# Petition — Nelson Oil Co. v. Shell Oil Co.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1980
- **Citation:** 449 U.S. 1022

## Text

te Supreme Court, U.S,

« FILED
80-519 OCT 2 1980
NO
| MICHAEL RODAK IR, CLERK

IN THE
SUPREME COURT OF THE UNITED STATES

October Term, 1980

NELSON OIL COMPANY, INC.,
Petitioner,
-vs-
SHELL OIL COMPANY,

Respondent.

PETITION FOR A WRIT OF CERTIROARI TO THE
TEMPORARY EMERGENCY COURT OF APPEALS

DAVID LAUFER,

Counsel of Record
KENNETH P. ROBERTS

JAMES H. LEHR

Of LAUFER AND ROBERTS
Attorneys for Petitioner

15760 Ventura Boulevard
Suite 1825

Crocker Bank Building
Encino, California 91436
(213) 990-6633

QUESTIONS PRESENTED

1. Whether the Temporary Emergency
Court Of Appeals erred in sanctioning
the District Court's exercise of juris-
diction, in light of the fact that the
case had already been remanded to state
court, and in violation of 28 U.S.C.
§1447(d).

2. Whether the Temporary Emergency
Court of Appeals erred in affirming the
District Court's failure to defer the
substantive issues herein to the primary
jurisdiction of the Department of Energy,
in light of the failure of the District
Court to consider Petitioner's competi-
tive viability as an independent marke-
ter of gasoline, and in light of the
Department of Energy's statutory obliga-

tion to do so.

IN THE
SUPREME COURT OF THE UNITED STATES
October Term, 1980

NO.

NELSON OIL COMPANY, INC.,
Petitioner,
-vs-
SHELL OIL COMPANY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE
TEMPORARY EMERGENCY COURT OF APPEALS,

To The Honorable Chief Justice and
Associate Justices of the Supreme Court
of the United States:

Nelson Oil Company, the Petitioner
herein, prays that a writ of certiorari
issue to review the judgment of the
Temporary Emergency Court of Appeals en-
tered in the above-entitled case on
July 21, 1980.

ii

-

TABLE OF CONTENTS

QUESTIONS PRESENTED
TABLE OF AUTHORITIES
OPINION BELOW
JURISDICTION

STATUTES AND REGULATIONS
INVOLVED

STATEMENT OF THE CASE
REASONS FOR GRANTING THE WRIT

I. THE TRIAL OF THIS ACTION IN
FEDERAL COURT WAS ERROR AND
IN EXCESS OF JURISDICTION,
BECAUSE A PRIOR DISTRICT COURT
HAD REMANDED THE ACTION TO
STATE COURT AND, PURSUANT TO

28 U.S S.C. §1447 Ta), SUCH ORDERS
ARE FINAL.

A. THE PRIOR ORDER OF THE
DISTRICT COURT REMANDING
THIS ACTION TO STATE
COURT WAS RES JUDICATA
ON THE QUESTION OF THE
PROPER FORUM.

B. THE ECONOMIC STABILIZATION
ACT DOES NOT PERMIT A CIR-
CUMVENTION OF 28 U.S.C.
§1447(d); DEFENSES BASED

iii

UPON THE ACT MAY BE HEARD
IN STATE COURT.

C. SHELL HAS IMPROPERLY USED
THE REMOVAL PROCEDURE FOR
THE PURPOSE OF FRUSTRAT-
ING TIMELY ACCESS TO STATE
COURT.

II. THE DISTRICT COURT AND TECA
ERRED IN INTERPRETING AND
APPLYING THE CERTIFICATION
REGULATION WITHOUT FIRST -
FERRING THE ISSUE TO THE DOE
AND IN A MANNER INCOMPATIBLE
WITH THE EMERGENCY PETROLEUM
ALLOCATION ACT.

CONCLUSION

iv

16

20

27

TABLE OF AUTHORITIES

Cases

American Fire & Casualty Co. v.
Finn,
341 U.S. 6, 95 L.Ed. 702 (1951)

Ashland Oil Corp. v. Federal

Energy Administration,

389 F.Supp. [119 (N.D. Cal. 1975)
Chandler v. O'Bryan,

445 F.2d 1045 Cloth Cir. 1971)

Coan v. State of California,
ll Cal.3d 2660, 520 P.2d 1003 (1974)

Eastern Air Lines, Inc. v. Mobil
Oil Corp.,
403 F.Supp. 757 (S.D. Fla. 1975)

Exxon Corp. v. Federal Energy
Administration,
417 F.Supp. 516 (D. N.J. 1975)

Far East Conference v. United
States,
342 U.S. 570, 96 L.Ed. 576 (1951)

Hampton House Management Corp. v.
Saleh,
357 F.Supp. 591 (S.D. N.Y. 1973)

Missouri Pac. Ry. Co. v.
Fitzgerald,
306 Uce. see, 26' S.Ct. 369,
40 L.Ed. 536 (1896)

15

22

Cases

Mobil Oil Corp... v. Federal

Ener Administration,

566 F.2d 67 (TECA 1977)

Morey v. Lockhart,

123 U.S. 56, 31 L.Ed. 68 (1887)

Nelson Oil Co. v. Shell Oil Co.,
Los Angeles Superior Court No.
C271545 (currently pending)

Orange & Rockland Utilities, Inc.

v. Howard Oil Co., 416 F.Supp.
460 (S.D. N.Y. 1976)

Owen Equipment & Erection Co. v.

Kroger,
7 U.S. 365, 57 L.Ed.2d 274 (1978)

Robertson v. Ball,
534 F.2d 63, (5th Cir. 1976)

Shell Oil Co. v. Nelson Oil Co.,
(TECA No. 9-47, Slip opinion,
July 21, 1980)

Terrell Oil Corp. v. Atlantic
Richfield Co.,

468 F.Supp. 860 (E.D. Tenn. 1978)

Thermtron Products, Inc. v.
Hermansdorfer,

423 U.S. 336, 46 L.Ed.2da 542
(1976)

vi

19

a5

22

Federal Statutes

10 U.S.C. §211.13(f)

12 U.S.C. §1904 note §210

12 U.S.C. §1904 note §211

15 U.S.C. §751
15 U.S.C. §753(b) (1) (D)
15 U.S.C. §754(a) (1)
28 U.S.C. §1254(1)

28 U.S.C. §1447(d)

Miscellaneous

Department of Energy Notice of
Rulemaking Proceeding,
44 Fed. Reg. 69962 (Dec. 5, 1979)

Exec. Order 11748,
33575 (Dec. 6,

39 Fed. Reg.
1973)

H. R. Rep. No. 93-531, 93d Cong.,
lst Sess. (1973); reprinted in
[1973] U.S. Code Cong. & Admin.
News 2582

vii

27

20

24

7F

OPINION BELOW

The opinion of the Temporary Emer-
gency Court of Appeals is unreported
and is reproduced in Appendix A.

JURISDICTION

The judgment of the Temporary Emer-
gency Court of Appeals was entered on
July 21, 1980. The Petition for Rehear-
ing was denied on September 9, 1980.

The jurisdiction of the Supreme Court is
invoked under 28 U.S.C. §1254(1).

STATUTES AND REGULATIONS INVOLVED

The following statutes and regula-
tions should be considered in determining
the issues herein, the pertinent texts
of which are reproduced in the Appendix:

1. The Economic Stabilization
Act of 1970, 12 U.S.C. §1904, note
§§210, 211;

2. The Emergency Petroleum

i.

Allocation Act of 1973, 15 U.S.C. §751 et
seq. (Appendix H) ;

3. 28 U.S.C. §1447(d) (Appendix
I);

4, 10 C.F.R. §211.13(f) (Ap-
pendix J).

STATEMENT OF THE CASE

Nelson is a Shell-branded indepen-
dent marketer, or "jobber", and franchi-
see of Shell, an integrated refiner and
distributor of petroleum products. Nel-
son filed a complaint against Shell in
California state court, on September 22,
1978, for unfair competition, fraud and
other unfair business practices in con-
nection with Shell's efforts to horizon-
tally control the marketing of Shell gas-
Oline in California. Shell removed the
complaint to federal court and filed a
counterclaim, asserting jurisdiction pur-

2.

7%

suant to, inter alia, the Economic Sta-

bilization Act of 1970, 12 U.S.C. §1904,
note §210 and the Emergency Petroleum
Allocation Act of 1973 ["EPAA"], 15
U.S.C. §754(a) (1).

Shell's counterclaim included an
allegation that Nelson had violated 10
C.F.R. §211.13(f£), which, Shell contend-
ed, required Nelson to "downward certi-
fy" or reduce the Department of Energy
["DOE"]-ordered allocation that Nelson
was entitled to receive from Shell, if
Nelson's customers' needs declined.
Nelson and the amicus below contested
this interpretation. Although requested
by Shell, the DOE has never issued any
order requiring Nelson to downward cer-
tify.

For the sake of clarity, it should
be noted in this regard that this Peti-

.

.-. |

tion raises only the questions of who is
the proper body to determine the meaning
and application of the regulation and the
manner in which such determination is to
be made; this Petition does not seek this
Court's determination of the meaning of
the regulation.

The District Court (Honorable Robert
Firth), on December 27, 1978, remanded
the removed complaint, as well as Shell's
counterclaim, for adjudication in the
state court, pursuant to 28 U.S.C. §1447
(c). (Appendix E).

Rather than proceed in state court,
Shell refiled its counterclaim in the
District Court (Honorable Manuel Real)
aS a complaint, on February 20, 1979, al-
leging the same claims that had appeared
in its counterclaim, less one count.

Nelson brought motions to dismiss,

4.

|

on the grounds that the regulatory issues
should be heard by the Department of En-

ergy, and because Judge Firth had already
remanded the entire proceedings to state

court. Both motions were denied.

The action proceeded to trial. At
the conclusion of the trial, the court
awarded Shell:

1. Money damages of
$617,308.98, representing the profit of
3.02 cents per gallon that Shell would
have made if it had sold the gasoline
through its dealers instead of through
an independent ,obber.

2. Immediate reduction of Nel-
son's DOE allocation from Shell by
17,935,929 gallons annually (approxi-
mately 40% of Nelson's gasoline supply),
without regard to the new 1977-1978 base
period set by DOE regulations.

5.

3. . ee a

L.Ed. 68 (1887).

The rule that an order remanding an
action to state court is final is not a
harsh one; Shell is entitled to and
should pursue its defenses in state
court. On the other hand, however, the
removal statutes should not be used as
a means of preventing timely relief in
state court. Otherwise, both fairness
to the plaintiff, as well as the orderly
functioning of the courts, are threat-
ened.

19,

Il

THE DISTRICT COURT AND TECA
ERRED IN INTERPRETING AND ~
APPLYING THE CERTIFICATION
REGULATION WITHOUT FIRST RE-
FERRING THE ISSUE TO THE DOE,
AND IN A MANNER INCOMPATIBLE
WITH THE EMERGENCY PETROLEUM
ALLOCATION ACT.

In considering the correctness of
the District Court's interpretation of
10 C.F.R. §211.13(f£) -- and, indeed,
whether it was even proper for the court
to attempt any interpretation without
prior guidance by the DOE -- it must
first be recognized that the author and
primary enforcer of regulations promul-
gated pursuant to the authority of the
Emergency Petroleum Allocation Act
["EPAA"], 15 U.S.C. §751 et seg., is the
DOE. Id. §754(d); Exec. Order 11748,

39 Fed. Reg. 33575 (Dec. 6, 1973).

Assuming arguendo that the District

20.

Court properly exercised jurisdiction in
the first place (see Argument I, supra),
the proper course would have been to
postpone exercise of that jurisdiction
and defer to the DOE for initial deter-
mination of the downward certification
issue. This is especially so, given the
particular circumstances of the case at
bar.

The classic statement of the prin-
ciples underlying the doctrine of pri-

1/
mary jurisdiction, still vital today,
was made by Mr. Justice Frankfurter:
"[I]n cases raising

issues of fact not within

the conventional experience

of judges or cases requir-

ing the exercise of admin-

istrative discretion, agen-

cies created by Congress
for regulating the subject

l/ For a good recent discussion of this

~ doctrine, including numerous cita-
tions, see Terrell Oil Corp. v. At-
lantic Richfield Co., 468 F.Supp.
860 (E.D. Tenn. 1978).

21.

matter should not be passed
over." Far East Conference
v. United States, 342 U.S.
570, 574-75, 96 L.Ed. 576
(1951) (emphasis added)

Preliminary resort to the primary
jurisdiction of an administrative agency
has been particularly useful to courts
confronted with the complex regulatory
scheme that has developed under the EPAA.

See, e.g., Terrell Oil Corp. v. Atlantic

Richfield Co., 468 F.Supp. 860, 865 (E.D.

Tenn. 1978) (staying district court ac-
tion pending review of issues by Federal

Energy Administration); Orange & Rockland

Utilities, Inc. v. Howard Oil Co., 416

F.Supp. 460, 466 (S.D. N.Y. 1976) (stay-
ing trial until FEA has opportunity to
rule on interpretation of regulations) ;

Eastern Air Lines, Inc. v. Mobil Oil

Corp., 403 F.Supp. 757, 759 (S.D. Fla.
1975) (staying action pending interpre-

22.

tation of regulations by FEA).

It is significant that, despite
Shell's repeated attempts to obtain a
DOE order requiring Nelson to downward
certify, for the same reasons argued by
Shell before the District Court and the
TECA, the DOE determined not to issue
such an eae”

The reason why the District Court
should have stayed the proceedings pend-
ing an explicit determination of the cer-
tification issue by the DOE, is indi-
cated in the provisions of the EPAA,.
Under the Act, 15 U.S.C. §753(b) (1) (D),
DOE is charged with providing, "to the
maximum extent possible", for the:

"Preservation of an econo-
mically sound and competitive
petroleum industry .. . and

to preserve the competitive
viability of independent re-

27 TECA No. 9-47, Slip op. at 4, July
21, 1980 (Appendix A); R.T. Vol. 3,
pp. 545-47.

23.

finers, small refiners, non-
branded independent marketers,
and branded independent market-
ers." See Exxon Corp. V. Fed-
eral Energy Administration, 417
F.Supp. 516, 522 (D. N.J. 1975);
Ashland Oil Corp. v. Federal En-

ergy Administration, 389 F.Supp.
rite; 1126 (N.D. Cal. 1975).

The singular importance of this -

Congressional mandate is manifest in the
legislative history of the EPAA. The
Act was designed to correct the shortages
and dislocations in the petroleum dis~
tribution system, resulting, in part,
from the refusal of the major oil com-
panies to follow a voluntary program
aimed at sharing the supplies of scarce
energy resources, See H.R. Rep. No. 93-
531, 93d Cong., lst Sess. (1973); re-
printed in [1973] U.S. Code Cong. & Ad-

min. News 2582, 2587-89; see generally

Mobil Oil Corp. v. Federal Energy Admin-

istration, 566 F.2d 87 (TECA, 1977).

24.

As seen from the explicit objectives
of the Act, as mandated by Congress, the
DOE must consider various factors in the
course of its deliberations, before a
particular regulation may be enforced in
a particular context. Primary among
these factors is that of preserving com-
petition.

Nelson introduced internal Shell
memoranda, in its pending state action,
demonstrating that Shell's foremost con-
cern throughout this dispute has been
to curb the competition of Nelson in
southern jiksbiieds = Given the objec-

tives of the EPAA, it is more than like-

ly that the reason why the DOE refrained

37 Exhibits "D", "E", and "F" to Nelson's
~ Memorandum of Points and Authorities
in Support of Motion for Partial Sum-
mary Adjudication of Issues, Nelson
Oil Co., Inc. v. Shell Oil Co., et
al., Los Angeles Superior Court No.
C 271545.

25.

from giving Shell the relief it sought
(which the District Court nonetheless

granted) was precisely because of the

competition generated by Nelson.

This position is underscored by the
amicus briefs submitted to the TECA by
the Society of Independent Gasoline Mar-
keters of America. The amicus demon-
strated that the District Court's inter-
pretation of 10 C.F.R. §211.13(f£) would
adversely affect not only Nelson's abil-
ity to meet its supply obligations under
other DOE regulations, but also the needs
of Nelson's customers and the general
public. This result is, of course, ex-
actly the opposite of that which the EPAA
was enacted to prevent.

In these circumstances, it was re-
versible error for the District Court to
render judgment based upon its interpre-

26.

tation of a DOE regulation, without the
initial guidance of the DOE. There was
no consideration given to the effects on
competition or the needs of Nelson's
customers and consumers in general.
Finally, the District Court's action ap-
pears to contradict the course chosen by
the DOE. This latter point, itself suf-
ficient to require deferral of the cer-
tification issue to the primary juris-
diction of the DOE, is all the more sig-
nificant because, as the District Court
and the TECA were informed by Nelson,
the DOE is currently engaged in rulemak-
ing proceedings that are considering
generally«the question of downward cer-
tification. 44 Fed. Reg. 69962.

CONCLUSION

The District Court had no jurisdic-
tion over the instant case because the

2i. °

entire proceedings had already been re-
manded for adjudication in state court.
Even if the District Court's assump-
tion of jurisdiction is deemed proper,
for the sake of argument, its judgment,
and the TECA's affirming of the judgment,
constitute reversible error. This is be-
cause the Court's interpretation and
application of 10 C.F.R. §211.13(f) is
inherently incompatible with the re-
quirements of the EPAA, 15 U.S.C. §753
(b) (1) (D). Assuming the District Court
had jurisdiction, it should have stayed
the proceedings and deferred the ques-
tion of the meaning and application of
the certification regulation to the DOE.
This is particularly so because the DOE
is currently in the midst of rulemaking
proceedings on the subject, is the auth-
or and prime enforcer of the regulations,

28.

and because, despite Shell's requests to
do so, has refrained from ordering Nel-
son to downward certify.

For these reasons, Petitioner re-
spectfully requests this Court to reverse
the anidiniliinds and dismiss Shell's action,
or alternatively, to reverse the judg-
ment with directions to stay further
proceedings pending a determination by

DOE as to the certification requirements.

Respectfully submitted,

DAVID LAUFER,

Counsel of Record
KENNETH P. ROBERTS
JAMES H. LEHR

Of LAUFER AND ROBERTS,
Attorneys for Petitioner

29.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_0534%3A1. Public record. Not legal advice.