A judge yesterday cleared the way for a trial centering on three white Gibson Island residents' allegations of systematic racial discrimination at the private enclave.
The residents, alleging a "subtle but extremely effective" system of racial discrimination in housing atthe bay-front community, are pursuing a legal tack known as a "derivative suit." In such a suit, a shareholder sues on behalf of the corporation, charging its officers with breaking the law.
In this case, the residents, who, as property owners, are shareholders in the Gibson Island Corp., have charged corporation officers with failing to turn a profit and pay dividends and with exposing shareholders to tax liabilities and claims of housing discrimination.
In yesterday's opinion, county Circuit Judge James C. Cawood Jr. ruled in favor of the corporation officers on the questions of paying dividends and potential tax liabilities.
But, he wrote, "The discrimination case is a closer question."
Ruling that a trial can begin Tuesday on the question of housing discrimination,Cawood wrote, "We must recognize that discrimination, by its very nature in this day and time, is unwritten and secretive. It can be a real wolf lurking in innocent clothing or a mere specter used as a crutch to mask other problems. When it is real, proof of its existence is often difficult."
The plaintiffs -- Richard Carson, an anesthesiologist, his wife, Kelley Carson, and Frederick B. Hetzel, a real estate broker and former pro basketball player -- are seeking to change the way the Gibson Island Corp. has conducted business since it bought the island 50 years ago for $150,000. Under the current system,property owners on the island are shareholders in the corporation, which owns a golf course, clubhouse, yacht basin and other recreational facilities. The corporation rents these facilities to the tax-exempt, non-profit Gibson IslandClub, for use by club members only.
Most of the 198 property owners on the island are club members. The plaintiffs were rejected for membership in the club.
Thus, they have complained, they don't get to use the facilities they own as shareholders in the corporation. The club has more than 600 members who are notproperty owners.
It isthrough this arrangement, Carson contends, that minorities are discouraged from buying property on Gibson Island. He said minorities get the hint they won't be allowed to use the club facilities, so they drop their bids to buy homes on the island.
The suit says no blacks or Jews have ever belonged to the club or owned property on the island. In pursuing the "derivative suit," the plaintiffs claimed that although legally a for-profit corporation, the organization operates on a break-even basis, a violation of law.
As an example, the suit says the corporation rents assets worth $12 million to $30 million to the Gibson Island Club for only $40,000 a year -- a fraction of thegoing rate.
In a letter contained in court files, Benjamin R. Civiletti, a former U.S. attorney general representing directors of the Gibson Island Corp., said the corporation directors were not aware of anydiscrimination at the club. He said Carson's allegations were based not on merit but on the belief that he could intimidate the corporation and its board by threatening adverse publicity or a government investigation.
Last December, Cawood ordered the two sides to mediatetheir dispute. He also dismissed parts of the $8.2 million suit, including the portion alleging "de facto segregation," but he gave the plaintiffs 45 days to amend their segregation claim by specifying which laws would be violated under the club's alleged practices.
The judge later issued an orderbarring lawyers in the case from discussingthe mediation.
In his ruling yesterday, the judge rejected the residents' claims that the corporation should be expected to turn a $1.2 million annual profit, ruling their testimony in depositions showedthey knew the corporation was a non-profit one when they became shareholders.
On the issue of exposure to tax liability, the judge ruled the fear must be real and not imaginary, and he noted, ". . . (The) IRS and the Maryland Comptroller's Office, who are entrusted with the protection of the citizenry in tax matters, have never raised a finger of protest against any of the entities involved."
Lawyers involved in the case declined to comment yesterday. The trial is expected to last a week to two weeks.