Levesque v. Iberdrola S.A.
| Decision Date | 06 August 2021 |
| Docket Number | 2:19-cv-00389-JDL |
| Parties | MARK LEVESQUE, et al., Plaintiffs, v. IBERDROLA, S.A., et al., Defendants. |
| Court | United States District Courts. 1st Circuit. United States District Court (Maine) |
ORDER ON MOTIONS TO DISMISS
Plaintiffs Mark Levesque, Christie Decker, Michael Platt, Sylvia Krainin, and Sally Trussell (collectively, the “Plaintiffs”) filed their Third Amended Complaint-a putative class action-against Defendants Iberdrola, S.A. (“Iberdrola”); Central Maine Power Company (“CMP”); Avangrid, Inc. (“Avangrid”); and Douglas Herling (“Herling”) (collectively, the “Defendants”) on January 31, 2020 (ECF No. 44). The Third Amended Complaint alleges that the Defendants implemented a metering and billing system that incorrectly measured and charged customers for electricity, and that they then attempted to cover up problems that resulted from their implementation of this allegedly defective system.
On August 7, 2020, Iberdrola filed a motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) or, in the alternative, for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) (ECF No. 84). On February 1, 2021, Avangrid and CMP jointly filed a motion to dismiss for failure to state a claim (ECF No. 128). That same day, Herling also filed a motion to dismiss for failure to state a claim (ECF No. 129). For the reasons that follow, I grant the motions in part and deny them in part.
CMP is an electric utility headquartered in Augusta, Maine that transmits and delivers electricity generated by various power suppliers to over 624, 000 customers in central and southern Maine. Herling is CMP's Chief Executive Officer. CMP is a subsidiary of Avangrid, a New York corporation headquartered in Connecticut. Iberdrola is a Spanish corporation that owns the majority of outstanding shares of Avangrid common stock.
In 2011, to dispense with the need for physical meter readings, CMP introduced a system of “smart meters” designed to measure CMP customers' use of electricity and transmit those measurements remotely. In October 2017, CMP switched to a new “SmartCare” meter and billing system that was designed to interface with the smart meters. Beginning the following month, nearly 300, 000 CMP customers saw their bills increase, many by 50% or more. These billing increases allegedly occurred without any actual increased use of electricity by the customers.
The Third Amended Complaint alleges that the Defendants failed to adequately test the SmartCare system prior to rollout, including conducting “far fewer weeks of testing than planned and recommended.” ECF No. 44 ¶ 72. CMP allegedly billed customers despite knowing that the SmartCare system was defective and inaccurate, and instructed CMP customer service representatives (who were understaffed following the rollout) to tell customers that the spikes in their electricity bills were caused by other factors. Following their complaints, some customers faced issues such as: not receiving bills, not being able to access their online CMP accounts, receiving disconnect notices, being placed on payment arrangements that they did not agree to, having money withdrawn from their bank accounts without their consent, being sent to debt collectors, receiving a high bill after months of no bills, and simply continuing to pay allegedly erroneously high bills. Customers also suffered indirect harm, such as paying electricians to investigate their energy usage, purchasing new appliances, and severely limiting their energy usage.
According to the Third Amended Complaint, this was not the first time an Iberdrola subsidiary had dealt with issues surrounding its billing system. In 2014, another Iberdrola subsidiary, Scottish Power, was investigated by the United Kingdom's Office of Gas and Electricity Markets (“Ofgem”) after its rollout of a billing system similar to SmartCare. Scottish Power customers received late or incorrect bills and experienced bill delays followed by a sudden demand for high bills to be paid, and Scottish Power call centers were overwhelmed by complaints and failed to respond to customers' issues. Ultimately, Ofgem fined Scottish Power.
The Third Amended Complaint also alleges that there was an overlap of key employees between Iberdrola, Avangrid, and CMP. The SmartCare project was led by a team that included Iberdrola employees, including employees located in Maine. Iberdrola exercised significant influence over CMP and Avangrid, and the SmartCare project was implemented at Iberdrola's direction. At least one Avangrid employee was also involved in the Scottish Power billing system rollout.
In response to complaints from CMP customers regarding their receipt of high electricity bills following the SmartCare rollout, the Maine Public Utilities Commission (“PUC”) retained the Liberty Consulting Group (“Liberty”) to conduct a forensic audit of CMP's metering, billing, and related systems.[1] In December of 2018, Liberty published a report of its audit. Ultimately, Liberty concluded that “CMP's meters produce accurate measurements of customer usage.” ECF No. 14-6 at 15. Liberty found that SmartCare “introduced errors and significant delay into the billing process, ” but that these billing errors were “minimal in number and in dollar value.” Id. Liberty criticized the “testing and training” surrounding the SmartCare implementation, along with the personnel shortages that “unduly delayed fixes to the errors, caused significant customer difficulty in reaching CMP representatives and in getting answers to questions and concerns, and meant overly long delays in resolving billing problems.” Id. It noted that “compressed timelines leading up to go-live” adversely affected the rollout of SmartCare, id. at 77, and that “[l]ack of post go-live planning and management for defect resolution and staff to manage these defects created a large backlog, which still remain[ed]” as of the date of the report, id. at 81. However, Liberty ultimately attributed CMP's customers' high bills to extreme cold weather during the winter of 2017-2018 that coincided with an increase in the price of electricity.
In January 2019, Herling sent a letter to CMP customers stating that the Liberty audit concluded that “all systems from meter to bill are working as intended and bills are accurate, ” and that the only shortcoming identified by the Liberty audit was CMP's failure to dedicate enough “staff, training[, ] or management oversight” to ensure adequate customer service after the SmartCare rollout. ECF No. 44 ¶¶ 113, 115. The Third Amended Complaint alleges that this statement was false because the Liberty audit also identified problems with CMP's implementation of SmartCare, and not merely its customer service following the rollout. In May 2018, before the Liberty report was issued, Herling also made statements to the Portland Press Herald and the Bangor Daily News indicating that CMP had found nothing about the SmartCare system that would artificially increase customer's usage. The Third Amended Complaint alleges that these statements were also false, that Herling knew or should have known that these statements would instill a false sense of security in the minds of CMP customers and curtail their desire to challenge their bills, and that customers relied on both statements to their detriment by making their electric payments, purchasing new appliances, paying electricians, and travelling to observe CMP's meter testings.
In July 2018, Levesque commenced a class action lawsuit against CMP in the Cumberland County Superior Court, alleging a single claim of unjust enrichment based on CMP's alleged cover-up of the SmartCare billing issues. Roughly a month later, he added a number of additional plaintiffs and added Avangrid as a defendant. The case was transferred to the Superior Court's Business and Consumer Docket in September 2018. In February 2019, the Superior Court stayed all proceedings in the matter pending the resolution of an investigation into the overbilling claims by the PUC. On July 30, 2019, the Plaintiffs filed a Second Amended Complaint, which added new named plaintiffs, added Iberdrola and Herling as defendants, and added additional claims. CMP and Avangrid filed a notice of removal to this court on August 23, 2019.
The Plaintiffs filed their Third Amended Complaint on January 31, 2020. The Third Amended Complaint presents claims for (1) unjust enrichment; (2) breach of contract; (3) failure to comply with the laws and regulations concerning the provision and billing of electrical services pursuant to 35-A M.R.S.A. § 1501 (West 2021); (4) fraud and intentional misrepresentation by the corporate defendants; (5) fraud and intentional misrepresentation by Herling; and (6) violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C.A. §§ 1961-1968. On February 26, 2020, the PUC issued the result of its investigation into CMP's metering and billing issues. CMP, Avangrid, and Herling then filed a motion to dismiss the Third Amended Complaint without prejudice or to stay the proceedings pending the Plaintiffs' exhaustion of administrative remedies on February 28, 2020. Following a hearing, I denied the motion on November 25, 2020 (ECF No. 104).
I now address three additional motions to dismiss. Iberdrola has filed a motion to dismiss for lack of personal jurisdiction or, in the alternative, for failure to state a claim. CMP and Avangrid have also filed a motion to dismiss for failure to state a claim, as has Herling. I held a consolidated hearing on all three motions on May 20, 2021.
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