Case No. RK272-04120
March 3, 1998
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Supplemental Order
Names of Petitioners: Lawrence Paperboard Corporation
Lawrence Paperboard
Atlantic Coast Paperboard
Dates of Filing: November 19, 1996
December 8, 1997
December 8, 1997
Case Numbers: RK272-04120
RK272-04718
RC272-00377
This case concerns a crude oil refund granted to Atlantic Coast Paperboard (Atlantic) in 1991, based on the purchases of Lawrence Paperboard Corporation (Lawrence). See Atlantic Coast Paperboard, Case No. RF272-27791 (April 9, 1991) (unpublished decision).
In 1996, Mr. Joseph Caimi, the sole shareholder of Lawrence at the time of its dissolution, filed a request (Case No. RK272-04120) for a supplemental check for the refund granted Atlantic. Mr. Caimi stated that Atlantic purchased assets from Lawrence in a bankruptcy proceeding but did not purchase the right to the refund. As a result of Mr. Caimis request, we contacted Atlantic and the Lawrence bankruptcy trustee. They each claim a right to the refund for the purchases of Lawrence.
As the decision below indicates, we have determined that Lawrence did not sell the right to the refund to Atlantic. Accordingly, we are rescinding, in Case No. RC272-0377, the 1991 refund granted Atlantic. We are granting, in Case No. RK272-4718, the request of the bankruptcy trustee that the Lawrence refund be sent to him. Accordingly, we are denying Mr. Caimis request, in Case No. RK272-4120, for the refund.
I. Background
A. Refund Proceedings
Refund proceedings concern the petroleum price and allocation controls that were in effect from 1973 to 1981. Through enforcement actions, the agency collected monies that firms had received as the result of violations. In 1979, the DOE promulgated Subpart V of the DOE procedural regulations, which set forth procedures for refunding such monies to injured purchasers. 10 C.F.R. Part 205, Subpart V (hereinafter Subpart V), 44 Fed. Reg. 8566 (February 9, 1979).
This case concerns crude oil overcharge funds. In 1986, the DOE entered into the Stripper Well Settlement Agreement which (i) resolved court litigation over a type of crude oil overcharge and (ii) established a framework for the distribution of all crude oil overcharges to be recovered by the DOE. Under that framework, in order to receive a refund pursuant to the agreement, a firm was required to waive the right to any Subpart V refund. See In re: Stripper Well Litigation, 653 F. Supp. 108 (D. Kan. 1986). In conjunction with the agreement, the DOE announced its Modified Statement of Restitutionary Policy in Crude Oil Cases (MSRP). See 51 Fed. Reg. 27899 (August 4, 1986); see also 51 Fed. Reg. 29689 (August 20, 1986). Under the MSRP, up to 20 percent of crude oil overcharge funds may be reserved for direct restitution to injured purchasers pursuant to Subpart V procedures, with the remainder divided equally between the states and the federal government. Subsequent to the announcement of the MSRP, Congress passed the Petroleum Overcharge Distribution and Restitution Act of 1986, which left in place the distribution of crude oil overcharge funds provided for in the Stripper Well Settlement Agreement and the MSRP. See 42 U.S.C. § 4501(c).
As a result of the foregoing, purchasers of petroleum products during the refund period, 1973 to 1981, were able to file applications for refunds from crude oil overcharge funds. The deadline for Subpart V applications was June 30, 1995.
Crude oil applications are governed by the standards set forth in Subpart V, as well as the case law that has developed with respect to such applications. See, e.g., New York Petroleum, Inc., 18 DOE ¶ 85,435 (1988); Ernest A. Allerkamp, 17 DOE ¶ 85,079 (1988); A. Tarricone, Inc., 15 DOE ¶ 85,495 (1987). A refund applicant generally must: (i) document the volume of petroleum products that it purchased during the refund period; and (ii) show that it was injured by the alleged crude oil overcharges. Despite the general requirement that an applicant show injury, there is a rebuttable presumption that end-users whose businesses were unrelated to the petroleum industry were injured. See, e.g., City of Columbus, 16 DOE ¶ 85,550 (1987); see also 52 Fed. Reg. 11737, 11742 (April 10, 1987).
Meritorious crude oil refund applicants are eligible to receive refunds equal to the number of gallons of refined petroleum products they purchased during the refund period multiplied by a per-gallon volumetric refund amount. The volumetric is derived by dividing the crude oil refund monies available by the total consumption of petroleum products in the United States during the period of price controls (2,020,997,335,000 gallons). The DOE has increased the volumetric as additional crude oil overcharge funds have become available. Initially, the DOE paid successful crude oil applicants at a volumetric of $.0002 per gallon. In 1989, the DOE increased the volumetric to $.0008 per gallon and mailed supplemental checks to applicants that had been paid at the lower $.0002 per gallon volumetric. In 1995, the DOE increased the volumetric again, to $.0016 per gallon, which is the current volumetric. The DOE notified refund applicants that had been paid at the lower $.0008 per gallon volumetric that they could request a supplemental payment to raise their refund to the $.0016 per gallon volumetric.
B. Claims on Behalf of Lawrence
In 1987, Atlantic applied for a crude oil refund for the 1973 - 1981 purchases of Lawrence, stating that Atlantic Coast Paperboard was operating as Lawrence Paperboard during the refund period. Application for Refund, Case No. RF272-27791. In 1991, the OHA granted Atlantic a $26,909 refund, based on the $.0008 volumetric in effect at the time. Atlantic Coast Paperboard, Case No. RF272-27791 (April 19, 1991 (unpublished decision).
In 1995, the OHA mailed a notice to applicants who were entitled to a supplemental check. The notice for Case No. RF272-27791 would have been sent to Atlantic at the address listed in the application. OHA did not receive a response from Atlantic.
In 1996, Mr. Joseph Caimi requested a supplemental check based on the refund granted to Atlantic. Mr. Caimi states that the Lawrence bankruptcy proceeding is closed and that he was the sole shareholder of Lawrence at the time of its dissolution.
In response to Mr. Caimis request, we notified Atlantic and the Lawrence bankruptcy trustee. Both contest Mr. Caimis claim. Atlantic maintains that it was entitled to the refund as the purchaser of Lawrences assets. The Lawrence bankruptcy trustee maintains that Lawrences unpaid creditors, rather than Mr. Caimi, are entitled to the refund.
II. Analysis
Where there has been a change of ownership since the refund period, the owner of the business during the refund period is generally entitled to the refund. This is because the owner during the refund period was the party who experienced the overcharge and the resulting injury. See, e.g., American Fiber & Finishing, Inc., 21 DOE ¶ 85,453 at 89,321 (1991).
The OHA has recognized two exceptions to the general rule that the owner of the business during the refund period is entitled to the refund. 21 DOE at 89,321. The first exception is where the business was a corporation and the current claimant purchased all of the stock of the corporation. Id. The second exception is where the business sold its assets pursuant to an agreement or court order that specifically transferred the refund or contained language so broad as to include the right to the refund. Id.
Under the foregoing standards, Atlantic is not entitled to the refund. Atlantic did not purchase any Lawrence stock and, therefore, has no basis to claim the refund on behalf of the corporation. Similarly, the Lawrence/Atlantic agreement did not transfer the right to the refund. The agreement concerned the sale of certain assets and properties of Lawrence. Agreement at 1. Section 2.02 of the agreement provided that the assets transferred consisted of the following:
The Business to be purchased from and sold by LPB consists of the following assets and properties (collectively, the Conveyed Property): the Real Estate owned by LPB, the Tangible Personal Property owned by LPB, the Tangible Personal Property owned by LPB, the Inventories, the Accounts Receivable, certain executory contracts and unexpired leases set forth in Exhibit I hereto and assumed by the Purchasers, books of account and records, and all other assets (including but not limited to patents and licenses) of LPB used in the Business other than Excluded Assets. . . .
Agreement § 2.02 at 5. As the quoted passage indicates, the description of the conveyed property does not specifically mention the right to the refund. Nor does the passage contain language so broad as to include the right to the refund. In cases where we have held that the agreement transferred the right to the refund, the description of the transferred assets has usually included a reference to claims or choses in action. See, e.g., Gulf Oil Corp./Marine Fueling, Inc., 25 DOE ¶ 85,011 (1995) (any and all claims, rights, [and] choses in actions); Murphy Oil Corp./Marine Fueling Division, 21 DOE ¶ 85,329 (1991) (any and all claims, rights, [and] choses in actions); Murphy Oil Corp./Severson Oil Co., 20 DOE ¶ 85,695 at 89,613-14 (1990) (all of the property and assets . . . of every kind except as specified including tangible and intangible). Unlike the agreements in those cases, the Lawrence/Atlantic agreement does not contain any reference to claims or choses in action. Moreover, the definition of excluded assets in the Lawrence/Atlantic agreement includes tax rebates, returns and receipts relating to periods prior to the Closing Date, Agreement at 3, and, therefore, excludes the right to the refund from the transferred assets. American Fiber & Finishing, Inc., 21 DOE at 89,321 (reference to refunds includes Subpart V refunds).
As the foregoing indicates, Atlantic is not entitled to a refund based on the purchases of Lawrence. Accordingly, we have determined that the 1991 decision granting Atlantic a refund should be rescinded.
As between Mr. Caimi and the Lawrence bankruptcy trustee, we have concluded that the refund should be sent to the trustee for distribution to unpaid creditors. The trustee has submitted the bankruptcy docket sheet showing his appointment as the trustee. The trustee states that he will remit the funds to unpaid creditors. Accordingly, consistent with our prior decisions, we have determined that the refund check should be sent to the trustee. See, e.g., Murphy Oil Corp./Dalke Oil Co., 20 DOE ¶ 85,308 at 88,708 (1990) (refund to individual appointed by bankruptcy court to manage debtors property and operate business) .
It Is Therefore Ordered That:
(1) The Decision and Order issued on April 9, 1991, Case No. RF272-27791, be and hereby is rescinded in Case No. RC272-00377, as set forth in Paragraph 2 below.
(2) Atlantic Coast Paperboard shall remit the sum of $26,909 to the Department of Energy within 30 days of this Decision and Order. The check shall be made payable to the U.S. Department of Energy, shall prominently display Case No. RC272-00377, and shall be sent to:
Department of Energy
Office of the Controller
Cash Control Branch
PO Box 500
Germantown, MD 20874
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.
(3) 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 Treasury denominated Crude Tracking-Claimants IV, Account No. 999DOE010Z.
(4) The request for a supplemental refund filed in Case No. RK272-04120 by Mr. Joseph Caimi on behalf of Lawrence Paperboard Corporation be and hereby is denied.
(5) The request for a crude oil refund filed in Case No. RK272-04718 by Mr. Joseph Braunstein, Trustee, on behalf of Lawrence Paperboard Corporation, be and hereby is granted as set forth in Paragraph 6 below.
(6) The Director of Special Accounts and Payroll, Office of Departmental Accounting and Financial Systems Development, Office of the Controller, of the Department of Energy (the Director) shall take appropriate action to disburse $53,818 from the escrow account denominated Crude Tracking - Claimants IV, Account No. 999DOE010Z, maintained at the Department of Treasury to:
Lawrence Paperboard Corporation
c/o Joseph Braunstein, Trustee
Three Center Plaza
Boston, MA 02108
(7) To facilitate payment of future refunds, the Lawrence bankruptcy trustee should notify the Office of Hearings and Appeals in the event that there is a change in his address, or if an address correction is necessary. Such information shall be sent to:
Director of Management Information
Office of Hearings and Appeals
Department of Energy
Washington, DC 20585-0107
(8) The determinations made in this Decision and Order are based upon the presumed validity of the statements and documentary material submitted by the applicant. This Decision and Order may be revoked or modified at any time upon a determination that the basis underlying a refund application is correct.
(9) This is a final Order of the Department of Energy.
George B. Breznay
Director
Office of Hearings and Appeals
Date: March 3, 1998