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DENNY KLEPPER OIL CO. v. UNITED STATES DOE

October 2, 1984

DENNY KLEPPER OIL COMPANY, Plaintiff,
v.
UNITED STATES DEPARTMENT OF ENERGY, Defendant



The opinion of the court was delivered by: GESELL

This is an action for judicial review of a decision by the Department of Energy to grant a partial refund to Denny Klepper Oil Company representing the amount it was overcharged by its gasoline supplier, Vickers Energy Corp. Klepper and the department disagree on how much money Klepper is owed. The parties have filed cross-motions for partial summary judgment, which have been fully briefed and argued. *fn1"

 I. The Refund Proceedings

 The controversy begins with a consent order entered on May 11, 1979 between Vickers and the department's Office of Enforcement. *fn2" The order settled the department's allegations that Vickers had overcharged its customers of refined petroleum products from August 19, 1973 through March 1979, in violation of price regulations promulgated under the Economic Stabilization Act of 1970, 12 U.S.C. § 1904 note, and the Emergency Petroleum Allocation Act of 1973, 15 U.S.C. § 751 et seq. Without admitting any legal violation, Vickers agreed to roll back prices at its own service stations and to pay $2.85 million into an escrow fund to provide refunds to those who bought Vickers gasoline at other than Vickers' own retail pumps, including companies like Klepper that bought gasoline wholesale from Vickers and resold it at their own service stations.

 The consent order provided that the department's Office of Hearings and Appeals (OHA) would administer distribution of the escrow fund, as provided under regulations for special refund procedures, 10 C.F.R. §§ 205.280-205.288. A subsequent petition filed by the Office of Enforcement with OHA included joint recommendations from Vickers and the Office of Enforcement as to how OHA should make the distribution. Among other things the petition recommended

 
that, to the maximum extent practicable and consistent with sound public policy, the total amount of the escrow fund, excluding the cost of administration, if any, shall be distributed among the purchasers which the Office of Hearings and Appeals finds to be eligible and which duly apply for a portion of such funds.

 After soliciting and receiving comments from Klepper and others as to how the distribution should be made, OHA proposed and later finally adopted standards for its refund procedure. *fn3" It decided to base a claimant's refund on the claimant's share of all the gasoline sold by Vickers (except through its own retail outlets) during the consent order period, rather than on the claimant's share of all the claims made. That assured that unless claims were filed for all the non-retail gasoline Vickers sold during the 5 1/2-year period, money would be left over in the escrow fund after all claimants were paid. OHA proposed, but did not finally decide, to distribute such leftover money to public utilities in Vickers' marketing region, which would then roll back their rates by a corresponding amount, so that Vickers' ultimate consumers would be benefited. *fn4" OHA reasoned that if it merely divided the money among actual claimants not accounting for all gasoline sold, each claimant's share could be bigger than its actual injury. Moreover, it noted that the purpose of its special refund procedures for such cases, pursuant to 10 C.F.R., Part 205, Subpart V, was to provide restitution to as many injured customers as possible, thus making a two-step distribution, first to actual claimants and then to the utilities, more consistent than a distribution of all the money to the actual claimants.

 In order for companies to show that they had not passed on the price increases, OHA required submission of "data showing the applicant's unrecouped increased product costs (bank) for each calendar quarter for which the firm claims a refund." *fn5"

 Klepper accordingly submitted data on its bank indicating that throughout the consent order period, the bank was increasing. *fn6" That showed that Klepper was "banking" at least some of its increased product costs during that time. But it did not necessarily show that Klepper was absorbing Vickers' illegal price increases, because other increased product costs during the same time could have accounted for some or all of the increased bank.

 In May 1982, OHA sent letters asking for additional data from Klepper and other resellers of Vickers gasoline to "help us to decide the extent to which you absorbed the price increases. . . ." The letter gave each claimant two options. Method A, which OHA said it preferred, required data on month-by-month prices by Vickers to the companies and corresponding data on the companies' prices to their own customers, along with the number of gallons bought and sold at each price. Method B, which OHA said should be used only if Method A data was not available, required monthly or quarterly figures on gross profits on sales of Vickers gasoline during the period, along with volume sold.

 Klepper elected Method B, as its counsel explained in a cover letter to OHA, "because of the limitations of the firm's records and accounting system." In June 1982, it provided monthly figures for gross profit, gallons sold, and margin (profit per gallon).

 In November 1982, OHA made a telephone request for additional data on "purchase or selling prices." Klepper complied by estimating its "weighted average cost of product" per gallon. *fn7"

 On June 16, 1983, OHA issued its decision. It found that Klepper had purchased 99,321,001 gallons of Vickers gasoline during the consent order period and that its banks of unrecovered increased product costs "were sufficient to cover the refund applied for in all quarters of the consent order period." However, it found that Klepper had passed on to its customers 30 of the 34 Vickers price increases during the period. *fn8" ...


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