LUIS ACEVEDO v. SUNNOVA ENERGY CORPORATION, et al.
Case No. 5:23-cv-02436-MRA-DTB
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
June 28, 2024
HON. MONICA RAMIREZ ALMADANI, UNITED STATES DISTRICT JUDGE
ECF 27; ECF 41; ECF 42
Before the Court is Defendant Sunnova Energy Corporation‘s Motion to Dismiss Plaintiff Luis Acevedo‘s First Amended Complaint (the “Motion“). ECF 27. The Court read and considered the Motion and deemed the matter appropriate for decision without oral argument. See
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Plaintiff Luis Acevedo brought this action against Defendant Sunnova Energy Corporation and Does 1-20 on November 30, 2023. ECF 1. On February 5, 2024, Plaintiff filed the operative First Amended Complaint (“FAC“). ECF 21.
Plaintiff is a homeowner residing in Riverside County, California. Id. ¶¶ 8, 43. Sunnova Energy Corporation (hereinafter, “Defendant” or “Sunnova“) is an energy company that provides a wide range of products, including solar panels. Id. ¶ 19. Defendant also provides consumers with financing options for its products, including loans, leases, and Power Purchase Agreements (“PPA“). Id. ¶ 19. The lease and PPA arrangements allow Sunnova to install solar panels on a consumer‘s home and charge the consumer for the solar energy system. Id. ¶ 20. Under a lease agreement, a consumer pays a flat monthly payment, whereas under the PPA, a consumer pays a certain rate for the energy generated by the solar energy system. Id. ¶¶ 21-22.
Sunnova partners with solar installation contractors, including Kuubix Global, LLC (“Kuubix“), to sell its products and secure financing agreements with consumers. Id. ¶¶ 1, 26, 28. As part of this business model, Sunnova authorizes its partners’ door-to-door salespeople to initiate financing applications, obtain consumers nonpublic personal identifying information (“PII“), and submit applications on the consumers’ behalf. Id. ¶¶ 29, 34. Sunnova‘s partners use an electronic, paperless financing platform administered by Sunnova to receive instant approval on applications and immediately close transactions.
In 2021, an individual named Mostafa Shaheen appeared unannounced at the home of Plaintiff and his husband. Id. ¶ 43. Unbeknownst to Plaintiff and his husband, Shaheen was a salesperson working with Kuubix. Id. ¶¶ 2, 43, 46. Shaheen represented that he was offering a free government program to qualifying homeowners to install solar panels and save money on their energy bills. Id. ¶¶ 2, 45. Shaheen repeatedly assured Plaintiff that there were no costs associated with the program. Id. ¶¶ 2, 3, 45, 48, 49.
Shaheen returned to Plaintiff‘s home on several occasions over the course of many months. Id. ¶ 44. During one of Shaheen‘s visits, he told Plaintiff that contractors would need to perform a “detach and reset” of the garage roof prior to installing the solar panels, and that this would also be free of charge. Id. ¶ 47. In August or September 2022, Plaintiff and his husband found permits at their home for work to be performed on their garage roof. Id. ¶ 51. Plaintiff‘s husband signed the permit. Id. A week later, solar panels were installed on their roof. Id. Shaheen never provided Plaintiff or his husband with a contract or agreement and never offered Plaintiff any kind of documentation. Id. ¶ 50.
The solar panels stopped functioning in February 2023. Id. ¶ 52. When Plaintiff‘s husband contacted Shaheen for repairs, Shaheen directed them to contact Kuubix. Id. This was the first time that Plaintiff or his husband heard of Kuubix. Id. When Plaintiff‘s husband called Kuubix, he was told to contact Sunnova to get a work order. Id. ¶ 52. This was the first time that Plaintiff or his husband ever heard of Sunnova. Id. Plaintiff never signed a contract with Kuubix or Sunnova. Id. ¶¶ 63, 66.
Plaintiff and his husband made numerous calls to Sunnova over a period of months. Id. ¶ 55. On one such call, Plaintiff‘s husband learned for the first time about a contract between Plaintiff and Sunnova. Id. ¶ 53. Upon request, Plaintiff‘s husband provided the Sunnova representative with Plaintiff‘s PII to access his account. Id. This information did not match the information Sunnova had on file. Id. Sunnova refused to provide Plaintiff with a copy of the contract or cancel the contract. Id. ¶ 54. Instead, Defendant informed
Plaintiff eventually received a copy of the contract on June 22, 2023. Id. ¶ 56. The PPA, which was affixed with Plaintiff‘s signature, was for a 25-year term totaling over $25,000. Id. ¶ 56. He also received a copy of an alleged PPA Amendment, signed three weeks after the PPA. Id. The PPA and PPA Amendment (collectively, the “Contract“) obligate Plaintiff to pay $116.98 per month for the first year, with the monthly cost increasing over the term of the agreement.2 Id. ¶ 61. The Contract contains inaccurate information. Id. ¶¶ 57-60. Unbeknownst to Plaintiff, Shaheen used a fake email address, false birth date, false phone number, and incorrect address to enter Plaintiff into a Contract with Sunnova. Id. ¶ 4. The incorrect email address would have been used to verify Plaintiff‘s e-signature. Id. ¶ 57. The PPA Amendment also includes an erroneous home address for a different “Luis Acevedo.” Id. ¶¶ 58-59. The salesperson listed on the Contract is one “Daniel Lee,” not Mostafa Shaheen. Id. ¶ 60. Upon receiving the Contract, Plaintiff attempted to cancel it, including by certified mail on October 10, 2023. Id. ¶ 61. Sunnova has refused to rescind the Contract and continues to demand monthly payments of Plaintiff. Id. ¶¶ 6, 61, 67-68.
On these allegations, Plaintiff brings eight causes of action against Defendant: (1) fraudulent concealment; (2) negligence; (3) violations of the Consumers Legal Remedies Act (“CLRA“),
II. LEGAL STANDARD
III. DISCUSSION
A. Agency Theory (First, Second, Third, Seventh, Eighth Causes of Action)
Defendant primarily argues that Plaintiff has not pleaded facts to plausibly allege an agency relationship between Sunnova and Kuubix wherein Sunnova could be held liable as principal for fraudulent concealment, negligence, as well as violations of the CLRA and the UCL. ECF 27 at 16-23.
Under California law, “[a]n agent is one who represents another, called the principal, in dealings with third persons. Such representation is called agency.”
“An agency may be created, and an authority may be conferred, by a precedent authorization or a subsequent ratification.”
The Court finds that the FAC contains sufficient facts to plausibly allege the existence of an agency relationship, either through prior authorization or subsequent ratification. The FAC claims that Sunnova partners with solar installation contractors like Kuubix to sell its products and secure financing agreements with consumers. ECF 21 ¶¶ 28, 34. Plaintiff further alleges that in this arrangement:
SUNNOVA retains the right to control its partners’ conduct by, among other things, (1) requiring Kuubix sales agents to use specific software, applications, and technology when engaging in transactions with consumers
on SUNNOVA‘s behalf; (2) controlling the SUNNOVA products Kuubix sales agents could offer, the terms and conditions of the products offered, the method of presentation of the products offered, and the contractual documents that could be utilized; (3) controlling the marketing and sales tactics of Kuubix and its sales agents; (4) retaining the right to discipline Kuubix and sales agents for violations of policies and procedures set by SUNNOVA; (5) requiring all sales agents who offer contracts using SUNNOVA forms, including those sales agents of Kuubix, to be registered with the [Contractors State License Board] as being employed by SUNNOVA; and (6) retaining the right to terminate Kuubix and/or Kuubix sales agents from the Sunnova Program.
Id. ¶ 34. The FAC claims that Defendant has financially benefitted from this arrangement, id. ¶¶ 24, 31, and continues to seek payment from Plaintiff on the Contract, id. ¶¶ 66, 68. It can be reasonably inferred from these facts, taken as true, that Defendant authorized Kuubix to enter it into legally binding contracts, including the Contract involving Plaintiff, and continues to believe that it has some legal entitlement under the Contract. As such, Plaintiff has plausibly alleged that Defendant granted Kuubix authority to alter its legal relationship with Plaintiff. This satisfies the elements of agency.
Nevertheless, Defendant alleges that this theory of agency is deficient for several reasons, none of which the Court finds persuasive.
First, Defendant contends that the FAC only alleges that Defendant partners with solar installation contractors to sell its products and secure related financing. ECF 27 at 17. But that is not “all that is alleged here,” as Defendant claims. Id. As set forth above, Plaintiff alleges with particularity the manner and means by which Sunnova directs Kuubix‘s conduct in fulfillment of a mutual enterprise. See ECF 21 ¶ 34. Defendant insists that “[t]here is nothing unusual about a company partnering with third-party vendors to help consumers finance a product.” ECF 27 at 18. Defendant does not explain or provide any authority for why the commonplaceness of this practice should factor in the agency inquiry. Moreover, even if it were a relevant consideration, Defendant still ignores that, as
Second, Defendant argues that Plaintiff has not alleged facts to show that Defendant had the right to control the “day-to-day operations” of Kuubix. ECF 27 at 18. The California Supreme Court clarified in Patterson that a principal‘s “day-to-day” authority, as it arose in the franchisor-franchisee context, includes the “general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee‘s employees.” 60 Cal. 4th at 497-98; see also Malloy, 37 Cal. 2d at 370 (“The power of the principal to terminate the services of the agent gives him the means of controlling the agent‘s activities.“). Plaintiff alleges that Defendant retains the right to discipline and terminate Kuubix and its salespeople for violations of Sunnova‘s policies and procedures. See ECF 21 ¶ 34. Plaintiff also alleges that Sunnova requires Kuubix‘s salespeople to be registered with the Contractors State License Board as employees of Sunnova. Id. Based on these facts, the Court finds that it is plausible Sunnova had the right to control Kuubix and its salespeople.
Third, Defendant argues that Plaintiff‘s allegations regarding Defendant‘s right to control Kuubix contradict those made in his original Complaint, and therefore should be disregarded. ECF 27 at 18. Specifically, Defendant notes that, in the Complaint, Plaintiff alleged that Sunnova “exercises virtually no oversight over [the third-party contractor‘s] activities.” ECF 1 ¶ 35. In the FAC, Plaintiff removed this allegation. While it is true that “[a] party cannot amend pleadings to directly contradict an earlier assertion made in the same proceeding,” Airs Aromatics, LLC v. Victoria‘s Secret Stores Brand Mgmt., Inc., 744 F.3d 595, 600 (9th Cir. 2014) (citation omitted), the FAC does not directly contradict the original Complaint. In both the original Complaint and FAC, Plaintiff alleges that Kuubix‘s salespeople acted “as agents and at the direction of Sunnova.” Compare ECF 1 ¶ 13 with ECF 21 ¶ 12. Moreover, consistent with the FAC, the original Complaint generally alleged that Sunnova “designed, implemented and oversees a program that entices solar installation contractors to partner with SUNNOVA ....” ECF 1 ¶ 29.
Fourth, Defendant argues that even if an agency relationship exists between Defendant and Kuubix, Plaintiff has failed to allege that Kuubix‘s salesperson acted within the scope of his authority to sell Sunnova‘s products because he concealed from Plaintiff that he was affiliated with Sunnova. ECF 27 at 20-21. But “it is well settled in this state that a principal is liable to third parties not only for the negligence of his agent in the transaction of the business of the agency but also for the frauds or other wrongful acts committed by such agent.” Grigsby v. Hagler, 25 Cal. App. 2d 714, 715-16 (1938); Brown v. Oxtoby, 45 Cal. App. 2d 702, 708 (1941) (“Although the principal may not have actually authorized the particular fraudulent act, yet the principal is responsible for the fraud of the agent if he has entrusted to the agent a matter which puts the agent in a position to perpetuate the fraud complained of, while the agent is executing the agency transaction within the scope of his employment.“); Powell v. Goldsmith, 152 Cal. App. 3d 746, 750 (1984) (“[A]n agent is under a duty to inform his principal of matters in connection with the agency which the principal would desire to know about. Even if he fails to do so, the principal will in most cases be charged with such notice.” (citation and internal quotation marks omitted)).
In the FAC, Plaintiff states that Defendant entrusts Kuubix and its salespeople with authority to sell its solar panels and sign consumers up for financing. See ECF 21 ¶¶ 1, 28, 29. As it relates to Plaintiff, Kuubix‘s salesperson was able to forge the Contract only while carrying out the agency‘s business. That the salesperson concealed the business does not mean he “step[ped] aside from the business of his employer.” Grigsby, 25 Cal. App.
Lastly, Defendant argues that it could not have ratified the alleged misconduct because an illegal contract cannot be ratified, and Plaintiff has not alleged that Defendant had “full knowledge of all material facts of the alleged wrongdoing.” ECF 27 at 22. Defendant‘s argument lacks merit.
“Ratification is the subsequent adoption by one claiming the benefits of an act, which without authority, another has voluntarily done while ostensibly acting as the agent of him who affirms the act and who had the power to confer authority.” Reusche v. Cal. Pac. Title Ins. Co., 231 Cal. App. 2d 731, 737 (1965). Where unauthorized conduct has later been ratified, “[a] principal cannot split an agency transaction and accept the benefits thereof without the burdens.” Id. Although “it is essential that the principal have full knowledge at the time of the ratification of all material facts and circumstances relative to the unauthorized act or transaction,” this “general rule” does not apply where “the principal is wilfully [sic] ignorant or purposely refrains from seeking information.” Gallagher v. California Pac. Title & Tr. Co., 13 Cal. App. 2d 482, 493 (1936).
The California Court of Appeals’ decision in Reusche is instructive. Like Sunnova, the respondent in that case argued that she did not know the true source of a fraudulently obtained check when she accepted it, and therefore could not have ratified the purported agent‘s misconduct. Reusche, 231 Cal. App. 2d at 737. The court rejected this argument, stating that a principal can be held to have ratified the unauthorized acts of an agent where “ignorance of the facts arises from the principal‘s own failure to investigate[,] and the circumstances are such as to put a reasonable man on inquiry.” Id. Plaintiff alleges that he and his husband made several calls to Sunnova over several months, informing them of the fraudulent nature of the contract. ECF 21 ¶¶ 53-55. Sunnova is also alleged to be on notice that Plaintiff‘s PII did not match the information Sunnova had on file and that the information on the Contract itself was inconsistent with Plaintiff‘s PII. Id. ¶¶ 53, 57-59. Plaintiffs allege that Sunnova has not pursued corrective action, instead repeatedly calling
The Reusche respondent argued, like Sunnova, that she could not have ratified a forgery “as a forger neither intends nor pretends to act for the principal.” Reusche, 231 Cal. App. 2d at 737-738. The court held to the contrary, that a principal can be held liable for an intentional tort or crime committed by its agent if the principal “should have realized at the time of his negligent conduct that there was a likelihood that as a result thereof, a third person might commit an intentional tort or crime.” Id. at 738. Plaintiff alleges that Sunnova incentivized Kuubix and its other partners to “win more work, close more deals, and get paid faster.” ECF 21 ¶ 28. This allegation raises a reasonable inference that Defendant knew or should have known that fraud was “within the orbit of risk” created by its enterprise. Reusche, 231 Cal. App. 2d at 738.
Accordingly, the Court finds that Plaintiff has plausibly alleged an agency theory of liability.
B. Failure to State a Claim (All Causes of Action)
1. Fraudulent Concealment (First Cause of Action)
“The required elements for fraudulent concealment are: (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact to the plaintiff; (3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would not have acted as he or she did if he or she had known of the concealed or suppressed fact; and (5) plaintiff sustained damage as a result of the concealment or suppression of the fact.” Graham v. Bank of Am., N.A., 226 Cal. App. 4th 594, 606 (2014).
Plaintiff has plausibly stated a fraudulent concealment claim against Sunnova. Plaintiff contends that Defendant concealed three facts: (1) that “SUNNOVA and its agents were selling and/or otherwise marketing a SUNNOVA PPA“; (2) “that SUNNOVA and its agents used fake information to complete a PPA in Plaintiff‘s name; and (3) “that
2. Negligence (Second Cause of Action)
“The elements of any negligence cause of action are duty, breach of duty, proximate cause, and damages.” Peredia v. HR Mobile Services, Inc., 25 Cal. App. 5th 680, 687 (2018). Defendant argues once again that there can be no negligence claim without an agency relationship between Defendant and Kuubix. ECF 27 at 23-24. The Court has found that an agency relationship has been plausibly alleged, and thus, the Court denies Defendant‘s Motion as to the negligence claim.
3. Violations of the CLRA (Third Cause of Action)
The CLRA prohibits certain enumerated “unfair methods of competition and unfair or deceptive acts or practices . . . undertaken by any person in a transaction intended to result or that results in the sale or lease of goods or services to any consumer.”
Defendant asserts that Plaintiff lacks standing to sue under the CLRA. To establish standing under the CLRA, a plaintiff must show that “(1) she has suffered economic injury or damage, and (2) this injury or damage was the result of, i.e. caused by . . . the CLRA violation that is the gravamen of [her] claim.” Shaeffer v. Califia Farms, LLC, 44 Cal. App. 5th 1125, 1137 (2020) (citations and internal quotation marks omitted). To show causation, the plaintiff must demonstrate that “she actual[ly] reli[ed] on the allegedly
Defendant contends that the FAC does not allege Plaintiff “detrimentally relied on anything Sunnova said or did.” ECF 27 at 25. This argument seems premised on two assumptions, both of which are incorrect: (1) Defendant cannot be held liable for the misrepresentations made by Kuubix and its salesperson, and (2) Plaintiff cannot claim reliance on an omission. The Court has considered and rejected Defendant‘s first premise. As to its second assumption, Defendant is wrong on the law. “Fraudulent omissions are actionable under both [the CLRA and the UCL]” so long as Plaintiff shows “actual reliance.” See Daniel v. Ford Motor Co., 806 F.3d 1217, 1225 (9th Cir. 2015) (citation omitted). This reliance is presumed when the omission is material, as in where “a reasonable consumer would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question.” Id. (quotation omitted). Plaintiff alleges that Defendant concealed the true cost of the solar energy system and the existence of the Contract. ECF 21 ¶ 73. Had he known these facts, Plaintiff alleges that he would have refused to engage at all. Id. ¶ 77. The Court can reasonably infer from this that Defendant‘s alleged omissions are material, and that Plaintiff presumptively relied on those omissions.
Accordingly, the Court dismisses the Motion with respect to the CLRA claim.
4. Violation of the FCRA (Fourth Cause of Action)
The FCRA,
Defendant contends that Plaintiff has not alleged that Defendant did not have an unauthorized purpose, i.e., that Sunnova did not have a reasonable belief that the Contract was legitimately executed. ECF 27 at 28. But the Ninth Circuit has been explicit that the defendant, not the plaintiff, “has the burden of pleading it obtained the report for an authorized purpose.” See Nayab, 942 F.3d at 487, 495. This is so because “placing the burden on the plaintiff would be unfair, as it would require the plaintiff to plead a negative fact that would generally be peculiarly within the knowledge of the defendant.” Id. at 495. Accordingly, the Motion is denied as to the FCRA claim.
5. Violation of the Rosenthal Act (Fifth Cause of Action)
The Rosenthal Act prohibits “debt collectors from engaging in unfair or deceptive acts or practices in the collection of consumer debts and to require debtors to act fairly in entering into and honoring such debts.”
To state a claim under the Rosenthal Act, a plaintiff must establish that (1) he or she is a “consumer,” (2) who was the object of a collection activity arising from a “debt,” (3) the defendant is a “debt collector,” and (4) the defendant violated a provision of the
Plaintiff has stated a claim under the Rosenthal Act. Plaintiff alleges that Defendant continues to attempt to collect on a purportedly fraudulent contract, which is conduct proscribed by the FDCPA. ECF 21 ¶¶ 2, 6, 69, 102-03; see
6. Violations of the HSSA (Sixth Cause of Action)
The HSSA was intended to “protect consumers against the types of pressures that typically can arise when a salesman appears at a buyer‘s home.” Weatherall Aluminum Prods. Co. v. Scott, 71 Cal. App. 3d 245, 248 (1977). The HSSA applies to “any contract . . . for the sale, lease, or rental of goods or services or both, made at other than appropriate trade premises in an amount of twenty-five dollars ($25) or more.”
Plaintiff alleges that Sunnova violated the HSSA by (a) failing to timely provide Plaintiff with a copy of the Contract, including notice of his three-day right to cancel and (b) refusing to honor his right to cancel the Contract. ECF 21 ¶¶ 122-25. Defendant argues that Plaintiff has not alleged that the Contract did not contain the requisite right to cancel notice or that he timely exercised his right to cancel. ECF 27 at 31.
Plaintiff has sufficiently stated a claim under the HSSA. While it is true that Plaintiff did not mail a written notice of cancellation until approximately four months after receiving a copy of the Contract, see ECF 21 ¶¶ 56, 61, Plaintiff disputes that there was ever a valid contract to begin with. See Nordeman v. Dish Network LLC, 525 F. Supp. 3d 1080, 1086 (N.D. Cal. 2021) (declining to dismiss HSSA claim based on disputed facts related to contract formation). Plaintiff contends that contrary to the spirit of the HSSA, he was never provided the Contract contemporaneous to the solicited sale and never signed the Contract prior to its execution. Id. ¶¶ 50-51, 63, 66. Plaintiff has sufficiently alleged that Defendant never brought the Contract into compliance with the HSSA, and therefore Plaintiff was not required to cancel the Contract within three business days of receiving it, which came months after the solar energy system was installed. Viewed in this light, the allegation that Defendant has rebuffed Plaintiff‘s attempts to rescind the Contract constitutes a violation
7. Violations of the Cal. Bus. & Prof. Code § 7150, et seq. (Seventh Cause of Action)
California Business & Professions Code section 7159(d) provides that “[a] home improvement contract and any changes to the contract shall be in writing and signed by the parties to the contract prior to the commencement of work covered by the contract.” The contract must contain specific information, including the “name, business address, and license number of the contractor.” Id. Furthermore, “[b]efore any work is started, the contractor shall give the buyer a copy of the contract signed and dated by both the contractor and the buyer.”
Plaintiff has sufficiently stated a claim under
Plaintiff further contends that Defendant has committed “a host of . . . violations of
8. Violations of the UCL (Eighth Cause of Action)
The UCL proscribes “any unlawful, unfair or fraudulent business act or practice.”
First, Defendant contends that Plaintiff does not have standing to bring a UCL claim. Since the CLRA and UCL standing requirements are “essentially identical,” Veera v. Banana Republic, LLC, 6 Cal App. 5th 907, 916 (2016), and the Court has determined that Plaintiff has standing to bring its CLRA claim, Plaintiff also has standing to bring his UCL claim.
Second, Defendant argues that Plaintiff‘s UCL claims under the “unlawful” prong fail because Plaintiff has not sufficiently alleged an underlying violation of law. ECF 27 at 26. To prevail on the “unlawful” prong of the UCL, “the plaintiff must show that a challenged advertisement or practice violates any federal or California statute or
Lastly, Defendant argues that Plaintiff has not given it fair notice of the public injunction it seeks pursuant to
Accordingly, the Court denies the Motion as to the UCL claim.
IV. CONCLUSION
For the foregoing reasons, the Motion is DENIED in substantial part and GRANTED in limited part as to any claims brought under
IT IS SO ORDERED.
Dated: June 28, 2024
HON. MÓNICA RAMÍREZ ALMADANI
UNITED STATES DISTRICT JUDGE
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