Dirty Boyz Sanitation Service, Inc. (DB) operates a garbage collection business in Rawlins, Wyo. In 2008, DB and the city of Rawlins signed an agreement giving the company a non-exclusive license to collect and dispose of locally generated waste.
Initially, DB hauled local garbage to the city-owned landfill. However, the situation changed in 2010 when the operating permit for the landfill expired. Rather than renew the permit, which would have required upgrading environmental controls, the City Council took the advice of its solid waste consultant to transport locally collected waste 115 miles to a landfill owned by the city of Casper.
The two cities signed a disposal agreement that included a provision whereby Rawlins would pay whatever tipping fee Casper charges its own residents. Rawlins then transformed its landfill site to function as a transfer station, and in 2011, began hauling garbage to Casper. Incidentally, the following year, the City Council discussed but later rejected the enactment of a flow control ordinance.
Knowing the problem with the Rawlins landfill, DB initially considered taking its loads to landfills in Rock Springs, Wyo., and Larimer County, Colo., but later sought approval from the Carbon County Planning Commission and the Wyoming Department of Environmental Quality (DEQ) for permits to construct its own transfer station. Even with higher labor and fuel costs, DB calculated it would be feasible and cheaper to transport garbage from its own facility to Larimer County (where the landfill charges by volume, not weight) than to pay the fee at the city transfer station. The company seemingly overlooked or discounted the likelihood that Rawlins might again consider a flow control ordinance.
In September 2014, the Rawlins city planner sent a letter to Carbon County planning officials objecting to the proposed DB transfer station permit because the city's population could not support more than one such facility. However, the county and the DEQ approved the permit in April 2015.
Formal closure of the Rawlins landfill did not begin until years after the landfill stopped receiving garbage. In October 2015, the state awarded Rawlins a grant of $3.65 million and a no-interest loan of $1.24 million to help pay the closure costs, leaving the city to self-fund the remaining $1.6 million in expenses. To repay these amounts, the city planned to use revenue from its transfer station.
Meantime, DB had obtained some private financing for its own transfer station, but it still needed more funds. The company applied for a grant from the Wyoming Small Business Credit Initiative, but to receive the grant, DB needed a statement from the host municipality that the proposed facility would provide an economic benefit. Unsurprisingly, the Rawlins City Council voted against endorsing the grant for the simple reason that a second transfer station would reduce the amount of solid waste processed at the city’s transfer station and thus decrease its revenue.
In November 2015, the city sent DB a letter advising that it might amend the license agreement to require that the company take all local garbage to the Rawlins transfer station. The letter explained that Rawlins was working with the DEQ to close and cap its landfill. The letter also expressed the city’s "desire" to withdraw any flow control requirement after it repaid the closing costs.
Two months later, the City Council enacted an ordinance requiring all garbage "generated and/or accumulated and/or collected" in the city to be taken to the Rawlins facility. One of DB’s owners, Patrick Cain, had participated in the City Council meetings leading up to the passage of the ordinance and had objected to the flow control requirement.
Shortly thereafter, Rawlins sent DB notice of the ordinance, advising it that the city attorney would soon seek an amendment to the agreement "that fully conforms to the newly enacted regulations." (Waste collection franchises and similar agreements typically provide that franchisees or licensees will be bound by changes in state or local law occurring during the term of the license or agreement.)
DB promptly sued Rawlins in federal district court, alleging that the ordinance violated (a) the Contracts Clause, the Commerce Clause and the Due Process Clause of the United States Constitution, (b) the Federal Aviation Administration and Authorization Act (FAAAA), (c) federal antitrust laws and (d) the Wyoming Constitution.
Even with its lawsuit pending, the company proceeded with construction of its transfer station and, in April 2016, the work was completed. Because the facility opened for business after Rawlins enacted its flow control ordinance, DB never used it to process what it collected in the city. However, the site did handle waste collected outside of the city destined for Colorado landfills.
With no key facts in dispute, each side filed a motion for summary judgment in its favor—that is, without a full trial. After a hearing, the district court granted Rawlins' motion and ruled against DB. Taking the case to the U.S. Court of Appeals for the Tenth Circuit, DB trimmed down its arguments to two points: first, that the flow control ordinance unconstitutionally impairs DB’s contract with Rawlins and second, that the FAAAA preempts the ordinance. To no avail; the appeals court upheld the district court’s ruling.
Article I, Section 10 of the U.S. Constitution provides, "No State shall . . . pass any . . . Law impairing the Obligation of Contracts . . . ." The clause limits the power of states and their political subdivisions to modify their own contracts and to regulate agreements between private parties.
To determine whether a state or local law impairs a contractual obligation in violation of the Contracts Clause, the courts ask whether the government action has substantially damaged or weakened a contractual relationship.
DB argued that the flow control ordinance impairs the agreement by requiring it to use Rawlins' transfer station, by keeping it from using its own transfer station to process the local garbage more cheaply and by preventing DB from choosing where the garbage is ultimately disposed. However, the appeals court concluded that the district court had properly addressed the issue.
“[DB] hasn't pointed to an agreement provision granting it the right to select the disposal sites it uses,” the appellate opinion said. “[T]he parties didn't contract on the question raised here, whether [DB] had a right to select any disposal site it chooses. Despite [DB’s] claim that a right to choose disposal sites is implicit in the agreement's language, the agreement's reference to garbage disposal doesn't give rise to a right to choose any disposal site. And here the agreement contemplates that garbage collected in Rawlins will continue to be disposed of at Rawlins's then-operating landfill. * * * If [DB] wanted rights not included in the agreement, it needed to ask Rawlins to amend its agreement to include them.”
Turning to DB’s second contention, the panel concluded that state and local regulation of garbage collection doesn't fall within the preemptive scope of the FAAAA. Even if it did, the Rawlins ordinance's impact on the routes, rates and services of garbage haulers is too insignificant to warrant preemption.
Under the Supremacy Clause of the Constitution, "the Laws of the United States . . . shall be the supreme Law of the Land . . . ." U.S. Const. art. VI, cl. 2. Thus, as a general rule, federal law displaces contrary state enactments.
The FAAAA prohibits states and their political subdivisions from enacting or enforcing laws "related to a price, route, or service of any motor carrier . . . with respect to the transportation of property." To determine whether garbage collection falls within the preemptive scope of the FAAAA, the appeals court had to decide whether garbage is property.
Although Congress did not define “property” within the statute itself, the legislative history of the FAAAA helped uncover Congress' intent about state or local regulation of garbage collection. Notably, the House-Senate Conference Report on the law clarified that the motor carrier preemption provision does not preempt state regulation of garbage and refuse collectors.
The managers have been informed by the Department of Transportation that under [the Interstate Commerce Commission's] case law, garbage and refuse are not considered “property.” Thus garbage collectors are not considered "motor carriers of property" and are thus unaffected by this provision.
H.R. Rep. No. 103-677, at 85 (1994) (Conf. Rep.), as reprinted in 1994 U.S.C.C.A.N. 1715, 1757. “So we conclude that state and local regulation of garbage collection doesn't fall within the preemptive scope of the FAAAA,” said the appeals court.
The appellate panel also found that even if garbage collection fell within the preemptive scope of the FAAAA, the ordinance's effect on prices, routes and services would be too insignificant to warrant preemption. DB had argued that the ordinance has a significant impact because the ordinance controls the routes company trucks must take by requiring a stop at Rawlins's transfer station. Moreover, its rates are likely to increase because of the transfer station fee. “[I]mposing flow control is too far removed from Congress's deregulatory purpose to warrant preemption,” the appeals court found. “Requiring that all garbage collected in the city be taken to Rawlins's transfer station would neither significantly determine what services garbage haulers in Rawlins will provide nor require garbage haulers to provide a service not available in the market.”
Barry Shanoff is a Bethesda, Md., attorney and general counsel of the Solid Waste Association of North America.