Opinion ID: 510053
Heading Depth: 3
Heading Rank: 1

Heading: Pennzoil II

Text: 23 Since the producers raise several arguments asserting that the Commission failed to comply with this Court's decision in Pennzoil II, we briefly mention some of the guidelines established in Pennzoil II for ascertaining the contracting parties' intent to collect NGPA rates once the Order 23 presumption has been rebutted by third-party protestors. Initially, the Order 23 presumption in favor of the contracting parties' mutual interpretation of their contractual intent imposes on the party against whom the presumption is directed (the third-party protestor) the burden of going forward with substantial evidence to rebut or meet the presumption, but does not shift the burden of persuasion. Pennzoil I, 645 F.2d at 392; Pennzoil II, 789 F.2d at 1136. Pennzoil II further clarified the concept of the Order 23 presumption by explaining that the Court adopted the bursting bubble or Thayer theory of presumptions, instead of the Morgan theory of presumptions, when it affirmed the Order 23 presumption in Pennzoil I. Pennzoil II, 789 F.2d at 1136. Pursuant to the bursting bubble or Thayer theory of presumptions, the only effect of a presumption is to shift the burden of producing evidence with regard to the presumed fact. Id. (footnote omitted) (emphasis in original). 21 Once the protestor produces evidence challenging the presumed fact--the contracting parties' assertion of mutual intent, the Order 23 presumption bursts or is eliminated from the analysis. Significantly, it is only the presumption which disappears, not the evidence supporting that presumption which, in the Order 23 context, is the parties' assertion of mutual intent to collect NGPA rates and their various exchanges and assertions. 24 After the protestor dispels the Order 23 presumption, an evidentiary hearing is conducted to probe the contracting parties' intent. The Commission is then obligated to construe the contracts to determine whether they authorize NGPA rates or not, taking into account the language of the contracts and all the extrinsic evidence of intent presented, including the parties' assertion of mutual intent. Id. at 1141 (emphasis in original). Further, in construing the contracts to ascertain the parties' intent, the presiding ALJ was to apply the law that would govern the parties' dealings were there no regulation at all of the contract's subject matter. Id. at 1142 (quoting Pennzoil I, 645 F.2d at 387 (footnote omitted)). In this regard, the Commission is entitled to assume that a specific state's contract law is the same as general contract principles, including the principles espoused in the Uniform Commercial Code (U.C.C.). 25 Finally, in reviewing the Commission's decision on the parties' intent, the factual determinations of the Commission are to be sustained if supported by substantial evidence. Pennzoil II, 789 F.2d at 1135. See 15 U.S.C. Sec. 3416. Substantial evidence is  'such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.'  Consolo v. Federal Maritime Commission, 383 U.S. 607, 619-20, 86 S.Ct. 1018, 1026-27, 16 L.Ed.2d 131 (1966) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 59 S.Ct. 206, 83 L.Ed. 126 (1938). In making its factual determinations after the presiding ALJ's initial resolution of the parties' intent, the Commission, while not strictly bound by the ALJ's credibility determinations, is to afford the credibility findings of the ALJ special weight and such findings are not to be easily ignored. Id.; Mattes v. United States, 721 F.2d 1125, 1129 (7th Cir.1983); Kirkland v. Railroad Retirement Board, 706 F.2d 99, 104 (2d Cir.1983). As to legal conclusions, this Court freely reviews such questions of law and is not obliged to accord any deference to the agency's determinations. Pennzoil II, 789 F.2d at 1135. 26 In addition to setting forth these general principles in Pennzoil II regarding the application of the Order 23 presumption, this Court noted several errors made by the Commission regarding the application of state law to the interpretation of the contracts. Those errors and the directions of the Pennzoil II Court regarding the application of state law to the contracts will be discussed later in this opinion.