Larry Riley formed a rental agreement for a self-storage unit with Iron Gate Self Storage in December 2003. The agreement stated that a maximum of \($5,000\) of personal property could be stored in the unit and that Iron Gate could only be held liable for up to \($5,000.\) Over the course of the lease, Riley fell behind on payments.
From May 2010 to July 2010, Iron Gate sent Riley three past-due notices. In July, Iron Gate sent Riley a notice of auction and the auction occurred seven days later. A bidder paid \($2,000\) for the contents of Riley’s storage unit. Although Iron Gate believed it acted lawfully, Washington state law required auctions in such cases to occur no less than 14 days before the notice.
Two days after the auction, Riley sent Iron Gate a letter asserting that the notice was invalid and the auction should not have occurred. Iron Gate recovered many of the sold auction items by repurchasing them and held them in a storage unit free of charge until Riley retrieved them. However, Riley filed a complaint claiming Iron Gate had violated the Storage Act and the CPA and alleging \($1.5\) million in damages.
JUDGE MELNICK Washington courts apply a six-factor balancing test to determine whether an exculpatory agreement violates public policy. These factors come from Wagenblast v. Odessa Sch. Dist. which states that the more of the six factors that "appear in a given exculpatory agreement case, the more likely the agreement is to be declared invalid on public policy grounds.”
The test is whether: (1) the agreement concerns an endeavor of a type generally thought suitable for public regulations; (2) the party seeking exculpation is engaged in performing a service of great importance to the public, which is often a matter of practical necessity for some members of the public; (3) such party holds itself out as willing to perform this service for any member of the public who seeks it, or at least for any member coming within certain established standards; (4) because of the essential nature of the service, in the economic setting of the transaction, the party invoking exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks the services; (5) in exercising a superior bargaining power, the party confronts the public with a standardized adhesion contract of exculpation, and makes no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence; and (6) the person or property of members of the public seeking such services must be placed under the control of the furnisher, subject to the risk of carelessness on the part of the furnisher, its employees, or agents.
The limiting provisions in Riley’s self-storage rental agreement weigh in favor of a majority of the factors listed above. First, as to public regulation, a selfstorage facility is a highly regulated industry or service. It must comply with numerous statutory and regulatory requirements contained in the Storage Act.
Second, self-storage facilities are not an essential or necessary public service. “A common thread runs through those cases in which exculpatory agreements have been found to be void as against public policy … they are all essential public services—hospitals, housing, public utilities, and public education.”
Third, Iron Gate holds itself out by advertising to the general public as willing to rent units to any member of the public who seeks it.
Fourth, Iron Gate does not provide an essential service. Nor does it possess a decisive advantage of bargaining strength. Riley had the freedom to take his business elsewhere if he disagreed with the rental agreement’s provisions.
Fifth, the agreement and limiting provisions within it did not create an adhesion contract. Iron Gate did not exercise a superior bargaining power. It provided Riley with an opportunity to pay additional reasonable fees and protect against Iron Gate’s negligence. Riley could have opted to purchase insurance and protect 100 percent of the cash value of his property, but he declined to do so.
Sixth, Riley had exclusive control over his storage unit. Per the agreement, Riley placed his own lock on the unit. Iron Gate could only enter the unit with written notice, in the case of an emergency, or if Riley defaulted. The rental agreement, therefore, gave Riley exclusive control of his unit and it did not place him under the control of Iron Gate.
…Riley argues that the agreement’s exculpatory provisions are void because limiting liability for intentional and wrongful seizure and sale of his property worth over \($1.5\) million is unconscionable. We disagree.
…Riley entered into the rental agreement with Iron Gate by choice and had a reasonable opportunity to understand the terms. Riley seems to argue that he did not have such an opportunity because he signed the agreement after a night of driving from California to Washington. This argument is meritless. Riley entered into the agreement with Iron Gate in 2003 and did not raise any issue as to its clarity or meaning until 2015. Riley testified that he understood the agreement. He placed his initials beside each limiting provision and signed the agreement, confirming that he understood its terms… We, therefore, conclude that the trial court did not err because there was no genuine issue of material fact regarding procedural unconscionability.
Substantive unconscionability involves cases where a clause or term in the contract is one-sided or overly harsh. However, such unfairness must truly stand out; “shocking to the conscience,” “monstrously harsh,” and “exceedingly calloused” are terms sometimes used to describe substantive unconscionability.
Riley contends that the agreement’s exculpatory terms were “monstrously harsh” and “shocking” because it allowed Iron Gate to auction an alleged \($1.5\) million of his property without following correct procedure, and because liability was limited to \($5,000.\) Riley provides no evidence to support this contention.
The agreement stated that the contents of his unit was expected to be valued at approximately \($5,000.\) Further, the limitation on damages was clear and not overly harsh when it capped damages at \($5,000—the\) total dollar amount Riley contractually agreed to keep in the unit. Riley agreed to the value limitation when he initialed his name beside the provision. Iron Gate relied on Riley’s representation that the contents of his unit were valued at approximately \($5,000.\) When read as a whole, the limitation provisions were not one-sided or overly harsh. We, therefore, conclude that the trial court did not err because there was no genuine issue of material fact as to substantive unconscionability.
…The analysis shows that the limiting provisions and rental agreement as a whole weigh in favor of the majority of the factors outlined above. We, therefore, conclude that the provisions do not violate public policy for self-storage rental agreements.
AFFIRMED in favor of Defendant.
CRITICAL THINKING:
Consider the sixth item in the test applied by Washington state courts. In this case, the court asserted Riley had exclusive control of his storage unit because he placed his own lock on the unit and “Iron Gate could only enter the unit with written notice, in the case of an emergency, or if Riley defaulted.” Do you think the sixth item in the test could be problematic if applied to apartment renters?
ETHICAL DECISION MAKING:
Examine the actions of each party leading up to this dispute. Who behaved in a blameworthy fashion, and who in a praiseworthy fashion? What facts from the case and what ethical theories or guidelines support your claim?
Now consider each party’s stance in the legal dispute. Does either one appear more or less ethical, relative to that party’s earlier actions? Why or why not?