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Resource Recovery Systems, LLC v. City of Ann Arbor

United States District Court, E.D. Michigan, Southern Division

August 31, 2017

RESOURCE RECOVERY SYSTEMS, LLC and FCR, LLC, Plaintiffs,
v.
CITY OF ANN ARBOR, Defendant.

          OPINION AND ORDER GRANTING MOTION FOR PARTIAL DISMISSAL [10] AND FINDING MOTION FOR EXTENSION OF TIME TO FILE ANSWER [11] MOOT

          STEPHEN J. MURPHY, III UNITED STATES DISTRICT JUDGE

         Plaintiffs Resource Recovery Systems, LLC ("RRS") and FCR, LLC (collectively, "ReCommunity") sued the City of Ann Arbor for alleged violations of Michigan law that arose from the parties' contractual relationship. Before the Court are the City's motions for partial dismissal, and for an extension of time and stay of discovery. The Court has reviewed the briefs, and finds that a hearing is not necessary. See E.D. Mich. LR 7.1(f).

         BACKGROUND[1]

         From 1993 to 2016, ReCommunity operated a City-owned materials recycling facility and transfer station (the "Plant") pursuant to a recurrently amended Operating and Management Contract (the "Contract") between the City and RRS. The most recent amendment extended the Contract through 2021. ECF 1, ¶ 14. At some point, the City encouraged ReCommunity to enter into materials-recycling contracts with public and private third parties, and the Contract was amended to include a revenue-sharing agreement. Pursuant to the agreement, revenue sharing was "triggered" when net revenue was higher than $54.00 per ton, and the City would receive a certain percentage of recycled tons from the City and third parties. When the net revenue fell below the trigger price, however, the difference in revenue would be added to the amount the City owed ReCommunity. The City also promised to take responsibility for the costs borne by ReCommunity for transporting those materials to the Plant. For example, the City approved the purchase of a new baler to reliably compact recyclables for transport. ReCommunity purchased one for $550, 000 and the City confirmed that it would cover the entire cost.

         The parties profited handsomely from the third-party contracts until failing commodity prices dropped per-ton revenues below the trigger price and "shift[ed] the historical flow of payments (from ReCommunity to the City) in the opposite direction." Id. ¶ 27. ReCommunity claims that the City owes it $183, 566.33 as a result of the reversal, and-despite ReCommunity's offers to amend the Contract-the City has yet to pay.

         As commodity prices continued to fall, the parties' relationship deteriorated, and various disputes precipitated back-and-forth communications. Id. ¶¶ 41-70. On July 7, 2016, the City sent ReCommunity a letter purporting to terminate the Contract, and eventually "barred ReCommunity from entering the Plant and providing its recycling services to the City." Id. ¶¶ 71, 81. On July 19, 2016, ReCommunity sent the City a letter terminating the Contract.

         The instant complaint alleges state-law claims of breach of contract (Count I and II), promissory estoppel (Count III), and unjust enrichment (Count IV).

         LEGAL STANDARD

         Federal Rule of Civil Procedure 12(b)(6) provides for dismissal of a complaint that fails to state a claim upon which relief can be granted. The Court may grant a Rule 12(b)(6)

         motion to dismiss only if the allegations do not sufficiently "raise a right to relief above the speculative level" and "state a claim to relief that is plausible on its face." Hensley Mfg. v. ProPride, Inc., 579 F.3d 603, 609 (6th Cir. 2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007)). In evaluating the motion, the Court presumes the truth of all well-pled factual assertions. Bishop v. Lucent Techs., 520 F.3d 516, 519 (6th Cir. 2008). Moreover, the Court must draw every reasonable inference in favor of the nonmoving party. Dubay v. Wells, 506 F.3d 422, 427 (6th Cir. 2007). But a "pleading that offers 'labels and conclusions' or 'a formulaic recitation of the element of a cause of action will not do.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555).

         DISCUSSION

         The City argues that ReCommunity's promissory estoppel and unjust enrichment claims should be dismissed because the Contract governed the parties' relationship, and the claims are barred by Michigan's Governmental Tort Liability Act ("GTLA").

         "The courts of Michigan will imply a contract when a plaintiff can establish that no express contract concerning the subject matter exists and that the defendant has received a benefit from the plaintiff and retained it, resulting in an inequity." Solo v. United Parcel Serv. Co., 819 F.3d 788, 796 (6th Cir. 2016) (citations omitted). "A plaintiff can only plead breach of contract and implied contract claims in the alternative if there is doubt as to the existence of a contract." Llewellyn-Jones v. Metro Prop. Grp., LLC, 22 F.Supp.3d 760, 794 (E.D. Mich. 2014). "If the parties admit that a contract exists, but dispute its terms or effect, an action will not also lie for quantum meruit or implied contract. In other words, alternative pleading of an implied contract claim is only allowed in a contract setting where a party doubts the existence of a contract." Id. (citations omitted).

         Among other things, the City states that the Contract "is a part of the Complaint for all purposes" because ReCommunity incorporated it by reference, the "procedures and obligations of both [ReCommunity] and the City relative to third party tonnages is [sic] explicitly spelled out in the [C]ontract, " the Contract explicitly addresses the requirements for ReCommunity "to be able to enter into contracts with non-City customers who seek to bring [] recyclable materials" to the Plant for processing, and "it is undisputed that at all relevant times in the Complaint, the parties had an express and comprehensive ...


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