Turner v. Equity Residential Properties
Turner v. Equity Residential Properties
Filed 8/4/06 Turner v. Equity Residential Properties CA6
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
Plaintiff and Appellant,
EQUITY RESIDENTIAL PROPERTIES, et al.,
Defendants and Respondents.
(Santa Clara County
Super. Ct. No. CV808619)
Plaintiff Christian Turner lived in rental property owned by defendant Equity Residential Properties (Equity) for almost two years. He received a check for the refund of his security deposit, less various deductions, more than 30 days after his move-out date. He filed this lawsuit against Equity and related defendants (collectively, defendants), asserting individual and purported class claims on behalf of himself and all tenants of defendants’ California properties between July 1998 and June 2002. The trial court struck the class allegations and later denied plaintiff’s motion for certification of the suit as a class action. Plaintiff appeals from the denial of his motion for class certification, contending that the trial court abused its discretion because it based its denial on improper criteria and erroneous legal assumptions, and because there is a lack of substantial evidence to support its findings. Because we find substantial evidence to support the trial court’s findings, which are based on proper criteria, we will affirm the order denying the motion for class certification.
Plaintiff leased an apartment from Equity from July 2, 1999, through May 31, 2001. He paid an $800 security deposit and an $800 pet deposit. On or about July 5, 2001, Equity issued plaintiff a check for $164.52 as a refund of his security deposit. On June 12, 2002, plaintiff filed a complaint for damages and injunctive relief against defendants asserting individual and purported class claims on behalf of “[a]ll persons who, within four years preceding the date of this complaint, rented a dwelling in California owned, leased, operated, serviced and/or managed by” defendants. Plaintiff alleged that Equity breached his form lease contract and violated Civil Code section 1950.5 and Business and Professions Code section 17200 by delaying the refund of his security deposit and by deducting utility charges and assessments for the normal wear and tear of furnishings and fixtures. Plaintiff also alleged that defendants generally breached their contracts with each member of the purported class and violated section 1950.5 and Business and Professions Code section 17200 by deducting from class members’ security deposits assessments for normal wear and tear and inflated utility services, and by not returning the security deposits within 30 days.
Defendants moved to strike the class action allegations, arguing that the liability determination for each class member necessarily turns on individual facts. Following a hearing on September 24, 2002, the trial court granted the motion, but told plaintiff that he could move to amend the complaint “on the proper set of facts.”
On February 3, 2004, plaintiff moved to file a first amended complaint on behalf of himself and “[a]ll others who entered into a residential lease agreement for an apartment located in California owned, leased, operated, or managed by [defendants] and who still occupy the unit at the time of judgment in this case or vacated on or after June 12, 1998.” At a hearing on the motion on February 24, 2004, the court stated that the proposed amended complaint had “for the most part the very same problems that we had with the original complaint . . . with regard to the allegations of the class action.” Therefore, the court granted leave to file the proposed amended complaint, but struck the class allegations. Plaintiff’s first amended complaint was filed February 25, 2004, with the class allegations crossed out. Defendants filed an answer to the first amended complaint on March 26, 2004.
On November 12, 2004, plaintiff moved to file a second amended complaint and for class certification. The purported class was “[a]ll persons who, on or after June 12, 1998, vacated an apartment located in California owned, operated, or managed by [defendants], and whose security deposit was deducted for painting charges, carpet replacement charges, and/or whose security deposit was not refunded within 21 days.” The proposed second amended complaint sought damages and injunctive relief based on class claims for breach of contract, violations of section 1950.5, breach of the implied covenant of good faith and fair dealing, and violations of Business and Professions Code section 17200 et seq. The complaint alleged that defendants breached their form lease contracts with plaintiff and each class member by failing to pro-rate deductions for paint from security deposits based on a two-year useful life; by deducting from security deposits amounts for painting for tenancies lasting two years or longer; and by deducting for carpet replacement in excess of the amount allowed under the applicable pro-rate formula or without knowledge of the age of the carpet, in contravention of the lease terms limiting deductions to those conditions that are in excess of ordinary wear and tear and that are not cumulative of prior tenants. The complaint further alleged that defendants violated section 1950.5 and Business and Professions Code section 17200 by failing to return security deposit refunds within three weeks of a tenant’s move-out date, by failing to prorate painting charges based on a two-year useful life, by failing to prorate carpet replacement charges based on the actual expected life and cost of the carpet, and by doing all of this in bad faith.
On February 15, 2005, defendants filed opposition to plaintiff’s motion for class certification. Defendants argued that the allegations of improper deductions and late refunds in the proposed second amended complaint were essentially unchanged from those in the original and first amended complaints, and that the allegations necessarily require a determination of tenant-specific claims that are unsuitable for class treatment. At the hearing on the motions on March 22, 2005, plaintiff argued that the “main difference” between the class claims in the proposed complaint and the prior complaints was that the proposed claims “look to the amount of the charges for the painting and the carpet rather than the initial decision as to whether or not to make the charge.” At the March 22, 2005 hearing on the motions, the court granted the motion to amend but denied the motion for class certification.
The formal order on the motions was filed on April 18, 2005. The order states in pertinent part: “b. The Court finds that it is not to the substantial benefit of either the Court or the parties to certify this matter as a class action. It would be superior for class members to pursue their remedies in small claims court because a class action would proceed on generalized evidence, rather than dealing with all of the specific cases as a small claims court would do. As such, small claims court actions provide an adequate remedy for all members of the class. Potential class members would also have to relinquish certain remedies or damages in order to be a member of plaintiff’s proposed class, as opposed to bringing an individual action in small claims court. [¶] c. The Court finds that statutory damages for the bad faith retention of security deposits under . . . section 1950.5 may not be adjudicated on a class-wide basis. Therefore, class members would have to relinquish their individual remedy for bad faith in order to be a member of this class, making the class action device an inferior means for resolving class members’ claims. [¶] d. The Court also finds that individual issues predominate over the common questions presented because there exist individual issues unique to each of the potential class members. Likewise, common issues of fact do not predominate in this case because the issues in defense are unique as to each of the potential class member[s]. In addition, the Court finds that plaintiff’s class claims would be very difficult to manage.”
“Code of Civil Procedure section 382 authorizes class actions ‘when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court . . . .’ The party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among the class members. [Citations.]” (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326 (Sav-On); Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435 (Linder).) “Generally, a class suit is appropriate ‘when numerous parties suffer injury of insufficient size to warrant individual action and when denial of class relief would result in an unjust advantage to the wrongdoer.’ [Citations.] But because group action also has the potential to create injustice, trial courts are required to ‘ “carefully weigh respective benefits and burdens and to allow maintenance of the class action only where substantial benefits accrue both to litigants and the courts.” ’ [Citations.]” (Linder, supra, 23 Cal.4th at p. 435.)
“The certification question is ‘essentially a procedural one that does not ask whether an action is legally or factually meritorious.’ [Citation.] A trial court ruling on a certification motion determines ‘whether . . . the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.’ [Citation.]” (Sav-On, supra, 34 Cal.4th at p. 326.)
“Because trial courts are ideally situated to evaluate the efficiencies and practicalities of permitting group action, they are afforded great discretion in granting or denying certification. The denial of certification to an entire class is an appealable order [citations], but in the absence of other error, a trial court ruling supported by substantial evidence generally will not be disturbed ‘unless (1) improper criteria were used [citation]; or (2) erroneous legal assumptions were made [citation]’ [citation]. Under this standard, an order based upon improper criteria or incorrect assumptions calls for reversal ‘ “even though there may be substantial evidence to support the court’s order.” ’ [Citations.] Accordingly, we must examine the trial court’s reasons for denying class certification. ‘Any valid pertinent reason stated will be sufficient to uphold the order.’ [Citation.]” (Linder, supra, 23 Cal.4th at pp. 435-436; Sav-On, supra, 34 Cal.4th at pp. 326-327.)
In this case, the trial court gave three reasons for its order denying certification. First, it found that it is not to the substantial benefit of either the court or the parties to certify the matter as a class action. Second, it found that statutory damages for the bad faith retention of security deposits under section 1950.5 may not be adjudicated on a class-wide basis in this case, making a class action an inferior means for resolving class members’ claims. Third, it found that individual issues predominate over the common questions presented. We find that the trial court based its order denying the motion for class certification on proper criteria, and that substantial evidence supports the trial court’s findings.
Substantial benefit to the court or the parties
“On a motion for class certification, the plaintiff has the ‘burden to establish that in fact the requisites for continuation of the litigation in that format are present. [Citations.]’ [Citation.]” (Caro v. Proctor & Gamble Co. (1993) 18 Cal.App.4th 644, 654 (Caro).) “A class action . . . must be the superior means of resolving the litigation, for both the parties and the court. [Citation.] ‘Generally, a class suit is appropriate “when numerous parties suffer injury of insufficient size to warrant individual action and when denial of class relief would result in unjust advantage to the wrongdoer.” [Citations.]’ [Citation.] ‘[R]elevant considerations include the probability that each class member will come forward ultimately to prove his or her separate claim to a portion of the total recovery and whether the class approach would actually serve to deter and redress alleged wrongdoing.’ [Citation.] ‘[B]ecause group action also has the potential to create injustice, trial courts are required to “ ‘carefully weigh respective benefits and burdens and to allow maintenance of the class action only where substantial benefits accrue both to litigants and the courts.’ ” [Citation.]’ [Citations.]” (Newell v. State Farm General Ins. Co. (2004) 118 Cal.App.4th 1094, 1101.)
In Hogya v. Superior Court (1977) 75 Cal.App.3d 122 (Hogya), the trial court denied class certification because substantial benefits would not accrue to the litigants, the class, the public and the courts, and because it was unlikely a high percentage of class members would ultimately come forward to prove separate claims to a portion of the total class recovery. (Id. at pp. 127, 134.) “Undoubtedly, these factors are germane to class certification in actions brought under Code of Civil Procedure section 382. In Blue Chip Stamps v. Superior Court [(1976)] 18 Cal.3d 381, the Supreme Court held (1): ‘the representative plaintiff must show substantial benefit will result both to the litigants and to the court [citations].’ [Citation.] and (2) ‘A factor in determining feasibility of the group approach is the probability each member will come forward ultimately, identify himself and prove his separate claim to a portion of the total recovery. [Citation.] . . . .” (Hogya, supra, 75 Cal.App.3d at pp. 134-135, fn. omitted; Caro, supra, 18 Cal.App.4th at p. 654; see also, Rees v. Wal-Mart Stores, Inc. (1999) 73 Cal.App. 4th 1225, 1235-1236.)
In this case the trial court found that “it is not to the substantial benefit of either the Court or the parties to certify this matter as a class action. It would be superior for class members to pursue their remedies in small claims court because a class action would proceed on generalized evidence, rather than dealing with all of the specific cases as a small claims court would do. As such, small claims court actions provide an adequate remedy for all members of the class. Potential class members would also have to relinquish certain remedies or damages in order to be a member of plaintiff’s proposed class, as opposed to bringing an individual action in small claims court.” On the record before us, we find that the trial court reasonably concluded that plaintiff did not demonstrate substantial benefits to the parties and the court would result from class certification.
Potential class members were unlikely to receive substantial benefit from a class action lawsuit because relief under section 1950.5 was already available to them in small claims court (§ 1950.5, subd. (n)), where the class members could personally control their own cases. Also, denial of class treatment would not burden potential class members since their alleged injuries were of sufficient size to warrant individual action and recovery by individual class members was likely even absent a class suit. In addition, plaintiff did not attempt to show that it was likely a high percentage of class members would ultimately come forward, identify themselves, and prove their separate claims to a portion of any class recovery. Thus, the finding by the trial court that there was not substantial benefit to the parties or the court in class certification is supported by the record.
Damages for bad faith retention of security deposits under section 1950.5
No later than 21 calendar days after a tenant vacates the premises, the landlord must both provide the tenant with a copy of an itemized statement indicating the disposition of any security deposit and return to the tenant any remaining portion of the security deposit. (§ 1950.5, subd. (g)(1).) If, within the specified period, the landlord does not provide the tenant with a written accounting of the retained portion of the security deposit, the landlord must return the entire security deposit to the tenant. (Granberry v. Islay Investments (1995) 9 Cal.4th 738, 745 (Granberry).) “The bad faith claim or retention by a landlord . . . of the security or any portion thereof in violation of this section, . . . may subject the landlord . . . to statutory damages of up to twice the amount of the security, in addition to actual damages. The court may award damages for bad faith whenever the facts warrant that award, regardless of whether the injured party has specifically requested relief. In any action under this section, the landlord . . . shall have the burden of proof as to the reasonableness of the amounts claimed . . . .”
(§ 1950.5, subd. (l).)
A landlord’s unlawful retention of a security deposit after a tenant vacates the premises also constitutes an unfair business practice under Business and Professions Code section 17200 et seq. Any tenant personally aggrieved by a violation of section 1950.5 may bring a suit on his or her own behalf or in a representative capacity on behalf of other aggrieved tenants for restitution of the unlawfully-collected amounts and/or injunctive relief. (Bus. & Prof. Code, §§ 17203, 17204; see e.g., Granberry, supra, 9 Cal.4th 742.) Because monetary relief in a Business and Professions Code section 17200 representative suit is limited to restitution, however, only return of the unlawfully retained money to the plaintiffs is allowed and “ ‘damages are not available under [Business and Professions Code] section 17203.’ ” (Inline, Inc. v. Apace Moving Systems, Inc. (2005) 125 Cal.App.4th 895, 903, citing Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1266.)
The trial court found “that statutory damages for the bad faith retention of security deposits under California Civil Code section 1950.5 may not be adjudicated on a class-wide basis. Therefore, class members would have to relinquish their individual remedy for bad faith in order to be a member of this class, making the class action device an inferior means for resolving class members’ claims.” Plaintiff argues that this finding is based on the trial court’s erroneous interpretation of section 1950.5. As he proffered only class-wide evidence of bad faith, the only way to reconcile the court’s finding with his proffered evidence is to find that the court determined that the class-wide evidence was insufficient as a matter of law and that the only way to prove entitlement to statutory damages is through tenant-specific evidence.
Defendants argue that the court’s finding is supported by the record as they proffered evidence that any alleged mishandling of security deposits were exceptions to their overall policy of compliance with section 1950.5, and that plaintiff’s claim raised individual disparate issues that were unique to each of the potential class members.
We agree with defendants that the trial court did not find that a bad faith retention claim can never be proven on a class-wide basis through “pattern or practice” evidence or otherwise. The court simply found that, in this case, it could not be. At the hearing on the motion, plaintiff stated that he would produce at trial evidence of company-wide practices, and not evidence of wrongful conduct as to any individual. The proffered evidence showed that there may be a number of reasons why security deposits were retained by defendants, and individual proof as to each of the potential class plaintiffs would be required. As plaintiff’s proffered evidence was admittedly of company-wide practices only, and not of wrongful conduct as to any individual tenant, in order to become a member of the class tenants would have to relinquish their individual claims for bad faith under section 1950.5.
Plaintiff also argues that even if the trial court correctly found that statutory damages for bad faith may not be adjudicated on a class-wide basis, the trial court failed to consider the option that notice to purported class members could advise them that if they wished to pursue statutory damage claims they should opt out. (See Anthony v. General Motors Corp. (1973) 33 Cal.App.3d 699, 704; Hicks v. Kaufman & Broad Home Corp. (2001) 89 Cal.App.4th 908, 926 (Hicks).) However, the statutory damages for bad faith available to each tenant in a small claims court action is up to twice the amount of the security deposit, and the statutory damages are available in addition to each tenant’s actual damages, which may be less than the amount of the entire security deposit. (§ 1950.5, subd. (l).) The trial court could properly find that a proposed class action that may limit damages available to individual tenants to substantially less than the amount that they could receive in small claims court is an inferior device for resolving those individuals’ claims, even if those individuals were notified that they could opt out of the class action. In addition, the trial court found that it was not to the advantage of proposed class members to forego bringing their claims in small claims court for other reasons, as stated above. The trial court’s finding that the proposed class action would be an inferior means of resolving proposed class members’ claims is amply supported by the record.
Individual issues predominate
A plaintiff moving for class certification must show that questions of law or fact common to the class predominate over the questions affecting the individual members. “In essence, this means ‘each member must not be required to individually litigate numerous and substantial questions to determine his [or her] right to recover following the class judgment; and the issues which may be jointly tried, when compared with those requiring separate adjudication, must be sufficiently numerous and substantial to make the class action advantageous to the judicial process and to the litigants.’ [Citation.]” (Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 913-914.)
Here, the trial court found that “individual issues predominate over the common questions presented because there exist individual issues unique to each of the potential class members. Likewise, common issues of fact do not predominate in this case because the issues in defense are unique to each of the potential class member[s]. In addition, the Court finds that plaintiff’s class claims would be very difficult to manage.”
In his written motion for class certification, plaintiff claimed the following common questions of law and fact: (1) whether defendants failed to timely return security deposit refunds under section 1950.5; (2) whether defendants deducted carpet replacement and paint charges from tenants’ security deposits for ordinary wear and tear during one or more tenancy (§ 1950.5, subd. (e)); and (3) whether defendants deducted paint charges from tenants’ security deposits when the tenants have occupied an apartment for more than two years. At the hearing on the motion plaintiff argued that the class claims “look to the amount of the charges for the painting and the carpet rather than the initial decision as to whether or not to make the charge.”
In his written motion plaintiff also discussed the common evidence he intended to use to prove the class claims. For instance, plaintiff asserted that a preliminary review of sample data provided by defendants revealed that between June 1998 and August 2003, defendants failed to timely return security deposits an average of 16 percent of the time each year. The same data showed that defendants lacked proof of age for 27 of 40 carpet replacement charges plaintiff reviewed. As explained by plaintiff’s expert E. Robert Miller, defendants’ policies on security deposit refunds as stated in their leases comply with the law and industry standards. However, charges that appear on defendants’ final billing and settlement statements sometimes fail to follow the applicable policies. Miller stated that a determination of possible overcharges for painting and carpet replacement assessed against security deposit refunds can be accurately calculated solely by review of the documents.
In its opposition to the motion, defendants argued that plaintiff does not dispute that defendants’ policies on security deposit refunds comply with the law and industry standards. Plaintiff’s class claims are based on individual instances where defendants’ records showed a deviation from its policies, but defendants have various tenant-specific defenses to many of the claims. For instance, defendants’ records showed that many of the so-called late refund checks were simply second checks that were issued after the first check was returned due to an incorrect forwarding address. And, after plaintiff’s motion was filed, defendants located records confirming carpet age for all but 13 of the 40 carpet replacement charges that plaintiff stated he reviewed.
This is not a suit where the class claimant maintains that a landlord’s security deposit policies as stated in their form lease contracts violate section 1950.5. Such suits are appropriate for class certification. (See e.g., Granberry, supra, 9 Cal.4th 738.) “As a general rule if the defendant’s liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages.” (Hicks, supra, 89 Cal.App.4th at p., 916.) Here, plaintiff maintains that defendants’ security deposit refund policies comply with section 1950.5 and industry standards, but claims that defendant sometimes deviates from its policies, and therefore breaches its form lease contracts, when it issues security deposit refund checks. Individual issues, such as whether defendants failed to provide proper accounting in each of these instances, whether defendants’ records support its accounting, and whether the tenant provided a proper forwarding address, would predominate over common questions. While the receipt of a refund of a security deposit from defendants may be a fact common to all proposed class members, defendants’ liability for additional refunds can be established only after extensive examination of the circumstances surrounding each individual proposed class member. No one factor, not even the timing of the refund check sent to each individual class member, will be determinative as to all class members.
A class action cannot be maintained where the existence of damage, the cause of damage, and the extent of damage have to be determined on a case-by-case basis, even if there are some common questions. (Basurco v. 21st Century Ins. Co. (2003) 108 Cal.App.4th 110, 119-120; City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 460-462.) Here, whether each class member was entitled to an additional refund, what was the reason or reasons for that entitlement, and what was the amount of the entitlement would all have to be determined on a case-by-case basis. The record in this case amply supports the trial court’s determination that individual issues predominate over the common questions and that a class action should not be certified.
The order denying the motion for class certification is affirmed.
Bamattre-Manoukian, ACTING P.J.
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 Other named defendants are ERP Operating Limited Partnership and Equity Residential Properties Management.
 Further unspecified statutory references are to the Civil Code.
 “Any action under this section may be maintained in small claims court if the damages claimed, whether actual or statutory or both, are within the jurisdictional amount [of $5,000] allowed by Section 116.220 of the Code of Civil Procedure.” (§ 1950.5, subd. (n).)
 “The court may make such orders or judgments, . . . as may be necessary to prevent the use or employment by any person of any practice which constitutes unfair competition, . . . or as may be necessary to restore to any person in interest any money
. . . which may have been acquired by means of unfair competition. Any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204 and complies with Section 382 of the Code of Civil Procedure, . . .” (Bus. & Prof. Code, § 17203.) “Actions for relief pursuant to this chapter shall be prosecuted . . . in a court of competent jurisdiction by . . . any person who has suffered injury in fact and has lost money . . . as a result of such unfair competition.” (Bus. & Prof. Code, § 17204.)
 Apparently, over 70,000 tenants had moved out of defendants’ properties during the relevant time period. As part of discovery defendants provided plaintiff with a sample of 1000 final billing and settlement statements, and plaintiff asked for some back-up documents on 107 of these statements.