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Service Corporation International v. Stericycle, Inc.

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

January 4, 2020

SERVICE CORPORATION INTERNATIONAL, Plaintiff,
v.
STERICYCLE, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          VIRGINIA M. KENDALL, UNITED STATES DISTRICT JUDGE

         Plaintiff Service Corporation International (“SCI”), in its amended complaint (Dkt. 27), alleges that its subsidiaries contracted with Defendant Stericycle, Inc. for Stericycle to provide medical waste disposal services. Despite entering into a fixed-price agreement, SCI says, Stericycle raised its prices for reasons not authorized by the contract. SCI now brings this action against Stericycle for breach of contract, unjust enrichment, and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”).

         Stericycle has moved to dismiss SCI's amended complaint, both for lack of prudential standing and failure to state a claim. (Dkt. 36). Because this Court agrees that SCI has not sufficiently alleged that it has the right to bring claims personal to its subsidiaries, the Court grants the motion to dismiss. The Court also concludes that, even if SCI can show that it has prudential standing, the complaint, as it stands now, fails to state a claim on any count.

         BACKGROUND

         The following factual allegations are taken from SCI's amended complaint and are assumed true for purposes of this motion. W. Bend Mut. Ins. Co. v. Schumacher, 844 F.3d 670, 675 (7th Cir. 2016).

         SCI operates funeral homes across the United States. (Dkt. 27 ¶ 3). Between 2010 and 2016, SCI acquired Keystone America, Inc., Stewart Enterprises, and Alderwood Group, LLC, and all of the subsidiaries of each organization (collectively, “the subsidiaries”). (Id. at ¶¶ 13-15). SCI alleges that, at some point, it was assigned the claims of each organization and its subsidiaries. (Id. at ¶¶ 13-15).

         Stericycle is a medical waste disposal company. (Id. at ¶ 3). SCI alleges that Stericycle contracted with the subsidiaries using a form contract called the “Steri-Safe Service Agreement.” (Id. at ¶¶ 22, 58). The Steri-Safe Service Agreement provides for a fixed price for services. (Id. at ¶¶ 22-23). The Agreement includes terms and conditions, which SCI alleges were often provided in “illegible” copies with “reduced font size.” (Id. at ¶ 24). The terms and conditions provide that “Stericycle reserves the right to adjust the contract price to account for operational changes it implements to comply with documented changes in the law, to cover increases in the cost of fuel, insurance, residue disposal, or to otherwise address cost escalation.” (Id. at ¶ 26).

         SCI alleges that Stericycle did not, in fact, limit its price increases to those implemented due to changes in the law or due to cost escalation. (Id. at ¶ 31). Instead, SCI says, Stericycle imposed improper “automatic price increases” or “APIs” not tied to the reasons for price increases set forth in the Agreement. (Id. at ¶¶ 31- 33, 36). Stericycle used an electronic financial reporting system called “Tower” (later “SteriWorks”) to apply an unjustified, periodic 18% price increase to the subsidiaries. (Id. at ¶¶ 34, 38). SCI alleges that Stericycle targeted the subsidiaries and other smaller customers for APIs because they were less sophisticated and had smaller (or no) legal or accounting departments. (Id. at ¶ 37). When customers called Stericycle to complain about price increases, its customer complaints and retention departments provided false justifications or used other tactics to convince the customers to accept the increases or pay as much of them as possible. (Id. at ¶¶ 44-48).

         SCI cites a class-action settlement in this district pertaining to Stericycle's API practice. (Id. at ¶ 59). SCI states that Stericycle represented in that litigation the subsidiaries were members of the class who contracted with and were overcharged by Stericycle between March 2003 and October 2017. (Id. at ¶ 59). SCI states that it did not know, prior to the class settlement in 2017, that the subsidiaries had been overcharged by Stericycle. (Id. at ¶ 68). The subsidiaries opted out of the class settlement (Id. at ¶ 61), and SCI has now brought this action alleging breach of contract, unjust enrichment, and violation of the ICFA.

         LEGAL STANDARD

         Stericycle moves to dismiss due to, among other reasons, lack of prudential standing, which is not jurisdictional and is assessed pursuant to Federal Rule of Civil Procedure 12(b)(6). See Dunnet Bay Const. Co. v. Borggren, 799 F.3d 676, 689 (7th Cir. 2015); VYSE Gelatin Co. v. Hicks, No. 17-CV-2937, 2018 WL 3970266, at *2 (N.D. Ill. Aug. 20, 2018). To survive a motion to dismiss under Rule 12(b)(6), the complaint “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. The Court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Olson v. Champaign Cty., Ill., 784 F.3d 1093, 1099 (7th Cir. 2015) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Toulon v. Cont'l Cas. Co., 877 F.3d 725, 734 (7th Cir. 2017) (quoting Iqbal, 556 U.S. at 678).

         DISCUSSION

         A. Standing

         To have Article III standing, “a litigant must ‘prove that he has suffered a concrete and particularized injury that is fairly traceable to the challenged conduct, and is likely to be redressed by a favorable judicial decision.'” Remijas v. Neiman Marcus Grp., LLC, 794 F.3d 688, 691-92 (7th Cir. 2015) (quoting Hollingsworth v. Perry, 570 U.S. 693, 704 (2013)). In addition to this jurisdictional understanding of standing, there is also the doctrine of prudential standing. Although a party may allege an injury caused by a particular defendant, that party lacks prudential standing to bring suit when the injury arose based on the legal rights of a third party. See G & S Holdings LLC v. Cont'l Cas. Co., 697 F.3d 534, 540 (7th Cir. 2012) (“[I]n general, the plaintiffs must assert their own legal rights and interests, and cannot rest their claims to relief on the legal rights or interests of third parties.”). Stericycle argues that SCI lacks prudential standing to sue because its claims rest on the legal rights of its subsidiaries, and SCI has not sufficiently pled an assignment of the right to sue from the subsidiaries. Were there a valid assignment, SCI would have both Article III and prudential standing and ...


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