Bad News for ADA Plaintiffs

In 2015, California tried to slow down the runaway freight train of ADA “architectural barrier” lawsuits by professional plaintiffs. Under amendments to the California Civil Code, professional plaintiffs and their law firms now had to identify themselves in their court pleadings as “high frequency litigants”, they had to pay an extra $1,000 filing fee, and they had to make specific disclosures to the targets of their lawsuits that they would not otherwise have to make.

The professional plaintiffs and their law firms have been avoiding this problem by filing their lawsuits in federal courts, where they would not have to “put up with” the procedural and financial burdens of the 2015 California law.  The federal courts would exercise their discretion to consider and impose the $4,000 statutory penalty provided by state law, which would otherwise not be available under federal law – all while avoiding the procedural burdens of the state law imposes on “high frequency litigants.”

In a pending case we have with a professional plaintiff and his law firm in the US District Court, Central District (Riverside, San Bernardino, Los Angeles, Ventura, Santa Barbara, and San Luis Obispo Counties), the District Court saw it for what it was: an attempt to skirt the more rigorous state law requirements for “high frequency litigants”. So, the court declined to exercise “supplemental jurisdiction”, effectively taking $4,000 off the table. The court cut to the chase: plaintiffs were using the federal court to avoid the burdens of state law, and the court wouldn’t stand for it.

In consideration of the Court’s decision, we are actively considering how to utilize this decision to decline supplemental jurisdiction to the advantage of our current and future clients throughout California.

Limited Liability Company vs. S Corporation

Limited Liability Company (LLC)

S. Corporation

Suitable For

Smaller businesses with few shareholders.

Small businesses with less than 100 shareholders, consisting of US citizens and/or resident aliens for income tax purposes.

Management Level

Only members and managing members of the company.

Officers, broad of directors of the company.


Single Taxation – Profit or loss are passed directly to members (top bracket 39.6%). Can elect to be taxed as a corporation.

Single taxation (Profit or loss are passed directly to shareholders.



Shareholders are owners of an S-Corp.

Choice of taxation structure given

Yes, it is Single Member LLC – SMLLC or partnership for multiple members by default, and S or C Corporation (by Election).

No, An S Corporation chooses to be taxed under Subchapter S of the IRC.

Paperwork and Records

Not much paperwork is required. Annual state reports are required to be filed with the appropriate fee; can file by mail but most states allow or mandate online filing

Formal broad and shareholder meetings and minutes are required. Annual state reports are also required to be filed with the appropriate fee; can file by mail but most states allow or mandate online filing

Self-employment tax

Assessed on business profits of $400 or more


Salary for owners or shareholders

No; Single Member LLCs and LLC-partnerships members are not employees thus salaries must not be paid themselves; they are allowed withdrawals

Yes, must be paid to shareholders owning more than 2% and provides service to their business; not optional mandatory.


Withdrawal throughout the business operating year; allowed provided the distributions do not prevent the company to pay its current operating obligations

Allowed throughout the business operating year, allowed after salaries are paid to the 2% or more owner-shareholders