Thompson v. St. Anthony Leased Hous. Assocs. II, LP
| Docket Number | A20-1367 |
| Decision Date | 24 August 2022 |
| 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. |
| Court | Minnesota Supreme Court |
Prentiss Cox, University of Minnesota Consumer Protection Clinic, Minneapolis, Minnesota; and John Cann, Margaret Kaplan, James Poradek, Housing Justice Center, Saint Paul, Minnesota, for appellant.
Thomas H. Boyd, Peter G. Economou, Winthrop & Weinstine, P.A., Minneapolis, Minnesota, for respondents.
This action arises from the lease agreement between appellant Linda Cobb Thompson and respondents St. Anthony Leased Housing Associates II, Limited Partnership; St. Anthony Leased Housing Associates II, LLC; and Dominium Management Services, LLC (collectively, Dominium). Thompson leases and lives in one of Dominium's rent-restricted housing units. She alleges that Dominium violated the Minnesota Bond Allocation Act, Minn. Stat. §§ 474A.01 –.21 (2020), which imposes rent limits on residential rental projects financed with tax-exempt municipal bonds. The district court dismissed Thompson's complaint, concluding that she had not alleged a violation of the Act. The court of appeals affirmed. Because we conclude that Thompson has alleged a violation of the Act sufficient to support her common-law and statutory claims, we reverse and remand.
In 2015, Dominium constructed the Legends at Silver Lake Village, a senior-living apartment complex in Saint Anthony.1 Thompson is a tenant of the Legends. Dominium financed the Legends project in part with tax-exempt municipal bonds issued by the City of Saint Anthony. When a private developer receives municipal bond proceeds for a housing project, as Dominium did here, the developer must comply with the Minnesota Bond Allocation Act. See Minn. Stat. §§ 474A.01 –.21. The Act restricts the maximum rent that a developer may charge for at least 20 percent of the project's housing units. Minn. Stat. § 474A.047, subd. 1(a)(2). Specifically, rent in those units may not exceed "the area fair market rent or exception fair market rents for existing housing, if applicable, as established by the federal Department of Housing and Urban Development [(HUD)]." Id .
Dominium entered into an agreement with the City, promising to abide by the rent restrictions in Minn. Stat. § 474A.047 for 15 years, as required by the Bond Allocation Act. See Minn. Stat. § 474A.047, subd. 2. Dominium's lease agreement with tenants in the rent-restricted units, including Thompson, contained a provision that addressed future rent increases, stating that any "rent increase will be made in accordance with all applicable state and local laws."
Thompson sued Dominium on behalf of a putative class of tenants for breach of contract, violations of the Uniform Deceptive Trade Practices Act, Minn. Stat. §§ 325D.43 –.48 (2020), and the Consumer Fraud Act, Minn. Stat. §§ 325F.68 –.70 (2020), and unjust enrichment. Thompson asserted that Dominium's rent exceeded the fair market rent figures that HUD sets and therefore violated Minn. Stat. § 474A.047. Because the rent allegedly violates the statute, Thompson claimed a breach of lease by Dominium. As alleged in the complaint, Dominium overcharged Thompson by a total of $4,120 for the period from June 2015 through January 2020.2 She also alleged that Dominium made misleading statements regarding the rent increases in violation of the Uniform Deceptive Trade Practices Act and the Consumer Fraud Act.
Dominium moved to dismiss the complaint under Minnesota Rule of Civil Procedure 12.02(e) for failure to state a claim upon which relief can be granted. Dominium argued that Thompson does not have standing to enforce Minn. Stat. § 474A.047 and, even if she did, the rent that Dominium charged did not violate the Bond Allocation Act. Dominium claimed that the rent did not exceed the payment standard amount set by the local public housing agency—here, the Metropolitan Council's Housing and Redevelopment Authority (Metro HRA)—which Dominium contended is the applicable rent limit under section 474A.047.
The district court granted Dominium's motion to dismiss. The court first concluded that Thompson has standing to pursue her claims against Dominium based on the lease agreements in which Dominium promised to abide by applicable state and local laws related to rent increases. On the merits, however, the court concluded that, as a matter of law, Dominium did not violate the rent restrictions in Minn. Stat. § 474A.047. The court agreed with Dominium that the payment standard amounts set by local housing agencies meet the requirements of section 474A.047. Because Thompson did not allege that her rent exceeded the payment standard amount set by Metro HRA, the local housing agency here, and all her claims were premised on an alleged violation of section 474A.047, the court dismissed the complaint in its entirety.
Thompson appealed, and the court of appeals affirmed. Thompson v. St. Anthony Leased Hous. Assocs. II, LP , 961 N.W.2d 787, 789 (Minn. App. 2021). The court held that "area fair market rent" in Minn. Stat. § 474A.047 means the payment standard amounts set by local agencies. Id. at 794. Ultimately, the court held that because Thompson does not allege that Dominium charged more than Metro HRA's payment standard amount, Dominium did not violate the rent restrictions in section 474A.047. Id. at 795.
We granted Thompson's petition for further review that challenged the court of appeals's interpretation of "area fair market rent."3
This case comes to us on review of the district court's grant of Dominium's motion to dismiss for failure to state a claim. A party fails to state a claim under Rule 12.02(e) when the complaint does not "set[ ] forth a legally sufficient claim for relief."
Graphic Commc'ns Loc. 1B Health & Welfare Fund "A" v. CVS Caremark Corp. , 850 N.W.2d 682, 692 (Minn. 2014). We accept the facts stated in the complaint "as true and constru[e] all reasonable inferences in favor of the nonmoving party." Id. We review a district court's dismissal for failure to state a claim de novo. Id.
At issue is the meaning of "area fair market rent" in Minn. Stat. § 474A.047, subd. 1(a)(2). Thompson argues that Dominium's rent exceeded the rent restrictions in the statute because the rent exceeded the fair market rent figures that HUD sets. Dominium contends that the rent complied with the statute because the rent did not exceed the payment standard amount that the local public housing agency set. Before turning to the merits of the district court's dismissal, we first consider whether Thompson has standing.
We review issues of standing de novo. Webb Golden Valley, LLC v. State , 865 N.W.2d 689, 693 (Minn. 2015). A person has standing if they are "the beneficiary of a legislative enactment granting standing" or if they have "suffered an injury-in-fact." Id. A party has suffered an injury-in-fact when there has been "a concrete and particularized invasion of a legally protected interest." Id. (quoting Lorix v. Crompton Corp. , 736 N.W.2d 619, 624 (Minn. 2007) ). The district court concluded that Thompson had standing, but the court of appeals did not discuss the issue. We decide the standing question because "[s]tanding is a jurisdictional issue." Id.
Thompson's claims against Dominium—breach of contract, violation of consumer protection statutes, and unjust enrichment—are founded on the allegation that Dominium charged more than the maximum rent allowed under Minn. Stat. § 474A.047. Dominium argues that the statute governs the relationship between a party that receives bond proceeds (here, Dominium) and a bond issuer (the City of Saint Anthony in this case) and does not grant enforcement authority to affected tenants. Therefore, Dominium contends, Thompson has no legally protected interest in Dominium's compliance with section 474A.047. The district court concluded that Dominium's lease with its tenants—specifically the provision that rent increases "will be made in accordance with all applicable state and local laws"—gave Thompson standing to enforce the rent restriction in the statute.
Dominium emphasizes that the Bond Allocation Act does not provide a private cause of action to enforce the rent restrictions and that bond issuers have the sole enforcement authority. We agree. In addition to imposing rent restrictions, Minn. Stat. § 474A.047 requires parties that receive bond proceeds to "enter into a 15-year agreement with the issuer" promising that their rent rates and the income levels of the project's tenants will be within section 474A.047 limits. Minn. Stat. § 474A.047, subd. 2. If a bond issuer determines that a project is not in compliance with the statute, the owners of the project must pay a penalty to the issuer, though an issuer can decide to "waive insubstantial violations." Id. , subd. 3. Because there is no indication that the Legislature intended for tenants to be able to sue their landlords for section 474A.047 violations but is instead focused on developers and issuers, we agree with Dominium that this statute is not "a legislative enactment granting standing." See Webb Golden Valley, LLC , 865 N.W.2d at 693.
But Thompson is not arguing that Minn. Stat. § 474A.047 gives her the right to enforce the statute's rent restriction. Thompson's claim that she was charged excessive rent is based on Dominium's lease agreement, which promised that rent increases would be made in compliance with state and local laws. It is the violation of the lease agreement, Thompson claims, that caused her an injury-in-fact and gives her standing to sue for Dominium's alleged section 474A.047 violations as a breach of their contract.
Dominium responds that Thompson does not have an injury-in-fact because Dominium charged rents that complied with Minn. Stat. § 474A.047. But Dominium conflates Thompson's standing with the merits of her...
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