Ruling goes against Indiana’s ‘strong public policy’ of enforcing contracts

August 3, 2016

A federal judge ruled Tuesday in a lawsuit challenging the town of Fortville’s procedure for disputing unpaid water bills that class members’ constitutional rights to procedural due process trump the state’s public policy of enforcing contracts.

Bobbi Kilburn-Winnie and Michelle Allen-Gregory had their water service disconnected after not paying their bills on time. They allege that the procedure that allows customers who want to dispute the amount billed or the impending disconnection to have a hearing before the Fortville Town Council is so complicated and burdensome that it violates the right to procedural due process under the 14th Amendment.

Allen-Gregory has sued over this issue before. In 2014, her complaint stated the town would terminate water service without a hearing. This led to the town revising its notice and disconnection procedure, but the plaintiffs claimed the new procedure was “overly burdensome” because it required four written submissions, including a notice of appeal of the service or disconnection fee.

The lawsuit was settled in 2015, with the settlement agreement becoming effective Oct. 12, 2015. The agreement contained a released claims clause, at issue in the instant case. The town defendants argue this released claims clause prevents the instant lawsuit, as Allen-Gregory was a named plaintiff in the original case and Kilburn-Winnie was a member of the settling class because she had her water disconnected in February and June 2014 under the defendants’ original procedure. She also received settlement proceeds.

After determining state law applies, Chief Judge Richard Young inthe U.S. District Court for the Southern District of Indiana found the plain language of the release bars the plaintiffs’ claim, but that does not necessarily mean it is enforceable against Allen-Gregory, Killburn-Winnie or potential class members.

The release is enforceable as it relates to Allen-Gregory because she was the original named plaintiff, participated in the settlement conference and signed the settlement agreement.

Killburn-Winnie received a notice of the class action and proposed settlement, but there’s no evidence she actually read the class action or the settlement agreement and release clause.

“The court recognizes that this ruling strikes against Indiana’s strong public policy of enforcing releases and enforcing contracts in general. This decision also overrules the clear intent of the parties to the Settlement Agreement and the very purpose of releases. Parties include a release in settlement agreements in order to “foreclose further claims,” Young wrote citing Zolman v. Geneva Leasing Assocs., 780 N.E.2d 387, 392 (Ind. Ct. App. 2002).

“Yet, at least at this stage in the proceeding, the court must allow the releasers to return with a claim Defendants reasonably believed was waived. The court is troubled by this result and its possible implications.

“Despite this …the court cannot enforce a waiver of a constitutional right until it is satisfied that the individual voluntarily relinquished a known right. At least in this context, the class members’ constitutional right to procedural due process trumps Indiana’s public policy of enforcing contracts, the parties’ contractual intent, and the plain language of the Release.”

Young ordered Allen-Gregory removed from the case. He also granted the defendants leave to renew their motion for summary judgment if evidence reveals that Killburn-Winnie knowingly and voluntarily waived her due process rights.

The case is Bobbie Kilburn-Winnie and Michelle Allen-Gregory, on behalf of themselves and all similarly situated persons v. Town of Fortville, Fortville Water Works and Fortville Utilities, 1:15-cv-0784. 


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