Research Fuels, Inc. v. United States Department of Energy

977 F.2d 601, 1992 U.S. App. LEXIS 20479, 1992 WL 207617
CourtTemporary Emergency Court of Appeals
DecidedAugust 27, 1992
DocketNo. 5-133
StatusPublished
Cited by5 cases

This text of 977 F.2d 601 (Research Fuels, Inc. v. United States 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
Research Fuels, Inc. v. United States Department of Energy, 977 F.2d 601, 1992 U.S. App. LEXIS 20479, 1992 WL 207617 (tecoa 1992).

Opinion

WESLEY E. BROWN, Judge.

Appellant Research Fuels, Inc. (“RFI”), appeals the district court’s ruling granting summary judgment in favor of the United States Department of Energy (“DOE”). The dispute concerns a claim filed by RFI in a special refund proceeding administered by the Office of Hearings and Appeals (“OHA”) of the Department of Energy. The OHA denied the claim, finding that RFI had not demonstrated that it was entitled to recover out of a special fund set up to compensate victims of regulatory violations committed by Marathon Petroleum Company. RFI appealed OHA’s ruling to the U.S. District Court for the Northern District of Texas. The district court upheld the OHA determination on the grounds that it was supported by a rational basis. RFI asks this court to reverse the OHA determination and to remand the case to the agency. We agree with the district court that the OHA’s determination was supported by a rational basis and we therefore affirm the judgment.

I. The Consent Order.

On January 30, 1986, Marathon Petroleum Company (“Marathon”) entered into a consent order with DOE. The consent order settled DOE’s allegations that Marathon had violated the Mandatory Petroleum Price and Allocation Regulations during the period of regulation. Without admitting wrongdoing, Marathon paid over $12,-649,522 to DOE for distribution to parties injured by Marathon’s alleged regulatory violations. The OHA then instituted special refund proceedings in accordance with 10 C.F.R. Part 205, Subpart V, to distribute the funds.

RFI filed an application for a refund in the Marathon proceeding. The application alleged that Marathon, which had been a supplier of RFI’s, unlawfully withheld 28.8 million gallons of gasoline from RFI during the period March 1, 1979 to January 27, 1981. RFI sought a total refund of $1,078,-305 from the fund, asserting that Mara[603]*603thon’s failure to deliver the gasoline caused RFI to lose that amount in profits.

OHA rendered a final decision denying RFI’s claim on October 21, 1989. See Marathon Petroleum Co., 19 DOE ¶ 85,575 (1989). The OHA decision noted that under the standard governing claims such as RFPs, RFI did not have the burden of proving that alleged regulatory violations had actually occurred. Rather, RFI had to show that its claim was “non-spurious” and that RFI had reacted contemporaneously to protect its interest.1 OHA nevertheless ' concluded that RFI had failed to show that its claim was “non-spurious.” The basis for this conclusion was a determination by OHA that Marathon would have had valid defenses against any action brought against it founded on the allocation violations alleged by RFI. RFI contends that this conclusion was erroneous and that it must be reversed. In order to address RFI’s argument, we first examine the history of Marathon’s relationship with RFI.

II. Procedural History.

RFI was a nonbranded independent marketer of gasoline throughout the period of regulation. RFI sold gasoline through approximately 220 retail outlets as of July 1978. It also sold gasoline to about 36 wholesale customers. Marathon Oil Company was one of RFI’s major suppliers. Under the allocation regulations then in effect, RFI was entitled to receive certain quantities of gasoline from Marathon. The size of this entitlement was determined by reference to quantities supplied to RFI in the year 1972.

By September of 1978, RFI was in dire financial straits, due in part to a number of unprofitable acquisitions. In addition, the firm was heavily indebted to its three major suppliers — Marathon, Cities Service and Champlin. In September of 1978, Marathon and Cities suspended sales of gasoline to RFI and demanded immediate payment of outstanding debts before resuming delivery. In order to raise needed capital, RFI entered into negotiations with Oasis Petroleum Corp. (“Oasis”) regarding the sale of 84 of RFI’s retail outlets. By an agreement dated September 27, 1978, Oasis agreed to purchase the 84 outlets for $1.8 million. The agreement also provided that Oasis would acquire all of RFI’s allocation of gasoline for the retail outlets. Oasis withdrew from the agreement, shortly after its execution, however, because of inadequate assurances from Marathon and Cities regarding the assignment of gasoline formerly delivered to RFI. Further negotiations were then undertaken, culminating in an amendment to the asset purchase agreement on October 24,1978. The amendment reduced the amount of consideration paid by Oasis. At the same time, a “Substitute Supplier Agreement” was executed which-purported to terminate the supplier/purchaser relationship between Marathon and RFI and to establish the same relationship between Marathon and Oasis. Also on October 24, 1978, RFI signed a promissory note of just over $3 million payable jointly to Marathon, Cities and Champlin. The note was payable in $50,000 monthly installments. Marathon’s share of this indebtedness was about $1 million. These agreements provided that they had to be approved by the DOE. The agreements were submitted to DOE but were never approved.

From November 1978 through January of 1979, RFI made payments on its note in a timely manner. RFI failed to make timely payment of installments due on February 1 and March 1, 1979. RFI did not become current on its note payments until March 22, 1979. Also about this time, RFI asserted in correspondence, to Cities that Cities remained the base supplier on certain RFI retail outlets that were not sold to Oasis. RFI stated that the agreement purporting to transfer RFI’s gasoline allocation to Oasis had inadvertently included 9.8 million gallons of gasoline attributable to retail stores not sold to Oasis. Just as this dispute began to emerge, a change in DOE regulations further complicated the picture. Effective March 1, 1979, DOE amended the [604]*604regulations by changing the “base period” from 1972 to the period July 1977 through June 1978. Thus, as of March 1, 1979, allocation entitlements were determined based on sales from the 1977-78 period rather than from the year 1972. This triggered a dispute between Oasis and RFI concerning their respective rights to receive gasoline from Cities and Marathon. As a result of the change in regulations, RFI’s wholesale customers acquired for the first time a regulatory right to obtain gasoline from RFI based on their purchase volumes in the 1977-78 period. RFI asserted that it was entitled to receive an allocation of gasoline from Marathon and Cities in order to supply these wholesale customers as well as its remaining retail outlets. Oasis, on the other hand, maintained that RFI had transferred its entire allocation to Oasis and was not entitled to any allocation from Marathon or Cities. The uncertainties caused by this dispute, together with a shortage in the national supply of motor gasoline, resulted in a disruption of deliveries to both RFI and Oasis.

On March 21, 1979, Oasis filed suit in the 17th Judicial District of Tarrant County, Texas, seeking to enjoin RFI from interfering with its contractual rights under the October 1978 agreements. That court issued a temporary restraining order barring RFI from interfering with Oasis’ rights under the Substitute Supplier Agreement. Oasis also filed an application for a temporary stay of the regulations with OHA. Some of RFI's customers, including Lucky Stores, also sought relief from DOE.

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Bluebook (online)
977 F.2d 601, 1992 U.S. App. LEXIS 20479, 1992 WL 207617, Counsel Stack Legal Research, https://law.counselstack.com/opinion/research-fuels-inc-v-united-states-department-of-energy-tecoa-1992.