Court Opinion

ID: 5133868
Source: CourtListenerOpinion
Date Created: 2021-12-10 01:00:23.943375+00
Date Added: 2024-06-11T09:18:59.348732
License: Public Domain

Case: 18-50846   Document: 00516124697      Page: 1    Date Filed: 12/09/2021

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

                                                                          FILED
                                                                  December 9, 2021
                             No. 18-50846                            Lyle W. Cayce
                                                                          Clerk

   Cathi Cleven, for herself and all others similarly
   situated; Tara Cleven, for herself and all others
   similarly situated; Areli Arellano, for herself and all
   others similarly situated; Joe L Martinez, for himself
   and all others similarly situated,

                                                      Plaintiffs—Appellees,

                                versus

   Mid-America Apartment Communities, Incorporated;
   Mid-America Apartments, L.P.; CMS/Colonial
   Multifamily Canyon Creek JV, LP,

                                                 Defendants—Appellants,

                        consolidated with
                          _____________

                            No. 18-50851
                          _____________

   Nathanael Brown, for himself and all others similarly
   situated,

                                                       Plaintiff—Appellee,

                                versus
Case: 18-50846      Document: 00516124697         Page: 2     Date Filed: 12/09/2021

   Mid-America Apartment Communities, Incorporated, as
   general partner of Mid-America Apartments, LP; Mid-
   America Apartments, L.P., as successor in merger to
   Post Apartment Homes, LP doing business as Post
   Worthington doing business as Post South Lamar doing
   business as Post Eastside doing business as Post Park
   Mesa doing business as Post Gallery doing business as
   Post West Austin doing business as Post Sierra at
   Frisco Bridges doing business as Post Katy Trail doing
   business as Post Abbey doing business as Post Addison
   Circle doing business as Post Cole's Corner doing
   business as Post Barton Creek doing business as Post
   Heights doing business as Post Legacy doing business
   as Post Meridian doing business as Post Midtown
   Square doing business as Post Square doing business as
   Post Uptown Village doing business as Post Vineyard
   doing business as Post Vintage doing business as Post
   Washington,

                                                         Defendants—Appellants.

                  Appeals from the United States District Court
                       for the Western District of Texas
                            USDC No. 1:16-CV-820
                             USDC No. 1:17-CV-307

   Before Owen, Chief Judge, and Smith and Dennis, Circuit Judges.
   Priscilla R. Owen, Chief Judge:
          In two separate cases, Plaintiffs have sued their landlord, Mid-
   America Apartment Communities (MAA), asserting that it charged
   unreasonable late fees in violation of the Texas Property Code. In both cases,
   Plaintiffs sought to certify a class under Rule 23 of the Federal Rules of Civil
   Procedure. The district court certified the class in both instances. MAA

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   sought interlocutory review of the district court’s class certification. We
   reverse and remand.
                                          I
          Both cases allege violations of section 92.019 of the Texas Property
   Code, which addresses “Late Payment of Rent; Fees.” At the times relevant
   to these consolidated appeals, that section provided:
                 (a) A landlord may not charge a tenant a late fee for
                 failing to pay rent unless:
                        (1) notice of the fee is included in a written lease;
                        (2) the fee is a reasonable estimate of uncertain
                        damages to the landlord that are incapable of
                        precise calculation and result from late payment
                        of rent; and
                        (3) the rent has remained unpaid one full day
                        after the date the rent was originally due.
                 (b) A late fee under this section may include an initial
                 fee and a daily fee for each day the rent continues to
                 remain unpaid.
                 (c) A landlord who violates this section is liable to the
                 tenant for an amount equal to the sum of $100, three
                 times the amount of the late fee charged in violation of
                 this section, and the tenant’s reasonable attorney’s fees.
                 (d) A provision of a lease that purports to waive a right
                 or exempt a party from a liability or duty under this
                 section is void.
                 (e) This section relates only to a fee, charge, or other
                 sum of money required to be paid under the lease if rent
                 is not paid as provided by Subsection (a)(3), and does
                 not affect the landlord’s right to terminate the lease or
                 take other action permitted by the lease or other law.
                 Payment of the fee, charge, or other sum of money by a

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                       tenant does not waive the right or remedies provided by
                       this section. 1
                The quoted portion of the statute is the text in effect at the time of the
       alleged violations by MAA. The Texas Legislature amended this statute,
       effective September 1, 2019, to clarify the meaning of “reasonable” within
       the context of late fees in the statutory scheme. That amendment does not
       affect this court’s analysis here, however, because we do not apply penal laws
       retroactively. 2
                Plaintiffs in both cases alleged that MAA violated section 92.019
       because its late fee scheme is not a reasonable estimate of uncertain damages.
       The district court granted summary judgment on liability in both cases.
       Those issues are not before this court. These appeals address the district
       court’s grant of summary judgment ruling that section 92.019 requires a
       calculation of what damages might be for late payment before a late fee is
       charged. The district court concluded that even if the late fee was in fact
       reasonable, the statute would be violated absent a calculation by the landlord
       to estimate its damages before it charged a late fee. Because MAA presented
       no evidence that it calculated what its damages from late payments might be
       before it charged the late fees, the district court granted summary judgment
       in favor of plaintiffs.
                                                 A.
                In the first case, Cleven, MAA owned sixty-two apartment properties
       across Texas that are included in the class action. A number of these MAA
       properties were acquired in late 2013 as part of a merger with Colonial
       Properties Trust. Prior to the merger, Colonial typically assessed a $75 initial
       late fee and a subsequent late fee of either $10 or $15 per day, while some of
       MAA’s properties assessed a $50 fee with a $10 fee for additional days late
       and others assessed a $75 fee with a $10 fee for additional days late.

       1
           Tex. Prop. Code Ann. § 92.019 (West 2014).
       2
          See Landgraf v. USI Film Prods., 511 U.S. 244, 266 (1994) (“The Ex Post Facto Clause flatly
prohibits retroactive application of penal legislation.”).

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   Following the merger, MAA decided to harmonize the late fee structure and
   began charging an initial late fee of $75 and at least $10 for every additional
   day late at all of its properties. The fee-structure change occurred after one
   of MAA’s regional vice presidents recognized an “[e]asy increase income
   opportunity.”
          In 2016, named plaintiffs Cathi and Tara Cleven filed a lawsuit against
   MAA alleging a violation of section 92.019 of the Texas Property Code. The
   Clevens resided at an MAA property beginning in December 2009. Their
   lease stated: “you must pay your rent on or before the 1st day of each month
   (due date) with no grace period. . . . If you don’t pay all rent on or before the
   3rd day of the month, you’ll pay an initial late charge of $75.00 plus a daily
   late charge of $15.00 per day after that date until paid in full.” While living
   at the MAA property, the Clevens paid their rent late twice. The first time,
   in May 2015, they paid rent on the fourth day of the month due to their own
   error. They paid a $75 late fee. In July 2015, Tara Cleven entered an
   incorrect account number, and the Clevens’ July rent payment was not
   funded. They were initially assessed a late fee of $75 plus three daily $15 late
   fees. Their building waived the $75 fee, so the Clevens paid $45 in late fees.
          The Second Amended Complaint added a second set of named
   plaintiffs, Areli Arellano and Joe Martinez (the Arellanos). The Arellanos
   lived at one of MAA’s properties from 2014 through 2018. Their lease
   stated: “You must pay your rent on or before the 1st day of each month (due
   date). There is no grace period . . . . If you don’t pay all rent on or before the
   3rd day of the month, you’ll pay an initial late charge of $75.00, plus a daily
   late charge of $10.00 per day after that date until the amount due is paid in
   full.” Over the approximately four-year period that the Arellanos lived at an
   MAA property, they paid their rent late numerous times. Each time, the
   Arellanos were assessed the initial $75 fee, plus $10 each day. The Arellanos
   admit that the payments were properly imposed under the payment schedule.
   Class counsel found the Arellanos when Areli Arellano posted on Yelp about
   an unrelated MAA policy. Counsel reached out to determine if the Arellanos
   had paid any late fees.

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          After plaintiffs filed their motion for class certification, the magistrate
   judge conducted a hearing and issued a Report and Recommendation that the
   class be certified. MAA filed objections to the report. The district court
   adopted the magistrate judge’s report and granted the motion for class
   certification. The district court certified the following class:
                 All persons during the Class Period [from April 10,
                 2013, to September 30, 2017] who (i) were residential
                 tenants of apartment properties in the State of Texas
                 under written leases where MAA or its predecessor in
                 merger, Colonial, served as an owner or landlord, and
                 (ii) were assessed and paid an initial rent late fee of
                 $75.00 and/or a daily rent late fee of at least $10.00.
          This court granted MAA’s motion for leave to appeal under Federal
   Rule of Civil Procedure 23(f). On appeal, MAA challenges the district
   court’s findings on commonality, typicality, adequacy, superiority,
   predominance, and ascertainability.
                                          B.
          The related case, Brown, involves approximately twenty “Post-
   branded apartment properties” that MAA acquired when it merged with
   Post Apartment Homes in December 2016.
          The named plaintiff in this case, Nathanael Brown, lived in an MAA
   property from August 2013 to December 2016. During that time Brown
   signed four different leases. Each lease contained the following provision: “If
   Your rent is not paid on or before the third day of the month, a late fee or
   charge in the amount of 10% of the full monthly rent shall be due as additional
   rent. Such ‘full monthly rent’ shall include all additional monthly rent due.”
   Brown paid his rent late three times during his tenancy. The first two times,
   Brown paid his late fee and MAA subsequently waived the fee. The third
   time, Brown paid his late fee and the fee was not waived.
          Brown filed a complaint in 2017, alleging violations of section 92.019.
   Brown alleged that “MAA assessed, and collected, late fees from tenants at
   its Texas properties that were not the product of a prospective estimate of

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   ‘uncertain damages’ and, in any event, were unreasonable.” Brown filed for
   class certification, which MAA opposed. The magistrate judge conducted a
   hearing, issued a Report and Recommendation, and recommended that the
   class be certified. MAA filed objections to the report and requested a hearing.
   Without a hearing, the district court adopted the Report and
   Recommendation and granted class certification. The court certified the
   following class:
                     All persons during the class period [April 10, 2013,
                     through September 30, 2017] who (i) were residential
                     lease tenants of Post-branded apartment properties in
                     the State of Texas under written leases (such properties
                     being formerly owned by Post Apartment Homes LP
                     and affiliates and now owned by MAA LP through
                     merger), and (ii) were charged (and which Defendants’
                     records show as paid) at least one fixed rent late fee
                     equal to 10% of their monthly rent.
             This court granted MAA’s motion for leave to appeal under Federal
   Rule of Civil Procedure 23(f). MAA argues that the district court erred in
   holding that Brown satisfied Rule 23’s commonality, predominance, and
   superiority requirements.
                                                 II
             Class certification requires plaintiffs to satisfy four requirements
   under Rule 23(a): (1) the class must be “so numerous that joinder of all
   members is impracticable”; (2) there must be “questions of law or fact
   common to the class”; (3) the claims or defenses of the representative parties
   must be “typical of the claims or defenses of the class”; and (4) the
   representative parties must “fairly and adequately protect the interests of the
   class.” 3 If these four conditions are met, a class may be certified under Rule
   23(b)(3) when “the court finds that the questions of law or fact common to
   class members predominate over any questions affecting only individual
   members, and that a class action is superior to other available methods for

   3
       Fed. R. Civ. P. 23(a); In re Monumental Life Ins. Co., 365 F.3d 408, 414-15 (5th Cir. 2004).

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          fairly and efficiently adjudicating the controversy.” 4 In addition, “[i]n order
          to maintain a class action, the class sought to be represented must be
          adequately defined and clearly ascertainable.” 5
                      This court reviews an order certifying a class for an abuse of
          discretion. 6 “An abuse of discretion occurs only when all reasonable persons
          would reject the view of the district court.” 7 “Implicit in this deferential
          standard is a recognition of the essentially factual basis of the certification
          inquiry and of the district court’s inherent power to manage and control
          pending litigation.” 8 A district court also abuses its discretion if its decision
          is based on “an erroneous understanding of governing law.” 9 Accordingly,
          legal questions arising in class certification proceedings are reviewed de
          novo. 10 “A district court must conduct a rigorous analysis of the rule 23
          prerequisites before certifying a class,” but “[t]he decision to certify is within
          the broad discretion of the court” as long as “that discretion [is] exercised
          within the framework of rule 23.” 11
                                                          III
                      The central issue in the present cases is whether common questions
          predominate over individual issues, which largely depends on the
          interpretation of section 92.019. These cases present merits questions that
          are “relevant to determining whether the Rule 23 prerequisites for class

          4
               Fed. R. Civ. P. 23(b)(3).
          5
        Union Asset Mgmt. Holding A.G. v. Dell, Inc., 669 F.3d 632, 639 (5th Cir. 2012) (quoting
DeBremaecker v. Short, 433 F.2d 733, 734 (5th Cir. 1970) (per curiam)).
          6
               Ibe v. Jones, 836 F.3d 516, 528 (5th Cir. 2016) (citing In re Rodriguez, 695 F.3d 360, 364 (5th Cir.
2012)).
          7
              Union Asset, 669 F.3d at 638 (citing Dawson v. United States, 68 F.3d 886, 896 (5th Cir. 1995)).
          8
          M.D. ex rel. Stukenberg v. Perry, 675 F.3d 832, 836 (5th Cir. 2012) (quoting Maldonado v. Ochsner
Clinic Found., 493 F.3d 521, 523 (5th Cir. 2007)).
          9
          Ahmad v. Old Republic Nat’l Title Ins. Co., 690 F.3d 698, 702 (5th Cir. 2012) (quoting Regents of
Univ. of Cal. v. Credit Suisse First Bos. (USA), Inc., 482 F.3d 372, 380 (5th Cir. 2007)).
          10
               Id.
          11
               Castano v. Am. Tobacco Co., 84 F.3d 734, 740 (5th Cir. 1996).

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   certification are satisfied.” 12 In both Cleven and Brown, MAA challenges the
   district court’s construction of section 92.019, and the proper construction
   is a necessary antecedent to the predominance issue. Thus, with great
   respect to the dissent, our conclusion does not rest on an improper merits
   consideration.
                                                 A.
              The district court, making an Erie guess, held that section 92.019
   requires (1) an estimate of the landlord’s late payment damages (2) that is
   made prior to charging a late fee. According to the district court, section
   92.019 is not satisfied when a late fee is imposed without making a calculation
   of estimated damages even though the late fee charged ultimately
   approximates the landlord’s actual damages. The district court reasoned
   that, in order for the late fee to be an “estimate,” some calculation is required.
   Further, because a landlord “may not charge a tenant a late fee for failing to
   pay rent unless . . . the fee is a reasonable estimate,” the district court
   reasoned that the estimate must be made at or before the time the fee is
   charged.
                                                 B.
              MAA challenges the district court’s analysis on two bases. First,
   MAA argues that the district court read a “prospective estimate”
   requirement into 92.019 though none exists. Second, MAA argues that
   section 92.019 codified Texas common law regarding liquidated damages
   provisions, which, according to MAA, only requires that liquidated damages
   be reasonable in light of actual damages.
              We begin with the text of section 92.019, which requires a late fee to
   be “a reasonable estimate of uncertain damages to the landlord that are
   incapable of precise calculation and result from late payment of rent.” 13 The
   district court reasoned that late fees cannot be an estimate unless some

   12
        Amgen Inc. v. Conn. Ret. Plans & Tr. Funds, 568 U.S. 455, 466 (2013).
   13
        Tex. Prop. Code Ann. § 92.019(a) (West 2014).

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   calculation or evaluation was actually employed—in other words, that the
   “estimate must be the result of a process.” The flaw in this reasoning should
   be obvious. There could be liability under section 92.019 even though the
   late fees charged were, at the time the lease was signed, in fact “a reasonable
   estimate of uncertain damages.” Under the district court’s reading of
   section 92.019, the punitive provisions apply if the landlord cannot
   demonstrate that an actual calculation of potential damages was made. This
   amounts to strict liability, without regard to whether the substantive
   requirements of section 92.019 were in fact met, which are that, at the time
   the lease was signed, the late fees were “a reasonable estimate of uncertain
   damages to the landlord that are incapable of precise calculation and result
   from late payment of rent.” 14
              The statute does not require the landlord to engage in a process to
   arrive at a reasonable late fee; it just requires that the late fee agreed upon be
   a reasonable estimate of damages that are incapable of precise calculation.
   There are many unknowable factors that might determine a landlord’s
   damages each time a tenant fails to pay rent on time. For example, it may be
   that the tenant ceases to pay altogether, and the landlord may be required to
   resort to legal action to re-enter the premises and to recover unpaid rent.
   There may be lost opportunity to rent to a new tenant if the defaulting tenant
   wrongfully remains in the premises without paying. Attorney’s fees and
   other legal costs may be involved, and the tenant may well be judgment-proof
   at the end of the day. The Texas statute expressly recognizes that it is
   difficult to calculate damages for late payment of rent with precision.
   Accordingly, the statute does not contemplate that a landlord must set forth
   or engage in a calculus of potential damages in various potential scenarios to
   arrive upon a reasonable estimate of damages. If a landlord determines its
   late fee by reasoning that a $50 initial late fee and a fee of $10 for each day
   the rent was not thereafter paid would reasonably compensate it, there would

   14
        Id.

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        be no violation of section 92.019 if those fees were, in fact, a reasonable
        estimate of the uncertain damages the landlord might suffer.
                   We employ three canons of construction to arrive at this
        interpretation. First, words and phrases should be “read in context and
        construed according to the rules of grammar and common usage,” which
        typically requires courts to look to the term’s dictionary definition. 15 Second,
        we should not look at words in a vacuum but instead construe them in light
        of what the Texas Legislature intended. 16 Third, courts must construe a
        penal statute such that any ambiguities are resolved in favor of the penalized
        party. 17
                   The statute protects tenants from paying unreasonable late fees. It
        thus seems that regardless of whether a process is employed, if the late fee is
        a reasonable estimate at the time of contracting of damages that are incapable
        of precise calculation, then the tenant is adequately protected and there
        should be no liability. The statute’s use of the word “estimate” seems to
        imply at least some forethought. 18 However, we construe the statute in favor
        of MAA, meaning that MAA need not prove it engaged in a “process” so
        long as the estimate is, in fact, reasonable.
                   It is also clear from the text of section 92.019 that the reasonableness
        of the fee is to be judged based on what was known as well as unknowable

        15
          Cadena Comercial USA Corp. v. Tex. Alcoholic Beverage Comm’n, 518 S.W.3d 318, 325 (Tex. 2017)
(quoting Crosstex Energy Servs., L.P. v. Pro Plus, Inc., 430 S.W.3d 384, 389-90 (Tex. 2014))); see also City of
Richardson v. Oncor Elec. Delivery Co., 539 S.W.3d 252, 261 (Tex. 2018) (quoting Tex. State Bd. of Exam’rs
of Marriage & Fam. Therapists v. Tex. Med. Ass’n, 511 S.W.3d 28, 35 (Tex. 2017)).
        16
          See City of Amarillo v. Martin, 971 S.W.2d 426, 428 n.20 (Tex. 1998) (“[I]n some circumstances,
words, no matter how plain, will not be construed to cause a result the Legislature almost certainly could
not have intended.” (quoting Bridgestone/Firestone, Inc. v. Glyn-Jones, 878 S.W.2d 132, 133 (Tex. 1994)
(Hecht, J., concurring))).
        17
             See Hovel v. Batzri, 490 S.W.3d 132, 137-38 (Tex. Ct. App. 2016).
        18
                Estimate,       MERRIAM-WEBSTER                DICTIONARY,         https://www.merriam-
webster.com/dictionary/estimate (last visited Sep. 30, 2019) (defining estimate as “to judge tentatively or
approximately the value, worth, or significance of” and “a rough or approximate calculation,” among
others); Estimate, The American Heritage Dictionary (5th ed. 2019) (defining estimate as “[a]
tentative evaluation or rough calculation, as of worth, quantity, or size”).

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   with precision at the time of contracting. The statute requires that “notice
   of the fee is included in a written lease.” 19 The Texas Legislature clearly did
   not contemplate that a landlord must re-estimate damages each time a
   tenant’s rent is tardy before imposing a late fee. The statute contemplates
   that both parties agree to a set fee or fees at the outset of the contract.
   Accordingly, whether late fees are “a reasonable estimate of uncertain
   damages to the landlord that are incapable of precise calculation” is to be
   judged as of the time of contracting.
             We therefore hold that there is no requirement that a landlord engage
   in a process to arrive at its late fee so long as the fee is a reasonable estimate
   at the time of contracting of damages that are incapable of precise calculation.
   Therefore, the district court erred in interpreting section 92.019 and the case
   is remanded to the district court to determine if class certification is
   appropriate.
                                    *      *      *
             The class certification judgments of the district court in these cases
   are REVERSED, and the cases are REMANDED to the district court for
   further proceedings not inconsistent with this opinion.

   19
        Tex. Prop. Code Ann. § 92.019(a) (West 2014).

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   James L. Dennis, Circuit Judge, dissenting:
          In haste to preclude plaintiffs’ class-action, the majority erroneously
   reaches and answers a merits question that is presently beyond its
   jurisdiction. This court granted leave under Federal Rule of Civil
   Procedure 23(f) for the defendants to appeal only the district court’s
   September 5, 2018 class certification orders. Thus, the majority’s claim that
   “[t]hese appeals address the district court’s grant of summary judgment
   ruling that section 92.019 [of the Texas Property Code] requires that
   a calculation of what damages might be for late payment before a late fee is
   charged,” Majority at 4, is simply incorrect. The district court separately
   granted partial summary judgment on the issue of liability only later, on
   September 18, 2018, thirteen days after it entered the certification orders that
   are the subject of this appeal.      The partial summary judgment ruling
   interpreting Texas Property Code § 92.019(a)(2) is therefore
   irrelevant to whether the earlier class certifications were proper. In fact,
   because the district court’s later partial summary judgment ruling addressed
   only the defendants’ liability and did not resolve damages, it is not a final
   appealable order, and we would lack jurisdiction to review it even if the
   defendants had attempted to appeal it. See Freeman v. Califano, 574 F.2d 264,
   268 (5th Cir. 1978) (“The general rule, and the rule by which this case is
   controlled, is that if there has been a determination of liability, leaving
   damages to be measured before judgment is entered, the determination of
   liability alone is not final.” (citing Wrist-Rocket Mfg. Co., Inc. v. Saunders
   Archery Co., 516 F.2d 846 (8th Cir. 1975); Western Geophysical Co. v. Bolt
   Associates, Inc., 463 F.2d 101 (2d Cir.), cert. denied, 409 U.S. 1040 (1972);
   United States v. Burnett, 262 F.2d 55 (9th Cir. 1959); and Fidelity Trust Co. v.
   Board of Education, 174 F.2d 642 (7th Cir. 1949))).

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          Properly framed, the class certification question in this case turns only
   on whether the plaintiffs have raised “a common contention” that is “of
   such a nature that it is capable of classwide resolution—which means that
   determination of its truth or falsity will resolve an issue that is central to the
   validity of each one of the claims in one stroke.’” Ahmad v. Old Republic
   Nat’l Title Ins. Co., 690 F.3d 698, 702 (5th Cir. 2012) (quoting Wal-Mart
   Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011)). Because all plaintiffs in this
   case argue that § 92.019(a)(2) mandates that a landlord engage in a
   prospective calculation of its expected losses before setting a late-payment
   fee, the proposed class members have plainly raised “a common contention
   . . . capable of classwide resolution,” id. That should be the end of this
   appeal—a simple affirmance that does not address whether the plaintiffs are
   actually correct as to what § 92.019(a)(2) requires.         At this stage, the
   plaintiffs must show only that they raise a common question of law, not that
   the question will ultimately be decided in a way that is favorable to the
   proposed class’s claims. See Amgen Inc. v. Conn. Ret. Plans & Tr. Funds, 568
   U.S. 455, 459 (2013) (“Rule 23(b)(3) requires a showing that questions
   common to the class predominate, not that those questions will be answered,
   on the merits, in favor of the class.” (emphasis in original)).
          Instead, the majority holds that class certification was improper
   because, in the majority’s view, the plaintiffs’ interpretation of
   § 92.019(a)(2) is incorrect, and thus their claims based on this theory will
   ultimately fail on the merits. This ruling is doubly problematic because,
   although it is currently irrelevant and beside the point how such a merits
   question will ultimately be decided, I think it is clear that the majority’s
   answer is wrong. Were the issue properly before us, I would contend that the
   district court correctly determined that § 92.019(a)(2) of the Texas
   Property Code requires a landlord to perform a prospective calculation

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                                           No. 18-50846
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   of the damages it expects to incur in the event of a late rental payment before
   setting a late-payment fee that is intended only as reimbursement. This
   conclusion follows from a plain reading of the statute’s text, fidelity to its
   purpose, and the limited Texas caselaw construing the provision. Because
   the majority inappropriately reaches this question and then incorrectly
   decides it, I respectfully dissent.
                                                 I.
           Federal Rule of Civil Procedure 23 allows named plaintiffs
   to pursue relief on behalf of a larger class of plaintiffs when certain
   requirements are met. If the prerequisites of Rule 23(a) are satisfied, 1 Rule
   23(b) then sets forth several options for “maintain[ing]” a class action, any
   one of which is sufficient for a class to be certified. As relevant here, Rule
   23(b)(3) permits certification if the plaintiffs demonstrate (1) predominance,
   i.e., “that questions common to the class members predominate over
   questions affecting only individual members”; and (2) superiority, i.e., “that
   class resolution is superior to available methods for fairly and efficiently
   adjudicating the controversy.”             Ackal v. Centennial Beauregard Cellular

           1
             Under Rule 23(a), Plaintiffs must show (1) numerosity, i.e., a class so large that
   joinder of all members is impracticable; (2) commonality, i.e., that there are questions of
   law or fact common to the class; (3) typicality, i.e., that the named plaintiffs’ claims or
   defenses are typical of those of the class; and (4) adequacy of representation, i.e., that the
   representatives will fairly and adequately protect the interests of the class. Ackal v.
   Centennial Beauregard Cellular L.L.C., 700 F.3d 212, 216 (5th Cir. 2012) (citing Amchem
   Prods., Inc. v. Windsor, 521 U.S. 591, 613 (1997)). We have also held that the Rule implicitly
   requires that the class be precisely ascertainable. John v. Nat’l Sec. Fire & Cas. Co., 501
   F.3d 443, 445 n.3 (5th Cir. 2007). The defendants raise some perfunctory alternative
   challenges to the district court’s decision, arguing that the named plaintiffs do not satisfy
   the typicality and adequacy of representation requirements and that the class is not fairly
   ascertainable. As the majority does not address these points and I see no error in the district
   court’s resolution of the matters, I do not address them further.

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   L.L.C., 700 F.3d 212, 216 (5th Cir. 2012) (quoting Feder v. Elec. Data. Sys.
   Corp., 429 F.3d 125, 129 (5th Cir. 2005)).
          The majority states that “whether common questions predominate
   over individual issues . . . largely depends on the interpretation of section
   92.019.” Majority at 8. But this is a failure to see the forest for the trees.
   How § 92.019 should be interpreted and whether it requires a landlord to
   engage in a prospective evaluation of its damages before setting a late fee are
   themselves common questions of law that predominate over any unique
   questions that would be pertinent to only each individual plaintiff’s claim.
   “Rule 23 grants courts no license to engage in free-ranging merits inquiries
   at the certification stage,” and a district court generally “has no ‘authority
   to conduct a preliminary inquiry into the merits of a suit’ at class certification
   unless it is necessary ‘to determine the propriety of certification.’” Amgen
   Inc., 568 U.S. at 466 (quoting Dukes, 564 U.S. at 351 n.6).
          Here, no merits evaluation is necessary to determine that class
   certification is proper. “Rule 23(b)(3) requires a showing that questions
   common to the class predominate, not that those questions will be answered,
   on the merits, in favor of the class.” Id. at 459 (emphasis in original). “What
   matters to class certification . . . is . . . the capacity of a class-wide proceeding
   to generate common answers apt to drive the resolution of the litigation.”
   Dukes, 564 U.S. at 350 (emphasis in original) (quoting Richard A. Nagareda,
   Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L. Rev. 97, 132
   (2009)). In other words, that the proper interpretation of § 92.019(a)(2) is a
   crucial component of each of the plaintiffs’ claims and that resolving that
   question will all at once largely determine whether the plaintiffs prevail on
   this theory means that a common question predominates. See Gen. Tel. Co.
   of Sw. v. Falcon, 457 U.S. 147, 155 (1982) (“Class relief is ‘peculiarly
   appropriate’ when the ‘issues involved are common to the class as a whole’

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                                         No. 18-50846
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   and when they ‘turn on questions of law applicable in the same manner to
   each member of the class.’” (quoting Califano v. Yamasaki, 442 U.S. 682,
   700-701 (1979))). Determining the validity of the plaintiffs’ “common
   contention”—that § 92.019(a)(2) requires a landlord to engage in a
   prospective evaluation of her damages before setting a late-payment fee—
   “will resolve an issue that is central to the validity of each one of the claims
   in one stroke,” and thus class certification is appropriate. Ahmad, 690 F.3d
   at 702 (quoting Dukes, 564 U.S. at 350).
           The majority errs by taking it upon itself to make that stroke,
   prematurely resolving the merits of the shared “issue that is central to the
   validity of each one of the claims.” Id. That a shared central question exists
   is sufficient for us to affirm at this juncture, and the answer to that question
   on the merits should be “left to be resolved in the first instance at the district
   court.” Torres v. S.G.E. Mgt., L.L.C., 838 F.3d 629, 635 (5th Cir. 2016). If
   the defendants wish to obtain review of the partial summary judgment
   decision on liability that the district court issued after the certification order
   that is currently on appeal, they must do so later, after damages have been
   determined and the rulings have been reduced to a final judgment, because
   we lack jurisdiction to address the matter in this procedural posture. 2 See
   Califano, 574 F.2d at 268; Fed R. Civ. P. 23(f) (authorizing a court of
   appeals to allow an interlocutory appeal of “an order granting or denying
   class-action certification under this rule” and not any other district court
   orders). An interlocutory appeal of a class certification decision is not
   intended to serve as a backdoor for a circuit court to review the merits of a

           2
            Indeed, had the district court stayed proceedings while the defendants sought
   leave from our court to appeal its certification decision, the partial summary judgment
   ruling would not have even been included in the record on appeal. It simply has no bearing
   on whether the prior certification decision was correct.

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   claim before the appellate process would normally allow, see Amgen Inc., 568
   U.S. at 466 (quoting Dukes, 564 U.S. at 351 n.6), and the majority is mistaken
   to use it as such.
                                         II.
          The majority compounds its error by answering incorrectly the
   extrajudicial question that we ought not be answering in the first place.
   Section 92.019(a)(2) of the Texas Property Code provides that “[a]
   landlord may not charge a tenant a late fee for failing to pay rent unless . . .
   the fee is a reasonable estimate of uncertain damages to the landlord that are
   incapable of precise calculation and result from late payment of rent.” The
   majority interprets this statute not to require that a landlord actually engage
   in a process of calculation. But this construction is inconsistent with the
   Texas common law § 92.019(a)(2) is intended to embody, as well as the plain
   text of the statute and what caselaw from Texas courts exists on the issue.
          Because this is a diversity action, we must interpret § 92.019(a)(2) in
   the manner that Texas state courts would interpret it. Mid–Continent Cas.
   Co. v. Swift Energy Co., 206 F.3d 487, 491 (5th Cir. 2000). It is useful, then,
   to outline at the outset the manner in which Texas courts have addressed
   liquidated damages provisions like the late-payment fees that § 92.019(a)(2)
   authorizes. See Atrium Med. Ctr., LP v. Houston Red C LLC, 595 S.W.3d 188,
   192 (Tex. 2020) (a “liquidated damages contract provision establishes an
   ‘acceptable measure of damages that parties stipulate in advance will be
   assessed in the event of a contract breach.’” (quoting Flores v. Millennium
   Interests, Ltd., 185 S.W.3d 427, 431 (Tex. 2005)). Although the freedom to
   contract is a policy “deeply embedded” in Texas’s jurisprudence, equally
   established is the “universal rule” that damages for a breach of contract—
   like a failure to pay rent by an agreed-upon date—“are limited to just
   compensation for the loss or damage actually sustained.” Id. (quoting

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                                    c/w No. 18-50851

   Stewart v. Basey, 245 S.W.2d 484, 486 (Tex. 1952)). Thus, a liquidated
   damages provision “must not be punitive, neither in design nor operation.”
   Id.
           To give effect to this maxim, Texas courts have formulated several
   factors that must be met in order for a liquidated damages provision to be
   enforceable. First, the harm caused by the contemplated breach must be
   incapable of precise calculation or difficult to accurately estimate. Id. (citing
   Phillips v. Phillips, 820 S.W.2d 785, 788 (Tex. 1991)). Because the purpose of
   a liquidated damage provision is simply to make injured parties whole and not
   to enrich one party or punish the other, the fee it provides for cannot displace
   the actual damages caused by a breach when such damages are susceptible to
   being readily ascertained. See id. Second, the amount of liquidated damages
   called for must be “a reasonable forecast of just compensation” arrived at the
   time of contracting. Id. (citing Philips, 820 S.W.2d at 788). And third, when
   a breach occurs, the amount of the award called for in the liquidated
   provisions cannot be significantly different from the actual damages suffered.
   Id. at 192-93. Regardless of whether a liquidated damage provision was a
   reasonable forecast of potential damages at the time of contracting, “[w]hen
   an ‘unbridgeable discrepancy’ exists between ‘liquidated damages provisions
   as written and the unfortunate reality in application,’ the provisions are not
   enforceable.” Id. at 193 (quoting FPL Energy, LLC v. TXU Portfolio Mgmt.
   Co., L.P., 426 S.W.3d 59, 72 (Tex. 2014)).
           It was against this backdrop of these decisions that the Texas
   legislature enacted § 92.019(a)(2), explicitly stating that the statute codified
   the common law on contractual liquidated damage clauses. See 2007 Leg.,
   80(R)         (Tex.       May        17,       2007)         at      43:30-55:15,
   http://tlcsenate.granicus.com/MediaPlayer.php?view_id=16&clip_id=302
   3 (recounting that, originally, the bill capped late fees at 7% of the unpaid rent,

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   but that the apartment industry “negotiated” to instead make the provision
   mirror “the common law” by allowing only “a reasonable estimation of the
   uncertain damages of collecting delinquent rent”). The legislature intended
   to apply the adage that a landlord—like any other contracting party—does
   not have the right to enforce a stipulation that would result in her receiving
   more than just compensation. See Stewart v. Basey, 150 Tex. 666, 670, 245
   S.W.2d 484, 486 (1952). Thus, § 92.019(a)(2) was obviously intended to
   limit landlords to late fees that are calculated to reimburse them for their late
   payment damages, not to provide an additional source of income
          The majority rules that § 92.019(a)(2) is complied with if a landlord
   can show at trial that the late fee actually is equal to a reasonable estimate of
   a landlord’s damages, regardless of how the fee amount was originally set.
   But this is inconsistent with the common law § 92.019(a)(2) embodies for
   several reasons. First, as stated, to enforce a liquidated damages provision, a
   party must separately show both that the amount was the product of a
   reasonable forecast at the time of contracting and that the amount does not
   differ significantly from the party’s actual damages. Atrium Med. Ctr., 595
   S.W.3d at 192-93. The majority’s approach would collapse these separate
   prongs of the test into a single requirement, requiring only that a landlord
   show after the fact that the late fee is roughly equal to a landlord’s actual
   damages. Second, and more fundamentally, under the majority’s approach,
   a landlord could charge an arbitrary late fee for the express purpose of
   extracting additional profits from tenants, and so long as the landlord can
   contrive some post hoc justification for the figure, § 92.019(a)(2) would not be
   violated. Indeed, as the majority notes, there is evidence in this very case that
   one of the defendants adopted its late fee specifically as an “[e]asy increase
   income opportunity.” This is precisely the sort of unjust enrichment that
   the Texas common law does not allow and that § 92.019(a)(2) was intended

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   to prevent. In Texas, liquidated damages “must not be punitive, neither in
   design nor operation.” Id. at 192 (emphasis added). The majority’s ruling
   goes a long way toward sanctioning a landlord’s use of late fees as a profit
   source rather than reimbursement for her late-payment damages, and it is
   therefore counter to § 92.019(a)(2)’s clear purpose.
          Even setting aside the substantial body of common law that
   § 92.019(a)(2) codified, the majority’s interpretation is not a reasonable
   reading of the text of the statute. “If the words of a statute are clear and
   unambiguous,” Texas courts “apply them according to their plain and
   common meaning.” Galbraith Engr. Consultants, Inc. v. Pochucha, 290
   S.W.3d 863, 867 (Tex. 2009). The majority acknowledges that the plain and
   common meaning of “estimate” is the result of “[a] tentative evaluation or
   rough calculation, as of worth, quantity, or size.”        The American
   Heritage Dictionary 609 (5th ed. 2011); see Majority at 11 n.18. But
   the majority fails to give effect to this definition. Because an estimate is the
   result of a calculation or evaluation, it must necessarily be preceded by a
   calculation or evaluation. In other words, by limiting a late fee to “a
   reasonable estimate of uncertain damages to the landlord that . . . result from
   late payment of rent,” the language of § 92.019(a)(2) plainly requires a
   landlord to attempt to calculate or evaluate what her late-payment damages
   would be and then use that number to set a late fee that is intended only to
   reimburse the landlord for those damages, not to provide an additional source
   of profit.
          The majority’s rule—that § 92.019(a)(2) is not violated so long as a
   landlord can demonstrate after the fact that the late fee is equal to a
   reasonable estimate of her damages—might make sense if the statute said
   that a late fee must be “equal to a reasonable estimate.” But § 92.019(a)(2)
   does not say that. Instead, the law mandates that a late fee must be “a

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   reasonable estimate.” The majority’s construction would permit a landlord
   to charge a fee that is not an estimate at all—a figure chosen arbitrarily is not
   the result of “[a] tentative evaluation or rough calculation,” The
   American Heritage Dictionary 609, even if a retroactive
   justification for the number can later be produced.             The majority’s
   interpretation thus does not fit the plain language of the statute.
          Lastly, the case law in this area, albeit limited, indicates that Texas
   state courts would disagree with the majority’s proposition. In Mosaic
   Baybrook One, L.P. v. Cessor, the Texas Court of Appeals affirmed
   certification of a similar tenant class on the questions, inter alia, of (1)
   whether the landlord defendants in that case “conduct[ed] an estimate of
   their damages . . . resulting from late payment of rent” and (2) whether the
   fees charged were a reasonable estimate of those uncertain damages. No. 01-
   18-01057-CV, 2020 WL 5637212, at *5 (Tex. App. Sept. 22, 2020). Were the
   majority’s interpretation of the statute correct, only the latter question would
   be relevant. By stating that the question of whether the landlord-defendant
   conducted an estimate was a shared question of fact on which the plaintiffs’
   claims all turned, the Texas appeals court necessarily ruled that § 92.019
   requires a landlord to engage in a prospective calculation when setting a late
   fee, and that a post hoc rationalization is not sufficient.
                                          ***
          In sum, the majority not only improperly uses the appeal of the district
   court’s class certification decision to address the merits of the plaintiffs’
   claims, but it also gets the question it should not be answering wrong. That
   the plaintiffs all raised a common contention about how § 92.019 should be
   interpreted that is central to their claims for relief is sufficient reason for us
   to affirm class certification, and we do not have jurisdiction to review the
   district court’s partial summary judgment ruling on only the issue of liability

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                                    No. 18-50846
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   at this stage in the litigation. Moreover, even if the question were properly
   before us, I would not adopt the majority’s interpretation of § 92.019, which
   is contrary to its purpose and the common law the statute incorporated,
   inconsistent with the text of the statute, and counter to what Texas state
   court precedent exists on this issue. Accordingly, I respectfully dissent.

                                         23