Petition for Writ of Certiorari — VGS Corp. v. United States Department of Energy

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86 - ll 34 _ Supreme Court, U.S,

| | ‘tL22 *

Ne, =... JAN 8 O87

SOSETE-SPANIOL, JR.

CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1986

VGS CORPORATION

d/b/a SOUTHLAND OIL COMPANY

. and GLOBE ASPHALT Co., INC.,

Petitioners,

Vv.

UNITED STATES DEPARTMENT OF ENERGY and

JOHN S. HERRINGTON, SECRETARY OF ENERGY,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

TEMPORARY EMERGENCY COURT OF APPEALS

OF THE UNITED STATES

EDWIN JASON DRYER

JACK L. LAHR

DENNIS A. HENIGAN *

FOLEY & LARDNER

1775 Pennsylvania Avenue, N.W.

Washington, D.C. 20006-4680

(202) 862-5300

ALEX A. ALSTON, JR.

THOMAS, PRICE, ALSTON, JONES

& DAVIS

121 North State Street

Jackson, MS 39201

(601) 948-6882

Counsel for Petitioners

* Counsel of Record

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

1. Should the doctrine of sovereign immunity be ex-

tended to bar a court order requiring the government to

pay interest on regulatory relief unlawfully delayed,

when the interest would be paid from funds held by the

government only as custodian for the benefit of rightful

claimants under a regulatory program, and not from

publie funds?

2. Even if the doctrine of sovereign immunity were

applicable to the court order described in question No. 1,

does the 1976 amendment to § 702 of the Administrative

Procedure Act, abolishing the defense of sovereign im-

munity in actions against the government for relief other

than money damages, permit a court to order the pay-

ment of interest on regulatory relief unlawfully delayed —

by the government?

(i)

TABLE OF CONTENTS

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STATUTORY PROVISIONS INVOLVED .....................

EMP eeeeeeen Ss We BOER CABE...-..-20....n-nrcccencesesnesnees.

The Entitlements Program And Exception Re-

EEE CE ESEN ISR, 8 ada tte a a

Sa a a stan neumaanncens

REASONS FOR GRANTING THE WRIT ....................

II.

The Decision Below Is An Unjustified Exten-

sion Of The Sovereign Immunity Doctrine........

A. The Rule Barring Interest On Claims

Against The Government Has Been Limited

-To Interest Accruing On Funds To Which

The Government Has Asserted A Right........

B. The Doctrine Of Sovereign Immunity Should

Not Be Extended To Bar Interest On Regu-

latory Relief To Be Paid From Funds Held

By The Government Only For The Benefit

ESE US OS

The Decision Below Is In Direct Conflict With

The Abolition Of The Sovereign Immunity De-

fense In The 1976 Amendment To Section 702

Of The Administrative Procedure Act ................

(iii)

TABLE OF CONTENTS—Continued

ec ae, LEER AANA RE at Siseaet he siekaeceasoas ten

APPENDIX

Court Of Appeals Decision, issued December 9,

I a

Memorandum Opinion Of The District Court,

dated July 12, 1985, as amended, August 20,

1985 is

Memorandum Opinion Of The District Court,

IE I Ml UNI oo iocctaciencdecsdneiaecsencseadntansiain

Final Judgment Of The District Court, dated De-

ESRI SSPE Ste CO ree Se Nan canp om CER

Stipulated Order Of The District Court, dated De-

Section 504 Of The Department Of Energy Or-

ganization Act, 42°U.S.C. § 7194 0000...

Section 702 Of The Administrative Procedure Act,

Om eee, BT, OTS ois econ.

lla

2la

26a

28a

30a

TABLE OF AUTHORITIES

CASES Page

Albrecht v. United States, 329 U.S. 599 (1947)... 13

Assiniboine and Sioux Tribes v. Board of Oil and

Ges, 792 F.2d 782 (Sth Cir. 1986) ......................- 21

B.K. Instrument, Inc. v. United States, 715 F.2d

EE Ce Si: TONER ceeeanaticilacseentciinmeminimesarssapponitinne 21

Brownell v. Bank of America Nat. Trust & Sav-

ings Ass’n, 214 F.2d 855 (D.C. Cir.), cert. de-

ae BS | gk” | eee ne eee Sr mnenveI 14

Citronelle-Mobil Gathering, Inc. v. Edwards, 669

F.2d 717 (Temp. Emer. Ct. App.), cert. denied,

gE eee ero 15

Dugan v. Rank, 372 U.S. 609 (1968) .......................... 16

Hawaii v. Gordon, 373 U.S. 57 (1968) ............2..---.---. 16

Henkels v. Sutherland, 271 U.S. 298 (1926)........ 14

Jaffee v. United States, 592 F.2d 712 (3d Cir.),

cert. denied, 441 U.S. 961 (1979) ........................ 21

Kern Oil & Refining Co. v. DOE, No. 85-0961,

slip op. (D.D.C. Sept. 20, 1985), appeal dis-

missed by stipulation, No. DC-106 (Temp.

eae. £0. . . Fe BOD hirer 10

Land v. Dollar, 330 U.S. 731 (1947) .......--.-------.-..-...- 16

Library of Congress v. Shaw, 106 S. Ct. 2957

I saa Sire ant aeons LETT TOE NL 12

Miller v. Robertson, 266 U.S. 243 (1924) —.......... 14,17

Navajo Refining Co. v. DOE, No. 83-1492-M, slip

op. (D.N.M. July 23, 1985), appeal dismissed

as moot, No. 10-62 (Temp. Emer. Ct. App. Mar.

i E paarraerarerercperereenersnicneiaaacaiielbiadamibasbacss 9

Sheehan v. Army and Air Force Exchange Serv-

ice, 619 F.2d 1132 (5th Cir. 1980), rev’d on

other grounds, 456 U.S. 728 (1982) ...............-.... 21

Smyth v. United States, 302 U.S. 329 (1937) -...... 13

Texaco, Inc. v. DOE, 795 F.2d 1021 (Temp. Emer.

Ct. App.), cert. dismissed, 107 S. Ct. 10 (1986)... 4,9

Tilison v. United States, 100 U.S. 43 (1879) ........ 13

USA Petroleum Corp. v. DOE, No. 84-1017, slip

op. (D.D.C. Sept. 20, 1985), appeal dismissed

by stipulation, No. DC-105 (Temp. Emer. Ct.

FI BE: Fe EE | raksicinceis. ewetemeoniea 10

TABLE OF AUTHORITIES—Continued

Page

United States v. Louisiana, 446 U.S. 253 (1980) ..12, 18, 21

United States v. N.Y. Rayon Importing Co.,

CD, BE Ure. COE (AGE T DF cacccccseesisestsccmnisnsccnes 13, 16, 17

United States v. Thayer-West Point Hotel Co., 329

te RRR een artak nn ee 13

VGS Corp. (Southland Oil Co.) v. DOE, No. J81-

0170(C), slip op. (S.D. Miss. May 18, 1981)... 5

VGS Corp. v. DOE, 613 F. Supp. 243 (S.D. Miss.

eLearn ce ia Ee 2,9

VGS Corp. v. DOE, No. J81-0170(B), slip op.

EEL. SUNN HINU. Mkg OPINED = Sicwncecnccanshavedumididsindnuscracers 2,10

VGS Corp. v. DOE, 4 Energy Mgmt. (CCH)

{ 26,572 (Temp. Emer. Ct. App. Dec. 9, 1986) ..2, 11, 17

Warin v. Dept. of Treasury, 672 F.2d 590 (6th

NAIA ERAS ar Sis ar rak pe ante «= AO 21

ADMINISTRATIVE CASES \

Coline Gas Corp., 9 DOE {| 82,508 (1981) ............... 15

Navajo Refining Corp., 21 FERC { 62,521 (1982),

aff/d, 23 FERC {7 61,017 (1988) ...................0....... 7

Placid Refining Co., 14 DOE 85,111 (1986) ........ 16

Southland Oil Co./VGS Corp., 7 DOE { 82,608

AN RI Galeria eee Se MOSS opiates 23 ee ae 5

Southland Oil Co./VGS Corp., 7 DOE 4 82,576

TAS RRR epi sne IRS Saeete gt seb cteNDs DSC Ae AE ON 5

Southland Oil Co./VGS Corp., 8 DOE { 82,505

RAE CREA aed pe a RE ee OE He RD Leno 5

Southland Oil Co./VGS Corp., 25 FERC § 62,118

aaah ka a a a 6,7

Southland Oil Co./VGS Corp., 27 FERC § 61,205

ESSA IRR RIE et Se MERE orice PO 7

USA Petroleum Corp., 19 FERC { 62,609 (1982),

aff'd, 23 FERC ¥ 61,016 (1988) ............................ 7

STATUTES

SE TE WIN EP UUEIED ccvesiccishincsinnsevesscbecennbmastnseannieris 2,18, 19, 21

12 U.S.C. § 1904 note (1982) ........ NEPA eee a EE 2, 6, 15

UE PUNO CRUD oi cccccccccecccnancnnrisneniteceucavemnsomne 3

vii

TABLE OF AUTHORITIES—Continued

Page

gk TRL . _ | Saleem men ieee oermoneee 2, 6,15

Oe riers te I ID nae onc sccsncsck asc ccevepnceenotone 6

28 U.S.C. § 13846 (1982) ..... PEAY Oe tect Bea Re SPR Te 20

Se Oe NE I isiiieciee ai hnttndinseneticeenwceninbictooniaien 6

FRR oN BL, ERR amen os men mn 20

SS i a Oe I MIE isin siaedensncenecinccccsckcanaguerenttnocec 6

Fe Titles Te ID eieitcncncccniatenevecsetecdsvsncatneioouaivs’ 6

42 U.S.C.A. §202le(d)(2)(A) (West. Supp.

, ERR SERCH ey Skt Sip nor eC eer nen EOE Here FORE 18

Fr Bis VOR Seeds } Re | | eweeee mene ennen ween 3

42 UGA. S TESS CH), COP CE) CICS R anne natece ene 2,3

REGULATIONS

ROGER, BZA UGT CUE) ann nisin nsesiseeccsesnsinsnserenes 3

Re NE onceeicndcc nics sccedensrecrmnneeintameion 4

Be Or ee ae ee COE ea iisncccisinnccnsscnssmemnsictcomnoisiiinins

ADMINISTRATIVE NOTICES

39 Fed. Reg. 42246 (Dec. 4, 1974) ..................---------+- 3

46 Fed. Reg. 12946 (Feb. 19, 1981) 2... ----------- 4

46 Fed. Reg. 14157 (Feb. 26, 1981) .........................-.- 4

46 Fed. Reg. 36092 (July 13, 1981) ............................ 4,8

48 Fed. Reg. 50824 (Nov. 3, 1983) ............................ 4

49 Fed. Reg. 27410 (July 3, 1984) ~............0-2220.2.--..--- 4,7

560 Fed, Reg. 1919 (Jan. 14, 1985) ..........:...................... 7,8

50 Fed. Reg. 27400 (July 2, 1985) -............................ 8,9

Amber Refining Inc., 50 Fed. Reg. 41572 (Oct. 11,

I vat ickits cilia sineoadnsnebacdiihasasiniiaegoanduncmaniapipecicumanananias 9, 18, 20

OTHER -

en EI <i sicgiicis mitiononpsinnideeitinaabneniaisinaoniaamaakahi 6

SN 8 BS ARES meade tee Orns Ne eee Sooo RIP eases 1

H.R. Rep. No. 94-1656, 94th Cong., 2d Sess., re-

printed in 1976 U.S. Code Cong. & Admin. News

a a eats uakenaeabebadien 20,21

Exec. Order No. 12,287, 3 C.F.R. 124 (1982), re-

printed in 15 U.S.C. § 757 note 1982 ................----- 4

4 K. Davis, Administrative Law Treatise (2d ed.

1983)

viii

TABLE OF AUTHORITIES—Continued

Page

Transcript of Proceedings, Navajo Refining Co.

v. DOE, (Temp. Emer. Ct. App. Dec. 10, 1985)

I cbse cinicsiccanseinccaeeclaeeencdaibuateRipiacandeaiorwotin 10

Brief of Defendants-Appellants, VGS Corp. v.

DOE, (Temp. Emer. Ct. App., filed Jan. 31,

SE Sie BE Seiiainitcadicatitbamaabicebiieiioninin 19

Brief of Plaintiffs-Appellees, Southland Oil Com-

pany and Globe Asphalt Co., Inc., V@GS Corp.

v. DOE, (Temp. Emer. Ct. App., filed Feb. 25,

SEND eeeisi ices rcoas tech caasniemeinn 20

Reply Brief of Defendants-Appellants, VGS Corp.

v. DOE, (Temp. Emer. Ct. App., filed March 11, ;

ee we ,_) Sea eMal Renuapine RE ir oben Rs Akai ee 20

IN THE

Siyirenve Court of the United States

OCTOBER TERM, 1986

VGS CORPORATION

d/b/a SOUTHLAND OIL COMPANY

and GLOBE ASPHALT Co., INC.,

Petitioners,

UNITED STATES DEPARTMENT OF ENERGY and

JOHN S. HERRINGTON, SECRETARY OF ENERGY,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

TEMPORARY EMERGENCY COURT OF APPEALS

OF THE UNITED STATES

Petitioners VGS Corporation, d/b/a Southland Oil

Company, and Globe Asphalt Co., Ine. (“Southland”)?

respectfully pray that a writ of certiorari issue to review

the judgment and opinion of the Temporary Emergency -

Court of Appeals entered in this proceeding on December

9, 1986.

1 Pursuant to Rule 28.1 of the Rules of this Court, petitioners

inform the Court that Globe Asphalt Co., Inc. is a wholly-owned

subsidiary of VGS Corporation. VGS Corporation is a majority-

owned subsidiary of Galaxie Corporation. Lamar Life Corporation

also is a majority-owned subsidiary of Galaxie Corporation.

OPINIONS BELOW

The Memorandum Opinion and Order issued by the

United States District Court for the Southern District of

Mississippi on July 12, 1985 is reported at 613 F. Supp.

243 (S.D. Miss. 1985) and is reproduced_in the Appendix

at lla. The Memorandum Opinion and Final Judgment

of that Court are unreported and are reproduced in the

Appendix at 2la and 26a respectively. The opinion of

the Temporary Emergency Court of Appeals, entered on

December 9, 1986, is reported at 4 Energy Mgmt. (CCH)

{| 26,572 (1986) and is reproduced in the Appendix at la.

JURISDICTION

The Judgment of the Temporary Emergency Court of

Appeals was entered on December 9, 1986, this petition

for certiorari being filed within thirty days of that date.

This Court’s jurisdiction is invoked under § 211(g) of

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

note (1982), as incorporated by § 5(a) (1) of the Emer-

gency Petroleum Allocation Act, 15 U.S.C. § 754 (1982).

STATUTORY PROVISIONS INVOLVED

Section 504 of the Department of Energy Organization

Act, 42 U.S.C. § 7194 (1982), is reproduced in the Ap-

pendix at 30a. Section 702 of the Administrative Proce-

dure Act, as amended, 5 U.S.C. § 702 (1982), is repro-

duced in the Appendix at 32a.

STATEMENT OF THE CASE

This case involves the use of the sovereign immunity

doctrine to bar courts from ordering complete relief from

governmental misconduct in the administration of a regu-

latory program. The relief at issue was in the form of

interest on regulatory benefits unlawfully delayed, to be

paid not from public funds, but from funds held by the

government solely for the benefit of rightful claimants

under the regulatory program. This case raises funda-

mental issues about the metes and bounds of the sover-

3 \

eign immunity doctrine as it affects the full accountability

of a federal agency for its regulatory misconduct.

A. The Entitlements Program And Exception Relief

Pursuant to the Emergency Petroleum Allocation Act

(“EPAA”), 15 U.S.C. § 753(a) (1982), between 1974

and 1981, the Federal Energy Administration (“FEA’’)

and, subsequently, the Department of Energy (“DOE”),

administered a system of crude oil price controls, under

which domestic crude oil (subject to price controls) was

substantially less expensive than imported crude oil (not

subject to controls). See 10 C.F.R. § 212.78 (1986). To

address the competitive disadvantage suffered by refiners

with less-than-average access to the less expensive domes-

tic crude oil, the FEA established the Entitlements Pro-

gram. 10 C.F.R. § 211.67 (1986); 39 Fed. Reg. 42246

(Dec. 4, 1974). Under the Entitlements Program, each

month refiners with greater-than-average access to price-

controlled crude oil were required to make cash transfer

payments, through the purchase of “entitlements,” to

other refiners with lower-than-average access to such

erude oil. The rights and liabilities of each refiner under

the Program were set out in monthly “entitlements no-

tices” issued by the government. The cash transfers

mandated by the Program were strictly between refiners:

no funds flowed to or from the government.

Under § 504(a) of the Department of Energy Organi-

zation Act, DOE was required to make “adjustments”

to the EPAA controls, including the Entitlements Pro-

gram, where necessary to alleviate “special hardship, in-

equity, or unfair distribution of burdens” caused by the

regulatory program. 42 U.S.C. § 7194(a) (1982). These

“adjustments” became known as “exceptions” and agency

action under this section as “exception relief”. Applica-

tions for exception relief were first considered by DOE’s

Office of Hearings and Appeals (“OHA’’) ; OHA denials of

relief were then appealable to the Federal Energy Regu-

latory Commission (“FERC”), an independent regulatory

body. See 42 U.S.C. § 7194(b) (2) (1982); 42 U.S.C.

§ 7171(a) (1982). While the Entitlements Program was

operating, final OHA or FERC orders granting exception

relief were implemented promptiy on the next monthly

entitlements notice. Such orders either increased the

number of entitlements the recipient refiner could other-

wise sell, or reduced the number it otherwise was re-

quired to purchase.

B. Crude Oil Decontrol And Its Aftermath

On January 28, 1981 President Reagan, by Executive

Order, exempted all crude oil and petroleum products

from the price and allocation regulations. Exec. Order

No. 12,287, 3 C.F.R. 124 (1986), reprinted in 15 U.S.C.

§ 757 note (1982). At the time of the Executive Order,

DOE had not yet issued entitlements notices for crude

oil transactions occurring in December 1980 and the first

twenty-seven days of January 1981. The notice for De-

cember 1980 was issued in February 1981, 46 Fed. Reg.

14157 (Feb. 26, 1981) and DOE announced that it would

thereafter issue the notice for January 1981 transactions.

46 Fed. Reg. 12946 (Feb. 19, 1981). However, from

March 1981 through December 1981, a series of federal

court injunctions prevented the issuance of the notice for

January 1981. During this period, DOE proposed, and

thereafter adopted, regulations calling for an additional

“clean-up” entitlements notice implementing exception or-

ders relating to the pre-decontrol period. 10 C.F.R.

§ 211.69 (1986); 46 Fed. Reg. 36092 (July 13, 1981).

Despite its earlier assurances that the 1981 and clean-

up entitlements notices would be issued, DOE took no

action unti! October 28, 1983, when it reversed its earlier

position and announced its proposed decision to issue no

further entitlements notices. 48 Fed. Reg. 50824 (Nov. 8,

1983). This proposal was made final on June 28, 1984.

49 Fed. Reg. 27410 (July 3, 1984).

2 The legality of DOE’s decision against the issuance of the final

entitlements notices was upheld by the Temporary Emergency Court

of Appeals in Texaco, Inc. v. DOE, 795 F.2d 1021 (Temp. Emer. Ct.

App.), cert. dismissed, 107 S. Ct. 10 (1986).

DOE’s decision against the final entitlements notices

eliminated the established regulatory mechanism by which

exception relief from the Program had been implemented.

During the years following the issuance of the December

1980 notice, refiners continued to receive OHA and FERC

orders granting exception relief based on hardship and

inequity caused by the Program during its operation.

DOE’s failure to recognize its legal obligation to imple-

ment these post-decontrol regulatory orders gave rise to

the relief granted petitioner Southland by the District

Court which is the subject of this Petition.

C. FERC’s 1984 Order Providing Relief To Southland

Throughout the course of the Entitlements Program,

OHA had granted exception relief from the Program to

petitioner Southland and other refiners who met the stat-

utory standard of hardship or inequity. This litigation

has its origins in two OHA orders issued on February 23,

1981, (“February 23 orders”) by which the agency retro-

actively changed its method of calculating Southland’s

exception relief for the years 1977 and 1978 and, as a

result, required Southland to pay an additional $13.4

million into the Entitlements Program. Southland Oil

Co./VGS Corp., 7 DOE § 82,608 (1981) ; 7 DOE { 82,576

(1981). This amount was paid by Southland through the

purchase of entitlements on the December 1980 entitle-

ments notice, issued in late February 1981. By Supple-

mental Order of April 1, 1981, (“April 1 order’) OHA

assessed an additional $1,638,068 obligation on Southland

to be included on the January 1981 entitlements notice.

Southland Oil Co./VGS Corp., 8 DOE 7 82,505 (1981).

On May 13, 1981, the United States District Court for

the Southern District of Mississippi granted Southland

preliminary injunctive relief from the OHA orders. VGS

Corp. (Southland Oil Co.) v. DOE, No. J81-0170(C),

slip op. (S.D. Miss. May 18, 1981).2 The Court re-

quired entitlements payments to be made to Southland

on the January 1981 entitlements notice in the amount

of the February 23 orders. The Court’s Order further

provided that this money would be placed in an interest-

bearing escrow account, along with the $1,638,068 that

Southiand had not yet paid under the April 1 Order,

to be repaid to Southland, with interest, to the extent it

finally prevailed at FERC in its challenge to the contested

OHA orders. However, the objective of the injunction to

protect Southland against the loss of interest income dur-

ing the FERC proceedings was effectively negated by

DOE’s failure to issue either the January 1981 or clean-

up entitlements notices.

On October 18, 1983, a FERC Presiding Officer issued

a Proposed Order finding that the February 23 and April

1, 1981 OHA Orders had erroneously imposed on South-

land entitlements obligations of $7,597,567. The Proposed

Order relieved the company of the $1,638,038 entitle-

ments purchase obligation imposed by the April 1 Order

and provided that an additional $5,956,499 in exception

relief be implemented on the final entitlements notices.

Southland Oil Co./VGS Corp., 25 FERC 62,118, at

63,259-60...(1983). Although issued ten days prior to

DOE’s October 28, 1983 announcement of its proposed

decision against the publication of the final entitlements

notices, the Proposed Order specifically addressed the

possibility that DOE would make such a decision. The

Presiding Officer ordered Southland’s relief 0 be imple-

mented regardless of that decision:

% Pursuant to Rule 21.1(i) of this Court, petitioners advise the

Court that the District Court found federal jurisdiction under 28

U.S.C. §§ 1331, 1361, and 2201-02, and under § 211 of the Economic

Stabilization Act of 1970, as amended, 12 U.S.C. § 1904 note (1982),

as incorporated by 5(a) (1) of the EPAA, 15 U.S.C. § 754 (1982).

In the event no further entitlements notice is issued,

DOE will take other appropriate action to implement

this order.

Id. at 63,260. On May 8, 1984, just prior to DOE’s final

decision against the issuance of the final entitlements

notices, FERC affirmed its Presiding Officer’s Proposed

Order, including the above-quoted language.* Southland

Oil Co./VGS Corp., 27 FERC § 61,205 (1984) (the “1984

FERC Order’’).

D. DOE’s Failure To Implement The 1984 FERC Order

Although the eight-month administrative proceeding on

issuance of the final entitlements notices also had ad-

dressed the exception relief issue, DOE ended the Pro-

gram without adopting an alternative means of imple-

menting unpaid exception orders. Instead, on the same

day it announced its final decision to terminate the En-

titlements Program, DOE commenced yet another “public

proceeding” on the exception order question, 49 Fed. Reg.

27410, 27419 (July 3, 1984), thus beginning a second

round of comments and testimony on the issue.

On January 9, 1985, after six more months of agency

proceedings and deliberation, DOE issued what it called

its “final decision” on exception orders. 50 Fed. Reg.

1919 (Jan. 14, 1985). In direct violation of the manda-

tory language of § 504(a) of the DOE Organization Act

as well as the FERC Orders in Southland and related

cases, DOE determined that exception relief orders “.. .

did not create any unconditional rights or obligations in

the event no further Entitlements lists were published.”

4 FERC also had adopted such language in several earlier orders

granting exception relief to other refiners. See, e.g., USA Petro-

leum Corp., 19 FERC {62,609 (1982), aff'd, 283 FERC { 61-016

(1983); Navajo Refining Corp., 21 FERC { 62,521 (1982), aff'd,

23 FERC { 61,017 (1983).

Id. at 1923.5 Nevertheless, the Department recognized

that “ ... fairness requires an attempt to use another

means of granting relief to firms with adjudicated hard-

ship.” Jd. at 1921. DOE noted that one alternative

mechanism to fund exception orders was payment from

crude oil refund monies held by DOE, in interest-bearing

accounts, as the result of enforcement proceedings against

firms charged with violating the price regulations (the

“overcharge funds”). Id. The Department proposed to

implement exception orders in this way, but only if OHA

determined, in its separately-pending administrative pro-

ceedings conducted in connection with the Stripper Well

litigation,® that refiners had been among those injured

by the violations for which the overcharge funds had been

collected. Jd. According to DOE, such a determination

would establish the overcharge funds as an appropriate

surrogate for the payment of exception relief through

the Entitlements Program; indeed, the Department found

that “[u]se of this refund money would be entirely con-

sistent with the effects of . . . [exception] orders issued

during the period . . . of controls and the operation of

the Entitlements Program.” Jd. at 1922.

OHA’s Stripper Well proceeding did not end until

June 21, 1985 when OHA found that refiners did, in-

deed, suffer injury from overcharge violations of the

EPAA. 50 Fed. Reg. 27400, 27401 (July 2, 1985). Thus,

the only precondition established by DOE for payment

of Southland’s relief from the overcharge funds finally

had been met. Incredibly, however, DOE still paid not a

° DOE’s January 1985 legal conclusion was wholly at odds with

the position it had taken at the time it issued its entitlements

clean-up regulations in July 1981. At that time, DOE had written:

“. .. [W]e cannot purport to cut off claims and obligations merely

because outstanding cases are not finally determined by the date

of the clean-up list.” 46 Fed. Reg. 36092, 36096 (July 13, 1981).

®In re the Department of Energy Stripper Well Exemption Liti-

gation, M.D.L. No. 378 (Theis, J.).

penny of relief to Southland nor to other refiners with

unpaid orders. Instead, the Department manufactured

a new excuse for non-payment, this time deciding to with-

hold payment pending the outcome of the Texaco, Inc. v.

DOE litigation concerning the legality of DOE’s decision

against the final entitlements notices. Jd. at 27403. Thus,

the Department, without explanation, reneged on its Jan-

uary 1985 commitment to pay exception orders once re-

finer class injury was determined.

On July 12, 1985 the District Court issued a declara-

tory judgment of DOE’s “unconditional and non-discre-

tionary obligation” to implement the Southland FERC

Order. Appendix at 17a-18a. The Court found “wholly

unreasonable and insupportable” DOE’s interpretation of

the FERC Order as imposing only “conditional” obliga-

tions on DOE. Appendix at 18a. The District Court

found DOE’s position “totally frivolous,” and character-

ized DOF’s track record as one of ‘“delay—delay—delay.”’

Appendix at 20a.

Despite this rebuke, DOE continued to withhold South-

land’s relief in flagrant disregard of its legal duty. On

October 2, 1985, the Department announced that it had

segregated the overcharge funds sufficient to pay the

Southland and other exception orders in separate ac-

counts, but continued to withhold them until completion

of the Texaco litigation. Amber Refining Inc., 50 Fed.

Reg. 41572 (Oct. 11, 1985) (“Amber Refining decision’’).

DOE also announced that it would pay interest on the

exception orders, but only from October 2, 1985, a random

date tied to its own announcement.

On December 4, 1985, the District Court issued a man-

damus order’ against DOE requiring the payment to

7™The Southland mandamus order was the fourth such order

issued by federal district courts in cases involving DOE’s failure

to implement adjudicated entitlements exception relief. See Navajo

Refining Co. v. DOE, No. 83-1492-M, slip op. (D.N.M. July 23,

Southland, within 20 days, of the $5,956,499 required

by the 1984 FERC Order, with interest on that sum

running from the date of that Order, May 8, 1984. Ap-

pendix at 26a-27a. The Court’s inclusion of an interest

factor made Southland whole for the loss of the time-

value of its adjudicated regulatory relief during the

period of DOE’s unlawful failure to implement that re-

lief. This was a loss suffered by no refiner while the

Entitlements Program was operating; as noted above,

the Program had implemented exception orders auto-

matically on the next monthly entitlements notice. Six

days after the District Court’s grant of mandamus to

Southland, the Temporary Emergency Court of Appea!s

(“TECA”’) expressed its own outrage at DOE’s failure

to honor adjudicated exception relief claims, when it

refused to stay a mandamus order in a similar case,

declaring that DOK’s delay in implementing adjudicated

exception orders was “. . . against the principles of good

government and proper treatment of its citizens. . . .”

Transcript of Proceedings at 45, Navajo Refining Co.

v. DOE, (Temp. Emer. Ct. App. Dec. 10, 1985) (No.

10-62).

The government did not appeal the District Court’s

determination that DOE had acted in contravention of its

legal authority in failing to implement Southland’s relief.

It appealed only the award of interest running from May

8, 1984 to October 2, 1985.

E. The Decision Of The Appellate Court

In its opinion in this case, TECA again condemned

DOE’s conduct toward exception orders recipients in ex-

1985), appeal dismissed as moot, No. 10-62 (Temp. Emer. Ct. App.

Mar. 10, 1986) ; USA Petroleum Corp. v. DOE, No. 84-1017, slip op.

(D.D.C. Sept. 20, 1985) and Kern Oil & Refining Co. v. DOE,

No. 85-0961, slip op. (D.D.C. Sept. 20, 1985), appeals dismissed by

stipulation, Nos. DC-105 and DC-106 (Temp. Emer. Ct. App.

Jan. 7, 1986).

traordinarily strong terms. The Court wrote that “.. .

sympathy and the equities all favor the plaintiff in this

case”, finding that “[t]he actions by DOE over the last

five years in this and other matters have simply been

beyond belief.” Appendix at 7a. Nevertheless, the Court,

by a 2-0 vote,® reversed the District Court’s award of in-

terest running from the date of the 1984 FERC Order.

TECA reached this conclusion by its reading of this

Court’s decisions on the doctrine of sovereign immunity.

According to TECA, the District Court’s award of in-

terest to Southland is barred by “the sovereign immu-

nity rule that in the absence of a specific provision in a

contract or statute, or express' consent by Congress, in-

terest does not run on a claim against the United States.”

Appendix at 7a (emphasis in original). According to

TECA, this Court’s decisions “never articulate the ra-

tionale underlying the rule, but rather simply apply it

in a mechanical fashion.” Appendix at 9a. For TECA,

two facts alone were sufficient to invoke sovereign im-

munity. First, TECA found that “[t]he Treasury has

the money” from which the interest would be paid, al-

though the Court acknowledged that the overcharge funds

were not part of the general fund of the U.S. Treasury

but rather were in “a separate interest-bearing account

....” Appendix at 9a. Second, TECA found that South-

land’s claim was “against the United States,” even

though “the government has never claimed a right to

the money” sought by Southland. Appendix at 9a. Find-

ing no express statutory waiver of sovereign immunity,

the Court held the interest award barred.

Thus, despite finding DOE guilty of egregious mis-

conduct in its administration of a regulatory program,

TECA found the courts powerless to provide a complete

remedy for the harm caused by that misconduct.

8 Judge Duniway, a member of the original three-judge panel,

died without having participated in the decision.

REASONS FOR GRANTING THE WRIT

I. THE DECISION BELOW IS AN UNJUSTIFIED

EXTENSION OF THE SOVEREIGN IMMUNITY

DOCTRINE

TECA’s self-described “mechanical” application of

the general rule against the award of interest on claims

against the government caused it to extend that rule to

a class of cases to which it heretofore has never been

applied. TECA simply failed to consider the distinguish-

ing characteristics of the District Court’s award of in-

terest to Southland.

A. The Rule Barring Interest On Claims Against The

Government Has Been Limited To Interest Accruing

On Funds To Which The Government Has Asserted

A Right \

The cases in which this Court has invoked sovereign

immunity to bar interest awards share a fundamental

similarity: the disputed interest had accrued on funds

which the federal government had collected for its own

benefit and asserted were its own. The two decisions on

which TECA primarily relied are illustrative.®

United States v. Louisiana, 446 U.S. 253 (1980) in-

volved a dispute between the federal government and

the State of Louisiana over ownership of various offshore

oil leases. By agreement between the parties, the dis-

puted proceeds from the leases were impounded in the

United States Treasury until the resolution of the own-

ership issue. After Louisiana was awarded some of the

® In addition to the cases discussed below, TECA cited this Court’s

recent 6-3 decision in Library of Congress v. Shaw, 106 S. Ct. 2957

(1986). The central issue in Shaw, however, was not whether

sovereign immunity was applicable, but rather whether Title VII of

the Civil Rights Act of 1964 had waived sovereign immunity so as

to permit the recovery of interest on court-awarded attorneys’ fees.

Petitioners here argue that the issue of waiver does not arise,

because sovereign immunity is inapplicable in the first instance.

impounded funds, it asserted a claim for the interest

which had accrued on the awarded funds. The Court

denied interest, invoking the general immunity of the

United States from interest claims absent express pro-

vision for interest in a contract or statute. Id. at 264.

There was, of course, no question that the government

had collected the disputed lease proceeds for its own

benefit. Thus, Louisiana’s interest claim was against the

United States because it was a claim for interest on

funds which the federal government had asserted were

its own.

This is also true of the interest claim in United States

v. N.Y. Rayon Importing Co., (#2), 329 U.S. 654

(1947). N.Y. Rayon involved a claim for interest on

customs duties which had been erroneously imposed.

Again, there was no doubt that the disputed duties were

funds which the government had collected for its own

benefit and had asserted were its own.

The decisions cited in the Louisiana and N.Y. Rayon

opinions also illustrate the point. Each case involved a

claim for payment of a debt with government funds.

For example, the issue in Smyth v. United States, 302

U.S. 329 (1937), was the plaintiff’s right to interest on

government bonds; in Albrecht v. United States, 329 U.S.

599 (1947), it was interest on the purchase price for

land bought by the government for its own use; and in

Tillson v. United States, 100 U.S. 43 (1879), and United

States v. Thayer-West Point Hotel Co., 329 U.S. 585

(1947), it was interest on amounts due under contracts

entered into by the government.

In contrast, this Court has found the government’s im-

munity from interest inapplicable in cases brought

against the government, but not involving claims of debts

owed by the government. These cases arose from claims

made by private citizens under the Trading with the

Enemy Act, a wartime statute under which the govern-

ment was empowered to seize the property of persons

regarded as enemies of the United States, property which

was then subject to the claims of other persons with legal

rights against such enemies. In Miller v. Robertson, 266

U.S. 243 (1924), plaintiff filed suit under the Act against

the Alien Property Custodian and the Treasurer of the

United States, alleging that certain German citizens

whose property had been seized by the United States were

in breach of a contract with the plaintiff. This Court

affirmed the lower court’s grant of interest to the plain-

tiff on the funds recovered, even though the statute con-

tained no provision for the payment of interest. The

Court held the sovereign immunity doctrine inapplicable:

While the suit . . . is one against the United

States, the claim was not against it. No debt was

alleged to be owing from it to the plaintiff. The

rule of sovereign immunity from liability for inter-

est... does not apply.

Id. at 257. See also Henkels v. Sutherland, 271 U.S. 298

(1926) (Court permitted recovery of interest by plaintiff

on proceeds from government’s sale of plaintiff’s securi-

ties which had been wrongfully seized under Trading

with the Enemy Act). The Court of Appeals for the

D.C. Circuit later followed Miller in allowing the recovery

of interest on a claim made under the Act, rejecting the

argument that amendments to the Act since Miller had

given the United States “something more than a custodial

interest in the enemy property held by it so as to char-

acterize Section 34 proceedings not only as suits against

a sovereign but also as claims against a sovereign. . . .”

Brownell v. Bank of American Nat. Trust & Savings

Ass’n, 214 F.2d 855, 857 (D.C. Cir.), cert. denied, 348

U.S. 864 (1954).

These cases demonstrate TECA’s misreading of this

Court’s sovereign immunity jurisprudence. Contrary to

TECA’s “mechanical” approach to the issue, this Court’s

decisions have turned on the nature of the relationship

between the government and the funds or property

against which the plaintiff’s claim is made. Where the

government has acted as a custodian or stakeholder as

to the funds or property sovereign immunity has been

held not to apply, regardless of whether government

agencies were named defendants or whether the funds

or property were held in the United States Treasury. As

will become evident, this case is a classic instance of a

claim on funds on which the government itself has never

asserted an interest beyond that of a custodian for the

benefit of those with rightful claims on the funds.

B. The Doctrine Of Sovereign Immunity Should Not

Be Extended To Bar Interest On Regulatory Relief

To Be Paid From Funds Held By The Government

Only For The Benefit Of Others

This case involves no claim on funds which the govern-

ment has asserted are its own. Rather, it involves a claim

for relief from a regulatory program using funds which

the government concedes are not public funds, but rather

were collected for the benefit of the rightful claimants

under the regulatory program.

The overcharge funds from which Southland’s interest

would be paid are held by DOE pursuant to its authority

under § 209 of the Economic Stabilization Act, 12 U.S.C.

§ 1904 note (1982), as incorporated in the EPAA, 15

U.S.C. § 754(a) (1982), to effect “restitution” of funds

received in violation of the price regulation. DOE itself

has acknowledged that it has “no pecuniary interest” in the

overcharge funds, Coline Gas Corp., 9 DOE { 82,508, at

85,052 (1981) and TECA has declared that DOE has a

“duty to try to ascertain those overcharged, and re-

fund them, with interest, from the restitution funds.”

Citronelle-Mobile Gathering, Inc. v. Edwards, 669 F.2d

717, 723 (Temp. Emer. Ct. App.), cert. denied, 459 U.S.

877 (1982) (emphasis in original). TECA’s inclusion

of the phrase “with interest” in its Citronelle holding is

itself starkly inconsistent with the idea that the payment

of interest from the overcharge funds raises the sover-

eign immunity issue. DOE functioned simply to collect

funds from regulatory violators and restore them to the

victims of the violations, with interest. That the govern-

ment itself asserted no proprietary claim on the funds

was made unequivocally clear by DOE in its Supple-

mental Order in Placid Refining Co., 14 DOE { 85,111

(1986), when it wrote:

. . . [T]he crude oil overcharge moneys involved in

this proceeding are not public funds, but are funds

obtained from private parties and held by the DOE

for distribution to injured parties pursuant to its

restitutionary authority under applicable statutes.

Id. at 88,199, n.1 (emphasis added). Thus, Southland’s

claim for regulatory relief to be paid from the overcharge

funds, and interest thereon, is a claim on funds which

the government has collected, and maintains, subject to

the claims of others on the funds. As in the cases de-

cided under the Trading with the Enemy Act, sovereign

immunity does not apply.?°

It is true, as TECA indicated, that in N.Y. Rayon

interest was held barred by sovereign immunity even

for the period following the final determination that the

customs duties had been wrongfully collected and the

government had no claim on them. The N.Y. Rayon case

nevertheless is distinguishable from the present case be-

cause in Rayon the government had originally claimed a

right to the customs duties; the government has never

10 That the District Court’s award of interest to Southland in-

volved no diversion of public funds should be contrasted with the

cases in which this Court has applied sovereign immunity because

the plaintiff had made a claim on public funds. In Dugan v. Rank,

372 U.S. 609, 621 (1963), the Court made a specific finding that

the judgment would “ ‘expend itself on the public treasury .. .’”,

(citing Land v. Dollar, 330 U.S. 731, 788 (1947)). In Hawaii v.

Gordon, 373 U.S. 57, 58 (1963), the Court relied on the fact that

the order requested would “cause . . . the disposition of property

admittedly belonging to the United States.”

- 17

claimed an interest in the overcharge funds apart from

its restitutionary obligations. N.Y. Rayon is also dis-

tinguishable because the interest denied the plaintiff in

that case presumably accrued to the benefit of the govern-

ment; in contrast, the interest denied Southland accrued

to the benefit of the other claimants on whose behalf the

government collected and maintains the overcharge funds.

Moreover, if N.Y. Rayon is to be read broadly to bar

interest claims on funds held for the benefit of others,

then the decision must be regarded as directly contrary

to Miller v. Robertson, a conflict which this Court should

resolve.

TECA’s decision also suggests that the application of

sovereign immunity should not turn on the characteristics

of the overcharge funds because DOE could have chosen

a different method to pay exception orders in the absence

of the final entitlements notices. Appendix at 10a. TECA

overlooked the fact that the choice of the overcharge

funds was necessitated by the need for a regulatory

surrogate for the Entitlements Program which would

impose the costs of regulatory relief on the same parties

who bore them during the operation of the Program. See

discussion supra, p. 8. The use of government funds

to pay exception orders would not have been appropriate

because such funds were never used in the operation of

the Entitlements Program. The government’s relation-

ship to the overcharge funds was the same as its rela-

tionship to the cash transfers under the Entitlements

Program; it effected transfers of funds between private

parties, but never made a claim on the funds for itself.

Thus, just as the payment of interest on cash transfers

made under the Entitlements Program would not have

raised the barrier of sovereign immunity," neither should

11 In point of fact, the issue whether refiners should be paid inter-

est on exception relief unlawfully delayed never arose during the

Entitlements Program because the Program functioned to effectuate

adjudicated exception orders on the next monthly entitlements

notice.

the payment of interest on entitlements claims from the

overcharge funds. This was implicitly conceded by DOE

itself when it decided, in its Amber Refining decision, to

use the overcharge funds to pay refiners interest on un-

paid exception orders from the arbitrarily chosen date

of October 2, 1985. Amber Refining Inc., 50 Fed. Reg.

at 41575.

TECA’s decision has important implications for any

situation in which the government acts as a custodian,

stakeholder or trustee with respect to funds or property.

As the Trading with the Enemy Act cases suggest, the

EPAA price control program was not the first instance

of this governmental function, nor will it be the last.”

II. THE DECISION BELOW IS IN DIRECT CONFLICT

WITH THE ABOLITION OF THE SOVEREIGN IM-

MUNITY DEFENSE IN THE 1976 AMENDMENT TO

SECTION 702 OF THE ADMINISTRATIVE PROCE-

DURE ACT

TECA’s reversal of the District Court’s interest award

is directly contrary to the language and intent of the

1976 amendment to § 702 of the Administrative Proce-

dure Act (“APA”). Pub. L. No. 94-574, §1, 90 Stat.

2721 (1976). The relevant provision reads:

An action in a court of the United States seeking

relief other than money damages and stating a claim

12 A recent example of this function is provided by the Low-Level

Radioactive Waste Policy Amendments Act of 1985, Pub. L. No. 99-

240, 99 Stat. 1842 (1985). This statute allows states which already

have radioactive waste disposal facilities to impose surcharges on

other states for the use of the existing facilities. A portion of the

surcharge money is to be transferred to an escrow account held

by the Secretary of Energy. The statute makes the Secretary

trustee for the funds, which “shall not be the property of the

United States.” 42 U.S.C.A. § 2021e(d) (2) (A) (West Supp. 1986).

These monies are then to be refunded to states according to their

progress in developing their own facilities. The statute is silent on

the payment of interest on these refunds.

that an agency or an officer or employee thereof

acted or failed to act in an official capacity or under

color of legal authority shall not be dismissed nor

relief thereon be denied on the ground that it is

against the United States or that the United States

is an indispensable party.

5 U.S.C. § 702 (1982). As Professor Davis has written

of this provision: “Sovereign immunity in suits for relief

other than money damages is no longer a defense. The

United States is liable in such suits as if it were a pri-

vate party.” 4 K. Davis, Administrative Law Treatise

§ 23:19, at 192 (2d ed. 1983).

DOE itself has conceded that Southland’s action to en-

force its FERC order was not a claim for “damages,”

but rather for “regulatory relief.” Brief of Defendants-

Appellants, at 23, VGS Corp. v. DOE, (Temp. Emer. Ct.

App., filed Jan. 31, 1986) (No. 5-119). Likewise, the Dis-

trict Court’s award of interest dating from May 8, 1984

was not an award of money damages, but was rather a

command by the Court, issued as part of a mandamus

order, requiring DOE to supplement the regulatory relief

ordered by FERC to compensate Southland for DOE’s

unlawful delay in implementing the 1984 FERC order.

As noted earlier, DOE itself had decided to pay interest

on unpaid regulatory relief, but only running from Oc-

tober 2, 1985, an arbitrary date with no restitutionary

justification whatever. Put simply, the District Court

exercised its equitable authority to order DOE to provide

greater regulatory relief than DOE had been willing to

provide.

The legislative intent of the 1976 amendment was to

permit courts to do precisely what the District Court did

in this case: to use their equitable powers to provide

relief for wrongs committed by the government. In re-

porting the bill favorably, the House Judiciary Committee

wrote:

Congress has made great strides toward estab-

lishing monetary liability on the part of the Govern-

ment for wrongs committed against its citizens by

passing the Tucker Act of 1875, 28 U.S.C. sections

1346, 1491, and the Federal Tort Claims Act of

1946, 28 U.S.C. section 13846(b). S.800 would

strengthen this accountability by withdrawing the

defense of sovereign immunity in actions seeking

relief other than money damages such as an injunc-

tion, declaratory judgment, or writ of mandamus.

H.R. Rep. No. 94-1656, 94th Cong., 2d Sess. 4, reprinted

m 1976 U.S. Code Cong. & Admin. News 6121 (‘House

Committee Report”). The Committee found that “the

time now [has] come to eliminate the sovereign immunity

defense in all equitable actions for specific relief against

a Federal agency or officer acting in an official capacity.”

Td. at 9.

Although Southland vigorously asserted to TECA that

the 1976 amendments to the APA made the sovereign

immunity defense unavailable to DOE," the decision be-

low fails to address this argument. The consequence of

the Court’s silence is not simply the failure to compen-

sate Southland for the injury caused by DOE’s miscon-

duct. Thirteen other refiners were similarly situated with

adjudicated claims of regulatory relief aggregating ap-

proximately $69 million’* which went unpaid by DOE

until the federal courts intervened. According to DOE’s

own figures,’ these refiners lost an aggregate of $100

million in interest during the period when their adjudi-

cated regulatory relief went unpaid. The use of the

shield of sovereign immunity to preclude a remedy for

injury of this magnitude from governmental wrongdo-

18 Brief of Plaintiffs-Appellees Southland Oil Company and Globe

Asphalt Co., Inc. at 22-23, VGS Corp. v. DOE (Temp. Emer. Ct.

App., filed Feb. 25, 1986) (No. 5-119).

14 Amber Refining Inc., 50 Fed. Reg. at 41579 (Oct. 11, 1985).

1 Reply Brief of Defendants-Appellants at 4, VGS Corp. v. DOE,

(Temp. Emer. Ct. App., filed March 11, 1986) (No. 5-119).

ing is precisely the kind of result which the 1976 APA

amendment was designed to avoid."®

Finally, TECA’s use of the sovereign immunity doc-

trine to preclude equitable relief to Southland is contrary

to the broad interpretation of the 1976 amendment given

by other federal circuit courts. For example, the Ninth

Circuit recently adopted Professor Davis’ view that:

“TAlbolition of sovereign immunity in § 702 is

not limited to suits ‘under the Administrative Pro-

cedure Act’; the abolition applies to every ‘action in

a court of the United States seeking relief other

than money damages... .’”

Assiniboine and Sioux Tribes v. Board of Oil and Gas,

792 F.2d 782, 793 (9th Cir. 1986) (quoting 4 K. Davis,

Administrative Law Treatise § 23:19, at 195 (2d ed.

1983) ).*7 This Court, however, has never addressed the

scope of the amendment. It should do’so in this case,

where the injury from agency misconduct was so great

and the violation of Congressional intent by the Court

below so patent.

16 DOE made two arguments to the appellate court concerning

the 1976 amendment. First, it asserted, without explanation, that

the decision in United States v. Louisiana, 446 U.S. 253 (1980)

demonstrated the irrelevance of that statute, even though the opin-

ion in Louisiana never mentioned the statute. Second, it mischarac-

terized the relevant provision as a “judicial review provision” not

applicable to DOE. As the legislative history makes clear, the 1976

statute does not provide for judicial review, but rather functions to

“remove the defense of sovereign immunity as a bar to judicial

review of Federal administrative action otherwise subject to judicial

review.” House Committee Report, at 1 (emphasis added). See

Sheehan v. Army and Air Force Exchange Service, 619 F.2d 1182,

1139 (5th Cir. 1980), rev’d on other grounds, 456 U.S. 728 (1982).

17 See also Jaffee v. United States, 592 F.2d 712, 718 (3d Cir.),

cert. denied, 441 U.S. 961 (1979); B.K. Instrument, Inc. v. United

States, 715 F.2d 718, 724-25 (2d Cir. 1983); Warin v. Dept. of

Treasury, 672 F.2d 590, 591 (6th Cir. 1982); Sheehan v. Army &

Air Force Exchange Service, 619 F.2d at 1139.

For the foregoing reasons, the Petition for a Writ of

CONCLUSION

Certiorari should be granted.

Dated:

January 8, 1987

Respectfully submitted,

EDWIN JASON DRYER

JACK L. LAHR

DENNIS A. HENIGAN *

FOLEY & LARDNER

1775 Pennsylvania Avenue, N.W.

Washington, D.C. 20006-4680

(202) 862-5300

ALEX A. ALSTON, JR.

THOMAS, PRICE, ALSTON, JONES

& DAVIS

121 North State Street

Jackson, MS 39201

(601) 948-6882

Counsel for Petitioners

* Counsel of Record

APPENDIX

TEMPORARY EMERGENCY COURT OF APPEALS

OF THE UNITED STATES

No. 5-119

VGS CORPORATION d/b/a SOUTHLAND OIL COMPANY and

GLOBE ASPHALT Co., INC.,

PLAINTIFFS-APPELLEES,

UNITED STATES DEPARTMENT OF ENERGY and

JOHN S. HERRINGTON, SECRETARY OF ENERGY,

DEFENDANTS-APPELLANTS.

On Appeal from the United States District Court

for the Southern District of Mississippi

(Civil Action No. J81-0170)

(Argued June 4, 1986 Decided November 28, 1986

Judgment Entered: December 9, 1986)

DENNIS A. HENIGAN, Foley & Lardner, Washington, D.C.,

with whom Edwin Jason Dryer and Jack L. Lahr of the

same firm, Alex A. Alston, Jr., Thomas, Price, Alston,

Jones & Davis, Jackson, Mississippi, were on the brief

for Plaintiffs-Appellees.

SAMUEL SOOPPER, Attorney, Office of the General Counsel,

United States Department of Energy, Washington, D.C.,

with whom Catherine C. Cook and Dennis M. Moore, At-

torneys, were on the brief for Defendants-Appellants.

Jerry E. Rothrock and Harry R. Silver, Akin, Gump,

Strauss, Hauer & Feld, Washington, D.C., for Amicus

Curiae Beacon Oil Company.

Sheldon Oliensis, Myron Kirschbaum, Robert B. Bern-

stein, Kaye, Scholer, Fierman, Hays & Handler, New

York, N.Y., A. J. Losee, Losee & Carson, Artesia, New

Mexico; Henry L. Stern, Holly Corporation, Dallas, Texas,

and Thomas W. Houghton, Mayor, Day & Caldwell,

Houston, Texas, Of Counsel, for Amicus Curiae Navajo

Refining Company.

Before METZNER, DUNIWAY* and WEIGEL, Judges.

METZNER, Judge

The Department of Energy (DOE) appeals from that

part of a mandamus order entered in the United States

District Court for the Southern District of Mississippi

which directed DOE to pay prejudgment interest from

May 8, 1984, to the appellee VGS Corporation, d/b/a

Southland Oil Company (Southland). DOE complied with.

the order for the period October 2, 1985 to December 20,

1985, when it paid Southland the principal amount due.

The subject of this appeal is the liability of DOE to pay

prejudgment interest for the period from May 8, 1984 to

October 2, 1985.

The Department of Energy Organization Act authorizes

exception relief from the Petroleum Price and Allocation

Regulations, including the entitlements program,’ for

those parties adversely affected by the operation of these

regulations. 42 U.S.C. § 7194. Exception relief was

awarded on a case by case basis to alleviate serious hard-

ship or gross inequity attributable to the impact of the

DOE regulations on a refinery. 10 C.F.R part 205, sub-

part D. This relief, awarded prospectively by the Office

of Hearings and Appeals (OHA), excused refiners from

certain future entitlements obligations for a_ specified

period. Since this relief was based on a projection of a

firm’s future performance, it was subject to a subsequent

review of actual data at the end of the year.

After OHA conducted its review at the end of a re-

finer’s fiscal year, it would issue a final order regarding

* Judge Duniway died without having participated in the

decision in this matter.

1 Cities Service Co. v. Federal Energy Administration, 529

F.2d 1016 (TECA 1975), cert. denied, 426 U.S. 947 (1976).

the relief that the firm was entitled to for the year. If

the review determined that the firm was entitled to more

exception relief than it had received during the fiscal year

an order was issued directing that the refinery be allowed

to sell an appropriate number of entitlements on the next

entitlements notice. Conversely, if less exception relief

should have been granted during the year, the firm was

required to purchase additional entit.ements on the next

entitlements notice.

The details of the entitlements program have been

thoroughly delineated in earlier opinions of this court

and need not now be repeated. See, Husky Oil Co. v. De-

_ partment of Energy, 582 F.2d 644 (Temp. Emer. Ct.

App. 1978); Cities Service Co. v. Federal Energy Ad-

ministration, 529 F.2d 1016 (Temp. Emer. Ct. App.

1975), cert. denied, 426 U.S. 947 (1976); Pasco, Inc. v.

Federal Energy Administration, 525 F.2d 1391 (Temp.

Emer. Ct. App. 1975).

On February 23, 1981, OHA had issued two orders

which changed the method of computing Southland’s

exception relief for the years 1977 and 1978. As a result

Southland was found to have received excessive prospec-

tive exception relief and was required to purchase an

additional $13.4 million in entitlements on the next

monthly notice. This obligation was included in the De-

cember 1986 entitlements notice which was issued in

February 1981, after President Reagan had ended the

price control program. Southland made the additional

entitlements purchases. On April 1, 1981, OHA modified

the original orders to assess an additional purchase ob-

ligation of $1,638,068. This obligation was to be reflected

on the next entitlements notice which would have been for

January 1981, the last month before decontrol. Although

this notice would customarily have been issued by the end

of March, it had not been issued by the date of the OHA

order.

Southland brought suit in federal court seeking declara-

tory and injunctive relief from these three orders. The

district court issued a preliminary injunction in favor of

Southland on May 18, 1981. This injunction required

that the January 1981 entitlements notice, which had not

as yet been issued, should include entitlements sales on

Southland’s behalf equal to the sum Southland had paid

for entitlements under the OHA orders of February 23,

1981. The injunction further required that when South-

land received this money, it should be placed in an

interest-bearing escrow account along with the $1,638,068

that Southland had not yet paid under the April 1, 1981

order. The fund was to be used to repay Southland to the

extent it prevailed before the Federal Energy Regulatory

Commission (FERC) where Southland was administra-

tively challenging the contested OHA orders.

In July 1981 DOE published a regulation establishing

a clean-up entitlements notice. In August it then sought

to dissolve the preliminary injunction because of the

existence of the July regulation. It stated to the court:

“Southland alleged here that it would suffer in-

jury because there was no mechanism in place that

would assure that Southland would receive its money

when and if it prevailed in its application for excep-

tion relief. That mechanism is now firmly in place

”

The court denied the motion to lift the injunction.

Nothing further happened in this matter until July 6,

1982, when DOE announced that it was seeking public

comments as to whether it should publish the January

entitlements notice. 47 Fed. Reg. 30,279 (July 13, 1982).

If these notices were not published, the district court’s

preliminary injunction could not be implemented.

On October 18, 1983, a FERC presiding officer issued

a proposed order finding that the disputed OHA orders

of February 23, 1981 and April 1, 1981 improperly calcu-

lated Southland’s exception relief. Southland Oil Co./

VGS Corp., 25 FERC 62,118. The proposed order

sought to make Southland whole by relieving it of the

remaining purchase obligation of $1,638,068 under the

April 1 order, and by providing that an additional

$5,956,038 be transferred to Southland in the form of

entitlements payments on the next entitlements notice.

The January 1981 notice had still not been issued. On

May 8, 1984, FERC adopted this proposed order as a

final order. Southland Oil Co./VGS Corp., 27 FERC

7 61,205.

On June 28, 1984, DOE decided not to issue further

entitlements notices. At that time, however, it stated that

it would initiate a public proceeding to consider how to

implement outstanding exception relief. On January 9,

1985, DOE decided that it would use crude oil overcharge

funds held by DOE in the Stripper Well? litigation to

pay holders of exception relief, but only if OHA found

that refiners were injured as a class by violations of

energy price regulations. OHA so found on June 21,

1985. 50 Fed. Reg. 27,400, 27,401 (July 2, 1985). DOE

also stated that payments would be withheld because of

the continuing litigation in Texaco v. Department of

Energy, and that “any payment pursuant to this order

will be placed in an interest-bearing escrow account pend-

ing the outcome of that litigation.” Jd.

On July 12, 1985, the scene moves back to the district

court which at that time issued a declaratory judgment

that DOE had an “unconditional and non-discretionary

obligation” to pay Southland. The court found DOE’s

position regarding method and timing of payment to be

“totally frivoious,” and its record to be one of “delay-

delay-delay.”

DOE honored this order on October 2, 1985, to the

extent of segregating funds in the Stripper Well account

2In re The Department of Energy Stripper Well Exemp-

tion Litigation, M.D.L. No. 378 (Theis, J.).

necessary to pay exception orders. It established separate

interest-bearing accounts in the United States Treasury

for each claimant to be released upon the completion of

the Texaco litigation. Amber Refining Inc., et al., 50

Fed. Reg. 41,572 (October 11, 1985). DOE announced

that interest on the exception orders would start to run

from October 2, 1985.

On December 4, 1985, the district court ordered full

restitution to Southland within 20 days. In addition,

DOE was directed to pay interest on the amount due

from May 8, 1984, the date of the FERC order. The

basis for this direction was twofold: (1) Southland’s re-

covery was liquidated at that time, and (2) DOE’s ob-

jection to honoring the FERC order was frivolous. An

order directing payment of exception relief had been

entered in Navajo Refining Co. v. Department of Energy

in September 1985, and a request for a stay in that case

was argued before this court on December 10, 1985. The

stay was denied at the conclusion of oral argument.

Judge Daugherty stated at the time that “the public in-

terest is fundamentally against the delay imposed by

D.O.E. in this case, and . . . against the principles of

good government and proper treatment of its citizens,

including its corporate citizens ... .” Navajo Refining

Co. v. Department of Energy, TECA No. 10-62. Tran-

script of Proceedings, December 10, 1985, at 465.

On December 20, 1985, DOE paid Southland the excep-

tion relief awarded by FERC, but included interest only

from October 2, 1985. It appealed that part of the court’s

order requiring it to pay interest from May 8, 1984, the

date of the FERC order, to October 2, 1985.

Discussion

This case involves two separate and distinct issues.

First, DOE contends that under the doctrine of sovereign

immunity it is entirely immune from any claim of pre-

judgment interest. Second, it contends that even if it is

not immune, the district court abused its discretion in

awarding interest in this case. Since the doctrine of

sovereign immunity precludes an award of prejudgment

interest against DOE, it is unnecessary to reach the ques-

tion as to whether the district court abused its discretion

which would call for a reversal of the judgment.

At the outset I want to state that symypathy and the

equities all favor the plaintiff in this case. The actions

by DOE over the last five years in this and other mat-

ters have simply been beyond belief. This court and

several district courts have made this point clear. How-

ever, these considerations are not helpful to the plaintiff

in this case.

The Supreme Court has frequently reaffirmed over the

past several decades the sovereign immunity rule that in

the absence of a specific provision in a contract or stat-

ute, or express consent by Congress, interest does not run

on a claim against the United States. As will become

evident in the ensuing discussion, “claim against the

United States” has been broadly construed and has not

been limited to the public fisc.

The stringency of the rule is clearly apparent in the

Court’s most recent discussion of the rule in Library of

Congress v. Shaw, 106 S.Ct. 2957 (1986). In that case

the Court was concerned with a judgment awarding an

employee back pay rights with interest against the gov-

ernment under the civil rights acts. Title VII provides

that the United States would be liable “the same as a

private person.” The wording was held not to have been

express enough to award interest against the govern-

ment. The Court took pains to emphasize that “policy,

no matter how compelling, is insufficient, standing alone,

to waive this immunity.” Id. at 2965.

In United States v. Louisiana, 446 U.S. 253 (1980),

the parties had agreed that payments made to the United

States on leases of offshore oil land were to be impounded

in a separate fund in the United States Treasury pend-

ing determination of the ownership of the land. Although

the moneys were commingled with the general funds of

the Treasury, a separate account had been established on

the books of the Treasury. “This was much more than a

recordkeeping device. The receipts were never treated as

governmental revenues.” Jd. at 264. The Court held,

under the long-expressed doctrine noted above, that the

United States has fulfilled its obligation under the agree-

ment, and “that there is no liability on the part of the

United States for interest or for the use of the funds;

and that the United States has no further obligation for

payment beyond those it has performed.” Jd. at 266.

In United States v. N. Y. Rayon Importing Co., Ine.

(#2), 329 U.S. 654 (1947), custom duties had been paid

erroneously by two corporations. Protests were filed and

the Customs Court sustained the protests. The amount of

refund was ascertained by the court and checks were

issued to the corporations. Because the corporations had

__been dissolved in the interim, the checks were trans-

mitted to the General Accounting Office where they were

deposited in a trust fund in the Treasury. While the

funds were commingled with other moneys, their exist-

ence in a trust fund was established by bookkeeping

entries. The court below had awarded interest for the

period after the issuance of the checks. Although the

Court was construing a different provision than the one

at issue in this case, it pointed out that the section merely

“codifies the traditional rule regarding the immunity of

the United States from liability for interest on unpaid

accounts or claims.” Jd. at 658. The Court said at 663:

“Courts lack the power to award interest against

the United States on the basis of what they think is

or is not sound policy. We reiterate that only ex-

press language in a statute or contract can justify

the imposition of such interest.”

It is significant that the Court has never considered

the nature of the account to be in any way important.

It makes no difference whether the money has been set up

as a “separate trust fund” or a “separate account”’ or,

as in this case as a separate interest-bearing account in

the United States Treasury. Nor has the existence of

strong equities, as in the N.Y. Rayon case, had an impact

on the Court’s views. The cases never articulate -the

rationale underlying the rule, but rather simply apply it

in a mechanical fashion. The Treasury has the money

and the claim is against the United States to recover that

money. This is sufficient to bring sovereign immunity

into play.

It is argued that sovereign immunity does not apply

in this case because the government has never claimed a

right to the money. While this might distinguish Louwisi-

ana, supra, it certainly does not remove the obstacle

presented by the N.Y. Rayon case. In that case, while it

is true that the government at one point claimed it had

a right to the money, it was finally determined that the

money belonged to the corporations. After the checks

were issued, the government had no claim to these funds.

The government was merely holding the money until the

rightful owner appeared. Nevertheless, the Supreme

Court denied the availability of interest to the claimants

under the doctrine of sovereign immunity.

Relief in this action was predicated on Section 504 (a)

of the Department of Energy Organization Act, 42 U.S.C.

§719(a). There is no provision for the payment of

interest in that Act. While Section 209 of the Economic

Stabilization Act, 12 U.S.C. § 1904, has been interpreted

to permit an award of interest against a private party,

United States v. Exxon Corp., 773 F.2d 1240, 1278-79

(Temp. Emer. Ct. App. 1985), such interest may not be

awarded against the government. At any rate, provision

for the payment of interest must be express in the stat-

ute under consideration. In Library of Congress v. Shaw,

10a

supra at 2961, the Court said: “In the absence of express

congressional consent to the award of interest separate

from a general waiver of immunity to suit, the United

States is immune from an interest award.” Similar

language is found in the N.Y. Rayon case, supra at 659:

“[T]here can be no consent by implication or by

use of ambiguous language. Nor can an intent on

the part of the framers of a statute or contract to

permit the recovery of interest suffice where the in-

tent is not translated into affirmative statutory or

contractual terms. The consent necessary to waive

the traditional immunity must be express, and it

must be strictly construed.”

The judgment entered by the court below flowed from

its finding on July 12, 1985, that DOE had an “uncondi-

tional and non-discretionary obligation” to pay to the

plaintiff. This obligation had nothing to do with the

overcharge fund. The importance of the fund is simply

that DOE chose to pay its liability out of that fund if

Texaco, supra, was reversed, which it was. The choice

by DOE of how it would pay the judgment has no bear-

ing on whether sovereign immunity applies to the judg-

ment itself. If the overcharge fund did not exist, DOE

would have had to pay the judgment some other way.

The part of the order appealed from is reversed, and

the provision for payment of interest from May 8, 1984

to October 2, 1985 is vacated.

lla

UNITED STATES DISTRICT COURT

S.D. MISSISSIPPI

JACKSON DIVISION

Civ. A. No. J81-0170(B)

VGS CORPORATION d/b/a COUTHLAND OIL COMPANY

and GLOBE ASPHALT Co., INC.,

Plaintiffs,

UNITED STATES DEPARTMENT OF ENERGY

and JOHN 8S. HERRINGTON, AS SECRETARY OF ENERGY,

Defendants.

July 12, 1985

As Amended Aug. 20, 1985

MEMORANDUM OPINION AND ORDER

BARBOUR, District Judge.

The Court has before it the following Motions:

(1) Motion of Plaintiffs, VGS Corporation, d/b/a

Southland Oil Company and Globe Asphalt Co., Ince.

(hereinafter collectively referred to as “Southland’”) for

Partial Summary Judgment; (2) Motion of Defendant,

United States Department of Energy (“DOE”) to Dis-

miss; and (3) Motion of DOE to stay.

1. Motion of Southiand for Partial Summary Judgment

and Motion of DOE to Dismiss

Southland seeks a declaratory judgment that the DOE

has an unconditional and non-discretionary obligation to

12a

implement an order issued by the Federal Energy Regu-

latory Commission (FERC) on May 8, 1984, requiring

DOE to restore to Southland $5,956,499.00 which DOE

wrongfully required Southland to pay under the Crude

Oil Entitlements Program. According to Southland the

DOE has not only failed to implement the FERC Order,

but has also unilaterally imposed additional conditions to

obtaining relief by virtue of its January 9, 1985, decision

which provides that the Office of Hearing and Appeals

(“OHA”) will implement the relief if the OHA deter-

mines that refiners as a class were injured by violations

of the Emergency Petroleum Allocation Act (“‘EPAA”),

After oral argument before the Court, on the parties’

Motions, DOE notified the Court that the OHA announced

on June 21, 1985, that an appropriate portion of crude

oil overcharge funds will be used to fund outstanding,

finally adjudicated “‘receive orders” such as that held by

Southland and that an appropriate procedure would be

implemented to provide the relief. However, because of

litigation concerning the termination of the entitlements

program, e.g., Texaco, Inc. v. DOE, TECA Nos. 3-44

through 3-49, payment of the “receive orders” will be

placed in an interest-bearing escrow account pending the

outcome of Texaco.

[1] DOE asserts that the OHA decision renders the in-

stant litigation moot. Suthland argues that the OHA

decision of June 21, 1985, places yet another condition on

the May 8, 1984, unconditional FERC order. Southland

notes that the Texaco litigation is now in the briefing stage

before the Temporary Emergency Appeals Court and that

the United States Supreme Court may yet have to ulti-

mately determine whether the entitlements lists will be

published. Then, Southland comments that other pending

litigation will have to decide the accuracy of the entitle

ments lists. Since the June 21, 1985, OHA ruling does

not satisfy the Southland claim, this Court concludes that

the June 21, 1985, OHA order does not moot the South-

13a

land claim. Accordingly, this Court will consider the

merits of the pending Motions before it.

In November 1973, Congress enacted the EPAA which

created comprehensive allocation and pricing regulations

for crude oil and petroleum products. 15 U.S.C. § 753(a).

Pursuant to the Act, the Federal Energy Administration

(“FEA”), the predecessor to DOE, established a multi-

tiered system of crude oil price controls. 10 C.F.R. Part

212, Sub-Part D (1984). Under the system, certain

domestic crude oil was subject to “old” or “lower tier”

ceiling prices while other domestic crude oil was subject

to higher “new” or “upper tier” ceiling prices. Other

categories of crude oil were exempt from price control.

The system placed those refiners forced to buy upper-

tier or uncontrolled crude oil at a competitive disadvan-

tage. To address this problem, FEA promulgated the

Entitlements Program. 10 C.F.R. § 211.67 (1984); 39

Fed.Reg. 42246 (Dec. 4, 1974). The regulations roughly

equalized the cost per barrel of crude oil among refiners

through cash transfers between refiners rather than the

physical transfer of oil. To achieve this result, each

nonth refiners with greater than average access to price-

controlled domestic crude oil bought “entitlements” from

refiners with less than average access to low cost crude.

10 C.F.R. §§ 211.67(a) (1), (b)(1) and (ce) (1984).

The “entitlements” purchased or sold each month by re-

finers were published in a monthly entitlements notice to

the refining industry. 10 C.F.R. § 211.67(i) (1) (1984).

If the obligation to purchase entitlements would impair

the refiner’s “historically established financial position,”

then the refiner was entitled to “an adjustment” or “ex-

ception” to “prevent speciai hardship, inequity or unfair

distribution of burdens. .. .” 42 U.S.C. § 7194(a).

The exceptions process functioned by OHA grants of

prospective relief for six month periods based upon the

financial projections of the refiner, to be followed by a

l4a

year-end review based on actual figures to determine

whether the refiner had received inadequate or excessive

exception relief. To implement the year-end findings,

OHA issued orders permitting the refiner to sell or re-

quiring it to buy additional entitlements. Beacon Oil

Company, 3 FEA { 83,209 (June 8, 1976). These buy

or sell obligations were then reflected on subsequent en-

titlement notices.

In October 1983, the Presiding Officer of FERC ruled

that Southland had unlawfully been required to pay

$7,597,567.00 to the Entitlements Program for the years

1977 and 1978. FERC sought to restore this sum to

Southland by relieving it of a purchase obligation imposed

boy an April 1, 1981, OHA order and by providing that:

. . . the Economic Regulatory Administration of the

Department of Energy shall in the next Entitlements

Notice increase the value of entitlements [Southland]

would otherwise be permitted to sell (or decrease the

value of the entitlements it would otherwise be en-

titled to purchase) by $5,956,499.00 to the nearest

entitlement. In the eveni no further Entitlements

Notice is issued, DOE will take other appropriate

action to implement this action.

On May 8, 1984, FERC issued an Order adopting the

Ovctober 1983 Order of the Presiding Officer. The May 8,

1984 FERC Order is the order which Southland seeks

to implement.

Prior to issuance of the FERC Order, President

Reagan, on January 30, 1981, issued Executive Order

12287, exempting all crude oil and petroleum products

from the price and allocation regulations (the “Decon-

trtol Order”). The Decontrol Order authorized the Secre-

tary of Energy “to take such actions as he deems neces-

Sa.ry to implement [the] Order, including the promulga-

tion of Entitlements Notices for periods prior to [the]

Order and the establishment of a mechanism for entitle-

ments adjustments for periods prior to [the] Order.”

15a

Shortly, after the Decontrol Order, DOE published

official assurances that it “will publish” a December 1980

Entitlements Notice in February 1981 and that it “will

also publish” a Notice in March reflecting transactions

in the first 27 days of January, 1981. Ruling 1981-1,

46 Fed.Reg. 12946 (Feb. 19, 1981) (Answer #2). The

December notice was issued February 20, 1981. 46 Fed.

Reg. 14157 (Feb. 26, 1981).

Between March 1981 and December 1981, a series of

Federal Court injunctions prevented the issuance of the

January 1981 Entitlements Notice. See, e.g., Mobil Oil

Corporation v. DOE, 520 F.Supp. 420 (N.D.N.Y.), rev'd,

659 F.2d 150 (Temp.Emer.Ct.App.), cert. denied, 454

U.S. 1110, 102 S.Ct. 687, 70 L.Ed.2d 651 (1981) ; Indi-

ana Farm Bureau Cooperative Association v. DOE, [1981-

84, Transfer Binder] Energy Mgmt. (CCH) { 26,315

(S.D.Ind.1981); Winston Refining Company v. DOE,

[1981-84 Transfer Binder] Energy Mgmt. (CCH)

{ 26,311 (M.D.N.C.1981). During this period, however,

the Economic Regulatory Administration (“ERA”) of the

DOE conducted a rule-making proceeding “to provide for

the orderly termination of the Crude Oil Entitlements

Program.” See 46 Fed.Reg. 15112 (March 3, 1981).

ERA adopted regulations which contemplated issuance

of a final “Clean-Up Notice” implementing adjustments

relating to the period prior to decontrol, specifically in-

cluding entitlements exceptions order. 10 C.F.R. § 211.64

(1984); 46 Fed.Reg. 36092 (July 13, 1981).

In 1981, when DOE established the Clean-Up Notice to

liquidate entitlements rights and obligations, it noted its

duty to implement all OHA exception decisions even after

decontrol ;

It is the DOE’s position that OHA may award en-

titlements exception relief after January 28, 1981,

if the relief awarded relates to periods prior to de-

control. If OHA decides that a firm should have had

l6a

exception relief at the time of decontrol, it is DOE’s

position that the intervention of decontrol did not

negate the prior claim to exception relief and that

DOE must give effect to such relief.

46 Fed.Reg. at 36093. With regard to claims finally ad-

judicated after issuance of the Clean-Up Notice, DOE

stated:

We have considered and rejected the notion of ignor-

ing post-clean-up claims and obligations adjudicated

by FERC or the courts. First, courts have made

clear that agencies cannot extinguish rights sub

judice, so we cannot purport to cut off claims and

obligations merely because outstanding cases are not

finally determined by the date of the clean-up list.

46 Fed. Reg. at 36096.

Despite these affirmations by the DOE of its obliga-

tions with regard to exception relief, in November 1983,

the DOE announced its tentative decision to issue no

further entitlements notices and questioned whether out-

standing OHA, FERC. and court decisions should be im-

plemented notwithstanding non-publication of the Jan-

uary entitlement adjustment notices. 48 Fed.Reg. at

50482. Thereafter, on June 28, 1984, DOE announced

its final decision to issue neither the January 1981 nor

the Clean-Up Entitlements Notices. 49 Fed.Reg. 27410

(July 3, 1984). Simultaneously, the DOE announced a

“tentative decision” to effectuate orders which provide

for receipt of money by firms only “if an appropriate

mechanism can be devised which does not unduly disrupt

the market.” 49 Fed.Reg. at 27148. DOE also announced

its tentative decision not to enforce OHA and FERC

orders requiring the repayment of excessive exception re-

lief received by certain firms during the course of the en-

titlements program. Id. On January 9, 1985, DOE an-

nounced its “final decision” on exception orders, making

final its “tentative decision” not to enforce such orders.

17a

50 Fed.Reg. 1919 (January 14, 1985). Thus, refiners

who, during the course of the Entitlements Program,

were granted exception relief in excess of that warranted

under the regulatory standards were excused from their

obligation tc repay the relief erroneously granted. Like-

wise, DOE also concluded that it had no legal obligation

to give effect to exception orders providing for the pay-

ment of exception relief wrongfully denied during the op-

eration of the program. 50 Fed.Reg. at 19238. DOE

noted, however, that OHA was conJucting proceedings to

determine proper disposition of refund monies collected

in cases involving violations of the crude oil pricing regu-

lations. 50 Fed.Reg. at 1921. According to DOE, un-

paid exception orders would be paid if OHA determines

refiners as a class were injured by violations or alleged

violations of the EPAA regulations. Jd. As indicated

above, the OHA determined on June 21, 1985, that re-

finers as a class had been injured and were entitled to

an appropriate portion of the Crude Oil Overcharge Fund.

[2] DOE opposes the Motion of Southland for Partial

Summary Judgment and moves to dismiss the complaint

on the basis that the Decontrol Order rendered the May

8, 1984, FERC order discretionary since the FERC order

presupposed the continued operation of the Entitlements

Program and the publication of the Entitlements lists.

DOE argues that the FERC order and the Decontrol

Order left it to the discretion of DOE to determine what

relief is appropriate in the event an entitlement list was

not published. DOE also states that the implementation

of the FERC order is conditional since it depends on

whether OHA determines that refiners as a class were

injured by violations of the EPAA. Now DOE contends

that payment or receive orders must await the outcome

in Texaco.

This Court finds that Southland is entitled to a declara-

tory judgment that the DOE has an unconditional and

non-discretionary obligation to implement the May 8,

18a

1984, FERC order, requiring DOE to restore to South-

land $5,956,499.00. The Court further finds that the

Motion of DOE to Dismiss or for Summary Judgment

is denied as being frivolous. See Texaco, Inc. v. DOE,

Civil Action No. 84-391-JLL (D.Del. March 20, 1985) ;

USA Petroleum v. DOE, Civil Action No. 84-1017 (D.C.

D.C. February 15, 1985); Navaho Refining Company v.

DOE, [1981-84 Transfer Binder] Energy Mgmt. (CCH)

7 26,484 (D.N.M. 1984), Appeal dismissed, [1981-84

Transfer Binder] Energy Mgmt. (CCH) { 26,514 (Temp.

Emer.Ct.App.1984). The decisions in USA Petroleum and

Navaho Refining Company clearly mandate the imple-

mentation of the Southland exception order. DOE cannot

now refuse to recognize the Southland exception order

based upon its wholly unreasonable and insupportable in-

terpretations of the FERC order and the Decontrol Order.

Indeed, by virtue of the OHA order of June 21, 1985,

DOE obviously recognizes that the Southland-type ciaims

are entitled to relief despite its earlier contrary conten-

tions.

In Texaco, Inc. v. DOE, Texaco sued to compel DOE

to publish the entitlements list under the Entitlements

Program, which DOE claimed it was relieved from doing

by virtue of the Decontrol Order. The court held that

the power of the DOE to amend the entitlements regula-

tions ended after the Decontroi Order, and that the DOE

could not now recoup that power by refusing to comply

with the regulations. Further, the court stated that the

regulations impose an obligation on DOE to issue entitle-

ments for crude oil transactions occurring prior to the

Decontrol Order.

[3] Based upon Texaco, Inc. v. DOE, this Court finds that

DOE cannot attach other conditions to the relief South-

land seeks since the power of DOE to amend the Entitle-

ments regulations expired after decontrol. Consequently,

whether the OHA determines that refiners as a class have

been injured by violations of the EPAA is irrelevant to

19a

implementation of the relief ordered Southland by FERC.

However, at this juncture, the OHA has determined that

refiners as a class were injured and has established a

fund to reimburse Southland-type claims. The method of

payment will be determined in “Stage II” of these pro-

ceedings.

In Navaho Refining Company v. DOE, supra, Navaho,

like Southland, sought summary judgment declaring its

right to restitution of over four million dollars in exces-

sive payments Navaho was required to make to the En-

titlements Program. DOE argued, as they do here, that

the implementation of the FERC order was conditioned

on issuance of a January 1981 Entitlements List. DOE

also argued that the FERC order was not final. The

court determined that FERC found that Navaho paid

excessive sums into the Entitlements Program. Conse-

quently, the court found that there was nothing more

for DOE to adjudicate. “All that is required is imple-

mentation of the relief that has already been ordered.”

Thus, the court granted Navaho summary judgment.

In USA Petroleum v. DOE, supra, the same issue was

before the court. The FERC order contained identical

language to the May 8, 1984, FERC order at issue here—

“in the event no further Entitlement Notice is issued,

DOE will take other appropriate action to implement this

order.” The court ruled that the FERC order clearly

required some relief, even if it did not specify the relief,

and that DOE has a duty to provide relief through ap-

propriate action. The court reasoned that the Decontrol

Order ended price control of oil; it did not change or

cancel the already adjudicated exceptions given to partici-

pants in the program. Consequently, the court granted

the motion of USA for partial summary judgment.

These decisions, although unpublished and subject to

appeal, convince this Court of the error and of the totally

frivolous nature of the DOE position. Consequently, this

20a

Court grants the Motion of Southland for Partial Sum-

mary Judgment and denies the Motion of DOE to Dis-

miss or for Summary Judgment. Furthermore, the Court

orders DOE to report to this Court within fifteen (15)

days the method by which it intends to implement the

May 8, 1984, FERC order, whether through means of

the crude oil overcharge fund or otherwise.

2. Motion of DOE to Stay.

[4] DOE moves to stay proceedings in this Court pending

final resolution of Texaco, Inc. v. DOE, supra, which it

has appealed and which it claims will moot the South-

land claim. As explained by Southland in opposition to

the Motion to Stay, DOE advanced the same argument

in USA Petroleum v. DOE, supra, and lost. As stated by

the court in USA Petroleum, the “DOE in this connec-

tion . . . is a dishonest litigant” and their track record

to date has been one of “delay—delay—delay.” More-

over, this Court is appalled at the manner in which the

DOE uses the Texaco appeal to its advantage, arguing in

this case that Texaco will be affirmed and will moot the

Southland claims and in Mobil Oil Corporation v. DOE,

Civil Action No. 81-CV-340 (N.D.N.Y.) that Texaco will

be reversed and moot the claims of Mobil Oil Corpora-

tion that the data upon which the DOE will base any

entitlements list is erroneous. It seems that the DOE is

playing fast and loose with federal courts across the

United States. It ends here. The Motion to Stay is

denied and the DOE will within fifteen (15) days of the

entry of this Order present to this Court its plans for

implementing the FERC order.

meee sow ee

2la

IN THE UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF MISSISSIPPI

JACKSON DIVISION

Civil Action No. J81-0170 (B)

VGS CORPORATION, D/B/A SOUTHLAND OIL COMPANY

AND GLOBE ASPHALT Co., INC.,

Plaintiffs

vs.

UNITED STATES DEPARTMENT OF ENERGY AND

JOHN S. HERRINGTON, AS SECRETARY OF ENERGY,

Defendants

[Filed Dec. 4, 1985]

MEMORANDUM OPINION

The Court has before it the Motion of Plaintiffs, VGS

Corporation, d/b/a Southland Oil Company, and Globe

Asphalt Co., Ine. (“Southland”), for Summary Judg-

ment. Southiand’s Motion seeks a mandamus, directing

Defendants, United States Department of Energy and

John S. Herrington, as Secretary of Energy (“DOE”),

to pay Southland, within twenty (20) days of entry of

this Court’s Order, the sum of $5,956.499.00 as required

by the May 8, 1984, Order of the Federal Energy Regu-

latory Commission (“FERC”), with interest from the

date of the FERC Order until paid, calculated at the

rate approved in United States v. Exxon, 561 F.Supp.

816, 864 (D.D.C. 1983), aff'd. TECA Nos. DC-91

through DC-100, Slip Op. (Temp. Emer.Ct. App. July 1,

1985).

22a

DOE does not dispute that Southland will receive its

exception relief from the entitlements program and sub-

mits that the only issues are when Southland will receive

its exception relief and whether Southland is entitled to

interest from the date of the FERC Order. DOE argues

that a mandamus directing DOE when to pay is improper

since the timing of payment is a matter within the

agency’s discretion.

Mandamus is appropriate pursuant to 28 U.S.C. § 1361

(1982), to “compel an officer or employee of the United

States or any agency thereof to perform a duty owed

the plaintiff” if three elements are satisfied: (1) the

plaintiff has a clear right to the relief; (2) the defend-

ant has a clear duty to act; and (3) no other adequate

remedy is available. Green v. Heckler, 742 F.2d 237,

241 (5th Cir. 1984); Sheehan v. Army and Air Force

Exchange Service, 619 F.2d 1132 (5th Cir. 1980).

There is no doubt that Southland has a clear right to

the relief requested and that DOE has a clear duty to

act. By virtue of the May 8, 1984, FERC Order, DOE

is required to restore to Southland $5,956,499.00 which

DOE wrongfully required Southland to pay under the

Crude Oil Entitlements Program. By virtue of this

Court’s Memorandum Opinion and Order of July 12,

1985, in this case DOE has an unconditional and non-

discretionary obligation to implement the May 8, 1984,

FERC Order which requires DOE to restore to South-

land $5,956,499.00. The Court is also of the opinion that

mandamus is the only adequate remedy available to

Southland to obtain relief in light of DOE’s past con-

duct in denying an obligation to afford relief and in

delaying implementation of relief. Although DOE pre-

viously represented to the Court that the Office of Hear-

ing and Appeal (“OHA”) would implement relief if

OHA found refiner class injury and although the OHA

found refiner class injury and determined that a portion

of crude oil overcharge funds would be used to fund

23a

outstanding, finally adjudicated “receive orders” such

as Southland’s, DOE, in its June 21, 1985 decision, has

required refiners with unpaid orders to file ‘“applica-

tions” for payment, which, if “approved,” would result

in payment to a DOE escrow account pending resolution

of the Texaco v. DOE litigation concerning issuance of

final entitlements notices. As such, DOE has added yet

another carrot to its stick. Yet, the DOE itself made

resolution of the Texaco litigation and the issuance of

further entitlements lists irrelevant to immediate pay-

ment of Southland by identifying crude oil overcharge

funds as the source of payments. See, e.g., Navaho Re-

fining Company v. DOE, Civil Action No. 83-1492-N

(D.N.M. Sept. 27, 1985). Moreover, as the court in

Navaho Refining Company v. DOE, Civil Action No.

83-1492-N (D.N.M July 23, 1985), commented “DOE has

unilaterally granted its own stay by refusing to make

any exception relief payments until after the Texaco dis-

pute is over.” This Court, in its previous ruling of July

12, 1985, specifically denied DOE’s Motion to Stay this

proceeding pending resolution of the Texaco litigation.

Under the statutory scheme for exception relief, 42

U.S.C. § 7194, DOE must insure that the exception relief

it grants is meaningful and effective. See Twin City

Barge and Towing Company v. Slesinger, 603 F.2d 197,

208 (TECA 1979). Moreover, DOE is required to con-

clude matters presented to it within a reasonable time.

Littlefield v. DOE, 4 Energy Mgmt. Rep. (CCH) { 26,492,

29,566 (D.D.C. June 29, 1984) ; see also 5 U.S.C. § 555H.

DOE has violated both congressional mandates. See

Navaho Refining Company v. DOE, supra. (D.N.M. July

23, 1985). Accordingly, mandamus is appropriate and

will issue such that DOE will restore to Southland

$5,156,499.00 within twenty (20) days of entry of this

Order. See Navaho Refining Company v. DOE, supra.

Southland also seeks interest from the date of the

FERC Order of May 8, 1984, calculated pursuant to

24a

United States v. Exxon, supra. Southland notes that

under DOE’s June 21, 1985, Order, funds sufficient to

pay exception orders are to be placed in an interest-

bearing escrow account. Thus, Southland argues, DOE

acknowledges its obligation to pay interest as compensa-

tion for the loss of the time-value of the money wrong-

fully taken from Southland. Yet, Southland claims that

only by receiving interest from the date of the FERC

Order will it be fully compensated for the loss of the

time-value of this money. DOE simply argues that since

Southland was not entitled to interest under the entitle-

ments program, it is not entitled to interest here.

DOE’s argument misses the point. We are no longer

operating under the entitlements program by virtue of

DOE’s June 1984 decision not to issue further entitle-

ments notices and its June 1985 decision that unpaid

exception orders would be paid from crude oil over-

charge funds if the OHA found refiner class injury.

Thus, FERC’s denial of interest of Southland is irrele-

vant to the present issue.

Pre-judgment interest is appropriate where the amount

allegedly due was liquidated when the claim was orig-

inally made or where the denial of the claim was friv-

olous or in bad faith. Piney Woods County Life School

v. Shell Ou Company, 539 F.Supp. 957, 988 (S.D.Miss.

1982), affd in part, rev’d in part on other grounds, 726

F.2d 225 (5th Cir. 1984. Southland’s claim was reduced

to a liquidated amount on May 1984, the date of the

FERC Order. Moreover, this Court, in its Memorandum

Opinion and Order of July 12, 1985, found that DOE’s

Motion to Dismiss or for Summary judgment was friv-

olous. Opinion, at 8. The basis of DOE’s Motion was

that it had a discretionary, conditional obligation to pay

Southland pursuant to the FERC Order. In denying

DOE’s Motion as frivolous, the Court, in essence, found

that DOE’s denial of Southland’s claim was frivolous.

25a

Accordingly, Southland is entitled to pre-judgment in-

terest from May 8, 1984, under either exception.

Southland further requests this Court to use the sched-

ule of interest rates applied by the DOE in its admin-

istrative enforcement actions since February 1980. See

United States v. Exxon, supra. Since DOE did not re-

spond to this point, the Court will allow Southland to

recover pre-judgment interest at the rate claimed.

A final judgment in accordance with this Memorandum

Opinion will be entered.

ORDERED this the 4th day of December, 1985.

/s/ William H. Barbour, Jr. __

United States District Judge

26a

IN THE UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF MISSISSIPPI.

JACKSON DIVISION

Civil Action No. J81-0170(B)

VGS CORPORATION, D/B/A SOUTHLAND OIL COMPANY

AND GLOBE ASPHALT Co., INC.,

Plaintiffs

VS.

UNITED STATES DEPARTMENT OF ENERGY AND

JOHN 8S. HERRINGTON, AS SECRETARY OF ENERGY,

Defendants

[Filed Dec. 4, 1985]

FINAL JUDGMENT

Upon consideration of Plaintiff’s Motion for Summary

Judgment, the briefs filed by the parties, and the entire

record in this proceeding, all showing that there is no

genuine issue as to any material fact and that Plaintiffs

are entitled to a judgment as a matter of law; now,

therefore,

IT IS ORDERED that Plaintiff’s Motion for Sum-

mary Judgment is granted.

IT IS FURTHER ORDERED AND ADJUDGED that

Defendant, Department of Energy shali pay to Plaintiff

Southland Oil Company (“Southland”), within twenty

days of entry of this Judgment, the sum of $5,956,499.00

as required by the May 8, 1984, Order of the Federal

Energy Regulatory Commission (“FERC”), Southland

27a

Oil Co./VGS Corp., 27 FERC 961,205 (May 8, 1984),

with interest running from the date of such FERC Order

to the date such sum is paid to Plaintiff Southland. In-

terest shall. be calculated using the average prime rate

for each calander quarter during that period, which shall

be the arithmetic mean, to the nearest one-hundredth of

one percent, of the prime rate value published in the

Federal Reserve Bulletin for the fourth, third, and second

months preceding the first month of the calendar quarter,

and shall be compounded quarterly. See U.S. v. Exxon

Corp., 561 F.Supp. 816, 864 (D.D.C. 1983), afd. TECA

Nos. DC-91 through DC-100, Slip op. (Temp. Emer. Ct.

App., July 1, 1985).

ORDERED this the 4th day of December 1985.

/s/ William H. Barbour, Jr.

United States District Judge

28a

IN THE UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF MISSISSIPPI

JACKSON DIVISION

Civil Action No. J81-0170(B)

JUDGE WILLIAM H. BARBOUR, JR.

VGS CORPORATION, D/B/A SOUTHLAND OIL COMPANY

AND GLOBE ASPHALT Co., INC.,

Plaintiffs,

Vv.

UNITED STATES DEPARTMENT OF ENERGY AND

JOHN S. HERRINGTON, AS SECRETARY OF ENERGY,

Defendants

[Filed Dec. 23, 1985]

STIPULATED ORDER

1. In accordance with the Court’s judgment of De-

cember 4, 1985, defendant Department of Energy (DOE)

will pay plaintiff VGS Corporation d/b/a Southland Oil

Company (Southland) $5,956,499.00 pursuant to the

_terms of the Order of the Federal Energy Regulatory

Commission (FERC) and interest in accordance with the

agency’s Order in Amber Refining, Inc., et al., by De-

cember 24, 1985.

2. The parties agree that, upon receipt by Southland

of said sums, payment of prejudgment interest from the

date of the FERC Order will be stayed pending appeal

by DOE to the Temporary Emergency Court of Appeals.

Pending resolution of. the prejudgment interest issue on

29a

appeal, the amount of prejudgment interest shall be

sequestered by DOE in an account bearing interest at

the same rate as those administered under Amber Re-

fining, Inc., et al.

3. DOE agrees, if an appeal is taken, to file its No-

tice of Appeal by January 3, 1986.

ALEX A. ALSTON, JR.

THOMAS, PRICE, ALSTON,

JONES & DAVIS

121 North State Street

Post Office Drawer 1532

Jackson, Mississippi

39215-1532

Telephone: (601) 948-6882

/s/ Edwin Jason Dryer

EDWIN JASON DRYER

JACK L. LAHR

DENNIS A. HENIGAN

FoLey & LARDNER

1775 Pennsylvania Ave., NW

Washington, D.C. 20006

Telephone: (202) 862-5300

Attorneys for Plaintiffs

SO ORDERED.

Respectfully submitted,

GEORGE L. PHILLIPS

United States Attorney

DANIEL E. LYNN

Assistant United States

Attorney

/s/ Catherine C. Cook

CATHERINE C. CooK

SAMUEL SOOPPER

JO ANN SCOTT

Department of Energy

Office of General Counsel

Room 6H-065

1000 Independence Ave.,

S.W.

Washington, D.C. 20585

(202) 252-5414

Attorneys for Defendants

Date: 12-23-85

/s/ William H. Barbour, Jr.

United States District Judge

30a

Section 504 of the Department of Energy Organization Act,

42 U.S.C. § 7194 (1982)

§ 7194. Requests for adjustments

(a) The Secretary or any officer designated by him

shall provide for the making of such adjustments to any

rule, regulation or order described in section 7191(a) of

this title issued under the Federal Energy Administration

Act [15 U.S.C. 761 et seq.], the Emergency Petroleum

Allocation Act of 1973 [15 U.S.C. 751 et seq..], the En-

ergy Supply and Environmental Coordination Act of 1974

[15 U.S.C. 791 et seq.], or the Energy Policy and Con-

servation Act [42 U.S.C. 6201 et seq.], consistent with

the other purposes of the relevant Act, as may be neces-

sary to prevent special hardship, inequity, or unfair dis-

tribution of burdens, and shall by rule, establish proce-

dures which are available to any person for the purpose

of seeking an interpretation, modification, or recission of,

exception to, or exemption from, such rule, regulation or

order. The Secretary or any such officer shall additionally

insure that each decision on any application or petition

requesting an adjustment shall specify the standards of

hardship, inequity, or unfair distribution of burden by

which any disposition was made, and the specific applica-

tion of such standards to the facts contained in any such

application or petition.

(b) (1) If any person is aggrieved or adversely af-

fected by a denial of a request for adjustment under sub-

section (a) of this section such person may request a

review of such denial by the Commission and may obtain

judicial review in accordance with this subchapter when

such a denial becomes final.

(2) The Commission shall, by rule, establish appro-

priate procedures, including a hearing when requested,

for review of a denial. Action by the Commission under

this section shall be considered final agency action within

3la

the meaning of section 704 of title 5 and shall not be

subject to further review by the Secretary or any officer

or employee of the Department. Litigation involving ju-

dicial review of such action shall be the responsibility of

the Secretary.

(Pub. L. 95-91, title V, § 504, Aug. 4, 1977, 91 Stat. 590.)

32a

Section 702 of the Administrative Procedure Act,

as amended, 5 U.S.C. § 702 (1982)

§ 702. Right of review

A person suffering legal wrong because of agency ac-

tion, or adversely affected or aggrieved by agency action

within the meaning of a relevant statute, is entitled to

judicial review thereof. An acticn in a court of the

United States seeking relief other that money damages

and stating a claim that an agency or an officer or em-

ployee thereof acted or failed to act in an official capacity

or under color of legal authority shall not be dismissed

nor relief therein be denied on the ground that it is

against the United States or that the United States is an

indispensable party. The United States may be named as

a defendant in any such action, and a judgment or decree

may be entered against the United States: Provided,

That any mandatory or injunctive decree shall specify

the Federal officer or officers (by name or by title), and

their successors in office, personally responsible for com-

pliance. Nothing herein (1) affects other limitations on

judicial review or the power or duty of the court to dis-

miss any action or deny relief on any other appropriate

legal or equitable ground; or (2) confers authority to

grant relief if any other statute that grants consent to

suit expressly or impliedly forbids the relief which is

sought.

(Pub. L. 89-554, Sept. 6, 1966, 80 Stat. 392; Pub. L.

94-574, § 1, Oct. 21, 1976, 90 Stat. 2721.)

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.