The Meta Fair Housing Settlement: watch out for unintended consequences . . .

By in Accessibility Litigation Trends, ADA FHA Litigation General, FHA Advertising, FHA Disparate Impact Tags: , , , ,

logo from Jurassic World Dominion movieThe Jurassic Park series of movies are all about unintended consequences. You can say the same thing about the Facebook advertising tools that were the subject of lawsuits against Meta. On June 21 the Department of Justice announced a settlement of claims against Meta related to Facebook’s advertising algorithms.¹ It is the second such settlement, the first having been obtained in a lawsuit filed by the National Fair Housing Alliance and other groups.² Both settlements are interesting reading for those who specialize in these subjects, but it is worth asking whether they will have any impact on other players in the real estate market. You don’t have to be a Meta, a Spectre, a T.H.R.U.S.H. or a Kaos(4) to for these settlements to have an effect on how you do business as a landlord, management company or real estate agent or broker. That’s because these settlements are aimed at new technologies, but rely on old fashioned legal principles that apply to all aspects of the housing market and to the unintended consequences of any kind of targeted marketing program.

To understand why you need to understand the legal issue behind the DOJ lawsuit, the NFHA lawsuit and the original HUD investigation of Facebook. The Fair Housing Act prohibits various kinds of discrimination in housing transactions, including what is called advertising discrimination. The relevant section (28 U.S.C. §3604(c)) covers more than just advertising, but the easiest to understand application is ads that show a preference for one group over another. “Whites only” or “Singles only” would be the most extreme examples.

But what if the advertiser is clever enough not to say “whites only” but wants to make sure there are no black applicants for an apartment? Facebook’s targeted advertising programs were tailor made for making sure that unwanted applicants didn’t apply for an apartment or try to buy a house but not being explicit about it. You don’t need to say “whites only” if you only advertise to whites. It didn’t have to be this blatant or deliberate though. Advertisements that target those who live in particular neighborhoods, or those whose children attend certain private schools, or even those who shop in certain stores could achieve the same effect. It also doesn’t have to be deliberate discrimination. If an apartment complex is designed to appeal to young single professionals the landlord may not intend to exclude families, but ads targeting the ideal market will have that effect. The claims made by NFHA, HUD and DOJ all concerned the notion that by providing the tools that facilitate discrimination Facebook was itself engaged in discrimination.

There is clearly a tension between the hyper-targeted marketing offered by Facebook and the inclusive marketing that serves the goals of the Fair Housing Act. The DOJ settlement resolves that tension by limiting the extent to which Facebook can offer highly targeted marketing. Facebook will not, in theory, be able to offer tools that let advertisers intentionally or unintentionally exclude individuals based on race, religion, gender, disability and other illicit categories. That doesn’t mean however that the settlement has nothing to say to parts of the housing industry that don’t rely on AI to place their ads. Here are some of the implications for the industry and beyond.

  • Other social media and online advertising platforms will be sued by DOJ or by the host of law firms that latch on to any new kind of lawsuit that promises lucrative returns. These platforms should already by thinking about how they can modify their targeted marketing programs to meet the standards to which Meta has agreed.
  • Advertising costs for real estate transactions will go up. Social media advertising is priced in part on the number of impressions of the ad displayed to users. One of the advantages of targeted marketing is fewer impressions are needed to generate the desired level of response. With less targeting advertisers will have to buy more impressions to generate the same level of engagement.
  • The landlords, managers and brokers who place ads could come under attack. Remember that Section 3604(c) is aimed primarily at those who place ads, not those who publish them. If it is illegal to offer tools that permit discriminatory advertising it is certainly illegal to use those tools for discriminatory purposes.
  • DOJ and others may attack advertising that is targeted by the choice of where it is displayed. Advertising on domestic websites written in languages other than English is an effective way to target only one ethnic or linguistic group. Ads posted on community oriented websites in Chinese, Vietnamese or Spanish will most likely never be seen by individuals who don’t speak those languages. Similarly, advertisements on Fox News and its local affiliates will be seen almost exclusively by whites.³ A landlord looking only for white tenants doesn’t need a sophisticated screening tool like those offered by Facebook. All they need to do is advertise only on websites, radio stations and television stations that appeal only to whites.

Finally, there is an extension of the principles behind the Meta settlement that goes beyond the housing market. EEOC and DOJ have recently suggested that AI based systems for finding employees can be discriminatory(5). Almost all businesses open to the public are subject to the prohibitions against discrimination in the ADA and the Civil Rights Act of 1964. These businesses use targeted marketing to attract individuals they think they are likely to sell to, but that marketing necessarily excludes others, and the exclusion may be largely of individuals of a particular race, ethnicity or religion. As in the housing market, what seems like innocent targeting of groups to which no objection can be made might also turn out to eliminate all or most of the members of some group against whom discrimination is illegal.

But returning to the housing industry, high profile settlements like these can serve to deter unlawful conduct, but they also serve to encourage litigation. Housing professionals should evaluate their advertising and marketing policies to decide whether they might have an unintentional discriminatory effect and whether they can be justified on grounds unrelated to discrimination. Discrimination can be an unintended consequence of targeted advertising. Another perhaps unintended consequence will be more strike suits. Where DOJ leads others with less worthy motives are sure to follow.

++++++++++++++++++

¹ See, Justice Department Secures Groundbreaking Settlement Agreement with Meta Platforms, Formerly Known as Facebook, to Resolve Allegations of Discriminatory Advertising

² See, Fair Housing Groups Settle Lawsuit with Facebook: Transforms Facebook’s Ad Platform Impacting Millions of Users

³ See, Fox News’s Audience Almost Exclusively White as Network Faces Backlash Over Immigration Coverage

(4) Knowing just how humorless Meta and its owners are I’m sure they won’t get the joke. No, I don’t think Meta is a worldwide organization devoted to doing evil. Like the computers running the algorithms attacked by DOJ, Meta is just a very complicated machine for making money whose actions may have unintended consequences.

(5) See, The Americans with Disabilities Act and the Use of Software, Algorithms, and Artificial Intelligence to Assess Job Applicants and Employees

 


Share

Quick Hits – If you’re going through hell edition.

By in Accessibility Litigation Trends, ADA - drive-by litigation, ADA - Hotels, ADA - serial litigation, ADA Attorney's Fees, ADA Internet Web, ADA Litigation Procedure, ADA service animals, ADA Vending Machines, ADA Web Access, FHA Emotional Support Animals, HOA, Public Facilities, Reasonable accommodation, Rehabilitation Act Tags: , , , , , , ,

Dante’s hell was a complicated place, as this map by Botticelli suggests. Although Rodney Atkins’ advice “if you’re going through hell, keep on going” appears sound, winding through all the complexities of the ADA and FHA can seem like descending through all nine levels of hell. Nonetheless, I’m happy to act on a temporary basis as Virgil and see how far we can get. No promise about whether we’ll find a Beatrice to take you to Paradise.

Self-service kiosks under fire

Davis v. Laboratory Corp. of Am. Holdings,  2022 WL 1682416, at *1 (C.D. Cal. May 23, 2022) certifies a class of blind users in a class action based on inaccessible self-service kiosks.(7) There is a theme here that runs through a variety of ADA cases dealing with time and cost saving technology. From the famous and finally settled Dominos case through the various kiosk decisions the heart of the question is to what degree those with disabilities must suffer inconvenience in their access to goods and services. Some inconvenience is inevitable – disabilities are disabling – but when the path to goods and services is blocked by technology inconvenience becomes inequality. In Dominos sighted pizza lovers could order a pizza in a few minutes with an app on their phone while blind users had to call and wait on line for a couple of hours. In Davis and similar kiosk cases clients could arrive and log in quickly and easily or, it is alleged, wait a long time for personal service. I find it hard to believe designing an accessible kiosk is especially difficult – standards for ATMs have been in place for a dozen years and the technology is similar. We all know litigation is not the solution to this kind of thoughtlessness, but I advise my clients to avoid the problem by only dealing with vendors who offer accessible technology.

Mootness – non-existence is pretty good proof no meaningful relief is possible.

In Whitaker v. Chan, 2022 WL 1814142 (N.D. Cal. June 2, 2022) the court had little trouble finding the original complaint was moot when there was no operating business in the facility being sued. Along the way it reminded us that damages, including nominal damages, cannot be recovered under the ADA and that Unruh Act claims don’t belong in federal court.

Mootness – pulling the trigger a little too soon.

In Dalfio v. J.G. Mgmt Properties IV, LLC et al, 2022 WL 2079716, at *5 (S.D. Cal. June 9, 2022) the defendants came within 2 alleged ADA violations of getting the case dismissed at the Rule 12 stage. The problem was that while the Court was skeptical about the remaining violations, “the merits of the action are intertwined with the jurisdictional issue of mootness and jurisdictional findings would be inappropriate.” In another case from the same plaintiff the defendant lost a motion for summary judgment because the plaintiff’s expert found remaining ADA violations. Dalfio v. Barlas, 2022 WL 1693827, at *1 (S.D. Cal. May 26, 2022). Mootness is tricky because ADA requirements are numerous and complicated. As a defense strategy it must be carefully managed. (9)

Factual attacks on standing – you need to find the trigger

In Johnson v. Rosvin, Inc., 2022 WL 1987857 (N.D. Cal. June 6, 2022) the defendant leveled what is called a factual attack on standing at the Motion to Dismiss phase. This requires evidence, which the defendant provided in the form of a defective declaration that had some obvious misstatements of fact. You don’t need to like Scott Johnson or his lawyers to know that having filed hundreds, maybe thousands, of lawsuits they know how to say what needs to be said. I wrote long ago that outrage is neither a defense nor a substitute for a carefully planned strategy.²

An HOA on the warpath.

In Parada v. Sandhill Shores Prop. Owners Assn., Inc., 2022 WL 1693977, (S.D. Tex. May 25, 2022) the defendant attacked the plaintiff’s claims in every way imaginable but failed, predictably, in every case. It’s worth looking briefly at the facts. The plaintiff suffers from Alzheimer’s disease which is a handicap or disability under either the FHA or ADA. The defendant claimed it wasn’t, which was foolish and may have made other defenses less believable. The FHA injury claimed by the plaintiff was the inability to use her house without constant fear and distress because a proposed beach access path would constantly bring strangers near her house, something that can be unusually upsetting for those with profound memory loss. Evidence might eventually establish that her distress was not so severe she could not equally use and enjoy her dwelling, but once you assume the pleadings are true the truth becomes an issue for another day. The defendant treated the plaintiff’s ADA claim as if it were the same as her FHA claim; that is, the only question was the use and enjoyment of her home, which is not an ADA public accommodation. The problem, as the court correctly pointed out, is that there was a public accommodation at issue, the beach.(10) Just because an action interferes with the use of a home doesn’t mean it can’t also interfere with the use of a public accommodation. The last gasp was an effort to stop the federal lawsuit because there was a parallel state court action based entirely on state law principles. Because the outcome of neither was determinative of the other abstention was denied.

There was one interesting note at the end of the decision. the HOA claimed it was compelled to place the beach path by the plaintiff’s home by the Texas Open Beaches Act and the City of Galveston Beach Access Plan. It is worth remembering that municipalities and many state agencies are also subject to the accommodation requirements in the Fair Housing Act. Just because it violates the law doesn’t mean it is impossible to do.

Surrender as a strategy, with a twist.

I note default judgment cases, usually from California, just to see what the market price of a default might be. In Cuesta v. DTC Lodging LLC, 2022 WL 2077940 (D. Colo. June 8, 2022) and Meggs v. Colorado Hosp. Group, LLC, 2022 WL 1810597 (D. Colo. June 2, 2022) the defendants took a more affirmative approach to surrender. They admitted all the material allegations in the plaintiff’s complaint and moved for entry of judgment against themselves. The goal was explicit – cut off the expenditure of money on attorneys’ fees. The plaintiff opposed the motion because, I suspect, it did the one thing no plaintiff’s firm can live with – it limited the profit they would make from the litigation. It is worth remembering that almost all Title III ADA lawsuits are about money for lawyers, not access for the disabled. In any case the courts thought the defendant’s approach was reasonable and granted the motion for judgment. I have been a proponent of this kind of strategy for a long time, but this is the first time I have seen it successfully implemented.¹

Default as a strategy

In Gastelum v. C. Valley Hosp. LLC, 2022 WL 2072839 (E.D. Cal. June 9, 2022) the plaintiff, a serial filer who now seems to file pro se because his attorney, Peter Strojnik, is not practicing law, failed to obtain a default judgment because he couldn’t get the defendants’ properly served. The lesson for defendants, found in the details of the decision, is that adequate service is not subject to rigid rules. Another court might have found service was adequate and granted a default judgment. Default as a strategy should be a choice, not an accident.

The market for default judgments is slipping. In Johnson v. Iguanas Burritozilla, Corp., 2022 WL 1750472 (N.D. Cal. May 31, 2022) the court awarded a total of $1085 in attorneys’ fees. All you need to know about the industrial nature of this litigation is that the total attorneys’ time was 2.2 hours and that 14 different legal assistants billed time to the matter. It’s not a law firm, it’s an assembly line.

Johnson and his lawyers did better in Johnson v. Pennylane Frozen Yogurt, LLC, 2022 WL 1750382, (N.D. Cal. May 31, 2022) with an award of $1,912.50. To file this cookie cutter lawsuit required 4 lawyers and 13 legal assistants. It’s a volume business.

If Disney World isn’t your cup of tea

go to Florida for cheap ADA standing. Following the Eleventh Circuit’s lead in Laufer v. Arpan, LLC, 29 F.4th 1268 (11th Cir. 2022), the court in Lugo v. Island Harbor Beach Club, LLC,  2022 WL 1773973, at *2 (M.D. Fla. June 1, 2022) denied a motion to dismiss against a serial website tester. The district court had little choice, but the 11th Circuit got it wrong³ and will have to opportunity to deal with the hundreds or thousands of lawsuits that are sure to result.

Disney Land, on the other hand, may be less welcoming. The Court’s analysis of standing in Gastelum v. Pinnacle Hotel Circle LP, 2022 WL 1608704, at *5 (S.D. Cal. May 20, 2022) is very much in line with the 2nd Circuit’s recent decision in Calcano v. Swarovski N.A. Ltd. (8) The court wanted specific facts justifying an injury and intent to return rather than the usual vague claims about willingness to return at some time in the future. Gastelum is given an opportunity to amend but run into the age old problem of serial litigants: the more you say the easier it is to spot the lies.

It’s hard to make a quick buck with a class action.

Serial litigation is all about making a quick buck. The goal is a lawsuit expensive enough to make the defendant want to settle and an offer of settlement cheaper than the cost of defense. One way to bump up the potential defense costs and risks is a class action, and many ADA serial lawsuits include a class action claim. In Brooks v. Morphe LLC, 2022 WL 2052680, at *1 (E.D. Cal. June 7, 2022) the defendant didn’t bother to answer the lawsuit, but because it was presented as a class action the court declined to enter judgment without certifying the class. Efforts to certify a class were apparently slipshod – not surprising when the goal is to keep costs as low as possible in order to maximize profits. The result was an order requiring a do-over. I don’t understand why the defendant did not appear to fight the lawsuit because unlike many physical access cases, website cases are very risky in terms of the potential remediation costs. I do understand why the plaintiff’s lawyers didn’t do a good job (according to the Court). Nothing in the ADA serial filer business model calls for it.

Remembering the “nexus” requirement in the 9th Circuit.

The Ninth Circuit has held that a website is covered by the ADA only if it is associated with a physical place of business. Langer v. Oval Motor Sports, Inc., 2022 WL 1914063 (N.D. Cal. June 3, 2022) is a reminder that this “nexus” requirement means that a website violates the ADA only if the lack of website accessibility inhibits the user’s ability to take advantage of the goods and services of that physical business. The Court granted a motion to dismiss because the plaintiff only alleged he had trouble accessing the website, not that he had trouble accessing the business itself. The same result was reached in Gomez v. Ackerman Fam. Vineyards LLC, 2022 WL 1693707, at *3 (N.D. Cal. May 26, 2022). This will be a useful defense against plaintiffs who find it easy to sue based on an inaccessible website but might find it hard to drive all the way to the physical business.

Pigs get fat. . .

I’ve never really understood why the saying “pigs get fat, hogs get slaughtered” makes any sense. Not being a farm boy I had to Google the difference between pigs and hogs, the later being (I’m told) bigger than the former. Assuming bigger means greedier I guess this bit of folk wisdom applies to the plaintiffs’ lawyers in Caplan v. All Am. Auto Collision, Inc., 2022 WL 1939553 (11th Cir. June 6, 2022).  It was a standard ADA serial filer case. Mediation failed because the plaintiffs’ lawyers demanded too much in attorneys’ fees. They then moved for summary judgment and won, but the district court cut their fees by 75% based on excessive billing and other conduct that appeared designed to drive up the fees. The Eleventh Circuit agreed, affirming an award of just $7500. On its face that is a very low amount for fees through summary judgment in a federal lawsuit, and I think it can only be understood as reflecting both the District Court and Court of Appeals knowing the case would have settled at mediation but for the excessive attorneys’ fee demands. I have to believe that a more reasonable fee application might have been granted without this kind of reduction. By demanding far too much the plaintiffs’ attorneys showed their true colors.

Real ADA problems make for complicated lawsuits.

Tyler v. Valley MRI and Radiology, Inc., 2022 WL 2067859, (E.D. Cal. June 7, 2022) is not your typical serial filer ADA lawsuit. In fact, it is not a serial filer case at all. The plaintiff was real patient of the defendant and her claim – that the only accessible parking was not as close as it should be to the building – wasn’t obviously correct or incorrect. The legal issue – must accessible parking be as close as possible to a building entrance – couldn’t be resolved without a trial. The discussion of the legal issue is worth reading for any defense counsel facing this kind of claim. The case itself is a refreshing change from the usual endless line of decisions dealing with serial filers.

Lack of pre-suit notice as an ADA defense.

It isn’t clear why the plaintiff in Munoz v. S. Fla. Fair and Palm Beach County Expositions, Inc., 2022 WL 1744013 (S.D. Fla. May 31, 2022) thought it was worthwhile to try to strike an affirmative defense based on lack of pre-suit notice, but the result is a good discussion of the role pre-suit notice might play in an ADA case. The bottom line: pre-suit notice is not required by the ADA but a failure to give notice may be evidence that the plaintiff “acted in bad faith, [was] unduly litigious, or [ ] caused unnecessary trouble and expense.” None of these are easy to prove, but all of them might be present in a typical ADA serial filer case.

Doesn’t the point of the law matter?

I’ve been corresponding with William Goren, who just blogged about an interesting standing decision from the Seventh Circuit.(4) The Rehabilitation Act(5) decision in Ellison v. U.S. Postal Serv., 2022 WL 1617435, at *4 (S.D. Ind. May 19, 2022) gets right at the heart of our discussion about tester standing and whether the goals of the statute matter in determining if the tester suffered an injury. The plaintiff, who was wheelchair bound, could not access her local post office because it had stairs. Various solutions were tried but, she said, were not sufficient. She could, however, get the same goods and services from three other post offices within ten miles of her home. The Court dismissed her claims under the Rehabilitation Act because the law was intended to guarantee access to government programs, not government facilities. In this case the post offices were a little more inconvenient, but that didn’t add up to a denial of meaningful access. The case is being appealed, but Indiana is in the Seventh Circuit and the case Bill blogged about suggests the plaintiff will fare no better in the court of appeals.

Indemnity in FHA design/build cases.

The decision in  U.S. v. J. Randolph Parry Architects, P.C., 2022 WL 1645796, at *4 (E.D. Pa. May 24, 2022) is notable mostly for what it never discusses; that is, whether the FHA as a matter of policy precludes any claim shifting liability to a third party. I’ve blogged about this issue before (6) but the Court never addresses it. Instead the Court simply refuses exercise supplemental jurisdiction over state law contribution and indemnity claims because they would clutter up the discrimination case with related but not relevant issues. Of particular concern was the defendant architect’s desire to add 39 additional third-party defendants, essentially treating the case like a typical construction defect case in which everyone who ever walked onto the job suit is brought into the lawsuit in order to get at their insurance. The Court’s approach is sensible because simply allocating injunctive relief among the parties based on their individual faults can accomplish the same thing as overlapping contribution claims. The lawsuit involves fifteen facilities in four states; meaning there’s probably real money at issue. I wouldn’t be surprised to see the parallel state court cases being filed in the near future.

Sanctions against a pro se – possible but not easy.

In Simmons v. Village of Minier, 2022 WL 1607901 (C.D. Ill. May 20, 2022) the Court sanctioned a pro se serial filer, but only after giving him the benefit of the doubt on most of his abusive claims. The standard, quoted from another case, was “when a layman persists in a hopeless cause long after it should have been clear to him, as a reasonable (though not law-trained) person, that his cause was indeed hopeless, sanctions should be imposed….” Lawyers advising clients on the likelihood of attorneys fees after prevailing in a civil rights case should keep this standard in mind.

+++++++++++++++++++++++++++++++++++

¹ See Strategies for Surrender

² See Quick Hits – Vernal Equinox edition, Standing for serial plaintiffs – it’s a legal issue, not a moral problem and Quick Hits – Polar Vortex edition

³ See Stigmatic injury and how the 11th Circuit got in wrong in Laufer v Arpan

(4) See, Is ADA Title II, III Tester Standing a Thing Anymore?

(5) It is, more or less, the ADA for the federal government.

(6) See, Contribution, Indemnity and Disability – Does the FHA make sense? and Time for a do-over – the 9th Circuit gets indemnity and contribution right among others.

(7) See, FHA and ADA Odds and Ends for my latest note on the subject, and track back through the footnotes to the other blogs on this subject. This and other kiosk cases are not typical serial litigant cases involving a tester with dubious standing. DOJ has been active in kiosk cases and as this class certification shows they aren’t going to settle for a few thousand dollars and a meaningless promise to fix the problem.

(8) See the next blog below this one.

(9) See, Mootness and the ADA – Fighting may not be the best way to win. and my many other blogs with the word “mootness.”

(10) It isn’t clear from the opinion whether the HOA owned the beach or merely owned the land giving access to a publicly owned beach. If the HOA does not own the beach the question of whether the HOA is a public accommodation becomes a little more complex. I suspect that the path to the beach itself is a public accommodation, subjecting the HOA to the ADA with respect to that path.


Share

A short sharp shock – the end of the beginning for serial ADA lawsuits?

By in ADA, ADA - drive-by litigation, ADA - Hotels, ADA - serial litigation, ADA - Standing, ADA Internet Web, ADA Litigation Procedure, Uncategorized Tags: , , ,

Painting of Queen Mary I of England“Short sharp shock” is too good a phrase not to re-use, as proved by the fact that after its first use by Mary I of England to describe her hope that burning a few protestants would bring others back into the fold and its popularization by Gilbert and Sullivan it turned up in a song by Pink Floyd and as the title of Michelle Shocked’s first album. My use probably won’t get added to the Wikipedia page on the phrase (7) but it suits a discussion of braille gift card litigation and the effect of TransUnion v. Ramirez in ADA litigation.

A few days after the Supreme  Court issued its opinion in TransUnion v. Ramirez I predicted that it would have an effect on ADA industrial litigation.¹ I’m happy to report that this particular prediction seems to be coming true.² The latest example is Calcano v. Swarovski N.A. Ltd., 2022 WL 1788305, at *1 (2d Cir. June 2, 2022) a case dealing with the sudden rise and fall of ADA lawsuits demanding braille gift cards.(6) The Second Circuit took its own 2013 holding on ADA standing, boosted it with the holding in TransUnion, and threw out five lawsuits with typical industrial boilerplate allegations. The Court’s reasoning deserves some attention because it will be useful  for defense counsel in any typical ADA lawsuit.

The standing related allegations were identical in all five lawsuits:

  • Plaintiff “telephoned Defendant’s customer service office in an attempt to purchase a store gift card from the Defendant and inquired if Defendant sold store gift cards containing Braille.”
  • Plaintiffs state that they live near their respective Defendants’ stores and have been customers “on prior occasions.”
  • Plaintiffs also claim that they “intend[ ] to immediately purchase at least one store gift card from the Defendant[s] as soon as the Defendant[s] sell[ ] store gift cards that are accessible to the blind.”

Beyond this they alleged in conclusory fashion that they were unable to equally use and enjoy the goods and services of the defendant businesses because they were blind and needed braille gift cards.

The Second Circuit began its analysis with its own 2013 decision in Kreisler v. Second Ave. Diner Corp., 731 F.3d 184 (2d Cir. 2013). In Kreisler the Court held that a plaintiff alleged the injury in fact and necessary likelihood of future injury if:

“(1) the plaintiff alleged past injury under the ADA; (2) it was reasonable to infer that the discriminatory treatment would continue; and (3) it was reasonable to infer, based on the past frequency of plaintiff’s visits and the proximity of defendants’ [businesses] to plaintiff’s home, that plaintiff intended to return to the subject location.”

Kreisler, 731 F.3d at 187–88. Projecting its own test onto the later TransUnion decision the Court held that third requirement, a reasonable inference of intent to return, was intended to make sure the “’the risk of harm is sufficiently imminent and substantial’ to establish standing,” quoting TransUnion, 141 S. Ct. at 2210. It went on to adopt the 11th Circuit’s standing analysis, which it describes this way:

Thus, the central inquiry is not whether a complaint pleads the magic words that a plaintiff “intends to return,” but if, “examined under the ‘totality of all relevant facts,’ ” the plaintiff plausibly alleges “a real and immediate threat of future injury.” . . . (including “definiteness of the plaintiff’s plan to return” and “frequency of the plaintiff’s travel near the defendant’s business” as factors to consider in assessing whether a plaintiff “faces a real and immediate threat of future injury” (cleaned up)).

quoting Kennedy v. Floridian Hotel, Inc., 998 F.3d 1221, 1233 (11th Cir. 2021). It did not adopt the 11th Circuit’s explicit four factor analysis concerning intent to return³ instead sticking to its own earlier and more general description of the needed analysis: “we must refer to a complaint’s “factual context” to discern whether to accept “a complaint’s conclusory statements.”” quoting Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 148 (2d Cir. 2011), which in turned quoted Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
With its framework for analysis in place the Court’s next step was a crucial one, for it rejected the idea that quoting or paraphrasing language from its own cases was sufficient. The reasoning is crucial and worth quoting:
Here, each Plaintiff pleads the identical assertion that he resides “in close proximity to” Defendants’ businesses, has been a “customer at Defendant’s [location] on prior occasions,” and “intends to immediately purchase at least one store gift card from the Defendant as soon as the Defendant sells store gift cards that are accessible to the blind.” . . . . These allegations parrot the court’s language in Kreisler, see 731 F.3d at 188, and Plaintiffs characterize them as factual assertions that we must presume as true. But these assertions are nothing more than “legal conclusion[s] couched as … factual allegation[s].
It would have been helpful if the Court had told us a little more about the difference between the allegations in Calcano and the allegations in Kreisler. Where the plaintiffs in Calcano pled “close proximity,” Mr. Kreisler pled “within several blocks,” and where the plaintiffs in Calcano pled “prior occasions” Mr. Kreisler pled that he passed by “three or four times a week.” The reason the allegations in Calcano were conclusory is that the words came not from Mr. Kreisler’s allegations, but rather from what the Court calls the Camarillo test after its decision in Camarillo v. Carrols Corp., 518 F.3d 153, 158 (2d Cir.2008). A description of a legal test is a conclusion that could apply to many different allegations. Facts, the court seems to be saying, won’t usually be alleged in words that quote a legal test.
Far more important than this distinction is, however, the Court’s willingness to compare the allegations in the various Complaints to facts that could only have come from outside the Complaint. The Court notes that one plaintiff claims he lived near a store that doesn’t exist, and that another used “close proximity” to refer to a location in Manhattan when he lived in the Bronx. Phrases like “close proximity” are used by serial litigants to avoid facts because facts are their enemy. A willingness to test such allegations against facts that cannot be disputed is the first step to early dismissal of these claims.
A second important fact is the Court’s willingness to insist on details. It describes the failings in the complaints like this:
Calcano, Dominguez, and Thorne fail to provide any details about their past visits or the frequency of such visits. They do not specify which stores they visited or what items they purchased. And they do not say why they want to purchase braille gift cards—for their own use or as gifts—so urgently that they intend to do so “immediately … as soon as the Defendant[s] sell[ ] store gift cards that are accessible to the blind.” . . .  Without such basic information, Plaintiffs cannot possibly show that they have suffered an injury that is “concrete and particularized.”
This is a standard that is almost never imposed on plaintiffs in ADA cases, especially in the Ninth Circuit, which only reluctantly acknowledges the possibility that plaintiffs might routinely file lawsuits that have no merit and is the reason why eliminating ADA litigation abuse has been left in the hands of the prosecutors.(4) Applying the Second Circuit’s insistence on details to ADA suits generally would make the suits almost impossible to plead.
Finally, and most important of all, the Second Circuit was willing to consider these lawsuits in the larger context of hundreds of lawsuits filed by the same law firms and plaintiffs. “Third, we cannot ignore the broader context of Plaintiffs’ transparent cut-and-paste and fill-in-the-blank pleadings.” Too many district judges bury their head in the sand and refuse to consider that the plaintiff’s actions in other lawsuits reflect on the credibility of allegations in the suit before them. Some recognize that multiple filings of almost identical filings are relevant (5) but this is not universal at the motion to dismiss stage.

Except for the decision in TransUnion nothing really changed between the earlier Second Circuit decisions and Calcano. I’m sure the Court would say it would have reached the same result regardless, but I think TransUnion has reminded this and other Courts that standing is an important concept that, among other things, takes the federal courts out of the business of aiding and abetting get rich quick schemes based on finding a pet plaintiff to file multiple lawsuits. To quote Winston Churchill, “This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

+++++++++++++++++++++++++++++++++

¹ See Transunion v Ramirez – has the Supreme Court put an end to cheap standing in ADA litigation?

² Circuit Court decisions in ADA serial filer cases that cite TransUnion include Laufer v. Arpan LLC, 29 F.4th 1268 (11th Cir. 2022) (which got it wrong for reasons I explain in Stigmatic injury and how the 11th Circuit got in wrong in Laufer v Arpan), Harty v. W. Point Realty, Inc., 28 F.4th 435, 438 (2d Cir. 2022) and Laufer v. Looper, 22 F.4th 871, 877 (10th Cir. 2022) (both of which got it right).

³ We have previously considered four factors relevant to this analysis: “(1) the proximity of the defendant’s business to the plaintiff’s residence; (2) the plaintiff’s past patronage of the defendant’s business; (3) the definiteness of the plaintiff’s plan to return; and (4) the frequency of the plaintiff’s travel near the defendant’s business.”  Kennedy v. Floridian Hotel, Inc., 998 F.3d 1221, 1233 (11th Cir. 2021).

(4) On April 11, 2022 the District Attorneys for San Francisco and Los Angeles County filed a civil action against the Potter Handy law firm and its partners claiming that it had filed numerous fraudulent ADA lawsuits. On May 19 a grand jury in San Francisco indicted Kousha Berokim, a Beverly Hills attorney, for grand theft by false pretense for ADA filings targeting small businesses. I think most ADA defense attorneys would agree these represent only the tip of the iceberg in terms of filings that are based on misrepresentations about the plaintiff’s standing to sue.

(5) See, Hunter v. Branch Banking and Tr. Co., 2013 WL 4052411, at *5 (N.D. Tex. Aug. 12, 2013), citing Norkunas v. Wynn Resorts Holdings, LLC, 2007 WL 2949569, at *4 (D.Nev. Oct.10, 2007) (stating that “a plaintiff’s litigation history can undercut the sincerity of his or her expressed intent to return”); Brother v. Tiger Partner, LLC, 331 F.Supp.2d 1368, 1374–75 (M.D.Fla.2004) (similar).

(6) See my blogs Blogathon – ADA and FHA cases with a little help from my friends. and Quick Hits – Vernal Equinox edition for a very brief history that will, we can only hope, end with Calcano.

(7) Wikipedia will confirm these facts. I only knew of its use in Gilbert and Sullivan’s Mikado and as Michelle Shocked’s album title. Mary I and burning protestants was a surprise, as was its use as the name of a “crossover thrash band” from Liverpool. Now I have to go look up “crossover thrash” music.


Share

Industrial ADA litigation – “roll me baby, just like a tumbling dice.”

By in ADA, ADA - drive-by litigation, ADA - serial litigation, ADA - Standing, ADA Litigation Procedure, ADA Mootness, Uncategorized Tags: , , , , ,

Tumbling dice - album cover for Rolling StonesThe Rolling Stones famously asked that they be rolled like a pair of tumbling dice, and looking at recent Title III ADA headlines reminded me of just what a crapshoot ADA litigation can be. The good news for businesses is that the district attorneys of San Francisco and Los Angeles have filed suit against the Potter Handy firm and its partners alleging that the firm filed false lawsuits under the ADA.¹ Hard on the heels of the action by the local authorities a federal judge in San Francisco, Vince Chhabria, entered a series of show cause orders requiring the Potter Handy firm and its clients to file sworn declarations providing factual support for their allegations concerning having visited and intending to visit ADA defendants in the future.² I don’t know how Potter Handy and its clients will respond to these orders, or what Judge Chhabria will do with those responses, but within days of these actions a federal judge in San Jose entered an all too typical order allowing a case to proceed despite being more or less identical to those being handled by Judge Chhabria. Sevens or snake eyes, in ADA Title III matters defendants and plaintiffs are at the mercy of the random assignment of judges done with each federal lawsuit filed.

First, a little background to Judge Chhabria’s orders. Because Title III of the ADA only provides for injunctive relief a plaintiff cannot maintain a lawsuit under Title III unless they allege and ultimately prove they plan to go back to the same store or restaurant they are suing. This is because in a private lawsuit federal courts cannot make orders that are only for the public good. Whatever the court does must be of benefit to the plaintiff. If the plaintiff is never going back to the property then ordering the owner to comply with the ADA won’t do the plaintiff any good. Thus, for the federal court to act the plaintiff must show they will return in the future; otherwise the court will dismiss the case for lack of jurisdiction.

It has been obvious for years that a serial lawsuit filer claiming they will return may not be telling the truth. After all, how likely is it that someone who has sued dozens of restaurants that they never ate at before really intends to go back to all of them?  However, in the earliest part of a lawsuit, before there has been any evidence, the court has to assume that what the plaintiff says in their complaint is true as long as it is minimally plausible. That means it is hard to get these cases dismissed early on, which in turn means that it they are expensive to fight. Since the owner doesn’t get back their attorneys fees  even if they win it always makes business sense to just settle and save money. That logic has lead to tens of thousands of settlements and made it highly profitable for law firms to file Title III ADA suits. For very little effort they can make thousands or tens of thousands of dollars on each case they file. This is the origin of industrial litigation under Title III; there is an incentive to file lawsuits on an industrial scale based on the structure of the ADA and the nature of the Federal Rules of Civil Procedure.

This incentive is especially strong in California because a plaintiff can always add a claim under the state’s Unruh Act. Under the Unruh Act the plaintiff gets a minimum of $4,000 in damages, meaning that the risk of litigation is higher and the plaintiffs’ lawyers can demand and get higher settlement amounts. The Unruh Act is why some 40% of all ADA cases nationwide are filed in California state or federal court.

The California legislature tried to put a stop to this use of the Unruh Act by making filing claims under the Unruh more expensive and difficult in state court. Unfortunately, state laws don’t affect how the federal courts do business, so many plaintiffs have kept filing in federal court while tacking on an Unruh Act claim, thus getting the benefit of the $4,000 damage amount without the hassle of the state court requirements. Seeing that they were being used by these plaintiffs many federal courts in California began refusing to consider Unruh Act claims – something technically called refusing to exercise supplemental jurisdiction.³ I say many federal courts because this isn’t universal. The rules about supplemental jurisdiction leave a lot of discretion to the federal judge, and some just think it is o.k. to allow Unruh Act claims to tag along with an ADA claim.

That brings us to two lawsuits that are kind of hard to tell apart. One, Whitaker v. Peet’s Coffee, Inc. is pending before Judge Chhabria in the San Francisco Division of the United States District Court for the Northern District of California as Case No. 21-cv-07698. The other, also called Whitaker v. Peet’s Coffee, Inc. is  pending before Judge Beth Labson Freeman in the United States District Court for the Northern District of California, San Jose Division as Case No. 21-cv-05163. Both were filed by the Potter Handy firm. I have not read the complaints, but it would be surprising if there was any significant difference except the address of the Peet’s Coffee that Mr. Whitaker supposedly visited. It is safe to say that given the number of lawsuits filed in Mr. Whitaker’s name these complaints are more like Fords rolling off the assembly line than Maseratis being hand crafted in Italy.

Despite their obvious similarities, within the last few days the two federal judges involved reached completely different conclusions about how to handle these cases. On April 19 and 20, 2022 Judge Chhabria entered  orders requiring an evidentiary hearing on whether Mr. Whitaker has standing to sue and ordering Mr. Whitaker and his attorneys to show cause why his Unruh Act claims should not be dismissed. This case is a little further along than the cases in which Judge Chhabria entered his show cause orders, but his approach is clear. He is skeptical of the plaintiff’s claim that he has ever been to the defendant Peet’s Coffee store and equally skeptical that he ever plans to return. Instead of waiting for a trial to hear the evidence on these issues he is going to take evidence early and, if it turns out the plaintiff cannot prove an intent to return, dismiss the case before he and the lawyers spend too much time on it.(4) He has also fairly clearly aligned himself with those federal judges who are declining to exercise supplemental jurisdiction over Unruh Act claims, thus making it a little less profitable to file ADA cases if they end up in his court.

Judge Freemen has taken a very different approach. In a decision entered on April 21, 2022 she refused a request that she do what Judge Chhabria is doing. I will let her speak for herself on this:

Overall, however, the Court agrees with Judge Orrick and several other courts in this Circuit that “if an ADA plaintiff is going to be disbelieved on the issue of standing, it should be in the context of factfinding, not in the context of a Rule 12(b)(1) motion.” Garcia, 2021 WL 7285264, at *4 (brackets omitted).
Here, given Plaintiff’s unequivocally asserted intent to return to the Coffeeshop and the absence of direct evidence rebutting that intent, the Court does not find that an evidentiary hearing is warranted. That said, the Court notes that discovery has yet to commence, and it is under a continuing obligation to ensure subject matter jurisdiction exists over Plaintiff’s claims at all times. Should subsequent facts arise in the course of discovery that would provide a direct basis to doubt Plaintiff’s sworn statements of his intentions to return to the Peet’s Coffee, Defendant is welcome to renew its standing challenge at that point.
Whitaker v. Peet’s Coffee, Inc., 2022 WL 1189888, at *5 (N.D. Cal. Apr. 21, 2022). She then concludes by refusing to dismiss the Unruh Act claim, leaving the plaintiff with a larger threat and making the case more valuable to the plaintiff’s lawyers. She does suggest she might consider a challenge to standing at some point before trial, but by then it will be too late because as a practical matter the defense costs will have far exceeded the cost of settlement.

I’m sure Judge Freeman does not think of herself as a proponent of industrial ADA litigation, but her unwillingness and that of many other federal judges to address standing to sue and the credibility of allegations of intent to return at the very beginning of the case has the effect of perpetuating a system that causes millions of dollars to be spent on lawyers and does almost no good for those with disabilities. In many cases the effect of an ADA lawsuit is simply to drive a small business out of business, thus making sure no disabled person will ever benefit from its goods and services. In most cases, I believe, the plaintiff’s lawyers get their money and walk away so that the owner never has to make the property accessible(5). The fees paid to settle these cases are just a tax businesses pay to avoid complying with the ADA.(6)

Whether you agree with Judge Freeman or Judge CChabria about how to approach ADA cases, it is disturbing that the fate of defendants and plaintiffs alike depends on the random assignment of cases to federal judges. No matter which side you are on, the determining factor in the outcome of the lawsuit will be the initials put after the case number that indicate which judge the case was assigned to. If you are a plaintiff or plaintiff’s lawyer and you see BLF after the case number you’ve hit the jackpot and it is almost certain you’ll get a quick and easy payday by settlement. If you are defendant and you see VC after the case number there’s a good chance you can either make a better deal or even get out of the case entirely at a reasonable cost of defense. I haven’t surveyed all 19 judges in the Northern District of California, but I’m sure that others can be found on both sides of this divide, or even taking their own independent approach to these issues.

The lawsuit against Potter Handy by the San Francisco and Los Angeles district attorneys might have some effect on these cases, but the outcome is probably years away and won’t affect the many other firms who file serial ADA lawsuits. The solution lies, unfortunately, with Congress, which has been notoriously dysfunctional for some years. For now defendants in Title III ADA lawsuits can only hope for the best and make sure their defense or settlement strategy is based on what can be known about the individual judge to whom their case is assigned. It is that assignment, not any principle of law, that will likely determine the outcome. We are all like Mick Jagger, except that it is a computer down at the District Clerk’s office that’s going to “roll me, just like a tumbling dice.”

+++++++++++++++++++++++++++++

¹ Thanks to Jim Vitale and William Goren for calling my attention to the filing. One of several stories about the filing can be found at https://www.courthousenews.com/law-firm-accused-of-ada-shakedown-of-small-businesses/ I cannot say, of course, whether the claims have any merit.

² See, Federal Judge in San Francisco Challenges Lawsuits Filed by Aggressive ADA Law Firm

³ See my blog Supplemental Jurisdiction for my earliest note about this kind of dismissal. Search “supplemental” in accessdefense.com and you’ll find the many updates I’ve posted on where various courts stand on the issue.

(4) It is a depressing truth that by the time a case gets as far as this one the defense costs have already exceeded the cost of settlement, but Judge Chhabria’s orders in newly filed cases have the potential to save defense costs by getting rid of meritless cases early on.

(5) Assuming, of course, that there was ever a real accessibility problem.

(6) I’ll note here, as I have many times before, that this kind of industrial litigation has been going on for at least 15 years and the number of cases continues to increase. If this kind of lawsuit were working as a way to persuade businesses to become accessible we would see the number of filings going down, not up. Industrial litigation is a failure in terms of ADA compliance; only the lawyers benefit.


Share

Stigmatic injury and how the 11th Circuit got in wrong in Laufer v Arpan

By in Accessibility Litigation Trends, ADA - Hotels, ADA - serial litigation, ADA - Standing, ADA Internet Web Tags: , , , , ,

King Cnut rebukes his courtiers for believing he can control the tideCan the 11th Circuit hold back the tide as King  Cnut famously failed to do?² In Laufer v. Arpan LLC, 2022 WL 906511 (11th Cir. Mar. 29, 2022) the 11th Circuit disagreed with the Fifth, Tenth and Second Circuits concerning the injury sufficient to satisfy the standing requirements in Article III of the Constitution. If the case goes to the Supreme Court the 11th Circuit is likely to get its feet wet on Article III standing, but of more interest is the Court’s failure to consider whether the plaintiff had even suffered a statutory injury; that is, did she suffer the kind of injury Title III of the ADA was intended to prevent? If there was no statutory injury then the question of constitutional injury never arises.

The lawsuit was typical of the thousands filed by Laufer. She admitted that she visited a hotel website with no intention of visiting the hotel but instead to see if it met DOJ regulations concerning information about accessibility features. When she found something missing she sued, claiming that this violation of the ADA caused her humiliation and embarrassment. That humiliation and embarrassment was her only injury. She never intended to visit the hotel so the absence of information did not deprive her of any opportunity to stay at the hotel or enjoy any of its goods and services.

This is where qustion of statutory injury comes in. There is very good evidence that Congress never intended Title III of the ADA to protect individuals with disabilities from humiliation and embarrassment. To see why it is useful to make the same comparison the 11th Circuit made when it considered that damages for emotional distress were available under Section 504 of the Rehabilitation Act, another disability discrimination statute. Section 504 explicitly permits the recovery of damages, which damages for emotional distress being only one kind of damages that may be awarded. Such damages are also available to victims of discrimination under the Fair Housing Act and under Titles I and II of the ADA. They are not, however, available under Title III of the ADA. Congress deliberately chose to exclude from Title III of the ADA any kind of damage remedy.

The absence of any damage remedy at all shows that emotional injuries like humiliation and embarassment are not injuries that Title III is intended to prevent. Title III only allows injunctive relief because its purpose is to prevent the denial of the “full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation.” It was never intended to prevent bad feelings that might result from being aware of an ADA violation. No matter how bad a discriminatory website or other condition makes a disabled person feel, unless it denies them the full and equal enjoyment of the public accommodation then it has not injured them in the way the statute is intended to prevent, and that is the only kind of injury that gives rise to standing. Because Laufer never suffered a Title III statutory injury she had no standing to sue under Title III regardless of any constitutional considerations.¹

However, even if Title III granted a remedy for emotional distress Laufer’s alleged distress would not satisfy the requirements of the Constitution. The 11th Circuit’s error is found in two sentences from the opinion:

Because she claims not only that she suffered illegal discrimination but also that the discrimination resulted in “frustration and humiliation” and a “sense of isolation and segregation,” she has adequately pleaded a concrete stigmatic injury. And because her emotional injury is her emotional injury, it affects her “in a personal and individual way” and is therefore sufficiently particularized

2022 WL 906511, at *4. The key word here is “stigmatic.” A stigmatic injury is an injury that one suffers  because one is a member of some group. The injury itself is by definition neither personal nor individual because every member of the group would suffer the same injury under the same circumstances.  All that is personal to Laufer or another member of the group who suffers a stigmatic injury is the degree of harm – how bad they feel – rather than the nature of the injury.

Allen v. Wright, a case the 11th Circuit refers to but does not seem to understand explains why a stigmatic injury, though real, does not satisfy the requirements for constitutional standing.

Our cases make clear, however, that such injury accords a basis for standing only to “those persons who are personally denied equal treatment” by the challenged discriminatory conduct.

Allen v. Wright, 468 U.S. 737, 755 (1984), abrogated on other grounds, Lexmark Intern., Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014). The Court went on to explain that there is no “personal” denial of equal treatment when the injury  is based on nothing more than membership in a particular group:
If the abstract stigmatic injury were cognizable, standing  would extend nationwide to all members of the particular racial groups against which the Government was alleged to be discriminating . . . All such persons could claim the same sort of abstract stigmatic injury respondents assert in their first claim of injury. A black person in Hawaii could challenge the grant of a tax exemption to a racially discriminatory school in Maine.
Laufer is just like the hypothetical black person in Hawaii who is offended by the grant of a tax exemption to a private school in Maine that engages in race discrimination. She is offended by discriminatory conduct but she is not a victim of that conduct because she was not “personally denied equal treatment.” She was not personally denied equal treatment because, of course, she never sought equal treatment from the hotel whose website she visited, and she was given exactly equal treatment with respect to the information on the website itself.
What Laufer really alleges and what the 11th Circuit mistakenly relies on is what the Supreme Court calls the “offended observer” theory of standing;  See, Am. Legion v. Am. Humanist Assn., 139 S. Ct. 2067 (2019) [Gorsuch and Thomas concurring]. This notion of standing has been rejected by the Supreme Court because:
The federal courts have abjured appeals to their authority which would convert the judicial process into “no more than a vehicle for the vindication of the value interests of concerned bystanders.”
United States v. SCRAP, 412 U.S. 669, 687, 93 S.Ct. 2405, 2416, 37 L.Ed.2d 254 (1973). Laufer is a concerned bystander. She is disabled, just as the plaintiffs in Allen v Wright were black, but like them she has never been denied equal treatment; that is, equal access to goods and services. Without a desire to take advantage of the goods and services of a public accommodation a plaintiff like Laufer will never suffer the kind of individual injury required to satisfy Article III.
Laufer v. Arpan cannot be squared with the Fifth Circuit’s decision in Laufer v. Mann Hosp., L.L.C., 996 F.3d 269 (5th Cir. 2021), the Tenth Circuit’s decision in Laufer v. Looper, 22 F.4th 871, 877–78 (10th Cir. 2022) or the Second Circuit’s decision in Harty v. W. Point Realty, Inc., 28 F.4th 435 (2d Cir. 2022). Each of these makes slightly different arguments concerning tester standing as the courts look back to their own earlier precedents, but at the end of the day these cases all correctly reject the notion that a stigmatic injury without unequal treatment is sufficient for Article III standing.  There is a clear conflict among the circuits as my colleague Bill Goren has pointed out, and one of these cases should make it to the Supreme Court, which will have the opportunity to put a stake in the heart of industrial litigation under the ADA by doing no more than requiring that ADA Title III plaintiffs allege and prove more than a mere stigmatic injury.
+++++++++++++++++++++++++++++++++++++
¹Many courts hold that a person with a disability suffers an injury if they merely confront or become aware of a discriminatory condition. These decisions ultimately rest on the notion that the person who confronted the condition was thereby deterred or prevented from taking advantage of the offered goods and services.
² King Cnut (or Canute or Knut) was supposedly annoyed by the flattery of his courtiers concerning his own power as King. To show them that their flattery was vain and did not impress him he had  his throne set by the sea and then commanded the tide, to no avail, to not get his feet wet.

 


Share
1 2 3 4 5 >»