Cleven v. Mid-Am. Apartment Cmtys., Inc.

• Decision Date: 09 December 2021
• Docket Number: No. 18-50846 CONSOLIDATED WITH No. 18-50851,18-50846 CONSOLIDATED WITH No. 18-50851
• Citation: Cleven v. Mid-Am. Apartment Cmtys., Inc., 20 F.4th 171 (5th Cir. 2021)
• Parties: Cathi CLEVEN, for herself and all others similarly situated; Tara Cleven, for herself and all others similarly situated; Areli Arellano, for herself and all others similarly situated; Joe L Martinez, for himself and all others similarly situated, Plaintiffs—Appellees, v. MID-AMERICA APARTMENT COMMUNITIES, INCORPORATED ; Mid-America Apartments, L.P. ; CMS/Colonial Multifamily Canyon Creek JV, LP, Defendants—Appellants, Nathanael Brown, for himself and all others similarly situated, Plaintiff—Appellee, v. Mid-America Apartment Communities, Incorporated, as general partner of Mid-America Apartments, LP ; Mid-America Apartments, L.P., as successor in merger to Post Apartment Homes, LP doing business as Post Worthington Doing Business as Post South Lamar doing business as Post Eastside doing business as Post Park Mesa doing business as Post Gallery doing business as Post West Austin doing business as Post Sierra at Frisco Bridges doing business as Post Katy Trail doing business as Post Abbey doing business as Post Addison Circle doing business as Post Cole's Corner doing business as Post Barton Creek doing business as Post Heights doing business as Post Legacy doing business as Post Meridian doing business as Post Midtown Square doing business as Post Square doing business as Post Uptown Village doing business as Post Vineyard doing business as Post Vintage doing business as Post Washington, Defendants—Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

20 F.4th 171

Cathi CLEVEN, for herself and all others similarly situated; Tara Cleven, for herself and all others similarly situated; Areli Arellano, for herself and all others similarly situated; Joe L Martinez, for himself and all others similarly situated, Plaintiffs—Appellees,

v.MID-AMERICA APARTMENT COMMUNITIES, INCORPORATED ; Mid-America Apartments, L.P. ; CMS/Colonial Multifamily Canyon Creek JV, LP, Defendants—Appellants,Nathanael Brown, for himself and all others similarly situated, Plaintiff—Appellee,

v.Mid-America Apartment Communities, Incorporated, as generalpartner of Mid-America Apartments, LP ; Mid-America Apartments, L.P., as successorin merger to Post Apartment Homes, LP doing business as Post Worthington Doing Business as Post South Lamar doing business as Post Eastside doing business as Post Park Mesa doing business as Post Gallery doing business as Post West Austin doing business as Post Sierra at Frisco Bridges doing business as Post Katy Trail doing business as Post Abbey doing business as Post Addison Circle doing business as Post Cole's Corner doing business as Post Barton Creek doing business as Post Heights doing business as Post Legacy doing business as Post Meridian doing business as Post Midtown Square doing business as Post Square doing business as Post Uptown Village doing business as Post Vineyard doing business as Post Vintage doing business as Post Washington, Defendants—Appellants.

No. 18-50846 CONSOLIDATED WITH No. 18-50851

United States Court of Appeals, Fifth Circuit.

FILED December 9, 2021

Russell S. Post, Owen Joseph McGovern, Beck Redden, L.L.P., Richard Eugene Norman, Esq., Ronald Martin Weber, Jr., Esq., Crowley Norman, L.L.P., Houston, TX, Britton D. Monts, Austin, TX, for Plaintiffs—Appellees.

Ashley Charles Parrish, Esq., King & Spalding, L.L.P., Washington, DC, Kathy Lynn Poppitt, King & Spalding, L.L.P., Austin, TX, Barry Goheen, Attorney, FisherBroyles, L.L.P., Atlanta, GA, for Defendants—Appellants.

Charles R. Watson, Jr., Greenberg Traurig, L.L.P., Austin, TX, for Amicus Curiae Texas Apartment Association.

Lori Levy, Texas Association of Realtors, Austin, TX, for Amicus Curiae Texas Association of Realtors.

Before Owen, Chief Judge, and Smith and Dennis, Circuit Judges.

Priscilla R. Owen, Chief Judge:

In two separate cases, Plaintiffs have sued their landlord, Mid-America Apartment Communities (MAA), asserting that it charged unreasonable late fees in violation of the Texas Property Code.In both cases, Plaintiffs sought to certify a class under Rule 23 of the Federal Rules of Civil Procedure.The district court certified the class in both instances.MAA sought interlocutory review of the district court's class certification.We REVERSE and REMAND .

I

Both cases allege violations of section 92.019 of the Texas Property Code, which addresses "Late Payment of Rent; Fees."At the times relevant to these consolidated appeals, that section provided:

(a) A landlord may not charge a tenant a late fee for failing to pay rent unless:

(1) notice of the fee is included in a written lease;

(2) the fee is a reasonable estimate of uncertain damages to the landlord that are incapable of precise calculation and result from late payment of rent; and

(3) the rent has remained unpaid one full day after the date the rent was originally due.

(b) A late fee under this section may include an initial fee and a daily fee for each day the rent continues to remain unpaid.

(c) A landlord who violates this section is liable to the tenant for an amount equal to the sum of $100, three times the amount of the late fee charged in violation of this section, and the tenant's reasonable attorney's fees.

(d) A provision of a lease that purports to waive a right or exempt a party from a liability or duty under this section is void.

(e)This section relates only to a fee, charge, or other sum of money required to be paid under the lease if rent is not paid as provided by Subsection (a)(3), and does not affect the landlord's right to terminate the lease or take other action permitted by the lease or other law.Payment of the fee, charge, or other sum of money by a tenant does not waive the right or remedies provided by this section.¹

The quoted portion of the statute is the text in effect at the time of the alleged violations by MAA.The Texas Legislature amended this statute, effective September 1, 2019, to clarify the meaning of "reasonable" within the context of late fees in the statutory scheme.That amendment does not affect this court's analysis here, however, because we do not apply penal laws retroactively.²

Plaintiffs in both cases alleged that MAA violated section 92.019 because its late fee scheme is not a reasonable estimate of uncertain damages.The district court granted summary judgment on liability in both cases.Those issues are not before this court.These appeals address the district court's grant of summary judgment ruling that section 92.019 requires a calculation of what damages might be for late payment before a late fee is charged.The district court concluded that even if the late fee was in fact reasonable, the statute would be violated absent a calculation by the landlord to estimate its damages before it charged a late fee.Because MAA presented no evidence that it calculated what its damages from late payments might be before it charged the late fees, the district court granted summary judgment in favor of plaintiffs.

A.

In the first case, Cleven , MAA owned sixty-two apartment properties across Texas that are included in the class action.A number of these MAA properties were acquired in late 2013 as part of a merger with Colonial Properties Trust.Prior to the merger, Colonial typically assessed a $75 initial late fee and a subsequent late fee of either $10 or $15 per day, while some of MAA's properties assessed a $50 fee with a $10 fee for additional days late and others assessed a $75 fee with a $10 fee for additional days late.Following the merger, MAA decided to harmonize the late fee structure and began charging an initial late fee of $75 and at least $10 for every additional day late at all of its properties.The fee-structure change occurred after one of MAA's regional vice presidents recognized an "[e]asy increase income opportunity."

In 2016, named plaintiffs Cathi and Tara Cleven filed a lawsuit against MAA alleging a violation of section 92.019 of the Texas Property Code.The Clevens resided at an MAA property beginning in December 2009.Their lease stated: "you must pay your rent on or before the 1^st day of each month (due date) with no grace period....If you don't pay all rent on or before the 3^rd day of the month, you'll pay an initial late charge of $75.00 plus a daily late charge of $15.00 per day after that date until paid in full."While living at the MAA property, the Clevens paid their rent late twice.The first time, in May 2015, they paid rent on the fourth day of the month due to their own error.They paid a $75 late fee.In July 2015, Tara Cleven entered an incorrect account number, and the Clevens' July rent payment was not funded.They were initially assessed a late fee of $75 plus three daily $15 late fees.Their building waived the $75 fee, so the Clevens paid $45 in late fees.

The Second Amended Complaint added a second set of named plaintiffs, Areli Arellano and Joe Martinez(the Arellanos).The Arellanos lived at one of MAA's properties from 2014 through 2018.Their lease stated: "You must pay your rent on or before the 1st day of each month (due date).There is no grace period ....If you don't pay all rent on or before the 3rd day of the month, you'll pay an initial late charge of $75.00, plus a daily late charge of $10.00 per day after that date until the amount due is paid in full."Over the approximately four-year period that the Arellanos lived at an MAA property, they paid their rent late numerous times.Each time, the Arellanos were assessed the initial $75 fee, plus $10 each day.The Arellanos admit that the payments were properly imposed under the payment schedule.Class counsel found the Arellanos when Areli Arellano posted on Yelp about an unrelated MAA policy.Counsel reached out to determine if the Arellanos had paid any late fees.

After plaintiffs filed their motion for class certification, the magistrate judge conducted a hearing and issued a Report and Recommendation that the class be certified.MAA filed objections to the report.The district court adopted the magistrate judge's report and granted the motion for class certification.The district court certified the following class:

All persons during the Class Period [from April 10, 2013, to September 30, 2017] who (i) were residential tenants of apartment properties in the State of Texas under written leases where MAA or its predecessor in merger, Colonial, served as an owner or landlord, and (ii) were assessed and paid an initial rent late fee of $75.00 and/or a daily rent late fee of at least $10.00.

This court granted MAA's motion for leave to appeal under Federal Rule of Civil Procedure 23(f).On appeal, MAA challenges the district court's findings on commonality, typicality, adequacy, superiority, predominance, and ascertainability.

B.

The related case, Brown , involves approximately twenty "Post-branded apartment properties" that MAA acquired when it merged with Post Apartment Homes in December 2016.

The named plaintiff in this case, Nathanael Brown, lived in an MAA property from August 2013 to December 2016.During that time Brown signed four different leases.Each lease contained the following provision: "If Your rent is not paid on or before the third day of the month, a late fee or charge in the amount of 10% of the full monthly rent shall be due as additional rent.Such ‘full monthly rent’ shall include all additional monthly rent due."Brown paid his rent late three times during his tenancy.The first two times, Brown paid his late fee and MAA subsequently waived the fee....