GSW, Inc. v. Long County, Ga., 92-8732

• Decision Date: 02 September 1993
• Docket Number: No. 92-8732,92-8732
• Parties: GSW, INC., f/k/a Allsafe Waste Management, Inc., Plaintiff-Appellee, v. LONG COUNTY, GEORGIA, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1508

999 F.2d 1508

GSW, INC., f/k/a Allsafe Waste Management, Inc., Plaintiff-Appellee, v. LONG COUNTY, GEORGIA, Defendant-Appellant.

No. 92-8732.

United States Court of Appeals Eleventh Circuit.

Sept. 2, 1993.

Albert Rahn, III, Gleenville, GA, Stephen E. O'Day, Smith Gambrell & Russell, Atlanta, GA, for defendant-appellant.

Brian J. Passante, Sell & Melton, Macon, GA, for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Georgia.

Before KRAVITCH and HATCHETT, Circuit Judges, and ATKINS ^*, Senior District Judge.

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Waste Management, Inc. (Allsafe) brought suit in district court alleging that Long County unconstitutionally had rescinded a contract between Allsafe and the County regarding a solid waste landfill facility which was to be owned privately by Allsafe and located in Long County.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.

I.

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 of a private solid waste facility in Long County. On November 6, 1990, Long County and Ocmulgee Services, Inc. (OSI), a sister corporation to Ocmulgee Disposal, entered into an agreement whereby the company agreed to build the facility and charge a "tipping fee" to all users, with a percentage of the revenues going to the County. The County agreed to provide technical assistance, to license the facility and to communicate its support for the project to the appropriate regulatory agencies. The contract did not mention any geographic restrictions on the origin of the waste and specifically authorized the company to accept waste from areas outside of Long County, as long as the facility complied with federal and state law.

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. ¹ In August 1991, Long County agreed to an assignment of interests from OSI to Allsafe. Allsafe was later renamed GSW, Inc. and O & G Industries Inc., a Connecticut company, acquired 52% of GSW's shares. ²

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.

II.

A.

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.

B.

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 Commerce Clause. ³ At its most basic level, the dormant Commerce Clause stands for the principle " 'that the right to engage in interstate commerce is not the gift of a state, and that a state cannot regulate or restrain it.' " Hughes v. Alexandria Scrap Co., 426 U.S. 794, 808, 96 S.Ct. 2488, 2497, 49 L.Ed.2d 220 (1976) (quoting Hood & Sons v. Du Mond, 336 U.S. 525, 539, 69 S.Ct. 657, 665, 93 L.Ed. 865 (1949)).

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. ⁴ The County contends that it was acting as a market participant when it purchased the right to use the landfill and receive revenue from it pursuant to the contractual agreement. Thus, the County argues that its actions fall outside of the Commerce Clause as a matter of law and that the district court erred when it refused to exempt the County's actions from constitutional scrutiny. Allsafe contends that the County was acting as a market regulator by imposing a restriction on trade, so its actions fall within the reach of the clause.

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

[t]he common thread of all these cases is that the State interfered with the natural functioning of the interstate market either through prohibition or through burdensome regulation. By contrast, Maryland has not sought to prohibit the flow of hulks, or to regulate the conditions under which it may occur. Instead, it has entered into the market itself to bid up their price.

Id.

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 of shortage. The Court reaffirmed its holding in Alexandria Scrap and again explained the reasoning behind its decision in that case. The Court stated that "[t]here is no indication of a constitutional plan to limit the ability of the States themselves to operate freely in the free market." Reeves, 447 U.S. at 437, 100 S.Ct. at 2277. It further reasoned that South Dakota, as a seller of cement, fit the description of a market participant even better than Maryland, which was subsidizing local producers. Id. at 440, 100 S.Ct. at 2271. Moreover, the Court found that South Dakota's program was not objectionable because it merely limited the benefits of a state program to those who fund such programs with state taxes. The Court noted that the citizens of South Dakota bore the business risk by setting up the plant at a cost of two million dollars from the state treasury. Id. at 442, 100 S.Ct. at 2280.

After reaffirming the market participant doctrine in Reeves, the Court extended it in White v. Massachusetts Council of Construction Employees, 460 U.S. 204,...