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From Antitrust Law Daily, November 7, 2014

Foreclosed home owners state monopoly, unfair competition law claims over storage of personal property

By Jeffrey May, J.D.

The federal district court in Los Angeles has refused to dismiss monopolization claims against Public Storage brought in a purported class action on behalf of former home owners whose belongings were stored at a Public Storage facility following a home foreclosure. The complaining home owners adequately alleged that the company monopolized the self-storage industry by working out a deal with Bank of America to store personal property recovered from homes upon which Bank of America had foreclosed. The plaintiffs also could pursue a California unfair competition law claim against Bank of America; however, RICO claims were dismissed (Urenia v. Public Storage, November 6, 2014, Pregerson, D.).

The defendants argued that plaintiffs had not stated a claim under Section 2 of the Sherman Act because they had not suffered an antitrust injury. The plaintiffs contended that they were injured because Public Storage offered a very low rental rate for the first month ($1 or even $0.01) to Bank of America, but later charged a rate higher than the market rate because owners of the personal property had no choice but to pay to store their belongings at the Public Storage facility.

It was unclear whether the plaintiffs claimed that the antitrust violation was an explicit agreement between Public Storage and Bank of America to collude regarding storage of foreclosed homeowners’ belongings or whether the antitrust violation was based on Public Storage charging a very low introductory rate to induce Bank of America to use its storage facilities. However, offering low introductory prices and then locking foreclosed homeowners into higher prices for subsequent months could harm the welfare of these “forced” consumers of self-storage services for antitrust standing purposes, the court concluded.

State consumer protection claims. The court also refused to dismiss a California Unfair Competition Law (UCL) claim based on Bank of America’s alleged practices of removing personal property from a foreclosed home and then making it difficult and costly to retrieve it. The challenged conduct could be characterized as oppressive and substantially injurious to the owners of such property and, therefore, could constitute unfair conduct actionable under the UCL, in the court's view.

RICO claims. The court dismissed the plaintiffs’ RICO claims. The defendants maintained that there was an insufficient nexus between the purported mail and/or wire fraud that served as the apparent basis for the RICO claims and the plaintiffs’ alleged injuries to satisfy the standing requirement under RICO. The plaintiffs contended that Bank of America, after taking their property to Public Storage, sent them a one-page “release” falsely representing that if they signed the release, they would be able to obtain their property from storage. However, according to plaintiffs, they were forced to sign a seven-page lease agreement with Public Storage in order to see their belongings.

The court pointed out that the harm at issue stemmed from the seizure of the plaintiffs’ items from their home and placement in a Public Storage facility. While the plaintiffs might have been forced to sign a purportedly adhesive and unconscionable lease agreement, such conduct would not constitute mail fraud or wire fraud, in the court's view. The plaintiffs did not allege that any particular harm occurred as a result of misrepresentations made in the “release” documents sent to them. By the time any such misrepresentations were made, the plaintiffs' property was already at a Public Storage facility. Thus, it was unclear what further harm did or could have occurred by reason of a misrepresentation, according to the court. Because the underlying RICO claim was insufficiently pleaded, a RICO conspiracy claim failed as well.

This is Case No. CV 13-01934 DDP.

Attorneys: Lenore L. Albert (Law Offices of Lenore L. Albert) for Victoria Urenia and Javier Hernandez. Peter J. Kennedy (Reed Smith LLP) for Public Storage, and Bank of America NA.

Companies: Public Storage; City of Los Angeles; Bank of America NA

MainStory: TopStory Antitrust StateUnfairTradePractices RICO CaliforniaNews

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