MARSHALL v. VERDE ENERGY USA, INC.
Filing
64
OPINION. Signed by Judge John Michael Vazquez on 12/19/2019. (lag, )
Not for Publication
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
RAY MARSHALL, individually and on behalf of
all others similarly situated,
Plaintiff
Civil Action No. 18-1344 (JMV) (JBC)
OPINION
V.
VERDE ENERGY USA, INC.,
Defimdani.
John Michael Vazguez, U.S.D,J.
This putative class action alleges deceptive and bad faith practices that resulted in
consumers paying more for electricity. The Court previously dismissed the initial Complaint (D.E.
1), Marshal/v. Verde Energy USA, Inc., No. 18-1344. 2019 WL 1254562 (D.N.J. Mar. 19, 2019)
(“Prior Opinion”). Plaintiff Ray Marshall then filed a First Amended Complaint (the “FAC”)
(D.E. 50). Presently before the Court is a motion to dismiss the FAC pursuant to Federal Rule of
Civil Procedure 12(h)(6) by Defendant Verde Energy USA, Inc. (“Verde”). D.E. 54. Plaintiff
filed a brief in opposition (D.E. 56), to which Defendant replied (D.E. 57).’ Afier briefing on the
motion xvas complete, both parties filed notices of supplemental authority and responses. D.E. 5863. The Court reviewed the pailies’ submissions and decided the motions without oral argument
Defendant’s brief in support of its motion to dismiss (D.E. 54) will he referred to as “DeE Br.”;
Plaintiffs opposition (D.E. 56) will be referred to as “PIf. Opp.”; and Defendant’s reply of its
motion (D.E. 57) will be referred to as “DeE Reply.”
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 Defendant’s motion to strike is DENIED.
I.
FACTUAL BACKGROUND2 & PROCEDURAL HISTORY
In New Jersey, a utility company cannot profit from buying and selling energy; it can only
profit from delivery. FAC
¶ 15, D.E.
50. Following energy deregulation in New Jersey, however.
an independent energy supply company (“ESCO”) can profit by buying and selling energy to
customers. Id. ¶ I 6. ESCOs compete to supply energy services in deregulated states, but local
utility companies continue to actually deliver the supply. Id. ¶ 17. Local utility companies may
also supply “metering, billing, and related administrative services to the consumer” regardless of
whether an ESCO supplies the energy. Id. ESCOs are regulated by New Jersey’s Administrative
Code, which requires that the terms of service with the consumer meet certain standards. Id.
Defendant is an ESCO that supplies power to residents in New Jersey. hA at
¶1J
¶ 36.
11, 12.
Plaintiff decided to switch from his local utility, PSE&G, to an ESCO, Discount Energy Group,
LLC (“Discount”), because Discount indicated that Plaintiff would save money on his electricity
bill. Id.
¶
46. Nearly a year after making the switch. Plaintiff was notified that his electricity
service was being assigned from Discount to Defendant. Id, ¶ 47. Shortly after, Plaintiff received
a “Welcome Letter” from Defendant, which stated that it “look[edj forward to saving you money
on your monthly electric bills in the months to come.” Id.
¶ 48,
Ex, A. The Welcome Letter added
that Defendant has “a strong focus on enabling our customers to save money on their monthly
2
The factual background is taken from the FAC (D.E. 50), as well as the exhibits attached to the
Complaint. D.E. 50-1, 50—2. When reviewing a motion to dismiss, a court accepts as true all wellpleaded facts in the Complaint. Fowler 1’. UPMC Shadvsidc, 578 F.3d 203, 210 (3d Cir. 2009). A
court may also consider any document integral to or relied upon in the FAC. Schmidt v. 51w/as,
770 F.3d 24i, 249 (3d Cir. 2014) (eitinghz rcBurlington Coat Factory Sec. Litk., 114 F,3d 1410,
1426 (3d Cir. 1997)). In this motion, the exhibits are referenced in the FAC, and the parties agree
that both documents are authentic and critical to deciding the current motion.
7
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 Tents 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
Tents 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.
¶ 49. Lx. B. The Agreement continued that Plaintiff “may compare price tents
by looking at the rates posted on Verde’s website and on Customer’s monthly bill.” Id., Lx. B. In
fact Plaintiff’s billing invoices appeared to include a “Price to Compare” section that compared
Verde’s current rate with PSE&G’s rate for the month. itt
¶ 57 n. o. The Agreement further
directed Plaintiff to visit Defendant’s website “www.lowcostpower.com for current rates and
updates.” Id.
¶ 51. This website contained the statement that Verde was “proud to offer
competitive electricity rates for 100% renewable energy.” Id.
¶ 61. 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. itt
54. Plaintiff was a Verde customer from August 2012 to January 2013. Id.
¶
¶ 57. Although
Plaintiff’s original Complaint (D.E. 1) provided more information on this issue. In a chart
comparing various rates, Plaintiff indicated that lie drew the “Utility Rate” from the “Price to
Compare’ provided on Plaintiff’s billing invoices.” (D.E. I ¶ 33 n. 5). This implies that Plaintiff
was in fact seeing comparable prices listed on his monthly bills. In the MC, the chart’s rates are
explained simply as “PSE&G Price to Compare.” Therefore, this Court infers that PSE&G’s prices
were in fact listed on Plaintiff’s monthly bill, as was promised in the Tents of Service.
3
Plaintiff was a customer from August 2012, Plaintiff includes a chart with price comparisons only
from October 2016 to December 2017. Id.
Plaintiff asserts that based on Defendant’s representations relating to competitive rates,
“any reasonable consumer would understand that Verde’s variable rate would reflect Verde’s cost
for purchasing electricity at wholesale, and that the variable rate would be competitive with the
rate offered by the local utility and other ESCOs.” Id. ¶62. Plaintiff alleges that Verde customers
are actually charged rates that are “not based at all on market conditions.” Id. ¶70. 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.
¶ 71.
Plaintiff alleges
that “there [werej numerous months where Defendant’s rate was more than triple the wholesale
rate.” Id. ¶ 70. In addition, Plaintiff contends that Verde’s rates “always remain[ed) substantially
higher than PSE&G’s rates” and, at times, more than eighty percent higher than PSE&G’s rates.
Id.
¶ 67.
PSE&G’s rates, Plaintiff alleges, are reflective of market conditions because PSE&G
purchases energy from a centralized wholesale electricity market and is statutorily required “to set
its electricity generation rates at prices consistent with market conditions.” Id. 164. Conversely,
Plaintiff contends that “Verde has a tactical advantage over PSE&G in providing lower electricity
prices to its cijstomers because it can purchase electricity from any number of markets using any
number of purchasing and hedging strategies.” Id.
¶ 69.
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.
¶ 57.
Also, as noted, Plaintiff appears to assert
that PSE&G’s rates were provided on his invoices, meaning that he could perfonn a quick
comparison between what he was being charged and what PSE&G was charging. Id. ¶57 n. 6.
4
Plaintiff filed this putative class action complaint on April 18, 2019 on behalf of all Verde
variable rate electric plan customers in New Jersey within the applicable statute of limitations. Id.
¶ 99. The Complaint asserts the following claims: (1) violation ofthe 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; and (4) violation of the Truth-In-Consumer Contract, Warranty, and Notice Act
C’TCCWNA”). Id. at ¶11 104-153. Defendant filed the instant motion to dismiss for failure to state
a claim on May 20,2019. D.E. 54. Additionally, Defendant moves to strike certain allegations in
the FAC. Id.
II.
STANDARD OF REVIEW
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 I 2(bX6), it must contain sufficient factual matter to state a claim that is plausible on
its face. Ashcroft “. Iqbal, 556 U.S. 662,678(2009) (quoting Be!! ML corp. v. Thvombly, 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 plaintiffmust “allege sufficient facts to raise a reasonable expectation that
discovery will uncover proof of her claims.” Conne!!y v. Lane Const. Cotp., 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. UPUC 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. Burteb v. Mitherg 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.” Fowier, 578 F.3d
at 210. Even if plausibly pled, however, a complaint will not withstand a motion to dismiss if the
5
facts alleged do not state “a legally cognizable cause of action.” Turner i 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. Kinvan Fin. Grp., Inc., 460 F.3d 494, 514 (3d Cir. 2006). To state a
CPA claim, a plaintiff must allege “(1) unlawfid conduct; (2) ascertainable loss; and (3) a causal
relationship between the unlawftil conduct and the ascertainable loss.” Intl Union of Operating
Engrs Local No. 68 We(fare Fund v. Merck & Co., Inc., 192 N.J. 372, 389 (2007). Unlawfiil
conduct is defined by the CPA 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 CFA “should be construed liberally.” Int’l Union
ofOperating Eng ‘rs Local No. 68 We(fare Fund, 192 N.J. at 389.
When a CPA claim is based on a valid, written contract, “a court will dismiss [thej 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
i&
Sovereign Bank, 374 P. App’x 341, 344 (3d Cir. 2010) (affirming dismissal of CPA
where alleged wrongfid conduct was expressly pennifted by agreement at issue). Moreover, when
a CPA 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 ofreasonable
business practice in that it will victimize the average consumer.” Suber v. Chrysler Corp., 104
P.3d 578, 587 (3d Cir. 1997). “Whether a business practice is unfair is a question for the juty, but
6
if the claim is founded on written statements, then the court must make a legal decision whether
the practice is unlawM in light of the writings.” Urbino, 2015 WL 4510201, at *3 (citing Hassler,
374 F. App’x. at 344).
In dismissing the CFA claim from Plaintiff’s initial Complaint (D.E. 1), the Court
concluded that the statement in the Terms of Service that “rates may fluctuate with market
conditions” did not guarantee Plaintiff any savings.4 Prior Opinion at *4 With respect to
representations made outside of the Terms of Service, the Court reasoned that Plaintiff’s reliance
on a “single statement about cost saving from the Welcome Letter” was insufficient to allow for a
claim under the CFA. Id.
Plaintiff now asserts further information throughout the FAC to demonstrate that
Defendant’s prices were higher than those of competing service providers. However, Plaintiff has
Plaintiff draws the Court’s attention to .91Mg v. Ambit Energy, L.P., 674 F. App’x 164 (3d Cir.
2017). PIE Opp. at ¶jj 14-15. Plaintiff argues that the SilvIs decision implies that the statement
“the rate may fluctuate monthly with market conditions” only gives Defendant discretion to vary
rates if according to market conditions. In Silvis, two clauses relating to pricing were at issue. One
“unambiguously” granted the defendant discretion to set rates, and the other stated that the
customer’s rate “may vary dependent on price fluctuations in the energy and capacity markets.”
Silvis, 674 F. App’x at 167. The Third Circuit found that this clause was ambiguous as to whether
the defendant had “the authority to vary the rates or [whether it] describes the circumstances under
which [the defendant] can vary the rates. Id. at 168. The Silvis court explained that when reading
“the two pricing clauses together, the contract is ambiguous as to the discretion afforded [the
defendant] in setting rates.” Id.
Here, the MI pricing clause in the Terms of Service is the following: “Customer agrees and
understands that the rate may fluctuate monthly with market conditions.” D.E. 50-1, Lx. B. This
is the only description of how the price may vary. The clause is at most ambiguous and the Court
disagrees that it required Defendant to vary its rates based on market conditions. In addition,
Plaintiff attempts to limit the definition of “market conditions” to wholesale rates or public utility
rates. But the phrase “market conditions” has not been found to be limited to wholesale rates or
rates of competitors. See Coda i& Constellation Energy Power Choice, LLC, No. 17-3437, 2018
WL 3201796, at *6 (D.N.J. June 29,2018). See also Richards v. Direct Energy Services, LLC,
915 F.3d 88, 98-99 (2d Cir. 2019) (allowing an expansive interpretation of’%usiness and market
conditions” beyond “procurement costs”).
7
not provided any new and persuasive facts as to how Defendant misrepresented to Plaintiff that its
prices would be anything other than what they were.
Plaintiffs
most
relevant
new
allegation
is
that
the
Defendant’s
website,
lowcostpower.com, and statements contained within, served as material misrepresentations by the
Defendant that its service would be low-cost and provide competitive rates. FAC at ¶11 113, 114.
The key determination is whether these statements are puffery. The CFA “distinguishes between
actionable misrepresentations of fact and ‘puffery’.” In re Toshiba America HD DVD Marketing
and Sales Practice Litigation, No. 08-939, 2009 WL 2940081, at *8 (citing Rodio v. Smith, 123
N.J. 345 (1991)). To determine whether a statement is puffery, courts detemiine whether the
statement is “characterized by ‘vague, highly subjective claims’ as opposed to ‘specific, detailed
factual assertions.” Melville v. Spark Energy, No. 15-8706, 2016 WL 677535, at *3 (D.N.3. Nov.
15, 2016) (quoting Hammer v. VitaL Pharm., Inc., No. 114124,2012 WL 1018842, at *7 (D.NJ.
Mar. 26, 2012)). Claims of “substantial savings,’ ‘low, competitive rates,’ ‘exceptional value,’
and ‘great savings” are not actionable. Urbino, 2015 WI.. 4510201, at *5 n. 7.
While Plaintiff calls attention to the non-specific indication of “competitive” rates on
Defendant’s website (FAC
¶
114), he neglects to consider that those descriptions of rates are
limited to “100% renewable energy” (FAC 1 61). Plaintiff has not alleged that Defendant’s rates
were not competitive with those of other renewable energy providers.
He does note that
Defendant’s rates were much higher than those of PSE&G and wholesale costs, but with respect
to overall competition, only generally notes that Defendant’s rates were higher than those of all
other ESCOs in 2017. FAC
1
114. Even if the representation of “competitive rates” were not
limited to renewable energy, it would still not be actionable due to its non-specific nature. In
addition, Plaintiff has not alleged that he actually visited the website or read any of the
8
representations contained therein, or that the website contained similar representations when he
entered into the contract with the Defendant in August of 2012.
Plaintiff would still need the presence of substantially aggravating circumstances to allow
the CFA claim to succeed in the face of a written contract. However, Plaintiff cannot point to any
such circumstance other than the faót that Defendant’s rates, for a period of Plaintiff’s multi-year
business relationship with Defendant, were substantially higher than competitors’ rates.
Defendant’s practices were not “outside the norm of reasonable business practice.” As this Court
has found, Defendant did not promise Plaintiff any savings. Prior Opinion at *4• Moreover,
Plaintiff does not provide any specific information that Defendant’s rates were higher than those
of PSE&O until October 2016, four years after becoming a customer of Defendant in August of
2012. FAC ¶57. Piaintifffiirther does not allege that Verde’s rates were higher than those of any
other relevant ESCO until 2017. FAC ¶ 76. In making this allegation, Plaintiff cites only a website
and does not indicate how much higher Verde’s rates were. In opposition, Verde points to similar
information and argues that its “average price in 2017 was immaterially higher than several of its
competitors[j” Def. Br. at 11 n. 6. Verde continues that Plaintiff likewise omits that Verde’s
average price was lower than several of its competitors in 2015 and 2016. Id.
As noted in the Prior Opinion, Plaintiff still fails to account for the following
circumstances. Each month, Plaintiff’s energy bill set forth Verde’s rate as well as PSE&G’s rate.
And Plaintiff contends that PSE&O’s rates are an apt comparison. Plaintiff was also free to cancel
his agreement with Verde at any time; Plaintiff was not locked into a long-term contract. Thus,
Plaintiff could have dropped Verde as soon as he felt Verde was overcharging
—
and Plaintiff had
PSE&G’s monthly rate next to Verde’s rate to compare. Also, of note, Plaintiff had been a
customer of Verde since 2012. While the FAC complains of continuous malfeasance by Verde
9
throughout Plaintiffs contractual arrangement with Defendant, Plaintiff thctually provides
information beginning only in October 2016
—
four years after Plaintiff began using Verde’s
energy. Plaintiff has not alleged any new, sufficient facts indicating that Defendant made
actionable misrepresentations as to the cost of its service or that Defendant’s conduct involved
substantially aggravating circumstances. Therefore, Plaintiff has 6iled to adequately plead a claim
under the CFA. Count One is dismissed.
2. Breach of Contract (Count Two)
Verde contends that the breach of contract claim should be dismissed because Plaintiff thus
to plead that Verde breached any actual obligations under the Terms of Service. Def. Br, at 2123. To state a claim for breach of contract, plaintiffmust allege (I) the existence of a contract; (2)
breach of the contract (3) damages as a result of the breach; and (4) that plaintiff performed its
duties under the contract Faisil v. Energy Plus Holdings, LLC, No. 12-2879, 2012 WL 3835815,
at 7 (D.N.J. Sept. 4, 2012). “The plaintiff must also specifically identi& portions of the contract
that were allegedly breached.” Id.
Plaintiff does not present any new facts that would allow him to plausibly plead a breach
of the Agreement. Plaintiffs principal argument is that the Tents of Service required the
Defendant to base its rates on market conditions, which the Defendant did not do, thereby
breaching the contract. Plf. Opp. ¶ 17. This argument fails because the Tents of Service did not
require Defendant to base its rates on market conditions. Prior Opinion at *4, As discussed above,
Plaintiffs arguments regarding the ambiguity of the term “market conditions” (PIf. Opp. at ¶iJ 1819) are therefore not relevant. Still, Plaintiff has not shown that Defendant failed to base its rates
on market conditions, alleging only that Defendant’s rates did not track PSE&G’s rates or
wholesale costs.
10
In a notice of supplemental authority (D.E. 59), Plaintiff directs the Court to a recent
Second Circuit ruling, Mirkin v. XOOM Energy, LLC, 931 F.3d 173 (2d Cir. 2019). While Mirkin
is not binding precedent on this Court, the case is nonetheless distinguishable. In Mirldn, rather
than tying the potential change in rates to “market conditions,” XOOM’s terms of service expressly
provided that the customer’s “monthly variable rate [would be) based on XOOM’s actual and
estimated supply costs.” Mirkin, 931 F.3d at 175 (emphasis in original). XOOM admitted that
their energy supply came from wholesale markets. Id at 176. The court found it was therefore
reasonable to infer that XOOM’s actual and estimated supply costs should track the wholesale
costs, and that plaintiff had adequately alleged XOOM’s rates did not. See Id. at 177. In this case,
the Terms of Service do not require Defendant to base its rates on supply costs. Therefore, this
Court cannot reasonably draw the inference that Defendant’s rates ought to track wholesale costs.
Plaintiff also makes a new argument relating to breach of contract. He argues that the
pricing term in the Terms of Service does not comply with the requirements of the New Jersey
Administrative Code
§ 14:4-7.6(b). FAC ¶ 36. Section 14:4-7(b)(2) (the “Pricing Regulation’
provides as follows:
(b) A TPS [Third Party Supplier] contract shall clearly and
conspicuously state that the purpose of the document is to authorize
a change in the customer’s TPS, and include explicit terms and
conditions, which shall include, at a minimum:
2. The price per kwh or therm or, jfaJLxed pricing
arrangement is not made, a clear and unambiguous
statement of the precise mechanism or formula Ltv
which the price will be determined; if the contract
contains no particular pricing terms, but rather,
expresses the charges for service rendered on a
percentage savings basis, the contract language shall
clearly and conspicuously state the percentage
savings being guaranteed, as well as the price or
charges to which the percentage savings is being
cornpared[.J
II
N .J.A.C.
§
14:4-7.6(h) (emphasis added). This argument may have some merit because Verde
indicated that it would provide electricity at a “variable
generation rate”
and that “the rate may
fluctuate monthly with market conditions.” FAC ¶ 49. Ex. B. This statement appears to fall short
of a “clear and unambiguous statement of the precise mechanism or formula by which price will
be determined” as required by the Pricing Regulation. But Plaintiff ihils to sufficiently plead. or
argue. the impact of a violation of the Pricing Regulation. For example. does a violation of the
regulation mean that the entire agreement was void (or voidable) from inception? If so. what
remedy may Plaintiff seek? Plaintiff does claim in the FAC that Defendant violated the Pricing
Regulation (FAC at ¶j 36-41), but only by way of supporting an interpretation of the pricing term
that Plaintiff desires. Plaintiff points to no relevant authority5 that this alleged violation supports
his breach of contract claim.
Without a better understanding of Plaintiff’s theory as to the
applicability of the regulation, and without legal authority to support his position. the Court is left
to speculate as to the effect of any alleged violation. Again, this argument may have merit, but the
The Third Circuit discussed a Pennsylvania statute sometvhat similar to the Pricing Regulation
in Orange r. Santo,, Ene;’gv R1, Inc., 711 F. App’x. 681 (3d Cir. 201 7). That case involved a
variable rate energy contract which was governed by Pennsylvania law. Id. at 682.
Pennsylvania law required that an “energy supplier’s contract include a statement informing the
customer ‘on what basis prices will vary.” Id. at 683 (quoting 52 Pa, Code § 54.5(c)(2)(i)-(ii)).
The plaiitiff alleged that the defendant energy supplier breached the contract by charging an
“arbitrary, exorbitant monthly’ rate fttr out of line with what tle rate would have reasonably been
had it been based on the market factors” set forth in the contract. Id. The Third Circuit rejected
this argument. finding that it was not enough to infer a breach of contract alleging that the rates
charged exceeded those of the local utility, since the contract expressly provided that the variable
rate could be based on, among other things, market conditions in five separate territories. liL at
683—84. Thus. the issue in Orange was different than the one presented here. There, it appears
that the energy supplier followed Pennsylvania law by setting forth bases on which the variable
rate would beset. Here, by comparison, Plaintiff is alleging that Defendant never included the
required information in the contract in the first place.
12
Court can only analyze its merits if Plaintiff present a clearer articulation (with legal support) of
his position.6
Plaintiff has failed to state a plausible claim for breach ofcontract. Count Two is dismissed.
3. The Implied Covenant of Good Faith and Fair Dealing (Count Three)
Defendant argues that Plaintiff fails to plausibly plead a breach of the duty of good faith
and fair dealing claim because the alleged vrongM conduct is encompassed by the Terms of
Service and was not different from that which underlies the alleged breach of contract. Def. Br. at
23. The implied covenant of good faith and fair dealing is a “component of every contract that
requires both panics to a contract act in good faith[,]” that is, they must “adher[eJ to community
standards of decency, fairness, or reasonableness.” Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88,
109 (2007) (internal citations omitted). “[A] breach of the covenant of goad faith and fair dealing
must not arise out of the same conduct underlying an alleged breach of contract action.” however,
in certain circumstances, a plaintiff is permitted to plead alternative claims. CR4, Inc.
i
Odtus
In! 1, Inc., No. 16-5632, 2017 WL 2779749, at *6_i (D.N.J. June 27, 2017).
In Count Three. Plainti ft alleges that if Defendant did not breach the express terms of the
Agreement, which gave Defendant unilateral discretion concerning PlaintiWs monthly rate,
Defendant breached the implied covenant of good faith and fair dealing by arbitrarily and
unreasonably exercising its discretion to adjust prices. FAC1 142. Thus, it is possible that while
Defendant did not breach an express term of the contract, Verde violated the implied covenant
Richards, 915 F.3d $8, is instructive. In that case, the plaintiff alleged that a vague pricing term
in the contract violated a Connecticut statute outlining required contract terms. However, the
Connecticut statute expressly noted that a violation of the statute would constitute an “unfair or
deceptive trade practice.” Id. at 101. The applicable New Jersey regulation contains no such
provision.
6
13
contained in the contract. Consequently, Count Three is appropriately construed as an alternative
to Plaintiffs claim for breach of contract.
Defendant maintains that Plaintiffs implied covenant claim must be dismissed because
Plaintiff fails to allege sufficient facts to show that Verde acted in bad fhith. Def. Br. at 24-25,
When a party has the right to exercise discretion under a contract, the discretion must not be used
for an improper motive, or “arbitrarily, unreasonably, or capriciously.” Wilson v. Amerada Hess
Corp., 168 N.J. 236, 251 (2001) (‘Without bad motive or intention, discretionary decisions that
happen to result in economic disadvantage.
.
.
are of no legal significance.”). Examples of bad
fldth conduct that supports an implied covenant claim are (I) purposefUlly hiding vital information
to ensure that the plaintiff continued to perform under the contract even though the defendant knew
it was going to terminate the plaintiffs exclusive distributorship arrangement, Bak-A-Lum Corp.
v. Alcoa Bldg. Products., 69 N.J. 123 (1976); and (2) deliberating evading the plaintiff after the
plaintiff notified the defendant that it intended to exercise its option to purchase a lease, Brunswick
Hills Racquet Club, Inc. v. Route 18 Shopping Center Associates, 182 N.J. 210, 229 (2005).
However, “a plaintiff cannot satis& the ‘improper motive’ element of a claim for breach
of the covenant of good faith and fair dealing by alleging, without more, that the defendant’s
discretionary decisions benefltted the defendant and disadvantaged the plaintiff.” Urbino, 2015
WL 4510201, at *6 (internal citations omitted). Although the Court may infer that Defendant
acted with a bad motive, Plaintiffmust provide factual support that would allow the Court to draw
such an inference. See Slack
i
Suburban Propane Partners, L.P., No. 10-2548, 2010 WL
3810870, at *7 (D.N.J. Sept.21, 2010) (“Without such factual content, the Court is unable to draw
the reasonable inference that Defendants had a bad motive in exercising their discretionary pricemaking authority.”) (internal quotation marks omitted).
14
Here, outside of”a fonnulaic recitation of the elements of a cause of action,” Plaintiff fails
to provide any facts that permit the Court to infer that Verde acted in bad faith when adjusting
Plaintiff’s monthly rate. See Iqbal, 556 U.S. at 678. As discussed above, it appears that Plaintiff
had the opportunity to compare Verde’s rates on a monthly basis with the PSE&G rates and exit
the contract at any time. Given that Verde’s monthly rate is the crux of Plaintiff’s case, the Court
cannot infer bad faith when Plaintiff had an opportunity to easily compare the rate with PSE&G’s
each month. As a result, Plaintiff fails to state a claim for breach of the implied covenant of good
faith and fair dealing. Count Three is also dismissed.7
4. TCCWNA (Count Four)
Defendant argues that the TCCWNA does not create an independent cause of action.
Because Plaintiff’s CFA claim fails, Defendant maintains that Plaintiff’s TCCWNA claim must
also be dismissed. Det Br. at 26.
The TCCWNA provides as follows:
No seller, lessor, creditor, lender or bailee shall in the course of his
business offer to any consumer or prospective consumer or enter
into any written consumer contract or give or display any written
consumer warranty, notice or sign after the effective date of this act
which includes any provision that violates any clearly established
legal right of a consumer or responsibility qf a jeller, lessor,
creditor, lender or bailee as established by Stale ofFederal law at
the time the offer is made or the consumer contract is signed or the
warranty, notice or sign is given or displayed.
“Plaintiff references Hamlen v. Gateway Energy Services Corporation, No. 16-3526, 2017 WL
892399 (S.D.N.Y. Mar. 6, 2017) in support of the inference that selling prices higher than
competitors allows for a claim of bad faith. Hamlen is not binding on this Court and is
distinguishable. The contract in Hamlen listed a variety of specific considerations that the ESCO
would take into account when setting its variable rate. Hamlen, 2017 WL 892399, at *1..2. No
such specific considerations were set forth here.
15
NJ.S.A. 56:12-15 (emphasis added). Thus. lube TCCVNA only holsters rights established by
other laws; it does not create any new consumer rights
i!ladcnor v. Wegmans Foot! Markets.
Inc., 124 F. Supp. 3d 360. 380 (D.NJ. 2015); sec ti/so Dugan v. WI Fridays, Inc.. 231 NJ. 24, 68
(2017) (“As the TCCWNA’s legislative history reflects, the Legislature did not recognize any new
consumer rights but merely imposed an obligation on sellers to acknowledge dearly established
consumer rights and provided remedies for posting or inserting provisions contrary to law.”)
(internal quotation omitted).
In this instance. Plaintiffs TCCWNA claim is premised on a purported violation of the
CPA. FAC
‘
152. Because the Cowl concluded that Plaintiti fails to sufticiently state a CFA
claim, his TCCWNA claim cannot survive either.
Sec Mkuknav, 124 F. Supp. 3d at 360
(dismissing TCCWNA claims that relied on an alleged CPA violation that was also dismissed),
Count Four, therefore, is dismissed.
V.
MOTION TO STRIKE
Defendant seeks to strike certain allegations from the FAC for being “irrelevant and
immaterial to this action.” Del’. Br. at 26. Specifically, Defendant seeks to strike statements
relating to ESCO regulation in other states. Id. Defendant cites only one authority. Mercado v.
Verde Energy USA, inc., No. 18-2068, 2019 WL 978531 (N.DJL. iuly 26, 2019), which allowed
a motion to strike similar allegations. Id. at 26-27. Rule 12(t) of the Federal Rules of Civil
Procedure states that a “court may strike from a pleading and insufficient defense or any redundant,
immaterial, impertinent, or scandalous matter.”
discretionary. flzronfs
Systems.
Inc.
i
Fed. R. Civ. P. 12(0.
The decision is
Sphere Technology Solutions. [IC. No. 18-12055, 2019
WL 2119558, at *2 (D.NJ. May 14, 2019) (internal citation omitted). Motions to strike “are
usually viewed with disfavor and will generally be denied unless the allegations have no possible
16
relation to the controversy and may cause prejudice to one of the parties, or if the allegations
confuse the issues.” Garlanger v. Verbeke, 223 F,Supp.2d 596, 609 (D.N.J. Sept. 27, 2002)
(internal quotations and citations omitted). Because the Court is otherwise dismissing the FAC, it
denies this motion as moot. Admittedly, however, the relevance of ESCO regulation in other states
is not readily apparent to the Court.
Plaintiff seems to be including such information to
demonstrate that energy deregulation has, in large part, not resulted in the cost savings originally
hoped for. At the same time, Defendant fails to explain how it is unfairly prnjudiced by these
allegations. The motion to strike is denied.
VL
CONCLUSION
For the reasons stated above, Defendant’s motion to dismiss (D.E. 54) is GRANTED and
the Complaint is dismissed. The dismissal is without prejudice and Plaintiff is panted leave to
file an Amended Complaint. Plaintiff has thirty (30) days to file an Amended Complaint, if he so
chooses, consistent with this Opinion.
If Plaintiff fails to file an Amended Complaint, the
dismissal will be with prejudice. In addition, Defendant’s motion to strike (D.E. 54) is DENIED
as moot. An appropriate Order accompanies this Opinion.
Dated: December 19,2019
John Michael Vazq,&4DJ.
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