Nicholas Malfitano Jun. 15, 2015, 2:32pm


PHILADELPHIA – A Philadelphia federal judge has granted a motion from IDT Energy to stay a pending class action lawsuit against it while also setting aside its motion to dismiss the case.

In March 2014, plaintiff Anthony Ferrare, a resident of Erie County, brought class action litigation against IDT, which provides electricity to Pennsylvania customers.

Ferrare, a former IDT customer, alleges IDT “breached its contracts with its customers and the covenant of good faith and fair dealing implicit in those contracts.”

Through his lawsuit, Ferrare alleges IDT coaxed energy consumers to switch from the local utility or from other energy suppliers to IDT by promising competitive, market-based rates and savings on electric energy bills.

IDT offered new customers a “teaser” rate, and promised after that initial rate expired, IDT would replace it with a “market-competitive variable rate.”

Despite this promise, IDT allegedly raised customers’ rates to above-market prices, two to four times higher than before they switched to IDT.

Ferrare enrolled as an IDT electricity customer in August 2013 and alleges from September 2013 until March 2014, IDT overcharged him by hundreds of dollars above the local utility’s rate for electricity.

Ferrare brought suit on behalf of himself and potential Pennsylvania class members.

Ferrare levied two claims against IDT related to its pricing practices - breach of contract and breach of the covenant of good faith and fair dealing.

The Public Utilities Commission is the state regulatory body with authority over EGS agencies. The Pennsylvania Public Utility Code authorizes the PUC to regulate certain aspects of EGS operations.

On June 20, the Pennsylvania Office of Attorney General and the Pennsylvania Office of Consumer Advocate began legal proceedings against IDT before the PUC. The PUC complaint relates to the IDT pricing practices implicated in Ferrare’s lawsuit.

In a December order, the PUC also determined that it has “authority to direct an EGS to issue a credit or refund for an overbill, because of having the authority to order EGS billing adjustments, including refunds, under the appropriate circumstances, helps ensure that EGSs comply with the Commission’s Regulations and bill customers in accordance with their disclosure statement—a fundamental consumer protection.”

PUC further clarified that it lacks “subject matter jurisdiction to interpret the terms and conditions of a contract between an EGS and a customer to determine whether a breach of the contract has occurred.”

Judge Anita B. Brody of the U.S. District Court for the Eastern District of Pennsylvania said a four-factor test would determine primary jurisdiction: “(1) Whether the question at issue is within the conventional experience of judges or whether it involves technical or policy considerations within the agency’s particular field of expertise; (2) Whether the question at issue is particularly within the agency’s discretion; (3) Whether there exists a substantial danger of inconsistent rulings; and (4) Whether a prior application to the agency has been made.”

In the first factor, though Ferrare argued the Court had the jurisdiction to handle what he termed as a mere “breach of contract” claim, Brody disagreed.

“The PUC has the technical expertise to evaluate how IDT calculated the electricity prices it charged customers and whether IDT’s method complied with its Disclosure Statement as the regulations require,” Brody said.

For the second factor, Brody said the PUC, “as the administrative agency authorized to develop and enforce the regulatory framework for EGSs, the PUC has the discretion to evaluate IDT’s compliance with its regulations.”

As to the third factor, Brody cautioned against leaving open the possibility for inconsistent rulings.

“The PUC Proceeding is pending; the next hearing is scheduled for September 2015. If this Court denies IDT’s Motion to Stay and the lawsuit proceeds, there is a risk of inconsistent rulings because eventually, the Court (or a jury) is likely to rule on the same issue in evaluating Ferrare’s claims. Any court or jury determination of this question could conflict with a PUC ruling on the same issue,” Brody said.

For the fourth factor, whether application to the agency has been made, Ferrare acknowledged a prior application had been made in June of last year. Brody explained because the PUC Proceeding is currently pending, that component weighs in favor of applying the doctrine of primary jurisdiction.

“For these reasons, I will grant IDT’s motion to stay and deny its motion to dismiss without prejudice. This action will be stayed until the PUC decides whether IDT charged prices consistent with its Disclosure Statement, and if there were any overcharges, whether refunds are necessary,” Brody said.

The plaintiff is seeking “all actual, general, special, incidental, statutory, treble, punitive and consequential damages” to which all plaintiffs and class are entitled, pre-judgment and post-judgment interest, injunctive relief plus any other relief the Court deems proper in this case.

The plaintiff is represented by Jonathan Shub of Kohn Swift & Graf; Troy M. Frederick of Marcus & Mack, all in Philadelphia.

The defendant is represented by Marc A. Goldich, Thomas L. Allen and Henry F. Reichner of Reed Smith, in both Philadelphia and Pittsburgh.

U.S. District Court for the Eastern District of Pennsylvania case 2:14-cv-04658

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com

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