Rent collusion suit tossed vs manufactured home community operators

By Scott Holland | Legal Newsline
The Center Square

A federal judge has dismissed, for now, a class action accusing some of the nation’s largest manufactured home community landlords of rent collusion.

In October 2023, attorneys from the firms of DiCello Levitt, of Chicago and New York; Hausfeld LLP, of Washington, D.C., New York and San Francisco; and Myron M. Cherry & Associates, of Chicago, filed the class action lawsuit in Chicago federal court.

Named plaintiffs in the action include Ronald Kazmirzak, of southwest suburban Justice; Luis Melendez, of Orlando, Florida; Carol Rachelle Roach, of Clearwater, Florida; Yvonne Sewell, of Vero Beach, Florida; and Anthony Silverence, of Newburgh, New York.

Named defendants are Equity LifeStyle Properties, Hometown America Management, Lakeshore Communities, Sun Communities, RHP Properties, Yes Communities, Inspire Communities, Kingsley Management, Cal-Am Properties and Murex. The lawsuit asserts they improperly used industry information, known as JLT Market Reports, to inflate rent prices in mobile home park communities and pricing out senior citizens and other vulnerable tenants. A company known as Datacomp, described in the complaint as “the nation’s largest provider of manufactured mobile home data,” distributes the JLT information and also is a named defendant.

In an opinion filed Dec. 4, U.S. District Judge Franklin Valderrama granted the defendants’ motion to dismiss the complaint.

Valderrama first noted the plaintiffs didn’t counter defendants’ argument the complaint lacked direct evidence of a conspiracy to raise rental prices. The companies further challenged whether the renters raised sufficient circumstantial evidence, claiming no allegations of any “parallel conduct” or other factors required to survive a dismissal motion.

According to the plaintiffs, the fact Datacomp asked the community operators constituted an invitation to participate in a conspiracy and their submission of the solicited “competitively sensitive pricing information” established their acceptance of the alleged scheme. However, Valderrama agreed with the community operators that the complaint didn’t allege Datacomp invited them to do anything, much less that they accepted any invitation.

Valderrama wrote the plaintiffs only alleged the companies participated in telephone surveys or otherwise communicated with Datacomp, and although “such an allegation supports an information exchange … it does not support an inference of an invitation, much less an acceptance to do anything.” He further said the cases the plaintiffs invoked as precedent are distinct because those plaintiffs alleged an explicit “demand to participate in the anticompetitive behavior.”

While the landlords did raise rent prices, they noted the plaintiffs didn’t plausibly allege the “increases were uniform or moved together at all,” Valderrama wrote. “The way defendants see it, asserting that aggregate prices rose across 10 defendants over the course of half a decade is not an allegation of parallel pricing, but rather impermissible group pleading. In fact, argue defendants, plaintiffs’ own allegations relating to timing — that is, that Datacomp began publishing the JLT Reports as early as 2014, but (rents) did not change at an allegedly unusual rate until 2019 — contradict plaintiffs’ argument that defendants’ conspiracy caused sudden and unprecedented changes in pricing structure.”

While Valderrama sided with the plaintiffs’ contentions that variable price increases spread across several years don’t inherently undermine their allegations, he said the companies sufficiently argued the complaint needs to “allege more than just parallel conduct” to survive. The renters insist they did so, alleging information exchange, market structure details, collusion opportunities, conduct contrary to the companies’ self interest and a strong motive.

Valderrama said the “information exchange allegations qualify as a plus factor because they facilitate the conspiracy at issue” but disagreed with regard to market structure. He noted the defendant companies make up 30% of the market, weakening the plaintiffs’ otherwise adequate allegations of “high barriers to entry in the market and the difficulty for (mobile home lot) renters to switch.”

Regarding opportunities to conspire, Valderrama said the complaint merely alleges the companies belonged to “a trade organization and attended industry meetings, which does not move the needle.” But he sided with the plaintiffs on the issue of the companies’ not acting in their self interest, giving weight to the argument that firms wouldn’t typically disclose sensitive pricing information and allowing for the inference the sharing was essential to a conspiracy.

That said, as to motivation, Valderrama noted the complaint merely alleges the companies wanted to increase profits, claims that “do not give rise to an inference of a conspiracy because such motives always exist.” He further said the complaint doesn’t meaningfully address other reasons mobile home lot rents might’ve increased, leaving the allegations “merely consistent with, rather than suggestive of, a price-fixing conspiracy.”

The renters also alleged the mere sharing of data violated the federal Sherman Antitrust Act, but Valderrama said they could only do so by also adequately defining the market. He also rejected their unjust enrichment claim, noting it relied on the same alleged facts bolstering the antitrust claims he’d already agreed to dismiss.

The plaintiffs have until Jan. 5 to amend their complaint.