Mercado v. Verde Energy Court Denies Motion to Dismiss Breach of Contract Claim Alleging that Utilitily Over Charged its Customers — Chicago Business Dispute and Class Action Lawyers

Where a class of consumers sued an energy company for breach of contract, fraud, and unjust enrichment, the district court dismissed some, but not all, of the claims. The district court found that the consumers had sufficiently alleged that the energy company violated its agreement to charge rates for electricity based on market conditions and that the consumers had pled a claim for unjust enrichment in the alternative. However, the court found that the consumers failed to allege adequate details of a fraudulent scheme.

Verde Energy USA, Inc. was sued by a class of consumers in federal court for the Northern District of Illinois. The consumers alleged that Verde violated the Illinois Consumer Fraud and Deceptive Business Practice Act, breached its contract, or alternatively was guilty of unjust enrichment with respect to the class. The consumers’ complaint alleged that Verde had taken advantage of the deregulation of the Illinois energy market, convincing consumers to switch from their prior energy company to Verde by offering a teaser rate that was lower than the utilities’ actual rates for electricity. The consumers alleged that, after the teaser rate expired, Verde switched consumers to a variable rate that was not based on market conditions as required by the contract the consumers had with Verde.

Verde moved to dismiss the complaint. The district court began by addressing the claim for breach of contract. The court found that the agreement between Verde and the consumers did not promise that the rate charged by Verde was tied to the wholesale market rate of electricity, as the consumers alleged. However, the court found that the agreement did specify that changes to the variable rate would be based on market conditions. The court noted that the contract did not provide a definition of “market conditions,” and that discovery was therefore required to address whether Verde’s electricity rates were in fact set in response to such conditions. The court, therefore, denied the motion to dismiss with respect to the breach of contract claim.

Next, the court addressed the ICFA claim. The court found that the consumers had failed to adequately plead the details of the alleged fraudulent scheme orchestrated by Verde. The court stated that, without sufficient details, it was impossible for the court to determine if the plaintiffs had adequately stated a cause of action, or if the alleged fraud should be excused. The court, therefore, dismissed the ICFA count but granted the plaintiffs leave to replead the count with further details.

Finally, the court turned to the claim for unjust enrichment. The court noted that, under Illinois law, claims for breach of contract and unjust enrichment are mutually exclusive. However, the court stated that, at the pleading stage, such inconsistency does not matter, as plaintiffs are allowed to plead claims in the alternative. The court denied Verde’s motion to dismiss, finding that proof of deception was not required at the pleading stage for a claim for unjust enrichment to proceed when such a claim was pled in the alternative to a breach of contract claim. The district court therefore granted in part and denied in part the defendant’s motion to dismiss.

You can read the full decision here.

Our Chicago business dispute and class action lawyers have litigated cases similar to this one including one in New York State making similar claims.

Our Oak Brook, Illinois consumer rights private law firm handles individual and class action gift card, data breach, privacy rights, deceptive advertising, predatory lending, unfair debt collection, lemon law, and other consumer fraud cases that government agencies and public interest law firms such as the Illinois Attorney General may not pursue. Class action lawsuits our law firm has been involved in or spear-headed have led to substantial awards totaling over a million dollars to organizations including the National Association of Consumer Advocatesthe National Consumer Law Center, and local law school consumer programs. The Chicago consumer lawyers at Lubin Austermuehle are proud of our achievements in assisting national and local consumer rights organizations to obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to consumer fraud and consumer rip-offs, and in the right case filing consumer protection lawsuits and class-actions you too can help ensure that other consumers’ rights are protected from consumer rip-offs and unscrupulous or dishonest practices.

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