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Reverberations continue from suit against law firms representing disabled ADA plaintiffs

Whitaker's suit against Cyclismo Cafe was one of a 20-lawsuit cluster that Whitaker filed in a single week in May of 2021 against Redwood City restaurant owners
BCN-2022-5-12-ADASUITREACTIONS-01
Cyclismo Cafe in Redwood City, Calif. was sued in May 2021 for violating the Americans with Disabilities Act; allegedly its outdoor tables were not accessible for persons in wheelchair. The case settled before trial but the owner wants her money back in light of allegations raised by the district attorneys of San Francisco and Los Angeles concerning the plaintiff and his law firm.

A lawsuit against a San Diego law firm known for filing thousands of court cases in the Bay Area and elsewhere on behalf of disabled clients continues to reverberate through the legal ecosystem as stakeholders wrestle with the implications.

The unusual civil suit -- filed jointly by the district attorneys of San Francisco and Los Angeles counties -- alleges that Potter Handy LLP and 15 of its lawyers schemed to bring thousands of lawsuits in federal court, knowing that their clients did not have the right to bring such actions.

The Americans with Disabilities Act allows claims by disabled plaintiffs who encounter barriers to access a store or restaurant, but only if they can prove that they plan to return to the business once the barrier is removed.

The suit alleges that the law firm used false statements by clients with no real intention of ever re-visiting the small businesses they sued, to force settlements from owners trying to avoid the expense of litigation.

The case has raised thorny questions for the parties and the other stakeholders, among them: Who is to determine if the allegations are true? (They are vigorously disputed by Potter Handy.) Should that question be decided in state court where the district attorneys brought the lawsuit, in federal court where the allegedly improper cases were commenced, or in both places?

If the district attorneys' claims are found to be true, what will happen to the cases that are currently pending in federal court? Will they be dismissed and refiled in state court or will the plaintiffs be barred from re-asserting the claims?

Even more problematically, what about the thousands of cases that have already been resolved, particularly those cases that were settled by the payment of money? Will the Potter Handy firm and its clients be compelled to repay the monies they obtained? If so, will they be able to make restitution?

While these and many related issues will play out in courtrooms across the state, the epicenter of the complicated litigation is likely to be in the Bay Area, where the district attorneys' suit is pending in San Francisco Superior Court.

Background

The ADA allows disabled individuals who encounter barriers to accessibility in public accommodations like stores and restaurants to obtain an injunction compelling the owner to remove the barrier to access. If successful, the plaintiff is allowed to recover his or her legal fees and out of pocket charges.

Moreover, in California, a violation of the ADA is also a violation of the state Unruh Act and allows the plaintiff to recover statutory damages equal to $4,000 for each visit (up to three) to the store or the restaurant while the inaccessible condition persisted.

The ADA is a civil rights statute and was intended to address discrimination against disabled people who were denied equal access to public accommodations. No federal agency was made responsible for enforcing the statute; instead, the act is enforced by disabled individuals acting as "private attorneys general."

During the 32 years, the law has been in place, a cottage industry of disabled plaintiffs and their lawyers has developed to litigate ADA cases. In part because of the statutory damages that the Unruh Act adds to a potential injunction, California has been home to a substantial amount of ADA litigation.

A Bay City News analysis found that since 2010, more than 36,000 ADA lawsuits have been filed in federal court in California. The Northern District of California has been the fastest growing area for new lawsuits. In 2021, there were 2,463 ADA suits filed in the district, a threefold increase from 2020. ADA cases represented a quarter of all new case filings in the district.

The Potter Handy law firm was counsel in 85 percent of the ADA cases filed in the district in 2021. Frequent new filings by the firm continued in 2022 up until the district attorneys' suit was filed on April 11.

The complaint in the district attorneys' lawsuit -- 58 pages with upwards of 300 pages of exhibits -- is based on the fact that the California Legislature recognized that some serial ADA litigants were abusing the Unruh Act by filing a high volume of questionable suits just to get a quick settlement.

In 2012 and 2015, the Legislature added procedural obstacles to bringing such suits in state court and raised the filing fee to $1,000.

Those rules, however, only apply to cases filed in state court. If a plaintiff sues in federal court and asks the federal court -- in the interest of convenience and economy -- to also hear the state law claim, the plaintiff can essentially end run the increased filing fee and procedural barriers.

Were that all there was to it, the district attorneys said, it would just be an instance of smart lawyers finding a loophole and using it to their clients' advantage. However, the lawsuit alleges that more than that was at play.

Federal courts have limited jurisdiction; a plaintiff must have legal standing to bring a case in the federal system.

In an ADA suit, a disabled plaintiff must not only demonstrate that he or she has encountered a barrier to accessibility in a public place like a store or a restaurant, but also that there is a real risk that he or she will suffer harm in the future at that place unless an injunction is issued.

If he or she does not genuinely intend to return to the store or restaurant, he or she would not need an injunction to prevent future harm and therefore would have no standing.

If a plaintiff cannot prove standing, the federal court has no jurisdiction and must dismiss the case. That would force the federal ADA plaintiff to either drop the case altogether or refile it in state court, where the state law procedural hurdles and increased expense would apply.

The district attorneys allege that Potter Handy's clients do not genuinely intend to return to the places they sue, and even though the law firm knows that fact, it files the suits anyway.

Potter Handy disputes the district attorneys' allegations. In a statement about the suit issued Wednesday, Dennis Price, a partner in the firm, said "We dispute the factual and legal contentions in this lawsuit, including the allegations of 'false standing,' which are completely unfounded and wrong as a matter of law."

Price said that the firm was proud of the work it has done in securing "full and equal access to public accommodations."

Price also challenged the motivation for the suit: "The District Attorneys' civil lawsuit is motivated to distract from their own political problems. This lawsuit is without merit, [and] is [a] misguided attack on the ADA intended to chill our clients' First Amendment rights. We look forward to addressing these issues in Court."

Potter Handy has not yet filed a response to the district attorneys' suit.

The Federal Judges

Even though little has happened in the district attorneys' suit beyond the filing of the complaint, the allegations quickly came to the attention of at least some of the judges in the U.S. District Court for the Northern District of California where the Potter Handy firm has filed at least 4,400 ADA lawsuits since 2010.

ADA cases filed in the district are assigned randomly, meaning that most of the judges and magistrate judges in the district have their own portfolio of ADA cases. The 994 open ADA cases pending as of Wednesday were divided among 19 federal judges and 11 magistrate judges.

Having 30 different judges and magistrates involved assures that there will be different approaches.

On April 19, eight days after the district attorneys' lawsuit was filed, U.S. District Judge Vince Chhabria issued an order in a group of his cases requiring Potter Handy's clients to file detailed declarations under penalty of perjury explaining their standing to file the suits.

The judge also ordered Potter Handy to file its own sworn declaration explaining the efforts it took to verify its clients' statements. District Judge William Alsup issued a similar order in one of his cases on May 5.

Meanwhile, in a case that was filed before the district attorneys' suit, U.S. District Judge Jacqueline Scott Corley found that the testimony given at an evidentiary hearing in her court by Brian Whitaker, one of Potter Handy's most prolific clients, was "not credible" when it came to the question of whether he intended to return to the defendant's place of business.

Based on that lack of credibility, she ruled that Whitaker had no standing and dismissed the case, though Potter Handy plans to appeal.

In a case pending before Chief Judge Richard Seeborg, Potter Handy tried to get a defense lawyer sanctioned after he refused to cooperate in scheduling a settlement conference as he was allegedly required to do by the local rules.

The defense lawyer, Eric Kastner of Mountain View, refused because he said the whole case should be put into abeyance until the state court resolves the district attorneys' suit. Kastner said that he took the case on a reduced fee and was trying to keep the cost down.

Potter Handy "wanted me to go to a settlement conference. Which again, all of this takes time and money, which is what they count on. And I said, no, I won't do it," Kastner said.

While Seeborg said Kastner should not have unilaterally refused to proceed, he declined to order him to do so now because, under the circumstances, settlement negotiations would be futile.

Seeborg went on to say that he was aware of the district attorneys' lawsuit and if "even a substantial part of the allegations made by the district attorneys are true, Potter Handy has crossed the line between vigorous private enforcement and abuse."

Seeborg quickly added that he "has had no occasion to evaluate that question."

Magistrate Judge Sallie Kim issued called out the Potter Hardy firm and its attorneys for not vigorously prosecuting some of its cases and, in a few cases, she imposed sanctions on its attorneys for letting the cases sit on the docket without action.

Pending Cases

Potter Handy appears to have stopped new ADA filings in the district, at least for the time being. In the month since the district attorneys sued, Potter Handy has only filed three new ADA suits; prior to that the firm was averaging three new suits a day, seven days a week. (Dennis Price, the Potter Handy partner, declined to comment on whether the cessation was temporary and, if so, how long it would last.)

But even if no new cases are filed, the firm continues to represent clients in at least 800 of the 994 open ADA cases in the district.

As the orders issued by the judges illustrate, the allegations in the district attorneys' suit are likely to affect many of the federal cases before there is a resolution of the state court litigation.

Potter Handy appears ready to fight the battle over the truth of its clients' statements in federal court without waiting for the state court resolution. On Wednesday, the firm responded to Judge Chhabria's orders to show cause. In those filings, clients and lawyers both swear, without providing the details, that the clients intend to return to the establishments they have sued.

Chhabria has said that he will allow the defendants in those cases to take depositions and other discovery concerning the plaintiffs' intent to return (and whether they visited the establishment in the first place). The judge also said he is likely to schedule an evidentiary hearing in order to "test the veracity" of the declarations.

Settled Cases

If the district attorneys' allegations are true, defendants who settled cases in the past are likely to want their settlement payments repaid.

"I absolutely think I should get my money back," said Jihan Bayyari, who owns Cyclismo Cafe in Redwood City. Bayyari reluctantly settled an ADA suit brought in May 2021 by Potter Handy client Brian Whitaker, who alleged that her outdoor dining tables were not accessible for those in a wheelchair.

Bayarri has a particular interest in the issue because her cafe is just a few blocks from the restaurant that was the subject of the hearing in which Judge Corley found Whitaker was not credible on the issue of his intent to return.

Whitaker's suit against Cyclismo Cafe was one of a 20-lawsuit cluster that Whitaker filed in a single week in May of 2021 against Redwood City restaurant owners (including the one Corley ruled upon.) Like Bayyari, all but a handful of those defendants had settled their cases before Corley's ruling.

The district attorneys' suit asks that Potter Handy "be ordered to restore to every person in interest all money and property which was acquired by Defendants through their unlawful conduct ... including but not limited to all settlement payments and attorney's fee awards ... within the four-year statute of limitations period."

According to the Bay City News analysis, in the last four years at least 3,142 cases in the district that were handled by Potter Handy firm have been resolved and the cases closed. While some of the resolutions were dismissals, most were settlements.

Settlement amounts are not made public, but the district attorneys allege in their suit that the firm typically settles its ADA cases for between $10,000 and $20,000.

Using the lower number as an order-of-magnitude estimate of the law firm's potential exposure were the district attorneys to be successful, refunding settlement payments in the Northern District alone would cost the firm more than $30 million.

However, the suit seeks a refund of settlement payments made in all federal courts throughout the state. Potter Handy represented clients in at least 2,800 cases in other California district courts that were closed in the last four years. If similar payments were made to resolve those cases, the firm's exposure would be close to double.