Vexatious Litigation

Vexatious Litigation

It should be axiomatic that almost every lawsuit is defended by one or more insurance companies and most civil judgments are paid by insurance. Vexatious litigation skews actuarial tables and increases the cost of insurance to everyone.
 
A case in point is Molski v. Evergreen Dynasty Corp., No. 05-56452 (9th Cir. 08/31/2007) where the Ninth Circuit acted reasonably, and counter to its liberal majority, when it affirmed an order that declared Jarek Molski a vexatious litigant and ordered that Molski obtain leave of the court before filing any claims under Title III of the Americans With Disabilities Act ("ADA") in the United States District Court for the Central District of California. The second order sanctioned the law firm representing Molski, Thomas E. Frankovich, a Professional Law Corporation ("the Frankovich Group"), by requiring it to obtain leave of the court before filing any claims under Title III of the ADA in the Central District of California.
 
Molski, who is paralyzed from the chest down, needs a wheelchair to get around. He has filed about 400 lawsuits in the federal courts within the districts in California. Molski lives in Woodland Hills, California, but frequently travels. According to Molski''s amended complaint in this case, during his travels, he stopped at the Mandarin Touch Restaurant in Solvang, California on January 25, 2003. After finishing his meal, Molski decided to use the restroom. Molski was able to pass through the narrow restroom door, but there was not enough clear space to permit him to access the toilet from his wheelchair. Molski then exited the restroom, and in the course of doing so, got his hand caught in the restroom door, "causing trauma" to his hand. Molski''s amended complaint also alleged that Mandarin Touch contained other accessibility barriers "too numerous to list."
 
In determining that Molski was a vexatious litigant, the district court applied the five factors set forth in the opinion of the United States Court of Appeals for the Second Circuit in Safir v. United States Lines, Inc., 792 F.2d 19, 24 (2d Cir. 1986). Those factors are: (1) the litigant''s history of litigation and in particular whether it entailed vexatious, harassing, or duplicative suits; (2) the litigant''s motive in pursuing the litigation, for example, whether the litigant had a good faith expectation of prevailing; (3) whether the litigant is represented by counsel; (4) whether the litigant has caused unnecessary expense to the parties or placed a needless burden on the courts; and (5) whether other sanctions would be adequate to protect the courts and other parties.
 
The district court first noted that Molski had an extensive history of litigation. The district court also noted that Molski''s complaints were all textually and factually similar. The district court surmised that boilerplate complaints might indicate intent to harass defendants. Against this background, the district court’s reasoning made clear that the most important consideration was its specific finding that the allegations in Molski''s numerous and similar complaints were "contrived and not credible." The court stressed that Molski often filed multiple complaints against separate establishments asserting that Molski had suffered identical injuries at each establishment on the same day.
 
The district court pointed out that Molski had filed thirteen separate complaints for essentially identical injuries allegedly sustained during one five-day period in May 2003. In particular, Molski had alleged that, at each establishment, he injured his "upper extremities" while transferring himself to a non-ADA-compliant toilet. The district court explicitly found that, in making these duplicitous injury claims, Molski had "plainly lied" in his filings to the court because the district court "simply [did] not believe that Molski suffered 13 nearly identical injuries, generally to the same part of his body, in the course of performing the same activity, over a five-day period."
 
The district court discussed what it characterized as an "astonishing" letter the Frankovich Group had sent to defendants in at least two cases after suing them. The letter described itself as "friendly advice" and counseled the unrepresented defendant against hiring a lawyer. The letter warned that a defense attorney would embark on a "billing expedition" and that the defendant’s money would be best spent on settlement and remediation of the ADA violations, rather than hiring a defense attorney. The letter also advised the defendant that its insurance policy might cover the claim. Finally, the letter advised the defendant that it had no bona fide defense to the lawsuit.
 
The trial court sanctioned the plaintiff and his lawyers emphasizing the ethics rules violations contained in the letter discussed above. For example, the letter offered legal advice to an unrepresented party whose interests conflicted with the interests of the Frankovich Group''s clients. The court found in particular that "the rate of physical injury defies common sense," noting that the plaintiffs alleged similar injuries sustained in a similar fashion at different businesses on the same day.
 
The Ninth Circuit found, as it considered Molski’s appeal, that two district courts in our circuit disagree about whether Molski’s frequent litigation is vexatious. Molski conceded that he has filed numerous claims. However, Molski contends that his suits were not vexatious because they had merit. As the district court observed, it is likely that many of the businesses Molski sued were not in compliance with the ADA. However, while Molski’s complaints may have stated legitimate claims for relief, it was not clearly erroneous for the district court to find that the claims of injury contained in those complaints were patently without merit. The district court’s conclusion that Molski "plainly lied" in making his injury allegations was not clearly erroneous.
 
The district court's determination that Molski harassed defendants into cash settlements was justified by its findings regarding Molski's litigation strategy. California law provides that a plaintiff who suffers discrimination based on his or her disability may recover up to three times the amount of actual damages for each offense, and that, at a minimum the plaintiff must recover damages of not less than $4000. Thus, Molski usually sought damages of not less than $4000 for each day that a facility did not comply with the ADA. Because Molski would often wait to file suit until a full year elapsed since his visit to the defendants' establishments, defendants often faced claims for statutory damages of over one million dollars.
 
The Ninth Circuit concluded that: "Frivolous litigation is not limited to cases in which a legal claim is entirely without merit. It is also frivolous for a claimant who has some measure of a legitimate claim to make false factual assertions. Just as bringing a completely baseless claim is frivolous, so too a person with a measured legitimate claim may cross the line into frivolous litigation by asserting facts that are grossly exaggerated or totally false. In an adversary system, we do not fault counsel or client for putting their best arguments forward, and it is likely the unusual case in which a finding of frivolous litigation follows in the train of a legitimate legal claim. It is a question of degree where the line falls between aggressive advocacy of legitimate claims and the frivolous assertion of false allegations. In this case, the district court, looking at the allegations of hundreds of lawsuits, made a decision that Molski's baseless and exaggerated claims of injuries exceeded any legitimacy and were made for the purpose of coercing settlement. We cannot on this record conclude that the district court's factual determinations were clearly erroneous or that the district court erroneously reached the legal conclusion that Molski's litigation was vexatious."
 
The Ninth Circuit noted 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. In light of the similarity and exaggerated nature of the frequent injuries Molski alleged, the Ninth Circuit concluded that the district court's findings regarding the lack of veracity in Molski's complaints were not clearly erroneous and that the district court was within its discretion in imposing a pre-filing order on Molski.
 
When a client stumbles so far off the trail it caused the court to wonder whether the attorney for the client gave inadequate or improper advice. The Ninth Circuit also noted that the Frankovich Group filed numerous complaints containing false factual allegations, thereby enabling Molski's vexatious litigation, provided the district court with sufficient grounds on which to base its discretionary imposition of sanctions.
 
Molski and his lawyer asked the Ninth Circuit to rehear their case en banc. The effort failed. Last August, a three-judge panel upheld Los Angeles Judge Edward Rafeedie's order barring Frankovich from filing disability access suits without prior court approval. Frankovich argued the litigation is fully authorized under the law and helps bring businesses into ADA compliance. Frankovich intends to appeal to the U.S. Supreme Court according to news stories.
 
Insurers may take hope from this decision as should the small business who paid the demands of the plaintiff rather than fight.