Direct Energy loses bid to toss proposed N.Y. consumer class action - Reuters

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• Judge says complaint "plausibly" alleges Direct Energy didn't clearly disclose pricing change
• Complaint says automatic plan change is misleading, results in higher prices

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NEW YORK (Reuters) - A federal judge on Thursday denied a bid by electricity end-use supplier Direct Energy Services to throw out a putative class action lawsuit alleging the company overcharged thousands of New York customers for natural gas by misleading them about its pricing plans.

U.S. District Judge Frank Geraci in Rochester, New York, allowed the lawsuit against Direct Energy to proceed on grounds that the named plaintiff sufficiently alleged the company failed to clearly disclose its policy of automatically switching customers' fixed-rate plans to pricier variable-rate ones.

Those plans are often two to three times more expensive than the "enticingly low" fixed rates that end after a set term, the complaint alleges. But reference to the variable charges is "buried" in a "sea of confusing fine print" in customer contracts, the complaint says.

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Houston-based Direct Energy was acquired by U.S. integrated power firm NRG Energy for $3.63 billion last year. Direct Energy did not immediately respond to a request for comment.

The plaintiff, Rochester resident Richard Schafer, sued in 2019 on behalf of himself and other New York Direct Energy customers. Geraci previously dismissed his complaint but a court of appeals reversed his decision in April, finding the judge had improperly considered evidence outside the complaint.

Direct Energy moved again to dismiss the lawsuit in June, arguing that its contract complies with the section of the New York General Business Law that Schafer accuses it of violating.

Geraci on Thursday disagreed. "Schafer has plausibly alleged that the contract materials he received did not 'clearly and conspicuously' identify all variable charges," he wrote.

Michael Aschenbrener, a lawyer for Schafer, declined to comment.

The case is Schafer et al v. Direct Energy Services, LLC, U.S. District Court for the Western District of New York, No. 6:19-cv-06907.

For Schafer et al: Scott Kamber of KamberLaw

For Direct Energy Services, LLC: Steven Lucks of Fishkin Lucks

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Sebastien Malo

Sebastien Malo reports on environmental, climate and energy litigation. Reach him at sebastien.malo@thomsonreuters.com

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