Federal Class Action Proceeds Against Public Storage

Federal Class Action Proceeds Against Public Storage Melanie Bell Public Storage. 851 Knights Road, Hollywood

A class-action suit over allegedly unenforceable exculpatory and indemnification provisions in Public Storage lease contracts has survived a dismissal motion in Camden, N.J., federal court.

U.S. District Chief Judge Jerome Simandle of the District of New Jersey denied a motion by Public Storage to dismiss a count challenging its contract language disclaiming liability for property damage and injury to plaintiffs and other persons from the defendant’s negligence. Simandle also declined the company’s motion to dismiss a count challenging a provision requiring the renter to indemnify Public Storage for claims arising out of use of the property by the renter and the renter’s visitors and invitees.

In addition, Simandle denied a motion by Public Storage to dismiss a count challenging its one-year limit to bring claims arising from the lease, and he rejected the defendant’s claim that the suit was untimely. He did, however, dismiss one count from the suit, which claimed that a requirement that consumers acknowledge and initial provisions of the contract violated New Jersey law.

The suit, Martinez-Santiago v. Public Storage, claims the company violated the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA) and the New Jersey Consumer Fraud Act (CFA). It seeks compensatory and punitive damages and injunctive relief as well as attorney fees and costs on behalf of a class of approximately 20,000 New Jersey consumers who rented storage units from the company.

Plaintiff Jackeline Martinez-Santiago rented a storage unit at a Public Storage location in Sicklerville, N.J., on Feb. 7, 2012, listing then-boyfriend Orlando Colon as an “alternate contact” on the lease form, according to the opinion. On Feb. 12, 2012, Colon slipped on a patch of ice directly in front of the plaintiff’s storage unit, suffering spinal injuries. He filed a negligence suit against Public Storage in the Superior Court of New Jersey.

Public Storage filed a third-party complaint for indemnification against Martinez-Santiago, claiming the matter fell under the indemnification provision in her lease agreement. She did not respond to the suit and a default judgment was entered against her in February 2013. In September 2013, after she retained an attorney, Martinez-Santiago moved to vacate the default judgment and sought leave to file a third-party answer and class-action counterclaim.

Public Storage settled Colon’s suit for $20,000. Martinez-Santiago would have been liable for that amount, in addition to the company’s attorney fees and costs from the personal injury case, said her attorney, Michael Galpern of the Locks Law Firm in Cherry Hill, N.J. But the company voluntarily dismissed its third-party complaint against Martinez-Santiago in September 2013 before the Superior Court could rule on her motion to vacate the default judgment against her.

Martinez-Santiago then re-filed her complaint in Superior Court in Camden in December 2013 and the company removed the case to federal court on diversity grounds because its headquarters are in Glendale, Calif. Public Storage’s motion to dismiss claimed that the provisions of the lease agreement are lawful and enforceable and that Martinez-Santiago failed to allege that the company engaged in unlawful conduct under the Consumer Fraud Act.

Alternately, the company claimed that, even if the plaintiff alleged the defendant engaged in unlawful conduct, she failed to demonstrate a causal link between that conduct and her alleged injury. The company also argued that her claims were time-barred under the contract because they were brought more than a year after she signed the lease contract.

Public Storage conceded that the default statute of limitations for the CFA and TCCWNA is six years, but argued that nothing prohibits parties from contracting for a shorter limitations period, provided that it is reasonable. Simandle said the one-year provision was not reasonable.

“A consumer would have to be clairvoyant to challenge contractual fine print addressed to circumstances (like indemnification) that did not themselves arise when the contract was signed,” Simandle said.

The plaintiff claimed that the indemnification provision is too broad. Simandle agreed, finding that Public Storage was seeking indemnification from its own negligence, and New Jersey law does not permit a party to indemnify against losses resulting from its own negligence unless that intention is stated in unequivocal terms. The provision in question is unenforceable because it does not unequivocally express an intention for such indemnification, Simandle said.

Public Storage sought to dismiss a challenge to its provision that it be held harmless for injuries or damage to property for any reason, including its own negligence, but excluding its own fraudulent or willful conduct. The company noted that such exculpatory provisions have been upheld in New Jersey. Simandle denied the motion to dismiss that count after finding the exculpatory provision falls under the TCCWNA’s proscription against contracts that appear to be enforceable but are not, thereby discouraging consumers from enforcing their rights.

Galpern called the lease agreement “an incredibly anticonsumer contract where Public Storage, for years, has been taking advantage of people.”

Joshua Zielinski and Robert Donovan of McElroy, Deutsch, Mulvaney & Carpenter in Morristown, N.J., representing Public Storage, did not return calls seeking comment on the decision.

Contact the reporter at ctoutant@alm.com.

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