Hybud Equipment Corp. v. City of Akron, Ohio
| Decision Date | 17 July 1981 |
| Docket Number | No. 80-3121,80-3121 |
| Citation | 654 F.2d 1187 |
| Parties | , 1981-2 Trade Cases 64,161, 11 Envtl. L. Rep. 20,894 HYBUD EQUIPMENT CORP.; Budoff Iron & Metal Co.; Glenwillow Landfill, Inc.; Waldo A. Sober, Jr.; J. P. Hawley Sanitation, Inc. & G. G. Kovach, Plaintiffs- Appellants, v. CITY OF AKRON, OHIO; John S. Ballard; Ray Kapper; Elsie Reaven; James R. Williams; Vincent Ciraco; Robert Goehler; Reginald Brooks; Kathleen Griessing; Robert Otterman; Mickey Eritano, Jr.; John Frank; Don Plusquellic; William C. Grimm; Robert Edwards; County of Summit, Ohio; Mark Ravenscraft; Ted Coles; Don Stephens; Ohio Water Development Authority, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
William C. Brashares, Cladouhos & Brashares, Washington, D. C., Joseph E. Abdenour, John L. Wolfe, Hershey & Browne, Akron, Ohio, for plaintiffs-appellants.
Eben G. Crawford, William H. Baughman, Jr., Cleveland, Ohio, John E. Holcomb, William F. Spicer, Asst. Dir. of Law, City of Akron, Steven J. Schwartz, Timothy Hartman, Asst. Pros. Attys., Akron, Ohio, James L. Bickett, Cuyahoga Falls, Ohio, for defendants-appellees.
William M. Bradner, Jr., Terry A. Thompson, Chadbourne, Parke, Whiteside & Wolff, New York City, for amicus curiae American Paper Institute.
Richard J. Lazarus, Dept. of Justice, Washington, D. C., for U. S. A. amicus curiae.
Before MERRITT and BOYCE F. MARTIN, Jr., Circuit Judges; GORDON, Senior District Judge. *
In the late 1960s, the City of Akron was confronted by the need to develop new sources of energy and to find alternative methods of waste disposal. In an attempt to alleviate both problems, the City decided to construct a $55 million energy recycling plant, a facility that generates energy in the form of steam heat from the incineration of trash. 1 Plaintiff-appellants seek injunctive relief against several actions undertaken by the City and other defendants to guarantee the feasibility of the plant, alleging that those actions violate the federal antitrust laws and the due process, interstate commerce and takings clauses of the Constitution. Underlying the legal issues are related and sometimes conflicting national policies respecting resource and energy conservation, environmental protection and energy production. After reviewing the questions presented, the District Court entered judgment for the defendants on all claims. Glenwillow Landfill, Inc. v. City of Akron, 485 F.Supp. 671 (N.D.Ohio 1979). The issues presented on appeal are whether the City has violated either federal constitutional provisions or the antitrust laws by adopting a city ordinance monopolizing garbage collection and disposal and eliminating competition in the market for recyclable wastes. We find no federal constitutional or statutory violation and accordingly affirm.
In the late 1960s, Akron's solid waste disposal landfills were approaching capacity, and a new landfill operating in violation of EPA standards was immediately challenged in court. In addition, Ohio Edison, which supplied steam heat to businesses in downtown Akron, sought to abandon the Akron market. The City began to search for an alternative energy supply. After a period of study, the City decided to develop the solid waste recycling plant, but the revenue bonds issued to finance the project proved unmarketable. The City turned to the Ohio Water Development Authority, a state agency, for financial assistance. It agreed to finance the project but later discovered that it could not secure the bonds from its general fund.
At this juncture, in 1976, the firm of Dillon, Reed & Co. was hired to study and possibly underwrite the bonds. To improve the marketability of the $46 million bond issue, the underwriters imposed the requirement that an agreement be executed between the Water Authority, Summit County (in which Akron is situated), and the City of Akron. Among the covenants included in the agreement was the requirement that the City enact an ordinance that would guarantee a supply of solid waste for the plant.
This is the ordinance challenged here. It was passed by the City in October 1976. Together the agreement 2 and the ordinance 3 prohibit the establishment of alternative waste disposal sites, require all garbage collectors within the City and County to deposit at the plant all waste "acceptable for disposal" at the facility, and require all collectors to pay a "tipping fee" when they deposit waste at the plant. Collectors violating the ordinance could lose their licenses and be subject to criminal penalties. These enactments were considered necessary for the financial success of the plant, for the defendants and the underwriters feared that without such restrictions it would be impossible to guarantee a sufficient waste supply from which a steady source of energy for potential customers could be generated. Some materials are not deposited at the plant, such as recyclables presorted at the source that never enter the waste stream, and materials judged unacceptable for disposal at the facility (e. g., hazardous wastes and solid matter that the plant is unequipped to incinerate). The wastes "acceptable for disposal" at the facility consist of two types of solid materials those that are incinerated to generate steam, and those (primarily ferrous) that cannot be burned but can be recovered and recycled. Some non-metal recyclable materials, such as paper products, which prior to the enactment of the ordinance were separated out and sold by the collectors, now will be incinerated instead to generate steam. Concern over the decision to destroy recyclable paper products caused the American Paper Institute to file an amicus brief challenging the legality of the ordinance.
According to this plan, revenue is earned by the plant in three ways: from the generation and sale of energy, from the tipping fees paid by collectors disposing of waste at the facility, and from the sale of recyclables recovered at the facility. The City has agreed with Teledyne National, the private company that has contracted to operate the plant that Teledyne may retain one-half of the revenues earned from sale of recovered materials.
The plan established in the agreement and ordinance interferes with the previous operations of the plaintiffs, landfill operators and collectors of solid waste in the County. Previously Hybud Equipment Corp. collected waste in the City, charging customers a fee for the service. The waste was hauled to a "transfer station" run by an affiliated company, Budoff Iron & Metal Corp., where recyclable materials were separated out and sold. Hybud paid rebates to its customers from the payments it received from selling the recyclables. The waste that could not be sold was hauled to landfills where Hybud paid a tipping fee to deposit it. Hybud in effect paid customers for the valuable recyclables it received from them while charging them for the service of hauling away nonrecyclable waste. The other plaintiffs are other waste collectors in the City and County and operators of landfill disposal sites that received a significant portion of their income from tipping fees paid by collectors hauling waste originating in the City and the County.
The ordinance and agreement interfere with plaintiffs' businesses in three ways. First, the income of the landfills is substantially reduced because they no longer receive waste (except materials unacceptable at the plant) originating in the City. Second, the collectors are required to haul waste to the plant and pay its fixed tipping fee. This eliminates the competition among waste disposal sites, grants the plant the power to fix tipping fees unrestrained by the forces of a competitive market, and deprives collectors of their former freedom to shop among disposal sites and to patronize those supplying services at minimal combined tipping and transportation costs. Finally, the business of recovering and selling valuable recyclables is removed from collectors such as Hybud. Instead of receiving payments from the sale of the recyclables they collect, haulers are required to deposit them at the plant and pay a tipping fee, as with the nonrecyclable solid waste deposited there. The plant treats the recyclables as it wishes, either burning them to create energy or separating them out and selling them. Either way, the revenue generated from the use of the recyclables is retained by the plant.
Plaintiffs do not challenge the establishment of the plant. The construction of an additional facility to compete in the waste disposal industry, they acknowledge, violates no law. Rather, they challenge the additional actions taken by the defendants to eliminate competition in the industry and to make the plant the sole waste disposal facility in the Akron area. Plaintiffs argue that the economic viability of the plant may not be insured at the price of destroying competition. They seek an injunction prohibiting enforcement of the ordinance and a declaration that the ordinance and other concerted activities among the defendants are illegal. Defendants concede that the agreement and the ordinance were enacted upon the urgings of the project's underwriters in order to guarantee the project's financial success. The defendants as well as the United States Department of Justice in an amicus brief filed on behalf of the Environmental Protection Agency and the Department of Energy argue, however, that the anticompetitive steps taken to make the plant feasible accord with national energy and environmental policy. 4
Akron exercises its municipal powers under a grant of municipal home rule found in Ohio's Constitution. Article XVIII, § 3 reads:
Municipalities shall have authority to exercise all powers of...
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