McHUGH, J.
The deregulation of retail electricity markets in Pennsylvania and several other states has produced a large number of putative class actions alleging various unfair business practices, with mixed results.
The facts are provided to the extent relevant to the motions. All well-pleaded facts in Landau's complaint are taken as true pursuant to the standard of review on motions under Rule 12(b)(6).
In 2008, the Pennsylvania Legislature passed Act 129, opening Pennsylvania's energy markets to competition and allowing retail customers to purchase electricity from energy services companies (or "ESCOs") like Viridian, rather than from their local utility company. Viridian is a Nevada limited liability company, registered in Pennsylvania as a foreign corporation. It
Sometime before July 18, 2013, two Associates met with Plaintiff Steven Landau and purportedly assured him that:
Compl. ¶ 38. In reliance on these representations and on various web-based advertisements that touted the affordability of Viridian's rates, Landau entered into a contract on or around July 18, 2013, to purchase electricity from Viridian.
The essential elements of Landau's contract with Viridian were as follows. Viridian agreed to supply Landau with electricity, 20% of which would be generated from renewable sources. In exchange, Landau agreed to pay a fixed rate of $0.0799 per kilowatt-hour (kWh) of electricity for a six-month period. After this six-month, fixed-rate term of service, Landau could either (1) cancel his Viridian service; (2) renew his service at a new fixed rate; or (3) do nothing, in which case his account would be transferred to Viridian's "Variable Price" plan. MTD Ex. 4 at *1.
Landau's deal with Viridian was recorded in a two-page document labeled "Pennsylvania Terms & Conditions" (T & C), and a one-page "Welcome Letter." The T & C reads like a standard retail services contract. Among other things, it defines essential terms, provides the process by which parties can cancel the arrangement, and, most relevant to this case, includes two price disclaimers. The first of these disclaimers states that "[u]nder Viridian's Variable Price, your price may fluctuate each month based on wholesale market conditions applicable to the DC's[
In style and substance, the T &C differs dramatically from the Welcome Letter. The latter document memorializes the $0.0799 per kWh, six-month, fixed-rate arrangement, but otherwise reads like a marketing brochure rather than a contract. The letter begins "You are on your way to enjoying affordable, green energy." Compl. Ex. A. Later, it describes the customer's "decision to choose a better energy supplier" as having "a positive environmental impact" that "directly contribute[s] to a better energy solution for our nation." Id. The Welcome Letter also promises that "from now on, you'll be doing your part to do something better for the environment while saving money on your energy costs at the same time." Id.
Typically in these kinds of cases, the courtship exemplified by the Welcome Letter does not become part of the marriage vows between provider and consumer. To the contrary, promises made as part of the marketing are generally left out of the agreement itself, with an integration clause serving as a type of contractual "pre-nup," warning the customer that the sweet nothings of the sales force do not guarantee "happily ever after." Remarkably, in this case, and of central relevance to my decision, the seductive promises of the Welcome Letter were specifically incorporated
After the expiration of his six-month, fixed-rate term, Landau took no action to renew service under a new fixed rate agreement, nor did he terminate his arrangement with Viridian. Therefore, pursuant to the terms of the Agreement, in February 2014, Landau's account was transferred to the Variable Price plan. As soon as this happened, Landau's rates more than doubled, jumping to $0.1749 per kWh, where they remained, with some minor variations, until Landau canceled his Viridian service in April 2015. During the 15 months that Landau was a Variable Price customer, PECO's rates averaged only $0.0866 per kWh.
On these facts, Landau alleges that Viridian breached the terms of the Agreement (Count I) and breached the implied covenant of good faith and fair dealing (Count II). Based on Viridian's alleged breach, Landau also seeks a declaration of the rights and obligations of the parties under the Agreement, pursuant to the Declaratory Judgment Act (DJA) (Count III). Landau further contends that Viridian engaged in deceptive business practices in violation of the UTPCPL (Count IV). Finally, Landau brings an alternative claim of unjust enrichment in the event that its contract with Viridian is found to be invalid (Count V).
Landau brings this action on behalf of himself and similarly situated current and former Viridian customers. Although Landau has not moved for class certification, he has signaled his intention to certify two classes, one under Rule 23(b)(2) and the other under Rule 23(b)(3). Rule 23(b)(2) permits class certification where a defendant "has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole." Fed. R. Civ. P. 23(b)(2). Class certification under Rule 23(b)(3) is appropriate when "questions of law or fact common to class members predominate over any questions affecting only individual members" such that "a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3).
Viridian now moves to dismiss Landau's claims, pursuant to Rule 12(b)(6). In a separate motion, Viridian also moves to strike Landau's class allegations under Rules 12(f), 23(c)(1), and 23(d)(1)(D).
A complaint is properly dismissed under Rule 12(b)(6) when it fails "to state claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). In considering a 12(b)(6) motion, the court must first separate the factual and legal elements of a claim, accepting as true all well-pleaded facts while disregarding any legal conclusions. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). The court must then "determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a `plausible claim for relief.'" Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)).
In deciding a Rule 12(f) motion, the court "may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). "Motions to strike are decided on the pleadings alone, and should not be granted unless the relevant insufficiency is `clearly apparent.'" Hanover Ins. Co. v. Ryan, 619 F.Supp.2d 127, 132 (E.D. Pa. 2007) (quoting Cipollone v. Liggett Group, Inc., 789 F.2d 181, 188 (3d Cir. 1986)). "[M]otions to strike generally are disfavored ... Indeed, striking a pleading is a drastic remedy to be resorted to only when required for the purposes of justice and should be used sparingly." DeLa Cruz v. Piccari Press, 521 F.Supp.2d 424, 428 (E.D. Pa. 2007).
Under Pennsylvania law, "a plaintiff wishing to proceed with a breach of contract action must establish (1) the existence of a contract, including its essential terms, (2) a breach of a duty imposed by the contract, and (3) resultant damages." Ware v. Rodale Press, Inc., 322 F.3d 218, 225 (3d Cir. 2003). The parties agree that they entered into a binding contract. The essential terms of the Agreement are spelled out in the T & C and the Welcome Letter. The dispute here is whether Viridian breached a duty imposed by the Agreement. There are flaws in the arguments advanced by both sides.
Landau's breach of contract allegation largely rests on the price disclaimer regarding Viridian's Variable Price plan, which reads: "Under Viridian's Variable Price, your price may fluctuate each month based on wholesale market conditions applicable to the DC's service territory." MTD Ex. 4 at *1. Landau points to the large gap between Viridian's variable rate and PECO's rates for the same time period. Based on this discrepancy, he argues that Viridian "failed to base [its variable] rates upon market conditions despite [its] contractual obligation to do so." Compl. ¶ 22.
There are two problems with this argument. First, the Agreement provides that variable rates "may fluctuate each month based on wholesale market conditions," but it does not require Viridian to fix its variable rate at any particular level relative to wholesale market prices. While Landau pleads facts showing that Viridian's variable rates were much higher than PECO's rates, this alone says nothing about why these rates changed from month to month.
Second, the Agreement provides that variable rates "may fluctuate each month based on wholesale market conditions," not based on PECO's rates. Viridian notes, and Landau does not dispute, that a utility's retail rates for a given month may be determined by multiple factors other than contemporaneous wholesale market conditions. For instance, when faced with rising prices in the wholesale electricity market, a utility may decide to shield retail customers from rate spikes by passing these costs along to customers incrementally over a period of several months. See Reply at 4. Because PECO's rates are not a true reflection of wholesale market conditions, Landau's comparison between PECO's rates and Viridian's rates does not show that Viridian's variable rates fluctuated based on anything other than wholesale market conditions.
Landau relies heavily on Mirkin v. Viridian Energy, Inc., where a Connecticut District Court denied Viridian's motion to dismiss the plaintiff's breach of contract claim in a case involving virtually identical contract terms. No. 3:15-CV-1057 (SRU),
In its defense, Viridian emphasizes the T&C's disclaimer that "Viridian's prices may be higher or lower than the DC's in any given month." MTD Ex. 4 at *1. Seizing on this provision, Viridian argues that a discrepancy between its rate's and PECO's rates cannot have legal significance because the Agreement gives Viridian carte blanche to set variable rates above PECO rates. The flaw in Viridian's claim of complete rate-setting discretion is that it is inconsistent with the language of the Welcome Letter. In relevant part, that document promises that "You are on your way to enjoying affordable, green energy," and that "from now on, you'll be doing your part to do something better for the environment while saving money on your energy costs at the same time." Compl. Ex. A (emphasis added). Admittedly, the Welcome Letter reads more like a marketing brochure than a contract document. Nevertheless, the T & C explicitly incorporates it into the fully integrated Agreement and I must therefore analyze it by applying principles of contract interpretation.
"The fundamental rule in contract interpretation is to ascertain the intent of the parties." Lesko v. Frankford Hosp.-Bucks Cty., 609 Pa. 115, 123, 15 A.3d 337, 342 (2011). Where the parties have entered into a written contract, "the intent of the parties is the writing itself." Id. In reading the contract, "all provisions ... will be construed together and each will be given effect." Id. Consequently, I may "not interpret one provision of a contract in a manner which results in another portion being annulled." Id.
Contract disputes between consumers and companies often turn on "standard terms and conditions" — lawyerly phrases buried in a contract's carefully drafted fine print. No one actually believes that consumers read standard terms and conditions,
Though I cannot precisely define terms like "affordable," "green energy," and "saving money on your energy costs," I find that Landau pleads sufficient facts to support a claim that these terms were violated. According to Landau's complaint, during the 15 months that he remained on Viridian's Variable Price plan, his rates were, on average, roughly 100% higher than PECO's rates.
Quantification of damages may prove problematic, but that is an issue for another day. For now, given Viridian's self-inflicted wound in the drafting of the contract, the Motion to Dismiss Count I is denied.
Landau cannot sustain a separate claim based on breach of the covenant of good faith and fair dealing because, under Pennsylvania law, there is no such independent cause of action. See Gallo v. PHH Mortg. Corp., 916 F.Supp.2d 537, 551 (D.N.J. 2012). Rather, courts applying Pennsylvania law read "a claim predicated on a breach of the covenant of good faith [as] `subsumed in a breach of contract action.'" Kantor, 100 F.Supp.3d at 430 (quoting Burton v. Teleflex Inc., 707 F.3d 417, 432 (3d Cir. 2013)). Stated differently, "a breach of such covenant is a breach of contract action." Kamco Indus. Sales, Inc. v. Lovejoy, Inc., 779 F.Supp.2d 416, 418 n.8 (E.D. Pa. 2011) (emphasis added).
Here, Landau's implied covenant claim is a nearly word-for-word restatement of his breach of contract claim, and I read it as wholly incorporated within Count I. Accordingly, Viridian's Motion to Dismiss Count II is granted.
Under Pennsylvania law, a plaintiff "may plead breach of contract and unjust enrichment claims in the alternative only where an express contract cannot be proven." Gallo, 916 F.Supp.2d at 553 (quoting Lugo v. Farmers Pride, Inc., 967 A.2d 963, 970 (Pa. Super. Ct. 2009)). Thus, courts allow unjust enrichment claims to proceed in breach of contract actions "where there is a question as to the validity of the contract in question," Montanez v. HSBC Mortg. Corp. (USA), 876 F.Supp.2d 504, 516 (E.D. Pa. 2012). If no dispute exists as to whether an enforceable contract exists, then plaintiffs are barred from bringing unjust enrichment claims.
Here, the parties acknowledge the existence of a legally binding, valid contract. Viridian's Motion to Dismiss Count V is therefore granted.
In Count IV, Landau alleges that Viridian's marketing activities violated the UTPCPL, 73 Pa. Stat. Ann. and Cons. Stat. §§ 201-1 et seq. Before reaching the substance of Landau's UTPCPL claim, I
In general, the economic loss doctrine "prohibits plaintiffs from recovering in tort economic losses to which their entitlement flows only from a contract." Duquense Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 618 (3d Cir. 1995). In Werwinski v. Ford Motor Co., the Third Circuit, predicting how the Pennsylvania Supreme Court would rule, held that the economic loss doctrine applies to statutory fraud claims, including those arising under the UTPCPL. 286 F.3d 661 (3d Cir. 2002). At the time Werwinski was decided, no Pennsylvania appellate court had yet considered whether the economic loss doctrine barred UTPCPL claims that flowed from a breach of contract. The Superior Court of Pennsylvania has since disagreed with Werwinski, holding in Knight v. Springfield Hyundai that the economic loss doctrine barred only "`cause[s] of action in
Whether Landau's UTPCPL claims are barred under the economic loss doctrine depends on whether Werwinski still controls after the Superior Court's decision in Knight. District courts in Pennsylvania are divided on this question. Some have held that Werwinski no longer is controlling authority and have followed Knight in ruling the doctrine inapplicable to claims brought under the UTPCPL. Kantor, 100 F.Supp.3d at 427; Roberts v. NVR, Inc., No. 15-489, 2015 WL 3745178, at *5 (W.D. Pa. June 15, 2015); Horne v. Progressive Advanced Ins. Co., No. 15-1029, 2015 WL 1875970, at *1 n.1 (E.D. Pa. Apr. 24, 2015). Other courts have held that Werwinski's prediction of the Pennsylvania Supreme Court's ruling on the economic loss doctrine remains binding. McGuckin v. Allstate Fire & Cas. Ins. Co., No. 15-2173, 118 F.Supp.3d 716, 720-21 (E.D. Pa. July 30, 2015); Vaughan v. State Farm Fire & Cas. Co., No. 14-1684, 2014 WL 6865896, at *4 n.6 (E.D. Pa. Dec. 3, 2014); Pesotine v. Liberty Mut. Grp., Inc., No. 3:14-CV-784, 2014 WL 4215535, at *4 n.1 (M.D. Pa. Aug. 25, 2014); Gadley v. Ellis, No. 13-17, 2014 WL 3696209, at *4-5 (W.D. Pa. July 23, 2014); see also Abraham v. Ocwen Loan Servicing, LLC, No. 14-4977, 2014 WL 5795600, at *7 n.3 (E.D. Pa. Nov. 7, 2014) (stating that Werwinski remains the binding law of the Third Circuit); Moore v. State Farm Fire & Cas. Co., No. 14-3113, 2015 WL 463943, at *2 (E.D. Pa. Feb. 4, 2015) (applying Werwinski after Knight); Zeglen v. Nw. Mut. Life Ins. Co., No. 14-173, 2014 WL 4215531, at *4 (M.D. Pa. Aug. 25, 2014) (same).
Viridian quotes extensively from Whitaker v. Herr Foods, Inc., where the court noted that under the Third Circuit's Internal Operating Procedure (IOP) 9.1, a panel's precedential decision is binding on subsequent panels "unless a U.S. Supreme Court decision requires modification or the Third Circuit sitting en banc overrules the prior decision." 198 F.Supp.3d 476, 489, No. CV 16-2017, 2016 WL 4060127, at *8 (E.D. Pa. July 29, 2016) (citing Horsey v. Mack Trucks, Inc., 882 F.2d 844 (3d Cir. 1989)). In refusing to abandon Werwinski, the Whitaker court found it "axiomatic that if another panel of the Court of Appeals for the Third Circuit is bound by a previous panel's construction of state law
I am not as convinced that the concerns addressed by the Third Circuit's internal rule necessarily resolve the question before me. IOP 9.1 is the court's formulation of what is generally referred to as the "coordinate jurisdiction" rule — the principle that one judge of equal rank may not overrule another. Among the well-established exceptions to that prohibition is where there has been an intervening change in the law. In re Pharmacy Benefit Managers Antitrust Litig., 582 F.3d 432, 439 (3d Cir. 2009). That is precisely the case here. After Werwinski, unanimous panels of the Superior Court have twice refused to apply the economic loss doctrine in UTPCPL cases, first in Knight and more recently in Dixon v. Northwestern Mutual, 146 A.3d 780 (Pa. Super. 2016) (Olsen, J.). In Dixon, the court cited a decision from Judge R. Stanton Wettick, one of Pennsylvania's most respected jurists, to the effect that application of the economic loss doctrine to the UTPCPL would render the UTPCPL's catch-all provision meaningless. Dixon, 146 A.3d at 790 (citing Toth v. Nw. Sav. Bank, No. GD-12-008014, 2013 WL 8538695, at *16 (Pa. Com. Pl. Mar. 1, 2013)). In short, six appellate judges in Pennsylvania and a highly regarded trial judge have rejected Werwinski as a proper statement of Pennsylvania law.
The Third Circuit itself has recognized the limited reach of IOP 9.1 in cases such as this. In Debiec v. Cabot Corp., the court described the binding force of predictive precedent this way:
352 F.3d 117, 131 (3d Cir. 2003) (emphasis added). This qualification to IOP 9.1 was underscored in Robinson v. Jiffy Executive Limousine Co., where the court held that:
4 F.3d 237, 239-40 (3d Cir. 1993) (emphasis added).
Robinson is highly relevant to this case. At issue there was the vitality of a Third Circuit panel's prediction of New Jersey law in light of two contrary rulings issued later by the Appellate Division of New Jersey Superior Court.
Robinson's reliance upon decisions from intermediate appellate courts has additional force in light of other decisions from the Third Circuit. In Gares v. Willingboro Township, it held that "in the absence of guidance from the state's highest court, we are to consider decisions of the state's intermediate appellate courts for assistance in predicting how the state's highest court would rule." 90 F.3d 720, 725 (3d Cir. 1996). And in U.S. Underwriters Insurance Co. v. Liberty Mutual Insurance Co., the circuit observed that "the rulings of intermediate appellate courts must be accorded significant weight and should not be disregarded absent a persuasive indication that the highest state court would rule otherwise." 80 F.3d 90, 93 (3d Cir. 1996).
The rejection of Werwinski by Pennsylvania appellate courts counsels a further look at the analytical strength of Wersinski itself. Preliminarily, it is noteworthy that the Werwinski court did not have the benefit of any Pennsylvania decisions directly addressing the applicability of the economic loss doctrine to the UTPCPL. Robinson implicitly recognizes that federal courts make predictions out of necessity: some rule must govern every pending case. But when federal judges are forced by circumstance to divine a path in the absence of meaningful precedent from the state courts, the exercise is by its very nature as much speculation as it is prediction, properly subject to re-evaluation in the face of new developments. As to the precise issue before it, the panel in Werwinski was painting on a blank canvas, forced to look to other jurisdictions. In light of Robinson, that alone should give pause because the intermediate appellate courts of Pennsylvania have twice rejected Werwinski. Beyond that, there is reason to be concerned about applying a judicially created doctrine to eviscerate the language of a statute.
The courts that created the economic loss doctrine were concerned about the scope of tort liability, specifically, whether the broad precepts of negligence, and even broader precepts of strict liability — meant to facilitate recovery for physical injury — should extend to claims where the only harm suffered by the plaintiff was to property or pocketbook. Jean Braucher, Deception, Economic Loss and Mass-Market Customers: Consumer Protection Statutes as Persuasive Authority in the Common Law of Fraud, 48 Ariz. L. Rev. 829, 835-36 (2006). At common law, recovery for purely economic loss was limited to the realm of contract, and the economic loss doctrine served to maintain and reinforce the traditional distinction between contract and tort. Stated differently, the economic loss doctrine was a common law rule created as a limitation upon common law causes of action. The UTPCPL, in contrast, represents the
That same distinction was recognized by Judge Van Antwerpen, then a member of this court, when he noted that by allowing recovery in excess if actual losses, the UTPCPL is a statute "in derogation of common law." O'Keefe v. Mercedes-Benz, USA, LLC, 214 F.R.D. 266, 275 (E.D. Pa. 2003). Traditionally, courts have strictly construed such statutes, but under Pennsylvania's Statutory Construction Act, they are explicitly prohibited from applying common law in a way that frustrates legislative intent and undermines a statute. 1 Pa. Stat. and Cons. Stat. Ann. § 1928(a). In fact, the Pennsylvania Supreme Court explicitly recognized the breadth of the UTPCPL shortly after its enactment:
Commonwealth v. Monumental Properties, Inc., 459 Pa. 450, 457-58, 329 A.2d 812, 815 (1974).
The Supreme Court's construction of statutory intent makes clear that the legislature's goal was to reach beyond simply compensating consumers for losses, which is the focus of the common law, to deter unscrupulous business practices. Application of the economic loss doctrine is flatly inconsistent with that legislative goal. As Judge Van Antwerpen further pointed out, Pennsylvania trial and appellate courts, both before and after Wersinski, repeatedly permitted enhanced damages under the statute, notwithstanding the economic loss doctrine. O'Keefe, 214 F.R.D. at 276-77. In short, the uniform practice of the Pennsylvania courts had been to ignore the economic loss doctrine in their application of the UTPCPL even before the doctrine's formal rejection by two separate panels of the Superior Court.
There is certainly wisdom to the proposition that a district judge should wait for definitive guidance from the circuit before presuming that a decision from the circuit has lost vitality.
Blind adherence to predictive precedent is also problematic because of the difficulty inherent in the task of prediction. Paynton v. Spuds, LLC, CIV.A. 13-6373, 2014 WL 3353248, (E.D. Pa. July 9, 2014). As one illustration, the Court of Appeals twice predicted that Pennsylvania would adopt Sections 1 and 2 of the Restatement (Third) on Product Liability. See Covell v. Bell Sports, Inc., 651 F.3d 357, 363-64 (3d Cir. 2011); Berrier v. Simplicity Mfg., Inc., 563 F.3d 38, 45 (3d Cir. 2009). It continued to direct district court judges to apply the Third Restatement even after the Pennsylvania Supreme Court passed on the opportunity to adopt it in two cases. Sikkelee v. Precision Airmotive Corp., No. 12-8081, 2012 WL 5077571 (3d Cir. Oct. 17, 2012). Ultimately, of course, the Pennsylvania Supreme Court rejected the Third Restatement. Tincher v. Omega Flex, 628 Pa. 296, 104 A.3d 328 (2014). In the meantime, litigants whose cases were removed to federal court had them resolved by substantive principles that did not comport with Pennsylvania law.
In light of Robinson and the Third Circuit's general caution that forum should not control the applicable law, now that the Superior Court has twice rejected Werwinski, I refuse to dismiss the UTPCPL claim on the basis of the economic loss doctrine, and will consider its substance.
"The UTPCPL is Pennsylvania's consumer protection law and seeks to prevent unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." Bennett v. A.T. Masterpiece Homes, 40 A.3d 145, 151 (Pa. Super. Ct. 2012). The law creates a cause of action for
73 Pa. Stat. Ann. and Cons. Stat. § 201-9.2. Section 201-2(4)(i)-(xx) lists 20 specific types of unlawful conduct, while § 201-2(4)(xxi) contains a catch-all provision that bans "any fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding."
The factual basis for Landau's UTPCPL claim is two-fold.
Compl. ¶ 38. Second, Landau cites nine instances of what he characterizes as misleading online advertising. Each of the cited passages touts Viridian's product as "responsible" or "green" energy that is also "affordable" or that will not "hurt your pocketbook." Compl. ¶¶ 14-20; 23, 29. The following passage is representative of the other eight in Landau's Complaint: "With Viridian, it's easy to choose affordable, responsible energy for your home or business[.]" Compl. ¶ 20.
Viridian argues that Count IV must be dismissed because Landau's UTPCPL claim: (1) is based on statements that were mere non-actionable puffery; (2) sounds in fraud and is not pleaded with sufficient particularity; (3) fails to establish the elements of a deception claim under the UTPCPL; and (4) is barred by a "regulatory compliance defense." Finally, Viridian argues that Landau lacks standing to assert a claim for injunctive relief under the UTPCPL. I consider each argument in turn.
The Third Circuit has described puffery as "exaggeration or overstatement expressed in broad, vague, and commendatory language." Castrol Inc. v. Pennzoil Co., 987 F.2d 939, 945 (3d Cir. 1993). Puffery is distinguishable from actionable "misdescriptions or false representations of specific characteristics of a product" that are subject to measurement and are therefore testable. Id.
I agree with Viridian that the online advertisements cited by Landau constitute non-actionable puffery. Although the language in Viridian's online marketing claims is nearly identical to the language in its Welcome Letter, the Welcome Letter formed a part of the Agreement and was therefore subject to analysis under the principles of contract interpretation. I was bound to give effect to each section of the Agreement, but I am under no corresponding obligation to hold Viridian to the statements that it makes in its online advertisements.
In other actions against Viridian and companies like it, courts have been asked to consider the legal significance of advertisements that made similarly vague promises of cost savings and competitive rates. Regardless of whether these courts allowed cases to proceed to discovery or dismissed them at the pleading stage, no court has found that such broadly worded claims of affordability were actionable on their own. See, e.g., Mirkin, 2016 WL 3661106, at *6 ("The statements that Viridian will allow customers to `save money' or that it will offer `competitive' rates are too vague to be actionable."); Daniyan v. Viridian Energy LLC, 2015 WL 4031752, at *2 ("Viridian's generalized statements that its energy is competitively priced and often costs less than the utility's rates amount to nothing more than vague generalities and puffery"). In the context of online advertisements, I too find that Viridian's vague descriptions of its product were mere puffery and therefore cannot support a claim under the UTPCPL.
Though Viridian's online marketing was non-actionable puffery, the alleged
Viridian next argues that Landau's UTPCPL claim sounds in fraud and therefore must be dismissed for failure to comply with the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). Viridian's argument mischaracterizes the law. As discussed below, the UTPCPL allows claims for "fraud" or "deception," and claims based on deception need only satisfy the normal pleading standard set forth in Rule 8(a).
Landau does not state in his Complaint which provision of the UTPCPL he is suing under,
The current version of the catch-all provision barring "fraudulent or deceptive conduct" dates back to 1996. Before that, the catch-all provision only applied to "fraudulent conduct." Based on that precise statutory language, courts required claims arising under the pre-1996 catch-all provision to satisfy the elements of common law fraud. See, e.g., Prime Meats, Inc. v. Yochim, 422 Pa.Super. 460, 619 A.2d 769, 773 (Pa. Super. Ct. 1993), appeal denied, 538 Pa. 627, 646 A.2d 1180 (1994) (holding that plaintiffs must prove elements of common law fraud to recover
In 1996, the Pennsylvania legislature expanded the UTPCPL's catch-all provision by adding "deceptive conduct." Courts struggled for well over a decade to interpret this change in statute. Uncertainty over the significance of the phrase "deceptive conduct" led to a line cases that effectively ignored the 1996 amendments by continuing to require claims under the catch-all provision to satisfy the elements of common law fraud. See Bennett, 40 A.3d at 151-53 (discussing the history of the 1996 UTPCPL amendments and its treatment by the courts).
More recently, both state and federal courts have acknowledged that the addition of the term "deceptive conduct" has legal significance. See Id. (discussing cases). As the Superior Court recognized in Bennett, the practice of treating "deception" claims as common law fraud claims has fallen out of favor. Today, the vast weight of authority in Pennsylvania holds that a plaintiff can state a claim under the catch-all provision by pleading facts sufficient to support a claim for fraud or deception. See, e.g., id.; Fazio v. Guardian Life Ins. Co. of Am., 62 A.3d 396, 405 (Pa. Super. Ct. 2012); Slemmer v. McGlaughlin Spray Foam Insulation, 955 F.Supp.2d 452, 463 (E.D. Pa. 2013); Schnell v. Bank of N.Y. Mellon, 828 F.Supp.2d 798, 807 (E.D. Pa. 2011); Vassalotti v. Wells Fargo Bank, N.A., 732 F.Supp.2d 503, 510 (E.D. Pa. 2010). Unlike fraud claims, deception claims are not subject to Rule 9(b) and need only comply with the pleading requirements imposed by Rule 8(a). Slemmer, 955 F.Supp.2d at 463.
Because plaintiffs can bring claims for fraud
The elements of a deception claim are: (1) "a deceptive act," meaning "conduct that is likely to deceive a consumer acting reasonable under similar circumstances"; (2) "justifiable reliance [based on] the defendants' misrepresentation or deceptive conduct"; and (3) an "ascertainable loss" caused by this justifiable reliance. Vassalotti, 732 F.Supp.2d at 510-11 (citation omitted).
Regarding the first element, Viridian argues that Landau cannot have been misled by its Associates' promises of low, stable rates because the T & C provides that variable rates "may fluctuate each month based on wholesale market conditions" and that "Viridian's prices may be higher or lower than the DC's in any given month." MTD Ex. 4 at *1. I am unpersuaded by this argument. Drawing all inferences in favor of Landau, the statement that Landau "would enjoy lower rates than those offered by PECO," Compl. ¶ 38, can be reasonably interpreted as an assurance that Viridian's average rate would be lower than PECO's average rate. Understood in this way, the Associates' statements are not contradicted by the disclaimer that
Admittedly, the promise that "[Landau] would never have to worry about [Viridian] suddenly increasing his rates," Compl. ¶ 38, is inconsistent with the warning that "rates may fluctuate from month to month," MTD Ex. 4 at *1, but I find it deceptive for Viridian to make bold assurances and then hide behind fine print disclaimers. This kind of bait-and-switch marketing is particularly misleading here because the Agreement also refers to "affordable, green energy" and promises that "from now on," customers will "sav[e] money on [their] energy costs." Compl. Ex. A. Thus, even assuming that Landau carefully studied the T & C, the language of the Welcome Letter, also a part of the contract, would reasonably lull him into discounting the force of the disclaimers on which Viridian now relies.
In short, because the Agreement did not adequately correct the Associates' misleading statements, I find that a reasonable consumer in Landau's position would likely have been deceived.
Turning to the element of justifiable reliance, Viridian maintains that Landau's complaint presents "a threadbare recital of the justifiable reliance element" of his UTPCPL claim, which "does not pass muster under Iqbal or its progeny." MTD at 24. This argument completely ignores sections of Landau's Complaint in which he pleads facts supporting his claim of reliance. Specifically, Landau avers that, "[p]rior to signing up with Defendant Viridian Energy," two Associates promised him that Viridian's rates were lower than PECO's rates and would not increase suddenly. Compl. ¶ 38. Moreover, Landau maintains that he "would not have enrolled in [Viridian's] program but for Defendant's promises of savings and rates competitive with the market." Compl. ¶ 45. At the pleading stage, I find these factual allegations sufficient to establish the element of reliance. Furthermore, as discussed in reference to Viridian's puffery defense, I find that a reasonable consumer in Landau's position would have been misled by the Associates' promises of low, stable rates; I therefore conclude that Landau has pled facts that support a reasonable inference of justifiable reliance.
Finally, Landau's Complaint makes out a clear claim for ascertainable loss as required under the UTPCPL's catch-all provision. Landau contends that Viridian's deceptive sales practices lured him from PECO. Therefore, the measure of Landau's loss is the difference between what he paid as a Viridian customer and what he would have paid had he remained with PECO. This loss should be readily ascertainable by multiplying Landau's monthly electricity consumption as a Viridian customer by the monthly rates for PECO and Viridian, respectively, and then comparing the resulting products.
Viridian next asserts a "regulatory compliance defense." MTD at 29. According to Viridian, this defense functions as a sort of preemption doctrine that defeats UTPCPL claims "where federal or state regulators have approved the conduct or documents that form the basis for a plaintiff's claim." Id. In fact, no such defense exists in Pennsylvania, and even if it did, it would not help Viridian here.
Viridian's fanciful defense rests on a misreading of three insurance cases: Fisher
Not only is Viridian's "regulatory compliance defense" without precedential support, but it has no bearing here. Landau alleges that Viridian's Associates made false or misleading statements in violation of the UTPCPL's catch-all provision. Viridian does not argue that these statements were approved by the Public Utilities Commission, so it is unclear why the purported safe harbor of regulatory compliance would defeat Landau's claim.
As part of his UTPCPL claim, Landau seeks an injunction to prevent Viridian's "unlawful practice of charging excessive undisclosed rates to its customers." Compl. ¶ 82. Viridian argues that Landau lacks standing to pursue an injunctive remedy because he is no longer a Viridian customer, and therefore cannot show that he is likely to suffer future injury from Viridian's actions.
The requirements of Article III standing — including an injury-in-fact that is concrete and particularized and actual and imminent — must be satisfied as to each form of requested relief. See City of Los Angeles v. Lyons, 461 U.S. 95, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983). To establish standing to seek injunctive relief, a plaintiff must show that a "real or imminent threat" of harm creates "a likelihood of substantial and immediate irreparable injury." Id. at 111, 103 S.Ct. 1660.
In McNair v. Synapse Group Inc., the Third Circuit found that lack of standing barred injunctive relief in a putative class action with facts very similar to the present case. 672 F.3d 213 (3d Cir. 2012). McNair concerned a suit against Synapse, a company that sold magazine subscriptions in much the same way that Viridian sells electricity service. Id. at 216-17. Synapse's practice was to offer introductory promotional subscriptions at greatly reduce rates. Id. After the introductory period, these promotional subscriptions would automatically be transformed into regular subscriptions, subject to the normal subscription rates. Id. McNair and several other named plaintiffs sued Synapse seeking damages and injunctive relief based on Synapse's alleged failure to warn customers that promotional offers would morph into regular subscriptions. Id. at 219. At the time the suit was filed, the named plaintiffs were no longer Synapse customers, having canceled their magazine subscriptions. Id. at 224. Synapse therefore argued that the plaintiffs lacked standing to seek injunctive relief because they were under no threat of future injury based on Synapse's actions. Id.
The Third Circuit agreed with Synapse, holding that the plaintiffs had "not established any reasonable likelihood of future injury." Id. at 225. In so doing, the court rejected the plaintiffs' argument that "they
McNair controls the outcome here. As with the named plaintiffs in McNair, Landau was no longer a Viridian customer at the time he filed his Complaint. Moreover, Landau's argument for standing — that "Plaintiff will inevitably receive solicitations from Defendant" and may therefore someday conduct business with Viridian again, Resp. at 36 — is nearly identical to the one that the Third Circuit rejected in McNair. The possibility that Landau might enter a new contract with Viridian despite his prior unhappy experience does not establish a likelihood of future injury sufficient to confer standing. Accordingly, Viridian's Motion to Dismiss is granted as to Landau's claim for injunctive relief.
In addition to his claims for damages and injunctive relief, Landau brings a claim under Declaratory Judgment Act (DJA), seeking "a declaration of [Viridian]'s obligation ... under the agreement regarding the pricing of its electricity." Compl. ¶ 73. Viridian argues that Landau's DJA claim should be dismissed because it is wholly duplicative of his breach of contract claim and therefore does not advance the litigation. I disagree.
In relevant part, the DJA provides that:
28 U.S.C. § 2201. Under Rule 57 of the Federal Rules of Civil Procedure, "[t]he existence of another adequate remedy does not preclude a declaratory judgments that is otherwise appropriate." The Advisory Committee Notes to Rule 57 further explain that "declaratory relief is alternative or cumulative and not exclusive or extraordinary," and that "[w]ritten instruments... may be construed [under the DJA] before or after breach at the petition of a properly interested party." Landau is thus free to seek a declaration of Viridian's rights and obligations under the Agreement.
Nevertheless, the decision to entertain DJA claims is committed to the trial judge's discretion, and the Third Circuit, in State Auto Insurances Companies v. Summy, encouraged courts to dismiss DJA claims "when doing so would promote judicial economy by avoiding duplicative and piecemeal litigation." 234 F.3d 131, 133 (3d Cir. 2000). Although Summy concerned duplicative claims arising in parallel in state and federal court proceedings, in both Smithkline Beecham Corp. v. Continental Insurance Co., No. CIV.A. 04-2252, 2004 WL 1773713 (E.D. Pa. Aug. 4, 2004), and Nova Financial Holdings Inc. v. Bancinsure, Inc., No. CIV.A. 11-07840, 2012 WL 1322932 (E.D. Pa. Apr. 17, 2012), judges in this district applied it to bar duplicative claims in the same cause of action at the federal level.
Unlike the present case, neither Smithkline nor Nova Financial concerned a putative class action where the DJA claim at issue served as the potential basis for class certification under Rule 23(b)(2). In declining to entertain the plaintiffs' DJA claim, the court in Nova Financial stressed that "Plaintiffs will not suffer prejudice from this ruling." 2012 WL 1322932, at *4. That is not the case here. Were I to dismiss Landau's DJA claim, I would effectively extinguish his attempt to certify a class under Rule 23(b)(2), which applies only where a named plaintiff seeks "final injunctive or corresponding declaratory relief."
By way of a separate motion, Viridian asks that I strike Landau's class allegations pursuant to Rule 12(f), Rule 23(c)(1), and Rule 23(d)(1)(D). Rule 12(f) allows courts to "strike from a pleading any ... redundant, immaterial, impertinent, or scandalous matter." Rule 23(c)(1) directs courts to determine "at any early practicable time" whether the proposed class satisfies the class certification requirements. And Rule 23(d)(1)(D) empowers courts to "eliminate allegations about representations of absent persons." While a plaintiff in a putative class action "may generally conduct discovery relevant to class certification," Rules 12 and 23 allow courts to strike class allegations at the pleading stage "if class treatment is evidently inappropriate from the face of the complaint." Zarichny v. Complete Payment Recovery Servs., Inc., 80 F.Supp.3d 610, 615 (E.D. Pa. 2015).
Viridian questions Landau's ability to satisfy the elements of typicality, and commonality essential to class certification. According to Viridian, variations across its contracts prevent Landau's breach of contract claim from supporting a class action. Viridian further contends that the oral representations of its Associates are inappropriate for class adjudication because these sales representatives employ widely varying sales pitches. Landau opposes Viridian's Motion as premature. He argues that until discovery is allowed to proceed, there will be an insufficient basis to dismiss his class allegations. I agree.
This is not the exceptional case "when no amount of discovery or time will allow plaintiffs to resolve deficiencies in class definitions under Rule 23." Id. Landau may take discovery to determine the extent to which Viridian's other contracts include assurances of affordability and cost savings that underpin his breach of contract claim. He may likewise take discovery to establish the uniformity of representations made by Viridian's Associates. Only after the creation of a factual record will I be able to undertake the requisite "rigorous analysis" into whether "the prerequisites of Rule 23 [have been] met." In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 309 (3d Cir. 2008) (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 161, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982)).
Landau's UTCPL claim for injunctive relief, his claim for unjust enrichment, and his claim for breach of the covenant of good faith and fair dealing are all dismissed. In all other respects, Viridian's Motion to Dismiss is denied. Viridian's Motion to Strike is also denied.