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The Perils of Groundless Suits Against Landlords

By: Terry R. Dowdall, Esq.facebook-emblem-DLO-pic-identifier-jan-28-2017_V_1.jpg

C'mon, let's sue!! Nothing to lose they may say. Everybody knows it's a sure bet. Right?

Consider the recent case of tenant "Molly McGreedy" and "Bea Rich"(not real names). Molly took her complaints about water damage and mold, allegedly causing health problems, to some local attorneys. The lawyers sent letters and retainer agreements to all the tenants in the premises, suggesting they could participate in a "risk free" lawsuit that could result in collecting damages against the landlord. The letter claimed that the proposed complaint would not be a class action suit, and that the only way the renters would "receive funds from settlement or judgment" would be to sign the retainer agreements. More than 40 tenants took the bait, including Bea.

THE TENANT LAWSUIT

McGreedy's attorneys filed suit alleging 18 different types of claims (causes of action). A typical "shotgun" approach to a lawsuit (the Court uses the term "shotgun;" if in any way offensive to the reader, I suggest you think "kitchen sink" instead; the only context in which the two terms mean the same thing seems to be lawsuits). They asked for damages for pain and suffering, emotional distress, medical expenses, loss of earnings, property and punitive damages. But when Molly was questioned under oath, her story changed. No mold problems, no visible signs of mold, no health problems -- only a belief that her security deposit should have been returned. Eventually, Molly tired of the litigation and requested dismissal of the lawsuit, though the attorneys continued to insist that Molly had a strong case. The lawsuit continued for a full eight months before it was dismissed.

Bea seemed to have few of the harms alleged in the lawsuit. She did claim to suffer from sinus congestion, watery and itchy eyes, headaches and fatigue. She experienced heating problems and made a claim of unfair retention of a security deposit. But Bea had never provided any specific information indicating that there was mold in her unit, or that she had suffered any damages attributable to mold. In Bea's written answers to sworn questions (aka, "interrogatories"), she said that she was not claiming to have suffered physical injuries, property damage, lost earnings or lost future earnings. In response to the question, "Do you attribute any physical, mental, or emotional injuries to the INCIDENT?" Bea answered, "Yes."

Even though she had stated in her response to the solicitation letter that she had suffered from various physical ailments, when Bea was asked to identify each injury she attributed to the landlord, Bea answered only that "The owner and staff have caused me mental and emotional distress because of their dishonesty." Bea identified no past or present physical injuries that she attributed to living at the complex. When asked "Do you still have any complaints that you attribute to the INCIDENT," Bea answered "No." Bea stated that she had not received any consultation, examination or treatment from a health care provider, had not taken any medications, and had not required any other medical services related to her tenancy. She did state that she felt that the premises were "unsuitable to live in." Bea eventually dismissed her claim as well.

After Molly and Bea dismissed their claims, the landlord filed suit based on "malicious prosecution." The landlord's complaint, not a "shotgun" pleading, claims that the tenant suit was filed and prosecuted without probable cause, and that the lawsuit was maintained in bad faith and with malice. In a preliminary ruling on the landlord's case, the judge ruled that there was sufficient evidence to allow the landlord's suit to proceed.

THE LANDLORD SUES!

In order for the landlord to sue successfully, he is required to prove that the tenant lawsuit:

(1) was commenced by or at the direction of the tenant and was pursued to a legal termination in landlord's favor;

(2) was brought without probable cause; and

(3) was initiated with malice.

The court also echoed the familiar rule that continuing to prosecute a lawsuit which is subsequently discovered to lack probable cause is grounds for a claim of malicious prosecution (continuing an action that is discovered to be baseless harms the defendant and burdens the court system just as much as initiating an action known from the outset to be baseless). What's more, a claim for malicious prosecution may also apply where an action charges multiple grounds of liability when some, but not all, of the grounds were asserted are without probable cause and with malice.

What did the court make of the underlying tenant claims? Well, Bea failed to appear for two depositions and submitted interrogatory responses that indicated she had incurred no damages other than mental and emotional distress, despite the suit with 18 causes of action alleging physical injury and property damage. The court held that this constituted a reasonable inference that her allegations of mold contamination and personal injury were groundless. Molly's claims were likewise, not supported by the evidence she presented.

Was the tenant lawsuit a malicious prosecution of the landlord? 

The court concluded that Bea had never discussed any of the several alleged complaints regarding management with the tenant lawyers. Still, Bea alleged 18 different causes of action, the great majority of which had nothing to do with any of the concerns she had discussed with them. Said the court,

"[U]nder these circumstances, it is difficult to conclude that a reasonable attorney would have believed that [Bea] had tenable claims under many of the causes of action alleged in the complaint as filed. The court also determined that whatever the tenant lawyers knew at the time the lawsuit was filed, it became clear, after Bea provided responses to the interrogatories, that she was not claiming any physical injuries or property damage. She claimed 'dishonesty' on management's part. For example, when asked 'Do you still have any complaints that you attribute to the INCIDENT,' Bea answered 'No.' Bea further denied that she had been examined by any health care provider or that she had received advice or treatment from any health care provider. She also denied that she had taken any medications, or that she had required other medical services as a result of any injury she attributed to the 'INCIDENT.' In response to the question, 'Do you attribute any loss of or damage to a vehicle or other property to the INCIDENT?' Bea answered, 'No.' In response to the question, 'Do you attribute any loss of income or earning capacity to the INCIDENT?' Bea answered 'No.' In response to almost every question concerning whether or not she had been injured or had suffered a loss, Bea answered, 'No' or 'Not that I know of.'

Even in stating that she felt the premises were "unsuitable to live in," Bea did not explain why, and offered no evidence that would demonstrate any factual support for this claim. The court stated that Bea's "subjective feelings" were insufficient to support a cause of action for breach. Bea had no complaints about mold or other health concerns at the premises.

The court therefore ruled that Bea and Molly had no "probable cause" to support most of the causes of action alleged in the complaint. 

TIPS FOR LANDLORDS

There is no such thing as a 'little lawsuit.' The filing of a legal action must be taken with great prior contemplation, care and concern -- especially when one considers the impact on the lives of the plaintiff and defendant.

Try to Resolve Disputes: First and foremost, no legal action should be taken without first seeking to resolve the dispute by all reasonable means, including dialogue and mediation. Even non-payment of rent cases should be scrutinized for conceivable settlement possibilities, work-outs, and then possible defenses if litigation is necessary. Use of alternate dispute resolution techniques such as mediation, arbitration, and settlement proceedings may help to avoid the unnecessary and sometimes intractable position into which litigation will thrust management.

Witness Statements: Statements of what the witnesses will say; written complaints from other residents. Some managers complain that the residents will not provide written complaints. The resident may fear retaliation from the offending resident, for example, or, the resident may have poor writing skills. Well, recording a verbal complaint in your handwriting is nearly as good. Better that your record be a word-by-word reflection of the resident's complaint, but even a summary is good. More detail can be garnered later.

Photographs are very important. Juries watch CSI and crime shows in which there is always visual, physical, direct and clear evidence. Pictures and video are expected. 

Correspondence and notices are also key. In typical rule and regulation violation cases, use of the 14 day notice may not be useful in the eviction case. Why? Because management has cleaned up the violation which we want to use for the eviction. And more significantly, the decision to clean up a space with a 14 day notice, implies a decision that the resident can stay if he or she would simply maintain the premises. If it is the management's decision to terminate the tenancy of the resident, acting to create damaging admissions by cleaning a mobilehome space so the resident complies with the rules may work against our interests.

Keep in mind that any written document given to a tenant may eventually be read by a jury. Communications with tenants must be professional at all times. A single piece of ill-considered correspondence can sink your ship. There is simply no excuse for anything less than professional communication at all times.

Weighing the Equities: More than ever before, equities weigh heavily in the balance of assessing the likelihood of prevailing in litigation. Even in non-payment situations, there is latitude to decide whether and how to proceed. One well-worn example is the long time resident who, for the first time in many years, fails to pay the rent on time. It behooves management to contact such resident and determine if there is a valid excuse. There may be a death in the family, illness, vacation, etc. Serving a 'pay or quit' notice would engender ill-will, create distrust, and waste the manager's time. Even if a resident pays late (beyond the time limitations of a 3 day 'pay or quit' notice) consider accepting the payment. If management proceeds to trial and the judge determines that the payment was a day or two late, and then considers a long-tenured occupancy in the park, the judge may reinstate that tenancy, allowing the tenant to remain in the park. In rule violation cases, the judge will weigh the detriment to the management and perhaps other tenants, against the forfeiture of the tenancy and required sale or removal of the mobilehome from the park. That is a heavy penalty for rule violations, and hence, especially in this problematic real estate market, a sanction that judge's cautiously and sparingly administer.

Someone is likely to say, "if we had mediated this issue," or "if we had accepted that proposal earlier," we would not be HERE. So, if you must litigate, I would be sure that there is no room for that kind of remorse later. The case of McGreedy and Rich reflects the importance of care and concern for the initiation, maintenance and necessity of legal action by and against anyone, including landlords.

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