Full opinion text
MEMORANDUM AND ORDER PLATT, District Judge. With the advent of the economic dislocations of the early 1970’s, Congress enacted the Economic Stabilization Act of 1970, 12 U.S.C. § 1904 (note) (“the Act”). One of the stated purposes of that Act was to attempt to control the inflation that then afflicted, and more recently has devastated, our economy. Particular attention was given to the oil industry, as evidenced by Congress’ passage of the Emergency Petroleum Allocation Act of 1973, 15 U.S.C. § 751 et seq., which incorporates the 1970 legislation. Pursuant to those laws, Mandatory Petroleum Price Regulations were promulgated to set limits on prices legally chargeable for petroleum products. 10 C.F.R. Part 212. The Regulations promulgated to establish and enforce appropriate price levels are exceedingly intricate and complex. While the Regulations provide for administrative remedies, Section 210 of the Act provides for legal remedies; unfortunately, the lines delineating the demarcation between administrative resolutions and legal relief are not always clearly drawn. The Code of Federal Regulations, 10 C.F.R. § 212.84, provides for disallowance of costs and includes provisions for the agency to require a “roll back” of prices and refunds to identifiable purchasers in the amount paid in excess of the amount permitted. At the same time, 12 U.S.C. § 1904 (note) provides for private suits by “any person suffering legal wrong” and allows the court to award plaintiffs “an amount not more than three times the amount of the overcharge upon which the action is based” plus reasonable attorneys’ fees. (See especially Section 210 of the Act.) This action presents a situation in which the dual nature of the remedies provided fosters confusion — and legal conflict. Plaintiffs, alleged purchasers of Gulf Oil Corporation (“Gulf”) petroleum products, are seeking recovery, under § 210 of the Act, of overcharges purportedly made by Gulf in sales of those products. Gulf claims that it entered into a Consent Order with the Department of Energy (“DOE”) dated July 26, 1978 in which Gulf agreed to pay all persons, including judgment creditors under § 210, their proportional share of the $42,240,000 (“$42.24 million” or “Consent Order Fund”), which sum Gulf agreed to pay to DOE. The DOE argues, however, that the $42.24 million was intended only as settlement of the administrative refund mandated by 10 C.F.R. Part 212 and in no way was intended to affect private legal remedies brought under § 210 of the Act. DISCUSSION The action now lies in the following procedural posture. At a hearing held on November 2,1979, it was agreed that while there were five motions in the first of the above cases presently pending before this Court, only three of them needed immediate consideration and the remaining two (for class certification and discovery) might await resolution of the first three. The first of the three motions was made by James Schlesinger, Secretary of the DOE (“Secretary”), and sought (i) an order pursuant to Rule 12(b) of the Federal Rules of Civil Procedure (“FRCP”) dismissing the action without prejudice or, alternatively, dismissing the Secretary from the action and striking all material relating to the Consent Order between the DOE and Gulf, or, in the further alternative, staying the first of the above-captioned actions pending completion of the distribution of the Consent Order Fund on the ground that the DOE has primary jurisdiction over the Consent Order Fund and (ii) an order pursuant to FRCP Rule 26(c) staying all discovery pending disposition of this motion. (Pursuant to an informal agreement between the parties, the last portion of such motion has been rendered in part academic in that partial discovery has been proceeding in these actions). The second of the three motions was brought on by an Order to Show Cause submitted by Gulf, seeking a preliminary injunction restraining the Secretary from taking any steps to effect or implement the Consent Order and granting the defendant Gulf leave to amend its answer to allege cross claims against the Secretary. The Order to Show Cause also contained a temporary restraining order enjoining the Secretary from taking any steps to effect or implement the Consent Order. The temporary restraining order was granted on consent and is still in full force and effect. The third motion was made by the Secretary and seeks an order, pursuant to FRCP Rule 12(c), granting judgment on the pleadings and dismissing the action as to the Secretary on the grounds that as to him, the action fails to state a claim upon which relief can be granted and that the Court lacks subject matter jurisdiction. I The first of the above-captioned actions was commenced with the filing of a Summons and Complaint by the plaintiffs on August 18,1978. Thereafter, on September 25, 1978, plaintiffs filed an amended complaint. In essence, plaintiffs sue under § 210 of the Economic Stabilization Act of 1970, 12 U.S.C. § 1904 (note) (expired April 30, 1974), as incorporated by the Emergency Petroleum Act of 1973, 15 U.S.C. § 751 et seq. (1976), on behalf of themselves and “all other purchasers of petroleum and petroleum products from Gulf from 1973 to 1976” (Amended Complaint pp. 2-3) and seek treble damages from Gulf in the amount of $221,700,000.00 plus attorneys’ fees for alleged violations of the Emergency Petroleum Allocation Act. Plaintiffs also sue the Secretary as a Stakeholder of the Consent Order Fund. Prior to the commencement of this action Gulf, in an attempt to settle its differences with the DOE in the administrative action, agreed to pay the Fund to the DOE for distribution to injured purchasers of Gulf petroleum products. Plaintiffs seek to require the Secretary to pay this Consent Order Fund of $42,240,000.00 into the Registry of this Court (Amended Complaint p. 7), in an effort to protect their legal remedies. Issue was joined with the service and filing of Gulf’s answer on or about October 31, 1978 and the Secretary’s answer on or about November 14, 1978. On or about November 27, 1978, plaintiffs served and thereafter filed a motion for class certification in the first of the above-captioned actions, pursuant to FRCP Rules 23(a) and 23(b)(3), asserting that plaintiffs’ class included “all of those individuals and entities (both business and governmental) who purchased petroleum and petroleum products from Gulf between 1973 and 1976.- ” Appearing in court, counsel for Gulf gave their conditional consent to plaintiffs’ motion for class certification without prejudice to its rights to change its position and move to dissolve the class following discovery proceedings. According to the Secretary, the Office of Special Counsel (“OSC”) of the DOE’s Economic Regulatory Administration, after its creation in December 1977, assumed from the Federal Energy Administration (“FEA”), a predecessor agency of the DOE, an investigation and audit of Gulf’s interaffiliate “transfer of prices for crude oil which Gulf obtained abroad through its affiliates and imported into the United States.” As a result of a prior investigation into Gulf’s transfer pricing of foreign crude oil, the FEA had issued a Notice of Probable Violation dated May 8,1974 and Notices of Proposed Disallowance dated July 14, 1975, August 29, 1975 and April 27, 1977. The latter Notice proposed a disallowance of $79,622,955.36 from Gulf’s landed cost of foreign crude oil imported into the United States in transactions between Gulf’s affiliated entities during the period October 1973 through May 1975. For various reasons the OSC and Gulf determined it best to settle these alleged “probable violations” and they did so by entering into the Consent Order herein under 10 C.F.R. § 205.199J (see 43 Fed.Reg. 34186 (August 3, 1978)). Under the terms of the Consent Order the OSC undertook to implement procedures to refund the $42,240,000.00 to all those “who may have been overcharged by Gulf” as the result of the alleged overstated costs. As is evident from the “Supplemental Comments of the Special Counsel for Compliance and Gulf Oil Corporation on proposed Decision and Order” dated and executed June 7, 1979, the OSC and Gulf have stipulated that the “Consent Order was not intended to expose Gulf to double liability, i. e., to have any part of the $42.24 million paid to any persons or entities (including the United States) other than purchasers of Gulf products who may have been overcharged so long as any overcharge claims whether asserted by legal action or by administrative claim, of such persons against Gulf remain outstanding and unsatisfied.” Pursuant to a petition of the OSC, Mr. Melvyn Goldstein, Director of the Office of Hearings and Appeals (“OHA”), on August 28, 1978, issued an Interim Decision and Order announcing a proposed administrative procedure to refund the $42.24 million in an attempt to implement the Consent Order. Gulf’s claim is that this Interim Decision and Order of the OHA has the effect of “ensuring Gulf’s exposure” to the very double liability which the Consent Order sought to avoid in that, inter alia, it “(a) provided no method for satisfying out of the $42.24 million judgment creditors who obtained judgments under Section 210, and (b) provided for payment from the fund to indirect purchasers of Gulf’s products who did not have standing to sue Gulf under Section 210, thus depleting the amount of the fund available to satisfy judgment claimants.” (Gulf’s Supplemental Memorandum pp. 5-6). According to Gulf, the first of the motions made by the DOE in December of 1978 to dismiss the first of the above-captioned actions on the grounds of primary jurisdiction would, if granted, leave intact the Interim Decision and Order and would preclude the application of any part of the Consent Order Fund to the satisfaction of any judgment that might be obtained in this or any other § 210 suit and would expose Gulf to the unintended double liability. (Id. p. 6). Therefore Gulf made the second of the above-referenced motions before this Court to enjoin the DOE from implementing the Consent Order in a manner which would expose Gulf -to this double liability and to grant Gulf leave to amend its answer to allege cross-claims against the DOE. The Government’s positions and actions with respect to the intent of the Consent Order have not been consistent. The OSC first took the position (in opposition to Gulf’s motion) that the question of any double liability was not raised by Gulf. (Affirmation of Paul Blum sworn to March 20, 1979). Thereafter, when Gulf pointed out that the OSC and Mr. Blum had previously acknowledged in connection with other matters that the Emergency Petroleum Allocation Act (15 U.S.C. § 751 et seq.) never contemplated the imposition of double liability upon an alleged violator such as Gulf, the OSC had to retract its erroneous position and execute the Supplemental Comments referred to above. In particular, Mr. Blum on November 23, 1977, some nine months before the Consent Order, had made a written submission to the DOE’s OHA in which he had stated “It might be argued that if DOE has already disgorged a violator of his unlawful overcharges through refunds to the Treasury, the violator sued in a private action may be required to pay twice for the same violation. Such a result was obviously not contemplated by the EPAA ...” Emphasis added. Subsequent to the Consent Order of July 26, 1978, the DOE on February 9, 1979, in discussing the comments of persons who had questioned the authority of the DOE, in general, and the OHA, in particular, to promulgate the Regulations providing for the distribution of refunds, specifically stated that: “It should first be noted that the regulations do not require all or any portion of the refunds to be paid to the Treasury. That particular remedy is only one of the methods permitted under the regulations, and moreover, the double liability problem to which the commenters (sic) refer could be avoided in cases in which payments may ultimately be made to the Treasury simply by delaying payment of all refunds until the period in which court actions can be initiated based on the pertinent violation has ended. At that time the outcome of all pending court actions would be known and special arrangements could be made to reimburse the defendant firm for court judgments.” (Emphasis added). 44 Fed.Reg. # 29 at 8564. Notwithstanding these subsequent acknowledgments of error by the OHA, and in particular its acknowledgment in the Supplemental Comments as to the intent of the Consent Order, and notwithstanding the fact that this Court had enjoined the Secretary on March 5, 1979 from “taking any steps to effectuate or implement the above-referred to Consent Order”, the OHA of the DOE (in an apparent deliberate defiance of this Court’s Order) issued under date of July 13, 1979, published and has left standing new special refund procedures designed to implement the Consent Order (44 Fed. Reg. 43094 et seq.). These procedures failed to implement the stipulated intent of the parties to the Consent Order, to wit, that the same “was not intended to expose Gulf to double liability.” Specifically, as indicated above, Gulf claims that this Final Decision and Order provides that in addition to § 210 judgment creditors and direct purchasers of Gulf products, indirect purchasers who do not have standing to proceed against Gulf in a judicial action will have a claim on the $42.24 million (id. p. 43097). The result, according to Gulf, will be to expose Gulf to the risk of being unable to satisfy § 210 judgment claims out of Consent Order Fund — a result contrary to the stipulated intent of the parties to the Consent Order. Further, Gulf claims that this Final Decision and Order violates the agreement between the parties that the OSC would have the right to approve any judicial settlements to be paid from the Consent Order Fund, “such approval not to be unreasonably withheld,” by eliminating the reasonableness requirement. It further violates the stipulated agreement that in the event of a disagreement between Gulf and OSC as to the size of a reserve to cover lawsuits, an independent third party was to make that determination. The Final Decision and Order provides that the arbitrator is to be selected solely by the OHA. Finally, and incredibly, the Government had the audacity at oral argument of these motions on November 2, 1979 to contend that the written agreement made and executed by the OSC on June 7, 1979 (see Supplemental Comments), did not mean what it said and that when it stated that “the Office of Special Counsel and Gulf agree that the July 26, 1978, Consent Order was not intended to expose Gulf to double liability” it meant that it only “agreed to recommend.” Of significance also in the background of these proceedings is the history of the second (Weiner) of the above-captioned actions which was commenced with the filing of a similar summons and complaint in the United States District Court for the Eastern District of Pennsylvania on May 17, 1979. On August 10, 1979, defendant Gulf moved to transfer that action to this Court and the Secretary filed a motion to dismiss on grounds similar to the ones he has advanced here. The District Court in the Eastern District of Pennsylvania granted Gulf’s motion over the Secretary’s objections in an Order dated August 17, 1979 and thereafter Gulf filed an answer in which it alleges four alternative cross claims against the Secretary. The first claim seeks an order that the Secretary comply with the Consent Order and agreements in the Supplemental Comments, and the second, third and fourth claims seek to annul the Consent Order on the ground of mistake, breach by the Secretary, and lack of authority on the part of the DOE to implement the same. II The question presented here is whether the DOE should be permitted to implement a Final Decision and Order dated July 13, 1979 formulating procedures to effect refunds of the $42.4 million settlement amount to (a) Section 210 judgment creditors and direct purchasers of Gulf products and (b) indirect purchasers of heating oil and gasoline (who do not have standing to proceed against Gulf in a judicial action). The DOE argues that (i) plaintiffs’ complaint against it must be dismissed under Dyke v. Gulf Oil Corp. and DOE, et al., 601 F.2d 557 (T.E.C.A.1979); (ii) Gulf’s motion for leave to amend its answer in the first of the above consolidated actions (the Stertz case) must be denied under the Dyke decision; and (iii) Gulf’s motions must be denied because they lack merit in that (a) Gulf cannot challenge the Consent Order and (b) Gulf’s argument that the Consent Order is unenforceable is spurious. Dyke did not hold, however, as the DOE suggests, that the DOE must be dismissed from these cases. In both the Stertz and the Weiner actions plaintiffs state claims against the DOE asserting that the DOE has no claim against the $42.24 million fund involved herein, and holds the same “which is properly the property of the plaintiffs.” Plaintiffs further request that the DOE be required to pay the same over to the Registry of this Court to be awarded or credited to them. The DOE moved to dismiss these claims as to it and while such motion was pending, Gulf served and filed an answer in the Weiner case in which it asserts cross claims alleging (i) breaches of the Consent Order of July 26,1978 and the agreement between it and the DOE dated June 7, 1979 by the issuance of a Pinal Decision and Order dated July 13, 1979, and (ii) that the Consent Order is null and void and of no legal effect by reason of mistake, by reason of DOE’s breach thereof, and by reason of DOE’s lack of authority to implement the same. At oral argument, plaintiffs concurred in these positions insofar as they seek to nullify the DOE’s attempt by its Final Decision and Order to remove the $42.24 million dollars from the money available to the class plaintiffs on whose behalf they seek to bring their actions. As indicated, DOE’s reliance on Dyke is misplaced. That decision merely held that joinder of the DOE in this type of case was not, as Longview Refining Co. v. Shore, 554 F.2d 1006 (TECA), cert. denied, 434 U.S. 836, 98 S.Ct. 126, 54 L.Ed.2d 98 (1977), had seemed to suggest, mandatory or in all cases necessary. Dyke did approve the holding in Associated General Contractors of America, Inc. v. Laborers International Local 612, 476 F.2d 1388 (Em.App.1973), that “no order of an ... agency should be mandated or subjected to invalidation in any judicial proceedings unless that agency has been made party to such proceedings.” (476 F.2d at 1407). The Dyke-opinion disapproved of joinder of the DOE where joinder would “bring to a complete halt .. . the administrative auditing, investigation and remedial action which the agency could carry on independently under controlling statutes.” 601 F.2d at 566. But as Gulf points out in its papers, most of the administrative proceedings are complete and the validity of the DOE’s Final Decision and Order dated July 23, 1979 is under direct attack by interested parties. Secondly, and of even greater significance, is the DOE’s present intransigence on the question of subjecting Gulf to possible double liability. Recognizing the inequity of this position, the DOE Office of Special Counsel in writing “agree(d) that the July 26th Consent Order was not intended to expose Gulf to double liability.” Notwithstanding this stipulation by its counsel, the DOE now takes the position that its OHA does not and need “not accept that” (Oral Argument TR 115). In this Court’s view, this is the second type of exception that the Dyke case contemplated and the precise situation contemplated by FRCP Rule 19(a)(2)(ii) which requires joinder of the DOE as a party. So long as the DOE continues to take the position that the parties to the Consent Order did not mean what they agree that they said, “the [double, multiple, or otherwise] inconsistent obligation^] contemplated by the rule” (FRCP Rule 19(a)(2)(h)) are á reality and represent judgments that cannot be “adjusted and reconciled” (Slip Op. at 20). DOE’s motions to dismiss and for judgment on the pleadings are therefore de'nied. Ill There remains the question of Gulf’s motion for a preliminary injunction restraining the DOE from publishing the Consent Order of July 1978 so as to make the same effective before a determination is made here with respect to “the true intent, meaning and validity of that order.” At the oral argument and in a subsequent letter dated November 15, 1979 addressed to the Court, DOE took the position that it would not be willing to postpone distribution to administrative claimants of the $42.24 million to be paid to the United States by Gulf pursuant to the Consent Order until the resolution of these actions in order to insure an equitable distribution of such moneys to all persons entitled thereto. In view of the legitimate concern of Gulf that failure to so postpone distribution may result in double liability, particularly given the DOE’s unwillingness to honor its previous written stipulation on this point and its actions taken in violation of this Court’s order, this Court feels it has no alternative but to issue the requested preliminary injunction. Gulf’s adversaries have evidenced some concern about allowing Gulf to withdraw from that part of the Consent Order which requires it to post at least $42.24 million for distribution to injured purchasers. The Court agrees that this should not be permitted if the DOE is to be enjoined until an equitable method of distribution can be agreed upon or ordered by this Court. Therefore, as a condition of the injunction this Court will require that Gulf post as security (i) a bond or undertaking in the amount of $42.24 million with this Court or (ii) the $42.24 million with a mutually agreed upon (or, failing agreement, Court designated) escrow bank or agent in an interest bearing account or with the Clerk of this Court. CONCLUSION Accordingly, the DOE’s motions for dismissal and judgment on the pleadings are denied and Gulf’s motion for a preliminary injunction and for leave to amend its answer is granted on the condition stated above. APPENDIX DEPARTMENT OF ENERGY OFFICE OF SPECIAL COUNSEL CONSENT ORDER ) WITH ) Case No. N00R00007 GULF OIL CORPORATION) INTRODUCTION Pursuant to the authority promulgated in 10 C.F.R. § 205.199J, and § 301 of the Department of Energy Organization Act, 42 U.S.C. § 7151, the Office of Special Counsel (OSC) of the Department of Energy (DOE) hereby enters into this Consent Order with Gulf Oil Corporation (Gulf). This Consent Order constitutes an agreement as to the disposition of the Notice of Proposed Disallowance issued to Gulf on April 27, 1977, and additional imported crude oil transactions found subject to disallowance. It specifically does not constitute an agreement as to any other matter subject to DOE regulations. Except as noted, this Consent Order is concerned exclusively with the crude oil component of Gulf’s landed costs for the period October 1973 through May 1975 which is subject to disallowance pursuant to 6 C.F.R. § 150.356 and 10 C.F.R. § 212.83 and § 212.84. JURISDICTION The Office of Special Counsel was created by a delegation of authority from the Administrator of the Economic Regulatory Administration which was created by § 206 of the Department of Energy Organization Act, 42 U.S.C. § 7136. Consequently, OSC, as part of DOE, is empowered to conduct and conclude audits and proceedings concerning the DOE Mandatory Petroleum Price and Allocation Regulations. FACTS The stipulated facts upon which this Consent Order is based are contained in the following paragraphs numbered 1 through 5. 1. Gulf is a refiner subject to the refiner price rule and the transfer pricing rules of 6 C.F.R. § 150.356, 10 C.F.R. § 212.83 and § 212.84. In September 1973, the Cost of Living Council promulgated 6 C.F.R. § 150.-356, 38 F.R. 25686 (September 14, 1973), which provided: Whenever a firm uses a landed cost which is computed by use of its customary accounting procedures, the Council may allocate such costs between the affiliated entities if it determines that such allocation is necessary to reflect the actual costs of those entities or the Council may disallow any cost which it determines to be in excess of the proper measurement of costs. This provision has continued in force to the present in the following sections: 10 C.F.R. § 212.83(e), 39 F.R. 1924 (January 15, 1974); 10 C.F.R. § 212.83(f), 39 F.R. 42368 (December 5, 1974); 10 C.F.R. § 212.83(b), 41 F.R. 15330 (April 12, 1976). 2. To establish standards for applying this section and to adopt more definitive regulations in this area, the Federal Energy Administration (FEA) issued two proposed rule-makings culminating in the promulgation of 10 C.F.R. § 212.84, 39 F.R. 38364 (October 31, 1974). See 39 F.R. 17771 (May 20, 1974); 39 F.R. 32310 (September 5, 1974). 3. Pursuant to § 212.84, Gulf reported its interaffiliate transfer prices to the FEA on Form FEA F701-M-O (Form 701). On the basis of the data collected from companies reporting third party transactions of foreign crude oil on Form 701, FEA has calculated maximum and representative prices for the months of October 1973 through May 1975 pursuant to the standards announced in § 212.84. Those prices were published in 42 F.R. 22190 (May 2, 1977). 4. Based on its determination of the maximum and representative prices, and an examination of the transfer prices reported to the FEA by Gulf, FEA issued a Notice of Proposed Disallowance (Notice) to Gulf on April 27, 1977. The Notice proposed the disallowance of $79,622,995.36 from Gulf’s landed costs of crude oil imported in transactions between affiliated entities during the period October 1973 through May 1975. This revised Notice superseded the three original Notices, one issued to Gulf on July 14, 1975 and the remaining two on August 28, 1975. Gulf also received, under date of May 8, 1974, a Notice of Probable Violation (NOPV) alleging that Gulf’s landed cost for certain crude oils imported in transactions between affiliated entities during the period October 1973 through January 1974 were overstated. 5. Gulf filed timely replies to each Notice and the NOPV issued to it, as well as a five-volume supplemental reply to the three original Notices. Gulf filed a formal response to the April 1977 Notice on June 9, 1977 and met with DOE officials on October 13, 1977. Gulf submitted additional information in subsequent conferences with OSC in connection with the issues raised in the Notice, asserting that it should be modified or rescinded. Gulf has contested the maximum and representative prices established for its crude oil from Ecuador, Columbia and Angola, which are determined in comparison to other crude oils in the same geographic region. Gulf has also contested the valuation of various Venezuelan crude oils and the market prices of Nigerian crude oil. The appropriate landed costs for Indonesian Katapa crude oil purchased through affiliates during the period August 1973 through January 1976 has also been considered. 6. OSC has informed Gulf that adjustments have been made to the disallowance, pursuant to modifications to the maximum and representative prices. The modifications to Venezuelan and Ecuadorian crude oil prices are the result of the correction of underlying data previously misreported to DOE. Further modifications to Ecuadorian prices were the result of the establishment of valid market prices in a number of months. The adjustments resulted in a total reduction of the disallowance of $5,709,-511.51. 7. Gulf without admitting any noncompliance with, or violation of, any rule or regulation of the DOE, desires to resolve, pursuant to 10 C.F.R. § 205.199J, the dispute arising between itself and the OSC as a result of the matters described herein with minimal disruption to its business operations and without more formal compliance action by OSC. OSC, by means of this Consent Order, desires to conclude the pending compliance proceeding. Gulf and DOE recognize that the time periods involved and the determination of proper costs allowable make it most difficult to determine whether any person sustained an overcharge in the purchase of covered products from Gulf; and, therefore, Gulf and OSC have mutually determined to conclude these matters and agree to the terms and conditions specified herein. TERMS AND CONDITIONS 8. Gulf agrees that within 15 days of notice that the Consent Order has been made final, it will tender to the United States, upon demand, a certified check in the amount of $42,240,000.00. The payment of this amount shall be in lieu of any other remedial action including a redetermination of increased costs of crude oil and resulting overrecoveries of costs, attributable to disallowed landed costs. Gulf and OSC agree that such payment to the United States represents the most effective method of achieving payment to those who may have been overcharged by Gulf. 9. Gulf further agrees to assist in the evaluation of any claims filed by persons asserting a right to any portion of the payment. Such evaluation will be made prior to disposition of the funds to the Treasury of the United States. DOE agrees that it will accept and discharge the full administrative DOE responsibility for establishing and administering a program for evaluating such claims and making restitution to such persons having validated claims. 10. OSC finds, due to the time and expense which could be involved in the litigation of the issues raised by Gulf, that it is in the best interest of the United States to deem Gulf to have complied with 6 C.F.R. § 150.356 and 10 C.F.R. § 212.83 and § 212.84 upon Gulf's fulfilling the requirements of this Consent Order. 11. In consideration of Gulf’s agreement to the terms and conditions of this Consent Order, OSC agrees that Gulf’s performance under this Consent Order will constitute compliance with 6 C.F.R. § 150.356, 10 C.F.R. § 212.83 and § 212.84 with respect to the determination of Gulf’s imported crude oil costs in the period October 1973 through May 1975, including the landed costs of Indonesian Katapa crude oil purchased by Gulf through a foreign affiliate from August 1973 through January 1976. OSC also agrees that it would not further the public interest to take any additional action against Gulf with respect to the allegations in the previously mentioned Notice or the NOPV; provided, however, that OSC reserves the right to take further remedial action in this case if OSC determines that information upon which this Order is based was materially erroneous or that the actions of Gulf have not been undertaken in a manner consistent with the aforementioned terms and conditions of this Order or with applicable DOE rules and regulations. OSC hereby expressly further reserves the right to take such actions as may be appropriate under DOE regulations concerning other costs measured, reported or recovered by Gulf and which are not the subject of this Consent Order. 15. The provisions of 10 C.F.R. § 205.199J are applicable to this Consent Order and are incorporated by reference herein. I, the undersigned, a duly authorized representative of Gulf Oil Corporation hereby agree to and accept on behalf of said corporation the foregoing Consent Order. Signed: Name: Jerry McAfee Title: Chairman of the Board Dated: July 26, 1978 I, the undersigned, a duly authorized representative of the Office of Special Counsel hereby agree to and accept on behalf of the Department of Energy the foregoing Consent Order. Signed: \<uJl L• ■_ Name: Paul L. Bloom_ Title: Special Counsel. OSC. DOE Dated: 7/26/78_ UNITED STATES OF AMERICA DEPARTMENT OF ENERGY OFFICE OF HEARINGS AND APPEALS SUPPLEMENTAL COMMENTS OF THE SPECIAL COUNSEL FOR COMPLIANCE AND GULF OIL CORPORATION ON PROPOSED DECISION AND ORDER The Special Counsel for Compliance (Special Counsel) of the Department of Energy (DOE) and Gulf Oil Corporation (Gulf) hereby jointly submit the following comments as a supplement to the comments submitted by the Special Counsel on April 20, 1979, and by Gulf on April 19, 1979, in the matter of the Proposed Decision and Order implementing special refund procedures in case No. DFF-0001. Following the submission of comments by Gulf and the Special Counsel on the Proposed Decision and Order, the Special Counsel and Gulf determined that it was necessary for them to have further discussions regarding the comments submitted by each of them. As a result of these further discussions, Gulf and the Special Counsel have reached agreement on matters which were not included in our respective comments, but which, in our opinion, should be included in the final Decision and Order adopted by the Office of Hearings and Appeals. The Office of Special Counsel and Gulf agree that the July 26, 1978, Consent Order was not intended to expose Gulf to double liability, i. e., to have any part of the $42.24 million paid to any persons or entities (including the United States) other than purchasers of Gulf’s products who may have been overcharged so long as any overcharge claims, whether asserted by legal action or by administrative claim, of such persons against Gulf remained outstanding and unsatisfied. Gulf has concurred with Special Counsel that a final Decision and Order incorporating these recommendations will minimize to an acceptable level Gulf’s “double liability” concerns under the Proposed Decision and Order. As more specifically stated below, Special Counsel and Gulf have agreed that direct purchasers of Gulf products who institute actions against Gulf pursuant to Section 210 of the Economic Stabilization Act of 1970 for overcharges based upon alleged regulatory violations resolved by the Consent Order, and who obtain judgments and settlements regarding such claims on or before fifteen (15) months from the date of publication of the final Decision and Order, should be compensated from the Consent Order fund of $42.24 million on an equal footing with direct purchasers making administrative claims, provided, however, that the amount of any such judgment to be satisfied from the Consent Order fund should be limited to such portion of the judgment which is the proportion of $42.24 million to the total overstatement of landed costs upon which the judgment is determined, if such disallowed landed costs exceeds $42.24 million. Both Gulf and the Special Counsel agree that a reserve fund out of the Consent Order fund should be established for litigation pending and unresolved at the end of such fifteen (15) months from the date of publication of the final Decision and Order. Gulf and the Special Counsel also agree that any necessary expenses, as determined by the OHA, incurred in connection with the implementation of the final Decision and Order should be paid from the Consent Order fund. In addition to these general considerations, Gulf and the Special Counsel have agreed that the following specific responses of the Special Counsel to Gulf’s comments of April 19, 1979, as herein modified, represent the concepts of an administrative refund procedure which should be adopted for the distribution of the Consent Order fund. Modified Response to Annex B to Gulf’s Comments A. (1) Persons who have obtained final judgments against Gulf after trial or by settlement with the approval of-the Special Counsel, such approval not to be unreasonably withheld, in legal actions brought by direct purchasers pursuant to Section 210 of the Economic Stabilization Act which are based upon claims arising out of an alleged overstatement of landed crude oil costs during the period August 19, 1973, through January 1976 should be included within the class of persons who have validated claims under the final Decision and Order. (2) Persons who within fifteen (15) months of the publication of the final Decision and Order have obtained settlements of claims against Gulf, other than settlements resulting in a final judgment as provided in A(l), which are asserted in legal actions brought by direct purchasers pursuant to Section 210 of the Economic Stabilization Act and which are based upon claims aris- , ing out of an alleged overstatement of landed crude oil costs during the period August 19, 1973, through January 1976 should be included within the class of persons who have validated claims under the final Decision and Order, but only to the extent that such settlement amounts are specifically approved by the Special Counsel, such approval not to be unreasonably withheld. (3) If there are one or more pending claims against Gulf which are asserted in legal actions brought prior to the expiration of fifteen (15) months from the date of publication of the final Decision and Order by direct purchasers pursuant to Section 210 of the Economic Stabilization Act and which are based upon an alleged overstatement of landed crude oil costs during the period August 19, 1973, through January 1976, a reasonable reserve out of the $42.24 million should be created in order to provide for the payment of each such claim. Gulf and Special Counsel will use their best efforts to agree to the amount of reserve for each such claim as soon as practicable after the filing of the action. If the Special Counsel and Gulf are unable to agree upon the amount to be held in each such reserve within thirty (30) days following the expiration of the fifteen (15) month period, they shall immediately submit the determination to an independent third party with the expectation that such determination will be made within sixty (60) days following the submission to such third party. The Special Counsel and Gulf agree to assist the independent third party fully to expedite this determination. B. The identification of those persons who are within the classes described in paragraphs A(l), A(2), and A(3) should be made within fifteen (15) months from the date of publication of the final Decision and Order. C. No distribution of the Consent Order fund should be made prior to a determination as to (1) those amounts which are to be paid from that sum to persons described in paragraphs A(l) and A(2) above; (2) the amounts of the reserves agreed to by Gulf and the Special Counsel for persons described in paragraph A(3); and (3) the amounts which are to be paid to direct purchasers of covered petroleum products from Gulf who have filed administrative claims in the refund program. In order for persons described in paragraphs A(l) and A(2) to have their judgments or settlements considered for payment from the Consent Order fund, they, or Gulf on their behalf, should be required to file a claim with the DOE which is based upon such judgment or settlement. Persons described in paragraph A(3) who wish to have claims they have pending against Gulf in litigation under Section 210 of the ESA considered by the DOE, may also file claims under the administrative procedure. To the extent that such pending claims are validated and authorized for payment by the DOE, appropriate adjustments in the amounts to be held in reserve under paragraph A(3) should be made. D. The amounts to be paid to persons described in paragraphs A(l) and A(2) should be made from the Consent Order fund on an equal footing with the amounts to be paid to direct purchasers of covered products from Gulf who only file administrative claims under the special refund procedures; provided, however, if a claim is filed by a person holding a judgment under paragraph A(l), or by Gulf on their behalf, which is based upon an overstatement by Gulf of landed costs for interaffiliate crude oil transactions in excess of $42.24 million, then the DOE may approve for payment only such portion of the judgment which is the proportion of $42.24 million to the total overstatement of landed costs upon which the judgment is determined. E. The balance of the Consent Order fund remaining after a determination by the DOE of the total amounts to be paid to direct purchasers who have filed administrative claims, and to the persons described in paragraphs A(l) and A(2), and the appropriate amounts to be held in reserve under paragraph A(3), should be available for payment to persons other than direct purchasers of Gulf covered products who have filed administrative claims under the special refund procedures. The disbursement of any amount remaining after a determination of the sum payable to persons other than direct purchasers should be at the direction of and as determined by the OHA. The determination of the amount available to persons other than direct purchasers or the disbursement of the balance remaining need not await a resolution of the pending claims for which the reserves under paragraph A(3) are created. F. (1) Gulf may retain the Consent Order fund in a separate identifiable account on its records, subject to such terms and conditions as are required by the OHA after consultation with Gulf. Gulf should be required to make only such payments from this fund as are directed by the OHA pursuant to the terms of the final Decision and Order. Payment to any particular class or claimant provided for hereunder need not await payment to any other class. (2) As each claim for which a reserve has been established under paragraph A(3) is settled with the approval of the Special Counsel or results in a final judgment, the OHA should direct an appropriate payment for such settlement or judgment out of the reserve fund, such payment not to exceed the amount set aside in the reserve fund for the claim. The amount approved for payment may be limited, if appropriate, in accordance with the formula outlined in the second clause of paragraph D. If the amount paid for the settlement or judgment is less than the amount set aside in the reserve fund for the claim, then the remaining balance of such reserve should be available for payment to persons filing administrative claims and persons described in paragraphs A(l) or A(2) in accordance with the provisions herein. If the claims of such persons have been fully satisfied under the procedures adopted in the final Decision and Order, then the remaining balance should be disbursed in accordance with paragraph E, above. G. If an action for judicial review of the Decision and Order is filed within 30 days of its publication in the Federal Register which challenges the authority of the DOE or the validity of the Decision and Order, then Gulf should not be obligated to pay any part of the Consent Order fund to claimants until fifteen (15) days following final adjudication or other resolution of such judicial action. To the extent that the action for judicial review challenges only a limited portion of the Decision and Order, then Gulf should be obligated to pay to persons with validated claims that portion of the Consent Order fund which is unaffected by the litigation. In the event that such an action for judicial review results in a determination that the authority of the DOE or the validity of the Decision and Order is materially deficient, in whole or in part, Gulf and Special Counsel have agreed they will negotiate in a good faith effort to promptly agree upon a remedy consistent with such determination with respect to the whole or any part of the Consent Order fund so affected by the determination. Respectfully submitted, (s) Paul L. Bloom Paul L. Bloom Special Counsel for Compliance, Department of Energy (s) Charles A. Bovce Charles A. Boyce Associate General Counsel, Gulf Oil Corporation Date: June 7, 1979. [3128-01] DEPARTMENT OF ENERGY Offico of Hoorings and Appoalt GULF OIL CORF. REFUNDS — SETTLEMENT OF CLAIMS Umkhko of tntorim Dodtlon and Ofdor and Roqoot* for Commontt Regarding Final Decion AGENCY; Office of Hearings and Appeals, Department of Energy. ACTION: Notice of Interim decision and order and request for comments regarding decision. SUMMARY: The Department of Energy (DOE) hereby gives notice of the issuance of an interim decision and order establishing procedures for making refunds to firms and individual» who* purchased refined petroleum products -from.», the Gulf Oil*. Corp-(Gulf) during the period4 August *1, 1973, through January 31, 1976. Gulf had agreed to remit $42,240,000 to the Department of Energy In. order to settle certain claims for pricing violations described in a proposed consent order signed by Gulf and the DOE Office of Special Counsel on July 26, 1978 (43 FR 34185 (August 3, 1978). In the event the proposed consent order is issued in final form, this sum. less amounts attributable to products that Gulf itself consumed or that were exempt from pricing regulations, will be available for refunds to purchasers. Pending settlement of claims, the total sum available from Gulf wül be placed in an escrow account. The escrow agent-will administer the account in accordance with the directives of the Office of Hearings and Appeals. The interim decision and order indicates that applications for refunds shall be submitted to the Office of Hearings and Appeals. In view of the nature of the proceeding and in order to establish efficient and effective procedures for adjudicating claims, the Office of Hearings and Appeals will utilize several presumptions. The first presumption is that the $42,240,000 to be remitted by Gulf was applied evenly on a volumetric basis to all refined petroleum products that Gulf produced during the period beginning August 1,1973, and ending January 31, 1976. and was proportionately reflected during that period in the prices that Gulf charged for all such products. The second presumption is that resellers who purchased Gulf products during this period would have passed through to their own customers 60 percent oí the benefits oí any price reduction which would have occurred if Gulf had determined its prices in accordance with applicable DOE regulations. It Is further presumed that ultimate consumers who purchased Gulf products during the relevant period purchased them after two prior sales had occurred to wholesalers or retailers. Consumers may rebut this presumption by proving that they purchase products directly from Gulf or after only one prior sale. Routine refund claims will be hanrdled by an administrator who will be appointed and supervised by the Office of Hearings and Appeals. A limited review will be provided within the Office of Hearings and Appeals from adverse decisions of the administrator. All applications for refunds must contain adequate documentation of the volume of purchases of covered products from Gulf. Claims for amounts totaling less than $5 by individual consumers and less than $100 by business entities will be considered to, be de. minimis and will not be processed.. Public- comment, on* the Interim decision and order and on the procedures contained in the appendix is invited. The Office of Hearings and Appeals is particularly interested in comments regarding the form of notice that it should employ after It publishes the final decision and order, and the type of material that Gulf should be directed to make available to substantiate applications for refunds. A public hearing will also be convened in Washington, D.C., on September 26, 1978, to consider the refund procedures. Persons who desire to make an oral presentation at the hearing concerning the interim decision and order must submit a request to speak which indicates the speaker and the amount of time requested. All persons submitting such requests will be notified by the DOE prior to the date that their prepared oral statements are to be submitted to the DOE. Pending consideration of comments and hearing proceedings, a determination of the procedures to be followed in handling Gulf refund claims is being issued on an interim basis. DATES: Written comments by September 18, 1978; requests to speak at public hearing by September 15, 1978; witnesses notified September 20, 1978: prepared statements by September 22, 1978; public hearing to be held at 9:30 aun., September 26, 1978. ADDRESS: Written comments <15 copies required), requests to speak and statements <100 copies required) should reference case No. DSG-0028 and shall be submitted to the following address: Office of Public Hearing Management, Box VH, 2000 M Street NW., Room 2313, Washington, D.C. 20461. The public hearing will be held at the same location in Room 2105. FOR FURTHER INFORMATION CONTACT: Debra KidweU, DOE Office of Public Hearing Management, Box VH, 2000 M Street NW., Room 2313, Washington, D.C. 20461,202-254-5201. George B. Breznay, Deputy Director, Office of Hearings and Appeals, 2000 M Street NW., Room 8014, Washington, D.C. 20461, 202-254-9681. SUPPLEMENTARY INFORMATION: Public Hearing and Comment Procedure Any interested person may participate in this proceeding by submitting data, views, or suggestions as to whether the refund procedures stated in the interim decision and order should be modified or whether alternative procedures should be adopted. Comments should be submitted by 4:30 p.m., e.d.t., September 18,1978, to the Office of Public Hearing Management at the address Indicated above and should be identified on the outside envelope and on the document with the designation: “Refund Procedures Case No. DGS-0028.” Fifteen copies should be submitted. * Any information or data submitted which are considered to be confidential must be so Identified and submitted in writing, one copy only. The DOE reserves the right to determine the confidential status of such information or data and to treat it according to our determination. The DOE has scheduled a public hearing in order to receive oral comments on the effectiveness of the refund procedures and suggestions regarding the possible modification of those procedures. The hearing will be held on September 26, 1978, at 2000 M Street NW., Room 2105, Washington, D.C., at* 9:30 a.m. Any person who wishes to make an oral presentation at the hearing should submit a request to speak. Including the name and title of the speaker, and the amount of time requested, to the Office of Public Hearing Management by September 15,1978, at the address provided at the beginning of this notice. The Office of Hearings and Appeals reserves the right to limit the number of persons to be heard and to establish the procedures governing the conduct of the hearing. Those individuals selected to make oral presentations will be notified by September 20, 1978. The Director of the Office of Hearings and Appeals or his designee will.preside at the hearing. If any person wishes to ask a question of any person who has made an oral presentation at the hearing, he or she may submit the question, in writing, to the presiding officer. The presiding officer will determine whether the question is relevant and whether the time limitations permit it to be presented for an answer. Any further procedural rules needed lor the proper conduct of the hearing will be announced by the presiding officer. A transcript of the hearing will be made and may be purchased from the reported. The DOE will retain the entire record of the hearing and will make it available for inspection at the Office of Hearings and Appeals Public Docket Room, Room B-120, 2000 M Street NW., Washington, D.C. 20461, between the hours of 1 p.m. and 5 p.m., Monday through Friday. Issued in Washington, D.C., August 22, 1978. Melvin Goldstein, Director, Office of Hearings and Appeals. Interim Decision and Order of the Department of Energy PETITION FOR SPECIAL REDRESS Name of petitioner: Office of Special Counsel for Compliance, Department of Energy. Date of filing: August 11,1978. Case No.: DSG-O028. This proceeding involves the procedures which the Department of Energy intends to use in directing refunds to certain customers of the Gulf Oil Corp. The total amount of the potential refunds is $42,240,000. On August 11, 1978, the Special Counsel for Compliance of the Department of Energy (OSC) filed a petition for special redress. In that petition the OSC requested that the Office of Hearings and Appeals adopt interim procedures for the disposition oí a refund remitted to the United States by Gulf Oil Corp. (Gulf). This refund would be paid pursuant to a proposed consent order entered into by Gulf and the OSC on July 26. 1978, notice of which was published for comment: 43 FR 34185 (August 3, 1978); see 10 CFR 205.199J. In the proposed consent order, the OSC and Gulf reached an agreement to settle a compliance proceeding which had been instituted against Gulf in April 1977 by a notice of probable disallowance (NOPD). The Federal Energy Administration alleged in the NOPD that Gulf had overstated its costs with respect to interaffiliate imported crude oil transactions by $79.6 million for the period October 1973 through May 1975. The DOE subsequently reduced the amount of disallowance by $5.7 million on the basis of subsequent corrections to information which had been reported to the DOE and adjustments to maximum and representative prices for crude oil which had been transferred by Gulf. The OSC and Gulf agreed in the proposed consent order to settle the disallowance claim and any over-recoveries for Indonesian Katapa crude oil purchased by Gulf through a foreign affiliate from August 1973 through January 1976. The proposed consent order also referred to overrecoveries alleged in a notice of probable violation issued to Gulf on May 8. 1974. Under the terms of the proposed consent order, Gulf will tender $42,240,000 to the United States in lieu of any further remedial action with respect to these matters. Howe\er. the proposed consent order states that Gulf and DOE recognize that the time periods involved and the determination of proper costs allowable make it most difficult to determine whether any person sustained an overcharge in the purchase of covered products from Gulf.* * * In view of the difficulties perceived in the determination of whether any person was overcharged as a result of the activities set forth in the proposed consent order, the DOE further agreed to accept responsibility for establishing an administrative procedure for evaluating claims for a portion of the refund and making restitution to persons presenting valid claims. In the present petition, the OSC requests the establishment of an ad hoc adjudicatory procedure within the Office of Hearings and Appeals for the consideration and disposition of any such claim. L AUTHORITY The OSC states In Its petition that the Secretary of Energy has the authority to issue the proposed consent order and to establish procedures for considering claims by persons for a portion of the payment specified in the order. We agree with that position. The authority of the FEA and the DOE to issue remedial orders requiring refunds to purchasers has been consistently sustained. Shell Oil Company, 3 FEA Par. 80,545 (January 6, 1976); accord, Southwestern Exploration Consultants, Inc., 1 DOE Par. 80,257 (May 9, 1978); MacKellar, Inc., 5 FEA Par. 80,655 (June 8, 1977). The basis for these holdings was expressed in Shell Oil Company in the following manner: The Congress was well aware of the fact that the Cost of Living Council had issued remedial orders requiring price rollbacks and refunds under the authority of the ESA (Economic Stabilization Act of 1970, as amended], and that this practice had been recognized as a legitimate exercise of regulatory authority by the Federal courts. See e.g., University of Southern California v. Cost of Living Council, 472 F.2d 1065 (T.E.CA.1972), cert. denied, 410 U.S. 928 (1973); and De Rieux v. Five Smiths, Inc., 499 F.2d 131 (TE.C.A.1974). As the successor to the Cost of Living Council with respect to the administration of price controls covering the petroleum industry, the FEO (and later the FEA) was also created to meet a national crisis and received the same broad discretionary powers for the enforcement of price controls. See Exec. Order No. 11748, 3 CFR 376 (1974); see also Note, Phase V: The Cost of Living Council Reconsidered 62 Geo. L. J. 1663, 1665 (1974). In enacting the EPAA, the Congress authorized the FEA to promulgate a regulatory program in order to insure, to the maximum extent feasible, that equitable prices would be charged for refined petroleum products throughout the United States. EPAA, sections (4)(a) and 4(b)(1). Shell Oil Company, 3 FEA at 80,690. Moreover, section 7(a) of the Federal Energy Administration Act of 1974 (FEAA), 15 U.S.C. 766(c), expressly authorizes the FEA Administrator to "promulgate such rules, regulations and procedures as may be necessary to carry out the functions vested in him. * * •" Those functions include a directive to "promote stability in energy prices to the consumer • • • [and] prevent unreasonable profits within various segments of the energy industry. * * •” FEAA 5(b)(5). 15 U.S.C. 764(b)(5). The responsibilities involved also extend to promulgating regulations providing for the "equitable distribution of crude oil, residual fuel oil and refined petroleum products at equitable prices among all the regions and areas of the United States and sectors of the petroleum industry. • • *” Emergency Petroleum Allocation Act of 1973, section 4(b)(1)(F). Pursuant to section 301 of the Department of Energy Organization Act, 42 U.S.C. 7151, all the functions formerly vested by law in the FEA Administrator have been transferred to the Secretary of Energy. The regulation authorizing the Issuance of the proposed consent order, 10 CFR 205.1991, was promulgated pursuant to that authority. 43 FR 3995, 4001 (January 31.1978). The proposed consent order was in turn Issued pursuant to section 205.1991 and is designed to prevent the retention of revenues by a party who allegedly violated mandatory price regulations and to compensate the customers that have been overcharged. See Shell Oil Company, 3 FEA at 80,691. Gulf is a major integrated petroleum firm engaged in the production, transportation, refining, and marketing of crude oil and refined petroleum products. Gulf sells an extensive schedule of petroleum products. Since it is one of the largest petroleum firms in the United States, the purchasers of Its products number in the millions. Because of the nature of the particular pricing practices alleged in the NOPD, which concern a fundamental element In a refiner's calculation of maximum permissible prices, each purchaser of Gulf products was potentially affected. However, the flexibility accorded refiners under the refiner price rule of the mandatory petroleum regulations makes it extremely difflculat to allocate specific overcharges to any particular sales transaction or to identify the specific customers who were overcharged. That determination is further complicated in this case by the fact that the practices in question occurred as long ago as 5 years. Under these circumstances It would appear necessary to implement an administrative claims procedure in order to insure that the statutory objectives referred to above are fulfilled. Zt would, for example, be exceedingly difficult for the DOE to insure that prices for petroleum products are established in an equitable manner unless an efficient and effective remedy exists for directing refunds to parties‘that have been overcharged. Zt would appear essential to do so in this case on the basis of a special claim procedure because of the difficulties discussed above which a particular claimant would otherwise experience in establishing the amount of overchares that should properly be attributable to a purchase that he made. In other words, even though it is very likely that overcharges occurred, the discretion which Gulf possessed as to the manner in which it could determine its prices makes it very unlikely that any particular claima