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As reported previously, the Court’s opinion arose from an appeal filed by Smart Energy SmartEnergy against the Maryland Public Service Commission’s (PSC’s) interpretation that a wet signature was required for contracts the company entered with customers over the phone when such customers placed an inbound call to SmartEnergy in response to a postcard mailer from the company.

SmartEnergy generally argued that inbound telephone calls made by customers in response to a postcard mail campaign were not telephone solicitations, and thus not subject to the MTSA, because such transactions were not entirely by phone, and the calls were not initiated by the merchant.

The Supreme Court, however, said sometimes this definition is easy to apply. If a merchant cold calls a consumer and attempts to sell its service during that call, that sales attempt would be a telephone solicitation and, unless one of CL § 14-2202’s exemptions apply, a resulting transaction would be subject to the MTSA’s contract requirements. The Commission correctly concluded that the MTSA applies to SmartEnergy’s business practices. The MTSA applies to sales made over the telephone where the consumer places the telephone call to the merchant in response to a merchant’s marketing materials unless the transaction falls within one of the statutory exemptions outlined in CL § 14-2202.  SmartEnergy mailing postcards to prospective consumers stating that they are eligible for a free month of electricity and providing a toll-free telephone number, which sets in motion a telephone call from the customer to SmartEnergy, during which SmartEnergy attempts to sell electricity to the customer—fall within the statutory definition of “telephone solicitation.” We will discuss the parties’ competing statutory interpretations.

On the other hand, when a consumer calls the local pizza joint and places a carry-out order, calls a plumber to unclog a shower drain, or calls a bike shop to order parts, such transactions result from a consumer-initiated attempt to buy, not from a merchant-initiated attempt to sell. Because those calls are not “telephone solicitations,” the resulting transactions are not subject to the MTSA’s contract requirements.

Excerpts from Maryland Supreme Court Order:
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For the reasons set forth above, we hold: 

Under the plain language of the Choice Act, the General Assembly has granted the Commission the express authority to determine whether electricity suppliers under its jurisdiction have violated Maryland’s consumer protection laws, including the MTSA, and to impose statutory remedies where it determines that the supplier has violated any applicable consumer protection laws of this State. 

2. The Commission correctly concluded that the MTSA applies to SmartEnergy’s business practices. The MTSA applies to sales made over the telephone where the consumer places the telephone call to the merchant in response to a merchant’s marketing materials unless the transaction falls within one of the statutory exemptions outlined in CL § 14-2202.
3. The Commission’s affirmance of the PULJ’s findings of fact that SmartEnergy’s business practices violated the Choice Act and the Commission’s regulations, and its additional findings of fact that SmartEnergy’s business practices violated the MTSA, was supported by substantial evidence in the record. 
4. The remedies imposed by the Commission in its final order arising from SmartEnergy’s violation of Maryland laws were within its discretion and were not arbitrary or capricious.

The Supreme Court of Maryland concludes that the Maryland Telephone Solicitations Act (MTSA), which generally requires a wet signature for telephonic sales, applies, “to sales made over the telephone where the consumer places the telephone call to the merchant in response to a merchant’s marketing materials unless the transaction falls within one of the statutory exemptions outlined in CL § 14-2202.”

The Court’s opinion arose from an appeal filed by Smart Energy SmartEnergy against the Maryland Public Service Commission’s (PSC’s) interpretation that a wet signature was required for contracts the company entered into with customers over the phone when such customers placed an inbound call to SmartEnergy in response to a postcard mailer from the company. 

Sometimes this definition is easy to apply. If a merchant cold calls a consumer and attempts to sell its service during that call, that sales attempt would be a telephone solicitation and, unless one of CL § 14-2202’s exemptions apply, a resulting transaction would be subject to the MTSA’s contract requirements. On the other hand, when a consumer calls the local pizza joint and places a carry-out order, calls a plumber to unclog a shower drain, or calls a bike shop to order parts, such transactions result from a consumer-initiated attempt to buy, not from a merchant-initiated attempt to sell. Because those calls are not “telephone solicitations,” the resulting transactions are not subject to the MTSA’s contract requirements.

SmartEnergy generally argued that inbound telephone calls made by customers in response to a postcard mail campaign were not telephone solicitations, and thus not subject to the MTSA, because such transactions were not entirely by phone, and the calls were not initiated by the merchant.

The PSC had held that an inbound/outbound distinction conflates the ‘initiation’ of the telephone call and the initiation of the attempt by the merchant to sell or lease consumer goods. The PSC had held that SmartEnergy initiated the attempt to sell its retail supply product to customers by sending the postcard to the customer. The PSC further held that the sales process used by SmartEnergy was consummated entirely over the telephone, meaning the MTSA applied, and a wet signature was required. SmartEnergy did not obtain wet signatures for the transactions at issue.

The Supreme Court affirmed the PSC’s conclusion, stating that, “[t]he Commission correctly concluded that the MTSA applies to SmartEnergy’s business practices.”

“The MTSA applies to sales made over the telephone where the consumer places the telephone call to the merchant in response to a merchant’s marketing materials unless the transaction falls within one of the statutory exemptions outlined in CL § 14-2202.”

“The plain language of the definition of ‘telephone solicitation’ explicitly separates the requirement relating to the ‘making’ of a sales attempt from the requirement relating to the ‘initiation’ of a sales attempt. While each requirement must be satisfied for an ‘attempt by a merchant to sell’ to be a ‘telephone solicitation,’ they do not, as written, apply to or limit each other.”

“We disagree with SmartEnergy’s interpretation that the initiation of the sales attempt is necessarily part of the sales attempt itself. SmartEnergy’s act of sending the postcard ‘initiates’ the attempt to sell. In other words, the postcard sets in motion SmartEnergy’s attempt to sell electricity, which SmartEnergy ‘makes’ entirely by telephone. We determine that, under the MTSA, the act or event that ‘initiates’ a telephonic sales attempt is not necessarily the same as attempting to ‘make’ a sale over the telephone — it can be, as here, the sending of marketing materials to consumers.”

“[W]e determine there is only one reasonable and logical interpretation of ‘telephone solicitation’ — it applies to both telephone calls initiated by the merchant, as well as telephone calls initiated by the consumer in response to marketing materials sent by the merchant, unless the transaction falls within one of the statutory exemptions outlined in CL § 14-2202.”

“[A]ccepting SmartEnergy’s interpretation of the MTSA — that it excludes telephone sales transactions arising from a consumer placing a call to a merchant in response to marketing material — would create an irrational loophole … under SmartEnergy’s interpretation, the merchant could send false and misleading marketing materials, and escape the mandates of the MTSA simply because the consumer called the merchant, instead of the merchant calling the consumer. Such an interpretation is not only illogical, but it is also inconsistent with the legislative purpose and intent of the MTSA[.]”

Under one of its exemption provisions, the MTSA statute provides that its provisions do not apply to a transaction, “in which the consumer purchases goods or services pursuant to an examination of a television, radio, or print advertisement or a sample, brochure, catalogue, or other mailing material of the merchant that contains: (i) The name, address, and telephone number of the merchant; (ii) A description of the goods or services being sold; and (iii) Any limitations or restrictions that apply to the offer[,]” (the § 14-2202(a)(5) exemption aka marketing materials exemption)

The Court agreed with the PSC’s finding that the SmartEnergy postcards did not fall within the marketing materials exemption set forth in CL § 14-2202(a)(5).

“[T]he Commission found that SmartEnergy designed the postcards to misleadingly appear to have been sent by the customers’ utility. There is substantial evidence in the record to support this finding. We agree with the Division [Division of Consumer Protection in the Office of the Attorney General] that, for the marketing materials exemption to apply, the postcard should identify who the real ‘merchant’ is, and not mislead the customer that the merchant is someone else.”

“Additionally, the postcards fail to describe SmartEnergy’s services, as required by CL § 14-2202(a)(5)(ii). We agree with the Division that the postcards failed to explain the basic facts that SmartEnergy is a third-party energy supplier selling electricity, and SmartEnergy was soliciting the consumer to switch energy suppliers from the consumer’s existing utility to SmartEnergy.”

Excerpts from Justice Steven Gould dissent In Part

“The Majority appears to create a bright-line rule that direct mail advertisements are part of the attempt to sell — and therefore telephone calls prompted by such ads are not ‘telephone solicitations’ — only if the ad contains all the information set forth in CL § 14-2202(a)(5). I disagree.”

“The General Assembly could have drafted the statute to include in the definition of ‘telephone solicitation’ all inbound calls except those made in response to advertisements containing the information identified in CL § 14-2202(a)(5). But it didn’t,” 

The Court also affirmed that the PSC is empowered to enforce the MTSA. 

The Court said, “we hold that, under the plain language of the Choice Act, the General Assembly granted the Commission the express authority to determine whether electricity suppliers under its jurisdiction have violated Maryland’s consumer protection laws, including the MTSA, and to impose statutory remedies when it determines that the supplier has violated any applicable consumer protection law of this State.”

The Court said, “under the Choice Act, the Commission has the power to conduct its ‘own investigation’ and upon a finding of ‘just cause,’ impose remedies for a violation of the Choice Act or the Commission’s regulations, including imposing a civil penalty, ordering a refund or credit to a consumer, imposing a moratorium on adding or soliciting additional customers, or even revoking or suspending the electricity supplier’s operating license. PU § 7-507(k)(1). The statutory definition of ‘just cause’ includes an electricity supplier’s violation of ‘any other applicable consumer protection law of the State.’ Id. § 7-507(k)(3)(viii).”

The Court said, “Thus, under the plain language of the Choice Act, the Legislature has granted the Commission the authority to ‘investigate’ electricity suppliers to determine whether a penalty or other remedy should be levied for ‘just cause,’ which exists if the supplier violated the consumer protection laws of Maryland. We agree with the Appellate Court that the Commission has the authority to ensure that electricity suppliers, such as SmartEnergy, ‘comply with specific consumer protection laws, under which the MTSA falls.’ In re SmartEnergy, 256 Md. App. at 42.”

The Court further said, “The MTSA states that violations of its provisions can be enforced by ‘any remedies . . . available at law.’ CL § 14-2205. Certainly, the Commission’s statutory authority to impose remedies on an electricity supplier when it finds, upon its own investigation, that the supplier has violated Maryland’s consumer protection laws, would constitute ‘remedies available at law’ to the Commission.”

As to matters relating to SmartEnergy’s specific alleged behavior, and less applicable to the broader market, the Court found that the PSC’s findings were supported by substantial evidence in the record.

In the Matter of Smart Energy Holdings, LLC D/B/A SmartEnergy, No. 1, September Term, 2023 

See also Maryland PSC Investigation – 9613

(InThe Matter Of The Complaint Of The Staff Of The Public Service Commission Against SmartEnergy Holdings,LLC D/B/A SmartEnergy)