Marathon challenging Ky. price-gouging law

John O'Brien May 22, 2007, 4:00pm


FRANKFORT, Ky. - Kentucky Attorney General Greg Stumbo says he won the race to the courthouse, so Marathon Oil's challenge of the state's price-gouging law should be dismissed.

Just hours after Stumbo filed a lawsuit that alleged $89 million in damages as a result of Marathon's unlawful gas price-gouging during a declared state of emergency, Marathon filed its challenge in federal court for the Eastern District of Kentucky.

Stumbo last week filed a motion to dismiss the challenge, which can be viewed here.

"If this was a race to the courthouse, Marathon lost," Stumbo said. "Because the state court action came first, it should take precedence."

Stumbo's motion to dismiss relies on the "strong federal policy against interference with pending state judicial proceedings."

Currently, that proceeding is not in state court, though. Marathon had the case against it moved to federal court, and Stumbo is trying to remand it to state court.

Kentucky is the first state to charge a major oil refiner with price-gouging, which Stumbo said occurred in the wake of hurricanes Katrina and Rita. Marathon is Kentucky's largest wholesale supplier of gasoline.

Of the more than $89 million allegedly overcharged, Marathon was responsible for $86 million, while Speedway SuperAmerica overcharged an additional $3 million.

When Katrina hit the U.S., Stumbo requested Gov. Ernie Fletcher declare a state of emergency. Fletcher complied.

Stumbo helped push price-gouging legislation in 2004 that says during a declared emergency, "No person shall sell... a good or service...for a price which is grossly in excess of the price prior to the declaration and unrelated to any increased cost to the seller."

Marathon makes three arguments in its challenge of the law:

-That the law is too vague because it does not define the period of time during which emergency price controls remain in effect, does not provide standards to calculate permissible price increases, resulting in "arbitrary and discriminatory enforcement of the statute" and allowed Stumbo to "improperly" use profit margins as his basis for what he felt was excessive;

-That the declared state of emergency and subsequent enforcement of the law was unconstitutional because it did not set a date for its termination or renewal and "thereby establishes emergency price controls of indefinite duration, constituting an invalid exercise of absolute and arbitrary government power... and an invalid exercise of the General Assembly's law-making power by the Executive Branch; and

-That the law violates the Commerce Clause of the U.S. Constitution by "unreasonably impeding the flow of interstate commerce, prohibiting the flow of interstate goods, and thereby unconstitutionally limiting competition and discriminating against interstate commerce."

More News