City Can Limit Landfill Customer List

A municipality that owns and operates a landfill may ban the disposal of non-local waste without violating the constitutional or contract rights of a hauler that seeks unrestricted access to the facility. [Red River Service Corp. v. City of Minot, N.D., No. 97-2979, 8th Cir., June 10, 1998.]

The city of Minot owns and operates a municipal landfill. Over a period of several years, city officials studied and discussed the nature, volume and sources of municipal solid waste entering the landfill. The handling of such waste, particularly putrescible matter and yard waste, was becoming more and more costly as it required leachate collection and groundwater monitoring systems.

In 1996, the city council decided to extend the useful life of the facility by limiting disposal to solid waste generated within the city limits and waste delivered by certain non-resident haulers that benefited from a grandfather clause under the new policy.

Consequently, the landfill refused to accept about 5,000 tons of municipal solid waste that Red River Service Corp. ("Red River"), an Oklahoma-based waste hauling company, collected from Minot Air Force Base (MAFB) even though "ample room" for such waste existed. The city, however, allowed Red River and other haulers to dump construction and demolition debris from MAFB and elsewhere outside the city boundaries.

The city's decision not to accept waste from MAFB came as a shock to Red River, which recently had won a five-year contract from MAFB to collect and haul the base's municipal solid waste. The company had sought the contract with the understanding that the city landfill would accept the waste. In fact, Red River claimed that it bid on the MAFB contract only after it had received quotes from the city on tipping fees and written assurances from the public works director that Red River could use the landfill.

Red River filed suit against the city in federal district court, seeking an injunction, damages and attorney's fees. The city responded with a motion for summary judgment. Following a ruling in favor of the city, Red River appealed.

A three-judge panel of the U.S. Court of Appeals for the Sixth Circuit affirmed the lower court's decision, finding that the city was a "market participant" rather than a "market regulator." The Commerce Clause of the U.S. Constitution prohibits state and local regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors. However, when a government authority acts as a "market participant," its conduct is outside the reach of the Commerce Clause.

Under various rulings by the U.S. Supreme Court, when a local government acts just like a private sector entrepreneur, it may pursue its own economic interests by choosing its customers without regard to whether its choices discriminate against out-of-state businesses or favor its own citizens.

"Here, Minot has chosen, in an effort to prolong the useful life of its landfill, to limit those who can dispose of municipal solid waste in its landfill," said the appeals court opinion. "Significantly, Minot has not attempted to regulate the flow of waste beyond its own market nor to require that all waste generated in the Minot market be deposited in the Minot landfill."

The appellate panel acknowledged that the city's decision would cause "serious economic consequences" for Red River, but added: "Minot is not obligated, however, to vouchsafe Red River's economic health. [The city] has the freedom to choose its trading partners without regard to Red River's contractual obligations to MAFB."

Red River also argued that the city's refusal to accept MAFB waste violated the company's equal protection rights under the U.S. Constitution. However, under the prevailing legal standard, Red River had to prove that the exclusion of non-local waste is wholly arbitrary and irrational, and lacked any conceivable legitimacy. As the appeals court saw it, the company failed to produce the necessary evidence.

Finally, Red River claimed that the city had breached an oral contract with the company for delivery of MAFB solid waste at the Minot landfill. The agreement allegedly was created when the company obtained quotes from the city on tipping fees at the landfill. Unpersuaded, the appeals court agreed with the trial judge that such a contract was void under a long-standing legal principle that invalidates any oral contract that cannot be performed within a year.

"Any contract between Red River and the city obviously could not be performed in a year because it would be coterminus with the five-year contract between Red River and MAFB," the court observed.