Court Opinion

ID: 3021433
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:24:45.257874+00
Date Added: 2024-06-11T15:03:27.530220
License: Public Domain

United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                                    ___________

                                    No. 98-1243
                                    ___________

United States of America,                *
                                         *
             Plaintiff-Appellant,        *   Appeal from the United States
                                         *   District Court for the District
      v.                                 *   of South Dakota.
                                         *
Days Inns of America, Inc.;              *
Hospitality Franchise Systems, Inc.,     *
                                         *
             Defendants-Appellees.       *

                                    ___________

                             Submitted: June 8, 1998
                                 Filed: August 6, 1998
                                  ___________

Before FAGG, BRIGHT, and BEAM, Circuit Judges.
                            ___________

BRIGHT, Circuit Judge.

       The United States government brought this action against Days Inns of America,
Inc. and its former parent company, Hospitality Franchise Systems, Inc. (collectively
referred to as “DIA”) alleging DIA violated the Americans with Disabilities Act
("ADA") by failing to design and construct facilities at the Days Inn hotel in Wall,
South Dakota (hereinafter “Wall Days Inn”), in compliance with accessibility
requirements of the ADA. The district court granted summary judgment in favor of
DIA. The district court opined that DIA did not design or construct Wall Days Inn and
did not serve as the owner, lessor or operator of the hotel.

       On appeal, the government challenges the district court’s conclusion regarding
whether DIA failed to “design and construct” the Wall Days Inn within the meaning of
section 303 of the ADA. In addition, the government asserts that DIA controls and
directs the functioning of the Wall Days Inn in several crucial respects and thus
constitutes an “operator” of the facility, as required by section 302(a) of the ADA. We
conclude that even though DIA does not serve as an “operator” of the Wall Days Inn,
DIA may still bear liability under section 303’s “design and construct” provision. We
remand for further proceedings on this issue.

I.    BACKGROUND

       In 1992, Richard and Karla Hauk (“the Hauks”) entered into negotiations with
Andy Anderson, a franchise representative for Days Inns of America, Inc., concerning
the possibility of opening a Days Inn franchise. Anderson referred the Hauks to an
architect, David Baumann, and a building contractor, Double H Enterprises, Inc. Both
Baumann and Double H Enterprises had previously participated in the design and
building of other Days Inn hotels. The Hauks ultimately retained the services of the
recommended architect and building contractor for construction of the Wall Days Inn.

       The Hauks entered into a licensing agreement with DIA (hereinafter “Licensing
Agreement”) on December 12, 1992. Part of the Licensing Agreement required the
following from the Hauks relating to design and construction for the hotel: (1) “create
a site plan and detailed architectural plans and specifications . . . which must be
submitted to DIA”; (2) obtain written approval of the architectural plans from DIA
before proceeding; (3) provide written notice to DIA prior to beginning construction;
(4) obtain DIA approval of any modifications to the construction plans; and (5) allow
DIA to inspect construction while in progress.

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       The Hauks did not comply with several of the above provisions. First, rather
than a detailed set of final architectural plans, the Hauks sent to Mark Zelazny of DIA’s
design and construction department only four pages of preliminary plans. Second, the
Hauks’ architect completed the final plans without receiving written approval of the
preliminary plans from Zelazny. Finally, the unapproved plans were modified during
construction without the approval of DIA.

      During the period relevant to this case, DIA had a Planning and Design
Standards Manual (PDSM) providing system standards for newly-constructed hotels.
The PDSM provided a variety of guidelines and requirements for designing and
planning new Days Inn hotels, including a provision requiring the franchisee to ensure
ADA compliance.

      During the construction of the Wall Days Inn, Anderson twice visited the
construction site on behalf of DIA. Representatives of DIA also called the Hauks on
several occasions during construction.

II.   DISCUSSION

      A.     Parties Liable Under Section 303 of the ADA

      For the purpose of this appeal only, DIA does not dispute that the Wall Days Inn,
as built, fails to meet the “readily accessible” standard of the ADA.1 The government
argues that DIA bears responsibility under section 303(a) of the ADA, which provides
in part:

      1
        According to the government, the absence of an elevator remains the primary
feature that makes the Wall Days Inn an inaccessible facility. The ADA provides that
unless a facility is two stories or less, the facility must provide an elevator. See 28
C.F.R. pt. 36, App. A, § 4.1.3(5) (1997).

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            Except as provided in subsection (b) of this section, as applied to
      public accommodations and commercial facilities, discrimination for
      purposes of [section 302(a) of the ADA] includes--
                   (1) a failure to design and construct facilities for first
            occupancy later than 30 months after July 26, 1990, that are
            readily accessible to and usable by individuals with
            disabilities, except where an entity can demonstrate that it is
            structurally impracticable to meet the requirements of such
            subsection in accordance with standards set forth or
            incorporated by reference in regulations issued under this
            subchapter; . . . .

42 U.S.C. § 12183(a) (emphasis added). Section 303, however, is silent with respect
to who is liable under section 303 for a “failure to design and construct” a readily
accessible facility. DIA directs the court’s attention to section 302(a) of the ADA,
which provides in part:

             No individual shall be discriminated against on the basis of
      disability in the full and equal enjoyment of the goods, services, facilities,
      privileges, advantages, or accommodations of any place of public
      accommodation by any person who owns, leases (or leases to), or
      operates a place of public accommodation.

42 U.S.C. § 12182(a) (emphasis added).

       DIA argues that it does not bear liability under section 303 because the reference
to section 302(a) in section 303 not only establishes that a failure to design and
construct a compliant facility is discrimination, but also clarifies the parties who may
be liable. Specifically, DIA maintains that section 302(a) limits the parties liable under
section 303 to “any person who owns, leases (or leases to), or operates” a
noncompliant facility. See 42 U.S.C. § 12182(a). Moreover, DIA argues that because

                                           -4-
it does not own, lease, or operate the Wall Days Inn, it cannot be liable for an ADA
violation. We reject DIA’s argument.

        Courts should interpret statutory language in a manner that gives effect to all
terms so as to avoid rendering terms useless. See Moskal v. United States, 498 U.S.
103, 109-110 (1990). We conclude that DIA’s proffered interpretation of section 303
would improperly create a gap in coverage that Congress did not intend. Specifically,
Congress clearly intended that commercial facilities be subject to the accessibility
standards for new construction. See H.R. Rep. No. 101-485(II), at 116 (2d
Sess.)(1990) (“the use of the term ‘commercial facilities’ is designed to cover those
structures that are not included within the specific definition of ‘public
accommodation.’”). However, DIA’s reading of sections 302(a) and 303 would limit
the parties liable under section 303 to owners, operators, lessors, or lessees of public
accommodations. The practical application of DIA’s interpretation would leave no
entity liable for violations of the new construction accessibility standards for buildings
which are commercial facilities only. Accordingly, by rendering meaningless section
303's inclusion of commercial facilities, DIA’s interpretation of section 303 would
result in an inexplicable gap in coverage of buildings that Congress clearly intended to
include.

       DIA attempts to remedy the gap in coverage by asserting that courts should
import the types of entities liable into section 303 from section 302(a), but the phrase
“owns, leases (or leases to), or operates a place of public accommodation” should be
interpreted as “owns, leases (or leases to), or operates commercial facilities.” See 42
U.S.C. § 12182(a) (emphasis added). In our view, DIA’s interpretation violates the
maxim of statutory interpretation that courts should give effect to the plain language of
the statute. Western Nat’l Mut. Ins. Co. v. Commissioner of Internal Revenue, 65 F.3d
90, 93 (8th Cir. 1995). Accordingly, we reject DIA’s position and conclude that
section 303's anti-discrimination requirements are not limited to owners, operators,
lessors and lessees of newly-constructed facilities.

                                           -5-
      B.     The Meaning of “Design and Construct” Under Section 303

       Having determined that section 303 of the ADA does not apply only to owners,
operators, lessors, and lessees of newly-constructed facilities, we must now turn to the
question of whether DIA bears responsibility for the failure to “design and construct”2
the Wall Days Inn in compliance with the ADA.

        Because the ADA does not specify a standard for interpreting section 303, we
must determine what types of entities are liable for failing to “design and construct” an
accessible facility. We note that the Department of Justice (DOJ) has issued a
Technical Assistance Manual, which directs that architects and contractors may be
liable for failing to design and construct accessible facilities. See The Americans with
Disabilities Act, Department of Justice, Technical Assistance Manual § III-5.1000 (Jan.
1993). This DOJ directive supports the government’s assertion that any party
substantially participating in the design and construction of a facility shares the
responsibility if the facility violates ADA’s standards.

       The Supreme Court has stated that courts should defer to a reasonable
interpretation of a statute adopted by the administrative agency charged with its
enforcement. Nationsbank of North Carolina, N.A. v. Variable Annuity Life Ins. Co.,
513 U.S. 251, 256-57 (1995) (citations omitted). Although we adhere to this well-
settled rule, the DOJ’s interpretation imports some limitation. Clearly, not any party
tangentially or remotely connected with the design and construction of a facility
sustains liability if the facility is ultimately constructed in violation of the ADA.

      2
        In the context of this case and DIA, we apply conjunctively the “design and
construct” language of section 303. Therefore, in order for DIA to be liable under
section 303, DIA must have been responsible for the design and construction of the
hotel. See Paralyzed Veterans of Am. v. Ellerbe Becket Architects & Eng’rs, P.C., 945
F. Supp. 1, 2 (D.D.C. 1996).

                                          -6-
       Recently, in United States v. Bestfoods, 118 S. Ct. 1876 (1998), the Supreme
Court considered the issue of liability for a parent corporation under the
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).
Although relating to a different federal statute, the Supreme Court’s opinion in
Bestfoods provides this court with helpful direction. In Bestfoods, the Supreme Court
opined that in order for a parent corporation to be liable for a violation of CERCLA,
the parent corporation “must manage, direct, or conduct operations specifically related
to” the violation or compliance with CERCLA. Id. at 1887.

       In the present case, to give effect to the plain language of section 303, as well
as deference to the DOJ’s interpretation of the statute, we conclude that to bear
responsibility for an inaccessible facility under section 303, a party must possess a
significant degree of control over the final design and construction of a facility.3

       DIA possessed extensive authority to control the design and construction
process. As stated, the Licensing Agreement required the Hauks to comply with DIA’s
design and construction standards (which included a requirement that the facility
comply with ADA requirements) and permitted DIA to terminate the franchise if the
Hauks failed to comply with those standards or with the requirements of the ADA.
Moreover, DIA established an elaborate mechanism for enforcing its design and
construction standards. Specifically, DIA required franchisees to submit architectural
and design plans for review, to allow inspection of construction sites, to obtain a
written certification from DIA that their hotels met the DIA’s standards, and to permit
DIA to inspect the hotels after they opened for business. Thus, the Licensing

      3
       Therefore, a franchisor that does not possess the authority to control the design
and construction of franchisee’s facility would not risk liability under section 303.
Moreover, a franchisor’s mere instruction that the franchisee’s facility comply with the
ADA or some other law would not constitute significant control over the design and
construction of the facility.

                                          -7-
Agreement provided DIA with a significant amount of authority (power to terminate
franchise) which would have enabled DIA to ensure ADA compliance.4

       Despite having significant authority to control the design and construction
process, DIA apparently chose to exercise only a meager portion of its available
influence. Although DIA reviewed and approved preliminary design plans, DIA never
received or demanded the final plans for the Wall Days Inn. Moreover, the Hauks’
architect made final the design plans before receiving DIA’s response to the
preliminary design plans. Thus, DIA’s review of building plans did not play much, if
any, factor in the design and construction of the Wall Days Inn. We must therefore
determine whether a party, such as DIA, violates section 303 when the party possesses
sufficient authority over the design and construction process to ensure ADA
compliance, but does not exert this authority.

       A franchisor with no knowledge that a franchisee has constructed a facility in
violation of the ADA should not suffer liability under section 303, regardless of the
franchisor’s available authority to ensure ADA compliance. The government has not
proffered any persuasive rationale for treating differently a franchisor that has no
control over the design and construction of a franchisee’s facility and a franchisor with

      4
        The district court discussed the amount of control DIA possessed in the context
of determining whether DIA constituted an “operator” of the Wall Days Inn. We agree
that DIA did not serve as an “operator” of the Wall Days Inn. Nevertheless, section
303's “design and construct” provision extends beyond persons or entities that may be
operators.

      The district court determined that DIA exerted an insignificant amount of control
over the design and construction of the Wall Days Inn. However, the district court
improperly focused on the amount of control DIA actually exerted rather than the
amount of control DIA had available and whether DIA had actual knowledge of the
ADA violation.

                                          -8-
significant control, but without any knowledge that the franchisee has built a facility in
violation of franchise agreements, as well as the ADA.

       In the present case, it remains unclear whether DIA had actual knowledge that
the Wall Days Inn did not meet ADA requirements. Upon reviewing the preliminary
plans sent to DIA, we cannot determine as a matter of law whether the preliminary
plans disclosed the ADA violations. Furthermore, we cannot determine from the record
whether the actual inspection by Anderson (DIA’s representative) of the Wall Days Inn
exposed the inaccessible features. Accordingly, we reverse the district court’s grant
of summary judgment in favor of DIA and remand this case for the district court to
determine whether DIA possessed actual knowledge that the final design and
construction plans for the Wall Days Inn violated the ADA.

       If DIA had such knowledge, it would be liable for the violations inasmuch as it
retained ample power to require compliance with the ADA. Without such actual
knowledge, however, it would not have “failed to design and construct” the proposed
Wall Days Inn in compliance with the accessibility requirements of the ADA.

      A true copy.

             Attest:

                     CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.

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