail operation in the

southeastern United States (excludin

Stone Oil) under one retal

management. These changes enabled

the personnel at Hi-Octane Terminal to

give more attention to the acquisition

and blending of product, not only for

our retail outlets, but also for our

wholesale customers.

"TULSA OIL CORPORATION

"Because of the energy crisis, it was

decided that no new locations were

required by Tulsa during 1973. Tulsa

concentrated on increasing

productivity per existing unit; this

1973 increase was 11.3 percent per

unit over 1972. In 1973 net profit

margins at retail improved over 1972

and per gallon unit operating costs

were reduced by 21%. Tulsa has been

in a strong retail gasoline marketing

area whereby they could sell at the

maximum ceiling prices allowed most of

the year. Under its excellent

management Tulsa continues’ to

contribute substantially to Company

earnings.

"STONE'S IND® PENDENT OIL

DISTRIBUTORS, INC.

"Stone's Companies had a_ good

operational year in 1973 with earnings

in its normal range. Even with

occasionally restricted volumes of

product, Stone was able to operate on

a profitable basis approximately equal

to previous years. Our operations

were temporarily taxed during the

month of August 1973 when our main

asoline supplier discontinued

eliveries. During the interval that

exchange negotiations were being

settled, our ability to supply even

minimum amounts to our customers

was, at times, in uestion. We

marketed a low volume for that month

of less than 2,000,000 gallons of all

products, which was down from a

volume of slightly over with a great

deal of aid from exchange .agreements

and from Hi-Octane Terminal Company,

another of our subsidiaries, we were

able to build back to an average

monthly volume in excess of 3,000,

gallons. With the impetus of the

energy crisis in ful! swing, our retail

market once again reached profitable

levels commensurate with effort and

investment involved. Those stations

which failed to react in this market

were temporarily closed on the basis

that products could be more profitably

placed at other locations at this time.

Our wholesale operation was stifled in

the latter part of the year by a supply

imbalance at certain terminal locations.

This, coupled with resulting terminal

—— and scheduled drawing down

of available products, did not ailow us

to operate our transports as efficiently

as in the past. While the cost was

recaptured in most cases, this loss in

me undoubiedly took its toll in

profit which we would have ordinarily

realized.

"With the mandatory controls for

etroleum products,. rise in cost,

ederal regulations of pricing, and

shortages in the marketplace, the

rojection of results is. difficult;

Oowever, we are Optimistic that Stone

Companies will contribute to the

earnings of the Company."

Accordingly, the exclusion in Section

212.91, is not a definition at all, but simply a

rule to determine whether reseller operations

controlled by refiners will be priced under

Subpart E "Refiners," or Subpart F, "Resellers

and Retailers," and has no application here. It

is clear that the retail distribution arms of

Crystal Oil Company qualify as "retailers" and

their pricing is governed by Subpart F. It

would not even matter if retail distribution

subsidiaries qualified as "resellers-retailers" for

the evidence purpose of the exclusion in 212.91

was to determine whether the middleman function

should properly be placed with the refiner or the

retailer for pricing purposes.

It is thus apparent that the

Respondents are not entitled to consolidate

retailers with refiners for pricing purposes.

The lower court held that the

"definition" contained in 10 C.F.R. Sec. 212.91

is solely for the purposes of Subpart F, Resellers

and Retailers, yet relied upon it in defining

"refiner" under Subpart E, to the exclusion of

the general definition by which the Act is

supposed to be interpreted (in Sec. 212.31,

Subpart B).

In doing so, the court relied upon

certain FEA determinations which do not support

the result reached. Esso Standard Oil S.A.

Ltd., Exxon Corporation, New York, New York

(Case No. FEA 20,300, Energy Management 1974

Transfer Binder), held that Esso Standard S.A.

Ltd. (Essosa) and Exxon Corporation (Exxon)

should be consolidated for price determination

purposes. However, this was done pursuant to

"price regulations in Puerto Rico," 39 F.R.

17764, May 20, 1974, which have no application

to the present case. Further, there is no

discussion in the opinion regarding the proper

definition of reseller, and no indication that

Essosa would not qualify as a reseller under the

definitions contained in Sec. 212.31 and the

exclusionary provision in Sec. 212.91.

The FEA Decision in Esso Standard Oil

S.A. Ltd., Coral Gables, Florida (Case No. FEE-

1025, Filed 7-30-74, decided 12-20-74) Paragraph

20,748, page 20,963, Energy Management, 1974,

Transfer Binder, concluded that Essosa of the

Virgin Islands should be consolidated with Exxon

for pricing purposes but, here again, there is no

indication that Essosa did not qualify as a

reseller under the definitions of Sec. 212.31. In

fact, there is no discussion of the point. The

fact that Essosa may have been referred to as a

"marketer" in the Virgin Islands is of no

consequence, for a reseller is exactly that, i.e.,

a "marketer." But a reseller is not a retailer,

and there is no indication that Essosa is a

retailer as opposed to being a reseller or a

reseller-retailer.

The case of Esso Eastern Incorporated

Houston, Texas, Case No. FEE-0915, filed 6-14-

74, decided 12-23-74, held that Esso Eastern's

Guam branch did not meet the criteria set out in

Sec. 212.91 and therefore could not be

considered a reseller for the purpose of

mandatory petroleum price regulations. There is

no indication that Esso Eastern did not meet the

definition of reseller contained in 212.31, and

certainly there is no indication that it qualified

as a retailer. Therefore, the FEA opinion does

not furnish support for the lower court's

conclusion.

The case of Getty Oil Company

(Eastern Operation), Inc., Skelly Oil Company,

New York, New York (Case No. FEE-1101),

Paragraph 83,041, page 83,106, Energy

Management, 1975 Decisions and Orders, is

subject to the same observations. In fact, it

clearly appears that both Getty and Skelly met

the definition of refiners, yet because of their

historical independent operation, the FEA

granted an exception and did not require their

consolidation. The same considerations apply in

the present case, and _ militate against

consolidation. Even those companiesqualifying as

refiners have historically and traditionally been

operated as separate, independent entities. In

fact, Crystal Oil Company only acquired and/or

commenced operation of several of them during or

after the period of overcharge, so Crystal serves

simply as a holding company.

The trial court was faced with contrary

positions, i.e., the Petitioners contended that

Longview Refining's overcharge should be

determined on the basis of separate calculations

applicable to Longview Refining, and _ the

Respondents contended that Longview should be

consolidated with various other entities whose

only relation to Longview, except for isolated

intercompany transfers, was the fact of common

ownership (which post-dated the origination of

the pricing regulations). The Petitioners had

notice of the attempt to consolidate the

calculations only a short time before trial, and

had no reasonable opportunity to test the

attempted consolidation. The trial court quite

properly and with adequate justification chose to

measure the overcharge on an unconsolidated

basis. This determination should have been

upheld. It is admitted that the Respondent

Longview Refining Company made a substantial

overcharge, when considered on an

unconsolidated basis (R. 562):

"Q All right, let me rephrase the question

then. If your theory in this case that

there should be a_ consolidated

approach to the application of the

formula is not accepted, and it is

determined that you've got to figure it

on an individual basis, the fact is, sir,

that there is a very substantial

overcharge under the formula. Is that

not correct, sir?

A That's correct." (Testimony of Mr.

Burns).

The overcharge was aiso_ publicly

admitted in a letter by Respondents' attorneys to

the F.E.O. which appears in the Record. Mr.

Burns testified that he made calculations on

which the letter was based, though he said such

were based on "incorrect assumptions," the

primary one being that the calculations should

not be consolidated.

In reasonable probability (though it is

not known for certain) consolidation of only the

refining operations will not diminish the

overcharge. Only by including the retail

companies was the effect of the disregard of the

pricing regulations alleviated. It is submitted

that the regulations do not permit this sort of

gerrymandered result. The trial court's

determination that consolidation is not proper

should be upheld.

(d) The trial court made a roper

determination of "classes" and “base

price” for purposes 2 EEE of

the pricing formula.

When Mr. Sanders, Petitioners’

C.P.A., first visited Longview’ Refining

Company, he was furnished a sheet purporting to

show transactions on May 15, 1973, supporting

the calculation of base price as of May 15, 1973,

supporting the calculation of base price as of May

15, 1973 (being an average price of .1525 cents

per gallon for regular gasoline and .1725 cents

per gallon for premium gasoline). (R. 18) Mr.

Sanders subsequently found that Thriftyman,

Incorporated, one of the Petitioners, had a

transaction on May 15, 1973, which was not listed

on the sheet furnished by Longview Refining

Company. When he called for additional

information, the request was handled through

Respondents' lawyers. (R. 19) The response to

Mr. Sanders' request for information relating to

calculation of base price is contained in a letter

dated February 8, 1974, appearing at page 5, et.

seq. of P. Ex. 4. The explanation given for the

apparent discrepancy noted by Mr. Sanders is as

follows:

"1, List (Exhibit A) of all

transactions for the sale of

asoline which occurred on

ay 15, 1973, at the refinery of

Longview Refinin Company

(Longview). You will note that

this list is in two parts. Part A

includes all gasoline sales to

customers of the class in which

the Plaintiffs in the captioned

receeane belong. Part B

ncludes all gasoline sales to Other

customers. On May 15, 1973, the

customers listed in Part B

constituted a distinct class

separate from the class of

customers in Part A as a result of

the distinction in the terms of

delivery to customers in Part B as

opposed to customers in Part A.

ustomers in Part B had agreed

from time to time to pick up

—- when requested b

ongview; such requests woul

be made when necessary as the

result of inadequate refinery

storage capacity. Customers in

Part A had made no. similar

commitment to ee: Shortly

after May 15, 1973, lack of

inventory storage capacity ceased

to be a_ problem, and_ the

distinctive arrangements with the

customers listed in Part B were

terminated, Thereafter such

customers have been members of

the class including the customers

listed in Part A--that is,

Longview has since June had only

one class of gasoline purchasers."

The companies listed as being in the

"distinctive" class were Allied, M&A,

Thriftyman, and Sun oil.’ = The evidence is

contrary to the assertions in the letter. When

Mr. French Peterson, who was president of

Longview Refining on May 15, 1973, was

questioned about these statements, the following

testimony was given.

"Q Mr. Peterson, you did not have any

special deal with Thriftyman that

riftyman would pick 5: gasoline

when requested to do so by you or

ae Refining Company, did you,

sir

A No, Thrlfyman as | said, was made

(sic), ecalse Mr. Blackman

approached me and said he would brin

a volume in if T could” furnish the

Volume and guarantee to furnish it to

him for a period, and we talked about

it~ and determined to negotiate a six-

months eriod for approximately

400,000 a month. It Would vary.

q In response to a question as to whether

Respondents calculated a different "class" (Base

price) for M & A, or Foremost, or Allied or any

combination of these companies, Mr. Burns said

that no sales were made "to that class of

urchaser" after August, 1972, or after "the

nception of the formula". (R. 569).

As | understand it, sir, you did not

have a deal either with Sun or Allied

or Humble or the Alkek Companies

Foremost and M & A, that they would

just come = and pick up gasoline

whenever Longview Refining Company

wanted them to. That was not the

basis of your---?

Not with Sun or Fira or Exxon,

Was it your deal with Foremost and

M& A that they would just come and

pick it up when you wanted them to?

Well, we tried to keep it on a

consistent volume, but our history was

such that if we needed to move some

they would come in and pull more, and

if we needed to move less, they could

et the product elsewhere, because

they were flexible on their supply.

All right, sir. If somebody has said in

connection with this case then that as

to Allied, M & A, Thriftyman, and Sun

Oil that these customers had agreed

from time to time to pick up gasoline

when requested by Longview, that

would not be true with respect to

anyone except possible M & A. Is that

correct, out of those four?

A Primarily M & a8 They never -- hey

were cut off sometimes for short

eriods, as | explained, or sometimes

hey would pull heavy. ae | were

sort of a balance wheel to the

refinery."

This testimony was so contrary to the asserted

basis for the different classifications of

customers that one of the attorneys for the

Respondents, Mr. Thomas W. Houghton, was

forced to the stand to admit authorship of the

letter ,of February 8th (which was over Mr.

Paine's signature) and attempt an explanation as

to its lack of accuracy. (R. 461, et. seq.)

Mr. Clint Blackman, Jr., President of

Thriftyman, testified that the price obtained by

Thriftyman, Inc, was never set or determined on

the basis that Thriftyman would pick up fuel

from Longview Refining Company whenever

Longview Refining Company requested, (R.

579). There is no apparent basis or justification

for the difference in treatment of the customers

making purchases on May 15th, once the

8 See Footnote 7. Since M & A made no

purchases on May 15, 1973 its price was not part

of the base price calculation, and = any

ustification for putting it in a separate class is

mmaterial,

explaination of the attorney's letter of February

8th, 1974, is negated. It is clear from reference

to the record (R. 431-36, 457-58) and to Mr.

Blackman's testimony that there was no

"customary price differential" based on "different

characteristics" of customer groupings. There is

no evidence whatever of any special contractual

relationship between Longview and any of the

companies which made purchases on May 15,

1973, and which were excluded from

Respondents’ base price calculations. In the

final analysis, the only attempted justification of

different "classing" related to Thriftyman (M & A

made no purchases on May 15, 1973). But

evidence directly contradicting the asserted

justification came from both Mr. Peterson and Mr.

Blackman, which demonstrates that all customers

concerned in this inquiry possessed the same

essential characteristics. Therefore, the proper

base price is that which averages all transactions

(including the transaction with Thriftyman and

others listed on Page 7 of P.Ex. 4) as of May 15,

1973, and is the base price used in Mr. Sanders’

calculations. The trial court so _ found,

(Findings of Fact, 25-28, page 9, App. D).

The Respondents’ position with respect

to base price for formula pricing purposes is

curiously inconsistent. They contended that

Thriftyman's transactions on May 15, 1973 should

not be included for purposes of determining the

base price applicable to the other Petitioners,

but, did not calculate charges separately for

Thriftyman using a different base price. This is

contrary to the regulations, which state that in

computing the base price, a firm may not exclude

any temporary special sale, deal, or allowance in

effect on May 15, 1973. Sec. 212.82 (f) (I).

Had Respondents separately calculated

Thriftyman's base price, the ~ resulting

overcharge to Thriftyman would have been much

greater than the overcharge to other Petitioners.

But, instead, Respondents simply excluded

Thriftyman for base price calculation, then

included it, along with all other Petitioners, for

pricing purposes.

The lower court said that the trial

court should have made a specific determination

of the dollar amount of May 15, 1973, weighted

average price for each product involved as well

as actual base price figures for sales to

Petitioners "class" of purchasers and should have

made a more specific finding as to whether

Petrofina and others claimed to be a class of

purchasers separate from Petitioners were

included in Petitioners' class. It is clear that the

trial court made these determinations, and that

the lower court is confused. The trial court

specifically found the base price used by

petitioners to be the weighted average price of

all transactions on May 15, 1973, and to be the

proper base price. It also found that there was

only one class involved in the pricing to

petitioners, which consisted of those companies

listed on page 7 of P. Ex.4, which contains the

base price calculation. There was more than

adequate evidence on which to base the trial

court's conclusions, and it is not clear if the

lower court even disagrees with those findings.

If it does, the opinion gives no guidance

whatever with regard to the question of why the

class determination was improper. Certainly,

there in no indication that the evidence, which

was fully developed on the point, required

putting Thriftyman or any other purchaser which

made a purchase on May 15, 1973, in a separate

class and accorded a different base price. The

Respondents similarily disregarded all lower

prices charged in transactions on

May 15, (including Thriftyman's) in arriving at

the base price for Petitioners. The lower court

does not indicate any support for this

manipulation, and all that can be safely assumed

from the opinion is that a separate finding as to

classes and base prices should he made with

specific reference to, petitioners and those, which

Respondents contend should be in _ separate

classes. But this does not require re-trial, and

the confusion in which the lower court has left

the issue has created the risk of further

appellate revision of any action that the trial

court might take.

(e) The lower court is incorrect in its

holding that petitioners failed to take

into account the refiners incentive

factor and erred in calculating the

overcharges by using the current

month as the month of measurement.

The amount of the overcharge is as set

forth in P. Ex.6, through the month of

February, 1974. It is correctly noted in the

lower court's opinion that Petitioners corrected

their figures twice during trial. This resulted

from one basic’ mistake, i.e., incorrect

application of a ratio factor. However,

Respondents have not pointed out any

mathematical deficiency or error in the final

corrected figures, nor has the lower court. But

the lower court held that there are errors in the

methodology of Mr. Sanders' application of the

pricing formula, including: (1) failure to utilize

the prior month as the month of measurement;

and (2) failure to take into account the refiner's

incentive factors.

(1) Month of Measurement: The

pricing formula is designed to allow recovery of

increased product costs by adding an appropriate

increment to the base price. See Mr. Sanders'

explanation, R. 71, et seq. The formula

determines an increment to be added to the

May 15th price which allows the refiner to

recover additional costs incurred in prior

months. If it is properly applied, the formula

will always find the refiner just one month behind

in either overcharge or undercharge. The

increment is determined by dividing unrecovered

costs from the past month's operation (or such as

may have accumulated in prior months) by the

estimated volume of sales of the product during

the "current" month. Since the current month is

not completed, sales in that month can not be

known, hence the "estimate." This is the only

"unknown" or "estimated" component to the

formula. When Mr. Sanders’ made _. his

calculations, it was not necessary for him to deal

with an unknown. He was furnished all the

figures (by Respondents) for the period he

analyzed, i.e., through February, 1974. Since

Plaintiffs' calculations cover the entire period for

which the refund was claimed, rather than a

month-to-month calculation of what the price

should have been, the "month of measurement"

calculation is not a consideration. See page 3 of

P. Ex. 6, which sets forth Mr. Sanders’

explanation of the formula. Mr. Sanders applied

the formula over the entire period, based on

known figures. There was no reason to estimate,

since he had all the figures applicable to the

period for which he calculated the overcharge.

When challenged as to this approach, Mr.

Sanders stated (R. 165):

"Well, when you go through a

series - a formula is designed to

be applied month to month. Now

when you are calculating over a

period of time in which no

adjustment is ag ohne to be

made on a monthly basis, it really

doesn't make any difference."

a |

There has been no logical challenge to

this observation. Mr. Burns testified that when

he made calculations for Longview, on an

individual basis, his figures were "very close" to

those of Mr. Sanders, which further serves to

verify the validity of Mr. Sanders' approach to

the problem. It has not been demonstrated that

this approach reaches an incorrect result. It is

obvious that this observation by the lower court

is of no consequence.

(2) Refiners' Incentive Factor: The

refiners' incentive factor was not included in

Petitioners’ calculations because there was never

any indication (until Respondents’ calculations

were furnished shortly before trial) that it

should be. Respondents' letter of February 8,

1974 indicates that Petitioners were being

furnished everything needed for determining the

validity of Respondents' pricing, but made no

mention of the incentive factor.” Under these

9 It was stated in Respondents’ letter of

February 8, 1974, P. Ex. 6, pages 8-9:

"It is our belief that the information

furnished herewith is sufficient to permit

application of such formula. Longview does

not take the position that it is entitled to

charge any price in excess of base price.

Therefore, the other information you have

circumstances, Respondents should logically have

been estopped from asserting that the factor

should be included. However, post trial

examination of Respondents’ sales schedules show

that no refiner incentive factor is applicable

during the pertinent period. The incentive

factor is applicable only to middle distillates, and

is designed to encourage and reward increased

middle distillate production. Longview Refining

Company had no increase in middle distillate yield

during the pertinent period. Therefore, under

the terms of Sec. 212.84, there is no refiner

incentive available to them.

The lower court also made a passing

reference to "increased product cost" included

by Respondents in their calculations. The

"additional costs" incurred by Respondents

represent costs "generated" by Crystal

subsidiaries through inter-company transfers.

9(cont) .

requested is not material to the lawfulness

of Longview's prices." The refiners

incentive factor results in a price in excess

of base price.

Accordingly, it is clear that Respondents are

estopped from claiming that information they did

not furnish should be included in_ the

calculations.

Butane was acquired through inter-company

transfer, and then sold to the B. F. Goodrich

Company at a loss. Longview Refining Company

purchased polymer from 8B. F. Goodrich

Company. The polymer was used as a blending

stock. Respondents contended that they had to

sell the butane to Goodrich in order to get the

polymer. The cost of the polymer, i.e., the

price paid by Longview Refining to B. F.

Goodrich was included in Petitioners' calculations

of product cost. The loss on the butane obtained

in the inter-company transaction was not

included. Only the direct cost of crude and

blending stocks used directly in the processing

of the finished product are properly includable

as costs. This applies also to the purchase of

gasoline and diesel. Respondents also included

in their calculations an inter-company purchase

of gasoline for .27587 cents per gallon and sale

by Longview at .2050 cents which served no

purpose except to increase Longview's costs.

The same is true of a purchase of diesel for

.27372 cents and sale at .2050 cents. These

inter-company transfers represent nothing more

than a further attempt to circumvent the law.

The lower court observed that they were not

demonstrated to be improper, but the trial court

was certainly justified in so concluding on the

basis of the nature of the transactions, and

Respondent's various manipulations of the pricing

regulations.

Furthermore, the effect of these

questionable transactions, even if accepted at

face value, are negligible so far as the present

case is concerned because of the decreased

purchases by the Petitioners. The figures are as

follows:

Additional cost - per consolidated report:

January $ 42,857.00

February 69,815.00

Total Additional Cost $§ 112,672.00

Gas and Diesel Percentage:

January

.5695 X 42,857.00 = $ 24,407.00

February

.5475 X 69,815.00 = 38 223.00

Petitioner's Percentage:

Tanuary

.1411 X 24,407.00 = $ 3,443.00

February

.0942 X 69,815.00 = 6,576.00

Total Additional Cost -

Petitioners’ Portion $ 10,019.00

The costs for February would not be recouped

until March, Since Petitioners' calculations only

covered a period ending in February, the

February costs would not be considered, Thus

these so-called additional costs would have only a

negligible effect on recovery in any event. If

Petitioners are wrong and the transfers are

required to be considered, Petitioners' recovery

can be reduced by the appropriate amount

($3,443.00), but there is certainly no need for

new trial for this purpose.

4. There is no. necessity and no _ legal

uirement for joinder of the admin trate

aGeney ih wou

agency which serve only to delay

Sposition of the case,

The lower court has instructed the

trial court, on remand, to order the FEA to be

joined as a party to the litigation. This is done

even though it has not been requested or

Suggested by either party. The court also

instructs the trial court that it may call and

examine a witness from Petrofina to determine the

100

truth regarding the existence of the alleged

agreement of June 4, 1973 between Longview and

Petrofina. The indication is that the trial court

could not make this determination from the

Respondents' testimony, adduced through French

Peterson, and Reba Morrow which testimony,

contrary to supporting such an agreement,

negates its existence. The trial court is also

invited to secure the testimony of Mr. Leeseman

(who properly should have been Respondents'

witness but was not) regarding the Respondents'

understanding and application of the pricing

formula. Of course, it is undisputed that no

qualified effort was made to follow the formula

while Mr. Leeseman was in charge and it is

difficult to see how Mr. Leeseman's testimony

could add or detract from this proposition, since

Mr. Leeseman's method of calculation, illustrated

in his own handwriting, is in evidence. These

directions by the court to the trial court are

unwarranted, without authority, and impose an

unnecessary burden upon retrial of this case.

The requirement that the FEA be joined is

particularly dilatory. It is settled that in

redressing grievances under the Acts and the

regulations, Petitioners may apply directly to the

101

district court and need not “exhaust

administrative remedies", a proposition that is

not even in question in this case, 10 This case

has been fully developed, and, if remanded, can

be retried expeditiously without bureaucratic

assistance or intervention, which will serve only

to delay. This delay should, and can easily be

avoided,

CONCLUSION

On different occasions in the opinion,

the lower court speaks of "fairness" for the

Respondents, but nothing is said about fairness

for the Petitioners. The trial court heard the

evidence and observed the demeanor of the

witnesses, and their attorneys (who were found

to have directly misstated relevant facts to the

Petitioners, which caused Mr. Houghton to take

the witness stand to shield Mr. Paine from

responsibility for the misstatements). On the

basis of all the evidence the trial court reached a

10 Respondents raised the point in the trial

po ef were overruled, and abandoned it on

eal,

102

conclusion that there had been a_ willful

overcharge. The Petitioners upon whom the

overcharge was inflicted were all seriously

injured financially, and certain of them were

forced out of business as a result. It is strongly

intimated by the lower court that the Petitioners

should have filed a presuit demand for refund of

the overcharge, setting forth specifically, with

respect to each Petitioner, the exact amount of

the overcharge claimed. The fact that this

presented an impossible burden to the

Petitioners, who, without litigation, did not have

access to the necessary facts and figures, is

ignored by the lower court, yet it embraces the

proposition that the Respondents, who are armed

with the facts and figures, may escape the

consequence of a willful overcharge by claiming

that they did not know their prices would results

in an overcharge.

The holding of the lower court that the

failure to follow the pricing formula does not

constitute a legal wrong, and that it is only the

intentional charging of a price known to be in

excess of the applicable ceiling price allowable

which constitutes a willful overcharge invites and

authorizes intentional disregard of _ the

103

regulations. When this holding is considered

against the following language in the opinion it is

apparent that the opinion gives unwarranted

protection to Respondents against the effect of

deliberate actions resulting in overcharges:

"It is difficult, even for experts,

to understand these complex

regulations, as evidenced by the

frequent correction, modification,

change and clarifying

rulings...."

With this as an umbrella Respondents will be

able, with virtual impunity, to state that they

did not understand the regulations and did not

know their prices exceeded the applicable ceiling

price. The incongruity of this holding is

illustrated by the fact that the opinion also states

that Petitioners, who do not have the facts and

figures (and rarely possesses the expertise) of

the Respondents must, before suit is filed, tell

the Respondents exactly how much _ the

Respondents have overcharged.

The record in this case clearly shows

that Respondents have thus far accomplished

what the regulations are designed to prohibit.

They have done so by deliberately ignoring the

regulations in charging excessive prices to the

104

Petitioners, and then manipulating — the

regulations to avoid the consequences of the

overciarges. By use of the illegal and erroneous

priciig scheme Respondents reduced _ the

percentage of gas and diesel sold to Petitioners

from 30.71% of production in May, 1973, to 9.42%

in February, 1974, with fuel being diverted to

Crystal retail subsidiaries. As a result, certain

of the Petitioners were forced from business, and

all suffered considerable financial loss.

The holdings in the lower court's

opinion obviously transcend the present case.

The opinion will place serious and perhaps

insurmountable obstructions in the path of proof

of legitimate overcharge cases. The Petitioners

do not believe that these obstructions are

contemplated by the Acts or the regulations. If

not, the intent of Congress and the rulemakers

stands to be frustrated. Before this is allowed,

it is respectfully submitted that this application

for writ of certiorari should be granted.

105

Respectfully submitted,

PRICE & WILLIAMS

306 East llth Street

Suite L-7

Austin, Texas 78701

(512) 474-1563

by: Yo V\ CP.

JACK N. PRICE

ATTORNEYS FOR PETITIONERS,

CERTIFICATE OF SERVICE

| hereby certify a true and correct

copy of the above and foregoing document has

been forwarded to opposing counsel of record by

U. S. Mail on this the ay of May, 1977.

Ya wR

106

APPENDIX

APPENDIX A (Opinion of the Temporary

Emergency Court of Appeals)

APPENDIX B (Petitioners' Petition for

Rehearing Denied)

APPENDIX C (Judgment of the United States

District Court for the Eastern

District of Texas, Tyler

Division)

APPENDIX D (Findings of Fact and Con-

clusions of Law of the

United States District Court

for the Eastern District of

Texas, Tyler Division)

Cemparary Emergency Court of Appeals

of the United States

No. 5-17

LONGVIEW REFINING COMPANY AND

CRYSTAL OIL COMPANY, DEFENDANTS-APPELLANTS,

Vv.

W. R. (BrLL) SHORE, d/b/a

SHORE OIL PRODUCTS, ET AL., PLAINTIFFS-APPELLEES,

INDEPENDENT TERMINAL OPERATORS ASSOCIATION,

AMICUS CURIAE.

Appeal from the United States District Court |

for the Eastern District of Texas

(No. TY-73-CA-268)

{Argued Nov. 22, 1976 Submitted Feb. 15, 1977)

DONALD B. CRAVEN, Miller & Chevalier, Washington,

D.C., with whom Louis Paine and Thomas W. Houghton,

Butler, Binion, Rice, Cook & Knapp, Houston, Texas, and

Thomas W. Hathaway, Hathaway & Jackson, Tyler,

Texas, were on the brief for the Appellants.

JACK N. PRICE, Price & Williams, Austin, Texas, on the

brief for the Appellees.

WILLIAM H. BopbE and WILLIAM C. LANE, JR., Batzell,

Nunn & Bode, Washington, D.C., were on the brief for

the Amicus Curiae.

Before INGRAHAM, VAN OOSTERHOUT, and ESTEs, Judges.

APPENDIX A

ESTES, Judge.

Plaintiffs-appellees, W. R. (Bill) Shore and 12 other

separate parties, are purchasers of gasoline and diesel

fuel from one or more refineries, which products each

of them resells to and through service stations for retail

distribution to consumers. Defendant-appellant Longview

Refining Company (Longview) operates a small refinery

which has been a supplier of gasoline and/or diesel fuel

for the respective plaintiffs at various periods of time.

Defendant-appellant Crysal Oil Company acquired all of

Longview’s capital stock as of November 1, 1973.

The plaintiffs sought declaratory and injunctive relief

and monetary damages for certain actions allegedly com-

mitted by defendants: (1) violations of the Economic

Stabilization Act of 1970, as amended (Stabilization Act),

12 U.S.C. § 1904 note (1976 Supp.),* and the Emergency

‘The plaintiffs-appellees are:

1. W. R. (Bill) Shore, d/b/a Shore Oil Products

2. J. C. Duke Oil Company

3. J. S. Hackler

4. Martin & Son, Inc.

5. Mitchell Oil Company, Inc.

6. Pete Roberts

7. T. C. Rosser

8. J. C. Bell

9. Matthews Oil Company

10. Bob Hodge

11. M. I. Dickey, Jr., d/b/a B. & M. Oil Company

12. John H. Roberts

13. Thriftyman, Inc.

* The Economic Stabilization Act of 1970, as amended (Sta-

bilization Act), 12 U.S.C. § 1904 note (1976 Supp.), expired

on April 30, 1974, pursuant to § 218 of that Act. The alleged

violations of regulations and orders issued pursuant to the

Stabilization Act purportedly occurred during the existence

of the statute, so this case falls within the § 218 saving clause

of the Stabilization Act. See Carpenters 46 County Conference

Petroleum Allocation Act of 1973, as amended (Alloca-

tion Act), 15 U.S.C. § 751 et seg. (1976 Supp.), and

regulations thereunder; (2) violations of the Sherman

and Clayton Acts; and (3) violations of the parties’

supply contract and the termination provisions of Article

2.309(c) of the Texas Business and Commerce Code,

V.T.C.A. Bus. & C. § 2.309(¢e) (1968).

The plaintiffs’ original complaint was filed December

27, 1973. On May 7, 1974, the district court ordered the

plaintiffs’ first cause of action to be severed and ad-

vanced on the trial docket. The trial on the severed cause

of action was held December 9-11, 1974.

Findings of Fact and Conclusions of Law were filed

by the district court on January 22, 1976, and judgment

was rendered February 23, 1976, for the plaintiffs

against the defendants for $518,053.71, with interest

from the date of judgment, attorney’s fees to be deter-

mined following any appeal from the judgment, and all

costs of court. On March 17, 1976, the district court

granted the defendants’ motion for a stay of execution

Board v. The Construction Industry Stabilization Committee,

522 F.2d 637 (TECA 1975), cert. denied, No. 75-1021,

U.S. , 96 S.Ct. 1724, 48 L.Ed.2d 194 (1976); United

States v. California, 504 F.2d 750 (TECA 1974), cert. denied,

421 U.S. 1015, 95 S.Ct. 2423, 44 L.Ed.2d 684 (1975); State

Trial Attorneys Association v. Flournoy, 522 F.2d 1406

(TECA 1975).

° In the first cause of action in the original complaint [Ap-

pellants’ Brief Appendix (Br. App.) pp. 6-18], the plaintiffs

alleged violations of the Stabilization Act alone, since the regu-

lations promulgated pursuant to the Emergency Petroleum

Allocation Act of 1973 (Allocation Act), 15 U.S.C. § 751 et

seq. (1976 Supp.), enacted November 27, 1973, had not been

issued. Plaintiffs’ Fifth Amended Complaint (Br. App. pp.

45-58) filed July 15, 1974, alleges, inter alia, violations of the

Allocation Act regulations which became effective January

15, 1974 (39 F.R. 1924).

of the judgment pending appeal to the Temporary Emer-

gency Court of Appeals (TECA).‘ Defendants filed a

notice of appeal with this court on March 23, 1976.

Finding the judgment entered February 23, 1976, by

the district court on plaintiffs-appellees’ severed cause

of action to be non-appealable without proper certifica-

tion by the district court in accordance with Federal

Rule of Civil Procedure (FRCP) 64(b), this court

entered an order on June 24, 1976, dismissing the

defendants-appellants’ appeal. Acting upon plaintiffs’

motion, the district court entered an order on August

10, 1976, dismissing the antitrust claims contained in the

second and third causes of action (Sections IV and V

of the Plaintiffs’ Complaint) without prejudice to re-

filing. Based on that order’s making the February 23,

1976 judgment final pursuant to the requirements of

28 U.S.C. § 1291, defendants filed a notice of appeal in

this court on September 7, 1976." Since the plaintiffs’

motion requested dismissal of the contract claims, the

antitrust claims, and the claims against Atlantic Rich-

field Company and since the third cause of action con-

*Under § 211(b) (2) of the Stabilization Act, the Tempo-

rary Emergency Court of Appeals (TECA) has exclusive ap-

pellate jurisdiction of all cases arising under the Stabiliza-

tion Act. Section 6(a) (1) of the Allocation Act, which adopts

§ 211 of the Stabilization Act, grants the TECA exclusive ap-

pellate jurisdiction over all cases arising under the Allocation

Act, under regulations promulgated pursuant to § 4(a) of that

Act, or under any action taken by the President or his delegate

under that Act.

* As we indicated in Spinetti v. Atlantic Richfield Company,

5622 F.2d 1401, 1408 (TECA 1976), this court does not have

jurisdiction over claims such as the antitrust and contractual

claims made in the plaintiffs’ complaint. Cf. Associated Gen.

Con., Okl. Div. v. Laborers Int. U., Loc. 612, 489 F.2d 749,

761 (TECA 1978); United States v. Cooper, 482 F.2d 1898

(TECA 1978), approved in Bray v. United States, 423 U.S. 73,

96 S.Ct. 8307, 46 L.Ed.2d 216 (1975).

tained in Section V of the Plaintiffs’ Fifth Amended

Complaint expressly deals with supply contract violations,

the contract claims and those against Atlantic Richfield

Company were dismissed, There being no further claims

cr causes of action in the district court, this court has

jurisdiction over this appeal,

There are two basic periods of time during which the

plaintiffs paid the defendants prices which allegedly con-

stituted overcharges under the Stabilization Act and the

Allocation Act, These two periods are: (1) the entire

freeze period from June 18, 1973, through August 19,

1973;" and (2) that portion of the pricing formula

period from November 1, 19738, through February 28,

1974." The defendant Longview Refining Company al-

legedly overcharged the plaintiffs during the first freeze

‘On January 11, 19738, President Nixon issued Executive

Order No, 11695, 88 F.R. 1478 (January 12, 19738), whieh

instituted the largely voluntary Phase III price control pro-

gram. Since sufficient stabilization of the economy was not be-

ing achieved under Phase III, the President imposed a compre-

hensive price freeze on sales prices of all services and com.

modities, except raw agricultural producta, for a maximum

period of 60 days, Executive Order No, 11728, June 13, 1973,

58 FR. 15768 (June 15, 1978). The 60-day freeze period

acheduled to expire on August 12, 1978, was extended to Au-

gust 19, 1978, 38 FR, 21983 (August 14, 1973). Phase IV

controls commenced on July 18, 1978. Executive Order No,

11780, 88 PLR, 19845 (July 19, 1973).

'The pricing formula regulations issued under Phase IV of

the Stabilization Act became effective August 19, 1973, 88 FR,

29586 (August 22, 1978). The basie price rule for refiners

originated at 6 CFR § 160.365, 38 FR, 22536 (August 22,

1978), and the allocation of increased costa to the price of

covered products sold by refiners was provided for in 6 CFR

£§ 150.366. Numerous changes and amendments were made,

(See Appendices A, B, and C to this opinion.) Subsequently,

new regulations were promulgated by th. Federal Energy

Office (FEO) under the authority of the Allocation Act, 10

CFR $§ 212,82-88, 39 FR. 1924 Clanuary 15, 1974),

period, and Longview Refining Company and Crystal

Oil Company allegedly overcharged the plaintiffs during

the pricing formula period, November 1, 1973, through

February 28, 1974,

In essence, plaintiffs’ cause of action was based upon

assertions: (1) that the defendant Longview Refining

Company's charges to plaintiffs for gasoline and diesel

fuels during the freeze period, from June 13 to August

19, 1978, were higher than the maximum allowable price

under Executive Order No, 11728, June 13, 19738, 38

FR, 15763 (June 15, 1973), as extended through August

19, 1978, at 88 F.LR, 21988 (August 14, 1973), resulting

in a overcharge to plaintiffs;* and (2) that the de-

fendants subsequently failed to comply with the Phase IV

pricing formula established by the Cost of Living Coun-

ceil (CLC) at 6 CFR $$ 150.855-856 and continued by

the Federal Energy Office (FEO), sometimes referred to

in this opinion as Federal Energy Administration (FEA),

in 10 CER § 212.82-838, resulting in additional overcharges

to the plaintiffs.’ Asserting that the overcharges were

"Plaintiffs contended that they did not learn about the

freeze period overcharge until the discovery phase of this

suit, so they sought recovery of those overcharges in addi-

tion to recovery due to overcharges resulting from the pricing

formula violations, (Br. App, p. 51). Neither the quantity

of the plaintiffs’ purchases from Longview during the freeze

period nor the dollar amount of any claimed overcharge dur-

ing the freeze period is alleged in the complaint.

* The plaintiffs did not state the amount of any overcharge

during the pricing formula period in their original or in any

of their amended complaints, Plaintiffs’ Exhibit 6 sets forth

overcharge calculations first on the basis of monthly reports

and second on the basis of more recent figures supplied by

defendants prior to trial. Under the former, the net over-

charge by defendants was $500,815.00, of which plaintiffs’

portion would be $100,466.15. Under the latter, plaintiffs

calculated a total net overcharge of $245,505.00, with their

portion being $91,964.96,

[Continued]

willful and intentional on the part of the defendants,

the plaintiffs sought treble damages under Section 210

of the Stabilization Act,"

» (Continued ]

After cross-examination by the defendants’ attorneys, the

plaintiffs reealeulated the figures in their exhibit and intro.

duced Exhibit 6-A, The overcharges based on the monthly

reports were alloyed to be $509,505.00, the plaintiffs’ .° ore

being $169,235.17. Using more recent figures, plainiitfs

showed overcharges of $552,452.00, their share being ®inu,-

864,20, The plaintiffs’ final reealeulation made in Exhibit 6-B

following further crossexamination indicates overcharges of

$500,305.00 based on the monthly reports, with plaintiffs’

portion being 899,207,06, The more recent figures showed

overcharges of $382,462.00, of which $99,656.08 was plaintiffs’

share,

' Section 5(a) of the Alloeation Act adopts § 210 of the

Stabilization Aet, which provides:

(a) Any person suffering legal wrong because of any

act or practice arising out of this title, or any order or

regulation issued pursuant thereto, may bring an action

in a district court of the United States, without regard

to the amount in controversy, for appropriate relief, in-

cluding an action for a declaratory judgment, writ of in-

junction (subject to the limitations in section 211),

and/or damayes,

(b) In any action brought under subsection (a)

against any person renting property or selling goods or

services who is found to have overcharged the plaintiff,

the court may, in ite diseretion, award the plaintif? rea.

sonable attorney's fees and costs, plus whichever of the

following sums is greater:

(1) an amount not more than three times the

amount of the overcharge upon which the action

in based, or

(2) not less than 8100 or more than $1,000;

except that in any case where the defendant establishes

that the overcharge was not intentional and resulted

from a bone fide error notwithstanding the maintenance

of procedures reasonably adapted to the avoidance of

The district court found that defendant Longview in-

tentionally and willfully overcharged during the freeze

period the amount of $73,027.59. Apparently, the district

court accepted the calculations of plaintiffs’ CPA witness,

Mr. Sanders, that the total overcharge was $,0125 x

5.842207, ie, the overcharge per gallon multiplied by

the total gallonage of regular gasoline, premium gasoline,

and diesel fuel purchased by plaintiffs June 13 through

August 19, 1973." According to Mr. Sanders, the $73,-

027.59 figure represents the total overcharges for all of

the plaintiffs except one who did not provide his pur-

chases for that period,"’

such error the liability of the defendant shall be limited

to the amount of the overcharge: Provided, That where

the overcharge is not willful within the meaning of sec-

tion 208(a) of this title, no action for an overcharge may

be brought by or on behalf of any person unless such

person has first presented to the seller or renter a bona

fide claim for refund of the overcharge and has not re-

ceived repayment of such overcharge within ninety days

from the date of the presentation of such claim,

charge’ means the amount by which the consideration for

the rental of property or the sale of goods or services

exceeds the applicable ceiling under regulations or orders

issued under this title.

'' In the trial court, plaintiffs introduced the total of their

freeze period purchases in aggregate form, (Plaintiffs’ Ex-

hibit 2), Defense counsel objected to this as not being proof

of the actual purchases by each plaintiff. [Transcript (T.R.)

pp. 40-41),

' Plaintiff J, C, Bell's purchases were not included in either

the freeze period calculations (T.R,. p. 40) or the pricing

formula calculations (T.R, pp, 190,185), At trial, Bell testi-

fied that his purchases averaged around 5,000 gallona a

month (T.R, p., 819) and that in the latter part of 1978 pur-

chases ranged from a high of approximately 6,000 gallons to

a low of 1,845 gallons (T.R. p. 823),

In addition, the district court found that the plaintiffs

had proved the defendants willfully violated the Phase

IV pricing formula, 6 CFR § 150.856, and the Alloca-

tion Act's pricing formula, 10 CFR &§ 212.881¢) (2),"'

The court accepted Mr, Sanders’ calculation in Plaintiffs’

Exhibit 6(b) that the overcharge through February,

1974, amounted to $99,656.08, Concluding that the over-

charge must be presumed to be deliberate and not the

result of bona fide error, rejecting the alternative of

awarding damages not less than $100 nor more than

$1,000, and exercising ita power to treble the amount of

the overcharge, the district court ordered that the plain-

tiffs recover $518,053.71 | ($73,027.59 — $09,656.98) x

3) with interest. |Conclusions of Law (C.L.) 15, 16),

The method for determining the existence and amount

of any overcharge during the freeze and formula periods

involved is different. Wuring the freeze period, the price

of covered petroleum products was required to be main-

tained at the level at which the seller had made at least

ten per cent of the total sales to the same class of pur-

chaser during the freeze base period, June 1 to June &,

1978. Under the Phase IV pricing formula which be-

came effective at the end of the freeze period and con-

tinued under FEO regulations, the maximum allowable

price was determined by reference to a complicated,

{Findings of Fact (F.F.) 15-24], The plaintiffs intro-

duced the relevant regulations (TR. 70) as they were repro-

lines for the Phase IV pricing rules. (See Appendix A, pages

48,432 and 48,833 of which were part of Plaintiff's Exhibit 6).

$212.82 us amended at least through April 10, 1974, and at

* 48,821, p, 48,834, 10 CFR § 212.83 as amended at least

through May 1, 1974, Close examination of this material and

the pertinent history of the regulations contained therein re-

veala that the regulations introduced were not the same as

those effective during the entire period in controversy,

changing formula which allocated refiners’ increased costs

to their covered products.''

Clearly, plaintiffs have the burden in this case to pro-

vide the specific data needed to prove the existence of an

overcharge. Determining lawful prices during both the

freeze period and the pricing formula period requires

an interpretation of certain essential concepts and terms

used in the regulations.’’ The pricing formula, 10 CFR

§ 212.83, is extremely complex and its application calls

‘In Schirtzinger v. Dunlop, 489 F.2d 1807 (TECA 1978),

this court noted regarding Subpart L of the Cost of Living

Council (CLC) Phase IV regulations dealing with the pric-

ing of petroleum products:

Subsequent to oral argument of this case on Septem-

ber 17, [19738] the CLC has on three separate occasions

significantly amended the regulations here involved. . .

489 F.2d at 1808. Another example of the agency's changing

regulations which were the subject of a pending lawsuit is

Conaumers Union of U. S. v. Sawhill, 626 F.2d 1068 (TECA

en bane 1976). The Schirtzinger court examined the amend-

ments and their effect on computation of allowable prices

under the regulations. 489 F.2d at 1308-9. See Appendix B

for text of changes.

For example, the formula was revised, corrected or changed

practically once a month between September, 1973, and

February, 1974. See Note 26,

'*The FEA issued Ruling 1974-17 dealing with Base Price

Computation, 39 F.R, 21042 (June 18, 1974), CCH Energy

Management {| 16,027, and Ruling 1974-18 dealing with Dis-

counted May 16, 1978 Price to a Class of Purchaser, 39 F.R.

21042 (June 18, 1974), CCH Energy Management ‘| 16,028, on

June 12, 1974. Subsequently, the FEA issued Ruling 1976.2

dealing with Application of the Term “Class of Purchaser”.

Under FEA Petroleum Price Regulations, 40 F.R. 106565

(March 7, 1974), CCH Energy Management % 16,042, stating

that “those rulings did not resolve all outstanding questions

and that to some extent the rulings themselves have been mis-

construed.” CCH Energy Management {| 16,042, at p. 16,073.

for expertise.” Thus, precise findings of fact by the

district court are of paramount importance in this case.

In Kelley v. Everglades Drainage Dist., 319 U.S. 415,

at 419, 63 S.Ct. 1141, at 1143, 87 L.Ed. 1485, at 1487

(1943), the Supreme Court stated that “{tjhe nature and

degree of exactness of the findings required depends on

the circumstances of the particular case.” After noting

facts which it would have been appropriate for the dis-

trict court to consider, the Supreme Court held:

It may be that adequate evidence as to these matters

is in the present record. On that we do not pass, for

it is not the function of this court to search the

record and analyze the evidence in order to supply

findings which the trial court failed to make. Nor

do we intimate that findings must be made on all of

the enumerated matters or need be made on no oth-

ers; ... We hold only that there must he findings,

stated either in the court’s opinion or separately,

which are sufficient to indicate the factual hasis for

the ultimate conclusion. (emphasis added)

319 U.S. at 421-422, 63 S.Ct. at 1145, 87 L.Ed. at 1489.

In the case before this court, the district court’s findings

as to the facts relevant to the proof of any overcharges

alleged in the plaintiffs’ complaint are not sufficiently

specific to substantiate concluding there was an over-

charge by the defendants in any sum certain as ‘o any

individual plaintiff.

Willful Overcharge

In considering the overcharges the district court found

that plaintiffs paid during the freeze and formula periods,

“See T.R. p. 70-91 and 492-520. The defendant’s CPA-

witness testified that the cost recovery formula is very com-

plex, that many parts are subject to multiple constructions,

and that «ven nccount:n's mav disegree about proper anplica-

tion. (T.R. p. 523).

the crucial question which must be examined initially

is whether the alleged overcharge was willful ‘in either

or both periods) within the meaning of section 208‘a)

of the Stabilization Act. Section 210‘b)‘(2) precludes

bringing an action for an overcharge which “is not

willful within the meaning of section 208(a)” unless “a

bona fide claim for refund has been presented.” *’ It is

undisputed that the plaintiffs did not present defendants

with a claim before instituting this action; plaintiffs

assert that the overcharge was willful.

Requiring presentation of a bona fide claim for refund

of an overcharge is part of the congressional provision of

an opportunity and an incentive for non-judicial settle-

ment. If the person refuses to refund the overcharge

within 90 days of the presentation of a claim, the in-

jured party may bring suit pursuant to § 210 of the

Stabilization Act. Under § 210(b) of that act, a de-

fendant can be subjected to serious penalties * in addi-

tion to repayment of the overcharge unless the defend-

ant “establishes that the overcharge was not intentional

** Section 210(b) (2) of the Stabilization Act is adopted by

§$ 5(a) of the Allocation Act and provides, inter alia:

That where the overcharge is not willful within the

meaning of section 208(a) of this title, no action for an

overcharge may be brought by or on behalf of any per-

son unless such person has first presented to the seller

or renter a bona fide claim for refund of the overcharge

and has not received repayment of such overcharge

within ninety days from the date of the presentation of

such claim. (emphasis added).

See Note 10, above, for more complete text of Stabilization

Act $210. The Act does not excuse failure to present a

claim for refund simply upon a conclusion that it would have

been futile.

** See Note 10, above, for the text of § 210(b) of the Stabili-

zation Act providing penalties which a court may award in

an action brought under § 210(a) of that Act.

and resulted from a bona fide error notwithstanding the

maintenance of procedures reasonably adapted to the

avoidance of such error . . .” Stabilization Act § 210(b)

(2), 12 U.S.C. § 1904 note (1976 Supp.).

The district court found as to each time period in-

volved that it was unnecessary for plaintiffs to present

a claim for refund, since defendants’ overcharge was

willful. The finding of willfulness was based upon an

erroneous conclusion that as a matter of law the “civil

meaning of willfulness” controls this case. (C.L. 14!.

In the absence of prior presentation of a claim for re-

fund, the overcharge must be found to be willful in the

criminal sense, even though the action is itself civil. As

this court stated in Manning v. University of Notre Dame

du Lac, 484 F.2d 501, 503 (TECA 1974):

The Act clearly reveals in this context that the term

“willful overcharge” must be construed in the crimi-

nal sense.

Pure statutory construction clearly supports the Manning

holding. Also, the district court concluded that section

210 of the Stabilization Act “is essentially civil in na-

ture.” (C.L. 14) This conclusion ignores the express

language of section 210 requiring the overcharge to he

“willful within the meaning of section 208(a).” From

the face of section 208, there can be no doubt that section

208(a) is essentially criminal in nature.’

Since the section 208(a) criminal meaning of willful

governs in section 210 of the Stabilization Act, two dis-

1° “§ 208. Sanctions; criminal fine and civil penalty

(a) Whoever willfully violates any order or regulation

under this title shall be fined not more than $5,000 for

each violation.

(b) Whoever violates any order or regulation under

this title shall be subject to a civil penaity of not more

than $2,500 for each violation.”

trict court decisions in criminal actions brought under

the Act are pertinent. Facing the issue of whether the

predecessor of section 208(a) was civil or penal in na-

ture, the district court in United States v. Fulura, 339

F.Supp. 162, 165 (N.D. Fla. 1972), held the section was

pena! and that

Violation of the [Stabilization] Act is predicated

upon a showing or finding of scienter, i.e. willful

disobedience of the Act or regulations by the offender.

The Futura court looked to the legislative history of sec-

tion 268 and concluded that it revealed “that Congress

did in facet intend that a crime be created and did in-

tend to provide for criminal punishment for violation

thereof.” United States v. Futura, at 165-166. Agree-

ing with the Futura court that “$208(a) criminal

penalties were written with an eye to scienter,” the dis-

trict court in United States v. Gulf Oil Corp., 408 F.

Supp. 450, 463 (W.D. Pa. 1975), decided that

The Congress in enacting § 208(a) of the Economic

Stabilization Act, intended that those refiners who,

with bad motive or criminal intent, refused to com-

ply with the regulations passed pursuant to the Act,

would thereby be subjected to criminal fines.

Further examination of legislative history substantiates

this court’s conclusion that the criminal rather than the

civil meaning of willful was intended to apply in this

case. While discussing the provisions of section 210 and

the requirement of presentation of a bona fide claim for

refund prior to commencing an action for overcharge,

the Conference Committee state:' in the Joint Explanatory

Statement: “The Heuse Bil! also provided that the term

‘willful’ shall have the same meaning as in the case of

criminal willfulness. . . . The Conference accepted the

House provisions.” Conference Report No. 92-753, 2 US.

Code Cong. & Adm. News, 92d Congress, Ist Sess., p.

2307, 2310 (1973).

Cases interpreting the word “willfully” for purposes

of the tax law require proof under the criminal mean-

ing. Deciding that “willfully” had the same meaning

in the context of a misdemeanor tax statute that it had

in the context of a felony tax statute, the Supreme Court

stated in United States v. Bishop, 412 U.S. 346, 360-

361, 93A S.Ct. 2008, 2017, 36 L.Ed.2d 941 (1973):

The Court, in fact, has recognized that the word

“willfully” in these statutes generally connotes a

voluntary, intentional violation of a known legal

duty. It has formulated the requirement of willful-

ness as “bad faith or evil intent,” [United States v.]

Murdock, 290 U.S. [389] at 398, 54 S.Ct. [223] at

226, or “evil motive and want of justification in

view of all the financial circumstances of the tax-

payer,” Spies [v. United States], 317 U.S. [492]

at 498, 63 S.Ct. [364] at 368, or knowledge that

the taxpayer “should have reported more income

than he did.” Sansone |v. United States), 380 U.S.

(343] at 353, 85 S.Ct. [1004] at 1011. ... In our

complex tax system, uncertainty often arises even

among taxpayers who earnestly wish to follow the

law. . . . The Court’s consistent interpretation of

the word “willfully” to require an element of mens

rea implements the pervasive intent of Congress to

construct penalties that separate the purposeful tax

violator from the well-meaning, but easily confused,

mass of taxpayers. (emphasis added)

Upholding a jury instruction concerning willful filing

of false income tax returns, the Supreme Court recently

held that willfulness means “a voluntary, intentional

violation of a known legal duty.” (emphasis added)

United States v. Pomponio, U.S. , 97 S.Ct. 22,

24, 50 L.Ed.2d 12, 16 (1976). Pomponio approved cases

instructing the jury to the effect the’ intentional viola-

tion of a known legal duty must be embodied in the

definition of willfulness and that negligence neither de-

fines nor constitutes willfulness. See United States v.

Pohlman, 522 F.2d 974, 976 (8 Cir. 1975) (en banc),

cert. denied, 423 U.S. 1049 (1976); United States v.

McCorkle, 511 F.2d 482, 484 (7 Cir. 1975) (en banc),

cert. denied, 423 U.S. 826 (1975); United States v.

Greenlee, 517 F.2d 899, 904 (3 Cir. 1975), cert. denied,

423 U.S. 985 (1975); United States v. Hawk, 497 F.2d

365, 366-367 (9 Cir. 1974), cert. denied, 419 U.S. 838

(1974).

In the instant case, the district court’s conclusion re-

garding a willful overcharge that

. in the framework of this case, an overcharge

is wilful where it is deliberate, or where it is the

natural and probable consequence of actions of the

defendants which are voluntary and intentional or

which are in reckless disregard of the applicable

regulations, as opposed to being the result of a bona

fide error notwithstanding the maintenance of pro-

cedures reasonably adapted to the avoidance of such

error (C.L. 14)

is clearly erroneous. This conclusion fails to recognize

that to establish a willful overcharge there must be an

intentional violation of a known legal duty, that is to say,

to be willful an overcharge must have been made with the

specific intention of charging a price which the defend-

ant knew was in excess of the ceiling price allowable

under the applicable pricing law and regulations. Ad-

ditionally, the district court erroneously concluded that

negligence can be sufficient to establish a violation. Thus,

the district court decided this case on a less stringent

standard of proof (civil instead of criminal willful con-

duct) than required by law. The findings, conclusions,

and judgment were no doubt influenced by application

of the wrong standard: This and other reasons discussed

herein require remand to the district court for a de-

termination of both the existence and the willfulness of

any overcharge by defendants during the periods in con-

troversy pursuant to the criminal standard of willful-

ness.

In view of the obvious complexity of the regulations

with respect to which the agency found it necessary to

provide extensive and necessary clarification by means

of several amendments and rulings and in view of the

gravity of the sanctions and penalties provided by the

statutes, there must be clear and convincing proof that

an overcharge was willful when a claim for the amount

of the overcharge was not presented to the defendant prior

to bringing an action for an overcharge.”

Freeze Period

Under the price freeze initiated by Executive Order No.

11723, “Effective 9:00 p.m., e.s.t., June 13, 1973,” 38

F.R. 15763 (June 15, 1973), the prices allowable during

the freeze period were the highest prices at which at

least ten per cent of a seller’s products were sold to the

same class of purchaser during the freeze base period

from June 1 te June 8, 1973.*' The determination of

*° See United States v. Empire Gas Corporation, F.2d

——, 3 CCH Energy Management ° 26,065 at p. 26,506, n. 2

(TECA No. 8-3, Dec. 8, 1976). Fundamental fairness requires

that the regulations be clear so that men of common intelli-

gence need not guess at the meaning and differ as to the

application. Boyce Motor Lines v. United States, 342 U.S.

337, 72 S.Ct. 329, 96 L.Ed. 367 (1952); Brennan v. Occupa-

tional Safety and Health Review Commission, 505 F.2d 869,

872 (10 Cir. 1974). One can have knowledge of a legal duty

imposed by regulations only when there is adequate notice.

When criminal sanctions are involved, courts will not tolerate

lack of specificity, e.g., United States v. Morrison, 536 F.2d

286 (9 Cir. 1976).

*t In finding of Fact No. 5, the district court erroneously

found that this Executive Order was effective June 15, 1973.

Executive Order No. 11723, 38 F.R. 15763 (June 15, 1973),

provides in pertinent part:

[Continued ]

*° [Continued ]

On January 11, 1973 I issued Executive Order 11695

which provided for establishment of Phase III of the

Economic Stabilization Program. On April 30, 1973 the

Congress enacted, and I signed into law, amendments to

the Economic Stabilization Act of 1970 which extended

for one year, until April 30, 1974, the legislative authority

for carrying out the Economic Stabilization Program.

. Price behavior under Phase III has not been satis-

factory, however. I have therefore determined to impose

a comprehensive freeze for a maximum period of 60 days

on the prices of all commodities and services offered for

sale except the prices charged for raw agricultural prod-

ucts. ...

NOW, THEREFORE, by virtue of the authority vested

in me by the Constitution and statutes of the United

States, particularly the Economic Stabilization Act of

1970, as amended, it is hereby ordered as follows:

Section 1. Effective 9:00 p.m., e.s.t., June 13, 1975, no

seller may charge to any class of purchaser and no pur-

chaser may pay a price for any commodity or service

which exceeds the freeze price charged for the same or a

similar commodity or service in transactions with the

same class of purchaser during the freeze base period.

This order shall be effective for a maximum period of

60 days from the date hereof, until 11:59 p.m., e.s.t.,

August 12, 1973. It is not unlawful to charge or pay a

price less than the freeze price and lower prices are en-

couraged. (emphasis added).

Section 7. Whoever willfully violates this order or any

order or regulation continued or issued under authority

of this order shall be subject to a fine of not more than

$5,000 for each such violation. Whoever violates this

order or any order or regulation continued or issued

under authority of this order shall be subject to civil

penalty of not more than $2,500 for each such violation.

Section 8. For purposes of this Executive Order, the

following definitions apply:

“Freeze price” means the highest price at or above

which at least 10 percent of the commodities or services

defendant’s allowable freeze price for sales to the plain-

tiffs is complicated by whether American Petrofina should

be included in the plaintiffs’ class of purchasers, what

prices are attributable to American Petrofina’s purchases,

and when the purchase transactions occurred.

Longview Refining Company historically maip<ained

different price levels for its customers, depending pri-

marily on the customers’ purchasing characteristics; how-

ever, on May 25, 1973, a price increase was adopted

which resulted in all customers paying the same price.°’

concerned were priced by the seller in transactions with

the class of purchaser concerned during the freeze base

period. In computing the freeze price, a seller may not

exclude any temporary special sale, deal or allowance in

effect during the freeze base period.

“Class of purchaser” means all those purchasers to

whom a seller has charged a comparable price for com-

parable commodities or services during the freeze base

period pursuant to customary price differentials between

those purchasers and other purchasers.

“Freeze base period” means

(a) the period June 1 to June 8, 1973; or

(b) in the case of a seller who had no transactions

during that period, the nearest preceding seven-day period

in which he had a transaction.

“Transaction” means an arms length sale between un-

related persons and is considered to occur at the time of

shipment in the case of commodities and the time of per-

formance in the case of services. June 13, 1973.

“On May 25, 1973, Longview began charging al

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.