BUFFALO, NY – The New York State Attorney General has reached an agreement with Buffalo Biodiesel over claims that the company filed lawsuits against hundreds of small businesses across Western New York and several surrounding states.
More than 600 lawsuits, most of which were filed in Buffalo City Court, made various breach-of-contract claims against businesses that had entered into a contract with the company.
Buffalo Biodiesel sought thousands of dollars, sometimes as much as tens of thousands of dollars, in damages, according to the Attorney General.
Sumit Majumdar started the company 11 years ago. Used cooking oil that his firm collects from restaurants is brought back to his Tonawanda facility, and purified into a product that can later be refined into biodiesel.
“It’s real simple,” Majumdar told WGRZ-TV. “You give me the oil you produce from your deep fryers for the period of the contract, and I will give you the money for it.”
However, a few years ago, when the price of the oil became volatile, he claims there was a lot of poaching of his clients by other firms offering to pay more for the oil.
“These restaurants would just switch companies (to take their oil) with no notice to us,” he said. “It’s like if you sign up with Verizon or whatever, and then find a better rate than your contract or service agreement. You can’t just go break a contract. This is the United States….you can’t do that.”
In most cases, Majumdar says a call or a letter to the restaurant reminding them of the arrangement his company had -- and notifying them that switching could be seen as a breach of contract -- was enough to bring them into compliance.
Those who either didn’t reply or told him they disagreed, however, he took to court.
“These are the remedies we have available to us,” said Majumdar, “provided we provide proper notification which we have been doing from day one.”
Those companies who then failed to respond in court, then had default judgments entered against them.
According to Assistant New York State Attorney General James M. Morrissey of the Buffalo Regional Office, who handled the case, Buffalo Biodiesel was awarded 9 judgments totaling $195,000 – an amount his office felt was “totally out of whack” compared to the potential in lost profits to Buffalo Biodiesel.
Restaurants are currently being paid about 50 cents a gallon for their used cooking oil, according to Majumdar.
“We didn’t investigate the individual facts of each case because obviously we were not able to do that given the fact that there were over 600 cases filed,” said Morrissey. “But we did investigate if Buffalo City Court was the proper venue, and whether the company followed proper procedure when it sought default judgments, and we concluded they did not.”
The Attorney General’s Office says its investigation also showed that the complaints initiating the lawsuits were virtual carbon copies of each other. The complaints, while alleging breach of a contract, provided very little specific information on how the business was supposed to have done do. Also, when seeking default judgments, Buffalo Biodiesel did not, as required by law, provide a sworn affidavit from someone with personal knowledge describing the facts of the breach.
The agreement reached with the AG requires Buffalo Biodiesel to withdraw all applications it made for default judgments. There are 94 of them pending, according to the AG. Buffalo Biodiesel also agrees to vacate default judgments it has taken against unrepresented businesses.
Majumdar says singing off on the agreement was “good business.” He said, “I haven't done anything wrong, I haven't paid any fines, I am not prevented from going to court in the future."
The agreement also requires the company to return any money it might have collected on judgments, although Majumdar says the amount returned will be “zero” simply because it never collected on the judgments it was awarded.
“We didn’t go to court seeking money; we went to court asking them to honor their contract, for the term of the contract, by providing us oil,” he said.
Buffalo Biodiesel has also agreed that, before it files any new court actions, the company will provide notice to businesses of its intent to sue in order to give the businesses the opportunity to resolve matters without a lawsuit.
“That is only agreeing to do what I did previously,” said Majumdar. “I had been sending (those) letters out all along.”