Key Points

  • The First District affirmed the Cook County Circuit Court, reversed a city administrative law judge, and reinstated the Chicago Department of Public Health's February 2022 denial of General III's large recycling facility permit.
  • The court held that the commissioner's express powers to conduct studies and cooperate with federal agencies implied authority to conduct and rely on a Health Impact Assessment, and that the delegation satisfies the Stofer nondelegation test.
  • The administrative law judge's decision is the final administrative decision whose fact findings receive manifest-weight deference, but the health department, not the hearings department, receives deference on interpreting the Municipal Code.
  • Section 11-4-2525's revoked-permit bar is not an exclusive list of denial grounds, so Rule 4.0 validly permits denial based on affiliates' compliance history, including unadjudicated violations.
  • The vested-rights doctrine is limited to zoning, and spending about $80 million before a permit issued, without positive assurances, created no vested right to the permit.

An Illinois appeals court on Nov. 6 reinstated Chicago's 2022 refusal to let General III, LLC operate a large scrap-metal recycling facility on the city's southeast side. The court held that the city's public health commissioner had the power to conduct, and then rely on, a study of the project's health effects that no city ordinance mentions.

A three-justice panel of the Appellate Court of Illinois, First District, affirmed Cook County Circuit Judge Allen P. Walker, who had overturned an administrative law judge's order vacating the denial. Justice Pucinski wrote the opinion, and Justices Hyman and Evans joined it. The result leaves General III without an operating permit for a facility that, by the company's account, cost about $80 million to build before the city ruled on its application.

The published opinion also holds that the Chicago Department of Public Health may deny a recycling permit based on violations by an applicant's affiliates, including violations no tribunal has adjudicated. And it holds that the vested-rights doctrine, which can protect a developer that spent money relying on a permit, belongs to zoning disputes and gave General III no right to this permit.

The case grew out of the planned closing of General Iron Industries Inc.'s decades-old scrap operation in Lincoln Park. General Iron agreed in 2018 to sell assets to Reserve Management Group, or RMG, whose affiliates own 80 percent of General III. A 2019 term sheet with the city said RMG intended to transition to a new metal recycling operation at a 175-acre site at 116th Street and Burley Avenue, where RMG and affiliated companies already ran four recycling facilities.

General III built its facility there from September 2020 to March 2021, before the health department decided its application. In October 2020, the U.S. Department of Housing and Urban Development began investigating a complaint that the city had engaged in racial discrimination by facilitating the move of General Iron's operations from a majority-white neighborhood to a majority Black and Hispanic one.

In May 2021, U.S. EPA Administrator Michael S. Regan wrote to then-Mayor Lori Lightfoot that "the current conditions facing Chicago's southeast side epitomize the problem of environmental injustice." The letter suggested an analysis "such as a Health Impact Assessment" before any decision. Three days later, the department suspended its review.

The assessment, issued in February 2022, recommended denial. It cited the neighborhood's existing pollution burden and "concerns about the company's operating history, including apparent violations of existing permit requirements." The department denied the permit on Feb. 18, 2022, citing the assessment and compliance problems at affiliated facilities on the site, including excess tonnage, a 2019 notice of violation for dust and an unreported warehouse collapse.

General III challenged the denial before the city's Department of Administrative Hearings. In June 2023, Administrative Law Judge Mitchell C. Ex vacated it, writing that the health department, "acting without City Council legislative authority, paused the permit application process and initiated a health impact assessment, which itself lacked authorization from the Council." Ex also found that the department's compliance-history rule, Rule 4.0, conflicted with a city code section barring permits for applicants whose permits had been revoked for cause.

The appellate panel first sorted out whose view it owed deference. It agreed with General III that the hearing officer's ruling was the final administrative decision, so the hearing officer's fact findings get deference. But the panel held that the health department, not the hearing office, is owed deference when it interprets the city code. Justice Pucinski wrote that "it is undoubtedly the CDPH (not the DOAH) that makes informed judgments on matters of public health, based upon its experience and expertise."

The panel pointed to code provisions letting the commissioner conduct studies and cooperate with federal agencies, and to the rule that an express grant of power carries the power to do what is reasonably necessary. "We believe that the enumerated powers given to the Commissioner in the Code are broad enough to encompass use of an HIA," the court wrote.

The panel rejected General III's argument that reading the code this way would make it an unconstitutional delegation of legislative power. Under the Illinois Supreme Court's test in Stofer v. Motor Vehicle Casualty Co., such a delegation must identify the people and activities regulated, the harm to be prevented and the general means available to prevent it. The panel found the code met all three requirements.

On compliance history, the court held that the revoked-permit provision "does not purport to narrow the grounds upon which the Commissioner may deny a permit." It rejected General III's contention that Rule 4.0 reaches only adjudicated violations. "It was within CDPH's authority to construe the term to encompass the other violations identified in its denial letter," the panel wrote. The hearing officer's remarks that the city had praised the site's operations in 2020 "appear to be dicta," the court said.

Finally, the panel turned away General III's claim that its spending gave it a vested right to the permit. The court said the doctrine is "explicitly limited to the specific context of zoning issues." Justice Pucinski wrote that the court declined to accept that "the mere expenditure of sums before a permit is granted somehow creates a property right, at least without any positive assurances that the permit would be granted."

The Illinois Chamber of Commerce, the Illinois Manufacturers' Association, the Illinois Environmental Regulatory Group and the Calumet Area Industrial Commission filed a friend-of-the-court brief supporting General III. Community groups including the Southeast Environmental Task Force filed one supporting the health department.

General III was represented by Jeffrey A. Rossman of Smith, Gambrell & Russell, LLP. The health department was represented by the office of Corporation Counsel Mary B. Richardson-Lowry. Matthew C. Wolfe of Shook, Hardy & Bacon L.L.P. filed for the Chamber of Commerce group.

General III had asked the appellate court to send the case back with instructions that the permit be issued. Instead, the panel affirmed the circuit court and reversed the hearing officer, putting the health department's February 2022 denial back in force.