Stanley v. Direct Energy Servs., LLC

Citation466 F.Supp.3d 415
Decision Date12 June 2020
Docket NumberNo. 19-CV-3759 (KMK),19-CV-3759 (KMK)
Parties Linda STANLEY, Plaintiff, v. DIRECT ENERGY SERVICES, LLC, Defendant.
CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York

Douglas Gregory Blankinship, Esq., Todd Seth Garber, Esq., Chantal Khalil, Esq., Finkelstein, Blankinship, Frei-Pearson & Garber, LLP, White Plains, NY, Counsels for Plaintiff.

William Franklin Cash, III, Esq., Matthew David Schultz, Esq., Levin, Papantonio, Thomas, Mitchell, Eschsner & Proctor, P.A., Pensacola, FL, Counsels for Plaintiff.

Andrew Kasner, Esq., Michael D. Matthews. Esq., Diane Wizig, Esq., McDowell Hetherington LLP, Houston, TX, Counsels for Defendant.

Steven Miles Lucks, Esq., Fishkins Lucks LLP, Newark, NJ, Counsel for Defendant.

OPINION & ORDER

KENNETH M. KARAS, United States District Judge:

Linda Stanley ("Plaintiff") brings this Action asserting claims against Direct Energy Services, LLC ("Defendant"), for breach of contract, breach of the implied covenant of good faith and fair dealing, violations of the New York General Business Law ("NYGBL"), and, in the alternative to breach of contract, unjust enrichment. (See Am. Compl. ¶¶ 67–109 (Dkt. No. 21).) Plaintiff claims that Defendant breached the promises it purportedly made when offering "competitive" utility rates based on the "market" in its variable rate plan and, instead, went on to charge prices that were allegedly untethered to any understanding of "competitive" or "market" prices in the industry. (See generally id. ) Plaintiff also purports to represent a class of Defendant's customers in a similar situation. (See id. ¶¶ 62–66.) Before the Court is Defendant's Motion To Dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and (6) (the "Motion"). (Not. of Mot. (Dkt. No. 27).) For the following reasons, the Motion is granted in part and denied in part.

I. Background
A. Factual History

The following facts are drawn from the Amended Complaint and the exhibits therein, and are taken as true for purposes of resolving the instant Motion.

1. The Utility Market

In the 1990s, state legislatures and agencies decided to partially deregulate the market for retail electricity supply. (Am. Compl. ¶ 13.) The goal was to increase competition in the field and provide customers with choices regarding their energy supplier. (Id. ) The new energy suppliers are known as "ESCOs," and they aim to provide a price competitor to local utilities. (Id. ¶ 14.) Although the local utility continues to deliver the commodity to people's homes and bill the customer for the requisite costs, an ESCO—should the consumer choose to contract with them—sets the price for the supply. (Id. ) Consumers may still choose to receive their supply from a local utility. (Id. ¶ 16.) Plaintiff alleges that, in New York, local utilities charge their supply customers "a rate consistent with market conditions," which Plaintiff defines as the New York Independent System Operator's ("NYISO") competitive short-term market. (Id. ) Local utilities allegedly pass the costs on to their consumers "without any markups or profit." (Id. ) On the other hand, ESCOs are able to buy electricity in a variety of ways, including by owning electricity production facilities, purchasing electricity from wholesale marketers and brokers, or trading on futures. (Id. ) These purchasing strategies may result in more competitive rates for consumers. (Id. ) ESCOs do not have to file or seek approval for the rates they charge or the methods by which they set their rates. (Id. ¶ 20.)

However, in an effort to curb any potential abuse in rate-setting by ESCOs, the New York legislature passed NYGBL § 349-d. The statute states that "[n]o person who sells or offers for sale any energy services for, or on behalf of, an ESCO shall engage in any deceptive acts or practices in the marketing of energy services." N.Y. Gen. Bus. Law § 349-d(3). It also 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." Id. § 349-d(7).

2. Plaintiff's Contract with Defendant

On December 30, 2009, one such ESCO (and Defendant's predecessor), NYSEG Solutions, LLC ("NYSEG Solutions") offered to provide Plaintiff with a competitive fixed rate for electricity supply services. (Am. Compl. ¶ 24.)1 The offer included the general terms of the agreement and provided Plaintiff with a three-day window to rescind any agreement with NYSEG Solutions. (See Am. Compl. Ex. B ("2009 NYSEG Solutions Agreement") (Dkt. No. 21-2).) Plaintiff accepted the offer. (Am. Compl. ¶ 24.)

On November 23, 2012, Plaintiff received a renewal notification from NYSEG Solutions and Defendant (the "2012 Renewal Notification"). (Id. ¶ 25.) The letter explained that, on August 23, 2012, Defendant had acquired NYSEG Solutions. (Id. ) The letter offered a renewal at a fixed rate for six months, and the terms attached to the letter explained that, unless a future renewal notification explained otherwise, the account would automatically convert to a monthly variable price agreement after those six months. (Id. ¶ 26; see also id. Ex. C ("2012 Renewal Not.") ("If a renewal notification does not include a new fixed, blended, or indexed price termed offer, accounts will automatically convert to a monthly variable price agreement with no end date and no associated termination fee.") (Dkt. No. 21-3).)

On May 9, 2013, Plaintiff received another renewal notification from NYSEG Solutions (the "2013 Renewal Notification"). (See id. ¶ 28; see also id. Ex. D ("2013 Renewal Not.") (Dkt. No. 21-4).) The letter explained that the new "Agreement Term" was "Monthly," that the "Renewal Price" was "Variable," and again noted that NYSEG Solutions had been acquired by Defendant, although it would continue to call itself NYSEG Solutions. (Id. ) The letter stated that Defendant "constantly strive[s] to give ... complete customer satisfaction and the most competitive pricing" and that the "Pricing Type" under the contract was "Market." (Id. ) The letter also explained that Plaintiff could reject the renewal terms within three business days of receiving the first billing statement and that either party could cancel the month-to-month service with 30 days’ advance written notice of termination to the other party. (See id. ) Like the previous renewal notifications, more comprehensive terms were attached to the summary letter. (See id. ) Plaintiff also submits a template letter and "Frequently Asked Questions" document, which states that NYSEG Solutions will continue to provide "the same competitive energy rates and exceptional customer service [consumers] have come to know and trust," that Defendant is one of "North America's largest competitive energy suppliers of electricity," and that, despite the acquisition, consumers will "continue to receive the same competitive rates and the highest level of support." (Am. Compl. Ex. E ("NYSEG Solutions FAQ") (Dkt. No. 21-5).) Plaintiff notes that she obtained this document through a Freedom of Information Law request and does not specifically allege that Plaintiff herself received or saw this document. (See Am. Compl. 10 n.6.)

3. Defendant's Pricing

According to Plaintiff, Defendant failed to provide the competitive pricing it had promised. To support its argument, Plaintiff includes within the Amended Complaint data from the 24 recent billing periods—beginning in November 2016 and ending in November 2018—comparing Defendant's charged rate per kilowatt hour ("kWh") with the rates of the local utility service. (See id. at 12 ("Pl.’s Table 1").) Plaintiff's calculations allege that, throughout this period, Defendant charged between 40% to 172% more than the local utility rate. (See id. ) According to Plaintiff, the local utility rates function as "an ideal indicator of market prices" because they are based on the NYISO public market and "are set without any markups or profit." (Id. ¶ 41.) Plaintiff also points out that, in certain periods, Defendant's rates ran contrary to the trends present in local utility rates. For example, from February to March 2018, although the local utility rate decreased by 27%, Defendant's consumer rate rose by 17%. (Id. ¶ 45.) Similarly, between March and April 2017, the local utility's rate decreased by 28%, but Defendant's consumer rate increased by 6%. (Id. ) Plaintiff also alleges that even when Defendant's rates followed the local utility rates, they did not reflect the substantial drop in pricing. For example, although the local utility rates dropped 27% between April and May 2018, Defendant's rates only dropped 2% within the same period. (Id. ¶ 47.)

Plaintiff also includes a second table comparing Defendant's rates with what Plaintiff alleges are "Market Supply Costs." (See id. at 17 ("Pl.’s Table 2").) Plaintiff alleges that the Market Supply Costs were estimated by an unnamed expert who tracked NYISO prices in Plaintiff's utility zone and included other small costs that Defendant might have incurred. (See id. ¶ 53.) Based on Plaintiff's expert's calculations, Defendant's customer rates were higher than Market Supply Costs for each month and were, on average, 176% higher than those costs. (Id. ¶ 55.) Plaintiff also claims that, despite downward trends in Market Supply Costs, Defendant's customer rates increased over a number of periods within the overall billing period included in the chart. (Id. ¶ 56.) According to Plaintiff, "other ESCOs incur these costs as well, yet they offer substantially lower rates" than Defendant. (Id. ¶ 57.) Plaintiff cites to Defendant's allegedly lower fixed rates as one example of lower ESCO rates. (Id. )

Plaintiff argues that Defendant should not be permitted to charge high rates out of alignment with the comparators set forth in the Amended Complaint. (Id. ¶ 58.) Plaintiff also alleges that Defendant's statements in the Renewal Notifications and accompanying terms regarding its rates...

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