S.A.M. Management Co., Inc. v. Consolidated Edison Company of New York, Inc.

Background

S.A.M. Management Co., Inc., doing business as Hoffman Management, 122nd Street LLC, and 150 West Burnside LLC sued Consolidated Edison Company of New York, Inc. The plaintiffs brought the case as a proposed class action for damages and injunctive relief. They asserted claims under New York General Business Law § 349, breach of contract, fraud by concealment, unjust enrichment, and money had and received.

The plaintiffs alleged that Con Edison improperly billed customers under its SC-3 gas-rate classification instead of the SC-2 classification. They alleged that the buildings involved had residential and non-residential uses, that the non-residential uses were not separately metered, and that Con Edison therefore charged the wrong rate. The proposed class covered Con Edison customers in New York who had allegedly been charged the SC-3 rate instead of the SC-2 rate.

The plaintiffs relied on the Class Action Fairness Act, or CAFA, as the basis for federal jurisdiction. CAFA generally permits federal courts to hear certain large class actions when the class has more than 100 members, at least one plaintiff and one defendant are citizens of different states, and more than $5 million is in dispute.

Jurisdictional dispute

Con Edison moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), which permits dismissal when the court lacks legal authority to hear a case. Con Edison argued that CAFA’s exceptions required the court to decline jurisdiction.

The court applied CAFA’s home-state exception, which requires a federal court to decline jurisdiction when at least two-thirds of the proposed class members and the primary defendant are citizens of the state where the action was filed. Con Edison’s service territory was entirely within New York, and Con Edison submitted evidence that approximately 98.4 percent of its SC-3 gas customers had New York mailing addresses. The court found that it was reasonable to use those addresses as evidence supporting the conclusion that at least two-thirds of the proposed class members were New York citizens.

The court also found that the discretionary exception applied. That exception allows a court to decline jurisdiction when the dispute is primarily local and between one-third and two-thirds of the proposed class members are citizens of the filing state, after considering the circumstances of the case. The court stated that this case concerned a New York company allegedly overcharging New York customers under New York law for gas service provided in New York under tariffs filed with New York’s Public Service Commission.

The court rejected the plaintiffs’ arguments that mailing addresses did not establish citizenship, particularly for corporations and limited liability companies. It noted that the plaintiffs had not provided facts about the proposed class members’ principal places of business or, for limited liability companies, their members. The court also noted that the plaintiffs could not identify a single proposed class member who was certainly not a New York citizen.

Ruling

The court held that Con Edison had met its burden of showing that the CAFA home-state and discretionary exceptions applied. Because the court lacked subject-matter jurisdiction, it did not address Con Edison’s additional arguments based on the primary-jurisdiction doctrine, the filed-rate doctrine, or failure to state a claim.

Judge Edgardo Ramos granted Con Edison’s motion. The First Amended Complaint was dismissed for lack of subject-matter jurisdiction, and the Clerk of Court was directed to terminate the motion and close the case. The opinion did not state that the dismissal was with or without prejudice.