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Louisville/Jefferson County Metro Government Waste Management District v. Waste Management of Kentucky, LLC

United States District Court, W.D. Kentucky, Louisville

September 26, 2019

LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT WASTE MANAGEMENT DISTRICT PLAINTIFF
v.
WASTE MANAGEMENT OF KENTUCKY. LLC DEFENDANT

          MEMORANDUM OPINION

          CHARLES R. SIMPSON III, SENIOR JUDGE UNITED STATES DISTRICT COURT

         This case arose from a claim by plaintiff Louisville/Jefferson County Metro Government Waste Management District (hereinafter “the District”) that defendant Waste Management of Kentucky, LLC (hereinafter “WMK”) has been underpaying the landfill license fee owed to the County for at least thirteen years, a claim which WMK staunchly denies. The action seeks (1) recovery of unpaid portions of landfill license fees with prejudgment interest; (2) a declaration of the rights and obligations between the parties, presently and going forward, with respect to Louisville Metro Code of Ordinances (“LMCO”) § 51.001, et seq. (LMCO Chapter 51, herein generally “the Ordinance, ” and specific sections and subsections, as specified) under which the license fee is imposed;[1] and (3) an accounting of gross receipts of WMK. This matter is presently before the court for consideration of cross-motions for summary judgment.

         The parties agree that there is no genuine issue of material fact concerning how WMK made its quarterly calculation of the gross receipts subject to the landfill license fee and its rationale for its method of calculation. The question is whether WMK has paid the appropriate amount in satisfaction of the Ordinance’s requirements and whether the District may recover the amounts underpaid, if any.

         As an initial matter, WMK asserts that the Ordinance is invalid and unenforceable in violation of the “Home Rule.”[2] WMK contends that the Ordinance exceeds the authority granted to the County by statute and contains irreconcilable discrepancies which render it infirm. Additional WMK urges that the County’s prior course of conduct bars the District from recovering on a claim for underpaid fees. Finally, it contends that any claim which seeks to reach beyond May 17, 2012 is barred by the applicable statute of limitations.

         The parties filed an Agreed Statement of Facts, accompanied by a number of exhibits (DN 27). The cross-motions for summary judgment addressing those facts are now ripe for decision.

         I. Agreed Facts, in pertinent part

         WMK owns and operates the Outer Loop Recycling & Disposal Facility (“Outer Loop Facility”). Agreed Statement of Facts, ¶ 27, p. 1, ¶ 1.[3] It was opened in 1969 and currently covers 782.10 acres, of which 518.30 acres are permitted for solid waste disposal in a landfill. Id. WMK engages in various activities on the property including disposal of solid waste, waste water treatment, composting, and capture of renewable natural gas. Id. These activities are permitted by the Kentucky Department for Environmental Protection, Division of Waste Management (“KDEP”). DN 27, ¶ 2. An “aerial map” appended to the Agreed Statement of Facts depicts the Outer Loop Facility as of January 2018. DN 27, ¶ 5; Ex. 1. The exhibit consists of an aerial photograph with superimposed notations identifying various points on the property such as “Compost Operations, ” “Waste Water Treatment Facility, ” and “Renewable Gas Facility.” There is no physical point or boundaries designated as “Landfill.” There is no legend or scale. The exhibit appears to be offered for illustrative purposes only.

         KRS 68.178, referred to by the parties as the “enabling statute, ” authorizes Kentucky counties to license the operation of off-site waste management facilities including landfills and permits them to charge a fee for these licenses. DN 27, ¶ 8.[4] The text of the enabling statute is set out in section II below.

         Louisville Metro Government adopted Chapter 51 of the Louisville Metro Code of Ordinances pursuant to statute KRS 68.178. Ordinance No. 44 (the “Ordinance”) repealed Chapter 51 relating to solid waste management and reenacted it as set forth in full in the Ordinance. DN 27, ¶ 10; Ord. No. 44, Series 2005, Section III. This version of Chapter 51 is the Ordinance in issue in this case.

         WMK pays annual license fees for landfill operations, composting operations, and hauling/transportation operations pursuant to the Ordinance. DN 27, ¶ 6. The fee for composting consists of a $100 application fee and a $100 annual renewal fee. The fee for waste hauling is $100 per year plus $10 per waste collection vehicle operated by the licensee. The fee for landfill operations is 5% per annum of the facility’s gross receipts. § 51.201(A) and (B). DN 27, ¶ 10.

         Section 51.001 of the Ordinance defines “Gross Receipts” as “[t]he total amount of money or value or other consideration received or generated by engaging in the business or businesses defined in this Ordinance before any deductions related to the cost of doing business.”

         In August of 2011, in a meeting of the District’s Advisory Committee, the “vagueness of the definition of Gross Receipts [in § 51.001] as it pertains to certain facilities” was raised and discussed. DN 27, ¶ 34; Meeting Minutes, Ex. 3. The Minutes indicate that “Discussion centered around the types of material and services that should be included in ‘Gross Receipts’ so that it encouraged ‘reuse’ and ‘recycling’ of solid waste but still captured what was due.” Id. In November of 2015, the District Advisory Committee Group A was tasked with drafting language to potentially better define the term “Gross Receipts.” DN 27, ¶ 35. The issue was researched, and the resulting report indicated that “in Jefferson County Gross Receipts are defined as any and all monies take [sic] in through business operations, sales, and services provided. Gross receipts are calculated before any deductions for business expenses have been made. There are no approved deductions for gross receipts.” DN 27, Ex. 4. No update to the Ordinance was approved or enacted. DN 27, ¶ 35. The definition of “Gross Receipts” remains unchanged.

         For the past thirteen years, WMK has submitted quarterly reports in connection with payment of the 5% license fee to the District, as required by § 51.204. DN 27, ¶ 14. Each report included a notation concerning WMK’s method of calculating the gross receipts subject to the fee:

Gross receipts are less receipts for recyclables, compost, revenue generating cover, bioremediation of petroleum contaminated soils, pretreatment facility (non-hazardous waste), non-hazardous liquid waste added to the bioreactor landfill, hauling (brokerage), container liners, weighing of vehicles, analytical, appliances, tire chips, fuel surcharge, landfill gas sales, the Old City of Louisville waste, and adjustments for billing corrections.

         WMK has consistently excluded sums in fifteen specific categories, identified by line item in the spreadsheets appended to the parties’ Agreed Statement of Facts, (DN 27, Ex. 2), in reaching its quarterly report figures and the District has accepted WMK’s payments, never questioning the calculations until 2016. DN 27, ¶¶ 15, 32, 33.

         In July of 2016, the District notified WMK for the first time that it believed WMK was underpaying the landfill license fee. DN 27, ¶ 36. The parties attempted to resolve their disagreement concerning how the landfill license fee should be calculated, but negotiations were unsuccessful. Id. The District filed a complaint in the Jefferson County, Kentucky, Circuit Court on May 11, 2017 seeking to end the impasse. The matter was removed to this Court under our diversity jurisdiction. DN 27, ¶ 37.

         II.

         The Ordinance and its Enabling Statute

         The pertinent provisions[5] of the enabling statute, KRS 68.178, are as follows:

68.178. County license fee for off-site waste management facilities – Use of proceeds.
(1) The fiscal court of any county[6] may license off-site waste management facilities located within the county with the imposition of a license fee at a percentage rate not to exceed two percent (2%) per annum of the gross receipts of such a waste management facility owned or operated by self-employed individuals, partnerships, or corporations. The proceeds from the license fee shall be used to defray the general revenue requirements of the county where the facility is located. For purposes of assessing the license fee provided for in this section, off-site waste management shall consist of establishing and operating a facility whose principal purpose is treatment, storage, disposal, or a combination of these activities…
(2)(a) The fiscal court of a county, or an urban-county council of an urban-county government may license a solid waste landfill located within the county or urban-county area. The license fee may be set at not less than one cent ($0.01) but no more than fifty cents ($0.50) per ton of waste received by the landfill or set at up to five percent (5%) of gross receipts of the landfill…
(c) The proceeds from the license fee shall be used to defray the government services provided to the landfill, necessary clean-up operations or emergency response related to operation of the landfill or transporting waste to the landfill, necessary maintenance, improvement or construction of roads, and for the general revenue requirements of the county or urban-county government where the landfill is located…
(d) …The fee provided for in this subsection shall be in lieu of the provisions of subsection (1)…[7]

         The Ordinance contains the following provisions:[8]

WASTE MANAGEMENT DISTRICT
§ 51.100. CREATION OF DISTRICT.
(A) There is a Waste Management District, which was created pursuant to KRS 109.041(13), KRS 109.115 and KRS 67.083(3), which includes in its jurisdiction all territory within the borders of the County and shall be called “Louisville/Jefferson County Metro Government Waste Management District.” § 51.105. POWERS AND DUTIES OF WASTE MANAGEMENT DISTRICT.
(A) The Waste Management District shall have those powers and duties assigned to solid waste management districts under KRS Chapter 68.178 and 109 and 224…which powers include, but are not limited to, the powers and duties set forth in this ordinance.
… (H) The right to charge reasonable fees and rentals for providing and/or regulating solid waste management facilities in order to finance the district’s operations, service its indebtedness and provide adequate funds for facility replacement. KRS 68.178 provides that the fiscal court of any county may license off-site waste management facilities located within the county with the imposition of a license fee. Therefore, pursuant to KRS 67C.101, the Metro Government has the authority to impose license fees. The Metro Government has assigned to the Louisville/Jefferson County Waste Management District all powers or duties given to it by KRS 68.178[.]
OFF-SITE WASTE MANAGEMENT FACILITIES
§ 51.200. LICENSING.
(A) All persons involved in the business of operating an off-site waste management facility within the County shall be licensed with the District pursuant to regulations duly adopted by the Board of Directors.
(B) The off-site waste management facility license shall consist, in part, of the filing of a quarterly report with the District pursuant to regulations duly adopted by the Board of Directors.
(C) Types of Facilities:
(1) Off-site waste management facilities shall be classified and licensed in one of more of the following categories:
(a) Landfill;
(b) Solid Waste Management Facility other than a landfill;
(c) Waste Disposal Facility other than a landfill;
(d) Recycling Facility; or
(e) Composting Facility.
§ 51.201. FEE SCHEDULE.
(A) Pursuant to the authority granted by KRS 68.178(1) and in conformity with the home rule power granted to Metro Government, there is hereby imposed an annual license fee for the operation of a recycling facility, solid waste management facility, landfill [or] waste disposal facility, or other waste management business.
(B) The fees for these specific licenses are as follows:

Type of Facility

License Fee

Landfill

5% per annum of the facility’s gross receipts

Waste Disposal Facilities, other than a landfill or recycling facility

2% per annum of the facility’s gross receipts

Solid Waste Management Facilities

2% per annum of the facility’s gross receipts

Recycling and Composting Facilities

$100 application fee and $100 annual renewal fee

Waste Haulers

$100 a year plus $10 per truck

(C) No license fees may be collected from the Metro Government solid waste collection trucks hauling solid waste to a landfill or transfer station and the license fees provided for in this Section shall not be collected from a landfill or transfer station on solid waste brought into a landfill or transfer station by Metro Government trucks.
LICENSE APPLICATIONS, FEES AND REPORTS
§ 51.204. LANDFILL.
(A) Landfill License Application.
(1) An applicant for a license to operate a landfill shall apply to the Department, at its designated address.
…(B) Landfill License Fee:
…(2) The licensing fee shall be determined by multiplying the gross receipts of the facility in each quarter of the year by up to five (5%) percent.
…(C) Required Reporting:
(1) The licensee shall file a quarter-annual report with the Department which shall accompany payment of the ...

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