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$3.725 million settlement reached in battle between Treasure Island, rehab center

TREASURE ISLAND — The city — or at least its insurance company — must pay a $3.725 million settlement to end a case involving an alcohol and drug rehabilitation program that began five years ago.

The settlement, which was agreed to earlier this month, is now formally filed in the U.S. District Court in Tampa.

At first, it seemed the city was winning its battle against Gulf Coast Recovery and its director, Matthew Schwarz, when the court ruled in 2007 in the city's favor.

That ruling was overturned in 2008, however, by the 11th Circuit Court of Appeals in Atlanta, sending the case back to the Tampa court.

In February, a federal jury finally heard the case and decided in Schwarz's favor.

At issue was whether the city's attempts in 2004 and 2005 to close the drug rehabilitation program's residential housing had violated the federal Fair Housing Act.

The jury said it had, effectively requiring the city to pay damages.

Just how much in damages would take more than eight more months, a formal mediation and many meetings to resolve.

The city did win one thing — it kept the settlement below a $5 million insurance limit on its Florida League of Cities insurance policy.

Schwarz had claimed the city's actions cost him more than $7 million, but in the end agreed to about half that amount.

"It was just certainty of ending the dispute. We felt it was a good settlement for our client," Schwarz's attorney, Ethan Loeb, said Friday when asked why Schwarz agreed to a lower amount.

Meanwhile, Gulf Coast Recovery is still operating, although at a much more reduced level than before the city began its fight to shut the facility down.

"They are in business, but just barely," said Loeb. "What has gone on with the city has stigmatized the business. Matt has a lot of debts and fewer clients, but he will try his best to keep going."

As for the city, as part of the settlement agreement, it had to agree that Gulf Coast Recovery is entitled to occupant turnover of up to six times a year in a total of four structures in the city's RM-15 zoning district.

For example, if a structure has four bedrooms that each can accommodate two people, that means the structure can house 48 different people over the course of a year.

"If the city had done this five years ago, it would not be forced to pay out all this money now," said Loeb.

The dispute began in 2004 over several single family homes in Treasure Island where the program housed its clients. Nearby residents repeatedly complained about noise from the rehabilitation center's clients, particularly during late night, backyard group meetings.

The city tried to solve the problem by citing Schwarz for having too many unrelated people living together and for violation of short-term rental regulations.

At one point, city code violation fees levied against one home on the Isle of Capri totaled $160,000.

Code enforcement efforts ceased after Schwarz filed suit against the city.

Last week, the City Commission found the settlement was "in the best interests of the city."

An additional settlement related to the case calls for a $36,000 payment to Krystal Falkowski, a treatment program client who joined in the initial lawsuit against the city.

Loeb said the money recognizes the "emotional turmoil" caused by the city's code enforcement efforts and will reimburse her and her family for the cost of the treatment she received while at Gulf Coast Recovery.

All but Commissioner Alan Bildz voted to approve the multimillion-dollar payment to Schwarz and his Gulf Coast Recovery program.

"I am glad it is over. It's another chapter done," Mayor Bob Minning said Friday. "Everybody is glad it is done with."

$3.725 million settlement reached in battle between Treasure Island, rehab center 11/16/10 [Last modified: Tuesday, November 16, 2010 3:19pm]
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