Opinion
00-CV-815A.
September 30, 2004
DECISION AND ORDER
INTRODUCTION
On September 19, 2000, plaintiffs, an association of landlords who own rental property in the City of Jamestown, New York and the individual landlords themselves, commenced this action under 42 U.S.C. § 1983, against the defendants, the City fo Jamestown ("the City of Jamestown" or "the "City"), the City of Jamestown Board of Public Utilities ("the BPU"), Samuel Teresi, who is the Mayor of Jamestown and a BPU member, and Matthew Dimas, who is the Chairman of the BPU, claiming, inter alia, that the defendants violated their right to procedural due process under the Fourteenth Amendment of the United States Constitution by placing liens on their properties as a result of their respective tenants non-payment of municipal utility bills without constitutionally adequate notice and a hearing.
Plaintiffs also asserted a substantive due process claim, an equal protection claim and a claim under § 65 of the New York State Public Utilities Law. Plaintiffs have since withdrawn those claims. See Item No. 26 at 12.
The case was referred to United States Magistrate Judge Leslie G. Foschio, pursuant to 28 U.S.C. § 636(b)(1), on October 20, 2000. On October 13, 2000, defendants filed an answer in which they included a counterclaim, claiming that this action was an attempt to intimidate elected officials and requesting costs and monetary sanctions pursuant to 42 U.S.C. § 1988 and Rule 11 of the Federal Rules of Civil Procedure. On November 1, 2000, plaintiffs filed a reply to defendants' counterclaim, asserting that it failed to state a claim upon which relief could be granted.
On December 26, 2001, defendants filed a motion for summary judgment. On August 22, 2003, Magistrate Judge Foschio issued a Report and Recommendation, recommending: (1) that the action be dismissed as to plaintiff Real Estate Investors Association ("Investors") for lack of standing; (2) that the claims against the BPU be dismissed because it is only an administrative arm of the City and therefore cannot be sued in its own right; (3) that defendants' motion for summary judgment should be granted on plaintiffs' due process claim; (4) that defendants' counterclaim should be dismissed for lack of subject matter jurisdiction; and (5) that defendants' request for sanctions, attorneys' fees and costs should be denied.
Defendants' motion was actually captioned "Motion to Dismiss Pursuant to Rule 12(c) of the Federal Rules of Civil Procedure," but, as Magistrate Judge Foschio concluded, the motion can and should be construed as a motion for summary judgment.
Plaintiffs filed objections to the Report and Recommendation on September 9, 2003. Defendants filed responses thereto on September 24, 2003 and April 30, 2004. After the filing of plaintiffs' objections, the parties, with the assistance of the Court, entered into extensive settlement discussions, which eventually proved unsuccessful. Oral argument on the objections was held on June 4, 2004.
Pursuant to 28 U.S.C. § 636(b)(1), this Court must make a de novo determination of those portions of the Report and Recommendation to which objections have been made. Upon a de novo review of the Report and Recommendation, and after reviewing the submissions of the parties and hearing argument from counsel, the Court adopts those portions of the Report and Recommendation to which there have been no objection, but declines to adopt the Magistrate Judge's recommendation that summary judgment be granted in favor of the defendants.
FACTUAL BACKGROUND
Plaintiff Investors is an organization comprised of owners of property located in the City of Jamestown that is leased to tenants for residential and commercial purposes. The individually named plaintiffs are members of Investors. The BPU is a department of the City of Jamestown and was established pursuant to Article IX of the City of Jamestown Charter. The BPU operates the City's electric, water, sewer and garbage systems. Defendant Matthew Dimas is the Chairman of the BPU and defendant Samuel Teresi is the Mayor of Jamestown and a BPU member.
Residents of the City of Jamestown, be they property owners or tenants, must contract with the BPU to obtain electric, water, sewer and garbage services at their residences. Pursuant to § 84 of the Charter of the City of Jamestown, if supplies and services furnished by the BPU remain unpaid, a lien may be placed on the property receiving the services. See Jamestown, N.Y. Code Sec. 84 (1996). Thus, under § 84, when a tenant in the City of Jamestown fails to pay his or her utility bill, the City may place a lien on the landlord's property. Neither the City nor the BPU forecloses on such utility liens; records such liens in the County Clerk's Office; levies unpaid liens on City real property tax bills; or denies utility services to either land lords or subsequent tenants based on prior tenants' unpaid utility bills. Instead, unpaid utility bills owed by a tenant to the BPU are treated as unpaid taxes on the landlord's property. The City's finance department is notified and the lien's existence becomes public record. Thus, although there is no immediate effect of the lien being placed on the landlord's property, such lien must be address ed when a landlord wishes to sell or mortgage that property.
The procedures governing the BPU's billing for utility services are as follows. Once payment for utility service provided by the BPU is 30 days overdue, the customer (in this case, the tenant of the plaintiff-landlord) is issued a second bill indicating that the relevant service may be disconnected 18 days from the date of such second bill. Three days after the second bill is issued, a further notice is sent to the customer stating that the service will be disconnected in 15 days. If the landlord of the customer-tenant has filed a request for a third-party notification from the BPU, the landlord will receive a copy of any discontinuation of service notice sent to the customer-tenant by the BPU.
After service has been disconnected for non-payment, a final bill is sent to the customer-tenant and if that bill remains unpaid, an "Owner's Notice" is sent to the landlord, regardless of whether a request for third-party notification was filed. The Owner's Notice warns the landlord that if the amount owed is not paid, a lien will be placed upon the landlord's property. The Owner's Notice does not ad vise the landlord of any right to a hearing for the purpose of disputing or appealing the un paid utility bill.
If the account remains unpaid, approximately 60 days after the Owner's Notice is sent, a "Notice of Tax Lien" is issued to the landlord. This Notice of Tax Lien is substantially similar to the Owner's Notice and again advises the landlord that a lien will be placed on the landlord's property if payment is not made. Like the Owner's Notice, the Notice of Tax Lien does not advise the landlord of any hearing or appeal rights.
DISCUSSION
A. Portions of the Report and Recommendation to which there are no Objections
In his Report and Recommendation, Magistrate Judge Foschio made the following findings and recommendations to which there are no objections: (1) that the action be dismissed as to plaintiff Investors for lack of standing; (2) that the claims against the BPU be dismissed because it is only an administrative arm of the City and therefore cannot be sued in its own right; (3) that the plaintiff-landlords have alleged a property interest protected under the Fourteenth Amendment and are therefore entitled to notice and a hearing before the placement of the liens on their property by the defendants; (4) that defendants' counterclaim should be dismissed for lack of subject matter jurisdiction; and (5) that defendants' request for sanctions, attorneys' fees and costs should be denied. As there are no objections to these findings and recommendations, the Court adopts them. The Court also adopts the standard of review for summary judgment cited by the Magistrate Judge in his Report and Recommendation. See Report and Recommendation at 12-14.
B. Constitutionally Defective Notice
In their objections, plaintiffs argue that the notices sent to them by the BPU regarding the placement of liens on the irrespective properties were constitutionally defective as they did not inform the plaintiffs of a procedure to challenge or appeal the underlying utility bills. The Court agrees .
In Memphis Light, Gas Water Div. v. Craft, 436 U.S. 1 (1978), the Supreme Court held that although a utility company's notification procedure was adequate to apprise utility customers of the threat of termination of service for nonpayment, it was constitutionally defective because it was not "`reasonably calculated'" to inform them of the availability of "`an opportunity to present their objections'" to their bills. Id. at 14 (quoting Mullane v. Central Hanover Bank Trust Co., 339 U.S. 306, 314 (1950)). The Court stated:
The purpose of notice under the Due Process Clause is to apprise the affected individual of, and permit adequate preparation for, an impending "hearing." Notice in a case of this kind does not comport with constitutional requirements when it does not advise the customer of the availability of a procedure for protesting a proposed termination of utility service as unjustified.Id. at 14-15 (footnote omitted). Thus, the Supreme Court has recognized that in order for "notice" to meet the requirements of the Due Process Clause, it must contain not only notice of the action to be taken by the agency, but also notice of the individual's hearing rights to protest such action.
It is undisputed that the "Owner's Notice" and "Notice of Tax Lien" sent to the landlords before liens were placed on their respective properties for non-payment of utility services by their tenants did not inform the landlords of any procedures to dispute or appeal the utility bills. Thus, such notice failed to meet the requirements of the Due Process Clause. Accordingly, defendants' motion for summary judgment must be denied.
C. Failure to Provide Opportunity for a Hearing
Plaintiffs further argue that their due process rights were violated because the City failed to provide them with a hearing at which they could challenge the accuracy of the underlying utility bills before placing liens on their respective properties. Again, the Court agrees with the plaintiffs.
There is no evidence in the record of any written, formal policy or procedure for the plaintiff-landlords to follow in order to challenge the accuracy of the underlying utility bills before liens were placed on their respective properties. Defend ants argue that such a procedure was available under the New York Public Service Law and its implementing regulations. This is simply incorrect. Those procedures state, on their face, that they apply to "residential . . . customers." See Item No. 32, Exhibit D. The term "residential customer" is defined in 16 N.Y.C.R.R. § 11.2(a)(2) as follows:
The term residential customer or current residential customer includes any person who, pursuant to an application for service made by such person or a third party on his or her behalf, is supplied directly by a utility with gas, electric or steam service at a premises used in whole or in part as his or her residence. . . . The plaintiff-landlords are not "residential customers" because they do not directly receive the utility services. Thus, the complaint procedures relied upon by the defendants do not apply to the plaintiff-landlords.
The evidence in the record shows that this was also the understanding of the BPU itself. The BPU's business manager, Michael A. Anderson, testified at his deposition that billing disputes are between the BPU and the customer of record, i.e., the customer-tenant, and not between the BPU and third-parties such as the plaintiff-landlords. See Item No. 29, Exhibit A at 57-59. Mr. Anderson testified that while the BPU is willing to hear from the landlords and answer any questions they might have, the question of validity of the bill must come from the customer of record. Id.
The Court notes that in a later reply affidavit, Mr. Anderson stated that "any landlord may question the billings by following the procedure[s]" under the New York Public Service Law. The Court rejects his statement for two reasons. First, as stated above, the New York Public Service Law complaint procedures apply only to "residential customers" and do not apply to the plaintiff-landlords. Second, Mr. Anderson's statement in his affidavit is contrary to his deposition testimony. As such, it cannot serve as a basis for summary judgment. See Perma Research Dev. Co. v. Singer Co., 410 F.2d 572, 578 (2d Cir. 1969).
The Court's conclusion that no hearing procedures were available to the plaintiff-landlords is consistent with its finding that the notices sent to the plaintiff-landlords did not include any notice regarding hearing rights. It is clear to the Court that the notices did not contain any notice regarding hearing rights because no such hearing rights existed, and still do not exist at the present time.
The fatal flaw in the way the City of Jamestown places liens on the plaintiff-landlords' properties is that it provides no established procedure for the resolution of disputes prior to the imposition of the liens on the properties. See Luedeke v. Village of New Paltz, 63 F. Supp.2d 215 (N.D.N.Y. 1999) (Village snow removal ordinance which allowed the placement of a lien on property if property owner failed to pay snow removal charge was unconstitutional be cause it did not provide for a pre-deprivation hearing). Accordingly, the Court must deny defendants' motion for summary judgment.
An "adequate post-deprivation remedy" defense is not available to the defendants in this case. While "an adequate post-deprivation remedy is a defense to a Sect ion 1983 due process claim where the deprivation is random and unauthorized . . . [it is not a defense] where the deprivation complained of results from the operation of established state procedures."Alexandre v. Cortes, 140 F.3d 406, 411 (2d Cir. 1998) (internal quotations and citations omitted). The City's actions here were not random and unauthorized, but were taken pursuant to a City policy.
CONCLUSION
For the reasons stated, the Court: (1) dismisses Investors as a plaintiff in this case; (2) dismisses the BPU as a defendant in this case; (3) denies defendants' motion for summary judgment; (4) dismisses defendants' counterclaim; and (5) denies defendants' motion for sanctions, attorneys' fees and costs. Counsel for the parties shall appear for a status conference on October 26, 2004 at 9:00 a.m.IT IS SO ORDERED.