Mid-America Dairymen, Inc. v. Herrington

878 F.2d 1448, 106 Oil & Gas Rep. 273, 1989 U.S. App. LEXIS 11638, 1989 WL 65635
CourtTemporary Emergency Court of Appeals
DecidedApril 19, 1989
DocketNo. 10-79
StatusPublished
Cited by13 cases

This text of 878 F.2d 1448 (Mid-America Dairymen, Inc. v. Herrington) 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
Mid-America Dairymen, Inc. v. Herrington, 878 F.2d 1448, 106 Oil & Gas Rep. 273, 1989 U.S. App. LEXIS 11638, 1989 WL 65635 (tecoa 1989).

Opinion

WESLEY E. BROWN, Judge.

Mid-America Dairymen filed a claim for crude oil refunds under DOE Subpart Y procedures, 10 C.F.R., Part 205, Subpart V. The Office of Hearing and Appeals (OHA) denied the claim because a Release and Waiver had been executed by its affiliate, Roberts Dairy Company, in connection with Roberts’ claim for a share in an escrow fund held by the District Court in connection with the settlement of In re: The Department of Energy Stripper Well Exemption Litigation, M.D.L. No. 378 (District of Kansas).

In this action to review the OHA decision, Mid-America appeals from an Order of the District Court granting the Motion for Summary Judgment filed by John S. Herrington, Secretary of the Department of Energy. 704 F.Supp. 198.

None of the relevant facts involved in the ruling of the District Court are contravert-ed. As found and noted by the District Court, they may be summarized as follows:

Mid-America owns more than 49% of the capital stock issued by the Roberts Dairy Company.

On December 5, 1986, Roberts Dairy, through its president, Randall Winters, submitted a claim and waiver and release for the purpose of obtaining a refund from the Surface Transporters Escrow account in the Stripper Well M.D.L. litigation. This waived and released all claims by Roberts and “its parents, subsidiaries, affil[1449]*1449iates, successors, and assigns” to crude oil refunds under DOE Subpart Y procedures, 10 C.F.R., Part 205, Subpart V.

In the claim form and waiver, Roberts Dairy further agreed “to be bound by the Settlement Agreement” as though it had executed the Agreement itself.

Paragraph VI.A of the Settlement Agreement in the MDL litigation defined the term “affiliate” as including a firm “which controls, is controlled by, or is under common control with” a person, executing a waiver and release. The term “control” is defined as including the ownership of more than 49% of the shares of stock of a corporation.

Mid-America acquired the issued and outstanding capital stock of Roberts Dairy in December, 1980. The stock was purchased for the sum of $10.00 after Roberts Dairy failed to pay for unprocessed milk it had received from Mid-America.

Shortly after the stock was acquired, Robert Quinn, an individual selected by Mid-America, was employed by Roberts as its general manager and chief operating officer.

In June, 1981, Roberts was reorganized by a merger of two other corporations. After this — Prairie Farms Dairy, Inc., owned approximately 50% of the issued and outstanding voting stock of Roberts Dairy. Under an agreement, Prairie Farms assumed the responsibility for managing the day to day business of Roberts Dairy under a management contract with Mid-America. Mr. Quinn was no longer employed by Roberts Dairy.

The Roberts Dairy Board of Directors has ten members. Two of them are also members of the Mid-America Board of Directors.

As of the date of its last balance sheet, Roberts Dairy was financed by approximately $12,158,000 in equity capital. The ratio of equity to assets was approximately 53.6%. At that time it had no interest bearing debt.

Roberts Dairy maintains separate accounting records, prepares separate financial reports and has its own independent auditing firm.

Roberts Dairy prepares and files separate income tax returns, its management functions with a high degree of autonomy, and it is responsible for its own business goals.

Roberts Dairy buys approximately 41 million pounds of unprocessed milk each month. Mid-America sells approximately 90% of the unprocessed milk received by Roberts. Mid-America sells about 27 million pounds of unprocessed milk per month. Roberts Dairy buys about 13.7% of this milk.

Roberts Dairy processes and distributes fluid milk and other dairy products, selling wholesale, primarily to grocery stores and other retail outlets.

Roberts Dairy does not act as an agent for Mid-America; it employs its own individuals. Prairie Farms provides management oversight for Roberts Dairy. Mid-America is not involved in the day to day operations of Roberts Dairy.

Under these facts, this appeal involves the proper interpretation of, and the effect of the Settlement Agreement, the Surface Transporters Order, and the Surface Transporters Claim Form and Waiver, heretofore approved by the Kansas District Court in In re The Department of Energy Stripper Well Exemption Litigation, M.D.L. No. 378, 653 F.Supp. 108 (D.C.Kan.1986). The issue presented here is whether the District Court correctly affirmed the OHA determination that the submission of a Surface Transporters Claim Form and Waiver under the Stripper Well Settlement Agreement waived the Subpart V refund claims of the submitting firm and its affiliates.

Mid-America contends that the waiver and release must be read in connection with the negotiations which led to the Settlement Agreement in the M.D.L. litigation, and that the release was effective only with respect to the specific gallons of oil product which were the subject matter of the Roberts claim.

Mid-America did not present the “gallon-age” argument, as such, to the District [1450]*1450Court, and the Secretary suggests that this appeal should be dismissed because it is based on an argument that was not presented below. However, the District Court specifically found that the Mid-America claim was barred under the “plain meaning” of the Settlement Agreement and waiver — and thus — by implication— found that there was no “internal inconsistency” or ambiguity of language in the provisions of the agreement which are at issue in this case. In our de novo review of the record1 we likewise find that there is no inconsistency or ambiguity to be found in the waiver and release provisions.2

Following our review of the record against the background of the Stripper Well litigation, and its ultimate settlement, we determine that the District Court’s ruling should be affirmed because it correctly interpreted and enforced the provisions of that Settlement Agreement and subsequent orders relating to the establishment of various escrow accounts, and in particular, the Order establishing the Surface Transporters Escrow Fund which was the fund pertinent to the Roberts claims here in question.

THE STRIPPER WELL LITIGATION

This multidistrict litigation presented the issue of the validity of the Federal Energy Administration (now the Department of Energy) rule interpreting the “stripper well exemption” as excluding injection wells from well count when computing crude petroleum production from stripper well leases.

In a decision reversing the District Court of Kansas, this Court determined that the agency’s decision to exclude injection wells from the well count for the purposes of determining average daily production was valid. In Re: Department of Energy Stripper Well Exemption Lit. (TECA 1982) 690 F.2d 1375, cert. den., 459 U.S. 1127, 103 S.Ct. 763, 74 L.Ed.2d 978 (1983).

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Bluebook (online)
878 F.2d 1448, 106 Oil & Gas Rep. 273, 1989 U.S. App. LEXIS 11638, 1989 WL 65635, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mid-america-dairymen-inc-v-herrington-tecoa-1989.