In 2014, we posted about the Massachusetts Supreme Judicial Court’s decision in Bellermann v. Fitchburg Gas & Electric Light Co. In that case, plaintiffs sought relief under the Massachusetts consumer protection statute, G.L. c. 93A, because of the defendant utility’s alleged failure properly to prepare and plan for a major winter storm, and its allegedly deceptive communications made to consumers before and during the storm. The SJC affirmed the trial court’s denial of class certification because plaintiffs could not establish that defendant’s conduct caused similar injury to consumers on a class-wide basis.
On remand, plaintiffs filed a renewed motion for class certification relying on a different liability theory – that they had suffered economic injury by overpaying for a level of emergency preparedness, required by Department of Public Utility regulations, which the defendant allegedly failed to provide. This time a different trial court judge certified two classes under this diminution-in-value theory (a business customers class and a residential customers class), but on direct appellate review, the SJC reversed.
One critical fact led to the reversal – plaintiffs did not allege that putative class members suffered a loss of power or interruption of service as a result of the utility’s lack of emergency preparedness. The Court’s review of some of its key chapter 93A precedents hints at a line between potential injury classes and no-injury classes, although the line may not be as bright as it appears.
On one side of the line, if plaintiffs can establish that they purchased a product or service that failed to meet regulatory requirements and that the regulatory deficiency resulted in purchasers receiving less value than the seller promised, they may under some circumstances be able to make out a claim for class-wide harm under the Massachusetts statute. The Court cited as examples Iannachino v. Ford Motor Co. (car owners did not satisfy 93A injury requirement because they failed to establish that cars did not meet federal safety standards) and Aspinall v. Philip Morris Cos. (purchasers of cigarettes could bring class action against manufacturer under chapter 93A’s certification provision where cigarettes did not deliver advertised health benefits). Even in such cases, however, the Court reaffirmed that plaintiffs cannot satisfy the injury requirement unless they can establish a “separate, identifiable harm arising from the [regulatory] violation,” and that non-conformity with a regulatory requirement alone, even if it results in overpayment for the product, may not be enough.
On the other side of the line, if consumers received everything they had bargained for regardless of the defendant’s alleged regulatory or legal violation, there is no injury and no basis for class certification. Here, the Court cited Hershenow v. Enterprise Rent-A-Car Co. (no 93A injury where defendant’s rental car contracts included unlawful damage waiver but all putative class members had returned their rented vehicles undamaged). The Court reasoned that the utility customers more closely resembled the Hershenow plaintiffs because they all received the electricity that they purchased, and suffered no loss of power as a result of defendant’s alleged lack of emergency preparedness:
. . . here, the plaintiffs would have suffered economic injury as a result of FG&E’s asserted failure to prepare for a severe storm only if a major storm had occurred during the class period, and the plaintiffs subsequently had lost electric power as a result of FG&E’s failure to respond adequately to the extreme weather conditions. Since no severe storm occurred, and no plaintiff lost electric power during the class certification period as a result of FG&E’s asserted lack of planning and preparedness for a nonexistent storm, none of the plaintiffs has demonstrated an economic injury.
In a footnote, the court emphasized “that not all regulatory noncompliance, even that violating ‘a regulation “meant for the protection of the public’s health, safety, or welfare,”‘ constitutes an unfair or deceptive act under” chapter 93A. Rather, “[w]hether a regulatory violation amounts to an actionable unfair or deceptive act is a question of law to be ‘discerned from the circumstances of each case’ (quotation omitted).” The court also noted that DPU had expressed “doubt whether its orders and directives are properly classified as ‘regulations,'” but concluded that it did not need to address this issue.
The Court’s application of Hershenow to the Bellermann facts should be welcome news to utilities and other regulated industries. The Court has now made clear, if it wasn’t clear already, that the violation of a regulatory requirement in delivering a product or service, standing alone, is not enough to establish a cognizable injury for purposes of a private consumer protection claim. Nor is the mere increased risk caused by such a violation sufficient to establish economic harm if the risk passes without consequence. As the Court’s footnote makes clear, where the line between injury and no-injury is to be drawn will continue to be determined on a case-by-case basis, as a matter of law for the courts to decide.
Written by former litigation partner, Donald R. Frederico.