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Random Thoughts About "Failure To Maintain Lawsuits"

FTMp9.JPGThe Mobilehome industry remains an unwilling participant and target defendant in multiple Failure to Maintain ("FTM") lawsuits. As a result, the legal exposure of Mobilehome Park owners in California has dramatically increased over the past 20+ years.

In the recent past there have been significant jury verdicts returned against Park owners in multiple California courts. Two of those, which are the impetus for this commentary, were returned in Los Angeles and San Diego Counties.

The LA case involved a Mobilehome Park located in Long Beach, CA. The trial was venued in downtown LA. In 2018 a jury returned an award in favor of a group of plaintiffs (tenants) of approximately $5 million in compensatory damages and another $30+ million in punitive damages!

In 2016 a San Diego jury in an FTM case returned a verdict to a group of tenants for $1.5 million in compensatory and $57 million in punitive damages. An appeal of this verdict is pending and oral argument is set in February 2019.*

The jury verdict forms in these 2 cases demonstrate that these juries took their job seriously. The deliberation results were not uniform. The awards to individuals differed dramatically from resident to resident. That same observation is true of the punitive damage awards. What is consistent is that these juries generally believed and accepted the economic and personal injury claims of the tenants.

The phenomenon of outsized verdicts in FTM litigation is difficult to explain. Hart King is currently defending several active claims (neither of the above). None of the pending claims where Hart King is counsel for a defendant community owner involve communities where the living conditions could accurately be described as anything close to "appalling" or "disgusting". None of the communities are 5 star resorts but neither are they modern day gulags. Not even close!

Indeed, several years ago a Park that was honored as the "Community of the Year" by MHI was hit with a substantial adverse FTM jury verdict. That ruling was reversed on appeal, but it demonstrates that actual Park living conditions are NOT the principal reason for these MHC industry adverse jury results. The juries clearly "voted" in favor of significant damage awards to Park tenants. It is hard for this author to fathom why a jury would return astronomical damage awards when the actual damages to tenants, if any, are typically quite nominal. So what is going on?

It is this author's view that the awards reflect the emotional nature of jury trials and that each of these juries concluded that the named defendants were "bad people". The theme of the plaintiffs' claims was that the Park owner was akin to a feudal landlord who was economically pillaging the property owned by the "peasants" who are "forced" by economic circumstances to live in the Park. If it were a movie there would be a Robin Hood style portrayal of the residents (and their attorneys) with the Park owner cast as the evil king seeking to exploit his subjects.

Whether the industry likes it or not this message seems to have been accepted by a number of California juries. So, what can the industry do?

My view is that the industry, and individual Park owners, need to clearly [and often] demonstrate to their residents that their communities are pleasant, healthy and safe places to live, with fair rent being paid by the tenants.

In rent control disputes, Park owners are frequently called upon to demonstrate how and why their rent is reasonable. I would submit that a similar analysis is appropriate in the context of FTM litigation. Hiring an expert to demonstrate that a Park space's rent is reasonable, when compared to nearby apartments, single-family dwellings, or condominiums should be considered. After 30+ years as an attorney in the industry, it is my observation, that in a majority of rent disputes with tenants, the Park has generally set rents below a reasonable estimation of market rent. Are there exceptions? Of course. But are they the norm? Absolutely not.

The plaintiffs (tenants) in FTM litigation frequently seek to compare and contrast the total annual revenue earned by the Park owner with the annual capital investment made in the park. I would submit that type of analysis, if closely analyzed, is usually favorable to Park owners.

Photographic evidence is, in the context of FTM claims, a mixed blessing. Residents are quite adept at using their cell phones to take isolated, out of context, pictures of anything that might be useful to demonstrate the Park is in disrepair. That same "snapshot" strategy can also be used by Park owners. Creating and maintaining a regular series of Park common area photographs over time demonstrating the community's ongoing infrastructure condition, and repair and maintenance efforts can be very effective in countering tenant photos. Documentation confirming prompt response to tenant inquiries and complaints can also be invaluable. This type of documentation is wholly within any Park owner's control. Creating and following the needed protocols to create and preserve such documentary evidence requires a conscious decision and continual follow up. But this type of business record can be very effective in disproving the allegations and story being advanced in FTM cases.

There is no guarantee a Park owner can successfully obtain a defense verdict in this type of litigation. However, it appears to this author that a primary element to achieve better results is for Park owners to consistently (year over year) demonstrate that their community provides a desirable lifestyle and economic value and that the owner and management are not the 21st century version of feudal lords. Juries are composed of people. That means emotions and perception are frequently more important than objective "facts". In the legal world there is a saying that bad facts make for bad law. Our industry can prepare for and meet FTM cases by creating a universe that has favorable facts.

Bill Dahlin is a partner with the Southern California law firm of Hart King and a leader in the firm's Manufactured Housing Industry Practice Group. He can be reached at (714) 432-8700, (714) 619-7084 (direct dial) or [email protected] This article is for general information purposes and is not intended to be and should not be taken as legal advice for any reader.

* The jury verdict was reversed by the 4th District Court of Appeal on February 28, 2019

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