Lea Augustin v. City of Philadelphia

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

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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

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

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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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