Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Linda Construction Inc. v. Allied Waste Industries

United States District Court, N.D. Illinois, Eastern Division

March 31, 2017



          Harry D. Leinenweber, Judge.

         Before the Court are four Motions to Dismiss [ECF Nos. 153, 156, 161, and 163]. For the reasons stated herein, the Court grants the Motions found at ECF Nos. 153, 156, and 163. The remaining Motion [ECF No. 161] is granted in part and denied in part. The Court dismisses Counts I through V against all Defendants with prejudice. Count VI, as narrowed below, survives.

         I. BACKGROUND

         The following facts are taken from Plaintiff's Third Amended Complaint (the “TAC”) and the documents attached to or referenced in that Complaint that are critical to it. See, Geinosky v. City of Chi., 675 F.3d 743, 745 n.1 (7th Cir. 2012). The Court accepts as true all well-pleaded factual allegations in the TAC, but where an attached exhibit and the TAC conflict, the exhibit controls. See, Forrest v. Universal Sav. Bank, F.A., 507 F.3d 540, 542 (7th Cir. 2007).

         Plaintiff Linda Construction, Inc. (“LCI”) is a garbage-hauling business whose owners are African-American. TAC, ¶¶ 2-3. The company is certified as a Minority Business Enterprise (“MBE”) by the City of Chicago. Id. ¶¶ 2, 5. This designation gives LCI certain advantages when it comes to contracts with the City, which generally requires that a percentage of the work it contracts out be done by MBEs and WBEs (Women Business Enterprises). Id. ¶ 16.

         In November 2009, LCI entered into an agreement with Defendant Republic Services Procurement, Inc. (“RSPI”). The parties signed an agreement called the “Master Transportation Services Agreement, ” or “Transport Agreement.” Under the agreement, LCI was to send its trucks to locations known as transfer stations and from there pick up garbage and haul it to landfills. See, ECF No. 137 (“Transport Agreement”) at 3. The Transport Agreement imposed certain conditions on LCI and allowed RSPI to terminate the contract if LCI failed to abide by them. Id. at 4-5.

         Around the same time that RSPI committed to the Transport Agreement, Republic Services, Inc. (“Republic”) submitted a bid for a waste hauling contract with the City of Chicago. TAC ¶¶ 19-20. (LCI is mum as to the nature of the relationship between RSPI and Republic. The Court makes do with the assumption that they are corporate affiliates.) Republic made the bid through a wholly-owned subsidiary that is one of the Allied entities sued in this litigation. Plaintiff sues three such Allied entities - Allied Waste Industries, Allied Waste North America, and Allied Waste Transportation (collectively, “Allied”) - and refers to the Allied corporations and Republic as Defendant Republic/Allied. TAC ¶ 9.

         The litigation was to come years later, however. In 2009, LCI was one of the companies Allied listed in its bid as a MBE that would work as a subcontractor to transport the City's garbage. TAC ¶ 26. The inclusion of such subcontractors helped to satisfy the City's requirement that a fixed percentage of the contract be performed by MBEs. ECF No. 149, Ex. C at 42.

         Allied had run into trouble with the City of Chicago over its MBE/WBE participation in the past. In early 2012, Allied settled a claim with the City over violations that it committed in the period before 2010. The Office of Inspector General (“OIG”) released a statement reporting the settlement. As is detailed by the OIG, Allied had participated in a “pass through” scheme in which the company “arranged for the work purportedly done by the certified MWBE haulers to be done by non-certified hauling firms.” ECF No. 149, Ex. E at 1. The OIG excoriated Allied; the MWBE firms, which were “willing participants in Allied's scheme, ” “essentially selling their certification” for a cut of the contract's price; and the City of Chicago for its poor administration of the program. Id. at 1-2. At the same time, the OIG “applaud[ed] Republic for having voluntarily stepped forward, disclosing possible violations and reforming the operation, ” something the company presumably did after it bought Allied. Id. at 2. The OIG concluded its report by making recommendations to the City on how to improve its MWBE program. See, Id. at 2-4. For example, the OIG recommended that instead of inserting the highest MWBE-participation percentages authorized by law in each contract, the City should set realistic goals based on “how much MWBE capacity actually exists in those areas.” Id. at 2.

         In any case, Allied won the bid it entered. The company and the City of Chicago then signed a contract, the “Main Contract, ” giving Allied $24 million worth of work over a three-year period beginning on March 19, 2010. ECF No. 149, Ex. C (the “Main Contract”), Contract Summary Sheet. The Main Contract was a hundred-page-plus document that laid out the responsibilities and obligations of the Contractor (Allied) and the City, as represented by its Chief Procurement Officer (“CPO”). Defendant Jamie Rhee (“CPO Rhee”) occupied the CPO position throughout the relevant period.

         The Main Contract made references both to the subcontractors and the CPO. For example, Section 2.21 stated: “The Chief Procurement Officer may, whenever he have [sic] reason to believe that the Contractor has neglected or failed to pay any subcontractors, workmen or employees for work performed . . ., order and direct that no future vouchers and estimates be issued and no further payments be made upon the contract until said Chief Procurement Officer has been satisfied that such subcontractors, workmen and employees have been fully paid. . . .” Main Contract at 13.

         In its latest Complaint, LCI also highlights Section 5.9 of the Main Contract. Section 5.9 governs Arbitration. It reads:

In the event a contractor has not complied with the contractual MBEs/WBEs percentage in its Schedule D, underutilization of MBEs/WBEs shall entitle the affected MBE/WBE to recover from the contractor damages suffered by such entity as a result of being underutilized; provided, however, that this provision shall not apply to the extent such utilization occurs pursuant to a waiver or substitution approved by the City. The Ordinance and contracts subject thereto provide that any disputes between the contractor and such affected MBEs/WBEs regarding damages shall be resolved by binding arbitration. . . . This provision is intended [to] the benefit of any MBE/WBE affected by underutilization and grants such entity specific third party beneficiary rights.

         Main Contract at 49.

         Before the contract between Allied and the City even took effect, however, RSPI and LCI began to have problems under their Transport Agreement. On March 18, 2010, RSPI sent LCI a notice letter, apprising LCI of its breach of the Transport Agreement. See, ECF No. 149, Ex. A at 1. Although RSPI then attempted to terminate its agreement with LCI, see, id., the parties appear to have worked out their differences afterwards. In July 2010, RSPI and LCI amended their Transport Agreement to extend the contract term through August 16, 2015. Id. at 2. The amended Transport Agreement also included an exclusivity clause in favor of LCI. Id. § 1(b) at 2.

         However, more than a year before the contract extension was to expire, RSPI terminated its agreement with LCI. On April 7, 2014, RSPI sent LCI a termination letter effective immediately. See, ECF No. 149, Ex. L. In its letter, RSPI cited three independent grounds for terminating the contract, all of which LCI disputes. See, ECF No. 149, Ex. H. These included the contentions that LCI had not paid its union contributions, that LCI had subcontracted work to another trucking unit without obtaining consent from RSPI, and that LCI had become insolvent. Id. at 1-3. On this last point, RSPI cited the statement of Jessie McGee, one of LCI's owners. According to RSPI, “Mr. McGee stated that Linda Construction was unable to meet its financial obligations.” Id. at 3. “Furthermore, ” said RSPI, “on March 30, 2014 Republic received the enclosed inquiry from Ken Seng of Seng, LLC, one of Linda Construction's creditors, which provides further evidence of Linda Construction's insolvency. According to Mr. Seng, Linda Construction currently has an unpaid debt to him of around $80, 000.00. . . . In his email, Mr. Seng stated that . . . Seng, LLC will repossess the equipment by April 15, 2014.” Id.

         In October 2015, LCI filed this lawsuit, naming RSPI, Republic, Allied, the City of Chicago, CPO Rhee, Ken Seng, Seng, LLC (collectively “Seng”), and others as Defendants. Many of these other Defendants have been dismissed in the year and a half since the suit was filed, but two remain: RT Specialists, Inc. and National Casualty Company (collectively “NCC”). (Again, LCI does not say what the relationship is between RT Specialists and National Casualty Company. Instead, it makes identical allegations, sometimes naming RT Specialists as the alleged perpetrator and sometimes naming National Casualty Company. Since treating the two entities as fungible does not change the substance of this Opinion, the Court proceeds as if RT Specialists and National Casualty Company were one defendant.) LCI alleges that NCC was its insurer, but that in 2014, NCC failed to obtain insurance for LCI to operate in Missouri, raised LCI's premiums, and wrongly retained LCI's deposit. TAC ¶¶ 66-68.

         LCI asserts various causes of action against RSPI, Republic, Allied, the City of Chicago, CPO Rhee, Seng, and NCC (collectively “the Defendants”). The nub of the company's grievances is that the Defendants discriminated against it on account of it being owned by African Americans. See, TAC ¶¶ 36-37, 46-59, 66, 69. LCI alleges that the Defendants engaged in racial discrimination by taking various adverse actions - either individually or as part of a conspiracy - against LCI that were not taken against “white-owned contracts.” See, TAC ¶¶ 50-52 (“Defendant Rhee's collusion with Defendants Republic/Allied, Republic, Kenneth Seng, Seng LLC, NCC and RT Specialists to discriminate against LCI was based on racial animus against LCI because LCI's owners are African Americans.”), 57, 66, 69. According to LCI, these discriminatory actions provided the pretext for RSPI to terminate its contract with LCI. LCI alleges that but for the Defendants' unlawful actions motivated by racial animus, LCI would have “graduated” from a three-year mentoring effort that Republic/Allied was contractually obligated to give it and thus qualified to bid as a prime contractor for the City's next contract.

         On these facts, LCI prays for over $20 million in damages.


         This is not the first time that the Court has been asked to dismiss LCI's Complaint. Twice before have the Defendants briefed their 12(b)(6) motions, and twice before has the Court found it appropriate to dismiss the Complaint in its entirety. Unfortunately for the Defendants, this appears to be a case of “if you first succeed, still you must try and try again.” LCI, after one change of counsel, a withdrawal and reappearance of substitute counsel, two dismissals, three amended complaints, and seventeen months of trying to state a claim upon which relief can be granted, brings in its TAC causes of action which rest on allegations that have been rejected as conclusory. The reasons for the previous dismissals thus continue to be relevant for disposition of the current Motions, and the Court covers its prior rulings in some detail.

         The Court probed and found wanting LCI's original Complaint in March of 2016. See, ECF No. 64 at 25-26. Among the claims dismissed in that ruling were a 42 U.S.C. § 1983 claim brought against the City of Chicago and CPO Rhee, a 42 U.S.C. § 1985(3) conspiracy claim brought against all the Defendants, and a claim for breach of the Main Contract made against the City and Republic/Allied. Id. at 14-22.

         The § 1983 and § 1985 claims against the City of Chicago were dismissed because LCI did not adequately plead that its civil rights were violated by a City's custom or policy. ECF No. 64 at 15-16. The Court specifically found that the allegations that “the City acquiesced in, or ratified, the misbehavior of the other Defendants and CPO Rhee” did not amount to a municipal policy because such conduct was not a practice “so permanent and well settled as to constitute a custom or usage with the force of law.” Id. (citing Moore v. Bd. of Educ. of City of Chicago, 300 F.Supp.2d 641, 645 (N.D. Ill. 2004)) (internal quotation marks omitted).

         The Court dismissed the same claims brought against CPO Rhee on the additional ground that LCI failed to allege that CPO Rhee's actions were motivated by race. It found that the “allegations as to CPO Rhee's discriminatory motive [were] general and conclusory” and as such, “d[id] not raise a plausible claim of intentional discrimination on the basis of race.” ECF No. 64 at 17.

         The § 1985(3) civil conspiracy claim asserted against the other Defendants failed for the same reason. ECF No. 64 at 20. As the Court noted, “Plaintiffs' allegations in the body of the Complaint that they were ‘treated differently than white owned contractors, ' . . . are conclusory at best.” Id. Such conclusions did not suffice to sustain a cause of action, and the Court pointed out to LCI that it needed to “allege facts [to] show[] . . . racial animus on the part of the City or the other Defendants.” Id. (emphasis in original). In addition, LCI did not make out the elements of a conspiracy since it did not plead any facts tending to show that a “meeting of the minds occurred between the City and the various Defendants to deprive Plaintiffs of their constitutional rights.” Id. at 19-20.

         LCI's contract claim fared even worse. While the Court gave LCI leave to amend its Complaint as to the other causes of action, it dismissed the contract claim with prejudice because LCI was “not a party to Contract No. 21472 [i.e., the Main Contract], which is between Allied and the City.” ECF No. 64 at 21-22. Moreover, LCI and its owners have not alleged “(nor could they in good faith) that they are third-party beneficiaries” of ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.