Tenoco Oil Co. v. Department of Consumer Affairs (876 F.2d 1013, 1989)

LEVIN H. CAMPBELL, Chief Judge.

This appeal is from a permanent injunction issued by the United States District Court for the District of Puerto Rico invalidating gasoline price regulations issued by an agency of the Puerto Rico government. The opinion of the district court is published at Isla Petroleum Corp. v. Department of Consumer Affairs, 640 F.Supp. 474 (D.P.R.1986). As we believe the enjoined price order was not yet ripe for constitutional review, we vacate the district court’s injunction.

I. BACKGROUND

This dispute arose when the Puerto Rico Department of Consumer Affairs (referred to herein as DACO, the acronym of its Spanish title, Departamento de Asuntos del Consumidor) issued in early 1986 consecutive orders regulating the price of gasoline in Puerto Rico. The plaintiffs in this litigation composed of eight separate suits consolidated for trial, comprised most of the gasoline wholesalers and refiners serving the Puerto Rico market.

DACO is empowered by Puerto Rico law to regulate the prices and profit margins of goods and services provided to the Puerto Rico public in order to protect consumers’ rights and restrain inflation. P.R'.Laws Ann. tit. 3, § 341b (1982). From 1973 until 1981, however, gasoline prices in Puerto Rico, as in the mainland United States, were regulated by the United States government, preempting separate regulation by DACO. Federal price controls took the form of a limitation upon the gross profit margin obtained from gasoline sales. In 1981, the gross profit margin on gasoline was limited by federal law to 8.6$ per gallon for the wholesale sale of gasoline and 17.7$ per gallon for the retail sale. The term “gross profit margin” refers to the difference between a seller’s sales price and the seller’s acquisition cost. “Acquisition cost” includes the price the seller paid for gasoline plus excise taxes, but not the seller’s transportation costs and other operating costs. A “gross” margin differs from “net” margin in that the latter excludes operating costs as well as acquisition costs. Thus the 8.6$ per gallon gross profit margin set by the federal government for wholesalers in 1981 was intended to encompass the wholesaler’s operating costs plus a return on its investment.

In 1975, anticipating the federal government’s imminent withdrawal from gasoline price regulation, DACO promulgated Price Regulation 45, which authorized DACO’s Secretary to regulate the prices and “maximum margins of benefits” of gasoline, kerosene, and diesel fuel. However, in December 1975, Congress extended the period of federal regulation until 1981. 15 U.S.C. § 760g (1976). DACO accordingly amended Price Regulation 45 to provide that it would not take effect until the federal government ceased its regulation. Price Regulation 45, Amend. 1 (July 23, 1976) (hereinafter “Regulation 45”). The amendment to Regulation 45 provided that once federal price controls over gasoline and other oil products were lifted, and so long as DACO’s Secretary had not yet issued a price order, no person could increase the selling price of gasoline without giving 15 days’ written notice of the change to the Secretary. Regulation 45, Art. 3. The same regulation authorized the Secretary to issue orders “fixing and revising prices and the maximum margins of benefits on the sale of the regulated product at any distribution level,” and established criteria to be used by the Secretary in fixing prices and margins. Regulation 45, Art. 4. The Secretary was empowered to request any data necessary to attain the regulation’s purposes. Regulation 45, Art. 8.

The federal government lifted its controls over gasoline prices in 1981, but for the next four years DACO’s Secretary did not exercise the authority contained in Regulation 45 to issue orders fixing prices and maximum margins. Instead, DACO officials informally indicated to the oil companies during this period their expectation that gross margins should stay within levels formerly prevailing under federal regulation. The district court found “that DACO and the wholesalers/retailers adopted informally as a reference point for future regulation the federal margins as they existed on January 28, 1981.” It also found that one wholesaler, Shell, had made refunds in 1982 and 1983 of amounts received in excess of the earlier 8.6