CLN PROPERTIES, INC. v. REPUBLIC SERVICES, INC.

• Decision Date: 13 January 2010
• Docket Number: No. CV 09-1428 PHX DGC.,CV 09-1428 PHX DGC.
• Citation: 688 F. Supp.2d 892
• Parties: CLN PROPERTIES, INC., et al., Plaintiffs, v. REPUBLIC SERVICES, INC., and Allied Waste Industries, Inc., Defendants.
• Court: U.S. District Court — District of Arizona

688 F.Supp.2d 892

CLN PROPERTIES, INC., et al., Plaintiffs, v. REPUBLIC SERVICES, INC., and Allied Waste Industries, Inc., Defendants.

No. CV 09-1428 PHX DGC.

United States District Court, D. Arizona.

January 13, 2010.

Andrew S. Friedman, Kathryn Ann Jann, Bonnett Fairbourn Friedman & Balint PC, Phoenix, AZ, Daniel Hume, David Bishop, David Kovel, Kirby McInerney LLP, New York, NY, Francis Joseph Balint, Jr., Bonnett Fairbourn Friedman & Balint PC, Phoenix, AZ, J. Michael Ponder, Cook Barkett Maguire & Ponder LC, Cape Girardeau, MO, for Plaintiffs.

Gregory Bryan Iannelli, James Demosthenes Smith, Lawrence GD Scarborough, Jonathan Grant Brinson, Bryan Cave LLP, Phoenix, AZ, Michele Odorizzi, Mayer Brown LLP, Chicago, IL, for Defendants.

ORDER

DAVID G. CAMPBELL, District Judge.

On August 31, 2009, Plaintiffs filed their first amended class action complaint against Defendants. Dkt. #21. Defendants have filed a Rule 12(b)(6) motion to dismiss. Dkt. #24. The motion is fully briefed.¹ For reasons that follow, the Court will grant Defendants' motion as to Count Five and deny it as to the remaining counts.²

I. Background.

CLN Properties, Inc. and Maevers Management Company, Inc. brought the present putative class action against Defendants Republic Services, Inc. and Allied Waste Industries, Inc. Dkt. #21 at 2.³ Defendants merged into a single company in 2008 and are now collectively known as Republic Services, Inc. (hereinafter referred to as "Defendant"). Id.

Defendant is a publicly traded waste disposal company. Id. Plaintiffs are companies that have contracts for Defendant to provide waste disposal services. Id. at 5; see Dkt. # 21-1 at 2-5. The contract between CLN and Defendant, which is attached to Plaintiffs' amended complaint as Exhibit A, is illegible. See Dkt. # 21-1 at 3. Defendant asserts, without contradiction, that the contract permits Defendant to raise rates if certain specified costs increase and for any other reasons so long as CLN consents verbally, in writing, or through a course of conduct: "`Defendant may only increase rates for reasons other than those set forth above with the consent of the Customer. Such consent may be evidenced verbally, in writing or by the actions and practices of the parties.'" Dkt. # 24 at 3 (quoting Dkt. # 21, Ex. A).

Maevers's contract with Defendant includes the following provision:

CHANGE IN PRICING: Because recycling, labor, disposal, and fuel costs constitute a significant portion of the cost of Defendant's services provided hereunder, Customer agrees that Defendant may increase Customer's rates hereunder to allot increases in such costs. Customer agrees that Defendant may also increase the rates from time to time to adjust for increases in the Consumer Price Index and increases in taxes, fees or other governmental charges assessed against or passed through Defendant (other than income or real property taxes). Defendant may increase rates for reasons other than those set forth above with the consent of the Customer. Customer's acceptance or consent to any increase or additional charges may be evidenced verbally, in writing, or by the actions and practices of the parties.

Dkt. # 21-1 at 5.

Plaintiffs allege that Defendant began charging two cost recovery fees in 2005, "one ostensibly to recover the company's rising fuel costs" and the other "ostensibly to recover the company's rising environmental costs." Dkt. # 21 at 2. Plaintiffs further allege that Defendant issued notices announcing that it was imposing the fees and stating that the fees would be guided by fluctuations in its actual costs—that if its "cost of fuel increased or decreased," it would "adjust the Fuel Recovery Fee accordingly." Id. at 6; see Dkt. # 21-1 at 9-10, 12, 14-16, 18-20, 22-24. Plaintiffs do not allege that they read or relied on these notices before paying bills that included the two fees.

Plaintiffs contend that Defendant's statements in the notices were "falsely and deceptively made," and that the fees were set at "levels that did not correspond" to the changes in its fuel or environmental costs. Dkt. #21 at 2. Plaintiffs assert that: "(a) the fees have not been tethered to actual changes in the company's fuel and environmental costs, but deceptively obtained increases in charges that were intended to and that did go to defendant's profit line; (b) the fees have been inconsistent with the expectations of the plaintiff contracting parties; (c) the fees have been unconscionable as they did not fall within the reasonable expectations of the plaintiff contracting parties, who were the weaker and adhering parties to the arrangements, as the existing agreements contained penalty provisions for refusal to accept the terms and carry on business with defendant; and (d) regardless, because the contract purports to give defendants the unilateral authority to increase the fees at will and without additional consideration to the plaintiff parties, the purported contract is illusory and without effect." Id. at 3.

Plaintiffs assert claims for injunctive relief (Count One), restitution (Count Two), breach of express contract (Count Three), breach of the implied covenant of good faith and fair dealing (Count Four), deceptive practices (Count Five), and unjust enrichment. Id. at 20-25. Plaintiffs seek to certify two classes, a "contract class" which presumably would assert Counts One through Four and the unjust enrichment claim, and a "UDAP class" which would assert Count Five. Id. at 17.

II. Legal Standard.

When analyzing a complaint under Rule 12(b)(6), "all allegations of material fact are taken as true and construed in the light most favorable to the non-moving party." Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir.1996). "To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations; rather, it must plead `enough facts to state a claim to relief that is plausible on its face.'" Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir.2008) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "The plausibility standard ... asks for more than a sheer possibility that a defendant has acted unlawfully," demanding instead sufficient factual allegations to allow "the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, ___ U.S. ___, ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955).

III. Choice of Law.

A. Is Choice of Law Necessary?

Plaintiffs appear to concede that their deceptive practices claims must be governed by the law of each Plaintiff's home state (Dkt. # 21 at 16; Dkt. # 29 at 22), but the parties disagree on the state law that will govern the contract-related claims. Defendant contends that the contract law of each Plaintiff's home state must be applied to that Plaintiff's claim. Plaintiffs, who are located in Georgia and Missouri, argue that Arizona law should apply.

Plaintiffs first assert that no choice of law is necessary because the law of all states concerned—indeed, the law of all 39 states where contract-class plaintiffs will be located—is the same as Arizona law. Plaintiffs attach several charts purporting to summarize the law of these 39 states. Dkt. # 29 at 10; Dkt. # 29-1 at 1-20. In support of this argument, Plaintiffs cite only an unreported decision of the Arizona Court of Appeals. Jahnke v. Federal Ins. Co., No. CA-CV 06-0795, 2008 WL 4093573, *3 n. 9 (Ariz.App. April 15, 2008). That case in turn cites Lucero v. Valdez, 180 Ariz. 313, 884 P.2d 199, 207 (Ariz.App. 1994) for the proposition that Arizona courts "only perform a choice of law analysis when there is a true difference in the law of two jurisdictions with an interest in the dispute." But Lucero was applying California choice of law principles, not Arizona principles. Plaintiffs cite no reported Arizona authority to support their contention that Arizona law requires no choice of law inquiry here.

More importantly, Plaintiffs have not shown that the laws of Georgia, Missouri, and Arizona are the same in all relevant respects. Plaintiffs submit charts that set forth four unremarkable principles of law: (1) that a contract based on misrepresentation is not valid, (2) that modifications to a contract require a meeting of the minds, (3) that the law implies a duty of good faith and fair dealing in contracts, and (4) that illusory contracts are unenforceable. Dkt. # 29-1 at 1-20. The charts then cite one case from each state in support of each proposition (with some of the cases being more than 40 years old), followed by a one-sentence parenthetical quote from each case.

Citation of a single case for an unremarkable principle of contract law does not come close to showing that the laws of Georgia, Missouri, and Arizona are the same on all contract and contract-related issues that might arise from Plaintiffs' claims. The discussion below, which is only deep enough to address the facial pleadings of the amended complaint, already has identified differences in the laws of these states. The more detailed inquiry required for summary judgment or motions in limine would likely reveal additional differences. Plaintiffs' single-citation charts for simple principles of law do not obviate the need for choice of law in this case.⁴

B. Choice of Law Analysis.

"In a diversity case, the district court must apply the choice-of-law rules of the state in which it sits." Abogados v. AT&T, Inc., 223 F.3d 932, 934 (9th Cir. 2000) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)); see also Jorgensen v. Cassiday, 320 F.3d 906, 913 (9th Cir.2003). Arizona has adopted the "most significant relationship" test set forth in the Restatement (Second) of Conflict of Laws. See Bates v. Super. Ct., 156 Ariz. 46, 749 P.2d 1367, 1369 (1988); Garcia v. General Motors Corp., 195 Ariz. 510, 990 P.2d...