# Petition for Writ of Certiorari — City of Detroit v. Theatre Control Corp. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385601_0514%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1962 - **Citation:** 371 U.S. 887 ## Text ae ea -* A. E. Deloach vy. hain et a 268 F. 2d 928, 930. . dD Gypsy Oil Co. v. Esgée, 275 US, 498...... erase ace 4 \Hagne v. Committge for Industrial-( Irganization, 307 “s/US 496, 507783 L. ed 1423, 1432......... eee Interstate Coipitnerce Commission v. United States, Ot OO: Fe As OE OE ws) esos sce’ 7 ‘State v. + aan States Tel. & Tel. Co., 294 P 2d - CO BOE evustSerccohsquesii hibce needy reenees 6 Theatre Control Corp. v. Detroit, 113 N.W. 2d, 783 K ited Gas Corp. v. Herd Laundries Co., 189 S.W. Bee ctasets shnmuehee od fipaecekvsatpeseneaye 7 Washington, ex rel., Stimson Lumber Co. v. Kay. , dendall, 275 US 207, 212772 Led 241, 245.0... “6,7 ‘SUBJECT INDEX ~ ) pen a Page A. Statement of the Case............... eaae eee 2-3 B. Opinion and Decision Below. oe ss eneseseeees ds 3 C. Jurisdiction peel Oe eee san Scat ea a . 34 D. Question Presented for Review. .... pobanssonse Fé 5 | : A oats KE. Laws‘ Involved............:.: eWevecccce spe 5 pO ee Re ear OR PR at afte se 5-7 Reasons for for. pe = "Pep Mere ee ee _—-Effect on. on. Municipal and- other Publi Utilities 7 “Conclusion .....5..+5 keke ot a pelo fee taeees oo. - Appendix A—Opinion of ‘the Mi CONS vicsdssce Pes eee reece ; Fed. Statutes, June 25, 1948, 0° 64, 62 Stat. 929.. 5 U.S.C.A., Title 28, See. 1257 (3) cabs weddsanes i ae (° . foro k, Title 28, See. .2101{e)--- oo ao pa ear » wif me, ire | se : Aris CONSTITUTIONS agi st eg \stitution of Michigan, Art. Il, _ errr ; 5 fe U ted States Constitution Amendments, Article a : : O14, See? 1 FEE RATE Sy Sry ndvueasedodd ass . 5, 6, t ae ct : e + ‘ : e s : . 2 we ° . : ® ; : "2 a > ee b on \ Supreme Court a the United States. THEATRE CONTROL CORPORATION, a Michigan. ‘Corporation; SAUL:KORMAN, d/b/a Apollo Theatre; WESTOWN THEATRE CORPORATION, a Michigan Corporation; HILLIER KILBRIDE Company, a Michi- gan Corporation, and all‘other members of the class, . |. . Plaintiffs and Appellees, ‘ and es ACE- WRIGLEY STORES, INC., a Delaware Corpora- tion; DAVIDSON BROTHERS, INC., a Michigan Cor- . , poration; LOCAL 575, INTERNATIONAL BROTHER- - HOOD OF BRIDGE, STRUCTURAL AND STEEL WORKERS OF AMERICA, AFL-CIO, ~ . 8 Tnterveniag Plaintiffs and Appellees, Vv. ° CITY OF DETROIT, a s Municipal Corporation; BOARD _' OF WATER COMMISSIONERS of the City of De- troit; OSCAR A. WAGNER, Commissioner; GEORGE - A. SHAFFER, Commissioner; ALFRED J. SIMPSON, Commissioner; HARVEY A.°WAGNER, Commissioner; ' GERALD J. REMUS, General Manager of the Detroit . Department of Water Supply, — _, .° Defendants and Appellants. PETITION FOR WRIT OF CERTIORARI - TO THE SUPREME COURT OF THE | STATE OF MICHIGAN’ —_>+—__ . oes 2. 7 To the Honorable-the Chief Justice and the Associate Jus-" . tices bs 4 the Supreme Court of the United States: Petitioners pray that-a writ of certiorari issue to. review: ‘décision of the Supreme Court of the State of Michigan, entered in the above-entitled cause on March 15, 1962, with | Motion for Rehearing of same finally denied on’ May 17,. 1962. (365 Mich. 432, 113. N.W. 2d 783.) | This i is A case arising out of action of Department of © W ater Supply of the City of Detroit (petitioner herein) in adopting. a regulation imposing .a demand (éxtra). charge . On non-water conserving air-conditioning equipment used for human and animal-comfort. It: was contended by plain- Pgs tiffs-appellees that the charge is illegal principally on ™ ground that it is discriminatory and theref. depri plaintiffs-appellees of property without due process, a of law, in violation of the Fifth and Fourteenth Amend- ments to the United States Constitution and Art. ‘FI, See. 16 of’ the Constitution of Michigan (Vol. 1 Appendix of . plaintiffs-appeHants in lower court, p. ‘222’. The class ‘represented by. plaintiff approximates 6000 water Tate. ’ payers. This case does not involve the amount of the demand _ charges so long at it is applied to all seasonal ‘users of water. Plaintiffs-appellees stipulated. i in the Trial Court that they were not rgising any question as to whether or |. ‘not the extra charge to users of non-water conserving, _ equipment was éxcessiye based on actual cost of service, (p. 1092{a] of supp. appendix, Vol. V, Plaintiffs-Appel- lants below), and this was confirmed by the trial judge in e “ ; — thei: «-- ~~ a er . 4 . ~. a ee , ania ttt — - : . . “d os ° ‘ , _a “This. case, xo far as the j issues, actually con- tested upon trial ix a dixerimination case ax eopopwonerd ‘to ap overcharge case, plaintiffs conceding that they are not paying *too much’ but alleging that the . whole basis of the classification is wrong * * *" (Appendit. for Maintifis and Appellants. VoL pp 6a, ss se : The main issue in the court helow was whether defendant— ‘unlawfully diseriminated in singling out- the one sex- ment of seasonal users while exempting all others ‘from ’ the added charges. : -* e s The case also involves the matter of possible refunds to this class of customers of rates paid since “inception” of the demand charge in 1956. ‘This is involved in re- mand to the trial court for proceeding in accordance with | the opinion of the Michigan’ Supreme” Court and could conceivably: Fesult in the repaxinent to 'thix class of water users ,of ‘seyeral million panne. (Motion for fe-hearing oo. *B. Opinion -—" Decision Biw ©. A a of opinion and decision of Supremé Courts of - Michigan, Theatre ‘Control Corp. v. Detroit, LBS, dl, " 783, is attached hereto, App.. A. 2. - A copy of opinion and decision of ‘the triat court (re- ported in Utilities Law Reforts-state J9600 CLC 36, 811) is attached hereto, App, B. (Also in Vol. 1 of I’lain- tiffs- Mebiaaceas sinks as below, yp. Mia: tor 68a): * C. Jurisdiction . + In the trial court, Judge (ieorge a * Bowles, w ayne County Cirenit Coirt, State of Michigan, upheld legali-. ty of the “demand charge.” if ‘Om appeal, ‘Suprejne Court of Michigan iveteel: the lower court and. heid. the cliarge unconstitutional as. a violation af due process (113.N.W, 2d, 783 at, p. 739) : “Having Danese" there was no reasonable ndésis oe for the additional demand charge here sought to be imposed, it necessarily follows that such charge was unreasonable and arbitrary and, therefore, in- valid -becaise it deéprived plaintiffs of property with- + out due process of MM os | ‘Reversed and retiaended for further proceedings . in uccordance With this’ opinion.”? (No proceedings "have vet been had on the remand, the lower court not yet having decided what if any proceedings to -, take by virtue of the aca ), . . Among allegations of the Senendie Bill of Complaint filed in this ease (Vol. 1 pJaintiffs-appellants’ Appendix (Below) p. 22a) is the allegation that the demand charge is ultra vires, illegal and void because: ‘~ ‘ art os e “It deprives the plaintiffs and other members of the class of their property without due process of -- 4: law, contrary to. the fifth and fourteenth. amend- ments to the. Constitution of.the United States, and _to Article IT, see. 16 of the Constitution of the State of M ichigan.”’ . Violation of ae Vnited States Constitution , was pleaded and decision of the Supreme Court of Michfgan as to-illegality was ‘premised upon a v iolation of. the Con- stitution of the United States. A substantial federal con- - stitutional question is therefore involved requiring final determination by this Court. - Jurisdiction of this court to i issue a writ of certiorari is . conferred bf 28 USCA 1257(3) and Sec. _—— fispsy | Ou Co. v. Escoe, 275 U.S . 498, ° D. Question Presented for Review The following question is presented for review: _ Does the detnand. charge of the Detroit Water Board up- on users (plainiiffs- appellees and the class represented by plaintiffs-appellees) of rion-re¢ ireulating air-conditioning equipment used for human or animal comfort deprive such’ users of property without, due process of law in ‘violation of Section 1 of the 14th Amendment to the Constitution: of - the U nited States? ( “ ~ i. | '- E.+Laws Involved The United States Constitution Amendinents, Article 14, See. 1. The C onstitution of Michigan, Art. IT, See. 16. , , ARGUMENT Reasons for Granting the Writ It affirmatively appears that in the State court there was duly drawn in question the validity of a statute-of or an authority exercised under the State because of repug- -nance to the Constitutionof the United States and a title, right, privilege or immunity is specially set up or claimed under said constitition. | le Fed. Statutes, ton 25, 1948, © 644,. 62 Stat. 924; T itle 28, U.S.C.A. Sees 1257:43)3 |... - A. E. Deloach v. Rogers, et al., 268 F 2d 928, 93 The question. of validity of the demand charge ‘here in-, volved as being a taking of ‘plaintiffs-appellees’ property Ww ithout-due- process of law in v violation of the United States’ ( ae , * -— 4 6. Constitution (Amend. Art. 14, See. 1) was raised by the pleadings and duly drawn in question as we have shown and the state court’s decision was based solely upon that ground. of constitutional invalidity. The Federal constitutional question was therefore prop- erly raised in the state court to qualify for review in this court. Hague v. Committee for Industrial Organization, 807: US 496, 507; 83 L. ed 1423, 1432. ; Review by this court is requested because of misconception (which was the basis of its decision) by the state court of _ the force and effect of the. 14th Amendment in relation to its prohibition of teking of property without due’ process . of law as applied to rates fixed by -publie utilities under the - -cireumstances of this ease. When users of utility services coineede that rates ‘aneia: are. not excessive as plaintiffs-appellees have in this case, there is no foundation, for a claim that the rates- deprive them of property without due process of law. - Washington, ex rel., Stimson Lumber Covv. Kuy- kendall, 275 US 207, 212; 72 L ed 241, 245. It is only when rates cals are so ie as to be sities «tory that there .can be a taking of property without due process of law and then only af the property of the publie — utility. There is mo unconstitutional. taking of property without due process of law of a utility’ customer even if rates are too high, and in this case there wasn't even any claim to that effect. State. Mountain States Tel. & Tel. a: 204 P 2d 155; 163. G - Sue h discrimination found by the state court bec ause of ‘an inequality:in rates between other se: isonal users of water and plaintiffs-appellees (such rates not. being excassive} of -itself is not ground fora holding that. the charges gre un- constitutional because they constitute a taking of property without due’ process of" law. on lhe It is not ‘claimed by plaintiffs-appelless that. they wif fered any loss or damages by reason ofssuch discrimination. Nor were any, proved: United Gas Corp. vi Herd Laun- dries Co., 189 S.W)..2d 485; Interstate Commerce Commix- sion v, United States, 289 U.S. 385, 77 L ed. 1273. ° « Effect on Municipal and Other Public Utilities The deéision of the Michigan Supreme Court in effect. holds that-a consumer-has a constitutional right to a‘rea- sonable utility rate under the United States Constitution, Amendment 14, ‘Section 1.° If permitted to stand as pre- ‘ cedent, the deejsion of the Michigan Supreme Court would — ‘adv ersely affect the interest of many municipal ; and other publi¢ utilities throughout the country. contrary. to the in- terpre tation of the Constitution (Amend. Art. 14, See. 1) by this court “now prevailing. . . VW "ashington, ex. rel, Stimson Lumber Co. v. Kuy- . kendall, 275 US 207, 212. CONCLUSION ‘For the foregoing 1 reasons, this petition for writ of cer- -tiorari meme be granted. Respectfully ahiiaa” CITY. OF DETROIT, a ‘Municipal corpo- | fia _ ration; | BOARD OF WATER: COMMISSION- ERS,, etal. . _ , By: ROBERT REESE, . ° Corporation Counsel, VANCE G. INGALLS, : . ; Assistant Corporation cit . Attorneys for si rancte heed. lants, . 7 : 1010 City-County Building, Detroit 26, Michigan. — —— Dated: August 8, 1962. APPENDIX A | Opinion of the Michigan Supreme Court Tueatre Coxtrot Corporation, , -Crry or Derrorr - 1. AprpEAL AND Error—Ixae Ni TIox—Dr. Novo—Revirw— ~ Water Rares. ‘ Review in Supreme Court of order dismissing bill to declare void additional charges for use of nonrecir- culating water-cooled air-conditioning equipment used for human or ayjmal comfort and to enjoin collection of such charges is de norg. to . Same—Qvestions * Reviewaste—Water R ates—Kat, ‘AL, y ROTES ‘Tiox—Dv EP ROC ESS. “Issue of denial of f equal protaction-it-thre tawe Tie virtue of the assessment of charges against the uxers of none ireulating water- cooled air- conditioning eqtlip- ment for human or anual comfort and not against users of ‘stich equipment. for commercial or industrial . ‘processing or other seasonal users of water is not de- termined, where such additional charge ix declared — to be unreasonable and arbitrary, hence, a depriva-_ tion of property Without due ‘process of law’ (US Const, Am 14; Mich Const. 1908, art 1, $51, 16). d . Reference for Points it Headriotes’ (iy 3 Am Jur, Appeal and Error §815. (2) 3 Am Jur, Appeal and Error §838. (*) 43 Am dur, Public Utilities and Services 5185 et seq. _ (4) 14 Am Jur, Costs $37. "| pecans - , —_— 10 3. Mesicipat Corrorstions—Am Cosprrionixe Equirmest vais ATER Rates—Dve Process, ot 3 - Plaintiffs, owners of theatres and other enterprises in defendant tity using nonrecirculating water-cooled: air-conditioning equipment-for human or animaf com fort held, to have sustained.their barden of proving that: there was no reasonable basis. for a charge for the use of such equipment in addition to the charge for actual water consumed, in order to pay for extra demand capacity of water system, hente, the addition- al charge was invalid as a deprivation. of property without due process of law. (US aris Am 14; Mich ‘Const 1908, art 2, 4.16). ‘ 4. Costs—Pvsiic Qu EsTions—AIR. CoxpiTionINe . Equip- MENT. | No costs are allowed in ude suit: to didlave void additionat char, larges by ejty upon users of nonrecirculat- ing water-cooled air-conditioning equipment, 2 public 7 being i involved. —— — Appeal f rom w ayne; Bowles (George F. « J. Submitted June 9, 1961. (Docket No. 49, Calendar No. 48,840.) De- cided March 15, 1962. Rehearing applied for. Bill by Theatre C ontrol Corporation, a Michigan corpo: 5 ration, Saul Korman, doing biisiness ax Apollo Theatre, Westown Theatre Corporation and Hillier Kilbride Com- pany, Michigan corporations, in their own behalf and in behalf of all other members of a class similarly situated, sesinet he City of Detroit, a municipal corporation, the - Board 6f Water Commissioners of the City of Detroit, its * individual me anbers.and the General Manager of the De- troit department of water supply, to declare void addi- tional charges imposed for use of air-conditioning equip- «- , 1 ment units which do not recireulate water, to enjoin assess- nient of such charges and to secure accounting, for and : repayment of such charges already collected. ACK-Wrig-- ley Stores, Inc, a Delaware corporation, and Local 575, Garrats International Brotherhood of Bridge, Structural and Steet ; Workers of. America, AFL-C1O, intervened as parties plaintiff. Bill dismissed. Plaintiffs and interve ning | plain- tiffs appeal. Reversed and rpinandyd. | William He ary Gallagher, David New man and Ie aan. Paul, for plaintiffs. , ; ; . — - Irwin 1. ‘ohn (John Sk lar, i counse 1), for, ee . plaintiffs ACF-W rigley Stores,- — ad Davidsin Broth- _ ers, Ine. honald J. Prebe a for intervening plaintiff Loe: 5 DID, International B rotherbood of Bridge, Structural and ‘Steel Workers of Anierica, AF Lt ). oe Nathaniel H. Goldstick A’orporation Counsel, and Robe rt Reese, Assistant Corporation Counsel, for defendants. Robert. Re ese, Corporation Counsel, and Vanee. Gy: A Ingalls, Assistant Corporation Counsel, on application for rehez uring for de fendants. Amicus Curiae: Fenton, Naderlandeér, Tracy & Dodge, for EMiott Amuse- ment Company and the Riviera Theatrical Corposation, Souris, J. This ease, like Palmer Park Theatre Co, 0, y City of Highland Park, 362 Mich $26, decided by us after entry of the decree liere appealed, presents for decision the validity of-a muticipality’s imposition of an amuual charge upon users of air-conditioning eyuipment whieh does not recireulate water, in addition to the charge made for water actually used. In the Palmer Park Theatre Case a city ordinance required annual purchasé of a license at the cost of $20 per ton of capacity for each unit exéeeding 5 mer oe o eA tons. In the case at bar, the Detroit board of water com- | ~ missioners on May 7, 1956, imposed an annual ‘demand charge” , beginning at.$1.50 per ton of capacity in the first | year to $7.50 per ton for 1961, ‘upon all such equipment used for hiunan or animal comfort. The license fee in the ‘. Palmer Park Theatre Case and the demand charge in the - case at bar were in addition to the aac charges for water actually consumed. ; -. We held, in the Palmer Park Theatre Case, that the license fee there inijposed was unreasonable and arbitrary, -and therefore invalid, because no longer necessary to its original purpose of conserving water, additions, improve- _ ments, and repairs to the city’s water system having in- creased its capacity meet all foreseeable demands. A majority of this Court also held the license fee invalid be- cause exemption of the users of such equipment with less than 5 tons of capacity was arbitrary and dicriminatary as against those users of such equipment with capacity in ex- cess,of 5 tons-who were required to pay the license fee, thereby denying the latter equalepretection of the laws. Differences between the 2 eases appear from the fore- going. In thé first we dealt with a city ordinance requiring purchase annually of a license fora fee; in the ease at bar the board of water conunissioners imposed anhually an ad- ditional charge computed on the basis of the tonnage capa- _city of the equipment used, Another difference is that in the first case @) wafer-cooled air-conditioning equipment of - the nonrecireulating type for whatever purposé used, ex- cept equipment less than 5 tons in capacity, was Tequired to he licensed; in the ease at bar. the additional charge was imposed only upon such equipment if used for human or animal comfort, but without regard ‘to its tonnage eapacity. Another significant difference in the 2’eases is that défend- - ants made no — to justify the — demand charge as a . “The, Detroit board of “water commissioners fa- vors the addition of a demand charge to the water rate, in the belief, that it wilh in effect prohibit new ‘ installations of water-wasting equipment, and will . result in qonversion of all or nearly all the water- “) Wasting equipment now in use, and cause those, if — ° _ any, who continue to use water-wasting equipment, lo to pay for the service rendered.” Stated simply, Shisetiaaleal sdaautien is whether defond- ants may impose an additional annual demand charge only upon users of nohrecirculating air-conditioning squipnient used for human or animal comfort without violating con- stitutional rights of due process and equal protection of the laws.* Plaintiffs argue forcefully that-exemption of wate Li wasting refrigeration, equipment used for commer-— cil or industrial processing, and failure to impose the ad- , . “ditional annual. demand charge upon other seasonal users of water, renders the attempted. classilie ation’ diserimina- tory and, therefore, denies. them equal protection of the laws.t In our Aisposition of this case, ROmeEe, we need - * Mich Const 1908; art 2,.§81 and 16; US Const, am 14, §1. : t See*the majority — in Palmer Park Theatre Co.-v./City of Highland Park, 362 Mich : , ‘ . eo ‘+ - * | RES oe Te not consider this ixsue, fer it is our. conclusion that’ the additional annual demand charge was unreasonable and arbitrary’ an‘, therefore, “deprived spear of property _Without due process of law. The chancellor ruled that the demand charge was valid. ‘He. found that because such equipment wag,used only dur- ing the, summer months and that then vi ly all. of such eqquipynent operates simultaneously, particularly on the day and at the hour of peak demand upon the system, great de- mang is: thereby placed upon the water-producing capacity of the city’s By stem, necessitating it to maintain substantial capacity in excess of its customers’ normal needs. He con- ‘eluded that the cost of providing water’for such, use was greater than for other uses, thereby j ifying the addi- tional demand charge. i Plaintiffs contend that the chancelld rred in his find- ‘ings that’ virtually all of such equipti nt is in use simul- / taneously and that’ such simultaneous use occurs at the’ peak hour of demand. From these factual errors, plaintiffs claim the chancellor was fed to his erroneous copelusion _. that the water system’s eXCERS capacity was required to meet the peak demands of such equipment, the users of ‘which should, therefore, bear the cost of maintaining suc aS) excess enpacity. There were offered by defendants Statistical tables and charts prepared by their expert witnesses and the wafer systam’s staff which support the chancellor’s findings and conclusions. One such greup of tables purports to allocate -the system’s costs‘and revenues to various customer elas- . - " - sifications : domestic, commercial, industrial, United States government, semicharitable, construction, suburban, and nonrecirculating ‘air-conditioning equipment used for hu- tere ° of William Paterson, defendants’ expert witne——__ Ps OPINION OF THE TRIAL COURT ‘Number, 432—53 New’ Decisions’ 36,811 THEATRE ConTRoL CORPORATION ET AL. Y. Crrv OF DETROIT ET AL. Michigan. Cireuit Court, County of Wayne, May 26, 1960. Municipal w ater rates—Demand charge on air condition- ing equipment users—Validity.. An. action against a mu- nicipality by certain consumers of water supplied by the municipality’s water department in connection with their operation of non-cireulating air conditioning equipment and “brought for the purpose of having a s6-called demand charge declared void and the imposition and collection of such charge enjoined was dismissed. It was held that the’ municipality has the power to fix rates based upon considerations other than the amount of water used, and that a sucharge imposed on the principle of a ready-to- serve eharge was valid undey the municipality's charter. Furthermore, ‘the non-cireulating air conditioning équip- - ment use was distinguishable in its characteristies from other uses so that the classification was a constitutional | one. Thus, while there-was ‘an adequate supply of water to meet current needs, a charge -based upon readiness-to- serve was nevertheless valid. This action is brought by plaintiffs * ° * suing on their own behalf and on behalf of all other ratepayers in Detroit siimlarly situated who likewise consume water supplied by the defendant Detroit De spartinent of Water Supply in con- ‘nection with their-operation of non- reciréulating air con-— ditioning equipment. , * * * * 24 a Stated- gencrally. plaintiffs bring a class action against defendant for its itnposition of a so-called demand charge computed upon the fonnage capacity of the coolage system, the demand charge heing $1.50 per ton of refrigeration for the calendar year 1957, progtessively to_be. increased to... _ : ~ $7-50 per ton for ‘the calendar year 1961 and the reaftér, A _ * * * .- | 2 a The demand charge is in addition to rates charged vib tiffs and other similarly situated, for water actually con- sumed at the rates regularly charged to all other consum- ers of water. Plainfiffs seek a decree that-the demand. - charge is void, request that defendants be permanently en- joined from imposing and collecting the demand charge, _ pray for an accounting as to the amounts of demand . charges heretofore collected by defendants from all mem- _ bers of the plaintiffs’ class and request that said suns be paid into court and redistributed to niembers of the class after deduction of costs of’ litigation and payment. of rea- sonable attorney fees. / In their opening statement plaintiffs set forth the follow- ing propositions : (1) That since the Department of. Ww ater Supply is a «creature of the Charter of the City of Detroit, and since under Chapter Xu, Section 9, of the Charter the Board is given the authority to fix and assess water rates upon such _ basis as shall be, equitable, the Charter limits the authority of the Board to fix water rates in relation to the use of . water, atid does not authorize the Board to impose any charges other tlian those based upon the amount of water consumed. It is therefore urged that no charge is valid, and any charge is beyond the powers of the Department. 25 (2) ‘That the.assessment ef the demand charge upon air conditioning equipment users of the non-recirculating ‘type for human comfort, and the exehision of all users of air conditioning equipment for other purposes suchas for iikaksatie preserving food or for industrial and commerc ‘ial processes rt cering 2. is discriminatory. Seieeecaaay ee (3) That even conceding, nt Ee that: the so-called NCAC use is distinguishable frou other sutmmer uses, the charge itself is unlawful and discriminatory as between members of a class because.of the great variations within and among menibers of the class. (4) That since the system is new operating profitably, no additional charge or revenue 4s required, , + (5). That since the demand charge was adopted oi May 7, 1956, and since some of the party plaintiffs installed their NCAC equipment prior to that date, the demand charge is confiseatory and unreasonable and constitution- ally offensive. | | ; * o * * . [.01 Judicial Rev - Disc — ( a ¥ ee The rule most ge nerally prevailing as to judicial review of utility rates is that a court is émpowered toy pass upon the reasonableness of a rate but may not set a new rate since it is.not a regulatory body. “The familiar presumptions are indulged in, favor’ of ratesmaking bodies; rates are presumed, to be a wasonable and the one charging unreasonableness has the burden of proof thereon, * * * This case * * * isa diserimination case as opposed to an overcharge ease, plaintiffs conceding that they ary not pay- ing “too much” but alleging that the whole basis. of. the classification is wrong, since it Is Claimed that the NCAC elassifieation is cither not broad enough, because it does not céntdin other seasonal users such as breweries, dairies, | ice plants and the like, and, further, because it does not con- . - tain year-round commercial and industrial refrigeration; or that it is not refined enough as a classification, constitn- ’ tionally, because there is a marked variation between and among NCAC customers. . Plaintiffs have also raised the question of a claimed— - vested right in a rate, since some of the equipment was \ purchased and was operating prior to 1956. 1 believe that _. preferential treatment can not be given to customers be- cause they are claimed to be old, as opposed to new custom- ers, and that such distin¢tion would constitute unlawful dis- . crimination. * * * As‘to the rate of earnings of the subject defendant utility, the 1958: return was 3.2 per cent, whieh included, of course, the disputed. NCAC charge; this re- turn, in my judgment, falls easily within permissible limits since a municipal corporation operating a utility) is not ie. cluded fiom earning a fair return. * * * “It is conceded that the. operation of a publiely owned utility by defendant City is governed by the same general duties and obligations applicable to_a privately owned utility. and it is prev ented, constitationally, from unreason- able discrimination * * * This is not to say that the profit to be enjoyed is the controlling consideration; rather there - is an obligation 6f ‘providing public atility service at a rea- sonable cost, but the public authority can make a fair re- turn in so doing. * * * It is held * * * that the use to which water is put can not, by itself, be made the reason or basis for a’ separate ‘rate classification * * * Thix would seem patently clear, since a municipal utility could not diserimi- nate between and among users on the basis of their use," assuming that all of the uses were lawful and were not con- trary to the genéral public. interest or inconsistent with the health, welfare and safety of the community. It has heen frequently held * * * that a difference in rates for a utility product based upon use is a wholly inadinissible basis of, discrimination. *° * * i 4 =. : I also held that readiness to serve is one of the.considera- _ . tions that a utility authority may use in determining proper charges for water. Fundamentally, the operating authority must make @ reasoned determination as to what demands will be ii upon. its system at a given day or hour, and certainly it is on the better side of prudence and good man: agement to make a conservative calculation baxed upon the high hour of the high day and to ascertain what demands will be made upon the system by any and all needs for water at that time. Ifa group of ¢ustomers place an un- usual and distinctive burden upon the system at peak de- mand, it is not unreasonable, or constitutionally offensive, to determine a rate or charge for that group of customers® based in part upon the readiness of the system to serve at the peak hour, keeping in mind, too, any additional capi- tal investment that is requisite to meet the peak hour. [.02 Inequities |- ss | Plaintiff urges with considerable persuasion that the subject charge is offensive because of the inequities be- tween members of the assumed class in violation of Section 9 of Chapter XII of the Detroit City Charter. “It is said that thix must be so because there is a great variance in the extent of use of the équipment because there is a great fluctuation in the amount-of water used by one ton of air: conditioning * *% * and. because, finally the naming of an Adjustment Committee by the Board of Water. Commis- ‘*sioners itself recognizes inequity. As toa ‘vested interest in the former charge, plaintiffs . Ss urge that it is evononiically impossible for them to install expensive conservation deviees to be used for relatively short periods of their unexpired leases, note also that the |” physical characteristics of buildings preclude installations, de, and allege that all members, of the class installed their air. expectation that water samer be used ‘and — for at the old or regular rates. — [.03 Reasonable Classifieation—Justifialle Distinctions} While in this type of ease one is frequently. tempted to oversimplify, it is believed that the central factual con- sideration upon which the rather familiar principles of law must dperate is the question whether or ‘not the “NCAC customers possess unique characteristics \and dis- tinguishing factors that justify singling out NCAC ensto- _ mers from other summer uses, as it were, and the .second- ary question flowing therefrom is: Assuming that th are such distinguishing characteristics justifying _ arate class, are there sufficient variations as between and among members of the class as to render the. classification * too broad? _ —-«* . x ” . - The Supreme Court of the State of Oregon held that a eharge against apartment house’ owners as distinguished from hotels, motels and single residences was discrimina-_ tory, and, in reviewing. the law in such cases, observed, inter. alia: “In the first place, it is eminently clear th it a charge for water need not be based entirely upon the anount of water actually used. It is the Common — and legally accepted practice to fix minimum rates whieh a customer must pay even though he uses less * 29. a ’ than ‘the minimum. amount df water for which the charge is paid, This minimum rate ix ip effect a S service charge for those customers ho use less than ~ \ the minimwi amount, differing only from, a fixed servie> charge unrelated to a minimum quantity of water in that under a minimun rate the charge is — . absorbed when a minimum quantity of water is - used: °* * #99 Z Asmunicipal utility. is ‘entitled to/make differen- tiations in the rate charged for water if those dif- ferentiations are based upon a proper classification. eee ‘*Whether differences in rates ames classes of customers are to be made, and if. the amount of r the differences, are legislative rather than judicial questions, and are for the determination of the gov- erning bodies of-the municipalities. The presump- tion is in favor of the legality of the rates estab- lished by the rate-making authority, and courts may interfere only in clear casesof ‘illegality. * * * The hurden of proof i is upon the party alleging that the * * * differences in rates is disproportionate to the difference in- conditions.”’ . The opiniyn goes on fo reason that if differences in con- ditions can. not be shown, then all” custome rs are entitled ' fo receive the same service on an © ual basis and at a uni- 1 form rate; the differences upon which the classifie ation, is predicated must have a reasonable relationship to the pur- pose for which the classification i ix made, of, stated another way, the classification must rest upon a difference which bears a reasonable ‘and just relation to the’ act in respect to which the classification, is proposed, | ¢ . . . . 7 = f The court noted analogous situations wherein it was held that in‘the absence of difference es Telating to supply! ing the aod fe i may a services, it is unjust discrimination to charge one rate to : stoekvards and railroads and another fate to laundries or one rate to general manufacturers and another to laundries, ot one to laundries and restaurants and another to domes- tie and other consumers, , @ The court Gecnseet distinctions between apartinent houses and hotels and reasoned that in hposing charges for water the distinctions were not iinportant uriless they could be pointed to-as the reaspn for imposing a different cost on persons in the two classes established. } As related. to the instant case, then, the ultimate ques- tion is whether those distinctions which have been shown _ by defendant are more than word choiees and whether, in fact, they are distinctions that can be justified in the light of-the purpose for which the classification was ereated. The distinefions are not persuasive, are not reasonable aid are, therefore, not constitutiénally sound, unless the dis- ‘ ‘ tinctions can be pointed to as a reason for imposing a dif- ferent cost on NCAC customers than the cost imposed on ‘other summer uses, particularly sprinkling. If the dif-.. ference in use and the other differences, that is the charac- teristics of the use.do not distinguish NCAC eustomers from other customers the classification must fail. > In the Kiiks case the Supreme Court of Oregon found ‘that the-elaimed differences in use, that i is, the manner of occupancy and the other differences relied*upon, were not ~ established and that the classification was, therefpre, un- reasonable. , Se ee i . oe, | It ix ony hobkling jhat the classification by defendant city _ here is a | Feasonable classifieation om, juelitid hy differ ‘and ‘other summer uses. The load factor between meubhers __ of the vlassification and. non- members i ix differnt. The\re-. - liability factor.is distinguishable, the sprinkling uxes, example, being, subject to limitation in an. emergency through ordinance provisions or through voluntary con trolx, The diversification factor is léxs favorable since - there is a concentrated use by virtually all users sof NCA . equipment during: the hottest day, and, indeed, at the hot-- test hour of the hottest day. Tine differences in the char- acteristics of use, in result, require the planning of @ipital ~ improvements. and the re-enforcement of the sy o meet the peak day and the peak hour. While thy fity, in Jaw, - - could have. prohibited the use of this typt of equipment, it chose rather to permit the continuance of its use under regulation. It is my judgment * * * that the defendant ex- tablished that the cost of service to this class of users was greater and different from the cost of ‘service for other simmer users, and that a reddy -o-serve cRarge wis justi- fies. ‘ [04 Conclusion] © 4 ‘ ‘6 It ix therefore held: : ; ; 1. That the City of Detroit etait | its Departanent of Water Supply is empowered to fix a rate or rates based upon considerations other than the amount of water used. 9) ‘That a surctiarze imposed upon NEAC customers on the basis or principle of a ready -to-se rv Ys valid f-* under the Charter, specitically Chapte r X11, - 3 That the NCAC use ix distinguishable in. its char- * aeteristies from other summer tines “o that the classiiiea- tion ix a constitutional one. “ie . fe \ _ 32 4. That it would Lave been i improper to distinguish he- tween prior users of NCAC ee as opposed to more recent or new users. — , ~ 5. That while it was stipulated that there is an ade- quate supply of water to meet current needs, a charge based ‘upon readiness-to-serve is nevertheless a-valid charge for the reverse would mean that because there was an adequate supply of water, no users coftld be required to pay the ac- tual cost of servi¢e to them, it having been established by competent proofs that the cost of service to NCAC ecus- _ tomers is greater than the cost of service to other summer users, ; - pO ae 6. That while -the use-to which water is put is not a proper basis for constitutional classification, differences in the characteristics of use do justify a separste classifica- - tion for NCAC users. For the foregoing 1 reasons the bill may be dismissed. : -. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385601_0514%3A2. Public record. Not legal advice.