Feeling Extorted? Mr. Molski’s Serial ADA Litigation and Why We Settle

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Many in the legal blogosphere are buzzing about the recent Supreme Court decision letting stand a Central District injunction barring wheelchair-bound Jarek Molski from filing further ADA accessibility cases in our local federal trial court here in Los Angeles.  See Justice Berzon’s and Kozinski’s spirited dissents to Ninth Circuit’s Per Curiam refusal of the Petition for a full panel re-hearing here.

Mr. Molski was declared a vexatious litigant by the California Central District federal court back in 2004.  See Wendel Rosen’s excellent report of that case here.  Molski v. Mandarin Touch Restaurant, 347 F. Supp. 2d 860 (C.D. Cal.2004) (declaring Molski a vexatious litigant and requiring court approval prior to his filing future lawsuits); aff’d Molski v. Evergreen Dynasty here.

Still active is Molski’s case in the Eastern District of California which was recently permitted to go forward by the same Ninth Circuit Court of Appeal.  As the Ninth Circuit explained the factual background of Mr. Molski’s “serial litigation,”

[Plaintiff] Molski and his lawyer Thomas Frankovich (“Frankovich”) were purportedly in the business of tracking down public accommodations with ADA violations and extorting settlements out of them. On cross examination, Molski acknowledged that: he did not complain to any of [the defendant’s] employees about his access problems; he had filed 374 similar ADA lawsuits as of October 8, 2004; Frankovich had filed 232 of the 374 lawsuits; even more lawsuits had been filed since that date; Molski and Frankovich averaged $4,000 for each case that settled; Molski did not pay any fees to Frankovich; Molski maintained no employment besides prosecuting ADA cases, despite his possession of a law degree; Molski’s projected annual income from settlements was $800,000;2 Molski executed blank verification forms for Frankovich to submit with responses to interrogatories; they had also filed lawsuits against two other restaurants owned by Cable’s; they had filed a lawsuit against a nearby restaurant; and Sarantschin obtained up to 95% of his income from Frankovich’s firm for performing investigations for ADA lawsuits.

See Molski v. MJ Cable, Inc. here.

Despite these apparently damning facts, in its 2007 affirmance of the vexatious litigant finding, the Ninth Circuit noted some of the reasons why Molski and his lawyer could not be condemned for their pursuit of serial ADA litigation.  The ADA, noted the Court,

does not permit private plaintiffs to seek damages, and limits the relief they may seek to injunctions and attorneys’ fees. We recognize that the unavailability of damages reduces or removes the incentive for most disabled persons who are injured by inaccessible places of public accommodation to bring suit under the ADA. See Samuel R. Bagenstos, The Perversity of Limited Civil Rights Remedies: The Case of “Abusive” ADA Litigation, 54 U.C.L.A. L. Rev. 1, 5 (2006).

As a result, most ADA suits are brought by a small number of private plaintiffs who view themselves as champions of the disabled. District courts should not condemn such serial litigation as vexatious as a matter of course. See De Long, 912 F.2d at 1148 n.3. For the ADA to yield its promise of equal access for the disabled, it may indeed be necessary and desirable for committed individ- uals to bring serial litigation advancing the time when public accommodations will be compliant with the ADA.

But as important as this goal is to disabled individuals and to the public, serial litigation can become vexatious when, as here, a large number of nearly-identical complaints contain factual allegations that are contrived, exaggerated, and defy common sense. False or grossly exaggerated claims of injury, especially when made with the intent to coerce settlement, are at odds with our system of justice, and Molski’s history of litigation warrants the need for a pre-filing review of his claims. We acknowledge that Molski’s numerous suits were probably meritorious in part—many of the establishments he sued were likely not in compliance with the ADA.

On the other hand, the district court had ample basis to conclude that Molski trumped up his claims of injury. The district court could permissibly conclude that Molski used these lawsuits and their false and exaggerated allegations as a harassing device to extract cash settlements from the targeted defendants because of their noncompliance with the ADA. In light of these conflicting considerations and the relevant standard of review, we cannot say that the district court abused its discretion in declaring Molski a vexatious litigant and in imposing a pre-filing order against him.

In other words, when the legislature puts the enforcement of the ADA in the hands of disabled individuals without permitting them to recover damages, you can’t blame private attorneys for working the market created for the private enforcement of public laws even if you can blame them for the manner in which the market is worked.

So what does this have to do with the settlement of litigation and, in particular ADA Litigation?

Because these accessibility cases always cost more to defend than to settle and because they’re often indefensible, the rational business decision is simply to settle the darn things.  

No one, however, wants to be extorted.  And in the few ADA cases I’ve mediated, it’s the principled refusal to pay money at the point of a gun that interferes with a business establishment’s willingness to do the economically “rational” thing rather than, say, try it;  appeal it to the Ninth Circuit; and, pursue it to the Supreme Court of the United States.

For those representing defendants who are feeling extorted, I offer my own (previously posted) ADA mediated settlement story below.

Mediators themselves are at least partially to blame for defendants’ perceptions that they have been brought to the mediation table or settlement conference to be extorted. Mediators so often stress the expense of litigation as the primary reason to settle a lawsuit that many defendants justly feel their consent is being given to the barrel of a gun. And none of us wants to be robbed.

Legal extortion was the theme of a recent mediation I conducted with the Chinese immigrant owner of a small motel in Long Beach. A local attorney brought suit against Mr. Wu for his failure to have the required handicapped parking space in his lot and a ramp for access to the registration desk. The lawsuit sought available civil remedies under the Americans with Disability Act (the ADA). Whatever the motivation of the plaintiff and his attorney, the Code called for recompense.

In response to my comments on the requirements of the ADA, Mr. Wu told me a story about his immigration to the United States; the money he and his wife had raised to buy this small motel and the way they both worked twenty-four hours a day to staff it.

Neither Mr. Wu nor his wife recalled any disabled person who’d been unable to use the facility. Nor did he recognize the paraplegic man in the hallway waiting outside — a man Mr. Wu wouldn’t acknowledge as he arrived nor consent to meet in a joint session.

As Mr. Wu spoke, his attorney pulled from his briefcase a map of the street on which his client’s motel was located. It flagged a dozen other motels whose owners had been sued by the same client and the same attorney.

“We didn’t know about the rules,” the motel owner said. “This attorney sues everyone,” he insisted, stabbing his finger at the flags on the map. “Now we have done it. Complete,” he said, as his attorney passed me photos of the required improvements. ” Mr. Wu paused, his face flushed. “He’s suing everyone. It’s extortion. We won’t pay.”

Responding to Story with Code and Convention

Foolishly, I didn’t respond to the extortion comment. Instead, I talked about making a business decision to settle the lawsuit for less than the cost of the defense. This was part convention and part techinal account.

The convention? It’s better to settle even a frivolous lawsuit if the cost of defense exceeds the expense of settling.

The technical account? The ADA provides statutory remedies taht cannot be defeated by Plaintiff’s motiviation for bringing suit. Nor would Mr. Wu win the case if he could prove that Plaintiff didn’t try to register. Just driving by and feeling discouraged was enough.

Not surprisingly, Mr. Wu was not moved by either convention nor by my expertise on the requirements of the ADA.

“It’s extortion,” he said again. We were, as Malcolm Gladwell notes [in his article on Charles’ Tilly’s book “Why”]  talking past one another.

My first concern was cross-cultural. Of course, I thought, not only was I talking code and convention, I was talking American code and convention to a Chinese immigrant. So I tried another angle.

“In your homeland,” I asked, “how are building codes enforced?”

The defendant laughed. “Bribes,” he said. It’s getting better I think. But still. A lot of bribes.”

“Here,” I replied, “the building inspectors don’t usually take bribes. I’m sure there are exceptions. But on the whole,” I continued, “the inspectors enforce the codes without taking money. In this country, lawyers do a lot of the enforcing. And they get paid to do it. I’ll wager that some Chinese businessmen consider bribes a part of the cost of doing business. Here, business people often consider payments to settle lawsuits a similar cost of doing business.”

Not placated in the least, Mr. Wu continued to insist that he would not be extorted.

So much for cross-cultural translation. Mr. Wu’s repeated insistence on framing the conflict as a matter of principle — not giving in to extortion — was a sure sign I was missing the heart of the conflict. Mr. Wu was telling a story of injustice and I continued to respond with business sense and legalisms. How frustrated he must be with me. I tried again.

Responding to Story with Story-Telling

“Let me start again,” I said. “The way I understand it, you purchased the motel without any of the required handicapped access improvements and you didn’t know you were required to upgrade. Is that right?”

“Yes,” he said, more eagerly than before. “No one needed to sue us. If we’d been asked to upgrade, we would have. And look,” he said, pointing to the photos scattered on the conference table, “as soon as we knew, we complied.”

I again examined the photos and said, “but you didn’t make these improvements until you’d been sued by the gentleman in the wheelchair outside the door. The one who said he drove by your motel but didn’t bother stopping because he could see there was no way for him to get in.”

“He said that?” asked Mr. Wu, his interest growing.

“That’s what he told me,” I responded. “He needed a place to stay and he drove past all these motels that you’ve flagged here, and he couldn’t get in to a single one of them.”

Mr. Wu was shaking his head slowly up and down now, in the way we do when we’re considering information that sounds newly plausible to us.

I continued. “Mr. Smith was in a car accident a couple of years ago and won’t walk ever again. He’s only thirty years old. It’s not just the wheelchair that is so confining to him. It’s his inability to go where people not in wheelchairs are able to go.”

Mr. Wu was silent, but still thoughtfully nodding his head.

“Some of the money you pay — if you pay the plaintiff rather than your attorney — some of that money will go to Mr. Smith. It won’t all go to his attorney. And I think that money will help him out. You could see your payment as a charitable act or simply a way of saying you’re sorry that Mr. Smith wasn’t able to use your motel.”

Then I waited.

I could see the motel owner begin to sag under the weight of resignation. His righteous indignation had been spent. There was someone else involved in this conflict. Someone who was even more challenged and more impoverished that Mr. Wu thought of himself as being.

“So, it’s at least a bit of rough justice to settle,” I proffered. “Not extortion, do you think?”

The Pay-Off — Material and Personal

This was a rush of reason-giving. Story. Convention. Code. As Gladwell notes, “one kind of reason is never really enough.” And the right reasons, or at least the “good enough” reasons did the trick in this instance. The case settled for a small amount of money, less than the cost of defense. I had, of course, also told the plaintiff and his attorney Mr. Wu’s story of hardship and his efforts to do the right thing. They lowered their demand in response.

More important than settling the case, was listening to both sides’ stories and responding to each with a story from the other. This is what allowed the parties to leave the mediation feeling better than when they’d arrived. Mr. Wu acknowledged his part in the conflict and accepted responsibility for it. And Mr. Smith was able to exercise a bit of generosity by accepting less money from Mr. Wu than he had from the other motel owners he’d sued.

On his way out the door, Mr. Wu thanked me for helping him to understand. Then he stopped by Mr. Smith in the hallway and offered his hand. I couldn’t help thinking that some degree of fellow-feeling had been created. At the very least, the rancor was gone. The resentment that someone once told me was like drinking poison and then waiting for the other guy to die.

Whether we’re mediating someone else’s dispute or negotiating our own business deals, we sometimes manage not only to make the right business decision, but to make the right people decision as well. And resolution just doesn’t get any better than that.