Society of the Plastics Industry, Inc. v. City of New York

Index No. 15225/1971 (N.Y. Sup. Ct. September 16, 1971)

New York City ordinance which imposes a 2-cent tax on the sale of plastic containers, in order to promote recycling and to reduce solid waste disposal problem, appears to lack a rational basis for discriminating against plastic, because it does not impose similar taxes on paper, fibre, glass, metal and other containers mentioned along with plastic in the state enabling law. However, plaintiffs are denied preliminary relief because the damage threatened is not irreversible, and a full trial is scheduled to take place before the tax goes into effect.

Counsel for the Defendant:
J. Lee Rankin
Municipal Building
New York, New York
(212) 566-3929

Counsel for the Plaintiff:
Shea, Gould, Climenko & Kramer
330 Madison Avenue
New York, New York 10017
(212) 661-3200

[1 ELR 20467]

Frank, J.:

This is a motion for a temporary injunction to restrain the City of New York and its Finance Administrator from enforcing or otherwise giving effect to certain provisions of a Local Law, Int. No. 640-A, which provides for a tax on plastic containers.

The plaintiffs in this action for declaratory judgment and injunctive relief are The Society of The Plastics Industry, Inc., a trade association representing approximately 1,000 companies throughout the United States that manufacture and distribute plastic products, and, in addition, a number of individual corporations who are variously engaged in the manufacture, distribution or purchase of plastic containers in New York City and elsewhere.

In June, 1971, the New York State Legislature passed an act (hereinafter referred to as the Enabling Act) amending section 1201 of the Tax Law of this State by adding thereto a new subdivision (f) "enabling any city with a population of one million or more to impose certain taxes on the sale of containers made in whole or in part of rigid or semi-rigid paperboard, fibre, glass, metal, plastic or any combination of such materials," The purpose of the legislation as stated in the Enabling Act is "to promote the recycling of containers and reduce the cost of solid waste disposal to such city."

Thereafter, in June, 1971, the City Council of the City of New York passed, and the Mayor signed, Local Law, Int. No. 640-A (hereinafter the Local Law) amending Chapter 46 of the Administrative Code of the City of [1 ELR 20468] New York so as to impose a tax purportedly pursuant to the authorizations contained in the Enabling Act. The stated purposes of the Local Law are "raising revenue by imposing taxes on plastic containers and to promote the recycling of such containers and reduce the cost of solid waste disposal of the city."

The Local Law provides, inter alia, for a tax of two cents on every sale of plastic container by a seller or supplier to a retailer on or after July 1, 1971, and for the allowance of a credit of one cent for each taxable container that is manufactured with a minimum of 30% of recycled material. While the seller or supplier is responsible for payment of the tax in the first instance, the retailer is held liable therefor if the seller or supplier fails to make such payment. The Law also provides for the keeping of records and for the filing of returns with the Finance Administrator.

In support of their application for temporary injunctive relief, plaintiffs have sought to demonstrate that there is a strong probability of their ultimate success in having the Local Law declared invalid on any one of several grounds.

First, it is asserted that the Local Law in imposing a tax solely on plastic containers impermissibly deviated from the authorization granted by the State Legislature in the Enabling Act. Plaintiffs argue that the Enabling Act defined the "taxable class" as "containers made in whole or in part of rigid or semi-rigid paperboard, fibre, glass, metal, plastic or any combination of such materials" and that if the City chose to act pursuant to the authority granted to it it was obliged to impose the tax upon the "taxable class" as specified in the Act and could not pick and choose from such class at its discretion. In other words, the City could either enact a tax law contiguous with the boundaries set forth in the Enabling Act or enact no law at all. Defendant City disputes such interpretation of the authorization conferred by the Enabling Act and contends that once the authority to tax is granted to the municipality, the municipality, with its superior awareness of local needs and problems, can legislate selectively within the limits of such authority to the extent it deems necessary.

While both sides have submitted various authorities dealing generally with statutory construction, plaintiffs rely particularly upon the case of Glen Cove Theatres v. City of Glen Cove (36 Misc 2d 772) which, as defendant concedes, touches directly upon the point here involved. The unappealed decision in that case offers persuasive support for plaintiffs' position with respect to the manner in which the municipality must carry out the authorization granted by the Enabling Act. Further support for such construction is found by comparing the language of the Enabling Act (Tax Law, Section 1201, subdivision (f) with the language contained in one of the other subdivisions of that section, specifically subdivision (c) dealing with coin-operated amusement devices, which expressly permits the imposition of taxes "either generally or upon selected types or classes of such devices" in distinction to the non-discretionary terminology of subdivision (f).

In considering whether the Local Law conforms to the authorization conferred by the State Legislature, it is also significant to note that the stated purpose of the Enabling Act is "to impose taxes to promote the recycling of containers and reduce the cost of solid waste disposal to such city." Toward that end, the Enabling Act sets forth a comprehensive legislative scheme, including schedules of tax rates and concomitant tax credits, covering containers of all types, with the various fabricating materials from which containers are made being specifically described. It is clear that it is the intention of the Enabling Act to promote the recycling of containers in general, of whatever material made, and thereby reduce the City's cost of solid waste disposal. By singling out only plastic containers for taxation, and exempting all others, the Local Law does violence to the legislative plan authorized by the Enabling Act and frustrates its purposes. Since it is the tax credit feature that encourages the use of recycled material, and such credit is meaningless unless a tax is imposed in the first instance, the exclusion from taxation of containers made from paperboard, fibre, glass and metal eliminates any incentive for the recycling of such non-plastic containers, which constitute by far the greatest portion of the total number of containers in use. Moreover, the imposition of a tax solely on plastic containers will not even promote the recycling of that category of containers but will merely serve to encourage the users thereof to switch to containers of the non-taxed varieties and add to the volume of those materials which, for the reason aforenoted, are not likely to be recycled. Only by taxing all containers of the various kinds specified in the Enabling Act would recycling be promoted with a resultant reduction in the cost of solid waste disposal. So long as containers of even one type of material are exempted from taxation, the purpose of promoting the recycling would tend to be frustrated because there would, predicatably, be a tendency by users to switch to the non-taxed variety of containers which would afford no incentive for recycling. Under the Local Law here in issue, with its exemption of all types of containers except plastic ones, the frustration of recycling would be particularly acute and widespread, and the provisions of such law appear to be in sharp conflict with the scope and intent of the authorization conferred by the Enabling Act.

Plaintiffs also contend that the Local Law is unconstitutional in that it violates both the equal protection and due process clauses of the state and federal constitutions, and in constituting an undue burden on interstate commerce.

An impressive factual showing has been made by plaintiffs in support of their contentions that the Local Law is oppressive and discriminatory in singling out for taxation plastic containers as against all other containers without any rational basis for such discrimination. While defendant City argues that a rational basis does exist for discriminating against plastic containers because they present more serious pollution problems and are more difficult and costly to dispose of than containers of other materials, plaintiffs have submitted substantial and persuasive evidence to the contrary. It appears from the papers herein that plastic containers constitute a comparatively insignificant portion of street litter and of the total waste flow in comparison to glass, metal, fibre and paperboard containers, and that the total cost of collecting and disposing of the other types of containers far exceeds the cost of similarly collecting and disposing of plastic containers.

Plaintiffs have made a prima facie showing on this application that there is no rational basis for subjecting plastic containers to a special tax while exempting other container materials which are essentially just as costly and difficult to dispose of, and it appears that plaintiffs would be able to establish that the discriminatory classification in the Local Law neither bears any reasonable relation to the object of the legislation, nor is the result of any rational legislative process.

Perhaps the most compelling argument for affording preliminary relief herein is the strong showing of the irreparable harm which plaintiffs will suffer if the Law should ultimately be held invalid. There is little merit to the defendants' contention that plaintiffs would have a complete remedy at thattime by way of refund of any taxes paid. This view completely and unrealistically ignores the far-reaching consequences of the Law involved. This is not an ordinary tax statute, but rather one that imposes a serious and potentially lethal competitive disadvantage upon plastic containers, as opposed to other types of containers, and one which will undoubtedly cause many users to switch from plastic to non-plastic containers not subject to such tax. What is involved here is not primarily a revenue measure but a tax which is designed to destroy a particular industry. Indeed, such is admitted in the affidavit of Jerome Kretchmer, the Administrator of the Environmental Protection Administration, wherein he states that the tax was intended to cause users to turn from plastic containers to other types of containers (Paragraph 44 of said affidavit). Clearly, then, refund procedures which return only the monies which have been paid in taxes are wholly inadequate in a situation where substantial business losses will be suffered and where it can even be anticipated that some manufacturers or distributors of plastic containers will be caused to cease operations entirely by reason of the tax.

Under the circumstances herein and in light of the strong showing made by plaintiffs, preliminary injunctive relief would appear warranted. It is, however, not necessary to grant such drastic remedy at this time since a more desirable option is here available. It is always preferable to reach a determination on issues of this magnitude after a trial at which all the factual and legal problems can be fully and adequately explored, and upon which plaintiffs can obtain all the relief to which they prove they are entitled. Since it appears that no tax is due under the Local Law before October 20, 1971 (Adm. Code, Section F46-7.0), a trial can be held and a disposition made prior to such date.

Accordingly, this motion for a temporary injunction is denied on condition that defendants shall proceed to trial at the time scheduled herein. If the defendants are not ready to proceed to trial at such time, the motion will be granted with provision for an appropriate bond (cf. Berlitz Publications, Inc. v. Berlitz, 29 A D 2d 743). Upon the filing of a short note of issue and payment of appropriate fees, the clerk is directed to place this matter at the head of the appropriate day calendar of September 24, 1971 for trial, subject to the approval of the justice presiding thereat. Pretrial procedures and the filing of a statement of readiness shall be dispensed with.