MOLSKI v. MANDARIN TOUCH RESTAURANT
359 F.Supp.2d 924 (2005)
United States District Court, C.D. California.
March 8, 2005.
Moreover, Courts have recognized that an unusual number of settlements can be evidence of an extortion scheme. In Reed v. Great Lakes Cos.,330 F.3d 931 (7th Cir.2003), the district court imposed sanctions on Melvin Reed, who had worked for 25 different employers over the previous 15 years, and filed 13 employment discrimination suits against them. The district court inferred that Reed was engaged in a pattern of extortion, working for an employer just long enough to obtain a pretext for a discrimination lawsuit, and imposed sanctions on him. The Seventh Circuit reversed the sanctions, noting that a lack of settlements belied any claim of extortion. Reed, 330 F.3d at 936 ("Were he engaged in extortion he would have dropped his suits in exchange for nuisance-suit settlements.").The indicia of extortion described in that case — an unusually high rate of discrimination lawsuits combined with an unusually high rate of settlements — are present in this case. Although standing alone this would not be proof of extortion, when combined with the other evidence that The Frankovich Group has aggressively and unethically pursued cash settlements, the high rate of settlements indicates such a scheme.
f. Conclusions
This Court has an obligation and a duty to protect the public from an unscrupulous practitioner. The record before the Court establishes that The Frankovich Group has engaged in a pattern of unethical behavior designed ultimately to extort money from businesses and their insurers. The Court believes that the record before it is sufficiently egregious to justify the suspension, or even disbarment, of the lawyers constituting The Frankovich Group. Accordingly, the Court has requested that the State Bar investigate the matter and consider disciplinary action if appropriate. In the meantime, the Court believes that the public can be adequately protected by a less restrictive and drastic measure: a pre-filing order that requires The Frankovich Group to seek leave of court before filing any new complaints under Title III of the Americans with Disabilities Act.
A pre-filing order is the least restrictive sanction that protects both the public and the courts. Some sort of pre-filing notice to the courts is necessary because of The Frankovich Group's history of filing lawsuits and then quickly settling the matter. If a court is not allowed to examine the complaint before it is served on the party, the matter may be settled and dismissed before the court has a chance to determine the issues of standing and jurisdiction discussed herein. Moreover, it is not sufficient merely to require Plaintiff Molski to seek leave of court before filing a complaint, because The Frankovich Group has demonstrated an ability to recruit additional serial plaintiffs who make nearly identical claims. Therefore, it is the order of the Court that The Frankovich Group, as presently constituted, and as it may hereafter be constituted, including all shareholders, associates and employees, is hereby required to file a motion requesting leave of court before filing any new complaints alleging violations of Title III of the Americans with Disabilities Act in the United States District Court for the Central District of California. Such a motion must include a copy of this order.
2. Jurisdictional Issues
As the Court noted in its prior Order Declaring Jarek Molski a Vexatious Litigant, the Plaintiffs seek damage remedies under state law that are not available under federal law. Congress made a conscious choice to limit a private plaintiff's remedy under the ADA to injunctive relief. See, e.g., Adam A. Milani, Go Ahead. Make My 90 Days, 2001 Wis. L.Rev. 107,
115 (2001). While the Plaintiffs could seek all of the remedies they are seeking in state court, they bring these suits in federal court for a reason. The Court believes that one of the reasons is intimidation. The letters sent to the defendants in these cases (mostly small business owners) state prominently that these suits are brought in federal court. This fact may be intimidating to small business owners, and attorneys unaccustomed to practicing in the federal courts, and thus increases the likelihood of settlement. Another reason for bringing these suits in the federal court is the added inconvenience to parties who reside some distance from a federal courthouse, many of whom would be forced to retain new counsel or pay the travel expenses of their local counsel.
1. A hearing was held on these Orders to Show Cause on February 7, 2005, the Honorable Edward Rafeedie, presiding. At that hearing, the Court announced its tentative ruling, including the findings of fact and conclusions of law that form the basis of this order. Despite requesting (and receiving) a continuance, purportedly to allow counsel time to prepare for that hearing, the Plaintiffs did not challenge any of the Courts tentative findings or conclusions, and did not present any oral argument.
2. The Court has obtained and read the 223 complaints that it that it was able to recover. A handful of complaints filed in the Northern and Central Districts were unavailable for various reasons. The Court also identified, but was unable to obtain, at least 11 complaints filed in the Eastern District.
3. Those claims are 1) Violation of California Civil Code § 54, et seq., The California Disabled Persons Act ("CDPA"); 2) Violation of California Health & Safety Code § 19955, et seq., Denial of Accessible Sanitary Facilities; 3) Violation of California Civil Code § 51, et seq., The Unruh Civil Rights Act; and 4) Violation of California Business & Professions Code § 17200, et seq., Unfair Business Practices.
4. The Court has attached a copy of the letter sent to Kathy McInerney as an appendix to this order. When citing or quoting the letter, this order refers specifically to that letter. The record also contains the letters that The Frankovich Group sent to the other defendants in Mandarin Touch and Yang Chow. For all relevant purposes, the letters are identical. [Editor's Note: The Appendix is not included in this publication].
5. Pursuant to C.D. Cal. Local Rule 83-3.1.2, the Model Rules of Professional Conduct of the American Bar Association may be considered as guidance when disciplining attorneys.
6. Although this Court has focused on three specific violations of the rule, the letter itself recognizes that it has actually given advice about seven different matters. See McInerney Letter at 5 ("We find all to [sic] often that many defendants are not properly advised as to their position in the litigation, insurance coverage issues, injunctive relief sought, damages, the tactics of insurance defense attorneys, attorneys' fees, and the use of an early mediation/settlement conference to resolve the matter."). As the Model Rules and relevant case law make clear, it is not the place of adverse counsel to advise an unrepresented defendant on these matters.
7. There should be no doubt that advising a party against retaining counsel constitutes legal advice under the Rule. The Model Rules specifically state that an attorney "shall not give legal advice to an unrepresented person, other than the advice to secure counsel." ABA Model Rules of Prof'l Conduct 4.3 (emphasis added). Thus, by its very words, the Rule recognizes that a recommendation to secure counsel qualifies as advice. It necessarily follows that advising an unrepresented party against retaining counsel constitutes legal advice as well.
8. Similar contradictions occur in complaints filed on behalf of other Frankovich Group clients. For example, in Jankey v. Mister D's Liquor Market, CV 04-9112 (C.D.Cal.2004), Jankey was unable to access the sidewalk in front of a liquor store due to a lack of ramps or cut curbs. Jankey blew his horn, at which time an employee came out of the store and assisted him with his order. Complaint at ¶ 22. Jankey noted other violations before leaving without attempting to enter the store. Despite a lack of any physical contact with an architectural barrier, Jankey then makes an identical claim of bodily injury "including, but not limited to, fatigue, stress, strain and pain in wheeling and attempting to and/or transferring." Id. at ¶ 28.
9. Further proof of canned allegations comes from a letter that The Frankovich Group sends to prospective clients, which outlines its litigation philosophy. See Ex. B to Declaration of Thomas E. Frankovich. The letter informs prospective clients that "[y]ou should also know that we use the terms `emotional distress' and `negligence as we prosecute your case. Although we use those terms, we do not file a cause of action based upon negligence, the negligent infliction of emotional distress, or the intentional infliction of emotional distress." The Frankovich Group made good on its pledge. In every case filed in 2004, Frankovich Group clients allege emotional distress and negligence without bringing a cause of action for negligence, or the negligent or intentional infliction of emotional distress. But how could The Frankovich Group have known this in advance? Surely it was likely that in (at least) one of the 223 cases, a client would be injured as the result of negligence, or not suffer emotional distress. That fact that 223 separate cases unfolded exactly as described in advance suggests that the identical allegations of emotional distress were contrived.
10. The requested damages accumulate during this time despite a lack of any notice to the defendants, who presumably would have some interest in mitigating their liability by performing the repairs immediately.
11. Moreover, it is unclear whether the sort of daily damages requested are available under California law. California courts read a statute against permitting cumulative daily damages unless the statute specifically authorizes them. See Hale v. Morgan,22 Cal.3d 388, 401, 149 Cal.Rptr. 375, 584 P.2d 512 (1978)("Uniformly, we have looked with disfavor on ever-mounting penalties and have narrowly construed the statutes which either require or permit them."). Neither the Unruh Act nor the CDPA specifically authorize daily damages, and thus, it is questionable whether such damages would be permissible under California law. 12. On November 18, 2004, a jury, finding no violations of the ADA, unanimously ruled in favor of the Defendants.
13. This is implicitly pointed out in the aforementioned letter which is sent to all defendants. The letter notes that if the matter does not settle quickly, the cost of litigation will "start[] to rise, or as some may say, skyrocket."
14. Such an understanding is even reflected in some of the settlement agreements which the Plaintiffs lodged with the Court. See, e.g., Declaration of Thomas E. Frankovich, Ex. 61 (Settlement Agreement for Molski v. Valencia Lanes, Inc., CV 03-5455 (C.D.Cal.2003)) at ¶ 3("It is understood and agreed that this settlement is the compromise of a doubtful and disputed claim, and that the payment made is not to be construed as an admission of liability on the part of Releasees, and each of them, and that said Releasees deny liability therefor and make settlement reflected herein merely to avoid litigation and buy their peace.")(emphasis added).
15. There is no evidence that proves that the barriers alleged actually exist, and if they do, whether their removal would be "readily achievable." None of the 65 settlement agreements which the Plaintiffs submitted to the Court contains an admission of liability, and Molski lost the only case he ever took to trial (with the jury making a special verdict finding that no barriers existed). The Plaintiffs almost never need to prove their allegations of discrimination because considerable disincentives discourage defendants from litigating a matter on its merits.