Reply Brief — TransAmerican Natural Gas Corp. v. United States Department of the Interior

Supreme Court, U.S.

FILED

JUL 23 87

" JOSEPH F. SPANIOL, JR,

meee

IN THE

Supreme Court of the United States

OCTOBER TERM, 1987

TRANSAMERICAN NATURAL GAS CORPORATION

(formerly GHR Energy Corporation),

Petitioner,

v.

UNITED STATES DEPARTMENT OF THE INTERIOR and

WILLIAM P. CLARK, Secretary of the Interior,

Respondents.

On Petition for a Writ of Certiorari to the

Temporary Emergency Court of Appeals

of the United States

REPLY BRIEF OF PETITIONER

EDWARD C. CERNY III

Counsel of Record

LANE & MITTENDORF

99 Park Avenue

New York, New York 10016

(212) 972-3000

Of Counsel:

JAMES L. MARKETOS

ROBERT J. WooDy

FRANKLIN D. DODGE

Witsow - Eres Printing Co.. Inc. - 789-O096 - WASHINGTON, D.C. 20001

TABLE OF CONTENTS

BAPEMNMIT Dy ces ssnssisonorecncassesenans salinstackesepipengbnhclscubsenionagne

I. The Petition Presents Issues of Immediate, Not

Merely Historical, Importance .............................

II. The Court Should Resolve a Conflict Among the

Circuits Concerning The TECA’s Jurisdiction

and Instruct Litigants and the Lower Courts on

How to Apply the Appropriate Jurisdictional

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TABLE OF AUTHORITIES

CASES: - Page

Bray v. United States, 423 U.S. 73 (1975) (per

UID evsicttcacsincicpinticsnienneascteiaea omnia 5

Citronelle-Mobile Gathering, Inc. v. Gulf Oil Corp.,

591 F.2d 711 (Temp. Emer. Ct. App.) (per

curiam), cert. denied, 444 U.S. 879 (1979) ........ 5

Coastal States Marketing, Inc. v. New England

Petroleum Corp., 604 F.2d 179 (2d Cir. 1979) _... 4

Conley v. Gibson, 355 U.S. 41 (1957) .............--..----.- 3

Gordon v. Laborers’ Int’l Union, 490 F.2d 133

(10th Cir.), cert. denied, 418 U.S. 836 (1974)... 5

Grand Blane Educ. Ass’n v. Grand Blanc Bd. of

Educ., 624 F.2d 47 (6th Cir. 1980) ..........02222222..... 4

Johnson Oil Co., Inc. v. DOE, 690 F.2d 191 (Temp.

mer. CL. AR. TI cco 3

Mountain Fuel Supply Co. v. Johnson, 586 F.2d

1375 (10th Cir. 1978), cert. denied, 441 U.S. 952

CRITE aecrecnnicnannsak:incaneacsecude ide sideman 4

RJG Cab, Inc. v. Hodel, 797 F.2d 111 (3d Cir.

BOD ennrsnceintcest scesticiisnsiincnnnaianeiiaislodsdndee macnn : 4

St. Mary’s Hosp. of East St. Lowis, Inc. v. Ogilvie,

26 F.28 1084 Ce Coe. 178) 4

Texaco Inc. v. DOE, 616 F.2d 1193 (Temp. Emer.

CH BIA, BIPCUD ccccsincicniceninscixtesenansnemngeeaanetaa 4

United States v. Hill, 694 F.2d 258 (D.C. Cir.

BE scion caccicacsssssceupontseonincecupeesoaaea 4

United States v. Wyatt, 680 F.2d 1080 (5th Cir.

BI soca ccscs «csc cccinancncansnieesmaatedtialbeeseeeien manana 4

STATUTES:

Economic Stabilization Act of 1970 (“ESA”),

Pub. L. No. 91-379, tit. II, 84 Stat. 799 (1970)

(expired April 30, 1974) (codified as amended

at 12 U.S.C.A. Section 1904 note (West 1980)

(Cost of Living Stabilization) ) -.........0....0002000022... 2

Outer Continental Shelf Lands Act (“OCSLA”’),

43 U.S.C. Sections 1331-1356 (1982 & Supp. III

| Rane eC Ma tcneans PRINS 2D AS I YAS 2

IN THE

Siywenw Cmet of the United States

OCTOBER TERM, 1987

No. 86-1712

TRANSAMERICAN NATURAL GAS CORPORATION

(formerly GHR Energy Corporation),

¥. Petitioner,

UNITED STATES DEPARTMENT OF THE INTERIOR and

WILLIAM P. CLARK, Secretary of the Interior,

Respondents.

On Petition for a Writ of Certiorari to the

Temporary Emergency Court of Appeals

of the United States

REPLY BRIEF OF PETITIONER

ARGUMENT

I. The Petition Presents Issues of Immediate, Not Merely

Historical, Importance

Respondents misstate the case in urging that it in-

volves nothing more than an arcane dispute over dis-

continued price controls (see Brief in Opp., at 7). The

fundamental question is the Government’s amenability to

suit. The specific issue is whether a litigant seeking to

enforce private rights originating in contracts with the

Government, authorized by a statute that waives sover-

eign immunity, will be foreclosed from all judicial relief

because the contracts incorporate by reference, for cer-

tain of their terms, a federal statute that does not ex-

pressly waive sovereign immunity.

2

The case pits the constitutionally protected, private

rights of the citizen directly against the perceived dic-

tates of a federal policy embodied in a regulatory stat-

ute. It raises a most fundamental issue of the faith,

credit, and obligation of the United States, namely,

whether the citizen can rely on the availability of a fed-

eral forum for the enforcement of his contract rights, or

whether he contracts with the Government at his peril,

taking to himself all the risks and liabilities of the con-

tract, but receiving none of its customary protections,

such as mutuality of obligation, which constitute prop-

erty rights. In addition, this specific case, because of its

unusual jurisdictional setting, also involves the questions

of which federal court properly hears the case, and

which court has the power to review disputed issues. These

are not questions of a passing or merely historical im-

portance. Instead, they go to the very heart of a private

citizen’s commercial relationship with the Government

and to the foundation of the federal judiciary’s author-

ity to resolve commercial disputes between the Govern-

ment and private parties.

Respondents necessarily hold to the very narrow view,

as did the TECA in reaching its decision, that this case

“arises under’—and only under—the ESA. Based on

this unduly constricted first premise, they conclude both

that the Government is immune from suit and that the

TECA has exclusive appellate jurisdiction over every is-

sue in the case. In so doing, they ignore other equally

justifiable sources of petitioner’s right, such as the stat-

ute authorizing the Government’s entry into the con-

tracts in the first place (the OCSLA, which expressly

waives sovereign immunity), the Constitution, and the

contracts themselves (which traditionally have sufficed

as grounds for invoking federal jurisdiction and over-

coming sovereign immunity). Petitioner is entitled to a

broader review of its pleading, which essentially alleges

that it bought oil from the Government under contract

and was overcharged. Any theory or form of action that

3

sustains this claim will be a basis for relief and should

be separately evaluated in determining whether sover-

eign immunity bars relief and whether jurisdiction is

properly exercised. See Conley v. Gibson, 355 U.S. 41,

48 (1957).

The TECA’s limited view stems, understandably, from

its special-purpose jurisdiction. The TECA, unlike the

other courts of appeals, has an openly avowed, policy-

based mandate “to wind up regulation of the oil indus-

try.” Johnson Oil Co., Inc. v. DOE, 690 F.2d 191, 196

(Temp. Emer. Ct. App. 1982). It is a court with a mis-

sion, and that mission, not the law, has produced the

judgment sought to be reviewed. In a different case, such

vindication of a “predominant” federal policy (see Brief

in Opp., at 7) by a special-purpose tribunal might be

seen as a laudable result, but here it is not, because im-

portant, constitutionally protected, private contract rights

have been trampled in the bargain. Not only should

this wrong be righted, but the Court should also take

the opportunity afforded by this case to reaffirm that

rights acquired under contract with the Government

continue to be, as they traditionally have been, protected

and are enforceable in the federal courts, that they can-

not be vitiated by an after-the-fact claim of sovereign

immunity, and that they are not subordinate to the

vicissitudes of federal commercial policy.

II. The Court Should Resolve a Conflict Among the Cir-

cuits Concerning The TECA’s Jurisdiction and In-

struct Litigants and the Lower Courts on How to

Apply the Appropriate Jurisdictional Standard

Contrary to respondents’ statement (Brief in Opp., at

5), the Circuits are in conflict concerning the scope

of the TECA’s jurisdiction. The Second, Third, Fifth,

Tenth, and District of Columbia Circuits, as well as

the TECA, interpret the TECA’s jurisdictional grant

over cases and controversies “arising under” the ESA

as requiring “bifurcated” appeals whereby the ESA is-

4

sues in a single controversy are reviewed by the TECA,

and the non-ESA issues in the same controversy are re-

viewed by the appropriate court of appeals. Coastal

States Marketing, Inc. v. New England Petroleum Corp.,

604 F.2d 179 (2d Cir. 1979); RJG Cab, Inc. v. Hodel,

797 F.2d 111 (3d Cir. 1986); United States v. Wyatt,

680 F.2d 1080 (5th Cir. 1982); Mountain Fuel Supply

Co. v. Johnson, 586 F.2d 1375 (10th Cir. 1978), cert.

denied, 441 U.S. 952 (1979); United States v. Hill, 694

F.2d 258, 260 n.5 (D.C. Cir. 1982) ; Texaco Inc. v. DOE,

616 F.2d 1193 (Temp. Emer. Ct. App. 1979). This

interpretation results in the possibility of conflicting ap-

pellate judgments in a single case.

By contrast, the Sixth and Seventh Circuits construe

the TECA’s jurisdiction as arising only when the entire

claim “arises under” the ESA, Grand Blane Educ. Ass’n

v. Grand Blane Bd. of Educ., 624 F.2d 47 (6th Cir.

1980); St. Mary’s Hospital of East St. Louis, Inc. v.

Ogilvie, 496 F.2d 1324 (7th Cir. 1974), thereby safe-

guarding against conflicting appellate judgments in the

same case, but raising the possibility that truly different

theories of relief, some perhaps arising under the ESA,

others not, will be inappropriately lumped together for

the expedient purpose of characterizing a claim and allo-

cating jurisdiction. Neither of the prevailing interpreta-

tions furnishes an arbiter for jurisdictional disputes aris-

ing within the same case, nor does either interpretation

articulate a standard for identifying so-called ESA issues

or claims, and the “ourt has not previously addressed

the issue.

The TECA’s special jurisdiction, and the conflicting

interpretations as to its scope, naturally produce confu-

sion in the large number of cases, like this one, which

present either a number of claims or allege differ-

ent theories of relief. As of 1979, approximately thirty

percent of the TECA’s cases were decided on jurisdic-

tional grounds, Texaco Inc. v. DOE, 616 F.2d 11938, 1199

(Temp. Emer. Ct. App. 1979) (Hoffman, J., dissenting),

5

and Congress’s purpose in creating the TECA to achieve

efficient and consistent review of ESA cases, see Bray v.

United States, 423 U.S. 73, 74 (1975) (per Curiam),

has been frustrated, with review often degenerating, as

here, into multiple appeals, stays, and dismissals owing

to uncertainty about the boundaries of the TECA’s juris-

diction. See generally Citronelle-Mobile Gathering, Inc.

v. Gulf Oil Corp., 591 F.2d 711 (Temp. Emer. Ct. App.)

(per curiam), cert. denied, 444 U.S. 879 (1979); Gordon

v. Laborers’ Int’l Union, 490 F.2d 133 (10th Cir.), cert.

denied, 419 U.S. 836 (1974).

The prejudice of such confusion is plainly apparent in

the present case. One appellate court, the Fifth Circuit,

which has jurisdiction over any issue in the case that does

not “arise under” the ESA, deferred, at least preliminar-

ily, to the other appellate court, the TECA, which has

claimed fuil jurisdiction (possibly for policy-based rea-

sons), but which ultimately may not be entitled to exer-

cise it. The confusion—and, hence, dispute—over whether

petitioner’s claims are jurisdictionally within the TECA’s

or the Fifth Circuit’s province, or partially in both, has

required petitioner to prosecute parallel appeals and to

make and defend against numerous motions in order to

preserve its procedural entitlement to a full review of all

issues in each court. Nor is this the first case in which

an appellate court has been tempted to defer to the

TECA’s claim of complete jurisdiction. In Gordon v.

Laborers’ Int’l Union, 490 F.2d 133 (10th Cir. 1974),

the Tenth Circuit, though harboring serious doubts as

to the wisdom of the TECA’s prior ruling in the case,

nonetheless deferred to the TECA’s presumption of ju-

risdiction, accepting it, in the absence of any attempt

to obtain certiorari review, as the “law of the case” in

order to “avoid any semblance of a conflict with TECA.”

Id. at 139.

The present case squarely presents the conflict avoided

by the Tenth Circuit in Gordon and points to the need

for a standard with which to determine whether a case

6

“arises under” the ESA. Without it, litigants are left

in confusion, and policy, not law, ultimately determines

the parties’ rights, including the important question of

jurisdiction. We respectfully submit that the present case

does not “arise under” the ESA, and that the TECA’s

determination that it does is erroneous and has led to

the further erroneous conclusions concerning sovereign

immunity and jurisdiction. A properly formulated “aris-

ing under” standard will allocate original and appel-

late jurisdiction in cases that allege numerous claims or

separate theories of relief, and will also have the salient

effect of reducing confusion, duplication, delay, and ex-

pense.

CONCLUSION

Some court of the United States must be competent to

determine the liabilities of the United States on petition-

er’s commercial contracts. The petition should be granted

so that the Court can confirm that contract rights do not

yield to changing federal policy, and that sovereign im-

munity does not bar a private party’s claim merely be-

cause a federal statute not expressly waiving sovereign

immunity is incorporated by reference in a contract to

which the Government is an authorized party. The peti-

tion should also be granted so that the Court can instruct

litigants and the lower federal courts concerning the

proper limits of the TECA’s jurisdiction.

Dated: New York, New York

July 23, 1987

Respectfully submitted,

EDWARD C, CERNY III

Counsel of Record

LANE & MITTENDORF

99 Park Avenue

New York, New York 10016

Of Counsel: (212) 972-3000

JAMES L. MARKETOS

ROBERT J. Woopy

FRANKLIN D. DODGE