United States District Court, E.D. New York
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For the Plaintiff: Paul B. Sweeney, Esq., Tony G. Dulgerian, Esq., Of Counsel, Certilman Balman Adler & Hyman, LLP, East Meadow, New York.
For Recycle Green Services, Caesar Figueroa, Edward Figueroa, Sr., Edward Figueroa, Jr., Kevin Johnson, and Salvatore Giordano, Defendants: Harry R. Thomasson, Esq., Wantagh, New York.
For Unity Fuels, LLC and Grease lightning, Defendants: George J. Szary, Esq., Albany, New York.
MEMORANDUM OF DECISION AND ORDER
ARTHUR D. SPATT, United States District Judge.
On August 13, 2013, the Plaintiff Environmental Services, Inc. (" ESI" or the " Plaintiff" ) commenced this action against the Defendants, alleging violations of the Racketeer Influenced and Corrupt Organizations Act (" RICO" ), 18 U.S.C. § § 1962(c), (d). The Plaintiff also alleged New York State law claims of conversion and misappropriation; unjust enrichment, which it now withdraws; tortious interference with contract; deceptive business practices; and conspiracy.
On October 31, 2013, the Defendants Unity Fuels, LLC and Grease Lightning (the " Unity Defendants" ) moved pursuant to Federal Rules of Civil Procedure (" Fed. R. Civ. P." ) 8, 9(b), and 12(b)(6) to dismiss the complaint for failure to state a claim upon which relief can be granted, or in the alternative under Fed.R.Civ.P. 12(d), for summary judgment dismissing the complaint.
On November 12, 2013, the Court " so-ordered" a voluntary dismissal as against the Defendant Pristine Properties, LLC.
On November 22, 2013, the Defendants Recycle Green Services, Inc. (" RGS" ) Kevin Johnson, Caesar Figueroa, Edward Figueroa, Sr., Edward Figueroa, Jr., and Salvatore Giordano (collectively the " RGS Defendants" ) moved separately pursuant to Fed.R.Civ.P. 8(a), 9(b), and 12(b)(1), and 12(b)(6) to dismiss the complaint for failure to state a claim upon which relief can be granted.
On January 15, 2014, the Plaintiff cross-moved pursuant to Fed.R.Civ.P. 65 for a preliminary injunction against the remaining Defendants enjoining them " from (1) interfering with servicing ESI's customers reflected in the contracts . . . which contracts were improperly interfered with by Defendants; (2)  further interfering with any of ESI's contracts with its remaining customers; and (3) stealing any further waste cooking oil from ESI, and for such other and further relief as this Court may deem just and proper." The Plaintiff did not move for a temporary restraining order or an evidentiary hearing with regard to the preliminary injunction.
On February 21, 2014, the RGS Defendants, although they had not filed an answer or counter-claims, cross-moved for a preliminary injunction enjoining and/or directing the Plaintiff " (1) from utilizing surreptitious GPS technology on Plaintiff's competitors' vehicles, including but not limited to Defendants herein; (2) to immediately reveal to Defendants the identity and last known addresses of all individuals and businesses utilizing such surreptitious GPS technology on Plaintiff's competitors' vehicles, including the dates of such use and the targets of such use for each and every instance such surreptitious GPS technology has ever been utilized by or for Plaintiff; (3) to immediately turn over to Defendants all documents indicating the use of such surreptitious GPS technology on Plaintiff's competitors' vehicles for each and every instance such surreptitious GPS technology has ever been utilized by or for Plaintiff, including, but not limited to, GPS reports, notes taken by any individual on behalf [of] Plaintiff while utilizing such TPG technology, contracts with any individual or business utilizing such GPS technology by or for Plaintiff, and the identity of all types of GPS devices utilized by or for Plaintiff against its competitors; (4)
following the production of information moved for in paragraphs numbered 2 and 3 herein, to appear for an evidentiary hearing before this Court to determine the extent of Plaintiff's use of such surreptitious GPS technology against its competitors; and (5) for such other and further relief as this Court may deem just and proper."
The three motions are fully briefed. For the following reasons, the Court (1) grants in part and denies in part the Defendants' motions to dismiss; (2) denies the motion by the RGS Defendants for a preliminary injunction; and (3) grants the motion by the Plaintiff for a preliminary injunction.
For purposes of the motion to dismiss, the following facts are drawn from the complaint and construed in a light most favorable to the Plaintiff, ESI.
ESI is a New York corporation with its principal place of business in New York. ESI is engaged in the business of purchasing from restaurants kitchen waste cooking oil and, in turn, processing and selling the oil to be turned into biofuel and/or animal feed ingredient.
Unity Fuels is a New York corporation managed by the non-parties Jeff Deweese and Malek Jalal.
Grease Lighting, wholly owned and operated by Unity Fuels, is a domestic corporation with its principal place of business in New York. Grease Lightning also maintains a processing plant in Newark, New Jersey.
RGS is a New York corporation with its principal place of business in New York. RGS is principally owned by Caesar Figueroa.
Edward Figueroa, Sr. is a partner of RGS.
Former Defendant Pristine Properties, LLC is a New York limited liability corporation with its principal place of business in New York. Pristine Properties is owned by Edward Figueroa, Sr.
Edward Figueroa, Jr. is the nephew of Caesar Figueroa and son of Edward Figueroa, Sr., and is employed by RGS.
Kevin Johnson is an officer and partner of RGS and holds the position of treasurer of the company.
Salvatore Giordano is also an officer and partner of RGS, where he holds the position of Vice President.
John Does 1-5 are individuals employed by and/or allegedly conspiring with the Defendants to effectuate the Defendants' racketeering, theft, and tortious interference.
ESI alleges that Unity, Grease Lightning, and RGS have not obtained the requisite permits and licenses for the collection, transportation, and processing of used cooking oil (Compl. ¶ 18-22.)
When ESI procures oil from a customer, ESI and the customer enter into a written contract, which generally provides that ESI will pay the customer either by collection or per gallon collected, for a 36 month period, which term is automatically renewable for additional 12 month periods. The contracts are terminable prior to the 36 month period by the customer under certain circumstances and only if the specific notice requirements are followed, such as 90 days written notice and/or an opportunity for ESI to match a better competing offer.
In order to reduce the risk of theft, ESI also provides its customers with a branded container, with a locking device, to deposit its used cooking oil, which are typically placed outside and behind the customer's premises. The contracts also provide that
any competitors' equipment placed at the customer's place of business constitutes a breach of the procurement contract.
According to ESI, in recent years, widespread theft of used kitchen oil, particularly by new, unlicensed operators, has plagued the industry (Id. ¶ 30.) The Plaintiff notes that although some of these operators have been arrested, the charges associated with such arrests are too minimal to deter repeat offenses (Id. ¶ 31.)
Upon the Plaintiff's information and belief, Unity Fuels entered into the business of collecting used kitchen waste oil in 2010, and established Grease Lightning to conduct such business (Id. ¶ 35.) In or about 2011, the individual defendants formed RGS for the purpose of entering the kitchen waste oil procurement business (Id.)
The complaint alleges that the Defendants have been working in concert since 2011 to steal ESI's oil from the containers located in its customers' premises so as to intentionally cause ESI's customers to falsely believe that ESI has been collecting, but not paying for, the customer's used cooking oil. According to ESI, RGS and/or Grease Lightning then fraudulently induce ESI's customers to breach their contracts with ESI and enter into new contracts with RGS and Grease Lightning.
ESI contends that the Defendants are aware that, when the theft occurs, the customers are under contract with ESI because the secured receptacles contain ESI's logo.
ESI alleges several instances of theft by the Defendants.
For instance, on April 24, 2012, Edward Figueroa, Jr. was driving a white Ford van owned by RGS (Id. ¶ 44.) A GPS tracking device on the van revealed that the van stopped at five restaurants that were at the time under contract with ESI (Id.) That night, ESI contends that each of the restaurants had the used cooking oil stolen from their ESI-designated containers. Surveillance photographs taken the next day allegedly show Edward Figueroa, Jr. driving the same van and delivering the stolen used cooking oil to Grease Lightning's facility in Hicksville (Id.).
In addition, on May 21, 2013, RGS's white van pulled into a shopping mall in Farmingville where three restaurants under contract with ESI were located (Id. ¶ 48.) The ESI containers located at these restaurants had their locks cut; the lids removed; and were vandalized (Id.) The incident was reported to the police, but no arrests were made (Id.)
The Plaintiff also alleges that, on numerous occasions, while restaurants were under contract with ESI, it discovered that the locking mechanism on the oil container was broken, the lid was pried open; and the oil inside the receptacle was stolen. The Plaintiff specified dates and locations of these occurrences.
The Plaintiff also asserts other instances where Grease Lightning stole oil from other legal operators in the industry. For example, on August 21, 2011, two individuals driving a white van bearing a Grease Lightning logo were arrested for stealing oil form containers belonging to Darling International, Inc. (" Darling" ) in Newark (Id. ¶ 51.)
The Plaintiff further alleges that, upon stealing the waste oil, RGS and Grease Lightning transported the oil to Grease Lightning's storage facility in Hicksville, where it was accepted with knowledge of its stolen nature. Grease Lightning then allegedly transports the waste oil across state lines to its processing plant in New Jersey, where, with RGS's knowledge, it is processed into biofuel and/or an animal feed ingredient for farm animals and sold in interstate commerce.
The scam alleged by ESI is described as follows: After several months of stealing ESI's oil, the Defendants induce ESI's customers into believing that ESI is collecting, but not paying for, their oil, in violation of their procurement contracts with ESI. (Id. ¶ 57.) In this regard, the Defendants jointly created a termination letter which they give to ESI's customers to sign and send to ESI. RGS and Grease Lightning used the identical letter regardless of whether the customer contracts with RGS or with Grease Lightning. (Id. ¶ 58.) The Termination Letter states that the customer has " decided to use another delivery service due to their ability to serve my needs better" and is intended to make ESI falsely believe that it is losing customers due to inefficiency in the procurement services it provides, as opposed to theft by the Defendants (Id. at ¶ 60). After ESI's customer signs the Termination Letter, it is faxed to ESI from Pristine Properties, the company owned by Edward Figueroa, Sr. (Id ¶ 62.). The Plaintiff asserts that none of the Termination Letters comport with the termination provisions in the ESI contracts with its customers (Id. ¶ 64.)
The Plaintiff further alleges that large fluctuations in the oil collected by ESI from containers on the customer's premises, as happened here, is highly unusual absent theft because restaurants typically use a consistent amount of cooking oil each month (Id. ¶ 66.) In this regard, the Plaintiff identifies 19 specific restaurants which had large fluctuations in the amount of oil collected by ESI during the relevant time period (Id. ¶ 72.) The Plaintiff asserts that each of these restaurants improperly terminated their procurement contract with ESI and subsequently contracted with RGS.
The Plaintiff estimates a loss 2.7 million gallons in waste oil collected from 2011 to 2012, despite increases in the number of supplier accounts, due to theft, which cost ESI profits of over $4 million (Id. ¶ 32.)
On December 19, 2012, ESI sent a cease and desist letter to RGS, stating that RGS was wrongfully servicing certain restaurants that were under contract with ESI; that RGS had tortuously interfered with ESI's contracts; and demanding that RGS cease servicing ESI's customers and return its containers to ESI. However, RGS allegedly did not comply with that letter.
Between April 23, 2013 and May 10, 2013, ESI received five Termination Letters from Grease Lightning (Id. ¶ 88.). As with RGS, each of those five restaurants allegedly experienced significant fluctuations in the amount of oil collected by ESI in the months preceding the letter (Id. ¶ 89.)
On May 21, 2013, ESI sent a cease and desist letter to Grease Lightning, stating that Grease Lightning was servicing the five restaurants that were under contract to ESI, and demanding that Grease Lightning cease servicing ESI's customers and return its ...