Prologue — Atlantic Richfield Co. v. United States Department of Energy

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92-789

No. 92- ——

IN THE

Supreme Court of the United States

OCTOBER TERM, 1992

ATLANTIC RICHFIELD COMPANY,

Petitioner,

UNITED STATES DEPARTMENT OF ENERGY, et al.,

Respondents,

DON VAN VRANKEN on behalf of himself

and all others similarly situated,

Intervenor-Respondents.

On Petition for a Writ of Certiorari to the

Temporary Emergency Court of Appeals

of the United States

PETITION FOR A WRIT OF CERTIORARI

Of Counsel:

RICHARD C. MORSE

ATLANTIC RICHFIELD COMPANY

1055 West Seventh Street

Los Angeles, CA

November 5, 1992

DAVID L. ROLL

(Counsel of Record)

SHELDON E. HOCHBERG

RICHARD K. WILLARD

ALFRED M. MAMLET

PANTELIS MICHALOPOULOS

STEPTOE & JOHNSON

1830 Connecticut Ave., N.W.

Washington, D.C. 20036

(202) 429-3000

Attorneys for Petitioner

WILSON - Epes PRINTING Co., INC.

- 789-0096 - WASHINGTON. D.C. 20001

“f

QUESTIONS PRESENTED

s Court’s decision in James B. Beam

Georgia, 111 S. Ct. 2439 (1991), applies

* decisions invalidating regulations of a

urt that announced a new rule of fed-

ed that new rule to the party challenging

leny any remedy to a similarly situated

party complied with the old rule.

PARTIES TO THE PROCEEDING BELOW

AND RULE 29.1 STATEMENT

The parties to the proceeding below were: petitioner

Atlantic Richfield Company (“ARCO’’); respondents

United States Department of Energy; Admiral James D.

Watkins, Secretary, United States Department of Energy;

George B. Breznay, Director, Office of Hearings and

Appeals. United States Department of Energy; intervenor-

respondents Don Van Vranken and Lew & Ted’s Service,

Inc.; and the intervenor-respondent certified class of

wholesale purchaser-resellers of gasoline, butane, aviation

fuels and propane from ARCO between May 1, 1976 and

January 28, 1981.

The following companies are subsidiaries of petitioner

ARCO ‘except wholly-owned subsidiaries) :

ARCO Chemical Company

Lyondell Petrochemical Company

TABLE OF CONTENTS

QUESTIONS PRESENTED ......00.2.o.ooc eects

PARTIES TO THE PROCEEDING BELOW AND

ti Ue 8 TE yy yy 5 4.

RPE REUACPEORS TREREAI WY .osccscscccc.cccsssnccscsesseees picaaicahnattaaecckise

JURISDICTION OF THIS COURT ......000000....

STATEMENT OF THE CASE ......000000000 eee.

A. The Federal Price Controls and the Mobil

Ne ec scuvcansboanth

B. The Proceedings Below ......................-...0000000--0....

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

I. TECA’S REFUSAL TO APPLY BEAM TOITS

DECISION INVALIDATING AN AGENCY

RULE CREATES A CONFLICT WITH AN-

OTHER COURT OF APPEALS, AND WITH

THIS COURT’S DECISION IN BEAM ............

A. The Decision Below Conflicts With Decisions

of the Eighth Circuit and the Court of In-

oe os anaanenecenia

B. The Court’s Prompt Resolution of This Con-

Neen ee aici ds ccncasinsusasrxnanasbeciavencacens

Il. COURTS SHOULD NOT BE PERMITTED TO

EVADE THE PROHIBITION OF SELECTIVE

PROSPECTIVITY BY REFUSING TO AWARD

ANY REMEDY TO A PARTY THAT COM-

PLIED WITH THE OLD RULE .........................

A. The Decision Below Evades Beam by Refus-

ing To Provide Any Remedy ...........................

B. The Basis On Which TECA Denied ARCO

Any Relief Was Inappropriate Under Beam

and Establishes a Principle That Would

ETE AR SEEN aie ee

och cu cenxansanbineiaslenkinnnennicn caniceaniaeeesens

TABLE OF AUTHORITIES

CASES Page

Bacchus Imports, Ltd. v. Dias, 468 U.S. 263

RINE is:tissciohcaeamnasinesnaivodieicedife ch ibaaae eldkdielastae cileha naa Aiea 16

Barr v. McGraw-Hill, 770 F. Supp. 855 (S.D.N.Y.

| | RRR Seine eee nae ARE ha tae aM 11

Ceramica Regiomontana, S.A. v. United States,

No. 88-05-00394, 1992 Ct. Intl. Trade LEXIS 68

(May 15, 1992), amended on other grounds, No.

#92-76, 1992 Ct. Intl. Trade LEXIS 71 (Ct.

Int’] Trade May 19, 1992) ........... 11

District Lodge 64 v. NLRB, 949 F.2d 441 (D.C.

Cir. 1991) 9

Harper v. Virginia Dep't. of Taxation, 410 S.E.2d

629 (Va. 1991), cert. granted, 112 S. Ct. 1934

(192) RADAR eC DTN ON 9

James B. Beam Distilling Co. v. ». Georgia, 111 S. Ct.

2439 (1991) eaddatsadiea eae cies ccnacecenncncunacencss fSOUIN

Mobil Oil Corp. v. DOE, 610 F.2d 796 (Temp.

Emer. Ct. App. 1979), cert. denied, 446 U.S. 937

(1980) STE Ne IASON LSI eng EE

Mobil Oil Corp. v. DOE, 647 F.2d 142 (Temp.

Emer. Ct. -_. _— EE Se eee eee A nea 2,4,5

Mobil Oil Corp. v. DOE, 678 F.2d 1083 (Temp.

Emer. Ct. Hal 1982) EEE Mee RAO AAO 2,4, 5

South Corp. & Seal Fleet, Inc. v. United States,

690 F.2d 1368 (Fed. Cir. 1982) . ae 10

United States v. Estate of Donnelly, 397 U. Ss. 286

5 PEALE Re Sk a te OSS Si ee NET OE eT 16

United States v. Goodner Brothers Aircraft, Inc.,

966 F.2d 380 (8th Cir. 1991), petition for cert.

filed, 61 U.S.L.W. 3314 (U.S. Oct. 27, 1992) 10, 13

Van Vranken v. Atlantic Richfield Co., 890 F.2d

421 (Temp. Emer. Ct. App. 1989), cert. denied,

EE ns I MD posceksccscenccncececanssiatcenmsicenoan : 5

CONSTITUTION

U.S. Constitution, Art. TIT ............... i

STATUTES AND ACTS

28 U.S.C. § 1254(1) (1988) .- baleecadanlessanaeare 2

TABLE OF AUTHORITIES—Continued

Page

Section 211(g) of the Economic Stabilization Act

of 1970, 12 U.S.C. § 1904 note (1988) 0.00000... e 2

REGULATIONS

10 C.F.R. § 212.126 (d) (2) ........ Soe Serna reece

poe ok AES Sh; | eee ee

oak A DG SG ct | errr os

ae a ie 0 IE whitest ctncditeceselavernseeadinns

Mandatory Petroleum Price Regulations, 46 Fed.

Reg. 7776 (1981) (final rule) —.........0000000000000200.... 4

FEDERAL REGISTER

Notice of Proposed Consent Order and Opportunity

www a

for Public Comment, 50 Fed. Reg. 8366 (1985)... 5

MISCELLANEOUS

Presidential Signing Statement re S. 1569 (Octo-

Se ID ole ais cce casccn ee carted tacmemecienes ican 10

OMB, Regulatory Program of the United States

He. WI issicecncchdcpcti ncctasnanataate eames 12

IN THE

Siygirene Court of the United States

OCTOBER TERM, 1992

No. 92- ———

ATLANTIC RICHFIELD COMPANY,

- Petitioner,

Vv.

UNITED STATES DEPARTMENT OF ENERGY, et al..

Respondents,

and

DON VAN VRANKEN on behalf of himself

and all others similarly situated,

Inte rvenor-Respondents.

On Petition for a Writ of Certiorari to the

Temporary Emergency Court of Appeals

of the United States

PETITION FOR A WRIT OF CERTIORARI

Petitioner Atlantic Richfield Company (“ARCO”) re-

spectfully prays that a writ of certiorari issue to review

the judgment and opinion of the Temporary Emergency

Court of Appeals of the United States entered on August

27, 1992.

OPINIONS BELOW

The opinion of the Temporary Emergency Court of

Appeals of the United States is not yet reported and is

reproduced at Appendix A. The unreported order of that

court denying petitioner’s Petition for Rehearing and Sug-

gestion for Rehearing En Banc is reproduced at Appendix

EK. The unreported order and the memorandum opinion of

the United States District Court for the District of Co-

lumbia, which is published at 772 F. Supp. 654 (D.C.

D.C. 1991), are reproduced at Appendices B and C re-

spectively. The decision and order of the Department of

Energy, reported at 21 DOE (CCH) { 80,104 (1991),

is reproduced at Appendix D.

JURISDICTION OF THIS COURT

The decision and ‘udgment of the Temporary Emergency

Court of Appeals was issued on August 27, 1992. On

October 6, 1992, the Temporary Emergency Court of Ap-

peals entered an order denying the timely Petition for Re-

hearing and Suggestion for Rehearing En Banc of Plain-

tiff-Appellant Atlantic Richfield Company.

This Court has jurisdiction to review the judgment of

the court of appeals by writ of certiorari pursuant to 28

U.S.C. § 1254(1) (1988) and section 211(g) of the Eco-

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

(1988).

STATEMENT OF THE CASE

Under this Court’s decision in James B. Beam Distilling

Co. v. Georgia, 111 S. Ct. 2439 (1991), if a new rule of

federal law is applied to the party in the proceeding in

which the rule is announced, that new rule must be

applied to all other similarly situated parties whose claims

are not otherwise barred Uy procedural requirements or

res judicata.' In the Mobil trilogy,” the Temporary Emer-

1 Beam, 111 S. Ct.-at 2448. Although this rule was announced

in Justice Souter’s plurality opinion in Beam, the concurring opin-

ions in the case make clear that six Justices concurred in the rule.

Beam, 111 8S. Ct. at 2448 (White, J., concurring); 111 S. Ct. at 2449-

50 (Blackmun, J., concurring); 111 S. Ct. at 2450-51 (Scalia, J.,

concurring).

2 Mobil Oil Corp. v. DOE, 610 F.2d 796, 804 (Temp. Emer. Ct.

App. 1979), cert. denied, 446 U.S. 937 (1980) (“Mobil I’); Mobil

Ou Corp. v. DOE, 647 F.2d 142, 145 (Temp. Emer. Ct. App. 1981)

(“Mobil II’) ; Mobil Oil Corp. v. DOE, 678 F.2d\1083, 1090 (Temp.

Emer. Ct. App. 1982) (“Mobil III’’).

gency Court of Appeals (“TECA’) determined that an

amendment to a Department of Energy (‘“DOE”’’)* regula-

tion (the old rule) was substantively and procedurally

unlawful, and applied the original unamended regulation

(the new rule) to Mobil. The court below, however, held

that the Beam choice-of-law does not apply to judicial

decisions finding a federal agency regulation invalid and

consequently failed to apply the new Mobil rule to ARCO.

A. The Federal Price Controls and the Mobil Litigation

Under the DOE price control regulations, a refiner’s

maximum lawful sales price (“MLSP”’) on refined prod-

ucts covered by the price control regulations was limited

to its increased costs over a base period price. A refiner

could recover all of the increased costs it incurred in a

particular month, or could save a portion of its increased

costs in its “banks” for recovery in a subsequent month.*

Prior to February 1976, a refiner’s increased costs were

allocated among covered products by the so-called “V

factor.” ®

In Mobil I, TECA held that DOE’s April 1974 amend-

ment to its V factor regulation (the old rule) was invalid

on substantive and procedural grounds.* The conse-

quence of this decision was to reinstate DOE’s pre-

existing unamended V factor regulation (the new rule),

which allowed refiners to allocate more cost increases to

the covered products than under the old ruie, and to estab-

lish a higher MLSP for covered products. The new rule

was retroactively applied to Mobil: Mobil was allowed to

reallocate its crude oil costs in accordance with the new

rule, thus increasing its MLSP and reducing its potential

overcharge liability in government and private overcharge

3 The term “DOE” is used here to include its predecessor agencies.

46 C.F.R. § 150.355 (1973); 10 C.F.R. § 212.83 (1975).

56 C.F.R. § 150.356 (1973) ; 10 C.F.R. § 212.83 (1975).

® Mobil I, 610 F.2d at 802, 804.

cases.’ In its petition for certiorari to this Court in

Mobil I, the government contended that this Court’s review

was needed because otherwise the new rule would apply

to other refiners with significant financial consequences:

“The agency estimates that refiners will claim a minimum

of $17 to $18 billion in additional [cost] credits for the

period April 30, 1974 through February 1, 1976, based

solely on the decision below.” *

Following denial of certiorari,» DOE continued its ef-

forts to impose the old rule. However, after remand to

the district court and upon subsequent appeal, TECA

reaffirmed the invalidity of the old rule, and permitted

Mobil “‘to reallocate its costs in accordance with the un-

amended V factor for the period between the 1974 amend-

ment and February 1976.” App. A at 3a (citing Mobil

17). On January 23, 1981, DOE repromulgated its previ-

ously invalidated amendment (the old rule), attempting to

cure the procedural and substantive defects, and seeking

to apply it retroactively to the April 1974 to February

1976 period.” However, TECA invalidated this retroac-

tive repromulgation of the old rule on the ground that the

old rule was unnecessary to fulfill the statutory design.

Mobil III, 678 F.2d at 1090.

B. The Proceedings Below

Following the promulgation of the amended V factor

regulation in April 1974, ARCO was required to file its

Refiner’s Monthly Cost Allocation Reports (“RMCARs”)

with DOE in accordance with the old rule. Shortly after

TECA determined that the old rule was unlawful in

Mobil I, ARCO sought to refile its RMCARs with DOE,

7 Mobil I, 610 F.2d at 804-05; Mobil 1], 647 F.2d at 145-47.

8 App. G at 80a.

® DOE v. Mobil Oil Corp., 446 U.S. 937 (1980).

1 Mandatory Petroleum Price Regulations, 46 Fed. Reg. 7776

(1981) (final rule).

adjusting its V factors to conform to the new rule. While

Mobil II and Mobil Ill were still in litigation, DOE de-

nied three different attempts by ARCO to refile its

RMCARs in accordance with the new rule. ARCO’s

fourth refiling request had not been formally resolved

when DOE and ARCO settled all of the refiner enforce-

ment issues in 1985."

In private overcharge litigation,“* ARCO sought to use

V factors computed pursuant to the new rule, rather than

the V factors ARCO had been required to use under the

old rule. After TECA held that ARCO could not auto-

matically reallocate its costs without having obtained

DOE’s permission to refile its RMCARs,"* ARCO applied

in 1989 to DOE for permission to refile its RMCARs in

accordance with the new rule. This refiling would have

provided ARCO the same remedy awarded Mobil—a “re-

allocat{ion of] its costs in accordance with the unamended

V factor for the period between February 1974 and Feb-

ruary 1976.” App. A at 3a (citing Mobil IJ). DOE’s

Office of Hearings and Appeals (“OHA”) affirmed the

sub silentio denial of ARCO’s application by DOE, on the

principal ground that the Mobil decisions did not con-

stitute “good cause” ™ for permitting ARCO to refile its

11 See Notice of Proposed Consent Order and Opportunity for

Public Comment, 50 Fed. Reg. 8366 (1985).

12 Van Vranken v. Atlantic Richfield Co., No. 79-0627 (N.D.

Cal.). A jurv awarded a verdict of $22.8 million in this case in

July 1992. A judgment, including substantial prejudgment interest,

is expected to be entered soon and appeals will follow. If this Court

reverses the decision below, then ARCO’s potential liability would

probably be either eliminated entirely or substantially reduced.

13 Van Vranken v. Atlantic Richfield Co., 890 F.2d 421 (Temp.

Emer. Ct. App. 1989) (interlocutory appeal), cert. denied, 494 U.S.

1005 (1990).

1410 C.F.R. § 212.126(d)(2) provides that a refiner seeking to

refile its RMCARs for periods more than one year prior to the

refiling is required to obtain written permission from DOE “for

good cause shown.”

RMCARs in accordance with the new rule.’ In a deci-

sion issued two months after Beam was decided, the dis-

trict court (which did not have the benefit of argument

on the applicability of Beam) affirmed OHA.** TECA

affirmed the district court.'’

TECA acknowledged the difficulty in applying Beam

since “Beam is a relatively recent decision, its scope has

not yet been judicially determined,” and “Beam was a

plurality decision in which the justices differed greatly

in their rationale for the judgment.” '* The court below

believed that not all of the rationales prohibiting selective

prospectivity in Beam applied here.

TECA held that Beam did not apply to federal court

decisions invalidating agency regulations because only

Justice Stevens joined Justice Souter’s plurality opinion

resting on the principles of equality and stare decisis.

The court below reasoned that because the concurring opin-

ions of Justices Blackmun and Scalia, joined by Justice

Marshall, were based on Article III of the Constitution,

their opinions in Beam were inapplicable to invalidations

of agency regulations. TECA concluded: “Thus, Beam

does not clearly preclude selective prospectivity in this

case.”’ }”

TECA further held that, even if Beam applied to ju-

dicial decisions finding federal regulations invalid, Beam

itself left the courts free in cases following announcement

of the new rule to consider the equities in the subsequent

case, and to apply a different remedy to litigants who

were not parties to the case in which the new rule was

S App. D at 52a, 61a.

16 App. C at 12a.

17 App. A at la, 10a.

18 App. A at 7a.

19 App. A at 8a.

adopted.” However, TECA did not cite any of the equi-

table considerations contemplated in Beam. Instead, the

court below held that the “equitable factor” that justified

treating ARCO differently from Mobil, and denying ARCO

any relief, was that ARCO’s original cost allocations were

not unlawful under either the valid or the invalid V fac-

tor regulations at issue in the Mobil litigation.

On September 10, 1992, ARCO filed a timely petition

for Rehearing and Suggestion for Rehearing En Bane,

pointing out the conflict between the panel’s decision and

the decisions by other courts, and arguing that the TECA

panel had erroneously applied Beam. The petition was

denied by order entered on October 6, 1992.”

REASONS FOR GRANTING THE WRIT

This petition presents the Court with the opportunity

to resolve a conflict among the Courts of Appeals as to

whetner the prohibition against selective prospectivity an-

nounced in Beam applies to federal court decisions invali-

dating agency regulations. This principle that prospec-

tivity cannot be applied selectively goes to the heart of

American jurisprudence. If courts can apply new rules

of law on a selective basis, then the fundamental policies

underlying Beam of equality, stare decisis, and the con-

stitutional requirements of Article III are all under-

mined.

The decision in the court below, which declined to

apply Beam to its own decisions invalidating a DOE reg-

ulation, conflicts with decisions of the Court of Appeals

for the Eighth Circuit and other federal courts. TECA

believed that the new rule announced in Mobil applied

only to Mobil and not to absent litigants. However, the

Eighth Circuit has held that Beam does apply to absent

litigants where an earlier federal court decision invali-

20 Such parties will be referred to as “absent litigants.”’

21 App. E at 62a.

dated an agency regulation and applied that decision

retroactively to the original party challenging the reg-

ulation. .

An early resolution of this conflict is imperative. Reg-

ulated firms frequently challenge the validity of regula-

tions by bringing “test” cases and the federal courts often

invalidate agency regulations and practices. Until this

Court provides authoritative guidance, prudent regulated

parties will be required to file their own “replicative law-

suits” * each time a regulation is challenged to ensure

that any decision invalidating the regulation will apply

to them; lower courts will not know whether a decision

invalidating a regulation will apply to absent litigants;

and after a regulation has been found invalid, federal

agencies will be unsure whether they should use scarce

resources to enforce that regulation against absent liti-

gants for past conduct.

In addition, this petition presents the question of

whether a court can evade Beam’s choice-of-law rule by

refusing to grant any remedy to a similarly situated

party on the ground that the regulated entity complied

to its detriment with a rule subsequently declared invalid.

TECA denied ARCO the benefit of Beam because of

TECA’s view that it was not unlawful for ARCO to

charge a lower price than it was allowed under the new

rule adopted in Mobil. If left standing, the decision be-

low would have far-reaching consequences. For example,

a taxpayer who pays a tax that is subsequently invali-

dated would be denied relief because it was “lawful” to

have paid the invalidated tax, i.e., to have paid more

in tax than the taxpayer validly owed. Thus, the decision

below would even preclude the award of a remedy in

Beam itself.

This Court should grant a writ of certiorari to resolve

the profound uncertainty over whether Beam applies to

22 Beam, 111 S. Ct. at 2447,

judicial decisions invalidating agency regulations. Alter-

natively, this Court should defer action on this petition,

; pending a decision in Harper v. Virginia Dep’t of Taxa-

tion, 410 S8.E.2d 629 (Va. 1991), cert. granted, 112 S. Ct.

1934 (1992), a case presenting similar issues regarding

the retroactive application of new rules.

I. TECA’S REFUSAL TO APPLY BEAM TO ITS DE-

CISION INVALIDATING AN AGENCY RULE CRE-

ATES A CONFLICT WITH ANOTHER COURT OF

APPEALS, AND WITH THIS COURT’S DECISION

IN BEAM

A. The Decision Below Conflicts With Decisions of the

Eighth Circuit and the Court of International Trade

TECA recognized that Beam “may extend beyond a

purely constitutional context. . . .”** However, TECA

declined to apply Beam’s prohibition on selective prospec-

tivity to its Mobil decisions invalidating a DOE regula-

tory amendment. App. A at 9a. While TECA noted that

Justice Souter’s plurality opinion “was based on the prin-

ciples of stare decisis, equality, and the rule of law gen-

erally,” App. A at 7a, it focused on the separate opinions

of Justices Blackmun and Scalia in which they had con-

curred in the result “on the grounds that Article III pro-

hibited prospectivity for the Court’s new rules of deci-

sion.” 7d. (citation omitted). Because Article III consid-

erations are inapplicable to agency decisions,** the court

below reasoned that “Beam does not clearly preclude se-

lective prospectivity in this case.” Jd.*

23 App. A at 7a.

4 TECA cited- District Lodge 64 NLRB, 949 F.2d 441, 447

(D.C. Cir. 1991) (whether Beam should apply to decisions of a

federal agency is unclear

25In the Petition for Rehearing * RCO suggested that whether

Beam applies to an “agency decision,”’ in the sense that an agency

must apply the Beam choice-of-law principle when the agency an-

nounces a new rule or interpretation, is not relevant to the instant

TECA’s decision conflicts with the decisions of the

Court of Appeals for the Eighth Circuit and of the Court

of International Trade. Those decisions have applied

Beam’s prohibition on selective prospectivity where there

were prior appellate court decisions that, like the TECA

decisions in Mobil, invalidated or set aside agency regula-

tions or methodologies.

In United States v. Goodner Brothers Aircraft, Inc.,*°

the Eighth Circuit applied Beam to hold that, because an

earlier D.C. Circuit decision had invalidated an EPA rule

on procedural grounds and had implicitly applied the in-

validation retroactively to the parties in that decision, the

invalidation of the EPA rule had to be applied to other

regulated parties as well.** By contrast, the court below

refused to apply Beam even though its own prior deci-

sions invalidated the agency’s V factor rule.**

case. The rule ARCO is seeking to have applied under Beam is a

rule of law announced by TECA in the Mobil trilogy, “that the 1974

amendment to the regulations was invalid.”” App. A at 9a. Thus,

the new rule in Mobil was decided by an Article III federal appellate

court, not an agency.

-6 966 F.2d 380, 385 (8th Cir. 1991), petition for cert. filed, 61

U.S.L.W. 3314 (U.S. Oct. 27, 1992) (92-607) (petition filed on other

grounds).

27 If, under Goodner, Beam should be applied where an agency rule

is invalidated only on procedural grounds, it should a fortiori be

applied where, as in Mobil, the agency’s rule was invalidated by

TECA because of substantive as well as procedural infirmities.

*8 On October 29, 1992, President Bush signed S. 1569, which

phases out TECA and consolidates appeals that had formerly gone

to TECA with the Court of Appeals for the Federal Circuit. The

TECA precedents will be binding in the Federal Circuit. See South

Corp. & Seal Fleet, Inc. v. United States, 690 F.2d 1368, 1369 (Fed.

Cir. 1982) (en banc) (“holdings of predecessor courts . . . shall be

binding as precedent in this court’’). See also Presidential Signing

Statement re S. 1569 (October 29, 1992) (President “hope[s] and

expect[s] that the Federal Circuit will adopt TECA precedent,

just as the Federal Circuit earlier adopted Court of Claims prece-

dent when its appellate jurisdiction was transferred to the Federal

Cireuit.”) (App. H at 8la). Therefore, this case still presents a

Since this issue will arise whenever a federal agency’s

regulation or methodology is challenged in a federal court,

it is not surprising that other cases raising this issue are

wending their way through the federal judicial system.

For example, in Ceramica Regiomontana, S.A. v. United

States,’ the Court of International Trade was confronted

with a Department of Commerce methodology for calcu-

lating country-wide countervailing duty rates which the

Court of Appeals for the federal Circuit had previously

set aside. On the basis of Beam, the Court of Interna-

tional Trade held that because the invalidation of the

agency methodology in the earlier Federal Circuit deci-

sion “was applicable to the parties therein on remand,

Beam requires that it be applied to this case.” *° This

holding—that Beam requires the previous invalidation of

the agency methodology to be applied to absent litigants—

also conflicts squarely with TECA’s decision.*'

B. The Court’s Prompt Resolution of This Conflict Is

Imperative

The Court should grant this petition to resolve this con-

flict as quickly as possible because continued uncertainty

will lead to confusion and wasted resources. Until the

Court provides authoritative guidance, each time a fed-

eral regulation is challenged regulated parties must file

“replicative suits”; and each time a federal court finds a

conflict among the Courts of Appeals that this Court should resolve

for the reasons discussed in the next section.

29 App. F at 68a, amended on other grounds, No. #92-76, 1992

Ct. Intl. Trade LEXIS 71 (Ct. Int’! Trade May 19, 1992).

30 App. F at 76a.

31 App. F at 76a. -See also Barr v. McGraw-Hill, 770 F. Supp.

855, 861 (S.D.N.Y. 1991) (“Nothing in Justice Souter’s opinion,

or the concurring opinions of Justices Blackmun and Scalia, indi-

cates that the Court’s analysis in Jim Beam is irtended to be limited

to newly announced constitutional rules, and not applicable to newly

announced interpretations of statutes or regulations ...”) (emphasis

added).

federal agency regulation invalid the effect of that deci-

sion will be in doubt. Will the decision invalidating a

federal regulation apply to absent litigants, as in the

Eighth Circuit? Or will the governing standard be

TECA’s determination that a decision invalidating a fed-

eral regulation does not apply to absent litigants?

While this Court sometimes declines to act despite a

conflict among the Courts of Appeals and resulting un-

certainty, the uncertainty involved here is pervasive,

touching nearly all regulated entities, federal courts and

federal agencies. Every year, the federal agencies prom-

ulgate thousands of new regulations. In 1990 alone, fed-

eral agencies enacted 4,765 regulations.** By their very

nature, most of these federal regulations have nationwide

applicability, controlling the economic relations, health

and safety of almost all corporations and individuals. In

due course, many of these regulations are subjected to

judicial challenge and some are found to be invalid. The

uncertainty arising from the decision below and the split

among Courts of Appeals may cause federal courts, fed-

eral agencies and nearly everyone covered by federal reg-

ulations to waste resources because they do not know

whether new rules finding agency regulations invalid will

apply to absent litigants. This uncertainty will create

precisely the problems that the prohibition on selective

prospectivity was intended to avoid.

Perhaps the greatest effect of the uncertainty precipi-

tated by the split among the Courts of Appeals is on regu-

lated parties. Previously, regulated parties have been

content to observe a “test” case challenging a federal

agency regulation from the sidelines. However, the im-

pact of the split among the Courts of Appeals is that reg-

ulated parties do not know whether a challenge by

another party to a federal regulation, if successful, would

apply to them. Therefore, prudent regulated parties are

32 OMB, Regulatory Program of the United States 721 (1992).

forced to file the very “replicative suits” * that Beam was

intended to avoid whenever a federal regulation is chal-

lenged by another party.

The tremendous uncertainty caused by the split in the

Courts of Appeals will affect the lower courts in three

ways. First, already overburdened federal courts will

suffer an increase in the filing of “replicative suits,”

which will multiply the number of lawsuits each time a

challenge to federal regulation is raised in court. Second,

courts will obviously be uncertain whether a prior judi-

cial decision invalidating a federal regulation must be

given retroactive effect to absent but similarly situated

parties. Third, this split among the Courts of Appeals

engenders significant uncertainty for a court considering

an initial challenge to federal regulations. The court will

not know whether a decision invalidating a regulation

retroactively for the litigant before it would apply to

similarly situated parties who are absent. A critical bene-

fit of the prohibition on selective prospectivity is that it

requires courts to weigh their departure from stare de-

cisis against “the disruption that [its] new decisional

rules cause.” Beam, 111 S. Ct. at 2450 (Blackmun, J.,

concurring). This uncertainty will mean that the salu-

tary effect of the prohibition on selective prospectivity

that Beam was intended to foster would be lost.

This split in authority also leaves federal] agencies in

a quandary. Under the Fighth Circuit’s decision in Good-

ner, an agency cannot apply an invalidated regulation to

the conduct of absent litigants during the time the regu-

lation was outstanding. However, under the decision be-

low, an agency is permitted to continue its efforts to en-

force the old regulation against absent litigants for past

conduct. As a result of this uncertainty, federal agencies

33']) |istinguishing between those with cases pending and those

without would only serve to encourage the filing of replicative suits

when this or any other appellate court created the possibility of a

new rule by taking a case for review.” Beam, 111 S. Ct. at 2447.

will be uncertain whether to allocate their scarce enforce-

ment resources to enforcing the old regulation against

absent litigants for past conduct or whether they are re-

quired to apply the new rule instead.

Until this Court resolves this uncertainty, absent liti-

gants will file “replicative suits,” lower courts will an-

nounce new rules without considering their application

to third parties and federal agencies will enforce invalid

regulations. Since the issue of whether a court decision

finding an agency regulation invalid applies to absent liti-

gants is squarely presented here, nothing would be gained

by delaying the resolution of this issue of national im-

portance.

II. COURTS SHOULD NOT BE PERMITTED TO

EVADE THE PROHIBITION OF SELECTIVE PRO-

SPECTIVITY BY REFUSING TO AWARD ANY

REMEDY TO A PARTY THAT COMPLIED WITH

THE OLD RULE

The decision below would eviscerate this Court’s prohi-

bition of selective prospectivity. Beam contemplated that,

when a court applies a new rule of law retroactively, cer-

tain equitable considerations could be taken into account

in fashioning the remedy. Beam, 111 S. Ct. at 2448.

However, Beam also contemplated that, absent a state law

bar to recovery, some remedy would be provided to any

litigant to whom the principles of Beam applied.

TECA held that even if Beam were applicable, ARCO

was not entitled to any remedy because its original cost

allocations were “legal and proper” under both the old

rule and the new rule. App. A at 8a-9a. Accordingly, the

court below held that even if the new rule applied to

ARCO as well, ARCO was not entitled to any remedy.

TECA’s decision on the “remedial” issue is a thinly

veiled attempt to avoid this Court’s prohibition on selec-

tive prospectivity, and to insulate the decision from fur-

ther appellate review by this Court. TECA’s decision ef-

fectively evades Beam’s prohibition on selective prospec-

tivity by denying ARCO any remedy. In addition, the

consideration cited by the court to deny any remedy to

ARCO and which it characterized as ‘“equitable’’—that

ARCO’s original RMCAR filings were “legal and proper”

under both the old rule and the new rule—is not the type

of “equitable consideration” contemplated by Beam. This

“equitable consideration” could be used to deny a remedy

to most absent litigants when a new rule is adopted, in-

cluding Beam itself.

A. The Decision Below Evades Beam by Refusing To

Provide Any Remedy

If a court can deny any remedy to an absent but sim-

ilarly situated litigant on the basis of equitable consid-

erations, it can evade the Beam holding that “precludes

retroactive application of a new rule to some litigants

when it is not applied to others... .” Beam, 111 S. Ct.

at 2447 (citations omitted). Thus, a court could readily

undermine the fundamental principles promoted by the

prohibition on selective prospectivity: equality, stare de-

cisis, and the limitations on judicial power in Article

52."

Beam clearly contemplated that some form of remedy

would be provided to a litigant, such as ARCO, to whom

Beam applies. While Justice Souter refused to speculate

about “the remedy that may be appropriate in this case,”

Beam, 111 8. Ct. at 2448, he expressed no doubts about

whether a remedy may be appropriate. He also recog-

nized that reliance interests may be entitled to considera-

4 See Beam, 111 S. Ct. at 2446-48 (principles of equality and

stare decisis prohibit selective prospectivity), 2488 (White, J., con-

curring) (principle of stare decisis prohibits selective prospectivity ),

2449-50 (Blackmun, J., concurring) (principles of equality, stare

decisis and limitations on judicial power in Article III prohibit

selective prospectivity), 2450-51 (Scalia, J., concurring) (principle

of limitation on judicial power in Article III prohibits selective

prospectivity ).

tion in determining “the nature of the remedy that must

be provided... .” 111 8S. Ct. at 2448 (emphasis added).

Similarly, Justice Harlan’s concurring opinion in Estate

of Donnelly, to which Beam cites in pertinent part, states

that equitable considerations should be taken into account

in determining “what relief is appropriate in any given

case,” not whether any relief is appropriate.”

The court below effectively applied the old pre-Mobil

rule to ARCO by denying it any remedy. Beam’s con-

tinued vitality depends on a determination that federal

courts cannot refuse to apply Beam’s choice-of-law rule

by denying any remedy to a litigant entitled to benefit

from the new rule.

B. The Basis On Which TECA Denied ARCO Any Re-

lief Was Inappropriate Under Beam and Establishes

a Principle That Would Nullify Beam

Even if equitable considerations might warrant denial

of any remedy to a litigant entitled to benefit from a new

rule of law, the factor chosen by the court below to deny

any remedy to ARCO was not the kind of equitable con-

sideration permitted by Beam. Justice Souter’s opinion

in Beam, and cases cited therein, identified several equi-

table considerations that a court might properly take into

account in fashioning an appropriate remedy for a liti-

gant to whom the Beam choice-of-law rule applied. These

equitable considerations included:

* state law provisions or considerations that might

affect the fashioning of a proper remedy by a fed-

eral court; *°

35 [/nited States v. Estate of Donnelly, 397 U.S. 286, 296 (1970)

(Harlan J., concurring) (emphasis added).

36 Citing to Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 277

(1984) (the decision held retroactively applicable to third parties

in Beam), Mr. Justice Souter observed that “federal ‘issues of

remedy ... may well be intertwined with, or their consideration

obviated by, issues of state law.’”’ Beam, 111 S. Ct. at 2448.

* the reliance interests of affected parties on the old

rule of law; ** and

* whether the litigant had “passed on” to customers

the economic incidence of a tax under a statute

subsequently declared invalid so that a refund

might be inappropriate.**

None of these equitable considerations is present here,

and none was cited by TECA. The consideration invoked

by TECA—that ARCO’s conduct was legal under both

the old and the new rules—is not even remotely related

to even the most expansive reading of any of the types

of equitable considerations contemplated in Beam.

The decision below would eliminate any remedy in most

cases where Beam was intended to apply, including Beam

itself. It is of course a truism that any time a regula-

tion or law specifies that a regulated party may charge

“no more” than a particular price, it is always “legal and

proper” under that regulation to charge less than the

maximum price—or indeed to charge nothing at all. In

this case, under the price control regulations it was not

unlawful for ARCO to charge a price lower than the

MLSP. In that narrow sense, ARCO’s original cost allo-

cations were permissible—they were ‘‘legal’—under both

the old and the new DOE rules. But this consideration is

completely beside the question of whether TECA’s inval-

idation of the amended V factor regulation in the Mobil

litigation required that court to provide ARCO some

remedy.

37 Beam, 111 S. Ct. at 2448 (citing to Mr. Justice Harlan’s con-

curring opinion in United States v. Estate of Donnelly, 397 U.S. at

296, and to Lemon v. Kurtzman, 411 U.S. 192, 203 (1973)) (ree-

ognizing that denial of reimbursement to schools which had _in-

curred significant expenses in reliance on a subsequently invalidated

state statute authorizing reimbursement would impose a substan-

tial burden on the schools).

38 These “pass-on’’ considerations were identified by the Supreme

Court in Bacchus itself, 468 U.S. at 276-77, when it remanded the

case to the state court for determination of the appropriate relief.

Indeed, the consideration that TECA relied on to deny

ARCO any relief would be equally applicable to Mobil

itself. It would have been legal for Mobil to charge a

lower price than it was entitled to charge under the new

rule announced in that case. Yet Mobil was permitted

to reallocate its costs in accordance with the new rule

while ARCO was not. The court below provided no basis

for distinguishing between ARCO and Mobil on equitable

grounds.

The critical consideration is that, in the absence of the

invalidated DOE regulation, ARCO would not have volun-

tarily allocated its costs to covered products as it did.

In Beam, it was likewise not “unlawful” for Beam to

have paid the invalidated liquor tax or, indeed, to have

volunteered to pay more in tax than the invalid law re-

quired. Thus, the decision below would preclude any

remedy in Beam itself.

Worse yet, the teaching of the decision below would

appear to be that if a regulation is being challenged, reg-

ulated entities other than the party bringing the challenge

who believed the regulation to be invalid would be better

off violating the regulation (so as to avoid the ground on

which TECA denied relief to ARCO) than complying with

it pending the outcome of the challenge. This case pre-

sents the Court with an opportunity to make it clear that

this Court’s prohibition on selective prospectivity cannot

be avoided by awarding no remedy, and that a regulated

entity does not have to file a replicative suit or flout a

regulation to benefit from a decision invalidating a reg-

ulation.

CONCLUSION

For these reasons a writ of certiorari should issue and

the decision below should be reversed.

Of Counsel:

RICHARD C, MORSE

ATLANTIC RICHFIELD COMPANY

1055 West Seventh Street

Los Angeles, CA

November 5, 1992

Respectfully submitted,

DAVID L. ROLL

(Counsel of Record)

SHELDON E. HOCHBERG

RICHARD K. WILLARD

ALFRED M. MAMLET

PANTELIS MICHALOPOULOS

STEPTOE & JOHNSON

1330 Connecticut Ave., N.W.

Washington, D.C. 20036

(202) 429-3000

Attorneys for Petitioner

“" eer ee oe a a eee

APPENDICES

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APPENDIX A

TEMPORARY EMERGENCY COURT OF APPEALS

OF THE UNITED STATES

No. DC-117

ATLANTIC RICHFIELD COMPANY,

Plaintiff-A ppellant,

U.S. DEPARTMENT OF ENERGY, et ai.,

Defendant-A ppellee,

and

DON VAN VRANKEN on behalf of himself

] +

| . “ “7 sles ? . ?

others simliarly situated,

Interve nors-A ppelle es.

and al

Appeal from the United States District Court

for the District of Columbia

(District Court No. 91-465)

(Argued: April 1, 1992 Decided: August 27, 1992) —

SHELDON E. HOoOCHBERG, David L. Roll and Pantelis

Michalopoulos, Steptoe & Johnson, Washington, D.C. and

Richard C. Morris, Atlantic Richfield Company, Los An-

geles, California, were on the brief for Plaintiff-Appellant.

RICHARD F. AHERN, Don W. Crockett and Thomas Sacco,

Judicial Litigation Division, Economic Regulatory Ad-

ministration, U.S. Department of Energy, Washington,

D.C., were on the brief for Defendants-Appellees; TRACY

R. KIRKHAM, Hennigan & Mercer, with whom Josef D.

Cooper, Law Offices of Josef D. Cooper, San Francisco,

California, and William C. Barnard, Sommers & Barnard,

Indianapolis, Indiana, were on the brief for Intervenor-

Defendants-Appellees.

Before GRANT, PECK, and WEIGEL, Judges.

PECK, Judge:

This appeal arose from the denial by the Office of Hear-

ings and Appeals (OHA? of ARCO’s application to refile

Refiner’s Monthly Cost Allocation Reports (RMCARs).

The district court affirmed OHA’s denial. For the reasons

stated below, we affirm the district court.

FACTS

During the period of petroleum price controls, the ap-

plicable regulations permitted oil refiners to incorporate

increased crude oil costs into the prices of their refined

products covered by the regulations. The formula for

allocating costs to price increases for the covered goods

was referred to as the V factor. The V factor entailed

taking the total volume of a given covered product sold

and dividing by the total volume of all covered products

sold. The resulting fraction was then used to determine

the portion of increased crude oil costs that could be at-

tributed to the covered product. Oil refiners could either

increase the price of the covered product or bank the

increased costs to offset overcharges.

When the Economic Stabilization Act (ESA) expired

on April 30, 1974, the Emergency Petroleum Allocation

Act (EPAA) succeeded it as the vehicle for administer-

ing the price controls. Under the EPAA and the accom-

panying Department of Energy (DOE) regulations, cer-

tain products which had been regulated under the ESA

were no longer subject to price controls. Under the new

regulations, the increased cost of crude oil used to pro-

duce the newly exempt products was included in the total

increased cost of producing covered goods, but the volume

of the exempt goods sold was not included in the denomi-

nator of the V factor. Therefore, the oil companies could

pass on the increased crude oil costs to produce newly

exempt products in the price of both the newly exempt

goods and the covered goods. In an eleventh hour at-

tempt to prevent this result, DOE passed an emergency

amendment to the regulations on April 30, 1974 which

included the volume of newly exempt goods in the de-

nominator of the V factor and thus prevented refiners

from allocating increased crude oil costs from exempt

goods to the price of the covered products. DOE promul-

gated the amendment without an opportunity for notice

or comment.

As a refiner, ARCO was required to file Refiner’s

Monthly Cost Allocation Reports (RMCARs). After the

promulgation of the emergency amendment, ARCO con-

sistently filed its RMCARs using the amended V factor.

However, Mobil Oil challenged the amendment in court.

In Mobil Oil Corp. v. Dept of Energy, 610 F.2d 796

(Temp. Emer. Ct. App. 1979), cert. denied, 446 U.S.

937 (1980) (Mobil I), this court affirmed the district

court’s determination that the amendment was substan-

tively and procedurally invalid because DOE had failed

to consider the relevant factors set forth in §4(b) of the

EPAA, 15 U.S.C. § 753(b) (1) and failed to provide

notice to interested parties and an opportunity for com-

ment. After remand and a second appeal, this court ruled

that Mobil was permitted to reallocate its costs in ac-

cordance with the unamended V factor for the period

between the 1974 amendment and February 1976. Mobil

Oil Corp. v. Dep’t of Energy, 647 F.2d 142 (Temp. Emer.

Ct. App. 1981) (Mobil II). In 1981, DOE attempted to

repromulgate and retroactively apply the 1974 amend-

ment. However, in Mobil v. Dep’t of Energy, 678 F.2d

1083, 1090 (Temp. Emer. Ct. App. 1982) (Mobil III),

this court invalidated the regulation.

saan een

In March 1979, DOE promulgated a refiling regula-

tion which provided that after May 31, 1979, any re-

finer wishing to refile a revised RMCAR for a_ period

more than one year prior to the refiling would have to

obtain written permission from DOE “for good cause

shown.” 10 C.F.R. § 212.126(d). The regulation also

stated:

DOE will not make a finding of good cause rou-

tinely. Where it appears that such a finding may

adversely affect the interest of the consuming public,

a firm must demonstrate in its application, at a

minimum, that the claimed errors or omissions in

the report or reports which the firm seeks to replace

or modify did not result from a failure to exercise

due care or diligence.

In March and April 1980 and August 1981, ARCO re-

quested permission from DOE to refile its RMCARs using

the unamended V factor. In each case, DOE rejected

these refilings as premature pending final resolution of

the Mobil litigation. In March 1982, ARCO again re-

quested permission to refile. DOE did not respond to this

request and ARCO did not pursue the matter. Shortly

thereafter, ARCO and DOE entered into settlement ne-

gotiations regarding ARCO’s compliance with the price

control regulations. The negotiations resulted in a settle-

ment and consent order in which the unamended V factor

was used.

Meanwhile, in 1979, Don Van Vranken and other

ARCO wholesale customers, who are intervenors in this

case, brought suit in federal court alleging that ARCO

had overcharged resellers for covered goods. Van Vranken

v. Atlantic Richfield Corp., 699 F. Supp. 1420 (N.D. Cal.

1988), affd, 890 F.2d 421 (Temp. Emer. Ct. App. 1989).

In considering whether ARCO had overcharged its cus-

tomers, the district court had to review ARCO’s calcula-

tion of its banks of unrecovered costs which would be

used to offset overcharges. Thus, the effect of the invali-

dation of the 1974 amendment became important with

regard to caleulating ARCO’s banked costs. In a sum-

mary judgment motion, ARCO argued that the Mobil

cases allowed it to retroactively reallocate its costs. The

practical effect of such a reallocation would have been

that ARCO could increase its banked costs and reduce

its overcharge liability. The district court rejected

ARCO’s argument holding that the Mobil decisions did

not automatically allow ARCO to reallocate its costs. /d.

at 1424.

On appeal, this court held that the Mobil cases neither

required nor permitted ARCO to retroactively reallocate

its costs. Van Vranken v. Atlantic Richfield Corp., 890

F.2d 421 (Temp. Emer. Ct. App. 1989). The court rea-

soned that ARCO was not required to reallocate costs

because it was not unlawful for ARCO to have priced its

goods below the fixed maximum price by using the

amended V factor. The court also stated that ARCO was

not permitted to reallocate its costs because it had failed

to obtain permission from DOE as required by the regu-

lations. Furthermore, the court ruled that ARCO had

waived it right to relief by failing to challenge the

amendment in a timely manner.

In December 1989, ARCO applied for permission to

refile its RMCARs claiming that this court’s decision in

Van Vranken necessitated the action. DOE did not re-

spond to the application. ARCO treated DOE’s silence

as a denial and appealed to the OHA.

In February 1991, OHA upheld DOE’s sub silentio

denial. OHA concluded that the Mobil decisions did not

constitute “good cause” under the regulation for ARCO’s

refilings. OHA relied on the Van Vranken decision and

its holdings that the Mobil decisions did not require or

permit ARCO to refile its costs. As an alternative ground

for denying the application, OHA determined that ARCO

had failed to satisfy the “due care and diligence” pro-

vision of the refiling regulation. ARCO appealed OHA’s

decision to the district court. In March 1991, the district

court affirmed OHA’s decision to deny ARCO’s applica-

tion on the grounds that there was no good cause for the

refiling and the alternative grounds. This appeal followed.

STANDARD OF REVIEW

Judicial review of OHA’s decision is limited by § 211

(d) (1) of the ESA which provides:

[N]o order of [DOE] shall be enjoined or set aside,

in whole or in part, unless a final judgment deter-

mines that such order is in excess of the agency’s

authority, or is based upon findings which are not

supported by substantial evidence.

12 U.S.C. § 1904, note, incorporated by reference in the

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

$ 754(a)(1). Furthermore, this court has stated that

because Congress authorized administrative contro! in

DOE, “the judicial role requires approval of the DOE’s

decision if there is a rational basis for it.” Thriftway

Co. v. Dep't of Energy, 867 F.2d 1577, 1580 (Temp.

Emer. Ct. App. 1989) (citing City of Long Beach v.

Dep't of Energy, 754 F.2d 379, 385 (Temp. Emer. Ct.

App. 1985)). Furthermore, DOE’s interpretation of its

regulations is entitled to great deference due to the

agency’s expertise and the difficulty of judicial adminis-

tration of complex programs dealing with the petroleum

industry. Jd. at 1580-81.

ANALYSIS

On appeal, ARCO’s primary argument is that the

Mobil decisions constitute “good cause’ for the purposes

of the refiling regulation. Although ARCO’s similar

argument that the Mobil cases required or permitted

ARCO to reallocate its costs was rejected by this court

in Van Vranken, supra, ARCO now argues that the

Supreme Court’s decision in James B. Beam Distilling

Co. v. Georgia, 111 S. Ct. 2439 (1991) (plurality) re-

quires this court to allow ARCO to retroactively allocate

V factor costs as Mobil did at the conclusion of the Mobil

litigation. We cannot agree.

Beam involved the validity of a Georgia law which

imposed an excise tax on imported liquor which was

double the tax imposed on alcohol made from products

grown in Georgia. In 1984, the Supreme Court held

similar Hawaii statute to be violative of the Commerce

Clause in Bacchus Imports, Ltd. v. Dias, 468 U.S. 263

(1984). The question presented in Beam was whether

the Bacchus decision should apply retroactively to the

claims in Beam which arose from facts antedating the

Bacchus decision. Justice Souter held that Bacchus should

be aplied retroactively stating ‘when the Court has ap-

plied a rule of law to the litigants in one case it must do

so with respect to all others not barred by procedural

requirements or res judicata.” Beam, 111 S. Ct. at 2448.

Since Beam is a relatively recent decision, its scope has

not yet been judicially determined. Whether Beam has

any application to agency adjudications is questionable.

We note that the holding involved the application of

new constitutional rule. While the Court’s remand in

light of Beam of Northwest Savings Bank, PaSA v.

Welch, 111 S. Ct. 2882 (1991), a ease concerning the

retroactive application of a statute of limitations, sug-

gests that Beam’s application may extend beyond a purely

constitutional context, there is no indication that regula-

tory matters are within its scope.

Furthermore, as noted in District Lodge 64 v. N.L.R.B.,

949 F.2d 441, 447 (D.C. Cir. 1991), Beam was a plur-

ality decision in which the justices differed greatly in

their rationale for the judgment. Justice Souter’s opinion

joined only by Justice Stevens, was based on the prin-

ciples of stave decisis, equality, and the rule of law gen-

erally. Beam, 11158. Ct. at 2444, 2446. However, Justices

Blackmun and Sealia in separate opinions, joined by

Justice Marshall, concurred in the judgment on the

grounds that Article III prohibited prospectivity for the

Court’s new rules of decision. /d. at 2449-51. While the

principles of equality and the rule of law would seem

applicable to agency decisions, Article III considerations

are inapplicable in this context. Thus, Beam does not

clearly preclude selective prospectivity in this case.

Finally, in his opinion concurring in the judgment,

Justice White articulated his belief that the scope of

Beam’s holding was not all-encompassing. He stated that

without overruling Chevron Oil Co. v. Huson, 404 U.S.

97 (1971) and other cases which hold that certain deci-

sions will be applied prospectively only, one could not

“sensibly insist on automatic retroactivity for any and all

judicial decisions in the federal system.” Beam, 111

S. Ct. at 2449.

Moreover, even if Beam is applicable to this case, its

application does not entitle ARCO to the desired remedy

of reallocating its costs for the applicable period. Justice

Souter made it clear that the grounds for Beam were

narrow and confined entirely to an issue of choice of law,

t.e., Whether to apply the old rule or the new rule. Jd.

at 2448. After a rule is found to apply retroactively, the

Separate issue arises of “whether the party prevailing

under a new rule should obtain the same relief that

would have been awarded if the rule had been an old

one.” /d. at 2443. While litigants are not to be distin-

guished for choice-of-law purposes on the equities of their

claims, Justice Souter declared that “nothing we say here

precludes consideration of individual equities when de-

ciding remedial issues in particular cases.” Jd. at 2447-

48. Although the liquor tax was declared unconstitutional

in Bacchus, and that ruling was retroactively applied

in Beam, the prevailing parties in each case were not

automatically awarded the desired remedy of tax refunds.

Id. at 2445, 2448. The cases were remanded for considera-

tion of the remedial issues.

In this case the “new rule” was that the 1974 amend-

ment to the regulations was invalid. As noted by this

court in Van Vranken and the district court in the in-

stant case, ARCO’s cost allocations as submitted were

legal and proper under the invalid regulation or the regu-

lation as it existed prior to the amendment. Therefore,

there is no requirement that the cost allocations be

changed. The question then becomes whether ARCO has

established sufficient good cause for DOE to grant special

permission for the refiling. This determination is within

the discretion of DOE. 10 C.F.R. § 212.126(d). OHA

upheld DOE’s denial based on this court’s express hold-

ing in Van Vranken, supra, that the Mobil decisions do

not require or permit ARCO to reallocate its costs. In its

decision, OHA noted that the effect of the reallocation of

costs would be to reduce ARCO’s potential liability in the

Van Vrarken case. DOE Administrative Record at 551,

553. In its brief and at oral argument, ARCO likewise

admitted that the only impact of the refilings would be

in determining its potential liability in Van Vranken.

Counsel for the DOE and the Van Vranken intervenor:

argued that reallocation at this time would effectively

allow ARCO to change the prices it charged its customers

in the 1970s. Thus, we echo the Van Vranken holdings

in coneluding that even if the “new rule’ in the Mobil

cases invalidating the 1974 amended regulation is ap-

plied to ARCO, its original cost allocations are valid and

legai and ARCO is not required or permitted to change

them at this late date. The equities of this particular

case especially militate against affording ARCO any spe-

cial remedy. This is consistent with other cases involv-

ing private actions under the price regulations which

“uniformly hold that where the original cost allocation

was permissible but not required, retroactive recalcula-

tion should not be allowed to offset overcharges which

had arisen as a result of unrelated regulatory violations.”

Chevron U.S.A., Inc. v. Dep't of Energy, 944 F.2d 914,

917 (Temp. Emer. Ct. App. 1991) (citations omitted).

10a

Thus, the OHA and district court correctly concluded

that no good cause exists to allow ARCO’s belated

refiling.

ARCO also argued that DOE’s lack of response to its

1982 refiling and DOK’s acquiescence in the use of the

unamended V factor in settlement negotiations with re-

finers misled ARCO into believing that there was no

need to pursue the refiling request and therefore DOE

is estopped from denying ARCO the use of the unamended

V factor now. This argument is disingenuous. In an

earlier case in which ARCO attempted to reallocate costs,

Eastern Airlines v, Atlantic Richfield Co., 712 F.2d 1402,

1408 n. 14 (Temp. Emer. Ct. App.), cert. denied, 464

U.S. 915 (1983), this court specifically noted that real-

location required written permission from DOE and cited

the refiling regulation at issue here. Thus, an experienced

and sophisticated litigant like ARCO cannot credibly

claim that it was misled by DOE’s actions or that it was

unaware that written permission was necessary.

ARCO also challenges OHA’s alternative grounds for

rejecting the application. Since we agree with the dis-

trict court’s determination that OHA had a rational basis

for denying ARCO’s application for lack of good cause,

we need not discuss these additional challenges. Accord-

ingly, the judgment of the district court is affirmed.

lla

APPENDIX B

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

Civil Action No. 91-465

Judge Flannery

ATLANTIC RICHFIELD COMPANY,

Plaintiff,

UNITED STATES DEPARTMENT OF ENERGY, et al.,

Defendants,

and

DoN VAN VRANKEN on behalf of himself and all others

similarly situated, and SINCLAIR OIL CORPORATION,

Intervencr-Defendants.

ORDER

This matter comes before the Court upon plaintiff’s

motion for summary judgment and upon the cross-motions

of defendanis and intervenor-defendants for summary

judgment. For the reasons stated in the accompanying

Memorandum Opinion, it is by the Court this 20th day

of August 1991

ORDERED that plaintiff’s motion for summary judg-

ment be, and it hereby is, denied; and it is further

ORDERED that defendants’ and intervenor-defendants’

cross-motions for summary judgment be, and they hereby

are, granted.

s/ Thomas A. Flannery

United States District Judge

12a

APPENDIX C

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

Civil Action No. 91-465

Judge Flannery

ATLANTIC RICHFIELD COMPANY,

Plaintiff,

Vv.

UNITED STATES DEPARTMENT OF ENERGY, et al.,

Defendants,

and

DON VAN VRANKEN on behalf of himself and all others

similarly situated, and SINCLAIR OIL CORPORATION,

Intervenor-Defendants.

MEMORANDUM OPINION

[Filed Aug. 20, 1991]

Plaintiff Atlantic Richfield Company (“ARCO”) brings

this action to set aside a ruling by the Office of Hearings

and Appeals (“OHA”) of the United States Department

of Energy (“DOE”). ARCO’s summary judgment motion

is opposed by the government defendants and by inter-

venor-defendants the Van Vranken class and Sinclair Oil

Corporation. As discussed below, the Court will uphold

the decision of the OHA and deny ARCO’s motion for

summary judgment.

13a

I. Background

A. The Regulatory Background

Between 1973 and 1981, the federal government regu-

lated the prices of petroleum and petroleum products.

Under the regulatory system, oil refiners could charge

no more than a fixed maximum price for products subject

‘to the regulations (“covered goods.”) The regulations

allowed, however, for refiners to incorporate increased

production costs into the prices of their covered goods.

The formula for allocating costs to price increases for

each type of covered good was known as the “V factor,”

and it entailed dividing the total volume of a given

covered good sold by the total volume of all covered goods

sold. The resulting fraction was used to determine the

amount of increased costs that could be attributed to

each type of covered good. Refiners had the option of

either increasing prices of covered goods or banking the

increased costs to offset overcharges. '

Petroleum price controls were originally administered

pursuant to the Economic Stabilization Act of 1970

(“ESA”), 12 U.S.C. § 1904 et seg. On April 30, 1974,

however, the ESA lapsed and was replaced by the Emer-

gency Petroleum Alloce'i¢1 Act of 1973 (“EPAA”), 15

U.S.C. § 751 et seg. Vee HPAA, and the accompanying

DOE regulations, exempted certain formerly covered

products from the riandatory price controls. The new

regulations, however, failed to similarly subtract the

increased production costs of the newly exempt goods from

the denominator of the V factor. As a result, refiners

could pass on increased costs of producing exempt goods

in the prices charged for non-exempt, covered goods, as

well as in the prices of the unregulated exempt goods.

1 Much of the background to this litigation is derived from Van

Vranken v. Atlantic Richfield Co., 890 F.2d 421 (Temp. Emer. Ct.

App. 1989) and 699 F. Supp. 1420 (N.D. Cal. 1988).

l4a

Also on April 30, 1974, the DOE, in an attempt to

remedy this situation, passed without notice or the oppor-

tunity for comment an emergency regulation (“the 1974

amendment”) intended to prevent refiners from incor-

porating the costs of producing exempt goods into prices

charged for covered goods. The 1974 amendment re-

defined the V factor to add the volume of exempt goods

to the denominator of the V factor.*

Throughout the regulatory scheme, it was necessary for

refiners to obtain DOE permission to allocate increased

costs among the prices charged for covered goods. Per-

mission was sought by filing with DOE a Refiner’s

Monthly Cost Allocation Report (“RMCAR” or “Re

port.) Following promulgation of the 1974 amendment,

ARCO consistently filed RMCARs utilizing the amended

V factor. In contrast, two other refiners challenged ap-

plication of the 1974 amendment. One refiner, Getty,

applied for and was granted administrative relief. An-

other refiner, Mobil, chose to challenge the validity of the

1974 amendment in federal court. In Mobil Oil Corp. v.

DOE, 610 F.2d 796 (Temp. Emer. Ct. App. 1979), cert.

denied, 446 U.S. 937 (1980) (Mobil 1), the Temporary

Emergency Court of Appeals (“TECA”) found the 1974

amendment to be invalid based upon the lack of notice and

opportunity for comment. Later, in Mobil Oil Corp. v.

DOE, 647 F.2d 142 (Temp. Emer. Ct. App. 1981) (Mobil

IJ), TECA permitted Mobil to reallocate its costs in

accordance with the unamended V factor. DOE attempted

to revive and retroactively implement the 1974 amend-

ment in 1981, but this regulation was also struck down

by TECA. Mobil Oil Corp. v. DOE, 678 F.2d 1083, 1090

(Temp. Emer. Ct. App. 1982) (Mobil II/).

2 The V factor as redefined by the 1974 amendment will herein-

after be referred to as the “amended V factor.” The original V

factor prior to the 1974 amendment will be referred to as the

“unamended V factor.”

;

| a

On three separate occasions in 1980 and 1981, ARCO

requested permission from DOE to refile its previous

RMCARS using the unamended V factor.* On all three

occasions ARCO’s requests were denied.* ARCO submit-

ted a fourth request to resubmit its previous RMCARS

on March 24, 1982. DOE never responded to this request.

ARCO did not further pursue this latest request.

l5a

B. The Van Vranken Litigation and Subsequent Events

In 1879, Don Van Vranken, on behalf of a nationwide

class of petroleum product resellers, brought an action

against ARCO in the Northern District of California al-

leging that ARCO had overcharged resellers for covered

goods purchased between 1974 and 1982.° On April 4,

1988, ARCO moved for summary judgment on the ground

that the Mobil decisions allowed it to retroactively re-

allocate its costs without reference to the invalidated

3 DOE regulations, discussed infra, allow refiners to request leave

to refile previously submitted RMCARs. See 10 C.F.R. § 212.126(d).

* ARCO maintains that its 1980 and 1981 requests for refiling

were rejected because DOE considered them to be premature in

light of the ongoing Mobil litigation. The Van Vranken class dis-

putes this characterization of DOE’s actions. An examination of the

administrative record in this matter reveals that DOE took the

position in all three denials that refiners were required to comply

with the amended V factor pending ultimate resolution of the

Mobil litigation. Administrative Record (“R.”) at 98-112. In the

interim, the regulations implementing the amended V factor were

considered by DOE to be “valid and enforceable.” R. at 101, 105;

see R. at 112.

5 Sinclair Oil Cerporation, one of the original members of the

Van Vranken class, opted out of the class action and brought a

separate complaint against ARCO, which was later consolidated

with the Van Vranken litigation.

Both the Van Vranken class and Sinclair Oil have joined as

intervenor-defendants in the present action. At oral argument,

counsel for Sinclair represented that Sinclair had reached a settle-

ment with ARCO, and argument on behalf on the intervenor-

defendants was presented by counsel for the Van Vranken class.

l6a

amended V factor. Van Vranken v. Atlantic Richfield

Co., 699 F. Supp. 1420, 1421-22 (N.D. Cal. 1988). The

practical result of such reallocation would have been to

allow ARCO to retroactively increase its costs and thereby

increase its banks to offset any overcharge liability. Jd.

The District Court rejected ARCO’s contentions and held

that the Mobil trilogy did not provide authorization for

non-party refiners to automatically reallocate past pro-

duction costs. Jd. at 1424.

The District Court decision was upheld by TECA in

Van Vranken v. Atlantic Richfield Co., 890 F.2d 421

(Temp. Emer. Ct. App. 1989), cert. denied, 110 S. Ct.

1298 (1990). TECA rejected ARCO’s arguments that

the Mobil decisions provided authority for retroactive re-

allocation of its costs. First, TECA held that the Mobil

decisions did not require reallocation. Jd. at 423. TECA

noted that “neither Mobil J nor Mobil II required Mobil

to retroactively reallocate costs,” and that “nothing in the

regulations required that costs for exempt goods be at-

allowable price for covered goods.” Jd. Retroactive re-

allocation would be required, TECA held, if ARCO’s

previous cost allocations had been unlawful. Jd. But be-

cause it was not unlawful for ARCO to have priced its

covered goods below the fixed maximum price, as it had

done by utilizing the amended V factor formula, ARCO

was not required to retroactively reallocate its costs. Id.

Second, TECA rejected ARCO’s argument that the

Mobil decisions permitted it to reallocate its costs. TECA

found that the invalidation of the 1974 amendment by

the Mobi! courts did not excuse ARCO from compliance

with DOE regulations relating to resubmission of

RMCARs, and that those regulations conditioned resub-

mission upon written permission from DOE. See id. at

424. The Court concluded that “ARCO sought, but did not

obtain, permission from the DOE to retroactively re-

allocate costs. . . . ARCO’s failure to obtain permission

17a

from the DOE precludes it from any relief by this court.”

Id. (footnote omitted). TECA also held that ARCO

waived its right to relief by not challenging the regula-

tions implementing the amended V factor in a timely

manner, as had Mobil and Getty. Jd. at 424-25.

Seizing upon language in TECA’s decision suggesting

that retroactive cost allocation could only be accomplished

with DOE permission, ARCO filed an application with

DOE to resubmit its RMCARs on December 12, 1989. Ad-

ministrative Record (“R.”) at 38. Again, DOE never

responded to ARCO’s request. In contrast to its actions

following its March 1982 request, ARCO decided to treat

DOE’s silence as a denial of its application and appealed

to the OHA. R. at 1. On February 1, 1991, OHA upheld

DOE’s constructive denial of ARCO’s request, R. at 549-

75, prompting ARCO to bring the present action chal-

lenging the OHA decision.

II. Standard of Review

The scope of review to be exercised by the Court is

limited. Thriftway Co. v. DOE, 867 F.2d 1577, 1580

(Temp. Emer. Ct. App. 1989) (citing City of Long Beach

v. DOE, 754 F.2d 379, 385 (Temp. Emer. Ct. App.

1985)). “Congress having authorized administrative con-

trol in the DOE, the judicial] role requires approval of

the DOE’s decision if there is a rational basis for it.”

Id. The limited scope of review is reflected in the standard

of review set forth in the EPAA and ESA:

[N]o order of [DOE] shall be enjoined or set aside,

in whole or in part, unless a final judgment deter-

mines that such order is in excess of the agency’s

®In the footnote accompanying this passage from Van Vranken,

TECA noted that “[i]f Arco thought the DOE erred in not grant-

ing the company permission to retroactively reallocate its costs,

ARCO could presumably have brought an action appealing the

DOE’s decision.” 890 F.2d at 424 n.2.

18a

authority, or is based upon findings which are not

supported by substantial evidence.

OSA, 12 U.S.C. § 1904 note, incorporated by reference

into the EPAA, 15 U.S.C. § 754(a) (1); see Thriftway,

867 F.2d at 1580. The Court must give “great defer-

ence” to DOE’s interpretation of its regulations based

upon its recognized expertise and upon the difficulty of

judicial administration of complex programs dealing with

the petroleum industry. 867 F.2d at 1580-81.

ARCO argues that OHA’s decision in this matter was

procedural and that procedural decisions are entitled to

less deference than substantive decisions. The Court is

not persuaded by ARCO’s argument. ARCO analogizes

OHA’s decision to that in Amoco Corp. v. DOE, 912 F.2d

472 (Temp. Emer. Ct. App. 1990), in which the OHA

held that an application for a refund of overcharges for

petroleum products was untimely and was subject to dis-

missal under DOE regulations. Jd. at 477. Unlike the

decision in Amoco, the decision of the OHA in this case

cannot clearly be characterized as a procedural decision.’

The standard of review having been set out by the stat-

utes creating the federal petroleum price control scheme,

the Court finds no reason to adopt a different standard

of review based upon the facts of this case.

Ill. The OHA Decision and ARCO’s Challenges

ARCO brings several challenges to the OHA decision.

ARCO contends that OHA’s decision was based upon a

clear error of judgment and was not supported by evi-

dence in the record. ARCO also claims that DOE is

estopped from denying its application to reallocate costs.

7™The Court also notes that although TECA in Amoco states

that courts may exercise more independent judgment when review-

ing DOE procedural decisions, it ultimately holds that such deci-

sions are to be reviewed under the traditional “arbitrary and ca-

pricious” and “abuse of discretion’? standards, which accord sub-

stantial deference to the OHA. See 912 F.2d at 475.

19a

_ A. Good Cause

DOE regulations provide that “DOE will routinely ac-

cept submissions or refiling of [cost allocation] reports

only within one year after the original filing or submis-

sion.” 10 C.F.R. § 212.126(d) (1). However,

[n]jotwithstanding the provisions of paragraph (d)

(1) of this section, a refiner may resubmit or refile

reports until June 1, 1979, for months of measure-

ment beginning with September 1973; where ex-

pressly authorized by DOE regulation or order; or

where DOE grants written permission to resubmit

or refile for good cause shown.

Id, § 212.126(d) (2) (emphasis added). In its February

1, 1991 decision, OHA found that ARCO had not estab-

lished good cause to resubmit its RMCARs. ARCO argues

that this finding was a clear error of judgment and must

be set aside.

First, ARCO argues that the invalidation of the

amended V factor by the Mobil decisions created good

cause for refiling. To hold otherwise, ARCO contends,

would permit refiners to file RMCARs which utilize an

illegal cost allocation formula. As OHA correctly noted,

however, this argument was previously raised and re-

jected by TECA in Van Vranken. R. at 566. Van Vran-

len expressly held that the Mobil decisions did not require

or permit ARCO to reallocate its costs. 890 F.2d at 423-

24. TECA further held that resubmission would be re-

quired only if past cost allocations were illegally in excess

of the price ceiling, which ARCO’s RMCARS were not.

Id. at 423. The OHA thus correctly concluded that the

Mobil decisions, standing alone, did not create good cause

for the refiling of ARCO’s cost allocation reports.

Second, ARCO argues that OHA improperly interpreted

Van Vranken to hold that OHA “should accord no weight

to the Mobil decisions in determining whether ‘good cause’

exists for the refiling which ARCO seeks.” R. at 566. It

20a

is unclear what OHA meant when it stated that it would

give “no weight” to the Mobil decisions. Obviously, the

Van Vranken opinions and ARCO’s application for cost

reallocation found their bases in the Mobil trilogy, so it

cannot be said that the Mobil litigation could be completely

ignored by OHA. Rather, the Court finds that OHA’s use

of the phrase “‘no weight” simply implies what Van Vran-

en and the OHA correctly held—that the Mobil decisions

did not establish per se good cause for refiners to resubmit

cost allocation reports. Although ARCO would have the

Court make a greater issue out of OHA’s use of the

phrase “no weight,” implying that OHA had called into

question the continued validity of the Mobil decisions, the

Court finds instead that OHA has properly interpreted

and applied the Mobil decisions in accordance with the

opinion of TECA in Van Vranken.*®

Third, ARCO contends that OHA committed a clear

error of judgment by mailing to accord weight to DOE’s

acquiescence to use of the unamended V factor after the

Mobil IIT decision. ARCO contends that following Mobil

III, DOE began using the unamended V factor in settle-

ment negotiations with refiners. These negotiations were

intended to resolve all enforcement matters between DOE

and petroleum refiners. Settlement of enforcement matters

between DOE and ARCO was ultimately resolved by a

Consent Order entered into March 1, 1985. See 50 Fed.

Reg. 8366 (Mar. 1, 1985). ARCO claims that DOE’s. use

of the unamended V factor in settlement negotiations and

the Consent Order led it to believe that DOE had accepted

use of the pre-1974 factors for all purposes and that re-

8 The Court also notes that TECA found ARCO to have waived

its right to relief by not challenging the amended V factor in a

timely manner. Van Vranken, 890 F.2d at 424. Assuming that

OHA gave no weight to the Mobil decisions, OHA’s actions were not

necessarily in error in light of the language from Van Vranken,

which suggests that ARCO was not at liberty to take advantage of

the invalidation of the amended V factor by the Mobil decisions.

Zla

submission of corrected RMCARs was rendered unneces-

sary.

OHA, however, reached a different conclusion as to the

effect of the DOE enforcement decisions on ARCO’s ability

to retroactively reallocate costs. OHA characterized DOE’s

use of the unamended V factors as “only a point of com-

promise to move settlement negotiations forward.” R. at

569. OHA also found that DOE’s “settlement practices

and the policy objectives of the refiling regulations are

completely separate.” Jd. OHA concluded that DOE’s

settlement position did not excuse ARCO from compliance

with formal refiling procedures, which required written

permission from DOF prior to reallocation of costs. /d.

OHA found support for this conclusion in the Van Vran-

ken decision, which held that “‘[n]othing in the invalida-

tion of the 1974 amendment had any effect on the refiling

regulations and nothing in the refiling regulations excepts

refiners from compliance when an allocation regulation is

invalidated.” 890 F.2d at 424.

ARCO disputes OHA’s finding that DOE’s use of the

unamended V factor was a mere “point of compromise.”

It also disputes that compliance with refiling regulations

was necessary following invalidation of the 1974 amend-

ment. The Court, however, is not free to replace OHA’s

conclusions with its own if the OHA decision had a

rational basis. The Court finds that OHA’s decision did

have a rational basis. OHA properly interpreted and

applied the holding of Van Vranken and the published

DOE regulations. The Court finds that OHA’s decision

was not a clear error of judgment and it will uphold

OHA’s finding that no good cause existed for ARCO to

reallocate its costs based upon DOFL’s alleged acquiescence

to use of the pre-1974 V factor.

B. Due Care and Diligence

OHA’s denial of ARCO’s request to refile based upon

lack of good cause effectively disposed of ARCO’s applica-

tion. The Court has found OHA’s ruling to have a rational

22a

basis and upholds that portion of OHA’s decision. OHA

also denied ARCO’s application on alternative grounds,

which the Court also finds to have a rational basis. DOE

regulations provide that

[ijn any application for permission to resubmit or

refile a report pursuant to paragraph (d) (2) of this

section, DOE will not make a finding of good cause

routinely. Where it appears that such a finding may

adversely affect the interest of the consuming public,

a firm must demonstrate in its application, at a

minimum, that the claimed errors or omissions in the

report or reports which the firm seeks to replace or

modify did not result from a failure to exercise due

care and diligence. |

10 C.F.R. § 212.126(d) (3) (emphasis added). OHA

found that ARCO failed to establish that it had exercised

due care and diligence in filing its RMCARs. Specifically,

OHA found that ARCO had failed to appeal the 1982

rejection of its application to refile its RMCARs and that,

although the Van Vranken litigation had been pending

since 1979, ARCO did not diligently pursue formal ap-

proval for its amended RMCARs until the present appeal

to OHA.

ARCO argues that OHA’s invocation of the “due care

and diligence” requirement to reject its application was

erroneous. First, ARCO claims that § 212.126(d) (3) ap-

plies only when there may be an adverse effect on the

interest of the consuming public. Because the Van Vran-

ken class consists of resellers, not consumers, ARCO

argues that the “due care and diligence” requirement is

not applicable to this case.

This same argument was raised in the proceedings below

and rejected by OHA. OHA noted that due care and dili-

gence requirement is invoked when the desired cost re-

allocation “may” adversely affect the interest of the con-

suming public. Because this interest is defined neither

23a

by statute nor by regulation, OHA was forced to deter-

mine whether reallocation of costs by ARCO would cause

the type of adverse effect proscribed by § 212.126(d) (3).

OHA concluded “that the phrase ‘interest of the consum-

ing public’ should be broadly construed to embrace the

policy objectives of the EPAA, pursuant to which the

regulation was promulgated.” R. at 572. OHA noted

that one of these policy objectives is “equitable distribu-

tion of .. . refined petroleum products at equitable prices

among e'l . .. sectors of the petroleum industry.” Jd.

(quoting 15 U.S.C. $ 753(b) (1) (F)). OHA found that

the interest of the consuming public was broad enough

to encompass the interest of petroleum resellers in avoid-

ing overcharges for petroleum products purchased. Be-

cause ARCO’s request to reallocate costs would frustrate

the resellers ability to recover overcharges, OHA found

that the “due care and diligence” requirement of § 212.126

(d) (3) should apply to ARCO’s application for resubmis-

sion of its RMCARs.

Once again, the Court encounters a situation in which

it must properly grant deference to the OHA’s decision.

Deference is especially appropriate in this instance, in

which the agency charged by Congress to administer a

statutory scheme has interpreted the statute and its

accompanying regulations in light of their underlying

policies and enforcement objectives. See Chevron, U.S.A.,

Ine. v. Natural Resources Defense Council, Inc., 467 U.S.

837, 843-44 (1984). OHA’s interpretation and applica-

tion of DOF regulations must be accorded substantial

deference by the Court in recognition of OHA’s recog-

nized expertise in administration of the petroleum price

control program. See Thriftway, 867 F.2d at 1580;

Mountain Fuel Supply Co. v. DOE, 656 F.2d 690, 694-95

(Temp. Emer. Ct. App. 1981); ef. MGPC, Inc. v. DOE,

763 F.2d 422, 430-31 (Temp. Emer. Ct. App.), cert. de-

nied, 474 U.S. 823 (1985). The Court finds that OHA’s

interpretation of § 212.126(d) (3) has a rational basis,

24a

and the Court cannot substitute its own interpretation of

the regulatory provision for that of OHA. Thus, the Court

upholds OHA’s ruling that § 212.126(d) (3)’s due care

and diligence requirement applies to ARCO’s request for

resubmission.

Second, ARCO contends that if the due care and dili-

gence requirement is applicable, ARCO has fulfilled it.

ARCO argues that its desire to amend its RMCARs re-

sulted from a change in the law brought about by the

Mobil decisions and not from a lack of due care or dili-

gence. ARCO again argues that DOE’s acceptance of its

unamended V factors in the Consent Order led ARCO to

believe that formal refiling and acceptance of its RMCARs

was unnecessary. ARCO contends that DOE’s post-Mobil

III conduct led it to conclude that an appeal from its

March 1982 reallocation request was not required.

The Court agrees with OHA’s finding that ARCO did

not exercise due care and diligence in seeking approval

for its retroactive cost reallocation. ARCO obviously was

aware of its obligation to secure DOE approval prior to

reallocating its costs, as evidenced by its repeated at-

tempts to gain such approval in 1980 and 1981. ARCO

can point to no circumstances which would justifiably

lead it conclude that compliance with published DOE

regulations was no longer necessary. Although ARCO

places great reliance upon its Consent Order with DOE,

that Order was not entered until 1985 and did not pur-

port to affect rights and liabilities under the private en-

forcement mechanisms of the ESA and the EPAA nor to

supersede DOE cost reallocation regulations.” The Van

® The 1985 agreement provided that “this Consent Order settles

and finally resolves all aspects of ARCO’s liability, if any, te DOR

under the Federal Petroleum Price and Allocation Regulations .. .”

Consent Order © 502(b), reprinted at 50 Fed. Reg. 8366, 8873 (Mar.

1, 1985) (emphasis added). The Consent Order further provided

that

etn aaa aneli iaianaiiiee ei cleaalial

25a

Vranken litigation commenced in 1979, prior to the Con-

sent Order and prior to the Mobil IJ and Mobil III deci-

sions. Significantly, in 1983 ARCO was party to a case

in which TECA decided that DOE regulations prevented

retroactive reallocation of costs without written approval

from DOE. Eastern Air Lines, Inc. v. Atlantic Richfield

Co., 712 F.2d 1402, 1408-09 (Temp. Emer. Ct. App.),

cert. denied, 464 U.S. 915 (1983). In light of this se-

quence of events, the failure of ARCO to receive formal

reallocation approval as required by DOE regulations, and

the holding in Eastern Air Lines, ARCO cannot credibly

argue that it was misled into believing that it was not

required to obtain written approval from DOE prior to

reallocating its costs. OHA’s finding that DOE failed to

exercise due care and diligence by neglecting to appeal

DOE’s failure to respond to its March 1982 reallocation

application is rational and supported by the evidence. The

Court agrees with OHA’s finding and will not set it aside.

C. Evidence in the Record

ARCO argues that the OHA decision must be set aside

because OHA made at least three findings that are un-

supported by the evidence in the record. First, ARCO

claims that OHA’s finding that DOE had not acquiesced

to ARCO’s use of the unamended V factor was based upon

assertions of counsel at oral argument and not upon evi-

dence in the record. Second, ARCO claims that OHA’s

finding that ARCO’s refiling of its RMCAR may affect

the consuming public was not based upon any evidence.

[njothing contained herein may be construed as a bar, an

estoppel, or a defense against any criminal action, or against

any civil action brought by any purchaser of covered products

from ARCO, ... [T]his Consent Order does not affect or

prejudice any private action brought by a third party against

ARCO, or by ARCO, against any third parties, including an

action for contribution.

Id. © 502(c).

26a

Third, ARCO argues that OHA had no basis upon which

to conclude that ARCO should have foreseen the need to

gain formal DOE acceptance of its amended RMCARs

rather than merely relying upon DOE’s perceived acquies-

cence to the use of the unamended V factor.

ARCO’s two latter arguments raise issues previously

addressed by the Court and will not be dealt with at length

again. The Court has discussed OHA’s responsibility to

interpret provisions of DOE regulations and the evidence

showing that ARCO could not justifiably have concluded

that formal DOE approval was not required prior to cost

reallocation. The Court also notes that OHA’s findings as

to how best to protect the interests of the consuming pub-

lic is not purely a factual question, but rather it involves

questions of interpretation of DOE regulations and en-

forcement policies. Although the Court finds a rational

basis for OHA’s conclusion that the interests of the con-

suming public are implicated by the facts of this case,

the Court also finds it to be improper to review OHA’s

decision upon the “unsupported by evidence” standard

urged by ARCO.

Although the Court has not expressly addressed ARCO’s

first contention, it has previously set forth the evidence

showing that ARCO was or should have been aware of

its obligation to secure written DOE permission to refile

its cost allocation reports. Based upon the presence of

objective evidence in the record, the Court finds ARCO’s

claim that OHA relied solely upon the statements of coun-

sel at oral argument to be without merit.

D. Estoppel

ARCO argues that DOF is estopped from denying

ARCO permission to amend its RMCARs based upon its

conduct indicating acquiescence to use of the unamended

V factors. ARCO claims that following Mobil JI], DOE

followed a general practice of allowing refiners to claim

27a

increased costs based upon the unamended V factors.

ARCO also contends that DOE used the unamended V

factor in reaching its Consent Order with ARCO. ARCO

claimed that it relied to its detriment upon DOE’s con-

duct, which it claims led it to believe that the unamended

V factor would be acceptable for all purposes.

Again, the Court has previously addressed the issues

raised by ARCO’s allegations. As previously noted, the

Court finds that ARCO had reason to know that it had

to comply with the published DOE regulations and obtain

written DOE permission to reallocate costs, and that the

actions of DOE following Mobil I/I and during settlement

negotiations did not relieve ARCO of those preexisting

obligations. The Court finds that ARCO’s reliance upon

DOE’s conduct was unwarranted, and it does not find

that DOE is estopped from denying DOE’s request fer

reallocation.

IV. Conclusion

For the foregoing reasons, the Court will deny ARCO’s

motion for summary judgment and grant the cross-

motions of the defendants and intervenor-defendants for

summary judgment. An appropriate Order accompanies

this Memorandum Opinion.

/s/ Thomas A. Flannery

United States District Judge

28a

APPENDIX D

{DOE SEAL]

DEPARTMENT OF ENERGY

Washington, DC 20585

Feb. 1, 1991

DECISION AND ORDER OF

THE DEPARTMENT OF ENERGY

Appeal

Name of Petitioner: Atlantic Richfield Company

Date of Filing: April 16, 1990

Case Number: LEA-0001

On April 16, 1990, the Atlantic Richfield Company

(ARCO) filed an Appeal with the Office of Hearings and

Appeals (OHA) of the Department of Energy (DOE),

in which it contests the denial by the Economic Regulatory

Administration (ERA) of an Application to Refile Re-

finer’s Monthly Cost Allocation Reports (Application to

Refile) submitted by ARCO on December 12, 1989. In

the Application which it submitted under 10 C.F.R.

§ 212.126(d), ARCO requests permission to refile its Re-

finer’s Monthly Cost Allocation Reports (RMCAR’s) for

the months August 1973 through December 1975 (the re-

filing period). The Application to Refile was denied by

the ERA, sub silentio.' If the present Appeal were

1The refiling regulations provide that “[the ERA] will dispose

of each application in writing, with a concise statement of the rea-

sons for granting or denying the application [and t]he disposition

of such an application shall be subject to appeal as an order under

Subpart H of Part 205.” 10 C.F.R. § 212.126(d)‘3). While the

ERA did not issue a written determination, ARCO submits that its

29a

granted, the ERA would be required to accept the revised

RMCAR’s submitted in ARCO’s Application to Refile.

I. Background

A. The Regulations

During the refiling period, ARCO was a “refiner” as that

term was defined in 10 C.F.R. § 212.31, and therefore

subject to the provisions of the refiner price rule, 10

C.F.R. § 212.83. In general, section 212.83 provided that

a refiner could not charge a price for a covered product

that exceeded the weighted average price at which the

product was sold in transactions with the class of pur-

chaser concerned on May 15, 1973, plus increased product

costs and non-product costs incurred since May 1973. See

39 Fed. Reg. 1924 (January 15, 1974). Relevant to the

present proceeding, the regulations established a formula

for determining the fraction of a refiner’s increased crude

oil costs that could be attributed to a given covered prod-

uct and recovered in its price. This calculation, known as

the “V factor,” generally entailed taking the total volume

of the covered product sold and dividing it by the total

volume of all covered products sold. See 10 C.F.R.

§ 212.83 (c) (2).

ARCO was also subject to certain of the reporting re-

quirements set forth in 10 C.F.R. Part 212, Subpart I.

Under these provisions, ARCO was required to submit

RMCAR’s to the DOE on a monthly basis. See 10 C.F.R.

§ 212.126(b). These reports generally provided the means |

by which refiners computed, reported and adjusted their

May 15, 1978, selling prices for covered products. Appli-

Application to Refile was governed by the provisions of 10 C.F.R.

Part 205, Subpart G. Section 205.96 of that subpart provides

that “[i]f the DOE fails to take action on any application filed

under this subpart within 90 days of filing, the applicant may treat

the application as having been denied in all respects and may appeal

therefrom as provided under this subpart.”

eisai

30a

cations to resubmit or refile RMCAR’s are governed by

10 C.F.R. § 212.126(d). Pertinent to the present case,

sections 212.126(d) (2) and (d) (3) provide:

(2) Exceptions. Notwithstanding the provisions of

subparagraph (d) (1) of this section, a refiner may

resubmit or refile reports until June 1, 1979, for

months of measurement beginning with September

1973, where expressly authorized by DOE regulation

or order; or where DOE grants written permission

to resubmit or refile for good cause shown.

(3) Applications to resubmit or refile. In any appli-

cation for permission to resubmit or refile a report

pursuant to subparagraph (d)(2), DOE will not

make a finding of good cause routinely. Where it

appears that such finding may adversely affect the

interest of the consuming public, a firm must demon-

strate in its application, at a minimum, that the

claimed errors or omissions in the report or reports

which the firm seeks to replace or modify did not

result from a failure to exercise due care and dili-

gence. Firms must apply for permission pursuant to

subparagraph (d) (2), in writing, to the [ERA].

Applications to resubmit or refile must be accom-

panied by a written statement completely describing

the proposed adjustments and the reasons therefor,

and a numerical schedule which reflects both the pre-

viously submitted figures and the proposed adjusted

figures. The [ERA] will dispose of each application

in writing, with a concise statement of the reasons

for granting or denying the application. The dis-

position of such an application shall be subject to

appeal as an order under Subpart H of Part 205.

(emphasis supplied); see 44 Fed. Reg. 14534 (1979).

See also Standard Oil Company of Ohio, 9 DOE {§ 80,101

(1981).

3la

B. ARCO’s Application to Refile

In its Application to Refile, ARCO sought permission tu

refile its RMCAR’s for the months August 1973 through

December 1975, for the purpose of adjusting its “V

factor” cost allocation fractions. This would reduce

ARCO’s potential liability in the Van Vranken private

overcharge litigation, a case currently pending before the

United States District Court for the Northern District of

California, which involves a claim brought by a class of

plaintiffs under section 210 of the Economic Stabilization

Act, 12 U.S.C. § 1904 note. Van Vranken v. Atlantic

| Richfield Co., C-79-0627-SW (N.D. Cal.). ARCO argued

in its Application to Refile that “good cause’ exists for

the ERA’s acceptance of these revised RMCAR’s under

10 C.F.R. § 212.126id) (2), on three bases: (i) in order

to bring its V factors in conformity with certain decisions

of the Temporary Emergency Court of Appeals (TECA),

referred to as the Mobil trilogy *; (ii) DOE has already

accepted ARCO’s V factors adjusted in accordance with

the Mobil decisions; and, (iii) ARCO’s refiling is neces-

sitated by TECA’s decision in Van Vranken, et al. v.

Atlantic Richfield Co., 890 F.2d 421 (Temp. Emer. Ct.

App. 1989) (Van Vranken), in which, according to

ARCO, TECA held that ARCO cannot use its corrected

V factors to reduce its liability for overcharges in private

litigation unless ARCO first obtains permission from the

DOE in the context of a formal refiling under 10 C.F.R.

§ 212.126(d). See Application to Refile at 2-5. These

bases for ARCO’s Application to Refile are discussed

briefly below.

The Mobil trilogy emanated from an emergency regula-

tory amendment redefining the V factor which the Fed-

2 Mobil Oil Corp. v. Department of Energy, 610 F.2d 796 (Temp.

Emer. Ct. App. 1979), cert. denied, 446 U.S. 937 (1980) (Mobil IJ);

Mobil Oil Corp. v. Department of Energy, 647 F.2d 142 (Temp.

Emer. Ct. App. 1981) (Mobil IT); Mobil Oil Corp. v. Department of

Energy, 678 F.2d 1083 (Temp. Emer. Ct. App. 1982) (Mobil III).

32a

eral Energy Administration, predecessor of the DOE,

adopted on April 30, 1974. 39 Fed. Reg. 15139 (May 1,

1974). This V factor amendment was intended to correct

an incongruity which had developed in the regulations

whereby, under the V factor formula, a greater than

proportionate amount of increased crude oil costs could

be passed through on each covered product.* The V

factor amendment was challenged in a suit brought by

Mobil Oil Corporation (Mobil). In Mobil I, TECA sus-

tained Mobil’s contention that the 1974 amendment was

invalid because DOE had failed to provide a period of

notice and comment. Later, in Mobil IJ, TECA affirmed

its determination in Mobil I and permitted Mobil to

reallocate crude oil costs it incurred producing exempt

products to the cost of producing covered products.

Finally, in Mobil III, TECA rejected the agency’s

attempt in a January 1981 rulemaking (46 Fed. Reg.

7776 (1981)) to repromulgate retroactively to April

30, 1974, the regulation held invalid in Mobil I. TECA

ruled, however, that the DOE could enforce the revised

V factor regulations prospectively effective February 1,

1976. Although ARCO neither joined the Mobil litiga-

tion as a party nor requested DOE to grant it adminis-

3 The price control regulations that were initially administered

in 1973, pursuant to the Economic Stabilization Act of 1970, 12

U.S.C. § 1904, et seq. (ESA), covered all refined petroleum products.

However, the price regulations that were continued under the

Emergency Petroleum Allocation Act of 1973, 15 U.S.C. § 751, et

seq. (EPAA), enacted in November 1973, did not cover certain

petroleum products previously regulated under the ESA, e.g., pe-

troleum wax, petroleum coke and asphalt. The definition of “cov-

ered products” in the recodified EPAA regulations was modified

to exclude these products, 39 Fed. Reg. 12353 (1974), but the agency

inadvertently neglected to modify the V factor formulas accordingly.

This resulted in the disproportionate passthrough of all crude oil

cost increases on the reduced scope of “covered products” subject

to price controls. The emergency V factor amendment was adopted

on April 30, 1974, without notice and comment, to rectify this

anomaly.

33a

trative relief from the V factor amendment when the

matter first arose, the firm maintained that the ERA

should still accept its revised RMCAR’s for the period

August 1973 through December 1975. The adjusted V

factors set forth in its revised RMCAR’s would result in

ARCO’s reallocation of crude oil costs attributable to ex- .

empt products to the cost of producing covered products

for that period, and thereby increase its maximum allow-

able prices for these covered products and reduce its po-

tential private overcharge liability.

ARCO argues that, by its actions and statements, the

DOE has acknowledged that the Mobil decisions provide

“good cause” for permitting ARCO to adjust its V fac-

tors. ARCO asserted that following Mobil I/I, the ERA

permitted refiners including ARCO to use V factors ad-

justed in accordance with Mobil for the period prior to

February 1976. In this regard, the record indicates that

in June 1985, the DOE and ARCO executed a final Con-

sent Order (10 C.F.R. § 205.199J) which resolved all

DOE price control compliance matters with respect to

ARCO, with limited exceptions. 50 Fed. Reg. 26603

(1985); see also 50 Fed. Reg. 8366 (1985) (proposed

Consent Order). ARCO asserted that in the settlement

negotiations from 1982 to 1985, which led to the Consent

Order, the ERA determined ARCO’s allowable costs using

the Mobil V factor calculations and indeed never ques-

tioned ARCO’s revised V factors.* See Application to

4 ARCO’s Application to Refile asserted that the final RMCAR’s

accepted by DOE were contained in a submission made on May 30,

1979 (the “1979 Restatement’), in which the firm refiled all of

its previously submitted RMCAR’s pursuant to 10 C.F.R. § 212.126

(d)(2). See Application to Refile at 4 n.4. The 1979 Restatement

incorporated V factor fractions calculated pursuant to the April 30,

1974 V factor amendment which at that time was controlling as

it had not been declared invalid by TECA. As discussed later in

this decision, ARCO attempted to refile its RMCAR’s to revise its

V factors in wake of the Mobil decisions on four instances prior to

entering settlement negotiations with DOE in 1982. The ERA did

not formally accept any of these refilings. Nonetheless, for pur-

34a

Refile at 10-11. ARCO further asserted that this was

consistent with agency policy regarding settlement ne-

gotiations at that time.*®

Finally, ARCO maintained that “good cause” exists for

the acceptance of its present refiling as a result of

TECA’s ruling in Van Vranken, supra. In September

1988, the District Court issued a decision in which it

determined, inter alia, that ARCO was prohibited from

performing a retroactive reapportionment of V_ factor

costs on the basis of TECA’s Mobil decisions. Van

Vranken v. Atlantic Richfield Co., 699 F. Supp. 1420

(N.D. Cal. 1988). ARCO brought an interlocutory ap-

peal contesting that ruling.

In October 1989, TECA affirmed that District Court de-

cision, noting that ARCO had previously “sought, but did

not obtain, permission from the DOE to retroactively re-

allocate costs” under 10 C.F.R. § 212.126(d) (2), and that

“ARCO’s failure to obtain permission from the DOE pre-

cludes it from any relief by this court.” 890 F.2d at 424

(footnote omitted). TECA explained further that ARCO

could have avoided the formal refiling of RMCAR’s if

it had timely challenged the 1974 amendment as Mobil

did, but “[h]aving failed to do so, ARCO cannot avoid

the clear language of the regulation requiring permis-

sion from the DOE before reallocating costs.” Jd. In

this regard, TECA held further that ARCO had waived

poses of settlement negotiations, the ERA utilized ARCO’s revision

of the 1979 Restatement adjusting the firm’s V factors in accordance

with the unamended V factor formula.

5 ARCO included with its Application to Refile the Affidavit of

Rayburn Hanzlik, Administrator of the ERA from October 1981

through September 1985. Mr. Hanzlik states, inter alia, that after

the issuance of Mobil IJ], DOE abided by TECA’s decisions and

that for purposes of estimating overcharge liability in settlement

negotiations, all refiners were permitted to calculate their V factor

fractions in acocrdance with the unamended V factor rule. Appli-

cation to Refile Exhibit D, Affidavit of Rayburn Hanzlik {5 and 7.

35a

its right to challenge the 1974 V factor amendment by

not timely challenging the regulation or seeking other

administrative relief, as had Mobil and Getty Oil Com-

pany. See id. at 424-25.

ARCO contended in its Application to Refile that in

Van Vranken, TECA held for the first time that a re-

finer cannot use V factors adjusted to conform with the

Mobil decisions for purposes of defending itself against

private claims unless it first obtains permission from

DOE to refile its RMCAR’s under 10 C.F.R. § 212.126

(d) (2). Thus ARCO claimed that until Van Vranken, it

had no reason to press DOE for permission to revise

its V factors in conformance with the Mobil decisions.

See Application to Refile at 12-138. ARCO maintained

that now as a result of TECA’s ruling, “good cause”

exists for the acceptance of its refilled RMCAR’s.

In addition, ARCO claimed that it otherwise satisfies the

refiling conditions of 10 C.F.R. § 212.126(d) (3). ARCO

contended that granting its Application to Refile would

not “adversely affect the interest of the consuming pub-

lic” because in the Mobil cases TECA has ruled that the

public interest warrants invalidation of the amended V

factor. Application to Refile at 14. ARCO further as-

serted that there would be no adverse affect to the public

interest since DOE price controls have ended, and that

in reaching the Consent Order agreement with ARCO

“DOE has already fulfilled its duty to safeguard the

public interest and it has discharged its responsibility

to provide full restitution to the consuming public.” Jd.

at 16.

ARCO maintained that, in any event, it easily satisfies

the alternative prerequisite of section 212.126(3), viz.,

“that the claimed errors or omissions in the report or

reports which the firm seeks to replace or modify did not

result from a failure to exercise due care and diligence.”

ARCO asserted that when it submitted the 1979 Restate-

ment, its last official RMCAR refiling for the period con-

cerned, the Mobil litigation was not finally resolved and

36a

the firm was therefore bound by the amended V factor

regulation. ARCO asserted that following the issuance of

Mobil I, it attempted to refile its RMCAR’s on four in-

stances: in March 1980, April 1980, August 1981, and

March 1982. -See Application to Refile at 17-19. The

first three of these attempted refilings were rejected by

the ERA in letter determinations: the first, on the

grounds that a petition filed by DOE for a Writ of

Certiorari to the Supreme Court for review of the Mobil

I decision was yet pending; the second, because TECA

had remanded Mobil I to the district court for further

findings and DOE reserved the right to exhaust further

appeals; and, the third, because TECA had not yet is-

sued its decision in Mobil I/] regarding the agency’s at-

tempt in the January 1981 rulemaking to retroactively

repromulgate the V factor amendment. See id. Exhibits

H-L. ARCO asserted that it received no formal response

with regard to the March 1982 refiling but that the ERA

acquiesced in the use of revised V factors in the context

of the settlement negotiations which began soon after.

Not until the Van Vranken decision, claimed ARCO, did

it have reason to again seek permission to use revised

V factors.

Finally, ARCO argued that nothing in the 1985 Consent

Order which the firm executed with DOE bars its Ap-

plication to Refile. According to ARCO, % 502 of the

Consent Order released DOE from all future “claims”

by ARCO relating to the subject matter of the settle-

ment. ARCO maintained that the term “claims” used in

the Consent Order does not encompass an “application”

such as the present one. See Application to Refile at 22-

23. ARCO asserted that, moreover, the Consent Order

by its terms was intended to resolve enforcement mat-

ters between ARCO and DOE, not to affect private en-

forcement litigation. /d. at 25-26. In that regard, ARCO

noted that | 502(c) provides that the Consent Order can-

not be used to “affect or prejudice” any private enforce-

ment action brought by a third-party against ARCO.

37a

C. ARCO’s Appeal

In its Appeal, ARCO restates all the bases for its Ap-

plication to Refile. Thus ARCO contends that: (i) the

ERA’s denial of ARCO’s Application was erroneous be-

cause ARCO’s Application satisfies the “good cause” cri-

terion of 10 C.F.R. § 212.126(d)(2); (ii) the ERA’s

action was arbitrary and capricious because the ERA

failed to articulate any factual or legal basis for its de-

nial (see note 1, infra); and, (iii) the ERA’s denial was

arbitrary, capricious, and erroneous because no valid

reasons existed for denying ARCO’s Application. See

Appeal at 4.

On May 21, 1990, the ERA filed Comments in Response

to ARCO’s Appeal (ERA Comments), in which it argues

that ARCO’s Appeal should be dismissed. The ERA prin-

cipally contends that: (i) ARCO’s failure to appeal the

ERA’s prior denials of ARCO’s refiling requests under

10 C.F.R. Part 205, Subpart H, bars the present relief

which ARCO seeks; (ii) ARCO’s Application to Refile

and Appeal are barred under the doctrine of laches by

reason of ARCO’s inexcusable delay in seeking to revise

its V factor allocations, and the resulting prejudice to

DOE; (iii) ARCO’s Application to Refile is barred by

the Consent Order which, with certain specified excep-

tions, resolved all matters relating to ARCO’s compliance

with the federal price and allocation regulations; and,

(iv) even on the merits, ARCO has failed to establish

“good cause’ for its refiling-under 10 C.F.R. § 212.126

(d) (2). With regard to the latter contention, the ERA

argues that the primary purpose of the form filing regu-

lations was to ensure industry compliance with the DOE

price regulations, and thus in view of the Consent Order

resolving all compliance matters with ARCO, no “good

cause” exists to accept ARCO’s Application to Refile.

See ERA Comments at 10-11. In addition, the ERA as-

serts that neither the Mobil trilogy nor the Van Vranken

decision constitute “good cause” to accept ARCO’s re-

38a

filing, and that in any event, ARCO has failed to satisfy

the “due care and diligence” prerequisite of section 212.126

(d)(3). The ERA’s contentions are examined in greater

detail below."

The ERA’s Comments opposing ARCO’s Application to

Refile and Appeal, and in particular the ERA’s procedural

challenges, spawned additional exchanges of pleadings by

the parties. On June 22, 1990, ARCO filed a Response to

Comments (ARCO Response) in which the firm chal-

lenges the ERA’s contention that the Application to Refile

is barred, and restates its position that “good cause” exists

for the Application to Refile. ARCO further requested in

its Response that an evidentiary hearing be convened,

entailing examination of witnesses, with respect to pur-

ported factual disputes raised by the ERA’s Comments.

On July 18, 1990, the ERA filed a Response to ARCO’s

Supplemental Request for Hearing, opposing the evi-

dentiary hearing request. Subsequently, on July 27, 1990,

ARCO filed a Revised Request for Hearing, in which the

firm narrowed the scope of its request for an evidentiary

hearing. The ERA again filed a Response in opposition

to ARCO’s Revised Request, on August 15, 1990. Ulti-

mately, in a letter ruling issued on August 28, 1990, OHA

®In addition to the ERA’s Comments, we authorized and received,

on June 1, 1990, Comments filed by representatives of the plaintiff

class in Van Vranken vy. Atlantic Richfield Company, C-79-0627-SW

(N.D. Cal.), in conjunction with Sinclair Oil Corporation (the

“Interested Parties”). In their Comments, the Interested Parties

oppose ARCO's Appeal essentially on the same grounds as the ERA,

viz., that the Application to Refile is barred by the Consent Order

and because ARCO failed to pursue timely appeals of its previous

refiling denials. The Interested Parties raise an additional argu-

ment that the refiling period sought by ARCO is improper in any

event since, as a result of pertinent agency promulgations subse-

quent to the April 30, 1974 V factor amendment, the Mobil deci-

sions provide no legitimate basis for a retroactive reallocation of

V factor costs for time periods after August 1, 1974. See Inter-

ested Parties’ Comments at 11-18. We have determined, however,

that we need not reach that issue in our consideration of ARCO's

Appeal.

39a

determined that ARCO had failed to establish the existence

of genuine factual disputes to justify the convening of an

evidentiary hearing, but that a hearing for the purpose of

oral argument should nonetheless be convened for greater

explication of the numerous legal issues materially in

dispute. Letter of August 28, 1990, from Thomas 0.

Mann, Deputy Director, OHA, to David L. Roll, Esq.” A

hearing for the purpose of oral argument was then con-

vened on October 4, 1990, at which representatives of

ARCO, the ERA and the Interested Parties (see note 6,

supra) presented oral testimony and documentary evi-

dence concerning ARCO’s Application for Exception and

Appeal. See Transcript of Hearing, Atlantic Richfield

Company, Case No. LEA-0001 (hereinafter “Tr.”’).

Il. Analysis

A. Whether ARCO’s Application to Refile is Barred

The ERA first challenges ARCO’s Application to Refile on

procedural grounds, arguing that it is barred and should

be rejected: (i) because ARCO failed to appeal the ERA’s

prior denials of ARCO refiling requests; (ii) under the

doctrine of laches, in view of Arco’s undue delay in filing

7 According to ARCO’s Response, the ERA’s Comments raised

factual disputes concerning: (i) whether ARCO knew or should

have known prior to Van Vranken that it would be necessary to

obtain DOE’s permission to use corrected V factors in private

overcharge litigation; (ii) whether DOE acquiesced in the Mobil

decisions following Mobil I/] and used corrected V factors for pur-

poses of estimating overcharge liability in settlements with ARCO

and other refiners; and (iii) whether the parties to the 1985 Con-

sent Order intended the settlement to preclude subsequent applica-

tions for permission to correct V factors for use in private litiga-

tion. See ARCO Response at 40-41. ARCO urged that an evi-

dentiary hearing be convened with respect to these matters, pur-

suant to 10 C.F.R. § 205.105(d). However, the ERA conceded the

second matter in its Response to Supplemental Request for Hearing.

We determined in our letter of August 28, 1990, that the first and

third issues identified by ARCO essentially involved matters of legal

interpretation, and were therefore inappropriate for examination

in the context of an evidentiary hearing.

40a

the Application to Refile and the resulting prejudice to the

ERA; and, (iii) under the terms of the Consent Order.

The respective positions of the parties on these matters

have been substantially developed in the pleadings sub-

mitted in this Appeal. For the reasons below, we have

determined that ARCO’s Application to Refile is not

barred on any of the alternative grounds advanced by the

ERA.

(1) Prior refilings

We cannot accept the ERA’s position that ARCO’s Ap-

plication to Refile is barred since ARCO failed to appeal

the ERA’s prior denials of ARCO refilings containing V

factor corrections. As indicated above, ARCO submitted

Applications to Refile its RMCAR’s to adjust its V factors

on four instances prior to the present: in March 1980,

April 1980, August 1981 and March 1982. In the first

three instances, the agency issued letter determinations

rejecting ARCO’s refiling since various aspects of the

Mobil litigation were yet pending. The ERA generally

asserted in each instance that until DOE had received a

final resolution, ARCO’s refiling was without basis.* Thus,

8 For instance, the agency stated in its letter rejecting ARCO’s

March 1980 submission, that:

The cited Mobil decision apparently relied upon by Atlantic

Richfield in the computations embodied in the twelve month

EIA-14 resubmission is under petition by the Department of

Energy for a Writ of Certiorari to the Supreme Court of the

United States. Pending adjudication by that tribunal, and

pending remand and further opinion from the Federal District

Court as ordered by the Temporary Emergency Court of Ap-

peals (and the complete adjudication of any_appeals which may

result subsequently), it is the position of the Office of Special

Counsel that the regulations as promulgated are valid and en-

forceable, and that the TECA decision in the Mobil case does

not provide Atlantic Richfield authority to alter the calcula-

tions currently required by Section 212.83.

Letter of April 18, 1980, from Felipe Garcia, Pacific District Office

of Special Counsel, DOE, to William R. Wilson, ARCO; see ARCO’s

Application to Refile Exhibit H.

4la

the agency’s position was that the first three ARCO re-

filings were premature. In view of the agency’s stated

basis for these denials, we are not persuaded that ARCO’s

failure to appeal these determinations should unduly prej-

udice or pose a bar to ARCO’s present application filed

subsequent to the Mobil litigation.

Nor are we persuaded that ARCO’s failure to file an

appeal with respect to its March 1982 attempted refiling

constitutes grounds to bar ARCO’s present Application to

Refile. The final TECA decision in Mobil I/I was issued

on April 29, 1982, approximately one month after this

refiling request. Section 212.126(d) (3) states unequivo-

eally that “{t]he [ERA] will dispose of each application

in writing, with a concise statement of the reasons for

granting or denying the application”; it then states that

“!t]he disposition of such an application shall be subject

to appeal as an order under Subpart H of Part 205.” Not-

withstanding, the ERA failed to issue any written determi-

nation with respect to ARCO’s March 1982 refiling. The

ERA suggests that despite the absence of a written de-

termination, ARCO could have brought an appeal pur-

suant to 10 C.F.R. § 205.96 (see note 1, supra), as in the

present instance. See, e.g., Tr. at 37. Section 205.96 pro-

vides, however, that in the event the agency fails to act

upon an application within 90 days of filing, “the appli-

cant may treat the application as having been denied in

all respects and may appeal therefrom . . .” (emphasis

supplied). ARCO states that it exercised its discretion

not to treat the ERA’s silence with respect to its March

1982 refiling as a denial and not to file a formal appeal

under section 205.96, since within a few months after the

submission it entered into the settlement negotiations dur-

ing which the ERA accepted its amended V factors. See

ARCO Response at 6-8; Tr. at 76. We leave to ARCO’s

own conscience whether that determination was prudent.

We coneur with ARCO’s position, however, that its deter-

mination not to file an appeal regarding the March 1982

42a

refiling should not bar its present Application to Refile

when the ERA failed to issue a written determination as

specifically required under 10 C.F.R. § 212.126(d) (3).°

(2) Laches

Next, the ERA argues that ARCO’s Application to Refile

and this Appeal are barred under the doctrine of laches

by reason of: (i) ARCO’s inexcusable delay in seeking

to revise its V factor allocations, and (ii) the resulting

prejudice to DOE. ERA Comments at 4, citing Mobil Oil

Corp. v. Department of Energy, 728 F.2d 1477, 1488

(Temp. Emer. Ct. App. 1983). The ERA asserts that

inexcusable delay is clearly present since ARCOQ’s latest

refiling comes nearly 16 years after the amended V factor

rule was promulgated, 12 years after the rule was origi-

nally challenged, ten years after the rule was declared

invalid, nine years after decontrol, eight to ten years after

ARCO failed to appeal denials of prior refilings, and five

years after ARCO entered into a “global” settlement with

DOE. See id. at 5. The ERA further maintains that

ARCO’s Application to Refile prejudices the agency since

it impermissibly revives matters which were resolved by

the Consent Order. Jd. at 4. The ERA asserts that the

agency would be required to devote substantial time and

resources to auditing ARCO’s refiled RMCAR’s, raising

issues that were intended by both parties to have been

settled. See Tr. at 39, 53.

Laches is an equitable doctrine under which relief may be

denied to one guilty of unreasonable delay in bringing an

action, if undue prejudice would result to the adverse

party. See generally Am. Jur. 2d, Equity § 152; Gulf

* As a practical matter, the ERA Comments filed in the present

Appeal constitute the “statement of the reasons for ... denying

the application” explicitly required under section 212.126(d)(3).

We may have been required, however, to remand ARCO’s Applica-

tion to Refile to the ERA for a formal statement of reasons had

the ERA failed to file explanatory comments in this proceeding.

43a

Airborne Instruments v. Weinberger, 694 F.2d 838, 843

(D.C. Cir. 1982). The laches doctrine is rooted in the

ancient maxim that “equity aids the vigilant, not those

who slumber on their rights.” 2 J. Pomeroy, Equity

Jurisprudence § 418. However, laches is an affirmative

defense and the determination whether laches bars an

action is entirely within the discretion of the reviewing

tribunal, based upon the facts and circumstances pre-

sented. See National Wildlife Federation v. Burford, 835

F.2d 305, 320 (D.C. Cir. 1987) ; University of Pittsburgh

v. Champion Products, 686 F.2d 1040, 1045 (8rd Cir.),

cert. denied, 459 U.S. 1087 (1982). Based upon the

circumstances presented in this proceeding, we have de-

termined that ARCO’s Application to Refile is not barred

by laches.

Initially, we disagree with the ERA’s alternative sug-

gestions that the date the amended V factor rule was

promulgated, or the date the rule was originally chal-

lenged or declared invalid, should be used to measure the

degree of any inexcusable delay on the part of ARCO.

The action which ARCO presently seeks is the acceptance

of refiled RMCAR’s. As indicated above, ARCO sought to

refile its RMCAR’s on the basis of the Mobil trilogy on

four occasions beginning in March 1980, and until the

Mobil litigation was finally resolved in 1982, the agency

informed ARCO that its refilings were premature. Thus,

we believe that any proper measure of delay on the part

of ARCO is the nearly eight years from the time ARCO

failed to pursue its formal refiling request in 1982.

We are unpersuaded that the eight year delay may be

properly utilized by the ERA to invoke laches. Equally

rooted in equity as the doctrine of laches is the precept

that the party asserting the defense must have “clean

hands.” See Am. Jur. 2d, Equity § 153; Personal Proper-

ties, Inc. v. Financial & Real Estate Consulting Co., 752

F.2d 178, 182-83 (5th Cir. 1985). In the present case, we

are unable to say that the ERA is completely without fault

44a

when, as discussed above, the ERA failed to issue a

written determination rejecting ARCO’s March 1982 re-

filing as specifically required under the section 212.126

(d) (3), and then accepted ARCO’s V factors revised in

accordance with Mobil for the purpose of settlement

negotiations.

Further, we believe that the ERA has overstated the

degree to which it has been prejudiced by ARCO’s delay

in filing the present application. The ERA asserts that

during settlement negotiations it accepted the Mobil V

factors contained in ARCO’s revised 1979 Restatement

as a matter of compromise, but did not formally accept or

audit the refiling and indeed specifically questions the

accuracy of certain figures contained in the revised

RMCAR’s. See Tr. at 52-58. The ERA maintains that it

is prejudiced since the present Application to Refile would

require the ERA to now audit the RMCAR’s contained in

the 1979 Restatement and thus revive issues which it con-

sidered settled by the Consent Order. However, the ERA

would have been required to audit the RMCAR’s even if

ARCO had timely appealed its previous refiling or filed a

renewed Application to Refile in 1982. The fact of the

ERA having to audit the RMCAR’s and examine the

underlying issues did not result from ARCO’s delay, but

is instead a requirement imposed by the regulations them-

selves.*° Only prejudice which directly results from in-

10In this regard, ARCO contends that the ERA is disingenuous

in its assertion that it would be required to audit ARCO’s refiled

RMCAR’s, claiming that this assertion is merely ‘‘a canard.” See

Tr. at 29. ARCO suggests that all the ERA need do is “rubber

stamp” the Mobil V factors which the ERA already accepted in the

context of settlement negotiations. ARCO is incorrect. The ERA’s

verification of the refiled RMCAR’s is clearly a condition of refiling

under section 212.126(d). See 44 Fed. Reg. 14534 (1979); see

Crown Central Petroleum Corp., 13 DOE { 83,024 at 86,175 (1985).

Moreover, the ERA has clarified that although it accepted ARCO’s

revised V factors for purposes of settlement negotiations, it in no

way endorsed the accuracy of the underlying figures. See ERA

Comments at 16-18.

| |

45a

excusable delay is properly considered in determining the

applicability of laches. See West Wind Africa Line v.

Corpus Christi Marine Services Co., 834 F.2d 1232, 1234-

35 (5th Cir. 1988). We recognize that the task of audit-

ing the revised 1979 Restatement is made more difficult

by the passage of time since the issues and pertinent

records have now grown cold. We are unpersuaded, how-

ever, that this degree of prejudice warrants the invocation

of laches to bar ARCO’s present Application to Refile

where, as here, the equitable footing of the ERA is not

completely firm.

(3) Consent Order

Finally, the ERA maintains that ARCO’s Application to

Refile is barred by the Consent Order executed with

ARCO in 1985. In support of its position, the ERA relies

"501. All pending and potential civil and adminis-

trative claims, whether or not known, demands, lia-

bilities, causes of actton or other proceedings regard-

ing ARCO’s compliance with the Federal Petroleum

Price and Allocation regulations during the period

covered by this Consent Order, irrespective of whether

heretofore raised by an issue letter, notice of prob-

able violation, notice of proposed disallowance, pro-

posed remedial order, proposed order of disallowance,

remedial order, notice of disallowance, or otherwise

are resolved and extinguished by this Consent Order.

50 Fed. Reg. 8366, 8372 (1985) (emphasis added). The

ERA further relies on Consent Order {| 502(d):

ARCO expressly agrees that in consideration of DOE’s

performance under the Consent Order, ARCO re-

leases DOE completely and for all purposes from all

administrative and civil judicial claims, liabilities or

causes of action ARCO has asserted or might other-

46a

wise be able to assert againt DOE under the Federal

Petroleum Price and Allocation Regulations, except

for matters specifically excluded from this Consent

Order.

50 Fed. Reg. at 8373 (emphasis added). The ERA argues

that ARCO’s Application to Refile and Appeal are “ad-

ministrative claims” which were extinguished by the Con-

sent Order, and that ARCO agreed to release DOE

completely from such claims irrespective of whether ARCO

were able to foresee the need for refiling at time the

Consent Order was executed. See ERA Comments at 6;

Tr. at 40-44. In effect, the ERA argues that the Consent

Order precludes even the filing of ARCO’s Application to

Refile, and the ERA need not consider whether the Appli-

cation to Refile meets the requirements 10 C.F.R. § 212.126

(d) on the merits. We cannot agree. We have determined

that neither by its letter nor by its apparent intent does

the Consent Order constitute a bar to ARCO’s Application

to Refile.

First, the ERA incorrectly relies upon { 501 of the Con-

sent Order in support of its position. Paragraph 501

by its specific language extinguished all enforcement mat-

ters existing and which could potentially be raised by

DOE against ARCO, except those itemized in the succeed-

ing paragraphs. It released ARCO with regard to these

matters, not DOE. Clearly, therefore, that paragraph does

not constitute a bar to ARCO’s Application to Refile.

Nor do we find that §502(d) should be construed to con-

stitute a bar to the filing of ARCO’s Application to Refile.

The ERA concedes that the matter of refiling of forms

was never considered during settlement negotiations lead-

ing to the Consent Order, but maintains nonetheless that

ARCO’s application to Refile is barred by the express

terms of the Consent Order. See ERA Response to

ARCO’s Supplemental Request for Hearing, filed July 13,

1990, at 22-23. We find nothing in the language of {| 502

47a

(d) which explicitly bars the filing of ARCO’s Application

to Refile. We recognize, as asserted by the ERA, that

the language “all administrative and civil judicial claims,

liabilities or causes of action” is quite broad in scope.

However, context of this broad language makes clear that

the intent of that paragraph was to release DOE from all

enforcement matters then existing and to preclude any

enforcement matters which ARCO might later “assert

against” DOE.

The mere filing of an Application to Refile does not ipso

facto constitute an enforcement matter ‘“assert[ed!

against” DOE. Indeed, in the preamble to the Notice of

Final Rulemaking of 10 C.F.R. § 212.126(d), the agency

stated that a refiling of RMCAR’s was proper in many

instances, noting that certain cost allocation options were

available upon election by refiners and “[RMCAR’s] some-

times require the use of estimated data and that in

dealing with such calculations some good faith errors are

unavoidable.” 44 Fed. Reg. 14534 (1979). In such

instances, a refiling of RMCAR’s to correct technical

errors could certainly not be deemed to constitute an en-

forcement matter asserted against DOE. While a refiner

might improperly refile RMCAR’s in an attempt to avoid

a compliance action, thus giving rise to an enforcement

matter, that may only be ascertained upon examination

by the agency, viz. in the context of determining whether

“good cause” exists for the refiling and, if so, upon verifi-

cation and approval of the underlying cost data. We reject

the notion that, without examination, the mere submission

of an Application to Refile by ARCO is itself an enforce-

ment matter asserted against DOE which is therefore

barred by the Consent Order." Cf. Chevron U.S.A., Ine.,

12 DOE % 80,103 (1984).

11 Two observations are worthy of note in this regard. First, as

made clear later in this decision, our determination that ARCO is

not barred from filing the Application to Refile by the Consent

Order does not mean the existence of the Consent Order may not

48a

B. “Good cause”

In its present Appeal, ARCO maintains that the ERA

should have accepted its Application to Refile because:

(i) in the Mobil cases, TECA declared that the V factor

adjustments described in ARCO’s Application to Refile

were the correct V factors for months prior to February

1976; (ii) DOE has already accepted ARCO’s Mobil V

factors; and, (iii) TECA’s decision in Van Vranken

made it necessary for ARCO to obtain DOE’s permission

to use corrected V factors to mitigate its potential dam-

age liability in private overcharge litigation. We have

concluded, however, that the ERA correctly determined

that “good cause” has not been shown by ARCO.

(1) The Mobil decisions

ARCO’s contention that the Mobil litigation constitutes

“good cause” for the acceptance of its refiling rings hollow.

ARCO insists that “TECA has indicated that refiners’ V

factors should be corrected to conform with the Mobil

decisions.” Appeal at 5. Relying principally on language

contained in Mobil JJ in which TECA struck down the

April 1974 V factor amendment, ARCO maintains that

“TECA could not have provided any clearer guidance to

ERA, ARCO and other refiners.” Jd. at 6-7, citing Mobil

II, 647 F.2d at 145. However, we believe there is no

better interpreter of the Mobil decisions than TECA it-

self. In this regard, TECA’s Van Vranken decision is

dispositive.

be considered in determining whether “good cause” exists for the

refiling. Secondly, the parties disagree whether ARCO’s refiling

would in fact give rise to a compliance matter in dispute, within

the prohibitive scope of the Consent Order, if the ERA were re-

quired to perform verification and approval of the refiled RMCAR’s.

ARCO claims that the ERA has already, in principle, accepted the

RMCAR’s which it presently seeks to refile, see note 10 supra, while

the ERA maintains that many of the underlying figures are ques-

tionable. See Tr. at 52-53. However, for the reasons discussed

in the succeeding sections of this decision, we need not reach that

issue.

a J o™ \y

49a

In Van Vranken, TECA considered alternative contentions

by ARCO regarding the invalidation of the April 1974

V factor amendment in the Mobil cases. ARCO argued

that in private overcharge litigation: (1) ARCO must

retroactively reallocate its costs from exempt to covered

goods, or in the alternative (2) ARCO may reallocate

its costs from exempt to covered products.* In rejecting

these contentions, TECA gives clear indication that in

fact the ERA should accord no weight to the Mobil deci-

sions in determining whether ‘good cause” exists for the

refiling which ARCO seeks. As explained by TECA below,

nothing in the Mobil decisions suggests that all refiners

were required or must be permitted to retroactively re-

allocate costs on the basis of the invalidation of the April

1974 V factor amendment; rather, that remedy was lim-

ited to Mobil. TECA further ruled that ARCO may not

even rely upon the Mobil precedents to accomplish a retro-

active reallocation of costs by similarly challenging the

V factor amendment, since ARCO has now waived its

right to do so by failing to challenge the amendment in a

timely manner.

TECA states specifically in Van Vranken that neither

Mobil I or Mobil II required Mobil to retroactively real-

locate costs but rather they ‘‘permitted . . . Mobil to allo-

cate exempt product costs to covered products.” Van

Vranken, 890 F.2d at 423, quoting Mobil I, 610 F.2d at

805; see also Mobil II, 647 F.2d at 146-47 (“the judgment

12 Before proceeding with its consideration, TECA noted that

“lsjeveral lower courts have addressed these issues and have re-

jected the arguments ARCO presently advances.” 890 F.2d at 423,

citing Naph-Sol Refining Co. v. Murphy Oil Corp., 550 F. Supp.

297 (W.D. Mich. 1982), mod’d on other grounds, sub. nom. Mobil

Oil Corp. v. Department of Energy, 728 F.2d 1477 (1983), cert.

denied, 467 U.S. 1255 (1984); Kickapoo Oil Co., Inc. v. Murphy

Oil Corp., No. 78-C-478-C (W.D. Wis., December 28, 1983); Martin

Oil Service, Inc. v. Koch Refinding Co., 718 F. Supp. 1334 (N.D.

Ill. 1989); U.S. Oil Company, Inc. v. Koch Refining Co., No. 79-C-

659 (E.D. Wis., March 13, 1989).

50a

is correct insofar as it permits Mobil to allocate exempt

product costs to covered products .. .”). TECA further

observed that, even absent the V factor amendment, noth-

ing in the regulations required that costs for exempt

products be attributed to covered products when calcu-

lating allowable prices, and thus there was nothing un-

lawful in the method whereby ARCO allocated its in-

creased costs which resulted in prices within the lawful

maximum. More simply stated, TECA’s invalidation of

the V factor amendment did not render ARCO’s election

unlawful. TECA therefore concluded that “there is no

support for ARCO’s contention that refiners are re-

quired to retroactively reallocate costs based on Mobil I

and Mobil Il....” Van Vranken, 890 F.2d at 423. Since

TECA determined that ARCO was not required under the

regulations to reallocate costs based upon the invalidation

of the V factor amendment, we must conclude that cor-

respondingly the Mobil decisions do not compe. a finding

of “good cause” for the acceptance of ARCO’s present re-

filing in which the firm seeks to accomplish this same

retroactive reallocation of costs. Nothing in the Mobil

cases indicates that ARCO, or any other refiner not sub-

ject to that litigation, must be permitted to reallocate

costs employing unamended V factors.

Nor are we persuaded that in view of the Mobil trilogy

ARCO should be permitted to perform the retroactive re-

allocation of costs it seeks. The ERA has clearly not

abused its discretion in determining that the Mobil cases

do not constitute “good cause’ for the acceptance of

ARCO’s refiling. Again, the Van Vranken decision leads

to the opposite conclusion. In considering the question of

whether ARCO may retroactively reallocate costs under

the Mobil cases, TECA determined that-two questions

were presented: (i) whether ARCO must first obtain

permission from DOE, and (ii) whether ARCO waived

any right to retroactive reallocation by failing to timely

challenge the 1974 amendment. Regarding the first issue,

5la

TECA ruled that ARCO’s failure to obtain permission

from DOE to retroactively reallocate costs in the context

of a formal refiling under 10 C.F.R. § 212.126(d), pre

cluded ARCO from any relief by the court. Jd. at 423-24,

citing Eastern Air Lines v. Atlantic Richfield Co., 712

F.2d 1402, 1408-09 (Temp. Emer. Ct. App.), cert. denied,

464 U.S. 915 (1983). Then, addressing the matter of

timeliness, TECA stated:

We further find that ARCO waived its right to relief

by not challenging the regulation in a timely manner.

At oral argument, ARCO suggested that once we de-

clared the 1974 amendment invalid, refiners had an

indefinite period in which to retroactively reallocate

costs. This argument is without merit. If ARCO

believed the 1974 amendment was invalid, the com-

pany should have taken steps to protest the regulation

rather than attempt to jump on Mobil’s coattails five

years after the amendment became effective. ARCO

could have, like Mobil, challenged the regulation.

The company could have also sought to intervene in

Mobil’s action, or requested administrative relief as

Getty [Oil Company] did. Having failed to challenge

the regulation in a timely manner, ARCO is not en-

titled to relief at this late date.

Id. at 424-25 (emphasis added). Thus, notwithstanding

the Mobil cases, TECA definitively closed the door on any

attempt by ARCO to challenge the April 1974 V factor

amendment. We find incongruous ARCO’s position that al-

though TECA has ruled that “Mobil’s coattails” are no

longer available to ARCO for that purpose, the firm may

nevertheless rely on the Mobil decisions to “bootstrap” a

showing of good cause for the acceptance of its refiling by

DOE at this late date. Any interest on the part of DOE

with respect to ARCO’s cost allocations was ended by de-

control of oil prices in 1981 and by the Consent Order in

1985, which resolved all enforcement matters, existng and

52a

potential, between ARCO and DOE. Absent any remain-

ing governmental interest in ARCO’s compliance with the

former price controls and in view of TECA’s holding that

ARCO has now waived its right to challenge the 1974

V factor amendment, the Mobil decisions simply do not

constitute good cause.

Instead, we are left with DOE’s official pronouncement

with regard to cost reallocations of the type which ARCO

seeks in its Application to Refile. In that regard, we need

look no further than the 1981 rulemaking in which the

agency promulgated the amended V factor rule. The

agency stated in pertinent part:

Generally, our regulations allow for refiling of in-

creased costs only within one year of the original

report. 10 C.F.R. 212.126(d) (1). Exceptions are

only made for “good cause.” 10 C.F.R. 212.126

(d) (2). In adopting this rule today, we are in effect

determining that no good cause exists to allow re-

finers on an industry-wide basis to retroactively in-

clude increased crude oil costs volumetrically attribut-

able to exempt products. No good cause exists be-

cause a rule that precludes the passthrough on covered

products of costs not volumetrically attributable to

those products best furthers the purposes of the

EPAA.

46 Fed. Reg. 7776, 7782 (1981) ‘emphasis added).

ARCO argues that this language is inapposite since in

Mobil IIT, TECA invalidated this rulemaking to the ex-

tent the agency attempted to make retroactive the re

promulgation of the amended V factor rule. See Appeal

at 7-9. We disagree. As made clear by TECA’s more

recent holding in Van Vranken, only a refiner which chal-

lenged the amended V factor rule on a timely basis, not

ARCO, may bring itself under the Mobil umbrella. We

therefore find no reason to ignore the agency’s stated

position that “good cause” does not exist for the retro-

58a

active reallocation of costs which ARCO seeks would

contravene the purposes of the EPAA.*

(2) DOE acquiescence

We also find without merit ARCO’s claim that there is

“good cause” for the acceptance of its refiling based upon

the agency’s actions and statements following Mobil I/1.

ARCO asserts that following TECA’s decision in Mobil

III, the agency permitted refiners, including ARCO, to

use Mobil V factors for the period prior to February

1976 in settlement negotiations. In this regard, ARCO

has submitted the Affidavit of Rayburn Hanzlik, for Ad-

ministrator of ERA, who acknowledges that following

Mobil IIT, the agency acquiesced in the use of the un-

amended V factor formula in settlement negotiations and

brought no enforcement actions against refiners on the

basis that they calculated V factors in that manner.

Appeal at 10-12, quoting Affidavit of Rayburn Hanzlik,

Application to Refile Exh. D, {7 5 and 7.

13 Indeed, in Martin Oil Service, Inc. v. Koch Refining Co., 718

F. Supp. 1334 (N.D. Ill. 1989), the District Court specifically en-

dorsed the efficacy of the agency’s pronouncement, notwithstanding

the Mobil decisions, in considering a purported refiling involving

circumstances substantially similar to the present:

Suffice it to say that Koch did not receive DOE permission

prior to its 1980 refiling. In fact, DOE chose to publish a class-

wide rejection of the multiple refiner refilings which followed

Mobil I as firms attempted to reallocate increased costs. See

46 Fed. Reg. 7782 (Jan. 23, 1981) (“‘we are in effect determin-

ing that no good cause exists to allow refiners on an industrvy-

wide basis to retroactively include increased crude oil costs

volumetrically attributable to exempt products’’).

This has led other courts to consider such refilings illegal

in the face of what might be interpreted to be agency acqui

escence—here, for example, Koch's claim that DOE “has never

rejected the August 1980 forms”...

718 F. Supp. at 1351, citing Kickapoo Oil Cempany, Inc. v. Murphy

Oil, No. 78-C-478-C (W.D. \ise. 1983).

‘

54a

However, even accepting the validity of these assertions,

the agency’s enforcement and settlement practices do not

amount to a showing of “good cause” for the acceptance

of a formal refiling. The ERA has explained that it ac-

cepted ARCO’s V factors during settlement negotiations

only as a point of compromise to move settlement nego-

tiations forward. See Tr. at 49-51. An agency determina-

tion to accept certain bargaining points, e.g., unamended

V factors, in the give and take of settlement negotiations

with a refiner is not a binding policy nor in any way does

it supersede the formal refiling requirements of 10 C.F.R.

§ 212.126(d). See Crown Central Petroleum Corp., 138

DOE { 83,024 at 86,174-77 (1985). Moreover, as stated

by TECA, “[n]othing in the invalidation of the 1974

amendment had any effect on the refiling regulations and

nothing in the refiling regulations excepts refiners from

compliance when an allocation regulation is invalidated.

[T]he regulations governing retroactive reallocation

are no less effective because the 1974 amendment was in-

validated.” Van Vranken, 890 F.2d at 424. Thus, neither

the invalidation of the 1974 amendment nor any resulting

settlement practice adopted by the agency eliminated the

formal refiling requirements of section 212.126(d). The

agency's settlement practices and the policy objectives of

the refifng regulations are completely separate. Thus,

DOE never acquiesced in ARCO’s filing of unamended

V factors. .

(3) The Van Vranken decision

Finally, we find untenable ARCO’s contention that good

cause exists because its refiling was “necessitated” by

Van Vranken. According to ARCO, it had no reason to

seek DOE’s permission to refile before Van Vranken, “in

which TECA for the first time held that compliance with

DOE’s refiling regulations is relevant to the determina-

tion of overcharges in private actions. .. .”” Appeal at 12.

ARCO claims that the essence of TECA’s decision is that

55a

“liJf you want to use these adjusted V’s in a private

case, you’ve got to get permission.” Tr. at 12. ARCOQ’s

reading of Van Vranken is specious. While it is correct

that TECA held that ARCO had failed to comply with re-

filing prerequisite of 10 C.F.R. § 212.126(d) (2), we find

nothing in the decision which directs or invites ARCO

to refile at this juncture."

Indeed, to the contrary, if there is any indication which

may be readily extracted from the Van Vranken decision,

it is that ARCO should not now seek to refile since it

would be a futile exercise. Citing a myriad of cases,

TECA observed that several courts have already rejected

attempts, such as that advanced by ARCO, to perform

a retroactive reallocation of costs in private overcharge

litigation based upon the invalidation of the 1974 V factor

amendment in the Mobil litigation. 890 F.2d at 423; see

cases cited in note 12, supra. These cases make clear that

retroactive cost reallocations of this type have been dis-

favored by the courts. ARCO refuses to recognize that

above all else in Van Vranken, TECA affirmed the U.S.

District Court’s decision in Van Vranken v. Atlantic

Richfield Company, 699 F. Supp. 1420 (N.D. Cal. 1988).

There, the District Court explained why it would be in-

appropriate at this late date to permit ARCO to reallocate

its costs in cther private overcharge actions:

Obviously the Mobil decisions invalidating the April

1974 amendment establish that a plaintiff cannot sue

for over-recoveries which stemmed from a refiner’s

improper use of this rule. The decisions indicate that

i4 Noting that ARCO had previously failed to obtain DOE’s per-

mission to refile, TECA stated that “[i]f ARCO thought the DOE

erred in not granting the company permission to retroactively re-

allocate its costs, ARCO could presumably have brought an action

appealing the DOE’s decision.” Van Vranken, 890 F.2d at 424 n.2.

Thus, TECA simply observed that ARCO had failed in its attempt

to refile previously. ARCO’s supposition that TECA thereby “neces-

sitated” the present refiling is to stretch the court’s dicta beyond

reasonable bounds.

56a

correct posture for a refiner in an exogenous world

would have been to ignore the amendment and to con-

tinue to include the exempt product prices in the

denominator of the V factor. Refiners like ARCO,

however, followed the amendment and excluded the

prices. The fact that the Mobil decisions later invali-

dated the amendment does not mean that ARCO can

now go back and allocate more costs to the products

it sold and thus expand its banked costs. The court

notes that this proposal would be akin to permitting

a refiner to return to its customers after a dozen

years had passed and inform them that it under-

charged them: The refiner mistakenly operated under

a recently invalidated regulation which set the prices

too low, so it should now be permitted to ask the

customers to pay the difference on products sold and

consumed many years ago. Whether the costs are

banked for the future or extracted from the customer

in the price of today’s goods, the result is the same.

699 F. Supp. at 1425 (footnote omitted). Then, in con-

sidering the matter of a refiling of cost forms by ARCO,

the District Court stated that “[i]f ARCO had received

permission from the DOE to include the exempt products

costs in its covered products costs, or if ARCO ever ap-

plied to the DOE during a grace period, it is possible

that the refiner might still be allowed to adjust its V

factor as it desires. The court determines that ARCO

did neither of these things.” Jd. at 1427 (emphasis

added). Thus, the District Court was unmistakable in its

judgment that it was too late for a reallocation of costs

by ARCO. In Eastern and again in Van Vranken, the

courts made it clear that the avenues on which ARCO

might have proceeded are now closed.

In any event, even were we to accept, arguendo, that

TECA suggested in Van Vranken that ARCO should

again seek DOE permission to refile, that suggestion is

irrelevant to a finding of “good cause” under section

57a

212.126(d). An invitation to seek permission does not

constitute grounds for the approval of permission any

more than the mere filing of an application means that

the application must be approved. ARCO’s Application to

Refile must be evaluated on its own merits in determin-

ing whether “good cause” exists for the acceptance of the

refiling. As discussed above, ARCO has failed to meet

that standard.

C. Due Care and diligence

We have further determined that ARCO fails the satisfy

the “due care and diligence” provision of refiling regula-

tion. Section 212.126(d)(3) states, in pertinent part,

that “|wlhere it appears that such a finding [of good

cause] may adversely affect the interest of the consuming

public, a: firm must demonstrate in its application, at a

minimum, that the claimed errors or omissions in the

report or reports which the firm seeks to modify did not

result from a failure to exercise due care and diligence.”

Under the circumstances presented, we have concluded

that ARCO has failed to meet this requirement.

ARCO claims in its Appeal that a showing of “due care

and diligence” is not required in this case since there is

no indication that the approval of its Application to Re-

file “may adversely affect the interest of the consuming

public.” In this regard, ARCO argues that: (i) public

interest issues relating to this matter were resolved by

TECA in the Mobil cases in favor of ARCO; (ii) since

price controls have ended, ARCO’s prices will be un-

affected by revisions of its RMCAR’s, (iii) permitting

ARCO to properly avail itself of valid regulations (in-

cluding unamended V factors) for purposes of the Van

Vranken litigation cannot adversely affect the “‘consum-

ing public’, and (iv) the plaintiffs in Van Vranken are

“wholesale purchaser-resellers”, not consumers, and con-

sequently there is no harm to the public interest.” See

Appeal at 15-16. We do not accept these assertions.

58a

As held by TECA, ARCO has now lost the opportunity

to ride on the coattails of Mobil. However, in any event

and despite Mobil, it is clear that permitting ARCO to

refile its RMCAR’s “may” adversely affect the consum-

ing public. ARCO attempts to avoid that conclusion by

raising the purported inequity of relegating the firm to

uncorrected V factors in the Van Vranken litigation.

Notwithstanding, the fact remains that permitting ARCO

to now modify its V factors would, as conceded by ARCO,

“prevent plaintiffs in Van Vranken and Sinclair from re-

ducing ARCO’s banks of unrecovered costs, thus making

it more difficult for them to prove liability and over-

charges in those cases ....”’ Appeal at 15-16. This cer-

tainly constitutes an adverse affect upon third parties.

Further, we reject ARCO’s supposition that because the

plaintiffs in Van Vranken are comprised of “wholesale

purchaser-resellers” as opposed to end-users, any impact

upon them as a result of ARCO’s refiling cannot be con-

sidered to “adversely affect the interest of the consuming

public.” We find no basis for that distinction in the

regulation. The agency does not define or even mention

the phrase “interest of the consuming public” in the No-

tice of Final Rulemaking adopting 10 C.F.R. § 212.126

(d) (2), but states only that “the burden is on the ap-

plicant to demonstrate that the claimed errors or omis-

sions in the initial report did not result from a failure

to exercise due care and diligence.” 44 Fed. Reg. 15534

(1979). We believe, however, that the phrase “interest

of the consuming public” should be broadly construed

to embrace the policy objectives of the EPAA, pursuant

to which the regulation was promulgated. In that regard,

section 4(b) (1) (F) of the EPAA provides for, in per-

tinent part, “equitable distribution of .. . refined pe-

troleum products at equitable prices among all... sec-

tors of the petroleum industry.” *° Consequently, it is

15 We further note that despite the termination of price controls,

achieving restitution for overcharge victims has remained a princi-

59a

incumbent upon ARCO to show that the firm exercised

due care and diligence with regard to V factors which

it now seeks to modify. For the reasons below, we have

determined that ARCO has failed to make that showing."

While ARCO once may have started to exercise “due

care and diligence” in attempting to correct its V factors

following the initial Mobil decisions, the firm never saw

that effort through to completion. We find no legitimate

justification for ARCO’s failure to appeal the ERA’s

nonacceptance of its March 1982 refiling or to make any

other attempt to formally refile its RMCAR’s prior to

the present Application to Refile. The Van Vranken

litigation was initiated in March 1979. Even though the

ERA let ARCO use adjusted V factors for the limited

purpose of settlement negotiations, ARCO should have

recognized that the only certain way it could protect its

interests in the Van Vranken litigation was by pursuing

and gaining formal acceptance of its March 1982 refiling.

We cannot accept ARCO’s contention that the firm was

justified in its curious decision not to press for accept-

ance of a formal refiling.

As explained earlier, TECA ruled in Van Vranken that

ARCO was required to make a formal refiling under sec-

pal interest of the agency. See 10 C.F.R. Part 205, Subpart V. In-

deed, in that regard, we have specifically recognized members of the

Van Vranken class of plaintiffs as claimants entitled to restitution

in the refund proceeding for ARCO customers established under

Subpart V. See Atlantic Richfield Company, 17 DOE { 85,069 at

88,149-50 (1988).

16 We differentiate our determination that ARCO failed to exer-

cise due care and diligence from our ruling above in which we

rejected the ERA’s contention that ARCO’s Application to Refile

is barred on the basis of laches. While inexcusable delay is a

primarily element in both instances, the requirement of “due care

and diligence” is clearly set forth in section 212.126(d)(3). Laches,

however, is an equitable doctrine; as discussed, the ERA had neither

the equitable footing nor the ability to show the requisite prejudice

to invoke that doctrine.

60a

tion 212.126(d) based upon its holding in another pri-

vate overcharge case involving ARCO, Eastern Air Lines

v. Atlantic Richfield Co., 712 F.2d 1402 (Temp. Emer.

Ct. App.), cert. denied, 464 U.S. 915 (1983). ARCO has

attempted to distinguish Eastern Air Lines on the basis

of that a different type of cost reallocation was involved

in that case. See ARCO Response at 12-14." However,

TECA addressed this matter in Van Vranken:

ARCO attempts to distinguish Eastern Air Lines on

the grounds that in Eastern Air Lines ARCO could

choose how to allocate costs while in the instant case

only one method for allocating increased costs was

available. We do not find this distinction consequen-

tial. The central basis of the decision in Eastern

Air Lines was that ARCO failed to obtain permission

from the DOE to retroactively reallocate costs as

required by the regulations. The failure to obtain

permission from the DOE, not the nature of the in-

itial allocation of costs, determined the outcome in

Eastern Air Lines.

890 F.2d at 424. Accordingly, we must reject ARCO’s

contention that Eastern Air Lines provided no indica-

tion that a formal refiling with DOE would be required

in order to claim adjusted V factors in private litiga-

tion. In essence, ARCO’s position is simply that it dis-

agrees with TECA regarding the interpretation of the

state of the case law prior to Van Vranken. ARCO’s

position is futile; it refuses to accept what it must. On

the basis of TECA’s language in Van Vranken, it is evi-

dent that ARCO misjudged the import of the Eastern

Air Lines decision. By myopically adopting a different

reading of the decision, ARCO gambled and lost. We

must conclude that for purposes of section 212.126(d)

17 Rather than a V factor adjustment, the Eastern Air Lines

decision concerned an “H factor” adjustment whereby ARCO sought

to retroactively allocate costs from its gasoline cost bank to other

covered products. See 712 F.2d at 1408.

6la

(3), ARCO failed to exercise due care and diligence in

delaying and not seeking to modify the V factors in its

RMCAR’s until the present Application to Refile. ARCO’s

Application to Refile may be properly denied on this basis.

See Standard Oil Company of Ohio, 9 DOE { 80,101 at

80,502 (1981). |

D. Conclusion

On the basis of the foregoing considerations, we have

concluded that the ERA’s determination denying ARCO’s

Application to Refile should be sustained. ARCO has

failed to show that “‘good cause” exists for the acceptance

of its refiling. 10 C.F.R. § 212.126(d) (2). In addition,

ARCO has failed to demonstrate that the firm exercised

“due care and diligence” in seeking the adjustments to

its RMCAR’s contained in its Application to Refile. See

id. § 212.126(d) (3). We therefore find that the ERA’s

denial of ARCO’s Application to Refile was not erroneous,

arbitrary or capricious. Accordingly, the Appeal filed by

ARCO should be denied.

It Is Therefore Ordered That:

(1) The Appeal filed by Atlantic Richfield Company

(ARCO) on April 16, 1990, is hereby denied.

(2) This is a final order of the Department of Energy

from which any aggrieved party may seek judicial re-

view.

/s/ George B. Breznay

GEORGE B. BREZNAY

Director

Office of Hearings and Appeals

Date: Feb. 1, 1991

62a

APPENDIX E

TEMPORARY EMERGENCY COURT OF APPEALS

OF THE UNITED STATES

No. DC-117

ATLANTIC RICHFIELD COMPANY,

. Appellant,

U.S. DEPARTMENT OF ENERGY, et al.,

and

DON VAN VRANKEN, on behalf of himself and

all others similarly situated,

Appellees.

Before: Grant, Peck and Weigel, Judges.

ORDER

Upon consideration of Appellant’s Petition for Rehear-

ing and Suggestion for Rehearing En Bane, it is

ORDERED that said Petition for Rehearing is DE-

NIED.

It is FURTHER ORDERED that the Petition For Re-

hearing En Banc is DENIED. The Court’s mandate shall

issue seven days from the date of this order—October 13,

1992.

FOR THE CourT:

CYNTHIA A. DYKES

Clerk

By: /s/ Sharon A. Krosel

SHARON A. KROSEL

Chief Deputy Clerk

October 6, 1992

(District Ct. No. 91-465)

63a

APPENDIX F

UNITED STATES COURT

OF INTERNATIONAL TRADE

Court No. 88-05-00394

CERAMICA REGIOMONTANA, S. A., CERAMICAS Y PISOS

INDUSTRIALES, DE CULIACAN, 8.A., INDUSTRIAS,

INTERCONTINENTAL, 8.A.,

Plaintiff,

THE UNITED STATES.

Defendant.

May 15, 1992, Decided

Brownstein, Zeidman and Schomer, (Steven P. Kersner

and Ronald W. Wisla) for plaintiffs.

Stuart M. Gerson, Assistant Attorney General, David

M. Cohen, Director, Commercial Litigation Branch, Civil

Division, U.S. Department of Justice, (Velta A. Meln-

brencis) for defendant.

Before: MUSGRAVE, Judge.

Opinion By: R. KENTON MUSGRAVE.

OPINION

Introduction Plaintiffs Ceramica Regiomontana (‘‘Cera-

mieca,”’) Ceramica Y Pisos Industriales de Culiacan

(“Culiaecan”) and Industrias Intercontinental (‘Inter-

continental’) challenge the final results of an adminis-

trative review by the Department of Commerce of an

order imposing countervailing duties upon imported ce-

64a

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