IN RE: THE DEPARTMENT OF ENERGY STRIPPER WELL LITIGATION.
THE STATES OF ALABAMA, CALIFORNIA, CONNECTICUT, IDAHO, INDIANA, MARYLAND, MICHIGAN, MISSISSIPPI, MONTANA, OHIO, SOUTH DAKOTA, VERMONT, WISCONSIN and WYOMING,
THE STATES OF ALABAMA, CALIFORNIA, CONNECTICUT, IDAHO, INDIANA, MARYLAND, MICHIGAN, MISSISSIPPI, MONTANA, OHIO, SOUTH DAKOTA, VERMONT, WISCONSIN and WYOMING,
Plaintiffs - Appellants,
UNITED STATES DEPARTMENT OF ENERGY, Hazel O'Leary, Secretary; OFFICE OF HEARINGS AND APPEALS, Department of Energy, George B. Breznay, Director,
Defendants - Appellees,
CHEVRON, USA, INC.,
(D.C. No. 79-CV-378)
(D.C. No. 96-CV-1180-MLB)
DELAWARE, HAWAII, ILLINOIS, KANSAS, NEBRASKA, NEVADA, NORTH CAROLINA, RHODE ISLAND and WEST VIRGINIA, THE TERRITORY OF GUAM AND THE VIRGIN ISLANDS,
UNITED STATES DEPARTMENT OF ENERGY, and CHEVRON U.S.A., INC.
(D.C. No. 97-CV-378)
Before EBEL, HOLLOWAY and KELLY, Circuit Judges.
Plaintiffs-Appellants in cases 99-3065 and 99-3066 are the states of Alabama, California, Connecticut, Idaho, Indiana, Maryland, Michigan, Mississippi, Montana, Ohio, South Dakota, Vermont, Wisconsin, and Wyoming (the "States"). Plaintiffs-Appellants in case 99-3102 are the states of Delaware, Hawaii, Illinois, Kansas, Nebraska, Nevada, North Carolina, Rhode Island, and West Virginia, as well as the territories of Guam and the Virgin Islands (the "Jurisdictions;" the States and the Jurisdictions are collectively referred to as "Appellants"). Appellants sued Defendants-Appellees United States Department of Energy ("DOE") and Chevron U.S.A. Inc. ("Chevron;" DOE and Chevron are collectively referred to as "Appellees") in connection with a settlement agreement purporting to resolve the Stripper Well Litigation.(1) That litigation concerned the proper disbursement of over $1 billion in overcharge funds collected by DOE pursuant to crude oil price controls imposed under the Economic Stabilization Act of 1970 ("ESA") and the Emergency Petroleum Allocation Act of 1973 ("EPAA"). In 1986, a multitude of interested parties, including the States and the Jurisdictions, entered into the Final Settlement Agreement ("FSA"), which apportioned these and subsequently recovered funds among DOE (40%), the fifty states and several territories (40%), and reserved the remainder to settle individual claims (primarily those of utilities and oil refineries). The FSA was approved by Judge Theis of the District of Kansas, pursuant to that court's MDL 378 jurisdiction. Although intended to end this controversy, the FSA has itself been the subject of extended litigation.
At the center of the present case is a decision by the Department of Energy not to seek from Chevron some $500 million, which Appellants maintain should then be disbursed under the FSA. In 1992, DOE's Economic Regulatory Administration ("ERA") issued a Proposed Remedial Order ("PRO") alleging that Chevron had improperly represented its status under the now-defunct Tertiary Incentive Program ("TIP"),(2) and that it therefore must disgorge $124,989,588 it had received under the program (with interest, the sum exceeds $500 million). Chevron challenged the PRO and the matter was referred to DOE's Office of Hearings and Appeals ("OHA").
The OHA, however, declined to enforce the PRO as a final Remedial Order, finding that "the ERA has failed to establish that Chevron was in fact unjustly enriched by its participation in the TIP as alleged in the PRO." (OHA Decision at 12-13.) As a result, none of the Appellants received additional disbursements under the FSA. After the OHA issued its decision in 1996, a group of private parties, who stood to recover additional funds as individual claimants under the FSA, directly challenged the ruling in the District of Columbia District Court. That claim, however, was twice rejected by the Federal Circuit. See Consolidated Edison v. O'Leary, 117 F.3d 538 (Fed. Cir. 1997) (dismissing plaintiffs' claims for lack of a private right of action and because the OHA's decision was not justiciable), Consolidated Edison v. O'Leary, 131 F.3d 1475 (Fed. Cir. 1997) (dismissing plaintiffs' claim because the OHA's decision was not reviewable).
In 1996, the States and Jurisdictions brought the present actions in the District of Kansas, challenging the same OHA decision. That court, however, dismissed all three suits. In its order denying both the States' and the Jurisdictions' motions to enforce the FSA (Nos. 99-3065 & 99-3102 before this court), the district court identified several reasons why these actions were improper. First addressing the States' claims, it found that one provision of the FSA upon which the States relied "does not provide any substantive rights." (Order at 11.) It further noted that "[t]he FSA settled the stripper well litigation, along with the entitlements litigation, but it did not place OHA and its enforcement proceedings under this court's oversight." (Id.) The court then turned to the second FSA provision that the States claimed DOE's decision violated, but found that no such violation in fact occurred. (See id. at 12-13.) Citing the Federal Circuit's recent decisions regarding this controversy, the court found that "OHA's dismissal of the proposed remedial order against Chevron was a part of DOE's prosecutorial function and as such, was unreviewable." (Id. at 13.) "Finally," the court continued, "paragraph IV.A.2 of the FSA specifically preserves DOE's prosecutorial discretion and shields it from review." (Id.)
Discussing the Jurisdictions' claims, the court similarly engaged in an analysis of the FSA. The Jurisdictions alleged that Chevron "'fraudulently misled' the court and the parties [to the FSA] by misrepresenting its status as an entitlements seller under the draft 1981 Entitlements Notice [upon which the FSA distributions were based.]" (Id. at 4.) Specifically, the Jurisdictions argued that when Chevron claimed certain tax credits after DOE discontinued the Entitlements Program, it automatically decertified itself as an entitlements seller under the TIP. (See id.) The court responded, however, that "[t]he jurisdictions assume that, in 1983, Chevron had to elect between a windfall profit tax refund and remaining on the entitlements list. There is nothing in the FSA requiring such an election." (Id. at 15.) The court further found that "tax matters were excepted from the settlement by Proviso (E) to the Refiners Release," and that "the FSA imposed no obligation on Chevron as a settling refiner to disclose its pending windfall profit tax refund claim." (Id. at 16.) Thus, its denial of the Jurisdictions' motion required a close inquiry into the terms of the FSA.
That same day, the district court issued a separate order dismissing the States' original complaint (No. 99-3066 before this court). The court specifically incorporated its findings in the MDL order, and dismissed the States' FSA claims on those grounds. (See Order of Dismissal at 2.) The States had also challenged DOE's interpretation of the TIP regulations, DOE's legal authority to issue or amend its regulations, and DOE's compliance with the Administrative Procedure Act and the Department of Energy Organization Act. The court dismissed these claims for lack of standing or, alternatively, for lack of proper venue. (See id. at 1-4.)
The States and Jurisdictions now seek review in this court. Appellees DOE and Chevron filed motions to dismiss for lack of appellate jurisdiction in each case, alleging that exclusive appellate jurisdiction over these claims lies with the Federal Circuit. For the reasons stated below, we agree.
A. Federal Circuit Jurisdiction
28 U.S.C. § 1295(a) provides that "[t]he United States Court of Appeals for the Federal Circuit shall have exclusive jurisdiction of an appeal . . . (11) under section 211 of the Economic Stabilization Act of 1970; (12) of an appeal under section 5 of the Emergency Petroleum Allocation Act of 1973." Among the relevant provisions of the ESA and the EPAA were the crude oil price controls, which formed the basis for the controversy resolved by the FSA. The Federal Circuit succeeded to this jurisdiction upon abolition of the Temporary Emergency Court of Appeals ("TECA") in 1993. See Pub. L. 102-572 § 102(d), (e) (1992). Thus, this court cannot exercise jurisdiction over appeals "under" these statutes.
B. Tenth Circuit Authority
The Tenth Circuit has carefully avoided encroaching on the exclusive jurisdiction of the Federal Circuit and its predecessor, TECA. In Mobil Oil Corp. v. United States Dep't of Energy, 983 F.2d 172 (10th Cir. 1992), this court found that a dispute over moneys claimed by DOE in restitution proceedings against an oil company implicated the ESA and EPAA and was therefore subject to TECA's exclusive jurisdiction. See id. at 175-76. The court found that the issue of liability for restitution was "intertwined with the ESA and EPAA," and therefore could not properly be removed from TECA's domain. Id. at 176. The court also noted that "[a]nother Tenth Circuit decision recognizes TECA's jurisdiction when interpretation of price ceilings regulations imposed by the ESA and EPAA cause a contract dispute between the parties." Id. (citing Mountain Fuel Supply Co. v. Johnson, 586 F.2d 1375 (10th Cir. 1978), cert. denied, 441 U.S. 952 (1979). The Tenth Circuit has never exercised jurisdiction over a dispute concerning the FSA.
Appellants argue that our decision in In re Seneca Oil, 906 F.2d 1445 (10th Cir. 1990), points in favor of jurisdiction over the present case. This argument is incorrect. In Seneca Oil, the court held that where ESA/EPAA issues are merely a backdrop to an independent claim, jurisdiction may obtain. "This appeal," the court wrote "is not from an action to enforce DOE regulations or to obtain an order of restitution; rather it is from a decision regarding the priority of the restitution claim in bankruptcy." Id. at 1454. Moreover, the court was careful to note that TECA's exclusive jurisdiction with respect to the ESA and EPAA is not to be narrowly construed: "Thus, the phrase 'arising under' is interpreted more expansively for purposes of TECA's jurisdiction than it is for purposes of the federal question jurisdiction of the district courts. For example, unlike federal question jurisdiction, the TECA's jurisdiction can be created by defenses that raise ESA/EPAA issues." Id. at 1454 n.1 (emphasis added). In sum, only where these statutes and their regulations are mere background will this court exercise jurisdiction.
The question remains, therefore, whether appeals relating to the FSA arise under the ESA and EPAA, or whether those statutes merely provide a backdrop for independent claims. In the absence of Tenth Circuit precedent speaking directly to this issue, we find it useful to seek guidance from the Federal Circuit's extensive dealings with the FSA. As a preliminary matter, we note that the Federal Circuit expressly held "that the TECA precedent and practice on jurisdictional matters shall continue to apply to cases that reach the Federal Circuit by virtue of succession to the TECA." Texas American Oil Corp. v. United States Department of Energy, 44 F.3d 1557, 1564 (Fed. Cir. 1995). Accordingly, we look to both Federal Circuit and TECA authority in making this inquiry.
Such a review reveals that appellate jurisdiction over FSA disputes is exclusively vested in the Federal Circuit. In In re Dep't of Energy Stripper Well Exemption Litigation, 864 F.2d 796 (Temp. Emer. Ct. App. 1988), the court held that "seeking interpretation of the Final Settlement Agreement to resolve a dispute between two signatories to that Agreement, [is] a cause of action arising out of federal law, specifically out of the laws and regulations concerning the Economic Stabilization Act." Id. at 799. Given the plain logic of this conclusion, as well as the experience and expertise of the Federal Circuit in interpreting the FSA, we hold that if a controversy requires interpretation of the FSA, 28 U.S.C. § 1295(a)(11) grants exclusive appellate jurisdiction to the Federal Circuit.
C. Nature of the Present Case
(1) The Jurisdictions' MDL 378 Case (No. 99-3102)
In their opposition to Appellees' motion to dismiss, the Jurisdictions admit that "[t]he Jurisdictions' claims are all based on enforcing the FSA." (Jurisdictions' Opposition at 3.) As we have previously stated, claims under the FSA are within the exclusive jurisdiction of the Federal Circuit and thus cannot be considered by this court. The Jurisdictions cite several TECA and Federal Circuit cases for the proposition that FSA claims do not arise under the ESA or EPAA. (See Jurisdictions' Opposition at 3-4.) None of these cases, however, directly addresses this point; moreover, the Jurisdictions fail to discuss TECA's 1988 In re Stripper Well case explicitly finding that FSA claims do indeed arise under those statutes. Thus, because the Jurisdictions' claims are based on the FSA, the Federal Circuit has exclusive jurisdiction.
(2) The States' MDL 378 Case (No. 99-3065)
In their brief, the States have carefully phrased the issues presented to this court to avoid any mention of the FSA. They ask this court: "Did the lower court err in ruling that the 1977 Department of Energy Organization Act ("DOEOA") requires the challenged order of the Department of Energy's Office of Hearings and Appeals to be deemed an unreviewable act of prosecutorial discretion?" Moreover, they urge that in evaluating jurisdiction we must "'look at the nature of the issue presented to us and not to the nature of the case or controversy presented below.'" (States 99-3065 Opposition at 2 (quoting MGPC, Inc. v. DOE, 673 F.2d 1277, 1281 (Temp. Emer. Ct. App. 1982).) The issues before this court, they argue, "are discrete and severable from any ESA/EPAA issues raised by the underlying claims or in the lower court's decision." (Id. at 3-4.) A careful review of the case, however, reveals otherwise.
Under the case or controversy requirement of Article III, courts decide cases in the context of a particular dispute and not in a legal vacuum. Thus, notwithstanding the States' careful semantics, we understand the primary question presented in this appeal to be: Did the district court err in determining that the OHA's decision that Chevron did not receive excess tertiary incentive revenue and therefore need not make restitution to the Stripper Well escrow fund was unreviewable? In order to determine whether the district court erred, we must first evaluate the reasoning it offered in support of its decision. Even a cursory review of the district court's Memorandum and Order indicates that interpretation of the FSA was integral to its decisionmaking process, and appellate review is therefore committed exclusively to the Federal Circuit.
First, we note that before declining to review the OHA's decision, the district court determined whether a certain provision of the FSA conferred a substantive right upon the plaintiffs. (See Order at 11.) Finding that it did not, the court went on to analyze a second provision pertaining to the States' claims, also finding that "DOE did not violate this provision." (Id. at 12.) Only after determining that other substantive rights under the FSA were not infringed did the court examine whether the OHA decision was unreviewable as prosecutorial discretion. In order for this court to determine whether the district court erred in finding that parties to the FSA cannot challenge such an OHA decision, we would likewise have to consider the impact of the FSA on this situation. The States were before the district court on its MDL 378 docket precisely because they are parties to the FSA, and it was in this context that the district court reached its decision. This court cannot don judicial blinders and evaluate merely one part of the district court's reasoning it offered in finding the OHA decision unreviewable. In short, the States ask us not to review the district court's decision, but simply to reverse it. This court cannot so abdicate its core appellate function.
Even were we to accept the States' invitation to decide merely whether the district court erred in finding an OHA decision unreviewable, such an examination would require interpretation of the FSA and thus infringe upon the Federal Circuit's exclusive jurisdiction over such matters. In support of its finding that "there is no right for the Secretary of Energy or any other person to appeal OHA's decision not to issue a remedial order," the court noted that "paragraph IV.A.2 of the FSA specifically preserves DOE's prosecutorial discretion and shields it from review." (Id. at 13.) It would be impossible for this court to discern whether the district court erred without evaluating the reasoning on which its decision was based.
This court declines to participate in the fiction that this dispute does not turn squarely on the FSA. As the district court's order clearly indicates, the holding that the OHA's decision is unreviewable rested in large part on the provisions of the FSA, and it is beyond this court's jurisdiction to consider such matters. Accordingly, this claim may only be presented to the Federal Circuit.(3)
The States also contend that the district court erroneously excluded certain arguments advanced in the States' reply brief before that court and that the district court "should have considered all of the States' claims together in the MDL 378 docket." (Aplt. Br. 99-3065 at 38, 43.) While these claims do not directly turn on an interpretation or application of the FSA, the Federal Circuit nevertheless has exclusive jurisdiction to resolve them. In Phoenix Petroleum Co. v. United States Fed'l Energy Regulatory Comm'n, 95 F.3d 1555 (Fed. Cir. 1996), the Federal Circuit explained that
TECA's exclusive jurisdiction extended to issues that did not themselves arise under the EPAA when "a meaningful ruling requires consideration of the issues as a whole, the construction of the EPAA will control the litigation, the issues are so commingled as to render separate treatment impractical, or the non-EPAA issues are subsidiary, preliminary or threshold to an EPAA issue."
Id. at 1563 (quoting Pennzoil Exploration & Prod. Co. v. Lujan, 928 F.2d 1139, 1141 (Temp. Emer. Ct. App. 1991). We hold that the same is true when issues not otherwise relating to the FSA are so inextricably linked and subsidiary to the FSA claim that it would be both impractical and wasteful to consider those claims separately.
In the present case, whether the district court properly excluded some of the States' arguments and whether the district court properly refused to consider certain claims under its MDL 378 docket are surely subsidiary to the States' primary FSA claims. As we have explained at length above, it is clear that these appeals are fundamentally based on the FSA, and it would merely waste the courts' and the litigants' resources to remove these secondary issues from their proper context. Indeed, the States rightly acknowledge that the "central issue" is their claim that the district court should have reviewed the OHA decision. (See States' Opposition 99-3065 at 4.) Furthermore, we note that because the additional claims the States sought to raise were themselves based on the FSA, whether the district court properly excluded these claims is merely a threshold inquiry to an FSA claim. Thus, it appears that the States' claims that do not on their face implicate the FSA in fact are so secondary in relevance and importance to their FSA companions that they must fall within the Federal Circuit's exclusive jurisdiction.
(3) The States' Original Complaint (No. 99-3066)
On the same day the district court dismissed the States' and Jurisdictions' motions to enforce the FSA, it issued a separate order dismissing the States' concurrent original complaint. In that order, the district court held that the States' allegation that DOE had violated the FSA failed to state a claim upon which relief could be granted. The court then dismissed the remainder of the States' claims for lack of standing, or, alternatively, for lack of proper venue. (See Order of Dismissal at 2.) The States have appealed these dismissals to this court.
In dismissing the States' FSA claim, the district court explicitly adopted the reasoning of its order dismissing the MDL 378 claims. (See Order of Dismissal at 2.) For the same reasons we cannot review the MDL 378 decisions, this court does not have jurisdiction to review the States' claim that the district court erroneously adopted the MDL 378 rulings.
The same result obtains with regard to the district court's dismissals for lack of standing. In it brief, Appellee DOE argues that the States do indeed lack standing under ESA:
The standing issue centers on an interpretation of ESA sections 209-11 and the bases on which Congress authorized public and private actions to enforce the ESA, the EPAA or regulations issued thereunder. An unbroken line of controlling decisions stand [sic] for the proposition that private parties, such as the States, lack standing to seek judicial review of a DOE enforcement decision made under the purview of the ESA, the EPAA or regulations issued thereunder.
(DOE Br. 99-3066 at 10.) As noted above, this court has held that "the TECA's jurisdiction can be created by defenses that raise ESA/EPAA issues." In re Seneca Oil, 906 F.2d at 1454 n.11. Consideration of Appellees' counter arguments on appeal would require this court to interpret statutes that are plainly within the exclusive jurisdiction of the Federal Circuit. Allowing this appeal to proceed would inevitably thwart either the will of Congress in granting exclusive jurisdiction to the Federal Circuit or the Appellees' right to have their defenses heard by the appropriate authority. Thus, Appellants' claims may not be presented to this court.(4)
For the above reasons, we find that all of Appellants' claims raised in these three cases are within the Federal Circuit's exclusive jurisdiction pursuant to 28 U.S.C. § 1295(a). Accordingly, Appellees' motions to dismiss these appeals for lack of appellate jurisdiction are hereby GRANTED.
The mandate shall issue forthwith.
ENTERED FOR THE COURT
David M. Ebel
*. This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. This court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
1. The present controversy between Appellants and Appellees took the form of three separate lawsuits. First, the States filed a motion to enforce the agreement in the District of Kansas, which was responsible for approving and overseeing the agreement under its Multi-District Litigation 378 ("MDL 378") docket. That is now case No. 99-3065 before this court. Second, the States filed an original complaint in the same district court, docket No. 96-CV-1180, which is now case No. 99-3066 before this court. Third, the Jurisdictions filed a separate motion to enforce the agreement under the MDL 378 docket, advancing a different theory than the States. That is now case No. 99-3102 before this court. All of these cases concern the same disputed DOE decision. We consolidated cases 99-3065 and 99-3102, and companioned 99-3066 for oral argument. This Order addresses the Appellees' Motions to Dismiss for Lack of Appellate Jurisdiction filed in each case.
2. The TIP was a DOE program designed to increase domestic oil production and thus reduce the country's dependence on foreign oil. Under TIP, companies that extracted oil using more difficult and costly "tertiary" methods were allowed to sell that oil at full market value, instead of at the government-imposed price, in order to recoup the additional expense. Because some refiners had greater access to price-controlled oil than others (who were forced to pay full market value), DOE also implemented the Entitlements Program, which required that refiners with such greater access purchase "entitlements" from other refiners. The price of the entitlements corresponded with the difference between the market and controlled prices, the goal being to avoid penalizing refiners buying TIP oil at full price. DOE issued an annual Entitlements Notice, detailing which refiners were over or under their allotted entitlements and requiring settlement of these accounts.
3.The States also alleged that "the court's conclusion that OHA was exercising unreviewable prosecutorial discretion (a) precluded it from addressing the merits and (b) fatally infected its review of the merits." (Aplt. Br. 99-3065 at 33.) Because we have found that this court lacks jurisdiction to review the district court's primary determination, we likewise cannot consider these subsidiary claims.
4.Because we find that the district court's dismissal for lack of standing cannot be reviewed in this court, it is unnecessary to determine whether the court's alternative rationale (lack of venue) was correct.