Melville v. Hop Energy, LLC
7:21-cv-10406
| S.D.N.Y. | Mar 27, 2023Background
- On October 19, 2018 Ryan Melville (Connecticut resident) signed a standardized form contract with HOP Energy, LLC for home heating oil: an initial capped-price program that, after the Pricing Period, shifted deliveries to "our Promotional Prevailing Retail Price for First Year Customers."
- HOP notified Melville by email before October 31, 2019 that his account would default to a Variable Price Plan if he did not respond; Melville took no action and remained a customer until April 2021.
- Melville’s expert compared HOP’s invoice prices (Nov 2019–Apr 2021) to public DEEP and EIA residential heating-oil price series and alleges HOP’s per-gallon prices were higher 100% of the time and on average ~42–46% above prevailing retail prices.
- Melville sues on behalf of a proposed multi-state class for breach of contract and breach of the implied covenant of good faith and fair dealing; HOP moved to dismiss under Fed. R. Civ. P. 12(b)(6).
- Key disputed contract terms: the meaning and scope of "our Promotional Prevailing Retail Price" (ambiguity and whether it reserves unfettered pricing discretion to HOP), and whether a billing-dispute notice provision ("write us... within 60 days") is a condition precedent to suit.
- The Court denied HOP’s motion to dismiss, concluding the contract language is at least ambiguous as to pricing discretion and that Melville plausibly pleaded both breach and a distinct implied-good-faith claim; the 60-day billing-notice language is not an unambiguous condition precedent.
Issues
| Issue | Plaintiff's Argument (Melville) | Defendant's Argument (HOP Energy) | Held |
|---|---|---|---|
| Breach of contract: meaning of "our Promotional Prevailing Retail Price" | Term reasonably read to tie HOP’s price to regional prevailing retail prices (or at least to require a promotional/competitive price); HOP’s charged rates were materially above those comparators | "Our" indicates HOP’s own retail price; language gives HOP discretion to set price and excludes market comparators | Court: Term is ambiguous; reasonable interpretation exists that limits HOP’s discretion; cannot dismiss breach claim at pleading stage |
| Use of extrinsic evidence (letter) to interpret ambiguous contract | Melville relies on HOP’s October 14, 2019 letter describing "prevailing retail price" as fluctuating with oil cost to support market-linked reading | HOP argued contract language alone is unambiguous and bars market-based comparison | Court: Because phrase is ambiguous, court may consider the letter; it supports plausible market-linked interpretation |
| Breach of implied covenant of good faith and fair dealing | Even if HOP had some contractual discretion, it acted in bad faith by charging commercially unreasonable/price-gouging rates inconsistent with reasonable consumer expectations | If contract conferred discretion, there is no separate implied-covenant claim; conduct derives from contract terms | Court: Implied-covenant claim not redundant at pleading stage; Melville plausibly alleged distinct bad‑faith exercise of any discretion |
| Condition precedent (60-day written notice for billing errors) | The provision is not an unambiguous pre-suit condition; "preserve your rights" ambiguous and not clearly a waiver of suit | The 60‑day written-notice clause is a condition precedent to suit which Melville did not allege he satisfied | Court: Clause is ambiguous and not an unambiguous condition precedent; dismissing for failure to satisfy it is unwarranted now |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (establishes plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (applies Twombly and clarifies pleading requirements)
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941) (federal courts in diversity apply forum state choice‑of‑law rules)
- W.W.W. Assocs., Inc. v. Giancontieri, 566 N.E.2d 639 (N.Y. 1990) (contracts should be enforced according to their clear terms and intent of parties)
- Debenture Tr. Co. of N.Y. v. Maverick Tube Corp., 595 F.3d 458 (2d Cir. 2010) (contract interpretation principles; UCC/common-law alignment)
- Richards v. Direct Energy Servs., LLC, 915 F.3d 88 (2d Cir. 2019) (ESCO contract language giving defendant discretion upheld; market comparators irrelevant)
- Mirkin v. XOOM Energy, LLC, 931 F.3d 173 (2d Cir. 2019) (plaintiffs plausibly alleged market-based comparator to defendant’s supply cost; dismissal reversed)
- Stanley v. Direct Energy Servs., LLC, 466 F. Supp. 3d 415 (S.D.N.Y. 2020) (contracts between Richards and Mirkin serve as useful "goalposts" for assessing ambiguity)
- Dalton v. Educ. Testing Serv., 663 N.E.2d 289 (N.Y. 1995) (implied covenant limits arbitrary exercise of contractual discretion)