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Disability Law

Serial ADA suits operated like 'a carnival shell game,' depriving plaintiff of proceeds, judge says

Ninety-nine lawsuits claiming New Mexico businesses violated the Americans with Disabilities Act should be tossed, according to a recommendation by a federal magistrate judge.

Chief U.S. Magistrate Judge Karen Molzen said the “boilerplate complaints” were primarily filed for an improper purpose and they should be tossed under standards for in forma pauperis cases, in which the plaintiff seeks to avoid prepayment of the filing fee. The Denver Channel and ABC 15 covered her recommended disposition (PDF).

The lawyer who filed the cases and the company that funded them are apparently “using the judicial process to harass defendants into settlements to obtain financial gain …. and not to remedy ADA violations,” Molzen said.

The complaints were largely the same, with the exception of information—plagued with misspellings—that identified the defendant business and briefly described the alleged violations, Molzen said.

Molzen said the cases should be dismissed, but the full amount of the filing fees should still be due the court. The court should retain jurisdiction in the cases to address any counterclaims by the businesses for abuse of process, Molzen added.

Lawyer Sharon Pomeranz of Santa Fe filed the 99 cases on behalf of one plaintiff, Alyssa Carton, who has spina bifida and uses a wheelchair. Carton became the plaintiff after responding to a Craigslist ad purportedly placed by a litigation funding company called Litigation Management and Financial Services, Molzen said.

Similar cases have been filed in Arizona, Nevada, Utah and Colorado, according to the Denver Channel, and all apparently have ties to the funding company and a related entity.

Carton’s agreement with the funding company required her to keep the contract confidential, a provision that helped the company evade its obligation to pay filing fees by claiming Carton couldn’t afford to pay, Molzen said.

Pomeranz also had an agreement with the funding company requiring her to reimburse it for its “staff work,” including a driver who took Carton to the business sites.

It appears Pomeranz made little effort to ensure there was evidentiary support for allegations in the complaints, and made little effort to ensure that Carton agreed with the allegations, according to Molzen.

Carton’s agreement with the funding company said she would be paid $50 for each lawsuit filed, she would be entitled to “remaining proceeds” of successful claims, and she gave LMFS complete authorization to negotiate and accept settlement offers.

Carton’s agreement with Pomeranz, however, said the attorney fee for each case would be $100, and the lawyer would receive “100 percent of the monetary recovery” in settlements. Carton believed she would receive money when the cases settled, but she gave up any proceeds in the agreement with the lawyer, Molzen pointed out.

“Thus, as in a carnival shell game, Ms. Carton’s expectation for receiving any settlement proceeds was illusory,” Molzen said.

Pomeranz did not immediately respond to an ABA Journal email requesting comment.