Taxpayers Feeling the Bite of Costly Lawsuits

On May 5, Cape May dismissed litigation it instituted four years ago against the construction and design firms responsible for building Convention Hall. Over those years, the city incurred an expenditure of $450,000 in legal fees.
The reason for the litigation was the allegation that the firms were negligent in the building’s construction at an elevation that was below FEMA guidelines, causing the city to pay extraordinary amounts for flood insurance. The reason for dismissing the case was that FEMA says the building’s fine, although there is no guarantee the flood insurance premiums will decrease.
Any municipality may deal with litigation as part of running a government, but, in several cases, county taxpayers have been left shaking their heads at high bills for litigation gone wrong.
West Wildwood is a small municipality, with approximately 600 residents, and, according to the U.S. Census Bureau, 276 households. It is not a rich community, as shore communities go, and the median household income around the 2010 census was $39,000. The median age of the population is 53, with over a quarter of the residents having passed their 65th birthday.
Borough government, in the form of a three-member commission, lives off an annual budget of less than $3 million.
In July 2017, a jury awarded a member of the borough’s five-person police force an almost $1.8 million judgment against the municipality. To make matters worse, the borough’s insurance carrier refused to pay its share, charging that the borough “deliberately breached” a clause in its coverage contract. A state appeals court agreed with the carrier, leaving the bill with the taxpayers.
The police officer, Jacquelyn Ferentz, who was discharged by a previous administration, filed two suits. One was settled by the borough in secret and discovered by the borough’s insurance carrier, through an open public records request. That settlement resulted in Ferentz being rehired, with back pay and promotion to chief of police.
The fact that Ferentz was also the housemate of Mayor Christopher Fox provoked additional press coverage.
Her second suit was not resolved in that early settlement.  Allowed to go forward, it resulted in the large judgment, which the insurance carrier successfully dodged.
One might think that municipal settlements resulting in sizable taxpayer burdens are rare events, but that thinking would be wrong.
In March 2015, Cape May City Police Chief Robert Sheehan was publically stripped of his rank as chief by a city council that voted to remove him one day before his probationary period would have ended. One day, in other words, before his position and rank would have been permanent.
Sheehan was returned to the rank of captain. With the chief’s position open, Sheehan continued to run the department for over a year before a new chief was appointed. He needed to be removed as chief but could still be trusted to manage the affairs of the department as its ranking officer.
That debacle also involved city officials acting to force the retirement of a police lieutenant, Clarence Lear, who ran for and won the mayor’s position in the next election. It involved a clash between the city and the county prosecutor, administrative hearings over a 7-year-old technical violation of firearms qualification dates, an attempt to recall the then sitting mayor, and, in the end, Lear’s election.
Finally, the day came, when Sheehan’s lawsuit over his removal as chief was settled by the city, with Sheehan, still a captain on the force, receiving $800,000 without having to resign his position.
Both Cape May City and West Wildwood saw the experience repeat itself.
In 2016, a harassment suit filed by an openly gay police officer, Steven Pascal, against Cape May resulted in a settlement award of $369,000. Just this year, litigation filed by another Cape May police officer, Douglas Henderson, whose complaint was tied to administrative hearing testimony during the convoluted Sheehan litigation, had his suit settled, with a payment of $275,000, of which almost $100,000 must be paid by the city taxpayers.
This past March, West Wildwood settled litigation brought by an ex-class II officer, Jeremy Mawhinney, for $215,000. Mawhinney alleged that he lost his job because he wrote tickets for violations by political supporters of Mayor Christopher Fox. He further stated that he was directed by Police Chief Ferentz to target the mayor’s opponents. The borough denied the allegations and admitted no wrongdoing in the settlement.
Other county municipalities are not immune to the process of settlements and judgments that drive up taxpayer burdens.
A $550,000 settlement in West Cape May resulted in the borough issuing bonds to cover the $300,000 portion of the settlement that was the taxpayers’ burden. The litigation was filed, in 2012, and finally settled, in 2016. The public meeting to consider the bond ordinance had to be moved to a venue that could accommodate the over 30 residents of the small borough who turned out.
The litigation involved a winery, located within 200 feet of the then mayor’s home. Disputes abounded, with the winery alleging that then mayor, Pam Kaithern, used the borough’s construction oversight role to harass the winery owners because the winery sought to hold weddings at its location. The allegation was that the mayor, who also performed weddings and received compensation for them, did not appreciate the competition.
Accusations flew back and forth alleging on the one hand construction code violations at the winery, noise problems during wedding events, and similar infractions. On the other side came complaints of harassment by borough officials urged on by a mayor who was protecting her wedding revenues and whose ego became involved in the controversy. The borough admitted no fault in the settlement agreement.
In March of this year, Ocean City agreed to a $300,000 settlement with a police officer who alleged sexual harassment.
Long-standing litigation involving former Wildwood Mayor Gary DeMarzo, claiming malicious prosecution by the previous County Prosecutor Robert Taylor, concluded with an undisclosed settlement.
In August 2019, a suit by yet another police officer, this one in Sea Isle City, resulted in an undisclosed settlement.
Lawsuits are a part of life in a litigious society. Ultimately, it is up to the voters to decide when municipal officials are engaged in or mismanage litigation that costs the taxpayer not just the settlements or judgments, but also the legal services fees.
The handling of the Robert Sheehan case by municipal officials was a visible part of the 2016 election, in which Lear unseated long-standing Mayor Edward Mahaney. Kaithern, who was first elected in 2001, in West Cape May, lost her seat, in 2017. What role the settlement played in that loss is unclear.
Back in West Wildwood, Mayor Christopher Fox still took more heat from some members of the public when the commission he chairs hired his 22-year-old daughter as a full-time police officer to work under Ferentz. Fox recused himself in the vote.
Meanwhile, the taxpayers of West Wildwood continue to pay $5,000 a month to Ferentz for a total of 200 months. Her attorney in the case collects $18,000 a month for 42 months.
To contact Vince Conti, email vconti@cmcherald.com.