Tenants Win Big Fraud Case Against Landlord 

East Bay residents won a $3 million judgment against "notorious" landlord Richard E. Thomas, but will they ever collect? And will he change?

Arek Nathanson knew from the moment he moved into a rented house on Hamilton Place in Oakland that relations with his new landlord, Richard E. Thomas, were going to be rocky. The house was infested with fleas; there was no stove or refrigerator; the stove the landlord finally brought in was broken; the back gate dangled from a lone hinge. Then, when Nathanson and his roommates had had enough and decided to move out, Thomas refused to return most of their deposit.

Nathanson's experience, it turns out, was common among tenants in numerous buildings owned by Thomas throughout the East Bay. Over the years, many tenants had given up on fighting Thomas, a multimillionaire who has been called a "vexatious litigant" by one judge because of his history of suing his tenants and his attorneys. But Nathanson and about two hundred other tenants decided to battle Thomas for as long as it takes. And it might ultimately pay off.

Last month, they won a state appellate court ruling that upheld a $3 million fraud judgment against Thomas. The court found that Thomas had a pattern of cheating his tenants out of their security deposits by claiming that repair costs to their dwellings were far higher than they actually were. Tenants and their attorneys in the class-action case, however, aren't counting their cash yet. They believe Thomas will now appeal the judgment to the California Supreme Court. Thomas also apparently has not changed his ways.

In an interview, Nathanson described Thomas as an "eccentric" landlord whose office desk was piled high with documents and who drove a Peugeot "with a trunk full of paperwork." Thomas, whose worth is between $25 and $35 million, owns about 150 residential units in Alameda County. Calls to Thomas through his property-management company, San Leandro-based Environment and Land Management, and his attorney, Paul Utrecht of San Francisco, were not returned.

According to court documents, Nathanson's allegations against Thomas were typical. He and his roommates paid a security deposit of about 1.25 times the monthly rent. They thought they'd get back most of the $4,245 deposit, anticipating that Thomas would lop off something for the damage they'd caused to the floor by the rotation of a heavy TV cart. But, while retaining $1,687 for work on the floor, Thomas returned just $622.50 to the tenants. Moreover, work on the floor wasn't done until two years after Nathanson moved out, according to court documents.

In all, Thomas sent estimates of $502,000 in repair costs to 157 tenants, but "only $215,057.72 was actually spent on repairing the affected units," court documents state.

But Thomas didn't just defraud his tenants of their security deposits. The court concluded that his business practices were designed "to deter tenants from claiming the deposits and asserting their rights." Some tried to take him to small claims court, but he would raise the stakes by suing the tenants for an amount that would cause the case to be kicked up to a higher court. At that point, tenants would generally drop their cases and walk away rather than go through the hassle and expense of hiring attorneys to fight him.

In 1998, Sue Jacky rented an apartment from Thomas in a building on E. 19th Street near Lake Merritt that she described as having "old Oakland charm." She paid $300 above the regular security deposit, as a pet deposit for her cat. When she moved out, Jacky paid professionals to clean the apartment because she had learned that other tenants had difficulty getting their deposits back. But despite the work of the cleaning company, Thomas returned just $252, rather than the $1,200 deposit Jacky expected.

Jacky said she complained, but that Thomas responded in writing, "making references to an 'illegal' cat that tore up the carpets." But Thomas must have known about the cat because of the supplemental pet deposit, she said. She also noted that the cat was declawed, unable to do the damage that she said Thomas had claimed. "I've always rented," Jacky said. I've always got 100 percent back on my deposits."

But subsequent letters from Thomas to Jacky alleged problems that included unwashed walls and a slew of deficiencies Jacky had noted when she moved into the apartment – holes in the kitchen flooring, a cracked window, and leaky faucets. Thomas' responses included one letter alleging that Jacky had been sent the original $252 refund check by accident and that she actually owed him an additional $909.87. Jacky said Thomas' letters were enough to deter her for a time from taking her him on. "I got intimidated," she said. "I didn't want to continue" to fight.

It also appears that the litigation has not made Thomas a better landlord. A visit last week to the deteriorating Victorian on Hamilton Place in which Nathanson used to live found paint peeling off the steps that lead to the front door while something that appeared to be a mostly detached rain gutter was blowing in the wind.

The problems at a house next door that Thomas owns appeared to be more serious — enough to drive the tenants out. Those living in the upstairs unit left after a dispute with Thomas over repairs for the leaking roof and growth of mushrooms inside the unit, according to Josh Neff and Paul Kastner, who live next door. The former tenants were not available for further verification.

Kastner recounted his own horror stories of renting a home from Thomas. For two weeks in December, he and his housemates had to navigate past raw sewage that was spewing from a broken sewer line in front of his house. Thomas finally had the sewer line repaired, Kastner said, but the work to cover the sewer and rebuild the driveway and sidewalk still has not been done, rendering the driveway and sidewalk impassable.

Thomas is well known among tenant advocates. Attorney Anne Omura, executive director of Oakland's Eviction Defense Center, has dealt with Thomas over the years on such matters as habitability and refusal to return security deposits. "He's probably one of the most notorious landlords we deal with," she said. "The problem goes beyond just returning security deposits," she added, but was unwilling to elaborate because she's working on her own case against him.

So will Nathanson, Jacky, and the two hundred other tenants ever see the money from their class-action lawsuit? Aram Antaramian, one of the attorneys in the case, says he thinks they will, although it will take time. Thomas "wants to drag it out," he said. Antaramian, however, does not believe the Supreme Court will review the case.

For her part, Jacky is not optimistic. She doesn't think they'll ever see the money. "He knows how to work the legal system," she said of Thomas. "This has gone on for years. This is a sad waste of time for the court system."

For Nathanson, the principle of pursuing the case is still important. "Thomas did the same thing to so many people," he said. "It's an issue of justice."

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