By Joshua Benton
Blade Staff Writer
A Toledo-Lucas County Port Authority board member is questioning whether the agency should continue to have its legal work done by the Spengler Nathanson law firm, after it made a judgment he says could have cost the agency millions.
“I just want to make sure that taxpayers are getting the bang for the buck they deserve,” board member Jerry Chabler said.
For six years, port officials dealt with a looming fear: that a multi-million-dollar legal settlement in the battle over noise at Toledo Express Airport could bankrupt the agency.
In 1993, a group of homeowners living near the airport filed suit against the port authority over the wall-rattling noise from passing jets, and officials feared a judgment that could reach as high as $10 million.
But under the terms of a $4.6 million settlement the port authority reached with the homeowners Friday, it will only have to pay $900,000 with its own money. The port authority’s insurance companies will pick up the remaining $3.7 million.
But the port authority almost had to pay for it all because Spengler Nathanson told board members that the agency’s liability insurance would not cover any of the payouts to homeowners, board members said.
That legal advice, which turned out to be incorrect, has led Mr. Chabler to question whether the port authority should keep doing business with the firm.
“I want a thorough explanation as to why one of Toledo’s biggest law firms told us our insurance wouldn’t cover our costs,” he said.
Spengler Nathanson has been doing legal work for the port authority since the agency began operation in 1955. Joseph Nathanson, one of the firm’s founders, helped craft the state law that allowed the port authority to be established and served as an early general counsel for the port authority.
The law firm initially defended the port authority when the homeowners filed their suit in 1993.
The Chicago law firm of Hopkins & Sutter was enlisted to assist on the case. Hopkins & Sutter is one of the nation’s top firms on airport noise issues, William Connelly, a Toledo attorney, said.
But Spengler Nathanson and Hopkins & Sutter told the port authority that insurance had never covered settlements in an airport noise case, Mr. Connelly said.
They said that in the event of a judgment against the port authority or a settlement, the agency likely would have to come up with the cash.
Considering the port authority has a cash reserve of only $2.9 million, that threatened the agency with potential bankruptcy.
But last year, the port authority brought in Mr. Connelly, of Connelly, Soutar, & Jackson, to look at the issue. Mr. Connelly, who said that insurance coverage is “an area of concentration” for his firm, felt the insurance companies should be legally bound to pay, and found arguments to support his view in their policies.
“It’s not a clear point, but we felt we could convince [the insurers] to pay,” he said.
In May, the port authority sued several of its insurers to determine if they would be forced to pay for a settlement.
On Friday, in announcing the settlement with homeowners, the port authority announced a settlement on its suit against Coregis Insurance, which agreed to pay $3.5 million of the $4.6 million deal.
An insurance consortium known as the London Cos. has agreed to pay $200,000.
The port authority is suing the London Cos. in an attempt to get it to pay the remaining $900,000 cost and the nearly $1.5 million the port authority has spent in legal fees fighting the airport noise battle.
Mr. Chabler said he wonders why Spengler Nathanson didn’t argue that the insurance companies should have to pay.
“It might have saved some time and legal fees if Spengler Nathanson had just done what Bill Connelly did a few years earlier,” he said.
Port board Chairman G. Ray Medlin said he does not want to comment on Spengler Nathanson’s legal work on the case.
“I think we got some excellent advice from Bill Connelly,” Mr. Medlin said. “I don’t have anything to say about the other advice we got.”
But he did say he would be open to discussing the firm’s role with the port authority, a discussion Mr. Chabler said he intends to begin.
Mr. Connelly said that Friday’s settlement was, to his knowledge, the first time an insurance company has agreed to pay part of a settlement of an airport noise suit.
Gary McBride, managing partner of Spengler Nathanson, said he was not directly involved in setting strategy in the case, and referred questions to his partner, Teresa Grigsby.
Ms. Grigsby and port authority President James Hartung did not return phone messages yesterday. Representatives of Hopkins & Sutter could not be reached for comment.