Peggy Zahn v. North American Power & Gas, LL
2017 U.S. App. LEXIS 2256
7th Cir.2017Background
- Plaintiff Peggy Zahn sued North American Power & Gas, LLC (NAPG), an Alternative Retail Electric Supplier, alleging violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, breach of contract, and unjust enrichment based on an advertised “New Customer Rate.”
- Zahn alleged NAPG advertised a teaser rate of $0.0499/kWh but charged $0.0599/kWh on her initial bill and never charged less than $0.0599/kWh.
- NAPG moved to dismiss for lack of subject-matter jurisdiction (arguing ICC exclusive jurisdiction) and for failure to state a claim; the district court dismissed for lack of jurisdiction and alternatively on the merits.
- The Seventh Circuit previously characterized NAPG’s jurisdictional argument as effectively asserting that Illinois state courts lacked jurisdiction, meaning federal diversity court relief would fail if Illinois law deprived the state court of authority.
- The Seventh Circuit certified a question to the Illinois Supreme Court asking whether the Illinois Commerce Commission (ICC) has exclusive jurisdiction over such reparation claims against an Alternative Retail Electric Supplier; the Illinois Supreme Court answered no, holding Illinois trial courts have subject-matter jurisdiction.
- Because the district court reached the opposite jurisdictional conclusion, the Seventh Circuit reversed the dismissal for lack of jurisdiction, vacated the merits dismissal, and remanded for further proceedings; it also noted the district court erred by not addressing a central breach allegation (the unreceived teaser rate).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal court lacked subject-matter jurisdiction because Illinois law gives ICC exclusive jurisdiction over reparation claims against ARES providers | Zahn argued state trial courts retain jurisdiction over her reparation claim and thus federal diversity court may adjudicate it | NAPG argued Illinois law (ICC jurisdiction) bars state trial-court jurisdiction, which in turn precludes federal diversity adjudication | Illinois Supreme Court answered certified question: ICC does not have exclusive jurisdiction; state trial courts have jurisdiction. Seventh Circuit: district court erred in dismissing for lack of jurisdiction |
| Whether state-law limits can deprive a federal diversity court of the right to grant relief | Zahn: state-law jurisdictional limits do not strip federal subject-matter jurisdiction but can defeat the substantive right asserted | NAPG: state-law limitation on remedies/jurisdiction defeats federal court’s ability to grant relief in diversity | Seventh Circuit: Congress, not states, controls federal jurisdiction; but if state law removes the substantive right, federal relief may fail; here state law does not bar trial-court jurisdiction |
| Whether Zahn stated a claim under the Illinois Consumer Fraud and Deceptive Business Practices Act | Zahn alleged deceptive advertising/teaser rate and billing inconsistent with contracted rate | NAPG argued complaint lacked sufficient factual pleading to show deception or statutory violation | Seventh Circuit found the district court erred by not addressing Zahn’s specific allegation that NAPG never charged the advertised teaser rate—that allegation could support a CFDBPA claim and dismissal on Rule 12(b)(6) was premature |
| Whether Zahn stated claims for breach of contract and unjust enrichment | Zahn alleged NAPG promised a $.0499/kWh rate in contract and charged a higher amount, supporting breach and unjust enrichment claims | NAPG argued insufficient factual allegations to show contractual breach or unjust enrichment | Seventh Circuit concluded the district court improperly dismissed without addressing the key breach allegation; remanded for further proceedings |
Key Cases Cited
- Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83 (jurisdiction is prerequisite; court must first determine jurisdiction)
- Ex parte McCardle, 74 U.S. (1 Wall.) 506 (federal courts cannot proceed without jurisdiction)
- Begay v. Kerr-McGee Corp., 682 F.2d 1311 (9th Cir. 1982) (state law can prevent federal courts from granting relief by denying substantive right)
- Zahn v. N. Am. Power & Gas, LLC, 815 F.3d 1082 (7th Cir. 2016) (prior Seventh Circuit discussion of jurisdictional framing)
- Sheffler v. Commonwealth Edison Co., 955 N.E.2d 1110 (Ill. 2011) (definition/discussion of reparation claims relevant to ICC jurisdiction question)
- Berger v. Nat’l Collegiate Athletic Ass’n, 843 F.3d 285 (7th Cir. 2016) (standard of review for Rule 12(b)(6) dismissals)
- Bell v. City of Chicago, 835 F.3d 736 (7th Cir. 2016) (construing complaint in plaintiff’s favor on dismissal)