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Self-Storage REIT Public Storage Battles $100M Class-Action Lawsuit in California

Update 2/27/19 – Superior Court Judge Carolyn Kuhl issued a tentative decision on Feb. 21 siding with Public Storage in the tenant-insurance class-action suit filed against the REIT. Kuhl supported the company’s argument that the plaintiffs failed to provide evidence proving it made “systemic violations” or “uniform misleading statements” in offering tenant insurance to tenants. The judge also wrote that she found the testimony offered by Public Storage employees to be credible, according to the source.

Under the framework of the order, Public Storage has until March 11 to file a “proposed statement of decision” to address the “principal controverted issues” in the case. Plaintiffs will then have until April 11 to file any objections to the REIT’s filing. Kuhl scheduled a June 12 hearing to consider the statement and objections. If Kuhl’s opinion remains the same, she will likely make the order permanent and close the case in favor of Public Storage, the source reported.

The class-action suit was originally filed in February 2016.


2/1/19 – Public Storage Inc., a publicly traded self-storage real estate investment trust (REIT) and third-party management firm, is facing a $100 million class-action lawsuit from past tenants claiming they were forced to buy tenant insurance from the company as a condition of renting a unit. Filed in California Superior Court in Los Angeles County, Perez, et. al. vs. Public Storage alleges employees misled customers into believing they had to obtain tenant insurance through the REIT as a uniform practice, which violates California’s unfair competition law, according to a source.

In its legal filings, Public Storage argues that it requires tenants to have insurance for the goods they store but doesn’t stipulate where a policy must be purchased. The REIT also maintains its managers don’t offer insurance advice or check for proof of insurance if the company’s offering is declined, a source reported.

Public Storage attorneys on Tuesday asked the judge to decertify the class, arguing that plaintiff testimony amounts only to a few isolated cases in which employees went “off-script” and, therefore, doesn’t meet the court’s mandate that class certification must apply only to instances in which staff carried out a companywide policy.

Clare Ingram, a Public Storage district manager, testified that company employees must follow a specific script and related procedures when renting storage units. Employees are trained to tell customers that insurance is a rental requirement and buying a policy through the company is an option, Ingram told the court. If a customer declines to purchase insurance through Public Storage, managers don’t ask for proof of insurance, she said. Ingram also indicated that telling customers they had to buy insurance through Public Storage wasn’t consistent with company training and policies.

Recently retired former chief financial officer Edward Reyes also testified on Tuesday, telling the court the REIT’s tenant-insurance program accounts for less than 5 percent of company revenue.

The class of plaintiffs is comprised of tenants who rented a Public Storage unit in California between Feb. 3, 2012, and Feb. 8, 2016.

In 2015, Public Storage settled a class-action suit in Florida in which plaintiffs claimed the REIT misrepresented how it was using the premiums collected from customers who bought tenant insurance through the company, a source reported.

Based in Glendale, Calif., Public Storage has interests in 2,418 self-storage facilities in 38 states, with approximately 161 million net rentable square feet. Operating under the Shurgard brand name, the company also has 228 facilities in seven European countries, with approximately 12 million net rentable square feet.

Sources:
SpareFoot Storage Beat, Judge Sides With Public Storage in Insurance Class Action Case
KCC Class Action Services LLC, Perez v. Public Storage
Law360, Public Storage Looks To Decertify $100M Class Mid-Trial
SpareFoot Storage Beat, Public Storage Battles $100 Million Class Action Suit in California

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