KRAVITCH, Circuit Judge:
Allsafe Waste Management, Inc. (Allsafe) brought suit in district court alleging that Long County unconstitutionally had rescinded a contract between Allsafe and the County regarding a solid waste landfill facility which was to be owned privately by Allsafe and located in Long County. Allsafe asserted that the County violated the Commerce Clause because its rescission was based on Allsafe's refusal to agree to a 150-mile geographic limitation on the source of waste. Long County filed a motion seeking dismissal of the Commerce Clause claim and Allsafe's companion equal protection claim. Allsafe petitioned for a preliminary injunction to prevent the County from acting on the rescission. The district court dismissed Allsafe's equal protection claim, denied the motion to dismiss the Commerce Clause claim and granted a preliminary injunction against the County. Long County seeks review of the denial of its motion with respect to the Commerce Clause claim and to the issuance and breadth of the injunctive order. We affirm the district court.
Long County is a political subdivision of the State of Georgia, acting through its elected Board of Commissioners. As of 1990, Long County did not have a municipal solid waste facility, but had relied upon a facility in Wayne County for the disposal of its waste. In 1990, Wayne County indicated that it would have to limit the intake of Long County's waste and consequently, Long County began to explore alternatives for its waste disposal.
In the summer of 1990, Long County began negotiations with Ocmulgee Disposal, Inc., a predecessor to Allsafe, for the construction
In March 1991, the Long County Board of Commissioners sent a letter to OSI stating that the Board of Commissioners passed a resolution limiting the transportation of refuse to waste generated within 150 miles of Long County.
After the assignment to Allsafe, Long County sent a letter seeking assurances from the company, including commitments to construct a recycling facility, to pay $25,000 for the County to hire engineering consultants, to reserve sufficient space for the County's waste over the 50-year term of the contract and to limit the origin of the waste to within 150 miles of Long County. Allsafe viewed the letter as an attempt to alter the terms of the original contract and refused to give the assurances requested. The County, interpreting Allsafe's refusal as a material breach, wrote a letter to Allsafe rescinding the contract. Allsafe then filed suit against the County on the ground that the County was rescinding the contract in an attempt to discriminate against interstate commerce.
Before addressing the substance of the Commerce Clause claim, we note the procedural posture of the case. We are asked to review the district court's decision to deny a motion to dismiss the claim. The appropriate standard for deciding to dismiss a claim is whether it appears beyond doubt that the plaintiff can prove no set of facts to support his claim. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). All facts set forth in the complaint are to be accepted as true and the court limits its consideration to the pleadings and exhibits attached thereto. See Fed.R.Civ.P. 10(c). We review the district court's legal conclusions de novo.
The Commerce Clause provides that "Congress shall have Power ... To regulate Commerce ... among the several states." U.S. Const. art. I, § 8, cl. 3. Implied in the granting of this power to Congress is a limitation on the state's ability to isolate itself from the national economy and usurp Congress's power; this restriction on the states is often referred to as the negative or dormant
The Supreme Court, however, has developed an exception to the broad reach of the dormant Commerce Clause to address situations where a state is acting as a participant in the market, rather than as a regulator.
The market participant doctrine upon which the County relies is a relatively new and difficult area of the Supreme Court's jurisprudence. The Court has recognized that "[t]he precise contours of the market-participant doctrine have yet to be established." South Central Timber Development, Inc. v. Wunnicke, 467 U.S. 82, 93, 104 S.Ct. 2237, 2243, 81 L.Ed.2d 71 (1984). To date, the Court has applied the doctrine in only four cases. See supra note 2. In addition, one of our sister circuits has noted the considerable practical difficulty in distinguishing between a "market regulator" and a "market participant." Shell Oil Co. v. City of Santa Monica, 830 F.2d 1052, 1056 (9th Cir. 1987).
The Supreme Court first articulated the market participant doctrine in Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 96 S.Ct. 2488, 49 L.Ed.2d 220 (1976), which involved Maryland's statutory scheme whereby the State would pay bounties for the destruction of any vehicle titled in Maryland, but out-of-state scrap processors were required to provide more extensive documentation to show that the vehicle was abandoned and the wrecker had clear title. The Court held that Maryland's scheme was not the kind of action covered by the Commerce Clause because the State had entered the market itself. Id. at 806, 96 S.Ct. at 2496. The Court distinguished a long line of Commerce Clause cases by noting that
The Court then reviewed the history and purpose of the Commerce Clause, which was designed to prevent states from erecting trade barriers that would undermine efforts to form a cohesive nation. Thus, states were prohibited from enforcing restrictions and regulations on the free flow of commerce. The Court concluded that this goal is not impeded by allowing a state to participate in a market and favor its own citizens over others. Id. at 808-09, 96 S.Ct. at 2497.
The Court revisited the market participant doctrine in Reeves, Inc. v. Stake, 447 U.S. 429, 100 S.Ct. 2271, 65 L.Ed.2d 244 (1980), a case challenging South Dakota's practice of limiting the sale of cement produced at a state-owned plant to state residents in time
After reaffirming the market participant doctrine in Reeves, the Court extended it in White v. Massachusetts Council of Construction Employees, 460 U.S. 204, 103 S.Ct. 1042, 75 L.Ed.2d 1 (1983), to permit a city to require that at least half of the workforce used to complete all construction projects funded in whole or part by city funds must be comprised of city residents. The Court limited its consideration to the issue of whether the Commerce Clause prohibited such restrictions on projects funded wholly with city funds and those funded by the city and federal government. Id. at 208-09, 103 S.Ct. at 1045. The Court acknowledged that there are "some limits on a state or local government's ability to impose restrictions that reach beyond the immediate parties with which the government transacts business." Id. at 210 n. 7, 103 S.Ct. at 1046 n. 7. The Court declined to define those limits, noting that in the case at hand, everyone affected by the city's policy was in "a substantial, if informal sense" employed by the city. Id. Thus, the city's restriction fell within the scope of the market participant doctrine.
In South Central Timber Development, Inc. v. Wunnicke, 467 U.S. 82, 104 S.Ct. 2237, 81 L.Ed.2d 71 (1984), however, a plurality of the Court found an example of a policy which went beyond the limits of the market participant doctrine. The Alaska Department of Natural Resources published a notice that it would sell timber to the highest bidder, but that bidder must agree to partially process the timber within the state before exporting it. The State charged a lower price for timber sold with this restriction.
The Court distinguished the Alaskan policy from Maryland's subsidy scheme at issue in Alexandria Scrap because the Alaskan policy did not offer the buyer a choice between complying with the requirement and getting a subsidy or noncompliance with no subsidy. Instead, the buyer had to abide by the limitation or be precluded from buying timber. Wunnicke, 467 U.S. at 95, 104 S.Ct. at 2244. The Court also distinguished Reeves because the Wunnicke case involved three factors not present in Reeves: foreign commerce, a natural resource and restrictions on resale. Id. at 96, 104 S.Ct. at 2245. The Court finally distinguished White because the Alaskan policy went beyond the normal buyer-seller relationship and attempted to impose post-sale obligations in which the seller usually has no interest. Id. The Court concluded that the market participant doctrine "is not carte blanche to impose any conditions that the State has the economic power to dictate, and does not validate any requirement merely because the State imposes it upon someone with whom it is in contractual privity." Id. at 97, 104 S.Ct. at 2245.
In the instant case, Long County claims that its rescission of the contract falls within the market participant doctrine and is analogous to the schemes at issue in Alexandria Scrap, Reeves and White. The County argues that it is merely fixing the terms and conditions upon which it will make a needed purchase, the very essence of economic participation. Allsafe counters by offering examples of the similarities between the instant case and Wunnicke and distinguishing the cases relied upon by the County. Allsafe argues that the County has not expended or risked any capital in the project and thus, cannot be a market participant. Allsafe also notes that the company is not a major participant. We agree with Allsafe for the reasons explained below.
Although the County maintains that Alexandria Scrap, Reeves, and White are controlling, there is a critical distinguishing factor between these cases and the instant case. Unlike the governmental entities in the Supreme Court cases, the County here has not invested, expended or risked any public funds in any aspect or stage of the venture. It did not invest or risk any capital in the siting, construction, preparation, or operation of the landfill.
In contrast, public funds were clearly at stake in White, Reeves and Alexandria Scrap. In White, Boston paid its contractors for construction services. Reeves involved a state-owned manufacturing plant. Maryland used state funds to pay a bounty to scrap processors in Alexandria Scrap.
The County's failure to expend or risk public funds has several ramifications which negate a finding of market participation. First, it indicates that the County is acting more as a regulator because its policies affect a private company which incidentally benefits from the County's policy decision regarding waste disposal. The White Court took pains to note that it was restricting its analysis to the city's policy as it affected contracts funded with city or federal monies and not private investment. The Court stated that the limited effect of the city's policy distinguished it from Hicklin v. Orbeck, 437 U.S. 518, 98 S.Ct. 2482, 57 L.Ed.2d 397 (1978), in which the Court struck down an Alaskan statute requiring that all jobs relating to oil and gas leases be offered first to state residents. The White Court quoted Hicklin in describing Alaska's scheme as "`an attempt to force virtually all businesses that benefit in some way from the economic ripple'" of Alaska's development of its natural resources, to discriminate in hiring in favor of state residents. 460 U.S. at 211, 103 S.Ct. at 1046 (quoting Hicklin, 437 U.S. at 531, 98 S.Ct. at 2490). White was different, the Court held, because the restrictive policy was limited to city funded projects; thus, it did not reach "virtually all businesses" that benefitted from the city's desire to develop its construction. White, 460 U.S. at 211, 103 S.Ct. at 1046.
In the instant case, the landfill was to be wholly owned by Allsafe, a private company. Allsafe assumed all risk of failure and liability. Thus, the County was maintaining a policy which would restrict the return on the investment of private actors and would regulate a private company. The County was attempting to control a business that happened to benefit from the County's desire to develop a plan for waste disposal.
The Reeves Court noted that the expenditure of public funds legitimizes a protectionist policy because the restriction merely "limits benefits generated by a state program to those who fund the state treasury and whom the State was created to serve." 447 U.S. at 442, 100 S.Ct. at 2280. Here, the County is attempting to gain benefits for its constituents without providing any funding for the program, rendering the policy more regulatory than participatory.
Furthermore, the market participant doctrine relies upon the premise that economic
Ignoring the economic differences between its actions and those at issue in the relevant Supreme Court cases, the County emphasizes the structural similarities between Boston's workforce restrictions in White and its alleged geographic restrictions on the origin of waste. The County asserts that both cases involve situations where the governmental entity was reaching beyond the contractual parties to limit third parties. The city order in White would affect subcontractors who did not hire city residents and the County's action in this case would harm persons from outside of the 150-mile limit who wanted to dispose of their waste.
Despite these superficial similarities, the Court's reasoning in White undermines the County's analogy. The White Court decided that the facts fell within the market participant exception even though the restriction affected parties beyond the boundary of formal privity of contract because the city policy addressed a "discrete identifiable class of economic activity in which the city is a major participant." White, 460 U.S. at 211 n. 7, 103 S.Ct. at 1046 n. 7. The Wunnicke court interpreted White narrowly on this point, noting that the doctrine does not allow any requirement as long as the party is in contractual privity with the state. Wunnicke, 467 U.S. at 96-97, 104 S.Ct. at 2245. The Wunnicke Court pointed out that if a state were allowed to impose such restrictions on any party it contracted with, then the fact that the workers in White were "in effect working for the city" would have been irrelevant because the restriction could have been imposed on any employer conducting business with the city. Wunnicke, 467 U.S. at 97 n. 10, 104 S.Ct. at 2245 n. 10.
Long County does not fit within the market participant doctrine set forth in White and later interpreted by Wunnicke. First, the County is not a major participant in the market. The proposed landfill was a regional site to be used for waste from the counties and states surrounding Long County as well as waste from the County itself. The County concedes that it would not be the exclusive purchaser of the facility's services. According to Allsafe, the waste actually generated by the County was a minor portion of the company's contemplated activity. The County argues that its indispensable role in establishing a waste disposal facility renders it a major participant in the market. The need for County participation, however, has more to do with the regulatory scheme and the need for a license than the County's economic weight as a purchaser.
Second, Long County's actions can be distinguished from Boston's market participation in White because the County did not impose its restriction during the bargaining process before the contract was signed.
Finally, a letter from the County Commission indicates that Long County sought to impose the geographic ban on waste by passing a resolution.
For these reasons, the instant case is readily distinguishable from Alexandria Scrap, Reeves and White and more analogous to the scheme in Wunnicke. In that case, the State was using its economic power as a supplier of a natural resource to impose a restraint on the location of processing that resource. Here the County is using the unique features of the waste disposal market to impose geographic restrictions on the origin of the waste.
Additionally, the waste disposal service at issue is more comparable to a natural resource than to construction services, cement or auto hulks. In Reeves, the Court stated that cement was not a natural resource and then cited several Commerce Clause cases dealing with traditional natural resources. 447 U.S. at 443, 100 S.Ct. at 2281. Included among these cases was City of Philadelphia v. New Jersey, 437 U.S. 617, 98 S.Ct. 2531, 57 L.Ed.2d 475 (1978), which struck down a state statute limiting the origin of waste for a landfill to the state territorial boundaries. Courts tend to give more careful scrutiny to state policies which hoard natural resources because such policies implicate the core purpose of the Commerce Clause, the prevention of state barriers to the free flow of trade. See Wunnicke, 467 U.S. at 96, 104 S.Ct. at 2245 (distinguishing Reeves because the scheme at issue in that case did not affect a natural resource).
The County attempts to limit the holding in Wunnicke to situations where the state is imposing a downstream restraint on a market in which it is not a participant. However, Wunnicke stands for the broader proposition that the market participant doctrine is not without limits and courts will scrutinize "the relationship of the subject matter of the contract and the condition imposed." Id. at 97 n. 10, 104 S.Ct. at 2245 n. 10. Here, the County's non-exclusive contract for the purchase of waste disposal services is not sufficiently linked to the geographic restriction such that the County should be allowed to impose a post hoc condition which will affect other purchasers.
If the trial court finds that the County's rescission of the contract was based on the desire to impose a geographic limitation on the origin of waste, the County's actions would fall outside of the market participation exception to the Commerce Clause because Long County was not a major participant in the market, public funds were not expended or risked and the restriction allegedly was imposed after the contract was agreed upon.
Having rejected the County's primary argument for an exception to the Commerce Clause rule, we reach the issue of whether Allsafe could prove a set of facts establishing a Commerce Clause violation.
The Supreme Court first addressed the issue of prohibitions on the importation of waste for disposal in City of Philadelphia v. New Jersey. New Jersey had passed a statute which prohibited the importation of waste which originated outside the state. The Court overturned the lower court's finding that the movement of waste was not commerce and held that the issue was not immune from Commerce Clause scrutiny because "[a]ll objects of interstate trade merit Commerce Clause protection; none is excludable by definition at the outset." Id. at 622, 98 S.Ct. at 2534.
In determining the merits of the Commerce Clause claim, the Court noted that it had developed a rule of per se invalidation for economic protectionism and a more flexible approach for legislation that has other credible objectives. Id. at 623-24, 98 S.Ct. at 2535.
Recently, the Court has addressed two other state schemes to limit the flow of waste from outside their borders. In one case, Alabama had passed a statute imposing an additional fee on all hazardous waste originating outside of the state boundaries. See Chemical Waste Management, Inc. v. Hunt, ___ U.S. ___, 112 S.Ct. 2009, 119 L.Ed.2d 121 (1992). In the other, Michigan had passed a similar statute prohibiting counties from accepting waste originating outside of the county unless authorized by the county's waste management plan. See Fort Gratiot Landfill v. Michigan Dept. of Nat. Res., ___ U.S. ___, 112 S.Ct. 2019, 119 L.Ed.2d 139 (1992). The Court found that both of the state practices violated the Commerce Clause.
The Hunt Court reaffirmed the holding in City of Philadelphia v. New Jersey, and reiterated the distinction between the two tests applied to possible violations of the Commerce Clause. The Court found that Alabama's statute was facially discriminatory and warranted "the strictest scrutiny of any purported legitimate local purpose and of the absence of nondiscriminatory alternatives." Hunt, ___ U.S. at ___, 112 S.Ct. at 2014. The Court recognized that health and safety concerns may mandate a restriction on waste, but the State offered no explanation for the decision to limit only out-of-state waste. Id. at ___, 112 S.Ct. at 2015. Because less discriminatory means were available to achieve the State's legitimate objectives, the Court declared the statute unconstitutional. Id. at ___, 112 S.Ct. at 2017.
In Fort Gratiot, the Court again adhered to its decision in City of Philadelphia v. New Jersey, and noted that the two cases were very similar because like New Jersey, Michigan "has not identified any reason, apart from its origin, why solid waste coming from outside the county should be treated differently from solid waste within the county." Fort Gratiot, ___ U.S. at ___, 112 S.Ct. at 2024. The Court considered this factor dispositive and rejected Michigan's argument that the limitation on out-of-county waste was distinguishable from state restrictions. The Court held that a state may not circumvent the Commerce Clause by using its subdivisions to impose a protectionist policy. Id. at ___, 112 S.Ct. at 2024. The Court similarly was unpersuaded by Michigan's argument that the policy was unobjectionable because some of the counties accepted waste originating outside of their borders. The Court noted that this fact merely reduced the amount of discrimination, but did not address the counties that did prevent the importation of waste from other counties or states. Id. at ___, 112 S.Ct. at 2025.
In the instant case, the County asserts that it has "allegedly imposed a waste origin limit to preserve the facility's capacity and protect the health of its residents."
The County further argues that its actions do not violate the Commerce Clause because the rescission of the contract prevents the facility from being built and has the effect of banning all waste disposal, not just waste from outside the County. Thus, the County
If this court were to ignore the County's intermediary actions and look only to the result, it would reward the County for acting unconstitutionally and allow future governmental entities to use rescission as a weapon to impose conditions that violate the Commerce Clause. Moreover, if Long County were to prevail on this argument, the County's actions would be immune from review because Allsafe would have to agree to the condition, preempting any claim, or risk rescission, which also would preclude relief. Such a result would insulate the County from judicial review of its actions.
A preliminary injunction will be reversed only if the trial court clearly abused its discretion. United States v. Jefferson County, 720 F.2d 1511 (11th Cir.1983). This circuit considers four factors in determining whether to grant a preliminary injunction; the movant must show: 1) a substantial likelihood of success on the merits of the case; 2) that movant will suffer irreparable harm if the injunction is denied; 3) that the injury to the movant from the denial of injunctive relief outweighs the damage to the opposing party if it is granted; and 4) that the injunction will not harm the public interest. Id. at 1519 (citation omitted). The County argues that the district court's issuance of the injunction was clearly erroneous because Allsafe is unable to prevail on any of the four factors.
Long County contends that Allsafe cannot establish a likelihood of success on the merits because the company is not likely to prevail on its contract claim. The County claims that Allsafe's anticipatory repudiation of the contract gives Long County the right of rescission. The County specifically points to Allsafe's denial of its obligation to construct a recycling facility. In its letter of rescission, the County also noted that Allsafe had refused to pay $25,000 to employ engineers who would ensure that the project was not a public health or safety risk. The County additionally claimed to be concerned with the change in ownership of Allsafe and the company's refusal to provide financial security with regard to the entire project.
The district court found that the contract "appears to be valid and enforceable" against the County and that the County "appears to have no legal basis" for its rescission action.
We also conclude that the district court did not abuse its discretion in ruling that Allsafe had established a likelihood of success with
The County contends that Allsafe failed to satisfy the second prong of the test because it will not suffer irreparable harm. The County claims that the district court confused speculative harm with irreparable harm. Furthermore, it attacks the district court's reliance on the affidavit of Allsafe's expert, alleging that it contains unfounded opinions by a party who has not established his qualifications as an expert.
The district court determined that Allsafe would suffer irreparable injury because cities and counties would not be willing to enter agreements with Allsafe for waste disposal services due to the rescission. A review of the entire record reveals sufficient support for the district court's conclusion; thus, the district court did not abuse its discretion.
Third, the County claims that the district court erred in finding that the County and public will suffer no harm if the injunction is issued. The County claims that the injunction prohibits it from holding hearings and otherwise participating in the decisions regarding the landfill and consequently, endangers the health and safety of residents. The district court characterized these arguments as conclusory and we agree. The County has offered no proof that the injunction will lead to any risk to health or safety. The injunction merely prevents the County from interfering with the contract. It appears that the County is arguing that enforcement of the contract will endanger the health and safety of its citizens; if that is the case, surely the County would not have signed the agreement. Presumably, the County will have the same amount of input into decisions that it would have under the terms of the contract dealing with the planning and preparation stage of the operation.
Finally, the County argues that the injunction is vague and overbroad leading to some of the same alleged health and safety risks as mentioned above. In addition, the County contends that the injunction forces it to legislate by including Allsafe in its waste management plan. The injunction, however, does not reach beyond the obligations of the agreement which the County signed. For example, the contract specifies that the County recognized that state and federal regulations mandate that it develop a plan for disposal of solid waste. The agreement further states that "[t]he County has determined after public hearing and due deliberation, that it is in the public interest of the citizens of the County to enter into this agreement."
We conclude that the district court correctly ruled that Long County failed to show beyond a reasonable doubt that Allsafe could prove no set of facts to establish its Commerce Clause claim. The County's action in rescinding the contract is not exempt from scrutiny under the market participant doctrine because the County did not invest, expend or risk public funds and the geographic limitation allegedly was imposed after the agreement was signed. We affirm the denial of the County's motion to dismiss.
Accordingly, the district court's orders are AFFIRMED.