Court Demands N.J. End Flow Contol

New Jersey must eliminate flow control from its comprehensive statewide waste disposal system, according to a ruling by a federal appeals court [Atlantic Coast Demolition & Recycling Inc. v. Board of Chosen Freeholders, etc., et al., No. 96-5567 (3rd Cir. May 1, 1997)].

The appeal stemmed from a series of flow control legal challenges filed in 1993 and 1994 by the owners of out-of-state facilities that process solid waste and by two trade associations that represent solid waste haulers in New Jersey and surrounding states.

In 1995, the same federal appeals court ruled that the state's flow control plan discriminated against interstate commerce by favoring in-state disposal facilities and by inhibiting the export of solid waste from New Jersey. The court returned the case to a federal district court to determine whether the flow control laws could meet a strict constitutional test.

After hearing extensive evidence, the district court ruled that the state had failed to prove that its legitimate goals for in-state solid waste management could not be achieved by other, non-discriminatory methods. The lower court issued an injunction, but postponed its effect for two years to give state officials time to develop alternatives.

Both sides appealed. The haulers objected to the delay in ridding the state of an unconstitutional law. The state, for its part, argued that it had provided sufficient proof that no viable alternatives to flow control existed.

The New Jersey system requires each of the state's 22 waste management districts to designate a private or public waste disposal facility which may handle locally- generated waste upon approval by state environmental officials. Some districts delegated their waste responsibilities to municipal authorities that assumed substantial debt obligations to build waste handling facilities. Although a waste management district or authority may contract with an out-of-state facility for disposal, state policy has overwhelmingly favored operators with in-state facilities. The state enforces its system through various regulations, fines and other penalties.

The appeals court reviewed the state's flow control system under the "heightened scrutiny" test applicable to laws that discriminate against interstate commerce, and found that the state had several legitimate justifications for its regulatory system. Nevertheless, "a state must do more than cite a legitimate interest; it must also show that it lacks alternative non-discriminatory means of achieving that interest," the opinion said. "Here we agree with the district court that the defendants have failed to satisfy this second burden."

Significantly, the appeals court rejected state and county arguments that loss of flow control would produce dire financial consequences. While acknowledging the seriousness of a potential default on existing bond indebtedness, the court said, "sympathy cannot cloud reason." Citing alternatives mentioned by the lower court for ensuring the financial integrity of the local authorities, the appellate judges agreed that the state had not convincingly proved that these options were unworkable.

The appeals court also clarified the injunction, limiting it to the state regulation that codifies the designated facilities for waste disposal within each waste management district. Thus, the listed facilities "can no longer be considered the facilities to which each district's solid waste must be directed," the opinion said.

However, the other solid waste statutes and rules, which do not discriminate against interstate commerce, remain fully enforceable. For example, companies that collect waste still will need a state-issued certificate of public convenience and must comply with general environmental laws, recordkeeping requirements and routing restrictions.

The appellate panel overturned the lower court's post-appeal, two-year stay. "Plaintiffs' remedy cannot be denied or delayed based on the financial cost of enjoining the state's flow control laws," the opinion said. But the injunction will not take effect until all appeals have been exhausted.

If the state appeals, it could ask the entire 15-judge Third Circuit team to hear the case, or it could directly petition the Supreme Court for review.

Despite its striking down the New Jersey laws, the opinion reiterated that not all flow control laws necessarily violate the Commerce Clause. Where out-of-state operators are given an even chance to compete for the opportunity to dispose of wastes, the system may pass muster under the Commerce Clause, said the appeals court, citing one of its 1995 decisions (Harvey & Harvey Inc. v. County of Chester).

Meanwhile, companies that plan to haul waste from New Jersey to other states probably cannot ignore existing contracts entered into before this latest ruling. Arguably, these companies waived the constitutional arguments against facility designation when they signed the agreements.