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Handling recycling cases on appeal: Rancho Mirage and beyond

By John Schreiber

Reprinted from May 1995 issue of Refuse News

Handling a solid waste or recycling case on appeal presents some unique problems.

As co-counsel for California cities in the case City of Rancho Mirage and Waste Management of the Desert v. Palm Springs Recycling Center, Inc., I am writing this article to discuss some of the dilemmas encountered in this case and other appeals similar to it, as well as some of the questions left open after Rancho Mirage.

In the case, the California State Supreme Court held that an exclusive franchise for commercial recycling purposes applies once the owner of recyclable material discards them. The court held that the exclusive franchise does not apply if the owner of these materials sells them to someone aside from the city=s exclusive franchisee.

Dilemmas posed by Rancho Mirage.

In Rancho Mirage, like in other appeals, the parties and their attorneys and the appellate court limit their review to the record on appeal. This generally means that what went on in the trial court is all the appellate court will look at (sometimes the appellate court also will take judicial notice of matters such as legislative history of a statute or the court files of a related case). All concerned are therefore generally stuck with what is on the record. This general rule is based on the principle that trial courts focus on determining factual issues while appellate courts focus on errors of law and will not act to second-guess the trial court=s factual determinations.

In Rancho Mirage and cases like it, this carries some practical problems relating to the nature of the parties. The City in Rancho Mirage may arguably be seen as serving the public interest, but it is harder to picture Waste Management, a huge corporation, acting with public-minded motives, even if they are in fact acting with such motives. By contrast, it is easy to see Palm Springs Recycling as the underdog in this case, especially where it may appear as if the City and Waste Management Aganged up@ on PSRC by filing suit against PSRC. Whatever underlying equities favoring the City could have been undercut by the part of the exclusive franchise agreement providing for a 50-50 split of recycling revenues between Rancho Mirage and Waste Management once the recycling program became self-sufficient.

Another oddity of Rancho Mirage is that, as Justice George pointed out in his dissent, AThe just compensation rights of property owners (the underlying basis of the majority=s decision in Rancho Mirage ) however, is not an issue presented by this case, because no property owner is a party to this action.@ Even though no one fitting that description was a party to the Rancho Mirage case, the majority still held on the merits that the exclusive franchise agreement for commercial recycling applied only when the owner of recyclable materials discards those materials.

While in most cases this rule tends to strongly favor the winning side at the trial court level, in cases like Rancho Mirage and others, in which a party challenges a local ordinance or other regulation, appellate courts give less deference to the trial court. In such cases, the trial court=s ruling whether the local agency=s action was arbitrary or capricious is a question of law. In those circumstances, both the trial and appellate courts fulfill the same function and therefore use (or are supposed to use) the same test.

As we will see, however, although courts traditionally give great deference to a local agency=s actions when it acts in a legislative capacity, that deference lessens, and in some cases, agencies now bear the burden of proof when they act in situations involving only individual parties where takings are at issue.

The Supreme Court in Dolan v. City of Tigard (1994) held that courts should defer to local agencies in takings cases only where the agency acts in a legislative capacity. When a local agency acts in that kind of capacity it enacts rules of wide application - county, city or district wide - for example. In Rancho Mirage, Palm Springs Recycling argued that there was a taking.

The nature of trials in these kinds of cases underscores the nature of these issues as questions of law. In these kinds of cases, there is little in the way of witness testimony. The issues generally focus on the administrative record before the agency at the time it makes its decisions.

Alternatively, there is little or no factual dispute at issue. In Rancho Mirage, Palm Springs Recycling admitted collecting recyclables from large commercial customers in downtown Rancho Mirage. The question was whether that violated the exclusive recycling franchise between the City and Waste Management. The trial court in Rancho Mirage granted a preliminary injunction in the City=s and Waste Management=s favor and the parties stipulated that the injunction would be permanent and that judgment would then be entered. In another non-recycling case in which a developer challenged a school district=s development impact fee, the parties tried the case based on their briefs (and a 23 page expert report submitted to the trial court by the developer that was not before the district when it passed its fee resolution).

What=s next

The Court in Rancho Mirage left open at least one question: What about cities= long-established police power under Article XI, '7 of the California Constitution and the 5th and 14th Amendments of the U.S. Constitution independently of the Act to enter into exclusive franchise agreements for refuse collection, i.e., garbage collection regardless of whether or not the materials collected have commercial value.

The majority in Rancho Mirage dealt exclusively on statutory interpretation of AB 939, the California Integrated Waste Management Act of 1989. They stated that they Adecline to decide the correctness of the Court of Appeal=s determination of that issue.@

The majority then hinted that the comprehensiveness of the Act may pre-empt any police power cities may have independent of the Act. They did not so rule, however.

Two weeks before the Rancho Mirage decision came out the First District in Waste Resource Technologies held that the Act did not preempt San Francisco=s police power to use an exclusive franchise for recycling as well as refuse collection.

The Waste Resource court held that the Act gave too much authority to local government to fashion an integrated waste management plan for their communities, particularly PRC '4059, which specifically allows local agencies to award exclusive franchises for solid waste handling services. A future court deciding that issue would have to overcome all the authority the Act leaves to local agencies. If someone wanted to make the pre-emption argument, it would be that the Act specified situations in which a local agency could grant an exclusive franchise.

Another open question is what is the standard of review in these cases. In Dolan, the Supreme Court placed the burden of proof on local agencies is that act in a quasi-judicial capacity, that is, on applying a general rule to a specific set of facts or a specific piece of property. In Rancho Mirage, and many of these cases, the party challenging the exclusive alleges a taking. The question then becomes whether the ordinance enacting the franchise agreement is a legislative act, in which case the act is presumed constitutional, or is quasi-judicial, in which case the agency has the burden of showing the constitutionality of its action.

Someone challenging the franchise might argue that the city acted in a quasi-judicial fashion, because the ordinance would provide for ratification of a contract with a single party. An agency or the franchisee would counter by pointing to the fact that such an ordinance has city-wide application, that the franchise is of limited duration, and that there is no dedication of land involved, as there was in Dolan.



John Schreiber specializes in Civil Appellate cases from his offices in Walnut Creek, California. His article was adopted from a presentation made at The Trumbull Law Firm=s annual Recycling Law Seminar.

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