IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF ARKANSAS NORTHERN DIVISION
ALLEN BETH INCORPORATED PLAINTIFF
v. No. 3:22-cv-59-DPM
WASTE CONNECTIONS US, INC. and WASTE CONNECTIONS OF ARKANSAS, INC. DEFENDANTS ORDER
The parties continue to wrestle about whether Allen Beth is the correct plaintiff. The record from the first round, as supplemented by the evidentiary materials added in the current round, makes a few things clear enough. Waste Connections' s predecessor made a contract with "Sharp Office Supply" in Ash Flat. Shelly Johnson signed as an owner. The parties' contract, Doc. 25-1, is appended. The contracting parties did business with each other for more than fifteen years. Allen Beth did not always turn square corners when it came to corporate names, fictitious names, and successors. But Shelly Johnson and her husband, Jeff, have been involved in the business through all these years. Allen Beth's amended complaint provides some of the corporate history.
After that pleading was filed, though, there were two more corporate developments. Allen Beth appears to have become "Sharp Office Furniture and Logistics, Inc." Doc. 48-2. Shelly Johnson
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is the corporate treasurer, and Jeff Johnson is the president, as he was of Allen Beth. Doc. 48-2; Doc. 56-1. In addition, "Sharp Office Supply, Inc." has been incorporated- by other individuals, but at the same address where this small business has long operated. Doc. 48-1. This is intriguing, for the new entity carries the name of the original plaintiff. Doc.1; Doc. 43 at 6-7. The why behind these two recent twists remains unexplained.
Whatever the whole story may be, it does not make any legal difference at this point. On the current record as a whole, Allen Beth has standing, and is the real party in interest in substance, because it made the original contract through an unregistered d/b / a name. Iowa Public Service Co. v. Medicine Bow Coal Co., 556 F.2d 400 (8th Cir. 1977); Fed. R. Civ. P. 17. Any mis-naming issue can be corrected in due course. Waste Connections's motion to dismiss based on the naming and entity issues is denied without prejudice to renewal, if need be, on a more complete record.
Waste Connections also asks to end the case now on the merits.
This request cannot be resolved on the motion to dismiss. But, in the alternative Waste Connections seeks summary judgment and has stated material facts supported by affidavits. The fighting issue is a notice-and-cure provision in the parties' contract. "Customer shall provide [Waste Connections] with written notice of any problem which it believes constitutes a failure by [Waste Connections] to fully perform
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its obligations under this Agreement. [Waste Connections] will be considered in breach of this Agreement if [Waste Connections] does not cure the problem in ten (10) business days after receiving such notice." Appendix at ,r 9a.
Allen Beth did not provide pre-suit notice of any overcharges.
This case was filed in state court on 26 January 2022. Waste Connections calculated the alleged overcharges paid by Allen Beth for the five-year period before the suit began, determined that amount (adjusted for inflation) to be $2,698.87, added interest at 6%, and got a total of $2,860.80. On 8 February 2022, Kendrick Ketchum (Waste Connections's district manager for Arkansas) met with Shelly Johnson at the business. Ketchum gave Johnson a check for $3,000.00 (which she accepted but has never cashed), explained what the check covered, and informed her that Waste Connections had reduced Allen Beth's service rate to an amount less than it was in January 2017 and that Waste Connections would not charge Allen Beth the fuel surcharge fee in the future. To Ketchum, Johnson seemed satisfied with Waste Connections' s fix of the alleged overcharges.
These are the material facts as stated by Waste Connections.
Doc. 48-1. Allen Beth has responded to them with various legal arguments rather than with proof showing some genuine dispute. LOCAL RULE 56.1; Conesco Life Insurance Co. v. Williams, 620 F.3d 902, 909 (8th Cir. 2010). In a footnote, Allen Beth does say it disagrees with
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Waste Connections' s characterization of the conversation between Kendrick Ketchum and Shelly Johnson, as well as whether that exchange and the tender of the $3,000.00 check was a legitimate attempt to cure the breach. Doc. 56 at 11, n.6. This factually unsupported aside does not create a genuine issue of material fact. Conesco, 620 F.3d at 909. Allen Beth also argues that it would be premature to address notice and cure given the lack of discovery on the parties' disputes and communications about the alleged overcharges. But no affidavit or declaration establishing a good reason to defer this issue pending some necessary discovery has been offered. Fed. R. Civ. P. 56(d). The Court takes judicial notice of the calendar: Waste Connections tendered the cure on the ninth business day after receiving notice of the alleged overcharges. Fed. R. Evid. 201. No genuine dispute exists on the material facts about notice and cure.
The parties chose Texas law. "This Agreement shall be governed in all respects by the laws of the State of Texas, without giving effect to the conflict of laws rules thereof." Appendix at ,r 10. Their choice was reasonably related to their transaction because Waste Connections' s principal place of business is Texas. And the parties' choice does not offend any public policy of Arkansas's. Arkansas Appliance Distributing Co. v. Tandy Electronics, Inc., 292 Ark. 482, 485, 730 S.W.2d 899, 900 (1987).
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Texas law therefore applies to the deep issue: Is the parties'
contractual term about notice and cure a covenant or condition? If the former, then Waste Connections has a claim for damages in the circumstances presented; if the latter, then Allen Beth's lack of notice and Waste Connections' s tendered cure eliminate Allen Beth's claim for breach of the contract. Criswell v. European Crossroads Shopping Center, Ltd., 792 S.W.2d 945, 948-49 (Tex. 1990); C & C Road Construction, Inc. v. Saab Site Contractors, L.P., 574 S.W.3d 576, 586-89 (Tex. App. -El Paso 2019, no pet.).
This term 1s a condition. Because they can have harsh consequences, "conditions are not favorites of the law." Criswell, 792 S.W.2d at 948. This provision might indeed work a forfeiture. Waste Connections could point to lack of pre-suit notice and refuse to fix any problem. It could, for example, defend against the overcharges alleged here by saying that Allen Beth had let them slide. Absent lack of notice being excused, Allen Beth's alleged overcharges might stand. RESTATEMENT (SECOND) OF CONTRACTS§ 225. Or this provision might work for good. It offers a way for Waste Connections to fix some non-performance, thus preserving the parties' agreement for waste collection and related services. Having this option makes good sense in a business relationship for continuing services. The parties' agreement was for a three-year term, renewable for an unlimited number of three-year terms unless Allen Beth gave a timely notice of
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termination. Appendix at , 1. The parties' working relationship endured for more than fifteen years before Allen Beth sued, and apparently still exists.
The Court must gather the parties' intentions about the notice-and-cure term from both the plain meaning of that term and the whole of their agreement. C & C Road, 574 S.W.3d at 588. The parties' contract uses a freighted word - if- in the sentence that deals specifically with a breach by Waste Connections. That company "will be considered in breach of this Agreement if [Waste Connections] does not cure the problem in ten (10) business days after receiving such notice." As a customer, Allen Beth had various obligations, such as not putting hazardous material in Waste Connections's containers, taking care of those containers, and providing unobstructed access to them. Appendix at , , 6, 7a & 7b. Allen Beth's main obligation was to pay monthly invoices upon receipt. In an echoing grace period, the parties agreed that Allen Beth would not be in breach of this obligation until "ten (10) days after receipt of an invoice from [Waste Connections]." Appendix at, 3.
The parties' use of the word "if" in connection with Waste Connections' s fix, or not, of a problem after notice signals an intention to create a condition. C & C Road, 574 S.W.3d at 588. The contract provides Waste Connections the opportunity to cure. A failure to do so promptly creates the breach. Cheung-Loon, LLC v. Cergon, Inc.,
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392 S.W.3d 738, 744-45 (Tex. App. - Dallas 2012, no pet.); RESTATEMENT (SECOND) OF CONTRACTS § 224.
Because Texas Law disfavors conditions, the Court must consider whether another reasonable interpretation of the notice-and-cure provision exists. If the opportunity to cure is merely a promise, then Waste Connections would have a claim for damages resulting from Allen Beth's breach of that promise. C & C Road, 574 S.W.3d at 588. What would Waste Connections' s damages be from Allen Beth's silence? The lost opportunity to cure, keep collecting waste, and keep getting paid. The potential damages from a customer's breach of this term, read as a promise, seem co-extensive with those available for the customer's non-performance of the contract as a whole -Allen Beth's loss of business. Reading this term as a promise or covenant rather than a condition reads it out of the contract. The Court must instead give legal effect to all of the parties' chosen words. James Construction Group, LLC v. Westlake Chemical Corp., 650 S.W.3d 392,414 (Tex. 2022).
Notice-and-cure conditions are commonplace under Texas law.
C & C Road, 574 S. W.3d at 588 (collecting cases). Waste Connections
proposed one in clear terms. Allen Beth accepted it long ago. And this condition is not harsh in the particular circumstances presented. Waste Connections did not say "No notice, Allen Beth, therefore our duty to address any billing problem is excused." Compare, Solar Applications Engineering, Inc. v. T.A. Operating Corp., 327 S.W.3d 104, 108 (Tex. 2010);
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RESTATEMENT (SECOND) OF CONTRACTS § 225. Waste Connections addressed the dispute both retrospectively and prospectively. That the company's fix may have been partly or wholly motivated by an intention to pretermit a class action rather to right a wrong does not alter its legal effect. The billing dispute was cured in Allen Beth's favor.
Allen Beth contends that Waste Connections waived its notice-and-cure defense by not asserting it in its motions to dismiss the earlier iterations of Sharp's complaint. But this defense is not among those waived by not asserting them at the first opportunity. Fed. R. Civ. P 12(h)(l). Waste Connections could have pleaded this defense in its eventual answer, then sought summary judgment. Fed. R. Civ. P. 12(c) & (h)(2). No procedural defect exists in Waste Connections's request for judgment now based on Allen Beth's lack of pre-suit notice and Waste Connections's timely cure.
Likewise, the Court sees no waiver in the tangled motion practice about removal, standing, subject matter jurisdiction under CAF A, and the real party in interest. The applicable procedural rules allowed Waste Connections to make the tactical choices it did.
Last, Allen Beth has not shown that notice would have been futile.
Cheung-Loon, 392 S.W.3d at 745. Allen Beth says Waste Connections knew about the overcharges based on similar litigation in South Carolina. The undisputed facts here, however, show that Waste Connections cured after Allen Beth sued and provided particulars
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about overcharges this business had paid. The fix undercuts Allen Beth's first argument from futility. The elimination of potential class-wide liability does not show that notice would have been futile, either. Parties do not make contracts intending to prot~ct other similarly situated parties. Allen Beth's second futility-based argument also fails.
Allen Beth contends that, even if its breach claim falters based on the lack of notice and the tendered cure, its unjust enrichment claim survives. Waste Connections' s main responding arguments are that Allen Beth has no standing and isn't the real party in interest. The Court has rejected those arguments. Allen Beth is the one who has been paying Waste Connections' s invoices all these years. And while the general rule is that no claim for unjust enrichment exists when the parties have a contract that covers the disputed issue, as Allen Beth points out, this rule has many exceptions. E.g., U.S. v. Applied Pharmacy Consultants, Inc., 182 F.3d 603, 606-09 (8th Cir. 1999) (Arkansas law). Plus, neither Allen Beth nor Waste Connections have explored the legal effect of the cure: the refund, the reduced service fee, and the "no more fuel surcharges" promise.
The Court would benefit from focused arguments about the unjust enrichment claim and the applicable Texas law. The RESTATEMENT (SECOND) OF RESTITUTION AND UNJUST ENRICHMENT might provide some insights, too. The evidentiary record is, for the
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moment, closed. And the parties' additional arguments must start from the rulings in this Order. Simultaneous supplemental briefs (ten-page limit) on unjust enrichment due by 8 September 2023. No replies. The pending motions remain under advisement.
So Ordered.
D.P. Marshall Jr. United States District Judge
SERVICE AGREEMENT
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THE UNDERSIGNED INDIVIDUAL SIGNING THIS 'AGREEMENT ON BEHALF OF CUSTQMER ACKNOWLEDGES P.O.# - - - - - - - - - - - - , - - - . Ticket Req.: Y / N THAT HE/SHE HAS READ AND UNDERSTANDS THE TERMS-AND CONDITIONS OF .THIS AGREEMENT, ON REVERSE SIDE, AND THAT HE/SHE HAS THE AUTHORITY TO SIGN ON IBEHA!..F OF CUSTOMER. Fed LO.# _ _ _~ - - - - - - - - - Taxable: Y/N Disposal Sii:e _ _ _ _ _ _ _ _ _ _ __ CUSTOMER .
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TERMS AND CONDITIONS
1.. . TERM._. TJie term of this Service Agreement (this "Agreement') shall be for an lnltlal term of thirty-six (36) months from the EtfeoUve Date, and shall be autq11_1p~cally re.ne~ed: for thirty~sl:t (~ill months {renewal term} thereafler·unless ei\her:party shall give written noijce of termination, by Certified Mail, to the other party at least si;cty (60) days ,but not more than one hundrsd eighty ('180) da;yJprior·to,\he termination of the initial term or any renewal -term. . . ·.:. _ ;. ..., ·. . .. . . .
2, SERYICES. JESI shall pr:ovicle .Customer.with waste collection, transportation and disposal services for Customer's waste, refuse and/or recyclable materials. Customer grants to IES! the e,cclusive'right to provide such services to customer. ·customer represents and warrants that.It has no existing agreements with olher companies or entitles for the provision or such services, and hereby agrees to hold IESI harmless Imm any claims, losses or damages resulting from any actions regart;!ing ar)Y preexisllng contracts. · . . . · ··· 3. ·. · SERv1ce Feces. Customer shall pay IESI monthly servfoo.fees In accordance with_the "Schedule ot Charges" set forth In this Agreement and the Invoices delivered to Customer, plus any and all federal, state and local taxes, fees or o_ther charges Imposed upon collection, transportation, disposal or recycling services. Customer shall pay IESI for addlllonal services performed by IESI that are not specifically set forth In this Agreement; In accordance with the terms o\ this Agreement Customer shall pay In 1011 IESl's service fees; upon receipt of Invoice, but no later than ten (10) days after receipt of an invoice from IESl: llttt1e ,~vent payment Is not timely inade, IESI may, at Its sole discretion, assess a late charge not to exceed the maximum interest rate allowed by law on an amounts due and owing by Customer. In the event that Customer falls to timely pay service.fees, IESl.may.lerminate this Agreement or suspend services until Customer tia·s paid In full. · ·· 4." . . RATE ADJUS-Tl\leNTS, ··a. Change In Service. The parties agree that the type or frequency of service may be changed during the term of this Agreeme.nt without affecting the validity of this Agreement and that such change shall ~come a·part of this Agreement In the event Customer requests any additional services or a change in the type or f_ requency of service, the service fees charged by IESl wlll be adjusted and Customer agrees to pay the adjusted:servlce fees. Upon agreementotthe adjusted service lees;·such modlfica.tlon shall become apart of this Agreen\errt. : . · · . b. ~ .lnci:ease.s. Customer agrees that IESI may increase the rates hereunder proportionately to adjust for any.increase to IESI In disposal and fuel cost or any increases in transportation costs rJue .,~ to changes)n location of the disposaJ facility. AddltionaOy,'C'iisto'rner agrees that IESi' may also Increase _Iha rates lrom time to time to adjust for increases In the Consumer Price Index, lncrease·s that IESI may proportionately pass through to Customer as .a result.of increases .in ..the average weight per container yard of the Customers Waste Matenals (IESI initial assumption is that Customer's Waste Material does noi e½ceed. 851bs per cubic yard), increases in IESl's·costs due·to changes In focal, state or federal rules, ordinances or regulations applicable to IESl's operations or, the services provided hereunder, and increases in tm,es, lees or other guvernmental charges assess,ed ·against or'passed through to IESI (excludlng·income or real property taxes), and shall not be withheld by the Customer.- ·IESI may only increase rates for reasons other than set -forth above wiih the consent '>I the Customer:· Such consent may be demonstrated vert;ally, in writing or by the actions and practices of the parties. · 5. Fl1;Loc.11T10N',0F.i;l!JSll'li;SS_. IIJ the event Customer .re.locates its business to another area serviced by IESI, Customer shall notify IESI. and such relocation will not ·affect.the validity oi "!his. Agreement, as long as IESI agrees to continue $rvice·to'Custonier. , · · · .. : · · · · · ·· · · · 6. WASTE MATl:RIA1.S. customer represents and warrants that the mater.ials placed in the Equipment shall ba "Waste Mate~al"J1s.~llned herllin and s~all :con!i!ln no othef substances-or materials.- The ter_m W!!ele Material as used In these Term~.and,.Gondltlors shall m~ansc:ilid waste generated ,bY _ CustQmer excluding radjo~ctiv~, VQl;ifileihigh!Y fla(limable, explo_sive, blomadlcal, l_ nfectious, to>cic or hazardous material.
The terin '11azardous material" shall include but not -be, llmlted_·to, any"amount:ot wi)Ste hsted or characterized as hazardQus by the United ·states 'Environmental Protection Agency or any state agency pursuant to the Resource Conservation and Recovery Act of 1976, ·as·amended, or applicable state law: IESl·shall acquire title to tile Waste Material when It is loaded· Into IESl's trucks. Title to arid liability for any waste ei<cluded above shall remain with customer and Customer eiq,ressly agrees to defend, indemnify and hold harmless IESI from and against any-_and all damages, penalties;. iines and liabilities resutting from or ;;;.:-ising out of such waste excluded above. · · . · .' . .· . , 7.. EOUIPMENT. Customer acknowledges and agree/! that all Equipmentfumished hereunder by IESI. shall remain the prope1iy of !ESL -The word "Equipment'' as used herein shall mean all containers used for the storage of Waste Material including stationary compaction units,_stationary baling units, Waste Material loading devices, tanks, tankers, and such other on-site .devices as may be specified on the iace of thls Agreement. IESI reserves the right to substitute the Equipment for similar Equipment at any time during the .term of this Agreement.
· a. Customer Aespon&ibility. Customer acknowledges thai it has care, cu\ltodY-and control of the Equipment while at the Custo.mer·s location and accepts responsibiliiy tor all loss or damage to u,e Equipment (except for normal wear and tear or for loss or damage resulting from IESrs hand~ng of the Equipment).and tor its contents. Custom;,i, agrees not to overload, by.weight or volume, move or alter the Equipment, and shall uss the Equipment only !or Its proper and intended purpose. Customer agrees fu indemniiy, defend.and h.old harmless IESI against aii claims, damages, suits, penalties,·fines and liabilities for Injury or death lo persons or less or damage lo property arising out of Customer's use, operation or-possession ot the Equipment .' .
b, Access, Customer shall provide unobstructed ·and reasonable access fo the Equipment on tha sch·eduled collection day. If the Equipment Is inaccessible so \hat the regularly scheduled pick up cannot be made, IESI will prompt!y noUfy the Customer and afford ll1e Customer a. reasonable opportunity to ·provide the requirad access;.howaver, JESI reserves the right to charge an additional fee fo, any additional collection seJVice required by Customer's faiiure to provide such access.
a. DRIVEWAYS.AND PAVEMi,NT DAMAGE. Customer warrants that any right of way provlfled by Customer for IESl's Equlpment locatlon _ to the most convenient public way !s sufficient io becll' the we!gJ·!i or all of. lESl's Equipment and vehicles reasonably required to perform ·the service herein contracted. IESI shall not be.responsible for damage lo any private pavement or accompanying sub-surface of any route reasonably necessary to perform the services herein contracted and Customer. assumes all llabllftles for damage to pavement or road suriace.
S. BREACH f..ND DAMAGE$.
a. Breach: Customer will be considered In breach of this Agreement-if It: (1),fails to pay service fees as selforth In this Agreement; (2) .attempts to terminate this Agrnisment without prior written notice as set !Orth in this 1\greement; and/or (3) fails fu comply witll any of ils obligations set'forthln this Agreement. Customer shall provide IESI with written notice of any problem which il'believes constliules a failure by IESI to fully perform Its obliga1lons under tills Agreement. IESI will be considered in breach of this Agreement.if IESI does not cure the problem in ten (1 O) business days after receiving ·such notice. ·Where IESI determinas, in its reasonable judgment;thatlheproblem does not constitute a.!a.ilure by·IESI to perform its obligations, or where such problem i.s beyond IESl's reason.able control; IESI shall not be obligated to cure such problem and tllis Agreement shall remai1{ln flilllorce:and effect. .: '· ' ; · · · · · . .
. a ..· b. Liquidated ·bamages;'·In the ·event Custoin9rterminates this Agreement priof 10·its expiration other than as result of a' breach by IESI or IESI terminates this Agreement !or Cuslcimer's breach, .including nonpayment, Customer·agrees to ·pay to IESI as liquidated damages a sum calculated as follows: (i} if the remaining _term under -this Agreement.is ,sil<.or more months,: Cu.s!omer shall pay its most. recent rnonlhll' charges multiplied by six: or (ii)' if the remaining term unaerthis Agreement is less than six months, Customer shall pay its most recent monthly cha~ge multiplied .ti\r the riumber of months-remaining In tl1s tem1. Customer acknowledges that in the event of an unauthorized termination ol this Agreement, the anticipated loss to IESI in suc!'r 11veritis estimate_ to d be the. amo\]rit' set forth in !he foregoing_liquidated damag€!s provision and , uch estimated value is reasonable and is not imposed ·as a penalty. In the event Customer fails to pay IESI all amounts·wti:ch'becomei·duei under this Agreen'rent, ·or tails to periorm 'its obligations hereunder, and IESI re/er.s st,G!1 matter to an attorney, Customer agrees to pay, in addition to the amount due, any and all costs incurred by IESI as a result ol such action, including, to the extant permitted by law, reasonable attorneys' lees.
c. Waiver. The failure of IESI to exercise any right to terminate this Agreement andior collect damages againsi Customer ior any breach oi tl1is Agreement will not ccnstitute a waiver ot anv of iESL.i rights under this Agreement. · 10. APFl'.ICABI.E LAW. This Agreement shall be governed In all re;spects by the laws of the State of Texas, without giving effect to the conflict of laws rules thereof. 11. AsSlGNMl!N'l' AND BENern.· This Agreement sha_ll bt! binding on and inure to the b'i:,nefit or the parties hereto and !heir respective subsidiaries, successors and assigns. IESI may assign iis obligations and rights under this Agreement without the consent ot Customer. Cus!omerJT1ay noi assign ii obligations or rights under this Agreement without the prior written consent of IESI. . · .· · 12. ATTORNEYS FE!:S; In the ..event of a breach of !Ills Agreement;by either par!y, the breaching party shall pay all reasonable attorneits fees, collection fees and costs of 11,e other party iricident to any action brought to eriforce this Agreement · .
13. ExcusED PERFORMANCI:•. ~either party heceto shall b.e .liable for its failure to perform or delay In pertormance hereunder due Jo conlingeincies beyond its reasonable control including, but not limited 16, strikes, riots, compliance with laws or governmerital orders, inability' to get to container, fires, ancl acts ol God and s1.1ch failure shall not constitute a deiault under this Agreement.