Local Flow Control Upheld

When a governmental authority furnishes waste disposal services for municipalities that, in return, provide contractual guarantees of waste supply, the arrangement is an ordinary market transaction that does not interfere with interstate commerce, according to a ruling by a federal appeals court. [Village of Rockville Centre, et al. v. Town of Hempstead, No. 98-9571, 2nd Cir., Nov. 18, 1999].

In the mid-1980s, new laws in New York State forced Long Island municipalities to convert to incinerators and gave town governments exclusive control over all solid waste from communities within their jurisdiction.

The town of Hempstead hired a contractor to build and operate an incinerator. The town also signed 20-year inter-municipal agreements (IMAs) with six village governments that promised to deliver all locally generated waste to the facility and pay for this service. The IMAs made it clear that the town needed such commitments to assure the project's economic viability and that the villages wanted a long-term waste disposal solution.

After the agreements were signed, the town enacted a flow control ordinance governing both public and private waste hauling and disposal.

In 1996, the villages filed suit in federal district court, claiming that the ordinance and the IMAs unlawfully interfered with interstate commerce. Above all, the villages wanted to escape their liability for disposal fees.

The town conceded that the ordinance was unconstitutional under C&A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383 (1994). But the district judge upheld the agreements, finding that the town was acting as a participant in the waste disposal market.

On appeal, the villages argued that because the town participates only in the waste disposal market, it cannot regulate the waste collection market by directing the municipalities' waste.

The test, said the appeals court, for applying the "market participant" defense, i.e., avoiding the restrictions of the Commerce Clause, is if the government agency is acting like a private trader or is effecting a regulatory, non-commercial purpose by attaching conditions to its commercial transactions.

"[A] private party seeking to enter the waste disposal market, but having to fund the creation of a local incinerator ... could and very likely would have engaged in exactly the same ... actions ... taken by the town ... when it negotiated and subsequently sought to enforce the IMA," the appeals court noted. "[T]he key IMA provisions - that is, the town's agreement to sell its disposal services to the villages for the next 20 years only on the condition that the villages agree to use the town exclusively in fulfilling their disposal needs - mirror language that is typical in ... private requirements contracts[,] reflect[ing] and respond[ing] to the economic needs of both parties," the court continued.

Moreover, the court added, any indirect restriction on waste haulers' freedom to dispose of refuse from the villages at the facility of their choice does not create a constitutional violation.