Case No. VEG-0009

June 11, 2001

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Petition for Special Redress

Name of Case: Philip P. Kalodner

Date of Filing: March 14, 2001

Case Number: VEG-0009

Philip P. Kalodner, on behalf of his clients, the “Participant End Users,” which consists of a group of Utilities, Transporters, and Manufacturers (hereinafter collectively UTM), filed an “Application of Participant End Users for Distribution to Them and Their Counsel From Funds Awarded to Airlines and Farmer Cooperatives as Compensation for the Creation of a Common Fund for Them.” UTM seeks $126,500 out of the $1,716,784 that has been awarded to 11 Agricultural Cooperatives and 14 Airlines in connection with the Citronelle Settlement Agreement (CSA). See The 341 Tract Unit of the Citronelle Field/National Cooperative Refinery Assoc., et al., 27 DOE ¶ 82,501 (1998). The Agricultural Cooperatives filed a response on March 20, 2001.

UTM claims that it has created a “common fund” from which it should receive additional compensation beyond that provided in the CSA. This contention is without merit. First, UTM along with all other signatories of the CSA waived any further right to the funds covered by the settlement. Second, UTM simply did not “create, preserve or increase” the value of the Citronelle escrow account. The account was already established as a result of regulatory actions and UTM was just one group of many claimants that negotiated a distribution of the assets of that account. Third, there is no other legal or equitable basis that would support UTM’s bid for fees from the funds reserved to the Agricultural Cooperatives and Airlines whose claims UTM opposed both administratively and in unsuccessful judicial litigation.

A. UTM Has Waived any Further Claim Outside the Four Corners of the Settlement.

The first sentence of paragraph III.A of the CSA states that “[t]he parties agree to compromise and settle all of their actual and potential claims arising out of the granting or termination of the Citronelle exception relief or to funds in the Citronelle escrow account.” (emphasis added). This language expressly precludes UTM’s claims. It provides that in exchange for obtaining whatever funds were provided in the agreement, the signatories waived any further claim against the Citronelle escrow account. UTM’s claim for additional benefits in the form of fees is flatly inconsistent with these terms.

The CSA provides that the funds from which the Agricultural Cooperatives and Airlines may draw any benefit are denominated as the “Post-Apportionment Citronelle Escrow Account” escrow account. UTM’s counsel contributed nothing to the creation of this separate account. The CSA provides that UTM and its counsel shall only be rewarded under the provisions of Section III.K of the agreement.

UTM’s theory appears to be that the funds which have been awarded to the Agricultural Cooperatives and Airlines should be treated in the same manner as if they had been distributed from the funds apportioned to the “End User” account referenced in Section III.K. However, the term “End User” in the CSA is a term of art that does not apply to the “Agricultural Cooperatives” or “Airlines.” The term “End-User” refers to any purchasers of refined petroleum products who are not otherwise described in Part II(B) of the CSA. Quite simply, the Agricultural Cooperatives and Airlines are not End Users and the “benefit” ascribed by the CSA to Participant End Users on behalf of End Users does not apply to the Agricultural Cooperatives and Airlines. See CSA at 16. Their refunds do not originate from the End User account, but from the “Post- Apportionment Citronelle Account,” to which the Participant End Users have no claim. If the parties had intended to provide the UTM and its counsel any awards from the “Post-Apportionment Citronelle Escrow Account,” they surely knew how to draft language to accomplish that objective as they did in Section III.K of the CSA. In this instance, they did not.

B. The Common Fund Theory Is Inapplicable to the Instant Situation.

Even were UTM’s claims not precluded by the waiver contained in Section III.A of the CSA, its claims are not of a nature that would make it eligible under the “common fund” doctrine as it has been interpreted by the courts.

In the leading case on the subject in the District of Columbia Circuit, Swedish Hosp. Corp. v. Shalala, 1 F.3d 1261 (D.C. Cir. 1993), the court stated that “... the 'common fund’ doctrine [is] typically applied in class actions ....” and “that doctrine allows a party who creates, preserves, or increases the value of the fund in which others have an ownership interest to be reimbursed from that fund for litigation expenses incurred, including counsel fees.” Id. at 1265 (emphasis added).

Here, UTM simply did not “create, preserve, or increase” the “Post- Apportionment Citronelle Escrow Account.” In fact, as is reflected in the introduction to the CSA, the funds arose from agency regulatory action and were not increased or preserved by any of UTM’s actions. As is also reflected in the signatures to the CSA, many parties were involved in this litigation and it is disingenuous for UTM to claim a reward for the jointly agreed resolution of years of litigation among the various parties. Like the other parties to the settlement negotiations, the UTM settled its claims and simply failed to provide for any additional payments to its counsel from the “Post-Apportionment Citronelle Escrow Account”.

C. There is No Other Legal or Equitable Basis for a Fee Award

As the foregoing makes clear, UTM waived any further claim to Citronelle funds, and the common fund theory is inapplicable. UTM cites no other legal authority that would support an award. As a result, there is simply no legal authority to support UTM’s request.

The Agricultural Cooperatives in their submission have made these same basic points, and further point out even if UTM had not waived any further claim to fees, the equities would weigh against any additional recovery by UTM. The Agricultural Cooperatives maintain that:

1. UTM has at every step of the administrative and judicial process resisted (unsuccessfully) any award to the cooperatives and airlines.

2. This opposition has delayed the distribution to those entities for more than three years.

3. Since UTM opposed the cooperatives’ participation in the administrative and judicial process leading to the Citronelle settlement, it seems contradictory and disingenuous for UTM to now claim that the cooperatives did not participate in that process.

Agricultural Cooperatives’ Submission at 4.

We agree that taken together these factors weigh heavily against any award of additional fees to UTM and its counsel. Simply put, in signing the CSA, the parties did not contemplate or agree to any payments to UTM beyond those specified in the agreement. The terms of the CSA were carefully negotiated by the parties with each compromising its potential claim in return for the certainty of payments specified in the CSA. Consequently, UTM’s attempt to rewrite the terms of the CSA to provide it additional fees is rejected and its petition for additional fees based upon a “common fund” theory should be denied.

Further, because UTM’s application is wholly unsupported, we reject UTM’S request to delay distribution to the Agricultural Cooperatives and Airlines of the amount in question here pending any “appeals” by UTM of this decision. There is simply no legal or equitable basis to support a further delay in providing these refunds to their rightful recipients.

UTM’s instant filing, like several others that it has submitted in Office of Hearings and Appeals refund proceedings, raises arguments with little, if any, likelihood of success. The main purpose of UTM’s claims seems to be to stall disbursement of refunds. This cannot be tolerated. The time is long overdue to provide the Agricultural Cooperatives and Airlines with the refunds that they have been rightfully anticipating for more than three years. Accordingly, we will countenance no further UTM pleadings, and will order that disbursement of these awards be made in accordance with the provisions of the March 25, 1998 Decision and Order authorizing payments of the Agricultural Cooperative’ and Airlines’ refunds.

It Is Therefore Ordered That:

The Application filed by Philip P. Kalodner for compensation from the Agricultural Cooperatives’ and Airlines’ escrow fund established in connection with the Citronelle Settlement Agreement (Case No. VEG-0009) be and hereby is denied.

George B. Breznay

Director

Office of Hearings and Appeals

Date: June 11, 2001