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Federal District Court Grants Preliminary Injunction in Challenge to City of Dallas Flow Control Ordinance

Beveridge & Diamond, P.C., February 9, 2012

The U.S. District Court for the Northern District of Texas has issued a preliminary injunction enjoining the City of Dallas from implementing the City’s flow control ordinance, which the City enacted in September 2011. The ordinance requires all solid waste generated, found, or collected inside the City to be disposed of at a City-owned or -operated facility. A violation of the ordinance is a criminal offense, and the a defense to criminal prosecution is available only if (1) no City-owned or -operated facility is permitted to accept the waste or (2) the waste is composed solely of recyclable material.

The National Solid Wastes Management Association and various solid waste companies and haulers filed suit challenging the ordinance on multiple federal and state law grounds. The plaintiffs moved quickly for a preliminary injunction, which was supported by amici curiae the American Forest & Paper Association (represented by Beveridge & Diamond, P.C.) and the North Texas Association of Public Employees. Judge O’Connor of the Northern District of Texas held a one-day preliminary injunction hearing and following the hearing, on January 31, issued an order granting a preliminary injunction.

Because the court found that a preliminary injunction was appropriate on the basis of the plaintiffs’ federal Contract Clause claim, the court’s order does not address the plaintiffs’ other claims (e.g., standardless delegation of power, Texas constitutional claims, and lack of notice and hearing in violation of the City’s charter). The court will take up these issues at an expedited trial on the merits of the plaintiffs’ claims, if the case proceeds to trial.

Addressing the plaintiffs’ Contract Clause claim, the court found that the express terms of the solid waste franchise agreements that the City had previously entered into with certain of the plaintiffs and other hauling companies gave the franchisees an ongoing contractual right to dispose of solid waste collected within the City at any location legally authorized, or permitted, to operate as a disposal, collection, or processing facility, not just at facilities that the City may authorize by ordinance. Impairment of this contractual relationship was found because the flow control ordinance impairs the franchisees’ rights under the franchise agreements -- namely, the right to dispose of solid waste collected within the City at legally facilities other than those owned or operated by the City. The court also found that the City’s express reservation of police powers in the franchise agreements did not lessen the substantial impairment. While the terms of the franchise agreements may have put the franchisees on notice that their contractual rights were subject to potential future City regulations, the City’s own reservation of police powers made clear that the franchisees assumed only the risk of lawful, necessary exercises of the City’s police powers. The court found that the Dallas flow control ordinance was not such a lawful, necessary exercise of the City’s police powers.

Turning to the issue of whether the flow control ordinance is justified by a significant and legitimate public purpose, the court found, based on the evidence currently before it, that the ordinance was enacted for purposes of raising revenue. For this finding, the court relied heavily on statements made by the City Mayor and City Council when passing the ordinance. The court determined that the City’s desire to raise revenue through the flow control ordinance was not a significant and legitimate public purpose because the ordinance was not adopted to address a fiscal problem but, rather, was adopted for the financial benefit of the City. The plaintiffs demonstrated to the court’s satisfaction that the ordinance was not necessary to remedy a broad and general social or economic problem or other similar situation. Additionally, the court found that the flow control ordinance is not reasonably necessary to achieve its purported non-financial goals.

While an expedited trial on the merits may be to come in the case, the City may seek an interlocutory appeal, and it is possible that the Fifth Circuit may be less inclined to invoke the seldom-used Contracts Clause to strike down a local law that that claims a public safety and environmental purpose. However, as it stands currently, the district court’s opinion is well supported and reasoned and likely to discourage flow control efforts nationwide, particularly those that disrupt existing franchise agreements and have no compelling public service or environmental need for flow control.

Jimmy Slaughter and Bryan Moore from Beveridge & Diamond’s Washington and Texas offices represent amicus curiae American Forest & Paper Association.

For more information, contact Jimmy Slaughter at jslaughter@bdlaw.com or Bryan Moore at bmoore@bdlaw.com

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