Posted: May 8
Updated: Today at 3:44 AM
Legal bills may sock Hazleton

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

WILKES-BARRE – Hazleton city could be on the hook for millions of dollars in attorneys’ fees if a federal judge agrees with its insurance carrier’s position that it is not responsible to pay costs associated with legal challenges to the city’s Illegal Immigration Relief Act.

Scottsdale Insurance Co. of Arizona claims exclusions within the city’s insurance contract mean the firm is not liable to pay attorneys’ fees being sought by plaintiffs who convinced U.S. District Judge James Munley to strike down the immigration ordinance in 2007.

The company also denies it is responsible to continue to defend the city in its appeal of Munley’s ruling, which is now awaiting a decision by the Third Circuit Court of Appeals, or for any further attorneys’ fees that lawyers for the plaintiffs are continuing to rack up as they fight that appeal.

Attorneys for the city and Scottsdale appeared before U.S. District Judge A. Richard Caputo in Wilkes-Barre on Thursday to argue their positions.

The stakes are huge for the city.

Should Caputo rule in Scottsdale’s favor, the city would have no insurance coverage for legal fees, already calculated at $2.4 million, that the plaintiff’s attorney would be able to recoup from if they prevail in the appeal. That does not include additional fees associated with the appeal, which the city estimates will be millions more.

The dispute centers on a federal lawsuit the American Civil Liberties Union filed in 2006 that challenged the constitutionality of the relief act, which set heavy fines for landlords who rented to illegal immigrants and businesses that hired them.

In a July 26, 2007, ruling, Munley declared the act unconstitutional and issued an injunction blocking its implementation. The ACLU and law firms that helped the group then filed a petition seeking $2.4 million in legal fees based on a federal law that allows the prevailing party in a civil rights case to obtain attorneys fees from the defendant.

The key issue regarding the insurance dispute centers on wording within a section of the city’s policy that covers public officials for wrongful acts.

Scottsdale says the policy covers officials only if a plaintiff seeks monetary damages against them. The initial suit filed by the ACLU initially sought a monetary judgment, but the group later filed an amended complaint that removed the request for damages. That suit sought only to prevent the implementation of the ordinance.

Scottsdale contends that because the plaintiffs did not seek any money, the lawsuit did not fall within coverage provisions of the policy. That also means Scottsdale has no duty to continue to defend the city in its appeal, and also has no liability for the plaintiffs’ attorneys’ fees, it claims.

At Thursday’s hearing, Randy Hess, attorney for Hazleton, argued Scottsdale is obligated to pay the plaintiffs attorneys’ fees – if Hazleton ultimately loses the case – under a separate provision of the policy that mandates the company pay all “damages.â€