BILL ANALYSIS Ó AB 1521 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1521 (Committee on Judiciary) As Amended September 4, 2015 2/3 vote. Urgency -------------------------------------------------------------------- |ASSEMBLY: |76-0 |(May 28, 2015 |SENATE: |38-0 |(September 10, | | | | | | |2015) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: JUD. SUMMARY: Provides additional information and legal resources to small business owners who may not realize how to minimize their liability for Americans with Disabilities Act (ADA) violations or respond to a lawsuit filed against them. Also limits the practice of high-volume lawsuits motivated by quick settlement with business owners, rather than correction of ADA violations. Specifically, this bill: 1)Revises the notice of rights and responsibilities that is required by current law to be provided to a defendant contemporaneously with service of a complaint or demand letter. 2)Requires the Judicial Council, by July 1, 2016, to develop a form to answer the complaint and requires a plaintiff's attorney to provide a defendant with a copy of the answer form AB 1521 Page 2 created by the Judicial Council when serving the defendant with a complaint or demand letter (and the notice of rights and responsibilities, as required by existing law). 3)Defines a "high-frequency litigant" (HFL) as either a plaintiff who has filed 10 or more complaints alleging violations of construction-related accessibility standards in the past 12 months; or an attorney who has represented 10 or more such plaintiffs in the past year. For attorneys, claims that result in correction of violations do not count. 4)Imposes new procedural requirements on HFLs who file new claims: a) A higher filing fee; b) Special pleading requirements; and c) Certification by the attorney that, among other things, the complaint is not being presented primarily for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. 5)Requires attorneys who file construction-related accessibility claims to notify the California Commission on Disability Access (CCDA or Commission) about how their claims are resolved. The Senate amendments add the HFL provisions and CCDA reporting requirements. FISCAL EFFECT: According to the Senate Appropriations committee: 1)Minor one-time absorbable costs (General Fund*) for the Judicial Council to update and develop the specified forms. 2)Potential increase in revenues to the Trial Court Trust Fund and General Fund from the additional $1,000 filing fee on AB 1521 Page 3 high-frequency litigants, as defined. To the extent the assessment of the additional fee serves to discourage the filing of construction-related accessibility claims that otherwise would have been filed, could result in some degree of workload relief to the trial courts. 3)Potential increase in the Proposition 98 minimum funding guarantee, potentially in excess of $50,000 (General Fund) annually should a specified portion of revenues from the high-frequency litigant fee be considered General Fund proceeds of taxes for purposes of calculating the minimum school funding obligation. 4)Unknown, potential future litigation costs (General Fund) to the extent imposing new requirements on one class of plaintiff (disabled litigants), due to the volume of cases filed, without regard to the legitimacy of the allegations or merits of each case, should be challenged in court. *Trial Court Trust Fund COMMENTS: Under the federal ADA, a business that constitutes a place of public accommodation (e.g., many places of lodging, entertainment, 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). 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. All violations of Unruh are subject to statutory damages of at least AB 1521 Page 4 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. Recent and objective evidence about the magnitude of ADA/Unruh litigation. 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) was sued in 2014 for violations of construction-related accessibility standards. 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. 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. 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). The Ninth Circuit acknowledged that "pre-filing orders are an extreme remedy that should rarely be used" and that courts "should not enter pre-filing orders with AB 1521 Page 5 undue haste because such sanctions can tread on a litigant's due process right of access to the courts." 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. This bill will help combat the problem of serial Unruh-ADA litigation in a number of ways. First of all, early and easy settlement by business owners is a problem because it fuels the unethical attorneys whose business model is easy settlement. Business owners, especially small businesses that are tenants in larger shopping centers, may not be liable for the damages they think they are exposed to. Landlords are responsible for maintaining parking lots in these complexes and are more likely to have the resources and wherewithal to litigate or settle claims and to bring the property into compliance. Second, the availability of a new answer form will allow the business owner to respond to the lawsuit and, in cases where it's necessary or appropriate, to do so without hiring an attorney. This bill seeks to slow the rate and number of lawsuits filed by the small number of attorneys who file large numbers of Unruh Act-ADA lawsuits. It is clear that a very small number of law firms files a very large and disproportionate share of Unruh-ADA lawsuits in California. This bill will limit the practice of high-volume lawsuits motivated by quick settlement with business owners, rather than correction of ADA violations in a number of ways: 1)Creates a new answer form, allowing business owners to respond to lawsuits and, where necessary or appropriate, to do so without hiring an attorney. 2)Defines a HFL as either a plaintiff who has filed 10 or more complaints alleging violations of construction-related accessibility standards in the past 12 months; or an attorney who has represented 10 or more such plaintiffs in the past AB 1521 Page 6 year. For attorneys, claims that result in correction of violations do not count. 3)Imposes new procedural requirements on HFLs who file new claims: a) A higher filing fee; b) Special pleading requirements; c) Certification by the attorney that, among other things, the complaint is not being presented primarily for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. 4)Requires attorneys who file construction-related accessibility claims to notify CCDA about how their claims are resolved. This focus on HFLs is an important component of a comprehensive solution to the problem of serial ADA litigation. Analysis Prepared by: Alison Merrilees / JUD. / (916) 319-2334 FN: 0002291