city of Los Angeles v. AECOM services Inc.

It isn’t one of my most popular blog entries, but in my opinion, it is one of my most important. I am referring to the blog entry talking about the ADA as a nondelegable duty, which can be found here. On April 24, 2017, the U.S. Court of Appeals for the Ninth Circuit came down with a decision that calls into question whether the Nevada Supreme Court in Rolf Jensen got it right.

The case of the day is City of Los Angeles v. AECOM Services, Inc. decided by the United States Court of Appeals for the Ninth Circuit on April 24, 2017. As is usual, the blog entry is divided into categories: facts; court’s reasoning; and takeaways. Of course, the reader is free to concentrate on any or all of the categories.

I

Facts:

Two individuals with disabilities filed suit against the City of Los Angeles alleging that the City’s flyaway facility and service, a bus system providing transportation between Los Angeles International Airport and various locations, failed to meet accessibility standards set forth in title II of the ADA. The City subsequently filed a third-party complaint against AECOM Services and Tutor Perini Corporation. The complaint alleged that pursuant to the provisions of the contract entered into by the City and the company hired to design and construct the facility, that AECOM was obligated to defend, indemnify, and hold harmless the City against all suits, claims, losses, demand, and expenses to the extent that any such claims resulted from the negligent and/or intentional wrongful acts or omissions of AECOM, its subcontractors, officers, agents, servants, or employees. The City further alleged that Tutor, the successor in interest to another company retained by the City to construct the facility, was contractually obligated per the provisions of that contract to defend, indemnify, and hold harmless the City against all costs, liability, damage or expense sustained as a proximate result of the acts or omissions of Tutor or relating to acts or events pertaining to, or arising out of, the contract. The contract between the City and Tutor’s predecessor in interest also required that the contractor when performing its contractual obligations comply with all applicable present and/or future local, state and federal laws, statutes, ordinances, rules, regulation, restrictions and/or orders, including the ADA. It also stated that contractor shall be solely responsible for any and all damage caused, and/or penalties levied, as the result of the contractor’s noncompliance with such statutes, ordinances, rules, etc. The District Court threw out the case on the grounds the ADA preempted the indemnification claims (i.e. nondelegable duty essentially), and the City appealed.

II

Court’s Reasoning

In reversing and remanding the case for further proceedings, the Ninth Circuit reasoned as follows:

1. In determining whether federal law preempts state law, the first thing to look at is the purpose of Congress.
2. In all preemption cases, especially where Congress has legislated in a field where the States have traditionally occupied, the assumption is that the historic police powers of the States are not superseded by the federal act unless Congress clearly and manifestly says so.
3. There are several ways federal law may preempt state legislation, including: 1) Congress stating so in express terms; 2) inferring preemption when federal regulation in a particular field is so pervasive as to make the reasonable inference that Congress left no room for States to supplement it, what is called field preemption. That is, the volume and complexity of federal regulation demonstrates an implicit congressional intent to displace all state laws. For a discussion of field preemption, check out this blog entry; 3) implying preemption when state law actually conflicts with federal law, or what is called conflict preemption; and 4) obstacle preemption.
4. The presumption against preemption exists because respect for the States as independent sovereigns in our federal system leads to the assumption that Congress does not cavalierly preempt state law causes of action.
5. Neither title II of the ADA nor §504 of the Rehabilitation Act contains a statement of express preemption.
6. Field preemption doesn’t work because title II of the ADA specifically states that nothing in that chapter is to be construed to invalidate or limit the remedies, rights, and procedures of any State or political subdivision of any States or jurisdictions providing greater or equal protection for the rights of individuals with disabilities than afforded by title II of the ADA. Accordingly, the ADA expressly disavows field preemption of the disability rights field.
7. Obstacle preemption, which is a subset of conflict preemption, does not apply here either for a host of reasons: the City is not seeking to allocate the full risk of loss to someone else; the City only assigned liability to the defendants to the extent that the defendants own actions gave rise to liability; and the greater concern is for potential contractors to shield themselves from any liability they cause under both States contract law and federal disability regulations if preemption is found to exist.
8. Though the City is seeking indemnification for a contractor’s wrongdoing, that compensation only constitutes a portion of the City’s total liability under federal disability statutes. In other words, the relief sought may be complete indemnification from the perspective of the contractor’s liability, but it constitutes only partial contribution from the perspective of the City’s liability exposure.
9. Cities implement policies and procedures as part of their standard operation. Were a court to permit a city to contract away liability to implement policies and procedures complying with federal disability laws and regulations, it would impermissibly be permitting delegation of an entity’s duties under the ADA.
10. In this case, the City is seeking the redress for specific construction and design failure related to the facility. Cities often have no choice but to contract out designing and construction of public facilities because they do not have the expertise, personnel, or equipment necessary for such projects. Such a delegation is by necessity. Accordingly, an important component in a city doing all that it can to fulfill its duties under title II of the ADA and §504 the Rehabilitation Act is to require as part of its contracts with necessary third parties that the requirements of those statutes be met.
11. Permitting enforcement of contract claims seeking to hold the contractor liable for duties necessarily delegated to it, does not raise the problem of entirely insulating public entities from ongoing title II of the ADA or §504 of the Rehabilitation Act liability posed by offloading all of the City’s responsibilities under those laws.
12. If title II of the ADA is viewed as encompassing a public entity’s outputs, that supports the notion that Congress would not have intended to preempt claims for liability arising from tasks that a city does not do, but, in many cases, must instead contract with others to provide the service.
13. Permitting claims for contribution commensurate with a third party’s wrongdoing does not pose the same obstacle as offloading all of the responsibilities of the ADA onto someone else.
14. The presumption against preemption applies where a given area is one where the States have historically had the power to regulate, and in this situation, States have historically regulated in the area of civil rights, including the field of discrimination against persons with disabilities.
15. Obstacle preemption, which applies when a given state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress, doesn’t work here either because nothing in title II of the ADA or §504 the Rehabilitation Act addresses a claim for state law indemnification or contribution claims filed by a public entity against a contractor.
16. Case law from other Circuits suggesting that congressional omission of a federal cause of action for indemnification is a reason to preempt state law claims, turns the presumption against preemption on its head. The basic premise of the presumption is that absent an affirmative indication to the contrary, a federal regulation does not preempt state law. The failure to provide a federal parallel to a state law cause of action doesn’t rise to that standard.
17. Certainly, it is a valid concern that a public entity could contract out of title II or §504 compliance with respect to the public entity’s failure to maintain appropriate policies and practices (failure to take action solely within its control). Permitting a shift of liability to a party lacking the power to remedy the violation would frustrate the federal statutes regulatory purposes. For example, the legislative history of the ADA confirms that a landlord has an independent obligation to comply with the ADA that may not be eliminated by contract.
18. The claims asserted by the City against the defendants in this case do not seek to shift liability for what the public entity can control onto somebody else.
19. The City’s third-party claims seek only to collect for violations arising out of defendants own negligence or wrongdoing. In other words, the City despite how it styled its claim, is in actuality seeking contribution from the defendants. Allowing such claims does not plausibly pose an obstacle to the intended purpose and effect of either the ADA or the Rehabilitation Act. In fact, a finding of preemption would hamper the statutes regulatory purposes. If there is no preemption, then the most a public entity can be able to do is to expressly contract for compliance and from there, the entity best situated to ensure full compliance may well be the contractor tasked with designing or constructing the public resource. If you preclude contract clauses for contributions, you then reduce a contractor’s incentives to ensure that the applicable statutes, laws, and regulations are complied with.

III

Takeaways:

1. Is this case really an overrule so to speak of our Mandalay Bay case? I’m not sure it entirely is for reasons that follow below.
2. The court was very careful to style this as a contribution case rather than an indemnification case. The difference is important because contribution implies shared responsibility while indemnification implies sole responsibility.
3. This case was a title II case and not a title III case. The difference is important because the range of responsibility for ADA compliance are far greater with respect to title II than they are with respect to title III.
4. The court did note that responsibilities of landlords cannot be delegated.
5. As mentioned above, if you are looking for where field preemption does work, check out this blog entry.
6. This case does allow for indemnification where that indemnity is the result of the contractor’s own negligence/screw up.
7. This case implies that failure of a contractor to understand the applicable ADA obligations necessary for a contractor to carry out their work may also be negligence. See also this blog entry.
8. The critical question is whether the liability exposure from the perspective of the entity contracting out services is indemnification or just partial contribution.
9. The court says that to permit a city to contract away liability to implement policies and procedures complying with federal disability regulations would impermissibly permit delegation of an entity’s duties under the ADA? Does that mean a public entity cannot contract out HR services or employee benefit services? Maybe. Certainly, means joint and several liability at a minimum.
10. To my mind, it is a strong argument to say that contractors are often the best situated to ensure full compliance with the designing or constructing of public resources and that if contribution was precluded, a disincentive for complying with the applicable statute, laws, and regulations is created.
11. The case seems to be strong in terms of its reasoning. With the current makeup of the Supreme Court and the nature of this case, I would think that the Ninth Circuit decision would be affirmed by the Supreme Court by at least a 6-3 majority. Unclear to me whether the Supreme Court would take the case in any event because there may not even be a conflict among the Circuits. For example, the Ninth Circuit went into elaborate detail as to why this case was different from the Fourth Circuit case.