Opinion
Civil Action 04-00152 (HHK).
December 20, 2004
MEMORANDUM OPINION
Philip Kalodner ("Kalodner"), a lawyer proceeding pro se, brings this action seeking to recover attorney's fees assertedly authorized by statute and by the "common fund" doctrine. Presently before the court are motions to dismiss by two separate groups of defendants [#10, 13]. Upon consideration of the motions, the opposition thereto, and the record of this case, the court concludes that both motions must be granted.
Kalodner styles his suit as a class action, with eight named defendants as representatives of the putative class. One of the motions to dismiss is brought by the General Council on Finance and Administration of the United Methodist Church; Seagroup, Inc.; and Zim Israel Navigation Company, Ltd. (the "Methodist Church group"). The other motion to dismiss is brought by Public Service Electric Gas Company; Florida Power Corporation; Eastman Chemical Company; and General Motors Corporation (the "Public Service Electric group"). The eighth named defendant, the City of New York, has filed an answer to the complaint but does not participate in either of the motions to dismiss.
Unless otherwise noted, citations in this opinion to "Pl.'s Opp'n" refer to Kalodner's opposition to the Public Service Electric group's motion to dismiss.
I. BACKGROUND INFORMATION
This suit represents the latest attempt by Kalodner's to obtain attorney's fees in connection with refunds issued by the Department of Energy ("DOE") to purchasers of crude oil and other petroleum products. In response to the Arab nations' oil embargo in 1973, Congress enacted the Emergency Petroleum Allocation Act ("EPAA") to ensure that petroleum supplies would be available at equitable cost and distribution. EPAA established temporary price controls on petroleum products, and mandated penalties for violations of these controls. EPAA incorporated the Economic Stabilization Act Amendments of 1971("ESA"), the operative statute in the instant case, which creates both public and private rights of action against violators of EPAA regulations. Section 209 of ESA authorizes the executive branch (ultimately DOE) to recover overcharges from producers and suppliers who violated the price controls during the regulatory period. Under § 210, ESA also allows any private-party victim of price control violations to bring an action directly against the price-gouger.
Pub.L. No. 93-159, 87 Stat. 627, codified at 15 U.S.C. §§ 751 et seq. (1982).
Pub.L. No. 92-10, 85 Stat. 743, codified at 12 U.S.C. § 1904 note. The Economic Stabilization Act Amendments are incorporated into the Emergency Petroleum Allocation Act at 15 U.S.C. § 754(a)(1). This opinion cites to the individual sections of the ESA rather than to their location within the United States Code.
The price control regime was terminated under Executive Order No. 12287, 46 Fed. Reg. 9909 (1981). In 1986, Congress repealed DOE's authority to obtain overcharge refunds for price control violations for actions commenced after September 30, 1988 or six years after an alleged violation, whichever was later. 15 U.S.C. § 4504(a)(1); see also Consol. Edison Co. of N.Y. v. Abraham, 271 F. Supp. 2d 104, 106 (D.D.C. 2003).
In 1986, pursuant to a settlement of multi-district litigation, DOE established a restitutionary policy allowing victims of overcharges to submit claims to DOE's Office of Hearings and Appeals for a share of the funds DOE obtained by judgment or settlement through § 209 enforcement actions. After initially opposing any distribution of these funds to private parties, DOE agreed to set aside 20% of the overcharges in escrow for private-party claimants, reserving the remaining 80% for government agencies. Under regulations set forth in 10 C.F.R. pt. 205, subpt. V, DOE determines claimants' eligibility for restitution and the amount each claimant should be awarded. These enforcement efforts produced "huge recoveries for crude oil overcharges." Consol. Edison Co. of N.Y. v. O'Leary, 117 F.3d 538, 540 (Fed. Cir. 1997). As of August 2001, DOE had processed more than 100,000 claims and distributed more than $610 million in restitution to private-party claimants. Consol. Edison, 271 F. Supp. 2d at 106-07. Approximately $270 million remains in the escrow accounts reserved for private-party claimants, awaiting imminent distribution. Am. Compl. ¶¶ 5-6, 17, passim.
In re Dep't of Energy Stripper Well Exemption Litig., 653 F. Supp. 108 (D. Kan. 1986), aff'd 855 F.2d 865 (Temp. Emer. Ct. App. 1988). Congress authorized DOE's collection of overcharges and restitution payments to injured parties through the Petroleum Overcharge Distribution and Restitution Act of 1986, 15 U.S.C. § 4501- 4507.
One by-product of Kalodner's ongoing litigation is that several previous opinions provide extremely thorough accounts of the history and mechanics of DOE's petroleum overcharge refund process. See, e.g., Consol. Edison, 117 F.3d at 540-41; Consol. Edison Co. of N.Y. v. Richardson, 233 F.3d 1376, 1378-79 (Fed. Cir. 2000); Consol. Edison, 271 F. Supp. 2d at 105-07.
Kalodner, representing a group of utilities and paper companies, has initiated numerous lawsuits in an effort to obtain larger reimbursements through judicial intervention than DOE allocated to his clients through its administrative process. He has also filed multiple applications over the past nine years to be awarded common fund fees from the overcharge accounts. After DOE denied these fee applications, Kalodner turned to the courts for relief. Since the courts found the funds at issue to be in the possession of the United States, with no applicable waiver of the federal government's sovereign immunity, they dismissed Kalodner's claims. Kalodner v. Abraham, 310 F.3d 767, 769-70 (D.C. Cir. 2002), cert. denied, 538 U.S. 1058 (2003); Kalodner v. Abraham, 309 F. Supp. 2d 100, 102-04 (D.D.C. 2004).
In re Philip P. Kalodner, ¶ 82,503 (Case No. VSG-0001) (July 16, 1997), Ex. 1 to Public Service Electric Group's Mot. to Dismiss; Petition for Special Redress — Philip P. Kalodner (Case No. VEG-0009) (June 11, 2001); Petition for Special Redress — Philip P. Kalodner (Case No. VEG-0010) (March 10, 2003). The latter two of these administrative opinions are currently available at http://www.oha.doe.gov/misccases.htm.
Most recently, Kalodner sued DOE to withhold 10% of its intended reimbursements to some 56,000 refund claimants and instead direct those monies to Kalodner as common fund attorney's fees. This court (Collyer, J.) again dismissed the action on grounds of sovereign immunity. Consol. Edison Co. of N.Y. v. Abraham, No. 1:01CV00548 (unpublished order following 271 F. Supp. 2d 104 (D.D.C. 2003)), Ex. 3 to Methodist Church Group's Mot. to Dismiss. Kalodner has now retooled that action as a suit against eight named defendants as representatives of a putative class "consisting of all claimants who will receive funds to be disbursed by the DOE, other than those claimants with whom plaintiff has fee agreements." Am. Compl. ¶ 1. He asks the court to "require that the class representative defendants on behalf of the members of the class direct the DOE to withhold such percentage in each disbursement to the claimants and disburse such amounts withheld at appropriate intervals to plaintiff." Am. Compl. ¶ 19. Kalodner's explicit rationale in bringing this suit is "to seek from the class members directly the common fund fee which should have been available even though the funds remained in the Treasury." Id. at ¶ 13. His requested fee remains 10%, Am. Compl. ¶ 17, or approximately $27 million.
II. ANALYSIS
A. Legal Standard
A motion to dismiss is appropriate "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Martin v. Ezeagu, 816 F. Supp. 20, 23 (D.D.C. 1993) (internal quotation marks omitted); see Conley v. Gibson, 355 U.S. 41, 45-46 (1957) (stating that a complaint should not be dismissed "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief"). In addition, the court must "construe the complaint in the light most favorable to [the] plaintiff and must accept as true all reasonable factual inferences drawn from well-pleaded factual allegations." In re United Mine Workers of Am. Employee Benefit Plans Litig., 854 F. Supp. 914, 915 (D.D.C. 1994); see Schuler v. United States, 617 F.2d 605, 608 (D.C. Cir. 1979) (stating that the court must give the plaintiff "the benefit of all inferences that can be derived from the facts alleged").
B. Applicability of ESA
Kalodner invokes this court's jurisdiction under §§ 209-211 of the ESA. Am. Compl. ¶ 2. Section 209, however, is unavailing to Kalodner's present efforts because it only empowers a public enforcement action, not a private right of action. Consol. Edison, 117 F.3d at 545 ("private claimants have no express or implied cause of action under Section 209 of the ESA"); accord Lea Exploration, Inc. v. Dep't of Energy, 843 F.2d 510, 515 (Temp.Emer.Ct.App. 1988). Likewise, § 211 does not create an independent cause of action at all, but simply confers jurisdiction on the federal district courts to hear cases or controversies arising under EPAA. Consol. Edison Co. of N.Y. v. O'Leary, 131 F.3d 1475, 1481 (Fed. Cir. 1997). That leaves § 210 alone as a possible statutory basis for Kalodner's present suit.
ESA § 209(a) provides, in pertinent part:
Whenever it appears to any person authorized by the President to exercise authority under this title that any individual or organization has engaged . . . in any acts or practices constituting a violation of any order or regulation under this title, such person may request the Attorney General to bring an action in the appropriate district court of the United States to enjoin such acts or practices . . . In addition to such injunctive relief, the court may also order restitution of monies received in violation of any such order or regulation.
ESA § 211 provides, in pertinent part:
(a) The district courts of the United States shall have exclusive original jurisdiction of cases or controversies arising under this title, or under regulations or orders issued thereunder, notwithstanding the amount in controversy . . .
Unlike §§ 209 and § 211, § 210 does create a private right of action. Specifically, the section provides:
(a) Any person suffering legal wrong because of any act or practice arising out of this title, or any order or regulation issued pursuant thereto, may bring an action . . . for appropriate relief, including an action for a declaratory judgment, writ of injunction . . . and/or damages.
(b) In any action brought under subsection (a) against any person renting property or selling goods or services who is found to have overcharged the plaintiff, the court may, in its discretion, award the plaintiff reasonable attorney's fees and costs . . .
Read alongside § 209, the plain language of § 210 makes clear that this provision provides plaintiffs a remedy against private parties who have allegedly injured those plaintiffs through violations of EPAA price controls. See Air Prods. and Chems., Inc. v. United Gas Pipeline Co., 503 F.2d 1060, 1063 (Temp. Emer. Ct. App. 1974); Bulzan v. Atl. Richfield Co., 620 F.2d 278, 282 (Temp.Emer.Ct.App. 1980) ("it is apparent that the provisions for a private remedy under section 210 focus on the relationship between a violator of a [Federal Energy Administration] or DOE regulation and an aggrieved party . . ."). To the extent that § 210 countenances attorney's fees at all, they are available only in conjunction with an action "against any person renting property or selling goods or services who is found to have overcharged the plaintiff," and then only as a discretionary matter for the court. See, e.g., N. Oil Co. v. Standard Oil Co. of Cal., 761 F.2d 699, 700 (Temp. Emer. Ct. App. 1985) (trial court awarded attorney's fees along with overcharge damages and statutory penalties); Gulf Oil Corp. v. Dyke, 734 F.2d 797, 807 n. 38 (Temp.Emer.Ct.App. 1984) (trial court abused discretion where attorney's fees were "grossly excessive" and overcharge was probably unintentional).
The Federal Energy Administration is DOE's predecessor agency.
Kalodner has not sued and prevailed against defendants for their violation of petroleum allocations, price controls, or any "act, practice, order, or regulation" of EPAA. Rather, defendants — like Kalodner's clients — are beneficiaries of public enforcement actions. The funds from which Kalodner seeks his fee entered the public fisc by virtue of DOE's § 209 efforts, not through § 210 suits brought by Kalodner or any other individual. Notwithstanding Kalodner's extensive citations to his role "assisting DOE's enforcement arm in obtaining refunds and maximizing the amount of those refunds," Am. Compl. ¶ 10(b)(i), the court is not aware of any statutory or regulatory enactment deputizing him to act on DOE's behalf. There is no reasonable construction of § 210 that allows the statute to support Kalodner's claim to attorney's fees for DOE's administration of the claims process, for such proceedings are "the exclusive right of the government." Ashland Oil, Inc. v. Dep't of Energy, 760 F.2d 298, 303 (Temp.Emer.Ct.App. 1985); Consol. Edison Co. of N.Y. v. Breznay, 683 F. Supp. 2d 832, 835 (D.D.C. 1987) ("private entities do not have the requisite interest in public enforcement actions brought under § 209 to intervene as of right"). If private parties do not have "rights" to the enforcement action, they (or their lawyers) certainly may not obtain attorney's fees for the successful completion of such an action. Accordingly, Kalodner fails to state a claim upon which relief could be granted under the ESA.
Kalodner's complaint implies that the true target of his efforts remains the federal government, as he endeavors "to seek from the class members directly the common fund fee which should have been available even though the funds remained in the Treasury," Am. Compl. ¶ 13. DOE has already determined on at least four occasions that Kalodner is not entitled to common fund attorney's fees, a decision that has been upheld by multiple federal courts. To the extent that "dissatisfaction with the DOE's decision lies at the heart of [Kalodner's] claim against the defendants," his suit is an "impermissible collateral attack on Agency action because plaintiff's grievance [is] with the Agency and not with the defendants." Caribou Four Corners, Inc. v. Am. Oil Co., 628 F. Supp. 363, 373, 372 (D. Utah 1985) (citing Whitney Nat'l Bank v. Bank of New Orleans Trust Co., 379 U.S. 411 (1965)).
Despite asserting ESA in his complaint, Kalodner later jettisons that statute, conceding that "the right to a common fund fee arises not from the ESA, but from the common fund fee doctrine." Pl.'s Opp'n at 41.
C. Applicability of Common Fund Doctrine
The other basis Kalodner asserts for his fee claim is the common fund doctrine, a creation of federal common law. Zucker v. Westinghouse Elec., 374 F.3d 221, 225 (3rd Cir. 2004). While the "American rule" is that each party to litigation bears its own costs, under special circumstances a prevailing party may obtain attorney's fees. Swedish Hosp. v. Shalala, 1 F.3d 1261, 1265 (D.C. Cir. 1993). In addition to a variety of statutory provisions that allow such feeshifting, several common law exceptions may apply, including the common fund doctrine, which recognizes that a "litigant or a lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney's fee from the fund as a whole." Boeing v. Van Gemert, 444 U.S. 745, 749 (1980).
The Equal Access to Justice Act, see infra note 14, provides a statutory basis for common fund recovery against federal government defendants. In addition, the doctrine "has been recognized and applied . . . in courts of virtually every state." Scholtens v. Schneider, 671 N.E. 2d 657, 663 (Ill. 1996); see, e.g., Hart v. Wal-Mart Stores, Inc. Assocs.' Health Welfare Plan, 360 F.3d 674, 676 (7th Cir. 2004) (Illinois) ; Morganroth Morganroth v. DeLorean, 213 F.3d 1301 (10th Cir. 2000) (Utah). "The common fund or benefit exception to the American Rule is fully recognized in the District of Columbia." Passtou, Inc. v. Spring Valley Ctr., 501 A.2d 8, 12 (D.C. 1985) (citations omitted).
See, e.g., Abraham v. District of Columbia, 338 F. Supp. 2d 113 (D.D.C. 2004) (Individuals with Disabilities Act, 20 U.S.C. § 1400 et seq.); Piper v. Dep't of Justice, 339 F. Supp. 2d 13 (D.D.C. 2004) (Freedom of Information Act, 5 U.S.C. § 552 et seq.); Thomas v. Nat'l Sci. Found., 330 F.3d 486 (D.C. Cir. 2003) (Equal Access to Justice Act ("EAJA"), 5 U.S.C. § 504, 28 U.S.C. § 2412). Kalodner makes extensive citation to EAJA, noting that it "waives sovereign immunity" and allows him to claim a fee from funds held in the Treasury. Pl.'s Opp'n at 33-36. While EAJA does operate to waive federal sovereign immunity under certain circumstances, it is of no avail to Kalodner, since it only pertains to fee claims against the federal government, not private-party defendants. 28 U.S.C. § 2412(b). Furthermore, any fee award EAJA authorizes "is made to the `prevailing party,' not the attorney. Thus, [the] attorney could not directly claim or be entitled to the award." Phillips v. Gen. Servs. Admin., 924 F.2d 1577, 1582 (Fed. Cir. 1991); accord United States v. Peck, 910 F.2d 509, 513 (8th Cir. 1990). Finally, there is no evidence before the court that Kalodner has complied with the EAJA requirement that a party dissatisfied with an agency's fee determination must appeal such a decision within 30 days. Scott v. Nat'l Transp. Safety Bd., 114 F.3d 305, 306 (D.C. Cir. 1997) (citing EAJA, 5 U.S.C. § 504(c)(2)). For these reasons, EAJA is irrelevant to Kalodner's present claims.
The rationale behind common fund fee recovery is that "unless the costs of litigation are spread to the beneficiaries of the fund they will be unjustly enriched by the attorney's efforts." Swedish Hosp., 1 F.3d at 1265 (citations omitted). The award of common fund fees is not an automatic legal entitlement but rather calls for a discretionary determination by the court, whose "equitable power" creates the obligation; the common fund doctrine "may provide the justification for a court order but, in and of itself, the doctrine imposes no obligation or liability on the common fund or on the party holding that fund." Knight v. United States, 982 F.2d 1573, 1580-81 (Fed. Cir. 1993). Significantly, common fund recovery requires "a common fund under the control of the court against which the court could under common law principles impose a charge for attorney fees on nonparties . . .," Knight, 982 F.2d at 1582 (emphasis added); see also Vincent v. Hughes Air West, Inc., 557 F.2d 759, 770 (9th Cir. 1977) ("What is crucial is that the court can legitimately exercise authority or control over the asset" (citation omitted)). Court control over the fund is mandatory, because "in common fund cases, it is not the creation of the fund itself that entitles the attorneys to be paid from the fund." Rather, "any obligation that the fund incurs to pay attorneys' fees must result from the exercise of the court's inherent equitable power to assess fees against those who stand to ultimately benefit from the fund." Democratic Cent. Comm. v. Washington Metro. Area Transit Comm'n, 38 F.3d 603, 605 (D.C. Cir. 1994) (citations omitted).
Applying the foregoing principles to the facts of this case, it is clear that the common fund doctrine cannot support the present action. Kalodner asks the court to order defendants to "direct the DOE to withhold" his 10% fee, and to then "disburse such amounts withheld at appropriate intervals to plaintiff." Am. Compl. ¶ 19. Despite Kalodner's averments that the relief he seeks is against defendants alone, Pl.'s Opp'n at 30-31, it is self-evident that the monies from which Kalodner seeks his payment are in the custody of the United States Treasury, where they will remain until they are distributed to eligible claimants. Kalodner's assertion that sovereign immunity is inapplicable because the funds are "necessarily on their way out of the Treasury," Pl.'s Opp'n at 37, has no merit. "The sine qua non of federal sovereign immunity is the federal government's possession of the money in question," Kalodner, 310 F.3d at 770, and thus as long as the funds at issue here remain in the Treasury, they are "fully protected by sovereign immunity." Id. Furthermore, while common fund recovery may be obtained against the federal government, such recovery is possible only if the government's sovereign immunity is waived. Contrary to Kalodner's attempted enlistment of EAJA on his behalf, supra note 14, this court (Lamberth, J.) has already determined there to be no applicable waiver of immunity. Kalodner, 309 F. Supp. 2d at 102-04.
Absent such relief, Kalodner threatens to unleash "thousands of individual suits against claimants," Am. Compl. ¶ 19, "perhaps in all 50 States." Pl.'s Opp'n at 4. While the court endeavors to promote judicial economy, it cannot grant relief in the absence of a legal basis for doing so.
Finally, Kalodner relies on National Treasury Employees Union v. Nixon, 521 F.2d 317 (D.C. Cir. 1975), to argue that court control over government-held funds is unnecessary for him to recover fees from defendants. Pl.'s Opp'n at 29-31. His reliance is misplaced, however, because in that case "the funds at issue had already been distributed to private parties, so the money was no longer in the government's possession." Kalodner, 310 F.3d at 770. In the absence of a fund under court control, the common fund doctrine does not provide a basis for Kalodner's action, and he has thus failed to state a claim upon which relief can be granted.
III. CONCLUSION
Accordingly, defendants' motions to dismiss are GRANTED. An appropriate order accompanies this memorandum opinion.