Tennessee Scrap Recyclers Ass’n v. Bredesen: Challenges to Scrap Metal Ordinance Denied

A federal appellate court has considered the constitutionality of a government’s attempt to impose new requirements on the purchasers of scrap metal.

Tennessee has a large scrap metal industry, annually shipping 120 million pounds of scrap metal. The scrap metal industry is organized like a pyramid, where small dealers gather the scrap metal and scrap metal is sold up the chain until it is melted down and processed for shipping.

In 2007, a wave of scrap metal theft plagued the state, due to rising prices for scrap. The City of Memphis (“City”) alone experienced a 821.7% increase over the prior year in scrap metal theft. Due to public outcry from the victims of the crime wave, the City enacted a new ordinance (“Ordinance”) regulating the activities of scrap dealers. The Ordinance imposed new permitting requirements for scrap dealers, record keeping requirements, and also a 10-day holding period for all purchased scrap metal, giving victims the chance to come and inspect the scrap metal.

Local scrap dealers and the state’s trade association for scrap metal dealers (collectively, “Challengers”) filed a lawsuit challenging the Ordinance. The Challengers argued that the Ordinance unconstitutionally burdened interstate commerce and also constituted a taking without compensation. The Challengers sought an injunction seeking to prevent the enforcement of the Ordinance, but the trial court rejected this request. The Challengers appealed this ruling.

The United States Court of Appeals for the Sixth Circuit affirmed the trial court’s ruling. A preliminary injunction requires a court to consider four factors: first, whether the parties requesting the injunction will likely succeed on the merits of their lawsuit; second, whether irreparable harm will be suffered by the failure to grant the injunction; third, whether the injunction could harm others if issued; and finally, whether the injunction will serve the public interest. The court evaluated the Challengers’ arguments to determine if it is likely that they would succeed on the merits of their case.

First, the court considered whether the Ordinance improperly interfered with interstate commerce. The Challengers argued that the Ordinance is an impermissible local regulation of interstate commerce. They also argued that the burden on interstate commerce imposed by the Ordinance exceeded the local benefits identified by the City.

The court rejected both arguments. Since the Ordinance regulated only the sale of local scrap metal, the court ruled that there was no burden on interstate commerce- indeed, the court found that the Ordinance could actually benefit out-of-state competitors. The focus of courts in this area has been on local governments attempting to regulate all commerce (including interstate) in their local area, not regulations that only regulate local commerce. The court also determined that the City had identified a real local benefit of the Ordinance, as it could help identify thieves and so could deter future scrap metal theft.

Second, the court evaluated the taking claims. The Takings Clause of the Fifth Amendment provides that "(nor) Shall private property be taken for public use, without compensation." The Challengers argued that the 10-day waiting period amounted to a physical taking, since they lost the right to use the scrap metal during that period. They also argued the Ordinance created temporary easement to their property, since the Ordinance gave the public the right to inspect the scrap metal during this period.

The court rejected both arguments. A temporary regulation of an individul’s use of its property does not constitute a physical taking, as a temporary regulation does not constitute a “physical invasion”. The court also determined that the right to inspect the property for ten days does not constitute the type of permanent easement that the Supreme Court has found to constitute a taking. Rather, the Ordinance simply gave law enforcement and victims of scrap metal theft a short period to identify potentially stolen scrap metal.

Since the court rejected both Constitutional arguments, the court affirmed the trial court’s ruling that the Challengers were unlikely to succeed on the merits of their lawsuit. Therefore, the denial of the injunctive relief was affirmed.

Tennessee Scrap Recyclers Ass’n v. Bredesen, No. 08-5824, 2009 WL 348834 (6th Cir. Feb. 13, 2009). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].

Editor’s Note: Editor’s Note: NAR joined an amicus curiae brief with a coalition of supporters of the law, including the Memphis Area Association of Realtors®, per the recommendation of NAR's Legal Action Committee.

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