Opinions of the United
1999 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


6-25-1999

Aronson v. Peoples Nat Gas Co
Precedential or Non-Precedential:

Docket 99-3000




Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1999

Recommended Citation
"Aronson v. Peoples Nat Gas Co" (1999). 1999 Decisions. Paper 165.
http://digitalcommons.law.villanova.edu/thirdcircuit_1999/165


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Filed June 25, 1999

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 99-3000

MARK B. ARONSON,
on behalf of himself and all others similarly situated,
       Appellant

v.

THE PEOPLES NATURAL GAS COMPANY

On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 98-cv-00705)
District Judge: Hon. Donald E. Ziegler

Submitted Under Third Circuit LAR 34.1(a)
June 8, 1999

Before: SLOVITER and MANSMANN, Circuit Judges
and O'NEILL,* District Judge

(Filed June 25, 1999)

       William F. Askin
       Pittsburgh, PA 15220

        Attorney for Appellant

       Joyce C. Dailey
       The Peoples Natural Gas Company
       Pittsburgh, PA 15222

        Attorney for Appellee
_________________________________________________________________

*Hon. Thomas N. O'Neill, Jr., United States District Judge for the
Eastern District of Pennsylvania, sitting by designation.
       James A. Michaels
       Washington, D.C. 20551

        Attorney for Board of Governors of
        the Federal Reserve System as
        Amicus Curiae

OPINION OF THE COURT

SLOVITER, Circuit Judge.

Plaintiff Mark B. Aronson appeals from the order of the
District Court granting summary judgment in favor of
Peoples Natural Gas Co. ("Peoples Gas") on Aronson's claim
that the billing practices of Peoples Gas violate the Truth in
Lending Act ("TILA"), 15 U.S.C.   1601 et seq. The District
Court remanded to the state court two other claims
Aronson brought against Peoples Gas, one for fraud and
misrepresentation and the other for violation of the
Pennsylvania Unfair Trade Practices and Consumer
Protection Law (the "Pennsylvania Act"), 73 Pa. Cons. Stat.
Ann.   201-1 et seq. Aronson has not sought to appeal the
remand ruling. We therefore limit our consideration to the
dismissal of the TILA claim, which raises an issue of first
impression for this court.

I.

Aronson is a customer of Peoples Gas and has purchased
utility services for his Allegheny County home since 1970.
His August 21, 1997, utility bill included new charges of
$16.24 and an accumulated balance of $541.12 for a total
account balance of $557.36. The bill stated, "Please Pay By
Sep 11, 1997 To Avoid A Late Payment Charge of $6.57
(1.5%)." It also listed an optional payment amount of
$113.00. Aronson's September 23 bill updated thesefigures
to show an unpaid accumulated balance of $557.36, a late
payment charge of $6.57, and new charges of $22.51, for a
new account balance totaling $586.44. That bill stated,
"Please Pay By Oct 14, 1997, To Avoid A Late Payment
Charge of $6.91 (1.5%)," and listed an optional payment
amount of $206.57. On October 3, Peoples Gas issued a

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ten-day turn-off notice which stated the company would
turn the gas service off if Aronson failed to pay the total
amount of $557.36 by October 16.

Aronson initially filed a complaint with the Pennsylvania
Public Utility Commission ("PUC") on October 10, 1997,
complaining of Peoples Gas's billing practices. 1 Prior to a
final decision from the PUC, Aronson filed a substantially
similar complaint in the Court of Common Pleas for
Allegheny County in March 1998, and sought class
certification. That complaint alleges that billing practices of
Peoples Gas violate TILA because the bills do not contain a
"due date," reveal the annual interest rate corresponding to
the late payment charge, or explain how the 1.5% late
payment charge is calculated. The bills refer only to "the
amount you owe," without specifying whether that amount
is the total balance, the current charges, or the optional
payment amount.

The complaint also alleges that the utility's billing
practices deviate materially from the tariff Peoples Gas filed
with the PUC, violate the Pennsylvania Act, perpetrate
common law fraud, and contain fraudulent
misrepresentations.

Peoples Gas removed the action to the United States
District Court for the Western District of Pennsylvania
pursuant to 28 U.S.C.   1441. It is the position of Peoples
Gas that the "Please Pay By" a specified date statement of
the bill is in fact a due date, although written in courteous
and customer-friendly language; that the bills inform
customers both how the late payment fee is computed and
how to avoid it; and that Peoples Gas never acted on the
ten-day turn-off notice. Shortly after Peoples Gasfiled its
answer, the District Court referred the matter to the
Magistrate Judge for pretrial proceedings.

After some activity, Peoples Gas moved for summary
_________________________________________________________________

1. The administrative law judge at the PUC ultimately dismissed the
complaint in July 1998 for lack of jurisdiction over the TILA claim and
for failure to carry the burden of proof as to the other claims. After
considering Aronson's exceptions, the PUC unanimously rejected the
exceptions on March 31, 1999.

                               3
judgment, asserting that "Regulation Z," promulgated by
the Board of Governors of the Federal Reserve System
("Board"), exempted utility billing from TILA's requirements.
See 12 C.F.R.   226.3(c). Aronson's verified response, see
Fed. R. Civ. P. 56(e), emphasized, inter alia, that the Board
had neither determined that a state regulatory body (here,
the PUC) regulates the charges at issue, nor specifically
exempted Peoples Gas. He attached a letter from a Board
attorney stating that "the Federal Reserve's regulations do
not apply to . . . public utility companies," App. at 58,
which Aronson concluded meant that "Defendant as a
public utility is exempt from Regulation Z." App. at 57.

The Magistrate Judge filed a Report and
Recommendation recommending the grant of summary
judgment for Peoples Gas on Aronson's TILA claim. The
Magistrate Judge reasoned first that the fact that Peoples
Gas files its tariff with the PUC pursuant to state law
establishes that a state regulatory body indeed does
regulate the tariff of Peoples Gas. The Magistrate Judge
recommended that the two state law claims (for common
law fraud and misrepresentation and violation of the
Pennsylvania Act) be remanded under 28 U.S.C.
  1367(c)(3), rather than dismissed, because these claims
involve complex issues of state law that would be better left
to resolution by a state court. Aronson filed objections to
the Magistrate Judge's Report and Recommendations,
but the District Court adopted the Report and
Recommendations without change. Because of their
decisions, neither the Magistrate Judge nor the District
Judge reached the class action issue.

Aronson filed a timely notice of appeal. After receiving the
briefs of the parties, we invited the Board to file a brief
amicus curiae, as the propriety and interpretation of its
regulation are at issue, and it has obliged us with its brief.
We have jurisdiction pursuant to 28 U.S.C.   1291. We
engage in plenary review of a district court's grant of
summary judgment and consider the facts in the light most
favorable to the non-movant. Seitzinger v. Reading Hosp.
and Med. Ctr., 

, 238 (3d Cir. 1999).

                               4
II.

Aronson raises three issues on appeal. First, he claims
that the Board exceeded its authority under TILA by
creating a blanket exemption for public utilities; instead, he
claims, the Board was required to make an individual
determination whether the state in fact regulated the
utility's tariffs. Second, Aronson contends that the District
Court erred in holding that the Board had authority to
issue a regulation exempting public utilities, such as
Peoples Gas, "upon the mere filing of tariffs without proof
of state regulatory control." Finally, Aronson contests the
ruling that his testimony and documents were not
admissible on summary judgment.

Congress enacted TILA to promote "the informed use of
credit," by assuring consumers "meaningful disclosure of
credit terms." Ford Motor Credit Co. v. Milhollin, 

, 559 (1980) (quoting 15 U.S.C.   1601). The statute
requires that the lenders specify, inter alia, the finance
charge and the annual percentage rate. See 15 U.S.C.
   1605, 1606, 1638(a)(3),(4). This disclosure enables
consumers to have the knowledge necessary to compare
credit terms offered by competing lenders. Congress
authorized the Federal Reserve Board to prescribe
regulations to carry out the purpose of TILA. See 15 U.S.C.
  1604(a).

A provision of TILA exempts public utility charges as
follows:

         1603. Exempted transactions

       This subchapter does not apply to the following:

       . . . .

       (4) Transactions under public utility tariffs, if the
       Board determines that a State regulatory body
       regulates the charges for the public utility services
       involved, the charges for delayed payment, and any
       discount allowed for early payment.

15 U.S.C.A.      1603.

Pursuant to its authority under TILA, the Board in turn
promulgated Regulation Z. One of those regulations
provides as follows:

                               5
         226.3 Exempt transactions.

       This regulation does not apply to the following:

       . . . .

       (c) Public utility credit. An extension of credit that
       involves public utility services provided through pipe,
       wire, other connected facilities, or radio or similar
       transmission (including extensions of such facilities), if
       the charges for service, delayed payment, or any
       discounts for prompt payment are filed with or
       regulated by any government unit. The financing of
       durable goods or home improvements by a public
       utility is not exempt.

12 C.F.R.   226.3 (footnote omitted).

Aronson argues that the statutory language of TILA does
not authorize the Board to make a blanket exemption for
public utilities. He does not argue that the charges about
which he complains are different than "the charges for
delayed payments" referred to in the TILA exemption
provision covered by   1603. Instead, he focuses on the
statutory language that exempts a public utility's charges
for delayed payment from TILA "if the Board determines
that a State regulatory body regulates the charges for the
public utility services involved." He argues that the Board
must make an affirmative individualized determination that
a state regulates the particular utility before that utility's
charges become exempt from TILA. Aronson contends that
in the absence of a factual finding that Pennsylvania does
regulate Peoples Gas, the regulation's blanket exemption is
arbitrary. Moreover, he contends that the regulation is
arbitrary because it is not reasonably related to TILA.

In arguing that the Board is required to make a
determination of state regulation in each instance in which
a utility claims exemption from a provision of TILA,
Aronson in effect challenges the Board's authority to
promulgate the provision of Regulation Z which broadly
exempts utility charges that are "filed with or regulated by
any government unit." We need look no further than the
Supreme Court's opinion in Ford Motor Credit Co. for a
discussion of the extent of the Board's authority under TILA
and an explanation of its broad scope.

                               6
In that case, the Court stated that, because the
complexity and variety of credit transactions covered by
TILA "defy exhaustive regulation by a single statute[,]
Congress . . . delegated expansive authority to the Federal
Reserve Board to elaborate and expand the legal framework
governing commerce in credit." Ford Motor Credit 

(emphasis added). The Court then noted
that "[t]he Board executed its responsibility by
promulgating Regulation Z, 12 C.F.R. Part 226 (1979),
which at least partly fills the statutory gaps." 

Later in the opinion, the Court stated, "Congress delegated
broad administrative lawmaking power to the Federal
Reserve Board when it framed TILA. . . . Furthermore,
Congress has specifically designated the Federal Reserve
Board and staff as the primary source for interpretation
and application of truth-in-lending law." 

(footnote
omitted).

The Board construes its broad power under TILA as
permitting it to implement the exception either by a
uniform rule or case by case. It opted for the former method
by adopting the regulation that exempts certain utility
credit transactions from TILA whenever "the charges . . .
are filed with or regulated by any government unit." 12
C.F.R.   226.3(c). As the Board's staff noted in a published
position letter, "It was the Board's intention that this
provision [in   226.3] embody an objective test, against
which all public utility transactions could be measured to
determine whether they are subject to the Truth-in-Lending
Act, without the Board having to make an individual
determination in each case." Federal Reserve Staff Position
Letter No. 524 (Sept. 13, 1971).

The Supreme Court considered the effect of a staff
memorandum in Ford Motor Credit, and commented:

       To be sure, the administrative interpretations proffered
       in this case were issued by the Federal Reserve staff
       rather than the Board. But to the extent that deference
       to administrative views is bottomed on respect for
       agency expertise, it is unrealistic to draw a radical
       distinction between opinions issued under the
       imprimatur of the Board and those submitted as
       official staff memoranda. See FRB Public Information

                               7
       Letter No. 444, [1969-1974 Transfer Binder] CCH
       Consumer Credit Guide   30,640. At any rate, it is
       unnecessary to explore the Board/staff difference at
       length, because Congress has conferred special status
       upon official staff interpretations. See 15 U.S.C.
         1640(f); 12 CFR   

n.9.

Moreover, it stated that "deference is especially
appropriate in the process of interpreting the Truth in
Lending Act and Regulation Z. Unless demonstrably
irrational, Federal Reserve Board staff opinions construing
the Act or Regulation should be dispositive. . . ." 

We cannot conclude that the Board's or its staff 's
understanding of the statute or its authority is
"demonstrably irrational." Therefore, we will defer to the
Board's interpretation, and conclude that TILA does not
require the Board to make a fact-specific determination in
every exemption case.

In light of this conclusion, Aronson's arguments based on
the lack of any evidence that Peoples Gas made an
individualized request for exemption are beside the point.
No determination was necessary, so no request was
required. It follows that the admissibility of the material
that Aronson sought to introduce consisting of his
verification in opposition to summary judgment, which was
addressed to the Board's exemption of utility charges, was
irrelevant.2 Moreover, we note that the courts that have
_________________________________________________________________

2. The trial court rejected the verification because it failed to set
forth
facts demonstrating Aronson's personal knowledge and competence to
testify regarding the subject matter discussed and because portions of it
constituted hearsay. Rule 56(e) requires that affidavits shall be made on
personal knowledge, set forth facts as would be admissible in evidence,
and show affirmatively that the affiant is competent to testify as to the
matters stated. Aronson contends that he has personal knowledge
resulting from his conversations with others about whether Peoples Gas
requested an exemption from the Board, whether the Board has
exempted Peoples Gas, and whether Pennsylvania itself requested an
exemption. We cannot conclude that the District Court abused its
discretion in finding that Aronson's verification failed to meet this
standard. Therefore, the District Court did not err in rejecting the
verification for the reasons given. See, e.g., Hollander v. American
Cyanamid Co., 

, 198 (2d Cir. 1999).

                                8
considered arguments like Aronson's regarding late
 537payment assessments under TILA unequivocally have

rejected them. See Ferguson v. Electric Power Bd. of
Chattanooga, 

, 790 (E.D. Tenn. 1974)
("Acting pursuant to 15 U.S.C.    1604, the Federal Reserve
Board has specifically exempted late charges in public
utility bills from the disclosure provisions of the Act."),
aff'd, 

(6th Cir. 1975); Grein v. Hawkins, 

, 223 (La. Ct. App. 1974) (refusing to read TILA
"restrictive[ly]" to require "positive action" by Board before
exemption under    1603(4) is effective). We therefore reject
Aronson's contention that the regulation is arbitrary and
inapplicable here.

We also reject Aronson's claim that the Board exceeded
its authority in promulgating the regulation that exempts a
utility's charges for service if they are "filed with . . . any
government unit." Under the Board's expansive authority to
implement TILA, it reasonably could interpret the reference
of   1603(4) to charges that are "regulate[d]" to include
charges that are "filed with" state authorities.

In any event, it is clear that Pennsylvania both requires
a utility to file its tariff and regulates utility rates. See 66
Pa. Cons. Stat. Ann.   1301 et seq. There is also no
question that Peoples Gas has filed the necessary tariffs
with the Pennsylvania PUC and is regulated under
Pennsylvania law. Therefore, we cannot conclude that
application of TILA and Regulation Z to exempt Peoples Gas
was inappropriate in this case.

III.

For the reasons stated above, we conclude that the
District Court did not err in granting the motion of Peoples
Gas for summary judgment.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

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