IN THE SUPERIOR COURT OF THE DISTRICT OF COLUMBIA DISTRICT OF COLUMBIA, Plaintiff v. EXXONMOBIL OIL CORP., et al. Defendants.

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Civil Action No. 13cv005874 B Judge Craig ISCOE Calendar No. 14 Next Court Date: December 13, 2013 Initial Scheduling and Settlement Conf.

REPLY BRIEF OF DEFENDANTS ANACOSTIA REALTY, LLC, SPRINGFIELD PETROLEUM REALTY, LLC AND CAPITOL PETROLEUM GROUP, LLC On October 7, 2013, defendants Anacostia Realty, LLC, Springfield Petroleum Realty, LLC, and Capitol Petroleum Group, LLC (hereinafter the CPG Defendants) filed a motion to dismiss the complaint in this action, along with a supporting memorandum of points and authorities (CPG Mem.). On November 8, 2013, the District of Columbia filed a response in opposition to the motion (District Opp.). There are two aspects of the Districts Opposition that require this brief reply. First, the Opposition distorts the relevant case law by offering snippets and partial quotes from cases that are presented out of context and without the benefit of the full quotations, and it reaches conclusions that are in no way supported by the cited cases. In some of these cases, the court reached conclusions that are the exact opposite of the ones reached by the District. Second, the District urges the Court to accept propositions that were specifically voted down by the D.C. Council, including its interpretation of the RSSA provision at issue in this case, and its claim that the Attorney General is authorized to enforce D.C. Code Section 36-303.1(a)(6). In short, the District asks this Court to adopt positions that the D.C. Council refused to enact into law, and to do so on the basis of a misapplication of the relevant cases.

I.

A BILL AUTHORIZING THE ATTORNEY GENERAL TO ENFORCE D.C. CODE 36-303.01(a)(6) WAS VOTED DOWN BY THE DISTRICT OF COLUMBIA COUNCIL In the memorandum filed by the CPG Defendants in support of the instant motion,

defendants attached a letter from the Attorney General to the sponsor of Bill No. 19-299 in support of the proposed legislation. See Attachment A to CPG Mem. In addition to supporting the Bill, the Attorney General asked that the Bill be amended to provide the Attorney General with authority to enforce the provision at issue in this case, D.C. Code 36-303.01(a)(6). Attachment A to CPG Mem. AG Letter at 3. After making reference to the relevant provision, D.C. Code 36-303.01(a)(6), which the Attorney General described as the Districts current law on gasoline marketing agreements, the Attorney General asked the Bills sponsor to include a new provision as part of this bill . . . Id., AG Letter at 3. Specifically, the Attorney General asked that the Bill be amended to provide him with authority to enforce the marketing agreement provisions of the RSSA, stating: First, we respectfully request the Council to consider providing the Attorney General with express authority to seek injunctions and civil penalties, on behalf of the public, against distributors that violate the Districts gasoline marketing agreement law or engage in other presumptively anti-competitive practices that could have the effect of increasing prices at the pump. (emphasis added). Id. In accordance with the Attorney Generals request, Bill No. 19-299 included a provision amending Section 4-206 of the Law (D.C. Code 36-303.06) to state that: The Attorney General for the District of Columbia, or any of his assistants, is hereby empowered to maintain an action or actions in the Superior Court for the District of Columbia in the name of the District of Columbia to enjoin any refiner, distributor, or retail dealer, and those acting in concert with such refiner, distributor, and retail dealer, from violating this subchapter, to recover a civil penalty of not more than $5,000 for each violation, and to recover the costs of the action and reasonable attorneys fees. [See Bill No. 19-299, Exhibit 1 hereto, at 2.] The Draft Report of the Committee on Government Operations and the Environment to accompany the Bill (Exhibit 2 hereto) contained a section-by-section analysis, including a section 2

stating that the Bill would expressly empower the Attorney General to bring actions in the name of the District of Columbia for violations of the RSS. Id. at 13. (emphasis added). The authority requested by the Attorney General, which was included in the Bill, was never enacted into law. On February 7, 2012, the Bill was voted down in a vote of the full Council. (Exhibit 3, hereto). Having failed to obtain legislative authority to enforce Section 36-303.01(a)(6), the Attorney General now seeks to obtain the same authority from this Court. In substance, the Attorney General argues that the parens patriae doctrine is not merely a doctrine of prudential standing. According to the Attorney General, it authorizes him to sue under any statute, even where the statute does not authorize a suit by the District. District Opp. at 21-22. As shown below, however, the Attorney Generals arguments are based on a contorted reading of relevant case law. None of the cases cited by the Attorney General hold that parens patriae standing is a substitute for a cause of action or a right of action under a statute. II. NO PARENS PATRIAE ACTION MAY PROCEED ON THE BASIS OF A STATUTE WHERE THE STATUTE PROVIDES NO RIGHT OF ACTION BY THE STATE As stated in the memorandum filed by the CPG Defendants, the doctrine of parens patriae is not a cause of action in and of itself. (See, CPG Mem. at 10-11 and cases cited therein). A State or other jurisdiction invoking the doctrine must assert a legally sufficient common law or statutory cause of action. Id. Moreover, if the cause of action is based on a statute, the statute must authorize an action by the State. Id. A statute can authorize an action by the State in two ways. First, a right of action under a statute can be conferred on a State by explicitly authorizing the State to enforce a specific statutory provision or provisions. For example, Section 28-4507(a) of the D.C. Code confers explicit

authority on the Attorney General to enforce Chapter 45 of the Code, which contains the Districts antitrust laws.1 Second, a statute can confer enforcement authority on any person injured or any person aggrieved by a violation thereof, and it can be enforced by a State where the State is determined to be a person within the meaning of the relevant statute. In Hawaii v. Standard Oil Company of California,2 for example, the Supreme Court permitted a parens patriae action by the State under Section 16 of Clayton Act, which permits suits for injunctive relief by any person injured by the federal antitrust laws. The Court held that Hawaii plainly qualifies as a person under the relevant statutory provision. Id., 405 U.S. at 261. The Attorney General argues, however, that his parens patriae authority enables him to enforce any statute, even where the statute confers no specific enforcement authority on the Attorney General, and even where it provides no broad grant of enforcement authority to any person injured or aggrieved. The Attorney General makes this argument in a somewhat disingenuous way by quoting from Connecticut v. Physicians Health Servs. of Connecticut, 287 F.3d 110, 127 (2d Cir. 2002), and omitting the most important part of the quote. In Physicians Health Servs. of Connecticut, the Second Circuit held that Connecticut may not proceed with a parens patriae action under Section 1132(a)(3) of ERISA because the Section grants no right of action to the State. The segment quoted by the Attorney General states: By holding that the State lacks parens patriae standing because 1132(a)(3) does not expressly provide for such standing, we do not of course intend to imply that
1

See, D.C. Code Section 28-4507(a) (Whenever the District of Columbia government is injured in its business or property by a violation of this chapter, the Corporation Counsel may bring a civil action in the name of the District of Columbia for damages, or for appropriate injunctive or other equitable relief . . .). Hawaii v. Standard Oil Company of California, 405 U.S. 251 (1972).

states may only sue in their parens patriae capacity when a statute specifically provides for suits by states. [S]tates have frequently been allowed to sue in parens patriae to . . . enforce federal statutes that . . . do not specifically provide standing for state attorney generals. Physicians at 121. However, the Attorney General left out the remainder of the quote, which provides: however, the federal statutes under which states have been granted parens patriae standing all contain broad civil enforcement provisions that permit suit by any person that is injured or aggrieved.' PHS, 103 F.Supp.2d at 50910 (collecting federal statutes with broad enforcement provisions). Section 1132 of ERISA, by contrast, carefully limits the parties who may seek relief. [Id., emphasis added] Thus, Physicians Health Services does not stand for the proposition that parens patriae standing authorizes a State to sue under a statute that does not empower the State to enforce its provisions. In fact, the above-quoted segment of the Courts opinion stands for just the opposite. It provides that a States authority to sue has been upheld only when the State is authorized by the statute to sue, either specifically, or by virtue of a broad grant of enforcement authority to any person that is injured or aggrieved. Subchapter III of the RSSA does not specifically authorize the District to enforce its provisions. Nor does it provide a broad grant of authority to any person injured by a violation of its provisions. It provides for enforcement only by retail service station dealers.3 Nor does the Supreme Courts decision in Massachusetts v. EPA, 549 U.S. 497 (2007) authorize suits by a State where there is no statutory authority to sue. In Massachusetts, the State petitioned the U.S. Court of Appeals for the District of Columbia Circuit to review an order of the

The same is true of another case cited by the Attorney General, New York ex rel Vacco v. MidHudson Med. Group P.C., 877 F.Supp. 143 (S.D.N.Y. 1995). As the district court pointed out in Physicians Health Services, all of the parens patriae cases cited in Mid-Hudson recognized the States right to sue under broad civil enforcement provisions that permit suit by any person that is injured or aggrieved. See, Physicians Health Services, 103 F.Supp.2d 495, 509-10, (D. Conn. 2000). Neither Mid-Hudson nor Physicians Health Services stands for the proposition that a State may enforce any statute under its parens patriae authority, even where the statute confers no such authority on the State specifically or on any person who is injured or aggrieved.

EPA denying a petition for rulemaking to regulate greenhouse gas emissions. Id. at 504-05. The petition for review alleged that EPAs decision to defer the promulgation of regulations governing greenhouse gases constituted agency action unlawfully withheld under a provision of the Clean Air Act, 42 U.S.C. 7607(b)(1). Under 42 U.S.C. 7607(b)(2), any person may challenge the deferral of regulations. The Supreme Courts decision in Massachusetts is simply another case in which a court recognized a States right to sue under a statute that grants broad enforcement authority to any person. The decision cannot be read to authorize suits under statutes that do not empower the State to sue, and it does not hold that parens patriae standing is a substitute for a right of action under a statute. Nor does the decision authorize parens patriae actions in the absence of a concrete and particularized injury.4 No case has ever held that parens patriae standing provides a State with authority to enforce a statute that does not empower the State to sue. This Court should reject this attempt to obtain through the judicial process authority that the legislature refused to grant. III. THE DISTRICT OF COLUMBIA COUNCIL VOTED DOWN A BILL THAT WOULD HAVE AMENDED SECTION 36-303.01(a)(6) TO PERMIT DEALERS TO PURCHASE ANY BRAND OF MOTOR FUEL FROM THIRD-PARTY SUPPLIERS The Attorney General argues that Section 36-303.01(a)(6) permits dealers to purchase any brand of motor fuels from third-party suppliers. On the other hand, defendants maintain that dealers can purchase any brand of motor fuels (including unbranded motor fuels) from third-party suppliers, except for motor fuels that can only be sold under the distributors trademark. Because

In Massachusetts, the Supreme Court reiterated the requirement for showing a concrete and particularized injury that is either actual or imminent. 549 U.S. at 498. It held only that a plaintiff may forego meeting the redressability and immediacy requirements of Article III standing in limited circumstances, not present here, where Congress has given the State a concomitant procedural right to challenge [a] rulemaking petition as arbitrary and capricious. Id.

the plain language of Section 36-303.01(a)(6) is consistent with the interpretation of the CPG Defendants, the Attorney General sought to amend the law, and he prevailed upon the sponsor of Bill No. 19-299 (Exhibit 1 hereto) to include a provision in the Bill making the law applicable to any brand, even if it is the distributors brand. The Bill contained a provision to amend section 4-201 of the Law (section 36303.01(a)(6)) to provide as follows: This subsection shall apply to all marketing agreements, including marketing agreements under which a retailer would sell a particular brand of fuel under a trademark. Marketing agreements shall not prohibit a retailer from purchasing any brand of fuel from any person not a party to the marketing agreement. (emphasis added). See Bill No. 19-299, Exhibit 1 hereto, at 2. As stated above, however, the Bill was voted down by a vote of the full Council, and the Attorney General was unsuccessful in expanding the reach of the law through legislative amendment. IV. THE ATTORNEY GENERALS INTERPRETATION OF SECTION 36303.01(a)(6) IGNORES THE PLAIN LANGUAGE OF THE STATUTORY PROVISION IN FAVOR OF A STRAINED APPLICATION OF ITS LEGISLATIVE HISTORY Section 36-303.01(a)(6) of the D.C. Code explicitly states that motor fuels purchased from non-parties to a marketing agreement cannot be sold under the distributors trademark. See CPG Mem. at 23-26. Because Exxon branded motor fuels can only be sold under the Exxon trademark, the provision clearly permits Anacostia to require dealers to purchase all of their Exxon branded motor fuel requirements from Anacostia. In other words, even to the extent that the RSSA would otherwise permit retail dealers to purchase from alternative suppliers unbranded gasoline or gasoline sold under a different brand, the statutes unambiguous language protects the supply rights of distributors of branded gasoline sold under the distributors trademark brand.

Given the clarity of the relevant statutory language, the Attorney General seeks to muddy the waters with references to the legislative history, claiming that legislative history can create ambiguities in an otherwise unambiguous statute. This tactic, however, stretches the rules of statutory construction to their limits, and even beyond. As the District of Columbia Court of Appeals stated in Hood v. United States, 28 A.3d 553 (D.C. 2011): The primacy of the statutory text means that resort to legislative history to construe a statute is generally unnecessary (if not, indeed, disfavored); usually it is appropriate only to resolve a genuine ambiguity or a claim that the plain meaning leads to a result that would be absurd, unreasonable, or contrary to the clear purpose of the legislation. Indeed, [t]he burden on a litigant who seeks to disregard the plain meaning of the statute is a heavy one, and [the] court will look beyond the ordinary meaning of the words . . . only where there are persuasive reasons for doing so. Hard Rock Caf v. District of Columbia Department of Employment Services, 911 A.2d 1217, 1219 (D.C. 2006). Here, there is no ambiguity in the statutory language. Nor is there any persuasive reason for disregarding it. If enforced strictly in accordance with its terms, the statute would permit dealers to purchase unbranded motor fuels and other branded motor fuels from a host of other distributors and terminal operators (of which, together, there are at least 50 in the D.C./Baltimore area), while prohibiting purchases of products from third-party suppliers that can only be sold under the distributors trademark. The Attorney General does not explain why this result is absurd or unreasonable in any way. He argues only that it is inconsistent with the purposes of the statute (at least, as he sees them). There is nothing in the legislative history, however, that would render a result based on a plain reading of the statute to be unreasonable, much less absurd. The legislative history of the statute indicates that it is designed primarily to prohibit exclusive dealing relationships, although the words exclusive and exclusivity do not appear 8

in the statutory text. For purposes relevant here, an exclusive dealing arrangement is one in which a dealer must purchase all of his motor fuels from a single distributor. It is one in which the distributor has the exclusive right to supply motor fuels to the dealer. A relationship in which a dealer is authorized to purchase motor fuels from any of the 50 or so distributors and terminal operators in the D.C./Baltimore area is hardly an exclusive relationship. Nor would it lead to an absurd result. After all, the marketing agreement between Anacostia and each dealer is a motor fuel supply contract, freely entered by the dealer, to purchase Exxon branded motor fuels from Anacostia. Under the Attorney Generals interpretation of the relevant statutory provision, the dealer is free to purchase all of its Exxon branded motor fuels from a third-party supplier or suppliers, rendering the supply contract with Anacostia meaningless. It is not at all absurd for a statute to provide some protection for the distributor, while leaving the dealer free to purchase all other motor fuels from a wide variety of sources. Nor is there any reason to deviate from the statutory language to interpret the term distributors trademark. As shown below, the Attorney Generals interpretation of the term (which he claims relates only to a trademark owned by the distributor) is not drawn from the statutory language or the statutory context in which the term is used. In fact, it is made up out of whole cloth. Section 36-303.01(a)(6) provides, in part, that if the marketing agreement permits the retail dealer to use the distributors trademark . . . the retail dealer shall neither represent such motor fuels or products as having been procured from the distributor nor sell such motor fuels under the distributors trademark. When viewed in the context of this provision, the term distributors trademark means the trademark which the distributor permits the dealer to use under the terms of its marketing agreement. Here, Anacostias marketing agreement permits the dealer to use the Exxon trademark. 9

Anacostia is not only authorized to use the Exxon trademark, it is also authorized to [g]rant the use of those Proprietary Marks to Distributors franchised lessee or franchised independent dealers . . . at Exxon-branded retail outlets approved [by Exxon]. Distribution Agreement at 1. With respect to the dealers use of the trademark at each dealer location, it is Anacostia that contractually authorizes the retail dealer to use the Exxon trademark. Thus, defendants interpretation of the term distributors trademark is not only consistent with the statutory context in which it is used, it is also consistent with the term trademark as used in the definition of a marketing agreement. A marketing agreement is one in which [t]he retail dealer is granted the right, privilege, or authority . . . [t]o use any trademark owned, leased, or otherwise controlled by the distributor for the purpose of engaging in the retail sale of motor fuel at a retail service station. D.C. Code 36-301.01(7)(B)(i). To be the distributors trademark, the trademark need only be leased to or controlled by the distributor (meaning that Exxon has granted the distributor a right to use the trademark and to grant its use to others). For all of these reasons, the distributors trademark is the Exxon trademark, and under the RSSA, no dealer purchasing branded Exxon motor fuels may purchase such fuels from thirdparties. As to Section 36-303.01(a)(6), therefore, the complaint fails to state a claim upon which relief can be granted. Respectfully Submitted,

/s/ Alphonse M. Alfano Alphonse M. Alfano (D.C. Bar No. 163555) Bassman, Mitchell & Alfano, Chartered 1707 L Street, NW, Suite 560 Washington, DC 20036 Tel: (202) 466-6502; Fax: (202) 331-7510 Email: bma@bmalaw.net Attorney for the CPG Defendants

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