Daniels Sharpsmart, Inc. v. Karen Smith
889 F.3d 608
9th Cir.2018Background
- Daniels Sharpsmart, an Illinois company, operates a medical-waste treatment facility in Fresno and transports California-generated biohazardous waste to out-of-state facilities for final treatment.
- California’s Medical Waste Management Act (MWMA) generally requires California-generated medical waste to be incinerated and provides that out-of-state transported medical waste be consigned to a permitted facility in the receiving state.
- From Sept–Dec 2014 Daniels sent ~320,000 pounds of California medical waste to Kentucky and Indiana for non-incineration treatments lawful in those states; earlier it used an incinerator in Maryland.
- California Department of Public Health officials inspected Daniels, asserted California law required incineration even for out-of-state treatment, issued a notice of violation and a $618,000 penalty, and pressured Daniels to use out-of-state incinerators at higher cost.
- Daniels sued under 42 U.S.C. § 1983, claiming the Department officials’ extraterritorial enforcement violated the dormant Commerce Clause; the district court granted a preliminary injunction enjoining enforcement against Daniels’ out-of-state waste disposal and denied qualified immunity for the officials.
- The Ninth Circuit affirmed the preliminary injunction (Daniels likely to succeed on the merits) but reversed the denial of qualified immunity as to three individual officials (no clearly established law that made their conduct obviously unlawful).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether California officials’ enforcement of the MWMA to control out-of-state treatment of California-origin medical waste violated the dormant Commerce Clause (extraterritoriality) | Daniels: California cannot regulate or punish wholly out-of-state waste-treatment transactions that comply with other states’ laws | Officials: MWMA authorizes regulating California-origin medical waste and requiring consignment to permitted facilities; enforcement within their authority | Held: Violation — injunction affirmed. Applying MWMA to control lawful out-of-state disposal is an impermissible extraterritorial regulation under dormant Commerce Clause |
| Whether Daniels likely to succeed on merits for preliminary injunction | Daniels: Clear extraterritorial application; transactions and treatment occurred wholly outside California | Officials: No redressable constitutional violation; statute allows control over California waste | Held: Daniels likely to succeed; district court did not abuse discretion in granting preliminary injunction |
| Whether officials are entitled to qualified immunity from damages for enforcing the MWMA extraterritorially | Daniels: Officials acted unconstitutionally and thus are not protected | Officials: Reasonable belief their actions were lawful under MWMA; ambiguity exists about reach of statute | Held: Qualified immunity applies to Pilorin, Dabney, and Hilton — right was not clearly established in the specific context, so denial of immunity was reversed |
| Whether the statutory language of MWMA removes ambiguity about extraterritorial reach | Daniels: Statute should not permit control of out-of-state conduct | Officials: MWMA’s consignment/permit provisions support enforcement | Held: Statute ambiguous; reasonable officials could (mistakenly) interpret MWMA to reach out-of-state activity, supporting qualified immunity for individual officials |
Key Cases Cited
- Or. Waste Sys., Inc. v. Dep’t of Envtl. Quality of State of Or., 511 U.S. 93 (1994) (dormant Commerce Clause extraterritoriality principles)
- Healy v. Beer Inst., 491 U.S. 324 (1989) (state law may not control commerce occurring wholly outside state borders)
- Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573 (1986) (discriminatory/regulatory effects on interstate commerce invalid)
- S.D. Myers, Inc. v. City & County of San Francisco, 253 F.3d 461 (9th Cir. 2001) (direct regulation occurs when a state law affects purely out-of-state transactions)
- Sam Francis Found. v. Christies, Inc., 784 F.3d 1320 (9th Cir. 2015) (invalidating state attempt to regulate out-of-state sales by residents)
- NCAA v. Miller, 10 F.3d 633 (9th Cir. 1993) (state law with extraterritorial effect forbidden by Commerce Clause)
- Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7 (2008) (preliminary injunction standard)
- Ashcroft v. al-Kidd, 563 U.S. 731 (2011) (qualified immunity requires rights to be clearly established)