COURT OF CHANCERY OF THE STATE OF DELAWARE
JOHN W. NOBLE 417 SOUTH STATE STREET VICE CHANCELLOR DOVER, DELAWARE 19901 TELEPHONE: (302) 739-4397 FACSIMILE: (302) 739-6179
December 31, 2014
John W. Paradee, Esquire Joseph C. Handlon, Esquire Prickett, Jones & Elliott, P.A. Scott W. Perkins, Esquire 11 North State Street Department of Justice Dover, DE 19901 820 North French Street Wilmington, DE 19801
Re: Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN Date Submitted: July 22, 2014
Dear Counsel:
Plaintiffs, landlords and tenants of manufactured home communities
throughout Delaware, filed this action seeking declaratory relief, injunctive relief,
and disgorgement of monthly assessments collected under the Manufactured Home
Owners and Community Owners Act1 by Defendants from February 1, 2006,
1 25 Del. C. ch. 70, subch. I. Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 2
through April 8, 2014.2 The parties have stipulated that there is no dispute of
material fact and have filed cross-motions for summary judgment. For the reasons
that follow, Plaintiffs’ motion for summary judgment is generally denied, except to
the extent that the Court concludes that certain assessments were collected
unlawfully and leaves open the possibility of recovery.
I. BACKGROUND
Defendant the Delaware Manufactured Home Relocation Authority (the
“Authority” or “DMHRA”) has collected a monthly assessment of $3 per rented
manufactured home lot in Delaware pursuant to a resolution adopted by its board
(the “Board”) on February 19, 2004.3 The assessments have been deposited in the
Delaware Manufactured Home Relocation Trust Fund (the “Trust Fund”), an
account maintained by Defendant the Division of Revenue of the Delaware
Department of Finance (the “Division of Revenue,” and collectively with
2 Verified Class Action Compl. (“Compl.” or the “Complaint”) ¶¶ A-F. Plaintiffs appear to have narrowed their request after a legislative amendment of April 8, 2014, discussed infra. 3 Stipulation of Facts (“Stip.”) ¶¶ 1, 8 (Dec. 31, 2013). Collection began as of April 1, 2004. Landlords and tenants have split the $3 assessment equally. Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 3
DMHRA, the “Defendants”).4 Plaintiffs are landlords and tenants who have paid
the monthly assessments.5
The General Assembly established DMHRA in 2003 “to provide financial
assistance to tenants and landlords in manufactured home communities who may
be required to relocate, abandon, or remove manufactured homes under a variety of
circumstances.”6 This financial assistance comes from the assessments Defendants
collect and hold in the Trust Fund. The parties do not dispute that, at least before
February 1, 2006, 25 Del. C. § 7012(f)(1) gave DMHRA the power to collect and
change the amount of the monthly assessments:
The board of directors of the Authority shall set a $3.00 monthly assessment for deposit in the Trust Fund for each rented lot in a manufactured home community. The board may adjust, eliminate or reinstate the assessment, and shall notify landlords and tenants of each adjustment, elimination or reinstatement [pursuant to board
4 Stip. ¶ 1. For convenience, the Court focuses its discussion on collection by DMHRA, although it acknowledges Plaintiffs’ argument that the Division of Revenue is involved by holding these monies. 5 See Stip. ¶¶ 2-5. This action seeks relief for a class consisting of landlords and tenants, but the Court does not address class certification issues here. 6 Stip. ¶ 1. Plaintiffs contend that it is difficult for landlords and tenants to obtain these benefits. See Pls.’ Answering Br. in Resp. to Defs.’ Mot. for Summ. J. (“Pls.’ Answering Br.”) 2 & n.2. Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 4
regulations]. If the board does not adopt an adjusted assessment on or before January 31, 2006, the board shall eliminate the fee in its entirety.7
The Board established the $3 assessment at a meeting on February 19,
2004.8 At all times relevant to the litigation, the nine-member Board9 needed a
75% majority of votes to “‘adjust, eliminate, or reinstate the Trust Fund
assessment.’”10 The implementing legislation provided that the Authority and the
Board may “[s]ue or be sued,”11 but also granted them immunity from a “civil
cause of action of any nature . . . for any act or omission in the performance of
powers and duties under this subchapter unless the act or omission complained of
was done in bad faith or with gross or wanton negligence.”12
7 Stip. ¶ 10 (quoting 25 Del. C. § 7012(f)(1) as it existed before an April 2014 amendment). The language in brackets is missing from the Stipulation of Facts but appears in Defendants’ briefs and the current Delaware Code. 8 Public notice was given for this meeting. See Stipulated Rs. Exs. (“Stip. R.”) Ex. A, at DMHRA-1. 9 Stip. ¶ 9. 10 Stip. ¶ 11 (quoting 25 Del. C. § 7011(c)(3)). An October 11, 2011, amendment of the statute reduced the number of board members from nine to five and required a three of five majority to take these actions. Stip. ¶ 11 & n.2. 11 25 Del. C. § 7011(d)(1). 12 25 Del. C. § 7011(b)(3). Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 5
DMHRA has consistently collected the $3 assessment. It has also made
various expenditures, including relocation benefits and administrative costs.13 As
of January 31, 2006, the Trust Fund reported a balance of $843,057.17.14 At
1:19 p.m. on the same day, DMHRA’s administrative assistant, Leslie Bird, sent an
email to the members of the Board asking each to “‘respond as a vote wether [sic]
you approve the reinstatement of the fee.’”15 By 2:33 p.m., five members of the
Board had voted by email to approve.16 The last of the nine approvals came in at
5:15 p.m.17 The parties agree that all nine members of the Board voted in favor of
reinstating the fee on January 31, 2006.18 They also agree that, with respect to the
January 31 vote, there was no public notice of a meeting, no public meeting, no
record in the form of minutes, and no subsequent notice of the contested Board
13 See, e.g., Pls.’ Opening Br. in Supp. of Pls.’ Mot. for Summ. J. (“Pls.’ Opening Br.”) Ex. A, at 4. 14 Stip. R. Ex. K, at DMHRA-511. 15 Stip. ¶ 12 (quoting Bird’s email). The email is attached at Exhibit D to the Stipulation of Facts. 16 Stip. ¶ 15. 17 Stip. ¶ 19. 18 Stip. ¶ 24 & n.3. Plaintiffs attempt to challenge the evidence of this vote, Pls.’ Answering Br. 11, but the Court will abide by the stipulation. Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 6
actions to any landlords or tenants.19 The extent of deliberation involved in the
Board’s vote is unclear. Meeting minutes show that the Board had hired an
actuarial consultant in the months before the vote.20 Yet while the Board’s Actuary
Committee had “no report” at the January 11, 2006, meeting,21 the Board
considered holding “an informal meeting to discuss increasing the collected fee to
19 Stip. ¶¶ 20-23. 20 See Stip. R. Ex. J, at DMHRA-13-14 (noting suggested changes in a contract with TowersPerrin and concern that “maximum payout amounts could change over time because fewer relocations means a higher cap rate”); DMHRA-25 (“[Actuary] Committee Chairman Bill Reed reported that he has spoken with a professor at the University of Delaware regarding the actuarial analysis. Mr. Reed wants to meet with the other members of the committee . . . before presenting a report to the Authority.”); DMHRA-26 (indicating distribution of a Trust Fund account summary, review of a financial report, and review of benefit requests); DMHRA- 40-41 (recording a vote for an actuarial consultant); DMHRA-44 (indicating approval of a letter agreement to hire the actuarial consultant); DMHRA-51-52 (reflecting concerns with the actuarial consultant’s report and contact with a second professional for an independent report); DMHRA-55 (noting a request for feedback on the actuarial consultant’s revised report and that “payment should be withheld until such a time the Board feels the [actuarial consultant’s] work has been satisfactorily completed”); DMHRA-58 (“[The actuarial consultant] was present to answer questions regarding his report.”). 21 Id. at DMHRA-60 (“There was no report of the Actuary Committee.”). Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 7
$5 or $6 over time” at its meeting held shortly after the email vote.22 The Board
officially mustered the requisite votes to recommend increasing the assessment to
$4 at a June 2008 meeting,23 but neither the General Assembly nor the Board has
actually changed the assessment from the original $3 amount.24
The Trust Fund had a balance of $6,093,948.57 and had paid out
$572,714.59 in relocation benefits and $940,615.98 in administration and overhead
costs as of October 2013.25 Financial summaries indicate that no relocation
benefits have been paid since 2009,26 but the Trust Fund provides insurance value
and has been authorized to cover some arbitration fees since June 2013.27 In July
2013, the General Assembly voted to (1) raise the cap on the Trust Fund from $10
22 The directors planned to hold the informal meeting in late March, after which they hoped to finalize a recommendation by May 31 and subsequently schedule a public hearing “with proper notice.” Id. at DMHRA-62. 23 Id. at DMHRA-156-57 (June 10, 2008 minutes). 24 See, e.g., Pls.’ Opening Br. 7; Defs.’ Answering Br. in Opp’n to Pls.’ Mot. for Summ. J. (“Defs.’ Answering Br.”) 12. 25 Pls.’ Opening Br. Ex. A, at 1. 26 See Stip. R. Ex. K, at DMHRA-1216, 1502, 1773; Pls.’ Opening Br. Ex. A, at 1. 27 The provision about arbitration payments can be found at 25 Del. C. § 7043(c) and is currently in effect. See Supplemental Transmittal Aff. of Scott W. Perkins (“Supplemental Perkins Aff.”) Ex. E, at 5-6 (discussing arbitration invoices). Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 8
million to $15 million and (2) extend the Trust Fund’s term from July 1, 2014, to
July 1, 2019.28 Pursuant to an April 8, 2014, amendment, 25 Del. C. § 7012(f)(1)’s
final sentence (regarding elimination of the fee absent an adjusted assessment) was
removed.29 The synopsis of the amending bill states that the General Assembly
removed the sentence because “[t]he Authority having complied with the
requirement, the sentence is no longer relevant.”30
Plaintiffs filed this action on May 6, 2013. There is no evidence that
Plaintiffs complained about the assessments before then.31 To promote efficient
resolution, the parties agreed “to bifurcate the substantive merits of the claims
stated by the Plaintiffs’ Complaint . . . from the issues of class certification . . . and
what remedies are available to the class,” if applicable.32 The parties have
28 Transmittal Aff. of Scott W. Perkins (“Perkins Aff.”) Ex. D (showing amendments to 25 Del. C. § 7012, approved July 31, 2013). 29 Supplemental Perkins Aff. Ex. F (showing the amendment and approval date). Plaintiffs do not ask for the assessments collected after this date, presumably because the legislation authorized collection of those assessments. 30 Id. Ex. G (synopsis of House Bill 233). The synopsis presumably refers to the Board’s voting effort of January 31, 2006. 31 Stip. ¶ 25. 32 Stipulation and Order ¶ 1 (Nov. 13, 2013). Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 9
submitted a stipulated record and cross-motions for summary judgment on the
merits of the claims. In addition, Plaintiffs have filed a motion in limine to exclude
certain evidence on the grounds of relevance, confusion, and undue prejudice.33
II. CONTENTIONS
Plaintiffs contend that Defendants’ continued collection of the monthly
assessments from February 1, 2006, to April 8, 2014, fell beyond their statutory
mandate and that the money should be returned.34 They argue that the Board acted
unlawfully, not only by maintaining the dollar amount of the assessment without
meaningful analysis, but also by disregarding the Freedom of Information Act
(“FOIA”) requirements for public bodies and the requirement for notice of fee-
related actions in 25 Del. C. § 7012(f)(1). They read the implementing legislation
to mean that DMHRA would lose the power to collect any assessments in the
33 Specifically, Plaintiffs object to “correspondence from Glasgow Court Enterprises . . . relating to a potential, not actual, change-in-use” of a portion of its manufactured housing community, invoking Delaware Uniform Rules of Evidence, Rules 401, 402, and 403. Pls.’ Mot. in Limine ¶¶ 1-3. 34 Pls.’ Answering Br. 23-24. Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 10
future35 unless the Board changed the monthly assessment to an amount other than
$3 before February 1, 2006.36 They ask for strict construction of DMHRA’s
statutory authority and claim that theirs is the clear and unambiguous
interpretation, giving effect to all parts of the statute and its mandatory language.
They further allege unjust enrichment and seek a constructive trust for the disputed
amounts collected.37
Defendants, on the other hand, argue that the Board complied with 25 Del.
C. § 7012(f)(1) on January 31, 2006, because the Board made a reasoned decision
to maintain the level of the assessment under the then-present circumstances.38
They explain that their interpretation of the requirement to adopt an adjusted
assessment (and the consequences of failing to do so) is correct by invoking the
plain language of the statute, legislative intent, a holistic reading, and subsequent
35 Id. at 17-20. 36 Pls.’ Opening Br. 13. 37 Id. at 16. The Court will not decide the issue of remedies at this time. 38 Defs.’ Answering Br. 17-18. Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 11
legislative acts.39 They also argue that Plaintiffs’ real complaint lies in the acts (or
lack thereof) taken on or around January 31, 2006.40 As such, immunity, the three-
year statute of limitations prescribed by 10 Del C. § 8106(a), the six-month statute
of limitations for FOIA violations set by 29 Del. C. § 10005(a), and laches bar
Plaintiffs’ claims.41
In response to Defendants’ affirmative defenses of immunity and statutes of
limitations,42 Plaintiffs attempt to frame the dispute as one about continuing,
unlawful collections.43 Plaintiffs assert that immunity does not prevent recovery
39 Defs.’ Opening Br. in Supp. of Their Mot. for Summ. J. (“Defs.’ Opening Br.”) 18-22. 40 Defs.’ Reply Br. in Further Supp. of Their Mot. for Summ. J. (“Defs.’ Reply Br.”) 21 n.8 (“To the extent a harm occurred, it happened within a reasonable time after January 31, 2006, when the Authority allegedly failed to eliminate the assessment.”). 41 While their arguments focus on DMHRA, Defendants note that the Division of Revenue should not be liable, either, as it only holds the deposited funds. Defs.’ Opening Br. 12 n.4. 42 Defendants observe that Plaintiffs do not address the laches defense. Defs.’ Reply Br. 17. Perhaps the laches arguments fall within the realm of Plaintiffs’ contentions of running accounts and continuing collection, but the Court does not reach this issue. See infra note 82. 43 See, e.g., Pls.’ Answering Br. 23-24 (“The ‘act or omission’ for which the Plaintiffs seek relief here is not whatever action the Authority’s Board may have Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 12
because they are only asking for disgorgement rather than seeking to hold
DMHRA and its Board liable for damages, Defendants were not acting within their
authority granted by the statute, and the Board acted with bad faith or gross or
wanton negligence.44 Plaintiffs further explain that their seven-year delay is not a
bar because the violation is continued unlawful collection,45 they more recently
became aware of the injustices in collection and use of the assessments,46 they
cannot be penalized for the Board’s concealment of its wrongdoing, 47 and a mutual
running account is not subject to the three-year statute of limitations.48 “At the
very worst,” Plaintiffs ask the Court to grant relief extending back to three years
before the date the Complaint was filed.49
taken or failed to take on January 31, 2006, but rather, the Defendants’ continuing collection of Trust Fund assessments after January 31, 2006.”). 44 Id. at 22-28. 45 See Pls.’ Reply Br. in Supp. of Their Mot. for Summ. J. (“Pls.’ Reply Br.”) 17. 46 Pls.’ Answering Br. 8. 47 Id. at 29-30. 48 See id. at 31 (invoking 10 Del. C. § 8108). 49 Id. at 32 n.60. Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 13
III. ANALYSIS
A. The Summary Judgment Standard
To succeed on a motion for summary judgment, the moving party bears the
burden of showing, through “the pleadings, depositions, answers to interrogatories
and admissions on file, together with the affidavits, if any, . . . that there is no
genuine issue as to any material fact and that [it] is entitled to a judgment as a
matter of law.”50 The Court views the evidence, presented in compliance with
Rule 56, in the light most favorable to the non-moving party.51 When the parties
agree to present cross-motions for summary judgment based on an absence of
dispute over any fact material to either motion,52 “the Court shall deem the motions
50 Ct. Ch. R. 56(c). 51 Graven v. Lucero, 2013 WL 6797566, at *2 (Del. Ch. Dec. 20, 2013). 52 While the parties disagree on various facts and inferences, both maintain that the matter can be resolved on summary judgment. See, e.g., Pls.’ Reply Br. 8 (“The Plaintiffs respectfully submit that . . . there is no genuine issue as to any material fact . . . .”); Defs.’ Reply Br. 9 (“Plaintiffs do not contend that there are any disputes of material fact that would preclude the Court from ruling on Defendants’ Motion for Summary Judgment.”). Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 14
to be the equivalent of a stipulation for decision on the merits based on the record
submitted with the motions.”53
B. Statutory Construction and the Nature of the Alleged Wrong
The threshold question for the Court is what 25 Del. C. § 7012(f)(1) required
of DMHRA and the Board. Plaintiffs assert that Defendants acted outside their
powers because they continued to collect assessments after the Board did not
adjust or eliminate the assessment (or provide relevant notice of any adjusted
assessment) as required under a plain-meaning interpretation of the statute and
supported by a debate in the House of Representatives.54 Defendants emphasize
legislative intent and reasonableness in support of their theory that the Board did
53 Ct. Ch. R. 56(h). 54 See Pls.’ Reply Br. Ex. A (excerpted transcript of the May 8, 2003, House Floor Debate). The debate suggests that the General Assembly intended a literal reading of the adjustment requirement: Representative Greg Lavelle: “So they could adjust it to $2.99, and it could live on?” Representative Donna Stone: “Yes.” Representative Greg Lavelle: “But if they leave it at $3.00 it goes away? You’re forcing them, essentially this is an important issue, which I don’t deny it is, you’re forcing them to adjust it.” Representative Donna Stone: “Yes.” Id. at 2. Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 15
adopt an adjusted assessment on January 31, 2006 (or at least could have lawfully
continued to collect future assessments). The Court’s job is to “determine and give
effect to legislative intent” when interpreting statutes.55 Under Delaware law, “[i]t
is well settled that statutory language is to be given its plain meaning and that
when a statute is clear and unambiguous there is no need for statutory
interpretation.”56 If there is ambiguity in the text itself, however, the Court
interprets the statute in a manner “that will promote its apparent purpose and
harmonize with other statutes.”57
Here, the Court’s statutory construction exercise begins and ends with a
plain-meaning analysis. The statute stated that “[i]f the board does not adopt an
adjusted assessment . . . , the board shall eliminate the fee.” The Court finds the
language clear for the purposes of this dispute.58 Defendants observe that “[h]ad
55 Eliason v. Englehart, 733 A.2d 944, 946 (Del. 1999). 56 See State v. Skinner, 632 A.2d 82, 85 (Del. 1993); see also 2A Norman Singer & Shambie Singer, Sutherland Statutory Construction § 45:2 (7th ed. 2014). 57 Eliason, 733 A.2d at 946. 58 Plaintiffs’ motion in limine directed at excluding evidence about a potential change in use of part of a manufactured home community, thus, is mooted to the extent that the Court interprets the statute by its plain meaning and does not reach Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 16
the General Assembly intended to divest the Authority of the power to take some
act, it knew how to do so in clear and unequivocal language.”59 The Court agrees.
The statute was not self-cancelling and did not strip the Board of continued power
to act. In fact, the Board had a duty to eliminate the fee (in other words, act) if it
did not adopt an adjusted assessment before or on January 31. Failure to do both
would constitute a breach of duty by the Board and result in unlawful action by
Defendants.60
The next question is whether the Board complied with its statutory mandate.
Plaintiffs argue that the Board failed to adopt an adjusted assessment because it did
not (1) change or minimally evaluate the assessment amount, (2) officially act
pursuant to FOIA, and (3) send notice of any adjusted assessment to affected
the issue of sufficiency of benefits. Correspondence from 2014 indicating that a specific entity intends to make changes triggering eligibility for benefits does not factor into the Court’s analysis of the Board’s statutory responsibilities or unjust enrichment. 59 Defs.’ Answering Br. 20. 60 This plain language construction is not inconsistent with the language in 25 Del. C. § 7001(a) that “[t]his subchapter must be liberally construed and applied to promote its underlying purposes and policies.” Furthermore, the Court does not look to recent legislative acts affecting the Trust Fund and the Board to construe the statute as it existed during the time of the contested actions. Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 17
parties. The Board could adopt an adjusted assessment by a 75% majority vote
according to 25 Del. C. § 7011(c)(3). Implicit in this provision is that directors
must consider their positions and come to an agreement representing the official
decision of the Board.61 Furthermore, DMHRA is a public body subject to FOIA.62
Thus, generally speaking, the Board needs to hold public meetings,63 for which
advance notice is given to the public64 and minutes are maintained.65
61 Cf. Liberis v Europa Cruises Corp., 1996 WL 73567, at *6 (Del. Ch. Feb. 8, 1996) (“[P]olling board members does not constitute a valid meeting or effective corporate action.”), supplemented, 1997 33177194 (Del. Ch. Aug. 20, 1997), aff’d, 702 A.2d 926 (Del. 1997) (TABLE); Cellular Info. Sys., Inc. v. Broz, 663 A.2d 1180, 1186 (Del. Ch. 1995) (“[I]t is an old rule that boards may act with legal effect only at duly convened meetings at which a quorum is present.” (citing Robert C. Clark, Corporate Law 110-12 (1986))), rev’d on other grounds, 673 A.2d 148 (Del. 1996). 62 See 25 Del. C. § 7011(b)(4) (“Meetings of the board of directors of the Authority are subject to the provisions of the Freedom of Information Act, Chapter 100 of Title 29.”). 63 See 29 Del. C. § 10004 (requiring that, excluding certain statutory exceptions, “every meeting of all public bodies . . . be open to the public”); see also 29 Del. C. § 10001 (“It is vital in a democratic society that public business be performed in an open and public manner so that our citizens shall have the opportunity to observe the performance of public officials and to monitor the decisions that are made by such officials . . . .”). 64 29 Del. C. § 10004(e). 65 29 Del. C. § 10004(f). Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 18
The parties do not dispute that FOIA applies to meetings of the Board and
that the Board did not hold a formal public meeting on January 31, 2006.
However, FOIA claims are barred by a six-month statute of limitations, and the
Court cannot void the Board’s actions on those grounds.66 Yet even independently
of FOIA, the Board did not meet the statutory mandate to adopt an adjusted
assessment. The Court does not decide whether the Board needed to gather
physically and vote,67 but it observes that there was no meaningful opportunity for
the members of the Board to exchange opinions on the specific topic of whether
each “approve[d] the reinstatement of the fee” prior to the individual votes.
Defendants offer no basis to conclude that the unanimous email vote met the
requirements for a meeting and board act other than the unavailing assertion that
“the Authority repeatedly and extensively considered the issue, in public, and with
66 See 29 Del. C. § 10005(a). 67 See 25 Del. C. § 7011(b)(4) (“All meetings must be conducted at a central location in the State, unless agreed to for a given meeting by at least 3 of the 5 board members.”). As of January 2006, the statute required agreement by 75% of the members. Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 19
the assistance of appropriate experts” before that day.68 Thus, the Board did not
effectively act to adopt an adjusted assessment on or before January 31, 2006.69
Whether the statutory language required the Board to change the assessment to an
amount other than $3 or merely to adopt an assessment appropriate to the
circumstances is inconsequential. Plaintiffs have shown that the Board did
neither.70
There is also no evidence that the Board officially acted to eliminate the $3
assessment on or around February 1, 2006.71 The General Assembly could have
drafted 25 Del. C. § 7012(f)(1) to say that the power to collect assessments would
automatically end absent an adjustment on or before January 31, but it did not.
Instead, the statute required the Board to eliminate the assessment. The underlying
wrong may have been the Board’s breach of duty by failing to eliminate the
68 Defs.’ Reply Br. 5. 69 Evidence of deliberation after January 31 is not helpful in assessing the Board’s actions through this date. 70 Accordingly, the Court need not reach the arguments about lack of subsequent notice. 71 It follows that there is no evidence that the Board officially reinstated an eliminated assessment. Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 20
assessment shortly after the statutory deadline, but each subsequent collection
without Board action to eliminate the fee separately violated 25 Del. C.
§ 7012(f)(1). Plaintiffs have thus shown that Defendants did not rightfully collect
the assessments between February 1, 2006, and April 8, 2014.
C. Affirmative Defenses
Because the Board did not perform the acts with which it was charged by
statute, the next question for the Court is whether any of Defendants’ affirmative
defenses bars Plaintiffs’ recovery. Defendants focus on the affirmative defenses of
immunity, statutes of limitations, and laches in their briefs.72
Defendants first contend that Plaintiffs cannot recover any damages because
this is a civil suit against DMHRA for acts within the scope of the Board’s duties,
and Defendants have the benefit of statutory immunity. While DMHRA and its
board may be sued under 25 Del. C. § 7011(d)(1), Subsection (b)(3) protects them
from civil liability and civil causes of action “of any nature . . . for any act or
72 Defendants raised additional affirmative defenses in their answer to the Complaint, but did not focus on these defenses in their briefing on the pending motion. Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 21
omission in the performance of powers and duties under this subchapter unless the
act or omission complained of was done in bad faith or with gross or wanton
negligence.”73 Bad faith, analogizing from the corporate law context, includes “not
only an intent to harm but also intentional dereliction of duty.”74 Gross negligence
requires “‘an extreme departure from the ordinary standard of care,’”75 and wanton
behavior requires “‘conscious indifference’ or [an] ‘I-don’t-care’ attitude.”76
Plaintiffs, in their answering brief, explain that immunity does not apply
because (1) this is an action seeking disgorgement of Plaintiffs’ money to Plaintiffs
rather than seeking to hold the Authority or the Board liable for damages,
(2) Defendants’ continued collection was not “in the performance of powers and
duties” under the statute, and (3) the Board at least knowingly violated its statutory
73 25 Del. C. § 7011(b)(3). Plaintiffs observe that 25 Del. C. § 7011(b)(3) does not give the Division of Revenue immunity, Pls.’ Answering Br. 22 n.39, but the Court will not require the Division of Revenue to disgorge monies that it finds no basis to require DMHRA to return. 74 Lyondell Chem. Co. v. Ryan, 970 A.2d 235, 240 (Del. 2009). 75 Browne v. Robb, 583 A.2d 949, 953 (Del. 1990) (quoting W. Prosser, Handbook of the Law of Torts 150 (2d ed. 1955)). 76 Foster v. Shropshire, 375 A.2d 458, 461 (Del. 1977) (citing McHugh v. Brown, 125 A.2d 583, 586 (Del. 1956)). Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 22
mandate by arranging a hasty email vote and withholding subsequent notice from
Plaintiffs.77 To begin, the statutory grant of immunity is worded broadly. The
Court, therefore, cannot meaningfully separate a suit seeking return of monies
collected by DMHRA and one seeking recovery against DMHRA for illegal
assessments, both of which would be paid from the Trust Fund pool.78 In other
words, this is at heart a civil cause of action against DMHRA to recover money.
77 See Pls.’ Answering Br. 22-28. Defendants emphasize that Plaintiffs failed to address the immunity arguments in an amended complaint, Defs.’ Opening Br. 13 n.5, or even their opening brief. Defs.’ Answering Br. 15 & n.5 (observing that “[t]he words ‘bad,’ ‘faith,’ ‘gross,’ ‘wanton’ or ‘negligence’ do not appear in Plaintiffs’ Opening Brief”). Plaintiffs’ responses might not have been prompt, but Defendants should have known that such answers were necessary, and the Court considered them at oral argument. 78 This is not a case of a plaintiff who seeks return of her own property from an account holding that property for her in trust. Cf. Taylor v. Westly, 402 F.3d 924, 932 (9th Cir. 2005) (“The State of California’s sovereign immunity applies to the state’s money. Money that the state holds in custody for the benefit of private individuals is not the state’s money, any more than towed cars are the state’s cars.”). While 25 Del. C. § 7012 collects money for the class and requires its return, the money is being held in state coffers primarily for public use. No individual is entitled to the precise amount that she contributed to the trust fund, and the likelihood of such matching is extremely low. See 25 Del. C. § 7012(e) (distributing the funds, “[i]f the Trust Fund ceases to exist,” to landlords and tenants who have rented or occupied qualifying lots “for at least the 12 months immediately prior to the time of the dissolution”). Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 23
Secondly, as discussed above, the Board violated its duties through an (ongoing)
failure to eliminate the assessment—an omission in the performance of its statutory
duties. Because the assessments were not self-eliminating, Defendants were
technically acting within their powers under the law by continuing to collect them.
Plaintiffs lastly contend that Defendants’ conduct demonstrated bad faith or
gross or wanton negligence. Generally speaking, the record shows that the
members of the Board, serving without pay79 and holding regular meetings before
January 31, 2006,80 attempted to comply (and appear to have believed that they had
complied) with their duties by responding promptly to Leslie Bird’s
correspondence.81 They were mistaken, but the record does not contain evidence
of their improper motives or extreme lack of care in so believing—at least until
Plaintiffs filed the Complaint. Once the Complaint focused Defendants’ attention
on deficiencies in the Board’s conduct, the alleged shortcomings might have been
79 25 Del. C. § 7011(b)(2). 80 See, e.g., Stip. R. Ex. J, at DMHRA-51, 55, 58, 60. 81 This does not appear to be the first time email votes occurred. See id. at DMHRA 46-48. Additionally, the Court does not find that the Board knowingly or intentionally concealed information and records related to the January 31, 2006 vote. Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 24
so clear that continuing to collect the assessment in normal course qualified as
conscious indifference. In fact, because immunity generally applies to bar
recovery of damages from Defendants, Plaintiffs’ primary recourse was to file suit
to compel the Board to eliminate the assessment. However, the parties did not
anticipate that the case would evolve in this manner and did not address this line of
reasoning in their briefs. The Court did not raise the potential difference between
the pre- and post-filing periods during oral argument, either. The parties should
address the issue to make briefing complete, and the Court declines to resolve the
immunity defense without providing the parties fair opportunity to present their
arguments.82
82 Because immunity is potentially dispositive, the Court does not analyze the remaining affirmative defenses of laches and the three-year statute of limitations (including arguments related to a February 19, 2014, mandatory injunction order, Del. Manufactured Home Relocation Auth. v. N. Chesapeake Mgmt., LLC, C.A. No. 8449 (Del. Ch. Feb. 19, 2014) (ORDER)) at this point. Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 25
D. Unjust Enrichment
Plaintiffs assert that DMHRA has been unjustly enriched by collecting
assessments unlawfully and using them to fund administrative expenses.
Defendants argue that Plaintiffs have not established the elements for an unjust
enrichment claim, for one because the assessments are held in trust for Plaintiffs’
benefit.83 To establish a claim for unjust enrichment, one must show “(1) an
enrichment, (2) an impoverishment, (3) a relation between the enrichment and
impoverishment, (4) the absence of justification, and (5) the absence of a remedy
provided by law.”84 With respect to the first prong, Plaintiffs allege that the
Authority has been enriched by collecting more than it can legitimately (and
actually does) spend to benefit landlords and tenants.85 However, even if the
Authority’s financial reports paint a somewhat bleak picture, the General
Assembly created the Trust Fund to assist landlords and tenants; the money in the
83 See, e.g., Defs.’ Answering Br. 27. Plaintiffs do not explain how they meet each element until their Reply Brief. Compare Pls.’ Reply Br. 19-22, with Pls.’ Opening Br. 15-16, and Pls.’ Answering Br. 23 n.40, 31 n.59. The Court includes this analysis for thoroughness. 84 Nemec v. Shrader, 991 A.2d 1120, 1130 (Del. 2010). 85 Pls.’ Reply Br. 20-21. Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority C.A. No. 8528-VCN December 31, 2014 Page 26
Trust Fund ultimately will be returned to landlords and tenants as classes (or
support the seemingly inevitable cost of administration);86 and Plaintiffs have not
shown evidence of abusive spending. Thus, Defendants have not been unjustly
enriched.
IV. CONCLUSION
For the reasons stated above, Defendants’ motion for summary judgment is
granted except for the possibility that Plaintiffs are entitled to some measure of
recovery for the assessments collected between the date they filed the
Complaint and April 8, 2014. Plaintiffs’ motion for summary judgment is granted
as to the failure of the Board “to adopt an adjusted assessment on or before
January 31, 2006,” or eliminate the fee, but it is otherwise denied.
IT IS SO ORDERED. Very truly yours,
/s/ John W. Noble JWN/cap cc: Register in Chancery-K
86 25 Del. C. § 7012(e).