Law Suits: Case Law Review

By Christopher A. LaVoy, Esq.
Tiffany & Bosco, P.C.

Rather than addressing a specific legal issue, I thought it would be worthwhile to review some interesting recent cases from around the country involving self-storage facilities. Seeing what kinds of situations commonly lead to litigation may help you avoid them. 

BEWARE OF THE AUTOMATIC-STAY 

The first case is out of California and concerns the consequences of foreclosing on a unit when the tenant is in bankruptcy. When the tenant fell behind in rent, he filed for bankruptcy to avoid foreclosure and notified the operator of the bankruptcy. The operator nevertheless auctioned the contents of the unit the next day. The renter then moved for sanctions against the operator in bankruptcy court for violating the automatic-stay, which prohibits collecting on a debt after the debtor has filed for bankruptcy. 

The bankruptcy court held the operator “had an affirmative duty to discontinue its post-petition collection actions” and sanctioned the operator. As for the amount of the sanction, the bankruptcy court held the amount was not limited to the value of the contents sold at the auction. The tenant was also entitled to recover emotional distress and punitive damages because he head lost “all he had left.” In other words, the operator would likely pay dramatically more than what it collected at the auction. 

This case is a sobering reminder of the need to discontinue all collection activities against a tenant after he or she files for bankruptcy. 

DRUG SNIFFING DOGS  

The second case comes from Minnesota. After witnessing suspicious activity at a self-storage facility, the police (with the permission of the operator) brought in a drug-detection dog to “sniff” outside of a unit. The dog signaled that drugs were inside, which was confirmed by a search of the unit. The tenant was then arrested. 

The tenant moved to have the evidence suppressed at trial because the police did not obtain a warrant to “sniff” the unit. The tenant argued that he had a reasonable expectation of privacy in the unit and thus a warrant was required before a drug-detection dog could be used. The Supreme Court of Minnesota agreed and suppressed the evidence. 

It should be noted that other state and federal courts have ruled the opposite, holding that no warrant is required in this situation. Thus, there is split of authority on this issue. The decision is bad for operators by making criminals feel safer storing drugs and other contraband at self-storage facilities. 

NO LIABILITY CLAUSE  

The third case is from Ohio and concerns the enforceability of a provision in a self-storage lease providing the operator “shall be free from all liability . . . from any cause.” 

The wife of a tenant sued the operator for negligently causing a fire at the facility that damaged her property in the unit. The operator asserted this no-liability clause as a defense. The wife argued she was not bound by the clause because it was her husband, not her, that signed the lease. 

The court ruled the clause was enforceable and that it applied to her even though she did not sign the lease. 

I have always had concerns about the enforceability of such no liability clauses because of their seeming unfairness. But this case, as well as others, show that such clauses can work to protect an operator from liability. Make sure that your lease includes this general type of provision (the AZSA standardized lease does). 

DAMAGES-CAP CLAUSE 

The last decision comes from Louisiana. The plaintiff rented a mobile self-storage unit, which leaked, damaging the contents. As a defense, the operator asserted its liability was limited to $2500 by the “MAXIMUM CONTENTS VALUE LIMITATION PER CONTAINER” provision in the self-storage lease. The court agreed with the defendant and so capped the operator’s liability. 

Make sure your lease contains a similar damages cap (the AZSA standardized lease caps a tenant’s damages at $5,000). 

As always, good luck and if you have any specific questions please do not hesitate to call me. 

HAZARDOUS CONDITIONS 

The most recent case I found (decided last month) is from Washington state. A tenant slipped and fell on ice that had accumulated on the ground while unloading items into her storage unit, injuring her hand, wrist, elbow and shoulder. Her medical bills totaled $27,500. She sued the facility for allowing the unsafe condition to develop. The facility denied liability, but nevertheless offered her $75,000 to settle the matter. She refused the offer and took the case to trial, where the jury, to her disappointment, awarded her only $22,000. 

She appealed arguing the trial court should have disregarded the jury verdict and given her more, but the appellate court refused to increase the award. The lesson for operators is to watch out for hazardous conditions on the premises, while the lesson for plaintiffs is that pigs get fed and hogs get slaughtered. 

STOLEN PROPERTY 

Another new case comes out of California. A tenant whose property was stolen from a unit sued the facility’s management company for negligence and conversion. The tenant claimed his stolen property was worth more than $250,000, which was curious considering he was so broke he had not paid rent on the unit for months. 

The appellate court held that the trial court properly dismissed the negligence claim based on the clause in the lease stating the owner and its agents are not liable for their negligent acts—“self storage contracts releasing the storage facility from liability for negligence are permissible, and do not violate public policy.” However, such a clause does not apply to intentional wrongs, so the conversion claim alleging that an employee stole the property was allowed to go to trial. Check your lease to make sure it contains such a waiver clause for both personal injuries and property damage. 

OPEN & OBVIOUS DANGERS 

Recently in Ohio a friend of a tenant who was helping unload items into a storage unit tripped over a ¾-inch rise in the cement floor and sued the facility for failing to warn of the hazard. The appellate court affirmed the trial court’s dismissal of the claim based on the conclusion that the danger was “open and obvious” and, therefore, there was no duty to warn people about it. 

Based on my experience, this operator was lucky. Many judges would have let this claim go to trial, and who knows what a sympathetic jury would have done. 

BATTLING COMPETITORS 

Not long ago in Washington state a lawsuit was filed by an operator against a competitor for hiring some of its key employees away who then shared the operator’s strategies and business plan with the competitor. The operator was understandably upset and sued the competitor for conversion, unfair competition, misappropriation of trade secrets, interference with contract and violation of the Computer Fraud and Abuse Act (the employees allegedly sent the trade secrets to the competitor via e-mail from their former employer’s office). 

While I do not know the outcome of this case, it is a keen reminder to be careful about how you compete. I see this type of lawsuit often and it rarely turns out well for either the competitor or the disloyal employees. 

A QUESTION OF LIABILITY 

Last, about six months ago a case was decided in Louisiana where a tenant sued a facility after a fire broke out that destroyed her possessions. The fire was caused by bad wiring in the facility. The appellate court held that the trial court properly dismissed the claim because there was no evidence that anyone who worked at the facility was aware of the defect that resulted in the fire. This case is a good remainder for plaintiffs and the attorneys representing them that someone is not necessarily liable simply because there was a loss. It generally has to be shown that the defendant’s conduct was unreasonable in some way, which it was not here because the facility had no prior notice of the hazard. 

Best of luck in avoiding similar problems at your facility! 

[This article deals with a law related subject at a general level and is not intended for you to rely on. You should consult a lawyer before making a final decision in a situation involving any legal issues.] 

Christopher A. LaVoy is partner in the law firm, Tiffany & Bosco, P.C., and serves as AZSA’s legal counsel. 

Source: Behind Closed Doors, AZSA Newsletter Archives