
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                FOR THE FIRST CIRCUIT                              _________________________          No. 94-2076                          TEXACO PUERTO RICO, INC., ET AL.,                                Plaintiffs, Appellees,                                          v.                       DEPARTMENT OF CONSUMER AFFAIRS, ET AL.,                               Defendants, Appellants.                              __________________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF PUERTO RICO                    [Hon. Jose Antonio Fuste, U.S. District Judge]                                              ___________________                              __________________________                                        Before                                Selya, Circuit Judge,                                       _____________                            Coffin, Senior Circuit Judge,                                    ____________________                               and Cyr, Circuit Judge.                                        _____________                             __________________________                Lynn  R. Coleman, with whom Pedro R. Pierluisi, Secretary of               ________________            __________________          Justice,  Roberto  Ruiz   Comas,  Director,  Federal   Litigation                    _____________________          Division,  Dep't  of Justice,  Richard  L.  Brusca, Matthew  W.S.                                         ___________________  _____________          Estes,  Laura A. Ingraham,  and Skadden,  Arps, Slate,  Meagher &          _____   _________________       _________________________________          Flom were on brief, for appellants.          ____               Alan M.  Grimaldi, with whom Jerrold  J. Ganzfried, Patricia               _________________            _____________________  ________          G. Butler, Howrey & Simon, William Estrella, and Ricks P. Frazier          _________  ______________  ________________      ________________          were on brief, for appellee Texaco Puerto Rico, Inc.               Donald  B. Craven,  with  whom James  P.  Tuite, Anthony  F.               _________________              ________________  ___________          Shelley, James R. Lovelace, Alvaro I. Anillo, Miller & Chevalier,          _______  _________________  ________________  ___________________          Chtd,  Luis Sanchez  Betances, Jaime  Sifre Rodriguez,  Miguel P.          ____   ______________________  ______________________   _________          Cancio Bigas, and  Sanchez Betances  & Sifre were  on brief,  for          ____________       _________________________          appellee Esso Standard Oil Co. (P.R.).               Ana Matilde  Nin, with whom Rafael  Perez-Bachs, Gilberto J.               ________________            ___________________  ___________          Marxuach-Torros, and McConnell Valdes were on brief, for appellee          _______________      ________________          Shell Co. (P.R.) Ltd.                              _________________________                                    July 19, 1995                              _________________________                    SELYA,  Circuit  Judge.    In  1986,  the  Puerto  Rico                    SELYA,  Circuit  Judge.                            ______________          Department  of Consumer  Affairs (DACO)  took a  small, tentative          step   toward   regulating  the   profit   margins   of  gasoline          wholesalers.  The  wholesalers treated this move as a declaration          of war.  They mounted a courtroom  counteroffensive and succeeded          in  obtaining an  injunction  against the  enforcement of  DACO's          embryonic regulation.  Following a series of pitched battles that          stretched from San Juan to Boston to the banks of the Potomac and          back again, DACO emerged victorious.                    Long  after  the  injunction  had  been  vacated,  DACO          purposed to exact tribute from  the vanquished.  Specifically, it          sought  restitution from  the wholesalers  based on  the "excess"          profits  that  they  allegedly   earned  while  shielded  by  the          injunction.  The district court declined to  grant the envisioned          spoils.  We affirm.          I.  BACKGROUND          I.  BACKGROUND                    This is presumably the  final skirmish in a decade-long          conflict.  Other jousts  are chronicled in a series  of published          opinions.   See, e.g., Puerto  Rico Dep't of  Consumer Affairs v.                      ___  ____  _______________________________________          Isla  Petroleum Corp., 485 U.S. 495 (1988) (Isla III); Tenoco Oil          _____________________                       ________   __________          Co.  v. Department of Consumer  Affairs, 876 F.2d  1013 (1st Cir.          ___     _______________________________          1989);  Isla Petroleum  Corp. v.  Puerto Rico  Dep't  of Consumer                  _____________________     _______________________________          Affairs, 811 F.2d  1511 (Temp.  Emer. Ct. App.  1986) (Isla  II);          _______                                                ________          Texaco  Puerto Rico, Inc. v.  Mojica Maldonado, 862  F. Supp. 692          _________________________     ________________          (D.P.R.  1994)  (TPR  II); Texaco  Puerto  Rico,  Inc. v.  Ocasio                           _______   ___________________________     ______          Rodriguez, 749 F. Supp. 348 (D.P.R. 1990) (TPR I); Isla Petroleum          _________                                  _____   ______________                                          2          Corp. v. Department of Consumer Affairs, 640 F. Supp. 474 (D.P.R.          _____    ______________________________          1986)  (Isla I).   Given  the detail  contained in  these earlier                  ______          opinions, we believe that a condensed summary of  the hostilities          will suffice for the nonce.                    From 1973 forward, the federal government imposed price          controls on the sale of petroleum and petroleum products.  See 15                                                                     ___          U.S.C.     751-760h (as amended).   At the  time federal controls          ended in  early 1981, the regulatory  scheme limited wholesalers'          gross profit margins (GPMs) on the sale of gasoline to  8.6 cents          per  gallon.1  See Tenoco,  876 F.2d at  1015 (recounting history                         ___ ______          of federal regulatory policy).   Although bureaucrats are reputed          to abhor  a vacuum,  DACO   an  arm of  Puerto Rico's  government          empowered by local law  to regulate prices and profit  margins in          order  to protect consumers,  see P.R. Laws  Ann. tit.  3,   341b                                        ___          (1982)   did not immediately impose its own controls.                    By  1985, the  GPMs of  gasoline wholesalers  in Puerto          Rico ranged from 6.9  to 16.76  per gallon.  In early 1986, world          oil prices plummeted   but  the price of gasoline in  Puerto Rico          (both  wholesale and retail) failed  to follow suit.   The Puerto          Rico legislature,  ostensibly concerned  that  the oil  companies          were  taking unfair advantage, imposed an excise tax on crude oil          and  refined petroleum products.  In connection with the new tax,          DACO promulgated an administrative order under date  of April 23,                                        ____________________               1A GPM represents the difference between the sales price and          the  seller's acquisition  cost.   The  latter cost  includes the          price of the  gasoline plus excise taxes, but  excludes operating          costs. See Tenoco, 876 F.2d at 1015.                 ___ ______                                          3          1986.   The order  prohibited  wholesalers from  passing the  tax          through  to  retailers.    It also  froze  wholesale  and  retail          gasoline prices at their March 31, 1986 levels.                    When,  thereafter, world oil  prices soared,  the price          freeze  forced several  wholesalers  to sell  gasoline at  prices          below their acquisition costs.  Since large oil companies are not          in business to  lose money, a  coterie of wholesalers  (including          the trio that  appear as  appellees here) wasted  little time  in          asking the  federal district court  to enjoin enforcement  of the          April 23 order.   Moving with equal celerity, the  district court          scheduled a trial on  the merits for May 21,  1986.  See Fed.  R.                                                               ___          Civ. P.  65(a)(2) (authorizing the  district court to  "order the          trial  on the  merits to  be advanced  and consolidated  with the          hearing on  the application  [for preliminary injunction]").   On          May  20, DACO reshuffled the cards; it rescinded the price freeze          and issued what it called a "temporary" order that harked back to          the former,  federally inspired ceiling and  established, in lieu          of  the  thawed  freeze, maximum  GPMs  of  8.6   per gallon  for          petroleum  wholesalers.  The May 20 order also scheduled a public          hearing  for June  2  to "receive  comments  from all  interested          persons  on the  adequacy  of this  Temporary  Order and  on  any          modifications that  should be  made to  attain a situation  where          primary  reliance can be  placed on competitive  market forces to          maintain fair  margins at  all levels  of  distribution and  fair          prices for the consumer."                    This  maneuver  did not  derail  the  litigation.   The                                          4          district court merely switched tracks, trained its sights on  the          May 20  edict, and went forward with a three-day bench trial.  On          June  4    roughly ten  days after  the trial  ended    the court          enjoined enforcement of  the May 20  order on federal  preemption          and other  constitutional grounds.  See  Isla I, 640 F.  Supp. at                                              ___  ______          515.                    DACO appealed  the preemption  ruling to the  Temporary          Emergency  Court of  Appeals (TECA),  see  15 U.S.C.    754(a)(1)                                                ___          (granting  TECA   exclusive  jurisdiction  over   claims  arising          directly under  the Emergency Petroleum Allocation  Act of 1973),          and appealed the remaining rulings (e.g., the invalidation of the                                              ____          order on  due process  and takings grounds)  to this  court.   We          stayed   proceedings  pending  consideration  of  the  preemption          ruling.   TECA affirmed  that ruling,  see Isla  II, 811  F.2d at                                                 ___ ________          1519, but the Justices reversed, holding that federal law did not          forbid  state regulation of gasoline  prices.  See  Isla III, 485                                                         ___  ________          U.S.  at  499-501.   This court  then  took up  DACO's concurrent          appeal and vacated the  district court's injunction as premature.          See Tenoco, 876 F.2d at 1024.          ___ ______                    On June 27, 1989  (the day after we issued  our mandate          incinerating the  district court's injunction),  DACO promulgated          an  interim order establishing a  maximum GPM of  11  per gallon,          effective  forthwith.  Its  final order,  issued on  November 30,          1989, adopted a ceiling  of 13  per gallon.  That order withstood          a vigorous constitutional challenge by the  wholesalers.  See TPR                                                                    ___ ___          I, 749 F. Supp. 348.          _                                          5                    An  ensuing  period of  unaccustomed  tranquility ended          abruptly in mid-1992  when DACO  again took up  the cudgels.   It          issued  a so-called remedial order  in which it  sought to recoup          almost  $250,000,000 in profits exceeding  an 8.6  per gallon GPM          that it estimated three wholesalers    Texaco Puerto Rico,  Inc.,          Esso Standard Oil Co. (P.R.), and the Shell Company (Puerto Rico)          Ltd. (appellees here)    had  earned during  the three-year  life          (June  1986 to  June  1989)  of  the  errant  injunction.2    The          wholesalers quickly repaired to  the district court and requested          protection  from the remedial order.  Before the court could act,          DACO  issued  a  revised remedial  order.    Under  its terms,  a          wholesaler could  choose  between  paying  a refund  based  on  a          retrospective  GPM of 13  per gallon for the injunction period or          paying  one based on whatever profit margin would have allowed it          to achieve an annual return on assets equal to the average return          on assets for  the electric utility  industry, plus one  percent,          during the same period.                    The  wholesalers were not  mollified.   They challenged          the  revised remedial order and, on April 1, 1993, DACO rescinded          it.  This hasty retreat did not restore the peace, for the agency          simply  attacked on a different  front.  It  revivified the court          action originally  instituted by  the oil  companies and filed  a          motion for  restitution  seeking an  award  equal to  the  excess          profits that the wholesalers  would have been forced to  disgorge                                        ____________________               2We  refer to the  three oil companies  collectively as "the          wholesalers," and individually as "Texaco," "Esso," and "Shell."                                          6          but  for the  pendency  of the  improvidently issued  injunction.          Following a tumultuous period of discovery, see, e.g., infra Part                                                      ___  ____  _____          III (discussing certain disputed discovery rulings), and a three-          week  bench trial, the court denied the motion for restitution on          September 9, 1994. SeeTPR II, 862F. Supp.at 709. DACO nowappeals.                             _________          II.  THE MERITS          II.  THE MERITS                    Our  analysis of  the merits  is partitioned  into four          segments.    We discuss  the  nature  of  restitution, parse  the          decision  below,  limn  the  standard of  review,  and,  finally,          examine the record to determine whether the denial of restitution          can be upheld.                            A.  The Nature of Restitution.                            A.  The Nature of Restitution.                                _________________________                    In its  motion, DACO sought restitution  based upon the          hoary adage "that a  party against whom an erroneous  judgment or          decree  has been carried into effect is entitled, in the event of          a reversal, to be restored by his adversary to that  which he has          lost thereby."   Arkadelphia Milling  Co. v. St.  Louis S.W.  Ry.                           ________________________    ____________________          Co., 249  U.S. 134, 145  (1919).  We  agree with this  tenet, but          ___          caution  that it tells only half the  tale.  Restitution is not a          matter of right, but a matter of sound equitable discretion.  See                                                                        ___          Atlantic  Coast Line  R.R.  Co. v.  Florida,  295 U.S.  301,  310          _______________________________     _______          (1935);  Democratic  Central  Comm.  v.  Washington  Metro.  Area                   __________________________      ________________________          Transit Comm'n, 485 F.2d 786,  825 (D.C. Cir. 1973);  Restatement          ______________          of Restitution   142, cmt. a, at 568 (1937).  Because restitution          is a creature of equity,  a claimant can prevail only by  showing          that it will  offend "equity  and good conscience"  if the  other                                          7          party  is permitted to retain the disputed funds.  Atlantic Coast                                                             ______________          Line, 295  U.S. at 309.  Put another way, restitution is a remedy          ____          ex  gratia that a  court will withhold  when "the  justice of the          __  ______          case does not call for  it . . . ."  Id. at  310; accord Williams                                               ___          ______ ________          v.  Washington Metro. Area  Transit Comm'n, 415  F.2d 922, 941-47              ______________________________________          (D.C. Cir. 1968), cert. denied, 393 U.S. 1081 (1969).                            _____ ______                    This  emphasis on  the particulars  of  each individual          case   is  consistent   with  the   central  feature   of  equity          jurisdiction:   "the  ability to  assess all  relevant facts  and          circumstances  and tailor  appropriate relief on  a case  by case          basis."   Rosario-Torres  v. Hernandez-Colon,  889 F.2d  314, 321                    ______________     _______________          (1st Cir. 1989) (en banc); see also Hecht Co. v. Bowles, 321 U.S.                                     ___ ____ _________    ______          321, 329 (1944) ("The essence of equity jurisdiction has been the          power  .  . .  to mould  each decree  to  the necessities  of the          particular case.");  Lussier v. Runyon,  50 F.3d 1103,  1110 (1st                               _______    ______          Cir.  1995) (stating that "the hallmarks of equity have long been          flexibility and particularity"),  petition for cert. filed  (U.S.                                            ________ ___ _____ _____          June 5, 1995) (No. 94-1979).                    Claims for  restitution arising out of  the vacation or          reversal of a judgment are tested by the same standards  as other          claims for restitution.  See Atlantic Coast Line, 295 U.S.at 310;                                   ___ ___________________          see also Restatement, supra,    74, at 302-03 ("A person  who has          ___ ____              _____          conferred a benefit upon another  in compliance with a  judgment,          or  whose property  has  been taken  thereunder,  is entitled  to          restitution  if  the judgment  is reversed  or set  aside, unless          restitution  would be  inequitable  . .  .  .").   This  approach                                          8          obtains in respect to both public and private actions, and, thus,          applies when, as  now, a  restitutionary claim arises  out of  an          errant   injunction  barring   enforcement   of  a   governmental          regulation.  See,  e.g., Arkadelphia, 249  U.S. at 145  (ordering                       ___   ____  ___________          restitution  by a regulated  company that charged  more during an          injunction  period  than  the  rate  ultimately  deemed  lawful);          Williams, 415 F.2d at 941-47 (similar); see also United States v.          ________                                ___ ____ _____________          Morgan, 307 U.S. 183, 197-98 (1939).          ______                               B.  The Decision Below.                               B.  The Decision Below.                                   __________________                    The  district  court predicated  its  denial  of DACO's          motion  for restitution  on alternative  grounds.   In the  first          place,  the  court determined  that there  was  no benefit  to be          restored as the wholesalers had not profited from the injunction.          See  TPR II, 862  F. Supp. at 705-06.   This determination rested          ___  ______          upon  a finding  that  DACO failed  to  show that  it  would have          regulated wholesalers'  GPMs during  the relevant period  but for          the improvidently issued injunction.  See id. at 702-06.   In the                                                ___ ___          second place, the  court determined that, even  assuming that the          injunction  conferred  an  economic  benefit,  "the  balance   of          equities" did not  require "a disgorgement of  profits earned six          to eight years ago."  Id. at 706.                                ___                    This latter  determination rested  upon an  analysis of          five equitable factors.  First,  based on evidence regarding  the          competitiveness  of the  gasoline  market and  earnings in  other          industries, the court found that the wholesalers "did not benefit          disproportionately from  the lack  of regulation."   Id. at  707.                                                               ___                                          9          Next, the  court found  DACO  guilty of  "unreasonable delay"  in          seeking restitution.  Id.   Third, the court concluded  that DACO                                ___          exhibited bad faith with regard to Texaco, Esso,  and Shell.  See                                                                        ___          id.   Fourth, the court determined that DACO's actions during the          ___          injunction period had lulled  the wholesalers into believing that          DACO would not demand restitution.  See id. at 708.  Finally, the                                              ___ ___          court  thought  that  the   public  interest  did  not   favor  a          restitutionary order.  See id.                                 ___ ___                               C.  Standard of Review.                               C.  Standard of Review.                                   __________________                    Appellate  review  often calls  into  play  a blend  of          rules.   So  it is  here.   We review  the factual  findings that          undergird the trial court's ultimate determination only for clear          error.  See Lussier,  50 F.3d at 1111;  Reilly v. United  States,                  ___ _______                     ______    ______________          863 F.2d  149,  163 (1st  Cir.  1988).   In contrast,  the  trial          court's  articulation  and  application of  legal  principles  is          scrutinized de novo.   See Cumpiano v. Banco Santander  P.R., 902                      __ ____    ___ ________    _____________________          F.2d  148, 152  (1st  Cir. 1990).    Thus,  "to the  extent  that          findings of  fact can be shown  to have been  predicated upon, or          induced  by,  errors of  law,  they will  be  accorded diminished          respect  on appeal."  Dedham Water Co. v. Cumberland Farms Dairy,                                ________________    _______________________          Inc., 972 F.2d 453, 457 (1st Cir. 1992).          ____                    The main event evokes a different criterion.  We review          a district  court's  ultimate decision  to grant  or withhold  an          equitable remedy for abuse of discretion.  See, e.g., Lussier, 50                                                     ___  ____  _______          F.3d  at 1111;  Rosario-Torres, 889  F.2d at  323.   Overall, the                          ______________          abuse-of-discretion standard  is deferential, see,  e.g., Dopp v.                                                        ___   ____  ____                                          10          Pritzker, 38 F.3d 1239, 1253 (1st Cir. 1994), and "not appellant-          ________          friendly,"  Lussier, 50 F.3d at 1111.  The solicitude extended by                      _______          a reviewing court takes  into account that the trial  judge, "who          has had first-hand exposure to the litigants and the evidence, is          in  a  considerably  better  position to  bring  the  scales into          balance than an appellate tribunal."  Rosario-Torres, 889 F.2d at                                                ______________          323.  For this reason,  the court of appeals ordinarily  will not          find  an abuse of  discretion unless perscrutation  of the record          provides strong evidence that the  trial judge indulged a serious          lapse in judgment.  See id.                              ___ ___                    We inspect the voluminous record with these precepts in          mind  to  ascertain  whether  the  denial  of  DACO's motion  for          restitution is sustainable.                                   D.  Discussion.                                   D.  Discussion.                                       __________                    The court below began with the question of benefit, and          treated that question as a discrete inquiry.  See TPR  II, 862 F.                                                        ___ _______          Supp. at 700.  But this approach tends to put the cart before the          horse.   A  court  mulling a  restitutionary  remedy must  almost          always  perform an  equitable assay.   Rather than  isolating the          question of whether the targeted party received a benefit (and if          so, the likely  extent thereof), we think it is preferable in the          first  instance  to  incorporate  that question  into  the  assay          proper, unless, of course, the state of the evidence is such that          the  court can conclude with  minimal effort that  no benefit has          been received.  If, however, the factual situation is more cloudy          and  speculative, it ordinarily will prove a more fruitful use of                                          11          judicial energies to  fold the  issue of benefit  into the  wider          issue  of equity.    Thus, the  probability  or improbability  of          whether DACO would have regulated wholesalers' profits during the          injunction  period  can initially  be  conceived  as a  relevant,          though not dispositive, equitable  factor.  More precise findings          as  to the  incidence  and effect  of  any  benefit can  then  be          pinpointed as part of a calculation  anent damages if restitution          is  ultimately found  to  be a  condign  remedy in  a  particular          situation.                    With  this preface,  we turn to  an examination  of the          judgment below.   For ease in reference,  we treat each group  of          factual findings as a separate integer in the equitable equation.          The methodologic innovation that  we have described   introducing          the  question  of whether  the  wholesalers  benefitted from  the          injunction  (and if so, to  what extent) into  the assay proper            does not require remand.   The lower court made  detailed factual          findings  on the  question of  benefit, and  we can  easily align          those findings along the preferred legal matrix.  See Societe des                                                            ___ ___________          Produits  Nestle v. Casa Helvetia,  Inc., 982 F.2d  633, 642 (1st          ________________    ____________________          Cir. 1992); United  States v. Mora,  821 F.2d 860, 869  (1st Cir.                      ______________    ____          1987).                    1.   Benefit.   Because restitution  is founded on  the                    1.   Benefit.                         _______          concept of unjust enrichment, a  court considering a request  for          restitution  must  investigate the  extent  to  which the  target          "received  a benefit."   Restatement, supra,   1,  cmt. a, at 12.                                                _____          In a  case  such  as this,  the  problems of  proof  are  readily                                          12          evident.   The  regulation that the  district court  enjoined was          clearly  labelled   as  temporary   when  promulgated,   and  the          injunction prevented further regulation (temporary or permanent).          Thus,  DACO  found  itself,   at  trial,  in  an  epistemological          quandary:   it had to prove that, had the district court sent the          wholesalers  packing, it (DACO) would have put into effect a more          durable regulation that would  have capped GPMs at a  level below          what the wholesalers  actually earned during the pendency  of the          injunction.                    The district court found DACO's strivings inadequate to          this  daunting task.   In  the court's  view, DACO's  adoption of          temporary  margin controls in 1986 did  not "evidence[] an intent          to implement a long-term regulatory plan" to curb profit margins,          but, instead,  constituted "a short-term erratic  response" to an          unprecedented situation.  TPR II, 862 F. Supp. at 702.  The court                                    ______          stressed that the unique  combination of exigent circumstances to          which  DACO reacted soon dissipated, see id. at 702-03; that DACO                                               ___ ___          thereafter  made  an  in-depth   study  of  the  desirability  of          regulation,  see id.  at 704;  and that,  upon completion  of the                       ___ ___          study, DACO  decided not to regulate, see id.  On this basis, the                                                ___ ___          district court concluded that the stopgap measure would have been          abandoned  when the  exigency abated;  that DACO  would  not have          implemented  other GPM regulations  during the  June 1986  - June          1989 time frame; and that, therefore, the wholesalers received no          monetary advantage from the injunction.  See id. at 707.                                                   ___ ___                    For  the  most  part,  this  conclusion  is  adequately                                          13          anchored  in the  record. Later actions  are often  revelatory of          earlier intentions, see, e.g., United  States v. Sutton, 970 F.2d                              ___  ____  ______________    ______          1001, 1007  (1st Cir. 1992) (holding  that "challenged testimony,          though it centered around later-occurring events, was relevant to          show  appellant's intent at  an earlier date");  United States v.                                                           _____________          Mena, 933  F.2d 19, 25  n.5 (1st Cir.  1991) (similar);  see also          ____                                                     ___ ____          Dedham  Water,  972  F.2d  at  460  n.4  (applying  principle  in          _____________          affirming district court's findings in  analogous circumstances),          and  DACO's actions  when freed  from the  specter of  preemption          indicatequiteplainly thatlong-term regulationwasnot onthe agenda.                    The  United States  Supreme Court  decided Isla  III on                                                               _________          April 19, 1988.   Within days, DACO disseminated a  press release          in which its  Secretary, Pedro Ortiz Alvarez (Ortiz), crowed that          the  Court had  "restored to  Puerto Rico  the historic  power to          regulate gasoline prices."  Shortly thereafter, DACO commenced an          administrative proceeding to determine whether controls should be          introduced.  To  this end, it requested (and  received) financial          data  and other information from the wholesalers.  It also sought          industry input  as to whether the commonwealth  should set either          price or  margin controls on  gasoline, and held  public hearings          beginning in the  fall of  1988 to consider  the desirability  of          controls, the problems that might arise incident to them, and the          reasonableness of existing profit margins in the industry.                    In  December, as  the  administrative proceeding  wound          down,   Esso's  general  manager,   Charles  Griffith,  met  with          Secretary  Ortiz.  According to Griffith, Ortiz informed him that                                          14          DACO  had  completed  its  study  and  decided  against  imposing          controls  because "the market was behaving."  Later that month, a          daily newspaper, El Nuevo  Dia, published an article based  on an                           _____________          interview  with Secretary Ortiz.   The article reported that DACO          had elected "not to regulate gasoline prices and to instead adopt          `close  supervision'  of the  industry."    The newspaper  quoted          Secretary Ortiz as conceding that the  wholesalers had not earned          "excessive profits."                    In January of 1989, Ortiz resigned.  The new Secretary,          Jorge  R. Ocasio  Rodriguez (Ocasio), told  Griffith that  he was          aware of the earlier study  and of his predecessor's conclusions,          and that  he "intend[ed] to follow  [Secretary Ortiz's] policies"          in regard to petroleum  wholesalers.  In fact, DACO did not adopt          controls until June 27, 1989   the day after the district court's          injunction had been lifted    and then attributed the  about-face          to newly  emergent "erratic  and unstable" price  fluctuations in          the Puerto Rico market.                    Noting   this  chronology   of   inaction  laced   with          reassurances,  and  remarking bits  of  trial  testimony such  as          Secretary Ortiz' oft-stated preference  for a free market system,          the district  court concluded that  DACO's failure to  impose any          controls  for over a year  after the Supreme  Court's decision in          Isla III cleared the regulatory path demonstrated  that it lacked          ________          long-term regulatory  intent, and that in all likelihood it would          not have regulated  wholesalers' profits during  the June 1986  -          June 1989 time frame even if the injunction had never issued.                                          15                    We believe  the district  court's finding  that, during          the injunction  period, DACO would  not have adopted  a permanent          regulation limiting  profit margins to  a level lower  than those          actually earned by the wholesalers is sustainable on this record.          Still, DACO's assault on this determination possesses  convictive          force  in  one  respect.    The  district  court  focused  almost          exclusively  on DACO's actions from and after April of 1988 (when          the  Supreme Court  overruled TECA  and gave  the green  light to          state  regulation)  in  attempting to  divine  DACO's  regulatory          intent  dating  back  to   mid-1986.    This  strikes  us   as  a          sufficiently  accurate barometer of  long-term regulatory intent,                                               _________          but fails to deal satisfactorily with the near term.  The stopgap          order that DACO promulgated  on May 20, 1986 would  have remained          in effect  for some period but for the injunction.  Thus, even if                         ____          the district  court's finding is accepted, some benefit   however          small   still might have accrued  to the wholesalers by reason of          the district court's abrupt suspension of this order.                    That said, DACO's proof does  not permit us to quantify          that  presumed  benefit.    Because  DACO,  as  the  claimant for          restitution, bears the burden of proving the conferral and extent          of  a benefit,  see Atlantic  Coast Line,  295 U.S. at  309, this                          ___ ____________________          failure   of  proof  looms  large.3    We  do  not  suggest  that                                        ____________________               3DACO's  estimate of the benefit received   it says that the          wholesalers charged their customers anywhere  from $64,500,000 to          $250,000,000 more  during the  injunction period than  DACO would          have  permitted   is  not only unproven  but also  deserves to be          taken with a good deal of salt.  DACO whips up the lower of these          frothy  figures by  suggesting  that, absent  the injunction,  it          would have limited  the wholesalers'  GPMs to a  level no  higher                                          16          uncertainty as to the extent of the benefit acts as an  automatic          bar  to  DACO's  claim  for  restitution,  but  for  purposes  of          equitable balancing, it neutralizes any advantage that DACO might          otherwise  achieve on  the  question of  benefit.   In  the  last          analysis, then, this factor is a wash.                     2.  The Wholesalers' GPMs.  The district court analyzed                    2.  The Wholesalers' GPMs.                        _____________________          the  wholesalers'  profit  margins  during the  pendency  of  the          injunction   and   concluded   that   they   "did   not   benefit          disproportionately  from the lack of regulation."  TPR II, 862 F.                                                             ______          Supp. at  707.  DACO disputes  the relevancy of this  factor.  It          argues   that   equity  does   not   require   there  to   be   a          disproportionate  benefit,  but,   rather,  that  restitution  is          appropriate  so long as the targeted party benefitted at all from                                                                __ ___          the  erroneous injunction.   In  this view  of the  universe, the          reasonableness of the wholesalers' earnings is beside the point.                    Once  again,   DACO's  conception  of  equity   is  too          inelastic.  "The mere fact that a person benefits  another is not          of itself  sufficient to  require the  other to  make restitution          therefor."   Restatement,  supra,    1, cmt.  c, at  13.   As the                                     _____          district  court noted,  a  finding that  the wholesalers'  actual          profit  margins were  unreasonably high  would assist  in showing          that  "the  money was  received  in such  circumstances  that the                                        ____________________          than  13   per  gallon   throughout  the  relevant  period,  and,          therefore, that any earnings above that plateau are the fruits of          the errant injunction.   The higher figure  is presumably derived          in the same way, but using a projected regulatory ceiling of 8.6           per gallon (the  ceiling imposed  in the May  20, 1986  temporary          order)  for the entire three-year span.  These gaudy claims enjoy          little or no record support.                                          17          possessor will  give offense  to  equity and  good conscience  if          permitted to  retain it."  TPR  II, 862 F. Supp.  at 701 (quoting                                     _______          Atlantic Coast Line, 295 U.S.  at 309).  The converse is  equally          ___________________          true:  the fact that the wholesalers' profits were reasonable (or          unreasonably low, for that  matter), tends to make the  denial of          restitution more  in keeping  with equitable principles.   Either          way,  the reasonableness vel non of the wholesalers' profits is a                                   ___ ___          concinnous  factor   for  inclusion  in  the   court's  equitable          balancing.   See  Restatement,  supra,     74,  cmt.  c,  at  305                       ___                _____          (suggesting that a  party who receives a benefit is not liable to          make  restitution therefor unless  the circumstances attendant to          receipt  or  retention  of   the  benefit  render  its  enjoyment          inequitable).                    The  district  court  based  its  assessment  that  the          wholesalers' earnings during the  relevant period were reasonable          on  a series of subsidiary findings.   It gave weight to the fact          that the wholesalers'  profits "were in line with  profits earned          during  the  unregulated  period  after  federal   controls  were          terminated, and before the 1986 regulation was enacted."  TPR II,                                                                    ______          862 F.  Supp. at 706.  It  then performed a comparative analysis4          and verified  that the wholesalers'  returns "were  in line  with          various  competitive  industries  and   investment  alternatives"          during the injunction period.  Id.  Last but not least, the court                                         ___                                        ____________________               4The court used as  congeners such benchmarks as  returns on          assets in  the electric  utility industry, returns  on government          bonds, and returns on investments in the industrial distribution,          services, and fuel industries.  See TPR II, 862 F. Supp. at 706.                                          ___ ______                                          18          observed   that   the  wholesale   market   remained  competitive          throughout the  period, thus ensuring  that margins were  held to          acceptable levels.  See id.                              ___ ___                    DACO suggests that these  findings have a tenuous basis          in  fact    but this  is a  fairly typical  rejoinder of  a party          seeking to surmount the  high hurdle of clear-error review.   The          district court relied mainly on the  testimony of four economists          presented  as  expert witnesses  by  the  wholesalers.   We  have          studied  their   testimony  (including  the   plethoric  exhibits          associated  therewith), and  we are  fully persuaded  that, given          this evidence, the district  court had a solid basis  for finding          that,  during  the injunction  period,  the  wholesale market  in          Puerto  Rico  was staunchly  competitive,  and  that the  profits          earned by  Texaco,  Esso, and  Shell were  reasonable.   Although          DACO's  expert  testified  in   a  diametrically  opposite  vein,          choosing between  experts in  a jury-waived trial  is principally          the business of  the district  court, not the  court of  appeals.          See, e.g.,  Keller v.  United States,  38 F.3d 16,  25 (1st  Cir.          ___  ____   ______     _____________          1994).   Consequently,  we decline  DACO's invitation  to second-          guess  the   trial  court's  scorecard  in   respect  to  dueling          experts.5  See Anderson v. City  of Bessemer City, 470 U.S.  564,                     ___ ________    ______________________                                        ____________________               5The court below  offered sound reasons for  siding with the          wholesalers'  experts.    Equally  as important,  it  viewed  the          testimony of appellant's expert, Dr. Logan, "with some skepticism          in  light of  his  intimate involvement  with  DACO," his  former          employment by  DACO's counsel,  and his  status as  "the putative          author of the 13-cent regulation."  TPR II, 862 F.  Supp. at 706.                                              ______          Though DACO cries foul  due to the court's "gratuitous  swipe" at          Dr. Logan's  bona fides, such credibility  determinations are the          prerogative   indeed, the duty   of the district judge in a bench                                          19          575  (1985) (explaining  the  virtual impregnability  of a  trial          judge's  finding  based on  a  reasoned  decision to  credit  the          testimony of one witness over another).                    3.  Delay.   In weighing the equities, the  lower court                    3.  Delay.                        _____          found  that  "DACO's actions  in  seeking  restitution have  been          marked by  unreasonable delay."   TPR II,  862 F.  Supp. at  707.                                            ______          DACO  asserts  that  the  court's  inclusion of  this  factor  is          improper  as a  matter  of  law  because  it  is  the  functional          equivalent of  raising a  laches defense against  the government.          We do not agree.                    It is true that laches ordinarily cannot be raised as a          defense  against the government in an action brought to enforce a          public  right  or protect  a public  interest.   See  Illinois v.                                                           ___  ________          Kentucky, 500  U.S.  380, 388  (1991)  (noting that  "the  laches          ________          defense  is generally  inapplicable against  a state");  Block v.                                                                   _____          North Dakota  ex rel Bd. of  Univ. and Sch. Lands,  461 U.S. 273,          _________________________________________________          294  (1983) (O'Connor, J.,  dissenting) (collecting authorities).          But the  unavailability of laches as a defense does not mean that          the sovereign's dilatoriness in  seeking an equitable remedy must          be totally disregarded by a chancery court.  We explain briefly.                    An  equitable  defense  and  an  equitable  factor  are          conceptually and practically distinct.  The divagation is subtle,          but significant.    An equitable  defense  "bar[s] the  cause  of                                        ____________________          trial.   See, e.g.,  Anthony v. Sundlun,  952 F.2d  603, 606 (1st                   ___  ____   _______    _______          Cir.  1991) (stating that appellate courts  "ought not to disturb          supportable  findings, based  on witness  credibility, made  by a          trial judge who has seen and heard the witnesses at first hand").                                          20          action entirely, or bar[s] . . . the equitable remedy."  1 Dan B.          Dobbs, Law  of Remedies   2.4(1), at 91 (2d ed. 1993).  Moreover,                 ________________          in evaluating an equitable defense, the court considers  only the          plaintiff's  conduct and  is free  to "deny  all remedies  if the          plaintiff  does not meet equity's  standards."  Id.    2.4(5), at                                                          ___          108-09.   In contrast, an equitable factor must always be weighed          in  concert with  other  relevant  factors.    See  id.  at  109.                                                         ___  ___          Moreover,  as part of balancing the equities, the court "looks at          the  conduct of  both parties  and the  potential hardships  that          might  result from a judicial decision either  way."  Id.  From a                                                                ___          practical standpoint,  then,  "[e]ven when  an equitable  defense          does  not  bar  the claim,  the  total  balance  of equities  and          hardships might do so."  Id.,   2.4(1), at 91.                                   ___                    Here,  the  district  court  explicitly  disclaimed any          intent  to apply  the equitable  doctrine of laches  as a  bar to          DACO's motion.   See TPR  II, 862  F. Supp. at  702 n.8.   In its                           ___ _______          search for the case's equitable epicenter, however, the court was          fully entitled to use delay as one of a number of factors bearing          on the  outcome.   This is  precisely what  Judge Fuste  did, and          there  is  no principled  basis  for  DACO's suggestion  that  he          mouthed  the vocabulary  of  equitable balancing  as  a means  of          surreptitiously injecting a barred  laches defense into the case.          Indeed, in  considering  DACO's delay  as part  of the  equitable          balance,  the   judge  merely   honored  the  precept   that  the          government, when it seeks an equitable remedy, "is no more immune          to the  general principles  of equity than  any other  litigant."                                          21          United States v.  Second Nat'l Bank, 502 F.2d  535, 548 (5th Cir.          _____________     _________________          1974).                    DACO  also  contends that  the  district  court clearly          erred  in   finding  prejudicial  delay.     This  contention  is          unpersuasive.   The  evidence shows  that DACO  first raised  the          refund issue  in its June  1989 interim order.   DACO did nothing          further  on this  score  until ten  months  later, when  it  sent          letters to  the wholesalers conveying its  "preliminary views" on          the suitability of refunds.   DACO then dropped the  refund issue          like a hot potato and did not resurrect it until August 20, 1992,          when the  then-Secretary,  Guillermo Mojica  Maldonado  (Mojica),          announced at a press  conference that he planned to  seek refunds          from  the wholesalers.  All  told, DACO waited  three years after          this court vacated the injunction to commit itself to the pursuit          of restitution.                    DACO does not dispute  the accuracy of this chronology,          but  takes  vigorous exception  to  the  court's conclusion  that          "[t]his  type  of  stopping   and  starting,  delaying  and  then          proceeding[,] must be considered prejudicial to the  wholesalers,          who had to  run their  business with the  threat of  multimillion          dollar refunds  occasionally flaring  up and then  disappearing."          TPR II, 862 F. Supp. at 707.  DACO offers a myriad of excuses for          ______          its procrastination;  it intimates that, as  a government agency,          torpor  is to be expected;  it claims to  have undergone numerous          changes  in staff and leadership  during the period;  and it says          that  its attention  was diverted  because of  ongoing litigation                                          22          over  its proposed 13  GPM that lasted  until March of 1991.  The          district  court dismissed these excuses  as lame.   We, too, find          them insufficient.                    Government agencies, like private corporations, have an          obligation  to conduct  their affairs  in a  reasonably efficient          manner.  See Potomac Elec. Power  Co. v. ICC, 702 F.2d 1026, 1034                   ___ ________________________    ___          (D.C. Cir. 1983) (warning  that "excessive delay saps  the public          confidence   in   an   agency's    ability   to   discharge   its          responsibilities").     An   entity  that   chooses  to   indulge          inefficiencies cannot expect to be granted special dispensations.          If  "[t]he mills of the bureaucrats grind slow," United States v.                                                           _____________          Meyer, 808 F.2d 912, 913 (1st Cir. 1987), then the agency, having          _____          called the tune, must pay the piper.  See, e.g., United States v.                                                ___  ____  _____________          Baus,  834  F.2d 1114,  1123 (1st  Cir.  1987) (holding  that the          ____          government "should not be allowed by words and inaction to lull a          party into a false sense of security and then by an abrupt volte-          face strip  the party of  its defenses");   Cutler v.  Hayes, 818                                                      ______     _____          F.2d  879,  896  (D.C.  Cir.  1987)  (explaining  that,  when  an          administrative  agency loiters, "the consequences of dilatoriness          may be great").   By like token, neither government  agencies nor          private employers  can escape responsibility for  the exercise of          due diligence  merely because  of employee turnover.   Department          heads   and  other  key  personnel  may  come  and  go,  but  the          institution  must endure.    See  Cutler,  818  F.2d  at  896-97.                                       ___  ______          Similarly, preoccupation with other litigation is hardly a reason          for  extreme delay.  See, e.g., Mendez v. Banco Popular, 900 F.2d                               ___  ____  ______    _____________                                          23          4, 6-7 (1st Cir.  1990) (district court did not  abuse discretion          in  failing to grant extension  of time based  on attorney's busy          trial  calendar);  Pinero  Schroeder  v. Federal  Nat'l  Mortgage                             _________________     ________________________          Ass'n, 574  F.2d 1117, 1118 (1st  Cir. 1978) (same).   And in all          _____          events, litigation  ending in early 1991  cannot credibly explain                                        __________          why DACO took no firm position until August 1992.                                               ___________                    We will not wax  longiloquent.  It is trite,  but true,          that equity ministers  to the  vigilant, not to  those who  sleep          upon their rights.   See, e.g., Sandstrom v. Chemlawn  Corp., 904                               ___  ____  _________    _______________          F.2d  83, 87 (1st Cir. 1990).  Given the uncontradicted evidence,          we  believe that the district court acted lawfully in ruling that          unreasonable delay on DACO's part militates against relief.                    4.  Bad Faith.  It is  old hat that a court called upon                    4.  Bad Faith.                        _________          to do equity should always consider whether the petitioning party          has  acted in  bad faith  or with unclean  hands.   See Precision                                                              ___ _________          Instrument Mfg. Co. v. Automotive Maintenance Mach. Co., 324 U.S.          ___________________    ________________________________          806,  814 (1945) (explaining  that the doctrine  of unclean hands          "closes the  doors of  a  court of  equity  to one  tainted  with          inequitableness or bad faith  relative to the matter in  which he          seeks relief"); see also  Dobbs, supra, at 109; see  generally K-                          ___ ____  _____  _____          ___  _________ __          Mart Corp. v.  Oriental Plaza,  Inc., 875 F.2d  907, 910-12  (1st          __________     _____________________          Cir. 1989)  (discussing "unclean  hands" doctrine in  relation to          the equitable maxim that  "he who seeks equity must  do equity").          But  even  though  equitable  doctrines are  renowned  for  their          elasticity, they are  not without  all limits.   The doctrine  of          unclean  hands only  applies  when the  claimant's misconduct  is                                          24          directly  related to  the merits of  the controversy  between the          parties,  that is, when the  tawdry acts "in  some measure affect          the  equitable  relations  between  the  parties  in  respect  of          something brought  before the court for  adjudication."  Keystone                                                                   ________          Driller Co. v. General Excavator Co., 290 U.S. 240, 245 (1933).           ___________    _____________________                    In the  case at bar,  the test was  met.   The district          court  found  pervasive evidence  of  bad faith  on  DACO's part,          directly  related to the core elements of the dispute sub judice.                                                                ___ ______          See  TPR II,  862 F.  Supp. at  707.   Although DACO  brands this          ___  ______          finding clearly erroneous and worse   for instance, DACO  claims,          without  a shred of record  support, that the  finding is "tinged          with political,  rather than legal,  analysis," Appellants' Brief          at 37   we believe that there  is ample evidence in the record to          support the district court's perspective.                    In  making its  finding of  bad faith, the  lower court          relied heavily on two occurrences.   The court found that, in the          spring of 1986, while the government of Puerto Rico was pondering          the  advisability of an excise tax, see supra pp. 3-4, high-level                                              ___ _____          officials,  including  the  President   of  the  Senate  and  the          Secretary of State, summoned executives of the three appellees to          a series of private audiences.  The court further found that "the          wholesalers  were  warned that  they  should  cooperate with  the          government  in the implementation  of the  new tax  by refraining          from further  lowering gas prices,  so that the  government could          achieve revenue from the  tax . . . ."   TPR II, 862 F.  Supp. at                                                   ______          695.  The discussions were blunt. To offer one illustration, Jose                                          25          Luis  Blanco, Esso's  operations manager  at the  time, testified          that the Secretary of State uttered "a very strong threat" to the          effect  that, if  Esso  failed to  acquiesce in  the government's          strategy, the company's continued  existence in Puerto Rico would          be "very difficult."                    DACO claims  that these thinly veiled  minations had no          bearing on margin regulations  imposed well after the  excise tax          was enacted.  This claim is  disingenuous.  Past is prologue, and          the district  court plausibly could find    as it did    that the          1986 meetings were  part of  the same overall  course of  conduct          that led to the push for restitution six years later.  After all,          the meetings  involved the same  principals and the  same subject          matter, and, with the  benefit of hindsight, can  be viewed as  a          harbinger of things to come.   On this basis, the district  court          did not err in concluding that the 1986 meetings were relevant to          DACO's good faith (or  lack thereof) in seeking  restitution some          years thereafter.   This  is particularly true  in that,  shortly          after the  government  "suggested" that  the wholesalers  refrain          from  lowering gasoline  prices,  DACO attempted  to justify  its          regulation of  GPMs on  the ground  that the  wholesalers' prices          were  too  high.    Thus,  in  effect,  DACO  bore  a  degree  of          responsibility for  creating the  "excess profits" that  it later          attempted to recapture,  first via  the excise tax,  and then  by          dint of the motion for restitution.     The second  pillar of the          court's conclusion lacks the  dramatic impact of these strong-arm          tactics, but affords a  closer temporal link.  The  court thought                                          26          that the actions of Secretary Mojica in and around 1992 betokened          bad faith.   See TPR II, 862  F. Supp. at 707.   At trial, Mojica                       ___ ______          admitted  that he had  chosen the  8.6  figure  based not  on any          economic  rationale,  but  as   a  stratagem  to  enhance  DACO's          negotiating  position.   The district  court found  this behavior          "irresponsible."   Id.  And Secretary Mojica made a bad situation                             ___          worse  by issuing a remedial order that singled out Texaco, Esso,          and Shell, whilst leaving unscathed a number of other wholesalers          who had exceeded  the 8.6  margin.   The lower  court found  that          these  efforts to exact restitution from the appellees   and from          no other similarly  situated wholesalers   smacked  of bad faith,          see  id., and  DACO can  point  to no  evidence that  refutes the          ___  ___          implication   of  selective  targeting  in  retaliation  for  the          appellees' active opposition to the government's desires.                    We think  that the record  as a whole  corroborates the          district court's determination that the 8.6  figure was chosen as          a crude  club  to bludgeon  the  wholesalers into  a  settlement,          without  regard  for  the  economic realities  of  the  petroleum          industry.  Indeed, the  nisi prius roll is replete  with evidence          suggesting this unhappy conclusion.   For one thing, DACO's chief          economist,  Carlos Lasanta,  testified  that he  had advised  his          superiors that  the 8.6  margin was  economically inadequate, yet          DACO  persisted in its plan.  For another thing, Secretary Mojica          testified that he issued  the remedial order and set  the ceiling                                          27          without even pausing to review the administrative record.6                    In sum, the  grounds relied upon by  the district court          pass  muster.  Because the  remedy of restitution  is premised on          the concept of unjust enrichment, DACO's actions both in 1986 and          in 1992 sabotage its present attempt  to seize the high ground by          asserting  that  the wholesalers  took  unfair  advantage of  the          erroneous injunction.   Hence, we  are unwilling  to disturb  the          court's determination  that DACO's  actions were tinged  with bad          faith.                    5.   Reliance.   A  court considering  a restitutionary                    5.   Reliance.                         ________          remedy may properly weigh the factor of reliance in its equitable          balancing.  See Moss v. Civil Aeronautics Bd., 521 F.2d 298 (D.C.                      ___ ____    _____________________          Cir. 1975), cert. denied, 424 U.S. 966 (1976).  In doing so here,                      _____ ______          the court found that the statements of  two different Secretaries          (Ortiz  and Ocasio)  led  the wholesalers  to  believe that  DACO          regarded  their margins  "to be  reasonable, and  therefore, that          restitution  of  such  reasonable  profits  would  not  later  be          demanded."   TPR  II,  862  F.  Supp.  at  708.    Moreover,  the                       _______          wholesalers convinced  the court that they  justifiably relied on                                        ____________________               6DACO asserts that, because the remedial order "was only the          starting point  for [its] consideration of  the appropriate level          of  refunds,"  the terms  of  the  order  "cannot  rationally  be          considered evidence of  bad faith."  Appellants'  Brief at 38-39.          This ipse  dixit  does not  withstand scrutiny.   When  Secretary               ____  _____          Mojica  announced  the promulgation  of  the  remedial order,  he          presented the 8.6  figure  not as a guidepost to  a determination          of the eventual  measure, but as a fait accompli.   Moreover, the          order  itself described "a maximum profit margin of 8.6 cents per          gallon"  as "conclusive  and undebatable."   DACO  retreated from          this   figure  only   after   the  wholesalers   sought  judicial          protection.                                          28          those statements in formulating their business plans.  See id.                                                                 ___ ___                    The record  is consistent with  these findings.   It is          not farfetched  to think that Secretary  Ortiz's statements, see,                                                                       ___          e.g.,  supra p.14, could have lulled the wholesalers into a false          ____   _____          sense of  security.  See, e.g.,  Insurance Co. v. Mowry,  96 U.S.                               ___  ____   _____________    _____          544,  547 (1877) ("A representation as  to the future can be held          to operate  as an estoppel . . . where  it relates to an intended          abandonment  of  an existing  right,  and  is  made to  influence          others, and by  which they have  been induced to  act.").   Then,          too,  the  wholesalers  adduced  explicit evidence  of  reliance,          credited by the  trier.   A number of  executives testified  that          they took the Secretary's statements regarding the reasonableness          of  their firms'  profit margins  at face  value,  and authorized          investments  in Puerto Rico  that they  would not  otherwise have          approved.    We  cannot hold  that  the  court  clearly erred  in          detecting  detrimental  reliance  on  these facts.    See,  e.g.,                                                                ___   ____          Cumpiano, 902 F.3d at 152 ("Where there are two permissible views          ________          of the evidence,  the factfinder's choice between  them cannot be          clearly erroneous.") (quoting Anderson, 470 U.S. at 573-74).                                        ________                    The   court's  finding   of  detrimental   reliance  is          bolstered  by another circumstance.  When  Judge Fuste issued the          injunction, DACO could have   but did  not   ask him to require a          bond or  an  escrow account.    See Inland  Steel  Co. v.  United                                          ___ __________________     ______          States,  306 U.S.  153, 156-57  (1939) (holding that  court acted          ______          lawfully in conditioning injunction against ICC  on establishment          of escrow account to defray possible restitutionary obligations).                                          29          Although  a bond  or  escrow  fund  is  not  a  prerequisite  for          restitution in cases involving  injunctions,  see, e.g., Newfield                                                        ___  ____  ________          House, Inc. v. Mass. Dep't of  Pub. Welfare, 651 F.2d 32, 39 n.12          ___________    ____________________________          (1st  Cir.) (holding that "the  need for a[n  injunction] bond is          limited to  the recovery of damages  and has no application  to a          claim of restitution of  amounts subsequently found to have  been          undue"),  cert. denied, 454 U.S. 1114 (1981), a court called upon                    _____ ______          to perform equitable balancing  may nonetheless weigh the absence          of a bond or other fund as  a factor in its equitable assay.  See                                                                        ___          Moss, 521 F.2d  at 314; see also Thompson v. Washington, 551 F.2d          ____                    ___ ____ ________    __________          1316, 1321  (D.C. Cir. 1977).   This  is the music  to which  the          district court marched.  See TPR II,  862 F. Supp. at 708.   Just                                   ___ ______          as the existence of a bond or other fund would  have undercut any          claim  of  detrimental reliance,  so,  too,  their absence  lends          credence to the wholesalers' lament.                    6.   Public  Interest.   It cannot  be gainsaid  that a                    6.   Public  Interest.                         ________________          court asked to dispense equitable remediation should give serious          consideration  to the public interest.   See Morgan,  307 U.S. at                                                   ___ ______          194 ("It is familiar doctrine that the extent to which a court of          equity may grant or withhold its aid, and the manner  of moulding          its remedies may be affected by the public  interest involved.");          Rosario-Torres, 889 F.2d  at 323 (similar).   Here, the  district          ______________          court  found  that  the  public interest  would  be  disserved by          granting  restitution.   The court  reasoned "that  investment in          Puerto Rico by the gasoline companies would be curtailed, or that          Esso,  Texaco   and/or  Shell  [might]  even   leave  the  island                                          30          completely,   resulting  in   a   possible  loss   of  jobs   and          competitiveness in the wholesaling market."  TPR II, 862 F. Supp.                                                       ______          at 708.                    At  trial,  DACO  made  no  effort  to  contradict  the          wholesalers' testimony on this point.  In this venue, it likewise          abjures  any challenge  to the  testimony's relevance.   Instead,          DACO complains about the  district court's related statement that          DACO had "failed  to propose a cogent plan to  restore losses" to          the  Puerto  Rico motorists  who bore  the  brunt of  the alleged          overcharges.  Id.   In DACO's  eyes, depositing a  restitutionary                        ___          award into the commonwealth's  general fund comprises an entirely          satisfactory trickle-down  substitute for the  court's envisioned          plan of direct payments to motorists.                    Once  again, DACO's  fascination  with  a  single  tree          obscures  its view of the forest.  The district court's rescript,          properly read, does  not hold  that depositing  refunds into  the          commonwealth's  coffers is repugnant to the public interest in an          absolute sense.   The court's  point is quite  different.   Judge          Fuste expressed the belief that the clear harm to the Puerto Rico          economy that would  result from levying a  huge restitution award          outweighed  the  benefit accruing  from  refunds  that would  not          directly compensate the  injured victims.  Though such a judgment          call may be arguable, we are unprepared to say that it represents          a clearly erroneous assessment of the evidence.  Cf., e.g., Moss,                                                           ___  ____  ____          521 F.2d at 308 ("The bite which is effectively taken from future          earnings by  a recovery fund may in turn impair the health of the                                          31          industry, to the disadvantage of the fare-payers themselves.").                    7.  Recapitulation.  We have fashioned a tried-and-true                    7.  Recapitulation.                        ______________          framework for gauging claimed abuses of discretion:                    In making discretionary judgments, a district                    court abuses  its discretion when  a relevant                    factor  deserving  of  significant weight  is                    overlooked,  or  when an  improper  factor is                    accorded  significant  weight,  or  when  the                    court  considers  the   appropriate  mix   of                    factors,  but commits  a  palpable  error  of                    judgment   in   calibrating  the   decisional                    scales.          United States v. Roberts, 978 F.2d 17, 21 (1st Cir. 1992); accord          _____________    _______                                   ______          Dopp, 38 F.3d  at 1253 (listing other  cases).  Here,  the record          ____          discloses that the district court made a careful appraisal within          the contours of  this tested framework.  DACO  has failed to show          that  the court, in performing this appraisal and arriving at its          judgment,    overlooked     appropriate    factors,    considered          inappropriate factors,  or made a detectable  mistake in weighing          the  evidence.  Mindful, as we are,  that "[t]he very nature of a          trial judge's interactive  role assures  an intimate  familiarity          with  the nuances  of  ongoing litigation     a familiarity  that          appellate judges,  handicapped by  the sterility of  an impassive          record, cannot hope to match," Dopp, 38 F.3d at 1253,  we decline                                         ____          to place  a heavy  appellate thumb on  the scales of  justice and          thereby  upset the  trier's delicate  balancing of  the competing          equities in this unusual situation.          III.  OTHER ISSUES          III.  OTHER ISSUES                    In addition  to its  assault upon the  district court's          equitable  determination, DACO  mounts  a more  narrowly targeted                                          32          offensive on a second front.  In this regard, DACO assigns  error          to  a  series  of  discovery rulings  that  together  forced  the          disclosure of eighteen agency documents, mostly in the  nature of          correspondence between DACO (or other government representatives)          and DACO's outside counsel.  This  attempt to open a second front          is little more than  a diversionary sortie, poorly outfitted  and          easily repulsed.                    We set the stage.   In ordering disclosure as  a subset          of  a   broader  order   that  DACO   turn  over   the  "complete          administrative file" in  the case to  the wholesalers, the  court          determined that  these writings  were not entitled  to protection          under either  the attorney-client privilege  or the  deliberative          process privilege.   We  consider the district  court's privilege          rulings cognizant that, "[b]ecause we  regard the existence of  a          privilege  as a factual determination  for the trial  court . . .          the district court's  finding of no  privilege can be  overturned          only  if clearly erroneous."   United States v.  Wilson, 798 F.2d                                         _____________     ______          509,  512  (1st Cir.  1986); accord  United  States v.  Bay State                                       ______  ______________     _________          Ambulance & Hosp.  Rental Serv., Inc., 874 F.2d 20,  27 (1st Cir.          _____________________________________          1989).   Since  local law does  not supply  the rule  of decision          anent DACO's  claim for  restitution, federal common  law governs          our analysis of the wrangling over privileges.  See Fed. R. Evid.                                                          ___          501.                            A.  Attorney-Client Privilege.                            A.  Attorney-Client Privilege.                                _________________________                    The  Supreme  Court has  described  the attorney-client          privilege  as  "the oldest  of  the  privileges for  confidential                                          33          communications  known to the common  law."  Upjohn  Co. v. United                                                      ___________    ______          States,  449 U.S. 383, 389  (1981).  The  privilege protects "not          ______          only the giving of professional advice to those who can act on it          but also the giving of information to the lawyer to enable him to          give sound and informed advice."  Id. at 390.  The purpose of the                                            ___          privilege is "to encourage  full and frank communications between          attorneys and  their clients  and thereby promote  broader public          interests  in  the  observance   of  law  and  administration  of          justice."  Id. at 389.                     ___                    In its unpublished  order requiring  revelation of  the          eighteen documents,  the district court rejected  DACO's claim of          attorney-client privilege on two grounds.  First, the court found          that DACO waived any such privilege because four of the documents          "were  inadvertently  shown  to  Texaco's  legal representatives"          during their  initial review  of the  administrative  file.7   We          examine the underpinnings of this ruling.                      It is apodictic that inadvertent disclosures may work a          waiver of the attorney-client privilege.  See, e.g., In re Sealed                                                    ___  ____  ____________          Case, 877  F.2d 976, 979-80  (D.C. Cir.  1989); In re  Grand Jury          ____                                            _________________          Proceedings,  727  F.2d 1352,  1356  (4th  Cir. 1984);  see  also          ___________                                             ___  ____                                        ____________________               7At  trial,  the district  court  described  how this  bevue          occurred:                    You   people   [DACO]  told   them  [Texaco's                    representatives],  here  is  a room  full  of                    papers, you  can take a  look at them.   They                    looked at them, they found them and then when                    you discovered  that they  had seen  them and                    that they  wanted copies of  those, then  you                    came running here seeking an order.                                          34          Allread v. City of Grenada, 988 F.2d 1425, 1434 (5th Cir.  1993).          _______    _______________          Thus, it beggars credulity to argue that the district court erred          in  entering a turnover order  anent the four  documents to which          Texaco's representatives previously had been exposed.  Apart from          that  fairly  obvious  conclusion,   however,  it  also  must  be          recognized that inadvertent  disclosures can have  a significance          that transcends the documents actually disclosed.                    In general, a waiver premised on inadvertent disclosure          will be deemed to encompass "all other such communications on the          same subject."  Weil  v. Investment/Indicators, Research & Mgmt.,                          ____     ________________________________________          Inc.,  647 F.2d 18,  24-25 & n.13  (9th Cir. 1981);  accord In re          ____                                                 ______ _____          Sealed Case,  877 F.2d at  980-81; see also  4 J.M. Moore  & J.D.          ___________                        ___ ____          Lucas,  Moore's Federal  Practice    26.11[2], at  26-185 (1994).                  _________________________          Since  DACO does not  contend that  the four  carelessly unveiled          documents  concerned a  different topic  than the  other fourteen          documents  in  the group,  we think  that, under  the deferential          standard  of  review  applicable  to   privilege  questions,  the          district  court  had  an  adequate  basis  for  disregarding  the          attorney-client privilege vis-a-vis all eighteen documents.                    The  district court's  alternative ground  for ordering          disclosure is equally solid.  The court found as a fact, after in          camera inspection of the disputed documents, that outside counsel          had become  an integral  part of the  adjudicative decisionmaking          process.  Based on this factual finding, the court ruled that the          attorney-client   privilege  did  not   apply  because,  when  an          administrative   agency  engaged  in   an  adjudicative  function                                          35          delegates its responsibilities to  outside counsel, then the work          product generated by the firm is part of the adjudicative process          itself  and,  hence,  beyond  the reach  of  the  attorney-client          privilege.                    DACO resists  this analysis, pontificating  that such a          doctrine "would render  the attorney-client privilege meaningless          where state or local governments employ counsel and rely on their          advice."     Appellants'  Brief  at  47.    But  this  trumpeting          misapprehends  the tenor  of the  district court's  ruling.   The          attorney-client privilege attaches only when the attorney acts in          that  capacity.   See  Bay State  Ambulance,  874 F.2d  at 27-28;                            ___  ____________________          Wilson,  798  F.2d at  512; United  States  v. United  Shoe Mach.          ______                      ______________     __________________          Corp.,  89  F. Supp.  357, 358-59  (D.  Mass. 1950).    Here, the          _____          district  court   found,  in   substance,  that  DACO   delegated          policymaking authority to its  outside counsel to such an  extent          that  counsel ceased to function as lawyers and began to function          as  regulators.  Therefore,  DACO could not  invoke the attorney-          client privilege in connection with the documents at issue.                    We  cannot term  this finding  clearly erroneous.   The          record shows that  DACO's counsel had, in  fact, drafted remedial          orders that DACO adopted verbatim; that Dr. Logan, an employee of          DACO's counsel, was  the "putative author  of the [1989]  13-cent          regulation," TPR II, 862  F. Supp. at  706; and that counsel  had                       ______          developed adjudicative data that the agency later reissued as its          own.  Nor can we term the finding unsupported in  law.  See Mobil                                                                  ___ _____          Oil Corp. v. Department  of Energy, 102 F.R.D. 1,  9-10 (N.D.N.Y.          _________    _____________________                                          36          1983)  (rejecting  claim   of  attorney-client  privilege   where          proponent  failed  to show  that  lawyers  were acting  in  their          capacities  as  attorney  advisors  rather   than  as  regulatory          decisionmakers); Coastal Corp.  v. Duncan, 86 F.R.D. 514, 521 (D.                           _____________     ______          Del.   1980)  (similar;   observing  that   such  a   showing  is          particularly   important  in  a  situation  in  which  "attorneys          function primarily as policy-makers rather than as lawyers").                         B.  Deliberative Process Privilege.                         B.  Deliberative Process Privilege.                             ______________________________                    DACO  also  takes  exception to  the  district  court's          ruling that the deliberative process privilege did not exempt the          same  cache  of  documents  from production.    The  deliberative          process  privilege "shields  from public  disclosure confidential          inter-agency memoranda on  matters of law  or policy."   National                                                                   ________          Wildlife Fed'n v. United States Forest Serv., 861 F.2d 1114, 1116          ______________    __________________________          (9th  Cir. 1988).  The  privilege rests on  a policy of affording          reasonable  security  to  the  decisionmaking  process  within  a          government agency.   See NLRB  v. Sears, Roebuck &  Co., 421 U.S.                               ___ ____     _____________________          132, 150 (1975).                    The  Supreme  Court  has  restricted  the  deliberative          process privilege  to materials  that are both  predecisional and          deliberative.  See EPA v. Mink, 410 U.S. 73, 88 (1973).  In other                         ___ ___    ____          words,  to  qualify for  the privilege,  a  document must  be (1)          predecisional,  that is,  "antecedent to  the adoption  of agency          policy," and  (2) deliberative, that is, actually "related to the          process by  which policies  are formulated."   National Wildlife,                                                         _________________          861  F.2d at 1117  (citation omitted).   Because the deliberative                                          37          process  privilege  is   restricted  to  the   intra-governmental          exchange  of thoughts  that actively  contribute to  the agency's          decisionmaking  process,  factual  statements or  post-decisional          documents explaining  or justifying  a decision already  made are          not shielded.  See Sears, Roebuck,  421 U.S. at 151-52; Mink, 410                         ___ ______________                       ____          U.S.  at  88;  see also  Developments  in  the  Law    Privileged                         ___ ____  ________________________________________          Communications, 98 Harv. L. Rev. 1450, 1620-21 (1985).          ______________                    Even  if   a  document   satisfies  the   criteria  for          protection    under    the   deliberative    process   privilege,          nondisclosure is not  automatic.  The  privilege "is a  qualified          one," FTC v. Warner Communications Inc., 742 F.2d 1156, 1161 (9th                ___    __________________________          Cir.  1984), and  "is  not absolute."    First Eastern  Corp.  v.                                                   ____________________          Mainwaring, 21  F.3d 465,  468 n.5  (D.C. Cir.  1994).  Thus,  in          __________          determining  whether to honor  an assertion  of the  privilege, a          court  must  weigh  competing  interests.    See  id.;  see  also                                                       ___  ___   ___  ____          Developments, supra, at 1621  (noting that courts asked  to apply          ____________  _____          the privilege must engage in "ad hoc balancing of the evidentiary          need against the harm that may result from disclosure").                    At bottom, then, the deliberative process privilege  is          "a  discretionary one."  In  re Franklin Nat'l  Bank Sec. Litig.,                                   _______________________________________          478  F. Supp.  577, 582  (E.D.N.Y.  1979).   In  deciding how  to          exercise  its discretion,  an  inquiring  court should  consider,          among  other things,  the interests  of the  litigants, society's          interest in  the accuracy and  integrity of factfinding,  and the          public's interest  in honest,  effective government.   See Warner                                                                 ___ ______          Communications,  742  F.2d at  1162.    Consequently, "where  the          ______________                                          38          documents   sought  may   shed   light   on  alleged   government          malfeasance," the  privilege is routinely denied.   Franklin, 478                                                              ________          F. Supp. at 582; see also Bank of Dearborn v. Saxon, 244 F. Supp.                           ___ ____ ________________    _____          394, 401-03 (E.D.  Mich. 1965) ("the  real public interest  under          such  circumstances   is  not   the  agency's  interest   in  its          administration but  the  citizen's  interest  in  due  process"),          aff'd, 377 F.2d 496 (6th Cir. 1967).            _____                    Assuming,  arguendo, that  the documents  at issue  are          both predecisional and deliberative    a matter on which  we need          not opine    the district court's  rejection of the  deliberative          process  privilege is nevertheless  impervious to  DACO's attack.          The  court supportably  found  that the  wholesalers  had made  a          "strong showing" of  arbitrariness and discriminatory  motives on          DACO's part.  Given the discretionary nature  of the deliberative          process privilege, and the  district court's warranted conclusion          that  DACO acted in bad faith over  a lengthy period of time, see                                                                        ___          supra  Part II(D)(4),  we  resist the  urge  to tinker  with  the          _____          court's  determination  that  the  wholesalers'  interest in  due          process and fairness outweighed  DACO's interest in shielding its          deliberations from public view.8                                        ____________________               8We  note  in  passing  that  the  district  court's  waiver          analysis, made in connection with DACO's claim of attorney-client          privilege,  see  supra  Part  III(A),  arguably  applies  to  the                      ___  _____          deliberative process  privilege as  well.  Because  the privilege          lacks  vitality here, we will  not pursue the  question of waiver          beyond noting  that it is  apparently unsettled.   Compare, e.g.,                                                             _______  ____          Clark v. Township of Falls, 124  F.R.D. 91, 93-94 (E.D. Pa. 1988)          _____    _________________          (holding  that  a  municipality  waived any  claim  of  executive          privilege by  prior disclosure) with, e.g.,  Redland Soccer Club,                                          ____  ____   ____________________          Inc.  v. Department  of Army,  ___ F.3d ___,  ___ (3d  Cir. 1995)          ____     ___________________          [1995  WL 289681 at *25]  (holding that inadvertent disclosure of                                          39                                 C.  Harmless Error.                                 C.  Harmless Error.                                     ______________                    We add a  postscript to our discussion  of the district          court's discovery rulings.  In all events, we do not believe that          the  district  court's  rejection  of  DACO's   privilege  claims          affected DACO's  substantial rights.   Any error  was, therefore,          harmless.  See Fed. R. Civ.  P. 61 (explaining that a court "must                     ___          disregard  any error or defect  in the proceeding  which does not          affect the substantial rights of the parties").                    In denying  DACO's claim for restitution,  the district          court mentioned only one of the eighteen challenged documents  (a          June  1989 memorandum  from  DACO's outside  counsel to  Governor          Hernandez  Colon).  See TPR II,  862 F. Supp. at  705.  The court                              ___ ______          cited  this  memorandum as  additional  support  for its  factual          finding  that  contemporaneous  events, rather  than  a long-term          commitment to regulation, spurred DACO's actions in June of 1989.          The memorandum comprised only a small fraction of the evidence on          which  the court relied in  reaching this conclusion.   See supra                                                                  ___ _____          Part II(D)(1) (limning other  evidence).  It is axiomatic  that a          litigant's substantial  rights are not offended  by the admission          of  cumulative evidence.   See,  e.g., Doty  v. Sewall,  908 F.2d                                     ___   ____  ____     ______          1053,  1056 (1st Cir. 1990); Garbincius v. Boston Edison Co., 621                                       __________    _________________          F.2d  1171, 1175 (1st Cir. 1980); deMars v. Equitable Life Assur.                                            ______    _____________________          Soc'y, 610 F.2d 55, 62 (1st Cir. 1979).          _____          IV.  CONCLUSION          IV.  CONCLUSION                                        ____________________          documents did  not give  rise to waiver  of deliberative  process          privilege).                                           40                    We  need  go no  further.   There  are  neither precise          answers nor perfect solutions when a court is forced to deal with          the shadowy world  of what might have been.   Where, as here, the          customary deference accorded  to the trial court as factfinder is          augmented by  due respect for that  court's equitable discretion,          appellate courts  should hesitate to  meddle.  In  this instance,          the judge, who had  handled the case from its  inception, weighed          and  balanced the  equities, and  juxtaposed the  parties' rights          with painstaking care.  Thus, whether  or not we, if writing on a          pristine page,  might have concluded otherwise, we  are unable to          tease  an abuse of discretion  out of what  is quintessentially a          judgment call.          Affirmed.          Affirmed.          ________                                          41
