08 Apr 2024
Although the data may not confirm this opinion, it seems as if the majority of lawsuits brought against self-storage facilities by their tenants are filed in small claims courts (or courts of limited jurisdiction) and filed “pro se”, meaning without the assistance of counsel. However, more and more of these courts are requiring that the responding defendant, if it is a company, be represented by counsel in order to file an answer and assert any defenses against a tenant’s claim.
What does that mean? Assuming that the amount in controversy is less than the company’s coverage deductible, it means that the facility owner will be required to pay out of its own pocket to hire a lawyer to defend itself against the unrepresented pro se tenant. It also means that self-storage facility owners are being forced to decide between paying a tenant’s claims, regardless of the validity of the claims, or hiring a lawyer to represent them in court.
Of course, I love lawyers. And there is a time and place for using counsel in response to legal disputes. But the lower jurisdiction courts of each state (otherwise known as the “people’s courts”) were meant for parties to address their grievances without the need for counsel because the amount in controversy was low and the cost of lawyers is high.
Unfortunately, for some reason, the local rules for many courts have changed to require company defendants to have lawyers appear on the company’s behalf, which automatically shifts the balance of the dispute in favor of the complaining tenant. The question becomes: Is it more economical and efficient for a facility to pay a claim rather than hire a lawyer to fight a claim? Of course, the decision lies solely with the facility owner. As a matter of principal, the answer might be to fight rather than to settle. But inevitably the issue of economics must be considered.
In addition, the shift to arbitration has made this ordeal even more challenging. Although there are certainly benefits to moving disputes into arbitration rather than the courts (most significantly, reducing the risk of class action claims), with an arbitration, the company may not only be incurring the out-of-pocket expense for its lawyer, but must typically also pay the fees of the arbitration service and the appointed arbitrator. Again, these charges may far exceed the amount of the claim itself. Although it is frustrating to pay a claim that is otherwise defensible, the reality is that the cost of defense may exceed the cost of the claim itself. Any lawyer will admit to its client that, when faced with such a calculation, it may be better to settle than to fight.
When the decision is made to settle, even a “small claim”, it is imperative for the company to obtain a full release from the complainant in consideration for any payment or action that the facility will take to resolve the dispute. A written settlement agreement, including provisions relating to confidentiality and non-disparagement, is essential, even in small cases.
This article was originally published in Self Storage Legal Monthly Minute by Scott Zucker, March 2024
Scott Zucker is a founding partner in the Atlanta law firm of Weissmann Zucker Euster Morochnik & Garber P.C. and has been practicing law since 1987. Scott represents self-storage owners and managers throughout the country on legal matters including property development, facility construction, lease preparation, employment policies and tenant claims defense. He also provides, on a consulting basis, advice to self-storage companies in the areas of foreclosure and lien sales, premises liability and loss control safeguards. Scott can be reached at 404-364-4626 or by e-mail at Scott@wzlegal.com
