Zahn v. N. Am. Power & Gas, LLC

• Decision Date: 01 December 2016
• Docket Number: No. 120526.,120526.
• Citation: 72 N.E.3d 333,2016 IL 120526
• Parties: Peggy ZAHN, Appellant, v. NORTH AMERICAN POWER & GAS, LLC, Appellee (The People of the State of Illinois ex rel. Lisa Madigan, Attorney General of Illinois, Intervenor–Appellant).
• Court: Illinois Supreme Court

2016 IL 120526

72 N.E.3d 333

Peggy ZAHN, Appellant,

v.NORTH AMERICAN POWER & GAS, LLC, Appellee (The People of the State of Illinois ex rel. Lisa Madigan, Attorney General of Illinois, Intervenor–Appellant).

No. 120526.

Supreme Court of Illinois.

Filed Dec. 1, 2016.

Rehearing denied Jan. 23, 2017.

Douglas Gregory Blankinship, of Finkelstein, Blankinship, Frei–Pearson & Garber, LLP, of White Plains, New York, for appellant.

Lisa Madigan, Attorney General, of Springfield (Carolyn E. Shapiro and David L. Franklin, Solicitors General, and Brett E. Legner, Deputy Solicitor General, of Chicago, of counsel), for the People.

Angelo J. Kappas and Stephanie F. Jones, of Gordon & Rees Scully Mansukhani LLP, of Chicago, for appellee.

Thomas R. Stanton, Special Assistant Attorney General, of Chicago, for amicus curiae Illinois Commerce Commission.

Michael R. Strong, of Strong Legal & Regulatory Solutions, LLC, of Chicago, and Joshua M. Feagans, of Griffin Williams LLP, of Geneva, for amicus curiae Illinois Competitive Energy Association.

OPINION

Chief Justice KARMEIER delivered the judgment of the court, with opinion.

¶ 1 The United States Court of Appeals for the Seventh Circuit has certified for instruction from this court the following question of Illinois law: Does the Illinois Commerce Commission have exclusive jurisdiction over a reparation claim, as defined in Sheffler v. Commonwealth Edison Co., 2011 IL 110166, 353 Ill.Dec. 299, 955 N.E.2d 1110, brought by a residential consumer against an alternative retail electric supplier, as defined by section 16–102 of the Electric Service Customer Choice and Rate Relief Law of 1997 (220 ILCS 5/16–102 (West 2014) )? Zahn v. North American Power & Gas, LLC, 815 F.3d 1082, 1095 (7th Cir.2016). We accepted the Seventh Circuit's invitation to consider this question pursuant to Illinois Supreme Court Rule 20 (eff. Aug. 1, 1992).¹ For the reasons that follow, we answer the question in the negative. Under Illinois law, the Illinois Commerce Commission does not have exclusive original jurisdiction over such claims. The claims may be pursued through the courts.

¶ 2 BACKGROUND

¶ 3 We take the facts as the Seventh Circuit has stated them in its certification ruling. They are simple and straightforward. Peggy Zahn is a residential consumer of electric power. North American Power & Gas, LLC (NAPG), is an alternative retail electric supplier (ARES) within the meaning of section 16–102 of the Electric Service Customer Choice and Rate Relief Law of 1997 (Rate Relief Law) (220 ILCS 5/16–102 (West 2014) ), which is part of the Public Utilities Act (Act) (220 ILCS 5/1–101 (West 2014) ).

¶ 4 As defined by section 16–102, an ARES is any "person, cooperative, corporation, municipal corporation, company, association, joint stock company or association, firm, partnership, individual, or other entity, their lessees, trustees, or receivers appointed by any court whatsoever, that offers electric power or energy for sale, lease or in exchange for other value received to one or more retail customers, or that engages in the delivery or furnishing of electric power or energy to such retail customers, and shall include, without limitation, resellers, aggregators and power marketers," subject to various exceptions. 220 ILCS 5/16–102 (West 2014). ARESs were authorized by the General Assembly when it enacted the Rate Relief Law as part of an effort to partially deregulate our state's electricity market and make it more competitive. Under this new system, consumers are no longer confined to purchasing their power from their local public utility. Rather, they have the option of buying their power from the local public utility, an electric utility other than their local public utility, or an ARES. Zahn, 815 F.3d at 1084–85.

¶ 5 In August 2012, Zahn decided to purchase her electricity from NAPG based on its promise of lower rates. NAPG sent Zahn a letter stating that she would receive its "New Customer Rate" of $0.0499 per kilowatt-hour during her first month of service and a "market based variable rate" thereafter. The company also sent her its "Electricity Sales Agreement Customer Disclosure Statement." The statement indicated that the term of the agreement was month-to-month and that "[o]ther than fixed and/or introductory/promotional rates, all rates shall be calculated in response to market pricing, transportation, profit and other market price factors." It also disclosed, under the heading "Open Price," that its prices were "variable" based on "market prices for commodity, transportation, balancing fees, storage charges, [NAPG] fees, profit, [and] line losses * * *. Your price may be higher or lower than your [local public utility] * * *."

¶ 6 Zahn never received the $0.0499 per kilowatt-hour "New Customer Rate" she was promised. During her first two months of service, September and October 2012, NAPG charged her $0.0599 per kilowatt-hour. Thereafter, from November 2012 through June 2014, the rate it charged her was always higher than what she would have been required to pay her local public utility, Commonwealth Edison (ComEd), had she not switched to NAPG. At times, NAPG's rate was nearly triple ComEd's.

¶ 7 Zahn objected to NAPG's higher charges and filed a class action against the company in the United States District Court for the Northern District of Illinois. Zahn's complaint invoked the court's diversity jurisdiction (28 U.S.C. § 1332 (2012) ) and sought damages based on violation of the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 2014)), common-law breach of contract, and unjust enrichment. NAPG moved to dismiss Zahn's complaint for lack of subject-matter jurisdiction and failure to state a claim. The district court granted that motion. Zahn then appealed to the United States Court of Appeals for the Seventh Circuit. It is in that appeal that the question before us was certified.

¶ 8 In assessing whether the district court erred in dismissing Zahn's complaint, the Seventh Circuit has concluded that the dispositive threshold issue is whether an Illinois state court would have had subject-matter jurisdiction to hear plaintiff's claims or whether exclusive jurisdiction over those claims lies, instead, with the Illinois Commerce Commission. The Seventh Circuit reasoned that if the Commerce Commission alone has jurisdiction to hear claims of this kind under Illinois law and such claims are not within the subject-matter jurisdiction of the Illinois state courts, it necessarily follows that a federal district court sitting in diversity cannot entertain them either. Zahn, 815 F.3d at 1087 (citing Tacket v. General Motors Corp., Delco Remy Division, 93 F.3d 332, 334 (7th Cir.1996) ).

¶ 9 In Sheffler v. Commonwealth Edison Co., 2011 IL 110166, 353 Ill.Dec. 299, 955 N.E.2d 1110, this court addressed the lines of demarcation between the jurisdiction of the Illinois Commerce Commission and the jurisdiction of the courts with respect to claims against public utilities. Citing section 9–252 of the Public Utilities Act (220 ILCS 5/9–252 (West 2014) ), which pertains to complaints "concerning any rate or other charge of any public utility," and in accordance with precedent from our appellate court, we held there that if a claim is deemed to be one for "reparations" rather than for civil damages, jurisdiction lies with the Commerce Commission, not the courts. A reparations claim is one where the essence of the grievance is that a public utility has charged too much for a service. A civil damages claim, by contrast, is one where the gist of the complaint is that a public utility has done something else to wrong the plaintiff. Sheffler, 2011 IL 110166, ¶¶ 41–42, 353 Ill.Dec. 299, 955 N.E.2d 1110.

¶ 10 In the case before us, the Seventh Circuit has characterized Zahn's claims as being in the nature of "reparations" as that term is used in Sheffler. There is an important difference, however, between this case and Sheffler. Sheffler involved a claim against a conventional public utility. The claim asserted here is against an ARES. Under section 3–105(b)(9) of the Public Utilities Act (220 ILCS 5/3–105(b)(9) (West 2014)), ARESs are expressly excluded from the definition of public utility. Pursuant to section 16–102 of the Rate Relief Law (220 ILCS 5/16–102 (West 2014) ), ARESs do not qualify as "electric utilities" either. They are merely "nonutilities licensed to sell retail electricity." Commonwealth Edison Co. v. Illinois Commerce Comm'n, 328 Ill.App.3d 937, 939, 263 Ill.Dec. 53, 767 N.E.2d 504 (2002).

¶ 11 Because NAPG is an ARES and ARESs are not utilities, the Seventh Circuit recognized that Sheffler does not resolve the question of whether claims against NAPG by customers seeking reparations for overbilling may only be brought before the Commerce Commission. Finding no other decision by this court directly on point, the Seventh Circuit looked to the legislature's stated and implied intent, the Rate Relief Law's consumer protection provisions and remedial measures, an unpublished order by our appellate court, an interim order by the Commerce Commission in an unrelated case, and a published decision by the appellate court involving a reparations claim against a telecommunications carrier in an attempt to estimate how we would decide the question if it came before us. The Seventh Circuit ultimately concluded that these sources failed to yield a definitive answer. It has therefore reached out to us directly here, through the mechanism of a certified question, for instruction.

¶ 12 ANALYSIS

¶ 13 As set forth above, the viability of Zahn's state law claims against NAPG in her federal diversity action turns on whether an Illinois state court would have had subject-matter jurisdiction to hear them or whether, under Illinois law, she would have been limited to pursuing those claims in an administrative proceeding before the Commerce Commission. The general principles governing this inquiry were recently...