                IN THE SUPREME COURT OF IOWA
                               No. 15–1348

                           Filed May 19, 2017


JOAN WALTON,

      Appellee,

vs.

MARTIN GAFFEY,

      Appellant.


      Appeal from the Iowa District Court for Johnson County, Patrick R.

Grady, Judge.



      A landlord appeals a district court’s ruling on summary judgment

that certain lease provisions are prohibited under the Iowa Uniform

Residential Landlord and Tenant Act and that certified a class of tenants.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.



      James W. Affeldt and Nicholas J. Kilburg of Elderkin & Pirnie,
P.L.C., Cedar Rapids, for appellant.



      Christopher Warnock of The Iowa Tenants’ Project, Iowa City, and

Christine Boyer of The Iowa Tenants’ Project, Iowa City, for appellee.
                                    2

HECHT, Justice.

        A tenant brought this action alleging her lease included several

provisions known by the landlord to be prohibited under the Iowa

Uniform Residential Landlord and Tenant Act (the Act). Claiming status

as an appropriate representative of other similarly situated residential

tenants, the tenant requested certification of a class. On interlocutory

appeal challenging a summary judgment in favor of the tenant and an

order certifying a class of tenants, the landlord contends (1) the lease

provisions are not prohibited under the Act; (2) the tenant has no claim

for damages because even if the lease provisions are prohibited under the

Act, the landlord did not enforce them against the tenant; and (3) the

district court erred in certifying the class.   Upon review, we conclude

some, but not all, of the challenged lease provisions are prohibited under

the Act and we reverse and remand on class certification.

        I. Background Facts and Proceedings.

        Tenant Joan Walton entered into a rental agreement with landlord

Martin Gaffey on March 14, 2014, for a lease term that ended on July 29,

2015.    The agreement included provisions imposing fees, charges, and

liquidated damages in the event of various occurrences.      Paragraph 7

prescribed a charge of $35 if the tenant’s check was returned for

insufficient funds.   Paragraph 8 imposed a “processing administrative

fee” of $35 for “issue and service of each 3-DAY NOTICE TO PAY UNPAID

RENT.”     Paragraph 12 established an administrative fee of $40 if the

tenant failed to register utilities in her name.   Paragraphs 13 and 27

prescribed a fee in the same amount in the event the tenant failed to

keep the utilities registered in her name until the end of the lease term.

A fine of $500 was imposed under paragraph 22 of the agreement if the

tenant was “caught smoking in [the] dwelling unit or interior common
                                     3

area” of the property.   Service calls precipitated by noise complaints,

trash removal, parking violations, unauthorized pets, or posting notices

to the tenant would result in a “minimum trip charge” of $50 payable by

the tenant under paragraph 24 of the agreement. A minimum service

charge of $50 was established in paragraph 25 in the event the tenant

was locked out of the abode and requested the landlord’s assistance in

regaining access after normal working hours. An administrative fee of

$40 for each new approved occupant and a fee of $100 for each

unapproved new occupant were prescribed in paragraph 26.          A fee of

$200 was charged in paragraph 27 in the event the tenant should

sublease the unit. A fee of $500 for keeping an unauthorized animal in

the unit was established under paragraph 28 of the agreement. A fee of

$100 was imposed in paragraph 37 for each inspection attempted by the

landlord as a result of the tenant’s failure to vacate the premise after

termination of the agreement.

      The agreement also included provisions purporting to limit the

landlord’s liability or exculpate him entirely for some types of damages or

losses. For example, paragraph 16 provided as follows:

      Subject to other remedies at law, if LANDLORD is unable to
      give TENANT possession at the beginning of the term, the
      rent shall be rebated on a pro rata basis until possession
      can be given, which rebated rent shall be accepted by
      TENANT as full settlement of all damages occasioned by said
      delay, and if possession can not be delivered within ten days
      of the beginning of said term, this lease may be terminated
      by giving prior written notice of such termination.

Paragraph 20(e) addressed the landlord’s liability for appliance failures.

This provision provided in relevant part:

      In the event of the failure of an appliance that is furnished
      by LANDLORD under this rental agreement, LANDLORD’S
      sole responsibility shall be the repair or replacement of the
      appliance at the LANDLORD’S sole discretion. In no event or
                                           4
       circumstance will LANDLORD be responsible for any loss of
       use or consequential damages caused by said appliance
       failure.

Paragraph 23 of the agreement further provided that “LANDLORD shall

not be liable for damage or loss of any of the TENANT’S personal property

for any cause whatsoever.”

       The agreement also addressed the subject of carpet cleaning.

Paragraph 29 provided in relevant part that “LANDLORD shall have all

carpeting professionally shampooed, paid out of tenants security

deposit.” 1

       Walton filed this action against Gaffey seeking a declaration that

each of the lease provisions mentioned above violated the Act.                        In

particular, Walton alleged the provisions imposing fees, charges, and

liquidated damages in the event of various occurrences violated Iowa

Code sections 562A.11(1), 562A.27, and 562A.32 (2015) because a

landlord may recover only actual damages under the Act.                       Walton’s

petition further asserted the various provisions limiting or exculpating

Gaffey’s liability violated section 562A.11(1).           In addition, the petition

alleged the lease provisions allocating to her the cost of carpet cleaning

are prohibited under the Act because they purport to impose the cost of

carpet cleaning whether or not cleaning was necessary to restore the

dwelling to its condition at the commencement of the lease, ordinary

wear and tear excepted, and because they authorized withholding the

cost of such cleaning from the security deposit. 2              The petition sought

       1Gaffey’s “Tenant Rules and Regulations” also addressed the subject of carpet
cleaning, stating that the “[c]arpet has been cleaned prior to move-in and is required to
be cleaned at move out and at TENANT’S expense only by approved or authorized firms.
At time of move-out a copy of the receipt for cleaning is to be provided to LANDLORD.”
       2Although  Walton’s petition challenged other lease provisions as well, we confine
our discussion to those provisions that were addressed in the district court’s summary
judgment ruling.
                                          5

judgment for actual and punitive damages, injunctive relief, and attorney

fees. Gaffey’s answer denied the agreement’s provisions violate the Act

and urged dismissal of the action.

       A. Motion for Partial Summary and Declaratory Judgment.

Walton filed a motion for partial summary and declaratory judgment.

The motion sought a declaration that the above-mentioned lease

provisions imposing charges, fines, penalties, liquidated damages, or

other fees are prohibited because, Walton contended, a landlord can

recover only actual damages from tenants under the Act. Walton further

urged the court to enter summary judgment declaring that the lease

provision imposing an automatic carpet-cleaning charge and withholding

it from her security deposit violates the Act. 3            Walton’s motion also

sought a summary declaration that paragraphs 20 and 23 of the lease

violate section 562A.11(1)(d) of the Act because they purport to limit or

exculpate Gaffey’s liability arising under law. In addition, Walton urged

the court to declare that Gaffey is liable under the Act as a matter of law

for willfully using the prohibited lease provisions even if he did not

attempt to enforce them against her.

       In his resistance to the tenant’s motion for partial summary
judgment, Gaffey contended the contested provisions are neither

prohibited under Iowa Code section 562A.11(1) nor unconscionable

under section 562A.7(1)(a).          In the alternative, Gaffey asserted that

Walton has asserted no claim that is ripe for adjudication because the




       3Walton’s   motion for summary judgment asserted that whether the cost of
carpet cleaning is withheld from her security deposit or paid to an authorized cleaner,
the Act does not permit Gaffey to impose—without inspection—the cost of cleaning a
carpet that is not in need of cleaning.
                                            6

challenged provisions were not enforced against her. 4                    The landlord

further asserted that even if any of the challenged provisions is

determined to be prohibited under the Act, the record does not support a

finding that he willfully used it with knowledge of its prohibition. Based

on these assertions, Gaffey urged the motion for summary judgment be

denied.

       B. Motion for Class Certification.               Walton also filed a motion

requesting she be certified as representatives of a class consisting of all

of Gaffey’s tenants who signed “the same or substantially similar

standard leases and lease rules.” 5             The motion requested the court

adjudicate for the entire class (1) whether the terms of the lease violated

the Act, and (2) whether Gaffey knowingly and willfully used a rental

agreement containing prohibited provisions.

       Gaffey resisted the certification of the proposed class of tenants,

contending Walton is not a proper representative of the purported class

because the challenged lease provisions were not enforced against her.

Contending Walton has suffered no injury as a consequence of the

inclusion of the challenged provisions in the lease agreement, Gaffey

posited that Walton lacks standing to proceed with her claims and is
therefore not a proper class representative. Certification should also be

denied in this instance, Gaffey asserted, because individual claims and

defenses predominate over common issues across the putative class.




       4In an affidavit filed in support of his resistance to the motion for summary
judgment, Gaffey attests that he does not invoke the carpet-cleaning provision in every
case and instead makes a case-by-case determination whether cleaning is required.
        5Gaffey has admitted in this case that the lease provisions that are the subject of

this case were part of his rental agreements with more than fifty tenants.
                                        7

      C. District Court’s Summary Judgment Ruling.                    The district

court granted Walton’s motion for partial summary judgment. Reasoning

that Gaffey owes his tenant a duty of due care to protect them from

injury, the court declared that paragraph 20(e) (limiting landlord’s

liability for any loss of use or consequential damages arising from

appliance failure) and paragraph 23 (landlord not liable for damage or

loss of any of the tenant’s personal property for any cause whatsoever) of

the agreement purport to exculpate or limit the landlord’s liability in

violation of Iowa Code section 562A.11(1)(d).

      The district court further concluded the lease provisions imposing

the fees, charges, and liquidated damages detailed above were prohibited

under the Act. Citing our decision in D.R. Mobile Home Rentals v. Frost,

545 N.W.2d 302 (Iowa 1996) (per curiam), the district court concluded

the Act allows landlords to recover only actual damages from their

tenants.    Because the fees, charges, and liquidated damages were set

“without any consideration of what the landlord’s actual damages and

fees would be in each situation,” the court concluded the lease provisions

violate the Act.

      The    court    also   decided    the   carpet-cleaning      provision     was

prohibited under the Act because it automatically imposed on Walton a

fee without regard to whether the carpet was clean at the end of the lease

term and because it authorized Gaffey to withhold the cost of the

cleaning from the security deposit without proof that such cleaning was

necessary    to    restore   the   dwelling   unit   to   its   condition   at   the

commencement of the tenancy, ordinary wear and tear excepted.                    The

court concluded, however, that the question of whether Gaffey willfully

used the prohibited provisions is a disputed question of fact for the fact

finder.
                                     8

       In reaching its summary judgment conclusions, the district court

relied on an unpublished decision of our court of appeals in Staley v.

Barkalow, No. 12–1031, 2013 WL 2368825 (Iowa Ct. App. May 30, 2013).

In Staley, the plaintiffs were tenants who alleged their landlord used

several lease provisions prohibited under Iowa Code section 562A.11(1).

Staley, 2013 WL 2368825, at *2. The tenants in that case challenged the

lease provisions on the grounds they constituted illegal indemnity and

exculpatory clauses, required tenants to pay rent even if the landlord

failed to deliver possession of the premises at the commencement of the

lease term, and illegally required tenants to pay for maintenance and

repair of the premises, carpet cleaning, and property damages caused by

third-party vandals. Id. at *2–3. The defendant landlord contended it

had no liability to the tenants under chapter 562A for lease provisions

that were included in the lease but not enforced. Id. at *4–5. The district

court denied the Staley tenants’ motion for partial summary judgment,

concluding the landlord had no liability to the tenants under section

562A.11(2) for including any lease provisions that were not enforced

against them, and denied a motion to certify a class of similarly situated

plaintiffs.   Id. at *5–6.   Our court of appeals reversed, concluding a

landlord “willfully uses” a lease provision prohibited under the Act by

willfully including it in a lease. Id. at *8. The court of appeals also found

the district court abused its discretion in refusing to certify the class of

tenants. Id. at *12.

       We granted Gaffey’s application for interlocutory review.

       II. Scope and Standards of Review.

       The relevant scope and standards of review are detailed in another

of this court’s opinions, filed today.     In Kline v. Southgate Property

Management, L.L.C., a case involving similar issues, we said,
                                      9
            Generally, our standard of review for a declaratory
      judgment ruling depends on whether the action was tried at
      law or in equity in the district court. When we review a
      declaratory ruling entered on summary judgment, however,
      our scope of review is for correction of errors at law.
      Summary       judgment     rulings    based     on     statutory
      interpretation are reviewed for correction of errors at law.

            We review a district court’s rulings on certification of a
      class for an abuse of discretion. The district court “enjoys
      broad discretion in the certification of class action lawsuits.”
      Iowa’s “class-action rules are remedial in nature and should
      be liberally construed to favor the maintenance of class
      actions.” A district court abuses its discretion when its
      “grounds for certification are clearly unreasonable.”

___ N.W.2d ___, ___ (2017) (citations omitted) (first quoting Legg v. W.

Bank, 873 N.W.2d 756, 758 (Iowa 2016) and then quoting Anderson

Contracting, Inc. v. DSM Copolymers, 776 N.W.2d 846, 848 (Iowa 2009)).

      III. Analysis.

      We first address Gaffey’s contention that the district court erred in

concluding a tenant against whom a rental agreement provision has

never been enforced has standing to sue her landlord under chapter

562A. We then turn to Gaffey’s alternative contention that even if such a

tenant could have standing to challenge a prohibited rental agreement

provision, the district court erred in concluding any of the provisions

assailed by Walton are prohibited under section 562A.11(1). Lastly, we

address Gaffey’s assertion that the district court abused its discretion in

certifying a class of tenants in this action.

      A.   Standing.     Because it is undisputed that he has made no

attempt to enforce the challenged lease provisions against Walton, Gaffey

argues the summary judgment record is devoid of evidence of any

injurious effect necessary to sustain standing to sue. Accordingly, Gaffey

suggests, Walton’s claims in this case are purely hypothetical or

academic—not concrete, ripe, and justiciable.          We rejected these
                                   10

arguments in Kline and reject them here for the same reasons.         See

Kline, ___ N.W.2d at ___.

      B. Fees, Charges, and Liquidated Damages Provisions.            The

district court concluded all of the challenged fees, charges, and

liquidated damage provisions in the leases are prohibited under the Act

“because they were set without any consideration of what the landlord’s

actual damages and fees would be in each situation.” As we have already

noted, the district court reached this conclusion because it believed our

decision in Frost required it.    See Frost, 545 N.W.2d 302.       Gaffey

contends reversal is required on this issue because the fees, charges,

and liquidated damages provisions challenged by the tenant in this case

are not prohibited under the Act. We resolved this issue in the landlord’s

favor in Kline.   For the reasons we articulated there, we conclude the

summary judgment ruling in Walton’s favor on this issue must be

reversed. See Kline, ___ N.W.2d at ___.

      As in Kline, however, we emphasize that

      the district court did not decide whether any of the fees,
      charges, and liquidated damage provisions challenged in this
      case by the tenants are unconscionable under section
      562A.7 or unenforceable penalties under any other principle
      of law or equity supplementing the Act.

Id. at ___. Accordingly, those issues remain for resolution in proceedings

on remand.

      C. Carpet-Cleaning Provision. The district court concluded the

carpet-cleaning provision in paragraph 29 of Gaffey’s rental agreement is

prohibited because it provides for automatic cleaning whether the carpet

needs cleaning or not and authorizes withholding of the cost of such

cleaning from the security deposit.     Gaffey contends the district court

erred on this issue because the record demonstrates the provision is not
                                     11

automatically invoked against tenants and because it is properly

understood as the parties’ expression of their expectations of cleanliness

at the beginning and end of the lease term.          In other words, Gaffey

explains, the professional carpet-cleaning requirement ensures the

carpet is returned to the condition it was in at the commencement of the

lease term, ordinary wear and tear excepted.               See Iowa Code

§ 562A.12(3)(a)(2) (permitting withholding such amounts from a security

deposit as are reasonably necessary “[t]o restore the dwelling unit to its

condition at the commencement of the tenancy, ordinary wear and tear

excepted”).

      We addressed the       legality of an       automatic carpet-cleaning

provision in a residential rental agreement in De Stefano v. Apts.

Downtown, Inc., 879 N.W.2d 155 (Iowa 2016).          The agreement in that

case provided,

      The carpets throughout the building are professionally
      cleaned each time apartments turn over occupancy. Tenants
      agree to a charge starting at $95 (efficiency) not to exceed
      $225 (6+ bedrooms) being deducted from the deposit for
      professional cleaning at the expiration of the Lease.

Id. at 160. We decided that the provision conflicted with the Act because

“it generates an automatic deduction from the rental deposit even when

none of the conditions of section 562A.12(3) have been met.” Id. at 185.

We acknowledged in De Stefano, however, that Iowa Code section

562A.12 “clearly authorizes the deduction of carpet-cleaning costs from

rental deposits if necessary to restore the dwelling to the condition at the

commencement of the tenancy, beyond the ordinary wear and tear.” Id.

at 186. We expressly left room for the possibility that “a landlord may be

able to impose a nonrefundable charge on tenants for automatic carpet

cleaning” not affecting the rental deposit. Id.
                                    12

      In Kline, we concluded the district court erred in declaring the

landlord’s carpet-cleaning provision was prohibited under section

562A.12(3). We reasoned that the language of the rental agreement in

that case was not reasonably understood as an authorization for

automatic withholding of the cost of carpet cleaning from a security

deposit.    It was, we concluded, instead “a provision establishing a

benchmark for the condition of the carpet—a clean carpet—at the

commencement of each tenancy from which subsequent assessments of

ordinary wear and tear can be measured.” Kline, ___ N.W.2d at ___; see

also De Stefano, 879 N.W.2d at 186.

      In this case, the carpet-cleaning provision in paragraph 29 of

Gaffey’s rental agreement with Walton provides: “Landlord shall have all

carpeting professionally shampooed, paid out of tenants’ security

deposit.”   It authorizes the landlord to undertake professional carpet

cleaning and deduct the cost from the security deposit without regard to

whether the cleaning is necessary to restore the carpet to its condition at

the commencement of the tenancy. We think this provision is more like

the carpet-cleaning provision in De Stefano than the one in Kline.

Accordingly, we affirm the district court’s determination that the carpet-

cleaning provision in paragraph 29 is unenforceable under law.         See

De Stefano, 879 N.W.2d at 186. Our confidence in the conclusion that

the subject provision is unenforceable is not diminished by the

undisputed fact that Gaffey made no effort to enforce the provision

against Walton; neither is it diminished by Gaffey’s assertion—supported

by substantial evidence in the summary judgment record—that he

exercises discretion in enforcing the provision and only does so when

necessary under the circumstances. As written, paragraph 29 amounts

to an agreement by Walton to waive her right to insist that Gaffey
                                           13

withhold from the security deposit only such amounts as are reasonably

necessary to restore the carpet to its condition at the commencement of

the tenancy, ordinary wear and tear excepted.                      See Iowa Code

§ 562A.12(3)(a)(2).      We therefore affirm the district court’s conclusion

that the carpet-cleaning provision in paragraph 29 of the rental

agreement is a prohibited provision. 6 See id. § 562A.11(1)(a).

         D. Certification of the Class. Gaffey contends the district court

made both procedural and substantive errors in certifying the class of

tenants.       In certifying the class, the district court again relied on the

decision of the court of appeals in Staley, a case brought by tenants

making similar claims against a different landlord.                Staley, 2013 WL

2368825, at *10. Gaffey contends the district court in this case relied

solely on the certification decision in Staley and assumed—without

performing an independent analysis and making findings of fact as to the

substantive       criteria   for   class    certification—that      certification    is

appropriate in this case and Walton is a suitable representative of the

class.

         Today we reverse the certification of a class of tenants in Kline.

See Kline, ___ N.W.2d at ___. The certification of a class in this case is

procedurally flawed for the same reasons and must therefore be reversed.

As in Kline, however, our ruling should not be understood as a

determination that Walton cannot establish the grounds for certification


         6We acknowledge that under Gaffey’s tenant rules, Walton could avoid the
deduction of the cost of mandatory carpet cleaning from the security deposit by hiring a
professional approved by Gaffey to undertake the cleaning and by providing a receipt
evidencing payment for the service. We conclude, however, that the provision still
violates the Act. An unauthorized deduction from the security deposit does not become
authorized merely because the tenant can avoid it by making a separate payment.
                                    14

of a class.   On remand, the court should make the findings required

under Iowa Rule of Civil Procedure 1.263(1).

      IV. Conclusion.

      We affirm the district court’s declaration that paragraphs 20(e), 23,

and 29 of Gaffey’s rental agreement constitute prohibited provisions. We

reverse the district court’s declaration that the other lease and rule

provisions challenged by Walton are categorically prohibited.     We also

reverse the class-certification ruling and remand for further proceedings.

      AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
