Court Opinion

ID: 4277973
Source: CourtListenerOpinion
Date Created: 2018-05-24 13:02:33.758789+00
Date Added: 2024-06-11T14:34:16.453439
License: Public Domain

Notice: This opinion is subject to formal revision before publication in the
Atlantic and Maryland Reporters. Users are requested to notify the Clerk of the
Court of any formal errors so that corrections may be made before the bound
volumes go to press.

             DISTRICT OF COLUMBIA COURT OF APPEALS

                                 No. 16-AA-369                             05/24/2018

                      BLAKE J. NELSON, et al., PETITIONERS,

                                        V.

      DISTRICT OF COLUMBIA RENTAL HOUSING COMMISSION, RESPONDENT,

                                       and

                THE KLINGLE CORPORATION, et al., INTERVENORS.

                  On Petition for Review of a Decision and Order
             of the District of Columbia Rental Housing Commission
                                    (TP-28,519)

(Argued April 24, 2018                                    Decided May 24, 2018)

       Blake J. Nelson, with whom Carol S. Blumenthal was on the brief, for
petitioners.

       Jason Lederstein, Assistant Attorney General, with whom Karl A. Racine,
Attorney General for the District of Columbia, Todd S. Kim, Solicitor General at
the time the brief was filed, and Loren L. AliKhan, Deputy Solicitor General at the
time the brief was filed, were on the brief, for respondent.

       Richard W. Luchs, with whom Debra F. Leege was on the brief, for
intervenors.

      Before FISHER and THOMPSON, Associate Judges, and FARRELL, Senior
Judge.
                                         2

      FISHER, Associate Judge: Blake and Wendy Nelson filed a petition with the

Rent Administrator alleging that their housing providers charged rent above the

lawful rent ceiling.     The petition eventually reached the Rental Housing

Commission (―the Commission‖) and it held that the rent was too high but awarded

the Nelsons less relief than they sought. Now, they contend that the Commission

shortchanged them and raise four challenges to its ruling. We find none persuasive

and affirm.

                                   I. Background

      On August 1, 2003, the Nelsons moved into unit 802 in the Kennedy-

Warren, a residential apartment complex owned by the Klingle Corporation and

managed by B.F. Saul Property Company (collectively, ―intervenors‖).          Their

petition, filed on January 26, 2006, alleged that intervenors miscalculated the rent

ceiling for their unit and charged rent above the lawful level. Specifically, they

averred that intervenors failed to perfect a 2003 vacancy adjustment and CPI-W (or

cost-of-living) adjustments in 2003, 2004, and 2005.1

      1
          Before 2006, the Rental Housing Act prohibited regulated housing
providers from charging rent above lawful rent ceilings. D.C. Code § 42-3502.06
(a) (2001). To increase the rent ceiling through a CPI-W or vacancy adjustment,
housing providers needed to ―take and perfect‖ the adjustment by filing with the
                                                                   (continued…)
                                         3

      The hearing examiner generally agreed with these arguments. In a proposed

order, he held that the 2003 vacancy adjustment and 2003–2005 CPI-W

adjustments were invalid, deducted those increases, and determined that the lawful

rent ceiling was $1,766 per month. Noting that intervenors had sought rent above

that level—they initially demanded $3,225 per month for the Nelsons‘ unit and

raised that figure to $3,349 and eventually $3,439—the hearing examiner awarded

the Nelsons a refund, with interest, for rent charged above the lawful maximum.

      Before the hearing examiner converted that order into a final one, the

Nelsons and intervenors filed briefs presenting exceptions and objections to the

proposed order. The Nelsons argued that the hearing examiner erred in concluding

that intervenors did not act in bad faith, a holding that made the Nelsons ineligible

for trebled damages. They also contended that he incorrectly calculated their rent

(…continued)
Rent Administrator and serving on the affected tenants a certificate of election.
14 DCMR §§ 4204.10, 4207.5. If a housing provider failed to do so, it failed to
perfect the rent ceiling adjustment and could not rely on it to increase the rent
charged. Sawyer Prop. Mgmt. of Md., Inc. v. District of Columbia Rental Hous.
Comm’n, 877 A.2d 96, 100 (D.C. 2005). The District of Columbia abolished rent
ceilings in 2006; however, because the Nelsons filed their petition before August 6,
2006, the effective date of that amendment, the rent ceiling regime still governs
this case. See D.C. Code § 42-3502.06 (a) (2012 Repl.).
                                          4

refund and, finally, moved to reopen the hearing so that they could submit

additional evidence. The hearing examiner rejected all of these arguments, as well

as those raised by intervenors, and made only minor changes to the proposed order.

      Both parties then sought review by the Commission, which affirmed most of

the hearing examiner‘s holdings.         In the one reversal relevant here, the

Commission held that, contrary to the hearing examiner‘s determination,

intervenors owed the Nelsons prejudgment interest through the date of the final,

rather than proposed, order at a rate of three, rather than four, percent. Rather than

remand, the Commission awarded the Nelsons the corrected interest amount. After

the Commission rejected their motion for reconsideration of this issue, the Nelsons

filed this petition for review.

                                      II. Analysis

      This court will accept the Commission‘s findings of fact if substantial

evidence on the record supports them. Loney v. District of Columbia Rental Hous.

Comm’n, 11 A.3d 753, 755 (D.C. 2010). As to questions of law, we remain ―the

final arbiter‖ but will defer to the Commission‘s interpretation of ―the statutes it

administers and the regulations it promulgates‖ unless its interpretation ―is
                                         5

unreasonable or embodies a material misconception of the law.‖ Sawyer Prop.

Mgmt. of Md., Inc. v. District of Columbia Rental Hous. Comm’n, 877 A.2d 96,

102–03 (D.C. 2005) (internal quotation marks and citation omitted).

     III. The Commission Properly Calculated the Nelsons’ Rent Refund

                    A. The CPI-W Increases from 1987 to 2002

      The Nelsons argue that the Commission incorrectly calculated their refund

because it erroneously interpreted the Rental Housing Act‘s statute of limitations.

The Act provides in relevant part that ―[n]o petition may be filed with respect to

any rent adjustment . . . more than 3 years after the effective date of the

adjustment.‖    D.C. Code § 42-3502.06 (e) (2012 Repl.).           In their primary

argument, the Nelsons interpret this provision to give tenants three years from their

first rent bill to challenge the entire basis of that initial charge. This approach

would allow the Nelsons to contest every rent ceiling adjustment intervenors ever

imposed on their unit—including the ones from 1987 to 2002, which the Nelsons

allege intervenors filed improperly. The Commission, by contrast, concluded that

the Nelsons could not challenge rent or rent ceiling adjustments with effective

dates more than three years prior to their petition, regardless of when the
                                           6

adjustment first affected them.        This holding precluded the Nelsons from

contesting any rent or rent ceiling increase before the 2003 CPI-W adjustment.

      The Commission‘s interpretation is consistent with its precedent and ours.

In Kennedy v. District of Columbia Rental Hous. Comm’n, we affirmed the

Commission‘s view that the statute of limitations bars challenges to ―adjustments

in either the rent levels or rent ceilings . . . in place more than three years prior to

the date of the filing of a tenant petition.‖ 709 A.2d 94, 97 (D.C. 1998). While the

Commission applied this rule, the Nelsons offered an incompatible interpretation—

one that would start the limitations period on the date a rent adjustment first affects

a particular tenant, rather than the effective date of the increase.

      Attempting to distinguish Kennedy, the Nelsons note that, unlike the tenants

in that case, who challenged inaccurate calculations of rent ceiling adjustments,

they contest improperly filed rent ceiling adjustments.           As the Commission

recognized, this distinction is immaterial:        both arguments constitute merits

challenges to the adjustments and the statute of limitations exists to preclude merits

arguments, no matter their basis.2 See Majerle Mgmt., Inc. v. District of Columbia

      2
          Observing that, in certain instances, the Kennedy rule will allow the
statutory period to expire before a rent or rent ceiling adjustment ever affects the
                                                                      (continued…)
                                         7

Rental Hous. Comm’n, 866 A.2d 41, 43, 46–48 (D.C. 2004) (observing that, absent

unique circumstances, Kennedy rule would apply to petition challenging

improperly filed and implemented rent ceiling adjustment).

                            B. The 2002 CPI-W Increase

      The Nelsons‘ alternative interpretation of the statute of limitations focuses

on a $5 portion of the 2002 CPI-W increase. The 2002 adjustment, which occurred

on a date beyond the statutory period, raised the rent ceiling on the unit from

$1,710 to $1,766 but the intervenors only raised the rent to $1,761. Then, on a

date within the limitations period, intervenors again raised the rent and the Nelsons

assert that the $5 left over from the 2002 CPI-W adjustment was included in that

(…continued)
petitioning tenant, the Nelsons contend that our approach deprives tenants of the
―reasonable time‖ to file their claims that due process requires. This argument
overlooks a key fact: even if the petitioners could not have challenged adjustments
established before they moved in, the prior occupants of their unit would have had
an opportunity to do so. Thus, the Nelsons essentially argue that due process
requires prolonging the statute of limitations so successors in interest can litigate
claims that their predecessors failed to pursue. They cite no authority for this
sweeping proposition and, as a result, we decline to rely on it to reconsider settled
precedent.
                                          8

increase.3 They contend that D.C. Code § 42-3502.06 (e) allows them to contest

this $5 portion of the 2002 CPI-W adjustment.

      To reach this conclusion, the Nelsons cite United Dominion Mgmt. v.

District of Columbia Rental Hous. Comm’n, 101 A.3d 426 (D.C. 2014). There we

held that when a housing provider has not properly perfected a rent ceiling

adjustment, the statutory period for contesting it begins when the housing provider

―implement[s]‖ the adjustment by using it as a basis to raise a unit‘s rent. Id. at

427. Based on this holding, the Nelsons essentially argue as follows:           when

intervenors raised the rent to $1,761, they ―implemented‖ that portion of the 2002

CPI-W adjustment. Tenants had three years from the date of implementation to

contest it.   However, the other $5 portion of the 2002 CPI-W rent ceiling

adjustment remained ―unimplemented,‖ and the statutory period for challenging it

did not begin, until intervenors (supposedly) incorporated it in the large 2003 rent

increase. In other words, the Nelsons claim they were entitled to five extra dollars

a month.

      3
         Specifically, intervenors increased the rent ceiling to $3,225 and raised the
rent to that amount. The Nelsons assert that the $5 portion of the 2002 CPI-W
adjustment served as one of several bases for raising the rent charged.
                                          9

      We reject this interpretation of United Dominion, which seems to ignore the

well-established distinction between the rent ceiling and the amount of rent

charged. That case in no way suggested that a rent ceiling adjustment is

implemented in stages, as the rent increases, and can be challenged multiple times. 4

Rather, we stated that a rent ceiling adjustment ―is implemented through a

corresponding increase in the rent charged.‖        Id.   Here, the ―corresponding

increase‖ occurred when intervenors relied on the 2002 CPI-W adjustment to raise

the rent above the old ceiling of $1,710. At that point, intervenors gave effect to

the new rent ceiling of $1,766 even if they did not raise the rent as high as the new

ceiling would allow. As United Dominion explained, this act triggered the statute

of limitations for contesting the adjustment.

      The Nelsons attempt to defend their interpretation by referencing 14 DCMR

§ 4205.9 (permitting housing providers to ―implement[] less than the full amount

      4
         Moreover, the Nelsons‘ reading of United Dominion is in tension with the
purpose of D.C. Code § 42-3502.06 (e). Before that provision, every new rent
charge restarted the statutory period for challenging all prior rent ceiling
adjustments. Kennedy, 709 A.2d at 96. The legislature enacted § 42-3502.06 (e)
to abolish that regime and ensure that the period for contesting a given rent ceiling
adjustment did not constantly renew. Kennedy, 709 A.2d at 96–97. The Nelsons‘
position, however, would restart the clock for contesting a rent ceiling adjustment
each time a housing provider raised the rent underneath that ceiling. This result
would undermine the principle that tenants have one three-year period for
challenging a given rent ceiling increase.
                                          10

of any rent ceiling adjustment‖) and § 4205.10 (―Any rent ceiling adjustment, or

portion thereof, which remains unimplemented shall not expire and shall not be

deemed forfeited.‖). It no doubt can be confusing that these regulations, which

were adopted long before United Dominion was decided, use various forms of the

verb ―implement.‖ Properly understood, however, they do not mean that the

statute of limitations permits a rent ceiling to be attacked each time the rent is

increased beneath it.

      The Nelsons‘ argument misconstrues the whole series of regulations in

Chapter 4205, which deals with increases and decreases in rent. (A separate

chapter, 4204, deals with adjustments in rent ceilings.)           These regulations

expressly recognize that the rent ceiling is not the same thing as the rent charged.

Moreover, they allow housing providers to raise the rent in increments.            See

§ 4205.2 (The housing provider ―may implement a rent increase to an amount

equal to, or less than, the authorized rent ceiling.‖); § 4205.3 (―A housing provider

may charge as rent for a rental unit an amount less than the authorized rent ceiling

without waiving or forfeiting the right to later implement a rent increase.‖). Seen

in this context, the regulations cited by petitioners simply reassure housing

providers that they will not forfeit the right ultimately to charge rent at the ceiling

by raising the rent in more modest increments.
                                        11

       In sum, the Commission properly applied the statute of limitations to the

circumstances presented here. We discern no error in its ruling that the old rent

ceiling was $1,766, not $1,761.5

                              IV. Other Arguments

                            A. Prejudgment Interest

      Next, the Nelsons raise two challenges to the award of prejudgment interest.

Both contest the Commission‘s interpretation of regulations promulgated under the

Rental Housing Act—14 DCMR §§ 3826.2 and 3826.3. See 14 DCMR § 3800

(―Unless otherwise noted, the authority for the chapter is . . . the ‗Rental Housing

Act of 1985.‘‖). As stated, we will affirm the Commission‘s interpretation of such

regulations unless it is ―plainly wrong‖ or embodies a ―material misconception of

      5
          The Nelsons also argue that the Commission should have calculated the
refund through October 2012 because, in that month, intervenors allegedly made a
judicial admission that they still intended to collect illegal rent. The Commission,
instead, awarded rent through the date of the last evidentiary hearing. We have
affirmed the Commission‘s practice of terminating refunds on that date, even when
a housing provider subsequently demands allegedly unlawful rent. See Levy v.
District of Columbia Rental Hous. Comm’n, 126 A.3d 684, 692 (D.C. 2015).
                                         12

law.‖       Sawyer, 877 A.2d at 102–03 (internal citation and quotation marks

omitted).6

        The Nelsons first argue that the Commission was ―plainly wrong‖ to

conclude that § 3826.3 establishes a single, fixed prejudgment interest rate rather

than a fluctuating one. We discern no error in the Commission‘s interpretation.

Section 3826.3 ties the prejudgment interest rate to the one used by the Superior

Court ―pursuant to D.C. Official Code § 28-3302 (c) (2001), on the date of the

decision.‖ (Emphasis added.) The Commission held that the italicized phrase

required the interest rate to remain fixed at the level in place on a particular day—

―the date of the decision.‖ Although the Nelsons make several arguments in favor

of a floating rate, their contentions do not demonstrate that the Commission‘s

holding, which comports with the plain text of the regulation as well as the

Commission‘s past interpretations of it, see, e.g., Rittenhouse LLC v. Campbell, TP

        6
         In light of the Nelsons‘ assertions to the contrary, we emphasize that this
deferential standard of review applies here. This court defers to the Commission‘s
interpretation of the regulations it promulgates, such as §§ 3826.2–.3. See Sawyer,
877 A.2d at 102. Moreover, the method of calculating prejudgment interest relates
to the administration of the Rental Housing Act‘s remedial scheme, a matter that
falls within the Commission‘s sphere of authority. See D.C. Code § 42-3502.02
(a)(1) (2012 Repl.) (authorizing Commission to issue ―rules and procedures for the
administration of this chapter‖). Separately, we note that because we affirm the
award of prejudgment interest on the merits, we do not consider the contention of
the government and intervenors that the Nelsons should be judicially estopped
from challenging it.
                                         13

25,093 2002 D.C. Rental Housing Comm. LEXIS 582 (RHC Dec. 17, 2002), was

unreasonable.

      In what appears to be a counterintuitive fallback argument, the Nelsons

contend that the Commission erred in holding that prejudgment interest runs from

the date of the injury until the date of the hearing examiner‘s final, rather than

proposed, decision.    Although this argument would shorten the prejudgment

period, the Nelsons apparently believe that it would increase their overall award

because the Superior Court‘s interest rate was higher on the date of the proposed

order than on the date of the final one. Once again, the Nelsons have failed to

show that the Commission‘s interpretation was unreasonable.7

      7
          This interpretation does not conflict with Johnathan Woodner Co. v.
Enobakhare, TP 27,730 2011 D.C. Rental Housing Comm. LEXIS 24 (RHC
Sept. 7, 2011). There, the Commission treated the ―date of the decision‖ for
purposes of calculating interest as March 2, 2007, when the hearing examiner
issued an order titled ―Proposed Decision and Order.‖ (Emphasis added.)
However, the Commission simply assumed that the March 2 order was the relevant
one (perhaps because the hearing examiner did not issue a subsequent decision).
The Commission did not address the issue raised here—whether the regulations
refer to the final or proposed order. See id; see also Levy, 126 A.3d at 690
(―[S]tare decisis is never properly invoked unless in the decision put forward as
precedent the judicial mind has been applied to and passed upon the precise
question.‖) (alteration in original) (internal quotation marks and citation omitted).
                                         14

                                   B. Bad Faith

       Housing providers demonstrate ―bad faith‖ under the Rental Housing Act if

they betray ―an intent . . . to misrepresent.‖ Bernstein Mgmt. Corp. v. District of

Columbia Rental Hous. Comm’n, 952 A.2d 190, 198 (D.C. 2008). Contrary to the

Nelsons‘ assertions, both the hearing examiner and the Commission applied this

standard or one substantially similar to it. Both found that intervenors did not act

with the prohibited intent, a conclusion that is supported by substantial evidence.

Specifically, the hearing examiner credited the testimony of Tanya Marhefka, the

general manager of the Kennedy-Warren, who stated that tenants could inspect

forms related to past rent ceiling adjustments (namely, ―registration documents . . .

[and] certificate[s] of election‖) in the Kennedy-Warren‘s business office. The

hearing examiner also found that intervenors served the certificates of election for

the CPI-W increases on the Nelsons (albeit belatedly), thereby informing tenants of

their intent to establish the adjustments and their basis for doing so. Based on the

record presented, the Commission reasonably affirmed the hearing examiner‘s

conclusion that intervenors sought to disclose their conduct, rather than deceive

their tenants.8

       8
         The Nelsons complain that the Commission erred by relying upon the
testimony of David Newcome, vice president of B.F. Saul Property Company, as
                                                                 (continued…)
                                        15

      The Nelsons counter that the Commission erred by ignoring six issues that

provided additional reasons for finding bad faith. In their notice of appeal before

the Commission, the Nelsons raised these issues as alternative bases for

invalidating the 2003 vacancy adjustment. The Commission properly deemed

these issues moot because, once it voided that adjustment on other grounds, it had

granted the Nelsons the relief they sought. See Fraternal Order of Police, Metro.

Labor Comm. v. District of Columbia, 82 A.3d 803, 813 (D.C. 2014) (case moot if

requested relief ―unnecessary‖). The Nelsons also mentioned some of these issues

as reasons why substantial evidence demonstrated that intervenors acted in bad

faith. Although the Commission did not analyze the nuances of every argument

the Nelsons made in their twenty-page discussion of bad faith, it observed that if

substantial evidence supports the hearing examiner‘s decision then ―substantial

evidence to the contrary does not permit the Commission to overturn‖ it. Thus, the

Commission did not ignore the six issues the Nelsons highlight; rather, it properly

(…continued)
well as certain statements by Ms. Marhefka. However, the Commission referred to
this testimony by way of example and there was a solid foundation for the hearing
examiner‘s conclusion that intervenors did not act in bad faith. Under these
circumstances we need not address the Nelsons‘ arguments in detail because, on
this record, we are satisfied that any error by the Commission was harmless. See
generally Kotteakos v. United States, 328 U.S. 750 (1946).
                                         16

held that those issues did not justify reversing the hearing examiner‘s holding that

intervenors did not act in bad faith.9

                             C. Reopening the Hearing

      The Nelsons‘ first basis for reopening the hearing concerns the hearing

examiner‘s decision to take official notice of a document in the Rent

Administrator‘s ―registration file‖ for their unit.   This act, the Nelsons contend,

entitled them to submit other documents from that file—specifically certificates of

election for CPI-W increases from 1987–2000 that intervenors allegedly filed late.

The Nelsons base this argument on D.C. Code § 2-509 (b) (2012 Repl.), which

states that if an agency decision ―rests on official notice of a material fact not

appearing in evidence in the record, any party to such case shall on timely request

be afforded an opportunity to show the contrary.‖ Here, however, none of the

agency‘s holdings rested on official notice of facts outside the record. Although

the hearing examiner did rely on one document in the registration file to conclude

      9
         We also disagree with the Nelsons‘ argument that the hearing examiner
deserved less deference because his proposed order ―copied‖ portions of
intervenors‘ ―Summary of Testimony.‖ The Commission found no evidence that
the hearing examiner failed to ―appropriately consider the respective proposed
decisions and orders from the Housing Provider and the Tenants.‖ This conclusion
accurately characterizes the record, and, consequently, the Commission was not
required to apply heightened scrutiny to the hearing examiner‘s orders.
                                         17

that intervenors properly registered their building, the Acting Rent Administrator

retracted this determination from the final order upon realizing that the parties had

not put that issue into dispute. Thus, § 2-509 (b) does not provide a basis for the

Nelsons to add the certificates.

      Second, the Nelsons assert that they should have had an opportunity to

present ―newly discovered‖ evidence, including tenant petitions, witness affidavits,

and recordings of other Rental Housing Commission hearings. Contrary to the

Nelsons‘ arguments before this court, both the hearing examiner and the

Commission properly evaluated this argument based on whether the Nelsons

exercised ―due diligence‖ in attempting to acquire this evidence before the

hearing.10 Substantial evidence supported the Commission‘s determination that the

Nelsons failed to satisfy this standard. The Nelsons justify their delay by noting

      10
           Contrary to the Nelsons‘ assertions, the fact that their evidence was
intended to rebut allegedly dishonest testimony did not entitle them to a more
lenient due diligence test. See, e.g., Oxendine v. Merrell Dow Pharm., Inc., 563
A.2d 330, 334–35 (D.C. 1989) (applying standard due diligence analysis to newly
discovered evidence of false testimony). Nor do we agree with the Nelsons‘
contention that the Commission should have applied the due diligence standard
less stringently because they were contesting a proposed, rather than final, order.
Courts and other tribunals value finality not simply to bring matters to a close, but
also to avoid needless delays and waste of resources. Reopening the hearing in this
case two years after it had ended would have wasted resources and needlessly
delayed the agency‘s decision.
                                         18

that their evidence responded to statements made by witnesses during the hearing

that they could not have anticipated. Yet this rationale does not explain the

Nelsons‘ failure to ask that the record remain open so that they could secure

additional evidence.11 Nor does it justify their decision not to file their motion to

reopen until two years after the hearing ended.

                                  V. Conclusion

      For the reasons stated, the Commission‘s order is

                                                    Affirmed.

      11
          The Nelsons argue that they did, in fact, make such a request. However,
they cite nothing in the record that supports this assertion.