PHA Can't Delegate Duty to Comply with the FHA

Facts: In 1999, a PHA launched a 10-year plan to update its housing. In 2000, HUD gave the PHA conditional approval for a prescribed period of five years during which time the PHA was to take certain actions to ensure it could adequately meet the needs of the disabled. The PHA planned its overall renovations to meet the requirements of Section 504 of the Rehabilitation Act by constructing a percentage of its units to accommodate mobility-impaired individuals and a percentage of units to be accessible to individuals with sensory impairments. In an effort to accomplish its goals, the PHA was required to conduct a Section 504 self-evaluation.

In 2000, the PHA hired an architectural and engineering services firm to oversee the engineering and construction of the rehabilitation project and to certify that all work conformed to federal fair housing and accessibility laws. In 2003, after construction of the project had begun, HUD notified the PHA of its plans to conduct a Section 504 and Americans With Disabilities (ADA) compliance review. In a September 2004 letter, HUD issued its preliminary findings of noncompliance with Section 504 and Title II of the ADA detailing a range of deficiencies both major and minor. The letter stated that resolution of the identified violations would be described in a forthcoming written plan called a voluntary compliance agreement. Moreover, the letter indicated that future compliance would be assessed and certified by a third-party independent architectural consultant.

The firm completed its work on the PHA’s buildings in 2004. And in June 2006, HUD and the PHA executed a negotiated voluntary compliance agreement requiring the PHA to correct the purported deficiencies identified in the preliminary noncompliance letter and to fulfill its responsibilities of complying with the federal accessibility standards set forth in Section 504 and Title II of the ADA. The agreement contained no findings of liability against the PHA, and no penalty was charged to the PHA.

In November 2006, the PHA hired a new architecture firm to perform the work necessary to comply with its obligations under the voluntary compliance agreement. According to the PHA, it incurred over $4.3 million to bring the seven buildings into compliance with the federal accessibility standards. So the PHA sued the original architectural and engineering services firm for breach of contract.

A circuit court dismissed the PHA’s state law-based breach of contract claim. The PHA appealed.

Ruling: An Illinois appeals court agreed with the lower court’s decision.

Reasoning: According to the court, the PHA was a “wrongdoer” in the sense that it failed to ensure the premises complied with the applicable federal accessibility standards in order to prevent discrimination. Instead, HUD was forced to expressly notify the PHA that the units worked on by the firm failed to comply with Section 504 and the ADA. Accordingly, the PHA didn’t uphold the responsibilities required of building owners under the federal accessibility standards.

The court stated that Congress’ failure to provide a contribution or indemnification remedy for one defendant against a third-party co-defendant means that Congress deliberately intended that each co-defendant have a non-indemnifiable, non-delegable duty to comply with the Fair Housing Act. In this case, the PHA’s failure to appropriately supervise the construction of the premises wasn’t conduct that Section 504 and the ADA were intended to protect, and the duty to ensure the buildings complied with the FHA wasn’t something the PHA could contract away to a third party.

• Chicago PHA v. DeStefano and Partners, December 2015