Antitrust Law Daily Wrap Up, RICO—M.D. Ga.: Deceptive service charge claims meet CAFA amount-in-controversy requirement, (Mar 5, 2014)

By Jody Coultas, J.D.

Michelle’s Restaurant of Georgetown, Inc. was denied remand of its Georgia Racketeer Influenced and Corrupt Organizations Act (RICO) class action claim to state court by the federal district court in Columbus, Georgia (Michelle’s Restaurant of Georgetown, Inc. v. Advanced Disposal Services, Inc., March 3, 2014, Land, C.). The court also held that Michelle’s lacked standing to assert injunctive relief claims and ordered Michelle’s to file a more definite amended complaint.

Michelle’s contracted with Advanced Disposal Services (ADS) for solid waste disposal services, but the relationship soured. ADS charged a monthly service rate, as well as a “fuel surcharge,” a “fuel/environmental fee,” and “administration fees.” Based on the collection of those additional charges, Michelle’s filed a putative RICO class action claim. ADS removed the action to federal court based on the Class Action Fairness Act (CAFA).

Because the jurisdictional amount was satisfied, the court denied Michelle’s motion to remand. CAFA allows for removal of certain class actions in which the matter in controversy exceeds $5 million. ADS demonstrated that its “recognized revenue” attributable to the fees in question was in excess of $5 million during the time period alleged. Michelle’s argued that “recognized revenues” should not be considered in determining the amount in controversy, and should be based instead on the amount of fees that the putative class members have actually “paid.” Amount in controversy must be determined from the plaintiffs’ point of view. However, ADS’s revenues from the fees paid were exactly what Michelle’s put in controversy in this case, and ADS established that amount to be in excess of $5 million.

Michelle’s lacked standing to pursue injunctive relief claims, according to the court. ADS allegedly altered the terms of the written service agreement by implementing an Arbitration Agreement, Jury Trial Waiver, and Class Action Waiver Clause. Michelle’s sought to enjoin ADS from enforcing the agreement. In addition to showing an actual injury, a plaintiff seeking injunctive relief must show a sufficient likelihood that he will be affected by the allegedly unlawful conduct in the future. The alleged alterations to the agreement did not apply to Michelle’s because it opted out of the amended terms. Therefore, Michelle’s could not show a likelihood of injury in the future from ADS enforcing the terms at issue. The mere sending of the proposed amendments by ADS did not create a sufficient injury for purposes of standing.

ADS’s motion to dismiss was denied, but the court granted its alternative motion for a more definite statement. To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a plausible claim for relief. Civil RICO claims predicated upon fraud must meet the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). ADS allegedly engaged in taking, theft by deception, mail fraud, and wire fraud. Theft by deception, mail fraud, and wire fraud are fraud-based claims that must meet the requirements of Rule 9(b). Although it was difficult to ascertain from the allegations “who” did “what” “where” and “when,” the court ordered Michelle’s to file a more specific amended complaint.

The case is No. 4:13-CV-488 (CDL).

Attorneys: Rodney Eugene Miller (McCallum, Methvin & Terrell, P.C.) for Michelle’s Restaurant Of Georgetown Inc. and Community Corner. Bryan O. Balogh (Burr & Forman LLP) for Advanced Disposal Services South and Advanced Disposal Services Solid Waste Southeast Inc.

Companies: Michelle’s Restaurant of Georgetown, Inc.; Advanced Disposal Services, Inc.

Cases: RICO GeorgiaNews