BILL ANALYSIS Ó AB 52 Page 1 Date of Hearing: April 21, 2015 ASSEMBLY COMMITTEE ON JUDICIARY Mark Stone, Chair AB 52 (Gray) - As Introduced SUBJECT: PUBLIC ACCOMMODATIONS: CONSTRUCTION-RELATED ACCESSIBILITY CLAIMS KEY ISSUES: 1)SHOULD A PLAINTIFF WHO IS DENIED FULL AND EQUAL ACCESS TO A PLACE OF PUBLIC ACCOMMODATION BASED UPON HIS OR HER PHYSICAL DISABLITY BECAUSE OF THE DEFENDANT'S VIOLATION OF A CONSTRUCTION-RELATED ACCESSIBILITY STANDARD BE ENTITLED TO A MAXIMUM OF ONE QUARTER OF THE DAMAGES RECOVERABLE BY A PERSON WHO IS DENIED ACCESS TO A PUBLIC FACILITY BECAUSE OF ANOTHER PROTECTED STATUS, WHEN THE DEFENDANT IS A BUSINESS THAT MAKES UP TO TEN MILLION DOLLARS PER YEAR AND THE BUSINESS CORRECTS THE VIOLATION UP TO SIX MONTHS AFTER DENYING ACCESS TO THE PLAINTIFF? 2)WOULD REDUCTION OF THE MAXIMUM LIABILITY FOR A VIOLATION OF A CONSTRUCTION-RELATED ACCESSIBILITY STANDARD DETER AN UNSCRUPULOUS ATTORNEY FROM FILING A LAWSUIT AGAINST A SMALL BUSINESS OWNER, CONSIDERING THAT AN EXISTING PROVISION OF THE LAW REDUCED THE MAXIMUM LIABILITY FOR SUCH A VIOLATION AND THE AUTHOR ASSERTS THAT IT HAS NOT BEEN EFFECTIVE IN CURTAILING THE PROBLEM? 3)ARE THERE OTHER APPROACHES TO DECREASE PREDATORY LAWSUITS AND SETTLEMENTS BY SMALL BUSINESSES (WHICH FUEL SUCH LAWSUITS) SUCH AS GIVING DEFENDANT BUSINESSES MORE INFORMATION ABOUT THE AB 52 Page 2 LIMITS OF THEIR LIABILITY, AND AN EASIER WAY TO RESPOND TO COMPLAINTS THAT ALLEGE CONSTRUCTION RELATED ACCESSIBILITY CLAIMS? SYNOPSIS Like other civil rights statutes that prohibit discrimination in businesses open to the public, the statutory scheme for enforcement of disability access laws rests on voluntary compliance and individual legal actions. There is no governmental entity charged with administrative or judicial enforcement of these obligations. This bill reiterates a controversial question that the Legislature has frequently heard and consistently rejected: should people with disabilities be required to comply with special procedural barriers not facing others who endure discrimination before they can assert legal claims against businesses that violate their right of access to public accommodations, and should they also be entitled to a small percentage of the damages recoverable to persons who are denied access to public accommodations because of another protected status, and be prevented from recovering for their injuries at all when the business corrects the violation at some point up to six months in the future? According to the author, the bill is necessary because many small businesses are out of compliance with longstanding state and federal disability access laws, leaving them vulnerable to lawsuits. Some of these suits, the author and supporters allege, are brought by plaintiffs for personal financial benefit, not out of an altruistic desire to improve disability access for disabled consumers, and some of these suits are brought against businesses that are willing to comply but are hampered by the complexity of the law. Disability rights advocates oppose the bill, but they agree with the supporters on a number of points, including that many businesses are not in compliance with access laws despite their long duration and that many lawsuits are filed, some by plaintiffs seeking monetary recovery. Opponents argue that they have supported prior legislation to increase business awareness of access obligations, improve voluntary AB 52 Page 3 compliance, and reward responsible behavior and those reforms should be furthered, not circumvented. Opponents argue that this bill singles out people with disabilities for unprecedented obstacles to the enforcement of civil rights, deprives them of a remedy for actual violations, and will deter, not encourage, compliance with disability discrimination law. Moreover, opponents state that the promise of the bill may be misleadingly unattainable because the requirements it would impose are inconsistent with federal disability discrimination law and therefore would not preclude the law suits from which businesses seek protection. Unlike two prior measures, SB 1608 (Corbett and Harman) of 2008 and SB 1186 (Steinberg and Dutton), historic bipartisan measures to reduce disability access violations and unnecessary lawsuits, this bill does not seek to encourage compliance with disability access laws and is not the result of open stakeholder meetings and mutual compromise. Rather, it reflects no input from disabled advocates or amendments as a result of its harsh impact on disabled citizens and their rights. This bill is supported by business groups, including the California Chamber of Commerce and the Civil Justice Association of California, and opposed by disability rights advocates, including Disability Rights California and the American Civil Liberties Union of California. SUMMARY: Provides that statutory damages recovered in a construction-related accessibility claim against a place of public accommodation resulting in a denial of full and equal access to the place of public accommodation that is based upon a violation of a construction-related accessibility standard are a maximum of one-quarter of the minimum damages that are recoverable for other violations of the Unruh Civil Rights Act and are not recoverable at all under certain conditions. Specifically, this bill: 1)Amends the provisions for notice, right to cure, and reduced statutory damages that are available under current law to some defendants---specifically those who correct all of the violations alleged in the complaint and had either sought an inspection by a Certified Access Specialist (CASp) prior to the date on which the plaintiff was allegedly denied full and AB 52 Page 4 equal access, or passed inspection by the local building department permit and inspection process as new construction and not made further changes to the premises-as follows: a) Statutory damages are further reduced to a maximum of one thousand dollars ($1,000) for each offense (rather than a minimum of one thousand dollars, as provided in existing law (and a minimum of $4,000 for all other violations of the Unruh Act). b) A defendant who is eligible for the reduced damages described above has an additional 120 days to correct all of the construction-related violations that are the basis of a complaint alleging a construction-related accessibility claim, allowing those violations to remain uncorrected for 180 days after the complaint is served, rather than the 60 days provided under current law. c) Removes the January 1, 2016 sunset on one method for qualifying for reduced damages in a construction-related access lawsuit: when the basis of an alleged violation is new construction or an improvement that was approved by, and passed inspection by, the local building department to allow all new construction projects approved by, and passed inspection by, the local building department permit process within five years prior to the date the claim being served on the defendant to qualify for reduced damages. 1)Amends the provisions for notice, right to cure, and reduced statutory damages that are available under current law to some defendants---specifically a defendant who corrects all of the violations alleged in the complaint and qualifies as a "small business"-as follows: a) Further reduces statutory damages to a maximum of one thousand dollars ($1,000) for each offense (rather than a minimum of two thousand dollars, as provided in existing law (and a minimum of $4,000 for all other violations of the Unruh Act). b) Gives a defendant who is eligible for the reduced damages described above an additional 150 days to correct all of the construction-related violations that are the basis of a complaint alleging a construction-related AB 52 Page 5 accessibility claim, allowing those violations to remain uncorrected for 180 days after a complaint is served, rather than just 30 days, as provided under current law. c) Greatly expands the definition of "small business" from a business that makes $3.5 million per year to any business with 100 or fewer employees and average annual gross receipts of ten million dollars ($10,000,000), or any California manufacturer with 100 or fewer employees, regardless of annual income. 1)Prohibits all damages in a construction-related accessibility lawsuit against a "small business" as defined above, unless the defendant seeks and is "granted a 180-day stay of court proceedings from the day the claim is filed during which time the place of public accommodation may meet the requirements of a qualified defendant as defined by paragraph (8) of subdivision (a) of Section 55.52." EXISTING LAW: 1)Pursuant to federal law, under the Americans with Disabilities Act (ADA), provides that no individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases, or leases to, or operates a place of public accommodation. (42 U.S.C. 12182.) 2)Pursuant to the state Unruh Civil Rights Act (Unruh), provides that all persons, regardless of sex, race, color, religion, ancestry, national origin, disability or medical condition, are entitled to the full and equal accommodations, advantages, facilities, privileges, or services in all business establishments of every kind whatsoever. A violation of the ADA also constitutes a violation of Unruh. (Civil Code Section 51. All further statutory references are to the California Civil Code, unless otherwise indicated.) 3)Provides that a violation of Unruh subjects a person to actual damages incurred by an injured party, treble actual damages but not less than $4,000, and any attorney's fees as the court AB 52 Page 6 may determine to be proper. (Section 51 et seq.) 4)Provides that a violation of Unruh subjects a person to injunctive and actual damages - plus treble actual damages but not less than $1,000, and attorney's fees as the court deems proper. (Section 54.3.) 5)Provides for a California Commission on Disability Access (the Commission), an independent state agency composed of 19 members, with responsibility for monitoring disability access compliance in California and authority to recommend necessary changes in to the Legislature in order to facilitate implementation of state and federal laws on disability access. (Government Code Section 8299 et seq.) 6)Requires an attorney, when serving a demand letter or a complaint on a defendant alleging a construction-related accessibility claim or noncompliance, to provide a written advisory with each demand letter or complaint, as defined. The written advisory shall include information about the defendant's rights and obligations, including the right of a qualified defendant to request a stay and an early evaluation conference regarding the allegations in the complaint. The written advisory is only required from any attorney, and not from a pro per plaintiff. (Section 55.3.) 7)Requires an attorney alleging the construction-related accessibility claim or noncompliance to state facts sufficient to allow the defendant to identify the basis for the claim. (Section 55.31.) 8)Provides that upon being served with a complaint asserting a construction-related accessibility claim, a defendant may move for a court stay and early evaluation conference if the defendant is any of the following: (A) Until January 1, 2018, a defendant whose site had new construction or improvement between January 1, 2008, and January 1, 2016 and was approved AB 52 Page 7 pursuant to the local building permit and inspection process; (B) a defendant whose site had new construction or improvement that was approved by a local public building department inspector who is a certified access specialist (CASp); or (C) a defendant who is a small business. The stay to the construction-related accessibility claim, as provided, may be provided for 90-days unless the plaintiff has obtained temporary injunctive relief. (Section 55.54.) 9)Authorizes a defendant who does not qualify for an early evaluation conference (EEC) pursuant to these provisions, or who forgoes those provisions, to request a mandatory evaluation conference, as specified, and authorizes a plaintiff to make that request if the defendant does not make that request. (Section 55.54.) 10)Specifies that a court shall lift the stay when the defendant has failed to file and serve the CASp inspection report when required and also did not produce the report at the EEC, unless good cause for the failure is shown. (Section 55.54.) 11)Specifies that a court may lift the stay at the conclusion of the EEC upon a showing of good cause by the plaintiff. (Section 55.54.) 12)Specifies the court's authority to schedule additional conferences or to extend the stay for no more than an additional 90 days, upon a showing of good cause. (Section 55.54.) 13)Provides that the stay and early evaluation conference shall not be deemed to make any inspection report or opinion of a CASp binding on the court or to abrogate the court's authority to make appropriate findings of fact and law. (Section 55.54.) AB 52 Page 8 14)Provides that the stay and early evaluation conference shall not be construed to invalidate or limit any California construction-related accessibility standard that provides greater or equal protection for the rights of persons with disabilities than is afforded by the ADA and the federal regulations adopted pursuant to that act. (Section 55.54.) 15)Provides that notwithstanding the requirement that offers of compromise are privileged and protected under Evidence Code Section 1152, the court may consider, along with other relevant information, settlement offers made and rejected by the parties, in determining an award of reasonable attorney's fees and recoverable costs in any construction-related accessibility claim. (Section 55.55.) 16)Provides that statutory damages may be recovered in a construction-related accessibility claim only if a violation or violations of one or more construction-related accessibility standards denied the plaintiff full and equal access to the place of public accommodation on a particular occasion. Existing law specifies that a plaintiff is denied full and equal access only if he or she personally encountered the violation on a particular occasion or was deterred from accessing the public accommodation on a particular occasion. (Section 55.56.) 17)Requires the court, in assessing liability in any action alleging multiple claims for the same construction-related accessibility violation on different particular occasions, to consider the reasonableness of the plaintiff's conduct in light of the plaintiff's obligation, if any, to mitigate damages. (Section 55.56.) 18)Reduces a defendant's minimum liability for statutory damages in a construction-related accessibility claim against a place of public accommodation in the following circumstances: AB 52 Page 9 a) To a minimum of $1,000 for each unintentional offense if (i) the defendant has corrected all construction-related violations that are the basis of the claim within 60 days of being served with the complaint, and (ii) the structure was either CASp -inspected, or was new construction approved in the building and permitting process, prior to the complaint being filed. b) To a minimum of $2,000 for each unintentional offense if (i) the defendant has corrected all construction-related violations that are the basis of the claim within 30 days of being served with the complaint and (ii) the defendant is a small business that has 25 or fewer employees and annual gross receipts of less than three million five hundred thousand dollars ($3,500,000) averaged over the past three years. (Section 55.56.) 1)Separately defines "small business" for purposes of state contracting as an independently owned and operated business that is not dominant in its field of operation, the principal office of which is located in California, the officers of which are domiciled in California, and which, together with affiliates, has 100 or fewer employees, and average annual gross receipts of ten million dollars ($10,000,000) or less over the previous three years, or is a manufacturer, as defined in subdivision (c), with 100 or fewer employees (and regardless of income). (Government Code Section 14837(d)(1).) 2)Defines "qualified defendant" as "a defendant in an action that includes a construction-related accessibility claim that is asserted against a place of public accommodation that met the requirements of "meets applicable standards" or "inspected by a CASp" prior to the date the defendant was served with the summons and complaint in that action." (Section 55.52(a)(8).) FISCAL EFFECT: As currently in print this bill is keyed non-fiscal. COMMENTS: Under the federal Americans with Disabilities Act (ADA), a business that constitutes a place of public accommodation (e.g., many places of lodging, entertainment, AB 52 Page 10 recreation, restaurants, bars, theaters, stores, health clubs, etc.) is prohibited from discriminating on the basis of disability if its operations affect interstate commerce. Prohibited discrimination can take a number of forms - e.g., denial of participation in the facility, or a service, benefit, or good of the business; denial of equal participation in a good, service, or facility; or provision of a different or separate facility, service or good (unless necessary to provide services and the like that are as effective as that provided to others). Government facilities are also covered by the access obligations of the ADA. Public accommodations in California are required to comply with not only the ADA, but also with the state's Unruh Act, which incorporates the ADA into its provisions and makes a violation of the ADA punishable as a violation of Unruh. (Section 51.) All violations of Unruh are subject to statutory damages of at least four thousand dollars per violation, except some cases where the violation is based on a construction-related accessibility claim, in which case lower damages (a minimum of one thousand or two thousand dollars, depending on the circumstances of the case) apply. Should state law single out one minority group for special barriers to enforcement of civil rights protections? Persons with disabilities are just one of the many groups protected from discrimination in the use and enjoyment of public facilities and accommodations. Under the state's Unruh Civil Rights Act, other protected characteristics include race, national origin, sex and sexual orientation. This bill would greatly expand the right to cure and reduced damages provisions in existing law so they apply to far more businesses. This bill would make the following additional changes to state law: (1) reduce statutory damages to, at most, 25 percent of the amount that is payable to all other persons who are victims of discrimination under the Unruh Act; (2) appear to effectively eliminate all damages payable to disabled plaintiffs who are denied access to public accommodations; (3) grant certain AB 52 Page 11 procedural benefits to large businesses and manufacturers; and (4) allow violations to be uncorrected for up to six months with no additional penalty. These proposals significantly alter the Unruh Act, which is designed to ensure access to public accommodations for all persons in the state and make special protections and remedies available to those who are members of groups whom the Legislature has deemed to be particularly vulnerable to discrimination because of their "sex, race, color, religion, ancestry, national origin, disability, medical condition, marital status, or sexual orientation" (Section 51 (b)) from further discrimination. This bill alters the Unruh act in a way that hurts only one protected class of vulnerable persons: the disabled. The Committee should be wary of any proposed law that limits access to the courts. "Because the right to access the courts implicates due process and First Amendment rights, courts have been exceedingly reluctant to restrict such access" (Moy v. United States (9th Cir. 1990) 906 F.2d 467, 470.), especially one which appears on its face to discriminate against a class of citizens who are entitled by state and federal law to special protections. Section Two of this bill appears to effectively eliminate ALL statutory damages for violations of the Unruh Act AND the Disabled Persons Act by conditioning the award of damages upon action by the defendant business that is against its financial interest. Section Two of the bill adds Section 55.565 to the Civil Code, providing that: When a plaintiff brings a construction-related accessibility claim alleging a violation of a construction-related accessibility standard by a place of public accommodation that is a small business as defined in Section 14837 of the Government Code, statutory damages under subdivision (a) of Section 52 or subdivision (a) of Section 54.3 may be recovered against a place of public accommodation only if the place of public accommodation where the alleged violation occurred is granted a 180-day AB 52 Page 12 stay of court proceedings from the day the claim is filed during which time the place of public accommodation may meet the requirements of a qualified defendant [who obtains a CASp inspection and thereby qualifies for an early evaluation conference]. Subdivision (a) of Section 52 sets forth the standard damages that may be awarded for a violation of the Unruh Civil Rights Act, providing that a defendant is "liable for each and every offense for the actual damages, and any amount that may be determined by a jury, or a court sitting without a jury, up to a maximum of three times the amount of actual damage but in no case less than four thousand dollars ($4,000), and any attorney's fees that may be determined by the court in addition thereto." Meanwhile, the other statute referenced in Section Two--subdivision (a) of Section 54.3--describes the standard damages to be awarded for a violation of the Disabled Persons Act (which prohibits all acts of intentional and unintentional discrimination against the disabled having access to public accommodations): "up to a maximum of three times the amount of actual damages but in no case less than one thousand dollars ($1,000), and attorney's fees as may be determined by the court in addition thereto." By its own terms, Section Two of the bill prohibits a disabled plaintiff who has been denied access to a public accommodation because of a violation of a construction-related accessibility standard from collecting any damages unless the defendant - the person who violated the disabled plaintiff's civil rights-seeks and obtains a 180-day stay from a court, during which the defendant is allowed to correct the violations. It is unclear whether this 180-day stay is concurrent with, or in addition to, the 180-days that the bill provides in Section One as the standard period for a "small business" to correct violations. But aside from the merits of giving a defendant six months (or perhaps even a year, if the stay were in addition to the standard six-month period) to comply with a decades-old law, why would a defendant ever seek a court stay, knowing that by not doing so, he or she would eliminate all potential liability for statutory damages? This provision effectively forecloses the AB 52 Page 13 ability of a disabled plaintiff to collect any damages for a violation of the Unruh Act or the Disabled Persons Act. Could this possibly be the author's intent? Apparently so, according to the author, who (without suggesting any intent to amend or remove Section Two from the bill) explains his reasoning as follows: The bill also recognizes that many small business owners cannot afford an attorney to guide them through the legal system. Small business protections that are put in place are often underutilized because the businesses owner fails to evoke them. AB 52 puts the onus on the attorney who has filed the suit to understand the defendants [sic.] rights. If they do not seek the 180 day fix-it period for small businesses, no statutory damages may be awarded. The general principle of our civil (and criminal) laws is that everyone is held accountable for the wrongs they have committed, even if they are not warned in advance and even if they comply with the law in the future. The Committee is unaware of any provision in civil rights law that is as extreme (and discriminatory) as the one in Section Two of this bill. This bill undermines recent bipartisan negotiated collaboration and compromise on disability access reform, pre-litigation relief to small businesses, and the important role and work of the Disability Access Commission. In response to complaints that small businesses were the victims of predatory lawsuits alleging ADA violations, a bipartisan and bicameral effort with disability rights organizations and business advocates over a period of years ultimately lead to the adoption of SB 1608 (Corbett and Harman) in 2008. It was the product of extended and careful consideration by thoughtful legislators and input and support from members of the disability and business communities including Disability Rights California, the California Chamber of Commerce, the California Foundation for Independent Living Centers, California Restaurant Association, Business Properties Association, California Hotel Association, and several others. AB 52 Page 14 SB 1608 enacted several reforms to increase voluntary compliance with state and federal laws requiring access to the disabled in any place of public accommodation. It established incentives for compliance and protection from litigation by responsible businesses, including a process by which businesses, if sued for violation of accessibility standards, could obtain a temporary stay of any litigation along with an in-person early evaluation conference with the court, attended by persons with authority to resolve the dispute between the parties, for the purpose of deterring frivolous cases and evaluating prospects for early settlement. Moreover, it clarified the standards for awarding damages and attorney's fees with respect to a claim alleging a violation of construction-related accessibility standards. It also required an attorney, when serving a written demand for money or a complaint on a defendant, to include a written advisory to the defendant of the defendant's rights and obligations. In addition, the bill required architects to complete coursework regarding disability access requirements and imposed continuing education requirements on local building officials relating to disability access requirements. Importantly, SB 1608 also established the California Commission on Disability Access (Commission) "to develop[] recommendations that will enable persons with disabilities to exercise their right to full and equal access to public facilities, and that will facilitate business compliance with the laws and regulations to avoid unnecessary litigation." (Government Code section 8299.) Among other things, the Commission was required to conduct studies and make reports to the Legislature. The Commission is responsible for monitoring compliance, reporting and making recommendations to the Legislature. Despite initial funding difficulties and delays, the Commission now has staff, has been meeting regularly, and is carrying out its responsibilities. Four years after SB 1608 was signed into law, Senate Bill 1186 enacted a number of additional reforms to the laws governing construction-related accessibility claims. According to the AB 52 Page 15 Senate Judiciary Committee's analysis of SB 1186, Senator and President Pro Tempore Darrell Steinberg, who was the joint author of the bill, described it as follows [emphasis added]: SB 1186 is a compromise that applies a common sense approach to resolve difficult issues. It maintains the hard-fought civil rights of the disabled community while helping to protect California businesses from predatory demand for money letters and lawsuits. Support for important laws like the Unruh Act and the Americans with Disabilities Act are weakened when those laws are abused for personal gain. This measure bans the unscrupulous practice of 'demand for money' letters, stops the stacking of claims based on alleged repeat violations to force a business into a quick settlement, while encouraging businesses to fix their violations to comply with the law. Thus, SB 1186 provides some relief to businesses who show good faith in trying to follow the law and are willing to correct the violation, which ultimately promotes compliance and brings greater access to the disabled community. Senator Dutton, the Senate Minority Leader and joint author of SB 1186, described the bill as: . . . the culmination of months of hard work with staff and all the various stakeholders in the community. [The bill] will not only provide a reasonable amount of time for small businesses to fix minor infractions, but will also help expand the California Access Specialist Program in California and provide any more tools for businesses to comply with this vital civil rights law. The policy goal of SB 1186, according to the authors, was "to incentivize property owners to correct their violations, as opposed to settling the case and doing nothing, by reducing the minimum statutory damages and potential attorney's fees award to the plaintiff when they correct the violation." AB 52 Page 16 Finally, SB 1186 gave defendants the option to request an early evaluation conference (EEC) and an immediate and mandatory stay of the proceedings, similar to the litigation protections now given to a qualified defendant who hired a CASp to inspect the property and issue a report on its compliance status. A mandatory stay would freeze the litigation at the point of the court order, which arguably freezes the plaintiff's attorney's fees at that point. An EEC could be useful to end a case at an early stage, particularly when the defendant has corrected the asserted violation. Unlike both SB 1608 and SB 1186, this bill is not the product of compromise or negotiation. It has never been amended in response to or consideration of concerns raised by the persons who are directly impacted by the widespread lack of compliance with construction-related access standards: the disabled community. There is no indication that anyone who is affected by construction-related disability access standards and litigation, other than business groups, has been consulted in the development of the bill's provisions. As the ACLU observes in its letter of opposition to the bill: The bill radically rewrites carefully crafted rules that were jointly authored and approved with bipartisan support not long ago after consultation with many experts and stakeholders. It turns the concept of minimum statutory penalties on its head by recasting it as a maximum. Under the bill, a person denied access to a place of public accommodation on the basis of race or gender would be presumed to have suffered at least $4000 in damages, while a person who is discriminated against on the basis of disability by the same business would be thought to have suffered at most $1000. The premise of the bill appears to be that disability discrimination is inherently less harmful than other forms of unlawful discrimination - a notion that is both offensive and unjustified. Moreover, the bill subverts the existing incentives for businesses to come into compliance by obtaining a CASp inspection, and for local building departments to employ CASps. Why would AB 52 Page 17 any business obtain a CASp inspection if it could achieve the same benefits by simply receiving review by a local building official. Similarly, why would local building departments bother to comply with their obligation to employ CASps if non-CASp review has the same legal significance? In addition, the bill extends the limitation on statutory penalties to far more serious violations by dramatically increasing the "fix-it" window for small violations that can be corrected in 30 days to much more substantial violations that require 180 days to fix. It is also noteworthy that many of the business groups that now support this bill supported SB 1186 when it was before the Legislature and claimed that it would greatly improve existing law by deterring frivolous lawsuits and serial litigants from filing Unruh Act-ADA lawsuits. There is a lack of evidence showing that the bipartisan reforms in 2008 (SB 1608) and 2012 (SB 1186) have been ineffective, litigation has increased in the past 18 months, or the problems identified by the author are widespread throughout the state. The latest reforms to state law governing construction-related accessibility claims, enacted by SB 1186, took effect on January 1, 2014, less than a year and a half ago. Nevertheless, the author contends that there is a crisis in California that merits the severe impact on the civil rights of disabled Californians that are proposed in this bill. According to the author: The federal Americans with Disabilities Act (ADA) provides that no individual shall be discriminated against on the basis of a disability. California's Unruh Civil Rights Act declares that a violation of the ADA subjects the violator to actual damages, treble actual damages, attorney's fees, and not less than $4,000 in statutory damages per violation. Among the five states with the highest disabled populations, more lawsuits have been filed in California than Florida, Pennsylvania, Texas and New York combined. It is estimated that more than 42% of all ADA lawsuits in AB 52 Page 18 the United States are filed in California. California's inflated statutory damages have made the state a hotspot for frivolous lawsuits, particularly against small businesses that lack the means to defend themselves in court. An estimated 20,000 ADA lawsuits have been filed in California since the ADA was enacted in 1992, typically resulting in a payout of $4,000-$6000. Small businesses, that made no conscious decision to violate the law, face a harsh financial decision sometimes resulting in the closure of the businesses and often costing the local community jobs and economic productivity. It is noteworthy that the author does not provide historical context for these figures. When were the figures compiled--prior to the date when SB 1186 was enacted, or after? Has the number of complaints fallen since January of 2012? The author cites an April 2014 CBS News report that indicates the investigative team had reviewed 10,000 lawsuits filed in federal courts around the country since 2005. But only a tiny percentage of any of those lawsuits, if any, could have been filed after January 1, 2014, when SB 1186 when into effect. The author also cites an article in California Lawyer published on April 30, 2012, almost two years before SB 1186 took effect. The author also cites an August 2014 article in the Merced Sun-Star with the headline, Atwater woman sues 21 businesses in Merced and Stanislaus counties, but the lawsuits discussed in the article were filed in 2013. Finally, the author cites a 2008 article in TIME Magazine, which was written before SB 1608, the 2008 ADA reform legislation, went into effect. Recent and objective evidence is available to provide perspective about the magnitude of this problem. California has approximately 3.3 million small businesses. According to data compiled by the Commission, from January 2014 until January 2015, 3,468 demand letters and complaints were filed in the state. This means that less than one percent of small businesses (and a far smaller percentage of all businesses) were sued in 2014 for violations of construction-related accessibility standards. AB 52 Page 19 Nevertheless, some of the information reported to the Commission is alarming in terms of the number and frequency of construction-related accessibility lawsuits being filed by a small number of law firms in California. According to the Commission, between September 2012 and October 2014, 5,392 complaints (including demand letters) were filed (in both state and federal courts). More than half (54%) of the complaints were filed by just two law firms. Forty-six percent of all complaints were filed by just 14 parties. However, data from the Commission shows that more attorneys are choosing to file lawsuits in federal court, perhaps to avoid complying with California-specific requirements, such as sending demand letters to the Commission and the State Bar. Interestingly, the Commission reports that the state's total share of complaints and demand letters has gone down. Between September 2012 and December 2013, state complaints/demand letters represented 68% of all the complaints/demand letters that the Commission received. However, between January 2014 and October 2014, state complaints/demand letters represented only 46% of all complaints/demand letters that the Commission received. In other words, more complaints are now being filed in federal court than in state court, which undermines the author's argument that plaintiffs are solely choosing to file lawsuits in state court in order to obtain damages. What can be done or should be done about (the small number of) attorneys who file large numbers of Unruh Act-ADA lawsuits? The Ninth Circuit Court of Appeals addressed this issue in Molski v. Evergreen Dynasty Corp. (9th Cir. 2008) 521 F.3d 1215. Molski was paralyzed from the chest down, needed a wheelchair to get around, and filed about 400 lawsuits in the federal courts within the districts in California. (Id. at p. 1051.) Upon motion of the defendant businesses (including the named defendant, a restaurant) the district court declared Molski a vexatious litigant and granted the defendants' request for a pre-filing order (requiring court approval before Molski could file additional lawsuits). (Ibid.) The Ninth Circuit acknowledged that "pre-filing orders are an extreme remedy that AB 52 Page 20 should rarely be used" and that courts "should not enter pre-filing orders with undue haste because such sanctions can tread on a litigant's due process right of access to the courts." (Id. at p. 1057.) Nevertheless, the Ninth Circuit upheld the order, finding that it was within the district court's power, "In light of the district court's finding that Molski did not suffer the injuries he claimed . . . to conclude that the large number of complaints filed by Molski containing false or exaggerated allegations of injury were vexatious" and the pre-filing requirement could be issued. (Id. at p. 1059.) Also, there is no evidence that these lawsuits are "frivolous." The Merriam-Webster Dictionary defines "frivolous" as "of little weight or importance," or "having no sound basis (as in fact or law) ." In other words, a lawsuit alleging a violation of the Unruh Act because of a denial of access would only be "frivolous" if it had no basis in the law (i.e. it did not state an actual violation). In fact, there is no evidence that the complaints which are filed are without merit. According to data collected by the California Commission on Disability Access, most complaints identify multiple access violations. For example, of the cases filed in July 2014, most complaints identified multiple or significant single violations, such as missing grab bars. Only two out of 201 complaints identified a single issue, such as a soap or seat cover dispenser being too high. Taken together, the information about the high number of complaints being filed by a very small number of plaintiffs AND the fact that courts now have the power and authority to limit the ability of vexatious litigants to file serial Unruh-ADA complaints, it seems clear that the rights of the vulnerable should not be sacrificed because of the despicable conduct of a few bad actors. Also, courts clearly have tools to limit vexatious litigation, but they will never be able to use those tools as long as businesses settle, rather than litigate, complaints. This bill would greatly expand the number and types of AB 52 Page 21 businesses that would qualify for the reduced statutory damages which are now available only to small businesses. Current law provides reduced damages (a minimum of $2,000 for each unintentional offense) if the defendant has corrected all construction-related violations that are the basis of the claim within 30 days of being served with the complaint and the defendant is a small business that has 25 or fewer employees and annual gross receipts of less than three million five hundred thousand dollars ($3,500,000) averaged over the past three years. (Section 55.56.) This bill would greatly expand the number and type of businesses that would be entitled to reduced damages by incorporating by reference a definition of "small business" from another code section, Government Code Section 14837(d)(1), into the Unruh Act. That Government Code definition, identifying those businesses which are entitled to a bidding preference in state contracting, defines "small business" as a California-based business "which, together with affiliates, has 100 or fewer employees, and average annual gross receipts of ten million dollars ($10,000,000) or less over the previous three years, or is a manufacturer . . with 100 or fewer employees [regardless of its annual gross receipts]." Obviously, the type of business that would fit in this category (but not within Section 55.56's definition) could never be considered the type of "mom and pop" business which deserves special protection from liability because it could be put out of business by one lawsuit alleging a construction-related accessibility violation, or as the author puts it in his statement explaining the need for the bill, the type of business that would "face a harsh financial decision sometimes resulting in the closure of the businesses and often costing the local community jobs and economic productivity." In fact, a manufacturer with 100 employees and receipts of $100 million or more per year would qualify as a "small business" under the bill. The changes to the law would be unlikely to further reduce the frequency of lawsuits being filed against small businesses and could even increase the number of lawsuits which are filed. One of the most significant and controversial aspects of SB 1186 in 2012 was the manner in which it reduced statutory damages for violations of accessibility standards by certain businesses AB 52 Page 22 because of their size, recently permitted and approved status, or proactive efforts to comply with construction-related accessibility laws (by hiring a CASp). The rationale for those reductions was that very small businesses didn't have the resources to fight lawsuits, and that all business owners should be able to rely upon building inspectors to ensure that permitted and approved recent construction projects complied with Unruh and ADA accessibility requirements. But the mechanism envisioned for imposing reduced damages was a court determination of the defendant's eligibility for the reduction. This bill likewise assumes that a court would determine whether a defendant would be eligible for reduced damages. In addition, it adds new determinations that would need to be made by courts. Courts would not only need to determine whether the defendant qualified as a "small business" under the bill's new definition, but also whether a stay of the proceedings should be granted and whether the corrections cited by the plaintiff in the original complaint were corrected within 180 days. All stakeholders agree that the vast majority of these cases never get to the point where a court makes any determination of damages. In fact, one of the few things about which all sides agree is that the vast majority of these cases settle out of court, and never even reach the stage of a settlement conference. AB 52 won't change that. Unsophisticated business owners will still settle, rather than litigate, as long as the complaints against their businesses allege actual violations of accessibility standards (which, as pointed out above, they do according to the complaints filed with the Commission) and businesses are uninformed about their legal rights and responsibilities. The few unscrupulous attorneys in the state who make a living off filing and settling serial complaints will continue to do so. They may even be motivated to file more complaints if each complaint were worth less money. Therefore, the solution is not further reduction of statutory damages in these cases. The only possible solution is to find ways to increase compliance with accessibility standards, educate business owners about their rights and responsibilities, and give small businesses and pro per defendants additional legal AB 52 Page 23 tools to protect themselves. There are many ways, other than the approach taken in this bill, to promote access to public accommodations, increase compliance with construction-related accessibility standards, and educate business owners that do not devalue the rights of disabled Californians. Over the past few months, the Chair and staff of this Committee have met with representatives of all of the major stakeholders on this issue: CJAC, the California Chamber of Commerce, Consumer Attorneys of California, the California Restaurant Association, Business Property Owners Association, California Lodging Industry Association, American Institute of Architects, disability advocates and their attorneys, the Commission (CCDA), the State Architect, CA Building Officials Association, and the ACLU. The Committee collected information and suggestions from those stakeholders about how existing law could be changed and improved, including many suggestions that would be supported by the disabled community and business interests. Based upon those extensive stakeholder meetings and discussions, the Committee urged the author to pursue a different, more productive, and more collaborative path. The Committee compiled its suggestions into three separate legislation proposals that were each at least one page in length: (1) A pilot program in Stanislaus and Merced Counties that would require new businesses to obtain CASp inspections prior to obtaining a business license; increase the number of CASp inspectors available in the county; provide CASp inspections free of charge to small businesses; require landlords to ensure that parking lots and common areas are in compliance with the ADA prior to leasing commercial property; and implement a meet and confer requirement for ADA litigants. (2) Landlord-tenant proposals to ensure that landlords meet their responsibilities to commercial tenants. (3) CASp-related proposals to increase the supply of CASp's in AB 52 Page 24 the state and encourage business owners to obtain CASp inspections. The Committee offered to draft the language for the author and work with the author and stakeholders on refining the language. The author's office has indicated that the author is not interested in any of these three alternatives because they either do not solve the problem in his district, or in the case of the district proposal, do not have statewide impact. Recommended Committee amendments. It is clear that the problem which the author wishes to address with this bill involves a very small number of law firms filing a very large and disproportionate share of Unruh-ADA lawsuits in California. At the same time, courts have tools to discourage vexatious litigation and recent reforms have not been given adequate time to be tested. The Legislature should not further sacrifice the rights of the disabled to deal with this problem, the best course of action would appear to be public policy proposals that do more of the following: (1) increase compliance by public accommodations with construction-related accessibility standards; and (2) increase information about rights and responsibilities that businesses have under Unruh; (3) discourage settlements by businesses of cases that either do not have merit or involve vexatious litigants; and (4) encourage defendants to seek court orders against vexatious litigants like the one issued against Molski. In light of the availability of alternative approaches and the need to educate business owners and provide them with additional legal tools to exercise their rights and responsibilities, the Committee proposes the following amendments to this bill. 1. On Page 2 starting at line 1, through Page 6 at line 2: strike out all text (the current text of the bill). AB 52 Page 25 2. Insert an amended version of Civil Code Section 55.53: Civil Code 55.3. (a) For purposes of this section, the following shall apply: (1) "Complaint" means a civil complaint that is filed or is to be filed with a court and is sent to or served upon a defendant on the basis of one or more construction-related accessibility claims, as defined in this section. (2) "Construction-related accessibility claim" means any claim of a violation of any construction-related accessibility standard, as defined by paragraph (6) of subdivision (a) of Section 55.52, with respect to a place of public accommodation. "Construction-related accessibility claim" does not include a claim of interference with housing within the meaning of paragraph (2) of subdivision (b) of Section 54.1, or any claim of interference caused by something other than the construction-related accessibility condition of the property, including, but not limited to, the conduct of any person. (3) "Demand for money" means a prelitigation written document or oral statement that is provided or issued to a building owner or tenant, or the owner's or tenant's agent or employee, that does all of the following: (A) Alleges that the site is in violation of one or more construction-related accessibility standards, as defined in paragraph (6) of subdivision (a) of Section 55.52, or alleges one or more construction-related accessibility claims, as defined in paragraph (2). (B) Contains or makes a request or demand for money or an offer or agreement to accept money. (C) Is provided or issued whether or not the attorney intends to file a complaint, or eventually files a complaint, in state or federal court. (4) "Demand letter" means a prelitigation written document AB 52 Page 26 that is provided to a building owner or tenant, or the owner's or tenant's agent or employee, that alleges the site is in violation of one or more construction-related accessibility standards, as defined in paragraph (6) of subdivision (a) of Section 55.52, or alleges one or more construction-related accessibility claims, as defined in paragraph (2), and is provided whether or not the attorney intends to file a complaint, or eventually files a complaint, in state or federal court. (b) An attorney shall provide the following items to a defendant, contemporaneous to serving the defendant with a demand letter or complaint alleging a construction-related accessibility claim: (1) a written advisory on the form described in subdivision (c), or, until that form is available, on a separate page or pages that are clearly distinguishable from the demand letter or complaint, with each demand letter or complaint sent to or served upon a defendant or potential defendant. The advisory shall not be required in subsequent communications following the initial demand letter or initial complaint unless a new construction-related accessibility claim is asserted in the subsequent demand letter or amended complaint. The advisory shall state as follows: STATE LAW REQUIRES THAT YOU GET THIS IMPORTANT ADVISORY INFORMATION FOR BUILDING OWNERS AND TENANTS This information is available in English, Spanish, Chinese, Vietnamese, and Korean through the Judicial Council of California. Persons with visual impairments can get assistance in viewing this form through the Judicial Council Internet Web site at www.courts.ca.gov. California law requires that you receive this information because the demand letter or court complaint you received with this document claims that your building or property does not comply with one or more existing construction-related accessibility laws or regulations protecting the civil rights of persons with disabilities to access public places. AB 52 Page 27 YOU HAVE IMPORTANT LEGAL OBLIGATIONS. Compliance with disability access laws is a serious and significant responsibility that applies to all California building owners and tenants with buildings open for business to the public. You may obtain information about your legal obligations and how to comply with disability access laws through the Division of the State Architect at www.dgs.ca.gov. Information is also available from the California Commission on Disability Access at www.ccda.ca.gov/guide.htm. YOU HAVE IMPORTANT LEGAL RIGHTS. The allegations made in the accompanying demand letter or court complaint do not mean that you are required to pay any money unless and until a court finds you liable. Moreover, RECEIPT OF A DEMAND LETTER OR COURT COMPLAINT AND THIS ADVISORY DOES NOT NECESSARILY MEAN YOU WILL BE FOUND LIABLE FOR ANYTHING. You will have the right if you are later sued to fully present your explanation why you believe you have not in fact violated disability access laws or have corrected the violation or violations giving rise to the claim. You have the right to seek assistance or advice about this demand letter or court complaint from any person of your choice. If you have insurance, you may also wish to contact your insurance provider. Your best interest may be served by seeking legal advice or representation from an attorney, but you may also represent yourself and file the necessary court papers to protect your interests if you are served with a court complaint. If you have hired an attorney to represent you, you should immediately notify your attorney. If a court complaint has been served on you, you will get a separate advisory notice with the complaint advising you of special options and procedures available to you under certain conditions. ADDITIONAL THINGS YOU SHOULD KNOW: ATTORNEY MISCONDUCT. Except for limited circumstances, State law generally requires that a pre-litigation demand letter from an attorney MAY NOT REQUEST MONEY OR MAKE A DEMAND FOR AB 52 Page 28 MONEY OR AN OFFER OR AGREEMENT TO ACCEPT MONEY. Moreover, a demand letter from an attorney MUST INCLUDE THE ATTORNEY'S STATE BAR LICENSE NUMBER. If you believe the attorney who provided you with this notice and a pre-litigation demand letter is not complying with State law, you may send a copy of the demand letter you received from the attorney to the State Bar by facsimile transmission to 1-415-538-2171, or by mail to the State Bar of California, 180 Howard Street, San Francisco, CA, 94105, Attention: Professional Competence. REDUCING YOUR DAMAGES. Even if you are found to be liable by a court, you may be able to reduce the amount of money the court orders you to pay in damages. If you are a small business owner and correct all of the construction-related violations that are the basis of the complaint against you within 30 days of being served with the complaint, you may qualify for reduced damages. If you believe you qualify for reduced damages, you may wish to consult an attorney to obtain legal advice, or contact the California Commission on Disability Access (CCDA) for additional information about the rights and obligations of business owners. COMMERCIAL TENANT. If you are a commercial tenant, you may not be responsible for ensuring that some or all portions of the premises you lease for your business (including common areas, such as parking lots), are accessible to the public because those areas may be the responsibility of your landlord. You may want to refer to your lease agreement, or consult with your landlord or an attorney, to determine if your landlord is responsible under the terms of your lease for maintaining and improving some or all of the areas you lease to operate your business. (2) A form, developed by the Judicial Council, allowing the defendant to respond to the demand letter or complaint. (A) The form shall be written in plain language and allow the defendant to indicate any relevant information affecting the defendant's liability or damages, including but not limited to the following: (i) A general denial, as well as specific denials of the AB 52 Page 29 allegations in the complaint, including the failure of the plaintiff to meet the standing requirements in Section 55.56. (ii) Any information that the defendant qualifies for reduced damages pursuant to paragraphs (1) or (2) of subdivision (f) of Section 55.56. (iii) Any information that the defendant has made a written settlement offer that has been rejected by the plaintiff, or met with the plaintiff in a good faith effort to negotiate a settlement of the complaint, both of which may be relevant to the court's determination of an award of reasonable attorney's fees and recoverable costs pursuant to Section 55.55. (iv) Any information about the defendant's landlord if the defendant believes the landlord is responsible for ensuring that some or all of the property leased by the defendant, including but not limited to common areas, such as parking lots, are accessible to the public, including the landlord's name and contact information. (B) The form shall give the defendant the option of using the form as either a formal Answer to the plaintiff's complaint, or as an informal response to the plaintiff in for use in a negotiated settlement. The form shall also provide general instructions to the defendant about how to file the form as a formal Answer to the complaint. (c) On or before July 1,20132016, the Judicial Council shall update the form that may be used by attorneys to comply with the requirements of paragraph (1) of subdivision (b). The form shall be in substantially the same format and include all of the text set forth in paragraph (1) of subdivision (b). The form shall be available in English, Spanish, Chinese, Vietnamese, and Korean, and shall include a statement that the form is available in additional languages, and the Judicial Council Internet Web site address where the different versions of the form may be located. The form shall include Internet Web site information for the Division of the State Architect and the California Commission on Disability Access. (d)SubdivisionParagraph (1) of subdivision (b) shall apply only to a demand letter or complaint made by an attorney. Nothing in this section is intended to affect the right to file a civil complaint under any other law or regulation protecting the physical access rights of persons with AB 52 Page 30 disabilities. Additionally, nothing in this section requires a party to provide or send a demand letter to another party before proceeding against that party with a civil complaint. (e) This section shall not apply to any action brought by the Attorney General, or by any district attorney, city attorney, or county counsel. These amendments will update the notice which is now required to be served on defendant businesses by plaintiffs pursuant to Section 55.53. The amendments will also require the plaintiff to provide, contemporaneously with the notice, the defendant with a new response and information form that is to be drafted by the Judicial Council. The new form will give the defendant business not only a way to respond to the complaint (and engage in effective negotiations with the plaintiff), but will also information about how to limit his or her liability. This new form will be especially helpful to small businesses with limited financial resources that may not be able to hire an attorney, the very businesses which the author says he hoped to help by introducing this bill. Similar pending legislation. AB 54 (Olsen) - requires a plaintiff who has been denied access to a public accommodation because of a construction-related accessibility violation of a standard which has changed in the past three years to give notice to the defendant 60 days before filing a complaint and an opportunity to cure the violation, with no statutory damages payable to the plaintiff; and provides a tax credit under the Personal Income Tax Law and the Corporation Tax Law to any taxpayer who obtains a certified access specialist inspection. This bill is currently in this Committee. AB 1230 (Gomez) - establishes, among other things, the California Americans with Disabilities Act Small Business Compliance Finance Act, which would provide loans, funded in part by bond issuances, to assist small businesses finance the costs of projects that alter or retrofit existing small business facilities to comply with the federal American with Disabilities Act. This bill is currently in Assembly Banking and Finance. AB 52 Page 31 AB 1342 (Steinorth) - provides, among other things, additional revenue to the California Commission on Disability Access. This bill is currently in this Committee. AB 1468 (Baker) -provides, among other things, that a public entity's possession of a close out letter from the State Architect certifying that the buildings, facilities, and other places meet the applicable construction-related accessibility standards of the federal Americans with Disabilities Act, serves as presumptive evidence of compliance with the federal Americans with Disabilities Act. This bill is currently in this Committee. SB 67 (Galgiani) - among other things, exempts a small business from statutory damage liability in connection with a construction-related accessibility claim and extends the period for correcting construction-related violations that are the basis of a claim from 60 days to 120 days of being served with the complaint, for purposes of reducing a defendant's minimum statutory damage liability to $1,000. This bill is currently in Senate Judiciary. SB 251 (Roth) - relating to civil rights and disability access, is currently in Senate Rules. REGISTERED SUPPORT / OPPOSITION: Support Apartment Association, California Southern Cities Apartment Association of Orange County Building Owners and Managers Association California California Association of Realtors California Building Industry Association AB 52 Page 32 California Business Properties Association Camarillo Chamber of Commerce California Citizens Against Lawsuit Abuse California Chamber of Commerce California Restaurant Association Civil Justice Association of California County of San Diego East Bay Rental Housing Association Fairfield-Suisun City Chamber of Commerce Fullerton Chamber of Commerce Goleta Valley Chamber of Commerce Greater Fresno Area Chamber of Commerce International Council of Shopping Centers La Raza Roundtable Lake Tahoe South Shore Chamber of Commerce Lodi Chamber of Commerce NAIOP - Commercial Real Estate Development Association Nor Cal Rental Property Association North Valley Property Owners Association North Lake Tahoe Chamber of Commerce Oxnard Chamber of Commerce Palm Desert Area Chamber of Commerce Rancho Cordova Chamber of Commerce Redondo Beach Chamber of Commerce and Visitors Bureau San Diego County Apartment Association San Diego Regional Chamber of Commerce Simi Valley Chamber of Commerce South Bay Association of Chambers of Commerce Southwest California Legislative Council The Chamber of Commerce Mountain View The Chamber of the Santa Barbara Region Opposition American Civil Liberties Union of California California Foundation for Independent Living Centers Californians for Disability Rights, Inc. Consumer Attorneys of California Disability Rights California (Numerous individuals) AB 52 Page 33 Analysis Prepared by: Alison Merrilees/JUD./(916) 319-2334