Why You Need Lawyers

A semi-monthly feature, exclusive to NCRA News, from NCRA general counsel and board member John Moore, concerning recent legal decisions relating in some manner to Zero Waste.

By John D. Moore, NCRA Vice President and Legal Counsel, Henn, Etzel & Moore, Inc.
A few months back I reported about a 3-judge panel of the Ninth Circuit Court of Appeals decision rejecting the constitutional Commerce Clause challenge to Alameda County’s drug EPR program (BTW- Longs in uptown Oakland does not accept take-back). Big pharma had asserted that the County ordinance impermissibly regulated out of state conduct. Since the ordinance expressly only applies to companies that sell drugs in the county and applies even-handily to such companies whether based inside or outside the county and state, I thought to myself: pretty obvious and the Court got it right.

But this week an 11-judge panel of the same Court (not including any of the judges in the pharma case) came to an opposite conclusion involving sales of fine art in St. Francis Foundation v. Christie’s et al. A California statute imposes a 5% royalty, payable to the artist, when a work of fine art is re-sold. The purpose is so when someone who bought an Andy Warhol print of a soup can for $10 from the artist when young, re-sells it many years later for $10 million, the artist, now successful, is rewarded. The California statute expressly applies only when a seller resides in California or the sale transaction occurred in California. Like the pharma case, when applied within this structure, out of state and in-state art sellers are treated the same.

In this new case, the plaintiffs (artists or their estates) sued three large agents for resellers of fine art, Christies, Sothebys and Ebay for not making the required royalty payment. Plaintiffs claimed unpaid royalties on sales both in California and in other states. Without distinguishing the claims about the in-state sales from the out-of-state ones, the Court decided that the California statute does violate the Commerce Clause because the legislation can apply to out-of-state conduct, which the Commerce Clause precludes. What? How can that be?

So the Court made up a hypothetical: what if a California resident living part time in New York buys fine art in North Dakota? This transaction has no relationship to California other than the residency of the buyer is there. From this hypothetical – not the reported facts of this case, the Court summarily concluded, “We easily conclude that the royalty requirement, as applied to out-of-state sales by California residents, violates the dormant Commerce Clause.” Without further explanation.

The Court did not reveal how the transactions subject to this lawsuit were analogous to this hypothetical. The Court offered no further explanation about how the California law regulated conduct out of state. The remainder of the opinion is a discussion about how the part of the statute applicable to the residence of the seller is legally severable from the rest of the statute that regulates California sales transactions, so that the former is effectively stricken while the rest remains valid.

Appellate Court judges and justices tend to be more result-oriented and less objectively analytical than they might confess in public. The result is either popular or it is not. Roe v. Wade, for example, is founded on a constitutional principle not actually found in the constitution. As another example, the Supreme Court case establishing that the Commerce Clause applies to solid waste because solid waste is an “article of interstate commerce”, never explains why that might be so, or what law it was relying upon to so state. Why a Court protects artists and competing waste haulers but not drug companies is anybody’s guess. I mention this only to highlight the unpredictability of the outcome of disputes that are litigated. But I can’t really complain, it creates work for me.

Stars Of Zero Waste

Report Back From The US Zero Waste Business Council 2015 Conference In Los Angeles
By Laura McKaughan, NCRA President and Principal Consultant, Envirolutions LLC, 5/14/15
From May 5-7, I attended the 3rd Annual Conference of the US Zero Waste Business Council (USZWBC) in downtown Los Angeles. As a promotional partner, NCRA members were eligible for a 20% discount on conference registration, and NCRA graciously provided for additional support for me to attend on our behalf. The opening day included a workshop on Zero Waste efforts in colleges and universities and featured select schools from around the country. Even this small workshop was sponsored by four different companies but soon enough it was made clear the recycling bins, bags and equipment the sponsors were promoting were instrumental to the success of the programs. Other offerings on the first day included a Zero Waste 101 workshop, a Zero Waste professional training and a tour of Loyola Marymount University’s Sustainability Program. Apparently there was an opening reception for select members but no opening reception for all attendees.

The first full day of conference programming featured the Mayor of Los Angeles, Eric Garcetti, speaking about LA’s Sustainable City pLAn. (Yes, that is how the plan is titled “pLAn”.) Garcetti stated the diversion rate for the City is 76%, the highest of any of the largest cities in the country. No time was allotted for Q&A though undoubtedly many had questions about how Los Angeles could achieve this feat without collecting food scraps on any notable scale. The Mayor also spoke about some of the other initiatives in the PLAn and was especially enthusiastic about increasing the number of public trash cans dramatically so Angelinos would have convenient alternatives to littering.

Enrique Zaldivar, Director of the LA Bureau of Sanitation, provided background about the formation of the PLAn and how instrumental the Mayor was in this process. He also said he wished LA could reach higher waste diversion voluntarily rather than by mandate, but did not go into any detail about the issues he perceived with mandatory requirements. Matt Petersen, the first ever Chief Sustainability Officer for the city – formerly President of Global Green, spoke about how the PLAn addresses the three prongs of sustainability: the environment, social equity and economics. He delved into some of the 14 topic areas, noting a strong focus on increasing solar capacity, reducing water use and improving the City’s air quality – still among the worst in region. Petersen admitted LA currently imports nearly 90% of their water and that of this, 50-60% is used on ornamental lawns. The City’s goal is to locally source 50% of the water necessary to run daily functions by 2035 and more immediately to reduce water consumption 20% by 2017 by converting 1000 low income homes to be “water wise”.

On the Zero Waste front, LA has established an ambition goal of 90% waste diversion by 2025 and 95% by 2035. They also have set a goal of 60% reduction in GHG emissions by 2035 and 80% by 2050. I am cautiously optimistic about these lofty goals, and am surely not alone in hoping these great gains will not be over-reliant on dirty MRFs, which results in material streams with diminished values and unsavory working conditions.

Unlike NCRA’s Recycling Update or CRRA’s annual conference, the USZWBC specifically targeted businesses and presented speakers and break-out sessions most relevant for them. Additionally, there were fewer concurrent sessions offered so if the topic discussed in the ballroom wasn’t of interest, for the most part there weren’t other alternatives. That said, many of the businesses about their successes in Zero Waste had global impact and it was inspiring to imagine that their massive amounts of discards were thankfully being managed responsibly. Marialyce Pedersen, Senior Representative of Corporate Citizenship for the Walt Disney Company, gave a noteworthy talk about Disney’s sustainability efforts over the last several decades. They have received several WRAP awards, were certified as a Zero Waste business, were a founding member of the USZWBC, and were awarded the 2014 Governor’s Economic and Environmental Leadership Award for their California operations. Among some of their more novel efforts, Disney has eliminated the mailing of 26 million catalogs by offering them on-line instead and has created innovative programs for recycling and reusing costumes, movie and TV show sets for use in other productions.

Elisa Varela, Printing Supplies Specialist from Hewlett Packard, shared their success in recycling over 35 million units of e-waste by 2013 and assisting in establishing 3,700 drop-off centers in Staples stores throughout the nation. Greg Kurkjian, Vice President of Retail Sales, IFCO Systems, spoke about the reusable shipping containers they sell which enable the food service industry to save money in shipping costs, protect fragile products from damage such as eggs, and result in a huge reduction in waste and greenhouse gas emissions associated with these shipments.

As the lunchtime speaker Fedele Baucio, CEO/Cofounder, Bon Appétit Management Company, gave an inspirational speech illuminating their efforts to incorporate sustainability and improve the working conditions for farmers. Specifically he spoke of the plight of migrant tomato farmers in Florida and his work to draw awareness to their dismal working conditions. He also spoke about their recent work to prioritize food recovery and finding local non-profits to redistribute their uneaten food.

Other notable presentations on the second day included Michelle “Mitch” Hedlund from Recycle Across America, who spoke about the need for universal bin signage. She has a very successful campaign utilizing celebrities to promote recycling and use of her signage. While her design was not earth-shattering, it struck a chord with many in the room about the need of having color-coded bins and clear, imaged-based signage. She later brought in actor Elvis Nolasco of ABC’s American Crime, to discuss why he got involved in the campaign. Though impressive by star power alone, this was the least provocative component to the programming in my opinion. Josh Prigge, Sustainability Manager for Fetzer Vineyards, shocked the audience when he announced 100% of the grapes they grow at their vineyards is organic – sold under their Bonterra label as well as a component grape in many of their Fetzer labeled wines.

Representatives from Toyota Motors North America and Kellogg Garden Products spoke on Thursday. Kathy Kellogg-Johnson, Director of Sustainability for Kellogg Garden Products, said that by putting 3” of composted material or mulch on top of the soil, water demand will decrease water by as much as 30%, which is exactly what the governor has mandated for water reduction statewide. Ryan McMullan, Manager of Environmental & Safety for Toyota, explained how the concept of “Mottainai” has been instrumental in cultivating environmental ethics within Toyota. Mottainai is Japanese term with no exact English translation which roughly translates to mean the regret experienced when something is not valued for its intrinsic value and is therefore “wasted”. Though Toyota does use waste-to-energy, they appropriately do not consider this to be a form of recycling and therefore it is not counted toward their diversion rate. They measure sustainability through several different metrics including their 3R rate (amount reduced, reused, and recycled out of total generation) and their Generation Rate, which does not include recycling because it is still a stream that has been generated and therefore not avoided.

Overall I am happy I attended the conference, and would encourage more NCRA members to take advantage of the discount in future years. There were speakers who had not been given the opportunity to present at other recycling conferences I have attended so this was refreshing. The conference was especially relevant for those interested in bringing businesses up to speed with Zero Waste goals and for businesses representatives interested in learning about how other companies have made strides toward Zero Waste. Hopefully the number of USZWBC certified businesses will grow even larger over time and we will continue to see the expanded influence of this very worthwhile organization.

Read more… USZWC 2015 Conference Program: http://www.uszwbc.org/2015conference/program

Franchise Fee Is A Tax

A monthly feature, exclusive to NCRA News, from NCRA general counsel and board member John Moore, concerning recent legal decisions relating in some manner to Zero Waste.

By John D. Moore, NCRA Vice President and Legal Counsel, Henn, Etzel & Moore, Inc.
On February 26, 2015, the California Court of Appeal for the Second Appellate District, entered into the murky fray of Proposition 218 interpretation and attempted to clarify when a franchise fee is a tax requiring pre-approval by the electorate. Though the case arose in the context of an electrical service utility, the Court’s analysis might well apply to other municipal franchises, such as solid waste.

In Jacks v. City of Santa Barbara, the City, with PUC approval, imposed a 1% (of gross receipts) surcharge on the utility, Southern California Edison, to be collected by SCE from the ratepayers, making SCE a pass-through of the surcharge. A taxpayer group challenged this surcharge under the CA Constitution provision known as Proposition 218. Proposition 218, in short, is an outgrowth of Proposition 13’s limitation on government taxation power and requires voter approval before any new tax can be imposed.

As the Court in Jacks noted, Proposition 218 prohibits local governments from imposing “taxes” without voter approval but does not define what “taxes” means. According to the California Supreme Court in Sinclair Paint v. State Board of Equalization, “The term “has no fixed meaning, and . . . the distinction between taxes and fees is frequently ‘blurred,’ taking on different meanings in different contexts… In general, taxes are imposed for revenue purposes, rather than in return for a specific benefit conferred or privilege granted.”
Jacks also noted that the state high court, in contrast, has defined “franchise fee” since 1922 as a “charge which the holder of the franchise undertakes to pay as part of the consideration for the privilege of using the avenues and highways occupied by the public utility.”

Jacks took a very literal reading of this 1922 definition to decide that Santa Barbara’s surcharge was a tax and not a franchise fee because, the …”primary purpose is for the City to raise revenue from electricity users for general spending purposes rather than for SCE to obtain the right of way to provide electricity. This constitutes a tax under Proposition 218 and is subject to approval by the electorate.

In reaching this conclusion, Jacks again echoed the state high court’s 1997 analysis in Sinclair Paint, that if it quacks like a duck, it’s a duck: “if revenue is the primary purpose, and [compensation for the franchise] is merely incidental, the imposition is a tax, but if [compensation for the franchise] is the primary purpose, the mere fact that revenue is also obtained does not make the imposition a tax.”

The Sinclair Paint Court also stated that the definition of “taxes”, ” ‘does not embrace fees charged in connection with regulatory activities which fees do not exceed the reasonable cost of providing services necessary to the activity for which the fee is charged and which are not levied for unrelated revenue purposes.’

In the field of solid waste franchises, the Court of Appeal’s 1993 determination in City of Dublin v. County of Alameda, that Alameda County Measure D did not impose a tax, but was an enactment of regulatory power, has long held sway.

But the 1993 Measure D case was decided before Sinclair Paint and before the constitutional amendment of Proposition 218. In light of Jacks, local governments, franchised haulers, and ratepayers, may want to take another look at the applicability of Proposition 218 to solid waste franchise fees.

NCRA’s Zero Waste Week Tour: Resilience Climate Change Expedition

res ex march 20th 1

March 20, 2015 marked the second annual Resilience Climate Change Expedition, originally inspired by Al Gore’s Climate Reality Project’s 2012 call to action. The Climate Reality project challenged individuals to conduct climate change expeditions within their own communities and Resilience, an action figure for Zero Waste, took up the charge.  Read More “NCRA’s Zero Waste Week Tour: Resilience Climate Change Expedition”