A three-judge panel with the U.S. Court of Appeals for the Second Circuit has affirmed a lower court’s ruling for summary judgment in favor of a power company accused of bait-and-switch billing that left consumers paying more for electricity.
The ruling came in the case of Connecticut resident Gary Richards’ 2014 suit against Direct Energy Services LLP.
Richards claimed the company misled consumers into thinking they were saving money with a promise to guarantee a fixed electricity rate for 12 months, but then switched to a variable rate for three months. While the fixed rate was 10 percent lower than the state-approved electricity rate, the lawsuit says the steep variable rate wiped out those savings.
Richards, who had a contract with the company in 2012 and 2013, had sought class certification on behalf of clients of the private electricity supplier accused of unfairly hiking its rates. He alleged breach of contract, deceptive and unfair trade practices and unjust enrichment under the Connecticut Unfair Trade Practices Act.
In March 2017, U.S. District Judge Victor Bolden in Connecticut granted summary judgment for the defense, quashing the lawsuit. He did not address class certification because the issue was moot after summary judgment.
Richards and his attorneys brought a challenge in the Second Circuit, which heard oral arguments last April. They got their answer Monday, when the panel voted 2-1 to affirm Bolden’s ruling.
Writing for the majority, Judge Debra Ann Livingston found: “Richard’s principal claim is that Direct Energy breached its contract with Richards and violated state unfair and deceptive trade practices law by not pegging its variable rate to Direct Energy’s procurement costs. We disagree. By the contract’s plain terms, Direct Energy promised that the variable rate would be set in its discretion and that it would reflect business and market conditions, a phrase which encompasses more than just procurement costs.”
Writing though for the dissent, Judge Rosemary Pooler had harsh words for Direct Energy.
“Direct Energy sucked customers in with an appealing teaser rate only to later jack up the cost when those customers would not notice,” Pooler wrote. “The temptation of this siren-like path was no accident. Direct Energy created glide paths to ensure customers were lulled into inattentiveness. It ramped up rates for those who were inattentive to begin with. And, then, it capitalized on its customers’ lack of awareness.”
In his complaint, Richards asserts the fixed rate was 7.45 cents per kilowatt hour when the rate was fixed but was hiked up about 30 percent to 10.64 cents per kilowatt hour when the variable rate kicked in.
Plaintiff counsel Craig Raabe said Richards was mulling his next move, which could include an appeal to the U.S. Supreme Court, or a bid for an en banc review in the Second Circuit.
“We are exploring our options with our client,” Raabe said.
Raabe, a partner with West Hartford’s Izard, Kindall & Raabe, said of the ruling: “Even the majority recognized that the savings from the fixed rate were eliminated in just three months when Mr. Richards was converted to the variable rate.”
On Pooler’s dissent, Raabe said, “She got it right.”
Assisting Raabe was partner Robert Izard.
The lawsuit had sought tens of millions of dollars for a prospective class.
Michael Matthews, James Chambers, Hutson Smelley and Robert Debelak III, all of McDowell & Hetherington, represented the defense. None of the attorneys responded to a request for comment Wednesday.
In court papers, the defendants denied any wrongdoing and reiterated that variable rates increased at the company’s discretion and were due to business and market conditions.