Thompson v. St. Anthony Leased Hous. Assocs. II, LP

• Decision Date: 24 May 2021
• Docket Number: A20-1367
• Citation: 961 N.W.2d 787
• Court: Minnesota Court of Appeals
• Parties: Linda Cobb THOMPSON, on behalf of herself and all others similarly situated Appellant, v. ST. ANTHONY LEASED HOUSING ASSOCIATES II, LP, et al., Respondents.

961 N.W.2d 787

Linda Cobb THOMPSON, on behalf of herself and all others similarly situated Appellant,

v.ST. ANTHONY LEASED HOUSING ASSOCIATES II, LP, et al., Respondents.

A20-1367

Court of Appeals of Minnesota.

Filed May 24, 2021

Granted August 10, 2021

Prentiss Cox, Jordan Hughes (certified student attorney), University of Minnesota Consumer Protection Clinic, Minneapolis, Minnesota; and John Cann, Margaret Kaplan, James Poradek, Housing Justice Center, St. Paul, Minnesota (for appellant)

Thomas H. Boyd, David A. Davenport, Sean M. Zaroogian, Peter G. Economou, Winthrop & Weinstine, P.A., Minneapolis, Minnesota (for respondents)

Considered and decided by Smith, Tracy M., Presiding Judge; Connolly, Judge; and Bryan, Judge.

SMITH, TRACY M., Judge

In this direct appeal, appellant Linda Cobb Thompson, a tenant in an apartment complex owned and managed by respondents, challenges the district court's dismissal of her complaint for failure to state a claim upon which relief may be granted. Thompson asserts a number of statutory and common-law claims, all of which are founded on the allegation that respondents have charged appellant rent in excess of the restrictions imposed by Minn. Stat. § 474A.047 (section 47). Under section 47, when a rental housing project is developed using tax-exempt bonds, 20% of the units must be offered for a period of time at rental rates that do not exceed limits imposed by the statute. Whether the rent charged by respondents has exceeded section 47's limits depends on the interpretation of the statute. We conclude that, under the correct interpretation of section 47, Thompson has not alleged facts that would establish a violation of the statute. Thompson's claims therefore fail as a matter of law, and the district court properly dismissed Thompson's complaint for failure to state a claim. We affirm.

FACTS¹

Respondents St. Anthony Leased Housing Associates, II, Limited Partnership; St. Anthony Leased Housing Associates, II, LLC; and Dominium Management Services, LLC, are closely related business entities (collectively, Dominium) that own and manage the Legends apartment complex. Dominium built the Legends apartment complex in St. Anthony using tax-exempt residential rental bonds from the City of St. Anthony.

Under section 47, Dominium must rent a portion of the complex's units at or below the "area fair market rent" or "exception fair market rent[ ]," as established by the federal Department of Housing and Urban Development (HUD). See Minn. Stat. § 474A.047, subd. 1(a)(2). In its leases, Dominium informs tenants that any rent increases "will be made in accordance with all applicable state and local laws." Dominium also entered into a regulatory agreement with the City of St. Anthony under which it agreed to abide by section 47.

Since 2015, appellant has resided in one of the rent-restricted units reserved for low-income tenants at the Legends apartment complex. She alleges that Dominium charged rental rates that exceed fair market rent established by HUD by seven percent to just under ten percent. She alleges that these rates exceed the limits of section 47. She asserts that from June 2015 to January 2020 she paid $4,120 in excessive rent.

On behalf of herself and a putative class of similarly situated plaintiffs, Thompson brought a four-count complaint against Dominium. Count I claims that Dominium's excessive rent constitutes a breach of contract and breach of the implied covenant of good faith and fair dealing. Counts II and III claim that Dominium misrepresents that it charges the maximum allowable rent, in violation of the Uniform Deceptive Trade Practices Act, Minn. Stat. §§ 325D.43 -.48 (2020), and the Minnesota Consumer Fraud Act, Minn. Stat. § 325F.69 (2020), respectively. Count IV claims unjust enrichment based on the excessive rent. The complaint seeks a permanent injunction prohibiting Dominium from charging rent that exceeds fair market rent, restitution to remedy unjust enrichment, damages to remedy excessive rent paid, and an award of costs and reasonable attorney fees.

Dominium moved to dismiss Thompson's complaint, arguing that she lacks standing to bring her complaint and, in the alternative, that her complaint fails to allege claims upon which relief could be granted.

The district court granted Dominium's motion to dismiss Thompson's complaint. It determined that, under her lease, Thompson has standing to bring her breach-of-contract claim but that section 47 permits Dominium to charge rent at the level it does and that the complaint therefore fails to state a claim.

Thompson appeals.

ISSUE

Did the district court properly grant Dominium's motion to dismiss Thompson's complaint for failure to state a claim?

ANALYSIS

We review de novo a district court's dismissal of a complaint for failure to state a claim upon which relief can be granted under rule 12.02(e) of the Minnesota Rules of Civil Procedure. See Sipe v. STS Mfg., Inc. , 834 N.W.2d 683, 686 (Minn. 2013). A claim may be dismissed on the pleadings "only if it appears to a certainty that no facts, which could be introduced consistent with the pleading, exist which would support granting the relief demanded." N. States Power Co. v. Franklin , 265 Minn. 391, 122 N.W.2d 26, 29 (1963). Thompson contends that her complaint states viable claims because it sufficiently alleges that Dominium charges rent in violation of the limits imposed by section 47. Her allegation requires us to interpret a statute that Minnesota appellate courts have not yet examined. Questions of statutory interpretation are reviewed de novo. See Christianson v. Henke , 831 N.W.2d 532, 535 (Minn. 2013).

Our object when interpreting a statute is to "ascertain and effectuate the intention of the [l]egislature." See Linn v. BCBSM, Inc. , 905 N.W.2d 497, 501 (Minn. 2018) (quoting Minn. Stat. § 645.16 (2016) ). The first step is to determine whether the statute is ambiguous; a statute is ambiguous when it allows for more than one reasonable interpretation. 500, LLC v. City of Minneapolis , 837 N.W.2d 287, 290 (Minn. 2013). If a statute is ambiguous, we may employ canons of construction to determine its meaning, see Brayton v. Pawlenty , 781 N.W.2d 357, 363 (Minn. 2010), including consideration of the object of the law, the consequences of a particular interpretation, and legislative history, Minn. Stat. § 645.16(4), (6), (7) (2020).

A. Section 47 is ambiguous.

Section 47 provides that, when a rental housing project is developed using tax-exempt bonds, "the maximum rent" charged for a specified portion of units may not "exceed the area fair market rent or exception fair market rent[ ] for existing housing, if applicable, as established by the federal Department of Housing and Urban Development." Minn. Stat. § 474A.047, subd. 1(a)(2). Section 47 does not define "area fair market rent" or "exception fair market rent[ ]."

To discern the meaning of those two terms, both parties look to HUD regulations regarding affordable housing. A review of the regulations helps frame the parties’ arguments.

Under its regulations, HUD annually establishes fair market rent (FMR) by setting a specific amount for each geographic market area. 42 U.S.C. § 1437f(c)(1)(B) (2018) ; 24 C.F.R. § 888.111(a) - (b) (2020). HUD sets the FMR at the 40th percentile rent in a market area—that is, the dollar amount below which 40% of standard-quality rental housing units are rented. 24 C.F.R. §§ 888.111(a) - (b), .113(a) (2020). FMR is a concept used by HUD for a number of purposes, including, importantly, the federal housing-choice voucher (HCV) program.

Section 8 Tenant-Based Assistance; Statutory Merger of Section 8 Certificate and Voucher Programs; Housing Choice Voucher Program, 64 Fed. Reg. 56,894, 56,911 (Oct. 21, 1999) (codified at 24 C.F.R. pt. 888, 982); U.S. Dep't of Hous. & Urban Dev., Fair Market Rents , https://www.huduser.gov/portal/datasets/fmr.html (last visited May 11, 2021).

The HCV program provides vouchers to low-income, disabled, and elderly tenants to assist them in paying rent. U.S. Dep't of Hous. & Urban Dev., Housing Choice Vouchers Fact Sheet , https://www.hud.gov/topics/housing_choice_voucher_program_section_8 (last visited May 11, 2021). Under HUD regulations, FMR is used in determining the amount of assistance to be provided. The regulations require the local public housing authority (PHA) to adopt a schedule establishing "payment standard amounts" for use in calculating the amount of housing vouchers for program participants. 24 C.F.R. § 982.503(a)(1) (2020). The regulations permit the local PHA to establish a payment-standard amount that is within 90% and 110% of FMR. Id. (b)(1)(i) (2020). This range is called the "basic range." Id. The regulations also permit HUD, in its discretion, to approve a payment-standard amount that is above 110% of FMR. Id. (c) (2020). This amount is called an "exception payment standard amount." Id.

With this background, we can describe the parties’ competing interpretations of the terms in section 47. Thompson contends that, under the plain language of section 47, "area fair market rent" corresponds to the FMR measure that is determined by and published annually by HUD and "exception fair market rent[ ]" corresponds to the HUD-approved exception payment-standard amount above 110% of FMR. Dominium, in its briefing to this court, agrees with Thompson that section 47's "exception fair market rent[ ]" corresponds to the HUD-approved exception payment-standard amount above 110% of FMR but contends that "area fair market rent" corresponds to the PHA-determined payment-standard amount that is within the basic range of 90% to 110% of FMR. This is the interpretation that the district court adopted.

Because section 47 does not define the terms "area fair market rent" or "exception fair market rent[ ]," and because those terms are technical in nature, their meaning is not readily ascertained by a plain-language analysis. We conclude that referring to the HUD...