66 F.3d 502 (2nd Cir. 1995), 1417, SSC Corp. v. Town of Smithtown

Docket Nº:1417, Docket 94-9192.
Citation:66 F.3d 502
Party Name:SSC CORP., Plaintiff-Counter-Defendant-Appellee, v. TOWN OF SMITHTOWN, Town Board of the Town of Smithtown, and Patrick Vecchio, as Supervisor, Town of Smithtown, Defendants-Counter-Claimants-Appellants.
Case Date:September 19, 1995
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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66 F.3d 502 (2nd Cir. 1995)

SSC CORP., Plaintiff-Counter-Defendant-Appellee,


TOWN OF SMITHTOWN, Town Board of the Town of Smithtown, and

Patrick Vecchio, as Supervisor, Town of Smithtown,


No. 1417, Docket 94-9192.

United States Court of Appeals, Second Circuit

September 19, 1995

Argued Feb. 21, 1995.

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[Copyrighted Material Omitted]

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Michael J. Cahill, Sinnreich Wasserman Grubin & Cahill, Hauppauge, NY (James Joyce, John Zollo, of counsel) for defendants-counter-claimants-appellants.

Leon Friedman, New York City (David L. Snyder, Snyder & Snyder, White Plains, NY, of counsel), for plaintiff-counter-defendant-appellee.

Gordon J. Johnson, Deputy Bureau Chief, Environmental Protection Bureau, John J. Sipos, Assistant Attorney General, Dennis C. Vacco, Attorney General of the State of New York, for Amicus Curiae State of New York.

Michael D. Diederich, Stony Point, New York, for Amici Curiae County of Rockland, Rockland County Solid Waste Management Authority, and New York State Association for Solid Waste Management.

Frank L. Amoroso, Nixon, Hargrave, Devans & Doyle, Garden City, New York, for Amicus Curiae Town of Babylon.

Robert M. Calica, Reisman, Peirez, Reisman & Calica, Garden City, New York, for Amici Curiae Town of Islip and Town of Brookhaven.

Frederick Eisenbud, Cahn, Wishod & Lamb, Melville, New York, for Amici Curiae Anthony Leteri, USA Recycling, Inc., and Friendly Carting, Inc.

Before: NEWMAN, Chief Judge, VAN GRAAFEILAND and CABRANES, Circuit Judges.

JOSE A. CABRANES, Circuit Judge:

A law professor at Harvard is said to have remarked facetiously, a generation ago, that the greatest constitutional cases had concerned the sale and distribution of milk. The story might well be apocryphal as well as hyperbolic but there is truth to the statement, evidenced by the ubiquity of milk in the Supreme Court's Commerce Clause jurisprudence. 1 Although the flood of milk cases

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has receded in recent years, it has given way to a federal docket that is just as clogged with--of all things--garbage. No fewer than six times in the past seven years has the Supreme Court granted certiorari to decide a case involving the disposal of solid or hazardous waste. 2

Not long ago, municipalities took out the trash simply by hauling it to the local dump. 3 But as landfills have reached the bursting point, and as environmental regulations have burgeoned, 4 local governments have been forced to make significant investments and become more innovative in safely and legally disposing of trash. These investments and innovations include the multifarious transfer stations, recycling centers, and incinerators that have mushroomed throughout the land in the past decade.

Smithtown, New York, responded to the environmental and regulatory crisis by arranging with the neighboring town of Huntington for the construction of a garbage incinerator--an incinerator that would be owned and operated by a private company, but financed by the towns. The two towns hoped that the incinerator would stem the flow of solid waste filling up the town dump, put the garbage to practical use by generating electricity, and ensure a reliable method of waste disposal for town residents for years to come. As part of its overall solid waste plan, and to protect its financial investment in the incinerator, Smithtown pursued two parallel strategies. First, it passed a "flow control" ordinance that required all residential and commercial garbage generated in town to be disposed of at the incinerator, where Smithtown charges so-called "tipping fees" based on the amount of garbage dumped. 5 Second, Smithtown created a residential garbage collection district and entered into a contract with private garbage haulers to pick up all household garbage in the district. Under the terms of the contract, the haulers were required to bring that garbage to the incinerator.

The United States District Court for the Eastern District of New York (Thomas C. Platt, Chief Judge ) invalidated both the ordinance and contract under the dormant Commerce Clause of the United States Constitution, 6 relying on the Supreme Court's holding in C & A Carbone, Inc. v. Town of Clarkstown, --- U.S. ----, 114 S.Ct. 1677, 128 L.Ed.2d 399 (1994), that a similar ordinance

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impermissibly discriminated against interstate commerce. Smithtown asks this court to distinguish the virtues of its flow control ordinance and residential garbage collection contract from the vices of the flow control ordinance struck down in Carbone. Smithtown contends primarily that its extensive financial stake in the local incinerator makes the town a "market participant" in the waste disposal market, and therefore exempts both its flow control ordinance and contract from the proscriptions of the Commerce Clause.

We conclude that Smithtown's flow control ordinance--enforceable by criminal fines and jail terms--clearly constitutes municipal regulation of the waste disposal market, not participation in that market, thus subjecting the ordinance to Commerce Clause scrutiny. Following the Commerce Clause analysis set forth by the Supreme Court in Carbone, we are compelled to find that the ordinance impermissibly discriminates against interstate commerce. On the other hand, we find that Smithtown's garbage hauling contract with SSC constitutes municipal participation in both the waste collection and disposal markets, and is thus free from the strictures of the Commerce Clause.

Accordingly, we affirm the district court's judgment striking down the flow control ordinance, but reverse its invalidation of the contract.


  1. Background

    Smithtown is a municipality in northwestern Suffolk County on Long Island, New York, with a population of approximately 125,000. In the mid-1980s, following the adoption of various federal 7 and New York State 8 policies designed to upgrade or replace old landfills that were either full or unsafe, Smithtown began negotiations with the neighboring town of Huntington to provide joint waste disposal service for residents of both towns. The towns entered into a municipal agreement, authorized by special state statute, to share Smithtown's existing landfill and Huntington's incinerator, whose construction was underway but incomplete at the time of the agreement. 9

    The incinerator was built and is operated by a private company, Ogden Martin Systems ("Ogden"), 10 on land owned by the town of Huntington. The service contract between Ogden and the towns stipulates that Ogden "is the sole owner" of the incinerator, and that the towns are "customer[s] only."

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    The towns financed construction of the incinerator through tax-free bonds issued by the New York State Environmental Facilities Corporation, a public authority. The bonding authority lent the proceeds from the bonds to Ogden to build the incinerator. These bonds are secured primarily by a twenty-five year contractual obligation of Smithtown and Huntington to reimburse Ogden for the construction and operation costs of the incinerator. This obligation is known as the "Service Fee," and is payable regardless of whether any waste is delivered to the incinerator. Accordingly, the towns pay the Service Fee to Ogden, which repays the state bonding authority, which in turn repays the bondholders. To satisfy its share of the Service Fee, Smithtown relies on funds from two sources: (1) ad valorem property taxes and (2) tipping fees at the incinerator.

    In return for paying the Service Fee, Smithtown and Huntington own exclusive rights to decide what waste may be disposed at the incinerator, and thus to charge tipping fees for garbage that is dumped there.

  2. The Flow Control Ordinance

    To ensure a steady flow of garbage to the Huntington incinerator (and thus to ensure a steady flow of tipping fees), Smithtown enacted a "flow control" ordinance in 1991 that provides as follows:

    No person authorized to collect or transport acceptable waste within the Town of Smithtown shall dispose of acceptable waste generated within the Town of Smithtown except at a solid waste management facility designated by the Town Board pursuant to this section.

    SMITHTOWN CODE Sec. 177-17(B) (1994). 11 Pursuant to this ordinance, Smithtown's Town Board designated the Huntington incinerator as the disposal site for both residential and commercial garbage 12 generated in town. For recyclables, the Board designated the adjacent town recycling center. Smithtown charges tipping fees of $65 per ton of garbage dumped at the incinerator, but imposes no charges for recyclables brought to the recycling center. Id. Sec. 177-83(D)(1)-(2). The town charges tipping fees for garbage only in order to encourage haulers to divert recyclables out of the solid waste stream.

    Violation of the flow control ordinance is an unclassified misdemeanor, punishable by a fine of up to $5,000 and up to 60 days' imprisonment. Id. Sec. 177-102.

  3. The Improvement Contract

    The second major step in Smithtown's solid waste plan was to arrange for municipal garbage collection and disposal for all town residents. In 1991, the town divided its residential areas into ten improvement districts and solicited competitive bids for waste collection services in each district. 13 The town also drew up a standard form contract (the "Improvement contract"), which all successful bidders had to sign, and which required them to dispose of residential garbage at the Huntington incinerator. Accordingly, they must factor into their bids the $65 per ton tipping fee charged by Smithtown for using the incinerator, and an estimate of the amount of waste generated in the district for which they are bidding. 1...

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