United States District Court, S.D. New York
OPINION AND ORDER
C. McCarthy United States Magistrate Judge
Robert Hamlen ("Hamlen") commenced this putative
class action against Defendant Gateway Energy Services
Corporation ("Gateway"), alleging that Gateway
overcharged thousands of New Jersey customers for natural
gas. In his original complaint, Hamlen asserted claims
against Gateway for (1) violations of the New Jersey Consumer
Fraud Act ("NJCFA"), N.J. Stat. Ann. §§
56:8-1 to -20; (2) breach of contract; (3) breach of the
implied covenant of good faith and fair dealing; and (4)
unjust enrichment. (Docket No. 1). Gateway moved to dismiss
the complaint in its entirety pursuant to Rule 12(b)(6) of
the Federal Rules of Civil Procedure. (Docket No. 14). United
States District Judge Vincent L. Briccetti granted
Gateway's motion in part, dismissing all of Hamlen's
claims, except for his claim for breach of the implied
covenant of good faith and fair dealing. (Docket No. 28).
Presently before the Court is Hamlen's motion for leave
to file an amended complaint. (Docket No. 56). Hamlen seeks to
amend his complaint in two ways: first, by re-pleading his
previously-dismissed claims for breach of contract and
violations of the NJCFA; and, second, by adding Direct Energy
Services, LLC ("Direct Energy") as a defendant. For
the reasons set forth below, Hamlen's motion is granted
in part and denied in part.
The Original Complaint
11, 2016, Hamlen filed his original complaint (the
"Complaint" or "Compl.") on behalf of a
putative class of New Jersey natural gas customers. (Docket
No. 1). The following summary is based on the facts alleged
in the Complaint.
is a New Jersey citizen who purchased natural gas from
Gateway between November 2010 and January 2016. (Compl.
¶¶ 5, 19). Gateway is a New York corporation that
sells natural gas to commercial and residential customers in
New Jersey and other areas. (Compl. ¶¶ 6-7).
Gateway has thousands of customers in New Jersey and
"tens of millions of dollars in combined revenues."
(Compl. ¶ 6). The natural gas offered by Gateway is a
commodity that has the exact same qualities as natural gas
supplied by other independent energy companies or local
utilities. (Compl. ¶ 30).
September 2010, Hamlen was a customer of New Jersey Natural
Gas ("NJNG"), a different retailer, when he spoke
with Gateway's representative via telephone. (Compl.
¶¶ 15, 19). The representative recited
Gateway's standard sales pitch for its variable-rate
natural gas plan, stating "your price of. .. natural gas
will be a variable rate set by Gateway Energy based on market
conditions and will fluctuate monthly." (Compl. ¶
15). Subsequent to this conversation, Gateway provided Hamlen
with a copy of its "New Jersey Residential Terms &
Conditions" (the "Contract"), which is
attached to the Complaint as Exhibit A. (Compl. ¶ 16).
clauses in the Contract are particularly relevant to this
case. First, the "Variable-Rate Plan" clause
The price for all electricity or natural gas sold under our
Variable-Rate Plan is a rate set by us each month based on
our evaluation of a number of factors that affect the total
price of electricity or natural gas to a customer. The
following description is not exhaustive of all factors that
may influence our pricing decision each month, but it does
describe the major components that influence our analysis in
a typical month. Each month our management uses the
information described below, along with numerous other
considerations, to determine how low a price we can charge in
the upcoming month.
• We determine the cost of all electricity or natural
gas (including, where applicable, transmission costs, storage
costs, transportation costs and line losses) that we have
already obtained for delivery to customers in your utility
territory for the upcoming month. Because we often acquire
supply over time in preparation for future delivery needs (in
an effort to mitigate the volatility in price) and do not
acquire all of our required electricity or natural gas from
the spot market, our supply costs may not directly follow
spot market prices.
• If additional supplies of electricity or natural gas
will be required for the upcoming month, we will determine
the anticipated cost to acquire such additional supplies from
the spot market.
• If we expect to have surplus supply for the upcoming
month, we evaluate the expected income we may receive from
selling the surplus. Additionally, with electricity, we may
expect to have surplus or shortfall in any given hour of the
upcoming month. In this case, we evaluate the expected income
or costs that may be incurred by eliminating the surplus or
• We evaluate, if known, the prices that your utility
and other competitors in your area plan to charge in the
• We evaluate the amount of profit we hope to earn from
the sale of electricity or natural gas in your utility
• We evaluate any taxes that must be included in the
rate we charge for electricity or natural gas in your
• From time to time, and as a direct result of sudden or
drastic increases in price, we may experience a higher level
of cost to supply our customers than we wish to bill our
customers in a single period. In these circumstances, we may
amortize this expense to our customers over multiple billing
(Compl. Ex. A). For convenience, this Opinion and Order
refers to the seven bullet-pointed items in the Variable-Rate
Plan clause as the "Listed Factors."
the "No Warranties" clause provides:
We provide no warranties, express or implied, and we
specifically disclaim any warranty of merchantability or
fitness for a particular purpose. Additionally, unless
expressly stated otherwise on your Enrollment Consent, we
specifically disclaim any warranty or guaranty that the price
charged by us for the energy supplied pursuant to the
Agreement will be lower than the price that you would have
been charged by the utility or another third-party supplier.
the "Governing Law" clause provides that the
Contract "is made and shall be construed in accordance
with the laws of the State of New Jersey."
to lower his natural gas bill, Hamlen switched from NJNG to
Gateway in November 2010. (Compl. ¶¶ 19, 30).
However, Gateway charged rates that were substantially higher
than other independent energy retailers or local utilities.
(Compl. ¶ 14). Gateway's rates were higher than
NJNG's rates every month for a four-and-a-half year
period while Hamlen was Gateway's customer. (Compl.
¶ 20). Some months, Gateway's rates were more than
double NJNG's rates. (Id.). Gateway often
increased its rates during periods when wholesale and
NJNG's rates decreased. (Compl. ¶¶ 23-24).
Gateway's Prior Motion to Dismiss
6, 2016, Gateway filed a motion to dismiss. (Docket Nos.
9-10). The next day, Judge Briccetti issued an Order, sua
sponte, granting Hamlen leave to file an amended
complaint and stating that, "[i]f plaintiff elects not
to file an amended complaint, the motion to dismiss will
proceed in the regular course and, absent special
circumstances, no further opportunities to amend will be
granted." (Docket No. 12), On July 15, 2016, Hamlen
declined the opportunity to file an amended complaint.
(Docket No. 13).
March 6, 2017, Judge Briccetti issued an Opinion and Order
(the "MTD Decision") granting in part and denying
in part Gateway's motion to dismiss. (Docket No. 28).
Familiarity with the MTD Decision is assumed. In short, the
court found that the Complaint provides only conclusory
allegations that Gateway failed to base its rates on its cost
for natural gas or market conditions. (Id. at 6).
Regarding Hamlen's breach of contract claim, the court
held that the Contract expressly grants Gateway discretion to
set rates based on other factors and that allegations
regarding those factors are not present in the Complaint.
(Id. at 7). Regarding Hamlen's NJCFA claim, the
court found that Hamlen agreed to allow Gateway discretion in
setting the rate for natural gas without a promise of a rate
lower than competitors' rates. (Id. at 5-6). The
court concluded that Gateway's decision to exercise its
discretion to set rates higher than other providers is not a
sufficiently "substantial aggravating" circumstance
to state a valid NJCFA claim. (Id. at 6).
The Proposed Amended Complaint
24, 2017, after the MTD Decision was issued, Hamlen deposed
Gateway's corporate representative, Mr. Cullen Hay,
pursuant to Rule 30(b)(6) of the Federal Rules of Civil
Procedure. (See Docket Nos. 64-1 ¶ 6; 67-1
¶ 2). On August 16, 2017, Hamlen moved for leave
to file an amended complaint, (Docket No. 56), attaching to
his motion a copy of the proposed amended complaint (the
"Amended Complaint" or "Am. Compl.") as
Exhibit 1, (Docket No. 56-1). The ...