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Simmons v. Ambit Energy Holdings, LLC

United States District Court, S.D. New York

September 30, 2014

TAURSHIA SIMMONS et al., Plaintiffs,
v.
AMBIT ENERGY HOLDINGS, LLC et al., Defendants.

OPINION AND ORDER

JESSE M. FURMAN, District Judge.

Plaintiffs Taurshia Simmons and Navid Kalatizadeh bring this putative class action against Defendants Jere W. Thompson and Chris Chambless (together, the "Individual Defendants"), as well as Ambit Energy Holdings, LLC; Ambit Texas, LLC; Ambit Marketing, LLC; and Ambit New York LLC (collectively, "Ambit" or the "Company" and, together with Individual Defendants, "Defendants") to recover damages for alleged violations of New York consumer protection laws and for unjust enrichment. (Second Am. Compl. (Docket No. 38) ("SAC") ¶¶ 93-130). Although Plaintiffs invoke the Court's jurisdiction pursuant to the Class Action Fairness Act ("CAFA"), Pub. L. No. 109-2, 119 Stat. 4 (2005), codified in part at 28 U.S.C. § 1332(d), Defendants move to dismiss for lack of subject-matter jurisdiction, arguing that a mandatory exception to CAFA jurisdiction, known as the "local controversy exception, " see 28 U.S.C. § 1332(d)(4)(A), applies. The question is a close one, but for the reasons stated below the Court agrees that the local controversy exception mandates dismissal. Accordingly, Defendants' motion is granted, and the Second Amended Complaint is dismissed in its entirety.

BACKGROUND

In 2006, the Individual Defendants founded Ambit, a Texas-based independent energy supplier that serves more than one million electric and natural gas customers across twelve different states. (SAC ¶¶ 2, 17-21, 63). Generally known as "Ambit" or "Ambit Energy, " the Company operates through Ambit Energy Holdings, LLC, a Texas limited liability company ("LLC") headquartered in downtown Dallas, and various related entities. (SAC ¶¶ 21-22). To the extent relevant here, all but one of those entities is either an LLC or a limited partnership organized under the laws of Texas. (SAC ¶¶ 23-29). The sole, but important, exception is Defendant Ambit New York LLC ("Ambit New York"), which - although also headquartered in Dallas, "wholly owned" by Ambit Energy Holdings, LLC, and "wholly controlled and directed" by the Individual Defendants - is a New York LLC. (SAC ¶¶ 28-29).

Plaintiffs, citizens and residents of New York, formerly contracted with Ambit New York to purchase electricity for residential use in New York. (SAC ¶¶ 15-16, 28, 38).[1] Plaintiffs were allegedly enrolled in Ambit's New York Guaranteed Savings Plan, under which "Ambit promises that its customers' 12-month energy costs will be at least 1% less than what the customers' existing utility (the incumbent provider') would have charged, or Ambit will make up the difference." (SAC ¶¶ 3, 65). Plaintiffs allege, however, that Ambit "overstates the amount customers' incumbent providers would have charged during the year, " thus profiting from the shortfall and leaving customers "in the dark as to the true savings Ambit owes them." (SAC ¶¶ 66-67; see also id. ¶¶ 4, 70-71). Further, Plaintiffs complain that Ambit does not disclose that customers have to wait a year or more before receiving refund checks, without interest, thus depriving customers of "the use of [their] refund money." (SAC ¶¶ 5, 68-69).

Beginning in 2011, Ambit implemented a new policy - which Plaintiffs call the "automatic default policy" - that "eliminated the supposed benefits" of the New York Guaranteed Savings Plan. (SAC ¶¶ 6-7, 72-73). Under the automatic default policy, Ambit created "a more expensive plan called the New York Select Variable Plan and began automatically shifting customers signed up for the Guaranteed Savings Plan into the New York Select Variable Plan." (SAC ¶ 6). More specifically, on or about January 31, 2012, Ambit amended the Ambit New York customer service agreement (the "Terms of Service") to require customers to renew their enrollment in the New York Guaranteed Savings Plan every year or otherwise be automatically enrolled in the New York Select Variable Plan. (SAC ¶¶ 8-9, 72-74). (Plaintiffs allege that, in fact, Ambit began implementing the automatic default policy even before it had amended its terms of service. (SAC ¶ 75).) Plaintiffs claim that when the New York Select Variable Plan was added to the Terms of Service, the reference constituted a single line and did not "identify a single variable charge." (SAC ¶ 79).

On September 5, 2013, Plaintiffs filed this case (Docket No. 1), and, on December 26, 2013, they filed the operative Second Amended Complaint (Docket No. 38). The Second Amended Complaint alleges that Plaintiffs and a class of similarly situated individuals - all of whom purchased energy services from Ambit after September 5, 2007, and were either enrolled in the New York Guaranteed Savings Plan or automatically enrolled in the New York Select Variable Plan (SAC ¶ 84) - suffered damages as a result of Ambit's policies. More specifically, the Second Amended Complaint states five claims - three under the Energy Services Company Consumers Bill of Rights, N.Y. G.B.L. § 349-d, a relatively recent New York consumer-protection law targeting abuses in the energy services market; one under New York's general consumer fraud statute, N.Y. G.B.L. § 349; and one under New York common law. In particular, Plaintiffs allege: (1) violations of Section 349-d(6)'s requirement that all material changes in contracts for residential energy services be expressly consented to by consumers (Count One); (2) violations of Section 349-d(7)'s requirement that all variable charges in contracts and marketing for residential energy be clearly and conspicuously delineated (Count Two); (3) violations of Section 349-d(3)'s prohibition of deceptive acts in the marketing of residential energy services (Count Three); (4) violations of Section 349's general prohibition of deceptive business conduct (Count Four); and (5) unjust enrichment (Count Five). They seek injunctive relief and damages. (SAC ¶¶ 100-01, 108-09, 116-17, 124-25, 130).

DISCUSSION

It is axiomatic that "federal courts are courts of limited jurisdiction and, as such, lack the power to disregard such limits as have been imposed by the Constitution or Congress." Purdue Pharma L.P. v. Kentucky, 704 F.3d 208, 213 (2d Cir. 2013) (internal quotation marks omitted). Here, as noted, Plaintiffs contend that jurisdiction is proper pursuant to CAFA, 28 U.S.C. § 1332(d), "which confer[s] federal jurisdiction over any class action involving: (1) 100 or more class members, (2) an aggregate amount in controversy of at least $5, 000, 000, exclusive of interest and costs, and (3) minimal diversity, i.e., where at least one plaintiff and one defendant are citizens of different states." Cutrone v. Mortgage Elec. Registration Sys., Inc., 749 F.3d 137, 142 (2d Cir. 2014) (internal quotation marks omitted). Although it is undisputed that those standards are met in this case ( see SAC ¶¶ 42-43; see also Defs.' Mem. Law Support Mots. To Dismiss (Docket No. 56) ("Defs.' Mem.") 6), Defendants nevertheless move to dismiss the Second Amended Complaint, pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, for lack of subject-matter jurisdiction. (Defs.' Mem. 6-20).

Defendants do so based on a statutory exception to CAFA jurisdiction, known as the local controversy exception, "for those cases consisting of primarily local, intrastate matters." Coffey v. Freeport McMoran Copper & Gold, 581 F.3d 1240, 1243 (10th Cir. 2009). That exception provides that a district court "shall decline to exercise jurisdiction" under CAFA

(i) over a class action in which-
(I) greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed;
(II) at least 1 defendant is a defendant-
(aa) from whom significant relief is sought by members of the ...

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