Antitrust Law Daily Wrap Up, ADVERTISING—EDNY: New York Laundromat Owner Fails to State False Advertising, Deceptive Acts, and RICO Claims Against Natural Gas Company, (Apr 2, 2013)

By Tobias J. Gillett, J.D., LL.M.

A laundromat owner failed to state New York false advertising, New York deceptive acts and practices, and federal Racketeer Influenced and Corrupt Organizations Act claims against an energy company that brought a collection action against her when she refused to settle an account transferred from another energy company, the federal district court in Brooklyn has ruled (Richmond v. National Grid, March 29, 2013, Irizarry, D.).

On March 21, 2009, representatives of Just Energy of New York visited Edith Richmond’s laundromat in New York. The representatives allegedly promised her that she could save money on her natural gas bill by switching to Just Energy. Richmond signed two agreements with Just Energy, a residential account that provided that she could cancel the contract within thirty days of her first bill and a commercial account that provided that she had to cancel the contract within three days of signing to avoid an exit fee. Later in 2009, Richmond sought to cancel her commercial account. Just Energy informed her that she would be charged an exit fee, which she disputed. Just Energy then transferred her account to National Grid NY.

National Grid allegedly did not verify whether Richmond actually owed the fee and did not inform her that she could dispute the exit fee while continuing to pay the undisputed portion of her bill. Richmond refused to settle her account, and National Grid commenced a collection action against her.

Richmond brought suit against Just Energy and National Grid, alleging claims for false advertising and deceptive acts and practices under New York law, and for violations of the RICO Act, among other claims. Richmond cited a New York State Attorney General press release regarding a settlement between the Attorney General and Just Energy in which the Attorney General stated that Just Energy’s “sales personnel deceived Western New York customers into entering into service contracts and paying more for services.” National Grid moved to dismiss.

False advertising. The court first rejected Richmond’s false advertising claim. The court explained that a claim for false advertising under New York law required a plaintiff, among other things, to demonstrate reliance on the allegedly false advertisement. Here, Richmond had not identified “any advertisements or promotional material disseminated by National Grid, let alone misleading ones that she relied on.” All the advertisements she referred to in her complaint originated from Just Energy.

Deceptive acts or practices. The court also dispensed with Richmond’s deceptive acts and practices claim. The court explained that under New York law a plaintiff must allege that “(1) the defendant’s deceptive acts were directed at consumers, (2) the acts are misleading in a material way, and (3) the plaintiff has been injured as a result.” Here, Richmond’s claim failed to satisfy the first element because she had not alleged that any of National Grid’s actions had “a broader impact on consumers at large.” Although she alleged that Just Energy had broadly engaged in misleading sales tactics, she had not alleged that National Grid had any involvement in Just Energy’s acts. With respect to National Grid, Richmond’s complaint contained only a private dispute between two parties.

Richmond’s complaint also failed to meet the second element, because she had not alleged that National Grid had engaged in actions “likely to mislead a reasonable consumer acting reasonably under the circumstances.” She did not identify any affirmative misleading conduct by National Grid. Although she alleged that National Grid did not inform her that she could dispute the exit fee while continuing to pay the undisputed portion of her bill, she did not provide any “detail or context to allow for the inference that the omission would likely mislead a reasonable customer.”

RICO

Substantive RICO claim. The court then proceeded to address Richmond’s claims under the RICO Act. Richmond had asserted a claim under Section 1962(c), which provides that a person commits a RICO violation by participating in the conduct of an enterprise’s affairs “through a pattern of racketeering activity.” “Racketeering activity” can consist of mail or wire fraud, but those claims are subject to the heightened pleading standards of Federal Rule of Civil Procedure 9(b). Here, Richmond had not pled “with particularity the content of National Grid’s communications in furtherance of the purported fraud, and connection, purpose, and role of those communications within the scheme.”

In her opposition brief, Richmond alleged that National Grid had committed mail fraud by sending her billing statements with “excessively high prices” and by transmitting her payments on a monthly basis. However, the court observed that she did not “describe with specificity the purpose or role of these actions in carrying out the purported fraud.” Moreover, the statements did not appear to further the fraud because they increased the likelihood that the fraud would be exposed. In any case, the court did not have to consider this allegation because Richmond had not included it in her complaint.

RICO conspiracy. Finally, the court rejected Richmond’s RICO conspiracy claim. The court explained that a plaintiff “must allege some factual basis for a finding of a conscious agreement among the defendants” to state a RICO conspiracy claim. Richmond had not alleged that National Grid had participated in Just Energy’s allegedly deceptive sales tactics, or that it derived any benefit from them. The complaint also failed to allege facts that would “support the inference that a conscious agreement existed between the two entities.”

Therefore, the court dismissed Richmond’s false advertising, deceptive acts and practices, and RICO claims. The court also dismissed all of her other claims against National Grid, including claims for fraudulent misrepresentation and unjust enrichment.

The case is No. 12-CV-1319(DLI)(VMS).

Attorneys: Roland G. Ottley (The Ottley Law Firm, P.C.) for Edith Richmond. John A. DeMaro (Ruskin Moscou Faltischek, P.C.) for US Energy Savings, doing business as Just Energy of New York. Elisa M. Pugliese (Cullen and Dykman LLP) for The Brooklyn Union Gas Company, doing business as National Grid NY.

Companies: National Grid NY; US Energy Savings; Just Energy of New York

Cases: Advertising RICO StateUnfairTradePractices NewYorkNews