United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
D. Leinenweber, Judge.
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,
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
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.
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.
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.
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.
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.
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.
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.
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.
Contract at 49.
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.
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.”
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.
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.
these facts, LCI prays for over $20 million in damages.
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.
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.
§ 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).
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.
§ 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.
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 ...