People v. Two Wheel Corp.
71 N.Y.2d 693, 530 N.Y.S.2d 46, 525 N.E.2d 692 (1988)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under New York's price-gouging statute, a price may be deemed "unconscionably excessive" based on procedural unconscionability, where a merchant exploits the unequal bargaining power created by a market disruption. Evidence of a gross disparity in price for some transactions can create a presumption that all price increases for the same goods during that single disruptive event are unconscionably obtained.
Facts:
- Hurricane Gloria caused a widespread power outage across Long Island from September 27 to October 8, 1985, creating an abnormal market disruption.
- Two Wheel Corp., presided over by Morris Zegarek, was a retailer of portable electric generators.
- In anticipation of and during the power outage, from September 26 to October 5, Two Wheel Corp. sold approximately 100 generators.
- The prices for these generators were inflated by amounts ranging from 4% to 67% over the prices charged immediately before the hurricane.
- Some consumers needed the generators for essential health and safety purposes, such as powering a nebulizer for a child with asthma or operating refrigerators and freezers to preserve food.
- Two Wheel Corp. contended that its price increases were justified by increased freight and labor costs, as well as various business risks.
Procedural Posture:
- The New York Attorney-General initiated a proceeding against Two Wheel Corp. and its president, Morris Zegarek, in the New York Supreme Court (the trial court of first instance).
- The trial court granted summary judgment for the Attorney-General, finding respondents had violated the price-gouging statute.
- The trial court ordered respondents to pay a civil penalty, make restitution to specific consumers, and establish a restitution fund for others.
- Respondents (as appellants) appealed the decision to the Appellate Division of the Supreme Court (an intermediate appellate court).
- The Appellate Division affirmed the trial court's order.
- The Court of Appeals (New York's highest court) granted respondents leave to appeal.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does proof that a merchant charged grossly disparate prices for some items during a single market disruption create a presumption that all of the merchant's price increases for those items, including lesser ones, are 'unconscionably excessive' under New York's price-gouging statute?
Opinions:
Majority - Chief Judge Wachtler
Yes. Proof that a merchant charged grossly disparate prices for some items during a single market disruption creates a presumption that all price increases for those items are unconscionably excessive. The term 'unconscionably excessive' encompasses both substantive and procedural elements. Procedural unconscionability looks at the contract formation process, including inequality of bargaining power. Here, the hurricane created an abnormal disruption and a temporary imbalance of bargaining power, which Two Wheel Corp. exploited. The statute's 'gross disparity' provision is a procedural tool to establish a prima facie case, not a rigid definition of price gouging. Since all sales occurred during one short, continuous event, the unconscionable conduct of using leverage taints all price increases, not just the most extreme ones.
Dissenting - Judge Alexander
No. The price-gouging statute requires the Attorney-General to prove on a transaction-by-transaction basis that a specific price represented a 'gross disparity' and was therefore unconscionably excessive. The statute prohibits charging 'a price' that is unconscionably excessive and states that evidence of 'a gross disparity' in 'the transaction' constitutes prima facie proof. The majority's holding improperly dilutes the Attorney-General's burden by allowing evidence from one transaction to condemn all others, regardless of how small the price increase. This approach effectively punishes a merchant for any price increase during a disruption, even if it does not meet the statutory standard of a 'gross disparity,' and incorrectly authorizes restitution for consumers who were not actually charged an unconscionably excessive price.
Analysis:
This decision significantly broadens the interpretation of 'unconscionability' within New York's price-gouging statute by emphasizing the procedural aspect—the seller's exploitation of a crisis—over a purely substantive one, such as a specific price-increase threshold. By allowing a presumption of guilt to flow from a few egregious examples to all related transactions, the court makes it easier for the Attorney-General to prosecute price gouging and secure widespread restitution. The case establishes a precedent that any price increase motivated by the leverage gained during a market disruption can be deemed unlawful, shifting the focus from 'how much' the price went up to 'why' it went up.
