AUGUSTIN et al v. City of Philadelphia
DECISION. SIGNED BY HONORABLE J. CURTIS JOYNER ON 1/4/2017. 1/5/2017 ENTERED AND COPIES E-MAILED.(amas)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
LEA AUGUSTIN, GERARD AUGUSTIN,
THOMAS MCSORLEY, DONNA MCSORLEY
RICHMOND WATERFRONT INDUSTRIAL
CITY OF PHILADELPHIA
: CIVIL ACTION
: NO. 14-CV-4238
January 4, 2017
We write now relative to the final motion of the plaintiffs1
in this ongoing civil rights matter – that seeking the entry of
permanent injunctive relief against the City of Philadelphia and
its wholly-owned gas utility, Philadelphia Gas Works.
Specifically, Plaintiffs now move to forever enjoin Defendant
from filing any liens on real property where those liens are for
unpaid gas services provided to PGW customers who do not own the
property being liened using PGW’s current methods for doing so.
Following hearings on the instant motion and Plaintiffs’ Motion
Previously, in our Memoranda and Orders of March 17, 2016, May 4 and
November 30, 2016, we granted the Plaintiffs’ Motions for Partial Summary
Judgment, for Preliminary Interim Injunctive Relief and to Certify this Matter
as a Class Action. Although we reiterate many of the portions of those
memoranda and orders in this decision as findings of fact and/or conclusions
of law, in the interests of providing a thorough and complete record in this
matter, we now hereby formally incorporate by reference into this Decision all
of our preceding opinions and orders.
for Class Certification on July 26 and 27, 2016, we now make the
FINDINGS OF FACT
Plaintiffs Lea and Gerard Augustin are adult individuals
residing at 221 Cadwalader Avenue, Elkins Park, Montgomery
(Trial Exhibit D-22, 3/3/15 Deposition of
Lea Augustin, pp. 8-9).
Mr. and Mrs. Augustin are also the owners of several
parcels of residential real estate in the City and County of
Philadelphia, located at 5105 Wayne Avenue, 2013 Stenton Avenue,
6174 North 17th Street, and 2147 Medary Avenue, all of which they
are presently renting and/or in the past have leased out to
Several of those properties are multi-unit buildings,
containing more than one apartment and more than one gas service
(Trial Exhibit D-22, pp. 8-10, 12-15, 78-79).
Plaintiffs Thomas and Donna McSorley are adult
individuals residing at 204 Blair Road, Warminster, Bucks County,
(Trial Exhibit D-20, 2/19/15 Deposition of Thomas
McSorley, p. 7; Trial Exhibit D-20).
Mr. and Mrs. McSorley are also the owners of two parcels
of real property situate in the City and County of Philadelphia
at 1916 Griffith Street and 1903 Grant Avenue, both of which are
residential rental properties containing more than one unit and
more than one gas service meter.
(D-20, pp. 7-9, 22-23, 31).
Plaintiff Richmond Waterfront Industrial Park, LLC is a
Pennsylvania Limited Liability Corporation with offices at 10901
Dutton Road, Philadelphia, Pennsylvania.
(Trial Exhibit D-10;
Pl’s Class Action Complaint and Defendant’s Answer thereto, ¶ 8;
Trial Exhibit D-21, 6/26/15 Deposition of David Wolf, p. 12).
Richmond Waterfront Industrial Park, LLC (hereafter
“Richmond”) is the owner of some 10 parcels of
commercial/industrial real estate in the City and County of
Among these is a 256,000 square foot facility
located at 2950 Kirkbride Street, a/k/a 4701 Bath Street in
Philadelphia, which is also subdivided into separate rental units
with separate meters for the gas service provided to each unit.
(D-21, pp. 8, 11-13, 16-20).
Defendant City of Philadelphia is a municipal
subdivision of the Commonwealth of Pennsylvania, the owner of
Philadelphia Gas Works, and as such acts under color of state
PGW is the entity through which the City of Philadelphia
provides gas services to residences and businesses within the
(Pl’s Complaint and Defendant’s Answer thereto, ¶s
9-10;D-20, pp. 23-24).
Since July 1, 2000, PGW has had the legal status of a
public utility subject to the jurisdiction of the Pennsylvania
Public Utility Commission.
(N.T. 7/26/16, 75; 66 Pa. C.S.A.
Following the passage of Act 201 amending the Public
Utility Code, 66 Pa. C.S.A. §1401, et. seq. which took effect in
December 2004, PGW, as a “city natural gas distribution operation
furnishing gas service to a property” became “entitled to impose
or assess a municipal claim against the property and file as
liens of record claims for unpaid natural gas distribution
service and other related costs, including natural gas supply in
the court of common pleas of the county in which the property is
situated or, if the claim for the unpaid natural gas distribution
service does not exceed the maximum amount over which the
Municipal Court of Philadelphia has jurisdiction, in the
Municipal Court of Philadelphia, pursuant to sections 3 and 9 of
the ... Municipal Claim and Tax Lien Law...(66 Pa. C.S.A. §2201,
66 Pa. C.S.A. §1414(a).
Initially, PGW voluntarily agreed to delay
implementation of the landlord lien provision of Act 201 until
approximately December 14, 2005, one year after the effective
date of the Act while it conducted a series of meetings and
discussions with a “Landlord Task Force,” which was made up of
representatives from the Greater Philadelphia Association of
Realtors, the Homeowners Association of Philadelphia, the
Pennsylvania Residential Owners Association and small business
investors and city residents in an effort to reach some type of
agreement regarding how to best use Act 201 in a way that would
benefit PGW’s customers and provide a “reasonable, though perhaps
distasteful process for landlords.”
(Declaration of John Grogan,
annexed to Plaintiffs’ Motion for Summary Judgment (“MSJ”),
Exhibit 1; Grogan Decl., Exhibit 6).
Eventually, the result of the meetings and discussions
between the Landlord Task Force and PGW was the adoption of the
Landlord Cooperation Program in or around July, 2005.
program, residential landlords who fulfilled certain criteria
(such as having valid and up-to-date landlord licenses issued by
the City’s Department of Licenses and Inspections) could register
their properties through PGW’s website.
Provided the landlords
were “fully cooperative,” no liens would be imposed upon their
registered properties while they were in the program and they
could receive notification when a tenant directed PGW to shut off
an account, possibly “skipping out” on a lease.
Declaration to Pl’s MSJ, Exhibits 1, 7, 8, 11; Pl’s SJ Exhibit 5,
For the next several years, between 2005 and 2008, PGW
“at times” placed liens for its customers’ unpaid gas bills on
the real properties at which the gas had been provided pursuant
to Act 201 and the Municipal Claim and Tax Lien Law (“MCTLL),
irrespective of the fact that the customers were not the owners
of the properties liened.
Defendant did so using a “slightly
automated” but primarily manual system.2
As we explained in footnote 2 in our Memorandum and Order of March
17, 2016, it was and is this Court’s understanding that “manual” means only
that it is necessary for a person to input the information necessary and to
take the steps required to file or record the liens for unpaid gas service
with the appropriate Philadelphia court. This differs from the “automated”
computerized Lien Management System which was later developed to automatically
of Deposition Excerpts and Declarations in Support of Plaintiffs’
Motion for Summary Judgment, Exhibit 2, pp. 43-44, 49-51).
In 2009, PGW began utilizing the computerized system
for automatically liening real estate which it had developed,
called the “Lien Management System” or “LMS.”
Exhibit 2, p. 43).
The goal of this system, which is entirely
automated, is the processing of some 200-300 liens per day, more
quickly, less expensively and with fewer human errors than the
(Pl’s Compendium, Exhibit 1, pp. 37-42, Exhibit
2, p. 43).
At present, LMS functions by automatically “trolling”
the account data in PGW’s Customer Billing and Collections
Database (“BCCS”) to identify accounts as “lien eligible”
depending upon the extent of the account arrearage and the length
of time it has gone unpaid. (Pl’s SJ Exhibit 1, pp. 21, 51-52,
To illustrate, in the case of a typical residential
account, once an arrearage reaches $300 and more than 91 days
have elapsed since the last payment was made, it is considered to
be eligible for liening and an automated pre-lien notification
letter sent to the owner of the property where the gas service
(Pl’s SJ Exhibit 2, pp. 18-22).
There are, however, circumstances under which this
process can disrupted manually, i.e., someone in the business or
undertake each of the necessary steps to accomplish the filing and recording
of the gas liens and to interface with other internal PGW systems and external
systems, such as the Philadelphia County Courts and Offices.
crediting collections departments must intervene and make an
adjustment into the system to prevent, for example, a pre-lien
letter from being sent or to vacate a lien.
(Pl’s SJ Exhibit 1,
These adjustments, which PGW refers to as
“exceptions” or “blockers” differ depending upon whether the
property at issue is residential or commercial in nature.
SJ Exhibit 2, pp. 37-39).
Thus, once an account is determined by the Lien
Management System to be lien-eligible, the system will further
automatically check to see whether there any blocking conditions
which are attached to the account.
If there are no “blockers,”
and if the system can identify a property owner’s name and an
address, LMS sends the lien information to the Court, after first
activating the mailing of the Pre-Lien Notice.
However, if a
“blocker” does exist on the account, the liening process,
including the mailing of the Pre-Lien Notice, is suspended until
such time as the blocking conditions have been resolved either in
the BCCS or by the manual intervention of PGW collection
(Pl’s SJ Exhibit 1, 117-120).
Although they are similar, exceptions and blockers do
differ - there are some blockers which are not exceptions and
some exceptions which are not blockers.
(Pl’s SJ Exhibit 2, pp.
Generally speaking, blockers are put on in the BCCS
system and will block an account from being liened automatically,
although they can be overridden manually.
(Pl’s SJ Exhibit 1, p.
229; Pl’s SJ Exhibit 2, p. 29).
Exceptions, on the other hand,
are put on in the LMS and likewise operate to prevent an account
from being liened (Pl’s SJ Exhibits 1 and 2, at pp. 229 and 29,
Examples of exceptions include being a registered
landlord in the Landlord Cooperation Program (“LCP”), a customer
being designated as a member of the Customer Responsibility
Program (“CRP”), i.e., they are low income, or as having some
type of medical condition such that PGW cannot turn off service.
(Pl’s SJ Exhibit 1, pp. 47-48, 51-52).
Blockers can also arise
where a customer has entered into a negotiated payment
arrangement for an overdue account or where there is a “name
mismatch” such that the property owner’s name and the property’s
user’s name are not the same.
(Pl’s SJ Exhibit 1, pp. 117-120).
At present, there are at least 7 different “lien
models” provided for in the LMS system, which govern when a lien
is selected to be or may be filed against a property.
Exhibit 2, pp. 16-17).
These models are subdivided into those
governing when to lien a commercial property and when to lien a
residential property and are further categorized by such
variables as the length of time the account has been in arrears,
the amount of the arrearage, whether the account or service
agreement has been closed and/or written off, whether the gas
service to the property has been shut off and whether the
property has been recently sold.
(Pl’s SJ Exhibit 2, pp. 17-22).
Although the models have been changed from time-to-time, neither
the models themselves nor the changes thereto have ever been made
(Pl’s SJ Exhibit 2, pp. 41-42).
As a result of the many exceptions and/or blocking
conditions placed into the system, it is not uncommon for there
to be significant delays in the processing of a lien that extend
well beyond the date that LMS first flags an account as lien
eligible, resulting in the filing of many liens well in excess of
the $300 threshold.
(Pl’s SJ Exhibit 2, pp. 54-58).
Again, if there are no blockers or exceptions on an
account, then the system will commence the liening process which
starts with the sending of an automated pre-lien notice letter.
(Exhibit X to Defendant’s Motion for Summary Judgment, p. 89).
Once a pre-lien letter is sent, unless the amount indicated in
the letter is paid within the time period provided, the LMS
automatically sends the lien information to the office of the
Prothonotary and the lien is recorded against the property.
(Pl’s SJ Exhibit 1, pp. 82, 117-120).
It is apparently not
uncommon for a pre-lien and a subsequent post-lien notification
letter to be sent to the service address (i.e., the address at
which service is provided and the property which is liened)
rather than the landlord/property owner’s registered mailing
address, despite the fact that this address is what must be
listed on the landlord’s rental license.
As a result, some
landlords do not receive these notifications until long after a
lien has been placed upon their property(ies).
(Pl’s SJ Exhibit
1, pp. 122-124; Pl’s SJ Exhibit 8).
Prior to November 2012, LMS was programmed to provide a
period of 11 days from the time a pre-lien letter was sent to the
time that properties were liened; since that time, 30 days’
notice is now afforded.
(Pl’s SJ Exhibit 1, pp. 82-84; Pl’s SJ
Exhibit 2, pp. 38-40).
Presently, LMS operates by automatically creating a
file which is uploaded to PGW’s contracted mailing company,
KUBRA, and it is KUBRA which then actually mails the pre- and
post-lien notices to the property owners via U.S. Mail notifying
them that PGW has liened their property.
(Pl’s SJ Exhibit 1, pp.
91-95; Grogan Decl., Exhibit 3).
However, if there are blockers on the account, the
liening process is suspended until such time as the blockers are
removed, after which any debt on the account can be liened.
(Pl’s SJ Exhibit 2, pp. 97-99, 142-144).
A customer can continue
to receive service and accrue debt on his or her account while a
blocker is in place – a blocker will only operate to forestall
the sending of notice and the placement of a lien on the property
where the service was provided.
(Pl’s SJ Exhibit 1, pp. 125-134,
218-219, 221; Pl’s SJ Exhibit 2, p. 63).
Among the blockers which can prevent a property from
automatically being liened is the “name mismatch” and “address
mismatch” blockers, which arise where the name on the delinquent
account and the service address listed in the BCCS does not match
with the name and/or address identified as belonging to the
property owners in the City of Philadelphia’s Office of Property
Assessments (“OPA”)3 database.
Although these properties can be
liened manually, it is not uncommon for this blocker to delay the
pre-lien notices from being sent for years, all while the account
arrearages continue to grow.
(Pl’s SJ Exhibit 1, pp. 79-80, 119-
157; Pl’s SJ Exhibit 2, pp. 54-56).
Exceptions function in a similar manner.
account is on the exceptions list, the issuance of a lien is
delayed until such time as the exception is no longer applied,
although debt can continue to accumulate.
(Pl’s SJ Exhibit 2,
pp. 56-57, 63).
Debt often accumulates over many years as a result of
PGW continuing to provide gas service on a delinquent account.
(Pl’s SJ Exhibit 2, pp. 63, 70-74; Pl’s SJ Exhibit 4, pp. 63-65,
In such situations and where the customer is not the
property owner but is instead a tenant of a landlord, the
landlord is not told that the customer is not paying his gas
bills unless they are specifically authorized to receive this
information or are a third-party designee on the account.
SJ Exhibit 2, pp. 63-64; Pl’s SJ Exhibit 4, p. 169).
result, landlords are often unable to take any action to prevent
large liens from being assessed against their properties and are
The Office of Property Assessment was previously called the Board of
Revision of Taxes (or “BRT”). (Pl’s SJ Exhibit 1, pp. 30, 77-78).
unable to recoup those funds from tenants who have long since
vacated their properties, frequently without paying their rents
(Pl’s SJ Exhibits 8, 9, 10; Defendant’s SJ Exhibit A,
pp. 39-43, 78-79, 89; Def’s SJ Exhibit H, pp. 55-58; Def’s SJ
Exhibit M, pp. 118-119).
Although PGW ostensibly has a “rule” that it will not
lien debt which is older than four years, this rule is not always
To the contrary, PGW has liened properties for debts
as old as ten years and has taken the apparently contradictory
position that so long as a property has not changed hands, it can
lien it at any time.
(Pl’s SJ Exhibit 2, pp. 66-74, 161-162;
Pl’s SJ Exhibit 4, pp. 69-72, 90-99, 101-104, 130-134; Pl’s SJ
Exhibit 10, ¶s 5, 8).
This is precisely what happened to the named Plaintiffs
in this case.
Lea and Gerard Augustin own two properties which
were liened repeatedly for unpaid tenant bills during the period
Those liens total over $19,500 on one property and
approximately $17,000 on the other and relate, at least in part,
to tenancies dating back to 2004.
(Pl’s SJ Exhibit 8; Def’s SJ
Exhibit M, p. 54; Def’s Trial Exhibit 22, pp. 23-25, 58-61; Pl’s
Trial Exhibit P-1).
In the case of Thomas and Donna McSorley,
two liens were assessed against a rental property which they own
on Griffith Street in the amounts of $1,066.79 and $1,144.31.
(Pl’s SJ Exhibit 9).
Richmond Waterfront Industrial Park
received notices on October 31, 2012 that PGW was placing liens
in the amount of $3,553.72 and $27,447.86 on its commercial real
estate at 4701 Bath Street.
The latter, larger lien was
attributed to a PGW indebtedness dating back to June 2003.
SJ Exhibit 10).
Even after a landlord receives notice that a lien has
been or is going to be placed against his property, PGW will
disclose little, if any information about the underlying debt, on
the grounds that it is prohibited by the Public Utility Code from
revealing confidential customer information.
(Pl’s SJ Exhibit 2,
p. 64; Pl’s SJ Exhibit 3, p. 57; Pl’s SJ Exhibit 10; N.T.
7/26/16, pp. 132-134, 192; Def’s Trial Exhibit 19).
speaking, PGW will not disclose to the property owner/landlord
the identity of the tenants who incurred the debt or over what
period of time the debt was amassed.
(Pl’s SJ Exhibit 1, pp. 58-
62; Pl’s SJ Exhibits 8, 9, 10; Def’s SJ Exhibits H and M, at pp.
57-58 and 54, 57-61, respectively).
When a property owner asks
what remedies he or she might have to contest the placement of
the lien, PGW informs them that they can file a complaint with
the Pennsylvania Public Utility Commission (“PUC”), an entity
which has repeatedly taken the position that it has no
jurisdiction to act in matters which arise under the Municipal
Claim and Tax Lien Law or in which the issue is the amount or
validity of a lien.
(Pl’s SJ Exhibit 4, p. 129; Pl’s SJ Exhibits
8, 10; Def’s SJ Exhibit M, p. 58; Def’s SJ Exhibit P; N.T.
7/26/16, pp. 138, 140, 145-149).
PGW also does not give notice to a landlord when a
customer with an arrearage moves to a new address and obtains gas
service at the new location or when a customer with an
outstanding balance on an account relocates to a new address and
is required to make a security deposit with PGW to ensure
(Pl’s SJ Exhibit 2, pp. 13-14).
Nor does PGW require
the customer to pay an outstanding balance on his or her account
before permitting the customer to obtain gas service at the new
Instead, it merely opens a new service agreement and
allows the arrearage to remain on the old service agreement for
the previous address.
(Pl’s SJ Exhibit 2, pp. 133-134).
and/or when the customer makes a payment, PGW distributes the
payment throughout the customer’s account, with the result that
although some portion of the payment may be credited against the
arrearage, how those payments are credited is unclear.
Exhibit 2, pp. 134-135).
It is quite easy for a tenant to obtain gas service
from PGW regardless of whether they have a balance from a
(Pl’s SJ Exhibit 6, p. 21).
tenant need only place a telephone call to PGW and give it the
new landlord’s name and telephone number, the lease start date
and the location of the property where the gas is to be provided.
Occasionally PGW “may require documentation to try to determine
could they possibly be responsible for that balance at the
property they’re moving to as well” if the gas is on at the new
property and there’s a large balance at that address.
Exhibit 6, 21-24).
PGW does not normally try to capture the
landlord’s mailing address at the time the tenant applies for
(Pl’s SJ Exhibit 6, p. 24).
One of the only avenues by which a landlord can obtain
some relief from the liening process and any information from PGW
is by enrollment in the Landlord Cooperation Program (“LCP”),
which went into full operation in April, 2010.
188; Pl’s SJ Exhibit 2, 64).
(N.T. 7/26/16, p.
Under that program, landlords who
register their rental properties receive lien protection from the
moment that a property is registered and they can receive
notification from PGW when a tenant has requested shut off of an
account so long as they fully cooperate and respond to emailed
notices and communications from PGW.
Thus, lien protection is
prospective only and has no effect on the arrearages that were
attributed to that property prior to enrollment in the LCP.
(Pl’s SJ Exhibit 5, 97-99; Pl’s SJ Exhibit 1, p. 71; Def’s SJ
Exhibit R; N.T. 7/26/16, 188-189).
To enroll in LCP, a property owner must have an active
rental license with the Philadelphia Department of Licenses &
Inspections, must enroll online through PGW’s website and have an
email address because, with the exception of letter notification
of a lapse in the landlord license, email is the only manner that
PGW communicates with LCP members.
Thus, if a property owner
does not have access to a computer, they are foreclosed from
enrolling in LCP, although they can designate an agent to receive
email for them.
(N.T. 7/26/16, pp. 190-192; Pl’s SJ Exhibit 5,
pp. 90-92; Def’s SJ Exhibit M, pp. 48-49).
To remain in the Landlord Cooperation Program, PGW
requires what it determines in its discretion to be “complete
(Pl’s SJ Exhibit 1, p. 71; Pl’s SJ Exhibit 5, pp.
97-98; N.T. 7/26/16, pp. 192-197).
If a landlord fails to renew
his/her rental license with L & I, fails to respond to an email
from PGW, fails to appear for an appointment, or fails to provide
access to his or her property for any reason, that landlord is
deemed uncooperative and expelled from the program, also often
(Pl’s SJ Exhibit 1, 69-71; Def’s SJ Exhibit M,
pp. 48-49; Def’s SJ Exhibit Q, p. 65; N.T. 7/26/16, pp. 196-204).
The determination that a landlord is uncooperative is generally
made automatically by PGW’s computer system.
(Pl’s SJ Exhibit 1,
p. 71; N.T. 7/26/16, p. 196).
The operation of LCP is in no way flawless.
PGW is the
frequent recipient of complaints from landlords that they were
improperly marked uncooperative for such reasons as failing to
appear for appointments when they in fact were present.
they are marked “uncooperative” when the PGW technician enters
such information, they lose the LCP protection from arrears as of
the date of that entry and can be liened immediately thereafter.
(N.T. 7/26/16, pp. 202-205; Pl’s SJ Exhibit 5, pp. 98, 130-133;
Def’s SJ Exhibit Q, pp. 67-68.).
Although they can be reinstated
into the program at PGW’s discretion, they are not protected from
the entry of any liens that may have been placed in the interim.
(N.T. 7/26/16, pp. 197-198, 205-206).
Finally, it is not
uncommon for there to be errors in the amounts of the liens
placed, necessitating the manual removal of the original lien and
replacing it with a lien in the correct amount.
(Pl’s SJ Exhibit
5, pp. 132-133).
In the last few years, PGW has also offered a
Commercial Lien Notification Program for commercial landlords.
Although this program has many of the same requirements as LCP,
including that enrollment be online, that landlords have current
commercial licenses issued by L & I, and that they “fully
cooperate,” it does not protect a property owner from having
liens placed against his property when the property is
Instead, its only benefit is that the commercial
landlord is afforded with an additional 30 days’ notice before a
lien is imposed. (Pl’s SJ Exhibit 5, pp. 134-136; Def’s SJ
Exhibit Q, pp. 137-140).
Although there are presently over 43,000 licensed
landlords who are enrolled in the LCP, many of the city’s
landlords have no knowledge of either the LCP or Commercial Lien
Notification Program (“CLNP”) and it appears that there is little
effort to publicize or advertise the programs by PGW, aside from
a tab on PGW’s website with a link to information on the
On various past occasions, some advertisements
regarding LCP were run in newspapers, on the radio and in a few
national magazines and community newspapers such as the Northeast
Times, Metro and Girard News, but it does not appear that these
advertisements are still running.
The City does put an insert
containing some information on the programs in with the license
renewal bills once a year and does some community outreach from
time-to-time with the Greater Philadelphia Association of
Realtors, the Homeowners’ Association Company, Coldwell Banker’s
rental agent affiliates and on at least one occasion went to the
Southwark Community Center in University City.
(Def’s SJ Exhibit
Q, pp. 54-56; Def’s SJ Exhibits R - V; N.T. 7/26/16, 198-201;
Trial Exhibit D-28, ¶83).
Plaintiffs Thomas McSorley and Lea Augustin learned of
the LCP only after they called PGW’s offices questioning some of
the pre-lien notices they had received for their properties.
(Def’s SJ Exhibit H, pp. 46-49; Def’s SJ Exhibit M, pp. 47-49).
Although the Augustins enrolled in LCP, they were also on at
least one occasion unbeknownst to them determined to be
uncooperative for failure to respond to an email that had been
sent to their son’s email address.
They did re-enroll through
their daughter and are presently in the program.
Exhibit D-22, pp. 46-53; Exhibit D-28, Stipulation of Facts, ¶s
The McSorleys have never enrolled in LCP.
Exhibit D-20, pp. 40-41, 46-50; Exhibit D-28, ¶s 44-45).
The Pennsylvania Municipal Claim and Tax Lien Law does
provide a means by which a property owner may contest the
placement and amount of a municipal claim through the filing of a
notice upon the claimant to issue a writ of scire facias and
force a hearing on the municipal claim.
7184, et. seq.
See, 53 P.S. §§7183,
This remedy is available only after a lien has
been placed and none of the named plaintiffs in this case have
availed themselves of the scire facias procedures.
Exhibit D-28, Stipulation of Facts, ¶6).
With the exception of the scire facias procedure and
participation in the LCP and/or CLNP, there are no other
processes by which an owner of real estate that has been liened
by PGW may contest the placement of such a lien.
It is, however, feasible and would be fairly easy and
inexpensive for the City to create a method for resolving
disputes between landlords and PGW arising out of the placement
of gas liens.
Indeed, one solution would be for the City to
follow the same principles that it uses in its dispute process
for the Water Department.
For the first step in the grievance
process, the City could employ the same internal and informal
procedures that it now uses with its existing staff.
dispute could not be resolved using the informal process, the
disputes could be pursued further through a formal process with,
for example, the Philadelphia Gas Commission as arbiter.
7/26/16, pp. 65-69, 150).
PGW does have the responsibility of safeguarding its
customers’ personal information and taking measures to prevent
the unauthorized use of such information.
PGW could very well be
subjected to civil penalties or other regulatory sanctions by the
PUC if it were found to have provided customer-specific account
information without the express consent of that customer.
7/26/16, pp. 70, 75-77, 95-96, 132-133).
In order for PGW to be able to release customer account
information, it would have to have express authorization from its
customer, even if the person seeking the information was the
customer’s landlord and the owner of the property subject to
being liened for the customer’s failure to pay his or her gas
(N.T. 7/26/16, pp. 70-71, 94).
As a pre-condition to
obtaining gas service, PGW could present its customers with an
express authorization form giving PGW permission to notify a
landlord that a customer has fallen behind in the payment of
his/her gas bills and informing the landlord that their interests
might be implicated.
(N.T. 7/26/16, pp. 71, 94-95, 151-155).
PGW’s tariff with the PUC requires customers to
identify themselves as a tenant and to provide PGW with the name
and address of the landlord.
(N.T. 7/26/16, p. 71).
would also allow for the inclusion of an additional provision
stating that should a customer’s account become sufficiently
delinquent, it will cause the property at which the gas is being
delivered to become lien eligible and in that event the customer
thereby implicitly gives PGW authority to notify the landlord of
the customer’s outstanding debt and that the landlord’s property
is subject to liening as a result.
(N.T. 7/26/16, pp. 71-72,
Presently, despite the customer confidentiality
requirements imposed upon PGW by the PUC and under Pennsylvania
public utility law, PGW does disclose the name(s) of delinquent
customers, the amount(s) of their delinquencies and the period of
time over which they amassed those arrearages at the time of
settlement when a property which has been liened is being sold
and the liens paid off.
(N.T. 7/26/16, pp. 160-162).
In addition to PGW requiring a tenant and prospective
gas customer to provide implicit or express consent to the
disclosure to a property owner of what would otherwise be
confidential information regarding his or her gas account in the
event of a delinquency, landlords could just as easily include
such a condition in their lease agreements with their tenants.
(Trial Exhibit D-28, ¶79).
That is, it would be a smart practice
on the part of a landlord to require a prospective tenant to
execute a written authorization at the time a lease is signed
permitting PGW to reveal such confidential account information as
the name of the tenant, the amount of any outstanding account
balances and the length of time such a balance has gone unpaid to
(N.T. 7/26/16, pp. 98-101).
Plaintiff Richmond, after learning that PGW could place
liens against its property, sent notices to all of its tenants
directing them to forward copies of their gas bills to it each
month so that it could be assured that the bills were being paid.
With the exception of just one of its tenants, these notices were
(Def’s Trial Exhibit 21, pp. 22-23, 45-49,
51; Trial Exhibit D-28, ¶21).
Now, with regard to some of its
tenants, Richmond has put the gas service into its own name and
it then forwards the bills to those tenants for payment.
The current methodology used by PGW to lien real estate
for unpaid gas bills belonging to non-owner residents does not
afford the owners of that real estate sufficient notice and/or an
opportunity to be heard on the propriety and/or amount of a lien
within such time and in such manner as to enable them to defend
against the taking of their property.
(Memorandum and Order of
March 17, 2016, (Doc. No. 50), at pp. 20, 26-27).
Notwithstanding the placement of the liens on their
properties, none of the plaintiffs have suffered any injury to
their personal credit or been impeded or hampered in securing
personal loans or re-financing their personal residences.
Trial Exhibits D-20, D-21 and D-22, at pp. 14-20, 80-82, 33-37,
respectively; Trial Exhibit D-28, ¶s 35-38, 61-62, 74-76).
gas liens have not impeded the plaintiffs’ ability to maintain
their properties or collect rents.
(Trial Exhibit D-28, ¶s 35,
38, 61, 74).
The City has not sought enforcement and does not
actively pursue execution of the liens against Plaintiffs but
they will remain on their properties until paid off.
the process by which PGW collects on liens is that it waits for
properties to either be sold or refinanced such that the owner
needs to clear title to their real estate.
(N/T. 5/3/16, pp. 26-
27; Def’s Trial Exhibit D-22, pp. 62, 75-77; Trial Exhibit D-28,
To date, none of the plaintiffs have attempted to sell,
mortgage or refinance their rental properties.
(Trial Exhibit D-
A “mismatch lien” is defined as a lien filed against a
property where the property owner was not the PGW customer of
record, i.e., the holder of the account for which the lien is
In PGW’s parlance, a “mismatch lien” could arise
out of a landlord-tenant arrangement but it might not.
5/3/16, pp. 17-18).
At present, less than 50% of the mismatch
liens on record at PGW are attributable to a landlord-tenant
(N.T. 5/3/16, pp. 18-19).
For the time period 2009
through March, 2016, there were a total of 80,031 mismatch liens
(both residential and commercial) filed against properties in the
Court of Common Pleas of Philadelphia County in an aggregate
amount of $71,813,122.
(N.T. 5/3/16, pp. 19-24; N.T. 7/26/16,
pp. 171-172; Trial Exhibit D-24).
Although PGW’s collection rate is only at 65%, liening
has produced some significant revenue for the City.
and March, 2016, the City collected $46,437,920 in revenue as the
result of gas liens, with $25,375,202 still outstanding.
5/3/16, p. 22; N.T. 7/26/16, pp. 171-172; Trial Exhibit D-24).
Among the sources for that $46,437,920 in revenue were
not only payments made by property-owner landlords at closing of
sales of liened properties but also any payments that may have
been made by the customers/account holders themselves on their
(N.T. 5/3/16, pp. 28-29; N.T. 7/26/16,
Additionally, between 2010 and May 2, 2016,
there were 9,127 Sheriff’s sales of property where the property
owner was different than the PGW account holder, i.e., “mismatch
liens,” which liens totaled $12,902,375.
The City collected
$6,699,862 associated with the original debt as a result of
filing a lien and securing its lien priority rights.
Exhibit D-28, ¶87).
PGW’s revenue only comes from one source and that is
Therefore, to the extent that one group of
customers is not paying, the utility will look to its other
customers to make up the deficiency.
(N.T. 5/3/16, p. 36).
The primary method by which PGW makes up a revenue
shortfall is through a rate increase.
To obtain a rate increase,
PGW must apply to the Pennsylvania Public Utility Commission,
which will analyze the numbers behind the request that PGW makes
and determine whether to approve the rate request.
pp. 34-35; N.T. 7/26/16, pp. 184-185).
Rate requests look forward into the future by picking
a “test year.”
One of the elements in the rate base is bad debt.
This fall, PGW was slated to go before the PUC with a rate
increase request based upon fiscal year 2018 into which it was
expecting to incorporate the expected revenue shortfall resulting
from this Court having found its landlord liening process
unconstitutional. (N.T. 5/6/13, pp. 37-39; N.T. 7/26/16, pp. 181182).
Sometimes years after a bad debt has been taken as an
expense and factored into the calculation of the rate base, money
will be received through the lien collection process.
5/3/16, pp. 39-40).
When a new Sheriff’s sale is completed and there is no
municipal gas lien of record, the City has permanently lost its
right to secure its debt.
The same thing is true with respect to
all property transfers that have unpaid municipal gas debt which
has not been reduced to a lien when the debt is more than threeplus the current calendar year old.
(Trial Exhibit D-28, ¶s 88,
Of course, all of PGW’s gas customers - residential,
commercial, homeowners and tenants, are negatively impacted by a
rate increase because they are required to pay more for gas and
(N.T. 7/26/16, p. 182).
There is a “vacate lien” function in the automated LMS
whereby the crediting collections department can easily vacate
liens that have been previously placed.
(Hearing Document and
Pl’s SJ Exhibit 1, pp. 76-77).
As we noted above in footnote 1, this Decision is the last
installment in this litigation, given our previous findings that
the procedures which PGW is presently following to place liens
for unpaid gas service belonging to non-customer property owners
is violative of the procedural due process clause of the 14th
Amendment, that the City of Philadelphia/PGW is properly
preliminarily enjoined from continuing this practice, and that
the named plaintiffs herein and their counsel are appropriate
representatives for the class of Philadelphia landlords whose
properties have been or will be liened for the unpaid gas
services of their delinquent tenants going forward.
We write now
on the question of whether the earlier-entered preliminary
injunction should be made permanent.
Though similar, the standard for granting a permanent
injunction differs from the standard for entering a preliminary
ACLU of NJ v. Black Horse Pike Regional Board of
Education, 84 F.3d 1471, 1477 (3d Cir. 1996).
It has long been
recognized that preliminary injunctive relief is an extraordinary
remedy never awarded as of right and which is properly granted
only in limited circumstances.
Groupe SEB United States, Inc. V.
Euro-Pro Operating LLC, 774 F.3d 192, 197 (3d Cir. 2014); Kos
Pharmaceuticals, Inc. v. Andrx Corp., 369 F.3d 700, 708 (3d Cir.
2004)(quoting American Tel. & Tel. Co. v. Winback & Conserve
Program, Inc., 42 F.3d 1421, 1427 (3d Cir. 1994)).
seeking a preliminary injunction must show: (1) a likelihood of
success on the merits; (2) that it will suffer irreparable harm
if the injunction is denied; (3) that granting preliminary relief
will not result in even greater harm to the nonmoving party; and
(4) that the public interest favors such relief.”
failure to establish any element of that test renders a
preliminary injunction inappropriate.
Arrowpoint Capital Corp.
v. Arrowpoint Asset Management, LLC, 703 F.3d 313, 318-319 (3d
A permanent injunction, in turn, requires actual
success on the merits.
State Troopers Fraternal Ass’n. of New
Jersey v. New Jersey, No. 13-4822, 2014 U.S. App. LEXIS 17687,
585 Fed. Appx. 828, 830 (3d Cir. Sept. 15, 2014); Shields v.
Zuccarini, 254 F.3d 476, 482 (3d Cir. 2001).
In other words,
when deciding whether to grant a permanent injunction, the
district court must therefore consider whether: (1) the moving
party has shown actual success on the merits; (2) the moving
party will be irreparably harmed by the denial of injunctive
relief; (3) the granting of the permanent injunction will result
in even greater harm to the non-moving party; and (4) the
injunction would be in the public interest.
SM& & J, Inc. v. NRG
Heat & Power, LLC, 912 F. Supp. 2d 189, 200 (M.D. Pa. 2012).
Accordingly, in deciding whether a permanent injunction should be
issued, the court must first determine if the plaintiff has
actually succeeded on the merits and, if so, it must then
consider the appropriate remedy.” State Troopers, and ACLU v.
Black Horse Regional Board of Ed., both supra; CIBA-Geigy Corp.
v. Bolar Pharmaceutical Co., Inc., 747 F.2d 844, 850 (3d Cir.
The decision to grant or deny permanent injunctive relief is
an act of equitable discretion by the district court, reviewable
on appeal for abuse of discretion.
Ebay, Inc. v. MercExchange,
L.L.C., 547 U.S. 388, 391, 126 S. Ct. 1837, 1839, 164 L. Ed.2d
641 (2006); Hayes v. Ohio National Financial Services, Inc., 642
F. Supp. 2d 456, 462 (E.D. Pa. 2009).
Indeed, “[d]istrict courts
are afforded considerable discretion in framing injunctions.”
Groupe SEB United States, Inc. v. Euro-Pro Operating LLC, 774
F.3d 192, 206 (3d Cir. 2014)(quoting Meyer v. CUNA Mutual Ins.
Society, 648 F.3d 154, 169 (3d Cir. 2011)).
An abuse of
discretion occurs when the District Court’s decision rests upon a
clearly erroneous finding of fact, an errant conclusion of law,
or an improper application of law to fact.
NAACP v. North Hudson
Regional Fire & Rescue, 665 F.3d 464, 475 (3d Cir. 2011).
Finally, it should be noted that the purpose of an
injunction is to prevent future violations and as a result,
before an injunction may properly issue, the court must find that
there exists some cognizable danger of recurrent violation.
United States v. EME Homer City Generation L.P., 823 F. Supp.2d
274, 290 (W.D. Pa. 2011)(citing United States v. W.T. Grant Co.,
345 U.S. 629, 633, 73 S. Ct. 894, 97 L. Ed. 1303 (1953)).
the illegal conduct has ceased, the party seeking the injunction
bears the burden of proving that there exists some cognizable
danger of recurrent violation, something more than the mere
possibility which serves to keep the case alive.
Id.; Sease v.
School District of Philadelphia, 811 F. Supp. 183, 193 (E.D. Pa.
1993)(citing U.S. v. Oregon State Medical Society, 343 U.S. 326,
333, 72 S. Ct. 690, 96 L. Ed. 978 (1952)).
In applying these legal precepts to the case before us, we
first observe that by virtue of our March 17, 2016 decision
granting partial summary judgment in favor of Plaintiffs, it is
indeed clear that Plaintiffs here have succeeded on the merits of
That is, we have already found that the methods and
procedures which the City follows in imposing gas liens for debts
incurred by customers who do not own the properties upon which
those liens are being placed fail to comply with the due process
requirements of the Fourteenth Amendment.
The first pre-
requisite to permanent injunctive relief has therefore been
We next consider whether the moving party, i.e., the
plaintiffs, will be irreparably harmed by the denial of
injunctive relief and after due consideration, we find that this
element is also satisfied.
For one, if the City were allowed to
continue to follow its current procedures for liening properties
of the Plaintiff Class members, those class members will continue
to suffer the deprivation of their property interests without due
process of law.
The City has not agreed to change its procedures
and methods, but has instead steadfastly insisted that it has a
right to do what it is doing, on the guise that because the liens
are placed against real estate pursuant to the MCTLL, the
proceedings are in rem only and because the Pennsylvania
Commonwealth Court in City of Philadelphia v. Perfetti, 119 A.3d
396 (Pa. Cmwlth. 2015) held that its procedures sufficiently
comported with due process.
(N.T. 5/3/16, pp. 6, 44-46).
Although since the March, 2016 summary judgment decision, the
City has apparently put a temporary halt to the liening process,
no changes have been made to the landlord notice procedures with
the result that the arrearages on PGW’s delinquent customers’
accounts continue to grow and compromise the property interests
of the members of the plaintiff class.
(N.T. 5/3/16, pp. 6, 12-
PGW has not suspended its liening of properties that are
subject to foreclosure and Sheriff’s sales but it has agreed to
track the funds which it receives from those sales. (N.T. 5/3/16,
By the City’s own admission, however, in the
absence of a court order, there is no guarantee that it won’t
discard these temporary measures and resume its “liening as
usual” practices, nor is there anything to ensure that the City
won’t decide to start affirmative collection measures against the
owners and the properties which it has already liened.
5/13/16, pp. 11, 14).
Although it is of course plausible that the plaintiffs could
be made whole through an award of money damages, the threatened
constitutional harm is ongoing.
It is simply not practical to
require the plaintiffs to repeatedly institute suit against the
defendant to recover monies erroneously taken and, in the event
that the City should elect to begin foreclosing on liened
properties, it is certainly possible that these properties would
be forever lost in a sale.
Thus we find that the plaintiffs here
are threatened with harm that could indeed be irreparable.
Turning now to the balance of harms and the public interest,
and as we observed in our March 17, 2016 Memorandum, the City of
Philadelphia unquestionably has a legitimate interest in
obtaining redress for unpaid gas bills.
It is further clear that
all of PGW’s customers benefit when these bills are paid inasmuch
as PGW does not have to raise its rates to compensate for the
shortfall caused by those who are delinquent. (N.T. 5/3/16, 3536).
That the City’s
collections efforts are aided
significantly by its liening of real property for these
arrearages is also by now well-established.
to the testimony of Bernard Cummings, there is some $25,375,202
still outstanding in uncollected liens, and arrearages are
continuing to accrue.
(N.T. 5/3/16, p. 22; N.T. 7/26/16, pp.
171-172; Trial Exhibit D-24). Should those outstanding liens be
invalidated, PGW would factor in to its next rate increase
request the amount of money that it would expect to lose as a
(N.T. 7/26/16, pp. 181-182).
Consequently, there is no
question but that the City and its gas customers would suffer
harm should this Court decide to make the preliminary injunction
entered on May 4, 2016 permanent.
The Plaintiffs of course, are also harmed by the process
which is presently being employed by the City to lien their
Again as we explained at length in the March, 2016
Memorandum, by liening their properties, the City is charging the
members of the plaintiff class with the debts of individuals
other than themselves - individuals who are both tenants of the
plaintiff landowners and customers of the gas utility.
City has a right to do so under Pennsylvania state law is not
It is, however, the means by which the City is doing
so which has been challenged and which this Court has found to be
an unconstitutional taking by virtue of its failure to give
notice to the plaintiffs of the takings at a meaningful time and
in a meaningful manner.
Again, in view of the dearth of
information given to the plaintiffs about whose bills they are
being charged with, when those bills were incurred and for how
long a period of time they have been outstanding, there is no
realistic manner for the plaintiffs to challenge or appeal the
amounts of debt to which the liens are attributable or, in most
cases, to recoup the funds from what are frequently long-gone
From this, we find that the balance of harms on both
parties to this litigation are nearly equal.
This equality notwithstanding, the City has remedies
available to it which the plaintiffs do not have.
For one, the
City is, by its own acknowledgment, free to continue to pursue
repayment from the customers themselves.
By this action,
Plaintiffs do not seek to invalidate the debts owed to PGW; what
is at issue here only are the liens which presently secure those
Indeed, as Mr. Cummings and Mr. Golden both testified, it
is not uncommon for its delinquent customers to make payments on
overdue bills for which their landlord’s properties have been
(N.T. 5/3/16, pp. 29-31; N.T. 7/26/16, pp. 173-175).
Accordingly, the amount of money which the City alleges that it
stands to lose in the event this Court should declare the liens
invalid may not be wholly accurate.
Additionally, it is the City which controls the methods and
procedures by which it liens properties.
To be sure, it is PGW
which developed the Lien Management System, including its
exceptions and blockers, it is PGW which determined when its
customers’ debts would be deemed “lien eligible,” and it is PGW
which decided when, where and how to send the pre-lien and postlien notices to Plaintiffs.
It is within PGW’s province to make
changes to this system and in fact, it has done just that a
number of times since it was first activated in 2009.
PGW likewise has control over how and when to make gas
service available to its customers and the means by which it
collects payments from its customers for that service.
being a regulated public utility whose activities are overseen by
the Public Utility Commission, there are many measures which PGW
could easily take to improve its customer collections and to
avoid the accumulation of large arrearages.
Examples of such
measures include: (1) the development of a dispute
resolution/grievance procedure such as that used by the City
Water Department and possibly utilizing the Philadelphia Gas
Commission as a final decisionmaker; (2) requiring a customer to
pay any outstanding bills in full on an old address before
agreeing to turn on gas service in that customer’s name at a new
address; (3) developing and presenting all customers with an
authorization form permitting PGW to disclose confidential
customer information to the owner of the property where the gas
is being provided in the event of an account delinquency as a
pre-condition to obtaining gas service with PGW; and (4) Amending
its Tariff with the PUC to provide for such authorization to
landlords in the event a customer account reaches a designated
monetary threshold or is overdue by a designated number of
While Plaintiffs could also easily include an
authorization form for their tenants to be signed concurrently
with and as a contingency for their leases, the remaining
suggested measures are within the ambit of PGW alone.
Finally, it is and has been entirely within the City’s
discretion to determine whether those landlords who have
registered with the Landlord Cooperation Program are in fact
If not, and as the record in this matter
has amply demonstrated, those landlords are promptly marked
“uncooperative,” and their properties then immediately become
“lien eligible” once again.
We certainly applaud PGW for
creating the LCP and recognize the benefits which it confers.
However, again, in the event that a landlord is deemed to be
uncooperative, the record reflects that the notice which they
receive of this designation is often unreliable and the only
avenue for appeal is by challenging it informally with Mr.
Mr. Rosario, in turn, has discretion to determine
whether or not to re-admit an “uncooperative” landlord to the
program but in the interim, any lien protection afforded by the
program has been lost.
From all of this, we conclude that the
granting of a permanent injunction would result in significantly
less harm to the City as the non-moving party than Plaintiffs
would suffer by its denial.
Regarding the last factor, we also find the issuance of
permanent injunctive relief in this case to be in the public
This case is one of constitutional dimension with
consequences that reach across a large class of landlords which
we have surmised is in excess of 40,000.
constitutional rights serves the public interest.”
Albemarle County School Board, 354 F.3d 249, 261 (4th Cir. 2003);
Exodus Refugee Immigration, Inc. v. Pence, 165 F. Supp. 3d 718,
742 (S.D. Ind. 2016).
Insofar as the City has made clear that in
the absence of a direct mandate, it will make no changes to its
system of liening non-customer property owners for the longunpaid debts of their tenants, we find that the entry of a
permanent injunction is necessary, appropriate and in the public
In view of all of the preceding, we now enter the following:
CONCLUSIONS OF LAW
This Court has jurisdiction over the parties and the
subject matter of this action pursuant to 28 U.S.C. §1331 and
The methods and procedures currently being followed by
the City of Philadelphia and its gas utility, Philadelphia Gas
Works, for placing municipal liens on realty for its customers’
unpaid gas bills constitute a taking of property without due
process of law in violation of the 14th Amendment to the U.S.
Constitution when the real estate being liened belongs to someone
or some entity other than the holder of the delinquent gas
Plaintiffs are currently suffering irreparable harm in
that Defendant’s current liening practices do not afford them any
opportunity to address tenant delinquencies or mitigate
accumulating arrearages in a meaningful time and in a meaningful
manner and so as to prevent arrearages from causing their
properties to be “lien eligible.”
Plaintiffs also stand to
suffer irreparable harm in the event that Defendant should elect
to begin taking affirmative steps to collect on its liens by,
inter alia, forcing liened properties to be sold.
In the absence of a court order, Defendant will continue
to violate the Plaintiffs’ constitutional rights by continuing to
utilize its current liening practices.
Although Defendant and all of its gas service customers
would suffer harm in the event it is permanently enjoined from
employing its current liening procedures, that harm would be
temporary and is not irreparable.
Defendant is free to develop
new methods and procedures for placing gas liens on real estate
pursuant to the Pennsylvania Municipal Claim and Tax Lien Law, 53
P.S. §7101, et. seq. which satisfy the constraints of
Constitutional due process and may thereafter resume liening.
The balance of harms weigh in favor of Plaintiffs in
that the granting of a permanent injunction would result in
significantly less harm to the City as the non-moving party than
Plaintiffs would suffer by its denial.
The public interest is always served when the dictates
of the United States Constitution are followed and constitutional
rights are vindicated.
The public interest is thus served here
by permanently enjoining the City of Philadelphia from continuing
to violate the rights of a large number of its property owners.
The extreme remedy of a permanent injunction is
warranted in this case.
An Order follows.
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