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July 6, 1982

Robert BOTTI, etc., et al., Defendants

The opinion of the court was delivered by: FISHER

Plaintiff, the Troy Towers Tenants Association, commenced this action to challenge the constitutionality of a 1980 amendment to the Union City, New Jersey, rent-stabilization ordinance. Before the court are cross motions for summary judgment pursuant to Fed.R.Civ.P. 56. For reasons stated herein, plaintiff's motion is granted.

In January 1980, Union City amended its rent-stabilization ordinance to permit landlords to apply for a fuel surcharge allowing them, in certain situations, to pass along to tenants a portion of an increase in fuel costs. The amendment provides that landlords may apply ex parte to the Rent Stabilization Board for a fuel surcharge. If a surcharge application is granted, the landlord must notify the tenants of the surcharge and may begin collecting it one month after such notification. The tenants have fifteen days from the time they receive notice of the increase to appeal the surcharge to the Union City Board of Commissioners.

 In February 1981, the Rent Stabilization Board granted an application for a fuel surcharge by Hudson Troy Towers Corporation, owner and landlord of Troy Towers Apartments. Plaintiff appealed to the Board of Commissioners arguing that the amendment to the rent-control ordinance violated the due-process clause of the fourteenth amendment by failing to provide notice and a hearing prior to the granting of a surcharge. The Board of Commissioners held that it could not rule on constitutional issues; nevertheless, the Board set aside the surcharge pending a judicial determination of the constitutional question.

 Plaintiff filed suit in federal district court challenging the constitutionality of the fuel-surcharge amendment. Named as defendants were Robert Botti, a member of the Board of Commissioners and the Director of the Rent Stabilization Board; Robert Balsamo, Chairman of the Rent Stabilization Board; and the Hudson Troy Towers Corporation. The district court abstained pending a determination by a state court of all underlying state-law issues. Hudson Troy Towers Corporation then filed suit in state court challenging the action of the Board of Commissioners. The state court reinstated the fuel surcharge. The tenants' association then moved in the district court to vacate the abstention order. The motion was denied, but the Third Circuit reversed and remanded the case for consideration of the issues raised by the pleadings. Plaintiff has since joined the City of Union City and the Rent Stabilization Board as defendants in this action. Plaintiff and defendant Union City now cross move for summary judgment.

 Rule 56(c) permits a summary judgment if "there is no genuine issue as to any material fact and (if) the moving party is entitled to a judgment as a matter of law." For purposes of these motions, there are no factual issues and the only legal issue presented is whether the fuel-surcharge amendment unconstitutionally deprives plaintiff's members of property without due process of law.

 In analyzing whether this particular amendment violates the fourteenth amendment, the first question is "whether the asserted individual interests are encompassed within the Fourteenth Amendment's protection of "life, liberty or property'; if protected interests are implicated, (the court) ... must then decide what procedures constitute "due process of law.' " Ingraham v. Wright, 430 U.S. 651, 672, 97 S. Ct. 1401, 1413, 51 L. Ed. 2d 711 (1977); Gaballah v. Johnson, 629 F.2d 1191, 1202 (3d Cir. 1980).

 Plaintiff claims that the fuel-surcharge amendment deprives its members of property without due process of law.

Property interests, of course, are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law-rules or understandings that secure certain benefits and that support claims of entitlement to those benefits.

 Board of Regents v. Roth, 408 U.S. 564, 577, 92 S. Ct. 2701, 2709, 33 L. Ed. 2d 548 (1972).

 Having established that, in certain situations, the fuel-surcharge amendment may affect property rights, the second inquiry concerns what process is due under these circumstances. "(Due) process is flexible and calls for such procedural protections as the particular situation demands." Morrissey v. Brewer, 408 U.S. 471, 481, 92 S. Ct. 2593, 2600, 33 L. Ed. 2d 484 (1972). Several factors must be considered:

First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.

 Mathews v. Eldridge, 424 U.S. 319, 335, 96 S. Ct. 893, 903, 47 L. Ed. 2d 18 (1976).

 The tenants have an interest in reasonably priced housing and in being certain that any rent increases due to fuel surcharges are justified. The municipal government has an interest in seeing that landlords do not have to bear the full burden of sharp increases in the price of heating fuel and in ...

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