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One of the nation’s largest real estate investment trusts will pay a multimillion-dollar settlement to more than 1,000 residents of an oceanfront apartment building in South Florida to end a class action mold lawsuit. The rental building’s owner, publicly traded Archstone-Smith Operating Trust, has said in filings with the Securities and Exchange Commission that total repair, settlement and related costs in the case could reach $25 million. The settlement calls for Englewood, Colo.-based Archstone-Smith to pay 100 percent of each class member’s personal property damages, 65 percent of each tenant’s rent obligation, $3,000 in “aggravation damages” for each class member who lived in the Miami-area building and 2.5 times actual expenses for certain medical conditions. Tenants of Harbour House in Bal Harbour, Fla., do not have to prove that mold caused their medical ailments. The settlement agreement did not estimate the total amount to be paid by Archstone-Smith. Under the deal approved Friday by Miami-Dade Circuit Judge Jeri B. Cohen, the company agrees to payments for every qualified class member in the lawsuit who lived in the 452-unit, oceanfront tower between June 2002 and January 2003. It was during that period, the class members alleged, that an improperly executed renovation of the building’s heating, ventilation and air-conditioning system allowed harmful mold to spread throughout the building. The settlement preserves the right of class members to pursue personal injury claims in a jury trial if they don’t settle their individual claims in mediation. The class members, however, waived their right to pursue punitive damages. Earlier this year, Archstone-Smith sued the architect and engineer that handled the renovation of Harbour House for breach of contract and negligence. That pending suit, filed in Miami-Dade Circuit Court, seeks more than $30 million from prominent Miami architect Bernard Zyscovich, Orlando, Fla.-based engineering firm Tilden Lobnitz & Cooper, and Pompano Beach, Fla.-based Penn Refrigeration & Air Conditioning. The lead counsel for the plaintiffs, shareholder Joy Spillis Lundeen of Stearns Weaver Miller Weissler Alhadeff & Sitterson in Miami, said current and former tenants are “getting real benefits, financially and in the form of remediation and in the right to pursue personal injury claims.” Lundeen worked on the case with shareholder Ana Barnett, of the same firm. Archstone-Smith’s lead lawyer, Francisco Silva of Akerman Senterfitt in Miami, declined comment until he could get permission from his client to discuss the case. But in an affidavit filed in the suit, Silva wrote that the company holds to its view that the claimants were so diverse that the suit should not qualify for class certification. However, he wrote: “Given the cost and uncertainties of continued litigation, Archstone-Smith decided to explore the possibility of a class settlement.” Mold lawsuits are mushrooming in Florida and around the country, with thousands filed against homebuilders for negligence and against home sellers for failing to disclose the problem. So-called toxic mold can grow in homes, schools and even cars due to water leaks. According to some medical experts, it can cause rashes, bloody coughs, sinus infections, sore throats and even memory problems. No certain link has been established between health problems and mold, but that hasn’t stopped plaintiffs lawyers. The litigation explosion has prompted insurers to seek to jack up premiums, withdraw from the market or exclude mold damage from coverage policies. In more than 35 states, insurance companies have successfully lobbied state insurance boards to eliminate mold coverage in their policies even when an event that led to the mold is covered by a policy. Other insurance companies are capping payments for mold or offering it as a separate add-on protection area, according to both insurers and plaintiffs lawyers. The field of mold litigation is still relatively new in Florida. But in Texas, a family won a $32 million verdict after their 22-room mansion was found to be infested with mold and the father’s mental capacity allegedly was reduced by his exposure. At Harbour House, experts found mold in 450 of the tower’s 452 units, Lundeen said. In some units, they found mold growth 100 times the naturally occurring levels outdoors. As units have been repaired, tenants have had to move out, in many cases receiving allowances for food and alternative housing. The settlement requires Archstone-Smith, which owns 230 apartment complexes across the country, to finish repairing each apartment, a process the company began after the suit was filed last year. Lundeen said that part of what made the settlement possible was that Archstone-Smith hired as its defense co-counsel Peter Morgan, of Dickstein Shapiro Morin & Oshinsky in Washington, D.C., whose practice is devoted to alternative dispute resolution of complex class actions. Morgan stressed that the company settled as a practical matter, but that the settlement is unlikely to set a precedent for any other mold cases brought against the REIT. The Harbour House air-conditioning system was a unique situation, he said Monday, in which the air conditioning was shut off for several months. One lasting effect of the case, Lundeen said, is that South Florida landlords planning heating, ventilation and air conditioning system renovations will have to give more thought to the potential impact on tenants.

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