Ihrke v. Northern States Power Company

• Decision Date: 03 May 1972
• Docket Number: No. 71-1504.,71-1504.
• Citation: 459 F.2d 566
• Parties: Robert J. IHRKE and Mary E. Ihrke, Appellants, v. NORTHERN STATES POWER COMPANY, a Minnesota Corporation, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

459 F.2d 566 (1972)

Robert J. IHRKE and Mary E. Ihrke, Appellants, v. NORTHERN STATES POWER COMPANY, a Minnesota Corporation, Appellee.

No. 71-1504.

United States Court of Appeals, Eighth Circuit.

Submitted February 15, 1972.

Decided May 3, 1972.

Rehearing and Rehearing Denied May 25, 1972.

Roger S. Haydock and Michael A. Wolff, St. Paul, Minn., for appellants.

Mackall, Crounse & Moore, Minneapolis, Minn., for appellee.

Before MATTHES, Chief Judge, and LAY and ROSS, Circuit Judges.

Rehearing and Rehearing En Banc Denied May 25, 1972.

ROSS, Circuit Judge.

Robert J. Ihrke and Mary E. Ihrke (the Ihrkes) appeal from the district court's orders granting the motion to dismiss filed by Northern States Power Company (Northern), and denying the Ihrkes' motion to maintain this suit as a class action. At the time of bringing this action, on April 21, 1970, the Ihrkes were gas and electricity customers of Northern in the City of St. Paul, Minnesota. They were delinquent in their payments, and Northern was threatening to terminate the services. The Ihrkes claimed that termination without notice and hearing constituted a taking of their property without due process of law. Jurisdiction was alleged under 28 U.S.C. §§ 1343(3) and (4), 2201 and 2202, and 42 U.S.C. § 1983.

On August 11, 1970, an order was entered denying the Ihrkes' motion to maintain this suit as a class action. The district court's Memorandum Opinion granting Northern's motion to dismiss was filed July 8, 1971. Ihrke v. Northern States Power Co., 328 F.Supp. 404 (D.Minn.1971). In that opinion, the district court found that Northern's threat to terminate the Ihrkes' utility services without a prior hearing did not fall within the purview of the Civil Rights Act, 42 U.S.C. § 1983, since Northern had not acted under color of state law, and for the additional reason that a "property right" cannot be asserted in a § 1983 civil rights action. While this case was pending in the district court, the Ihrkes moved from a residence where they directly subscribed to Northern's utility services to another where they received said services through their landlord's subscription.

Upon this appeal, the Ihrkes assert that (1) Northern's threat to terminate the Ihrkes' utility services without notice and a hearing constituted a deprivation (a) under color of law (b) recognizable under § 1983 (c) of a constitutionally protected right; (2) a justiciable controversy still remains even though they are no longer subscribers to Northern's utility services ; and (3) the class action should have been permitted since the subscribers to Northern's utility services and the welfare recipients therein were a proper class and subclass respectively. For the reasons hereinafter stated, we reverse and remand for further proceedings consistent with the views expressed herein.

I.

The trial court determined as one of its two grounds for dismissal that "while property rights and rights of personal liberty are entitled to the procedural protections provided by due process, only the latter can be asserted in federal courts in § 1983 civil rights actions." Id. at 407. This question has now been decided by the Supreme Court in the case of Lynch v. Household Finance Corp., 405 U.S. 538, 92 S.Ct. 1113, 31 L.Ed.2d 424 (1972), in which the following statement is made for the Court by Justice Stewart:

"Neither the words of § 1343(3) nor the legislative history of that provision distinguish between personal and property rights. In fact, the Congress that enacted the predecessor of §§ 1983 and 1343(3) seems clearly to have intended to provide a federal judicial forum for the redress of wrongful deprivations of property by persons acting under color of state law." Id. 92 S.Ct. at 1117.

Accordingly, the decision of the trial court cannot be sustained on this basis.

II.

The second ground upon which the trial court determined that the motion to dismiss should be sustained was that Northern did not engage in the conduct complained of under color of state law. In making that determination, the district court relied upon Kadlec v. Illinois Bell Telephone Co., 407 F.2d 624, 626 (7th Cir.), cert. denied, 396 U.S. 846, 90 S.Ct. 90, 24 L.Ed.2d 95 (1969) where the court said:

"Motivated by purely private economic interests and pursuant to its own regulations, Illinois Bell terminated plaintiffs\' Call-Pak service. The only apparent state connection with the termination rests in the fact that defendant company filed its regulations with state authorities ; the state in no sense benefited from, encouraged, requested or cooperated in this suspension of service."

However, this case does not present the same situation. While Northern prepared its own regulations, the City Council of St. Paul had the right to review, and revise or reject them. Also, since the city received 5% of Northern's gross earnings, the city benefited from the payment of bills resulting from Northern's threatening to terminate services. We believe that this case presents the situation anticipated by Kadlec's concurring opinion, supra, 407 F.2d at 628 where it is said :

"It may be possible to demonstrate that a privately-owned publicly-regulated utility or carrier or similar entity has a sufficient nexus with or dependence on a state as to make some of its actions under color of law. Some of the factors which should be considered are whether 1) the entity is subject to close regulation by a statutorily-created body (such as the Illinois Commerce Commission), 2) the regulations filed with the regulatory body are required to be filed as a condition of the entity\'s operation, 3) the regulations must be approved by the regulatory body to be effective, 4) the entity is given a total or partial monopoly by the regulatory body, 5) the regulatory body controls the rates charged and/or specific services offered by the entity, 6) the actions of the entity are subject to review by the regulatory body, and 7) the regulation permits the entity to perform acts which it may not otherwise perform without violating state law. There may be other factors to be considered besides those here enumerated. The enumeration here of particular factors means that less than all may be sufficient to show color of law in some cases and that nothing less than all may be required in other cases. Each case will depend on its facts."

In viewing the Ihrkes' allegations, we find that they adequately alleged "color of law" in asserting, among other things, that (1) Northern was given exclusive franchises to furnish utility services ; (2) Northern was granted permission to use public property for performing the necessary functions to provide such services; (3) the City Council had the right to review Northern's operations ; (4) Northern could not perform certain functions without the City Council's prior approval ; (5) Northern had to file with the city copies of its schedules, contracts, agreements, rules and regulations ; (6) the City Council had the right to review and reject Northern's rate changes, schedules, contracts, agreements, rules and regulations ; and (7) Northern had to submit to the city certain financial statements and a fee based upon 5% of gross earnings. These allegations, which are supported by St. Paul, Minn., Code § 444 and Ordinances 11761 and 11762, were not contradicted by Northern's affidavit in support of the motion to dismiss. That affidavit basically asserted that Northern was a "privately owned and managed utility" organized under Minnesota corporate law which received "no direct subsidies or other funds," "no tax exemptions," and no assistance in the "rendering or collection of bills" or in the "discontinuing service" from the "State of Minnesota nor any of its political subdivisions."

Federal courts have generally recognized private conduct as "color of law" or "state action" when it performs a "public" function and is subjected to "public" regulation. In Evans v. Newton, 382 U.S. 296, 299, 86 S.Ct. 486, 488, 15 L.Ed.2d 373 (1966) a private park whose management was entwined with municipal control, the Supreme Court said :

"Conduct that is formally \'private\' may become so entwined with governmental policies or so impregnated with a governmental character as to become subject to the constitutional limitations placed upon state action. . . . That is to say, when private individuals or groups are endowed by the State with powers or functions governmental in nature, they become agencies or instrumentalities of the State and subject to its constitutional limitations."¹

In the recent case of Lavoie v. Bigwood, 457 F.2d 7 (1st Cir. 1972), the First Circuit determined that the eviction of a tenant from a mobile home park was "state action" under 42 U.S.C. § 1983 where the mobile home park was in fact a monopoly created by municipal zoning. In that case, the town of Merrimack, New Hampshire enacted a zoning ordinance pursuant to a delegation of that power by the state statutes of New Hampshire. This zoning ordinance provided that no mobile home could be located other than in a mobile home park, and further provided that no mobile home park could be established without a permit from the Board of Selectmen of the town. Such permits could not be issued under the ordinance until the Town Planning Board determined and certified to the Board of Selectmen that the proposed mobile home park would not be injurious or detrimental to the neighborhood in which it was to be located. The First Circuit Court determined that this had the practical effect of creating a monopoly and that "an ejectment action instituted to punish the exercise of a tenant's rights of speech and association by a mobile home park owner whose monopoly had been created by zoning is an 'invalid application' of the New Hampshire landlord and tenant statute." Id. at 14.

In this case, the State of Minnesota, by statute, prohibits the operation of a public service corporation in any ...