Originally posted Friday, 18 January 2013

Written by John Sier

Parties to construction projects spend a fair amount of time reviewing contracts to make sure that the rights, duties, and obligations are understood by the parties, especially the indemnification obligations. However, federal and state laws can nullify contract provisions that conflict with statutory requirements—particularly specific federal laws that have the ability to pre-empt state law claims. The Supreme Court of Nevada recently held that the Americans with Disabilities Act of 1990 (ADA) precludes an Owner from pursuing indemnification from the designer on a project that was found to violate the ADA. Rolf Jensen and Associates, Inc. v. Eighth Judicial District Court of the State of Nevada, 282 P.3d 743 (Nev. 2012).

The Owner hired the designer specifically to consult on ADA compliance for an expansion to the existing facility. The contract with the designer specifically required indemnification of the Owner from any claim arising out of any act, omission, or willful misconduct by the designer. Following completion of the project, the Department of Justice performed an investigation of the property and found numerous violations requiring remediation with an estimated cost in excess of $20 million. The Owner sought indemnification from the designer, who in turn sought dismissal of the action as being pre-empted by the ADA.

The principle of pre-emption derives from the Supremacy Clause of the Constitution, which has been interpreted to require that state law yield when it frustrates or conflicts with federal law. Sometimes Congress will specifically state in the statute that the particular law pre-empts state laws to the contrary. Other times, the courts may interpret a federal law as either dominating a legislative topic area or superseding any state law that impedes the achievement of the federal law’s purpose and intended effects.

In turning to the ADA, the Nevada Supreme Court observed that the ADA not only prohibits intentional discrimination, but it also seeks to prevent discrimination stemming from neglect and indifference. When a facility is not constructed to be readily accessible to individuals with disabilities, the Owner is liable for unlawful discrimination. The Owner attempted to argue that the designer had accepted the responsibility on behalf of the Owner to provide designs that would result in a facility in compliance with the ADA. However, the court found that the responsibilities of the ADA cannot be delegated or assigned by contract. After reviewing the analysis of several courts around the country pertaining to indemnification claims by Owners against designers, the court concluded that “permitting indemnification claims would weaken Owners’ incentive to prevent violations of the ADA and therefore would conflict with the ADA’s purpose and intended effects. Simply put, such claims would allow Owners to contractually maneuver themselves into a position where, in essence, they can ignore their nondelegable responsibilities under the ADA.”

The lack of indemnification does not immunize the designer, since the designer remains directly liable to disabled individuals who may bring a separate suit. The court noted that the Code of Federal Regulations (CFR) allows a landlord and tenant to allocate responsibility for compliance with the obligations of the ADA, but the court observed the silence of the CFR on Owners and designers appears to be intentional and further buttressed the finding that an Owner’s indemnification claims against a designer are pre-empted. Likewise, the court found that the remaining claims for breach of contract and warranty were simply restated indemnification claims seeking the same relief, and therefore were likewise pre-empted.

When performing any construction or renovation of a place of public accommodation as defined by the ADA, Owners need to be aware of the risk of nondelegable responsibility for ADA compliance and consider that potential in the overall risk management and insurance program.

John Sier, with the firm of Kitch Drutchas Wagner Valitutti & Sherborook in Detroit, Michigan, is Associate Counsel to COAA.