Hawthorne Oil & Gas Corp. v. Department of Energy

647 F.2d 1107, 1981 U.S. App. LEXIS 13953
CourtTemporary Emergency Court of Appeals
DecidedApril 24, 1981
DocketNo. 5-50
StatusPublished
Cited by14 cases

This text of 647 F.2d 1107 (Hawthorne Oil & Gas Corp. v. Department of Energy) is published on Counsel Stack Legal Research, covering Temporary Emergency Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hawthorne Oil & Gas Corp. v. Department of Energy, 647 F.2d 1107, 1981 U.S. App. LEXIS 13953 (tecoa 1981).

Opinion

BECKER, Judge.

Appellant Hawthorne Oil and Gas Corporation (Hawthorne) appeals from a final judgment of the United States District Court for the Western District of Louisiana [1108]*1108(Record on Appeal, R. hereinafter, 129) dismissing without prejudice a complaint of Hawthorne seeking a declaratory judgment and injunctive relief against the appellees Department of Energy (DOE) and Scurlock Oil Company (Scurlock). The final judgment, from which the appeal was taken, was accompanied by an opinion of the district court entitled “Ruling on Motion” (R. 125-128).

The final judgment of the district court was entered, after notice and hearing,1 on the motion of DOE to dismiss, and memo-randa in support containing a summary of and part of the underlying administrative record (R. 23-63). Also filed and considered by the district court were a motion of Hawthorne to deny dismissal of the complaint, a memorandum of Hawthorne in support thereof (R. 73-79, 101-116), and of DOE in opposition thereto (R. 74-79, 117-121, 122-124). There was no formal offer of evidence at the hearing on the motion to dismiss, but without objection the material uncontroverted facts concerning the history and status of the administrative and judicial proceedings were fully developed prior to final judgment in the above described proceedings.

Filing of The Complaint and Answer

The complaint of Hawthorne, that was dismissed without prejudice by the district court, was in one count, and entitled “Complaint For Declaratory Judgment And Injunction” (R. 1-70). It asserted jurisdiction only “under the Federal Declaratory Judgment Act, 28 U.S.C. 2201” even though it sought immediate conventional injunctive relief against DOE and Scurlock. No defect in this regard was noted or ruled on by the district court in its opinion or judgment of dismissal without prejudice.

Appellee Scurlock filed answer (R. 15-19) preserving the defense that no claim for relief was stated and asserting two additional defenses, including denials of some material allegations of the complaint described below.

Jurisdiction

The clear jurisdiction of the district court and of this court is not an issue on this appeal.

Decision of the District Court

In its findings of fact and conclusions of law which accompanied its final judgment of dismissal without prejudice appealed from, the district court stated (R. 125-128):

In May 1977, the Economic Regulatory Administration of the Department of Energy began enforcement proceedings against Hawthorne Oil & Gas Corporation by issuing a notice of probable violation. The notice alleged in essence that Hawthorne had overpriced domestically produced crude oil in violation of the Mandatory Petroleum Price Regulations. After Hawthorne’s responses to the notice were considered, the Department issued a proposed remedial order (PRO) on May 30, 1978. The PRO alleged that Hawthorne had incorrectly certified production from its drilling unit, and had failed to establish a unit base production control level. As a consequence, Hawthorne had allegedly overcharged Scurlock Oil Company approximately $600,000. Among other actions, the PRO proposed that Hawthorne recertify its product for lower tier prices. Eleven months later, Hawthorne filed a notice of objection to the PRO and submitted a statement of objections on September 12, 1979, to the Department’s Office of Hearings and Appeals.
Less than one month later, Hawthorne filed suit in this court against the Department and Scurlock Oil in which it seeks an order: 1) permitting it to compute its base production control level on a per lease rather than per unit basis; 2) requiring Scurlock to pay upper tier prices pending a final agency determination; and 3) enjoining the agency’s enforcement of mandatory price regulations as to Hawthorne. The Department thereafter filed a motion to dismiss which the [1109]*1109court took under advisement after oral argument.
The Department contends that Hawthorne’s suit should be dismissed because it is not ripe for adjudication and because the corporation has failed to exhaust its administrative remedies. Hawthorne, on the other hand, argues that without immediate judicial review it is faced with the dilemma of either complying with the PRO and losing substantial income which, under the regulatory scheme, it cannot recoup or ignoring the PRO and subjecting itself to possible criminal and civil liability.
Generally, “no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted.” Myers v. Bethlehem Shipbuilding Corporation, 303 U.S. 41, 50-51, 58 S.Ct. 459, 463, 82 L.Ed. 638, 644 (1938). In the instant case, it is apparent, as the plaintiff admits, that additional steps remain in the administrative procedure. At present, Hawthorne is appealing the PRO to the Office of Hearings and Appeals. A decision unfavorable to Hawthorne would result in the issuance of a remedial order which is then appealable of right to the Federal Energy Regulatory Commission. Only a final decision by this commission adopting, rejecting, or amending the remedial order constitutes final agency action for the purposes of judicial review, 42 U.S.C. § 7193(c).
The policies behind the exhaustion rule have recently been articulated by the Supreme Court: “The basic purpose of the exhaustion doctrine is to allow an administrative agency to perform functions within its special competence — to make a factual record, to apply its expertise, and to correct its own errors so as to moot judicial controversies.” Parisi v. Davidson, 405 U.S. 34, 37, 92 S.Ct. 815, 818, 31 L.Ed.2d 17, 25 (1972). In the present litigation it is evident that factual issues still await development and that the agency’s expertise will be helpful for a resolution of these issues. Moreover, there exist obvious opportunities within the administrative framework for a resolution of this dispute which will moot the present proceeding — the Office of Hearings and Appeals may rule in Hawthorne’s favor, and determine that a remedial order should not issue and even if a remedial order issues, the Federal Energy Regulatory Commission may in turn reject the order. Therefore, the underlying policy arguments for the exhaustion doctrine apply to the case at hand.
In addition, Hawthorne’s argument that it faces a dilemma is not persuasive. Hawthorne advances two possible scenarios: 1) after complying with the PRO and losing substantial revenues, it prevails on the merits of the claim but is unable to recoup the difference between upper and lower tier prices; or, 2) after ignoring the PRO, it loses on the merits and faces possible criminal and civil liability. However, it is just as possible that Hawthorne’s fears are unfounded. For example, Hawthorne may comply with the PRO and fail in its legal battle to have the oil recertified at the higher price; or Hawthorne may ignore the PRO but prevail on its argument that the oil should be priced at the higher level.

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Bluebook (online)
647 F.2d 1107, 1981 U.S. App. LEXIS 13953, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hawthorne-oil-gas-corp-v-department-of-energy-tecoa-1981.