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A group of Philadelphia attorneys have secured a $2.5 million settlement for a northwest Pennsylvania food products manufacturer that said a municipal government had hindered its growth by implementing zoning ordinances designed to prevent its expansion. The settlement in Pellegrino Food Products Co. v. City of Warren involves $1.5 million that will be available to the food products manufacturer without further litigation as well as assigning to the plaintiff the Warren city government’s $1 million general liability insurance policy, a claim under which has previously been denied by that policy’s underwriter, attorneys involved in the case said. Of the $1.5 million effectively guaranteed, $500,000 will be given to Pellegrino by the City of Warren itself, and $1 million will come from the city’s municipal liability insurer, according to Kevin Berry of Cozen O’Connor in Philadelphia, who represented Pellegrino along with Thomas Fiddler and Margo Pagano-Kelleher. Berry said he and co-counsel would be challenging the denial of Warren’s claim under its general liability policy. According to court documents filed by Pellegrino Food Products Co., the family-owned business has been operating for over five decades and has been at its current location in Warren since 1974. The company began by canning peppers, and now is involved in the production of foods such as stromboli, pizza bread and pot pies. In 1981, according to the court papers, the property on which Pellegrino sits was rezoned to R-2 residential, though the company was allowed to stay in its location via a non-conforming use. In 1993, Pellegrino requested from the city a special exception so that it could build a freezer next to its plant. The company was given such permission, according to court papers it filed, but only on the condition that it change its parking plan and seek expert certification as to its noise emanations. Five years later, the company claims, the city’s zoning officer sought to limit the use by company employees of parking on an adjacent street, and, the year after that, denied a Pellegrino request to have its property rezoned. Pellegrino also asserted in court papers that subsequent attempts by the company to request expansion permission have been met with proposals for “onerous conditions” from the city. Pellegrino filed suit in federal court against the City of Warren and a number of its municipal officials. Berry said Pellegrino’s case, which was filed in late 1999, was about to go to trial in 2002 when the city official defendants filed a motion for summary judgment, arguing qualified immunity. At roughly the same time, Berry noted, the 3rd U.S. Circuit Court of Appeals had, in its January 2003 decision in United Artists Theatre Circuit Inc. v. Township of Warrington, raised the standard for proving substantive due process claims from “bad faith and improper motive” to “shocks the conscience.” Still, the 3rd Circuit, affirming the Western District, ruled that the city officials could not establish qualified immunity to Pellegrino’s action. The case went back to the Western District, where it was scheduled for trial in mid-March 2005 before Judge Sean J. McLaughlin. At a conference in December 2004, Berry said, McLaughlin requested that Pellegrino make a formal demand, and the company responded with the figure $4.6 million. Berry said the parties engaged in unfruitful conversations about settling the matter until mid-February, when McLaughlin contacted counsel in the case and requested that they not settle on the eve of trial, but try to reach an agreement sooner rather than later if they were going to settle at all. Subsequently, Berry and Arthur Marinucci of Quinn Buseck Leemhuis Toohey & Kroto in Erie – who acted as counsel for the City of Warren when its official solicitor acknowledged a potential conflict of interest if he took on the case – began a series of settlement discussions that lasted over the course of roughly 10 days, with McLaughlin being given regular updates on the status of those talks. By the end of February, Berry said, he and Martinucci were close to reaching a compromise, and McLaughlin helped them arrive at a figure that satisfied both Pellegrino and Warren. The $2.5 million settlement was agreed to on March 1. (Warren’s municipal liability insurer, Coregis Insurance Co., was represented by attorneys from Pietragallo Bosick & Gordon in Pittsburgh. A call to that firm seeking comment was not immediately returned.) Berry said municipal officials need to be careful not to “exert their personal points of view” where zoning regulations are concerned. “I do think that there is a limit to what municipalities can do to stunt or to thwart growth that they don’t like,” Berry said. Martinucci warned that if there’s even an appearance of an improper result when it comes to zoning ordinances, municipalities “expose themselves to the cost and hassle of litigation.” “I don’t think that [the outcome of this case] necessarily establishes any new law,” Martinucci said. “I think it’s just a bit of a cautionary tale for how municipalities go about enforcing zoning [regulations].”

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