United States District Court for the District of Columbia
July 21, 2004.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., et al., Plaintiffs,
FEDERICO PENA, SECRETARY OF ENERGY, et al., Defendants.
The opinion of the court was delivered by: EMMET SULLIVAN, District Judge
On March 31, 1999, this Court granted defendants' Motion to
Dismiss plaintiff's complaint, finding that plaintiffs lacked
standing to challenge a Department of Energy ("DOE") award to a
third-party from a statutorily-established common fund. See
Consolidated Edison Co. v. Peña, Civ. Action No. 97-2213, at 10
(D.D.C. Mar. 31, 1999). On appeal, the Federal Circuit reversed,
holding that the answer to the question "to what is the claimant
entitled under the law?" was of "direct and immediate concern to
all other claimants in the fund," giving the plaintiffs standing
to challenge the award. Consolidated Edison Co. v. Richardson,
233 F.3d 1376, 1382 (Fed. Cir. 2000) ("Consolidated Edison
The Federal Circuit described the questions presented by the
case alternatively as: (1) "After a fund is established, and the monies are recovered for distribution, how is the amount that is
to be distributed to an individual claimant to be determined?"
Id. at 1381; and (2) "whether DOE has properly followed its own
procedures in awarding a specific refund amount to a particular
claimant, and whether the evidence supports the amount of the
award?" Id. at 1382. The latter question best frames the
inquiry on remand, where this Court faces the parties' cross
motions for summary judgment and plaintiffs' motion to certify a
class under Fed.R.Civ.P. 23(b)(2).
The plaintiffs are ten of the 95,000 companies that the
Department of Energy's Office of Hearings and Appeals ("OHA") has
found are entitled to crude oil refunds under the statutory
scheme established by the amendments to the Economic
Stabilization Act of 1971, Pub.L. No. 92-210, 85 Stat. 743
(1971), as incorporated into the Emergency Petroleum Allocation
Act of 1973, Pub.L. No. 93-159, 87 Stat. 627 (1973). Pls.'
Statement of Material Facts ¶ 4. Stated succinctly, the statutes
created a scheme in which the DOE collected funds from petroleum
producers and suppliers that had overcharged customers while
price controls were in effect. DOE then divided the acquired
funds among pools for private claimants as well as federal and
state governments. The pool for individual claimants was further divided into crude oil consumers and refined petroleum product
consumers. See Consolidated Edison III, 233 F.3d at 1378-79.
Under the volumetric formula for calculating the distribution
of recovered funds, plaintiffs here would receive approximately
12.5% of the recovered funds. Because "any increase in the size
of the total consumed volume . . . reduces the volumetric and
thus directly reduces the share of each claimant," plaintiffs
allege that the improper award to another recipient, Chesebrough,
potentially deprives them of more than $116,000. Id. at 1379.
In an earlier unrelated proceeding, the Department of Energy
("DOE") collected thirty-seven million dollars in a settlement
with Exxon and distributed those funds nationwide to various
purchasers. See Defs.' Mot. at 7. As part of that proceeding,
Exxon submitted a "Record of Purchases" Report ("Report" or
"Exxon Report") chronicling Chesebrough's purchases from Exxon
between 1977 and 1981. Initially, Chesebrough was unwilling to
accept the amount identified in the Report, saying it believed
the number to be "erroneous" and requesting an extension of time
in order to review its own records. Pls.' Statement of P & A at
4. When filing its claim in the Exxon proceedings, Chesebrough
left blank the space for volume consumed, noting "apparent
inaccuracies" in the Report. Id. at 4-5. Chesebrough later sent
a letter, noting that it "could not account for the volume of
purchases set forth" in the Report. Id. at 5. Nevertheless, the company acquiesced to the use of the Report figure in early 1990,
and that figure was used to calculate Chesebrough's award of
$187,000, which was promulgated on April 18, 1990. Defs.' Mot. at
7. Since the settlement, no one has either challenged the volumes
provided by Exxon or appealed the award to Chesebrough. Defs.'
Statement of Material Facts at ¶ 4.
In 1997, Chesebrough filed an application for a refund of crude
oil overcharges pursuant to the statutory scheme adopted by
Congress in the 1970's and 1980's, described briefly above, and
discussed at length in this Court's March 31, 1999, Memorandum
Opinion and the Federal Circuit's opinion on appeal. See
Consolidated Edison Co. v. Peña, Civ. Action No. 97-2213, at
2-5 (D.D.C. Mar. 31, 1999); Consolidated Edison III, 233 F.3d
at 1378-79. Chesebrough based its claim on purchases of gasoline,
motor oil, and petrolatum. See OHA 1997 Decision and Order,
RF272-97101, at 2. The Department of Energy's Office of Hearings
and Appeals ("OHA") concluded that Chesebrough was not an
end-user of petrolatum and that the company had submitted no
proof that it had been injured by systematic overcharges. Id.
at 3-4. OHA thus denied Chesebrough's claim in part. OHA also
refused to award Chesebrough a refund on the 2.2 million gallons
of gasoline it asserted having purchased from suppliers other
than Exxon. In doing so, OHA stated that Chesebrough had produced
no documents demonstrating that it had purchased the gasoline.
Id. at 4. However, relying on the Exxon Report on which the DOE
had based its 1990 award to Chesebrough, OHA awarded Chesebrough a $930,603
The Federal Circuit has instructed that the principal
issue for this Court to consider is "whether the evidence
supports the amount of the award?" Consolidated Edison III, 233
F.3d at 1382. In other words, is there "sufficient evidence in
the record to explain" OHA's decision to award Chesebrough
$930,603? Mullins v. Department of Energy, 50 F.3d 990, 992
(Fed. Cir. 1995) ("Mullins I"); see also id. at 994 ("While
an agency need not make detailed factual findings to support its
actions under this standard, the agency's rational basis must be
evident in the administrative record . . .") (Archer, C.J.,
Both parties agree that the proper standard of review of DOE's
decision is set out in Phoenix Petroleum Co. v. U.S.F.E.R.C.,
where the Federal Circuit explicitly adopted the standard of
review previously employed by the Temporary Court of Emergency
Appeals. 95 F.3d 1555, 1566-67 (Fed. Cir. 1996). According to the
Federal Circuit, a reviewing "court will set aside an EPAA/ESA
agency action only if it is in excess of the agency's authority,
or is based upon findings [that] are not supported by substantial
evidence." Id. at 1567. The court elaborated, "We recognize
DOE's administrative expertise, accord the agency's determination great deference, and must approve the
DOE decision if there is a rational basis for it." Id.
Plaintiffs challenge OHA's reliance on the Exxon Report as a
basis for calculating Chesebrough's award by arguing that
Chesebrough's refusal to rely on the Exxon Report in 1990 and
Chesebrough's initial statement that the Report was "erroneous"
are evidence that the Report was inaccurate. Thus, plaintiffs
conclude, OHA's reliance on an inaccurate Report is irrational.
Defendants argue that Chesebrough might have initially
characterized the Exxon Report as "erroneous" because it
undervalued the company's purchases. Defs.' Mot. at 7.
Defendants also argue that it is equally plausible that
Chesebrough might have been hesitant to adopt the Exxon numbers
because they were based on the years 1977-1981 and thus did not
cover the entire eight-year period. Id.
Resolution of these intricate arguments is not, however,
necessary. Indeed, this Court's duty is not to conduct an
extensive factual inquiry but instead to ascertain "whether the
evidence supports the amount of the award," Consolidated Edison
III, 233 F.3d at 1382, while "recogniz[ing] DOE's administrative
expertise" and "accord[ing] the agency's determination great
deference." Phoenix Petroleum, 95 F.3d at 1567.
In this regard, the Court is persuaded that OHA had a rational
basis for its decision. See id. None of the current parties dispute that the Exxon Report has not been questioned by
any of the parties involved in the Exxon settlement. While
plaintiffs are correct that they had no reason to challenge that
award, it does not reduce the significance of the apparently
undisputed fact that no one, not even those parties with a
clear interest, has challenged the Exxon settlement as either
fraudulent or erroneous.
In addition to noting that no one has challenged the Exxon
Report, the Court finds that Exxon would have no incentive to
overvalue its sales in the Report. In settling the amount it
had overcharged customers during the period covered by the
federal plan, Exxon had every incentive to undervalue its sales
as much as possible. Thus, it appears to this Court that the
DOE's use of the Exxon Report in making its determination was
rational and should not be disturbed.
The Federal Circuit acknowledged that its holding "open[ed] the
door to the possibility of an endless series of challenges to
awards . . ." issued by DOE but expressed "confidence that the
trial courts will be able to control the matter." Consolidated
Edison III, 233 F.3d at 1383. Deciding this case at the summary
judgment stage is fully consistent with the Federal Circuit's
exhortation to "control" litigation challenging agency refunds awarded under a well-established system. See id.
Plaintiffs here argue that Cheseborough's award was
unsubstantiated and irrational. However, absent some showing that
the agency does not normally give credence to third-party reports
or that the agency had reason to suspect fraud or deception,
plaintiffs have failed to establish that they are "entitled to
judgment as a matter of law." Fed.R.Civ.P. 56. In contrast,
because defendants have shown that the agency had sufficient
evidence before it and a rational basis for making its ruling,
the Court grants their motion for summary judgment. Having found
that the DOE decision should not be disturbed, there is no need
to reach plaintiffs' Motion to Certify a Class. Thus, plaintiffs'
Motion will be denied as moot.
An appropriate Order and Judgment accompanies this Memorandum
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