Chetty Sevugan, individually and on behalf of others similarly situated, Plaintiff-Appellant,
Direct Energy Services, LLC, a Delaware Corporation Defendant-Appellee.
March 26, 2019
from the United States District Court for the Northern
District of Illinois, Eastern Division No.
l:17-cv-06569-Virginia M. Kendall, Judge.
Bauer, Rovner, and Brennan, Circuit Judges.
Brennan, Circuit Judge.
with his utility bill, Chetty Sevugan filed this putative
class action challenging the electricity prices of Direct
Energy Services, LLC, an alternative retail energy supplier
in the Chicago market. After Sevugan's third attempt to
plead a breach of contract claim, the district court
dismissed his complaint with prejudice. Repetition does not
make a claim more valid; just so for the customer here. Given
his failure to allege facts which allow a reasonable
inference that the parties' contract was breached, his
claim is not facially plausible, so dismissal was proper.
case comes to us after a grant of a motion to dismiss, so
"[w]hen evaluating the sufficiency of the complaint, we
construe it in the light most favorable to the nonmoving
party, accept well-pleaded facts as true, and draw all
inferences in [the nonmovant's] favor." Reger
Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 763 (7th
decades, regulated, vertically-integrated utilities dominated
the U.S. electricity market. These utility companies (in
Illinois, Commonwealth Edison Company or "ComEd")
generated, transmitted, distributed, billed, and collected
payments for electricity. ComEd's rates are set by the
Illinois Commerce Commission, a state regulatory agency.
than twenty years ago, Illinois restructured its electricity
market by the Electric Service Customer Choice and Rate
Relief Law of 1997, 220 Ill. Comp. Stat. Act 5, Art. XVI,
which allows alternative retail electric suppliers to compete
with ComEd and against each other to service retail
customers, both residential and commercial. Unlike ComEd,
alternative retail electric suppliers set their own rates and
are not regulated by the Illinois Commerce Commission. ComEd
(which in the 1990's divested itself of its power plants)
and alternative suppliers serve as middlemen, purchasing
electricity wholesale from PJM Interconnection LLC-a regional
transmission organization that controls the electric grid
covering northern Illinois and several other states -and
reselling it to customers.
Illinois retail consumers choose their electricity supplier
from among ComEd and a collection of state-certified
alternative retail electric suppliers serving their area.
ComEd serves as the default energy provider; consumers who
wish to buy from an alternative supplier must
"opt-in" to that alternative supplier.
Energy is one such alternative retail electric supplier.
Sevugan, hoping to save money on his monthly electric bills,
contracted with Direct Energy in 2011. Sevugan's
allegations center on two clauses in his contract with Direct
Energy. The first, which we call the "Terms
Clause," explains the contract's pricing terms:
3. Pricing, Billing and Payment Terms.
During the Initial Term, you will pay Direct Energy for your
electric generation services a price set for the Initial Term
.... This price includes electric generation service and
transmission charges .... Electric generation service
prices of electric suppliers, such as Direct Energy, are set
competitively and are not regulated by the Commission
contract required Direct Energy to supply electricity at a
fixed price per kilowatt hour (kWh) for the first twelve
months. At the end of that initial term, Sevugan renewed for
an additional twelve months at a lower fixed rate. In 2013,
though, Sevugan neither re-enrolled nor cancelled service,
which triggered what we will call the "Renewal
5. Renewal: Notice of a Change to this
Agreement. Upon completion of the Initial Term, this
Agreement will automatically renew on a month-to-month basis
at a variable price per kWh with no early cancellation fee.
Direct Energy will charge you at a variable price per kWh
based upon generally prevailing market prices for electricity
in the PJM market at the Electric Utility load zone for the
applicable period, plus an adder, determined solely by Direct
Energy in its discretion.
(emphasis added). Per the Renewal Clause, Sevugan's
contract automatically renewed on a month-to-month basis,
with his price set at a variable rate.
several years as a customer, Sevugan became unhappy with his
electricity costs, believing them to be above market rates
and more expensive than if he had remained with ComEd. He
cancelled service with Direct Energy and sued in September
2017, alleging Direct Energy deceived him (and others like
him) in the parties' four-page form contract.
made a variety of claims in his lawsuit,  asserting that
after his fixed-rate term expired, the variable charges
should have been based on market-related factors. He claimed
the rates he paid did not reflect changes in wholesale-market
prices and failed to correspond to rates offered by ComEd.
Direct Energy moved to dismiss, arguing that Sevugan did not
plausibly allege that the parties' contract made those
promises. In a thorough opinion, the district court dismissed
Sevugan's breach of contract claim without prejudice
under Fed.R.Civ.P. 9(b) and 12(b)(6), concluding that Sevugan
failed to allege enough facts to show that Direct Energy
plausibly breached a contractual duty.
dismissal was without prejudice, Sevugan filed a second
amended complaint, which asserted only that Direct Energy
breached paragraphs 3 and 5 of the parties' contract by:
"(a) fail[ing] to base its prices upon generally
prevailing market prices for electricity in the PJM market at
the Electric Utility load zone for the applicable period, (b)
fail[ing] to provide a ...