Hybud Equipment Corp. v. City of Akron, Ohio
| Decision Date | 24 August 1984 |
| Docket Number | No. 83-3306,83-3306 |
| Citation | 742 F.2d 949 |
| Parties | , 1984-2 Trade Cases 66,162, 14 Envtl. L. Rep. 20,809 HYBUD EQUIPMENT CORP., et al., Plaintiffs-Appellants, v. CITY OF AKRON, OHIO, et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
William C. Brashares, argued, John H. Korns, (LC), Charles A. Samuels, Cladouhos & Brashares, Washington, D.C., Joseph Abdenour, Akron, Ohio, Francis X. Beytagh, Toledo, Ohio, John L. Wolfe, Akron, Ohio, for plaintiffs-appellants.
Edward J. Riegler (LC), W.F. Spicer, James L. Bickett, Akron, Ohio, Eben Crawford, argued, Cleveland, Ohio, John E. Holcomb, Akron, Ohio, William E. Schultz, Steven J. Schwartz, Timothy M. Hartman, Asst. Pros. Attys., Akron, Ohio, William Baughman, Jr., Squire, Sanders & Dempsey, Cleveland, Ohio, for defendants-appellees.
John W. Pestle, Randall W. Kraker, Jeffrey S. Rueble, Varnum, Riddering, Schmidt & Howlett, Grand Rapids, Mich., for amicus curiae Public Corp. Law Section of the State Bar of Mich., The Mich. Tps. Assoc. and Mich. Cities of Ann Arbor, Battle Creek, Dearborn, Detroit, Flint, Grand Haven, Grand Rapids, Holland, Kalamazoo, Lansing, Livonia, Pontiac, Southfield, Traverse City and Troy.
Before MERRITT and MARTIN, Circuit Judges; BROWN, Senior Circuit Judge.
This case, which now makes its third appearance before this court, is one of the increasingly frequent challenges under the federal antitrust laws to the actions of state and municipal bodies. These actions raise fundamental questions about the balance of federal and state power and pose the inherent conflict between the national policy of free competition and the anticompetitive consequences of state regulation. This rapidly evolving area of the law portends far-reaching changes in the role of the federal courts in reviewing the exercise of regulatory authority by the states and, ultimately, in the relationship between states and their political subdivisions. 1
The plaintiffs in the instant case allege that the City of Akron, as part of a comprehensive program to dispose of solid waste and create steam energy, has monopolized the business of solid waste processing in violation of the Sherman Antitrust Act. 15 U.S.C. Sec. 1 et seq. The defendants, including the City and a state agency, contend that their actions are protected by the to the antitrust law developed by Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943) and its progeny. The plaintiffs appeal from summary judgment holding that the defendants' actions were within the state action exemption and therefore immune to antitrust attack.
The facts in this case are set forth in detail in the original district court opinion, Glenwillow Landfill, Inc. v. City of Akron, 485 F.Supp. 671 (N.D.Ohio 1979). Those facts relevant to the issues before us are summarized below.
The plaintiffs in this case challenge an ordinance adopted as part of a plan to solve two pressing problems confronting the City of Akron. In the late 1960's, Akron had exhausted all but one sanitary landfill for solid waste disposal. A proposal to open a new site encountered immediate legal challenges. As the City struggled to find alternatives for waste disposal, Ohio Edison petitioned the Public Utilities Commission to permit the company to abandon its steam heating system and halt the supply of steam for Akron's downtown business district.
In an effort to find a single solution to its difficulties, the City began to consider constructing a "Recycle Energy System" ("RES") to convert solid waste into steam. After several studies and a public hearing, the City Council, in April 1973, authorized the City administration to retain a firm to design an RES project. By December 1974, final plans and specifications were completed and construction contracts were let out for bid. Financing, however, proved to be a substantial barrier. The City intended to issue revenue bonds to finance the project, but in mid-1975 the underwriters for the bond issue informed the City that the bonds would not be marketable.
The City turned to the Ohio Water Development Agency ("OWDA") for assistance, and in September 1975, OWDA agreed to finance the project by issuing revenue bonds. When OWDA found that the bond issue could not be secured by the City's general fund, the proposed financing package was restructured with new underwriters. The new underwriters renegotiated steam supply contracts for the project and required the creation of a special contingency fund by the City and county governments to cover construction cost overruns. The underwriters also determined that the RES must be assured a steady supply of waste in order to market the bonds. Following this evaluation, the City and OWDA decided that it would be necessary to require, by ordinance, that all solid waste collected within the City limits be transported to the RES facility.
In 1976, the City and OWDA entered into a Cooperative Agreement to finance the RES project. Section 5.5 of the Agreement provides that the City ("LGA") covenants with the OWDA for the benefit of the bond holders that:
I. For the term of this Agreement, the LGA shall require that all collectors and haulers of Solid Waste within the LGA be licensed by the LGA and all such licenses shall provide that all collectors or haulers of Solid Waste shall dispose of all Solid Waste generated within the corporate limits of the LGA which is acceptable for disposal by the Project to be delivered to the Project for disposal through the Project and require that such haulers and collectors and the LGA pay or cause to be paid the fees and charges imposed by the LGA for the disposal of Solid Wastes at the Project. The LGA will take all available action, administrative, judicial and legislative, to cause all Solid Waste generated within the corporate limits of the LGA and which is acceptable for disposal by the Project, to be delivered to the Project for disposal through the Project.
The Agreement further provides that the City would prohibit the establishment of alternative waste disposal sites. 2 In December 1976, the OWDA issued an Official Statement announcing the offering of $46,000,000 of special obligation bonds to finance the project. The Statement contained a copy of the Cooperative Agreement.
To carry out the terms of the Agreement, the Akron City Council adopted Ordinance No. 841-76 in October, 1976. The ordinance requires all rubbish collected within the corporate limits of the City to be deposited at the RES plant. The ordinance also authorizes the Director of Public Service to establish a service charge ("tipping fee") for disposal of solid waste at the RES facility. Persons who violate the ordinance may lose their licenses and face criminal prosecution. 3
Before the adoption of the ordinance, plaintiff Hybud Equipment Corp. was a licensed hauler of waste in the Akron area. Under agreements with various commercial and industrial firms, Hybud collected solid waste in return for a fee. An affiliated company, plaintiff Budoff Iron and Metal Corp., operated a transfer station that separated out recyclables--primarily cardboard and metals--to be sold. Nonrecyclable solid waste was transported to landfills where a tipping fee was charged to the haulers for each ton of waste disposed.
The ordinance affects the plaintiffs' business in several ways. All waste collected within the City limits must be transported to the RES plant and haulers must pay a uniform tipping fee to the RES plant. This exclusive right eliminates any possible competition among disposal sites within the City and prohibits haulers from seeking lower tipping fees at sites outside the City. Furthermore, the separation and sale of recyclable materials by collectors is curtailed by the ordinance. All solid waste--including waste containing recyclables--must be delivered to the RES facility. Recyclable materials may be burned as fuel or separated by the plant operator and sold to generate additional income. As part of an incentive agreement, the operator of the plant, Teledyne National, is permitted to retain one-half of all revenues recovered from the sale of recyclable materials. The remainder is to be used to offset operating expenses.
The plaintiffs brought suit in federal court alleging that the ordinance and agreement deprived them of due process, constituted a restraint of commerce, and violated the Sherman Antitrust Act. In Glenwillow Landfill, Inc. v. City of Akron, 485 F.Supp. 671 (N.D.Ohio 1979), the district court awarded summary judgment to the defendants on all issues.
The district court ruled that the defendants' activities were protected from antitrust liability under the state action exemption of Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). The district court rested its decision on two alternative grounds. First, the court found that OWDA was acting for the state in advancing legitimate state interests. The restrictions in the Cooperative Agreement, the court found, were within OWDA's authority to finance solid waste facilities. This exercise of this state power, the court held, was beyond the reach of the antitrust laws. 485 F.Supp. at 676-77. Second, the court found that the state of Ohio had authorized the City of Akron through its home-rule powers to regulate waste collection. "[T]he Ohio Constitution declares that cities act as agents of the state when they exercise governmental powers within their city limits." 485 F.Supp. at 677. The Ohio courts, moreover, had held that such power could lawfully be exerted through a monopoly. Therefore, the district court concluded, the state action exemption protected the City's exercise of state power.
The district court's decision was affirmed on appeal. Hybud...
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