Recycling hauler sues San Jose for discrimination, contract violations

San Jose’s largest recycling hauler is suing the city, claiming the city profits from contract violations and discriminates against the company because of its owners’ ethnicity.

California Waste Solutions (CWS), which provides recycling services to more than 175,000 single-family homes in San Jose, filed a lawsuit in Santa Clara County Superior Court this month. The company, which has contracted with the city since 2002, claims San Jose has, for years, failed to address the large amount of garbage that ends up in recycling bins. The issue, previously documented in city-commissioned studies, results in millions of dollars in additional costs the company has to shoulder in processing and disposal, the complaint said. San Jose officials also retaliated against the company, which is owned by a Vietnamese family, when the company complained about the high contamination rates—imposing hefty fines and putting the company on “probation,” the suit claims.

Kristina Duong, co-owner and CFO of California Waste Solutions, alleges the city’s treatment is unique to CWS. Duong claims the other waste haulers—non-minority-owned businesses—do not face fines or contract-ending threats. In 2019, the city paid GreenTeam, which also provides recycling services, the same rates as CWS, although CWS had to process more contaminated recyclables, Duong said.

“They found every opportunity to screw us,” Duong told San José Spotlight. “We had to fight and prove ourselves. Why did we have to prove ourselves again and again?”

The city failed to work with the company on education campaigns to reduce contamination in recycling containers and prohibited the hauler from denying service to violators—breaking the contract terms, the lawsuit said. The company also claims the city threatened to cut ties with CWS if it refused to haul contaminated recyclables. CWS is asking for $34 million in damages and $14.4 million in restitution.

“We’ve been telling the city that the material is very contaminated, but the city doesn’t want to hear (it),” Duong told San José Spotlight. “They tried to throw us out of San Jose and discriminate (against) us.”

City Attorney Nora Frimann declined to comment, citing ongoing litigation. In a letter responding to the hauler’s claim sent last June, Frimann said the company’s allegations were untimely and without merit.

The San Jose lawsuit comes after CWS settled legal challenges with Oakland city officials in 2021, where the East Bay city claimed CWS overcharged apartment-building owners. CWS maintains it did nothing wrong, but agreed to return $6 million to property owners and to reduce fees to protect the working relationship with Oakland. Oakland also agreed to pay CWS more than $3 million after the company counter-sued over allegations of breaches of contract, Duong said.

A messy business

Recycling contamination—which happens when garbage and non-recyclable material end up in the recycling process—has been a yearslong issue in San Jose. The city almost ended its contract with CWS in 2019, citing low performance. But CWS said the problem stems from the city’s small garbage cans, which encourage residents to fill recycling bins with trash.

The company has advocated for the city to provide larger trash containers with little results, the lawsuit said. The smallest garbage container offered to residents is 32 gallons. This accommodates trash from one to two people and costs $593 a year. The next size, 64 gallons, is double the price at $1,186 a year, and the largest size, 96 gallons, is $1,779 a year, according to the city. Residents can choose any size for recycling bins, which come in all three sizes, for no additional cost.

According to city data from 2021, 87% of single-family homes opt for the 32-gallon garbage cans. Roughly 80% of homes use 96-gallon recycling bins. Duong said because most residents pay for the smallest garbage bins, their overflow trash often ends up in the 96-gallon recycling bins.

“That’s where the garbage goes,” she said, adding the typical size for trash cans for single-family homes in other cities is 64 gallons.

A 2021 study paid for by the city found the contamination problem was exacerbated during the COVID-19 pandemic when residents became more confined to their homes. According to the study, roughly 51% of recycled material collected in 2020 was contaminated and could not be processed at all—a jump from a 32% contamination rate in 2015.

San Jose said CWS was “exaggerating” the issue and remained steadfast in its position even after the study results, the lawsuit said.

The company has paid at least $30 million to deal with excessive trash in recycling bins—roughly $6 million of which was spent to dispose the trash should have been paid by San Jose, the lawsuit said. But because the garbage ended up in recycling containers, the disposal cost shifted to CWS.

In addition, San Jose also received a rebate for the garbage that CWS disposed, the lawsuit claims, “creating a double benefit” to the city.

San Jose fined CWS roughly $2.5 million in recent years for failing to meet the recycling rates at 30% to 35%, despite the city’s knowledge of the high contamination rates, the lawsuit claims.

The first hearing for the lawsuit is set for June.