October 7, 1997
by Edmund Tsang
Despite reaching settlements in three recent lawsuits involving charges of discrimination in its apartment rental policies and selling all its apartment units in summer, 1996, Mitchell Brothers, Inc. (MBI) finds itself once again in court over the matters related to these lawsuits. This time, MBI is the plaintiff, and the defendant is the Aetna Insurance Company. MBI wants the court to rule that its policies with Aetna require the insurance company to pay for the litigation costs incurred in two of the recent housing discrimination lawsuits.
One of the cases, Lowman vs. MBI, was a class-action lawsuit joined by the U.S. Department of Justice, which alleged that MBI used coded cards to identify African-American applicants for purposes of discrimination in renting apartments managed by MBI. This case was settled in August, 1996 for $1.7 million, in which MBI paid a $75,000 fine and allocated $250,000 to start a fair-housing center in Mobile.
The plaintiff in the other case, Craft vs. MBI, charged that she was fired from her position as manager of an apartment complex under MBI management because she refused to follow the discriminatory policies. This case was settled in December, 1996, after a jury had already been impaneled, when a witness produced some of the original coded cards that were used over one ten-month period in one apartment complex managed by MBI to identify African-Americans for purposes of discrimination.
Trail date for the present case between MBI and Aetna concerning insurance coverage has been set for October 27 in the courtroom of Judge Braxton Kittrell. A call to the state court as The Harbinger went to press on Oct. 3 confirms the October 27 trial date.
The two folders containing the papers for this latest lawsuit at the state circuit court stand almost a foot tall. There are another two folders of court papers at the federal court involving the same two parties, but with Aetna the plaintiff and MBI the defendant. Attorneys for Aetna argued in the federal case that MBI tries "forum shopping" by filing a lawsuit against Aetna in the state court. Attorneys for Aetna also argued that the federal court is the proper forum to decide the issue over insurance coverage of attorney fees defending the housing discrimination lawsuits, since both the Lowman and Craft cases were heard in the federal court.
This case in the federal circuit court was dismissed "without prejudice" by Judge Alex Howard in August, 1996. Judge Howard ruled in favor of MBI, which argues that the state case will address all the issues of the federal case plus other issues. Under Howard's ruling, Aetna retains the right to re-file the case in federal court in the future.
Mack B. Binion, representing MBI, said In an August, 1996 letter to the presiding judge hearing the case in state court that delay by Aetna in responding to request by MBI in the Lowman case, as well as "a series of flip-flops" by Aetna -- accepting coverage, denying coverage, and then accepting coverage -- caused MBI to incur additional litigation costs.
W. Alexander Moseley of the firm Hand Arendall, LLC, stated in a letter filed with the state circuit court that "because of its insurer's [Aetna] substantial delay in advising MBI of their position regarding coverage, MBI incurred additional legal expenses -- had Aetna provided defense, MBI would have avoided substantial legal expense incurred in connection with the retention of our firm and other counsels with whom we associated in the defense of the Lowman case on behalf of MBI." Moseley represented MBI in the Lowman class-action lawsuit.
The claim of Aetna's liability for the attorney fees incurred in defending the housing discrimination lawsuits was also made by Abraham Mitchell, an owner of MBI and a defendant named in all three lawsuits involving housing discrimination. His deposition in July, 1997 contains the following exchange: "Q: What are the damages that you claim in this lawsuit as a result of the delay from September to December in notifying Aetna of the Lawman matter? A: The attorneys' fee that we discussed."
Aetna said in state court papers that it sent a letter in January, 1996 to James Spafford, an executive with MBI and a defendant in all three lawsuits alleging housing discrimination, "declining coverage based on the allegations of the complaint and the exclusions in the policy." The letter said while MBI had policies with Aetna covering "bodily injury, property damage, personal and advertising injury ...and bodily injury and property damage liability, and personal and advertising injury liability," none of the allegations [housing discrimination] "qualify" as defined by the policies. "The acts of discrimination constituted an intentional violation of law, and thus, fall outside the policy," attorneys for Aetna stated in papers filed with the state court.
According to documents submitted by attorneys for Aetna, Moseley wrote on MBI's behalf in February, 1996 asking Aetna to reconsider its decision declining coverage on the basis that the housing discrimination complaint alleged "unintended and unexpected person injury, through unintentional acts."
According to court papers, Aetna offered in April, 1996 to contribute $50,000 to the settlement of the Lowman case, "but the offer was refused." An earlier offer to defend MBI was also refused, attorneys for Aetna said in court papers, citing a February, 1996 letter by Moseley to an Aetna representative, which stated: "Although MBI welcome the offer of a defense, we would appreciate your postponing any formal appearance in the litigation" because of "on-going settleman negotiation."
Attorneys for Aetna said in court papers that the insurance company had initially offered to enter the Lowman case on MBI's behalf under "reservation of rights."
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