With the expansion of the “green” industry, we have all received solicitations from Solar companies, either on the phone, at the house, or from a table set up at a big box store. The solicitor wants to know whether you are interested in switching to solar, and if so, he or she will schedule an in-person meeting to review your electric bills in order to estimate how much money you can save. If you are still interested, a representative will visit your home to perform a site evaluation to determine your home’s suitability for installation of a solar panel system.
Depending on which solar company you are dealing with, you will usually be offered 1 of 3 potential options for switching to solar:
- You can purchase the panels either lump sum or via installment plan
- You can sign a long-term lease
- You can enter into a solar power purchase agreement (PPA) in which you enter into a contract with a solar panel installer who installs the system at your home, and then you enter into a separate long-term contract with a power provider who purchases the system from the installer after installation and you begin making monthly payments to the provider based on actual usage once the system is activated. As you will see from the story below, this PPA arrangement can be extremely problematic for customers.
Last winter, a client came to my office and informed me that she had entered into a PPA, had a new solar panel system installed, and sections of her roof were leaking buckets of water into her master bedroom. She contacted the Installer many times. On some occasions, the installer no-showed the appointments. Other times, the installer visited the home, tried to do some repairs, but was unable to stop the leaks. Ultimately, several workers admitted to my client that they could not stop the leaks because the solar panel system had been installed on a low-sloped shingled roof which was not suitable for installation of the system because the brackets that were nailed to the roof causing the shingles to lift and the low slope of the roof caused water to accumulate behind the brackets and ultimately infiltrate underneath the raised shingles and through the roof. The workers informed my client that low-sloped roofs required the installation of a rubber roofing system rather than shingles in order to be “solar ready.”
This of course led to her biggest question – – “why didn’t the guy who performed the site inspection tell me that I had to install a rubber roof before installing the panels?” The answer was obvious, albeit not one she wanted to hear – – “because then you would not have agreed to switch to solar if you had to spend a few thousand dollars in roofing upgrades to become solar ready.”
It was clear that my client had been baited into switching to solar. My first move was contacting the installer and demanding that it remove the system from the house and release my client of her contractual obligations. But when I did, the installer and its attorney advised that it could not remove the system because it no longer owned it after selling the system to the power Provider and it could not release my client of her contractual obligations because her contract was now with the power provider.
So I then contacted the power provider with these same demands. But when I did, the power provider and its attorney advised that it would not comply because the power provider was not responsible for the installer’s actions and the power provider had not breached any contractual obligations to my client.
I could not believe it. I had a client who was duped into switching to solar, had water pouring into her master bedroom every time it rained, was sleeping on the couch for months, could not get anyone to remove the system to stop the leaks, and was contractually prohibited from removing the system herself. How was this possible?
The answer was that it was made possible by the way the two contracts were structured. By requiring my client to sign separate and distinct contracts with the installer and the power provider, it allowed the installer to wash its hands clean after installing the system and selling it to the power provider, and it allowed the power provider to assert plausible deniability for the installer’s actions.
Upon dissecting the two contracts and interpreting them in tandem, I concluded that this contractual structure amounted to a civil conspiracy intended to preclude an unsuspecting customer from obtaining any recourse where the installer had fraudulently induced the customer into switching to solar. Certain terms in the contracts supported my theory.
For example, the installation agreement attempted to shield the installer from liability after the installation was complete, while the power agreement attempted to shield the power provider from liability arising out of the installation and it expressly prohibited the customer from being excused from making any monthly payments for any reason whatsoever.
In addition, the two agreements had competing venue clauses which sought to deny my client the opportunity to have her dispute with the installer and the power provider resolved in one proceeding in the same venue. The installation agreement did not contain any arbitration clauses, which meant that any dispute with the installer had to be venued in a court of law. In contrast, the power agreement contained a mandatory arbitration clause that required the parties to submit all disputes to binding arbitration, it prohibited my client from joining any other parties to the arbitration, and it prohibited the arbitrator from issuing an award that extended to any transaction other than the one between my client and the power provider. These competing venue clauses force the aggrieved customer into court with the installer, where the power provider will argue that it cannot be subject to jurisdiction because of the arbitration clause and the court lacks the power to rescind the power agreement. On the flip side, the customer is stuck in arbitration with the power provider, where the installer is prohibited from joining, the arbitrator is prohibited from making an award that pertains to the installer, and the power provider can claim plausible deniability because it did not perform the inspection or the faulty installation.
Once it became clear that a pre-litigation settlement was not possible, I worked diligently to prepare a Verified Complaint and Order to Show Cause seeking a court order for the immediate removal of the leaking portion of the solar panel system during the pendency of the litigation. The Complaint was thoroughly pleaded and asserted causes of action for breach of contract, consumer fraud, negligence and civil conspiracy.
The power provider opposed the Order to Show Cause on two grounds: (1) the case should be dismissed and sent to arbitration; and (2) my client could not show a reasonable likelihood of success on the merits because the power provider was not responsible for the installation of the solar panel system. These were the exact arguments I anticipated and they only served to underscore the public policy concerns at stake in this case. However, we still needed to clear the first hurdle which was convincing the Judge that the case should not be dismissed and sent to arbitration.
On first glance, the law did not appear to be on our side. Under New Jersey law, any contractual provision waiving one’s right to a jury trial must reflect that the party has agreed thereto “clearly and unambiguously.” Leodori v. Cigna Corp., 175 N.J. 293, 302 (2003). “No particular form of words is necessary to accomplish a clear and unambiguous waiver of rights. It is worth remembering, however that every ‘consumer contract’ in New Jersey must ‘be written in a simple, clear, understandable and easily readable way.’ As such, arbitration clauses will pass muster when phrased in plain language that is understandable to the reasonable consumer.” Atalese v. U.S. Legal Services Group, L.P., 219 N.J. 430, 444 (2014); quoting N.J.S.A. § 56:12-2. Arbitration clauses may also be struck down for unconscionability.
On its face, the power agreement’s arbitration clause made it clear that my client was waiving her right to a jury trial. But upon closer examination and upon comparison with the installation agreement, the true inequity of strict contractual interpretation began to rear its ugly head. The power agreement’s arbitration clause prohibited my client from joining the installer to any arbitration and it prohibited the arbitrator from issuing an award that extended to any parties other than my client and the power provider. We argued that the defendants’ desired effect was to make it impossible to have a court or an arbitrator issue a valid binding order to rescind the contracts leaving the customer trapped in a 20+ year contract that she was duped into signing. So, while the power provider tried to argue that its arbitration clause was plainly visible to my client, the true legal ramifications of that clause were cloaked by smoke and mirrors that were not “sufficiently clear to a reasonable consumer.” See Atalese, 219 N.J. at 436 (2014). If that is not unconscionable, then what is?
At the hearing for the Order to Show Cause, my client honestly and tearfully testified about the months that she had been sleeping on her couch while water was pouring into her master bedroom. By the time we had the hearing, she had hired contractors to remove all of the rotting sheetrock on her bedroom ceiling and they placed numerous tarps around the bedroom to catch the water and drain into buckets. It was that bad.
The Judge was extremely displeased with the defendants and their refusal to make this right. He granted the Order to Show Cause and required the defendants to immediately remove the leaking portion of the solar panel system during the pendency of the case. The Judge also held that the power provider did not properly cross-move for summary judgment to dismiss the case based on the arbitration provision and the Judge provided the parties with 30 days to conduct discovery concerning the drafting and preparation of the arbitration clause after which time the power provider could file its motion.
After hearing my client’s testimony and seeing the Judge’s reaction, the defendants contacted my office within days of the hearing and expressed their desire to settle. Shortly thereafter, we reached a global settlement in which the defendants agreed to remove the entire solar panel system, all contracts were rescinded and my client was relieved of all contractual obligations, and my client was reimbursed all of her legal fees and out-of-pocket expenses which were tripled under the New Jersey Consumer Fraud Act.
After months of hopelessness, my client was ecstatic with this result. We were also very proud of this victory because it demonstrated the power of creative lawyering and an artfully pleaded complaint, it reaffirmed the importance of equity and fairness in the judicial process, and it was a moment for the solo attorney and his client to show the corporate defendants, their team of attorneys and their insurance companies that we were not to be trifled with.
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