Friday, August 23, 2013

Individual Issues Predominate in Tenants' Suit to REAP Their Landlord

Hendleman v. Los Altos Apartments, No. B235404 (D2d3 Aug. 20, 2013)

Denial of class certification was upheld in a landlord/tenant dispute because common questions of liability did not predominate over individualized issues regarding the condition of tenants' apartments and the effect of the landlord’s deficient maintenance on individual tenants.

Plaintiffs are tenants in a once-famous, but now down on its luck, apartment building on the outskirts of Koreatown in Los Angeles. They brought a class action on behalf of all of the tenants who lived there over a five-year period, alleging violations of two Los Angeles housing ordinances—the Rent Escrow Account Program, L.A. Mun. Code, § 162.00 et seq., and the Los Angeles Rent Stabilization Ordinance, L.A. Mun. Code, § 151.00 et seq. REAP institutes mandatory 50 percent rent reductions when a landlord is found in non-compliance of the Los Angeles Housing Department’s health and safety orders, with the tenant permitted to pay the balance into a trust fund, which is intended to coerce the landlord into curing the violations. The RSO, on the other hand, controls the rates at which a landlord can increase rents or decrease services while maintaining the same rent. In 2007, the Housing Department put the building into REAP due to repeated violations and ordered rent reductions for most units. 

Plaintiffs sued on a number of theories, including violating the RSO by keeping rent constant while diminishing services, retaliation against tenants who refused to pay rent over the REAP amounts, breaches of the implied warranty of habitability, nuisance, and abuse of process. Plaintiffs sought to certify a class of all tenants from 2005 to present as well as subclasses of tenants who received three-day notices to pay rent or quit, notices to pay full rent over the REAP amount, and notices that rent was past due. According to plaintiffs, common questions predominated because their claims addressed code violations and habitability issues that affected the whole building as well as building-wide practices related to improper notices and demands for overpayment of rent.  Defendants opposed, arguing that various plaintiff-specific issues precluded certification, such as the condition of individual units, standing issues related to sub-lessees, statute of limitations issues, plaintiff-specific allegations of retaliation and harassment, and the fact that one named plaintiff had admitting to never paying more than the REAP-reduced rent. The trial court denied certification, reasoning that the class was not ascertainable and that individual issues predominated.

The court of appeal, stressing the deference that should be afforded to the trial court on certification issues, affirmed. After reviewing the standard for class certification under Code of Civil Procedure § 382, the court went through the complaint, count-by-count and found that certification was properly denied on each claim. The habitability and nuisance issues affected each tenant differently, even if only violations occurring in common areas were considered, and thus their materiality could not be assessed on a class basis. Similarly, the RSO claims—which were premised on reductions of services, not increased rents—implicated individual questions of the levels in which the services were allegedly reduced. The REAP retaliation claims also turned on individualized tenant decisions involving the regulatory particulars of the REAP ordinance. And the abuse of process claims didn’t merit certification on for lack of numerosity given that only seventeen tenants received three-day notices to quit and many of those paid their rent before unlawful detainer proceedings were initiated. Finally, in response to plaintiffs' many offers to amend their class definitions to cure the defects, the court of appeal noted that those issues were better addressed in the first instance by the trial court.


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