Opinion
E044336
2-27-2009
JONATHAN NEESE et al., Plaintiffs and Appellants, v. SATELLITE MANAGEMENT CO., Defendant and Respondent.
Law Offices of Ron Bochner and Ron Bochner, for Plaintiffs and Appellants. Hartnett Law Group, Patrick M. Hartnett, and Michael A. Boswell, for Defendant and Respondent.
Not to be Published in Official Reports
Plaintiff Jonathan Neese, individually and on behalf of all others similarly situated (Neese) initiated this action to challenge the practice of Satellite Management Co. (Satellite) of charging a $30 application fee to obtain a credit report and conduct a background check on potential tenants. Neese appeals from the trial courts denial of his motion for class certification, along with the courts prior grant of Satellites motion for summary adjudication of issues. Neese contends that the trial court erred (1) in denying his motion for class certification, (2) in dismissing all of his California Consumers Legal Remedies Act (CLRA) claims, and (3) in adjudicating the issues of overcharging as to late fees and failure to get a real estate license in favor of Satellite.
I. PROCEDURAL BACKGROUND AND FACTS
Satellite is a property manager for several apartment complexes. As a property manager, it processes applications submitted by potential renters. Under California law, Satellite is entitled to charge an application fee, which is regulated by statute. Under Civil Code section 1950.6, this processing fee may be as high as $30 (with an allowance for yearly increases based on the consumer price index). As part of this process, Satellite provides the potential renters with an application receipt that provides a breakdown of the fee; specifically, there is a designated cost for "labor" and another for "product."
Neese, along with a co-applicant, Tara Thacker (Thacker), applied to rent an apartment at the Casa Del Valle apartment complex located in Redlands, California. As part of their application process, each of them was requested to pay the application fee of $30 for their individual credit reports and background checks. Satellite collected the allowed amount. No other fees were charged. Once each of them paid the $30, an itemized receipt was prepared and presented to them. After completing the background checks, approval was given to rent an apartment to them. Neese and Thacker signed a rental agreement and moved into an apartment on or about February 7, 2004. On or about February 14, 2005, Neese moved out of the apartment.
On January 31, 2006, Neese initiated this action. He alleged three causes of action: (1) Violation of the CLRA; (2) Violation of Business and Professions Code section 17200; and (3) Declaratory Relief. Neese challenged Satellites practice of charging each tenant applicant a fee of $30 to process his or her credit report and conduct a background check. Satellite answered the complaint, and on July 17, 2006, it filed two motions. The first motion sought a determination that the action was without merit pursuant to Civil Code section 1781, subdivision (c)(3), i.e., a "No-Merit" determination. As a result of that motion, the trial court dismissed Neeses claim under the CLRA because it did not fall within the ambit of the CLRA. Notice of this ruling was sent to Neese on August 23, 2006. Neese did not appeal the trial courts decision via a writ of mandate.
Satellites second motion was for summary judgment, or in the alternative, summary adjudication. (Code Civ. Proc., § 437c.) The motion was heard on November 1, 2006. The trial court granted summary adjudication under Business and Professions Code section 17200 on the issues of overcharging as to late fees and failure to get a real estate license. The court denied Satellites request as to the claims of overcharging for application fee on the grounds that the court found there was a triable issue of fact as to whether the application fee exceeded the actual cost, i.e., compliance with Civil Code section 1950.6. Both parties waived notice of the courts ruling. Neese did not appeal the trial courts order via a writ of mandate.
The only issue remaining in Neeses action was the question of whether or not Satellite overcharged Neese and other potential applicants regarding the application fee. On July 23, 2007, Neese filed a motion for class certification. The proposed class was defined as "[a]ll Satellite . . . applicants for residential rentals who were not provided a receipt that itemized the out-of-pocket costs and time spent to obtain and process information about the applicant and/or who were charged more than the out-of-pocket (credit report) costs and or reasonable value of time spent obtaining information about applicants between January 31, 2002 and the present." He claimed the application fee receipts were not in conformance with Civil Code section 1950.6, and that the alleged contentions made the matter suitable for class certification. Neeses motion was heard on August 23, 2007. After oral argument the matter was taken under submission. On August 28, the court denied the motion, stating that "[i]ndividual review of the prospective tenants applications and receipts would be required here, thereby disfavoring the practicalities and efficiencies of class action treatment." The court clerk gave notice.
On October 12, 2007, Neese filed notice that he was appealing from the denial of the motion to certify class action ordered on August 28, 2007. Neese did not mention the trial courts prior grant of Satellites motion to find that the action is without merit pursuant to Civil Code section 1781, subdivision (c)(3), or its motion for summary adjudication.
II. NEESES RIGHT TO APPELLATE REVIEW
In his notice of appeal, Neese stated that he was appealing from "the denial of the Motion to Certify the Class Action ordered on August 28, 2007 by the above-entitled court." Nonetheless, his appellate brief raises two other issues not mentioned in his notice. The first relates to Satellites "No-Merit" determination motion, and the second relates to the summary adjudication motion. Satellite contends that the two issues not identified in Neeses notice of appeal are not properly before this court. According to Satellite, no direct appeal lies from an order granting or denying a motion for summary judgment or summary adjudication. (Code Civ. Proc., § 437c; Levy v. Skywalker Sound (2003) 108 Cal.App.4th 753, 761, fn. 7.) Rather, an appeal from such order should be taken from the judgment rendered on the order. (Code Civ. Proc., § 437c, subd. (m)(1).) Likewise, the propriety of an order granting summary adjudication is reviewable on appeal from the final judgment (Jennings v. Marralle (1994) 8 Cal.4th 121, 128), or immediately by way of petition for extraordinary writ (Code. Civ. Proc., § 437c, subd. (m)(1)). Satellite notes that while summary judgment is not available with respect to Neeses CLRA claim, appellate treatment is the same. We agree with Satellite.
Here, Neese is not appealing from a final judgment because there is no final judgment. Instead, he is appealing from the denial of his motion to certify his case as a class action. Orders denying class certification are appealable. "`The one-final-judgment rule generally precludes piecemeal litigation through appeals from orders which dispose of less than an entire action. [Citations.] An order denying class certification does not finally dispose of an action since it leaves it intact as to the individual plaintiff. However, the order is appealable if it effectively terminates the entire action as to the class, in legal effect being "tantamount to a dismissal of the action as to all members of the class other than plaintiff. [Citations.]" [Citations.] The appeal is allowed, as a matter of state law policy, because the order has "the `death knell effect of making further proceedings in the action impractical. . . ." [Citations.]" (Kennedy v. Baxter Healthcare Corp. (1996) 43 Cal.App.4th 799, 807.) Thus, Neese is entitled to appeal the order denying his motion for class certification; however, as to the other orders, they are not properly before this court.
In his reply brief, Neese contends that he should be allowed to challenge the courts grant of Satellites "No-Merit" determination motion and summary adjudication motion because the "CLRA `No-Merits adjudication is something of a hybrid or no-brid provision. It is a hybrid in the sense that it combines features of class certification and summary judgment[.]" Neese acknowledges that the Legislature failed to provide a means of reviewing a No-Merit determination, and there is no case law that has addressed this issue. However, he argues that we should treat the determination as "instantly writable, appealable as a denial of class certification order, but only at the same time as all certification issues have been denied and in the mode of final judgments." Neese suggests "it would be inefficient and disorderly to require the CLRA ruling to await final judgment, since this might provide inconsistent and incomplete relief in the case where other class action allegations proceed to trial and judgment." He applies the same reasoning to allowing review of the summarily adjudicated issue. We reject his argument.
"No-Merit" determination motions are treated like motions for summary judgment/adjudication. While the CLRA prohibits courts from granting motions for summary judgment under Code of Civil Procedure section 437c "in any action commenced as a class action pursuant to subdivision (a)" (Civ. Code, § 1781, subd. (c)(3)), appellate courts have given this prohibition a narrow reading (Olsen v. Breeze, Inc. (1996) 48 Cal.App.4th 608, 614 (Olsen)). According to the Olsen court, the plain meaning of subdivision (c)(3) of Civil Code section 1781 was to provide a means of resolving CLRA actions prior to trial. (Olsen, supra, at p. 612.) "In practice, courts . . . have applied the standards applicable to motions for summary judgment and summary adjudication in deciding motions for no-merit determinations. [Citations.] One court commented that it could `see no meaningful distinction in the choice between dismissal of a cause of action after a motion for summary judgment and a motion for a no-merit determination. [Citation.]" (Smith v. Wells Fargo Bank, N.A. (2005) 135 Cal.App.4th 1463, 1474-1475.)
Given the similarity in treatment between a "No-Merit" determination motion and a motion for summary judgment/adjudication, we find that the right to appeal the grant of a "No-Merit" determination is the same as that of a summary judgment/adjudication motion. Accordingly, the order granting Satellites "No-Merit" determination is reviewable on appeal from the final judgment, or immediately by way of petition for extraordinary writ. Having failed to seek a writ review, Neese must now wait until final judgment is entered.
III. DENIAL OF CLASS CERTIFICATION
Neese, as class representative, contends the trial court abused its discretion in denying class certification for the causes of action for violation of Business and Professions Code section 17200, regarding Satellites compliance with the requirements of Civil Code section 1950.6, and declaratory relief.
As to the declaratory relief action, Neese contends that the trial court erred in failing to discuss this issue. Because we find the declaratory relief claim tied to the Business and Professions Code section 17200 claim, resolution of one resolves the other.
A. Applicable Legal Principles
"Generally, a class suit is appropriate `when numerous parties suffer injury of insufficient size to warrant individual action and when denial of class relief would result in unjust advantage to the wrongdoer. [Citations.] But because group action also has the potential to create injustice, trial courts are required to `"carefully weigh respective benefits and burdens and to allow maintenance of the class action only where substantial benefits accrue both to litigants and the courts."" (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435, quoting Blue Chip Stamps v. Superior Court (1976) 18 Cal.3d 381, 385, and City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 459.)
"`The ultimate question . . . is whether . . . the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants." (Lockheed Martin Corp. v. Superior Court (2003) 29 Cal.4th 1096, 1104-1105, quoting Collins v. Rocha (1972) 7 Cal.3d 232, 238.)
"The party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members. [Citations.] The `community of interest requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class. [Citation.]" (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326.)
"Because trial courts are ideally situated to evaluate the efficiencies and practicalities of permitting group action, they are afforded great discretion in granting or denying certification. . . . [A] trial court ruling supported by substantial evidence generally will not be disturbed `unless (1) improper criteria were used [citation]; or (2) erroneous legal assumptions were made [citation] [citation]. . . . Accordingly, we must examine the trial courts reasons for denying class certification. `Any valid pertinent reason stated will be sufficient to uphold the order." (Linder v. Thrifty Oil Co., supra, 23 Cal.4th at pp. 435-436, quoting Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470, and Caro v. Procter & Gamble Co. (1993) 18 Cal.App.4th 644, 656.)
"The certification question is `essentially a procedural one that does not ask whether an action is legally or factually meritorious." (Sav-On Drug Stores, Inc. v. Superior Court, supra, 34 Cal.4th at p. 326, quoting Linder v. Thrifty Oil Co., supra, 23 Cal.4th at pp. 439-440.) "[W]e consider whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment. [Citations.] `Reviewing courts consistently look to the allegations of the complaint and the declarations of attorneys representing the plaintiff class to resolve this question." (Sav-On Drug Stores, Inc. v. Superior Court, supra, at p. 327, quoting Richmond v. Dart Industries, Inc., supra, 29 Cal.3d at p. 478.) "But, `[w]here a certification order turns on inferences to be drawn from the facts, "`the reviewing court has no authority to substitute its decision for that of the trial court."" (Sav-On Drug Stores, Inc. v. Superior Court, supra, at p. 328, quoting Massachusetts Mutual Life Ins. Co. v. Superior Court (2002) 97 Cal.App.4th 1282, 1287.)
B. Background Facts Offered in Support of Class Certification
In connection with Neeses motion for class certification, his attorney, Ron Bochner, offered a declaration with attachments, including: (1) Neeses application; credit report, and receipt; (2) discovery responses from Satellite; (3) excerpts from the deposition of property manager M.K. Bean; (4) copy of Ms. Beans declaration offered in support of Satellites motion for summary judgment; and (5) copy of rent receipt for Dummies Reference Manual. These documents support the following facts.
Neeses application identified two costs: product costs amounting to $10 and labor costs amounting to $20. Satellite processed over 9,000 applications between January 2002 and July 2006. Ms. Bean testified that Satellite would run a credit report on the applicant, contact former employers and places of residence, and verify the information on the application.
Other discovery responses described the tasks associated with the application as: "(1) Meeting with the prospective tenant, providing a site walkthrough with the tenant, explaining the procedures in qualifying for the apartment; (2) Assisting the prospective tenant in the completion of the application; (3) Collecting the application and the fee; (4) Documenting the fee and providing the prospective tenant with an itemized receipt (Items Nos. 1-4 took approximately 30 to 40 minutes); (5) The employee then drives to another location managed by SATELLITE that is approximately 10 miles away from the Palm [B]rook Apartments. At that location, the employee gave the application to another employee of SATELLITE who then runs the credit report (approximately 45 minutes). [(6)] Additionally, the application fee is dropped off, which is then picked up by a courier and deposited in the bank account of SATELLITE (approximate time involved, unknown at this time); (7) The employee then returns on the 10 mile trip to the apartment complex (approximately 30 minutes); (8) The application and credit report are then reviewed by the employee (approximately 20 to 25 minutes); (9) Previous landlords are then contacted to verify the information provided by the prospective tenant; (10) Employers are then contacted to verify the information provided by the prospective tenant; (11) References are checked (Item Nos. 9-11 took approximately 60 minutes, can be more); (12) Contact is made with the prospective tenant to let them know decision (approximately 15 minutes); and [(13)] Meet with the prospective tenant to discuss and sign the lease and provide them with keys (approximately 30 minutes). Additionally, SATELLITE home office employees process the billing from the credit report company for the report." The credit report provider charged Satellite "$6.99, exclusive of direct out of pocket costs associated with the procuring and processing of the credit report information by SATELLITE personnel located at the main office. . . . [T]his charge did not include costs associated with internet access fees, ink and paper."
Satellite employees were instructed as to what dollar amounts to use regarding costs. If using First Advantage, the product cost is $6.99 and the labor cost is $26.01. However, if using Screening Pros, the product cost is $6.50 and the labor cost is $26.50. The employees were given a list of procedures to follow upon receiving an application to rent. In explaining the contents of each applicants receipt, Satellite stated that it is "allowed to charge for the reasonable value of time spent in obtaining information on any applicant. The reasonable amount of time, indicated as labor cost on the receipt, indicates the value of time spent by Satellite personnel in the process[ing] of the applications based upon the hourly rates of the employees involved in the tasks associated with the applications." Satellite employs "both salaried and hourly personnel. The hourly wage of persons employed on an hourly basis ranges from: $13.00 per hour for regular employees up to $20.00 per hour for Supervisors."
C. Application of the Law to these Facts
Neese argues the trial court erred by finding that "[i]ndividual review of the prospective tenants applications and receipts would be required here, thereby disfavoring the practicalities and efficiencies of class action treatment." According to Neese, the applications and receipts "do not set out either the out-of-pocket costs nor actual time spent. Rather, the receipt is limited to `remarks about product costs and labor costs." Arguing that the applicants are charged a predetermined set fee, Neese claims the trial court would not have been required to review every one of the prospective tenants applications or receipts. Similarly, Neese challenges the trial courts finding that each application and receipt would need to be reviewed as to labor costs.
The evidence in the record before this court fails to support Neeses claims. As noted above, while each applicants receipt may reflect a certain charge for the product and labor costs, such charges, alone, do not represent the full amount of the costs associated with each application. Neese offers no evidence or authority that precludes Satellite from collecting the true costs incurred in processing each application. Civil Code section 1950.6, subdivision (a), in relevant part, provides that "when a landlord or his or her agent receives a request to rent a residential property from an applicant, the landlord or his or her agent may charge that applicant an application screening fee to cover the costs of obtaining information about the applicant. The information requested and obtained . . . may include, but is not limited to, personal reference checks and consumer credit reports produced by consumer credit reporting agencies . . . ." Subdivision (b) of Civil Code section 1950.6 limits the screening fee to "actual out-of-pocket costs of gathering information concerning the applicant, including, but not limited to, the cost of using a tenant screening service or a consumer credit reporting service, and the reasonable value of time spent by the landlord or his or her agent in obtaining information on the applicant. In no case shall the amount of the application screening fee charged . . . be greater than . . . ($30) per applicant. . . . [A]djusted annually by the landlord or his or her agent commensurate with an increase in the Consumer Price Index, beginning on January 1, 1998." (Italics added.) Accordingly, Satellite is entitled to charge for the reasonable value of time spent by its personnel in the process of the applications, along with the costs associated with Internet access fees, ink, paper, and overhead.
To the extent that the receipts provide an appearance of a "predetermined set fee," we note that Civil Code section 1950.6 limits the amount Satellite may charge to process each application. Nonetheless, the evidence shows that the review process for each applicant is unique. The amount of time spent on each application varies depending on the applicants job, credit, and residential histories. Thus, while Satellite may incur actual costs in an amount greater than the statutory limit, it may only charge the statutory limit. The only way to find out how much actual costs were incurred for each application is to review each applicants receipt and question all employees responsible for each application as to the time spent.
Neese claimed that the class was composed of "[a]ll Satellite . . . applicants for residential rentals who were not provided a receipt that itemized the out-of-pocket costs and time spent to obtain and process information about the applicant and/or who were charged more than the out-of-pocket (credit report) costs and or reasonable value of time spent obtaining information about applicants between January 31, 2002 and the present." Satellite pointed out that any determination of whether an applicant was a member of the class requires an individualized inquiry. Such inquiry would encompass a review of each application and receipt, along with the testimony of each Satellite personnel involved in the process. Given the time frame at issue, Satellite argues that the testimony may reflect the best recollection of each witness, which in turn would present a triable issue of fact. We agree. Considering the above, the evidence supports a finding that costs associated with each application are unique to each applicant.
Neese challenges the need to conduct an individual inquiry into each application, arguing that such labor-intensive inquiry is the result of Satellites failure to properly maintain its records/receipts in accordance with Civil Code section 1950.6, subdivision (d). Given the state of Satellites records, Neese argues that he is entitled to an evidentiary inference that the evidence is untrue, i.e., "that the time and value itemized, if properly made, would provide a showing adverse to defendant." (Evid. Code, § 412 [providing weaker evidence affords an inference that the evidence is untrue].) He contends this case is similar to Aguiar v. Cintas Corp. No. 2 (2006) 144 Cal.App.4th 121, 134 and 135 (Aguiar), and concludes Satellites failure to make records according to the statute should be treated as proof of systematically overcharging. Thus, he argues there is no need to look at each application/receipt. We disagree.
In Aguiar, the City of Los Angeles had adopted a "Living Wage Ordinance" (LWO), which required employers having service contracts with the city to pay a minimum wage to their employees who worked on those contracts. (Aguiar, supra, 144 Cal.App.4th at pp. 124-125, 133.) The plaintiffs alleged that their employer, Cintas, had failed to comply with the LWO. (Aguiar, supra, at p. 128.) The proposed class was defined as all employees who had worked on Cintass city contracts. (Id. at pp. 128-129, 134-136.) The trial court denied class certification. (Id. at pp. 130-131.) The appellate court, however, reversed. (Id. at pp. 135-139.) First, it explained, the class could be readily ascertained from Cintass payroll records. (Id. at p. 136.) Second, the plaintiffs claims were both common and typical, partly because the plaintiffs "theory of the case" (ibid.) was that Cintas had simply failed to comply with the LWO. (Aguiar, supra, at pp. 136-138.) Third, a class action was superior. (Id. at p. 138.)
To the extent there were questions as to membership, the court opined, "that burden falls on Cintas. It was Cintass business decision to commingle [the Department of Water and Power (DWP)] items with those of other customers and to allow all employees to work on the items at each substation (for example, sorting, hanging, folding) as they were processed through the plant. [¶] Moreover, the LWO through its implementing regulations requires employers to provide the City a list of all employees subject to the LWO . . .; and at the time Cintas was awarded the DWP contracts it certified it would do so, including the name, position, classification and rate of pay for each employee. Thus, Cintas was aware that, if the LWO was applicable to its contracts, it was responsible for keeping track of employee time. Accordingly, it is appropriate to shift the burden of proof on issues regarding employee time spent on DWP contracts to Cintas: `"[W]here the employers records are inaccurate or inadequate and the employee cannot offer convincing substitutes a . . . difficult problem arises. The solution, however, is not to penalize the employee by denying him any recovery on the ground that he is unable to prove the precise extent of uncompensated work. Such a result would place a premium on an employers failure to keep proper records in conformity with his statutory duty; it would allow the employer to keep the benefits of an employees labors without paying due compensation . . . . In such a situation we hold that an employee has carried out his burden if he proves that he has in fact performed work for which he was improperly compensated and if he produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference. The burden then shifts to the employer to come forward with evidence of the precise amount of work performed or with evidence to negative the reasonableness of the inference to be drawn from the employees evidence. If the employer fails to produce such evidence, the court may then award damages to the employee, even though the result be only approximate." [Citations.] [Citations.]" (Aguiar, supra, 144 Cal.App.4th at pp. 134-135.)
Here, by contrast, there is no requirement in Civil Code section 1950.6 that Satellite maintain any records relating to application receipts. Instead, it was merely required to provide a receipt that itemizes "the out-of-pocket expenses and time spent . . . to obtain and process the information about the applicant." (Civ. Code, § 1950.6, subd. (d).) To the extent that Satellite has records to support its "labor" and "product" costs, those records include employment documents, bills paid relating to overhead costs, credit report costs, labor costs, and the testimonies of its employees regarding their work. However, no detailed records were required. Thus, we reject Neeses claim that the trial court erred by not acknowledging Satellites failure to properly keep records/provide receipts in accord with Civil Code section 1950.6, subdivision (d).
For the above reasons, we agree with the trial courts finding that "[i]ndividual review of the prospective tenants applications and receipts would be required here, thereby disfavoring the practicalities and efficiencies of class action treatment."
IV. DISPOSITION
The order appealed from is affirmed. Satellite is awarded its costs on appeal.
We concur:
RICHLI, J.
KING, J.