More than 20 years after the US Supreme Court ruled that the interstate movement of trash is "commerce" and more than six years after the high court struck down overt flow control, some states and localities are still adjusting.

By Barry S. Shanoff

"We’re going to fight hard," Virginia Governor James S. Gilmore III told a radio audience in July 1999, as the state fretted over the specter of New York City trash arriving via barge. "Virginia cannot become the dumping ground for garbage from New York or anywhere else.... We’ll take it all the way to the Supreme Court if we have to."

His remarks came on the heels of a federal district court ruling that put a crimp in the state’s efforts to curtail the importation of out-of-state waste into the commonwealth. In a written opinion that accompanied his decision, US District Judge James R. Spencer sharply criticized the state’s attempt to restrict garbage barge traffic and trash disposal at large private landfills. By the time the governor’s remarks were broadcast, a federal appeals court already had rejected a plea from the state attorney general to overturn or delay the district court’s preliminary injunction.

As expected, Judge Spencer eventually ruled against the state on the legal merits of its case, finding that the legislative scheme overtly discriminated against out-of-state interests (Waste Management Holdings, et al. v. Gilmore, No. 3:99CV425, E.D.Va. (Feb. 2, 2000)).

The United States Constitution gives Congress the power to "regulate Commerce with foreign Nations, and among the several States..." (Art. I, §8, cl. 3). The Supreme Court, however, has long interpreted the so-called Commerce Clause as a backhanded limitation on the power of states and local governments to enact laws that burden such commerce. This "hands-off!" aspect of the Commerce Clause means that municipalities, counties, special districts, and other nonfederal authorities at all levels may not freely meddle in certain kinds of economic activity.

More than two decades ago, the Supreme Court announced that the interstate movement of solid waste is "commerce" for purposes of the Commerce Clause. Thus, states cannot restrict such movement without subjecting their action to constitutional scrutiny. In City of Philadelphia v. New Jersey, 437 US 617 (1978)), the high court invalidated a New Jersey law that blocked the in-state disposal of waste that originated outside the state. Although New Jersey had the right to limit access to its diminishing waste disposal capacity, it could not selectively embargo waste based on its out-of-state origin, the majority opinion said. Ever since this landmark ruling, the Supreme Court has repeatedly overturned attempts by states and localities to ban, unduly restrict, or specially tax out-of-state waste destined for local disposal.

During the 1980s, environmental mandates from federal and state authorities forced local governments to build and operate advanced, innovative waste disposal facilities that cost hundreds of millions of dollars and required long-term financial commitments. But when key private-sector tax incentives were eliminated, the ownership and operation of waste disposal facilities, together with the corresponding financial burden, shifted to public agencies. As a result, the viability of these solid waste processing and disposal facilities became dependent on the ability of local officials to control how and where the collected waste was handled.

Many local governments enacted flow control ordinances, which forced waste haulers to transport their loads to landfills or other waste management facilities designated by local officials. Such directives guaranteed a specific waste supply and corresponding revenue at the selected facilities.

As the Commerce Clause reserves to Congress the power to "regulate Commerce...among the several States," the Supreme Court has developed a constitutional loophole known as the "market participation" doctrine. It allows states and units of local government to behave in the marketplace on the same terms and with the same limitations as a private party.

Under Supreme Court guidance, the lower federal courts conduct a two-stage analysis whenever a state or municipal program or activity is alleged to be unlawfully interfering with interstate commerce. Initially, the trial judge must decide from the evidence whether the governmental unit is "regulating" the market or merely "participating" in it. Whenever a state or locality buys or sells goods or services as any private entity might do, it is deemed to be a "market participant" and thus not affected by Commerce Clause limitations.

A government agency with exclusive authority over solid waste from municipalities within its borders may sign binding agreements with municipal officials for the delivery of a guaranteed volume of locally generated waste to the agency’s disposal facility and for the payment of tipping fees, according to a federal appeals court ruling (Village of Rockville Centre v. Town of Hempstead, 196 F.3d 395 (2d Cir. 1999)). Notably, the opinion referred to specific wording in the contracts on the agency’s need for waste flow and tipping-fee commitments to ensure the facility’s financial stability and on the municipalities’ need for a long-term waste disposal solution.

"(A) private party seeking to enter the waste disposal market, but having to fund...(an) incinerator...very likely would have engaged in the same...actions...taken by the town...when it negotiated and subsequently sought to enforce the (agreements)," the appeals court noted. "The key contract provisions...mirror language that is typical in...private requirements contracts(,) reflect(ing)...the economic needs of both parties."

A state or local government that acts as a market participant may pick and choose its business partners, its terms of doing business, and its business goals just as if it were a private party. For example, the Supreme Court has upheld (1) a Maryland program that gave state-funded bounties to all scrap processors, but saddled out-of-state processors with onerous paperwork and (2) a requirement that projects funded by the City of Boston be performed by crews made up of at least 50% city residents.

Federal appeals courts have cited the market participation doctrine in upholding waste management programs under arrangements that compel the contract or franchise service provider to deliver waste to a designated facility, even where local governments have entirely displaced private waste companies and assumed exclusive responsibility for collection and disposal. (Compare SSC Corp. v. Town of Smithtown, 66 F.3d 502 (2d Cir. 1995) with Sal Tinnerello & Sons, Inc. v. Town of Stonington, 141 F.3d 46 (2d Cir. 1998).)

Where government action is essentially "regulatory" in nature, however, the court’s inquiry progresses to a second phase: whether the activity discriminates against interstate commerce or regulates evenhandedly with only "incidental" effects on interstate commerce.

As the Supreme Court put in Oregon Waste Systems, Inc. v. Dept. of Envtl. Quality, 511 US 93 (1994),

"discrimination" simply means differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter. If a restriction on commerce is discriminatory, it is virtually per se invalid. By contrast, nondiscriminatory regulations that have only incidental effects on interstate commerce are valid unless "the burden imposed on such commerce is clearly excessive in relation to the putative local benefits" (citations omitted).

If a plaintiff presents evidence that a governmental directive or restraint discriminates against interstate commerce "either on its face or in practical effect," then the public-agency defendant is obliged to prove that the challenged measure promotes a legitimate local purpose and that equally effective but nondiscriminatory alternatives are unavailable.

In C&A Carbone, Inc. v. Town of Clarkstown, 511 US 383 (1994), the Supreme Court invalidated an ordinance that required haulers to transport nonhazardous solid waste, whether or not locally generated, to a town-designated transfer station. The facility had been built by a private contractor in exchange for the town’s guarantee that the transfer station would receive at least 120,000 tons of waste per year. The tipping fee was higher at the transfer station than at facilities outside the town. Thus, the municipal officials needed the ordinance to ensure a sufficient waste volume to minimize the town’s liability under a commitment to compensate the contractor with cash payments in case of any waste shortfall.

As high court saw it, the town’s ordinance overtly discriminated against interstate commerce by favoring the facility contractor, thereby depriving out-of-state competitors of access to a local market. "(J)ust one more instance of local processing requirements that we long have held invalid," the 6-3 majority sniffed. Since Carbone, overt flow control measures have been consistently struck down by federal district and appeals courts throughout the country.

If a challenger alleges that a waste-facility designation scheme illegally discriminates against interstate commerce, the complaining party must prove that the designation process, directly or indirectly, favors in-state economic interests. In response, governmental defendants can present evidence that the designation process was open, fair, and competitive. According to a decision handed down several years ago by a federal appeals court,

(s)uch evidence might include bid solicitation, selection criteria, evaluation of bidders, and so on, but such evidence alone may be insufficient to prove the flow control scheme’s neutrality. The government defendants in these cases might also present additional evidence, such as statistical evidence or expert testimony, demonstrating that different aspects of the designation process are as neutral to out-of-state interests in practice as they appear on their face. Municipalities that have adopted flow control schemes would also be wise to demonstrate that the goals of the designation process included capacity assurance and the protection of the public health and safety (Harvey & Harvey, Inc. v. County of Chester, 68 F.3d 788 (3d Cir. 1995)).

Despite such rebuttal evidence, a plaintiff still may be able to prove discrimination. If so, the governmental agency is left with a daunting task: establishing that it lacked a nondiscriminatory alternative that could have adequately protected its legitimate local interests (see Maine v. Taylor, 477 US 131 (1986)).

A municipal waste system or activity that survives the "discrimination" test nevertheless must overcome yet another constitutional hurdle. In Pike v. Bruce Church, Inc., 397 US 137 (1970), the Supreme Court noted, "(Where a) statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits."

In effect, if the challengers cannot prove that the governmental authority has created requirements and limitations on out-of-state firms that do not apply to in-state firms, then the court must weigh the wider effects of the impediments against the legitimate local interests served by the program.

Although not overtly discriminating against interstate commerce, a city ordinance that requires haulers to bring locally collected mixed waste to a municipal transfer station, except for loads destined for out-of-state disposal, nevertheless may unlawfully diminish or impair the interstate market in recyclable materials extracted from the waste (U&I Sanitation v. City of Columbus, 205 F.3d 1063- 8th Cir. 2000).

The City of Columbus, NE, and nearby communities built a regional landfill and share its operating costs. The city operates a transfer station with a $49 tipping fee that helps pay the city’s share of the landfill expenses. The fee also supports the transfer station and other beneficial community waste management projects, including recycling and composting. Haulers deliver mixed loads to the transfer station where hazardous materials are removed but no recyclable items are separated.

Hauler U&I’s customers account for about one-fifth of the waste coming from the city. When the company began taking loads to a private landfill where it paid a $23 tipping fee, the city attempted to stem the corresponding loss of revenue by passing a flow control ordinance, designating the transfer station for all locally collected waste that was not shipped for disposal outside Nebraska.

When the company refused to comply with the ordinance, the city suspended the hauler’s license. In response, U&I sued the city in federal district court for interference with interstate commerce. The district judge upheld the flow control measure. An appeals court, however, while agreeing with the trial judge that the ordinance did not outright discriminate against interstate commerce, found that local interests (i.e., revenue generation) were outweighed by "the interstate effect on the recyclables market if several (Nebraska) jurisdictions (passed) similar ordinances."

Some states encourage local communities to take control of the haulers and landfills that serve their collection and disposal needs. Inexplicably, the same federal appeals court that invalidated the Columbus ordinance had several months earlier upheld an Iowa solid waste disposal program that empowers local governments to sign agreements with waste transporters and disposal facilities and to select in-state landfills for locally generated waste (United Waste Systems of Iowa, Inc. v. Wilson, 189 F.3d 762 [8th Cir. 1999]).

The court called the state’s program "an evenhanded regulatory scheme" that does not discriminate against interstate commerce. "[The state] freely permits political subdivisions to send their wastes to out-of-state facilities... Cities and counties...are free to renegotiate their landfill contracts and alter their comprehensive plans to designate a different landfill."

Meanwhile in Virginia, where state officials have vowed to travel every legal path to stem the flow of trash into the state, local governments continue to enjoy considerable authority and discretion to invite proposals from landfill operators and to host large waste facilities.

Professor Donald Cell perceptively noted in a July 1999 op-ed piece in the Washington Post, "The issue in solid waste is not about crossing state lines. Rather, it is between cities and suburbs that produce most of the waste and the countryside that hosts most of its disposal."

Under agreements with landfill developers, local communities in Virginia - and throughout the country - have achieved sizable financial gains and amenities, including infrastructure improvements and donations to public safety and educational needs. Besides tonnage-based cash payments, landfill operators have agreed to ratchet up environmental safeguards, exceeding already stringent state standards, and to restrict waste volumes, operating hours, and access routes.

For their part, states rightfully have a critical role in ensuring that all solid waste management facilities protect human health, safety, and the environment. However, transportation, capacity, and siting issues, as well as facility design and operating standards, must be addressed through deliberative state plans and regulatory programs - not with ad hoc measures. At the same time, local governments need the means, vision, and resolve, not merely to negotiate with facility owners and managers regarding operating concerns and host benefits, but to take full advantage of the interstate marketplace.

Barry S. Shanoff, a Washington, DC, attorney, represents local governments throughout the country on solid waste matters and serves as general counsel for the Solid Waste Association of North America.

MSW
Elements 2001