Opinion ID: 3009773
Heading Depth: 1
Heading Rank: 3

Heading: application to these cases

Text: In granting judgment for Chester County, the district court determined that the Ordinance does not discriminate on its face nor is the primary purpose or effect to discriminate. The court, however, demanded too much, for in order to find a dormant Commerce Clause violation there is no requirement that discrimination must be the primary purpose or effect. This erroneous legal conclusion would alone mandate that we set aside the judgment and remand for consideration under the proper legal standard. Moreover, the current record creates the strong impression that the Chester County process was not sufficiently open, and that there was no real potential for amendment that 0 We assume that these flow control ordinances will always have a sufficient effect on interstate commerce to warrant at least some Commerce Clause scrutiny. 36 could offer out-of-state bidders a fair chance at Chester County's business.0 In combination, Pennsylvania's Act 101 and the Chester County ordinance require that waste from within Chester County be disposed of at one of the County's designated sites, all of which are located within the Commonwealth. Harvey contends that, because the County's Plan, adopted pursuant to the flow control ordinance, specifies only the Lanchester, SECCRA, and Pottstown facilities, the entire flow control scheme facially discriminates against inter-state commerce. We disagree. As in the public utility context described supra, local governments have the capacity, in the practical exercise of their police powers, which are at their strongest in the health and safety area, to contract with specific businesses to provide certain services. Furthermore, to accept Harvey's contention that a plan designating in-state sites facially discriminates against interstate commerce would require a local government to select out-of-state sites, irrespective of their merits, in order to withstand Commerce Clause scrutiny. This result plainly cannot prevail. 0 We have considered the joint motion of defendants (Chester County, the Authority, the Commonwealth of Pennsylvania, and the DER) to strike portions of appellant's opening brief and appendix. Essentially, the defendants argue that Harvey has relied on different excerpts from various depositions, agreements and exhibits than it did in the district court. But because the parts, albeit different parts, of the disputed materials were submitted to the district court, the materials were incorporated by reference into the record in their entirety. Thus, the Motion will be denied. 37 Also contrary to Harvey's assertions, this case does not resemble those cases involving export or import bans (we will refer to the alleged violation here as a ban on the importation of waste disposal site services) since those cases explicitly banned out-of-state interests from participating in the local market because they were from outside the state. See, e.g., Philadelphia, 437 U.S. at 624; Fort Gratiot, 112 S. Ct. at 2024. We do not mean to suggest that the ordinance must have the purpose of discriminating against inter-state commerce, for it is well settled that ordinances which have the effect of discriminating also violate the Commerce Clause. See Carbone, 114 S.Ct at 1684; Fort Gratiot, 112 S. Ct. at 2023-25. But if effects are the purported basis for unconstitutionality, the statute must have the consistent effect or the inherent bias of favoring one or more in-state interests. Harvey might still prevail if it can demonstrate that the Act or the Ordinance discriminates through some aspect of the selection process which favors in-state bidders for the designation because they are local facilities. Although Act 101 does not require flow control ordinances, it does offer guidelines to those localities which adopt them. We will therefore examine both the Act and Chester's Plan, as implemented by its ordinances.
The Act does not mandate flow control ordinances; it only authorizes counties to adopt them. SA 385; §303(a)-(e). One of the County's witnesses claimed that Pennsylvania's Act 101 38 directs the county to use a fair, open and competitive process to select its providers, see 53 P.S. §4000.502(f)(2) (requiring plan to describe alternative facilities considered and provide reasonable assurances that the county utilized a fair, open and competitive process for selecting such facilities or programs from among alternatives); 53 P.S. §4000.503(c) (requiring the county to make the plan available for a 90-day public review period and hold at least one public hearing on the proposed plan); 53 P.S. §4000.502(d) (providing that when additional disposal capacity is needed, the county shall give public notice of such a determination and solicit proposals and recommendations regarding facilities and programs to provide such capacity). While these provisions of the Act suggest an open process, other provisions do not seem so neutral. One provision, for example, provides that [p]roper and adequate processing and disposal of municipal waste generated within a county requires the generating county to give first choice to new processing and disposal sites located within that county. 53 P.S. §4000.102(6). Another provision states that County waste management plans shall identify the general location within a county where each municipal waste processing or disposal facility . . . will be located and . . . explain how the site will be chosen. For any facility that is proposed to be located outside the county, the plan shall explain in detail the reasons for selecting such a facility. 53 P.S. §4000.502(g) (emphasis added). By imposing an incremental administrative burden on counties attempting to designate a facility outside its borders, 39 these provisions clearly express a preference that counties use sites within their borders. While not as strong an expression of favoritism, the Act's preference for in-county sites resembles the policies we found offensive in Atlantic Coast. Although Pennsylvania's policy preferences evidence some intent to favor in-state sites, Harvey did not attack the Act directly and did not rely upon any of these passages of the Act. With the provisions nonetheless in mind, we will therefore proceed to examine the County's implementation of the waste disposal planning mandate to determine whether Chester County officials in fact favored sites within the county.
We do not doubt that the county's legitimate intention to comply with the Act0 motivated its adoption of flow control. But legitimacy of purpose generally does not end our inquiry. If the manner in which the county implemented its flow control system, particularly the process used to designate the ten year providers, favored in-county interests, then the flow control ordinance has the effect of discriminating against interstate commerce and must be subject to the strict scrutiny test enunciated in Taylor and Philadelphia. Chester County does indeed appear to have favored incounty interests. It is true that one cannot draw any inferences about the equity of the designation process from its description 0 There are indications that the state authority, the DER, was going to withhold approval of the plan unless it included flow control. SA331. 40 in the Chester ordinance. Section 2 of the ordinance originally defined designated facilities as those processing or disposal facilities designated by resolution of the Chester County Board of Commissioners adopted in accordance with the Plan. (SA 252). The lateear whether the Committee actually considered designating those sites or whether it was simply investigating an alternative method of waste disposal. If the Committee never considered designating those sitesy. Other provisions of the Plan, however, do reveal a bias for designating in-county sites. For instance, the Plan provides that The County will consider developing an in-County resource recovery facility (emphasis added), if in-County landfill capacity becomes unavailable, or if the County cannot secure sufficient capacity outside the county. These particular provisions of the Plan reveal that the Committee intended to keep the waste disposal business within the County. Although the county was not favoring all in-County sites simply because they were in state (thus not favoring inCounty sites as a group), this does not preclude a finding of impermissible discrimination. Establishing discrimination requires only a demonstration that out-of-state interests did not compete for designation on a level playing field. We believe that the County's economic interest in keeping the business at home and the Plan's legislative history, see, e.g., A135, suggest that the designation process did not offer a level playing 41 field.0 That the county sought only to provide environmentally safe waste disposal capacity, a legitimate exercise of its police powers, would not save the Plan: as we have explained, the evil of protectionism can reside in legislative means as well as legislative ends. Philadelphia, 437 U.S. at 627.
Harvey claims that, in preparing the Plan, the County never considered any out-of-state landfill for designation or allowed any such facility to submit a bid to accept County waste. If supported, these allegations would establish that out-of-state sites did not compete on a level playing field and that the process had the effect of discriminating against interstate commerce. At least some of these accusations are not borne out by the record, however. The County included a description of the Waste Advisory Committee's consideration of alternative sites, one of which was in Baltimore, Maryland, and one in Philadelphia.0 0 Although the county's pre-existing economic interest in the designated landfill creates the incentive for the county to favor these in-state sites in violation of the dormant commerce clause, not every case where the county has an economic stake in the designated site will result in such a violation. The county could, for example, have selected the designated sites in an open, fair and competitive process, and then made investments in improving those sites. The length of the period of designation would, of course, have to be related to the amount of the investment. 0 It is not clear whether the Committee actually considered designating those sites or whether it was simply investigating an alternative method of waste disposal. If the Committee never considered designating those sites, that would increase the impression that the process favored the in-state facilities. 42 But other aspects of the County's process are less reassuring. While the Committee met 13 times to discuss various aspects of the plan and evaluate the alternative waste disposal strategies and facilities (app 23), and while these meetings were supposed to be open to the public, they were advertised in only one small, local newspaper, the Daily Local News. Public hearings to review the draft Plan were held on May 29 and 31, 1990, but there is no reason to believe that those meetings were any better publicized.0 In the end, the Committee selected the two in-county sites that already served as the primary disposal sites for the County's waste. The Pottstown facility was designated as an alternate only after the process was concluded (as the result of two letters and public comment received during the review and comment period). Two factors in particular create the impression that parochialism rather than competition determined the outcome of the designation process: (1) that established local businesses won the designation; and (2) that the Pottstown site was designated as an alternative after the process had concluded -- a status that appears to have been specially created for this situation.
0 Of course, if the County can demonstrate on remand that the relevant out-of-state market participants knew about the designation opportunity anyway -- and perhaps word of such proposals travels quickly through the trade grapevine -- that would rebut the evidence about the lack of adequate publicity and tend to show that the process was open. Similarly, if the County could demonstrate that the publication was a specialized trade journal which effectively notified the relevant market participants despite its relatively small circulation, that would also refute evidence that the bidding process was closed. 43 The capacity to amend the Plan in order to add additional sites does not appear sufficiently to mitigate the effect of having chosen the established in-state interests. If the amendment process were open and fairly liberal, it could conceivably save the initially discriminatory effect of home cooking. But the amendment process in Chester's Plan is quite constrained: additional sites can only be designated if the existing facilities have insufficient capacity, are unable to obtain expansion permits, develop unforeseen environmental problems which preclude continued use of those facilities, or are subject to regulatory changes which affect their capacity or preclude their continued use. See Chester County Selection and Justification of Municipal Waste Management Program § 6.3.4. The prospect that an out-of-state site could gain designation through the amendment process is too remote to equalize the opportunity for out-of-state businesses, which were initially shut out, to participate in the local waste disposal market. There were, moreover, indications that the Committee had no intention of designating additional facilities. First, one of the Committee members wrote to the DER specifically requesting guidance on whether the County was obligated to review each request formally since it did not wish to designate additional disposal facilities at this time. Second, the Authority had covenanted in the 1990 bond indenture not to construct, acquire or operate any waste processing plants, 44 structures, facilities or properties which would compete for revenues with those already designated by the Authority.0
It also appears that Chester County may have had an economic motive for favoring certain in-county sites. The County had purchased the Lanchester landfill through the issuance of $42.55 million in revenue bonds. (b.8). The County has guaranteed an additional $41.5 million in Authority debt, secured a $9.2 million letter of credit, and committed to provide the Authority with an additional $9.5 million for landfill projects. That the flow control ordinance was not adopted until after the county had financed the authority's purchase of SECRA does not lessen its incentive to assure the Authority's revenues and thereby shield its exposure under the guarantee agreement. Flow control certainly would be an effective means to achieve this end: designation conferred on the three selected sites the capacity to charge 200-300% of the prevailing tipping fees at alternative sites. Lanchester charged $57 per ton and SECCRA charged $52 per ton. The Baltimore facility, by contrast, charged only $34 per ton. Furthermore, the legislative history of the flow control scheme suggests that this financial pressure did indeed play a role. The County's Administrative Agreement with the Authority also reflects this pressure. In that 0 Despite this documentary evidence indicating that there was little chance of an amendment, Chester County's counsel represented at oral argument that the county would consider amending the Plan to designate any facility that submitted a suitable bid. The district court will want to probe these conflicting indications on remand. 45 agreement, the County committed not to adopt a new Plan or to amend the existing plan in such a manner as to reduce the existing service area of the Authority or to narrow the definition of municipal waste directed to the Authority, [the owner of the SECCRA facility]. SA 373, §6(a) [Amended and Restated Administrative Agreement]. The need to protect the county's financial interests thus appears to have played a role in the county's decision to adopt flow control. In this respect, this case closely resembles Carbone, where the Supreme Court found discriminatory Clarkstown's avowed purpose . . . [of] retain[ing] the processing fees charged at the transfer station to amortize the cost of the facility. 104 S. Ct. at 1680.
While the Act requires a fair, open and competitive process, and while the Committee did consider at least one outof-state and several out-of-county sites, it appears that Chester County's designation process did not afford other sites, including out-of-state sites, a level playing field. Because, for the many reasons stated, the process appears to have been biased in favor of the Lanchester, SECCRA and Pottstown facilities, the Plan and its implementing ordinances might have the effect of discriminating against interstate commerce. Nevertheless, because the district court did not have the benefit of Atlantic Coast or of the clarifications we offer today, we will remand so that the district could may consider Chester County's flow control scheme in light of these principles. We 46 therefore reverse the judgment and remand for further proceedings consistent with this opinion. B. TRI-COUNTY INDUSTRIES, INC. V. COUNTY OF MERCER The district court in the Western District of Pennsylvania found that the Mercer County flow control scheme enacted pursuant to the Act discriminated against interstate commerce and granted injunctive relief in favor of the plaintiff/hauler. The district court opined: It is the designation of a single, in-state landfill, rather than the process by which it was designated, that has resulted in the discrimination against interstate commerce. This conclusion is at odds with our conclusion that the focus should be on the designation process, on the reasonableness of the duration of the designation and on the practical likelihood of an amendment to designate an out-of-state facility. Despite the erroneous legal standard used by the district court, we could affirm its decision if it appeared that these aspects of Mercer County's flow control scheme discriminated against interstate commerce. But we are not convinced that the facts in the record can establish either that Mercer County's designation process was truly discriminatory, that the contractual tipping fee was unreasonable at the time the site was selected, or that there was insufficient likelihood of amendment to show that the scheme discriminated against out-ofstate bidders. For these reasons, and those explained infra, we must reverse and remand for further development of these aspects in order to gauge the real extent of the opportunity enjoyed by 47 out-of-state providers to participate in the Mercer County waste disposal market. The Mercer County scheme resulted in the designation of a single site. Although the designated site is not located within Mercer County, it is in Pennsylvania. It is possible that the site's selection resulted from in-state prejudice. Because Carbone rejected the argument that a statute had to favor all instate interests as a group in order to be discriminatory, the fact that Mercer's scheme allegedly favors only a single in-state site does not preclude a Commerce Clause challenge. Nevertheless, that only one in-state site has been selected under the county's designation process provides less evidence that the process has a discriminatory effect -- that is, that the process tends to select in-state sites -- than if a greater number of in-state sites had been selected in the designation process. As with Harvey, the flow cr Discriminatory Effect We still must directly address the question whether the selection criteria have the effect, irrespective of the County's intent or its economic interests, of favoring in-state interests. We emphasize that this case does not involve facial discrimination: the designation process set objective criteria to choose the facility. Moreover, the RFP requirements appmpt to open its designation process to out-of-state sites. Unlike Atlantic Coast, where the scheme had the explicit goal of securing in-state disposal capacity, Mercer County officials testified that no preference was given to in-state or out-of-state facilities. And unlike Chester County, the county prepared detailed bid 48 specifications and advertised its RFP nationwide. Twenty three companies purchased the RFP package, including companies from Pennsylvania, Ohio, New York, Maryland, New Jersey, Minnesota and Louisiana. Only four companies submitted bids in response to the RFP, and they all had landfills in Pennsylvania. The appellee, Tri-County, was among the four which submitted bids. As the district court acknowledged: [T]he failure of the Authority to designate an out-of-state disposal facility was not the result of discrimination. Rather, it was attributable to the failure of any out-of- state disposal facility to bid on the contract, and the evidence clearly established that the procedures followed by the Authority in selecting a disposal site were fair, open and competitive, as required by Act 101. Dist. Ct. Op. at 13. (citation omitted). These facts certainly suggest that the process was fair, open, and competitive. Nevertheless, on remand Tri-County may be able to identify specifications of the bid or decisional criteria with a discriminatory effect. 2. Lack of Economic Interest Because the county had a relatively small economic interest in the facilities economic performance (it received a $1 per ton surcharge on the waste dumped at the facility), the district court concluded that the ordinance did not foster economic protectionism. As we have seen, and as the district court recognized, that the ordinance serves legitimate local purposes, does not save Mercer County's flow control scheme if 49 it has the effect of favoring in-state interests. But the relative lack of economic interest refutes at least one basis for the argument that the designation process did not really offer a level playing field to out-of-state competitors. 3. Potential for Discriminatory Effect We still must directly address the question whether the selection criteria have the effect, irrespective of the County's intent or its economic interests, of favoring in-state interests. We emphasize that this case does not involve facial discrimination: the designation process set objective criteria to choose the facility. Moreover, the RFP requirements applied equally to all disposal facilities, irrespective of their location. While this provision appears to rule out special dispensations for instate sites, it does not preclude the possibility that some of the requirements were in practice more burdensome for out-ofstate interests. That a number of out of state companies requested the RFP package but that not a single out-of-state interest submitted a bid raises the concern that some aspect of the RFP discouraged out of state interests. We recognize, of course, that there was a considerable attrition rate in this process overall, which may indicate that Mercer County's business was not terribly attractive to any landfill operator. Indeed, of the twenty-three companies (in- or out-of-state) who requested the package, only four submitted a bid. On this record, however, it is impossible to determine whether the bid requirements had -- or would tend to have -- a disparate effect on out-of-state businesses. On remand, the 50 district court might consider statistical or other evidence regarding the differential drop out rates of firms in this contested designation process and/or expert testimony on the issue whether any specific RFP requirement was in fact more costly or burdensome for an out-of-state site to comply with.
It is important to note that Mercer's scheme would be less problematic if a realistic opportunity existed for an outof-state landfill to compete for at least some of the county's business within a reasonable period, either because amendment to designate an additional site was more likely or because the contract period was not so long. Although the County did have the capacity to amend its Plan to designate an additional site0, the County conceded that it probably did not have enough waste to justify adding another facility, especially since the county had been advised that it would be most efficient for it to use a single site. Dist. Ct. Op., Add. 32-33. The designation of the site in this case, therefore, effectively amounts to the grant of a monopoly for the period of the designation. Because the Act required the counties to secure ten-year access to disposal capacity, we will not attribute a discriminatory motive to the county's effective grant of a ten-year monopoly in this case.0 0 Section 3 of the Ordinance No. 6-1991 provides: All Municipal Waste shall be transported to and delivered to the Facility designated by MCSWA from time to time. . . . 0 Although we do not infer a discriminatory purpose from the length of the contractual period, we concede that this would be an easier case if the losers in the designation process were not precluded from the local market for ten years. Nevertheless, we cannot say, given the costs of constructing and operating 51
The possibility still exists, however, that the county contracted for a tipping fee that was so high relative to the ten-year tipping fees (the rate that the parties would be willing to fix for the entire period) prevailing in the market at the time of contracting that it would suggest an attempt to confer some extraordinary, super-monopolistic profit on the chosen landfill operator. It is not clear whether, in addition to securing ten-year disposal capacity, the Act required the County to lock in a price as well. Regardless, we would not infer any discrimination from the County's desire to lock in the price unless it turns out that the price was unreasonable at the time the site was selected. Although the County appears to have made a bad bet on the price of long term waste disposal,0 the market could just as easily have moved in the opposite direction and made county officials look financially savvy.0 Indeed, the differential between the contracted tipping fee and the spot market is much smaller than it is in the Harvey case: the contractual tipping fee was $35 per ton relative to the spot rates of $17.20 at the American Waste Landfill or the $27.95 due at the Carbon Limestone Landfill. environmentally sound facilities, that the ten-year period was unreasonable. 0 Spot market tipping fees, fees charged to dump waste today only, have declined precipitously since the County made its contract with the facility in Butler County. Spot rates currently are apparently approximately $17.50 - $30.00 per ton. 0 County officials apparently chose to lock in the tipping fee out of their concern that tipping fees would continue to escalate. See dist. ct. adjudication. 52 Appellees devote considerable effort to their attempts to demonstrate the less restrictive alternative means of ensuring long term environmentally safe waste disposal capacity. We do not pass on the efficacy of these alternative strategies. If the district court decides on remand that the Mercer County designation scheme has the effect of discriminating against outof-state interests, it must then under the strict scrutiny standard address both the question whether the government interest is strong enough and whether less discriminatory means to achieve the same goal are available.