Mirkin v. XOOM Energy, LLC

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

SUSANNA MIRKIN and BORIS MIRKIN, Individually

and on Behalf of All Others Similarly Situated,

Plaintiffs, 18-CV-2949 (ARR) (RER)

-against- OPINION & ORDER

XOOM ENERGY, LLC, and XOOM ENERGY NEW

YORK, LLC,

Defendants.

ROSS, United States District Judge:

Plaintiffs Susanna Mirkin and Boris Mirkin, a married couple residing together in

Brooklyn, bring this putative class action against defendants XOOM Energy, LLC, and XOOM

Energy New York, LLC (collectively, “XOOM”). XOOM, an independent energy service

company (“ESCO”), provided residential electricity to the Mirkins for six months at a variable rate

pursuant to a March 2013 contract with Susanna Mirkin. The Mirkins’ amended complaint asserts

a claim for breach of that contract, alleging that XOOM charged them exorbitant rates. Following

discovery, XOOM moved for summary judgment, principally arguing that it had no contract with

Boris Mirkin and that it did not breach its contract with Susanna Mirkin. For the following reasons,

I grant the motion as to Boris Mirkin and deny it as to Susanna Mirkin.

BACKGROUND1

Factual Background

In 1996, New York deregulated its energy markets with the goal of fostering competition

and lowering rates for consumers. Pls.’ 56.1 ¶¶ 48–50. Deregulation allowed the proliferation of

ESCOs like XOOM, which purchase energy from producers on the wholesale market and sell it to

consumers. Id. ¶¶ 51–52. ESCOs are essentially middlemen––unlike utilities, they do not generate

or deliver electricity. Id. ¶ 52.

In March 2013, Boris Mirkin applied under his wife’s name to receive residential electricity

service through XOOM’s SimpleFlex variable rate plan. Pls.’ 56.1, at 2. XOOM sent Boris a new

customer enrollment email stating that the Mirkins’ electricity service would be switched to

XOOM following approval of the enrollment application and that they would receive electricity at

an introductory (or “teaser”) rate of $0.0899 per kWh. Decl. of Steven L. Wittels in Opp’n to Mot.

for Summ. J. (“Wittels Decl.”), Ex. 1 (“Enrollment Email & ESA”), at 1–2, ECF 147-2. The email

attached a copy of an Electricity Sales Agreement (“ESA” or “contract”), which described the

company’s pricing policies and services. Id. at 4–6. The ESA contained several terms that are

relevant to the present motion. First, and most importantly, it stated:

Your rate for energy purchases will be a variable rate, per kWh, that may change

on a monthly basis, plus taxes and fees, if applicable. Your monthly variable rate is

1 The background facts, which are viewed in the light most favorable to the non-movants, are

drawn from the parties’ submissions in connection with the motion for summary judgment,

including Defendants’ Local Rule 56.1 Statement (“Defs.’ 56.1”), ECF No. 146-25 (filed under

seal), Plaintiffs’ Local Rule 56.1 Counterstatement (“Pl.’s 56.1”), ECF No. 148-52 (filed under

seal), and Defendants’ Response to Plaintiffs’ Local Rule 56.1 Statement of Additional Material

Facts (“Defs.’ 56.1 Response”), ECF No. 150-1 (filed under seal).

Many of the documents supporting summary judgment have been filed under seal pursuant to a

discovery confidentiality order, see ECF No. 48-1; they are hereby deemed unsealed to the extent

that their contents are quoted or described in this order.

based on XOOM’s actual and estimated supply costs which may include but not

be limited to prior period adjustments, inventory and balancing costs.

Id. at 4 (emphasis added). The contract also provided that “[t]here are no guaranteed savings in

this Agreement at this time.” Id. On the next page, under a header labeled “AGENCY,” the contract

stated:

You hereby appoint XOOM Energy as agent for the purposes of (i) acquiring the

supplies necessary to meet your electricity needs, and (ii) arranging, contracting for

and administering transportation and related services over transmission facilities

and those of the [Local Distribution Utility (“LDU”)] needed to deliver electricity

to your premises. These services are provided on an arm’s length basis and market-

based compensation is included in the price noted above.

Id. at 5. Finally, a choice of law provision designates North Carolina law as governing the contract.

Id. at 6.

XOOM began providing the Mirkins with electricity two months later, in May 2013. Defs.’

56.1 ¶¶ 1, 5. After the first month’s teaser rate, the rate increased and fluctuated at higher levels

from then on.2 Am. Compl. ¶ 43, ECF No. 42; Pls.’ 56.1 ¶ 44, at 55.3 The Mirkins canceled their

XOOM energy service in November 2013, after six months. Defs.’ 56.1 ¶ 6.

Because the Mirkins claim that XOOM violated the agreement to set its rates based on

actual and estimated supply costs, the process by which XOOM set rates is of central importance.

At a high level, XOOM set its variable rates by calculating or estimating the cost of procuring

energy for its customers and adding a markup, or margin, to that cost, thereby producing the rate

2 Though the ESA stated the Mirkins would be charged a teaser rate of $.0899 per kWh, Am.

Compl. ¶¶ 41–43; Answer ¶ 43, the parties apparently agree that the rate for the first month of

service was $.1290 per kWh, Pls.’ 56.1, at 39.

3 Plaintiffs’ Local Rule 56.1 statement of additional material facts repeats certain numbered

paragraphs. See Pls.’ 56.1, at 55–58. Where a duplicated paragraph number is cited, I have included

the page number for clarity.

charged to customers’ monthly bills. In reality, the process was not so simple, and the parties

disagree about how XOOM ultimately determined the monthly rates.

However, a few aspects of the process are beyond peradventure. XOOM utilized

spreadsheets to estimate and calculate certain costs of procuring electricity. Defs.’ 56.1 ¶ 7. These

cost calculations were aggregated in “rate-setting workbooks” that summarized the projected costs

for each of XOOM’s products. Id. ¶ 8. The rate-setting workbooks listed the sum of projected cost

components under the label “Total Cost,” a figure XOOM also refers to as the “Cost of Goods

Sold” or “COGS.” Id. ¶ 10. After determining the Total Cost figure, analysts on the pricing team

proposed a rate. Id. ¶ 12. The percentage difference between the proposed rate and COGS

comprised the margin. Id. Rates were eventually finalized for multiple markets and products by a

team of decisionmakers at a rate-setting meeting. Id. ¶ 13.

It is important to clarify that the Total Cost or COGS number may not represent XOOM’s

“actual and estimated supply costs,” as that term is used in the contract, because the parties dispute

whether all supply cost components were included in the Total Cost. XOOM says that prior period

adjustments,4 balancing charges, risk premiums, broker and sales channel costs, and other “non-

supply costs” were accounted for in a separate budgeting process5 and added to the margin. Defs.’

4 “Prior period adjustments” refers to the practice of raising rates in future months to recover

unanticipated costs over time. Mem. in Support Mot. for Summ. J. (“Defs.’ Mot.”) 21, ECF No.

146-1 (filed under seal).

5 XOOM Director of Pricing and Structuring Jason Loehde explained the incorporation of prior

period adjustments into the budget as follows:

Prior period adjustments flowed into our actual costs and actual results. And so they

would only be reflected when we made––next made a budget plan iteration. So if

we updated the budget at some point during the year, those costs would be reflected

in what we ultimately came up with at that point.

56.1 ¶¶ 9, 14–15; Pls.’ 56.1 ¶ 106. This budgeting process “looked at [XOOM’s] margins in

aggregate across the portfolio,” rather than on a market-by-market basis. Loehde Dep. 210:2–6. If

margins were falling short of annual budget projections—say, for example, due to the 2014 polar

vortex—XOOM’s decisionmakers could make “overall adjustment[s] to the portfolio” through

several “levers,” including the increase of variable rates. Id. at 210:2–211:24. The Mirkins accept

that prior period adjustments were “captured through the budgeting process,” Pls.’ 56.1 ¶ 106, but

maintain that “there is no evidence that prior period adjustments, balancing charges, broker costs,

or risk premiums were included in XOOM’s margin,” Pls.’ 56.1, at 24; see also Wittels Decl., Ex.

8, at 95:17–96:4, ECF No. 148-9 (filed under seal) (XOOM expert stating he did not see any prior

period adjustment calculations in data XOOM provided); Loehde Dep. 214:7–25 (acknowledging

risk premiums were included as costs in the rate-setting workbooks). To the extent the Mirkins

acknowledge that XOOM made rate adjustments based on unanticipated cost overruns, they argue

that XOOM did so in violation of the contract. For example, plaintiffs point to the polar vortex as

an instance of XOOM increasing variable rates in New York to offset significant losses in other

states because attrition was lower in New York than in other markets. Pls.’ Mem. of L. in Opp’n

to Mot. Summ. J. (“Pls.’ Opp’n”) 39, ECF No. 148 (filed under seal).

The Mirkins also present a different interpretation of the rate-setting process, contending

that XOOM “disregarded” its internal supply cost calculations when setting variable rates. E.g.,

Pls.’ 56.1, at 25. By this account, XOOM’s rate-setting meetings were guided by pricing strategies

designed to protect its margin and achieve revenue goals, leading XOOM to calculate its margin,

and therefore set its ultimate rate, based on considerations such as profit, competitor and utility

Decl. of Michael D. Matthews (“MDM Decl.”), Ex. A-10 (“Loehde Dep.”), at 251:13–19, ECF

No. 146-12 (filed under seal).

rates, sales trends, attrition, and geographic market elasticity, rather than supply costs. Pls.’ 56.1

¶¶ 74–75.

During the Mirkins’ six months as XOOM customers, XOOM’s internal Total Cost figure

accounted for 66% to 80% of the total rate charged. Pls.’ 56.1 ¶ 44, at 55. In other words, XOOM

added a margin on top of cost that ranged from 20% to 44%, as shown by the following chart:

XOOM’s Internal Actual Rate

XOOM’s Markup

Month “Total Cost” Charged to Mirkins

Above “Total Cost”

($/kWh) ($/kWh)

June 0.1078 0.1290 20%

July 0.1181 0.1440 22%

August 0.1215 0.1490 23%

September 0.1021 0.1399 37%

October 0.1176 0.1490 27%

November 0.0903 0.1299 44%

Pls. 56.1, at 10 (reformatted). The Mirkins do not claim that XOOM cannot charge any margin at

all, such that the rate must be equal to XOOM’s costs. Pls.’ Opp’n 7–9. Rather, they argue that the

margins were excessive because the rates were not set in accordance with the ESA’s pricing terms.

The present motion is thus principally concerned with whether the “Actual Rate” in the above

chart was “based on XOOM’s actual and estimated supply costs,” keeping in mind that the internal

“Total Cost” measure may not necessarily equal XOOM’s “actual and estimated supply costs.”

In 2016, XOOM changed the pricing terms in its form contract. The revised agreement

included the following pricing term:

Your rate may be based upon a number of factors, which may include but not be

limited to, the fluctuation of wholesale commodity costs or other components of

wholesale prices (including but not limited to capacity related costs, fluctuations in

energy supply and demand, and weather patterns) and XOOM’s pricing strategies.

Pls.’ 56.1 ¶ 91. In December 2019, the New York Public Service Commission banned ESCOs from

offering variable rate energy plans that did not guarantee savings to consumers. Id. ¶ 58.

Procedural Background

Plaintiffs’ original complaint, filed in New York state court, asserted claims for breach of

contract, breach of the implied covenant of faith and fair dealing, and unjust enrichment.

Complaint, ECF No. 1-2. XOOM removed the action to federal court and moved to dismiss. I

granted XOOM’s motion under Federal Rule of Civil Procedure 12(b)(6) and denied the Mirkins’

post-judgment motion for leave to amend. Mirkin v. XOOM Energy, LLC, 342 F. Supp. 3d 320

(E.D.N.Y. 2018); Mirkin v. XOOM Energy, LLC, No. 18-cv-2949 (ARR) (RER), 2018 WL

11169574 (Nov. 2, 2018). On appeal, the Second Circuit affirmed the dismissal of the implied

covenant and unjust enrichment claims, reversed the dismissal of the breach of contract claim, and

remanded with direction to grant permission to file the proposed amended complaint. Mirkin v.

XOOM Energy, LLC, 931 F.3d 173, 174, 178 (2d Cir. 2019). After the Mirkins filed their amended

complaint, the parties proceeded to discovery. In March 2023, the Mirkins moved to certify the

proposed class, Mot. to Certify Class, ECF No. 131, and in May 2023, XOOM moved for summary

judgment, Mot. for Summ. J., ECF No. 145.6

LEGAL STANDARDS

Summary judgment is appropriate when “the movant shows that there is no genuine dispute

as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.

56(a). “A dispute about a ‘genuine issue’ exists for summary judgment purposes where the

evidence is such that a reasonable jury could decide in the non-movant’s favor.” Beyer v. County

6 I have reserved decision on the class certification motion pending disposition of the present

motion for summary judgment. See Encarnacion v. Astrue, 491 F. Supp. 2d 453, 459 (S.D.N.Y.

2007), aff’d, 568 F.3d 72 (2d Cir. 2009); Richards v. Direct Energy Servs., LLC, 246 F. Supp. 3d

538, 560 (D. Conn. 2017), aff’d, 915 F.3d 88 (2d Cir. 2019) (noting that Federal Rule of Civil

Procedure 23(c)(1) “affords district courts with flexibility when presented with both a dispositive

motion and a motion for class certification”).

of Nassau, 524 F.3d 160, 163 (2d Cir. 2008). In deciding this motion, I must construe the facts in

the light most favorable to the Mirkins, as the non-moving party, and draw all reasonable

inferences in their favor. Ashley v. City of New York, 992 F.3d 128, 136 (2d Cir. 2021).

The moving party has the burden of demonstrating the absence of a dispute of material

fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). If the movant carries its burden,

the non-moving party “must come forward with specific evidence demonstrating the existence of

a genuine dispute of material fact.” Brown v. Eli Lilly & Co., 654 F.3d 347, 358 (2d Cir. 2011)

(internal citations and quotation marks omitted). In doing so, the non-moving party “must do more

than simply show that there is some metaphysical doubt as to the material facts[] and may not rely

on conclusory allegations or unsubstantiated speculation.” Id. (internal citations and quotation

marks omitted).

DISCUSSION

I. There is a Genuine Dispute as to Whether XOOM Breached the Contract.

Under North Carolina law, which the parties agree applies in this case, a plaintiff can state

a claim for breach of contract if she establishes that (1) a valid contract exists, and (2) the defendant

breached the terms of that contract. See Crosby v. City of Gastonia, 635 F.3d 634, 645 (4th Cir.

2011). There is no dispute that a valid contract exists between XOOM and Susanna Mirkin, so for

now the only issue is whether XOOM breached that contract. (Below, in Part II, I also address

whether a valid contract exists between XOOM and Boris Mirkin.) XOOM, which has the initial

burden as the moving party, principally argues that there is no genuine dispute that it fully

complied with the terms of the ESA because (1) the contract unambiguously required only that

XOOM use its actual and estimated supply costs as a foundational component of the variable

energy rates, and (2) the evidence establishes that supply costs were the foundational component

of those rates. See Mem. in Support Mot. for Summ. J. (“Defs.’ Mot.”) 18, ECF No. 146-1 (filed

under seal).

A. The Contract is Not Ambiguous and Must Be Construed Consistent with

Plaintiffs’ Reading.

XOOM’s form contract stated that plaintiffs’ monthly variable rate would be “based on

XOOM’s actual and estimated supply costs which may include but not be limited to prior period

adjustments, inventory and balancing costs.” Enrollment Email & ESA 4. The crucial question is

the meaning of the phrase “based on.” XOOM argues that the phrase unambiguously

communicates that XOOM’s supply costs merely had to be a foundational component of the

ultimate rate. The Mirkins argue that the phrase is ambiguous but should be understood as limiting

XOOM to charging rates that are close or proportionate to its supply costs.

Whether “based on” is ambiguous is an important question because an ambiguous contract

term would defeat summary judgment. Under North Carolina law, when “an agreement is

ambiguous and the intention of the parties is unclear, . . . interpretation of the contract is for the

jury.” Schenkel & Shultz, Inc. v. Hermon F. Fox & Assocs., P.C., 658 S.E.2d 918, 921 (N.C. 2008).

A contract contains ambiguity “when either the meaning of words or the effect of provisions is

uncertain or capable of several reasonable interpretations.” Register v. White, 599 S.E.2d 549, 553

(N.C. 2004). “Thus, if there is uncertainty as to what the agreement is between the parties, a

contract is ambiguous.” Schenkel & Shultz, Inc., 658 S.E.2d at 921. Non-technical words in a

contract “are to be given their meaning in ordinary speech, unless the context clearly indicates

another meaning was intended.” Singleton v. Haywood Elec. Membership Corp, 588 S.E.2d 871,

875 (N.C. 2003).

I find that “based on” is not ambiguous as used in the contract. A word or phrase is

ambiguous if it has more than one linguistic meaning. “Base,” of course, has multiple meanings:

in baseball, for example, it means “any of the four stations at the corners of a baseball infield”; in

a variant of rummy, a base is “the least number of natural cards that will form a canasta when a

required number of natural or wild cards is added.” Base, Merriam-Webster’s Unabridged

Dictionary (accessed July 20, 2023), https://unabridged.merriam-webster.com/unabridged/base;

see also Fleisher v. Phoenix Life Ins. Co., 18 F. Supp. 3d 456, 472–73 (S.D.N.Y. 2014) (“[T]here

are literally dozens of dictionary definitions of ‘base’ for use in different literal and figurative

contexts.”). However, in the present context, “base” is a verb that means: “[t]o make, form, or

serve as a foundation for . . . [t]o place on a foundation; to ground . . . [t]o use (something) as the

thing from which something else is developed.” Base, Black’s Law Dictionary (11th ed. 2019);

see also Base, Merriam-Webster’s Unabridged Dictionary (accessed July 17, 2023),

https://unabridged.merriam-webster.com/unabridged/base (choose “base (verb)”) (defining as “to

make or form a foundation for . . . to use as a base or basis for”). Given this definition, the parties

do not seriously dispute that the verbal phrase “based on” means that the variable rate must be

founded on or have a basis in XOOM’s supply costs. Thus, the contract does not contain an

ambiguity that must be interpreted by the jury.

The central issue with the contract term is vagueness, not ambiguity. Whereas ambiguous

terms have multiple meanings, vague terms are imprecise. As a result, courts generally must use

rules of construction to determine the legal operation of vague words. 5 Corbin on Contracts § 24.3

(2023). Many courts, including those of North Carolina, do not always distinguish ambiguity from

vagueness, or interpretation (discernment of meaning) from construction (determination of legal

effect). See id. In the context of the present case, “based on” is unambiguous because we

understand its general linguistic meaning, but “based on” is vague because it is not clear what

effect the phrase has on the legal operation of the contract.

The parties present dueling constructions. XOOM contends that “based on XOOM’s actual

and estimated supply costs” means that supply costs must be the foundational component of the

variable rate, but that the contract does not otherwise restrict XOOM’s discretion to layer

additional sums on top of the supply costs—so long as the margin does not vastly exceed supply

costs. See Consol. Reply in Supp. Mot. Summ. J. & Sur-Reply in Opp’n to Class Cert. (“Defs.’

Reply”) 7, ECF No. 150 (filed under seal) (acknowledging that a rate “ten times greater than supply

costs” would not comply with the contract). XOOM’s reading is not unreasonable. In normal

usage, “based on” can mean a foundation from which something is developed, as in a movie that

is “based on” a true story, where real-life events are developed into a narrative through the addition

of fictional elements. See Norem v. Lincoln Ben. Life Co., 737 F.3d 1145, 1150 (7th Cir. 2013).

The Mirkins offer an equally (or perhaps more) plausible construction: that “based on”

connotes exclusivity and limits XOOM’s discretion such that the rates can be determined only by

XOOM’s actual and estimated supply costs. Plaintiffs’ construction finds support in case law. In

Fleisher v. Phoenix Life Insurance Co., the parties sparred over the meaning of a contract term

stating an insurance rate would be “‘based on’ six enumerated factors.” 18 F. Supp. 3d at 471. The

court observed the following:

In everyday parlance, when you make a calculation “based on” specific factors, you

take only those factors into account; the calculation is made “relying on” or

“building on” those factors. You calculate a baseball player’s batting average

“based on” his number of hits and his number of at bats—nothing more and nothing

less. The area of a rectangle is calculated “based on” its width and length, while

velocity is calculated “based on” distance and time.

Id. Consistent with this construction, the Fleisher court found that the average insured could

plausibly read the contract’s use of “based on” as limiting the calculation to the six enumerated

factors. Id.

Because both parties present plausible constructions of the legal effect of the contested

contract phrase, we must locate a rule of decision to break the tie. Under North Carolina law,

“[o]ne of the most fundamental principles of contract interpretation is that ambiguities are to be

construed against the party who prepared the writing,” Chavis v. S. Life Ins. Co., 347 S.E.2d 425,

427 (N.C. 1986), because the drafter “had the best opportunity to protect its interests,” Silvers v.

Horace Mann Ins. Co., 378 S.E.2d 21, 25 (N.C. 1989).7 Though this principle of construction is

pronounced in general terms, it is “usually applied in cases involving an adhesion contract or where

one party is in a stronger bargaining position.” Joyner, 361 S.E.2d at 905–06. Thus, before

applying this rule, “the record should affirmatively show that the form of expression in words was

actually chosen by one [party] rather than by the other.” Id. at 906 (quoting 3 Corbin on Contracts

§ 559 (1960 and Supp. 1984)). Here, there is no question that XOOM chose the language in the

ESA, which was a contract of adhesion. Defs.’ 56.1 Response ¶ 103.

I therefore apply North Carolina’s rule of construction and conclude that the agreement

requires the monthly variable rates to be determined by XOOM’s actual and estimated supply

costs—and only those costs.

XOOM objects to this construction on several grounds—all unavailing. First, XOOM

argues that an exclusive reading would not allow the addition of any margin on top of supply costs,

a position incompatible with the Mirkins’ concession regarding the permissibility of a reasonable

margin. See Defs.’ Mot. 15 (arguing that supply costs cannot be “the only legitimate component”

7 Though courts do not always distinguish between the concepts of interpretation and construction

or ambiguity and vagueness, at least one North Carolina court has recognized that the rule of

construing contracts against the drafter “is essentially one of legal effect, of construction rather

than interpretation, since it can scarcely be said to be designed to ascertain the meanings attached

by the parties.” Joyner v. Adams, 361 S.E.2d 902, 905 (N.C. Ct. App. 1987) (quotation omitted).

of the variable rate). But XOOM is mistaken. A variable rate that varies depending only on the

actual and estimated supply costs must vary according to those costs, but it does not have to equal

those costs. In other words, the margin would have to remain proportionate, but not equal to the

supply costs over time. Second, XOOM argues that this reading is foreclosed by the contract’s

agency provision, which states that “market-based compensation is included in the price noted

above.” Enrollment Email & ESA 5. But the meaning of the compensation term in the agency

provision is unclear. It is at least plausible that “market-based compensation” refers to

compensation owed to the electricity supplier and LDU for their role in the procurement and

delivery of electricity, which would be included “in the price noted above” as a supply cost. Even

if the compensation term refers to XOOM’s compensation, that meaning would be entirely

compatible with the proportionate-margin construction, which allows a margin so long as it is not

untethered to the actual and estimated supply costs. Third, XOOM claims that the non-exclusive

phrase “which may include but not be limited to” means the legitimate components of XOOM’s

rates cannot be limited to components identified in the contract. Defs.’ Mot. 18. But that phrase

occurs in the following sentence: “Your monthly variable rate is based on XOOM’s actual and

estimated supply costs which may include but not be limited to prior period adjustments, inventory

and balancing costs.” Enrollment Email & ESA 4. In context, the non-exclusive phrase—which is

followed by example supply cost components—clearly modifies “actual and estimated supply

costs,” not “[y]our monthly variable rate.”

Finally, in its reply, XOOM points out that the Mirkins acknowledge the contract “is silent

as to an appropriate margin” and argue that any interpretation capping the margin would

improperly impose an additional term not contained in the contract. Defs.’ Reply 4–7. Citing

Richards v. Direct Energy Services, XOOM argues that jurors cannot “invent absent contract

terms” to require a specific margin in an ESCO contract that does not explicitly set a cap. 915 F.3d

88, 98 & n.5 (2d Cir. 2019). But Richards held that a contract stating an ESCO had “discretion”

to set a variable energy rate “based upon business and market conditions” unambiguously did not

require rates to be tied to procurement costs. Id. at 97–98. The contention that Richards forecloses

any limitation on a margin where a contract is silent as to the margin requires an overreading of

inapposite dicta contained in a footnote. See id. at 98 n.5. Richards in fact confirms that contractual

silence does not allow unbounded discretion, because discretion granted by a contract must be

“exercise[d] . . . in good faith.” Id. at 99 (quoting 23 Williston on Contracts § 63:22 (4th ed. 2018));

see also Cole v. Wells Fargo Bank, N.A., No. 15-CV-39 (MR), 2016 WL 737943, at *7 (W.D.N.C.

Feb. 23, 2016) (contracts contain an implied “obligation to exercise discretion reasonably and with

proper motive” (quotation and alteration omitted)).

In sum, I find that the contract required the variation in the variable rates to be determined

solely by XOOM’s actual and estimated supply costs. Next, I consider whether XOOM has

presented sufficient evidence demonstrating that it complied with the terms of the agreement as

construed under North Carolina law.

B. There is a Genuine Dispute as to Whether XOOM’s Rates Were Based on its

Actual and Estimated Supply Costs.

XOOM principally argues that summary judgment is warranted because there is no

question that “actual and estimated supply costs” were the foundational component of the variable

rates. And though it seems true that COGS was always the largest component of the Mirkins’ rate

and that additional costs and charges were layered on top of the supply costs to form the margin,

see Defs.’ Mot. 19–20, to prevail on summary judgment XOOM must demonstrate that the ultimate

rates were undoubtedly determined solely by its actual and anticipated supply costs.

XOOM principally offers two forms of evidence: direct evidence of XOOM’s rate-setting

procedures and statistical evidence demonstrating the correlation between the Mirkins’ rates and

XOOM’s supply costs. The direct evidence demonstrates that XOOM decisionmakers clearly

considered supply costs when setting rates. As previously explained, XOOM calculated the sum

of various cost components listed in rate-setting workbooks to reach a number labeled Total Costs,

or COGS; analysts then added a margin on top of COGS; and finally, the preliminary rate

calculations were presented at a pricing meeting where a team of decisionmakers would set a final

rate. Defs.’ Mot. 8–9. Because this process made COGS “always the first and largest component

of [the] rate,” XOOM says it is undisputed that the rate-setting procedure complied with the

contract. Id. at 20. And the statistical evidence shows that there was a close correlation between

the Mirkins’ rates and the Total Cost figure. Indeed, XOOM’s expert explains that the there is a

“less than 1-in-400 chance that the two were unrelated.” Id. at 22.

However, I find that XOOM has failed to demonstrate that there is no genuine dispute of

material fact as to whether it breached the contract. XOOM’s arguments and evidence certainly

show that it considered its supply costs when calculating the Mirkins’ monthly rates. And if all

XOOM had to do under the contract was consider and incorporate its supply costs into the final

rate, it would likely prevail. But under the controlling reading of the agreement, XOOM must show

that its rates were determined by its actual and estimated supply costs. XOOM has not done so.

First, XOOM has failed to adequately explain why the fluctuations in plaintiffs’ variable

rate did not directly correspond to XOOM’s internal COGS metric. As shown in the following

chart, the markup fluctuated over the six months the Mirkins received XOOM’s variable rate

product, twice rising (in September and November) even when XOOM’s Total Cost measure fell:

XOOM’s Internal Actual Rate

XOOM’s Markup

Month “Total Cost” Charged to Mirkins

Above “Total Cost”

($/kWh) ($/kWh)

June 0.1078 0.1290 20%

July 0.1181 0.1440 22%

August 0.1215 0.1490 23%

September 0.1021 0.1399 37%

October 0.1176 0.1490 27%

November 0.0903 0.1299 44%

Pls. 56.1, at 10 (reformatted).

XOOM advances three unsuccessful responses to this evidence. The first is that it could

charge any markup it wanted under the contract so long as supply costs were the starting point of

its rate calculation. I have already explained that the prevailing contract construction renders that

argument unavailing. The second is that the Total Cost or COGS number does not constitute its

“actual and estimated supply costs” because some of its supply costs—such as prior period

adjustments—are incorporated in the margin. XOOM presents ample testimonial evidence

supporting the general proposition that prior period adjustments were included in the margin and

therefore responsible for rate fluctuations, see Defs.’ 56.1 ¶¶ 14–18, but no documentary evidence

demonstrating how non-COGS supply costs actually impacted the Mirkins’ rates.8 And the

Mirkins counter with evidence that none of the documents considered at rate-setting meetings

mention prior period adjustments. Pls.’ 56.1 ¶¶ 42–43, at 57–58. To the extent the record contains

evidence of prior period adjustments being implemented, it appears that XOOM aggregated cost

overruns into annual and revised budgets, which it used to inform rate-setting decisions for over a

thousand products across many markets, in at least one occasion leading XOOM to raise New

8 According to XOOM Director of Product Management Ryan Park, there was no set formula for

incorporating prior period adjustments. MDM Decl., Ex. A-12, at 198:15–17, ECF No. 146-14

(filed under seal) (“There’s certainly a human element in terms of factoring in, you know, prior

period adjustments.”).

York variable rates to make up for unanticipated costs in other regions. See Loehde Dep. 64:12–

14; 69:10–14; 210:2–211:24. Based on this evidence, viewed in the light most favorable to the

Mirkins, a reasonable jury could find either that XOOM did not factor prior period adjustments

into its margin or that cross-market margin adjustments made on the basis of relative regional

consumer elasticity (or other considerations) were inconsistent with the terms of the ESA.

Therefore, whether permissible supply costs incorporated in the margin determined the monthly

change in markup is a disputed material fact. Third, XOOM points to its expert evidence of a “near

perfect correlation” between the rate and XOOM’s COGS. Defs.’ Reply 14. However, the

statistical correlation seems to prove at most that XOOM incorporated its internal cost calculation

into the rate. The correlation does not tell us whether XOOM added a permissible markup above

its cost calculation.

Even if XOOM were able to meet its burden, the Mirkins have presented evidence

sufficient to demonstrate the existence of a question of fact as to whether XOOM set the Mirkins’

monthly variable rate in compliance with the contract. Several pieces of evidence suggest that

XOOM relied on pricing strategies or other considerations to determine the monthly variable rate

in the New York market. First, it appears that XOOM’s rate-setting decisionmakers were primarily

concerned with meeting revenue goals, and that rates were set accordingly. For example, Director

of Pricing and Structuring Jason Loehde suggested that rates determined margins, explaining in

his deposition that “we would input a proposed rate into the rate setting workbook and then there

would be a calculated margin that results from the rate that we input.” Loehde Dep. 67:12–16. And

XOOM CEO Tom Ulry acknowledged that most of the pricing team “wasn’t even privy to the

operating expenses and things like that,” but that they were privy to “[t]he gross margin goal for

the month.” Wittels Decl., Ex. 25, at 101:16–22, ECF No. 148-26 (filed under seal). Finally, in

April 2013, a few months before the Mirkins signed up for XOOM’s service, Ulry explained that

electricity rates in New York had increased because “[w]holesale rates are up and we raised our

margins so we could lower them elsewhere.” Wittels Decl., Ex. 26, at 1, ECF No. 148-27 (filed

under seal); see also Loehde Dep. 210:20–212:4 (explaining that XOOM increased variable rates

for New York customers to make up for margin shortfalls sustained in markets outside New York).

Second, the record indicates that XOOM considered several factors besides supply costs

when setting its monthly rates. For example, Loehde sent an email before a 2015 meeting listing

monthly rate-setting process considerations, including “[p]ositioning in relation to price to

compare, creating a value proposition for customer, prices of our competitors, regulatory

requirements, competitive trends, target margins.” Pls.’ 56.1 ¶ 76; Wittels Decl., Ex. 27, ECF No.

148-28 (filed under seal); see also Wittels Decl., Ex. 20 (“Coppola Dep.”), at 50:18–24, ECF No.

148-21 (filed under seal) (Senior Vice President of Energy Supply and Pricing Andrew Coppola

confirming that XOOM considered many factors when setting prices, including “[a]ttrition, sales

growth, regulatory changes, [and] competitors”).

Third, XOOM’s 2016 amendment to its form Electricity Sales Agreement supports an

inference that XOOM set its rates based on pricing strategies. The amended contract states that the

variable rate would be “based upon a number of factors, which may include but not be limited to,

the fluctuation of wholesale commodity costs or other components of wholesale prices . . . and

XOOM’s pricing strategies.” Pls.’ 56.1 ¶ 91 (emphasis added). In the Rule 30(b)(6) deposition of

XOOM, Loehde explained that XOOM’s rate-setting process did not change between 2013 and

2016, and so “the updated language is just simply providing more accurate language to our

customers.” Wittels Decl., Ex. 24, at 134:19–24, ECF No. 148-25 (filed under seal). And Coppola

confirmed that in 2013 XOOM customer rates were “based in part” on XOOM’s pricing strategies.

Coppola Dep. 98:11–14.

XOOM responds by arguing that the use of pricing strategies was permissible under the

contract. Defs.’ 56.1 Response ¶ 92. But, as explained, the contract as construed according to North

Carolina law required XOOM’s rates to be determined by its actual and estimated supply costs.

XOOM also argues that reliance on record evidence from 2015 and 2016 is irrelevant because the

Mirkins were customers for only six months in 2013. But XOOM’s witnesses have asserted that

XOOM’s pricing process remained constant from 2013 to 2016.

In sum, there is a genuine question of fact as to whether XOOM set the Mirkins’ rates

based on supply costs or based on other considerations, such as pricing strategies driven by margin

goals.

II. Summary Judgment is Granted as to Boris Mirkin’s Claim.

XOOM’s final argument is that summary judgment should be granted as to Boris Mirkin’s

claim either because he lacks Article III standing or because he is neither a party to nor a third-

party beneficiary of the contract with XOOM and thus cannot sustain his claim under North

Carolina law.

To satisfy the requirements of Article III standing, a “plaintiff must have (1) suffered an

injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is

likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540,

1547 (2016). At the summary judgment stage, a plaintiff must support standing with specific facts,

by affidavit or other evidence, that are assumed to be true for the purpose of the motion. Lujan v.

Defenders of Wildlife, 504 U.S. 555, 561 (1992). Plaintiffs argue that Boris has standing because

he was the primary decision-maker regarding the family’s energy supply and they enrolled in the

XOOM variable rate plan using Boris’s email and phone number. Pls.’ 56.1 ¶¶ 39–41, at 55.

However, because standing requires an injury to a plaintiff’s own legally protected interests, a

breach of contract claim can be maintained only where the plaintiff is a party to the contract, an

intended third-party beneficiary of that agreement, or an assignee of the claim. Rynasko v. New

York University, 63 F.4th 186, 193 (2d Cir. 2023). The Mirkins concede that Boris is not a party

to the contract and do not argue that he is an assignee of Susanna’s claim. See Pls.’ Opp’n 46

(“Boris Mirkin . . . is not a direct party to the contract with XOOM.”). The only question is whether

he is a third-party beneficiary.

As previously explained, to prevail on a breach of contract claim under North Carolina law,

a plaintiff must prove that (1) a valid contract exists, and (2) the defendant breached the terms of

that contract. See Crosby, 635 F.3d at 645. A third party can sue for breach of contract by

additionally showing that “(3) the contracting parties ‘intended primarily and directly to benefit

him or the class of persons to which he belongs.’” Edwards v. CSX Transp., Inc., 983 F.3d 112,

117 (4th Cir. 2020) (quoting DeMent v. Nationwide Mut. Ins. Co., 544 S.E.2d 797, 801 (N.C. Ct.

App. 2001)). Under North Carolina law, it is not enough for a contract to incidentally benefit a

third party—the parties must “intend it to benefit the plaintiff directly.” Holshouser v. Shaner

Hotel Grp. Properties One Ltd. P’ship, 518 S.E.2d 17, 25 (N.C. Ct. App. 1999), aff’d, 524 S.E.2d

568 (2000). In determining the parties’ intent, North Carolina courts “consider the circumstances

surrounding the transaction as well as the actual language of the contract.” Id. (quotation and

alteration omitted).

Here, the actual language of the contract provides the answer. The ESA explicitly states:

“There are no third-party beneficiaries to this Agreement.” Enrollment Email & ESA 4. This

language clearly indicates that XOOM did not intend that the contract directly benefit a third-party

such as Boris. See Holshouser, 518 S.E.2d at 25. Because Boris was not a third-party beneficiary,

he lacks standing to sue for breach. Rynasko, 63 F.4th at 194–95. I therefore grant XOOM’s motion

as to Boris’s claim for breach of contract.

CONCLUSION

For the foregoing reasons, the motion for summary judgment is granted in part and denied

in part. Specifically, I grant summary judgment for XOOM as to Boris Mirkin’s claim for breach

of contract because he was neither a party to nor a third-party beneficiary of the contract. I deny

summary judgment as to Susanna Mirkin’s claim for breach of contract because she contracted to

receive residential electricity from XOOM and there is a genuine dispute as to whether XOOM

breached the contract.

SO ORDERED.

/s/

Allyne R. Ross

United States District Judge

Dated: August 14, 2023

Brooklyn, New York