IUE-CWA Local 901 v. Spark Energy, LLC

440 F.Supp.3d 969

IUE-CWA LOCAL 901, on behalf of itself and on behalf of all others similarly situated, Plaintiff,

v.SPARK ENERGY, LLC, Defendant.

CAUSE NO.: 1:19-CV-389-HAB

United States District Court, N.D. Indiana, Fort Wayne Division.

Signed February 18, 2020

Lynn A. Toops, Cohen & Malad LLP, Indianapolis, IN, for Plaintiff.

Ezra D. Church, PHV, Morgan Lewis & Bockius LLP, Philadelphia, PA, Michelle D. Pector, PHV, Morgan Lewis & Bockius LLP, Houston, TX, Krissy A. Katzenstein, Morgan Lewis & Bockius LLP, Washington, DC, for Defendant.

OPINION AND ORDER

JUDGE HOLLY A. BRADY, UNITED STATES DISTRICT COURT

Plaintiff, IUE-CWA Local 901, on behalf of itself and all others similarly situated, brings claims against Defendant Spark Energy, LLC, for violations of Indiana's Deceptive Consumer Sales Act (IDCSA or the Act), breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment. Plaintiff alleges that Defendant is an alternative natural gas supplier that "engaged in a classic bait-and-switch deceptive and unfair marketing scheme aimed at those hoping to save on the cost of natural gas" ( Class Action Compl. ¶ 2, ECF No. 1 ), when it promised competitive variable rates based on market prices. In actuality, Defendant's prices were much higher than the rates otherwise available in the natural gas market.

This matter is before the Court upon Defendant's Motion to Dismiss [ECF No. 5 ] pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendant asserts that the applicable statute of limitations bar all claims, which they contend accrued fifteen years ago when Plaintiff began receiving natural gas from Defendant¹ , or thirteen years ago when the fixed rate was converted to a variable rate. As additional grounds for dismissal, Defendant argues that the Complaint allegations fail to set forth plausible claims for relief under the IDCSA, or for breach of contract, breach of the covenant of good faith and fair dealing, or unjust enrichment.

In response, Plaintiff argues that there is no statute of limitations bar because a separate actionable violation occurred each time Plaintiff paid the charged rate for natural gas that was not based on market prices. Plaintiff asserts that all the claims are supported by factual allegations that plausibly state its entitlement to relief

STANDARD OF REVIEW

A pleading that states a claim for relief must set forth "a short and plain statement of the grounds for the court's jurisdiction," "a short and plain statement of the claim showing that the pleader is entitled to relief," and "a demand for relief sought." Fed. R. Civ. P. 8(a). In considering motions to dismiss for failure to state a claim, "[courts] construe the complaint in the light most favorable to the plaintiff, accepting as true all well-pleaded facts alleged, and drawing all possible inferences in her favor." Tamayo v. Blagojevich , 526 F.3d 1074, 1081 (7th Cir. 2008). "A plaintiff ...must provide only enough detail to give the defendant fair notice of what the claim is and the grounds upon which it rests, and, through his allegations, show that it is plausible, rather than merely speculative, that he is entitled to relief." Id. at 1083 (quotation marks and citations omitted). Legal conclusions can provide a complaint's framework, but unless well-pleaded factual allegations move the claims from conceivable to plausible, they are insufficient to state a claim. Ashcroft v. Iqbal , 556 U.S. 662, 680, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

When the "allegations in the complaint itself set forth everything necessary to satisfy the affirmative defense, such as when a complaint plainly reveals that an action is untimely under the governing statute of limitations" it is not premature to dismiss a complaint that does not anticipate an affirmative defense. United States v. Lewis , 411 F.3d 838, 842 (7th Cir. 2005) ; see also Tregenza v. Great Am. Comm'ns Co. , 12 F.3d 717, 718 (7th Cir. 1993) (noting that even though a plaintiff is not required to negate statute of limitations affirmative defense in his complaint, "if he pleads facts that show that his suit is time-barred or otherwise without merit, he has pleaded himself out of court").

When a party is alleging fraud, the heightened pleading standard of Rule 9(b) applies. The party must "state with particularity the circumstances constituting fraud." Fed. R. of Civ. P. 9(b). "While the precise level of particularity required under Rule 9(b) depends upon the facts of the case, the pleading ‘ordinarily requires describing the who, what, when, where, and how of the fraud.’ " Camasta v. Jos. A. Banks Clothiers, Inc. , 761 F.3d 732, 737 (quoting AnchorBank, FSB v. Hofer , 649 F.3d 610, 615 (7th Cir. 2011) ).

COMPLAINT ALLEGATIONS

Defendant is an "alternative natural gas supplier" or "ANGS." It sells natural gas to commercial and residential consumers. Plaintiff is a labor union located in Fort Wayne, Indiana, who was a customer of Defendant from 2004 through March 2019.

In 1995, Indiana deregulated the market for natural gas supply to increase competition, provide consumers with choices, and reduce energy rates. ANGS provide the same product to consumers as do utilities, such as NIPSCO, with the only difference being price. In fact, the local utilities continue to maintain and service the distribution system and deliver gas to customers.

The deregulation scheme was designed so that ANGS could compete with NIPSCO on price. While NIPSCO's rates remain subject to regulation by the Indiana Utility Commission, the rates are based on its actual costs and are adjusted every three months to compensate for those actual costs. Ind. Code § 8-1-2-42. NIPSO's rates serve as pure reflections of the market costs for natural gas and associated market costs. ANGS are unregulated and have greater opportunity to be more aggressive and creative than NIPSCO in reducing their wholesale purchasing costs. Among other things, ANGS can own natural gas production facilities, take advantage of spot markets to purchase natural gas from wholesale marketers and brokers at the price available at or near the time of delivery, or they can purchase natural gas well in advance for future delivery, while being able to take greater advantage of futures markets to hedge against fluctuations in natural gas prices.

Other than potential price savings, there is nothing to differentiate Defendant from other ANGS or local utilities, and the potential for price savings is the only reason any reasonable customer would enter into a contract for natural gas supply with Defendant. In 2004, Plaintiff switched from NIPSCO to Defendant. Defendant provided Plaintiff with its standard customer agreement, which provided that for the first two years Plaintiff would pay a fixed rate. The fixed rate was competitive with NIPSCO's then-current rate. Plaintiff would thereafter be automatically transferred to Defendant's variable rate plan, "which would be based on market prices." (Compl. ¶ 22.)

Any reasonable customer would understand based on Defendants' representation about market prices that Defendant's variable rate would be competitive and only vary from the initial fixed rate according to changes in "market prices," which would include wholesale costs and the retail prices charged by other competitors, namely the local utility and other ANGS. Defendant's variable rates, to which Plaintiff transferred in 2006, were not based on these market prices. Available data from May 2017 to March 2019, shows that Defendants rates were, on average, 589.9% higher than NIPSCO's rates. Nor was there any correlation between Defendant's rates and the wholesale rates (the Citygate rate) for natural gas, or to fluctuations in the wholesale market. Often, when wholesale prices dropped, Defendant increased its rates.

No reasonable consumer would believe that rates based on "market prices" would have no correlation with wholesale markets. Moreover, Defendant's rates were higher than 90% of other natural gas retailers. Thus, Defendant statements regarding its natural gas rates are materially misleading. No reasonable customer who knows the truth about Defendant's rates would choose Defendant as its natural gas supplier. Further, Defendant knows that its variable rates are unconscionably high, and the misrepresentations it makes with regard to rates being based on "market prices" were made for the sole purpose of inducing customers to purchase natural gas from it despite the detriment to the consumer.

ANALYSIS

A. Indiana Deceptive Consumer Sales Act

The IDCSA prohibits the use of deceptive acts in connection with a "consumer transaction." Ind. Code § 24-5-0.5-3. The IDCSA is to "be liberally construed and applied to promote its purposes and policies." Id. § 24–5–0.5–1.

Indiana Code Section 24-5-0.5-3 concerns "deceptive acts." Subsection (a) provides:

[a] supplier may not commit an unfair, abusive, or deceptive act, omission, or practice in connection with a consumer transaction. Such an act, omission, or practice by a supplier is a violation of this chapter whether it occurs before, during, or after the transaction. An act, omission, or practice prohibited by this section includes both implicit and explicit misrepresentations.

Ind. Code § 24-5-0.5-3(a) Subsection (b), "without limiting the scope of subsection (a)," sets forth thirty-seven "deceptive acts."

1. Statute of Limitations

"Any action brought under [the IDCSA] may not be brought more than two (2) years after the occurrence of the deceptive act." Ind. Code § 24-5-0.5-5(b). Under the occurrence rule, the IDCSA's two-year statute of limitations is "triggered by the date of each occurrence" of a deceptive act. State v. Classic Pool & Patio, Inc. , 777 N.E.2d 1162, 1166 (Ind. Ct. App. 2002).

Plaintiff filed its Complaint on August 14, 2019, which is significantly more than two years after the parties initially entered into a contract for natural gas. At this point in the proceedings, the...