Speedway LLC v. State
| Decision Date | 24 April 2019 |
| Docket Number | DOCKET NO. A-5496-16T1 |
| Parties | SPEEDWAY LLC, Plaintiff-Appellant, v. THE STATE OF NEW JERSEY and ATTORNEY GENERAL GURBIR S. GREWAL, Defendants-Respondents. |
| Court | New Jersey Superior Court — Appellate Division |
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
Before Judges Yannotti and Natali.
On appeal from Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-0284-17.
Brian J. Molloy argued the cause for appellant (Wilentz, Goldman & Spitzer, PA, attorneys; Brian J. Molloy and Daniel J. Kluska, of counsel and on the briefs).
Renee Greenberg, Deputy Attorney General, argued the cause for respondents (Gurbir S. Grewal, Attorney General, attorney; Jason W. Rockwell, Assistant Attorney General, of counsel; Wendy Leggett Faulk and Renee Greenberg, Deputy Attorneys General, on the brief).
Brennan Law Firm, attorneys for amicus curiae New Jersey Gasoline-C-Store-Automotive Association and Fuel Merchants Association of New Jersey (Francis J. Brennan, III and Craig A. Cox, of counsel and on the brief).
Over seventy-five years ago, the New Jersey Legislature established "[a]n act to regulate the retail sale of motor fuels" (1938 Act), N.J.S.A. 56:6-1 to -17. Among other provisions, the 1938 Act prohibits retail dealers from selling gasoline below the net cost of the fuel plus all selling expenses, defined as "all overhead and general business expense[s]." N.J.S.A. 56:6-2(b); N.J.S.A. 56:6-1.
On October 16, 2016, the Middlesex County Department of Weights and Measures filed two complaints in the Woodbridge Municipal Court against plaintiff Speedway, LLC, alleging it violated N.J.S.A. 56:6-2(b) because it sold gasoline at its Hopelawn filling station below cost. According to Speedway, it is the "second[] largest chain of company-owned-and-operated convenience stores in the United States[,] with approximately 2730 locations in [twenty-one] states." Speedway owns and operates approximately seventy convenience stores in New Jersey, which all sell motor fuel.
On February 13, 2017, Speedway filed a complaint in the Law Division seeking a declaration that the below-cost sales prohibition violated the due process clause of the New Jersey and United States Constitutions, infringed plaintiff's right to sell goods, and violated the Federal Civil Rights Act, 42 U.S.C. § 1983, and the New Jersey Civil Rights Act, N.J.S.A. 10:6-2(c). Speedway also sought an injunction to prevent defendant, the State of New Jersey, from enforcing the provision.
After the trial court granted defendants' motion to dismiss under Rule 4:6-2(e), Speedway filed this appeal. We affirm because the trial court, after accepting as true all of Speedway's factual allegations, properly dismissed the complaint. The Legislature's decision, as expressed in N.J.S.A. 56:6-2(b), prohibiting the below-cost sale of gasoline is a rational, necessary restraint on the market, and is in the public interest.
We also agree with the court that N.J.S.A. 56:6-2(b) is not unconstitutionally vague. The challenged terms - "net cost" and "expenses" - are words of common usage and understanding, particularly for a sophisticated business entity such as Speedway. Finally, because the below-cost sales provision addresses a specific state interest, it is not unconstitutionally overbroad.
We begin our opinion with a brief discussion of the 1938 Act, its subsequent amendment, and the relevant legislative history.
The 1938 Act outlines the conditions for the sale of motor fuel by retail dealers. Among other requirements, it mandates that retailers post the per-gallon fuel price on each pump, and requires all dispensing equipment to conspicuously identify the fuel brand. N.J.S.A. 56:6-2(a) and (g). The fuel price must be posted inclusive of all taxes, and cannot employ rebates or concessions that would affect the sale of fuel below the posted price. N.J.S.A. 56:6-2(a) and (e). Retailers are prohibited from selling gasoline at a price below their net cost of the fuel plus all selling expenses, defined in the statute as "all overhead and general business expense[s]." N.J.S.A. 56:6-2(b); N.J.S.A. 56:6-1. As noted, Speedway challenges only the constitutionality of the below-cost sales prohibition, codified in subsection (b).
The Legislature created a "Gasoline Study Commission" (Commission) in February 1952 to study New Jersey's gasoline industry, with an emphasis on those factors "governing the fixing of prices of gasoline to the public." Inaddition, the Commission prepared a report that also "survey[ed] the operation of the entire gasoline industry in the [s]tate . . . with a view to[ward] correcting - if it appeared necessary and desirable - by legislative recommendation[], any practices which might be found to be injurious to the best interests of all the people of New Jersey." (emphasis in original).
The report also explained that although the Commission's "paramount obligation" was to all New Jersey citizens, it stressed that:
[s]pecial attention has been directed in this examination to the plight of those New Jersey citizens - small businessmen - who own or operate the retail outlets in this State. The problem of the retailers and of all other phases of the petroleum industry have been carefully and fully reviewed both from the viewpoint of serving the best interests of the vast army of consumers of a commodity - gasoline - which has become a necessity in modern living and from the viewpoint of recognizing the difficult and important position of the small businessman in an industry dominated by giants.
The Commission recommended that the 1938 Act be amended to make it a misdemeanor if any distributor offered, or any retail dealer accepted, a rebate or concession with respect to the distribution of motor fuel. The Commission also endorsed that the Legislature invoke the State's police power to protect the public welfare by ending unfair practices that curtailed, rather than strengthenedcompetition, because "[t]he motor fuel business constitutes such an important and necessary part in the economy of this State."
In addition, the Commission considered proposing that any retail distributor of fuel be required to sell "at a price determined by the [distributor's] cost of doing business plus the posted tankwagon price."1 The Commission explained that company-owned-and-operated retail stations (at the time described as "few in number") were typically "integrated corporations" that can "exert considerable influences on the posted retail prices" and operate retail outlets at a loss if necessary "in sharp contrast to the individual dealer who is compelled to carry on his business at a profit in order to survive." Despite expressly recognizing the influence company-owned retail dealers had on the price of fuel, the Commission declined to recommend amending the 1938 Act in this regard because it concluded the below-cost sales prohibition adequately addressed the issue and additional legislation would be "superfluous."
The 1938 Act was amended in 1953, consistent with the Commission's recommendations, and retitled the Uniform Motor Fuels Practices Act, N.J.S.A. 56:6-19 to -32 (1953 Amendments). When passing the new legislation, theLegislature declared that the "practices of the distribution and sale of motor fuels in th[e] State have developed unfair methods of competition in the marketing of motor fuels" and that "conditions have . . . impair[ed] . . . the supply of motor fuel needed by the general public[,] thereby affecting the general economic welfare of the people of th[e] State." N.J.S.A. 56:6-19(a). Although the 1953 Amendments modified the 1938 Act to prohibit certain trade practices related to the distribution of motor fuel that "inten[d] to injure competitors or destroy or substantially lessen competition," N.J.S.A. 56:6-22,2 the Legislature did not amend or change the below-cost sales prohibition to include similar language.
Since 2008, the Legislature considered a number of bills seeking to amend the below-cost sales prohibition that would permit a retailer to sell gasoline at a price below its net cost plus selling expenses to meet competition, and deem it illegal for a dealer to sell at a price below net cost if done with the intent to harm or injure competition. See Senate Bill No. 2414 (2008 Session); Senate Bill No. 484 and Assembly Bill No. 2932 (2010 Session); Assembly Bill No. 1567 (2012 Session); and Assembly Bill No. 1695 (2014 Session). None of these bills wereenacted. Accordingly, the Legislature has not altered the original language of N.J.S.A. 56:6-2(b) contained in the 1938 Act.
On appeal, Speedway raises five points of error, three of which relate to its claim that the 1938 Act, and specifically section (b), is unconstitutional. First, Speedway contends that the complaint alleged viable due process violations because the below-cost sales prohibition unreasonably and arbitrarily "deprives it of its property and liberty interests and abrogates its common-law right to sell goods," as the provision lacks "an element of intent and a meeting competition defense." Second, Speedway argues that the below-cost sales prohibition deprives it of due process of law because it is unconstitutionally vague as it "leaves retailers guessing at its meaning and application." In further support of this argument, Speedway contends that the State is collaterally estopped from disputing that section (b) is constitutionally infirm on vagueness grounds, because it unsuccessfully litigated the issue before another New Jersey court. Third, Speedway maintains that the below-cost sales provision is unconstitutionally overbroad. Fourth, Speedway...
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