In late October, the Illinois Court of Appeals released its decision in Vartik Dubey vs. Public Storage Inc., another harsh verdict against the self-storage industry for wrongful sale of goods. I’m not personally involved in the case; the facts I cite are those delivered in the decision, and I don’t know if Public Storage plans to appeal to a higher court. As of November, the case had been remanded for review of a portion of punitive-damage award, so it’s not final. But the decision is worth noting.
Here’s a recap: Ms. Dubey rented a unit at a Public Storage facility in Illinois and, at the time, advised an employee that she had a large amount of goods: a washer, dryer, refrigerator, bikes, lawnmowers, televisions, jewelry, basketball hoop, etc. She picked the larger of the two units she was shown, and agreed to come back later to sign the rental agreement.
The manager prepared the rental agreement for unit C-10. Dubey signed it. Then the manager took Dubey to her unit and placed her lock on it. A day or so later, the tenant began to move in.
Unfortunately, the unit on which the manager placed the lock was E-11, not C-10. E-11 had been rented to someone else, who consequently failed to pay rent. Public Storage sold the contents of E-11―Dubey’s property. Dubey, by the way, had been on automatic payment via credit card and was not delinquent at the time her unit was sold.
When Dubey discovered she could no longer access her unit, the manager explained the unit had been sold to recoup the $191 past-due balance, and items of a personal nature that could not be sold (photos, for example) had been thrown out. The manager wouldn’t even tell Dubey where the garbage was so she could attempt to retrieve her items.
Assessing the Damage
Dubey claimed her goods were wrongfully sold and she was given no notice of the sale. She also claimed to have stored $150,000 worth of goods, even though the rental agreement she signed contained a provision limiting the value of personal property stored to $5,000. She further testified that the rental agreement was only explained to her for five minutes, the unit number on the agreement was not clearly disclosed, and she wasn’t informed of the value limit.
This case was tried partially by a jury and partially to the court. The verdict in Dubey’s favor was $5,000 for breach of contract and $5,000 for conversion. The jury also awarded punitive damages in the amount of $745,000 (this amount has been remanded for reconsideration). The trial court handling the Consumer Fraud Act claim awarded compensatory damages of $69,145, an additional punitive-damage award of $207,435, plus attorneys fees of $185,849, bringing the wrongful-sale verdict total to $1.217 million, upheld by the Court of Appeals.
There are two things you need to take from this case as it pertains to value limits. First, value limits in the rental agreement should be highlighted or bolded and pointed out if not explained to tenants. Also, make sure you include language in your agreement stating that higher value limitations may be available for consideration if requested. This is mandatory in New York and recommended in light of several cases on the subject.
In the Dubey case, the Court seems particularly concerned with a $5,000 limit on a large unit, particularly when the occupant notified Public Storage of the items she needed to store. As operators, you need to think about whether it’s appropriate to have ascending value limits based on unit size, perhaps limiting $2,500 value to smaller than 100 square feet, $5,000 for 200 or less square feet, and a different value limit for larger units.
The other lesson you can take away from this case is the Court was disturbed that Public Storage had no remorse and did nothing to help Dubey retrieve her sentimental items once it learned of its mistake. In addition, Public Storage never seemed to admit, at the time relevant, that there was a wrongful sale. The company also showed no policy or procedure to describe how it made sure it was selling the right unit.
If you find you committed a wrongful sale, sticking your head in the sand is the wrong action. Showing appropriate contrition, assisting the tenant in recovering any sold property, and excluding items with no saleable value such as pictures, diplomas, etc., may not have averted a wrongful-sale verdict in the Dubey case, but it certainly could have taken the wind out of the sails in upholding punitive damages.
If you feel uncomfortable about how you’re performing lien sales, proceed with caution. If you don’t understand your state statute, you feel your process is sloppy, or you let emotions get in the way of common sense during the sale, take note: The Dubey case is now the third largest verdict in a year against a self-storage operator for wrongful sale.
Understand there’s little your attorney can do to protect you if you commit a wrongful sale. That’s why you should have wrongful sale and disposal insurance. Given the large recent verdicts, $25,000 or $50,000 for this type of coverage may not be adequate anymore, even if you have a value limit in your rental agreement. You can see how easily a court, if it’s looking to do so, can get around the value limit by disregarding it or awarding compensatory or punitive damages as well as attorneys fees.
Wrongful-sale verdicts are skyrocketing in value. Protect yourself and your business. You cannot afford to have a million-dollar verdict against you.
This column is for the purpose of providing general legal insight into the self-storage field and should not be substituted for the advice of your own attorney.
Jeffrey J. Greenberger is a partner with the law firm of Katz, Greenberger & Norton LLP in Cincinnati and is licensed to practice in Kentucky and Ohio. Mr. Greenberger primarily represents the owners and operators of commercial real estate, including self-storage owners and operators. To reach him, call 513.721.5151; visit www.selfstoragelegal.com.