[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
_____________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
August 16, 2005
No. 04-13035
THOMAS K. KAHN
_____________ CLERK
D.C. Docket No. 03-80003-CV-KLR
SOUTHERN WASTE SYSTEMS, LLC.,
Plaintiff-Appellee,
versus
CITY OF DELRAY BEACH, FLORIDA,
WASTE MANAGEMENT INC. OF FLORIDA,
Defendants-Appellants,
BFI WASTE SYSTEMS OF NORTH AMERICA, INC.,
Defendant.
____________
Appeal from the United States District Court
for the Southern District of Florida
____________
(August 16, 2005)
Before BIRCH, CARNES and HILL, Circuit Judges.
HILL, Circuit Judge:
Southern Waste Systems, LLC sued the City of Delray Beach , Florida and
Waste Management Inc. of Florida seeking both a declaratory judgment that a
contractual agreement between the defendants was unconstitutional and an
injunction against its enforcement. The district court entered summary judgment
for plaintiff and this appeal followed.
I.
In 2001, the City of Delray Beach, Florida (the “City”) issued a request for
proposals, seeking a single contractor to provide comprehensive waste collection
services within the City. The request provided that the successful bidder would
become the exclusive provider of residential waste collection services, residential
waste recycling services, and commercial waste collection services throughout the
City. The agreement was to have an initial term of five years.
Southern Waste Systems, LLC (“SWS”), which is in the business of
collecting and disposing of construction and demolition debris (“C&D”) in
Florida, lacked the capacity to provide the full range of services specified in the
proposal and did not submit a bid. Five waste companies, including BFI Waste
Systems of North America, Inc. (“BFI”) – a non-Florida corporation – did submit
bids. Following a public hearing, the City awarded the contract to BFI, the lowest
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bidder, and, as previously noted, an out-of-state corporation. SWS concedes that
local firms enjoyed no preference or advantage in the bidding and selection
process.
The City and BFI entered into a contract that provided that BFI would be
the exclusive waste hauler in the City. The contract further provided that, while
the City would set the rates for waste collection, BFI would directly bill and
collect payment from the City’s residents, and then transmit a 5% franchise fee to
the City. The City codified the contract by municipal ordinance.
Sometime later, a customer to whom SWS supplied C&D removal services
was cited for violating the ordinance, and SWS filed this action against the City
and BFI challenging the ordinance and the underlying agreement between the City
and BFI. SWS asked the court to declare that the exclusive franchise violated the
Commerce Clause of the United States Constitution and to enjoin its enforcement
as to C & D.1 After Waste Management Inc. of Florida (“WM”) purchased various
assets of BFI and assumed BFI’s rights and obligations under the contract and
ordinance, it was substituted as a defendant.2
1
SWS also asked for declaratory and injunctive relief for violation of the Equal Protection
Clause and sought damages under 42 U.S.C. § 1983.
2
At oral argument, SWS disavowed any intention to argue that the purchase of BFI by
WM, an in-state waste hauler, transformed the initial selection of an out-of-state bidder into a
selection of a local bidder.
3
The district court granted partial summary judgment to SWS on its claim for
injunctive and declaratory relief, holding that the exclusive franchise agreement
violated the Commerce Clause. After a stipulated dismissal of SWS’s remaining
claims and the City’s counterclaim, the court entered final judgment and enjoined
enforcement of the portions of the agreement and ordinance pertaining to C&D.
We review this grant of summary judgment de novo. Pennington v. City of
Huntsville, 261 F.3d 1262, 1265 (11th Cir. 2001).
II.
The Commerce Clause of the United States Constitution empowers
Congress to regulate commerce among the states in order to promote the free flow
of goods and services across state lines. U.S. Const. Art. 1, § 8, cl.3. Conversely,
the Commerce Clause also forbids a state or municipality from impeding the flow
of goods and services across state borders, or from favoring in-state economic
interests at the expense of out-of-state economic interests. Oregon Waste Sys.,
Inc. v. Department of Envtl. Quality, 511 U.S. 93, 98 (1994). This “dormant” side
of the Commerce Clause prohibits states or cities from “advancing their own
commercial interests by curtailing the movement of articles of commerce, either
into or out of the state.” H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 535
(1949). Thus, if state or municipal regulations discriminate against out-of-state
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companies in favor of local ones, they offend this dormant side of the Commerce
Clause.3
In this case, SWS claims that the City’s ordinance violates the dormant
Commerce Clause because it awards the exclusive right to collect waste in the City
to one company, thereby excluding all other companies – both interstate and
intrastate – from waste collection. SWS relies for this claim on the Supreme
Court’s decision in C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383
(1994). In that case, the Court struck down a municipal ordinance that awarded
exclusive rights to process all town solid waste to a single, privately owned local
transfer station. 511 U.S. at 391.4 The ordinance mandated that all waste haulers
in the town transport their waste to the local station for processing. The Court
held that such an arrangement constituted a “forced business transaction” that
unconstitutionally favored the local processor, thereby discriminating against out-
of-state interests. Id. at 391-92.
3
Even regulations that do not discriminate on their face against interstate commerce must
regulate even-handedly and impose only incidental burdens on interstate commerce. Pike v.
Bruce Church, Inc., 397 U.S. 137 (1970). As the district court held that the City’s ordinance
unconstitutionally discriminates against non-selected waste haulers, it did not reach this second
step in its review of the ordinance.
4
A local private contractor constructed the processing facility, agreeing to operate it for
five years, after which the town would buy it for $1. During those five years, the contractor
received the processing fees, at a certain level guaranteed by the town.
5
Following Carbone, waste haulers around the country challenged municipal
waste collection agreements that awarded exclusive rights to collect waste to one
hauler, arguing that their exclusivity constitutes a forced business transaction that
offends the Commerce Clause. None was successful. See Houlton Citizens’
Coalition v. Town of Houlton, 175 F.3d 178 (1st Cir. 1999); USA Recycling, Inc. v.
Town of Babylon, 66 F.3d 1272 (2d Cir. 1995); Barker Sanitation v. City of
Nebraska City, No. 4:02CV3330, slip op. At 14-22 (D. Neb. Nov. 4, 2003); Waste
Management of Alameda County, Inc. v. Biagini Waste Reduction Sys. Inc., 74
Cal. Rptr. 2d 676 (Ca. Ct. App. 1998). See also Harvey & Harvey, Inc. v. County
of Chester, 68 F.3d 788, 807 (3d Cir. 1995) (dormant Commerce Clause inquiry
should focus “on the designation process, on the reasonableness of the duration of
the designation and on the practical likelihood of [designation of] an out-of-state
facility”). These courts all agreed that there is nothing inherently discriminatory
in the award of an exclusive waste hauling contract. As the Second Circuit noted
in USA Recycling:
For ninety years, it has been settled law that garbage collection and
disposal is a core function of local government in the United States.
At their option, cities may provide garbage pick-up to their citizens
directly . . . Or they may rely on a closely regulated private market to
provide those services. . . . [W]e reject the plaintiffs’ contention that
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the Carbone decision fashioned from the “dormant” Commerce
clause a new, and unprecedentedly sweeping, limitation on local
government authority to provide basic sanitation services to local
residents and businesses, on an exclusive basis and financed by tax
dollars.
Id. at 1275-76.
The Commerce Clause forbids only the promotion of local economic
interests over out-of-state interests. It does not forbid exclusive franchise
agreements whereby a city selects one waste hauler to provide basic waste
collection services to its citizens, so long as the bidding process is open to all, and
there is no requirement that local interests be favored in the performance of the
contract.5 As the Second Circuit concluded in USA Recycling:
There is no reason to assume that by shifting all hiring of garbage
haulers into the hands of one buyer, the flow of interstate commerce
will be reduced, and thereby burdened. In fact, the open bidding
process used by the Town to hire a single garbage hauler could
readily result in the hiring of an out-of-state garbage hauler – which
would actually shift a portion of the garbage collection market into
interstate commerce.
Id.
Indeed, in the instant case, the waste collection franchise was not only open
to out-of-state competitors, but it was, in fact, awarded to one. There is nothing in
the record to support the claim that the City’s actions constituted the sort of “local
5
The contract did not specify where BFI was to process or dispose of the waste.
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economic protectionism” that the Commerce Clause forbids. Carbone, 511 U.S. at
390. We agree with the First Circuit that “to the extent that in-state and out-of-
state bidders are allowed to compete freely on a level playing filed, there is no
cause for constitutional concern.” Houlton, 175 F.3d at 189. The award of an
exclusive waste hauling contract to the low bidder after a fair and open bidding
process that has the effect of excluding all others for the term of the agreement
does not, for this reason, offend the Commerce Clause.
Apparently recognizing this, SWS asserts that it is not just the selection of
an exclusive waste hauler, but the failure to pay for those exclusive waste hauling
services with tax dollars that is the City’s constitutional error. SWS argues that
the City may not constitutionally require its residents to use a single waste hauler
unless it eliminates the waste hauling market entirely by providing those services
to its residents using public funds. SWS reasons that because the City’s ordinance
provides that the contractor bill and collect payment from City residents, the City
has not eliminated the market by using public funds to pay for waste collection.
Thus, SWS concludes, the City’s franchise arrangement constitutes a “forced
business transaction” between its residents and BFI/WM that excludes all other
waste haulers, thereby violating the Commerce Clause. Therefore, the real
question in this case is whether the City’s decision to allow BFI/WM to bill its
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customers directly and rebate a fee to the City transforms an otherwise
constitutional exclusive waste hauling contract into an unconstitutional forced
business transaction.
We think not. We do not believe that the answer to the question whether the
City’s exclusive waste hauling agreement violates the Commerce Clause lies in its
choice of billing method.
The First Circuit has reached the same conclusion in rejecting a similar
challenge to an exclusive municipal waste hauling agreement that requires its
residents to contract individually with the designated waste hauler. Houlton, 175
F.3d at 189. In Houlton, the First Circuit recognized that the town’s decision to
require its residents to individually contract for waste disposal added an element
of the forced business transaction present in Carbone. The court, however,
completely rejected the idea that Carbone requires the invalidation of such
arrangements. To so suggest, according to the court, stretches the logic of the
dormant Commerce Clause to the breaking point. Id. at 188. Instead, the court
reasoned that the core purpose of the clause is to prevent economic protectionist
policies, and that the relevant inquiry is whether the plan for their provision
discriminates against non-local interests. In that inquiry, the critical question is
not how waste hauling services are paid for, but how they are selected. Id. at 188-
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89. See also Barker, No. 4:02CV3330, slip op. at 14-22; Biagini, 74 Cal. Rptr. 2d
at 682.
We agree that the critical issue is not whether direct billing by BFI/WM
constitutes a forced business transaction, but whether the award of the contract
discriminated in any way against non-local interests. This means:
[T]hat when the Commerce Clause inquiry focuses on a state or local
plan that culminates in an award of an exclusive contract to one of
several aspirants (actual or potential), the process by which the
contractor is chosen assumes great importance in determining the
plan’s constitutionality vel non. After all, in-state interests are not
unduly pampered, nor out-of-state competitors unduly burdened,
when a municipality awards an exclusive contract to a low bidder
(from whatever state or region) after a fair and open bidding process.
Id. at 188. Inasmuch as we have previously determined that the selection process
in this case did not favor local interests, and in fact awarded the contract to an out-
of-state company, we hold that it did not offend the dormant Commerce Clause.
III.
Finding no discrimination forbidden by the Commerce Clause in the award
or performance of the City’s exclusive waste hauling agreement with BFI/WM, we
shall reverse the judgment of the district court, vacate the injunction, and remand
for further proceedings not inconsistent with this opinion.
REVERSED, VACATED, and REMANDED.
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