In the wake of the big antitrust Class Action Complaint Case No. 23-cv-6715 – HAJEK vs. DATACOMP APPRAISAL SYSTEMS, INC.; EQUITY LIFESTYLE PROPERTIES, INC.; HOMETOWN AMERICA MANAGEMENT, L.L.C.; LAKESHORE COMMUNITIES, INC.; SUN COMMUNITIES, INC.; RHP PROPERTIES, INC.; YES! COMMUNITIES, INC.; INSPIRE COMMUNITIES, L.L.C.; KINGSLEY MANAGEMENT, CORP.; and CAL-AM PROPERTIES, INC., MHProNews reached out to a select group of industry professionals. Because several of the defendants were mentioned in the suit as being members of the Manufactured Housing Institute (MHI), some of those included those in the MHI orbit contacted for comments were included in that outreach in order to get a better sense of how the defendants may respond to the allegations. Among the inputs obtained by MHProNews is the one that follows in Part I. Readers who have not yet read the case pleadings can either read all about it at this link here or can learn more at this link here, either before or after reading these related insights from a manufactured home community (MHC) professional.
The following text is unedited, as submitted. The views are those of the author, and not necessarily those of MHProNews.
Thanks, Tony. I had seen a notice of the lawsuit but hadn’t had the chance to review it. I’ve now skimmed a partially redacted copy of it. Here are my OFF THE RECORD comments which you could consider generically in your follow up articles. You can use these concepts, but do not attribute them to me.
Off the top, I think it’s a common practice in many industries to keep track of what your competition is doing. Zillow, Trulia, Redfin publishes the value of sale transactions and new listings, so a new seller and broker knows how to price a home. A buyer knows how to make a reasonable offer. Apartments.com and other rental sites post the monthly rental rates of area apartments. Gas stations post their price per gallon in big red letters at virtually every station. An airline or hotel can see what their competitors are doing on kayak, orbitz, expedia etc, as can the consumer. None of this is private or confidential, no? All are easily accessible to the consumer as well as to the provider, which might adjust their prices accordingly too based on this market info. I doubt a gas station owner would price a gallon of gas materially higher than the station across the street, when all the prices are disclosed, no?
The site rent at a community is not confidential. Every resident knows it. A prospect can walk in and ask. The fact that Datacomp performs this service to accumulate public info, and makes it available publicly (anyone can buy a copy of their report) would also allow a MH resident to quickly see where site rent might be cheaper and use the same Datacomp info to their advantage to find cheaper site rent with comparable amenities in their area. This is the same thing my partner does when she plans weekly shopping by viewing the grocer ads – finding the best price for what we need.
I think we all know the lack of new supply is generally attributable to the difficulty in getting new communities zoned. The barrier to entry is more governmentally restricted than monopoly driven.
Moving a home is not a resident’s only option in the face of a site rent increase they deem to be too high. They can sell their home, and use the proceeds to buy a comparable home in a lower priced community, avoiding the cost of transport. That’s the market at work. If the government wanted to make this even easier, they’d follow up on the Duty to Serve that they’ve been studying for too many years and find a way to federally back chattel loans on MH homes in communities. That would make it easier to privately sell homes, then switch communities in search of lower site rent and unlock significant equity for homeowners of community located manufactured homes. Again, the market at work.
Anecdotally, some of the driver of site rent increases is coming from “mom and pop” operators selling their communities to the larger operators, and telling them “we’re $xx under the market.” (because we weren’t raising site rent as much and as often as we should have been). Some of these deals are being made with the expectation that “mom and pop” seller will receive a price for the community as if the site rent had been adjusted to market, and the institutional buyer is under great pressure to significantly raise the site rent in accord with how “mom and pop” priced the community for sale. For a time over the last few years, there were sellers willing to pay the price, on the basis of a significant post-closing site rent increase. “West Des Moines” comes to mind.
Figure 8 in the lawsuit suggests that the average monthly site rent in the US was $202 in 2019, and jumped significantly to $258 by 2021. That’s certainly a big jump in 2 years, but in daily terms, isn’t it $6.64 per day to $8.48 per day? That $8.48 per day to keep your what, 16×80? on a site, snow plowed (as long as you’re not in a Frank Rolfe community), property taxes paid, professional management, some amenities. Think about what you pay for an hour in a downtown Chicago parking lot. $40+/hour? Difficult to say $8.48/day is unquestionably too high for that kind of an exchange.
I’m sure there are operators that are jacking rents beyond justification. They are bringing regulation down on them (and the rest of us) in the form of rent control and better disclosure, and that is wrong and unfortunate (the jacking, not necessarily tailored government regulation). At the moment, in Illinois, we need to disclose the history of site rent increases for the past 5 years and a forecast for the next 3, so residents and prospects have some idea. In Illinois, site rent increases have to be disclosed 90 days in advance, so residents have time to adjust or relocate. The Illinois legislature is looking at MH rent control. In other words, the defendants are likely in compliance with existing government regulation, which is not unknown to our industry.
I’m sure all the defendants’ attorneys are far more experienced than I, but my first move would be to send the plaintiffs a Rule 11 letter, stating that this is a frivolous lawsuit, not based on a good faith application of law and facts, and it should be withdrawn. I’m sure the plaintiffs won’t withdraw, but that would allow the case to continue, and if the court finds for the defendants, they’d have a claim to have the plaintiffs and attorneys reimburse their legal fees, which I’m sure will be significant.
Again, I don’t claim to be an expert on this subject, just my off the top opinion.” ##
Part II – Additional Information with More MHProNews Analysis and Commentary
Editorially speaking, it is no secret that MHProNews, along with our Mobile and Manufactured Home Living News (MHLivingNews.com) sister site, have been doing news and views articles on predatory behavior, antitrust, RICO, Hobbs Act, shareholders, and stakeholders related issues among other legal concerns within manufactured housing for over 5 years. While a champion for ‘more affordable manufactured homes done right,’ we are critics of illegal and unethical behavior that harms the industry, its consumers, taxpayers, and independents. MHProNews has brought industry-leading evidence from a range of actual cases in manufactured housing, as well as possible evidence from hypothetical ones or those outside of our industry which may apply to MHVille.
So, broadly, speaking, it is the view of our publication’s leadership that there are several legitimate grounds for the kind of suit that the plaintiffs’ attorneys have brought in CLASS ACTION Case No. 23-cv-6715 v Datacomp-Equity LifeStyle Properties-Hometown America-Lakeshore Communities-Sun Communities-RHP Properties-YES! Communities-Inspire Communities-Kingsley Mgt-Cal-Am Properties. That article on the case includes the case pleadings which were provided to MHProNews/MHLivingNews by an authorized agent of the attorneys for the plaintiffs in that legal action which brings among other possible risks and remedies, triple damages, attorneys fees, and possible injunctive relief, among other possible outcomes.
The thoughtful, valued, and cogent analysis by a manufactured home community professional who knows the players involved provided above will be referred to in follow-up reporting and analysis.
MHProNews was assured in writing that we would be given certain case related insights by the attorneys for the plaintiffs. Among the inquiries from MHProNews are related to ‘Frank and Dave,’ mentioned by the professional’s remarks above. While there may be a wrinkle, stay tuned for more on the follow up topics from attorneys from the law firms of DiCello Levitt LLP and Myron M. Cherry & Associates LLC as well as from defense attorneys.
Speaking of defense. What is all but assured, based on their track record, is that Equity LifeStyle Properties (ELS), who now own Datacomp (and MHVillage, MHInsider), will bring the best counsel they think their money can buy them.
Given others named as co-defendants in Case No. 23-cv-6715, it is likely that they will find appropriate ways to provide the most robust defense that they can.
The MHVille linked professional who submitted the remarks mentioned a potential “Rule 11” response by the defendants. Here is what the American Bar Association (ABA) said on 4.30.2020 about the use of Rule 11. What follows is provided under fair use guidelines for media.
Rule 11 Sanctions Are Not Fit for Every Occasion
There’s a time and a place for everything.
By Michael Stefanilo Jr.
The rules of civil procedure afford litigators numerous weapons to employ when confronted with diverse difficulties during the litigation process, including issues related to the conduct of opposing counsel. Yet, the threat of Rule 11 sanctions is often both overstated and misapplied by attorneys, particularly when cited in the context of discovery disputes. Critically, counsel should make certain to proceed with caution when actually filing a motion for sanctions under Rule 11, and be sure to adhere to all of the formalities of the rule’s proscriptive text. A proper submission to the court requires familiarity with both the substantive and procedural limitations and prerequisites of Rule 11(c)(2), and should be invoked sparingly. …”
The Mintz legal site says the following in an article entitled: Rule 11—Use It Wisely by attorneys Brad M. Scheller, Robert C. Sweeney.
Last week we discussed how useful Rule 11 can be used to recoup reasonable expenses drawn from frivolous litigation in the context of a recent decision in Imprenta Services, Inc. et al. v. Karll et al., 20-cv-6177 (C.D. CA. Jul. 5, 2022) from Judge Wu of the Central District of California. But the power of Rule 11 – as with any weapon – must be employed diligently and with good judgment, as recently reiterated by Judge Calabrese of the Northern District of Ohio. …
Stopping just short of issuing sanctions on Watson, Judge Calabrese explained, “[a]lthough counsel’s efforts did not locate the relevant authority, and might even have been negligent, the Court is not prepared to say that even negligent diligence meets a standard of objective unreasonableness.” Dkt. 33, 14. The court, however, issued a stern reminder that “[t]hreatening sanctions casually or as a matter of course has no place among officers of the court—again, except in the most egregious cases and, then, only as a last resort” and that “[t]he type of conduct on display here threatens the civility and professionalism on which the Rules and the Court rely to resolve disputes.” Id., 13.
Judge Calabrese’s dicta reminds us that, while Rule 11 may be a useful tool against frivolous allegations, its use must be calculated, reasonable and supported by the record.”
So, the point is that while ELS and their co-defendants may invoke Rule 11 and are likely to make an effort to get the case ‘tossed’ by the court, as with so much in the law, there are legal counters and options on both sides.
Per Top Class Actions, the following.
Manufactured home class action lawsuit overview:
- Who: Carla Hajek and Gregory Hammerlund filed a class action lawsuit against a group of manufactured home community owners and Datacomp, a provider of manufactured and mobile home data.
- Why: Hajek and Hammerlund claim the manufactured home community owners conspired with a mobile home data valuator, Datacomp, to fix, maintain and/or stabilize lot rental prices for their residences.
- Where: The class action lawsuit was filed in Illinois federal court.
The plaintiffs are represented by Adam J. Levitt, Brian M. Hogan, John E. Tangren, Gregory S. Asciolla, Karin E. Garvey and Jonathan S. Crevier of DiCello Levitt LLP; Reena Gambhir, Scott Martin and Megan E. Jones of Hausfeld LLP; and Myron M. Cherry, Jacie Zolna and Benjamin Swetland of Myron M. Cherry & Associates LLC.
Community owners coordinate to reduce, eliminate competition, class action says
Hajek and Hammerlund claim the manufactured home community owners coordinate with each other “to increase manufactured home lot rents systematically and unlawfully by purchasing and using market reports published by Defendant Datacomp.”
That takeaway by Top Class Action – “Community owners coordinate to reduce, eliminate competition, class action says” – is one of several concerns raised by MHLivingNews/MHProNews in recent years. Will more such suits follow? While the future is unknown, what occurred with high profile MHI member Cavco Industries in their now concluded (for now?) woes with Securities and Exchanges (SEC) may lead someone to believe that yes, other suits are more likely to follow.
A group of manufactured home community owners conspired alongside a mobile home data valuator to fix, raise, maintain and/or stabilize lot rental prices for the residences, a new class action lawsuit alleges.
Plaintiffs Carla Hajek and Gregory Hammerlund claim residents of manufactured homes are “being overcharged for what used to be affordable housing,” thanks to the companies alleged conspiracy.
Now that the plaintiffs have launched their case, they had better be in it for the long haul if they serious hope to win against the array of ‘deep pockets’ available to the manufactured home community operations involved.
To learn more about recent, active, past, and possible legal actions in MHVille, or as a refresher in the light of the remarks and insights herein, see the linked reports. Each of those that follow offer cross-linked options for still more still insights and information. ##
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By L.A. “Tony” Kovach – for MHProNews.com.
Tony earned a journalism scholarship and earned numerous awards in history and in manufactured housing.
For example, he earned the prestigious Lottinville Award in history from the University of Oklahoma, where he studied history and business management. He’s a managing member and co-founder of LifeStyle Factory Homes, LLC, the parent company to MHProNews, and MHLivingNews.com.
This article reflects the LLC’s and/or the writer’s position and may or may not reflect the views of sponsors or supporters.
Connect on LinkedIn: http://www.linkedin.com/in/latonykovach
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