Back to Business? Expect the ADA Plaintiffs’ Bar Will be Too

Henry Pfutzenreuter April 29th, 2021

The COVID-19 pandemic caused a slowdown in claims under Title III of the Americans with Disabilities Act (“ADA”) last year, but as more people return to restaurants and retail stores, we expect those claims to rise again. Whether inadvertent or intentional, plaintiffs sometimes sue franchisors for ADA violations despite the fact they are not the actual owners or operators of the franchised location. As a result of fee-shifting, strict liability, and exacting technical compliance requirements, defending ADA claims on the merits can be an uphill battle. Experienced counsel, however, can often get franchisors an easy, early out.

The ADA requires a plaintiff to establish that the defendant “owns, leases (or leases to), or operates a place of public accommodation.” 42 U.S.C. § 12182(a). Unless a franchisor is a landlord or tenant, it is typically not the owner or operator of the franchised location. A franchisor only becomes an operator when it “specifically controls the modification of the franchises to improve their accessibility to the disabled.” Neff v. Am. Dairy Queen Corp., 58 F.3d 1063, 1066 (5th Cir. 1995). A franchise agreement’s reservation of a franchisor’s right to disapprove of proposed modifications to the franchised location is not enough.

Of course, this does not always stop plaintiffs from trying to sue franchisors for ADA violations, particularly serial filers who make boilerplate allegations to extract shakedown settlements from as many targets as they can identify. Plaintiffs’ counsel knows the cost of defending their lawsuits can quickly exceed their ransom demand.

Usually, a call from outside counsel with franchise experience is enough to educate plaintiffs’ counsel about how the franchisor is not the owner or operator of the franchised location. Plaintiffs who refuse to accept this reality do so at their own peril, as we saw late last year in Range v. 230 W. 41st St. LLC, 2020 WL 6729113, at *1 (S.D.N.Y. Nov. 16, 2020). The plaintiff sued Dominos, its franchisee, and the property owner. After Dominos prevailed on summary judgment, and declined the plaintiff’s offer of dismissal without prejudice, the court awarded the attorneys’ fees it incurred for its “summary judgment motion and fee application, none of which was necessary but for Plaintiff’s counsel’s stubborn refusal to dismiss the meritless claims against Domino’s.”

The franchise business model is founded on the franchisor’s shift of operational responsibility to the franchisee, who independently owns and operates the franchised business. ADA claims are just one of the looming vicarious liability issues that franchisors need to stay on the lookout for in the near future, including COVID-19 safety protocols, cybersecurity threats, and the Biden administration’s approach to joint employment.

If you receive a notice of a claim alleging vicarious liability for your franchisee’s operation or have any questions about how to control your exposure to such claims, you can contact any of our franchise attorneys.