State By and Through Div. of Consumer Protection v. Rio Vista Oil, Ltd.

• Decision Date: 08 February 1990
• Docket Number: No. 860620,860620
• Citation: 786 P.2d 1343
• Parties: , 1990-1 Trade Cases P 68,943 The STATE of Utah, By and Through the DIVISION OF CONSUMER PROTECTION, Dixie L. Minson, Director, Plaintiff, Appellant, and Cross-Appellee, v. RIO VISTA OIL, LTD., a corporation of the State of Utah, Defendant, Appellee, and Cross-Appellant.
• Court: Utah Supreme Court

Page 1343

786 P.2d 1343

58 USLW 2540, 1990-1 Trade Cases P 68,943

The STATE of Utah, By and Through the DIVISION OF CONSUMER PROTECTION, Dixie L. Minson, Director, Plaintiff Appellant, and Cross-Appellee, v. RIO VISTA OIL, LTD., a corporation of the State of Utah Defendant, Appellee, and Cross-Appellant.

No. 860620.

Supreme Court of Utah.

Feb. 8, 1990.

R. Paul Van Dam, Stephen G. Schwendiman, Ruth Lybbert Renlund, Salt Lake City, for plaintiff, appellant and cross appellee.

L.R. Gardiner, Jr., Thomas R. Vuksinick, Salt Lake City, for defendant, appellee and cross appellant.

ZIMMERMAN, Justice:

The State of Utah, through the Division of Consumer Protection, appeals a district court decision holding that the Motor Fuel Marketing Act ("the Act") is unconstitutional. See Utah Code Ann. §§ 13-16-1 to -9 (1986 & Supp.1989) (amended 1987). ¹ The court ruled that several provisions of the Act relating to its ban on below-cost sales violated the due process clauses of both the Utah and the United States Constitutions. Utah Const. art. I, § 7; U.S. Const. amend. XIV, § 1. Rio Vista Oil, Ltd. ("Rio Vista"), cross-appeals the court's denial of its request for an award of attorney fees. We hold that the Act is not unconstitutional and reverse and remand the matter for further proceedings. This disposition makes it unnecessary for us to address Rio Vista's cross-appeal.

Some background is necessary. ² The Act was passed in March of 1981 with the declared purpose of counteracting a tendency toward monopolization in the motor fuel marketplace and its attendant destructive effects on competition and injury to the consuming public. See Utah Code Ann. § 13-16-1 (1986) (repealed 1987). ³ To that end, the Act prohibits, inter alia, marketers of motor fuel in Utah from engaging in below-cost sales and discriminatory pricing, two practices the legislature considered to be conducive to monopolization. Section 13-16-4 provides:

It is unlawful for any person engaged in commerce within this state to sell or offer to sell motor fuel below cost or to sell or offer to sell it at a price lower than the seller charges other persons at the same time and on the same level of distribution.

Utah Code Ann. § 13-16-4 (1986) (amended 1987). ⁴ Limited defenses are available to persons charged with such violations. Section 13-16-6 provides what can be termed a "meeting-competition" defense:

(2) It is not a violation of § 13-16-4 [the ban on below-cost sales or discriminatory pricing] ... if a difference exists ... between sales prices at the same marketing level if the difference exists because of a good faith effort to meet an equally low price of a competitor or is exempt under § 13-5-12.

(3) It is not a violation of § 13-16-4 ... if a difference exists ... between sales prices at the same marketing level if the difference exists because of a promotional effort to initially enter a new market area if the subsidization ceases no more than 14 days after initial market area entry.

Utah Code Ann. § 13-16-6(2), (3) (1986) (amended 1987). ⁵ The State or any person injured by a violation of the Act may institute civil actions for injunctive relief and damages. See Utah Code Ann. § 13-16-7 (1986) (amended 1987). ⁶

In late June of 1986, the State filed a civil action against Rio Vista, seeking injunctive relief and damages for alleged violations of the Act. Specifically, the State charged that Rio Vista, a gasoline retailer in Utah, violated section 13-16-4 by offering to sell motor fuel below cost in Moab, Utah, in March of 1986, and in American Fork, Utah, in June of 1986. The State sought a temporary restraining order to prevent further below-cost sales by Rio Vista. The third district court issued such an order and scheduled a hearing on the State's motion for a preliminary injunction. Rio Vista opposed the preliminary injunction on two grounds: (i) that the Act's ban on below-cost sales violated the due process clauses of the federal and state constitutions, U.S. Const. amend. XIV; Utah Const. art. I, § 7; and (ii) that Rio Vista's below-cost sales were eligible for the meeting-competition defense provided in section 13-16-6.

After the hearing, the court issued a memorandum decision denying the preliminary injunction. Without explaining its conclusion at any length, the court found that the Act denied Rio Vista due process. The court specifically declined to address the narrower question of whether Rio Vista's sales were permitted by section 13-16-6. The court requested that counsel for Rio Vista prepare findings and conclusions.

Rather lengthy findings and conclusions were submitted and subsequently signed. In the findings and conclusions, the court held that the Act violated the due process clauses of both the Utah and the United States Constitutions. Although the extensive findings and conclusions are somewhat opaque, the underlying logic seems to flow as follows: First, section 13-16-4 of the Act prohibits all below-cost sales without regard to the intent of the seller or to whether there is any resulting injury to competition. Second, the meeting-competition defense of section 13-16-6 is not available to one charged with below-cost sales. Finally, the definition of "cost" in section 13-16-2, which is used to determine whether a sale is below cost, is so vague that it is impossible for a seller to reasonably determine whether the law is being violated. Based on these premises, the court concluded that the statute prohibits innocent below-cost sales having no deleterious effect on competition. Such a sweeping ban is not reasonably related to any legitimate legislative purpose and, therefore, runs afoul of the due process clauses of the state and federal constitutions.

As a result of these findings and conclusions, the State's suit was dismissed with prejudice. Rio Vista, as the prevailing party, then sought an award of attorney fees under section 13-16-7(3) of the Act. ⁷ The request was denied. The State appealed from the judgment dismissing its action, and Rio Vista cross-appealed from the denial of attorney fees.

Before addressing the State's attack on the district court's ruling, we must deal with several preliminary matters. First, there is an apparent inconsistency between the reasoning of the findings and conclusions and the district court's memorandum decision. The findings and conclusions state, in substance, that the meeting-competition defense is not available to a below-cost seller like Rio Vista; indeed, such a conclusion is one of the premises upon which the court bases its ultimate conclusion of unconstitutionality. Yet in the cursory memorandum decision, the judge stated that he was not reaching this issue. The explanation for this inconsistency may be that the judge changed his mind. It may also be that counsel for Rio Vista, in drafting the findings and conclusions, thought that the issue of the meeting-competition defense should be addressed to strengthen the ultimate conclusion that the statute violated the constitution by prohibiting all below-cost sales. Whatever reason for this inconsistency, the findings and conclusions were signed by the judge and are not attacked here as not representing his views. We must assume that he found them satisfactory in all particulars. See Automatic Control Prods. Corp. v. Tel-Tech, Inc., 780 P.2d 1258, 1260 (Utah 1989); id. at 1263 (Zimmerman, J., concurring).

Second, we note the applicable standard of review. The State does not challenge any of the district court's factual findings on appeal. Instead, it claims that the court erred in interpreting the Act and concluding that it is unconstitutional. Because the judge purported to make some twenty-four findings of fact, it might be supposed that the State accedes to those findings. However, in reality almost all of these "findings of fact" are actually conclusions of law. On appeal, we do not accord conclusions of law added deference simply because they are denominated findings of fact. We disregard labels and look to the substance. Zions First Nat'l Bank, N.A. v. National Am. Title Ins. Co., 749 P.2d 651, 656 (Utah 1988); see Demetropoulos v. Vreeken, 754 P.2d 960, 963 n. 8 (Utah Ct.App.1988). Here, all relevant rulings are matters of statutory interpretation. We accord a lower court's statutory interpretations no particular deference but assess them for correctness, as we do any other conclusion of law. See, e.g., State v. Mitchell, 779 P.2d 1116, 1123 (Utah 1989); Utah State Coalition of Senior Citizens v. Utah Power & Light Co., 776 P.2d 632, 634 (Utah 1989); City of West Jordan v. Utah State Retirement Bd., 767 P.2d 530, 532 (Utah 1988); Atlas Corp. v. Clovis Nat'l Bank, 737 P.2d 225, 229 (Utah 1987).

It should also be noted that when, as here, we are faced with a claim that a statute is unconstitutional, we adhere to the rule that "legislative enactments are endowed with a strong presumption of validity and will not be declared unconstitutional unless there is no basis upon which they can be construed as conforming to constitutional requirements." In re Criminal Investigation, 7th Dist. Ct., 754 P.2d 633, 640 (Utah 1988) (citing Greaves v. State, 528 P.2d 805, 806-07 (Utah 1974)); see also Provo City Corp. v. Willden, 768 P.2d 455, 458 (Utah 1989); Trade Comm'n v. Skaggs Drug Centers, Inc., 21 Utah 2d 431, 437-38, 446 P.2d 958, 962 (1968).

With these standards in mind, we consider the State's challenge to the trial court's holding that the Act is unconstitutional.

The State first claims that the district court erred in construing the Act not to provide a meeting-competition defense to a below-cost seller situated as is Rio Vista. We agree with the State. Section 13-16-6(2) provides:

It is not a violation of § 13-16-4 [the ban on below-cost sales or discriminatory pricing] ... if a difference exists ... between sales prices at the same marketing level if the difference exists because of a good faith effort to...