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Carton v. Carroll Ventures, Inc.

United States District Court, D. New Mexico

July 10, 2017

ALYSSA CARTON, Plaintiff,
v.
CARROLL VENTURES, INC., Defendant.

          PROPOSED FINDINGS OF FACT AND RECOMMENDED DISPOSITION

         THIS MATTER came before me on Chief United States District Judge M. Christina Armijo's Order of Reference referring this matter to me to conduct hearings, if warranted, including evidentiary hearings, and to perform any legal analysis required to recommend to the Court “an ultimate ruling on this matter in order to determine whether the actions [filed by Plaintiff] are frivolous or malicious.” See Doc. 20. The Court has heard the testimony of Plaintiff and the statements of her counsel, the arguments of attorneys for some of the Defendants in these actions joined for this purpose, and has given due consideration to the exhibits submitted in this earliest-filed case and the relevant law. The Court will recommend that Chief Judge Armijo find all of Ms. Carton's Complaints to be malicious and that she dismiss them with prejudice.

         Background

         Plaintiff Alyssa Carton suffers from spina bifida and requires the use of a wheelchair. Her attorney, Sharon Pomeranz, filed 99 cases on her behalf earlier this year. The Complaints allege that each Defendant owns and/or operates a place of public accommodation (“PPA”) which violates the Americans with Disabilities Act (“ADA”), 42 U.S.C. § 12181 et seq., and related regulations. The Complaints are identical except for the names of the Defendants, the addresses of Defendants' PPAs, and the specific alleged ADA violations at each PPA.

         Ms. Carton asserts claims in two capacities. The first capacity alleged is as a customer of each Defendant, stating she has “personally visited each Defendant's PPA, but was denied full and equal access and full and equal enjoyment of the facilities, services, goods and amenities.” Complaint ¶¶ 8-9 at 2-3. The second is as a “tester.” Complaint ¶ 11 at 3 (“Completely independent of Plaintiff's personal desire to access the PPA, Plaintiff also acted as a tester for purposes of discovering, encountering, and engaging discrimination against persons with disabilities at [each] Defendant's PPA.”).

         Plaintiff is proceeding in forma pauperis (“IFP”) in all but two of those cases.[1]The statute governing proceedings in forma pauperis states: “Notwithstanding any filing fee, or any portion thereof, that may have been paid, the court shall dismiss the case at any time if the court determines that . . . the action . . . is frivolous or malicious.” 28 U.S.C. § 1915(e)(2). Therefore, on May 1, 2017, this Court held a hearing to determine whether Plaintiff's cases are frivolous or malicious. Contrary to the Court's Order setting the hearing, Ms. Carton did not attend. However, Attorney Pomeranz did answer questions from the Court and from defense counsel. The Court held a second hearing on May 11, 2017, at which Ms. Carton and Attorney Pomeranz both answered questions from the Court and from some of the defense counsel.

         Legal Standard

         Pursuant to the statute governing in forma pauperis status, “the court shall dismiss the case [proceeding IFP] at any time if the court determines that . . . the action . . . is frivolous or malicious.” 28 U.S.C. § 1915(e)(2)(B). “A complaint is frivolous if ‘it lacks an arguable basis either in law or in fact.'” Fogle v. Infante, 595 F. App'x 807, 809 (10th Cir. 2014) (quoting Neitzke v. Williams, 490 U.S. 319, 325 (1989)).

Dismissal as malicious is appropriate if the court determines that the action was filed in “an attempt to vex, injure or harass the defendant.” Deutsch v. United States, 67 F.3d 1080, 1086 (3d Cir.1995); see Lindell v. McCallum, 352 F.3d 1107, 1109 (7th Cir. 2003) (although “‘malicious' . . . is sometimes treated as a synonym for ‘frivolous, ' . . . [it] is more usefully construed as intended to harass”). To make this determination, the court “must . . . engage in a subjective inquiry into the litigant's motivations at the time of the filing of the lawsuit.” Deutsch, 67 F.3d at 1086. An action may be adjudged malicious if it “is plainly abusive of the judicial process.” Abdul-Akbar v. Dep't of Corr., 910 F.Supp. 986, 999 (D. Del. 1995), aff'd, 111 F.3d 125 (3d Cir. 1997) (unpublished). And “repetitious litigation of virtually identical causes of action” supports a finding of malice. McWilliams v. Colorado, 121 F.3d 573, 574 (10th Cir. 1997) (internal quotation marks omitted).

Rosiere v. United States, 673 F. App'x 834 (10th Cir. 2016); see also Black's Law Dictionary 1101 (10th ed. 2014) (“Malicious” means “substantially certain to cause injury” or “without just cause or excuse”); Hernandez v. Earney, 558 F.Supp. 1256 (W.D. Tex. 1983) (complaint that demonstrated that purpose of action was extortion was “malicious”); Green v. Jenkins, 80 F.R.D. 686 (W.D. Mo. 1978) (actions initiated in bad faith for purposes of harassment found malicious); Spencer v. Rhodes, 656 F.Supp. 458 (E.D. N.C. 1987) (in determining whether a pro se complaint should be dismissed as malicious, judge may consider not only printed words, but “circumstances and history that surround the filing, the tone of the allegations, and whether probative facts vital to life of lawsuit have been alleged.”).

         Discussion

         I. An Introduction to Plaintiff, her Attorney and the Litigation Support Company

         Although not disclosed in her Complaints or IFP Affidavit, Plaintiff Alyssa Carton filed these cases with the assistance of not only her attorney, Sharon Pomeranz, but also a litigation funding entity. Just how and why these actions were filed was explored during the two hearings held in 2017 on May 1 (1st Hearing) and May 11 (2nd Hearing).

         A. Ms. Carton's Version of Events

         Interested in advocacy, Ms. Carton wanted to find things to do to benefit her community of people with disabilities, and so in the fall of 2016, she responded to an ad that had been posted on Craigslist. Transcript - 2nd Hrg at 12:02-17 (Doc. 35 in 17cv00037). Ms. Carton called the phone number listed in the ad and spoke to someone who indicated that “they were there and available to help” and to “provide litigation support.” Transcript - 2nd Hrg at 30:05-07. Ms. Carton referred to this group as “the Litigation Management Company.” Transcript - 2nd Hrg at 36:06-07.[2] According to Ms. Carton, the group “basically introduced me to Ms. Pomeranz.” Transcript - 2nd Hrg at 30:08-16, 36:08-10. Ms. Carton testified that her “assumption is they all worked together.” Transcript - 2nd Hrg at 37:02.

         The organization that purportedly placed the ad on Craigslist and entered into a litigation funding agreement with Ms. Carton is an entity known as Litigation Management and Financial Services, LLC (“LMFS”). It appears, however, that LMFS is somehow affiliated with another organization, Advocates for Individuals with Disabilities Foundation (“AID”). Specifically, Ms. Carton received both the “Litigation Funding Agreement” that she executed and the IFP application form that she filled out in an email from Emily@aid.org sent November 1, 2016. Doc. 34 at 4-14 (“Attached is the paperwork that I will need filled out for us to begin filing cases.”). Apparently, the same individual later re-sent the agreement to Ms. Carton on April 21, 2017, but this time with a return e-mail address of Emily@litmanco.com. Doc. 34 at 3 (“Here is that agreement again for your records:] Craig just got out of his meeting so we will call you in just a second.”). The Litigation Funding Agreement between LMFS and Ms. Carton is attached as Exhibit A to this PF&RD.

         B. Attorney Pomeranz' Version of Events

         At the first hearing, Attorney Pomeranz implied that Ms. Carton was not referred to her by any outside entity such as a litigation funding group:

THE COURT: Are you, as an officer of the Court, indicating to me that Ms. Carton came to you on her own to file these lawsuits?
MS. SHARON POMERANZ: Ms. Carton contacted me, yes.
THE COURT: On her own?
MS. SHARON POMERANZ: She contacted me on her own.
THE COURT: Did she say how she had gotten your name?
MS. SHARON POMERANZ: She said she got my name through Google.

Transcript - 1st Hrg at 38:19-25, 39:01-05 (emphasis added). Attorney Pomeranz declared that it was after meeting with Ms. Carton that they then “contacted a group that specializes in this work” named “Litigation Management Company.” Transcript - 1st Hrg at 39:06-18 (emphasis added). She flatly denied that this “non-profit” group in Arizona is the controversial “AID” organization that filed over 1, 000 ADA cases in Arizona last year. Transcript - 1st Hrg at 39:10-18 (“They are not AID.”). In fact, the company's name is Litigation Management and Financial Services, LLC (“LMFS”).

         Attorney Pomeranz expressly disclaimed a connection with any ADA advocacy group at the first hearing:

I don't work in the ADA industry. I have never filed ADA cases before. I was contacted by one client. It seemed like she had very legitimate cases. I agreed to represent her. I'm not in the industry. I do family law, Judge. . . . I have never done ADA work before, and I'm not affiliated with any groups or trying to do impact litigation.

Transcript - 1st Hrg at 47:05-09, 57:10-12 (emphasis added). She further claimed that she ‘had no basis to know if [Ms. Carton] was working with an outside group or not.” Transcript - 1st Hrg at 54:13-20. Attorney Pomeranz insisted:

I have been completely honest with the Court about my representation of her. It was an agreement between she and I (sic) to enforce the ADA, and that's the extent of it. There's no cottage industry. There's no outside influence. And, you know, this idea that, you know, there's some industry springing up all over the country has nothing to do with me or Ms. Carton. That may or may not be true, and there may be groups out there planning to enforce the ADA. But that's outside the scope of this proceeding.

Transcript - 1st Hrg at 56:04-16 (emphasis added).

         At the second hearing, however, Attorney Pomeranz did an “about face” and revealed that as to the ADA cases brought here, she indeed had a confidential “litigation funding agreement” with a previously undisclosed entity - LMFS. Attorney Pomeranz indicated that she first connected with LMFS during the summer of 2016 when she “answered an ad for civil rights attorneys on Indeed.” Transcript - 2nd Hrg at 101:09-16. The Court notes that “Indeed.com” is a website which touts itself as “the world's #1 job site.” https://www.indeed.com/about (last visited July 5, 2017). Attorney Pomeranz said she answered LMFS's “ad prior to meeting Ms. Carton . . . but [she] didn't sign [her] agreements with them until after meeting Ms. Carton.” Transcript - 2nd Hrg at 143:19-22. Attorney Pomeranz stated that LMFS was responsible for “paying the filing fees, and they were providing staff, and they paid her the money to reimburse her for any litigation expenses.” Transcript - 2nd Hrg at 80:10-20. Among the resources provided by LMFS was Attorney Pomeranz' new e-mail address - Sharon@newmexicoada.com - and website proclaiming, as of the date of the first hearing, “extensive knowledge” and “experience of over 1, 000 ADA Title III cases.” Transcript - 1st Hrg at 57:19-22 and 2ndHrg at 70:01-07; http://newmexicoada.com (viewed May 1, 2017). It should be noted that those representations have since been removed from the website.

         II. The Three Contractual Agreements

         A. “Litigation Funding Agreement” Between Ms. Carton and LMFS

         The Litigation Funding Agreement entered into November 1, 2016, between Ms. Carton and LMFS, provides in relevant part:

This Agreement is limited to providing funding to [Ms. Carton] and to [Ms. Carton's] attorney for legal services. . . . the Parties have agreed that [LMFS] shall bear the costs so that [Ms. Carton] may pursue the Claims.
. . . .
[LMFS] shall pay the costs of pursuing the Claims including costs of legal advice and representation, court fees . . . .
. . . .
[LMFS] shall pay to [Ms. Carton] $50.00 for each of [Ms. Carton's claims that result in a filed complaint initiating a civil action.
. . . .
[Ms. Carton] shall be entitled to all remaining Proceeds [of any successful claims].
. . . .
[Ms. Carton] affirms that it has had full and lengthy opportunity to discuss with [LMFS] the options for and likelihood of settlement of Claims. . . . [Ms. Carton] therefore gives [LMFS] full and complete authorization to negotiate and accept any settlements of Claim.
[Ms. Carton] agrees to cooperate and consent to any settlement deemed reasonably [sic] by [LMFS].

Attachment A - Notice and Order, Doc. 37 at Exhibit 1, filed May 17, 2017 (emphasis added).

         B. “Fee Agreement” Between Ms. Carton and Attorney Pomeranz

         A little over two weeks later, on November 17, 2016, Ms. Carton also entered into an agreement for attorney representation with Attorney Pomeranz, which is Attachment B to this PF&RD. That entitled “FEE AGREEMENT” between Ms. Carton and her attorney provides in pertinent part as follows:

Attorney [Pomeranz] agrees to abide by Client's [Ms. Carton] decisions regarding the objectives of the representation, and shall consult with Client [Ms. Carton] as to the means by which they are pursued. . . .
The fee of Attorney for representing Client is $100.00 per case filed on behalf of Client. Client authorizes payment to Attorney by third-party litigation management support company ("LMSC"). . . .
Costs and expenses incurred by Attorney in its representation of Client are covered by the attorney unless otherwise agreed upon with Client. Client agrees that LMSC may cover some or all of attorney's costs and expenses. Costs and expenses include, but are not limited to, fees for expert witnesses, filing fees, fees for service of process, deposition costs, travel expenses, investigators' fees and expenses, copying charges, long distance telephone charges, messenger service fees, and Westlaw/ Lexis Nexis legal research charges.. . . .
Attorney may retain support staff and support companies including the Company as a third-party LMSC. The retention of any LMSC shall not change the fee owed to Attorney by Client or the duties owed to Client by Attorney.
LMSC is anticipated to provide attorney with litigation support including, but not limited to, initial drafting of legal filings, managing correspondence from opposing counsel/parties, and facilitating settlement discussions as directed by Attorney and with final authorization by Client. Attorney will provide LMSC authority to present settlement offers to opposing counsel/parties.
Additional Compensation and Client Waiver of Monetary Recovery In the event that Client's case(s) result in a judicial award or settlement payment ("Monetary Recovery"), Attorney shall receive an amount equal to one-hundred percent (100%) of the Monetary Recovery if effected by settlement before or after service of suit, with or without trial or if said monetary recovery is an award of the Court.

Attachment B - Doc. 38, filed May 19, 2017 (emphasis added).

         C. “Litigation Management Agreement” Between Pomeranz and LMFS

         The undated, executed Agreement between Attorney Pomeranz and Alex Callan, an agent for LMFS, for the provision of “management services to Attorney only in ADA Actions filed by Attorney on behalf of Testers” states in part:

[Pomeranz] is retaining [LMFS] to provide all litigation support services within the broadest scope of ethical rules governing the practice of law. The litigation support includes [LMFS] providing receptionist, telephone, e-mail, paralegal and consulting services by [LMFS] attorneys knowledgeable and experienced in ADA enforcement actions. . . . [Pomeranz] directs [LMFS] to provide services described in this Agreement. . . . [LMFS] shall assign paralegals, staff and personnel to work for [Pomeranz]. . . .
[LMFS], under the supervision, authority and consent of [Pomeranz], shall manage all aspects of ADA civil actions. . . .
[LMFS] shall . . . Contact [Carton] directly for the purpose of preparing and submitting Motion to Proceed in Forma Pauperis pursuant to 28 U.S.C. § 1915 and to complete the Affidavit . . . . prepare a draft Verified Complaint [and] file the same with the U.S. District Court; and Pay the filing fee unless waived.

Attachment C - Notice and Order, Doc. 37 at Exhibit 2, filed May 17, 2017 (emphasis added).

         III. Identification of ADA Violations

         There appear to be inconsistencies between the allegations in the Complaints and Ms. Carton's testimony regarding the identification of alleged ADA violations. Among them, the filed Complaints allege that Ms. Carton personally visited Defendants' PPAs and encountered barriers to access at each PPA. See Complaint ¶ 8 (“Plaintiff personally visited Defendant's PPA, but was denied full and equal access”), ¶ 9 (Plaintiff “visited Defendant's PPA”), ¶ 11 (Plaintiff “visited the Premises, encountered barriers to access”), ¶¶ 30-31 (“Plaintiff visited Defendant's PPA. . . . Plaintiff was prevented from the full and equal enjoyment” of Defendant's PPA).

         However, Ms. Carton testified that she did not enter all of the PPAs: “I entered most of them. I think there is several that we - that were just parking lot situations. . . so most of them, yes, I would say I was there in the building. But there's several that we just filed for the parking lot.” Transcript - 2nd Hrg at 23:01-06. Ms. Carton also testified that for some of the businesses, she did not go into the building and did not know whether there were any actual barriers to entering the building. See Transcript - 2nd Hrg at 126:02-11. In some cases, she testified that there were no barriers to her entering a PPA. See Transcript - 2nd Hrg at 55:05-08 (nothing ever kept Plaintiff from entering Buffett's Candies) and 59:11-14 (Plaintiff doesn't recall experiencing any barriers at Office Depot).

         The Complaints also allege that “Plaintiff in her individual capacity and as a tester, visited the Premises, encountered barriers to access at the PPA, engaged and tested those barriers.” Complaint ¶ 11. “Engaged and tested” suggests that Ms. Carton encountered and measured alleged barriers, such as the height of soap and towel dispensers and aisle width. However, Ms. Carton testified that generally her driver would visit the PPA, take the measurements, and then later take Ms. Carton to the PPA to “observe” violations and sometimes photograph her at the location to document her physical presence at the location. See Transcript - 2nd Hrg at 24:02-05 (Ms. Carton “took a few [measurements], but not a lot”), 50:13-53:10 (Ms. Carton doesn't think she was at Office Depot when driver took the measurements, but didn't remember, “there were days where [the driver would] go and measure things first, and then I'd go back . . . [to] make sure that the violations were there”).

         IV. Preparation of the Complaints

         Attorney Pomeranz claims that she was the individual who drafted an ADA complaint that was then used as a “boilerplate for the rest.” Transcript - 1st Hrg at 34:23-24; Transcript - 2nd Hrg at 70:19-22. Indeed, she says that she “started drafting the complaint[s] before [Ms. Carton] had experienced any barriers at any business[es] in Albuquerque.” Transcript - 2nd Hrg at 76:10-13 (emphasis added). Attorney Pomeranz explained:

We were preparing for litigation for the - well, she had already told me, when I met her at her house, all the barriers she faced every day. . . . We just drafted a general ADA Title III complaint. We didn't have, as you say, a Carroll Ventures yet because [Ms. Carton] hadn't visited any - she hadn't experienced barriers at any particular defendant.

Transcript - 2nd Hrg at 76:22-25 (emphasis added). Yet Attorney Pomeranz also maintained that she “started drafting the complaint[s] in August [2016], ” which was long before she knew of Ms. Carton and long before her client experienced any alleged barriers to services. Transcript - 2nd Hrg at 77:05-09. Ms. Pomeranz also claims that she gave this generic ADA complaint to LMFS and contends that this explains the virtually identical complaints filed in the Districts of Nevada and Colorado by attorneys with similar “litigation funding agreements” with LMFS. Transcript - 2nd Hrg at 70:23-25 -71:01-19, and 72:11-14 (“we developed one template, and we used it for all of the rest, and that that is the same model they must have been using in their other litigation support efforts.”).

         The Court finds Attorney Pomeranz' claim of composing the Complaints at issue to be unconvincing for several reasons. As she acknowledges, she had virtually no experience in this area of litigation. She further contends that she began drafting the complaint in August 2016, but says she had no contractual relationship with LMFS until after she met with Ms. Carton in late 2016. Moreover, it was the expert in this area - LMFS - that contractually had undertaken the obligation to draft any ADA complaints that Attorney Pomeranz would file. Finally, despite her assertion that she had drafted the allegations of all the complaints, Attorney Pomeranz stated that “this allegation that she's a tester is another reason that I feel uncomfortable continuing with my representation of her.” Transcript - 1st Hrg at 14:16-28. These observations seem inconsistent with the attorney's professed involvement in the drafting of the complaints.

         It also appears that Attorney Pomeranz made little effort to ensure that the factual contentions in the Complaints had evidentiary support. When asked at the first hearing what investigation she made into the merits of the case pursuant to Rule 11, Attorney Pomeranz responded: “I went with [Ms. Carton] to visit most of those establishments. I reviewed all of the ADA regulations and saw that the factual allegations and the photos we had showed lack of compliance; some minor, some major. But they all fell within the regulations for, per se, violations of the ADA.” Transcript - 1st Hrg at 14:23-15:03 (emphasis added). But when asked if Attorney Pomeranz accompanied her on the visits, Ms. Carton responded: “I think there might have been one or two. I don't really remember. I remember being on the phone with her, as well, so it might have been that we were on the phone. But, yeah, that's all I remember about that.” Transcript - 2nd Hrg at 24:06-12 (emphasis added). Attorney Pomeranz maintained that prior to ...


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