Always Towing & Recovery Inc v. City of Milwaukee

District Court, E.D. Wisconsin·Decided October 21, 2020·No. 2:20-cv-00919·Unknown

Opinion

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN

ALWAYS TOWING & RECOVERY, INC., et al.,

Plaintiffs,

v. Case No. 20-CV-919

CITY OF MILWAUKEE, et al.,

Defendants.

DECISION AND ORDER ON DEFENDANTS’ MOTIONS TO DISMISS AMENDED COMPLAINT

Always Towing & Recovery, Inc., Apys Cars, Inc., Brew City Towing, LLC, SP Towing, LLC, and Adams Recycling, LLC (collectively the “plaintiffs”) sue the City of Milwaukee (the “City”), the Milwaukee Department of Public Works (“DPW”), the Milwaukee City Tow Lot, the Milwaukee Police Department (“MPD”) (collectively the “City defendants”), and Miller Compressing Company, for alleged violations of the Sherman Act, 15 U.S.C. §§ 1, et seq.; the Clayton Act, 15 U.S.C. §§ 12, et seq.; the Federal Trade Commission Act (“FTCA”), 15 U.S.C. § 45; the Pollution Prevention Act, 42 U.S.C. § 13101; and Wisconsin common law. (Docket # 13.) Both the City defendants (Docket # 18) and Miller Compressing (Docket # 27) move to dismiss the plaintiffs’ amended complaint for failure to state a claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6). For the reasons below, both motions to dismiss are granted and the amended complaint is dismissed. BACKGROUND With the exception of Adams Recycling, the plaintiffs are Wisconsin companies performing vehicle towing services in the City of Milwaukee and surrounding areas. (Am. Compl. ¶¶ 21–25, Docket # 13.) Adams Recycling provides salvaging services. (Id. ¶¶ 164–

69.) The plaintiffs allege that scrap metal recycling is a lucrative global business. (Id. ¶ 37.) The plaintiffs allege that the City of Milwaukee earned almost $1.9 million in revenue in 2017 from recycling (though not clearly from scrap metal recycling). (Id. ¶ 41.) In 1996, the City entered into a multiple year contract with the largest scrap metal recycling company in the Milwaukee Area, Miller Compressing, for the processing and recycling of all vehicles delivered to Miller. (Id. ¶ 51.) The plaintiffs allege that despite a requirement that the City open up its scrap metal recycling bidding process to other public companies, the City awarded the contract to Miller Compressing without allowing others to bid. (Id. ¶¶ 52–54.) In 2002, the City delivered 16,423 vehicles to Miller Compressing. (Id. ¶ 55.) In 2003, the

City and Miller Compressing entered into a contract in which the City agreed to supply Miller Compressing with a certain percentage of the scrap vehicles disposed of by the City and Miller Compressing would pay the City a fixed price for each vehicle. (Id. ¶¶ 57–58.) From 2004 to 2009, the City delivered 40,000 vehicles to Miller Compressing for processing and recycling, resulting in city revenues exceeding $5,000,000. (Id. ¶ 60.) In 2009, the City extended its contract with Miller Compressing until 2023. (Id. ¶ 61.) The plaintiffs allege that the towing industry plays a vital role in suppling metals to the scrap metal recycling industry. (Id. ¶ 64.) They allege that the City is attempting to use its governmental power to increase its profitability and injure its competitors. (Id. ¶¶ 67–81.)

For example, the plaintiffs allege that Wis. Stat. § 342.40 governs abandoned vehicles and allows a municipality or county to sell the vehicle. (Id. ¶¶ 74–75.) The plaintiffs allege that the City and the DPW City Tow Lot sell unclaimed vehicles for scrap at the City of Milwaukee Tow Lot. (Id. ¶ 76.) The City and the DPW compile a list of unclaimed vehicles that are available through a bidding system and the abandoned vehicle is sold to the highest

bidder. (Id. ¶¶ 77–78.) The plaintiffs allege, however, that the City awards the vehicles to Miller Compressing even if it places a low bid or no bid at all. (Id. ¶ 79.) 1. Allegations Specific to Always Towing The plaintiffs also allege that the City has four contracts for municipal towing and divides the contracts into two territories: Zone 1 and Zone 2. (Id. ¶¶ 83–84.) Each zone has two contracts for municipal towing: a contract for “police safekeeping” and a contract for “municipal citations.” (Id. ¶¶ 85–87.) “Municipal citations” towing involves the towing of vehicles due to citations to public vehicles and abandoned vehicles. (Id. ¶ 88.) In 1998, CHI Towing held all four contracts for the City of Milwaukee municipal towing. (Id. ¶ 96.) Prior

to 2016, Wisconsin statute provided that a vehicle could not be removed from private property without the owner’s permission, a repossession judgment, or an issued citation for illegal parking. (Id. ¶ 89.) In 2004, CHI Towing subcontracted with Always Towing to aid in its municipal citation towing for the City. (Id. ¶ 99.) Always Towing’s business, however, also consists of towing for private property owners and parties. (Id. ¶ 98.) The plaintiffs allege that in January 2011, the DPW informed Always Towing that it needed to prioritize towing for the City between 2 a.m. and 6 a.m. and that it would not be issuing citations for private property towing between those hours. (Id. ¶¶ 100–01.) As a result of this practice by the City, private property owners lobbied to change the

law so that citations would not have to be issued for vehicles on private property prior to towing. (Id. ¶ 105.) The lobbying efforts were successful, and legislation was passed in 2016 allowing private property owners to have vehicles towed off of their properties without having a citation issued. (Id. ¶¶ 106–09.) The plaintiffs allege that after passage of this law, the City lobbied for the adoption of Emergency Rule 15-14, which imposes pricing

restrictions and notification requirements upon towing companies in the City. (Id. ¶ 111.) Emergency Rule 15-14 was passed and created Trans § 319. (Id. ¶ 117.) The plaintiffs allege that prior to the passing of Emergency Rule 15-14, there was no existing or proposed state regulation governing the towing of vehicles from private property. (Id. ¶ 119.) However, in 2014, the City began holding public hearings and the Common Council created a task force to “review and make recommendations relating to City licensing and regulation of recycling, including junk collections and junk dealing, second-hand vehicle dealing, salvage and wrecking, and metal recycling and scrapping.” (Id. ¶ 121.) Following the recommendations of the Task Force, the City created two new licenses for the

Recycling, Salvaging, and Towing market: the Recycling, Salvaging, or Towing Vehicle License (“RSTV”) and the Recycling, Salvaging, or Towing Premises License (“RSTP”). (Id. ¶ 128.) The plaintiffs allege that while Always Towing and other private companies are required to hold these licenses, the City does not hold a RSTP License to operate the municipal city tow lot even though it engages in the business of recycling, salvaging, or non- consensual towing. (Id. ¶¶ 131–33.) 2. Allegations Specific to Adams Recycling The plaintiffs allege that in 1998, Nick Adams started Tows R Us and that same year, CHI subcontracted with Tows to tow cars from the City tow lot to Miller

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