SAN FRANCISCO (CN) - Pacific Gas & Electric must face RICO allegations from a rival that claims the utility giant stole millions in a fraudulent billing scheme, a federal judge ruled.
U.S. District Judge Richard Seeborg on Friday rejected PG&E's motion to dismiss RICO and unfair competition charges in a June lawsuit from United Energy Trading . Seeborg found that PG&E's smaller competitor adequately alleged wire fraud by various PG&E employees.
PG&E, the second-largest provider of natural gas in the Golden State, claimed the RICO charges should not stand because the employees accused of theft are not a distinct entity and were "simply doing [their] jobs."
Seeborg disagreed. He found that United Energy identified three PG&E employees and three separate billing schemes. He allowed one RICO claim to stand.
"UET has pleaded adequately a 'pattern of racketeering' because it credits at least ten different acts to the direction and supervision of each individual defendant, even if they were working together," Seeborg wrote.
In its complaint, UET accuses PG&E, which provides UET access to its extensive pipeline network and billing services, of illegally withholding payments and unnecessarily contacting its customers. United Energy is known as a "Core Transportation Agent" and began serving accounts in Northern California in 2010.
United Energy supplies natural gas to 60,000 customers in PG&E's territory and pays its competitor $40,000 per month for billing services, according to the complaint. The Colorado-based utility says it's owed more than $1.7 million from customers monitored by PG&E and that PG&E wrongfully disconnected service to hundreds of UET customers for nonpayment.
PG&E is the default natural gas provider and UET's ex-customers are automatically directed to PG&E.
While PG&E will face a RICO charge, Seeborg granted its motion in part and struck UET's antitrust claim. UET failed to plead monopoly allegations against PG&E for purposely driving customers to their service.
"UET's claim under the Sherman Act fails because UET has not sufficiently pleaded that the alleged schemes, whether independently or in combination, caused antitrust injury or foreclosed competition in a substantial share of the relevant market," Seeborg wrote.
Seeborg also granted PG&E's motions to dismiss conversion and breach of contract claims, as well as a respondeat superior racketeering claim.
United Energy, which seeks punitive damages, is represented by Holland & Knight of San Francisco.
On Monday, the California Public Utilities Commission announced it is investigating whether PG&E violated ex parte communication laws and avoided rules intended to prevent backroom deals. The 11-page CPUC order instituted the investigation and ordered PG&E to show cause why it should not be sanctioned for, among other things, "allegations of ex parte violations raised by the City of San Bruno" after the disastrous pipeline explosion in 2010 that killed eight people and leveled a neighborhood.
PG&E did not respond to a request for comment placed after business hours Monday.
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