A federal judge has ruled in favor of several landlords who were dunned by Philadelphia Gas Works for money owed by their deadbeat tenants, declaring the utility's system of placing liens on landlords' properties to be unconstitutional.
U.S. District Judge J. Curtis Joyner, in a summary judgment posted Friday afternoon, ruled that landlords' property interests "are clearly being unconstitutionally compromised" by PGW's collection process.
The landlords sued in 2014, arguing that PGW's practice of slapping liens on rental properties with little or no notification leaves property owners scant recourse to defend themselves or to pressure their tenants to pay. In some cases, the tenants are long gone, and the landlords are left holding the bag for unpaid gas bills on top of unpaid rent.
"PGW's methods do not meet the fundamental requirements of due process in that they do not afford the plaintiffs and others like them the opportunity to address their tenants' arrearages at a meaningful time or in a meaningful manner," Joyner wrote in a 27-page memorandum and order, dated Thursday.
Joyner suggested a solution: He said the city could pass an ordinance requiring PGW to follow the same procedures used by the Philadelphia Water Department, which sends duplicate bills to landlords whose tenants fall behind on payments, long before the debts accumulate and a lien is filed.
"Right now, property owners get nothing more than a payment demand," said Irv Ackelsberg of the Langer Grogan & Diver law firm, who represented the landlords along with John J. Grogan.
The judge ordered a March 30 settlement conference before a magistrate. "The court has mandated change," Ackelsberg said Saturday. "Either that will be negotiated, or we will be seeking the imposition of such change."
Through a spokesman, PGW declined to comment on the case. The utility was represented by Jeffrey M. Scott, of the Archer & Greiner law firm.
The suit was brought in 2014 by landlords Lea and Gerard Augustin, Thomas and Donna McSorley, and Richmond Waterfront Industrial Park L.L.C., which is owned by investor David Wolf. PGW dunned them for tenant debts ranging from $1,000 to more than $27,000.
The judge also ordered that arguments be heard on the plaintiffs' demand for class-action status. Other landlords have reached out to the plaintiffs since the suit was first filed.
City-owned PGW, as a government entity, has the authority to place liens against properties to collect debts. Investor-owned utilities have no equivalent power. Liens are legal encumbrances that must be settled when real estate changes hands.
Landlords have long argued that PGW is too quick to rely on liens and does not adequately notify property owners when one has been placed. Some property owners say they discover liens only when they attempt to sell a property.
In recent years, PGW has more aggressively used liens to collect delinquent accounts. In 2009, according to testimony, it rolled out a computerized "Lien Management System" that processed 200 to 300 a day.
Much of the testimony about how PGW's Lien Management System functioned was filed in court under a protective seal, but Joyner said the material is not confidential and ordered the documents refiled as public records.
"There was also evidence and testimony concerning the operational problems which the system has previously had and which it still has, which is also, we find, relevant and of interest to the public," Joyner wrote.
PGW argued that landlords were sufficiently notified about tenant arrearages through its Landlord Cooperation Program, which holds registered residential landlords harmless for future tenant arrearages if PGW has access to the tenants' meters.
But there is no comparable program for commercial landlords. In 2012, PGW created a Commercial Lien Notification Program, which gives registered landlords 30 days' notice of a lien on a commercial property, but landlords say the notifications arrive too late for them to get tenants to pay.
Only landlords the PGW computer determines are "cooperative" remain in the notification programs.
"As a result, if a landlord fails to respond to any of PGW's emails, fails to provide access to his or her property, or fails to appear for an appointment, they are automatically deemed to be uncooperative and expelled from the program, also without notice," Joyner said in his order.