Cherry Hill Business Litigation Lawyers discuss Fraud Claims Against Independent Energy Supply Company Survive Motion to Dismiss

On March 16, 2016, Judge McNulty of the District Court for the District of New Jersey denied a motion to dismiss fraud claims asserted against U.S. Gas & Electric, Inc. (“USGE”) and Energy Service Providers, Inc. (“ESPI”). The plaintiffs filed a putative class action against USGE and ESPI alleging that, after switching from traditional utilities, they found that they were being charged double or triple what they had been paying with traditional utilities. The plaintiffs alleged that:

USGE and ESPI have engaged in aggressive marketing to induce customers to switch, touting projected savings of hundreds of dollars per year. In standardized telephone sales pitches, defendants stated that customers’ rates would be “competitively priced” in comparison to those of Utilities, “every month.” Welcome Packages supplied to new customers confirmed that Defendants’ prices were “competitive” or “highly competitive.” In fact, when protracted cold weather hit, the customers were charged double or even triple the Utilities’ rates. Defendants knew this was inevitable under their purchasing/business model.

Vitale v. U.S. Gas & Elec., Inc., Civil No. 14-4464 (KM), 2016 U.S. Dist. LEXIS 34730, at *2-3 (D.N.J. Mar. 16, 2016) (citations omitted).

USGE and ESPI filed a motion to dismiss the plaintiffs’ claims for common law fraud, violation of the Truth in Consumer Contract, Warranty and Notice Act (“TCCWNA”), and the New Jersey Consumer Fraud Act (“NJCFA”), arguing that the allegations of the complaint were not specific enough to state a claim of fraud or do not make out a claim as a matter of law. In denying this motion, Judge McNulty explained:

The major issue dividing the parties is fairly simple. Defendants contend that their statements constituted non-actionable sales “puffery.” Plaintiffs contend that they were actionable false statements or part of a deceptive scheme.

Electricity and gas are commodities. The consumer little knows or cares about their source or the factors that go into their wholesale pricing. True, the terms and conditions disclosed that the rates would be “variable” and that they could be higher or lower than the Utilities’ rates. (The complaint does not disclose examples of lower rates, but it wouldn’t.) The complaint alleges that the defendants’ rates were pitched as being “competitive” with the Utilities’ rates “every month.” It is inferable from the complaint that a consumer, hearing the telephone pitch, could interpret “competitive” to mean “close to” the Utilities’ rates. If not, then why switch?

The complaint also inferably alleges that the defendants knew contemporaneously that weather conditions could drive their prices disastrously higher. Defendants suggest that no “mortal” can predict “extreme” weather. True, no one can accurately predict exactly when extreme weather will occur, but it is a virtual certainty that it will occur. Defendants suggest that “competitive” lacks content. That, too, is a question of degree and context; the marathoner who finishes in the third, fourth, or fifth hour may be regarded as competitive; the one who finishes long after dark, though literally in the race, may not be. Defendants suggest that the likelihood of skyrocketing prices during cold weather would have been “obvious” to consumers. These, too, are matters of degree and of interpretation, unsuitable for resolution on a motion to dismiss.


Id. at *7-10.