Phillips v. Equity Residential Management, L.L.C. , 844 F.3d 1 ( 2016 )

United States Court of Appeals
For the First Circuit
No. 16-1254
SCOTT PHILLIPS, individually and on
behalf of all others similarly situated,
Plaintiff, Appellant,
v.
EQUITY RESIDENTIAL MANAGEMENT, L.L.C.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya W. Zobel, U.S. District Judge]
Before
Lynch, Stahl, and Barron,
Circuit Judges.
David Pastor, with whom Pastor Law Office LLP, Joshua N.
Garick, Law Office of Joshua N. Garick, Preston W. Leonard, and
Leonard Law Office PC were on brief, for appellant.
Craig M. White, with whom Baker & Hostetler LLP, Thomas H.
Wintner, and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
were on brief, for appellee.
December 12, 2016
STAHL, Circuit Judge. This dispute arises out of a class
action brought by Scott Phillips against his former landlord,
Equity Residential Management, L.L.C. ("ERM"). Phillips alleged
that ERM violated several provisions of the Massachusetts Security
Deposit Law ("Security Deposit Law"), Mass. Gen. Laws ch. 186,
§ 15B, relating to unlawful charges or deductions taken against
his security deposit and ERM's failure to return the security
deposit within thirty days after he moved out of his leased
apartment. The purported class consisted of other former tenants
of ERM-owned or managed apartments who also, since August 6, 2009,
had these same grievances.1 As recompense, Phillips sought
recovery under the Security Deposit Law's penalty provision, Mass.
Gen. Laws ch. 186, § 15B(7), which includes, inter alia, the
availability of treble damages.
At summary judgment, the district court awarded Phillips
a Pyrrhic victory: though he was entitled to recover his security
deposit (less a small amount of holdover rent), the district court
refused to apply Section 15B(7), and soon after denied his class
1The purported class also consisted of two subclasses, a
"Sworn Statement Subclass" and a "Cleaning Charge Subclass." These
subclasses relate to Phillips's contention that ERM violated
several different provisions of the Security Deposit Law and that
his claims are typical of the claims of each subclass. The merits
of Phillips's proposed class, however, are not before this court.
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certification motion on mootness grounds.2 Phillips challenges
these rulings on appeal, arguing that the district court should
have ruled on his class certification motion before the parties'
summary judgment motions, that his class certification motion
should not have been dismissed as moot, and that he was entitled
to recovery under Section 15B(7).
Phillips's last contention is of particular importance,
since the outcome turns on provisions of the Massachusetts Security
Deposit Law that have not been interpreted by the Massachusetts
Supreme Judicial Court ("SJC") in over three decades. See Mellor
v. Berman, 454 N.E.2d 907, 910-13 (Mass. 1983). Generally, we
must make an "informed prophecy" as to how the highest state court
would rule on questions of that state's law. Ambrose v. New Eng.
Ass'n of Schs. & Colls., Inc., 252 F.3d 488, 497-98 (1st Cir. 2001)
("Our task . . . is to discern the rule the state's highest court
would be most likely to follow under these circumstances, even if
our independent judgment might differ."). The SJC's guidance in
this area, however, is "sufficiently undeveloped . . . so as to
make such prophetic action unwise," see Showtime Entm't, LLC v.
Town of Mendon, 769 F.3d 61, 79 (1st Cir. 2014). For this reason
and the others that follow, we certify a question regarding the
2 The district court determined that "Phillips no longer ha[d]
a live individual case because all of his claims have been decided"
and "[a]s a result, proceeding to class certification [would be]
inappropriate."
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relevant provisions of the Massachusetts Security Deposit Law to
the SJC, and refrain from deciding the merits of Phillips's other
claims until that question is resolved. See Mass. S.J.C. R. 1:03;
see also, e.g., Easthampton Sav. Bank v. City of Springfield, 736
F.3d 46, 48, 50-53 (1st Cir. 2013).
I.
We recite the facts relevant to the certified question.
Phillips and a friend, Sean Ostriker,3 entered into a written lease
with ERM for an apartment located at Longview Place in Waltham,
Massachusetts. The lease term lasted from July 20, 2012 to May
19, 2013. In accordance with the lease, Phillips paid ERM a
$750.00 security deposit prior to move-in, and he requested its
return shortly after vacating the apartment on May 20, 2013. After
receiving his request, ERM sent Phillips a signed Statement of
Deposit Account ("SODA") listing charges against his security
deposit totaling $968.08.4 The SODA credited $750.06 against this
amount, reflecting Phillips's $750.00 security deposit and $0.06
in accumulated interest, and claimed a balance due of $218.02.
3 Ostriker moved out of the apartment in December 2012 and
arranged for one of Phillips's fraternity brothers, Gil Jacobs, to
take his place. Jacobs moved into the apartment in February 2016.
Jacobs, however, moved out in April 2013, leaving Phillips as the
sole tenant.
4 The charges included unpaid rent, a late payment fee,
apartment and carpet cleaning charges, a carpet replacement
charge, and an "Other Phys Damages" charge.
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On August 6, 2013, Phillips filed a class action
complaint against ERM in Massachusetts Superior Court. He alleged
that ERM had violated the Security Deposit Law by: (1) not
providing him, within thirty days of his vacating the apartment,
sufficiently detailed written evidence of damages for which funds
were deducted from his security deposit, (2) not providing him
with an itemized list of damages sworn to under the pains and
penalties of perjury, and (3) impermissibly deducting certain
cleaning charges from his security deposit. ERM removed the case
to the United States District Court for the District of
Massachusetts based on diversity of citizenship, see 28 U.S.C. §
1332(d), and counterclaimed for the $218.02 balance outlined in
the SODA.
Soon after, both Phillips and ERM moved for summary
judgment. The district court found that ERM did not comply with
Mass. Gen. Laws ch. 186, § 15B(4)(iii), which required ERM to
provide Phillips with "an itemized list of damages" sworn to "under
pains and penalties of perjury." Phillips v. Equity Residential
Mgmt., No. 13-12092, 2015 WL 12733438, at *3 (D. Mass. Dec. 14,
2015). This failure, the court concluded, also resulted in a
second violation under a separate provision of the Security Deposit
Law since Phillips did not receive the required "itemized list of
damages . . . in compliance with the provisions of [Section 15B]"
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within thirty days after the termination of his tenancy.5 Id.(quoting Mass. Gen. Laws ch. 186, § 15B(6)(b)). Based on this
second violation, the district court held that ERM forfeited its
right to retain any part of Phillips's security deposit. Id.; see
also Mass. Gen. Laws ch. 186, § 15B(6) (stating that a lessor
"shall forfeit [the] right to retain any portion of [a tenant's]
security deposit for any reason" if the lessor violates any
provision of Section 15B(6)).
Phillips nonetheless insisted that ERM's Section
15B(6)(b) violation resulted in a third Security Deposit Law
violation under Mass. Gen. Laws ch. 186, § 15B(6)(e). That
provision provides that a lessor must "return to the tenant the
security deposit or balance thereof to which the tenant is entitled
after deducting therefrom any sums in accordance with the
provisions of this section, together with any interest thereon,
within thirty days after termination of the tenancy." Id.
The alleged Section 15B(6)(e) violation, Phillips
continued, activated yet another Security Deposit Law provision,
Mass. Gen. Laws ch. 186, § 15B(7). Section 15B(7) awards tenants
5
Phillips emailed ERM to request the return of his security
deposit on May 28, 2013. He claims that ERM sent him his SODA
detailing the charged damages to the apartment in "late May or
Early June," though the record suggests that it was mailed that
same day. Phillips's father, a guarantor of his son's lease, later
sent an email to ERM on June 23, 2013 (thirty-four days after
Phillips had vacated the apartment) asserting that the SODA did
not comply with Section 15B's requirements.
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"three times the amount of [their] security deposit or balance
thereof to which the tenant is entitled plus interest at the rate
of five per cent from the date when such payment became due,
together with court costs and reasonable attorney's fees" if the
lessor or his agent fails to comply with clauses (a), (d), or (e)
of Section 15B(6). Id.
The district court, however, refused to entertain
Phillips's argument, finding that ERM only violated Section
15B(6)(e) because of its violation of Section 15B(6)(b). Phillips,
2015 WL 12733438, at *4. Under Phillips's reading of the statute,
the court reasoned, any violation of Section 15B(6)(b) would result
in a violation of Section 15B(6)(e), making Section 15B(6)(b)
redundant. Id. Since Section 15B(6)(b) is not listed in Section
15B(7), the district court also inferred that Section 15B(6)(b)
was excluded from its list "by deliberate choice." Id. at *3.
Thus, the district court limited Phillips recovery to $647.58.6
This appeal followed.
II.
A federal court is permitted to certify questions to the
SJC "if there are involved in any proceeding before it questions
6 The amount reflects the district court's holding that
Phillips was entitled to recover his $750.00 security deposit, but
nonetheless owed ERM $102.42 in holdover rent since Phillips
conceded that he stayed in the apartment one day past the date on
which he had agreed to vacate. Id. at *5.
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of law of [Massachusetts] which may be determinative of the cause
then pending in the certifying court and as to which it appears to
the certifying court there is no controlling precedent in the
decisions of this court." Mass. S.J.C. R. 1:03; see also In re
Engage, Inc., 544 F.3d 50, 52-53 (1st Cir. 2008); Bos. Gas Co. v.
Century Indem. Co., 529 F.3d 8, 13-15 (1st Cir. 2008).7 We conclude
that this case meets those requirements.
To start, issues of state law are determinative. If the
SJC concludes that a violation of Section 15B(6)(b) does not also
constitute a violation of Section 15B(6)(e) for Section 15B(7)
purposes, then that answer shall be determinative as to Phillips's
personal claim. In other words, Phillips will only receive "the
full measure of relief [he] seek[s]" if the SJC agrees with his
position that Section 15B(7) is invoked in such circumstances.
See Easthampton Sav. Bank, 736 F.3d at 50; see also Bos. Gas Co.,
7 Although neither party requested certification, "we have
the discretion to certify questions to the SJC sua sponte."
Easthampton Sav. Bank, 736 F.3d at 50 n.4. At oral argument, we
asked the parties whether certification on this issue was
appropriate. Neither party objected to certification, though both
questioned the judicial economy of sending Phillips's $750 claim
to the SJC. Still, both parties conceded that certification might
be "appropriate" and a "viable option." Regardless, the SJC "has
previously answered questions certified even over the objections
of both parties." Id. (citing Knapp Shoes, Inc. v. Sylvania Shoe
Mfg. Corp., 649 N.E.2d 1101, 1101-02 (Mass. 1994) (answering
certified question); and Knapp Shoes, Inc. v. Sylvania Shoe Mfg.
Corp., 15 F.3d 1222, 1224 (1st Cir. 1994) (noting objections to
certification)).
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529 F.3d at 15 (certifying questions to the SJC that were
"determinative of the scope" of the plaintiff's claim).
Meanwhile, we have interpreted the SJC's second
requirement that there be no controlling precedent as preventing
certification "in cases when 'the course [the] state court[] would
take is reasonably clear.'" Easthampton Sav. Bank, 736 F.3d at 51
(alterations in original) (quoting In re Engage, 544 F.3d at 53).
The course that a state court would take is not reasonably clear
when a case "presents a close and difficult legal issue." Id. As
we will explain, such is our current predicament.
The district court's interpretive methodology admittedly
has a certain intuitive appeal: the Massachusetts Legislature
deliberately excluded Sections 15B(6)(b) and (c) from Section
15B(7)'s list, suggesting that violations of these provisions are
excused from the Security Deposit Law's enhanced penalties.
Similarly, if violations of Section 15(6)(b) also necessarily
constituted violations of Section 15B(6)(e), both sections may
lose their independent meaning. See Blum v. Holder, 744 F.3d 790,
803 (1st Cir. 2014) ("Avoidance of redundancy is a basic principle
of statutory interpretation.").
The Security Deposit Act's recognized purpose and
legislative history, however, complicate matters. The SJC has
noted that the Security Deposit Law "manifest[s] a concern for the
welfare of tenants . . . who, as a practical matter, are generally
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in inferior bargaining positions and find traditional avenues of
redress relatively useless." Mellor, 454 N.E.2d at 912 (internal
citation and quotation marks omitted). Nonetheless, some
Massachusetts courts emphasize that "the purpose of § 15B is seen
not to be arbitrarily penal; rather, the 'underlying goal [is to
establish] an "equitable relationship"' between tenants and
landlords." Castenholz v. Caira, 490 N.E.2d 494, 497 (Mass. App.
Ct. 1986) (alteration in original) (quoting McGrath v. Mishara,
434 N.E.2d 1215, 1222 (Mass. 1982)).
Mellor similarly traces the gradual evolution of the
Security Deposit Law:
In 1969, § 15B merely stated that a lessor might
not require a security deposit in an amount in
excess of two months' rent. One year later the
Legislature added a penalty of double damages for
the wilful withholding of a tenant's security
deposit. The requirement in the multiple damages
provision of a wilful violation was deleted by the
Legislature in 1972 and has remained omitted
despite substantial changes in the form of the
legislative controls on security deposits. The
deletion of the requirement of a finding of bad
faith was not accidental.
454 N.E.2d at 912-13 (citations omitted).
Later changes to the statutory framework further
subjected landlords to larger potential monetary penalties (i.e.,
Section 15B(7)). Massachusetts Security Deposit Law, ch. 979,
sec. 1, § 15B(7), 1977 Mass. Acts 1418, 1418-25 (1978). The
Legislature, however, also identified a landlord's obligations
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under the Security Deposit Act with more specificity and limited
Section 15B(7)'s application to only certain of those violations.
Id.One potential reading of Section 15B's evolution
suggests that the legislature wished to empower tenants, but in a
limited and balanced way. Nonetheless, certain Massachusetts
courts view the history differently and suggest that the
Legislature's significant interest in compliance with Section
15B's requirements warrants a broad application of its penalty
provision. See Taylor v. Beaudry, 971 N.E.2d 313, 318 (Mass. App.
Ct. 2012) (Taylor II) ("[T]he Legislature thought the deterrent
effect of [these] suits . . . was necessary to ensure all landlords
return security deposits on time and in full compliance with the
statute.").
As previously mentioned, the SJC has not provided
guidance on these provisions of the Security Deposit Law in 33
years. See Mellor, 454 N.E.2d at 907. And in the guidance
provided, the SJC has not opined on how or whether a lessor's
noncompliance with Section 15B(4)(iii) might lead to violations of
Sections 15B(6)(b) and (e) and subsequent penalties under Section
15B(7). See id. at 909 n.4, 913 (declining to consider the issue
and limiting its inquiry to whether a lessor's good faith mitigated
against awarding damages under Section 15B(7)).
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Despite this lack of clarity, the district court made
its ruling notwithstanding two Massachusetts state court decisions
construing the interplay between Sections 15B(6)(b), (6)(e), and
(7). See Taylor v. Beaudry, 914 N.E.2d 931, 933-36 (Mass. App.
Ct. 2009) (Taylor I), review denied 920 N.E.2d 44 (Table) (Mass.
2009); Carter v. Seto, 2005 Mass. App. Div. 62, 2005 WL 1383337,
at *4-5 (Mass. App. Div. 2005), aff'd, 849 N.E.2d 925 (Table)
(Mass. App. Ct. June 29, 2006), review denied, 853 N.E.2d 1059(Table) (Mass. 2006).
In Taylor I, a tenant vacated his apartment on August
31, 2007. 914 N.E.2d at 932. By mail postmarked October 1, 2007,
the landlord sent the tenant a check covering his security deposit
and accrued interest, minus charges for cleaning and repairs to
the tenant's apartment. Id. Accompanying the check was an undated
letter detailing the charges, but the letter was not signed under
the pains and penalties of perjury as required by Section
15B(4)(iii). Id. In response, the tenant filed a complaint
claiming that the landlord had violated Section 15B(6)(b) by not
providing him with an itemized list of damages in compliance with
the provisions of Section 15B, and therefore had forfeited any
right to the entire security deposit. Id. The tenant also claimed
that the landlord had violated Section 15B(6)(e) because the
landlord did not return any portion of the security deposit within
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thirty days after the end of his tenancy.8 Accordingly, the tenant
sought a judgment for three times the total amount of his deposit,
plus interest, costs, and reasonable attorney's fees, pursuant to
Section 15B(7). Id.
The court concluded that the landlord's conduct had
triggered Section 15B(7), and stated that Section 15B(6)(e)'s
"statutory obligation to return the deposit is clear, as is the
time within which the deposit must be returned." Id. at 416. It
went on, however, to declare that "failure to return the security
deposit, less any amounts that § 15B(4)(iii) permits the landlord
to retain, within [thirty days] subjects the landlord to" Section
15B(7) damages. Id. at 417.
Carter presented a similar factual scenario but was more
explicit in its reasoning. In that case, tenants sued under
Section 15B after receiving a letter from their previous landlord
stating that they could recover only $270.22 of their $2,150.00
security deposit. Carter, 2005 WL 1383337, at *2. The letter,
which itemized the damages charged against the security deposit,
was not signed under the pains and penalties of perjury and did
not include any repair bills or estimates to substantiate these
8 The court noted that "[a]t some point shortly after
receiving the [tenant's] complaint, the landlord returned to the
tenant the balance of the security deposit." Id. However, "the
record [was] clear that [the landlord] did not return the balance
within thirty days following termination of the tenancy." Id. at
412-13.
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charges. Id. Unlike in Taylor I, the letter was dated only
nineteen days after the tenants relinquished possession of the
apartment. Id. at *1-2.
The court ultimately determined that the letter was
noncompliant with Section 15B(4)(iii) and that the landlord's
"failure to submit a properly sworn itemized list of security
deposit deductions within the time mandated by the statute resulted
in a forfeiture of [the landlord's] right to retain any portion of
the security deposit." Id. at *4. The landlord was therefore
required to return the full amount of the security deposit within
thirty days of the termination of the tenancy and did not do so,
resulting in a violation of Section 15B(6)(e). Id. The court
then awarded the tenants damages pursuant to Section 15B(7). Id.
Given Taylor I and Carter's factual similarities to the
current case, these two decisions raise a measure of doubt that
the SJC would agree with the district court's interpretation.
Thus, although the statutory provisions to be applied in this case
are readily apparent, "the application of those [statutes] is
difficult, and the outcome far from certain." See Easthampton
Sav. Bank, 736 F.3d at 51.
Nonetheless, "[t]hat a legal issue is close or difficult
is not normally enough to warrant certification, or else diversity
cases would regularly require appellate proceedings in two
courts." Bos. Gas Co., 529 F.3d at 15. Additional factors,
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including "the dollar amounts involved, the likely effects of a
decision on future cases, and federalism interests," guide our
decision of whether to certify questions to the SJC. See
Easthampton Sav. Bank, 736 F.3d at 52.
Though Phillips's individual claim may revolve around a
relatively small $750.00 security deposit, the outcome of the case
has the potential to impact a large swath of current and future
tenancies throughout Massachusetts. See id. (certifying questions
to SJC partly because the outcome of the case "ha[d] the potential
to impact thousands of outstanding and future mortgages" across
Massachusetts). The many residential landlords operating in the
Commonwealth, meanwhile, rely on interpretations of these
important provisions of the Security Deposit Law when structuring
their business activities. The case also involves interpretation
of a state statute governing an area of traditional state
authority. See Conille v. Sec'y of Hous. & Urban Dev., 840 F.2d
105, 111 (1st Cir. 1988) (stating that "the area of landlord-
tenant law . . . typically has been the province of state courts
and legislatures."). Certifying questions about these issues thus
"promotes 'strong federalism interests.'" Easthampton Sav. Bank,
736 F.3d at 53 (quoting Real Estate Bar Ass'n for Mass., Inc. v.
Nat'l Real Estate Info. Servs., 608 F.3d 110, 119 (1st Cir. 2010)).
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III.
For the above reasons, we certify the following question
of Massachusetts law to the SJC:
1. With respect to the Massachusetts Security
Deposit Law, Mass. Gen. Laws ch. 186, § 15B,
when a lessor violates the terms of Section
15B(4)(iii), does the lessor's
corresponding violation of Section
15B(6)(b), which "forfeit[s] his right to
retain any portion of the security deposit
for any reason," id. § 15B(6), also
constitute a violation of Section 15B(6)(e)
-- "fail[ing] to return to the tenant the
security deposit or balance thereof to
which the tenant is entitled . . . within
thirty days after termination of the
tenancy" -- thereby triggering the
statute's treble damages provision, Section
15B(7)?
We would also welcome any other comments that the SJC
may wish to offer on any relevant aspects of Massachusetts law.
The Clerk of this court is directed to forward to the SJC, under
the official seal of this court, a copy of the certified question
and our opinion in this case, along with copies of the parties'
briefs and appendices. We retain jurisdiction over this appeal
pending resolution of the certified question.
So ordered.
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