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Ryan v. Maryann Morse Healthcare Corp.

Superior Court of Massachusetts, Middlesex

January 9, 2018

James M. RYAN, Executor of the Estate of Julia W. Ryan, Individually and on Behalf of Others Similarly Situated
MARYANN MORSE HEALTHCARE CORP. dba Heritage at Framingham


          Christopher K. Barry-Smith, Justice of the Superior Court

         In this nominal class action, the plaintiff, James Ryan, executor of the Estate of Julia Ryan ("Ryan"), alleges that the defendant assisted living facility, Maryann Morse Healthcare Corp., d/b/a Heritage at Framingham ("Heritage") violated G.L.c. 186, § 15B, the Security Deposit Statute, and chapter 93A by charging Plaintiff a "community fee" of $2, 800, together with first and last month’s rent ($4, 000 each) at the outset of Julia Ryan’s residency at Heritage. Heritage acknowledges the "community fee" was not treated as a security deposit under the Security Deposit Statute.[1] Ryan alleges the community fee is an impermissible fee in violation of the Security Deposit Statute, which also constitutes unfair business conduct in violation of chapter 93A pursuant to 940 C.M.R. § 3.17(4)(a). Before the court is Heritage’s motion to dismiss under Rule 12(b)(6).

         Heritage contends that because it is an Assisted Living Residence ("ALR") and subject to a statutory and regulatory scheme that governs A.L.R.s, the Security Deposit Statute does not apply and Ryan’s claims fail as a matter of law. In response, Ryan contends that the Security Deposit Statute is a generally applicable law and that the latter-enacted statute governing A.L.R.s, chapter 19D, not only did not exempt A.L.R.s from the Security Deposit Statute (though it exempted A.L.R.s from certain other statutes), it required A.L.R.s to conform to "all applicable federal and state laws and regulations," including the Security Deposit Statute. Heritage’s motion turns on whether the Legislature intended the Security Deposit Statute to apply to A.L.R.s which are subject to chapter 19D.

         I. Standard

         To survive a motion to dismiss under Rule 12(b)(6), a complaint must allege facts that, if true, would "plausibly suggest[ ] ... an entitlement to relief." Lopez v. Commonwealth, 463 Mass. 696, 701 (2012), quoting Iannocchino v. Ford Motor Co., 451 Mass. 623, 636 (2008) and Bell v. Twombly, 550 U.S. 544, 557 (2007). To decide the motion, the court must presume that the factual allegations in the complaint and any reasonably inferences that may be drawn in plaintiff’s favor from the facts alleged are true. See Golchin v. Liberty Mut. Ins. Co., 460 Mass. 222, 223 (2011). The court, however, also must "look beyond the conclusory allegations in the complaint and focus on whether the factual allegations plausibly suggest an entitlement to relief." Maling v. Finnegan, Henderson, Farabow, Garett & Dunner, LLP, 473 Mass. 336, 339 (2015), quoting Curtis v. Herb Chambers I-95, Inc., 458 Mass. 674, 676 (2011).

         II. Facts

         The facts essential to the motion to dismiss are drawn from the complaint and are of limited scope. The court has also drawn additional limited facts from Heritage’s moving papers. Specifically, Heritage attached a copy of Heritage’s certification as an Assisted Living Residence, issued by the Executive Office of Elder Affairs ("EOEA"). The EOEA on its website publishes a list of certified A.L.R.s, which includes Heritage. There is no dispute that Heritage holds an A.L.R. certification and the court takes judicial notice of EOEA’s certification issued to Heritage. See Schaer v. Brandeis Univ., 432 Mass, 474, 477 (2000) (evaluation of Rule 12(b)(6) motion may consider "matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint"); Jarosz v. Palmer, 49 Mass.App.Ct. 834, 836 (2000) (court may consider "facts of which judicial notice may be taken"). The court also considers, though to a limited degree, the Consumer Guide to A.L.R.s, published by the EOEA and a matter of public record. See id. And, because Ryan acknowledges that his mother signed a contract with Heritage at the outset of her residency, and both parties have referred to that contract in their papers, this decision also refers to the Residency Agreement between the parties. See Maram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43, 45 & n.4 (2004) (Rule 12(b)(6) motion considers facts alleged in complaint and "uncontested documents of record").

         The following facts are relevant to Heritage’s motion to dismiss.

         Heritage holds a license as an A.L.R. from EOEA. Ryan’s mother and Heritage executed a contract, captioned "Residency Agreement," by which Ryan’s mother became a resident at Heritage, in Framingham, Massachusetts. In connection with that contract, at the inception of her residency Heritage charged Ryan first and last month’s rent, at $4, 000 each, as well as a "community fee" of $2, 800. The Residency Agreement states that the community fee "is intended to cover upfront staff administrative costs, the Resident’s initial service coordination plan and move-in assistance, and establish a replacement reserve for building improvements." Residency Agreement, IV.A, at p.7. The community fee was not first or last month’s rent, was not for installing a lock and key, and Heritage did not treat the community fee as a "security deposit" under the Security Deposit Statute. Heritage, without limitation, did not place the community fee in a separate interest-bearing account and did not provide Ryan’s mother a receipt and notice of rights.

         In his complaint, Ryan seeks to hold Heritage liable for failing to comply with the Security Deposit Statute, and for unfair or deceptive acts or practices in violation of G.L.c. 93A, § 2 due to the alleged violations of the Security Deposit Statute.

         III. Analysis

         Heritage’s motion to dismiss requires the interpretation and harmonization of two statutes: i) G.L.c. 186, § 15B (the "Security Deposit Statute"), originally enacted in 1969 and updated several times since then, which governs several aspects of the landlord-tenant relationship and contains restrictions on the amounts of money a landlord may collect at the outset of a tenancy and how that money must be treated; and i) G.L.c. 19D, §§ 1-18 ("Chapter 19D"), enacted in 1995, which governs "Assisted Living Residences." Heritage contends that Chapter 19D expressly or impliedly exempts A.L.R.s from the Security Deposit Statute; Ryan disagrees. Both parties argue that principles of statutory construction, discussed further below, support their position. The court analyzes both statutes, the parties’ arguments, and how to harmonize the statutes.

         A. The Statutes at Issue

         1. The Security Deposit Statute

         The Security Deposit Statute governs several aspects of the landlord-tenant relationship in Massachusetts, including the amounts that a landlord may charge at the outset of a tenancy, and how those funds must be treated by the landlord. G.L.c. 186, § 15B. By enacting a statute that restricted the freedom of contract between landlord and tenant, the legislature manifested concern for the welfare of residential tenants who are generally in inferior bargaining positions and find unhelpful the traditional avenues of redress-for instance, the legal expense of chasing a security deposit might exceed the amount of the deposit. Mellor v. Berman, 390 Mass. 275, 282 (1983), citing Goes v. Feldman, 8 Mass.App.Ct. 84, 91 (1979). Section 15B(1)(b) strictly limits the amount that a landlord may demand of a tenant at the outset of a tenancy to: first month’s rent, one additional month’s rent, the cost to buy and install a key and lock, and "a security deposit equal to the first month’s rent provided that the security deposit is deposited [as required by the statute] and the tenant is given the statement of condition [as required by the statute]." G.L.c. 186, § 15B(1)(b). Section 15B(3) then requires that the security deposit be held in a separate interest-bearing account, and that the landlord furnish to the tenant a receipt disclosing its banking location, among other requirements. And Section 15B(2) requires, among other things, that a tenant receive "a separate written statement of the present condition of the premises to be leased or rented." Id., § 15B(2)(c). Other provisions of Section 15B limit the ability of the landlord to enter the premises before the end of the lease (§ 15B(1)); require recordkeeping with respect to damage to the premises and application of security deposits to repair damage (§ 15B(2)(d) & (4)); and provide the remedy of treble damages and attorneys fees when a landlord fails to properly deposit or return security deposits (§ 15B(7)).

         The provisions of Section 15B apply to "lessors" and "tenants" and residential "lease" arrangements. See G.L.c. 186, § 15B. Chapter 186, in which Section 15B appears, governs many aspects of the landlord-tenant relationship, from lease termination and eviction (§§ 11-13) to provision of utilities (§ 14) to security deposits (§ 15B). See, e.g., G.L.c. 186. Courts apply Section 15B broadly to a variety of landlord-tenant relationships. See, e.g., Hermida v. Archstone,826 F.Supp.2d 380, 384 (D.Mass. 2011) (Section 15B is unambiguous and applied strictly). Courts also have forbade landlords from avoiding the Security Deposit Statute by inventing new fees or giving new labels to monies that are required as a condition of tenancy. See Hermida, 826 F.Supp.2d at 384 (D.Mass. 2011) (amenity fees, for use of pool, gym and ...

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