Exhibitors Subject
The Cost of ADA
Class Action Litigation
by Steven John Fellman
and Adam Smallow
NATO Washington Counsel
In 1999, a group of class action plaintiffs
filed a lawsuit against Kmart alleging that Kmart stores
were not accessible
to persons with disabilities who use either wheelchairs
or scooters. Seven years later, in July 2006, a settlement
was finally approved by the court. Although the litigation
was extended – because Kmart went through a Chapter
11 proceeding after suit was filed and a preliminary ruling
of the trial court had been appealed to the United States
Court of Appeals – a national settlement was ultimately
negotiated before a trial was held.
The plaintiffs’ suit
was filed not only under the Americans With Disabilities
Act (ADA), but also under the
disability rights laws of the states in which members of
a class were domiciled. Plaintiffs’ attorneys contended
that they represented a national class of disabled persons,
and they were entitled to injunctive relief and attorneys
fees under the federal ADA statute as well as actual damages
for the individual members of the class under the various
state statutes.
After lengthy negotiations, Kmart and the
plaintiffs reached a settlement, which was submitted to
the court for preliminary
approval, submitted to various disability rights groups
for review, and then ultimately approved by the court
as a final settlement. Under the terms of the settlement,
Kmart agreed to the following:
Notice to the Class. Through notices – in newspapers
and magazines such as Reader’s Digest and People,
in Kmart stores, on the websites of disability rights groups
and Kmart, and circulated via other means – the terms
of the proposed settlement were provided to members of
the national class. An expert on consumer notices and class
action matters was retained to evaluate the system of providing
notice and concluded that over 75 percent of the class
members received notice of the settlement. The cost of
providing notice was estimated to be $1 million.
Store Renovation. Kmart agreed to bring
all of its stores into compliance with the ADA within
a 7.5-year period.
The proposed order contains specific requirements with
regard to aisle width, accessibility of merchandise, checkout
counters, employee training and customer service facilities.
The cost of renovations was not reported in the court’s
decision.
$13 Million Damage
Fund. Kmart agreed
to establish a fund of $8 million in cash and $5 million
in store credits to
be used by a subclass of disabled customers in states where
there is a damage provision under the state ADA. Class
members will be entitled to participate in the damage fund
by showing that they visited Kmart stores, which were not
fully accessible. If any of the $13 million allocated is
not claimed by members of this plaintiff’s subclass,
the remaining amount will be donated to disability rights
causes.
Attorney Fees. Kmart will pay plaintiff’s attorneys
fees of $3.25 million as of the date of the final approval
of the settlement and further agreed to pay reasonable
additional plaintiff’s counsel fees for administering
the settlement.
Cost of Litigation. In addition to the Kmart costs described
above, the company has incurred significant legal fees
for its own counsel during this 7-year litigation. The
company has also absorbed major administration costs in
litigation support efforts while the suit was pending for
some seven years. Finally, the company has to retrain staff
on settlement administration procedures and settlement
compliance requirements.
Conclusion. The Kmart settlement demonstrates what is
involved in a national class action ADA suit. Although
Kmart certainly contended that its stores met ADA requirements,
the terms of this settlement do not appear to be unusually
harsh for a case of this nature.
All operators of public facilities
such as motion picture theatres are subject to this type
of national class action
litigation. In order for plaintiffs to move forward in
a class action, they must convince the court that under
Rule 23 of the Federal Rules of Civil Procedure, the court
has the proper basis for certifying a national class and
that plaintiffs’ counsel has the experience necessary
to represent that class. Although there has been significant
ADA litigation in the motion picture theatre industry,
no plaintiffs’ representatives have yet succeeded
to the point where a court has certified a national class
in an action against cinema owners.
The Kmart case is a lesson showing
the serious nature of private ADA enforcement and the
necessity for all operators
of public facilities to take affirmative action to make
sure their facilities comply with ADA requirements. 
