Ben Oehrleins, Inc. v. Hennepin County

• Decision Date: 28 March 1996
• Docket Number: Civ. No. 4-94-63.
• Parties: BEN OEHRLEINS AND SONS AND DAUGHTER, INC. n/k/a Dakota Resource Recovery, Inc.; Dick's Sanitation; Elk River Landfill, Inc.; Gallagher's Service, Inc.; Knutson Services, Inc.; Randy's Sanitation, Inc.; Poor Richard's, Inc.; Vasko Rubbish Removal, Inc.; Wasteco, Inc.; Waste Systems Corp.; and Walters Recycling & Refuse Service, Plaintiffs, v. HENNEPIN COUNTY, MINNESOTA, Defendant.
• Court: U.S. District Court — District of Minnesota

922 F. Supp. 1396

BEN OEHRLEINS AND SONS AND DAUGHTER, INC. n/k/a Dakota Resource Recovery, Inc.; Dick's Sanitation; Elk River Landfill, Inc.; Gallagher's Service, Inc.; Knutson Services, Inc.; Randy's Sanitation, Inc.; Poor Richard's, Inc.; Vasko Rubbish Removal, Inc.; Wasteco, Inc.; Waste Systems Corp.; and Walters Recycling & Refuse Service, Plaintiffs, v. HENNEPIN COUNTY, MINNESOTA, Defendant.

Civ. No. 4-94-63.

United States District Court, D. Minnesota, Fourth Division.

March 28, 1996.

COPYRIGHT MATERIAL OMITTED

Robert E. Cattanach, Steven J. Wells, Alexandra B. Klass and Dorsey & Whitney, Minneapolis, MN, for plaintiffs.

Charles N. Nauen, Robert J. Schmit, William A. Gengler and Schatz, Paquin, Lockridge, Grindal & Holstein, Minneapolis, MN, and Michael O. Freeman, Hennepin County Attorney and Toni A. Beitz, Senior Assistant County Attorney, Minneapolis, MN, for defendant.

ORDER

DOTY, District Judge.

This matter is before the court on plaintiffs' motion for partial summary judgment and defendant's motion to dismiss. Based on a review of the file, record and proceedings herein, and for the reasons stated, the court grants plaintiffs' motion for partial summary judgment and grants in part and denies in part defendant's motion to dismiss.

BACKGROUND

Many of the essential facts may be found in the court's prior order denying defendant's motion to dismiss, reported at 867 F.Supp. 1430 (D.Minn.1994). In response to the Minnesota Waste Management Act, Minn. Stat. § 115A.02, et seq., Hennepin County ("the County") enacted Ordinance 12. Ordinance 12 is a waste flow-control regulation which, consistent with the Act and widespread practice, reflects the hierarchy of waste disposal methods. Processing is considered to be environmentally superior to landfilling. Ordinance 12, as written, requires that all "Designated Waste" generated within Hennepin County shall be delivered to a "Designated Facility". The County, in implementing the ordinance, did not have to look far for a facility to designate. In the mid-1980s, the County issued approximately $150,000,000 in bonds for the construction of a "mass burn" facility which cost $129,000,000 to build. To date, only this facility (known as "HERC") and one other have been designated by the County. This designation permitted the County to charge a fee substantially higher than that charged by other waste disposal facilities.

Plaintiffs in the present action are haulers and processors of waste. They allege that Ordinance 12 discriminated against interstate commerce because, as written, it does not permit County waste to be disposed out-of-state. In late 1993, the County suspended, "until further notice", enforcement of Ordinance 12 with respect to waste destined for out-of-state disposal. As a result, there is also presented the issue of the ordinance's constitutionality "as enforced."

DISCUSSION

I. Defendant's Motion to Dismiss

A. Standard of Review

A motion to dismiss for failure to state a claim tests the sufficiency of the complaint. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). When analyzing a motion to dismiss, the court looks to the complaint as pleaded. The complaint must be liberally construed and viewed in the light most favorable to the plaintiff. The court will dismiss a complaint only when it appears the plaintiff cannot prove any set of facts that supports the claim. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957).

B. The Tax Injunction Act

Defendant's motion to dismiss has three grounds. First, the County argues that the court lacks jurisdiction to entertain plaintiffs' challenge to Ordinance 12 because the ordinance, as characterized by plaintiffs, constitutes a "tax". The Tax Injunction Act provides that:

The district court shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of that state.

28 U.S.C. § 1341. This prohibition extends to suits for injunctive relief and to section 1983 claims in which a plaintiff seeks an injunction. Burris v. City of Little Rock, 941 F.2d 717, 720 (8th Cir.1991).

An essential predicate for invoking this defense is a determination that Ordinance 12 constitutes a tax. Whether it does so is a question of federal law, and this court need not defer to the label given by the County. Wright v. McClain, 835 F.2d 143, 144 (6th Cir.1987). The County does not argue that Ordinance 12 is a tax, rather the County suggests that plaintiffs characterize the fee-generating aspects of Ordinance 12 as a funding measure and thus a "tax". This position can perhaps be traced to the County's reliance on Indiana Waste Systems v. County of Porter, 787 F.Supp. 859, 865 (N.D.Ind.1992). Indiana Waste Systems involved a $0.20 fee levied on each cubic yard of waste disposed of at plaintiff's landfill. In considering a Tax Injunction Act defense to the plaintiff's suit, the court stated that "IWS agrees that the fee is a tax by stating in its complaint `no statute grants Porter County the express authority to impose a tax such as the one contemplated by Section V of the Ordinance'". Id.

Hennepin County's reliance on this case is misplaced. In determining whether Ordinance 12 is a tax the court must look toward the purpose underlying the ordinance. If it is primarily a revenue-raising measure, then it may be considered a tax. Marigold Foods v. Redalen, 809 F.Supp. 714, 719 (D.Minn. 1992). On the other hand, if it is primarily regulatory or punitive in nature, then it is not a tax. Id.; see also American Petrofina Co. of Texas v. Nance, 859 F.2d 840, 841 (10th Cir.1988) ("the mere fact that a statute raises revenue does not imprint upon it the characteristics of a law by which the taxing power is exercised").

Ordinance 12 clearly raises revenue. However, the "tipping fee" which the County has been able to charge is not the primary feature of the ordinance. Rather, the ordinance regulates the flow of waste originating in Hennepin County. The revenue raised, while undeniably significant, is incident to the requirement that waste must go to the County's designated facilities. As it is not a tax, the court is not precluded from considering the constitutionality of Ordinance 12.

C. Collateral Estoppel

The County argues that Count II of the complaint, which alleges that the County arbitrarily and capriciously enforced Ordinance 12 despite knowing of its unconstitutionality, must also be dismissed. On March 20, 1995, a discovery order was issued in the companion state-court litigation which arose following this court's dismissal of plaintiffs' related claims.¹ The discovery order rejected plaintiffs' claim that certain putative work-product generated by the County was subject to the crime-fraud exception to the work-product doctrine. The order states:

Plaintiffs have at most established that the County was aware of potential constitutional problems with Ordinance 12. This awareness, however, is not enough to establish that the County's continued enforcement of that ordinance was in violation of the law. Accordingly, the Court denies Plaintiffs sic motion as said motion relates to the crime fraud exception.

Oehrleins v. Hennepin County, No. 94-12549, at 8 n. 4 (Hennepin Cty. Dist.Ct. Mar. 20, 1995). The County argues that this statement collaterally estops the plaintiffs from proceeding under Count II. The court disagrees.

Collateral estoppel requires, inter alia, the existence of a valid, final judgment and an identity between the issue decided and the one for which preclusion is sought. Restatement (Second) of Judgments, § 27. The County has demonstrated neither of these. First, a discovery order is not a final judgment. Further, plaintiffs are not seeking in Count II a determination that the County is guilty of criminal or fraudulent conduct. Plaintiffs' substantive due process claim is a constitutional tort, the merits of which are not implicated by an order denying discovery based on the crime-fraud exception to the work-product doctrine. Defendant's motion to dismiss Count II based on collateral estoppel is therefore denied.

D. Minnesota Constitution

Finally, the County argues that Count V, which articulates a violation of due process rights secured by Article I, § 7 of the Minnesota Constitution, fails to state a claim. Paragraph 83 of the complaint states that "Ordinance 12 impermissibly interferes with intrastate commerce in violation of the Minnesota due process clause." Paragraph 3 under plaintiffs' prayer for relief requests damages as a result of this violation.

The court agrees that this count fails to state a claim. Minnesota does not recognize a damage remedy for violations of Art. I, § 7 of the Minnesota Constitution. Bird v. State Dept. of Public Safety, 375 N.W.2d 36, 40 (Minn.Ct.App.1985). Moreover, the basis of plaintiffs' claim, restriction of intrastate commerce, was rejected in Waste Systems Corp. v. County of Martin, 784 F.Supp. 641 (D.Minn.1992). In Waste Systems, the court noted that, although the Minnesota Supreme Court held in 1975 that intrastate restrictions were invalid, this holding was legislatively overturned by Minn.Stat. § 115A.80, et seq., which explicitly authorized such restrictions. Waste Systems, 784 F.Supp. at 647. Accordingly, this claim is dismissed with prejudice.

E. Walters Recycling

Consistent with the court's prior order, 867 F.Supp. at 1435-1436, Count IV of the complaint (Sherman Act) is dismissed with respect to plaintiff Walters Recycling, a party added by the April 5, 1995, order of Magistrate Judge Lebedoff.

II. Plaintiffs' Motion for Partial Summary Judgment

A. Standard of Review

The court should grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact...