Wednesday, June 16, 2010

Indemnification Claims in Civil Rights Cases Preempted; Contribution Claims Left For a Later Day

Not Your Average Whistleblower Statute

Twenty-nine years ago in Northwest Airlines, Inc. v. Transport Workers, 451 U.S. 77 (1981), Justice Stevens, for a unanimous Court, held that there was no right to contribution under either the Equal Pay Act or Title VII.  The Court’s decision was based on the non-existence of a federal common law or statutory right to contribution; the fact that neither the Equal Pay Act nor Title VII expressly creates a right to contribution; and the Court’s holding that the equitable considerations advanced by the employer should be more properly addressed to Congress, not the federal courts.  That holding, at the federal level, has remained unchallenged since then.  Under state anti-discrimination laws, New York has held that under its state law, a claim for contribution may be pursued.  Rodolico v. Unisys Corp., 189 F.R.D. 245 (E.D.N.Y. 1999).  In Rodolico, federal district Judge Spatt found that Section 1401 of the New York Civil Practice Law and Rules mandated a finding that the employer in that case could file a third-party complaint against the union, seeking contribution under the New York State Human Rights Law.  See also Flaherty v. S.D. Warren Co., No. 98-254-P-H (D. Me. Jan. 26, 1999); Degener v. Hall Contracting Corp., 27 S.W.3d 775 (Ky. 2000); Donajkowski v. Alpena Power Co., 460 Mich. 243, 596 N.W.2d 574 (1999) (Michigan Supreme Court permits a right of contribution among joint tortfeasors in a sex discrimination case under the Michigan anti-discrimination statute); Biggs v. Surrey Broadcasting Co., 811 P.2d 111, 114-15 (Okla. Ct. App. 1991) (permitting counterclaim claim for indemnification by employer against employee in gender discrimination claim).  Contra Thomas v. EDI Specialists, Inc., 773 N.E.2d 415 (Mass. 2002) (“[T]here may be many sound policy reasons favoring an award of contribution.  We are of the view, however, that those policy considerations are for the Legislature to weigh, and we will not engraft provisions that the Legislature has not enacted.”).
In Equal Rights Center v. Archstone Smith Trust v. Niles Bolton Associates, Inc., 602 F.3d 597 (4th Cir. 2010), aff’g, 603 F. Supp. 2d 814 (D. Md. 2009) (Davis, J.), the Fourth Circuit in a case brought by the Equal Rights Center against the owner/builder (Archstone) and architect (Niles Bolton) of 71 apartment buildings that allegedly were not designed and constructed so that they were accessible to persons with disabilities in compliance with the Fair Housing Act (FHA) and Title II of the Americans with Disabilities Act (ADA), affirmed then-district Judge Davis’ ruling, first, that a claim for indemnification asserted by Archstone against the architect was preempted by the FHA and ADA, and, second, that a belated claim for contribution was also barred.  Indemnification shifts the entire loss from one wrongdoer to another; whereas contribution requires each wrongdoer to pay its proportionate—or pro rata—of an adverse judgment.  See Baker, Watts & Co. v. Miles & Stockbridge, 876 F.2d 1101, 1103 (4th Cir. 1989) (en banc). 
In Equal Rights Center, Archstone timely asserted its claim for indemnity, but did not assert its claim for contribution until after discovery had closed on the eve of trial.  Judge Davis, now a member of the Fourth Circuit, rejected Archstone’s implied indemnity claim on the grounds that no right to indemnification existed under the FHA or ADA, and because allowing indemnification on the state-law claims asserted by Archstone would be antithetical to the purposes of the FHA and ADA, and thus preempted under the doctrine of conflict, or obstacle, preemption.  While Judge Davis denied Archstone’s belated motion to add a contribution claim on the eve of trial on the ground that it would be prejudicial and require that discovery be reopened, he also opined that a claim for contribution would also be preempted by the FHA and ADA.  In rejecting these claims, Judge Davis relied heavily on Northwest Airlines, as well as the decision in Texas Ind., Inc. v. Radcliff Materials, Inc., 451 U.S. 630 (1981), a decision from the same term as Northwest Airlines, rejecting a claim for contribution under the federal anti-trust laws.  Judge Davis noted that other courts had applied the reasoning of Northwest Airlines in similar cases.  See, e.g., Bowers v. NCAA, 346 F.3d 402 (3d Cir. 2003) (no contribution claim under Title II of the ADA); United States v. Shanrie Co., Inc., 610 F. Supp. 2d 958 (S.D. Ill. 2009); United States v. Gambone Brothers Dev. Co., 2008 U.S. Dist. LEXIS 73503 (E.D. Pa. Sept. 25, 2008); Access 4 All, Inc. v. Trump Int'l Hotel & Tower Co., 2007 U.S. Dist. LEXIS 13560, at *20 n.8 (S.D.N.Y. Feb. 26, 2007) ("There is no express right to indemnity under the ADA, and the fact that the ADA has a comprehensive remedial scheme and that owners of non-compliant properties are not members of the class that the statute was intended to protect argue against reading any implied right of indemnification into the statute."); United States v. Quality Built Constr., 309 F. Supp. 2d 767 (E.D.N.C. 2003) (applying the reasoning of Northwest Airlines in a case in which the government filed an action against a developer, a builder and an architect for failing to design and build FHA-compliant complexes).
The Fourth Circuit, Judge Shedd, writing for Judges Niemeyer, King, and himself, found that the FHA and ADA are regulatory rather than compensatory; their principal purpose being to provide a national mandate for the elimination of discrimination against disabled individuals; and that compliance with those statutes was non-delegable.  In other words, the owner/builder could not insulate itself from liability by relinquishing the responsibility for preventing such discrimination to another party.  Accordingly, the court held that the regulatory purposes of those statutes would be undermined by allowing a claim for indemnity, finding that it would diminish one’s incentive to ensure compliance with the discrimination laws. 
With respect to the belated contribution claim, the court merely affirmed Judge Davis’ holding that to permit the claim on the eve of trial would be prejudicial, and the court specifically states that it does “not reach the question of whether a state-law claim for contribution is preempted under federal law.”
I would not interpret the Fourth Circuit’s decision to not reach the substantive contribution claim as suggesting that the courts may be prepared to revisit Northwest Airlines.  If anything, its rationale and Judge Davis’ rationale below, as well as the other courts that have addressed these issues, strongly suggest that, at the federal level, Northwest Airlines remains the law.  On the other hand, as the New York experience teaches us, depending upon the applicable law of the state at issue, there may be room where an employer is sued under the state or local anti-discrimination statute, to seek contribution against others.  The New York case involved, like Northwest Airlines, unions.  But, if there is a right of contribution, and individuals can be sued under the local anti-discrimination statute (like they can be in the District of Columbia), then, it seems to me, that an employer can seek contribution from, for example, an offending high-level sex harasser who might have deep pockets and some ability to recompense the employer for his/her wrongdoing.  Such an argument would seem to have special resonance if, for example, the jurisdiction did not recognize under the state anti-discrimination statute a Faragher/Ellerth-type affirmative defense.  See, e.g., Zakrzewska v. The New School, 2010 N.Y. LEXIS 632 (N.Y. May 6, 2010).

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