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Coastal States Marketing Inc. v. New England Petroleum Corp.

decided: August 1, 1979.


Motion by Appellant to transfer to the Temporary Emergency Court of Appeals an appeal from a ruling of the United States District Court for the Southern District of New York (Hon. Henry F. Werker, Judge) denying a motion to vacate judgment and obtain other relief. Motion denied and appeal dismissed for lack of jurisdiction.

Before Van Graafeiland and Newman,*fn* Circuit Judges, and Bonsal, District Judge.*fn**

Author: Newman

This motion to transfer this appeal to the Temporary Emergency Court of Appeals (TECA) poses a substantial question concerning the appropriate allocation of appellate jurisdiction between a court of appeals and the TECA. The suit was brought by plaintiff Coastal States Marketing, Inc. (Coastal) for money alleged to be owed by defendant New England Petroleum Corp. (Nepco) for Coastal's sale of fuel oil to Nepco. Jurisdiction of this breach of contract action was grounded on diversity of citizenship. 28 U.S.C. § 1332. After completion of discovery but before the trial began, Nepco moved unsuccessfully to reopen discovery to develop a defense of illegality based on a contention that Coastal had overcharged Nepco in violation of mandatory price controls. 10 C.F.R. § 212.1 Et seq. After a bench trial in the District Court for the Southern District of New York (Hon. Henry F. Werker, Judge) Nepco was found liable, and judgment was entered for Coastal in the amount of $192,936.

Nepco appealed from that judgment to this Court, complaining solely of the denial of the motion for additional discovery. Nepco brought to this Court's attention two circumstances alleged to warrant reopening of the judgment: 1) the Department of Energy had issued a Proposed Remedial Order to Coastal States Gas Corp., Coastal's parent corporation, alleging price control violations during a period relevant to Nepco's transactions, and 2) a Congressional subcommittee had conducted hearings concerning the legality of some of Coastal's fuel oil transactions. On October 31, 1978, this Court remanded, without prejudice, to permit Nepco to bring these circumstances to the attention of the District Court and to make an appropriate motion to the District Court. On November 10, 1978, Nepco moved in this District Court to reopen discovery to explore the legality of the transactions with Coastal, to amend its pleadings to include a counterclaim alleging illegality, to present additional trial evidence, and to vacate the judgment. On April 9, 1979, Judge Werker filed a Memorandum Decision denying Nepco's motion to vacate the judgment and denying all other requested relief. The decision adjudicated and rejected Nepco's claim of illegality, concluding that the transactions were exempt from mandatory price controls as "first sales" into United States commerce. 10 C.F.R. § 212.53(b).*fn1 Finding no basis for a claim of illegality, Judge Werker therefore denied all of Nepco's efforts to use this claim as the basis for further relief.

Nepco filed notices of appeal both in the District Court, to appeal to this Court the denial of the motion to vacate, and in the TECA, to challenge there the same ruling of the District Court. Nepco then sought and obtained a stay of further proceedings in the TECA and has now moved to have the appeal in this Court transferred to the TECA. Nepco contends the TECA has exclusive jurisdiction under § 211(b)(2) of the Economic Stabilization Act of 1970, as amended (ESA), reprinted in the notes following 12 U.S.C.A. § 1904.

Section 211 of the ESA, the judicial review provision, was added by Congress in 1971. Economic Stabilization Act Amendments of 1971, Pub.L. No. 92-210, § 2, 85 Stat. 743 (1971). These provisions vest exclusive original jurisdiction in the district courts and exclusive appellate jurisdiction in the TECA over cases and controversies arising under the ESA. Section 211(b)(2) provides:

Except as otherwise provided in this section, the Temporary Emergency Court of Appeals shall have exclusive jurisdiction of all appeals from the district courts of the United States in cases and controversies arising under this title or under regulations or orders issued thereunder. . . .

The mandatory petroleum price regulations, 10 C.F.R. § 212.1 Et seq., which Nepco claims Coastal has violated, were promulgated under the authority of the ESA and the Emergency Petroleum Allocation Act of 1973 (EPAA), 15 U.S.C.A. § 751 Et seq. Section 5 of the EPAA, 15 U.S.C.A. § 754(a)(1), incorporates the judicial review provisions of § 211 of the ESA. Thus, the issue on this motion to transfer is whether the instant appeal is a case or controversy arising under the ESA and the EPAA within the meaning of § 211(b)(2) of the ESA, and therefore within the exclusive jurisdiction of the TECA.

It is unusual to find a statutory scheme for appellate review that contemplates judgments from a single court being reviewed in one of two appellate courts of coordinate authority.*fn2 The allocation of jurisdiction between the TECA and the courts of appeals depends upon the scope of the TECA's exclusive jurisdiction. Three approaches are possible. First, the exclusive appellate jurisdiction of the TECA could be construed to be limited to those cases that "arise under" the ESA in the same sense that cases are said to "arise under" federal law for purposes of federal question jurisdiction (traditional "arising under" jurisdiction). Second, the exclusive appellate jurisdiction of the TECA could be broadly construed to include all cases involving any ESA issue, even if raised as a defense or in some other way that would not suffice for traditional "arising under" jurisdiction (TECA "case" jurisdiction). Third, appellate jurisdiction could be divided in a way that placed within the exclusive appellate jurisdiction of the TECA only those issues involving any aspect of the ESA (ESA issues),*fn3 while leaving to the court of appeals all other issues in the same case (TECA "issue" jurisdiction). This third approach could in some contexts be narrower and in some contexts broader than traditional "arising under" jurisdiction. It could be narrower if the TECA has no jurisdiction over non-ESA issues, even when joined with ESA claims and arising out of the same nucleus of operative facts; plainly a district court with jurisdiction over a substantial claim arising under federal law has jurisdiction to decide all other claims bearing such a relationship to the federal claim that "the entire action . . . comprises but one constitutional "case.' " United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S. Ct. 1130, 1138, 16 L. Ed. 2d 218 (1966); see also Siler v. Louisville & Nashville Railroad, 213 U.S. 175, 29 S. Ct. 451, 53 L. Ed. 753 (1909). On the other hand, the TECA "issue" approach could be broader than traditional "arising under" jurisdiction if the TECA has jurisdiction over appeals raising any ESA issue, as, for example, where the ESA issue is raised solely as a defense to a non-ESA claim; a federal question thus raised would not result in a case "arising under" federal law for purposes of district court jurisdiction. Louisville & Nashville Railroad v. Mottley, 211 U.S. 149, 29 S. Ct. 42, 53 L. Ed. 126 (1908).

Each of the three approaches implicates conflicting considerations. Limiting the TECA to traditional "arising under" jurisdiction makes applicable a well-developed body of jurisdictional law, yet scatters among the courts of appeals some ESA issues, raised by way of answer or otherwise, on which the expertise of the TECA would be helpful. Giving the TECA "case" jurisdiction assures uniform decision-making of all ESA issues, yet withdraws from the courts of appeals many non-ESA issues, which may really be the dominant issues in the case and which the TECA may have no interest and no special competence in deciding. Splitting the cases and giving the TECA only TECA "issue" jurisdiction assures uniformity of decision-making on all ESA issues and avoids burdening the TECA with non-ESA issues, yet encounters the risk of delay*fn4 and confusion*fn5 inevitably associated with a system of bifurcated appeals.

The statutory language offers clues but no firm answer. The use of the phrase "cases and controversies arising under" in § 211(b)(2) is strong evidence that Congress intended to borrow the body of decisional law that has developed under 28 U.S.C.A. § 1331 and other grants of jurisdiction to the district courts over cases "arising under" various regulatory statutes. See, E. g., 28 U.S.C. §§ 1337, 1338, 1339, 1340. The traditional meaning associated with these words could hardly have been overlooked. This view is reinforced by language in § 211(a), the subsection conferring exclusive jurisdiction on district courts over "cases or controversies arising under" the ESA and regulations. That subsection explicitly provides that it does not affect the power of any court of competent jurisdiction, I. e., a state court, to determine "any issue by way of defense" with two exceptions not here relevant. Thus, Congress, recognizing that an issue arising under the ESA could be injected into a state court case by way of defense, elected to leave such cases in the state court with federal appellate review limited to the Supreme Court, rather than to provide for removal to the district court with appellate review in the TECA. This arrangement parallels the scheme for federal question cases. It also demonstrates Congressional acceptance of the fact that not all ESA issues would be reviewed in the TECA.

Of course, Congressional willingness to leave in the State courts cases in which ESA defenses are raised does not inevitably indicate that District court cases in which such defenses are raised are not within the appellate jurisdiction of the TECA. Important federalism concerns weigh against expanding removal of state court cases, concerns which are totally absent when the only issue is which of two coordinate federal appellate courts has jurisdiction. While it would be unusual to give the phrase "arising under" a different meaning in two sections of the same statute limited with respect to district court jurisdiction and broader with respect to TECA jurisdiction such a difference could be explained by the existence of comity considerations in one context but not in the other.

Another subsection of the ESA gives some indication that Congress did not scrupulously follow the scheme associated with the "arising under" language of the federal question jurisdictional grant and was willing, in at least one instance, to give the TECA "issue" jurisdiction. Section 211(e)(2) provides that "Any party aggrieved by a declaration of a district court of the United States respecting the validity of any regulation or order issued under (the ESA)" may appeal "therefrom" to the TECA. Presumably this would permit appeal to the TECA by a district court defendant who relied on an ESA regulation as a defense and lost to a plaintiff who successfully contended that the regulation was invalid. It might also permit appeal by a plaintiff who unsuccessfully contended that an ESA regulation relied on by the defendant as a defense was invalid. In both these situations the ESA issue arises by way of defense, yet appeal apparently lies in the TECA.*fn6 By traditional standards, such a case is not one "arising under" the ESA. However, the very fact that Congress specifically provided for appeal to the TECA in this limited situation is some evidence that in all other circumstances traditional "arising under" jurisdiction may have been contemplated.

The legislative history provides no aid in resolving the § 211(b)(2) issue posed in this case. The Senate Report identifies as among the goals of a system of judicial review "speed and consistency of decisions in cases arising under the Act . . . ." S.Rep. No. 92-507, 92d Cong., 1st Sess. 10, reprinted in (1971) U.S.Code Cong. & Admin.News, pp. 2283, 2292. "Consistency of decisions" will be aided by construing § 211(b)(2) to provide for TECA "issue" jurisdiction. "Speed" will more likely be promoted either by limiting the TECA to ...

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