Housing & Redevelopment Authority of Duluth v. Lee
832 N.W.2d 868
Minn. Ct. App.2013Background
- Tenant Brian Lee lived in Section 8 public housing operated by the Duluth Housing and Redevelopment Authority; his rent was $50/month based on $203/month income.
- Lease imposed a $25 late fee for rent not paid by the 5th; Lee accrued three $25 late fees after a maintenance charge left his account delinquent.
- Landlord filed eviction for nonpayment when Lee was $50 in arrears; parties stipulated eviction would be proper unless Minn. Stat. § 504B.177(a)’s 8% cap on late fees barred the fees.
- District court held the $25 fee reasonable under federal standards and found HUD rules preempted the state 8% cap; landlord won at summary judgment.
- Court of Appeals reviewed preemption and statutory-construction issues de novo and considered HUD regulations and guidebook language about lease reasonableness and deference to state law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Minn. Stat. § 504B.177(a) is preempted by federal law | Lee: state 8% cap applies to PHAs and is not preempted | HRA: HUD permits reasonable late fees and that federal standard preempts stricter state cap | Not preempted — no actual conflict; HUD establishes a floor and defers to state/local law |
| Whether § 504B.177(b) allows PHAs to follow federal reasonableness rather than state cap when rules “conflict” | Lee: no conflict exists; 8% cap defines reasonableness in Minnesota | HRA: the statutes conflict because federal "reasonable" may exceed 8% so § 177(b) permits federal standard | § 177(b) applies only if an actual preemption-level conflict exists; none here, so state cap controls |
| Whether the specific $25 fees complied with federal "reasonableness" standard | Lee: $25 equals 50% of rent and is unreasonable given circumstances | HRA: $25 is reasonable under HUD guidance | Even under federal standard, $25 fees were unreasonable and therefore noncompliant |
| Remedy — validity of eviction based on the assessed late fees | Lee: eviction invalid because fees were improper under state law | HRA: eviction valid because fees reasonable under federal standard | Eviction reversed because fees violated § 504B.177(a) and there would be no legal basis for eviction if landlord had complied |
Key Cases Cited
- In re Estate of Barg, 752 N.W.2d 52 (Minn. 2008) (standard for preemption review)
- Fidelity Fed. Sav. & Loan Ass’n v. de la Cuesta, 458 U.S. 141 (1982) (conflict preemption framework)
- Hines v. Davidowitz, 312 U.S. 52 (1941) (state law as obstacle to federal objectives)
- Hillsborough Cnty. v. Automated Med. Labs., Inc., 471 U.S. 707 (1985) (agency intent needed for regulatory preemption)
- Wyeth v. Levine, 555 U.S. 555 (2009) (presumption against preemption in traditional state domains)
- Barrientos v. 1801-1825 Morton LLC, 583 F.3d 1197 (9th Cir. 2009) (HUD regulations create a federal floor, allowing stricter local tenant protections)
- Atherton v. F.D.I.C., 519 U.S. 213 (1997) (federal standard as a floor permitting stricter state law)
- Gorco Constr. Co. v. Stein, 256 Minn. 476, 99 N.W.2d 69 (Minn. 1959) (reasonableness test for penalties)