ADA and FHA Defense

Update – well, in the fast moving world of the internet it looks like this blog is out of date because the California bill it discusses is unlikely to pass. Nonetheless, the princinciple still applies – it’s easy to legislate and hard to fix the unintended consequences.

In the children’s nonsense song written by Burl Ives an old woman swallows a fly for reasons unknown and then:

• swallows a spider to catch the fly
• swallows a bird to catch the spider
• swallows a cat to catch the bird
• swallows a dog to catch the cat
• swallows a goat to catch the dog
• swallows a cow to catch the goat
• and finally, swallows a horse to catch the cow

at which point “she died of course.” Senate Bill 84, just passed by the California legislature, reminds me quite a bit of this song, for it is only the latest in a long line of failed efforts to curb the industrial litigation problem exacerbated by the Unruh Act.

In its original form California’s Unruh Act included a state equivalent of the Americans with Disabilities Act concerning physical accessibility. However, it added something that is not in the ADA, an automatic $4,000 penalty paid to the plaintiff if a violation was proved. This created California’s industrial ADA litigation machine by incentivizing litigation. In other states the only threat to a defendant besides being ordered to remediate is paying legal fees to the plaintiff’s lawyer. In California it has been legal fees plus $4,000. It even seemed, for a while, that it might be $4,000 per violation.

Not surprisingly, California soon had more accessibility lawsuits than any other state and California businesses; especially smaller businesses with fewer financial resources, faced an unrelenting series of lawsuits about accessibility. You might say California swallowed a fly, although unlike the old woman in the song there was a reason for it.

Within a few years the California legislature realized that its effort to incentivize enforcement had created a monster that was not improving accessibility but was terrorizing small businesses. In recent years it has taken steps to slay the dragon it created, including a notice requirement, new pleading requirements, a higher filing fee for serial plaintiffs and a smaller penalty – $2,000 – under some circumstances. This had no noticeable effect on the volume of cases filed because most Unruh Act claims were joined with an ADA claim and filed in federal court, where the state court filing fee and pleading requirements did not apply. The spider intended to catch the fly was wriggling and tiggling (as the song says) but despite the addition of a bird, cat and dog the problem had not been solved.

While the California legislature was taking these steps the federal courts realized that they were being used both as a money making tool for lawyers who did not seem to care about accessibility and then as a loophole to evade what the California legislature intended with its various reforms of the Unruh Act. Most (not all) federal courts in California began dismissing state law claims joined to a federal ADA claims. That meant no state law penalty and less incentive to file suit. You might say that without help from the California legislature the federal courts had swallowed a goat in the hope of putting ADA litigation back on track as a tool to eliminate discrimination instead of a means of enriching lawyers.

The plaintiffs’ bar, with the endless creativity inspired by the desire to make money, began pivoting to the state courts where, for procedural reasons, it was harder and therefore more expensive for defendants to raise issues about the new pleading standard.  The federal procedural goat couldn’t get rid of the dog any better than the spider etc. got rid of the fly. Federal courts began to see a reduction in the huge volume of ADA cases but the problem for business remained the same as did the underlying cause – a financial incentive that made industrial litigation profitable for lawyers.

With Senate Bill 84 the California Senate is hoping that by swallowing a cow it might take down the ineffective goat and give small businesses a break. The law requires 120 days notice and an opportunity to cure before an Unruh Act lawsuit is filed against a business with 50 or fewer employees. The penalty for failing to give notice is a losing the chance to win statutory damages and legal fees. This seems, on its face, the perfect solution. It makes it much harder for lawyers to get the attorneys’ fees and penalties that created the litigation monster in the first place, which should tame the monster.

I am not optimistic that this particular evil genie can ever be returned to its bottle.¹ The foundation on which ADA and Unruh Act industrial litigation rests is the asymmetrical nature of the risks and rewards from such litigation. Under both the ADA and Unruh Act a winning plaintiff will be awarded attorneys’ fees but a winning defendant will get nothing. For a plaintiff’s lawyer there is a low risk (a few hundred dollars in filing expense) and a large potential reward (thousands of dollars in attorneys fees). For the defendant there is only risk. If the defendant wins they lose all the money they spent on their attorneys. If they lose they pay their attorney and the plaintiff’s attorney. While the Unruh Act’s penalty provision certainly made California the hotbed of accessibility litigation it is today, it is the asymmetry of risk and reward that supports the industrial ADA litigation machine across the nation.

What about the 120 day notice and cure provision? Surely that gives small businesses a chance to fix their problems and therefore avoid a lawsuit. There are three problems here. First, of course, the federal ADA remains unchanged. Second, depending on the business and the nature of the accessibility problems 120 days may be too short a time and the cost may be more than the business can afford. Defendants in ADA/Unruh Act lawsuits are very often small businesses occupying the cheapest available space in aging strip shopping centers. They are often run by recent immigrants or their children.³  For a marginally profitable business that survives only because the whole family works, the cost of remediation may be beyond reach. This is especially true for the most common violations, which involve accessible parking. Existing guidance suggests that any substantial work on a parking space may trigger an obligation to remediate the entire parking lot, which multiplies the expense. Finally, when remediation work requires complex permitting 120 days may not be long enough, even assuming the labor required is available. There are a good reasons why so many businesses in California that are hit with an Unruh Act or ADA claim simply allow a default judgment to be taken or close down entirely.

No doubt a few years down the road we’ll see another legislative effort at the state or federal level to make adjustments that discourage litigation. Once you’ve swallowed a cow, why not try a horse? The problem is that no amount of fiddling can solve the fundamental problems that create industrial ADA litigation. The first is the asymmetry in cost and risk when a plaintiff who has nothing to lose except a little time and expense sues a defendant whose absolutely best outcome is paying their own attorney thousands or tens of thousands of dollars that cannot be recovered. The second is the fact that in most cases remediation costs money but does not improve revenues or profitability, making remediation difficult or impossible for small businesses.² Finally, those small businesses are likely to occupy the oldest buildings and therefore most likely to have accessibility violations.

We don’t need to throw the baby out with the bath water¹, but creating a more accessible world and reducing litigation will require solutions that don’t just involve tinkering around with notice requirements and providing an opportunity to cure. The existing model of trying to encourage accessibility by incentivizing litigation and punishing businesses that are not accessible has been a complete failure as applied to small businesses in aging buildings. The number of ADA accessibility cases filed each year has not gone down for decades, which is proof enough that the existing system of incentives and punishments does not work. What happened to the old lady who swallowed a horse? “She died, of course.” After more than three decades of failures the California legislature and the Congress need to find real solutions to the problem of accessibility.(4)

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

Thanks to Jim Vitale for pointing out this new legislation. You can read more about the details at Ogletree Deakin’s article on JD Supra, “California Senate Passes”

¹ Mixing metaphors is the author’s prerogative.

² There are tax incentives for remediation, but they don’t apply to buildings built after 1991, and are therefore of little use to most defendants. More important, we know that most accessibility litigation concerns problems that do not have a significant impact on real disabled customers. Businesses would invest in remediation voluntarily if they thought it would improve revenues. Real customers, rather than serial filers, would enforce the Unruh Act and ADA if they believed they were being denied meaningful access. Even allowing for ignorance and misconceptions the real problem with accessibility is that the cost outweighs the benefit when measured in purely economic terms, and most of those with disabilities would rather live their lives and simply do business with those that are accessible. Accessibility is an important social good, but forcing individual businesses to bear the cost of that social good is likely to fail when there is no obvious dollar benefit to the business itself.

³ There is considerable evidence that the law firms in California and elsewhere who file ADA claims deliberately seek out businesses likely to be owned by minorities or recent immigrants, sweeping through the local Chinatown or Koreatown while avoiding neighborhoods that are predominantly White.

(4) I’m afraid these will probably involve spending taxpayer dollars, which is of course anathema in California and the U.S. as a whole. Everybody wants an accessible society, but nobody wants to pay for it.

(5) See, Bill to Stop Shakedown ADA