Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Sevugan v. Direct Energy Services, LLC

United States Court of Appeals, Seventh Circuit

July 26, 2019

Chetty Sevugan, individually and on behalf of others similarly situated, Plaintiff-Appellant,
v.
Direct Energy Services, LLC, a Delaware Corporation Defendant-Appellee.

          Argued March 26, 2019

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division No. l:17-cv-06569-Virginia M. Kendall, Judge.

          Before Bauer, Rovner, and Brennan, Circuit Judges.

          Brennan, Circuit Judge.

         Unhappy 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.

         I

         This 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 Cir. 2010).

         For 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.

         More 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.

         Today, 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.

         Direct 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 ....

(emphasis added).

         The 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 Clause":

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.

         After 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.

         Sevugan made a variety of claims in his lawsuit, [1] 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.

         As the 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 ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.