Getting sued is somewhat analogous to having a car accident. Sometimes, no matter how hard you try to drive safely, there's a chance you'll get rear-ended by the other guy.
Under today's legal system, even if a self-storage business does everything right, it can still be sued. Facility owners face potential disputes with their employees and vendors. They also risk premises liability claims like personal injury. But most commonly, they face claims from tenants alleging wrongful sales or damage or loss to stored property.
Unfortunately, having a good lease or following the proper procedures for foreclosure and sale won’t prevent you from being sued. Litigation has exploded in this country, and self-storage facilities, with their steady cash flow and large insurance protection, are big targets. Owners should expect to eventually face a legal situation. That said, the following is a crash course on what happens in a lawsuit and some things to think about as you travel down the bumpy road of litigation.
1. Notify Your Insurance Company
Upon service of a lawsuit, one of the first things you should do is notify your insurance company. If you fail do so, the company may be able to refuse coverage based on lack of notice. It’s prudent to always notify your insurer.
If your carrier has any questions whether the claim is covered under its policy, it’ll likely issue a "reservation of rights." This means the company will assume the obligation of defending you in the lawsuit but reserve its right to later determine whether the claim is actually covered. It will then assign the lawsuit to a firm in your area. You may also request that your own lawyer (if your business has one) represent the facility on behalf of the insurance company.
2. Gather the File
It’s your obligation as the owner to maintain all records concerning operation of your storage facility. If the lawsuit relates to a tenant loss or damage claim, you’ll need to assemble the tenant's file and all pertinent documents. If the claim relates to a personal injury, you should have a copy of the incident report, any photographs taken, police reports or any other documents relating to the incident.
All of this information, as well as names and addresses of individuals who have knowledge of the matter, should be provided to the lawyer handling your case. Remember, your attorney can only defend you to the extent that he is given complete information.
3. File an Answer
Once the case has been assigned to a lawyer, it’s his obligation to file an Answer to the Complaint. If you aren’t insured and don’t have an attorney, then you’re the one obligated to file. In either case, it’s imperative that a timely answer be filed. If neither you nor a lawyer file the answer, you’ll be in default. In other words, the court will presume you’re admitting the allegations of the complaint, and a judgment will be entered against you.
If it’s appropriate, your lawyer will seek to dismiss the complaint at the time the answer is filed based on specific legal defenses, including lack of jurisdiction, lack of venue over the facility, or other technical defenses that allow the case to be dismissed without a further showing. Unfortunately, many of these defenses can be cured by the plaintiff. Many times, even if the case is originally dismissed, it can later be refiled.
After the answer is filed and before trial, there’s a phase of the proceedings called “discovery.” Discovery is when each party is entitled to ask questions of the other party to learn all of the information possible about their position in the case. It can take the form of interrogatories (written questions to the other side), requests for documents or depositions.
A deposition is when the parties meet face to face and lawyers ask questions of the parties and witnesses in the presence of a stenographer, who keeps a written record of the testimony. Depositions are used for discovery as well as to later impeach witnesses who change their testimony during a trial.
Discovery can be a long, arduous process and very costly to both sides. However, it’s necessary to build a case for the plaintiff and defend a case on behalf of the defendant.
Through the course of discovery and up until trial, it’s important to keep in mind the practicalities of settling the lawsuit. If the plaintiff has brought a suit that has merit and is defensible, and there’s some risk the defendant may be found liable, there may be some benefit in negotiating a settlement. Settlements are often the best resolution for a bad situation.
Negotiations for resolution commonly occur from the beginning of the case to the end; however, most settlements are best reached early in the process. They’re often harder to conclude closer to trial due to the time and expense already incurred by both parties. They shouldn’t be reached lightly, but they’re an economic reality due to the expense as well as the physical and mental wear and tear involved in litigation. Furthermore, where there’s a risk of liability and high damages, settlement often reduces those damages.
Not all cases can be settled and many are brought to trial. Just like on TV, trials are where parties are able to present their case before a judge or jury (the trier of fact) and have their day in court. The parties are able to tell their sides of the story and allow the trier of fact to decide on two issues: whether the self-storage business is liable for the loss or damage, and the amount of damage suffered by the plaintiff. It’s possible for a judge or jury to find you liable but at the same time find low damages. Unfortunately, in most scenarios, significant damages will be found.
The trial is generally broken into six parts:
- Jury section (when the lawyers for both sides interview potential jurors)
- Opening statements
- Plaintiff presents its case to the court
- Defendant presents its case to the court
- Closing arguments
- Jury deliberation and verdict
In civil trials, verdicts are appealable to the next level of the court, commonly the appeals court. Depending on the legal issue involved, the appeals court might find the jury acted outside the boundaries of the law or reached its decision in error. However, other than there being error in the lower court's decision, the trial court's decision will likely be upheld.
Lawsuits aren’t fun. Unfortunately, they can’t be stopped. While they may be prevented by appropriate actions and business judgment, accidents do happen. If you’re sued, you must take the appropriate steps to protect the interests of your company by understanding the process and how to respond. Hopefully, frivolous lawsuits will be dismissed, valid lawsuits will be settled, and defensible lawsuits will be tried and won.
Scott Zucker is a partner in the law firm Weissmann Zucker Euster Morochnik P.C. in Atlanta, where he specializes in business litigation with an emphasis on real estate, landlord-tenant and construction law. He’s a speaker at industry events, author of “Legal Topics in Self Storage: A Sourcebook for Owners and Managers,” and a partner in the Self Storage Legal Network, a subscription-based legal service for storage owners and managers. To reach him, call 404.364.4626; e-mail [email protected]; visit www.wzlegal.com.