Serv. Corp. Int'l v. Stericycle, Inc.
| Decision Date | 15 June 2021 |
| Docket Number | No. 20 C 838,20 C 838 |
| Parties | SERVICE CORPORATION INTERNATIONAL, Plaintiff, v. STERICYCLE, INC., Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
Plaintiff Service Corporation International ("SCI") alleges that Defendant Stericycle, Inc. ("Stericycle") entered into fixed-price contracts with its subsidiaries to provide medical waste disposal services. SCI alleges Stericycle raised its prices in violation of those contracts. SCI brings 39 causes of action against Stericycle: (1) breach of contract under Illinois law (Count I); (2) unjust enrichment under Illinois law (Count II); (3) violation of various state consumer protection laws (Counts III-XXXIX).
Before the Court is Defendant's Motion to Dismiss the Complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). (Dkt. 57). Defendant's Motion to Dismiss is granted without prejudice.
The following factual allegations are taken from SCI's Complaint and are assumed true for the purposes of this motion. W. Bend Mut. Ins. Co. v. Schumacher, 844 F.3d 670, 675 (7th Cir. 2016).
Medical waste which may be exposed to blood and bodily fluids or is capable of causing an infectious disease is subject to special disposal procedures and is highly regulated by both state and federal authorities. (Dkt. 1-1 ¶¶ 24, 30). Stericycle is a medical waste disposal company which serves both large-quantity businesses, such as hospitals, and small-quantity businesses, such as individual doctor's offices. (Dkt. 1-1 ¶¶ 4, 26). Small-quantity businesses are particularly important to Stericycle's business because they generate comparatively higher profit margins and account for 97% of Stericycle's customers and the majority of Stericycle's revenue. (Dkt. 1-1 ¶¶ 27-28). Stericycle is incorporated in Delaware with its principal place of business and corporate offices in Lake Forest, Illinois. (Dkt. 1-1 ¶¶ 11, 23).
SCI is a Texas corporation with its principal place of business in Harris County, Texas which operates funeral homes throughout the United States. (Dkt. 1-1 ¶ 13). Between 2006 and 2010, SCI acquired Alderwoods Group, LLC ("Alderwoods"), Keystone America, Inc. ("Keystone"), and Stewart Enterprises ("Stewart"), along with all the subsidiaries of each organization (collectively, "the subsidiaries"). (Dkt. 1-1 ¶¶ 14-22). SCI alleges it was also assigned the claims ofAlderwoods, Keystone, Stewart, and the subsidiaries. (Dkt. ¶¶ 62-65). All of the subsidiaries were designated small-quantity businesses by Stericycle. (Dkt. 1-1 ¶ 5).
One of the services Stericycle offered small-quantity customers was the "Steri-Safe" service, a fixed-fee based service whereby the small-quantity customer paid a monthly subscription fee in exchange for ongoing medical waste disposal from Stericycle as laid out in the "Steri-Safe Service Agreement." (Dkt. 1-1 ¶¶ 28-29). The Steri-Safe Service Agreement includes terms and conditions which, according to SCI, were often provided in "illegible" copies with "reduced font size." (Dkt. 1-1 ¶¶ 30). The terms and conditions provides:
Stericycle reserves the right to adjust the contract price to account for operational changes it implements to comply with documented changes in the law, to cover increases in the cost of fuel, insurance, residue disposal, or to otherwise address cost escalation.
Stericycle systemically increased the Steri-Safe fixed fee by 18% every six to twelve months, a practice known as the Automated Price Increase ("API"). (Dkt. 1-1 ¶¶ 4, 37, 44). The API was not based on any increased operational costs incurred by Stericycle and was applied by default. (Dkt. ¶¶ 42, 45, 48). Stericycle targeted the subsidiaries and small-quantity customers for the API because it deemed them comparatively less sophisticated, outfitted with smaller legal and accounting departments, and less able to dispute the justification for the price increases. (Dkt. 1-1 ¶¶ 39, 43). When customers called Stericycle to complain about price increases, its customer complaints and retention departments (located in Illinois) provided falsejustifications or used other tactics to convince customers to accept the increases or pay as much of them as possible. (Dkt. 1-1 ¶¶ 50-54).
SCI cites a class-action settlement in this district pertaining to Stericycle's API practice. (Dkt. 1-1 ¶ 60-61). SCI states Stericycle represented in that litigation the subsidiaries were members of the class that contracted with and were overcharged by Stericycle between March 2003 and October 2017. (Dkt. 1-1 ¶ 70). Prior to the class settlement in 2017, SCI did not know that the subsidiaries had been overcharged by Stericycle. (Dkt. 1-1 ¶¶ 80-81). The subsidiaries opted out of the class settlement. (Dkt. 1-1 ¶ 73). SCI now brings this action alleging breach of contract, unjust enrichment, and violations of 37 state consumer protection laws. (Dkt. 1-1 ¶¶ 93-246).
To survive a motion to dismiss under Rule 12(b)(6), the complaint "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. The Court accepts the complaint's factual allegations as true and draws all permissible inferences in Plaintiff's favor. Schumacher, 844 F.3d at 675 (quoting Iqbal, 556 U.S. at 678). The Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Olson v. Champaign Cty., 784 F.3d 1093, 1099 (7th Cir. 2015) (quoting Bell Atl. Corp. v.Twombly, 550 U.S. 544, 555 (2007)). The Seventh Circuit interprets this plausibility standard to mean that the plaintiff must "give enough details about the subject-matter of the case to present a story that holds together." Vanzant v. Hill's Pet Nutrition, Inc., 934 F.3d 730, 736 (7th Cir. 2019) (quoting Swanson v. Citibank, N.A., 614 F.3d 400, 404 (7th Cir. 2010)). Evaluating whether a plaintiff's claim is sufficiently plausible to survive a motion to dismiss is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Schumacher, 844 F.3d 676 (quoting McCauley v. City of Chicago, 671 F.3d 611, 616 (7th Cir. 2011); Iqbal, 556 U.S. at 678)).
In addition, Federal Rule of Civil Procedure 9(b) requires all allegations of fraud to be "state[d] with particularity," although "malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b). This heightened pleading requirement protects against the "great harm to the reputation of a business firm or other enterprise a fraud claim can do." Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 507 (7th Cir. 2007). Rule 9(b) requires that the plaintiff state "the identity of the person who made the misrepresentation, the time, place and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff." Windy City Metal Fabricators & Supply, Inc. v. CIT Tech. Fin. Svc's, Inc., 536 F.3d 663, 668 (7th Cir. 2008). In other words, the plaintiff must allege the "who, what, when, where, and how" of the alleged fraud. Menzies v. Seyfarth Shaw LLP, 943 F.3d 328, 338 (7th Cir. 2019) (quoting Vanzant v. Hill's Pet Nutrition, Inc., 934 F.3d 730, 738 (7th Cir. 2019));Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 569 (7th Cir. 2012) (quoting Windy City, 536 F.3d at 668). Each instance of fraud must be alleged with "precision and some measure of substantiation." Menzies, 943 F. 3d at 338 (quoting U.S. ex rel. Presser v. Acacia Mental Health Clinic, LLC, 836 F.3d 770, 776 (7th Cir. 2016)).
"Under Illinois law, a plaintiff looking to state a colorable breach of contract claim must allege four elements: (1) the existence of a valid and enforceable contract; (2) substantial performance by the plaintiff; (3) a breach by the defendant; and (4) resultant damages." Sevugan v. Direct Energy Servs., LLC, 931 F.3d 610, 614 (7th Cir. 2019) (internal quotation marks omitted). SCI must plead so that Stericycle has "fair notice of what the claim is and the grounds upon which it rests." Bissessur v. Indiana Univ. Bd. of Trustees, 581 F.3d 599, 603 (7th Cir. 2009) (internal quotation marks omitted). For breach of contract claims under Illinois law, fair notice includes information about the existence of a contract between Stericycle and the subsidiaries, such as when the contracts were entered into and when they were operational. Bissessur, 581 F.3d at 603; see also, e.g., Montgomery v. Scialla, No. 15-CV-10840, 2017 WL 3720178, at *5 (N.D. Ill. Aug. 29, 2017); Loup Logistics Co. v. Windstar, Inc., No. 17 C 9045, 2018 WL 5619454, at *2 (N.D. Ill. Oct. 30, 2018) ().
SCI may not look to Stericycle's prior class action settlement as evidence of contracts with the subsidiaries. The settlement agreement provides:
In no even shall this Agreement, any of its provisions or any negotiations, statements or court proceedings relating to its provisions in any way be construed as, offered as, received as, used as, or deemed to be evidence of any kind in the Actions, any other action, or in any judicial, administrative, regulatory or other proceeding except in a proceeding to enforce this Agreement or the rights of the Parties or their counsel.
(Dkt. 61 at 8); Phillips v. Prudential Ins. Co. of Am., 714 F.3d 1017, 1020 (7th Cir. 2013) (). In an all-but-identical prior suit, this Court determined "[t]he...
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