• Federal District Court Holds Customer of a Municipal Utility Entitled to Formal Opportunity to be Heard Prior to Disconnection
  • May 15, 2012 | Author: P. Jason Stephenson
  • Law Firm: Barnes & Thornburg LLP - Indianapolis Office
  • The United States District Court for the Southern District of Indiana recently found that the Due Process Clause of the United States Constitution’s Fourteenth Amendment required an Indiana municipal water utility to provide an opportunity to interpose a formal request to be heard before disconnecting utility service. The Due Process Clause of the Fourteenth Amendment prohibits a state from depriving “any person of life, liberty, or property, without the due process of law.”

    The Court found that an implied contract existed between the municipality and the utility customer which gave rise to a protected property interest in continued water service. Because the customer believed she was in full compliance with her payment obligations, the municipal utility could not terminate service “at will.” The protected property interest required the municipality to provide the customer written notice of a procedure for protesting a proposed termination of utility services as unjustified before disconnecting the customer. A delinquent card including only a municipally telephone number was insufficient notice because it failed to describe the protest procedure. The protest procedure must provide some meaningful way to be heard prior to a decision that will affect the customer’s interest in important and substantial ways.

    This is the first instance we are aware of in Indiana imposing such a due process requirement on a municipal utility. The decision appears to permit class action lawsuits and requests for attorneys’ fees of customers denied this due process. Municipalities operating utilities should review their rules and regulations to determine (1) if they give rise to an implied contract that cannot be terminated at will and (2) if their due process procedures are adequate.