A Northeast neighborhood group may be forced to disband after fight over UPS warehouse

The 80-year-old Greater Bustleton Civic League is likely to fade away after a lawsuit from a real estate developer has made it impossible to secure directors and officers insurance, which reimburses legal defense costs for the organization’s leadership.

The community group’s insurance policy ended June 3, as costs soared from a premium of $450 to $5,600 because of a lawsuit from the St. Louis-based Commercial Development Corp., developer of a warehouse the neighborhood group opposed.

“I’m hoping I can secure insurance, but I don’t have that right now, and it doesn’t look good,” said Jack O’Hara, chairman of the Greater Bustleton Civic League (GBCL), which is a volunteer organization. “I hope other volunteer groups benefit from this, but for us — we’re done.”

O’Hara said he hopes city or state lawmakers will pass legislation to protect community groups from retaliation from deep-pocketed foes.

But some observers say this case illustrates exactly why the City of Philadelphia has been reluctant to offer protections to community groups.

In 2018, the Commercial Development Corp. (CDC) purchased 138 acres at 1 Red Lion Rd. in Northeast Philadelphia, the site of a former Budd Co. manufacturing facility turned golf course.

The CDC planned a million-square-foot warehouse and distribution center custom made for the United Parcel Service (UPS) on the land, which remained zoned for industrial development for purposes like the warehouse after the Budd plant’s closure.

The GBCL and nearby residents and businesses opposed the plan because of the truck traffic it would route through their community.

“It is the size and scale of this particular project and the damage that it will inflict on the community with traffic,” O’Hara told The Inquirer last year. “The whole fabric of this area will change with the massive infusion of traffic.”

In January 2021, the GBCL and the nearby Sandmeyer Steel Co. appealed the developer’s permits, arguing that the project actually didn’t conform with the underlying zoning. When the city’s Zoning Board of Adjustment dismissed the challenge, the civic league appealed to the Court of Common Pleas in November. When that case was thrown out “for lack of merit” in July 2022, the group appealed in Commonwealth Court, where the case is pending.

The CDC countersued earlier this year, arguing that the civic group’s appeal of their zoning permits was “filed solely for the purpose of … thwarting its development plans and intentionally interfering with its known contract with UPS.”

The CDC declined to comment for this story.

O’Hara argues that his group was just doing what the city asks of a registered community organization (RCO), the official designation given in the city’s zoning code to some neighborhood groups.

The code requires that developers meet with RCOs before they bring cases to the Zoning Board of Adjustment if, for example, they are trying to build outside what is allowed by a site’s zoning. Neighborhood support does not determine whether a project will get permission to move forward, but the board takes it into account. Developers would rather have the support than not.

For larger projects, developers have to present to the RCO before they are considered at the city’s advisory Civic Design Review committee. That’s why the CDC had to meet with O’Hara’s group: The Red Lion Road project was large enough to trigger an advisory meeting on its architectural and landscaping plans.

“These guys came after us for doing something that we are encouraged to do: review zoning matters,” said O’Hara, who said his lawyers had otherwise told him to avoid commenting on the case.

Community advocates say that because RCOs are codified by the city’s zoning code, they are put in a legally tenuous position that invites lawsuits. If a community group clashes with a developer by, say, opposing them in front of the zoning board, the developer could sue as a way to scare them off. That’s called a “strategic lawsuit against public participation” (SLAPP).

“Since the RCO is a legal structure in the city code, and RCOs are officially certified by the city with specific legal responsibilities, my opinion is that the city should be legally compelled to indemnify them” against lawsuits, said Matt Ruben, former head of the Northern Liberties Neighborhood Association.

A decade ago, the Old City Civic Association (OCCA) voted itself out of existence after its insurance costs mounted to unsustainable heights after repeated lawsuits — even though the organization never lost a case.

In response, anti-SLAPP legislation was put forward in Harrisburg and City Hall, where former Councilmember Bobby Henon tried to get the City of Philadelphia to provide funds for insurance costs to RCOs. But new laws were not enacted.

When RCOs were created under former Mayor Michael Nutter, the city considered providing legal support to the newly official neighborhood groups. But the Law Department warned against it, saying that the city could incur huge legal bills defending organizations it had little control over.

“The city didn’t want to indemnify RCOs when it had no voice in how they operated,” said Gary Jastrzab, the former head of the Planning Commission. “It shouldn’t be the responsibility of all of us, the public, to indemnify possibly irresponsible action on the part of an RCO.”

That remained the city’s position under Mayor Jim Kenney, who declined to support Henon’s RCO insurance bill.

“There are many incredible, professional, and well-run RCOs throughout the city of Philadelphia, but there are a number of RCOs that are not,” Kenney said in a 2018 statement about Henon’s legislation. “Until there is meaningful reform for RCO[s], we cannot subsidize the cost of their insurance.”

The complications of the civic league’s case look like the kind of situation the city did not want to be caught up in, Jastrzab said. The neighborhood group wasn’t contesting a developer who wanted to build something outside the site’s legally allowable zoning. Should the city be backstopping a group that’s arguing against a legal land use?

Even some supportive observers of the GBCL’s plight say that its case is more complicated than a SLAPP suit, in which an aggressive business interest is simply trying to bully an RCO that is fulfilling its basic duties.

“The developer’s proposal is within their rights and consistent with the current code, but the community does not like what the code allows,” said Joe Schiavo, former head of the Old City Civic Association.

Schiavo supports legislation giving city protections to RCOs and says he’s sympathetic to the GBCL, but its case may not meet the SLAPP suit standard.

“I remain very concerned that SLAPP suits remain a malicious, reckless tool regularly deployed by developers and their agents without consequence,” said Schiavo, but he isn’t sure this is one.

O’Hara disagrees with those who say his group is acting aggressively. They hired traffic engineers and zoning experts to study the development, and they found it to be disproportionate to the site. He believes they have a real case — if it could get a hearing.

He hopes his group’s plight will inspire legislative action. The current state anti-SLAPP law is very narrow and largely applies to environmental issues.

In the meantime, O’Hara is hoping an angel insurance company will swoop in.

“I’m just hoping someone will be generous, one of the [insurance] carriers might not look at this as serious as the rest of them do,” said O’Hara.

For now, O’Hara has begun the GBCL’s summer break a month early. Usually the group closes down operations for July and August.

“There has got to be a solution out there,” O’Hara said. “I cannot believe that an out-of-state developer put an 80-year-old community group out of business because they’re unhappy with us. How could this be allowed to happen?”