ELR Citation: ELR 20018
No(s). s. 94-1924, -3622 (3d Cir. Oct 20, 1995)

The court reverses and remands district court judgments that applied the incorrect legal standard concerning challenges under the dormant Commerce Clause to two Pennsylvania counties' solid waste flow-control plans, which generally require waste haulers to dispose of solid waste generated within the respective county to designated landfill sites located in the state. The Chester County plan requires county waste to be disposed of at two in-county landfills as the primary disposal sites, and a landfill in a neighboring county as a third disposal option. The Mercer County plan requires waste haulers to obtain licenses and dispose of county waste at a single designated site in a neighboring county. The court holds that the district court did not consider whether Chester County's flow-control scheme offered out-of-state landfill operators an equal opportunity to compete for the county's waste disposal business. With respect to the Mercer County plan, the court also holds that the district court erred in concentrating on the operation of the ordinance and concomitantly failing to consider whether out-of-state interests competed on a level playing field.

Regarding the applicable legal standard, the court holds that to determine whether these flow-control schemes actually discriminate against interstate commerce—thus triggering strict scrutiny analysis—the district court must closely examine: (1) the facility designation process; (2) the duration of the designation; and (3) the likelihood of an amendment to the plan to add alternative sites. The court notes that although the U.S. Supreme Court's decision in C&A Carbone, Inc. v. Town of Clarkstown, 24 ELR 20815 (1994), has broad application, it did not establish a per se rule subjecting all flow-control ordinances to strict scrutiny. That a flow-control ordinance requires all waste to be processed or deposited in-state for some fixed period of time does not necessarily violate the dormant Commerce Clause unless out-of-state businesses did not compete for the designation on an even playing field. The court notes that the burden of showing discrimination rests on the party challenging the ordinance in question. To make this showing, a plaintiff must show that the designation process favors in-state sites—either purposely or in effect. The court further notes that a governmental defendant can rebut a putative showing of discrimination by presenting evidence that the designation process was open, fair, and competitive. If the defendant succeeds in this showing, the ordinance is subject only to the balancing test of Pike v. Bruce Church, Inc., 397 U.S. 137 (1970), under which the plaintiff must prove that the burden on interstate commerce is clearly excessive in relation to the putative local benefits. If the defendant cannot satisfactorily demonstrate that the ordinance does not discriminate against interstate commerce, however, it must then prove that the ordinance survives strict scrutiny analysis.

Applying these principles, the court then holds that the district court erred in determining that the Chester County ordinance did not discriminate on its face or in its primary purpose or effect. Discrimination need not be the "primary" purpose or effect for there to be a Commerce Clause violation. Moreover, the record creates the strong impression that the Chester County designation process was not sufficiently open, and that there was no real potential for amendment that could offer out-of-state bidders a fair chance at the county's business. The court rejects, however, plaintiff waste hauler's claim that the county's flow-control scheme facially discriminates against interstate commerce. As in the public utility context, local governments have the capacity, in the exercise of their police powers in the health and safety area, to contract with specific businesses to provide certain services. Nor does this case resemble cases in which localities explicitly banned out-of-state interests from participating in the local market because they were from outside the states. The court next holds that the county's economic interest in keeping the business at home and the plan's legislative history suggest that the designation process did not offer a level playing field. Two factors in particular create the impression that parochialism rather than competition determined the outcome: (1) that established local businesses won the designation; and (2) that the third site was designated as an alternative after the process had concluded—a status that appears to have been specially created for this situation. Moreover, the capacity to amend the plan to add alternative sites does not appear to mitigate sufficiently the effect of having chosen in-state interests. The prospect that an out-of-state site could gain designation through the amendment process is too remote to equalize the opportunity for out-of-state businesses, which were initially shut out, to participate in the local waste disposal market. The court notes that it appears that the county had an economic motive for favoring certain in-county sites, and that the need to protect the county's financial interests played a role in its decision to adopt flow control. The court thus holds that the Chester County plan and its implementing ordinances might have the effect of discriminating against interstate commerce. Because the district court did not have the benefit of the Third Circuit's decision in Atlantic Coast Demolition & Recycling, Inc. v. Board of Chosen Freeholders, 25 ELR 20620 (1995), and the clarifications it offers in this opinion, the Third Circuit remands so that the district court may consider Chester County's flow-control scheme in light of these principles.

Turning to the Mercer County plan, the court holds that the district court's conclusion that the designation of a single, in-state landfill, rather than the process by which it was designated, resulted in discrimination against interstate commerce is at odds with this court's conclusion that the focus should be on the designation process, the reasonableness of the duration of the designation, and the practical likelihood of amendment. The court is not convinced that the facts in the record can establish that Mercer County's designation process was truly discriminatory, that the contractual tipping fee was unreasonable at the time the site was selected, or that there was insufficient likelihood of amendment to show that the scheme discriminated against out-of-state bidders. Thus, the court reverses and remands for further development of these aspects in order to gauge the real extent of the opportunity enjoyed by out-of-state providers to participate in the county's waste disposal market. The court notes that in operating its plan, Mercer County made a significant attempt to open its designation process to out-of-state sites. The court also notes that the county's relative lack of economic interest refutes at least one basis for the argument that the designation process did not really offer a level playing field. The court further notes, however, that the fact that a number of out-of-state companies requested the bidding package, but not a single out-of-state interest submitted a bid, raises the concern that some aspect of the process discouraged out-of-state interests. The court will not, however, attribute a discriminatory motive to the county's effective grant of a 10-year monopoly in this case, because the state law on which the scheme is based requires counties to secure 10-year access to disposal capacity. Further, the court would not infer any discrimination from the county's desire to lock in the tipping fee unless it is shown that the fee was unreasonable at the time the site was selected. If the district court decides on remand that the Mercer County designation scheme has the effect of discriminating against out-of-state interests, it must then, under the strict scrutiny standard, address whether the governmental interest is strong enough and whether less discriminatory means to achieve the same goal are available.

Counsel for Appellant
James McC. Geddes
Ashby & Geddes
One Rodney Sq., Wilmington DE 19899
(302) 654-1888

Counsel for Appellee
Dennis W. Strain
Pennsylvania Department of Environmental Resources
555 N. La., Ste. 6015, Conshohocken PA 19482
(610) 832-6027

Before Becker, Nygaard, and Alito, JJ.