Court Reverses PSC's Finding With Respect To TPV Independence -- EnergyChoiceMatters.com

Court Reverses PSC's Finding With Respect To TPV Independence

Court Largely Affirms Other PSC Orders, Including Application Of Telemarketing Rules To Certain Inbound Sales Calls

Supplier To Appeal Court's Opinion, Says All Telephonic Commerce In State Would Be "Upended" Under Order

December 20, 2021

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Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The Montgomery County Circuit Court in Maryland issued an opinion which largely affirmed a Maryland PSC decision concerning an investigation into SmartEnergy Holdings, LLC d/b/a SmartEnergy ('SmartEnergy' or the 'Company') that principally centered on application of the Maryland Telephone Solicitations Act

Of largest import, the court affirmed the PSC's decision that the Maryland Telephone Solicitations Act (MTSA) applied to the at-issue sales by SmartEnergy, in which, generally, a prospective customer was first mailed a postcard, and an interested customer would call SmartEnergy to enroll

Background on the specific findings from the PSC and alleged behavior can be found in our story here. The PSC ordered a return of customers enrolled through this marketing channel to SOS, but the PSC stayed its order pending appeal by SmartEnergy

SmartEnergy prepared the following response:

"We are in the process of reviewing the Order from the local Montgomery County Circuit Court judge. We are disappointed and perplexed with the court’s conclusion, and we will file our notice of appeal in the coming days. Among other reasons, because no court or statute in the history of Maryland has ever interpreted an incoming telephone call to be an outgoing telephone call, we are very confident that the appellate court will overturn this decision. Were this decision to be upheld, marketing and commerce in Maryland as it has existed for as long as telephones have existed, would be completely upended and without the benefit of an actual change in law by the Maryland legislature. During the course of the appeal, we will continue to bring value to Maryland customers while continuing to comply with all Maryland regulations."
--- Statement from SmartEnergy

The circuit Court affirmed the PSC's decision on application of the MTSA

"This Court finds that the common sense reading of the statute is that the MTSA is triggered by the facts of this case. By writing the statute in the conjunctive as it did, the Maryland legislature seemed to be addressing sales discussions made entirely by phone AND that were initiated, by some means, by the merchant. It defies logic that the legislature would only want to address cold calls by the merchant but not calls brought on by a merchant's advertisement. It is telling that the legislature used the word 'initiated,' meaning 'to cause the beginning of something.' If the legislature wanted the Act to apply only to calls going in one direction-made by the merchant to the consumer-the legislature could easily have written it as such," the Court said

"[T]he MTSA does not distinguish between 'inbound' and 'outbound' calls," the Court said

While SmartEnergy cited language on both the PSC's and OPC's websites as supporting its reading of the MTSA, the Court said, "this argument does not prevail. While the Court has some concerns about the language contained on the websites, SmartEnergy must comply with the law as it is written. It is also clear the Consumer Protection Division of the Maryland Attorney General's Office has consistently interpreted the statute to apply to calls made by a consumer in response to an advertisement."

The Court also affirmed the PSC's findings that SmartEnergy's marketing did not qualify for two exemptions from certain of the MTSA's requirements (such as a wet signature): the first is an exemption for when a potential customer has a preexisting business relationship with the seller, and the second is when a person replies to an advertisement that conveys certain required information.

With respect to the latter, the Court said, "SmartEnergy's postcards did not adequately describe the goods or services it would provide consumers. There was no price listed. Nor did the postcards mention that after six months, the price becomes a variable rate ... Furthermore, SmartEnergy's postcards did not sufficiently provide the limitations or restrictions that apply to its offer. The text of the MTSA requires SmartEnergy to provide '[a]ny limitations or restrictions that apply to the offer.'"

The Court also affirmed PSC findings that SmartEnergy's postcards were "misleading," and that there was a "pattern and practice" of such conduct

The Court did reverse a PSC finding with respect to COMAR 20.53.07.08C(4)(b)(iii), relating to independence of third party verification

The PSC found that SmartEnergy having access to, and the ability to edit, call recordings violated COMAR 20.53.07.08C(4)(b)(iii), which provides that a supplier contracting via TPV shall, "Confirm that an independent third party verifies the contract or records the entire telephone conversation and maintains the recording for the duration of the contract..."

"This Court agrees with SmartEnergy that nothing in COMAR 20.53.07.08C(4)(b)(iii) prohibited SmartEnergy from having access to the recordings or the ability to edit them. This Court takes no issue with the Commission's factual finding that SmartEnergy had such capability. This Court's concern is the Commission's legal conclusion that these facts constituted a violation of COMAR 20.53.07.08C(4)(b)(iii), which makes no mention of any prohibition on access to the recordings or the ability to edit them," the Court said

"Were a supplier to permanently alter or delete part or all of an original recording while a contract was still operative, then said supplier would clearly violate the regulation by failing to '[c]onfirm that [the] independent third party ... maintain[ ed] the recording for the duration of the contract.' Merely having the capability to do so, however, is not a violation of this regulation as it is written. Therefore, this Court reverses the Commission's decision as to the retention of phone calls," the Court said

The Court also declined to reverse any of the specific sanctions imposed on SmartEnergy (including a drop of customers enrolled through the at-issue marketing to SOS and refunds), as the Court said that, "the Commission had just cause to impose sanctions against SmartEnergy because SmartEnergy: (1) unlawfully enrolled customers; (2) engaged in deceptive trade practices; (3) violated Commission regulations; and (4) violated State consumer protection laws. The Commission's decision is affirmed."

Case No. 485338V

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