Bfi business finance

Byline: Barry Shanoff

SUCCESSFUL LAWSUITS AREN'T JUST about how badly the defendant supposedly behaved. A winning case depends on what the plaintiff has going for it, as two waste companies and their trade group learned when a federal appeals court tossed out their claims.

Several Mississippi cities and counties developed a master plan for disposing of their region's solid waste. To implement the plan, they formed the Pine Belt Regional Solid Waste Management Authority, which quickly issued a request for proposals (RFP) for a landfill and transfer stations. The RFP contained an estimated volume of disposable waste generated in the region and a commitment by the authority to require its communities, if necessary, to enact ordinances requiring all locally generated waste to be transported to the authority's facilities.

Five firms, including the local affiliates of BFI (owned by Scottsdale, Ariz.-based Allied Waste Industries) and Houston-based Waste Management (WM), submitted bids. The authority issued revenue bonds to finance the construction of the facilities and signed an operating contract with low bidder Enviro Inc., a company based in the region.

From the outset, the landfill and transfer stations handled much less solid waste than the potential disposable tonnage in the region. The corresponding shortfall in tipping fee revenue made it difficult for the authority to meet its debt payments. To improve its financial position, the authority directed its member communities in 2002 to adopt identical flow control ordinances applicable within their geographical areas.

No sooner were the measures on the books, than the National Solid Wastes Management Association (NSWMA) and the BFI and WM affiliates filed suit against the authority and its member cities and counties. They alleged that the flow control ordinances unlawfully discriminated against and otherwise burdened interstate commerce. A federal judge declared the ordinances invalid on both grounds and blocked their enforcement.

On appeal, a three-judge panel of the U.S. Court of Appeals for the Fifth Circuit dismissed the discrimination claim and ruled that the ordinances did not excessively burden interstate commerce.

As the court saw it, the plaintiffs' injury did not fall within the zone of interests protected by the Commerce Clause with respect to ordinances alleged to discriminate against out-of-state economic interests. The court noted that BFI and WM hauled the trash they collected to facilities outside the region. No waste was shipped outside the state, and the plaintiffs had no plans to do so.

"In sum, plaintiffs' injury is not related to any out-of-state characteristic of their business," the appellate panel concluded. The plaintiffs were thus deemed ineligible to challenge the discriminatory nature of the ordinances.

As for the alleged burden on interstate commerce, the appeals court first examined the authority's local purpose - the economic viability of its landfill - and found it legitimate. Next, the court found that flow control created no greater hindrance on the plaintiffs' interstate business than on their intrastate affairs. Unable to demonstrate a disparate impact on interstate commerce, the plaintiffs' alternative claim was rejected.

[National Solid Wastes Management Association v. Pine Belt Regional Solid Waste Management Authority, 389 F.3d 491 (5th Cir. 2004)]

The legal editor welcomes comments from readers. Contact Barry Shanoff via e-mail: shanoff@knopf-brown.com.

The columnist is a Rockville, Md., attorney and serves as general counsel of the Solid Waste Association of North America.