Memphis Light, Gas and Water Division v. Craft

• Decision Date: 01 May 1978
• Docket Number: No. 76-39,76-39
• Citation: 98 S.Ct. 1554,56 L.Ed.2d 30,436 U.S. 1
• Parties: MEMPHIS LIGHT, GAS AND WATER DIVISION, et al., Petitioners, v. Willie S. CRAFT et al
• Court: U.S. Supreme Court

436 U.S. 1

98 S.Ct. 1554

56 L.Ed.2d 30

MEMPHIS LIGHT, GAS AND WATER DIVISION, et al., Petitioners,

v Willie S. CRAFT et al.

No. 76-39.

Argued Nov. 2, 1977.

Decided May 1, 1978.

Syllabus

Because of two separate sets of gas and electric meters in their newly purchased house, respondents, for about a year after moving in, received separate monthly bills for each set of meters from a municipal utility. During this period respondents' utility service was terminated five times for nonpayment of bills. Despite respondent wife's good-faith efforts to determine the cause of the "double billing," she was unable to obtain a satisfactory explanation or any suggestion for further recourse from the utility's employees. Each bill contained a "final notice" stating that payment was overdue and that service would be discontinued if payment was not made by a certain date but did not apprise respondents of the availability of a procedure for discussing their dispute with designated personnel who were authorized to review disputed bills and to correct any errors. Respondents brought a class action in Federal District Court under 42 U.S.C. § 1983, seeking declaratory and injunctive relief and damages against the utility and several of its officers and employees for terminations of utility service allegedly without due process of law. After refusing to certify the action as a class action, the District Court determined that respondents' claim of entitlement to continued utility service did not implicate a "property" interest protected by the Fourteenth Amendment, and that, in any event, the utility's termination procedures comported with due process. While affirming the District Court's refusal to certify a class action, the Court of Appeals held that the procedures accorded to respondents did not comport with due process. Held:

1. Although respondents as the only remaining plaintiffs apparently no longer desire a hearing to resolve a continuing dispute over their bills, the double-billing problem having been clarified during this litigation, and do not aver that there i a present threat of termination of service, their claim for actual and punitive damages arising from the terminations of service saves their cause from the bar of mootness. Pp. 7-9.

2. Under applicable Tennessee decisional law, which draws a line between utility bills that are the subject of a bona fide dispute and those that are not, a utility may not terminate service "at will" but only "for cause," and hence respondents assert a "legitimate claim of entitlement" within the protection of the Due Process Clause of the Fourteenth Amendment. Pp. 9-12.

3. Petitioners deprived respondents of an interest in property without due process of law. Pp. 12-22.

(a) Notice in a case of this kind does not comport with constitutional requirements when it does not advise the customer of the availability of an administrative procedure for protesting a threatened termination of utility services as unjustified, and since no such notice was given respondents, despite "good faith efforts" on their part, they were not accorded due notice. Pp. 13-15.

(b) Due process requires, at a minimum, the provision of an opportunity for presenting to designated personnel empowered to rectify error a customer's complaint that he is being overcharged or charged for services not rendered, and here such a procedure was not made available to respondents. The customer's interest in not having services terminated is self-evident, the risk of erroneous deprivation of services is not insubstantial, and the utility's interests are not incompatible with affording the notice and procedure described above. Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18. Pp. 16-19.

(c) The available common-law remedies of a pretermination injunction, a post-termination suit for damages, and a post-payment action for a refund do not suffice to cure the inadequacy in petitioner utility's procedures. The cessation of essential utility services for any appreciable time works a uniquely final deprivation, and judicial remedies are particularly unsuited to resolve factual disputes typically involving sums too small to justify engaging counsel or bringing a lawsuit. Pp. 19-22.

534 F.2d 684, affirmed.

Frierson M. Graves, Jr., Memphis, Tenn., for petitioners.

Thomas M. Daniel, Nashville, Tenn., for respondents.

Mr. Justice POWELL delivered the opinion of the Court.

This is an action brought under 42 U.S.C. § 1983 by homeowners in Memphis, Tenn., seeking declaratory and injunctive relief and damages against a municipal utility and several of its officers and employees for termination of utility service allegedly without due process of law. The District Court determined that respondents' claim of entitlement to continued utility service did not implicate a "property" interest protected by the Fourteenth Amendment, and that, in any event, the utility's termination procedures comported with due process. The Court of Appeals reversed in part. We granted certiorari to consider this constitutional question of importance in the operation of municipal utilities throughout the Nation.

I

Memphis Light, Gas and Water Division (MLG&W) ¹ is a division of the city of Memphis which provides utility service. It is directed by a Board of Commissioners appointed by the City Council, and is subject to the ultimate control of the municipal government. As a municipal utility, MLG&W enjoys a statutory exemption from regulation by the state public service commission. Tenn.Code Ann. §§ 6-1306, 6-1317 (1971).

Willie S. and Mary Craft, respondents here,² reside at 1019 Alaska Street in Memphis. When the Crafts moved into their residence in October 1972, they noticed that there were two separate gas and electric meters and only one water meter serving the premises. The residence had been used previously as a duplex. The Crafts assumed, on the basis of information from the seller, that the second set of meters was inoperative.

In 1973, the Crafts began receiving two bills: their regular bill, and a second bill with an account number in the name of Willie C. Craft, as opposed to Willie S. Craft. Separate monthly bills were received for each set of meters, with a city service fee ³ appearing on each bill. In October 1973, after learning from a MLG&W meter reader that both sets of meters were running in their home, the Crafts hired a private plumber and electrical contractor to combine the meters into one gas and one electric meter. Because the contractor did not consolidate the meters properly, a condition of which the Crafts were not aware, they continued to receive two bills until Jan- uary 1974. During this period, the Crafts' utility service was terminated five times for nonpayment.

On several occasions, Mrs. Craft missed work and went to the MLG&W offices in order to resolve the "double billing" problem. As found by the District Court, Mrs. Craft sought in good faith to determine the cause of the "double billing," but was unable to obtain a satisfactory explanation or any suggestion for further recourse from MLG&W employees. The court noted:

"On one occasion when Mrs. Craft was attempting to avert a utilities termination, after final notice, she called the defendant's offices and explained that she had paid a bill, but was given no satisfaction. The procedure for an opportunity to talk with management was not adequately explained to Mrs. Craft, although she repeatedly tried to get some explanation for the problems of two bills and possible duplicate charges." Pet. for Cert. 38-39.

In February 1974, the Crafts and other MLG&W customers filed this action in the District Court for the Western District of Tennessee. After trial, the District Court refused to certify the plaintiffs' class and rendered judgment for the defendants. Although the court apparently was of the view that plaintiffs had no property interest in continued utility service while a disputed bill remained unpaid, it nevertheless addressed the procedural due process issue. It acknowledged that respondents had not been given adequate notice of a procedure for discussing the disputed bills with management, but concluded that "[n]one of the individual plaintiffs [was] deprived of [a] due process opportunity to be heard, nor did the circumstances indicate any substantial deprivation except in the possible instance of Mr. and Mrs. Craft." Id., at 45.⁴ The court expressed "hope," "whether on the principles of [pendent] jurisdiction, or on the basis of a very limited possible denial of due process to Mr. and Mrs. Craft," that credit in the amount of $35 be issued to reimburse the Crafts for "duplicate and unnecessary charges made and expenses incurred by [them] with respect to terminations which should have been unnecessary had effectual relief been afforded them as requested." The court also recommended "that MLG&W in the future sen a certified or registered mail notice of termination at least four days prior to termination," and that such notice "provide more specific information about customer service locations and personnel available to work out extended payment plans or adjustments of accounts in genuine hardships or appropriate situations." Id., at 46-47.⁵

On appeal, the Court of Appeals for the Sixth Circuit affirmed the District Court's refusal to certify a class action, but held that the procedures accorded to the Crafts did not comport with due process. 534 F.2d 684 (1976).

On July 12, 1976, petitioners sought a writ of certiorari in this Court to determine (i) whether the termination policies of a municipal utility constitute "state action" under the Fourteenth Amendment; (ii) if so, whether a municipal utility's termination of service for nonpayment deprives a customer of "property" within the meaning of the Due Process Clause; and (iii) assuming "state action" and a "property" interest, whether MLG&W's procedures afforded due process of law in this...