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Recyclers Scrap with Wake County, NC Officials Over Metal Scrap Ownership

Article-Recyclers Scrap with Wake County, NC Officials Over Metal Scrap Ownership

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When grownups think of property in an everyday sense, we reflect on or fixate on an object – a car, a tennis racket, a cellphone – and a relationship some person has to it.  Not necessarily ourselves. 

Those of us who have engaged with a toddler know that special rules apply to objects.  He or she will say:  If I like it, it’s mine!  If I had it in my hand, it’s mine!  If I had it a little while ago, it’s mine!  If it looks like mine, it’s mine!  If I think it’s mine, it’s mine!

When grownups think of property in an everyday sense, we reflect on or fixate on an object – a car, a tennis racket, a cellphone – and a relationship some person has to it.  Not necessarily ourselves. 

By comparison, the law renders the concept of property in terms far more nuanced.  It explores a number of factors, including the nature of the object, how an individual or entity came to possess the object, the link or claim a number of people may have to the object, and how the object is regarded within its political and social context.

We see this on display where a county sought to dispose of valuable materials it possessed, but misconceived its status vis-à-vis the items and its corresponding legal obligations.  In this case, the local government seemingly tried to have it both ways:  “It isn’t mine, except when it is mine.”

Begun in 2006 as Elite Waste Service, a one-man, one-truck operation, Wall Recycling now does business in 13 locations throughout North Carolina. Under the direction of founder Dan Wall and his team, the company provides waste management services and buys, processes and resells scrap metal.

TT&E Iron &Metal, Inc., competes with Wall in the recycling of scrap metal. Launched by brothers Alfred and Wallace Thompson, TT&E opened its doors in 1975 on a small site just south of Raleigh. The company steadily grew and now its operations, still family-owned, occupy 60 acres. 

As a service to its residents, Wake County collects scrap metal at designated facilities throughout its jurisdiction. Among the items collected are pots and pans, metal containers, and even household appliances and machinery. The high demand for quality scrap metal makes it one of the most valuable products that individuals and businesses can recycle today.   

This commercial value is a source of revenue for local governments when they contract with private recycling businesses who amply pay for the privilege of picking up and hauling away the metal from collection locations. Between 2015 and 2019, TT&E paid about $4 million to the county under its contract for the scrap metal.

In April 2019, the county sought bids "for the payment for scrap metal and white goods collected" at the county's facilities. The proposal request stated that the county "desires revenue for recyclable materials" intending to maximize "the earnings associated with the recycling of scrap metal."

The county instructed interested companies to address in their proposals collection-related services such as managing and removing the containers at the county's facilities where residents deposit their scrap.  Bidders were also required to provide a price per ton that they would pay for the scrap metal.  That price had to factor in "all costs associated with the scrap metal collection" such as providing the recycling containers for the facilities and removing the containers once they are full.

The request stated the county’s commitment to award the contract after considering multiple factors.  The county would calculate a numerical score for each bidder using a "forced choice matrix spreadsheet" to rank the evaluation criteria and each bidder's "level of excellence" on the criteria.  (Using the spreadsheet, the evaluation committee ranks the relative importance of the criteria before reviewing any of the proposals. By doing so, the committee members cannot manipulate the criteria rankings to achieve a desired outcome.)  This process represented a departure from the county’s previous approach.  Until 2019, the county had singled out price as the most important criterion for awarding the contract.

Three companies submitted proposals. Wall offered the highest price – nearly $10 per ton more than what TT&E tendered.  However, the evaluation committee had ranked price as the fourth most important factor.  The committee gave TT&E a higher score than it gave Wall in two of the three criteria ranked more important than price, and ended up awarding the contract to TT&E. 

Wall representatives met with county officials, in July 2019, to discuss its objections to the contract. The company asked the county to either reevaluate the proposal responses or issue a new request for proposals.  The county refused.  

In April 2020, Wall learned that the county was extending the contract with TT&E and would not be issuing a new request for proposals. It then filed suit against the county and TT&E in Wake County Superior Court seeking a declaration that state law compelled the county to award the contract to the highest responsible bidder.  The company also asserted a number of other statutory and constitutional claims. After discovery, Wall moved for summary judgment as did the defendants.  Judge G. Bryan Collins, Jr., granted the defendants’ motions, denied Wall’s motion, and dismissed all of Wall’s claims.  

On appeal, a three-judge panel focused on whether the contract awarded to TT&E was subject to state laws that favor the highest contract bidder. The panel found unresolved issues concerning whether the scrap metal is county property and how the bidding process was conducted.  It reversed the lower court’s decision and sent the case back for further proceedings.

          Under North Carolina law, a county must dispose of its property one of five ways:  (1) private negotiation and sale; (2) advertisement for sealed bids; (3) negotiated offer, advertisement and upset bid; (4) public auction; or (5) exchange.  Here, the county chose advertisement for sealed bids, which, if done in the manner prescribed by law, requires a purchase contract to be awarded to "the lowest responsible bidder or bidders, taking into

consideration quality, performance and the time specified . . . for the performance of the contract."  A "responsible bidder" is one that has the "skill, judgment and integrity necessary to the faithful performance of the contract, as well as sufficient financial resources and ability."

An award based on lowest price makes sense when purchasing goods and services. However, when addressing the sale of property, the state’s courts have recognized it would be nonsensical to require counties to accept the fewest dollars.  Thus, when a sale of county property is at issue, it is deep-rooted in North Carolina law that the contract to be awarded to the highest responsible bidder, taking into consideration quality, performance, and other relevant factors.

Aside from that aspect, the appeals court confronted a key question: Does the disputed contract involve the sale of county property?  The county argued that the appeals court should answer by saying “No.”

First, the county claimed that the scrap metal and other material that its residents deposit at these recycling facilities never becomes county property.  It submitted evidence establishing that the industrial containers into which residents deposit their scrap are supplied by the contractor, not the county.  The county further explained that when the scrap is deposited, "the metal objects sit in a 'holding pattern' until the containers become full and the service provider hauls them away for processing and recycling."  Ownership of the scrap metal, so the argument went, passes from its residents directly to the recycler.  Lamentably for the county, things were not so simple.

Although deposition testimony from the county's solid waste facilities manager helped establish these facts, other aspects of his testimony contradicted the county's position. For example, the county collects the scrap metal at facilities it owns or leases. These facilities are securely fenced by the county with no public access to the deposited material. He also acknowledged that the county itself collects scrap metal from residents and later turns it over to the private recycler:

Q. Once deposited by the public within the containers at the multisite, no one can take them away from the –

A. No one can take any items that are even set on the ground from the facility.

Q. And why is that?

A. That's a safety and security situation.

Q. The county takes possession and control of those materials once they're left on site?

A. Yeah. We take possession of them in a holding pattern until they're collected, and we don't want people removing them from the site.

Q. How is it secured?

A. We have fencing around the entire facility.

Q. Are members of the public allowed to take scrap metal from convenience centers?

A. No. We don't allow removal of any material from any of our facilities. * * *

Q. The scrap metal in particular, that becomes the property of the county at the time it's deposited by the public in these containers at multisites and convenience centers?

A. I'm not sure if it becomes the property of the county, but I do know that we collect it at the county and in a holding position. We don't keep it forever, so I don't know that "property of the county" is the appropriate word.

Q. But at the time that it's deposited, the county treats it as its own? ...

A. I wouldn't say we treat it as our own. I would say we would treat it as a material that we're collecting and holding until it's picked up for processing.

This inconsistent testimony illustrated “genuine issues of material fact concerning whether the scrap metal is county property,” said the appeals court. “The record indicates that the residents who deposit items in the recycling containers are doing so because the county advertises to them that the county is providing these locations to turn in recyclable material as a county service to residents. Thus, residents who take their scrap to these locations may intend for title to the property to pass to the county. * * *  Even if residents intend solely to abandon the property – that is, relinquish their ownership permanently as they would with other forms of trash – there are fact issues to resolve. Once abandonment takes place, title to the abandoned property passes to the first person who thereafter takes possession.”

Besides testifying that the county is "collecting and holding" the scrap until it is removed from its facility, county witnesses provided further indications of county authority and control while the material remains it is at its facilities. In particular, the appellate panel noted the county restrictions on who can access the scrap and remove it. “The county would have no right to unilaterally impose these restrictions if it did not hold title to the property,” the panel wrote.  “And, importantly, nothing in the contract or anywhere else in the record suggests that TT&E – the party currently responsible for providing the containers – directed the county to impose these restrictions. Simply put, there are genuine issues of material fact concerning whether the scrap metal that county residents deposit at these facilities is county property.”

The county next argued, unsuccessfully, that, even if the scrap metal were county property, the disputed contract provides for scrap metal recycling services.  Thus, the statutory criteria would not apply.  “To be sure, the contract requires the recycler to provide various collection services to the county,” the panel observed. “But those services are part of the payment the recycler is making to obtain the scrap metal from the county – indeed, the proposal expressly details how bidders should account for the cost of these collection services when calculating the amount they would pay per ton for the scrap metal. Moreover, the record indicates that this scrap metal has significant value, with TT&E paying millions of dollars to the county in the 2015 to 2019 time period.”

With ownership of the scrap metal remaining unsettled and debatable, the lower court ruling in favor of the county was inappropriate. If, indeed, the material is determined to be county property, the county’s compliance with the statutory criteria can be questioned.  The appeals court opinion ended with these remarks:  “We leave it to the trial court, on remand, to determine whether there are other grounds on which to rule in this case . . . or whether the case must proceed to trial.”

Wall Recycling, LLC v. Wake County, et al., No. COA22-181, N.C. Ct. App., Dec. 20, 2022.

TAGS: Metals
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