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Developer Can’t Recover from Architect for FHA/ADA Violation

Commercial Litigation Update Charles E. Harper

In the finger-pointing game between owners and their architects over the Fair Housing Act ("FHA") or the Americans with Disabilities Act ("ADA") design and construction violations, the Fourth Circuit Court of Appeals recently put the responsibility more squarely in the lap of the owners. In Equal Rights Center v. Niles Bolton, Case No. 09-1453 (4th Cir. April 19, 2010), the Fourth Circuit ruled that an owner who has violated the design and construct provisions of the FHA or ADA cannot seek contribution or indemnity from its architect for the costs to remedy the violations or damages arising from the violations.

Archstone, an owner and developer of multi-family housing projects throughout the United States, hired architect Niles Bolton to design a number of apartment buildings that the Equal Rights Center and several other disability advocacy groups claimed violated the provisions of the FHA and ADA requiring multi-family buildings to be designed and constructed to be accessible to persons with disabilities. The advocacy groups brought their design and construct allegations against both Archstone and Niles Bolton. Archstone settled the case by entering into a consent decree, under which it would pay $1.4 million in damages to the advocacy group and retrofit the apartment buildings for a cost of $2.5 million. Niles Bolton also entered into a consent decree which did not include any admission of liability.

After the settlement, Archstone filed a cross-claim against its architect Niles Bolton to recover its damages and the remediation costs under theories of express and implied indemnification, breach of contract and professional negligence. Archstone argued that Niles Bolton "bears a substantially greater share of responsibility for any failure of the properties to be designed according the requirements of the FHA and the ADA, given Niles Bolton's superior knowledge, skill and involvement in the design of the properties."

The trial court, finding that Archstone's breach of contract and professional negligence claims were merely reiterations of its indemnification request, entered summary judgment for Niles Bolton and held that Archstone's state law claims were preempted by the FHA and the ADA. The Fourth Circuit affirmed, explaining that obstacle preemption applied to Archstone's claims because those claims "interfere with the methods by which the federal statute was design to reach its goal."

Quoting its opinion in Walker v. Crigler, 976 F.2d 900, 904 (4th Cir. 1992), the court explained that "compliance with the ADA and FHA is 'non-delegable' in that an owner cannot 'insulate himself from liability for…discrimination' in regard to living premises owned by him and managed for his benefit merely by relinquishing responsibility to another party." Walker is a rental discrimination case, and not a design and construction case. Yet, the Fourth Circuit made it clear that even in the design and construct setting an owner cannot contract away its responsibility to comply with the FHA or the ADA, writing:

Allowing an owner to completely insulate itself from liability for an ADA or FHA violation through contract diminishes its incentive to ensure compliance with discrimination laws. If a developer of apartment housing, who concededly has a non-delegable duty to comply with the ADA and FHA, can be indemnified under state law for its ADA and FHA violations, then the developer will not be accountable for discriminatory practices in building apartment housing. Such a result is antithetical to the purposes of the FHA and ADA.

This ruling underscores the importance for developers to make sure that their architects and contractors understand and comply with the FHA and the ADA when designing and building multi-family dwellings or places of public accommodation. Developers should not only be aware of the requirements but must also take steps to ensure that their architects, engineers and contractors are complying with the requirements of FHA and ADA, and the related regulations and specifications.

If you have questions about this decision, questions about FHA/ADA design and construction requirements or other related issues, please contact Charles Harper at (312) 715-5076 / charles.harper@quarles.com or your Quarles & Brady attorney.