A recent decision from the Minnesota Court of Appeals highlights several significant tenant protections in Minnesota law. Minnesota Attorney General’s Office v. Schierholz and Associates, Inc., d/b/a Broadmoor Valley arose from the State’s enforcement action concerning the operation of a manufactured-home park in Marshall, Minnesota. The State alleged that the park owner subjected residents to unlawful late payment fees and deceptive practices and failed to maintain the park and its roads. Although the district court and jury rejected most of the State’s claims, the Court of Appeals concluded that several important legal errors, including erroneous jury instructions, affected the proceedings. The court therefore reversed portions of the district court’s rulings, ordered a new trial on several claims, and directed judgment for the State on the unlawful late-fee claim.
One of the most important aspects of the decision for tenants concerns the Minnesota Consumer Fraud and Deceptive Trade Practices Acts. The State alleged that the park owners used false or misleading information concerning the terms and legality of late fees and other charges imposed on residents. The State alleged, among other things, that the park owner represented to tenants, through their residential leases, that it could lawfully charge late fees above the eight-percent limit, told tenants they owed late fees when they did not, represented that it could impose other unauthorized charges, and represented that tenants were responsible for certain maintenance obligations. The district court instructed the jury that, in addition to determining whether defendants used false information with an intent that tenants rely on it, the jury had to determine whether tenants actually relied on the information and whether they were harmed by it. The district court also dismissed the State’s Deceptive Trade Practices Act claim, ruling that no binding Minnesota precedent expressly applied that statute to residential or manufactured-home leases.
The Court of Appeals held that this imposed an improperly high burden, essentially grafting common-law fraud requirements on a statutory consumer-protection claim, and found that the jury was provided with erroneous jury instructions. Under the Consumer Fraud Act, a violation does not require proof that a tenant actually relied on the misrepresentation or suffered actual harm. The court emphasized that the Minnesota Legislature deliberately eliminated traditional common-law fraud requirements such as reliance and damages in order to make consumer-fraud claims easier to establish. The Consumer Fraud Act focuses on the prohibited conduct itself—using false or misleading information with the intent that others rely upon it. The Court of Appeals therefore concluded that the district court’s jury instructions materially understated the protections afforded by the statute. Because the jury’s initial finding may have been affected by those erroneous instructions, the court ordered a new trial on the Consumer Fraud Act claim. The Court of Appeals also rejected the district court’s reasoning that the Deceptive Trade Practices Act did not apply and held that the Act can apply to residential leases of any kind.
The late-fee ruling even more directly exposes the errors committed by the district court. Minnesota law limits a landlord’s late fee to eight percent of overdue rent. The defendants acknowledged that they had charged late fees exceeding that statutory limit. The district court nevertheless declined to grant judgment for the State because it believed there was a factual issue concerning whether tenants had actually paid the excessive fees. The Court of Appeals rejected that approach, concluding that the statute prohibits the landlord from charging an excessive late fee; it does not require the State to prove that a tenant ultimately paid the unlawful charge. This distinction has immense practical importance for tenants. Under the Court of Appeals’ reasoning, a landlord cannot avoid responsibility for imposing an unlawful charge simply by arguing that a tenant refused to pay it, disputed it, or otherwise did not ultimately transfer the money to the landlord. Under Minn. Stat. § 504B.177, the unlawful act occurs when the excessive late fee is charged. The Court of Appeals therefore reversed the district court’s ruling on this issue and directed the district court to enter judgment for the State on the late-fee claim, with the appropriate remedies to be determined on remand.
The Court of Appeals’ decision reinforces the broader principle that Minnesota’s consumer-protection statutes are intended to protect tenants, like other consumers, from unfair and deceptive business practices. Hellmuth & Johnson have represented tenants in similar actions against landlords who have sought to use residential leases as a means to impose unlawful fees or to shift the burden of property maintenance onto tenants, including in a recently settled class action against a private equity landlord, which obtained $34 million in monetary relief for tenants in Minnesota and nationwide.
If you have any questions about the information above, contact Anne Regan at [email protected].
