The insurance agency funding some of the city of Sandy Springs’ court battles with adult businesses recently won the right to stop cutting checks in one lawsuit, leaving the city to foot its own bill. But the city attorney says the lawsuits will continue and any financial impact on city coffers would be minor.
The insurance dispute is a behind-the-scenes court battle within a court battle in the city’s decade-old attempt to restrict where strip clubs and adult bookstores can operate.
The city is the target of three separate lawsuits from adult businesses alleging violations of their constitutional rights. The city is defended in those suits by the well-known Tennessee attorney Scott Bergthold, who specializes in crafting city laws to crack down on sexually oriented businesses.
The legal bills have been paid by the Georgia Interlocal Risk Management Agency, or GIRMA, a liability insurance agency operated by the Georgia Municipal Association. GIRMA was the city’s insurer until 2012, when the contract was rebid and OneBeacon won the contract instead, according to Sandy Springs city attorney Wendell Willard. However, GIRMA remained contractually obligated to fund the lawsuits it was already defending, Willard said.
“GIRMA, I think, got their feelings hurt” by losing the contract and decided to file its own lawsuit against the city, Willard said. GIRMA argued that it is not contractually obligated to continue funding the city’s defense in one of the lawsuits, involving the clubs Mardi Gras and Flashers and the bookstore Inserection, and that it should get reimbursed for what it has already paid.
GIRMA and the municipal association did not immediately respond to comment requests. According to the legal newspaper the Daily Report, the fees amounted to hundreds of thousands of dollars.
GIRMA’s case was dismissed in Fulton County Superior Court, Willard said, but the insurer filed an appeal and last month won its case in the state Court of Appeals. The court ruled that GIRMA does not have to defend the city in lawsuits that do not involve possible monetary damages. But the court also declined to make the city reimburse any existing legal fees.
In practical terms, Willard said, that means GIRMA can stop funding the city’s defense of two existing lawsuits—but would have to continue paying for a third. If the city has to pay for its own legal bills in those first two cases, Willard said, it won’t be a big amount because the city already won and they are under appeal. The third case, which Willard says GIRMA must still fund, is in an early stage and would be the most expensive.
“Most of the work’s already been done” in cases under appeal, Willard said, adding that the decision is “not likely to have a major financial impact at all…Ninety-five [percent] of the money’s already been spent.”
Willard said he does not believe the legal battles are affecting the city’s current insurance rates or premiums.
It also remains to be seen whether GIRMA can stay off the hook. Willard said the city will ask the Court of Appeals to reconsider its decision and, failing that, may appeal to the Georgia Supreme Court.
No matter what, Willard said, the city will see the lawsuits through with Bergthold defending them. “We’ve gone 10 years,” he said. “[We’re] not going to give up now.”
The three GIRMA-funded lawsuit defenses
- The owners of Flashers, Mardi Gras and Inserection, filed in 2006 and refiled in 2009. Status: City won in lower court, but under appeal. This is the case that GIRMA specifically sought to get out of funding in its own lawsuit.
- Main Stage/Coronet Club, filed in 2006. Status: Still pending in Fulton County Superior Court. GIRMA is obligated to continue funding the city’s defense in this suit, Willard said.
- Inserection, filed 2014. Status: City won, but under appeal. This case was filed after GIRMA was no longer the city’s insurer. But GIRMA is obligated to fund the suit because it is technically a spin-off from the 2009 Flashers/Mardi Gras/Inserection lawsuit, Willard said. GIRMA likely can get out of defending this lawsuit, too, if the recent Court of Appeals ruling stands, Willard said.