Businesses Still Battle Disability Suits

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LOS ANGELES BUSINESS JOURNAL
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Volume 36, Number 12
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March 24 - 30, 2014 • $5.00
Businesses Still Battle Disability Suits Merchandisers
LAW: Plaintiff attorneys raise
Work in Concert
costs by going straight to filing.
MUSIC: Merger gets two
former competitors in sync.
By HOWARD FINE Staff Reporter
It’s mystical
power that’s
letting Jeffrey
Segal expand
his bookstore.
Convenience store owner Frank Ahn was hit last
year with a lawsuit alleging a handicapped access
aisle in his parking lot was three feet too narrow. As
he was widening the aisle, Ahn got sued a second time
for the same violation.
That was not supposed to happen under a state law
passed two years ago in response to business complaints about abuse of the Americans With Disabilities
Act. Even though he showed proof that the violation
was corrected, Ahn might have to pay a settlement for
By JONATHAN POLAKOFF Staff Reporter
Rock ’n’ roll merchandising is a tough business. So in an effort to drum up more profits, two
locally run firms that had been competing have
merged to create a higher-volume music merchandising company, BandMerch.
The Burbank company was created this month
when concert promoter AEG Live on the Miracle
Mile sold its BandMerch division to private equity firm Transom Capital Group in West Los
Angeles. Transom then merged BandMerch with
its own music merchandising firm, Cinder Block,
and kept the BandMerch name. AEG Live retains
RINGO H.W. CHIU/LABJ
Please see LAW page 46
ADA Angst: Frank Ahn at his Van Nuys shop.
PAGE 3
News &
Analysis
Please see MUSIC page 45
Old Ford Factory
May Shift Gears
REAL ESTATE: Site seen as
likely mixed-use development.
By BETHANY FIRNHABER Staff Reporter
Why this water
desalination
technology lured
a $200 million
payday. PAGE 6
RINGO H.W. CHIU/LABJ
Banking
A century-old Ford Motor Co. factory in downtown Los Angeles is driving investment interest.
San Francisco real estate firm Shorenstein
Properties is under contract to purchase the
vacant 300,000-square-foot facility, which once
churned out hundreds of Model T automobiles
each day. The collection of four connected warehouses on a 4.3-acre parcel is one of few remaining redevelopment sites of its size in the burgeoning Arts District.
The industrial property, owned by a trust established by Imperial Toy Corp. founder Fred Kort,
Please see REAL ESTATE page 44
Leading Man: Yossi Dina outside his Dina Collection pawnshop in Beverly Hills.
OneWest vaults
from thrift to
bank – and
lands as L.A.’s
third biggest.
Star Shine
SPECIAL REPORT
BUSINESS PERSONS
OF THE YEAR
Reality show gets ritzy pawnshop out of hock
PAGE 12
By OMAR SHAMOUT Staff Reporter
Comment
Seriously? L.A.
bans oil drilling,
then asks
Occidental
Petroleum to
stay in town?
PAGE 49
A
flashy new store on Beverly Drive
seemed like an ideal location to sell
designer jewelry, but Yossi Dina said he
began to have second thoughts soon after opening
his shop two years ago.
Rather than drawing customers, the glitzy,
Tiffany-like exterior turned off shoppers who felt
intimidated by the environment. Foot traffic failed
to materialize and soon the $10 million he invested
in the property began to look like a costly error.
“I thought, ‘I made a big mistake,’” Dina
recounted from inside his office at Dina Collection,
a 5,000-square-foot pawnshop emporium in Beverly
Hills. “People would come, look and then leave. In
their mind, they feel like they have no bargain.”
Then came an offer from a television producer
who helped turn Dina’s fortunes around.
Now the star of “Beverly Hills Pawn” on the
Reelz channel, Dina has seen his business boom
thanks to the exposure that comes from having
Please see LENDING page 44
DEEP L.A. ROOTS: Agribusiness billionaires
Stewart and Lynda Resnick have planted
themselves at nexus of society, business
and philanthropy.
BEGINNING ON PAGE 20
Now accepting nominations for LA’s
most successful women business leaders!
Nomination Deadline: Wednesday, March 26, 2014
For more
information,
see page 40
46 LOS ANGELES BUSINESS JOURNAL
MARCH 24, 2014
Law: Businesses Battle Disability Lawsuit Abuse
Continued from page 1
that second lawsuit; the total cost including
attorney fees could hit $4,000.
“There is no mechanism for us to prove to
them that we were fixing the problem,” he said.
“We just have to pay the money.”
Such demands for money were supposed to
have been reined in by a 2012 state reform law,
SB 1186. The bill was passed in response to
mounting business anger over letters sent by
ADA plaintiff attorneys demanding several thousand dollars each in settlement money to avoid
lawsuits. The bill tried to limit such demand letters, requiring a copy to be sent to the California
State Bar for review and possible enforcement
action against those plaintiff attorneys who had a
pattern of sending out numerous letters.
But defense attorneys say that plaintiff
lawyers have simply shifted tactics. They have
stopped sending the demand letters and now
file suits targeting business owners such as
Ahn, who owns a Circle K in Van Nuys, and
hundreds of others like him in Los Angeles
County alone.
“If you’re a plaintiff attorney, you can still
make any demand you want, just file your lawsuit first,” said David Warren Peters, Ahn’s
attorney and chief executive at the San Diego
office of California Justice Alliance, a
statewide firm that represents business owners
hit by ADA lawsuits. “What’s worse, now the
monetary demands are higher because plaintiff
lawyers throw in legal fees for filing lawsuits.”
Ahn’s example is revelatory. Actually, he’s
faced three ADA lawsuits in three years. The
first was filed in 2011, alleging discrimination
because an employee questioned a man who
was bringing a service dog into the store. The
employee allowed them in, but Ahn was hit
with a suit months later. He paid a settlement
of $4,000 plus attorney fees.
The suit over the handicapped access aisle
last year sought $25,000 in damages. Ahn
decided to bring in a state-certified consultant to
go through the store to ensure that it was fully
compliant for disabled access. The consultant
said the store and parking lot were largely compliant, but he suggested several additional steps
– including adjusting the height of bathroom
amenities – as a guard against further lawsuits.
The fixes came to $24,000.
“I have gone above and beyond what’s
required in trying to do the right thing to be
fully accommodating of disabled customers,”
Ahn said. “So far, I think I’ve spent a total of
$60,000 to deal with everything related to
these ADA lawsuits and I still have to pay
more once this latest case settles. That’s all
money out of profits.”
The plaintiff attorneys in the parking lot lawsuits – H.J. Sims of the ADA Law Group in San
Diego and Rummel Mor Bautista of Hollywood
– did not return calls or emails for this article.
Widespread pain
Under the old system, a plaintiff’s lawyer
sent a letter to a business stating that it was
somehow out of compliance with ADA regulations. The lawyer threatened to sue the business unless the lawyer and his handicapped
client were paid, typically $4,000 or so. The
ADA was a favored vehicle because it has
numerous regulations that include numbers;
bathroom sinks must be between a minimum
and maximum height in inches, for example.
But the reform, which took effect Jan. 1 of
last year, called for the state bar to monitor the
number of demand letters sent by each lawyer.
Those who sent a lot could face sanctions. At
the Business Journal’s request, the state bar
counted only 226 demand letters statewide last
year. Defense attorneys believe there were
thousands in previous years.
But now that plaintiff lawyers tend not to
send letters but simply file lawsuits, defense
lawyers complain that the situation is worse.
Settlement costs are now greater because lawsuits take more time and money for the plaintiffs
RINGO H.W. CHIU/LABJ
In Cross Hairs: Owner Frank Ahn, at his Circle K convenience store with its disputed handicapped access aisle.
and they want to recoup those additional costs.
As a result, settlements now often exceed
$10,000 when legal fees are included. Often,
business owners figure that’s still cheaper than
taking a case to trial and facing the prospect of
paying out $50,000 or more in settlements and
legal fees should they lose. While the plaintiffs
typically get $4,000 in settlement payments,
the rest of the money goes to lawyers, fueling
the filing of more cases.
“They are clearly doing this for profit, not
to genuinely improve the conditions for the
disabled,” said Marc Wasserman, a Torrance
attorney who defends business owners against
ADA lawsuits.
Of course, the businesses usually must
spend thousands more on fixes to their establishments. Some of the improvements are
based on valid complaints and will help the
disabled have more access; others are made in
an attempt to ward off more lawsuits.
Disabled rights advocates say many of the
lawsuits address legitimate problems with
access: bathroom stalls too small to accommodate wheelchairs, paths too narrow for wheelchairs or counters too high. They also say that
despite the ADA’s 24-year history, discrimination against the disabled persists.
“There’s a continuing obligation under the
ADA, as you have more resources, to remove
barriers and fix things,” said Paula Pearlman,
executive director of the Disability Rights
Legal Center at Loyola Law School and a
visiting associate law professor at the school.
“Even if a business owner does make fixes,
that does not make things all right for those who
have experienced discrimination in access,” she
said. “They are entitled to compensation for the
discrimination they experienced.”
But Pearlman acknowledged that the filing of
frivolous lawsuits has gotten out of hand and it’s
damaging the environment for legitimate cases.
“They are violating the spirit of the law and
making it more difficult for legitimate cases to
go forward,” she said. “They create a backlash
against people who are seriously trying to do
something to make the built environment more
accommodating.”
One business owner who took steps to
improve access for the disabled is Snay Patel,
owner of a Roadway Inn motel in Norwalk.
When he and other investors bought the 42room motel in 2005, they spent several thousand
dollars making changes in some of the rooms to
accommodate disabled guests, including roll-in
showers for people in wheelchairs.
“When the franchise inspectors and the city
inspectors came through, everyone signed off
that we were compliant with the ADA,” he said.
Despite this, Patel was served with an ADA
lawsuit in late 2011. He soon learned that two
other nearby motels got hit with virtually identical
lawsuits on the same day. All three claimed identical access barriers – disabled parking spaces too
small, the pathway to the motel entrance not wide
enough to accommodate a wheelchair, sinks and
toilets not the right height and more.
“Some of the complaints were demonstrably false, with inaccurate measurements,”
Patel said. “What’s more, during all the years
leading up to this, we never had one complaint
from any of our disabled customers. Not one.”
Some alleged violations apparently exploited a loophole in an earlier ADA lawsuit reform
bill, SB 1608, which was passed in 2008.
Under that bill, the plaintiff must show that the
violation prevented equal access to the facility
before seeking damages.
But some of the alleged violations, such as
failure to post all the required parking signs, did
not impede access. Peters, who also represented
Patel and the two other nearby motel owners,
said the lawsuits were tailored for a loophole
that allows ADA lawsuits when conditions can
lead to “discomfort or embarrassment.”
Patel ultimately settled the lawsuit, paying
out $4,000.
“We didn’t want to settle but it was the easiest and cheapest option for us,” he said.
Fighting lawsuits
But not everybody chooses to settle.
Roanne Mitchell, who owns two bars in
Torrance, has been hit with five ADA lawsuits
in the last three years. She settled the first two,
but since then she’s been fighting.
Mitchell’s two bars, the Zebra Room and
Hi N Dry, are in older buildings; both have
restrooms that have little or no space for
wheelchairs. She estimates she would have to
spend up to $30,000 removing walls, reconfiguring the plumbing and making other changes
to make each restroom fully ADA compliant.
She said she doesn’t have the money.
“After I settled the first two cases, I started
saving up the money so that I could make the
changes,” she said. “But then I got hit with
three more lawsuits – all in a matter of weeks
and all from attorneys in San Diego – and I
could see that unless I fought back, there
would be no end to the lawsuits. It’s time
somebody put a stop to all this.”
So she hired attorney Wasserman, who has
challenged the plaintiffs to appear at depositions, filed motions for discovery and done
everything he can to make it more difficult for
the plaintiffs and their attorneys to collect.
“What these attorneys count on is getting a
quick settlement so they don’t have to spend
much money on the cases,” Wasserman said.
“We’re denying them that quick settlement.
When they get that message, we think they will
drop their cases.”
One case has been dismissed, but the other
two are still pending.
Attorneys for these two cases – Michael
Taibi and H.J. Sims of San Diego’s ADA Law
Group – did not return phone calls or emails
seeking comment.
Meanwhile, the experience has taken a toll
on Mitchel, 51.
“I can’t sleep and whenever someone with
any sort of disability comes into my bars, it’s
very nerve-wracking,” she said. “And, of
course, the money I’ve been forced to spend on
legal fees could have been spent on actually
fixing the bathrooms.”
Mitchell last week flew to Sacramento as
part of a delegation from Californians
Against Lawsuit Abuse calling for stricter
state controls on ADA lawsuits. The organization says that even after the reforms, California
still accounts for more than 40 percent of all
ADA lawsuits filed nationwide, although the
state has 12 percent of the nation’s population.
Some want a fix-it provision, where a business owner gets a window of 90 days or so to
fix an access problem without facing a lawsuit
or paying a settlement fee.
Attorney Peters, who was also part of last
week’s delegation, said other changes are desperately needed, especially requiring official
certification of ADA compliance every time a
business owner gets a license renewed or a commercial property owner gets a building permit.
“I believe that alone would eliminate 90
percent of the cases,” he said. “Then private litigation would only be necessary to bring the
holdouts to heel.”