Title: Casserlie v. Shell Oil Co.

State: ohio

Issuer: Ohio Supreme Court

Document:

[Cite as Casserlie v. Shell Oil Co., 121 Ohio St.3d 55, 2009-Ohio-3.] 
 
 
CASSERLIE ET AL., APPELLANTS, v. SHELL OIL COMPANY ET AL., APPELLEES. 
[Cite as Casserlie v. Shell Oil Co., 121 Ohio St.3d 55, 2009-Ohio-3.] 
Contracts — Good faith — R.C. 1302.18(B) — 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. 
(No. 2007-1408 – Submitted May 20, 2008 – Decided January 6, 2009.) 
APPEAL from the Court of Appeals for Cuyahoga County, 
No. 88361, 2007-Ohio-2633. 
__________________ 
SYLLABUS OF THE COURT 
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. 
__________________ 
MOYER, C.J. 
I 
{¶ 1} Appellants’ proposition of law proposes that “[t]he definition of 
Good Faith under the [Uniform Commercial Code] incorporating an ‘honesty in 
fact’ component requires a subjective inquiry.”  We disagree and affirm the 
judgment of the court of appeals. 
II 
SUPREME COURT OF OHIO 
2 
{¶ 2} Appellants, Donald Casserlie and others, are a group of 
independent Shell lessee-dealers in the greater Cleveland area (collectively, “the 
dealers”).  The appellees in this case are Shell Oil Company, its partners, and its 
successors (collectively, “Shell”), who at various times between 1995 and the time 
the complaint was filed sold Shell-branded gasoline to the dealers in the greater 
Cleveland area.  The dealers leased gas stations, including equipment and land, 
from Shell and operated them as franchisees.  The parties’ contracts obligated the 
dealers to buy gasoline only from Shell at a wholesale price set by Shell at the 
time of delivery.  This type of term in a contract is known as an open-price term. 
{¶ 3} The price paid by the dealers is referred to as the dealer-tank-
wagon (“DTW”) price because it includes the cost of delivery to the stations.  
Shell charged the dealers a DTW price that was based on market factors including 
the prices offered by its major competitor, British Petroleum (“BP”), and the street 
price within areas of Cleveland.  In each area of the city, called a price 
administration district (“PAD”), Shell charged all dealers the same DTW price. 
{¶ 4} In 1998, Shell, Texaco, and Saudi Aramco formed Equilon 
Enterprises L.L.C.; Shell’s agreements with service stations in Cleveland were 
assigned to Equilon.  In November 1999, Equilon and appellee Lyden Company 
entered into a joint venture called True North Energy, L.L.C.  True North became 
the distributor of Shell-branded gasoline in the Cleveland area, including to the 
stations operated by the dealers.  True North set the DTW price as the wholesale 
price it had paid Equilon for gasoline plus six or seven cents per gallon. 
{¶ 5} Shell also sold gasoline to “jobbers,” which were independent 
companies operating non-Shell-owned gas stations.  Jobbers purchased gasoline 
directly at the oil company’s terminal and paid the “rack” price, which was the 
cost of purchasing gasoline at the oil company’s terminal and thus did not include 
delivery costs. 
January Term, 2009 
3 
{¶ 6} In 1999, the dealers filed suit against Shell, alleging, among other 
claims, that Shell had engaged in bad faith when it set the DTW price.  The 
dealers alleged that the rack price was often substantially lower than the DTW 
price.  This allowed jobbers, including Lyden Company, to offer wholesale DTW 
prices that were substantially lower than the DTW price charged to the dealers.  
The dealers contend that this pricing is unreasonable and is part of a marketing 
plan proposed by Shell that was designed to drive them out of business.  The 
dealers assert that Shell’s goal was to eliminate them so that Shell could take over 
operation of the gas stations, thus profiting from all of the sales, including nonfuel 
sales, at the stations, and not just from wholesale gasoline sales to and rental 
income from the dealers. 
{¶ 7} The parties agreed to bifurcate the proceedings and move forward 
only on the bad-faith claim.  On April 13, 2005, the trial court granted summary 
judgment for Shell.  The court found that Shell did not violate R.C. 1302.18, 
which codifies Uniform Commercial Code (“UCC”) section 2-305 and requires a 
price to be fixed in good faith, when it set the DTW price and that the dealers had 
not proven that the price had been set in a commercially unreasonable manner. 
{¶ 8} The dealers appealed, 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 is 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.  The court 
determined that the dealers failed to show that Shell’s prices were not 
commercially reasonable.  The cause is before this court upon our acceptance of a 
discretionary appeal. 
III 
SUPREME COURT OF OHIO 
4 
{¶ 9} As a preliminary matter, we review de novo the granting of 
summary judgment.  Comer v. Risko, 106 Ohio St.3d 185, 2005-Ohio-4559, 833 
N.E.2d 712, ¶ 8. 
{¶ 10} 
The parties agree that Shell has authority pursuant to the dealer 
agreements to set the price of gasoline at the time of delivery.  They agree that the 
price must be set subject to R.C. 1302.18, which requires the price to be 
“reasonable.”  R.C. 1302.18(A).  Pursuant to R.C. 1302.18(B) (UCC section 2-
305(2)), the price must be set “in good faith.”  “Good faith” is defined generally 
as “honesty in fact in the conduct or transaction concerned,”  R.C. 1301.01(S), but 
in the case of a merchant, “ ‘good faith’ * * * means honesty in fact and the 
observance of reasonable commercial standards of fair dealing in the trade.”  R.C. 
1302.01(A)(2).  It is undisputed that Shell is a “merchant,” as defined in R.C. 
1302.01(A)(5). 
{¶ 11} 
Shell argues that good faith requires an objective inquiry and is 
demonstrated when a seller’s price is within the range of its competitors and the 
seller has not discriminated between similarly situated buyers.  Shell also 
contends that “an inquiry into the seller’s subjective intent is neither permitted nor 
required.”  The dealers argue that good faith requires a subjective inquiry and ask, 
“[H]ow can an open price, specifically calculated to drive a contractual partner out 
of business, be a ‘good faith’ price.” 
{¶ 12} 
The trial court and court of appeals agreed with Shell, relying on 
Tom-Lin Ents., 349 F.3d 277.  In Tom-Lin, the court confronted an agreement 
nearly identical to the one between the dealers and Shell and concluded, applying 
Ohio law, that an inquiry into good faith required “an objective analysis of the 
merchant-seller’s conduct.”  (Emphasis sic and footnote omitted.) Id. at 281-282.  
Thus, neither the trial court nor the court of appeals considered whether an 
January Term, 2009 
5 
examination into “good faith” required a subjective inquiry, and neither court 
engaged in a subjective inquiry. 
{¶ 13} 
It is not disputed that the latter half of the definition of good 
faith, “the observance of reasonable commercial standards of fair dealing in the 
trade,” requires only an objective analysis.  The issue before us is whether there is 
room for a subjective inquiry within the honesty-in-fact analysis in these 
circumstances. 
{¶ 14} 
The UCC does not define the term “honesty in fact.”  It should 
also be noted that “[c]ourts and commentators have recognized that the meaning 
of ‘good faith’ is not uniform throughout the [UCC].”  Mathis v. Exxon Corp. 
(C.A.5, 2002), 302 F.3d 448, 456.  See also Martin Marietta Corp. v. New Jersey 
Natl. Bank (C.A.3, 1979), 612 F.2d 745, 751 (noting that good faith is considered 
subjective in Article 1 but objective in Article 2).  Thus, case law defining good 
faith in other areas of the UCC, such as the Article 1 covenant of good faith and 
fair dealing, is of somewhat limited value here.  Non-UCC cases defining good 
faith are of even less relevance. 
{¶ 15} 
Official Comment 3 to UCC section 2-305 does provide some 
guidance.  That comment provides, in full: 
{¶ 16} 
“[UCC section 2-305(2)], dealing with the situation where the 
price is to be fixed by one party rejects the uncommercial idea that an agreement 
that the seller may fix the price means that he may fix any price he may wish by 
the express qualification that the price so fixed must be fixed in good faith.  Good 
faith includes observance of reasonable commercial standards of fair dealing in 
the trade if the party is a merchant.  (Section 2-103 [R.C. 1302.01]).  But in the 
normal case a ‘posted price’ or a future seller’s or buyer’s ‘given price,’ ‘price in 
effect,’ ‘market price,’ or the like satisfies the good faith requirement.” 
SUPREME COURT OF OHIO 
6 
{¶ 17} 
Comment 3 explains that the purpose of R.C. 1302.18(B) is to 
restrict the price a seller or buyer may set when the contract price has been left 
open, by requiring the price to be fixed in good faith.  The second sentence of the 
comment does not remove honesty in fact from the definition of good faith in this 
context, because it uses the nonexclusive term “includes.”  The last sentence, 
however, is not limited to part of the good-faith definition but rather provides a 
safe harbor where a “posted price” satisfies good faith in its entirety. 
{¶ 18} 
A number of cases from other jurisdictions considering open-
price terms have relied on the posted-price comment.1  This court has noted in the 
past that “it is desirable to conform our interpretations of the Uniform 
Commercial Code to those of our sister states.”  Edward A. Kemmler Mem. 
Found. v. 691/733 E. Dublin-Granville Rd. Co. (1992), 62 Ohio St.3d 494, 499, 
584 N.E.2d 695.  Relying on the Official Comments to the UCC helps to achieve 
this uniformity, as does reviewing case law that has previously interpreted 
particular provisions. 
{¶ 19} 
The Supreme Court of Texas addressed the very issue before us 
here in an essentially identical fact pattern in Shell Oil Co. v. HRN, Inc. 
(Tex.2004), 144 S.W.3d 429.  Independent gasoline dealers brought suit against 
Shell, alleging that the prices were not set in good faith under UCC section 2-
305(2) because Shell had set the prices intending to put them out of business.  144 
S.W.3d at 431-432.  The court held that Shell did not violate its duty of good 
faith, because the posted price was both commercially reasonable and 
nondiscriminatory.  Id. at 435-436.  It noted that “ ‘[i]t is abundantly clear * * * 
                                                 
1.  See Havird Oil Co., Inc. v. Marathon Oil Co., Inc. (C.A.4, 1998), 149 F.3d 283, 290-291; 
Richard Short Oil Co., Inc. v. Texaco, Inc. (C.A.8, 1986), 799 F.2d 415, 422; United Food Mart, 
Inc. v. Motiva Ents., L.L.C. (S.D.Fla.2005), 457 F.Supp.2d 1329, 1334-1338; Wayman v. Amoco 
Oil Co. (D.Kan.1996), 923 F.Supp. 1322, 1349; Shell Oil Co. v. HRN, Inc. (Tex.2004), 144 
S.W.3d 429, 433-438. 
January Term, 2009 
7 
that the chief concern of the UCC Drafting Committee in adopting § 2-305(2) was 
to prevent discriminatory pricing.’ ”  Id. at 434, quoting Wayman, 923 F.Supp. at 
1346-1347.  A subjective good-faith inquiry “injects uncertainty into the law of 
contracts and undermines one of the UCC’s primary goals-to ‘promot[e] certainty 
and predictability in commercial transactions.’ ”  Id. at 435, quoting Am. Airlines 
Emps. Fed. Credit Union v. Martin (Tex. 2000), 29 S.W.3d 86, 92, quoting 
Putnam Rolling Ladder Co., Inc. v. Mfrs. Hanover Trust Co. (1989), 74 N.Y.2d 
340, 349, 547 N.Y.S.2d 611, 546 N.E.2d 904.  The drafters of the UCC, therefore, 
incorporated the posted-price safe harbor to prevent extensive litigation involving 
any open-price term, “while seeking ‘to avoid discriminatory prices.’ ”  Id., 
quoting Malcolm, The Proposed Commercial Code: A Report on Developments 
from May 1950 through February 1951 (1951), 6 Bus.Law. 113, 186.  The court 
concluded that subjective intent was not intended to stand alone as a basis for 
liability: “[A]llegations of dishonesty under this section must also have some 
basis in objective fact which at a minimum requires some connection to the 
commercial realities of the case.”  Id. at 435-436. 
{¶ 20} 
A few cases note the posted-price comment but conclude that it 
does not provide a safe harbor where there is subjective bad faith.  See Marcoux v. 
Shell Oil Prods. Co. L.L.C. (C.A.1, 2008), 524 F.3d 33, 50; Mathis, 302 F.3d at 
455-456; Bob’s Shell, Inc. v. O’Connell Oil Assoc., Inc. (Aug. 31, 2005), D.Mass. 
No. 03-30169, 2005 WL 2365324; see also Allapattah Servs., Inc. v. Exxon Corp. 
(S.D.Fla.1999), 61 F.Supp.2d 1308, 1322 (finding that when the seller double 
charged for credit-card processing, the action was not a “normal case,” because 
the dispute was not over the actual price charged but over the manner in which the 
price was calculated; thus, the safe-harbor provision did not apply).  Those cases 
contend that the comment is limited to the “normal case,” which does not include 
SUPREME COURT OF OHIO 
8 
a situation where the seller is purposefully trying to drive the buyer out of 
business. 
{¶ 21} 
This interpretation would eviscerate the safe harbor in any action 
in which the plaintiff alleges circumstantial evidence of an improper motive, 
leading to drawn-out litigation “even if the prices ultimately charged were 
undisputedly within the range of those charged throughout the industry.”  HRN, 
144 S.W.3d at 435.  See Berry, Byers, & Oates, Open Price Agreements: Good 
Faith Pricing in the Franchise Relationship (2007), 27 Franchise L.J. 45, 49.  If a 
subjective inquiry could determine bad faith, a seller charging a fair price, even 
exactly the same price as another, good-faith seller, could be deemed to be acting 
in bad faith. 
{¶ 22} 
There appear to be five other cases, besides HRN, that directly 
address the issue of subjectivity.  Two, each holding in favor of a subjective 
inquiry, were decided under Massachusetts law.  See Marcoux, 524 F.3d 33; 
Bob’s Shell, 2005 WL 2365324.  Mathis, 302 F.3d 448, the only other case 
proposing subjectivity, is no longer good law, as it was decided by the Fifth 
Circuit Court of Appeals under Texas law before the Texas Supreme Court issued 
its ruling in HRN.  The final two cases, including one from the Sixth Circuit 
applying Ohio law, conclude that UCC section 2-305 requires only an objective 
inquiry.  See Tom-Lin Ents., 349 F.3d 277; United Food Mart, Inc. v. Motiva 
Ents., L.L.C. (S.D.Fla.2005), 457 F.Supp.2d 1329.  There are a number of other 
cases discussing similar open-price-term contracts under UCC section 2-305 that 
conduct only an objective analysis, although those cases do not directly state that a 
subjective inquiry is inappropriate.  See, e.g., Schwartz v. Sun Co., Inc. (R & M) 
(C.A.6, 2002), 276 F.3d 900, 905; Mikeron, Inc. v. Exxon Co., U.S.A. 
(D.Md.2003), 264 F.Supp.2d 268, 276; T.A.M., Inc. v. Gulf Oil Corp. 
(E.D.Pa.1982), 553 F.Supp. 499, 509.  In total, prior to this court’s opinion today, 
January Term, 2009 
9 
at least three jurisdictions found that the test could be met only with objective 
evidence of bad faith, while only one concluded that evidence of intent was 
sufficient. 
{¶ 23} 
All of this is not to say that intent is necessarily irrelevant to an 
analysis of good faith under UCC section 2-305(2), but only that a subjective 
inquiry is not permitted when the posted-price safe harbor applies.  By its 
language, the safe harbor does not apply when it is not the “normal case” or when 
the price setter is not imposing a “posted price,” “given price,” “price in effect,” 
“market price,” or the like.  As long as a price is commercially reasonable, it 
qualifies as the “normal case.”  The touchstone of prices set through open-price-
term contracts under UCC section 2-305 is reasonableness.  A price that is 
nondiscriminatory among similarly situated buyers correspondingly qualifies as a 
“posted price” or the like.  A discriminatory price could not be considered a 
“posted” or “market” price, because, in effect, the seller is not being “honest in 
fact” about the price that it is charging as a posted price, since it is charging a 
different price to other buyers. 
{¶ 24} 
Therefore, a price that is both commercially reasonable and 
nondiscriminatory fits within the limits of the safe harbor and complies with the 
statute’s good-faith requirement.  Given our conclusion below that the safe harbor 
applies to the facts of this case, we are not required to precisely define good faith 
as it is used in UCC section 2-305(2).  We offer no opinion, in particular, on the 
role of subjective intent within the good-faith analysis beyond the safe harbor. 
IV 
{¶ 25} 
The facts of this case demonstrate that the prices set by Shell 
were both commercially reasonable and nondiscriminatory.  Aside from claiming 
that Shell’s goal in setting prices was to drive the dealers out of business, the only 
evidence of bad faith was that the prices set were too high for dealers to remain 
SUPREME COURT OF OHIO 
10 
profitable and compete with jobbers in the Cleveland area.  However, Shell is not 
required to sell gasoline at a price that is profitable for buyers.  “A good-faith 
price under section [2-305] is not synonymous with a fair market price or the 
lowest price available.”  HRN, 144 S.W.3d at 437.  As noted by the court of 
appeals: “The trial court * * * found that Shell submitted expert testimony which 
established that the DTW prices set by the company were within the range set by 
its competitors.”  Casserlie v. Shell Oil Co., 2007-Ohio-2633, at ¶ 31.  The dealers 
failed to rebut this evidence.  Id. 
{¶ 26} 
The dealers also point out that Shell’s prices varied throughout 
the area because of PAD pricing.  But the fact that Shell’s DTW prices varied by 
PADs does not itself demonstrate unreasonable or discriminatory pricing.  It is 
reasonable for Shell to adjust according to competition, and there is no evidence 
that Shell discriminated among similarly situated buyers, such as dealers within a 
given PAD or dealers in similar PADs. 
{¶ 27} 
Finally, the only other argument of discrimination put forth by 
the dealers is that jobbers were charged significantly less, specifically, the rack 
price rather than the DTW price.  Jobbers and dealers are not, however, similarly 
situated buyers.  The price difference is partially explained by the fact that the 
DTW price includes a delivery charge, while the rack price does not.  We further 
find the Sixth Circuit Court of Appeals analysis comparing jobbers and dealers in 
Tom-Lin instructive, just as the lower courts did.  See Tom-Lin Ents., 349 F.3d at 
285-286.  Tom-Lin noted that jobbers perform additional functions compared to 
dealers, such as maintaining the properties they own and bearing the risk of 
environmental liability.  Id. at 285.  Because jobbers relieve Shell of these 
obligations, they are charged a lower price.  The dealers have not challenged these 
differences.  The disparate pricing between jobbers and dealers is not evidence of 
discrimination. 
January Term, 2009 
11 
V 
{¶ 28} 
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.  In this case, the dealers have not provided any evidence 
that the prices set by Shell were commercially unreasonable or discriminatory.  
The posted-price safe harbor therefore applies, and we affirm the judgment of the 
court of appeals. 
Judgment affirmed. 
 
LUNDBERG STRATTON, O’CONNOR, O'DONNELL, and CUPP, JJ., concur. 
 
LANZINGER, J., concurs in judgment only. 
 
PFEIFER, J., dissents. 
__________________ 
PFEIFER, J., dissenting. 
{¶ 29} 
The majority opinion’s reliance on the safe-harbor presumption 
is misplaced, as shown by one simple fact:  Official Comment 3 to Uniform 
Commercial Code (“UCC”) section 2-305, which introduced the concept of a 
safe-harbor presumption, has never been adopted by the General Assembly.  See 
Am.S.B. No. 5, 129 Ohio Laws 13, 28.  The safe-harbor presumption is not part of 
the law of Ohio, despite the majority opinion’s insouciant belief to the contrary. 
{¶ 30} 
“Good faith” is generally treated as incorporating both subjective 
and objective standards.  Although R.C. 1302.18 deals exclusively with open-
price terms, it does not define “good faith” differently from its customary 
meaning.  Many different jurisdictions in many different contexts, including in the 
context of an open-price term, define “good faith” as requiring both subjective and 
objective analysis.  I am more persuaded by the bulk of these cases than by the 
SUPREME COURT OF OHIO 
12 
fact that three out of four jurisdictions (one of which, in my view, mistakenly 
applied Ohio law) have decided that an open-price term is susceptible only of 
objective analysis.  See Bhatia v. Debek (2008), 287 Conn. 397, 412, 948 A.2d 
1009, quoting Kendzierski v. Goodson (1990), 21 Conn.App. 424, 429-430, 574 
A.2d 249 (“In common usage, the term good faith has a well defined and 
generally understood meaning, being ordinarily used to describe that state of mind 
denoting honesty of purpose, freedom from intention to defraud, and, generally 
speaking, means being faithful to one's duty or obligation. * * *  Whether good 
faith exists is a question of fact to be determined from all the circumstances”); 
Tonka Tours, Inc. v. Chadima (Minn.1985), 372 N.W.2d 723, 728 (determining 
good faith “necessarily involves factual findings. * * * It is for the trier of fact to 
evaluate the credibility of a claim of ‘honesty in fact’ and, in doing so, to take 
account of the reasonableness or unreasonableness of the claim”); Smalygo v. 
Green (Okla.2008), 184 P.3d 554, 559 (“By requiring good faith, the Legislature 
did not create an ambiguity nor did it render the provision vague. Rather, it 
employed a well-known legal concept that applies to a variety of situations and 
transactions. For example, the Uniform Commercial Code defines ‘good faith’ as 
‘honesty in fact and the observance of reasonable commercial standards of fair 
dealing.’ * * * Similarly, the concept of subjective honesty combined with 
objective reasonableness is found in an insurer's ‘implied-in-law duty to act in 
good faith and deal fairly with the insured to ensure that the policy benefits are 
received.’ Christian v. Am. Home Assurance Co., 1977 OK 141, ¶ 8, 577 P.2d 
899, 901”); Simmons v. Jenkins (1988), 230 Mont. 429, 435, 750 P.2d 1067 (“the 
breach of a duty of good faith is a question of fact not susceptible to summary 
judgment” [emphasis sic]); Miller Brewing Co. v. Ed Roleson, Jr., Inc. (2006), 
365 Ark. 38, 45, 223 S.W.3d 806 (in determining whether the Miller Brewing 
Company violated the Arkansas Franchise Practices Act, Ark.Code Ann. 4-72-201 
January Term, 2009 
13 
et seq., the Supreme Court of Arkansas stated that “[w]hether Miller dealt with the 
franchise in a commercially reasonable manner and in good faith is a fact question 
for the jury”); Garrett v. BankWest, Inc. (S.D.1990), 459 N.W.2d 833, 841 
(“Good faith is derived from the transaction and conduct of the parties.  Its 
meaning varies with the context and emphasizes faithfulness to an agreed 
common purpose and consistency with the justified expectations of the other 
party”);  and Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assoc. 
(2005), 182 N.J. 210, 224-225, 864 A.2d 387, quoting 4 Williston on Contracts 
(3d Ed.1961), Section 610B (“The covenant of good faith and fair dealing calls for 
parties to a contract to refrain from doing ‘anything which will have the effect of 
destroying or injuring the right of the other party to receive’ the benefits of the 
contract”). 
{¶ 31} 
The majority opinion dismisses these cases as being of “limited 
value” because they do not specifically address open-price terms.  But “good 
faith” does not have a different meaning in Ohio, which has not adopted the UCC 
comments, when used with open-price terms than when used in any other context.  
Although the cases mentioned above discussed “good faith” in a variety of 
contexts, the courts agree that it is not possible to determine whether a party acted 
in “good faith” without a subjective inquiry.  See Allapattah Servs., Inc. v. Exxon 
Corp. (S.D.Fla.1999), 61 F.Supp.2d 1308, 1322, fn. 24 (The UCC “imposes a 
duty on merchants to meet good faith requirements that are measured both 
subjectively and objectively”). 
{¶ 32} 
We have had little occasion to discuss “good faith” in Ohio other 
than to parrot the Revised Code.  See Master Chem. Corp. v. Inkrott (1990), 55 
Ohio St.3d 23, 28, 563 N.E.2d 26 (“ ‘ Good faith’ is defined in UCC 1-201(19), 
R.C. 1301.01(S), as ‘honesty in fact in the conduct or transaction concerned’ ”); 
Arcanum Natl. Bank  v. Hessler (1982), 69 Ohio St.2d 549, 554, 23 O.O.3d 468, 
SUPREME COURT OF OHIO 
14 
433 N.E.2d 204 (same).  But we have defined “bad faith” as “ ‘that which imports 
a dishonest purpose and implies wrongdoing or some motive of self-interest.’ ”  
Master Chem., 55 Ohio St.3d at 28, quoting Smith v. Halverson (S.D.1978), 273 
N.W.2d 146, 151 (Wollman, C.J., dissenting).  See Black’s Law Dictionary (8th 
Ed.2004) 713 (“good faith” is defined as the “absence of intent to defraud or to 
seek unconscionable advantage”).  Tom-Lin Ents., Inc. v. Sunoco, Inc. (R&M) 
(C.A.6, 2003), 349 F.3d 277, on which the majority opinion relies, clearly 
misinterpreted Master Chem. in concluding that “good faith” requires only 
objective inquiry.  The definition of “bad faith” in Master Chem. is the closest that 
opinion came to addressing the issue before us, and it does not support the 
conclusion reached by the court in Tom-Lin or the conclusion reached by the 
majority in this case.  Master Chem., 55 Ohio St.3d at 28. 
{¶ 33} 
Although Shell cited several cases from federal courts to support 
its contention that prices set pursuant to an open-price term are subject to only 
objective inquiry, none of them are persuasive.  Ajir v. Exxon Corp. (May 26, 
1999), C.A. 9 Nos. 97-17032 and 97-17134, 1999 WL 393666, did not address 
“good faith” but only whether the price charged was “commercially reasonable.”  
Id. at *7.  Schwartz v. Sun Co., Inc. (C.A.6, 2002), 276 F.3d 900, 905, does not 
support Shell’s contention, because the court addressed only the “commercially 
reasonable” aspect of “good faith.”  USX Corp. v. Internatl. Minerals & Chems. 
Corp. (Feb.8, 1989), N.D.Ill. No. 86 C 2254, 1989 WL 10851, *1, does not 
support Shell’s contention, because the court emphasized only that the obligation 
to fix a price in good faith does not “impose a requirement for a seller to match 
the lowest price available,” an issue that is not before us.  Adams v. G.J. Creel & 
Sons, Inc. (1995), 320 S.C. 274, 279, 465 S.E.2d 84, does not support Shell’s 
contention, because the court stated only that the plaintiff did not produce 
evidence that the price fixed by the defendant was unreasonable.  Richard Short 
January Term, 2009 
15 
Oil Co., Inc. v. Texaco, Inc. (C.A.8, 1986), 799 F.2d 415, 422-423, also does not 
speak directly to subjective or objective inquiry; the court concluded that Short 
had not presented sufficient evidence to support a claim that Texaco did not act in 
good faith when it set a cap on rebates, in part because Short did not show that 
Texaco was dishonest or had a bad motive to injure Short.  Wayman v. Amoco Oil 
Co. (D.Kan.1996), 923 F.Supp. 1322, 1349, does not support Shell’s contention.  
In Wayman, the court concluded that the plaintiffs could not establish that Amoco 
had set its price in bad faith.  That court stated, however, that “[i]f there was 
evidence that Amoco had, for example, engaged in discriminatory pricing or tried 
to run plaintiffs out of business, then the court's decision might be different.”  
T.A.M., Inc. v. Gulf Oil Corp. (E.D.Pa.1982), 553 F.Supp. 499, 509, does not 
support Shell’s contention.  The court stated, with respect to “good faith,” that 
“[t]he plaintiffs have not alleged that the prices they were asked to pay differed 
from those demanded of other Gulf dealers.”  In short, none of these cases provide 
a reason to conclude that the analysis of whether a defendant acted in good faith in 
setting a price under an open-price term is amenable only to objective inquiry. 
{¶ 34} 
The majority opinion also relies on Shell Oil Co. v. HRN, Inc. 
(Tex.2004), 144 S.W.3d 429, in which the Supreme Court of Texas considered 
the issue that is before us and concluded that open-price terms are subject only to 
objective inquiry.  Because the court in HRN relied on the readily distinguishable 
federal cases discussed above and on the safe-harbor presumption, which Ohio 
has not adopted, this court should not rely on HRN.  See Bob's Shell, Inc. v. 
O'Connell Oil Assoc., Inc. (Aug. 31, 2005), D.Mass. No. 03-30169, 2005 WL 
2365324 (the court rejected the logic and conclusion of HRN and stated that it 
agreed “with Plaintiffs' assertion that [UCC] section 2-305's purpose of preventing 
price discrimination should bar a supplier from trying to drive its dealers out of 
business”). 
SUPREME COURT OF OHIO 
16 
{¶ 35} 
“Good faith” in the context of open-price terms should be subject 
to both objective and subjective inquiry.  Even courts and commentators who 
have written in favor of the safe-harbor presumption have concluded that an intent 
to drive a contractual partner out of business might overcome the presumption.  
Wayman, 923 F.Supp. at 1349; Berry, Byers, and Oates, Open Price Agreements:  
Good Faith Pricing in the Franchise Relationship (2007),  27 Franchise L.J. 45, 
51.  See Wilson v. Amerada Hess Corp. (2001), 168 N.J. 236, 247, 773 A.2d 1121 
(“various courts have stated that a party must exercise discretion reasonably and 
with proper motive when that party is vested with the exercise of discretion under 
a contract” [emphasis added]).  I can conceive of situations in which 
nondiscriminatory pricing could violate “good faith.”  For instance, in this case, it 
is alleged that Shell charged all of its similarly situated franchisees the same price, 
and it is alleged that that price was set too high for them to profitably operate a 
gas station.  In that situation, even though the pricing was nondiscriminatory, it 
was designed to drive a contractual partner out of business.  So much for the 
concept of a partnership. 
{¶ 36} 
I believe that “good faith” as defined in R.C. 1302.01 requires 
parties to act both honestly in fact and according to reasonable commercial 
standards.  A court’s analysis of a merchant’s good faith, then, should be both 
subjective and objective.  Furthermore, the safe-harbor presumption, even though 
not part of the law of Ohio, only applies in the normal case; at a minimum, the 
appellants should be allowed to attempt to establish that this is not a normal case.  
I would reverse the judgment of the court of appeals and remand the cause for 
further consideration consistent with this opinion.  After this opinion becomes 
public, all franchisees in Ohio should watch their wallets very carefully because 
their franchisors will no longer be held to subjective good-faith standards.  
Instead, the law of the ocean applies:  the big fish are free to consume smaller fish 
January Term, 2009 
17 
at will.  Apparently, not until the waters are exclusively inhabited by a few great 
white sharks will the majority decide they need a bigger boat or a more robust 
interpretation of the UCC. 
__________________ 
Robert E. Sweeney Co., L.P.A., Bernard Goldfarb, and Sean S. Kelly; and 
O’Quinn Law Firm and Anthony E. Farah, for appellants. 
Baker & Hostetler, L.L.P.,  Thomas R. Lucchesi, and Lora M. Reece; and 
Baker Botts, L.L.P., Thomas R. Phillips, and David M. Rodi, for appellees. 
__________________