DEVIN NEIL, KOLLIN KALK, SUSAN ZHAO, and JOHN STOEHR, Plaintiffs,
KUESTER REAL ESTATE SERVICES, INC., CHS/ASU, LLC, and KUESTER-GREENWAY COMPANY, LLC, Defendants
Heard in the Court of Appeals September 19, 2014
[Copyrighted Material Omitted]
Hedrick Kepley, PLLC, by Michael P. Kepley, and Eggers, Eggers, Eggers, Eggers and Eggers, by Austin F. Eggers, for Plaintiffs.
Hedrick Gardner Kincheloe & Garofalo, LLP, by Hatcher B. Kincheloe and Lindsey L. Smith, for Defendant Kuester Real Estate Services, Inc.
Turner Law Office, PA, by Victoria H. Tobin, for Defendants CHS/ASU, LLC, and Kuester-Greenway Company, LLC.
STEPHENS, Judge. Chief Judge MCGEE and Judge HUNTER concur.
Appeal by Plaintiffs from order dated 30 January
2014 by Judge Mark E. Powell in Watauga County Superior Court, No. 12 CVS 677.
This case is an appeal from the trial court's denial of Plaintiffs' motion for class certification in their action against various real estate entities which provide rental housing, largely to a college student population, in Boone, North Carolina. The crux of Plaintiffs' complaint concerns alleged violations of the North Carolina Tenant Security Deposit Act (" the Act" ), and the dispositive question in resolving their motion for class certification concerns the remedy to which they would be entitled under the Act. Plaintiffs assert that the proper remedy would be an automatic full refund of their security deposits, obviating the need for separate trials on damages for every prospective class member. After careful consideration, we hold that, for the violations of the Act alleged, Plaintiffs would not be entitled to an automatic full refund, but rather, would only be entitled to a refund of any amounts withheld from their security deposits for a use not permitted by the Act. Determination of the appropriate amount of each Plaintiff's refund would require individual trials, thus rendering class action an inferior method for the adjudication of Plaintiffs' claims. Accordingly, we affirm the order of the trial court denying Plaintiffs' motion for class certification.
Factual and Procedural Background
At the time their complaint was filed in November 2012, Plaintiffs Devin Neil, Kollin Kalk, Susan Zhao, and John Stoehr were students at Appalachian State University in Boone. On 1 August 2011, Neil and Kalk, along with another individual, entered into a lease agreement with Defendant Kuester Real Estate Services, Inc. (" Kuester" ), for unit 407 at Turtle Creek West, an apartment complex owned by Defendant CHS/ASU, LLC (" CHS" ), and located near the University. CHS had contracted with Kuester to manage and maintain Turtle Creek West. The lease agreement ended on 31 July 2012, and Neil and Kalk allege that, before they vacated the premises, they thoroughly cleaned the apartment and returned it to the
same condition as when they moved in, minus any normal wear and tear.
However, Neil and Kalk later received invoices from Kuester which reflected charges for, inter alia, carpet cleaning, painting, cleaning bathrooms, replacing drip pans, and cleaning the washer and dryer, as well as for an " administrative fee" of $40. This fee is explicitly authorized by the lease addendum to which Neil and Kalk agreed in writing. In pertinent part, the lease addendum provides:
In order to promote and maintain the community, and as a condition of residency, " Turtle Creek West" has established the following additional rules and regulations for all tenants. Adherence to these rules and regulations is essential for the comfort and convenience of all tenants.
Tenant shall be subject to a $40 Administrative Fee (in addition to the cost of any repairs or remedies) for: [any of some forty listed safety, health, and maintenance regulations]
Among the rules and regulations listed are several which require tenants to keep their units clean and in good condition, specifically including the bathroom, kitchen, walls, and carpets. On appeal and in their complaint, Plaintiffs assert that the charges listed on each invoice exceeded the security deposit of $250 per person which Neil and Kalk had made at the time they entered into the lease, leaving an outstanding balance owed by each of them.
On 6 August 2011, Zhao and Stoehr, along with another individual, entered into a lease agreement with Kuester for unit 104 at Greenway Commons, another apartment complex located in Boone and managed by Kuester. Greenway Commons is owned by Defendant Kuester-Greenway Company, LLC (" Greenway" ). Zhao's and Stoehr's lease also ended on 31 July 2012, and like Neil and Kalk, they allege that they thoroughly cleaned their unit and returned it to its original condition, less any normal wear and tear, before moving out. They each received an invoice from Kuester which reflected charges for services such as carpet cleaning, painting, cleaning bathrooms, replacing drip pans, and cleaning the washer and dryer, as well as for an administrative fee of $40. Greenway Commons requires all tenants to agree in writing to an addendum explaining the administrative fee to be charged for violation of listed rules and regulations. This addendum is identical to that used at Turtle Creek West, with the exception of the apartment complex name. Zhao and Stoehr each initialed an addendum. The complaint alleges that the total charges on each invoice exceeded the $550 per person security deposit Zhao and Stoehr had been required to pay when signing their lease.
On 13 November 2012, Plaintiffs initiated this action by the filing of a complaint in Watauga County Superior Court. The complaint alleges that Defendants formed a plan " to increase profits through the overcharging of their respective tenants and taking their security deposits at the end terms of their respective leases" and includes claims for violations of the Act, unfair and deceptive trade practices (" UDTP" ), fraud, and punitive damages. Plaintiffs defined their proposed class as " [a]ll natural and/or legal persons who have entered into lease agreements to lease residential dwelling units at either and/or Turtle Creek West and Greenway Commons, which leases were managed by Defendant Kuester during the years 2009 and ongoing." In support of class certification, the complaint alleges, inter alia :
37. Common questions of law and fact exist as to all members of the Applicator
Class, and they predominate over any questions that affect only individual Applicator Class Members. The questions of law and fact that are common to the Applicator Class, and which would dominate [sic] over any individualized issues, include but are not limited to the following:
a. Whether Defendants violated the . . . Act through their administration and use of the Plaintiffs' and Applicator Class Members' respective security deposits;
b. Whether Defendants withheld as damages part of Plaintiffs' and the Applicator Class Members' respective security deposits for conditions that were due to normal wear and tear;
c. Whether Defendants retained amounts from Plaintiffs' and the Applicator Class[ members'] respective security deposits which exceeded their actual damages;
d. Whether Defendants knew, reasonably should have known, or were reckless in not knowing the lease agreements the Defendants were using to rent their respective properties contained clauses and requirements that were void, in contravention of the North Carolina General Statutes, in violation of public policy, and otherwise illegal;
e. Whether Defendants negligently, recklessly, and/or unfairly and deceptively concealed from [their] tenants the fact that their contracts contained clauses and requirements that were void, in contravention of the North Carolina General Statutes, in violation of public policy, and otherwise illegal;
f. Whether Defendants misrepresented to their respective tenants the actual damage sustained by Defendants, if any;
g. Whether Defendants failed to disclose material facts about the alleged need for repairs and/or cleaning to each of their respective tenants prior to sending the respective tenants invoices for alleged charges;
h. Whether Defendants' conduct constitutes unfair and/or deceptive acts or practices, in or affecting commerce, in violation of Chapter 75 of the North Carolina General Statutes;
i. Whether Plaintiffs and Applicator Class Members are entitled to compensatory damages;
j. Whether Plaintiffs and Applicator Class Members are entitled to an award of treble damages;
k. Whether Plaintiffs and Applicator Class Members are entitled to all or some of their security deposits to be returned to them along with all or some of the charges which were charged over ...