Ruling against Midwest Oil in gas pricing case overturned: Appeals Court says the law does not specify how often price surveys be done

Special to the Shawano Leader and The Associated Press/December 29, 2005
By Kevin Murphy

A Shawano gas station didn’t violate state law by selling gasoline below cost in October 2002, a state appeals court ruled Wednesday.

Midwest Oil’s Mobil gas station was wrongly ordered to pay $2,000 to each of six competitors, plus attorney’s fees, after being accused of violating the state’s so-called minimum markup law, the 3rd District Court of Appeals said in a ruling Wednesday.

The ruling overturns a decision by Shawano County Circuit Court Judge Thomas Grover, who found that Midwest Oil violated the law by failing to conduct a price survey of its competition every 24 hours.

Grover had ordered Midwest to pay a total of $12,000 in damages, along with attorney’s fees, bringing the total judgment to $29,815.

Midwest Oil is a subsidiary of the Dr. R.C. Samanta Roy Institute of Science and Technology. The original lawsuit was filed against SIST Corp., doing business as Midwest Oil, which has owned the Mobil station at 1206 E. Green Bay St. since July 2002.

The amount of the award ordered by Grover was determined by state law, which allows each of the gas stations $2,000 in damages for each day that the state’s Unfair Sales Act is violated.

Francis Slattery, an Oshkosh attorney who represented Midwest’s competitors said he didn’t have a reaction to the decision and it was too early to determine whether it would be appealed to the Wisconsin Supreme Court.

"It’s a very fact-specific decision and the chances of this fact situation arising again are very slim," Slattery said.

Slattery said the Wisconsin Petroleum Marketers and Convenience Store Association was interested in a constitutional challenge Midwest Oil presented in the case, but the issue wasn’t addressed on appeal.

Winston Ostrow, attorney of Midwest Oil, said he wasn’t surprised by the decision as it conformed to the law as he read it. He added that he was surprised when Judge Grover ruled against his clients last year.

The plaintiffs originally sought damages for 26 days of violations but withdrew their claims for all but one of those days – choosing to focus on the one violation that was investigated by the Department of Agriculture, Trade and Consumer Protection (DATCP).

DATCP ultimately issued a warning letter to the Mobil station but did not order any fines or penalties.

The minimum markup law generally prohibits retailers from selling gasoline below cost.

According to court records, Midwest Oil sold unleaded regular for $1.54 a gallon on Oct. 17, 2002, after manager Naarah Kindseth surveyed competitors in the morning and another station, Auto Prep Center, charged the same price.

About an hour later, Auto Prep Center raised its price to $1.59, leaving Midwest Oil as the only station in the area at $1.54, which was below cost, court records said.

Kindseth did not conduct another pricing survey until late the next day, but by then another competitor, Kwik Trip, had lowered its price to $1.54 after its own survey of competitors and matched Midwest Oil’s price.

The lawsuit was brought by six competitors, including Auto Prep Center of Shawano; Lee’z Gas and Mini Mart; 22 Shawano, LLC; Bonduel City Express Corp.; J.S. Rusch, Inc.; and Schierl Sales Corp.

The competitors said Midwest Oil’s decision put them in an unfair dilemma of either raising prices and losing sales of gas and other goods or setting the lower price and losing money on the gas sales.

Midwest Oil conceded that its Oct. 18 price was below cost but that it didn’t violate the law because it set its price after checking the competition and filed the required Notice of Meeting the Competition with the DATCP.

Grover ruled Midwest Oil violated the Unfair Sales Act, failing to aggressively survey its competition, thus acting in bad faith in setting its price.

In overturning that decision, the three-judge appeals court said the law does not specify how often price surveys must be conducted – state regulators recommend daily surveys – or during what time period. Midwest Oil acted in good faith to comply with the law because it performed daily price surveys, the panel said.

There was no evidence Kindseth delayed her price survey or set the station’s gas price "with the intent to defraud or seek an unconscionable advantage," the appeals court said.

While the statute doesn’t define "good faith" the DATCP rules suggest daily price checks but don’t require them, the appeals opinion stated.

"Nowhere does the Department require or even suggest a price check every 24 hours; rather, it recommends daily price surveys. It is undisputed that the Institute conducted price surveys on Oct. 17 and Oct. 18. Thus, the Institute conducted ‘daily price surveys’ and complied with the department’s recommendation," Judge Gregory Peterson wrote in the nine-page opinion.