1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 GLOBAL DISPOSAL REDUCTION Case No.: 23-cv-582-GPC-KSC

SERVICES, INC.,

12

ORDER

Plaintiff, 13 (1) DENYING IN PART AND v. GRANTING IN PART 14

DEFENDANT’S MOTION TO

ALLIED WASTE SYSTEMS, INC., d/b/a 15 DISMISS PLAINTIFF’S FIRST REPUBLIC SERVICES of SAN DIEGO,

AMENDED COMPLAINT

16 Defendant. (2) GRANTING PLAINTIFF LEAVE 17 TO AMEND THE COMPLAINT [ECF No. 15] 18

19 Currently pending before the Court is Defendant Allied Waste Systems, Inc.’s 20 Motion to Dismiss, ECF No. 15, Plaintiff Global Disposal Reduction Services, Inc.’s First 21 Amended Complaint (“FAC”), ECF No. 13. Plaintiff has responded in opposition, ECF 22 No. 17, and Defendant has filed its reply, ECF No. 18. 23 Pursuant to Civil Local Rule 7.1(d), the Court found the matter appropriate for a 24 decision without oral argument and vacated the hearing scheduled for August 4, 2023. ECF 25 No. 19. For the reasons that follow, Defendant’s Motion to Dismiss is hereby DENIED IN 26 PART and GRANTED IN PART. Plaintiff is GRANTED LEAVE TO AMEND. 27 1 I. BACKGROUND AND PROCEDURAL INFORMATION 2 This action arises from a purported breach of contract between the parties. Plaintiff 3 Global Disposal Reduction Services, Inc. “negotiates contracts with waste disposal 4 providers” to haul waste for its customers. First Amended Complaint (“FAC”) ¶ 6. 5 Defendant Allied Waste Systems, Inc., doing business as Republic Services of San Diego, 6 is one such waste disposal provider. FAC ¶¶ 6–7. 7 A. Master Customer Service Agreement 8 In August 2021, Plaintiff and Defendant entered into a Master Customer Service 9 Agreement (“Service Agreement”) whereby Defendant agreed to be the exclusive waste 10 disposal provider for roughly 125 of Plaintiff’s customer locations listed in Schedule A of 11 the Service Agreement. FAC ¶¶ 8–9, 18; ECF No. 13-1 at 2, 7.1 The Service Agreement 12 runs for a 36-month term with an effective date in June 2021, subject to an automatic 13 monthly renewal thereafter. ECF No. 13-1 at 2. In relevant parts, the Service Agreement 14 has provisions for making payments, rate adjustments, payment upon early termination, 15 and excusing performance. Id. at 3, 5. Section 6, regarding payment, instructs that Plaintiff 16 shall pay Defendant “for the Services and equipment furnished by [Defendant] at the rates 17 provided in Schedule A.” Id. at 3. Plaintiff is obligated to “pay all taxes, fees, and other 18 governmental charges assessed against or passed through to [Defendant],” and instructed 19 to “pay such fees as [Defendant] may impose from time to time by notice to [Plaintiff] 20 (including, . . . late payment fees, administrative fees and environmental fees), with 21 [Defendant] to determine the amounts of such fees in its discretion up to the maximum 22 amount allowed by Applicable Law.” Id. Plaintiff is supposed to pay Defendant “within 23 20 days after the date of [Defendant]’s accurate and correct invoice.” Id. 24 Section 7, concerning rate adjustments, permitted Defendant to “increase the rates 25

26 1 Page numbers are based on CM/ECF pagination. 27 1 annually by” 3%. Id. Defendant could increase its rates for many reasons, including due 2 to “increased fuel costs; . . . increased landfill disposal cost[s]; . . . increased recycling 3 processing & handling cost[s]; and . . . increased or added fees[] passed through from 4 government entities.” Id. However, “[a]ny increases above the 3% annually must be 5 agreed to by both parties in writing.” Id. 6 Section 14, concerning payment upon termination, included a liquidated damages 7 clause whereby Plaintiff’s early termination or breach of the Service Agreement could 8 result in Plaintiff owing Defendant the value of up to six months of services. Id. at 5. 9 Plaintiff is not obligated to pay liquidated damages in the event of Defendant’s breach, 10 though Section 16 explains that Defendant’s “failure or delay in performance due to 11 contingencies beyond a party’s reasonable control, including strikes, . . . shall not 12 constitute a breach of this Agreement.” Id. Within Section 16, Defendant is further 13 instructed to “reasonably correct[]” “all service gaps . . . within 7 to 10 days of [Plaintiff] 14 notifying [Defendant]” and to correct “[b]illing errors . . . within 15 30 [sic] days of 15 notification.” Id. 16 Schedule A of the Service Agreement, containing the account information for each 17 customer account, has two columns that appear to be labeled “FRF” or “ERF” and a third 18 column that appears to be labeled “FRF/EVR CAP.”2 Id. at 7. Most of the cells within 19 these three columns are blank, but roughly 30 rows have at least one cell with a dollar 20 amount, a note, and/or a percentage listed. Id. Plaintiff defines “FRF” and “ERF” in the 21 Complaint as Fuel Recovery Fees and Environmental Fees, respectively. FAC ¶ 11. 22 Plaintiff alleges that the blank cells denote which “customer locations are exempt from” 23 these fees and that most cells are blank in accordance with Defendant’s “custom and 24

25 26 2 Roughly the bottom quarter of the cells are cutoff such that the letters “F” and “E” are indistinguishable. See ECF No. 13-1 at 7. 27 1 practice of exempting most properties brokered by [Plaintiff] from such fees.” Id. “EVR” 2 is not defined in the Complaint, Service Agreement, or Defendant’s motion to dismiss. See 3 id. (absence); ECF No. 13-1 (absence); ECF No. 15 (absence). 4 The bottom of Schedule A lists six accounts that “will be honored for DNS service.” 5 ECF No. 13-1 at 7. Plaintiff defines “DNS” as “do not service,” and alleges that Defendant 6 was required to “credit the bill” for any addresses on the list “because the location was 7 either a delinquent account or an account with no waste bins onsite.” FAC ¶ 20. 8 B. Franchise Agreement With County Of San Diego 9 In June 2021, Defendant and the County of San Diego purportedly assented to a 10 Non-Exclusive Franchise Agreement (“Franchise Agreement”) with an effective date of 11 July 1, 2023. ECF No. 13-2 at 8, 85; see FAC ¶ 25. In relevant part, Section 5.10(A)(3) 12 of the Franchise Agreement instructs Defendant that its contracts with customers “shall not 13 require more than 60 days’ prior written notice for cancellation in any case where the 14 cancellation occurs not less than six (6) months after the initial term of the contract.” ECF 15 No. 13-2 at 47. 16 Section 10.7 of the Franchise Agreement concerns “parties in interest” whereby 17 “[n]othing in [the Franchise] Agreement, whether expressed or implied, is intended to 18 confer any rights on any Persons other than the Parties to it and their representatives, 19 successors, and permitted assigns.” Id. at 80. 20 C. Plaintiff’s First Amended Complaint 21 Plaintiff alleges that it “has performed all conditions, covenants, and promises 22 required on its part to be performed in accordance with the” Service Agreement, but that 23 “Defendant has repeatedly and habitually breached the” Service Agreement. FAC ¶¶ 19– 24 20. Since January 2023, Defendant has allegedly “increased Fuel Recovery Fees and 25 Environmental Fees between 22% and 49% on the locations covered by the [Service 26 Agreement],” amounting to “approximately $95,000 per month more than what the 27 1 [Service Agreement] allows [Defendant] to charge without [Plaintiff]’s” consent. FAC 2 ¶ 13. Plaintiff alleges that “[t]hese large unilateral increases are not permitted by the 3 [Service Agreement], id., and that Plaintiff has timely notified Defendant in writing of the 4 purported billing errors to no avail, FAC ¶ 14; see ECF No. 13-1 at 5 (excused performance 5 provision requiring Defendant to correct billing errors “within 15 30 [sic] days of 6 notification”). Instead of correcting the alleged billing errors, Defendant purportedly 7 “threatened to terminate the [Service Agreement] if [Plaintiff] does not pay.” FAC ¶ 14. 8 Plaintiff alleges it has continued to pay the allegedly improper charges so that Defendant 9 will continue to service the customer locations. Id. Plaintiff further alleges that Defendant 10 has violated Service Agreement Section 16 because Defendant “has repeatedly failed to 11 [timely] haul waste, deliver bins, provide accurate billing, and otherwise respond to 12 customer service issues at multiple locations.” FAC ¶ 15. 13 Plaintiff alleges that Defendant’s CEO has made public statements denouncing the 14 value of brokers like Plaintiff and demonstrating a desire to remove brokers from the 15 equation. FAC ¶ 7 & n.1. Defendant’s purported breaches of the Service Agreement align 16 with these public statements and Plaintiff alleges they are designed to “cause customers to 17 cancel service with [Plaintiff], and thereby eliminate [Plaintiff] as a consultant or broker.” 18 FAC ¶ 16. 19 Plaintiff lists over a hundred customer locations in which Defendant has purportedly 20 breached the Service Agreement over the course of its service. FAC ¶ 20. For all but a 21 few customer locations, Plaintiff alleges that Defendant charged “Fuel Recovery Fees and 22 Environmental Fees greater than permitted by the [Service Agreement]” on . . . invoices 23 from January–April 2023.” Id. For some customer locations, Plaintiff alleges that 24 Defendant has breached the Service Agreement in other ways, such as “[f]ailing to provide 25 prompt and effective customer service to assist with” requested service reductions; 26 “[f]ailing to provide accurate billing” for accounts on the DNS list; “[i]ssuing inaccurate 27 1 invoices” and overcharging for equipment; “[f]ailing to provide [required] recycling 2 hauling services” and failing to cure this failure; failing to timely deliver the required waste 3 containers; “[i]ncreasing the base rate more than permitted by the [Service Agreement]” 4 on an invoice; and “[f]ailing to promptly provide damaged waste container exchanges.” Id. 5 Plaintiff alleges that the customer for one of these listed customer locations terminated its 6 account with Plaintiff due to Defendant’s breach “and is now believed to be a direct 7 customer of Defendant because Defendant agreed to withdraw the fee increases that it had 8 charged while the account was with Plaintiff.” FAC ¶ 21. Plaintiff allegedly lost an 9 additional three customers between December 2021 and July 2022 when “Defendant failed 10 to provide waste hauling service as required by the [Service Agreement],” for the three 11 customers and Defendant “damaged the doors to the waste chute room” for one of the three 12 customers but did not handle the issue in a timely manner. Id. 13 Plaintiff alleges the following harms have arisen from Defendant’s breach of the 14 Service Agreement: (a) “Payment of the improper and excessive charges”; (b) “Credits 15 owed when Defendant wrongfully imposed and collected charges for services that it failed 16 to provide during a strike by its employees [from] December 2021 to January 2022”;3 (c) 17 “Lost revenues associated with customers cancelling with Plaintiff”; and (d) “Harm to 18 reputation and customer goodwill.” FAC ¶ 22. Plaintiff seeks compensatory damages in 19 excess of $75,000. Id. 20 Plaintiff also seeks declaratory relief regarding the parties’ respective rights and 21 duties under the Service Agreement. FAC ¶¶ 25–27. Concerning the Service Agreement, 22 Plaintiff asserts the following contentions are disputed: (a) “that Defendant cannot charge 23

24 3 The original complaint alleged that “[b]etween approximately December 17, 2021, and 25 January 16, 2022, a number of [Defendant’s] employees . . . went on strike. During this 26 time, [Defendant] failed to haul away waste for many of [Plaintiff]’s customers. For some locations, [Defendant] provided no service during the strike.” ECF No. 1 at 6, ¶ 22. 27 1 a fuel recovery fee if the FRF column for that location is blank and if there is no reference 2 to such a fee in the FRF/EVR CAP column on Schedule A”; (b) “that Defendant cannot 3 charge an environmental fee if the ERF column for that location is blank and if there is no 4 reference to such a fee in the FRF/EVR CAP column on Schedule A”; (c) “that Defendant 5 cannot charge a fuel recovery fee or an environmental fee for a location in excess of the 6 amount or % listed in the FRF/EVR CAP column on Schedule A”; (d) “that increases of 7 rates and fees are capped at 3% annually unless agreed to by both parties”; and (e) that any 8 ambiguity in the Service Agreement as to fees and rates “was created by [Defendant] as 9 the drafter of the agreement and can be explained by evidence of the parties’ prior 10 agreements and course of dealing/performance, and usage of trade.” FAC ¶ 25.a–e. 11 Plaintiff further alleges, and seeks declaratory relief affirming, that despite the 12 liquidated damages clause of Section 14 to the Service Agreement, Section 5.10(A)(3) of 13 the Franchise Agreement affords Plaintiff the right to terminate nearly ten specific 14 customer locations “on 60 days’ notice without penalty.” FAC ¶ 25.f–i. 15 II. LEGAL STANDARD 16 Federal Rule of Civil Procedure 12(b)(6) permits a court to dismiss a complaint 17 when the plaintiff has failed “to state a claim upon which relief can be granted.” “Dismissal 18 can be based on the lack of a cognizable legal theory or the absence of sufficient facts 19 alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 20 699 (9th Cir. 1988). “A complaint should not be dismissed unless it appears beyond doubt 21 that a plaintiff can prove no set of facts in support of his claim which would entitle him to 22 relief.” Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1997). 23 “To survive a motion to dismiss, a complaint must contain a sufficient factual matter, 24 accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 25 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 26 A claim is facially plausible when it contains factual allegations “that allow[] the court to 27 1 draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. 2 “Threadbare recitals of the elements of a cause of action, supported by mere conclusory 3 statements, do not suffice.” Id. Instead, “for a complaint to survive a motion to dismiss, 4 the non-conclusory ‘factual content,’ and reasonable inferences from that content, must be 5 plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Serv., 6 572 F.3d 962, 969 (9th Cir. 2009). “All reasonable inferences must be drawn in favor of 7 the non-moving party.” Bryan v. MacPherson, 630 F.3d 805, 823 (9th Cir. 2010). 8 “Generally, a court may not consider material beyond the complaint in ruling” on a 9 motion to dismiss. Intri-Plex Techs., Inc. v. Crest Grp., Inc., 499 F.3d 1048, 1052 (9th Cir. 10 2007). However, the Court “may consider materials incorporated into the complaint or 11 matters of public record.” Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 12 2010). 13 “If a complaint is dismissed for failure to state a claim, leave to amend should be 14 granted ‘unless the court determines that the allegation of other facts consistent with the 15 challenged pleading could not possibly cure the deficiency,’ ” i.e., “the amendment would 16 be futile.” DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting 17 Schreiber Distrib. Co. v. Serve-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)). 18 III. DISCUSSION 19 Defendant moves to dismiss the Complaint in its entirety. ECF No. 15. It argues 20 that Plaintiff fails to allege facts establishing a breach of the Service Agreement on either 21 basis of charging fees or failing to haul waste. Id. at 9–12. And for Plaintiff’s allegations 22 regarding Defendant’s purported breach for failing to haul waste, Defendant alleges that 23 Plaintiff fails to plead that it has suffered any damages from Defendant’s breach. Id. at 12– 24 13. Finally, Defendant argues that Plaintiff’s claim for declaratory relief fails because there 25 is no controversy regarding the terms of the Service Agreement and Plaintiff lacks 26 “standing to assert any declaratory relief claim based on the” Franchise Agreement. Id. 27 1 at 13. 2 A. Breach Of Contract 3 Defendant argues that Plaintiff’s first cause of action should be dismissed because 4 Plaintiff failed to allege facts necessary for a breach of contract claim. Under California 5 law, “the elements of a cause of action for breach of contract are (1) the existence of the 6 contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, 7 and (4) the resulting damages to the plaintiff.” Oasis W. Realty, LLC v. Goldman, 51 Cal. 8 4th 811, 821 (2011). Defendant challenges only the third element as to Plaintiff’s 9 allegation that Defendant raised fees in breach of the Service Agreement, and both the third 10 and fourth elements as to Plaintiff’s allegation that Defendant failed to haul waste, deliver 11 bins, and “otherwise respond to customer service issues at multiple locations” in breach of 12 the Service Agreement. ECF No. 15 at 10–13 (quoting FAC ¶ 15). 13 Under California law, “[a] contract must be so interpreted as to give effect to the 14 mutual intention of the parties as it existed at the time of contracting, so far as the same is 15 ascertainable and lawful.” Cal. Civ. Code § 1636. To the extent possible, the mutual intent 16 of the parties is to be inferred “solely from the written provisions of the contract.” 17 MacKinnon v. Truck Ins. Exch., 31 Cal. 4th 635, 647 (2003) (quoting Waller v. Truck Ins. 18 Exch., 11 Cal. 4th 1, 18 (1995)). “[T]he whole of a contract is to be taken together, so as 19 to give effect to every part, if reasonably practicable, each clause helping to interpret the 20 other.” Int’l Bhd. of Teamsters v. NASA Servs., Inc., 957 F.3d 1038, 1042 (9th Cir. 2020) 21 (quoting Cal. Civ. Code § 1641). 22 Contract terms “are to be understood in their ordinary and popular sense, . . . unless 23 used by the parties in a technical sense, or unless a special meaning is given to them by 24 usage, in which case the latter must be followed.” Cal. Civ. Code § 1644; accord 25 MacKinnon, 31 Cal. 4th at 647–48. However, when a provision “is capable of two or more 26 constructions, both of which are reasonable,” “the provision will be considered 27 1 ambiguous.” MacKinnon, 31 Cal. 4th at 648. An ambiguous contract provision is 2 “construed against the drafter,” International Brotherhood, 957 F.3d at 1042, and requires 3 “a factual determination that precludes dismissal on a motion for failure to state a claim,” 4 Cont’l Airlines, Inc. v. Mundo Travel Corp., 412 F. Supp. 2d 1059, 1066 (E.D. Cal. Jan. 26, 5 2006) (quoting Martin Marietta Corp. v. Int’l Telecomms. Satellite Org., 991 F.2d 94, 97 6 (4th Cir. 1992)). 7 1. Fees charged in breach of contract 8 Defendant argues that the terms of the Service Agreement demonstrate that the 9 disputed Fuel Recovery Fees and Environmental Fees, see FAC ¶ 20, were within 10 Defendant’s discretion because Section 6 “allows Defendant to charge Plaintiff fees ‘in its 11 discretion up to the maximum amount allowed by Applicable Law,’ ” ECF No. 15 at 10– 12 11 (quoting ECF No. 13-1 at 3). Defendant argues that Plaintiff’s assertion that cells in 13 Schedule A column titled “FRF/EVR CAP” were left blank in accordance with 14 Defendant’s “custom and practice of exempting most properties brokered by [Plaintiff] 15 from such fees,” FAC ¶ 11, see ECF No. 13-1 at 7, is impermissibly conclusory and directly 16 contradicted by Section 6, ECF No. 15 at 11. 17 Plaintiff responds that the terms of the Service Agreement are at least ambiguous, if 18 not explicit, that Defendant’s fees exceeded those permitted by the Service Agreement. 19 ECF No. 17 at 10–13. Plaintiff argues that Sections 6 and 7 conflate the terms “rates,” 20 “fees,” and “costs” such that there is no clear distinction and that a reasonable interpretation 21 of the two sections would suggest “that the 3% annual cap on increases governs the fees in 22 dispute.” Id. at 10–11. In response to Defendant’s position that Plaintiff’s allegations 23 about Schedule A of the Service Agreement were impermissibly conclusory, Plaintiff 24 argues that Defendant is improperly suggesting that the Court and the parties disregard 25 Schedule A or interpret it in a light most favorable to Defendant. Id. at 12–13. 26 Looking at the Service Agreement as a whole, the provisions concerning rates and 27 1 fees are ambiguous. At the outset, the following terms and abbreviations are not defined 2 within the Service Agreement: rates, fees, costs, FRF, ERF, and EVR. See ECF No. 13-1 3 (absence). Plaintiff plausibly alleges that FRF and ERF are defined as “Fuel Recovery 4 Fees” and “Environmental Fees,” respectively, FAC ¶ 11, which the Court accepts as true. 5 The Service Agreement does not address the significance of the blank spaces in the “FRF,” 6 “ERF,” and “FRF/EVR CAP” columns of Schedule A, see ECF No. 13-1 (absence), but at 7 this stage of the proceedings the Court accepts as true Plaintiff’s factual allegation that 8 Defendant has a “custom and practice of exempting most properties brokered by [Plaintiff] 9 from such fees,” see FAC ¶ 11. The Court is permitted to draw such a reasonable inference 10 absent any terms in the Service Agreement suggesting otherwise and given Plaintiff’s 11 assertion that the parties “also do business at other customers[’] locations through separate 12 agreements,” see FAC ¶ 9, offering support for Plaintiff’s knowledge of Defendant’s 13 custom and practice via their course of dealing. See, e.g., In re CFLC, Inc., 166 F.3d 1012, 14 1017 (9th Cir. 1999) (“Course of dealing is defined as ‘a sequence of previous conduct 15 between the parties to a particular transaction which is fairly to be regarded as establishing 16 a common basis of understanding for interpreting their expressions and other conduct.’ ” 17 (quoting former Cal. Com. Code § 1205, renumbered to Cal. Com. Code § 1303 and 18 amended by 2006 Cal. Legis. Serv. Ch. 254 § 23 (S.B. 1481)) (emphasis removed)). 19 Sections 6 and 7 do not clarify the relationship between fees, rates, and the 3% cap. 20 Section 6 refers to “rates provided in Schedule A” for Defendant’s “Services and 21 equipment,”4 yet the term “fee,” not “rate,” is what appears in Schedule A. ECF No. 13-1 22 at 3, 7. Section 6 first lists “fees” along with taxes and other governmental charges as 23 24 25 4 “Services” is defined as “the exclusive right to collect, transport, and dispose of or recycle 26 all non-hazardous solid waste materials (including Recyclable Materials) (collectively, “Waste Materials”) at the Locations.” ECF No. 13-1 at 2. 27 1 examples of charges that can be “assessed or passed through to” Plaintiff. See id. at 3. 2 However, the following sentence addresses charges that can be assessed against Plaintiff— 3 “late payment fees, administrative fees and environmental fees”—purportedly limited only 4 by Defendant’s discretion and “Applicable Law.”5 Id. at 3. Defendant’s reply asserts that 5 these two sentences concern different types of fees: pass-through fees from the government 6 in the first sentence and discretionary fees in the second. ECF No. 18 at 8. Defendant’s 7 argument that these two fee types “are different because the [Service Agreement] addresses 8 both separately in Section 6,” see id., is made without any analysis and strains credulity 9 given that the second sentence immediately follows the first without any transitional terms 10 that would suggest the sentences are discussing different topics; the second sentence begins 11 “[Plaintiff] shall pay such fees,” ECF No. 13-1 at 3 (emphasis added), allowing for the 12 possibility that the fees just mentioned are still being discussed in the second sentence, see 13 Such, MERRIAM-WEBSTER.COM, https://www.merriam-webster.com/dictionary/such (last 14 visited July 26, 2023) (defining “such” to mean both “of a kind or character to be indicated” 15 and “of the character, quality, or extent previously indicated or implied”); and presumably 16 the “environmental fees” referenced in the second sentence would be related to 17 governmental fees discussed in the first sentence. 18 Defendant’s conclusory statement that the terms “rates,” “fees,” and “costs” are “the 19 opposite” of conflated because the terms “are all referenced independently,” ECF No. 18 20 at 7, becomes even less credible upon turning to Section 7 of the Service Agreement. 21 Section 7 makes clear that rates cannot be increased annually by more than 3% without 22

23 24 5 “Applicable Laws” are defined in the Service Agreement to mean the “applicable federal, state or local laws or regulations.” ECF No. 13-1 at 2. Neither party directs the Court’s 25 attention to any relevant Applicable Law, see ECF No. 15 (absence); ECF No. 17 26 (absence), and the Court is not familiar with any relevant Applicable Law that would influence the Court’s contract interpretation analysis. 27 1 agreement by both parties, but does not distinguish rates from the fees in Schedule A. Id. 2 Furthermore, Section 7 enumerates seven non-exhaustive reasons for why Defendant may 3 increase rates subject to the 3% annual limit. Id. Several of the listed reasons include 4 charges that appear to be of the same type that would constitute the discretionary 5 environmental fees and pass-through governmental fees discussed under Section 6: 6 “increased fuel costs,” “increased landfill disposal cost,” “increased recycling processing 7 & handling cost,” and “increased or added fees[] passed through from government 8 entities.” Id. When drawing inferences in Plaintiff’s favor, see Bryan v. MacPherson, 630 9 F.3d 805, 823 (9th Cir. 2010), presumably any Fuel Recovery Fees and Environmental 10 Fees subject to Defendant’s discretion under Section 6, see ECF No. 15 at 10–11, would 11 also be subject to the 3% annual limit under Section 7 in as far as they are related to any 12 increased fuel costs, landfill disposal costs, recycling processing and handling costs, and 13 government fees. In other words, the Service Agreement is facially ambiguous as to which 14 fees—if any—could be charged by Defendant under Section 6 without regard to the 3% 15 limit imposed by Section 7. 16 Absent any explicit definitions of the above-described terms and any explanation of 17 how the terms interact, the Service Agreement is facially ambiguous. One plausible 18 interpretation of the Service Agreement is that all fees—even the allegedly discretionary 19 Fuel Recovery Costs and Environmental Fees—are subject to the 3% cap in Section 7. 20 Accordingly, Defendant’s motion to dismiss as to Plaintiff’s claims alleging breach for fees 21 charged in excess of the 3% cap is hereby DENIED. 22 2. Other billings errors and service lapses in breach of contract 23 The Service Agreement affords Defendant “the exclusive right to collect, transport, 24 and dispose of or recycle all non-hazardous solid waste materials” at the locations set out 25 in Schedule A. ECF No. 13-1 at 2. “[A]ny failure or delay in performance due to 26 contingencies beyond a party’s reasonable control, including strikes,” does not constitute 27 1 a breach under the Service Agreement. Id. at 5. However, “all service gaps must be 2 reasonably corrected within 7 to 10 days of [Plaintiff] notifying [Defendant]” and “[b]illing 3 errors must be corrected within 15 30 [sic] days of notification.” Id. The Service 4 Agreement provides that Plaintiff may terminate services at particular locations upon 5 written notice. Id. at 2. 6 Defendant argues that Plaintiff failed to allege facts establishing that a breach 7 occurred or that Plaintiff suffered damages arising from Defendant’s alleged lapses in 8 service. ECF No. 15 at 11–13. Defendant argues that to the extent that service 9 interruptions occurred during a labor strike, see ECF No. 1 at 6 (alleging that “a number of 10 [Defendant’s] employees in San Diego County” went on strike between “approximately 11 December 17, 2021 and January 16, 2022”), performance was excused under Section 16 of 12 the Service Agreement, ECF No. 15 at 12. For service interruptions “separate from the 13 labor strike,” Defendant argues that Plaintiff’s claim must be dismissed for failing to allege 14 damages arising from the alleged breach. Id. at 12–13. In other words, Defendant’s motion 15 to dismiss argues that to the extent Plaintiff alleges service breaches arising from the labor 16 strike, Plaintiff fails to allege the element of breach, and to the extent that the alleged 17 service breaches are unrelated to the labor strike, Plaintiff fails to allege damages. 18 Plaintiff responds that dismissal is not warranted under either of Defendant’s 19 theories. Plaintiff argues that the Complaint details “allegations of repeated service and 20 billing-related breaches that are unrelated to Defendant’s employee strike” and which 21 Defendant does not address in its motion to dismiss. ECF No. 17 at 13. Regarding 22 damages, Plaintiff argues it sufficiently alleged that it paid specific invoices with “improper 23 and excessive charges”; that Defendant still owes Plaintiff credits for services billed but 24 not provided during the employee strike; “that Plaintiff lost revenues from customers that 25 canceled service”; and that Plaintiff “suffered general damages including harm to 26 reputation and customer goodwill from Defendant’s repeated breaches.” Id. at 13–14. 27 1 a. Breaches associated with the strike 2 “When a pleading is amended or withdrawn, the superseded portion ceases to be a 3 conclusive judicial admission; but it still remains as a statement once seriously made by an 4 authorized agent, and as such it is competent evidence of the facts stated, though 5 controvertible, like any other extrajudicial admission made by a party or his agent.” Huey 6 v. Honeywell, Inc., 82 F.3d 327, 333 (9th Cir. 1996) (quoting Kunglig Jarnvagsstyrelsen v. 7 Dexter & Carpenter, Inc., 32 F.2d 195, 198 (2nd Cir. 1929))). Accordingly, the Court may 8 consider Plaintiff’s allegations in its original complaint regarding Defendant’s employees 9 going on strike from approximately December 17, 2021 to January 16, 2022. See ECF No. 10 1 at 6. The original complaint alleged that Defendant “failed to haul away waste for many 11 of [Plaintiff’s] customers” both during and after the strike, id., but did not allege that any 12 billing issues were connected to the strike, see ECF No. 1 (absence). The Riverdale account 13 is the only account in the First Amended Complaint that appears to have experienced 14 service issues related to the strike. See FAC ¶ 21 (“Plaintiff lost this account on or about 15 January 21, 2022, because Defendant failed to provide waste hauling service as required 16 by the” Service Agreement.). Plaintiff’s allegation that “Defendant failed to provide waste 17 hauling service as required by the” Service Agreement for Riverdale is not accompanied 18 by any facts suggesting that Defendant was notified of the lapse or that the lapse in service 19 extended longer than the 7 to 10 days permitted for correction by the Service Agreement. 20 See ECF No. 13-1 at 5 (concerning Defendant’s obligation to rectify service gaps). 21 Accordingly, this allegation is too conclusory to support a cause of action upon which relief 22 may be granted and Defendant’s motion to dismiss as to this account is hereby GRANTED. 23 b. Breaches unassociated with the strike 24 The only other accounts for which Defendant challenges the sufficiency of 25 Plaintiff’s allegations of breach of contract are those of Carroll Canyon, Villa Vicenza, Bay 26 Scene, and those associated with the “do not serve” list. See ECF No. 18 at 9–10. 27 1 Plaintiff’s allegation of breach as to Carroll Canyon Business Park is sufficient because 2 Schedule A suggests that Defendant was supposed to provide pickup service on one day 3 each week, see ECF No. 13-1 at 7, and yet Plaintiff states that even after submitting 4 “service requests . . . to reduce both the trash and recycling services . . . to once per week,” 5 Defendant failed to make the correction, FAC ¶ 20 (ECF No. 13 at 10). Plaintiff alleges 6 that it lost both the Villa Vicenza and Bay Scene accounts “because Defendant failed to 7 provide waste hauling service as required by the MSA.”6 FAC ¶ 21. Akin to the Riverdale 8 account, these two allegations amount to inadequate, conclusory statements of breach and 9 Defendant’s motion to dismiss as to the Villa Vicenza and Bay Scene accounts is hereby 10 GRANTED.7 11 Next, Plaintiff alleges that Defendant breached the Service Agreement when it 12 issued “billing statements that did not include required credits for DNS properties.” E.g., 13 FAC ¶ 20 (ECF No. 13 at 11). Schedule A of the Service Agreement includes a list of six 14 accounts under “DNS service,” ECF No. 13-1 at 7, which Plaintiff plausibly defines to 15 mean “do not service,” FAC ¶ 20 (ECF No. 13 at 11). Plaintiff’s allegations for breach as 16 to four of these accounts—Casablanca HOA, Escala HOA, Rancho Santa Fe/Groves, 17 and Santa Fe Sur/Paco Largo—are sufficient because they are listed in Schedule A as 18

19 6 For reasons that are unclear, the Villa Vicenza, Riverdale, and Bay Scene accounts are 20 listed under only FAC ¶ 21 and were omitted from FAC ¶ 20, where Plaintiff raises the 21 majority of its allegations for breach of contract. 22 7 Plaintiff also alleges that Defendant “damaged the doors to the waste chute room” for the Villa Vicenza account and did not “handle” the matter in a timely fashion. FAC ¶ 21. 23 Absent any indication that the Service Agreement addresses damage to private property, 24 cf. ECF No. 13-1 at 4 (allocating liability for damage to Defendant’s equipment by residents and damage pavement by Defendant, but not other private property), this claim 25 appears to more appropriately arise in the law of tort. The damage also does not appear to 26 have been to Plaintiff’s property but to the property associated with the Villa Vicenza account. Defendant’s motion to dismiss this claim is also GRANTED. 27 1 “DNS” and Plaintiff describes Defendant issuing “billing statements that did not include 2 required credits for [these] DNS properties.” FAC ¶ 20 (ECF No. 13 at 11, 15, 26, 28). 3 Plaintiff also alleges breach arising from Defendant failing to credit Rancho Diegueno 4 Area Residents on the billing for its association with the DNS list. FAC ¶ 20 (ECF No. 5 13 at 25). This allegation fails, however, because the Rancho Diegueno Area Residents 6 account does not appear on the DNS list, see ECF No. 13-1 at 7 (absence), and Plaintiff 7 does not otherwise allege that it was added to the list at a later time, see ECF No. 13 8 (absence). Accordingly, Defendant’s motion to dismiss Plaintiff’s allegation of breach of 9 service as to Rancho Diegueno Area Residents—but not Plaintiff’s allegation of breach 10 concerning Fuel Recovery Fees and Environmental Fees as to this account—is GRANTED 11 on the basis that it fails to state a claim upon which relief may be granted. 12 c. Adequacy of allegation of damages 13 The Court next turns to whether Plaintiff has sufficiently alleged damages in relation 14 to the remaining alleged breaches of contract. See ECF No. 15 at 12–13. Defendant alleges 15 that Plaintiff failed to plead that “it suffered any damages as a result of [Defendant’s] 16 failure to haul waste” for the accounts listed in Paragraph 20. ECF No. 15 at 12. Defendant 17 does not specify a particular account from the scores of accounts listed in Paragraph 20, 18 but is presumably referring to the Verranzano account, for which Defendant allegedly 19 “repeatedly failed to provide waste pick up on the scheduled service day and then failed to 20 cure the default, for weeks at a time for some homes.” FAC ¶ 20 (ECF No. 13 at 33). 21 Plaintiff does not specifically allege that it was improperly billed for these missed waste 22 pick up days, but does list “[h]arm to reputation and customer goodwill” as one of the 23 damages it has suffered from Defendant’s breaches of contract. FAC ¶ 22. If the company 24 Plaintiff contracted with to haul waste for its clients repeatedly failed to haul waste, harm 25 to Plaintiff’s reputation and customer goodwill would naturally follow. Such harms are 26 cognizable injuries. See, e.g., Herb Reed Enters., LLC v. Florida Ent. Mgmt., Inc., 736 27 1 F.3d 1239, 1250 (9th Cir. 2013) (recognizing that damage to reputation and “goodwill 2 could constitute irreparable harm” in context of preliminary injunction). 3 Defendant’s motion to dismiss for failure to allege damages is therefore DENIED as 4 to the Verranzano account as well as any other account which has not already been 5 dismissed. 6 B. Declaratory Relief 7 Plaintiff also seeks declaratory relief regarding the parties’ respective rights and 8 duties under the Service Agreement. FAC ¶¶ 25–27. In relevant parts, Plaintiff seeks 9 declaratory relief regarding the applicability of: (1) the 3% rate cap in Section 7 of the 10 Service Agreement to the Fuel Recovery Fees and Environmental Fees, and (2) the 11 provision for 60-day notice for termination without penalty in the Franchise Agreement to 12 the liquidated damages clause of Section 14 to the Service Agreement. FAC ¶ 25. 13 1. Section 7’s rate cap 14 “The Declaratory Judgment Act of 1934, 28 U.S.C. § 2201, permits a federal court 15 to declare the rights of a party whether or not further relief is or could be sought . . . .” 16 Green v. Mansour, 474 U.S. 64, 72 (1985). Defendant challenges the sufficiency of 17 declaratory relief as to the 3% cap only on the issue of whether there is any live controversy 18 between the parties because it alleges the provisions of the Service Agreement are clear 19 and uncontroverted. ECF No. 15 at 13. As discussed in Section III.A.1, supra, the relevant 20 provisions in the Service Agreement are both ambiguous and controverted such that 21 Defendant’s conclusory statement to the contrary is unpersuasive. Given the parties’ 22 ongoing contractual relationship, declaratory relief may be necessary to help “guide their 23 future conduct” and Defendant’s motion to dismiss this request for relief is hereby 24 DENIED. See Warren v. Kaiser Found. Health Plan, Inc., 47 Cal. App. 3d 678, 683–84 25 (1975) (explaining that a court should not refuse declaratory relief “where the alternative 26 remedy of suing upon the matured breach is not as ‘speedy and adequate or as well suited 27 1 to the plaintiff’s needs as declaratory relief’ ” (quoting Maguire v. Hibernia S. & L. Soc., 2 23 Cal. 2d 719, 732 (1944)). 3 2. Section 14’s liquidated damages clause 4 Defendant argues that the remaining declaratory relief sought, concerning Plaintiff’s 5 rights under the Service Agreement in light of the Franchise agreement, must be dismissed 6 because Plaintiff lacks standing to seek such relief. ECF No. 15 at 13–14. Defendant 7 argues that Section 10.7 of the Franchise Agreement precludes Plaintiff from exercising 8 any rights under the Franchise Agreement given that Plaintiff is not a party to the 9 agreement. Id.; see also ECF No. 18 at 10–11. Indeed, Section 10.7 of the Franchise 10 Agreement is explicit that “[n]othing in [the Franchise Agreement], whether expressed or 11 implied, is intended to confer any rights on any Persons other than the Parties to it and their 12 representatives, successors, and permitted assigns.” ECF No. 13-2 at 80. The Franchise 13 Agreement identifies only Defendant and the County of San Diego as parties to the 14 agreement, id. at 8, and Plaintiff does not otherwise allege that it is a party, representative, 15 successor, or assignee, see FAC (absence); ECF No. 17 at 15–16 (absence). Instead, 16 Plaintiff argues that it is seeking declaratory relief concerning the liquidated damages 17 clause of the Service Agreement, the terms of which are subject to the Franchise 18 Agreement. ECF No. 17 at 15. 19 To the extent that Plaintiff relies on the Franchise Agreement for the purpose of 20 interpreting the Service Agreement, Plaintiff has failed to allege that the liquidated 21 damages clause of the Service Agreement is ambiguous such that a factfinder would need 22 to consider such extrinsic evidence. See MacKinnon v. Truck Ins. Exch., 31 Cal. 4th 635 23 (2003) (“[T]he mutual intention of the parties at the time the contract is formed governs 24 interpretation. Such intent is to be inferred, if possible, solely from the written provisions 25 of the contract.” (citations omitted) (quoting Waller v. Truck Ins. Exch., 11 Cal. 4th 1, 18 26 (1995)); accord Cal. Civ. Code §§ 1636, 1639. The Service Agreement is clear that if 27 1 Plaintiff terminates the Service “Agreement before its expiration other than as a result of a 2 breach by [Defendant],” Plaintiff will owe Defendant liquidated damages worth up to six 3 months of monthly service charges. ECF No. 13-1 at 5. Plaintiff does not allege that these 4 terms are ambiguous such that the consideration of the Franchise Agreement is necessary 5 to resolve the ambiguity. See FAC ¶ 25.f–i (absence); ECF No. 17 at 14–16 (absence). 6 Plaintiff’s Complaint does not invoke third party beneficiary standing under the 7 Franchise Agreement. See FAC ¶ 25.f–h (absence). To the extent that Plaintiff intended 8 to do so, Section 10.7 of the Franchise Agreement would be grounds to dismiss for lack of 9 such standing. See Goonewardene v. ADP, LLC, 6 Cal. 5th 817, 830 (2019) (requiring “a 10 motivating purpose of the contracting parties” must also be “to provide a benefit to the 11 third party” and such an “action against a contracting party” must be “consistent with the 12 objectives of the contract and the reasonable expectations of the contracting parties” in 13 order to find third party beneficiary standing); Berkley Assurance Co. v. Olam Ams., Inc., 14 No. 1:22-cv-00904, 2023 WL 4238459, at *7–8 (E.D. Cal. June 28, 2023) (finding 15 provision comparable to Section 10.7 of Franchise Agreement “forestalls the creation of 16 third-party rights by the contracting parties” (emphasis removed)). 17 Because there does not appear to be any alleged ambiguity as to the liquidated 18 damages provision or any alleged standing for Plaintiff as a third party beneficiary, 19 Defendant’s motion to dismiss as to this claim for declaratory relief is therefore 20 GRANTED. 21 IV. CONCLUSION 22 For the reasons explained above, IT IS HEREBY ORDERED that Defendant’s 23 motion to dismiss is GRANTED as to Plaintiff’s cause of action for damages arising from 24 breach of contract for the Riverdale, Villa Vicenza, Bay Scene, and Rancho Diegueno Area 25 Residents accounts, but DENIED as to the rest of the accounts. The Court did not review 26 the sufficiency of the claims which Defendant did not specifically challenge. Plaintiff is 27 1 ||hereby granted leave to amend the dismissed claims of breach as well as any allegations of 2 || breach which would benefit from additional factual contentions. 3 IT IS FURTHER ORDERED that Defendant’s motion to dismiss is GRANTED as 4 ||to Plaintiff's request for declaratory relief concerning the liquidated damages clause of the 5 ||Service Agreement but DENIED as to the declaratory relief concerning the parties’ 6 ||respective rights and duties concerning Sections 6 and 7 of the Service Agreement. 7 || Plaintiff is hereby granted leave to amend the dismissed request for declaratory relief. 8 An amended complaint, if any, shall be filed within 30 days of the date of this Order. 9 IT IS SO ORDERED. 10 ||Dated: August 16, 2023 2 < 1 Hon. athe Coke 12 United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 21 28 23-ev-582-GPC-KSC