Forewarned, Now Foreclosed

Forewarned, Now Foreclosed

Smart people gauge the politics and legalities before starting up a hauling business. Cary Scarborough is no exception.     

Before launching Deep South Sanitation (DSS) in Lowndes County, Ga., in 2011, he discussed his business plan with both a county board member and the county manager. He learned that the county was considering new ways to manage waste and recyclables, including a single-provider franchise. At the time, the county was losing more than $400,000 a year operating its underutilized solid waste collection centers in unincorporated areas.

About a year later, the county issued a request for proposals for curbside waste collection, addressing both multiprovider and sole provider services. Although DSS initially showed interest, it did not respond because it could not serve all unincorporated areas, nor could it provide the desired recycling services.

Convinced that only by utilizing a single contractor would it be economically feasible to serve the far reaches of the county, the board enacted an ordinance authorizing an exclusive collection franchise. Concurrently, the county board approved a franchise agreement giving Advanced Disposal Services (ADS) sole operating rights.

DSS paid no mind. Ignoring a warning from county officials, it continued serving customers in the franchise territory. The county and ADS filed separate lawsuits against DSS seeking an injunction. In its defense, DSS claimed, among other allegations, that the ordinance violated its constitutional due process rights and promoted unlawful, anti-competitive conduct.

Denying both injunction requests, the trial court gave DSS the green light to continue operating as before. “A government cannot cancel the constitutional enjoyment of citizens in ... their property by the claimed exercise of police powers,” the judge said, noting that DSS had operated its business before the ordinance took effect. In addition, he ruled that, by excluding DSS, the county had violated federal antitrust laws.

On appeal, the state supreme court overturned the lower court ruling. “It is not for this or any other court to judge the wisdom of the County’s decision to implement an exclusive provider arrangement, but only to determine whether in doing so the County acted lawfully,” the unanimous opinion said.

To survive DSS’s due process challenge, the ordinance had to “serve a legitimate public purpose, and ... employ means ... reasonably necessary to achieve that purpose without unduly  oppressing the individuals regulated,” the justices said. Local officials are not obliged to adopt the absolute best or least intrusive means available to achieve their objective. “To the contrary, the means adopted by an ordinance need only be reasonable in relation to the goal they seek to achieve,” they continued.

Applying this test, the high court concluded that the trial judge got it wrong. “DSS concedes, as it must, that regulation by a local government of the collection and disposal of solid waste serves an important and legitimate ... purpose of protecting the public health, safety, and welfare,” the opinion said. “Moreover, the means ... for [solid waste] collection and disposal ... in unincorporated areas ... is reasonably related to and furthers this public purpose.”  As the county saw it, an exclusive franchise offered “the best opportunity to provide curbside collection of solid waste, yard waste, and recycling in a cost-effective and uniform manner to all of its residents in the unincorporated areas, thereby discouraging illegal dumping in the county,” the court noted.

The justices also brushed aside the trial judge’s conclusion that the system created an illegal monopoly. Local governments are immune from federal antitrust laws where their anti-competitive conduct is sanctioned by state policy. The lower court overlooked or ignored a 2004 state supreme court ruling which held that an exclusive contract with a waste company was not anti-competitive because “solid waste collection was conduct expressly contemplated ... in the enactment of the [state solid waste act].”

Advanced Disposal Services Middle Georgia, LLC v. Deep South Sanitation, LLC, Nos. S14A0784, S14A0785, Supreme Court of Georgia, Sept. 22, 2014

Barry Shanoff is a Rockville, Md., attorney and general counsel of the Solid Waste Association of North America.

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