Hazleton is facing $2.4M legal bill

By Terrie Morgan-Besecker tmorgan@timesleader.comLaw & Order Reporter

HAZLETON – A federal appellate court on Friday ruled an insurance company does not have to pay attorneys’ fees associated with Hazleton City’s battle over its illegal immigration ordinance, leaving the city on the hook for at least $2.4 million, and likely much more.

The Third Circuit Court of Appeals agreed with U.S. District Judge A. Richard Caputo that Scottsdale Insurance Company is not obligated to pay the legal fees of attorneys who represented Pedro Lozano and other plaintiffs who successfully challenged the city’s Illegal Immigration Relief Act.

The decision is a huge blow to the city, which would be on the hook for the fees if it does not prevail in its expected appeal of a separate ruling the Third Circuit court issued in September that declared the bulk of the Relief Act unconstitutional.

Under federal law, plaintiffs who prevail in a civil rights action can obtain payment of their legal fees from the defendant. U.S. District Judge James Munley declared the Relief Act unconstitutional in a July 26, 2007 ruling. The 37 attorneys and paralegals who represented Lozano and other plaintiffs then filed a petition seeking $2.4 million.

The total bill the city could be forced to pay will be much higher, however, as that petition dealt only with legal work that was performed in the first round of the battle.

The plaintiffs’ attorneys will also be entitled to payment for work performed on the city’s appeal of Munley’s ruling, which was upheld by the Third Circuit on Sept. 9 this year, and its anticipated appeal to the U.S. Supreme Court. Payment of all fees was stayed pending final resolution of the case.

It could not be determined how much those fees will be, but they are likely to be substantial given the legal complexity of the case.

The city had hoped to force Scottsdale Insurance to foot the bill, but the company denied the city’s claim, citing an exclusion within its contract relating to coverage of public officials for wrongful acts.

Scottsdale argued that the policy only covered the officials if the plaintiff sought monetary damages. The Lozano suit did not seek money for the plaintiffs, only to prevent the implementation of the ordinance.

The city maintained the plaintiffs’ legal fees equated to monetary damages, therefore they should be covered. The dispute went to court and in May 2009, Caputo sided with Scottsdale. The Third Circuit’s ruling on Friday upheld Caputo’s decision.

The city now has two options left to avoid paying the fees. It could ask the U.S. Supreme Court to hear an appeal of Friday’s ruling. The other option lies with its expected appeal of the Third Circuit’s ruling in September that declared the Relief Act unconstitutional.

Should the high court take the case and overturn the ruling regarding constitutionality, the city would be the prevailing party and would not have to pay the plaintiffs’ attorneys fees.

It could not be determined Friday whether the city has yet filed that appeal. It also was not clear where the money would come from if the city ultimately loses the battle over the attorneys’ fees.

Mayor Lou Barletta could not be reached for comment Friday evening. In an interview in September, he said that all the city’s legal fees have been covered by a legal defense fund that was set up.

Barletta said the legal fees had reached about $500,000 as of that point. That figure only refers to fees of attorneys representing the city. It does not include fees the city will be obligated to pay the plaintiffs’ attorneys.

It could not be determined Friday how much money is in the defense fund or whether it could be utilized to pay the plaintiffs’ attorneys fees.