Case Nos. RC272-00373 & RK272-04055

September 5,1997

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Supplemental Order

Names of Applicants: Pillsbury Company

Seneca Foods Corporation

Dates of Filing: September 2, 1997

December 2, 1996

Case Numbers: RC272-373

RK272-4055

On January 17, 1989, the Office of Hearings and Appeals (OHA) of the Department of Energy (DOE) issued a Decision and Order granting a refund to Green Giant/Pillsbury in the Subpart V crude oil refund proceeding. Flasher Public School District, 18 DOE ¶ 85,499 (1989) (Flasher). The refund was granted for the purchases of the Green Giant Co. (Green Giant) and was issued in the name of Green Giant and its parent corporation, Pillsbury Company (Pillsbury). Green Giant/Pillsbury (Case No. RF272-26062) received a $374 refund based on purchases of 1,872,226 gallons of refined petroleum products between August 19, 1973, and January 27, 1981 (the crude oil price control period) and a per gallon volumetric refund amount of $0.0002. Green Giant/Pillsbury later received a supplemental refund for those purchases of $1,123, based upon a per gallon volumetric refund amount of $0.0006. Crude Oil Supplemental Decision, 18 DOE ¶ 85,878 (1989) (unpublished appendix 11). Thus, the total refund that Green Giant/Pillsbury was granted under Case No. RF272-26062 was $1,497.

It has come to our attention that an affiliate of Pillsbury received a refund from the Surface Transporters Escrow in the Stripper Well refund proceedings. Pillsbury’s affiliate, Burger King Corporation/Distron Div. (BK), received a refund under Case No. RF270-01308. Arrowhead Drinking Water Company, 16 DOE ¶ 85,265 (1987) (unpublished appendix). The “Stripper Well” refund proceedings refer to the eight escrow accounts created by the U.S. District Court for the District of Kansas to implement the terms of the Stripper Well Settlement Agreement (Settlement Agreement). In Re: The Department of Energy Stripper Well Exemption Litigation, 653 F. Supp. 108 (D. Kan. 1986). The escrow accounts were created to refund a portion of the 1.4 billion dollars in crude oil overcharges to eight specified groups of petroleum product

purchasers: Refiners, Retailers, Resellers, Agricultural Cooperatives, Airlines, Surface Transporters, Rail and Water Transporters, and Utilities. In creating the escrow accounts, the court announced that "[a]ll parties and claimants receiving refunds under this agreement will waive any further claims to crude oil refunds." 653 F. Supp. at 114.

In order to participate in one of the Stripper Well refund proceedings, BK executed the "Surface Transporters Escrow Settlement Claim Form and Waiver" (Waiver Form). By executing the Waiver Form, BK waived its right to participate in any future refund proceeding based on crude oil overcharges, including this Subpart V proceeding. The waiver provision is found in Paragraph 7(a) of the Waiver Form, which states that the signer:

hereby releases, and waives all [the signer's] existing and future claims whether assertable at law or in equity, and whether known or unknown that fall within any one or more of the following classes ...

(2) all present and future claims asserting rights to share in existing or future monies paid, ordered to be paid, or held for payment as restitution as a result of any judicial or administrative proceeding relating to the federal mandatory allocation and price regulations applicable to crude oil ....

In addition, Paragraph 10 of the Waiver Form provides that:

[the signer] hereby agrees to withdraw and to take all necessary steps to file appropriate withdrawals of any and all claims it now has or hereinafter may have for funds in any Court or agency proceedings, including "Subpart V" proceedings, where such funds are related to Alleged Crude Oil Violations ... [the signer] agrees it will not file any such claims for refund of Alleged Crude Oil Violations in these or similar proceedings in the future.

Paragraph VI.A of the Settlement Agreement states:

The provisions of this Agreement. . . shall be binding upon (1) all the Parties hereto and (2) all Persons executing waivers or releases pursuant to this Agreement, and with respect to such Parties and Persons, their Affiliates, subsidiaries. . . officers, agents, attorneys and any other Persons while acting under their direction or control. As used herein, an “Affiliate” of any Party includes any Person (and the successors and assigns of such Person) . . . which controls, is controlled by or is under common control with such Party. For this purpose, “control” means the power (existing on the Payment Date), by contract, partnership agreement, stock ownership or otherwise, to control the policies and business operations of a Person, including, without limitation, the ownership, directory or indirectly (thorough one or more intermediaries), of shares of stock having the right to elect a majority of the Board of Directors of a corporate Person, or the ownership (on the Payment Date), directly or indirectly (through one or more intermediaries), of more than 49 percent of a person.

Settlement Agreement, ¶ VI.A. This language is incorporated in the provisions of Paragraph 9 of the Waiver Form signed by Pillsbury’s affiliate, BK.

By choosing to obtain relief from the Surface Transporters escrow, BK waived the rights of its affiliates to receive a refund in the Subpart V crude oil proceeding. See Pillsbury Company, Case No. RF272-69342 (December 30, 1991) (denying another Pillsbury Subpart V claim). Therefore, the OHA will rescind the Flasher Decision and Order and the 1989 supplemental refund Decision and Order, with respect to Green Giant/Pillsbury. However, we must determine the proper party from which to require repayment of the refund.

In 1995, Seneca Foods Corporation (Seneca) bought some of the assets of Green Giant. Pillsbury has asserted that this Office should therefore require that the refund be repaid by Seneca. It bases this assertion on the assumption of liabilities clause in the 1995 asset purchase agreement, which it has submitted to this Office. We disagree. As a general rule, a firm that receives an erroneous refund is responsible for repaying it. There is nothing in the asset purchase agreement that transfers this obligation to Seneca. Seneca’s assumption of liabilities is limited to a list of enumerated items and this list does not include rescinded refunds either expressly or impliedly. Further, Pillsbury appears to have retained the right to this type of refund under its excluded assets clause that includes “any rights to recovery by Seller arising out of litigation with respect to the Business that relates to activities occurring prior to the Closing Date.” Since Pillsbury would have received a supplemental refund if this Office had granted one in this case,(1) it is responsible for repaying the incorrect original refund. Therefore, Pillsbury is obligated to remit to the DOE the total amount of the crude oil refund that it received.

On December 2, 1996, Seneca submitted an Application for Supplemental Refund based on the refund previously received by Green Giant/Pillsbury under Case No. RF272-26062. Since the underlying refund is being rescinded, the Application for Supplemental Refund must be denied.

It Is Therefore Ordered That:

(1) The Decision and Order issued by the DOE on January 17, 1989,

Flasher Public School District et al., RF272-09389 et al., is hereby rescinded with respect to Green Giant/Pillsbury (Case No. RF272-26062, redesignated RC272-373).

(2) The Decision and Order issued by the DOE on April 11, 1989, Crude Oil Supplemental Refund Decision, RA272-00002, is hereby rescinded with respect to Green Giant/Pillsbury (Case No. RF272-26062, redesignated RC272-373).

(3) Pillsbury Company shall remit the sum of $1,497 to the DOE within 30 days. The check shall be made payable to the "U.S. Department of Energy" and shall prominently display Case No. RC272-373. The check shall be sent to:

Department of Energy

Office of the Controller

Cash Control Branch

P.O. Box 500

Germantown, MD 20874-0500

In the event that payment is not made within 30 days of the date of this Decision and Order, interest shall accrue on the amount due at the rate generally assessed by the Department of Energy on overdue receivables. Other charges generally assessed on overdue DOE receivables shall also apply.

(4) Upon notification by the Office of the Controller of the receipt of these funds, the Director of Special Accounts and Payroll, Office of the Departmental Accounting and Financial Systems Development, Office of the Controller of the Department of

Energy, shall deposit these funds into the deposit fund escrow account maintained at the Department of the Treasury denominated Crude Tracking - Claimants 4, Account Number 999DOE010Z.

(5) The Application for Supplemental Refund filed by Seneca Foods Corporation (Case No. RK272-4055) is hereby denied.

(6) This is a final Order of the Department of Energy.

George B. Breznay

Director

Office of Hearings and Appeals

Date: September 5, 1997

(1)For information pertaining to the second supplemental distribution of Subpart V Crude Oil refund monies, see State of Montana, 25 DOE ¶ 85,059 (1995).