Court Faults Franchise Link

A county ordinance may unlawfully interfere with interstate commerce if it incorporates a waste collection and hauling franchise arrangement whereby local residents are obliged to purchase services directly from the exclusive provider. [Huish Detergents, Inc. v. Warren County, Ky., et al., No. 98-5566, 6th Cir., May 31, 2000.]

Authorities in Warren County, Ky., solicited competitive bids from haulers interested in collecting and processing all municipal solid waste generated within the city of Bowling Green. Monarch Environmental won the job, signing a five-year commitment to collect the waste, process it at the city's transfer station and transport it to a Kentucky-licensed landfill. The agreement took effect when the county passed an ordinance incorporating it into local law.

Under the franchise arrangement, all residential, commercial and industrial generators must deal with Monarch for waste removal. No self-hauling is allowed. The company directly bills customers using an approved fee schedule. The county receives a portion of Monarch's revenues and receives free waste collection at county buildings.

Huish Detergents, which operates a manufacturing facility in the city, claims that it must pay Monarch more for waste removal than it would pay to purchase such services on the open market or to perform the work itself. In 1997, it filed suit in federal district court charging that the ordinance/ franchise system violates the Commerce Clause. Despite ruling that a waste generator had a protected legal interest, the district court nevertheless dismissed the suit.The court found that the county's "takeover" of the local waste collection market did not discriminate against or excessively burden interstate commerce and that the county simply was acting as a market participant in awarding an exclusive franchise.

A three-judge panel of the U.S. Court of Appeals for the Sixth Circuit agreed with the lower court regarding Huish's legal standing to bring the claim. "Huish [asserts] its individual right as a consumer to purchase waste processing and disposal services across State boundaries, an interest that falls squarely within the zone of interests protected by the Commerce Clause," the appeals court noted.

However, the appellate panel took issue with other rulings by the district judge. For one thing, it held that the county was not acting as a market participant - either in designating the city transfer station for all waste processing or in prohibiting out-of-state disposal - because the county neither bought processing and disposal services with taxpayer funds nor sold such services. For another, the appeals court found that the county used its regulatory power to force residents to pay for these services. "We agree with the district court that the County could have achieved the same result, without implicating the Commerce Clause, by hiring Monarch as its exclusive waste hauler using public funds," the opinion stated.

The appeals court reinstated Huish's Commerce Clause claims and sent the case back to the district court for trial.