Court: District Court, D. New Jersey; July 16, 2015; Federal District Court
Defendant Sov-ran Self Storage's Motion to Partially Dismiss Plaintiff Juan Castro Jr.’s First Amended Complaint is evaluated under Fed. R. Civ. P. 12(b)(6), with the Court granting the motion in part and denying it in part. Plaintiff alleges that Sov-ran operates numerous storage facilities in New Jersey and entered into three agreements with him, all containing similar unenforceable provisions. The first agreement is a Rental Agreement from January 11, 2013, for a $242 monthly rent. The second is a Rental Insurance Addendum requiring insurance to lease storage space, and the third is a Customer Vacate Notice signed on July 2, 2014, which releases the Defendant from liability upon vacating.
The Complaint challenges six specific provisions in the Rental Agreement:
1) A Limitation of Value provision caps stored property value at $5,000, not meeting N.J.S.A. 2A:44-193(a) requirements for prominence.
2) An Invalidity provision allows unenforceable clauses to remain in effect without clarity on which are void, violating N.J.S.A. 56:12-16.
3) A Lien Sale Preparation Fee provision, contested under N.J.S.A. 2A:44-189 and 2A:44-191.
4) An Exculpatory Clause preventing claims against the Defendant for negligence, gross negligence, or intentional conduct.
5) An Indemnification of Owner provision requiring Plaintiff to indemnify the Defendant for personal injuries, including those caused by the Defendant’s negligence.
6) A Waiver of Jury Trial provision requiring Plaintiff to forgo jury trial rights.
Additionally, concerning the Insurance Addendum, Plaintiff claims that Sov-ran received part of the $21 monthly premium for insurance coverage from Bader Insurance Company, despite not being licensed to engage in insurance activities in New Jersey, as per N.J.S.A. 17:22A-29 and 17:22A-41(b). He also contends that the Defendant did not provide copies of the insurance contracts or Certificates of Insurance, contrary to the Insurance Addendum and in violation of N.J.S.A. 56:8-2.22.
Plaintiff claims to have incurred at least $5,000 in damages due to water and mold while his property was stored at Defendant's facility. He alleges that Defendant misrepresented the insurance coverage at the time of purchase, stating it would cover damages from various causes, including water damage and mold. However, when Plaintiff filed a claim in July 2014, Bader Insurance denied it, stating coverage was limited to damages from "accidental discharge or leakage of water or steam" resulting from a system or appliance malfunction, which did not apply as there were no such systems in the rented storage space. Plaintiff contends that the insurance protection sold was therefore "meaningless" and did not match Defendant's representations.
Additionally, Plaintiff challenges the Notice to Vacate, asserting it unfairly misrepresents conditions that bar customers from filing claims against Defendant for personal injuries or property damage, requires customers to indemnify Defendant for injuries caused by its negligence, and waives the right to a jury trial.
Plaintiff seeks to bring claims on behalf of himself and a putative Class, which includes two Subclasses and one Sub-subclass. The main Class comprises individuals in New Jersey who since August 19, 2008, have entered into form contracts with terms similar to the attached Rental Agreement. The “Notice to Vacate Subclass” consists of Class members who received similar Notices to Vacate, while the “TCCWNA Insurance Subclass” includes those with Insurance Addendums resembling the attached Exhibit B. Furthermore, there is an “Insurance Subclass” within the TCCWNA Insurance Subclass, specifically for members who signed agreements with similar terms to the Insurance Addendum.
Plaintiff seeks both monetary damages and specific forms of relief, including: (a) a declaration that Defendant cannot require Plaintiff to indemnify or cover Defendant's attorney fees for losses from Defendant's negligence; (b) an injunction against Defendant from issuing contracts with illegal provisions; (c) a directive for Defendant to notify class members that certain clauses in their agreements are void and that they retain the right to sue Defendant for consumer protection violations, potentially recovering attorney's fees; and (d) a requirement for Defendant to inform indemnified class members that their indemnification or judgments are illegal and will be refunded.
The legal standard for evaluating a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) requires that a complaint must contain sufficient factual allegations to support a plausible claim for relief. Courts must accept the complaint's allegations as true and viewed favorably toward the plaintiff, while not accepting generalized legal conclusions or unsupported inferences.
Jurisdiction is established as the case qualifies as a putative class action under federal jurisdiction criteria, with the amount in controversy exceeding $5 million and diversity of citizenship between Plaintiff, a New Jersey resident, and Defendant, a Maryland corporation with a principal office in New York.
The Amended Complaint cites violations of the Truth in Consumer Contract, Warranty and Notice Act (TCCWNA) and the New Jersey Consumer Fraud Act. Defendant's motion to partially dismiss these claims is based on alleged failures to state a valid claim under the relevant statutes. The TCCWNA prohibits any seller or related entity from offering or entering into consumer contracts that violate established consumer rights or responsibilities under state or federal law.
Plaintiff claims that Defendant's Rental Agreement, Insurance Addendum, and Notice to Vacate violate the TCCWNA by including six problematic provisions: Limitation of Value, Invalidity, Lien Sale Preparation Fee, Indemnification of Owner, Exculpatory Clause, and Waiver of Jury Trial.
1. **Limitation of Value Provision**: Plaintiff argues that the provision, which caps the stored property value at $5,000, violates N.J.S.A. 2A:44-193(a) because it lacks bold or underlined formatting. However, Defendant asserts that the statute became effective after the Rental Agreement was signed, and the title of the provision is emphasized. As Plaintiff did not address this point in his Opposition Brief, the court will grant Defendant's motion to dismiss this claim.
2. **Invalidity Provision**: Plaintiff contends that this provision violates N.J.S.A. 56:12-16, as it states that if any part of the agreement is illegal or unenforceable, the rest remains valid without specifying which parts may be void. Defendant counters that the provision's language requires specification only if the agreement is used in multiple jurisdictions and indicates which provisions may be void in New Jersey. The court notes that the provision addresses potential applicability in multiple jurisdictions, thus implicating N.J.S.A. 56:12-16.
In summary, the court will dismiss the Limitation of Value claim and will consider the validity of the Invalidity provision under the TCCWNA.
Defendant's Rental Agreement is governed by New Jersey law, and the Invalidity provision functions as a severability clause, ensuring the remainder of the contract remains enforceable if any part is invalidated. The court finds that N.J.S.A. 56:12-16 does not apply to this provision, leading to the dismissal of Plaintiff’s TCCWNA claim related to it.
Regarding the Lien Sale Preparation Fee, Plaintiff argues that this fee violates N.J.S.A. 2A:44-189 and 2A:44-191, which regulate liens on personal property and the process for satisfying such liens. Both statutes allow for the collection of reasonable fees related to the sale of stored property, but do not explicitly prohibit a lien sale preparation fee. The statutes permit self-service storage facility owners to retain liens for reasonable charges specified in rental agreements and recognize that owners may incur expenses prior to a sale.
Defendant’s fee of $115 for accounts in default for 30 days is considered a flat fee, raising concerns since it could apply before any actual lien-related expenses are incurred. The court notes that the explicit procedures outlined in 2A:44-191 suggest owners may only recover actual expenses, not a predetermined fee. Consequently, the court denies Defendant's motion to dismiss Plaintiff's TCCWNA claim regarding the Lien Sale Preparation Fee provision.
Plaintiff contends that Defendant's Indemnification Provision improperly mandates that Plaintiff indemnify Defendant for personal injuries, even if arising from Defendant's own negligence or intentional misconduct. Additionally, the Exculpatory Clause in Defendant’s Insurance provision allegedly prevents Plaintiff and guests from claiming damages for personal injuries or property damage caused by Defendant's own negligence. These claims are central to the Truth-in-Consumer Contract, Warranty, and Notice Act (TCCWNA). The Third Circuit references legislative statements indicating that provisions absolving sellers or lessors from responsibility for damages, even due to their negligence, violate consumer rights.
Defendant's Indemnity provision requires the Customer to defend and indemnify the Owner against claims related to the lease or activities on the premises. The Insurance provision releases the Owner from liability for a wide range of potential damages and injuries occurring on the property. Defendant argues that these provisions do not contravene the TCCWNA as they do not violate a clearly established right and would not be enforced broadly by any court. However, this argument lacks merit. Chief Judge Simandle in Martinez-Santiago found that similar provisions could constitute a violation of established rights, noting the common law duty to prevent known hazardous conditions on the property. Unlike Kane v. U-Haul, where an opportunity for insurance mitigated public interest concerns, Defendant’s provisions overly broadly exempt it from liability for injuries or damages sustained on its property, paralleling the concerns raised in Martinez-Santiago.
Plaintiff was not afforded the opportunity to select insurance for personal injuries, leading to a stated violation of a clearly established legal right. Defendant contends that a provision unenforceable by a court cannot form the basis for a TCCWNA violation. Under New Jersey law, indemnity clauses cannot protect an indemnitee from their own negligence unless explicitly stated, which Defendant's provisions fail to do. Thus, these provisions likely do not prevent personal injury negligence claims. TCCWNA claims focus on the misleading implications of such provisions, which may deter valid lawsuits by misrepresenting legal rights. The case of Martinez-Santiago supports this view, noting that unenforceable exculpatory clauses can fall under TCCWNA's scope if they suggest enforceability. Defendant’s Indemnity and Exculpatory Clauses discourage litigation regarding personal injury claims, justifying the denial of Defendant’s motion to dismiss the TCCWNA claim related to these provisions.
Regarding the Waiver of Jury Trial provision, Plaintiff asserts it improperly requires a waiver of the right to a jury trial for himself and third parties. The provision specifies that both parties waive their rights to a jury trial for claims arising from the Rental Agreement, including those for bodily injury. While a plaintiff can waive their own jury trial rights, it is less clear whether they can do so on behalf of others. There is no established right violated by waiving jury trials for third parties, leading to the dismissal of Plaintiff's TCCWNA claim concerning this provision.
Lastly, Plaintiff alleges that, in addition to the Rental Agreement, Defendant required him to sign an Insurance Addendum to lease storage space. While Plaintiff raises several issues regarding this addendum, Defendant's motion to dismiss focuses on the claim that it received part of Plaintiff's monthly premium without proper licensing, violating the Insurance Producer Licensing Act (IPLA). Plaintiff claims that Defendant lacks the necessary license to sell or negotiate insurance in New Jersey as mandated by the IPLA.
Defendant seeks dismissal of the case, arguing it is properly licensed to sell insurance and that the Insurance Producer Licensing Act (IPLA) does not provide Plaintiff with a private right of action. Defendant claims that Sovran Acquisition LP, the entity managing the facility, holds a valid limited lines license from New Jersey’s Department of Banking and Insurance. However, Plaintiff challenges the relationship between Sovran Acquisition LP and Defendant, questioning whether the license covers the premium in question. The Court deems these factual disputes inappropriate for consideration at this stage and focuses on Defendant's second argument.
Defendant asserts that the IPLA does not grant a private right of action, a position supported by the New Jersey Supreme Court. The IPLA governs the licensing of insurance agents and authorizes the Department of Banking and Insurance to revoke licenses or impose penalties for violations, but it does not permit private lawsuits. Plaintiff counters that the Truth in Consumer Contract, Warranty and Notice Act (TCCWNA) allows legal action against sellers for contractual provisions violating consumer rights. Plaintiff contends that Defendant’s requirement for a portion of the insurance premium without proper licensing breaches TCCWNA by disregarding the licensing responsibilities outlined in IPLA. Nonetheless, Defendant argues that New Jersey courts have disallowed using consumer protection statutes to indirectly enforce IPLA. Consequently, the Court grants Defendant’s motion to dismiss the TCCWNA claim linked to the IPLA violation.
Regarding the Notice to Vacate signed by Plaintiff on July 2, 2014, which purportedly absolves Defendant of liability and misrepresents Plaintiff's rights, the Court finds similar reasoning applies as with the Exculpatory Clause and Indemnity provisions of the Rental Agreement. Therefore, the motion to dismiss Plaintiff’s claims related to personal injury and property damage liability is denied. However, the Court grants the motion to dismiss claims concerning the waiver of a jury trial in the Insurance Addendum, following the same rationale as applied to the Rental Agreement's waiver provisions.
The New Jersey Consumer Fraud Act (CFA) defines unlawful practices as any unconscionable commercial practice, deception, or misrepresentation that leads others to rely on concealment or omission of material facts, regardless of whether anyone was misled or harmed. The CFA is interpreted liberally as remedial legislation. To establish a claim, a plaintiff must demonstrate unlawful conduct, an ascertainable loss, and a causal connection between the conduct and the loss, without needing to prove actual reliance on the deceptive act.
In this case, the Plaintiff alleges that the Defendant violated the CFA by collecting insurance premiums without proper licensing, selling insurance that did not cover promised losses, and failing to provide necessary insurance documents. The Defendant seeks dismissal of the CFA claim, arguing the Plaintiff cannot show any ascertainable loss. However, the Plaintiff claims to have incurred an ascertainable loss by paying $126 for insurance that inadequately covered water damage, contradicting the promised coverage. The Plaintiff also argues that the absence of the insurance contracts misled him into the purchase.
The court finds that the Plaintiff's allegations sufficiently demonstrate an ascertainable loss resulting from the Defendant's misrepresentations and failure to provide the required documents, thus denying the motion to dismiss the CFA claim based on those grounds. Conversely, any CFA claim associated with alleged violations of the Insurance Producer Licensing Act (IPLA) is dismissed, as the IPLA does not allow for a private cause of action and cannot be circumvented through consumer fraud statutes. The Defendant's motion to dismiss is partially granted and partially denied, leading to a mixed outcome for the Plaintiff’s claims.
Defendant's Motion to Partially Dismiss Plaintiff's First Amended Complaint was heard by the Court, which issued an order on July 16, 2015. The Court granted the motion regarding the Plaintiff's claims under the New Jersey Truth in Consumer Contract, Warranty and Notice Act (TCCWNA) related to the Limitation of Value, Invalidity, and Waiver of Jury Trial provisions in the Rental Agreement, as well as the Waiver of Jury Trial in the Notice to Vacate. Additionally, the Court granted the motion concerning TCCWNA and New Jersey Consumer Fraud Act claims based on alleged violations of the Insurance Producer Licensing Act. However, the remainder of the motion was denied.
The Court noted that no issues of class certification were addressed in this motion. The Plaintiff had received a "Summary of Coverage" only upon filing a claim in July 2014 and asserted that his damages were partly due to Defendant's negligence. Nonetheless, the Amended Complaint did not allege negligence on behalf of the class, focusing instead on contractual provisions. The ruling emphasized that businesses are responsible for maintaining safe premises and that enforcing the exculpatory clause could allow negligence in property maintenance.
Comparative case law was discussed, including Martinez-Santiago, where a plaintiff's guest slipped on ice outside a storage facility, leading to a negligence claim against the facility. The Court stated that actual damages related to property rather than personal injury do not preclude a TCCWNA claim if a clearly established legal right is violated. The broad language of Defendant’s exculpatory clause was contrasted with previous cases (Stelluti and Sauro) that upheld narrower clauses linked to activities inherently involving risk. The Court found that using a storage facility does not constitute an inherently dangerous activity and that the exculpatory clause in question was overly broad, absolving the Defendant of liability for both personal injuries and property damage on their premises.
The Court acknowledges that the TCCWNA aims to prevent misleading provisions that may deter plaintiffs from pursuing legitimate claims. However, it finds no evidence that an unenforceable waiver of a jury trial would discourage plaintiffs from seeking legal counsel. Unlike other provisions that may mislead plaintiffs into believing they are entirely barred from suing, the waiver is unlikely to prevent them from consulting an attorney, allowing them to challenge its enforceability or proceed without a jury. Relevant New Jersey statutes (N.J.S.A. 17:22A-29 and N.J.S.A. 17:22A-41(b)) outline licensing requirements for selling or negotiating insurance. The Defendant suggests that the relationship between Sovran Acquisition LP and the Defendant can be clarified by reviewing the Plaintiff’s Complaint exhibits, yet does not address the limitations of the required licensing. Federal Rule of Civil Procedure 9(b) imposes a stricter pleading standard for fraud allegations, requiring specificity regarding the circumstances of the fraud, including details such as date, time, and place, as well as who made the misrepresentation and its content. The Plaintiff has met this heightened requirement by clearly identifying the specific provisions and agreements that contain the alleged misrepresentations leading to his harm.
