1995 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

2-16-1995

Atlantic Coast v Bd Chosen Free

Precedential or Non-Precedential:

Docket 94-5173

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Recommended Citation

"Atlantic Coast v Bd Chosen Free" (1995). 1995 Decisions. Paper 56.

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 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 

 N0. 94-5173 

 

 ATLANTIC COAST DEMOLITION & RECYCLING, INC. 

 Appellant 

v. 

 BOARD OF CHOSEN FREEHOLDERS OF ATLANTIC COUNTY; 

 ATLANTIC COUNTY UTILITIES AUTHORITY; 

 BOARD OF CHOSEN FREEHOLDERS OF CAMDEN COUNTY; 

 POLLUTION CONTROL FINANCING AUTHORITY OF CAMDEN COUNTY; 

 SCOTT WEINER, individually and in his capacity as Commissioner 

 of New Jersey Department of Environmental Protection and Energy 

 

 On Appeal From the United States District Court 

 For the District of New Jersey 

 (D.C. Civil Action No. 93-cv-02669) 

 

 Argued September 13, 1994 

 BEFORE: STAPLETON, ALITO and LEWIS, Circuit Judges 

 (Opinion Filed February 16, 1995) 

 

 

Mark R. Rosen (Argued) James J. Ciancia 

Jodi Isenberg Acting Attorney General 

Mesirov, Gelman, Jaffe, Cramer & of New Jersey 

Jamieson Andrea M. Silkowitz 

44 Tanner Street Ass't Attorney General 

P.O. Box 183 Gail M. Lambert (Argued) 

Haddonfield, NJ 08033-0141 Stefanie A. Brand 

 Attorneys for Appellant Deputy Attorneys General 

 124 Halsey Street 

William J. Linton P. O. Box 45029 

Atlantic County Utilities Newark, NJ 07101 

Authority Attorneys for Appellee 

6700 Delilah Road Scott Weiner 

Pleasantville, NJ 08232 
 Attorney for Appellee 

 Atlantic County Utility Authority 
Frederick J. Schuck 

14th Floor 

Office of Camden County Counsel 

520 Market Street 

Camden, NJ 08102 

 Attorney for Appellee 

 Board of Chosen Freeholders 

 of Camden County 

Jonathan L. Williams 

J.S. Lee Cohen (Argued) 

Michael S. Caro 

DeCotiis, Fitzpatrick & Gluck 

401 Hackensack Avenue 

Hackensack, NJ 07601 

 Attorneys for Amici Curiae 

 Hudson County Improvement Authority, 

 Passaic County Utilities Authority and 

 Essex County Utilities Authority 

 Mercer County Improvement Authority 

Joseph J. Slachetka 

John A. Mercer, Jr. 

Higgins, Slachetka & Long 

1027 Chews Landing Road 

Laurel Springs, NJ 08021 

 Attorneys for Amicus Curiae 

 Cape May County Municipal Utilities 

 Authority 

Gail B. Phelps, Assistant Counsel 

Bureau of Regulatory Counsel 

9th Floor, MSSOB 

400 Market Street 

Harrisburg, PA 17101-2301 

 Attorney for Amicus Curiae 

 Pennsylvania Department of 

 Environmental Resources 

 

Betty Jo Christian 

Paul J. Ondrasik, Jr. 

William T. Hassler 

Steptoe & Johnson 

1330 Connecticut Ave., N.W. 

Washington, D.C. 20036 

 and 

Bruce J. Parker (Of Counsel) 

Alan S. Ashkinaze (Of Counsel) 

 and 
Michael F. Riccardelli 

Ronald S. Bergamini 

Riccardelli, Rose & Hoonhoudt 

51 Park Street 

Montclair, NJ 07042 

 Attorneys for Amici Curiae 

 City of Jersey City, Borough of 

 Northvale, C & A Carbone, Inc., 

 National Solid Wastes Management 

 Association, and Waste Management 

 Association of New Jersey 

 

 OPINION OF THE COURT

 

STAPLETON, Circuit Judge: 

 This appeal concerns the constitutional validity of New 

Jersey's solid waste regulatory scheme. Atlantic Coast 

Demolition and Recycling, Inc. ("Atlantic Coast") sought to 

enjoin enforcement of New Jersey's waste flow regulations on the 

ground they violate the dormant Commerce Clause. The district 

court entered judgment in favor of defendant New Jersey 

Department of Environmental Protection and Energy ("the 

Department"), finding that the flow control regulations did not 

impose an unconstitutional burden on interstate commerce. 

Atlantic Coast appealed. We will reverse. 

 Shortly after the district court entered final judgment 

upholding the flow control regulations, the Supreme Court issued 

its decision in C & A Carbone, Inc. v. Town of Clarkstown, 114 S. 

Ct. 1677 (1994), in which the Court struck down a local flow 
control ordinance of the Town of Clarkstown, New York, as 

violative of the dormant Commerce Clause. In light of the 

Supreme Court's recent teachings, we conclude that the district 

court erred in holding that the regulations do not discriminate 

against interstate commerce and in applying the balancing test 

set forth in Pike v. Bruce Church, Inc., 397 U.S. 137 (1970). 

Because the district court did not consider whether the 

regulations could pass muster under the stricter dormant Commerce 

Clause test applicable to discriminatory measures, we will vacate 

the district court's judgment and remand so that the district 

court may determine whether the regulations can be upheld despite 

their discriminatory effect.1

I. 

 The facts of this case are generally not in dispute.2 

The necessary factual background concerns New Jersey's waste 

management system and Atlantic Coast's activities. 

 

1. The district court had jurisdiction over this matter 

pursuant to 28 U.S.C. § 1331 as the constitutionality of state 

regulations was challenged and we have jurisdiction over this 

appeal from the district court's final judgment pursuant to 28 

U.S.C. § 1291. 

2. While the Department argues that some of the district 

court's findings of fact were clearly erroneous, the "facts" it 

takes issue with actually involve the district court's 

application of the governing legal principles to the facts, which 

we discuss infra. The factual background summarized by the 

district court in its oral opinion of September 8, 1993, is 

supported by the record and is therefore not clearly erroneous. 

See Cox v. Keystone Carbon Co., 894 F.2d 647, 650 (3d Cir.) (the 

reviewing court is not to substitute its own findings for that of 

the district court, but "may only make an assessment of whether 
 A. New Jersey's Solid Waste Management System

 New Jersey has an extensive statutory and regulatory 

system governing the management and disposal of solid waste. 

This highly regulated system grew out of a crisis that began in 

the 1970s as a result of wide-spread illegal practices in the 

then private, unregulated waste disposal market and the closing 

of many landfills due to unsanitary conditions and noncompliance 

with newly enacted federal regulations. This crisis has been 

documented in the caselaw of both this court and the New Jersey 

courts. See, e.g., J. Filiberto Sanitation v. Department of 

Envtl. Protection, 857 F.2d 913, 918-19 (3d Cir. 1988); Trade 

Waste Management Ass'n, Inc. v. Hughey, 780 F.2d 221, 223 (3d 

Cir. 1985); A.A. Mastrangelo, Inc. v. Commissioner of Department 

of Envtl. Protection, 449 A.2d 516, 518-19, 521 (N.J. 1982); 

Hackensack Meadowlands Dev. Comm'n v. Municipal Sanitary Landfill 

Auth., 348 A.2d 505 (N.J. 1975), rev'd sub nom. City of 

Philadelphia v. New Jersey, 437 U.S. 617 (1977); Southern Ocean 

Landfill, Inc. v. Mayor & Council of the Township of Ocean, 314 

A.2d 65, 66-67 (N.J. 1974); In re Scioscia, 524 A.2d 855, 857 

(N.J. Super. Ct. App. Div. 1987). As the Department has observed 

in a recent update to its Statewide Solid Waste Management Plan: 

 By the early 1980s, the department had 

closed, or was in the process of closing, 

over 300 unsafe or unregulated landfills that 

posed serious environmental hazards or had 

(..continued) 

there is enough evidence to support such findings"), cert. 

denied, 498 U.S. 811 (1990). 
exhausted capacity. However, the 

department's persistent actions to implement 

rigorous environmental standards on landfill 

construction and operations, coupled with a 

steady influx of millions of tons of waste 

annually from neighboring states during the 

1970s, resulted in a serious shortfall of 

disposal capacity in the state. . . . 

 By the late 1980s, the "solid waste 

crisis" had become a national issue, and New 

Jersey, the most densely populated state in 

the union, was at the forefront of both the 

problem and the solution. Responding to the 

need to develop safe, efficient systems, by 

1990 the state/county planning process 

produced 13 new major disposal facilities . . 

. . Despite this remarkable progress, 

however, a number of additional counties were 

forced by the continuing capacity shortages 

to make disposal arrangements with out-ofstate facilities, and New Jersey, once a net 

importer of waste, became a net exporter with 

peak exports of 28% of all solid waste 

generated in the state in 1988. As national 

attention focused on the environmental 

concerns associated with solid waste 

management practices, a number of states 

moved to restrict the importation of waste. 

On several occasions, New Jersey waste was 

banned, without notice, from out-of-state 

facilities, resulting in serious disruptions 

of service and unhealthy conditions as waste 

collected in the streets. 

New Jersey Dep't of Envtl. Protection and Energy, Div. of Solid 

Waste Management, Solid Waste Management State Plan Update: 1993-

2002, Executive Summary 1-2 (Draft Jan. 1993) (App. 511-12) 

[hereinafter State Plan Update-Executive Summary]. 

 New Jersey's existing statutory and regulatory waste 

management system is the result of attempts to respond to this 
crisis.3 The two major statutory provisions of New Jersey's 

solid waste management system are the Solid Waste Management Act 

("SWMA"), N.J. Stat. Ann. § 13:1E-1 to -207 (West 1991 & Supp. 

1994), and the Solid Waste Utility Control Act ("SWUCA"), N.J. 

Stat. Ann. § 48:13A-1 to -13 (West Supp. 1994). These acts were 

passed in 1970 to establish a statutory framework to coordinate 

"all solid waste collection, disposal, and utilization activity" 

in the state, N.J. Stat. Ann. § 13:1E-2(b)(1) (West 1991), and to 

regulate the rates at which these services are provided as a 

means of providing safe, adequate, and proper waste management 

services, N.J. Stat. Ann. § 48:13A-2 (West Supp. 1994). 

 The Department is vested with broad regulatory 

authority,4 while direct management responsibility is delegated 

to the twenty-two solid waste management districts that comprise 

the state, one for each of New Jersey's counties plus the 

Hackensack Meadowlands District. See N.J. Stat. Ann. § 13:1D-19 

(West 1991). Each solid waste district is responsible for 

developing a ten-year solid waste management plan that must be 

approved by the Department before it is implemented. Id.

 

3. An attempt to conserve landfill space by instituting a 

qualified ban on the importation of solid waste was struck down 

by the United States Supreme Court as violative of the dormant 

Commerce Clause in City of Philadelphia v. New Jersey, 437 U.S. 

617 (1977). 

4. Solid waste management functions delegated to the Board 

of Public Utilities were transferred to the Department in 1991. 

See Reorganization Plan No. 002-1991, set out as note under N.J. 

Stat. Ann. § 13:1D-1 (West 1991). 
§§ 13:1E-20, 13:1E-24 (West 1991). In each waste district, solid 

waste disposal is managed either directly by the county 

government or by municipal authorities created and designated by 

the district for this purpose.5 Each district's waste plan must 

provide for "sufficient [and] suitable" disposal facilities to 

treat and accommodate all solid waste generated within the waste 

district; the districts may meet this obligation by contracting 

with public or private entities or by constructing and operating 

the waste facilities themselves. Id. § 13:1E-21 to -22 (West 

1991); §§ 40:14B-19 (West 1991), 40:37A-55 (West 1991), 40:37C-5 

(West 1991). By the early 1980s the Department had approved 

solid waste management plans for each of the twenty-two solid 

waste districts. State Plan Update-Executive Summary, supra, at 

1 (App. 511). 

 In addition to this system of local district 

management, the disposal facilities6 themselves are subject to 

state regulation by the Department. The private or public entity 

 

5. These local agencies may be municipal utilities 

authorities, county improvement authorities, or pollution control 

financing authorities. See N.J. Stat. Ann. §§ 40:14B-1, -22.1 

(West 1991 & Supp. 1994); 40:37A-103 (West Supp. 1994); 40:37C-3 

(West 1991). Five of the waste districts manage through county 

control while eleven use the utilities authority model and the 

remaining six use either county improvement or pollution control 

financing authorities. 

6. Disposal facilities include transfer stations (at which 

solid waste is transferred from collection vehicles to haulage 

vehicles for transportation to an offsite disposal facility), 

resource recovery centers (which engage in both recycling and 

waste disposal), sanitary landfills, and incinerators. N.J. 

Stat. Ann. § 48:13A-3 (West Supp. 1994). 
performing the disposal service must register with and obtain 

approval from the Department before providing disposal service, 

N.J. Stat. Ann. § 13:1E-5 (West 1991), and must obtain a 

certificate of public convenience and necessity from the Board of 

Regulatory Commissioners, id. § 48:13A-6 (West Supp. 1994). To 

register with the Department, a waste disposal facility must 

obtain a solid waste permit which is granted only after review of 

the appropriateness of the facility's location, its effect on the 

surrounding community, and its consistency with the state and 

district solid waste plans. N.J. Admin. Code tit. 7, §§ 26-2.3 

to -2.4; 26-2.8 to -2.9. Waste disposal permits are also 

conditioned on the facility's operator satisfying the "integrity" 

requirements contained in N.J. Stat. Ann. § 13:1E-126 to -135 

(West 1991 & Supp. 1994),7 and only disposal facilities included 

in a district plan will receive operating permits, id. § 13:1E-4, 

-26 (West 1991 & Supp. 1994). 

 Additionally, all disposal facilities are regulated on 

the state level as public utilities. N.J. Stat. Ann. § 13:1E-27 

(West Supp. 1994). Pursuant to traditional utility regulation, 

the disposal facilities must therefore provide their services at 

just and reasonable rates, id. § 48:13A-2 (West Supp. 1994), in a 

nondiscriminatory manner, id. § 48:3-3, -4 (West Supp. 1994), and 

may not abandon or discontinue service without authorization, id.

§ 48:2-24 (West 1969). Nor may the solid waste facilities adjust 

 

7. These requirements were enacted in response to the 

illegal anti-competitive activities that previously existed 

within the private waste industry. 
their rates without regulatory approval. Id. § 48:2-21 (West 

1969). 

 Like waste disposal, solid waste collection was originally 

regulated under the utility structure as well, but pursuant to the 

Solid Waste Collection Regulatory Reform Act, which became effective 

in 1992, waste collection services will no longer be regulated as 

public utilities, although they will continue to be under the 

supervision of the Board of Regulatory Commissioners. See N.J. Stat. 

Ann. §§ 48:13A-7.1 to 48:13A-7.23 (West Supp. 1994). Thus, although 

waste collection rates will no longer be regulated, a company will 

still be required to register and obtain a certificate of public 

convenience before performing waste collection services in the state. 

See id. § 13:1E-5(a) (West 1991); id. § 48:13A-6 (West Supp. 1994). 

Full rate deregu- lation of the waste collection industry will occur 

in April 1996.8 

 Additionally, the Board of Regulatory Commissioners may 

designate a district as a solid waste disposal franchise area to 

be served by one or more entities engaged in waste disposal. 

N.J. Stat. Ann. § 48:13A-5 (West Supp. 1994). According to the 

Department, such franchises have been awarded to most of the 

districts and public authorities responsible for the waste 

 

8. Under the former rate regulation system, the regulated 

rate for government-owned disposal facilities became, by 

operation of law, a component of the tariff of all solid waste 

collectors. N.J. Stat. Ann. § 48:13A-7.8 (West Supp. 1994). 

This aspect of the system will continue until full deregulation 

in 1996. 
districts' solid waste management.9 A franchise grants a solid 

waste disposal facility the "exclusive right to control and 

provide for the disposal of solid waste, except for recyclable 

material whenever markets for those materials are available, 

within a district or districts" as long as the proposed franchise 

is consistent with the district's solid waste plan. Id. The 

district government or public authority, as franchisee, may 

operate the disposal facility itself, or contract with another 

district or with a private facility. 

 As an integral part of the district plan and utility 

regulation system, the Department and waste districts are 

authorized under the SWMA and SWUCA to direct the flow of waste 

to designated facilities. N.J. Stat. Ann. § 48:13A-4(c) (West 

Supp. 1994); Op. N.J. Att'y Gen. No. 3 (1980). It is the 

resultant waste flow regulations that Atlantic Coast challenges 

in this action. The waste flow requirements enable the waste 

districts to control the processing and disposal of all solid 

waste generated within the district. See Op. N.J. Att'y Gen. 

No. 3 (1980). The district plans specify to which disposal 

facility the waste from each of New Jersey's 567 municipalities 

is directed, and these designations are codified as Department 

regulations. N.J. Admin. Code tit. 7, § 26-6.5. 

 These waste flow measures do not apply to separated 

recyclable materials. N.J. Admin. Code tit. 7, § 26-1.1(a)(1). 

 

9. Amici Hudson County Improvement Authority, Passaic 

County Utilities Authority, and Essex County Utilities Authority 

have all been awarded such franchises. 
The separation of recyclables from other waste at the source of 

the waste and the marketing of recyclables may be performed 

competitively by private entities, and these activities are 

subject to much less stringent overall regulation than waste 

management services. See, e.g., N.J. Admin. Code tit.7, §§ 26A1.4(a)(2) (exemption of traditional recyclables from Department 

approval process), 26A-3.1 (regulation of nontraditional 

recyclables). Mixed waste, because it contains both waste and 

recyclables and therefore presents environmental risks not 

associated with separated recyclables, is subject to the waste 

flow regulations. Under recently promulgated regulations that 

memorialize the Department's previously informal "Pereira 

policy," mixed-waste generated within a waste district may be 

removed from the district for separation without initial 

processing at the designated disposal facility, as long as the 

nonrecyclable residue, or a similar kind and amount, is returned 

to the designated disposal facility, or if, in lieu of returning 

any residue waste, a payment equal to the tipping fees that would 

otherwise be due for the nonrecyclable portion is paid to that 

facility. N.J. Admin. Code tit. 7, §§ 26-6.9, 26-2B.9. 

 The disposal charges, or tipping fees10 charged by the 

designated waste facilities are used for operating revenues. 

See, e.g., N.J. Stat. Ann. § 40:14B-22.1 (West Supp. 1994). 

 

10. Tipping fees are the rates that a disposal facility or 

transfer station charges the hauler who deposits waste at the 

facility. J. Filiberto Sanitation v. Department of Envtl. 

Protection, 857 F.2d 913, 916 (3d Cir. 1988). 
Because the county governments and public authorities that manage 

these facilities may raise funds for capital construction by 

issuing revenue bonds, the tipping fees may also be pledged 

toward repayment of the bonds. According to the Department, 

approximately $1.6 billion in revenue debt has been issued by and 

remains outstanding to the county governments and authorities. 

The tipping fees are set by the Board of Regulatory Commissioners 

at a rate that will enable the waste district to recover the 

costs associated with its solid waste management plan, including 

costs associated with disposal and recycling. See N.J. Stat. 

Ann. § 48:13A-6.3 (West Supp. 1994). Because the districts are 

engaged in aggressive disposal management and recycling programs, 

the tipping fees are quite high. Thus, it is often less 

expensive to dispose of solid waste generated in New Jersey at 

facilities located in a neighboring state, even when 

transportation costs to transport the waste to the out-of-state 

facility are factored in. 

 The disposal facilities are designated through the 

district planning process. N.J. Admin. Code tit. 7, § 26-6.6. 

The designated facilities may be located within the waste 

district, in another waste district pursuant to an interdistrict 

plan, or out-of-state. Thus, a district plan can propose a 

contract with an out-of-state disposal facility. However, 

district plans must be approved by the Department and the 

Department candidly acknowledges that the twin "goals of 60% 

recycling and disposal self-sufficiency for the nonrecyclable 

waste stream . . . form the core of New Jersey's current solid 
waste management system and constitute the statewide solid waste 

management objectives, criteria and standards with which the 

[district] plans must be consistent." Appellee's Br. at 11. 

Thus, as the district court found: 

 Although it is not the subject of a 

clear legislative direction [sic], it is 

equally clear that the D.E.P.E. administers 

the law with the specific goal that all waste 

generated in New Jersey be disposed of within 

the borders of the state. The 1993 solid 

waste management state plan update, which was 

admitted into evidence and herein referred to 

as the Update, provides: "As a key policy 

objective, New Jersey will continue to move 

toward achievement of self-sufficiency in 

disposal capacity. The Department's 

objective is to eliminate reliance on out-ofstate disposal within a seven-year period." 

App. 1017. 

 Accordingly, a waste district that is unable to 

identify sufficient existing waste facilities or suitable sites 

within the district, or within another district pursuant to an 

interdistrict agreement, to meet the district's waste needs must 

certify to the Department the absence of suitable in-district 

sites and the failure to reach an interdistrict agreement. See

N.J. Stat. Ann. § 13:1E-21 (West 1991). Only after such a 

certification, can a waste district plan that designates an outof-state disposal site receive Department approval. In re LongTerm Out-of-State Waste Disposal Agreement Between County of 

Hunterdon & Glendon Energy Commission, 568 A.2d 547, 551-53 (N.J. 
Super. Ct. App. Div.), certif. denied, 583 A.2d 337 (1990).11 

Thus, the designation process is intended to favor operators that 

have facilities already located within, or those that are willing 

to construct a facility within, the state. 

 B. Atlantic Coast's Activities

 Atlantic Coast is a Pennsylvania corporation that was 

formed in 1989 to operate a transfer station and recycling center 

for construction and demolition ("C & D") debris. This facility 

 

11. As quoted in In re Waste Disposal Agreement, the 1985 

Update to the Statewide Solid Waste Management Plan contained the 

following statement: 

 "The Department considers the use of 

out-of-state disposal facilities to be 

inappropriate as a long-range solid waste 

management option. . . . 

 The uncertainty inherent in use of outof-state facilities conflicts with the 

philosophy of the Solid Waste Management Act, 

which is that districts should be able to 

plan for and predict the availability of 

disposal capacity to meet their needs. The 

Department has allowed several districts to 

rely upon out-of-state facilities, as a 

short-term option, in cases where districts 

have not been able to secure interdistrict 

agreements for access to in-state capacity. 

However, it is critical that districts which 

do rely on out-of-state disposal capacity, 

secure enforceable assurances from those 

facilities in order to ensure continued use 

until in-state facilities can be brought on 

line. It is equally critical that those 

districts develop an in-state solution as 

quickly as practicable." 

In re Waste Disposal Agreement, 568 A.2d at 551. 
is located in Philadelphia. Atlantic Coast is licensed by the 

Commonwealth of Pennsylvania Department of Environmental 

Resources to accept for processing at its facility various types 

of construction and demolition debris, including uncontaminated 

rock, soil, ferrous metals, and wood; recyclables; and 

unmarketable construction and demolition materials. Atlantic 

Coast processes the C & D debris by separating the recyclable 

materials from the nonrecyclable. The nonrecyclable residue 

waste is then shipped to landfills for disposal. During periods 

relevant to this appeal, Atlantic Coast was transporting the 

nonrecyclable waste to a landfill in Ohio. The majority of the 

waste processed at the Atlantic Coast facility is not recyclable; 

by weight only approximately eight and one-half to twenty percent 

of the waste is recycled.12 Thus, most of the materials received 

by Atlantic Coast are shipped to a landfill for disposal. 

 Construction and demolition debris is generated when a 

building is constructed, demolished, or refurbished. It is not 

composed of a single material, but is rather a mixture of 

recyclable and nonrecyclable materials. As a practical matter, 

C & D waste is not source separated, that is, the generator of 

the debris does not separate out the recyclable materials at the 

construction site. Prior to separation the mixture of recyclable 

and nonrecyclable materials is considered waste, but once the 

 

12. This figure varies depending on whether wood is 

included as a recyclable material. Atlantic Coast was at one 

time stockpiling the wood at its facility for a particular 

purchaser, but it appears that in the absence of that arrangement 

the wood is disposed of as waste. 
recyclable portion is separated out, only the remaining 

nonrecyclable portion is considered waste. Thus, if Atlantic 

Coast collects C & D debris from a construction site in New 

Jersey and transports it to its facility for separation and 

processing, the waste it collects is subject to New Jersey waste 

flow regulations. This means that it is required by those 

regulations to return the nonrecyclable waste (or equivalent 

waste) to the source district's designated disposal facility or 

to pay to that facility an amount equal to the tipping fee it 

would pay if it returned that portion of the C & D debris to the 

designated facility. 

 Because of its proximity to New Jersey's southern 

counties, Atlantic Coast sought to gain access to the New 

Jersey's C & D debris market, but its efforts to be included as a 

designated facility in a district waste management plan were 

unsuccessful. Atlantic Coast rejected the alternate means of 

serving the New Jersey market, i.e., returning the residual waste 

to the designated facilities for processing, or paying a 

compensating fee, as too costly. Following its unsuccessful 

efforts to serve the New Jersey market, Atlantic Coast filed an 

action in the district court challenging the constitutionality of 

New Jersey's solid waste flow control regulations.13 

 

13. In addition to the Commissioner of the New Jersey 

Department of Environmental Protection and Energy, Atlantic Coast 

named as defendants two county governments--the Board of Chosen 

Freeholders of Atlantic County and the Board of Chosen 

Freeholders of Camden County, and the solid waste authorities 

within those counties--the Atlantic County Utilities Authority 

and the Pollution Control Financing Authority of Camden County. 

Atlantic Coast subsequently reached a settlement agreement with 
 In its complaint, Atlantic Coast sought a declaration 

that the district waste plans identified in the flow control 

regulations violate the Commerce Clause and a permanent 

injunction barring the defendants from prohibiting or interfering 

with the transportation of construction and demolition debris 

from its generation or collection within New Jersey, or in 

Atlantic and Camden Counties in particular, to facilities outside 

the state. Although the scope of Atlantic Coast's attack on the 

New Jersey solid waste management system was somewhat unclear 

from the complaint, the district court concluded that Atlantic 

Coast's main contention centered on the waste flow regulations. 

At oral argument before this court, counsel for Atlantic Coast 

reiterated that its dormant Commerce Clause allegation and its 

claim for relief were limited to the waste flow regulations, and 

in particular the requirement that residual waste from mixed 

waste loads be returned to each district's designated facility 

unless the facility is compensated for the lost waste revenue. 

 C. The District Court Proceedings

 Atlantic Coast moved for a preliminary injunction. 

Following a short period of intense discovery, an evidentiary 

hearing was held on Atlantic Coast's motion, at which a 

substantial amount of deposition and live testimony was admitted. 

(..continued) 

the county and authority defendants, pursuant to which those 

defendants would not participate in the district court action or 

in any appeals, but would be bound by the court's determination. 

The Department therefore became the sole remaining defendant. 
The district court promptly issued an opinion declining to enter 

a preliminary injunction. After further discovery, the parties 

elected to submit the case on its merits based on the preliminary 

injunction record without supplementation. Ultimately, the 

district court entered final judgment in the Department's favor 

based on the findings and conclusions in its oral opinion of 

September 8, 1993. This appeal followed.14

II. 

 The fundamental issue presented by this appeal is 

whether the district court erred in concluding that the New 

Jersey regulatory waste flow scheme does not violate the dormant 

Commerce Clause. To determine this fundamental issue, three 

subsidiary issues must be decided: (1) whether the district court 

erred in applying the Pike balancing test, rather than what we 

 

14. This court granted a stay pending the Supreme Court's 

disposition in C & A Carbone, Inc. v. Town of Clarkstown. After 

the Supreme Court issued its opinion on May 16, 1994, 

invalidating the Clarkstown waste flow ordinance, Atlantic Coast 

filed a motion with this court for summary reversal of the 

district court's final order or expedited disposition of the 

appeal. We denied the motion for summary reversal but expedited 

the appeal. Amicus curiae briefs were submitted in support of 

the Department's position by Hudson County Improvement Authority, 

Passaic County Utilities Authority, Essex County Utilities 

Authority, and Mercer County Improvement Authority ("Hudson 

County Amici"); by Cape May County Municipal Utilities Authority; 

and by the Pennsylvania Department of Environmental Resources. 

An amicus curiae brief in support of Atlantic Coast's position 

was submitted by the City of Jersey City, the Borough of 

Northvale, C & A Carbone, Inc., National Solid Wastes Management 

Association, and Waste Management Association of New Jersey ("the 

Municipal and Trade Association Amici"). Additionally, we 

granted the Hudson County Amici leave to participate in oral 

argument. 
have termed the "heightened scrutiny" test,15 (2) whether the New 

Jersey waste flow regulations are excepted from the strictures of 

Commerce Clause scrutiny under the market participant doctrine, 

and (3) if not, whether these regulations meet the applicable 

Commerce Clause test in light of New Jersey's particular 

circumstances. We conclude that New Jersey's waste flow 

regulations, in effect and by design, discriminate against 

interstate commerce and that heightened scrutiny under the 

dormant Commerce Clause is required. We reject the Department's 

argument that New Jersey's regulation of waste disposal through a 

utility system requires application of the less stringent 

balancing test, and likewise reject its argument that New Jersey 

is entitled to the market participant exception. Because the 

district court did not consider whether the waste flow 

regulations can be upheld despite their discriminatory effect, we 

will remand to the district court so that it may make this 

determination in the first instance. 

III. 

 The Commerce Clause grants to Congress the affirmative 

power "[t]o regulate Commerce . . . among the several States." 

U.S. Const. art. I, § 8, cl. 3. "Although the Clause thus speaks 

in terms of powers bestowed upon Congress, the [Supreme] Court 

long has recognized that it also limits the power of the States 

 

15. See Norfolk Southern Corp. v. Oberly, 822 F.2d 388 (3d 

Cir. 1987). 
to erect barriers against interstate trade." Lewis v. BT 

Investment Managers, Inc., 447 U.S. 27, 35 (1980). The negative 

or dormant aspects of the Commerce Clause that limit state 

authority apply to subject areas in which "Congress has not 

affirmatively acted to either authorize or forbid the challenged 

state activity." Norfolk Southern Corp. v. Oberly, 822 F.2d 388, 

392 (3d Cir. 1987). Thus, any state regulation of interstate 

commerce is subject to scrutiny under the dormant Commerce Clause 

unless such regulation has been preempted or expressly authorized 

by Congress. The district court held that Congress has 

legislated in the area of solid waste disposal but "expressly 

left to the states the primary role in the collection and 

disposal of solid waste." App. 1015-16 (citing the Waste 

Disposal Act, codified at 42 U.S.C. § 6901(A)(4)). The parties 

have not advanced either a preemption or authorization argument 

before this court, and we decline to examine the issue further.16 

We therefore turn to the issues of whether and how New Jersey's 

 

16. We note, however, that Justice O'Connor, concurring in 

the result reached by the C & A Carbone Court, recently rejected 

the argument that the federal Waste Disposal Act authorizes 

discriminatory solid waste measures. C & A Carbone, Inc. v. Town 

of Clarkstown, 114 S. Ct. 1677, 1691 (1994) (O'Connor, J., 

concurring in the judgment). The district court's determination 

that Congress has authorized concurrent state legislation in the 

area of solid waste management is not inconsistent with Justice 

O'Connor's conclusion that discriminatory measures are not 

authorized. We note further that several competing federal 

measures that expressly authorized local waste flow restrictions, 

as well as waste importation and exportation bans, were 

introduced during the 103d Congress, but were not enacted into 

law. At least one of these measures has been introduced for 

consideration by the current Congress as well. 
waste flow regulations affect interstate commerce. The Supreme 

Court's recent decision in C & A Carbone, Inc. v. Town of 

Clarkstown, 114 S. Ct. 1677 (1994), provides significant guidance 

with respect to these issues, and we begin with a review of the 

opinion of the Court in that case. 
A. 

 The solid waste flow control ordinance before the court 

in C & A Carbone required that all waste within the town of 

Clarkstown, New York, be processed at a designated transfer 

station which the town had caused to be built to comply with a 

consent decree between the town and the New York State Department 

of Environmental Conservation. C & A Carbone, 114 S. Ct. at 

1680. To finance the new facility, the town entered into an 

arrangement with a local private contractor under which the 

contractor would build the facility, operate it for five years, 

and then turn it over to the town for one dollar. In return, the 

town guaranteed the contractor a tipping fee of $81.00 per ton 

and guaranteed that a minimum of 120,000 tons of waste would be 

deposited at the transfer station for processing each year. If 

the total waste brought to the facility was less than 120,000 

tons in any year, the town would make up the difference in the 

lost fees. Id. 

 To ensure that the contractor would receive the agreed 

upon sums, the town enacted its flow control ordinance. The town 

was thus assured of customers for the new transfer facility and 

could finance the facility through the mandated tipping fees. 

C & A Carbone, who operated a recycling center within the town, 

was found to be violating the ordinance by transporting waste 

from its facility to out-of-state locations for processing. 

C & A Carbone challenged the constitutionality of the ordinance 

based on the dormant Commerce Clause. The New York courts 

concluded that the town's ordinance did not discriminate against 
interstate commerce because it applied "evenhandedly to all solid 

waste processed within the Town." 587 N.Y.S. 2d 681, 686 (N.Y. 

App. Div. 1992). The Supreme Court reversed. 

 The Supreme Court first concluded that the ordinance 

did regulate interstate commerce, rejecting the town's contention 

that its flow control did nothing more than delay the entry of 

garbage into the stream of interstate commerce until it was safe. 

The Court noted that Carbone received and processed solid waste 

from out of state, and the requirement that it route that waste 

through the town's transfer station increased the cost of 

processing for out-of-state waste generators. More importantly 

for present purposes, the Court pointed out that the relevant 

stream of interstate commerce was not the market for solid 

wastes, but rather the market for solid waste processing and 

disposal services. "[W]hat makes garbage a profitable business 

is not its own worth but the fact that its possessor must pay to 

get rid of it. In other words, the article of commerce is not so 

much the solid waste itself, but rather the service of processing 

and disposing of it." C & A Carbone, 114 S.Ct. at 1682. 

 In addition to the effect on the cost to out-of-state 

possessors of garbage, the Court stressed that "even as to waste 

originant in Clarkstown, the ordinance prevents everyone except 

the favored local operator from performing the initial processing 

step" and thus "deprives out-of-state businesses of access to a 

local market." Id. at 1681. The conclusion that the ordinance 

affected interstate commerce was, accordingly, inescapable. 
 Having concluded that the town's ordinance affected 

interstate commerce, the Court addressed whether its effect was a 

discriminatory one -- whether it operated to favor local 

commercial interests or disfavor out-of-state ones. This was 

important because a local measure that discriminates against 

interstate commerce on its face or in effect can be upheld only 

if it falls within "a narrow class of cases in which the 

municipality can demonstrate, under rigorous scrutiny, that it 

has no other means to advance a legitimate local interest." Id.

at 1683. Such protectionist measures are thus subjected to 

heightened scrutiny as compared with local measures that pursue a 

legitimate local interest evenhandedly and impose only an 

incidental burden on interstate commerce. Nondiscriminatory 

measures will be upheld unless the incidental "burden on 

interstate commerce . . . is 'clearly excessive in relation to 

the putative local benefits.'" Id. at 1682 (quoting Pike v. 

Bruce Church, Inc., 397 U.S. 137, 142 (1970)). Because the Court 

found the "practical effect and design" of the Clarkstown 

ordinance discriminatory, it held that heightened scrutiny was 

required and that the Pike balancing test was inappropriate. See

id. at 1684. 

 Clarkstown's flow control ordinance regulated the local 

market for solid waste processing services in a protectionist 

manner. It allowed only the favored operation to process waste 

located within the limits of the town and the Court found this 

"no less discriminatory because in-state or in-town processors 

are also covered by the prohibition." Id. at 1682. In support 
of these conclusions, the Court cited Dean Milk Co. v. Madison, 

340 U.S. 349 (1951), which involved a dormant Commerce Clause 

challenge to a city ordinance requiring that all milk sold in the 

city be pasteurized within five miles of the city limits. The 

ordinance was held to be an unjustifiable protectionist measure 

because it favored milk processors located within a five-mile 

radius. The Dean Milk court found "immaterial [the fact] that 

Wisconsin milk from outside the [local] area [was] subjected to 

the same proscription as that moving in interstate commerce." 

Dean Milk, 340 U.S. at 354 n.4, quoted in, C & A Carbone, 114 

S. Ct. at 1682. 

 The Clarkstown ordinance was found to be "just one more 

instance of local processing requirements that . . . long have 

[been] held invalid." Id. at 1682. Citing a long line of cases 

in which local processing requirements had been stricken, the 

Court described the evil there addressed and the evil of 

Clarkstown's flow control ordinance as follows: 

 The essential vice in laws of this sort is 

that they bar the import of the processing 

service. Out-of-state meat inspectors, or 

shrimp hullers, or milk pasteurizers, are 

deprived of access to local demand for their 

services. Put another way, the offending 

local laws hoard a local resource -- be it 

meat, shrimp, or milk -- for the benefit of 

local businesses that treat it. 

 The flow control ordinance has the same 

design and effect. It hoards solid waste, 

and the demand to get rid of it, for the 

benefit of the preferred processing facility. 

The only conceivable distinction from the 

cases cited above is that the flow control 

ordinance favors a single local proprietor. 

But this difference just makes the 
protectionist effect of the ordinance more 

acute. In Dean Milk, the local processing 

requirement at least permitted pasteurizers 

within five miles of the city to compete. An 

out-of-state pasteurizer who wanted access to 

that market might have built a pasteurizing 

facility within the radius. The flow control 

ordinance at issue here squelches competition 

in the waste-processing service altogether, 

leaving no room for investment from outside. 

114 S. Ct. at 1683. 

 Having determined that heightened scrutiny rather than 

interest balancing was appropriate, the Court held that 

Clarkstown had "any number of nondiscriminatory alternatives for 

addressing the health and environmental problems alleged to 

justify the ordinance in question." Id. at 1683. In the course 

of so holding, the Court recognized that the flow control 

ordinance was adopted by the town as a means of financing the 

construction of a needed processing facility. This did not aid 

the town case, however, because there was a non-discriminatory 

alternative available: 

 Clarkstown maintains that special 

financing is necessary to ensure the longterm survival of the designated facility. If 

so, the town may subsidize the facility 

through general taxes or municipal bonds. 

But having elected to use the open market to 

earn revenues for its project, the town may 

not employ discriminatory regulation to give 

that project an advantage over rival 

businesses from out of State. 

114 S. Ct. at 1684 (citation omitted). 

B. 
 New Jersey's flow control regulations accomplish on a 

district level substantially what Clarkstown's flow control 

ordinance accomplished on a local level. They favor the 

district's designated facilities at the expense of out-of-state 

providers of processing and disposal services that would 

otherwise compete for the opportunity to service solid waste 

generated within the district. Here, as in C & A Carbone and 

Dean Milk, it is immaterial that the designated facilities are 

favored over other in-state facilities as well as over out-ofstate ones. Similarly, it is irrelevant here, as in Dean Milk, 

that an out-of-state firm willing to build an in-district 

facility is entitled to compete to have that facility become a 

designated facility. Like the governmental entities in the other 

cases involving local processing requirements, New Jersey is 

regulating a market which the Commerce Clause intended to be open 

to non-local competitors. More specifically, New Jersey is 

regulating the market for solid waste processing and disposal 

services in each of the districts by directing district consumers 

of those services to utilize a favored service provider who, in 

the absence of exceptional circumstances, operates a local 

facility. It necessarily follows, we conclude, that any Commerce 

Clause analysis of New Jersey's flow control regulations must 

employ the heightened scrutiny test and that the district court 

erred by subjecting them only to the balancing test of Pike.

17

 

17. In applying the Pike test, the district court relied on 

J. Filiberto Sanitation v. Department of Envtl. Protection, 857 

F.2d 913 (3d Cir. 1988). We there found that a requirement that 

all waste generated in a county be processed at the county's 
C. 

 It is true, as the Department stresses, that New Jersey 

has not placed an absolute bar on the utilization of out-of-state 

facilities as designated facilities. This, however, does not 

transform a fundamentally discriminatory scheme into a nondiscriminatory one. While out-of-state facilities can compete to 

become designated facilities, the Department acknowledges that it 

approves district plans only if they are consistent with the 

"core" goal of having all of New Jersey's solid waste processed 

and disposed of in New Jersey within the next five years. This 

can be accomplished, and is being accomplished, only by selecting 

existing and proposed in-state facilities whenever possible. In 

short, out-of-state facilities do not compete on anything 

approaching a level playing field. Wyoming v. Oklahoma, 112 S. 

Ct. 789, 801 (1992) ("The volume of commerce affected measures 

only the extent of the discrimination; it is of no relevance to 

the determination whether a State has discriminated against 

interstate commerce."). 

 In reaching our conclusion that the appropriate 

Commerce Clause measuring rod is heightened scrutiny, we have not 

(..continued) 

transfer station did not have any effect on interstate commerce 

because the waste entered the interstate market after processing, 

and then noted that the rule would have met the Pike test as 

well. Our holding that the waste flow restriction did not affect 

interstate commerce is inconsistent with C & A Carbone and is 

therefore overruled. To the extent Filiberto can be read to 

authorize the application of the Pike balancing test to New 

Jersey's waste flow regulations it is also inconsistent with 

C & A Carbone and is overruled. 
been unmindful of the Department's insistence that the public 

utility aspects of New Jersey's solid waste system distinguish 

the flow control regulations here from the Clarkstown ordinance. 

In substance, the Department urges that (1) Clarkstown's transfer 

station was not a regulated public utility; (2) New Jersey's 

designated facilities are regulated public utilities; (3) what 

Atlantic Coast finds objectionable in the waste flow regulations 

-- the monopoly and resulting captive customer base of the 

designated facilities -- is inherent in any public utility 

regulatory scheme; (4) Commerce Clause analysis in the context of 

state public utility regulation has consistently employed the 

balancing test of Pike; and (5) state public utility regulation 

is upheld where, as here, the burdens on commerce are not 

disproportionate to the local benefits. 

 While we agree with the Department's first three 

propositions, we do not read the dormant Commerce Clause 

jurisprudence to suggest that state utility regulation is to be 

judged by different standards than other state regulation. When 

state utility regulation is protectionist, the Supreme Court has 

employed heightened scrutiny; where it is not, a benefits and 

burdens analysis has been applied. 

 In New England Power Co. v. New Hampshire, 455 U.S. 

331, 334-36 (1982), the Supreme Court reviewed an order of the 

New Hampshire Public Utility Commission that required the New 

England Power Company, a consortium of Connecticut River 

hydroelectric power companies, to reserve for New Hampshire 

residents an amount of power equal to the amount generated by the 
consortium within that state. The Court found that the 

Commission's order was essentially an "exportation ban" that 

placed a direct and substantial burden on interstate commerce and 

therefore applied the heightened scrutiny test to the 

discriminatory order. Id. at 339. 

 Subsequently, in Arkansas Electric Cooperative Corp. v. 

Arkansas Public Service Commission, 461 U.S. 375 (1983), in 

rejecting an outdated Commerce Clause utility test that focused 

on whether the state was regulating wholesale or retail sales of 

gas or electricity, the Supreme Court noted: "Our constitutional 

review of state utility regulation in related contexts has not 

treated it as a special province insulated from our general 

Commerce Clause jurisprudence." Id. at 391 (citing New England 

Power Co., 455 U.S. 331 (1982)). The Court then articulated the 

Pike balancing test as "[o]ne recent reformulation of the 

[Court's dormant Commerce Clause] test" and, after noting that 

the regulation at issue did not implicate economic protectionism 

and would involve only an incidental effect on interstate 

commerce, applied the balancing test to conclude that the 

regulation did not violate the Commerce Clause. Id. at 393-95.18 

Although the Arkansas Electric Court did not expressly 

 

18. The issue in Arkansas Electric Cooperative Corp. was 

whether the Arkansas Public Service Commission had violated the 

Supremacy or Commerce Clauses by asserting regulatory 

jurisdiction over the wholesale rates that the cooperative 

charged to its retail members, all of whom were located within 

the state. Wholesale rates charged by cooperatives was one area 

of wholesale electricity sales that the federal legislation and 

rules did not govern. See 461 U.S. at 377, 381-82. 
characterize the regulation before it as non-discriminatory, the 

Court's opinion can only be read as implicitly rejecting 

application of the heightened scrutiny test because it found no 

discrimination against interstate commerce. 

 More recently, the Supreme Court applied the heightened 

scrutiny test to protectionist state public utility regulation in 

Wyoming v. Oklahoma, 112 S. Ct. 789 (1992). The state statute 

there under attack required that all coal-fired electricity 

plants located within the state of Oklahoma burn at least ten 

percent Oklahoma mined coal. The Court concluded that the 

statute discriminated against interstate commerce and struck it 

down under the dormant Commerce Clause, noting that the question 

of which level of scrutiny to apply to the protectionist measure 

was "not a close call." Id. at 800 n.12. 

 Based on this Supreme Court case law, we reject the 

Department's contention that because the waste flow regulations 

are part of a larger utility regulation system, they are not 

subject to the heightened scrutiny test despite any 

discriminatory effect. 

 We have found only one Supreme Court case in which a 

Commerce Clause challenge was made based on the exclusionary 

effects of a monopoly created by a state public utility 

regulatory scheme. In that case, Panhandle Eastern Pipe Line Co. 

v. Michigan Public Service Commission, 341 U.S. 329 (1951), the 

Court sustained the state utility commission's refusal to allow 

an out-of-state natural gas supplier to sell natural gas to 

industrial consumers in an area where a Michigan public utility 
had been granted an exclusive certificate of public convenience 

and necessity. Panhandle is not helpful here, however, because 

it was decided before Arkansas Electric. As we have noted, the 

Court there rejected the bright line test of cases like Public 

Utilities Commission v. Attleboro Steam & Electric Co., 273 U.S. 

83 (1927), and Cities Service Gas Co. v. Peerless Oil & Gas Co., 

340 U.S. 179 (1950), that regarded state regulation of wholesale 

utility markets as a direct burden on interstate commerce and 

state regulation of retail utility markets as "essentially local" 

in nature and as having only an incidental effect on interstate 

commerce. The Court in Panhandle Eastern sustained the local gas 

company's monopoly on the authority of Cities Service and the 

wholesale/retail distinction there reflected. 

 Now that the Supreme Court has rejected this 

distinction and made it clear in Arkansas Electric that public 

utilities regulation is not a special category for Commerce 

Clause purposes, it well may be that the heightened scrutiny test 

would be applied to a situation like that presented in Panhandle 

Eastern where an out-of-state firm challenges its exclusion from 

the local franchise market. A strong argument can be made that 

the rationale in C & A Carbone would require use of this test. 

See 114 S. Ct. at 1682 (finding the ordinance discriminatory 

because "it allows only the favored operator to process waste 

that is within the limits of the town" and "no less 

discriminatory because in-state or in-town processors are also 

covered by the prohibition"). We do not suggest, however, that 

traditional public utilities regulation of retail sales would be 
invalidated by heightened scrutiny. Where the regulation is 

addressed to a utility, like a local gas utility and unlike 

Atlantic Coast, whose service requires a tangible distribution 

system, a franchise monopoly may be the only economically 

feasible alternative. 

 We note that there is a discriminatory aspect to the 

waste flow control regulations in the context of New Jersey's 

scheme that is not present in a situation like that presented in 

Panhandle Eastern. A gas or electric utility granted a franchise 

to serve the needs of all residents within a local area is not 

ordinarily required to commit to producing its electricity or 

securing its natural gas supply within that area as well. 

Normally, both in-state and out-of-state interests may, 

therefore, compete equally for the franchise award and the 

creation of a captive consumer base does not, under these 

circumstances, discriminate against electricity and gas generated 

or produced out of state. 

 Under New Jersey's system, collectors of waste -- those 

who supply disposal services at the retail level -- are required 

to secure processing and disposal services from the designated, 

franchised facility and out-of-state disposal firms are thus 

excluded not only from the market for such services during the 

franchise period but also from competing for the franchise. The 

burden on the flow of services from out of state in the situation 

now before us is thus far greater than the burden on the flow of 

electricity and gas from out-of-state in the traditional public 

utility regulation situation. 
 We thus conclude that the public utility aspects of New 

Jersey's solid waste disposal scheme do not require application 

of the Pike balancing test. 

IV. 

 As an alternative to its argument that the nature of 

the New Jersey waste disposal scheme distinguishes it from the 

ordinance in C & A Carbone and requires that its waste flow 

regulations be subject to a more lenient level of scrutiny, the 

Department contends that the nature of the system earns the 

regulations the protection of the market participant doctrine. 

The Supreme Court has recognized what amounts to an exception 

from the restraints of the dormant Commerce Clause for otherwise 

discriminatory action taken by a governmental entity in its role 

as a market participant, rather than as a market regulator. The 

market participant doctrine "differentiates between a State's 

acting in its distinctive governmental capacity, and a State's 

acting in the more general capacity of a market participant." 

New Energy Co. of Indiana v. Limbach, 486 U.S. 269, 277 (1988). 

When a governmental entity enters the market place in a capacity 

analogous to that of private market participants and makes 

decisions analogous to those made by private market participants, 

its decisions are not subject to dormant Commerce Clause 

scrutiny. Thus, "'[t]he Commerce Clause does not prohibit all 

state action designed to give its residents an advantage in the 

marketplace, but only action of that description in connection 

with the State's regulation of interstate commerce.'" Oregon 
Waste Systems v. Department of Environmental Quality, 114 S. Ct. 

1345, 1354 n.9 (1994) (quoting New Energy Co. of Indiana v. 

Limbach, 486 U.S. 269, 278 (1988)). 

 The Supreme Court has found the market participant 

doctrine to be applicable in only three cases: Hughes v. 

Alexandria Scrap, 426 U.S. 794, 808-09, 810 (1976) (upholding a 

program involving payments by a state for auto scrap where the 

payments were restricted to in-state processors for state-titled 

vehicles); Reeves, Inc. v. Stake, 447 U.S. 429 (1980) (sustaining 

a restriction on the sale of government-produced cement to state 

residents); and White v. Massachusetts Council of Construction 

Workers, Inc., 460 U.S. 204 (1983) (upholding an executive order 

requiring that city residents comprise at least one-half the 

staff of all public works construction projects funded in whole 

or part by city funds or city-administered federal funds). Two 

important characteristics tie these three cases together. In 

each situation the government was participating directly in some 

aspect of the market as a purchaser, seller, or producer, and the 

alleged discriminatory effects on the interstate market flowed 

from these market actions. 

 In the solid waste arena, the Supreme Court has not yet 

reviewed a case involving a government-owned waste facility and 

the Court has consequently left unanswered the question as to 

what effect government ownership of a waste facility would have 

on otherwise discriminatory waste measures. See City of 

Philadelphia v. New Jersey, 437 U.S. at 627 n.6 (reserving the 

question whether a governmental unit who operates a landfill is a 
market participant); Oregon Waste Systems, 114 S. Ct. at 1354 n.9 

(finding impermissibly discriminatory a state statute directing 

private landfills to pass on a mandated surcharge on out-of-state 

generated waste and declining to address the issue whether Oregon 

could accomplish its "cost-spreading" through market 

participation). This court, however, has applied the market 

participant doctrine in the context of a publicly owned waste 

disposal facility. In Swin Resource Systems, Inc. v. Lycoming 

County, 883 F.2d 245, 250 (3d Cir. 1989), cert. denied, 493 U.S. 

1077 (1990), we held that the local government did not violate 

the dormant Commerce Clause by charging at the county-operated 

landfill a higher disposal fee for waste generated outside a 

local area than for locally-generated waste, stating: 
 If Maryland may decree that only those 

with Maryland auto hulks will receive state 

bounties, it would seem that Lycoming can 

similarly decree that only local trash will 

be disposed of in its landfill on favorable 

terms. If South Dakota may give preference 

to local concrete buyers when a severe 

shortage makes that resource scarce, it would 

seem that Lycoming may similarly give 

preference to local garbage (and hence local 

garbage-producing residents) when a shortage 

of disposal sites makes landfills scarce. 

And if Boston may limit jobs to local 

residents, we see no reason why Lycoming may 

not limit preferential use of its landfill to 

local garbage (and hence local garbageproducing residents). 

Swin Resource Systems, 883 F.2d at 250 (footnote omitted). We 

held that the county, rather than regulating the waste disposal 

market, was "deciding the conditions under which [a private waste 

processor] could use [the public] landfill." Id. at 249. The 

county was simply operating a government facility in a manner 

that favored its own citizens over others, and its activities did 

not have "downstream" effects.19 

 The Department argues that the market participant 

doctrine is applicable here because New Jersey participates (or 

directs local government entities to participate) in the waste 

disposal market as sellers and purchasers of waste disposal 

 

19. In South-Central Timber Dev. v. Wunnicke, 467 U.S. 82 

(1984), a four-justice plurality held that the market participant 

doctrine did not apply to an Alaska regulation requiring in-state 

processing of timber obtained by private companies from state 

forest land because it had the effect of controlling aspects of 

the timber market in which the government, acting as a timber 

seller, did not participant. 467 U.S. at 97-99 (opinion of 

White, J.). The regulation was thus seen as having impermissible 

"downstream" effects. 
services and disposal capacity. The districts "sell" waste 

disposal services, according to the Department, through the 

designated disposal facilities. Where a district has opted not 

to own or operate the designated facilities directly, it 

"purchases" these services for "resale" by contracting with 

private facilities for the provision of waste disposal services. 

Thus, the Department maintains, the waste flow regulations simply 

represent a means by which the state manages the districts' 

market participation and the regulations are therefore protected 

from Commerce Clause scrutiny under the market participant 

doctrine. 

 While we do not quarrel with the Department's 

characterization of the districts' activities as involving 

purchases and sales of disposal service and capacity, we cannot 

agree with its conclusion that the waste flow regulations, 

therefore, cannot be violative of the dormant Commerce Clause. 

When a public entity participates in a market, it may sell and 

buy what it chooses, to or from whom it chooses, on terms of its 

choice; its market participation does not, however, confer upon 

it the right to use its regulatory power to control the actions 

of others in that market. In Wyoming v. Oklahoma, 502 U.S. 437 

(1992), for example, an Oklahoma statute required all electrical 

utilities in the state, including state-owned utilities, to burn 

a mixture of coal containing at least ten percent Oklahoma-mined 

coal. The Court recognized that Oklahoma could legitimately 

impose this restriction on state-owned utilities because, as a 

market participant, it was entitled to make its own decisions 
regarding energy source purchases. That fact did not, however, 

immunize from dormant Commerce Clause review its attempt to 

regulate the behavior of others in the market. As we have 

earlier noted, the Court applied heightened scrutiny and found 

the statute invalid.20 Oklahoma's participation in the market as 

an electricity producer did not permit it to regulate in a 

discriminatory manner privately owned utilities in the same 

market. 

 Under New Jersey's solid waste disposal program, the 

districts are doing more than making choices about what waste 

they will accept even in those instances where the district owns 

the designated facility. The waste flow regulations purport to 

control the market activities of private market participants. 

Those regulations do not concern only the manner of operation of 

the government-owned or government-managed designated disposal 

facilities; they require everyone involved in waste collection 

and transportation to bring all waste collected in the district 

to the designated facilities for processing and disposal. They 

do not merely determine the manner or conditions under which the 

government will provide a service, they require all participants 

in the market to purchase the government service--even when a 

 

20. The Court refused to uphold that portion of the statute 

that applied specifically to the state-owned utility after 

determining that it could not be severed from the remaining 

provisions. Wyoming, 112 S. Ct. at 802-04. In so doing, the 

Court stated: "We leave to the Oklahoma Legislature to decide 

whether it wishes to burden this state-owned utility when private 

utilities will otherwise be free of the Act's restrictions." Id.

at 804. 
better price can be obtained on the open market. New Jersey's 

waste flow control regulations were thus promulgated by it in its 

role as a market regulator, not in its capacity as a market 

participant. As a result, those regulations are not immune from 

review under the Commerce Clause. 

 

V. 

 Because we conclude that the waste flow regulations 

discriminate against interstate commerce on their face or in 

effect, and that they are not protected from dormant Commerce 

Clause scrutiny under the market participant exception, the only 

remaining question is whether the regulations can survive the 

heightened scrutiny test. "[O]nce a state law is shown to 

discriminate against interstate commerce either on its face or in 

practical effect, the burden falls on the State to demonstrate 

both that the statute serves a legitimate local purpose, and that 

this purpose could not be served as well by available 

nondiscriminatory means." Maine v. Taylor, 477 U.S. 121, 138 

(1986) (internal quotations and citation omitted). While 

Atlantic Coast urges us to decide whether the Department has so 

demonstrated, we decline to do so. 

 When the district court decided this case, C & A 

Carbone had not been decided and J. Filiberto Sanitation v. 

Department of Environmental Protection, 857 F.2d 913 (3d Cir. 

1988), was the law of this circuit. Understandably relying on 

Filiberto, the district court balanced the benefits to New Jersey 

against the burden on interstate commerce under Pike. It 
therefore had no occasion to consider whether the Department had 

accomplished the much more onerous task of demonstrating that 

there is no alternative to its waste flow control regulations 

that would accomplish its legitimate objectives. 

 The parties compiled a very substantial record in the 

district court, much of which consisted of live testimony the 

district court had the benefit of hearing. Based on that record, 

it is not difficult to believe the Department and the amici when 

they insist that New Jersey has one of the most serious and 

complex solid waste problems in the country. At the same time, 

it is apparent from the record that the feasibility and 

effectiveness of alternative measures pose technologically and 

economically complex issues. While these issues have been 

touched upon in the briefing before us, it is fair to say that 

they have not been the focus of the parties' efforts on this 

appeal.21 In this context, we believe that this court, the 

parties, and the public deserve the benefit of the district 

court's views before this controversy is finally resolved. 

 We are mindful of the fact that New Jersey has vowed 

not to abandon its present system until compelled to do so and of 

Atlantic Coast's contention that it suffers more irreparable 

 

21. The district court is in a far better position than we 

to evaluate whether the focus of the efforts of the parties 

before it would have been substantially the same had C & A 

Carbone been earlier decided. Accordingly, we leave it to the 

discretion of the district court in the first instance whether to 

resolve the remaining issues, including the issue of the 

appropriate form of relief if relief is to be granted, on the 

basis of the current record or to reopen the record for 

supplementary evidence. 
injury with each passing month. We note, however, that Atlantic 

Coast is free at any time to apply again for pendente lite

relief. The district court's prior decision to deny such relief 

was based primarily on its conclusion that Atlantic Coast had 

failed to demonstrate a likelihood of success on the merits of 

its challenge. This conclusion was based in turn on its view 

that the more lenient Pike test was the applicable one. After 

C & A Carbone, the likelihood of success issue is a materially 

different one from that which the district court previously 

addressed. 

VI. 

 Because the waste flow regulations discriminate against 

interstate commerce by restricting the access of out-of-state 

facilities to waste processing and disposal service markets, they 

can be upheld only if they can survive the heightened scrutiny 

required by C & A Carbone. Because the district court analyzed 

the waste flow regulations under the more lenient Pike balancing 

test, we will remand for application of the appropriate test. 

For the foregoing reasons, the district court's judgment in favor 

of the Department will be reversed and this case will be remanded 

for further proceeding consistent with this opinion.