Automated Salvage Transport, Inc. v. Wheelabrator Environmental Systems, Inc., 229

CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)
Citation155 F.3d 59
Docket NumberD,No. 229,229
Parties29 Envtl. L. Rep. 20,171 AUTOMATED SALVAGE TRANSPORT, INC.; Bria Rubbish and Recycling, Inc.; Connecticut Carting & Salvage Corp.; Connecticut Disposal Service, Inc.; D.P.L. Refuse Service, Inc.; Frank Perrotti & Sons, Inc.; Royal Refuse & Recycling, Inc.; Sanitary Refuse Company, Inc.; Quality Recycling and Disposal; C & D Sanitation & Recycling, LLC, Plaintiffs-Appellants, v. WHEELABRATOR ENVIRONMENTAL SYSTEMS, INC.; Bridgeport Resco Company, L.P.; Riley Energy Systems of Lisbon Corporation, Defendants-Appellees, Connecticut Resources Recovery Authority, Intervenor-Defendant-Appellee. ocket 96-9281.
Decision Date20 August 1998

William M. Bloss, New Haven, CT (David L. Belt, Alinor C. Sterling, Jacobs, Grudberg, Belt & Dow, P.C., New Haven, CT, of counsel), for Plaintiffs-Appellants.

J. Anthony Downs, Boston, MA (A. Lauren Carpenter, Goodwin, Procter & Hoar, LLP, Boston, MA, of counsel), for Defendants-Appellees.

Everett E. Newton, New Haven, CT (Barry J. Waters, April L. Lieberman, Murtha Cullina Richter & Pinney, New Haven, CT, of counsel), for Intervenor-Defendant-Appellee.

Before MESKILL and JACOBS, Circuit Judges, and KORMAN, District Judge. *

KORMAN, District Judge:

The Connecticut Resources Recovery Authority ("CRRA") was created by the Connecticut General Assembly in 1973. Since then, "CRRA has developed and maintained a vast system of solid waste management projects, under a Solid Waste Management Plan, which include[s] waste-to-energy plants...." Amended Complaint p 7. The Solid Waste Management Plan, which was promulgated by Connecticut's Department of Environmental Protection ("DEP") pursuant to express legislative directive, Conn.Gen.Stat § 22a-211, "abandoned landfilling in favor of transporting waste via transfer stations or directly to trash-to-energy plants for ultimate disposal." Amended Complaint p 7.

CRRA owns four of the six trash-to-energy plants currently operating in Connecticut. These four plants, which were constructed by CRRA with the proceeds of bonds issued by CRRA, are in Hartford, Preston, Wallingford, and Bridgeport, and serve over two-thirds of the cities and towns in Connecticut pursuant to long-term contracts by which these cities and towns committed themselves to dispose of their waste. 1 A fifth waste-to-energy plant is located in Bristol, Connecticut, and is privately "owned, operated and/or controlled" by Ogden Systems, Inc. Amended Complaint p 9.

The opening of Connecticut's sixth waste-to-energy facility in Lisbon by defendant, Wheelabrator Environmental Systems (and related defendants), provides the backdrop for this lawsuit. See generally Connecticut Resources Recovery Authority v. Commissioner of Environmental Protection, 233 Conn. 486, 488-96, 659 A.2d 714, 715-19 (1995) (detailing history of CRRA opposition to permit). Specifically, CRRA challenged the decision of the Commissioner of Environmental Protection to permit the Lisbon waste-to-energy plant. CRRA invoked Conn.Gen.Stat. § 22a-208d, which was enacted to ensure that new solid waste disposal facilities would be permitted only if they would "not result in substantial excess capacity of resources recovery facilities...."

The challenge was ultimately resolved by the settlement agreement at the center of this case. CRRA agreed to withdraw its objection to the Lisbon facility permit in consideration for an agreement that addressed, inter alia, a problem caused by certain waste haulers including plaintiffs, Automated Salvage Transport, Inc. (and related plaintiffs). These waste haulers essentially interfered with the performance of long-term contracts that CRRA negotiated with Connecticut municipalities to commit the municipal solid waste to CRRA facilities for disposal at fixed long-term rates. Instead of delivering this waste to CRRA, plaintiffs hauled it to privately operated waste-to-energy plants with more favorable spot market rates. The settlement agreement requires both CRRA and the Wheelabrator defendants to respect one another's municipal contracts by rejecting deliveries of any waste committed to one another. In addition, if a hauler delivers waste committed to CRRA three times within a three-month period to the Wheelabrator defendants, the Wheelabrator defendants must refuse all deliveries of waste from that hauler for the next three months.

The settlement agreement is the subject of a Sherman Act and Commerce Clause complaint. Plaintiffs allege that the settlement agreement is a per se antitrust violation because it is "an unlawful contract, combination and conspiracy" to maintain an alleged CRRA monopoly over Connecticut waste disposal, Amended Complaint pp 11, 13(e), and that it violates the Commerce Clause because it "unreasonably restrain[s] free trade and interstate commerce." Amended Complaint p 13(h). Since the defendants have asserted the state action immunity defense to the antitrust cause of action and the market participant defense to the Commerce Clause cause of action, a brief history of the CRRA, and of the State of Connecticut's role in its creation and operation, is appropriate before we discuss plaintiffs' challenge to this settlement agreement.

Background

In 1973, after decades of reliance on landfills, the Connecticut legislature recognized that the State's "prevailing solid waste disposal practices ... result[ed] in unnecessary environmental damage, waste[d] valuable land and other resources, and constitute[d] a continuing hazard to the health and welfare of the people of the state." Conn.Gen.Stat. § 22a-258. Worse yet, floor debates in the Connecticut General Assembly revealed that roughly ninety percent of these landfills were actually illegal. 16 (S-97) Senate Proceedings, Pt. 8, 1973 Sess., p. 3753 (remarks of Sen. Costello). 2 They continued to operate, violating clean air and landfill regulations, because there was simply no alternative means for waste disposal. Id. Unable to enforce the laws without aggravating the crisis, Connecticut's Department of Environmental Protection (DEP) was forced into a "holding action." Id. at 3761. In 1971, the Connecticut General Assembly ordered the DEP to study Connecticut's solid waste system, and develop a master solid waste disposal solution for the entire state.

The DEP unveiled the contours of its state-wide waste disposal plan in 1973, proposing "an antithesis to the burn and bury philosophy which ha[d] caused such a problem" for Connecticut. 16 (H-143) H.R. Proceedings, Pt. 8, 1973 Sess., p. 6665 (remarks of Rep. Harlow). 3 Rather than simply incinerating or landfilling Connecticut's solid waste, the DEP plan phased out these disposal methods in favor of recycling and energy recovery. In the DEP's model, which has since become common across the nation, residents would "segregate" their waste, separating combustible materials from non-combustibles. The combustible waste would be sent to incinerators where it would be converted into energy, which, in turn, would be sold to utility companies. The non-combustible materials, such as aluminum, would be recycled. H. Rep. Tr. at 6658, 6666, 6692 (remarks of Rep. Harlow). Advocates of the solid waste plan touted it as not only environmentally sound but also "economically viable, perhaps the first plan in the country if not the world to provide a format which can ... provide positive economic benefits." Id. at 6669.

Even as the DEP was working out the plan's final details, the Connecticut General Assembly, deeming the plan's general strategy both sound and inevitable, passed implementing legislation during its 1973 session, rather than delay the solid waste crisis another year. See id. at 6659, 6667-78. This legislation created the Connecticut Resources Recovery Authority ("CRRA") as a "necessary state structure, which can take initiative and appropriate action to provide the necessary systems, facilities, technology and services for solid waste management and resources recovery." Conn.Gen.Stat. § 22a-258.

The Connecticut General Assembly rejected the landfill system in favor of an "appropriate governmental structure, processes and support ... so that effective state systems and facilities for solid waste management and large-scale resources recovery [could] be developed," Conn.Gen.Stat. § 22a-259(3), and so that "solid waste disposal services [could] be provided for municipal and regional authorities and private persons in the state, at reasonable cost, by state systems and facilities ... in accordance with the statewide solid waste management plan." Conn.Gen.Stat. § 22a-259(6).

The Connecticut General Assembly hoped that, by creating this state-wide authority to implement the DEP plan, Connecticut would benefit from an economy of scale, allowing more efficient and affordable development of necessary systems and technologies. See Conn.Gen.Stat. § 22a-258 (finding that "coordinated large-scale processing of solid wastes may be necessary in order to achieve maximum environmental and economic benefits for the people of the state" and that "the development of systems and facilities and the use of the technology necessary to initiate large-scale processing of solid wastes have become logical and necessary functions to be assumed by state government").

A. CRRA's Self-Sustained Operation

CRRA was to fund itself by issuing $250 million in self-liquidating bonds. Sen. Tr. at 3751 (remarks of Sen. DeNardis). It was critical to the General Assembly that CRRA would repay these bonds through sales of its waste disposal services and recovered energy. See, e.g., H. Rep. Tr. at 6687 (remarks of Rep. Dice) ("I'm not ... in favor of the state under-writing or ever subsequently having to pay from the state's funds as a whole to subsidize these matters from the towns. This is supposed to be a self-liquidating program."). See also Conn.Gen.Stat. § 22a-262(2) (directing CRRA to generate "revenues...

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