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Kinard v. East Capitol Family Rental, L.P.

United States District Court, District of Columbia

May 28, 2019

MILDRED KINARD et al., Plaintiffs,
v.
EAST CAPITOL FAMILY RENTAL, L.P. et al., Defendants.

          MEMORANDUM OPINION

          TIMOTHY J. KELLY UNITED STATES DISTRICT JUDGE.

         Plaintiffs in this class action are tenants of a low-income housing development in the District of Columbia. They allege that Defendants, management companies overseeing the development, violated federal laws by adjusting their utility allowances-rent reductions that should reflect reasonable utility use-improperly and without adequate notice. After lengthy negotiations, the parties reached a settlement agreement under which the named plaintiffs and other class members will receive both monetary and non-monetary relief. In November 2018, the Court preliminarily approved the settlement agreement and conditionally certified the class, and in April 2019, it held a fairness hearing. Before the Court is the parties' Joint Motion for Final Certification of Class for Settlement Purposes and for Approval of Class Action Settlement. ECF No. 35. For the reasons explained below, the motion will be granted.

         I. Background

         A. Factual and Procedural History

         Capitol Gateway Family Rental (“Capitol Gateway”) is a low-income housing development in the District of Columbia, which includes 86 family rental units. ECF No. 1 (“Compl.”) ¶¶ 1, 27-28. Defendant East Capitol Management Family Rental, L.P., (“East Capitol”) owns a portion of Capitol Gateway. Id. ¶ 9. Some of the units in Capitol Gateway- 61 of the 86-are designated as low-income housing, and therefore must be operated in accordance with regulations governing the Low-Income Housing Tax Credit (LIHTC) Program. Id. ¶¶ 22, 29, 32. In addition, according to Plaintiffs, East Capitol entered into a “Regulatory and Operating Agreement” (“R&O Agreement”) with the District of Columbia Housing Authority (DCHA), under which it agreed to operate those units subject to regulations promulgated by the U.S. Department of Housing and Urban Development (“HUD”). Id. ¶¶ 29, 30. Defendant A&R Management, Inc., served as the managing agent at Capitol Gateway from 2007 until mid-2014, when Defendant Kettler Management, Inc., took over. Id. ¶¶ 10-11. Plaintiffs are past and present residents of the low-income units in Capitol Gateway. Id. ¶¶ 5-8, 34. Mildred Kinard began living there in 2008, and the other named plaintiffs started the year before that. Id. ¶¶ 5-8. The proposed class consists of all tenants who were residents of Capitol Gateway in one of the low-income units at any time between January 1, 2014 and December 31, 2015. ECF No. 32-2 (“Settlement Agreement”) ¶ 8(e).

         Plaintiffs allege that, according to their lease agreements and the R&O Agreement, East Capitol had to provide them a utility allowance in the form of a rent reduction. Compl. ¶ 36. Prior to 2013, their utility allowances remained constant. Id. ¶ 46. Around October 2013, however, Defendants notified them that their allowances were being reduced that December. Id. ¶ 47. Plaintiffs allege that the notice failed to adequately describe the reason for the reduced allowance and did not give them an opportunity to comment about it or request individual relief from it. Id. ¶ 48. Moreover, Plaintiffs assert, less than two years later the same thing happened to them again. Id. ¶¶ 51-52. More specifically, Plaintiffs allege that in early 2015, some tenants received written notice either immediately before or after a second reduction to their allowances, and some received no notice at all. Id. ¶ 52. And once again, the notice that was provided to some Plaintiffs was deficient because it failed to describe the reason for the reduction or provide an opportunity for them to comment or request individual relief. Id. ¶ 53. Finally, Plaintiffs contend that, starting in December 2013, the amounts of their reduced individual allowances were unlawful under the United States Housing Act and its implementing regulations. See Id. ¶¶ 15, 59.

         In November 2015, Plaintiffs filed this class action under Federal Rule of Civil Procedure 23(b)(2) and (b)(3), challenging both Defendants' alleged failure to provide proper notice of the reduced utility allowances and the reduced allowances themselves. Id. ¶ 82. In their five-count complaint, Plaintiffs assert that Defendants violated 42 U.S.C. § 1983; the United States Housing Act of 1937, 42 U.S.C. §§ 1437a and 1437a(a)(1); the Low-Income Housing Tax Credit Program, 26 U.S.C. § 42; Plaintiffs' lease agreements; and the Indenture of Restrictive Covenants for Low-Income Housing Tax Credits. Id. ¶¶ 89-120.

         The next month, Defendants moved to dismiss the complaint. ECF No. 11. Following briefing on the motion, the parties agreed to mediate the case with the assistance of Magistrate Judge G. Michael Harvey. ECF No. 23. In advance of mediation, the parties exchanged informal discovery and engaged in extended settlement negotiations. ECF No. 32-1 at 12. Just when those negotiations appeared to be breaking down, the parties accepted one of two alternative “mediator's proposals” suggested by Judge Harvey, which led to a settlement in principle in March 2017. Id. The parties then negotiated and memorialized a formal settlement agreement, which they executed over a year later, in May 2018. See Id. at 5.

         B. The Settlement Agreement

         In June 2018, the parties jointly moved for preliminary approval of the settlement agreement, conditional certification of the class for purposes of settlement, appointment of class counsel, approval of notice to the class, and for the scheduling of a fairness hearing. ECF No. 32. Under the terms of the settlement agreement, Defendants have agreed to designate $100, 000 to compensate the named plaintiffs and other class members. Settlement Agreement ¶ 8(r). Of that $100, 000, the agreement allocates $15, 000 for fees for Plaintiffs' counsel and $5, 000 for service awards for each of the four named plaintiffs. Id. ¶¶ 11-12. The remaining amount is available for distribution to class members according to a formula that sets individualized awards based on the length of time the class member lived in Capitol Gateway and size of the class member's unit. Id. ¶ 16. The settlement agreement also includes non-monetary relief for class members. Id. ¶ 21. Defendants have agreed to adjust class members' utility allowances for two years according to another formula, and to do so subject to agreed-upon notice provisions. Id. ¶¶ 21-22. For their part, class members have agreed to release all claims in the complaint and all claims relating to the calculation of utility allowances by Defendants during those two years. Id. ¶¶ 23, 57.

         The Court preliminarily approved the settlement agreement and conditionally certified the class in November 2018. ECF No. 33. Pursuant to the terms of the settlement agreement, on December 18, 2018, Defendants provided the claims administrator identifying and contact information for the 64 members of the class. ECF No. 35-5 ¶ 3. On January 11, 2019, the claims administrator mailed a “Notice to Class of Proposed Settlement” and a claim form to the last known address of each class member. Id. ¶ 4. The notice form provided an explanation of the basis for the lawsuit and of the class members' rights with respect to the suit, including the right to opt out of the suit and to object to the settlement terms. See ECF No. 32-3. The notice also informed class members that they had to complete an enclosed claim form and return it by a date certain to participate in the settlement. Id. at 5. Class members also received separate, individualized notices with a preliminary calculation of the award they would receive under the settlement. Id. at 4-5. For each notice returned as undeliverable, the claims administrator tried to locate an updated address for the class member and re-sent the notice to any identified updated address. ECF No. 35-5 ¶ 5. By February 22, 2019-the deadline for a class member to opt-out from the settlement, object to the settlement, or challenge the monetary amount that he or she would receive-the claims administrator had received no opt-outs, objections, or challenges.[1] Id. ¶¶ 8-10. On February 25, 2019, the claims administrator mailed reminder postcards to the 19 class members who had not returned a claim form by then. Id. ¶ 6. By March 22, 2019-the deadline for class members to submit claim forms-the claims administrator had received forms from 57 out of 64 class members. Id. ¶ 7.

         C. Joint Motion for Final Approval and Fairness Hearing

         In March 2019, the parties jointly moved for final certification of the class and for approval of the settlement. ECF No. 35. As required by Federal Rule of Civil Procedure 23(e), the Court held a fairness hearing on April 10, 2019, which was attended by counsel for the parties and one of the named plaintiffs. As described above, although class members had been advised of their right to appear at the hearing and to object to the settlement, no objectors appeared.

         II. Legal Standards

         A. Class Certification

         When certifying a class for settlement purposes, the Court must consider whether Plaintiffs have established “that each of the elements of Rule 23(a) are met and that the class is maintainable pursuant to one of Rule 23(b)'s subdivisions.” Radosti v. Envision EMI, LLC, 717 F.Supp.2d 37, 50 (D.D.C. 2010). Under Rule 23(a), Plaintiffs must establish that (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims and defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. These requirements are generally referred to as “numerosity, commonality, typicality, and adequacy of representation.” Cohen v. Chilcott, 522 F.Supp.2d 105, 113 (D.D.C. 2007).

         In addition, the parties have moved the Court to certify the class under Rule 23(b)(3), which requires Plaintiffs to show that “questions of law or fact common to class members predominate over any questions only affecting individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” See ECF No. 35-1 (“Joint Mot.”) at 19. “These requirements are referred to as predominance and superiority.” Chilcott, 522 F.Supp.2d at 113.

         B. Final Approval of Class Settlement

         Rule 23(e) provides that “[t]he claims, issues, or defenses of a certified class may be settled . . . only with the court's approval” and upon its finding that the proposed settlement is “fair, reasonable, and adequate.” Fed.R.Civ.P. 23(e)(2). In evaluating proposed class action settlements under Rule 23(e), courts in this Circuit generally consider the following factors: (1) whether the settlement is the result of arm's-length negotiations; (2) the terms of the settlement in relation to the strength of the plaintiffs' case; (3) the status of the litigation at the time of settlement; (4) the reaction of the class; and (5) the opinion of experienced counsel. See Howard v. Liquidity Servs. Inc., No. 14-1183 (BAH), 2018 WL 4853898, at *4 (D.D.C. October 5, 2018); In re Vitamins Antitrust Litig., 305 F.Supp.2d 100, 104 (D.D.C. 2004). In so doing, the Court “must strike a balance between a rubber stamp approval and the detailed and thorough investigation that it would undertake if it were actually trying the case.” Chilcott, 522 F.Supp.2d at 113 (internal quotations omitted). It is the role of the Court to “provide[] a check against settlement dynamics that may lead the negotiating parties-even those with the best intentions-to give insufficient weight to the interests of at least some class members.” In re Vitamins Antitrust Class Actions, 215 F.3d 26, 30 (D.C. Cir. 2000) (internal quotations omitted). However, there is a “long-standing judicial attitude favoring class action settlements.” In re Vitamins Antitrust Litig., 305 F.Supp.2d at 103 (citing Mayfield v. Barr, 985 F.2d 1090, 1092 (D.C. Cir. 1993)). Therefore, “[a]bsent evidence of fraud or collusion, such settlements are not to be trifled with.” Osher v. SCA Realty I, Inc., 945 F.Supp. 298, 304 (D.D.C. 1996) (quoting Granada Invs., Inc. v. DWG Corp., 962 F.2d 1203, 1205 (6th Cir. 1992)).

         III. ...


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