P. KEVIN CASTEL, District Judge.
Plaintiffs Julie Claridge and Helen Marsh move, pursuant to Rule 23, Fed. R. Civ. P., to certify a class of New York consumers who paid a variable monthly rate for electricity that they purchased from defendant North American Power & Gas, LLC ("North American"). (Docket # 50.) Plaintiffs assert that the proposed class was commonly bound by a sales agreement that North American distributed to all customers, and that this agreement misleadingly described the "variable market based rate" used to calculate monthly electricity bills. Plaintiffs bring claims for breach of contract, breach of the implied covenant of good faith and fair dealing and deceptive trade practices in violation of New York General Business Law sections 349 and 349-d.
For the reasons explained, the plaintiffs' motion for class certification is granted.
North American is an energy services company ("ESCO") that supplies electricity to its customers, with the actual delivery of that electricity managed by local utilities. (Felder Report at 3.) North American first began selling electricity to New York consumers in or around June 2011. (Kinneary 4/7/16 Dep. at 19.)
When customers began their subscriptions to North American, they generally paid either a promotional rate for two months, or a fixed monthly rate for a set term. (Kinneary 4/7/16 Dep. at 23; Pl. Mem. at 4.) Once the promotional rate or fixed rate expired, customers paid North American for monthly electricity calculated under North American's "variable market based rate." (
All new customers received a "Welcome Packet" consisting of a "Welcome Letter" and "Sales Agreement," which included a "Customer Disclosure Statement and Terms and Conditions." (Blankenship Dec. Ex. 4.) The Disclosure Statement described North American's variable monthly rate. (Blankenship Dec. Ex. 4.) Under the heading "Open Price," it stated that customers would be charged a "variable market based rate" that "will be calculated on the method stated above to include any market prices for commodity, transportation, balancing fees, storage charges, NORTH AMERICAN POWER fees, profit, line losses plus applicable taxes, and any other charges or fees imposed by the utility or other entity having such authority to impose any such charges." (Blankenship Dec. Ex. 4.) There is no dispute that North American distributed a uniform version of the Sales Agreement to all new customers.
As this Court discussed in its decision denying North American's motion to dismiss, the Complaint plausibly alleged that the Sales Agreement's description of the "variable market based rate" was "incomplete and confusing," including a reference to a "method stated above" when no such method was described.
According to plaintiffs, during the time that North American has sold electricity in New York, it has determined its rates by forecasting customer demand for the coming month and then using a hedging strategy to purchase electricity in advance. (Kinneary Dep. at 67-68.) North American would then purchase additional electricity, as needed, on the short-term or "spot" market, to make up for any differences between its advance purchase and the actual demand of its New York customers. (
Rule 23 governs the certification of a class action. The party seeking class certification must satisfy Rule 23(a) and "at least one of the three requirements listed in Rule 23(b)."
"The Rule's four requirements — numerosity, commonality, typicality, and adequate representation — effectively limit the class claims to those fairly encompassed by the named plaintiff's claims."
Plaintiffs seek to certify a class under Rule 23(b)(3), which requires that "questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." A court must "bear[] firmly in mind that the focus of Rule 23(b)(3) is on the predominance of common
"[A] plaintiff must satisfy all of the requirements of Rule 23, by a preponderance of the evidence, to obtain class certification. . . ."
Rule 23(a)(1) requires plaintiffs to show that "the class is so numerous that joinder of all members is impracticable." Plaintiffs' expert, Frank Felder, Ph.D., estimates that there are more than 40,000 members of the proposed class. (Felder Report at 12.) In opposition, North American does not dispute that plaintiffs have shown numerosity.
The Court concludes that the plaintiffs have satisfied the numerosity requirement.
Rule 23(a)(2) requires plaintiffs to show that "there are questions of law or fact common to the class." It "requires the plaintiff to demonstrate that the class members have suffered the same injury," which must turn "upon a common contention."
"[C]laims based on uniform misrepresentations to all members of a class are appropriate subjects for class certification" because "uniform misrepresentations" can be adjudicated with "no need for a series of mini-trials."
Plaintiffs contend that North American misleadingly described to its New York customers the "variable market based rate" set forth in the Terms and Conditions portion of its Sales Agreement. The claims of the proposed class turn on common contentions of whether North American's description of its rate-setting practices was accurate and truthful, including whether North American misleadingly described its method for setting the variable market-based rate and whether its method was consistent with the factors specified in the Sales Agreement. Plaintiffs also point to common questions on damages, including whether damages should be calculated according to the difference between North American's rates and those of other market participants, or whether damages should instead reflect the difference between North American's actual charged rate and a hypothetical rate calculated pursuant to the factors described in the Sales Agreement. There is also the common question of whether, if the plaintiffs succeed on their claims, class members should be awarded $500 in statutory damages under New York General Business Law section 349-d.
North American argues that plaintiffs' claims require individualized adjudication because customers had different, subjective understandings of terms like "market rate," "daily market price" and "market value." (Opp. Mem. at 12.) It points out that Claridge testified in her deposition that she did not understand the distinction between the terms "market rate" and "wholesale rate," and that Marsh testified that variable prices should have been determined by "the commodity rate, the competitive rate of other electric energy sources. . . ." (
The claims of the proposed class turn on the "common contention" that North American misleadingly described its method for calculating variable monthly rates, a claim that "is capable of classwide resolution. . . ."
Rule 23(a)(3) requires plaintiffs to show that "the claims or defenses of the representative parties are typical of the claims or defenses of the class." "To establish typicality under Rule 23(a)(3), the party seeking certification must show that `each class member's claim arises from the same course of events and each class member makes similar legal arguments to prove the defendant's liability.'"
Plaintiffs assert that their claims are typical because, like all proposed class members, they assert that North American misrepresented the "variable market based rates" used to calculate monthly electricity bills. North American contends that Marsh and Claridge cannot show typicality because, prior to paying the monthly variable rate, they were offered introductory fixed rates for different periods of time, and that the initial fixed rates varied widely. (Opp. Mem. at 15.) It also asserts that customers received differing sales pitches from North American, which informed their decisions to become North American customers. (
North American also argues that plaintiffs cannot show typicality because its "fixed and variable rates are calculated based upon a complex algorithm of variables unique to each customer," including a customer's "zone and/or subzone," weather, renewable energy credits, customer complaints and "[l]ocal, national and global news." (Opp. Mem. at 15-16.) As support, North American cites different fixed rates (as opposed to variable rates) that it charged to Marsh and Claridge. (
Because Marsh and Claridge have made a showing that their claims are typical of the proposed class members, the Court concludes that they satisfy the typicality requirement of Rule 23(a)(3).
Rule 23(a)(4) requires a showing that "the representative parties will fairly and adequately protect the interests of the class." "[A]dequacy is satisfied unless `plaintiff's interests are antagonistic to the interest of other members of the class.'"
North American does not assert that Marsh or Claridge have interests antagonistic to the class. It again points to the named plaintiffs' failure in their depositions to provide a consistent definition of the phrase "wholesale market prices," and argues that "a plaintiff who does not understand the definition or scope of a term that is at the heart of a litigation cannot adequately represent the interests of a class the plaintiff seeks to certify." (Opp. Mem. at 18.) But again, the failure of the two named plaintiffs to articulate in their depositions a consistent interpretation of allegedly misleading terms does not render plaintiffs inadequate class representatives.
The Court concludes that plaintiffs satisfy the adequacy requirement of Rule 23(a)(4).
Rule 23(b)(3) requires plaintiffs to show that "questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." It requires "a showing that
Plaintiffs' claims under the New York General Business Law can be adjudicated through common proof, and the use of generalized proof is more substantial than the issues potentially subject to individual proof. New York General Business Law section 349(a) makes it unlawful to use "[d]eceptive acts or practices in the conduct of any business, trade or commerce. . . ." New York General Business Law section 349-d(3) specifically governs the deceptive practices of ESCOs, and states that "[n]o person who sells or offers for sale any energy services for, or on behalf of, an ESCO shall engage in any deceptive acts or practices in the marketing of energy services." The parties agree that sections 349(a) and -d(3) have identical elements.
Here, liability can be determined on a class-wide basis because the plaintiffs' claims are directed toward uniform terms that were contained in a common Sales Agreement distributed to all new customers. Individualized evidence is not required. Rather, plaintiffs must prove whether North American employed "a deceptive act or practice" by misleading consumers about its method for calculating a "variable market based rate." In large measure, plaintiffs' claims will succeed or fail based on a determination of whether the Sales Agreement was deceptive in its description of the "variable market based rate" — an issue that can be adjudicated through the use of common proof, and not individualized proof. A class-wide determination is superior to an individualized determination because the latter would simply entail repeated adjudications of identical provisions of the Sales Agreement.
The Court therefore concludes that, under Rule 23(b)(3), common questions of law and fact predominate over plaintiffs' General Business Law claims, and that a classwide resolution is superior to individual actions to adjudicate the merits.
Plaintiffs also seek certification for their claims asserting breach of contract and breach of the covenant of good faith and fair dealing. "[T]he essential elements of a cause of action for breach of contract are the existence of a contract, the plaintiff's performance under the contract, the defendant's breach of that contract, and resulting damages."
Contract claims satisfy Rule 23(b)(3) when the claims of the proposed class "focus predominantly on common evidence. . . ."
Plaintiffs' claims for breach of contract and breach of the covenant of good faith and fair dealing are largely directed to language in the Sales Agreement that was distributed to all members of the proposed class. The claims predominantly focus on common evidence. In opposition to plaintiffs' motion, North American again cites to subjective interpretations of the phrase "wholesale market rate," and argues that each customer may have had a unique and individual interpretation of the underlying billing practices. However, there is no dispute that North American distributed a uniform Sales Agreement that governed customers' subscriptions and described the calculation of variable market based rates. To the extent that North American argues that customers' subjective understanding may have been informed by loosely scripted conversations with telemarketers or by other marketing materials (Opp. Mem. at 20), the Sales Agreement contains an integration clause that states, "This agreement and the Enrollment Form or Welcome Letter reflect Customer's entire agreement with [North American] and supersede any oral or written statements made in connection with this agreement or Customer electricity supply." (Blankinship Dec. Ex. 4 at 7.) External marketing about North American's billing rates would not go toward plaintiffs' breach claim, and North American has not pointed to any ambiguity that would make parol evidence relevant to resolving plaintiffs' claims.
Plaintiffs' claims for breach of contract and breach of the covenant of good faith and fair dealing are directed to the text of a uniform Sales Agreement that was distributed to all members of the proposed class. Common issues susceptible to generalized proof substantially predominate over individualized issues, if any. The Court therefore concludes that plaintiffs have satisfied Rule 23(b)(3) as to these claims.
Rule 23(g)(1) states that "[u]nless a statute provides otherwise, a court that certifies a class must appoint class counsel." The Court must consider the work of counsel in identifying or investigating potential claims; counsel's experience in litigating class actions; counsel's knowledge of applicable law; and the resources available to counsel. Rule 23(g)(1)(A). Class counsel "must fairly and adequately represent the interests of the class." Rule 23(g)(4). "The purpose of this requirement is to protect the interests of absent class members, who will be bound by the results of the action under
Plaintiffs are represented by three law firms: Finkelstein, Blankinship, Frei-Pearson & Garber, LLP ("Finkelstein"); Mazie Slater Katz & Freeman, LLC ("Mazie"); and McCuneWright LLP ("McCune"). Attorneys from Finkelstein and Mazie have been counsel of record to plaintiffs since the commencement of this action. Matthew D. Schelkopf, an attorney at McCune, also has been counsel of record to plaintiffs since the action was commenced, but was employed by different law firm at commencement. The three firms jointly move to be appointed co-class counsel.
Based on their performance in this action, the Court concludes that the plaintiffs' attorneys have fairly and adequately represented the interests of the class, and there is no indication that they will not continue to do so. Counsel successfully opposed the defendant's motion to dismiss the Complaint pursuant to Rule 12(b)(6), and have advocated for plaintiffs' interests throughout a discovery process that has been contentious at times. Their submissions to the Court have reflected knowledge of the law governing plaintiffs' claims and familiarity with class action procedures. Their present performance has demonstrated competence to protect the interests of the class and to pursue the class's claims.
Based on the declarations submitted by counsel and their supporting exhibits, the Court also concludes that plaintiffs' counsel have adequate resources to litigate this action and are experienced in litigating class actions. Finkelstein has been appointed class counsel in several consumer class actions, including cases in this District that were brought against electricity providers and other utilities. (Blankinship Dec. Ex. 7.) Greg Blankinship, a partner at Finkelstein, has practiced law since 2003 and has been appointed class counsel in at least five class actions, including actions against utilities that asserted deceptive pricing practices. (Blankinship Dec. Ex. 7.) Mazie has been appointed class counsel in at least eight class actions, principally in cases that involve products liability. (Mendelsohn Dec. ¶ 5) Matthew R. Mendelsohn, a partner at Mazie, has practiced law since 2005, and has been class counsel in consumer class actions, primarily involving products-liability claims. (Mendelsohn Dec. Ex. A.) In 2013, he was appointed class counsel in a products-liability action brought in this District. (Mendelsohn Dec. ¶ 6.) McCune has been appointed class counsel in class actions involving products liability and consumer fraud claims. (Schlkopf Dec. ¶¶ 8-14 & Ex. A.) Matthew D. Schelkopf, a partner at McCune, has practiced law since 2002, and has been class counsel in at least seven class actions, all of them involving products-liability claims. (Schelkopf Dec. ¶¶ 8-14.)
Based on their performance in this case, the experience of the law firms and of the attorneys of record, and of the resources available to those attorneys, the Court appoints the Finkelstein, Mazie and McCune firms as co-class counsel in this case.
Plaintiffs' notice of motion seeks to certify a class "of all New York North American Power & Gas, LLC customers who paid North American Power & Gas, LLC's variable rate. . . ." (Docket # 50.) This proposed class is overbroad and does not account for the relevant limitations periods.
This action was filed on February 20, 2015. New York General Business Law sections 349(a) and 349-d(3) has a three-year limitations period. CPLR 214(2);
Plaintiffs' claims for breach of contract and breach of the implied covenant of good faith and fair dealing are governed by the six-year limitations period of CPLR 213(2). North American first began selling electricity to New York consumers in or around June 2011. (
Plaintiffs' motion for class certification is GRANTED. (Docket # 50.) The Clerk is directed to terminate the motion.
The law firms of Finkelstein, Blankinship, Frei-Pearson & Garber, LLP, Mazie Slater Katz & Freeman, LLC and McCuneWright LLP are jointly appointed to act as class counsel.
Within 21 days, class counsel shall submit a proposed form of notice to class members and a proposed plan for distributing notice.
SO ORDERED.