2:15-cv-00799
E.D. Cal.Nov 23, 2022Background
- Plaintiffs are Section 8 tenants (class action) who paid standardized "Additional Services Agreements" (ASAs) fees (e.g., covered parking, media packages, in‑unit washers/dryers, renters’ insurance) in addition to the "rent to owner" set by HAP contracts.
- Defendants used uniform HAP contracts with public housing agencies (PHAs) and separate standardized rental agreements/ASAs; defendants did not include ASA charges in the "rent to owner" amount submitted to PHAs.
- Company policy and accounting software applied tenant payments to non‑base charges first; defendants treated failure to pay ASA charges as lease defaults and issued "Pay or Quit" notices to Section 8 tenants (eviction could cause loss of voucher).
- Before July 2019 HAP contracts generally made owner responsible for appliances unless otherwise specified, yet defendants charged tenants for in‑unit washers/dryers; until Dec. 2019 many tenants were required to obtain renters’ insurance (charged with rent).
- Plaintiffs sued (Fifth Amended Complaint) asserting: FCA (as relators), breach of contract (California class), CLRA, and UCL; the court granted plaintiffs’ motion for partial summary judgment on breach of contract and UCL (classwide) and denied defendants’ cross motions including decertification.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Do ASA charges constitute unlawful "rent" under HAP/regulations? | ASA charges are effectively rent because tenants must pay to retain right to occupy; accounting and notices make them mandatory. | ASA charges are separate, lawful fees; defendants disclosed ASAs to PHAs and did not include them in rent to owner. | ASA charges are rent; summary judgment for plaintiffs on breach of contract and UCL class claims. |
| Are in‑unit washer/dryer charges authorized by HAP contracts? | Washer/dryer fees violate plain HAP language that owner pays appliances unless specified. | Defendants do not dispute facts but contend their practices are lawful. | Washer/dryer charges violate HAP; summary judgment for plaintiffs on breach and UCL. |
| Did requiring renters’ insurance constitute impermissible rent? | Mandatory renters’ insurance (and enrollment in pay‑with‑rent programs) was a leasing condition and therefore rent. | Defendants dispute scope but offered contradictory corporate testimony. | Insurance requirement was unlawful rent; summary judgment for plaintiffs on breach and UCL. |
| Are defendants entitled to summary judgment on FCA or to class decertification? | (Plaintiffs) FCA and CLRA claims survive; class certification remains appropriate. | Defendants argued no false claims because PHAs knew of ASAs and alternatively sought decertification. | Court denied defendants’ summary judgment on FCA and CLRA and denied decertification; factual disputes remain as to government knowledge and FCA elements. |
Key Cases Cited
- Velez v. Cuyahoga Metro. Hous. Auth., 795 F.3d 578 (6th Cir. 2015) (definitional analysis of when extra charges function as rent)
- Sager v. Hous. Comm’n of Anne Arundel Cnty., 957 F. Supp. 2d 627 (D. Md. 2013) (practical effect of applying payments to non‑rent charges can convert them into rent)
- Universal Health Servs., Inc. v. United States, 579 U.S. 176 (2016) (omissions can render representations misleading for FCA liability)
- Nozzi v. Hous. Auth. of City of Los Angeles, 806 F.3d 1178 (9th Cir. 2015) (overview of Section 8 Housing Choice Voucher Program)
- Oasis W. Realty, LLC v. Goldman, 51 Cal.4th 811 (2011) (elements of breach of contract under California law)