BROWN v. AGWAY ENERGY SERVICES, LLC

Filing 44

MEMORANDUM OPINION indicating that, for reasons more fully stated within, Defendant Agway's Motion to Dismiss 21 is GRANTED. This case is dismissed with prejudice. An appropriate Order follows. Signed by Judge Nora Barry Fischer on 9/13/18. (jg)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
JAMES BROWN, individually and on
behalf of all others similarly situated
Plaintiff,
v.

AGWAY ENERGY SERVICES, LLC,
Defendant.

)
)
)
)
)
)
)
)
)
)
)

Civ. A. No. 18-321
Judge Nora Barry Fischer

MEMORANDUM OPINION
I.

INTRODUCTION
Presently before the Court is Defendant Agway Energy Services, LLC’s (“Agway”)

Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) and Brief in Support,
(Docket Nos. 21, 22); Plaintiff James Brown’s (“Plaintiff”) Response, Brief in Opposition, and
Exhibits in Support of Opposition to Motion (Docket Nos. 32, 33, 34); and Agway’s Reply Brief,
(Docket No. 35). Agway seeks dismissal of all claims asserted by Plaintiff in his March 13, 2018
Class Action Complaint (“Complaint”). (Docket No. 21, at 1). Count One of Plaintiff’s Complaint
is a claim for breach of contract. (Docket No. 1, at 18). Count Two pleads, in the alternative, an
unjust enrichment claim. (Id. at 19). Plaintiff withdrew Count Two, leaving only one claim—
breach of contract—pending before the Court. (Docket No. 33, at 8 n.1). This Court exercises
subject matter jurisdiction over Plaintiff’s remaining claim pursuant to 28 U.S.C. § 1332(d)(2)(A)
(Class Action Diversity). After careful consideration of the parties’ positions and for the following
reasons, Agway’s Motion to Dismiss will be granted.

II.

BACKGROUND
Agway is an electric generation supplier (“EGS”) that purchases energy directly or

indirectly from energy production companies and, in turn, sells that energy to consumers.1 (Docket
No. 1, at ¶¶ 17, 19). Consumers may opt to switch from a public utility to an EGS, at which point
the EGS sets the price for the consumer’s energy supply.2 (Id. at ¶ 21). Plaintiff switched to
Agway, an EGS, for his electricity needs in March 2016, contractually binding him to electricity
rates set by Agway in accordance with Agway’s “Customer Contract.” (Id. at ¶ 34). The Customer
Contract, attached to Plaintiff’s Complaint as Exhibit A, is a two-page document with key terms
provided in an easy-to-read chart on the first page and more comprehensive language enumerated
in sections on the second page. (Docket No. 1-1). The first page contains the following relevant
language:
Price Structure: The Electric Variable Rate shall be set each month at Agway’s
discretion and reflect the cost of electricity acquired by Agway from all sources
(including energy, capacity, settlement, ancillaries), related transmission and
distribution charges, renewable energy compliance charges and other marketrelated factors, plus all applicable taxes, fees, charges or other assessments and
Agway’s costs, expenses and margins. The underlying costs are a derivative of the
PJM market. The monthly variable price will be communicated to you in your
invoice from your Electric Distribution Company (EDC). There is no limit on how
much the variable rate can change from one billing cycle to the next.
Electricity Supply Price: The first month of the Initial Term will be at an
Introductory Rate per kWh for electricity; thereafter a monthly variable rate will
apply.
Statement Regarding Savings: Participation in this program is NOT a guarantee of
future savings.
....
Incentives: EnergyGuard™ Repair Program
1

EGSs emerged after Pennsylvania deregulated its energy supply market in 1996. Orange v. Starion Energy
PA, Inc., 711 F. App’x 681, 682 (3d Cir. 2017).
Plaintiff’s Complaint explains that EGSs like Agway do not actually deliver the electricity to the consumer.
Rather, the EGS operates like a broker, buying electricity from various sources and simply reselling it to the consumer.
(Docket No. 1, at ¶ 19).
2

2

....
Cancellation/Early Termination Fees: Either party may terminate this agreement at
any time without prior written notice. There is no early termination/cancellation fee
for Variable Rate service.
(Docket No. 1-1, at 2) (emphasis in original).3 The second page of the Customer Contract contains
more detailed terms and conditions that take on a more legal tone:
1. Service. This is an agreement between Agway Energy Services, LLC
(“Agway”) and the undersigned customer (“Customer”) under which Customer
will be enrolled as an electric generation supply customer of Agway (the
“Agreement”). The Agreement includes the Cover Letter and any approved
addenda. Subject to the terms and conditions of this Agreement, Agway agrees
to sell and cause to be delivered, and Customer agrees to purchase and accept,
Customer’s full requirements of electricity for the location(s) listed herein, as
estimated by Agway, acquired by Agway from a variety of third party sources.
Agway is not affiliated with your Electric Distribution Company (“EDC”).
Your EDC will continue to deliver the energy supplied by Agway. Generation
price refers to the charge for production of electricity. Transmission price refers
to the charge for moving high voltage electricity from a generation facility to
the distribution lines of an EDC.
2. Term. This Agreement shall commence as of the first day of the billing cycle
which commences immediately after your EDC switches your electric
generation supplier to Agway, and shall continue for twenty-four (24) months
thereafter (the “Initial Term”). Unless otherwise agreed to, upon completion of
the Initial Term, this Agreement will renew with a monthly variable rate
methodology with no change to the Agreement without the Customer’s
affirmative consent. Either party may cancel or terminate this Agreement at any
time.
3. Price. The price for electricity sold during the initial term will be at an
introductory rate/kwh. All electricity sold under this Agreement will be at a
variable price. The variable price will be calculated by Agway, at Agway’s
discretion, on a customer specific basis each billing cycle and will include all
of the costs incurred in providing service to customer, including the following:
electricity acquired by Agway from all sources (including energy, capacity,
settlement, ancillaries), transmission and distribution charges, renewable
energy compliance charges, other market-related charges, plus all applicable
3

Agway argues that the Customer Contract attached to the Complaint (Docket No. 1-1) is not the actual
contract that Plaintiff entered into in 2016, and Agway attaches a slightly different customer contract to its Brief in
Support of its Motion to Dismiss. (Docket No. 22-1). Despite the two different “versions,” Agway concedes that
“[t]he relevant terms [in both customer contracts] are similar or identical.” (Docket No. 22, at 13 n.14). Because the
Court “must accept the allegations in the complaint as true,” the Court will use the exact language of the Customer
Contract provided by the Plaintiff at Docket No. 1-1. Morrow v. Balaski, 719 F.3d 160, 165 (3d Cir. 2013).

3

taxes including the gross receipts tax, fees, charges or other assessments and
Agway’s costs, expenses and margins. The underlying costs are a derivative of
the PJM market (PJM Interconnection, LLC is a regional transmission
organization that coordinates the movement of wholesale electricity in all or
parts of 13 states, including Pennsylvania). This price will be calculated for
each meter each month, depending upon factors such as changes in wholesale
energy prices, or other variables listed above, and so the price for each meter,
even for the same customer, are likely to be different each month. All charges
will be included in our monthly, per kwh charge. There is no limit on how much
the variable rate can change from one billing cycle to the next. Historical prices
are not indicative of present or future prices. To obtain historical average billed
prices, please contact us at 1-888-982-4929 or www.agwayenergy.com.
a. Generation prices are set by the electric generation supplier you
have chosen, in this case, Agway. The Pennsylvania Public Utility
Commission regulates distribution prices and services. The Federal
Energy Regulatory Commission regulates transmission prices and
services.
4. Agency (electric): Customer hereby designates Agway as agent to: (a) arrange
and administer contracts and service agreements between Customer and Agway
and those entities, including PJM, engaged in the generation, transmission and
delivery of Customer electricity supplies; and (b) nominate and schedule with
the appropriate entities including your EDC for the delivery of electricity to the
EDC which is the interface between PJM and the and the Customer’s end-use
premises. Agway as agent for the Customer will schedule the delivery of
adequate supplies of electricity that meet the Customer’s requirements as
established by your EDC and in response to information provided by your EDC.
These services are provided on an arm’s length basis and market-based
compensation is included in the price noted above.
....
9. Incentives. Customer is eligible for, and will receive service under the Agway
EnergyGuard™ program when Customer begins receiving their electricity
supply from Agway and according to the EnergyGuard terms and conditions,
which are separate from this Agreement. Customer should refer to the
EnergyGuard brochure for the terms and conditions and details on this
incentive. Agway will notify the Customer if the terms and conditions of the
EnergyGuard program are updated or otherwise changed at least thirty (30) days
in advance of any such change. Customer may terminate this Agreement
without penalty if the proposed changes to the EnergyGuard program are
unacceptable. If Customer terminates this commodity Agreement with Agway,
Customer will no longer receive the benefits of the Agway EnergyGuard
program. It may take thirty (30) to sixty (60) days to enroll Customer in the
EnergyGuard™ program after Customer switches to Agway.
10. Dispute Resolution. In the event of a disagreement involving Agway’s service
hereunder, the parties will use their best efforts to resolve the dispute. If
Customer is not satisfied following discussion with Agway, Customer may
4

contact the Pennsylvania Public Utility Commission. A dispute or complaint
relating to a residential customer may be submitted by Customer at any time to
the Pennsylvania Public Utility Commission’s Bureau of Consumer Services
by calling 1-800-692-7380.
....
13. Choice of Laws. Venue for any lawsuit brought to enforce any term or condition
of this Agreement or to construe the terms hereof shall lie exclusively in the
State of Pennsylvania. This Agreement shall be construed under and shall be
governed by the laws of the State of Pennsylvania without regard to application
of its conflicts of laws principles.
14. No Warranties. Unless otherwise expressly set forth in this Agreement, Agway
provides, and Customer receives, no warranties, express or implied, statutory,
or otherwise and Agway specifically disclaims all other warranties, express or
implied, including, without limitation, warranties of merchantability or fitness
for a particular purpose.
....
19. For inquiries and information regarding Electric Generation Suppliers and the
Competitive Retail Energy Market, contact the Pennsylvania Public Utility
Commission’s toll-free number at 1-800-692-7380 or visit their web site at
www.PaPowerSwitch.com.
....
21. Entire Agreement. This Agreement is binding upon the parties hereto and their
respective successors and legal assigns. This Agreement contains the entire
agreement between the parties and supersedes all prior negotiations, proposals,
understandings, representations and oral or written agreements with respect to
the subject matter hereof. Subject to Agway’s rights, as set forth in this
Agreement, to unilaterally change prices for each Renewal Term and to
unilaterally modify this Agreement to reflect a Regulatory Change, this
Agreement may only be amended by a writing executed by both parties, and
provisions herein may only be waived by Agway in writing.
(Docket No. 1-1, at 3).
Plaintiff alleges that he “was initially placed on a plan with introductory teaser rates for
electricity for the first two months of service.” 4 (Docket No. 10, at ¶ 35). After those two months,
Agway charged a variable month-to-month rate that was between 20% and 46% higher than his

4

Plaintiff alleges in his Complaint that he received two months at the introductory rate even though the
Customer Contract states that the introductory rate only applies to the first month. (Docket No. 1, at ¶ 35). This
inconsistency does not appear to materially affect the issues in the Motion to Dismiss as Plaintiff is challenging the
billed rates based on the variable rate, not the introductory or “teaser” rate.

5

local utility’s rates during those same months. (Id. at ¶¶ 35, 39). Plaintiff cancelled his service
with Agway in January 2017, and he returned to his local utility. (Id. at ¶ 39).
Plaintiff brings this suit individually and on behalf of all others similarly situated alleging
that Agway uses improper pricing practices with respect to its variable rates, resulting in its
consumers paying considerably more for their electricity than they otherwise should pay under the
Customer Contract. (Id. at ¶ 1). According to Plaintiff, Agway lures customers into switching
energy suppliers by offering initial teaser rates and then promising a variable rate based on marketrelated factors. (Id. at ¶ 4). In reality, Plaintiff alleges that Agway’s later variable rates are not
based on market-related factors but are instead inflated, price-gouged rates that do not conform
with Agway’s own “price structure” provisions of its Customer Contract. (Id. at ¶¶ 4, 36).
III.

PROCEDURAL HISTORY
Plaintiff initiated this action by filing his Complaint on March 13, 2018. (Docket No. 1).

Defendant responded by filing its Motion to Dismiss and Brief in Support on April 30, 2018.
(Docket Nos. 21, 22). Plaintiff countered with his Response and Brief in Opposition on May 25,
2018. (Docket Nos. 32, 33, 34). Defendant submitted its Reply on June 8, 2018. (Docket No.
35).
Thereafter, the Court was advised that the parties disputed whether discovery should
commence or not while the motion to dismiss remained pending and the Court set a briefing
schedule to resolve this matter. (Docket No. 36). Pursuant to the Court’s Order, Defendant filed
its Motion to Stay on July 17, 2018; Plaintiff submitted his Response on July 27, 2018; and
Defendant sought leave to file a reply brief on July 31, 2018. (Docket Nos. 37-40). After
considering the parties’ arguments, the Court entered an Order on July 31, 2018 staying discovery
pending disposition of this motion. (Docket No. 41). Plaintiff then filed a Notice of Supplemental

6

Authority on September 6, 2018, providing the Court with a decision by the Hon. Mark R. Hornak
in another case involving the same subject matter as the instant dispute. (Docket No. 42).
Defendant filed a response to Plaintiff’s Notice on September 13, 2018. (Docket No. 43). The
parties have not requested oral argument and the Court does not believe it is necessary to resolve
this straightforward dispute. As the matter is fully briefed, it is now ripe for disposition.
IV.

LEGAL STANDARD
When reviewing a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6),

the Court must “accept all factual allegations as true, construe the complaint in the light most
favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint,
the plaintiff may be entitled to relief.” Eid v. Thompson, 740 F.3d 118, 122 (3d Cir. 2014) (quoting
Phillips v. Cty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)). To survive a Rule 12(b)(6)
challenge, a plaintiff’s “[f]actual allegations must be enough to raise a right to relief above the
speculative level.” Id. (quoting Bell Atl. v. Twombly, 550 U.S. 544, 555 (2007)). “Thus, ‘only a
complaint that states a plausible claim for relief survives a motion to dismiss.’” Id. (quoting
Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)).
Although the Court must accept the allegations in the complaint as true, it is “not compelled
to accept unsupported conclusions and unwarranted inferences, or a legal conclusion couched as a
factual allegation.” Morrow v. Balaski, 719 F.3d 160, 165 (3d Cir. 2013) (quoting Baraka v.
McGreevey, 481 F.3d 187, 195 (3d Cir. 2007)). “Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678 (citing
Twombly, 550 U.S. at 555). Instead, the plaintiff must plead facts which permit the court to make
a reasonable inference that the defendant is liable. Iqbal, 556 U.S. at 678; Twombly, 550 U.S. at
556–57.

7

Consistent with these principles, the Third Circuit Court of Appeals has prescribed a threestep analysis for purposes of determining whether a claim is plausible. First, the court should
“outline the elements a plaintiff must plead to a state a claim for relief.” Bistrian v. Levi, 696 F.3d
352, 365 (3d Cir. 2012). Second, the court should “peel away” legal conclusions that are not
entitled to the assumption of truth. Id.; see also Iqbal, 556 U.S. at 679 (“While legal conclusions
can provide the framework of a complaint, they must be supported by factual allegations.”). Third,
the court should assume the veracity of all well-pled factual allegations and then “determine
whether they plausibly give rise to an entitlement to relief.” Bistrian, 696 F.3d at 365 (quoting
Iqbal, 556 U.S. at 679). This third step of the analysis is “a context-specific task that requires the
reviewing court to draw on its judicial experience and common sense.” Id. (quoting Iqbal, 556
U.S. at 679).
V.

DISCUSSION
Agway argues that the breach of contract claim—the sole remaining claim in the case—

should be dismissed because Plaintiff fails to allege any cognizable breach of Agway’s duties
under the Customer Contract. (Docket No. 22, at 18). In the alternative, Agway claims that
dismissal is appropriate because Plaintiff fails to allege compliance with the UCC’s notice
requirements. (Id. at 22). Finally, Agway contends that even if Plaintiff states a plausible claim
for breach of contract and satisfied the UCC’s notice requirements, the claim is nonetheless barred
by the voluntary payment doctrine. (Id. at 23).
A. Failure to Allege Breach of Contract
Agway argues that Plaintiff’s allegation that he paid too much for his electricity is
insufficient to allege a breach of the Customer Contract because it clearly states that Agway has
sole discretion to set electricity rates based on numerous factors, which include factors beyond the

8

“market rate.” (Docket No. 22, at 18). Agway further claims that its variable rates cannot be
compared to the local utility’s rates because Agway offers “energy-related, value added services”
that the local utility does not. (Id. at 12). Agway also points to Orange, 711 F. App’x 681, as
controlling authority on the issue of higher utility rates by EGSs and breach of contract claims by
consumers. (Docket No. 22, at 19). Plaintiff responds that he adequately pleads a breach of the
Customer Contract because the Complaint plausibly shows that Agway failed to charge rates for
electricity that were based on market-related factors, which is what the Customer Contract
represents. (Docket No. 33, at 12). To support his argument, Plaintiff points to the local utility’s
rates as an accurate reflection of market-based rates and points out that Agway failed to list
EnergyGuard (the “energy-related, value added service”) in the Customer Contract’s price
structure section as one of the factors it considers in setting its rates. (Id. at 14–15). Plaintiff seeks
to distinguish Orange and directs the Court to a plethora of district court cases, including Basile v.
Stream Energy Pennsylvania, LLC, No. 15-cv-01518, 2016 WL 4611443 (M.D. Pa. Sept. 6, 2016).
(Docket No. 33, at 13). In reply, Agway insists that its set rates do not constitute a breach but
rather conform to its stated price structure, which takes into account factors beyond “marketrelated” factors. (Docket No. 35, at 6).
As an initial matter, the Court notes that the parties do not dispute that Pennsylvania law
applies to Plaintiff’s breach of contract claim and that no choice-of-law analysis is necessary
regarding same. (Docket No. 1, at ¶ 6; Docket No. 22, at 18 n.19).
Second, while the Court will consider the version of the Customer Agreement provided by
the Plaintiff for the reasons stated in footnote 3 above, the Court will also consider the letter from
Agway to Plaintiff, dated March 10, 2016 (“Cover Letter”), attached to Agway’s Brief in Support.
(Docket No. 22-1, at 4). In doing so, the Court will not convert Agway’s motion to a motion for

9

summary judgment. It is well-settled that in deciding a motion to dismiss, courts generally
consider only the allegations contained in the complaint, any exhibits attached to the complaint,
and matters of public record. Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384
n.2 (3d Cir. 1994), abrogated on other grounds by Rotkiske v. Klemm, 890 F.3d 422, 428 (3d Cir.
2018); Pension Benefit Guar. Corp. v. White, 998 F.2d 1192, 1196 (3d Cir. 1993). “However, a
plaintiff’s failure to attach or cite documents explicitly relied on or integral to the complaint does
not preclude the court, when considering a motion to dismiss, from reviewing the text of these
extrinsic documents.” Rogan v. Giant Eagle, Inc., 113 F. Supp. 2d 777, 780–81 (W.D. Pa. 2000).
Indeed, “[c]ourts may consider a document that a defendant attaches as an exhibit to a motion to
dismiss, provided that its authenticity is undisputed and that plaintiff’s claims are based on the
document.” Id. at 781.5 Here, it is clear that Plaintiffs’ claims are based upon the “Customer
Contract,” and § 1 of the Customer Contract states that “[t]he Agreement includes the Cover Letter
and any approved addenda.” (Docket No. 1-1, at 3). Plaintiff clearly does not dispute the
authenticity of the Cover Letter because he relies on it in his Brief in Opposition for factual support
of Agway’s price structure promises. (Docket No. 44, at 7, 12). Thus, the Court will consider the
Cover Letter as part of the “Customer Contract” without converting Agway’s Motion to Dismiss
to a motion for summary judgment.
The Cover Letter, in relevant part, states:
By choosing Agway as your supplier, West Penn Power will continue to provide
safe, reliable energy delivery services and will respond in emergencies, regardless
of your energy supplier.
We’re excited to be providing you with our competitive monthly variable price
starting with your next scheduled meter reading.
5

This exception to the general rule wherein courts convert a motion to dismiss to one for summary judgment
when considering extrinsic evidence “is premised on the theory that when a complaint relies on a document, the
plaintiff is clearly on notice as to its contents and the need for an opportunity to refute the evidence is diminished.”
Rogan, 113 F. Supp. 2d at 781.

10

For being an Agway electricity customer, we also include the peace of mind
and added value of Agway Energy Services EnergyGuard Repair Program.
Agway EnergyGuard provides you with protection in the event of a
breakdown of your residential central air conditioning unit or a problem with
the electrical wiring in your home. It provides up to a maximum of $1000 for
parts and labor per each service plan every calendar year that you’re a
customer.
(Docket No. 22-1, at 4 (emphasis in original)).
Under Pennsylvania law, a claim for breach of contract has three elements: “(1) the
existence of a contract, including its essential terms, (2) a breach of a duty imposed by the contract
and (3) resultant damages.” Kaymark v. Bank of Am., 783 F.3d 168, 182 (3d Cir. 2015) (quoting
Omicron Sys., Inc. v. Weiner, 860 A.2d 554, 564 (Pa. Super. Ct. 2004)).6 “When a written contract
is clear and unequivocal its meaning must be determined by its contents alone.” Robert F. Felte,
Inc. v. White, 302 A.2d 347, 351 (Pa. 1973) (internal quotations omitted).
The parties do not dispute that the Customer Contract (which incorporates the Cover Letter)
constitutes a valid contract. (Docket No. 1, at ¶ 65; Docket No. 22, at 18). The dispute lies in
whether Plaintiff has sufficiently alleged a breach of that contract with respect to the price structure
terms. Plaintiff relies solely on the Customer Contract’s language that the variable rate structure
revolves around “market-related factors,” and thus, Plaintiff concludes, the ultimate rate must be
competitive with the local utility’s rates. (Docket No. 33, at 12). Because Agway charged variable
rates between 20% and 46% higher than the local utility’s rate, Plaintiff alleges that Agway is in
breach of the Customer Contract’s variable rate terms. Plaintiff, however, argues an implausible

The essential elements of a contract will be found to exist where: (1) “both parties have manifested an intent
to be bound by the terms of the agreement,” (2) “the terms are sufficiently definite,” and (3) “consideration existed.”
Johnston the Florist, Inc. v. TEDCO Constr. Corp., 657 A.2d 511, 516 (Pa. Super. Ct. 1995). The agreement shall be
considered valid and binding if all three elements exist. Id.
6

11

interpretation of the plain language of the agreement and fails to acknowledge multiple contractual
provisions that defeat his argument and his claim.
The price structure summary, (Docket No. 1-1, at 2), and the price structure clause in the
Customer Contract, (id. at 3), clearly state that the electric variable rate is set each month “at
Agway’s discretion” and “reflect[s]” multiple enumerated factors. Other courts in this circuit that
have reviewed EGS variable rate contracts acknowledge that an EGS does not have “carte
blanche” discretion to set rates when it also promises to base its rates on enumerated factors.
Landau v. Viridian Energy PA LLC, 223 F. Supp. 3d 401, 409 (E.D. Pa. 2016); see also Basile,
2016 WL 4611443. In Basile, the variable rate was structured to “fluctuate ‘at the sole discretion
of [defendant], based upon the fluctuation of wholesale natural gas prices or other inputs to
wholesale electric prices.’” 2016 WL 4611443, at *4 (quoting the operative complaint). The Basile
Court concluded that the defendant had a duty to set a rate with a basis in “natural gas prices or
other inputs,” so the plaintiff’s allegation that no such basis existed (because rates were set “well
above market rates”) sufficiently pled a breach of contract claim. Id.
The Court agrees that the terms of the Customer Agreement here do not give Agway total
discretion to set whatever electricity rate it so chooses, but the inclusion of the term “discretion”
does provide Agway with some leeway in setting its rate. Orange v. Starion Energy PA, Inc., No.
15-773, 2016 U.S. Dist. LEXIS 33656, at *8 (E.D. Pa. Mar. 16, 2016) (“[W]here discretion is
given under a contract, the discretion must be exercised reasonably.”) (citing Haywood v. Univ. of
Pittsburgh, 976 F. Supp. 2d 606, 628 (W.D. Pa. 2013)). Thus, the Court must look at exactly what
Agway promised with respect to its rate structure and determine whether a rate that is 20% to 46%
higher than the local utility’s rate could plausibly indicate that Agway breached the price terms.

12

The Customer Contract provides the price terms of its variable rates in two locations. On
the first page, in the easy-to-read chart, Agway states that it will set a rate:
[A]t Agway’s discretion and reflect the cost of electricity acquired by Agway from
all sources (including energy, capacity, settlement, ancillaries), related transmission
and distribution charges, renewable energy compliance charges and other marketrelated factors, plus all applicable taxes, fees, charges or other assessments and
Agway’s costs, expenses and margins. The underlying costs are a derivative of the
PJM market.
(Docket No. 1-1, at 2). The next page of the Customer Agreement provides a more in depth
description:
1. The variable price will be calculated by Agway, at Agway’s discretion, on a
customer specific basis each billing cycle and will include all of the costs
incurred in providing service to customer, including the following: electricity
acquired by Agway from all sources (including energy, capacity, settlement,
ancillaries), transmission and distribution charges, renewable energy
compliance charges, other market-related charges, plus all applicable taxes
including the gross receipts tax, fees, charges or other assessments and Agway’s
costs, expenses and margins. The underlying costs are a derivative of the PJM
market (PJM Interconnection, LLC is a regional transmission organization that
coordinates the movement of wholesale electricity in all or parts of 13 states,
including Pennsylvania). This price will be calculated for each meter each
month, depending upon factors such as changes in wholesale energy prices, or
other variables listed above, and so the price for each meter, even for the same
customer, are likely to be different each month. All charges will be included in
our monthly, per kwh charge. There is no limit on how much the variable rate
can change from one billing cycle to the next. Historical prices are not
indicative of present or future prices. To obtain historical average billed prices,
please contact us at 1-888-982-4929 or www.agwayenergy.com.
a. Generation prices are set by the electric generation supplier you have
chosen, in this case, Agway. The Pennsylvania Public Utility Commission
regulates distribution prices and services. The Federal Energy Regulatory
Commission regulates transmission prices and services.
(Docket No. 1-1, at 3).
Agway clearly did not promise money savings, since the Customer Contract also explicitly
states that there is no “guarantee of future savings.”

(Id. (“Statement Regarding Savings:

Participation in this program is NOT a guarantee of future savings.”)). Cf. Landau, 223 F. Supp.

13

3d at 409–10 (denying the motion to dismiss breach of contract claim because the agreement
between the consumer and the EGS included promises of “saving money” and rates that were
double the local utility’s plausibly alleged a breach of such promise). Plaintiff in this case argues
that Agway’s charged variable rates breached the pricing terms of the Customer Contract because
the local utility rates incorporate essentially the same factors as Agway’s, so the difference
between the two rates each month shows plausible price gouging, which is a breach of Agway’s
pricing terms. (Docket No. 1, at ¶¶ 38, 42). The Court concludes this “comparison” provides
insufficient factual support for Plaintiff’s claim to survive Agway’s Motion to Dismiss.
The Third Circuit Court of Appeals has held that with respect to breach of contract claims,
“[t]hat the price far exceeded the local public utility rate for a discrete amount of time is not
sufficient to show that [the EGS] breached its duty to calculate the price in accordance with the
contract.” Orange, 711 F. App’x at 683 (emphasis added).7 That is because “[t]he contract does
not require [the EGS] to charge rates tied only to rates otherwise available or to wholesale rates or
to charge rates lower than those charged by [the public utility].” Sevugan v. Direct Energy Servs.,
LLC, No. 1:17-CV-6569, 2018 WL 2267806, at *8 (N.D. Ill. May 17, 2018) (concluding no breach
of contract where defendant’s rates were up to 350% higher than the local utility rates and the price
structure was based on “generally prevailing market prices for electricity . . . plus an adder,
determined solely by [defendant] in its discretion.”). See also Gillis v. Respond Power, LLC, No.
14-CV-3856, 2018 WL 3427636, at *5 (E.D. Pa. July 16, 2018), on appeal, No. 18-2765 (3d Cir.)
(“The fact that this list of factors does not include the rate charged by the local utility company

Although Plaintiff correctly points out that Orange is a non-precedential opinion, “[a]n ‘unreported-not
precedential’ opinion is not binding authority, but may be cited as persuasive authority.” Prudential Prop. & Cas.
Ins. Co. v. Jefferson, 185 F. Supp. 2d 495, 499 n.1 (W.D. Pa. 2002). The Court finds the recent opinion by the Third
Circuit Court of Appeals in Orange highly persuasive given the similar set of facts.
7

14

further belies [p]laintiffs’ reading of the Variable Rate Provision as a promise to charge no more
than that rate.”); Hamlen v. Gateway Energy Servs. Corp., 16-CV-3526, 2017 WL 892399, at *4
(S.D.N.Y. Mar. 6, 2017) (dismissing breach of contract claim where rates were more than 200%
local utility rates because “defendant[’s] discretion to set rates based on many other factors” does
not result in a breach when defendant charges a rate that does not “track wholesale or competitors’
rates”).8
As the Hamlen Court pointed out, Plaintiff’s allegation in his Complaint that “purchases
made by the utilities from the wholesale market reflect actual market costs and conditions”
confuses wholesale rates with Agway’s actual costs. (Docket No. 1, at ¶ 41); 2017 WL 892399,
at *4. Plaintiff’s Complaint acknowledges that the very purpose of deregulating the energy market
was to allow EGSs, like Agway, to use “innovative purchasing strategies” to buy electricity.
(Docket No. 1, at ¶ 20). While lawmakers may have intended for this to result in lower prices for
consumers, the “various options” for purchasing electricity gives Agway discretion as to how it
acquires its electricity. (Id.) Agway could have bought electricity wholesale, “either in advance
or on the spot market, produce its own supply, or contract from other brokers. Moreover, retailers
often seek to offset market volatility through futures contracts, which could also impact [Agway’s]
costs.” Because Plaintiff does not plead how Agway filled its supply needs, it cannot equate
wholesale rates with Agway’s acquisition costs, and a difference of even 46% in a discrete window
of time is not sufficiently unreasonable to give rise to a plausible breach of Agway’s price structure

8

After the Hamlen Court dismissed the breach of contract claim and the parties engaged in discovery on the
remaining claims, the plaintiff sought leave to amend his pleading in order to re-plead breach of contract with new
facts (testimony from the defendant’s corporate representative) showing that the defendant intentionally concealed
customer attrition and retention as a “primary” factor in setting its variable rate. Hamlen v. Gateway Energy Servs.
Corp., No. 16-CV-3526, 2017 WL 6398729, at *4 (S.D.N.Y. Dec. 8, 2017). The Hamlen Court granted the motion,
holding that the amended complaint plausibly alleged a breach of contract on the basis that “the Listed Factors did not
describe the major components that influence[d] [Gateway’s] analysis in a typical month.” Id. at *6 (internal
quotations omitted). The factual allegations brought by Plaintiff in this case more closely resemble the factual
allegations supporting the first complaint in Hamlen and likewise require dismissal.

15

even if Agway’s price structure was more narrowly tailored to simply “market factors.” See
Hamlen, 2017 WL 892399, at *4. But the price structure here is not so narrowly tailored.
So long as the contractual price structure incorporates some factor beyond market factors,
“a simple comparison of [the EGS’s] rate to the local public utility rate is not sufficient to support
the reasonable inference that [the EGS] did not adhere to that formula.” Orange, 711 F. App’x at
684.9 Here, Agway’s price structure was based on many factors beyond “market-related charges.”
(Docket No. 1-1, at 2–3). Agway gave itself discretion in setting rates. (Id.) Many cases on which
Plaintiff relies to support his argument that high EGS rates demonstrate unlawful price gouging
involved written agreements where discretion was not a named factor and the price was explicitly
linked to only market conditions, thus distinguishing those holdings from this case. See Melville
v. Spark Energy, Inc., No. 15-CV-8706, 2016 WL 6775635, at *1, *3 (D.N.J. Nov. 15, 2016)
(denying motion to dismiss breach of contract where EGS “specifically linked prices to market
conditions” yet charged up to 400% more than the local utility); Claridge v. N. Am. Power & Gas,
LLC, No. 15-CV-1261, 2015 WL 5155934, at *4 (S.D.N.Y. Sept. 2, 2015) (denying motion to
dismiss breach of contract where EGS’s variable rate price structure—resulting in almost 300%
higher rates—did not include a discretionary factor but was “incomplete and confusing” and
“could lead a reasonable consumer to believe” that they would receive a competitive rate); Yang
Chen v. Hiko Energy, LLC, No. 14-CV-1771, 2014 WL 7389011, at *5 (S.D.N.Y. Dec. 29, 2014)
(denying motion to dismiss breach of contract where EGS promised savings during teaser rate
window yet plaintiffs did not save money during the teaser rate window and EGS’s variable rate

Plaintiff seeks to distinguish Orange on the basis that the defendant’s price structure took into account market
conditions of multiple geographic areas, so its rates could not be compared to the local utility’s rates in one area.
(Docket No. 33, at 16). Such a factual difference (what the different factors are between the EGS and the local utility)
does not take away from the Orange holding that when two sets of rates are computed with different factors, they
cannot be fairly compared to one another. 711 F. App’x at 684.
9

16

price structure—which led to rates that were 300% higher than the local utility—did not include a
discretionary factor).
Furthermore, the percent difference of 20% to 46% is a lower rate discrepancy than most
of the cases relied upon by Plaintiff where the price structure incorporated a discretionary factor.
See Sobiech v. U.S. Gas & Electric, Inc., No. 14-CV-4464, Docket No. 17, at ¶ 28 (E.D. Pa. Feb.4,
2015) (EGS charged rates 300% higher than the local energy provider); Landau, 223 F. Supp. 3d
at 409 (EGS charged rates that were 100% greater than the local utility). 10 In cases where the
EGS’s rates were multiples higher, the rate structure would naturally be more suspect, which is
why many of those cases also included a claim for breach of the covenant of good faith and fair
dealing.11 See, e.g., Landau, 223 F. Supp. 3d 401.
Therefore, Plaintiff’s factual allegation regarding the discrepancy between the local utility
rate and Agway’s utility rate as pled in the Complaint, in light of Agway’s discretion to set rates,
is insufficient to “support the reasonable inference that [Agway] did not adhere to [its rate]
formula.” Orange, 711 F. App’x at 684.12

10

But see Oladapo v. Smart One Energy, LLC, No. 14-CV-7117, 2016 WL 344976, at *2 (S.D.N.Y. Jan. 27,
2016) (denying motion to dismiss breach of contract claim where EGS’s rate was 35% higher than the local utility
rate but EGS promised savings on one’s utility bill and rates that would “remain competitive in the industry”).
Although the Oladapo Court recognized that the EGS had some discretion to set its rates, it distinguished its holding
from cases where the agreement’s price structure included “non-market-based factors” and agreements that had “a
statement that the private utility’s prices ‘may be higher or lower’ than the public utility.” Id. Both of those facts also
distinguish Oladapo from this case.
Here, Plaintiff characterizes rates that are 20% to 46% higher than the local utility to constitute “profiteering
. . . so extreme that its rate bears no relation to market prices but is instead outrageously higher.” (Docket No. 1 ¶ 46).
Plaintiff does not plead what other EGSs in the area charged during these months, leaving these statements to be
unsupported conclusions.
11

12

Plaintiff also relies upon an unpublished court order in Sobiech v. U.S. Gas & Electric, Inc., No. 14-CV4464, Docket No. 24 (E.D. Pa. Feb.4, 2015), denying a motion to dismiss a breach of contract claim. Plaintiff attached
a copy of that order to its Brief in Opposition. (Docket No. 34-1, at 1). That court did deny the defendant’s motion to
dismiss a breach of contract claim, but the court’s order contains no legal support for its ruling for this Court to
consider. The Court has reviewed the amended complaint at issue in Sobiech (which Plaintiff did not include in his
appendix) and concludes the factual allegations therein are in no way “virtually identical to the rate specifications in
Agway’s contract.” (Docket No. 33, at 9; Sobiech, No. 14-CV-4464, Docket No. 17). The Sobiech amended
complaint alleged that the EGS made affirmative promises to the consumer to help the consumer lower her total energy

17

The discretion factor and varying market factors aside, Plaintiff’s attempt to rely on a
comparison between Agway’s variable rates and those of the local utility still fails because
Agway’s price structure incorporates “all of the costs incurred in providing service to customer,
including . . . Agway’s costs, expenses and margins.” (Docket No. 1-1, at 3). Agway may, for
example, factor in the cost of its incentive program, EnergyGuard. By including the “costs,
expenses and margins” factors into its rate structure, Agway has promised a rate structure that
allows it to pass on its costs and expenses to consumers. That Agway did not specifically cite to
EnergyGuard or an “incentive program” in the specific rate sections of the Customer Contract is
of no consequence. The plain meaning of “the costs incurred in providing service to customer,
including . . . Agway’s costs, expenses and margins” would include Agway’s services beyond the
mere delivery of electricity. (Docket No. 1-1, at 3 (emphasis added)).13 The incentive program is
not an added cost that Agway hid from Plaintiff. The EnergyGuard program is mentioned on every

costs, an allegation that is not present in this complaint. Id. at ¶ 16. The Sobiech amended complaint also focuses on
the EGS’s advertisements and content outside the actual customer contract, components that are not found in Plaintiff’s
Complaint. Id. Finally, the agreement attached to the Sobiech amended complaint makes no reference of a program
or incentive comparable to Agway’s EnergyGuard. The differences in allegations between the Sobiech amended
complaint and Plaintiff’s Complaint in this case and the absence of persuasive legal authority explaining the Sobiech
court’s decision to deny the motion to dismiss give the Sobiech ruling little value to the issues present here.
The Court rejects Plaintiff’s argument that the language of the Customer Contract is ambiguous because the
Customer Contract fails to explain “the extent to which Agway’s rates must be based on market-related factors.”
(Docket No. 33, at 9). Plaintiff’s position is untenable because Agway clearly lays out an exhaustive list of factors of
which its rates “reflect.” (Docket No. 1-1, at 2). “[T]here is no ambiguity if one of the two proffered meanings is
unreasonable.” Trizechahn Gateway LLC v. Titus, 976 A.2d 474, 483 (Pa. 2009). Plaintiff’s attempts to show what
Agway’s “Contract Rate” should have been is also unsupported by any factual allegations. In the Court’s estimation,
the two pled charts, taken together, undermine Plaintiff’s argument that the local utility’s rates offer an appropriate
benchmark of what the market rate should have been. For the May 17, 2016, billing period, Plaintiff alleges that
Agway charged 20% more than West Penn Power charged, yet Agway’s rate was somehow 40% higher than what
Plaintiff claims “Agway should have charged for electricity based on the factors enumerated in its contract.” (Docket
No. 1, at ¶¶ 39, 48). This implies that Agway was contractually bound to charge rates 20% less than the local utility
for that billing period, a result that completely undercuts Plaintiff’s argument that Agway’s rate must reflect marketrelated factors and the local utility’s rate is an accurate reflection of market-related factors. (Docket No. 1-1, at ¶¶ 36,
37).
13

18

page of the Customer Contract and is also mentioned in the Cover Letter. (Docket No. 1-1; Docket
No. 22-1, at 4).
Plaintiff argues that of all the price structure factors enumerated, the “factors beyond the
wholesale electricity cost are ‘insignificant in terms of the overall costs,’” but Plaintiff’s statement
that factors beyond electricity acquisition costs represent only an “insignificant” adder (and thus
cannot account for up to a 46% differential) is a conclusory statement unsupported by factual
allegations. (Docket No. 33, at 17 (quoting Docket No. 1, at ¶ 45)). Plaintiff directs the Court to
Paragraphs 40 through 50 of his Complaint as “explaining how each of those factors affect the
rate,” yet these allegations do not shed any light on “how the components exclusive to EGSs such
as Agway might cause variations in Agway’s rates.” (Docket No. 33, at 17). As Plaintiff has failed
to allege that his rate comparator, the local utility, incorporates costs, expenses, and margins
comparable to those of Agway, he has failed to allege sufficient facts to state a plausible claim for
breach of contract. Orange, 711 F. App’x at 684.
Along these same lines, Plaintiff’s attempt to align this case with the Court’s recent
decision in Gorecki v. Clearview Elec., Inc., No. 2:18-cv-00035, 2018 U.S. Dist. LEXIS 151194
(W.D. Pa. Sep. 5, 2018), is unsuccessful.14 Gorecki addressed an EGS’s variable rate that was
promised to be “based on wholesale market conditions.” Id. at *4. The Court explicitly noted that
the contractual rate did not “list factors besides ‘wholesale market conditions.’” Id. In addition, the
“variable” rate charged by the EGS actually did not vary but remained constant for eleven
consecutive months. Id. at *5 (“Between September 11, 2016, and August 13, 2017, Clearview’s
rate was .1299/kwh each and every month.”). In light of the fact that the “wholesale market price”
fluctuated substantially during that time frame and the fact that the contract did not list additional

14

Plaintiff filed Notice of Supplemental Authority, Docket No. 42, referencing the Gorecki opinion.

19

factors beyond “wholesale market condition,” the Gorecki Court concluded that Plaintiff stated a
facially plausible claim for breach of contract. Id. at *15. Those facts wholly distinguish Gorecki
from the facts before the Court in this case.
Finally, Plaintiff’s reliance on a phrase in the Cover Letter, “[w]e’re excited to be providing
you with our competitive monthly variable price,” is insufficient to create a promise to keep rates
comparable to the local utility. (Docket No. 33, at 6). As explained above, Plaintiff fails to provide
any factual allegations that Agway’s rates were not “competitive” in the marketplace.15 Cf.
Landau, 223 F. Supp. 3d at 406 (denying motion to dismiss breach of contract where cover letter
promised that the consumer would be “saving money on your energy costs”).
Plaintiff’s breach of contract claim is dismissed as it fails to “raise a right to relief above
the speculative level.” Eid, 740 F.3d at 122. Despite a request from Plaintiff for leave to amend
(Docket No. 33, at 11 n.3), the Court is at a loss for what additional facts Plaintiff could plead that
would overcome the deficiencies in his Complaint; therefore, leave to amend is futile. Johnson v.
Wylie, 733 F. App'x 31, 32 (3d Cir. Aug. 2, 2018) (per curiam) (citing Grayson v. Mayview State
Hosp., 293 F.3d 103, 108 (3d Cir. 2002)). Plaintiff had an opportunity to amend under Rule
15(a)(1)(B)(i) upon receipt of Agway’s Rule 12 motion but declined to do so. Furthermore,
Plaintiff’s bare request for leave to amend (that is tucked in a footnote of his brief in response)
does not allege what additional facts it could include that would cure the deficiencies alleged by
Agway and identified by the Court herein. United States ex rel. Wilkins v. United Health Grp.,

Plaintiff argues that the use of the work “competitive” means “commensurate with the rates of its competitors
like other EGSs and the local utilities . . . .” (Docket No. 33, at 8; Docket No. 1, at ¶ 46 (“That other EGSs’ rates are
lower . . . demonstrates that Agway sets its prices in bad faith.”)). Plaintiff pled no information about the rates of
other EGSs nor did Plaintiff provide any details about these “competitors” in his responses to the Motion to Dismiss.
Sevugan v. Direct Energy Servs., LLC, No. 17 C 6569, 2018 WL 4126568, at *6 (N.D. Ill. Aug. 29, 2018) (“‘Generally
prevailing market prices’ necessarily includes prices charged by more than one market participant.”). This is not a
difficult task, as the Customer Contract even directs Plaintiff to a website, www.PaPowerSwitch.com, where Plaintiff
can compare rates from all EGSs that could provide service to him. (Docket No. 1-1, at 3 ¶ 19).
15

20

Inc., 659 F.3d 295, 314–15 (3d Cir. 2011), abrogated on other grounds by United States ex rel.
Freedom Unlimited, Inc. v. City of Pittsburgh, 728 F. App'x 101, 106 (3d Cir. 2018),
(“[A]ppellants’ failure to explain how they could have amended the complaint to cure its
deficiencies is a critical omission,” and a request in a responsive brief for leave to amend, “without
an attached amended complaint, [is] not the proper method for appellants to seek to amend their
complaint.”).
B. UCC Notice Requirements and Voluntary Pay Doctrine
Because the Court concludes that Plaintiff fails to state a claim for his sole remaining count
in this case, breach of contract, the Court need not address whether the Count satisfies the UCC
Notice Requirements or whether the Voluntary Payment Doctrine bars Plaintiff’s claim.
VI.

CONCLUSION
For the foregoing reasons, Defendant Agway’s Motion to Dismiss, (Docket No. 21), is

GRANTED. This case is dismissed with prejudice.
An appropriate Order follows.
/s Nora Barry Fischer
Nora Barry Fischer
United States District Judge

Dated: September 13, 2018
cc/ecf: All counsel of record.

21