Judge backs scrapyard company in suit over Manchester fees

The ordinance required the firm to pay 50 cents per transaction to the city – an amount that would increase its annual fee from $420 to $45,000



The city of Manchester is appealing a Hillsborough County Superior Court ruling that prevents it from forcing the owner of two scrap metal yards to pay thousands of dollars in fees and handing over “proprietary” information to a third party in Texas.

Last month, the court rendered unenforceable a city ordinance passed in June 2012, at least when it was applied to two subsidiaries of Schnitzer Steel Industries Inc. -- Prolerized New England Company LLC and B. Royner & Co., which operate scrap-metal operations located at 200 Allard Drive and 399 S. Willow St., respectively.

Schnitzer – a company based in Portland, Ore. – which recorded $3.2 billion in revenues in the last fiscal year – said that the decision would be the “most significant thus far” in what is becoming an ongoing battle between the scrap metal industry and third-party data companies that are working with local police to create a national database aimed at curtailing metal theft, said Chip Terhune, a Schnitzer spokesperson.

When pushing for the ordinance, Manchester police told the Board of Mayor and Aldermen that the peddling of stolen goods to both pawn shops and junkyards has become a major problem, and that the police had to manually process 63,000 items on 25,000 slips into its computer system.

Schnitzer said it wants to work with Manchester, but complained that the ordinance required it to pay 50 cents per transaction to the city – an amount that would increase its annual fee from $420 to $45,000.

The ordinance also requires that the company provide more information than previously sought, such as the details on vehicles used by sellers and scanned color photographs of the goods. And rather than keep the information on file, the facilities would need to transmit it electronically every day to a designated third party.

The city designated Plano, Texas-based LeadsOnline, a private company, that third party. LeadsOnline, which is paid $10,000 by Manchester, works with some 2,000 police departments around the country to develop a scrapyard database. The Queen City was the first to participate in New Hampshire.

In addition to the fees and reporting requirements, Schnitzer’s attorney -- Donald Crandlemire, of Shaheen & Gordon – also objected to his client being forced to effectively sign a contract that releases LeadsOnline from any liability and gives the company the right to unilaterally change the agreement’s terms.

A spokesperson for LeadsOnline assured NHBR that “We work as an extension for that agency. The proprietary matters only law enforcement is able to access.”

The city solicitor’s office would not comment on ongoing litigation, but in its answer to the complaint filed last September, it echoed the company’s assurance that the private information would be protected, even while denying that it was confidential or that it was substantially more than what scrapyards were providing in the past.

The solicitor also said that vehicle information would be helpful in tracking down stolen scrap metal, and scanning pictures would not be particularly burdensome. It also said that the new fee pales in comparison to the company’s sales and could easily be passed on to competitors.

But, wrote Crandlemire, Schnitzer “loathed the prospect of being required to electronically transmit sensitive, proprietary business data – the very lifeline of their business – to a private, for-profit, web-based entity in Plano, Texas, over which it has no control whatsoever.”

He wrote that the fee – far above the cost of the contract – was really a “business tax” used to help finance police operations, adding that passing along the cost to sellers, would hurt the company competitively.

He also submitted the testimony of an expert who argued that municipal restrictions on scrap dealers are ineffective because metal thieves could just purloin their stolen goods at a junkyard in the next town. And in the case of Manchester -- which only has one other scrap metal yard aside from those owned by Schnitzer -- police could learn more visiting the operations and going through their records rather than combing through databases that consists of over a half-billion transactions.

Finally, Crandlemire argued that state law regulating scrap metal dealers preempted the local ordinance.

Superior Court Judge Kenneth Brown agreed with the latter argument – preemption by state statute – in his summary judgment ruling against the city, thus rendering a decision on Schnitzer’s other claims unnecessary.

The city filed its intention to appeal that decision to the state Supreme Court last week on May 23.

If the decision is upheld, Schnitzer will seek a return of the fees it paid to the city, Crandlemire said.

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