City Homes Inc.’s filing for bankruptcy protection last week will not stop the more than 70 pending lead-paint-poisoning claims against the Baltimore landlord, plaintiffs’ attorneys said.
Although the Chapter 11 filing automatically puts pending litigation on hold, lawyers for the plaintiffs said they can and will ask the presiding judge to let the cases proceed, at least to the extent of the landlord’s insurance coverage.
In addition, the lawsuits also were brought against the company’s president and sole officer, Barry Mankowitz — and he has not filed for bankruptcy protection.
“The bankruptcy is a non-issue because there’s plenty of insurance coverage,” said attorney David F. Albright Jr. His firm, Bennett & Albright P.A. in Baltimore, has about 10 cases pending against City Homes and Mankowitz on behalf of brain-damaged children who allegedly ingested lead-based paint in company-owned homes.
Other plaintiffs’ attorneys made much the same point. “We only proceed against the insurance coverage” in lead-paint cases, said Scott E. Nevin, an attorney at The Law Offices of Peter T. Nicholl.
Veteran lead-paint litigator Saul E. Kerpelman, who also has suits pending against City Homes and Mankowitz, said City Homes downplayed the extent of its insurance coverage.
In filings in U.S. Bankruptcy Court, City Homes said its insurance is very limited, covering incidents of alleged lead exposure up to August 1999. Since then, the company has been “unable to obtain liability insurance that included full lead-related coverage,” the company added.
Meanwhile, the number of lead-paint lawsuits against the company has “dramatically escalated” in recent years and it now faces more than 70 pending cases, the filing states.
“They’re up to their eyeballs in lead-paint litigation,” said City Homes’ bankruptcy attorney, James A. Vidmar Jr.
Mankowitz did not return a telephone message seeking comment Friday afternoon.
City Homes, a nonprofit that operates 327 low-income housing units in Baltimore, has endured operating losses of more than $1.1 million during the past two years due largely to “substantial increases in legal expenses due to lead paint cases,” according to Tuesday’s filing in bankruptcy court in Baltimore.
The filing pointed to an October 2011 decision of the Court of Appeals, Jackson v. The Dackman Co., in which the top court struck down a 1994 law that immunized landlords of older properties from lead-paint liability if they registered their properties and offered $17,000 for the medical expenses of children at risk of lead poisoning.
The Court of Appeals, in its unanimous decision, found the immunity unconstitutional as applied. The amount provided was “totally inadequate and unreasonable” to compensate children severely harmed by lead paint, and the immunity provision violated the Maryland Declaration of Rights, which grants people the right to go to court to seek redress for their injuries.
Since 2011, attempts to create a new landlord immunity bill have failed in the General Assembly. One such measure, H.B. 754, failed to get out of committee in the House of Delegates this year.
‘Stop the music’
In an interview Friday, Vidmar said the Chapter 11 filing was absolutely necessary in light of the mounting lead-paint claims. He disputed the plaintiffs’ attorneys’ comments that the company’s insurance can cover its potential exposure.
Bankruptcy affords the company “a breathing spell so they can handle it better,” added Vidmar, of Yumkas, Vidmar & Sweeney LLC in Annapolis. “The bankruptcy is to stop the music so we can all figure out what to do with a company that has tried to do something good.”
Kerpelman, though, scoffed at City Homes’ claim in its filing that it is “a model landlord,” saying the statement could have been public-relations spin amid the pending lead-paint litigation.
“Something doesn’t smell right,” said the head of Saul E. Kerpelman & Associates P.A. in Baltimore. “I don’t think the 70 kids that [allegedly] got brain damage in his houses are thinking he’s a model landlord.”
Nevin also voiced dismay that the bankruptcy filing would delay the start of lead-paint trials, as the plaintiffs’ attorneys must spend time seeking court orders to lift the automatic stays.
“My concern is [for] my clients who have waited a long time to get to this point,” he said.
“Once the stay is lifted, we have to get a new trial date and that just puts off everything,” Nevin added. “We just want to get the administrative part out of the way and represent our clients the best way we can.”
Vidmar, City Homes’ bankruptcy attorney, said the company respects the right of the plaintiffs to ask the court to lift the automatic stays and will decide whether to fight those motions as they are submitted.
“They have their view and we have ours and that’s what the courts are for: to get us on the same page,” Vidmar said.