Pure Wafer Inc. v. City of Prescott, No. 14-15940 (9th Cir. 2017)
Annotate this CasePure Wafer, a facility that cleans silicon wafers, filed suit against the City, challenging Ordinance No. 4856-1313. The Ordinance imposes limits on the pollutants that industrial users, like Pure Wafer, are permitted to discharge into the City’s sewer system. Pure Wafer claims that by enacting the Ordinance, the City impaired the obligation of its contract with Pure Wafer and committed at least two different breaches of contract. The district court entered judgment for Pure Wafer and awarded Pure Wafer a permanent injunction. The court concluded that the City has not impaired the obligation of its contract with Pure Wafer in violation of the Contracts Clause of the Constitution, because the Ordinance has not altered the ordinary state-law remedies to which Pure Wafer would otherwise be entitled if it successfully proves a breach of contract. The court explained that the City might very well have breached its contract but that does not necessarily mean it has violated the Contracts Clause. Therefore, the court reversed as to the Contracts Clause claim. The court agreed, however, with Pure Wafer's alternative claim that the City has breached the contractual obligations it undertook in the Development Agreement. In this case, the City agreed to accept such effluent as the parties knew Pure Wafer would need to discharge in order to maintain a viable business, and the City agreed to bear the financial risk that State-initiated regulatory changes would make complying with such promise more costly than it was when the parties entered into the Agreement. Therefore, the court concluded that the City may not force Pure Wafer to absorb the costs needed to bring the City into line with the terms of its Aquifer Protection Permit. The court explained that enforcing the Ordinance against Pure Wafer would eviscerate the benefit of Pure Wafer’s bargain; the City cannot do so without putting itself in breach of the Agreement. Accordingly, the court affirmed in part, reversed in part, and remanded for further proceedings.
Court Description: Contract Clause. The panel affirmed in part and reversed in part the district court’s permanent injunction in favor of plaintiff, entered following a bench trial, and remanded in an action brought under 42 U.S.C. § 1983 alleging that the City of Prescott, Arizona violated the Contract Clause of the Constitution when it declared that its sewage treatment plant would no longer accept wastewater discharged by plaintiff’s metal refinishing plant. This controversy centered on the fluoride concentration in plaintiff’s effluent, and the City’s enactment of an Ordinance imposing limits on such concentration. Plaintiff alleged that application of the Ordinance to plaintiff’s industrial wastewater discharges constituted an unconstitutional impairment of its contract rights, in violation of the Contract Clauses of the federal and state constitutions. Reversing the district court’s judgment on the Contract Clause claims, the panel held that the City had not impaired the obligation of its contract with plaintiff, because the Ordinance has not altered the ordinary state-law remedies to which plaintiff would otherwise be entitled if it successfully proved a breach of contract. The panel stated that the City might very well have breached its contract, but that did not necessarily mean it has violated the Contract Clauses of the federal and state constitutions. 4 PURE WAFER V. CITY OF PRESCOTT The panel held that the judgment for plaintiff could be sustained on the alternative ground that the City breached its contract with plaintiff. The panel held that the City had previously agreed to accept such effluent as the parties knew plaintiff would need to discharge in order to maintain a viable business and that the City agreed to bear the financial risk that state-initiated regulatory changes would make complying with such promise more costly than it was when the parties entered into an agreement. The panel held that enforcing the Ordinance against plaintiff would eviscerate the benefit of plaintiff’s bargain; the City could not do so without putting itself in breach of the agreement. The panel stated that on remand the district court should decide the appropriate remedy. The panel further ordered that the district court’s injunction forbidding enforcement of the Ordinance against plaintiff would remain in effect during subsequent stages of litigation. Concurring in part and dissenting in part, Judge N.R. Smith concurred with the majority’s conclusion that plaintiff did not have a claim under the Contract Clause of the United States or Arizona constitutions. Judge Smith dissented from the majority’s sua sponte decision to reach plaintiff’s alternative claims that the City breached its agreement. Judge Smith stated that the circumstances warranted remand to permit the district court (or an Arizona court) the first opportunity to address the merits of the breach of contract claim. PURE WAFER V. CITY OF PRESCOTT 5
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