Case No. RK272-04642
March 12, 1998
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Supplemental Order
Names of Applicants: Stroehmann Bakeries, L.C.
Stroehmann Brothers Co., Inc.
National Tea Company
Eastern Fine Paper, Inc.
National Tea Company
Eastern Fine Paper, Inc.
Dates of Filing: June 23, 1997
March 2, 1998
March 2, 1998
March 2, 1998
March 2, 1998
March 2, 1998
Case Numbers: RK272-4642
RC272-380
RC272-381
RC272-382
RJ272-53
RJ272-54
On August 10, 1989, the Office of Hearings and Appeals (OHA) of the Department of Energy (DOE) issued a Decision and Order granting a refund to Eastern Fine Paper, Inc., (Eastern) in the Subpart V crude oil refund proceeding. Eastern Fine Paper, Inc., 19 DOE ¶ 85,253 (1989) (Case No. RF272-16591). Eastern was granted a $44,536 refund based on purchases of 55,669,937 gallons of refined petroleum products between August 19, 1973, and January 27, 1981 (the crude oil price control period). Eastern was later granted a supplemental refund of $44,536. Crude Oil Supplemental Refund Distribution, Case No. RB272-00039 (August 15, 1995) (unpub. decision).
On May 22, 1989, the OHA issued a Decision and Order granting a refund to National Tea Company (National) in the Subpart V crude oil refund proceeding. Southwest Tennessee Electric Membership Corp., et al., 18 DOE ¶ 86,067 (1989) (Case No. RF272-29697). National was granted a $7,258 refund based on purchases of 9,072,186 gallons of refined petroleum products during the crude oil price control period. National was later granted a
supplemental refund of $7,258. Crude Oil Supplemental Refund Distribution, Case No. RB272-00086 (September 12, 1996) (unpub. decision).
On August 6, 1990, the OHA issued a Decision and Order granting a refund to Stroehmann Brothers Company, Inc. (Stroehmann Brothers), in the Subpart V crude oil refund proceeding. Dairy Leasing Services, Inc., et al., Case Nos. RF272-75501, et al., (August 6, 1990) (unpub. decision) (Case No. RF272-76888). Stroehmann Brothers was granted a $218 refund based on purchases of 272,734 gallons of refined petroleum products during the crude oil price control period. On June 23, 1997, Stroehmann Bakeries, L.C., applied for Stroehmann Brothers supplemental refund.
During the processing of Stroehmann Bakeries, L.C.s Application for Supplemental Refund, it came to our attention that Stroehmann Bakeries, Inc., received a refund from the Surface Transporters Escrow in the Stripper Well refund proceedings. The refund was granted under Case No. RF270-02498. Stroehmann Bakeries, Inc., 16 DOE ¶ 85,714 (1987). 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 "all parties and claimants receiving refunds under this agreement will waive any further claims to crude oil refunds." 653 F. Supp. at 114. Following the court's holding, the Settlement Agreement provides that the settling parties waive their right to participate in any future refund proceeding based on crude oil overcharges. Settlement Agreement, Paragraph III.A.1, 6 Fed. Energy Guidelines ¶ 90,509 at 90,660. Furthermore, this waiver provision is binding not only on the settling parties, but on their affiliates as well. Settlement Agreement, Paragraph VI.A, "Agreement Binding on Parties and their Affiliates," 6 Fed. Energy Guidelines at 90,667.
As defined in Paragraph VI.A of the Settlement Agreement, an affiliate of a party
includes any 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) to control the policies and business operations of a person, including ... the ownership ... of shares of stock ... of more than 49 percent of a person....The Settlement Agreement goes on to define the "Payment Date" as "the date on which funds are distributed to all of the Parties or their Escrows." Paragraph III.B.1.b, 6 Fed. Energy Guidelines at 90,654. The court directed the transfer of funds to the escrows in an Order dated August 7, 1986. In Re: The Department of Energy Stripper Well Exemption Litigation, 3 Fed. Energy Guidelines ¶ 26,568. Therefore, August 7, 1986 is the Payment Date. Any firm that was an affiliate of a party to the Settlement Agreement on August 7, 1986 is bound by the waiver provision.
According to Moodys International Manual, Stroehmann Brothers was purchased by Weston Limited in 1980, and Stroehmann Bakeries, Inc., is currently a wholly owned subsidiary of Weston. Also, the Tax Identification Numbers for Stroehmann Bakeries, L.C., Stroehmann Bakeries, Inc., and Stroehmann Brothers are the same. Therefore, we believe all three companies are actually just different names for the same company. We stated this belief to Stroehmann Bakeries, L.C., Eastern, and National in separate letters dated December 10, December 10, and December 15, 1997 respectively. None of the companies disputed our assertion that the three Stroehmann companies are the same company. Therefore, we will consider the three companies one and the same, and we will refer to them collectively as Stroehmann for the remainder of this decision.
Both Eastern and National are currently subsidiaries of Weston. In our December letters to Eastern and National, we stated our belief that both companies were subsidiaries of Weston on August 7, 1986. Although both companies submitted responses to our letters, neither disputed that both companies were subsidiaries of Weston, and therefore affiliates of Stroehmann, on August 7, 1986.
As explained above, Stroehmann participated in the Surface Transporters refund proceeding of the Stripper Well settlement. To participate in this proceeding, Stroehmann executed a Claim Form and Waiver.(1)
The provisions of the Claim Form and Waiver follow those in the Settlement Agreement. The general waiver provision is found in Paragraph 7 of the Claim Form and Waiver, which provides that Stroehmann:
hereby releases, and waives all [Stroehmanns] 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 Claim Form provides that:
... [Stroehmann] 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 ... [Stroehmann] agrees it will not file any such claims for refund of Alleged Crude Oil Violations in these or similar proceedings in the future.
The waiver of an affiliate's rights is found in Paragraph 9 of the Claim Form, which says that "this Waiver and Release shall be binding upon [Stroehmann], its parents, subsidiaries, affiliates, successors and assigns." The terms of the Settlement Agreement and Claim Form mean that:
an applicant must choose between obtaining relief under the M.D.L. 378 [Stripper Well] Escrows or under the Subpart V process. Once an applicant files an Application for Refund from a [Stripper Well] Escrow, it is precluded from receiving a refund in crude oil refund proceedings conducted under the provisions of 10 C.F.R. Part 205, Subpart V.
Roberts Dairy Co., 16 DOE ¶ 85,573 at 89,147 (1987); enforced sub nom. Mid-American Dairymen, Inc. v. Herrington, 704 F. Supp. 198 (D. Kan. 1988); aff'd 878 F.2d 1448 (Temp. Emer. Ct. App. 1989); see also Boise Cascade Corp., 16 DOE ¶ 85,214 (1987); enforced sub nom. In Re: The Department of Energy Stripper Well Exemption Litigation, 707 F. Supp. 1267 (1987). Accordingly, by choosing to obtain relief from the Surface Transporters escrow account, Stroehmann waived its own right, and the right of each of its affiliates, to participate in the Subpart V crude oil refund proceeding.
In our December letters, we gave Stroehmann, Eastern, and National an opportunity to respond with information or a reasoned argument for why their refunds should not be rescinded. We did not receive a response from Stroehmann. National submitted a letter which argued that there is no operation relationship between Stroehmann Bakeries and National Tea Co., and one entity does not speak for the other. January 15, 1998 letter at 1. Even though National and Stroehmann have no operational relationship, they are still affiliates as defined by the Settlement Agreement because they are under the common control of Weston. Therefore, National has not presented a sufficient showing that its refunds should not be rescinded.
Eastern presented several arguments. Its first argument is that it should not be required to repay its refunds for the reasons set forth in a recent OHA Decision and Order. CertainTeed Corp., 26 DOE ¶ 85,089 (1997). Easterns situation, however, is distinct from CertainTeeds situation. CertainTeed notified OHA of its Stripper Well waiver at the time it filed its Subpart V application. OHA, with this information in hand, mistakenly granted CertainTeed a Subpart V refund. Eastern, conversely, did not notify OHA of Stroehmanns waiver at the time it filed its Subpart V application. In fact, Eastern certified that neither I, my parent firm, nor any affiliates have elsewhere waived their right to a refund. Application at 1. OHA granted Easterns application based on this certification, and therefore CertainTeed does not apply to Easterns situation. Id. at note 4.
Eastern also argues that Stroehmann was not authorized to waive Easterns refund because it was too distant a relative on Westons corporate family tree. The distance on the corporate family tree between Eastern and Stroehmann is irrelevant. The language regarding affiliates in the Settlement Agreement is clear, and the OHA has consistently found that a Stripper Well waiver is binding on all affiliates, regardless of how distant the affiliation is. See e.g. Koppers Company, 24 DOE ¶ 85,084 (1994); Britt Well Service, Inc., 16 DOE ¶ 85,617 (1987). For the purposes of this proceeding, Stroehmann and Eastern were affiliates on the payment date because they were under the common control of Weston.
We have reviewed Easterns entire submission and we find that Eastern has not demonstrated that its refunds should not be rescinded.
Stroehmann, National, and Eastern have not shown that they are entitled to their Subpart V refunds. We will therefore deny Stroehmanns Application for Supplemental Refund and rescind its original refund because it waived its rights to crude oil refunds. We will also rescind both of Easterns refunds and both of Nationals refunds because they were affiliates of Stroehmann on August 7, 1986.
It Is Therefore Ordered That:
(1) The Application for Supplemental Refund filed by Stroehmann Bakeries, L.C., Case No. RK272-4642, is hereby denied.
(2) The Decision and Order issued by the DOE on August 10, 1989,
Eastern Fine Paper, Inc., Case No. RF272-16591, is hereby rescinded (Case No. RF272-16591, redesignated RC272-382).
(3) The Supplemental Order issued by the DOE on August 15, 1995, Crude Oil Supplemental Refund Distribution, Case No. RB272-00039, is hereby rescinded with respect to Eastern Fine Paper, Inc., Case No. RF272-16591 (redesignated RJ272-54).
(4) The Decision and Order issued by the DOE on May 22, 1989, Southwest Tennessee Electric Membership Corp., et al., Case Nos. RF272-26591, et al., is hereby rescinded with respect to National Tea Company (Case No. RF272-29697, redesignated RC272-381).
(5) The Supplemental Order issued by the DOE on September 12, 1996, Crude Oil Supplemental Refund Distribution, Case No. RB272-00086, is hereby rescinded with respect to National Tea Company, Case No. RF272-29697 (redesignated RJ272-53).
(6) The Decision and Order issued by the DOE on August 6, 1990, Dairy Leasing Services, Inc., et al., Case Nos. RF272-75501, et al., is hereby rescinded with respect to Stroehmann Brothers Company, Inc., (Case No. RF272-76888, redesignated RC272-380).
(7) Eastern Fine Paper, Inc., shall remit the sum of $89,072 to the DOE within 30 days. National Tea Company shall remit the sum of $14,516 to the DOE within 30 days. Stroehmann Bakeries, L.C., shall remit the sum of $218 to the DOE within 30 days. Each check shall be made payable to the "U.S. Department of Energy." Easterns check shall prominently display Case No. RC272-382 and Case No. RJ272-54. Nationals check shall prominently display Case No. RC272-381 and Case No. RJ272-53. Stroehmanns check shall prominently display Case No. RC272-380. Each 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.
(8) Upon notification by the Office of the Controller of the receipt of these funds, the Director of Special Accounts and Payroll, Office of 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.
(9) This is a final Order of the Department of Energy.
George B. Breznay
Director
Office of Hearings and Appeals
Date: March 12, 1998
(1)The Claim Form was signed on behalf of Stroehmann by Robert C. Gansel, Vice President, Controller/ Treasurer, on December 4, 1986.