Sanitation and Recycling Industry, Inc. v. City of New York

• Decision Date: 26 June 1996
• Docket Number: No. 96 Civ. 4131 (MP).,96 Civ. 4131 (MP).
• Citation: 928 F. Supp. 407
• Parties: SANITATION AND RECYCLING INDUSTRY, INC., et al., Plaintiffs, v. CITY OF NEW YORK, Defendant.
• Court: U.S. District Court — Southern District of New York

928 F. Supp. 407

SANITATION AND RECYCLING INDUSTRY, INC., et al., Plaintiffs, v. CITY OF NEW YORK, Defendant.

No. 96 Civ. 4131 (MP).

United States District Court, S.D. New York.

June 26, 1996.

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Rosenman & Colin, LLP by Gerald Walpin, New York City, for Plaintiffs.

The City of New York, Office of the Corporation Counsel by Terri Feinstein Sasanow, New York City.

New York City, Department of Investigation by Richard W. Mark, New York City.

MILTON POLLACK, Senior District Judge.

The police powers of local governments over the waste collection industry are by now an unexceptional element of municipal governance. Control over the regulation of garbage collection is a classic example of municipal police powers reserved to the state and local governments. Courts have upheld the authority of local governments to control local garbage collection in countless cases.

This suit relates to the licensed business of carting companies who remove trade waste in the City of New York under private contracts with business establishments. The plaintiffs are licensed carters of trade waste and sue here for an injunction against the City which, on June 3, 1996, enacted a new licensing law which Plaintiffs allege contains certain facially unconstitutional provisions.¹ This Court denied an application for a temporary restraining order on the ground that Plaintiffs did not establish irreparable damage. A hearing for a preliminary injunction was set for June 25, 1996. The City has countered with a motion for summary judgment in its favor, returnable at the same time. The facts are substantially undisputed.

Carters of trade waste, up until June 3, 1996, were licensed by the City's Department of Consumer Affairs ("DCA") to conduct such business and generally did so under private contracts with business establishments. Local Law 42 has turned over to a newly created agency, the New York City Trade Waste Commission ("the Commission"), the responsibility "for the licensing, registration of businesses that remove, collect or dispose of trade waste." (N.Y.C.Admin.Code § 16-503) ("Code.") The statute provides that "it shall be unlawful for any person to operate a business for the purpose of the collection of trade waste ... without having first obtained a license therefor from the Commission," (Code § 16-505(a)), which license "shall be valid for a period of two years." (Code § 16-505(a).)

The new statute authorizes the Commission "after notice and the opportunity to be heard," to "refuse to issue a license to an applicant who lacks good character, honesty and integrity." (Code § 16-509(a).) Likewise, "after due notice and opportunity to be heard," the Commission may "revoke or suspend a license or registration." (Code § 16-513.)

Local Law 42 provides that it "shall take effect immediately." (Local Law 42 § 14.) It also provides, however, that if a business required by the Local Law to possess a license issued by the Commission possessed a license issued under prior law by the DCA, such license shall "remain valid and upon payment of the renewal fee or fee therefor be deemed extended" pending further action or rule making by the commission. Id.

The background for the creation of the new Commission and the need for re-examination of the fitness of the existing carter licensees is apparent from the history of the business and the City Council's legislative findings. Those findings state in relevant part:

The council hereby finds that the carting industry has been corruptly influenced by organized crime for more than four decades; that organized crime's corrupting influence over the industry has fostered and sustained a cartel in which carters do not compete for customers and in which customers are compelled to enter into long-term contracts with onerous terms, including "evergreen" clauses; that the anti-competitive effects of this cartel have resulted, with few exceptions in the maximum rates established by the department of consumer affairs effectively being the only rate available to businesses; that businesses often pay substantively higher amounts than allowed under the maximum rate because carters improperly charge or overcharge for more waste than they actually remove; that organized crime's corrupting influence has resulted in numerous crimes and wrongful acts, including physical violence, threats of violence, and property damage to both customers and competing carting firms; that a situation in which New York City businesses, both large and small, must pay a "mob tax" in order to provide for removal of trade waste is harmful to the growth and prosperity of the local economy.

The council further finds that recent indictments have disclosed the pervasive nature of the problem, the structure of the cartel, and the corruption it furthers through the activities of individual carters and trade associations, and that law enforcement must be coupled with new and expanded regulatory efforts on the city's part. The council further finds that despite the efforts of city agencies to regulate the industry under existing laws and regulations, private carting companies have continued to engage in various illegal and anti-competitive practices. The council further finds that unscrupulous businesses in the industry have taken advantage of the absence of an effective regulatory scheme to engage in fraudulent conduct, such as the creation of a lucrative illegal landfill, and to actively discourage new firms from entering the industry. The council therefore finds and declares that in order to provide for the more efficient and lawful conduct of businesses in the carting industry and to protect the public interest, it is necessary to establish a New York City trade waste commission that shall be responsible for the licensing and regulation of businesses in the carting industry.

Enactment of this chapter is intended to enhance the city's ability to address organized crime corruption, to protect businesses who utilize private carting industry with the aim of reducing consumer prices.

(Local Law 42 § 1).

Plaintiffs' Amended Complaint ("Amend. Compl."), filed on June 11, 1996, challenges numerous provisions of the new legislation, and seeks relief on nine claims. Plaintiffs' claims fall generally into three categories. The first category addresses four provisions of the law enacted to cure the past effects of anti-competitive practices, and eliminate those practices in the future by incorporating term limitations into all contracts between carters and their customers. Such provisions include: a limitation on all trade waste collection contracts to a maximum term of two years (Local Law 42, §§ 11(i) & (ii)); a termination provision effective 30 days after the law's effective date, permitting either party to terminate a contract upon 30 days written notice unless the carter has either received a new license from the Commission or applied to the Commission for a waiver (Local Law 42 § 11(iii))²; a provision allowing a customer to terminate any carting contracts which have been assigned to another carter on 30 days notice (Code § 16-520(e)(ii)); and a provision authorizing the termination of existing carting contracts in special pilot districts to be established in the future (Code §§ 16-504(h), 16-523, 16-524). Plaintiffs allege that these provisions violate the Contract, Takings and Due Process clauses of the Federal Constitution. (Amend.Compl.Claims 1-4.)

The second group of challenges addresses those provisions of the law which grant the Commission the discretionary authority to: (1) require that a licensee enter into a contract with an independent auditor (Code § 16-511) and, (2) waive that provision of the law that renders existing contracts with carters who have not received a new license from the Commission, terminable upon thirty days notice. (Local Law 42 § 11(iii).) Plaintiffs allege that these provisions violate the Due Process clauses of the United States Constitution because they do not provide for notice and an opportunity to be heard before the Commission takes action, and are impermissibly vague. (Amend.Compl.Claims 2, 7).

The final group of challenges addresses those provisions of the law that specify the type of information that the Commission may consider when making licensing determinations. Such provisions include certain business and financial disclosure requirements, and allow for consideration of a license applicant's membership in an indicted trade association or knowing association with criminals or members of organized crime. (Code §§ 16-508, 16-509, 16-520.) Plaintiffs claim that these provisions violate their constitutional right to association and the right to privacy. (Amend.Compl.Claims 5, 6, 8, 9).

Discussion

A few preliminary points are in order. As regulation of the garbage collection industry is one of the traditional police powers, the Court is required to "respect the wide discretion on the part of the legislature in determining what is and what is not necessary." El Paso v. Simmons, 379 U.S. 497, 508-09, 85 S.Ct. 577, 584, 13 L.Ed.2d 446 (1964), reh. denied, 380 U.S. 929 (1965) (citations omitted.) Accordingly, "there is a strong presumption of validity of a statute passed under a state or local government's police power," Richmond Boro Gun Club, Inc. v. City of New York, 92 CV 0151, 1995 WL 422014 at *2 (E.D.N.Y.), and parties attacking such statutes on constitutional grounds carry a heavy burden. In the present case, the Court notes that Local Law 42 is geared towards enabling the City to inquire into the fitness of license applicants to participate in the waste collection industry. As such, it is entitled to the deference traditionally given to exercises of a local government's police power.

In order to obtain a preliminary injunction, the moving party has the burden of showing: (1) irreparable harm, and (2) either a) a likelihood of success on...