Zahn v. North American Power & Gas, LLC
Enter MEMORANDUM, OPINION AND ORDER: For the reasons stated herein, the motion to dismiss 28 is granted. Civil case terminated. Signed by the Honorable Virginia M. Kendall on 5/22/2015.Mailed notice(tsa, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
NORTH AMERICAN POWER & GAS, LLC,
14 C 8370
Judge Virginia M. Kendall
MEMORANDUM OPINION AND ORDER
Defendant North American Power & Gas, LLC (“NAPG”) moves to dismiss Peggy
Zahn’s Complaint (Dkt. No. 1) because the Illinois Commerce Commission (“ICC”) has
exclusive jurisdiction over the dispute and, in the alternative, for failure to state a claim under
Rule 12(b)(6) of the Federal Rules of Civil Procedure. Zahn alleges that NAPG deceived her and
others similarly situated when they promised variable rates on electricity that varied with market
conditions, but delivered electricity at a rate she alleges exceeded the market price. Zahn seeks
damages under the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS
505/1 et seq., and based on the Illinois common law of breach of contract and unjust enrichment.
For the reasons stated below, NAPG’s motion to dismiss (Dkt. No. 28) is granted.
The Court takes the following factual allegations in the Complaint as true of the purposes
of this facial Rule 12(b)(1) motion to dismiss. See Apex Digital, Inc. v. Sears, Roebuck & Co.,
572 F.3d 440, 443 (7th Cir. 2009). NAPG is an Alternative Retail Electric Supplier (“ARES”), a
type of energy supplier that competes against traditional utilities such as Commonwealth Edison.
(Compl. ¶ 10). In Illinois, consumers are permitted to choose between traditional utilities and
ARES on a somewhat open market. (Id. ¶¶ 9-11). NAPG offered Zahn and others an introductory
rate for electricity that was lower than the rate she had previously paid to Commonwealth
Edison. (Id. ¶ 14). According to a disclosure statement that NAPG provided to potential
customers, after the introductory rate expired NAPG offered a variable rate “calculated in
response to market pricing, transportation, profit and other market price factors, plus all
applicable taxes.” (Id. Ex. 2 p. 2). More specifically, the price of electricity was “a variable price
based on the method stated above and market prices for commodity, transportation, balancing
fees, storage charges, NAP fees, profit, line losses plus applicable taxes.” (Id. p. 3). The
disclosure statement continued: “Your price may be higher or lower than [the traditional utility in
your area] and current pricing is not a guarantee of future pricing and/or savings.” (Id.). In an
introductory letter to subscribers, including Zahn, NAPG summarized its pricing policy: “The
electric plan is a market based variable rate and you will receive the current rate, quoted below,
on your first month of service.” (Id. Ex. 1).
Zahn, who resides in Libertyville, Illinois, began purchasing electricity from NAPG in
August 2012. (Id. ¶ 5). During the time that Zahn was a customer, however, NAPG charged
higher prices for electricity than Commonwealth Edison did. After the introductory rate expired,
the rate that NAPG charged Zahn rate increased from $0.0599 per kW/hr to $0.1599 kW/hr, an
increase of over 100%. (Id. ¶ 18). At no point between September 2012 and February 2014 did
NAPG charge a rate below $0.0599 kW/hr.
Zahn claims that NAPG’s statements regarding the factors that could cause the rate to
vary were misleading because Zahn believed, and suggests that any reasonable consumer would
believe, that the NAPG rate would vary consistently with the prevailing market price for
electricity. (Id. ¶22). Zahn claims that the price that Commonwealth Edison and other ARES
charged provide a reliable approximation of the market price. (Id. ¶¶ 21-22). During the relevant
time period from September 2012 to February 2014, Commonwealth Edison never charged more
than $0.08324 kW/hr. The weighted average price of wholesale electricity based on
Intercontinental Exchange data varied between $0.03127 and $0.08221 between September 2012
and February 2013. (Id. ¶ 24). A graph of electricity prices during the relevant time period
including in the Complaint shows that the NAPG price varied in rough proportion to the average
These facts, Zahn argues, show that NAPG’s price does not vary with prevailing market
conditions. Because Zahn viewed NAPG’s statements as to the factors that could cause the rate
to vary as an assurance that the rate would vary in accordance with the prevailing market price,
Zahn argues that a variation caused by factors other than the prevailing market price constitute a
breach of contract. Zahn also argues that NAPG’s statements as to the factors were false and
misleading in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act.
Finally, Zahn argues that NAPG has been unjustly enriched at her expense as a result of the
higher than market rates.
A motion under Rule 12(b)(1) of the Federal Rules of Civil Procedure challenges the
Court’s subject matter jurisdiction. “The party asserting federal jurisdiction bears the burden of
demonstrating its existence.” Farnik v. F.D.I.C., 707 F.3d 717, 721 (7th Cir.2013). Where, as
here, the Rule 12(b)(1) jurisdictional challenge concerns the sufficiency of the allegations in the
complaint regarding subject matter jurisdiction, the Court accepts all well-pleaded factual
allegations as true and draws all reasonable inferences in favor of the plaintiff. See United
Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003) (overruled on other
grounds by Minn-Chem., Inc. v. Agrium, Inc., 683 F.3d 845 (7th Cir. 2012)).
To survive a Rule 12(b)(6) motion to dismiss, a complaint must “include sufficient facts
to state a claim for relief that is plausible on its face.” Cole v. Milwaukee Area Tech. Coll. Dist.,
634 F.3d 901, 903 (7th Cir. 2011) (internal quotation and citation omitted). “A claim has facial
plausibility when the plaintiff pleads sufficient factual content that allows the court to draw the
reasonable inference that the defendant is liable for the alleged misconduct.” Adams v. City of
Indianapolis, 742 F.3d 720, 728 (7th Cir. 2014) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)). A plaintiff must allege that all elements of its claim are satisfied, but cannot survive a
Rule 12(b)(6) motion to dismiss by alleging only legal conclusions. Reynolds v. CB Sports Bar,
Inc., 623 F.3d 1143, 1147 (7th Cir. 2010). “Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678.
Rule 12(b)(1) Motion to Dismiss
The Court, as it must, considers NAPG’s jurisdictional challenge before its 12(b)(6)
challenge. See Yassan v. J.P. Morgan Chase and Co., 708 F.3d 963, 967 n.1 (7th Cir. 2013)
(error for district court to consider 12(b)(6) challenge before 12(b)(1) challenge). NAPG
contends that the Illinois Commerce Commission has exclusive jurisdiction over this action
because it is essentially a case about an allegedly excessive rate. Zahn counters that she does not
dispute the rate itself, but instead seeks civil damages for fraud and breach of contract. The Court
agrees with NAPG. While this Court has diversity jurisdiction over the present Complaint, the
state law on which the Complaint relies vests exclusive jurisdiction over this type of claim with
the ICC. See Glebocki v. City of Chicago, 32 F. App’x 149, 154-55 (7th Cir. 2002) (district court
lacked jurisdiction when state statute provided for exclusive jurisdiction in state agency);
Johnson v. Honda, 125 F.3d 408, 418 (7th Cir. 1997) (district court properly dismissed
complaint where state law provided for exclusive agency jurisdiction).
The issue, then, is whether Illinois courts of law would have jurisdiction over the
Complaint or whether it would be within the exclusive jurisdiction of the ICC. The ICC “retains
jurisdiction over claims submitted for reparations and the circuit court retains jurisdiction over
claims submitted for civil damages.” SRT Enters., Inc., v. Direct Energy Bus., LLC, No. 1-122760, 2013 WL 3379245 at *4 (Ill. App. Ct. 2013) (citing 220 ILCS 5/16-115B). The ICC also
has exclusive jurisdiction over disputes relating to the contracts between ARES and their
customers, which the ICC has interpreted to include unjust enrichment claims such as the one
Zahn has alleged. See 220 ILCS 5/16-115B; see also Chilku Enters. Inc. v. GDF Suez Energy
Resources NA, Inc., No. 10-0157, 2011 WL 1474049 at *3 (Ill. C.C. 2011). “Reparation claims
are those maintaining that a utility has overcharged for a service, while claims for civil damages
are those maintaining that the utility has engaged in other conduct to wrong the plaintiff.” SRT
Enters., 2013 WL 3379245 at *4. (citing Sheffler v. Commonwealth Edison Co., 955 N.E.2d
1110, 1124 (Ill. 2011)). “Other conduct” refers to unlawful conduct unrelated to the rate charged,
such as billing for services not provided or fraudulently inducing customers to consume more
than intended. See Flournoy v. Ameritech, 814 N.E.2d 585, 586-87 (Ill. App. Ct. 2004) (ICC did
not have exclusive jurisdiction when complaint alleged that telephone provider intentionally
dropped calls, requiring customer to pay extra connection fees); Sutherland v. Illinois Bell, 627
N.E.2d 145 (Ill. App. Ct. 1993) (ICC did not have exclusive jurisdiction over complaint alleging
the telephone provider billed for services not provided). That Zahn has framed her dispute as one
seeking civil damages for fraud and breach of contract rather than reparations for an
unreasonable rate is immaterial. “The fact that plaintiff identified [her] causes of action in terms
of seeking civil damages does not automatically impose the jurisdiction of the circuit court.” SRT
Enters., Inc., 2013 WL 3379245 at *6; see also Village of Evergreen Park v. Commonwealth
Edison Co., 695 N.E.2d 1339, 1343 (Ill. App. Ct. 1998) (“The fact that plaintiff labels its action a
breach of contract action is not dispositive nor does it transform plaintiff’s action into a civil
action for damages.”). The ICC has jurisdiction over suits against ARES and public utilities alike
when the dispute is “essentially” a dispute about rates. See SRT Enters., Inc., 2013 WL 3379245
The Court finds that the Complaint is more accurately characterized as seeking
reparations than seeking civil damages and is therefore within the ICC’s exclusive jurisdiction,
than seeking civil damages. The present suit is “essentially” a reparations claim because Zahn’s
injury fundamentally stems from the allegation that NAPG charged too much for electricity. The
Complaint contains no allegations that NAPG charged Zahn for services it did not provide, that
NAPG acted unlawfully to induce Zahn to incur more charges than desired, or that NAPG
wronged Zahn in any way not directly related to the rate it charged for electricity. Instead,
Zahn’s only quarrel with NAPG relates to its rate, which was higher than the rate she believed
she agreed to pay. Because Zahn’s entire injury would have been avoided had NAPG charged a
lower rate, the Court finds that the Complaint seeks reparations rather than civil damages. The
Court therefore lacks jurisdiction over the Complaint because Illinois law grants the ICC
exclusive jurisdiction over the matter.
Rule 12(b)(6) Motion to Dismiss
Even if the Court had jurisdiction over the Complaint, the Court would dismiss the
Complaint for failing to state a claim under Rule 12(b)(6) of the Federal Rules of Civil
Procedure. In the alternative to the jurisdictional argument above, NAPG moves to dismiss the
Complaint in its entirety for its failure to state a claim upon which relief can be granted. The
Complaint contains three causes of action that rely on the same basic facts described above.
Again, the Court takes the Complaint’s factual allegations as true for the Rule 12(b)(6) motion to
dismiss. See Adams, 742 F.3d at 728.
Illinois Consumer Fraud and Deceptive Business Practices Act
Zahn first alleges that NAPG’s pricing scheme violates the Illinois Consumer Fraud and
Deceptive Business Practices Act, 815 ILCS 505/1, et seq (“ICFA”). The ICFA prohibits “unfair
methods of competition and unfair or deceptive acts or practices.” 515 ILSC 505/2. To state a
claim under the ICFA, a plaintiff must allege: “(1) a deceptive act or practice by the defendant;
(2) the defendant intended that the plaintiff rely on the deception; (3) the deceptive act occurred
in a course of conduct involving trade or commerce; and (4) actual damage to the plaintiff (5)
proximately caused by the deceptive act.” Philadelphia Indemnity Ins. Co. v. Chicago Title Ins.
Co., 771 F.3d 391, 402 (7th Cir. 2014) (citing De Bouse v. Bayer AG, 922 N.E.2d 309, 313
(Ill. 2009)). “[A] statement is deceptive if it creates a likelihood of deception or has the capacity
to deceive.” Bober v. Glaxo Wellcome PLC, 246 F.3d 934, 938 (7th Cir. 2001). The framework
applies to unfair practices as well as deceptive practices. See Wigod v. Wells Fargo Bank, N.A.,
673 F.3d 547, 574 (7th Cir. 2012) (citing Rockford Mem’l Hosp. v. Havrilesko, 858 N.E.2d 56,
62 (Ill. 2006)). A practice is unfair if it: (1) offends public policy; (2) is immoral, unethical,
oppressive, or unscrupulous; or (3) substantially injuries consumers. See Robinson v. Toyota
Motor Credit Corp., 775 N.E.2d 951, 960 (Ill. 2002). The Complaint fails to allege either an
unfair or deceptive practice or act by NAPG.
The Complaint fails to allege any deceptive practice on behalf of NAPG. The Complaint
alleges, and the documents attached to the Complaint corroborate, that NAPG disclosed that its
rate was “calculated in response to market pricing, transportation, profit and other market price
factors, plus all applicable taxes” (Compl.. Ex. 2 p. 2) and, in more detail, could vary based on
“market prices for commodity, transportation, balancing fees, storage charges, [NAPG] fees,
profit, line losses plus applicable taxes.” (Id. p. 3). Zahn argues that these statements deceive the
consumer into believing that NAPG’s rates will always reflect the market price, i.e. a price
related to the Commonwealth Edison price and the average wholesale price on the
Intercontinental Exchange. 1 The statements themselves, however, make no such representation.
The Complaint alleges that Commonwealth Edison and the average wholesale price on the
Intercontinental Exchange roughly approximate the market price for electricity during the time
period relative to the Complaint. The Court accepts that characterization for the purpose of this
motion to dismiss, but notes that it is somewhat perplexing that Zahn would leave
Commonwealth Edison, apparently dissatisfied with its pricing, to become an NAPG subscriber
in hopes that NAPG’s “market” pricing would rise and fall to in tandem with the Commonwealth
Edison pricing she had just switched suppliers to escape.
The factors that NAPG identifies as affecting price include factors not necessarily reflected in the
prevailing market price, most notably profit. The Complaint contains factual allegations
supporting the conclusion only that the NAPG price was higher than Commonwealth Edison’s
price, but not that NAPG’s electricity price did not vary based on the factors cited,. The
disclosures explicitly state that NAPG’s price “may be higher or lower than [Commonwealth
Edison] and current pricing is not a guarantee of future pricing and/or savings.” Id. The
Complaint contains no allegations that support the inference that prices did not rise and fall
based on these factors and therefore no allegations that could lead to a finding of deceptive
practices by NAPG. See, e.g., Chandler v. Amer. Gen. Finance, Inc., 768 N.E.2d 60, 69 (Ill. App.
Ct. 2003) (common theme of ICFA claim is attractive solicitations where solicitor has no
intention of delivering on the apparent promises).
Nor does the Complaint allege any unfair practice on the part of NAPG. Nothing in the
Complaint suggests that NAPG did not disclose the factors that could cause its pricing to vary or
even that NAPG waited until late in the process to disclose its policies. Cf. Romo v. Fed. Nat’l
Mortgage Ass’n, 2014 WL 5620157 at *4 (N.D. Ill. Nov. 4 2014) (complaint stated IFCA unfair
practices claim when lender waited until eve of closing to disclose fees). Nor is the pricing
scheme oppressive. Nothing suggests that NAPG or anyone else forced Zahn to accept NAPG’s
rates. Cf. Wendorf v. Landers, 755 F. Supp. 2d 972, 979 (N.D. Ill 2010) (“plaintiff states a claim
under the ICFA where the defendant’s conduct gave plaintiff no reasonable alternative to avoid
incurring a charge or penalty”). Zahn would have been able to cancel her NAPG service and
return to Commonwealth Edison at any time with minimal notice and without a fee. (Compl.
Ex. 2 p. 3). Any potential for unfairness based on Zahn’s subjective misunderstanding of the
explicit terms of the contract is vitiated by the ease with which she could return to
Commonwealth Edison or another ARES. Accordingly, Count I fails to state a claim.
Breach of Contract
Zahn argues that the NAPG breached the Electricity Sales and Customer Disclsoure
Statement by charging rates that varied by factors other than those contained in the agreement.
NAPG counters that while its rates did not match the rates offered by Commonwealth Edison,
the rates did vary based on the factors promised. “The required elements of a breach of contract
claim in Illinois are the standard ones of common law: “offer and acceptance; (2) consideration;
(3) definite and certain terms; (4) performance by the plaintiff of all the required conditions; (5)
breach; and (6) damages.” Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 560 (7th Cir. 2012)
(internal quotation marks and citations omitted). The Court finds that the Complaint does not
contain sufficient factual allegations to support the reasonable inference that NAPG breached the
Zahn again characterizes the disclosures as promising a rate that varies with the market
price. The plain language of the disclosures, however, belies this characterization and Zahn’s
characterizations are subordinate to the plain language of the contract. See Centers v. Centennial
Mortg., Inc., 398 F.3d 930, 933 (7th Cir. 2005) (“to the extent that the terms of an attached
contract conflict with the allegations of the complaint, the contract controls”). While Zahn
characterizes her Complaint as alleging that NAPG varied its rates based on factors other than
ones upon which the parties agreed, (See Compl. ¶ 48), the Complaint contains no factual
allegations to substantiate that assertion. As described above, the Complaint contains factual
allegations supporting only the conclusion that NAPG charged rates higher than Commonwealth
Edison and the average wholesale price on the Intercontinental Exchange. These facts alone do
not plausibly allege that the NAPG rate was guided by factors other than the ones in the
disclosures. Moreover, the disclosures expressly state that NAPG’s rate may be higher than
Commonwealth Edison’s. In other words, Zahn has not pled facts adequate to show that NAPG
breached a term of the agreement between the parties. NAPG promised a variable price that
would vary based on “market prices for commodity, transportation, balancing fees, storage
charges, [NAPG] fees, profit, line losses plus applicable taxes.” Zahn’s allegation that NAPG’s
prices did not track Commonwealth Edison’s price – something the contract explicitly states is
not guaranteed – does not constitute an allegation that the rate NAPG charge did not vary based
on those conditions. Therefore, even assuming that the disclosures constituted a valid contract,
there are no allegations in the Complaint that could constitute a breach of that contract.
Accordingly, the Complaint does not a claim for breach of contract.
The Complaint also fails to state a claim for unjust enrichment. Absent sufficient
allegations of deception, the claim for unjust enrichment must fail. See Bober v. Glaxo Wellcome
PLC, 246 F.3d 934, 943 (7th Cir.2001) (“in the absence of any deception on the part of the
defendants, the requisite [elements of unjust enrichment are] not present”). As described in more
detail above, the Complaint does not contain allegations that NAPG deceived Zahn in its
description of the criteria on which its prices are based. Moreover, a claim for unjust enrichment
cannot stand on its own in light of the Court's dismissal of her ICFA. See Martis v. Grinnell Mut.
Reins. Co., 905 N.E.2d 920, 928 (Ill. 2009) (“Unjust enrichment is not a separate cause of action
that, standing alone, will justify an action for recovery.”). The Complaint therefore does not state
a claim for unjust enrichment.
For the reasons stated herein, the motion to dismiss is granted.
Virginia M. Kendall
United States District Court Judge
Northern District of Illinois
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