Martinez v. Agway Energy Services, LLC
88 F.4th 401
2d Cir.2023Background
- Naomi Gonzales entered into an electricity supply contract with Agway Energy Services, LLC, which involved an introductory rate followed by a "competitive monthly variable price" set at Agway's discretion.
- Agway's materials stated customers would receive its EnergyGuard program, which provided certain home repair coverages, automatically as part of the contract.
- After two years under the agreement (with rates 1–6 cents higher per kWh than the local utility), Gonzales canceled.
- Gonzales sued Agway for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and violations of New York's General Business Law (GBL) §§ 349, 349-d, alleging the rates were unconscionably high and EnergyGuard was misrepresented as free.
- The district court granted summary judgment for Agway; Gonzales, by her estate, appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was Agway permitted under the contract to set variable rates based on factors beyond procurement costs? | Agway promised competitive rates based on procurement or market costs, and failed to do so. | The contract allowed rate-setting at Agway’s discretion considering multiple factors, not limited to procurement costs. | Agway’s conduct was permitted; contract allowed broader discretion. |
| Did Agway breach by charging for EnergyGuard, allegedly promised as free? | EnergyGuard was presented as free; including its costs in the variable rate was a breach. | Contract allowed inclusion of costs, expenses, & margins, which encompassed EnergyGuard. | No breach; contract plainly allowed EnergyGuard cost to be factored in rates. |
| Did Agway act in bad faith in setting rates—including EnergyGuard costs? | Agway’s charges were excessive, not based on actual costs, constituting bad faith. | No evidence rates were set in bad faith; discretion was exercised as permitted by contract. | No triable issue of bad faith; rates within contractual discretion. |
| Were Agway’s practices deceptive under GBL §§ 349, 349-d? | Misrepresented rates as competitive, EnergyGuard as free—misleading consumers. | All representations matched the unambiguous contract terms. | No triable issue of deception; reasonable consumer would not be misled under the contract. |
Key Cases Cited
- Richards v. Direct Energy Servs., LLC, 915 F.3d 88 (2d Cir. 2019) (contractual discretion for setting variable utility rates includes profit margin and other business factors)
- Mirkin v. XOOM Energy, LLC, 931 F.3d 173 (2d Cir. 2019) (where contract pegs variable rates to actual supply costs, deviations may form basis for breach)
- Topps Co. v. Cadbury Stani S.A.I.C., 526 F.3d 63 (2d Cir. 2008) (summary judgment appropriate when contract language is unambiguous)
- Lockheed Martin Corp. v. Retail Holdings, N.V., 639 F.3d 63 (2d Cir. 2011) (contract language with definite meaning is unambiguous)
- O’Neil v. Ret. Plan for Salaried Emps. of RKO Gen., Inc., 37 F.3d 55 (2d Cir. 1994) (ambiguity of contract terms is a question of law for the court)