Landau v. Viridian Energy PA LLC

Citations: 223 F. Supp. 3d 401; 2016 WL 6995015; 2016 U.S. Dist. LEXIS 164879Docket: CIVIL ACTION No. 16-2383

Court: District Court, E.D. Pennsylvania; November 29, 2016; Federal District Court

SummaryOriginalCytator Case TreatmentAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

The memorandum addresses a legal case involving Plaintiff Steven Landau and Defendant Viridian Energy PA LLC, situated within the context of deregulated retail electricity markets in Pennsylvania. Landau claims Viridian engaged in unfair business practices by making misleading promises of low and stable electricity rates, violating Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL). He further alleges that Viridian breached their contract by charging excessively high prices for electricity.

Viridian has filed a motion to dismiss the case based on the “economic loss” doctrine and to strike Landau’s class allegations. The court’s ruling partially grants and denies the motion to dismiss but denies the motion to strike.

The background reveals that Pennsylvania's energy markets were opened to competition in 2008 through Act 129, permitting customers to choose energy service companies (ESCOs) like Viridian instead of local utility providers. Landau was recruited by Viridian through Independent Viridian Associates, who assured him of lower rates and stability. Relying on these assurances and online advertisements, Landau entered into a contract on July 18, 2013, agreeing to pay a fixed rate of $0.0799 per kilowatt-hour for electricity, with a portion sourced from renewable energy.

After the initial six-month term, Landau could either cancel, renew, or automatically transition to a variable pricing plan. The contractual terms were documented in a “Pennsylvania Terms and Conditions” agreement and a “Welcome Letter.” The Terms and Conditions included disclaimers regarding the possibility of fluctuating prices under the variable plan and that Viridian’s rates might differ from the local utility's rates. The Welcome Letter, while highlighting the fixed rate, presented the arrangement in a more promotional style, emphasizing environmental benefits and savings.

In this case, the Welcome Letter's promises were explicitly included in the contract with Viridian, contrary to typical practices where marketing claims are excluded. The Terms and Conditions state that the agreement includes the Welcome Letter and supersedes any prior statements. Following the end of his six-month fixed-rate term, Landau did not renew or terminate his service, resulting in his account being switched to a Variable Price plan in February 2014, which more than doubled his rates. During his time as a Variable Price customer, the average rates from PECO were significantly lower than what Landau was charged. Landau claims Viridian breached the contract (Count I) and the implied covenant of good faith and fair dealing (Count II), seeks a declaration of rights under the Declaratory Judgment Act (Count III), alleges violations of the UTPCPL for deceptive business practices (Count IV), and presents an alternative unjust enrichment claim (Count V). He represents himself and similarly situated customers, signaling intent to certify two classes under Rules 23(b)(2) and 23(b)(3). Viridian has moved to dismiss Landau’s claims under Rule 12(b)(6) and to strike his class allegations under Rules 12(f), 23(c)(1), and 23(d)(1)(D). A motion to dismiss is appropriate when a complaint fails to state a viable claim, requiring the court to accept factual allegations as true while evaluating their sufficiency. A motion to strike is used to eliminate insufficient defenses or irrelevant material, typically disfavored and granted only when necessary for justice.

Under Pennsylvania law, to succeed in a breach of contract claim, a plaintiff must demonstrate the existence of a contract, a breach of duty under that contract, and resultant damages. The parties acknowledge the existence of a binding contract, with essential terms detailed in the Terms and Conditions and the Welcome Letter. The crux of the dispute centers on whether Viridian breached its contractual obligations. 

Landau’s claim hinges on a price disclaimer in Viridian's Variable Price plan, which states that prices may fluctuate based on wholesale market conditions. Landau argues that the significant disparity between Viridian’s rates and those of PECO indicates a failure to comply with this obligation. However, the agreement allows for variable rates to fluctuate without requiring them to align with any specific wholesale price level, and Landau's argument does not clarify why rates changed monthly. Additionally, he misconstrues the relationship between PECO's rates and wholesale market conditions, as PECO’s rates are influenced by various factors beyond those conditions.

Landau draws on a precedent from Mirkin v. Viridian Energy, where a similar claim was upheld based on factual assertions regarding wholesale prices. In contrast, Landau's claim relies solely on comparisons to PECO's rates without substantiating how Viridian's rates relate to actual market conditions. 

Viridian counters by highlighting a provision allowing its prices to differ from PECO's, suggesting that such discrepancies lack legal weight. However, this assertion conflicts with the Welcome Letter's claims of providing affordable energy while saving costs, which, despite its promotional tone, is part of the integrated Agreement requiring interpretation. Overall, the analysis suggests both parties have weaknesses in their arguments regarding the breach of contract claim.

The primary rule in contract interpretation focuses on ascertaining the parties' intent, which is grounded in the written contract itself. All provisions of the contract must be read together, and one provision cannot be interpreted in a way that nullifies another. In disputes involving standard terms and conditions, the law assumes these terms reflect the parties' intent, even if consumers often do not read them. In this case, Viridian's contract features informal and vague language, raising questions about its legal effect. However, the court must interpret the entire agreement cohesively.

Landau's complaint alleges that during his 15 months on Viridian’s Variable Price plan, his rates were approximately 100% higher than those of PECO, which suggests a violation of terms like "affordable" and "saving money," despite these terms being difficult to define. The price disclaimers allowed Viridian to charge more than PECO monthly, but consistently exceeding PECO’s rates violates the Welcome Letter's terms. Although quantifying damages may be challenging, the Motion to Dismiss Count I is denied.

Regarding Count II, alleging breach of the covenant of good faith and fair dealing, the claim is dismissed as under Pennsylvania law, this is not an independent cause of action but is subsumed within breach of contract claims. Count II is essentially a restatement of Count I.

In Count V, which pertains to unjust enrichment, the claim is also dismissed. Pennsylvania law permits alternative claims of unjust enrichment only when there is uncertainty about the contract's validity. Since both parties recognize a valid contract exists, the unjust enrichment claim cannot proceed.

Count IV addresses alleged violations of the Unfair Trade Practices and Consumer Protection Law (UTPCPL). Before evaluating this claim, the court must determine if it is barred by the economic loss doctrine, which restricts recovery for economic losses that arise solely from a contractual relationship.

In *Werwinski v. Ford Motor Co.*, the Third Circuit predicted that the Pennsylvania Supreme Court would apply the economic loss doctrine to statutory fraud claims under the Unfair Trade Practices and Consumer Protection Law (UTPCPL). At that time, no Pennsylvania appellate court had ruled on whether this doctrine barred UTPCPL claims stemming from a breach of contract. Subsequently, the Superior Court disagreed with *Werwinski*, holding that the economic loss doctrine only applies to negligence claims that result in economic damages without physical injury or property damage. This raises the question of whether *Werwinski* remains authoritative after the Superior Court's decision, with Pennsylvania district courts split on the issue. Some courts have concluded that *Werwinski* is no longer controlling, while others maintain its binding status. The *Viridian* case extensively cites *Whitaker v. Herr Foods, Inc.*, noting that under Internal Operating Procedure (IOP) 9.1, a panel's decision is binding unless altered by the Supreme Court or the Third Circuit en banc. The *Whitaker* court emphasized that district courts are similarly bound by prior constructions of state law. However, the author expresses skepticism regarding whether IOP 9.1 resolves the current question, highlighting an intervening change in law represented by subsequent unanimous Superior Court panels that have refused to apply the economic loss doctrine to UTPCPL claims, specifically in *Knight* and *Dixon v. Northwestern Mutual*. The *Dixon* ruling referenced respected Judge R. Stanton Wettick's opinion that applying the doctrine would undermine the UTPCPL’s catch-all provision. Six appellate judges and a prominent trial judge have thus contradicted *Werwinski*. The Third Circuit has acknowledged the limitations of IOP 9.1, noting that predictive precedent is binding only in the absence of clear changes in state law. This principle was reiterated in *Debiec v. Cabot Corp.* and *Robinson v. Jiffy Executive Limousine Co.*, where it was stated that while state intermediate appellate decisions are not automatically controlling, federal courts must give considerable weight to them when interpreting state law.

The court determined that recent decisions from the New Jersey appellate court indicated a change in state law, rendering the Third Circuit's prior predictions obsolete, despite Internal Operating Procedure 9.1. The dismissal of the Werwinski case by Pennsylvania appellate courts necessitates a reevaluation of its analytical validity. Importantly, the Werwinski court lacked access to Pennsylvania rulings that directly addressed the economic loss doctrine's relevance to the Unfair Trade Practices and Consumer Protection Law (UTPCPL). Concerns arise from the potential misuse of a judicial doctrine to undermine statutory language.

Historically, the economic loss doctrine was designed to delineate the boundaries of tort liability, limiting recovery for purely economic losses to contract law, thereby preserving the distinction between contract and tort. Conversely, the UTPCPL was legislated to provide remedies that exceed common law, permitting judges to award treble damages and reasonable attorneys' fees, explicitly aiming to protect the public from unfair business practices. The Superior Court's ruling in Knight, which restricts the economic loss doctrine to common law tort claims, emphasizes that judicial limitations cannot be imposed on statutory remedies.

Judge Van Antwerpen highlighted that the UTPCPL allows for recovery exceeding actual losses, positioning it as a statute that diverges from common law. Under Pennsylvania’s Statutory Construction Act, courts are barred from interpreting common law in a manner that contradicts legislative intent. The Pennsylvania Supreme Court recognized the broad scope of the UTPCPL, which was intended to combat deceptive business practices, thus necessitating a liberal interpretation to fulfill its objectives.

The economic loss doctrine's application contradicts the UTPCPL's legislative intent, as evidenced by Pennsylvania courts allowing enhanced damages under the statute, regardless of the doctrine's status prior to its rejection by Superior Court panels. This inconsistency between federal and state court outcomes, noted by the Superior Court in Dixon, highlights a troubling divergence that can affect case results based solely on the forum. The Third Circuit has warned that federal outcomes should align closely with state court results when jurisdiction is based solely on diversity of citizenship.

Federal courts in diversity cases serve as neutral venues and should not impose legal standards different from state courts based on the parties' citizenship. The persistent application of the Werwinski precedent, despite its rejection by Pennsylvania courts, raises federalism concerns and complicates the predictive nature of legal precedents. The Court of Appeals previously predicted Pennsylvania would adopt specific sections of the Restatement (Third) on Product Liability, yet the Pennsylvania Supreme Court ultimately rejected them. Given the Superior Court's dismissal of Werwinski, the court will not dismiss Landau's claim under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL) based on the economic loss doctrine. The UTPCPL aims to protect consumers from unfair or deceptive business practices, allowing claims for any ascertainable loss from unlawful conduct. Landau's claim is based on two main points: assurances from Viridian Energy representatives regarding competitive rates and allegations of misleading online advertising, which he argues represents deceptive marketing. Viridian contends that Landau's claims should be dismissed due to the statements being non-actionable puffery, insufficient pleading of fraud, failure to meet deception claim elements, and lack of standing for injunctive relief. Puffery is defined as vague and exaggerated claims, which are not legally actionable, contrasting with specific misrepresentations that can be tested. The court agrees with Viridian that Landau's cited advertisements represent non-actionable puffery.

Viridian's online marketing claims, while similar to those in its Welcome Letter, are not bound by the principles of contract interpretation as the Welcome Letter is part of the Agreement. The court is not obligated to enforce vague statements in advertisements, and prior cases have established that such general claims about cost savings are non-actionable. Specifically, phrases like “save money” or “competitive rates” are considered too vague and amount to puffery. However, specific claims made by Viridian's Associates regarding stable rates and lower costs than PECO’s are measurable factual assertions, distinguishing them from mere opinions. The court notes that reasonable consumers could be misled by specific assurances, making these claims actionable under the UTPCPL (Unfair Trade Practices and Consumer Protection Law). 

Viridian's argument that Landau's UTPCPL claim sounds in fraud and should be dismissed for lack of specificity under Federal Rule of Civil Procedure 9(b) is incorrect. The UTPCPL allows for claims of fraud or deception based on a lower pleading standard under Rule 8(a). Although Landau does not specify which provision he is pursuing, his claim most likely fits within the catchall provision against fraudulent or deceptive conduct, which has evolved since 1996 to encompass broader deceptive practices rather than just fraud, alleviating the need to meet common law fraud elements.

Plaintiffs must establish elements of common law fraud to recover under the catch-all provision of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), as this provision explicitly prohibits only "fraudulent" conduct. Historical claims under the pre-1996 catch-all provision were required to adhere to Rule 9(b), mandating detailed pleading of fraud, including the essential facts akin to a news story's lead. In 1996, the Pennsylvania legislature expanded the catch-all provision to include "deceptive conduct," leading to confusion among courts regarding its interpretation. For over a decade, courts continued to apply common law fraud standards to these claims despite the statutory change. Recent rulings, however, recognize the significance of "deceptive conduct," with the prevailing view now allowing claims under the catch-all provision based on sufficient facts for either fraud or deception, without the heightened pleading requirements of Rule 9(b). Deceptive claims are subject only to the general pleading standard of Rule 8(a).

The essential elements of a deception claim under the UTPCPL's catch-all provision include: 1) a deceptive act that is likely to mislead a reasonable consumer; 2) justifiable reliance on the defendant's misrepresentation or deceptive conduct; and 3) an ascertainable loss resulting from this reliance. In the case at hand, Viridian's argument that Landau could not have been misled by promises of stable rates is not persuasive, as the statement that Landau would enjoy lower rates than PECO's can reasonably be interpreted as a commitment to lower average rates.

Associates' statements regarding Viridian's rates are not negated by a disclaimer indicating that Viridian's prices may vary from DC's prices. A reasonable consumer, like Landau, could interpret that while Viridian's rates might occasionally be higher, overall savings would be realized. The assurance that Landau would not have to worry about sudden rate increases contradicts the disclaimer about monthly rate fluctuations, which constitutes deceptive marketing practices. The Agreement's claims of "affordable, green energy" and promises of savings further obscure the disclaimers, leading to potential consumer confusion.

Landau's complaint adequately establishes justifiable reliance, countering Viridian's argument that it lacks sufficient detail. Landau asserts that prior to enrolling, Associates guaranteed lower rates than PECO’s and stable pricing, indicating he would not have signed up without these assurances. These allegations support a reasonable inference of reliance.

Moreover, Landau's complaint demonstrates a clear claim for ascertainable loss under the UTPCPL, calculated as the difference between the costs incurred with Viridian and what he would have paid with PECO, based on his electricity consumption and respective rates.

Viridian's attempt to invoke a regulatory compliance defense, claiming it preempts UTPCPL claims when conduct is approved by regulators, is unsupported in Pennsylvania law. Even if such a defense existed, it would not apply in this case, as Viridian misinterprets precedents from insurance-related cases.

The cases referenced involved disputes over insurance policies previously approved by the Insurance Commissioner, but they did not hinge on this approval as Viridian suggests. Instead, the courts dismissed the UTPCPL claims for reasons independent of the defendants' regulatory compliance. Only the Fay and Grudkowski opinions mentioned regulatory compliance, and their discussions were not central to the rulings, serving instead as public policy justification for the outcomes. Viridian's defense based on regulatory compliance lacks supporting precedent and is irrelevant here, as Landau alleges that Viridian Associates made false or misleading statements that violate the UTPCPL. Viridian has not claimed these statements were approved by the Public Utilities Commission, making it unclear how regulatory compliance could undermine Landau's claims.

Regarding injunctive relief, Landau seeks to prevent Viridian from allegedly charging excessive undisclosed rates, but Viridian contends that Landau lacks standing since he is no longer a customer, thus unable to demonstrate a likelihood of future injury. Article III standing requirements must be met for each type of relief requested. To seek injunctive relief, a plaintiff must show a real or imminent threat of harm that could lead to substantial and immediate irreparable injury. In a similar case, McNair v. Synapse Group, the Third Circuit ruled that plaintiffs lacked standing for injunctive relief because they were no longer customers and faced no future injury from Synapse's practices. The court rejected the argument that plaintiffs might return as customers in the future, affirming that they had not established a reasonable likelihood of future injury.

The law presumes individuals act rationally based on their available information. The court determined that the plaintiffs were unlikely to resign with Synapse due to previous negative experiences. The court rejected the appellants' claim that a lack of self-restraint when faced with enticing subscription offers could establish federal jurisdiction, emphasizing that this does not suffice for standing. In the case of Landau, similar to the plaintiffs in McNair, he was not a current Viridian customer when filing his complaint, and his claim of inevitability to receive solicitations from Viridian did not demonstrate a sufficient likelihood of future injury to confer standing. Consequently, Viridian's Motion to Dismiss Landau's claim for injunctive relief was granted.

Additionally, Landau sought a declaration under the Declaratory Judgment Act regarding Viridian’s pricing obligations, which Viridian argued was redundant to his breach of contract claim. The court maintained that the Declaratory Judgment Act allows for such declarations if there is an actual controversy, and having another adequate remedy does not preclude declaratory relief. The court noted that while the decision to entertain a DJA claim lies within the trial judge's discretion, it may be dismissed to promote judicial economy and avoid duplicative litigation, as illustrated in past cases. Despite Viridian's claims of duplicity, Landau is permitted to seek a declaration regarding Viridian’s obligations under the agreement.

Interpretation of the parties' agreement is central to the Plaintiffs' breach of contract claim. Viridian seeks dismissal of Landau’s Declaratory Judgment Act (DJA) claim, citing precedents such as Smithkline and Nova Financial, which did not involve class actions. In contrast, dismissing Landau’s DJA claim would impede his ability to certify a class under Rule 23(b)(2), which is necessary for injunctive or declaratory relief. The court in Nova Financial noted that plaintiffs would not suffer prejudice from dismissal, but this is not applicable here. Therefore, Viridian's motion to dismiss the DJA claim is denied to allow Landau's class certification efforts to proceed.

Separately, Viridian moves to strike Landau's class allegations based on Rule 12(f) and Rules 23(c)(1) and (d)(1)(D). Viridian challenges Landau's ability to meet the typicality and commonality requirements for class certification, arguing that contract variations and differing sales pitches from Associates hinder class adjudication. Landau contends that such a motion is premature as discovery is necessary to assess the viability of class claims. The court agrees, affirming that it cannot determine class certification prerequisites without a factual record. As a result, Viridian's motion to strike class allegations is also denied.

In conclusion, while Landau's UTCPL claim for injunctive relief, unjust enrichment claim, and breach of the covenant of good faith and fair dealing claim are dismissed, all other aspects of Viridian's Motion to Dismiss and the Motion to Strike are denied.

Kantor v. Hiko Energy, LLC, Basile v. Stream Energy Pennsylvania, LLC, Mirkin v. Viridian Energy, Inc., Daniyan v. Viridian Energy LLC, and Zahn v. N. Am. Power. Gas, LLC present cases with similar contractual provisions and legal theories, but they differ in significant factual elements from the current case. The term "Electric Distribution Company" (DC) refers to the local utility, PECO, which supplies electricity to customers through Viridian. The Enrollment Form was not submitted as evidence, limiting the analysis to the language in the Terms and Conditions (T.C.) and the Welcome Letter, the latter being integral to the Agreement and distinguishing this case from other class actions against Viridian and other energy suppliers.

The term "Local Distribution Utility" is synonymous with "Distribution Company" as used in the relevant Agreement. The analysis also notes that customers typically do not read or understand standard terms. An arithmetic error in the Complaint understates the plaintiff’s losses, revealing that Landau’s Viridian rate surpassed the PECO rate by as much as 118%. The discussion includes the case of Robinson, which addresses liability concerning independent contractors, noting a shift in judicial predictions regarding hiring entity liability based on subsequent Pennsylvania Superior Court decisions.

Regarding claims, recovery for common law tort or contract claims is limited to actual losses, with no provision for counsel fees. Historical context reveals tensions in judicial decisions, particularly concerning the Wersinski case and subsequent rulings. Landau's potential claim under the Unfair Trade Practices and Consumer Protection Law (UTPCPL) appears complicated; he initially separates it from his breach of contract claim but later suggests it relies on the Terms and Conditions and Welcome Letter. The analysis ultimately focuses on Landau's pre-contract interactions with Viridian to clarify these claims.

Viridian argues for the dismissal of Landau’s claim under the Unfair Trade Practices and Consumer Protection Law (UTPCPL) due to Landau's failure to specify the applicable section of the UTPCPL. Viridian references three cases to support this argument. The first two cases, Taggart v. Franconia Township and Loften v. Diolosa, are deemed distinguishable because they involved complaints lacking specificity that left defendants unaware of the factual grounds for the claims. In contrast, Landau’s Complaint provides sufficient notice of the alleged misconduct. The third case, Connolly v. Reliastar Life Ins. Co., similarly involved a lack of specification but did not result in dismissal; instead, the court emphasized the need to review the allegations before determining applicability under the UTPCPL. Although Landau does not specify the section of the UTPCPL, it is evident that his claim is based on an alleged violation of this law. Therefore, Viridian's characterization of Landau's claim as common law fraudulent concealment is rejected. Additionally, since Landau lacks standing for injunctive relief, his only method to certify a class under Rule 23(b)(2) is through declaratory relief.