Opinion ID: 774507
Heading Depth: 3
Heading Rank: 2

Heading: Private Ownership vs. Public Ownership

Text: 57 The Counties' waste management scheme creates a bottleneck. Within the bottle, private waste haulers compete for the opportunity to collect solid waste from individual and corporate generators located within the Counties. Once collected, the private waste haulers must deliver the waste to one of five designated, Authority-owned processing facilities located within the Counties, the bottleneck. For the time being, once the waste has been delivered, private waste disposal companies, both in-state and out-of-state, stand outside the bottle to bid, on an open and competitive basis, for the right to process and ultimately dispose of the waste delivered to the Counties' transfer station. The parties do not dispute, in any relevant respect, how the Counties' system is organized, but instead disagree about whether the flow control restrictions on private haulers, those within the bottle, are discriminatory under the Commerce Clause. 58 The Counties and the Authority urge us to analyze the flow control ordinances as part of their overall waste management scheme. Specifically, they argue that the bidding process for the operation of the Utica Transfer Station negates any alleged hoarding of the disposal service because it opens the local disposal market to out-of-state bidders. See, e.g., Harvey & Harvey, 68 F.3d at 801-02 (holding that selecting a favored facility or business with an open and fair bidding process that permits out-of-state competition comports with the dormant Commerce Clause). The district court, however, did not reach this aspect of the Counties' system. Furthermore, in several post-Carbone decisions, we severed our analysis of flow control ordinances from other aspects of a municipal waste management plan. See, e.g., Inc. Vill. of Rockville Ctr., 196 F.3d at 398-99; SSC Corp., 66 F.3d at 512-13; see also Huish Detergents v. Warren County, 214 F.3d 707, 715 (6th Cir. 2000). We do so here as well. 59
60 Our analysis naturally begins with Carbone, the Supreme Court's only occasion thus far to apply the Commerce Clause to a flow control ordinance. The SupremeCourt was presented with the following setting. 61 The Town of Clarkstown, New York agreed with environmental authorities to close its landfill and build a solid waste transfer station. See Carbone, 511 U.S. at 387. A local private contractor agreed to construct the facility, which the local contractor would own and operate for a period of five years. Id. The town thereafter agreed to buy the station back for one dollar. Id. To make the endeavor worthwhile, the contractor charged a set tipping fee for each ton of solid waste disposed of at the transfer station. The town guaranteed the transfer station a minimum yearly waste flow, which was intended to generate tipping fees sufficient to finance the cost of the facility. See id. at 412. To meet the minimum tonnage guarantee, the town enacted a flow control ordinance that required all waste within the town to be delivered to the transfer station. Id. The purpose of the ordinance was to finance [the] new facility with the income generated by the tipping fees. Id. 62 Clarkstown's ordinance differs from the Counties' ordinances in two significant respects. First, the Clarkstown ordinance applied to all solid waste within the town, whether that waste was generated within or outside the town. In contrast, the Counties' flow control ordinances apply only to waste generated within the Counties. 4 We do not rely on that distinction because, in SSC Corp., we struck down a flow control ordinance as indistinguishable from the ordinance in Carbone, even though the challenged law, unlike Carbone, applied only to waste originating within the town. 66 F.3d at 514. Second, the Clarkstown ordinance differs from the Counties' ordinances because the transfer station in Clarkstown was owned by a local private contractor. Carbone, 511 U.S. at 387. The Counties' transfer station, as well as the other designated facilities, are publicly owned. This latter distinction is determinative. 63 The majority opinion in Carbone held that Clarkstown's flow control ordinance was just one more instance of local processing requirements that [the Court] long [has] held invalid. Id. at 391. Stated otherwise, the ordinance hoard[ed] solid waste, and the demand to get rid of it, for the benefit of the preferred processing facility, in that case a single local proprietor. Id. at 392. The Court repeatedly referenced the private nature of the favored facility and repeatedly alluded to the dangers of allowing local government to favor local industry or a single local business over out-of-state competition. For example, the Court held that the town may not employ discriminatory regulation to give [the designated facility] an advantage over rival businesses from out of State. Id. at 394 (emphasis added). And again, [s]tate and local governments may not use their regulatory power tofavor local enterprise by prohibiting patronage of out-of-state competitors or their facilities. Id. (emphasis added). 64 United Haulers casts a blind eye to the Court's repeated reference to Clarkstown's favoritism for a single local proprietor. United Haulers contends that, read in conjunction, all three Carbone opinions imply a rejection of the distinction between public and private ownership for Commerce Clause purposes. The argument proceeds as follows: The dissenters in Carbone argued that the favored facility was an agent of the municipality and therefore publicly owned. Accordingly, the dissent argued that the ordinance did not discriminate against out-of-state business in favor of in-state business: 65 While our previous local processing cases have barred discrimination in markets served by private companies, Clarkstown's transfer station is essentially a municipal facility, built and operated under a contract with the municipality and soon to revert entirely to municipal ownership.... 66 The majority ignores this distinction between public and private enterprise, equating Local Law 9's hoard[ing] of solid waste for the municipal transfer station with the design and effect of ordinances that restrict access to local markets for the benefit of local private firms. 67 See id. at 419-20 (Souter, J., dissenting) (footnote omitted). The majority, the argument continues, although clearly aware of the dissent's contention, nonetheless held that the town may not use discriminatory regulation to earn revenues for its project. This holding, according to United Haulers, necessarily rejected the distinction between public and private ownership relied on by the dissent. 68 We disagree with United Haulers' reading of Carbone. A careful reading of the separate opinions in Carbone does not support United Haulers' theory. Indeed, if we were to divine direct guidance from those opinions, we would reach the opposite conclusion; namely, that in Carbone the Justices were divided over the fact of whether the favored facility was public or private, rather than on the import of that distinction. 69 As noted above, the Carbone majority referenced the private character of the favored facility several times, id. at 387 (local private contractor); id. at 392 (single local proprietor); id. at 394 (to give that project an advantage over rival businesses from out of State (emphasis added)). In contrast, Justice O'Connor, in her concurrence, characterized the Clarkstown scheme as a public monopoly, foreclosing competition from all competitors in-state and out-of-state. See id. at 402-03. As such, Justice O'Connor rejected the notion that the Clarkstown ordinance should be found discriminatory and, thus, analyzed under the Maine v. Taylor framework. Instead, Justice O'Connor would have analyzed, and ultimately struck down, the ordinance under the Pike balancing test. Id. at 403-07. Like Justice O'Connor, the three-justice dissent clearly articulated its view that the Clarkstown transfer station was public for dormant Commerce Clause purposes and, therefore, would have analyzed the ordinance under the Pike test. See id. at 410-30. Unlike Justice O'Connor, however, the dissent would have upheld the ordinance. In the face of these opinions, the majority's frequent reference to the private local contractor that legally owned the transfer station and its silence regarding the distinction between public and private ownership leads us to conclude that underlying its analysis of the constitutionality ofthe ordinance was a finding that the favored facility was private rather than public. 70 Nevertheless, we require more than the Court's silence on this point before concluding that it either rejected or accepted the public/private distinction advocated by the concurring and dissenting opinions. See Fort Gratiot Sanitary Landfill v. Mich. Dep't of Natural Res., 504 U.S. 353, 358-59 (1992) (noting that the case did not raise any question concerning policies that municipalities or other governmental agencies may pursue in the management of publicly owned facilities). As the majority in Carbone did not directly address the issue and its language can fairly be described as elusive on that point, we proceed to examine those local processing cases, upon which the Court placed heavy reliance. This examination removes any remaining doubt we may have had regarding the importance of the distinction between private and public ownership in the dormant Commerce Clause analysis of such cases. As discussed in great detail by the Carbone dissent, in each and every one of the local processing cases the challenged laws favored a local private business, industry or investment (not a state-owned facility or a public monopoly) to the detriment of out-of-state competitors. 71
72 A commonly cited example of the Court's local processing cases is Dean Milk Co. v. City of Madison, 340 U.S. 349 (1951). There, the Court struck down a city of Madison, Wisconsin ordinance that required all milk sold in the city to be pasteurized within five miles of the central portion of the city. The ordinance applied to all businesses, in-state and out-of-state. The practical effect of the ordinance, however, was to erect[] an economic barrier protecting a major local industry against competition from without the State. 340 U.S. at 354 (emphasis added). The fact that out-of-state businesses could build pasteurizing facilities within the five-mile radius did not make it any less discriminatory. Requiring local investment benefitted the city at the expense of other states and municipalities. In South-Central Timber Dev. v. Wunnicke, 467 U.S. 82 (1984), a four-justice plurality confirmed that export restraints undertaken to promot[e] employment or investment within the state fell within the rule of virtual per se invalidity. Id. at 100-01. There, the Court struck down a state regulation requiring in-state processing of timber. See id.; see also Hughes v. Oklahoma, 441 U.S. 322, 338 (1979) (striking statute that restricted the number of minnows that could be transported out-of-state); Minnesota v. Barber, 136 U.S. 313, 323 (1890). 73 Other decisions in the local processing line of cases evidence the same intent to prevent state or local governments from favoring in-state business or investment at the expense of out-of-state businesses. In Baldwin v. G.A.F. Seelig, 294 U.S. 511 (1935), another milk case, the Court struck down an ordinance which erected barriers to out-of-state competition of the local milk industry by instituting a system of minimum prices. Id. at 519. In Foster Fountain Packing Co. v. Haydel, 278 U.S. 1 (1928), the Court struck down a Louisiana statute which forbade the export of shrimp unless the heads and hulls had first been removed within the state. Id. at 12-14; see Johnson v. Haydel, 278 U.S. 16 (1928) (striking a similar Louisiana statute regarding thepre-shipment processing of oysters); see also Toomer v. Witsell, 334 U.S. 385, 403-07 (1948) (striking down South Carolina statute that required shrimp fishermen to unload, pack and stamp their catch before shipping it to another state). The Court held these statutes discriminatory because, whether in design or effect, they benefitted the local seafood processing industry over out-of-state competition. 74 United Haulers asks us to focus on the Court's broadly stated prohibition against the hoarding of local resources that otherwise would enter the stream of interstate commerce. A blanket prohibition against the hoarding of articles of commerce would appear to preclude the Counties' flow control scheme. However, we must interpret the Court's holdings in context, not in a vacuum. The common thread in the Court's dormant Commerce Clause jurisprudence, highlighted in the local processing cases discussed above, is that a local law discriminates against interstate commerce when it hoards local resources in a manner that favors local business, industry or investment over out-of-state competition. See, e.g., College Sav. Bank v. Fl. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666, 685 (1999) (describing the evil addressed by the Commerce Clause as the prospect that States will use custom duties, exclusionary trade regulations, and other exercises of governmental power (as opposed to the expenditure of state resources) to favor their own citizens). The majority in Carbone recognized this additional requirement while describing the evils of local processing laws: Put another way, the offending local laws hoard a local resource -- be it meat, shrimp,... milk [or garbage] -- for the benefit of local businesses that treat it. 511 U.S. at 392 (emphasis added). 75 There is sound reason for the Court's consistent, although often unstated, recognition of the distinction between public and private ownership of favored facilities: 76 Reasons other than economic protectionism are... more likely to explain the design and effect of an ordinance that favors a public facility.... An ordinance that favors a municipal facility, in any event, is one that favors the public sector, and if we continue to recognize that the States occupy a special and specific position in our constitutional system and that the scope of Congress' authority under the Commerce Clause must reflect that position, then surely this Court's dormant Commerce Clause jurisprudence must itself see that favoring state-sponsored facilities differs from discriminating among private economic actors, and is much less likely to be protectionist. 77 Id. at 421 (Souter, J., dissenting) (internal quotation marks and citation omitted). Not only are such regulations less likely to be protectionist, id., they are less likely to give rise to retaliation and jealousy from neighboring states. Moreover, ordinances that favor a public facility to the detriment of all private actors are equipped with a built-in check: municipal legislators are accountable to citizens, many of whose interests are likely to be aligned to some degree with the interests of private business, either as owners, employees or investors. Where the local legislation benefits local industry to the detriment of its competition, as in all of the local processing cases, this check is inadequate. Here it is not. 78 The principal burden of any economic inefficiency imposed by the Counties' ordinances falls on the residents of the Counties. They must pay over twice as much to dispose of their solid waste as they paid prior to the adoption of theordinances. There is no evidence that any out-of-state business or individual is paying more for waste collection or disposal as a result of the ordinances (as was the case in Carbone). The plaintiffs here are local waste collection companies. While it is true that private waste processors both in-state and out-of-state are prevented by the ordinances from competing to perform and receive payment for the operations performed at the mandatory transfer station, that disadvantage does not fall more heavily on out-of-state concerns than on local ones. The out-of-state processors furthermore have not complained, and there is no indication the deprivation represents a meaningful economic loss. 79 The Commerce Clause was not passed to save the citizens of Clarkstown from themselves. It should not be wielded to prevent them from attacking their local garbage problems with an ordinance that does not discriminate between local and out of town participants in the private market for trash disposal services and that is not protectionist in its purpose or effect. 80 Id. at 430 (Souter, J., dissenting). To the extent that a state or local government risks causing inconsistent local laws or inciting retaliation among the states to the detriment of the national market, the Pike test is a suitable vehicle for meaningful judicial review. 397 U.S. at 142; see Healy v. The Beer Inst., 491 U.S. 324, 336-37 (1989) (holding that, under the Pike test, the practical effect of the statute must be evaluated not only by considering the consequences of the statute itself, but also by considering how the challenged statute may interact with the legitimate regulatory regimes of other States). 81 United Haulers also relies on the fact that no case has yet expressly relied on the distinction between public and private ownership, see U & I Sanitation v. City of Columbus, 205 F.3d 1063, 1067-68 (8th Cir. 2000); Huish Detergents, 214 F.3d at 715-16 (striking down regulation that awarded private local waste collection company franchise over County collection duties); Waste Mgmt. v. Metro. Gov't, 130 F.3d 731, 733-36 (6th Cir. 1997); Harvey & Harvey, 68 F.3d at 807-09 (remanding for consideration of effects of local action awarding exclusive waste disposal contract to private local business), and that a number of appellate and district courts have implicitly rejected the distinction without discussion. See Waste Sys. Corp. v. County of Martin, 985 F.2d 1381, 1385-89 (8th Cir. 1993) (striking down ordinance that required all waste generated within locality to be delivered to public waste facility); Coastal Carting Ltd. v. Broward County, 75 F.Supp.2d 1350, 1352 & n.1 (S.D. Fla. 1999); Randy's Sanitation v. Wright County, 65 F.Supp.2d 1017 (D. Minn. 1999); Zenith/Kremer Waste Sys. v. W. Lake Superior Sanitary Dist., 1996 WL 612465, at -3, 10 n.13 (D. Minn. July 2, 1996); Waste Recycling v. Southeast Ala. Solid Waste Disposal Auth., 814 F.Supp. 1566, 1570, 1577-83 (M.D. Ala. 1993) (striking down flow control ordinances which required all waste to be delivered to a Public Authority landfill), aff'd, 29 F.3d 641 (11th Cir. 1994) (unpublished table decision). Assuming that these courts were faced with pure public ownership of the favored facility, as we are here, their holdings are not binding on our determination and have little persuasive value given that the courts did not directly address the issue we decide today. 82 Only one case has expressly addressed and rejected the distinction. See Southcentral Pa. Waste Haulers Ass'n, 877 F.Supp. at 943. There, private waste haulers were required by law to deliver all solid waste to a landfill, owned and operatedby the local solid waste authority, a public corporation. Id. at 938. The defendants, like the Counties and the Authority here, argued that Carbone did not apply to an ordinance that favored a publicly owned facility. Id. at 943. The district court, relying primarily on the Supreme Court's statements about hoarding local resources, was not persuaded that the public nature of the Authority facility changes the applicable analysis. Id. (citing Waste Sys. Corp., 985 F.2d at 1387, and Waste Recycling, 814 F.Supp. at 1578). We believe that it does change the analysis and we respectfully disagree with that decision for the reasons already discussed. 83 Moreover, we find ample precedential support for our conclusion in (1) the consistent underlying facts of the local processing line of cases, a line in which the majority squarely placed Carbone, and (2) the opinions of four Supreme Court Justices, all of whom characterized the facility in Carbone as publicly owned, and therefore would have analyzed the challenged ordinance under the more lenient Pike test. In this case, unlike Carbone, there is no confusion or room for debate regarding the ownership of the favored facilities. They are owned by the Authority, a public entity, and not by any local business. 84 To summarize, a flow control ordinance governing the processing of waste is not discriminatory under the Commerce Clause unless it favors local private business interests over out-of-state interests. Flow control regulations like the Oneida-Herkimer ordinances, which negatively impact all private businesses alike, regardless of whether in-state or out-of-state, in favor of a publicly owned facility, are not discriminatory under the dormant Commerce Clause. The district court erred by so holding.