Home » LAW » 2011 Hermida v Archstone (illegal fees)

2011 Hermida v Archstone (illegal fees)

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

)

MAEVE HERMIDA and )

JEFFLEE HERMIDA )

)

Plaintiffs, )

)

v. ) CIVIL ACTION

) NO. 10-12083-WGY

ARCHSTONE, ARCHSTONE AVENIR )

GP LLC, ARCHSTONE AVENIR LP, )

ASN PARK ESSEX LLC, ASN QUINCY )

LLC, ANS QUARRY HILLS LLC, )

ASN BEAR HILL LLC, ASN NORTH )

POINT I LLC, ASN NORTH POINT )

II LLC, ASN CAMBRIDGE PARK LLC, )

ARCHSTONE CRONIN’S LANDING, )

ASN WATERTOWN LLC, ARCHSTONE )

COMMUNITIES LLC, ARCHSTONE )

KENDALL SQUARE, and )

ARCHSTONE READING LLC )

)

Defendants. )

)

MEMORANDUM AND ORDER

YOUNG, D.J. November 29, 2011

I. INTRODUCTION

This is a case of first impression. The issue is one of

statutory construction of a Massachusetts statute, a matter of

law. Maeve and Jefflee Hermida (collectively, the “Hermidas”)

bring this suit for declaratory judgment against their former

landlord, ASN Reading LLC d/b/a Archstone Reading LLC (“Archstone

Reading”) and fourteen other affiliated entities. The Hermidas

have sued on behalf of themselves and a putative class. Here,

the Hermidas claim that they were illegally charged with an

“amenity use fee” in connection with the lease of an apartment

owned by Archstone Reading, in violation of the Massachusetts

Security Deposit Statute, Massachusetts General Laws, chapter

186, section 15B(1)(b) (“Security Deposit Statute” or “section

15B(1)(b)”). This Court presently considers Archstone Reading’s

motion for summary judgment.

A. Procedural Posture

On October 28, 2010, the Hermidas filed a putative class

action in the Massachusetts Housing Court, Boston Division,

against Archstone Reading and various other entities seeking

declaratory judgment. Class Action Compl. ¶ 1 (“Compl.”), Aff.

Diane R. Rubin Supp. Def. Archstone’s Notice Removal, ECF No. 1-

1. On December 2, 2010, Archstone removed this action to federal

court under the Class Action Fairness Act of 2005 and the

Hermidas did not seek remand. Notice of Removal, ECF No. 1. On

December 9, 2010, all defendants, except Archstone Reading, filed

answers to the Complaint. ECF Nos. 5-18. During the period

between March 31, 2001 and April 11, 2011, all defendants, except

Archstone Reading, moved for summary judgment. ECF Nos. 41, 46,

51, 56, 61, 67, 73, 79, 85, 91, 97, 103, 110, 116. On May 9,

2011, those motions were heard and taken under advisement. Mot.

Hr’g May 9, 2011.

Archstone was served with the Hermidas’ Complaint on April

19, 2011 and timely filed its answer on June 6, 2011. Summons

Civil Action, ECF No. 123; Answer Archstone Reading, ECF No. 145.

On May 9, 2011, the Hermidas moved for class certification. Mot.

Class Certification, ECF No. 135. Subsequently, on May 13, 2011,

Archstone Reading moved to dismiss the Hermidas’ claims, which

this Court denied by electronic order on May 23, 2011. Def.

Archstone Reading Mot. Dismiss, ECF No. 139.

On June 22, 2011, this Court held a motion hearing on the

Hermidas’ Motion for Class Certification. This Court deferred

ruling on the motion, and instead collapsed the motion with the

trial of an exemplar case during the hearing on the Hermidas’

Motion for Class Certification. Tr. Oral Hr’g 20:7-11, June 22,

2011, ECF No. 149. Defendants’ written objections to the

exemplar trial, filed July 8, 2011, were denied by electronic

order on July 12, 2011. Defs.’ Objection Exemplar Trial, ECF No.

152. On July 22, 2001, the Hermidas and Archstone Reading

jointly filed a Stipulation as to All Uncontested Facts. ECF No.

157.

After a motion’s hearing held on September 15, 2011, this

Court granted in part and denied in part the Hermidas’ Motion to

Certify a Class, viz., the motion was allowed as to all persons

similarly situated in Archstone Reading who have paid amenity

fees and demand return thereof; in all other respects the motion

was denied. The Court took under advisement Archstone Reading’s

Motion for Summary Judgment, ECF No. 153, and the Hermidas’

Motion for Summary Judgment, ECF No. 159. Archstone Reading

filed its Motion for Summary Judgment on July 20, 2011, which is

presently before this Court. ECF No. 153.

B. Undisputed Facts

On May 14, 2007, the Hermidas entered into an initial twelve

month lease agreement with Archstone Reading for apartment unit

#302, a property then owned by Archstone Reading and located at 4

Archstone Circle, Reading, Massachusetts 01867. Compl. ¶ 4, ECF

No. 1. The Hermidas renewed their lease twice; once on a monthto-

month basis and once for another twelve months. Stipulation

All Uncontested Facts ¶ 11; Def.’s Statement Undisputed Material

Facts Offered Supp. Def. Archstone Reading Mot. Summ. J. (“Def.’s

Statement Undisputed Facts”), ¶ 9, ECF No. 155. Under the terms

of the May 14, 2007 lease, the Hermidas’ were obligated to pay

Archstone Reading a monthly rent in the amount of $1,750 for the

term running from May 24, 2007 through May 23, 2008. Stipulation

All Uncontested Facts ¶ 9; Rebecca Schwartz Aff. (“Archstone

Reading Lease Agreement”) ARCHH00000054, ECF No. 156-1. The

Hermidas moved into the apartment on May 24, 2007. Stipulation

All Uncontested Facts ¶ 10.

On April 30, 2007, prior to commencement of the lease, the

Hermidas paid a one-time $475 “amenity use fee” to Archstone

Reading in a bill titled “Apartment Lease Agreement”.

Stipulation All Uncontested Facts ¶ 6; Archstone Reading Lease

Agreement ARCHH00000018. The Hermidas signed the Apartment Lease

Agreement, which included a definition that “in this lease, ‘you’

means the resident (tenant).” Archstone Reading Lease Agreement

ARCHH00000018. Together with the amenity use fee, the Hermidas

also paid Archstone Reading $451.61 in prorated rent for the

month of May, 2007 and $2.58 in prorated trash removal fees for

the same period (out of a monthly trash fee of $10). Def.’s

Statement Undisputed Facts, ¶ 13. The Hermidas did not pay

Archstone Reading a last month’s rent, or a security deposit at

or prior to the commencement of their tenancy. Id. ¶ 14-15.

Furthermore, the Hermidas did not pay and Archstone Reading did

not request, any key or lock fee, at or prior to, the

commencement of their tenancy, although under the terms of lease,

the lock replacement fee was $50. Id. ¶ 16. The total amount

paid by the Hermidas to Archstone Reading at or prior to the

commencement of their tenancy was $929.19. Id. ¶ 17.

Under the terms of their lease signed May 14, 2007, the

Hermidas were obligated to, and did, pay for utilities for their

apartment during the duration of the lease, including

electricity, gas, water/sewer, and trash. Id. ¶ 18.

Jefflee Hermida was aware of the amenity use fee at the time

he completed the online rental application for Archstone Reading.

Id. ¶ 26. When the Hermidas asked, either during their initial

tour of the Archstone Reading community or when they signed the

lease, what the amenity use fee was for, they were told that it

was for using the property’s pool, gym, and outdoor grill.

Stipulation All Uncontested Facts ¶ 4. Archstone Reading never

told the Hermidas that the amenity use fee was optional. Id. ¶

7. The Hermidas paid the amenity fee without objection before

leasing their apartment at Archstone Reading. Def.’s Statement

Undisputed Facts, ¶ 24.

C. Federal Jurisdiction

Jurisdiction is proper under 28 U.S.C. § 1332. There is

diversity among the parties, and the amount in controversy

exceeds $75,000, exclusive of interest and costs. This case was

removed to this Court under 28 U.S.C. § 1453. Jurisdiction is

thus also proper under 28 U.S.C. § 1331 as this case arises under

the laws of the United States.

II. ANALYSIS

A. Legal Standard

Summary judgment is proper where “there is no genuine issue

as to any material fact and the moving party is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(c). A fact is

“material” when it “might affect the outcome of the suit under

the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 248 (1986). A dispute of fact is “genuine” if “the evidence

is such that a reasonable jury could return a verdict for the

nonmoving party.” Id. The moving party bears the burden of

showing that no genuine issue of material fact exists. Celotex

Corp. v. Catrett, 477 U.S. 317, 322 (1986). Courts must construe

the evidence in the light most favorable to the nonmoving party,

and draw all reasonable inferences in its favor. Anderson, 477

U.S. at 255.

While this is the standard of review in summary judgement,

here there are no factual inferences to draw. Rather, the

parties present differing views on purely legal questions of

statutory interpretation. See Rhode Island v. Narragansett

Indian Tribe, 19 F.3d 685, 691 (1st Cir. 1994) (“The search for

statutory meaning inevitably reduces to a pure question of

law.”); see also Skinner v. Salem Sch. Dist., 718 F. Supp. 2d

186, 188 (D.N.H. 2010) (“Questions of statutory interpretation

are ‘ripe for resolution.’”) (quoting Simmons v. Galvin, 575 F.3d

24, 30 (1st Cir. 2009)). Unlike factual allegations, “[m]ere

legal conclusions ‘are not entitled to the assumption of truth.’”

Sanchez v. Esso Standard Oil P.R., Inc., Civ. No. 08-2151(JAF),

2010 WL 3069551, at *2 (D.P.R. Aug. 2, 2010) (quoting Ashcroft v.

Iqbal, 129 S. Ct. 1937, 1950 (2009)). “[T]he Court is not

required to adopt purely legal conclusions asserted by the moving

party.” Crooker v. United States, Civ. No. 08-10149-PBS, 2010 WL

3860597, at *5 (D. Mass. Sept. 29, 2010) (Saris, J.) (citing Luc

v. Wyndham Mgmt. Corp., 496 F.3d 85, 88 (1st Cir. 2007)).

B. The Language of The Security Deposit Statute Section

15B(1)(b) Is Unambiguous.

Here, the underlying facts are undisputed, and the sole

issue is one of law, the statutory interpretation of

Massachusetts General Laws, chapter 186, section 15B(1)(b), viz.,

whether the language of the statute allows a landlord to charge

an up-front amount of money different than the enumerated

statutory categories in clauses (i) through (iv). Following the

statute, this Court is to focus on the charges made at or prior

to the commencement of any tenancy and it need not consider any

charge or fee made during or after the tenancy.

When determining if there is an ambiguity in the statute,

the courts must look to the language of the statute itself.

Harvard Crimson, Inc. v. President & Fellows of Harvard Coll.,

445 Mass. 745, 749 (2006). “Courts must ascertain the intent of

a statute from all its parts and from the subject matter to which

it relates, and must interpret the statute so as to render the

legislation effective, consonant with sound reason and common

sense.” Taylor v. Burke, 69 Mass. App. Ct. 77, 80 (2007)

(quoting Harvard Crimson, Inc., 445 Mass. at 749).

Courts have held that the language of section 15B is

unambiguous and strict compliance is required. See generally

Mellor v. Berman, 390 Mass. 275, 279 (1983) (holding that the

language of Massachusetts General Laws, chapter 186, section

15B(7) is unambiguous); Cote v. Sylvia, 2008 Mass. App. Div. 27,

2008 WL 217396, at *1 (Jan. 22, 2008) (holding that the security

deposit requirements imposed by section 15B are “unequivocal” and

“[n]either ignorance, nor the absence of bad faith, on the part

of the landlord is justification for noncompliance.”) (citing

Mellor, 390 Mass. at 279).

In the present case, both parties state, and this Court

agrees, that section 15B is unambiguous, and the words should be

given their ordinary meaning. The pertinent language, found in

section 15B(1)(b), reads:

At or prior to the commencement of any tenancy, no lessor

may require a tenant or prospective tenant to pay any amount

in excess of the following:

(i) rent for the first full month of occupancy; and,

(ii) rent for the last full month of occupancy . . . ; and,

(iii) a security deposit equal to the first month’s rent .

. . ; and,

(iv) the purchase and installation cost for a key and lock.

The plain meaning of section 15B(1)(b) prohibits the

landlord: at the inception of the tenancy, from requiring any

tenant or prospective tenant, to “pay any amount in excess of”

the enumerated categories in clauses (i) through (iv).

None of the parties dispute that section 15B(1)(b) refers to

payments made by the tenants or prospective tenants at the

inception of the tenancy, therefore this Court turns to the other

issues.

C. The Hermidas Were Tenants When the Landlord Required

Them to Pay the Amenity Use Fee.

The Security Deposit Statute only prohibits charges to

“tenants or prospective tenants.” Mass. Gen. L. ch 186, §

15B(1)(b). In Dolben Co. v. Friedmann, 2008 Mass. App. Div. 1,

2008 WL 81549, at *4 (Jan. 2, 2008) the court held that it was a

violation of the statute to charge a $35 application fee “once

[the tenant] agreed to lease the unit.” The court reasoned,

however, that a landlord may pass some reasonable costs of

processing applications and other expenses incidental to the

review of “potential tenants onto those seeking rental of a

dwelling.” Id. The court in Dolben does not define “potential

tenant,” as opposed to “tenants or prospective tenants.”

The Hermidas were tenants when they paid the amenity fee to

Archstone Reading. The record shows that Jefflee Hermida was

aware of the amenity use fee at the time he completed the online

rental application; again, during the initial tour of the

apartments, the Hermidas were told that Archestone Reading

charged a one-time amenity use fee. Prior to moving into their

apartment, the Hermidas tendered $475 to Archstone Reading in

satisfaction of the amenity use fee, $451.61 in prorated rent for

the month of May, 2007 and $2.58 in prorated trash removal fee.

The fact that Archstone Reading made all these charges together

with the first month rent, and under a bill titled “Apartment

Lease Agreement” suggests that the parties intended to treat the

Hermidas as tenants. Furthermore, the Apartment Lease Agreement

unambiguously defines the term used for the Hermidas as “the

resident (tenant).” See Archstone Reading Lease Agreement

ARCHH00000018.

Therefore, because Archstone Reading charged the $475

amenity fee once the Hermidas agreed to lease the unit, the

landlord required the up-front payment from “tenants or

prospective tenants” within the meaning of section 15B(1)(b).

Now, this Court turns to the other issues where the parties

differ in the interpretation of section 15B(1)(b).

D. Archstone Reading’s Amenity Use Fee Is Not a

Permissible Charge Within the Enumerated Provisions in

Clauses (i) Through (iv).

The issue is whether the provisions in clauses (i) through

(iv) in section 15B(1)(b) ought be understood as a limit on the

amount and type of fees a landlord can charge, or whether a

landlord cannot exceed the sum of all the allowable charges

listed.

The Hermidas read the statute as enumerating a list of

permissible up-front charges, as well as a statutory cap upon

each listed charge. Conversely, Archstone Reading contends that

section 15B(1)(b) ought be read as a total maximum amount

resulting from the sum of the amounts listed in clauses (i)

through (iv).

Archstone Reading adopts a construction of the phrase “any

amount in the excess of” that treats the enumerated provisions

(namely the first month’s rent, last month’s rent, security

deposit, and cost for a lock and key) as a list of calculable

components which, summed all together, result in total maximum

amount a landlord can charge at the inception of the tenancy.

This Court disagrees.

Archstone Reading has not produced any case that supports

its interpretation, and Archstone Reading’s interpretation of

section 15B(b)(1) is incompatible with prior case law and the

legislative intent. Courts have construed the statute as

prohibiting the landlord from charging a prospective tenant any

amount for any purpose other than those listed, and in excess of

the amount of each provision.

In Dolben, the Court held that a $35 application fee at the

inception of the tenancy was unfair and deceptive practice,

because it was “a charge in excess of those permitted by 186, §

15B,” and landlords are prohibited “from requiring new tenants to

pay moneys in addition to the first month’s rent, the last

month’s rent, a security deposit, and the cost of purchasing and

installing a new lock.” Dolben, 2008 WL 81549, at *4. The

Dolben court read the phrase “any amount in excess of” simply as

prohibiting a prospective tenant from being required to “pay

moneys in addition to.” Id. Therefore, the court in Dolben

concluded that the $35 application fee violated the Security

Deposit Statute, because the landlord charged a fee different to

those listed in the statute.

Similarly in Carter v. Seto, 2005 Mass. App. Div. 62, 2005

WL 1383337, at *4 (June 23, 2005) the court held that it is a

violation of section 15B(1)(b)(iii) to demand and receive a $150

deposit for a garage door mechanism and electric eye unit in

excess of the security deposit equal to the first month’s rent.

In Carter the landlord did not charge for the cost of purchasing

and installing a new lock. Id. at *3. The landlord did,

however, charge the tenant a $2,000 security deposit, and an

extra $150 deposit for the garage door mechanism and electric eye

unit. Id. at *1. The court held that the extra $150 was

intended as a security deposit and exceeded the amount permitted

under section 15B(1)(b)(iii). Id. at *4. The reasoning behind

the decision in Carter was that the landlord could not collect a

fee larger than permitted by the statute for each provision. Had

the court in Carter adopted Archstone Reading’s interpretation of

the statute, the court would have been compelled to reduce the

$150 charged to the actual cost of a lock and key regardless

whether such a cost was incurred or not.

Here, the “amenity use fee” charged by Archstone Reading

does not conform to any of the categories of charges indicated in

section 15B(1)(b). The amenity use fee was an optional payment

of $475 to set off the costs for the use of the pool, the gym,

and the outdoor grill at the property. In addition, Archstone

Reading required the Hermidas to pay $451.61 in prorated rent for

the first month of occupancy. Conversely, the landlord did not

1 The statute ought be read in conjunction with Massachusetts General

Laws, chapter 93A, section 2 (“Consumer Protection Statute”), and 940 Code of

Massachusetts Regulations, section 3.17(4) promulgated thereunder which

provides that “it shall be an unfair or deceptive practice for an owner to:

(a) require a tenant or prospective tenant, at or prior to the commencement of

any tenancy, to pay any amount in excess of the following:

1. rent for the first full month of occupancy; and,

2. rent for the last full month of occupancy . . . ; and,

3. a security deposit equal to the first month’s rent; and,

4. the purchase and installation cost for a key and lock.”

940 Mass. Code Regs. § 3.17(4)

require, nor does the statute mandate, payment of a security

deposit or the last month’s rent. Both parties admit that they

did not intend the amenity use fee to be a security deposit.

Although under the terms of lease, the fee for replacing all

locks was set at $50, Archstone Reading did not charge this

amount to the Hermidas, waiving its right to collect. Therefore,

each amount of the statutorily enumerated provisions had its

corresponding charge or waiver thereof. Even though Archstone

Reading did not exceed any of the statutory categories, the

amenity use fee did not fit within any of them.

Archstone Reading’s interpretation of section 15B(b)(1) is

also incompatible with the legislative intent. The Security

Deposit Statute is intended to afford protection to both the

landlord and the tenant. It protects the landlord by allowing it

to charge certain advances of money prior to the commencement of

the tenancy; the statute also limits the up-front charges that

the landlord legally can collect from the tenant in order to

prevent unfair or deceptive charges.1 See Jinwala v. Bizzaro, 24

Mass. App. Ct. 1, 7 (1987) (holding that the Legislature intended

2 Hampshire Village Associates, 381 Mass. at 151-152 (“Section 15B is

not without reason. The question of security deposits has long been agitated

. . . and the Legislature has attempted progressively to deal with them. In

1969, s[ection] 15B provided on the point merely that a landlord was not to

a construction of the statute where ”[a]n equitable balance is .

. . struck between the rights of landlords and those of

tenants.”). The major legislative concern, however, has been for

the tenant. See Hampshire Vill. Assoc. v. District Court of

Hampshire, 381 Mass. 148, 152-53 (1980) (“[b]y limiting the

freedom of landlords and tenants to contract in this regard (as

to security deposits), the Legislature manifested a concern for

the welfare of tenants in residential property who, as a

practical matter, are generally in inferior bargaining positions

and find traditional avenues of redress relatively useless.”)

(quoting Goes v. Feldman, 8 Mass. App. Ct. 84, 91 (1979)); see

also Taylor, 69 Mass. App. Ct. at 84 (“The over-all legislative

intent of the statute is amply demonstrated to be the protection

of the tenant. The legislative history of amendments to the

statute evince an increasing concern for the tenant.”). To

protect the tenant, the Legislature has created statutory

limitations on the amount and purpose for which the landlord can

legally collect moneys. Amendments to the statute show that the

Legislature has also reduced the amounts of money the landlord

can collect prior to the commencement of the tenancy, as well as

increasing the landlord’s accountability for the safekeeping and

expenditure of those amounts.2 This trend is also followed in

require a security deposit in excess of two months’ rent. St.1969, c. 244. By

September 1, 1978, when that section reached its present form (see St.1978, c.

553, ss 2, 3), the legislative controls were much elaborated. A security

deposit is not to exceed one month’s rent, and is to remain the tenant’s

property and be held as a fund in trust in an interest-bearing account in a

bank whose name and location must be notified to the tenant; and there is

provision for payment of interest to the tenant on certain terms.”).

other sections of the Security Deposit Statute. See Commonwealth

v. Chatham Development Co., 49 Mass. App. Ct. 525, 527 (2000)

(“To say that [constable] costs may be assessed by agreement and

awarded before the close of proceedings is more than a

stretch.”). Thus, Archstone Reading’s interpretation is

incompatible with the legislative intent because its adoption

would erode the protection granted by section 15B(1)(b) to

tenants and would allow landlords to circumvent the statutory

limitations on the amount and purpose for which the landlord can

legally collect under section 15B(1)(b).

Therefore, this Court concludes that even though Archstone

Reading did not exceed any of the statutory categories, the

amenity use fee did not fit within any of them. Because section

15B(1)(b) prohibits the landlord from charging up-front any

amount in addition to those enumerated provisions, Archstone

Reading exceeded the charges allowed by the Security Deposit Statute.

3 A federal district court may certify a question for decision by the

Supreme Judicial Court “if there are involved in any proceeding before it

questions of law of [the Commonwealth of Massachusetts] which may be

determinative of the cause then pending in the certifying court and as to

which it appears to the certifying court there is no controlling precedent

in the decisions of [the Supreme Judicial Court].” Mass. S.J.C. Rule 1:03,

§ 1 (2010). This Court is aware that here there is no controlling precedent,

that the interpretation of the Massachusetts Security Deposit Law, Mass. Gen.

L. ch 186 § 15B(1)(b), is purely a question of Massachusetts state law, and

that the cases relied on herein are primarily those of the lower courts of the

Commonwealth. Should either the Hermidas or Archstone wish to bring a motion

for certification, this Court will entertain it. Mass. S.J.C. Rule 1:03, § 2

(a question may certified “upon the motion of any party to the cause”).