IS WMI FIT FOR BUSINESS?

Waste Management Inc. (WMI) is fighting for its continued dominance in the US waste collection business. In the last six months the fitness of WMI has been questioned in communities in both California and in New York. In California, the San Luis Obispo County Board of Supervisors ruled WMI unfit to continue a collection contract of a local company they took over. The Superior Court upheld the decision. In upstate New York the Administrative Law Judge ruled WMI fitness should be adjudicated during the permit process to expand a landfill. The judge's decision was overturned by the state environment commissioner. That decision is being appealed by the local citizen group fighting WMI, SPOC. These fitness/bad boy decisions follow upon the 1997 Fort Wayne, Indiana case when the state declared WMI unfit, a decision also upheld by the courts.

A major concern for Waste Management is that governments and courts are tending to rule that fitness is determined by the fitness of the entire corporation and not just its subsidiary. WMI has historically had many subsidiaries to attempt to protect against fitness being only determined by the subsidiary applicant.

For the first time, WMI stated its concern about fitness/bad boy decisions in its 1999 Annual Report. They stated, "Many states and local jurisdictions in which the Company operates have enacted 'fitness' laws that allow agencies having jurisdiction over waste services contracts or permits to deny or revoke such contracts or permits on the basis of an applicant's (or permit holder's) compliance history. Some states and local jurisdictions go further and consider the compliance history of the parent, subsidiaries or affiliated companies, in addition to the applicant. These laws authorize the agencies to make determination of an applicant's fitness to be awarded a contract or to operate and to deny or revoke a contract or permit because of unfitness absent a showing that the applicant has been rehabilitated through the adoption of various operating policies and procedures put in place to assure future compliance with applicable laws and regulations." (p.19)

In many states, good character (boy actor) laws have been enacted. But environmental attorney Gary Abraham says such laws are generally not necessary. Fitness is a more fundamental basis of judgment of contract awarding. Abraham writes, "Any governmental licensing or permitting body has authority to inquire into the fitness of an applicant to hold the license or permit. Although many states have "bad actor" statutes granting authority to so inquire in specific areas (usually hazardous waste facilities), the authority is ultimately rooted in common law, predating and not superceded by statute. This authority goes back to the first licenses granted by William the Conqueror in 1066 and has been recognized ever since. Fitness to hold a permit relates to an applicant's trustworthiness to comply with the terms and conditions of the proposed permit. A record of fraud or past permit violations in the same or similar regulatory area may be used as grounds for exercising reasonable discretion to deny a permit."

A more fundamental disqualification of WMI would be by the state Attorney General. Such an action would disqualify Waste Management from doing business in the state. Such an action night require them to sell off all their holdings and contracts within the state. Finally, the actual attack of the WMI charter to do business is the ultimate action. Such actions are the type recommended by the Program on Corporations since they attack the bais c power of the corporation and its charter.

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