State v. Texaco, Inc.

• Decision Date: 17 November 1961
• Citation: 14 Wis.2d 625,111 N.W.2d 918
• Parties: STATE of Wisconsin, Respondent, v. TEXACO, INC., Appellant.
• Court: Wisconsin Supreme Court

Page 918

111 N.W.2d 918

14 Wis.2d 625

STATE of Wisconsin, Respondent, v. TEXACO, INC., Appellant.

Supreme Court of Wisconsin.

Nov. 17, 1961.

An action commenced by the State of Wisconsin against Texaco Inc., pursuant to the provisions of sec. 100.24 and sec. 280.02, Stats., for the purpose of enforcing the provisions of the rule of Ag 112.01 and Ag 112.03, 1 Wis.Adm.Code of the Wisconsin Department of Agriculture relating to the unfair competition and advertising in the sale of gasoline.

The complaint alleges that proceedings are instituted under Secs. Ag 112.01 and Ag 112.03, 1 Wis.Adm.Code, issued by the Wisconsin Department of Agriculture, pursuant to sec. 100.20(2), Stats., to prevent and restrain violations of the order aforementioned pursuant to Sec. 280.02, Stats., and in the alternative, for revocation of the defendant's license or authority to do business in this state for violating said order pursuant to sec. 100.24, Stats.

The complaint further alleges that beginning on or about September 1, 1959, and continuing until on or about March 1, 1960, the defendant discriminated in the price of gasoline by giving a 'Dealers' Aid Allowance,' which is in reality a rebate off the purchase price, to various retailers within the city of Milwaukee to the exclusion of other retailers transacting business in said city.

That the effect of the discriminations as alleged substantially lessen competition or tend to create a monopoly in the marketing of gasoline in that portion of the city of Milwaukee, in which the defendant was selling gasoline at lower prices; and that such discriminations in price were not commensurate with an actual difference in the quality or quantity of gasoline sold to said retailers or in the transportation charges or other expenses of marketing involved in the sale to said retailers.

That the discriminations alleged are a part of Texaco's business policy, and that such practices are resorted to whenever it deems it to be desirable; and that the defendant threatens to continue and will continue to operate its business in contravention of the aforementioned orders of the Wisconsin Department of Agriculture unless enjoined therefrom.

The defendant Texaco demurred to the complaint. The trial court overruled the demurrer with leave to the defendant to serve and file an answer to the complaint within twenty days.

It is from the order overruling the demurrer that the defendant appeals.

Amzy B. Steed, James W. Campbell, New York City, Foley, Sammond & Lardner, Steven E. Keane, Milwaukee, Wis., Kaye, Scholer, Fierman, Hays & Handler, New York City, Milton Handler, New York City, of counsel, for appellant.

John W. Reynolds, Atty. Gen., George F. Sieker, Asst. Atty. Gen., George B. Schwahn, Asst. Atty. Gen., for respondent.

DIETERICH, Justice.

Texaco in support of the demurrer contends that the complaint fails to state a cause of action because there has been no determination made by the Department of Agriculture that Texaco has violated a department order. It further contends that orders Ag 112.01 and Ag 112.03, 1 Wis.Adm.Code adopted by the Department of Agriculture pursuant to sec. 100.20(2), Stats., are unconstitutional in their application to Texaco because of an alleged conflict with congressional policy as expressed in the Robinson-Patman Act and that proceedings instituted by the Federal Trade Commission under the Robinson-Patman Act in Virginia preclude this state from also prosecuting for allegedly similar violations in Milwaukee.

We find no merit in the defendant's contention that the State of Wisconsin is precluded from bringing the action. General orders of Ag 112.01 ¹ and Ag 112.03, ² 1 Wis.Adm.Code became a part of sec. 100.20, Stats., ³ upon their adoption by the Wisconsin Department of Agriculture. The action was commenced pursuant to secs. 100.24(3), (4) ⁴ and 280.02, Stats., ⁵ which authorize the enforcing of the provisions of sec. 100.20, Stats.

The conflict between the federal and state statute, if any, cannot be considered in the abstract. The defense must plead specific facts and parties when it alleges a defense based on a conflict of federal and state policy. Until this court knows what the facts are it cannot determine whether a conflict, if any, exists. The question of conflict is moot until it is presented in a factually concrete manner. Because of the alleged conflict with the Robinson-Patman Act (15 U.S.C.A. § 13), ⁶ it is of the utmost importance that the pertinent facts be brought as fully into the record as possible before a decision is reached.

The federal case in Virginia is pending and if at all applicable must be pleaded as a matter of defense. The factual basis of the defense is not before us however, because in the instant case no answer has been filed or evidence submitted. Whether these cases are in fact prosecution for the same violation cannot be decided in a factual vacuum. This state is not precluded from the exercise of its police power on the mere possibility that a conflict of jurisdiction exists with the federal government; such conflict must be factually verified.

The constitutionality of a statute may be raised by a general demurrer where a cause of action depends on that statute. Ocean Accident & Guar. Corp. v. Poulsen (1943), 244 Wis. 286, 12 N.W.2d 129.

However, whether or not this court, when confronted with an issue of the constitutionality of a statute, will require a judicial investigation through trial of facts, or whether it will inform itself through independent research and the taking of judicial notice, is something that lies entirely within the court's sound discretion. Associated Hospital Service v. City of Milwaukee (1961), 13 Wis.2d 447, 473, 109 N.W.2d 271.

The validity or invalidity of the statute in this case is dependent upon facts other than those of which the court can take judicial notice. To make a determination on the constitutionality of a regulation statute like sec. 100.20, the court must determine whether propositions which the legislature deemed to be facts, and upon which it presumably based its decision to legislate may be reasonably conceived (as facts) in the mind of the court. Ritholz v. Johnson (1944), 244 Wis. 494, 12 N.W.2d 738.

A statute will be held constitutional unless the court can say that no state of fact can reasonably be conceived that would sustain it. State v. Neveau (1941), 237 Wis. 85, 294 N.W. 796, 296 N.W. 622. The burden rests with the party challenging a statute to negate every conceivable basis which may reasonably support the statute's constitutionality. Texaco has not met this burden.

We hold that the complaint states facts sufficient to state a cause of action under the provisions of secs. 100.24(3), (4) and 280.02, Stats. An answer is required so that evidentiary facts may be produced at the trial level. This court and the trial court will then have relevant evidentiary facts now denied to it. White House Milk Co. v. Reynolds (1960), 12 Wis.2d 143, 106 N.W.2d 441.

Order affirmed. The defendant to be granted twenty days from the return of the remittitur to file an answer.

FAIRCHILD, Justice (concurring in the result).

(1) Conflict with federal law. Texaco argues that there is a conflict between the Robinson-Patman act ¹ forbidding price discrimination in interstate commerce (hereinafter referred to as the federal act) and Ag. 112.01, 112.03, and 112.04 (hereinafter referred to as the Wisconsin regulation). Texaco disclaims any contention that the federal act preempts the field of regulation of price discrimination where interstate commerce is involved, and concedes that if the Wisconsin regulation were entirely consistent with the federal act, the former could properly operate concurrently with the federal act. ² But Texaco claims that the differences between them are so substantial that since interstate commerce is involved, the Wisconsin regulation is superseded. ³ The attorney general argues, however, that there is no conflict and no substantial difference between the federal act and the Wisconsin regulation. Counsel do not agree on the proper interpretation of the language of portions of the Wisconsin regulation and of the federal act, where different.

Texaco tells us that the ultimate test for conflict between state and federal law is whether the state law 'stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.' ⁴

Texaco perceives two substantial differences between the Wisconsin regulation and the federal act. The one which it stresses as the more important is the presence in the federal act of a defense sometimes referred to as the good faith meeting competition defense. ⁵ It claims that many acts of price discrimination which would be unlawful if the Wisconsin regulation were applied would be lawful under the federal act if they occurred under such circumstances that the good faith meeting competition defense could be proved. Counsel do not agree as to the applicability of the defense to some types of transactions, and indicate that there is disagreement among the federal courts and the federal trade commission. ⁶

A second difference claimed is that under the Wisconsin regulation, it is unlawful to charge different prices for different grades of gasoline unless the difference can be justified on the bases of cost, but under the federal act a difference in prices of different grades need not bear any relationship to the difference in value of the goods.

Although it must be conceded that the terms of the Wisconsin regulation and of the federal act are different in certain respects, both have the general purpose of preventing price discrimination where its effect may be substantially to lessen competition or tend to create a monopoly. Presumably there are, or, could be if the regulation and act did not exist, a great many acts of price discrimination which are or would be violations of both.

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