United Energy Trading, LLC v. Pac. Gas & Elec. Co.

Decision Date20 November 2015
Docket NumberCase No. 15-cv-02383-RS
Citation146 F.Supp.3d 1122
CourtU.S. District Court — Northern District of California
Parties United Energy Trading, LLC, Plaintiff, v. Pacific Gas & Electric Co., et al., Defendants.

Charles Lagrange Coleman, III, David Ilan Holtzman, Tara Kaushik, Holland & Knight LLP, San Francisco, CA, Thomas Drew Leland, Holland & Knight LLP, Leah E. Capritta, Denver, CO, for Plaintiff.

Arnold Barba, Lim Ruger Kim LLP, Dennis S. Ellis, Adam Michael Reich, Nicholas James Begakis, Paul Hastings LLP, Los Angeles, CA, for Defendants.


RICHARD SEEBORG, United States District Judge


This case stems from a dispute between defendant Pacific Gas & Electric Company (PG&E), a leading utility provider in northern California, and one of its competitors, plaintiff United Energy Trading, LLC (UET), a supplier of natural gas. UET avers the defendants engage in unlawful billing, collection, and payment schemes that misappropriate funds, defraud UET, and unfairly compete for natural gas customers. UET asserts federal claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq. , and the Sherman Act, 15 U.S.C. § 2, in addition to state law claims under a variety of theories, including breach of contract, breach of fiduciary duty, intentional misrepresentation, and intentional interference with prospective business advantage. PG&E counters that UET's claims in their entirety belong before the California Public Utilities Commission (“CPUC”), and in any event, argue they have not pleaded any of their separate claims with the requisite specificity.

For the reasons explained below, PG&E's motion to dismiss is granted with respect to the breach of contract claim, and granted with leave to amend with respect to the respondeat superior , Sherman Act, and conversion claims. It is denied with respect to the remaining claims. PG&E's motion for Rule 11 sanctions is also denied.


Defendant PG&E has been the regulated monopoly utility in California since 1905. Its service area spans from Eureka in the northern part of the state to Bakersfield in the south, and from the Pacific Ocean along the coast to the Sierra Nevada mountains in the east. PG&E provides both electricity and natural gas to commercial and residential end-users. Its website indicates it maintains approximately 4.3 million natural gas customers.

As a monopoly utility, PG&E is regulated by the CPUC, which determines the rates the company may charge for its electricity and natural gas. In 1991, the California legislature sought partially to deregulate the state's natural gas utility industry. To that end, the CPUC established an important pilot program affording residential and small commercial gas customers—called “core” customers—the opportunity to aggregate their gas loads so they could participate in competitive gas markets. As a result of this program, Californians today are free to purchase their commodity gas from either PG&E or certain private providers known as Core Transportation Agents (“CTAs”).

The delivery and billing models employed by the CTAs are crucial to the instant dispute. CTAs purchase natural gas on the open market and then sell it to end-users using PG&E's distribution system. As a consequence, when an end-user purchases natural gas from a CTA, PG&E charges the customer a separate transportation fee. In the typical case, PG&E also charges customers for electricity on the same bill.

Perhaps for that reason, as another aspect of deregulation, PG&E is required to offer CTAs the opportunity to consolidate their billing with those of PG&E. Specifically, under PG&E's relevant tariffs—known as its “Gas Rules”—CTAs may participate in a billing and collection program called “Optional Consolidated PG&E Billing.” Under this program, both the CTA's charges and PG&E's charges appear on a single, consolidated statement, and the customer pays both sets of charges with a single check to PG&E. If the CTA chooses this billing option, PG&E is required to calculate the CTA's charges based on the customer's gas usage and the CTA's confidential rate. PG&E assumes responsibility for the accuracy of these charges, but not for the accuracy of the CTA's rate.

Under Consolidated Billing, PG&E also acts as the CTA's collections agent. In that capacity, PG&E is responsible for sending notices to the CTA's customers informing them of unpaid balances, collecting from the CTA's customers the balance of unpaid charges, and taking other appropriate actions to help recover from customers any unpaid amounts owed to the CTA. After PG&E receives money from a customer, it is required to pay the CTA the amounts paid to PG&E for the CTA's charges. Additionally, when transferring payments, PG&E is required to specify the amount paid by each service account. If there are any amounts resulting from returned payments (e.g., the customer's check “bounces”) or returned payment charges, PG&E may debit those amounts to the CTA on the billing statement for the following month. The tariffs, however, permit no other debits or set-offs.

Plaintiff UET is a qualified CTA operating in PG&E's service area. It signed a Core Gas Aggregation Service (“CGAS”) agreement with PG&E in September 2010, and began serving customers in northern California shortly thereafter. UET thus competes with PG&E for commodity natural gas customers. Indeed, if UET cancels a customer's account, the end-user reverts to PG&E as the default natural gas provider.

UET supplies its natural gas to customers in California by transporting it across interstate pipelines for delivery to PG&E's Citygate. Once the gas arrives, PG&E charges UET for storage and transportation of the gas to the end-user. The amount of this charge is determined by reference to UET's overall volume.

In 2012, UET elected to participate in the Optional Consolidated PG&E Billing program. Accordingly, PG&E possesses all of UET's customer information, and is responsible for calculating the amounts owed to UET, billing those amounts, collecting the money, and transferring it to UET.

The instant dispute centers on allegations that PG&E engages in unlawful activity as UET's billing and collections agent. Specifically, UET avers three separate schemes in which PG&E defrauds UET and its customers. In the “Payment Withholding Scheme,” UET avers PG&E receives payments from UET customers and “holds” that money in a PG&E account instead of paying it to UET for its commodity charges. In the “Energy Credit Scheme,” PG&E applies credits from its own services or programs, such as rebates for the use of solar panels, to UET's commodity gas charges, effectively misappropriating UET's charges to offset the money PG&E owes to its own customers. In the “Reversal Scheme,” PG&E inappropriately “reverses” UET customer charges. A reversal is a signal to UET that PG&E has not, and cannot, collect on UET's unpaid balance. It should occur only where PG&E ends service to a customer, based either on non-payment or the customer's complete termination of PG&E service. PG&E nonetheless apparently reverses UET accounts from which payment has affirmatively been received.

The complaint identifies the fulcrum of the illegality as an associated-in-fact enterprise called “Consolidated Billing.” It names three individuals—defendants Albert Torres (PG&E's Vice President of Customer Operations), William Chen (PG&E's ESP Service Manager), and Tanisha Robinson (PG&E's Supervisor for EDI Operations and ESP Billing)—alleged to be responsible for engaging in a pattern of wire fraud in furtherance of the Consolidated Billing enterprise.

UET avers PG&E's unlawful schemes have caused it substantial harm. Specifically, UET has lost countless customers who were annoyed or upset at UET's collection efforts on fully-paid accounts, but which PG&E falsely informed UET were in arrears. UET has also disconnected hundreds of accounts for non-payment based on PG&E's false representation that these customers had not paid UET's charges. What is more, PG&E has inaccurately informed UET's customers that they need not pay for UET's services, and its employees have improperly induced UET's customers to switch their service to PG&E. UET avers these actions not only were knowingly calculated to drive as many customers as possible back to PG&E, but also that PG&E engaged in these activities with the specific intent to destroy competition in the retail natural gas commodity market.

In January 2014, UET initiated an adjudicatory proceeding before the CPUC seeking an injunction against certain of PG&E's customer confidentiality practices and a refund on UET's accounts. Eight months later, it moved for party status in another proceeding relating to PG&E's compliance with tariffs governing CTA payment allocation. After the Commission enjoined several of PG&E's practices and ordered discovery on the amount of UET's refund, the three schemes mentioned above apparently came to light. Opining that the Commission could no longer provide it with complete relief, UET commenced this action. It asserts federal claims under RICO and the Sherman Act, in addition to state law claims for breach of fiduciary duty, intentional misrepresentation, negligent misrepresentation, conversion, intentional interference with contract, intentional interference with prospective business advantage, breach of contract, and violation of California's unfair competition law. Insisting that UET's RICO claim is frivolous, PG&E filed a motion for sanctions under Rule 11 of the Federal Rules of Civil Procedure. In July 2014, the Administrative Law Judge agreed to hold the CPUC proceeding in abeyance during the pendency of this action.


A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). While “detailed...

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    • ABA Antitrust Library Antitrust Law Developments (Ninth Edition) - Volume II
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