THE LAW OF FLOW CONTROL: 1997 John Douglas Moore

The law permitting government to regulate the collection and disposal of recyclables and solid waste, sometimes called flow control, is not singular. It is multi-layered, like an onion. The core consists of legislation and resolutions adopted locally by the city or county which authorize and implement flow control. The outer layers of the onion are: (1) state law as interpreted by the courts; (2) federal law; and (3) constitutional law. Each outer layer can, under proper circumstances, overrule or trump any of the inner levels around which it is wrapped. For example, the California Supreme Court has held that the maximum scope of an exclusive franchise is the collection of "solid waste" which the Court defined to mean material that a generator pays to have taken away (" fee for service"). State law clearly does not require government to grant any exclusive franchise for solid waste collection; exclusive franchising is just one tool that government may employ. Any local franchise agreement or solid waste ordinance in conflict with these state law parameters is likely to be unenforceable. These state law parameters may be proscribed further by federal law and constitution. This chapter examines only the law generally applicable to California collectors, sorters, processors, and end users of recyclable material generated in California.

LOCAL LAW

In reviewing the applicable law in any local jurisdiction the best starting point is the franchise agreement or other device used by the public entity. The franchise agreement will likely state the scope or grant of the franchise. Outside the scope of the franchise grant, independent recyclers may collect materials without any conflict between this activity and the franchise agreement. A franchise agreement may cover only specified material or it may only apply to certain sectors (i.e. residential collection) or it may have other qualifying factors that permit competitive collection activity. The franchise agreement is a contract and its breach is governed by contract and tort law principles not addressed here. Often, the franchisee asks local government to enforce the franchise against competing non-franchisees. The franchise agreement is typically coupled with legislation found in the city or county code whereby the public entity establishes its right to franchise, the scope of the permissible franchise, the requirement, if any, of mandatory collection by the franchisee, the material which may be the subject of an exclusive franchise, the specifications of any curbside collection programs and definitions of terms used such as "solid waste", "garbage", or their constituent materials. It is not uncommon for the ordinance to read inconsistently with the franchise agreement, which also creates enforcement difficulties.

STATE LAW

AB 939 grants local government the primary responsibility for adopting and implementing solid waste and recycling legislation subject to state-imposed limitations.2 The most important flow control limitation found in AB 939 is the maximum-permissible grant of an exclusive franchise. Under state law, local government may only, but does not have to, grant an exclusive franchise for "solid waste handling services". 3 The grant of this exclusive franchise need not be by competitive bid, but must be supported by legislative findings that the "public health, safety, and well-being" require an exclusive franchise.4 The state law definition of "solid waste"5 (which is collected by the franchisee providing "handling service") was interpreted by the California Supreme Court in the case commonly known as the Rancho Mirage 6 decision. The Supreme Court held that solid waste which can be exclusively franchised is material which is "discarded".7

In contrast, material that is "disposed" for compensation is not solid waste.8 Under state law, the maximum permissible exclusive solid waste franchise covers only materials that are "discarded". The Court defined "discard" to mean "throw away" using the American Heritage Dictionary definition of that term (which also makes it synonymous with "reject").9 The Court then applied its own illustration of "throwing away" by finding that if an owner/generator pays a fee for the collection service for the material, the material is "discarded" and is "solid waste" subject to the maximum exclusive franchise.10 Conversely, if the owner/generator sells the material, it is "disposing" of the material, not discarding it, so that the material is not solid waste.11 If the owner/generator gives away the material, the Court was less than clear whether the material is solid waste or not. Both recyclers and franchised garbage haulers can point to illustrations used by the Court to support the view either that material given away or donated is solid waste or not.12

Many recyclers initially interpreted the Supreme Court's decision to mean that a generator could establish the materials' value - and hence that it is not solid waste - by lower collection cost charged by a recycler or by the societal value of recycling material to avoid the environmental consequences of landfill disposal, incineration, or depletion of virgin resources. In this author's view this interpretation was inconsistent with the Supreme Court's bright line test of fee for service. A later California Court of Appeal decision faced with these competing arguments rejected the recyclers' viewpoint and upheld the Supreme Court's bright line fee for service test.13 While there are legitimate reasons to contend legally that the Supreme Court misinterpreted AB 939 and defined "solid waste" too broadly -- because it includes so-called "negative value" materials which are, in fact, recycled, this high court has firmly entrenched the definition of solid waste to mean materials that are collected for a fee (and possibly given away).

Last year the Supreme Court was presented with a case which would have allowed it to revisit or reconsider its Rancho Mirage interpretation and the Court chose not to accept the case for hearing.14 Today, any reinterpretation of the definition of "solid waste" must come either from the California State Legislature or by statewide voter initiative, or from a federal body with the ability to "trump" the Supreme Court's interpretation. There are numerous other California state laws which also impact flow control and are deserving of brief mention: 1. CEQA Any change to a franchise agreement, local government ordinance or the implementation of either, which has a potential significant adverse environmental impact, triggers the application of California's Environmental Quality Act (CEQA).15 Since the California State Legislature has found there to be detriment to the environment by landfill disposal and incineration16 any possible increase to landfill disposal and incineration by virtue of a change of local government action, probably constitutes a "project" which requires the publication of an environmental impact report detailing the environmental impacts before any local government change may be implemented. Although this premise has not yet been tested in a California Court of Appeal, this author has had considerable success in persuading local government that CEQA must be complied with under these circumstances. CEQA requires public reporting of all factors which potentially create significant adverse environmental impact.17 2. Nuisance laws AB 939 explicitly states that local government may protect the health and welfare of its citizenry by regulation.18 Simply stated, the same local legislation that prevents a produce market from throwing its rotting vegetables out into the street also prohibits mishandling of any recyclable material in ways that are detrimental to health and safety. The fact that these health and safety laws exist and that AB 939 clearly permits them, proves that exclusive franchising is not necessary to protect public health and safety. In fact, the opposite is true: so long as local government can protect health and safety by less restrictive means than a monopolization of recyclables, which arevaluable commodities, it is difficult for government to find a necessity for the grant of a broad exclusive franchise covering recyclables. 3. Voter approval of taxes It is arguable that a franchise fee paid by an exclusive franchisee and passed on as a cost to the ratepayer is a special tax requiring 2/3 voter approval.19 The only recycling-related "special tax" case decided by a Court of Appeal involved Alameda County's Measure D and its landfill surcharge.20 The Court found the surcharge was not a special tax requiring 2/3 voter majority. (Measure D received simple voter majority approval.)21

FEDERAL LAW

Where the federal constitution reserves an exclusive power to Congress and Congress chooses to exercise the power and not delegate it to the states, state law must defer to the acts of Congress.22 The best current example of how federal law may preempt a local flow control law is a 1995 Act of Congress to amend a law regulating motor carriers (truckers) who possess permits issued by the Federal Surface Highway Transportation Board (formerly the Interstate Commerce Commission). Congress enacted a law stating that local government may not prohibit completely the transportation service by federally permitted motor carriers of "property", although local government was permitted to enact reasonable health and safety regulations.23 A federal trial court in Portland, OR, found that this new act of Congress preempted an Oregon county's franchise system where the county barred the competitive collection service by a non-franchisee for the collection of material that was recycled, in fact.24 The trial court reasoned that material that is in fact recycled is property as that term is used in the federal law and that Congress properly exercised its power to preempt restrictive local legislation affecting federally permitted motor carriers.25 The local government has appealed this decision to the United States Circuit Court of Appeals for the Ninth Circuit where the case is now pending.26 The Ninth Circuit will be confronted with the question of what is "solid waste" as opposed to "recyclable" for the purpose of determining whether or not "property" is being collected by the non-franchisee. The Court might choose a bright line of whether the material is recycled in fact or not as opposed to the California Supreme Court's bright line of whether the material is collected for a fee or not.

The Ninth Circuit decision might be appealed to the United States Supreme Court. It may be possible to employ other federal laws to craft a pre-emption argument. RCRA's amendment to the Solid Waste Disposal Act is not preemptive since it specifically delegates waste disposal issues to the states.27 There is a split amongst the courts as to whether this Act regulates recyclables.28

CONSTITUTIONAL LAW

At least two clauses in the United States Constitution impact flow control legislation, the Commerce Clause29 and the Substantive Due Process Clause.30 A. The Commerce Clause The United States Constitution grants Congress the exclusive power to enact laws affecting interstate commerce -- one of the cornerstones of America as a federalist state. Even where Congress has not adopted a law, a state may not adopt laws significantly affecting interstate commerce.31 The United States Supreme Court stated the guiding principle as:32 "Our system, fostered by the Commerce Clause, is that every farmer and every craftsman shall be encouraged to produce by the certainty that he will have free access to every market in the nation, that no home embargoes will withhold his exports, and no foreign state will by customs, duties, or regulations, exclude them. Likewise, every consumer may look to the free competition from every producing area in the Nation to protect him from exploitation by any. Such was the vision of the Founders; such has been the doctrine of this Court which has given it reality." The United States Supreme Court has consistently found that "waste", even "hazardous waste", is an article of commerce enjoying constitutional protection against impairing state legislation.33

While most of the Commerce Clause cases have involved limits on the exportation or importation of waste and local regulation commanding that discarded material be disposed of at particular facilities,34 exclusive franchising -- regulation commanding that all discarded material be collected by one entity is just as suspect constitutionally where the local regulation substantially impairs interstate commerce. In fact, even impairment of intrastate commerce can be constitutionally proscribed.35 Likewise, material that is recycled is a commodity the same as eggs, gold, textiles, etc. and should enjoy equal, if not greater, constitutional protection than waste. These issues are also raised in the pending Ninth Circuit case mentioned earlier.

If a local regulation discriminates against interstate commerce either on its face or in practice, a court will find it unconstitutional unless the local government demonstrates under rigorous scrutiny that it has no other means to advance a legitimate local interest.36 Local regulation that burdens interstate transactions only incidentally are unconstitutional only if the local ordinance imposes a burden upon commerce which is clearly excessive in relation to the putative local benefits.37 On one occasion the United States Supreme Court held that a local legislative aim to reduce waste disposal costs was no excuse for impairing interstate commerce.38 A violation of the Commerce Clause is actionable, among other theories, under the Federal Civil Rights Act, which carries remedies of punitive damages, attorneys' fees and actual damages.39 B. Substantive Due Process Clause Both the United States and California Constitutions forbid "arbitrary and capricious" exercise of local government's regulatory power.40 Like the Commerce Clause, courts have used a two prong approach to analyze claims of excessive regulatory power.

If the regulatory power impairs upon a "protected" activity (e.g. free speech) then the local government must demonstrate under rigorous scrutiny that it cannot achieve a legitimate public purpose any other way.41 Conversely, where the activity impacted by the legislation is not "protected" the local government's regulatory exercise must be "rational".42 In practical terms, unless the activity is "protected", courts almost always uphold local government's regulatory exercise. There is California authority that the exercise of a lawful business activity is a "protected" activity.43 Under this view, a recycler may argue that it is engaged in a lawful business activity and therefore cannot be legislated out of existence by local government absent a compelling public purpose and no other means to achieve it. In a recycling industry context, this has not yet been presented to a Court of Appeal in California.

CONCLUSION

The recycling industry perspective on flow control generally is: Garbage haulers should be compensated fairly for the waste collection service they provide. As a public service, the cost should be assessed to and subsidized by the users, the ratepayers who generate waste and don't recycle. If the actual cost of providing the service is higher to the garbage hauler because it cannot collect (and profit from) recyclables, the generators of waste should absorb this cost. If the particular service area is remote, scattered, or distant from a disposal facility or transfer station, again this is a cost which either is absorbed by the ratepayers or results in a competitive bid process whereby lower overhead garbage haulers assume responsibility for the remote service area. In other words, a service area with 2,000 citizens should not be forced to absorb the cost of maintaining a hundred packer truck fleet of a national garbage company C the service provider must be to scale of the service area. With legislative mandates for source reduction and recycling, discards that are marketable should be handled as any valuable commodity in free enterprise. If there is any mishandling, local governments have unquestioned power to regulate, short of outright ban, as health and safety warrants. .

1. California Public Resources Code '40000 et seq. 2. Public Resources Code '40001 3. Public Resources Code '40059(a)(2) 4. id 5. Public Resources Code '40191 6. Waste Management of the Desert, Inc. v. Palm Springs Recycling Center, 7 Cal. 4th 478 (1994) 7. op. p. 486-88 8. id 9. id 10. id 11. id 12. id 13. City of San Marcos v. Coast Waste Management, Inc., 47 Cal. App. 4th 320 (1996) 14. Petition for Review in Coast Waste Management denied on *. 15. 14 Cal. Code Regs. ''15002(k)(2), 15063, 15365; No Oil, Inc. v. City of Los Angeles, 13 Cal. 3d 68 (1974) 16. Public Resources Code '40052-40056 17. 14 Cal. Code Regs. '15002 19. Cal. Const. Art. XIII A '4 and XIII C&D; Government Code '53720 et seq.; Santa Clara County Local Trans. Authority v. Guardino, 11 Cal. 4th 220 (1995) 20. City of Dublin v. County of Alameda, 14 Cal. App. 4th 264 (1993) 21. op. p. * 22. See for example SSC Corp. v. Town of Smithtown, 66 F. 3d 502, 509 (2 Cir. 1995) 23. 49 U.S.C. '14501(c)(1) 24. Woodfeathers, Inc. v. Washington County, Oregon, Docket no. *. Judgment filed *, p. *. 25. op. p. * 26. Docket nos. 97-35557 and 97-35598 27. 42 U.S.C. '6901 28. Compare U.S. v. Wedzeb Ent., 844 F. Supp. 1328 (S.D. Ind. 1994) and American Mining Congress v. U.S.E.P.A., 824 F.2d 1177 (D.C. Cir. 1987) with U.S. v. ILCO, Inc., 996 F.2d 1126 (11 Cir. 1993) and Owen Electric Shell Co. of S. Carolina v. Browner, 37 F. 3d 146 (4 Cir. 1994) 29. U.S. Const. Art. I, '8, cl. 3 30. U.S. Const., 5th and 14th Amendments, Cal. Const. Art. I, ''7, 15 31. Oregon Waste Systems v. Dept. of Environmental Quality, 511 U.S. 93 (1994) 32. H. P. Hood & Sons, Inc. v. DuMond, 336 U.S. 525 (1949) 33. Fort Gratiot Sanitary Landfill, Inc. v. Michigan Dept. of Natural Resources, 504 U.S. 353 (1992) and Chemical Waste Management v. Templet, 967 F.2d 1058 (5 Cir. 1992) cert. den. 506 U.S. 1080 34. i.e. C & A Carbone v. Town of Clarkstown, 114 S. Ct. 1677 (1994) 35. Ben Oerhlein Son & Daughter, Inc. v. Hennepin Co., 115 F. 3d 1372 (8 Cir. 1997) 36. Carbone, op. at p. 392 37. Pike v. Brice Church, Inc., 397 U.S. 137 (1970) 38. City of Philadelphia v. New Jersey, 437 U.S. 617 (1978) 39. 42 U.S.C. '1983; Dennis v. Higgins, 498 U.S. 439 (1991) 40. Goldblatt v. Town of Hempstead, 369 U.S. 590 (1962); Hale v. Morgan, 22 Cal. 3d 388 (1978) 41. People ex rel. Younger v. Dorado, 96 Cal. App. 3d 403 (1979) 42. id 43. id