ROSS, United States District Judge:
Plaintiffs Susanna Mirkin and Boris Mirkin, a married couple residing together in Brooklyn, bring this putative class action against defendants XOOM Energy, LLC and XOOM Energy New York, LLC (collectively, "XOOM"). They assert claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment arising out of their March 2013 agreement to obtain residential electricity services from XOOM, an independent energy service company ("ESCO"). Defendants moved to dismiss the complaint on the ground that plaintiffs have failed to state a claim under Federal Rule of Civil Procedure 12(b)(6).
The following facts are drawn from plaintiffs' April 2018 complaint and are presumed to be true for the purpose of
In March 2013, Boris Mirkin created an application on XOOM's website to begin receiving residential electricity services through the company's SimpleFlex Variable Rate Plan. Compl. ¶ 41, ECF No. 1-2; Compl, Ex. 1, at 1 ("ESA"). Shortly thereafter, XOOM sent plaintiffs an Electricity Sales Agreement ("the agreement") which described the company's pricing policies and services. Compl. ¶ 41; see ESA. Plaintiffs began receiving electricity supplied by XOOM two months later, in May 2013. Compl. ¶ 42. For the first month of the agreement, XOOM charged plaintiffs a teaser rate of 8.99¢/kWh. Compl. ¶ 41.
Pursuant to the agreement, XOOM stated that it would provide energy services to plaintiffs at "a variable rate, per kWH, that may change on a monthly basis." ESA 1. The agreement further explained that the monthly variable rate will be "based on XOOM's actual and estimated supply costs[,] which may include but not be limited to prior period adjustments, inventory and balancing costs." Id. (emphasis added). Separately, the agreement stated that "[t]here are no guaranteed savings in this [a]greement at this time." Id. Plaintiffs allege that this representation led them — as it would have led any reasonable consumer — to believe that their variable rate "would reflect XOOM's costs for purchasing electricity at wholesale prices." Compl. ¶ 45. Yet instead of reflecting the price of electricity on the wholesale market, XOOM's monthly variable rates "were not commensurate with XOOM's supply costs." Compl. ¶ 46.
As support for their contentions that XOOM failed to comply with the rate-setting methodology outlined in the agreement, plaintiffs compare XOOM's rates to an estimated "Market Supply Cost." Compl. ¶ 47. The term "Market Supply Cost" does not appear anywhere in the agreement, but plaintiffs allege that it "corresponds to a rate that reflects [the] `actual and estimated supply costs'" referenced as the basis for XOOM's variable rates. Id. To arrive at the "Market Supply Cost," plaintiffs developed an undisclosed formula that takes into account a variety of factors relevant to the electricity market: "(load-weighted) Zone J day-ahead prices, ancillary services costs, capacity costs, renewable portfolio standards (RPS) costs, and various charges and taxes related to New York's Independent Systems Operator." Id. Plaintiffs increased the resulting figure by an unspecified "substantial margin" in an effort to approximate the likely "retailer fixed costs" of an ESCO like XOOM. Id. Though plaintiffs do not disclose the formula or the raw data they used, they allege that the resulting "Market Supply Rate" was "estimated based on the costs of a retailer supplying a residential customer for each period," id. In their opposition to XOOM's motion to dismiss, they further explain that the figure was
Plaintiffs' complaint includes a table that compares XOOM's rates to the "Market Supply Cost" during the same billing cycle, demonstrating that XOOM charged plaintiffs up to 58.55% more than the "Market Supply Cost."
After growing increasingly dissatisfied with XOOM's rates, plaintiffs cancelled their service with the company in November 2013. Compl. ¶ 47. In April 2018, they filed this complaint in New York State Supreme Court in Kings County. See Notice of Removal ¶ 1, ECF No. 1. A month later, defendants removed the case to this court pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d), et seq. Id. ¶ 2. XOOM's motion to dismiss argues that plaintiffs have failed to state a claim upon which relief can be granted. Specifically, defendants argue that the agreement gave them the authority to set variable rates based on a non-exhaustive set of factors, "and not, as [p]laintiffs have invented, an unknown yet somehow hyper-specific `Market Supply Rate' that is nowhere to be found in the four corners of the parties' contract." Defs.' Mot. to Dismiss 1.
To survive a motion to dismiss under 12(b)(6), a complaint "must contain sufficient factual matter ... to state a claim to relief that is plausible on its face." County of Erie v. Colgan Air, Inc., 711 F.3d 147, 149 (2d Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)). Though plaintiffs do not need to include "detailed factual allegations" in the complaint, "[t]hreadbare recitals of the elements of cause of action, supported by mere conclusory statements,
XOOM argues that all three of plaintiffs' causes of action — breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment — fail to state a claim upon which relief can be granted. Defs.' Mot. to Dismiss 2-3. Because the agreement between the parties specifies that it will be "governed by the laws of the state of North Carolina," ESA 3, I analyze plaintiffs' claims using the law of that state.
As an initial matter, XOOM argues that the court should dismiss the complaint because plaintiffs have failed to take advantage of the dispute-resolution provisions outlined in the agreement. Defs.' Mot. to Dismiss 22-23. The agreement states that, "[i]n the event of a billing dispute or a disagreement involving XOOM's service," a party "should contact XOOM's Customer Care Center" either by phone or in writing. ESA 3. It also notes that "[a] dispute or complaint relating to a residential customer may be submitted by either party at any time to the [New York State Department of Public Service]." Id. Before the dispute is settled, parties "must pay [their] bill in full, except for the specific disputed amount." Id. Finally, it provides that, in the event that the parties are unable to resolve their disagreement within forty-five days, either party "may avail itself of all remedies available under law or equity." Id.
Read in the light most favorable to plaintiffs, I find that the dispute-resolution clause of the agreement does not impose a mandatory exhaustion requirement upon XOOM's customers. Instead, I agree with plaintiffs that the language used in the clause is permissive, "set[ting] forth a voluntary pre-suit procedure that a customer may invoke at her discretion." Pls.' Opp'n 17. The provision uses the permissive terms "should" and "may" to describe the opportunities available to a dissatisfied
Furthermore, it is not even entirely clear that the dispute resolution provision would apply to plaintiffs' complaints, which allege systemic violations rather than a discrete "billing dispute," ESA 3. XOOM's arguments to the contrary are unconvincing, as they rely in large part on cases involving arbitration clauses, which are analyzed under the Federal Arbitration Act and are not at issue here. See Benihana of Tokyo, LLC v. Benihana Inc., 73 F.Supp.3d 238, 249 (S.D.N.Y. 2014) ("The overwhelming balance of authority in this circuit and elsewhere indicates that, absent some separate suggestion that an [a]rbitration [p]rovision is intended to trigger permissive arbitration, provisions with the word `may' trigger mandatory arbitration." (emphasis added) (citations omitted)). I am similarly not persuaded by XOOM's argument that the provision mandating that a customer wait forty-five days before she "may avail [herself] of all remedies available under law or equity" would be meaningless if this court were to find the dispute-resolution provisions voluntary. Reply Br. in Further Supp. of XOOM Energy, LLC and XOOM Energy New York, LLC's Mot. to Dismiss Pls.' Class Action Compl. 14, ECF No. 22 ("Defs.' Reply"). Instead, I find that the forty-five-day waiting period applies only to those customers who choose to use the dispute-resolution mechanisms available to them under the agreement; those who do not use these mechanisms, like plaintiffs here, may file a case in federal or state court without exhausting other resolution channels.
For these reasons, I do not agree with XOOM that plaintiffs' failure to use the dispute-resolution provisions compels dismissal of their claims. As a result, I analyze each of plaintiffs' three causes of action separately to determine whether the complaint alleges sufficient facts to support each claim.
Plaintiffs allege that XOOM "failed to perform its obligations under the contract because [it] charged variable rates for electricity and gas that were not based on `[its] actual and estimated supply costs.'" Compl. ¶ 71. Under North Carolina law, a plaintiff can state a claim for breach of contract if she establishes that (1) a valid contract exists, and (2) the defendant breached the terms of that contract. See Crosby v. City of Gastonia, 635 F.3d 634, 645 (4th Cir. 2011). The parties both agree that the Electricity Sales Agreement constitutes a valid contract,
When analyzing the terms of a contract, I must "resolve all ambiguities in the contract in [p]laintiffs' favor." Serdarevic v. Centex Homes, LLC, 760 F.Supp.2d 322, 328 (S.D.N.Y. 2010). A contract's terms are ambiguous if "the meaning of words or the effect of provisions is uncertain or capable of several reasonable interpretations." Schenkel & Shultz, Inc. v. Hermon F. Fox & Assocs., P.C., 362 N.C. 269, 658 S.E.2d 918, 921 (N.C. 2008) (citation omitted). However, the mere fact that the parties urge different interpretations of the same language does not mean that the contract is ambiguous. See Johnson v. Levy, 812 F.Supp.2d 167, 182-83 (E.D.N.Y. 2011). The court should not declare a contract ambiguous "on the basis of the interpretation urged by one party, where that interpretation would strain the contract language beyond its reasonable and ordinary meaning." Id. (quoting Fed. Ins. Co. v. Am. Home Assurance Co., 639 F.3d 557, 568 (2d Cir. 2011)). I must "examine the language of the contract itself for indications of the parties' intent at the moment of execution," State v. Philip Morris USA, 363 N.C. 623, 685 S.E.2d 85, 90 (2009) (quoting State v. Philip Morris USA, 359 N.C. 763, 618 S.E.2d 219, 225 (2005)), focusing only on the "four corners" of the "written instrument," Carolina Power & Light Co. v. Bowman, 229 N.C. 682, 51 S.E.2d 191, 199 (1949).
Plaintiffs argue that a reasonable customer would have interpreted XOOM's reference to its "actual and estimated supply costs" as a promise that its variable rates would bear some relationship to "wholesale prices." Compl. ¶¶ 44-45 (emphasis omitted). In making this argument, plaintiffs rely upon cases from a variety of federal courts around the country that have had the occasion to consider the prices charged by deregulated ESCOs on the residential electricity market. "While analogous, these cases ... address contractual provisions, legal theories, and factual allegations that are similar, but not identical, to those in the present case." Landau v. Viridian Energy PA LLC, 223 F.Supp.3d 401, 405 n.1 (E.D. Pa. 2016). However, the differences between the contractual terms are revealing, as they help to demonstrate the deficiencies in plaintiffs' complaint.
Plaintiffs attempt to equate XOOM's "actual and estimated supply costs" to a verifiable, external rate of electricity costs, which can be ascertained by customers and easily compared to the rate they were actually charged. See Compl. ¶¶ 51-54. The problem with this position is that it belies the plain terms of the contract. The agreement says nothing about the "wholesale" rate of electricity, the market rate, or any of the factors that plaintiffs use to calculate their "Market Supply Cost" — "(load-weighted) Zone J day-ahead prices, ancillary services costs, capacity costs, renewable portfolio standard (RPS) costs, and various charges and taxes," Compl. ¶ 48. XOOM does not claim in the agreement or elsewhere that it purchases its electricity on the wholesale market, and plaintiffs make no specific allegations about the mechanism by which "XOOM fill[s] its supply needs," Defs.' Reply 4.
Instead, plaintiffs "transpose allegations from other complaints and provisions from other agreements" into XOOM's agreement with its customers. Defs.' Reply 6. Yet unlike the agreement here, the contracts used by other electricity companies in cases that have survived motions to dismiss directly reference the "wholesale market," "wholesale prices," or "market-related" circumstances, making it eminently
In contrast, plaintiffs' agreement with XOOM does not incorporate any references to external rates or market prices. The agreement references a handful of factors that may help determine XOOM's "actual and estimated supply costs,"
As XOOM notes, the court's decision in Hamlen v. Gateway Energy Services Corp. is particularly instructive. In that case, the plaintiff's contract with Gateway noted that the electricity provider's variable rates would be based on an "evaluation of a number of factors that affect the total price of electricity or natural gas to a customer." 2017 WL 892399, at *1. The contract provided a description of some of the considerations that the company might use to determine costs, but noted that those considerations are "not exhaustive of all factors that may influence our pricing decision each month." Id. Based on this representation — which gave the electricity provider considerable, even if not total, discretion to determine the rates charged based on an evaluation of its costs each month — the court found that plaintiffs were wrong to "conflate[] wholesale rates with defendant's natural gas costs." Id. at *4. Even if were accurate that the defendant
At the same time, plaintiffs are correct that XOOM's promises are distinguishable from the contracts in Hamlen and Daniyan in one respect. Unlike the contracts in both cases, XOOM's agreement does commit the electricity provider to set prices that are based on a specific variable: XOOM's costs. Nevertheless, plaintiffs are wrong to suggest that the reference to XOOM's costs invokes a stable, fixed, or easily determined rate that customers can use as a benchmark for their own variable rates. To the contrary, the multiple factors plaintiffs use to calculate their fabricated "Market Supply Rate" demonstrate just how little resemblance this figure bears to the expectations of a reasonable customer. While a reasonable customer may plausibly expect that XOOM will set rates based on its costs, a reasonable customer would likely not assume that XOOM's costs will be based, for example, on "(load-weighted) Zone J day-ahead prices," Compl. ¶ 48.
Plaintiffs' allegations fail because they conflate XOOM's internal costs with complicated factors that appear nowhere on the face of the agreement. Defs.' Mot. to Dismiss 2. Ultimately, the agreement's reference to XOOM's costs "amount[s] to [little] more than vague generalities." Daniyan, 2015 WL 4031752, at *2. This may lead to a lack of clarity, but it does not plausibly provide plaintiffs with a reasonable expectation that XOOM's costs are equivalent to the wholesale market rate or any of the variables that plaintiffs include in their calculations. Cf. Claridge v. No. Am. Power & Gas, LLC, No. 15-cv-1261(PKC), 2015 WL 5155934, at *5 (S.D.N.Y. Sept. 2, 2015) (comparing a legitimately ambiguous contractual provision to one where the defendant "simply publish[ed] truthful information and allow[ed] consumers to make their own assumptions about the nature of the information" (alterations in original) (quoting Gomez-Jimenez v. N. Y. Law Sch., 103 A.D.3d 13, 956 N.Y.S.2d 54, 59 (2012))). Thus, the reference to XOOM's costs does not make the agreement "ambiguous," as plaintiffs' preferred interpretation would "strain the contract language beyond its reasonable and ordinary meaning." Johnson, 812 F.Supp.2d at 183 (quoting Fed. Ins. Co., 639 F.3d at 568).
A comparison between plaintiffs' complaint and the complaints filed in similar cases further demonstrates these distinctions. In Mirkin v. Viridian Energy — a case involving the same named plaintiffs as the instant case — the court found that plaintiffs had adequately pleaded that Viridian Energy failed to comply with its contractual promise to set variable rates "from month-to-month based on wholesale market conditions." 2016 WL 3661106, at *6. Plaintiffs' amended complaint in that case not only reasonably alleged that a customer would expect that her variable rates would bear some relationship to wholesale rates — rising and falling in relationship to changes in the wholesale rate — but it also provided a side-by-side comparison between Viridian's rates and the "Average Wholesale Market LBPM Rate for the NYC Region." First Amended Class Action Complaint ¶ 47, Mirkin v. Viridian Energy, Inc., No. 3:15-cv-01057(SRU), 2015 WL 9702814 (D. Conn. Dec. 18, 2015), ECF No. 47. This comparison demonstrated that Viridian's rates were as much as
These comparable complaints began with reasonable allegations about a customer's expectations under the contract, and then compared the actual rates charged by the energy company defendant to the rate that should have been charged based on plaintiffs' reasonable expectations. Here, the plaintiffs have failed to do both of these things: (1) they do not plausibly allege that XOOM's reference to "actual and estimated supply costs" could have led a reasonable customer to believe that prices would be based on wholesale or market rates, and (2) their manufactured "Market Supply Cost" is far too attenuated from XOOM's "actual or estimated supply costs" to demonstrate a breach. As a result, plaintiffs' breach of contract claim is dismissed.
Plaintiffs' second cause of action is for a breach of the implied covenant of good faith and fair dealing. As XOOM acknowledges, every contract in North Carolina "carries with it an implied covenant by the parties to act fairly and in good faith in carrying out the agreement." Defs.' Mot. to Dismiss 15 (citing Bicycle Transit Auth. v. Bell, 314 N.C. 219, 333 S.E.2d 299, 305 (1985)). However, courts in North Carolina generally hold that this claim rises and falls with a claim for breach of contract; where, as here, the court has already determined that the defendants' behavior did not constitute a breach of an express contractual term, "it would be illogical ... to conclude that [the defendants] somehow breached implied terms of the same contract[]" with the same behavior. Suntrust Bank v. Bryant/Sutphin Props., LLC, 222 N.C. App. 821, 732 S.E.2d 594, 603 (2012); see also Rezapour v. Earthlog Equity Grp., Inc., No. 5:12CV105-RLV, 2013 WL 3326026, at *4 (W.D. N.C. July 1, 2013) ("Where the claim for breach of good faith is `part and parcel' of a similar claim for breach of an express term of the contract claim, that claim will rise and fall with the other breach of contract claim.").
Plaintiffs argue that they can sustain this claim as a separate cause of action because the claims "are based on different (although to some degree overlapping) facts." Pls.' Opp'n 11. They cite several cases that interpreted similar claims under the law of other states, including New York. See, e.g. Hamlen, 2017 WL 892399, at *4-5 (allowing the claim for breach of the implied covenant of good faith and fair dealing to proceed even after dismissing the breach of contract claim where the defendants' rates were "substantially higher
Moreover, I agree with defendants that plaintiffs have not actually based their claims on different facts. Though plaintiffs add a few buzzwords to their second cause of action, alleging that XOOM engaged in "price gouging" and acted "arbitrarily and unreasonably," Compl. ¶¶ 77, 78, these terms do not change the reality that their claims are derived from the same underlying behavior. See Defs.' Reply 7 (noting that plaintiffs have added certain "conclusory buzzwords" but "fail to plead any facts to support these allegations"). Plaintiffs allege that XOOM breached the implied covenant by "frustrat[ing] [p]laintiffs['] and other [c]lass members' reasonable expectations that the variable rates for electricity would be based on `XOOM's actual and estimated supply costs.'" Compl. ¶ 78. Just as in Melville v. Spark Energy, "[t]hese allegations are ones that arise from the contract itself — they center on what the [agreement] promised and whether [XOOM] fulfilled that promise." No. 15-8706 (RBK/JS), 2016 WL 6775635, at *5 (D.N.J. Nov. 15, 2016).
Furthermore, plaintiffs are incorrect that XOOM's variable rates deprived them of their reasonable expectations under the agreement, since I have already found that they failed to adequately plead that XOOM was obligated to set its prices in accordance with wholesale prices or plaintiffs' own "Market Supply Cost." See, e.g., Cole v. Wells Fargo Bank, N.A., No. 1:15-cv-00039-MR, 2016 WL 737943, at *7 (W.D.N.C. Feb. 23, 2016) ("[N]o obligation may be implied that would be inconsistent with the other terms of the contractual relationship"). Thus, having already found that XOOM did not fail to comply with customers' reasonable expectations under the agreement, I find that this claim also fails as a matter of law. See B. Lewis Prods., Inc. v. Angelou, No. 01Civ.0530MBM, 2005 WL 1138474, at *11 (S.D.N.Y. May 12, 2005) ("[T]he weight of North Carolina authority holds also that a claim for breach of the covenant of good faith and fair dealing based on facts identical to those supporting a breach of contract claim should not be pursued separately.").
As an alternative to their claims based on the contract, plaintiffs assert a claim for unjust enrichment. They allege that XOOM "unjustly enriched itself and received a benefit beyond what was contemplated in XOOM's customer contract." Compl. ¶ 82. North Carolina law recognizes a claim for unjust enrichment as a "quasi-contract" claim, where a "contract [is] implied in law." Carty v. Westport Homes of N.C., Inc., 472 F. App'x 255, 258 (4th Cir. 2012) (internal quotation marks omitted) (quoting Atl. & E. Carolina Ry. Co. v. Wheatly Oil Co., 163 N.C. App. 748, 594 S.E.2d 425, 429 (2004)). As a result, "[i]f there is a contract between the parties the contract governs the claim and the law will not imply a contract." Booe v. Shadrick, 322 N.C. 567, 369 S.E.2d 554, 556 (1988) (citing Vetco Concrete Co. v. Troy
XOOM makes several arguments in response. While I am not convinced by all of XOOM's arguments, I ultimately agree that the unjust enrichment claim can only be sustained in the alternative if there is a genuine dispute about the validity of the underlying contract. To the extent that XOOM argues that plaintiffs' claim fails because it is not explicitly pleaded in the complaint "as an alternative," Defs.' Mot. to Dismiss 21, I am not persuaded that this is a fatal defect. Cf. Pres. Prof'l Servs., LLC v. M2 Pictures, LLC, No. 3:14-CV-589-RJC-DCK, 2015 WL 3659506, at *7 (W.D. N.C. May 5, 2015) (noting that the claims were not pleaded in the alternative, but ultimately dismissing on different grounds), adopted by 2015 WL 3657463 (W.D.N.C. June 12, 2015). XOOM also argues that plaintiffs' claim for unjust enrichment is time-barred, as New York courts
However, I agree that the weight of authority demonstrates that an unjust enrichment claim can only be sustained as an alternative to a claim based on a contract if the existence of that contract is in doubt. See, e.g., Melville, 2016 WL 6775635, at *5 ("Where a valid contract governs the parties' rights and obligations, a party cannot bring a claim for unjust enrichment."); Karski v. Brazilian Res., Inc., No. 3:08CV608-RJC-DSC, 2009 WL 1255545, at *6 (W.D. N.C. May 4, 2009) (applying both North Carolina and New Hampshire law and holding that under either, "an unjust enrichment claim lies only in the absence of a valid express contract"), adopted by 2009 WL 2045869 (W.D.N.C. July 9, 2009). Plaintiffs argue for the first time in their opposition to XOOM's motion to dismiss that the validity of the underlying
Furthermore, plaintiffs' claim for unjust enrichment directly invokes the underlying contract, demonstrating that the unjust enrichment claim "simply duplicates, or replaces, a conventional contract or tort claim." Yang Chen, 2014 WL 7389011, at *7 (quoting Corsello v. Verizon N.Y., Inc., 18 N.Y.3d 777, 944 N.Y.S.2d 732, 967 N.E.2d 1177, 1185 (2012)); see Compl. ¶ 82 (arguing that XOOM unjustly enriched itself because it "received a benefit beyond what was contemplated in XOOM's customer contract" (emphasis added)). I agree with the court in Madison River Management Co. v. Business Management Software Corp. that plaintiffs "cannot now claim the existence of an implied contract" when all of the facts pleaded in their complaint "allege there is an express contract between the parties." 351 F.Supp.2d 436, 446 (M.D.N.C. 2005).
As a result, plaintiffs' claim for unjust enrichment is dismissed.
For the foregoing reasons, XOOM's motion to dismiss is granted in its entirety. The clerk of court is directed to enter judgment accordingly and close the case.
So ordered.