Energy Choice
                            

Matters

Court Dismisses RICO Claims, Suit That Had Sought Class Action Status Against Retail Supplier, In Granting Summary Judgment

Says Auto-Renewal Onto Variable Rate Does Not Amount To Mail/Wire Fraud

March 24, 2017

Email This Story
Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

A federal judge for the United States District Court For The Northern District Of Illinois, Eastern Division has granted summary judgment in favor of Ambit Energy, and dismissed a suit, that had sought class auction status, that had alleged that Ambit violated the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq.

The complainant had specifically alleged that Ambit's actions had amounted to mail fraud and wire fraud

The suit concerned the complainant's experience with Ambit's Guaranteed Savings Plan and a rollover, due to not affirmatively continuing with such plan, onto a monthly variable rate. The complainant took natural gas supply service from Ambit in the Nicor Illinois territory

While the customer saved money under the Guaranteed Savings Plan, when subject to the monthly variable rollover rate, the complainant alleged that their rate was nearly double the Nicor rate ($1.01 per therm, versus Nicor's rate of $0.68 per therm).

The complainant alleged that he was not "on notice" of the terms of service (either for the guaranteed savings plan and its rollover terms, or the variable rate terms), because he did not personally assent to them when he signed up through a consultant and because he never saw them thereafter.

Regardless of what occurred at enrollment, the Court found that, "undisputed evidence shows that [complainant] did have notice of the terms of service -- he received two separate mailings containing them [including a mailing immediately after the initial enrollment] and/or alerting him to the renewal requirement. This means that he could easily have informed himself of the need to renew well in advance of his August 2014 rollover."

"[Complainant's] receipt of the terms of service shortly after he signed up, and again a year later, combined with his decision to continue as an Ambit customer, amounted to an acquiescence in those terms -- whether or not he actually read them," the Court said

"Because [complainant] was on notice of the renewal requirement, there was no fraudulent misrepresentation in Ambit Illinois’s switching him to the Select Variable Natural Gas Plan when he did not renew his Guaranteed Savings Plan," the Court said

The Court cited, among other cases, Corley v. Rosewood Care Center, Inc. of Peoria, in which similar actions concerning an initial contract rate and subsequent increases explicitly permitted under the terms of service were found to not be an act of fraud on which a complainant could predicate a RICO claim

The Court noted that, "Ambit explicitly reserved in its terms of service the right to do what it did -- roll [complainant] onto a different plan if he did not renew his current one."

Borrowing language from another precedent, the Court said, "No 'fraud' was involved because the defendants told [the plaintiff] exactly what they were doing."

"And Ambit’s transparency cuts, as a matter of law, against a finding that what occurred here was fraud within the meaning of the mail fraud and wire fraud statutes; it shows that, whatever else Ambit was doing, it was not affirmatively deceiving [the complainant]," the Court said

Moreover, the Court noted that Ambit gave the complainant an "absolute out" -- the terms of service empowered him to renew the Guaranteed Savings Plan, or switch back onto it after rolling over at any time, simply by notifying Ambit of his desire to do so, and therefore no fraud was involved.

"Ambit Illinois’s terms of service never locked him [complainant] into paying the higher rates. This is part and parcel with one of the reasons that [complainant] was not defrauded by the rollover policy. Ambit Illinois gave him the means to benefit from the Guaranteed Savings Plan had he simply been a more attentive customer -- thus avoiding any harm from its failure to offer competitive rates to Select Variable Natural Gas Plan customers -- because its terms of service empowered him both to remain on the Guaranteed Savings Plan before the rollover and to shift back afterward," the Court said

The Court noted that RICO claims could have been pursued under an additional avenue -- the complainant could have sought to prove the fraud predicate of the RICO claims by alleging that Ambit misled him by promising to charge a "competitive" rate on the Select Variable Natural Gas Plan, when in fact its prices later soared relative to both the Guaranteed Savings Plan’s rates and Nicor’s rates.

"A reasonable jury might have found that Ambit broke this promise -- at times it was charging Select Variable Natural Gas Plan customers more than double Nicor’s rate. And that broken promise might have been actionable as a breach of contract or under a state consumer protection statute. But a broken promise or breached contract, in and of itself, is not fraud or racketeering," the Court said

"When distinguishing run-of-the-mill broken promises and breached contracts from RICO fraud, the second element of mail and wire fraud is crucial: there must be evidence of intent to defraud," and such intent was lacking in the Ambit case, the Court said

And the Court noted that the complainant, "deliberately declined to bring a contract or state consumer fraud claim."

The Court did state that, "It is likely that Ambit Illinois was counting on a material segment of its customer base automatically rolling onto the pricier Select Variable Natural Gas Plan due to inertia and inattentiveness."

"That may be a distasteful way of doing business, but it was not fraudulent and thus not racketeering," the Court said

The Court added, "This is, again, not to say that Ambit’s approach to delivering upon its value proposition was admirable, or that Ambit did not breach its contract with [complainant] or run afoul of state consumer protection law," but any such behavior did not give rise to violation of RICO, and no alleged violations of contract or state consumer fraud statutes were before the Court.

The Court also rejected an untimely intervention by another complainant, represented by the same law firm as the original complainant, which the Court saw as an attempt to save the original complainant's case.

Such late intervention was not made until, "[the original complainant's] suit was on life support -- briefing had been ordered, and discovery completed, on what turned out to be a fatal summary judgment motion," the Court noted.

An Ambit Energy representative provided the following statement to EnergyChoiceMatters.com: "We appreciate Judge Feinerman’s careful consideration of the issues in the case and are gratified that the Court found plaintiff’s claims to be meritless. Courts in New Jersey, Pennsylvania, and now Illinois have summarily rejected allegations that Ambit acted deceptively or in bad faith in setting rates following the unprecedented weather event known as the Polar Vortex."

Case: 1:15-cv-02553

ADVERTISEMENT
NEW Jobs on RetailEnergyJobs.com:
• NEW! -- Customer Retention -- Retail Supplier -- Houston
• NEW! --Director of Channel Sales -- Retail Supplier
• NEW! -- Regulatory Response I/C -- Retail Supplier -- Houston
• NEW! -- Channel Manager, Sales -- Retail Supplier -- Houston
• NEW! -- Commercial Sales B2B -- Retail Energy
• NEW! -- Brand/Marketing/Channel Manager -- Retail Energy
• NEW! -- Business Development Professional -- Retail Supplier -- Houston
• NEW! -- Senior Analyst -- Retail Energy -- Houston
• NEW! -- Manager of Regulatory Affairs -- Retail Supplier
• NEW! -- Channel Manager, Sales -- Retail Supplier
• NEW! -- Implementation Manager -- Retail Energy -- Houston