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SmartEnergy’s lead counsel is former Maryland Attorney General Douglas F. Gansler. (AP Photo/Matt Rourke)
The Maryland Supreme Court will consider whether the state’s Public Service Commission’s oversight of utility companies includes the authority to penalize them for deceptive telephone solicitations.
The justices this month agreed to hear SmartEnergy Holding LLC’s challenge to a Maryland Appellate Court ruling that PSC’s authority to protect consumers against “anticompetitive and abusive practices” includes those conducted by phone in violation of the Maryland Telephone Solicitations Act.
In its successful petition for high court review, SmartEnergy stated that regulating telephone conversations with customers is a duty of the attorney general’s consumer protection division and not within the PSC’s limited jurisdiction.
SmartEnergy added the MTSA does not even apply to the electricity supplier’s activities because it did not initiate the telephone calls to would-be customers. Rather, the customers called SmartEnergy after receiving its marketing mailers.
“In short, the Maryland Public Service Commission … is pretending that an inbound call from a potential customer is actually an outbound call,” wrote SmartEnergy’s lead counsel, former Maryland Attorney General Douglas F. Gansler.
“Should this (Supreme) Court not step in, commerce in Maryland will be dramatically altered by overturning the plain language of the statute and legislative intent, for example, to require someone ordering a pizza in response to a mailer or television ad to sign a contract prior to getting their pizza,” wrote Gansler, of Cadwalader, Wickersham & Taft LLP in Washington. “Without intervention by this Court, companies engaging in direct advertising to Marylanders, whether in print, television, radio, billboards, or digital form, would be subject to an indefensible interpretation of the MTSA if their advertising could possibly yield an inbound call.”
In its controversial decision, the Appellate Court said the PSC had “substantial evidence” to conclude that SmartEnergy mailed millions of misleading postcards to Maryland consumers between February 2017 and May 2019 telling them they were eligible for a free month of electricity and a six-month rate protection plan. The postcards stated the deal was “time sensitive” and provided a telephone number to call.
About 104,000 prospective customers called and about 32,000 enrolled after being misled into believing SmartEnergy was affiliated with their current electricity provider and that their service would remain unchanged, according to the PSC.
The callers were neither told that the free month would kick in only after they paid for six months of service nor informed what their rates would be after the six months of rate protection, PSC stated in ordering the company to pay refunds to the customers.
The PSC’s action followed numerous complaints from customers and an evidentiary hearing before a public utility law judge who found that SmartEnergy engaged in unfair, false, misleading and deceptive marketing, advertising and trade practices. The PSC said it investigated SmartEnergy after receiving numerous complaints from customers.
SmartEnergy appealed the PSC’s decision to the Montgomery County Circuit Court which upheld the commission’s ruling. The company then sought review by the Appellate Court.
“The commission is expressly charged with fashioning remedies for violations of ‘any’ applicable consumer protection law,” Judge Laura S. Ripken wrote for the court. “It, therefore, has jurisdiction over each electricity supplier in Maryland, which includes SmartEnergy, to ensure that those suppliers comply with specific consumer protection laws, under which the MTSA falls.”
The Appellate Court added that the MTSA’s application to phone calls “initiated by the merchant” to a consumer also applies to calls made by the customer in response to a business’s solicitation, such as the postcards SmartEnergy distributed to millions of would-be customers in Maryland asking them to call.
In its failed request that the Supreme Court deny the company’s appeal, PSC stated it has authority to enforce the MTSA and other consumer protection laws designed to prevent “deceptive conduct,” such as when consumers are “tricked” into calling a telephone number and subjected to “a pressurized and highly misleading sales pitch.”
PSC added the SmartEnergy case is solely about the commission’s jurisdictional authority, which covers the providing of electricity and not the ordering of pizza.
The commission is represented at the high court by its general counsel, H. Robert Erwin Jr., and deputy general counsel, Miles H. Mitchell.
The Supreme Court is scheduled to hear arguments in the case in September. The justices are expected to render their decision by Aug. 31, 2024 in In the Matter of SmartEnergy Holdings LLC d/b/a SmartEnergy, No. 1 September Term 2023.
