Pietoso, Inc. v. Republic Services, Inc. ( 2021 )

United States Court of Appeals
For the Eighth Circuit
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No. 20-2950
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Pietoso, Inc., a Missouri corporation, individually and on behalf of all those
similarly situated, doing business as Cafe Napoli
Plaintiff - Appellant
v.
Republic Services, Inc., A Delaware corporation; Allied Services, LLC, A
Deleware limited liability company, doing business as Allied Waste Services of
Bridgeton
Defendants - Appellees
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Appeal from United States District Court
for the Eastern District of Missouri - St. Louis
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Submitted: April 13, 2021
Filed: July 9, 2021
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Before GRUENDER, BENTON, and SHEPHERD, Circuit Judges.
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GRUENDER, Circuit Judge.
Pietoso, Inc. d/b/a Café Napoli appeals part of the district court’s order and
judgment dismissing with prejudice Pietoso’s complaint against Republic Services,
Inc. and Allied Services, LLC d/b/a Allied Waste Services of Bridgeton
(“Defendants”).1 We reverse.
I.
Pietoso operates Café Napoli in Clayton, Missouri.2 In April 2011, Pietoso
entered into an agreement (“Agreement”) with Allied Services, a subsidiary of
Republic Services, for waste-removal services at the restaurant. In the Agreement,
Pietoso agreed to pay a basic-service rate of $323 per month for trash pickup four
times a week. Pietoso was billed monthly for these services. The Agreement had
an initial thirty-six-month term and automatically renewed for successive thirty-six-
month terms. If Pietoso terminated the Agreement before the end of a thirty-six-
month term for a reason other than Defendants’ breach of the Agreement, Pietoso
would have to pay liquidated damages.
Pursuant to a provision in the Agreement entitled “Rate Adjustments,”
Defendants had the right to increase the basic-service rate without Pietoso’s consent
for any one of five enumerated, cost-related reasons (“Unilateral Reason”). They
also could increase the basic-service rate with Pietoso’s consent for any other reason
(“Optional Reason”). The Agreement specified that this consent “may be evidenced
verbally, in writing or by the parties’ actions and practices.” Pietoso would suffer
no consequences under the Agreement if it refused to consent to an Optional Reason
rate increase—Defendants still had to provide Pietoso the same services and could
not terminate the Agreement early.
1
Pietoso also appeals the district court’s denial of its motion to alter or amend
the dismissal order. Because we reverse the dismissal in relevant part, Pietoso’s
appeal from the district court’s denial of its motion to alter or amend is moot. See,
e.g., Zimmerman v. City of Oakland, 255 F.3d 734, 740 (9th Cir. 2001).
2
The facts in this section are taken from Pietoso’s operative complaint and the
exhibits attached to it. See Soueidan v. St. Louis Univ., 926 F.3d 1029, 1031 n.2 (8th
Cir. 2019); Trone Health Servs., Inc. v. Express Scripts Holding Co., 974 F.3d 845,
850 (8th Cir. 2020).
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Since April 2011, Defendants have regularly increased Pietoso’s monthly
basic-service rate for the same waste-removal services provided four times a week
such that the rate went from $323 in April 2011 to $870.25 by August 2018. The
monthly invoices sent to Pietoso that reflected rate increases never indicated that a
given increase was for an Optional Reason that Pietoso was not obligated to pay. To
the contrary, the increases were “always presented” as increases for a Unilateral
Reason that Pietoso was obligated to pay. Accordingly, Pietoso believed that the
increases were for Unilateral Reasons and paid them in accordance with its
obligations under the Agreement.
Pietoso continued paying the monthly invoices until early 2019. At that time,
Pietoso contacted Defendants to complain about the increases to its basic-service
rate. In response, Defendants offered to reduce Pietoso’s basic-service rate from
$870.25 to $280, a figure below Pietoso’s initial April 2011 basic-service rate. For
this reason, Pietoso suspected that Defendants repeatedly had increased the basic-
service rate for Optional Reasons without obtaining its consent, thereby breaching
the Agreement.
Accordingly, Pietoso terminated the Agreement and commenced this putative
nationwide class action, claiming breach of contract.3 Defendants moved to dismiss,
arguing that Pietoso had failed to state a claim for breach of contract, see Fed. R.
Civ. P. 12(b)(6), because Pietoso pleaded that it was aware of and paid the rate
increases for approximately eight years, thereby consenting by its “actions and
practices” to the increases. The district court agreed and dismissed Pietoso’s
complaint with prejudice. Pietoso appeals, challenging the dismissal of its breach-
of-contract count.
3
Pietoso’s complaint also included a declaratory-judgment count, but Pietoso
does not challenge the district court’s dismissal of that count.
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II.
We review de novo the district court’s grant of a Rule 12(b)(6) motion to
dismiss, accepting the facts alleged in the complaint as true and drawing all
reasonable inferences in favor of the nonmovant. Trone Health Servs., 974 F.3d at
850. To survive a motion to dismiss, a plaintiff must allege facts that, accepted as
true, state a claim to relief that is plausible on its face. Soueidan, 926 F.3d at 1034.
“A claim has facial plausibility when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Glick v. W. Power Sports, Inc., 944 F.3d 714, 717 (8th Cir.
2019).
It is undisputed that Missouri law governs Pietoso’s breach-of-contract claim.
Under Missouri law, this claim has four elements: “(1) the existence and terms of a
contract; (2) that plaintiff performed or tendered performance pursuant to the
contract; (3) breach of the contract by the defendant; and (4) damages suffered by
the plaintiff.” WireCo WorldGroup, Inc. v. Liberty Mut. Fire Ins., 897 F.3d 987,
994 (8th Cir. 2018) (quoting Keveney v. Mo. Mil. Acad., 304 S.W.3d 98, 104 (Mo.
2010)). The only element in dispute here is the third, and the issue is whether Pietoso
has plausibly pleaded that Defendants breached the Agreement by increasing the
basic-service rate for Optional Reasons without Pietoso’s consent.
Defendants do not dispute that Pietoso plausibly pleaded that Defendants
increased the basic-service rate for Optional Reasons. Instead, Defendants contend,
and the district court concluded, that Pietoso pleaded itself out of its own claim by
asserting that it was aware of and paid the increases for approximately eight years.
To Defendants and the district court, Pietoso’s faithful invoice payments constituted
“actions and practices” manifesting its consent to Optional Reason increases,
meaning that Defendants could not have breached the Agreement in the manner
Pietoso alleged. We disagree.
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The Agreement permitted Defendants to increase Pietoso’s basic-service rate
for an Optional Reason if Pietoso consented to paying the increase, and the
Agreement specified that Pietoso’s consent “may be evidenced” by “the parties’
actions and practices.” This provision of the Agreement essentially incorporated
hornbook contract law. See Maples v. United Sav. & Loan Ass’n, 686 S.W.2d 525,
527 (Mo. Ct. App. 1985) (noting that assent may be determined “by the conduct of
the parties” to a contract); Restatement (Second) of Contracts § 19 cmt. a (Am. L.
Inst. 1981) (noting that conduct “may often convey” assent “as clearly as words”).
The Agreement does not explicate this consent-by-conduct provision, such as by
specifying in what circumstances “actions and practices” would manifest consent or
whether particular “actions and practices” would be deemed to manifest consent.
But we presume that Pietoso and Defendants contracted with existing principles of
Missouri contract law in mind as to when conduct will show consent. See Wheeling
Pittsburgh Steel Corp. v. Beelman River Terminals, Inc., 254 F.3d 706, 713 (8th Cir.
2001) (“[I]t is presumed that the parties had the well settled law of the land in
contemplation when the contract was made.” (quoting Sadler v. Bd. of Educ. of
Cabool Sch. Dist. R-4, 851 S.W.2d 707, 712-13 (Mo. Ct. App. 1993))).
Under Missouri law, whether conduct manifests consent is determined by
“what a reasonably prudent person would be led to believe” by that conduct, Silver
Dollar City, Inc. v. Kitsmiller Constr. Co., 931 S.W.2d 909, 914 (Mo. Ct. App.
1996), in light of “all the circumstances and relations of the parties,” Roper v.
Clanton, 258 S.W.2d 283, 288 (Mo. Ct. App. 1953). Conduct that is “unambiguous”
in light of all relevant circumstances suffices to show consent. Roper, 258 S.W.2d
at 288; see also Maples, 686 S.W.2d at 527 (noting that consent is implied if it is a
“necessary deduction from the circumstances, general language or conduct of the
parties”). But acts that are “ambiguous in their character” in light of the relevant
circumstances are insufficient. See Zumwinkel v. Leggett, 345 S.W.2d 89, 95 (Mo.
1961) (per curiam). Ordinarily, whether conduct manifests consent “is a question to
be resolved by the trier of fact.” Silver Dollar City, 931 S.W.2d at 914.
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Even assuming that there are cases where the consent-by-conduct question
can be resolved at the pleading stage, this is not one of them. In light of Pietoso’s
allegations, the relevant circumstances here do not give rise to the “necessary
deduction” that Pietoso consented to Optional Reason increases solely by its actions
and practices of faithfully paying the invoices. See Maples, 686 S.W.2d at 527.
Under the Agreement, Defendants had the right to increase the basic-service rate for
a Unilateral Reason without Pietoso’s consent, and Pietoso had to pay such increases
or else breach the Agreement. Defendants also could increase the basic-service rate
for an Optional Reason, but only with Pietoso’s consent, and Pietoso could refuse to
pay such an increase without contractual consequence. According to Pietoso, the
invoiced increases were always presented as Unilateral Reason increases, which is
why it paid them without dispute for approximately eight years.4 In these
circumstances and at this stage of the litigation, Pietoso’s faithful payment of the
increases does not conclusively show anything more than that Pietoso complied with
its contractual obligations. See Zumwinkel, 345 S.W.2d at 95 (noting that actions
that are “consistent either with the continued existence of the original contract, or
with a modification thereof,” do not suffice to show consent to a modification).
Drawing reasonable inferences in Pietoso’s favor, as we must at this stage,
bolsters this point. See Trone Health Servs., 974 F.3d at 850. It is “common sense”
that “people are not inclined knowingly to consent to being economically gouged.”
Paolella v. Browning-Ferris, Inc., 973 F. Supp. 508, 514 (E.D. Pa. 1997), aff’d, 158
F.3d 183 (3d Cir. 1998). Because Pietoso could refuse to pay an Optional Reason
increase without contractual consequence, it defies common sense to view its actions
4
Pietoso attached one such invoice as an exhibit to its complaint. That invoice
does not contradict Pietoso’s allegation that the increases were always presented as
Unilateral Reason increases. Cf. Kaempe v. Myers, 367 F.3d 958, 963 (D.C. Cir.
2004) (noting that a court reviewing whether a complaint fails to state a claim to
relief need not “accept as true the complaint’s factual allegations insofar as they
contradict exhibits to the complaint”). The invoice shows that Defendants simply
billed the increase as part of the “Total Amount Due” without explanation or
qualification, suggesting that the increase was one Pietoso had to pay and thus was
for a Unilateral Reason.
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and practices of faithfully paying the invoices as an unambiguous manifestation of
its consent to pay more voluntarily for the services it was receiving and would
continue to receive under the Agreement. The more reasonable inference in the
circumstances alleged here is that Pietoso paid the increases simply because, by all
appearances, it had no choice but to do so.
In sum, we cannot conclude at this stage that Pietoso’s invoice payments
manifested its consent to paying Optional Reason increases. Thus, it cannot yet be
decided that Defendants did not breach the Agreement by imposing Optional Reason
increases without Pietoso’s consent. The district court erred in concluding otherwise
and in deciding that Pietoso’s allegations failed to state a claim for breach of
contract.
III.
For the foregoing reasons, we reverse the district court’s dismissal of the
breach-of-contract count in Pietoso’s complaint and remand for further proceedings
consistent with this opinion.
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