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Marshall v. Verde Energy USA, Inc.

United States District Court, D. New Jersey

March 19, 2019

RAY MARSHALL, individually and on behalf of all others similarly situated, Plaintiff,


          John Michael Vazquez, U.S.D.J.

         This putative class action alleges deceptive and bad faith practices that resulted in consumers paying more for electricity. Presently before the Court is a motion to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) by Defendant Verde Energy USA, Inc. ("Verde" or "Defendant"). D.E. 13. Plaintiff Ray Marshall ("Marshall" or "Plaintiff) filed a brief in opposition (D.E. 29), to which Defendant replied (D.E. 30).[1] After briefing on the motion was complete, both parties filed notices of supplemental authority and responses. D.E. 31-33, 42-47. Plaintiff then filed a motion to strike Defendant's response to its July 5, 2018 notice of supplemental authority, D.E. 34, which Defendant opposed. D.E. 35. The Court reviewed the parties' submissions and decided the motions without oral argument pursuant to Fed.R.Civ.P. 78(b) and L. Civ. R. 78.1(b). For the reasons set forth below, Defendant's motion to dismiss is GRANTED and Plaintiffs motion to strike is DENIED.


         In New Jersey, a utility company cannot profit from buying and selling energy; it can only profit from delivery. Compl. at ¶ 13, D.E. 1. Following energy deregulation in New Jersey, however, an independent energy supply company ("ESCO") can profit by buying and selling energy to customers. Id. ¶ 14. ESCOs compete to supply energy services in deregulated states, but local utility companies continue to actually deliver the supply. Id. ¶ 15. Local utility companies may also supply "metering, billing, and related administrative services to the consumer" regardless of whether an ESCO supplies the energy. Id.

         Defendant is an ESCO that supplies power to residents in New Jersey. Id. at ¶¶ 19, 21. Plaintiff decided to switch from his local utility, PSE&G, to Discount Power, an ESCO, because of Discount Power's representations that Plaintiff would save money on his electricity bill. Id. ¶ 25. A few months after making the switch, Plaintiff was notified that his electricity service was being assigned from Discount Power to Defendant. Id. ¶ 26. Shortly after, Plaintiff received a "Welcome Letter" from Defendant, which stated that it "look[ed] forward to saving you money on your monthly electric bills in the months to come." Id. ¶ 27, Ex. A. The Welcome Letter adds that Defendant has "a strong focus on enabling our customers to save money on their monthly electric bills and in the past three years have helped our over 250, 000 customers save an estimated $17 million on their bills." Id., Ex A. Plaintiff does not allege that the representation about past savings was false.

         Defendant's Terms of Service for Discount Energy Group Variable Rate Customers (the "Terms of Service" or "Agreement") was contained on the back of the Welcome Letter. In the Terms of Service, Defendant explained that Plaintiff would "receive electricity from Verde at a variable generation rate." The Agreement added that "the rate may fluctuate monthly with market conditions." Id. ¶ 28, Ex. B. The Agreement continued that Plaintiff "may compare price terms by looking at the rates posted on Verde's website and on Customer's monthly bill." Id., Ex. B. In fact, Plaintiffs billing invoices appeared to include a "Price to Compare" section that compared Verde's current rate with PSE&G's rate for the month. Id. ¶ 33 n. 5. The Agreement further directed Plaintiff to visit Defendant's website "for current rates and updates." Id. Plaintiff was also informed that his monthly electric bill would still be provided by PSE&G. Id. Finally, the Agreement provided that either Plaintiff or Defendant "may cancel this Agreement at any time and for any reason without penalty." Id., Ex. B ¶ 3. Based on these representations, Plaintiff switched to Defendant for electricity in August 2012 and was placed on Defendant's variable rate plan. Id. ¶ 29. Plaintiff was a Verde customer from August 2012 to December 2017. Id. ¶ 33.

         Plaintiff asserts that "[a] reasonable consumer... would understand that Verde's [v]ariable rates fluctuate in a manner correlated with the underlying wholesale market rate, and that although prices would go up when wholesale prices rose, they would also go down when wholesale prices decreased." Id. ¶ 31. Plaintiff alleges that Verde customers are actually charged rates that are "untethered from the market conditions." Id. ¶ 39. Specifically, Plaintiff maintains that Defendant increased the rates charged to Plaintiff and class members when wholesale prices rose but kept prices level when wholesale prices fell. Id. ¶ 32. Plaintiff alleges that "there are numerous months where Defendant's rate was more than triple the wholesale rate." Id. ¶ 34. In addition, Plaintiff contends that Verde's rates were, at times, more than eighty percent higher than PSE&G's rates. PSE&G's rates, Plaintiff alleges, are reflective of market conditions because they are based on publicly held auctions. Id. ¶ 34. As a result, "Verde used its [v]ariable rates as a pure profit center." Id. ¶ 32. Of note, although Plaintiff asserts that PSE&G's rates are reflective of market conditions, PSE&G's rates were usually at least twice as high as the wholesale rate and often higher. Id. ¶ 33. Also, as noted, Plaintiff appears to assert that PSE&G's rates were provided on his invoices, meaning that he could perform an easy comparison between what he was being charged and what PSE&G was charging. Id. ¶ 33 n. 5.

         Plaintiff filed this putative class action complaint on January 31, 2018 on behalf of all Verde variable rate electric plan customers in New Jersey within the applicable statute of limitations. Id. at ¶ 46. The Complaint asserts the following claims: (1) violation of the New Jersey Consumer Fraud Act ("CFA" or the "Act"); (2) breach of contract; (3) breach of the implied covenant of good faith and fair dealing; (4) violation of the Truth-In-Consumer Contract, Warranty, and Notice Act ("TCCWNA"); and (5) unjust enrichment. Id. ¶¶ 51-90. Defendant filed the instant motion to dismiss for failure to state a claim on April 16, 2018. D.E. 13.


         Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss when a complaint fails "to state a claim upon which relief can be granted[.]" For a complaint to survive dismissal under Rule 12(b)(6), it must contain sufficient factual matter to state a claim that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Ail. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Further, a plaintiff must "allege sufficient facts to raise a reasonable expectation that discovery will uncover proof of her claims." Connelly v. Lane Const. Corp., 809 F.3d 780, 789 (3d Cir. 2016). In evaluating the sufficiency of a complaint, district courts must separate the factual and legal elements. Fowler v. UPMC Shadyside, 578 F.3d 203, 210-211 (3d Cir. 2009). Restatements of the elements of a claim are legal conclusions, and therefore, not entitled to a presumption of truth. Burtch v. Milberg Factors, Inc., 662 F.3d 212, 224 (3d Cir. 2011). The Court, however, "must accept all of the complaint's well-pleaded facts as true." Fowler, 578 F.3d at 210. Even if plausibly pled, however, a complaint will not withstand a motion to dismiss if the facts alleged do not state "a legally cognizable cause of action." Turner v. J.P. Morgan Chase & Co., No. 14-7148, 2015 WL 12826480, at *2 (D.N.J. Jan. 23, 2015).

         III. ANALYSIS

         1. The New Jersey Consumer Fraud Act (Count One)

         The CFA "seeks to protect consumers who purchase goods or services generally sold to the public at large." Cetel v. Kirwan Fin. Grp., Inc., 460 F.3d 494, 514 (3d Cir. 2006). To state a CFA claim, a plaintiff must allege "(1) unlawful conduct; (2) ascertainable loss; and (3) a causal relationship between the unlawful conduct and the ascertainable loss." Int'l Union of Operating Eng'rs Local No. 68 Welfare Fund v. Merck & Co., Inc., 192 N.J. 372, 389 (2007). Unlawful conduct is defined by the Act as "any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission." N.J.S.A. 56:8-2. As "remedial legislation," the Act "should be construed liberally." Int'l Union of Operating Eng 'rs Local No. 68 Welfare Fund, 192 N.J. at 3 89.

         Among other things, Defendant argues that Plaintiffs CFA claim must be dismissed because the alleged wrongful conduct is undercut by the Terms of Service. Def. Br. at 13-18. When a CFA claim is based on a valid, written contract, "a court will dismiss [the] claim" if the conduct alleged is "expressly authorized" by the terms of that contract. Urbino v. Ambit Energy Holdings, LLC, No. 14-5184, 2015 WL 4510201, at *3 (D.N.J. July 24, 2015); see also Hassler v. Sovereign Bank, 374 Fed.Appx. 341, 344 (3d Cir. 2010) (affirming dismissal of CFA where alleged wrongful conduct was expressly permitted by agreement at issue). Moreover, when a CFA claim is based on a breach of contract, Plaintiff must allege a "substantial aggravating circumstance," demonstrating that the defendant's behavior "stands outside the norm of reasonable business practice in that it will victimize the average consumer." Suber v. Chrysler Corp., 104 F.3d 578, 587 (3d Cir. 1997). "Whether a business practice is unfair is a question for the jury, but ...

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