Antitrust Law Daily Wrap Up, ADVERTISING—2nd Cir.: Dismissal of false advertising, deceptive practices, RICO claims against natural gas company upheld, (Jan 31, 2014)

By Linda O’Brien, J.D., LL.M.

The U.S. Court of Appeals in New York City has affirmed the dismissal of false advertising, deceptive practices, and RICO claims brought against a natural gas company by a laundromat owner regarding the company’s collection efforts of her commercial utility account that had been transferred from another energy company (Richmond v. National Grid, January 30, 2014, Per Curiam).

In 2009, Edith Richmond, an owner of a laundromat, entered into an agreement with Just Energy for the supply of natural gas. When she sought to cancel her account, she was informed that she would be charged an exit fee, which she then disputed. Just Energy later transferred the account to The Brooklyn Gas Company, d/b/a National Grid. National Grid filed a collection action against Richmond when she refused to settle the account. Richmond brought suit against National Grid and Just Energy, alleging claims for false advertising and deceptive acts and practices under the New York General Business Law, and for violations of the RICO Act, among other claims. National Grid’s motion to dismiss was granted by the district court.

Deceptive acts and practices. Richmond alleged that National Grid attempted to collect the exit fee without verifying its accuracy or informing her that she could dispute the fee while paying the undisputed portion of the bill. Sections 349 and 350 of the New York General Business Law prohibit deceptive acts or practices and false advertising in the conduct of any business, trade or commerce, or in the furnishing of any service in the state. To establish both claims, Richmond must allege that the defendant’s conduct affected consumers generally or the public at large. In this case, Richmond alleged that National Grid acted improperly only with respect to her. Private contract disputes that are unique to the parties do not fall within the statute, according to the court.

RICO claims. Richmond claimed that National Grid engaged in a pattern of racketeering activity in violation of the RICO statute by committing mail and wire fraud in its attempts to collect the exit fee. The district court noted that “to state a viable claim for mail and wire fraud, a plaintiff must allege: “(1) the existence of a scheme to defraud, (2) the defendant’s knowing participation in the scheme, and (3) the use of [wire or mail] communications in interstate commerce in furtherance of the scheme.” Richmond’s RICO claims were properly dismissed because she failed to plead the elements of fraud with particularity, and failed to allege that National Grid’s collection attempts were in furtherance of a fraudulent scheme, the appellate court concluded.

The case is No. 13-1702-cv.

Attorneys: Roland G. Ottley (The Ottley Law Firm, PC) for Edith Richmond. Elisa M. Pugliese (Cullen and Dykman LLP) for National Grid and The Brooklyn Union Gas Co. Mark S. Mulholland (Ruskin Moscou Faltischek, PC) for US Energy Savings.

Companies: National Grid; The Brooklyn Union Gas Co.; US Energy Savings

Cases: Advertising RICO StateUnfairTradePractices ConnecticutNews NewYorkNews VermontNews