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Whitton v. Deffenbaugh Industries, Inc.

United States District Court, D. Kansas

June 11, 2014

LARRY WHITTON, on behalf of himself and all others similarly situated, Plaintiff,
v.
DEFFENBAUGH INDUSTRIES, INC., et al., Defendants.

MEMORANDUM AND ORDER

CARLOS MURGUIA, District Judge.

Named plaintiff Larry Whitton, on behalf of himself and all others similarly situated, has filed a motion for class certification (Doc. 48). Plaintiff brings claims against defendants Deffenbaugh Disposal, Inc. and Deffenbaugh Industries, Inc. (referred to collectively as "defendants")[1] for breach of contract, violation of the Kansas Consumer Protection Act ("KCPA"), and unjust enrichment[2] for defendants' practice of charging two types of fees: the "environmental/fuel charge" and the "administrative fee." Plaintiff asks the court to certify two separate classes under Federal Rule of Civil Procedure 23(b)(3): a nationwide class for the breach of contract claim (the "Contract Class") and a statewide class for the KCPA claim (the "KCPA Class"). For the reasons stated below, the court denies plaintiff's motion.

I. Background

Defendant Deffenbaugh Industries, Inc. ("Deffenbaugh") is a solid waste disposal company serving customers mostly in Kansas and Missouri. Deffenbaugh provides services to its customers in exchange for an agreed upon monthly service rate. The vast majority of the class members are customers in Deffenbaugh's commercial line of business. Deffenbaugh has approximately 20, 000 commercial customers at any given time.

Plaintiff alleges that Deffenbaugh utilizes form, pre-printed contracts with its commercial customers. The contract has blank spaces to enter by hand the customer's name, address, type of service, and other information. Plaintiff entered into a contract with Deffenbaugh in November 2008 and again in January 2010.[3] Plaintiff alleges that these contracts are identical in all relevant ways and that each member of the Contract Class entered into the same form contract. Plaintiff alleges that the contracts differ only in ways (such as customer name, address, and monthly service rate) that have no bearing on defendants' liability.

Plaintiff alleges that Deffenbaugh (referred to as "DDS" in the provision below) charges an "environmental/fuel charge" and "administrative fee" purportedly pursuant to a form provision in the contract titled "Service of Equipment Changes/Rate Adjustments/Fiber Purchases." (Doc. 51-2 at 3.) This provision provides:

Customer agrees that DDS may from time to time increase the price or rates to adjust for (1) increases in DDS's fuel, disposal, or transportation costs, (2) increases in the Consumer Price Index, (3) increases in costs due to changes in local, state or federal laws applicable to DDS's operations or the Services rendered and (4) increases in taxes, fees or other governmental charges assessed against or passed through to DDS (other than income or real property taxes). DDS may only increase prices or rates for reasons other than those set forth above with the consent of the Customer, which consent may be evidenced in writing or by the practices or actions of the parties.

(Doc. 59-4 at 74.) Plaintiff's proposed class definition (as described later) contains only the first sentence in the provision above. Plaintiff also alleges that the contract contains three other identical provisions: a Kansas choice of law provision, an integration clause, and a five-year term provision.

Deffenbaugh created the "environmental/fuel charge" in 2003, but it called this fee a "fuel surcharge" until February 2011. Plaintiff alleges that the methodology for calculating this fee is based on a table that ties the amount of the fee to the average retail price of diesel fuel as tracked by the Energy Information Administration ("EIA"). According to plaintiff, defendants increased the percentage paid by its customers for a given EIA price in order to increase its profits. All customers are charged the same amount for the fuel fee. Deffenbaugh created the "administrative fee" in 2003, and all customers are charged the same amount.

Plaintiff argues that defendants have breached the contracts in two ways. First, plaintiff contends that the provision as stated in the proposed class definition (the first sentence in the provision above) does not contemplate the "administrative fee" or the environmental portion of the "environmental/fuel" fee, and so defendants breached the contracts by charging them. (Doc. 51 at 7, 8 n.6.) Second, plaintiff acknowledges that the provision upon which he relies explicitly allows for increased rates to adjust for increases in defendants' fuel costs. But plaintiff alleges that defendants breached the contract as to the "fuel fee" because it does not "adjust for, " nor even relate to, defendants' increased fuel costs. ( Id. at 8.) Plaintiff alleges that the "environmental" portion of the fee and the "administrative fee" also are not related to increased costs.

Plaintiff alleges that defendants violated the KCPA by willfully misrepresenting the "environmental/fuel charge" and the "administrative fee" and by willfully failing to disclose material facts regarding these fees. Plaintiff argues that by using these terms, defendants "intentionally convey a particular meaning about each fee, " namely, that the fee is related to increased environmental, fuel, or administrative costs. But plaintiff alleges that these fees are not related to increased costs. Further, plaintiff alleges that defendants' failure to divulge the methodology used to calculate the fees, failure to report their fuel costs, and failure to disclose that the fees are intended to increase profits (and not to "adjust for" specific costs) violates the KCPA. Plaintiff contends that this allegedly intentional misleading naming of the fees conveys a false meaning to putative class members in violation of the KCPA.

II. Legal Standard

It is within the court's broad discretion to certify a class. Shook v. El Paso Cnty., 386 F.3d 963, 968 (10th Cir. 2004). "The class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.'" Wallace B. Roderick Revocable Living Trust v. XTO Energy, Inc., 725 F.3d 1213, 1217 (10th Cir. 2013) (quoting Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2550 (2011)). The court is required to perform a "rigorous analysis'" before determining that the Rule 23 prerequisites have been met. Id. (quoting Dukes, 131 S.Ct. at 2550.) And this "rigorous analysis" will frequently "entail some overlap with the merits of the plaintiff's underlying claim." Dukes, 131 S.Ct. at 2551. In performing its analysis under Rule 23, the court "must accept the substantive allegations of the complaint as true, though it need not blindly rely on conclusory allegations of the complaint which parrot Rule 23 and may consider the legal and factual issues presented by [the] plaintiff's complaint[ ]." Midland Pizza, LLC v. Sw. Bell Tel. Co., 277 F.R.D. 637, 639 (D. Kan. 2011) (quoting DG ex rel Stricklin v. Devaughn, 594 F.3d 1188, 1194 (10th Cir. 2010)) (internal quotation marks omitted).

To obtain class certification, the moving party must show that the requirements of Federal Rule of Civil Procedure 23 are met. These requirements include first showing that:

(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
(4) the representative parties will fairly and adequately protect the interests of the class.

Fed. R. Civ. P. 23(a)(1)-(4). Next, the plaintiff must show that the proposed class falls under one of the categories delineated in Rule 23(b). Plaintiff seeks classification under Rule 23(b)(3), which requires a finding of predominance (that "the questions of law or fact common to class members predominate over any questions affecting only individual members, ") and superiority (that "a class action is superior to other available methods for fairly and efficiently adjudicating the controversy"). Fed.R.Civ.P. 23(b)(3).

III. Discussion

A. Class Definitions

Plaintiff moves for certification of two classes: the Contract Class and the KCPA Class. For the Contract Class, plaintiff proposes the following definition:

All individuals and entities who reside in the United States who (1) paid "environmental/fuel charges, " "fuel surcharges, " and/or "administrative fees" to Deffenbaugh Industries, Inc. at any time from May 1, 2007 through the date of class notice and (2) entered into a written contract with Deffenbaugh Industries, Inc. that was in effect at any time from May 1, 2007 through the date of class notice which contains the following provision:
Service or Equipment Changes/Rate Adjustments/Fiber Purchases... Customer agrees that DDS may from time to time increase the price or rates to adjust for (1) increases in DDS's fuel, disposal, or transportation costs....

(Doc. 51 at 13-14.)

For the KCPA Class, plaintiff proposes the following definition:

All individuals, sole proprietors, and family partnerships who (1) paid "environmental/fuel charges, " "fuel surcharges, " and/or "administrative fees" to Deffenbaugh Industries, Inc. at any time from May 1, 2009 through the date of class notice, and (2) ...

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