BALTIMORE (LN) — U.S. District Judge Matthew J. Maddox on Tuesday denied in part a motion to dismiss a class action against Major Energy Electric Services LLC, ruling that the defendant’s variable-rate pricing practices, which allegedly averaged 151% higher than local utility rates, survive a motion to dismiss for breach of contract and breach of the implied covenant of good faith and fair dealing.
The court granted the motion to dismiss the plaintiff’s unjust enrichment claim and dismissed a separate breach of contract claim premised on a 2018 welcome letter, but allowed the core pricing allegations to stand.
Angela Glikin, the named plaintiff, enrolled with an energy services company in 2013 at a fixed rate of 9.5 cents per kilowatt-hour. Her contract provided that the plan would eventually shift to a month-to-month variable rate calculated to “reflect market conditions, including market pricing of commodity, transportation, profit, and other market price factors.”
Major Energy Electric Services, LLC, assumed the contract in 2018. Glikin alleges that the company immediately began to “price gouge” her, charging rates that were on average 151% higher than Baltimore Gas and Electric Company’s rates during the 21 months she was a customer.
The complaint further alleges that Major Energy’s rates were the second highest among 54 energy services companies operating in Maryland in 2018 and exceeded competitors’ rates every year from 2002 through 2019.
Maddox rejected the defendant’s argument that the contract allowed it to consider “profit” and “other market price factors” without limit. He wrote that a reasonable construction of the contract supports the conclusion that an exclusive focus on maximizing profit without adequately considering relevant market factors would breach the obligation to set rates that “reflect market conditions.”
“The phrase “market conditions” implies consideration of objective market realities, including supply costs, rather than rates set mainly to maximize profit margins,” Maddox wrote.
The judge distinguished the case from a Second Circuit decision involving Agway Energy Services, noting that the Amended Complaint in this case discloses no market-based explanations for the defendant’s allegedly excessive rates.
Maddox also rejected the defendant’s argument that the Maryland Public Service Commission’s prior dismissal of Glikin’s administrative complaint precluded the federal claims. The PSC had concluded that charging a price significantly higher than other suppliers was not unlawful under state regulations, but Maddox ruled that this finding did not preclude a finding that the conduct breached the implied covenant of good faith and fair dealing.
The court dismissed the unjust enrichment claim, ruling that the dispute was governed by an express contract. It also dismissed the claim that the defendant breached the contract by failing to provide “competitive prices” as stated in its 2018 welcome letter, finding the statement too vague to be an enforceable promise.
The court granted in part the defendant’s motion to strike, removing specific paragraphs from the complaint that referenced regulatory proceedings in other states and matters not concerning the defendant’s conduct in Maryland, while allowing other paragraphs referencing similar proceedings to remain.
Glikin’s counsel did not immediately return a call for comment.