CSC ServiceWorks Sued Over Alleged Sky-High, Unauthorized Admin Fees [SETTLED]

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A proposed class action alleges CSC ServiceWorks, Inc. has engaged in a scheme to defraud thousands of its laundry customers by charging an unauthorized 9.75 percent administrative fee, a charge “above and beyond” the agreed-upon amount. 

The 16-page lawsuit out of New York’s Eastern District alleges CSC has imposed and continues to impose the unauthorized fee on all customers, thereby breaching thousands of leases each month and reaping millions it is not contractually authorized to earn. The complaint says that contrary to CSC CEO Mark Hjelle’s representations, the company is not authorized to charge customers the 9.75 percent fee nor effectively rewrite tens of thousands of contacts unilaterally. 

“Under all fifty states’ laws, CSC is liable for breach of contract,” the lawsuit alleges. “This lawsuit seeks to correct these wrongs and restore the money grab implemented by CSC, at Hjelle’s direction.” 

Defendant CSC operates and maintains laundry equipment in multi-family residential properties, college campuses and commercial spaces nationwide through subsidiaries such as Coinmach, Mac-Gray and SDI Laundry Solutions (in New York only), the suit begins. Per the case, CSC is the nation’s leading provider of multi-family residential and commercial laundry solutions, and promises customers that it holds itself to a higher standard of conduct than merely what’s provided in its contracts with customers. 

“Indeed, CSC self-imposes a commitment and promise of responsible and ethical behavior—and claims this behavior is a ‘foundational element’ of its business model,” the suit says, relaying the company’s stated commitment to “trust” that it calls “the CSC difference.” 

According to the complaint, however, a shift occurred within CSC when Hjelle took the reigns as CEO in July 2016. As the case tells it, Hjelle has been focused on the “growth” of CSC since he took over, “even if it means breaching its contractual obligations to customers,” the lawsuit alleges.

“Hjelle is doing this in an attempt to financially and monetarily benefit himself, by artificially boosting CSC’s bottom line and increase its operating margin. Hjelle benefits because he receives higher compensation and higher bonuses as CSC’s profitability increases, and he hopes to personally profit from a sale of CSC at an inflated valuation, predicated upon Hjelle’s deceitful conduct and CSC’s corresponding systematic breaches of contract by imposing the Unauthorized Fees.” 

The suit claims that because Hjelle “cannot achieve the boost in revenues legally, he turned to deception to do so,” namely through the alleged scheme of siphoning 9.75 percent of CSC’s gross collections from customers through a “usurious and phony” administrative fee. 

The lawsuit says that though the CSC CEO has stated that the company’s customer agreements allow for the deduction of the administrative fee, the contracts, in reality, do not permit such. 

“Some agreements, perhaps, might allow some deduction, but there is no standardized agreement between CSC and its 70,000 lessors that allows a 9.75% administrative fee,” the case argues, alleging the scheme was motivated by Hjelle’s “quest for a large buy-out” of the company. 

The suit goes on to claim CSC knowingly furthered and concealed the fraudulent scheme by way of a cover-up through a website supposedly dedicated to “fee transparency.” According to the complaint, the ill-gotten gains CSC has derived from the administrative fee are easy to compile from the company’s financial records.

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