Forte v. Direct Energy Servs., LLC
| Decision Date | 14 August 2017 |
| Docket Number | 6:17-CV-264 (FJS/ATB) |
| Parties | MARTIN FORTE, Plaintiff, v. DIRECT ENERGY SERVICES, LLC, a Delaware Limited Liability Company, Defendant. |
| Court | U.S. District Court — Northern District of New York |
KAMBERLAW, LLC
220 North Green Street
Chicago, Illinois 60607
Attorneys for Plaintiff
EDISON, MCDOWELL &
First City Tower
1001 Fannin Street
Suite 2700
Houston, Texas 77002
Attorneys for Defendant
FISHKIN LUCKS, LLP
277 Broadway
Suite 408
New York, New York 10007
Attorneys for Defendant
ADAM C. YORK, ESQ.
MICHAEL J. ASCHENBRENER, ESQ.
ANDREW M. EDISON, ESQ.
HUTSON B. SMELLEY, ESQ.
MICHAEL D. MATTHEWS, JR., ESQ.
ROBERT P. DEBELAK, III, ESQ.
STEVEN M. LUCKS, ESQ.
MEMORANDUM-DECISION AND ORDER
Pending before the Court is Defendant's motion to dismiss Plaintiff's First Amended Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. See Dkt. No. 24.
In 1996, New York deregulated its energy market to allow consumers to choose to purchase natural gas and electricity from traditional utilities, like National Grid, or energy services companies ("ESCOs"), like Defendant. See Dkt. No. 18 at ¶ 17. ESCOs have gained in popularity over the years; and, according to Plaintiff, there are more than one million New York consumers who use an ESCO to purchase their energy. See id.
The New York State Public Service Commission ("NYPSC") still regulates ESCOs; however, unlike traditional utilities, ESCOs are not required to disclose their rates with NYPSC. See id. at ¶ 18. Switching to an ESCO does not change which company delivers energy to the consumer; rather, "[t]he only difference to the customer is which company sets the price for the customer's energy supply." See id. at ¶ 19. ESCOs charge customers according to usage, e.g., based on the number of kilowatt hours, kWH.
In 2009, New York's legislature passed the ESCO Bill of Rights, which provides certain enumerated protections against deceptive acts and practices. See id. at ¶ 21 (citing N.Y. Gen. Bus. Law § 349-d(3)). Moreover, the ESCO Bill of Rights requires that, "'[i]n every contract for energy services and in all marketing materials provided to prospective purchasers of such contracts, all variable charges shall be clearly and conspicuously identified.'" See id. (quoting N.Y. Gen. Bus. Law § 349-d(7))
Plaintiff alleges that Defendant advertises that its "'fixed New York electricity rates give you freedom from price fluctuations imposed by your utility,' but it fails to adequately inform consumers who switch that once their low 'teaser' rate expires their energy rates can skyrocket." See id. at ¶ 23. In that vein, after the initial fixed-rate period expires, Defendant charges consumers on a variable rate plan, which can be significantly higher than what a traditional utility would charge. See id. at ¶ 24. Plaintiff asserts that Defendant's variable rate plans limit Defendant's exposure by shifting the risk of rate fluctuation to the consumer. See id. at ¶ 26.
Specifically, Plaintiff alleges that Defendant "fails to: a) adequately inform consumers that a variable rate plan can result in large increases in monthly energy bills when energy prices rise; and b) clearly and conspicuously describe the factors that can cause consumers' energy costs to rise." See id. at ¶ 27. In that regard, Plaintiff avers that the agreement between the consumer and Defendant provides the following disclosure regarding variable rates:
After the Initial Term and during the Renewal Period, Direct Energy will charge you at a variable price per kWh based upon generally prevailing market prices for electricity in the LDU load zone for the applicable period, plus an adder, determined solely by Direct Energy in its discretion. Your variable price will include ancillary charges, cost of capacity, generation, line losses, New York City Utility Tax (when applicable), and other miscellaneous charges.
The preceding disclosure is, according to Plaintiff, "buried without highlighting or other emphasis amid the Contract's sea of confusing fine print." See id.
Plaintiff further points to an NYPSC Order issued on February 23, 2016, which required ESCOs to "guarantee that customers will pay no more, on an annual basis, than the customer would have paid as a full service customer of the utility." See id. at ¶ 33. However, as Plaintiff acknowledges, the Albany County Supreme Court vacated the NYPSC Order. See id. at ¶ 34 & n.2 (citing Nat'l Energy Marketers Assn. v. N.Y. State Pub. Serv. Commn., 53 Misc. 3d 641, 37 N.Y.S.3d 178 (N.Y. Sup. Ct. 2016)).
Plaintiff agreed to a contract with Defendant in December 2014. See Dkt. No. 18 at ¶ 35. Defendant sent Plaintiff a Welcome Letter, with a copy of the Terms and Conditions and a Disclosure Statement enclosed. See id. at ¶ 36. Plaintiff was originally contracted to pay a fixed price of $0.07890/kWH for the first year of service. See id. at ¶ 37. The Disclosure Statement further stated that See id.
According to Plaintiff, his "fixed rate electricity supply plan with [Defendant] automatically converts to a variable rate without any action required by [him]." See id. at ¶ 38. In explaining the variable rate Plaintiff should expect at the end of his initial contracted period of service, the Terms and Conditions state as follows:
6. Price: the Rate and Daily Fee. During the Initial Term, your rate per kWh will be as set forth on the Customer Disclosure Statement. . . . For variable rate, each month will reflect the cost of electricity, including energy, capacity, settlement, ancillaries, related transmission and distribution charges and other market-related factors; plus all applicable taxes, fees, charges, costs, expenses and margins. You may also be charged a flat daily fee, which you will find in the Customer Disclosure Statement. After the Initial Term and during the Renewal Term, your rate per kWh, as well as the daily fee, will both be variable, and will not change more than once each monthly billing cycle, unless we send advance written notice indicating otherwise. Each will change as we solely determine based on business and market conditions, and will not increase more than 40% over the rate for previous monthly billing cycle.
See id.
Plaintiff argues that Defendant's disclosure "is not clear or simple, and it does not clearly and conspicuously identify all variable charges, as required by law." See id. at ¶ 39. Plaintiff also alleges that he did not receive a renewal notice at least thirty days prior to the contract renewal that identified all variable charges. See id. at ¶ 41. Finally, Plaintiff asserts that, as a result of Defendant's conduct, he was injured because he paid more for the variable rate than he would have from an alternative energy supplier. See id. at ¶ 43. In that regard, Plaintiff contends that he paid $822.14 more than he would have with National Grid. See id.
Based on the foregoing, Plaintiff asserts two causes of action against Defendant.1 First, Plaintiff asserts that Defendant violated New York Business Law § 349-d(7), which provides that, "'[i]n every contract for energy services and in all marketing materials provided to prospective purchasers of such contracts, all variable charges shall be clearly and conspicuously identified.'" See id. at ¶ 56 (quoting N.Y. Gen. Bus. Law § 349-d(7)). Plaintiff argues that none of Defendant's materials adequately disclose that Defendant charges a variable rate or explain how that rate is calculated. See id. at ¶¶ 57-58.
Second, Plaintiff contends that "Defendant has been unjustly enriched by charging its residential and small business customers more than they would have paid as full service utility customers, while providing them with nothing of value in return for their higher payments." See id. at ¶ 70. Specifically, Plaintiff contends that he paid $822.14 more than he would have if he had maintained service directly via National Grid. See id. at ¶ 71.
Defendant's motion seeks dismissal of each of Plaintiff's claims. Generally, Defendant argues that Plaintiff's N.Y. Gen. Bus. Law § 349-d(7) claim fails as a matter of law because Defendant complied with that law's requirements. Further, Defendant contends that Plaintiff's unjust enrichment claim fails because there is an adequate remedy in contract and at law.
Courts use a two-step inquiry when addressing a Rule 12(b)(6) motion. "First, they isolate the moving party's legal conclusions from its factual allegations." Hyman v. Cornell Univ., 834 F. Supp. 2d 77, 81 (N.D.N.Y. 2011). Second, courts must accept factual allegations as true and "determine whether they plausibly give rise to an entitlement to relief." Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). A pleading must contain more than a "blanket assertion[ ] of entitlement to relief." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 n.3 (2007). Thus, to withstand a motion to dismiss, a pleading must be "plausible on its face" such that it contains "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citation omitted).
Furthermore, when addressing a Rule 12(b)(6) motion, a court may "consider documents attached to or incorporated by reference in [a] complaint[.]" Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998) (citation omitted). Even where "'a plaintiff chooses not to attach to the complaint or incorporate by reference a [document] upon which it solely relies and which is integral to the complaint,' the court may . . . take the...
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