Lea Augustin v. City of Philadelphia , 897 F.3d 142 ( 2018 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 17-1216
___________
LEA AUGUSTIN; GERARD AUGUSTIN;
THOMAS MCSORLEY; DONNA MCSORLEY;
RICHMOND WATERFRONT INDUSTRIAL PARK, LLC
v.
CITY OF PHILADELPHIA,
Appellant
__________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2-14-cv-4328)
District Judge: Honorable J. Curtis Joyner
___________
Argued November 8, 2017
Before: SMITH, Chief Judge, HARDIMAN, Circuit Judge,
and BRANN, District Judge.

The Honorable Matthew W. Brann of the United States
District Court for the Middle District of Pennsylvania, sitting
by designation.
(Filed: July 18, 2018)
Craig R. Gottlieb [Argued]
City of Philadelphia Law Department
1515 Arch Street, 17th Floor
Philadelphia, PA 19102
John C. Connell
Archer & Greiner
One Centennial Square
33 East Euclid Avenue
Haddonfield, NJ 08033
Jeffrey M. Scott
Archer & Greiner
Three Logan Square
1717 Arch Street, Suite 3500
Philadelphia, PA 19103
Counsel for Appellant
Irv Ackelsberg [Argued]
Edward Diver
John J. Grogan
Peter E. Leckman
Langer Grogan & Diver
The Bell Atlantic Tower
1717 Arch Street, Suite 4130
Philadelphia, PA 19103
2
Seth F. Kreimer
University of Pennsylvania School of Law
3400 Chestnut Street
Philadelphia, PA 19104
Counsel for Appellees
____________
OPINION OF THE COURT
___________
HARDIMAN, Circuit Judge.
This case involves a group of landlords who object to
the system of liens used by the City of Philadelphia to collect
unpaid gas bills. The District Court certified a class and held
that the City had violated the landlords’ rights under the Due
Process Clause of the Fourteenth Amendment. The City filed
this appeal, arguing that its procedures for collecting gas debts
are constitutional. We agree with the City, so we will reverse
the District Court’s summary judgment in favor of the
landlords.
I
Before evaluating the City’s various arguments on
appeal, we begin by describing Pennsylvania’s municipal lien
system. We then discuss how the City ensures it is paid for gas
service and the effect its methods have on the Plaintiffs and the
class of landlords they seek to represent. We conclude these
3
preliminaries with a review of the procedural history of the
case.
A
Municipal liens in Pennsylvania are created and
enforced in three steps as set out in the Pennsylvania Municipal
Claim and Tax Lien Law (the Lien Law), 53 Pa. Stat. Ann.
§§ 7101–7455. First, a lien is automatically created when a
municipality acquires a claim against a property, since the Lien
Law “declare[s]” that all such claims are “to be a lien on said
property” with “priority to . . . the proceeds of any judicial
sale.” 53 Pa. Stat. Ann. § 7106(a)(1). Such liens arise by
operation of law, City of Philadelphia v. Manu, 76 A.3d 601,
604 (Pa. Commw. Ct. 2013), and “without any form of
hearing,” when a municipal claim is “lawfully . . . assessed,”
Shapiro v. Center Township, 632 A.2d 994, 997 (Pa. Commw.
Ct. 1993).
Second, the municipality perfects the lien by filing it
with the appropriate local court, 53 Pa. Stat. Ann. § 7143,
where it is publicly docketed by the Prothonotary, id.
§ 7106(b). Until filed, a municipal lien may not be enforced
through a judicial sale of the property. See id. §§ 7185, 7282,
7283(a). The statute does not require municipalities to provide
either notice or a hearing before filing a lien. City of
Philadelphia v. Perfetti, 119 A.3d 396, 400 (Pa. Commw. Ct.
2015). Municipalities can delay filing a lien indefinitely, id.,
but the lien is not enforceable against subsequent purchasers of
the property until filed, 53 Pa. Stat. Ann. § 7432, and the failure
to file a lien within 20 years after the claim accrues deprives
the lien of priority over other encumbrances, see id. §§ 7183,
7432.
4
Third, the Lien Law establishes post-filing procedures
for judicial sales. A municipality has two options if it wants to
sell a property to satisfy a gas lien: (1) it can petition the court
where the lien was filed for a rule requiring interested parties
to show cause why the property should not be sold, id.
§ 7283(a), or (2) it may sue on the claim by a writ of scire
facias, id. § 7185. Scire facias is meant to “warn the owner of
the existence of a claim so that the owner may make any
defenses known and show why the property should not be
under judicial subjection of a municipal lien.” North Coventry
Township v. Tripodi, 64 A.3d 1128, 1133 (Pa. Commw. Ct.
2013). At the close of a scire facias proceeding, the
municipality may obtain a judgment in rem and sell the
property to satisfy it. See 53 Pa. Stat. Ann. §§ 7274, 7279,
7281.
Although a municipality may enforce a lien only after it
is filed, the Lien Law empowers property owners to request a
hearing on the legality of a lien at any time. There are two ways
to get a hearing. First, a property owner may discharge the lien
by paying the amount of the underlying claim into court and
filing a petition setting out defenses. Id. § 7182. A jury then
decides whether the municipality or the property owner is
entitled to the deposited funds. Id.; see also City of
Philadelphia v. Merz, 28 Pa. Super. 227, 228 (1905) (citation
omitted). Second, after a claim is filed, a property owner may
serve the municipality with a notice to issue a writ of scire
facias. If the municipality does not commence scire facias
proceedings within fifteen days after receiving the notice, its
lien is voidable and the property owner may move to strike it.
53 Pa. Stat. Ann. § 7184.
5
B
The City distributes natural gas to its residents through
Philadelphia Gas Works (PGW or, for the sake of variety, the
utility), a public utility owned by the City. As a “city natural
gas distribution operation,” PGW is “entitled to . . . assess . . .
and file as liens of record [municipal] claims for unpaid natural
gas distribution service” under the Lien Law. 66 Pa. Cons. Stat.
§ 1414(a).
The cornerstone of PGW’s lien operations is the “Lien
Management System” (the System), which relies on computers
to automatically file real-estate liens. The System scans PGW’s
billing database for accounts that, according to the utility’s
criteria, are “lien eligible.” At least seven different criteria—
termed “lien models”—may apply based on whether a property
is commercial or residential, among other factors. A property
will become lien eligible when it accumulates a large enough
arrearage and has been delinquent for a long enough time, with
“large enough” and “long enough” varying based on which
model applies. For example, a typical residential account
becomes lien eligible “once an arrearage reaches $300 and
more than 91 days have elapsed since the last payment was
made.” Augustin v. City of Philadelphia, 2017 WL 56211, at
*3 (E.D. Pa. Jan. 5, 2017).
In theory, once the System identifies an account as lien
eligible, a pre-filing notification letter is sent to the property
owner. Pre-filing notices do not contain much information.
Pennsylvania’s Public Utility Code prohibits PGW from
disclosing certain confidential information, and the utility
generally refuses to tell landlords either the identity of the
tenant whose delinquency led to the lien or when the debt
accrued. The notices in the record state only the amount of
6
money owed and a deadline for payment. Prior to November
2012, pre-filing notices afforded property owners 11 days to
pay; today they afford 30 days. If that time passes without full
payment, the System automatically files the lien with the
Prothonotary, who dockets it. The System then sends a post-
lien notice alerting the property owner that a lien has in fact
been recorded.
In practice, however, the utility frequently interrupts the
System’s otherwise-automatic process by making certain
manual adjustments. These adjustments are grouped into two
categories—“blockers” and “exceptions.” If the System
encounters a blocker or an exception, it won’t send notice and
file a lien on its own. In those cases, notice and filing proceeds
only if workers manually override the adjustment.
PGW’s procedures for addressing accounts that are
subject to a blocker or exception, but are otherwise lien
eligible, do not prevent arrearages from continuing to grow.
Nor do they prevent a delinquent customer from continuing to
receive service. Rather, they operate only to prevent the lien
securing the delinquency from being filed with the
Prothonotary. “Debt often accumulates over many years” as
delinquent customers continue to use gas. Augustin, 2017 WL
56211, at *5. And unless they “are specifically authorized . . .
or are a third-party designee on the account,” landlords are not
apprised of those growing arrearages. Id.
Two blockers that play a significant role in this case are
“name mismatches” and “address mismatches.” If the
name/address combination associated with a gas account does
not match the City’s property tax records, the System will not
automatically file a lien on the delinquent account. These
“mismatch liens” often arise when a tenant maintains her own
7
gas-service account. Nevertheless, at the time of the District
Court’s decision “less than 50% of the mismatch liens on
record at PGW [were] attributable to a landlord-tenant
situation.” Id. at *9. Thousands of mismatch liens are filed
every year, and “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.” Id at *4.
Unsurprisingly, property owners regularly contact
PGW to ask how they may challenge a lien. When that
happens, the owner is often told to “file a complaint with the
Pennsylvania Public Utility Commission (“PUC”), . . . [which]
has repeatedly taken the position that it has no jurisdiction to
act in matters which arise under the [Lien Law].” Augustin v.
City of Philadelphia, 171 F. Supp. 3d 404, 414 (E.D. Pa. 2016).
The record shows that the utility knew this and took advantage
of it by continuing to steer customers in the PUC’s direction in
spite of the fact that the PUC declined jurisdiction over such
complaints. Indeed, when two of the named Plaintiffs here filed
complaints with the PUC, PGW immediately turned around
and successfully challenged the agency’s jurisdiction.
C
The landlords complain that the City’s lien procedures
violate their due process rights. There are five named
plaintiffs—two pairs of residential landlords and one
commercial landlord. Lea and Gerard Augustin own several
residential properties in Philadelphia. Between 2009 and 2012,
PGW repeatedly filed thousands of dollars’ worth of liens
against the Augustins’ properties on account of tenant
arrearages dating back as far as 2004. The Augustins first
learned of the liens in 2011, when the utility sent pre-filing
notices to their home address. Previous notices had not reached
8
the Augustins because PGW had mailed them to their rental
properties instead of their residence. In 2012, Lea Augustin
contacted the utility to seek guidance about the liens and was
told to file a complaint with the PUC. When the Augustins did
so, PGW objected to their complaint on the ground that the
PUC had no power to determine the validity of gas liens. The
PUC agreed, and dismissed the Augustins’ complaint for lack
of jurisdiction in May 2013.
Donna and Thomas McSorley are also residential
landlords. In 2013, PGW filed a lien against one of their rental
properties for about $1,150. Like the Augustins, the McSorleys
first learned of their tenants’ failure to pay their gas bills when
they received a pre-filing notice. The McSorleys paid off their
lien in September 2014.
The final named Plaintiff, Richmond Waterfront
Industrial Park LLC, owns 10 commercial and industrial
properties in Philadelphia. In 2012, PGW filed two liens
against one of Richmond’s properties, one for about $3,500,
and one for more than $27,000. Richmond eventually
persuaded the utility to identify the delinquent accounts. The
larger lien secured a delinquency attributable to a tenant that
had vacated Richmond’s property in 2003. The smaller one
was attributable to a tenant that had vacated in 2010. Armed
with that information, Richmond convinced PGW not to file
the larger lien, but the utility did eventually file the smaller one.
As in the Augustins’ case, Richmond was told to challenge the
lien before the PUC. Once again, the PUC declined to act on
the ground that it lacked jurisdiction over Lien Law disputes.
9
D
The five named plaintiffs commenced this action in the
District Court in mid-July 2014. After discovery closed, the
parties filed cross-motions for summary judgment, with the
landlords’ motion limited to the question of whether the
utility’s procedures for filing gas liens failed to provide due
process. The District Court granted summary judgment for the
landlords, denied the City’s cross-motion, and entered a
preliminary injunction barring the City from filing new liens or
collecting on old ones against members of the putative class.
With liability decided, the landlords moved for class
certification under Rule 23(b)(2) of the Federal Rules of Civil
Procedure and for the entry of final injunctive relief. After a
two-day hearing, the District Court granted both motions.
First, the Court certified a class of
[a]ll owners of rental properties within the City
of Philadelphia whose property is or will be
encumbered by a municipal lien to enforce
unpaid charges for natural gas service, where
such service, according to the records of the
Philadelphia Gas Works, was provided to a
residential or commercial gas service customer
other than the property owner, excluding
however, any owner who was a party in a state
court scire facias proceeding regarding such lien
initiated under Article 3 of the Pennsylvania
Municipal Claims and Tax Lien Act, 53 P.S.
§ 7182, et seq. if a final judgment in such
proceeding was entered.
10
Ohio App. 57. The named Plaintiffs were appointed class
representatives, and their lawyers were named class counsel.
Second, the District Court entered a final remedial order
that included both prospective and retroactive elements. The
District Court enjoined the City and PGW from “filing any
liens on real property to enforce unpaid charges for natural gas
service, where such service . . . was provided to a . . . customer
other than the owner of the property targeted for the lien using
its current methods and procedures for doing so.” App. 96. The
order further allowed the City to resume filing liens if it
provide[d] property owners with (a) meaningful
notice of the facts underlying the decision to
impose a lien which is (b) delivered at a
sufficiently early time as to enable the property
owner to resolve the problem before the account
delinquency grows unnecessarily, and (c)
provide[d] the property owner with an
administrative opportunity to obtain all relevant
facts and have all factual disputes resolved
before the lien is imposed.
App. 96–97.
In addition to the injunction, the District Court ordered
that “[a]ny existing gas liens currently of record which were
imposed on properties for unpaid gas charges incurred by a
class member,” or “Covered Liens,” were “invalid, null, and
void.” App. 97. It directed the City to vacate all Covered Liens
and enjoined future attempts to collect them. And it told the
City to refund all the money it had accepted in satisfaction of
Covered Liens since the entry of the preliminary injunction.
The City filed this appeal.
11
II1
A
Before analyzing whether the lien procedures at issue
here satisfy due process, we must first address the City’s claim
that it need not provide any process at all.
The Due Process Clause applies so long as the City acts
to deprive the landlords of a “significant”—and therefore
constitutionally protected—property interest. See Fuentes v.
Shevin, 407 U.S. 67, 86 (1972). The point at which an
encumbrance on real estate requires due process is controlled
by the Supreme Court’s decision in Connecticut v. Doehr, 501
U.S. 1 (1991). In that case, the Court considered the
constitutionality of Connecticut’s prejudgment attachment
scheme and held that attachment represents a significant
deprivation of property, even when the defendant remains in
possession of the attached assets. The Court reasoned that
attachment “clouds title; impairs the ability to sell or otherwise
alienate the property; taints any credit rating; reduces the
chance of obtaining a home equity loan or additional mortgage;
and can even place an existing mortgage in technical default
where there is an insecurity clause.” Id. at 11.
Under the Lien Law, similar consequences follow the
filing—but not the automatic creation—of a lien securing a
municipal claim. Municipal liens are entitled to priority over
everything but taxes. 53 Pa. Stat. Ann. § 7106(a)(1). Once
recorded with the Prothonotary, a gas lien represents a
significant cloud on the property owner’s title. Indeed, the
1
The District Court had jurisdiction under 28 U.S.C.
§ 1331. We have jurisdiction under 28 U.S.C. § 1291.
12
District Court found that the utility depends on that leverage to
collect on its liens. Augustin, 2017 WL 56211, at *9. Rather
than forcing a sheriff’s sale of liened property, the utility’s
ordinary practice is to “wait[] for properties to either be sold or
refinanced such that the owner needs to clear title to their real
estate.” Id. A filed lien, then, interferes sufficiently with
property interests to trigger scrutiny under the Due Process
Clause.
The same is not true, however, of an unfiled lien, which
exists only by virtue of its automatic creation under the Lien
Law. Until perfected by filing, liens are not a matter of public
record and, by the statute’s express language, will not cloud the
title held by subsequent purchasers. See 53 Pa. Stat. Ann.
§ 7432. A lien such as this that does not actually interfere with
property in any practical sense is not a “significant”
deprivation for due process purposes. The ultimate question in
this case, then, is what process must accompany the filing of a
gas lien.
The City resists that conclusion, relying largely on pre-
Doehr federal decisions as authority for the proposition that, so
long as the owner retains possession and control over her
property, liens do not work a deprivation sufficient to trigger
an entitlement to due process. In this Circuit, it was indeed the
law before Doehr that “[u]nder the [Lien Law] the filing of the
[lien] does not affect the alleged debtor’s use of the property,
and no interference with that use can take place until the
municipality resorts to a judicial foreclosure.” Winpenny v.
Krotow, 574 F.2d 176, 177 (3d Cir. 1978). That rule, however,
which has not been relied on by this Court since it was first
13
announced more than 30 years ago, must now give way to the
Supreme Court’s contrary holding in Doehr.2
B
Having rejected the City’s threshold argument, we turn
to the landlords’ procedural due process claims, which are
subject to the familiar standard first announced in Mathews v.
Eldridge, 424 U.S. 319 (1976). Whether the City’s lien
procedures comport with due process depends on the balance
of three factors: (1) “the private interest that will be affected by
the official action”; (2) “the risk of an erroneous deprivation of
such interest through the procedures used” and the value of
“additional or substitute procedural safeguards” in avoiding
such errors; and (3) the governmental interest, “including the
function involved and the fiscal and administrative burdens
that the additional or substitute procedural requirement[s]
would entail.” Id. at 335. Because this dispute involves an
essentially private debt stemming from the City’s participation
in ordinary commerce, rather than any truly governmental
action, the final prong of the Mathews test is refocused on “the
interest of the party seeking the prejudgment remedy,” with
“due regard for any ancillary interest the government may have
2
The City also cites a recent decision of the
Pennsylvania Commonwealth Court upholding the Lien Law
against a similar challenge, which relies in part on substantially
the same obsolete reasoning as Winpenny. See City Br. 30
(citing City of Philadelphia v. Perfetti, 119 A.3d 396, 405 (Pa.
Commw. Ct. 2015).
14
in providing the procedure or forgoing the added burden of
providing greater protections.” Doehr, 501 U.S. at 11.3
There is little need for further discussion of the
landlords’ interest. Although the filing of a lien is “significant”
enough to trigger the protections of the Due Process Clause, it
remains a relatively limited interference with the landlords’
property. An owner whose property is subject to a lien filed
under the Lien Law may still use the property or sell it subject
to the gas debts. Thus, the filing of a lien under the statute
burdens the right to alienate the subject property, but does not
abolish it. Indeed, the District Court found that “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.” Augustin, 2017 WL
3
When States act in commerce as ordinary buyers or
sellers, the Supreme Court has long recognized at least one
context in which they are treated like any other market
participant, with neither particular solicitude granted nor
special constraints imposed by virtue of their status as
sovereigns. See Reeves, Inc. v. Stake, 447 U.S. 429, 436–40
(1980) (discussing the market-participant exception to the
dormant Commerce Clause). That treatment “reflects a ‘basic
distinction between States as market participants and States as
market regulators’” we recognize here as well. See Dep’t of
Revenue of Ky. v. Davis, 553 U.S. 328, 339 (2008) (quoting
Reeves, 447 U.S. at 436). But see Edinboro Coll. Park
Apartments v. Edinboro Univ. Found., 850 F.3d 567, 582 n.12
(3d Cir. 2017) (declining to decide whether to recognize a
similar market-participant exception to state-action immunity
under the Sherman Act, and observing that the existence of
such an exception is an open question).
15
56211, at *9. Nor have the liens interfered with the landlords’
“ability to maintain their properties or collect rents.” Id. This
is essentially identical to the deprivation that the Supreme
Court addressed in Doehr. As such, that case provides a useful
benchmark for comparison respecting the other factors that
play into our inquiry under Mathews.
The next factor, the risk of an erroneous deprivation, is
somewhat difficult to assess on the present record, which
comes to us following a summary judgment. As such, the
District Court was obliged to determine that there was no
genuine dispute as to the facts on which it based its decision.
See Fed. R. Civ. P. 56(a). But the Court largely failed to do so
with respect to the risk of erroneously-filed liens.
The District Court did devote a portion of its order to
discussing the “Landlord Cooperation Program” (LCP)—a
voluntary accommodation that the utility reached with a group
of landlords, under which it refrains from filing liens on
properties owned by landlords who agree to meet certain
conditions. Describing problems that PGW had in
implementing that program, the District Court found as fact
that “there are frequent errors in the amounts of the liens placed
[on LCP participants’ properties], which requires [sic] the
original lien to be manually removed and then replaced by a
lien for a valid amount.” Augustin, 171 F. Supp. 3d at 413. This
factual finding was clearly erroneous, however, because the
witness whose testimony the District Court relied on said no
such thing. Rather, as the City points out, in response to the
question, “[D]o you ever have to deal with [errors in lien
amounts]?”, the testifying PGW employee stated only that
“[t]here ha[d] been a few, yes,” App. 718 (Tr. 132:20–22).
16
On appeal, the landlords fare little better in
demonstrating a major risk of erroneous liens. They assert that,
“where PGW’s computer system is filing liens with little
human involvement, there is a substantial risk of liens being
filed erroneously or in incorrect amounts,” and claim that they
“presented the district court with a substantial evidentiary
record concerning the likelihood of mistaken decisions and
erroneous deprivations.” Landlords Br. 41. Their opening brief
to this Court, however, points to only one place in the record
where we can find such evidence—two citations in one
footnote to the report of the landlords’ expert. And even
reading that evidence in the most generous light, the risk of
erroneous deprivation in this case remains significantly less
than that which existed in Doehr.
In that case, Connecticut permitted ex parte attachment,
before judgment, to secure payment of a potential future
personal-injury judgment. Doehr, 501 U.S. at 5–6. The
petitioner attached Doehr’s home “in conjunction with a civil
action for assault and battery that he was seeking to institute
against Doehr.” Id. at 5. As the Second Circuit has explained,
“[i]n Doehr, a substantial risk of error was created by the nature
of the underlying claim: an intentional tort that had no
connection to the property and did not ‘readily lend itself to
accurate ex parte assessment of the merits.’” Diaz v. Paterson,
547 F.3d 88, 98 (2d Cir. 2008) (quoting Doehr, 501 U.S. at 17)
(internal alterations omitted).
By contrast, disputes about the applicability of a
municipal lien involve only “determining the existence of a
debt or delinquent payments”—a matter that lends itself to
documentary proof and can be calculated with relatively little
risk of error. Doehr, 501 U.S. at 14–15. The landlords’ expert
points out that the rules governing gas billing are complicated
17
and sometimes subject to reasonable dispute. And to be sure,
the calculation of a gas bill is not without risk of error. Cf. Diaz,
547 F.3d at 98 (prejudgment remedies sought for a promissory
note for a sum certain and for a mortgage). But although it may
not always be simple to calculate what is due PGW, the fact
remains that a claim for gas service already provided is “pre-
existing, readily quantifiable, and largely susceptible to proof
by documentary evidence.” Id.
The risk-of-erroneous-deprivation factor, in addition to
considering the probability of error, also takes into account the
consequences of error. More protective process will generally
be required the more the “length or severity of the deprivation”
indicate “a likelihood” that “serious loss” will accompany any
mistake. See Memphis Light, Gas and Water Div. v. Craft, 436
U.S. 1, 19 (1978). Whether a loss is minimal enough to excuse
the ordinary requirement of pre-deprivation process will
depend on a variety of factors, including the hardship suffered
during the deprivation and the adequacy of the available post-
deprivation remedies.
By way of example, in Dixon v. Love, 431 U.S. 105
(1977), the Supreme Court considered the risk of error
associated with the decision to suspend a truck driver’s license.
Id. at 106, 111. In concluding that the risk was relatively low,
the Court noted that retroactive relief would never be able to
make a wrongly-suspended driver fully whole because the
driver would have been irreversibly deprived of time on the
road. Id. at 113. On the other hand, the Court observed that “a
driver’s license may not be so vital and essential as are social
insurance payments on which the recipient may depend for his
very subsistence.” Id. (citing Goldberg v. Kelly, 397 U.S. 254,
264 (1970)). In this appeal, both factors point toward a
relatively low risk. Under most circumstances, an erroneously
18
filed lien can be fully remedied by a post-filing hearing and an
order removing the encumbrance. And as we noted already, the
consequences of a mistaken lien are relatively slight—even a
filed lien does not interfere with the owner’s present use and
enjoyment of her property.
Moreover, the risks that are associated with an
erroneous lien are mitigated by the post-deprivation remedies
available under the Lien Law. See Doehr, 501 U.S. at 14–15.
The most significant risk is that a cloud on title will hinder the
owner’s ability to dispose of her property exactly as she
wishes. She may be unable to borrow against it, unable to sell
it, or be otherwise hindered in various transactions.
But as the City points out, an owner who wishes to do
any of those things despite a lien has two prompt remedies.
First, she may serve on the City a notice to issue a writ of scire
facias, in which case the City has only 15 days to respond or
the lien becomes voidable. Second, an owner may pay security
into court—immediately clearing the lien—and then proceed,
clean title in hand, to a full hearing on the validity of the lien.
Indeed, a property owner could do this before a lien is ever
filed. See 53 Pa. Stat. Ann. § 7182. And because the utility
provides 30 days’ notice before a lien is filed, owners have a
meaningful opportunity to avoid the recording of a lien
altogether—without prejudicing any defenses they might have.
In addition to these statutory remedies, landlords may
structure their tenant relationships to eliminate the possibility
of a surprise encumbrance. As the City points out, landlords
are well-positioned to apprise themselves of their tenants’
obligations to PGW, without demanding that the City do so for
them. They may “(1) contractually require the tenant to prove
utility payment; (2) contractually require the tenant to allow
19
[the] landlord access to the tenant’s account information; or (3)
place the bill in the [landlord’s] name by keeping himself as
customer of record, and incorporate the cost into the rental
rates.” City Br. 23. Where an individual can protect himself at
little or no expense, the case for the government’s obligation
to protect him through a potentially costly and inevitably
imperfect notice regime is markedly less compelling.
The final two factors in our due process inquiry under
Mathews and Doehr are the interests of PGW as the party
seeking a prejudgment lien, and of the City as the
governmental entity responsible for providing any additional
procedural protections. The utility’s interest is
straightforward—it has a strong interest in collecting on debts
legitimately imposed for service already provided. That
interest in particular, intermingled as it is with the City’s
interest in stable municipal finances, and the public’s interest
in a functioning gas-distribution network, weighs heavily in
our analysis.
Moreover, because PGW enjoys an automatic lien on a
property to which it provides service, it has a preexisting
interest in the delinquent property at the time a lien is filed. In
Doehr, the Supreme Court rejected Connecticut’s prejudgment
attachment scheme in part because it ran in favor of claimants
who lacked any preexisting interest in the property being
attached. 501 U.S. at 16. As the Court explained, while the
presence of such an interest does not mean that no process is
due, “a heightened plaintiff interest in certain circumstances
can provide a ground for upholding procedures that are
otherwise suspect.” Id. at 12 n.4. Chief Justice Rehnquist’s
concurrence in Doehr sheds additional light on what those
circumstances might entail:
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[I]n Spielman-Fond[, Inc. v. Hanson’s, Inc., 417
U.S. 901 (1974)] . . . Arizona recognized a pre-
existing lien in favor of unpaid mechanics and
materialmen . . . . Since neither the labor nor the
material can be reclaimed once it has become a
part of the realty, this is the only method by
which workmen . . . may be given a remedy
against a property owner who has defaulted on
his promise to pay for the labor and the materials.
To require any sort of a contested court hearing
or bond before the notice of lien takes effect
would largely defeat the purpose of these
statutes.
501 U.S. at 28 (Rehnquist, C.J., concurring).
Essentially the same considerations apply here—the
company can’t take back its gas, so it gets an automatic senior
lien to secure its deliveries. And since PGW is a regulated
utility, its ability to select its customers based on
creditworthiness is greatly restricted. Under these
circumstances, the recourse that a lien provides to the value of
the property itself is, as in Spielman-Fond, “the only method”
for giving PGW a reliable remedy for non-payment. See id.
The landlords respond that this case is different than
other preexisting interest cases “because the debt the City is
seeking to recover is the debt of someone other than the
property owner. Pre-deprivation notice is less necessary when
the person affected already knows of the impending
deprivation, as is more often the case in a mechanic’s lien or
lis pendens situation.” Landlords’ Br. 38. We disagree. As the
City points out, nothing in Doehr or Spielman-Fond suggests
that the presence or absence of a preexisting interest goes to
21
whether the debtor has prior notice of the debt. Rather, those
cases rely on preexisting interests only to assess the strength of
the claimant’s interest in the prejudgment remedy he seeks.
Based on the foregoing analysis, we will reverse the
District Court’s partial summary judgment for the landlords.
The District Court’s Mathews balancing went astray in three
ways. First, it failed to recognize the relatively mild imposition
that filing a municipal lien works on landlords’ property rights.
Second, it overstated the record as to the risk of erroneously-
filed liens and failed to account for the relative ease of
accurately calculating gas debts. And finally, it did not take
proper account of PGW’s preexisting interest in liened
property. We hold that PGW’s procedures, in combination
with the remedies made available under the Lien Law, are
adequate to satisfy due process as applied to the landlords.4
4
Our conclusion accords with those of the Second and
Tenth Circuits as well as the Rhode Island Supreme Court,
which have, since Doehr, upheld similar schemes that involved
encumbering real property to secure a creditors’ preexisting
interests. See Diaz v. Paterson, 547 F.3d 88, 90 (2d Cir. 2008)
(upholding state lis pendens scheme); Shaumyan v. O’Neill,
987 F.2d 122, 122–23 (2d Cir. 1993) (upholding the same
prejudgment attachment statute addressed in Doehr, but as
applied to a suit between a property owner and contractor);
Cobb v. Saturn Land Co., Inc., 966 F.2d 1334, 1337–38 (10th
Cir. 1992) (upholding state mechanic’s lien statute); Gem
Plumbing & Heating Co., Inc. v. Rossi, 867 A.2d 796, 818 (R.I.
2005) (upholding state mechanic’s lien scheme).
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* * *
For the foregoing reasons, we will reverse the Court’s
summary judgment that PGW’s lien procedures violate due
process, and remand with instructions to enter judgment for the
City.5
5
The City also asks us to reverse the District Court’s
class certification order for lack of an adequate class
representative. We decline to do so because the City failed to
preserve its argument that Richmond is an inadequate
representative. Consequently, our decision binds the absent
class members as well as the named parties.
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