If there is a silver lining to the extended application of most state price gouging laws, it is that we now know more about their ramifications. State attorneys general have launched numerous investigations and brought many lawsuits, and several class actions have been filed by consumers against companies for alleged price gouging up and down the supply chain. Insights can be gleaned from these price gouging-related suits to understand the “anatomy” of these suits, including what they allege, how to avoid them, and, when necessary, how to defend against them.

Activation

States activated their price gouging statutes in March. As we have noted, most states continue to signal that their pricing restrictions remain in effect. These statutes create different ranges of time during which lawsuits can be initiated, by varying actors.

• Continuing impact: Since some of the statutes allow for private causes of actions to be brought for years following the alleged violations, price gouging liability will be an ongoing issue.

• Authority to sue: While some state pricegouging laws vest prosecutorial authority solely in the state’s attorney general, others permit private plaintiffs to bring suit on their own. In practice, we have seen state attorneys general, private plaintiffs, and the federal government all involved in price gouging investigations and enforcement actions targeting the entire  supply chain.

Proactive Strategies

Companies can consider certain steps to avoid being entangled in investigations or actions, and to best situate themselves to defend against actions that may arise.

• Internal practices: In general, companies will benefit from reliance on their compliance practices and their own internal documentation of costs and justifications, both in avoiding investigations and in defending against any eventual lawsuit.

• Declaratory Judgments: As previously suggested on this blog, businesses should consider whether, in the appropriate circumstances, they may be able to head off a significant expense, or even ultimate liability, with a well-constructed declaratory judgment action.

Legal Theories

Should a company ultimately wind up on the other side of an investigation, or defending against a lawsuit, they should be cognizant of the variety of legal theories that are being raised in similar actions. In addition to straightforward claims of violations of the state price gouging laws, many other statutes or legal theories are also being used to prosecute price-gouging claims, including:

• Unfair competition laws: In multiple federal district court actions, plaintiffs’ complaints have included a cause of action based on violation of a state unfair competition law.

• Consumer protection laws: In at least one case in a federal district court, class action plaintiffs’ complaint included a cause of action based on violation of a state deceptive trade practices act.

• Quasi-contract / unjust enrichment: In multiple federal district court actions, plaintiffs’ complaints included a cause of action based on unjust enrichment theories.

• Negligence: In at least one price gouging case in a federal district court, class action plaintiffs’ complaint included causes of action based on negligence and negligence per se.

• Fraud and deceit: In at least one case in a federal district court, a private plaintiff’s complaint included a cause of action based on the alleged willful and intentional injury plaintiff suffered and/or defendant’s willful and intentional injury, intentional misrepresentations, and/or negligent misrepresentations.

• Other statutes: In at least one case in a federal district court, a private plaintiff’s complaint included a cause of action based on RICO, alleging a pattern of racketeering activity and for the unlawful purpose of intentionally defrauding and extorting monies from Plaintiff.

Penalties:

The available remedies sought for price gouging violations can range widely. (For more in depth discussion of some of the damages claims companies could face, see our prior post.) In addition to injunctive relief, other penalties can include:

• Restitution: Many price gouging statutes include restitution as a possible (and, importantly, a nonexclusive) penalty, providing for companies to refund customers any amounts those customers paid in excess of the permissible prices.

• Civil penalties: Many states allow for civil penalties to be imposed on a “per violation” basis. Some statutes impose a daily or a total cap on potential liability, but not all price gouging statutes that allow for financial penalties include such caps.

• Recovery of costs of litigation: Some statutes, like those of Delaware and Pennsylvania, allow for fees and costs incurred when investigating the price gouging at issue to be shifted to the defendant.

• Criminal penalties: Some statutes allow that, depending on the circumstances, violators could be jailed, with potential sentences ranging from thirty days up to ten years.

Defenses:

Finally, companies can also familiarize themselves with the defenses and legal justifications for their price increases, including:

• Goods or services not covered: The specifics of the coverage varies widely, and any price gouging statutes only apply to limited goods or services.

• Standing: Consumers often lack a private right of action, and hence lack standing to sue under many of the state price gouging laws. Some statutes also require plaintiffs to prove that they suffered actual damage or injury, not just identify an impermissibly heightened sales price.

• Class certification: Differences in pricing may pose barriers to class certification.

• Mootness: Depending on the timeline of the case and the status of the relevant state(s) of emergency, permanent injunctive relief may become moot.

• Justifications: Many state price gouging statutes contemplate  justifications and exceptions that act as a complete defense where, for example, the seller can prove the price increase was directly attributable to its own rising costs of supply, labor, or materials. A New York Supreme Court recently dismissed a price gouging case in, despite allegations that defendant’s costs had not increased, where the defendant was able to demonstrate that its prices were not “unconscionable or overall extreme.”