Family Run New Orleans Waste Collection Firm Files Chapter 11 with Over 10mn in Liabilities; Cites Pandemic, Hurrican Ida and Potential Political Cronyism as Necessitating Bankruptcy Shelter

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October 6, 2022 – Metro Services Group Inc  (“Metro” or the "Debtor") have filed for bankruptcy in the Eastern District of Louisiana (Case No. 22-11197). New Orleans-based Metro is a minority-owned sanitation company founded in 1982 by brothers Glenn and Jimmie Woods; with the business dependent on contracts to collect waste entered into with the City of New Orleans (the “City”). 

At filing, Metro, which employs approximately 200 local residents and collects residential sanitation at approximately 73,000 homes, lays blame for its need to seek Chapter 11 shelter on City; which it argues has refused to meet its contractual obligations to allow it to up-size its fleet to meet additional waste removal needs occasioned by a pair of force majeure events: Covid-19 and Hurricane Ida. There is a third "suspicious" factor, however, that the Debtor points to as it counters efforts by the City to rubbish its reputation: What it suggests is an effort by New Orleans Mayor LaToya Cantrell to reward a competing firm that had run attack ads against one of Mayor Cantrell's political opponents.

COVID-19 and Hurrican Ida

Metro argues that its contract with the City includes an “Emergency Collection clause that provided that in the event of a declared emergency by either the federal, state, and/or local government, the City could issue a task order in the event of a declared disaster authorizing Metro to bring in additional equipment and labor to meet increased waste tonnage and demand for collection to be funded by the federal government.” 

Each of Covid-19 and Ida, the Debtor argues, merited a task order; Covid-19 resulting in a huge increase in residential waste during City-issued stay-at-home orders and Hurricane Ida likewise littering the City with tons of unforeseen waste. Despite requests for the necessary task orders, none were issued, leaving the Debtor unable to finance additional equipment necessary to meet dramatically increased waste collection needs. Summing up, the Debtor notes that “Pandemic and Hurricane Ida both presented situations in which no company could have collected the waste without the assistance that Metro asked for and was denied.” 

Although conceding that its job performance dropped, the Debtor does not provide detail as to how the pair of force majeure events impacted it financially, although the Debtor does claim that the City has “refused to pay Metro the agreed upon $13.60 per unit for the thousands of residences that it has been servicing since 2017” and refused to process several “extra tonnage payments” billed to the city Metro when collected waste exceeded an agreed tonnage limit. It does not specifically tie either of these shortcomings to the force majeure events.

IV Waste, LLC 

The Debtor's narration of the events preciptating its Chapter 11 filing, then shifts to suggestions of cronyism, arguing that the City is looking to use the Debtor's inability to maintain service levels during the pair of force majeure events (which it argues have now returned to normal) as a pretext for cancelling its contract and awarding it to a competitor at higher rates and lower service levels. That new contractor, IV Waste, LLC , the Debtor argues, is not being considered based on price or merit, but rather on cronyism. The Debtor argues: “The City has threatened…to cancel the Service Contract with Metro and enter into a new contract with IV Waste, LLC (‘IV Waste’). The current Service Contract with Metro includes twice weekly waste collection and once weekly recycling collection at a total cost to the City of $13.60 per household. On information and belief, the new contract with IV Waste, however, would cost the City $23.00 per household for only once weekly service of waste collection. As background, and perhaps providing political motivation to cancel the Service Contract with Metro in favor of a more burdensome and costly contract with IV Waste, IV Waste is owned by Sydney Torres whose political action committee (‘PAC’) spent considerable amounts of money in 2018 on attack ads against Desiree Charbonnet, who was Mayor Cantrell’s runoff opponent in that year’s mayoral election.

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