San Jose faces $48 million lawsuit over recycling claims

A San Jose recycling company is suing the city claiming it profits by failing to prevent residents from throwing garbage into their recycling bins.

Recycling business California Waste Solutions alleged in the lawsuit filed in Santa Clara Superior Court that the city of San Jose broke its contract with CWS to jointly develop a consumer-education campaign on proper recycling, leading to millions of dollars in costs shifted onto the company instead of the city.

“The City forced CWS to collect, process and dispose of massive amounts of garbage in the recycling containers,” the lawsuit said. “The City claimed CWS was exaggerating the problem until it conducted its own study confirming as much as 58% of the recycling containers were garbage and other non-recyclable material.”

San Jose city attorney Nora Frimann declined to comment on the company's claims, saying her office typically doesn't speak publicly about lawsuits. The city and the company have been in a long-running dispute. The firm in 2021 settled for $6 million a lawsuit by the City of Oakland over recycling fees charged to apartment-building owners.

According to the suit against San Jose filed by CWS on Jan. 6, the company provided recycling services to about a third of San Jose's residents under a 2010 contract. A purported copy of the contract filed as a court exhibit says the recycling firm would “partner with” the city's environmental services department to “develop education programs” to prevent residents from contaminating recyclables with trash. Programming was to potentially include tactics including providing recycling information in multiple languages, outreach to children on recycling practices, and setting up tables or kiosks at public events such as parades to spread recycling information, according to the document.

By allegedly reneging on the agreement, the city cost the company about $34 million, the company claimed. “The greater the amount of garbage improperly placed in the recycling containers, the greater the expense to CWS,” said a letter of claim from the company to the city that was also filed as an exhibit.

The firm had to pay more than $6 million in extra landfilling costs, and the “many tens of thousands of tons” of trash it had to pick up from recycling containers added another $14 million in expenses, the letter claimed. Increased processing costs for dealing with the contamination amounted to more than $10 million, the letter alleged. Also, the amount of recoverable recyclables was “substantially reduced because otherwise recyclable material was contaminated by food waste, used diapers and many other types of putrescible garbage,” leading the city to hit the company with more than $2.5 million in penalties for not meeting its contractual performance standards, the letter claimed.

San Jose reaped financial rewards “in multiple ways” by failing to uphold the contract, the suit alleged. “Under the City's agreements with garbage collection companies, the City was required to pay disposal costs for garbage. But when that garbage was placed in a recycling container, the disposal cost was shifted from the City to CWS,” the suit claimed. “The landfill operator then paid payments to the City for each ton of garbage disposed of by CWS — creating a double benefit to the City from City residents putting garbage in their recycling containers.”

San Jose prohibited the company from declining to pick up contaminated recycling containers or educating residents on its own, the letter alleged.

The rocky relationship between CWS and the city goes back years. In 2016, a city consultant accused the company of underinvesting in a recycling plant and understaffing it, and city officials claimed that CWS was refusing to pick up recyclables at a much higher rate than another city-contracted recycler, leading to large numbers of complaints from residents. The company responded to those allegations by attributing problems to contamination of recyclables with trash, the core issue of the lawsuit.

In 2019, with city staff saying that CWS had issued an average of more than 4,000 “non-collection notices” to residents per month from January through September 2018, San Jose's City Council considered letting its contract with CWS expire and finding a replacement contractor, but ended up renewing the agreement.

The company has also faced controversy in the East Bay. In 2021, after the city of Oakland sued CWS, accusing it of overcharging apartment-building owners, the firm agreed to pay $6 million to multi-family dwelling owners and slash their recycling fees. In its lawsuit against San Jose, CWS is seeking $34 million in damages and $14.4 million in restitution.