Episode Transcript:  

  A DA Compliance is a topic that a lot of real estate investors don't bother to think about. Until a lawsuit, and over the past decade, a DA related litigation has surged more than 300% with many cases filed over very minor or even questionable violations. So as of now, these cases are beginning to shift.

State courts, making the waters even murkier and the stakes even higher. We're gonna unpack that and more on today's episode. Let's get ready to scale.

Hey guys, my name is Jeanette Friedrich. I'm the director of investor Relations here at Blue Lake Capital. Joining me today is Joshua Bachner. Joshua is a partner at Mandelbaum Barrett pc, a litigation practice that focuses on real estate, general business torts, insurance defense, corporate bankruptcies, and adversary proceedings.

Prior to that, he was a partner at Ansel Grimm and Aaron and several other firms before that as well. He has his JD in law, obviously from Brooklyn Law School, as well as his BA in Political Science from Wheaton College in Massachusetts, and he is joining us today from New York City. So Joshua, welcome to the show.

Hi, good 

afternoon. 

Thank you so much for having 

me. 

Yeah, thank you. It's interesting. I happen to have two children. I have four, but I have two that actually have disabilities. And so I'm very well versed in the world of a DA and I've been an advocate for years and years. For Americans with disabilities.

However, there's definitely some bad actors out there that love to take advantage of these protections that have been put in place, and that's what you're really gonna help us understand today. So first of all. There's been a lot of these nuisance cases that have been going around in the media especially when it comes into a DA world, if you will.

So can you share with us maybe a surprising or outrageous, case that's, and it can give us a really good example of what these are like, and what they, look like, and then explain to us how do you identify if it's really a nuisance case? 

Sure. And as you pointed out, just to kinda level set.

The a DA is a great statute, very important, I think, created access to millions of Americans since its adoption in 1992. And I think very important to have on the books. 

But 

under the law of Unintended Consequences, as you've pointed out, it has become used in abused by plaintiff's attorneys because the statute does provide for fees and costs.

So the concept is called Private Attorneys General. Enabling private individuals and their attorneys to basically correct public wrongs or wrongs that impact the public, like access issues to a place of public accommodation. But many places these days, because the statute's been on the books for so long, know this.

And so when. New buildings are erected. They are a DA compliant. It's part of the architectural plans, right? So you ensure you have a DA accessible ramps bathrooms elevators, everything else. So that's taken the wind outta the sails of some of these planets attorneys because it's no longer shooting fish in a barrel.

They kept, you look like you're in a beautiful office building right now. I'm confident it's a DA compliant, right? My office building in the city was actually built in 1912, 

right? 

So it required a lot of retrofitting to ensure a DA compliance over the years, but it's done that what we're seeing, to answer your question with these nuisance suits is just people who basically do what are called cookie cutter complaints, and they take an a DA complaint that predominantly just quotes the statute.

The prohibition's under the statute, whether they apply to the particular premises or not. And so one example is we had a client who was sued in New York City, Manhattan for failure to provide handicap parking spaces in the parking lot. Now, if you've ever been to New York, you'll know many things.

First stores don't have parking lots. Second, second there are no handicapped parking spaces available in, Midtown Manhattan. The whole suit was basically, like I said, a cookie cutter action that they had used maybe against a defendant in another state or upstate that was more suburban and did have a big parking lot, for example, at a mall where you are required to have handicap.

Handicap parking spaces, excuse me. And we had to alert plaintiff's counsel to this. We sent them what's called a Rule 11 letter, which is basically putting them on notice that if they don't dismiss the action, they're gonna be liable for sanctions. 



And it took us months to be able to get their attention and explain to them we had to use Google Maps and send them pictures that there are just no handicapped parking spaces.

I think it was like. 26th Street and Broadway or something like that. In Midtown. But because a lot of these shops are mills, they'll file hundreds of suits in a year. And so they're not paying attention to the details. They're not paying attention to the facts. And the reason it took us so long to get someone on the phone to address this is because they just don't care.

They're basically just it's like playing the lottery, right? If they have one or two cases that hit every year and they could recover their fees and costs and get what's called a little bit of an incentive award for the plaintiff, usually it's a thousand, $2,000. They feel like they're making out well.

Wow. Interesting. Now to further complicate it, different states handle a DA cases differently, and I got to experience this firsthand years ago. My I have a daughter that's deaf and deaf education is not streamlined in the United. States and it was very interesting getting that world opened up to me for me to understand how, basically a DA can be very differently managed from one state to another.

So I'm just curious to know, are there certain regions that are more litigious or friendly, to serial plaintiffs and, what should out of state investors be aware of when they're trying to expand into potentially a new market? 

So good question. In theory, because the ADA A is a federal statute.

It should 

apply uniformly to all 50 states, but you're exactly right. Different states have interpreted its provisions and implied them differently. The biggest example, frankly, is with respect to websites. Some states believe that the A DA does apply and I should say some jurisdictions. So for example, the Second Circuit, which is predominantly New York state.

Believes that the aada a should apply to websites. So if the website isn't ADA a compliant, it doesn't, for example, have the ability to read out loud to someone who's blind, it doesn't have the ability to be if there's audio, it provides subtitles to someone who's deaf. It's not compliant with the aada.

A by contrast, the third circuit right next door in New Jersey takes the opposite approach and concludes that it doesn't apply. Now, websites, as are usually accessible. The world wide web globally. So now you have real questions, right? So for example, if someone is accessing a website from New York, does that mean Second Circuit precedent applies?

Does the operator for the website have to be in New York? Does the store perhaps have to be in New York, or maybe it's not even a store? My firm's website has to be compliant. We have offices in New York and New Jersey as well as Colorado and Florida. What governs. So now you get into all of these jurisdictional issues, which when layered on top of the differences between different circuits, ruling different ways for its application does create 

chaos.

Yeah, absolutely. So what is your advice for investors that are looking into new markets that want to actually be able to take this into consideration when they're weighing their decisions? 

So if you're gonna invest in, some large multifamily properties, for example. It, particularly if they're built after 1992.

Because if you're prior to 1992, you can be grandfathered in and I'm happy to explain how that works. But if you're built after 1992 and it's a significant investment in a large property, there are actually individuals who will go out there and do an a DA compliance assessment. And so they'll survey the property.

Make a determination as to whether it is in fact compliant with the statute within that jurisdiction and more generally at the national level. So that's everything from having handicapped parking spaces to ramps, which have to be at a certain angle. The doorways have to be at a certain width.

Many handicapped doorways, as have to have that push button. To allow the door to remotely access. The hallways have to be a certain width. Bathrooms have to be a DA compliant. Obviously elevators. So there's a host of variables that these individuals will review and consider to ensure compliance.

The challenge is, again, retrofitting to bring the property into compliance can be prohibitively expensive. 

As another example we have a client who owns a deli in the city, been around for 80 years, the building's been around for a hundred years. The bathroom is down a narrow stairway into the basement.

It's a restaurant. There is no way to correct that, right? There's no way to install an elevator. There's no way to install a chair. There's no way to do anything to get the bathroom up, right? And other than spend tens of millions of dollars. And so there's this grandfather provision that I mentioned wherein the building predates 92.

You can show financial hardship with respect to remediating the condition. You don't have to do so to engage in that undertaking. But if you're investing in more recent property, more recently constructed property, it should be compliant. That's one of the things an architect will do at the very outset.

But if you want to be certain, if your investment to protect it, you could ensure that it's been inspected by a consultant. 

Great. Great. Now also something else I know that's very common within the industry is making sure that assets are put into separate LLCs. Ideally it protects the owners.

But does it really protect people in court, is what I'd like to know. And if not, what other protections should LPs be making sure that GPS or sponsors are putting in place to reduce any exposure to a DA claims. 

So good question. And that's gonna depend now again on the jurisdiction and frankly on the judge.

So in theory, if you're trying to establish this financial hardship, you would just look to the LLC that actually owns the property, right? The deed holder. But you're exactly right. In most instances, they're single purpose entities that exist particularly in solely to own the property. And some of the better plaintiff's attorneys will then recognize that fact and they'll want to go up the food chain and determine, to your point, who actually is behind the scenes of the SPD.

A very large management company, a very large holding company, et cetera. And once you get into their financials, which first of all, no one wants to disclose, of course. There's a reason. These are all non-publicly traded companies. They're intended to be private and keep the financial information close to the chest.

You're at risk of disclosing all of that. Frankly, not only disclosing it to your adversary, but more likely than not, it's gonna end up in the public record in court. So the kimono will be wide open. Obviously creating a corporate shield along the lines of what you explained to protect against that is invaluable and ensuring that those corporate formalities are then adhered to.

So the plaintiff can't pierce the corporate bail. So that the LLC does in fact have its own bank account, like you mentioned, it is properly incorporated. It does have its own operating agreement. If it's an LLC, it has a member managing member who's distinct from the other entities. We've seen cases where you've got, one managing member for 400 LLCs.

That's right. Two, two keep by half. And, all those corporate formalities really will protect against the plaintiff piercing the corporate bail. To go up the food chain to get the financial information from the holding company or otherwise.

Interesting. Very interesting. All right. And then, I have to ask, of course, given all of your experience with the various cases that you've had to, litigate, if you could give one piece of legal advice to every passive real estate investor out there, what would it be?

Outside the aada A or just in general? I'll let you go as broaden as wide with it as you like. 

With respect to the Aada, a compliance in particular if you can't get the, they're called certified Accessibility Specialists or CSPs, if you're not gonna have a C come make sure there's warrants and representations in the investment documentation, the offering memorandum, whatever the case may be that confirms that the property has their properties.

Have been inspected and are compliant and that the sponsor, for example, is standing by that representation. Because if there is a lawsuit, obviously it's gonna be expensive and a challenge. And you really want to ensure if you're making these investments in these properties, like I said, particularly the older properties from, the nineties on forward that you're protected.

I should also mention. Not quite in response to your question, but if there have been any significant modifications to the property since 92, you have a property that's a hundred years old, like I mentioned my office building, but if there's been significant modifications since 92, the expectation is that those modifications will include a DA remediation that come to compliance.

So you're not automatically grandfathered in if you've done a huge retrofit, you remodeled the lobby, right? You installed new elevators, you, whatever it might have been. That process has to bring the property into compliance. So you wanna keep an eye out for that more. Generally speaking we, like you mentioned, we represent a lot of folks who are, I think in your demographic go to the property.

We've had a lot of clients who invest in Florida and in, Arkansas, Ohio, whatever it might be. They're based out east where I am. And it's like those old land scams back in the. The forties and fifties where the old people invest in some property in Florida only to realize it's the middle of the Everglades.

And, it's not exactly gonna be developed. We strongly recommend people actually visit the property so that they can walk in and see it for themselves and take a look, for example, at some of these issues that we've been discussing. But, reading things is great. The representations in the offering meran or the PPP, whatever it might be, is great.

PPM, excuse me, but seeing it with your own eyes is always the safest. 

Excellent advice. I love it. All right, very good. Now, you touched on this earlier and basically what I'm referencing is you were talking about, people being able to file lawsuits over websites and the website's not being a DA compliant.

And it's something that I also have worked on here at Blue Lake as shoring up our website because I know for quite some time there was a real aggressive trend for lawsuits. All over the place against every kind of business, over their websites. That was I assume, essentially just very low hanging fruit.

So I'm curious to know, what trends in real estate litigation should we be watching closely? Like that over the next, say, 12 to 24 months, what's trending up? 

So with respect to the websites, that certainly is a hot item that's probably gonna go up to the Supreme Court. A case did go that far, but actually the court didn't grant tertiary to hear it.

So there is still disparate rulings from these various circuits. I think. Franco, like I mentioned, a lot of these plaintiff's attorneys are running out of options. 

And 

that's why, because again, new properties are being developed, they're compliant, properties are being substantially modified, brought into compliance.

We're seeing folks sue because you know of a, the incline, the ramp incline, it's supposed to be at a certain grade, 3% and it's, 3.1. 



Settled. Those little things we've had suits over the toilet paper holder. Supposed to be 24 inches off the floor. Don't quote me on that.

And it's 24 and a half, right? And they will come in with a tape measure, right? So what they'll do is they'll send people to the property who are not the plaintiff, right? They're just going to the property with a tape measure, and they're looking at all of these issues, and then they write a report, and then that's what they used to sue the plaintiff.

And this is, to answer your question, may not even visit the property. 



For a while it was just an intent to visit, and then it became, if you visited once. Was sufficient. Now many courts, and this is why, as you mentioned at the outset, a lot of these cases have gone to the state courts as opposed to the federal courts.

Many judges, particularly in the southern district of New York, are I think, fed up with this. And so the trend is towards standing. Does someone who just has a mere intent to visit the property has standing to sue? Does someone who just visited the property once but really doesn't have an intention to return, have standing To sue another example, we had a plaintiff out in Queens, New York alleged that he couldn't visit a coffee shop in the Bronx.

And we pointed out you can get coffee in Queens, right? So the fact that this individual went once and again, not disparaging the individual rights to access all the rest, the fact that they went once to get this cup of coffee was obviously a pretext to filing suit. It 

wasn't 

that they intentionally, were gonna consider going to the property over and over again and had this barrier to access.

Yeah. We 

still, we had a case against a Chinese delivery restaurant. Now, I don't know as well where you are, how that works, but here, Chinese delivery restaurants bring the food to you. As the name would apply, right? You don't go into these places nor would you want to because if you saw what was actually going on, you would never eat the food.

So we had a lawsuit where someone sued because there was an access delivery, and we pointed out there doesn't need to be. And our in fact accommodation, our reasonable accommodation to this plaintiff was bringing the food to them. The court agreed with that as well. In fact, the court issued rather scathing decision on this one.

So what's happened is because the federal courts are getting frustrated, like you pointed out, three 20% increase. I think there were over 3,200 cases filed in New York alone last year. And they see these serial plaintiff's attorneys, the same attorneys over and over again, often relying on the same plaintiff over and over again.

Plaintiffs are now filing state courts. Which creates a whole other host of problems because unlike the a DA, which is supposed to be uniform nationally every state could have different rules and regulations. Some obviously far more restrictive New York, California, or more protective, I should say.

New York, California, others, infinitely less so Texas. For example. Florida's an interesting combination. Florida's obviously bright red these days no regs and low rest, but has it rather aging demographic God's waiting room where people wanna have wheelchair access, right?

Yeah. So they're a little torn asunder by this. But that's really where the trend is going is who's gonna have standing. And these cases in state court brought under state statutes that are the analogs to the a DA and how that's gonna work out. It's these plaintiff's attorneys, like I said, are the real problem, right?

They're not just looking, they're forum shopping, looking for another forum because they realize the judges at the federal courts have gotten fed up with them. 

Wow. It sounds definitely like a complicated and hot mess that is probably not going anywhere anytime soon. I guess then, for my last question before we jump into what I call the lightning round, I will ask, if.

Earlier I asked you what advice you would give to real estate investors specifically more passive investors, but what about the sponsors? What would be your key piece of advice to sponsors that are, essentially putting these deals together? Trying to make sure that they're putting, their passive investors in the safest, best position possible, as well as protecting their own interest.

We do a lot of sponsor litigation at my firm as well because sponsors often take, I found a cookie cutter approach. We'll use the same offering memorandum over and over again and it's not particularized to the property at issue. And that's, and we represent sponsors as well. That's where, you could run into problems similarly with the lawsuit alleging a lack of handicap parking spaces in Midtown Manhattan.

Our recommendation to sponsors as always as well, be careful. People are gonna rely on these reps and warranties. And if you don't do exactly what they say, these passive inve investors are gonna have a cause of action because that's a misrepresentation, if not a fraud. 



To sue you.



And so you wanna be very careful in what you're putting out there and that om that people are relying upon. Similarly, I know a lot of clients, again, who do this, they package up properties in multiple jurisdictions. Put it together in a portfolio. Have the passive investors invest in that portfolio with what we've just discussed.

Your property in Arkansas, again, could be regulated very differently than the property in California, which we've regulated very differently than the property in Ohio. And if you're making reps with warranties that are uniform to all three, in that example. You might have a problem because it might be different in each jurisdiction, particularly as, again, these plaintiffs are now bringing cases in state court, under the state statutes rather than the federal a DA.

So it's a DA compliance, again, are very important, but the lawsuits are very expensive. Particularly, again, because the incentive for these plaintiffs, these private attorneys, general, is fees, right? These attorneys figure they're gonna throw in, and as difficult as we make it in defending. Our client's going to end up paying them.

So if we drag it out, we bring motion practice, we fight tooth and nail, they just figure, great, you're gonna pay me for your fight. And it's only if you really can kick 'em between the teeth. I'll go with between the teeth for your podcast you could really, scare 'em off and make 'em go away. And that's why that rule 11 letter, that the sanctions letter that I mentioned holds some weight because now they've got skin in the game.

Now they have to be at risk of paying my client's fees and cost. Like the property owner. The other challenge with these with the sponsors is in multifamily situations it's a little bit different, but if you've got commercial tenants 



There can be a challenge there as well because in most leases with a commercial tenant, as I'm sure it provides that the tenant will comply with all local, state, and federal law and indemnify the landlord against that obligation.

So if a tenant moves into the premises has no idea. Commercial tenant has no idea, the property's not compliant, just figures. The landlord took care of it and gets sued. They'll sue the tenant and the landlord. The landlord is gonna look to the tenant to indemnify the tenant's gonna look to the landlord and say why did you put me in these premises that aren't compliant?

You're gonna have that invite. That too, in order the benefit of the plaintiff because now they're just sitting back and waiting for the, to it out and increased expense and all the rest. You mentioned a lot of multifamily, but if there's commercial tenants there as well. That's a big challenge. And because of the expense, a lot of these tenants can't afford to fight. 

So 

they'll just defer to the landlord and then the landlord will hope to recover their fees and costs from the tenants and defending. It just becomes, a real hot mess for everyone. It sours relationships.

Oh, no doubt. No doubt. Is it common for anyone to ever be able to recoup those expenses? In some of these nuisance filing cases, are there, injuries or awards to the party that has to endure, going through this? 

Rarely, if ever. 

Wow. I've been doing this 

for about a quarter century, and I could probably count on one hand the amount of times a court has awarded sanctions against a party.



Wow. 

Judges are really just loathed to do it, particularly in cases like this. The plaintiff in this instance won't be able to afford it. Rule 11 does put the law firm on the hook as well. But most courts just figure if they've dismissed the case, move on. Wow. 

And a lot 

of the judges don't wanna be bothered by a fee application at that point.

Wow. Very interesting. Thank you for pulling back the veil on a really, a very important subject. A little terrifying, but extremely important to know. I appreciate that. Before we let you go though, I do wanna take you through what we call the lightning round questions, which are just light and fun for the most part.

But a little, just more personable. Are you ready? Yes. All right, so when you are not having to defend people against, nuisance, a DA lawsuits what do you actually do for fun? 

I've got two wonderful kids, so I enjoy my time with them. I'm also a very big Yankee fan. I know where you are and I still haven't forgiven you folks for that fifth inning during last year's World Series.

So I watch a lot of baseball and I read quite a bit. I'm a big fan of biography and history. 

Nice. Nice. And actually that's a great segue to one of my other questions for you, which is basically what book or podcast would you recommend that someone should check out? 

I just finished The Coldest War, which is about the Korean War.

Terrific book. The Forgotten War as the Korean War is often referred to. And I really enjoyed it. Like I said, a history buff. It really was fascinating. The author was able to interview a lot of the folks who were there, who are unfortunately no longer with us.

And when you understand, how these troops, these young, 17, 18, 19-year-old kids who just thrust up against what was effectively, millions of people in a Chinese army where they really weren't even intending to be there to fight. It's really devastating the loss of life, the, that cold winter where they all suffered.

And, had a, that retreat, the fight between MacArthur and Truman at the time it, it was all really quite fascinating. Perhaps like today we, we had someone who basically was awarding the president and MacArthur, who thought he was just above the law.

And he could 

do what he wanted to do. And because he had been doing that for so long with Roosevelt as well, Truman was afraid to do anything about it. In fact, the joint chiefs of staff were all afraid to do anything about it. He was untouchable for a while. So it was a fascinating read. It's called The Coldest Winter.

Oh wow. Very interesting. Very interesting. And I'll have to check that out for sure. What is something interesting about you that most people don't know? 

About me that most people don't know. I'm an open book, so that's kind a little bit of a hard question.

Play any musical instruments.

Can you wiggle your ears?

Yeah. I did play the sax in the clarinet a lifetime ago, high school, college. I cannot wiggle my ears thing if that, nice. But I dunno how that is to anyone. Yeah. I don't know. I it's public. It's on the website, but in addition to the litigation work I do, I also happen to be a cannabis hemp and psychedelics attorney.

So at cocktail parties and those types of things. You mentioned you're an attorney and you could see people's eyes closed. You're a commercial litigator and this goes down. But as soon as you mention, cannabis having psychedelics what's that? What does that mean?

And then of course, the inevitable, do you have any free samples kind of question and but that's a big and fun part of my practice and it's obviously very different from the commercial litigation base. Both the clients are incredibly different. The work's incredibly different and it's.

Remarkable because the plant is 5,000 years old, but the law is 5, 10, 15 years old, obviously in California. You've been doing it since 96, but everything is new, even though it's all, 5,000 years ago in Nepal. 

Wow. That is very interesting. See, that was fun. All right, there you go.

Yep. Very good. Now one of the things that we'd like to talk about on the show also is that, yes, we all wanna make, good money, we wanna have strong returns, but the whole point really of it is we wanna be able to build and live extraordinary lives. And so what's your advice for someone that's focused on doing that?

I don't live it. But I recommend it that work life balance is the most important thing, right? It's the famous line. No one ever said on their deathbed, I wish I had spent another day at the office, right? I, I'm doing my best to be done by 60, frankly. And leave the rat race behind at that point.

I'm very fortunate. I love my job. I love people I work with in New York City. So it's a good life. I would much prefer to spend every waking hour with my kids. 



And, cherish that time because my daughter's about to go to college. My, my son is soon to be 14, so I know there's a very finite window where they'll tolerate me.

And I wanna take advantage of that as much as I can before it closes. So always family first. 

Nice. Couldn't agree more. All right. And then last but not least, Joshua, if people wanna get in touch with you, how can they find you? 

Oh thank you. So the easiest way is probably on our website, which is MB for Mandel, van Barrett mb law firm.com.

My email address is j. Bachner, so J-B-A-U-C-H-N-E r@mblawfirm.com. And I'm as easy as, like I said, transparent. My cell phone, which is what I use for work, is 6 4 6 3 6 9 0 2 5 0, so 24 7. 

There you have it. All right. Very good. We'll be sure to include that in the show notes too, in case someone was driving, while they're listening in or something along those lines.

Thank you Joshua, very much for important information today. Really appreciate it. Absolutely. 

Thanks so much for having me. I've enjoyed our time. 

And for those of you that invested your time with us today, thank you. Please make sure to leave us some comments, let us know more that you want us to dig into, and in the meantime, be bold, be extraordinary, and keep moving forward.

Ready to Scale is brought to you by Blue Lake Capital, where we hunt down the best multifamily investment opportunities that we can find and invite investors to join in with us. We target class B value add multifamily properties across the Sunbelt. Our CEO Ellie Perlman, invest a substantial amount of capital into every deal.

This means our interests are aligned with yours. If you're an accredited investor looking to expand your portfolio and diversify sponsors, be sure to visit us@bluelakecapital.com. Blue Lake Capital, be bold, be extraordinary, and keep moving forward.