Equal Rights Center v. Archstone: Fourth Circuit says “No” to ADA and FHAA Indemnity Claims against Architects

On April 19^th, 2010 the Fourth Circuit United States Court of Appeals held that an owner or developer cannot seek indemnity from an architect for damages or liability for accessibility violations under the Fair Housing Act or the Americans with Disabilities Act.

In 2004, the Equal Rights Center and other disability advocates filed suit against Archstone, the developer and owner of a project, for failure to design and construct various apartment complexes in compliance with the Fair Housing Act and Americans with Disabilities Act, federal laws that prohibit housing discrimination against persons with disabilities. Eventually Archstone settled with the Equal Rights Center and agreed to retrofit the properties to make them accessible and pay $1.4 million in damages, attorney fees, and expenses to the plaintiffs.

After resolving the dispute with the Equal Rights plaintiffs, Archstone filed a cross claim against Niles Bolton, the architect for one or more of the apartment complexes, seeking indemnity under several theories —  express indemnity, implied indemnity, breach of contract, and professional negligence. Archstone sought to recover all damages and fees paid to the Equal Rights Center for the settlement, to recover the costs of retrofitting the properties, and to be indemnified for future costs that will be incurred in order to modify the remainder of the properties so that they are compliant.

The district court granted summary judgment to Niles Bolton based on ‘obstacle preemption’ which applies “where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress”. Archstone claimed that it was only seeking partial indemnification, for the properties directly related to Niles Bolton, and that indemnification would not prevent compliance with the federal laws. The Fourth Circuit rejected Archstone’s arguments and held that obstacle preemption did exist, because the intent and purposes of the federal laws were to ensure compliance with accessibility laws, and that allowing indemnification would undermine the incentive for owners and developers to verify that their properties are accessible and in accordance with federal statutes.

Before the district court, Archstone sought leave to amend their complaint to include a contribution claim, and therefore was not seeking full indemnification, and not shifting the blame to insulate itself from liability. The Fourth Circuit upheld the lower court’s decision to deny the amendment because it would ‘prejudice’ Niles Bolton, in that it would fundamentally change the nature of the litigation.

While indemnity claims have been explicitly rejected by the Fourth Circuit, the viability of contribution claims in ADA and FHA cases remains open.

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