Repub Waste Svc of TX, Ltd. v. Texas Disposal Systems, Inc.

Filing

UNPUBLISHED OPINION FILED. [15-11035 Reversed, Vacated and Remanded] Judge: CES, Judge: EBC, Judge: CH. Mandate pull date is 01/05/2017 [15-11035]

Case: 15-11035

Document: 00513798412

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Date Filed: 12/15/2016

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit

No. 15-11035

FILED
December 15, 2016

REPUBLIC WASTE SERVICES OF TEXAS, LIMITED,

Lyle W. Cayce
Clerk

Plaintiff - Appellant
v.
TEXAS DISPOSAL SYSTEMS, INCORPORATED,
Defendant - Appellee
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 6:14-CV-67
Before STEWART, Chief Judge, and CLEMENT and HAYNES, Circuit
Judges.
PER CURIAM:*
This case involves a dispute between two waste disposal service entities,
Plaintiff-Appellant Republic Waste Services of Texas, Ltd. (“Republic”) and
Defendant-Appellee Texas Disposal Systems, Inc. (“Texas Disposal”). At issue
is a purported conflict between the Texas Health and Safety Code (“the Code”)
and an exclusive contract for solid waste disposal services entered into by
Republic and the city of San Angelo, Texas (“the City”). After a hearing, the

Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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district court granted Texas Disposal’s Rule 12(b)(6) motion to dismiss the suit
and denied as moot Republic’s motion for partial summary judgment. For the
following reasons, we reverse the part of the district court’s order granting
Texas Disposal’s motion to dismiss, vacate the part of the order denying as
moot Republic’s motion for partial summary judgment, and remand for further
proceedings.
I. Facts & Procedural History
In July 2013, the City issued Texas Disposal a “Solid Waste Hauling
Permit,” allowing it to transport and dispose of garbage, trash, and debris
within city limits, and to render “any service that is allowed by state law or
city ordinance that does not conflict with the City’s contract with Republic . . .
and the exclusive rights granted by that contract[.]” 1 Then, in July 2014,
pursuant to a city ordinance, 2 Republic and the City entered into an agreement
titled “Special Exclusive Contract for Solid Waste Collection and Disposal
Services,” with an effective date of August 1, 2014. Under the terms of the
contract, Republic was given the exclusive right to collect, transport, and
dispose of all residential and non-residential solid waste, including temporary
construction and demolition waste. The contract also contained a provision
indicating that Republic, not the City, was responsible for enforcing its
exclusivity in the event of legal proceedings.
At some point after the contract between the City and Republic went into
effect, Texas Disposal began to contract for and provide solid waste disposal
services to various construction projects in the City. Consequently, Republic
sent Texas Disposal a cease-and-desist letter stating that its own contract with

Although the City issued the permit to Texas Disposal in 2013—a year prior to
entering into a contract with Republic in 2014—the terms of the permit nevertheless prohibit
Texas Disposal from rendering services that conflict with the City’s contract with Republic.
2 San Angelo, Tex., Code of Ordinances ch. 11, art. 11.04.003(d).
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the City precluded Texas Disposal from entering into construction waste
disposal contracts with the City’s residents and businesses. In response, Texas
Disposal acknowledged the contract between Republic and the City but
contended that its terms concerning solid waste management services for
construction projects were unenforceable due to a conflict with Section
364.034(h) of the Code. 3
Republic disagreed and sued Texas Disposal in federal district court
advancing a state law claim for tortious interference with an existing contract.
Republic also sought: (1) a declaratory judgment as to the validity of its
exclusive contract with the City, (2) an injunction against Texas Disposal’s
continued waste disposal servicing of construction projects, and (3) money
damages. In lieu of an answer, Texas Disposal filed a Rule 12(b)(6) motion to
dismiss, arguing that Section 364.034(h) of the Code precluded the City from
entering into exclusive contracts for temporary construction solid waste
disposal services. See Fed. R. Civ. P. 12(b)(6). Republic then filed a motion for
partial summary judgment on its declaratory judgment claim and as to liability
on its tortious interference claim.
The district court conducted a hearing on both motions and rendered an
order granting Texas Disposal’s motion to dismiss and denying as moot
Republic’s motion for partial summary judgment. In its order, the district
court reasoned that the plain wording of Section 364.034(h) conveyed the
legislature’s “clear intent to take away the City’s inherent authority to grant

Under Section 364.034(a) of the Code, a public agency—which is defined to include
municipalities—may enter into an exclusive contract for solid waste disposal services. Tex.
Health & Safety Code Ann. § 364.034(a) (“A public agency or a county may: (1) offer solid
waste disposal service to persons in its territory; (2) require the use of the service by those
persons; (3) charge fees for the service; and (4) establish the service as a utility separate from
other utilities in its territory.”). Subsection (h) states that “[t]his section does not apply to a
private entity that contracts to provide temporary solid waste disposal services to a
construction project.” Id. § 364.034(h).
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exclusive [contract rights] in the specific instance of ‘contracts to provide
temporary solid waste disposal services to a construction project.’” Republic
filed this appeal.
II. Standard of Review
“This court reviews a district court’s dismissal under Federal Rule of
Civil Procedure 12(b)(6) de novo, accepting all well-pleaded facts as true and
viewing those facts in the light most favorable to the plaintiff.” Harris Cty. v.
MERSCORP Inc., 791 F.3d 545, 551 (5th Cir. 2015) (internal quotation marks
omitted) (citing Toy v. Holder, 714 F.3d 881, 883 (5th Cir. 2013)). A district
court’s Rule 12(b)(6) dismissal may be affirmed on any grounds raised below
and supported by the record. Harris Cty., 791 F.3d at 551.
We also conduct a de novo review of a district court’s denial of summary
judgment, applying the same standard as the district court. Robinson v. Orient
Marine Co., 505 F.3d 364, 365 (5th Cir. 2007). Summary judgment is
appropriate if the record evidence shows that there is no genuine issue of
material fact and that the moving party is entitled to judgment as a matter of
law. Id. at 366; Fed. R. Civ. P. 56(a).
III. Discussion
“Home-rule” cities in Texas, such as San Angelo, derive their authority
from the Texas constitution. See Tex. Const. art. XI, § 5. As the Texas Supreme
Court has consistently acknowledged, “[h]ome-rule cities have the full power
of self-government and look to the Legislature, not for grants of power, but only
for limitations on their powers.” S. Crushed Concrete, LLC v. City of Hous.,
398 S.W.3d 676, 678 (Tex. 2013) (citing Lower Colo. River Auth. v. City of San
Marcos, 523 S.W.2d 641, 643 (Tex. 1975)). “An ordinance of a home-rule city
that attempts to regulate a subject matter preempted by a state statute is
unenforceable to the extent it conflicts with the state statute.” Dall. Merch.’s
& Concessionaire’s Ass’n v. City of Dall., 852 S.W.2d 489, 491 (Tex. 1993). Still,
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the mere fact that the legislature has enacted a law addressing a subject does
not mean the subject matter is entirely preempted. Id. Rather, “[a] general
law and a city ordinance will not be held repugnant to each other if any other
reasonable construction leaving both in effect can be reached.” Id. Thus, “if
the Legislature decides to preempt a subject matter normally within a homerule city’s broad powers, it must do so with ‘unmistakable clarity.’” S. Crushed
Concrete, 398 S.W.3d. at 678 (citing In re Sanchez, 81 S.W.3d 794, 796 (Tex.
2002)). Further, “if the limitations arise by implication, the provisions of the
law must be ‘clear and compelling to that end.’” City of Coll. Station v. Turtle
Rock Corp., 680 S.W.2d 802, 807 (Tex. 1984) (providing that a statutory
enumeration of powers is not to “be construed as an implied limitation on home
rule powers”).
In the recent case of Laredo Merchants Ass’n v. City of Laredo, a Texas
appellate court addressed the unmistakable clarity rule in the context of a
home-rule city ordinance that purportedly conflicted with part of the Solid
Waste Disposal Act. No. 04-15-00610-CV, 2016 WL 4376627 (Tex. App.—San
Antonio Aug. 17, 2016). There, the court was tasked with deciding whether
Section 361.0961 of the Code preempted a checkout bag ordinance enacted by
the home-rule city of Laredo that prohibited merchants in commercial
establishments from providing paper or plastic “one-time-use” checkout bags
to customers. Id. at *1. Section 361.0961 provides:
(a) A local government or other political subdivision may not adopt
an ordinance, rule, or regulation to:
(1) prohibit or restrict, for solid waste management
purposes, the sale or use of a container or package in a
manner not authorized by state law[.]
Tex. Health & Safety Code Ann. § 361.0961. In considering this statutory
language to be unmistakably clear, the court explained:
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By its plain language, section 361.0961 specifically addresses a
particular subject matter—the sale or use of containers or
packages for solid waste management purposes—and is
unmistakably aimed at prohibiting local governments from
enacting certain ordinances. By prohibiting the adoption of an
ordinance prohibiting or restricting that particular subject matter,
section 361.0961 unmistakably limits a local government’s police
powers[.]
Laredo Merchs., 2016 WL 4376627, at *5 (alterations, citations, and internal
quotation marks omitted). The court concluded that the language in Section
361.0961 clearly preempted the checkout bag ordinance. Id. at *5, *7 (“[W]e
hold the Ordinance is inconsistent with section 361.0961 of the Act and
therefore unenforceable as a matter of law.” (citation omitted)).
Here, Republic argues that the district court erred in similarly
concluding that the language in Section 364.034(h) of the Code conveyed the
legislature’s clear intent to abrogate the City’s home-rule authority to enter
into an exclusive contract for solid waste disposal services to a construction
project. We agree.
Neither party disputes that San Angelo is a home-rule city deriving its
broad powers of self-government from the Texas constitution, and thus, any
limitation by the legislature on those powers must be imposed with
unmistakable clarity. Tex. Const. art. XI, § 5; S. Crushed Concrete, 398 S.W.3d.
at 678. It is true that Section 364.034(a) of the Code provides that a “public
agency” 4 or county may enter into an exclusive contract for solid waste disposal
services and, further, that subsection (h) limits the scope of subsection (a) by
indicating that it does not apply to construction projects. Tex. Health & Safety
Code Ann. § 364.034(a),(h). However, because the City’s home-rule authority
Section 364.003(3) provides: “Public agency means a district, municipality, regional
planning commission created under Chapter 391, Local Government Code, or other political
subdivision or state agency authorized to own and operate a solid waste collection,
transportation, or disposal facility or system.” Tex. Health & Safety Code Ann. § 364.003(3).
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to enter into an exclusive contract for waste disposal services is inherent, and
not derived from Chapter 364 or any other part of the Code, 5 the language in
subsection (h) limiting the scope of the general grant of authority conferred by
subsection (a) is immaterial. Id. At most, the City’s inherent authority to enter
into exclusive contracts of this kind is merely supplemented by subsection (a)’s
language providing the same authority to public agencies and counties and
remains intact regardless of subsection (h)’s limiting language. Id. This is not
to say that the legislature could not limit the City’s home-rule authority to
enter into an exclusive contract for the disposal of construction waste if it chose
to do so with unmistakable clarity. But if the legislature were to limit the
City’s authority in this respect, it would do so independently of any general
grants of authority bestowed by the Code since a home-rule city does not look
to the Code or other legislative acts for grants of power, only for limitations on
its power. S. Crushed Concrete, 398 S.W.3d at 678.
Moreover, as Republic points out, subsection (f)—which employs very
different language from subsection (h)—does indicate an unmistakably clear
legislative intent to limit the City’s home-rule authority. There, the statutory
language clearly and unmistakably limits the City’s home-rule authority to
restrict the rights of other entities to contract for the removal of grease, grit,
lint, and sand trap waste.

Tex. Health & Safety Code Ann. § 364.034(f)

(“Notwithstanding the other provisions of this section . . . a county or a
municipality [] may not restrict the right of an entity to contract with a licensed
waste hauler for the collection and removal of domestic septage or of grease
trap waste, grit trap waste, lint trap waste, or sand trap waste.”). Unlike the

Chapter 363 of the Code is short-titled the “Comprehensive Municipal Solid Waste
Management, Resource Recovery, and Conservation Act” and also provides municipalities
and counties with the authority to contract for solid waste disposal services. Id. §§ 363.001,
363.117(4).
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language in subsection (h), the language in subsection (f) operates
independently of any general grant of authority conferred by the Code and
reads similarly to the language construed as unmistakably clear legislative
intent in Laredo Merchants. See Laredo Merchs., 2016 WL 4376627, at *5
(citing Tex. Health & Safety Code Ann. § 361.0961) (“A local government . . .
may not adopt an ordinance . . . to . . . prohibit or restrict, for solid waste
management purposes, the sale or use of a container or package in a manner
not authorized by state law[.]”); S. Crushed Concrete, 398 S.W.3d at 679
(holding that a statute stating that “a city ordinance ‘may not make unlawful
a condition or act approved or authorized under [the Act] or the [C]ommission’s
rules or orders’” was unmistakably clear); cf. Quick v. City of Austin, 7 S.W.3d
109, 122–23 (Tex. 1998) (reasoning that silence will not be construed as
unmistakably clear legislative intent to limit a home-rule city’s authority on
an issue). In contrast, the language in subsection (h) is not unmistakably clear
in this regard and, at best, appears to only define the limitations of the section
itself—as opposed to the City’s limitations. See Tex. Health & Safety Code
Ann. § 364.034(h) (“This section does not apply to a private entity that contracts
to provide temporary solid waste disposal services to a construction project.”
(emphasis added)). 6

The record reveals that the district court and both parties—with good reason—
indicated uncertainty as to what effect, if any, subsection (e) has on subsection (h). See Tex.
Health & Safety Code Ann. § 364.034(e). Subsection (e) provides in relevant part that
“[n]othing in this section shall limit the authority of a public agency, including a county or a
municipality, to enforce its grant of a franchise or contract for solid waste collection and
transportation services within its territory.” Id. It is unclear if all or only part of subsection
(e) is removed from the purview of subsection (h). Id. However, because the effect of
subsection (e) on subsection (h) is not dispositive to our holding on appeal, we decline to decide
the issue today. Id.
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In light of these reasons, we hold that the language in Section 364.034(h)
fails to indicate with unmistakable clarity that the legislature intended to
restrict a home-rule city’s authority to enter into an exclusive contract for solid
waste disposal services to a construction project. See S. Crushed Concrete, 398
S.W.3d at 678. Accordingly, we hold that the district court erred in granting
Texas Disposal’s Rule 12(b)(6) motion to dismiss.
IV. CONCLUSION
The part of the district court’s order granting Defendant-Appellee’s Rule
12(b)(6) motion to dismiss is reversed and the part of the order denying as moot
Plaintiff-Appellant’s motion for summary judgment is vacated. The case is
remanded for further proceedings consistent with this opinion.

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