Wrong on the Money

DURING THE WATERGATE SCANDAL, an FBI official named Mark Felt, a.k.a. “Deep Throat,” advised investigative reporters to “follow the money.”

For Southern Waste Systems (SWS), a Lantana, Fla.-based construction and demolition (C&D) debris handler, targeting the money trail seemed like a sure-fire way to undo the awarding of a waste collection contract to a rival company. Although SWS initially got the result it was looking for, the company came up empty-handed in the end.

After deciding that it wanted comprehensive waste collection services from a single contractor, the city of Delray Beach, Fla., advertised for proposals. The RFP announced that the successful bidder would have exclusive rights to provide residential waste and recycling services as well as commercial waste collection.

Unable to offer the complete service package, SWS did not submit a bid. Five waste companies, both local and out-of-state, submitted proposals. Following a public hearing, the city awarded the contract to the low-bidder — Little Rock, Ark.-based BFI Waste Systems of North America (BFI) — and adopted an ordinance codifying the agreement. Under the contract, the city sets the rates for waste collection, and BFI directly bills and collects payment from customers, remitting a five percent franchise fee to the city.

Sometime later, the city issued a citation to an SWS customer for violating the ordinance by continuing to receive C&D removal services from an unauthorized provider. Thereupon, SWS filed suit against the city and BFI in federal district court, alleging, among other things, that the ordinance and the exclusive franchise violated the Commerce Clause of the U.S. Constitution. The lawsuit sought to block enforcement of the ordinance for C&D waste. Waste Management (WM) of Florida was drawn into the suit after it bought some BFI assets, including its rights and obligations in Delray Beach.

U.S. District Judge Kenneth L. Ryskamp ruled in favor of SWS, finding that the exclusive franchise agreement discriminated against interstate commerce. He enjoined the city from enforcing the C&D portions of the agreement and ordinance.

On appeal, the U.S. Court of Appeals for the 11th Circuit, whose rulings govern activities in Alabama, Georgia and Florida, reversed the judgment of the lower court and set aside the injunction. The appellate panel found no discrimination in the award of the city's contract with BFI/WM. Citing appellate decisions in other circuits, the court stated: “The Commerce Clause … does not forbid exclusive franchise agreements whereby a city selects one waste hauler to provide basic waste collection to its citizens, so long as the bidding process is open to all, and there is no requirement that local interests be favored.”

SWS particularly stressed that the direct billing and fee-rebate arrangement amounts to an unconstitutional “forced business transaction” between residents and BFI/WM, and that the city was obliged to eliminate the market by using public funds to pay for waste collection. However, the appeals court said the key issue is not the billing method, but whether the selection process favored local interests — which the court said it did not.

[Southern Waste Systems, LLC v. City of Delray Beach, 420 F.3d 1288 (11th Cir. 2005)]

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.