MEMORANDUM AND ORDER
Appeal from a judgment of the Supreme Court (Richard M. Koweek, J.), entered May 23, 2023 in Albany County, which dismissed petitioners application, in a proceeding pursuant to CPLR article 78, to review, among other things, a determination of respondent revoking petitioners eligibility to operate as an energy service company in New York.
In October 2017, respondent deemed petitioner eligible to serve New York residential and nonresidential natural gas and electric customers as an energy service company (hereinafter ESCO).
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Petitioner began servicing customers in December 2018, and, shortly thereafter, respondent began receiving consumer complaints concerning petitioners marketing tactics related to, among other things, soliciting and enrolling new customers. Following an investigation, respondent identified Uniform Business Practices (hereinafter UBP)
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violations related to petitioners sales script and third-party verification telephone calls. Petitioner crafted a modified sales script, and respondent approved same in May 2019. Thereafter, respondent continued to receive complaints about petitioners marketing and soliciting efforts, specifically that customers were promised savings, discounts and rebates that did not materialize, customers were led to believe they were speaking to representatives of the traditional utility companies and that customers did not receive refunds after filing complaints. Consequently, respondent issued a notice of apparent failure in September 2020. The notice required petitioner to submit evidence showing what steps it had taken to address the alleged wrongdoing by its sales agents, the measures it had taken to remedy customer complaints and specific actions it had taken to avoid any recurrence.
Dissatisfied with petitioners response, and in light of receiving additional complaints, respondent directed petitioner in December 2020 to show cause why its eligibility to operate as an ESCO should not be revoked given that its process for soliciting new customers seemed to involve an initial, unrecorded phone call designed to avoid respondents oversight and that its sales agents continued to use deceptive and misleading practices to persuade customers to accept its services. Respondent further alleged that petitioner enrolled customers without authorization, failed to follow record retention requirements, failed to remove customers from its marketing database upon the customers request and apparently failed to cease telemarketing during the COVID–19 pandemic state of emergency. Petitioner responded by proffering as justification for its marketing complaints a rogue marketing vendor, tendering a proposed compliance plan consisting of a nine-month moratorium on its telemarketing and door-to-door sales, proposing to provide additional training and testing of its sales representatives, undertaking comprehensive auditing and quality controls, furnishing retraining on record-keeping requirements and issuing refunds to all customers who filed complaints.
Respondent found petitioners response to the order to show cause unconvincing. Specifically, respondent found that there was a material pattern of consumer complaints based on 116 complaints within a 16–month period, including unsolicited telemarketing sales calls during the COVID–19 pandemic declared state of emergency. Respondent also determined that petitioner violated the UBP marketing provisions by failing to remove customers from its marketing database after being requested to do so and that it engaged in misleading and deceptive conduct by making false or misleading representations regarding the rates or savings offered by petitioner. As to petitioners proposal to issue refunds, respondent found that these refunds had been previously promised or had been flatly denied by petitioner and that the new offer was its attempt at self-preservation rather than a gesture of actual good faith. Respondent additionally found that petitioners lack of adequate responses to customer complaints contradicted its statement that it gave priority to handling all consumer inquiries and complaints, and, thus concluded that petitioners practices were not indicative of high standards of customer service. Respondent further concluded that petitioners numerous violations of the UBP, violations of the telemarketing prohibition during the state of emergency, and findings of its violation of similar regulations in the State of Maryland, belied petitioners contention that it took compliance obligations seriously. Lastly, respondent found that, contrary to petitioners allegation that its noncompliance was caused by the rogue actions of a marketing vendor, the vendor that petitioner claimed was the cause (and with whom it had consequently terminated its relationship) was an entirely different vendor than petitioner had listed on its compliance documents. As a result, respondent revoked petitioners ESCO eligibility in May 2021 and denied petitioners request for a rehearing.
Petitioner then commenced this CPLR article 78 proceeding seeking to annul the revocation of its eligibility to operate as an ESCO, arguing, as relevant here, that respondents determination had violated its due process rights, violated several statutes entitling it to a hearing, and was a shockingly unfair abuse of discretion. Supreme Court dismissed the petition, finding that petitioner received adequate process under the law, that no statutory authority entitled petitioner to a hearing and that respondents determination to revoke petitioners eligibility to operate as an ESCO was not an excessively harsh abuse of discretion. Petitioner appeals.
Petitioner first contends that respondents decision to revoke its eligibility was made without affording it adequate procedural due process, thereby violating its liberty interest in its ability to conduct and operate its business. For such a contention to succeed, “petitioner must show, as a threshold matter, the deprivation of a protected interest by procedures that were insufficient under the circumstances” (Matter of Atlantic Power & Gas LLC v. New York State Pub. Serv. Commn., 203 A.D.3d 1352, 1354, 165 N.Y.S.3d 144 [3d Dept. 2022] [internal quotation marks, brackets and citation omitted]). While petitioner initially claimed both a property and liberty interest, on appeal it limits the assertion to a liberty interest. “Although a business may possess a liberty interest, this is limited to instances where a business ability to conduct its operations suffers from being stigmatized – such as being branded irresponsible or lacking integrity” (id.; see Matter of Schiavone Constr. Co. v. Larocca, 117 A.D.2d 440, 443, 503 N.Y.S.2d 196 [3d Dept. 1986], lvs denied 68 N.Y.2d 610, 508 N.Y.S.2d 1026, 501 N.E.2d 37 [1986], 68 N.Y.2d 610, 508 N.Y.S.2d 1027, 501 N.E.2d 37 [1986]).
A review of the revocation order confirms that the findings include statements that petitioner, “engaged in misleading or deceptive conduct in marketing to New York customers, including making false or misleading representations ” (emphasis added) and “[t]hat, combined with the consistent complaints about misleading sales tactics and promises of rebates, rewards, and/or discounts, is not indicative of high standards of customer service.” Arguably, these statements brand petitioner as lacking integrity, being irresponsible and may indeed cast aspersions on its reputation and its ability to conduct future business (cf. Matter of Atlantic Power & Gas LLC v. New York State Pub. Serv. Commn., 203 A.D.3d at 1354, 165 N.Y.S.3d 144; see Matter of Schiavone Constr. Co. v. Larocca, 117 A.D.2d at 443, 503 N.Y.S.2d 196).
However, even assuming a liberty interest in this instance, we find that the requirements of due process were satisfied by the procedures afforded to petitioner. “[D]ue process is a flexible constitutional concept calling for such procedural protections as a particular situation may demand” (Matter of Medicon Diagnostic Labs. v. Perales, 74 N.Y.2d 539, 546, 549 N.Y.S.2d 933, 549 N.E.2d 124 [1989] [internal quotations marks and citation omitted]; see Matter of Brown v. City of Schenectady, 209 A.D.3d 128, 134, 175 N.Y.S.3d 591 [3d Dept. 2022]). It “is determined by a weighing of the interests at stake, the risk of erroneous deprivation, the probable value of additional safeguards and the cost of substitute procedures” (Matter of Atlantic Power & Gas LLC v. New York State Pub. Serv. Commn., 203 A.D.3d at 1355, 165 N.Y.S.3d 144 [internal quotation marks and citation omitted]; see Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 47 L.Ed.2d 18 [1976]).
Respondent provided notice to petitioner of its numerous problematic business practices and offered it several opportunities to take corrective action, including an initial meeting with respondents staff to adjust its sales pitch, seeking a response to the notice of apparent failure to address respondents concerns and receipt of an order to show cause requesting petitioner to set forth reasons why its eligibility should not be revoked. At each stage, petitioner had notice of the claims against it, mechanisms available for challenging respondents determinations and opportunities to present explanations and defenses for its actions. Nevertheless, after each stage, the consumer complaints continued. Finally, after respondent revoked petitioners eligibility to operate as an ESCO, it was able to pursue this CPLR article 78 proceeding to challenge that determination (see Matter of Atlantic Power & Gas LLC v. New York State Pub. Serv. Commn., 203 A.D.3d at 1355, 165 N.Y.S.3d 144). Upon undertaking the balancing test set forth in Mathews v. Eldridge, 424 U.S. at 335, 96 S.Ct. 893, the safeguards and procedures afforded petitioner were adequate to satisfy due process (see Matter of Keyspan Energy Servs. v. Public Serv. Commn. of State of N.Y., 295 A.D.2d 859, 861–862, 744 N.Y.S.2d 245 [3d Dept. 2002]).
Petitioner also contends that respondents order revoking its ESCO eligibility violated numerous statutory provisions entitling it to a hearing prior to such revocation. We find no merit to any of petitioners claims pertaining to this argument. Although petitioner points to statutory provisions located in the Public Service Law, including Public Service Law §§ 65(16) and 66(5), as authority for its position, “[i]t is undisputed that ESCOs have been operating ․ pursuant to [respondents] oversight and regulation, as reflected in the UBPs requirements” (Matter of National Energy Marketers Assn. v. New York State Pub. Serv. Commn., 33 N.Y.3d 336, 343, 103 N.Y.S.3d 1, 126 N.E.3d 1041 [2019]), rather than the statutory provisions relied upon by petitioner. Nor does petitioner succeed by relying on 16 NYCRR part 12, as this set of rules pertain to individual consumer complaints and is, therefore, not applicable. As relevant to State Administrative Procedure Act §§ 301 and 401, also cited by petitioner, ESCOs are not licensed; instead, they are regulated by the set of rules contained in the UBP and these statutes are likewise inapplicable. Lastly, although petitioner questioned respondents authority to determine that in making telemarketing calls during the COVID–19 pandemic it violated GBL § 399–z, respondent clearly stated that it did not have jurisdiction to decide this question but, rather, it was noting it as a violation under UBP § 2.D.5.m.
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Here, respondents actions and proceedings were based solely on petitioners alleged noncompliance with various UBP requirements. As the UBP does not direct that an ESCO be provided a hearing, respondent was within its authority to revoke petitioners eligibility without providing an administrative hearing (see Matter of National Energy Marketers Assn. v. New York State Pub. Serv. Commn., 33 N.Y.3d at 343, 103 N.Y.S.3d 1, 126 N.E.3d 1041; Matter of Marathon Power LLC v. Public Serv. Commn. of the State of N.Y., 209 A.D.3d 1245, 1246, 177 N.Y.S.3d 772 [3d Dept. 2022], lv denied 39 N.Y.3d 913, 2023 WL 3512946 [2023]; Matter of Atlantic Power & Gas LLC v. New York State Pub. Serv. Commn., 203 A.D.3d at 1354–1355, 165 N.Y.S.3d 144).
Finally, petitioner contends that revoking its eligibility was not supported by evidence, was an abuse of discretion and vastly disproportionate to the number and nature of complaints it had received from consumers. We disagree. “[A]n administrative penalty must be upheld unless it is so disproportionate to the offense, in the light of all the circumstances, as to be shocking to ones sense of fairness, thus constituting an abuse of discretion as a matter of law” (Matter of Lalima v. New York State Dept. of State, 214 A.D.3d 1051, 1054, 184 N.Y.S.3d 451 [3d Dept. 2023] [internal quotation marks and citations omitted]; see Matter of Patel v. New York State Educ. Dept., 211 A.D.3d 1149, 1152, 179 N.Y.S.3d 451 [3d Dept. 2022]). Further, “it is not the role of this Court to either second-guess the administrative agency or substitute its own judgment for the action taken” (Matter of Castle v. Maine–Endwell Cent. Sch. Dist., 111 A.D.3d 1221, 1222, 975 N.Y.S.2d 816 [3d Dept. 2013] [internal quotation marks, brackets and citation omitted], lv denied 22 N.Y.3d 862, 2014 WL 642717 [2014]; see Matter of Nappi v. Verizon N.Y., 205 A.D.3d 1181, 1184, 169 N.Y.S.3d 156 [3d Dept. 2022]). Respondent noted in its determination revoking petitioners eligibility that it had fielded nearly 116 complaints against petitioner, that two of its own staff had been the targets of petitioners deceptive marketing practices and that petitioner had exhibited a pattern of noncompliance. Given that petitioner had been operating as an ESCO within New York for a short period of time and was resistant to changing its business practices to conform to the requirements of the UBP, respondents revocation of petitioners eligibility to operate does not seem shockingly unfair. To the extent that we have not addressed any of petitioners remaining contentions, they have been considered and found to be without merit.
ORDERED that the judgment is affirmed, without costs.
FOOTNOTES
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. An ESCO is an entity eligible to sell electricity and/or natural gas to customers using the transmission or distribution system of a traditional utility company.
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. The UBP is a set of rules regulating ESCOs business and marketing practices and sets forth requirements for an ESCO to follow in order to maintain eligibility. Additionally, the UBP authorizes respondent to determine and impose appropriate consequences for an ESCOs noncompliance with UBP terms and conditions (see Matter of Marathon Power LLC v. Public Serv. Commn. of the State of N.Y., 209 A.D.3d 1245, 1246, 177 N.Y.S.3d 772 [3d Dept. 2022], lv denied 39 N.Y.3d 913, 2023 WL 3512946 [2023]).
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. Moreover, it was undisputed that petitioner violated the statute.
Reynolds Fitzgerald, J.
Clark, J.P., Aarons, McShan and Powers, JJ., concur.