NIBCO Inc. v. City of Lebanon
680 F. App'x 428
| 6th Cir. | 2017Background
- The City of Lebanon operates a municipal electric utility governed by its Code of Ordinances (Chapter 910), not PUCO rules.
- Nibco opened a new account in 2009; a City employee entered an incorrect meter multiplier (40 instead of 400), causing underbilling from Jan 2009–June 2014 totaling $1,269,993.
- Upon discovering the error in 2014, the City reset the multiplier and sought to recoup the undercharge by adding a fixed additional amount to Nibco’s bills over 65 months; it waived interest and penalties.
- Nibco paid all billed amounts and sued for a declaratory judgment that it was not obligated to pay the underbilled amounts.
- Chapter 910 expressly provides recovery for meter malfunctions (limited to 12 months) and for unauthorized taking/theft, but is silent as to recovery for undercharges caused by the City’s clerical error.
- The district court found the ordinance ambiguous and ordered full recovery; the Sixth Circuit reversed, holding the ordinance unambiguous and precluding recovery for the City’s clerical error.
Issues
| Issue | Plaintiff's Argument (Nibco) | Defendant's Argument (City) | Held |
|---|---|---|---|
| Whether the City may recoup undercharges caused by its own clerical error when the ordinance is silent | Chapter 910 grants recovery only for meter malfunction (12-month limit) and theft; silence means no power to recover City-caused mistakes | Silence does not prohibit recovery; municipality should be able to collect for service actually consumed despite clerical error | Held for Nibco: ordinance unambiguous; silence does not confer power; City cannot recoup undercharges from its clerical error |
| Whether Chapter 910 is ambiguous such that courts may consult intent/policy | The ordinance’s language is clear and not susceptible to multiple reasonable meanings; therefore extratextual inquiry is inappropriate under Ohio law | The ordinance is silent/ambiguous on this problem and courts may look beyond text to avoid absurd results | Held for Nibco: under Ohio precedent, ambiguity exists only if text supports more than one reasonable interpretation; court refused to treat silence as ambiguity |
| Whether PUCO-based authority (and related Ohio cases) require recovery to avoid discriminatory billing | Nibco: PUCO cases rely on statutory scheme inapplicable to municipal utilities exempt from PUCO; thus they do not compel recovery here | City: Ohio cases (Norman, Joseph Chevrolet) support full recovery to avoid shifting costs to other customers | Held for Nibco: PUCO-based precedents are not controlling because municipal utilities are exempt; those cases are not persuasive authority here |
| Whether equitable defenses (estoppel/laches) or policy considerations should bar recovery | Nibco: allowing unlimited recovery would reward the drafter’s mistake and remove incentive for accurate billing; also fairness to customer who paid all billed amounts | City: denying recovery unfairly shifts costs to other customers; collecting for actual service consumed is consistent with intent | Held: Court declined to rewrite ordinance for policy reasons; absence of ordinance provision means City lacks authority to collect in these circumstances |
Key Cases Cited
- Xenia v. Ohio, 746 N.E.2d 666 (Ohio 2000) (municipally owned utilities are exempt from PUCO regulation and governed by local ordinances)
- Appleton v. First Nat. Bank of Ohio, 62 F.3d 791 (6th Cir. 1995) (courts may avoid literal readings that produce absurd results; discussion of statutory interpretation)
- Dunbar v. Ohio, 992 N.E.2d 1111 (Ohio 2013) (ambiguity exists only if statute is susceptible to more than one reasonable interpretation; extratextual inquiry inappropriate absent textual ambiguity)
- Norman v. Pub. Util. Comm’n of Ohio, 406 N.E.2d 492 (Ohio 1980) (PUCO may interpret tariffs to allow backbilling; discussion of limits on backbilling under regulatory scheme)
- Cincinnati Gas & Elec. Co. v. Joseph Chevrolet Co., 791 N.E.2d 1016 (Ohio Ct. App. 2003) (public-utility statutes preclude discriminatory billing; upheld backbilling where statutory scheme applied)
- Bible Believers v. Wayne Cty., 805 F.3d 228 (6th Cir. 2015) (standard of review for summary judgment and de novo review of ordinance interpretation)