Franchise Fracas

IDAHO CITIES CANNOT grant an exclusive solid waste disposal franchise because state law, which strictly limits the scope of municipal powers, neither expressly nor implicitly allows municipalities to do so, according to a ruling by the state supreme court.

Teresa and Matt Plummer considered moving to Fruitland, Idaho, where they hoped to open a garbage collection service. Before doing so, they talked with city officials who assured them that the municipal code allowed such a business. Heartened, they bought property near the city and began advertising their service.

Shortly thereafter, Hardin Sanitation Inc., which had been the sole hauler in the area for more than 50 years, sought an exclusive waste collection franchise in the city. Not to be cast aside, the Plummers also asked for the same rights. The city council initially considered nonexclusive franchises for both haulers, but later, without competitive bidding, passed an ordinance giving Hardin a 10-year exclusive franchise.

After one of the Plummers' employees was arrested for violating the franchise ordinance by collecting garbage in the city, the Plummers filed suit asking that the city be permanently restrained from enforcing the ordinance. They argued that the city lacked the authority to grant an exclusive franchise for waste collection and that the city's actions violated state laws concerning unfair competition and competitive bidding. The trial judge upheld the validity of the ordinance and summarily dismissed the Plummers' claims.

On appeal, the Idaho Supreme Court reversed the lower court decision, voiding the franchise and faulting the city's disregard for competitive bidding and free trade.

Although state law gives Idaho cities the power to operate solid waste collection systems by “[c]ontracts, franchises or otherwise,” the statute does not “expressly permit ‘exclusive’ franchises,” the high court found. “[I]f there is a fair, reasonable, substantial doubt as to the existence of a power, the doubt must be resolved against the city,” the opinion explained. However, the authority to grant exclusive waste collection franchises can be sustained, said the court, if the power were “necessarily implied” from the statute — that is, “indispensable” to an express power.

“[E]xclusivity is not integral to the provision of garbage hauling services,” the opinion said, noting that Hardin had been in business half a century without a franchise. “[C]ompetition does not necessarily prevent the city from accomplishing its objectives; it just may mean that garbage hauling will subject itself to … capitalism,” it continued.

The court also ruled that the city failed to adequately substantiate any public safety, health and welfare exceptions to state-mandated competitive bidding on municipal contracts and franchises.

Finally, the court held that the unlawful exclusive franchise may have violated the state law prohibiting anticompetitive behavior. The case was sent back to the district court, where the city faces potential liability under the state monopoly and trade practices law for damages, costs and attorney's fees incurred by the Plummers.

[Plummer v. City of Fruitland, 2003 WL 2004522 (May 2, 2003)]

The legal editor welcomes comments from readers. Contact Barry Shanoff via e-mail: [email protected].

The columnist is a Rockville, Md., attorney and serves as general counsel of the Solid Waste Association of North America.