Case Study #2
In the same time frame that Niles Bolton was working its way through the federal lower and appellate courts, Weil & Drage was litigating a similar case in Nevada state court. In 2005/2006, the DOJ investigated Mandalay Corporation (“Mandalay”) and its related entities for alleged ADA violations. The investigation focused on multiple properties, including the Mandalay Bay Hotel and Casino and an expansion project, THEhotel in Las Vegas. In approximately 2006, MGM Mirage (“MGM”) acquired Mandalay as a subsidiary. In 2007, MGM settled with the DOJ on behalf of its subsidiary, Mandalay, and agreed to pay a fine and retrofit aspects of both the original hotel as well as the expansion project. Shortly after the settlement, Mandalay sued multiple design professionals and contractors who worked on the project. In 2008, Mandalay amended its complaint to name Rolf Jensen & Associates (“RJA”) as a defendant.
By way of background, in 1996 RJA served as a fire protection consultant retained by the architect on the original hotel. In 1997, during construction, a question arose as to whether toilet room doors in non-accessible rooms needed to be “extra wide.” Although RJA was not serving in the capacity of an ADA consultant, it was asked to review the general contractor’s Request for Information (“RFI”). RJA commented that, while the issue was not definitive (under the then-current guidelines), the owner would be wise to take the most conservative approach and maximize accessibility to avoid a civil lawsuit.
Despite RJA’s comment, Mandalay elected not to stop work in order to change out the toilet room doors. Mandalay thus avoided a significant time and cost impact associated with changing out some 4000 doors that had been partially framed or installed. In 1998, the project opened up on time and within budget. Ultimately, however, RJA’s words about a potential civil lawsuit proved prophetic.
Fast forward to 2002, Mandalay retained RJA directly as an ADA consultant for the expansion project. At that time, RJA was tasked with reviewing only limited portions of the project wherein the owner had questions about ADA compliance. Later, RJA learned that much of its advice was not followed.
As mentioned above, Mandalay brought RJA into its lawsuit as a defendant in 2008. Shortly after the Niles Bolton case was published in 2010, Weil & Drage filed a motion for summary judgment on behalf of RJA seeking dismissal of all of Mandalay’s state-based claims for: (1) express indemnity; (2) breach of contract; (3) breach of warranty; and (4) negligent misrepresentation. In the motion, Weil & Drage argued the facts and law of Niles Bolton and asserted that, while not binding authority in Nevada, the decision was nonetheless very persuasive. Mandalay, in turn, made all the same arguments that Archstone had made. The trial court found that the Niles Bolton decision was not binding on a Nevada state court and declined to follow it, thus denying summary judgment.
On behalf of RJA, Weil & Drage filed a Petition for Writ of Mandamus to the Nevada Supreme Court, seeking review and reversal of the trial court’s denial of RJA’s motion for summary judgment. After nearly two years, on August 9, 2012, the Nevada Supreme Court issued its opinion in Rolf Jensen v. Eighth Judicial District Court (“Rolf Jensen”). In a 17 page en banc decision with no dissent, the Court ordered the trial court to reverse its denial of RJA’s motion for summary judgment, and instead order judgment in RJA’s favor. The Court based its ruling on the conclusion that all of Mandalay’s pending state-based claims were obstacles to the objectives of the ADA and therefore preempted by federal law. The Court held that the ADA was enacted to remedy discrimination against the disabled, and therefore any owner who constructs a facility of public accommodation not readily accessible is liable for unlawful discrimination.
The Court further held that, except for landlord-tenant relationships, the ADA does not provide for a private right of indemnity and that Mandalay’s claims were merely de facto indemnity claims, and thus barred. Applying the law, the Court found that allowing Mandalay to maintain its indemnity claims would weaken owners’ incentives to prevent violations. Accordingly, Mandalay’s claims conflicted with the ADA’s purpose and intent, because owners could contractually maneuver themselves to ignore their non-delegable duties to comply with the ADA. The Court stated that allowing such maneuvering would frustrate Congress’ goal of preventing discrimination and intrude on the remedial scheme of the ADA, which does not expressly or impliedly permit rights of indemnity (except in the limited landlord-tenant relationship). Relying on Niles Bolton, the Court found that Mandalay’s state-law claims were preempted and thus barred under the doctrine of obstacle preemption.Niles Bolton and Rolf Jensen have changed the legal landscape of ADA and FHA cases. Other federal courts outside of Niles Bolton’s Fourth Circuit (which includes Maryland, Virginia, West Virginia, North Carolina and South Carolina) have now followed the Fourth Circuit’s lead, beginning with the Southern District of Ohio (Miami Valley Fair Housing Center, Inc. v. Campus Village Wright State, LLC) and the Southern District of Mississippi (United States v. Bryan Co. ). To date, however, Nevada’s Supreme Court is the first high state court in the nation to rule on this issue.