UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
JAMES LINVILLE BREARTON
MARY ELIZABETH BREARTON CASE NO. 88-795
JAMES BREARTON and MARY
ELIZABETH BREARTON PLAINTIFFS
VS: MEMORANDUM OPINION ADV. NO. 88-202
CITY OF FALMOUTH DEFENDANT
This matter is before the Court on Plaintiffs' Motion for Partial Summary Judgment pursuant to Federal Rule of Civil Procedure 56(d) and on Defendant's Motion for Summary Judgment. Plaintiffs contend that the Defendant, City of Falmouth, is liable for violation of the automatic stay provision, 11 U.S.C.'362(a), the protection against discriminatory treatment provision, 11 U.S.C. '525, and the utility service provision, 11 U.S.C. '366. Defendant contends that it is not so liable. Plaintiffs also seek an interim award of attorney's fees and a trial date. This Court has jurisdiction of this matter pursuant to 28 U.S.C. '1334; it is a core proceeding pursuant to 28 U.S.C. '157(b)(1).
The Plaintiffs were disconnected from electrical service by the Defendant, a monopolistic provider of utilities, on August 22, 1988. On August 29, 1988, they filed a Chapter 7 petition in this Court and advised the Defendant of such filing around September 1, 1988. Between that date and September 13, 1988, the Plaintiffs apparently made several requests for resumption of electrical service. The Defendant received "official notice" of the automatic say sometime in the first week of October. The Plaintiffs filed this adversary proceeding on October 6, 1988. More requests for resumption of service were made in November. The Defendant accepted a security deposit on November 16, 1988, and reconnected service on November 25, 1988.
Federal Rule of Civil Procedure 56(c), made applicable in adversary proceedings by Bankruptcy Rule 7056, places the burden on the movants to demonstrate that there is no genuine issue as to any material fact and that they are entitled to judgment as a matter of law. The record in this proceeding indicates that after the Plaintiffs filed their Chapter 7 petition on August 29, 1988, they made several requests for reconnection of electrical service at the office of the Falmouth City Clerk. The City Clerk brought these requests to the attention of the City Council at its meeting on September 13, 1988. At that time, the City Council unanimously decided not to reconnect the Plaintiffs and not to accept a deposit from them. (See England depo., pp. 16-18).
Pursuant to 11 U.S.C.'366(b), a utility "may alter, refuse, or discontinue service if neither the trustee nor the debtor, within 20 days after the date of the order for relief, furnishes adequate assurance of payment, in the form of a deposit or other security, for service after such date." By the testimony of the Defendant's City Clerk, the Defendant, acting through its decision-making body, the Falmouth City Council, decided within the 20 day period not to accept a deposit from the Plaintiffs. The Defendant did not demand a deposit from the Plaintiffs, nor did it give them the opportunity to offer one. Therefore, the question of whether or not the Defendant was furnished adequate assurance of payment never arose, and could not be a basis for its refusal of service to the Plaintiffs.
By the same token, the action of the Defendant obviates the necessity of considering whether a new deposit was required of any new customer. The Defendant may not, for purposes of'366(b), argue that its requirement of a new deposit was non-discriminatory when it did not offer the Plaintiffs an opportunity to give a new deposit within the 20 day period. It did not, in fact, accept one from them until almost three months after the filing of their Chapter 7 petition. The Defendant clearly was not justified in refusing electrical service to the Plaintiffs under '366(b), and its action constitutes a violation of '366(a), as well. The uncontroverted fact of the Falmouth City Council's decision of September 13, 1988, can be based on nothing other than the non-payment of the pre-petition electric bill.
As regards the Plaintiffs' claim under 11 U.S.C.'525, the anti-discrimination provision, the Defendant's decision to refuse reconnection and to refuse to accept a deposit is again the basis for a finding of violation. The required elements of that section are present here; the Defendant is a "governmental unit", the discrimination is based solely on the basis of non-payment of a debt discharged in bankruptcy, and the discrimination was in the provision of "a license, permit, charter, franchise, or similar grant." Several courts have suggested that the concept of a "similar grant" may be expanded to include the provision of utility service. See In re Begley, 46 B.R. 707 (D.C.E.D. Pa. 1984) and In re Webb, 38 B.R. 541 (Bkrtcy. E.D. Pa. 1984). This Court agrees with such expansive definition.
Finally, this Court considers whether the Defendant's conduct amounts to a violation of the automatic stay provision, specifically 11 U.S.C.'362(a)(6). It has been held that the automatic stay provision applies to informal collection efforts of all creditors, including public utilities. In re Smith, 1 B.R. 334 (Bkrtcy. C.D. Cal. 1979). The record in this case makes it clear that the Defendant's first concern was the debt owed to it. As City Clerk Terry England testified, "And they felt, as a business, which they felt the City of Falmouth is a business, that they had the right to give service to the customers that, not necessarily that they didn't pay or whatever, but they felt, if you were hooked once, you might get hooked the second time." (England depo., p. 16). As a result of its fear of getting "hooked", the Defendant refused to reconnect the Plaintiffs or to accept a deposit from them, an obvious attempt to pressure the Plaintiffs to pay their pre-petition bill.
In conclusion, it is the opinion of this Court that the Plaintiffs have successfully carried forward their burden of establishing that there is no genuine issue as to any material fact and that they are entitled to judgment as a matter of law. They have demonstrated that the Defendant's decision to refuse them reconnection and to refuse to accept a deposit was precipitated solely by the non-payment of their pre-petition electric bill. The Defendant has made several arguments, including the fact that Plaintiff, Mary Brearton, was loud and insistent in her demands to be reconnected, but has failed to refute what the Plaintiffs have established. The Plaintiffs should therefore be granted Partial Summary Judgment on the issue of the Defendant's liability for violation of 11 U.S.C.'366(a) and (b), 525, and 362(a)(6). The Defendant's Motion for Summary Judgment should be dismissed.
Plaintiffs have also moved for an interim award of attorney's fees pursuant to 11 U.S.C.'362(h), and a trial date. Trial has been set for September 12, 1990. The motion for interim award of attorney's fees should be reserved for trial when the issue of all damages will be considered.
Dated this ______ day of ___________________, 1990.
By the Court -
Carl J. Melcher, Esq.
David Doan, Esq.