Appeals Government
Sixth Circuit Finds No Right to Affordable Water
November 14, 2016 November 17, 2016 LORRAINE BAILEY
bankruptcy, Detroit, water
CHICAGO (CN) – Detroit can continue to shut off water service to residents unable to pay their water bills after the Sixth Circuit ruled Monday there is no fundamental right to affordable water service.
After Detroit filed for Chapter 9 bankruptcy protection in July 2013, the city began shutting off the water service of residents who failed to pay their bills.
In 2015, Detroit shut off water service to more than 20,000 homes, depriving many low-income families with children of running water.
A class of Detroit residents asked the bankruptcy court to issue a permanent injunction prohibiting Detroit from shutting off their water based on an asserted "right to water service at a price they can afford to pay."
Plaintiff John Smith testified that the city terminated his water service for three to five months in early 2014. Plaintiff Nicole Hill said her water was shut off three different times between 2014 and 2016, and anticipates her water will be shut off a fourth time because she cannot afford her August water bill.
However, a federal judge dismissed their suit, and the Sixth Circuit affirmed Monday that there is no cognizable property right to affordable water service.
"A right of this nature is not rooted in our nation's traditions or implicit in the concept of ordered liberty," Judge Richard Griffin wrote for a three-judge panel.
Due process requires only that Detroit's water rates reasonably reflect the cost of providing the service, not that the rate structure reflect the customers' ability to pay, the panel said.
Further, Section 904 of the Bankruptcy Code explicitly prohibits the court from interfering with a municipality's exercise of governmental power.
"Preliminary or permanent injunctions directing [the Detroit Water and Sewerage Department, or DWSD] to stop terminations or to provide water service – including service at a specific price – necessarily 'interfere[s] with' the city's 'governmental powers,' its 'property [and] revenues,' as well as its 'use [and] enjoyment of . . . income-producing property,'" Griffin said. "A declaration that DWSD's practices are illegal or unconstitutional does the same. Section 904 strips the bankruptcy court of authority to order anything of the sort."
The Sixth Circuit said it was particularly loath to wade into the issue given the massive scope of Detroit's reorganization. At the time it filed bankruptcy, the city had $18 billion in debt, hundreds of millions of dollars in negative cash flow, and a failing water and sewer system.
"The bankruptcy court bore responsibility for approving a plan of adjustment equally vast in its aim to remedy these conditions. Concerns for state sovereignty loom larger with so much at stake," Griffin said.
The panel said it needed to preserve the delicate balance of state-federal sovereignty by ensuring that bankruptcy power cannot be used to indirectly dictate how a debtor city should be governed.
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