Friday, May 6, 2016

Class Has So Little in Common that Demurrer Gets Upheld

Schermer v. Tatum, No. D067807 (Mar. 18, 2016)

Generally, its pretty tough to get class allegations dismissed at the pleading stage, and even harder getting that type of dismissal to stand up on appeal. But it happens sometimes. This is one of those cases.

The case is a class action brought on behalf of residents at eighteen different mobile home parks. The complaint alleged violations of the UCL, breaches of the covenants of quiet enjoyment and good faith and fair dealing and fraud. The allegations raised various and sundry abusive landlord-tenant practices, including forcing the residents to enter into unconscionable leases, although not all of the leases were the same, and the unconscionability was to be shown by some mix of eleven different factors set out in the complaint. Factors like “failing to provide all documents related to the lease until after expiration of the statutory review period.” On top of that, the parks had somewhat different ownership structures. 

If that doesn’t sound to you like the kind of stuff that is amenable to class-wide resolution, you aren’t alone. The trial court sustained a demurrer to the class allegations. When plaintiffs tried to fix the amended complaint, they did so by including twenty-one different subclasses, and claiming that defendants had a “uniform policy and procedure” to use some or all of the eleven factors in every least transaction. The trial court sustained another demurrer, explaining that the similarities in lease terms might show some commonality, but not enough to make class-wide litigation a superior vehicle. Plaintiff appealed under the death-knell doctrine.

The court of appeal notes that class allegations can be struck if the complaint fails to state facts sufficiently to show that class treatment is appropriate. But the court won’t credit contentions, deductions, or factual conclusion. Which is what the court thinks of the uniform class-wide “policy” allegation. It’s pretty clear from the actual facts that even assuming the parks employed some or all of the eleven factors, how those would affect the unconscionability analysis would depend on individualized interactions during the leasing process. So the fact that the parks had a “policy” of using certain shady tactics wasn’t common enough to merit class treatment.

Going through on a claim by claim basis, the court agrees that each cause of action can’t be brought as a class action. Plaintiff’s demand for restitution of excess rents under the UCL pretty clearly required individual treatment. The eighteen parks were in sixteen different cities, some of which have rent control and others of which to not. There was no feasible way to measure restitution on a class-wide basis. The covenant claims deal with individualized interactions  between the tenants and the parks. And the common law fraud claim requires individualized proof of reliance. So in sum, there wasn’t even enough commonality to meet that element of the standard. The court didn’t even need to get to typicality or the superiority of proceeding on a class basis.


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