Jackson v. Metropolitan Edison Company Reply Brief for the Petitioner

    2 3 5 2 t -IN THE

m prrm r C ou rt of tlje ®nitrt> pt&fr;S
OCTOBER TERM, 1974

No. 73-5845

kiart, fi 2 
L E D

SEP 19 1374 

MICHAEL RSiffiK, JR„CLERK

CATHERINE JACKSON, On Behalf of Herself and 
All Others Similarly Situated,

Petitioner,
v.

METROPOLITAN EDISON COMPANY,
A Pennsylvania Corporation,

Respondent.

ON WRIT OF CERTIORARI TO THE UNITED STATES 
COURT OF APPEALS FOR THE THIRD CIRCUIT

REPLY BRIEF FOR THE PETITIONER

ALAN LINDER, ESQUIRE 
EUGENE F. ZENOBI, ESQUIRE 
J. RICHARD GRAY, ESQUIRE 

Central Pennsylvania Legal 
Services

(Formerly Tri-County Legal Services) 
53 North Duke Street - Suite 457 
Lancaster, Pennsylvania 17602 
(717) 397-4236 

Attorneys for Petitioner
Of Counsel:
JONATHAN M. STEIN, ESQUIRE 

Community Legal Services 
313 South Juniper Street 
Philadelphia, Pennsylvania

Washington, D.C. • C LB  P U B LISH ER S' • LAW PRIN TING  CO. • (202) 393-0625



( i )

TABLE OF CONTENTS

Page
ARGUMENTS:

I. PETITIONER HAS STANDING TO BRING
THIS ACTION . . ' .........................................................  I

A. Petitioner is entitled to bring this action 
because she is the Respondent’s cus­
tomer and is the real party in interest 
and the intended beneficiary and 
recipient of Respondent’s services...................... 1

II. RESPONDENT’S BRIEF FAILS TO PRO­
VIDE A COMPREHENSIVE ANALYSIS OF
THE CUMULATIVE EFFECTS OF THE
VARIOUS INDICIA OF STATE ACTION .................  4
A. A multi-dimensional approach is re­

quired.......................... ................................................  4
B. The Accessary indicia of state action are

present in this case so as to require a 
finding that Respondent acted under 
color of law when it terminated 
Petitioner’s electrical services. . ..............................  6
1. The state specifically approved the

particular conduct challenged herein 
because Respondent’s proposed 
termination of service tariff was 
passed by the Public Utility Commis­
sion following public hearings.............................. 6

2. ' Respondent performs a public
function, which constitutes one in­
dex of state action................................................  7

3. Pervasive state regulation of the
specific conduct challenged is a 
significant index of state action........................... 8



( ii)

4. Respondent is a monopoly whose
challenged activity herein is author­
ized by and promotes interests of the 
Commonwealth of Pennsylvania..........................  9

5. The fact that Respondent’s activities 
are subject to some Federal regula­
tion is not incompatible with a 
finding of action under color of state 
law with regard to termination of

Page

service for nonpayment of a bill. .................... 11
6. Respondent’s actions constitute the 

effectuation of state policies which 
are repugnant to the Constitution............. .. 12

7. The fact that Respondent’s revenues 
are subject to the Utilities Gross 
Receipts Tax is one index of state
action.................... ......................... ................ 13

8. In employing the authority of the 
Com m onwealth to terminate 
Petitioner’s electrical services, it is 
immaterial for state action purposes 
that the Respondent did not enter
upon the Petitioner’s premises..................... .. 14

9. Granting Petitioner due process of 
law will not deprive the Respondent 
of due process of law. ....................................... 15

CONCLUSION .............................. .............................................. 19



(Hi)

TABLE OF AUTHORITIES

Cases:
Adickes v. S.H. Kress Co., 398 U.S. 144 (1970) . ..................  8
Arnett v. Kennedy, 40 L.Ed.2d 15 (1974) ............... .. 35, 16
Bailey v. Philadelphia, 184 Pa. 594, 39 A. 494

(1898)   8
Beaver Valley Water Co. v. Public Service Commis­

sion, 70 Pa. Super. 621 (1918) ............................................ 3
Bell v. Burson, 402 U.S. 535 (1971) ........................................  17
Board of Regents v. Roth, 408 U.S. 564 (1972) ............. 16, 17
Boddie v. Connecticut, 401 U.S. 371 (1971) ...........................  15
Burton v. Wilmington Parking Authority, 365 U.S.

715(1961)   4
Davis v. Weir, 328 F. Supp. 317, 359 F. Supp. 1023 

(N.D. Ga., 1971, 1973) affirmed 497 F.2d 139 
(5th Cir., 1974) ............................................................ 3, 4, 18

Fuentes v. Shevin, 407 U.S. 67 (1 9 7 2 ) ..............................  15, 16
Fletcher v. Rhode Island Hospital Trust National

Bank, 496 F.2d 927 (C.A. 1, 1974) ...................................... 6
Gilmore v. City of Montgomery, Alabama, 94 S.Ct.

2416 (1974)      9-10
Girard Life Insurance Co. v. The City of Philadel­

phia, 88 Pa. 393 (1 8 7 9 ) .........................................................  8
Goldberg v. Kelly, 397 U.S. 254 (1970) ................................... 18
Ihrke v. Northern States Power Co., 459 F.2d 566 

(C.A. 8, 1972) vacated for mootness, 409 U.S.
815 (1972)   14

Page

i



Jackson v. Northern States Power Co., 343 F. Supp.
265 (D. Minn., 1972) ......................... ..................................  3

Kadlec v. Illinois Bell Telephone Co., 407 F.2d 624
(C.A. 7, 1969) cert, den., 396 U.S. 846 (1969) .................  9

Lathrop v. Donohue, 367 U.S. 380 (1961) ......................  11. 12
Lombard v. Louisiana, 373 U.S 67 (1963) ..............................  9
Lynch v. Household Finance Corp., 405 U.S. 538

0972) ........................... ...................................................  3, 12
Marsh v. Alabama, 326 U.S. 502 (1946) ...................................  12
Mitchell v. W.T. Grant Co., 40 L.Ed.2d 406 (1974) . . . .  15, 16
Mitchum v. Foster, 407 U.S. 224 (1972) ................................  12

Moose Lodge 107 v. Irvis, 407 U.S. 163 (1972) .............  4, 7, 9
Mullane v. Central Hanover Bank and Trust Co.,

339 U.S. 306 (1950) .......................................... ’ .................  4
Munn v. Illinois, 94 U.S. 113 (1877) .................... ..............  . 8
Otter Tail Power Co. v. United States, 410 U.S. 366

(1973), reh. den. 411 U.S. 910 .............................. ..............12
Palmer v. Columbia Gas of Ohio, 342 F. Supp. 241 

(N.D. Ohio, W.D., 1972), affirmed 479 F.2d 153 
(C.A. 6, 1972) ............................ ............................... ........... 17

Pa. Chautauqua v. Public Service Commission of Pa.,
105 P. Super. 160 (1932) .......... .........................................  3

Public Utilities Commission v. Poliak, 343 U.S. 451
(1952) .............................. ............................................ 7, 12, 13

Railway Employees Dept. v. Hanson, 351 U.S. 225
(1956) ............................................................................. 11, 12

Reitman v. Mulkey, 387 U.S. 369 (1967) . ..............................  8
Shapiro v. Thompson, 394 U.S. 618 (1969) ...........................  18

(iv)

Page



Page

Tyrone Gas and Water Co. v. Public Service
Commission, 77 Pa. Super. 292 (1921) ..............................  3

United States v. Williams, 341 U.S. 97 (1950) .........................  12

Statutes:
42 U.S.C. §1983 .........................................................................  12
72 Pa. Stat. Anno. §8101   14
66 Pa. Stat. Anno. §1122      13
66 Pa. Stat. Anno. §1141   7
66 Pa. Stat. Anno. § 1171 .............................................. 5, 8, 16
Miscellaneous:
Rules of the Supreme Court of the United States .................  2
Cong. Globe, 42nd Cong., 1st Sess., App. 68 (1871)...............  12
Pa. P.U.C. Tariff Regulation No. VIII .............................. 13, 15
Pa. P.U.C. Electric Regulation Rule No. 14D ................. 13, 15
Metropolitan Edison Company Electric Tariff Elec­

tric Pa. P.U.C., No. 41, Rule 15 ................................ 2, 7, 13
P.U.C. et al v. Metropolitan Edison Co., R.l.D. 64,

—P.U.R. 4 th -  (March 25, 1974) ........................................... 10
Re Rules and Reguations Governing the Discon­

nection o f Utility Sendees o f the Vermont Public 
Service Board, 2 P.U.R. 4th 209 (April 19, 1974)............... 18

Amicus Brief o f  the Public Service Commission o f 
New York ........................................................... .. 17-18



IN THE

Supreme Court of tfjr ®mteb H>tateg
OCTOBER TERM, 1974

No. 73-5845

CATHERINE JACKSON, On Behalf of Herself and 
All Others Similarly Situated,

v.
Petitioner,

METROPOLITAN EDISON COMPANY,
A Pennsylvania Corporation,

Respondent.

ON WRIT OF CERTIORARI TO THE UNITED STATES 
COURT OF APPEALS FOR THE THIRD CIRCUIT

REPLY BRIEF FOR THE PETITIONER

ARGUMENT
I.

PETITIONER HAS STANDING TO BRING 
THIS ACTION

A. Petitioner is entitled to bring this action 
because she is the Respondent’s customer 
and is the real party in interest and the 
intended beneficiary and recipient of the 
Respondent’s services.

In its first argument, Respondent raises the issue of 
Petitioner’s legitimacy to bring this action. This issue



was not raised in the lower courts, nor was it included 
in Respondent’s brief in opposition to the Petition for 
the Writ of Certiorari.1 Certainly, the failure of the 
district court and court of appeals to consider this 
obvious issue lends support to the apparent lack of 
significance of such issue.

There is no question that the Petitioner is a proper 
party to bring this action. Petitioner was the owner, 
occupant and prior billing party of the premises to 
which Respondent’s electrical services were provided, 
(A-22). The Respondent was certainly aware of the 
above and provided service to the Petitioner as the 
beneficiary of the contract entered into between it and 
Dodson in September 1971. (A-23). Furthermore, after 
Dodson moved from the premises, the Respondent 
considered the Petitioner to be its customer and liable 
for the bill, as shown by the demand made by the 
Respondent’s employee for $30.00 by the following 
Monday on October 11, 1971 (A-25). The fact that a 
written contract was not entered into at this point is 
irrelevant since Rule 1 of the Respondent’s Tariff No. 
41 provides that a written contract is not necessary to 
create a customer relationship (A-38).

In addition to having standing to sue as the customer 
or intended beneficiary of the service, the Petitioner 
acquired standing as an occupant with a legal interest in 
the premises who is also the intended recipient of the 
services. Thus, Respondent’s statement on page 10 of 
its Brief that the Fourteenth Amendment protections

*See Rules 24(2) and 4G(l)(d)(2) of the Rules of this Court 
as to timeliness of arguments.



3

apply to “persons” and not to “premises” not only 
appears to reassert the discredited personal v. property 
rights distinction which was struck down in Lynch v. 
Household Finance Corp., 405 U.S. 538 (1972), but 
also ignores the reality of the fact that Petitioner’s 
personal rights are being denied by Respondent when it 
unconstitutionally deprives her of the property right to 
continued receipt of electrical services during a billing 
dispute.

To accept Respondent’s argument that only the 
billing party has standing to contest a utility company’s 
termination action is to maintain that a non-billing 
occupant has no legal interest in receipt of utility 
service. This position is not only contrary to common 
sense and to public policy, but is contrary to caselaw.2 
In this regard, since Respondent’s challenged tariff 
requires that notice be provided prior to termination of

2 In Pennsylvania, an incoming tenant cannot be held 
responsible for the bills of the former occupant of the premises. 
Tyrone Gas and Water Co. v. Public Service Commission, 77 Pa. 
Super. 292 (1921). See also, Beaver Valley Water Co. v. Public 
Service Commission, 70 Pa. Super. 621 (1918); Pa. Chautauqua 
v. Public Service Commission o f Pa., 105 Pa. Super. 160 (1932). 
Similarly, courts have held that a tenant who is the non-billing 
party, has standing to challenge the termination of utility service 
to his or her premises without prior notice and opportunity to 
be heard when the landlord billing party refuses or fails to pay 
the bill. Jackson v. Northern States Power Co., 343 F. Supp. 265 
(D. Minn., 1972); Davis v. Weir, 328 F. Supp. 317, 359 F. Supp. 
1023 (N.D. Ga„ 1971, 1973), affirmed 497 F.2d 139 (5th Cir., 
1974) at 145, where the Court noted that the “Department’s 
actions offend not only equal protection of the laws but also due 
process.”



4

service for nonpayment of a bill, it is submitted that 
such notice, in order to be meaningful and pass 
constitutional muster, must be furnished to the 
occupant of the premises. Mullane v. Central Hanover 
Bank and Trust Co., 339 U.S. 306 (1950); Davis v. 
Weir, 328 F. Supp. 317, 359 F. Supp. 1023 (N.D. Ga„ 
1971, 1973), affirmed 497 F.2d 139 (5th Cir., 1974).

As an occupant with a legal interest in said premises, 
Petitioner is the customer and real party in interest, 
with standing to bring this action regardless of whether 
or not she was the prior billing party.

II.

RESPONDENT’S BRIEF FAILS TO PRO­
VIDE A COMPREHENSIVE ANALYSIS OF 
THE CUMULATIVE EFFECTS OF THE 
VARIOUS INDICIA OF STATE ACTION.

A. A multi-dimensional approach is required.

In its brief, and contrary to the rule of Burton v. 
Wilmington Parking Authority, 365 U.S. 715 (1961) 
and Moose Lodge 107 v. Irvis, 407 U.S. 163 (1972), 
Respondent seeks to avoid a finding of state action by 
treating the various indices of state action separately 
and in a vacuum. Rather, Petitioner submits that it is 
consideration of the cumulative effect of the several 
indices of state action that is required for a 
determination that ostensibly private conduct is taken 
under color of law. Thus, a finding of state action is 
required when specific governmental interests are



furthered by challenged conduct which is extensively 
regulated, authorized and approved by the state.

In this case the several indices of state action are 
integrally related to \  the conduct challenged. Hence, 
Respondent’s status as a state sanctioned monopoly 
enables it to threaten to terminate a customer’s services 
without fear of loss of competitive advantage. The fact 
that Respondent performs a public function in 
furnishing electrical services furthers the state’s interest 
in assuring the reasonably continuous supply of services 
at a reasonable price to its citizens. See 66 Pa. Stat. 
Anno. §1171. The joint participation of the Common­
wealth with the Respondenuderives a State guaranteed 
rate of return and is permitted to operate without 
significant competition, while the Commonwealth 
benefits from the efficient operation of the 
Respondent’s activities and receives direct tax revenues 
therefrom. In addition, the Commonwealth derives an 
economic benefit when it delegates quasi judicial 
authority to the Respondent to adjudicate billing 
disputes and to deprive customers of property. Finally, 
the Commonwealth regulates and specifically authorizes, 
encourages, and approves the particular conduct 
challenged.

The thrust of Respondent’s brief is not only to 
attempt to discredit the Petitioner’s argument by 
isolating the various indices of state action, but also to 
utilize the “floodgates” argument for its in terrorem 
effect. Respondent implies that a finding of state action 
herein will result in a complete breakdown of the 
distinction between essentially private conduct and 
public action. However, in so doing, Respondent applies



6

Petitioner’s argument out of context in this regard. 
State action need not be found solely because of state 
licensing or regulation, but instead, results where, in 
addition to the above, the conduct challenged promotes 
state interests and is authorized by the state which acts 
as a partner in such conduct.3

B. The necessary indicia of state action are 
present in this case so as to require a finding 
that Respondent acted under color of law 
when it terminated Petitioner’s electrical 
services.

In its brief, Respondent mistakenly attempts to 
isolate, distinguish or minimize the importance of the 
various indicia of state action set forth in Petitioner’s 
brief.

1. The state specifically approved the particular conduct 
challenged herein because Respondent’s proposed 
termination of service tariff was passed by the Public 
Utility Commission following public hearings.

On pages 24-25 of its brief, Respondent notes that in 
1971 it filed proposed tariffs for a rate increase with

3 Although failing to find state action where a bank set off an 
indebtedness against the checking account of a depositor, the 
First Circuit Court of Appeals noted that there was “little 
parallel between a closely regulated bank and a public utility 
which has been chosen by the state to carry out a specific 
governmental objective. Fletcher v. Rhode Island Hospital Trust 
National Bank, 496 U 2d 927, 932 (C.A. 1, 1974).



7

the Public Utility Commission. In its proposed tariff the 
Respondent included certain of its prior tariffs, 
including Rule No. 15, the termination of service tariff. 
Hearings were then held before the Commission from 
September 30, 1971 to March 10, 1972. The
Commission granted a rate increase and did not order a 
change in Respondent’s other regulations.

, It is apparent from the above that the Commission 
considered and gave specific approval to Respondent’s 
termination of service-  tariff, l i \ Public Utilities 
Commission v. Poliak, 343 U.S. 45 i (1952) state action 
resulted where the District of Columbia Public Utility 
Commission held hearings and specifically approved the 
challenged action. Respondent’s challenged activity thus 
falls within the doctrine of Poliak, supra, and requires a 
finding of state action thereunder. See Moose Lodge 
107 v. Irvis, supra.

2. Respondent performs a public function, which consti­
tutes one index of state action.

Respondent contends that it does not perform a 
public function because the Commonwealth of Penn­
sylvania allegedly had no common law duty to furnish 
utility services to its citizens (Resp. Br., 11). Whether 
or not the Commonwealth originally had such a duty is 
immaterial, since, in passing the Public Utility Law, the 
Commonwealth in fact assumed an obligation to assure 
that its citizens receive reasonably continuous utility 
services at reasonable rates. 66 Pa. Stat. Anno. §1141,



8

§1171.4 See also Munn v. Illinois, 94 U.S. 113 (1877). 
Furthermore, conduct undertaken pursuant to common 
law “custom or usage” is certainly state action. See 
Adickes v. S.H. Kress Co., 398 U.S. 144 (1970); 
Reitman v. Mulkey, 387 U.S. 369 (1967).

In addition to the above noted public function, the 
Respondent also performs a public function through the 
exercise of quasi-judicial authority delegated to it by 
the Commonwealth. Respondent can thus determine the 
lawfulness of its own regulations, adjudicate disputes 
between itself and its customers, and effect a seizure of 
property interests by terminating a customer’s electrical 
services.

3. Pervasive state regulation of the conduct challenged is 
a significant index of state action.

Respondent charges that the distinction between 
public and private action will be destroyed if a finding 
of state action may rest upon the sole fact of a state 
regulatory scheme in a particular case. (Resp. Br., 14). 
However, Respondent misstates Petitioner’s argument in 
tliis regard. Petitioner asserts only that a finding of 
state action is required where it is found that the state 
benefits from challenged conduct-*vhtre i f -i5 found that

which it 4

4 The cases cited by Respondent in support of its position, 
predate the enactment of the Public Utility Law. Girard Life 
Insurance Co. v. The City o f Philadelphia, 88 Pa. 393 (1879); 
Baily v. Philadelphia, 384 Pa. 594, 39 A. 494 (1898).



9

regulates, encourages and authorizes.5 See Moose Lodge 
v. Irvis, supra. Thus, as noted by the district court 
herein, the state must be involved not simply with some 
activity of the institution alleged to have inflicted 
injury upon a plaintiff, but with “the activity that 
caused the injury” (A-71). See also Kadlec v. Illinois 
Bell Telephone Co., 407 F.2d 624 (C.A. 7, 1969) cert, 
den., 396 U.S. 846 (1969). Certainly, as noted above, 
the Commonwealth of Pennsylvania is so significantly 
involved in the Respondent’s termination activity as to 
warrant a finding of state action.

4. Respondent is a monopoly whose challenged activity 
herein is authorized by and promotes the interests of 
the Commonwealth of Pennsylvania.

Respondent disputes Petitioner’s characterization of 
it as a “state sanctioned monopoly” (Resp. Br., 15). 
Certainly, such a characterization cannot now be 
seriously disputed in view of Gilmore v. City o f

5Hence, the mere fact that a state may regulate restaurants in 
general would not warrant a finding of state action in a situation 
involving excessive prices if the challenged prices are not 
specifically authorized by the state, but might very well warrant 
a finding of state action in a situation where the state authorizes 
restaurants to engage in challenged racial discrimination. See 
Lombard v. Louisiana, 373 U.S. 67 (1963).



in

Montgomery, Alabama, 94 S.Ct. 2416 (1974).6 Further­
more, it is apparent that the above characterization of 
Respondent is fully supported by the finding of the 
Pennsylvania Public Utility Commission, as recently as 
March 25, 1974 when it granted the Respondent a rate 
increase of over $18 million.7

6In Gilmore, supra, this Court noted that:
“Traditional state monopolies, such as electricity, water, 
and police and fire protection—all generalized governmental 
services—do not by their mere provision constitute a 
showing of state involvement’ in- invidious”discriminations.” 
Supra, 2426. ......

It should be noted that Petitioner’s legal position is fully 
consistent with the above statement, since state action is present 
herein not because Respondent is a state granted monopoly, but 
because the Respondent’s monopoly status enables it to 
effectuate state interests and facilitates termination of a 
customer’s services.

7In its Order of March 25, 1974, at R.I.D. 64, P.U.C. et al v. 
Metropolitan Edison Co.,—P.U.R. 4 th -, the Commission noted 
that:

“Respondent was incorporated under the laws of Pennsyl­
vania on July 24, 1922, and is a subsidiary of General 
Public Utilities Corporation (G.P.U.), a holding company 
registered under the Public Utility Holding Company Act 
of 1935. G.P.U. now owns all the common stock of three 
operating electric subsidiaries; namely respondent, Pennsyl­
vania Electric Company, and Jersey Central Power and 
Light Company, which form a fully integrated power pool. 
G.P.U. is a member of the Pennsylvania - New Jersey - 
Maryland (P.J.M.) inter-connection, which consists of 
twelve operating utility companies combined into six 
member systems. Respondent participates in P.J.M. as a 
subsidiary of G.P.U. . . .”

continuedI



Respondent’s monopoly status is significant because 
it is by virtue of such state granted status that it is 
enabled to successfully threaten to terminate 
Petitioner’s service with impunity. In addition, the fact 
that Respondent’s monopoly status promotes certain 
state interests is significant in the consideration of the 
existence of state action. See Railway Employees’ 
Department v. Hanson, 351 U.S. 225 (1956); Lathrop 
v. Donahue, 367 U.S. 830 (1961).

5. The fact that Respondent’s activities are subject to 
some Federal regulation is not incompatible with a 
finding of action under color of state law with regard 
to termination of service for nonpayment of a bill.

Respondent seeks to exempt itself from a state 
action analysis merely because it is subject to some 
Federal regulation (Resp. Br., 16). However, the fact 
that Respondent is subject to some Federal regulation 
does not negate the fact that it is also extensively 
regulated by the Commonwealth of Pennsylvania. 
Whether Respondent may be considered as acting on 
behalf of the state in a particular situation depends 
upon how extensively the state is involved in that

“At August 31, 1972, respondent furnished electric service 
to 312,188 customers located in all or portions of four 
cities, 92 boroughs, and 155 townships located within 14 
counties in eastern and central Pennsylvania. The service 
area comprises approximately 3,300 square miles or seven 
per cent of the entire state, with an estimated population 
of 826,400 at December 31, 1972.” Supra, pp. 4-5.



12

particular conduct,8 As noted above, the Common­
wealth of Pennsylvania is significantly involved in the 
Respondent’s challenged termination activity.

6, Respondent’s actions constitute the effectuation of 
state policies which are repugnant to the Constitution.

On page 18 of its brief, Respondent suggests that a 
finding of state action should be confined only to cases 
involving racial discrimination. Such a suggestion 
certainly lacks merit especially in light of the history of 
the Civil Rights Act, 42 U.S.C. §1983, the purpose of 
which was to provide protection not only for former 
slaves, but for all people who were deprived of federal 
rights under color of state law. Cong. Globe, 42nd 
Cong., 1st Sess., App. 68 (1871). See also Mitchum v. 
Foster, 407 U.S. 224 (1972); Lynch v. Household 
Finance Corp., supra. Thus, this Court has decided 
numerous state action cases not involving racial 
discrimination. See Public Utilities Commission v. 
Poliak, supra; United States v. Williams, 341 U.S. 97 
(1950); Railway Employees Dept. v. Hanson, supra; 
Lathrop v. Donohue, supra; Marsh v. Alabama, 326 U.S. 
502 (1946).

* Otter Tail Power Co. v. United States, 410 U.S. 366 (1973), 
noted by Respondent on page 17 of its brief, is fully consistant 
with this position, since in that case, Otter Tail was not exempt 
from anti-trust action where its particular complained of conduct 
was not subject to specific state governmental regulation or 
authorization.



13

Respondent correctly notes that there must be a 
nexus between the state and its relationship with the 
challenged activity for state action purposes. (Resp. Br.,
19) . However, Respondent incorrectly states that 
Pennsylvania law does not command or approve 
Respondent’s summary termination action. (Resp. Br.,
20) . By authorizing Respondent’s termination of service 
tariff, No. 41, Rule 15, through prior enactment of 
Sections 202(d) and 401 of the Public Utility Code, 66 
Pa. Stat. Anno. §§1122, 1171, and, as further 
authorized by Public Utility Commission Tariff Regula­
tion No. VIII and Electric Regulation Rule 14D, the 
Commonwealth of Pennsylvania has expressly 
sanctioned the Respondent’s challenged activities. 
Furthermore, the fact that the Public Utility Commis­
sion actually held formal hearings in 1971 and 1972 
regarding Respondent’s proposed rate increase and 
various other proposed tariffs, including Rule 15, the 
very rule challenged herein, brings this case within the 
doctrine of Public Utilities Commission v. Poliak, supra, 
so as to justify a finding of state action based on the 
express and formal approval by the state of the 
challenged termination activity.

7. The fact that Respondent’s revenues are subject to the 
Utilities Gross Receipts Tax is one index of state 
action.

Payment of taxes in itself need not justify a finding 
of state action. (Resp. Br., 26). However, the Utilities



14

Gross Receipts Tax, 72 P.S. §8101 et seq., is not an 
ordinary tax paid by all corporations, but instead, is a 
unique tax paid only by public utilities, based upon 
gross revenues. Thus, the state directly benefits from 
payment of said tax as reflected in increased company 
revenues resulting from threatened utility terminations.

Respondent is correct in its position that the Utilities 
Gross Receipts Tax is no different from the 5% profit 
sharing arrangement recognized as prominent for state 
action purposes in Ihrke v. Northern States Power Co., 
459 F.2d 566 (8th Cir., 1972), vacated for mootness, 
409 U.S. 815 (1972). (Resp. Br., 26). However, it 
should be noted in tills regard that the finding of state 
action in Ihrke, supra, was based not only on such 
profit sharing arrangement between the utility and the 
City of St. Paul, but upon a variety of state action 
indicia, including extensive regulatory review of the 
utility’s tariffs and pervasive governmental regulation of 
the utility’s activities. Such factors, as noted above, are 
abundantly present in the instant case.

8. In employing the authority of the Commonwealth to 
terminate Petitioner’s electrical services, it is im­
material for state action purposes that the Respondent 
did not enter upon Petitioner’s premises.

As noted above, contrary to Respondent’s assertion 
(Resp. Br., 26), Respondent did terminate Petitioner’s 
electrical service pursuant to state authorization. The 
fact that this termination was accomplished without



15

entry on Petitioner’s premises is irrelevant, since the 
issue is whether the Respondent may terminate services 
without due process of law in the first instance. The 
means by which such service is terminated is not
significant.9

9. Granting Petitioner due process of law will not deprive 
the Respondent of due process of law.

Respondent asserts that Petitioner seeks to use the 
federal courts to compel Respondent to furnish free 
service to its customers (Resp. Br., 28). This statement 
certainly misconstrues the nature of this action. At no 
time has Petitioner asserted that she should be provided 
with free service. Indeed, although Respondent has 
refused to bill Petitioner for services following the 
commencement of this action (Resp. Br., 9), Petitioner 
has placed funds aside for her estimated electric bills 
pending termination of this action. Accordingly, 
Petitioner seeks to assure only that utility services not 
be terminated without due process of law for failure to 
pay a disputed bill.10 Petitioner does not seek to avoid

9 Respondent’s tariffs authorizing entry on private property to 
terminate service were authorized by Commission Rule 14D and 
Commission Regulation No. VIII, and were subject to the 
approval of the Commission.

10The requirement of a prior hearing, as mandated by Fuentes 
v. Shevin, 407 U.S. 67 (1972), in the absence of “extraordinary 
circumstances” , Boddie v. Connecticut, 401 U.S. 371 (1971), is 
not modified by Arnett v. Kennedy, 40 L.Ed.2d 15 (1974), or 
by Mitchell v. W.T. Grant Co., 40 L.Ed.2d 406 (1974).

(continued)



16

payment. of the current bill pending resolution of a 
disputed bill.

Arnett v. Kennedy, supra, involved the termination of a public 
employment situation where rights could be adequately vindi­
cated by a post hearing review and where adequate administrative 
remedies were available. It should be noted in that case that six 
members of this Court adhered to the concept that “the 
adequacy of statutory procedures for deprivation of a statutorily 
created property interest must be analyzed in constitutional 
terms” . Arnett v. Kennedy, supra (Opinion of Mr. Justice Powell, 
concurring in part and concurring in the result in part). 
Furthermore, such property interests are not “created by the 
Constitution” ; rather, they are created and their dimensions are 
defined by existing rules that “stem from state laws.” Board o f  
Regents v. Roth, 408 U.S. 564 (1972) at 577. Such property 
interests are created and defined by the Pa. Public Utility Law, 
66 Pa. Stat. Anno. §1171, in the instant case. In balancing the 
individual’s property interests in due process of law against the 
competing interests of the state, factors such as the individual’s 
“brutal need” and “being driven to the wall” must be afforded 
important consideration. Arnett v. Kennedy, (opinion of Mr. 
Justice White, concurring in part and dissenting in part) 40 
L.Ed.2d at 54-55. Certainly, such factors are present in the 
instant case.

The case of Mitchell v. IW. T. Grant, supra, involved a creditor 
replevin situation specifically distinguishable from Fuentes supra, 
in that, due to fear of disposal or waste by the debtor of the 
creditor’s property, the creditor would be permitted to 
temporarily seize such property pursuant to a closely supervised 
procedure under control of the court from beginning to end, in 
which a sworn affidavit and petition is presented to and 
approved by a judge, following posting of a bond. This procedure 
also allows for return of the property to the debtor and an 
immediate hearing upon posting of a counterbond by the debtor, 
upon whom the “ impact” of a temporary deprivation is not

(continued)



17

Respondent asserts that the tremendous hardship that 
would allegedly be imposed upon it by requiring it to 
afford customers the opportunity to resolve disputed 
bills before their services are terminated justifies a 
continued denial of the constitutional rights of such 
customers. Certainly, any added costs of administration 
must be subordinate to consideration of whether due 
process is to be provided in the first instance. See Bell 
v. Burson, 402 U.S. 535 (1971). Only after a
determination is made that due process is required may 
consideration be given to what type of process is in fact 
due, following a “balancing” of the circumstances. 
Board o f Regents v. Roth, 408 U.S. 564 (1972).

In this case, although due process requires that 
customers be afforded a prior opportunity to resolve 
disputes, the actual nature of the dispute resolution 
procedure may vary depending upon the circumstances 
of the case, and may be informal in the first instance. 
Contrary to Respondent’s expressed fears, Petitioner 
does not seek to impose an “inflexible” hearing 
requirement in every case. (Resp. Br., 28). Hence, the 
requirement of providing a conference with a company 
official or an informal hearing at the company level 
would seem to be an inexpensive method of resolving 
disputes. See Amicus Brief of the Public Service

great. Such situation has little applicability to the instant case, 
where the temporary deprivation of utility services following a 
summary and unsupervised termination may affect life itself. 
Palmer v. Columbia Gas o f Ohio, 342 F. Supp. 241 (N.D. Ohio, 
W.D., 1972), affirmed 479 F.2d 153 (C.A. 6, 1973).



18

Commission of New York.11 Certainly, the requirement 
of a formal hearing conducted by the Public Utility 
Commission following the failure of the utility 
company to satisfactorily resolve the dispute, would not 
involve such extensive costs as to make such procedure 
economically infeasible or constitutionally prohibitive.12 
Finally, the cost involved in disposing of administrative 
appeals cannot outweigh due process requirements. 
Goldberg v. Kelly, 397 U.S. 254 (1970); Shapiro v. 
Thompson, 394 U.S. 618 (1969). Thus, when presented 
with the very argument that the utility would suffer an 
undue financial burden if required to comport with due 
process of law, the Fifth Circuit Court of Appeals 
stated:

“Finally, in view of the concededly small number 
of similar applicants, the miniscule percentage of 
the Department’s revenue that is affected, the 
minimal cost of instituting constitutionally suffi­
cient procedures, and the availability of other 
collection methods, we hold the City has failed to 
demonstrate any substantial detriment to its 
revenue bond rating.” Davis v. Weir, supra, 497 
F.2d at 145.

11 See also “Re Rules and Regulations Governing the 
Disconnection of Utility Services” , of the Vermont Public Service 
Board, 2 P.U.R. 4th 209 (April 19, 1974) at 218.

12 It should be expressly noted that at the time of this action, 
as well as at present, neither the Respondent’s tariffs nor the 
Public Utility Commission’s regulations provided for any formal 
method of dispute resolution prior to the termination of a 
customer’s utility services.



19

CONCLUSION

For the foregoing reasons, Petitioner respectfully 
urges that this Court reverse the Judgment and Opinion 
of the Court below.

Of Counsel:

Respectfully submitted,

ALAN LINDER, ESQUIRE 
EUGENE F. ZENOBI, ESQUIRE 
J. RICHARD GRAY, ESQUIRE 

Central Pennsylvania Legal 
Services

(Formerly Tri-County Legal Services) 
53 North Duke Street - Suite 457 
Lancaster, Pennsylvania 17602
Attorneys for Petitioner

JONATHAN M. STEIN, ESQUIRE 

September 1, 1974