RECOMMENDED FOR FULL-TEXT PUBLICATION 20 Huish Detergents v. Warren No. 98-5566 Pursuant to Sixth Circuit Rule 206 County, Kentucky, et al. ELECTRONIC CITATION: 2000 FED App. 0182P (6th Cir.)
File Name: 00a0182p.06
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CONCURRENCE UNITED STATES COURT OF APPEALS ______________________ FOR THE SIXTH CIRCUIT
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CLAY, Circuit Judge, concurring. I agree with the majority’s reasoning and holding as far as it goes, but I would ;
proceed to hold that the County also violated the Commerce Clause by designating Monarch as the exclusive waste hauler HUISH DETERGENTS, INC., and processor for municipal waste. It appears abundantly Plaintiff-Appellant, clear on the record below, and not subject to serious dispute, that the County instituted a comprehensive monopolistic No. 98-5566 v.
scheme by which it used its regulatory power to favor a single > provider of waste removal, disposal and processing services, WARREN COUNTY, and by so doing eliminated other potential local and interstate
waste services providers from the relevant market. I would KENTUCKY; MONARCH
Defendants-Appellees. not attempt to truncate the analysis with regard to segments of ENVIRONMENTAL, INC., the local waste disposal process, as does the majority opinion,
1
inasmuch as the County awarded a single monopoly to Monarch with respect to all aspects of the waste disposal business in Warren County.
Appeal from the United States District Court The ordinance and finance agreement favor a single waste for the Western District of Kentucky at Bowling Green. hauler and processor to the detriment of both in-state and out- No. 97-00123—Joseph H. McKinley, Jr., District Judge. of-state competitors by forcing all who generate waste in Bowling Green to use the services of Monarch at a rate Argued: April 27, 1999 designated by Warren County and Monarch. Given the way in which vertical integration of the waste disposal services are Decided and Filed: May 31, 2000 provided by Monarch pursuant to its arrangement with the County for waste collection, hauling, processing and disposal, Before: RYAN, BATCHELDER, and CLAY, Circuit and given the comprehensiveness of the contractual Judges. arrangement between the County and Monarch, I would hold that the County violated the Commerce Clause by designating _________________ Monarch as the exclusive waste hauler and processor for COUNSEL municipal waste--notwithstanding the district court’s inappropriate failure to address the issue. I concur with the ARGUED: Walter M. Jones, WYATT, TARRANT & majority opinion in all other respects. COMBS, Louisville, Kentucky, for Appellant. Dennis J.
Conniff, BROWN, TODD & HEYBURN, Louisville, Kentucky, for Appellees. ON BRIEF: Walter M. Jones,
2 Huish Detergents v. Warren No. 98-5566 No. 98-5566 Huish Detergents v. Warren 19 County, Kentucky, et al. County, Kentucky, et al.
Stephen D. Berger, Cynthia B. Doll, WYATT, TARRANT & purchasing for it. In so doing, the County opened itself up to COMBS, Louisville, Kentucky, for Appellant. Dennis J. Commerce Clause scrutiny. The Supreme Court has Conniff, Larisa E. Gilbert, BROWN, TODD & HEYBURN, explicitly “reject[ed] the contention that a State’s action as a Louisville, Kentucky, Michael E. Caudill, Bowling Green, market regulator may be upheld against Commerce Clause Kentucky, for Appellees. challenge on the ground that the State could achieve the same end as a market participant.” South-Central Timber Dev., 467 RYAN, J., delivered the opinion of the court, in which U.S. at 98-99 (1984); cf. Chemical Waste Mgt., 504 U.S. at BATCHELDER, J., joined. CLAY, J. (p. 20), delivered a 351 (Rehnquist, C.J., dissenting). separate concurring opinion.
Given our holdings in subsections (a) and (b) above, and _________________ our understanding that the district court did not specifically address whether the County violated the Commerce Clause by OPINION designating Monarch as the exclusive waste collector and _________________ processor for municipal waste, it is unnecessary for us to decide this issue here. We note that some courts considering RYAN, Circuit Judge. Huish Detergents, Inc., challenges the award of an exclusive waste collecting or processing an ordinance enacted by Warren County, Kentucky, and a franchise, following an RFP, focus their inquiry on whether franchise agreement entered into by Warren County and in-state and out-of-state businesses competed on a level Monarch Environmental, Inc., pursuant to which Monarch is playing field. See, e.g., Houlton Citizens’ Coalition v. Town the exclusive contractor for collecting and processing all the of Houlton, 175 F.3d 178, 188-89 (1st Cir. 1999); Atlantic solid waste generated in the city of Bowling Green, Kentucky. Coast Demolition & Recycling, 48 F.3d at 713. We express Huish’s claim is that the ordinance and companion agreement no opinion on this approach or its potential application to the violate both the so-called “dormant” Commerce Clause of the County’s ordinance/franchise scheme. United States Constitution and the Kentucky Constitution. The district court dismissed the suit under Fed. R. Civ. P. III. 12(b)(6) for failure to state a claim upon which relief may be granted. Because we hold that the district court erred in The district court’s dismissal of this action is REVERSED, dismissing Huish’s Commerce Clause claim, we reverse. and the case is REMANDED for further proceedings consistent with this opinion. Because we are reversing the I. dismissal of the Commerce Clause claim, we also REVERSE the dismissal of the section 1983 and state law claims. They Warren County, Kentucky, issued a Request for Proposal too are REMANDED. (RFP) and considered competitive bids from trash haulers interested in collecting and processing all municipal solid waste in Bowling Green, Kentucky. The County awarded the contract to Monarch and formalized the relationship in a written “franchise agreement.” Under the franchise agreement, Monarch has the exclusive right for five years (1995-2000) to collect and process all municipal solid waste generated in Bowling Green. Monarch is obligated to operate 18 Huish Detergents v. Warren No. 98-5566 No. 98-5566 Huish Detergents v. Warren 3 County, Kentucky, et al. County, Kentucky, et al.
The County’s prohibition on out-of-state disposal, therefore, the city’s transfer station to process the waste it collects and is subject to the restrictions of the Commerce Clause. must dispose of all waste at a landfill “approved and permitted by the State of Kentucky,” effectively prohibiting Although Carbone dealt with waste processing, its holding the use of out-of-state disposal sites. The agreement can be applies with equal force to the waste disposal market, renewed for three terms of five years each and will renew compelling the conclusion that the County violated the automatically for a five-year term absent prior notice by one Commerce Clause by prohibiting out-of-state disposal. See of the parties. SSC, 66 F.3d at 514. This prohibition facially discriminates against out-of-state disposal services which, again, constitutes The franchise agreement provides that all residential, a per se violation sufficient, in and of itself, to survive the commercial, and industrial entities that generate municipal Rule 12(b)(6) motion. solid waste in Bowling Green must employ Monarch to remove that waste; waste generators may not remove their c. Award of “Exclusive Franchise” to a Single In-State own waste, and they are prohibited from using any company Waste Collector and Processor other than Monarch. Monarch bills its Bowling Green customers directly according to a fee schedule fixed by the The district court declined to address the merits of Huish’s franchise agreement; Monarch is solely responsible for challenge to Monarch’s “exclusive franchise” for waste collecting payment. The County receives a portion of the collection and processing on the grounds that the County was revenues Monarch generates servicing Bowling Green a market participant. The court reasoned that the County, businesses and residents, and Monarch removes the waste through its franchise agreement, effectively “purchased” generated at the County’s own buildings at no charge. waste collection and processing services. We respectfully disagree. On the same day that the franchise agreement became effective, the County passed an ordinance “executing” the The County used its regulatory power—not its proprietary franchise agreement and incorporating its provisions by purchasing power—to retain Monarch’s services by requiring reference. In essence, the ordinance transforms the franchise the County’s residents to pay for those services. Stated agreement provisions into law. another way, the County used its regulatory power to grant an exclusive right to collect and process Bowling Green waste, Huish operates a laundry detergent manufacturing facility a result that no private party could accomplish on an open in Bowling Green. Not surprisingly, this facility generates market. The district court observed that the County would considerable solid waste. Under the ordinance and franchise have been a market participant had it purchased Monarch’s agreement, Huish must use Monarch to remove this waste. services with “its own funds,” and reasoned that the exception Huish filed this lawsuit seeking to invalidate the County’s was still applicable where the County directed its residents to ordinance/franchise scheme, claiming that the scheme violates purchase Monarch’s services. We agree with the district court the Commerce Clause , 42 U.S.C. § 1983, and section 164 of that the County could have achieved the same result, without the Kentucky Constitution. implicating the Commerce Clause, by hiring Monarch as its exclusive waste hauler using public funds to pay for the The district court dismissed Huish’s complaint pursuant to service. But the County rejected that strategy, opting instead Fed. R. Civ. P. 12(b)(6). The court first concluded that the to apply its regulatory leverage by forcing residents to do the County is not entitled to Eleventh Amendment immunity and 4 Huish Detergents v. Warren No. 98-5566 No. 98-5566 Huish Detergents v. Warren 17 County, Kentucky, et al. County, Kentucky, et al.
that Huish has the requisite standing to bring suit. With Carbone and discriminated against the interstate flow of respect to the Commerce Clause claim, the court took the waste for processing out-of-state. view that the County engaged in two separate challenged activities: (1) “taking over” the local waste collection, Such discrimination constitutes a per se violation of the processing, and disposal markets; and (2) granting Monarch dormant aspect of the Commerce Clause, “absent the clearest the exclusive right to collect, process, and dispose of waste showing that the unobstructed flow of interstate commerce generated in Bowling Green. itself is unable to solve the local problem.” Carbone, 511 U.S. at 393. The County’s conclusory justification for its The court began its analysis of Huish’s Commerce Clause actions—that it wanted to assure the “safe and efficient” claim by examining the County’s decision to prohibit collection and disposal of solid waste—does not satisfy this residents from independently purchasing waste collection, stringent test. See id. Even if we were to accept these processing, or disposal services on the open market, which the nonspecific goals as legitimate local interests, the County court described as the County’s “takeover” of the local waste offers no explanation why these goals cannot be satisfied outcollection market. The court held, as a preliminary matter, of-state. See Fort Gratiot, 504 U.S. at 366-67; Chemical that the County was not acting as a market participant in Waste Mgt., 504 U.S. at 343-44. taking this action and, therefore, its action was subject to Commerce Clause restrictions. Proceeding with a “dormant We hold, therefore, that for all these reasons, Huish’s Commerce Clause” analysis, the district court concluded that Commerce Clause claim survives the defendants’ Rule the County’s “takeover” of Bowling Green’s waste collection, 12(b)(6) motion. While this holding alone requires that we processing, and disposal market did not violate the dormant reverse the district court’s judgment, we will proceed to Commerce Clause. The court reasoned that the “takeover” consider Huish’s remaining arguments, at least to the extent did not discriminate against interstate commerce and that the that the district court purported to address them. burden imposed on interstate commerce was not excessive in relation to the benefits for the County. b. Prohibition on Out-of-State Disposal
As to the second issue, the district court concluded that the The County did not act as a market participant in County acted as a market participant in awarding an exclusive prohibiting out-of-state disposal of Bowling Green’s franchise to Monarch. According to the district court, the municipal waste because the County neither bought nor sold County “purchased” waste removal and processing services disposal services with taxpayer funds. Indeed, even if the and was free to choose Monarch as the County’s provider of County’s “agreement” with Monarch constituted market these services. In light of its conclusion that the market participation in either the waste collection or processing participant exception applied, the district court did not markets, the market participant exception would not insulate address whether the franchise agreement with Monarch ran the County’s regulation of the separate waste disposal market, afoul of the Commerce Clause. which is downstream from the collection and processing markets. See South-Central Timber Dev., Inc. v. Wunnicke, The court then dismissed Huish’s federal claims with 467 U.S. 82, 97-98 (1984) (plurality opinion); SSC, 66 F.3d prejudice and its pendent state law claim without prejudice. at 515-16. Cf. Incorporated Village of Rockville Centre v. This appeal followed. Town of Hempstead, 196 F.3d 395, 399-400 (2d Cir. 1999).
16 Huish Detergents v. Warren No. 98-5566 No. 98-5566 Huish Detergents v. Warren 5 County, Kentucky, et al. County, Kentucky, et al.
a municipality labels its action as an “agreement.” Rather, we II. must determine whether the municipality was acting in a proprietary capacity as a purchaser or seller with regard to the A. STANDING challenged action.
At the outset, we must address the defendants’ contention Here, it is clear that the County was not acting in a that Huish lacks standing to bring this action. The defendants proprietary capacity in forcing all municipal waste to flow claim that, inasmuch as Huish is not a member of the solid through the city’s transfer station. The County was not waste industry, its injuries do not fall within the zone of “purchasing” the processing services with public funds, nor interests protected under the Commerce Clause. The district was it “selling” its own processing services. These factors court concluded that Huish has standing, and we agree. routinely govern courts’ analysis of the market participant exception in the waste context. See USA Recycling, 66 F.3d In cases such as this involving a constitutional claim, the at 1288-89, 1291; SSC, 66 F.3d at 515-16; GSW, Inc. v. Long plaintiff must satisfy two tests for standing: first, it must meet Cty., Georgia, 999 F.2d 1508, 1513-14 (11th Cir. 1993). “A basic Article III constitutional requirements; and second, the governmental entity which expends or risks no public money plaintiff’s injury must fall within the “zone of interests” . . . is not subject to the vagaries of the market and need be protected by the constitutional guarantee. afforded no corresponding freedom” under the market participation doctrine. See GSW, 999 F.2d at 1514. By To establish Article III standing, Huish must demonstrate: effectively forcing all city residents to purchase the processing (1) an injury in fact that is actual or threatened; (2) a causal services directly from Monarch, the County’s action far connection between the defendants’ conduct and the alleged exceeded that which a private entity could accomplish on the injury; and (3) a substantial likelihood that the injury will be free market. See SSC, 66 F.3d at 512-13; Atlantic Coast redressed by a favorable decision. Lujan v. Defenders of Demolition & Recycling, Inc. v. Board of Chosen Freeholders Wildlife, 504 U.S. 555, 560-61 (1992); Coyne v. American of Atlantic Cty., 48 F.3d 701, 717 (3d Cir. 1995). Thus, the Tobacco Co., 183 F.3d 488, 494 (6th Cir. 1999). “At the market participation exception does not shield Warren pleading stage, general factual allegations of injury resulting County’s action from scrutiny under the Commerce Clause. from the defendant’s conduct may suffice, for on a motion to dismiss we presum[e] that general allegations embrace those Carbone controls the remainder of our analysis. To be specific facts that are necessary to support the claim.” Lujan, sure, the essentially unitary ordinance/franchise scheme in 504 U.S. at 561 (internal quotation marks and citation this case was not identical to the flow control ordinance in omitted) (alteration in original). Carbone. The county in Carbone required that all waste be processed at the town’s transfer station. Here, on the other We find that Huish satisfies the requirements for standing hand, the County “contracted” with Monarch to collect and under Article III, and, indeed, the defendants do not argue then process all municipal waste. But the “contract” went otherwise. Huish alleged an actual injury as a result of the further than that. Warren County dictated where Monarch County’s ordinance and agreement with Monarch, in must provide the processing services—at the city’s transfer consequence of which Huish is forced to pay Monarch more station and nowhere else. This explicit condition is the to collect, process, and dispose of its waste than Huish would functional equivalent of the flow control ordinance in spend if it could purchase one or more of these services from a company operating out-of-state or perform the work itself. The fact that Huish is not a member of the waste industry 6 Huish Detergents v. Warren No. 98-5566 No. 98-5566 Huish Detergents v. Warren 15 County, Kentucky, et al. County, Kentucky, et al.
does not undermine the causal connection between the at one location within Bowling Green; and (2) the prohibition challenged scheme and Huish’s injury as a consumer. on out-of-state disposal. We also note that, while we agree that Monarch acted as the County’s “exclusive franchisee” for [C]ognizable injury from unconstitutional discrimination waste collection and processing in Bowling Green, the district against interstate commerce does not stop at members of court erred in characterizing Monarch as the County’s the class against whom a state ultimately discriminates, “exclusive franchisee” for waste disposal. Monarch and customers of that class may also be injured, as in this apparently was not involved in waste disposal at all, but rather case where the customer is liable for payment . . . and as purchased these services from a third party. a result presumably pays more for the [product] . . . . Consumers who suffer this sort of injury from regulation We identify Huish’s three challenges to the forbidden under the Commerce Clause satisfy the ordinance/franchise scheme as follows: (1) the designation of standing requirements of Article III. a single in-state processing station for municipal waste; (2)
the prohibition on out-of-state waste disposal; and (3) the General Motors Corp. v. Tracy, 519 U.S. 278, 286 (1997). award of an “exclusive franchise” to Monarch for waste Finally, Huish’s injury can be redressed with a favorable collection and processing. At this stage of the proceedings, result. Huish’s lawsuit can survive the Rule 12(b)(6) motion if any one of these three challenges states a valid Commerce Clause Huish must also satisfy a prudential limitation on our claim. jurisdiction—a further standing requirement—by showing that the interest it seeks to protect “arguably fall[s] within the a. Designation of a Single In-State Processing Station zone of interests protected or regulated by the statutory provision or constitutional guarantee invoked in the suit.” The defendants contend that the County acted as a market Bennett v. Spear, 520 U.S. 154, 162 (1997); see also participant in requiring Monarch to process all municipal Association of Data Processing Serv. Orgs., Inc. v. Camp, waste at a single Bowling Green transfer station. According 397 U.S. 150, 153 (1970). In this case, the constitutional to the defendants, the challenged restriction is not subject to guarantee arises under the Commerce Clause, which is Commerce Clause scrutiny because it appeared in an designed to prevent economic protectionism and insure the “agreement” with Monarch, rather than in an ordinance. We free movement of goods between State borders, prohibiting disagree with both the factual and legal premises of this “laws that would excite . . . jealousies and retaliatory argument and hold that the County was not acting as a market measures” among the several States. C & A Carbone, Inc. v. participant when it designated a single in-state processing site Town of Clarkstown, New York, 511 U.S. 383, 390 (1994). for all municipal waste.
Huish argues that it meets this additional standing First, as a factual matter, the defendants overlook the requirement because it has pleaded an injury that falls within relationship between the ordinance and franchise agreement the zone of interests protected by the Commerce Clause, and scheme. The ordinance did contain the challenged restriction we agree. Huish seeks to protect its right to contract with a because it incorporated the full franchise agreement by company that can transport its waste for out-of-state reference. More importantly, the distinction that the processing and/or disposal. In making this claim, Huish is defendants identify is legally irrelevant. The market asserting its individual right as a consumer to purchase waste participant exception does not come into play simply because 14 Huish Detergents v. Warren No. 98-5566 No. 98-5566 Huish Detergents v. Warren 7 County, Kentucky, et al. County, Kentucky, et al.
expenditure of state resources) to favor their own processing and disposal services across State boundaries, an citizens—is entirely absent where the States are buying interest that falls squarely within the zone of interests and selling in the market. protected by the Commerce Clause. The Clause protects not only producers, but also consumers like Huish who “‘may College Sav. Bank v. Florida Prepaid Postsecondary Educ. look to the free competition from every producing area in the Expense Bd., 527 U.S. 666, ___, 119 S. Ct. 2219, 2230 (1999) Nation to protect [it] from exploitation by any.’” Dennis v. (citation omitted). Higgins, 498 U.S. 439, 450 (1991) (quoting H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 539 (1949)).
3. Huish’s Challenges to the Ordinance/Franchise Scheme The defendants rely on two cases from our sister circuits in arguing that Huish’s grievance does not satisfy the zone of To address Huish’s Commerce Clause claim, it is interests test: Individuals for Responsible Government, Inc. imperative that we properly characterize Huish’s challenges v. Washoe County, 110 F.3d 699, 703 (9th Cir. 1997), and to the ordinance/franchise scheme. We believe that the Ben Oehrleins and Sons and Daughter, Inc. v. Hennepin district court mischaracterized the challenged activities, and County, 115 F.3d 1372, 1382 (8th Cir. 1997). Individuals for this mischaracterization led to a mistaken analysis. The Responsible Government involved a challenge to county district court separated Huish’s challenges into two ordinances that required all residents to purchase garbage categories: (1) the County’s “takeover” of the private market collection and disposal services from a company chosen by for waste collection, processing, and disposal; and (2) the the county. Unlike the ordinance and agreement in this case, County’s award of an exclusive franchise to Monarch for however, the challenged ordinances in Individuals for collecting, processing, and disposing of municipal waste. As Responsible Government permitted residential customers to to (1), the court held that the County was not a market opt out of the requirement and dispose of their own garbage, participant and therefore not entitled to the market without any restriction on the location of disposal. Residents participation exception, but that its “takeover” of the waste- who elected this self-help option were exempted from paying services market in Bowling Green did not violate the fees to the county-designated hauler, provided the residents Commerce Clause. As to (2), the court held that the County submitted appropriate documentation to the hauler. was acting as a market participant in awarding an “exclusive Individuals for Responsible Gov’t, 110 F.3d at 701. Three franchise” to Monarch. Therefore, the court did not proceed residents who apparently failed to submit the required to consider whether this “franchise” violated the Commerce documentation for the exemption sought a declaratory Clause. judgment that the ordinances violated the dormant Commerce Clause. Id. at 701-02.
The district court correctly observed that it must evaluate each challenged activity separately, see USA Recycling, Inc. The Ninth Circuit held that these residents did not satisfy v. Town of Babylon, 66 F.3d 1272, 1283 (2d Cir. 1995), but the “zone of interests” test. Id. at 704. The court observed having said so, the court failed to do so. Specifically, by that the ordinances did impose a barrier to interstate grouping several challenged activities together under the commerce by reducing the flow of garbage out of the state, heading of a County “takeover,” the court overlooked the but that the residents’ claimed injury—“being forced to pay unique aspects of two provisions of the ordinance/franchise for services they do not want”—would exist even if the scheme: (1) the requirement that Monarch process all waste ordinances imposed no barrier to interstate commerce because 8 Huish Detergents v. Warren No. 98-5566 No. 98-5566 Huish Detergents v. Warren 13 County, Kentucky, et al. County, Kentucky, et al.
all garbage was disposed out-of-state. Id. at 703-04. But that U.S. 204, 208 (1983). “There is no indication of a is not the case here. Huish’s claimed injury—paying a higher constitutional plan to limit the ability of the States themselves cost for in-state waste processing and disposal—would to operate freely in the free market.” Reeves, Inc. v. Stake, disappear if it could hire a waste hauler to transport its waste 447 U.S. 429, 437 (1980). The market participation out-of-state for processing and/or disposal. Thus, Individuals exception applies equally to States and municipalities. See for Responsible Government does not contradict our holding. White, 460 U.S. 204. Consequently, if we determine that Warren County was acting as a market participant with regard In Ben Oehrleins, the county required all waste haulers to to any of its challenged actions, we need not proceed to deliver waste to a designated transfer station. The Eighth consider whether the actions burdened interstate commerce in Circuit held that residential waste generators who challenged violation of the Commerce Clause. See id. at 210. the ordinance failed to satisfy the zone of interests test. Ben Oehrleins, 115 F.3d at 1381-82. Reasoning that the harm The market participation inquiry is limited to “whether the suffered by residential waste generators—having to pay challenged program constitute[s] direct state participation in relatively high bills for waste disposal—was “narrow, the market.” Id. at 208 (internal quotation marks and citation personal, and strictly local,” the court declared that “[l]ocal omitted) (emphasis added). The Supreme Court has applied consumers shouldering the end-line burden of a purely local the market participation exception to the dormant component regulation are not within the zone of interests of the of the Commerce Clause only in cases where the State was Commerce Clause.” Id. at 1382. spending “its own funds,” see White, 460 U.S. at 214, Hughes v. Alexandria Scrap Corp., 426 U.S. 794 (1976), or selling a We find Ben Oehrleins to be distinguishable. The Ben resource that it owned or produced, see Reeves, 447 U.S. 429. Oehrleins waste generators did not allege a direct injury; Of course, the State has no funds of “its own,” only funds it rather, their “sole allegation of injury and claim for relief is has exacted from taxpayers and holds in trust for all of its that they have incurred increased costs because of citizens. The reference in these cases is to taxpayer funds in enforcement of the designation requirements against the hands of the State, or in this case, the County. White, haulers.” Id. at 1379 n.6 (emphasis added). Huish—by Hughes, and Reeves “stand for the proposition that, for challenging the County’s restriction on Huish’s own ability to purposes of analysis under the dormant Commerce Clause, a purchase out-of-state waste processing or disposal State acting in its proprietary capacity as a purchaser or seller services—claims an injury more directly implicating the may ‘favor its own citizens over others.’” Camps interests under the Commerce Clause. Moreover, we disagree Newfound/Owatonna, Inc. v. Town of Harrison, Maine, 520 with the Eighth Circuit’s reasoning, at least insofar as it U.S. 564, 592-93 (1997) (quoting Hughes, 426 U.S. at 810) applies to waste generators. As we have explained, waste (emphasis added). generators participate directly in commerce, and the Commerce Clause guarantees to them access to the interstate The Supreme Court recently observed that the market market for waste-related services. participation exception For these reasons, we hold that Huish has standing. makes sense because the evil addressed by [the Because the County does not challenge the district court’s Commerce Clause]—the prospect that States will use holding on Eleventh Amendment immunity, we do not custom duties, exclusionary trade regulations, and other consider that issue here. exercises of governmental power (as opposed to the 12 Huish Detergents v. Warren No. 98-5566 No. 98-5566 Huish Detergents v. Warren 9 County, Kentucky, et al. County, Kentucky, et al.
finance the transfer station, the town guaranteed a minimum B. RULE 12(b)(6) DISMISSAL waste flow to the station and permitted the contractor to charge a “tipping fee” to haulers depositing waste at the We turn now to Huish’s claim that Warren County’s station. The town chose the flow control ordinance as the ordinance/franchise scheme violates the so-called “dormant” mechanism for ensuring the minimum waste flow. Commerce Clause. Huish argues that it has adequately pleaded a valid Commerce Clause claim on three independent Carbone operated a recycling center of its own in grounds: first, the scheme discriminates against out-of-state Clarkstown, performing functions equivalent to those waste processors by requiring that all municipal waste be performed at the new transfer station. Carbone challenged the processed at the Bowling Green transfer station; second, the flow control ordinance on dormant Commerce Clause scheme discriminates against out-of-state waste disposers grounds. In its defense, Clarkstown pointed to its need to because it prohibits the disposal of Bowling Green waste finance the transfer station. Id. at 386. The Court sided with outside of Kentucky; and third, the scheme discriminates Carbone. The Court explained that by preventing any against the interstate market for waste collection and company “except the favored local operator” from processing processing by designating Monarch, a local business, as the waste generated in the town, the flow control ordinance exclusive waste collector and processor for Bowling Green. deprived out-of-state businesses of access to the local market. Id. at 389. In other words, the offending ordinance “hoards We review a Rule 12(b)(6) dismissal de novo. George solid waste, and the demand to get rid of it, for the benefit of Fischer Foundry Sys., Inc. v. Adolph H. Hottinger the preferred processing facility.” Id. at 392. The Court held Maschinenbau GmbH, 55 F.3d 1206, 1208 (6th Cir. 1995). that the ordinance’s discrimination against out-of-state waste Our duty is to construe the complaint in the light most processors was per se invalid, rejecting Clarkstown’s favorable to the plaintiff, accepting all well-pleaded factual argument that it had no other means to advance its interest in allegations as true. Columbia Natural Resources, Inc. v. ensuring the long-term viability of the transfer facility. Id. at Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995). “[A] complaint 392-94. should not be dismissed unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim The reach of the Commerce Clause into the waste industry which would entitle him to relief.” Hartford Fire Ins. Co. v. extends not only to waste processing, but also to waste California, 509 U.S. 764, 811 (1993) (internal quotation disposal. See Fort Gratiot, 504 U.S. 353; Chemical Waste marks and citations omitted) (alteration in original). Mgt., Inc. v. Hunt, 504 U.S. 334 (1992); City of Philadelphia, 437 U.S. 617. Carbone teaches us that a State cannot “hoard” 1. The “Dormant” Commerce Clause solid waste by prohibiting or restricting the flow of waste to an out-of-state disposal facility. The Commerce Clause grants Congress the power to regulate commerce among the States. It reads, with disarming 2. The Market Participation Exception simplicity: “[The Congress shall have Power] [t]o regulate Commerce with foreign Nations, and among the several So-called dormant Commerce Clause principles are not States, and with the Indian Tribes.” U.S. Const., art. I, § 8, implicated when the State’s activity can be characterized as cl.3. As interpreted by the Supreme Court, the Clause, by “market participa[tion],” rather than market regulation. White negative implication, restricts the States’ ability to regulate v. Massachusetts Council of Constr. Employers, Inc., 460 interstate commerce. See CTS Corp. v. Dynamics Corp. of 10 Huish Detergents v. Warren No. 98-5566 No. 98-5566 Huish Detergents v. Warren 11 County, Kentucky, et al. County, Kentucky, et al.
Am., 481 U.S. 69, 87 (1987). There is, of course, no As a preliminary matter, there is no question that a State “dormant” clause to be found in the text of clause 3 of section law restricting the interstate travel of waste implicates the 8 of article I. Clause 3 is the Commerce Clause; the judge- Commerce Clause, and, as we have indicated, this is equally made notion that a negative implication is subsumed in the so of a local ordinance. Any doubt about this fact was laid to affirmative declaration of clause 3 that Congress has power rest by the Supreme Court in 1978. City of Philadelphia v. “[t]o regulate Commerce . . . among the several States” New Jersey, 437 U.S. 617, 621 (1978). Since then, the Court should more properly be called the dormant aspect or has reiterated that garbage is not valuable, in and of itself, but component of the Commerce Clause. But it is too late in the it is a “profitable business” because “its possessor must pay day to rewrite the substantial case law that speaks, however to get rid of it. In other words, the article of commerce is not inaccurately, of “the dormant Commerce Clause.” Instead, so much the solid waste itself, but rather the service of we can only yield to this inaccurate but settled usage. [collecting], processing and disposing of it.” Carbone, 511 U.S. at 390-91.
The Supreme Court has interpreted the Commerce Clause to “prohibit[] States from ‘advanc[ing] their own commercial Whether the business arrangements between . . . interests by curtailing the movement of articles of commerce, generators of waste and the . . . operator of a waste either into or out of the state.’” Fort Gratiot Sanitary [processing or] disposal site are viewed as sales of Landfill, Inc. v. Michigan Dep’t of Natural Resources, 504 garbage or purchases of transportation and disposal U.S. 353, 359 (1992) (quoting H.P. Hood & Sons, 336 U.S. services, the commercial transactions unquestionably at 535). And this court, among others, has construed the have an interstate character. The Commerce Clause thus Clause as limiting the regulatory activity of counties and cities imposes some constraints on [a State’s] ability to as well as States. Waste Mgt., Inc. of Tennessee v. regulate these transactions. Metropolitan Gov’t of Nashville and Davidson Cty., 130 F.3d 731, 735 (6th Cir. 1997), cert. denied, 523 U.S. 1094 (1998). Fort Gratiot, 504 U.S. at 359 (internal quotation marks Thus, where this opinion refers to “States,” the defendant, omitted). Indeed, one of our sister circuits has observed that Warren County, is included in this designation. federal courts are now clogged with cases challenging restrictions on waste-related services, making garbage the If an ordinance discriminates against interstate commerce modern legal battleground over the Commerce Clause. See by treating in-state and out-of-state interests differently, SSC Corp. v. Town of Smithtown, 66 F.3d 502, 505 (2d Cir. benefitting the former and burdening the latter, it is per se 1995). invalid unless the State has “no other means to advance a legitimate local interest.” Carbone, 511 U.S. at 392; see also In Carbone, 511 U.S. 383, the Supreme Court held that a Waste Mgt., 130 F.3d at 735. On the other hand, if the law so-called flow control ordinance that required all solid waste regulates evenhandedly, it will be upheld unless the burden it in the town to be processed at a designated transfer station imposes on interstate commerce is “‘clearly excessive in before leaving the town violated the dormant Commerce relation to the putative local benefits.’” Carbone, 511 U.S. at Clause. The town of Clarkstown, New York, had agreed to 390 (quoting Pike v. Bruce Church, Inc., 397 U.S. 137, 142 close its landfill and build a new solid waste transfer station. (1970)). Id. at 387. A local private contractor constructed the transfer station and agreed to operate it for five years, at which time the town would buy the station for a nominal price. Id. To