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Pollution Control Financing Authority of Warren County

August 27, 1999

POLLUTION CONTROL FINANCING AUTHORITY OF WARREN COUNTY, PLAINTIFF-APPELLANT, *FN1
V.
COUNTY OF SOMERSET, BOARD OF CHOSEN FREEHOLDERS OF SOMERSET COUNTY, AND BRIDGEWATER RESOURCES, INC., DEFENDANTS-RESPONDENTS,
AND
RICHARD E. WILLIAMS, SOMERSET COUNTY ADMINISTRATOR, DEFENDANT.
WARREN ENERGY RESOURCE CO., L.P., PLAINTIFF-APPELLANT,
V.
COUNTY OF SOMERSET, BOARD OF CHOSEN FREEHOLDERS OF SOMERSET COUNTY, AND BRIDGEWATER RESOURCES, INC., DEFENDANTS-RESPONDENTS,
AND
RICHARD E. WILLIAMS, SOMERSET COUNTY ADMINISTRATOR, DEFENDANT.
POLLUTION CONTROL FINANCING AUTHORITY OF WARREN COUNTY, PLAINTIFF-RESPONDENT,
V.
COUNTY OF SOMERSET, BOARD OF CHOSEN FREEHOLDERS OF SOMERSET COUNTY, AND BRIDGEWATER RESOURCES, INC., DEFENDANTS-RESPONDENTS,
AND
RICHARD E. WILLIAMS, SOMERSET COUNTY ADMINISTRATOR, DEFENDANT.
WARREN ENERGY RESOURCE CO., L.P., PLAINTIFF-APPELLANT,
V.
COUNTY OF SOMERSET, BOARD OF CHOSEN FREEHOLDERS OF SOMERSET COUNTY, AND BRIDGEWATER RESOURCES, INC., DEFENDANTS-RESPONDENTS,
AND
RICHARD E. WILLIAMS, SOMERSET COUNTY ADMINISTRATOR, DEFENDANT.



Before Judges Brochin, Kleiner and Steinberg.

The opinion of the court was delivered by: Brochin, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued April 20, 1999

The opinion of the court was delivered by

Plaintiff Pollution Control Financing Authority of Warren County (PCFA) is an agency established by Warren County pursuant to the New Jersey Pollution Control Financing Law, N.J.S.A. 40:37C-1 to -18. PCFA financed, arranged for the construction of, and now owns a waste incinerator and landfill in Warren County, New Jersey. Plaintiff Warren Energy Resource Co. (WERC) is a private corporation which operates the incinerator under contract with PCFA. Defendant Bridgewater Resources, Inc. (BRI) is a licensed operator of a solid waste transfer station and a waste hauler which delivered Somerset County solid waste to the PCFA incinerator. PCFA and WERC appeal from a final judgment entered May 27, 1998, which incorporates prior orders for summary judgment and an order denying reconsideration. These orders were entered in favor of Somerset County and BRI relieving those defendants from any further obligation to deliver solid waste to the PCFA incinerator or pay for failing to deliver it.

By an "Interdistrict Agreement" dated January 17, 1990, between PCFA and Somerset County, Somerset County promised to cause 1,400 tons a week of solid waste generated within the county to be delivered to PFCA's incinerator and to pay for the processing of that quantity of solid waste, whether delivered or not. The summary judgment in favor of Somerset County declares that this agreement is "void and unenforceable as a matter of law" and that Somerset County is excused from its further performance as of November 10, 1997.

BRI was not a party to the 1990 Interdistrict Agreement, although it was a party to 1992 and 1994 *fn2 supplements to that agreement. Those supplements provided for the delivery of additional quantities of solid waste in excess of 1,400 tons a week to the PCFA incinerator to make up for failures to satisfy the delivery quota during prior years. The parties have disagreed about whether those supplements made BRI a party to the 1990 agreement. But whether or not BRI was a party to the inter-district agreement, it was subject to the Somerset County solid waste management plan, reflected in DEP regulation N.J.A.C. 7:26-6.5(s)(3) (repealed), because BRI was a regulated waste hauler and transfer station operator. The terms of that regulation obligated it to transport "[u]p to 1,400 tons per week of processible solid waste generated within Somerset County . . . from the Bridgewater Resources, Inc. Transfer Station to the Warren County Resource Recovery Facility . . . ." The order for summary judgment entered in favor of BRI declares that BRI "has no further obligation to deliver waste" to PCFA and WERC. The final judgment also makes it clear that BRI is not liable for failure to comply with the provision of an agreement for partial settlement which declares that a prior court order requiring BRI to continue delivery of solid waste "will remain in effect unless and until vacated or modified by the Court," and the court declined to hold BRI in contempt of the subsequently vacated order.

The orders for summary judgment which are the subject of this appeal are based on the Commerce Clause jurisprudence enunciated by the United States Supreme Court in C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 114 S. Ct. 1677, 128 L. Ed. 2d 399 (1994) ("Carbone"). The Third Circuit Court of Appeals interpreted Carbone and applied it to the New Jersey solid waste management system in Atlantic Coast Demolition & Recycling, Inc. v. Board of Chosen Freeholders of Atlantic County, 48 F.3d 701 (3d Cir. 1995) ("Atlantic Coast I"), and Atlantic Coast Demolition & Recycling, Inc. v. Board of Chosen Freeholders of Atlantic County, 112 F.3d 652 (3d Cir. 1997) ("Atlantic Coast II"), cert. denied, ___ U.S. ___, 118 S. Ct. 412-13, 139 L. Ed. 2d 316 (1997), amended, 135 F.3d 891 (3d Cir. 1998). The United States District Court for the District of New Jersey interpreted and applied the Atlantic Coast cases in Union County Utilities Authority v. Bergen County Utilities Authority, 995 F. Supp. 506 (D.N.J. 1998). In order to explain our decision in the present case, we need to review the opinions in those cases.

These are the facts of Carbone. Pursuant to a consent decree entered into by the town of Clarkstown and the New York State Department of Environmental Conservation, Clarkstown agreed to close its landfill and to build a new solid waste transfer station on the site that had been occupied by the landfill. The transfer station would receive bulk solid waste and would separate recyclable from non-recyclable waste. Non-recyclable waste would be shipped from the transfer station to a landfill or incinerator. A local contractor agreed to construct the transfer station, to operate it for five years, and then to sell it to the town for one dollar. The contractor would recover the costs of construction and operation of the transfer station by charging a "tipping fee" of $81 a ton to be paid by haulers of delivered waste. To ensure that the contractor would collect tipping fees sufficient to pay the costs they were planned to cover, the town guaranteed that 120,000 tons a year of solid waste would be delivered to the transfer station. To implement that guaranty, the town adopted a "flow control" ordinance which required all solid waste collected within the town to be taken to that particular transfer station. Refuse collectors other than the town's contractor could collect waste within the town, but they had to deliver it to that transfer station and to pay the $81 a ton tipping fee, even though their waste was already sorted, and they were prohibited from shipping waste out of the town. Carbone, a refuse collector that had a competing transfer station in the municipality, challenged the flow control ordinance.

The Supreme Court held that Clarkstown's flow control ordinance burdened interstate commerce and impeded its free flow. However, "[t]he real question," according to the Court, was "whether the flow control ordinance is valid despite its undoubted effect on interstate commerce," 511 U.S. at 389, 114 S. Ct. at 1682, 128 L. Ed. 2d at 407, either because "the ordinance discriminates against interstate commerce [citing City of Philadelphia v. New Jersey, 437 U.S. 617, 624, 98 S. Ct. 2531, 2535, 57 L. Ed. 2d 475, 481-82 (1978)]" or because it "imposes a burden on interstate commerce that is `clearly excessive in relation to the putative local benefits' [citing Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S. Ct. 844, 847, 25 L. Ed. 2d 174, 178 (1970)]." 511 U.S. at 390, 114 S. Ct. at 1682, 128 L. Ed. 2d at 407. The Court ruled that, like any other law that sought to permit only local processors to process locally produced materials, the ordinance discriminated against interstate commerce because it "allows only the favored operator to process waste that is within the limits of the town." Ibid. Such "[d]iscrimination against interstate commerce in favor of local business or investment is per se invalid, save in a narrow class of cases in which the municipality can demonstrate, under rigorous scrutiny, that it has no other means to advance a legitimate local interest." Id. at 392, 114 S. Ct. 1683, 128 L. Ed. 2d at 409. The Clarkstown ordinance was invalid because it did not fall within that limited exception. Rejecting a justification for the ordinance that is particularly pertinent to the present case, the Court said:

The flow control ordinance does serve a central purpose that a nonprotectionist regulation would not: It ensures that the town-sponsored facility will be profitable, so that the local contractor can build it and Clarkstown can buy it back at nominal cost in five years. In other words, as the most candid of amici and even Clarkstown admit, the flow control ordinance is a financing measure. By itself, of course, revenue generation is not a local interest that can justify discrimination against interstate commerce. Otherwise States could impose discriminatory taxes against solid waste originating outside the State.

Clarkstown maintains that special financing is necessary to ensure the long-term survival of the designated facility. If so, the town may subsidize the facility through general taxes or municipal bonds. But having elected to use the open market to earn revenues for its project, the town may not employ discriminatory regulation to give that project an advantage over rival businesses from out of State. [Id. at 393-94, 114 S. Ct. at 1684, 128 L. Ed. at 410 (citations omitted).]

Atlantic Coast was a Pennsylvania waste hauler and transfer station operator. It accepted construction and demolition debris at its transfer station in Philadelphia, separated out the recyclable materials, which amounted to less than twenty percent of the total by weight, and shipped the residue to various landfills for disposal. It sought to obtain access to construction and demolition debris generated in New Jersey, but it was unsuccessful in having its transfer station included as an authorized facility in any New Jersey district waste management plan. Since New Jersey's waste management regulations required shipping all non-recyclable solid waste collected in New Jersey to the transfer stations designated for the districts from which the waste had been taken, Atlantic Coast's only course consistent with New Jersey law would have been to return non-recyclable waste to the designated facilities for processing or to pay a compensating fee.

Rejecting those expedients as too costly, Atlantic Coast commenced an action in the United States District Court for the District of New Jersey challenging the constitutionality of New Jersey's solid waste flow control regulations. The Atlantic County and Camden County Boards of Chosen Freeholders, the Atlantic County Utilities Authority, the Pollution Control Financing Authority of Camden County, and the Commissioner of the New Jersey Department of Environmental Protection and Energy were named as defendants. Atlantic Coast I, supra, 48 F.3d at 709 n13. Atlantic Coast sought, among other things, a declaration that New Jersey's solid waste flow control regulations were unconstitutional and a permanent injunction barring the defendants from prohibiting or interfering with the transportation of construction and demolition debris at any point from its generation or collection within New Jersey to its shipment to facilities outside the State.

The district court, whose first opinion in the case preceded the United States Supreme Court's Carbone decision, ruled against Atlantic Coast. Atlantic Coast appealed. *fn3 According to the Third Circuit, the "fundamental issue" presented by the appeal was "whether the district court erred in concluding that the New Jersey regulatory waste flow scheme does not violate the dormant Commerce Clause." Id. at 709. In order to decide that issue, the court described and analyzed the New Jersey regulatory scheme in detail.

The following excerpts from that description and analysis are particularly pertinent to the case now before us:

As an integral part of the district plan and utility regulation system, the Department and waste districts are authorized under the [Solid Waste Management Act, N.J.S.A. 13:1E-1 to -207] and [Solid Waste Utility Control Act, N.J.S.A. 48:13A-1 to -13] to direct the flow of waste to designated facilities. N.J. Stat. ...


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