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USA Recycling, Inc. v. Babylon, Town of

Citation: 25 ELR 21522
No. Nos. 95-7129, -7131, 66 F.3d 1272/41 ERC 1254/(2d Cir., 09/19/1995)

The court holds that a municipal waste management plan that grants a single contractor the exclusive right to collect garbage within a designated commercial district does not violate the Commerce Clause of the U.S. Constitution. The plan allows the contractor to dispose of up to a specified amount of garbage at a municipal incinerator for free and requires commercial property owners in the district to pay an annual assessment for an allocable basic collection service. Businesses not entitled to the basic service and businesses requiring collection of more than a specified amount of garbage must pay a user fee for the collection of additional garbage. The district court preliminarily enjoined the town from implementing the plan even though the district court found that plaintiffs would not suffer any irreparable harm as a result of the plan's implementation. On appeal, the court first finds that the town's decision to replace the private market for commercial garbage collection with uniform municipal collection is subject to the limitations of the dormant Commerce Clause. The town has exercised its governmental powers by denying licenses to all garbage haulers but the one the town hired and by establishing civil and criminal penalties for haulers who collect garbage without a license. Because no private actor could engage in such activity, the town is acting as a market regulator rather than a market participant. The court holds, however, that the town's decision to eliminate the commercial garbage collection market does not discriminate against interstate commerce, because the town has not favored in-state garbage haulers over out-of-state competitors. In addition, the town has not handicapped other in-state and out-of-state businesses from competing against a group of local proprietors. The town's waste management plan differs dramatically from the flow-control ordinances the Supreme Court struck down in C&A Carbone, Inc. v. Town of Clarkstown, 24 ELR 20815 (1994), because local businesses do not buy services from anyone. Instead, the town unilaterally provides garbage service to everyone in the district. Although taxpayers in the district ultimately pay for these garbage services, the payment of taxes in return for municipal services is not comparable to the forced business transaction that the ordinance in Carbone required. Because the town is not selling anything, it is not a favored single local proprietor. New York law makes clear that the town is fulfilling a governmental duty, because New York municipalities have a duty to ensure proper collection and disposal of trash for the well-being and health of the community. The town chose to replace private commercial garbage hauling with public garbage collection, provided by an independent contractor hired by the town. The court holds that the garbage hauling fees the town imposes on commercial property in the district do not discriminate against nonlocal taxpayers in favor of local taxpayers, because the town imposes its fees uniformly throughout the district on all commercial property and does not differentiate between local and nonlocal businesses. Applying the balancing test set forth in Pike v. Bruce Church, Inc., 397 U.S. 137 (1970), the court next holds that the town has not imposed any incidental burdens on interstate commerce that are clearly excessive in relation to the putative local benefits, because plaintiffs failed to show that the town's waste collection system places any extra burden on out-of-state companies or on local companies engaged in interstate commerce.

The court holds that a town's decision to let its designated waste hauler dump trash collected in the district at the town's incinerator for free constitutes market participation and is thus not subject to the limits of the dormant Commerce Clause. The town effectively owns the incinerator and owns exclusive rights to dispose of waste there. The court notes that the town's selection of the designated waste hauler would not violate the dormant Commerce Clause, even if the dormant Commerce Clause applied. The town conducted an open bidding process to find a garbage hauler pursuant to the New York General Municipal Law and the town considered the relative merits of the submitted bids according to several distinct criteria, including cost, prior experience, ability to provide equipment and support services on the schedule the town requested, and ability to meet financial obligations. The town's requirement that the chosen hauler maintain a secured parking lot and a local office imposed de minimis burdens, which are far outweighed by the nondiscriminatory local interests served by ensuring reliable, consistent sanitation service to town businesses. The court next holds that the town's purchase of incinerating services from the incinerator operator is market participation. Furthermore, although the town's financing system is regulation, it does not havea discriminatory effect or impermissibly burden interstate commerce.

The court notes that if it were to rule in plaintiffs' favor, the municipal garbage systems upheld by the Supreme Court in California Reduction Co. v. Sanitary Reduction Works, 199 U.S. 306 (1905), and Gardner v. Michigan, 199 U.S. 325 (1905), would be unconstitutional, and municipalities could no longer undertake the traditional local governmental function of collecting town garbage. Finally, noting that a plaintiff must make a showing of irreparable harm before a court may issue a preliminary injunction, the court holds that it could only affirm the district court's grant of a preliminary injunction by determining that the district court's factual finding was clearly erroneous. Because the record supports the district court's determination that plaintiffs' alleged injuries would be entirely financial, and therefore remediable by an award of money damages, the district court did not clearly err when it found that plaintiffs had not demonstrated irreparable harm. The court, therefore, reverses the district court's entry of the preliminary injunction.

Counsel for Plaintiffs
Frank L. Amoroso
Nixon, Hargrave, Devans & Doyle
990 Stewart Ave., Garden City NY 11530
(516) 832-7500

Counsel for Defendants
Frederick Eisenbud
Cahn, Wishod & Lamb
534 Broadhollow Rd., CS 9034, Melville NY 11747
(516) 694-2300

Before Newman, Van Graafeiland and Cabranes, JJ.