Stericycle Of Wa, Inc. v. Wa Utilities & Transportation Commission,respondents ( 2015 )

F_ ILE- D
COU T OF APPEALS
DWIS" M 11
2015 SEP - 9 A, 1 li: 55
IN THE COURT OF APPEALS OF THE STATE OF WASHIN
DIVISION II
STERICYCLE OF WASHINGTON, INC., No. 46100 -5 -II
Appellant,
PM
WASHINGTON UTILITIES AND PUBLISHED OPINION
TRANSPORTATION COMMISSION and
WASTE MANAGEMENT OF WASHINGTON,
INC.,
Respondent.
SUTTON, J. — Stericycle of Washington Inc. appeals the superior court' s order affirming
the Washington Utilities and Transportation Commission' s final order granting Waste
Management of Washington Inc.' s application for non-exclusive statewide authority to provide
biomedical waste collection services. Stericycle argues that the Commission ( 1) exceeded its
statutory authority, ( 2) decided that biomedical waste collection customers would_benefit from
market competition without substantial evidence to support that decision, and ( 3) acted arbitrarily
and capriciously. We hold that the Commission acted within its authority under the plain language
of RCW 81. 77. 040 to grant Waste Management' s application after it determined that Stericycle
was not providing service to the satisfaction of the Commission and that its decision was based
upon substantial evidence and was not arbitrary or capricious. Therefore, we affirm.
No. 46100 -5 -II
FACTS
I. THE COMMISSION' S HISTORICAL EVALUATION OF BIOMEDICAL WASTE SERVICE
The Commission regulates solid waste collection services under chapter 81. 77 RCW. To
operate in Washington, solid waste companies must first obtain a certificate of authority from the
Commission that " public convenience and necessity" ( PCN) require the company' s operations.
RCW 81. 77. 040. The Commission began issuing PCN certificates of authority to companies
providing specialized services for biomedical waste collection in the 1980s following concerns
about the spread of disease posed by disposing of this waste like regular garbage.' AR at 595 ( In
re Am. Envtl. Mgmt. Corp., Order M.V. G. No. 1452, at 4 ( Wash. Utils. & Transp. Comm' n Nov.
30, 1990)); AR at 632 ( In re Ryder Distrib. Res. Inc., Order M.V.G. No. 1596, at 6 ( Wash. Utils.
Transp. Comm' n Jan. 25, 1993)).
Although neighborhood garbage collection service companies typically operate in a
monopoly in a given territory, the Commission questioned whether universal collection of
biomedical waste by a single company was useful in this specialized service. AR at 632 ( Ryder
Distrib. Res., Order M.V.G. No. 1596, at 6). The Commission thus developed different factors for
granting a PCN certificate to collect biomedical waste than for granting certificates to collect
regular neighborhood garbage. AR at 632 ( Ryder Distrib. Res., Order M.V.G. No. 1596, at 6). In
1990, the Commission explained its belief that
in the context of neighborhood solid waste collection, [ RCW 81. 77. 040]
contemplates an exclusive grant of authority as the best and most efficient way of
Biomedical waste encompasses animal waste, waste contaminated with "biosafety level 4 disease
waste" ( blood and other excretions), cultures and stocks, human blood and blood products,
pathological waste ( biopsies, tissues, and other anatomical waste), and sharps waste. WAC 480-
70- 041.
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serving all customers in a given territory. In this general context, it is assumed that
all or most people and businesses in a given territory are also customers needing
garbage service. Under these circumstances, an exclusive grant of authority in a
given territory promotes service, efficiency, consistency and is generally in the
public interest.
The collection of medical waste is quite a different situation. Customers are
only a small percentage of the total business in any given territory.... Therefore,
while sound policy and economic reasons exist in favor of exclusive authority for
typical residential or commercial collection in a specific territory, those reasons are
less compelling in this new, specialized area. The Commission is not ready to say
that a grant of one application for statewide authority would preclude a grant of
others, and will consider this element in future proceedings.
AR at 574- 75 ( In re Sure - Way Incineration, Inc., Order M.V.G. No. 1451, at 16- 17 ( Wash. Utils.
Transp. Comm' n Nov. 30, 1990)).
To grant a PCN certificate to a company that will operate in a territory already served by a
certificate holder, the Commission must determine whether the existing company or companies
provide " service to the satisfaction of the [ C] mIn
omission." RCW 81. 77. 040. 2 1993, the
Commission stated that when determining whether to grant a PCN certificate for biomedical waste
collection service, unlike its determinations on whether to grant PCN authority for neighborhood
garbage collection, it would not " limit its consideration to evidence of service failures of the sort
that usually are significant in neighborhood garbage collection service." AR at 668 (In re Sureway
Med. Servs., Inc., Order M.V. G. No. 1663, at 10 ( Wash. Utils. & Transp. Comm' nNov. 18, 1993)).
2 RCW 81. 77. 040 provides as follows,
When an applicant requests a certificate to operate in a territory already
served by a certificate holder under this chapter, the commission may, after notice
and an opportunity for a hearing, issue the certificate only if the existing solid waste
collection company or companies serving the territory will not provide service to
the satisfaction of the commission or if the existing solid waste collection company
does not object.
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Rather, it would also consider " need -related sufficiency of service considerations - - whether the
existing service reasonably serves the needs of the specialized market." AR at 668- 69 ( Sureway
Med. Servs., Order M.V. G. No. 1663, at 10- 11). Thus, it would give " considerable weight to
testimony of [biomedical] waste generators regarding their service requirements." AR at 743 ( In
re Pet' n.ofComm' n Stafffor a Decl. Ruling, Docket No. TG -970532, Decl. Order, at 10 n. l (Wash.
Utils. & Transp. Comm' n Aug. 14, 1998)).
By 1998, the biomedical waste service industry had grown " into a highly competitive
industry as a result of the Commission interpreting RCW 81. 77. 040 consistently with the unique
requirements and attributes of the service." AR at 744 ( In re Pet' n of Comm' n Stafffor a Decl.
Ruling, Docket No. TG -970532, Decl. Order, at 11). It is within this historical backdrop that we
consider Stericycle' s appeal of the Commission' s approval of Waste Management' s application
for non- exclusive statewide biomedical waste service authority.
II. STERICYCLE' S BIOMEDICAL WASTE SERVICE MARKET COMPETITION
Stericycle has provided statewide biomedical waste collection service since the
Commission first granted it such authority in 1995. Stericycle competed with another company
which also held statewide biomedical collection authority, but in 2000 Stericycle acquired that
competitor, making Stericycle currently the sole solid waste company with statewide authority to
collect biomedical waste.
Waste Management competed with Stericycle under its G-237 certificate before
Stericycle' s parent corporation bought Waste Management' s biomedical waste operations in 1996.
In 2011, the Commission allowed Waste Management to resume biomedical waste collection
services under G- 237 over Stericycle' s objection. G- 237 granted Waste Management authority to
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collect biomedical waste in territory that encompasses 80 percent of the total amount of biomedical
waste .produced in Washington. After Waste Management resumed competition with Stericycle
for biomedical waste collection service, Stericycle' s revenues and total number of customers
increased.
In December 2011, Waste Management applied to the Commission to extend its authority
to collect biomedical waste statewide. Stericycle and several other smaller regional companies
objected. These companies provide biomedical waste collection services within Waste
Management' s proposed expanded territory. In December 2012, the Commission conducted four
days of evidentiary hearings on Waste Management' s application for statewide nonexclusive
authority for biomedical waste service.
III. WASTE MANAGEMENT' S APPLICATION FOR NON- EXCLUSIVE STATEWIDE AUTHORITY FOR
BIOMEDICAL WASTE SERVICE
At the hearings on Waste Management' s application, eight biomedical waste generators
testified that they wanted a market competitor to Stericycle for a variety of reasons:
1) competition would ensure they receive the best service and prices, ( 2) the larger businesses
wished to use the same biomedical waste collection provider across the state for the sake of
efficiency, ( 3) dissatisfaction with Stericycle' s scheduling, pricing, and customer service, ( 4) a
desire to exert leverage over Stericycle, ( 5) a desire for access to another service provider as a
backup in case of catastrophe, and ( 6) for one generator, reduction in pollution emissions because
Waste Management' s facilities are closer to its location. Two biomedical waste generators
testified that they experienced ongoing billing and customer service problems as Stericycle
customers.
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A Waste Management account developer, Jeff Norton, who previously worked for
Stericycle, testified that, as a Waste Management employee, he witnessed a change in Stericycle' s
practices when Waste Management began competing with Stericycle. When Norton worked for
Stericycle, he received complaints about the containers Stericycle provided to customers for
collection. According to Norton, Stericycle did not want to change their collection container
design because of its investment in the old container. Within a month of Waste Management' s
entry into the market with a different collection container design, however, Stericycle began
offering the same new container that Waste Management offered and reduced its rates on that
container, matching Waste Management' s rate.
Norton acknowledged, however, that as a Waste Management employee he lacked personal
knowledge of Stericycle' s reason for the collection container change. Stericycle provided counter
testimony that in response to customer inquiries it had been considering offering the new plastic
container before Waste Management entered the market.
IV. THE COMMISSION' S APPROVAL OF WASTE MANAGEMENT' S APPLICATION
The administrative law judge ( ALJ) granted Waste Management' s application in an initial
order. The ALJ ruled that Stericycle' s billing and customer service issues did not make its service
unsatisfactory to the Commission. Instead, the ALJ found that under RCW 81. 77.040, Stericycle
was not providing service to the satisfaction of the Commission based upon the generators'
testimony of a need for a competitive alternative and Waste Management' s evidence of market-
place benefits of a competitor to Stericycle.
The ALJ recognized that there was no prior Commission ruling recognizing a competitive
market, standing alone, as a justification for authorizing competing statewide authority, but the
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No. 46100 -5 -II
ALJ reasoned that much had changed since the beginning of the biomedical waste industry to
justify the need for competition. The ALJ stated explicitly that the Commission would no longer
rely on a previous decision that dismissed competition as an insufficient reason to find
unsatisfactory service. The ALJ concluded that Waste Management proved that consumers need
its statewide services for public convenience and necessity and that the existing providers were
not providing service to the satisfaction of the Commission. The ALJ also found .that the public
benefit of a competitive market outweighed " unsubstantiated claims" of economic harm to the
existing companies and that Waste Management had demonstrated its financial and operational
fitness.3 Clerk' s Papers ( CP) at 43.
The objectors, including Stericycle, petitioned the Commission for administrative review
of the initial order. In its final order, the Commission affirmed and adopted the entirety of the
initial order, concluding that the initial order " properly reflect[ ed] the intent of prior Commission
decisions determining when existing carriers will provide service to the satisfaction of the
Commission." CP at 21- 22. Finding of fact 3 in the initial order stated that Waste Management
demonstrated the consumer need for, and positive results from, its expansion into the. statewide
bio -hazardous collection services market." CP at 43. The Commission found that its authority to
grant competing biomedical waste collection service " is not limited to circumstances of inadequate
service." CP at 26. It viewed such a conclusion not as a change to prior decisions but an
adaptation of regulation to the realities of the market." CP at 26. The Commission found that
3 Stericycle does not appeal the ALJ' s findings of fact and conclusions of law that the public benefit
of a competitive market outweighed economic harm to existing companies and that Waste
Management was financially and operationally fit to provide biomedical waste services.
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No. 46100 -5 -II
substantial evidence supported Waste Management' s application for non- exclusive statewide
authority based upon the generators' testimony of a need for an additional service provider.
The objectors petitioned the superior court for judicial review. The superior court affirmed
the Commission' s final order. Only Stericycle appeals.
ANALYSIS
Stericycle claims the Commission exceeded its statutory authority in its interpretation of
the Commission' s governing statute, RCW 81. 77. 040, and claims that the Commission reversed
its precedent without substantial evidence or reasoned explanation. Stericycle challenges finding
of fact 3 of the initial order, which the Commission adopted in the final order. This finding states
that consumers would benefit from Waste Management' s expanded authority. We reject
Stericyle' s challenges.
I. JUDICIAL REVIEW OF RCW 81. 77. 040
A. CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY
When deciding whether to issue, a PCN certificate to a biomedical waste service company,
the Commission must first analyze five factors under RCW 81. 77. 040.4 If the service territory that
a biomedical waste .company seeks to operate in is already served by another PCN certificate
4 Stericycle does not appeal the Commission' s determination that the evidence satisfied these five
factors as to Waste Management' s application for nonexclusive statewide authority for biomedical
waste service collection. RCW 81. 77.040 provides that the Commission may issue. a PCN
certificate to a waste collection company after it analyzes the following five factors: ( 1) the present
service in the area to be served and the cost for that service, ( 2) the estimated cost of facilities to
be used for collection and disposal, ( 3)
a statement of the company' s assets that will be expended
on the collection and disposal
4) the company' s prior experience in the field, and ( 5) the
plant, (
sentiment in the community to be served as to the necessity of the proposed service.
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holder and that holder objects to competition, the Commission may issue the PCN certificate for
competing authority only if, after notice and opportunity to be heard, the Commission determines
that the existing " company or companies serving the territory will not provide service to the
satisfaction of the commission." RCW. 81. 77. 040. Stericycle appeals the Commission' s
determination that it was not providing service to the satisfaction of the Commission.
B. STANDARD OF REVIEW
Judicial review of agency action is governed by the Administrative Procedure Act (APA).'
RCW 34.05. 510. In reviewing agency action under the APA, we stand in the same position as the
superior court. Pal v. Dep' t of Soc. & Health Servs., 185 Wash. App. 775, 780- 81, 342 P.3d 1190
2015). When a statute directs that the agency shall exercise its discretion, we limit our function
to determining whether that agency exercised its discretion within the law and we do not overrule
the agency' s discretion. RCW 34. 05. 574( 1). The burden of demonstrating invalidity is on the
party asserting it. Cornelius v. Dep' t of Ecology, 182 Wash. 2d 574, 585, 344 P.3d
199 ( 2015).
RCW 34. 05. 570( 3) provides the only circumstances in which we may overturn an
adjudicative agency proceeding. Stericycle' s challenges fall under four of these provisions:
1) the final order is " outside the [ Commission' s] statutory authority," ( 2) the Commission
erroneously interpreted the law, ( 3) the final order is unsupported by substantial evidence, and
4) the final order is arbitrary and capricious. RCW 34. 05. 570( 3)( b), ( d), ( e), ( i). Stericycle' s
challenges fail.
Chapter 34. 05 RCW.
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II. THE COMMISSION PROPERLY INTERPRETED ITS STATUTORY AUTHORITY
We review an agency' s interpretation or application of the law de novo. Chicago Title Ins.
Co. v. Office oflns. Comm' r, 178 Wash. 2d 120, 133, 309 P.3d 372 ( 2013). The purpose of statutory
interpretation is to implement the legislature' s meaning and intent. O.S.T. v. Regence BlueShield,
181 Wash. 2d 691, 696, 335 P.3d 416 ( 2014) ( BlueShield). If.the statute' s meaning is plain on its
face, we give effect to that plain meaning and our inquiry ends, as we do not construe the statute
otherwise. BlueShield, 181 Wash. 2d at 696. We use the ordinary meaning of the statute' s language,
the context of the statutory provision, related provisions, and the statutory scheme as a whole to
determine plain meaning. Dellen Wood Prods., Inc. v. Dep' t of Labor & Indus., 179 Wash. App.
601, 615, 319 P.3d 847, review denied, 180 Wash. 2d 1023 ( 2014).
Stericycle argues that the Commission misinterpreted the plain and unambiguous language,
service to the satisfaction of the [ C] ommission," under RCW 81. 77. 040 when it granted statewide
biomedical waste service authority to Waste Management. Stericycle is correct that the statute is
plain and unambiguous, but that plain language does not reach the result Stericycle advances.
A. PLAIN LANGUAGE OF RCW 81. 77. 040
Stericycle argues that ( 1) the legislature has required a monopoly marketplace in the solid
waste industry and ( 2) " service" under RCW 81. 77. 040 must be interpreted as a directive to the
Commission to examine only the " attributes" of the services provided by existing collection
companies to decide whether customers are satisfied with the existing companies. Br. of Appellant
at 20. The plain language of RCW 81. 77. 040 does not support either argument.
The legislature has not mandated a monopoly market in the solid waste collection industry.
The plain language of RCW 81. 77. 040 clearly contemplates competing certificate authority if the
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Commission decides that existing .service providers are not operating to the Commission' s
satisfaction. No language in RCW 81. 77. 040 mandates a monopoly model on solid waste
collection service. Instead, it provides that the Commission may grant an application for
competing authority if existing serving the
waste collection " or companies"
solid company
territory will not provide service to the satisfaction of the Commission. RCW 81. 77.040.
The plain language of RCW 81. 77. 040 reserves consideration of whether service is
satisfactory to the Commission. By phrasing the key statutory requirement of RCW 81. 77. 040 as
satisfactory service," Stericycle glosses over who is to decide whether existing biomedical waste
companies are providing adequate service. Service is satisfactory ifthe existing provider is serving
the community " to the satisfaction of the [ C] ommission" not, as Stericyle' s argument suggests, to
the satisfaction of the customers themselves. RCW 81. 77. 040 ( emphasis added); e. g. Br. of
Appellant at 20 (" The Commission' s interpretation of RCW 81. 77. 040 would read the `` satisfactory
service' requirement out of the statute.").
Stericycle acknowledges that the Commission is the entity that must be satisfied, but argues
that " service" should be defined narrowly so that the Commission' s discretion is restrained to focus
on factors that point to whether customers are satisfied with existing service. That focus does not
adhere to the plain language of RCW 81. 77. 040. The Commission and Waste Management focus
on the phrase " service to the satisfaction of the [ C] ommission," asserting that this language gives
the Commission broad authority to determine its satisfaction before granting competing authority.
RCW 81. 77. 040. We agree that the Commission has broad authority to determine to its satisfaction
whether service is satisfactory.
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B. THE COMMISSION PROPERLY EXERCISED ITS DISCRETION UNDER RCW 81. 77. 040
Stericycle relies heavily on Superior Refuse Removal, Inc. v. Washington Utilities &
Transportation Commission, 81 Wn. App. 43, 913 P.2d 818 ( 1996), the only case to examine the
meaning of " service to the satisfaction of the [ C] ommission" under RCW 81. 77. 040. There, we
affirmed the Commission' s denial of an application for a PCN certificate to provide competing
garbage collection services to commercial businesses in Yakima. Superior Refuse, 81 Wn. App..
at 44. We held that the Commission' s findings of fact were supported by substantial evidence in
the record that the existing service provider' s service deficiencies alleged by the petitioner were
not widespread and therefore the Commission' s conclusion that the existing provider was
providing service to the " satisfaction of the [ C] ommission" was supported by its findings of fact.
Superior Refuse, 81 Wash. App. at 49.
Stericycle attempts to analogize this case to Superior Refuse because the Commission
found that Stericycle' s alleged billing and customer services issues did not support the need for
Waste Management' s statewide authority. But Superior Refuse is inapplicable here because that
case was concerned only with neighborhood garbage collection service and disposal, and the
Commission has differentiated biomedical waste from neighborhood garbage collection due to the
unique attributes of the biomedical waste collection industry. AR at 575 ( Sure -Way Incineration,
Order M.V. G. No. 1451, at 17). Superior Refuse did not discuss the Commission' s reasoning on
the specialized needs of biomedical waste generators.
The Commission did not exceed its statutory authority under RCW 81. 77. 040 by allowing
competition in the biomedical waste industry and in exercising its discretion granting Waste
Management statewide biomedical waste service authority. Eight biomedical waste generators
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testified that they were unhappy with their limited market choices for disposing of their specialized
waste. Each of them testified that they wanted or needed a statewide market competitor to
Stericycle. The record demonstrates that the Commission properly exercised its discretion under
the plain language of RCW 81. 77. 040 by deciding that Stericycle was not providing service to the
satisfaction of the Commission.
III. THE COMMISSION' S ORDER IS SUPPORTED BY SUBSTANTIAL EVIDENCE AND IS NOT
ARBITRARY OR CAPRICIOUS
Stericycle next challenges the Commission' s finding of fact 3 in the initial order and
adopted by the final order that Waste Management demonstrated consumer need for, and positive
results from, its expansion into statewide biomedical waste collection. Stericycle argues that the
Commission' s ruling was arbitrary and capricious because it reversed what Stericycle
characterizes as a previous interpretation of RCW 81. 77. 040 without substantial evidence or
reasoned analysis. We hold that the Commission' s challenged finding of fact 3 was based upon
substantial evidence, and its ruling was not arbitrary or capricious.
A. SUBSTANTIAL EVIDENCE
We review an agency' s findings of fact for substantial evidence. Thomas v. Dep' t ofEmp' t
Sec., 176 Wn. App. 809, 813, 309 P.3d 761 ( 2013). Substantial evidence is evidence that is
sufficient to persuade a fair- minded person of its truth. Cornelius, 182 Wash. 2d at 607. The
substantial evidence standard of review is highly deferential to the agency' s action. ARCO Prods.
Co. v. Wash. Utils. & Transp. Comm' n, 125 Wash. 2d 805, 812, 888 P.2d 728 ( 1995). On appeal,
we will not invalidate an agency' s discretionary decision without a clear showing of abuse. ARCO
Prods., 125 Wash. 2d at 812. In deciding whether substantial evidence supports an agency' s finding
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of fact, we will not reweigh evidence or substitute our judgment for the agency' s determination of
witness credibility. Thomas, 176 Wn. App. at 813. Unchallenged findings of fact are verities on
appeal. Pal, 185 Wash. App. at 781.
Substantial evidence on the record supports the Commission' s finding of consumer need
for and benefit from competition with existing service providers for biomedical waste collection.
Eight generators of biomedical waste testified that they wanted and needed a competitor to
Stericycle for a variety of reasons. The Commission found that the public benefits of a statewide
competitive market outweighed " unsubstantiated claims" of economic harm to the existing
companies, including Stericycle. CP at 43. Importantly, this finding of fact is a verity on appeal
because Stericycle does not assign error to it. Pal, 185 Wn. App. at 781. Jeff Norton testified that
he believed Stericycle' s decision to provide the same new waste collection container that Waste
Management began providing at a lower rate than Stericycle' s other rates was a direct reaction to
Waste Management' s competition. Although Stericycle presented counter evidence to Norton' s
testimony, we do not reweigh evidence or make our own credibility determinations. Thomas, .
176 Wn. App. at 813. Finding of fact 3 is supported by substantial evidence.
Stericycle also argues that the final order' s paragraphs 12, 13,. and 15 reference " factual
allegations" that are not on the record and that Stericycle did not have an opportunity to rebut.
Br. of Appellant at 36. We disagree. Paragraph 12 states,
We further observe that the development of competition in former
monopoly utility markets was only just beginning in Washington in the late 1980' s
and early 1990' Due to a lack of experience with the impacts of allowing more
s.
than one company to provide service, the Commission was properly cautious and
limited competitive entry to demonstrated instances in which multiple providers
would serve consistent with the public interest. The Commission thus required that
a new entrant in the biomedical waste collection market be willing and able to
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provide service that was not being provided in the requested territory as determined
by the needs of the customers of that specialized service.
CP at 25- 26. Paragraph 13 states,
Twenty years later, the Commission has greater experience and comfort
with competition in certain utility markets. Biomedical waste collection " has
evolved into a highly competitive industry as a result of the Commission
interpreting RCW 81. 77. 040 consistently with the unique requirements and
attributes of the service." [ In re Pet``n of Comm' n Stafffor a Decl. Ruling, Docket
TG -970532, Decl. Order at 11 ( Wash. Utils. & Transp. Comm' n Aug. 14, 1998).]
Stericycle currently competes with another certificated company to provide such
service throughout the vast majority of the state— including with Waste
Management for the last two years in territory that includes 80 percent of the
generators in Washington— without any adverse impact on the companies'
economic viability or ability to provide service. To the contrary, Waste
Management' s re- entry into the biomedical waste collection market in the
Company' s existing solid waste collection service territory has resulted in
demonstrated benefits to consumers without detriment to Stericycle' s revenues or
customer count.
CP at 26 ( footnotes omitted). Paragraph 15 states,
We view this that an applicant can demonstrate that existing
conclusion[,
companies will not provide service to the satisfaction of the Commission by
proving unmet need for a competitive alternative and that the new entrant will
enhance effectiveness of competition,] as less of a change to the Commission' s
determinations two decades ago than as an adaptation of regulation to the realities
of the market. Existing biomedical waste collection companies will not provide
service to the satisfaction of the Commission if the consumers of that specialized
service need, and an additional company can provide, and an effective competitive
alternative. We continue to adhere to the statement Stericycle quotes from the
Commission' s 2010 report to the legislature that the rate and service regulations
applicable to ferry, garbage collection, and bus industries are intended to provide a,
surrogate for the pricing discipline that would be exerted by a competitive
marketplace. But where competition can or does exist, as in the biomedical waste
collection industry, regulation should ensure that consumers reap the benefits of
multiple service providers by encouraging an effectively competitive marketplace.
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We will not use the statute to shield incumbent companies from the greater service
option availability and pricing discipline that such a marketplace is intended to
exert.
CP at 26- 27 ( footnotes and internal quotation marks omitted).
Paragraphs 12, 13, and 15 are not new factual allegations; they merely recite the evolution
of the biomedical waste industry as compared to regular neighborhood garbage collection, and the
Commission' s response to that evolution: These recitations could not have come as a surprise to
Stericycle. After multiple Commission orders since 1990 that reference the uniqueness of the
biomedical and the
waste industry, as compared to neighborhood garbage collection,
Commission' s statement that it would consider competition in future decisions, Stericycle cannot
plausibly claim that it had no notice that the Commission might consider the need for competition
and, as we have already held, substantial evidence supports the generators' need and desire for a
competitive alternative to Stericycle. AR at 575 ( Sure -Way Incineration, Order M.V.G. No. 1451,
at 17); AR at 667 ( Sureway Med. Servs., Order M.V. G. No. 1663, at 10); AR at 744 ( In re Pet' n
of Comm' n Staff for a Decl. Ruling, Docket No. TG -970532, Decl. Order, at 11). The
Commission' s challenged finding of fact is supported by substantial evidence on the record and
the Commission' s orders did not present new facts.
B. ARBITRARY OR CAPRICIOUS
Finally, Stericycle argues that the Commission' s final order was arbitrary and capricious.
because the Commission' s initial and final orders in this case changed the way it defined " service"
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without sufficient reasoning based on substantial evidence.6 Because the Commission' s final order
is based upon its precedent of treating biomedical waste collection services differently than
neighborhood garbage collection and its order contains sufficient reasoning to justify its decision,
the Commission' s final order was not arbitrary or capricious.
An agency acts arbitrarily and capriciously when its action is " willful, unreasoned, and
taken without regard to the attending facts or circumstances." Northwest Sportfishing Indus.
Ass' n v. Dep' t of Ecology, 172 Wn. App. 72, 90, 288 P.3d 677 ( 2012). If the record demonstrates
two possible opinions, an agency' s action is not arbitrary or capricious if the agency gave the
action due consideration even if we might believe it was erroneous. Ass' n of Wash. Spirits & Wine
Distrib. v. Wash. State Liquor Control Bd., 182 Wash. 2d 342, 358, 340 P.3d 849 ( 2015). Stare
decisis, the principal that reviewing courts will overturn precedent only if it is incorrect or harmful,
plays only a limited role in administrative agency decisions. City of Federal Way v. Koeing,
167 Wash. 2d 341, 343, 217 P.3d 1172 ( 2009); Kittitas County v. K Wash. Growth Mgmt. Hearings
Bd. 172 Wash. 2d 144, 173 n. 9, 256 P.3d 1193 ( 2011). Agencies should not treat similar situations
differently and should strive for equal treatment. Seattle Area Plumbers v. Wash. State
Apprenticeship & Training Council, 131 Wash. App. 862, 879, 129 P.3d 838 ( 2006); Kittitas County,
172 Wash. 2d at 173 n. 9. Our scope of review under the arbitrary and capricious standard is very
6 Stericycle argues that the Commission' s decision was made without authority because it did not
make a specific finding that " services provided by existing carriers are deficient." Br. of Appellant
at 29 ( citing Krakenberger v. Dep' t of Pub. Works, 141 Wash. 168, 169, 250 P. 1088 ( 1926)). This
argument is misplaced because the Commission explicitly found that a need for Waste
Management' s services and a competitive alternative to existing service providers outweighed any
adverse economic impact on those existing services. Because the Commission used its discretion
to consider competition in its evaluation of service, finding of fact 3, discussed above, constitutes
a sufficient finding about existing service.
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narrow and the party asserting it carries a heavy burden. Ass' n of Wash. Spirits & Wine,
182 Wash. 2d at 359.
As recited above, the Commission' s analysis in granting PCN certificates to biomedical
waste service providers began over two decades ago. In 1990, the Commission first recognized
the need for biomedical waste collection services. AR at 574- 75 ( Sure -Way Incineration, Order
M.V.G. No. 1451, at 16- 17). Because it determined that biomedical waste service did not fit the
typical monopoly model of neighborhood garbage collection, the Commission stated that it would
consider " in future proceedings" allowing biomedical service companies to compete in a given
territory. AR at 575 ( Sure -Way Incineration, Order M.V.G. No. 1451, at 17). Stericycle trivializes
the Commission' s statement that it would consider competition in the future as dicta and
characterizes the respondents' argLunents as a " gross exaggeration" of a mere " possibility" that the
Commission could authorize additional statewide service in the future and not a general statement
of pro -competition policy. Br. of Appellant at 39 n. 125.
The Commission' s subsequent decisions since Sure -Way Incineration contradict
Stericyle' s argument. The Commission has repeatedly built upon its initial recognition that
competition could be beneficial in the biomedical waste service context. In 1993, the Commission
explicitly recognized that strict adherence to the monopoly model in the biomedical waste
collection industry would not necessarily best achieve the legislature' s purpose in chapter
81. 77 RCW. AR at 667 ( Sureway Med. Servs., Order M.V. G. No. 1663, at 9). The Commission
explained that it would not limit its consideration to " service failures" of the sort common to
neighborhood garbage collection. AR at 668 ( Sureway Med. Servs., Order M.V.G. No. 1663, at
10). The Commission also explained that in granting PCN authority to a biomedical waste service
11
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company it would broaden its consideration to include " need -related sufficiency of service
considerations - - whether the existing service reasonably serves the needs of the specialized
market." AR at 668- 69 ( Sureway Med. Servs., Order M.V.G. No. 1663, at 10- 11).
In 1994, the Commission implemented this reasoning when it granted competing authority
for biomedical waste collection services over the objection of two existing companies because the
applicants demonstrated that they would provide service not offered by the existing companies.
AR at 704- 05 ( In re Med. Res. Recycling Sys., Inc., Order M.V.G. No. 1707, at 3- 4 ( Wash. Utils.
Transp. Comm' n May 23, 1994)).
In 1995, the Commission granted Stericycle its certificate for non-exclusive statewide
authority to provide biomedical waste collection services. AR at 722 ( Ryder Distrib. Res., Order
M. V. G. No. 1761, at 12). The Commission noted that competition can be detrimental to business
but that competition can also bring " benefits to consumers," which had been demonstrated on the
record before it. AR at 723- 24 ( Ryder Distrib. Res., Order M.V.G. No. 1761, at 13- 14).
By 1998, the Commission recognized that the biomedical waste collection industry had
evolved into a highly competitive industry as a result of the Commission interpreting
RCW 81. 77. 040 consistently with the unique requirements and attributes of the service." AR at
744 ( In re Pet' n of Comm' n Stafffor a Decl. Ruling, Docket No. TG -970532, Deel. Order, at 11).
The initial order on this docket number noted that while RCW 81. 77. 040 " expresses a preference
for monopoly service in the collection of solid waste," the Commission had interpreted the statute
according to the unique needs of biomedical waste generators, giving their testimony " considerable
weight" when deciding if existing companies' service was satisfactory to the Commission. Reply
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Br. of Appellant, App. A, Tab 13 ( In re Pet' n of Comm' n Stafffor a Decl. Ruling, Docket No.
7
TG -970532, Initial Order, at 3 n. l ( Wash. Utils. & Transp. Comm' n Oct. 29, 1997)) .
In a 2011 order in Stericycle' s earlier challenge to Waste Management' s certificate
authority, the Commission again noted that it regulates the biomedical waste collection industry
differently than neighborhood garbage collection by authorizing competition because competition
in the biomedical waste collection industry " promotes higher quality of service in terms of
protecting the public health and safety." AR at 767- 68 ( Stericycle of Wash., Inc. v. Waste Mgmt.
of Wash., Inc., Docket No. TG -110553, Order 2, at 14- 15 ( Wash. Utils. & Transp. Comm' n July
13, 2011)). " Commission policy has historically encouraged competition in the provision of
biomedical waste services." AR at 769 (Stericycle of Wash., Docket No. TG -110553, Order 2, at
16). The Commission refused to erect barriers to entry into the biomedical waste collection
market, contrary to Stericycle' s urging. AR at 769 ( Stericycle of Wash., Docket No. TG -110553,
Order 2, at 16).
Stericycle relies on the Commission' s statement in 1993 that " mere preference for
competition" does not demonstrate a need for an additional service provider. AR at 698- 99
I The declaratory order in docket number T.G-970532 did not adopt the initial order wholesale, but
the final order does not contradict this rule in the initial order. AR at 734 (In re Pet' n of Comm' n
Stafffor a Decl. Ruling, Docket No. TG -970532, Deel. Order).
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Sureway Med. Serv., Order M.V.G. No. 1674, at 4- 5). 8 Given the context of the Commission' s
historical evolution in regulating this particular industry, this isolated quote is not persuasive.
Furthermore, the Sureway Medical Services quote appears after the Commission' s reiteration that
it gives considerable weight to the needs of generators of specialized waste; the testimony in that
case, however, did not demonstrate a great need for competing PCN authority. AR at 699
Sureway Med. Serv., Order M.V. G. No. 1674, at 5). Here, as we have already concluded,
substantial evidence on the record supports the Commission' s finding of a need for competition,
not mere preference for it.
Based on this history, recited throughout the final order in this case, the Commission' s
finding that Stericycle' s service was unsatisfactory based upon the waste generators' testimony
about their need for competition was not arbitrary or capricious. The final order reiterated that the
Commission' s satisfaction with service for specialized waste generators is measured according to
those customers' needs and that eight witnesses testified to the need for a statewide competitive
8 The Commission explained that
t]he satisfactory nature of service by existing providers of specialized solid waste
collection services will be measured according to the specialized needs of
customers. The Commission will give considerable weight to the judgment of
biohazardous waste generators regarding the sufficiency of existing service,
because they are professionally involved in health care, and are in a unique position
to evaluate the risks and benefits of collection and disposal services....
The applicant [ in a previous order] made a very persuasive demonstration
that existing companies, although providing " satisfactory" physical collection
service, were not providing service that sufficiently met the specialized
requirements of the customers....
The final order does not depart from the Commission' s consistent view that
mere preference for competition[] does not demonstrate a need for an additional
carrier.
AR at 698- 99 ( Sureway Med. Serv., Order M.V.G. No. 1674, at 4- 5).
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alternative. The Commission acknowledged Sureway Medical Services' s statement that " mere
preference for competition" is not sufficient to find unsatisfactory service, but decided to revisit
that decision and then described the history of the biomedical waste industry, noting the
Commission' s encouragement of competition in this industry. CP at 36- 37. From this history, the
Commission concluded that its prior decision dismissing competition as an insufficient factor in
granting PCN authority in the biomedical waste services industry no longer reflects " the realities
of the current marketplace." CP at 38. This reasoned analysis is contrary to Stericycle' s argument
that the final order is arbitrary and capricious, and its argument fails.
We affirm the Commission' s final order granting Waste Management statewide authority
to provide biomedical waste collection service because the Commission did not exceed its statutory
authority, and its decision was based on substantial evidence and was not arbitrary or capricious.
SUTTON, J.
We concur:
BJ ; KG' I, A.C. J.
LLQ, J.
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