Natl Solid Wastes v. Daviess Cnty KY ( 2006 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 06a0035p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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NATIONAL SOLID WASTES MANAGEMENT
Plaintiff-Appellee, -
ASSOCIATION,
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No. 04-6498
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v. >
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Defendant-Appellant. -
DAVIESS COUNTY, KENTUCKY,
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Appeal from the United States District Court
for the Western District of Kentucky at Owensboro.
No. 04-00031—Joseph H. McKinley, Jr., District Judge.
Argued: November 29, 2005
Decided and Filed: January 24, 2006
Before: CLAY and COOK, Circuit Judges; COOK, District Judge.*
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COUNSEL
ARGUED: Allen W. Holbrook, SULLIVAN, MOUNTJOY, STAINBACK & MILLER,
Owensboro, Kentucky, for Appellant. Dennis J. Conniff, FROST BROWN TODD, Louisville,
Kentucky, for Appellee. ON BRIEF: Allen W. Holbrook, SULLIVAN, MOUNTJOY,
STAINBACK & MILLER, Owensboro, Kentucky, for Appellant. Dennis J. Conniff, Amy D.
Cubbage, Sheryl G. Snyder, FROST BROWN TODD, Louisville, Kentucky, for Appellee. Michael
J. Cahill, GERMANO & CAHILL, Holbrook, New York, for Amici Curiae.
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OPINION
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CLAY, Circuit Judge. Defendant Daviess County, Kentucky appeals the November 19, 2004
order of the United States District Court for the Western District of Kentucky granting summary
judgment for Plaintiff National Solid Wastes Management Association (“NSWMA”), declaring
proposed Daviess County Ordinance 830.5 (“Ordinance”) unconstitutional, and enjoining the
County from enforcing the terms of the Ordinance. For the reasons set forth below, this Court
AFFIRMS the district court order.
*
The Honorable Julian A. Cook, United States District Judge for the Eastern District of Michigan, sitting by
designation.
1
No. 04-6498 Nat’l Solid Wastes Mgmt. Assoc. v. Page 2
Daviess County, Kentucky
I. BACKGROUND
A. PROCEDURAL HISTORY
On March 25, 2004, Plaintiff filed a complaint against Defendant that sought a declaratory
judgment that the Ordinance was unconstitutional because it violated the dormant Commerce Clause
and a permanent injunction barring Defendant from enforcing the Ordinance against Plaintiff’s
members.
Both parties filed motions for summary judgment.
On November 19, 2004, the district court granted Plaintiff’s motion for summary judgment,
denied Defendant’s motion for summary judgment, issued a declaratory judgment that the Ordinance
was unconstitutional, and issued a permanent injunction barring Defendant from enforcing the terms
of the Ordinance.
On December 17, 2004, Defendant timely filed a notice of appeal.
B. FACTS
The facts are not in dispute. Defendant is a county located in Kentucky. Under Kentucky
law, Defendant is responsible for developing and implementing solid waste management plans for
the county. Ky. Rev. Stat. Ann. § 109.011(9) (West 2005). Pursuant to this responsibility,
Defendant enacted the Ordinance on February 19, 2004. The Ordinance states, in relevant part:
1. Daviess County Fiscal Court shall provide universal municipal solid waste
collection within its jurisdiction through the grant of nonexclusive franchises.
2. All franchise agreements entered into under this ordinance shall require the
party providing municipal solid waste collection service to dispose of the
waste they collect at the Daviess County Landfill or Transfer Station.
3. Nonexclusive franchises shall be granted to all haulers that are properly
registered in accordance with KRS 224.43-315(2), have properly filed an
annual report as required by KRS 224.43-315(3), and are in compliance with
all other applicable laws and regulations.
4. No hauler shall be allowed to collect municipal solid waste in Daviess
County unless granted a franchise by Daviess County Fiscal Court.
Plaintiff is a trade association whose members are “engaged in various aspects of solid waste
management, including the collection, transportation and disposal of municipal solid waste
generated in Daviess County.” (J.A. at 8.) One of these members is Republic Services of Kentucky,
LLC (“Republic”). Republic currently conducts business in Daviess County as a waste collector,
and it disposes of this waste either at Plaintiff’s transfer station or at a Kentucky landfill owned by
Republic. Plaintiff claims that its members operating within Daviess County as waste collectors
may need to dispose of waste in the future at out-of-state disposal sites. Plaintiff also claims that
its members who operate out-of-state waste disposal sites will be unable to participate in the waste
disposal market for Daviess County.
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Daviess County, Kentucky
II. DISCUSSION
A. STANDING
This Court has an independent obligation to determine whether it has subject matter
jurisdiction over a case, including whether Plaintiff meets the requirements of constitutional and
prudential standing. In re Cannon, 277 F.3d 838, 852 (6th Cir. 2002). This Court reviews these
standing issues de novo. Id. (citing Johnson v. Econ. Dev. Corp. of the County of Oakland, 241 F.3d
501, 507 (6th Cir. 2001)).
1. Constitutional Standing
Under Article III, Plaintiff must demonstrate three components to establish standing: “(1)
an injury in fact that is actual or threatened; (2) a causal connection between the defendants’ conduct
and the alleged injury; and (3) a substantial likelihood that the injury will be redressed by a
favorable decision.” Huish Detergents, Inc. v. Warren County, 214 F.3d 707, 710 (6th Cir. 2000)
(citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)).
We find that Plaintiff has established constitutional standing. With respect to the first
element, NSWMA members who are waste collectors in Daviess County would be prohibited from
contracting with less expensive waste disposal sites under the Ordinance; in fact, member Republic,
a waste collector in the county, also owns a waste disposal facility that it would be unable to use.
Moreover, NSWMA members who own waste disposal sites cannot contract with waste collectors
for disposal of solid waste that is generated within Daviess County. Thus, the Ordinance would
work an actual injury on NSWMA members. With respect to the second element, a causal
connection exists between Defendant’s conduct and the injury; without the Ordinance, NSWMA
members would be free to contract to dispose of waste at sites other than the County-owned disposal
site or transfer station. With respect to the third element, a favorable decision would redress
Plaintiff’s injury, as an injunction against the enforcement of the Ordinance would allow NSWMA
members to freely contract for waste disposal services.
2. Prudential Standing
In addition to the Article III requirements, Plaintiff must prove prudential standing;
specifically, Plaintiff must demonstrate that the interest that it seeks to protect is “‘within the zone
of interests protected or regulated by the statutory provision or constitutional guarantee invoked in
the suit.’” Id. (quoting Bennett v. Spear, 520 U.S. 154, 162 (1997)). Here, Plaintiff claims
Defendant’s Ordinance is in violation of the dormant Commerce Clause. The Supreme Court has
explained that “[t]he central rationale for the rule against discrimination [under the dormant
Commerce Clause] is to prohibit state or municipal laws whose object is local economic
protectionism, laws that would excite those jealousies and retaliatory measures the Constitution was
designed to prevent.” C&A Carbone, Inc. v. Clarkstown, 511 U.S. 383, 390 (1994).
We find that Plaintiff has met the prudential standing requirement. This Court has
specifically held that the1Commerce Clause protects a party’s right to contract with an out-of-state
waste disposal provider. Huish Detergents, 214 F.3d at 711 (“In making this claim, [the plaintiff]
1
The fact that Plaintiff has not shown that waste generated within Daviess County has actually crossed state
lines is of no import with respect to prudential standing; the Commerce Clause protects the right to contract across state
lines, not just the actual movement of goods or services across state lines. See Huish Detergents, 214 F.3d at 710-11.
While one other circuit has seemingly required such actual movement, see Nat’l Solid Waste Mgmt. Assoc. v. Pine Belt
Reg’l Solid Waste Mgmt. Auth., 389 F.3d 491, 498-501 (5th Cir. 2004), the law of this Court recognizes prudential
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Daviess County, Kentucky
is asserting its individual right . . . to purchase waste processing and disposal services across State
boundaries, an interest that falls squarely within the zone of interests protected by the Commerce
Clause.”)
B. THE DISTRICT COURT DID NOT ERR WHEN IT FOUND THAT THE
ORDINANCE WAS FACIALLY DISCRIMINATORY AGAINST INTERSTATE
COMMERCE
1. Standard of Review
This Court reviews the district court’s grant of summary judgment de novo. Odle v. Decatur
County, 421 F.3d 386, 389 (6th Cir. 2005) (citation omitted). The moving party must show “that
there is no genuine issue as to any material fact and that the moving party is entitled to a judgment
as a matter of law.” Fed. R. Civ. P. 56(c). The Court “must view all the facts and the inferences
drawn therefrom in the light most favorable to the nonmoving party.” Cummings v. City of Akron,
418 F.3d 676, 682 (6th Cir. 2005) (internal quotations and citation omitted).
2. Analysis
The district court did not err when it found that the Ordinance was facially discriminatory
against interstate commerce. The Ordinance, in practical terms, is no different than other local laws
struck down by the Supreme Court and this Court as unconstitutional.
a. Legal Framework
The United States Constitution gives Congress the power to “regulate Commerce . . . among
the several States.” U.S. Const. art. I, § 8, cl. 3. While the Constitution does not directly speak to
the states’ power to regulate commerce amongst themselves, the Supreme Court has long interpreted
the Constitution as not only granting power to Congress to regulate interstate commerce, but also
denying that same power to the states. See generally Gibbons v. Ogden, 22 U.S. (9 Wheat) 1 (1824);
H.P. Hood & Sons v. Du Mond, 336 U.S. 525 (1949). As a result, this “dormant” Commerce Clause
“limits the actions of municipalities . . . where such actions ‘burden interstate commerce or impede
its free flow.’”2 Waste Mgmt., Inc. v. Metro. Gov’t, 130 F.3d 731, 735 (6th Cir. 1997) (quoting
Carbone, 511 U.S. at 389).
By its nature, the dormant Commerce Clause only disallows local regulation of interstate
commerce. If a local government action is market participation, as opposed to market regulation,
then the action is not barred by the dormant Commerce Clause. Huish Detergents, 214 F.3d at 714.
We agree with the Second Circuit that the proper inquiry to determine if a local government is
engaged in market regulation is if “it exercises governmental powers that are unavailable to private
parties. . . . Classic hallmarks of government regulation include the threatened imposition of fines
and/or jail terms to compel behavior.” United Haulers Assoc., Inc. v. Oneida-Herkimer Solid Waste
Mgmt. Auth., 261 F.3d 245, 255 (2d Cir. 2001) (citation omitted).
standing where the plaintiff seeks to protect its right to contract for or purchase out-of-state goods or services.
2
The dormant Commerce Clause must still be considered even in cases where there is a substantial local
interest, as explained infra. Amici spend the majority of their brief extolling the virtues of flow control regulations in
today’s complex waste management landscape; however, the practicality of a regulation is hardly sufficient to correct
its unconstitutional nature. Furthermore, if amici believe that the dormant Commerce Clause should not apply in the
waste management context, amici need not endure the burden of constitutional amendment to achieve their ends; they
can simply petition Congress, as Congress may approve of state and local regulations of interstate commerce.
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Daviess County, Kentucky
If the local government meets this threshold inquiry and is engaged in regulation of interstate
commerce, then the Court must determine whether the regulation discriminates against interstate
commerce, or whether it “regulates evenhandedly.” Huish Detergents, 214 F.3d at 712-13. “If an
ordinance discriminates against interstate commerce by treating in-state and out-of-state interests
differently, benefitting the former and burdening the latter, it is per se invalid unless the State has
‘no other means to advance a legitimate local interest.’” Id. (quoting Carbone, 511 U.S. at 392).
“On the other hand, if the law regulates evenhandedly, it will be upheld unless the burden it imposes
on interstate commerce is ‘clearly excessive in relation to the putative local benefits.’” Id. at 713
(quoting Carbone, 511 U.S. at 390.) This is known as the Pike balancing test. See Pike v. Bruce
Church, Inc., 397 U.S. 137, 142 (1970).
With this framework in mind, this Court addresses three relevant waste management cases.
In C&A Carbone v. Clarkstown, the Supreme Court addressed the constitutionality of a town
ordinance. There, the town of Clarkstown decided to build a waste transfer station, as it closed its
local landfill in cooperation with the State of New York. 511 U.S. at 387. The transfer station’s
purpose was to receive bulk solid waste, separate the waste between recyclable and nonrecyclable
waste, and process these two types of waste for transport to the appropriate ultimate disposal
destinations. Id.The town hired a private contractor to build the transfer station. Id. Instead of paying for
the transfer station with municipal funds, the town gave the private contractor the right to operate
the station for five years. Id. At the end of the five years, the private contractor would sell the
transfer station to the town for a nominal amount. Id. The town also guaranteed a minimum waste
flow of 120,000 tons, and the town authorized the private contractor to charge a “tipping fee” of $81
per ton. Id. If the actual waste flow was less than 120,000 tons, the town would pay for the
difference in revenues. Id.In order to make good on its guarantee to the private contractor, the town passed an
ordinance that required all nonhazardous solid waste from the town to be brought for processing to
the transfer station. Id. The plaintiff, a recycling center in the town, brought suit. Id. at 387-88.
The Supreme Court found that the ordinance was unconstitutional. The Court held that the
ordinance discriminated against interstate commerce, because “[i]t hoard[ed] solid waste, and the
demand to get rid of it, for the benefit of the preferred processing facility.” Id. at 392. In other
words, without the ordinance, waste collectors would be free to take the waste to any number of
transfer and disposal sites, including out-of-state sites. The ordinance thus “deprive[d] out-of-state
businesses of access to a local market.” Id. at 389. The court found that the case did not fall into
a narrow exception “in which the municipality can demonstrate, under rigorous scrutiny, that it has
no other means to advance a legitimate local interest.” Id. at 392.
In Waste Mgmt., Inc., this Court followed the Supreme Court’s lead in Carbone. There, the
county enacted a “flow-control” regulation that required, among other things, that all residential
waste collected within the county be disposed of at a “waste-to-energy” facility owned by the
county. 130 F.3d at 733. This Court found Carbone to be directly on point and held that the
regulation discriminated against interstate commerce, and that the county could have engaged in
alternative, nondiscriminatory actions to meet its proffered local concerns. Id. at 736.
In Huish Detergents, Inc. v. Warren County, the Court had a second opportunity to address
a flow-control regulation. There, the county solicited competitive bids for the collection and
processing of all municipal solid waste in Bowling Green, Kentucky. 214 F.3d at 708. Under the
agreement, the contractor would have the exclusive right to collect solid waste for five years. Id.The city would not directly pay the contractor; instead, all entities generating solid waste were
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Daviess County, Kentucky
required to use the contractor, and the contractor would collect its payment from these customers.
The contractor was required to operate the city’s transfer station and process all of the solid waste
collected at the transfer station. Id. at 708-09. Finally, the contractor was required to dispose of all
waste at a landfill approved and permitted by the state, “effectively prohibiting the use of out-of-
state disposal sites.” Id. at 709. After selecting the contractor, the county passed an ordinance that
executed the agreement. Id.This Court found the ordinance to be unconstitutional. With respect to the requirement that
the contractor process all of the solid waste at the transfer station, the Court rejected the defendant’s
market participation argument. The defendant argued that because it was a market participant in that
it was procuring waste collection services for one of its cities, it was exempt from the strictures of
the dormant Commerce Clause, and could thus force the contractor to use a single transfer station.
Id. at 715. This Court disagreed and ruled that the county was neither purchasing nor selling
products or services. Instead, it was forcing all of the inhabitants of a city to purchase services from
a contractor, a power that “far exceeded that which a private entity could accomplish on the free
market.” Id. at 716. Disposing of the defendant’s market participation argument, the Court then
ruled that the ordinance was the “functional equivalent” as the one in Carbone, in that it required
processing services at the city’s transfer station and “nowhere else.” Id. The ordinance thus
discriminated against interstate commerce; the Court further found that the ordinance did not fall
into the narrow exception based on local interests. Id.With respect to the requirement that the contractor dispose of the solid waste at an in-state
site, the Court found that Carbone was equally applicable; the ordinance “violated the Commerce
Clause by prohibiting out-of-state disposal.” Id. at 716. Interestingly, the Court stated in dicta that
even if the defendant were a market participant with respect to the collection or processing of waste,
it could not regulate the downstream market of waste disposal.3 Id.Lastly, the Court readdressed the defendant’s market participation argument. The Court
found that had the defendant actually purchased the contractor’s services with its own funds, it could
have avoided scrutiny under the dormant Commerce Clause. Id. at 717. But by deciding to regulate
the market, by forcing city residents to purchase the contractor’s services, instead of participating
in the market, the defendant “opened itself up” to such scrutiny. Id. Moreover, the fact that the
defendant could have acted as a market participant to achieve the same ends did not save its ultimate
decision to regulate the market in violation of the dormant Commerce Clause. Id. (quoting South-
Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 98-99 (1984) (plurality opinion)).
b. Application to This Case
The three cases cited above leave little doubt that the Ordinance in this case discriminates
against interstate commerce. By forcing Plaintiff’s members to use Defendant’s disposal and
transfer facilities, the Ordinance would prohibit these members from using other in-state and out-of-
state facilities. The Ordinance is thus facially discriminatory against out-of-state interests.4
3
We agree that the defendant could not regulate the waste disposal market if it were only a market participant
in the waste collection or processing markets; however, it could make a decision as a market participant that would
duplicate the results of regulation. For example, if the defendant operated the transfer station as a market participant,
it could choose where it ultimately disposed of the waste, such as an in-state disposal site.
4
Defendant does not argue that it has no other means to advance a local interest; it only argues that the
Ordinance is nondiscriminatory.
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Daviess County, Kentucky
In response, Defendant makes a strange argument: “[Defendant] contends that its Ordinance
affects both in-state and out-of-state entities the same. All haulers of solid waste that is generated
in Daviess County must deposit waste in Daviess County’s publicly owned landfill.” (Def.’s Br.
15.) As Plaintiff points out, there is a difference between the market for waste collection and for
waste disposal. We agree that the Ordinance does not discriminate against out-of-state waste
collectors; however, that is not the point. The Ordinance discriminates against out-of-state waste
disposal facilities, and this is dispositive with respect to this issue.
Defendant’s argument that the Ordinance does not create a “bottleneck” also lacks merit.
Defendant attempts to distinguish Carbone in that Carbone involved a waste transfer station, and
the Ordinance here involves a waste disposal facility. Defendant’s contention is that “[w]hen solid
waste is delivered to a landfill for disposal, it is no longer in the stream of commerce.” (Def.’s Br.
17.) This argument fails for two reasons. First, this Court has already held that Carbone applies to
waste disposal facilities. See Waste Mgmt., 130 F.3d at 736; Huish Detergents, 214 F.3d at 716.
Second, Carbone is as applicable to disposal facilities as it is to transfer stations because “what
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.” Carbone, 511 U.S. at 390-91. In other words, the
focus is not on the actual waste and its location in the steam of commerce; the focus is on the
attendant services and whether the Ordinance constricts the open channels of commerce to these
services. Here, the Ordinance does exactly that: by requiring disposal at Defendant’s facility, out-
of-state disposal service providers are shut out of the disposal market for waste generated in Daviess
County.
Defendant’s citations to purportedly analogous case law are likewise unconvincing and merit
only a brief response. Defendant cites to Maharg, Inc. v. Van Wert Solid Waste Mgmt. Dist. for the
proposition that the Ordinance is facially neutral. In that case, Ohio law authorized the county waste
management board to make “facility designations.” 249 F.3d 544, 547 (6th Cir. 2001). This
authorization “allow[ed] the board to ‘designate solid waste disposal, transfer, or resource recovery
facilities . . . where solid wastes generated within or transported into the district shall be taken for
disposal.’” Id. (quoting Ohio Rev. Code Ann. § 343.014(A)). Van Wert County then adopted a
resolution whereby it solicited bids from in-state and out-of-state waste facilities to become
“designated” facilities. Id.This Court upheld the resolution because it was not “territorially based,” as the bidding
process was equally open to in-state and out-of-state waste facilities. Id. at 551. The Ordinance in
this case does not open the waste disposal market equally to in-state and out-of-state interests; it
closes the market to all except Defendant’s waste disposal facility. Thus, there is not even a remote
analogy to be drawn between Maharg and the instant case.
Eastern Kentucky Res. v. Fiscal Court of Magoffin County is also inapposite. There, this
Court upheld Kentucky statutes that required local governments to create solid waste management
plans for municipal solid waste and to identify any additional capacity for “out-of-area” solid waste.
127 F.3d 532, 541 (6th Cir. 1997) (quoting Ky. Rev. Stat. Ann. § 224.43-345(1)(l)). The Court
found that although the statute distinguished between in-area and out-of-area waste, the statute did
not provide for different treatment between the two categories. Id. In this case, there is an absolute
difference in treatment; the Ordinance completely disallows out-of-state waste disposal services.
Finally, Defendant relies on the district court case of Nat’l Solid Wastes Mgmt. Assoc. v.
Granholm. There, the plaintiff contested the legality of a set of Michigan statutes that created
disposal requirements for Michigan landfills. 344 F. Supp. 2d 559, 563-64 (E.D. Mich. 2004).
Under the statutes, solid waste generated in Michigan automatically qualified for disposal in
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Michigan landfills, whereas solid waste generated in other states did not automatically qualify, but
instead required additional procedures. Id. The district court found that the statutes “contain no
overt distinctions between in-state and out-of-state waste, nor do they expressly bar the entry of out-
of-state waste into Michigan;” as a result, the statutes were facially neutral. Id. at 566. The
Ordinance in this case, on the other hand, expressly bars out-of-state waste disposal providers from
the Daviess County waste disposal market.
C. THE DISTRICT COURT DID NOT ERR WHEN IT FOUND THAT DEFENDANT
DID NOT ELIMINATE THE DISPOSAL MARKET FOR SOLID WASTE
1. Standard of Review
The standard of review for the district court’s grant of summary judgment is set out above.
2. Analysis
a. Legal Framework
Defendant’s argument with respect to this issue centers entirely around the Second Circuit
case of USA Recycling, Inc. v. Town of Babylon. In that case, the town built an incinerator as a
waste disposal facility. 66 F.3d 1272, 1277 (2d Cir. 1995). The town raised funds via local bonds
and hired a private contractor to build the incinerator. Id. The private contractor then leased the
incinerator from the town, and the town paid the private contractor to operate the facility. Id.Originally, the town passed a flow control ordinance that required all solid waste collected
from the town to be disposed of at the town incinerator. Id. at 1278. In the wake of Carbone, the
constitutionality of that practice was in great doubt. Id. In response, the town decided to purchase
commercial waste collection services from one provider by utilizing a competitive bidding
procedure open to in-state and out-of-state waste collection service providers. Id. at 1278-79. The
key fact is that the town paid for the waste collection services itself; it did not force its commercial
residents to purchase the services from the winning bidder. Id. The town passed on the cost by
assessing an “annual benefit assessment” against each benefitted commercial parcel. Id.In conjunction with this new policy for waste collection, the town also allowed the waste
collector to dispose of 96,000 tons of solid waste per year at the incinerator for no charge. Id. If the
waste collector disposed of more than this amount at the incinerator, the waste collector would be
forced to pay the market rate at the incinerator for waste beyond this amount. Id. The contract also
had a provision that gave the town the right to direct the waste collector to the disposal site of its
own choice, but then the town would have to pay the disposal fee. Id.The plaintiffs filed suit against the town, challenging both the waste collection and the waste
disposal provisions of the contract. Id.With respect to the waste collection aspect of the contract, the Second Circuit found that the
town acted both as a market participant, as it purchased waste collection services, and as a market
regulator, as it prevented any other entity from providing waste collection services other than the
single contractor selected. Id. at 1282. Because the town effectively entered into regulation of the
waste collection market, the court undertook the dormant Commerce Clause analysis.
The court found that the contract did not discriminate against interstate commerce. It found
that:
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Daviess County, Kentucky
No one enjoys a monopoly position selling garbage collection services in Babylon’s
commercial garbage market, because the Town has eliminated the market entirely.
Not even the Town itself remains as a seller in the market. Although the Town is
now the lone provider of garbage collection services in the District, it does so as a
local government providing services to those within its jurisdiction, not as a business
selling to a captive customer case. . . . In Babylon, local businesses do not buy
services from anyone. . . . Although taxpayers in the District ultimately foot the bill
for these garbage services–just as they foot the bill for street sweeping, street
lighting, sewage treatment, public schools, and police and fire protection, to name
just a few other basic services provided by local governments–the payment of taxes
in return for municipal services is not comparable to a forced business transaction
. . . . In short, because Babylon is not selling anything, it cannot be considered to be
a favored single local proprietor as in Carbone.
Id. at 1283 (emphasis supplied). Instead of forcing its commercial residents to purchase waste
collection services from a single provider, the town eliminated the market in the sense that the
commercial residents no longer purchased waste collection services, and waste collection service
providers no longer sold these services to the commercial residents. The town paid for the service
itself, and then passed the cost on to its commercial residents.
With respect to the waste disposal aspect of the contract, the court found that the town could
legally offer free disposal services to its selected waste collection provider, because it was a market
participant. The town owned the incinerator; moreover, it paid a private contractor to operate the
incinerator; in essence, the town had “exclusive rights to dispose of waste [at the incinerator].” Id.
at 1288-89. As the court viewed the situation,
[t]he Town may exercise [its waste disposal] rights as it sees fit. It could sell those
rights on the open market. . . . Instead, the Town has chosen to give away those
rights for free, to dispose of garbage generated by town businesses. Babylon’s
decision . . . therefore constitutes municipal participation in the waste disposal
market.
Id. at 1289.
b. Application to This Case
Babylon is in diametric opposition to the facts presented in this case. Defendant claims that,
like the contract in Babylon, the Ordinance would merely “eliminate[ ] the market for solid waste
disposal.” (Def.’s Br. 24.) Despite Defendant’s contention otherwise, the market for solid waste
disposal would continue to exist in Daviess County under the Ordinance, and Defendant would have
a monopoly on that market. Here, Defendant would be forcing waste collectors to purchase its waste
disposal services; Defendant would remain as the lone seller in this market as a result of its
regulation. A market is where a seller sells goods or services, and a buyer buys goods or services.
In Babylon, the contract between the town and the private contractor eliminated the waste collection
market because the waste collectors no longer sold their services to commercial residents, and
commercial residents no longer purchased these services from the waste collectors. Instead, the
town purchased these services and provided them for the benefit of its commercial residents, just
as with countless other government benefits.
In this case, waste collectors would be purchasing waste disposal services from Defendant
under the Ordinance, and Defendant would be selling waste disposal services to waste collectors.
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Thus, the proposition that the Ordinance would eliminate the market is absurd. The Ordinance
would not eliminate the market; instead, it would make Defendant the only player in the market.
The waste disposal analogue to the waste collection system in Babylon would be if
Defendant’s waste disposal facility charged nothing for the disposal of waste generated within
Daviess County, and then passed this cost on to its residents via taxes. If this were the case, then
there would be no sale or purchase of waste disposal services, and thus there would be no market.
If this were the case, then the system would not discriminate against interstate commerce.
Unfortunately, this is not the system that would be implemented by the Ordinance.5
Defendant relies on Harvey & Harvey Inc. v. County of Chester and Houlton Citizens’
Coalition v. Town of Houlton for the proposition that a municipality could eliminate the market for
waste services. Both cases are examples where the court endorsed the principle that a municipality’s
selection of a waste service provider (be it collection or disposal) does not run afoul of the dormant
Commerce Clause if the selection process was open to in-state and out-of-state contractors, a process
that was obviously different from the unilateral selection of Defendant’s landfill as the sole waste
disposal provider in this case. Harvey & Harvey, 68 F.3d 788, 802 (3d Cir. 1995) (waste disposal);
Houlton, 175 F.3d 178, 188 (1st Cir. 1999) (waste collection and processing). Furthermore, neither
of these cases turned on the elimination of a market: Harvey & Harvey is a case where the
municipality designated waste disposal sites; it did not purchase waste disposal services on behalf
of its citizens, so no market elimination occurred. 68 F.3d at 794-95. Houlton is a case where the
municipality did purchase waste collection and processing services on behalf of its citizens;
however, the First Circuit explicitly decided not to base its decision on the market elimination
analysis of Babylon; instead, the court found that because the selection process for a waste collector
and processor was competitive and open to out-of-state businesses, the measure was valid under the
Commerce Clause. 175 F.3d at 187-89. These two cases do not support Defendant’s position that
the Ordinance would merely eliminate the waste disposal market in Daviess County.
D. THIS COURT DECLINES TO ADOPT THE SECOND CIRCUIT’S PUBLIC-
PRIVATE OWNERSHIP DISTINCTION WITH RESPECT TO THE DORMANT
COMMERCE CLAUSE
1. Standard of Review
The standard of review for the district court’s grant of summary judgment is set out above.
2. Analysis
a. Legal Framework
In United Haulers Assoc., Inc. v. Oneida-Herkimer Solid Waste Mgmt. Authority, the Second
Circuit examined the constitutionality of a county ordinance that required waste collectors to dispose
of solid waste at approved processing sites designated by the county. 261 F.3d 245, 249-50 (2d Cir.
2001). The county owned all of the designated processing sites. Id. at 250.
5
Defendant seems to place weight in the fact that it “purchased” the Daviess County landfill in that it invested
public funds in its construction. Defendant then attempts to analogize this purchase to the purchase of disposal services
made by the town in Babylon. This Court agrees that Defendant is a market participant in the sense that it operates the
County landfill; however, this is irrelevant. The operation of the landfill is not the concern; the concern is the regulatory
behavior as prescribed in the Ordinance that requires waste collectors to purchase the landfill’s services. Unlike the town
of Babylon, Defendant would not be acting only as a market participant; it would also be regulating the waste disposal
market to benefit its participation.
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In a surprising decision, the Second Circuit found that the ordinance did not discriminate
against interstate commerce. The court drew a distinction between private ownership and public
ownership: in a case where the regulation benefits a facility owned by the municipality, the
regulation is nondiscriminatory. Id. at 263. The court based its decision first on the language of
Carbone. The court noted that the facility in Carbone was privately owned. Id. at 259. The court
also pointed to language that local governments “‘may not use their regulatory power to favor local
enterprise.’” Id. at 258-59 (quoting Carbone, 511 U.S. at 394) (emphasis in the original).
Moreover, the court characterized the struggle between the majority, concurrence, and dissent in
Carbone as one that wrestled with the question of “whether the favored facility was public or
private.” Id. at 259 (emphasis in the original). The concurrence and the dissent viewed the facility
in Carbone as one that was publicly owned, so it was nondiscriminatory in that it discriminated
equally against in-state and out-of-state facilities; the concurrence and the dissent then analyzed the
regulation under the Pike balancing test. Id. (citing Carbone, 511 U.S. at 402-03 (O’Connor, J.,
concurring); 511 U.S. at 410-30 (Souter, J., dissenting)).
The court then examined the language of other dormant Commerce Clause cases, and it
found that those cases were primarily concerned with the protection of local businesses at the
expense of out-of-state businesses. Id. at 260-61.
The court found that, from a policy perspective, a local regulation that favored a local
municipality, as opposed to local businesses, was less likely to be protectionist, and was less likely
to engender negative reaction from neighboring areas. Id. at 261.
Having found that the ordinance did not discriminate against interstate commerce, the court
remanded the case to the district court to conduct the Pike balancing. Id. at 263-64.
b. Application to This Case
This Court has already found dormant Commerce Clause violations in cases where the
facility was publicly owned. See Waste Mgmt., 130 F.3d at 736; Huish Detergents, 214 F.3d at 716.
Those cases did not directly address the public-private ownership issue raised by United Haulers;
however, an adoption by this Court of the public-private ownership distinction, as suggested by
Defendant and amici, would amount to the overturning of our prior decisions, as a necessary
implication of those decisions was that public ownership did not change the dormant Commerce
Clause inquiry. This Court does not have the ability to take such action. See LRL Properties v.
Portage Metro Hous. Auth., 55 F.3d 1097, 1105 n.2 (6th Cir. 1995) (“It is well-settled law of this
Circuit that a panel of this Court cannot overrule the decision of another panel.” (internal quotations
and citation omitted)).
Moreover, this Court respectfully disagrees with the Second Circuit on the proposition that
Carbone lends support for the public-private distinction drawn by that court. For every sentence in
the decision that can be interpreted as supporting such a distinction, there is a sentence that can be
interpreted in opposition. For example, the Court focused on the fact that “the ordinance prevents
everyone except the favored local operator from performing the initial processing step. The
ordinance thus deprives out-of-state businesses of access to a local market.” Carbone, 511 U.S. at
390 (emphasis supplied). There, the focus of the court was on the harm to out-of-state businesses
and the local market, as opposed to the benefit conferred to the local provider. Importantly, this
harm would occur regardless of who owned the benefitted facility. In further support that the focus
of the dormant Commerce Clause inquiry was on the economic harm to out-of-state actors and the
local market, the Court stated, “The essential vice in laws of this sort is that they bar the import of
the processing service.” Id. at 392 (emphasis supplied). In other words, the crux of the inquiry is
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whether the local ordinance burdens interstate commerce, not whether the local entity benefitted by
the ordinance is publicly owned.
Even in the language of the United Haulers decision itself, the court recognized this focus
on the effects on foreign businesses by isolating the local market:
Our system, fostered by the Commerce Clause, is that every farmer and craftsmen
shall be encouraged to produce by the certainty that he will have free access to every
market in the Nation, that no home embargoes will withhold his exports, and no
foreign state will by customs duties or regulations exclude them.
United Haulers, 262 F.3d at 254 (quoting H.P. Hood & Sons, 336 U.S. at 539). Free access for out-
of-state businesses to the local market is “the rationale underlying the judicially created dormant
Commerce Clause.” Id.In our view, the Second Circuit placed too much importance on phrases like “rival
businesses” and “local enterprise” as used by the Carbone Court. See id. at 258-59. A municipality
can be considered a local business in competition with out-of-state businesses, and a municipality
can participate in local enterprise. While the Supreme Court expressed concerns of aiding local
enterprise at the expense of rival businesses, these concerns remain regardless of whether the
municipality owns the favored business.6
This fact is implicit in the Carbone decision. We disagree with the Second Circuit that the
point of contention in Carbone between the majority on the one hand, and the concurrence and the
dissent on the other, was whether the waste transfer facility was public or private. Both the
concurrence and the dissent agreed that because the waste transfer facility was publicly owned, it
treated all other businesses, in-state and out-of-state, equally. See supra. The analysis of four
Justices thus turned on the public-private distinction relied on by the Second Circuit; however, the
majority’s7 decision was not based on the categorization of the waste transfer facility as a private
business.
6
The Second Circuit also placed stock in the Supreme Court’s use of the phrase “single local proprietor” in
Carbone to support its public-private ownership distinction. Id. at 258. We fail to see the logical connection; a
proprietor is defined simply as “[a]n owner, esp. one who runs a business.” Black’s Law Dictionary 1236 (7th ed. 1999).
There is absolutely no denotation that a proprietor can only be a private entity. Moreover, when the Supreme Court
spoke of the “single local proprietor,” its focus was on the harm to out-of-state competition:
The only conceivable distinction from [the cited dormant Commerce Clause cases] is that the flow
control ordinance favors a single local provider. 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 pastuerizer 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.
Carbone, 511 U.S. at 392. The Supreme Court’s concern about squelching competition altogether, leaving no room for
outside investment, exists in the present case under the Ordinance; the fact that Defendant would be the single local
proprietor does not in any way mitigate this explicit harm.
7
The Second Circuit considered it unclear whether the Carbone majority “either rejected or accepted the
public/private distinction.” United Haulers, 261 F.3d at 260. But not even the Carbone dissent was willing to adopt
this view, though it had every incentive to do so. Had the dissent thought it plausible to read the majority’s reasoning
as consistent with the public-private distinction, it never would have characterized the majority as rejecting the
distinction outright. See Carbone, 511 U.S. at 420 (Souter, J., dissenting) (“The majority ignores this distinction between
public and private enterprise.”). The dissent thought that the public nature of the favored transfer facility rendered the
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From the facts of Carbone, the waste transfer facility was quite clearly owned in fact by the
municipality. Though possessed and operated by the private contractor who built the facility for the
first five years of operation, the entire arrangement between the county and the private contractor
dealt only with the form of payment to the private contractor for building the transfer station for the
town; there was no real doubt as to who actually owned the facility. Contrary to the declaration of
the Second Circuit, the Supreme Court did not “repeatedly reference[ ] the private nature of the
favored facility,” id. at 258; in fact, the Court stated, “The object of this arrangement was to
amortize the cost of the transfer station: The town would finance its new facility with the income
generated by the tipping fees.” Carbone, 511 U.S. at 387 (emphasis supplied). At most, the private
contractor was an agent of the town, collecting tipping fees on behalf of the town and then applying
these fees to the construction costs that were not directly charged to the town because of the
agreement.
Other language denoted an understanding by the majority that the facility was publicly
owned: the Court’s characterization of the “town-sponsored facility,” the fact that “the flow control
ordinance is a financing measure,” the reference to the facility as “its [i.e., the town’s] project.” Id.
at 393-94. The majority did not find that the ordinance discriminated against interstate commerce
because the waste transfer facility was privately owned, and we find that the Supreme Court
implicitly rejected the public-private distinction.
The Second Circuit’s interpretation of other dormant Commerce Clause cases was similarly
strained. We assume the truth of the statement that “[t]he common thread in the Court’s dormant
Commerce Clause jurisprudence . . . 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.” United Haulers, 261 F.3d at 261. But again, Daviess County is acting
as a local business in the local industry of waste disposal. Not to belabor the point, but under the
Ordinance, Defendant would be acting in a dual role: as a local business selling waste disposal
services, and as a local government hoarding “waste, and the demand to get rid of it, for the benefit”
of this business. Carbone, 511 U.S. at 392. The fact that Defendant acts as both a business and a
government, as opposed to just a government, does not cloak its facially protectionist activity from
the appropriate scrutiny under the Commerce Clause.
III. CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s order.
ordinance to be non-discriminatory; it thus considered the public-private distinction of constitutional import. It makes
no sense to suggest that the dissent, rather than characterizing the majority’s holding narrowly, as concerning only private
entities, would have broadened the majority’s holding to reject a distinction that it itself advocated.