On Appeal from the United States District Court For the Eastern District of Pennsylvania
(D.C. Civ. No. 94-cv-03615) On Appeal from the United States District Court For the Western District of Pennsylvania (D.C. Civ. No. 93-cv-00592)
Before: BECKER, NYGAARD, and ALITO, Circuit Judges.
These appeals, briefed separately but listed together for oral argument, both present Commerce Clause challenges to municipal "flow control" ordinances. These ordinances require waste haulers, like the plaintiffs in each case here, to bring solid waste picked up within the municipal boundaries to designated landfill sites located within a state. These designated sites, in turn, usually charge "tipping fees" considerably higher than other, non-designated sites located nearby in other states. In each case we must determine whether these ordinances, which threaten haulers taking waste to non-designated sites with fines and suspension, impermissibly discriminate against interstate commerce.
In one case Harvey & Harvey ("Harvey"), an interstate collector, hauler and processor of municipal solid waste, brought suit against Chester County, the Chester County Solid Waste Authority ("the Authority") *fn1 the Southeastern Chester County Refuse Authority ("SECCRA") *fn2 and the Pennsylvania Department of Environmental Resources (the "DER"). It seeks to have the County's flow control plan declared unconstitutional under the dormant Commerce Clause. The district court denied Harvey's motion for a preliminary injunction. Concluding that the plan does not discriminate against interstate commerce, it held that the Pike balancing test, see Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S. Ct. 844 (1970), which Harvey acknowledged that it could not meet, would apply. (Sept. 8, 1994 Order.) Because the district court did not consider whether the Chester County flow control scheme offered out-of-state landfill operators an equal opportunity to compete for the county's waste disposal business, we vacate and remand for further proceedings.
In the other case Tri-County Industries, Inc. ("Tri-County"), a hauler of residential and commercial solid waste throughout Mercer County and in other Western Pennsylvania and Ohio counties, brought suit against the County of Mercer and the Mercer County Solid Waste Authority ("MCSWA"). It sought both a declaratory judgment that the county's flow control plan violated the dormant Commerce Clause and a permanent injunction enjoining its enforcement. The district court, concluding that the plan improperly impeded interstate commerce, granted final judgment on stipulated facts in favor of Tri-County. We hold that the district court erred in concentrating on the operation of the ordinance and concomitantly in failing to consider whether out-of-state interests competed on a level playing field. Therefore, the order in Tri-County must also be vacated and remanded.
I. FACTS AND PROCEDURAL HISTORY
A. THE SOLID WASTE CRISIS
During the 1970s and '80s, national environmental concerns fostered stricter state regulation of waste disposal. This regulation led to a large number of landfill closures throughout the United States, creating shortages in many places and driving up landfill pricing. See Eric S. Petersen & David N. Abramowitz, Municipal Solid Waste Flow in the Post-Carbone World, 22 Fordham Urb. L.J. 361 n.33 (1995); see also Harvey SA 382 (Kerns); James C. Vago, Comment, The Uncertain Future of Flow Control Ordinances: The Last Trash to Clarkstown?, 22 N. Ky. L. Rev. 93, 98 (1995). Pennsylvania was no exception. It too experienced inadequate and rapidly diminishing disposal capacity for municipal waste. See 53 P.S. Section(s) 4000.102(a)(2) (legislative findings).
Waste disposal methods, ranked in descending order of environmental impact, include: source reduction and reuse, waste combustion, and landfilling. See Vago, 22 N. Ky. L. Rev. at 106. Environmentally advanced, innovative waste disposal facilities can cost "in the tens to hundreds of millions of dollars to construct." See Vago, 22 N. Ky. L. Rev. at 108. State and federal environmental mandates often require the use of these new, more expensive facilities. Petersen & Abramowitz, 22 Fordham Urb. L.J. at *7 [n.66]. Securing long term access to disposal facilities necessary to protect the citizens' health and safety "requires long-term commitments, debt and security." Id. [n.66]. Methods less protective of the environment generally have lower capital and operating costs, and thus can charge a lower tipping fee.
Until the Tax Reform Act of 1986 repealed many of the tax incentives, most waste disposal facilities were privately owned and operated. Id. at *4 [n.36]. In response to the tax changes and increased costs caused by environmental regulation, increased public ownership became necessary, shifting the financing burden to the local governments. With this burden came risk. Even where the municipal government contracts with a private operator to construct or upgrade the disposal facility, the municipality often continues to bear the risk of an inadequate waste supply through municipal guarantees. Consequently, "it is the ability of local governments to control these haulers and where they transport the collected waste that often determines the feasibility of the solid waste processing disposal programs." See Petersen & Abramowitz, 22 Fordham Urb. L.J. at *2 [n.31].
Flow control ordinances, enacted by a number of states attempting to deal with these waste disposal crises, create a system in which waste haulers are licensed by the municipality and are directed to take the waste collected to landfills that have been designated by the county. By conditioning the haulers' licenses on their compliance, local governments can assure a certain minimum revenue at the designated sites. Flow control both guarantees that a certain volume will be deposited and enables the operators of the designated landfill to collect a "tipping fee" *fn3 high enough to cover the cost of processing. Indeed, tipping fees are typically based on both the system's construction cost and the estimated amount of waste that will be deposited there annually. In some cases, the municipalities actually set the tipping fee contractually.
Given the municipalities' reliance on the higher rates in effect when the municipalities were constructing and financing these facilities, flow control ordinances have been crucial to the financial viability of these facilities in the wake of the precipitous decline of tipping fees. *fn4 Indeed, flow control has "been a vital economic element in supporting dozens of major waste-to-energy and landfill-based waste disposal programs involving billions of dollars in capital investment." Petersen & Abramowitz, 22 Fordham Urb. L.J. at *2 [n.25]. *fn5
C. PENNSYLVANIA'S MUNICIPAL WASTE ACT
In responding to its own solid waste crisis, the Pennsylvania legislature enacted the Municipal Waste Act (the "Act") to protect the public health, safety and welfare from the shortand long-term dangers of the transportation, processing, treatment, storage and disposal of municipal waste. See 53 P.S. Section(s) 4000.102(b)(3). The Act establishes a system requiring each county to plan for the long-term processing and ultimate disposal of its waste. In authorizing each county to adopt flow control ordinances, the Act explicitly set forth the policy goal of such flow control legislation:
Authorizing counties to control the flow of municipal waste is necessary, among other reasons, to guarantee the long-term economic viability of resource recovery facilities and municipal waste landfills, to ensure that such facilities and landfills can be financed, to moderate the cost of such facilities and landfills over the long term, to protect existing capacity and to assist in the development of markets for recyclable materials by guaranteeing a steady flow of such materials. Section(s) 102(a)(10).
Under the Act, counties may designate for a ten-year period the facilities at which waste generated within the county will be processed or disposed. See 53 P.S. Section(s) 4000.303(e). Such facilities do not have to be located within the county, although one provision of the Act states that "[p]roper and adequate processing and disposal of municipal waste generated within a county requires the generating county to give first choice to new processing and disposal sites located within that county." 53 P.S. Section(s) 4000.102(6). Each county must consider alternative facilities and programs, and "provide reasonable assurances that the county utilized a fair, open and competitive process for selecting such facilities or programs from among the alternatives which were suggested to the county." 53 P.S. Section(s) 4000.502(f)(2). In addition, if a county proposes to own or operate a municipal waste processing or disposal facility, it must explain the basis for such a proposal, giving consideration to the comprehensive costs and benefits of private ownership and operation of such facilities. 53 P.S. Section(s) 4000.502(m).
The facilities designated by a county, and the process by which they are chosen, must be set out in a municipal waste management plan. 53 P.S. Section(s) 4000.502(f). During its preparation, the plan is reviewed by a county advisory committee made up of representatives from the county's municipalities, civic groups, and industry. The committee makes suggestions and proposes any changes it believes are appropriate. 53 P.S. Section(s) 4000.503(a). At least thirty days before submitting any proposed plan revisions to the Department of Environmental Resources ("DER"), the county must submit a copy of the proposed revision to the County Advisory Committee. 53 P.S. Section(s) 4000.503(d). The county must also make the plan available for a ninety-day public review and comment period, and hold at least one public hearing on the proposed plan during this period. 53 P.S. Section(s) 4000.503(c).
After adoption by the county, a plan must undergo a municipal ratification process requiring approval by fifty percent of the municipalities in the county, representing at least fifty percent of the population. 53 P.S. Section(s) 4000.503(d); 504(c). The plan must then be submitted to the DER for approval, after which any party objecting to the plan may appeal to the Pennsylvania Environmental Hearing Board. If a county chooses to require that municipal waste be processed or disposed of at designated facilities by means other than contract (e.g., by ordinance), the plan must explain the basis for such a proposal and include a copy of the proposed flow control ordinance or other legal instrument. 53 P.S. Section(s) 4000.502(1).
The plan, and the list of facilities designated by the county for processing and disposal, may be revised by the county at any time but must be revised at least three years prior to the time that the remaining capacity for a county is exhausted. 25 Pa. Code Section(s) 272.251(b); 25 Pa. Code Section(s) 272.251(a)(1).
1. The Chester County Plan
Harvey is a Delaware corporation operating in Pennsylvania, Maryland and Delaware as an interstate collector, hauler and processor, inter alia, of municipal solid waste. Harvey is a licensed hauler of municipal solid waste in Chester County, Pennsylvania.
On May 30, 1989, the Chester County Board of Commissioners appointed the Chester County Act 101 Municipal Waste Advisory Committee. The Committee evaluated six potential waste management methods in order to select the components that would constitute the Chester County solid waste management system: waste reduction, recycling, waste-to-energy technology, a trash-for-ash exchange, transfer stations and landfilling. In addition, the Committee participated in four day-long site inspections of existing waste disposal and processing facilities located in Baltimore, Maryland and Chester County, Montgomery County, Philadelphia, and York, Pennsylvania. The Committee also attended a presentation on the Westinghouse resource recovery facility located in the City of Chester, Pennsylvania.
The Committee held 13 meetings between July 11, 1989, and March 20, 1990, to discuss the elements of the County's waste management plan. Although these meetings were open to the public, they were advertised only in the Daily Local News, a Westchester paper with a circulation of approximately 45,000. The Committee then prepared a draft plan, and on May 29 and May 31, 1990, conducted public hearings to entertain public comment on the draft plan. The record does not reveal how these public meetings were advertised or how many people attended. The Committee approved revisions based on that public comment. Harvey did not participate in the process, either as an advocate of an alternative site or as a commenter. The record does not contain any explanation for Harvey's absence, but it appears that Harvey did not have significant business in the County prior to 1990.
The County Commissioners adopted the updated Plan on September 25, 1990, and the DER granted its final approval on April 11, 1991. The Plan contained key components of the committee's draft plan, including the decision to designate the Southeastern Chester County Refuse Authority Sanitary Landfill (the "SECCRA Landfill") and the Chester County Solid Waste Authority Lanchester Sanitary Landfill ("Lanchester Landfill") as the primary disposal sites for the County. The County selected these two sites from among those considered because "the haulers of trash in the County had established a historical pattern of disposal at these landfills." County Br. at 11. In fact, the County had played a role in financing the Lanchester landfill. In 1984, the County purchased it and turned its operation over to the Authority. The County financed the purchase with $42.55 million in Authority revenue bonds which carry a County guarantee. After the purchase, the County guaranteed an additional $41.5 million in Authority debt, secured a $9.2 million letter of credit, and agreed to provide the Authority with an additional $9.5 million for landfill projects.
In response to concerns voiced by Committee members that the "northern tier" of the County might be adversely affected by the system proposed by the Committee (i.e., designating only the SECCRA and Lanchester landfills), the Committee voted to recommend that the Pottstown Landfill, a privately owned facility located in adjacent Montgomery County, be included in the Plan as a disposal option. *fn6
Initially, the 1990 Plan did not mandate the adoption of flow control. The DER informed Chester County during its review process, however, that it would not approve the Plan unless the County flow controlled its waste. DER letters of 3/12/91; 4/11/91; committee notes. Consequently, the County commissioners enacted a flow control ordinance on April 2, 1992. The ordinance divides the County into two service areas: the SECCRA Landfill service area and the Lanchester Landfill Service Area. Municipal waste generated in these service areas must be disposed of at the facility designated by the County to receive the waste. A certain amount of waste may also be taken to the Pottstown landfill. The terms of the ordinance permit amendment to designate other facilities and do not prohibit out-of-state facilities from applying. *fn7 However, the indentures of the revenue bonds and administrative agreements between the County and the Authority stipulate that the County will oppose the construction, acquisition, operation or designation of any facility that might divert revenue from Lanchester. (Committee letters to DER seeking permission not to consider additional sites for designation).
Harvey filed its complaint in the district court on June 15, 1994, challenging Chester County's flow control plan under the Federal Constitution's Commerce Clause, Art. I, Section(s) 8, Cl. 3. Harvey alleged that the regulations isolate the County from the interstate solid waste market by prohibiting the export of locally generated waste to out-of-state disposal and by similarly prohibiting the import of waste processing and disposal services from out of state. On June 27, 1994, Harvey moved for a preliminary injunction to enjoin enforcement of the relevant regulations adopted pursuant to the ordinance. After a hearing, the district court denied the motion on the grounds that Harvey had made an insufficient showing of immediate and irreparable harm. A trial date was set for September 12, 1994.
Prior to trial, the parties filed cross motions to determine the standard of review and, thus, who would bear the burden of proof. The district court granted the defendants' motion to apply the Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S. Ct. 844 (1970) balancing test since it found that the Chester County Ordinance did not discriminate on its face or in purpose or effect against interstate commerce. September 8, 1994 Order. Harvey conceded that it could not prove its case under the Pike standard and therefore stipulated to an order of final judgment Harvey appealed.
1. The Mercer County Plan
Plaintiff/appellant, Tri-County Industries, Inc., is a Pennsylvania corporation doing business in Mercer County, Pennsylvania. In late 1989, the Mercer County Commissioners formed the Mercer County Solid Waste Authority ("MCSWA") to implement the County's duties under the Act. Mercer County generates approximately 5,000 tons of municipal waste each month.
After retaining the services of an independent consultant, Mercer County decided that the best solution for this fairly small county would be to contract with a single disposal facility. The County prepared detailed bid specifications for the needed municipal waste capacity. The Request for Proposals ("RFP") was advertised nationwide and was obtained by twenty-three companies around the country. Although many of these companies were located in Pennsylvania, others were located in Ohio, New York, Maryland, New Jersey, Minnesota and Louisiana. Only four companies, including the appellee, Tri-County, submitted a bid in response to the RFP, and none of these was from outside Pennsylvania. The successful bidder was Waste Management of Pennsylvania, the owner of a landfill in Butler County.
By its terms the process outlined by Mercer County in its RFPs does not discriminate against inor out-of-state interests. The RFP requirements apply equally to all disposal facilities, irrespective of their location. Id, see also RFP 1.4(g). The plan was submitted to DER in the fall of 1990 and approved in March, 1991. After DER approved the Plan, MCSWA contracted with the successful bidder, and Mercer County adopted the now contested Ordinance, No. 6-1991. The ordinance requires each hauler in the county to obtain a license and to haul municipal waste generated in the county to the landfill designated in the county plan "as it may be revised from time to time." Section 3, 6-1991.
Although the Plan required Tri-County to haul the waste to the Butler facility and pay the $35 per ton tipping fee, Tri-County in fact took some of its waste to two other facilities in Ohio which charged tipping fees of only $17.20 and $27.95 per ton. Of the approximately 600 to 900 tons of waste Tri-county hauled monthly, it took 500 tons per month to the non-designated, Ohio facilities. The MCSWA notified Tri-County by letter dated March 19, 1993, that it would hold a hearing on April 15, 1993, to determine whether Tri-county's waste hauling license should be revoked for its failure to deliver all of its waste to the designated facility.
In response to this notice of hearing, Tri-County filed this declaratory judgment action in the district court seeking a declaration that the ordinance violated the Commerce Clause, and a permanent injunction enjoining its enforcement. It also moved for a preliminary injunction, and the district court held hearings on that motion, which the court then denied. After some discovery, the parties filed a joint ...