MEMPHIS LIGHT, GAS & WATER DIV. v. CRAFT

Transcript: 

Argument of Frierson M. Graves, Jr.

Chief Justice Warren E. Burger: We will hear arguments next in 76-39, Memphis Light & Gas against Craft.

Mr. Graves you may proceed when you are ready.

Mr. Frierson M. Graves, Jr.: Mr. Chief Justice, members of the Court, my name is Frierson Graves and I represent the Memphis Light, Gas & Water Division which is a part of the City of Memphis, a municipal utility which has both electric, gas and water operations.

This action arose when Mr. and Mrs. Craft and several others sued the Memphis Light, Gas & Water Division alleging that their utility services were being terminated without due process of law and they ask for both injunctive and declaratory relief.

The District Court implied that there was property in the utility services.

It really did not say one way or another, but the implication is there, but found that minimum due process was present in the procedure used by the Light, Gas & Water, but it suggested a change in the notice that we were given, giving to our customers when the final notice was sent out which was an additional stuff or a flag.

This change was made in the notice, a final order entered.

It was an appeal to the Sixth Circuit which found that utility services was property.

However, this finding as to due process had two different holdings, as to Mr. and Mrs. Parks who had an admitted liability for an amount of the bill.

The Sixth Circuit said that our final notice with Act applying to credit counselors and a hearing before credit counselors to arrange budget payments or extended payments was a efficient constitutional due process notice and hearing, but on the other hand, the Crafts who allegedly had a dispute that a notice and a hearing was not sufficient and we did not have a established procedures for a hearing nor did I notice used the word dispute really in it and applying to the Crafts.

We petitioned this Court and the two questions were whether or not utility services are property and secondly whether or not the procedures used by the Light, Gas & Water meet the minimum requirements of the due process or what procedures must be used.

I would like to say first that a utility wants to keep its customers on land.

It wants to generate the revenue whether it is a municipal utility or a private utility because we in Memphis operate on a non-profit basis as a municipal utility just to pay expenses so the more revenue we are able to generate from the customer, they end up better to spread that for your administrative expenses among your ratepayers.

Secondly, we think and we think our procedures establishes this that a utility ought to do all it can to help its customer pay its bills and one of things that we did which is in the record of this Court is to establish a budget procedure or a policy of having extended payments.

Chief Justice Warren E. Burger: I suppose a fair quarreler of what you have just suggested is that the paying customer should not be required to subsidize the non-paying customers?

Mr. Frierson M. Graves, Jr.: Your Honor I think that goes back to sort of the general common law rules about a utility that you should not give free service because just as you must provide service to a customer, if a reasonable service to him so that every person can have the service, likewise you should not give the service to a customer who is not paying for that because you are discriminating against your ratepayer in that way and of course they say that reason both is for reasonable room for free service plus the fact that you are avoiding numerous small petty suits because utility services is merely a credit transaction.

Normally, you have an individual either in oral contract, in Memphis you can have your utilities connected by calling up on the telephone and say will you connect the utilities to my address?

The utilities are connected, you are asked to pay a deposit of $25 in this, that sometimes place the point in your first bill, in this you have a small credit transaction therefore which, we extend the new customer 65 days of service almost or that possibility 60 or 65 days before we can cut the personnel.

Unknown Speaker: Mr. Graves, I want to be sure the damages feature this case is gone, is it not?

Mr. Frierson M. Graves, Jr.: The court suggested that the Craft’s be allowed a $35 credit and they were allowed that credit.

So I do not consider that damages are still in this case sir.

Unknown Speaker: If damages are all -- is the case rendered moot by your new procedures?

Mr. Frierson M. Graves, Jr.: No sir because we still do not have what the petitioners wanted.

We established a notice and a procedure and the Sixth Circuit said that they did not comment on our new notice, but our old notice was still constitutionally deficient, so that is their declaratory judgment and relief that our notice was sufficient in this and of course we are contending that utility service really is not property.

Justice William H. Rehnquist: The Sixth Circuit's analysis on this one was based on its, at least in part on it Palmer case, was it not?

Mr. Frierson M. Graves, Jr.: Yes sir.

Justice William H. Rehnquist: And that did not address Tennessee Law at all as I read it?

Mr. Frierson M. Graves, Jr.: No sir that was a private utility that the Court found was sort of callous and we do not think that our policies do that.

They were also -- it was conceded that utility services were property, in that case for a private utility.

Justice William H. Rehnquist: What do you understand to be the reasoning of the Sixth Circuit as to why they continued to say the utility services is a property under the Fourteenth Amendment?

Mr. Frierson M. Graves, Jr.: Your Honor they cited a number of cases which rely upon several reasons.

One that water or electricity is indispensable to life, and therefore, you should have it and they cite a number of cases both district and other circuits that tend to say both are necessity of life or that there is some by having this as a municipal utility, we have that state action and also that you have the rule that you should give utilities to every customer.

Justice William H. Rehnquist: Of course, the state action in Goss is quite different from the property interest?

Mr. Frierson M. Graves, Jr.: That is right.

Unknown Speaker: Mr. Graves, under Tennessee Law is there a legal right to receive a utility service along as one pays for it?

Mr. Frierson M. Graves, Jr.: Yes sir.

We go back to 1902 Tennessee case of Jones v. Nashville and that established more or less a franchisee ordinance and that establishes what I think was merely the common law of general rule of utilities that quasi public type of corporation that when you provide the service you must give it to all customers, but you have in the righteous upon the utility to furnish those services to the customers, but the utility may make reasonable rules and among those rules is they can deny the service to a person if he does not comply with it.

Unknown Speaker: This case involves a dispute as to whether or not the bill submitted by the utility was correct?

Mr. Frierson M. Graves, Jr.: Yes sir and I think the rule whether it is an admitted liability or dispute, that the utility can determine the rules and regulations and that the right of either of suing for an injunction, paying on a protest and suing or suing for damages, that the rule was made in common law for the utility's benefit and not as an entitlement or an independent source or a state statute to allow an entitlement to the customer because the utility could terminate, but it did so at its peril, in this case making it subject for damages.

Unknown Speaker: The position is that state law or remedies were adequate and no constitutional -- there is no constitutional entitlement to the prior hearing?

Mr. Frierson M. Graves, Jr.: Yes sir and that you cannot argue that water is indispensable to life or electricity is indispensable to life because if that is so then a person with an admitted liability for that is mere using the services why should you ever be able to cut them off. Congress this past year have appropriated 200 million dollars for the Community Development Act to help pay on utility bills for this past winter, but that is if they want energy stamps or other matters in which to pay for utility services, it should be taxpayer program and not a ratepayer program that it is upon the utility to maintain this.

Justice Byron R. White: Right, I take it then you say if the utility sense of personal analysis says you are cut off and the person wants to know why and the utility says it is none of your business and then the person sues the utility and wins and utility freely admits that, well, we just cut you off for no reason at all, you would agree that under the State Law the utility would be liable?r

Mr. Frierson M. Graves, Jr.: Yes sir and under state law the utility would have to adopt reasonable rules because that is the normal rule.

Justice Byron R. White: I understand that, but you say despite that there should be no constitutional requirement that the utility even notify the person as to what the basis for the cut off is?

Mr. Frierson M. Graves, Jr.: Your Honor, I think they have got to send them the bill, so they know what they have to pay and once they know they just do.

Justice Byron R. White: Well I know, but I just -- under my example the utility simply notifies the person you are cut off, gives no reason whatsoever?

Mr. Frierson M. Graves, Jr.: No sir, it could do that, they would have to tell them --

Justice Byron R. White: So there is some constitutional requirement then for an adequate prior notice or not?

Mr. Frierson M. Graves, Jr.: No sir, the common law rule is that you must send any creditor his bill in this when you have send the creditor his bill and you tell him you owe $9.89 for utilities then you are telling him pay the $9.89 or you will be terminated by certain effect.

Justice Byron R. White: You do say than there is a requirement that the utility beforehand, before cutting off go through some procedure to let the person know what his obligation is?

Mr. Frierson M. Graves, Jr.: What his obligation is, but not the fact that he may dispute what that obligation is and have a continued right to get the water out of the city pipes in the street or gas out of the pipes and continue this while he is doing a dispute because if they want to terminate it on the basis of this, they do not have to do the continued credit transaction and they cannot say, well, that is because it is a necessity of life or say, well, there is some independent source such as a state statute do this because there was a state statute enough in Jackson when they codified common law rights to say what was --

Justice Byron R. White: What if the utility cuts a person of without sending him the bill?

Mr. Frierson M. Graves, Jr.: I think that gives rise to a damage action too, I do not know what it is constitutional or not, but I think --

Justice Byron R. White: Well, that is what I want to know, that is what the issue is in this case, at least part of it?

Mr. Frierson M. Graves, Jr.: Well, I do not think the issue is whether or not you must send a bill.

I admit that you must send the bill.

Justice Byron R. White: Well why?

Justice William H. Rehnquist: What is the source of the obligation?

Mr. Frierson M. Graves, Jr.: The source of the obligation is the credit transaction.

The question is do you have to continue selling on credit while you are litigating whether the old, the past credit or not.

Justice William H. Rehnquist: Well if you agree with Mr. Justice White’s question to a moment, well, then you are conceding that there is some sort of a limited property or you not?

Mr. Frierson M. Graves, Jr.: I am saying under the common law there is a right to receive the service so long as you obey the rules and regulations.

Justice Byron R. White: And under the statute of the state, under the state law?

Mr. Frierson M. Graves, Jr.: Well, under common law regarding your utilities.

Justice Byron R. White: Is that enforced in Tennessee?

Mr. Frierson M. Graves, Jr.: Of course sir it is enforced every where, just like Jackson v. Metropolitan.

They had to furnish services to anybody that would pay for it and if they did not pay for it then the question was could they cut it off.

Justice Byron R. White: What I want to know the utility cuts the person off, does not tell him why, does not send him the bill, does not do anything, just cuts them off and could the person then have a 1983 suit for failure to provide an adequate notice beforehand, that is part of the issue in this case?

Mr. Frierson M. Graves, Jr.: Well, you are making assumption that they are not sending any bill at all or not making any claim?

Justice Byron R. White: Yes of course I am, yes I am

Mr. Frierson M. Graves, Jr.: Or if they send then the bill then I do not --

Justice Byron R. White: I did not -- I just said they did not send any bill, they did not give him any notice, now what?

Mr. Frierson M. Graves, Jr.: Then I think they merely have a common law right to damages against the utility and it is not the constitutional right.

Justice Byron R. White: So your answer is that there is no violation --

Mr. Frierson M. Graves, Jr.: No violation of constitutional right --

Justice Byron R. White: --Despite the fact that there is a property interest?

Mr. Frierson M. Graves, Jr.: Well, I do not consider the property interest for continued payment, of continued credit being given.

Chief Justice Warren E. Burger: May I ask you a hypothetical question to see if it would shed some light on this problem on your position for me.

A newspaper is not a public utility, is it?

Mr. Frierson M. Graves, Jr.: That is right.

Chief Justice Warren E. Burger: But they serve people at their homes with a carrier service to bring a newspaper there.

Would you say there is any obligation on the part of the newspaper, enforceable obligation to deliver newspapers just because people want it or can they refuse anyone they want?

Mr. Frierson M. Graves, Jr.: I think they can refuse it like any other credit transaction.

Chief Justice Warren E. Burger: Now, a utility on the other hand is not free to refuse service, is it, in Arkansas?

Mr. Frierson M. Graves, Jr.: It is not free to refuse service except under its rules and regulations, if it has not been paid for past service.

Chief Justice Warren E. Burger: Well, I mean, in the first instance if the customer calls up and says I want water, gas and electricity, they must --

Mr. Frierson M. Graves, Jr.: They must serve them if it has the reasonable means to do it at that time and if they live 5 miles from town, we could say --

Chief Justice Warren E. Burger: I willing to (Voice Overlap) my question assumes, they are on the main line.

So that distinction is of some importance to this case, is it not?

Mr. Frierson M. Graves, Jr.: Yes sir and we say that in answer again to Justice White if they did not get a bill to begin with, then they receive some damages and then they will have an adequate remedy of law, but it is not a constitutional right to continue paying it on the basis of not paying a bill and not having a continued and time limit to credit while they are litigating for past credit extended.

Chief Justice Warren E. Burger: Now, the newspaper could give you a subscription free because they might think it was good for them to have you on their subscriber list, but charge me or next door neighbor the full price, could they not?

Mr. Frierson M. Graves, Jr.: Yes sir.

Chief Justice Warren E. Burger: They cannot do that in the utility?

Mr. Frierson M. Graves, Jr.: No sir.

They have to charge everyone the same rate without discrimination.

Justice Byron R. White: But none of this has to do with the constitution?

Mr. Frierson M. Graves, Jr.: No sir it does not.

Justice William H. Rehnquist: Well, but if I walk into Massey's and ask him to charge something for me I take it even if Massey's is partly owned by the City of New York, they are free to tell me no we are not going to charge?

Mr. Frierson M. Graves, Jr.: That is right.

Justice William H. Rehnquist: Even the fact that I may be a delinquent creditor and they have not send me a bill, does not mean that they have -- that something in the constitution gives me a property right to get my next transaction charged, but am I not right in thinking that Tennessee treats the utility somewhat differently then it would Massey’s?

Mr. Frierson M. Graves, Jr.: Our Padison case that you may adopt a rule that you can terminate for non payment and our other cases say that you can still terminate for non payment even if there is a dispute because the termination is at your peril and the utility could be sued for damages if they make that improper termination.

Unknown Speaker: Mr. Graves, I have a question that I would have asked earlier because it is really a special question.

How is your client Memphis Light, Gas & Water Division of the City of Memphis immutable to suit at all under 1983 because of the Dr. Monroe against Pape in City of Kenosha and others?

Mr. Frierson M. Graves, Jr.: Your Honor we consider the fact of saying that we were not a person.

We are also sued by individual commissioners.

We were being asked for declaratory relief, so that the previous counsel did not choose to raise that arguments as to whether they were person because we also had our individual commissioners sued who could be charged and were charged under charter with making the policy just as individual Boards of Education or individual other members of board would make policies --

Unknown Speaker: I know it is in the part of Judge Peck's opinion in the Court of Appeals says that the District Court correctly I think says that the District Court after trail found that there was no civil rights jurisdiction over municipal MLG&W.

The foot note cite to a case and he says nothing further about it in the entire opinion.

He neither affirms, the court neither affirms nor reverses that, but it is not a correct holding under the --

Mr. Frierson M. Graves, Jr.: Yes sir it is, but the counsel who tried this before me chose not to raise the question --

Unknown Speaker: But that has been decided that you are out of the case, has not it, by the District Court and it was not reversed in the Court of Appeals?

Mr. Frierson M. Graves, Jr.: Your Honor I do not think he really was finding that.

I think he was finding that we were not violating due process in this.

He may have mentioned that, but he is still entered his decree and said we should have a better notice and we should give credit and our individual commissioners were also sued in this case as well.

Unknown Speaker: Would you agree that if the Court of Appeals, through Judge Peck is correct in saying that the District Court held that you were not sueable under 1983 that was the correct holding?

Mr. Frierson M. Graves, Jr.: Yes sir.

Unknown Speaker: Because you are a municipality?

Mr. Frierson M. Graves, Jr.: Yes sir.

We are under the charge of City Memphis and just a division of it.

Unknown Speaker: Of the City of Memphis actually?

Mr. Frierson M. Graves, Jr.: Yes sir and if please the Court, I would like to talk a little bit about the facts on our hearing and notice because we consider --

Unknown Speaker: First of all before you get to that, do you concede then that there is property?

Mr. Frierson M. Graves, Jr.: No sir, I am not conceding there is property because I do not consider there is an independent source by state statute or otherwise that you said in Board of Regents v. Roth and others that makes it, that what we are talking about is the general law of utilities which would apply to a private or municipality which says that you can make reasonable rules which include at your peril terminating someone for what you consider not --

Unknown Speaker: Alright.

So, now when you are moving on to talk about the procedures that you do provide, you are saying, assuming arguendo there was deprivation of property, but only arguendo, is that right?

Mr. Frierson M. Graves, Jr.: That is right.

On that basis sir, I would --

Unknown Speaker: May I ask just ask one question on the property issue?

Assume for a moment you have a customer who has not paid his bill and the utility admits he has paid his bill, could the utility cut his services off without notice and so forth, without raising any federal question?

I realize you would have a state law I believe?

Mr. Frierson M. Graves, Jr.: Yes sir.

Unknown Speaker: You say even there, there is no property interest?

Mr. Frierson M. Graves, Jr.: No sir.

Because we have made an error in taking that service, he has the same common law actions to go in and ask for an injunction to go in and say do you (Voice Overlap)

Unknown Speaker: I know he has a lot of state law remedies, does he also not have a state law right to continued service, if he has paid his bills?

Mr. Frierson M. Graves, Jr.: If he has paid his bill.

Unknown Speaker: Now why is that not property within the meaning of Fourteenth Amendment?

Mr. Frierson M. Graves, Jr.: Your Honor, the fact of whether or not utility makes a mistake --

Unknown Speaker: No, no mistake at all.

They know it.

They say we just have decided to cut you off.

You paid your bills, we are going to violate the state law, we got all sorts of reasons, you are bad person, whatever it may be, does he have a federal property interest in having continued service, does he have a property interest in continued service when he has paid his bills and everybody acknowledges he has paid his bills, is that a property right within the meaning of Fourteenth Amendment and if not, why not?

Mr. Frierson M. Graves, Jr.: Your Honor, I think under the law of utility he has the right to service whether that makes it a --

Unknown Speaker: I know it, I am nor asking you as a matter of (Voice Overlap) because that is submitted that he has --

Mr. Frierson M. Graves, Jr.: That is submitted.

Unknown Speaker: Now why is that not a property right within the meaning of --?

Mr. Frierson M. Graves, Jr.: Because I do not think it reaches that independent source that the Court has said you must make it Fourteenth Amendment, that is by state law rule or understanding that you have done and now if you say that is so then you have made it, but when you look at the education case of Goss v. Lopez and say because the state chose to provide the service and pass the statute that made and also a statute you must attend school, that made it federally protective, but we do not have that statute or that independent source.

Unknown Speaker: But you have a state law that says you must provide the service --

Mr. Frierson M. Graves, Jr.: No sir, it is not a state law.

It is just the regular law of utilities.

It is just the common law.

Unknown Speaker: But it is the law followed in the state of Tennessee?

Mr. Frierson M. Graves, Jr.: Yes sir and every state.

Unknown Speaker: Do you not have a decision of the Supreme Court of Tennessee to that effect?

Mr. Frierson M. Graves, Jr.: Yes sir.

Unknown Speaker: You have not drawn a distinction between the law declared by your Court and law declared by your legislature?

Mr. Frierson M. Graves, Jr.: I am from the standpoint that they are declaring it is the common law for utilities throughout every state, Your Honor and they are following the general rule, Now, if that makes it a constitutional protected property right that may be, but I did not think it met the test of Roth.

Unknown Speaker: In Roth that you cite, was that state statute?

Mr. Frierson M. Graves, Jr.: Yes sir.

You had a state statute that provided for free education and the state statute for compulsory attendance and when they suspended somebody, they should be given a hearing.

Unknown Speaker: You are talking about Goss v. Lopez?

Mr. Frierson M. Graves, Jr.: Yes sir.

Unknown Speaker: I thought you cited Roth?

Mr. Frierson M. Graves, Jr.: Well, Roth was the tenure, yes sir.

Unknown Speaker: Was that the statutory right or one (Voice Overlap)?

Mr. Frierson M. Graves, Jr.: I think they send it back to determine whether or not it was defecto types rights.

Unknown Speaker: But would that have made a difference?

Suppose the University Board had prescribed tenure?

Mr. Frierson M. Graves, Jr.: Well, our rules and regulations also provide that if you pay your bills, you get the service, but if you do not pay your bills, you do not get the service, so that is the distinction between them.

Chief Justice Warren E. Burger: I suppose in Tennessee there are some privately owned utilities, are they not?

Mr. Frierson M. Graves, Jr.: Yes sir and they are in the public service commission.

Chief Justice Warren E. Burger: Now, those privately owned utilities function by virtue of the grant or franchise from the state, do they not?

Mr. Frierson M. Graves, Jr.: Yes sir.

Chief Justice Warren E. Burger: I assume it is as in other states, the franchisee itself defines the right of every person within the reach of the service to receive that service, if he pays for it?

Mr. Frierson M. Graves, Jr.: Yes sir.

Chief Justice Warren E. Burger: Now, would you say it was respect to a private utility that is or is not a property right in Fourteenth Amendment terms?

Mr. Frierson M. Graves, Jr.: Your Honor, if they were under state action, but some of the District Court cases say because of those state statutes that makes it a property right.

On the other hand I say that is no different than just the codification of the common law and does that make it a property law.

Chief Justice Warren E. Burger: In other words, you have draw no distinction between a private utility in this respect and the public (Voice Overlap)?

Mr. Frierson M. Graves, Jr.: No sir, we are still subject to damages and liability for failure to abide by own rules and regulations.

Your Honor, I would like to say something about our notice in this case.

We sent out notices that not only had a final notice, but it also had a flier in it that said if you had any dispute in some cases, in some cases it did not say the word dispute, but it says if you are having difficulty paying your bill come to the credit counselors.

We think that the record clearly shows that we were giving adequate notice and a hearing for this reason.

When somebody gets a utility bill, they say I did not use that much service, you made a mistake, I have got too high a bill.

When you talk to Light, Gas & Water, we re-read 33,000 meters during 1973, so we were cognizant of any complaint and did something about it of any high bill.

If you had difficulty paying your bill or you had something to matter with it, 62000 people came into the credit office during that year and were handled by the credit officials.

When the Crafts had their problems because they bought a duplex and the real estate agent said do not pay any attention to the fact that you have got two meters here then the Crafts had a help, even though they had 25 days from the time they got their bill until they got final notice to they got cut off.

They went to the utility.

They got their meter put back in.

They got their utilities on and they lasted from June until September.

When a meter reader went by and they said our checks in the mail and they did not cut off.

When they were cut off in October, they went to the utility and somebody must have told them at the utility that you have got two meters, you got to have them combined if you do not want a duplex with two meters.

They did it, they did not pay their bill again, when they were cut off in November, even though they were getting two bills for not double billing, split billing, each meter registering the service.

When they came back in November, their utilities were cut back on and they were put on budget billing and they paid $25 or so and $100 were delayed.

When in December they were to be cut off again, December 28th they called up and got an extension till January 8th.

In this time, the meters were finally combined because the electricians and the plumber had made a mistake in combining which ones that were there so then you cannot say that we were callous towards the Crafts or anybody and that we consider that when we were giving that information and handling the people and adopting the budget procedure and that when you have a dispute regardless of whether its an amount of a bill or whether you owe that much, or whether you owe it at all, if you go to Massey's, you go to the credit department to any big place.

When you go to the utility those notices which were not in the opinion or any appendix say MLGW credit department at the bottom so that is --

Unknown Speaker: Massey's is not government?

Mr. Frierson M. Graves, Jr.: That is right sir.

Unknown Speaker: The Fourteenth Amendment applies only to state --

Mr. Frierson M. Graves, Jr.: That is right, but when we give you notice of who to come to and we say MLGW credit department or credit counselors or if you have any difficulty paying your bill, I think common sense tells you that you go the credit department, that is the people that signed the bill and that the record shows that we handled over a 100,000 people through either credit department or calling up to get extensions or re-reading their meters and we did it.

Thank you sir.

Chief Justice Warren E. Burger: Mr. Daniel?

Argument of Thomas M. Daniel

Mr. Thomas M. Daniel: Mr. Chief Justice and may it please the Court.

This case arouse as a result of a dispute that developed Memphis, Tennessee between Mr. and Mrs. Willie. S Craft and the Memphis Light, Gas & Water Division.

Without going into the details of that dispute, I think its fair to say that the dispute existed over a period of several months prior to the filing of this suit, during which time the Crafts' utility services were terminated on several occasions and also during which time the Crafts made good faith effort as the District Court found to resolve their dispute with Memphis Light, Gas & Water Division.

The dispute that developed, occurred because of double computer billing that was being sent to the Crafts' residence. And during this period, Mrs. Craft made several efforts even to the point of going to the offices of Memphis Light, Gas & Water Division and spending the entire day in an effort to ascertain the reasons for the terminations and to try to straighten up the problem.

There is one important fact that should be noted in this that is important to a proper resolution of this case and that is that Memphis Light, Gas & Water Division then as now has no orderly dispute resolution process and that is why Mrs. Craft was unable to resolve her dispute with the Memphis Light, Gas & Water Division.

Mr. Graves has indicated that Memphis Light, Gas & Water Division did not harshly treat the Crafts, the record is quite contrary in this case.

On one occasion when Mrs. Craft called to explain that her bill had been paid she was met with a response, pay it again and on another occasion when she was talking with someone at the Memphis Light, Gas & Water Division concerning her bill, she was actually cursed by one of the employees, but the important point is that no dispute resolution process exists within Memphis Light, Gas & Water Division.

Chief Justice Warren E. Burger: You have a small claims -- you have a small claims court system in Tennessee?

Mr. Thomas M. Daniel: We have what is called a general session’s court Your Honor, but it is not a small claims court in the sense that no lawyers are allowed to appear such as we have in some states.

Justice Byron R. White: Suppose the notice said that you have not paid your bill, if you have any complaints about it come and see Mr. so and so at room so and so between the hours of so and so; bring any information you have, bring your lawyer if you want to and we will hear your side of the story to see if we have made a mistake and would that be enough to satisfy you before there is a cut off?

Mr. Thomas M. Daniel: I think a notice of that sort is the type that we are asking.

Justice Byron R. White: So, your answer is yes?

Mr. Thomas M. Daniel: It is hard to say yes to a specific notice without seeing it in print and going over it --

Justice Byron R. White: But you do not, you do not for example claim that before there is cut off there has to be some independent hearing examiner or a full adversary trial?

Mr. Thomas M. Daniel: Well, your question was directed to the notice, but as I think what we are asking for is the type of notice that you just mentioned to give the person opportunity for some type of hearing that that would only have to be at the first stage, an informal conference with a responsible official at Memphis Light, Gas & Water Division and then if it is not resolved at that stage, I think there should be an informal hearing before an impartial hearing.

Justice Byron R. White: You mean before the termination of service?

Mr. Thomas M. Daniel: Yes, Your Honor.

Justice Byron R. White: Now, what authority did you have for that in your case?

Mr. Thomas M. Daniel: Well, I think in numerous cases it is decided by this Court such as Goldberg v. Kelly, I think before the termination of welfare service in that case.

Justice Byron R. White: What kind of the hearing was that?

Mr. Thomas M. Daniel: That was an informal hearing before an independent hearing examiner prior to the termination.

Let me make clear that when I say --

Chief Justice Warren E. Burger: But when you are say an independent hearing examiner, did not Goldberg against Kelly simply say that it must be within the organization, the granting organization but a different person --

Mr. Thomas M. Daniel: That is correct and I want to point out we are not necessarily asking for someone outside the company so long, even if it is an employee of the company, so long as that person has the independence to look at the case fairly and to make a decision in favor of the consumer, we feel that would be adequate.

Chief Justice Warren E. Burger: But do not you think that the natural urge of a utility just sell as much of its product as possible or gives them a certain amount of independence in that respect?

Mr. Thomas M. Daniel: I suppose it does, but the record in this case indicates that they also have some problems in resolving disputes that developed between customers and one of the problems that Mrs. Craft had was that the persons that she was communicating were lower level employees who really did not have the authority to resolve any dispute that might have developed.

We are saying that the situation would probably be improved if a responsible company official, in other words, a higher level employee --

Justice Thurgood Marshall: Mr. Daniel there is a reason for that, it is probably the utility or that is the state?

Mr. Thomas M. Daniel: I think it is because it is a state in this case.

Justice Byron R. White: You would not have any plan unless the defendant is a state?

Mr. Thomas M. Daniel: That is correct under the Jackson --

Justice Byron R. White: The state within the meaning of the Fourteenth Amendment?

Mr. Thomas M. Daniel: That is correct, Your Honor.

Justice Byron R. White: And what about the other offices?

Mr. Thomas M. Daniel: I am not sure.

Justice Thurgood Marshall: Their Commissioners?

Mr. Thomas M. Daniel: Well, the --

Justice Thurgood Marshall: Their state offices?

Mr. Thomas M. Daniel: Well, they are employees of the city, at least in so far as they are officials of the Memphis Light, Gas & Water Division, they are state officers, yes.

Justice William H. Rehnquist: Well, their President, Vice-President, are they --

Mr. Thomas M. Daniel: Yes.

Justice William H. Rehnquist: So, so far you have largely in response to question, you have quite addressed yourself to the due process aspect of the case Mr. Daniel.

Do you think the Sixth Circuit’s analysis of the property interest question which I suppose logically comes before the due process inquiry as satisfactory in the light of Roth and Sindermann?

Mr. Thomas M. Daniel: No, I do not think their analysis is as full as it should be.

I think at the time this case was decided they were just relying primarily on other cases.

I think as this Court has pointed out, there must be reference to whether this property interest exists under state law, but I think it is clear that under the state law of Tennessee a person has a right to receive utility service and the utility supplier has a duty to supply.

So I think analysis of, a proper analysis under Roth and Sindermann and more recent decisions of this Court that there clearly is a property interest under state law.

Justice William H. Rehnquist: And you did not appeal or seek to assert from that portion of the Sixth Circuit’s opinion which held that where the bill is undisputed, judgment goes for the defendant in the case?

Mr. Thomas M. Daniel: That is correct.

We do not assert that the customers have the right to free utility service.

There is no question of what utility service may be terminated for non-payment in Tennessee.

It is just that we question the right of the utility service under the Fourteenth Amendment to terminate utility service while a dispute is pending.

Chief Justice Warren E. Burger: But I want to be clear that you are not asking that the fact finder to resolve this dispute must be independent and neutral apart from the utility?

Mr. Thomas M. Daniel: That is correct.

Chief Justice Warren E. Burger: It cannot be an employee of the utility.

You said I think a responsible representative?

Mr. Thomas M. Daniel: A responsible company official, I think that would be adequate.

Chief Justice Warren E. Burger: I am not sure what official means.

Mr. Thomas M. Daniel: Well, I think there was a distinction made in the Palmer case of the Sixth Circuit in that an official or an officer of the company would have more freedom to rule in favor of the customer than a lower level employee.

In other words --

Justice Thurgood Marshall: Mr. Graves suggested you go to the credit department, will that be okay?

Mr. Thomas M. Daniel: Well, no I do not think that would be okay because the problem as the record in this case indicates is that the employees in the credit department our concerned primarily with getting people to pay their bills.

They are not concerned with resolving disputes.

The record in this case indicates that they do not even have the time to do that because there so many calls that they get each day, there is no way possible that they can deal with disputes concerning bills.

The only thing they can deal with is people who are having difficulty paying an admitted liability.

Justice John Paul Stevens: Mr. Daniel may I ask you a question please?

I would like to ask about the your objection to the notice in the Court of Appeals holding, and notice and put to one side the hearing problem and also of course I am just asking you about the constitutional requirement as to inadequate notice as opposed to what a commission might say is desirable in the sense of telling the customer how to go in and straighten up the dispute.

Your point is I understand it is that the notice although it told the customer of the harm that was about to occur, namely you are going to be cut off, it did not explain to the customer the procedure to be followed in avoiding that harm?

Mr. Thomas M. Daniel: That is correct.

Justice John Paul Stevens: Now, is there any precedent that you know of under the Fourteenth Amendment for holding that a notice must do more than tell the person to be harmed about the prospective harm, but must go further and in effect give them legal advice as to what his possible remedies must be?

Mr. Thomas M. Daniel: Well, I think the holdings of this Court indicate that the question of notice and hearing is always are variable according to the circumstances of a particular case and I cannot cite any specific holding that would require that, but I think that under recent decisions of this Court, the type of notice that has been required in certain cases such as Morrissey v. Brewer was a very specific notice and it informed the person of more than just the action that was about to be taken.

It also informed the person of the steps that they might take to prevent the threat and harm.

The problem in this case is that Mrs. Craft attempted to take some steps to prevent threat and harm.

She acted as any reasonable person would and went to the offices of Memphis Light, Gas & Water Division, but was unable to resolve the dispute because she was never informed either there or in the notice of what she --

Justice John Paul Stevens: Often I suppose the -- in a serious matter that one citizen gets a notice that something is about to happen, one thing he can do is ask a lawyer for help.

Presumably if either of these people asked a lawyer for help they would have been straightened out in a hurry?

Mr. Thomas M. Daniel: Well, I am not even sure that it would have been straightened out in a hurry because there was no dispute whether --

Justice John Paul Stevens: They would leverage the president of the company, so you terminate this service you are going to be get sued for three million dollars or something like that, might not have got an action?

Mr. Thomas M. Daniel: That is possible, but my only point is there is no dispute resolution process within Memphis Light, Gas & Water.

So they may not --

Justice John Paul Stevens: Does the record tells us how often there are disputes about the amount of the bill as opposed to the questions of credit and things like that.

Mr. Thomas M. Daniel: The only indication in the record as far as numbers is that during the year 1973, I believe when this case was being litigated there were something like 33000 hard deal complaints.

Now, as to whether that can be classified as a dispute, I do not know, but I think that it probably would be. This is certainly different from some of the cases in this area such as the one that, Your Honor decided in the Seventh Circuit where the record indicated that there were only a small number of disputes that developed over a certain time period and also I believe in the Lucas case which Your Honor decided, there was a process within the company for resolving disputes and most of them were in fact resolved prior termination that is required.

Justice John Paul Stevens: That is right as required by State regulation.

Mr. Thomas M. Daniel: That is correct.

Another important factor there is that the Public Service Commission in that case, since it was a privately owned utility, had the authority and did in fact intervene on many occasions and halted the termination service while the dispute was being resolved.

In this case the Public Service Commission has no jurisdiction over Memphis Light, Gas & Water Division and there is nobody that can intervene like that and halt the termination while the dispute is being resolved.

Justice Thurgood Marshall: The Court would not have to supervise this, would they not?

Mr. Thomas M. Daniel: No I do not think so Your Honor.

Justice Thurgood Marshall: That is what worries me?

Mr. Thomas M. Daniel: I think all we are asking the Court do to is to set up and order Memphis Light, Gas & Water Division to setup a dispute resolution process.

It would not mean that every kind of a person had a dispute concerning their utility service, if they could run into the Federal Court for resolution.

Justice Thurgood Marshall: Why not?

Mr. Thomas M. Daniel: Well, I think if they -- there would be no right of action in Federal Court to resolve the dispute, the claim here is that the Fourteenth Amendment is violated because due process is not being provided.

Justice Thurgood Marshall: Well, I mean due process is a -- it is about like that, is it not?

Who would decide that how much due process was going on?

Mr. Thomas M. Daniel: Well, I think we are asking --

Justice Thurgood Marshall: I mean, if you put it, you said somebody cursed over to phone.

Well, if they put that person in charge in this division that would not help, would it?

Mr. Thomas M. Daniel: I suppose not Your Honor.

Justice Thurgood Marshall: Well, what would help?

Mr. Thomas M. Daniel: Well, I think what would help is as we have discussed previously, to have a hearing examiner who has the responsibility to hear disputes, that develop between consumers and Memphis Light, Gas & Water Division who has the authority to render a decision --

Justice Thurgood Marshall: And to enforce it?

Mr. Thomas M. Daniel: And to enforce that decision.

Justice Thurgood Marshall: How can you do that in a public utility?

Mr. Thomas M. Daniel: Well I would --

Justice Thurgood Marshall: You mean he could enforce and say call the Chairman of the Board or was it the counsel or whatever these things called?

Mr. Thomas M. Daniel: The commissioners of the utility --

Justice Thurgood Marshall: So he would be over them?

Mr. Thomas M. Daniel: MI do not think he would necessarily be over them.

I really do not see a problem developing that Your Honor has anticipated.

I assume enough good faith on the part of Memphis Light, Gas & Water Division, that if they have a hearing examiner, and he hears the case and orders that the utilities be turned back on, that he would be a high enough company official that he could order lower level employees to the turn the utility services back on.

Chief Justice Warren E. Burger: Now, that is the first time you have used the used term hearing examiner.

Previously you had said I thought any responsible employee of the company.

There is quite a difference between that and a hearing examiner, those ought to have some connotations that responsible official doe not have?

Mr. Thomas M. Daniel: Well, if there is any confusion there, I was using the terms interchangeably, that the person who is hearing the case could be a responsible company official.

Unknown Speaker: That is sort of ombudsman type?

Mr. Thomas M. Daniel: That is correct Your Honor.

Justice William H. Rehnquist: You use the term hearing the case which certainly, I would think does nothing to dispel the fears that some of us may share with Justice Marshall.

If this is a case, that goes before a hearing examiner, you really have a brand new division of the utility.

Are you suggesting that formal, a procedure is required simply by the language in the Fourteenth Amendment that says no property shall be taken without due process?

Mr. Thomas M. Daniel: No, I think if we look at what the Sixth Circuit did for example in the Palmer case is an indication of what I am talking about.

There, they required that a responsible company official within the utility supplier be able to hear the dispute in an informal manner and make the decision as to whether service should be terminated or not so that while the person hearing the dispute was an employee of the official, they nevertheless conducted an informal type dispute resolution process, but they would not necessarily have to be completely disassociated from the utility supplier.

Justice Byron R. White: Suppose the notice said that if you have -- you owe some money, you are going to be cut off in 20 days unless you pay.

If you have any objections, file your suit in court and you can ask for a preliminary injunction, if you could not satisfy the ordinary standards for preliminary injunction, why of course this service would not be cut off, but if you cannot satisfy them it will be put off -- the service would be cut off, but of course then you can go ahead and try your lawsuit and get damages if you win, this is a State Court suit, that is the notice you will get.

Would that satisfy the Fourteenth Amendment or do you think the Fourteenth Amendment requires an administrative hearing?

Mr. Thomas M. Daniel: I think the Fourteenth Amendment requires some type of opportunity fohearing prior to the termination of service.

I do not think that the common law remedy of suing for damages in State Court would be adequate.

Now, this Court recently in Ingraham v. Wright held that a common a lawsuit for damages was adequate in the context of the corporal punishment.

I think that case is quite different from here.

First of all, the governmental interest involved there in school disciplinary --

Justice Byron R. White: You mean really a full court hearing is not good enough procedure for satisfying the due process law?

Mr. Thomas M. Daniel: That the problem with the full court hearing in that situation is the burden of proof is switched to the customer to show that he is right and the utility service is wrong.

That is the reverse of the normal common law procedure that want us starting something do you have the burden of proving that it is due.

It puts the burden on the customer to hire a lawyer, pay the litigation expenses required to --

Justice Byron R. White: Well, suppose you have this administrative setup the way you wanted and you have a so called responsible company official.

Would not it be enough under our cases if after hearing the customer side of the story he said, I think there is probable cause to believe that you have not paid your bill and that you owe some money and there is probable cause to cut this services off, is not suspicious, he does not have to make some final decision, he just has to say some probable cause?

Mr. Thomas M. Daniel: I think that that might be sufficient as an initial process, but as the Sixth Circuit required in the Palmer case what we are asking is that if he makes that decision there still should be some tort type of informal hearing where a written decision is rendered.

Now --

Justice Byron R. White: This has been before the cut off?

Mr. Thomas M. Daniel: Not necessarily before the cut off.

Justice Byron R. White: Well that is what we are talking about right now, before the cut off?

Mr. Thomas M. Daniel: I think before the cut off that might be sufficient under the decisions of this Court.

Justice Byron R. White: Well, how about -- can you say whether or not they can be sufficient?

Mr. Thomas M. Daniel: I think it would be sufficient before the cut off as long as at least act for the cut off, there would be a more formalized hearing or the administrator --

Justice Byron R. White: But it still has to be administrator?

Mr. Thomas M. Daniel: That is correct.

Justice Thurgood Marshall: Could the person have one a month, have a hearing once a month?

Mr. Thomas M. Daniel: I suppose it is conceivable that a person could abuse the process in that way, but I do not think the fact that there might somewhere be a customer who would abuse the process would mean that we should not -- that we should have banned on the requirements of the Fourteenth Amendment.

Justice Thurgood Marshall: I mean, that if the complaint is which I do not know about you, but I had a same complaint every month, my bill is too much, So I would go there each month and have a hearing and there all I would say is this is too much and the company would say well here is the meter reading then what else would you do, nothing?

Mr. Thomas M. Daniel: That is correct but I suppose it is possible, but --

Justice Thurgood Marshall: Does that seem silly to you?

Mr. Thomas M. Daniel: It does and I do not think that most people would abuse the process in that way because what we are talking about here is real disputes that people have concerning their utility service.

Justice Thurgood Marshall: The dispute is that you have double bill, which obviously was a mistake?

Mr. Thomas M. Daniel: That is correct.

Justice Thurgood Marshall: And you will never have a hearing whether who made the mistake, you are never have a hearing with the computer?

Mr. Thomas M. Daniel: That is correct, you would not.

Justice Thurgood Marshall: So I do not see what the hearing would be about?

Mr. Thomas M. Daniel: Well, the hearing such as in the Craft case would be about why are the Crafts were getting two bills every month rather than one that most customers get and whether that bill was correct or not.

Chief Justice Warren E. Burger: That was partly related to the fact that they had an off again, on again program on their own part.

So two meters and then one meter and then two meters.

They have brought on some of these problems by their own indecision, did they not or changes of decisions?

Mr. Thomas M. Daniel: Well, except for the fact that Your Honor -- even though they were aware that they had two meters, there were, they thought and were in fact told by a Memphis Light, Gas & Water Division employee that one of the meters were belted off and so they thought that service was only coming through one meter and I think as the District Court found Mr. and Mrs. Craft were making effort to find out what the problem was and were ready and willing to pay the bill that was due.

It is just that they could not understand of why they were getting those two bills and Memphis Light, Gas & Water Division seem to unable to explain it to them.

Chief Justice Warren E. Burger: Now, this has been litigated for nearly 5 years, has not it?

Mr. Thomas M. Daniel: Well, it started in 1974, so about four years.

Chief Justice Warren E. Burger: 73 I suppose?

Mr. Thomas M. Daniel: Well, right the dispute started in 73, that is correct, but the suit was not actually filed until 74.

If the Court please, what we are asking this Court to do in terms of requiring due process here is as this Court has done in numerous cases is to balance the private interest that is involved here and the government’s interest.

The private interest that is involved here is an extremely important interest.

It is the interest in the very means to life in some situations.

We are talking about water service, gas and electrical service which in the cold winter months provides the means for heat in most municipalities in this country.

So the significance of this interest is quite important.

Termination of this interest can cause serious harm to a customer and in some cases has even caused death and so we are not talking about a situation like this Court dealt with in Ingraham v. Wright where we are talking about corporal punishments of students.

We are talking about the potential for much more serious harm to the plaintiffs.

We also had to balance that against the government’s interest involved here.

The government’s interest of course is preserving scarce physical resources, but there is no reason that Memphis Light, Gas & Water Division cannot provide the type of notice and hearing that we are requesting within the time frame that they presently terminate service and still be able to preserve their scarce physical resources and the fact that a person gets a hearing does not mean that they are not going to have to pay the bill.

If it is found that customer is incorrect, they will nevertheless have to pay the bill.

Justice Thurgood Marshall: And also the cost to the hearing?

Mr. Thomas M. Daniel: And the cost of the hearing, we would concede that Your Honor.

Justice Byron R. White: Did you tell me why this is a proper 1983 suit?

Mr. Thomas M. Daniel: Well, if the court please, we are dealing here with the property interest on the Fourteenth Amendment and of course the source is --

Justice Byron R. White: I am really going to Mr. Justice Stewart’s question to your colleague?

Mr. Thomas M. Daniel: As to where the Memphis Light, Gas & Water Division is a person?

Justice Byron R. White: Oh! Yes.

Mr. Thomas M. Daniel: Well, I think that that issue has really not being raised, but I think --

Justice Byron R. White: It is jurisdictional issue though, is not it?

Mr. Thomas M. Daniel: Yes.

Justice Byron R. White: So is not that always open?

Mr. Thomas M. Daniel: Yes Your Honor.

Justice Byron R. White: Well what about it then?

Mr. Thomas M. Daniel: Well, I think that we have certain individual dependence here, Commissioners of Memphis Light, Gas & Water Division who clearly are persons under Section 1983, even though it is questionable whether Memphis Light, Gas & Water Division itself is a person.

Justice Byron R. White: And so you say it is questionable, what do you think the answer is?

Mr. Thomas M. Daniel: I think they are probably not because in Memphis, the Memphis Light, Gas & Water Division is not a separate corporation, it is a part of the city.

Justice Byron R. White: So this is a party to the extent that Memphis Gas and Electric, water division is a party here, it should not be?

Mr. Thomas M. Daniel: That is correct Your Honor, I would agree with that.

Justice Byron R. White: And that let us assume there were some damages and would it be paid out of city funds?

Mr. Thomas M. Daniel: I do not know the answer to that since the damages would be instant --

Justice Byron R. White: What if they were to be paid out of city funds?

They are the individual persons?

Mr. Thomas M. Daniel: I think that whatever the damages were paid out of city funds, would not make any difference, as to whether they are persons under Section 1983.

Justice Byron R. White: Would it make any difference under the Eleventh Amendment?

Mr. Thomas M. Daniel: I do not believe it would.

Justice Byron R. White: Because it is a city?

Mr. Thomas M. Daniel: Because it is a city, that is correct Your Honor.

I did want to raise one point in that regard to Mr. Justice Blackmun raised the issue of mootness in this case and raised the question as to whether there is a damage issue still open.

It is the respondent’s position that there is a damage issue still open in this case, if this court affirms the holding of the Sixth Circuit.

There were no damages ordered at the District Court level because the District Court held that we had no due process right, but if this case is remanded on the holding that the plaintiffs did have a right to due process prior to termination of service, I think the issue of damages would still be an open question and for that reason the case is not moot.

In addition to that, on the claims for declaratory and injunctive relief, I think that this case would come within that class of cases which are capable of reputation yet awaiting review as set out by previous decisions of this Court and so that it would not been moot for that reason.

Justice Potter Stewart: Mr. Daniel, in addition to the claim if there was a deprivation of the property here without due process of law, there was also a claim on behalf a party named Holmes that there was a denial equal protection of the law by the defendant?

Mr. Thomas M. Daniel: That is correct.

Justice Potter Stewart: Nobody has talked about that.

What happened to that in the Court of Appeal and what is your position?

Mr. Thomas M. Daniel: That issue we believe has been finally decided by the Court of Appeals for the Sixth Circuit.

That issue was not raised by the petitioners.

Justice Potter Stewart: So that is out of the case?

Mr. Thomas M. Daniel: That is correct.

Justice Potter Stewart: Alright.

That was a refusal to install I think, was not it?

Mr. Thomas M. Daniel: That is correct Your Honor, and the Sixth Circuit held that there was a denial of equal protection and I believe the petitioners --

Justice Potter Stewart: And there is no appeal from that?

Mr. Thomas M. Daniel: -- have conceded that point.

Justice Potter Stewart: I see.

Thank you.

Chief Justice Warren E. Burger: Do uou have anything further Mr. Graves?

You have just --

Rebuttal of Frierson M. Graves, Jr.

Mr. Frierson M. Graves, Jr.: I have one sentence.

I agree with Justice Marshall that everyone complaints about the amount of utility, they all, so that the question of whether it is a dispute or not and we say by our notice to come to the credit department that we have established a hearing procedure because the evidence was that our hearing, our credit counselors usually have 15 to 20 years of service and are competent people and so they would be ones and you need 10 or 12 or 15 people because we had 235,000 electric customers and we feel that establishing that initial contact and the Crafts waited until their utilities, had the notice and had been terminated and then they came and they got the ultimate advice by telling them, combine your meters, put you on a budget payment and it would not be double billing, but split billing because they got the service to reclaim.

Chief Justice Warren E. Burger: That does not solve the problem which seems to be hanging in air, whether their due process right such as the Sixth Circuit has outlined it, is satisfied if they do not get the answer they like?

Mr. Frierson M. Graves, Jr.: Your Honor, I do not think they can -- that everybody gets the answer they right about utility bills in this because I think a utility could not compromise and give away the utilities just on the basis of selling it, that they would have to attempt the charge what was reasonably said by the meter to the purpose.

Chief Justice Warren E. Burger: Thank you gentlemen.

The case is submitted.