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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1993
- **Citation:** 507 U.S. 910

## Text

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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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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-

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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
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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]

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_1591%3A2. Public record. Not legal advice.