Mohave Disposal, Inc. v. City of Kingman

Citations: 184 Ariz. 368; 909 P.2d 435; 195 Ariz. Adv. Rep. 41; 1995 Ariz. App. LEXIS 167Docket: No. 1 CA-CV 93-0428

Court: Court of Appeals of Arizona; July 27, 1995; Arizona; State Appellate Court

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Mohave Disposal, Inc., a private garbage collection company in Mohave County, Arizona, sought compensation under A.R.S. section 9-516.A after the City of Kingman began offering competing services in areas previously served by Mohave Disposal. The court concluded that Mohave Disposal did not qualify as a public service corporation or a public utility under the relevant statutes, affirming the trial court's dismissal of Mohave Disposal’s suit. 

The facts established that Mohave Disposal had been providing waste services in unincorporated Mohave County and lost customers after the City annexed part of the county and imposed its own trash collection fee on residents. Mohave Disposal filed a lawsuit in December 1992, asserting that the City violated A.R.S. section 9-516.A by not compensating it for lost business and equipment in the annexed area. This statute asserts that a competing utility service cannot be established unless the existing utility is compensated for its services and equipment.

Mohave Disposal argued for a broad interpretation of "public utility service" to include refuse collection, claiming it did not need a certificate of convenience to be protected under the statute. The City moved to dismiss the case, asserting that Mohave Disposal was not a public utility and therefore not entitled to compensation. The trial court sided with the City and dismissed the case, leading to Mohave Disposal's appeal.

In reviewing the dismissal, the court accepted the non-moving party's facts as true, maintaining that if Mohave Disposal could not claim relief under any interpretation of its allegations, the dismissal would stand. The court reviewed the statute's interpretation de novo, considering its context, language, and purpose.

Mohave Disposal is not classified as a public service corporation under Article 15, Section 2 of the Arizona Constitution. The legislature's intent in enacting A.R.S. section 9-516.A was not to protect businesses like Mohave Disposal, which were considered common carriers at that time. The Arizona Constitution defines public service corporations as those engaged in specific utility services, including gas, electricity, water, sewage disposal, and telecommunication. Trash collection is not included in these services, even though common carriers can qualify as public service corporations. 

Mohave Disposal's claim that the legislation aimed to protect private garbage collection from municipal competition is undermined by the lack of definitive legislative intent, as opinions from individual senators or the Attorney General do not establish this. The absence of a presumption of jurisdiction by the Corporation Commission over these businesses is supported by precedent. Additionally, the court has consistently shown reluctance to extend the Corporation Commission's power to businesses like crop dusting and tow trucks, reinforcing that clear constitutional and statutory support is necessary for granting monopolies. 

The Arizona Supreme Court, in 1963, clarified that refuse collection businesses are not common carriers and do not require certificates of convenience nor are they subject to Corporation Commission regulation. The historical context of some refuse businesses being treated as common carriers does not alter their non-qualification as public service corporations.

A mistaken belief or desire by a business owner to be recognized as a common carrier does not extend the jurisdiction of the Arizona Corporation Commission beyond constitutional or statutory limits. Mohave Disposal is not classified as a public service corporation and therefore cannot be considered a public utility. The court referenced City of Tucson v. Polar Water Co., indicating that municipalities can compete with existing utility providers without compensation, while acknowledging legislative authority to protect existing utility contracts. In response to perceived unfairness from this ruling, A.R.S. section 9-516 was enacted, which mandates that a city or town must acquire the relevant utility's infrastructure before providing competing services. The statute requires that if adequate public utility service is already provided, a municipality cannot introduce a competing service without this acquisition. The core issue in the appeal is whether Mohave Disposal qualifies as a "public utility service" under this statute. The City maintains the statute applies only to public service corporations as defined in the state constitution, while Mohave Disposal argues for a broader interpretation. However, the court notes that A.R.S. section 9-516.A does not define "public utility service," and various statutes cited by both parties do not conclusively define Mohave Disposal's status as a utility.

The interpretation of 'public utility service' in A.R.S. section 9-516.A is not restricted to public service corporations, as indicated by the absence of such specification in subsection A. The Arizona Supreme Court's ruling in Mesa v. Salt River Project established that a political subdivision engaged in retail electricity sales qualifies as a 'public utility' despite not being a public service corporation. This was supported by the court's finding that Salt River Project had property rights related to its distribution system within city limits and could not be compelled to cease operations without just compensation. The court emphasized that 'public utility' encompasses businesses traditionally affected with public interest. Mohave Disposal argues its refuse disposal service is similarly affected by public interest; however, it lacks the essential characteristics of a public service corporation, as it is not a political subdivision and does not provide service types typically associated with such corporations, like water or electricity. The court reiterated that a broader public interest in a business does not inherently categorize it as a public service corporation. Previous cases indicate that only businesses providing services explicitly recognized as public service corporation activities, or those falling under significant public interest, qualify for such classification. Thus, there is no precedent for categorizing refuse disposal as a public utility in this context.

The court in Visco established that while services like emergency signals and fire alarms are tied to public health obligations, they do not classify these services as public utility corporations. Following the precedent set in Mesa v. Salt River Project, the court concluded that Salt River Project operates uniquely and is not a public utility, despite providing services typically associated with public service corporations. Mohave Disposal, in contrast, does not meet the criteria to be deemed a public service corporation. Unlike utilities such as gas or electricity, refuse collection lacks the costly infrastructure that could justify a monopoly with state regulation. Declaring Mohave Disposal a public utility would contradict existing case law, which emphasizes free enterprise over monopolies. Consequently, 'public utility' under section 9-516.A includes only public service corporations and state political subdivisions providing similar services. The trial court's judgment affirming that garbage collection does not meet this definition stands, allowing the City to offer competing services without needing to purchase or condemn Mohave Disposal’s property. Additionally, the court cited Laidlaw Waste Systems, which determined that neither state nor federal law requires compensation for trash collection services prior to annexation. Mohave Disposal did not contest the dismissal of its claims regarding unconstitutional property deprivation or antitrust violations, and the City maintained that the court lacked jurisdiction over the appeal concerning the summary judgment denial. Lastly, historical legislative concerns were noted regarding the potential burdens of requiring cities to purchase municipal services, with the court clarifying that distinctions between public utilities and public service corporations are not interchangeable.

Political subdivisions are characterized by their role in local governance, defined geographical areas, and authority for self-governance through elected officials. The Salt River Project Agricultural Improvement and Power District qualifies as a political subdivision under Article 13, section 7 of the Arizona Constitution, which designates certain districts, including power and agricultural improvement districts, as political subdivisions of the state. This designation allows the district to perform public service functions as outlined in the Constitution, while maintaining its status as a political subdivision and not becoming a public service corporation. Relevant case law includes McClanahan v. Cochise College and Rubenstein Const. Co. v. Salt River Proj. Agr. Imp. Pow. Dist.