Reply Brief — Inexco Oil Co. v. United States Department of Energy

= | Supreme Court, U.S,

(4) FILED

Ll

NO. 85-922 FEB 25 1986

: J

CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1985

INEXCO OIL COMPANY,

Petitioner,

V.

UNITED STATES DEPARTMENT OF ENERGY AND

JOHN S. HERRINGTON, SECRETARY OF ENERGY,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE TEMPORARY EMERGENCY COURT OF APPEALS

OF THE UNITED STATES

REPLY BRIEF OF PETITIONER

INEXCO OIL COMPANY

ROGER RIDER

Counsel of Record

THOMAS W. HOUGHTON

RONALD J. BIGELOW

THOMAS M. FARRELL

Mayor, Day & CALDWELL

P.O. Box 61269

Houston, Texas 77208

(713) 225-7000

STANLEY K. HATHAWAY

HATHAWAY, SPEIGHT AND KUNZ

One Pioneer Center

2424 Pioneer Avenue

Cheyenne, Wyoming 82001

(307) 634-7723

Attorneys for Petitioner

Inexco Oil Company

TABLE OF AUTHORITIES

Asarco, Inc. v. EPA, 616 F.2d 1153 (9th Cir. 1980)........ 7

Atlantic Richfield Co. v. DOE, 769 F.2d 771 (D.C. Cir.

RARER TIE tee te Neo ace 2.4

Blonder-Tongue Laboratories, Inc. v. University of II-

linois Foundation, 402 U.S. 313 (1971)... 6

Bray v. United States, 423 U.S. 73 (1975) (percuriam). 2,4

Citizens to Preserve Overton Park, Inc. v. Volpe, 401

I I i a scebudadieiuien 7

Coastal States Marketing, Inc. v. New England Petro-

leum Corp., 604 F.2d 179 (2d Cir. 1979) oo... 2

DOE v. Osborn, 760 F.2d 282 (TECA 1984) ......0....... 5.6

Environmental Defense Fund, Inc. v. Costle, 657 F.2d

Fee Gp se nee 7

Exxon Corp. v. DOE, 91 F.R.D. 26 (N.D. Tex. 1981)... 7

Grigsby v. DOE, 585 F.2d 1069 (TECA 1978), cert.

I I EN, WN TD varied sitetecauahandtcdasosadecceronn 5.6

Gulf Oil Corp. v. DOE, 639 F.2d 766 ( TECA 1981 )........ 2

Inexco Oil Co., 7 DOE J 83.015 (1981) wo... eee 5

Mountain Fuel Supply Co. v. DOE, 656 F.2d 690

BR, SR HRS Ra Se ee aD 5, 6

Mountain Fuel Supply Co. v. Johnson, 586 F.2d 1375

( 10th Cir. 1978), cert. denied, 441 U.S. 952 (1979)... y

Scallop Corp. v. Tully, 705 F.2d 645 (2d Cir. 1983) ........ 2.4

Texaco Inc. v. DOE, 616 F.2d 1193 (TECA 1979) ......... 2, 4

United States v. Uni Oil, Inc., 646 F.2a 946 (5th Cir. ©

1981), cert. denied, 455 U.S. 908 (1982)... 3

United States v. Wyatt, 680 F.2d 1082 (Sth Cir. 1981)... = 2

Statutes

Economic Stabilization Act of 1970, 12 U.S.C. § 1904

SU eich dice acialitecualnk hick ad vcch Gniskineunsntianceuetanihanwinbiientniabains |

Emergency Petroleum Allocation Act of 1973. 15 U.S.C.

§§ 75] 8 ee REE Be Se ae ON CE a OR eee Oe |

Miscellaneous

ii)

ome

—

ty

tv

4K. Davis. Administrative Law Treatise S§ Zz.

are Fo I ec le ee ee 6

Restatement (Second) of Judgments §§ 34 and ;83

Bi 5 RRR ee aan cen RE ERI CERT ON TET OF EON DE 6

IN THE

Supreme Court of the United States

OCTOBER TERM, 1985

INEXCO OIL COMPANY,

Petitioner,

Vv.

UNITED STATES DEPARTMENT OF ENERGY AND

JOHN S. HERRINGTON, SECRETARY OF ENERGY,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE TEMPORARY EMERGENCY COURT OF APPEALS

OF THE UNITED STATES

REPLY BRIEF OF PETITIONER

INEXCO OIL COMPANY

Respondents have mischaracterized the law concerning the

scope of the jurisdiction of the Temporary Emergency Court of

Appeals (““TECA”) and TECA’s improper use of res judicata

below.

I.

Respondents suggest that TECA had jumisdiction of this

mandamus proceeding because it concerns information “related

to” claims under the Economic Stabilization Act of 1970

(“ESA”), 12 U.S.C. § 1904 note, and/or the Emergency Petro-

leum Allocation Act of 1973 (“EPAA’”’), 15 U.S.C. §§ 751 ef

seq.; because it “involved” the ESA or EPAA; and because

TECA would have exclusive appellate jurisdiction of an appeal

from a final judgment in an underlying controversy concerning

the proper construction, applicability or effect of the ESA,

ee a

2

EPAA or regulations promulgated thereunder. DOE Mem. at

4-5. In Bray v. United States, 423 U.S. 73 (1975) (per curiam), |

this Court properly and emphatically rejected any suggestion

that the foregoing factors invested TECA with jurisdiction over

the appeal of that criminal contempt order. Respondents would

limit Bray strictly to criminal contempt proceedings. DOE Mem.

at 4-5. Inexco contends that this Court’s analysis in Bray should

be applied outside the criminal contempt context. Pet. at 8-12. |

Whatever the outcome on this question, this Court should issue

a writ of certiorari in this case to resolve the intra- and inter-

court conflict generated by TECA’s decision below.

If Inexco is correct, the decision below must be vacated in

order to preserve the substantial agreement among the appel-

late courts on the question of the proper scope of TECA’s

jurisdiction. The courts of appeals have held that TECA does

not necessarily have jurisdiction over the entirety of a case

involving matters arising under the ESA or EPAA, but only

over those specific issues on appeal which arise under the ESA

or EPAA and have been decided by the district court on that

basis. Texaco Inc. v. DOE, 616 F.2d 1193, 1196-98 (TECA

1979): Coastal States Marketing, Inc. v. New England Petro-

leum Corp., 604 F.2d 179, 187 (2d Cir. 1979). They have held

that it is mot enough that the underlying controversy has

involved (or will or may involve) issues arising under the ESA

or EPAA; the reviewing court must make its jurisdictional

determination by reference solely to the specific issues present-

ed to it. Gulf Oil Corp. v. DOE, 639 F.2d 766, 766-67 (TECA

1981). Moreover, under this analysis, an issue “arises under”

the ESA or EPAA only if it “involve[s] the construction,

applicability or effect” of either of those statutes or the regu-

lations promulgated thereunder. Atlantic Richfield Co. v. DOE,

769 F.2d 771, 778-80 (D.C. Cir. 1984). See Scallop Corp. v.

Tully, 705 F.2d 645, 647-49 (2d. Cir. 1983): Mountain Fuel

Supply Co. v. Johnson, 586 F.2d 1375, 1382 (10th Cir. 1978),

cert. denied, 441 U.S. 952 (1979); see also United States v.

3

Wyatt, 680 F.2d 1080, 1083-1085 (Sth Cir. 1982); United

States v. Uni Oil, Inc., 646 F.2d 946, 950-51 (Sth Cir. 1981),

cert. denied, 455 U.S. 908 (1982).

Careful review of the district court’s order below (see Pet.

App. B) reveals that that court did not (and did not need to)

adjudicate an EPAA issue. In that order, the district court made

more than 25 separate citations to authorities addressing the

proper application of the discovery provisions of the Federal

Rules of Civil Procedure. Furthermore, the district court made

at least 63 separate, express adjudications regarding the con-

struction, applicability and effect of the discovery provisions of

the Federal Rules of Civil Procedure, focusing on the in-

adequacy of Respondents’ attempts to bring themselves within

the scope of the pre-decisional, deliberative-process privilege.

In the entire 36 pages of the original order, however, there

is not one citation to the ESA or the EPAA. Nor is there any

decision by the district court below, express or implied, regard-

ing the construction, applicability or effect of any provision of

the ESA, EPAA or regulations promulgated thereunder. The

court’s few references to EPAA-related regulations note only

the existence’ of the regulations or the possible existence of

controversy regarding the meaning of the regulations. There is

no attempt to resolve any controversy regarding the meaning of

those regulations.

Respondents’ attempt (DOE Mem. at 5 n.2) to distinguish

the cases cited in Inexco’s Petition is wholly inconsistent with

their analysis elsewhere in the Memorandum. Each of those

cases in some way “involved” or was “related to” the EPAA

and, in at least three of the cases, final judicial resolution of the

underlying controversy would require adjudication of an EPAA

issue. In each case, however, the appellate court held that

TECA did not have jurisdiction because the particular issue

then on appeal did not involve the construction, applicability or

effect of the ESA, EPAA or regulations promulgated there-

under. See Pet. at 8-11.

Respondents have suggested (DOE Mem. at 5-6) that the

discovery issues in this case will, whatever the means chosen to

obtain appellate review, be reviewable only in TECA. Nothing

is further from the truth. Respondents have avoided mentioning

the route chosen in Bray (appeal of a conviction for criminal

contempt) where, by the express holding in Bray, jurisdiction

lies only in the circuit court of appeals. Moreover, if the district

court were to render judgment for Inexco as a sanction for

Respondents’ refusal to produce the documents, appeal of that

judgment would not, as Respondents assert, “unquestionably”

be to TECA — jurisdiction would lie in TECA only if the

district court adjudicated an ESA issue in reaching its judgment

(which is unlikely, as the district court would have rendered

judgment as a discovery sanction, not on the basis of an

interpretation or application of the ESA or the EPAA), and

then only if the discovery issues on appeal were so intertwined

with the ESA/EPAA issues as not to give rise to the need for a

bifurcated appeal. A‘lantic Richfield Co. v. DOE, 769 F.2d 771,

778 (D.C. Cir. 1984); Scallop Corp. v. Tully, 705 F.2d 645, 650

(2d Cir. 1983); Texaco Inc. v. DOE, 616 F.2d 1193, 1197-98

(TECA 1979),

In view of the foregoing, Inexco contends that TECA’s

decision below cannot be reconciled with the cases cited above.

This Court should vacate TECA’s order to restore consistency

among the courts of appeals.

On the other hand, if Respondents are correct. a// of the

foregoing cases are wrong. In that unlikely event. this Court

should take this opportunity to reject the analysis of those cases

and declare that, except in the criminal contempt context,

TECA has exclusive appellate jurisdiction of all cases that in

any way “involve” or are “related to” the ESA or EPAA.

Inexco submits that any such decisioa by this Court would

generate all of the problems that this Court sought to lay to rest

in Bray.

Il.

TECA’s decision on the merits of this interlocutory man-

damus proceeding creates dangerous precedent that would be

applicable to all proceedings in the federal judicial svstem for

‘sa

review of administrative agency adjudications. Respondents

now purport to give TECA’s decision a narrow, innocuous

reading. The actual decision, however, is not so limited. Ac-

cordingly, DOE and other federal agencies subsequently will be

able to cite TECA’s decision for two propositions that here-

tofore would have been unthinkable in American jurispru-

dence.

First, TECA held below that its prior decisions' reviewing

the administrative interpretations of DOE regulations are

irrebuttably binding on Inexco even though Inexco was not a

party to any of those prior proceedings and even though those

decisions were based upon (and thus limited by) the evidence

introduced into the administrative records by parties other than

Inexco having litigation objectives and resources different from

those of Inexco. That holding is wholly inconsistent with

fundamental principles of administrative law. A federal admin-

istrative agency may choose to make policy on a case-by-case

basis through adjudications involving individual parties, or it

may make policy by promulgating rules that are applicable to

all entities. However, each avenue imposes certain limitations

on the agency. An agency desiring to establish rules having the

binding effect of a statute on all regulated entities must comply

with statutorily mandated rulemaking requirements, including

the requirements of notice to affected parties and an oppor-

tunity to comment. [f, on the other hand, an agency elects to

make policy in individual adjudications rather than rulemak-

ings. the agency must bear the attendant burden of proving its

case in each individual adjudication solely on the strength of

the evidence in the administrative record of each such case.

Both DOE and TECA earlier expressly recognized this limita-

uon on DOE’s ability to proceed against Inexco. /nexco Oil Co..

7 DOE 4 83,015 at 86,159 n.S (1981) (“we will not be bound

by the Osborn determination”); Osborn, 760 F.27T "IT DSA_286

n.6. (“the specific issues of the Inexco case are not before us”).

Remarkably, TECA now ignores the limitation.

' DOE v. Osborn, 760 F.2a 282 ( TECA 1984): Wounrain Fuel

Supply Co. v. DOE. 686 F.2d 690 ( TECA 1981): Grigsby v. DOE. 385

F.2d 1069 ( TECA 1978). cert. denied. 440 US. 908 (1979)

6

Moreover, due process does not allow DOE to misuse the

doctrine of res judicata to foreclose all argument by subsequent

litigants who were not parties to the previous cases and have

had no opportunity to submit evidence or otherwise participate

in those prior proceedings. Blonder- Tongue Laboratories, Inc. v.

University of Illinois Foundation, 402 U.S. 313, 329 (1971).

That limitation on res judicata is equally applicable to adminis-

trative adjudications. Restatement (Second) of Judgments

§ 83( 1) and Comment c. at 272 (1982); 4 K. Davis, Adminis-

trative Law Treatise §§ 21:1, 21:2, 21:6 and 21:7 (1983).

Osborn, Mountain Fuel and Grigsby should be given only

stare decisis effect in this case. The narrow holding in each of

those cases was that the private party there failed to demon-

strate that there was not substantial evidence in the adminis-

trative record to support the agency's decisions. Inexco does not

seek reversal of those narrow holdings. Rather. by using

evidence and legal argument not contained in the adminis-

trative records of those prior proceedings. Inexco seeks the

opportunity to demonstrate that the substanual evidence in its

own administrative record does not support the same inter-

pretation that had been upheld in the earlier proceedings on the

basis of less complete administrative records.

Respondents’ suggestion that TECA’s decision does not

abuse the doctrine of res judicata is belied by Respondents’

statement that TECA’s mandamus ruling “was an appropriate

means of enforcing [TECA’s] prior rulings” in Osborn, Moun-

tain Fuel and Grigsby. DOE Mem. at 6 ( emphasis added). The

reviewing court's role in this case is to decide this case, not to

“enforce” prior decisions against one who was neither a party

nor a privy to the prior proceedings.

Second, TECA’s decision below improperly precludes

Inexco from having a meaningful opportunity (a) to tesi the

completeness of the administrative record presented to the court

for review and (b) to contest DOE's application of its pre-

viously adopted interpretation to the unique evidence that was

before the agency in Inexco’s case. Respondents blithely assert

that TECA’s “decision simply requires the district court to

resolve petitioner's claims on the basis of the administrative

record.” DOE Mem. at 7. DOE refused to provide the re-

quested information to Inexco during the administrative pro-

ceedings. By its decision, TECA has sanctioned DOE's efforts to

preclude Inexco from having an opportunity to create a full and

fair administrative record. The district court, on the other

hand, properly recognized that a reviewing court is not bound

by an incomplete record, but may permit supplementation as

necessary to ensure plainuff the opportunity of having mean-

ingful judicial review of a full and complete administrative

record. Pet. App. B-21. See, e.g., Citizens to Preserve Overton

Park, Inc. v. Volpe, 401 U.S. 402, 419-21 (1971) (“the bare

record may not disclose the factors that were considered”):

Environmental Defense Fund, Inc. v. Costle, 657 F.2d 275, 285

(D.C, Cir. 1981) (court may consider evidence that claritie

and explains the administrative record); Asarco, Inc. v. EPA,

616 F.2d 1153, 1158-60 (9th Cir. 1980) (reviewing court not

“straight jackeied™ to the compilation of documents forwarded

to it by the agency under the guise of the “administrative

record,” but may consider evidence indicating that the agency

failed to consider relevant factors); Exxon Corp. v. DOE, 9|

F.R.D. 26, 32-36, 40 (N.D. Tex. 1981) (court may permit

discovery and presentation of evidence of, among other things.

contemporanous construction of a reguiatory term)

The documents requested by Inexco are logically probative

not only of the proper imerpretation of the term “posted price.”

but also of the proper application of that term to particular

circumstances, such as those set forth in the administrative

record in this case. Although TECA did not separately address

the issue below, Respondents concede that the application

question remains in the case. DOE Mem. at 6. Accordingly.

even if the requested documents were not relevant to the

interpretation question, the documents sull would be relevant to

the equally important question of the proper application to

*-s* 0. On this relevance point TECA and Respondents have

i. aimed cunously silent.

serene veel

III. Conclusion

The petition for a writ of certiorari should be granted.

Respeci Secyfully, a

By Kone

ROGER River

Counsel of Record

THOMAS W. HOUGHTON

RONALD J. BIGELOW

THOMAS M. FARRELL

Mayor, Day & CALDWELL

P.O. Box 61269

Houston, Texas 77208

(713) 225-7000

STANLEY K. HATHAWAY

HATHAWAY, SPEIGHT AND KUNZ

One Pioneer Center

2424 Pioneer Avenue

Cheyenne. Wyoming 82001

(307) 634-7723

Attorneys for Petitioner

Inexco Oil Company

CERTIFICATE OF SERVICE

I hereby certify that all parties required to be served with a

copy of the foregoing document have been served. A copy of

the foregoing document was mailed postage prepaid by first

class mail to each of the following:

Solicitor General

Department of Justice

Washington, D.C. 20530

Thomas C. Newkirk

Larry P. Ellsworth

Thomas H. Kemp

Charles L. Cope

Rodney L. Solenberger

U.S. Department of Energy

Office of Genera! Counsel

1000 Independence Avenue, S.W.

Washington, D.C. 20585

(202) 252-5411

The Honorable Clarence A. Brimmer

Chief Judge of the United States District

Court for the District of Wyoming

P.O. Box 985

Cheyenne, Wyoming Ol

ROG RIDER