People v AGIP Gas, LLC

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People v AGIP Gas, LLC 2013 NY Slip Op 32805(U) October 18, 2013 Sup Ct, Suffolk County Docket Number: 13-11907 Judge: Jerry Garguilo Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [* 1] I I MEMORANDUM Copy I SUPREME COURT, SUFFOLK COUNTY I.A.S. PART 471 ----------------------------------------------------------------X THE PEOPLE OF THE STATE OF NEW YORK By ERIC T. SCHNEIDERMAN, Attorney General of the State iJfNew York, Petitioner, I By: Jerry Gar$,uilo, J.S.C. Dated: October 1/8, 2013 I IndexNo. 13-llfJ07 Mot. Seq. #001 -/MotD; CDISPSUBJ I - against - Return Date: Adjourned: 5Jt3!13 7/~4/13 ! AGIP GAS, LLC, d/b/a USA PETROLEUM, Respondent. ----------------------------------------------------------------)( ERIC T. SCHNEIDERMAN, ESQ. Attorney General of the State of New York By: Matthew S. Eubank, Esq. 55 Hanson Place, Suite 1080 Brooklyn, New York 11217 JULES A. EPST Attorney for Res 600 Old Country Garden City, Ne JN, P.C. ondent Road, Suite 505 r York 11530 In this proceeding, the petitioner seeks the entry of an order and judg ent (i) permanently enjoining the respondent, its successors, agents or a~:signs from selling or offe ing to sell any consumer goods or services for an amount which represents an unconscionably excessiv price during any abnormal disruption of the market for such goods, (ii) directing the responden to disgorge to New York State the amount of the excess profit it generated by price gouging, (iii) direct ng the respondent to pay a civil penalty for each violation of General Business Law§ 396-r, and (iv) dire 'ting the respondent to pay the petitioner the sum of $2,000.00 in costs pursuant to CPLR 8303 (a) (6). The petitioner initiated this proceeding pursuant to Executive Law § 61 (12) and General Business Law§ 396-r, under which the attorney gen~ral is authorized to seek edress on behalf of consumers against merchants who are alleged to have charged excessive price· for essential consumer goods and services during periods of abnormal disruption of the market, such is those following hurricanes and winter storms. I I According to the petition, the respondent, which operates a retail gasol ne filling station at l 1 h1sl Main Street. East Islip. New York, engaged in price gouging by illegally nflating the retail price of its gasoline in the aftermath of Hurricane Sandy, wh1eh hit the New York met opolitan area on October 29. 2012. On November 5, in response to a consumer complaint, the office of the attorney general sent a letter to the re.spondent requesting information on the prices it paid its supplie , and charged its consumers for its lowest grade of gasoline between October 22 and November 5. Based on the information provided by the respondent, it appears that on October 25, the res ondent received a delivery of regular unleaded gasoline, for which it p2.id $2.705 per gallon, and that on the same day, it [* 2] People v. AGIP Gas Index Nu. l 3- I 1907 Page 2 I charged a retail price of $3.779 per gallon, representing a markup of$1.074~er gallon; it also appears that from Novemb.er 3 through November 5, the re:;pondent received multi pl~ deliveries of regular . unleaded gasoline. for which it paid $3.145 per gallon, and that over those s 11e days, it charged a retail price of $4.599 per gallon, representing a markup cf $1.454 per gallon. / I The petitioner alleges two causes of action in its petition: the first, tl1t the respondent violated General Business La.\V § 396-r by charging "unconscionably excessive" pric s for its gasoline in the days following the "abnormal disruption of the market" 2aused by Hurricane San y, and the second, that the respondent violated Executive Law § 63 (12) by its repeated and persistent ii egal acts in violation of General Business Law § 396-r. ! i General Business Law§ 396-r, entitled "Price gouging," provides as 'allows: 1. Legislative findings and declaration. The legislature hereby finds of abnormal disruption of the market caused by strikes, power failure or other extraordinary adverse circumstances, some parties within the distribution of consumer goods have taken unfair advantage of consu grossly excessive prices for essential consumer goods and services. hat during periods , severe shortages chain of 1ers by charging I In order to prevent any party within the chain of distribution~ any consumer o' goods from taking unfair advantage of consumers during abnormal di Tuptions of the market, the legislature declares that the public interest requires that s 'h conduct be . prohibited and made subject to civil penalties. I 2. During any abnormal disruption of the market for consumer goods and services vital and necessary for the health, safety and welfare of consumers, no part 1 within the chain of distribution of such consumer goods or services or both shall sell o offer to sell any such goods or services or both for an amount which represents an unc mscionably excessive price. For purposes of this section, the phrase "abnormal di Tuption of the market" shall mean any change in the market, whether actual or immi ently threatened, resulting from stress of weather, convulsion of nature, failure or short ge of electric power or other source of energy, strike, civil disorder, war, military a ti on, national or local emergency, or other cause of an abnormal disruption of the marl et which results in the declaration of a state of emergency by the governor. For the purp ses of this section, the term consumer goods and services shall mean those used, bought r rendered primarily for personal, family or household purposes. This prohibitio shall apply to all parties within the chain of distribution, including any manufacturer, s pplier, wholesaler, distributor or retail seller of consumer goods or services or both sold y one party to another when the product sold was located in the state prior to the sale. Consumer goods and services shall also include any repairs m:ide by any party within t e chain of distribution of consumer goods on an emergency basis as a result of s ch abnormal disruption of the market. 3. \V'hcther a price is unconscionably excessive is a question of Ia\v the court. [* 3] People v. AG!P Gas fndex No. 13-11907 Page 3 (a) The court's determination that a violation of this section h ts occurred shall be based on any of the following factors: (i) tint the amount of the exce 'S in price is unconscionably extreme; or (ii) that there was an exercise of unfair le erage or unconscionable means; or (iii) a combinaticn of both factors in subpa agraphs (i) and (ii) of this paragraph. I i I (b) In any proceeding commenced pursuant to subdivision fo+ of this section, prim a facie proof that a violation of this section has occurred shall in~lude evidence that I (i) the amount charged repre~;ents a gross disparity bet goods or services which were the subject of the transaction and their the price at which such consumer goods or services were sold or offe defendant in the usual course of business immediately prior to the on disruption of the market or een the price of the alue measured by 'd for sale by the et of the abnormal (ii) the amount charged grossly exceeded the price at similar goods or services were readily obtainable by other consumers defendant may rebut a prima facie case with evidence that additional control of the defendant were imposed on the defendant for the goods hich the same or n the trade area. A osts not within the or services. 4. Where a violation of this section is alleged to have occurred, the at orney general may apply in the name of the People of the State of New York to the suprene court of the State of New York within the judicial district in which such violation are alleged to have occurred, on notice of five days, for an order enjoining or restraining ommission or continuance of the alleged unlawful acts. In any such proceeding, the court shall impose a civil penalty in an amount not to exceed twenty-five thousand dollar· and, where appropriate, order restitution to aggrieved consumers. Executive Law § 63 ( 12) provides: Whenever any person shall engage in repeated fraudulent or illegal ac s or otherwise demonstrate persistent fraud or illegality in the carrying on, conductin, or transaction of business, the attorney general may apply, in the name of the people of the state of New York. to the supreme court of the state of New York, on notice of five days, for an order enjoining the continuance of such business activity or of any fraudule1 tor illegal acts, directing restitution and damages and, in an appropriate case, cancelli g any certificate filed under and by virtue of the provisions of* **section one hundre l thirty of the general business law. and the court may award the relief applied for or so much thereof as it may deem proper. The word "fraud" or "fraudulent" as used herein -hall include any device. scheme or artifice to defraud and any deception, rnisrepresenta ion, concealment, suppression. false pretense, false promise or unconscionable contractu tl provisions. The term .. persistent fraud" or "illegality" as used herein shall include cont nuance or carrying on of any fraudulent or illegal act or conduct. The term "repeated" as sed herein shall include repetition of any separate and distinct fraudulent or illegal act, or conduct which [* 4] People'. AGIP Gas Index Nll. 13- 11907 Page 4 affects more than one person. In connection with any such application, the attorney general is auth rized to take proof and make a determination of the relevant facts and to issue subpoena in accordance with the civil practice law and rules. Such authorization shall not abate or terminate by reason of any action or proceeding brought by the attorney general under thi · section. As a threshold matter, there can be little argument that Hurricane San y created "an abnormal disruption of the market" for gasoline in the New York metropolitan area, th t gasoline falls within the definition of ·'consumer goods" that are vital and necessary for the health, sa ety, and welfare of consumers and used primarily for personal, family m household purposes, a d that the respondent is a .. party within the chain of distribution" of such goods (see General Business ,aw§ 396-r [2]; see also People v My Serv. Ctr., 14 Misc 3d 1217[A), 836 NYS2d 487 [2007); Peopl v Wever Petroleum, 14 Misc 3d 491, 827 NYS2d 813 [2006]). Tn accordance with those observations, and based on the evidence pre ·ented by the petitioner, the court finds such a gross disparity between the price at which gasoline was so d by the respondent on October 25 and the price at which it was sold from \Jovember 3 through Nov mber 5 as to establish prima facie proof that the price increase was uncorn:cionably excessive and, ence, that the respondent violated General Business Law§ 396-r (see General Business Law§ 396-r [3] [a), [b) [i)). To the extent the respondent claims that the petitioner's calculations of its markups are ina curate because they fail to properly account for taxes, its claim is unpersuasive. In particular, the respo dent argues that its gross purchase price for the regular unleaded gasoline which it received on Octobe 25 was actually $3.30 per gallon, not $2. 705 per gallon, and that its gross purchase price for the regular unleaded gasoline which it received from November 3 through November 5 was $3.74 per gallon, not $3 145 per gallon. Even using those figures, it remains that the retail price charged by the respondent m October 25 was $3.779, which reflects a markup of $0.4 79 per gallon, and that the retail price charge by the respondent from November 3 through November 5 was $4.599, which reflects a markup of $0. 59 per gallon-an increase in markup of nearly 80<Yo. The respondent also argues that the retail price oft e gasoline should be adjusted to reflect State sales tax of $0.10 or $0.11 per gallon which it is requ red to collect from consumers at the pump, i.e., that the retail price used as the basis for compari on should be net of those taxes. But that argument-irrespective of the dubious logic which it employs oes not avail the respondent either; if the markup immediately prior tJ Hurricane Sandy was o ly $0.3 79 and the markup from November 3 through November 5 was only $0.749, this would reflect ai (even greater) increase in markup of nearly 100%. Thus, notwithstanding the sharp increase in the pric which the respondent was evidently required to pay its supplier following Hurricane Sandy, it appears th it the concomitant increase in its retail price far exceeded what was required for the respondent to maintai 1 its profit margin (see People v Wever Petroleum, supra). The court further finds that the respondent failed to rebut the petitione 's prima facie case (see General Business Law~ 396-r [3] [b) [ii]). The respondent asserts, in relevan part, that the increased prices which it charged its customers from November 3 through November 5 'ere reasonable because of the additional burdens and costs, including man-hours, which it incurred relati g to gas lines, security concerns. crowd and traffic flow, uncertainty with respect to the delivery of re Jlacement inventory, and [* 5] People v. AGIP Gas Index No. 13-11907 Page 5 other .. soft costs'" due to emergency conditions. Additionally, the responden asserts that any increased leverage on its part was the result of New York's fr.ilure to earlier mandate o d/even gasoline rationing, as was done 111 Nevi Jersey, and that such failure and other failures to reduce ·onsumer anxiety led to the "topping otr phenomenon and contributed to the gas lines and supply issues which, in turn, increased the respondent's costs. Without more, however, the court is constrained to fi 1d such assertions insufficient to raise a triable issue of fact, particularly as the respondent faile to demonstrate the extent to which those burdens and costs justified the price increase (see People v T o Wheel Corp., 71 NY2d 693, 530 NYS2d 46 [1988]; People v Beach Boys Equip. Co., 273 AD2d 85 , 709 NYS2d 729 [2000]). Accordingly, the court finds as a matter of law that the price increase~vas "unconscionably excessive" in vi~lation of ~~ner~l B~siness Law §. 396-r and, further, that su h conduct constituted ··repeated * * * illegal acts' m v10lat10n of Executive Law § 63 (12). , 'i Notwithstanding the violation of those sections, the petitioner is note having failed to demonstrate that illegal acts are presently occurring or that a threatened and imminent (see Elow v Svenningsen, 58 AD3d 674, 873 NYS both General Business Law§ 396-r (4) and Executive Law§ 63 (12) provide apply for injunctive relief: neither authorizes the granting of such relief mere! respondent has violated its provisions. titled to injunctive relief, ditional illegal acts are 319 [2009]). Although hat the petitioner may ' upon a showing that the I The petitioner's further request for disgorgement of profits obtained b the respondent through its illegal acts is denied as well. While General Business Law§ 396-r (4) and Executive Law§ 63 (12) authorize the granting of restitution to aggrieved consumers-relief which the etitioner has not requested-they make no provision for disgorgement of profits to the State. E en had the petitioner sought restitution, the court would be inclined to deny the request in light oft e petitioner's failure to submit affidavits from consumers or to identify any consumers allegedly har ed by the price gouging (see People v Wever Petroleum, supra). I However, since General Business Law § 396-r ( 4) mandates the imposjtion of a civil penalty not to exceed $25.000.00 for its violation, the court hereby imposes against the re pondent a civil penalty in the amount of $10,000.00. 1 J i Finally, since CPLR 8303 (a) (6) provides that a court may award to thr' petitioner in a proceeding brought pursuant to Executive Law§ 63 (12) an allowance not exc eding $2,000.00 against each respondent. the court, in its discretion, hereby awards the petitioner an allowance in the amount of $2.000.00. i ! Submit judgment.

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