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Atlantic Coast Demolition & Recycling, Inc. v. Board of Chosen Freeholders

Citation: 25 ELR 20620
No. No. 94-5173, 48 F.3d 701/40 ERC 1417/(3d Cir., 02/16/1995) Remanded for application of appropriate Commerce Clause test

The court reverses and remands a district court decision that New Jersey's solid waste flow control regulations, which require each state district to designate a particular facility to process and dispose of all solid waste generated within the district, do not violate the Commerce Clause of the U.S. Constitution. The court first holds that any Commerce Clause analysis of New Jersey's flow control regulations must employ the heightened scrutiny test that the U.S. Supreme Court used to analyze a similar flow control ordinance in Town of Clarkstown v. C&A Carbone, Inc., 24 ELR 20815 (1994). New Jersey's flow control regulations accomplish on a district level substantially what Clarkstown's flow control ordinance accomplished on a local level in that New Jersey's regulations favor a district's designated facilities at the expense of out-of-state providers of processing and disposal services that would otherwise compete for the opportunity to service solid waste generated within the district. The court holds that the district court thus erred in analyzing New Jersey's regulations under the balancing test set forth in Pike v. Bruce Church, Inc., 397 U.S. 137 (1970). That New Jersey does not absolutely bar the use of out-of-state facilities as designated facilities does not transform the discriminatory scheme into a nondiscriminatory one. Although out-of-state facilities can compete to become designated facilities, the New Jersey Department of Environmental Protection and Energy acknowledges that it approves district plans only if they are consistent with the core goals of having all of New Jersey's solid waste processed and disposed of in-state within the next five years. And this can be accomplished only by selecting existing and proposed in-state facilities whenever possible.

The court rejects the Department's contention that because New Jersey's flow control regulations, unlike the ordinance at issue in Carbone, are part of a larger utility regulation system, they are not subject to the heightened scrutiny test despite any discriminatory effect. The court does not read the dormant Commerce Clause jurisprudence to suggest that state utility regulation is to be judged by different standards from other state regulation. When state utility regulation is protectionist, the Supreme Court has employed heightened scrutiny; when it is not protectionist, the Court has applied a benefits and burdens analysis. The only Supreme Court case in which a Commerce Clause challenge was made based on the exclusionary effects of a monopoly created by a state public utility regulatory scheme is not helpful, because it was decided before a decision that made it clear that public utilities regulation is not a special category for Commerce Clause purposes. Thus, the court holds that the public utility aspects of New Jersey's solid waste disposal scheme do not require application of the Pike balancing test.

The court next holds that the regulations are not immune from Commerce Clause review under the market participant doctrine. Although the districts' activities involve purchases and sales of disposal service and capacity, the regulations purport to control the market activities of private market participants. Thus, the state promulgated the regulations in its role as a market regulator, not in its capacity as a market participant. The court directs the district court on remand to decide, under the heightened scrutiny test, whether the Department has demonstrated that the regulations serve a legitimate local purpose and that this purpose could not be served as well by available nondiscriminatory means.

Counsel for Appellant
Mark R. Rosen
Mesirov, Gelman, Jaffee, Cramer & Jamieson
44 Tanner St., P.O. Box 183, Haddonfield NJ 08033
(609) 795-4988

Counsel for Appellee
Gail M. Lambert, Deputy Attorney General
Attorney General's Office
RJH Justice Complex
25 Market St., CN 080, Trenton NJ 08625
(609) 292-4925

Before Stapleton, Alito and Lewis, JJ.: