Sonder USA v. 635 N. Scott Street

CourtCourt of Appeals for the Fifth Circuit
DecidedOctober 4, 2023
Docket22-30360
StatusUnpublished

This text of Sonder USA v. 635 N. Scott Street (Sonder USA v. 635 N. Scott Street) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sonder USA v. 635 N. Scott Street, (5th Cir. 2023).

Opinion

Case: 22-30360 Document: 00516919828 Page: 1 Date Filed: 10/04/2023

United States Court of Appeals for the Fifth Circuit United States Court of Appeals Fifth Circuit

____________ FILED October 4, 2023 No. 22-30360 Lyle W. Cayce ____________ Clerk

Sonder USA, Incorporated,

Plaintiff—Appellee,

versus

635 N. Scott Street, L.L.C.,

Defendant—Appellant. ______________________________

Appeal from the United States District Court for the Eastern District of Louisiana USDC No. 2:18-CV-13891 ______________________________

Before Clement, Haynes, and Oldham, Circuit Judges. Edith Brown Clement, Circuit Judge: * This is an appeal concerning a jury verdict rendered against Defendant-Appellant 635 N. Scott Street, L.L.C. (“635”). 635 makes two core arguments on appeal: (A) the district court erred in denying 635’s motion for judgment as a matter of law; and (B) the district court erred in denying 635’s motion for a new trial. For the reasons explained below, we reject these arguments and AFFIRM.

_____________________ * This opinion is not designated for publication. See 5th Cir. R. 47.5. Case: 22-30360 Document: 00516919828 Page: 2 Date Filed: 10/04/2023

No. 22-30360

I. A. Sonder USA Incorporated (“Sonder”) is a hospitality company that operates residential-style hotels. To that end, in 2017, Sonder entered into lease agreements with 635 N. Scott Street, L.L.C. in New Orleans, Louisiana, with the intent to lease the apartment complex and operate it as a residential hotel. Each of Sonder’s lease agreements with 635 requires 635 to “promptly provide” repair and maintenance to keep the apartments in “good working order, suitable for residential use.” Prior to taking possession, Sonder conducted its own inspections of the apartments, including the filters on the air-conditioning units. Sonder located visible mold in at least one unit, which Sonder ostensibly remediated prior to taking possession of the apartment. Eventually, Sonder took possession of twenty-five of the twenty-six units located at 635 North Scott Street. 1 Soon after taking possession of the units at 635, Sonder began to observe water leakages in units throughout the building. In March 2018, Sonder started documenting and reporting to 635 the water leakages. These leaks continued through at least August 2018. In some units, water leaked from the air-conditioning units into the walls and flooring. In another apartment, water seeped through the ceiling, causing “substantial [] damage.” By July 2018, Sonder reported the appearance of mold in multiple apartments. In September 2018, an air-conditioning serviceman apprised Sonder that mold had spread inside the air-conditioning units in three

_____________________ 1 Sonder never took possession of unit 18.

2 Case: 22-30360 Document: 00516919828 Page: 3 Date Filed: 10/04/2023

separate apartments. Shortly thereafter, Sonder reported to 635 the emergence of mold in several additional apartments. In response to Sonder’s many reports of mold, 635 would either deny the existence of mold, deny responsibility for the mold, or inspect and supposedly remediate the issue. 635 often dismissed complaints of mold as mere “discoloration.” And, in response to the first reports from Sonder that air-conditioner units had developed mold, the owner of 635 referred to the damage as “[s]elf inflicted” and noted the absence of mold tests. Upon hearing that the air-conditioning serviceman had discovered mold in the air- conditioning units of three separate apartments, the owner of 635 responded: “send me tests showing mold.” Sonder obliged, engaging Dan Paradela of All American Home Inspections to collect and test samples based on inspections of certain 635 units on October 15 and 16, 2018. Sonder shared with 635 the Paradela report, which found visible mold in most units, elevated levels of mold in certain units, the probability of hidden mold in improperly installed air conditioners, and extensive water damage in most apartments and recommended further testing. 635 rejected Paradela’s report, denying responsibility and refusing to remediate. Instead, 635 threatened litigation and engaged its own mold examiner, Dan Driskill, to inspect the property and conduct testing, which Driskill completed on November 8 through 13, 2018. But before Driskill could conduct his own mold testing, and after 635 refused to accept the Paradela report, Sonder terminated all twenty-five leases with 635 on November 7, 2018, because of its policy against renting out units that contain potential health hazards. B. In December 2018, Sonder filed suit against 635 in Louisiana’s Orleans Parish Civil District Court, seeking declaratory judgment that the

3 Case: 22-30360 Document: 00516919828 Page: 4 Date Filed: 10/04/2023

twenty-five leases between Sonder and 635 were terminated. On December 17, 2018, 635 removed the action to the United States District Court for the Eastern District of Louisiana. On January 17, 2019, 635 answered and filed a counterclaim for breach of contract and violation of the Louisiana Unfair Trade Practices Act (“LUTPA”). Sonder filed an amended and restated complaint, asserting three causes of action: (1) declaratory judgment that the leases were dissolved because their use as short-term rentals was “substantially impaired” due to 635’s failure to maintain, repair, and remediate the issues; (2) breach of warranty that the units were in good condition at the time of entry into the leases; (3) breach of contract relating to 635’s failure to maintain the roof and HVAC systems and to remediate the mold issues. Sonder also sought as damages the resulting lost profits. On September 30, 2019, 635 amended its pleadings to add a request for damages for breach of contract and violation of LUTPA. After the district court denied cross-motions for summary judgment, the case went before a jury in March 2022. At trial, Sonder introduced evidence to show the existence of mold in the units, including the Paradela testimony concerning his inspection and report and the expert testimony of William Feaheny, whom Sonder engaged in July 2019 to conduct his own mold inspection and to review Paradela’s findings. Among this evidence were email reports and photograph attachments that an air-conditioning serviceman, Basil Lohaza, sent to Sonder, which stated that certain air- conditioning units at 635 contained mold. Although Sonder subpoenaed Lohaza to testify, Lohaza notified the company that he would not honor the subpoena because he intended to travel to Ukraine to volunteer in the Ukraine-Russia conflict. The district court admitted the emails and photographs as business records. 635 never objected to their authenticity at trial.

4 Case: 22-30360 Document: 00516919828 Page: 5 Date Filed: 10/04/2023

At the close of Sonder’s case in chief, 635 moved orally for judgment as a matter of law. In support of its Rule 50(a) motion, Sonder made three arguments: (1) Sonder failed to present expert evidence on the presence of mold, which is required to show that lease cancelation was warranted; (2) Sonder failed to show that 635 breached its warranty because Sonder presented no admissible evidence of prior defects at the property; and (3) 635 did not breach its lease agreements because it delivered the units in good condition. The district court denied the Rule 50(a) motion. After the defense rested, 635 renewed its motion for judgment as a matter of law on 635’s breach-of-contract claims, which motion the district court again denied. All told, the trial lasted four days, during which nine witnesses testified and eighty-seven exhibits came into evidence. At the close of trial, the district court administered the jury instructions, which included thirty-eight charges, and issued the verdict form.

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Bluebook (online)
Sonder USA v. 635 N. Scott Street, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sonder-usa-v-635-n-scott-street-ca5-2023.