IN THE IOWA DISTRICT COURT IN AND FOR JOHNSON COUNTY

SOPHIE BORER, ) CASE NO. SC 081695PLAINTIFF, ) ON DISTRICT COURT APPEAL

)vs. )

) BRIEF OF JOSEPH CLARK, ET AL ) PLAINTIFF/APPELLEE

DEFENDANTS. )********************************************

Comes now Sophie Borer, Plaintiff/Appellee, by and through her attorney

Christopher Warnock, and files her Brief, stating as follows:

I. Statement of the Case

On March 26, 2012, Plaintiff/Appellee Sophie Borer (“Tenant”) filed a motion to

proceed in forma pauperis1 and her small claims petition. Docket.2 On April 16 & 17,

2012 Defendants (“Landlord”) made multiple motions to consolidate the instant case

with Conroy v. Apts Downtown,3 LACV072840 which were denied May 17, 2012.

Docket. Trial was held before the Honorable Karen Egerton, Magistrate/Judge of the

Johnson County District Court sitting in small claims on September 14, 2012.4

Judgment at 1. The trial court found in favor of Tenant and issued an lengthy and

detailed Findings of Fact, Conclusions of Law and Judgment (“Judgment”) on September

3, 2013. This appeal followed.1 Leave to proceed in forma pauperis was granted on March 26, 2012. Docket.2 All citations to Docket reference the online docket at Iowa Courts Online https://www.iowacourts.state.ia.us/ESAWebApp3 In Conroy plaintiffs’ counsel sought class action certification, which was denied on almost identical grounds to that overturned by the Court of Appeals in Staley v. Barkalow, No. 3-255 / 12-1031 (Iowa App. 2013). 4 As noted by the trial court, this is one of three connected landlord tenant cases, all with the same plaintiffs’ and defendants’ counsel. Trial in all three cases was unusually elaborate for small claims matters. Plaintiff and Defendants each had two counsel, a court reporter was used instead of electronic recording, the trial court sat on a Friday when small claims matters are not normally heard, with each case having an extended hearing as the only case on the calendar. Finally, the legal issues presented in the case were extensively briefed.

II. Statement of Facts

Tenant rented an apartment from Apartments Near Campus, which is a fictitious

name of Defendant Apts. Downtown, Inc. Transcript (“Tr.”) at 8, 57. Apartments

Downtown is owned by the Clark Family, the largest landlords in Iowa City.5 Tenant

was a tenant of Landlord at 412 South Dodge Street , Unit 7 from August 5, 2011 to July

29, 2012. Lease, Defendant’s Exhibit A; Tr. at 8.

Tenant testified that on or about October 24, 2012 that her father visited her and

brought the family dog, described as small. Tr. 9; Judgement at 3. Tenant testified that

the dog was in the apartment for about five minutes and then they received a call from the

Landlord informing them that they had incurred a $600 dog fine. Tr. at 9; Defendant’s

Exhibit D, Lease Charge for Pet Violation. Tenant testified that the dog did not damage

the unit, was removed immediately and the tenants had no further pets in the unit. Tr. 10.

Tenant subsequently paid the $600 pet penalty so she could sublet her unit. Tr. 11.

III. Standard of Review

Appeal of a small claims case is to the district court and is governed by Iowa

Code §631.13,

The judge shall decide the appeal without regard to technicalities or defects which have not prejudiced the substantial rights of the parties, and may affirm, reverse, or modify the judgment, or render judgment as the judge or magistrate should have rendered.

Iowa Code §631.13(4).

5 James Clark is President of Apts Downtown, Iowa Secretary of State business entities database https://sos.iowa.gov/search/business/%28S%28vp4zpu45vrsakhnloa5levyd%29%29/officers.aspx and Joe Clark is the general manager. James Clark “Developed and owns more Iowa City real estate than anyone else (301 parcels assessed at $93.6 million), providing housing to more than 1,000 university students, as well as businesses, mostly in the downtown area.” Iowa Press Citizen, http://www.press-citizen-media.com/150/clarkja.html.

2

In Sunset Mobile Home Park v. Parsons, 324 N.W.2d 452 (Iowa 1982), an appeal

of a small claims landlord tenant case to district court, the Supreme Court held,

The district court conducts a de novo review on the record before the magistrate unless it finds the record inadequate for the purpose of rendering a judgment, in which case it may order additional evidence to be presented. Ravreby v. United Airlines, Inc., 293 N.W.2d 260, 262 (Iowa 1980)… [on de novo review the court] will “review the facts as well as the law and determine from the credible evidence rights anew on those propositions properly presented, provided issue has been raised and error, if any, preserved in the trial proceedings." In re Marriage of Full, 255 N.W.2d 153, 156 (Iowa 1977).

Sunset Mobile Home Park v. Parsons, 324 N.W.2d at 454.

On de novo review, the reviewing court will, “….give considerable deference to

the [trial court's] credibility determinations because the court has a firsthand opportunity

to hear the evidence and view the witnesses.” In re Marriage of Berning, 743 N.W.2d

872 at ¶30 (Iowa App. 2007) citing In re Marriage of Brown, 487 N.W.2d 331, 332

(Iowa 1992); see also Payton Apartments, Ltd. v. Board of Review of City of Des Moines,

358 N.W.2d 325, 329 (Iowa App. 1984) (trial court in a much better position to weigh

the credibility of witnesses and weight given to the trial court's decision even in a de

novo review.)

IV. Questions Presented

A. Was the $600 pet charge a penalty or liquidated damages?

B. Does the IURLTA prohibit liquidated damages?

C. Can a residential lease contain a provision banning all pets?

D. Did Landlord willfully use a rental agreement with known prohibited

provisions ?

E. Did the trial court properly award attorney fees?

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V. Argument

A. The $600 Pet Penalty was a Penalty Not Liquidated Damages

Section 54 of Tenant’s lease states, “No animals allowed in the building or on the

premises. If pets are found on the property a penalty of $600 per pet plus $20.00 per day

will be charged for each violation.”6 As the evidence at trial established, after a brief

visit by Tenant’s family dog, which caused no damage, Tenant was assessed and paid the

$600 penalty. In its ruling the trial court used a liquidated damages analysis, “…

Defendant’s lease in this case labels the $600.00 fee for having any animal in the

property or premises as a ‘penalty’ and this Court determines it to be the same. The

$600.00 fee provisions is not a liquidated damages clause.” Judgement at 8.

The trial court held,

A liquidated damages provision will be held to violate public policy and hence will not be enforced, when it is intended to punish, or has effect of punishing, a party for breaching the contract or when there is a large disparity between the amount payable under the provision and the actual damages likely to be caused by a breach, so that in effect [it] seeks to coerce performance of the underlying agreement by penalizing non-performance and making a breach prohibitively and unreasonably costly. Barrie School v. Patch, 401 Md. 497, 933 A.2d 382, 225 Ed. Law Rep. 973 (2007) See Restatement (Second) of Contract §356 (1981).

Judgement at 8.

It is well settled in leases, as in any contract, that a party may not use a lease to

profit from a breach of contract,

A party seeking to recover for breach of contract is entitled only to be placed in as good a position as the party would have occupied had the contract been performed. Midland Mut. Life Ins. Co. v. Mercy Clinics, 579 N.W.2d 823, 831 (Iowa 1998). A party is not entitled to use the breach to better its position by recovering damages not actually suffered. Id. These propositions are equally true when the contract calls for liquidated damages. Liquidated damages are permitted in contracts as long as they do not constitute a

6 Lease, Defendant’s Exhibit A.

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penalty. Aurora Bus. Park Ass'n v. Michael Albert, Inc., 548 N.W.2d 153, 156 (Iowa 1996); Restatement (Second) of Contracts § 356 (1981). Whether a contract provision is a valid liquidated damages clause or an enforceable penalty is a question of law. Aurora Bus. Park, at 155. Liquidated damages are not penalties if they are set at an amount reasonable in light of the anticipated or actual loss caused by the breach. Rohlin Constr. Co. v. City of Hinton, 476 N.W.2d 78, 80 (Iowa 1991). In this case, the amount of liquidated damages provided by the contract was not reasonable in light of the actual loss sustained by the breach.

Grunwald v. Quad City Quality Service, Inc., 662 N.W.2d 370 at ¶¶31-2. (Iowa

App. 2003).

While Landlord at trial and in its Brief attempts to characterize the pet fee as

liquidated damages,7 Landlord’s own lease characterizes the pet fee as a “penalty” and at

trial Joseph Clark, general manager for Landlord, admitted the punitive nature of the fee

saying, “I guess I’m not saying it’s just an administrative fee…it involves several things,

including, you know, the deterrent…” Tr. at 91. Clearly Landlord is seeking to deter

tenants from having pets and to punish them if they do,

The parties to a contract may effectively provide in advance the damages that are to be payable in the event of breach as long as the provision does not disregard the principle of compensation…However, the parties to a contract are not free to provide a penalty for its breach. The central objective behind the system of contract remedies is compensatory, not punitive. Punishment of a promisor for having broken his promise has no justification on either economic or other grounds and a term providing such a penalty is unenforceable on grounds of public policy.

Rohlin Construction v. City of Hinton, 476 N.W.2d 78 (Iowa 1991).

Furthermore, the essence of liquidated damages is that they are “liquidated” or

fixed in the contract or lease, “…parties may fix damages by contract when the amount

of damages is uncertain and the amount fixed is fair. Rohlin, 476 N.W.2d 78, 79 (Iowa

7 Appellants’ Brief at 8-10.

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1991). The trial court questioned Joseph Clark, general manager for Landlord on just

this point,

Q. [by the Court] So it’s not what you would classify as a liquidated damages clause? So, if someone had a pet, you would charge them this fine, but then that’s all you would charge them if there were damages to the property or what?A. [Joseph Clark] If someone had a pet and they got caught, they would get charged the $600. And then if there’s damages found, then they could be charged in addition to that.

Tr. at 90-1.

The pet penalty is not an isolated instance of this policy. Landlord’s lease §48

states, “No grilling, parties or events of any kind are permitted in common areas…A fee

of $150 plus actual damages will be charged out for each occurrence.”8 Lease §52

states, “Natural evergreen trees and pumpkins are not allowed in the apartments or on

balconies for safety reasons. A violation may result in a $50 penalty plus cleanup

charges.”9

In her Response to Defendant’s Hearing Memorandum,10 Tenant argued that the

fact that Landlord intended to exact the both $600 fee and in addition any actual

damages, rendered this a penalty, not liquidated damages, citing the Florida Supreme

Court’s decision in Daniel Lefemin v. Judith Barron, 573 So. 2d 326,

In J. Calamari & J. Perillo, The Law of Contracts § 14-32, at 645 (3d ed. 1987), the authors state: 14-32. Two Pitfalls of Draftsmanship: The Shotgun Clause and the Have Cake and Eat It Clause, Another pitfall into which contract draftsmen have plunged involves an attempt to fix damages in the event of a breach with an option on the part of the aggrieved party to sue for such additional actual damages as he may establish. These have been struck down as they do not involve a reasonable attempt definitively to estimate the loss…We hold that the default provision in the subject contract was not enforceable as a liquidated damages clause. The provision

8 §48, Lease, Defendant’s Exhibit A.9 $52, Lease, Defendant’s Exhibit A.10 Plaintiff’s Response to Defendant’s Hearing Memorandum at 2.

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constituted a penalty as a matter of law because the existence of the option negated the intent to liquidate damages.

Daniel Lefemin v. Judith Barron, 573 So. 2d 326 at ¶33-9 (Florida, 1991).

Clearly the $600 pet charge was a penalty and not liquidated damages as the

lease itself characterizes the pet charge as penalty, Landlord admitted its punitive nature

and Landlord’s policy was to charge the penalty in addition to any actual damages caused

by the pet.11

B. The IURLTA Prohibits the Use of Liquidated Damages Provisions In its Brief, Landlord argues that, “nothing in the IURLTA prohibits the use of

liquidated damages provisions.”12 This in incorrect, since the IURLTA requires that

Landlords charge only their actual damages. As we shall see, since only actual damages

can be charged to tenants and liquidated damages provisions are a substitute for and in

lieu of actual damages, liquidated damages provisions are illegal under the IURLTA. In

addition, liquidated damages clauses illegally shift the burden of proof onto tenants and

are inappropriate as the damages in a residential rental setting are simple and easy to

determine. Tenant believes that this issue, the legality of liquidated damages under the

IURLTA, is the most important issue presented in the instant appeal, with the most far

reaching consequences.

11Tenant would also note that liquidated damages clauses are only allowed in circumstances when, “actual damages were indeterminable or difficult to measure at the time the parties entered into the contract.” Cottingham & Butler Insurance Services, Inc. v. Jacoway, No. 0-645 / 10-0412 at ¶62 (Iowa App. 2010); see also American Soil Processing Inc. v. Iowa Comprehensive Petroleum Underground Storage Tank Fund Board, 586 N.W.2d 325 at ¶83 (Iowa 11/25/1998) citing Restatement (Second) of Contracts § 356 cmt. a, at 157 (purpose of liquidated damages provision is to provide a way to establish damages for nonperformance when those damages would otherwise be difficult to determine). Damages for breach of a residential lease are not difficult to determine as they consist merely of the landlord’s reasonable out of pocket costs for labor and materials. See e.g., City Wide Associates v. Supreme Judicial Court of Mass., 564 N.E.2d 1003 at ¶14 (Mass 1991) (“…cost of materials and labor to repair the damage done by the tenant”). Thus liquidated damages provisions are not permissible in residential leases.12 Appellant’s Brief at 8.

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In her Hearing Memorandum, filed before trial, Tenant argued that under the Iowa

Uniform Residential Landlord Tenant Act (“IURTLA”) that landlords could only charge

their actual damages.13 The Iowa Supreme Court has held that when a lease is breached

a landlord may only recover their actual damages,

…we agree with [the tenant] that the landlord is not entitled to recover if no evidence substantiates that actual damage has been sustained. Section 562A.32 provides the landlord "may have a claim . . . for actual damages for breach of the rental agreement." (Emphasis added.) Even though the aim of the small claims statute is "to secure adjudication of demands for limited amounts quickly, simply, and inexpensively," Roeder, 321 N.W.2d at 4, "[j]udgment shall be rendered, based upon . . . a preponderance of evidence." Iowa Code § 631.11(4). Here, the landlord did not present any testimony or other evidence to support the value of its demand for debris removal. In fact, the landlord did not present evidence that Frost's debris was removed. Absent evidence that actual damages were sustained, it was error to award any sum for debris removal.

D.R Mobile Home Rentals v. Frost, 545 N.W.2d 302 at ¶34-5 (Iowa 1996).

The IURLTA repeatedly limits both landlords and tenants to the amount of their

actual, proven damages. Section 562A.32, cited in D.R Mobile Home Rentals, states, “If

the rental agreement is terminated, the landlord may have a claim for possession and for

rent and a separate claim for actual damages for breach of the rental agreement and

reasonable attorney's fees as provided in section 562A.27.” Section 562A.27 regulates a

landlord’s remedies if a tenant fails to comply with the rental agreement or the tenant’s

obligations under §562A.17 which include cleaning and not damaging the premises.

What §562.32 makes clear is that a landlord is limited to recovering actual damages for

the tenant’s breach of the lease or other statutory obligations. Five separate sections of

the IURLTA limit tenants to actual damages14, three sections limit landlords to actual

13 Plaintiffs’ Hearing Memorandum at 5.14 §§562A.11, 562A.12, 562A.22, 562A.26 & 562A.36

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damages15 while §562A.35 limits both landlords and tenants to actual damages. The

requirement of actual damages is thus pervasive in the IURLTA.

Since proof of the amount of actual damages is required, a residential lease cannot

include liquidated damages, since the very purpose of liquidated damages is to obviate

any need to prove or even determine actual damages. See American Soil Processing, Inc.

v. Iowa Comprehensive Petroleum Underground Storage Tank Fund Bd., 586 N.W.2d

325, 333 (Iowa 1998) (parties include liquidated damages clauses in their contracts to

provide alternative to providing proof of actual damages).

In addition, liquidated damages provision illegally shift the burden of proof onto

tenants. The Supreme Court held in Gordon v. Pfab, 246 N.W.2d 283, 288 (Iowa 1976),

A party who contends that a liquidation clause is in reality a penalty has the burden to plead that fact and prove the actual damages in the trial court. Korshoj v. Mills, 156 F.Supp. 138, 139 (S.D.Iowa 1957); Heaberlin v. Heaberlin, 255 Iowa 403, 409, 122 N.W.2d 841, 844 (1963); Pace v. Zellmer, 194 Iowa 516, 518, 86 N.W. 420, 421 (1922).

Gordon v. Pfab, 246 N.W.2d at 288. This requirement of proof of actual damages by a

party seeking to show that a liquidated damage clause is a penalty conflicts with Iowa

Code §562A.12(3)(c), “In an action concerning the rental deposit, the burden of proving,

by a preponderance of the evidence, the reason for withholding all or any portion of the

rental deposit shall be on the landlord.” By placing a liquidated damages provision in a

lease a landlord is able to shift the burden of proof of actual damages to the tenant in

violation of the IURLTA and the Supreme Court’s decision in D.R Mobile Home Rentals

v. Frost, 545 N.W.2d 302 at ¶34-5 (Iowa 1996).16

15 §§562A.29, 562A.32, 562A.34.16Note that Iowa Code 562A.3 provides, “Unless displaced by the provisions of this chapter, the principles of law and equity in this state,…shall supplement its provisions.”

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Under the IURLTA as there were no actual damages due to the pet, the Landlord

is not entitled to recover damages for breach of the lease. This is not, however, to argue

that the Landlord is without any legal remedy. Under Iowa Code § 562A.27, the

Landlord could have issued a seven day letter to the tenant insisting that they remove the

dog and if the dog was not removed Landlord could terminate the Tenant’s lease. As

noted, in addition, if there was actual damage by the dog, under Iowa Code §§562A.27&

562A.32, the Landlord could recover their reasonable costs of labor and materials for

repair and cleaning.

While the trial court did not rely in its ruling on Tenant’s argument that only

actual damages are permitted under the IURLTA this argument was made to the Court in

Tenant’s pre-trial Hearing Memorandum. The Supreme Court in Devoss v. State, 648

N.W.2d 56 (Iowa 2002) ruled,

We have in a number of cases upheld a district court ruling on a ground other than the one upon which the district court relied provided the ground was urged in that court. See, e.g., Interstate Power Co. v. Ins. Co. of N. Am., 603 N.W.2d 751, 756-58 (Iowa 1999) [additional citations omitted] We have likewise applied the rule in reversing a district court ruling. See Fencl v. City of Harpers Ferry, 620 N.W.2d 808, 811-12, 818-19 (Iowa 2000)

Devoss v. State, 648 N.W.2d 56 at ¶43-4.

Futhermore on appeal of a small claims judgment, the district court may, “…

affirm, reverse, or modify the judgment, or render judgment as the judge or magistrate

should have rendered.” Iowa Code §631.13(4). On district court appeal of a small

claims case the court will “review the facts as well as the law and determine from the

credible evidence rights anew on those propositions properly presented, provided issue

has been raised and error, if any, preserved in the trial proceedings." In re Marriage of

Full, 255 N.W.2d 153, 156 (Iowa 1977).

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Tenants certainly agree that the pet charge is clearly an illegal penalty and is also,

as the trial court held, clearly unconscionable.17 However, the root problem is that

Landlord insists on including in its lease a wide variety of charges that exceed its actual

damages and force its tenants to pay its overhead and ordinary costs of doing business.

Having had its $600 “pet penalty” found to be a penalty and unconscionable,

Landlord has, for example, in later leases, changed the pet charge to a $200

“administrative fee.” Attached to this brief is a listing of the 38 different sections in

tenant’s lease18 with excessive penalties and charges exceeding actual damages. Given

the plethora of charges it will be easy for Landlord to keep changing how the fees are

labeled and their amount, requiring an individual determination, either under a liquidated

damage or unconscionability standard, for every permutation of every charge, burdening

tenants and this court with endless lawsuits.

Given the drastic difference in the bargaining power of Landlord, with thousands

of tenants, while its tenants are typically young undergraduates of the University of Iowa,

the wisdom of the drafters of the IURLTA in requiring actual damages is clear. Allowing

liquidated damages gives a green light to Landlord to continue abusing its tenants with

penalties and excessive charges, like the $600 pet penalty at issue in this case. By

following the clear dictates of the IURLTA. which forbids landlords charging anything

but their actual, proven damages and thus excludes liquidated damages, both landlords

and tenants are protected and a clear, bright line standard is determined once and for all.

17 Judgement at 8.18 Lease, Defendant’s Exhibit A.

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C. A Residential Lease Cannot Ban All Animals

Section 54 of Tenant’s lease states, “No animals allowed in the building or on the

premises.”19 The Trial Court in its ruling held that this provision was illegal under the

Iowa Civil Rights Act, Iowa Code §216, as it prohibited service animals.20

While Tenant in this case did not have a service animal, actual enforcement of a

lease provision is not necessary, mere inclusion in the lease is sufficient under §562A.11.

In Staley v. Barkalow, 3-255 / 12-1031 (Iowa App. 2013) the Court of Appeals held,

the trial court erred in interpreting chapter 562A to require the landlord's enforcement of a prohibited provision as a prerequisite to a tenant suffering injury or harm in all situations. Specifically, we decide "willfully uses, " in Iowa Code section 562A.11(2), does not require "willful enforcement, " but encompasses a landlord's "willful inclusion" of prohibited provisions.

Staley at 14.

Iowa Code §216C.5 states, “A landlord shall waive lease restrictions on the

keeping of a guide dog for a blind person.” Similarly, §216C.10 states, “A landlord

shall waive lease restrictions on the keeping of dogs for a deaf or hard-of-hearing

person with a hearing dog.” However, as the Trial Court notes, Landlord’s lease

prohibits all animals and does not contain a waiver for the blind, deaf or hard of

hearing and therefore the Trial Court was correct in finding Landlord’s lease to be

illegal on these grounds.

D. Landlord Willfully Used a Lease with Known Prohibited Provisions

As we have seen liquidated damages provisions clearly violate the IURLTA

because they violate a Tenant’s right under numerous provisions to only be charged

their actual damages.

19 Lease, Defendant’s Exhibit A.20 Judgement at 9-10.

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Iowa Code §562A.11(2) provides,

If a landlord willfully uses a rental agreement containing provisions known by the landlord to be prohibited, a tenant may recover actual damages sustained by the tenant and not more than three months' periodic rent and reasonable attorney's fees.

Appellant makes a variety of arguments with regard to knowledge, stating that it

could not have actual knowledge due to the lack of any previous court ruling, its

attorney’s opinion, etc. However, in Staley v. Barkalow, 3-255 / 12-1031 (Iowa App.

2013) the Court of Appeals held,

On remand, the district court should consider whether the challenged lease provisions are provisions that "shall not be included, " and whether the inclusion was made willfully and knowingly. See id. § 562A.11; see also Summers, 236 P.3d at 593 (stating landlord's "provision requiring tenants to pay its attorney fees in any legal dispute is clearly prohibited by the Landlord and Tenant Act, and [landlord] should have known that from simply reading the Act").

Staley at 24.

Since the violation of the IURLTA was clear, knowledge on the part of Landlord

can be presumed. In addition, during trial Landlord’s counsel established that Joseph

Clark, general manager for Landlord, was an expert on the IURLTA. Mr. Clark testified

that he had been general manager of Landlord for 15 years and was involved in all

litigation including leases.21 Mr. Clark testified at length, showing his familiarity with

the IURLTA, its practical application and in particular with what provisions were

prohibited,

Q. [by Landlord’s Counsel]: Are you familiar with the code section that deals with what provisions are prohibited?A. [Joseph Clark] Yes, I am.Q. What section is that? A. It’s right here under 562A.11Q. Why don’t you read what it says.

21 Tr. at 68-9.

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A. “A rental agreement shall not provide that a tenant or landlord (a) agree to waive or forego other rights or remedies under this chapter provided that this restriction shall not apply to rental agreements covering single family residents [sic] or land assessed as agricultural land and located in an unincorporated area.”Q. Does that apply to this case? Is this land agricultural?A. No, it does not.

Tr. 72.

This is not a case involving a small mom and pop landlord renting out their

upstairs room, but a very large, experienced, sophisticated landlord whose general

manager has testified as to his intimate familiarity with the IURLTA. As the Staley Court

held Landlord’s knowledge of such clear violations of the IURLTA must be presumed.

E. The Trial Court’s Award of Attorney Fees was Appropriate

Appellant argues that the trial court inappropriately awarded $5,550 in attorney

fees asserting that the fees exceeded the jurisdictional limit of the small claims division

and were unreasonable.

Section 562A.11(8) provides, “The court may, in any action on a rental

agreement, award reasonable attorney fees to the prevailing party.” Reasonable attorney

fees are defined as, “means fees determined by the time reasonably expended by the

attorney and not by the amount of the recovery on behalf of the tenant or landlord.” Iowa

Code §562A.6(8).

1. Attorney Fees are Costs and Not Part of the Jurisdictional Limit of the Small Claims Division

The Supreme Court has held that attorneys fees are taxed as costs. See Ayala v.

Center Line, Inc., 415 N.W.2d 603 (Iowa 1987) citing Maday v. Elview-Stewart Sys.,

Co.,324 N.W.2d 467 (Iowa 1982) . As such attorney fees are not included in the $5000

jurisdictional limit of a small claims case. “A civil action for a money judgment where

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the amount in controversy is five thousand dollars or less for actions commenced on or

after July 1, 2002, exclusive of interest and costs. Iowa Code §631.1(1).

In Ayala the defendant made an almost identical argument, asserting that the

attorney fees could not be assessed as the plaintiff had failed to present attorney fee

evidence to the jury at trial. The Supreme Court rejected this argument citing Maday

and holding that, “we sided with those authorities treating statutory allowance of attorney

fees as a court cost logically assessable by the court.” Ayala, 415 N.W.2d 603.

When a statute provides for attorney fees but is silent as to their ascertainment, we find the better rule to be that "[w]here attorneys' fees are allowed to the successful party, they are in the nature of costs and are taxable and treated as such." 20 Am.Jur.2d Cost § 72 (1965). When faced with a request for the allowance of attorney fees in a modification of a divorce decree, we recognized this rule and stated "attorney fees when authorized by statute, with few exceptions, are taxed as costs in the action in this state. This is too well settled to require reference to the numerous sections of the code relating thereto." Hensen v. Hensen, 212 Iowa 1226, 1227, 238 N.W. 83, 84 (1931). In the absence of a statute indicating other intent, we stand by our pronouncement in Hensen.

Maday v. Elview-Stewart Sys., Co.,324 N.W.2d 467, 469 (Iowa 1982). Finally, rather

than being determined at trial, “The assessment of attorney fees, like the assessment of

court costs, cannot be done until liability has been established.” Maday, 324 N.W.2d at

470.

Landlord’s suggested remedy, transfer to the district court, is impractical. The

amount of attorney fees will not be known until after trial. This means that the case will

initially be tried in small claims and then must be transferred to the district court, to a

judge unfamiliar with the case, for a decision on attorney fees. This is highly impractical

and would burden both litigants and the district court unnecessarily.

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2. The Attorney Fee Award Was Reasonable

Tenant would note that a judicial officer is considered to an expert on determining

attorney fees. Parrish v. Denato, 262 N.W.2d 281, 285 (Iowa 1978). The award of

attorney fees by the trial court was based on affidavits submitted by Tenant’s attorneys

indicating the amount of time spent on the case.22

As to the reasonableness of the attorney fee award no specific issues are raised by

Landlord and only a general contention made that “a small claims action is not

complex.”23 This is certainly not correct in the instant case. Despite being a small claims

case it was tried with four counsel, two for each party, with a court reporter, with several

hours of trial and a 102 page trial transcript. The trial court noted 32 separate pleadings

filed in the case.24 Both parties filed extensive hearing memoranda raising multiple legal

and factual issues. Appellant’s own brief is 15 pages long and addresses 5 separate

issues. There are legal issues of first impression raised in this case by the Iowa Tenants’

Project which apply to thousands of other tenants in both Iowa City and across the state

and are likely, as in Staley v. Barkalow, to be the subject of one or more appellate

decisions. Despite originating in the Small Claims Division, this is a complex case.

3. An Attorney Fee Award is Appropriate Even When the Prevailing Party had Pro Bono Representation

Finally, Landlord argues that as Tenant was in forma pauperis and received pro

bono representation that the Court cannot award attorney fees.25 Tenants believes that an

award of IURLTA statutory attorney fees to pro bono counsel is appropriate under Iowa

law. Under the Iowa Rules of Professional Conduct governing pro bono legal services,

22 Attorney Fee Affidavits; Judgment at 2. 23 Appellant’s Brief at 15.24 Judgment at 1-2.25 Appellant’s Brief at 15.

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…services rendered cannot be considered pro bono if an anticipated fee is uncollected, but the award of statutory attorneys’ fees in a case originally accepted as pro bono would not disqualify such services from inclusion under this section

Iowa Rules of Professional Conduct 32:6.1 comment 4; see also In re Legislative

Districting of General Assembly, 193 N.W.2d 784, 791-2 (Iowa 1972) (request for

attorney fees by pro bono litigants denied due to lack of statutory authorization for

payment of attorney fees).

In Cariaso v. Coleman, No. 4-080 / 03-1174 at ¶37 (Iowa App. 2004) the Iowa

Court of Appeals, even after stating that the petitioner was represented by the Iowa Legal

Aid Society, found that an award of appellate attorney fees to the petitioner were

appropriate. Tenant would note that the Legal Aid Society provides pro bono

representation.26

Some courts have denied attorney fees to pro bono litigants on the grounds that

the relevant statute required attorney fees to be “incurred” See, e.g., Wilkins v. Sha'ste

Incorporated, 99167 at ¶¶10-13 (Ohio App. Dist.8 08/15/2013). However Section

562A.11(8) provides, “The court may, in any action on a rental agreement, award

reasonable attorney fees to the prevailing party.” Reasonable attorney fees, “means fees

determined by the time reasonably expended by the attorney and not by the amount of the

recovery on behalf of the tenant or landlord.” Iowa Code §562A.6(8).

Read together these sections require that for an award of attorney fees that a party

must prevail and that the fee set by the court must be reasonable, there is no statutory

requirement that the fees actually be incurred. See e.g. Brown v. Commission for Lawyer

Discipline, 980 S.W.2d 675 (Tex.App. Dist.4 1998) (attorney fees awarded to pro bono

26 “Free legal help with civil law problems for eligible low-income Iowans.” Legal Aid Society website http://www.iowalegalaid.org/

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attorney as statute does not require fees be contracted-for or incurred; the rules merely

require that an award of attorney fees be reasonable).

In fact, §562A.6(8) appears to contemplate that in a situation where the attorney

agreed to a contingent fee arrangement, that the court could not give attorney fees based

on the fees as actually agreed or paid, but must instead award fees based on a different

measure, that of the time reasonably expended by the attorney. In upholding an attorney

fee award to a party with pro bono representation, the 8th Circuit Court of Appeals in

Cornella v Schweiker, 728 F.2d 978 (8th Circuit 1984) held,

Once the actual fee arrangements between the attorney and client are excluded from computation of the award, there is no logical distinction which can be drawn between cases in which fees have been incurred and those in which they have not.

Cornella v Schweiker, 728 F.2d 978 at ¶43.

Another concern raised in some cases is that the client, having not incurred

attorney fees, receives a windfall if attorney fees are awarded. However the Judgement

in the instant case appears to award attorney fees directly to the attorneys themselves.

See Pearson v. Pearson, 488 S.E.2d 414, 426 (W. Va. 1997) (attorney fees "may be

awarded to a party who received free legal aid services or pro bono legal representation…

such an award is to compensate and reimburse for legal services rendered and shall not be

paid to the litigant."); see also Benavides v. Benavides, 526 A.2d 536, 539 n.2 (Conn.

App. Ct. 1987) (reasoning that "[t]o avoid a windfall to the plaintiff, the award of

attorney's fees should be made directly to the organization providing the legal services.")

Courts have also pointed out that a party opposed by an indigent defendant with

pro bono representation would itself receive a windfall if otherwise appropriate attorney

fees are not awarded. See, e.g. Matter Entertainment Partners v. Gail Davis, 590

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N.Y.S.2d 979 at ¶49 (NY Supreme Ct. NY County 1992). Accepting Landlord’s

argument would give landlords an incentive to discriminate against poorer tenants, secure

in the knowledge that even if the tenant prevails, no attorney fees could be awarded.

While some courts have refused to allow attorney fee awards unless the fees were

actually paid, see e.g., Patronelli v. Patronelli, 623 S.E.2d 322, (N.C.App. 2006), the

greater weight of precedent allows the award of attorney fees even when a client has

received pro bono representation.27 Courts have found numerous basis to support the

award of attorney fees even when representation has been pro bono observing that this

approach is,

"an incentive to lawyers and organizations to accept and pursue actions and proceedings otherwise avoided by private practitioners" (Nassau Trust Co. v Belfield, 89 Misc. 2d 282, 284 [Civ Ct, Kings County 1977, Goldstein, J.]). Absent a tie of blood or affection, it is a rare attorney who will offer free or low-cost assistance to defend an individual from a specious claim, especially given the rising cost of legal services, the view that pro bono work lowers income, and the increasing depersonalization of the practice of law (see generally, Adams, The Legal Profession: A Critical Evaluation, 74 Judicature 77 [1990]). If the individual is poor, chances for legal assistance are even less, for it is widely reported that "only fifteen to twenty percent of the civil legal service needs of the poor are met" (Watkins, In Support of a Mandatory Pro Bono Rule for New York State, 57 Brook L Rev 177 [1991]).

Matter Entertainment Partners v. Gail Davis, 590 N.Y.S.2d 979 at ¶50 (NY Supreme Ct.

NY County 1992); See also In re Marriage of Swink, 807 P.2d 1245 (Colo. App. 1991);

Miller v. Wilfong, 119 P.3d 727, 730-31 (Nev. 2005) (award of attorneys' fees to pro

bono counsel was proper, "[t]o impose the burden of the cost of litigation on those who

volunteer their services, when the other party has the means to pay attorney fees, would

27See, e.g. Martin v. Tate, 492 A.2d 270, 274 (D.C. 1985); In re Marriage of Brockett, 474 N.E.2d 754, 756 (Ill. App. Ct. 1984); Butler v. Butler, 376 So. 2d 287, 287 (Fla. Dist. Ct. App. 1979); In re Marriage of Gaddis, 632 S.W.2d 326, 329 (Mo. Ct. App. 1982); Ferrigno v. Ferrigno, 279 A.2d 141, 142 (N.J. Super. Ct. Ch. Div. 1971); Sellers v. Wollman, 510 F.2d 119, 123 (5th Cir. 1975); Folsom v. Butte County Ass'n of Governments, 652 P.2d 437, 447 n.26 (Cal. 1982).

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be unjust”). The award of attorney fees even when representation is pro bono is

generally accepted in Federal courts as well.28

VI. Conclusion

This case is very simple: Landlord imposed, through its lease, a $600 pet penalty

on Tenant for a brief dog visit that caused no damage. The trial court properly ruled that

this was illegal under contract principles and unconscionable under the IURLTA.

Tenant argued to the trial court that the IURLTA only permits actual damages and

thus is permitted to raise this point on district court appeal to sustain or supplement the

trial court’s ruling. Since liquidated damages are a substitute for actual damages and

illegally shift the burden of proof it is clear that liquidated damages are illegal under the

IURLTA as well.

Tenant’s Counsel does not want the Court’s attention diverted from the real issue

in this case, the legality of lease clauses under the IURLTA, into a tussle over attorney

fees. While Tenant’s Counsel would certainly appreciate being paid for their hard work,

their primary purpose is to determine the legality of widely used lease provisions under

the IURLTA in a quest for fair play for both landlords and tenants. Tenant’s Counsel are

perfectly willing to continue their representation on a pro bono basis as it is both an honor

and a privilege to be able to speak for those whose voices, due to their transience,

inexperience and poverty, would otherwise not be heard.

28 See, under 42 USC § 1988, Martin v Heckler, 773 F2d 1145, 1152 [11th Cir 1985]; and Oldham v Ehrlich, 617 F2d 163, 168 [8th Cir 1980]; see, under Equal Access to Justice Act, Ceglia v Schweiker, 566 F Supp 118, 123 [ED NY 1983]; see, as to 42 USC § 2000e-5 [k], New York Gaslight Club v Carey, 447 US 54, 70, n 9 [1980]; see, under Freedom of Information Act, Crooker v U.S. Dept. of Treasury, 634 F2d 48, 49, n 1 [2d Cir 1980]; and see, under Age Discrimination in Employment Act of 1967, Rodriguez v Taylor, 569 F2d 1231, 1244-1246 [3d Cir 1977], cert denied 436 US 913 [1978]).

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WHEREFORE, Plaintiff/Appelle requests that the decision of the trial court be

affirmed, including or additionally, that liquidated damage clauses be found to be illegal

under the IURLTA.

Respectfully submitted

_____________________________CHRISTOPHER WARNOCK AT0009679

532 Center StreetIowa City, IA 52245

(319) 358-9213 chriswarnock@gmail.com

ATTORNEY FOR PLAINTIFF

CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true copy of this document was served on December 26, 2013, via e-mail upon all attorneys of record who have not waived their right to service and/or pro se parties at their respective addresses as shown herein:

James Affeldt C. Joseph HollandElderkin and Pirnie, P.L.C. Holland & Anderson316 Second St SE, Ste 124 123 N. Linn St, Suite 300P.O. Box 1968 PO Box 2820Cedar Rapids, IA 52406 Iowa City, IA 522244jaffeldt@elderkinpirnie.com jholland@icialaw.comAttorney for Joseph Clark Attorney for Joseph Clark& Apartments Downtown & Apartments Downtown

__________________________Christopher Warnock

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Summary of Charges in Excess of Actual Damagesfrom Borer Lease, Defendant’s Exhibit A.

§5(a) $80 a month additional tenant charge§5(b) $500 one additional tenant charge, $200 per month retroactive charge

§6 $10 per day & $50 per month charge failing to have utilities in tenant’s name

§10 $40 for 3 day notice, $250 eviction charge plus costs

§13(a) $100 per hour penalty for failing to be ready for checkout§13(b) $200 TALD late fee§14(a) lost key $10 plus lockout charge $100§14(c) entry lock change $100 minimum charge§14(d) lock out charge minimum $70 during office hours, $90 minimum after office hours, note no calls after midnight.

§18 $10 per lightbulb

§19 $10 per nail hole, plus $70 an hour per person plus materials for painting. $175 per drywall hole bigger than nail.

§26(d) $150 plus clean up charge for items stored on decks

§29 $100 minimum charge for debris or mess caused by tenants or visitors

§33(c) All repairs and maintenance by Iowa City Maintenance, minimum charge one hour, $70 an hour during regular business hour, $90 an hour nights and weekends.

§33(e) estimated prices for maintenance and repair including 1 hour of labor, pre-hung entry door $543-$599, pre-hung hollow core door $289, window screen $110, patio window $325, patio screen $125-$205, mini-blinds $85, towel bar $85, mirror $109, light cover $82, t-stat $95, fire extinguisher $126, smoke detector $116, carpet replacement $875-2600.

§37(a) $100 an hour for not moving out by checkout time

§37(b) $100 per lock charge for failure to hand in all keys at inspection§37(c) $40 an hour per person (6-8 people on cleaning crew) plus $40 service charge for general cleaning. Minimum cleaning fee $150.§37(d) $150 fee for turning off utilities early§37(f) $40 for oven drip pans§37(g) general painting $70 an hour per person plus materials§37(h) $10 per person for waste removal

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§42(a) $150 fee for open windows when heat is on

§47(a) $100 for trash

§48 $150 fee plus “actual damages”

§49(b) $100 excessive noise penalty

§50(a) $150 party non-compliance fee§50(b) $150 disorderly house fee§50(c) $150 free for citations for illegal drugs or alcohol

§51(b) $150 smoking penalty§51(c) $10 per cigarette butt

§52 $50 natural evergreen or pumpkin penalty “plus cleanup charge”

§54 $600 pet fee, plus $20 a day

§57(d) one month’s rent charged for subleasing with failure to sign sublease addendum

§59 Complete release from lease prior to start of lease is 25% of total annual rent

§60 Sublease fees 1BR 2BR 3BR 4 & 5BR

Entire house sublease prior to oct 1 $350 $550 $750 $950Entire house sublease after oct 1 $125 $200 $275 $350Individual sublease $125 $125 $125 $125

§64 $95 failure to shovel snow charge

§65 $150 failure to mow and maintain lawn charge

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