Ludwig et al v. The City of Jamestown, New York et al

Filing 64

ORDER granting in part and denying in part 56 Motion for Summary Judgment. Signed by Hon. Richard J. Arcara on 2/25/2009. (JMB)

U N IT E D STATES DISTRICT COURT W E S T E R N DISTRICT OF NEW YORK ________________________________________ C H A R L E S L. LUDW IG , K A T H L E E N L. LUDW IG , L U D W IG AUCTION & REALTY CO., INC., and L A R R Y J. SCHNELZER, Plaintiffs, D E C IS IO N AND ORDER 0 5 -C V -3 5 3 (A ) v. T H E CITY OF JAMESTOW N , NEW YORK, and S C O T T L. BENSINK, in his individual and official capacities, D e fe n d a n ts . ________________________________________

In tr o d u c tio n C u rre n tly before the Court is a motion by the defendants, the City of J a m e s to w n , New York and Scott L. Bensink, for summary judgment pursuant to F e d e ra l Rule of Civil Procedure 56 dismissing plaintiffs Kathleen L. Ludwig, L u d w ig Auction & Realty Co., Inc., and Larry J. Schnelzer from this action for lack o f standing.1 Oral argument was held on February 6, 2009. For the reasons in d ica te d below, the motion is denied as to plaintiff Ludwig Auction & Realty Co., Inc . and granted as to plaintiffs Kathleen L. Ludwig and Larry J. Schnelzer.

Defendants have not challenged the standing of plaintiff Charles L. Ludwig in this motion.

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B a c k g ro u n d T h is action concerns the decision of the Jamestown Board of Public U t ilitie s ("BPU") on January 11, 2005 to terminate electrical service to two p ro p e rtie s , located at 15 and 19 Cross Street in Falconer, New York. Plaintiff C h a rle s Ludwig leased space at 15 Cross Street and owned 19 Cross Street. Plaintiff Ludwig Auction & Realty Co., Inc. is a business that was located at 15 C ro s s Street during the times relevant to this action. Charles Ludwig operated the business, while plaintiff Kathleen Ludwig was the owner, sole shareholder, a n d president. The business operated as an unincorporated entity until February 1 9 9 3 , and has operated as a corporation since. Plaintiff Larry Schnelzer ("S c h n e lz e r") subleased space at 15 Cross Street for a woodworking shop and s to ra g e area. From a time prior to February 1993 until approximately January 25, 2 0 0 5 , the name on the BPU account for 15 Cross Street was "Ludwig Auction R e a lty." The name on the BPU account for 19 Cross Street was Charles L. L u d w ig during the times relevant to this action. B P U disconnected service to both 15 and 19 Cross Street on January 11, 2 0 0 5 because of past balances due on the account for each property. At that tim e , Schnelzer did not have his own BPU account; he was receiving electricity fo r his subleased space through an alleged improper connection to the Ludwigs' s e rvic e box. After January 11, 2005, Schnelzer contacted BPU about taking over th e account for 15 Cross Street, but was informed that he could not do so without 2

a ls o assuming responsibility for the past balance due, at least some of which re la te d to service that Mr. Ludwig had received for another property not involved in this action. Schnelzer did not want to assume responsibility for the past b a la n c e due. According to Schnelzer, BPU told him that the only way in which he c o u ld take over the 15 Cross Street account without paying the past balance due w a s if he installed his own meter and electric service box in his subleased space a n d rewired the space to receive electricity only from the new meter and service b o x. O u t of an apparent concern for the time that a rewiring of his entire space w o u ld take, Schnelzer proceeded with an installation of a new meter and service b o x, but rewired only about half of his subleased space before taking over the 15 C ro s s Street account. Schnelzer supplied power to the rest of his subleased s p a c e by connecting his new wiring to the old service box on the property, the o n e that the Ludwigs had used prior to their disconnection and that still featured th e alleged improper connection. BPU began service to Schnelzer through the new service box and wiring o n or around January 25, 2005. On or around February 1, 2005, BPU informed S c h n e lz e r that, because the alleged improper connection still existed, the L u d w ig s now were receiving electricity when they should not. A site inspection o c c u r re d on February 10, 2005. BPU threatened to terminate service at 15 Cross S tre e t by February 11, 2005 unless Schnelzer removed the improper connection 3

a n d cut power to the old service box that the Ludwigs had used. Schnelzer re s p o n d e d by removing the alleged improper connection and incurring the cost n e c e s s a ry to install new wiring in the other half of his subleased space--the half th a t he had not rewired initially. Importantly, Schnelzer never experienced an in te rru p tio n in service after becoming a BPU customer on or around January 25, 2005. D i s c u s s io n "S u m m a ry judgment is appropriate when there is no genuine issue as to a m a te ria l fact, and the moving party is entitled to judgment as a matter of law. All in fe re n c e s are drawn in favor of the non-moving party." Hermès Int'l v. Lederer d e Paris Fifth Ave., Inc., 219 F.3d 104, 107 (2d Cir. 2000) (citations omitted). "If th e movant satisfies the burden of establishing that there is no genuine issue of m a te r ia l fact, then the burden shifts to the nonmovant to proffer evidence d e m o n s tra tin g that a trial is required because a disputed issue of material fact e xis ts." W e g v. Macchiarola, 995 F.2d 15, 18 (2d Cir. 1993). H e re , defendants have moved for summary judgment against three of the fo u r plaintiffs, contending that plaintiffs Kathleen L. Ludwig, Ludwig Auction & R e a lty Co., Inc., and Larry J. Schnelzer never were customers of BPU and th e re fo re lack standing to bring a due process claim. "The Article III limitations a re familiar: The plaintiff must show that the conduct of which he complains has c a u s e d him to suffer an `injury in fact' that a favorable judgment will redress." Elk 4

G ro ve Unified Sch. Dist. v. Newdow, 542 U.S. 1, 12 (2004) (citation omitted). In the specific context of plaintiffs' Fourteenth Amendment claims, defendants are a s s e rtin g through their motion that plaintiffs cannot point to "actions of g o ve rn m e n t that work a deprivation of interests enjoying the stature of `property' w ith in the meaning of the Due Process Clause." Memphis Light, Gas & W a te r D iv. v. Craft, 436 U.S. 1, 9 (1978). If defendants meet their summary judgment burden and make an initial s h o w in g that plaintiffs Kathleen L. Ludwig, Ludwig Auction & Realty Co., Inc., and L a rr y J. Schnelzer were not BPU customers during the times relevant to this a c tio n , then those plaintiffs will bear the burden of identifying triable issues of fact c o n c e rn in g property interests personal to them that were implicated by the J a n u a ry 11, 2005 disconnection of service by BPU. "Property interests are not c re a te d by the Constitution, they are created and their dimensions are defined by e xis tin g rules or understandings that stem from an independent source such as s ta te law . . . ." Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 538 (1985) (in tern a l quotation marks and citation omitted). "W h e n determining whether a p la in tiff has a claim of entitlement, [courts] focus on the applicable statute, c o n tra c t or regulation that purports to establish the benefit." Martz v. Inc. Village o f Valley Stream, 22 F.3d 26, 30 (2d Cir. 1994) (citation omitted).

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S t a n d in g of Ludwig Auction & Realty Co., Inc. D e fe n d a n ts claim that Ludwig Auction & Realty Co., Inc. lacks standing b e c a u s e it never was a BPU customer in its incorporated form. Defendants state th a t the customer account for 15 Cross Street was in the name of "Ludwig A u c tio n & Realty" since prior to February 1993, but that this entity was an "a s s u m e d name filed by Mr. Ludwig for the auction business he owned and o p e ra te d ." Defendants state that Mr. and Ms. Ludwig incorporated the business in February 1993 as "Ludwig Auction & Realty Co., Inc.," but that they never in fo rm e d BPU of this change. According to defendants, had the Ludwigs in fo rm e d BPU of the incorporation and posted a deposit for a non-residential a c c o u n t, the account would have been changed. Defendants explained at oral a r g u m e n t that the change in corporate status is significant because the past b a la n c e due on the 15 Cross Street account was carried over from service that C h a rle s Ludwig received personally at another property in the past. As a result, d e fen d a n t s argue, the corporation owes no money to BPU, and BPU would have h a d no grounds to disconnect service at 15 Cross Street had the corporation b e e n the customer there. In opposition, plaintiffs refer generally to prior deposition testimony and e xh ib its indicating that the assumed name is an assumed name under the c o rp o ra tio n , and that a termination notice for 15 Cross Street dated December 1 4 , 2004 from BPU was addressed to "Ludwig Auction & Realty." Plaintiffs cite to 6

a service change form dated July 24, 1995 as evidence that the corporate entity re c e ive d customer service from BPU after February 1993, when the change in c o rp o ra te status occurred. Plaintiffs also attach to their memorandum of law in o p p o s itio n copies of an electric bill and of receipts for payments on the account fo r 15 Cross Street that list "Ludwig Auction Realty" as the customer for that p r o p e r ty . D is p u te d factual issues about the relationship between Ludwig Auction & R e a lty Co., Inc. and the BPU accounts for 15 and 19 Cross Street preclude s u m m a ry judgment. Both parties have provided exhibits demonstrating that the c u s to m e r listed for the BPU account for 15 Cross Street was "Ludwig Auction R e a lty." Defendants assert that this listing reflects the unincorporated business a n d not the corporation, but they have not explained why a change in corporate s ta tu s would matter to BPU. The company, whether incorporated or not, was the s a m e company at all relevant times and was the sole customer at 15 Cross S tre e t from a time prior to February 1993 until late January 2005, when Schnelzer to o k over the account. Mr. Ludwig has testified at a deposition that the assumed n a m e was "an assumed name under Ludwig Auction & Realty Company, Inc." Defendants concede that Mr. Ludwig paid utility bills for 15 Cross Street with c o rp o ra tio n funds after incorporation occurred in February 1993. Finally, E xh ib it C to Mr. W rig h t's affidavit in support of the pending motion also contains a b ill for 19 Cross Street, also dated December 29, 2004. The customer listed on 7

th a t bill is Charles L. Ludwig, but Mr. Ludwig mentioned in a prior affidavit that the c o rp o ra tio n holds that account as well. Under these circumstances, plaintiffs h a ve identified triable issues of fact regarding the corporation's standing. Plaintiffs have made enough of a showing that the corporation may have a p ro p e rty interest at stake in this action, that a jury should be allowed to examine th e history between the company and BPU more closely. A jury also should be a llo w e d to examine whatever significance BPU's policies might attach to a c h a n g e in corporate status. Defendants' motion is therefore denied as against L u d w ig Auction & Realty Co., Inc. S ta n d in g of Kathleen L. Ludwig D e fe n d a n ts challenge Ms. Ludwig's standing on the grounds that she never w a s a BPU customer and has no connection to this action except as sole s h a re h o ld e r of Ludwig Auction & Realty Co., Inc. Ms. Ludwig argues that, as the s o le shareholder of a BPU customer, she has the right to bring this action on b e h a lf of her corporation. Based on the allegations in the complaint, Ms. Ludwig lacks standing in a n y individual capacity. Shareholders generally cannot sue to enforce the rights o f their corporations. "[T]he so-called shareholder standing rule . . . . is a lo n g s ta n d in g equitable restriction that generally prohibits shareholders from in itia tin g actions to enforce the rights of the corporation unless the corporation's m a n a g e m e n t has refused to pursue the same action for reasons other than 8

g o o d -fa ith business judgment. There is, however, an exception to this rule a llo w in g a shareholder with a direct, personal interest in a cause of action to bring s u it even if the corporation's rights are also implicated." Franchise Tax Bd. of C a l. v. Alcan Aluminum Ltd., 493 U.S. 331, 336 (1990) (citation omitted). Here, th e complaint alleges that Ludwig Auction & Realty Co., Inc. suffered a loss and d e p riva tio n of property and a loss of profits as a result of the termination. Ms. L u d w ig alleges damages in the complaint, but does not allege that these d a m a g e s resulted from any event other than the disconnection of service to her c o rp o ra tio n . Plaintiffs' papers in opposition to the pending motion explain that M s . Ludwig's damages consist solely of "financial damage" that she suffered "coe xte n s ive ly" with losses that the corporation allegedly suffered because of BPU's d is c o n n e c tio n on January 11, 2005. At no time in the complaint does Ms. L u d w ig allege that defendants breached any duty or obligation owed to her as an in d ivid u a l, apart from any duty or obligation that defendants may have owed the c o rp o ra tio n . Cf. Rand v. Anaconda-Ericsson, Inc., 794 F.2d 843, 849 (2d Cir. 1 9 8 6 ) (holding that plaintiffs lacked standing to sue a creditor of their corporation a n d the creditor's affiliates under antitrust and anti-racketeering laws because "[t]h e legal injury, if any, was to the firm. Any decrease in value of plaintiffs' s h a re s merely reflects the decrease in value of the firm as a result of the alleged ille g a l conduct"). Consequently, Ms. Ludwig lacks standing to bring the claims a lle g e d in the complaint and is dismissed from this action. Any damages that Ms. 9

L u d w ig suffered will be redressed through the corporation's action against d e fe n d a n ts . Standing of Larry J. Schnelzer D e fe n d a n ts challenge Schnelzer's standing on the grounds that he was not a BPU customer when service at 15 Cross Street was terminated on January 11, 2 0 0 5 , and thus had no relationship with BPU that would have warranted due p ro c e s s or protection of property rights. Schnelzer does not dispute that he was n o t a BPU customer as of January 11, 2005. Rather, Schnelzer contends that he b e c a m e a customer of BPU on or around January 25, 2005, when he took over th e 15 Cross Street account. Once Schnelzer took over the 15 Cross Street a c c o u n t, he volunteered to pay for all electricity consumed there regardless of w h o consumed it. Schnelzer also characterizes the alleged improper connection a s equivalent to a valid connection between a main electrical panel and a s u b p a n e l. Thus, according to Schnelzer, BPU's insistence that Schnelzer rewire th e last half of his subleased space was unnecessary and was the source of his in ju rie s in this action. S c h n e lz e r's arguments do not refute defendants' showing that he has no p ro p e rty interest at stake in this action. Schnelzer did not become a customer of B P U until approximately January 25, 2005. Schnelzer thus lacks standing to c h a lle n g e any action that BPU took before then. See Golden v. City of C o lu m b u s , 404 F.3d 950, 956 (6th Cir. 2005) (requiring evidence of a contractual 10

re la tio n s h ip to establish a property interest). After January 25, 2005, when S c h n e lz e r took over the 15 Cross Street account and was a BPU customer, he s u ffe re d no service disconnections or interruptions from BPU. T h e only claim that Schnelzer can advance against BPU is that BPU th re a te n e d him with disconnection had he refused to remove the alleged im p ro p e r connection. This claim does not constitute a deprivation of a property in te re s t for two reasons. First, Schnelzer chose voluntarily to comply with BPU's re q u ire m e n t to remove the connection before BPU disconnected service. No d e p riv a tio n thus occurred. Second, Schnelzer has not substantiated his d is a g re e m e n t with BPU over the nature of his wiring. There is evidence in the re c o rd suggesting that the connection that Schnelzer established between his s e rvic e box and the Ludwigs' service box violated the National Electrical Code a n d posed a safety hazard. In response, Schnelzer has offered only his own c o n c lu s o ry , self-serving assertions that he did not believe his connection to be im p ro p e r. Cf. BellSouth Telecomm., Inc. v. W .R . Grace & Co.-Conn., 77 F.3d 6 0 3 , 615 (2d Cir. 1996) (rejecting self-serving affidavits as insufficient to raise a tria b le issue of fact). Schnelzer has not submitted any factual assertions from an e le c tric a l wiring expert asserting what physical characteristics of the connection a r e proper under applicable codes. "The object of [Rule 56(e)] is not to replace c o n c lu s o ry allegations of the complaint or answer with conclusory allegations of a n affidavit. Rather, the purpose of Rule 56 is to enable a party who believes 11

th e r e is no genuine dispute as to a specific fact essential to the other side's case to demand at least one sworn averment of that fact before the lengthy process of litig a tio n continues." Lujan v. Nat'l W ild life Fed'n, 497 U.S. 871, 888-89 (1990) (c ita tio n s omitted). Under these circumstances, Schnelzer cannot show that BPU d e p rive d him of any property interest, making summary judgment appropriate. Schnelzer accordingly is dismissed from this action. C o n c l u s io n F o r all of the foregoing reasons, defendants' motion for summary judgment is denied as to plaintiff Ludwig Auction & Realty Co., Inc. and granted as to p la in tiffs Kathleen L. Ludwig and Larry J. Schnelzer. The parties are directed to a p p e a r on Friday, March 6, 2009 at 9:00 a.m. for a status conference to set a tria l date.

S O ORDERED. s / Richard J. Arcara HONORABLE RICHARD J. ARCARA C H IE F JUDGE U N IT E D STATES DISTRICT COURT D A T E D : February 25, 2009

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