Zeff v. Greystar Real Estate Partners
| Decision Date | 18 February 2021 |
| Docket Number | Case No. 20-cv-07122-EMC |
| Parties | ZACHARY ZEFF, Plaintiff, v. GREYSTAR REAL ESTATE PARTNERS, LLC, Defendant. |
| Court | U.S. District Court — Northern District of California |
Plaintiff Zachary Zeff has filed a putative class action against Defendant Greystar Real Estate Partners, LLC ("Greystar"), alleging that Greystar charges its tenants illegal late-fee penalties for late rent and utility payments and unlawfully withholds tenants' security deposits beyond 21 days of move-out. Plaintiff alleges a violation of, inter alia, California Civil Code §§ 1671 and 1950.5, and California's Unfair Competition Law (Cal. Bus. & Prof. Code §§ 17200, et seq.). Plaintiff seeks compensatory damages and restitution for the money Greystar has unlawfully withheld, and a declaratory judgment that Greystar's late-fee penalties and security deposit practices are unlawful. Defendant has filed a Motion to Dismiss under Federal Rules of Civil Procedure 12(b)(6) and 12(b)(7) for failure to state a claim and failure to join a necessary party under Rule 19. Docket No. 16 ("MTD"). For the reasons set forth below, the Court DENIES Defendant's Motion to Dismiss.
Greystar is the largest owner, manager, and operator of apartments in the U.S. Compl. ¶ 9. It owns, manages, and operates thousands of apartment units in California, including at least 79 large apartment communities in the Bay Area. Id. Plaintiff Zachary Zeff was a tenant at a Greystar apartment community in San Rafael, California. Id. ¶ 15. While a tenant, Plaintiff was subject to Greystar's unlawful late penalty scheme. Id.
Plaintiff alleges that Greystar operates a "stacking" scheme. Plaintiff describes the scheme as follows. First, Greystar mandates a $100-per-occurrence late rent penalty, which it automatically imposes the minute it deems rent late. Id. ¶ 10. Second, Greystar insists that utility payments (e.g., for gas and electricity) be paid to the utility provider using Greystar's payments platform, and Greystar tacks on a $3.95 monthly administration fee. Id. ¶ 11. Greystar's policy and practice is to categorize the utility fees, as well as the $3.95 administration fee, as "rent" which generates its own $100 penalty fee for late payment. Id. ¶ 12.
In so doing, Greystar unilaterally expands the definition of "rent," because the lease which Plaintiff signed defines "rent" as merely the base rent for occupying the unit. Id. It is through this unilateral expansion of the term "rent" that Greystar subjects tenants to a "stacking" scheme. Id. ¶¶ 12-13. If any portion of the "rent" (e.g., the water bill or the $3.95 administration fee) is not paid on time, Greystar adds a $100 "late rent" penalty. Id. ¶ 13. Stacking then happens when that $100 late penalty is not paid off by the following month, even when a tenant makes all other rent payments on time (e.g., a tenant could be on-time with February base rent, utilities, and the administration fee, but still technically "late" on rent because the $100 late penalty from January was not paid in full). Id. This occurs because Greystar intentionally applies a tenant's rent payments to their previously recorded debt (i.e., the previously assessed penalties and fees) first, rather than the rent that is due for the month in which a payment is actually made. Id. ¶ 48.
Plaintiff alleges that he experienced this stacking scheme firsthand. For instance, Plaintiff paid his May base rent on time, but did not pay his utilities and the $3.95 administration fee on time. Id. ¶ 15. As a result, Greystar tacked on the standard $100 late penalty. Id. The next month, Plaintiff again paid his base rent on time, but he was unable to bring his Greystar balance back to zero after accounting for utility fees, the $3.95 administration fees from both months, andthe prior late penalty assessment of $100. Id. ¶ 16. Greystar tacked on another late fee penalty. Id. Plaintiff alleges that Greystar created a "shortfall" on his account by virtue of its accounting practices. Id. ¶ 15. Namely, because Greystar applied Plaintiff's rent payment first to the accrued fees, and not his current rent, Plaintiff was caught in an endless cycle of "stacked" $100 penalties. Id. ¶ 16. The stacking policy therefore creates multiple late charges based on a single original payment. Id. ¶ 24.
Plaintiff alleges that Greystar's penalties—both the $100 late fee itself, and the $100 fee when combined with the stacked fees and/or additional fees—are arbitrary amounts which function as illegal penalties. Id. ¶ 21.
Next, Plaintiff alleges that Greystar unlawfully withheld Plaintiff's security deposit. Plaintiff made a $700 security deposit, and Greystar unlawfully returned that deposit more than 21 days after Plaintiff vacated the premises, and without any documentation (e.g., repair bills or receipts) for the $127 deduction it took from that deposit. Id. ¶ 18 (). Greystar's refusal to timely refund security deposits, and its unilateral deductions from those deposits, has cost putative class members millions of dollars in the aggregate. Compl. ¶ 25.
Plaintiff brings this putative class action pursuant to Federal Rules of Civil Procedure 23(b)(1), (b)(2), and (b)(3). Id. ¶ 26. Plaintiff proposes the following two sub-classes:
Id. ¶ 27. Plaintiff does not provide the size of the class but estimates that it is "into the thousands." Id. ¶ 29.
Greystar states that Plaintiff entered into a lease with his landlord, Bel Albert Holdings, LLC ("Bel Albert"), and Greystar was not a party to that contract. MTD at 1. See also Docket No. 16-1, Ex. A, Lease Contract, § 1 ("Parties") (describing the parties to the Lease Contract as Zachary Zeff and Bel Albert Holdings, LLC) (hereinafter "Lease Contract"). Greystar alleges that Bel Albert is the party who owns the property where Plaintiff lived, and that Bel Albert was paid all rents and fees. MTD at 1. As a result, Plaintiff cannot pursue his claims, either individually or on a class-wide basis, without naming Bel Albert as a party to this suit. Id.
Greystar contends specifically that Bel Albert is a necessary party under Rule 19. It asserts several reasons. First, Bel Albert has a legally protected interest in this suit that will be impaired or impeded if it is not joined. Reply at 5. Second, the Court cannot accord complete relief among existing parties, because Bel Albert could frustrate any relief which Plaintiff obtains by replacing Greystar with another property management company to enforce the late fee provision at issue. Id. at 6. Third, Bel Albert's absence exposes the existing parties to the risk of multiple or inconsistent obligations, because Bel Albert could institute a separate action against Greystar seeking a declaration that the late fee provision in its lease is not void. Id. at 6-7. Because it is feasible to join Bel Albert as a party to this action, Greystar asks the Court to dismiss Plaintiff's complaint without prejudice so he can amend his complaint to add Bel Albert as a defendant. Id. at 7. Further, Greystar argues that Bel Albert is an indispensable party under Rule 19(b) and that the case cannot proceed without it, because cases arising out of a contract cannot proceed without the contracting parties. Id.
Federal Rule of Civil Procedure 19(a) provides:
Fed. R. Civ. P. 19. Joinder under Rule 19(a)(1)(B) is contingent upon "an initial requirement that the absent party claim a legally protected interest relating to the subject matter of the action." United States v. Bowen, 172 F.3d 682, 689 (9th Cir. 1999) (emphasis in original) (internal citation omitted). Cf. Ward v. Apple Inc., 791 F.3d 1041, 1051 (9th Cir. 2015) (). "'[I]t is inappropriate for one defendant to attempt to champion [the] absent party's interests.'" Bowen, 172 F.3d at 689 (citing United States ex rel. Morongo Band of Mission Indians v. Rose, 34 F.3d 901, 908 (9th Cir. 1994)).
Here, Bel Albert has not claimed any such interest in this action. Hence, joinder under Rule 19(a)(1)(B) is not required.
Even if Bel...
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