Court Opinion

ID: 9642604
Source: CourtListenerOpinion
Date Created: 2023-08-22 18:04:07.894121+00
Date Added: 2024-06-11T18:10:50.015830
License: Public Domain

Walter Niblock, Special Justice, dissenting. INTRODUCTION I respectfully dissent to the opinion of the majority on all counts. Further, I am authorized to state that Special Justices Bell and Bonds join in this dissent. I would affirm the decision of Judge Reynolds, as it is my belief that the majority did not give due deference to the findings of fact of the trial court, and as a result reached a decision that I cannot subscribe to; therefore, based upon the analysis which follows I would affirm the trial court’s decision. This case presents an issue of first impression — the interpretation of the Arkansas Unfair Practices Act, codified at Ark. Code Ann. § 4-75-201 et seq. In interpreting a statute and attempting to construe legislative intent, the appellate court looks to the language of the statute, the subject matter, the remedy provided, legislative history, and other appropriate means that throw light on the subject. McCoy v. Walker, 317 Ark. 86, 89, 876 S.W.2d 252, 254 (1994) (quoting Gritts v. State, 315 Ark. 1, 864 S.W.2d 859 (1993)). The Arkansas Unfair Practices Act (hereinafter Arkansas Act) was enacted in 1937, during the Great Depression, as a companion to the Robinson-Patman amendments to the Clayton Act. This Court has stated that “the purpose of this act is to safeguard the public against the creation or perpetuation of monopolies and to foster and encourage competition, by prohibiting unfair and discriminatory practices by which fair and honest competition is destroyed or prevented. This act shall be literally construed that its beneficial purposes may be subserved.” Beam v. Monsanto Co.. Inc., 259 Ark. 253, 532 S.W.2d 175 (1976). I. PROCEDURAL HISTORY. The Appellees, American Drugs, Inc., Tim Benton d/b/a/ Mayflower Family Pharmacy and Jim Hendrickson d/b/a/ Baker Drug, filed a complaint on December 17, 1991, in the Circuit Court of Faulkner County, alleging that the defendant, Wal-Mart Stores, Inc., advertised, offered for sale, and sold merchandise at retail for less than the cost of the merchandise to the retailer, in violation of the Arkansas Act. Appellees requested damages and an injunction against Appellant to cease and desist violating the Arkansas Act. As a result of the remedies requested, this case was transferred to the Chancery Court of Faulkner County. After a full hearing of the testimony and evaluation of the evidence, Judge David Reynolds entered an order on October 14, 1993, finding Wal-Mart in violation of the Arkansas Act. The trial court specifically found that Wal-Mart had made sales to the public at a price below the cost of the merchandise. Citing a lack of direct evidence, the trial court found the prohibitive intent, intent to injure competitors and destroy competition, from the effects of its stated policy on the plaintiffs, and six enumerated factors. The six factors were: (1) the number and frequency of below cost sales; (2) the extent of below cost sales; (3) Wal-Mart’s stated pricing policy — “meet or beat the competition without regard to cost;” (4) Wal-Mart’s stated purpose of below cost sales — to attract a disproportionate number of customers to WalMart; (5) the in-store price comparison of products sold by competitors, including Plaintiffs; and (6) the disparity in prices between Faulkner County prices of the relevant product-lines and other markets with more and less competition. On October 21, 1993, Appellant Wal-Mart requested Judge Reynolds to make additional findings of fact concerning the constitutionality of the Arkansas Act as it is written and as it was applied in this case. Judge Reynolds found that the Arkansas Unfair Practices Act was constitutional on its face and in its application and did not violate either the Arkansas or the United States Constitution. It is from this decision that the Appellant appeals. II. STANDARD OF REVIEW. We review chancery cases de novo and will not reverse a finding of fact unless if is clearly erroneous. Smith v. Paul, 317 Ark. 182, 876 S.W.2d 266 (1994) (quoting Conway Corp. v. Construction Eng’rs, Inc., 300 Ark. 225, 782 S.W.2d 36 (1986)); Leathers v. Active Realty, Inc., 317 Ark. 214, 876 S.W.2d 583 (1994); ARCP 52(a); Roach v. Concord Boat Corp., 317 Ark. 474, 880 S.W.2d 305 (1994); Brasel v. Brasel, 313 Ark. 337, 854 S.W.2d 346 (1993); Milligan v. General Oil Co., 293 Ark. 401, 738 S.W.2d 404 (1987). We affirm if we find the result reached by the chancellor was correct for any reason. Pryor v. Raper, 46 Ark. App. 150, 877 S.W.2d 952 (1994); American Investors Life Insurance Co. v. TCB Transportation, 312 Ark. 343, 345, 849 S.W.2d 509, 511 (1993). We consider the evidence in the light most favorable to the appellee. Leathers v. W.S. Compton, Co., 316 Ark. 10, 14, 870 S.W.2d 710, 712 (1994); Guaranty Nat’l Ins. v. Denver Roller Inc., 313 Ark. 128, 854 S.W.2d 312 (1993). The burden is upon the appellant to show that the findings are erroneous. Leathers v. W.S. Compton, Co., 316 Ark. at 14, 870 S.W.2d at 712; Burson v. Day, 284 Ark. 515, 683 S.W.2d 917 (1985). III. ISSUES ON APPEAL. A. CHANCELLOR’S RULING IS LEGALLY ERRONEOUS; DOES NOT SUPPORT AN INFERENCE OF INTENT TO DESTROY COMPETITION; AN INFERENCE IS CONTRARY TO LEGISLATIVE INTENT. For its first point of error, Appellant argues that the Chancellor used an improper legal standard to find the inference of intent to destroy competition. The analysis advanced by Appellant requires Appellees to establish two factors: (a) conduct inconsistent with a lawful purpose; and (b) knowing conduct that creates a dangerous probability of achieving a monopoly. Appellant states the Appellees did not establish these two factors, and any inference of unlawful purpose by the Trial Court is, therefore, improper and legally erroneous. Appellees responded to this argument by stating that the Chancellor not only used the proper standard but evaluated the evidence and reached the only permissible conclusion. The evidence showed that up to thirty percent (30%) of Wal-Mart’s pharmaceutical sales were below cost (R. 1808-1810); that Wal-Mart posted negative profit margins on their most competitive items in over one-half of the period under examination; and that many of the prices were below invoice or replacement cost without consideration of the additional factors mandated by Ark. Code Ann. § 4-75-209(b)(2). Appellant’s contention is unpersuasive on two points. First, Appellant fails to identify the legal standard used and how the legal standard was improperly applied. Appellant also failed to articulate the alleged “proper legal standard” for this Court to use when interpreting the Arkansas Act. Second, Appellant provides this Court with a potential framework for analysis but provides no authority or source for this framework. If Appellant does not like the statute as it is written, its remedy is in the legislature not the courts. “However this question ... is not a matter to be addressed by the court but is within the province of the legislature.... [T]his is a matter which must be left to the sound discretion of the General Assembly.” State v. Ruiz & Van Denton, 269 Ark. 331, 602 S.W.2d 625, 626 (1980). Appellant’s second argument concerns the inference of intent to destroy competition and that the enumerated factors identified by the Chancellor could not possibly support an unlawful inference. The burden is upon the appellant to show that the findings are erroneous. Leathers v. W.S. Compton, Co., 316 Ark. at 14, 870 S.W.2d at 712; Burson v. Day, 284 Ark. 515, 683 S.W.2d 917 (1985). Despite their analysis of each factor, Appellants fail to articulate a legal basis to reverse the findings and conclusions of the Chancellor. Appellant argues that the interpretation of the Arkansas Act given by the Chancellor is inconsistent with legislative intent. They cite the Unfair Cigarette Sales Act, Ark. Code Ann. § 4-75-708(b) (Michie 1991), in which the legislature inserted a provision that below cost sales were “prima facie evidence of intent to injure competitors and destroy or substantially lessen competition.” Because the legislature failed to insert a comparable provision in the Arkansas Act, Appellant argues that non-inclusion of a similar phrase “establishes that the General Assembly did not intend for unlawful intent to be inferred from below-cost sales.” The proper source of legislative intent is the language of the statute. The legislative intent of the Arkansas Act is expressed in Ark. Code Ann. § 4-75-202: The General Assembly declares that the purpose of this subchapter is to safeguard the public against the creation or perpetuation of monopolies and to foster and encourage competition by prohibiting unfair and discriminatory practices by which fair and honest competition is destroyed or prevented. The basic rule of statutory construction, to which all other interpretations must yield, is to give effect to the intent of the General Assembly. Pugh v. St. Paul Fire & Marine Ins. Co., 317 Ark. 304, 877 S.W. 577, 578 (1994) (quoting Roy v. Farmers & Merchants Ins. Co., 307 Ark. 213, 819 S.W.2d 2 (1991)). This Court should give effect to the expressed General Assembly intent, and in doing so, should reject the argument advanced by the Appellant. This Court adopted this language in Beam v. Monsanto Co.. Inc., 259 Ark. 253, 532 S.W.2d 175 (1976), and should continue to construe the Arkansas Act consistent with the intent of the legislature as expressed in the statute. The Court should decline to engage in speculation and conjecture to unearth a possible legislative intent, and should reject Appellant’s contention that the legislature’s failure to include a statement similar to the one found in the Unfair Cigarette Sales Act necessitates a conclusion that the interpretation of the Arkansas Act is inconsistent with legislative intent. Unlike the Arkansas Act which addresses the creation and maintenance of monopolies and discriminatory practices, the Unfair Cigarette Sales Act was enacted to address unfair and deceptive business practices. See Preamble to Unfair Cigarette Sales Act, Title 4, Chapter 75, Subchapter 7 (Michie 1991). B. VALUATION OF COST AND PROFIT — MARKET-BASKET OR SINGLE PRODUCT? Appellant’s next point of error requires this Court to examine the language of the statute and resolve the question of what price benchmark should be used to determine if the Arkansas Act has been violated. Appellant urges this Court to adopt a market basket valuation approach for the cost of goods. Under the market basket approach, a court would be required to consider other factors in addition to the invoice cost of an item allegedly for sale below cost. Appellant’s economist, Dr. Leonard White, testified that the cost of an item under the market basket approach would include the product, the atmosphere of the store, the parking lot, air conditioning, and a whole group of services that surround the purchase of the alleged below cost item. Appellees urge this Court to adopt a single product cost comparison to determine if sales below cost have occurred. Under the individual item approach, the invoice cost of a product becomes the benchmark to determine if sales below cost have occurred. The Arkansas Act has not been interpreted on this point. The Chancellor found Wal-Mart guilty of violating § 4-75-209(a)(1), which states: (a)(1) It shall be unlawful for any person, partnership, firm, corporation, joint-stock company, or other association engaged in business within this state, to sell, offer for sale, or advertise for sale any article or product, or service or output of a service trade, at less than the cost thereof to the vendor, or to give, offer to give, or advertise the intent to give away any article or product, or service or output of a service trade, for the purpose of injuring competitors and destroying competition. The first rule in considering the meaning of a statute is to construe it just as it reads, giving the words their ordinary and usually accepted meaning in common language. McCoy v. Walker, 317 Ark. 86, 876 S.W.2d 252, 254 (1994) (quoting Mountain Home School Dist. v. TMJ Builders, 313 Ark. 661, 858 S.W.2d 74 (1993)). When a statute is clear, it is given its plain meaning and we do not search for legislative intent. That intent must be gathered from the plain meaning of the language used. Pugh v. St. Paul Fire & Marine Ins. Co., 317 Ark. 304, 877 S.W. 577, 578 (1994) (quoting Hinchey v. Thomasson, 292 Ark. 1, 727 S.W.2d 836 (1987)). A literal reading of Ark. Code Ann. § 4-75-209 supports the Trial Court’s use of a “single product” cost comparison to determine if Appellant has engaged in below cost sales in violation of the Arkansas Act. The language of § 4-75-209 refers to “any article or product” and does not include consideration of the atmosphere of the store, the parking lot, air conditioning, and a whole group of services that surround the purchase of an item. We should reject Appellant’s market basket approach for establishing the price benchmarks. C. THE ARKANSAS ACT VIOLATES THE ARKANSAS CONSTITUTION. Appellant argues that the Trial Court’s construction of the Arkansas Act bears no rational relation to legislative purpose and violates the Arkansas Constitution, Article 2, Section 2, which states: All men are created equally free and independent, and have certain inherent and inalienable rights, amongst which are those of enjoying and defending life and liberty; of acquiring, possessing and protecting property and reputation, and of pursuing their own happiness. To secure these rights governments are instituted among men, deriving their just powers from the consent of the governed. Appellant cites Union Carbide & Carbon Corp. v. White River Distrib., Inc., 224 Ark. 558, 275 S.W.2d 455 (1955) in which this Court ruled that the Arkansas Fair Trade Act was unconstitutional, as it established minimum prices. This Court said that “the right to sell is a valuable property [that] cannot be denied.” Id. at 561. Appellant also cites Noble v. Davis, 204 Ark. 156, 161 S.W.2d 189 (1942), in which a statute establishing minimum prices, commissions and hours of operations for barbers failed a constitutional challenge. Appellant states that this Court found that “statute had no rational relation to the public safety, health or welfare.” Id. at 152-63. The same result should attain here. Appellant states “[t]hat these cases establish that the Arkansas Constitution recognizes that each person has a right to sell his property and services at the price at which he chooses. That right should not be abridged except upon a compelling showing of public harm.” We review challenges to the constitutionality of statutes under the principle that statutes are presumed to be constitutional. First National Bank v. Ark. State Bank Comm’n, 301 Ark. 1, 784 S.W.2d 744 (1989). The burden of proving a statute unconstitutional is upon the party challenging it. Urrey Ceramic Tile Co. v. Mosley, 304 Ark. 711, 805 S.W.2d 541 (1991). On appeal, if it is possible to construe a statute as to meet the test of constitutionality, we will do so. Id.; Clinton v. Bonds, 306 Ark. 554, 556, 816 S.W.2d 169. In searching for any rational basis, we ask whether the created classification has a conceivable reasonable relationship to the governmental action. Medlock v. Leathers, 311 Ark. 175, 842 S.W.2d 428, 431 (1992) (quoting Madden v. Kentucky, 309 U.S. 83, 60 S.Ct. 406, 84 L.Ed. 590 (1940)). Our task is merely to consider if any rational basis exists which demonstrates the possibility of a deliberate nexus with state objectives so that the legislation is not the product of utterly arbitrary and capricious government and void of any hint of deliberate and lawful purpose. Medlock v. Leathers, 311 Ark. 175, 842 S.W.2d 428, 431 (1992) (quoting Streight v. Ragland, 280 Ark. 206, 214-15, 655 S.W.2d 459, 464 (1983)); Arkansas Hosp. Ass’n v. Bd. of Pharmacy, 297 Ark. 454, 763 S.W.2d 73, 74 (1989). The Arkansas Act addresses the creation of and perpetuation of monopolies. Appellees established at trial that Appellant sold goods below invoice cost and presented circumstantial evidence from which the Chancellor made a permissible inference of intent to destroy competition and harm competitors. Once a plaintiff has established that one of the enumerated conditions existed in a given market, this Court and any court under its jurisdiction must follow the dictates of the statute. Appellant merely alleges that the Arkansas Act as applied in this case is unconstitutional. It would require intellectual somersaults to declare that the Arkansas Act does not have any rational basis for its enactment by the Legislature. The task of the court “is merely to consider if any rational basis exists which demonstrates the possibility of a deliberate nexus with state objectives so that the legislation is not the product of utterly arbitrary and capricious government and void of any hint of deliberate and lawful purposes.” Medlock v. Leathers, 311 Ark. 175, 842 S.W.2d 428, 431 (1992). The court should find that the Appellant failed to establish that there was no rational basis for the Arkansas Act as applied in this case. D. THE ARKANSAS ACT IS PREEMPTED BY FEDERAL LAW. Appellant argues the Arkansas Act is preempted by the Robinson-Patman Amendments to the Clayton Act, which specifically addresses the weapon of predatory pricing by monopolies. United States v. National Dairy Products Corp., 372 U.S. 29, 83 S.Ct. 594, 9 L.Ed.2d 561, reh. den., 372 U.S. 961, 83 S.Ct. 1011, 10 L.Ed.2d 13. The doctrine of federal preemption is based upon the supremacy clause in Article VI, Clause 2, of the United States Constitution. CIBA-Geigy Corp. v. Alter, 309 Ark. 426, 834 S.W.2d 136 (1992). State laws that “interfere with, or are contrary to the laws of congress, made in pursuance of the constitution” are invalid. Gibbons v. Ogden 22 U.S. (9 Wheat.) 1, 211, 6 L.Ed. 23 (1824). The preemption test of Gibbons v. Ogden was expanded in Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 104 S.Ct. 2694, 81 L.Ed.2d 580 (1984), where the Court based preemption on four factors: whether' Congress expressed a clear intent to preempt state law; whether Congress occupies the field so as to leave no room for the states to supplement; whether compliance with both the state and federal laws is impossible; and whether the state law stands as an obstacle to Congress’ objective or purpose. Id. This Court adopted the U.S. Supreme Court’s test of preemption in Medlock v. Leathers, 311 Ark. 175, 842 S.W.2d 428, 433 (1992). In deciding whether a state law would be preempted, [the Court] asked whether the state law stood as an obstacle to the accomplishment of Congress’s objectives or purposes. Medlock v. Leathers, 311 Ark. 175, 842 S.W.2d 428, 433 (1992). The burden is on the moving party to prove that Congress intended to preempt state law. CIBA-Geigy Corp. v. Alter, 309 Ark. 426, 834 S.W.2d 136, 142 (1992) (quoting Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 104 S.Ct. 615, 78 L.Ed.2d 443 (1984)). “The fact that the Arkansas statute is broader in scope than the Robinson-Patman Act does not invalidate the state statute, for in applying the rational basis test, the judiciary will not act as a superlegislature to question the means employed to accomplish the state objective.” Arkansas Hosp. Ass’n v. Bd of Pharmacy, 297 Ark. 454, 763 S.W.2d 73, 75 (1989) (quoting Massachusetts Board of Retirement v. Murgia, 427 U.S. 307, 316-17, 96 S.Ct. 2562, 2568-69, 49 L.Ed.2d 520 (1976)). “As long as the classificatory scheme ... rationally advances a reasonable and identifiable governmental objective, we [the judiciary] must disregard the existence of other methods of [achieving the legislative goal] that we, as individuals, perhaps would have preferred.” Arkansas Hosp. Ass’n v. Bd. of Pharmacy, 297 Ark. 454, 763 S.W.2d 73, 75 (1989) (quoting Schweiker v. Wilson, 450 U.S. 221, 235, 101 S.Ct. 1074, 1083, 67 L.Ed. 2d 186 (1981)). We find Appellant has not established that the Arkansas Act is contrary to or in opposition to any federal statute. Further, Appellant has not demonstrated that “Congress expressed a clear intent to preempt state law; Congress occupies the field so as to leave no room for the states to supplement; [that] compliance with both the state and federal laws is impossible; and [that] the state law stands as an obstacle to Congress’ objective or purpose.” Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 104 S.Ct. 2694, 81 L.Ed.2d 580 (1984). IV. CONCLUSION. We would hold that the Appellant has failed to prove that the Chancellor used an improper legal standard with respect to the inference of intent to injure competitors and to destroy or substantially lessen competition. We also find that the Chancellor could have found an intent to injure competitors from the evidence in the record and particularly from the testimony of David Glass, president of Wal-Mart Stores, Inc., who used language such as “aggressive,” “do whatever it takes,” “kill the competition’s momentum,” and “war zones.” Appellant failed to establish that the Arkansas Act violates rights guaranteed by the Arkansas Constitution, Article 2, Section 2. Appellant also failed to establish that the Arkansas Act was preempted by federal law. For the foregoing reasons, I would affirm the trial judge’s decision. Special Justices A. Watson Bell and Barbara P. Bonds join.