Express Disposal, LLC v. City of Memphis

Citation: Not availableDocket: W2007-02081-COA-R3-CV

Court: Court of Appeals of Tennessee; December 28, 2008; Tennessee; State Appellate Court

Original Court Document: View Document

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Express Disposal, LLC contested the City of Memphis' authority to take over garbage collection services in the Berryhill area after its annexation, arguing that it had a vested right to conduct its business prior to annexation. The key legal question was whether Memphis' actions constituted a taking of Express Disposal's property rights without just compensation, in violation of the Tennessee Constitution. The court ruled that Memphis' assumption of garbage collection in Berryhill did not amount to a constitutional taking, affirming the circuit court's dismissal of Express Disposal's claim for failure to state a valid cause of action. 

The factual background includes Memphis' annexation of Berryhill effective January 1, 2007, following a lengthy legal dispute resolved by a Consent Final Judgment in 2005. Express Disposal had provided garbage services to Berryhill from 2005 until December 31, 2006. In October 2006, Memphis notified Express Disposal that it would begin providing these services in January 2007, exercising both its statutory rights and a contractual agreement with Allied Waste Services. Express Disposal's complaint cited City Ordinance 9-56-3, which prohibits unauthorized garbage collection in newly annexed areas, and did not contest Memphis' right to collect garbage but sought relief under the premise of a vested business right. Key ordinances were referenced, establishing the city's exclusive authority over solid waste collection and restrictions on private haulers.

Private collection services are deemed in the public interest when the director assesses that property dimensions and capacities hinder public collection. Express Disposal contended that its customer retention rates indicated a reasonable expectation of continued business and argued that the loss of service constituted an unconstitutional taking without just compensation, violating Article I, section 21 of the Tennessee Constitution. Express Disposal claimed a loss of $267,300 based on implied contracts with 135 customers, representing nearly a decade of potential revenue in Berryhill. 

On March 2, 2007, Memphis moved to dismiss the case under Tennessee Rule of Civil Procedure 12.02(6) for failure to state a viable claim. The trial court granted this motion on August 15, 2007, determining that Express Disposal did not establish a property right subject to an unconstitutional taking. The court highlighted several points: Memphis held exclusive rights to provide municipal services in its borders, Memphis ordinances allowed Express Disposal permits for limited service areas, a diminished operational capacity does not equate to a compensable taking, and Express Disposal did not claim Memphis took any physical property. Furthermore, Express Disposal had prior knowledge of the annexation and the city's solid waste collection plans when it began operations in Berryhill.

Express Disposal appealed, raising two main issues: 1) whether it had a vested right to operate in Berryhill before the annexation, and 2) whether the annexation was an unconstitutional taking of its rights without compensation. Additionally, Memphis challenged whether the dismissal was correct based on its exclusive right to municipal services. The appellate court affirmed the trial court's decision. The standard for review on a motion to dismiss for failure to state a claim is a legal issue.

The Court will review the trial court's ruling on a Rule 12.02(6) motion to dismiss without any presumption of correctness and must interpret the plaintiff's complaint in a liberal manner, accepting all factual allegations as true. A motion to dismiss assesses only the legal sufficiency of the complaint. Express Disposal acknowledges Memphis's exclusive right to provide garbage collection under Tennessee law but argues that Memphis must compensate for 'taking' its customers and contracts, as well as for preventing Express Disposal from serving residential clients. Article I, section 21 of the Tennessee Constitution prohibits the taking of property for public use without consent or just compensation, recognizing the government's eminent domain powers while limiting its application. The General Assembly has enacted statutes related to eminent domain and inverse condemnation, where eminent domain involves government-initiated property acquisition, while inverse condemnation allows property owners to seek compensation for property taken without formal proceedings. Express Disposal's claim is classified as inverse condemnation due to the lack of eminent domain proceedings by Memphis. Tennessee courts distinguish between two types of takings: physical occupation takings, which involve direct and continuing invasions of property, and nuisance-type takings. A physical occupation occurs when the government directly invades or destroys property rights, particularly when the property's use is significantly impeded.

A plaintiff's property rights are considered "taken" when a decrease in the value of real property occurs that uniquely affects the property and is not experienced by the public at large. Nuisance-type takings arise from governmental interference with a landowner’s use and enjoyment of property. To claim compensation for such takings, the plaintiff must demonstrate direct, substantial, and repeated interference that uniquely impacts the property, resulting in a loss of market value.

Express Disposal's inverse condemnation claim does not qualify as either a physical occupation or nuisance-type taking. The company argues that its inability to service residences in Berryhill is akin to an eminent domain situation, citing two Tennessee cases for support. However, these cases do not establish a right to just compensation for the loss of business ability.

In Duck River Electric Membership Corporation v. City of Manchester, the court ruled that while the city could exercise eminent domain, it was required to compensate the utility for the loss of its real and personal property, not for intangible property rights. Similarly, in Forked Deer Electric Cooperative, Inc. v. City of Ripley, the cooperative lost customers due to the town granting an exclusive franchise to another entity. The court acknowledged this as a form of inverse condemnation but limited the issue to compensation calculation, rendering it less relevant as precedent in Express Disposal's case.

Forked Deer addressed a taking without just compensation under the Fifth Amendment, not the Tennessee Constitution. The Tennessee Supreme Court clarified that Forked Deer’s loss of customer service rights did not qualify as a 'taking'; it focused solely on how to calculate compensation. Tennessee law mandates compensation for electric cooperatives affected by annexation but does not extend similar protections to displaced garbage collectors. Consequently, there is no basis for Express Disposal's claim that Memphis' appropriation of garbage collection services constituted a taking requiring compensation. The circuit court's dismissal of Express Disposal’s Complaint is affirmed, with all other issues left unaddressed. Costs of the appeal are assigned to Express Disposal and its surety, with potential execution if needed.