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

The 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.”

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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.

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