Property Owners Have No Indemnification or Other Liability-Shifting Rights Against Consultants Whose Advice Results in ADA Title III Violations

by Sherman & Howard L.L.C.

[author: Ted Olsen]

Owners of "public accommodations" covered by Title III of the Americans with Disabilities Act, as well as public entities with facilities governed by Title II of the ADA, often rely on the advice of consultants for compliance with the ADA's accessibility requirements.  The contracts with the consultants typically have indemnification provisions, pursuant to which the consultants are liable for any losses incurred by the owners or public entities caused by any condition in violation of the ADA.  However, a recent decision of the Nevada Supreme Court, Rolf Jensen & Assocs., Inc. v. Eighth Judicial Dist. Court,[1] and a federal court of appeals case indicate that no property owner, developer, general contractor or public entity should expect to enforce any indemnification provision or similar liability-shifting theory against such a consultant with regard to any ADA violation.

The Mandalay Corporation hired Rolf Jensen & Associates, Inc., for consulting services on the construction of an expansion to the Mandalay Bay Resort and Casino.  One provision of their contract provided that Rolf Jensen would indemnify Mandalay for any damages arising from any act, omission, or willful misconduct by the consultant in the performance of its duties.  After the expansion was completed, the U.S. Department of Justice investigated numerous violations of Title III of the ADA arising from inaccessible conditions.  The estimated cost of retrofits required to bring conditions into compliance was $20 million.  Mandalay sued the consultant for indemnification.

The district court and, on appeal, the Nevada Supreme Court, ruled that the federal ADA preempts such indemnification claims and other similar state law claims for breach of contract, breach of express warranty, and negligent misrepresentation.  The Nevada Supreme Court's rationale was that the purpose of the ADA is to impose liability on owners and operators of places of public accommodation, if the premises violate Title III, regardless of who specifically is responsible for the non-compliant conditions, and that the ADA does not permit the shifting or allocation of liability between the various entities subject to the ADA (with the exception of landlord-tenant situations).  The Court reasoned that, if liability-shifting claims for ADA violations were permitted, the claims would weaken owners' and operators' incentive to prevent ADA violations and therefore would conflict with the ADA's purpose and intended effects.

The Court scoffed at Mandalay's argument that the availability of indemnification-type relief against ADA consultants actually encourages owners like Mandalay to seek consultants' advice, thereby improving ADA compliance.  Owners and operators should engage consultants for the purpose of ADA compliance, explained the Court, not to set up indemnity claims when a property is not in compliance.  "[T]he surest way to maximize compliance with the ADA is to hold owners' risks of noncompliance firmly in place."  Of course, Mandalay never argued that it was not responsible under the ADA for the violations.  It would seem that its liability under the ADA does not necessarily, as a matter of logic, supplant its pre-existing legal rights to obtain recourse against a professional consultant holding itself out as having expertise in the field, upon which it relied, when the consultant failed on the job.  Indeed, the Court in Rolf Jensen did not give complete immunity to the consultant.  Instead, it noted that the Department of Justice could pursue relief against Rolf Jensen and any other entities that contributed to the violations at Mandalay; however, Mandalay could not.  Regardless of the legal theory utilized by the owner, any such claim would be preempted by Title III.

This case relied on the rationale used by the Fourth Circuit in Equal Rights Center v. Niles Bolton Assocs.,[2] where a general contractor sued the architect that designed apartment buildings that were found to violate the ADA and the Fair Housing Act.  The Fourth Circuit held that the ADA and the FHA preempted any state law in conflict with the purpose of the federal laws, and that any liability-shifting claim by the general contractor would conflict with that purpose.

The reasoning of Rolf Jensen and Niles Bolton applies equally to general contractors that expect to obtain recourse against their subcontractors if they fail to perform in compliance with the ADA.

[1] Rolf Jensen & Assocs., Inc. v. Eighth Judicial Dist. Court, 282 P.3d 743 (Nev. 2012).

[2] Equal Rights Center v. Niles Bolton Assocs., 602 F.3d 597 (4th Cir. 2010).


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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