Waste Management of the Desert, Inc. v. Palm Springs Recycling Center, Inc. , 7 Cal. 4th 478 ( 1994 )

Opinion

BAXTER, J.

The California Integrated Waste Management Act of 1989 (the Act) authorizes cities to grant exclusive franchises for solid waste handling services. (Pub. Resources Code, § 40059, subd. (a)(2).) The question is whether this authority extends so far as to prohibit the owner of recyclable materials from selling them to someone other than the exclusive franchisee. Whether the Legislature has authorized such franchises is solely a question of statutory construction.

We hold the Act does not allow an exclusive franchise for the collection of recyclables not discarded by their owner. As we shall explain, the Act authorizes exclusive franchises only for “solid waste handling.” (Italics added.) An item that is sold is not discarded and thus does not become “waste” subject to an exclusive franchise.

The exclusive franchise agreement in this case between plaintiffs City of Rancho Mirage (City) and Waste Management of the Desert, Inc. (Waste Management) is therefore invalid and unenforceable to the extent the exclusive franchise purports to include recyclable materials that are not waste under the Act. The trial court erred in enjoining defendant Palm Springs Recycling Center, Inc. (Palm Springs Recycling) from collecting such recyclable materials within City limits.

Facts

The City contracted with Waste Management for the collection and disposal of residential and commercial waste within the City limits (the Agreement). The Agreement consists of two parts, a “Refuse Collection Agreement” and a “Recycling Agreement.” Under the Refuse Collection Agreement, Waste Management has the obligation and exclusive right to collect, receive, transport, segregate, recycle, and dispose of residential and commercial refrise of the type customarily deposited by residents and businesses in collection containers or areas for pickup and disposal. The Refuse Collection Agreement does not prohibit any person from transporting that person’s own refuse to a legal dump site.

The Recycling Agreement provides that Waste Management has the obligation and exclusive right to collect and remove all specified materials that are segregated and placed in separate recycling containers at the curbside on public streets or adjacent to multifamily complexes or in bins at locations designated by commercial establishments. Subject to specified limitations, Waste Management is authorized to retain the revenue from the sale of recyclable materials.

When it entered into the Agreement, the City adopted ordinance No. 8.12.010 (Ordinance), providing that “[a]ll garbage and rubbish accumulated in the city shall be collected, conveyed and disposed of by the city or by any person with whom the city has a contract for the collection, removal, and disposal of ashes, waste matter, garbage and rubbish. Except as otherwise provided in this chapter, no person, other than the city or its contract agent, shall collect, convey over any of the streets or alleys of the city, or dispose of any refuse accumulated in the city.”

Under its exclusive franchise, Waste Management established a city wide recycling program for single-family residences, multifamily complexes, and commercial establishments.

In May 1991, the City and Waste Management sued Palm Springs Recycling, alleging that beginning in 1990 Palm Springs Recycling “had been sending trucks into [the City] on a regular basis to collect recyclable material from large commercial customers” in violation of the rights of the City and Waste Management under the Agreement and the Ordinance, and had refused to comply with demands made by the City that Palm Springs Recycling cease those activities. The complaint sought preliminary and permanent injunctive relief prohibiting Palm Springs Recycling from collecting recyclable materials within the City.

Palm Springs Recycling admitted it had sent trucks into the City on a regular basis to collect recyclable materials from commercial customers and had continued to solicit new customers within the City’s boundaries. It denied, however, engaging in illegal activities or interfering with plaintiffs’ rights under the Agreement, asserting as affirmative defenses that: (1) The City had acted in excess of its police power by enacting the Ordinance and entering into the Agreement; (2) the Agreement constituted an illegal combination in restraint of trade under Business and Professions Code section 16600 et seq.; and (3) the Ordinance and Agreement, as construed by plaintiffs, constituted an invalid taking of property in violation of the Fifth Amendment to the United States Constitution and article I, section 19 of the California Constitution.

Palm Springs Recycling also filed a cross-complaint against plaintiffs: (1) essentially reasserting the affirmative defenses set forth in the answer to the complaint; (2) seeking an order enjoining Waste Management from providing recycling services to residents of the City at less than cost and enjoining the City from enforcing the Ordinance and the Agreement as they related to recycling and the collection of recyclable materials; and (3) requesting related affirmative relief.

The City and Waste Management alleged as affirmative defenses to the cross-complaint that the Ordinance and Agreement were authorized by the Act and that the Agreement and enforcement of the Ordinance against Palm Springs Recycling were within the City’s police power.

The trial court granted plaintiffs’ application for a preliminary injunction. The court entered judgment for plaintiffs both on their complaint and on • defendant’s cross-complaint, enjoining Palm Springs Recycling from placing bins or other receptacles within the City for the purpose of collecting recyclable materials and from collecting or removing recyclable materials from within the City. (The judgment did not specifically define the term “recyclable materials,” but the context makes clear the term was intended to correspond to the use of the same term in the exclusive franchise contract. Palm Springs Recycling has not suggested the recycling activities enjoined by the judgment included the recycling of materials other than those that Waste Management must recycle under the Agreement.)

The Court of Appeal reversed the judgment. The court held the Act does not authorize the City to grant an exclusive franchise for the collection and removal of “recyclable materials” that have not been placed into separate containers maintained by the City or its authorized waste collector or that otherwise are not “discarded” by the owner. The court relied on Public Resources Code section 41952’s provision that “[njothing in this chapter limits the right of any person to donate, sell, or otherwise dispose of his or her recyclable materials.” The court concluded that, until the generator of recyclable materials discards them into the specified bins, the owner retains control over the materials’ disposition and is free to have them collected by a recycling enterprise of the owner’s choice. The court further held the City’s police power, apart from the Act, did not authorize the City to restrict recycling services to the waste collection enterprise exclusively designated by the City.

Discussion

The Act sets forth a comprehensive statewide program for solid waste management. (Pub. Resources Code, § 40000 et seq.) (All further section references are to the Public Resources Code unless otherwise noted.) No one disputes that the Act allows a local agency to award an exclusive franchise for “solid waste handling” services. (§ 40059, subd. (a)(2), italics added.) The question is whether property with a market value to its owner— for example, a recyclable material—is “waste” within the scope of the Act and its exclusive franchise provision. We conclude this property is not “waste” until it is discarded. This construction encompasses two concepts— value and discarding—that in this context must be considered in relation to one another.

1. Economic value to the owner

“The concept of market value is perhaps most clearly stated in the poetic axiom that, ‘The worth of a thing, is the price it will bring.’ ” (Union Pacific R.R. Co. v. State Bd. of Equalization (1989) 49 Cal.3d 138, 148 [260 Cal.Rptr. 565, 776 P.2d 267], quoting 1 Bonbright, Valuation of Property (1st ed. 1937) p. 15.) If the owner of a material can sell it, perhaps for the reason that it is recyclable, it has an economic (i.e., market) value to its owner.

The Act’s very title, the California Integrated Waste Management Act of 1989, and its repeated references to “solid waste” “solid waste handling,” “recycling of solid wastes,” and the like strongly indicate the Legislature was concerned with just what it said—waste—and not with materials of economic value to their owner. The Act’s own definition of “solid waste” further supports the view that valuable recyclables that have not been discarded are not waste. “Solid waste” is defined as “all putrescible and nonputrescible solid, semisolid, and liquid wastes, including garbage, trash, refuse, paper, rubbish, ashes, industrial wastes, demolition and construction wastes, abandoned vehicles and parts thereof, discarded home and industrial appliances, dewatered, treated, or chemically fixed sewage sludge which is not hazardous waste, manure, vegetable or animal solid and semisolid wastes, and other discarded solid and semisolid wastes.” (§ 40191, subd. (a).) This definition hardly connotes the notion of valuable materials.

The commonly understood meaning of “waste” is something discarded “as worthless or useless.” (Amer. Heritage Dict. (1985) p. 1365, col. 1; 19 Oxford English Dict. (2d ed. 1989), p. 958, col. 1.) If the owner sells his property—that is, receives value for it—the property cannot be said to be worthless or useless in an economic sense and is thus not waste from the owner’s perspective. Conversely, if the owner voluntarily disposes of the property without receiving compensation or other consideration in exchange—that is, throws it away—the obvious conclusion is that the property has no economic value to the owner. The concept of value is in this sense related to the manner in which the property is disposed of.

2. Valuable materials not discarded

The Act’s definition of waste also reflects the traditional view that waste—at least for purposes of its collection—is material that has been discarded by its owner. Section 40191, subdivision (a) defines solid waste as being several enumerated types of materials and “other discarded solid and semisolid wastes.” (Italics added.) The restrictive modifier “other discarded’ plainly refers to all the enumerated materials in the statute, thereby meaning that an item is not waste until it is discarded.

The Court of Appeal also relied heavily on this statutory definition of “waste” in concluding that “only discarded waste materials become solid waste subject to ‘handling’ ” under the Act. Plaintiffs object to this approach, contending it would eviscerate the Act because owners could discard all their property—recyclable and otherwise—as they see fit and thereby render an exclusive solid waste handling franchise a nullity as a practical matter. In other words, the Court of Appeal opinion might be read to mean that a property owner could decide unilaterally with whom he will discard his waste. If three competing waste handlers (the exclusive franchisee and two others) placed their respective receptacles at the owner’s curbside, he could put his waste into whichever container he chooses. Perhaps the Court of Appeal did not intend that result, but its opinion might be read as suggesting as much and, if so, we believe this result would be inconsistent with the Act’s apparent intent. If, however, the concept of being discarded is properly understood, this perceived problem is easily avoided.

This returns us to the concept of value. Property that is sold for value—for example, a recyclable—is not “discarded” under any traditional understanding of the term. “Discard” means “to throw away.” (Amer. Heritage Dict. (2d college ed. 1982) p. 402, col. 1.) It is not synonymous with the broader term “dispose,” which means “[t]o transfer or part with, as by giving or selling.” (Id., at p. 407, col. 2.) A homeowner, for example, can dispose of used furniture, clothing, or automobiles by discarding them or by selling them, but either method of disposition necessarily precludes the other. If he sells the property, he cannot discard it; and if he discards it, he cannot sell it. That “discard” connotes throwing away or abandoning has been well recognized in cases dealing with waste and related issues. (American Min. Congress v. U.S. E.P.A. (D.C. Cir. 1987) 824 F.2d 1177, 1184 [263 App.D.C. 197]; Reading Co. v. City of Philadelphia (E.D. Pa. 1993) 823 F.Supp. 1218, 1236-1237; Carothers v. Capozziello (1990) 215 Conn. 82 [574 A.2d 1268, 1291]; Darling Delaware Corp. v. District of Columbia (App. D.C. 1977) 380 A.2d 596, 597; Ticonderoga Farms v. County of Loudoun (1991) 242 Va. 170 [409 S.E.2d 446, 449].)

The Court of Appeal opinion did not reflect the distinction between selling and discarding. Perhaps an example will illustrate. Assume that, as in this case, there is an exclusive franchise. A property owner throws his recyclables into the receptacle provided by the franchisee and does so without receiving compensation. He has plainly discarded his property, and it is thus waste under the Act. Could he instead throw the property into the bin of a competing waste hauler without receiving compensation? No, because by disposing of the property without receiving compensation, he has discarded the property and thereby rendered it waste that is subject to the exclusive franchise. If, however, he is paid for the material by the franchisee’s competitor, the owner has sold the property and thus has not discarded it, so it has not become waste.

An especially relevant example of the distinction between selling and discarding is found in Darling Delaware Corp. v. District of Columbia, supra, 380 A.2d 596, in which a company that purchased and transported meat fat and bones from grocery stores and markets and then sold them for processing into other products, e.g., tallow, soup, and margarine, was charged with hauling solid waste without a license. The question was whether the materials were waste. As in the present case, the statute defined waste as being “discarded materials.” The court relied on the traditional meaning of “discard.” “It ‘indicates dispensing with, letting go of, getting rid of as not immediately useful.’ ” (Id., at p. 597, quoting Webster’s Third New Internat. Dict. (1971).) The court then concluded, “At no point in the chain of purchase and sale of these animal by-products were they ever discarded. The record reflects that they were either sold by grocery stores directly to a few retail customers or frozen for sale to large buyers such as appellant. Appellant promptly transported them to plants in New York where they were resold for processing into other useful products. Since these materials were never thrown away as not immediately useful, they cannot be said to have constituted waste . . . .” (Id., at p. 598, fn. omitted.) The same analysis obtains in this case. If an owner segregates recyclable or otherwise useful materials and sells them, he has not discarded them and they do not become waste.

The view that all items enumerated in section 40191, subdivision (a) are waste, regardless of their value and whether they have been discarded, is further called into question by many of the types of items enumerated. For example, the statute refers to “paper.” This can refer to all paper, however, only if the term is taken out of context and without consideration of value or the statute’s stated limitation that it applies only to discarded materials. A piece of elaborate origami, a collector’s autograph collection, or a watercolor painting are each indisputably paper, but we doubt anyone would seriously contend such an item is waste and that its owner cannot keep it or sell it as he sees fit. The obvious, intuitive, and correct response to the contention would be that the property has value and that the owner has not discarded the property if he sells it. That is, the property has not become waste.

The tension between plaintiffs and the Court of Appeal can be eliminated by relying on the distinction between selling and discarding. The Court of Appeal was correct that property does not become waste under the Act until discarded, but incorrect in suggesting (perhaps inadvertently) that the owner can discard the property as he sees fit. Discarding is governed by the Act. Selling and other methods of disposition by which the owner receives or donates the value of the recyclable materials are not discarding and are not subject to the Act. The fundamental purpose of the Act is to reduce the amount of material entering into the waste stream. The buying and selling of materials in the marketplace is inapposite to that purpose because those materials remain in circulation and do not enter into the waste stream.

The proper rule is this: If the owner of property disposes of it for compensation—in common parlance, sells it—it is not waste because it has not been discarded. The owner is not required under the Act to transfer this property to the exclusive franchisee. But, consistent with the purpose of the Act, an owner cannot discard property as he sees fit. Discarding the property renders the property waste and subjects it to the Act.

3. The owner’s right to sell recyclables

If one accepts the general proposition that an owner has a right to sell his property for value, the question then becomes whether a different rule should apply to a particular type of property—property defined as recyclable materials in the Recycling Agreement between the City and Waste Management. Under plaintiffs’ view, a special rule should apply to recyclables in light of the statutory definitions of solid waste handling and recycling. We read these provisions differently.

“Solid waste handling” is defined as “the collection, transportation, storage, transfer, or processing of solid wastes.” (§ 40195, italics added.) “Processing” is, in turn, defined as “the reduction, separation, recovery, conversion, or recycling of solid waste.” (§ 40172, italics added.) Put simply, solid waste handling includes recycling—of solid waste. If, as explained above, the owner does not discard his property, it does not become waste in the first instance. Thus, even if the property might be viewed as a feasibly recyclable material, it is not necessarily a recyclable waste. The distinction is significant because only the recycling of waste is included within the Act’s definition of solid waste handling and, in turn, the provision allowing exclusive franchises.

Plaintiffs also point to section 40180’s definition of “recycling” as “the process of collecting, sorting, cleansing, treating, and reconstituting materials that would otherwise become solid waste, and returning to the economic mainstream in the form of raw material for new, reused, or reconstituted products . . . .” (Italics added.) Perhaps plaintiffs are relying primarily on the word “material” and concluding that all recyclable materials are subject to an exclusive franchise even if they do not become waste. If so, we disagree. Section 40180’s reference to materials is merely an acknowledgment of the reality that, as a technological matter, materials are capable of being recycled. The provisions, however, that define solid waste handling refer only to “recycling of solid waste,” not to the recycling of solid materials. (§§ 40172 & 40195, italics added.) If the statutes were worded otherwise, the mere fact that something is capable of being recycled would render it subject to an exclusive franchise, thereby prohibiting the owner from selling it.

Moreover, section 40180 is itself consistent with the view that only waste is subject to the Act. The section refers to “materials that would otherwise become solid waste.” (§ 40180, italics added.) If an owner discards property, it enters into the waste stream if not recycled. But, if a material is sold, it is not a material “that would otherwise become solid waste.” As explained above, it becomes waste only when discarded. Thus, if an owner sells an item, it does not enter the solid waste stream, the reduction of which is the fundamental purpose of the Act.

The injunction in this case is directed at a commercial recycling activity, but the logic of plaintiffs’ view would extend inexorably to noncommercial activity as well, for example, a school newspaper drive, a youth group’s gathering of empty soda pop containers, or clothing donations to the Salvation Army. (Indeed, even gifts from one individual to another would be suspect, for example, a person who gives scrap metal to a sculptor of welded art.) The items collected in such activities are often recyclable materials. Nothing, however, in the language or legislative history of the Act suggests the Legislature intended to eliminate gifts to charity or gifts between friends. As with items that are sold, gifts cannot be fairly said to have entered the solid waste stream. Moreover, a gift of valuable property, like a sale of such property, is a transfer of value and thus cannot properly be characterized as “discarding” under the Act.

In short, if the owner of recyclable materials discards them into the solid waste stream, they become solid waste subject to the Act, and an exclusive franchisee would have the right to collect that waste in accordance with its franchise agreement. If, however, the owner disposes of the recyclables for compensation—in common parlance, sells them—the recyclables are not discarded and do not become waste.

We therefore hold that the owner of undiscarded recyclables is not required to transfer them to the holder of an exclusive franchise under the Act. The Recycling Agreement between plaintiffs City and Waste Management is unenforceable under the Act to the extent the franchise purports to include recyclable materials that have not become “waste,” as we have construed the term.

Plaintiffs contend Palm Springs Recycling is seeking “to skim the cream of the recycling business” by collecting only the more commercially valuable materials and that a comprehensive recycling program cannot be economically sustainable absent an exclusive franchise that includes recyclable materials. This misses the mark in two respects. First, it suggests that Palm Springs Recycling is somehow taking something of value from Waste Management. Not so. The “cream” belongs to the owner of the recyclable material. Second, the contention is better addressed to the Legislature. Our holding is based on the Act as it is written, not on a different, perhaps broader, version that could have been, or still may be, enacted.

Finally, we address plaintiffs’ additional argument that the City’s award of the exclusive franchise was a valid exercise of the police power. This argument is not clearly presented, but it seems to have two, perhaps three, aspects. First, the focus of the argument is the state’s police power. In light of our conclusion that the Act does not support the exclusive franchise in this case, whether the state constitutionally could have framed the Act to allow the franchise is beside the point.

Second, plaintiffs also assert, albeit cryptically and only in passing, that the exclusive franchise is a valid exercise of the City’s own police power. Plaintiffs seem to suggest the City properly exercised that power under the Act. The argument necessarily fails because, as we have explained, the Act does not itself authorize the franchise to extend to nondiscarded recyclables.

Third, plaintiffs also suggest the City had the police power independent of the Act to award an exclusive franchise for the collection of undiscarded recyclables. We decline to decide the correctness of the Court of Appeal’s determination of that issue. (Cal. Rules of Court, rule 29.2(a).) The primary focus in this court has been the scope of the City’s power under the Act. And, the question of the City’s own police power raises the important issue of whether the comprehensive Act has preempted any power the City might otherwise have had.

Under our construction of the Act, we need not address Palm Springs Recycling’s other arguments.

Disposition

The judgment of the Court of Appeal is affirmed with one modification. The court directed the trial court to issue an injunction prohibiting the City from enforcing the Ordinance against Palm Springs Recycling with respect to “recyclable materials [which] have not been turned over to City or its agent as discussed in this opinion.” This was consistent with the Court of Appeal’s view that the owner of recyclables can discard them as it wishes. As we have explained, our view is narrower—that, if the materials are “discarded,” as we have construed the term, they are subject to the exclusive franchise.

To accommodate this difference, the judgment of the Court of Appeal is affirmed with directions to remand this matter to the trial court with directions to issue a permanent injunction and/or writ of mandate in favor of defendant Palm Springs Recycling prohibiting the City from enforcing the Ordinance either by criminal prosecution or injunctive relief against defendant for engaging within the City’s boundaries in the business of collecting, receiving, transporting, segregating, recycling, and disposing of recyclable materials that are acquired for compensation by Palm Springs Recycling from commercial establishments.

Defendant shall recover its costs on appeal.

Lucas, C. J., Kennard, J., Panelli, J.,^* and Cottle, J.,^† concurred.

* Retired Associate Justice of the Supreme Court sitting under assignment by the Chairperson of the Judicial Council.

† Presiding Justice, Court of Appeal, Sixth Appellate District, assigned by the Acting Chairperson of the Judicial Council.