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District Court Dismisses $50M Class Action vs. Starion Energy

March 28, 2016 By Cheryl Kaften

The United States District Court for the Eastern District of Pennsylvania has dismissed a potential $50 million class action suit (Case 2:15-cv-00773-CDJ/Civil Action No. 15-773) brought on behalf of plaintiff John D. Orange and all others similarly situated against retailer Starion Energy.

Starion Energy currently operates in ten deregulated markets – among them, Connecticut, Delaware, District of Columbia, Illinois, Maryland, Massachusetts, New Jersey, New York, Ohio, and Pennsylvania.

The suit charged that the retailer used bait-and-switch tactics to attract new customers and then raised its variable rates. The plaintiffs held that Starion was obligated to base its rate calculations on “market pricing.”

Indeed, the plaintiffs alleged, “Defendants routinely increase their customers’ rates well above the market – sometimes by as much as 300 percent. Instead of benefitting from switching to Starion Energy, a typical customer loses hundreds, or even thousands, of dollars per year. Defendants’ acts and/or omissions in connection with its energy supply activities constitute breach of contract and/or a breach of, the covenant of good faith and fair dealing, and warrant declaratory relief.”

“Starion promises customers savings on their energy bills if they switch their accounts from other energy suppliers,” said Jeremy Heisler – a founding partner with the law firm, Sanford Heisler, which represents plaintiffs in a similar case against Starion –  in an interview with the Washington Examiner.  “In fact, Starion often jacks up its promised rate to two or three times what customers were paying before the switch. Starion has a practice of targeting vulnerable low-income and elderly consumers.”

In some instances, Heisler claimed, the energy company would promise savings under a low-income assistance program, but then the customers would find that their bill was at least two to three times greater than it was previously.

In the case of plaintiff John Orange of Punxsutawney, Pennsylvania, the record shows that he enrolled as a Starion customer on or about September 3, 2013. “As a result of defendants’ conduct,” the plaintiff said, “[he] was charged almost three times more for his electric generation service than what he would have paid had his service been [still been with his previous provider], Penelec. In some of those months, the rate that Starion Energy charged per kilowatt hour (kWh) was nearly three times the market rate.”

The suit further charged that, “Defendants knew (or but for reckless indifference would have known) prior to agreeing to supply electricity to plaintiff and other customers that it would be unable or unwilling to provide the savings and/or competitive rate that it agreed/promised to provide.”

However, in finding for the defendant in the case, the court noted that “Although plaintiff claims defendants breached the contract by allegedly failing to offer variable rates that were “keyed to market factors and/or [were] otherwise competitive[,]” the contract does not establish a duty by defendants to provide customers with competitive-based rates and savings on their electric energy bills.… In fact, the Welcome Letter references the fact that Plaintiff chose Starion Energy ‘in an effort’ to lower his electricity bill …. An ‘effort’ by plaintiff to achieve a certain result does not constitute a duty by defendant.”

The court said that the conditions of variability under the contract are clear — “The Variable Rate may change in response to market conditions” – and, therefore, that the plaintiff’s breach of contract claim fails on that basis.”

Clarion’s legal representatives commented that the court’s ruling was “significant,” in light of similar cases pending.

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