Legal Lode: Veolia Ensnared in a Waste Collection Price War

Fed up with the elaborate array of airline fees and surcharges for all sorts of things that used to be part of the ticket price? These days, airlines squeeze extra money out of travelers who book by phone, check bags, change itineraries, board early, desire extra leg room, eat airline food, or use their own frequent flier miles. Fortunately, the federal government announced a series of new consumer protection measures that will force airlines to disclose hidden fees. Soon, air travelers will be able to see how much each carrier charges for different services and minimize or even avoid these extra costs.

It’s quite a different situation for the buyers of waste services. What they end up paying under their waste removal contracts can be driven by factors and sources that seem bewildering, misleading and downright implausible. Lately, some collection and disposal customers, frustrated by what they say are suspect bills and vague explanations, apparently have seized upon the oft-quoted line from the 1976 film “Network”: “I’m as mad as hell, and I’m not going to take this anymore.”

Two businesses, a church and a resident of Alabama — who claim to represent typical customers served by solid waste service firms affiliated with Veolia Environmental Services North America — have filed a class action suit in federal district court against the companies and five of their executives.

The complaint essentially has two elements: an alleged “coordinated fraudulent scheme” by the defendants to intentionally bilk their customers by “collect[ing] unlawful and misrepresented fees throughout the United States” in violation of the federal Racketeer Influenced and Corrupt Organizations (RICO) Act; and an alleged breach of a uniform contract between the Veolia entities and their customers.

The RICO Act has both criminal and civil elements. The civil component, which is the focus of the class action, offers successful plaintiffs the potential for triple damages. In this case, the plaintiffs claim that their monthly service rate for solid waste disposal services already includes the cost of fuel, environmental compliance and overhead. As the plaintiffs see it, the haulers are tacking on additional fees that purportedly cover those costs but actually fatten profits. “Defendants bait customers with an artificially low service rate, lock those customers into five-year long, auto-renewing contracts, and then charge them a much higher rate through the misrepresented fees,” the complaint alleges.

“Defendants created these fees to increase their profits at their customers’ expense,” the plaintiffs contend. The defendants “routinely manipulated the amounts of these fees to meet the profit goals [that] determine their executives’ bonuses, including the bonuses of the five individual [d]efendants — who each profited directly from the fraudulent scheme set out herein,” the suit adds.

The defendants’ attorney did not return repeated phone calls seeking comment before press time.

The biggest hurdle for the plaintiffs’ attorneys will be to gain class certification for their claims. That will be no easy feat. Although class action lawsuits continue to be filed in both state and federal courts, their success rate has plummeted, largely due to a series of U.S. Supreme Court decisions tightening the rules for such claims.

In 2009, a group of waste generators filed a class action lawsuit against Allied Waste Industries Inc. and Republic Services Inc. in an Arizona federal court [CLN Properties, Inc. and Maevers Management Company, Inc. v. Republic Services, Inc. and Allied Waste Industries, Inc., (Case No. 2:09-cv-01428-DGV)]. The suit alleged that the defendants assessed additional charges purportedly to recover rising fuel and environmental costs, but then set the amounts at levels that did not correspond to the increases that Allied and Republic actually incurred. After the district judge denied class certification for the plaintiffs, leaving individual lawsuits as their only recourse, the case came to an end.

Significant developments in this case will be reported in this column as they occur.

[Danny Lynn Electrical  & Plumbing, LLC, et al. v. Veolia ES Solid Waste Southeast, Inc., et al., No. 2:09cv192-MHT (M.D.Alabama)]

Barry Shanoff is a Rockville, Md., attorney and general counsel of the Solid Waste Association of North America.

The legal editor welcomes comments from readers. Contact Barry Shanoff via e-mail: [email protected].