Understanding the ADA

The Blog of William D. Goren, J.D. LL.M.

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ADA and Landlord-Tenant obligations

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Just what are the obligations of landlord and tenant with respect to ADA compliance? Does it matter if an architectural issue is involved or if it is an issue involving practices, policies, and procedures?

Our case of the day that answers this question is Supancic v. Turner, 2016 Cal. App. LEXIS 4235 (Cal. App. Second District, June 7, 2016). It is an unpublished decision, but nevertheless is instructive. As is my usual practice, the blog entry is divided into categories: facts; issue presented; court’s reasoning; and takeaways. The reader is free to focus on any or all of the categories.

I

Facts Taken Straight from the Court Opinion

On March 13, 2012, around 9:15 p.m., plaintiff entered the White Harte Public House (White Harte) with a friend and plaintiff’s service dog which was wearing a vest identifying it as a service dog. Pierre Moeini approached plaintiff and told him that he must pick up the service dog or leave. Plaintiff explained to Moeini that plaintiff’s dog was a service dog and that Moeini was infringing upon plaintiff’s rights. Moeini “physically forced” plaintiff out of the White Harte along with plaintiff’s dog and friend.

Outside the pub, plaintiff advised Moeini that he was violating the law. In response, Moeini told plaintiff that he didn’t “`give a f[u]ck'” and to “`leave or get [his] ass kicked.'” When plaintiff informed Moeini that he had committed an additional wrongful act by threatening plaintiff with bodily harm, Moeini said, “`I don’t give a sh[i]t. How about this. I’m not letting you in because you look like a little faggot, you and your friend look like faggots, and you have a little faggot dog.'” Plaintiff again advised Moeini that those statements were wrongful acts, but Moeini just laughed and told plaintiff that he owned “`six of these places'” and that Moeini did not allow homosexuals into any of them.

At that point, Moeini realized that someone had been recording his statements, so he said, “`I will smash your head into a million pieces if you do not get the f[u]ck off my property right now.'” Moeini then assumed a threatening physical stance, causing plaintiff and his friend to leave quickly.

Plaintiff’s theory of liability against defendant individually was based on an agency theory or the fact that defendant was liable as an owner or landlord. Defendant was not an agent or partner, but was a 50 percent owner of Harte LLC. Harte LLC owned and operated the White Harte, not defendant. “The `[l]andlord’ as defined by [t]he lease [under which Harte LLC occupied the White Harte was] Pierre Moeini and [defendant].”

The real property on which the White Harte was located was owned by defendant and Moeini. Defendant and Moeini, as landlords, leased the real property on which the White Harte was located to Harte LLC, as tenant, and defendant and Moeini were the members of Harte LLC. The White Harte was a place of public accommodation licensed to sell food and drinks. Harte LLC had no operating agreement. Defendant signed the White Harte fictitious business name statement as an individual registrant.

California Corporations Code § 17101(a) provides that no member of the limited liability company shall be personally liable for any liability of the limited liability company solely by reason of being a member of that limited liability company.

II

Issue Presented

Whether a defendant’s status as the owner of real property or of an LLC operating on the property, is sufficient by itself to mandate liability against the defendant for discriminatory action taken by an individual on the property and/or the entity operating on the property?

III

Court’s Reasoning

In holding that ownership status by itself is not sufficient for liability, the court reasoned as follows:

  1. Under the ADA, liability attaches to both landlords and tenants.
  2. Between the landlord and tenant, allocation of responsibility for complying with the ADA may be determined by lease or other contract.
  3. Generally speaking, a plaintiff can sue either the landlord or the tenant in alleging ADA noncompliance.
  4. An allocation of responsibility for ADA compliance between the landlord and tenant in the lease is not binding on third parties, such as the person with a disability who has been the victim of disability discrimination.
  5. The final implementing regulations carrying out title III of the ADA specifically provides that allocation of responsibility between the landlord and the tenant by lease is effective only as between the parties.
  6. In cases involving architectural barriers, the regulatory scheme imposes upon owners a duty based upon their status as owners.
  7. With respect to policy, practices, and procedures permitting the use of service animal by an individual with a disability, a landlord incurs liability only where the landlord implements the discriminatory policy, practice, or procedure.
  8. In general, landlords should not be given responsibility for policies a tenant applies in the operation of its business if such policies are solely those of the tenant. Therefore, if a restaurant tenant discriminates by refusing to seat the patron, it is the tenant, and not the landlord that bears responsibility because the discriminatory policy is imposed solely by the tenant and not by the landlord. On the other hand, if a tenant refused to modify a no pets rule to allow service animals in his restaurant because the landlord mandates such a rule, then both the landlord and the tenant would be liable for violation of the ADA when a person with a service dog is refused entrance.
  9. Under the facts of this case, defendant’s duty to plaintiff under the ADA was limited to ensuring that Harte LLC, the lessee and operator of the public accommodation, had in place policies, practices, and procedures permitting the use of service animal by persons with disabilities patronizing the place of public accommodation.
  10. The plaintiff was not able to show that the defendants discriminated against the plaintiff within the meaning of the ADA outside of showing that the defendant was an owner of the facility.

IV

Takeaways:

  1. This is a useful case for understanding just how liability works between the landlord and tenant in ADA matters.
  2. An owner’s obligations under the ADA may be different depending upon whether architectural barriers or policies, practices, and procedures are involved.
  3. The court said that, “in general landlord should not be given responsibility for policies attend and applies in operating his business, if such policies are solely those of the tenant.” I get that, but in this case, the real property on which the place of public accommodation was located was owned by the defendant and his partner, the offending party, as landlords. They then leased the real property for the place of public accommodation to an LLC as tenant with the defendant and his partner as members of that LLC. Further, the LLC had no operating agreement and the defendant signed a fictitious business name statement as an individual registrant. Accordingly, an argument can be created here that defendants were using corporate structure as a way to circumvent legal liability, in this case ADA liability. In other words, the argument is akin to arguing that the corporate veil should be pierced. At any rate, there is nothing in the case to suggest that a corporate veil argument was made. I wonder if the case will be appealed and whether this kind of argument would be made on appeal. I am also unclear on why the LLC was not sued, though the reasoning of the case is such that the outcome may have been the same.
  4. The case is also a lesson in why it pays to incorporate in order to protect against individual liability.
  5. If you represent a landlord or a tenant, make sure the lease contains a discussion of how ADA liability will be apportioned.

Since ADA is a nondelegable duty, does that mean indemnity is dead?

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In a previous blog post, I wrote about a case involving a major resort in Las Vegas Nevada that hired somebody to help ensure that its resort modifications were in compliance with the Americans with Disabilities Act. When it turned out that those modifications were not in accordance with the ADA and the resort was sued, they sought indemnification. The Nevada Supreme Court said that the ADA was a nondelegable duty and that the resort was not going to be able to get indemnification. Does that mean indemnification is dead? The answer is not exactly. In Reid v. Summit Claiborne, LLC 2013 WL 486783 (E.D. La. February 6, 2013), Summit brought a third party complaint for indemnity against AARD NOLA and Mainstream Development, the prior owners that they purchased the building from. The underlying suit involved a lawsuit by Reid against Summit alleging that the building violated the ADA.

Here are the critical facts:

1. The building was purchased from two different entities (Mainstream Development LLC and AARD NOLA ST. Claude LLC, two separate entities). It was AARD NOLA that moved for summary judgment.

2. The purchase agreement and other relevant documents did not include an express indemnity clause.

3. There was a lease between the lessee and Mainstream LLC regarding the building being in ADA compliance and continuing to be in ADA compliance for the duration of the lease, but AARD NOLA was not on that lease, rather only Mainstream Development was.

4. The purchase agreement between Summit and AARD NOLA made numerous references to that lease , but the purchase agreement said that to seller’s knowledge the lease was a true and correct copy.

5. Purchase agreement stated that the seller was making no representation or warranty as to the information or accuracy disclosed in the survey and reports and that the seller was transferring to purchaser the property without warranty except the title.

6. The purchase agreement also contained a clause (I call it the parol evidence clause), that said that the agreement was the sole and entire agreement of the parties and that there was no other agreement other than what was set forth in the written agreement. These kind of clauses are quite common in contracts and what they do is they set up a system whereby any negotiations prior to the signing of the agreement disappear unless they are contained within that agreement.

7. There were numerous representations and warranties in the purchase agreement, but ADA compliance was not one of them.

8. Cash sale document said that there were no statements or representations or declarations of any kind being made regarding the existence or nonexistence of any quality, characteristic or condition of the property being sold.

The above facts can be found at 2013 WL 486783, **1-4.

Based upon the above facts, the court reasoned as follows. First, nothing in the documents themselves imposed a contractual duty to indemnify. Id. at *2. Second, AARD NOLA was not a party to the lease containing the language that the building had to be an ADA compliance. Id. at *3. Third, even though AARD NOLA was not on that lease, the purchasing agreement could still have incorporated that lease but did not do so. Id. Fourth, while there may have been discussions about ADA compliance done the negotiations leading up to purchase, the parol evidence clause that was part of the purchase agreement made those negotiations disappear. Id. at *4. Fifth, the seller sold the property as is. Id. Sixth, there were numerous representations and warranties in the purchase agreement, but ADA compliance was not one of them. Id. Seventh, saying that a copy of the lease is true to the best of the seller’s knowledge, is not the same as incorporating that lease and agreeing to abide by its terms. Id. at *3. Finally, the court noted that any continuing obligation to ensure compliance with the ADA was assumed by Summit during the property purchase. Id.

Preventive tips: For anyone involved in commercial real estate, this case demonstrates that a close review of documents is always in order. It also demonstrates that you need to have specific references to ADA compliance in the purchase documents. It would also be a good idea if in the purchase documents one of the representations and warranties is ADA compliance. Finally, in addition to all that, it would be wise for the purchaser to have someone knowledgeable about the ADA architectural guidelines inspect the building before purchase goes through so that the purchaser can know exactly what the ADA risks are. Once those risks are known, the purchaser could either demand that the seller bring the building into compliance as a condition of the purchase going through, or that the seller knock off money off the sale price leaving it to the purchaser to remedy the ADA violations.