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HABC SUCCESSFUL IN ITS APPEAL OF $2.6 MILLION LEAD PAINT JUDGMENT

(Baltimore – January 19, 2012) The Maryland Court of Special Appeals overturned a $2.6 Million lead paint judgment against the Housing Authority of Baltimore City (HABC). HABC appealed the multi-million dollar judgment in Fulgham, et al. v. HABC because the plaintiffs failed to give proper notice of their claims. In addition evidence showed, through test results, the absence of any lead paint at one property and the absence of lead dust at the other property in question.

The overturned judgment was the basis of the recent attempt to seize 20 HABC vehicles. HABC is pleased that this decision effectively ends those efforts.

“HABC is committed to addressing lead paint judgments in a fair and responsible way; however, we also have responsibility to defend against unfounded lawsuits to protect limited resources for the 50,000 low income housing residents we serve today,” said HABC Executive Director Paul Graziano. “Of course we remain deeply concerned about anyone who may have suffered any injury as a result of lead paint poisoning.”

HABC has been in full compliance with Maryland’s Lead Paint Risk Reduction Act since 1996. HABC continues to address ongoing lead paint legal liabilities. Recognizing that ongoing litigation involving lead paint liability is complex, HABC has compiled a general fact sheet on the issue to increase public understanding.

HOUSING AUTHORITY OF BALTIMORE CITY
Q&A FACT SHEET CONCERNING LEAD PAINT LITIGATION ISSUES

Why is HABC refusing to pay the judgments?

Contrary to published articles, HABC has never stated that it will not pay the judgments. In light of the statutory and regulatory restrictions on the use of HABC funds, HABC cannot pay the judgments, because it does not have the means or independent authority to pay. This distinction is very important. HABC is pursuing all viable options to address the issue. If the current judgments totaling $12 million represented the limits of HABC's exposure, the situation could be handled very differently. However, given 175 additional claims, value at nearly $1 billion and at least another six-year window for claims, HABC must consider a much broader approach.

Why does HABC retain outside counsel?

Lead defense litigation requires specialized legal representation. HABC has engaged outside counsel with extensive experience in handling lead paint cases. HABC’s counsel has successful defended 95% of its resolved cases representing $873 million in claims.

Why doesn’t the Mayor order HABC to pay the judgments?

HABC is not a City agency; therefore the Mayor does not have the legal authority to direct the operations of HABC subsidies to provide low income housing from the United States Department of Housing and Urban Development (HUD). Also, the HABC Board of Commissioners, the Executive Director and all HABC staff must comply with the federal requirements that govern the use of the federal funds. Therefore, neither the Board of Commissioners nor Commissioner Graziano can pay the judgments without HUD’s approval.

What is HUD’s involvement?

HABC’s funds to provide public housing and voucher housing assistance to approximately 50,000 low income residents come from Federal sources that restrict the use of those funds and other HABC assets. Therefore, the enforcement of these judgments involves Federal interests. Ultimately, HUD has jurisdictional authority over this issue. Neither the Mayor nor HABC can resolve this issue independent of HUD. For example, the Federal District Court has ruled in one case that the Federal funds in HABC’s bank accounts are protected from garnishment.

Is HABC currently poisoning children who reside in housing?

Protecting residents (especially children) is a top priority for HABC. [1] HABC has been in compliance with the Maryland Lead Paint Risk Reduction Act, since it was implemented in 1996. This compliance involves, among other things, a full risk reduction process prior to each new occupancy including a visual inspection of the unit (interior and exterior) and testing. The lead paint judgments and claims currently being discussed relate to lead exposures that occurred or allegedly occurred 15 to 20 years ago, before enactment of the law.

Why doesn’t HABC have insurance?

HABC’s insurance for lead paint liability was cancelled in 1996. Even if HABC had been able to acquire lead liability coverage, it would not cover claims already filed or occurrences, like the pending cases, that predate the inception of the policy. No commercially reasonable amount of insurance or self insurance would be adequate to cover the potential liability reflected in the claims asserted (exceeding 800 million dollars). Although, the Maryland General Assembly provided a $200,000 cap on claims against housing authorities, including HABC, effective July 1, 1988. However, Maryland’s courts have not uniformly applied that cap to claims against HABC alleging lead poisoning.

Do other housing authorities have the same problem with unpaid lead paint judgments?

After checking with other housing authorities with housing stock similar to Baltimore, we have concluded that HABC’s experience with the number of cases and amount of lead paint judgments in addition to the large number of pending cases is unique. Other housing authorities have not experienced either the high volume of cases or the large size of the judgments.

Why doesn’t HABC raise money to pay the judgments?

Each housing authority, including HABC, receives a specific allocation of federal funds[2], and there are no provisions for seeking supplemental grants from the federal government to pay judgments or any other unfunded needs. For example, HABC has over $800 million in needs (such as new heating systems and roofs) for which we receive no additional federal funding. Also, its rents are federally regulated (unlike private landlords), and contrary to statements in the Baltimore Sun, it is not feasible for HABC to issue bonds to pay the judgments. Further, HABC cannot levy taxes to raise money.

Why has HABC paid outside attorneys $4 Million to avoid paying $12 Million in judgments?

The Baltimore Sun article entitled, Housing Authority Racks Up Legal Bills, printed Sunday, September 18, 2011 falsely indicated that HABC has spent $4 million in legal fees merely to avoid paying $12 million in court-ordered judgments surrounding 10 cases. In truth, the funds were paid to defend the agency in hundreds of cases. For instance, in 2009 alone, our defense saved HABC more than $100 million in unfounded claims.

How many lawsuits is the agency facing and has there been an increase in legal action?

Since 2004, HABC has been sued in 327 cases lead paint cases. In 2009, there was a spike in the number of cases HABC had to defend. Over this 8 year period, 71.8% of the lead paint cases were filed against HABC in the last 3 years (2009-2011).

HABC Lead Paint Litigation- Cases Assigned to Outside Counsel by Year

2004: 27
2005: 10
2006: 12
2007: 22
2008: 34
2009: 61
2010: 87
2001: 119

Total: 372

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