Court of Appeals for the Second Circuit Cases

Martinez v. Agway Energy Services, LLC

88 F.4th 401 • 2023-12-13

Citation88 F.4th 401

Date Filed2023-12-13

Docket22-1026

Cited27 times

StatusPublished

Full Opinion (html_with_citations)

No. 22-1026
Martinez v. Agway Energy Services, LLC




                                              In the
                      United States Court of Appeals
                                 For the Second Circuit
                                          ______________

                                         August Term, 2022

                    (Argued: June 8, 2023        Decided: December 13, 2023)

                                         Docket No. 22-1026
                                          ______________

           ANTONIO MARTINEZ, IN HIS CAPACITY AS EXECUTOR OF THE ESTATE OF NAOMI
                                       GONZALES,

                                                                     Plaintiff-Appellant,

                                                –v.–

                                  AGWAY ENERGY SERVICES, LLC,

                                                                     Defendant-Appellee. *
                                          ______________

B e f o r e:

                         CARNEY, BIANCO, † and MENASHI, Circuit Judges.
                                      ______________




*   The Clerk of Court is directed to amend the case caption to conform to the above.

†Judge Rosemary S. Pooler, originally a member of the panel that heard oral argument in this
case, passed away on August 10, 2023. Judge Joseph F. Bianco was selected at random to
complete the panel. See

28 U.S.C. § 46

(d); 2d Cir. IOP E(b).
Antonio Martinez, in his capacity as executor of the estate of Naomi Gonzales,
appeals from the judgment of the district court (D’Agostino, J.), which granted
summary judgment to the defendant Agway Energy Services, LLC (“Agway”) in this
putative class action for breach of contract and for engaging in deceptive business
practices in violation of New York General Business Law §§ 349, 349-d. Agway is an
energy supply company that markets electricity to residential customers in New York
and Pennsylvania. In 2016, Gonzales entered into an electricity supply agreement with
Agway, under which she would receive a one-month promotional rate and then be
charged a “competitive” variable monthly rate to be set at Agway’s “discretion.” The
agreement listed several factors guiding that discretion, including “market-related
factors” and Agway’s “costs, expenses and margins.” Agway also promised to
“automatically” include its EnergyGuard service, which covered up to $2,000 in parts
and labor for specified repairs related to the electrical services provided. Gonzales had
the right to cancel her agreement at any time without penalty. She maintained the
contract for almost two years. Soon after she canceled the agreement, she sued Agway
on behalf of a putative class of New York and Pennsylvania customers, alleging that
Agway’s monthly variable rate was consistently higher than that charged by the
incumbent local utility and claiming that Agway breached its agreement by failing to
charge “competitive” rates and by charging customers for the cost of EnergyGuard as
part of its overall rate. On behalf of the New York customers, she also argued that
Agway’s conduct violated New York’s General Business Laws. Because Gonzales
received what was promised under the plain terms of the agreement, we affirm the
district court’s grant of summary judgment to Agway.

AFFIRMED.
______________

D. GREGORY BLANKINSHIP (Todd S. Garber, Bradley F.
Silverman, on the brief), Finkelstein, Blankinship, Frei-
Pearson & Garber, LLP, White Plains, New York, for
Plaintiff-Appellant.

JOHN D. COYLE, Coyle Law Group LLP, Morristown, NJ, for
Defendant-Appellee.
______________

2
CARNEY, Circuit Judge:

In February 2016, Naomi Gonzales entered into an electricity supply contract

with Defendant-Appellee Agway Energy Services, LLC (“Agway”), an energy supply

company incorporated in Delaware and selling electricity to residential and other

customers in New York and Pennsylvania. Under its agreement with Gonzales (“the

Agreement”), Agway would charge an introductory rate of $0.044 per kilowatt hour

(“kWh”) for one month, and, if she chose to continue receiving its services thereafter, it

would then charge her a “competitive monthly variable price,” which would be

“determined at Agway’s discretion.” App’x at 766–67. Agway’s materials represented

that, along with electricity services, it would “automatically” include its EnergyGuard

program, which it described as providing services for “protection in the event of a

breakdown of [the customer’s] residential central air conditioning unit or a problem

with the electrical wiring in [the customer’s] home.” Id. at 766–69. The Agreement was

explicit that purchasing electricity from Agway would not guarantee future savings,

and that the customer was free to cancel the Agreement at any time without paying a

termination fee.

After maintaining the Agreement for almost two years, Gonzales exercised her

termination rights toward the end of 2017 and returned to her local default utility,

Central Hudson, as her source of electricity. During the period of its Agreement with

Gonzales, Agway charged a variable rate that was between 1 and 6 cents per kWh

higher than Central Hudson’s regulated rate.

In December 2017, Gonzales sued Agway in federal district court, alleging that

Agway’s variable rate was “unconscionably high” compared to the rates charged by

Central Hudson during the term of the Agreement. She brought claims for breach of

contract, breach of the implied covenant of good faith and fair dealing, and unjust

enrichment, all under New York common law, and statutory claims under N.Y. General

3
Business Law (“GBL”) §§ 349 and 349-d, which prohibit deceptive business practices.

Through successive orders issued by it in 2022, the district court granted Agway’s

summary judgment motion in its entirety. See Martinez v. Agway Energy Services, LLC,

No. 5:18-cv-235 (MAD/ATB),

2022 WL 306437

, at *10–11 (N.D.N.Y. Feb. 2, 2022);

Martinez v. Agway Energy Services, LLC, No. 5:18-cv-235 (MAD/ATB),

2022 WL 1091607

,

at *6 (N.D.N.Y. Apr. 12, 2022). Gonzales, by way of the executor of her estate, 1 now

appeals the judgment entered based on these orders. She argues principally that Agway

wrongfully charged customers for its EnergyGuard service and failed to charge rates

“competitive” with default utility rates.

       On de novo review, we conclude that the Agreement’s plain terms permitted

Agway’s conduct, and that Gonzales received what she was promised. Accordingly, we

AFFIRM the district court’s judgment in Agway’s favor.


                                       BACKGROUND

I.     Factual Background 2

       A.      Regulation of Energy Supply Companies

       The claims at issue arise in the context of New York’s regulation (and de-

regulation) of its electricity market, fields committed by law to the New York Public

Service Commission (“Commission”).




1After Gonzales’s death in 2020, her son, Antonio Martinez, was substituted as Plaintiff. For
simplicity, we use “Gonzales” to refer to the Appellant throughout the opinion.

2We present the facts in the light most favorable to Gonzales, the non-moving party. See Elliott
v. Cartagena,

84 F.4th 481, 495

 (2d Cir. 2023). Factual statements about the New York energy
market are drawn from the class action complaint and the parties’ statements of undisputed
facts, filed under N.D.N.Y. Local Civil Rule 56.1.



                                                4
       Until 1996, residential customers in New York had no choice but to purchase

electricity from their local incumbent utility—in Gonzales’s case, Central Hudson. 3 In

1996, however, the Commission decided to deregulate certain aspects of the retail

electricity market, aiming to promote competition and thereby to bring lower prices to

retail customers. Under the regulatory scheme, third-party energy supply companies—

so-called “ESCOs,” of which Agway is one—are permitted to buy electricity wholesale

from the local incumbent utility and resell it to customers, in theory employing

innovative purchasing strategies to reduce costs and pass on savings. When a customer

contracts with an ESCO, the local incumbent utility still delivers the electricity, but the

ESCO deals with the customer, sets the price and receives the customer’s payment, itself

paying the incumbent utility for the energy delivered.

       The Commission maintains supervisory authority over all ESCOs in the State of

New York. See

N.Y. Pub. Serv. L. §§ 5

(1)(h), 66(1); see generally In re Nat’l Energy

Marketers Ass’n v. N.Y. State Pub. Serv. Comm’n,

33 N.Y.3d 336

, 340–42 (2019). New

York’s Public Service Law (abbreviated in New York as “PBS”) charges the Commission




3 The phrase incumbent utility is commonly used to refer to the entity that manages
transmission and distribution of electricity for a particular area in the state of New York. See
How to Shop for Utility Services, Dep’t of Pub. Serv., https://dps.ny.gov/how-shop-utility-services
(last visited Nov. 21, 2023). For incumbent utilities, the Commission uses an administrative
“major rate case process” to approve any proposed major changes to the rates charged. Major
Rate Case Process Overview, Dep’t of Pub. Serv., https://dps.ny.gov/major-rate-case-process-
overview (last visited Nov. 21, 2023). Under this process, the incumbent utility must first
demonstrate the need for rate increases, considering operating expenses, taxes, and return on
investments.

Id.

 The Commission then conducts administrative hearings over an eleven-month
period to evaluate the requested rate increases. Id.; see also

N.Y. Pub. Serv. L. § 66

(12) (setting
forth the major rate case process). We take judicial notice of this procedural information posted
on the Commission’s website. See Village Green at Sayville, LLC v. Town of Islip,

43 F.4th 287

, 299
n.7 (2d Cir. 2022).



                                                 5
with ensuring that “every electric corporation[ 4] . . . furnish and provide such service . . .

as shall be safe and adequate and in all respects just and reasonable,” and that “[a]ll

charges made or demanded by any such . . . electric corporation . . . be just and

reasonable and not more than allowed by law or by order of the commission.”

N.Y. Pub. Serv. L. § 65

(1). To that end, the PBS authorizes the Commission to limit or

discontinue an ESCO’s access to utility distribution systems based on whether the

Commission deems such access to be “just and reasonable.” Nat’l Energy Marketers

Ass’n, 33 N.Y.3d at 351; see also

N.Y. Pub. Serv. L. §§ 5

(1)(b), 65, 66.

       B.     Gonzales’s Agreement with Agway

       Before 2016, Gonzales was a retail customer of Central Hudson, her local

incumbent utility in Cornwall, New York. In January 2016, Gonzales spoke by

telephone with an Agway representative, seeking to obtain her electrical service from

Agway. At the start of this recorded call—referred to by the parties as a “Third-Party

Verification Call” (“TPV call” and, by us, as “the enrollment call”)—the representative

told her that “[o]ral acceptance of Agway’s offer is an agreement to initiate service and

begin enrollment.” App’x at 758 (transcript of enrollment call). The Agway

representative explained to Gonzales that, in her first month of service, she would be

charged Agway’s introductory rate of $0.044 per kWh; after the end of the first month,

she would “continue to receive Agway’s competitive market based monthly variable

rate until [she] notif[ied] Agway of [her] wish to cancel.”

Id. at 761

. The representative

warned that “[p]articipation in this program is not a guarantee of future savings.”

Id.


According to the representative, Gonzales would also “automatically receive” Agway’s




4As relevant here, the PBS defines “electric corporation” expansively to include “every
corporation, company, association, joint-stock association, partnership and person, . . . owning,
operating or managing any electric plant or thermal energy network.”

N.Y. Pub. Serv. L. § 2

(13).



                                                6
EnergyGuard program “that provides coverage for your center [sic] air conditioning

unit and electric wiring in your home.”

Id.


       Soon after the call, Agway sent Gonzales written materials confirming her

enrollment and setting out detailed terms. These were a “Cover Letter,” a “Residential

Customer Disclosure Statement,” and a brochure describing the EnergyGuard program.

App’x at 766–70. 5 The Disclosure Statement reiterated the terms of Gonzales’s

enrollment, as set forth more generally in the enrollment call. It provided:

              The first month of the Initial Term will be at an Introductory
              Rate of . . . $ .044 per kWh for electricity; thereafter a monthly
              variable rate, to be determined at Agway’s discretion, will
              apply.

              ...

              The Electric Variable Rate shall each month reflect the cost of
              electricity acquired by Agway from all sources (including
              energy, capacity, settlement, ancillaries), related transmission
              and distribution charges and other market-related factors,
              plus all applicable taxes, fees, charges or other assessments
              and Agway’s costs, expenses and margins.

              ...

              Savings are NOT guaranteed[.]

Id. at 767

. The Cover Letter also repeated the statement made in her enrollment call that,

after the end of the promotional period, she “will receive a competitive monthly

variable price.”

Id. at 766

. In addition, it specified that, “[f]or being an Agway electricity

customer, we also include the peace of mind and added value of Agway Energy




5The Disclosure Statement specified that, in addition to its own text, the Agreement between
Agway and the customer “includes the Cover Letter and any approved addenda.”

Id. at 767

.
Agway now agrees that these three documents comprise its contract with Gonzales.



                                               7
Services EnergyGuard Repair Program.”

Id.

 The EnergyGuard brochure enclosed with

the Disclosure Statement similarly affirmed that customers would “automatically

receive all of the benefits of” EnergyGuard,

id. at 769

, which provided “[u]p to $1,000

each calendar year in covered parts and labor” as needed to repair covered damage to

central air conditioning units, and up to another $1,000 in covered repairs to electric

lines in the customer’s home,

id. at 770

.

       Gonzales’s use of Agway-supplied electricity began in February 2016, and she

was charged the promised promotional rate—$0.044 per kWh—in both February and

March of that year. Starting in April 2016, Agway set rates for her electricity anew each

month, initially charging her $0.08605 per kWh. From April 2016 through December

2017, Agway’s variable rate was consistently 1 to 6 cents per kWh higher than Central

Hudson’s retail rate for the same period. Gonzales canceled her service with Agway in

late 2017 and returned to Central Hudson as her electricity supplier.


II.    Procedural Background

       On December 6, 2017, Gonzales filed a class action complaint against Agway in

the United States District Court for the District of Delaware. She alleged that during the

period of her enrollment Agway wrongfully incorporated the costs of EnergyGuard

into its variable rates and failed to charge the promised “competitive” prices. Through

these actions, she asserted, Agway violated GBL §§ 349, 349-d; breached the Agreement;

breached the implied covenant of good faith and fair dealing under New York law; and

was unjustly enriched. As to the common law claims, Gonzales sought to represent a

class of all New York and Pennsylvania Agway customers who paid the variable rate

for residential electricity services; as to the New York statutory claims, she sought to

represent a subclass of Agway’s New York customers. On the parties’ stipulation, the

case was soon transferred to the Northern District of New York.




                                             8
       In 2018, the district court dismissed Gonzales’s claims for unjust enrichment and

breach of the implied covenant of good faith and fair dealing under Federal Rule of

Civil Procedure 12(b)(6), concluding that they were duplicative of the contract claim.

Gonzales v. Agway Energy Services, LLC, No. 5:18-cv-235 (MAD/ATB),

2018 WL 5118509

,

at *4–5 (N.D.N.Y. Oct. 22, 2018). 6 After discovery and further proceedings, the court in

2022 granted Agway summary judgment as to the breach of contract claim. The court

construed the Agreement as permitting Agway to include the disaggregated costs of its

EnergyGuard program in its variable rate. Martinez,

2022 WL 306437

, at *10. The court

further held that Gonzales did not create a triable issue of fact merely “by showing that

Defendant’s rates are not ‘competitive’ compared solely against those of the incumbent

utilities.”

Id.

 Giving similar reasons, the district court in a separate order also granted

summary judgment to Agway as to the GBL claims. The court reasoned that it would be

“logically inconsistent” to hold that no triable issue of fact remained as to whether

Agway’s variable rate was “competitive” or “market-based,” but to allow Gonzales to

proceed with GBL claims that required her to “establish that those very same terms

were materially misleading to a reasonable consumer.” Martinez,

2022 WL 1091607

, at

*5.

       This appeal followed.


                                        DISCUSSION

       On appeal, Gonzales challenges the district court’s grant of summary judgment

to Agway on her breach of contract and GBL claims. We review a district court’s

summary judgment grant de novo, construing the evidence in the light most favorable to




6Gonzales does not appear to be challenging this ruling, as she fails to develop any argument
concerning the district court’s Rule 12(b)(6) ruling in her briefs. Accordingly, we affirm the
district court’s dismissal of those claims.



                                               9
the non-moving party and drawing all reasonable inferences in that party’s favor. Bey v.

City of New York,

999 F.3d 157

, 164 (2d Cir. 2021). Summary judgment is appropriate

only if “there is no genuine dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a). The movant bears the burden of

“demonstrat[ing] the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett,

477 U.S. 317, 323

 (1986). For the following reasons, we AFFIRM the district court’s

judgment.


I.     Breach of Contract Claim

       The parties agree that the Agreement is governed by New York law. To prevail

on a breach of contract claim under New York law, a plaintiff must show that “(1) a

contract exists; (2) plaintiff performed in accordance with the contract; (3) defendant

breached its contractual obligations; and (4) defendant’s breach resulted in damages.”

34-06 73, LLC v. Seneca Ins. Co.,

39 N.Y.3d 44

, 52 (2022) (internal citations omitted); see

also Moreno-Godoy v. Kartagener,

7 F.4th 78, 85

 (2d Cir. 2021) (same). Only the third of

these factors is at issue here: whether Agway breached its contractual obligations.

       Summary judgment on a contract claim is appropriate “only when the

contractual language . . . is found to be wholly unambiguous and to convey a definite

meaning.” Topps Co. v. Cadbury Stani S.A.I.C.,

526 F.3d 63, 68

 (2d Cir. 2008). We will find

a contract unambiguous “if the language it uses has a definite and precise meaning, as

to which there is no reasonable basis for a difference of opinion.” Lockheed Martin Corp.

v. Retail Holdings, N.V.,

639 F.3d 63, 69

 (2d Cir. 2011). Whether contract terms are

unambiguous presents “a question of law that is resolved by reference to the contract

alone.” O’Neil v. Ret. Plan for Salaried Emps. of RKO Gen., Inc.,

37 F.3d 55

, 59 (2d Cir.

1994) (internal quotation marks omitted). When a contract contains “definitive,

particularized” language, that language “takes precedence over expressions of intent




                                              10
that are general, summary, or preliminary.” Rabin v. Mony Life Ins. Co., 387 Fed. App’x

36, 40 (2d Cir. 2010) (quoting John Hancock Mut. Life Ins. Co. v. Carolina Power & Light Co.,

717 F.2d 664

, 669 n.8 (2d Cir. 1983).

       As explained above, Gonzales’s agreement with Agway consisted of the Cover

Letter, Disclosure Statement, and EnergyGuard brochure that she was sent soon after

her enrollment call. 7 The Agreement promised that Gonzales would be charged $0.044

per kWh for her first month of service, and thereafter a “monthly variable rate, to be

determined at Agway’s discretion.” App’x at 767. It described this monthly variable

price as “competitive,”

id. at 766

, and explained that the variable monthly rate would

reflect “the cost of electricity acquired by Agway from all sources (including energy,

capacity, settlement, ancillaries), related transmission and distribution charges and

other market-related factors, plus all applicable taxes, fees, charges or other assessments

and Agway’s costs, expenses and margins,”

id. at 767

. The Agreement cautioned that

savings were “NOT guaranteed.”