Opposition Brief — Atlantic Richfield Co. v. United States Department of Energy

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No. 92-789 i WAN 29 1993

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“PFEICE OF THE CLAY

Jn the Supreme Court of the Cinited stars

OCTOBER TERM, 1992

ATLANTIC RICHFIELD COMPANY. PETITIONER

oP

UNITED STATES DEPARTMENT OF ENERGY. ET Al

ON PETITION FOR A WRIT OF CERTIORARI

TO THE TEMPORARY EMERGENCY COURT OF APPEAI

OF THE UNITED STATES

BRIEF FOR THE FEDERAL RESPONDENTS

IN OPPOSITION

WILLIAMC. BRY

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7 ART M (;1

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Mic HA] 1A >

BRUCE G. FORI

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Don W. CROCKET Washington, DC

Director } ea i

RICHARD FL AHERN

Assistant Director

Judicial Litigation Dini

Keonomic Re gulatory Ad» ) Prat

1D) partnn nt of Ene rg

Washington, D.C. 2058

QUESTION PRESENTED

Whether the Department of Energy abused its dis-

cretion in denying petitioner’s 1989 application for

retroactive reallocation of certain increased crude oil

costs, incurred from 1973 through 1975, to reduce

petitioner’s liability in private litigation over alleged

overcharges.

(I)

TABLE OF CONTENTS

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TABLE OF AUTHORITIES

Cases:

Chevron U.S.A. Inc. v. Department of Energy, 944 F.2d

Pee COMED, TROT, CL, ADD. BODE) ...ccecesccesscsovcscccescccocsse

Dobbs v. Zant, No. 92-5579 (Jan. 19, 1993) ......................

James B. Beam Distilling Co. v. Georgia, 111 S. Ct. 2349

INE HAIL. diwtecaidcdnsueceal sdencsuphiankbedanpacbehedinaxcensuseerextets

Mobil Oil Corp. v. Department of Energy:

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

EMP NE MINER dn niedacedenacterncecsssevessonesisaes

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

678 F.2d 1083 (Temp. Emer. Ct. App. 1982) .............

United States v. Goodner Bros. Aircraft Inc., 966 F.2d

380 (8th Cir. 1992), cert. denied, No. 92-607 (Jan. 11,

as Ts ace mebgndnapndasasddnandades

Van Vranken v. Atlantic Richfield Co.:

699 F. Supp. 1420 (N.D. Cal. 1988) ............... eens

890 F.2d 421 (Temp. Emer. Ct. App. 1989), cert. de-

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Statutes and regulations:

F.conomic Stabilization Act Amendments of 1971, Pub. L.

NO. GE-E1O, § ZB, BS Stat. T44-TEB ...........ccsccccccessssccesessseses

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

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Regulations—Continued: Page

10 C.F.R.:

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Miscellaneous:

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In the Supreme Court of the Gited States

OCTOBER TERM, 1992

No. 92-789

ATLANTIC RICHFIELD COMPANY, PETITIONER

Vv.

UNITED STATES DEPARTMENT OF ENERGY, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE TEMPORARY EMERGENCY COURT OF APPEALS

OF THE UNITED STATES

BRIEF FOR THE FEDERAL RESPONDENTS

IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. la-

10a) is reported at 977 F.2d 611. The opinion of the

district court (Pet. App. 12a-27a) is reported at 772 F.

Supp. 654.

JURISDICTION

The judgment of the court of appeals was entered on

August 27, 1992. A petition for rehearing was denied

on October 6, 1992. Pet. App. 62a. The petition for a

writ of certiorari was filed on November 5, 1992. The

jurisdiction of this Court is invoked under Section

211(g) of the Economic Stabilization Act of 1970, as

amended, 85 Stat. 750, and 28 U.S.C. 1254(1).

(1)

2

STATEMENT

1. Under the Economic Stabilization Act of 1970

(ESA), as amended, 85 Stat. 744-753 (1971), and reg-

ulations issued thereunder, all products refined from

crude oil were subject to price controls. The

applicable regulations permitted oil refiners, such as

petitioner, to incorporate their increased crude oil

costs into the maximum permissible prices they could

charge for products subject to price controls, using a

volume-based formula known as the “V factor.” Pet.

App. 2a. The V factor was used to allocate allowable

crude oil cost increases among various refined prod-

ucts, and was derived by dividing the volume of a given

covered product sold during the relevant period by the

total volume of all covered products sold during that

period. /bid. Refiners could pass increased costs

through in the price of a covered product during a

given month, using the amount calculated under this

formula, or they could “bank” the allowable cost

increases for pass-through in subsequent months.

Ibid.

The ESA expired on April 30, 1974, and was

superseded for present purposes by the Emergency

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

(1982) (EK PAA). See Pet. App. 2a. Certain refinery bv-

products subject to price controls under the ESA

were to be decontrolled under the EPAA. J/bid.

Shortly before the ESA expired, the Department of

Energy concluded that its existing regulations would

permit refiners to allocate their total increased crude

oil costs (including those associated with the newly

decontrolled by-products) to products still subject to

price controls. Pet. App. 2a-3a. In an effort to prevent

5)

this result, the Department promulgated an emer-

gency amendment to the regulations on April 30, 1974,

without notice or comment, requiring that refiners

include the volume of all products, including the

newly decontrolled products, in the denominator of

the V factor fraction. 39 Fed. Reg. 15,139 (1974); see

Pet. App. 8a.

Certain refiners, including Mobil Oil Corporation,

subsequently challenged the validity of the amended

regulations or requested administrative exceptions.

In a series of cases, the Temporary Kmergency Court

of Appeals determined that the April 30, 1974, amend-

ment to the allocation formula was procedurally and

substantively invalid and that Mobil was entitled to

reallocate its costs in accordance with the unamended

formula. Mobil Oil Corp. v. Department of Energy,

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

446 U.S. 937 (1980) (Mobil 1); Mobil Oil Corp. v.

Department of Energy, 647 F.2d 142 (Temp. Emer. Ct.

App. 1981) (Mobil 11); Mobil Oil Corp. v. Department

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

(Mobil III). Pet. App. 3a. Beginning in 1976, the V

factor (as amended) was first supplemented and then

replaced with a different cost allocation formula, the

validity and effect of which are not at issue here. See

Mobil ITI, 678 F.2d at 1085.

The EPAA regulations required petroleum refin-

ers like petitioner to file monthly cost allocation

reports with the Department of Energy. See 10

C.F.R. 212.126(b) (1975). Petitioner filed such reports

for the period in question, using the amended V factor

formula in calculating its increased cost allocations.

Pet. App. 3a. In March 1979, the Department of

4

Energy issued a firtal regulation limiting the time

within which it would “routinely” accept revised and

resubmitted cost allocation reports. 44 Fed. Reg.

14,536; 10 C.F.R. 212.126(d). The regulation provided a

further grace period (until June 1, 1979) for refiling

reports covering periods beginning in or after

September 1973. After that time, refilings would be

accepted only where expressly authorized by reg-

ulation or order, or where the Department granted

“written permission to resubmit or refile for good

cause shown.” 10 C.F.R. 212.126(d)(2). As the court of

appeals noted, Pet. App. 4a, the regulation specifically

provides that the Department “will not make a finding

of good cause routinely.” Although it does not limit

the Department’s discretion in determining whether

good cause has been shown, the regulation does

provide specifically that

Where 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 replace or modify did not result from

a failure to exercise due care or diligence.

10 C.F.R. 212.126(d)(8).

In March and April 1980 and August 1981, peti-

tioner requested that the Department of Energy

permit it to refile various cost allocation reports,

using the unamended V factor formula. The Depart-

ment rejected each of these requests as premature

pending final resolution of the Mobil litigation. In

March 1982 (before the decision in Mobil III), peti-

tioner again requested permission to refile; this time

5

the Department did not respond. Shortly thereafter,

negotiations began that resulted in the settlement, in

1985, of essentially all price control compliance issues

between petitioner and the Department. Pet. App. 4a,

oda.

2. In 1979, a group of petitioner’s wholesale cus-

tomers (intervenor-respondents here) filed suit

alleging that petitioner had overcharged them for

price-controlled products. Pet. App. 4a. See Van

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

(N.D. Cal. 1988). In a summary judgment motion filed

in 1988, petitioner argued that, under the Mobil cases,

it had the right to reallocate its costs retroactively

using the unamended V factor formula, thus in-

creasing the costs allocable to covered products and

offsetting any overcharge liability to the Van

Vranken plaintiffs. Pet. App. 5a. The district court

rejected petitioner’s argument, holding that the

Mobil decisions did not automatically allow petitioner

to reallocate its costs. [bid.

The court of appeals affirmed, holding that the

Mobil cases neither required nor permitted peti-

tioner to reallocate its costs retroactively without

complying with the Department’s discretionary refil-

ing regulation. Van Vranken v. Atlantic Richfield

Co., 890 F.2d 421 (Temp. Emer. Ct. App. 1989), cert.

denied, 494 U.S. 1005 (1990). See Pet. App. 5a. As the

court below in this case described its prior reasoning

in Van Vranken, petitioner was not required to

reallocate its costs because there was nothing illegal

about having claimed less than the maximum

permissible cost increase by using the amended

V factor formula. /bid. Petitioner was not permitted

6

to reallocate its costs because it had not complied

with the applicable regulations and obtained the

Department’s permission to refile its cost reports.

Ibid. Moreover, the court held that petitioner had

waived any right to judicial relief by failing to

challenge the validity of the V factor amendment in a

timely manner. /bid.

3. a. After the court of appeals’ decision in Van

Vranken, petitioner submitted a new application with

the Department requesting permission to refile its

cost allocation reports for the months August 1973

through December 1975 using the unamended

V factor formula. Pet. App. 5a, 28a. When the Depart-

ment did not respond within 90 days, see 10 C.F.R.

205.96, petitioner appealed to the Department’s Office

of Hearings and Appeals (OHA). Pet. App. 5a, 28a. In

February 1991, the OHA issued an opinion upholding

denial of petitioner’s application to refile. /bid.

Relying largely on the court of appeals’ opinion in

Van Vranken, the OHA concluded that the Mobil

decisions and other factors cited by petitioner did not

constitute “good cause” for the refiling under

10 C.F.R. 212.126(d)(2). Pet. App. 5a, 48a-57a. Alter-

natively, the OHA determined that petitioner had

failed to satisfy the “due care and diligence” provision

of the regulation. Pet. App. 5a, 57a-61a; 10 C.F.R.

212.126(d)(3).

b. Petitioner challenged the OHA’s decision in the

United States District Court for the District of

Columbia, beginning the present litigation. In reject-

. ing petitioner’s good cause arguments, that court

held that the OHA had “preperly interpreted and

applied the holding of Van Vranken” and the De-

7

partment’s regulations, had acted rationally, and had

made no clear error of judgment. Pet. App. 2la. The

court further held that the OHA’s interpretation of

the “due care and diligence” requirement of the

refiling regulation was both entitled to deference and

substantively correct. Pet. App. 21a-27a.

c. On appeal, petitioner renewed its good cause and

“due diligence” arguments. See Pet. C.A. Br. 12-25.

Petitioner also argued for the first time that

“principles of equality * * * and stare decisis” articu-

lated by this Court in James B. Beam Distilling Co.

v. Georgia, 111 S. Ct. 2439 (1991), required reversal so

that petitioner could enjoy the benefit of the Mobil

decisions invalidating the amended V factor reg-

ulations. Pet. C.A. Br. 14.

The court of appeals rejected petitioner’s argu-

ments. The court observed that Beam involved this

Court’s announcement of a new constitutional rule,

that the scope of its holding was not yet clear, and

that the members of this Court who joined in the

decision “differed greatly in their rationale[s] for the

judgment.” Pet. App. 7a-8a. The court concluded,

however, that it was unnecessary to address any of

those issues in detail, because even if the Beam ret-

roactivity principle applied to this case, it would not

entitle petitioner to reallocate its costs without

obtaining permission in accordance with the Depart-

ment’s regulations. Pet. App. 8a-9a.

The court noted that Beam distinguished carefully

between the ‘determination of what rule of law was

applicable to litigants generally, and what remedies

would be available to litigants in particular cases.

Pet. App. 8a (citing, inter alia, 111 S. Ct. at 2448

8

(remanding case and making clear that respondent

remained free to raise “procedural bars to recovery”

or other arguments affecting availability of relief in

the particular case)). The court then reiterated that

because petitioner’s cost allocations as originally

filed were permissible under either the amended

V factor formula invalidated in Mobil J or under the

original formula, there was “no requirement that the

cost allocations be changed.” Pet. App. 9a. Thus, the

court viewed the question on appeal as the same as

that presented to the OHA and to the district court:

“whether [petitioner] has established sufficient good

cause for [the Department] to grant special permis-

sion for the refiling” under the applicable regulations.

Ibid. ‘

As the court observed, that question lies “within

the discretion of [the Department].” Pet. App. 9a. In

light of the court’s previous decision in Van Vranken,

petitioner’s admission that “the only impact of the

refilings would be in determining its potential

liability” to the Van Vranken plaintiffs, and “other

cases * * * which ‘uniformly hold that where the

original cost allocation was permissible but not

required, retroactive recalculation should not be

allowed to offset overcharges which [arose] as a

result of unrelated regulatory violations,’ ” the court

held flatly that “the OHA and [the] district court

correctly concluded that no good cause exists to allow

[petitioner’s] belated refiling.” Pet. App. 9a-10a,

quoting Chevron U.S.A. Inc. v. Department of

Energy, 944 F.2d 914, 917 (Temp. Emer. Ct. App.

1991).

9

ARGUMENT

Petitioner contends that this Court’s decision in

James B. Beam Distilling Co. v. Georgia, supra,

requires that the court of appeals grant petitioner the

benefit of that court’s prior decision in Mobil /,

invalidating the amended V factor formula. As the

court of appeals correctly recognized, however, this

case does not turn on the application of Beam to

invalidated agency regulations, nor does it involve a

dispute over basic principles of retroactivity. See

Pet. App. 6a-8a. Indeed, the court of appeals assumed

that the unamended V factor formula reinstated by

Mobil I would supply the rule of law governing

petitioner’s cost allocations for the period in ques-

tion. Pet. App. 9a. The question instead is whether

petitioner, in its quest to obtain the benefit of Mobil J,

has satisfied the Department of Energy’s separate

regulatory requirements for amending a valid,

previously filed cost allocation.' /bid.

1 Petitioner is similarly mistaken in suggesting that the

court of appeals’ decision conflicts with United States v.

Goodner Bros. Aircraft, Inc., 966 F.2d 380 (8th Cir. 1992), cert.

denied, No. 92-607 (Jan. 11, 1993). In that case, the Eighth

Circuit cited Beam in reversing various criminal convictions

that were potentially predicated on an invalid Environmental

Protection Agency regulation. In this case, by contrast, peti-

tioner is not charged with having violated a voided regulation.

As the court of appeals has specifically (and repeatedly) found,

there was nothing illegal or improper about petitioner’s cost

allocations under either the amended or the unamended

formula. Pet. App. 9a; Van Vranken, 890 F.2d at 423. As dis-

cussed in the text, petitioner simply seeks to benefit from a

change in formulas without having satisfied the necessary

procedural requirements. See Pet. App. Ya.

10

As petitioner concedes, a new rule of federal law is

applied to similarly situated parties “whose claims

are not otherwise barred by procedural requirements

or res judicata.” Pet. 2, citing Beam, 111 S. Ct. at

2448. This case involves precisely the sort of

“procedural requiremen|[t]” that Beam expressly

recognized as a potential bar to recovery by a litigant

in a particular case. Under the Department of En-

ergy’s regulations, any refiner wishing to amend and

refile a cost allocation report more than one year

after its original filing must obtain written permis-

sion from the Department of Energy “for good cause

shown.” 10 C.F.R. 212.126(d)(2). Moreover, the De-

partment “will not make a finding of good cause

routinely,” and where such a finding might adversely

affect the interest of the consuming public, the

applicant must “at a minimum” demonstrate that it

has exercised “due care and diligence.” Petitioner

does not challenge the validity or applicability of

these obviously reasonable procedural rules, which

operate in the nature of a statute of limitations.”

2 For the same reason, petitioner’s complaint that the

decision below “eviscerate[s] this Court’s prohibition of selective

prospectivity” by denying petitioner “any remedy” in this

case, Pet. 14, is misconceived. A party whose request for relief

is barred by an applicable statute of limitations or some other

valid procedural condition precedent to the relief sought is not

the victim of impermissible “selective prospectivity.” It is a

routine consequence of all rules of finality and repose that some

potential litigants will have no opportunity to benefit even

from “fully retroactive” decisions. See, e.g., Beam, 111 S. Ct.

at 2443 (fully retroactive decision applies to all parties “by and

against whom claims may be pressed, consistent with res judi-

cata and procedural barriers such as statutes of limitations”).

1]

Thus, as the court of appeals recognized, Pet. App.

9a, despite petitioner’s emphasis on Beam, the issue

in this case remains what it has always been: whether

or not the Department abused its considerable

discretion in finding that petitioner has not es-

tablished “good cause” for refiling its cost reports

under the circumstances of this case. As discussed

above, the OHA, the district court, and the court of

appeals have all found squarely in favor of the

Department on that issue. See pages 6-8, supra.

Indeed, all three have also found that the specific “due

care or diligence” standard applies to petitioner’s

application in this case and that the Department was

correct in concluding that petitioner had not met that

standard. bid.

The only issue this case presents—whether the

agency properly applied a valid procedural rule to

particular facts—has been carefully addressed and

properly resolved in the various proceedings below.

Its resolution affects only petitioner and the

intervenor respondents in this case, and presents no

question of broad importance warranting this Court’s

review. See, e.g., Dobbs v. Zant, No. 92-5579 (Jan. 19,

1993) (Scalia, J., concurring in the judgment). As the

court of appeals noted, petitioner has “admitted that

the only impact of the refilings would be in deter-

mining its potential liability in Van Vranken.” Pet.

App. 9a. Indeed, in its brief in the court of appeals,

Pet. C.A. Br. 1, petitioner assured the court that

[t]he Court’s decision in this case will not affect

any ongoing [Department of Energy] regulatory

program. It will not affect consumers through

| price increases or otherwise. Rather, the sole

|

12

impact. will be the extent to which a class of

wholesale-purchaser resellers may assert liabil-

ity against [petitioner] in a 1979 private over-

charge suit still pending in California.

We concur in that assessment of the significance of

the issue presented.

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

WILLIAM C. BRYSON

Acting Solicitor General

STUART M. GERSON

Assistant Attorney General

MICHAEL JAY SINGER

BRUCE G. FORREST

Attorneys

DON W. CROCKETT

Director

RICHARD F. AHERN

Assistant Director

Judicial Litigation Division

Economic Regulatory Administration

Department of Energy

JANUARY 1993

PY]