Architect Cannot Be Held Liable for Failure to Design in Accordance with Federal Accessibility Standards Because Owner Had Non-Delegable Duty

The Illinois Appellate Court recently affirmed a circuit court’s ruling that the Chicago Housing Authority (“CHA”) cannot sue an architectural firm, DeStefano and Partners, Ltd. (“DeStefano”), for breach of contract based on a failure to design handicapped-accessible housing in accordance with federal laws because the CHA’s duty as an owner to provide accessible housing under federal law was non-delegable — even though the architect owed the CHA a contractual obligation to  provide a design that complied with federal disability laws.

In The Chicago Housing Authority v. DeStefano and Partners, Ltd., http://www.illinoiscourts.gov/Opinions/AppellateCourt/2015/1stDistrict/1142870.pdf, the CHA argued that the lower court erred in dismissing its state law breach of contract claim which the CHA brought to recover from DeStefano substantial costs to bring a rehabilitation project into compliance with federal fair housing and accessibility laws as a result of DeStefano’s  failure to perform under the terms of the parties’ contract.  Such contentions shaped an issue yet to be considered in the Illinois Appellate Court or the Illinois Supreme Court.  This issue was: whether federal disability laws preempt state breach of contract claims based on a party’s failure to meet accessibility standards required under federal laws.

In July 2000, the CHA hired DeStefano for architectural and design services for a portion of the renovation and construction project that the CHA undertook to comply with certain accessibility requirements for its residential units imposed both by federal law and by a transformation plan that the CHA had agreed to with the U.S. Department of Housing and Urban Development (“HUD”).

In August 2003, during construction, HUD notified the CHA of its plans to conduct a Section 504 and Americans with Disabilities Act (“ADA”) compliance review.  The review found “a range of deficiencies both major and minor” in regards to the accessibility for people with disabilities.  This review took place a year before completion of construction in 2004.  HUD specifically told the CHA that its sites did not meet the ADA requirements before DeStefano was done working.  Eventually, the CHA and HUD entered a “negotiated voluntary compliance agreement” in which the CHA agreed to remediate the accessibility deficiencies.

After being formally put on notice by HUD that the DeStefano units did not meet the federal accessibility standards, the CHA spent over $4.3 million retrofitting apartments in seven buildings it contracted with DeStefano to design.  The CHA sought to recoup its expenditures through a suit against DeStefano alleging breach of contract.  The trial court dismissed the claims.

On appeal, the CHA contended that its state law breach of contract claims should be permitted because the liability arose from the voluntary compliance agreement and not a violation of federal accessibility laws per se.  The Illinois Appellate Court rejected this contention and relied heavily on a federal court decision in Equal Rights Center v. Niles Bolton Associates, 602 F.3d 597 (4th Cir. 2010) in doing so.  Specifically, the court reasoned that a developer or owner could not contractually delegate its duty to comply with federal accessibility standards.  By “[a]llowing CHA to seek indemnification from defendant effectively would insulate it from liability” and “[s]uch an outcome is contrary to the goal of the ADA of preventing and remedying discrimination against disabled individuals.  Because allowing the state-law claim would interfere with Congress’ goal, CHA’s breach of contract claim is preempted under the obstacle preemption doctrine.”