R L Jordan Oil Comp v. Boardman Petroleum ( 2003 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
R. L. JORDAN OIL COMPANY OF 
NORTH CAROLINA, INCORPORATED,
Plaintiff-Appellant,
v.
 No. 03-1152
BOARDMAN PETROLEUM,
INCORPORATED, A Georgia
Corporation,
Defendant-Appellee.

Appeal from the United States District Court
for the District of South Carolina, at Spartanburg.
Henry M. Herlong, Jr., District Judge.
(CA-98-2892-7-20)
Argued: October 28, 2003
Decided: December 22, 2003
Before LUTTIG, WILLIAMS, and GREGORY, Circuit Judges.
Reversed and remanded by published opinion. Judge Luttig wrote the
opinion, in which Judges Williams and Gregory concur.
COUNSEL
ARGUED: Matthew A. Henderson, HENDERSON, BRANDT &
VIETH, P.A., Spartanburg, South Carolina, for Appellant. William
Marvin Grant, Jr., GRANT & LEATHERWOOD, Greenville, South
Carolina, for Appellee. ON BRIEF: Joshua M. Henderson, HEN-
2 JORDAN OIL CO. v. BOARDMAN PETROLEUM
DERSON, BRANDT & VIETH, P.A., Spartanburg, South Carolina,
for Appellant. R. Perry Sentell, III, KILPATRICK STOCKTON,
L.L.P., Augusta, Georgia, for Appellee.
OPINION
LUTTIG, Circuit Judge:
Appellant R. L. Jordan Oil Company ("Jordan Oil") appeals from
the district court’s dismissal of its suit against appellee Boardman
Petroleum, Inc. ("Boardman"), brought under section 325(A) of the
South Carolina Unfair Trade Practices Act, S.C. Code § 39-5-325(A).
For the reasons that follow, we reverse and remand for further pro-
ceedings.
I.
The facts giving rise to Jordan Oil’s claim against Boardman are
set forth in our opinion in Jordan Oil’s first appeal of this case, and
we do not recount them here. See R. L. Jordan Oil Co. of North Caro-
lina, Inc. v. Boardman Petroleum, Inc., 23 Fed. Appx. 141, 142-43
(4th Cir. 2001) (per curiam) (unpublished).
Upon remand following our decision, the district court found that
it had diversity jurisdiction over this case under 28 U.S.C. § 1332(a),
and, per our instructions, certified to the South Carolina Supreme
Court the question of whether Boardman fell within the "meet compe-
tition" exception of section 325(A). The South Carolina Supreme
Court, in turn, held that the "meet competition" clause meant what it
said and did not include Boardman’s retail sale of fuel $0.02 below
the price of its competition. See R.L. Jordan Oil Co. of North Caro-
lina, Inc. v. Boardman Petroleum, Inc., 572 S.E.2d 288, 290 (S.C.
2002) ("R.L. Jordan II").
On December 31, 2002, the district court dismissed the case again,
on the ground that section 325(A) violates the substantive due process
clause of the South Carolina Constitution, S.C. Const. art. I, § 3. In
the alternative, the district court found that, even if section 325(A) did
JORDAN OIL CO. v. BOARDMAN PETROLEUM 3
not violate the state constitution, Jordan Oil’s claim still failed
because section 325(A) required the plaintiff "to submit evidence of
an anti-competitive or anti-trust injury to prevail," J.A. 93, which Jor-
dan Oil failed to do. From this judgment, Jordan appeals.
II.
Initially, the district court erred by first deciding the constitutional-
ity of the act and only thereafter interpreting the statute. If, as the dis-
trict court held, section 325(A) required Jordan Oil to show that
Boardman’s conduct caused "anti-competitive or anti-trust injury to
prevail," J.A. 93, then it was not necessary for the court to consider
whether section 325(A) violated the state constitution’s substantive
due process clause. Indeed, were the district court correct in its inter-
pretation of section 325(A), the statute would not violate the state
constitution under the district court’s own constitutional analysis,
because the statute would "create a violation" only where the plaintiff
could show "anti-competitive or anti-trust injury," not "where there is
any injury to a competitor." J.A. 93. Nevertheless, because we find
that the act does not require proof of "anti-competitive or anti-trust
injury," we must address both questions.
A.
We turn first to the interpretation of section 325(A). Section
325(A) provides as follows:
Except as otherwise permitted to meet competition as pro-
vided by this chapter, it is declared an unfair trade practice
and unlawful for any person who is in the retail business of
selling motor fuel to sell motor fuel of like grade and quality
at retail at a price which is below the cost of acquiring the
product plus taxes and transportation where the intent or
effect is to destroy or substantially lessen competition or to
injure a competitor.
S.C. Code § 39-5-325(A) (emphasis added). The district court inter-
preted the phrase, "or to injure a competitor," to require that a plaintiff
"submit evidence" that the defendant’s conduct caused an "anti-
4 JORDAN OIL CO. v. BOARDMAN PETROLEUM
competitive or anti-trust injury." J.A. 93. The district court explained,
and held, that this required the plaintiff to show "either effect or intent
to injure competition as a whole." Id.
We conclude that this interpretation was in error under the plain
language of the statute. See Wade v. Berkeley County, 559 S.E.2d
586, 588 (S.C. 2002) (holding that, "[i]f a statute’s language is plain
and unambiguous, and conveys a clear and definite meaning, there is
no occasion for employing rules of statutory interpretation and the
court has no right to look for or impose another meaning"). Section
325(A) provides that below cost selling is an "unfair trade practice"
in two different circumstances, "where the intent or effect is to
destroy or substantially lessen competition," or "where the intent or
effect is . . . to injure a competitor." To interpret the act as the district
court did, transposes the showing of harm to competition required
under the first circumstance onto the less demanding showing of "in-
jury to a competitor" required by the second, effectively reading the
lower standard of the second circumstance out of the act.
Without specific direction from the South Carolina courts, we
decline to read section 325(A) in such a way to deny independent
effect to each of its clauses. Accordingly, we hold that the clause, "or
to injure a competitor" in section 325(A), requires simply that "the
intent or effect" of the defendant’s below cost-selling be to injure the
plaintiff.
B.
Having interpreted section 325(A) to allow a competitor to recover
upon a mere showing of economic injury as a result of the defendant’s
below cost selling of motor fuel, we turn to the question of whether,
as the district court held, the act violates the substantive due process
clause of the South Carolina state constitution. We conclude that it
does not.
Until the South Carolina Supreme Court’s decision in R.L. Jordan
Oil Co., Inc. v. Boardman Petroleum, Inc., 527 S.E.2d 763 (S.C.
2000) ("R.L. Jordan I"), in which the South Carolina Supreme Court
answered a question certified to it in this case, the South Carolina
courts, "adhered to the traditional substantive due process analysis
JORDAN OIL CO. v. BOARDMAN PETROLEUM 5
developed by the United States Supreme Court during the first third
of the 20th century," id. at 764, in giving meaning to the substantive
due process clause of the South Carolina Constitution. In R.L. Jor-
dan I, however, the South Carolina Supreme Court overruled its pre-
vious cases and adopted the "modern rule" for judging substantive
due process challenges. The inquiry under this "new" approach is
"[w]hether [the statute being challenged] bears a reasonable relation-
ship to any legitimate interest of government." Id. at 765. As the R.L.
Jordan I court observed, this "modern rule gives great deference to
legislative judgment on what is reasonable to promote the public wel-
fare when reviewing economic and social welfare legislation." Id.
Applying this deferential standard, it is evident that the district
court erred in concluding that, insofar as section 325(A) "creates a
violation where there is any injury to a competitor,"* "it is not reason-
ably related to the legitimate state interest of preventing predatory
pricing, and therefore cannot be upheld." J.A. 93. There are two fun-
damental flaws in the district court’s analysis.
First, the district court erroneously presumed that the legitimate
state interest, to which section 325(A) must be "reasonably related,"
is limited to "preventing predatory pricing," or, put another way, to
deterring below cost pricing only when such pricing harms competi-
tion as a whole. For better or worse, the state legislature’s power is
not so circumscribed. There are myriad "legitimate interest[s] of gov-
ernment" that do not necessarily promote competition in marketplace,
such as the prevention of "loss leader" selling or the promotion of sta-
bility in the market for gasoline prices. Either interest would be
directly served by section 325(A).
Second, even accepting the prevention of "predatory pricing" as the
state’s only legitimate interest, it is clear that section 325(A) is "rea-
sonably related" to that interest. Simply because the state legislature
seeks to deter anti-competitive conduct does not mean that it must
*The district court held that the constitutional infirmities of section
325(A) would be cured by severing the "or to injure a competitor" clause,
thereby making it a requirement, under the statute, for a plaintiff to show
that the defendant’s conduct had the "intent or effect . . . to destroy or
substantially lessen competition." J.A. 93.
6 JORDAN OIL CO. v. BOARDMAN PETROLEUM
require plaintiffs to demonstrate that the defendant’s conduct had
such an effect in every case. The legislature could reasonably choose,
as it appears to have done here, to accept the plaintiff’s own injury
as a proxy for such anti-competitive effect. One could quibble with
this choice on the ground that it may also penalize entities whose
below-cost selling is pro-competitive; but, critically, this does not
mean that such a choice fails to bear a "reasonable relationship" to the
goal of preventing anti-competitive conduct.
III.
For the reasons stated, the judgment of the district court is reversed
and the case is remanded for further proceedings consistent with this
opinion.
REVERSED AND REMANDED