Northside Sanitary Landfill, Inc. v. City of Indianapolis

No. IP 89-01-C (S.D. Ind. August 4, 1989)

The court holds that the city's exclusion of plaintiff's sanitary landfill from the city's list of approved solid waste disposal sites does not violate plaintiff's equal protection rights or the Sherman Antitrust Act. The court holds that the city's state action exemption from the Sherman Act applies. The city's authority to exclusively control the disposal of waste and to require haulers to deposit waste at sites designated by the city's Board of Public Works came from the state legislature, and the state action immunity applies to municipalities acting pursuant to state policy. The anti-competitive effect created by the city's actions would certaintly be reasonably foreseeable or a reasonably foreseeable consequence of the state's grant of authority. The court next holds that plaintiff's equal protection rights have not been violated. The court holds that the proper disposition of county trash is a legitimate state interest under the applicable rational basis test, and the city's decision not to choose plaintiff for landfilling arguably served a legitimate public purpose. The city chose to exclude plaintiff's landfill, at least in part, because the United States Environmental Protection Agency designated the landfill as a Superfund site on the national priorities list, and named the city as a potentially responsible party under the Comprehensive Environmental Response, Compensation, and Liability Act for cleanup costs at the landfill. The reason for not selecting the plaintiff is legitimately debatable, since findings were made that further use of plaintiff for the disposal of waste would subject the city to further risk regarding its cleanup responsibility.

Counsel for Plaintiff
Warren D. Krebs
Parr, Richey, Obremskey & Morton
121 Monument Circle, Ste. 500, Indianapolis IN 46204-2994
(317) 632-3686

Counsel for Defendants
Stephen W. Terry Jr., Michael J. Huston, Lewis D. Beckwith, Robert K. Stanley
Baker & Daniels
300 N. Meridian St., Ste. 2700, Indianapolis IN 46204-2454
(317) 237-4535

[20 ELR 20293]

McKinney, J.

Order

I. Procedural Background

The City of Indianapolis by its Department of Public Works has since early 1988 excluded Northside Sanitary Landfill, Inc. from its list of approved solid waste disposal cites [sic]. Northside complains that such an exclusion is violative of its Fourteenth Amendment right to equal protection. Plaintiff asserts that the decision to exclude it from such list has no rational relationship to any legitimate municipal interest. In addition, Northside complains that the conduct is violative of the Sherman Antitrust Act, 15 U.S.C. [20 ELR 20294] § 1. The plaintiff seeks injunctive relief. The defendants have moved for summary judgment as to both theories.

The Court held a hearing on February 2, 1989, on the plaintiffs' petition for preliminary injunction. The parties agreed that the facts elicited at that hearing could be used in addition in the Court's consideration of defendants' motion for summary judgment. Matters filed with the motion for summary judgment and the responses thereto form the factual background for this controversy.

II. The Antitrust Claim

Northside's antitrust claim is countered by the City's invocation of the "state action exemption" from the Sherman Act. The Court finds that the state action exemption applies in this case and the defendants' motion for summary judgment addressed to that issue of the plaintiff's complaint will be GRANTED and the plaintiff's motion for preliminary injunction on that theory will be DENIED. The Seventh Circuit case of Fuchs v. Rural Electric Convenience Coop., Inc., 858 F.2d 1210 (7th Cir. 1988) addresses the state action immunity doctrine. The Court therein examines the development and the rationale of the doctrine from Parker v. Brown, 317 U.S. 341, 63 S. Ct. 307, 87 L. Ed. 315 (1943), which held that the Sherman Act did not prohibit official action by or directed by the state to, Town of Hallie v. City of Eau Claire, 471 U.S. 34, 105 S. Ct. 1713, 85 L. Ed. 2d 24 [15 ELR 20373] (1985), which held that state and quasi-state actors are subject to less stringent requirements than purely private actions. Fuchs found that Congress never intended to subject the states to antitrust limitations and that the Parker case illustrates that the courts have refused to "infer this purpose." Id. at 1214.

In other words, the antitrust laws do not apply to actions of the state which restrain trade, and therefore do not preempt laws authorizing such state action. Thus, state action immunity is not dependent on the wisdom or extent of the state regulation, only on whether the state is actually acting to displace free competition.

Id.

This case, of course, does not involve state action, this case involves the action of a municipality. Citing Hallie, the Seventh Circuit concludes in Fuchs that

the court has therefore held that to be immune from the antitrust laws municipalities must be acting pursuant to a "clearly articulated and affirmatively expressed" state policy to displace competition. Midcal, 445 U.S. at 105, 100 S. Ct. 943 [California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S. Ct. 937, 63 L. Ed. 2d 233 (1980).] The state policy need not compel the municipality to take the challenged action, it is enough that anti-competitive effects are reasonable foreseeable consequences of the state's grant of authority. Hallie, 471 U.S. at 42, 105 S. Ct. at 1718. Nothing more is required to insure confidence that the acts of a municipality should be shielded as acts of the state because a municipality lacks the attributes and incentives of private actors and does not pose the danger of private price fixing that the antitrust laws were intended to prevent.

858 F.2d 1214. Thus the state action immunity applies to municipalities acting pursuant to state policy.

In the case at bar the City's authority to act came from the Indiana Legislature. Indiana Code § 36-9-31-3(9)-(25) (1971) contains the relevant statutory language. These sections read as follows:

Section 3. In order to provide for the collection and disposal of waste in the consolidated city and for the management, operation, acquisition, and financing of facilities for waste disposal, the board may exercise the following powers on behalf of the city, in addition to the powers specifically set forth elsewhere in this chapter:

(9) to exclusively control within the city the collection, transportation, storage, and disposal of waste and to fix fees in connection with these matters;

(25) to require all persons located within the service district or waste disposal district to deposit waste at sites designated by the board.

Pursuant thereto, the defendant Board adopted resolution number 2682-1985, which reads as follows:

As of January 1, 1988, all solid waste disposed of in the solid waste collection special service district or waste disposal district shall be transported to and disposed of in the Indianapolis Resource Recovery Facility located on the southwest corner of Raymond and Harding Streets, Indianapolis, Indiana, unless such waste is directed elsewhere by the Department of Public Works.

That facility is an incinerator which disposes of trash and generates saleable steam for sale to power plants.

There does exist waste that cannot be burned in this facility. That "unacceptable waste" must be disposed of at alternative sites approved by the Board of Public Works. Waste unacceptable for the incinerator includes explosives, liquids, demolition debris, tires, pathological or infectious wastes and offal. Plaintiff's exclusion as an alternative site for the waste not suitable for the incinerator is the specific subject of this suit.

The state statute give the City the authority to exclusively control the disposal of waste and to require haulers to deposit waste at sites designated by the Board. The challenged conduct, the selection of sites, is conduct authorized by the state. Waste disposal as a business in Marion County therefore has been relegated by state policy to the regulation of the Indianapolis, Indiana, Board of Public Works. Such a delegation of authority by the state foreseeably results in the lack of a free market which would control the price of the method and place of disposal of Marion County waste. The Legislature has chosen to rely not on the free market, but on the Board of Public Works.

The State of Indiana has affirmatively expressed state policy to displace competition in the disposal of wastes in Marion County. Conduct by the Board of Public Works that results in anticompetitive effect would certainly be reasonably foreseeable or a reasonably foreseeable consequence of the state's grant of authority. Pursuant then to Fuchs, Parker, and Town of Hallie, the plaintiff's antitrust complaint falls.

III. The Equal Protection Claim

Plaintiff's equal protection claim also fails, but for different reasons. The case of Hancock Industries v. Schaeffer, 811 F.2d 225 [17 ELR 20728] (3d Cir. 1987), provides the analytical framework leading to this conclusion. The facts of that case are different from the facts of the instant case, although the method of analysis is certainly helpful for the resolution of the instant case. In Hancock, the municipality has made a decision to limit dumping at the municipal landfill to trash generated within the county. Local haulers filed suit against the city alleging that such conduct violated the equal protection clause of the United States Constitution. Several principles applied by that court are of assistance in the resolution of the instant case. Those principles will be discussed after setting out the facts as they apply to plaintiff's equal protection claim.

Plaintiff's complaint is summarized on page 21 of its Memorandum in Support of a Preliminary Injunction and in Opposition to the Defendants' Motion for Summary Judgment. Therein plaintiff complains that

what the city is doing is nothing less than using a statute which is for the purpose of collection of disposable waste in the consolidated city as a means of economically penalizing a potential joint tort feasor because the city has without being sued decided to admit liability and holds the opinion that Northside "has not behaved in cooperation or in concert with EPA."

(Tr. 90).

The evidence does not support that argument. The fact is that in September of 1984, the United States Environmental Protection Agency ("USEPA") placed Northside on its national priorities list for cleanup under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601, et seq. (commonly known as "CERCLA" or "Superfund"). Northside's designation as a superfund site on the national priorities list was affirmed in Northside Sanitary Landfill, Inc. v. Thomas, 849 F.2d 1516 [18 ELR 21032] (D.C. Cir. 1988). The official USEPA estimate (made in September 1987) of the cost of cleaning up Northside and the adjacent EnviroChem site pursuant to CERCLA is $ 33.9 million. Because [20 ELR 20295] of waste (sewage sludge) deposited at Northside in the early 1980's, the City has been identified by USEPA as a "potentially responsible party" under CERCLA for the cleanup costs at Northside.

On January 21, 1987, the Indiana Solid Waste Management Board ("ISWMB") issued a decision in a state adminstrative proceeding against Northside which included extensive findings of fact that contained a final administrative order that:

No further solid waste shall be disposed of on any property included within any construction or operating permit issued to Northside, except that plans may take in account the receipt of conventional waste with which to adequately contour the site. All permits and approvals to Northside for the disposal of any such wastes are hereby revoked. Final plans for contouring the site shall be included within the closure plan. . . .

According to the Tippecanoe Circuit Court in its special findings of fact and judgment affirming the ISWMB's finding and order, the evidence presented in the ISWMB's proceedings

establish[ed] extensive and egregious violations of this state's environmental laws and regulations," including evidence 'that Northside has contaminated surface and ground water beyond the limits allowed by regulation . . .; that Northside failed to obtain various permits required by regulation; [and] that Northside violated its landfilling permits and hazardous waste disposal regulations. . . .

In particular, the ISWMB found that:

Northside "is not geologically secure."

Contaminants have migrated from the disposal area and there is a substantial threat that they will continue to migrate by way of surface runoff, surface waterways, erosion and groundwater. . . .

The NSL permitted site continues to release and threatens to release chemicals to the surface and groundwaters so as to significantly impair, threaten and pollute the environment of the State of Indiana. . . .

In a rapidly changing hazardous, toxic and conventional waste disposal regulatory climate, [Northside] was unable to demonstrate the requisite technical expertise and sophistication of management and operational knowledge to maintain compliance with regulatory requirements. . . .

On September 25, 1987, USEPA issued its own Record of Decision. In the Summary of Remedial Alternative Selection accompanying its Record of Decision, USEPA stated as follows:

Both the unnamed ditch and Finley Creek receive ground water and surface water runoff from NSL. Contaminants in the surface water may volatize, degrade, precipiate or absorb to the sediments or remain in solution and be transported downstream to Eagle Creek and eventually to Eagle Creek Reservoir. . . . Contaminated ground water entering Finley Creek potentially affects aquatic life in the creek, people eating fish caught in the creek, and people drinking water from Eagle Creek Reservoir.

According to the affidavit of Barbara S. Gole, Director of the Department of Public Works, Northside was excluded from DPW's list of approved disposal sites because, among other reasons:

(a) Northside's landfilling permits were ordered revoked by the Indiana Solid Water Management Board ("ISWMB") in 1987, and the ISWMB ruled at that time that Northside should be closed; and

(b) Northside is the subject of a "Superfund" environmental cleanup action by the United States Environmental Protection Agency ("USEPA") which has placed Northside on its National Priorities List and has designated the city as a "potentially responsible party" for the cost of the Northside cleanup based on the City's disposal of sewage sludge at Northside in the early 1980's. Because the City is already exposed to the possibility of incurring millions of dollars in liability for the Northside cleanup, DPW does not wish to add to those potential costs (and hence the City's potential liability) by allowing additional waste under the City's control to be deposited at Northside.

In addition, during the course of the testimony of Barbara S. Gole, Director of the DPW, she listed the following further reasons for the failure to place the plaintiff on the approved disposal site list:

Well, you are looking at the amount of environmental risk the facility has placed the community in and the responsibility of the owners, the affirmative actions that are taken by the owners of these facilities to mitigate the risk to their customers for utilizing their facilities, and there are striking differences in this case. Northside Landfill has taken absolutely no steps to minimize the risk to people who utilize their facilities or people who — as far as I know people who live near them or downstream from them, whereas Southside Landfill has mitigated the risk for people who live — for the community that they are residing in and in addition to that have minimized the risk of the people who are their customers.

Tr. 111.

I believe the only thing I'm blaming Northside for is that Northside has not acted to minimize the city's liability. That is my only interest. And my only interest is in not increasing the city's liability. That is my job.

That is the only risk that I am empowered by the citizens of Marion County to judge upon, is where do we put our waste so that it presents the least amount of risk to the community.

QUESTION: So the reason you have excluded Northside as an alternative site is because of your liability on its site which you indicate was derived because of the disposal of sludge at the landfill?

ANSWER: Well, not only that, but Southside — if you read the letter Southside came to us, sat down, and said, "How can we protect the city's interest? We don't want to live in a community where we spoil the environment." Northside has never done that. Northside has never taken one affirmative action to protect any time of contaminants leaving that landfill.

Tr. 94.

The plaintiff insists that these are not constitutionally adequate reasons for the exclusion of Northside Landfill from the appropriate list. They argue that to allow one government entity to discriminate "against a facility because another governmental agency (the USEPA) classified it as a Superfund site would make the right to appeal such a classification under 42 U.S.C. § 9613a a rather hollow due process procedure." Plaintiff complains that just because the City has decided to admit liability under CERCLA where it hasn't even been sued doesn't mean the plaintiff has no equal protection rights. Northside asserts that there is no reason to treat it any differently than Southside.

Both parties agree that the test of the government classification at issue is the rational basis test. As the Hancock Industries v. Schaeffer case, supra, points out:

When faced with a challenge to a governmental classification under the rational basis test, a court should ask, first, whether at least one of the purposes of the classification involves a legitimate public interest and, second, whether the classification is naturally related to achievement of that purpose.

811 F.2d at 237. The Hancock court further points out that these inquiries do not involve an examination of historic fact or an inquiry "into the subjective motives of the decisionmakers." Id. The Hancock court concludes,

Thus, where "there are plausible reasons for [the legislative] action [the court's] inquiry is at an end. It is, of course, "constitutionally irrelevant whether this reasoning in fact underlaid the legislative decision." U.S. Railroad Retirement Board, 449 U.S. at 179, 101 S. Ct. at 461 (quoting Fleming v. Nester, 363 U.S. 603, 612, 80 S. Ct. 1367, 1373, 4 L. Ed. 2d 1435 (1960)).

[20 ELR 20296]

As regards the second question, that is whether the classification is rationally related to achievement of that legitimate public interest, the inquiry is not whether that reason given by the public body is iron clad and irrefutable, but, as the Hancock court states,

If the legislative determination that its action will tend to serve a legitimate public purpose "is at least debateable" the challenge to the action must fail as a matter of law. U.S. v. Carolene Products Co., 304 U.S. 144, 154, 58 S. Ct. 778, 784, 82 L. Ed. 1234 (1938).

811 F.2d at 238.

As in Hancock Industries, no one in this case disputes the fact that the proper disposition of county trash is a legitimate state interest. Plaintiff insists in this case that the fact that Northside is a Superfund site is not a legitimate reason for the defendants' conduct. The plaintiff urges that because it is still open for the acceptance of some of the kinds of waste that the City cannot burn in its incinerator that it must have the same opportunity for the City's business as does every other operator. Northside argues that each and every one of the reasons given by Barbara Gole are insufficient.

It is important to point out, however, that the question is not whether they are insufficient, the question is whether these reasons are at least debateably legitimate. It appears to the Court that the reasons of the defendants for not selecting the plaintiff are at least debateably legitimate. Again, it is not this Court's responsibility to re-try the EPA determination or the Tippecanoe County Circuit Court's determination. It appears to this Court that if the Board of Public Works determines that further use of plaintiff for the disposal of waste would subject the City to further risk regarding its cleanup responsibility, and if the Board bases that opinion on EPA findings and Indiana state court rulings, then its reasons for rejecting the plaintiff as a landfill site are at least debateably legitimate.

Therefore, the plaintiff's evidence is insufficient to cause this Court to conclude that Northside's Superfund status, its exposure of the City to the possibility of incurring millions of dollars for cleanup, and the City's concern that additional waste would cause it additional expense was not a legitimate goal for the City to pursue through its Department of Public Works. Again, the Court is not trying the historical background of these decisions, it is not weighing whether the facts assumed by the decisionmaker are true by a preponderance of the evidence. The Court makes its decision responsive to the notion that it is the plaintiff's burden to prove that these reasons are not at least debateable. The Court's view, again, is that the plaintiff has failed to do so.

In addition to the analysis of the Third Circuit, the Seventh Circuit has spoken on the application of the rational basis test. See Oriental Health Spa v. City of Fort Wayne, 864 F.2d 486, 490 (7th Cir. 1980). The test therein gives the challenging plaintiff "the burden of demonstrating that no conceivable legitimate public interest is furthered by the classification." Id. In this case no one could argue, and no one does, that the safe disposal of the City's waste is not in the public interest. The plaintiff herein challenges the validity of the reasons underlying the decision excluding them for the approved disposal site list. Plaintiff urges that the defendants' fear of bad publicity has caused its action and not its fear of further pollution. To recharacterize the plaintiff's claim, the City fears the pollution of bad publicity rather than the pollution of contaminants. Again, the facts don't support the plaintiff's position. The City's fear of compounding its waste problem is not inconceivable.

The Court makes no decision regarding the current situation at the Northside Landfill as it relates to any EPA difficulties that Northside Landfill may now be experiencing. The Court makes no finding of fact regarding leachate and pollution. The Court only decides that it is at least debateably in the public interest of the City of Indianapolis not to dump further waste in the Northside Landfill and that plaintiff has not carried its burden in this matter of showing that no conceivable public interest is served thereby. Plaintiff's motion for preliminary injunction is DENIED. Defendants' motion for summary judgment is GRANTED. The action is DISMISSED WITH PREJUDICE.

IT IS SO ORDERED this 4th day of August, 1989.