Sevugan v. Direct Energy Services, LLC
Filing
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MEMORANDUM Opinion and Order signed by the Honorable Virginia M. Kendall on 5/17/2018. The Court grants Defendants' Motion to Dismiss 21 . Count III of the Complaint is dismissed with prejudice. Counts I, II, and IV are dismissed without prejudice. Mailed notice(lk, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CHETTY SEVUGAN, individually and on
behalf of all others similarly situated,
Plaintiff,
v.
DIRECT ENERGY SERVICES, LLC, a
Delaware corporation,
Defendant.
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Case No. 1:17-cv-6569
Judge Virginia M. Kendall
MEMORANDUM OPINION AND ORDER
Plaintiff Chetty Sevugan, individually and on behalf of all others similarly situated,
brings this action against Defendant Direct Energy Services, LLC (“Direct Energy”) alleging a
violation of the Illinois Consumer Fraud and Deceptive Business Practices Act1 (“ICFA”),
breach of contract, breach of implied covenant of good faith and fair dealing, and unjust
enrichment. (Dkt. No. 9.) Sevugan seeks punitive damages, attorney’s fees, and injunctive
relief. (Id.) Direct Energy filed a Motion to Dismiss all of Sevugan’s claims. (Dkt. No. 21.)
For the following reasons, the Motion to Dismiss is granted.
BACKGROUND
The following facts are based on the allegations in the Complaint as well as the partial
2011 Direct Energy Electricity Supply Contract and the 2011 Direct Energy Residential Uniform
Disclosure Statement for Illinois attached to the Complaint. (Dkt. No. 9, Ex. 1-2); see also
Tierney v. Vahle, 304 F.3d 734, 738-39 (7th Cir. 2002) (documents attached to the complaint
“indisputably becomes a part of it for all purposes”) (citing Fed. R. Civ. P. 10(c)). The Court
accepts all well-pleaded facts in the Complaint as true for purposes of the Motion to Dismiss and
1
815 ILCS 505/1, et seq.
draws all reasonable inferences in favor of Sevugan. See Reynolds v. CB Sports Bar, Inc., 623
F.3d 1143, 1146 (7th Cir. 2010). The Court also considers the complete version of the 2011
Direct Energy Supply Contract attached to Direct Energy’s Motion to Dismiss. (Dkt. No. 21-3).
Generally, matters outside the pleadings may not be considered on a motion to dismiss. See Fed.
R. Civ. P. 12(b). However, the Court can examine concededly authentic documents attached to a
party’s motion to dismiss if the documents are referred to in the plaintiff’s complaint and are
central to his claim. See Chemetall GMBH v. ZR Energy, Inc., 320 F.3d 714, 718 (7th Cir.
2003); Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 432 (7th Cir. 1993). The
2011 contract is referred to in the Complaint and central to Sevugan’s claim and the majority of
it is already incorporated into the Complaint by Sevugan.2
Prior to 1997, only local public utility companies were permitted to sell and distribute
electricity in Illinois. (Dkt. No. 9 at ¶ 9). In 1997, Illinois deregulated the market for electricity
supply, allowing independent, privately-operated alternative retail electric suppliers (“ARES”) to
supply electricity without having to disclose the rates they charged or their method for setting
those rates to the Illinois Commerce Commission.3
(Id. at ¶¶ 9-10). The purpose of the
deregulation was to increase competition among suppliers thereby reducing wholesale
2
Direct Energy also attached to its Motion to Dismiss a certified transcript of an August 5, 2011 enrollment call
between Sevugan and a Direct Energy representative. (Dkt. No. 21-2). However, the Court finds that the call is not
sufficiently referenced in the Complaint to warrant consideration of this transcript at the motion to dismiss stage.
Sevugan alleges simply that he was “solicited” by a Direct Energy representative but it is not clear from the face of
the Complaint that the “solicitation” refers to the August 5, 2011 call. C.f. Constr. Workers Pension Fund-Lake Cty.
& Vicinity v. Navistar Int'l Corp., 114 F. Supp. 3d 633, 647 (N.D. Ill. 2015) (court considered call transcripts
attached to defendant’s motion to dismiss where complaint alleged misstatements were made during analyst calls
and included excerpts from those calls); Rubinstein v. Gonzalez, No. 14-CV-9465, 2016 WL 1213931, at *3 (N.D.
Ill. Mar. 29, 2016) (court considered call transcript attached to motion to dismiss where complaint alleged
misstatements were made during telephonic investor conference and included excerpts of the investor conference
call). In fact, the transcript is of a call from Sevugan to Direct Energy after he purportedly received a letter from
Direct Energy.
3
Sevugan refers to these entities as energy service companies (“ESCOs”). However, the Illinois’ Electric Service
Customer Choice and Rate Relief Law of 1997 discussed in the Complaint applies specifically to alternative retail
electric suppliers, or ARES, as defined in the Act. 220 ILCS 5/16-101. Therefore, the Court will use the term ARES.
2
purchasing costs and, in turn, retail residential rates. (Id. at ¶ 9). When a customer switches to
an ARES, the ARES supplies the electricity but the local utility continues to deliver the
electricity and to bill the customer for both the supply and delivery costs. (Id. at ¶ 11). For an
ARES customer, the utility calculates the supply cost as the number of kilowatt hours used
multiplied by the supply rate charged by the ARES, instead of the regulated rate charged by the
utility. (Id. at ¶¶ 11-12).
Direct Energy is an ARES that supplies electricity to Illinois consumers. (Id. at ¶
13).
Sevugan alleges that Direct Energy exploited the deregulation of the Illinois electricity
supply market by falsely promising to charge variable rates based on market-related factors in
order to lure consumers from local utilities and instead charging rates that are not based on
market-related factors and are substantially higher than those charged by the utilities. (See, e.g.,
id. at ¶¶ 2-3, 13-14).
Sevugan switched electricity suppliers and entered into a contract with Direct Energy in
or around August 2011. (Id. at ¶ 17, Ex. A). Sevugan alleges that a Direct Energy representative
“solicited” him to switch from his former supplier, utility company Commonwealth Edison
(“ComEd”), by offering him a teaser rate lower than its regular rates and promising he would
save money if he switched to Direct Energy.
(Id. at ¶¶ 15-16). Sevugan entered into a
contractual relationship with Direct Energy governed by the 2011 Energy Supply Contract,
which provided in relevant part:
1. Terms of Service. The essential terms of your electric generation service are as
follows:
Initial Term. “The Initial Term of your service is 12 monthly billing cycles.
(“Initial Term”).
Electric Generation Service Price per kWh During Initial Term. During your
Initial Term you will pay Direct Energy a fixed price of $.0689 per kWh. This
3
price includes your electric generation service and transmission charges, and
excludes taxes and other utility fees and charges. . . .
Electric Generation Service Price per kWh After Initial Term. Your service
will automatically continue on a month-to-month basis, and you will pay a
variable price per kWh. This price may be higher or lower each monthly bill
cycle. There is no early cancellation fee while taking service on a month-tomonth basis. See Section 5 for details. . . .
(Id. at ¶¶ 17-18, Ex. A. at ¶ 1 (emphasis in original)). Sevugan was initially placed on a 12month fixed rate plan and “subsequently switched to a variable rate plan.” (Id. at ¶¶ 18-19).
Section 5 of the Electric Supply Contract provided the following with regard to the
variable rate to be charged after the Initial Term:
5. Renewal; Notice of a Change to this Agreement. Upon completion of the
Initial Term, this Agreement will automatically renew on a month-to-month basis
at a variable price per kWh with no early cancellation fee. Direct Energy will
charge you at a variable price per kWh based upon generally prevailing market
prices for electricity in the PJM market at the Electric Utility load zone for the
applicable period, plus an adder, determined solely by Direct Energy in its
discretion. . . . You may obtain next month’s variable price by calling Direct
Energy using the contact information set forth in Section 15 below. Pricing is
available on the 20th day (or following business day) of the previous month.
(Id. at Ex. A ¶ 5 (emphasis added)). The 2011 Residential Uniform Disclosure Statement for
Illinois stated the same:
After the Initial Term, your service will automatically continue on a month-tomonth basis, and you will pay a variable price per kWh. Direct Energy will
charge you at a variable price per kWh based upon generally prevailing market
prices for electricity . . . plus an adder, determined solely by Direct Energy in its
discretion.
(Id. at Ex. B (emphasis added)).
Sevugan assumed based on these representations that Direct Energy would charge rates
“based on market-related factors” and that such rates would reflect changes in wholesale market
prices for electricity and be commensurate with the rates offered by the local utility and other
ARES. (Id. at ¶¶ 21-22). Direct Energy rates did not reflect wholesale market prices or rates
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charged by other suppliers. (Id. at ¶ 23). Rather, Direct Energy charged Sevugan variable rates
as high as 145% of ComEd rates for 2012, 120% for 2013, 150% for 2014, 240% or 2015, and
350% for 2016. (Id. at ¶ 24). Sevugan contends that rates charged by utilities like ComEd are
“an accurate measure of what market-based rates should be” because utilities purchase electricity
from the Illinois wholesale electricity market at the same prices per kilowatt that other suppliers,
including Direct Energy, can purchase electricity for supply to consumers. (Id. at ¶¶ 25-27).
Accordingly, Sevugan argues that Direct Energy rates could not have been based on marketrelated factors because they were substantially higher than ComEd’s and other utilities’ and
ARES’ rates. (Id. at ¶¶ 28-29-27).
Sevugan alleges that Direct Energy’s statements and omissions to consumers with respect
to the rates it will charge are materially misleading because it does not charge rates based on
market-related factors and fails to disclose that its rates are substantially higher than rates based
on market-related factors, knowing that the only reason a reasonable consumer would switch
from a local utility to Direct Energy is for the potential to pay market-based rates. (Id. at ¶¶ 32,
34-35). Sevugan claims that neither he nor any reasonable consumer would have enrolled in
Direct Energy’s plan had he known the rates would be higher than those charged by the local
utilities and, therefore, suffered injuries caused by Direct Energy’s misrepresentations and
omissions by paying the higher rates. (Id. at ¶¶ 32, 34-35).
Sevugan alleges state law claims for violation of ICFA, breach of contract, breach of
implied covenant of good faith and fair dealing, and unjust enrichment. Direct Energy seeks to
dismiss Sevugan’s claims pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). (Dkt.
No. 21).
5
LEGAL STANDARD
In order for a claim to survive a 12(b)(6) motion to dismiss, the complaint must contain
sufficient factual allegations to plausibly suggest that the plaintiff is entitled to relief. Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” McCauley v. City of Chicago, 671 F.3d 611, 615 (7th Cir. 2011)
(quoting Iqbal, 556 U.S. at 678). Facial plausibility requires factual allegations sufficient “to
raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
555 (2007). Determining plausibility is “a context-specific task that requires the reviewing court
to draw on its judicial experience and common sense.” McCauley, 671 F.3d at 616 (quoting
Iqbal, 556 U.S. at 679). In evaluating a motion to dismiss brought pursuant to Rule 12(b)(6), the
Court must accept as true all well-pleaded allegations in the complaint and draw all reasonable
inferences in favor of the plaintiff. Cole v. Milwaukee Area Tech. Coll. Dist., 634 F.3d 901, 903
(7th Cir. 2011).
Rule 9(b) requires a party alleging fraud to “state with particularly the circumstances
constituting fraud.” Fed. R. Civ. P. 9(b). This heightened pleading requirement was intended to
protect against the “great harm to the reputation of a business firm or other enterprise a fraud
claim can do.” Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 507 (7th Cir.2007).
Thus, pursuant to Rule 9(b), a plaintiff must “describe the ‘who, what, when, where, and how’ of
the fraud—‘the first paragraph of any newspaper story.’” United States ex rel. Presser v. Acacia
Mental Health Clinic, LLC, 836 F.3d 770, 776 (7th Cir. 2016) (quoting United States ex rel.
Lusby v. Rolls-Royce Corp., 570 F.3d 849, 853 (7th 2009)).
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DISCUSSION
I.
The Illinois Consumer Fraud and Deceptive Practices Act
Sevugan’s ICFA claim alleges that Direct Energy “knowingly and willfully
misrepresented to [him] and the class that [its] rates are based on market-related factors and
reflective of wholesale electricity costs in the market when its rates are not, in fact, based on
market-related factors” and “failed to inform consumers of the material fact that [its] rates are
substantially higher than those otherwise available in the market” with the intent that consumers
rely on this deception, causing him and the class “to pay substantially higher rates than those
otherwise available in the market.” (Dkt. No. 9 at ¶¶ 47-49). Direct Energy seeks to dismiss
Sevugan’s ICFA claim for failure to bring the claim within the statute of limitations and for
failure to state a claim pursuant to Rule 12(b)(6) and to meet the heightened pleading standards
required by Rule 9(b).
A.
Sevugan’s ICFA claim is not time-barred.
Direct Energy argues first that Sevugan’s ICFA claim is time-barred. “Dismissing a
complaint as untimely at the pleading stage is an unusual step, since a complaint need not
anticipate and overcome affirmative defenses, such as the statute of limitations.”
Cancer
Found., Inc. v. Cerberus Capital Mgmt., LP, 559 F.3d 671, 674 (7th Cir. 2009); see also United
States v. N. Tr. Co., 372 F.3d 886, 888 (7th Cir. 2004) (dismissing a complaint as time-barred
under Rule 12(b)(6) is “irregular”). Such dismissal is appropriate only where “the allegations of
the complaint itself set forth everything necessary to satisfy the affirmative defense, such as
when a complaint plainly reveals that an action is untimely under the governing statute of
limitations.” United States v. Lewis, 411 F.3d 838, 842 (7th Cir. 2005); see also Cannon v.
Newport, 850 F.3d 303, 306 (7th Cir.), cert. denied, 138 S. Ct. 320 (2017) (“[W]hen a complaint
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reveals that the action is untimely, the court can dismiss it.”). “In other words, the plaintiff must
affirmatively plead himself out of court.” Chicago Bldg. Design, P.C. v. Mongolian House, Inc.,
770 F.3d 610, 614 (7th Cir. 2014).
ICFA claims must be brought “within 3 years after the cause of action accrued.” 815
ILCS 505/10a(e); see also, e.g., Addison Automatics, Inc. v. RTC Grp., Inc., 2013 WL 3771423,
at *6 (N.D. Ill. July 16, 2013). Under Illinois law, “[c]laims accrue, commencing the limitations
period, when ‘the party seeking relief knows or reasonably should know of an injury and that it
was wrongfully caused.’” Pendleton v. Pendleton, 50 F. Appx 770, 773 (7th Cir. 2002) (quoting
Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc., 770 N.E.2d 177, 192 (Ill. 2002)). The
term “wrongfully caused” does not mean the plaintiff must have knowledge of actionable
conduct before the statute of limitations is triggered; rather, it requires only that the plaintiff have
“sufficient information concerning his injury and its cause to put a reasonable person on inquiry
to determine whether actionable conduct is involved.’” In re marchFIRST Inc., 589 F.3d 901,
904 (7th Cir. 2009) (quoting Knox Coll. v. Celotex Corp., 430 N.E.2d 976, 980-81 (Ill. 1981)).
Sevugan’s alleged injury for purposes of the ICFA claim is that he paid Direct Energy
variable rates that were “substantially higher” than rates otherwise available in the market. (Dkt.
No. 9 at ¶ 49). The Complaint does not specifically allege when Sevugan began paying the
higher variable rates or when he knew these rates were wrongfully caused. It alleges only that
Sevugan switched to Direct Energy “in or around 2011,” “was initially placed on an introductory
fixed rate plan” and “subsequently switched to a variable rate plan.” (Id. at ¶¶ 17-19). The
Electric Supply Contract suggests Sevugan could have begun paying a variable rate as early as
August 2012, as it provided that Direct Energy would charge Sevugan variable rates after the 12month, fixed-rate Initial Term expired. (Id. at Ex. A, ¶ 1). The fact that the Complaint points to
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discrepancies in the rates charged by Direct Energy and ComEd starting in 2012 supports this
inference. (Id. at ¶ 24 (“The variable rates that Direct Energy charged Plaintiff . . . evidence that
Direct Energy rates were as high as 145% of Com.Ed. rates for 2012 . . .” (emphasis added)).
Regardless, Sevugan’s claim did not accrue when the variable rate began but when he knew
enough to be put on inquiry that he was paying higher-than-market rates because he had been
deceived. Nothing in the Complaint sheds light on when or how Sevugan learned that the
variable rates were higher than others available in the market, that the variable rates were not
commensurate with wholesale market changes, or any other information that could possibly alert
him to wrongful conduct of the type he alleges on the part of Direct Energy. Therefore, the
Complaint does not “plainly reveal” that Sevugan’s ICFA claim is untimely, and the Court
declines to dismiss it as time-barred at this stage.
B.
Sevugan fails to state an ICFA claim pursuant to Rule 12(b)(6) and the
heightened pleading standards of Rule 9(b).
To state a claim under 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
deception occurred in the course of conduct involving trade or commerce; (4) the plaintiff
suffered actual damage; and (5) the damage was proximately caused by the deception.” Geschke
v. Air Force Ass’n, 425 F. 3d 337, 345 (7th Cir. 2005) (citing Oliveira v. Amoco Oil. Co., 776
N.E.2d 151, 160, (Ill. 2002)). This framework applies to unfair and deceptive acts and practices.
Philadelphia Indemnity Ins. Co. v. Chicago Title Ins. Co., 771 F.3d 391, 402 (7th Cir. 2014)
(citations omitted). Direct Energy argues Sevugan fails to sufficiently allege that it engaged in a
deceptive practice or that Sevugan was actually deceived by its statements. (Dkt. No. 21 at 910).
9
Like common law fraud, ICFA claims of deceptive acts or practices invoke the
heightened pleading standard of Rule 9(b). Pirelli Armstrong Tire Corp. Retiree Med. Benefits
Tr. v. Walgreen Co., 631 F.3d 436, 441 (7th Cir. 2011). Thus, plaintiffs alleging ICFA claims
must state with particularity and specificity the circumstances surrounding the allegedly
fraudulent conduct. Id. In other words, “a plaintiff ordinarily must describe the ‘who, what,
when, where, and how’ of the fraud.” Id. at 441–42 (citation omitted).
Sevugan initially offered two theories of deceptive acts and practices—the “what” of his
claim— in the Complaint. First, the Complaint alleges that Direct Energy misrepresented that it
would charge rates “based on market-related factors and reflective of wholesale electricity costs
in the market when its rates are not, in fact, based on market-related factors.” (Dkt. No. 9 at ¶
47.) Second, the Complaint alleges that Direct Energy acted deceptively by “fail[ing] to inform
consumers of the material fact that Direct Energy’s rates are substantially higher than those
otherwise available in the market.” (Id. at ¶ 48.)
However, Sevugan abandons the latter
omissions theory in his Response to Direct Energy’s Motion to Dismiss.4 The Court therefore
focuses only on whether the alleged misrepresentations constitute deceptive acts and practices
under ICFA.
“[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) (citing People ex
rel. Hartigan v. Knecht Servs., Inc., 575 N.E.2d 1378, 1387 (Ill. App. Ct. 1991)).
The
allegations in the Complaint offer little insight into what allegedly deceptive statements Direct
4
Direct Energy argues in its Motion to Dismiss that Sevugan’s Complaint failed to state a claim for consumer fraud
based on an omission because the Electric Supply Contract itself detailed how Sevugan could check the variable
rates he would be charged. (See Dkt. No. 21 at 8). In his Response, Sevugan did not address this argument or
otherwise discuss the omissions alleged in the Complaint in any way. See Lekas v. Briley, 405 F.3d 602, 614 (7th
Cir. 2005) (dismissing claim as abandoned where plaintiff “did not present legal arguments or cite relevant authority
to substantiate that claim in responding to defendants’ motion to dismiss”). Rather, Sevugan asserted that he “bases
his ICFA claim on Defendant having promised to set its rates one way and doing so another.” (Dkt. No. 28, at 6.)
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Energy actually made to Sevugan or how those statements misled him. Plaintiff offers only
general allegations that Direct Energy “lur[es] consumers into switching energy suppliers with
false promises that it offers market based variable rates,” Direct Energy “lures consumers to
switch from their local utility companies or other energy suppliers, promising that it will offer
market based variable rates for electricity,” “Direct Energy’s scheme falsely promises energy
rates based on market-related factors,” and “Direct Energy . . . misrepresented to Plaintiff and the
Class that Direct Energy’s rates are based on market-related factors and reflective of wholesale
electricity costs.” (Dkt. No. 9 at ¶¶ 2, 14, 47.) The Complaint is entirely void of any specifics
related to these alleged promises, for example, what was said, when it was said, who said it, or
how the representation was made. See Windy City Metal Fabricators & Supply, Inc. v. CIT
Tech. Fin. Servs., Inc., 536 F.3d 663, 670 (7th Cir. 2008) (internal quotation marks omitted)
(“[T]he district court properly dismissed the plaintiffs’ fraud claims for failure to state with
particularity who made the fraudulent statement, when the fraudulent statement was made, and
how the fraudulent statement was made.”).5
In his Response to Direct Energy’s Motion to Dismiss, Sevugan argues that the language
in the Electric Supply Contract—that the rates are based “upon generally prevailing market
prices for electricity . . . plus an adder”—is the deceptive statement giving rise to his ICFA
claim. (Dkt. No. 28 at 7). However, Sevugan may not base his ICFA claim on the parties’
contract. Sevugan must allege “unfair and deceptive conduct distinct from the alleged breach of
a contractual promise” in order to state a claim under ICFA. Greenberger v. GEICO Gen. Ins.
Co., 631 F.3d 392, 400 (7th Cir. 2011); see also Avery v. State Farm Mutual Auto. Ins. Co., 835
5
The Complaint alleges that in August 2011 a Direct Energy representative promised him “he would save money if
he switched to Direct Energy.” (Id. at ¶ 16). However, Sevugan’s ICFA claim is not based on alleged
misrepresentations that he would “save money” but that Direct Energy would charge rates “based on market-related
factors.”
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N.E. 2d 801, 844 (2005) (“A breach of contractual promise, without more, is not actionable
under the Consumer Fraud Act.”).
Sevugan also relies on Zahn v. N. Am. Power & Gas, LLC, to argue that his ICFA claim
is sufficiently plead. 847 F.3d 875 (7th Cir. 2017). But Zahn is easily distinguished. In Zahn,
the plaintiff alleged that she entered into a contract with the defendant service provider after it
offered her a temporary initial rate for new customers but that she never in fact received the
initial rate as promised. Id. at 877-78 (“[The plaintiff] alleged that the teaser rate [the defendant]
offered her was $.0499 per kilowatt hour and that she never received that initial rate but instead
was charged $.0599 per kilowatt hour on her initial bill.”). The Seventh Circuit held that
offering a teaser rate that was never in fact received “could constitute a breach of contract or a
deceptive business practice.” Id. at 878. Here, however, Sevugan admits that he received the
initial rate as promised. (Dkt. No. 9 at ¶ 18 (“Plaintiff was initially placed on an introductory
fixed rate plan for electricity.”)).
Finally, “[a] plaintiff may allege that conduct is unfair under ICFA without alleging that
the conduct is deceptive.” Siegel v. Shell Oil Co., 612 F.3d 932, 935 (7th Cir. 2010) (citation
omitted). In his Response to the Motion to Dismiss, Sevugan argues for the first time that Direct
Energy’s conduct is not only deceptive but also “unfair.” (Dkt. No. 28 at 8). “While charging an
unconscionably high price generally is insufficient to establish a claim for unfairness, whether a
practice is unfair depends on a case-by-case analysis.” Siegel, 612 F.3d at 935. “Because neither
fraud nor mistake is an element of unfair conduct under Illinois’ Consumer Fraud Act, a cause of
action for unfair practices under the Consumer Fraud Act need only meet the notice pleading
standard of Rule 8(a), not the particularity requirement in Rule 9(b).” Windy City Metal, 536
F.3d at 670. Therefore, the complaint need only “provide a short and plain statement of the
12
claim that shows, through its allegations, that recovery is plausible rather than merely
speculative.” Id. (citation omitted).
Conduct is unfair if it “(1) violate[s] public policy; (2) [is] so oppressive that the
consumer has little choice but to submit; and (3) cause[s] consumers substantial injury.” Siegel,
612 F.3d at 935 (citing Robinson v. Toyota Motor Credit Corp., 775 N.E.2d 951, 960 (Ill. 2002)).
Conduct need not satisfy all three criteria to permit a finding of unfairness. Id. The injury to
consumers must: “(1) be substantial; (2) not be outweighed by any countervailing benefits to
consumers or competition that the practice produces; and (3) be an injury that consumers
themselves could not reasonably have avoided.” Id.; see also Batson v. Live Nation Entm’t, Inc.,
746 F.3d 827, 834 (7th Cir. 2014).
Sevugan’s Complaint contains no explicit allegations of unfairness. The Complaint
focuses only on alleged deceptive practices and clearly states: “This action seeks to redress the
deceptive pricing practices of Direct Energy that have caused thousands of Illinois consumers to
pay considerably more for their electricity than they should otherwise have paid.” (Dkt. No. 9, at
¶ 1 (emphasis added)). The Complaint also alleges that Direct Energy made “false promises”
and that “Direct Energy’s representations are deceptive.” (Id. at ¶¶ 2–3 (emphasis added)). Thus,
in his Response to the Motion to Dismiss, Sevugan essentially contends that his allegations of
deception simultaneously state a claim for unfair conduct in the alternative. But allowing
Plaintiff’s allegations of deceptive conduct to serve as the basis for a claim of unfair conduct
would render the heightened pleading standard of Rule 9(b) pointless. See Camasta v. Jos. A.
Bank Clothiers, Inc., 761 F.3d 732, 737 (7th Cir. 2014) (“Simply adding language of ‘unfairness’
instead of ‘misrepresentation’ does not alter the fact that [plaintiff’s] allegations are entirely
grounded in fraud under the ICFA.”).
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Even if Plaintiff had alleged unfair conduct, his argument would fail because his contract
with Direct Energy gave him an explicit alternative: he could find out the variable rate by calling
and could terminate the contract at any time with no cancellation fee. (Dkt. No. 9 at Ex. A, ¶ 1.)
Because Sevugan had alternatives and could have reasonably avoided paying the variable rates,
he fails to allege unfair conduct. See Fogt v. 1-800-Pack-Rat, LLC, 74 N.E.3d 186, 199 (Ill.
App. Ct. 2017) (“To be oppressive, the conduct must leave the consumer with little alternative
but to submit.”); see also, e.g., Saunders v. Michigan Ave. Nat. Bank, 662 N.E.2d 602, 609 (Ill.
1996) (dismissing ICFA claim under 12(b)(6) finding “a total absence of the type of
oppressiveness and lack of meaningful choice necessary to establish unfairness”).
The Court dismisses the ICFA claim (Count I) without prejudice.
II.
Breach of Contract
“Under Illinois law, a plaintiff looking to state a colorable breach of contract claim must
allege four elements: ‘(1) the existence of a valid and enforceable contract; (2) substantial
performance by the plaintiff; (3) a breach by the defendant; and (4) resultant damages.’” Reger
Dev., LLC v. Nat’l City Bank, 592 F.3d 759, 764 (7th Cir. 2010) (quoting W.W. Vincent & Co. v.
First Colony Life Ins. Co., 814 N.E.2d 960, 967 (Ill. App. Ct. 2004)). Not surprisingly, “a breach
of contract claim requires an identifiable breach of a contract term.” Navar v. Tribler, Orpett &
Meyer, P.C., 2015 IL App (1st) 142641-U, at *57 (Ill. App. Ct. 2015).
Here, the Complaint alleges that Sevugan entered into a contract with Direct Energy,
pursuant to which Sevugan paid for electricity provided by Direct Energy. (Dkt. No. 9 at ¶ 54).
The Complaint identifies the contract term Direct Energy allegedly breached as the term stating
that Direct Energy would charge Plaintiff “at a variable price per kWh based upon generally
prevailing market prices for electricity in the PJM market at the Electric Utility load zone for the
14
applicable period, plus an adder, determined solely by Direct Energy in its discretion.” (Id. at ¶
19, Ex. A ¶ 5 (emphasis added)). In his Response to the Motion to Dismiss, Sevugan claims the
Complaint alleges that Direct Energy breached this term “by charging him at a rate for electricity
that was not based on these factors.” (Dkt. No. 28 at 9). But that is incorrect. The Complaint
alleges only that Direct Energy breached this term by charging “variable rates for electricity that
were not based on market-related factors.” (Dkt. No. 9 at ¶ 57 (emphasis added)). The phrase
“market-related factors” appears nowhere in the parties’ contract. (Id. at Ex. A, ¶ 5).
Additionally, the Complaint does not allege facts sufficient to show that Direct Energy
plausibly breached its contractual duty to calculate the variable rates “based upon generally
prevailing market prices for electricity . . . plus an adder, determined solely by Direct Energy in
its discretion.”
The only facts alleged in the Complaint with regard to the alleged breach are
that the rates charged “were not commensurate with rates otherwise available in the market or
with changes in wholesale rates” and were higher than rates charged by ComEd. As an initial
matter, Sevugan’s claim that rates charged by utilities are “an accurate reflection of rates that are
based on market factors” is undermined by other statements in the Complaint alleging Illinois
deregulated the electricity supply market because utilities were not providing market-based rates.
Anyway, it does not matter because as stated above, the contract does not require Direct Energy
to charge rates tied only to rates otherwise available or to wholesale rates or to charge rates lower
than those charged by ComEd. The contract allowed Direct Energy to base its rate on more than
one factor, including a discretionary component completely unrelated to any market rates or
wholesale prices.
The facts alleged in the Complaint are insufficient to give rise to any
reasonable inference that Direct Energy did not do so. See, e.g., Orange v. Starion Energy PA,
Inc., 711 F. App’x 681, 683 (3d Cir. 2017) (fact that defendant charged higher rate than local
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utility insufficient to state breach of contract claim where contract stated that the rate could be
based on market conditions in several geographic areas and that “calculation of market
conditions could account for” various factors “as determined in [defendant’s] discretion”); see
also Hamlen v. Gateway Energy Servs. Corp., No. 16 CV 3526, 2017 WL 892399, at *4
(S.D.N.Y. Mar. 6, 2017) (allegation that defendant’s rates “did not track wholesale or
competitors’ rates is not sufficient to allege breach of contract” where “contract expressly
granted defendant discretion to set rates based on many other factors, and allegations regarding
these factors [we]re not present in the complaint”). In fact, the Complaint entirely ignores the
discretionary component of the rate calculation and what effect it may have (permissibly) had on
the rates charged. Therefore, Sevugan fails to allege a breach of contract.
Sevugan cites to and attaches official transcripts from various cases he claims denied
motions to dismiss in similar scenarios.
(Dkt. Nos. 28-29).
However, these cases are
distinguishable because they are based on narrower contract language that does not include a
discretionary component. See, e.g., Yang Chen v. Hiko Energy, LLC, No. 14 CV 1771 VB, 2014
WL 7389011, at *6 (S.D.N.Y. Dec. 29, 2014) (contract provided that rate would “reflect the
wholesale cost . . . and other market-related factors” but did not provide for supplier discretion);
Melville v. Spark Energy, Inc., No. 15-8706, 2016 WL 6775635, at *3 (D.N.J. Nov. 15, 2016)
(contract “specifically linked prices to market condition” and did not provide for supplier
discretion). Therefore, Orange, Hamlen and other cases in which the contract permitted the
supplier to base rates on multiple factors including its own discretion are more persuasive here.
The Court dismisses the breach of contract claim (Count II) without prejudice.
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III.
Breach of Implied Covenant of Good Faith and Fair Dealing
“Under Illinois law, the covenant of good faith and fair dealing is not an independent
source of duties for the parties to a contract.” Brooklyn Bagel Boys v. Earthgrains Refrigerated
Dough Prods., 212 F.3d 373, 381 (7th Cir. 2000) (internal quotation marks omitted). An alleged
violation of the implied covenant of good faith cannot form the basis for an independent tort
action or even its own cause of action. See Wilson v. Career Educ. Corp., 729 F.3d 665, 673–74
(7th Cir. 2013) (citing Anderson v. Burton Assoc., Ltd., 578 N.E.2d 199, 203 (Ill. App. Ct.1991)).
Because Illinois law does not recognize this cause of action, Sevugan’s claim for breach of
implied covenant of good faith and fair dealing (Count III) is dismissed with prejudice.
Additionally, Sevugan abandoned this claim by failing to provide any legal authority to
substantiate it when responding to Direct Energy’s Motion to Dismiss. See Lekas, 405 F.3d at
614 (dismissing claim as abandoned where plaintiff “did not present legal arguments or cite
relevant authority to substantiate that claim in responding to defendants’ motion to dismiss”);
Cincinnati Ins. Co. v. E. Atl. Ins. Co., 260 F.3d 742, 747 (7th Cir. 2001) (failure to oppose an
argument permits an inference of acquiescence and “acquiescence operates as a waiver”);
Stransky v. Cummins Engine Co., 51 F.3d 1329, 1335 (7th Cir. 1994) (“[W]hen presented with a
motion to dismiss, the non-moving party must proffer some legal basis to support his cause of
action. The federal courts will not invent legal arguments for litigants.”).
IV.
Unjust Enrichment
“In Illinois recovery for unjust enrichment is unavailable where the conduct at issue is
the subject of an express contract between the plaintiff and defendant.” Cohen v. Am. Sec. Ins.
Co., 735 F.3d 601, 615 (7th Cir. 2013) (citing Guinn, 836 N.E.2d at 704); see also Nesby v.
Country Mut. Ins. Co., 805 N.E.2d 241, 243 (Ill. App. Ct. 2004) (“Where there is a specific
17
contract that governs the relationship of the parties, the doctrine of unjust enrichment has no
application.”). While a party may plead unjust enrichment in the alternative, “the inconsistentpleading option in this context is limited.” Id. “A plaintiff may plead as follows: (1) there is an
express contract, and the defendant is liable for breach of it; and (2) if there is not an express
contract, then the defendant is liable for unjustly enriching himself at my expense.” Id.
Sevugan fails to do so here.
The unjust enrichment claim in the Complaint
acknowledges that a contract exists, alleging that “Direct Energy has unjustly enriched itself
and received a benefit beyond what was contemplated in the contract, at the expense of Plaintiff
and the other members of the Class.” (Dkt. No. 9 at ¶ 68). Accordingly, Sevugan’s claim of
unjust enrichment (Count IV) is dismissed without prejudice. See Guinn, 836 N.E.2d at 704
(plaintiff “may not include allegations of an express contract which governs the relationship of
the parties, in the counts for unjust enrichment”); see also, e.g., The Sharrow Grp. v. Zausa
Dev. Corp., No. 04 C 6379, 2004 WL 2806193, at *3 (N.D. Ill. Dec. 6, 2004) (dismissing unjust
enrichment claim where plaintiff re-alleged and therefore incorporated allegations regarding
existence of contract into the count for unjust enrichment).
CONCLUSION
For the reasons stated above, Defendants’ Motion to Dismiss [21] is granted. Count III
of the Complaint is dismissed with prejudice.
Counts I, II and IV are dismissed without
prejudice.
____________________________________
Hon, Virginia M. Kendall
United States District Judge
Date: May 17, 2018
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