Opinion
DOCKET NO. A-4532-12T1
07-15-2014
MARK NAPIER, Plaintiff-Appellant, v. PUBLIC SERVICE ELECTRIC AND GAS COMPANY, and PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED, Defendants-Respondents.
John J. Coughlin argued the cause for appellant. Michael R. Griffinger argued the cause for respondents (Gibbons P.C., attorneys; Mr. Griffinger, Thomas R. Valen, and Marc D. Bianchi, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Grall and Waugh.
On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-0070-13.
John J. Coughlin argued the cause for appellant.
Michael R. Griffinger argued the cause for respondents (Gibbons P.C., attorneys; Mr. Griffinger, Thomas R. Valen, and Marc D. Bianchi, on the brief). PER CURIAM
Plaintiff Mark Napier appeals the Law Division's April 22, 2013 order dismissing with prejudice his complaint against defendant Public Service Electric and Gas Company, which is a regulated public utility wholly owned by defendant Public Service Enterprise Group Incorporated (collectively Public Service). We affirm, but modify the order of dismissal.
I.
We discern the following facts and procedural history from the record on appeal.
New Jersey encourages development of renewable energy sources. To that end, N.J.S.A. 48:3-87(d) required the Board of Public Utilities (BPU) to issue renewable energy portfolio standards (REPS) requiring energy providers to generate a predetermined percentage of electricity by means of renewable sources, including solar power. The standards set forth in N.J.A.C. 14:8-2.1 to -2.3, require energy suppliers to generate the solar energy directly or to purchase an appropriate number of Solar Renewable Energy Certificates (SRECs) from solar energy producers, or both. N.J.A.C. 14:8-2.2 and -2.3. They were adopted in 2004.
SRECs are defined as certificates "issued by the [BPU] or its designee, which represents one megawatt-hour (MWh) of solar energy that is generated by a facility connected to the distribution system in New Jersey, and has value based upon, and driven by, the energy market." N.J.A.C. 14:8-2.2.
Energy suppliers failing to meet the standards must pay a penalty to the BPU. N.J.A.C. 14:8-2.2, -2.10.
The BPU, through its designee PJM Interconnection, LLC, and PJM-EIS (collectively PJM-EIS), the "wholly-owned subsidiary of PJM Technologies, Inc., which is in turn a wholly-owned subsidiary of PJM Interconnection, L.L.C.," N.J.A.C. 14:4-1.2, awards SRECs to solar energy producers based on the amount of solar electricity generated, N.J.A.C. 14:8-2.9. A solar-energy producer is authorized to sell its SRECs to energy suppliers for the purpose of meeting their REPS requirements. See N.J.A.C. 14:8-2.8. The dollar value of SRECs, which are traded in a competitive market, fluctuates over time based on supply and demand.
PJM stands for Pennsylvania New Jersey Maryland. It is a "regional transmission organization (RTO) that coordinates the movement of wholesale electricity" in a region. N.J.A.C. 14:4-1.2. EIS stands for Environmental Information Services. Ibid.
The BPU also designated PJM-EIS to perform related supervisory and regulatory activities. N.J.A.C. 14:4-1.2; N.J.A.C. 14:8-2.2, -2.9, -2.11.
In February 2009, Public Service petitioned the BPU to implement a proposed initiative called the "Solar 4 All Program." One segment of the program proposed the installation of solar panels on approximately 200,000 utility and street light poles serviced by Public Service. In its petition, Public Service represented that it did not have the ability to measure the power output of each solar panel individually. Instead, it proposed to measure a sample of panels and calculate the appropriate load profile from the sample.
During its six month review of Public Service's petition, the BPU held six public hearings in different parts of New Jersey, and considered commentary from interested and intervening parties. On July 27, 2009, the BPU approved the petition, subject to the terms and conditions of a settlement agreement involving the BPU, the Division of Rate Counsel, and other interested parties. The settlement permitted Public Service to receive and sell SRECs on the market regulated by PJM-EIS. The BPU formally approved and ratified the settlement agreement on August 3, 2009.
The PBU's approval provided that any challenge to the right of Public Service to receive SRECs would be reviewed upon request and only prospectively.
Napier is the owner of two solar photovoltaic generation systems in New Jersey. They generate solar electricity and sell the resulting SRECs to energy suppliers to satisfy their REPS requirements.
In January 2013, Napier filed a complaint on behalf of himself and a putative class consisting of "all persons, businesses and organizations that generated, owned and/or sold and/or held for sale SREC[s] that were issued for the generation of solar power from systems located in New Jersey in the years 2009, 2010, 2011 and 2012." The complaint alleged that Napier and the class members sustained economic loss "due to the decline in the price of [SRECs] caused by the dilution of the SREC market resulting from defendants' sale of SREC[s] that were obtained without actually producing the renewable energy that the SRECs are supposed to represent." According to the complaint, Public Service had received and sold approximately 34,000 SRECs, representing up to twenty-five percent of the SREC market, at the time the complaint was filed.
The complaint alleged that Public Service received SRECs based on representations that it produced more electricity than, is possible for the type of pole-mounted solar panels used. In contrast, Napier contends that he and other solar generators were required to follow a "rigid reporting and audit scheme" to which Public Service was not subject. As a consequence, according to the complaint, Public Service received more SRECs than it had a right to, which resulted in a market "flooded" with illegitimately-obtained SRECs that devalued legitimately-obtained SRECs, resulting in economic loss to the holders of non-Public-Service-generated SRECs. On behalf of himself and the putative class, Napier sought to recover damages based upon two legal theories: unfair competition and unjust enrichment.
In March, Public Service filed a motion in lieu of an answer, seeking dismissal of the complaint for failure to state a claim upon which relief can be granted. R. 4:6-2(e). The motion judge heard oral argument on April 19, and rendered an oral decision explaining his reasons for granting the motion. He entered an order of dismissal with prejudice on April 22. This appeal followed.
II.
On appeal, Napier argues that the motion judge erred as a matter of law in finding that he had no claim against Public Service under an unjust enrichment or unfair competition theory. He also argues that, in any event, the judge should not have dismissed the complaint with prejudice because there was no determination on the merits of the claims.
In reviewing the dismissal of a complaint for failure to state a claim, Rule 4:6-2(e), we are bound by the same standard that governed the motion judge. Sickles v. Cabot Corp., 379 N.J. Super. 100, 106 (App. Div.), certif. denied, 185 N.J. 297 (2005); see also Indep. Dairy Workers Union v. Milk Drivers Dairy Emps. Local 680, 23 N.J. 85, 89 (1956). We are obligated to accept the allegations of the complaint as true and afford plaintiff all reasonable factual inferences. Indep. Dairy Workers, supra, 23 N.J. at 89.
The complaint must be "searched in depth and with liberality to determine whether a cause of action can be gleaned even from an obscure statement." Seidenberg v. Summit Bank, 348 N.J. Super. 243, 250 (App. Div. 2002) (citing Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989)). "If a generous reading of the allegations merely suggests a cause of action, the complaint will withstand the motion." F.G. v. MacDonell, 150 N.J. 550, 556 (1997). A motion to dismiss should be granted "in only the rarest of instances." NCP Litig. Trust v. KPMG LLP, 187 N.J. 353, 365 (2006) (quoting Printing Mart, supra, 116 N.J. at 772) (internal quotation marks omitted); accord Cnty. of Warren v. State, 409 N.J. Super. 495, 503 (App. Div. 2009), certif. denied, 201 N.J. 153, cert. denied, ___ U.S. ___, 130 S. Ct. 3508, 177 L. Ed. 2d 1092 (2010).
Where, however, it is clear that the complaint states no basis for relief and that discovery would not provide one, dismissal of the complaint is appropriate. Banco Popular N. Am. v. Gandi, 184 N.J. 161, 166 (2005). As we held in Sickles, supra, 379 N.J. Super. at 106, "a court must dismiss the plaintiff's complaint if it has failed to articulate a legal basis entitling plaintiff to relief," see also Holmin v. TRW, Inc. , 330 N.J. Super. 30, 32 (App. Div. 2000), aff'd o.b., 167 N.J. 205 (2001); Camden Cnty. Energy Recovery Assocs. v. N.J. Dep't of Envtl. Prot., 320 N.J. Super. 59, 64 (App. Div. 1999), aff'd o.b., 170 N.J. 246 (2001); Pressler & Verniero, Current N.J. Court Rules, comment 4.1.1 on R. 4:6-2 (2014). "[A] dismissal is mandated where the factual allegations are palpably insufficient to support a claim upon which relief can be granted." Rieder v. State, 221 N.J. Super. 547, 552 (App. Div. 1987).
A.
We turn first to the claim based on unjust enrichment. Napier characterizes his claim as follows:
[D]efendants are receiving a thing of value, to which they are not entitled, for which they receive money. Because this money comes from the sale of a product in a competitive, finite marketplace, the plaintiff and other sellers' competing products are sold for a lower price. . . . [I]f these fraudulent SREC[s] were not in the market, there would be a corresponding greater demand and higher price for those properly acquired and sold.
"'The doctrine of unjust enrichment rests on the equitable principle that a person shall not be allowed to enrich himself unjustly at the expense of another.'" Goldsmith v. Camden Cnty. Surrogate's Office, 408 N.J. Super. 376, 382 (App. Div.) (quoting Assocs. Commercial Corp. v. Wallia, 211 N.J. Super. 231, 243 (App. Div. 1986)), certif. denied, 200 N.J. 502 (2009). If a plaintiff is successful in a claim for unjust enrichment, "under general principles of equity the court may require the wrongdoers to account for their profits so that as nearly as may be the parties will be protected and equity done." Driscoll v. Burlington-Bristol Bridge Co., 8 N.J. 433, 499, cert. denied, 344 U.S. 838, 73 S. Ct. 25, 97 L. Ed. 652 (1952); see also Cnty. of Essex v. First Union Nat'l Bank, 186 N.J. 46, 56-57 (2006).
The motion judge recognized two different approaches to claims for unjust enrichment claims: one based on quasi-contract and the other based on disgorgement of the benefit illicitly obtained from a government entity. To establish a quasi-contractual claim for unjust enrichment,
a plaintiff must show both that defendant received a benefit and that retention of that benefit without payment would be unjust. The unjust enrichment doctrine requires that plaintiff show that it expected remuneration from the defendant at the time it performed or conferred a benefit on defendant and that the failure of remuneration enriched defendant beyond its contractual rights."[A] claim for unjust enrichment may arise outside the usual quasi-contractual setting." Goldsmith, supra, 408 N.J. Super. at 382; see also Cnty. of Essex, supra, 373 N.J. Super. at 550 ("[W]hen corrupt means have been employed to obtain a governmental contract, the concept of unjust enrichment has been used to deny the wrongdoer any profit from the transaction and to thereby deter such conduct.").
[VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554 (1994) (citations omitted).]
The motion judge determined that Napier had not stated a viable claim against Public Service on either theory. Napier argues that the motion judge erred as a matter of law. We agree with the motion judge that a claim based on quasi-contract is not viable in this case. "[Q]uasi-contract [unjust enrichment] cases involve either some direct relationship between the parties or a mistake on the part of the person conferring the benefit." Callano v. Oakwood Park Homes Corp., 91 N.J. Super. 105, 109 (App. Div. 1966); accord Castro v. NYT Television, 370 N.J. Super. 282, 299-300 (App. Div. 2004). There is no such relationship between Napier and Public Service.
Napier focuses his argument primarily on the second type of claim, those involving wrongful conduct related to a public entity, arguing that the government entity need not be directly involved or have suffered the loss sought to be recovered. According to Napier, County of Essex and Driscoll stand for the proposition that disgorgement of the benefit received is an appropriate remedy in a private cause of action. Public Service responds that the alternative theory of unjust enrichment is "limited to actions brought by government entities to disgorge payments made under fraudulently obtained government contracts" and still requires a benefit to be directly conferred.
In Driscoll, supra, 8 N.J. at 449-50, the defendants used their political power to orchestrate the purchase, by the State, of two bridges from a county commission, as a result of which they unjustly profited. The State sought rescission of the contract. The Supreme Court voided the contract because the "wrongdoers ha[d] conspired together to reap a profit out of a fraudulent transaction" that was "fraught with fraud and corruption." Id. at 476, 499. However, because innocent third parties were interested in the transaction, the Court allowed the transaction to proceed and required the defendants to disgorge the profits they received from the deal. Id. at 499 ("Where rescission is prayed for and is warranted by the facts, but cannot be decreed because of the intervening equities of innocent third parties[,] . . . the court may require the wrongdoers to account for their profits so that as nearly as may be the parties will be protected . . . . .").
In County of Essex, supra, 186 N.J. at 49, a bank's vice president paid kickbacks to an Essex County financial consultant, resulting in the bank's receipt of a county contract "to serve as underwriter on three municipal bond issues" involving the county. Essex County sued the bank on the theory of unjust enrichment, seeking disgorgement of any profits the bank received from the illicit activity. The Court cited Driscoll for the proposition "that a contract is unenforceable where it is held to be contrary to public policy" and found "that when a public contract is obtained by bribing a public official, the public entity is entitled to the gross profits obtained by the wrongdoer." Id. at 58. Ultimately, the Court held that "enrichment/disgorgement is a valid basis on which to require recovery when the wrongdoer obtained the benefit as a direct result of bribing a public official" because "[o]ur case law has long recognized that in analogous circumstances, general principles of equity mandate that the wrongdoer be relieved of any profits." Id. at 56.
We reject Napier's assertion that he can recover under the theory established in County of Essex and Driscoll. The County of Essex Court linked the right to disgorgement to situations in which a public official has been bribed for private gain. Cnty. of Essex, supra, 186 N.J. at 56. The Driscoll Court's holding was limited to cases "fraught with fraud and corruption" as it related to the illicit manipulation of a public entity for private gain. Driscoll, supra, 8 N.J. at 499. There is no allegation of such public corruption in this case. Even if, as Napier alleges, Public Service misled or defrauded the BPU or PJM-EIS, there was no corruption involving the public entities or those affiliated with it.
In addition, both County of Essex and Driscoll were brought by a public entity or public official for the benefit of the public entity, which was the victim of the wrongful conduct. There is nothing in either opinion to suggest that a private person or entity, indirectly harmed by wrongful conduct involving a public entity, would also have a cause of action to recover its own damages. Indeed, the Driscoll Court noted that the "action was brought by the Governor and Attorney-General to rescind an illegal purchase made by a public body. It is not an action to create or preserve a fund for the benefit of a class of which the plaintiffs are representatives." Driscoll, supra, 8 N.J. at 495. To the extent Napier invites us to extend County of Essex and Driscoll to recognize a private right of action that does not involve public corruption and loss of the types involved in those cases, we decline to do so.
B.
We now turn to the issue of unfair competition. Napier contends that Public Service "knowingly provid[ed] inaccurate information for the purpose of acquiring SRECs" and "placed themselves in a position of unfair advantage over all other persons or entities who acquire SREC[s] legitimately based on accurate actual power production." He also suggests that Public Service violated BPU regulations, failed to meet agency requirements, or committed fraud against the BPU, or some combination thereof.
Common law unfair competition "presupposes business competition." N.J. Optometric Ass'n v. Hillman-Kohan Eyeglasses, Inc., 144 N.J. Super. 411, 427 (Ch. Div. 1976), aff'd, 160 N.J. Super. 81 (App. Div. 1978).
The law of unfair competition is an amorphous area of jurisprudence. It knows no clear boundaries. Indeed, the nomenclature itself may be a misnomer. See 1 Callman, Unfair Competition, Trademarks & Monopolies (3 ed. 1967), § 5.1. The concept is as flexible and elastic as the evolving standards of commercial morality demand. Sachs, etc., Radio Co. v. Sachs Quality Stores Corp., 39 N.J. Super. 70, 85 (App. Div. 1956). The judicial tendency is to promote and advocate higher ethical standards in the business world. Q-Tips v. Johnson & Johnson, 206 F. 2d 144, 145 (3[d] Cir.), cert. den.[,] 346 U.S. 867, 74 S. Ct. 106, 98 L. Ed. 377 (1953).Unfair competition is a "business tort" that generally "consists of misappropriation of one's property by another." Ibid. "The misappropriation usually takes the form of 'palming off' or 'passing off' another's goods as your own, although this modus operandi is not essential." Id. at 428 (quoting Columbia Broad. Syst., Inc. v. Melody Recordings, Inc., 134 N.J. Super. 368, 377-78 (App. Div. 1976)).
[Ibid.]
Both parties cite the Third Circuits opinion in Lexington National Insurance Corp. v. Ranger Insurance Co., 326 F.3d 416, 419 n.1 (3d Cir. 2003), which applied New Jersey law. In Lexington, in reviewing a dismissal for failure to state a claim under Fed. R. Civ. P. 12(b)(6), the Third Circuit considered whether a party's alleged failure to calculate premium taxes properly justified a private cause of action for unfair competition by a competitor which calculated the tax properly. Id. at 419-20. The plaintiff alleged that the defendant, in calculating and paying less state tax, gave its "bondsmen more favorable rates than those of its competitors." Id. at 419. The court concluded that, treating the allegations of underpaying taxes as true as it was required to do, the "matter is . . . an issue between the State of New Jersey and [the defendant]." Id. at 420. "[I]f [defendant] has underpaid its taxes, . . . the determination that it has done so must be made in state administrative proceedings subject to state judicial review." Id. at 421.
The Third Circuit held that such a failure to pay a tax could not create a private cause of action for unfair competition under New Jersey law. (Ibid.).
It should be clear that the implications of this case cannot be cabined. For example, if a business may assert a valid claim against a competitor for unlawfully reducing its costs by underpaying its taxes it follows that a business could assert a claim against a competitor predicated upon a theory that it is obtaining an economic advantage by underpaying its employees in violation of minimum wage act or similar laws. Indeed, the principles underlying Lexington's claims, if accepted, would justify a business suing its competitor on the theory that it is reducing its costs by violating environmental protection laws or any other federal or state law regulating its operations. If we hold that Lexington has pled a claim on which relief may be granted we will invite a tidal wave of litigation as businesses find opportunities to meddle in their competitors' affairs. We are aware that in New Jersey arguments that a result in a case may open a Pandora's box do not always fare well. Nevertheless, we will not reach the result that Lexington seeks in part because a federal court in a diversity case should be reluctant to expand the common law.
[Id. at 420.]
Although we are not bound by Lexington, there is no basis to reject Judge Greenberg's clearly correct conclusion that the cause of action proposed by Lexington in that case and Napier in this case does not exist in New Jersey. In addition, although we agree that floodgate arguments are not necessarily persuasive in defeating arguments in favor of broadened or new causes of action, we see no reason to recognize such a cause of action, particularly in the context of a case involving a market created and governed by the BPU and the regulations it adopted to further the legislative purposes set forth in N.J.S.A. 48:3-87(d). We note that while this appeal was pending, Napier has sought relief before the BPU with respect to Public Service's method of calculating the amount of solar energy produced by its solar panels. That is an appropriate forum in which to raise the issue of the methodology used by Public Service to calculate its production of solar electricity.
In its motion in the Law Division, Public Service raised the issue of whether the BPU has primary jurisdiction in this controversy, but the motion judge did not base his decision on that argument. Because we review judgments rather than decisions, we have the option of affirming an order for reasons different than those articulated by the trial court. Serrano v. Serrano, 367 N.J. Super. 450, 461 (App. Div. 2004) (quoting Isko v. Planning Bd. of Livingston Twp., 51 N.J. 162, 175 (1968)), rev'd on other grounds, 183 N.J. 508 (2005). We need not do so in this case, but note that Public Service makes what appears to be a strong argument in that regard. See Muise v. GPU, Inc., 332 N.J. Super. 140, 157-60 (App. Div. 2000).
C.
Finally, we briefly address the issue of whether the order of dismissal should have been with or without prejudice.
It is well settled that dismissals for failure to state a claim are generally without prejudice, to permit amendment to add additional facts that might remedy the flaws that led to the dismissal. Nostrame v. Santiago, 213 N.J. 109, 127 (2013) (quoting Printing Mart, supra, 116 N.J. at 771-72). Nevertheless, a motion judge has discretion to dismiss with prejudice for appropriate reasons. See Hoffman v. Hampshire Labs, Inc., 405 N.J. Super. 105, 116 (App. Div. 2009) (reversing where trial judge "provided no reasons for departing from [the] general rule."); Johnson v. Glassman, 401 N.J. Super. 222, 246 (App. Div. 2008) (finding no abuse of discretion where the trial judge dismissed with prejudice when the plaintiff already amended a complaint once and did not provide a certification or a proposed amended pleading to cure the complaint's defects)). "'[C]ourts are free to refuse leave to amend when the newly asserted claim is not sustainable as a matter of law. In other words, there is no point to permitting the filing of an amended pleading when a subsequent motion to dismiss must be granted.'" Notte v. Merchs. Mut. Ins. Co., 185 N.J. 490, 501 (2006) (quoting Interchange State Bank v. Rinaldi, 303 N.J. Super. 239, 256-57 (App. Div. 1997)).
Napier seeks, as an alternative to reversal of the entire order, reversal of that portion of the order providing for a dismissal with prejudice. However, he fails to articulate what further actions he wishes to file. The prospect of serial complaints alleging diverse causes of action is not appealing, especially in light of the principles underlying the single- controversy rule. See Kent Motor Cars, Inc. v. Reynolds & Reynolds, Co., 207 N.J. 428, 442-46 (2011). Nevertheless, because there was no opportunity to amend prior to the dismissal, we direct modification of the order to provide that it is without prejudice as to (1) claims made before the BPU on any viable legal theory and (2) claims filed in the courts articulating other causes of action, assuming there is a good faith basis to plead any. See R. 1:4-8.
We note, for example, that Lexington also involved unsuccessful claims for tortious interference and unconscionable commercial practice. Lexington, supra, 326 F.3d at 418.
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D.
In summary, we affirm the order dismissing Napier's complaint, but direct entry of a modified order of dismissal consistent with this opinion.
Affirmed as modified.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION