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Automated Salvage Transp., Inc. v. Wheelabrator Envtl. Sys., Inc.

ELR Citation: 29 ELR 20171
Nos. 96-9281, 155 F.3d 59/(2d Cir., 08/20/1998)

The court holds that a settlement agreement between a state solid waste authority and a private waste disposal company does not violate the Sherman Act or the federal Commerce Clause. The agreement requires both the state authority and the company to respect one another's municipal contracts by rejecting deliveries of any waste committed to one another. If a hauler delivers to the company waste that is committed to the state three times within a three-month period, the company must refuse all deliveries from that hauler for three months. Ten haulers subjected to the three-month ban filed suit against the company to prohibit enforcement of the settlement agreement. The court first holds that the agreement does not subject the state company or the authority to liability under the Sherman Act. Because the authority is a political subdivision of the state, its alleged anticompetitive behavior is exempt under the foreseeability standard of the state action immunity defense. The authority was created to implement a uniform statewide waste disposal policy. As such, the authority was authorized to enter into long-term contracts. While the state legislature may not have had the precise terms of this agreement in mind, it is not precluded by the legislative mandate the authority was given, and it is a reasonably foreseeable consequence of the authority's specific direction to operate a financially solvent waste-to-energy system. Moreover, the state legislature's willingness to supplant competition is explicit in its decision to forbid the construction or expansion of disposal facilities that would create an excess capacity, or demand, for municipal solid waste.

The court then holds that the haulers' federal Commerce Clause action fails. The agreement does not prevent out-of-state waste processors from operating in the state or from accepting waste generated there, and the haulers concede that the agreement does not facially discriminate against interstate commerce. The agreement may very well affect commerce if it forces the haulers to haul committed waste from the state to out-of-state processors. Nevertheless, because it cannot be said that the flow of interstate commerce will be reduced, and thereby burdened, the settlement agreement has not imposed any incidental burdens on interstate commerce that are clearly excessive in relation to the putative local benefits. In addition, the case does not involve a direct assertion of the legislative power of the state to regulate conduct outside its borders. While the agreement affects the conduct of the company outside the state by requiring it to refuse the haulers' delivery of waste at its out-of-state facilities, it is the antithesis of the direct regulation of the kind that is per se invalid. The court also holds that the state authority and the company are market participants, and, therefore, any undue burden that their agreement imposes on interstate commerce does not implicate the federal Commerce Clause is not implicated. In this case, the article of commerce at issue is the service of processing and disposing of waste. The authority is in that business, and it is absurd to suggest that it does not have an interest in obtaining the waste generated by municipalities that have contracted with the authority. Furthermore, the actions of the authority do not have a regulatory effect outside its market. The haulers are essential market participants in the waste processing and disposal market. They pick up waste from municipalities who are contractually obligated to have it delivered to the authority for disposal. The agreement's impact on the haulers is simply a necessary consequence of the authority's right to contractually procure a supply of municipal waste. Last, the court rejects the haulers' argument that the authority cannot claim both the market participant exception from the federal Commerce Clause and state action immunity from the Sherman Act.

Counsel for Plaintiffs
William M. Bloss
Jacobs, Grudberg, Belt & Dow
350 Orange St., New Haven CT 06503
(203) 772-3100

Counsel for Defendants
J. Anthony Downs
Goodwin, Procter & Hoar
Exchange Pl., Boston MA 02109
(617) 570-1000

Before Meskill and Jacobs, JJ.