LEA AUGUSTIN; GERARD AUGUSTIN; THOMAS MCSORLEY; DONNA MCSORLEY; RICHMOND WATERFRONT INDUSTRIAL PARK, LLC
CITY OF PHILADELPHIA, Appellant
November 8, 2017
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
R. Gottlieb [Argued] City of Philadelphia Law Department,
John C. Connell, Archer & Greiner, Jeffrey M. Scott
Archer & Greiner Counsel for Appellant.
Ackelsberg [Argued] Edward Diver, John J. Grogan, Peter E.
Leckman, Seth F. Kreimer Counsel for Appellees.
Before: SMITH, Chief Judge, HARDIMAN, Circuit Judge, and
BRANN, District Judge. [*]
HARDIMAN, CIRCUIT JUDGE.
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
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 preliminaries with a review of the procedural history
of the case.
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).
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.
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.
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.
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. §
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,
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 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.
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.
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.
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 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