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Lucas v. Wisconsin Electric Power Co.

decided*fn*: August 2, 1972.

ALVIN LUCAS, ON BEHALF OF HIMSELF AND ALL OTHER SIMILARLY SITUATED, PLAINTIFF-APPELLANT,
v.
WISCONSIN ELECTRIC POWER COMPANY, A WISCONSIN PUBLIC UTILITY COMPANY, ET AL., DEFENDANTS-APPELLEES



Swygert, Chief Judge, Knoch, Senior Circuit Judge, Kiley, Fairchild, Cummings, Pell, Stevens and Sprecher, Circuit Judges. Sprecher, Circuit Judge, dissenting, with whom Swygert, Chief Judge, joins.

Author: Stevens

STEVENS, Circuit Judge.

This appeal arises out of a dispute over plaintiff's monthly billing of $9.89 for residential electric service for November, 1969. The question presented is whether the Power Company's proposed method of resolving the dispute -- by terminating plaintiff's service unless the disputed bill is paid within five days -- is proscribed by § 1 of the Civil Rights Act of 1871, 17 Stat. 13, now 42 U.S.C. § 1983.*fn1 The statute protects the plaintiff from deprivation of his federal constitutional rights by a defendant acting "under color of any statute, ordinance, regulation, custom, or usage" of the State of Wisconsin.

Because the defendant proposes to act before the dispute has been resolved, plaintiff contends that he will be deprived of liberty or property without due process of law;*fn2 because the proposed termination is consistent with disconnect rules which have been approved by the Wisconsin Public Service Commission, he contends that the Power Company's threat is made "under color of" state law. We shall consider both contentions after describing the background of this particular dispute and the Power Company's disconnect procedures as approved by the Wisconsin Commission.

I.

Plaintiff is one of the 599,051 customers of the defendant Wisconsin Electric Power Company. As a representative of that class, and also on his own behalf, he filed a complaint on July 2, 1970, requesting that a three-judge court be convened to enjoin the enforcement of § 113.13(4) of the regulations of the Wisconsin Public Service Commission, and to prevent defendant Power Company from "terminating electrical services for alleged arrearages without prior, adequate notice and hearing."

The complaint alleged that plaintiff had paid his monthly bill in cash on December 23, 1969, but failed to obtain a stamped receipt. Thereafter he paid current charges, but consistently refused to pay the alleged arrearage. In due course the Power Company notified him that his service would be disconnected on July 6, 1970.

After filing his complaint on July 2, 1970, plaintiff moved for a temporary restraining order. The parties apparently agreed informally that his service would continue while the litigation was pending.*fn3 A few days later, plaintiff amended his complaint to join the commissioners of the Wisconsin Public Service Commission as individual defendants. In his amended complaint and in his argument in this court he emphasized the absence of "an impartial decision maker" to resolve the dispute before service could be discontinued.*fn4

The defendant commissioners moved to dismiss the complaint on the ground that the relevant provisions of the Wisconsin Administrative Code "do provide due process of law to plaintiff and to all similarly situated." The motion was supported by affidavits describing the commission's disconnect regulations and the rules of the defendant Power Company relating to collections. The affidavits also described both formal and informal procedures which the commission employs to resolve disputes between customers and a regulated utility. The affidavits indicated that the plaintiff had not invoked these procedures.

Every utility is required to furnish reasonably adequate service and to comply with a variety of commission regulations as well as detailed rules which each utility must file with the commission.*fn5 The commission's rule covering deposits, guarantees and disconnects (§ 113.13) contains the following provision specifically attacked by plaintiff in this litigation:

"(4) DISCONNECT RULE. (a) Service may be disconnected if a customer's current bill for service as defined in the utility's filed rules is not paid within a reasonable period set forth in said rules."

Pursuant to that rule, the defendant Power Company had filed detailed rules and regulations describing, among other things, its collection procedures. The section applicable to arrearages amounting to between $5 and $20 stated that when collection action is required, the following steps should be taken:

"1. A written notice shall be sent to the customer, stating the amount the customer is in arrears, and notifying him that service will be disconnected if such arrears are not paid within five days.

"2. If the arrears remain unpaid at the end of the period specified on the disconnection notice and satisfactory arrangements for payment have not been made, service may be disconnected without further notice to the customer."

It is the commission's acceptance of these "filed rules" as adequate compliance with § 113.13(4) that plaintiff attacks as unconstitutional.

The affidavit of the Director of the Rates and Research Division of the commission described the manner in which customer complaints involving service, including situations in which a public utility threatens to invoke the disconnect rule for nonpayment, are handled by the commission. Formal complaints may be brought by no less than 25 private citizens. Such a procedure might lead to the modification of a utility's disconnect procedures, but apparently has not been invoked for that purpose. However, affiant received an average of about two informal complaints per week concerning either actual or threatened terminations of service. It was his practice to make a written record of each such complaint and to request the utility to withhold actual disconnection until he could inquire into the relevant facts. The "great bulk of all complaints" was settled by mutual agreement. If no settlement was reached, the affiant indicated that the commission was authorized to initiate a formal investigation. However, he did not describe what had happened to any complaint which was not resolve by an agreement between the customer and the utility.

The defendant Power Company filed an answer to the complaint specifically denying that it received a payment from plaintiff on or about December 23, 1969,*fn6 and admitting that it had notified plaintiff that his electric service would be discontinued if plaintiff did not comply with the Company's filed rule procedure respecting delinquent accounts. The Company averred that plaintiff had an adequate remedy in the courts of the State of Wisconsin for resolution of the dispute over the alleged nonpayment; that injunctive relief was inappropriate; that the case was not proper either for a declaratory judgment or for a three-judge federal court; denied that plaintiff's claim was typical of a significant definable class; and specifically denied that either § 113.13(4) or the rules which the Power Company had filed with the commission violated plaintiff's rights under the Fourteenth Amendment to the United States Constitution.

Plaintiff propounded detailed interrogatories to the Power Company pertaining to its procedures for resolving disputes with customers and the records relating to plaintiff's specific claim. In response, the defendant identified various Company personnel who handled such complaints and indicated that during 1969, 71 disputes had been presented to persons other than regular Company personnel. Of the total of 71 cases, 33 disputes were presented to the Public Service Commission, 35 to Company officers, 2 to the Better Business Bureau, and 1 to the Milwaukee Journal. The interrogatory answers stated that the number of service terminations for nonpayment of bills in 1968 and 1969, respectively, were 10,691 and 9,970. The answers then described in great detail the Company's billing procedures, the way in which its computers are employed, and stated that no customer billings were corrected in 1969 due to computer errors, although a total of 646 errors due to human agency had been brought to the attention of the Company. Most of the errors resulted either from incorrect meter readings or clerical errors; in all such cases the errors had been corrected when they became known.*fn7

The defendant Power Company took plaintiff's deposition. Although his testimony indicated that the accounting discrepancy might have arisen in part because of his move from one address to another in January, or possibly because he had given two monthly receipts to a Power Company clerk who had failed to return them to him in accordance with her promise, we assume for present purposes that the factual dispute involves nothing more than the question whether he actually made the cash payment in December, 1969, as alleged in the amended complaint.*fn8 Plaintiff was employed by the City of Milwaukee at the time the litigation was commenced and, although he subsequently lost his job and was permitted to prosecute this appeal in forma pauperis, he made no claim of inability to pay electrical bills when rendered.

In response to the motion to dismiss, and apparently without relying on any facts developed by affidavits or discovery, the district court dismissed the complaint for failure to state a claim on which relief can be granted and for failure to state a substantial federal question. The court held that the defendant Power Company was a private company whose rights had not been enlarged by the commission regulation which plaintiff challenged. Since the Company did not act on behalf of the state and was given no rights under state law over and above the rights which it possessed under common law, the court held that it was not acting "under color of" state law within the meaning of § 1983. The court held our decision in Kadlec v. Illinois Bell Telephone Co., 7 Cir., 407 F.2d 624, cert. denied, 396 U.S. 846, 90 S. Ct. 90, 24 L. Ed. 2d 95, applicable, and Public Utilities Commission v. Pollak, 343 U.S. 451, 72 S. Ct. 813, 96 L. Ed. 1068 distinguishable. In response to the suggestion that neither our decision in Kadlec, nor the district court's analysis of the "state action" issue, gave appropriate effect to Supreme Court decisions such as Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S. Ct. 856, 6 L. Ed. 2d 45, and Public Utilities Commission v. Pollak, 343 U.S. 451, 72 S. Ct. 813, 96 L. Ed. 1068 we decided to review the case en banc. We reaffirm Kadlec.

II.

Before discussing the principal issues, it is appropriate to put certain preliminary matters to one side.

First, plaintiff's challenge is directed at the practices of only one of several public utilities in the State of Wisconsin. Section 113.13(4) of the Wisconsin Administrative Code is not self-implementing, but rather contemplates further action by each of the utilities subject to its provisions. The rules which the defendant Power Company filed pursuant to that regulation do not have state-wide application and the regulation itself does not foreclose the procedural safeguards which plaintiff requests. We are satisfied, therefore, that a three-judge court should not be convened. See Board of Regents v. New Left Education Project, 404 U.S. 541, 92 S. Ct. 652, 30 L. Ed. 2d 697.

Second, we express no opinion on whether this litigation was appropriately commenced as a class action. Manifestly, there is room to doubt whether all of the customers of Wisconsin Electric Power Company would desire the Company to make the changes in its disconnect procedures which plaintiff requests. See Ihrke v. Northern States Power Co., 459 F.2d 566, 572 (8th Cir. 1972). In view of the plaintiff's allegations, however, we assume that plaintiff is a typical customer of the utility.

Third, we note that plaintiff, of course, makes no claim that the defendant Power Company has any obligation to provide electric service to anyone who is unable to pay his bills. For purposes of decision, we assume that the defendant's typical customer is solvent and may be required to make a reasonable security deposit as a condition to the initiation or continuation of service. We stress this assumption because in argument before this court plaintiff's counsel suggested that the issues are affected by the fact that plaintiff is now receiving welfare assistance. We reject this suggestion. Although plaintiff's present indigency might be relevant to the question whether it would be reasonable for the utility to extend him further credit, it cannot control our analysis of a procedure which is designed to treat 599,051 paying customers with an even hand.*fn9

We should also note that we do not believe the outcome of this litigation, particularly since plaintiff purports to act in a representative capacity, may turn on the plaintiff's lack of understanding of the remedies available to him. Although he indicated in his deposition that he is unable to read or write, and that he was neither advised nor knew that he might seek the assistance of the Wisconsin Public Service Commission in attempting to resolve his dispute, he affirmatively alleged that he is an adequate representative of the entire class of customers. For purposes of testing the sufficiency of his claim, he must be presumed to have had the same knowledge of the law as any other citizen. Whether the action be considered as an individual action or as a class action, it is apparent that the unique disability of a particular recipient of a formal notice cannot be the measure of its constitutional adequacy.*fn10

Finally, we note that our disposition of the case avoids the necessity for considering the possible applicability of the Johnson Act, 28 U.S.C. § 1342, and the troublesome question of whether decisions such as Alabama Public Service Commission v. Southern Railway Co., 341 U.S. 341, 71 S. Ct. 762, 95 L. Ed. 1002, would require a federal court to abstain when requested to review the validity of state administrative action.

We turn to the merits.

III.

The amended complaint was dismissed because the district court, 322 F. Supp. 337, concluded that there was insufficient "state involvement" on which to predicate federal jurisdiction. Defendants argue that in any event plaintiff has not been denied "due process." The case is thus argued as though it presented a "state action" issue and a "due process" issue. Because of the confusion that the "state action" concept has generated,*fn11 however, it is useful to identify two different reasons for analyzing a state's participation in challenged conduct; one reason is constitutional and the other statutory.

The Fourteenth Amendment is a prohibition against certain types of conduct by a state. It contains no self-executing prohibition against private discriminatory conduct, or against procedures by which one private citizen may deal unfairly with another. For a plaintiff to invoke the Fourteenth Amendment, he must establish that his rights have been impaired by a state.*fn12 Thus, in this case, the issue identified by the "due process" label is whether the State of Wisconsin has deprived plaintiff of his liberty or property without due process of law.

The statutory language provides a separate reason for considering the state's relationship to the alleged wrong. Section 1983 is inapplicable unless the defendant has acted "under color of" state law, custom or usage. Whereas the primary focus of the constitutional prohibition is upon the action of the state, the statutory prohibition encompasses private conduct, the effectiveness of which is in part attributable to the fact that it derives support, or at least the appearance of validity, from a state law or custom. Neither Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S. Ct. 856, 6 L. Ed. 2d 45, nor Public Utilities Commission v. Pollak, 343 U.S. 451, 72 S. Ct. 813, 96 L. Ed. 1068, arose under § 1983 or involved a consideration of when private conduct is "under color of" state law within the meaning of that statute. Conversely, Kadlec v. Illinois Bell Telephone Co., 7 Cir., 407 F.2d 624, cert. denied, 396 U.S. 846, 90 S. Ct. 90, 24 L. Ed. 2d 95, relied exclusively on the interpretation of § 1983 and did not decide any constitutional issue. Instead, therefore, of accepting the parties' invitation to consider the issues simply in terms of, first, "state action" and, second, "due process," we believe our holding will be more precise if we discuss (a) the claim against the commissioners and then (b) the claim against the Power Company.

It is a violation of the Fourteenth Amendment for a state to deprive any person of "life, liberty, or property without due process of law."*fn13 When the defendant commissioners act in their official capacity they unquestionably act "under color of" state law within the meaning of § 1983; we therefore need not concern ourselves with the statutory issue in the case against the commissioners. The real question as to the commissioners is constitutional -- whether on behalf of the State of Wisconsin they have deprived plaintiff of due process of law. As to the Power Company, however, we need not reach any constitutional issue unless a statutory hurdle is first overcome. The statutory question is whether the Company acts "under color of" state law when it disconnects service. If not, it does not violate § 1983 even if its conduct would otherwise deprive plaintiff of a federal right.

We shall therefore first direct our attention to the claim that the Constitution requires that the defendant commissioners be enjoined from enforcing, or be required to modify, § 113.13(4) of the Wisconsin Administrative Code and then consider whether the proposed action of the defendant Power Company is "under color of" state law within the meaning of § 1983.

A.

When the defendant commissioners, or their predecessors, adopted § 113.13(4), and later when they accepted the Power Company's five-day notice rule as conforming thereto, they were, of course, acting for the state. Unquestionably, therefore, this case involves "state action."*fn14 But the right which plaintiff seeks to vindicate in this litigation was not abridged in the slightest by that action. To grant plaintiff's request for a judgment declaring § 113.13(4) invalid, or to enjoin defendant commissioners from enforcing it, would merely remove a restriction on the utility's freedom.*fn15 The action of the state which plaintiff seeks to restrain has neither enhanced the Company's powers nor diminished plaintiff's rights. The "state action" in promulgating § 113.13(4) of the regulations did not deny plaintiff due process of law.

What plaintiff really seeks is not an injunction against the state's action, but an affirmative command that it act more effectively. In essence, he contends that there is state inaction in the face of circumstances which are constitutionally intolerable. It is by no means clear that "state inaction" is equivalent to "state action" for Fourteenth Amendment purposes. Obviously, a state does not violate the Fourteenth Amendment by failing to enact into law the programs or policy judgments advocated by any particular citizen or group. We assume, however, without deciding, that there are situations in which the state's duty is so clear that the failure to act might violate the due process clause.*fn16 Even so, analysis of the "inaction" claim reveals that the alleged shortcomings in Wisconsin's administrative procedures involve policy decisions which a state may make without offending the Federal Constitution.

Plaintiff contends that no disconnection for nonpayment, at least if the arrearage is disputed, should be permitted unless the credit dispute has first been resolved by an impartial decision maker. Less forcefully he also contends that the regulation failed to require adequate notice of the proposed termination.*fn17 We shall comment on both points.

Defendants argue that requiring a pretermination hearing would be costly, would provide an incentive to dispute arrearages, and by delaying the discontinuance of service would, in effect, compel the Company to extend credit to nonpaying customers.*fn18 If these arguments are valid, presumably the cost of service might be increased. Such policy considerations must give way, however, if the Constitution commands greater procedural safeguards before a termination may be effected.*fn19 We therefore consider whether "due process" requires a hearing before an impartial arbiter before service may be disconnected.

The answer is provided by a consideration of the remedies which are actually available to plaintiff. If those remedies satisfy the standards of due process articulated in recent Supreme Court decisions, the state has no constitutional duty to require or provide other procedures merely because they might be better as a matter of policy.*fn20

The two "remedies" which customers have most frequently invoked are informal. The record indicates that most credit disputes are resolved by an official of the Company or through the good offices of the commission. The informal disposition of disputes in either of these ways is not really a legal remedy for an aggrieved customer, but the fact that most customer controversies are easily resolved tends to minimize the need for a special formal procedure to handle a case such as plaintiff's.

The formal remedies available to plaintiff include two primary alternatives. First, he has a right to seek emergency relief in the state courts. If the termination of service would cause a customer irreparable harm, and if he had paid the disputed bill by check, or had saved his receipt, or had other convincing evidence of payment at hand, presumably a Wisconsin court would temporarily enjoin the disconnect pending a full hearing on the merits;*fn21 more weighty controversies are frequently resolved by a chancellor on equally short notice.*fn22 Second, the customer may forestall the disconnect by paying the disputed amount under protest and then suing for a refund; such a procedure is frequently required in disputes over taxes, rent, or other arrearages, without being considered constitutionally defective.*fn23 A third formal remedy is also available. If the Power Company wrongfully cuts off plaintiff's electricity, he may sue in tort for his actual damages.*fn24 Thus, Wisconsin does provide the customer of the utility with impartial tribunals empowered to resolve disputes over billings and to grant appropriate relief.

As a practical matter, we recognize that most disputes are so nominal in amount that judicial remedies are seldom, if ever, invoked. In most cases the only "hearing" actually held is that provided by the Power Company itself. Plaintiff therefore contends that fair procedure requires the reference of disputes over billing to an inpartial arbiter before he is required either to suffer the inconvenience of a termination or to pay a disputed amount under protest. In practice, he argues, it simply is not fair to permit the Power Company to be the effective final judge of its own credit disputes. There are at least three answers to the argument.

First, the fact that a dispute may be so trivial that an injured party may elect to suffer injustice rather than to assert his legal rights -- in other words, that the maxim de minimus non curat lex suitably applies -- is certainly no reason for construing the Federal Constitution as requiring special procedural safeguards for such matters. The constitutional commands are met once an opportunity for a hearing is afforded. That opportunity is protected by the ...


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