Housing v. Lee

• Decision Date: 01 July 2013
• Docket Number: No. A12–2078.,A12–2078.
• Citation: 832 N.W.2d 868
• Parties: HOUSING AND REDEVELOPMENT AUTHORITY OF DULUTH, Respondent, v. Brian LEE, Appellant.
• Court: Minnesota Court of Appeals

832 N.W.2d 868

HOUSING AND REDEVELOPMENT AUTHORITY OF DULUTH, Respondent,

v.Brian LEE, Appellant.

No. A12–2078.

Court of Appeals of Minnesota.

July 1, 2013.

Syllabus by the Court

Because Minn.Stat. § 504B.177(a) (2012) does not conflict with any federal statute, regulation, or guideline, landlords of federally-subsidized housing must comply with its provision prohibiting imposition of late fees exceeding eight percent of the overdue rent payment.

Joseph J. Mihalek, Eric S. Johnson, Fryberger, Buchanan, Smith, & Frederick, P.A., Duluth, MN, for respondent.

Gwen Updegraff, Legal Aid Service of Northeastern Minnesota, Duluth, MN, for appellant.

Considered and decided by HUDSON, Presiding Judge; SCHELLHAS, Judge; and STAUBER, Judge.

OPINION

HUDSON, Judge.

On appeal in this eviction matter, appellant-tenant argues that his eviction was invalid because it resulted from the imposition of late fees exceeding eight percent of appellant's rent payment in violation of Minn.Stat. § 504B.177(a). Appellant also argues that the district court erred by determining that section 504B.177(a) conflicts with federal regulations and guidelines permitting landlords to impose “reasonable” late fees on public-housing tenants, and that state law was therefore preempted. Because Minn.Stat. § 504B.177(a) does not conflict with any federal statute, regulation, or guideline, respondent-landlord was required to comply with the statute's provision prohibiting the imposition of late fees exceeding eight percent of a tenant's overdue rent payment. And because there would have been no legal basis for eviction had respondent complied with Minn.Stat. § 504B.177(a), we reverse.

FACTS

Appellant Brian Lee was a tenant living in a multi-unit apartment building owned by respondent, the Housing and Redevelopment Authority of Duluth, a public housing authority (PHA). See42 U.S.C. § 1437a(b)(6)(B) (2006). The premises are conventional subsidized public housing under the Section 8 housing-assistance program. See42 U.S.C. § 1437f (2006 & Supp.2011).

Appellant's sole source of income is general assistance benefits of $203 per month. Based on his income, and under the terms of the lease, appellant's rent was $50 per month. The lease provided that appellant was to be assessed a $25 late charge each month that he did not pay his rent in full by the fifth of the month. Appellant's account became delinquent in July 2012 after he failed to pay in full a $95.50 charge assessed for repair and maintenance services. As a result, his rent payment was late in July, August, and September 2012, and he was assessed three late charges totaling $75. On September 26, 2012, respondent filed an eviction action for nonpayment of rent. Appellant was $50 in arrears when the eviction action was commenced.

The parties stipulated that respondent was entitled to evict appellant unless the district court determined that the late fee was barred by Minn.Stat. § 504B.177(a). The issue was submitted to the district court on cross motions for summary judgment.

The district court held that the $25 late fee was “reasonable and valid,” entering judgment for respondent on November 8, 2012. The district court concluded that there was a conflict between the federal and state regulations, because federal regulations place no cap on the late fees that may be assessed by a PHA, other than that the amount must be reasonable, even though Minn.Stat. § 504B.177(a) caps the late fee at eight percent of the monthly rent, which might be lower than what a PHA deems to be a reasonable late fee. The district court concluded that, because the federal and state regulations conflict, the federal scheme preempts the state statute. This appeal follows.

ISSUES

I. Is Minn.Stat. § 504B.177(a) preempted by federal law?

II. Does the provision prohibiting late fees exceeding eight percent of the overdue rent payment in Minn.Stat. § 504B.177(a) conflict with a federal statute, regulation, or handbook, thereby permitting landlords of federally-subsidized housing to impose a late fee that complies with the federal, but not the state, standard under Minn.Stat. § 504B.177(b) (2012)?

ANALYSIS

I

The district court held that federal law permitting PHAs to charge late fees so long as they are reasonable preempts the provision in Minn.Stat. § 504B.177(a) prohibiting the imposition of late fees exceeding eight percent of the overdue rent payment. “Whether federal law preempts state law is primarily an issue of statutory interpretation, which we review de novo.” In re Estate of Barg, 752 N.W.2d 52, 63 (Minn.2008).

State law

Under Minnesota law, “[a] landlord of a residential building may not charge a late fee ... unless the tenant and landlord have agreed in writing that a late fee may be imposed.” Minn.Stat. § 504B.177(a). “In no case may the late fee exceed eight percent of the overdue rent payment.” Id. The district court held that this provision, as it applies to federally-subsidized housing, is preempted by federal law.

Federal law

PHAs are required to enter into a written lease with each tenant. 24 C.F.R. § 966.4 (2012). “At the option of the PHA, the lease may provide for payment of penalties for late payment.” 24 C.F.R. § 966.4(b)(3) (emphasis added). While the regulations do not establish a maximum late fee, PHAs are required to “utilize leases which ... do not contain unreasonable terms and conditions.” 42 U.S.C. § 1437d( l )(2) (2006).

The U.S. Department of Housing and Urban Development (HUD) publishes a guidebook “designed to assist [PHAs] and HUD with a range of issues related to public housing occupancy.” U.S. Dep't of Hous. & Urban Dev., Public Housing Occupancy Guidebook 1 (2003). Regarding late fees, the HUD guidebook states that while “many PHAs have adopted late payment penalties ... these terms are considered optional under the lease requirements of 24 C.F.R. § 966.4.” Id. at 189. The guidebook instructs PHAs that “[l]ease provisions, taken as a whole, should be ‘reasonable’ according to their plain meaning.” Id. Lease terms such as late fee provisions are “always subject to the reasonableness test. The lease terms are subject to court review when an action proceeds to court, such as in a lease termination.” Id. at 190. “If a [lease] term is found to be unfair then that term will not be binding on the party to whom it applies.” Id.

Preemption doctrine

Under the Supremacy Clause of the United States Constitution, the federal government may preempt state law. U.S. Const., art. VI, cl. 2 (“This Constitution and the Laws of the United States ... shall be the supreme Law of the Land....”). “The purpose of Congress is the ultimate touchstone” in each preemption case. Retail Clerks Int'l Ass'n v. Schermerhorn, 375 U.S. 96, 103, 84 S.Ct. 219, 223, 11 L.Ed.2d 179 (1963).

Congress may preempt state law in three ways. Cal. Fed. Sav. & Loan Ass'n v. Guerra, 479 U.S. 272, 280–81, 107 S.Ct. 683, 689, 93 L.Ed.2d 613 (1987). First, Congress may expressly preempt state law. English v. Gen. Elec. Co., 496 U.S. 72, 78, 110 S.Ct. 2270, 2275, 110 L.Ed.2d 65 (1990). Second, it may do so by fully occupying a field, such that congressional intent to preempt “may be inferredwhere the scheme of federal regulation is sufficiently comprehensive to make reasonable the inference that Congress left no room for supplementary state regulation.” Guerra, 479 U.S. at 280–81, 107 S.Ct. at 689 (quotation omitted). Neither express nor field preemption is at issue here.

Third, state law is preempted “to the extent that it actually conflicts with federal law.” Fid. Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 153, 102 S.Ct. 3014, 3022, 73 L.Ed.2d 664 (1982). Conflict preemption arises when (1) “compliance with both federal and state regulations is a physical impossibility,” or (2) “when state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Id. (quoting Fla. Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142–43, 83 S.Ct. 1210, 1217, 10 L.Ed.2d 248 (1963) (quotation marks omitted); Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941)) (quotation marks omitted). The parties agree that conflict preemption is at issue here.

Along with Congress, “a federal agency acting within the scope of its congressionally delegated authority may preempt state regulation and hence render unenforceable state or local laws that are otherwise not inconsistent with federal law.” City of N.Y. v. FCC, 486 U.S. 57, 63–64, 108 S.Ct. 1637, 1642, 100 L.Ed.2d 48 (1988) (quotation omitted). A reviewing court does not focus on congressional intent when analyzing the preemptive effect of federal regulation because a “preemptive regulation's force does not depend on express congressional authorization to displace state law.” de la Cuesta, 458 U.S. at 154, 102 S.Ct. at 3023. Instead, the court is to consider whether the federal agency intended to preempt the state law in question, and if so, whether that action is within the scope of the agency's delegated authority. Id. A federal agency's preemption of state law is invalid if it appears from the authorizing statute or its legislative history that Congress would not have sanctioned the preemption. City of N.Y., 486 U.S. at 64, 108 S.Ct. at 1642. Given the many modes of communication available to agencies including regulations, interpretive statements, responses to comments, and, as here, guidebooks, “we can expect that they will make their intentions clear if they intend for their regulations to be exclusive.” Hillsborough Cnty., Fla. v. Automated Med. Labs., Inc., 471 U.S. 707, 718, 105 S.Ct. 2371, 2377, 85 L.Ed.2d 714 (1985).

When “Congress has legislated in a field which the states have traditionally occupied, we start with the assumption that the historic police powers of the states were not to be superseded by the federal act unless that was the clear and manifest purpose of Congress.” Wyeth v. Levine, 555 U.S. 555,...