Johnson v. Octopus Energy LLC

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
KIMBERLY JOHNSON, 	§
§
Plaintiff, 	§
§
V. 	§ 	No. 3:25-cv-274-E-BN
§
OCTOPUS ENERGY, LLC, 	§
§
Defendant. 	§
FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE
UNITED STATES MAGISTRATE JUDGE
Plaintiff Kimberly Johnson filed a pro se complaint alleging violations of the
Electronic Funds Transfer Act, 15 U.S.C. § 1693 et seq. (the “EFTA”) and Texas laws.
See Dkt. No. 3.
And United States District Judge Ada Brown referred this lawsuit to the
undersigned United States magistrate judge for pretrial management under 28
U.S.C. § 636(b) and a standing order of reference.
Defendant Octopus Energy, LLC moved to dismiss the original complaint
under Federal Rule of Civil Procedure 12(b)(6). See Dkt. No. 14. And Johnson
responded by timely filing an amended complaint as a matter of course. See Dkt. No.
17; FED . R. CIV. P. 15(a)(1)(B).
Octopus then moved to dismiss the amended complaint under Rule 12(b)(6).
See Dkt. No. 19. And, so, the Court terminated the first motion to dismiss as moot.
See Dkt. No. 20. But, instead of responding to Octopus’s second motion, Johnson
moved for leave to file a second amended complaint. See Dkt. No. 23. Octopus
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responded to Johnson’s motion. See Dkt. No. 24. Johnson failed to reply, and the
deadline to so has expired. See N.D. TEX. L. CIV. R. 7.1(f).
For the reasons and to the extent set out below, the Court should grant the
motion to dismiss the amended complaint, deny leave to file a second amended
complaint, and dismiss this lawsuit.
Legal Standards
A motion under Rule 12(b)(6) is “not meant to resolve disputed facts or test the
merits of a lawsuit” but “instead must show that, even in the plaintiff’s best-case
scenario, the complaint does not state a plausible case for relief.” Sewell v. Monroe
City Sch. Bd., 974 F.3d 577, 581 (5th Cir. 2020).
Considering such a motion, the Court “accepts all well-pleaded facts as true,
viewing them in the light most favorable to the plaintiff.” In re Katrina Canal
Breaches Litig., 495 F.3d 191, 205-06 (5th Cir. 2007).
But a plaintiff still must plead “enough facts to state a claim to relief that is
plausible on its face” and must plead those facts with enough specificity “to raise a
right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570, 555 (2007).
“A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
So a court’s “obligation [is] to accept [the] complaint’s factual allegations as
true and assess whether those facts permit a reasonable inference that [a defendant]
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is liable.” Sewell, 974 F.3d at 581; cf. Bryant v. Ditech Fin., L.L.C., No. 23-10416, 2024
WL 890122, at *3 (5th Cir. Mar. 1, 2024) (“[J]ust as plaintiffs cannot state a claim
using speculation, defendants cannot defeat plausible inferences using speculation.”).
This “plausibility standard is not akin to a ‘probability requirement,’ but it
asks for more than a sheer possibility that a defendant has acted unlawfully.” Iqbal,
556 U.S. at 678.
So, “[w]here a complaint pleads facts that are merely consistent with a
defendant’s liability, it stops short of the line between possibility and plausibility of
entitlement to relief.” Id. (cleaned up; quoting Twombly, 550 U.S. at 557); see, e.g.,
Parker v. Landry, 935 F.3d 9, 17 (1st Cir. 2019) (Where “a complaint reveals random
puffs of smoke but nothing resembling real signs of fire, the plausibility standard is
not satisfied.”).
And, while Federal Rule of Civil Procedure 8(a)(2) does not mandate detailed
factual allegations, it does require that a plaintiff allege more than labels and
conclusions. So, while a court must accept a plaintiff’s factual allegations as true, it
is “not bound to accept as true a legal conclusion couched as a factual allegation.”
Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555).
Consequently, a threadbare or formulaic recitation of the elements of a cause
of 	action, 	supported 	by 	mere 	conclusory 	statements, 	will 	not 	suffice. 	See 	id.;
Armstrong v. Ashley, 60 F.4th 262, 269 (5th Cir. 2023) (“[T]he court does not ‘presume
true a number of categories of statements, including legal conclusions; mere labels;
threadbare recitals of the elements of a cause of action; conclusory statements; and
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naked assertions devoid of further factual enhancement.’” (quoting Harmon v. City of
Arlington, Tex., 16 F.4th 1159, 1162-63 (5th Cir. 2021))).
Summed up, “to survive” dismissal under Twombly and Iqbal, plaintiffs must
“plead 	facts 	sufficient 	to 	show” 	that 	the 	claims 	asserted 	have 	“substantive
plausibility” by stating “simply, concisely, and directly events” that they contend
entitle them to relief. Johnson v. City of Shelby, Miss., 574 U.S. 10, 12 (2014) (per
curiam) (citing FED . R. CIV. P. 8(a)(2)-(3), (d)(1), (e)); cf. Brown v. Tarrant Cnty., Tex.,
985 F.3d 489, 494 (5th Cir. 2021) (While “[p]ro se complaints receive a ‘liberal
construction,’” “mere conclusory allegations on a critical issue are insufficient.”
(cleaned up)).
Federal Rule of Civil Procedure 15 requires that leave to amend be granted
freely “when justice so requires.” FED . R. CIV. P. 15(a)(2).
Because this rule provides a “strong presumption in favor of granting leave to
amend,” Fin. Acquisition Partners, LP v. Blackwell, 440 F.3d 278, 291 (5th Cir. 2006),
the Court must do so “unless there is a substantial reason to deny leave to amend,”
Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 598 (5th Cir. Nov. 1981).
One such reason is futility. That is, “[i]f the complaint, as amended, would be
subject to dismissal, then amendment is futile and the district court [is] within its
discretion to deny leave to amend.” Martinez v. Nueces Cnty., Tex., 71 F.4th 385, 391
(5th Cir. 2023) (quoting Ariyan, Inc. v. Sewage & Water Bd. of New Orleans, 29 F.4th
226, 229 (5th Cir. 2022)).
In this regard, the Court must “ask whether, in his proposed amended
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complaint, [a plaintiff] has pleaded ‘factual content that allows the court to draw the
reasonable inference that [a] defendant is liable for the misconduct alleged.’” Id.
(quoting Iqbal, 556 U.S. at 678); cf. Peña v. City of Rio Grande City, 879 F.3d 613, 618
(5th Cir. 2018) (“Where the district court’s denial of leave to amend was based solely
on futility, [the United States Court of Appeals for the Fifth Circuit] applies a de novo
standard of review identical, in practice, to the standard used for reviewing a
dismissal under Rule 12(b)(6).” (cleaned up)).
Analysis
The operative (first amended) complaint alleges that Octopus violated a federal
statute and provisions of state law. And, so, the undersigned will focus on the alleged
violations of federal law – and how Johnson would amend those claims if the Court
were to allow her to file a second amended complaint. Because, if those claims should
be dismissed without leave to amend at this initial (pleadings) stage, it’s then likely
that this whole lawsuit no longer belongs in federal court.
The facts currently alleged are succinct:
On or about July 26, 2024, Plaintiff entered into a contract with
Defendant for residential electricity services under the “Octo 12” plan
with a contract term running until July 26, 2025.
Under the terms of the Agreement, Defendant was required to
issue monthly billing statements for the electricity services rendered.
Defendant failed to issue monthly bills from July 26, 2024,
through 	November 	14, 	2024, 	in 	violation 	of 	applicable 	regulatory
requirements (e.g. 16 Tex. Admin. Code § 25.479(b)(1)) and the terms of
the Agreement.
On November 14, 2024, Defendant issued a single consolidated
bill for $972.84 covering the period from July 26, 2024, to November 11,
2024, and demanded payment by December 2, 2024.
Defendant 	subsequently 	offered 	to 	waive 	a 	portion 	of 	the
outstanding balance and proposed a deferred payment plan. Plaintiff,
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relying 	on 	Defendant’s 	representations, 	assumed 	that 	her 	account
balance had been fully waived.
Despite Plaintiff’s acceptance of the waiver offer, Defendant later
attempted an unauthorized electronic fund transfer on January 29,
2025, for an amount totaling approximately $1,311.58, an attempt that
was blocked by Plaintiff’s banking institution.
Defendant 	then 	issued 	further 	communications 	threatening
disconnection of Plaintiff’s service unless full payment was received or a
new payment plan arranged.
As a result of Defendant’s conduct including failure to issue
timely bills, its contradictory waiver and collection practices, and its
unauthorized attempted withdrawal – Plaintiff has suffered actual
financial harm, emotional distress, and significant inconvenience.
As of the date of this amendment, the defendant has been
attempting to collect the amount payment that it stated that it waived
after it made the agreement to waive the balance.
Dkt. No. 17 at 2-3.
And Johnson claims that these facts show that Octopus plausibly “violated the
EFTA by (a) initiating an unauthorized electronic fund transfer from [her] account in
violation of 15 U.S.C. § 1693e(a); and (b) failing to provide the requisite disclosures
mandated by 15 U.S.C. § 1693c(a) regarding electronic fund transfers.” Dkt. No. 17
at 4.
As the name reveals, the EFTA regulates the electronic transfer
of funds between bank accounts. The Act provides that a “preauthorized
electronic fund transfer from a consumer’s account may be authorized
by the consumer only in writing,” and that “a copy of such authorization
shall be provided to the consumer when made.” See 15 U.S.C. § 1693e(a).
The 	statutory 	text 	reveals 	two 	basic 	requirements 	before
transferring funds from a consumer’s account. The consumer must (1)
provide preauthorization for an electronic funds transfer, in writing, and
(2) receive a copy of the authorization. A failure to comply gives rise to
a claim. See 15 U.S.C. § 1693m et seq.
Barrientos v. Fitness Member Servs., LLC, 749 F. Supp. 3d 944, 951 (N.D. Ill. 2024)
(footnote omitted).
And, 	maybe 	more 	related 	to 	Johnson’s 	contentions, 	applicable 	federal
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regulations related to transfers varying in amount provide:
(1) Notice. When a preauthorized electronic fund transfer from
the consumer’s account will vary in amount from the previous transfer
under the same authorization or from the preauthorized amount, the
designated payee or the financial institution shall send the consumer
written notice of the amount and date of the transfer at least 10 days
before the scheduled date of transfer.
(2) Range. The designated payee or the institution shall inform
the consumer of the right to receive notice of all varying transfers, but
may give the consumer the option of receiving notice only when a
transfer falls outside a specified range of amounts or only when a
transfer differs from the most recent transfer by more than an agreed-
upon amount.
12 C.F.R. § 205.10(d).
“The clear purpose of this advance notice is to protect the consumer from
unauthorized, fraudulent or erroneous transfers, which allows the consumer an
opportunity to stop payment in accordance with the applicable laws and procedures
established by the consumer’s financial institution.” Bultemeyer v. Fitness Alliance,
LLC, No. CV-12-2619-PHX-LOA, 2014 WL 667585, at *4 (D. Ariz. Feb. 20, 2014)
(citing Bank of Am. v. City & Cnty. of San Francisco, 309 F.3d 551, 564 (9th Cir.
2002); Kashanchi v. Tex. Commerce Med. Bank, 703 F.2d 936, 940-41 (5th Cir. 1983)
(citing H.R. REP. NO . 95-1315, at 2 (1978) (providing that the EFTA was passed due
to a concern that electronic funds transfers are “much more vulnerable to fraud,
embezzlement, and unauthorized use than the traditional payment methods.”))).
But no facts alleged by Johnson in the operative complaint or the proposed
amendment reflect that Octopus violated Section 1693e(a) or its related regulations.
So this claim should be dismissed with prejudice.
As to Johnson’s claim that Octopus failed to provide the disclosures required
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by Section 1693c, even if the Court accepts that conclusion as true, it doesn’t matter.
Because Johnson has not alleged that Octopus is required to provide disclosures
under this provision of the EFTA, which applies solely to “financial institutions,” a
term that the statue defines as “a State or National bank, a State or Federal savings
and loan association, a mutual savings bank, a State or Federal credit union, or any
other person who, directly or indirectly, holds an account belonging to a consumer.”
15 U.S.C. § 1693a(9). (An “account” is defined by the act as “a demand deposit, savings
deposit, or other asset account.” Id. § 1693a(2).)
As another federal district court has explained, Section 1693c
states that the “terms and conditions of electronic fund transfers
involving a consumer’s account shall be disclosed at the time the
consumer contracts for an electronic fund transfer service.” 15 U.S.C. §
1693c(a). The provision then identifies ten types of required disclosures,
which are intended to notify consumers about their rights under EFTA.
Several of these types of disclosures refer specifically to “the financial
institution” 	involved 	in 	each 	transaction. 	See, 	e.g., 	15 	U.S.C. 	§
1693c(a)(1) 	(requiring 	disclosure 	of 	“the 	consumer’s 	liability 	for
unauthorized electronic fund transfers and, at the financial institution’s
option, notice of the advisability of prompt reporting of any loss, theft,
or unauthorized use of a card, code, or other means of access” (emphasis
added)). In addition, another provision of EFTA directs the Bureau of
Consumer Financial Protection to “issue model clauses for optional use
by financial institutions to facilitate compliance with the[se] disclosure
requirements.” 15 U.S.C. § 1693b(b). The language in these provisions
thus suggests that the disclosure requirements are directed exclusively
at financial institutions. Furthermore, the only federal court to confront
the question of whether entities other than financial institutions may be
liable under § 1693c [at that time] expressly held that “the disclosure
requirements set forth in 15 U.S.C. § 1693c, as further articulated in 12
C.F.R. § 205.7, apply only to financial institutions.” Olen v. N. Tier
Retail, Civ. No. 11-2665 (DWF/JJG), 2012 WL 1580994, at *3 (D. Minn.
May 4, 2012). Plaintiffs have not cited any authority holding otherwise.
Accordingly, this Court concludes that § 1693c does not apply to entities
that are not financial institutions.
I.B. ex rel. Fife v. Facebook, Inc., No. C 12-1894 CW, 2013 WL 6734239, at *5 (N.D.
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Cal. Dec. 20, 2013); accord Stock v. Firstmark Servs., SACV 18-01363-CJC(KESx),
2018 WL 8193373, at *3 (C.D. Cal. Dec. 12, 2018) (noting that it “is not alone in
reaching this conclusion. Given the repeated reference to financial institutions, courts
have held that section 1683c’s disclosure requirements apply only to financial
institutions”; distinguishing Section 1693c from Section 1693e: “Unlike section 1693e,
however, section 1693c’s statutory text appears to apply only to financial institutions.
Compare 15 U.S.C. § 1693c (referring repeatedly to financial institutions), with id. §
1693e (describing a general duty regarding written preauthorization)”).
The Court should therefore dismiss Johnson’s EFTA claims.
And (1) because no factual allegations in the proposed second amended
complaint salvage the EFTA claims and (2) because Johnson has amended her
complaint multiple times, it’s likely that she has now alleged her “best case,” and
further leave to amend need not be granted as to the EFTA claims. See, e.g., Allen v.
Navy Fed. Credit Union, No. 3:24-cv-949-L-BN, 2025 WL 484818, at *13 (N.D. Tex.
Feb. 13, 2025) (“Granting leave to amend … is not necessary when the plaintiff has
pleaded his or her ‘best case’ after being apprised of pleading deficiencies. Likewise,
a district court need not grant a motion to amend if doing so would be an exercise in
futility.” (citations omitted)).
In sum, the claims arising under federal law should be dismissed with
prejudice.
And, if the Court agrees that these claims should be so dismissed, there will no
longer 	be 	an 	“independent 	basis 	of 	subject 	matter 	jurisdiction” 	to 	allow 	for
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supplemental jurisdiction under 28 U.S.C. § 1367 for the remaining state law counts.
Atkins v. Propst, No. 22-10609, 2023 WL 2658852, at *2 (5th Cir. Mar. 28, 2023) (per
curiam) (citing Arena v. Graybar Elec. Co., Inc., 669 F.3d 214 (5th Cir. 2012)).
And, under these circumstances, a balance of the applicable factors favors
relinquishing jurisdiction over the remaining state law claims at this initial stage, so
the Court should decline to exercise supplemental jurisdiction over the alleged
violations of Texas law. See 28 U.S.C. § 1367(c); Enochs v. Lampasas Cnty., 641 F.3d
155, 158-59 (5th Cir. 2011); Mendoza v. Murphy, 532 F.3d 342, 346 (5th Cir. 2008).
In sum, for the reasons set out above, the Court should deny the motion for
leave to amend and grant the motion to dismiss to the extent that it should dismiss
all claims arising under federal law with prejudice and relinquish jurisdiction over
the remaining state law claims, dismissing those claims without prejudice.
Recommendation
The Court should deny Plaintiff Kimberly Johnson’s motion for leave to file a
second amended complaint [Dkt. No. 22] and grant Defendant Octopus Energy, LLC’s
motion to dismiss Johnson’s amended complaint under Federal Rule of Civil
Procedure 12(b)(6) [Dkt. No. 19] to the extent that it should dismiss all claims arising
under federal law with prejudice and relinquish jurisdiction over the remaining
state law claims, dismissing those claims without prejudice.
A copy of these findings, conclusions, and recommendation shall be served on
all parties in the manner provided by law. Any party who objects to any part of these
findings, conclusions, and recommendation must file specific written objections
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within 14 days after being served with a copy. See 28 U.S.C. § 636(b)(1); FED . R. CIV.
P. 72(b). In order to be specific, an objection must identify the specific finding or
recommendation to which objection is made, state the basis for the objection, and
specify the place in the magistrate judge’s findings, conclusions, and recommendation
where the disputed determination is found. An objection that merely incorporates by
reference or refers to the briefing before the magistrate judge is not specific. Failure
to file specific written objections will bar the aggrieved party from appealing the
factual findings and legal conclusions of the magistrate judge that are accepted or
adopted by the district court, except upon grounds of plain error. See Douglass v.
United Servs. Auto. Ass’n, 79 F.3d 1415, 1417 (5th Cir. 1996).
DATED: January 28, 2026
_________________________________________
DAVID L. HORAN
UNITED STATES MAGISTRATE JUDGE
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