Case Study #1
Equal Rights Center v. Niles Bolton
Recent case law provides a defense in some jurisdictions with respect to indemnity actions. In Equal Rights Center v. Niles Bolton, (“Niles Bolton”) the architect was retained by the developer, Archstone, to design multiple apartment complexes nationwide. An organization representing the disabled, the Equal Rights Center (“ERC”) sued Archstone and Niles Bolton for violations of ADA and FHA. Archstone settled with the ERC. Under the terms of the settlement, Archstone agreed to pay $1.4 million to ERC and agreed to retrofit 71 properties (15 of which were designed by Niles Bolton). Niles Bolton settled separately with the ERC with no admission of fault. Archstone then filed a cross-claim in federal court against Niles Bolton for express indemnity, implied indemnity, breach of contract and negligence. Archstone sought to recover from Niles Bolton all monies paid to ERC, the cost of the retrofits, plus attorneys’ fees and costs.
In response to Archstone’s cross-claims, Niles Bolton filed a motion for summary judgment, arguing that: (1) the ADA and FHA do not expressly provide rights of indemnity except in limited context of landlord/tenant relationships. Niles Bolton contended that it would therefore undermine the purpose of the ADA and FHA if Archstone could seek indemnity, and that Archstone’s state-law claims were therefore preempted by federal law under the doctrine of obstacle preemption.
In its opposition to the motion, Archstone argued that Niles Bolton was hired to comply with the ADA and FHA, and had superior knowledge and skills, and that it would be “unfair” if it could not recover its damages. The trial court disagreed with Archstone, and held that:
- The ADA and FHA did not expressly permit indemnity;
- All of Archstone’s claims were, at their core, merely de facto indemnity claims; and
- Allowing such claims would indeed undermine the purpose of the ADA and FHA, and were thus preempted.
Archstone appealed to the United States Court of Appeals (the Fourth Circuit in Maryland), and argued that allowing it to pursue its state-law claims did not pose an obstacle to the enforcement of the underlying purpose of the ADA or FHA and that there was no conflict with any federal law. However, the Court of Appeals affirmed the lower court’s ruling and upheld summary judgment in favor of Niles Bolton. The Court went to great lengths to explain the doctrine of obstacle preemption, which applies “where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress”.
The Court of Appeals stressed the underling purposes of the ADA. As referenced above, those express purposes set forth by Congress are as follows:
- To provide a clear and comprehensive mandate for elimination of discrimination against individuals with disabilities;
- To provide clear, strong, consistent, enforceable standards addressing discrimination;
- To ensure the federal government enforces standards on behalf of individuals with disabilities; and
- To invoke congressional authority to address discrimination.
As also referenced above, the purposes of the FHA are as follows: (1) to eliminate housing discrimination against multiple classes of individuals, including disabled individuals; and (2) to promote residential integration.
The Court of Appeals reasoned that the above purposes would be undermined if parties could seek indemnity for their own ADA or FHA violations. Thus, it did not matter if the result was “unfair” to Archstone. Rather, all that mattered is what would maximize compliance and accessibility in the long run.