Opinion ID: 8410697
Heading Depth: 2
Heading Rank: 3

Heading: The City's Water Service Termination Policy

Text: We reach a different conclusion with respect to the City's policy of terminating water service to tenants whose landlords fail to pay their water bills. With respect to this policy, Winston alleges that the City violated both the Equal Protection and Due Process Clauses of the Fourteenth Amendment. We address each in turn, beginning with the Equal Protection claim.
We start by defining the classes at issue. In her complaint, Winston alleges that the City creates two classes of tenant water users-tenants whose landlords have delinquent water bills and tenants whose landlords are current in their payments. App. 12. The City has not challenged this definition of the classes, and for good reason: the City's own ordinances appear to encourage the collection of unpaid water bills from tenants whose landlords are delinquent in paying and permit water shutoffs to those same tenants. See Syracuse, N.Y., Code of Ordinances, Part M, §§ 16-53, 16-108(e). Thus, Winston plausibly alleges that that the City's ordinances and practices create these two different classes of tenants and that the City treats these classes differently. The question, then, is whether there is any reasonably conceivable state of facts that could provide a rational basis for [that] classification. Beach Commc'ns , 508 U.S. at 313 , 113 S.Ct. 2096 . 6 Put another way, we must ask whether there is a rational relationship between the disparity of treatment and some legitimate governmental purpose. Heller , 509 U.S. at 320 , 113 S.Ct. 2637 . In answering this question, we have considerable guidance. Other circuits have addressed similar circumstances in decisions that date back to the 1970s. The Fifth Circuit first addressed these issues in Davis v. Weir , 497 F.2d 139 (5th Cir. 1974). The situation in Davis was very similar to this case. The plaintiff-tenant, Davis, was current in his rental payments to his landlord, but because of defective plumbing, there was an exorbitant waste of water and Davis'[s] landlord ... had refused to pay the water bill. Davis , 497 F.2d at 141 . As a result, the City of Atlanta shut off Davis's water service, and declined to restore service until the bill was paid. Id. To resolve that problem, Davis and other tenants attempted to open water service accounts directly with the City of Atlanta, but the city denied their applications because of the pre-existing balances on the landlord's water account. Id. at 142 . Davis then filed a lawsuit in federal court raising due process and equal protection claims, just as Winston does here. Id . The district court enjoined Atlanta's practices, and the Fifth Circuit affirmed. On appeal, the City of Atlanta argued that the practice of rejecting water service applications until all accrued debts at the premises have been extinguished facilitates collection of unpaid bills at multi-unit dwellings and preserves the City's municipal revenue bond rating. Id. at 144 . The Fifth Circuit nevertheless held that the policy failed even rational basis review: A collection scheme ... that divorces itself entirely from the reality of legal accountability for the debt involved[ ] is  devoid of logical relation to the collection of unpaid water bills from the defaulting debtor. The City has no valid governmental interest in securing revenue from innocent applicants who are forced to honor the obligations of another or face constructive eviction from their homes for lack of an essential to existence-water. The fact that a third-party may be financially responsible for water service provided under a prior contract is an irrational, unreasonable and quite irrelevant basis upon which to distinguish between otherwise eligible applicants for water service. Id. at 144-45 (footnote and internal quotation marks omitted). Since Davis , three other Courts of Appeals have reached similar conclusions. First, in Craft v. Memphis Light, Gas & Water Division , the Sixth Circuit addressed a publicly-owned utility company's practice of refusing water service to new tenants of residences when prior tenants left unpaid bills. 534 F.2d 684 , 689-90 (6th Cir. 1976), aff'd on other grounds , 436 U.S. 1 , 98 S.Ct. 1554 , 56 L.Ed.2d 30 (1978). Relying on Davis , the Sixth Circuit held that the plaintiffs had established a valid equal protection claim. Id. at 690 ; see also Golden v. City of Columbus , 404 F.3d 950 , 961-62 (6th Cir. 2005) (reaffirming Craft on facts nearly identical to Winston's case (where a landlord fails to pay the water bill) and holding that terminating a tenant's water service is [not] a rational means of collecting the landlord's water service debt because the person directly penalized by the [shutoff] scheme is not the debtor but an innocent third party with whom the debtor contracted). 7 In Sterlingv. Village of Maywood , 579 F.2d 1350 (7th Cir. 1978), the Seventh Circuit also found an equal protection violation in a similar situation. In that case, the town's water department refused water service to the tenant-plaintiff because of overdue water bills from either a prior tenant or the landlord. 579 F.2d at 1352 . The Seventh Circuit joined the Fifth and Sixth Circuits, pointing to the language quoted above from Davis. Id. at 1355 . Nearly two decades later, the Ninth Circuit also joined those Courts of Appeals. See O'Neal v. City of Seattle , 66 F.3d 1064 (9th Cir. 1995). Similar to Craft , the Ninth Circuit appeal concerned whether the City of Seattle's refusal to provide water service to the new tenant of a residence based on a prior tenant's unpaid water bill is constitutionally permissible. Id. at 1065 . The Ninth Circuit rejected an intervening Third Circuit case (which we discuss further below) and held that [r]efusing a new tenant water service because of the debt of an unrelated prior tenant is illogical and violates the Equal Protection Clause. Id. at 1068 . We agree with the Fifth, Sixth, Seventh, and Ninth Circuits that requiring a tenant without any legal obligation for a landlord's unpaid bill to pay that bill to retain or restore water service fails rational basis review. The tenants of non-delinquent and delinquent landlords are similar in all relevant respects in this situation. First, they rent their homes and cannot open water accounts in their own name. Syracuse, N.Y., Code of Ordinances, Part M, § 16-11. Second, their landlords have the legal obligation to pay the water bills to the City; neither class of current tenants possesses a legal obligation to pay the unpaid water bill. As a result, the City's policy of shutting  off water to collect debts divorces itself entirely from the reality of legal accountability for the debt involved, Davis , 497 F.2d at 144 , and penalize[s] ... not the debtor but an innocent third party with whom the debtor contracted. Golden , 404 F.3d at 962 . The City argues that this case is distinguishable from those of the other circuits and points to the Third Circuit's ruling in Ransom v. Marrazzo , 848 F.2d 398 (3d Cir. 1988), which rejected Davis , Craft , and Sterling . Specifically, the City suggests four arguments to justify treating tenants of delinquent and non-delinquent landlords differently. First, the City argues that the water service termination policy is justified because a municipality has an important interest in ensuring the financial soundness of its utility system ... by the collection of unpaid utility bills. Appellee's Br. at 14. In the City's view, this legitimate interest allows it to ignore the absence of a tenant's legal responsibility when seeking to collect a landlord's water bill payment from a tenant. In making that argument, the City points to the Ransom decision. Ransom concerned Philadelphia's practice of denying water service to non-tenant occupants of a dwelling when there was an outstanding water bill from a prior tenant or owner. 8 848 F.2d at 403, 411 . In Ransom , the Third Circuit concluded that Davis 's holding unnecessarily restricts the characterization of the city's interest as not merely the collection of unpaid [payments], but the collection of those [payments] 'from the defaulting debtor.'  Id. at 413 (quoting Davis , 497 F.2d at 145 ). The court then reasoned that [t]he city has a valid interest in collecting unpaid [payments] from any source , and that there is a logical relation between ... a scheme [that encumbers a tenant's residence and prevents water service] and the more general goal of collecting debts, period. Id (emphasis added). It then concluded that the means Philadelphia adopted were in fact legitimate under its broader definition of the interest at stake, explicitly rejecting Davis . Id. That rationale is unconvincing, and we decline to adopt it here. Ransom cited no authority for its conclusion that a state or local government entity can collect money owed to it from any source, regardless of legal obligation. Id. We therefore agree with the Ninth Circuit that [p]roclaiming a goal of collecting the debt from anyone willing to pay does not give the City license to pursue payment by refusing water service to an unrelated, unobligated third party. O'Neal , 66 F.3d at 1068 . The City may not separate its debt collection scheme from the actual legal obligation for the unpaid water bills. See, e.g. , Davis , 497 F.2d at 145 (The City [of Atlanta] has no valid governmental interest in securing revenue from innocent applicants who are forced to honor the obligations of another or face constructive eviction from their homes for lack of an essential to existence-water.). The City's second argument is that Davis and the cases that follow it are  factually distinguishable. Specifically, the City contends that Winston cannot claim 'innocent third party' ... status with regards to her landlord's water service arrears because she has lived at the property in question for over ten years, and thus presumably lived on the premises when the arrears accrued. Appellee's Br. at 24 (quoting Brown v. City of Barre , 878 F.Supp.2d 469 , 498 (D. Vt. 2012) ). In its decision below, the district court agreed with that reasoning, holding that the City rationally concluded that it could suspend water service to current tenants because they used the water-and, as a result, increased the amount that their landlords owed to the City. Winston , 205 F.Supp.3d at 248-49 . At least one other district court in our Circuit has also adopted that view. 9 We conclude that that argument is also unavailing. The argument does not distinguish this case from the situation in Davis , where the plaintiff was current in his rental payments, and Atlanta terminated his water service because the plaintiff's landlord ... refused to pay the water bill. Davis , 497 F.2d at 141 . In both Davis and this case, the plaintiffs were current tenants who may have contributed to the water usage resulting in the landlord's unpaid water bill. However, even if this did distinguish Winston's allegations in her complaint from some other cases, it would not change our result. As we discussed above, the City cannot rationally compel tenants to pay their landlord's bills, because the tenants have no legal obligation to pay those bills. Their prior use of water does not change the fact that only the landlord is contractually obligated to the City to pay the water bills. Absent a change in the City's policy to allow tenants to open water accounts, that fact will not change-and the City's alleged water service termination policy will fail rational basis review under the Equal Protection Clause. 10 Third, the City argues-and the district court agreed-that it can rationally distinguish between tenants with delinquent landlords and tenants with non-delinquent landlords because of the delinquent landlords' non-payment. See Winston , 205 F.Supp.3d at 248 (The two alleged classes are differentiated by the non-payment for water services by landlords in one class, and the payment for such services by landlords in the other.); see also Brown , 878 F.Supp.2d at 499-500 (relying on similar reason to find no equal protection violation). That argument fails for substantially the same reasons. Neither class of tenants possesses a legal obligation to pay their landlord's unpaid bills. The fact of the landlord's non-payment is irrelevant, because the City cannot force an individual without a legal obligation to pay the bill of another. As a result, the City cannot point to the landlord's non-payment to satisfy rational-basis review under the Equal Protection Clause.  Finally, the City seems to argue that the same reasons that justify treating landlords and tenants differently for opening water accounts also justify the practice of collecting money from tenants for their landlords' water bills. But that argument is not responsive to Winston's allegation that the City lacks a rational basis to treat the tenants of delinquent and non-delinquent landlords differently. As we discussed above, the difference between landlords and tenants is relevant for the City's policy regarding who may open a water account. However, those differences are not the same for the water service termination policy, where the City must provide a reason for treating the two classes of tenants differently. Because those arguments are non-responsive, we decline to discuss them here. We conclude that Winston has stated a plausible claim alleging a violation of the Equal Protection Clause of the Fourteenth Amendment. We turn next to Winston's allegation that that same policy violates the Due Process Clause of the Fourteenth Amendment.
We also reverse as to Winston's due process claim against the City's termination of water service policy. To establish a substantive due process violation, a plaintiff must show both (1) that she has an interest protected by the Fourteenth Amendment, and (2) that the statute, ordinance, or regulation in question is not rationally related to a legitimate government interest. See, e.g. , Lange-Kessler v. Dep't ofEduc. of the State of N.Y. , 109 F.3d 137 , 140 (2d Cir. 1997) ; see also Sensational Smiles , 793 F.3d at 284 . 11 We conclude that Winston also plausibly alleges a violation of substantive due process. The City does not contest that Winston has a valid property interest in continued water service. 12 As to whether the  City's policy satisfies rational-basis review, we conclude that Winston plausibly alleges a due process violation. Winston asserts that the City is seeking to collect payment on landlords' bills by requiring tenants who have no legal obligation for those bills to pay their landlords' accounts. As we have discussed, such a policy scheme, which is not based in legal accountability for the debt, fails rational-basis review. Accordingly, we also reverse the district court's dismissal of Winston's alleged Due Process Clause violation.