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When a price that has been left open in a contract is fixed at a price posted by a seller or buyer, and the posted price is both commercially reasonable and nondiscriminatory, the price setter has acted in good faith as required by R.C. 1302.18(B), and a subjective inquiry into the motives of the price setter is not permitted.
Appellants, Donald Casserlie and others, were a group of independent Shell lessee-dealers in the greater Cleveland area. They filed suit against Shell, alleging, among others, that Shell had engaged in bad faith when it set the dealer-tank-wagon ("DTW") price. Appellants contended that the pricing was unreasonable and was part of a marketing plan proposed by Shell that was designed to drive them out of business. The trial court granted summary judgment for Shell, holding that Shell did not violate R.C. 1302.18, which codified Uniform Commercial Code ("UCC") section 2-305 and required a price to be fixed in good faith. Appellants challenged the decision, arguing that bad faith may be shown either by evidence of a party's intent, a subjective standard, or by evidence of its commercial unreasonableness, which was an objective standard. The court of appeals affirmed the trial court's ruling and adopted an objective standard based on Tom-Lin Ents. v. Sunoco, Inc. (R&M) (C.A.6, 2003), 349 F.3d 277. A discretionary appeal was accepted.
Did the oil company act in bad faith when setting the dealer-tank-wagon ("DTW") price?
The state supreme court held that, pursuant to R.C. 1302.18, the posted-price safe harbor applied because the appellants did not provide any evidence that the prices set by the oil company were commercially unreasonable or discriminatory. The facts demonstrated that the prices set by the oil company were both commercially reasonable and nondiscriminatory. Aside from the appellants’ claim that the oil company’s goal in setting prices was to drive the appellants out of business, the only evidence of bad faith was that the prices set were too high for appellants to remain profitable and compete with jobbers in the area. However, the oil company was not required to sell gasoline at a price that was profitable for buyers. The oil company submitted expert testimony which established that the DTW prices set by the company were within the range set by its competitors. The appellants failed to rebut that evidence. Finally, the disparate pricing between jobbers and dealers was not evidence of discrimination. Accordingly, the judgment of the lower court was affirmed.