National Solid Wastes Management Brief

Case 3:11-cv-03200-O Document 6
Filed 11/28/11
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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION
NATIONAL SOLID WASTES MANAGEMENT ASSOCIATION, BLUEBONNET WASTE CONTROL, INC., IESI TX CORPORATION, REPUBLIC WASTE SERVICES OF TEXAS, LTD, ALLIED WASTE SYSTEM, INC., CAMELOT LANDFILL TX, LP, WASTE MANAGEMENT OF TEXAS, INC., WM RECYCLE AMERICA, LLC, AND BUSINESSES AGAINST FLOW CONTROL, Plaintiffs, v. THE CITY OF DALLAS, MIKE RAWLINGS, PAULINE MEDRANO, TENNELL ATKINS, DWAINE CARAWAY, MONICA ALONZO, CAROLYN DAVIS, JERRY ALLEN, LINDA KOOP, AND ANGELA HUNT, Defendants.
CIVIL ACTION NO. 3:11-cv-03200-O
PLAINTIFFS BRIEF IN SUPPORT OF THEIR APPLICATION FOR A PRELIMINARY INJUNCTION
Filed 11/28/11
TABLE OF CONTENTS
Table of Authorities ....................................................................................................................iii Introduction .................................................................................................................................. 1 Facts................................................................................................................................................ 2 Arguments and Authorities ....................................................................................................... 7 A. There is a substantial likelihood that the plaintiffs will prevail on the merits of their claims..................................................................................................... 7 1. The Ordinance impairs the plaintiffs franchises in violation of the Contracts Clause of the federal constitution. .................................................... 7 The Ordinance is an unconstitutional exercise of the police power because it restricts the franchise rights of the plaintiffs to serve the Citys financial interests. ........................................................................................ 11 Because the Ordinance has as its primary purpose raising revenue, its enactment was not an exercise of the police power............................................. 13 The Ordinance violates Section 2 of the Sherman Act.............................................. 14 a. The Ordinance will allow the City to monopolize the market for processing recyclable materials in the City. ..................................................... 14 The Citys unlawful anti-competitive conduct is not excused by the state-action exemption................................................................................... 16 The definition of solid waste used in the Ordinance is in conflict with state law and is unenforceable. ........................................................................... 18 a. With unmistakable clarity, the Texas Legislature has signaled its intent to comprehensively regulate solid waste and recycling activities. ......................... 18 The definition of solid waste used in the Ordinance directly conflicts with the SWDA. ........................................................................... 18 The Ordinance relies on a critical termrecyclable materialthe meaning of which is improperly left to the complete discretion of a single city employee. ... 20
2.
3.
4.
b.
5.
b.
6.
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7.
The Ordinance fails to define a critical termrecyclable material making it unconstitutionally vague. ....................................................................... 21 The Ordinance violates the City Charter because it was passed without providing Franchisees notice and a hearing. ............................................................. 22 There is a substantial threat of irreparable injury if a preliminary injunction is not issued...................................................................................................... 23 The threatened injury if the preliminary injunction is not issued outweighs any harm that will result if the injunction is granted................................ 24
8.
B.
C.
D. Granting a preliminary injunction will serve the public interest................................ 25 Conclusion .................................................................................................................................. 25
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TABLE OF AUTHORITIES FEDERAL CASES Advocates for Arts-Based Education Corp. v. Orleans Parish Sch. Board, No. 09-6607, 2010 WL 375223 (E.D. La. 2010, Jan. 26, 2010).....................8 Allied Structural Steel Co. v. Spannaus, 438 U.S. 234 (1978).............................................................................................................7 America Federation of State, Cnty., & Municipal Emps. v. City of Benton, 513 F.3d 874 (8th Cir. 2008) ..............................................................................................8 City of Chicago v. Morales, 527 U.S. 41 (1999).............................................................................................................21 City of Lafayette v. La. Power & Light Co., 435 U.S. 389 (1978)...........................................................................................................16 Connally v. General Construction Co., 269 U.S. 385 (1926)...........................................................................................................21 Deerfield Medical Ctr. v. City of Deerfield Beach, 661 F.2d 328 (5th Cir. 1981) ............................................................................................23 Doe v. Duncanville Independent Sch. District, 994 F.2d 160 (5th Cir. 1993) ............................................................................................23 Doran v. Salem Inn, Inc., 422 U.S. 922 (1975)...........................................................................................................24 Eastman Kodak Co. v. Collins Ink Corp., No. 11-CV-6513L, 2011 WL 5304059 (W.D.N.Y. 2011) ...............................................24 Elrod v. Burns, 427 U.S. 347 (1976)...........................................................................................................23 Fla. Businessmen for Free Enterprise v. City of Hollywood, 648 F.2d 956 (5th Cir. 1981) ................................................................................23, 24, 25 Kolender v. Lawson, 461 U.S. 352 (1983)...........................................................................................................21
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Lipscomb v. Columbus Municipal Separate Sch. District, 269 F.3d 494 (5th Cir. 2001) ..............................................................................................8 Roark & Hardee LP v. City of Austin, 522 F.3d 533 (5th Cir. 2008) ............................................................................................24 Six Kingdoms Enterprises, LLC v. City of El Paso, No. EP-10-CV-485-KC, 2011 WL 65864 (W.D. Tex. Jan. 10, 2011) ........................ 9-10 Stearns Airport Equipment Co. v. FMC Corp., 170 F.3d 518 (5th Cir. 1999) ............................................................................................15 Surgical Care Ctr. of Hammond, L.C. v. Hospital Serv. District Number 1 of Tangipahoa Parish, 171 F.3d 231 (5th Cir. 1999) ............................................................................................16 Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985).............................................................................................................16 U.S. Trust Co. of N.Y. v. New Jersey, 431 U.S. 1 (1977).......................................................................................................7, 9, 11 United Healthcare Insurance Co. v. Davis, 602 F.3d 618 (5th Cir. 2010) ......................................................................................7, 8, 9 United States v. Carlton, 512 U.S. 26 (1994)...............................................................................................................9 United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377 (1956)...........................................................................................................15 United States v. Grinnell Corp., 384 U.S. 563 (1966)...........................................................................................................15 University of Haw. Profl Assembly v. Cayetano, 183 F.3d 1096 (9th Cir. 1999) ............................................................................................8 Yick Wo v. Hopkins, 118 U.S. 356 (1886)...........................................................................................................21 STATE CASES Brazosport Sav. & Loan Association v. America Sav. & Loan Association, 342 S.W.2d 747 (Tex. 1961)...............................................................................................8
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City of Beaumont v. Fall, 291 S.W. 202 (Tex. 1927) .................................................................................................18 City of Brookside Village v. Comeau, 633 S.W.2d 790 (Tex. 1982).............................................................................................20 City of Jacksonville v. General Telegraph Co of the Southwest, 538 S.W.2d 253 (Tex. Civ. App.-Tyler 1976, writ refd n.r.e.) .....................................8 City of Wichita Falls v. Abell, 566 S.W.2d 336 (Tex. 1978).............................................................................................19 Cnty. of Harris v. Shepperd, 291 S.W.2d 721 (Tex. 1956).............................................................................................13 Coffee City v. Thompson, 535 S.W.2d 758 (Tex. Civ. App.Tyler 1976, writ refd n.r.e.).................................20 Crossman v. City of Galveston, 247 S.W. 810 (Tex. 1923) .................................................................................................20 Dallas Merch.s & Concessionaires Association v. City of Dallas, 852 S.W.2d 489 (Tex. 1993).............................................................................................18 Foster v. City of Waco, 255 S.W. 1104 (Tex. 1923) .........................................................................................22, 23 Gates v. City of Dallas, 704 S.W.2d 737 (Tex. 1986).............................................................................................14 Hurt v. Cooper, 110 S.W.2d 896 (Tex. 1937).............................................................................................13 Lowenberg v. City of Dallas, 261 S.W.3d 54 (Tex. 2008)...............................................................................................13 Spann v. City of Dallas, 235 S.W. 513 (Tex. 1921) ...........................................................................................20, 21 Tex. Power & Light Co. v. City of Garland, 431 S.W.2d 511 (Tex. 1968)....................................................................................... 11-12 Tex. River Barges v. City of San Antonio, 21 S.W.3d 347 (Tex. App.San Antonio 2000, pet. denied) .....................................22
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Willman v. City of Corsicana, 213 S.W.2d 155 (Tex. Civ. App.Waco 1948), affd, 216 S.W.2d 175 (Tex. 1949) ..................................................................................................................................22 TEXAS CONSTITUTION Tex. Const. art. VIII, 3........................................................................................................13 Tex. Const. art. II, 5 ............................................................................................................14 STATE STATUTES Tex. Health & Safety Code Ann. 361.002(a) ...................................................................18 Tex. Health & Safety Code Ann. 361.011(a)-(b).............................................................18 Tex. Health & Safety Code Ann. 361.022(b)...................................................................18 Tex. Health & Safety Code Ann. 361.022(b)(2) ..............................................................19 Tex. Health & Safety Code Ann. 361.421(5) .....................................................................6 Tex. Health & Safety Code Ann. 363.003(9) ...................................................................17 Tex. Health & Safety Code Ann. 363.006(a) ...................................................................17 Tex. Health & Safety Code Ann. 363.006(b)...................................................................17 Tex. Health & Safety Code Ann. 363.111(a) ...................................................................16 Tex. Health & Safety Code Ann. 363.227........................................................................17 STATE REGULATIONS 30 Tex. Admin. Code 328.2(3) ............................................................................................6 30 Tex. Admin. Code 328.4(d)............................................................................................6 30 Tex. Admin. Code 328.4(a) ..........................................................................................17 30 Tex. Admin. Code 330.3(122) ........................................................................................6
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INTRODUCTION For decades, franchised waste haulers in the City of Dallas (the City) had the contractually guaranteed freedom to choose among authorized facilities to dispose of commercial solid waste and recyclable material they collected in the City based on price, proximity, and quality of service. Haulers built businesses that compete for customers based on that contractual right. Purporting to eliminate those contractual rights, the City enacted, on September 28, 2011, by a 9-6 vote a controversial flow control ordinance (the Ordinance) that criminalizes all but one choice for disposal of solid waste and effectively outlaws recycling. Now all solid wasteswhich the City defines to include recyclablesgenerated, found, or located within the City must be sent to a landfill owned and operated by the City. The Ordinance does not identify, nor was it intended to address, any current or reasonably foreseeable problem with the collection, transportation, and disposal of solid wastes or the management of recyclables generated or found in the City. The sole purpose of the Ordinance is to divert revenue to the City by creating a monopoly in Dallas for solid waste disposal and recycling. That monopoly comes at the expense of franchisees who have invested heavily in reliance on their franchise rights and customers who will be paying more for solid waste services. The Ordinance violates the United States and Texas Constitutions as well as federal antitrust laws, and is preempted by state law. Its enforcement should be enjoined.1
Plaintiffs brief eight reasons why the Ordinance is invalid, more than would be typically presented to support an application for a preliminary injunction. Here any one of the arguments alone is sufficient to justify the requested injunction. Only the Citys rush to generate new revenue can explain the enactment of an ordinance with so many procedural and substantive defects. For example, the three procedural
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PLAINTIFFS BRIEF IN SUPPORT OF THEIR APPLICATION FOR A PRELIMINARY INJUNCTION 518713 000002 DALLAS 2809700.5
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FACTS The facts necessary for consideration of the plaintiffs application for preliminary injunction are in large part set out in their Complaint for Declaratory Judgment and Injunctive Relief. Those facts fall into two broad categoriesfacts establishing that the Ordinance is a money grab and facts demonstrating that the Ordinance improperly regulates recycling.2 Background Members of the National Solid Wastes Management Association, all but one of the named individual plaintiffs, and certain members of Businesses Against Flow Control (the Franchisees) hold franchises granted by the City to engage in solid waste collection services. All of the franchises have materially identical terms.3 All of the franchises were created in March 2007 with 20-year terms. All Franchisee plaintiffs have invested substantial sums in order to exercise their rights under their franchises. In exchange for a Franchisee paying to the City 4% of its gross receipts, the franchise grants the Franchisee the right to use the Citys streets to engage in solid waste collection services for apartments and businesses.4 The term solid waste
collection services is defined in the Dallas Code of Ordinances to include removing, transporting, and disposing.5 Franchisees thus have an absolute right to contract with commercial customers (apartments and businesses) located in the City to collect their
problems discussed are so glaring that only limited explanation is needed to demonstrate the plaintiffs likelihood of prevailing on the merits. 2 Plaintiffs intend to submit affidavits, deposition transcripts, and/or live testimony at the hearing to establish the facts relied upon in this brief and in the Complaint, most of which are beyond dispute. 3 See the franchise of one of the plaintiffs at Appendix (App) at 44-81. 4 Except for one brief period, the City has always itself directly provided solid waste disposal services meaning collection, transportation, and disposal of wastesto single-family residences in the City. 5 The Municipal Solid Wastes Chapter of the Dallas Code of Ordinances can be found at App. at 1-42.
PLAINTIFFS BRIEF IN SUPPORT OF THEIR APPLICATION FOR A PRELIMINARY INJUNCTION 518713 000002 DALLAS 2809700.5 Page 2 of 35
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wastes and recyclable materials and send them to an appropriate facility. Relying on those rights, the Franchisees have built businesses that offer combinations of collection, transportation, disposal, and recycling services, all in a free and open marketplace. The freedom to choose among competing disposal sites and recycling facilitiesincluding their ownhas been integral to the Franchisees ability to offer lower prices to apartments and businesses than otherwise possible. The Franchisees right to select among disposal sites and recycling facilities has also shaped the revenue and profit expectations on which they based their business plans. Solid waste collection services for apartments and businesses in the City, which include a significant recycling component, have been provided by private companies in the manner just described for decades. The City has never before tried to dictate where to send commercial waste or recyclable material generated or found in the City. The City had been content to let the free market and state regulations control. No complaints have been made about those arrangements. In short, at the time the current franchises were approved, the Franchisees had a reasonable investment-backed expectation that they would be able to send commercial waste and recyclable material wherever they chose during the term of the franchise. Money Grab Facts So why the change? Immediately before voting on the Ordinance, City Council members candidly identified capturing money leaving the City as the reason to pass it.6
A transcript of these statements can be found in the App. at 82-102.

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Given the last word before calling the vote, Mayor Rawlings dismissed any other considerations and identified the single purpose at stake: Mayor Rawlings made it clear: This is a business revenue issue, and corporations outside of Dallas are making money off of [it]. According to Mayor Rawlings, the flow control ordinance was about one thing - who deserves that revenue. Should it be the owners of the landfills outside the city, or should it be the taxpayers. Thats the fundamental issue. Im going to vote for the taxpayers. I believe we - - everybody in this room that lives in Dallas, if you have a business in Dallas, deserves that and not a private enterprise. Other Council Members had sounded the same theme: Council Member Allen: Trash is value. Its a valuable commodity. Its a valuable asset to anyone. And its big business. Council Member Kadane: We need the funds and I think its a good way to get it. And I think we can get some of our funds through this. Council Member Caraway: Its [trash] going somewhere if not at this particular location, it will go somewhere. Now the somewhere is who will receive the benefit - - us or someone else? Opportunity come along, sometimes we got to grin and bear it. This purpose had long been recognized. A November 8, 2010, email between Department of Sanitation employees Rick White and Ron Smith agreed that the Ordinance is about revenue: We can disguise and misdirect the issue all we want, but the reality is the 6th bullet. Increase revenue to Sanitation Services. In a city that used to take pride in being business friendly this might not fly as the primary reason to implement flow control. Most recently, Mayor Rawlings had this to say about the Ordinance at a November 21, 2011, community forum held at Cedar Crest Golf Course as reported in the Dallas Observer:
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When flow control came up next, Rawlings defended that decision too. He called McCommas Bluff the best landfill in the state of Texas, adding, Its world-class. Its a beautiful place. And he wants it to make as much money for the city as possible, he said. Im a Dallas person. I dont like somebody making money off of us. Ive been accused of caring too much about money, but I want that money for Dallas. He promised too that flow control would act as a checkbook for economic development in [South Dallas], including those grocery stores. We need money to spur that economic growth, he said. In the Citys view the Ordinance will generate $15,000,000 to $18,000,000 annually in new revenue. By resolution adopted the same day as the Ordinance, the City has already committed up to $1,000,000 of that total for unspecified economic development projects in the southern section of the City. Recycling Facts The Franchisees currently collect thousands of tons per year of recyclables from their Dallas customers and deliver the recyclables for processing both within and outside the City. The Ordinance would criminalize that recycling unless a franchisee can prove that it is hauling solely recyclable materials. Given that incidental waste is present in virtually all recyclable loads, the Ordinance will shut down commercial recycling in the City. This result flows from two facts. First, the Citys Director of Sanitation has never defined the term recyclable materials as required under the sanitation section 18-2(39) of the Dallas Code of Ordinances.7 Without a definition, the Franchisees have no way of knowing whether or in what circumstances they could ever gain protection under the solely recyclable materials defense. Even if a definition of recyclable materials
Because the City has never previously restricted where recyclable materials can be sent, the absence of a definition has been unimportant.
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existed, the fact that the defense only applies to wastes that are solely recyclable materials will effectively eliminate recycling from apartments and businesses in the City. Currently, the plaintiffs collection, transportation, and processing of recyclable material is governed by state law that makes clear that recyclable materials are not a solid waste.8 Additionally, state law recognizes that virtually no recycling stream will contain only recyclable materials. Therefore, recyclable materials that contain as much as 10% non-recyclable materials by volume or weight remain recyclable materials and are not a solid waste.9 The City has made clear that contrary to state law it intends to treat any recyclable material that contains even a trace amount of non-recyclable material as solid waste that must be sent to the Citys landfill. As stated by the Citys Director of Sanitation at a meeting held on Monday, November 14, 2011, to discuss with franchisees implementation of the Ordinance: Any trucks that are picking up loads that have less than solely recyclable material on it [which could include one banana peel] should go to the landfill. The Director of Sanitation concededat the same meetingthat the effect of that interpretation will be the elimination of commercial recycling in the City, because as a practical matter it is impossible to remove all non-recyclable material from recyclable materials and the City has no recycling operations currently or in the foreseeable future.
Under the Texas Solid Waste Disposal Act, if a material is recyclable it is not solid waste. Tex. Health & Safety Code 361.421(5) (Recyclable material is not solid waste unless it is a hazardous waste); 30 Tex. Admin. Code 330.3(122) (Recyclable material is not a solid waste) 9 30 Tex. Admin. Code 328.2(3), 328.4(d).
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Compliance with the Ordinance will require material that is being delivered to recycling facilities today to be sent starting January 2, 2012, to the Citys landfill. ARGUMENTS AND AUTHORITIES A. There is a substantial likelihood that the plaintiffs will prevail on the merits of their claims. 1. The Ordinance impairs the plaintiffs franchises in violation of the Contracts Clause of the federal constitution.
The Ordinance strips the Franchisees of their vital contractual right to determine where to dispose of solid waste and process recyclable materials. Article I, Section 10 of the United States Constitution prohibits state laws (including municipal ordinances) that impair the obligation of contracts without sufficient justification. When the State or city impairs a contract that is between a private party and the governmental entity, courts must give heightened scrutiny to the asserted public purpose. U.S. Trust Co. of N.Y. v. New Jersey, 431 U.S. 1, 2526 (1977). The Supreme Court has made it clear, in other words, that the typical deference to a legislative assessment of reasonableness and necessity is not appropriate when the governmental entitys self-interest is at stake. Id. Plaintiffs Contracts Clause claim has three elements. First, does the Ordinance substantially impair the rights of the Franchises? Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 260 (1978); United Healthcare Ins. Co. v. Davis, 602 F.3d 618, 627-628 (5th Cir. 2010). Second, taking a hard look at the justification advanced by the City, does the Ordinance serve an asserted significant and legitimate public purpose? United
Healthcare, 602 F.3d at 627-28. Finally, does the Ordinance serve the asserted public purpose in a manner that is both reasonable and necessary? Id. If impairment exists
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and either condition two or three is not met, the Ordinance is unconstitutional.10 Plaintiffs have the burden on impairment, but the City has the burden to show elements two and three are met. Id.11 The Ordinance indisputably impairs the plaintiffs rights under their franchises, which contracts are considered vested rights. Brazosport Sav. & Loan Assn v. Am. Sav. & Loan Assn, 342 S.W.2d 747, 750 (Tex. 1961); City of Jacksonville v. Gen. Tel. Co of the Sw., 538 S.W.2d 253, 255 (Tex. Civ. App.Tyler 1976, writ refd n.r.e.). Unconstitutional impairment does not require total destruction of contract expectations. United
Healthcare, 602 F.3d at 628. The court must consider how specific terms are affected and for how long. Lipscomb v. Columbus Mun. Separate Sch. Dist., 269 F.3d 494, 504 (5th Cir. 2001). Here, by effectively rescinding a crucial term of the franchisenamely the right of the franchisee to choose where to send waste or recyclables on the basis of price, location, and servicethe Ordinance extinguishes a right on which the plaintiffs justifiably relied in building and operating their businesses. Constrained by a web of contractual and other obligations to their own customers and employees, the plaintiffs now face significant harm to their businesses because they can no longer choose where to send solid waste or recyclable materials. This harm is even more acute for those Franchisees who operate landfills and recycling facilities, either directly or through
Courts have not been reluctant to enjoin statutes and ordinances when such a showing is made. See, e.g., Am. Fedn of State, Cnty., & Mun. Emps. v. City of Benton, 513 F.3d 874, 882 (8th Cir. 2008) (affirming injunction against citys attempt to terminate contractually guaranteed health benefits to City employees); Univ. of Haw. Profl Assembly v. Cayetano, 183 F.3d 1096, 1100 (9th Cir. 1999) (affirming injunction of legislation that would have authorized lags in pay intervals to university employees); Advocates for ArtsBased Educ. Corp. v. Orleans Parish Sch. Bd. No. 09-6607, 2010 WL 375223, at *4 (E.D. La. 2010, Jan. 26, 2010) (implementation of 2% administrative fee on charter school grant contract was substantial impairment). 11 In United Healthcare, the Fifth Circuit affirmed enjoining a statute requiring the state to contract with only state health maintenance organizations because it impaired existing contracts and did not remedy any social problems.
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affiliates. Moreover, the Ordinance will not have merely a temporary effect. It will bind Franchisees for a long period if not enjoinedthe remaining 16 years of their franchises and beyond. The impairment imposed by the Ordinance is unquestionably substantial. The Ordinance does not advance a significant and legitimate public purpose. Justifications for contractual impairments that the Supreme Court has found to be acceptable have been exercises of the states sovereign authority to protect its citizens and prevent abuses of its contracts. justification is present here. United Healthcare, 602 F.3d at 631. No such
Rather, as described in the presentation of facts, the
Ordinances only actual goal is to generate revenue for the City. Revenue raising in the context of the taxing power can certainly be a legitimate legislative purpose. United States v. Carlton, 512 U.S. 26, 40 (1994) (Scalia, J., concurring in judgment). But it can never be a significant and legitimate reason for a law such as the Ordinance, purportedly adopted under the police power, which substantially impairs a contract between the lawmaking governmental unit and a private party. If it were, in the words of the Supreme Court the Contracts Clause would provide no protection at all. Trust Co. of N.Y., 431 U.S. at 26. The Ordinance having no legitimate and significant purpose, the Court need not reach the final element of the plaintiffs contract-impairment claim. But if the Court were to take the required hard look at the non-revenue reasons advanced by the City for the Ordinance, it could only conclude that creating a waste-disposal monopoly is neither reasonable nor necessary to achieve any of the Citys stated objectives. Six
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Kingdoms Enters., LLC v. City of El Paso, No. EP-10-CV-485-KC, 2011 WL 65864, at *8 (W.D. Tex. Jan. 10, 2011) (court found requirements of City ordinance were neither necessary nor reasonable to achieve the purpose of the ordinanceeliminating animal euthanizationbased on the evidence presented). The Ordinances prefatory language identifies five reasons in addition to revenue-raising for its adoption. Each one is counterfactual and even pretextual. Three of the reasons(1) insuring safe and proper handling of solid waste; (2) providing environmentally sound, cost-efficient solid waste management; and (3) deterring illegal dumping of solid wasteare already addressed by existing state regulations.12 Given the cradle-to-grave regulatory system governing the collection, transportation, and disposal of solid wastes generated in the City, requiring that all wastes go to the City landfill instead of to other landfills subject to the same regulatory requirements cannot conceivably be justified by reference to regulatory concerns. Indeed, during the
Councils debate on the measure, no member identified any health or safety problems with the current system for commercial waste disposal. To the contrary, because the disposal fee charged at the Citys landfill and transfer station is higher than the fee charged at other nearby legally permitted landfills, the Ordinance will increase the total costs of disposal, thereby encouraging unsafe and environmentally damaging illegal dumping.
12
The regulations governing municipal solid waste are found in Chapter 330 of Title 30 of the Texas Administrative Code. Initial collection and transportation is governed by subchapter C, consolidation by subchapters A and E, landfills by subchapters B, D, F, H, I, J, K, M, and N, providing financial assurance to deal with the closure of landfills and any environmental problems they create by subchapters L and R of Chapter 37, reporting obligations by subchapter P, and control of air emissions by subchapter U.
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The City also claims in that prefatory language that the Ordinance will increase recycling of solid wastes. As plaintiffs demonstrate in their presentation of the facts, the Ordinance will actually materially decrease recycling because few, if any, loads of recyclable material contain solely recyclable material. The final non-revenue reason advanced by the City - facilitating data development - is just as counterfactual as the others. The City already receives at its landfill an enormous amount of waste generated or found in the City. No obvious reason exists why more wastes will generate better, as opposed to simply more, data. The Citys asserted non-revenue reasons for the Ordinance do not survive a glancing assessment, much less the hard look the City must overcome when it attempts to legislate away its own contractual commitments. Nor is there any evidence that the City considered options short of eviscerating franchise rights to advance its purported goals. Trust Co. of N.Y., 431 U.S. at 30-31. The Ordinance unconstitutionally impairs the franchises. 2. The Ordinance is an unconstitutional exercise of the police power because it restricts the franchise rights of the plaintiffs to serve the Citys financial interests.
The Ordinance also violates Article I, Section 19 of the Texas Constitution, commonly known as the due course of law provision, because the City adopted it to limit competition and for the Citys own financial gain. That is not a reasonable or legitimate exercise of the police power. Tex. Power & Light Co. v. City of Garland, 431 S.W.2d 511, 517 (Tex. 1968).
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In City of Garland, both the city and Texas Power & Light Company (TP&L) offered electrical service to city residents. Id. at 513. TP&L operated in the city under a 1915 franchise that did not limit where it could provide service. Id. In 1949, the city adopted an ordinance that required TP&L to obtain a permit before it could install infrastructure to expand service and established a number of permitting standards. Id. In 1965, TP&L sought authorization from the city to expand its infrastructure to supply electrical power to a 118-unit apartment complex under construction. Id. The city denied the request because it wanted its own electric utility to serve the area. Id. The Texas Supreme Court had little difficulty concluding that the 1949 ordinance was not a reasonable exercise of the police power. The Court found that the terms of the ordinance were instead aimed directly at the advancement of the Citys economic and proprietary interests, and have for their purpose the elimination of the Company as a competitor. Id. at 518. In words that speak directly to the Citys action here, the court admonished: Essential franchise rights cannot be taken under a pretense of regulation designed to gain a competitive advantage to the City acting in its proprietary capacity. The City has no right to barter with the police power. When the City authorized the extension of the franchise, it contractually submitted itself to economic competition. Conversely, the Company received rights protected by Article 1, 19 of the Texas Constitution. Id. at 518-19. Because the 1949 ordinance did not genuinely serve to protect public health, safety, morals or welfare, the alteration of the franchisees rights was forbidden. Id. at 518-20.
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The plaintiffs here are threatened with the same harms faced by TP&L in City of Garland. The Ordinance will eliminate the Franchisees as competitors in the market for the disposal of solid wastes and the processing of recyclables generated in the City. And the Citys purpose is, just as it was in City of Garland, to advance its own economic and proprietary interests, not to further public health, safety, or welfare. The City is seizing a business opportunitythe right to select and provide disposal and recycling servicesthat it previously granted the Franchisees, to their detriment and the detriment of other franchisees and their customers that receive lower-priced disposal and recycling services today. As discussed above, there is no other factually defensible reason for the Ordinance. Purporting to exercise the police power for competitive advantage and pecuniary gain to the detriment of a citys franchisees violates the due course of law provision of the Texas Constitution. 3. Because the Ordinance has as its primary purpose raising revenue, its enactment was not an exercise of the police power.
When the primary purpose of a municipal ordinance is raising revenue rather than regulating conduct for health, safety, and welfare reasons, the city is exercising its taxing power, not its police power. Lowenberg v. City of Dallas, 261 S.W.3d 54, 57-58 (Tex. 2008); Cnty. of Harris v. Shepperd, 291 S.W.2d 721, 723-24 (Tex. 1956); Hurt v. Cooper, 110 S.W.2d 896, 899 (Tex. 1937). An ordinance that imposes a tax is lawful only if a general law authorizes it. See Shepperd, 291 S.W.2d at 723; TEX. CONST. art. VIII, 3. The Lowenberg case is particularly instructive. There, the City of Dallas, faced in 1995 with difficult economic conditions similar to current circumstances, adopted an ordinance requiring owners of commercial buildings to pay a fee to generate funds for
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fire-protection services.
Id. at 56.
The Texas Supreme Court recognized that the
ordinance advanced legitimate health, safety, and welfare concerns by facilitating collection of fire-safety information for a database used in fire-prevention efforts. Id. at 59. The court was also willing to assume that all money generated would be used only to enhance fire protection of commercial buildings. Id. at 58. The court nonetheless readily concluded that because the fee imposed by the ordinance would generate revenue greatly exceeding any regulatory costs, the ordinance actually was a forbidden tax: Though the City is a home rule municipal corporation with broad powers of self-government, Gates v. City of Dallas, 704 S.W.2d 737, 738 (Tex. 1986); TEX. CONST. art. II, 5, it cannot impose regulatory fees that are really taxes prohibited by the Constitution. Id. Here, as already demonstrated, the primary if not the only purpose of the Ordinance is revenue generation. And it is revenue that will be largely derived from the plaintiffs who generate solid waste in the City who will pay as a tax in the form of higher fees. It follows that enactment of the Ordinance was not an exercise of the police power but instead an attempt to impose taxes prohibited by the Constitution. 4. The Ordinance violates Section 2 of the Sherman Act. a. The Ordinance will allow the City to monopolize the market for processing recyclable materials in the City.
Certain plaintiffs operate recycling facilities that process recyclables from the City. The Ordinance will eliminate this business because it establishes the Citys landfill as the sole repository for all wastes, including recyclable materials, generated, found, or located in the City. Those plaintiffs must prove two elements to establish that the
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monopoly created by the Ordinance violates section 2 of the Sherman Act, 15 U.S.C. 2: (1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident. United States v. Grinnell Corp., 384 U.S. 563, 57071 (1966). If the Ordinance is allowed to take effect, the City will assume complete monopoly power over the market for processing recyclable materials generated in the City, which by the terms of the Ordinance is the relevant market. The City has
criminalized the delivery of recyclable materials generated in the City to privatelyowned companies. Monopoly power is the power to control prices or exclude competition. United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391 (1956). Under the Ordinance, competition in the relevant market, the City, is not only excluded, it is illegal. 13 The Citys acquisition of monopoly power is willful and not the product of successful competition. Illegal exclusionary conduct under section 2 is the creation or maintenance of monopoly by means other than the competition on the merits. Stearns Airport Equip. Co. v. FMC Corp., 170 F.3d 518, 522 (5th Cir. 1999). Through the
Ordinance, the City seeks to achieve complete monopoly power over the relevant market by outlawing competition. Such overt anti-competitive behavior is the essence of a Section 2 monopolization claim.
13
The Ordinances defense to prosecution for loads composed solely of recyclable materials does not ameliorate its anti-competitive effects. As noted previously, even source-separated loads of recyclable materials contain incidental amounts of solid waste.
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b.
The Citys unlawful anti-competitive conduct is not excused by the state-action exemption.
A municipality is bound by the requirements of the Sherman Act unless it can demonstrate that its anti-competitive behavior is authorized by the state government pursuant to state policy to displace competition with regulation or monopoly public service. City of Lafayette v. La. Power & Light Co., 435 U.S. 389, 412 (1978). A
municipality may claim this state action exemption from federal antitrust laws only if the state policy to displace competition is clearly articulated and affirmatively expressed, and the municipalitys anticompetitive actions are of a sort
contemplated by the policy. Town of Hallie v. City of Eau Claire, 471 U.S. 34, 44 (1985) (quoting Lafayette, 435 U.S. at 415). While a statute need not explicitly state an intent to displace competition, id. at 4344, an intent to insulate municipalities from Sherman Act liability must be fairly signaled. Surgical Care Ctr. of Hammond, L.C. v. Hosp. Serv. Dist. No. 1 of Tangipahoa Parish, 171 F.3d 231, 233 (5th Cir. 1999) (en banc). Far from clearly and affirmatively authorizing municipalities to monopolize the processing of recyclable materials generated within their territorial boundaries, the Texas Legislature has expressly excluded recyclable materials from statutes authorizing municipalities to regulate the disposal of solid waste. Municipalities have some
statutory authority over solid wastes (subject to constitutional and statutory constraints). They may adopt rules for regulating solid waste collection, handling, transportation, storage, processing, and disposal. Tex. Health & Safety Code 363.111(a). And they may choose to operate a solid waste management system. Id. 363.117.
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But the power of municipalities to regulate solid waste disposal does not extend to recyclable materials. Texas law makes clear that recyclable material is by definition not a solid waste. See supra note 8. Moreover, the same chapter of the Health and Safety Code that grants municipalities authority over solid waste expressly excludes recyclable materials from its coverage. Id. 363.006(b) (Materials that are separated or recovered from solid waste for reuse or recycling by the generator, by a private person under contract with the generator, or by a collector of solid waste or recovered materials are not subject to this chapter.) (emphasis supplied). And no solid waste permit is needed to process recyclable materials. See 30 Tex. Admin. Code 328.4(a). The Ordinance is thus unprotected by the state-action exemption. What is more, Texas law expressly recognizes the valuable role that private companies play in the States recycling strategy, finding that the government will benefit from cooperation with private business[es] that have acquired knowledge, expertise, and technology in the fields of . . . recycling, reuse, reclamation, and collection of materials. Tex. Health & Safety Code 363.003(9). Thus, the Legislature clarified that its laws governing municipal solid waste d[o] not prohibit or limit a person from extracting or using materials that the person generates or legally collects or acquires for recycling or resale. Id. 363.006(a). Certain plaintiffs regularly collect or acquire recyclable materials from their customers in the City and thus have the right under state law to take them where they want for recycling or resale. The City cannot legally create a monopoly that destroys that right.
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5.
The definition of solid waste used in the Ordinance is in conflict with state law and is unenforceable. a. With unmistakable clarity, the Texas Legislature has signaled its intent to comprehensively regulate solid waste and recycling activities.
The Solid Waste Disposal Act provides that its purpose is to protect the public and the environment by controlling the management of solid waste and reducing solid waste through recycling. Tex. Health & Safety Code 361.002(a), 361.022(b). In the SWDA, the Texas Legislature vested the Texas Commission on Environmental Quality (TCEQ) with broad jurisdiction over municipal solid waste: the TCEQ shall accomplish the purposes of this chapter by controlling all aspects of the management of municipal solid waste . . . [and] has the powers and duties specifically prescribed by this chapter relating to municipal solid waste management . . . and all other powers necessary or convenient to carry out those responsibilities under this chapter. Id. 361.011(a)-(b) (emphasis added). Accordingly, any attempt by the City to regulate solid waste or recycling activity cannot conflict with the SWDA or with TCEQ regulations promulgated under authority of the SWDA. b. The definition of solid waste used in the Ordinance directly conflicts with the SWDA. It treats all
The Ordinance directly conflicts with state law in two ways.
recyclable materials as solid waste when state law does not. It also treats recyclable material that contains any amount of non-recyclable material as solid waste when state law does not. The City is without authority to pass an ordinance that directly conflicts with state law. Dallas Merch.s & Concessionaires Assn v. City of Dallas, 852 S.W.2d 489, 491 (Tex. 1993) (citing City of Beaumont v. Fall, 291 S.W. 202 (Tex. 1927)). If the state law
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and the local ordinance have the same purpose but impose different requirements, the conflict is direct. City of Wichita Falls v. Abell, 566 S.W.2d 336, 339 (Tex. 1978). In Abell, the Texas Supreme Court upheld a determination that a municipal ordinance was unconstitutional and void because the ordinance used a different measurement than a state statute regulating the same conduct. Id. at 337. The City of Wichita Falls provided a method for measuring the distance between businesses with alcohol sales and churches, schools, and hospitals that differed from the method provided for in the Texas Alcohol and Beverage Code. Id. The court noted that that the citys alteration of the method of computing the distance made illegal some establishments legal under state law. Id. at 339. The Supreme Court found that the conflict between the ordinance and state law rendered the ordinance unconstitutional. Id. Both the SWDA and the Ordinance regulate solid wastejust as the Texas Alcohol and Beverage Code and the Wichita Falls ordinance regulated liquor sales. And just as the Wichita Falls ordinance made certain establishments legal under state law illegal under the ordinance, the definition of solid waste in the Ordinance makes material not a solid waste under state law a solid waste in the City. That conflict is direct and irreconcilable, and, therefore, the Ordinance is void. Finally, the Ordinance has the effect of discouraging recycling in favor of landfilling. That outcome is contrary to the statutory requirement that recycling be preferred over landfilling and resource recovery. Tex. Health & Safety Code Ann. 361.022(b)(2). The Ordinance is therefore not acceptable local regulation because it is
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not ancillary to and in harmony with the general scope and purpose of the state enactment. City of Brookside Village v. Comeau, 633 S.W.2d 790, 796 (Tex. 1982). 6. The Ordinance relies on a critical termrecyclable materialthe meaning of which is improperly left to the complete discretion of a single city employee.
According to the Dallas Code of Ordinances, section 18-2(39), recyclable material is [a]ny material or product designated in writing by the director of sanitation as being suitable for re-use and/or recycling. That delegation to the
sanitation director is standardless. [B]eing suitable for re-use and/or recycling is circular as a description of recyclable material. It amounts to no more than I know it when I see it or it is what it is. The Texas Supreme Court has been clear that a municipalitys standardless delegation violates the due course of law provision of the Texas Constitution. Spann v. City of Dallas, 235 S.W. 513, 517 (Tex. 1921); Crossman v. City of Galveston, 247 S.W. 810, 815 (Tex. 1923). Those two decisions were relied on in Coffee City v. Thompson, 535 S.W.2d 758, 763 (Tex. Civ. App.Tyler 1976, writ refd n.r.e.), to declare a zoning ordinance invalid because it improperly delegated standardless discretionary authority to a city official to issue or deny building permits. As the Court noted: The ordinance does not provide any criteria or guidelines for the city secretary to follow in granting or refusing building permits; and, therefore, it must be implied that the city secretary has discretionary authority without restriction in issuing or denying such permits. An ordinance leaving the question of issuing or denying building permits to the arbitrary discretion or determination of the city secretary without any rule or standard to follow is invalid. Id. (emphasis supplied).
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The Texas Supreme Court observed in Spann that the need for conditioned delegation exists because the very essence of American Constitutions is that the material rights of no man shall be subject to the mere will of another. Spann, 235 S.W. at 517 (citing Yick Wo v. Hopkins, 118 U.S. 356 (1886)). Here, the existence of a crucial defense to a criminal ordinance is left entirely to the whim and unbridled discretion of the Citys Director of Sanitation. The due course of law provision of the Texas Constitution prohibits that approach. 7. The Ordinance fails to define a critical termrecyclable material making it unconstitutionally vague.
A criminal ordinance is void for vagueness if it fails to provide adequate notice of what is and is not criminalized and the guidelines by which the ordinance will be applied. See City of Chicago v. Morales, 527 U.S. 41, 64 (1999). Moreover, the absence of any definition means there are no guidelines necessary to prevent arbitrary and discriminatory enforcement of the law. Id. at 6465 (quoting Kolender v. Lawson, 461 U.S. 352, 357 (1983)). Because the Citys Director of Sanitation has never defined recyclable material, even though directed to do so, the plaintiffs must necessarily guess at its meaning. Connally v. Gen. Constr. Co., 269 U.S. 385, 391 (1926). That the Citys Director of Sanitation can change that meaning on a whim and with unbridled discretion allows arbitrary and discriminatory enforcement in violation of the due process clause of the 14th Amendment to the United States Constitution.
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8.
The Ordinance violates the City Charter because it was passed without providing Franchisees notice and a hearing.
The City [cannot] perform a governmental function in any manner contrary to the express provisions of its charter. Willman v. City of Corsicana, 213 S.W.2d 155, 157 (Tex. Civ. App.Waco 1948), affd, 216 S.W.2d 175 (Tex. 1949). All acts beyond the scope of the powers granted are void. Foster v. City of Waco, 255 S.W. 1104, 105-06 (Tex. 1923). Indeed, a charters grant of power will be strictly construed, and if any fair, substantial and reasonable doubt exists as to any power, it is to be resolved against the corporation and the power denied. Tex. River Barges v. City of San Antonio, 21 S.W.3d 347, 354-55 (Tex. App.San Antonio 2000, pet. denied) (quotations omitted). Here, the Citys Charter mandates that [t]he city council shall provide for a fair hearing to any . . . business entity enjoying a public service franchise in the City of Dallas, prior to the change in the rates, rules, or regulations applicable to such franchise. City of Dallas Charter, Ch. XIV 7 (emphasis added).14 The Ordinance imposes a significant new rul[e] or regulatio[n] applicable to such franchise by requiring all franchisees to send waste, including recyclable materials, to a City-owned and operated facility, or be subject to a criminal penalty. The City did not provide any fair hearing as described in the franchises to Franchisees before imposing the new requirements of the Ordinance. The Texas Supreme Court has consistently held that a citys action in violation of the procedures prescribed in its charter is void ab initio. E.g., Willman, 213 S.W.2d at 161
14
The relevant section of the Citys Charter is at App. at 103-109. Pursuant to the Franchise Agreement, this hearing shall afford the Franchisee rudimentary due process in an individualized hearing with requisite notice. App. at 34, 79.
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(holding that [s]ince the city prescribed in its charter the manner in which the power granted should be performed, such method must be followed, and citys failure to follow express provisions in passing the ordinance rendered it void); Foster, 255 S.W. at 1105 (Since the charter of the city has specially provided for [how the city may incur debts and] . . . the notes and contract were not executed in substantial compliance with [those methods], they are void.). In the absence of a fair hearing, the Ordinance is void. B. There is a substantial threat of irreparable injury if a preliminary injunction is not issued. Violation of a partys constitutional rights results in irreparable harm as a matter of law, therefore satisfying the irreparable injury prerequisite for obtaining a preliminary injunction. See, e.g., Elrod v. Burns, 427 U.S. 347, 37374, 375 (1976)
(plurality and concurring opinions) (affirming grant of preliminary injunctive relief based on irreparable injury from threatened constitutional violation); Doe v. Duncanville Indep. Sch. Dist., 994 F.2d 160, 166 (5th Cir. 1993) (the existence of an irreparable injury follows from the finding that there is a likely constitutional violation); Deerfield Med. Ctr. v. City of Deerfield Beach, 661 F.2d 328, 338 (5th Cir. 1981) (the loss of First Amendment rights for even a minimal period of time constitutes irreparable harm); Fla. Businessmen for Free Enter. v. City of Hollywood, 648 F.2d 956, 958 (5th Cir. 1981) (same). For that reason alone, a preliminary injunction is proper given the plaintiffs likelihood of succeeding on the merits of their constitutional claims, as discussed above. Furthermore, as explained in the complaint and as will be shown at the hearing, to comply with the Ordinance the plaintiffs must make immediate and significant
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changes in the conduct of their businesses, with criminal penalties and possible loss of their franchises attached to noncompliance. Those changes will mean higher costs for their services, only some of which will be passed on to customers, meaning some will be absorbed, and loss of revenue for affiliated operations. Those impacts likewise establish a threat of irreparable harm sufficient to warrant a preliminary injunction. Doran v. Salem Inn, Inc., 422 U.S. 922, 932 (1975); Roark & Hardee LP v. City of Austin, 522 F.3d 533, 545 (5th Cir. 2008); Fla. Businessmen, 648 F.2d at 968 n.2. C. The threatened injury if the preliminary injunction is not issued outweighs any harm that will result if the injunction is granted. When a preliminary injunction is directed toward a city ordinance that has not yet taken effect, the potential harm to the city from delaying enforcement of the ordinance is at most slight. Fla. Businessmen, 648 F.2d 956, 959 (5th Cir. 1981). In this case, as explained previously, private companies have disposed of solid waste generated at the Citys apartments and commercial buildings for decades, without even a suggestion that this practice causes harm to the public health, safety, or welfare. Nor could there be such a suggestion, as the same rules apply to collection, transportation, and disposal regardless of what landfill is used. There can be no potential harm in continuing current practices while this lawsuit is pending. See Eastman Kodak Co. v. Collins Ink Corp., No. 11-CV-6513L, 2011 WL 5304059, at *9 (W.D.N.Y. 2011) (an injunction that merely preserves the status quo that has existed for many years poses little risk of harm). Thus, the potential harm to the plaintiffs if an injunction is not granted far outweighs the harm (if any) to the City or the public if the Ordinance is preliminary enjoined.
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D.
Granting a preliminary injunction will serve the public interest. For the same reasons, the public interest will not be disserved by an injunction.
In fact, enjoining enforcement of the Ordinance will serve the public interest by preventing the drastic reduction in recycling that is sure to result if the Ordinance becomes effective. If a substantial likelihood exists that a citys ordinance will be
declared invalid, the public interest also disfavors the city expending public resources attempting to enforce the ordinance. Fla. Businessmen, 648 F.2d at 959. Granting an injunction here will serve the public interest. CONCLUSION Having decided trash is no longer a nuisance but treasure, the City through the Ordinance seeks to capture that value by unconstitutionally impairing franchises, using its police power improperly, acting outside of its police power, and creating an illegal monopoly. The Ordinance should be enjoined.
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Dated: November __, 2011 Respectfully submitted, THOMPSON & KNIGHT LLP
By: /s/James B. Harris James B. Harris State Bar No. 09065400 Stephen F. Fink State Bar No. 07013500 1722 Routh Street, Suite 1500 Dallas, Texas 75201 (214) 969-1700 TELEPHONE NO. (214) 969-1751 FAX NO. Email: james.harris@tklaw.com ATTORNEYS FOR NATIONAL SOLID WASTES MANAGEMENT ASSOCIATION, BLUEBONNET WASTE CONTROL, INC., IESI TX CORPORATION, and BUSINESSES AGAINST FLOW CONTROL
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BAKER BOTTS L.L.P. By: /s/Ryan Bangert (by permission) Aaron M. Streett State Bar No. 24037561 910 Louisiana Street Houston, Texas 77002 (713) 229-1855 TELEPHONE NO. (713) 229-7855 FAX NO. Ryan Bangert State Bar No. 24045446 2001 Ross Avenue Dallas, Texas 75201 (214) 953-6915 TELEPHONE NO. (214) 661-4915 FAX NO. ATTORNEYS FOR WASTE MANAGEMENT OF TEXAS, INC., and WM RECYCLE AMERICA, LLC JACKSON WALKER L.L.P. By: Charles L. Babcock (by permission) Charles L. Chip Babcock Texas State Bar No. 01479500 Patrick R. Cowlishaw Texas State Bar No. 04932700 901 Main Street, Suite 6000 Dallas, Texas 75202 (214) 953-6000 TELEPHONE NO. (214) 953-5822 FAX NO. Email: pcowlishaw @jw.com ATTORNEYS FOR REPUBLIC WASTE SERVICES OF TEXAS, LTD., ALLIED WASTE SYSTEMS, INC., and CAMELOT LANDFILL TX, LP.
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Certificate of Service I hereby certify that on the 28th day of November 2011, I served the foregoing on defendants by email to Chris Caso, Assistant City Attorney for the City of Dallas, as agreed to by Mr. Caso. /s/James B. Harris James B. Harris
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Case 3:11-cv-03200-O Document 6

CIVIL ACTION NO. 3:11-cv-03200-O

PLAINTIFFS BRIEF IN SUPPORT OF THEIR APPLICATION FOR A PRELIMINARY INJUNCTION

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A transcript of these statements can be found in the App. at 82-102.

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Rather, as described in the presentation of facts, the

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The Texas Supreme Court recognized that the

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