Green Solutions Recycling, LLC v. Reno Disposal Co.
Green Solutions Recycling, LLC v. Reno Disposal Co.
Opinion of the Court
I. SUMMARY
This case is about the City of Reno's authority to grant a monopoly for the collection and disposal of certain recyclable materials. Plaintiff Green Solutions Recycling, LLC ("GSR") contends that the City has no such authority and unlawfully has restrained trade in violation of Section 1 of the Sherman Antitrust Act,
*965Merits Motion, and denies Plaintiff's Motion.
II. BACKGROUND
Nevada law allows the City to "[g]rant an exclusive franchise to any person" for the "[c]ollection and disposal of garbage and other waste." NRS §§ 268.081, 268.083. Accordingly, the City entered into an exclusive franchise agreement with Reno Disposal on November 7, 2012. (ECF No. 113 at 2; ECF No. 106 at 6.) The City entered into a second exclusive franchise agreement with another entity, but Reno Disposal eventually acquired the franchise rights under that agreement as well. (ECF No. 106 at 6.) The Court refers to both franchise agreements as the "Franchise Agreement." The Franchise Agreement basically grants Reno Disposal the exclusive right to pick up and remove solid waste and certain recyclable materials from commercial entities, although the Franchise Agreement uses a number of terms of art that are defined in the Franchise Agreement itself. (Id. at 10; see also ECF No. 113-1 at 15.)
Plaintiff contracted with various commercial entities in the City to pick up and remove certain recyclable materials from their premises. (ECF No. 113 at 4.) Plaintiff operates by providing its customers with recycling containers in exchange for payment offset by a rebate. (ECF No. 106 at 12, 17.) For example, Plaintiff charged one customer $ 440 per bin each month and provided that customer with a rebate of $ 2.52 per bin each month. (Id. at 17.)
The City eventually took the position that Plaintiff was violating the Franchise Agreement based on its view that Plaintiff's customers were essentially paying for Plaintiff to remove waste when Reno Disposal had the exclusive rights to remove waste. (See ECF No. 113 at 4.) The City informed Plaintiff's counsel that Plaintiff could pick up and remove certain recyclable materials without violating the Franchise Agreement only if Plaintiff's customers actually sold the recyclable materials instead of paying for them to be removed. (Id. ) In other words, Plaintiff's customers were essentially required to realize a net profit from the arrangement, and thus the rebate would have to exceed the container rental charges. (See
Plaintiff asserts five claims for relief in its First Amended Complaint ("FAC"): (1) violation of Section 1 of the Act; (2) violation of the Commerce Clause under
III. LEGAL STANDARD
"The purpose of summary judgment is to avoid unnecessary trials when there is no dispute as to the facts before the court." Nw. Motorcycle Ass'n v. U.S. Dep't of Agric. ,
*966Celotex Corp. v. Catrett ,
The moving party bears the burden of showing that there are no genuine issues of material fact. Zoslaw v. MCA Distrib. Corp. ,
IV. DEFENDANTS' JURISDICTIONAL MOTION (ECF NO. 105)
Defendants move for summary judgment on two jurisdictional grounds: that the Court lacks subject matter jurisdiction and that Plaintiff lacks standing. The Court finds both grounds unpersuasive for the following reasons and denies Defendants' Jurisdictional Motion.
A. Subject Matter Jurisdiction
"In determining jurisdiction under the Sherman Act, the focus of the inquiry is the defendant's business activities." Musick v. Burke ,
Plaintiff argues that Defendants' business substantially affects interstate commerce because Defendants ship all the recyclables they collect in Nevada to a materials recycling facility in California. (ECF No. 120 at 4-5.) As evidence, Plaintiff cites to the testimony of Greg Martinelli-Defendants' employee-at the preliminary injunction hearing. (Id. at 5 (citing ECF No. 113-18 at 184-85).) Defendants do not dispute this evidence and instead make a number of arguments that the Court finds unpersuasive for the reasons discussed below. Accordingly, the Court finds that it has subject matter jurisdiction over Plaintiff's claim under the Act.
Defendants first make several arguments that the Court lacks subject matter jurisdiction because Plaintiff is not implicated in interstate commerce. (See ECF No. 105 at 14-27.) But Plaintiff correctly notes that Plaintiff's own activity is irrelevant. (See ECF No. 120 at 6.) Defendants' activity-not Plaintiff's-determines subject matter jurisdiction under the Act. Musick ,
Defendants' argument to the contrary misstates the record. Defendants assert that the Court initially found that it had subject matter jurisdiction based on Plaintiff's involvement in interstate commerce. (ECF No. 123 at 3 (citing ECF No. 47 at 2).) But in the order Defendants cite, the Court expressly found subject matter jurisdiction because Defendants' alleged conduct-not Plaintiff's-implicates interstate commerce. (ECF No. 47 at 3 (emphasis added) ("The Court finds that GSR has satisfied the Court's Order - Defendants' alleged conduct under GSR's theory as explained in GSR's Response implicates interstate commerce. ").)
Defendants further argue that the Court lacks subject matter jurisdiction because the Franchise Agreement does not apply to recyclable materials that are commodities in interstate commerce-it only applies to waste. (See ECF No. 105 at 12-14.) However, even if the Franchise Agreement only covers waste, Defendants do not dispute Plaintiff's evidence that Defendants ship recyclable materials out of state. (See ECF No. 105, 123.) Plaintiffs may rely on Defendants' general business activities as opposed to the alleged antitrust violations themselves to make a showing of a substantial effect on interstate commerce for the purpose of establishing jurisdiction. Musick ,
Defendants further argue that the Court lacks subject matter jurisdiction under the state-action immunity doctrine derived from Parker v. Brown ,
Defendants further argue that the only activity at issue in this case is the collection and disposal of waste in the City, *968which does not implicate interstate commerce or antitrust concerns. (ECF No. 105 at 13.) Again, Defendants have not disputed Plaintiff's evidence that Defendants' general business activities have a substantial effect on interstate commerce. (See
B. Standing
"Article III of the Constitution limits federal-court jurisdiction to 'Cases' and 'Controversies.' " Massachusetts v. EPA ,
1. Injury
Defendants argue that Plaintiff has not suffered a legally cognizable injury because Plaintiff has not obtained a business license from the City of Reno to "legally 'collect, transport, process, recycle or dispose of' recyclable materials." (ECF No. 105 at 28.) Defendants contend that Plaintiff cannot suffer injury if it is acting unlawfully. (Id. ) Plaintiff argues that it is not required to obtain a license under Reno Municipal Code ("RMC") § 5.90.010 to engage in its business. (ECF No. 120 at 11.) Plaintiff further argues that the RMC has no specific licensing requirements or specific licenses for the collection, hauling, transportation, and recycling of recyclable materials. (Id. ) Defendants do not address Plaintiff's argument in their reply and have not identified a statute or other source of authority that requires Plaintiff to obtain a license for the collection, hauling, transportation, and recycling of recyclable materials. (See ECF No. 123 at 9.) Accordingly, the Court finds Defendants' argument unpersuasive.
2. Prudential Standing
Prudential standing "encompasses the general prohibition on a litigant's raising another person's legal rights, the rule barring adjudication of generalized grievances more appropriately addressed in representative branches, and the requirement that a plaintiff's complaint fall within the zone of interests protected by the law invoked." Freedom Mortg. Corp. v. Las Vegas Dev. Grp., LLC ,
Defendants argue that Plaintiff lacks prudential standing because "(1) the City has the authority to regulate the collection, transportation and disposal of recyclable materials that are treated as waste; (2) GSR does not buy or sell recyclable materials but instead is collecting, transporting and disposing of recyclable materials in violation of the City's Franchise Agreement;
*969(3) GSR's activity violates the clear prohibitions in the City's Franchise Agreement and (4) even if GSR's activity did not violate the Franchise Agreement, GSR's activity in the City is illegal since GSR is not licensed or permitted to collect, transport or dispose of recyclable materials in the City." (ECF No. 105 at 30.)
Plaintiff argues that its antitrust claim falls within the zone of interests protected by the Act because Plaintiff alleges that the Franchise Agreement is a price fixing scheme. (ECF No. 120 at 15.)
The Court agrees with Plaintiff. Defendants' arguments as presented to the Court do not bear on Plaintiff's prudential standing.
Accordingly, the Court will deny Defendants' Jurisdictional Motion.
V. DEFENDANTS' MERITS MOTION (ECF NO. 106)
Defendants essentially argue that they are entitled to summary judgment under the state-action immunity doctrine derived from Parker v. Brown ,
"State-action immunity is the exception rather than the rule."
"The Supreme Court uses a two-part test, sometimes referred to as the Midcal test, 'to determin[e] whether the anticompetitive acts of private parties are entitled to immunity.' "
A. The Clear-Articulation Test
The "inquiry with respect to the clear-articulation test is a precise one." Id. at 782. The relevant question is whether the regulatory structure adopted by the state specifically authorizes the conduct alleged to violate the Act. Id. (quoting Cost Mgmt. Servs., Inc. v. Wash. Nat. Gas Co. ,
*970"The state's authorization must be plain and clear: The relevant statutory provisions must 'plainly show that the [state] legislature contemplated the sort of activity that is challenged,' which occurs where they 'confer express authority to take action that foreseeably will result in anticompetitive effects.' "
The statute at issue here expressly authorizes anticompetitive conduct. See NRS § 268.081 (allowing municipalities to displace or limit competition in the collection and disposal of garbage and other waste). Thus, the Court must consider "whether the particular alleged anti-competitive conduct was a foreseeable result of the overall anticompetitive scheme." Shames v. Cal. Travel & Tourism Comm'n ,
It is foreseeable that NRS § 268.081 would result in a monopoly over the collection and disposal of materials whose status as "waste" is disputed because the concept of waste is subjective. For example, a commonplace item such as a disposable plastic spoon might have little value to many people but a great deal of value to someone who has no spoons. Moreover, it is not necessary that the state legislature "contemplated the precise action complained of as long as it contemplated the kind of action to which objection was made." Mercy-Peninsula Ambulance, Inc. v. San Mateo County ,
Plaintiff argues that the Nevada legislature could not have foreseen that Defendants would regulate and peg the price of recyclable commodities as a result of NRS § 268.081. (ECF No. 113 at 30.) The Court finds Plaintiff's argument unpersuasive because it mischaracterizes Defendants' activity as price-fixing. Rather than artificially fixing prices for recyclable materials, the City has adopted a definition of waste that-as it must-incorporates monetary value to the producer: the City has defined waste as materials that the generator pays someone to take away. (ECF No. 113-5 at 4.) Any effect that the City's definition has *971on the price of recyclable materials is a necessary consequence of enforcing the exclusive franchise it is entitled to grant. And even if the Court accepted Plaintiff's characterization of Defendants' activity, Defendants still have not "fixed prices" in the typical sense. "Horizontal price fixing occurs when retail competitors arrange to set prices and thus interfere with free market forces." Taggart v. Rutledge ,
Plaintiff further argues that NRS § 268.081 -which permits the City to grant an exclusive franchise over the "[c]ollection and disposal of garbage and other waste"-does not authorize the City to limit competition over "non-discarded recyclable materials." (ECF No. 113 at 28.) In support of its argument, Plaintiff notes that the Nevada legislature has not amended NRS § 268.081 to address recyclable materials even though the Nevada legislature defined "recyclable materials" in another statute- NRS § 444A.013. (Id. ) Plaintiff further notes that "recyclable materials that are not treated as waste" are not "solid waste" within the meaning of another statute- NRS § 444.490 -and therefore are not "other waste" within the meaning of NRS § 268.081. (Id. ) The Court finds these arguments unpersuasive because it is foreseeable that the City would have to define "other waste" for itself in light of the term's subjectivity.
Accordingly, the Court finds that the City and Reno Disposal's anticompetitive conduct has been clearly articulated and affirmatively expressed as state policy.
B. The Active-Supervision Requirement
"The active supervision requirement demands ... that state officials have and exercise power to review particular anticompetitive acts of private parties and disapprove those that fail to accord with state policy." Chamber of Commerce ,
However, the active-supervision requirement does not apply when the "challenged activity is within a traditional municipal function." Grason Elec. Co. v. Sacramento Mun. Util. Dist. ,
*972United Nat'l Maint., Inc. v. San Diego Convention Ctr., Inc. ,
First, the "challenged activity is within a traditional municipal function." Grason ,
Second, "the actor is a municipality rather than a private party." Chamber of Commerce ,
Given that the challenged restraint in this case-the City's grant of a monopoly over the collection of recyclable materials that Plaintiff wishes to pick up-is clearly articulated and affirmatively expressed as state policy, state-action immunity applies. Accordingly, the Court grants summary judgment in favor of Defendants.
VI. REMAINING STATE LAW CLAIMS
"If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action." Fed. R. Civ. P. 12(h)(3). Plaintiff's FAC contained two claims that raised federal questions. (ECF No. 48 at 7-10.) The Court dismissed one of those claims (ECF No. 86 at 236) and now grants summary judgment on the other. Having resolved the federal claims in this case, the Court declines to exercise supplemental jurisdiction over the remaining state law claims.
*973VII. CONCLUSION
The Court notes that the parties made several arguments and cited to several cases not discussed above. The Court has reviewed these arguments and cases and determines that they do not warrant discussion as they do not affect the outcome of the motions before the Court.
It is therefore ordered that Defendants' jurisdictional motion for summary judgment (ECF No. 105) is denied.
It is further ordered that Defendants' merits motion for summary judgment (ECF No. 106) is granted. The Court grants summary judgment in favor of Defendants Reno Disposal, WMON, and the City of Reno on Plaintiff's remaining federal claim for violation of Section 1 of the Sherman Antitrust Act (first claim for relief).
It is further ordered that Plaintiff's motion for summary judgment (ECF No. 113) is denied as moot.
It is further ordered that the remaining state law claims are dismissed without prejudice.
The Clerk of the Court is instructed to enter judgment in favor of all Defendants and close this case.
The City filed a joinder to Defendants' Jurisdictional Motion and Defendants' Merits Motion. (ECF No. 107, 108.) The City also filed a joinder to Defendants' opposition to Plaintiff's Motion. (ECF No. 127.)
The facts recited below are undisputed unless noted otherwise.
The Court also lacks independent diversity jurisdiction under
Reference
- Full Case Name
- GREEN SOLUTIONS RECYCLING, LLC v. RENO DISPOSAL COMPANY, INC.
- Status
- Published