Marathon Petroleum Co. LLC. v. Stumbo

• Decision Date: 20 November 2007
• Docket Number: Civil Action No. 3:07-CV-00029-KKC.
• Citation: 528 F.Supp.2d 639
• Parties: MARATHON PETROLEUM COMPANY LLC, et al., Plaintiffs, v. Gregory D. STUMBO, in his official as the Attorney General of Kentucky, Defendant.
• Court: U.S. District Court — Eastern District of Kentucky

528 F.Supp.2d 639

MARATHON PETROLEUM COMPANY LLC, et al., Plaintiffs, v. Gregory D. STUMBO, in his official as the Attorney General of Kentucky, Defendant.

Civil Action No. 3:07-CV-00029-KKC.

United States District Court, E.D. Kentucky, Central Division at Frankfort.

November 20, 2007.

COPYRIGHT MATERIAL OMITTED

Charles S. Cassis, Peter Matthew Cummins, Tanya Yarbrough Bowman, Frost Brown Todd LLC, Louisville, KY, for Plaintiffs.

Dennis G. Howard, II, Janet M. Graham, Jennifer Black Hans, Maryellen Buxton Mynear, Pierce B. Whites, Todd E. Leatherman, D. Brent Irvin, Elizabeth. Ungar Natter, Office of Attorney General, Frankfort, KY, for Defendant.

OPINION AND ORDER

KAREN K. CALDWELL, District Judge.

This matter is before the court on the Defendant Attorney General's Motion to Dismiss (Rec. No. 9); the Plaintiffs' Motions for Leave to File Second Amended Complaint and a Supplemental Brief in Opposition to Defendant's Motion to Dismiss (Rec. No. 19); and the Attorney General's Motion for Leave to File Surreply to Marathon's Motion for Leave to File Second Amended Complaint and Supplemental Brief (Rec. No. 25).

Because the court must abstain from resolving the issues raised in the Plaintiffs' First Amended Complaint, this court will grant the Attorney General's Motion to Dismiss. Further, because the court would also have to dismiss the Plaintiffs Second Amended Complaint on abstention grounds, the Court will deny the Plaintiffs' Motion for Leave to File Second Amended Complaint because the amendment is futile. Finally, because no further briefing is necessary on the issues raised in the Motion to Dismiss or in the Motion for Leave to File Second Amended Complaint, the court will deny the Plaintiffs' Motion for Leave to File a Supplemental Brief in Opposition to Defendant's Motion to Dismiss and the Attorney General's Motion for Leave to File Surreply to Marathon's Motion for Leave to File Second Amended Complaint and Supplemental Brief.

I. History.

A. The Kentucky Act.

The Kentucky statute at issue in this case is KRS § 367.372 et seq. (the "Kentucky Act"). It provides, in relevant part, the following:

(1) (a) When a Condition Red has been declared by the United States Department of Homeland Security under the Homeland Security Advisory System or the Governor has declared a state of emergency under KRS 39A.100, the Governor may implement this section by executive order for a period of thirty (30) days from notification of implementation, as required by KRS 367.376. The order implementing this section shall be limited to the geographical area indicated in the declaration of emergency.

(b) No person shall sell, rent, or offer to sell or rent, regardless of whether an actual sale or rental occurs, a good or service listed in this paragraph or any repair or reconstruction service for a price which is grossly in excess of the price prior to the declaration and unrelated to any increased cost to the seller. Goods and services to which this section applies are:

1. Consumer food items;

2. Goods or services used for emergency cleanup;

3. Emergency supplies;

4. Medical supplies;

5. Home heating oil;

6. Building materials;

7. Housing;

8. Transportation, freight, and storage services; and

9. Gasoline or other motor fuels.

(c) A person who increases a price does not violate this subsection if the price increase is attributable to an additional cost imposed by a supplier of a good or other costs of providing the good or service, including an additional cost for labor or materials used to provide a service.

(2) The provisions of this section may be extended for an additional period, not to exceed thirty (30) days, by the Governor if necessary to protect the lives, property, or welfare of the citizens.

(3) If a person sold or rented a good or service listed in subsection (1) of this section at a reduced price in the thirty (30) days prior to the Governor's implementation of this section, the price at which that person usually sells or rents the good or service in the area for which the declaration was issued shall be used in determining if the person is in violation of this section.

(4) If a person did not sell or rent or offer to sell or rent a good or service listed in subsection (1) of this section prior to the Governor's implementation of this section, the price at which a good or service was generally available in the area for which the declaration was issued shall be used in determining if the person is in violation of this section.

KRS § 367.374.

B. The Governor's Declaration of a State of Emergency and Implementation of the Kentucky Act After Hurricane Katrina.

On August 30, 2005, Kentucky Governor Ernie Fletcher issued an Executive Order declaring a State of Emergency in Kentucky due to the potential heavy rainfall, flooding, tornadoes, and other natural hazards after Hurricane Katrina. The Executive Order stated that it was effective, "until terminated by subsequent Order or by operation of law." (Rec. No. 1 Complaint, Ex. 1).

On August 31, 2005, Governor Fletcher issued another Executive Order by which he implemented the Kentucky Act as to gasoline sales in the state. The Governor ordered that "[n]o person . . . shall sell or offer to sell gasoline at a price grossly in excess of the price prior to the declaration by Executive Order on August 30, 2005, that a State of Emergency exists in the Commonwealth of Kentucky." (Rec. No. 1, Complaint, Ex. 2). The August 31, 2005 Executive Order provided that it was "in effect for the duration of the State of Emergency herein referenced, and shall be subject to renewal thereafter, subject to applicable law, if necessary to protect the lives, property, or welfare of the citizens of the Commonwealth of Kentucky." (Rec. No. 1, Complaint, Ex. 2).

C. The State Court Action—the Attorney General v. Marathon and Speedway.

On the morning of May 10, 2007, the Attorney General filed an action in Franklin Circuit Court against Marathon Petroleum Company, LLC, Marathon Oil Corporation, and Speedway SuperAmerica, LLC. In the state court complaint, the Attorney General charged that the defendants violated the Kentucky Act by selling motor fuels during the period covered by the Kentucky Governor's Declaration of Emergency following Hurricane Katrina at prices that were grossly in excess of pre-emergency prices and that were unrelated to any increase in costs which the defendants had incurred. (Stumbo v. Marathon Petroleum Co., E.D.K.Y, Civil Act. No. 3:07-CV-30, Rec. No. 1, Notice of Removal, State Court Complaint, ¶ 14).

D. This Federal Action—Marathon and Speedway v. the Attorney General.

Within an hour or two after the Attorney General filed the state court action, two of the three defendants in that action—Marathon Petroleum Company, LLC and Speedway SuperAmerica, LLC (collectively, "Marathon")—filed this federal action against the Attorney General in this court. In the Complaint, Marathon charges that the Kentucky Act and the Governor's Executive Order implementing it after Hurricane Katrina violate the federal and Kentucky state constitutions.

Marathon charges that the statute is unconstitutionally vague as applied to it and, thus, violates the Due Process Clause of the 14th Amendment to the United States Constitution and Section 2 of the Kentucky Constitution which prohibits arbitrary power. Marathon also charges that the governor's Executive Order implementing the Kentucky Act as to gasoline sellers violates Section 2 of the Kentucky Constitution because it does not set forth a date that it terminates and violates the separation of powers doctrine contained in the Kentucky Constitution because, with it, the Governor instituted permanent price controls. Finally, Marathon charges that the Kentucky Act violates the Commerce Clause of the United States Constitution because it unreasonably burdens interstate commerce.

Marathon asks the court for a declaration that the Kentucky Act and the Executive Order implementing it are unconstitutional and for an injunction prohibiting the Attorney General from enforcing the Kentucky Act.

E. Removal and Remand of State Action.

On May 14, 2007, Marathon removed the state action to this court asserting that this court had jurisdiction over the action pursuant to 28 U.S.C. § 1332 which grants federal district courts original jurisdiction over any action in which the amount in controversy exceeds $75,000 and is between citizens of different states. On May 18, 2007, the Attorney General filed a Motion to Remand the matter to state court. This court granted that motion on October 3, 2007.

F. The Attorney General's Motion to Dismiss the Federal Action and Marathon's Motion to Amend the Federal Complaint.

On May 18, 2007, the Attorney General filed this Motion to Dismiss the federal court action, arguing that this court should abstain from deciding the federal court action under the Younger and Pullman abstention doctrines.¹ After the parties had fully briefed that motion, on September 25, 2007, Marathon filed a Motion for Leave to File Second Amended Complaint² and a Motion for Leave to File a Supplemental Brief in Opposition to Defendant's Motion to Dismiss (Rec. No. 19). In the motion, Marathon asks for permission to file an amended complaint adding two additional constitutional claims and "some historical context" to this matter.

As to the "historical context" provided by the Second Amended Complaint, Marathon inserts a section titled "History of Price Controls for Petroleum Products," in which Marathon asserts that economic theory advises against price controls. Marathon asserts that higher prices attract additional supply which eliminates shortages. Decreased shortages lowers the prices of the good. Marathon argues that if prices are not allowed to increase, increased supply is not likely to occur. Thus, shortages will remain. Marathon argues that motor fuel supply will flow toward locations where prices are...