Tennessee Scrap Recyclers Ass'n v. Bredesen

• Decision Date: 13 February 2009
• Docket Number: No. 08-5824.,08-5824.
• Parties: TENNESSEE SCRAP RECYCLERS ASSOCIATION, Metal Management Memphis, LLC, and H. Iskiwitz & Co., Inc., Plaintiffs-Appellants, v. Phil BREDESEN, Governor of the State of Tennessee, The City of Memphis, Willie Herenton, Mayor of the City of Memphis, Larry A. Godwin, Chief of Police for the City of Memphis, and William L. Gibbons, in his official capacity as District Attorney for the Thirtieth Judicial District, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

556 F.3d 442

TENNESSEE SCRAP RECYCLERS ASSOCIATION, Metal Management Memphis, LLC, and H. Iskiwitz & Co., Inc., Plaintiffs-Appellants, v. Phil BREDESEN, Governor of the State of Tennessee, The City of Memphis, Willie Herenton, Mayor of the City of Memphis, Larry A. Godwin, Chief of Police for the City of Memphis, and William L. Gibbons, in his official capacity as District Attorney for the Thirtieth Judicial District, Defendants-Appellees.

No. 08-5824.

United States Court of Appeals, Sixth Circuit.

Argued: December 11, 2008.

Decided and Filed: February 13, 2009.

ARGUED: James F. Blumstein, Vanderbilt Law School, Nashville, Tennessee, for Appellants. Philip E. Oliphant, City of Memphis, Memphis, Tennessee, Steven Ashley Hart, Office of the Tennessee Attorney General, Nashville, Tennessee, for Appellees. Paul H. Morris, Martin, Tate, Morrow & Marston, Memphis, Tennessee, for Amici Curiae. ON BRIEF: James F. Blumstein, Vanderbilt Law School, Nashville, Tennessee, John Ward McQuiston II, Evans & Petree, Memphis, Tennessee, for Appellants. Philip E. Oliphant, City of Memphis, Memphis, Tennessee, Steven Ashley Hart, Office of the Tennessee Attorney General, Nashville, Tennessee, for Appellees. Paul H. Morris, Adam Calhoun Simpson, Martin, Tate, Morrow & Marston, Memphis, Tennessee, Danielle F.

Waterfield, Institute of Scrap Recycling Industries, Washington, D.C., for Amici Curiae.

Before: MARTIN and GILMAN, Circuit Judges; CARR, Chief District Judge.^*

BOYCE F. MARTIN, JR., Circuit Judge.

OPINION

The Tennessee Scrap Recyclers Association and its co-plaintiffs, two scrap metal dealers in Memphis, Tennessee (collectively "the scrap dealers"), appeal the district court's denial of their motion for a preliminary injunction to enjoin enforcement of a Memphis ordinance requiring scrap metal dealers to "tag and hold" the scrap metal they acquire for a period of ten days. The scrap dealers also appeal the district court's denial of their motion for partial summary judgment on the constitutionality of the law.

The scrap dealers argue that the "tag and hold" ordinance is unconstitutional in four ways: first, they argue that it violates the dormant commerce clause, either as a direct regulation of interstate commerce or an undue burden upon it; second, they argue that it takes property without just compensation; third, they argue that it takes property without procedural due process; and fourth, they argue that it violates federal law by restricting the use of legal tender and infringing upon the federal power to coin money.

Because we find that none of the scrap dealers' arguments is likely to succeed on the merits, and that they have not shown they are entitled to partial summary judgment, we AFFIRM.

I.

Scrap metal recycling is big business in Tennessee. Tennessee scrap metal dealers annually ship 120 million pounds of scrap metal, 95% of which is eventually sold out of state. The value of this metal exceeds $1.7 billion. Plaintiff Metal Management Memphis alone annually ships 38 million pounds of scrap metal; plaintiff H. Iskiwitz & Co. annually ships 8.3 million pounds.

The scrap metal industry is composed of dealers of various sizes, and it operates in a pyramid structure, with small dealers purchasing scrap metal and reselling it to larger dealers up the chain of distribution, where the scrap metal is eventually baled and shipped to be "processed" (i.e. melted down). To resell scrap metal, individual dealers first sort the different metals in their inventory into piles, then they bundle the individual piles together for resale in unprocessed form. To reduce their risk from volatile metal prices, scrap metal dealers prefer to bundle and resell purchased scrap as quickly as possible.

A regrettable corollary of the scrap metal market is metal theft. Much like pawn shops, used jewelry stores, and other purchasers in secondary markets, scrap metal dealers can serve as fences for individuals seeking to sell stolen goods. As a result, many cities and states regulate scrap metal dealers to deter metal theft and aid law enforcement in prosecuting metal theft. Both the City of Memphis and the State of Tennessee have scrap dealer laws. The Tennessee law has been on the books since 1968; however, it was substantially revised in 2008 and the provisions that were the subject of this lawsuit were removed.¹ The Memphis scrap dealer ordinance was passed in December 2007, amidst a historic wave of scrap metal theft in Memphis— reported metal thefts for the first five months of 2007 were 821.7% higher than the same period the previous year. The burden of this increase fell largely upon urban businesses, utilities, and community organizations, who lobbied local government for stricter regulation of scrap metal dealers. In response, the City of Memphis passed an ordinance providing for comprehensive regulation of scrap dealers. Its provisions include a permit requirement, screening and record-keeping requirements for all scrap metal purchases, mandatory delays on cash payment for certain frequently stolen metals, and a ten-day waiting period wherein scrap metal dealers must "tag and hold" purchased metal so that victims of metal theft and law enforcement can inspect it. Memphis, Tenn., Ordinance 5217 (Dec. 13, 2007) (codified at MEMPHIS, TENN., CODE OF ORDINANCES § 6-40 (2008)).

Local scrap dealers strongly objected to the ordinance, particularly the ten-day "tag and hold" provisions, which the dealers claimed would put them out of business. The dealers argued they would have to acquire more land or reduce inventory to comply with "tag and hold," and that the holding period would impair their ability to buy and sell scrap metal, increase their business risk, and impair their access to credit.

When Memphis made it clear that it intended to enforce "tag and hold," the Tennessee Scrap Dealers Association, Metal Management Memphis, and H. Iskiwitz & Co. filed suit to enjoin enforcement. The district court denied the scrap dealers' motion for a preliminary injunction, holding that while the scrap dealers had shown a likelihood of irreparable harm, they had not shown a sufficient likelihood of success on the merits on any of their claims. The district court denied the scrap dealers' motion for partial summary judgment "for the same reasons." The scrap dealers now appeal.

II.

A preliminary injunction is an extraordinary remedy designed to preserve the relative positions of the parties until a trial on the merits can be held. Whether to grant a preliminary injunction is a matter within the discretion of the district court and is thus reviewed for abuse of discretion. Certified Restoration Dry Cleaning Network, L.L. C. v. Tenke Corp., 511 F.3d 535, 540 (6th Cir.2007). Under this standard, this Court reviews the district court's legal conclusions de novo and its factual findings for clear error. Id. at 541. In determining whether to grant a preliminary injunction, district courts consider four factors: (1) whether the movant has demonstrated a likelihood of success on the merits; (2) whether the movant will suffer irreparable harm if the injunction is not issued; (3) whether the injunction will cause substantial harm to others if issued; and (4) whether granting the injunction will serve the public interest. Id. at 542. Whether the plaintiff is likely to succeed on the merits is a determination of law that is reviewed de novo. Id. at 541.

Whether to grant a motion for summary judgment is a question of law; thus, the district court's ruling on a motion for summary judgment is reviewed de novo. Hunt v. Sycamore Community School District, 542 F.3d 529, 534 (6th Cir.2008). Summary judgment is proper where no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Id.

III.

The primary question in this appeal is whether the district court erred in ruling that the scrap dealers were not likely to succeed on the merits of any of their claims. As we proceed to explain in detail, we agree with the district court's assessment of the scrap dealers' constitutional challenges.

A. The Dormant Commerce Clause

Under the Articles of Confederation, the National Government lacked power to regulate commerce among the states, and "[b]ecause each State was free to adopt measures fostering its own local interests without regard to possible prejudice to nonresidents, ... a `conflict of commercial regulations, destructive to the harmony of the States' ensued." Camps Newfound/Owatonna v. Town of Harrison, 520 U.S. 564, 571, 117 S.Ct. 1590, 137 L.Ed.2d 852 (1997) (quoting Gibbons v. Ogden, 22 U.S. (Wheat.) 1, 224, 6 L.Ed. 23 (1824) (Johnson, J., concurring)). Preventing state regulation that was "partial or contrary to the common interests," Gibbons, 22 U.S. (Wheat.) at 88, 6 L.Ed. 23 (Johnson, J., concurring), "was the immediate cause, that led to the forming of a convention" and the subsequent grant of the federal power over interstate commerce. Id. at 88. Thus,

[t]he few simple words of the Commerce Clause ... reflect[ ] a central concern of the Framers that was an immediate reason for calling the Constitutional Convention: the conviction that in order to succeed, the new Union would have to avoid the tendencies toward economic Balkanization that had plagued relations among the Colonies and later among the States under the Articles of Confederation. Hughes v. Oklahoma, 441 U.S. 322, 325, 99 S.Ct. 1727, 60 L.Ed.2d 250 (1979) (citations omitted). Consistent with this, "[t]he Commerce Clause has accordingly been interpreted ... not only as an authorization for congressional action, but also, even in the absence of a conflicting federal statute, as a restriction on permissible state regulation." Id. at 325, 99 S.Ct. 1727.

The scrap dealers offer two theories of why the "tag and hold" law violates the dormant commerce clause. First, they argue that it is a "direct" local regulation of interstate commerce that...