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ATLANTIC COAST DEMOLITION & RECYCLING, INC. v. BOA

June 9, 1995

ATLANTIC COAST DEMOLITION & RECYCLING, INC., et al., Plaintiffs,
v.
BOARD OF CHOSEN FREEHOLDERS OF ATLANTIC COUNTY, et al., Defendants,



The opinion of the court was delivered by: JOSEPH E. IRENAS

 IRENAS, District Judge:

 Plaintiffs in these consolidated cases have brought challenges under the dormant Commerce Clause *fn1" to portions of the New Jersey Solid Waste Management Act, N.J.S.A. 13:1E-1 to -207 ("SWMA"), the Solid Waste Utility Control Act ("SWUCA"), and regulations promulgated thereunder, N.J.A.C. 7:26, a group of statutes and regulations that the Court shall refer to collectively as the "waste flow regulations." Certain plaintiffs have now moved for a preliminary injunction.

 The Court finds that plaintiff Atlantic Coast Demolition and Recycling, Inc. ("Atlantic Coast") has shown a likelihood of success on the merits and irreparable injury, and that on the basis of the current record these factors outweigh the irreparable injury that the narrow preliminary relief requested could cause to defendants and the public. However, because of the Court's concerns that the requested relief might cause serious irreparable harm to the defendants and the public, and because of important issues of comity, the Court will condition the grant of the requested relief upon the consideration of further submissions by defendants regarding potential alternatives to the current regulations and the impact of these regulations on defendants and the public.

 As to plaintiffs National Solid Waste Management Association ("NSWMA") and Waste Management Association of New Jersey ("WMANJ," and along with NSWMA, the "association plaintiffs"), the Court finds that their likelihood of success and the irreparable injury that they suffer due to the waste flow regulations are outweighed by the irreparable harm that their request for preliminary relief would cause defendants and the public. The motion of the association plaintiffs will therefore be denied. Finally, as to plaintiffs Bret Schundler, the Mayor of the City of Jersey City, New Jersey, John Rooney, the Mayor of the Borough of Northvale, New Jersey, the City of Passaic, New Jersey, and the City of Patterson, New Jersey (collectively the "municipal plaintiffs"), the Court finds that these plaintiffs have no claim against defendants and they will be dismissed from the case.

 PROCEDURAL HISTORY

 Plaintiffs in this case come from two consolidated cases, Atlantic Coast Demolition & Recycling, Inc., v. Board of Chosen Freeholders, et al., 893 F. Supp. 301, and C & A Carbone, et al. v. Shinn, et al., Civ. No. 94-3244 (JEI). The Atlantic Coast case was filed on June 23, 1993, and Atlantic Coast, the sole plaintiff in that matter, moved for a temporary restraining order. On September 2, 1993 after a period of intensive discovery, the Court held a hearing, and on September 8, 1993, rendered its oral findings of fact and conclusions of law. Following the Third Circuit's decision in J. Filiberto Sanitation, Inc. v. New Jersey Dep't of Envtl. Protection, 857 F.2d 913 (3d Cir. 1988), the Court concluded that the waste flow regulations should be analyzed under the balancing test articulated in Pike v. Bruce Church, Inc., 397 U.S. 137, 25 L. Ed. 2d 174, 90 S. Ct. 844 (1970), and that the state interest served by the waste flow regulations outweighed any burden on interstate commerce. The Court therefore denied Atlantic Coast's application for a temporary restraining order, and on February 28, 1994, with the consent of the parties, entered final judgment in defendants' favor on the basis of its prior findings of fact and conclusions of law.

 Atlantic Coast appealed. In an opinion filed February 16, 1995, the Third Circuit reversed this Court's decision and remanded the case for further proceedings. Atlantic Coast Demolition & Recycling, Inc. v. Board of Chosen Freeholders, 48 F.3d 701 (3d Cir. 1995). The court concluded that in light of the Supreme Court's recent decision in C & A Carbone, Inc. v. Clarkstown, 128 L. Ed. 2d 399, 114 S. Ct. 1677 (1994), which was decided after this Court's entry of final judgment, New Jersey's waste flow regulations discriminate against interstate commerce and are subject to heightened scrutiny under the dormant Commerce Clause rather than the less strict Pike balancing test. 48 F.3d at 713. However, the court also held that it would leave the district court to determine whether the regulations could be upheld under strict scrutiny. Id. at 718. In doing so, the court specifically stated that "Atlantic Coast is free at any time to apply again for pendente lite relief." Id.

 On April 12, 1995, this Court granted the motions of Hudson County Improvement Authority, Mercer County Improvement Authority, Essex County Utilities Authority, Passaic County Utilities Authority (the "county authorities") and Camden County Energy Recovery Associates, L.P., ("CCERA") to intervene as defendants. On that date, Atlantic Coast filed the instant request for pendente lite relief.

 The C & A Carbone case was filed on July 11, 1994, and assigned to the Newark vicinage. The case raises essentially the same challenges to the New Jersey waste flow regulations as those brought in Atlantic Coast. The case was stayed pending the Third Circuit's decision in Atlantic Coast, and when that case was remanded, C & A Carbone was transferred to this Court. On April 12, 1995, this Court granted defendants' motion to consolidate the case with Atlantic Coast. On April 17, 1995, the association plaintiffs and the municipal plaintiffs in C & A Carbone moved for pendente lite relief.

 Since the filing of the preliminary injunction motions, the parties have engaged in extensive discovery that delayed the preliminary injunction hearing. The Court set June 6, 1995, as the date for the hearing, and in accordance with the Third Circuit' opinion, indicated that it would exercise its discretion "to reopen the record for supplementary evidence." 48 F.3d at 718 n.21. The parties, however, elected not to offer further oral testimony, but rather elected to proceed on the basis of the previous record before this Court and the briefs, exhibits, and affidavits submitted in connection with the preliminary injunction motions and defendants' responses thereto. The Court held oral argument on the motions on June 6, 1995, and now renders its findings of fact and conclusions of law in accordance with Fed. R. Civ. P. 52(a).

 FINDINGS OF FACT

 The Court hereby adopts its Findings of Fact Numbers One through Twenty-Six of its oral opinion rendered September 8, 1993. These findings relate primarily to the waste disposal problems in New Jersey, the flow control regulations, and Atlantic Coast's efforts to be included in the flow control scheme. The Third Circuit specifically upheld these findings. Atlantic Coast, 48 F.3d at 704 n.2. The Court also adopts the Third Circuit's detailed discussion of the New Jersey solid waste management system and Atlantic Coast's activities. 48 F.3d at 704-09. The following additional findings of fact are based on the exhibits and affidavits submitted by the parties in conjunction with the preliminary injunction motions.

 1. Between February and September of 1993, Atlantic Coast received approximately 15,800 tons of construction and demolition ("C & D") waste from New Jersey, resulting in approximately $ 90,000 in monthly revenue. (Dengler Decl. at P 3.) From 1993 to February 1995, when Atlantic Coast was not receiving New Jersey waste, its average monthly net loss increased from $ 27,237 to $ 80,607. (Durkin Decl. at PP 2-4.) Atlantic Coast's exclusion from New Jersey has also resulted in many of its New Jersey waste haulers refusing to pay outstanding bills, because Atlantic Coast could no longer process this waste and therefore had little leverage to collect this money. Atlantic Coast now shows $ 233,000 in bad debt on total New Jersey sales of $ 630,000, for a bad debt ratio of approximately 27% as compared to an overall bad debt ratio of 6%. (Id. at P 6.)

 2. Despite Atlantic Coast's poor financial performance, its parent corporation, United Waste Systems, Inc., has continued to finance Atlantic Coast, primarily in the hope that Atlantic Coast's entry into the New Jersey market will increase its profitability. (Sheehan Decl. at PP 9-11.) *fn2" On the other hand, if New Jersey's waste flow scheme is finally declared constitutional, United Waste intends to either shut down or sell the Atlantic Coast facility (Id. at PP 12-13.) However, United Waste will continue to support Atlantic Coast pending the final resolution of this case.

 3. NSWMA and WMANJ are both trade associations made up of private companies in the solid waste disposal industry. NSWMA members include transporters of solid waste, operators of solid waste treatment, storage, and disposal facilities, recyclers of solid waste, and manufacturers and distributors of solid waste management equipment. WMANJ members include New Jersey collection companies, waste transporters, transfer stations, materials recovery facilities, and recycling facilities. Associate members of WMANJ include New Jersey vehicle and equipment providers, maintenance companies, consultants, and various professionals such insurance brokers.

 4. Out of state members of the NSWMA who process solid waste are affected by the New Jersey waste flow regulations in primarily the same way as Atlantic Coast. They are either effectively excluded from the New Jersey market or, if they are included in a district plan and obtain the requisite state and local approvals, may deal in New Jersey waste under the now-codified "Pereira policy." N.J.A.C. 7:26-6.9 and 26-2B.9. Nonetheless, the processor must still return any residual waste to the disposal facility designated by that district plan or pay the tipping fee *fn3" that the facility would charge, see id., a fee that often exceeds what the processor would pay at an out of state facility. Furthermore, out of state NSWMA disposal facilities are precluded from accepting New Jersey waste unless they are accepted into a district plan, a contingency that is unlikely unless the district is unable to locate sufficient disposal capacity within that district or another district. See 48 F.3d at 707-08. New Jersey NSWMA and WMANJ members are primarily affected by the waste flow regulations because they require them to dispose of solid waste at designated New Jersey solid waste facilities and pay the requisite tipping fee rather than disposing of the waste at the facility of their choice, either within or outside the state.

 6. Intervenor-defendants Passaic County Utilities Authority, Essex County Utilities Authority, Hudson County Improvement Authority, and Mercer County Improvement Authority are each Solid Waste Management Districts established by the 1975 amendments to the SWMA. N.J.S.A. 13:1E-20. Each authority promulgates a district plan, which consists of some combination of designated disposal facilities, transfer stations, and contracts for the disposal and hauling of waste. See, e.g., N.J.A.C. 7:26-6. Not all solid waste, however, is ultimately disposed of within the boundaries of the state of New Jersey. For example, much of the solid waste handled by the Mercer County Improvement Authority is ultimately disposed of in the G.R.O.W.S. landfill in Bucks County, Pennsylvania. N.J.A.C. 7:26-6.5(1). Nonetheless, this waste still passes through the Mercer County Transfer Station, id., which charges a tipping fee that is generally conceded to be above market rate.

 7. If the waste flow regulations are disrupted, the revenues of the county authorities would be similarly disrupted. This effect would be caused by a loss of business to out of state processing and disposal facilities or by lower rates charged to compete with these facilities. (Lambert Cert. at P 12; Lund Cert. at P 30; Ross Aff. at P 18; Vaccarino Cert. at P 15.) Furthermore, in reliance upon the steady revenue generated by the waste flow regulations, the county authorities have incurred over one billion dollars in debt in the form of revenue bonds and contractual obligations, much of which is guaranteed by the respective counties, other public authorities such as the Port Authority of New York and New Jersey, or financial institutions. Wholesale disruption of the waste flow regulations could impair the ability of the county authorities to finance this debt and could ultimately force them into default on the bonds or contractual obligations. (Whelan Aff. at PP 4-5.)

 8. Intervenor-defendant CCERA owns and operates the South Camden Resource Recovery Facility ("SCRRF"), an incinerator that acts as the disposal facility for much of the solid waste generated in Camden County, New Jersey. See N.J.A.C. 7:26-6.5(d). Because the disposal of solid waste at the SCRRF is generally more expensive than at an out of state disposal facility, SCRRF would not operate at full capacity if the waste flow regulations were enjoined, with a concomitant loss of income by CCERA. (Karpenski Decl. at P 12.)

 9. New Jersey generates approximately seven million tons of solid waste per annum, or approximately 24,500 tons per day. (Sondermeyer Aff. at P 2.) 75% of this waste is type 10, or residential and commercial municipal waste, 20% is type 13, or bulky and construction waste, and the remaining 5% is made up of other types of waste.

 10. New Jersey currently requires all waste transported out of the state to pass through a transfer station. (Id. at P 5.) Currently, New Jersey has the transfer station capacity to inspect only about 14% of the solid waste generated in the state. (Id. at P 6.) Therefore, New Jersey could not maintain this policy if the waste flow regulations were immediately dismantled. The unregulated transportation of waste out of the state would present environmental hazards. (Id. at 7.)

 11. Approximately 469 solid waste collectors currently hold certificates to do business in New Jersey. (Id. at 9.) These haulers are required by state statute to file a tariff with the state. See N.J.S.A. 48:13A-7.1 et seq. While the rates charged by the waste haulers are now relatively stable due to the constraints of the waste flow system, dismantling the system would change the operating expenses of these haulers and require each hauler to file a new tariff each time it changed its rate. (Id. at PP 9-10.)

 12. The waste management plan envisioned under the SWMA depends heavily upon the steady revenue flow to each county authority described above. (Gates Cert. at P 1.) Therefore, dismantling the waste flow regulations and allowing out-of-state competition could suddenly disrupt the entire scheme of waste flow management in New Jersey. (Id. at P 8.) In the long term, this disruption will discourage (a) the creation of new waste disposal facilities and (b) the maintenance and expansion of existing facilities unless a new comprehensive regulatory scheme is ...


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