Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Deceptive sales practices claims against utility company proceed, (Apr 12, 2016)

By Linda O’Brien, J.D., LL.M.

Two utility customers alleged sufficient facts to pursue claims against a utility company for engaging in fraudulent and deceptive sales practices that convinced customers to switch energy providers on the promise that the customers would decrease their energy bills by switching when in fact their energy bills increased significantly, the federal district court in Oakland has decided. Thus, the utility company’s motion to dismiss was denied (Amaya v. Spark Energy Gas, LLC, April 11, 2016, White, J.).

Spark Energy Gas, LLC is a residential and commercial energy supplier that provides natural gas and electricity utilities services across 16 states in the United States. Arturo Amaya and Barbara Gehrke were former customers of Spark Energy. In October 2014, a Spark Energy representative approached Amaya at his home and convinced him to switch his energy provider from Southern California Gas Company to Spark Energy. The representative assured Amaya that the program he was signing up for was designed to help low income families save money on their energy bills.

After switching to Spark Energy, Amaya’s energy bills increased up to 30 percent. Similarly, Gehrke was convinced to switch to Spark Energy and her energy bills increased 100 percent. Amaya and Gehrke filed a putative class action suit, alleging violations of California’s Consumer Legal Remedies Act (CLRA), Unfair Competition Law (UCL), and False Advertising Law (FAL). Specifically, the plaintiffs claimed that Spark Energy representatives engaged in fraudulent, deceptive, and high pressure “bait and switch” sales practices that were derived from Spark Energy selling scripts, and were targeted at low income earners, the elderly, and non-English speaking persons. The representations were made more harmful by a lengthy and difficult cancellation process. Spark Energy moved to dismiss the complaint.

The court determined that the plaintiffs adequately alleged that Spark Energy representatives made oral misrepresentations to falsely advertise and promise customers terms of service more favorable than the terms they later received. Spark Energy’s argument that various contracts and selling scripts should be considered to determine that no scripted misrepresentations were made was rejected. The court noted that the plaintiffs disputed the authenticity of sales scripts provided by Spark Energy and production of unauthenticated scripts did not preclude the possibility of additional documents and practices to show that customers were induced to switch.

Spark Energy’s contention that the plaintiffs’ claims were insufficiently particularized under Federal Rule of Civil Procedure 9(b) also was rejected. According to the court, the plaintiffs pleaded the approximate month during which Spark Energy representatives approached them at their homes, the location of their homes, and the specific representation of decreased pricing made to induce them to switch to Spark Energy utility services. By alleging the “time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations,” the plaintiffs satisfied the requirements of Rule 9(b), the court concluded.

The case is No. 4:15-cv-02326-JSW.

Attorneys: William M. Audet (Audet & Partners, LLP) for Arturo Amaya. Joshua Carter Thomas (Baker Hostetler LLP) for Spark Energy Gas, LLC and Spark Energy Gas, LP.

Companies: Spark Energy Gas, LLC; Spark Energy Gas, LP

Cases: Advertising StateUnfairTradePractices CaliforniaNews