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The rules for the ADA about service dogs includes a section with zoos as the example. "service animals can be restricted from areas where the animals on display are the natural prey or natural predators of dogs, where the presence of a dog would be disruptive, causing the displayed animals to behave aggressively or become agitated."

I currently have a sign in on the door at my shop saying "There are cats in the store. No animals of any kind or service dogs permitted." because I have two cats in my store. We don't sell food or clothing and I live above the store so my cats tend to be in the store as much as they're upstairs. They're all up to date on their shots, they're healthy and they're perfectly friendly to people. They don't take well to other animals though. So as I understand it, because the dog would cause my cats to become agitated I am legally permitted to deny the dog entry to my store.

Is this correct or would it still be illegal to deny the dog?

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    Do the cats have something to do with the store or are they just your pets? – IllusiveBrian May 26 at 1:49
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    Service dogs won't react to the cats. It is not reasonable to exclude service animals merely because your personal animals are allowed in the store sometimes. They are not "display animals" as the text related to zoos uses the phrase. – Nij May 26 at 9:05
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    @JSalasukuinen Even if the owner keeps the dog under control the cats will still become agitated by it's presence. Pretty much all three of the above are present. The cats are the natural prey, the presence of the dog would cause a disruption, and the cats would become agitated. – Naki May 26 at 12:14
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    Yeah, no, they're not display animals. They're just animals that happen to be around - they're not there to be seen or because the business relies on them being there. – Nij May 26 at 19:13
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    Adding a text for service dogs in some form of 'call us and we will shu the cats away'. In that way both sides are happy. – Mark Johnson May 27 at 11:11
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According to This official FAQ page:

Q25. When can service animals be excluded?

A. The ADA does not require covered entities to modify policies, practices, or procedures if it would “fundamentally alter” the nature of the goods, services, programs, or activities provided to the public. Nor does it overrule legitimate safety requirements. If admitting service animals would fundamentally alter the nature of a service or program, service animals may be prohibited. In addition, if a particular service animal is out of control and the handler does not take effective action to control it, or if it is not housebroken, that animal may be excluded.

Q26. When might a service dog's presence fundamentally alter the nature of a service or program provided to the public?

A. In most settings, the presence of a service animal will not result in a fundamental alteration. However, there are some exceptions. For example, at a boarding school, service animals could be restricted from a specific area of a dormitory reserved specifically for students with allergies to dog dander. At a zoo, service animals can be restricted from areas where the animals on display are the natural prey or natural predators of dogs, where the presence of a dog would be disruptive, causing the displayed animals to behave aggressively or become agitated. They cannot be restricted from other areas of the zoo.

This seems to indicate that the zoo exception exists because it would “fundamentally alter” the nature of the zoo. I don't think that it would “fundamentally alter” the nature of a store with a mascot cat for the cat to be temporarily restricted to the upstairs living quarters or other area away from the customer areas where a service dog must be permitted to accompany a disabled customer.

In the FAQ document Service Animals under the ADA from the Great Lakes ADA center, on page 7, it is said that:

In General Covered entities must modify policies, practices, or procedures to permit the use of a service animal by an individual with a disability in any area open to the general public, unless the entity can demonstrate (1) that making such modifications would fundamentally alter the nature of the entity’s goods, services, facilities, privileges, advantages, or accommodations, (2) the safe operation of the entity would be jeopardized, or (3) such modifications would result in an undue financial or administrative burden.

28 C.F.R. §§ 35.130(b)(7), 35.136, 35.150 (a)(3), 35.164, 36.301(b), 36.302 (c)(1), and 36.303(a).

DOJ commentary suggests that Congress intended the ADA to allow service animals the “broadest feasible access” to public accommodations and public entities and to avoid unnecessarily separating service animals from from their owners. 28 C.F.R. pt. 36, App. C.

Covered entities that have blanket policies or practices that exclude service animals may be subjected to court orders or settlement agreements requiring modification of the relevant policy or practice.

On pages 8-9 of the same document it is said that:

It is the entity’s burden to allege and prove the existence of a fundamental alteration. The outcome of such defense will depend on the distinct facts of each case.

The document cites Lentini v. California Center for the Arts, Escondido, 370 F.3d 837 (9th Cir.2004), in which (according to the document) an attempt to exclude a service dog which had previously barked during musical concerts was not allowed, and a "fundamental alteration" defense was denied at both the distinct and circuit court levels.

The Great Lakes document also cited Johnson v. Gambrinus Company/Spoetzel Brewery, 116 F.3d 1052 (5th Cir. 1997), in which a brewery attempted to exclude a service dog for a tour open to the public, Citing FDA regulations in support of a "no animals" policy, and argued that to admit animals would constitute a "fundamental change". The Fifth Circuit ruled that the brewery must modify its policy, and awarded damages under a parallel state law.

This seems to confirm that the "zoo exception" is limited to a situation where the animals on display are a "fundamental" part of the operation of the facility, as is surely the case with a zoo, but would not be the case in a store as described in the question.

I have not found any case law directly on point. If the issue has been in court, it probably has not been taken to the appeals court level where opinions are published.

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    There are things such as "Cat Cafes" that are specifically marketed and designed as a Cafe (of some sort) which features cats for people to pet and interact with. This site for one asserts service animals are to be left outside in someone's care. I have no idea if they or any other cat cafe have been taken to court on the matter, but otherwise it would seem to open up the possibility of OP's store being a valid exception, if properly done. – zibadawa timmy May 26 at 23:03
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    @zibadawa timmy In that case there is a separate room where one does nothing but interact with cats, for a separate charge. To remove the cats from that room would surely be a "fundamental change" as the cats are the whole reason for being there. A store with a 'store cat" or "mascot" does not seem comparable. But if OP adopts a no-service animal policy and is challenged, a court will decide. There can be financial penalties if the decision goes against such a policy, depending on the state and how the challenge is brought. – David Siegel May 27 at 1:42

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