Lauren H. KANE; Martin Feierstein, Appellants v. U-HAUL INTERNATIONAL INC.; U Haul Storage Inc; Three Sac Self Storage; Republic Western Insurance Company; Gab Robins North America, Inc., Corporations; Donald Cesaretti; Vicki Cesaretti; John Doe, Individuals, Representing Unknown Managers or Management Company; John Does 11-20, Representing Unknown Roofer, Contractor and/or Repairman Company or Individuals; U-Haul Southern New Jersey; John Does 21-30, Representing Unknown Owner(s).
No. 05-5002.
United States Court of Appeals, Third Circuit.
Feb. 7, 2007.
218 Fed. Appx. 163
Submitted Under Third Circuit LAR 34.1(a) Jan. 9, 2007.
Joseph M. Toddy, Zarwin, Baum, Devito, Kaplan, Schaer & Toddy, Philadelphia, PA, for Appellees.
Before: McKEE, AMBRO and FISHER, Circuit Judges.
OPINION OF THE COURT
FISHER, Circuit Judge.
Lauren Kane and Martin Feierstein (Appellants) appeal the District Courts grant of summary judgment in favor of Republic Western Insurance Co., U-Haul Southern New Jersey (improperly pleaded as U-Haul International Inc. and U-Haul Storage Inc.), Three Sac Self Storage, Donald Cesaretti and Vicki Cesaretti (Appellees). For the following reasons, we will affirm.
I.
As we write only for the parties, who are familiar with the factual context and the procedural history of the case, we will set forth only those facts necessary to our analysis.
Appellant Kane notified Appellee Republic Western and an insurance adjuster met with Appellant Kane and inspected the units. The adjuster did not value the claim at that time. Several months later, Appellant Kane provided the adjuster with an inventory list, and claimed over $120,000 in damages. After that time, the Appellees attempted to inspect and inventory the property in order to value the claim, but the Appellants refused to allow the inspection.1 The Appellees adjuster valued Appellant Kanes claim at $3,632.55. The Appellees provided $500 to the Appellants to enable them to remove their property from the storage facility. The Appellants brought suit in December 2001, alleging damages in excess of $75,000 on multiple claims. The Appellees deposited $14,500, which was the remaining amount under the policy, with the District Court. The Appellees also notified the District Court that they stipulated that Appellant Kanes loss was the policy limit. The parties made cross-motions for summary judgment, and the District Court granted summary judgment in favor of the Appellees as to all of the Appellants claims in two separate orders. The Appellants brought this timely appeal.
II.
We have jurisdiction over this lawsuit pursuant to
A.
The first question on appeal is whether the exculpatory clause is enforceable. Although the New Jersey Supreme Court has not addressed this question in the context of self-storage contracts, New Jersey law regarding exculpatory clauses is fairly well-settled. Exculpatory clauses are disfavored because exempting a party from liability induces a want of care. Kuzmiak v. Brookchester, Inc., 33 N.J.Super. 575, 111 A.2d 425, 427 (1955). However, exculpatory clauses in private agreements that do not adversely affect the public interest are generally sustained. See Abel Holding Co., Inc. v. American Dist. Tel. Co., 138 N.J.Super. 137, 350 A.2d 292, 297 (1975) (citation omitted). Therefore, an exculpatory clause may not be enforced if a party to the agreement is under a public duty to perform, there is unequal bargaining power between the parties, or the clause is unconscionable. See id. (citations omitted).2
The Appellants claim that the exculpatory clause in this case is unenforceable because unequal bargaining power existed. Generally, invalidating a contract on this basis occurs when there is a contract of adhesion, and one of the parties has no other choice but to accept or reject the terms of the offer because of the imbalance of power. See Vasquez v. Glassboro Serv. Ass‘n, Inc., 83 N.J. 86, 415 A.2d 1156, 1165-66 (1980). The New Jersey courts have refused to enforce such a clause in the context of residential apartment leases or where an exculpatory clause is hidden in a clause which purports to confer a benefit on the weaker party. See Tessler & Son, Inc., v. Sonitrol Sec. Sys. of N. N.J., Inc., 203 N.J.Super. 477, 497 A.2d 530, 533 (1985) (citations omitted). However, exculpatory clauses in leases for commercial property are regularly upheld because there is no inequality of bargaining power. Abel, 350 A.2d at 297.
The contract for the storage units clearly was standardized. However, it cannot be said that the Appellants had no opportunity to make any choices. They were provided with the option of purchasing insurance to protect against negligence for an additional fee. The public interest is not affected in light of the fact that the opportunity to elect insurance for an additional reasonable fee existed. See Abel, 350 A.2d at 300 (quoting Tunkl v. Regents of Univ. of Ca., 60 Cal.2d 92, 32 Cal.Rptr. 33, 383 P.2d 441, 443 (Ca.1963)). A contract for self-storage cannot be equated with a residential lease. The prohibition of enforcing exculpatory clauses in residential leases is based on housing shortages, especially affordable housing, the need for which has been recognized by the New Jersey legislature. See, e.g., Kuzmiak, 111 A.2d at 431. Additionally, the exculpatory clause and offer of insurance were both clear in the contracts signed by the Appellants. A self-storage contract is more akin to a lease for commercial space. Therefore, we agree with the District Courts determination that no unequal bargaining power existed that would make the exculpatory clause unenforceable.
The exculpatory clause is enforceable and therefore we will affirm the District Courts grant of summary judgment in favor of the Appellees as to those claims.
B.
The next issue is whether the Appellees conduct was wanton and willful because such conduct cannot be exculpated. See Tessler, 497 A.2d at 533. The New Jersey Supreme Court defined wanton or willful misconduct as follows:
It must appear that the defendant with knowledge of existing conditions, and conscious from such knowledge that injury will likely or probably result from his conduct, and with reckless indifference to the consequences, consciously and intentionally does some wrongful act or omits to discharge some duty which produces the injurious result.
McLaughlin v. Rova Farms, Inc., 56 N.J. 288, 305, 266 A.2d 284, 293 (1970). We hold that the failure of the Appellees to notify the Appellants of the leak in the roof of the storage facility did not constitute wanton and willful misconduct. The failure to notify probably constituted gross negligence, but even viewing the facts in the light most favorable to the Appellants, we find as a matter of law that this conduct or lack thereof was not wanton and willful. Therefore, we will affirm the District Courts dismissal of this claim.3
C.
The Appellants also claim that the Appellees violated the New Jersey Consumer Fraud Act,
[t]he act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation,
or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice.
Id. Appellants allege that the Appellees failure to notify them about the leaks constituted unconscionable commercial practices as defined by the CFA. The New Jersey Supreme Court has explained that the standard of conduct contemplated by the unconscionability clause is good faith, honesty in fact and observance of fair dealing. Kugler v. Romain, 58 N.J. 522, 279 A.2d 640, 652 (1971). As discussed above, we agree with the District Courts conclusion that the exculpatory clause is not unconscionable. Similarly, the failure to notify the Appellants of the leak does not constitute an unconscionable commercial practice. Although we do not condone the Appellees conduct in this case, it does not rise to the level of what the New Jersey courts have found to constitute unconscionable commercial practices under the CFA. See, e.g., Kugler, 279 A.2d at 652-54; 49 Prospect St. Tenants Ass‘n v. Sheva Gardens, Inc., 227 N.J.Super. 449, 547 A.2d 1134, 1142 (1988). Therefore, we will affirm the District Courts grant of summary judgment on this claim.
D.
The Appellants next claim that Appellee Republic Western engaged in bad faith adjustment of the insurance claim.4 New Jersey law recognizes such a claim. See Pickett v. Lloyd‘s, 131 N.J. 457, 621 A.2d 445, 450-51 (1993). In Pickett, the New Jersey Supreme Court explained that a settlement offer by an insurer must be made in good faith, and be honest and intelligent in light of the insurers experience. Id. at 450. The court adopted an approach taken by the Rhode Island Supreme Court, which held that if a claim is fairly debatable, then no liability arises. Id. at 453 (citation omitted). We agree with the District Court that the claim was fairly debatable in this case. Appellant Kane claimed that her property damage was approximately $120,000. The Appellants then refused to allow further inspection of their property for a significant period of time. When Republic Western eventually was able to inspect and value the property, its adjuster (an expert) determined that the amount of the loss was only $3,632.55. In light of the significant difference between these two valuations, and the fact that Republic Western could not attempt to settle until it was provided access to the property, it is easy to say that the claim was fairly debatable. Therefore, we will affirm the District Courts grant of summary judgment as to this claim.
E.
The final claim that the Appellants raise in this appeal is that the District Court erred by dismissing Appellant Kanes claim for breach of contract against Appellee Republic Western. The Appellants claim that the District Courts conclusion that the claim is moot—because Republic Western offered the policy limit
III.
For the foregoing reasons, we will affirm the District Courts grant of summary judgment as to all of the Appellants claims in favor of the Appellees.