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Nearly 23 years after a police confrontation with the radical group MOVE caused a fire that consumed a block of West Philadelphia row houses, a federal appeals court has partially upheld a jury’s verdict in favor of a group of residents who said the city reneged on its repeated promises to fix chronic problems in their rebuilt homes. In its April 2005 verdict in Chainey v. City of Philadelphia, the jury awarded $534,583 to each of the 24 sets of plaintiffs, for a verdict of more than $12.8 million But the verdict was later reduced to $6 million � $250,000 per plaintiff � by Senior U.S. District Judge John P. Fullam, who took over the case after the death of the trial judge, Clarence C. Newcomer. Now the 3rd U.S. Circuit Court of Appeals has upheld awards of $150,000 to each plaintiff on their contract claims, affirming $3.6 million from the original verdict. But the court said Fullam must reconsider whether each of the plaintiffs is entitled to an additional $100,000 on their substantive due process claims. Lead plaintiffs attorney Robert T. Vance Jr. said he is confident that the $2.4 million awarded by the jury on the substantive due process claims will ultimately be upheld because there was “more than enough evidence” that the city had “played fast and loose with the facts.” Assistant City Solicitor Craig R. Gottlieb said the city is “very pleased with the result,” because a verdict of $12.8 million was first reduced to $6 million and has now been reduced to $3.6 million. Gottlieb said the appellate court has also “cast considerable doubt” on the plaintiffs’ prospects of winning reinstatement of the $2.4 million award for the substantive due process claim. And if the lower court sides with the city, Gottlieb said, the plaintiffs lawyers would no longer be entitled to the $1.1 million award of attorney fees they requested because the substantive due process claim was the only remaining federal civil rights claim in the case. In the suit, the residents of the 6200 block of Osage Avenue claimed the city had promised to do whatever was necessary to repair their homes, which were rebuilt after the May 1985 bombing that killed 11 members of the radical group MOVE and set off a blaze that destroyed 61 homes. But the newly constructed homes were plagued with problems, the suit alleged, and former Mayor Edward G. Rendell had pledged to fix them all. The suit alleged that the city reneged on that promise soon after Mayor John F. Street took office when Street conspired with other city officials to misuse police powers to force the plaintiffs from their homes. As recounted by 3rd Circuit Chief Judge Anthony J. Scirica, the story of the rebuilding of the Osage Avenue homes is a tortuous one that began with a builder who misappropriated funds and was convicted on theft charges, and later resulted in expenses that mounted at nearly every step due to shoddy workmanship that required a series of attempted repairs. For two years, the residents lived in substitute housing at the city’s expense. But in 1987, when they moved into their newly constructed homes, they quickly found a host of problems, Scirica noted, including “leaking roofs, defective bathroom and kitchen plumbing, improper or inadequate flooring, nails popping out of walls, bursting pipes, defective electrical wiring, flooded basements and backyards, and non-functioning appliances.” In June 1987, the city hired the Redevelopment Authority to oversee repairs, but Scirica noted that despite a “continuous flow of money into the project,” it was estimated in 1995 that an additional $8.5 million was needed to complete the project. Work continued, but in 1999 the estimated costs rose again when workers discovered even more problems. Rendell, in one of his final acts as mayor, sent a letter to the homeowners that reaffirmed the city’s promise to complete the necessary repairs. But according to the suit, after Street took office in January 2000, city officials balked at the Redevelopment Authority’s request for an additional $2.9 million. A city audit estimated that the true cost of completing the project was $129,000 per home, or more than $7.8 million, in addition to the $13 million the city had already spent for the repairs. In July 2000, the suit said, Street summoned the homeowners to a meeting and presented each with a letter informing them that the homes were found to be “imminently dangerous” because of a problem with air vents that could potentially draw carbon monoxide into the houses. Street’s letter said the city would pay $125,000 per house, plus $25,000 for relocation expenses, but that the residents would be required to vacate their premises within 45 days, and that if they refused, their homes would be taken through eminent domain. According to the suit, residents of 37 homes accepted the offer, but the remaining 24 rejected it and filed suit. The jury found in favor of the plaintiffs on two contract claims, finding that Rendell’s letter was a contractual promise and that the Redevelopment Authority had also breached its contract to oversee the repairs. On those claims, the jury awarded $150,000 in “expectation damages” based on the RDA contract and $100,000 in emotional distress damages based on the Rendell letter. The jury also awarded each plaintiff $52,500 on a conspiracy claim, $80,000 on a takings claim, as well as $100,000 in compensatory damages and more than $52,000 in punitive damages on the substantive due process claim, for a total verdict of $12,816,000. But the verdict was later slashed by more than 50 percent when Fullam tossed out all the punitive damages, the conspiracy claims and the takings claim awards and held that the substantive due process awards were duplicative of the contract claim awards. Fullam’s ruling left each plaintiff with a $250,000 award, for a total judgment of $6 million against the city. On appeal, Assistant City Solicitors Gottlieb and Richard G. Feder argued that Fullam erred by refusing to toss out the contract claims on statute-of-limitation grounds. But Scirica found that Fullam had properly ruled that the city had waived that defense by failing to raise it until post-trial motions. “Although a statute of limitations defense does not necessarily have to be raised in the answer, it does not follow that a limitations defense can be raised at any time. In this case, it was raised too late,” Scirica wrote. The city also argued that the plaintiffs had no right to sue over an alleged breach of the contract between the city and the Redevelopment Authority. Scirica rejected that argument, too, saying the plaintiffs were “third-party beneficiaries” of the contract and therefore “may properly assert claims … against both the city and the Redevelopment Authority.” But Scirica agreed with the city’s argument that Rendell’s letter should not have been treated as a binding contract because it lacked the approval of the city’s Law Department and Finance Department as required by the Philadelphia Home Rule Charter. Fullam had concluded that Rendell had “apparent authority,” but Scirica disagreed, saying Pennsylvania courts have held that the theory of apparent authority cannot be invoked in cases where a statute “gives public notice of the required procedures for governmental contract approval.” As a result, Scirica found that the awards of $100,000 in emotional distress damages to each plaintiff, which were premised solely on the Rendell letter, cannot stand. Scirica found that because Fullam had ruled that the $100,000 compensatory awards on the substantive due process claims were “duplicative” of the Rendell letter contract claim awards, the lower court never reached the issue of whether the awards were valid. But Fullam must now reach those issues, Scirica said, because the awards premised on the Rendell letter have been overturned. At trial, Scirica said, there was evidence “that the city and Mayor John Street ‘manufactured’ the ‘imminently dangerous’ designation to pressure the homeowners to accept the city’s offer and move out.” The “crux” of the plaintiffs’ claim, Scirica said, “is that the city falsely declared their homes imminently dangerous as a pretext to avoid completing the promised repairs.” But the city’s lawyers argued that since the plaintiffs remained in their houses at all times, no deprivation occurred. In response, the plaintiffs lawyers argued that courts can find a deprivation of substantive due process even without an actual property loss. Scirica said the 3rd Circuit would not address those issues because Fullam should have the first chance to do so. On remand, Scirica said, Fullam must first decide whether the city waived its right to challenge the substantive due process awards by failing to raise any such objection during the trial. If Fullam agrees to hear the city’s arguments, Scirica said, Fullam must then decide whether each plaintiff has adequately proven causation and damages. On that final point, Scirica noted that the testimony from the plaintiffs varied. Some testified that they suffered emotional damage from the ongoing stress of seeking repairs, while others testified that they suffered no emotional harm, and still others testified about emotional harm from the 1985 fire. (Copies of the 52-page opinion in Chainey v. City of Philadelphia , PICS No. 08-0589, are available from The Legal Intelligencer . Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. Some cases are not available until 1 p.m.) �

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