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People by Abrams v. Two Wheel Corp.

Court of Appeals of New York

March 21, 1988, Argued ; April 28, 1988, Decided

No Number in Original

Opinion

 [*695]  [***47]  [**693]    OPINION OF THE COURT

This appeal requires us to consider several aspects of New  [*696]  York's price-gouging statute (General Business Law § 396-r), which prohibits merchants from charging unconscionably excessive prices for essential consumer goods during disruptions in the market caused by such forces as strikes, power failures, weather conditions and other emergencies.

Respondent Two Wheel Corp., through its division, Honda-Yamaha of Mineola, is a retailer of portable electric generators; respondent Morris Zegarek is president of the corporation. The Attorney-General initiated this proceeding pursuant to the enforcement powers granted by General Business Law § 396-r (4) and Executive Law [****8]  § 63 (12), alleging that respondents violated the price-gouging prohibition following Hurricane Gloria, which left much of Long Island without electrical power between September 27 and October 8, 1985.

The petition charged that, beginning on September 26, in anticipation of the storm, and continuing through October 5, respondents sold approximately 100 generators at inflated prices ranging from 4% to 67% over the "base prices" for those models. 1 Respondents did not deny either the sales or the price disparities. They argued, however, that generator sales were not governed by the price-gouging statute. In addition, they contended that the price increases were justified by increased freight and labor costs and various business risks associated with the sales, such as the possibility that customers might cancel their orders if power were restored before the generators were delivered, leaving respondents with a large inventory.

 [****9]  Supreme Court denied respondents' request for a hearing, concluding that no  [***48]   [**694]  factual issues had been raised, and granted the relief sought in the petition. In pertinent part, respondents were ordered to pay a civil penalty of $ 5,000, to make restitution to 13 consumers who had submitted affidavits in support of the petition, and to establish a $ 20,000 restitution fund for other consumers who purchased generators from respondents during the period for any amount exceeding the base price. The Appellate Division affirmed (128 AD2d 507) and we granted leave. We affirm, but for reasons which differ from those given by the trial court and the Appellate Division.

 [*697]  The substance of the price-gouging prohibition is found in subdivision (2) of General Business Law § 396-r: "During any abnormal disruption of the market for consumer goods and services vital and necessary for the health, safety and welfare of consumers, resulting from stress of weather, convulsion of nature, failure or shortage of electric power or other source of energy * * * no merchant shall sell or offer to sell any such consumer goods or services for an amount which represents an unconscionably [****10]  excessive price." Consumer goods and services are defined as "those used, bought or rendered primarily for personal, family or household purposes".

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71 N.Y.2d 693 *; 525 N.E.2d 692 **; 530 N.Y.S.2d 46 ***; 1988 N.Y. LEXIS 612 ****

The People of the State of New York, by Robert Abrams, as Attorney-General of the State of New York, Respondent, v. Two Wheel Corp., Doing Business as Honda-Yamaha of Mineola, et al., Appellants

Prior History:  [****1]  Appeal, by permission of the Court of Appeals, from an order of the Appellate Division of the Supreme Court in the Second Judicial Department, entered March 24, 1987, which affirmed a judgment of the Supreme Court (Angelo D. Roncallo, J.), entered in Nassau County, inter alia, enjoining respondents from selling or offering for sale any consumer goods or services for an unconscionably excessive price during any abnormal disruption of the market, ordering them to make restitution, and assessing a civil penalty against them in the amount of $ 5,000.

 People v Two Wheel Corp., 128 AD2d 507.

Disposition: Order affirmed, with costs.

CORE TERMS

unconscionably, sales, generators, disruption, consumers, merchant, excessive price, costs, respondents', disparity, increased price, increases, facie, consumer goods, price-gouging, electric, gouging, prices, predisruption, restitution, base price, abnormal, bargaining, supplier, factors

Antitrust & Trade Law, Consumer Protection, Deceptive & Unfair Trade Practices, General Overview, Commercial Law (UCC), Collateral, Goods, Consumer Goods, Business & Corporate Compliance, Types of Commercial Transactions, Sales of Goods, Remedies, Limitations & Modifications, Exclusive & Optional Remedies, Contracts Law, Defenses, Unconscionability, General Provisions (Article 1), General Provisions, Application & Construction, Sales (Article 2), Contract Provisions, Contract Terms, Unconscionable Terms, Form, Formation & Readjustment, Unconscionable Limitations, Warranties, Exclusions & Modifications, Buyer's Damages & Remedies, Limitation & Modification, Seller's Damages & Remedies