Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—DMass: Rejection of Settlement Letter Did Not Limit Class Attorney Fee Award, (Jun 17, 2013)

By Jody Coultas, J.D.

A petitioner’s rejection of a settlement offer to the individual petitioner alone does not limit the recovery of damages or attorney fees available to the class because the Massachusetts Consumer Protection Act (CPA) provided that the petitioner shall be awarded attorney fees in any action, a federal district court in Massachusetts has held (Hermida v. Archstone, June 14, 2013, Young, W.).

Apartment renters Maeve and Jefflee Hermida sent a pre-suit demand letter on their behalf and on that of the putative class to landlord Archstone alleging CPA violations based on charging renters up-front amenity-use fees. Archstone offered to pay the Hermidas $665.67, which included both $475 in actual damages and statutory interest. The offer was impliedly rejected when the renters filed a class action suit. The renters sent a second demand letter on behalf of the members of the certified class. Archstone also offered a full refund of each class members’ amenity-use fee plus twelve percent simple interest to each class member minus the representatives, but that offer was also rejected.

A party filing a CPA claim must first send a written demand letter identifying the claimant and describing the deceptive act and the injury suffered. Demand letters encourage negotiation and settlement and operate as a control on the amount of damages which the complainant can ultimately recover. The demand letter need only be made on the party’s own behalf, even if the party is proposing to represent a class. Multiple damages may be awarded if the defendant refuses to tender reasonable relief despite having knowledge or reason to know that the act or practice complained of violated the CPA.

The renters’ first demand letter was sufficient, according to the court. The letter sufficiently described the claimants, the unfair or deceptive practice, and the injury suffered with enough detail for Archstone to ascertain its exposure and to initiate negotiations. Other members of the class could have joined the action without a new demand letter.

A party that rejects a reasonable settlement offer and later prevails at trial is entitled to an award of attorney fees, but will be denied recovery of attorney fees and costs that were incurred after the rejection of the settlement. Damages may not exceed the relief tendered, so long as the settlement offer was reasonable. Because Archstone tendered relief solely to the renters, it could not expect the offer to control the amount of recovery for the entire class, to whom no relief was tendered. The demand letter put Archstone on notice that its amenity-use fee violated the Massachusetts Security Deposit Statute. Therefore, the Hermidas’ rejection of the offer to settle the individual CPA claim did not limit the recovery of the entire class. The offer was clearly insufficient to remedy the classwide injury and did not provide the class with a reasonable basis to encourage pre-suit negotiations and settlements, according to the court.

The renter’s rejection of a settlement offer did not limit the recovery of damages or attorney fees available to the class, according to the court. Archstone argued that the rejection of the offer to the renters as individuals foreclosed recovery of attorney fees for the putative class until the class was certified. No Massachusetts court had previously decided whether the rejection of a reasonable offer made to the individual claimant, who made a pre-suit demand both on behalf of herself and a putative class, may limit recovery for attorney fees for the entire class. The court held that the renters were entitled to reasonable attorney fees and costs incurred in connection with the action brought on behalf of the class less the attorney fees and costs incurred in connection with their individual claims. Any other ruling would amount to “picking off” the renters. Settlement agreements may not be used to “pick off” the named representatives.

The renters were awarded $7,710.01 in attorney fees and costs while the class was awarded $55,004.37 in attorney fees and costs. Attorney fees are recoverable under the CPA only in that amount which represents just compensation for the services of counsel in the case viewed as a whole.

The case is No. 10-12083-WGY.

Attorneys: Kevin T. Peters (Arrowood Peters LLP) for Maeve Hermida. Amy B. Hackett (Prince, Lobel, Glovsky & Tye LLP) for Archstone.

Companies: Archstone

Cases: StateUnfairTradePractices MassachusettsNews