Opposition — Shore v. Longview Refining Co.

IN THE

Supreme Court of the United States

OcToBer TERM, 1976

No. 76-1863

W. R. (Brit) SuHore. dba

SHORE O11 PrRopucts, et al., Petitioners

Ve

LONGVIEW REFINING (‘OMPANY, ef al., Responde nts

On Petition for Writ of Certiorari to the

Temporary Emergency Court of Appeals

of the United States

BRIEF FOR THE RESPONDENTS IN OPPOSITION

wile Penn ving Avenue,

Washington. D.C. P0000

Aftorwe His for ia spondents

Of Counse

MILurPR & CHEVALIER

1700 Pennsylvania Avenue, N.W.,

Washington, D.C. 20006

Tuomas W. HarHaway

The Petroleum Building

Suite 797

P. O. Box 119

Tyler, Texas 75701

July 27, 1977

Separs

Press oF Byron S. ADAMS PRINTING, INC., WASHINGTON

INDEX

Page

ES EET 1

Nw cnc a cece stesecces 2

Te edness e acess asservcccecs 2

STATUTES AND REGULATIONS INVOLVED ............... 3

NE sn ce onc eee eeescesnes: 3

Neen sc ccc wc et neces ccces 6

EL EE 12

CITATIONS

Cases:

Evans v. Sun Tree Growers & Shippers, Inc., 531 F.2d

ee ces cp ecccecscccece: 11

Kelley v. Everglades Drainage Dist., 319 U.S. 415.... 11

Manning v. University of Notre Dame du Lae, 484

a 5, 6, 8

United States v. Bishop, 412 U.S. 346 .............. 9

United States v. Futura, 339 F. Supp. 162 .......... 5, 8

United States v. Gulf Oil Co., 408 F. Supp. 450...... 5,9

United States v. MeCorkle, 511 F.2d 482, cert. denied,

ee ine pean ci seescccccce 10

United States v. Pohlman, 522 F.2d 974, cert. denied,

ee kee seca sccsecses 10

United States v. Pomponio, 429 U.S. 10 ............ 10

STATUTES AND REGULATIONS:

eonomie Stabilization Act of 1970, as amended, Sec-

tions 2U8 and 210, 12 U.S.C. (Supp. V) $1904 note 3

Emergency Petroleum Allocation Act of 1973, as

amended, Section 5(a), 15 U.S.C. (Supp. V)

es ce 6G b SS nec ecegdecacceses 3

i] Citations Continued

Page

fin oe SE er ere ee eee ee hig26- dau 1]

fe ¢ Bo re ren re en 1]

OP Chara SE 0. 05,540050 sasusateuctonaee 11

BP Gr: SO 6 nc cco oben dua scesakeeeteteiew 1!

Pes Es nce van obee sade ree eee eee ames 1]

38 F.R. 22536 (August 22, 1973) ........ ccc cccccess 4

on eS. FP le rere ere 5

MISCELLANEOUS:

Executive Order 11723, 38 F.R. 15763 (June 15, 1973) = 4

Conf. Rep. No. 92-753, 2 U.S. Code Cong. & Admin.

News, 92d Cong., Ist Sess. 2307 (1973) ......... 0, 9

l’sso Standard Oil 8.A. Ltd., 1974 CCH Energy Man-

agement Transfer Binder § 20,748 (December 20,

SD. ducacecwunndanc due cuon veel 1]

Gietty Oil Co. (Eastern Operations), Ine., Skelly Oil

Co., 1975 CCH Energy Management Transfer

Binder 9 83,041 (February 11, 1975) ............ 1]

Kerr-McGee Corp., 1974 CCH Energy Management

Transfer Binder { 20,658 (September 12, 1974)... 11

_

IN THE

Supreme Court of the United States

OcTOBER TERM, 1976

No. 76-1863

W. R. (Brt_) Suore, d/b/a

SHORE Ori Propucts, et al., Petitioners

Ve

LONGVIEW REFINING CoMPANY, et al., Respondents

On Petition for Writ of Certiorari to the

Temporary Emergency Court of Appeals

of the United States

BRIEF FOR THE RESPONDENTS IN OPPOSITION

OPINIONS BELOW

The opinion of the Temporary Emergency Court of

Appeals (Pet. App. A) is unreported. The judgment

and findings of fact and conclusions of law of the

United States District Court for the Eastern District

of Texas (Pet. App. C and D, respectively) are also

unreported.

)

JURISDICTION

The judgment of the Temporary Emergeney Court

of Appeals was entered on February 15, 1977. On

Mareh 25, 1977, a petition for rehearing and a sugges-

tion of rehearing en bane were denied (Pet. App. B

and Resp. App. A, respectively). The petition for a

writ of certiorari was initially filed on May 12, 1977.

Petitioners were subsequently directed to file a cor-

reeted version of their petition and did so on June 27,

1977. The jurisdiction of the Court is invoked under

1b U.S.C. (Supp. V) §754(a) (1).

QUESTIONS PRESENTED

1. Whether the Temporary Emergency Court of

Appeals was correct in holding that the Economie Sta-

bilization Act of 1970 requires that a purchaser present

a claim for refund to a seller and wait for a ninety-day

period prior to instituting a civil action for recovery of

an overcharge, unless the purchaser is able to demon-

strate that the overcharge was ‘‘ willful’? in a eriminal

sense ?

2. Whether the Temporary Emergency Court of

Appeals was correct in holding that the trial court

erred in failing to find the specifie amount of over-

charges in a sum certain as to each petitioner?

3. Whether the Temporary Emergency Court of

Appeals was correct in holding that the trial court

erred, with respect to alleged violations during the so-

called formula period, in misapplying Ageney regu-

lations?

oe

»

STATUTES AND REGULATIONS INVOLVED

The relevant statutes, §§ 208 and 210 of the Keo-

nomie Stabilization Act of 1970, as amended (Stabiliza-

tion Act), 12 U.S.C. (Supp. V) § 1904 note, are set

forth in their entirety in the opinion of the Temporary

Emergency Court of Appeals (Pet. App. A at 13 n.19

and at 7-8 n.10, respectively). The regulations relevant

to the Temporary Emergency Court of Appeals’ re-

versal of the trial court’s judgment are set forth in the

appendices to the appellate court's opinion.

STATEMENT

Section 5(a) of the Emergency Petroleum Alloca-

tion Act of 1973. as amended (Allocation Act), 15

U.S.C. (Supp. V) 6754(a), incorporates by reference

6210 of the Stabilization Act. Seetion 219, entitled

“Snits for Damages or Other Relief,’ creates a private

right of action for violations of the Stabilization Aet,

the Allocation Act and regulations issued there-

nuder and provides for recovery of damages and in

come circumstances treble damages where a purehaser

has been overcharged, Section 2luCb) (2), however,

contains a jurisdictional prerequisite to an action for

an overcharge, namely, unless it can be shown that an

overcharge Is

willful within the meaning of section 208(a) of

this title, no action for an overeharge may be

brought by or ou behalf of any pergon unless such

person has first presented to the Bie ...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.

Section 208, entitled ‘‘Sanctions ; eriminal fine and

civil penalty,’’ provides:

4

(a) Whoever willfully violates any order or reg-

ulation 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 penalty

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

Petitioners filed this action in the United States Dis-

triet Court for the Eastern District of Texas and sought

declaratory and injunctive relief and monetary dam-

ages for certain actions allegedly committed by re-

spondents, Longview Refining Company (Longview)

and Crystal Oil Company (Crystal), in violation of the

Stabilization Act and the Alloeation Act.’ The district

eourt filed its findings of fact and conclusions of law

and rendered judgment for petitioners against re-

spondents in the amount of $518,053.71, plus interest

and attorneys’ fees. The district eourt found that dur-

ing the two relevant time periods—the freeze period,

June 13, 1973 through August 19, 1973, and the price

formula period, November 1, 1973 through February

28, 1974*—one or both of the respondents overcharged

' Petitioners original complaint also asserted violations of the

Sherman and Clayton Acts and of the parties’ supply contract

and the termination provisions of Article 2.309(c) of the Texas

Business and Commeree Code. The district court, however, severed

the elatms arising under the Stabilization Act and the Allocation

Act and advanced them on the trial docket. The decisions of the

trial court and the Temporary Emergency Court of Appeals rele-

vant to the instant petition for writ of certiorari relate solely to

claims asserted under the Stabilization Act and the Allocation Act.

*The freeze period was implemented pursuant to Executive

Order No, 11723, 38 F.R. 15763 (Tune 15, 1973). The price formula

period began under the Phase IV program of economie controls.

The relevant price formula regulations issued during Phase IV

heeame effective August 19, 1973. 38 F.R. 22536 (August 22, 1973).

Subsequently, the Federal Energy Office assumed responsibility over

D

petitioners in sales of motor gasoline and diesel fuel.

The district court held that petitioners’ failure to pre-

sent claims for refund on respondents prior to insti-

tuting their civil action was of no consequence because

respondents’ overcharges were willful. (Pet. App. D.)

The Temporary Emergency Court of Appeals re-

versed. It held that the district court’s finding of will-

fulness, as a basis for not requiring a pre-litigation

presentment of claims to respondents, was based upon

the erroneous conclusion of law that the civil meaning

of willfulness was controlling for purposes of § 210 of

the Stabilization Act. The court observed that

§210(b) (2) explicitly refers to a criminal standard of

willfulness in §208(a), that a number of courts have

recognized the applieability of a criminal standard in

this context,’ and that the Stabilization Act’s legislg-

tive history confirms this conclusion.’ (Pet. App. A at

11-14). Further, the court held

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 heen made with the specifie intention of

charging a price which the defendant knew was in

excess of the ceiling price allowable under the ap-

plicable pricing law and regulations... .

(Pet. App. A at 16.)

petroleum-related controls and promulgated its own price formula

regulations under the Stabilization Act and the newly-enacted

Allocation Act. 39 F.R. 1924 (January 15, 1974).

* Manning v. University of Notre Dame du Lac, 484 F.2d 501,

503 (T.E.C.A. 1974) ; United States v. Gulf Oil Corp., 408 F. Supp.

450, 463 (W.D. Pa. 1975); United States vy. Futura, 339 F. Supp.

162, 165 (N.D. Fla. 1972).

* Conf. Rep. No. 92-753, 2 U.S. Code Cong. & Admin. News, 92d

Cong., lst Sess. 2307, 2310 (1973).

6

The court also ruled that the district court failed to

make any findings of the amount of overcharges in

any sum certain and that with respect to the price

formula period, the district court misapplied the rele-

vant regulations.

The court remanded the case to the district court

‘for a determination of both the existence and the

willfulness of any overcharge by defendants during the

periods in controversy pursuant to the criminal stand-

ard of willfulness.’’ (Pet. App. A at 16-17.) ° The court

subsequently denied a petition for rehearing and a sug-

gestion of rehearing en bane (Pet. App. C; Resp. App.

A).

ARGUMENT

The Temporary Emergency Court of Appeals cor-

rectly held that the word ‘‘willful’’ in §210(b) (2) of

the Stabilization Act is used in the criminal sense and

requires an intentional violation of known legal duty.

This conclusion is fully supported by the language of

the statute, its legislative history, and judicial con-

struction of this and similar statutes. There is no con-

fliet on this issue within the Temporary Emergency

Court of Appeals, which denied petitioners’ request

for rehearing and suggestion of rehearing en bane.

Indeed, the emergency appeals court followed its

earlier decision in Manning vy. University of Notre

Dame du Lac, supra, 484 F.2d at 503-04, construing the

“willful overcharge’ requirement in §210(b)(2) ‘in

the criminal sense.’’ Further, the Temporary Emer-

*On remand, the district court was directed to order the Fed-

eral Energy Administration to be joined as a party to the litiga-

tion in view of its expertise in the interpretation, application, and

enforcement of the statutes and pricing regulations in controversy.

7

geney Court of Appeals has exclusive jurisdiction over

cases arising under the Stabilization Aet and Alloca-

tion Act (Pet. App. A at 4 n.4). The court’s opin’ m

was based on its special familiarity with those Acts

and their implementation, The court’s treatment of the

word ‘willful’? is also consistent with prior decisions

of this Court.

The issue of willfulness is threshold in nature, The

district court’s improper application of the civil stand-

ard of willfulness in and of itself requires reversal and

remand, The presentation of claims for overcharges

by petitioners to respondents prior to instituting the

action below is a prerequisite to that court’s jurisdic-

tion, unless, of course, petitioners can demonstrate

criminal willfulness on remand.

As to the ancillary issues addressed by the Tem-

porary Emergeney Court of Appeals, i.e, whether

specific findings were required as to individual over-

charges and whether the distriet court misappliea

Agency regulations, they similarly do not present ques-

tions as to which a conflict exists within the Temporary

Emergency Court of Appeals. Moreover, these issues

are insubstantial in importance and merely relate to

the inadequacy of findings of fact or the misapplica-

tion of Agency regulations,

1, Section 210(b) (2) of the Stabilization Act pre-

cludes the filing of a civil action to recover an over-

charge prior to the time ‘ta bona fide claim for refund

of the overcharge’’ has been presented to the seller.

This presentment of claims requirement is waived only

where it can be demonstrated that the overcharge was

‘‘willful within the meaning of section 208(a).’’ It is

$8

undisputed on the record that petitioners did not

present respondents with claims for refunds of over-

charges prior to instituting the action below. Thus, to

satisfy the jurisdictional requirement, petitioners as-

sert that the overcharges were ‘‘willful.”’

The terms of §210 of the Stabilization Act could

hardly be more clearly expressed, Seetion 210(b) (2)

explicitly refers to §208(a) for the meaning of the

word ‘willful,’ and § 208(a) without question relates

to the imposition of a criminal fine and is thus criminal

in nature., Furthermore, the Temporary Emergency

Court of Appeals has previously found that based on

the language of §210(b) (2) and its legislative history,

the word ‘‘willful’’ is used ‘tin the criminal sense.”’

Manning v. University of Notre Dame du Lac, supra,

484 F.2d at 503-04.

The standards to be applied in § 208(a) proceedings

have also been previously considered by the courts, In

United States v. Futura, supra, 339 F. Supp. at 165,

the court held that §208(a) was penal in nature and

that Stabilization Act violations were ‘‘ predicated up-

on a showing or finding of scienter, i.e. willful disobedi-

ence of the Act or regulations by the offender.’’' Simi-

*That case involved the question of whether the distrist court

erred in dismissing an action on the grounds that appellants had

failed to seek a refund from appellee prior to instituting an action

for overcharges under the Stabilization Act. Absent an allegation

that the overcharge was willful in a criminal sense, the appeals

court affirmed the district court's dismissal, finding that the com-

plaint failed to state a cause of action.

" Based on a review of the relevant legislative history, the court

concluded ‘‘that Congress did in fact intend that a crime be created

and did intend to provide for criminal punishment for violation

thereof.’’ Id. at 165-66,

)

larly, in United States v. Gulf Oil Corp., supra, 408 F.

Supp. at 463, the court ruled that:

The Congress in enacting §208(a) of the EKeo-

nomic Stabilization Act, intended that those refin-

ers who, with bad motive or criminal intent, re-

fused to comply with the regulations passed pur-

suant to the Act, would thereby be subjected to

eriminal fines... .

2. Section 210(b) (2) reflects a well-conceived con-

gressional judgment that non-judicial settlements of ov-

ercharge claims should be encouraged. It does not bar

a civil action, Rather, if a seller refuses to refund an

asserted overcharge within ninety days of the presen-

tation of a claim, the purchaser may then bring suit for

recovery of overcharges pursuant to §210, The Con-

gress recognized that the only circumstances in which

the presentment of claims requirement would not be

applicable is where the overcharge is willful in a erimi-

nal sense. In diseussing § 210, the Conferenee Commit-

tee stated: ‘*The House Bill also provided that the

term ‘willful’ shall have the same meaning as in the

case of criminal willfulness. ... The Conference ac-

cepted the Hlouse provisions.’’ Conf. Rep. No, 92-753,

2 U.S. Code Cong, & Admin. News, 92d Cong., Ist Sess.

2307, 2310 (1973),

3. In the context of the Federal tax laws, this

Jourt has recogn’ zed that the concept of willfulness in

criminal statutes invokes a criminal standard, In

United States v. Bishop, 412 U.S. 346, 361 (1973), the

Court acknowledged that the word ‘willfully’? gen-

erally means ‘‘a voluntary, intentional violation of a

known legal duty’’ and that:

The Court’s consistent interpretation of the word

‘willfully’? to require an element of mens rea im-

10

plements the pervasive intent of Congress to con-

struct penalties that separate the purposef | tax

violator from the well-meaning, but easily con-

fused, mass of taxpayers.

A similar result obtained in the Court’s recent decision

in United States v. Pomponio, 429 U.S. 10, 12 (1976).

In connection with the standard applicable to the will-

ful filing of false income tax returns, the Court held

that willfulness means ‘‘a voluntary, intentional viola-

tion of a known legal duty.’’*

4. On the basis of the foregoing, it is apparent

that the Temporary Emergeney Court of Appeals was

correct in rejecting the district court’s less demanding,

civil standard of willfulness for purposes of aetions in-

stituted under §210(b)(2) and holding

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 defendant knew was

in excess of the ceiling price allowable under the

applicable pricing law and regulations. ...

(Pet. App. A at 16.)

5. As to the remaining, ancillary issues raised by

petitioners, none warrants review by this Court.

First, the court below correctly found that the dis-

trict court simply failed to make findings of over-

*In so doing, the Court approved a number of cases recognizing

the need for intentional conduct in violation of a known legal

duty, not just negligent conduct, as constituting a prerequisite to

a finding of willfulness, See, e.g., United States v. Pohlman, 522

F.2d 974, 976 (8th Cir, 1975) (en bane), cert, denied, 423 U.S.

1049 (1976); United States v. McCorkle, 511 F.2d 482, 484 (7th

Cir.) (en bane), cert. denied, 423 U.S, 826 (1975).

charges as to any individual petitioner in any specific

amount.” The distriet court’s action ignores established

precedent, e.g., Kelley v. Everglades Drainage Dist.,

319 U.S. 415 (1943); Bvans v. Sun Tree Growers &

Shippers, Ine., 531 F.2d 568 ('T.ELC.A, 1976), and was

appropriately held to be erroneous by the appellate

court,

Seeond, for the violations allegedly arising under the

price formula regulations, the Temporary Emergency

Court of Appeals recognized that the district court ig-

nored specifie language in Agency regulations and ad-

ministrative interpretations thereof, Without belabor-

ing the errors committed by the district court, many

of whieh are spelled out in the opinion of the court

below (Pet App. A at 22-38), it should be noted that

specific language of key Ageney regulations was dis-

vegarded,” and administrative interpretations there-

of were not taken into account.” In hopes of avoiding

similar errors and omissions on remand, the district

court will have the benefit of the Federal Energy Ad-

ministration’s expertise, sinee the Temporary Emer-

"In this regard, the court below observed :

I'Tihe distriet court's findings as to the faets relevant to the

proof of any overcharves alleved in the plaintiffs’ complaint

are not sufficiently specific to substantiate concluding there

was an overcharge by the defendants in any sum certain as

fo any individual plaintiff. (Pet. App. A at 11)

Ki, 6 CLFLR. § 150.355; 10 C.FLR, §§ 212,.82(f), 212.83(¢) (2),

212.88(e), and 212.91,

" Kg, Getty Oil Co, (Eastern Operations), Ine, Skelly Oil Co.,

1975 CCH Energy Management Transfer Binder {] 83,041 (Febru-

ary 11, 1975); Esso Standard Oil S.A. Litd., 1974 CCH Energy

Management Transfer Binder {| 20,748 (December 20, 1974) ; Kerr-

McGee Corp., 1974 CCH Energy Management Transfer Binder

{| 20,658 (September 12, 1974).

12

gency Court of Appeals has directed the district court

to order the Agency to be joined as a party to the liti-

gation (Pet. App. A at 38-39).

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted,

DonaLp B, CRAVEN

Jay L. CARLSON ‘

1700 Pennsylvania Avenue, N.W.

Washington, D.C. 20006

Attorneys for Respondents

Of Counsel:

MILLER & CHEVALIER

1700 Pennsylvania Avenue, N.W.

Washington, D.C. 20006

Tuomas W. HATHAWAY

The Petroleum Building

Suite 797

P. O. Box 119

Tyler; Texas 75701

July 27, 1977

APPENDIX

la

APPENDIX A

TEMPORARY EMERGENCY COURT OF APPEALS

OF THE UNITED STATES

No. 5-i7

Loneview Rerininc Company anp Crystrat Or Company,

Appellants,

v.

W. R. (Bu) Suors, et al., Appellees.

Brerore Honorasce Joe IncranHam, Honorasie Martin D.

VAN OosTERHOUT, AND Honoras_e Joz Ewine Estes, J upoEs

Upon consideration of plaintiffs-appellees’ Suggestion

of Rehearing En banc,

Ir Is OrpEreEp that said Suggestion is denied.

For tHe Court:

/s/ Ruta H. Jacosson

Ruth H. Jacobson

Clerk

March 23, 1977