-
925496.1
Of Counsel: BAYS LUNG ROSE & VOSS DAVID R. MAJOR 9194-0
Attorney at Law A Law Corporation BRIAN M. MULLIN 10969-0 Topa
Financial Center 700 Bishop Street, Suite 900 Honolulu, Hawaii
96813 Telephone: (808) 523-9000 Facsimile: (808) 533-4184 Email:
[email protected] [email protected] Attorneys for
Defendants PAT DONAHUE; JAMES MELSA; CHRISTINE KLINE; ROBERT
STEINEBEL; and JAMIE BROWN
IN THE CIRCUIT COURT OF THE SECOND CIRCUIT
STATE OF HAWAII
WILLIAM J. ALLRED; LYNDA JANE ALLRED; MICHAEL GENE JORDAN AS
LEGAL REPRESENTATIVE OF THE MICHAEL GENE JORDAN TRUST DATED
FEBRUARY 4, 2014; ALOHA MOANA LLC BY ITS MANAGER LUCINDA BIGEH; AND
RALPH RICCIARDI AND MADELINE RICCIARDI AS CO-TRUSTEES OF THE
RICCIARDI TRUST Derivatively on Behalf of THE ASSOCIATION OF
APARTMENT OWNERS OF THE WHALER ON KAANAPALI BEACH, Plaintiffs, vs.
DAVID A. SENIOR; PAT DONAHUE; JAMES MELSA; CHRISTINE KLINE; ROBERT
STEINEBEL; JAMIE BROWN;
))))) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
CIVIL NO. 2CCV-20-0000209 (Other Civil Action) DEFENDANTS PAT
DONAHUE, JAMES MELSA, CHRISTINE KLINE; ROBERT STEINEBEL, AND JAMIE
BROWN’S MOTION TO DISMISS VERIFIED FIRST AMENDED COMPLAINT, FILED
OCTOBER 5, 2020; MEMORANDUM IN SUPPORT OF MOTION; DECLARATION OF
BRIAN M. MULLIN; EXHIBITS A-D; Hearing: Date: January 7, 2021 Time:
8:15 a.m. Judge: Honorable Rhonda I. L. Loo No trial date set.
(caption continued on next page)
Electronically FiledSECOND
CIRCUIT2CCV-20-000020930-NOV-202005:37 PMDkt. 31 MD
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2 925496.1
DESTINATION MAUI, INC.; JOHN DOES 1-100; JANE DOES 1-100; DOE
CORPORATIONS 1-100; AND DOE PARTNERSHIPS 1-100, Defendants.
_____________________________________
) ) ) ) ) ) )
NOTICE OF HEARING AND CERTIFICATE OF SERVICE
DEFENDANTS PAT DONAHUE, JAMES MELSA,
CHRISTINE KLINE; ROBERT STEINEBEL, AND JAMIE BROWN’S MOTION TO
DISMISS VERIFIED FIRST AMENDED COMPLAINT, FILED OCTOBER 5, 2020
Defendants Pat Donahue, James Melsa, Christine Kline, Robert
Steinebel, and
Jamie Brown (collectively, “Defendants”), by and through their
attorneys, Bays Lung Rose &
Voss, respectfully move this Court for an order dismissing the
claims asserted against the
Defendants in Plaintiffs’ Verified First Amended Complaint,
filed October 5, 2020
(“Complaint”) with prejudice, to the extent that the Complaint
and the individual claims therein
are asserted as derivative claims. To the extent that this Court
concludes that any of the claims
are brought directly by Plaintiff’s in their individual
capacity, Defendants respectfully request
that the Court dismiss them to the extent that they assert
claims upon which relief cannot be
granted.
This This Motion is made pursuant to Rules 7, 7(g), 7.1, 7.2(b),
7.2(d) and 8 of
the Rules of the Circuit Courts; Rules 7, 12(b)(1) and 12(b)(6)
of the Hawaii Rules of Civil
Procedure; and is based on the Memorandum in Support of Motion,
Declaration of Counsel, the
-
3 925496.1
attached exhibits, the records and files herein, and such
further argument and evidence as may be
presented at the hearing.
DATED: Honolulu, Hawaii, November 30, 2020.
/s/ Brian M. Mullin DAVID R. MAJOR BRIAN M. MULLIN Attorneys for
Defendants PAT DONAHUE; JAMES MELSA; CHRISTINE KLINE; ROBERT
STEINEBEL; and JAMIE BROWN
-
925496.1
IN THE CIRCUIT COURT OF THE SECOND CIRCUIT
STATE OF HAWAII
WILLIAM J. ALLRED; LYNDA JANE ALLRED; MICHAEL GENE JORDAN AS
LEGAL REPRESENTATIVE OF THE MICHAEL GENE JORDAN TRUST DATED
FEBRUARY 4, 2014; ALOHA MOANA LLC BY ITS MANAGER LUCINDA BIGEH; AND
RALPH RICCIARDI AND MADELINE RICCIARDI AS CO-TRUSTEES OF THE
RICCIARDI TRUST Derivatively on Behalf of THE ASSOCIATION OF
APARTMENT OWNERS OF THE WHALER ON KAANAPALI BEACH, Plaintiffs, vs.
DAVID A. SENIOR; PAT DONAHUE; JAMES MELSA; CHRISTINE KLINE; ROBERT
STEINEBEL; JAMIE BROWN; DESTINATION MAUI, INC.; JOHN DOES 1-100;
JANE DOES 1-100; DOE CORPORATIONS 1-100; AND DOE PARTNERSHIPS
1-100, Defendants. _____________________________________
))))) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
CIVIL NO. 2CCV-20-0000209 (Other Civil Action) MEMORANDUM IN
SUPPORT OF MOTION
-
i
TABLE OF CONTENTS
Page
Table of Authorities
....................................................................................................................
iii-v
I. INTRODUCTION
..............................................................................................................1
II. FACTUAL BACKGROUND
.............................................................................................3
III. LEGAL STANDARD
.........................................................................................................4
IV. PLAINTIFFS’ COMPLAINT MUST BE DISMISSED FOR LACK OF STANDING
........................................................................................................................5
A. Plaintiff Has No Standing To Bring A Derivative Suit On
Behalf
Of The Association
.................................................................................................5
1. Plaintiffs’ lack of standing to pursue a derivative claim is
supported by the underlying Arbitration Award
.........................................7
B. Plaintiffs Are Already Litigating Their Claims Against
Defendants In A Separate Suit And Are Precluded From Initiating A
New Separate Litigation
.................................................................................................8
1. Plaintiffs’ are precluded from maintaining the same
claims
in both a direct and derivative capacity
....................................................10
V. PLAINTIFFS’ INDIVIDUAL CLAIMS EACH FAIL FOR SEPARATE AND
INDEPENDENT REASONS
..................................................................................12
A. Plaintiffs’ Count I Breach of Fiduciary Duty Must Be
Dismissed .......................12
1. Defendants do not owe Plaintiffs a fiduciary duty in
their
individual capacity
....................................................................................12
2. Plaintiff has no derivative standing to bring a breach of
fiduciary duty claim
..................................................................................14
B. Plaintiffs’ Count II Intentional/Negligent Misrepresentation;
Count
IV Failure To Fund Reserves; Count VI Other Violations Of HRS
514 B; Count IX Intrusion Of Privacy Are All Barred Pursuant To HRS
§ 414D-149(f)
...............................................................................................14
C. Plaintiffs’ Count III, Breach Of Covenant of Good Faith And
Fair
Dealing Claim, Is Not Recognized In Hawaii’s Courts
........................................16
-
ii
D. Plaintiff Is Without Standing To Assert Count V For
Violations Of Chapter 480
...........................................................................................................17
E. Plaintiff Count VIII Negligence/Gross Negligence Should Be
Dismissed
..............................................................................................................18
F. Plaintiffs Lack Standing To Bring Count VIII For Conversion
And Also Do Not Satisfy The Elements Of A Conversion Claim
................................19
VI. CONCLUSION
.................................................................................................................20
-
iii
TABLE OF AUTHORITIES
Page
Cases
Aarona v. Unity House Inc., No. 05-00197 DAE/BMK, 2007 U.S.
Dist. LEXIS 47979, at *15-16 (D. Haw. July 2, 2007)
......................................................................6,
18, 19
Adam v. Jacobs, 950 F.2d at 93
.....................................................................................................8
Baham v. Assn. of Apt. Owners of Opua Hale Patio Homes, 2014
U.S. Dist. LEXIS 82873, at *23 (D. Haw. June 18, 2014)
......................................................................13
Bank of Am., N.A. v. Reyes-Toledo, 143 Hawai‘i 249, 257, 428
P.3d 761, 769
(2018)
........................................................................................................................................5
Best Place v. Penn Am. Ins. Co., 82 Hawai‘i 120, 131, 920 P.2d 334,
345 (1996) .....................17
Chambless v. Officers and Directors of Snapper Creek, 743 So. 2d
129 (3rd Dist. Fla. 1999)
................................................................................................................................13
Cigal v. Leader Dev. Corp., 408 Mass. 212, 218-20 (1990)
.........................................................10
Curtis v. Citibank, N.A., 226 F.3d 133, 138-139 (2d Cir. 2000)
....................................................8
Davis v. Dyson, 387 Ill. App. 3d 676, 678 (2008)
........................................................................10
DeRosa v. Ass'n of Apt. Owners of the Golf Villas, 2016 U.S.
Dist. LEXIS 60694, at *13-15 (D. Haw. May 6, 2016)
.........................................................................13,
16
Dubois v. Ass'n of Apartment Owners, 453 F.3d 1175, 1181 (9th
Cir. 2006) .............................15
Fernandez v. Mark Dev., Inc., 125 Hawai‘i 381, 262 P.3d 670
(App. 2011) ...............................18
First City Nat'l Bank & Trust Co. v. Simmons, 878 F.2d at 80
......................................................9
Gamrex, Inc. v. Schultz, No. 10-00380 JMS-KSC, 2010 U.S. Dist.
LEXIS 102652, at *10-16 (D. Haw. Sep. 9, 2010)
.............................................................................10
Justice v. Fuddy, 125 Hawai‘i 104, 253 P.3d 665 (App. 2011)
......................................................5
Kealoha v. Machado, 131 Hawaiʻi 62, 74, 315 P.3d 213, 225 (2013)
............................................5
Kerotest Mfg. Co. v. v. C-O-Two Fire Equipment Co, 342 U.S. at
183 ........................................8
-
iv
Mansha Consulting LLC v. Alakai, 236 F. Supp. 3d 1267, 1279-80
(D. Haw. 2017)
.......................................................................................................................................15
McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 1988)
......................................................5
Mid-State Fertilizer Co. v. Exchange National Bank of Chicago,
877 F.2d 1333, 1335–36 (7th Cir. 1989)
..........................................................................................................11
Poulet v. H.F.O., L.L.C., 353 Ill. App. 3d 82, 99 (2004)
..............................................................10
Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th
Cir. 1984) ...............................5
SCI Mgmt. Corp. v. Sims, 101 Hawai‘i 438, 455, 71 P.3d 389, 406
(2003) ..................................8
Segal v. Powers, 180 Misc. 2d 57, 687 N.Y.W.2d 589, 591 (N.Y.
Sup. Ct. 1999) ........................6
Siller v. Hartz Mountain Assocs., 93 N.J. 370, 381 (1983)
..........................................................10
Smith v. Ridgeview Homeowner’s Assoc., 2011 WL 1743787 (Minn.
App. May 9, 2011)
...........................................................................................................................13
Souza v. Fisher, 139 Hawai‘i 431, 392 P.3d 1215, 1215 (App.
2017) .........................................18
State v. Bunn, 50 Haw. 351, 358, 440 P.2d 528, 534 (1968)
.......................................................18
State v. One Love Ministries, 142 Haw. 197, 205, 416 P.3d 918,
926, 927 (Haw. Ct. App. 2018)
.......................................................................................................................4,
5
Strouss v. Simmons, 66 Haw. 32, 50, 657 P.2d 1004, 1016 (1982)
.............................................12
Tax Found. of Haw. v. State, 144 Hawai‘i 175, 192, 439 P.3d 127,
144 (2019) ...........................7
Tradewind Ins. Co. v. Stout, 85 Hawai'i 177, 184, 938 P.2d 1196,
1203 (App. 1997)
.........................................................................................................................................8
United States v. The Haytian Republic, 154 U.S. 118, 38 L. Ed.
930, 14 S. Ct.
992)
.......................................................................................................................................5,
8 Uy v. Spencer Homes, Inc., 135 Hawai‘i 533, 354 P.3d 186 (App.
2015) ...................................18
Walton v. Eaton Corp., 563 F.2d at 70
...........................................................................................9
Yamane v. Pohlson, 111 Haw. 74, 81, 137 P.3d 980, 987 (2006)
..................................................4
Yoneji v. Yoneji, 136 Hawai‘i 11, 16, 354 P.3d 1160, 1165 (App.
2015) ...................................19
-
v
Zerilli v. Evening News Ass'n, 202 U.S. App. D.C. 217, 628 F.2d
217, 222 (D.C. Cir. 1980)
........................................................................................................................9
Zyda v. Four Seasons Hotels & Resorts, 371 F. Supp. 3d 803,
809
(D. Haw. 2019)
.......................................................................................................................16
Rules Haw. R. Civ. P. 12(b)(1)
.................................................................................................................4
Haw. R. Civ. P. 12(b)(6)
.................................................................................................................5
Haw. R. Civ. P. 23.1
.............................................................................................2,
6, 7, 11, 14, 19
Statutes Haw. Rev. Stat. § 414D-90(a)
..............................................................................5,
6, 11, 14, 18, 19
Haw. Rev. Stat. § 414D-149, 159, 167
......................................................................................2,
14
Haw. Rev. Stat. Chapter 480
..........................................................................................................17
Haw. Rev. Stat. § 480-1
..........................................................................................................17,
18
Haw. Rev. Stat. § 480-2
................................................................................................................17
Haw. Rev. Stat. § 480-2(a)
............................................................................................................17
Haw. Rev. Stat. § 480-2(d)
...........................................................................................................17
Haw. Rev. Stat. § 480-13
..............................................................................................................17
Haw. Rev. Stat. Chapter 514B
.......................................................................................................16
Haw. Rev. Stat. § 514A-1
................................................................................................................4
Haw. Rev. Stat. § 514B
..................................................................................................2,
4, 14, 115
Haw. Rev. Stat. § 514B-9 and
10...................................................................................................16
Haw. Rev. Stat. § 514B-106(a)
.....................................................................................................12
Haw. Rev. Stat. § 514B-149(f)
...............................................................................................14,
15
Haw. Rev. Stat. § 514B-3
.............................................................................................................12
-
925496.1
MEMORANDUM IN SUPPORT OF MOTION
I. INTRODUCTION
Defendants Pat Donahue, James Melsa, Christine Kline, Robert
Steinebel, and
Jamie Brown (collectively, “Defendants”), respectfully request
that Plaintiff’s Verified
Complaint, filed on June 15, 2020 (“Complaint”) be dismissed
with prejudice. As an initial note,
this case represents Plaintiffs’ third attempt to seek redress
against Defendants for the same
claims, based on the exact same set of facts. Plaintiffs first
brought their claims as direct claims
in their individual capacities by way of an underlying
arbitration that resulted in an arbitration
award following a full hearing on the merits. Plaintiffs
subsequently initiated a second action
against Defendants, again based on the exact same facts and
circumstances, and again in their
individual capacities, this time in the Second Circuit Court of
the State of Hawaii, as William J.
Allred, et. al. v. The Association of Apartment Owners of the
Whaler on Kaanapali Beach, et. al.;
Civ. 17-0251 (1). Then, despite the fact that the Second Circuit
case is still actively being
litigated, Plaintiffs’ initiated the instant litigation, in the
same Circuit no less, by filing the
Complaint that is subject of this Motion to Dismiss, this time
purportedly in a derivative
capacity. Notwithstanding that Plaintiffs’ Complaint in this
matter represents a belligerent
disregard for long standing tenets that preclude a plaintiff
from repeatedly bringing the same
claims against the same party based on the same set of facts;
Plaintiffs’ Complaint in this matter
very clearly fails to establish any actionable claims for
relief, particularly to the extent that those
claims are asserted as a derivative claims.
As will be described in detail below, to the extent that it is
asserted as a derivative
action, Plaintiffs’ Complaint should be dismissed because
Plaintiffs have failed to demonstrate
the requisite standing to bring such a claim on behalf of the
Association of Apartment Owners of
The Whaler On Kaanapali Beach (the “Association”). Specifically,
Plaintiffs’ cannot satisfy the
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2 925496.1
numerosity requirement set out by Hawaii Rules of Civil
Procedure (“HRCP”) 23.1, which
expressly requires that any derivative action can only be
brought by the lesser of fifty (50)
individual owners or five (5) percent of the association
ownership. Here, the Association is
comprised of 357 individual units and Plaintiffs are
demonstrably inadequate to represent the
interests of the Association both practically and by rule.
Notably, this same conclusion was
reached at the underlying arbitration brought by Plaintiffs on
identical facts. Accordingly, to the
extent this action has been commenced by Plaintiffs’
derivatively, it must necessarily be
dismissed.
In addition, Defendants further request that the Court dismiss
Plaintiff’s
individual claims, as follows:
• Defendant’s breach of fiduciary duty claim, to the extent
brought in a
personal capacity, must be dismissed as the board’s fiduciary
duty only extends to the
Association as a whole, and not the Plaintiff individually. To
the extent that the claim is brought
derivatively, Plaintiffs’ have no derivative standing to bring
such a claim.
• As pled in the Complaint, Plaintiffs’ bases for a breach of
the covenant of
good faith and fair dealing claim is not recognized in Hawaii’s
courts, and should, therefore, be
dismissed.
• Plaintiffs’ claims related to breach of fiduciary duties,
intentional/negligent misrepresentation; failure to fund
reserves, “other violations of HRS 514 B”
and intrusion of privacy claims are all barred pursuant To HRS §
414D-149.
• Plaintiffs’ claims related to negligence/gross negligence
should be
dismissed because Plaintiffs fail to plead facts that support
gross negligence. To the extent the
court sees this claim as being brought in a derivative capacity,
no such cause of action exists.
-
3 925496.1
• Defendants are entitled to a dismissal of Plaintiff’s
conversion claim to the
extent that Plaintiff (1) has no standing to assert such a claim
on a derivative basis, and (2) has
not articulated any basis to assert such a claim against any of
the Defendants other than
Defendant David Senior.
• Plaintiff’s Chapter 480 UDAP claim should be dismissed, since
Plaintiff
does not qualify as a “consumer” for purposes of the statute,
and has not met the standing
requirements to bring such as a derivative claim on behalf of
the Association.
Based on the foregoing, and as explained in greater detail
below, the Court should
dismiss Plaintiff’s Complaint with prejudice.
II. FACTUAL BACKGROUND
For purposes of this Motion only, the allegations contained in
Plaintiffs’
Complaint are taken to be true. “This is a homeowners derivative
action” brought by Plaintiffs
on behalf of the Association against certain members of the
AOAO’s Board of Directors. See
Exhibit A, Complaint, at 5, ¶ 22. Plaintiffs, each a homeowner,
were, at all relevant times
herein, members of the Association of Apartment Owners of The
Whaler On Kaanapali Beach.
See id. at 6, ¶ 23. Defendants, also each a homeowner, were, at
all relevant times herein,
members of the Board of Directors of the Association of
Apartment Owners of The Whaler On
Kaanapali Beach. See id. at 3-4, ¶¶ 8-12.
The Whaler condominium project (the “Whaler” or “Project”) is a
condominium
project located in Kaanapali, Maui, Hawaii containing 359
individual units. See id. at 6, ¶ 24.
Ownership at the Whaler is determined by common-interest. See
id. at 24, ¶ 100. Each unit in
the Project is a separate parcel of real estate to which an
owner is entitled independent ownership
and possession as set forth in the governing documents. Id. The
Amended and Restated
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4 925496.1
Declaration of Condominium Property Regime (the “Declaration”)
and the Amended and
Restated Bylaws (the “Bylaws”), both dated March 6, 2007, are
the operative Declaration and
Bylaws of the Condominium and the Association. See id. at 6, ¶
26. The AOAO is a non-profit
association created under the provisions of HRS 514A-1 et. seq.
See id. at 6, ¶¶ 27-28. Later, the
Association elected to make the project subject to HRS 514B et.
seq. See id.
The issues and facts alleged in the Complaint were subject to
the arbitration
proceeding by Honorable Judge Karl K. Sakamoto (ret.) (the
“Arbitrator”) under DPR No. 18-
0280-A and subsequently confirmed by the court via the
Stipulated Order. See id. at 14, ¶ 62.
On October 17, 2019, the Arbitrator issued a Final Award of
Arbitrator (the “Arbitration
Award”). See id. at 15, ¶ 64. Plaintiffs have also initiated a
third action against Defendants, also
in in the Second Circuit Court of the State of Hawaii, as
William J. Allred, et. al. v. The
Association of Apartment Owners of the Whaler on Kaanapali
Beach, et. al.; Civ. 17-0251 (1),
based on the same facts and circumstances. See Exhibit B.
III. LEGAL STANDARD
Under Hawaii Rules of Civil Procedure (“HRCP”) Rule 12(b)(1), a
complaint may
be dismissed for “lack of jurisdiction over the subject matter.”
“Unlike a motion to dismiss under
HRCP Rule 12(b)(6), the standard for a court to apply in
deciding a motion to dismiss under
HRCP Rule 12(b)(1) for lack of jurisdiction permits a court,
under certain circumstances, to
consider evidence outside the complaint and to resolve factual
disputes.” State v. One Love
Ministries, 142 Haw. 197, 205, 416 P.3d 918, 926 (Haw. Ct. App.
2018). As declared by the
Hawaii Supreme Court, “when considering a motion pursuant to
HRCP Rule 12(b)(1) the [trial]
court is not restricted to the face of the pleadings, but may
review any evidence, such as affidavit
and testimony, to resolve factual disputes concerning the
existence of jurisdiction.” Yamane v.
-
5 925496.1
Pohlson, 111 Haw. 74, 81, 137 P.3d 980, 987 (2006) (alterations
in original) (quoting McCarthy v.
United States, 850 F.2d 558, 560 (9th Cir. 1988). Hawaii courts
recognizes that:
A factual challenge to jurisdiction attacks the validity or
truthfulness of the facts alleged which support the existence of
jurisdiction. To resolve a factual challenge, the court must
generally consider matters outside the pleadings. For a factual
challenge to jurisdiction under HRCP Rule 12(b)(1), the court is
permitted to consider evidence outside the pleadings and resolve
disputed facts that are necessary to determine the existence of
jurisdiction.
See State, 142 Haw. at 927, 416 P.3d at 927 (Haw. Ct. App.
2018).
Under Rule 12(b)(6) of the Hawaii Rules of Civil Procedure
(“HRCP”), the Court
may dismiss a complaint for “failure to state a claim upon which
relief can be granted.” Haw. R.
Civ. P. 12(b)(6) (2000). It is well established that “a
complaint should not be dismissed for
failure to state a claim unless it appears beyond a doubt that
the plaintiff can prove no set of facts
in support of his or her claim that would entitle him or her to
relief.” Bank of Am., N.A. v.
Reyes-Toledo, 143 Hawai‘i 249, 257, 428 P.3d 761, 769 (2018)
(citing Kealoha v. Machado, 131
Hawaiʻi 62, 74, 315 P.3d 213, 225 (2013)). The Court may dismiss
a complaint for “(1) lack of
cognizable legal theory or (2) insufficient facts under a
cognizable legal claim.” Robertson v.
Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984);
see also Justice v. Fuddy, 125
Hawai‘i 104, 253 P.3d 665 (App. 2011) (“this want of merit may
consist in an absence of law to
support a claim of the sort made, or of facts sufficient to make
a good claim, or in the disclosure
of some fact which will necessarily defeat the claim.”)
IV. PLAINTIFFS’ COMPLAINT MUST BE DISMISSED FOR LACK OF
STANDING
A. Plaintiff Has No Standing To Bring A Derivative Suit On
Behalf Of The Association
Plaintiffs have no standing under Hawaii law to bring a
derivative suit on behalf
of the Association. HRS § 414D-90(a) only permits a derivative
suit to be brought by “five per
cent or more of the voting power, or by fifty members, whichever
is less . . . .” Haw. Rev. Stat. §
-
6 925496.1
414D-90(a) (2004). HRCP 23.1 further precludes any derivative
actions where “it appears that
the plaintiff does not fairly and adequately represent the
interests of the shareholders or members
similarly situated in enforcing the right of the corporation or
association.” Haw. R. Civ. P. 23.1
(2000). Notably, this numerosity requirement requires that a
plaintiff name the 50 or 5% of
Association members who are bringing the derivative action on
behalf of an association. See
Aarona v. Unity House Inc., No. 05-00197 DAE/BMK, 2007 U.S.
Dist. LEXIS 47979, at *15-16
(D. Haw. July 2, 2007) (dismissing plaintiffs’ claims based on
their failure to meet the
numerosity requirement, and holding that “[i]n order to know
whether a proceeding is being
brought by the requisite number of persons, those persons must
be named in the caption and
allegations describing their interest in the corporation must be
made in the body of the
complaint.”). “The purpose of the numerosity requirement in the
statute is to ensure that enough
members support the lawsuit on behalf of the corporation.” Id.
at *16 (citing Segal v. Powers,
180 Misc. 2d 57, 687 N.Y.W.2d 589, 591 (N.Y. Sup. Ct.
1999)).
Here, Plaintiffs have failed to allege that they have the proper
standing to bring a
derivative claim on behalf of the Association because Plaintiffs
are only six unit owners, and do
not constitute anywhere close to the statutory minimum of owners
necessary to properly
represent the interests of an Association containing over 350
individual units. Voting power
within the Association is distributed among its members
according to their “Common Interests,”
which are divided among the owners according to the common
interests of their respective
apartments. See Exhibit C at 2, ¶ 7. Plaintiffs expressly state
in the Complaint that “[t]his is a
homeowners derivative action.” See Exhibit A, Complaint, at 5, ¶
22. Plaintiffs, however,
submit absolutely no proof or allegation that they have the
requisite 5% voting power or more
required to show standing to bring a derivative claim, nor can
they, and they name only
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7 925496.1
themselves as Plaintiffs in this action. Plaintiffs have
similarly failed to show or allege that they
fairly and adequately represent the interests of the Association
members similarly situated, or
that the other members have a similar interest in enforcing the
alleged rights of the Association
as a whole. See Haw. R. Civ. P. 23.1.
Based on the foregoing, Plaintiffs lack standing to bring a
derivative claim, which
necessarily frustrates the justiciability of this case as
presently alleged. See Tax Found. of Haw.
v. State, 144 Hawai‘i 175, 192, 439 P.3d 127, 144 (2019). The
Court should, therefore, dismiss
the Complaint as asserted by Plaintiff.
1. Plaintiffs’ lack of standing to pursue a derivative claim is
supported by the underlying Arbitration Award.
The exact same facts alleged in the Complaint were subject to
the arbitration
proceeding by Honorable Judge Karl K. Sakamoto (ret.) (the
“Arbitrator”) under DPR No. 18-
0280-A. See Exhibit A at 14, ¶ 62. On October 17, 2019, the
Arbitrator issued a Final Award of
Arbitrator (the “Arbitration Award”). See id. at 15, ¶ 64;
Exhibit D.
In the Arbitration Award, relying on the aforementioned HRCP 23
.1, the
Arbitrator concluded in relevant part:
31. Absent a derivative action, Claimants are not the real party
in interest and do not have standing to bring their derivative
claims against the AOAO.
…
33. Claimants do not have the legal capacity to bring a
derivative action because they have not established that they are
the proper representatives of the AOAO's interests. See HRCP Rule
23.1
…
35. Claimants lack standing to assert their derivative claims
against the AOAO that represents the interests of the owners of the
359 units at the Whaler.
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8 925496.1
See Exhibit D at 8-9, ¶¶ 31, 35. Based on the foregoing
language, the Arbitrator then dismissed
all derivative claims, including claims alleging the Association
breached duties of good faith,
failed to follow the financial and fiscal operations, Policies
and Procedures Manual, failed to
maintain the proper reserve, and breached its fiduciary duties.
See id. at 9, ¶ 36. The instant
Complaint is based on identical facts and brought by the same
group of Plaintiffs.
B. Plaintiffs Are Already Litigating Their Claims Against
Defendants In A Separate Suit And Are Precluded From Initiating A
New Separate Litigation
The rule against duplicative litigation is distinct from, but
related to the doctrine
of claim preclusion or res judicata. See Curtis v. Citibank,
N.A., 226 F.3d 133, 138 (2d Cir.
2000)(citing United States v. The Haytian Republic, 154 U.S.
118, 38 L. Ed. 930, 14 S. Ct. 992).
The power to dismiss a duplicative lawsuit is meant to foster
judicial economy and the
"comprehensive disposition of litigation." Kerotest Mfg. Co. v.
v. C-O-Two Fire Equipment Co,
342 U.S. at 183. The doctrine is also meant to protect parties
from "the vexation of concurrent
litigation over the same subject matter." Adam v. Jacobs, 950
F.2d at 93. Furthermore, “allowing
duplicative adjudication increases the burden upon litigants and
the judicial system, contrary to
the express policies of this court.” SCI Mgmt. Corp. v. Sims,
101 Hawai‘i 438, 455, 71 P.3d 389,
406 (2003); Tradewind Ins. Co. v. Stout, 85 Hawai'i 177, 184,
938 P.2d 1196, 1203 (App. 1997)
(observing that the purpose of preventing duplicative litigation
is "to protect litigants from the
burden of relitigating an identical issue with the same party .
. . [and to] promote[] judicial
economy by preventing needless litigation").
Because of the obvious difficulties anticipating the claim or
issue-preclusion
effects of a case that is still pending, a court faced with a
duplicative suit will commonly stay the
second suit, dismiss it without prejudice, enjoin the parties
from proceeding with it, or
consolidate the two actions. See Curtis v. Citibank, N.A., 226
F.3d 133, 138-39 (2d Cir. 2000);
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9 925496.1
see also Kerotest Mfg. Co. v. v. C-O-Two Fire Equipment Co., 342
U.S. at 186 (stay); First City
Nat'l Bank & Trust Co. v. Simmons, 878 F.2d at 80 (dismissal
without prejudice). “[S]imple
dismissal of the second suit is [a] common disposition because
plaintiffs have no right to
maintain two actions on the same subject in the same court,
against the same defendant at
the same time.” Id. (citing e.g., Zerilli v. Evening News Ass'n,
202 U.S. App. D.C. 217, 628
F.2d 217, 222 (D.C. Cir. 1980); Walton v. Eaton Corp., 563 F.2d
at 70).
This litigation represents the third time that Plaintiffs’ have
brought claims
against Defendants based on the exacts same facts. Based on the
foregoing body of case law, to
the extent that Plaintiffs are inclined to bring additional
claims against Defendants, whether
directly or derivatively, those claims can only be brought in
the already existing lawsuit. Courts
universally reject initiating duplicative actions. Here,
Plaintiffs first brought their claims by way
of the underlying arbitration that resulted in an arbitration
award based on a full hearing on the
merits. See Exhibit D at 9, ¶ 34 (“Claimants' testimony
indicated that they brought their claims
solely for themselves, as individual claims”). Plaintiffs have
also already previously initiated a
parallel action against Defendants, again based on the exact
same facts and circumstances, which
is currently an active litigation in the Second Circuit Court of
the State of Hawaii, as William J.
Allred, et. al. v. The Association of Apartment Owners of the
Whaler on Kaanapali Beach, et. al.;
Civ. 17-0251 (1). See Exhibit B.1 To the extent that any new
theories of the case may have
arisen based on the underlying arbitration, or to the extent
that Plaintiffs feel inclined to assert
additional claims against Defendants, those claims cannot be
brought as part of a new and
independent legal proceeding. Instead, such claims must be
brought as part of the existing
1 In William J. Allred, et. al. v. The Association of Apartment
Owners of the Whaler on Kaanapali Beach, et. al.; Civ. 17-0251 (1),
Plaintiffs assert claims of Declaratory Judgment; Injunctive
Relief; Breach of the Duty of Good Faith and Fair Dealing;
Violations of Chapter 480; Violations of Chapter 514B; Negligence;
Breach of Fiduciary Duty; Failure Regarding Reserve Funding.
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10 925496.1
litigation. Because Plaintiffs have already initiated an active
litigation against Defendants, which
is based on the same facts and circumstances, this Court should
use its authority to dismiss the
instant Complaint.
1. Plaintiffs’ are also precluded from maintaining the same
claims in both a direct and derivative capacity.
It is axiomatic that the direct/derivative distinction precludes
a plaintiff from
seeking redress for the same injury in both his individual and
derivative capacity. See e.g. Davis
v. Dyson, 387 Ill. App. 3d 676, 678 (2008)( holding that the
homeowners lacked standing to
pursue their suit in their individual capacities, the Court
analogized the homeowners’ indirect
harm to that of a shareholder of a corporation alleging injury
based on the diminution in value of
corporate shares); Cigal v. Leader Dev. Corp., 408 Mass. 212,
218-20 (1990) (holding that the
unit owners were required to bring a derivative suit on behalf
of the association against the
subcontractor claims); Poulet v. H.F.O., L.L.C., 353 Ill. App.
3d 82, 99 (2004) (holding that the
individual unit owner lacked standing to bring claims of
conversion and common law
constructive fraud in connection with the association’s funds as
that claim belonged exclusively
to the association, but stating that the individual unit owners
could bring a derivative action
against the association if the association failed to protect its
interests against third parties.); Siller
v. Hartz Mountain Assocs., 93 N.J. 370, 381 (1983) (holding that
a unit owner may bring a
derivative claim for an association’s failure to act for
injuries to the common elements of a
condominium) The Court explained in Gamrex, Inc. v. Schultz, No.
10-00380 JMS-KSC, 2010
U.S. Dist. LEXIS 102652, at *10-16 (D. Haw. Sep. 9, 2010):
The distinction between derivative and individual actions rests
upon the party being directly injured by the alleged wrongdoing. A
derivative suit is brought by a shareholder on behalf of the
corporation and seeks redress for harm done to the corporation. By
contrast, a direct action is for injuries done to [the shareholder]
in his individual capacity if he has "an injury which is separate
and distinct from that suffered by other shareholders, or a wrong
involving a contractual right of
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11 925496.1
a shareholder, such as the right to vote, or to assert majority
control, which exists independently of any right of the
corporation." To bring an individual action, a shareholder must be
"injured directly or independently of the corporation." In
evaluating whether a claim is derivative or direct, courts "must
look to the nature of the wrongs alleged in the body of plaintiffs'
complaint, not plaintiffs' characterization or stated
intention."
Id. (internal citations omitted)(emphasis added).
In Mid-State Fertilizer Co. v. Exchange National Bank of
Chicago, the court
explained the reasoning for these rules:
Good reasons account for the enduring distinction between direct
and derivative injury. When the injury is derivative, recovery by
the indirectly-injured person is a form of double counting…[.]
877 F.2d 1333, 1335–36 (7th Cir. 1989) (citations and
parenthetical omitted; emphasis added).
Based on the foregoing authority, Plaintiffs’ are not allowed to
bring a claim for
the same injury in both derivatively and directly in their
individual capacities. Courts draw a
distinction between direct and derivative claims specifically to
avoid a plaintiff seeking redress
for the same injury, multiple times. Here, to the extent that
the Court views any of the claims in
Plaintiffs’ Complaint as being direct claims, this litigation
represents the third such attempt by
Plaintiffs to assert direct claims; Plaintiffs’ direct claims
are already being litigated in a separate
action, and they have also already been determined at an
underlying arbitration hearing that
resulted in a binding Arbitration Award.
As noted above, Plaintiffs are barred from bringing a derivative
action based on a
lack of standing under HRS § 414D-90(a) and HRCP 23.1, meaning
the only claims available to
Plaintiffs are direct claims. And while Plaintiffs expressly
bring this complaint in a derivative
capacity, to the extent the Court views any or all of the claims
as direct, Plaintiffs have already
brought their direct claims in two other proceedings. As such,
Plaintiffs are either trying to bring
the same direct claims against Defendants in a duplicative
proceeding, or alternatively, they are
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12 925496.1
trying to bring the claims derivatively, which they have no
standing to do. Either way, this Court
should dismiss Plaintiffs’ Complaint in its entirety with
prejudice.
V. PLAINTIFFS’ INDIVIDUAL CLAIMS EACH FAIL FOR SEPARATE AND
INDEPENDENT REASONS
A. Plaintiffs’ Count I Breach of Fiduciary Duty Must Be
Dismissed
1. Defendants do not owe Plaintiffs a fiduciary duty in their
individual
capacity.
Despite the express language in the Complaint that Plaintiffs’
have brought the
instant action in a derivative capacity, to the extent that this
Court is inclined to construe any of
Plaintiffs’ claims as direct claims brought by the individual
Plaitniffs, Defendants do not owe
Plaintiffs a fiduciary duty in their individual capacity, and
Plaintiffs’ Count I breach of fiduciary
duty claim should therefore be dismissed. HRS § 514B-106(a)
clearly states that an association
board member’s fiduciary obligations are owed to the association
as a whole, and not just to
individual unit owners. Haw. Rev. Stat. § 514B-106(a) (2019)
(“[i]n the performance of their
duties, officers and members of the board shall owe the
association a fiduciary duty . . . .”)
(emphasis added). The definitions in HRS § 514B-3 further
clarify the distinction between the
“Association” and a “Unit owner,” as follows:
‘Association’ means the unit owners’ association organized under
section 514B-102 or under prior condominium property regime
statutes. . . . ‘Unit owner’ means the person owning, or the
persons owning jointly or in common, a unit and its appurtenant
common interest . . . .
Haw. Rev. Stat. § 514B-3 (2019).
“It is an elementary principle of statutory construction that
‘where the language of
the law in question in plain and unambiguous, construction by
this court is inappropriate and our
duty is only to give effect to the law according to its plain
and obvious meaning.’” Strouss v.
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13 925496.1
Simmons, 66 Haw. 32, 50, 657 P.2d 1004, 1016 (1982) (citations
omitted). The meaning of
HRS § 514B-106 here is plain and obvious – the fiduciary duty is
owed by an association’s
board members to the association as a whole, and not to
Plaintiffs individually.
Federal courts in Hawaii, in looking at this issue, have notably
reached the same
conclusion. See DeRosa v. Ass'n of Apt. Owners of the Golf
Villas, 2016 U.S. Dist. LEXIS
60694, at *13-15 (D. Haw. May 6, 2016); see also Baham v. Assn.
of Apt. Owners of Opua Hale
Patio Homes, 2014 U.S. Dist. LEXIS 82873, at *23 (D. Haw. June
18, 2014). The court in
DeRosa dismissed, with prejudice, a unit owner's claim for
breach of fiduciary duty against an
association, and expressly held that the relationship between a
condominium association and an
individual unit owner “was not the type of relationship that
gave rise to a fiduciary duty.”
DeRosa, 185 F. Supp. 3d 1247, 1254 (D. Haw. 2016). Similarly,
the court in Baham dismissed
with prejudice a single unit owner's claim for breach of
fiduciary duty against an association of
apartment owners, holding that “it would be illogical for the
association . . . to owe a fiduciary
duty to its individual members, as the association was comprised
of its members and would then
owe themselves a fiduciary obligation.” Id. In so ruling, the
Baham court cited other examples
from jurisdictions with similar condominium statutory schemes,
including Smith v. Ridgeview
Homeowner’s Assoc., 2011 WL 1743787 (Minn. App. May 9, 2011)
(homeowners’ association
directors’ duty is to act in the best interest of the
association and its members as a group, not in
the interest of any individual unit owners) and Chambless v.
Officers and Directors of Snapper
Creek, 743 So. 2d 129 (3rd Dist. Fla. 1999) (association charter
created general obligation to
protect the property of all the members of the association and
not the property of one member in
particular).
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14 925496.1
The case law on this issue is overwhelming and provides that
while the Whaler
board members’ owed a fiduciary to the association as a whole,
they owe no such duty to any
Plaintiff individually. To the extent, therefore, that
Plaintiffs’ breach of fiduciary duty claim is
brought by the individual Plaintiffs directly, it must be
dismissed as improper.
2. Plaintiff has no derivative standing to bring a breach of
fiduciary duty claim
To the extent that Plaintiff is asserting a breach of fiduciary
duty claim on behalf
of the Association, the claim must still be dismissed based on
his lack of standing to bring such a
claim. As discussed above, Plaintiff must name at least 5% of
the voting power or 50
Association members and show that he fairly and adequately
represents the interests of similarly-
situated members in order to have standing to bring a derivative
claim. Haw. Rev. Stat. § 414D-
90(a); Haw. R. Civ. P. 23.1; Aarona, No. 05-00197 DAE/BMK, 2007
U.S. Dist. LEXIS 47979,
at *15-16. Where Plaintiff has not made such a showing, they
have no standing to assert a
derivative breach of fiduciary duty claim.
B. Plaintiffs’ Count II Intentional/Negligent Misrepresentation;
Count IV Failure To Fund Reserves; Count VI Other Violations Of HRS
514 B; Count IX Intrusion Of Privacy Are All Barred Pursuant To HRS
§ 414D-149(f)
Plaintiffs cannot sustain any of their claims based on
Intentional/Negligent
Misrepresentation, “Other Violations of Chapter 514B,” Failure
to Fund Reserves, or their claim
for Intrusion of Privacy, because the standard governing as
association director’s conduct is
already expressly set forth in HRS § 514B-149(f) (2017). HRS §
514B-149(f) states as follows:
Any person who serves as a director to the corporation without
remuneration or expectation of remuneration shall not be liable for
damage, injury, or loss caused by or resulting from the person’s
performance of, or failure to perform duties of, the position to
which the person was elected or appointed, unless the person was
grossly negligent in the performance of, or failure to perform,
such duties. For purposes of this section, remuneration does not
include payment of reasonable expenses and indemnification or
insurance for actions as a director as allowed by sections
414D-159, 414D-167.
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15 925496.1
Haw. Rev. Stat. § 514B-149(f) (2017) (emphasis added). Pursuant
to the plain language of the
above statute, the only standard under which a director may be
liable is if they are guilty of gross
negligence in the performance of their duties. Cases in this
jurisdiction addressing the foregoing
standard have consistently recognized that § 514B-149(f)
precludes a breach of fiduciary duty
claim against individual members of an association board. See
Dubois v. Ass'n of Apartment
Owners, 453 F.3d 1175, 1181 (9th Cir. 2006) (“Dubois alleged …
that the Condominium
Association’s officers and directors breached fiduciary duties
to him, but he failed to even allege
gross negligence on their part, as required by statute.”); see
also Mansha Consulting LLC v.
Alakai, 236 F. Supp. 3d 1267, 1279-80 (D. Haw. 2017) (“The
Complaint also does not allege
that Defendant Alakai—or any of the other Defendants—were
grossly negligent in carrying out
their duties. Accordingly, Defendant Alakai is not liable to
Mansha, pursuant to HRS § 414D-
149(f).”). Where gross negligence is the standard, Plaintiff’s
failure to allege such conduct must
necessarily preclude Count II Intentional/Negligent
Misrepresentation, Count IV Failure To
Fund Reserves, Count VI Other Violations Of HRS 514 B and Count
IX Intrusion Of Privacy, to
the extent that their standards conflict with HRS § 514B-149(f)
and to the extent these claims are
seen as direct claims of the individual Plaintiffs.
To the extent that any or all of these claims are more properly
determined to be
derivative based on the plain language of the Complaint, they
should be dismissed based on a
lack of standing as detailed supra. Notably, in the underlying
arbitration, the Arbitrator
dismissed all derivative claims, including claims alleging the
Association breached duties of
good faith, failed to follow the financial and fiscal
operations, failed to adhere to the
Association’s policies and procedures manual, failed to maintain
the proper reserve, and
breached its fiduciary duties. See at 9, ¶ 36.
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16 925496.1
C. Plaintiffs’ Count III, Breach Of Covenant of Good Faith And
Fair Dealing Claim, Is Not Recognized In Hawaii’s Courts
Plaintiffs’ breach of the covenant of good faith and fair
dealing claim does not
form the basis for a cognizable claim in Hawaii’s courts. As an
initial note, Plaintiffs have
already incorporated this allegation into their Count VI “Other
Violations of Chapter 514B”
claim, and should not be allowed to sustain duplicate claims in
separate counts. See Exhibit A, at
28, ¶ 120.
With respect to the substance of Plaintiff’s Count III
allegations, it appears that
Plaintiff relies upon HRS §§ 514B-9 and 10, and Restatement
(Third) of Property: Servitudes §§
6.13 and 6.14 (3d 2000) to argue a cause of action for breach of
the covenant of good faith and
fair dealing. As the U.S. District Court has already noted,
however, Hawaii has not recognized a
cause of action arising out of these sources. See DeRosa, 85 F.
Supp. 3d at 1253; see also Zyda
v. Four Seasons Hotels & Resorts, 371 F. Supp. 3d 803, 809
(D. Haw. 2019) (“However, while §
514B-10(1) requires that the remedies specified in Chapter 514B
be ‘liberally administered,’
neither that provision nor any case law interpreting it requires
that Chapter 514B be interpreted
liberally to create remedies that are not specified within the
chapter’s provisions.”). Without any
Hawaii case precedent recognizing a cause of action arising from
these statutes/secondary
sources, Plaintiff is without grounds to properly assert a claim
for breach of the covenant of good
faith and fair dealing.
To the extent that Plaintiffs’ good faith claim is asserted
based on an alleged
common law “implied duty of good faith and fair dealing in each
contract[,]” this claim must fail
as well. As the DeRosa court noted, claims of bad faith must be
limited to “the insurance context
or situations involving special relationships characterized by
elements of fiduciary responsibility,
public interest, and adhesion.” DeRosa, 185 F. Supp. 3d at 1252.
The relationship between an
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17 925496.1
association and a unit owner does not amount to such a special
relationship. Id. (finding that, in
a case involving alleged bad faith on the part of an association
board, that “[t]he instant case does
not arise from the insurance context, nor is the relationship
between Plaintiff and [the board] the
type of special relationship that supports a bad faith claim,
such as ‘an innkeeper, a common
carrier, a lawyer, [or] a doctor.’”) (citing, among others, Best
Place v. Penn Am. Ins. Co., 82
Hawai‘i 120, 131, 920 P.2d 334, 345 (1996)).
Where Plaintiff is without statutory, secondary, or common law
grounds to
sustain a claim for breach of the covenant of good faith and
fair dealing against Defendants, the
Court should dismiss it with prejudice.
D. Plaintiff Is Without Standing To Assert Count V For
Violations Of Chapter 480
Plaintiffs have no standing under Chapter 480 to bring an unfair
deceptive acts
and practices (“UDAP”) claim. HRS § 480-13 (2005) permits a
party injured by “any unfair or
deceptive act or practice forbidden or declared unlawful by
section 480-2” the right to file suit
for damages sustained as a result. Haw. Rev. Stat. § 480-13
(2005). HRS § 480-2 forbids and
declares unlawful “[u]nfair methods of competition and unfair or
deceptive acts or practices in
the conduct of any trade or commerce.” Haw. Rev. Stat. §
480-2(a) (2002). The types of
persons who may file a UDAP claim, however, is restricted by the
express language of the
statute. See Haw. Rev. Stat. § 480-2(d) (2002) (“No person other
than a consumer, the
attorney general or the director of the office of consumer
protection may bring an action
based upon unfair or deceptive acts or practices declared
unlawful by this section.”) (emphasis
added). In this case, Plaintiffs may only bring a UDAP claim if
they qualify as a “consumer”
under Chapter 480, which they do not. Id.
HRS § 480-1 (2005) defines a “Consumer” as “a natural person
who, primarily
for personal, family, or household purposes, purchases, or
attempts to purchase, or is solicited to
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18 925496.1
purchase goods or services or who commits money, property, or
services in a personal
investment.” Haw. Rev. Stat. § 480-1 (2005). Real estate and
residences, however, do not
qualify as “goods” for purposes of HRS § 480-1. Souza v. Fisher,
139 Hawai‘i 431, 392 P.3d
1215, 1215 (App. 2017); see also Fernandez v. Mark Dev., Inc.,
125 Hawai‘i 381, 262 P.3d 670
(App. 2011).
Here, so far as Defendants can ascertain, Plaintiffs appears to
allege standing to
bring a UDAP claim in both a personal and derivative capacity.
See Exhibit A at 27, ¶¶ 113-115.
First, and as with all of the other claims alleged in the
Complaint, Plaintiffs have no standing to
bring a derivative action on behalf of the Association without
showing that he has 5% of the
voting power/50 members supporting the same. Haw. Rev. Stat. §
414D-90(a); Haw. R. Civ. P.
23.1; Aarona, No. 05-00197 DAE/BMK, 2007 U.S. Dist. LEXIS 47979,
at *15-16. Second, and
to the extent that Plaintiffs are bringing this claim in their
individual capacity, Plaintiffs do not
satisfy the definition of a “consumer” where the basis for their
claim is solely by virtue of
ownership of a residence. The Court should therefore dismiss
Count V with prejudice.
E. Plaintiff Count VIII Negligence/Gross Negligence Should Be
Dismissed
“Gross negligence is an aggravated form of negligence, which
differs from
ordinary negligence only in degree and not in kind. It falls
short of recklessness which is not
willful or wanton." Uy v. Spencer Homes, Inc., 135 Hawai‘i 533,
354 P.3d 186 (App.
2015)(citing State v. Bunn, 50 Haw. 351, 358, 440 P.2d 528,
534)(emphasis added). “Gross
negligence has also been described as a reckless and conscious
indifference to the consequences
that could arise. Ordinary negligence, on the other hand, ‘is
the failure to do what a reasonable
and prudent person would ordinarily have done under the
circumstances of the situation, or doing
what such person would not have done.’” Id. (internal citations
omitted).
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19 925496.1
Here, to the extent that Plaintiffs’ claim of gross negligence
is brought
derivatively, such a claim does not exist under the law, and, as
has been established, Plaintiffs
lack standing to assert any derivative claims in the first
place. See Aarona v. Unity House Inc.,
No. 05-00197 DAE/BMK, 2007 U.S. Dist. LEXIS 47979, at *15-16;
Haw. Rev. Stat. § 414D-
90(a); HRCP 23.1. Should this Court Plaintiffs’ claim as direct,
Plaintiff fails to properly plead a
claim of gross negligence, which requires pleading behavior that
is willful or wanton.
F. Plaintiffs Lack Standing To Bring Count VIII For Conversion
And Also Do Not Satisfy The Elements Of A Conversion Claim
Defendants are entitled to a dismissal of Plaintiffs’ conversion
claim to the extent
that (1) Plaintiffs lack standing to assert the claim on behalf
of the Association, and (2) the claim
only alleges conversion against one Defendant, Defendant David
Senior, and does not plead any
facts that implicate the Defendants bringing this Motion. Based
on its plain language, Plaintiffs’
conversion claim is brought on behalf of “AOAO,” and the claim
is therefore being asserted on a
derivative basis. However, and as with the remainder of
Plaintiff’s Complaint, Plaintiff has not
met the requirements to show standing to bring a derivative
claim. Haw. Rev. Stat. § 414D-
90(a); Haw. R. Civ. P. 23.1; Aarona, No. 05-00197 DAE/BMK, 2007
U.S. Dist. LEXIS 47979,
at *15-16. Where Plaintiff is without standing to bring such a
claim, the Court should dismiss
the claim.
Furthermore, conversion “encompasses the following acts (1) A
taking from the
owner without his consent; (2) an unwarranted assumption of
ownership; (3) an illegal use or
abuse of the chattel; and (4) a wrongful detention after
demand.” Yoneji v. Yoneji, 136 Hawai‘i
11, 16, 354 P.3d 1160, 1165 (App. 2015) (citations omitted).
Based on this test, Plaintiff’s
pleading is entirely inadequate to support an allegation of
conversion against any of the
Defendants, because the Complaint only asserts a conversion
claim against Defendant David
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20 925496.1
Senior specifically. See Exhibit A, Complaint, at 31, ¶¶
133-136. Despite alleging conversion
against only Defendant David Senior, the Complaint goes on to
allege that “[a]s a direct,
proximate, and foreseeable result of the Defendants’ actions,
the AOAO has suffered damages in
an amount to be determined at trial.” Id. at 31, ¶ 136 (emphasis
added). To the extent that the
Court declines to dismiss Plaintiff’s Count VIII conversion
claim based on Plaintiffs’ lack of
standing to bring a derivative claim, it should restrict its
assertion as worded toward the
appropriate Defendant named in its allegations, which is
Defendant David Senior, and dismiss
the claim as to any other Defendants.
VI. CONCLUSION
Based on the foregoing, Defendants respectfully request that the
Court GRANT
their Motion, and dismiss Plaintiff’s Complaint with
prejudice.
DATED: Honolulu, Hawaii, November 30, 2020.
/s/ Brian M. Mullin DAVID R. MAJOR BRIAN M. MULLIN Attorneys for
Defendants PAT DONAHUE; JAMES MELSA; CHRISTINE KLINE; ROBERT
STEINEBEL; and JAMIE BROWN
-
925496.1
IN THE CIRCUIT COURT OF THE SECOND CIRCUIT
STATE OF HAWAII
WILLIAM J. ALLRED; LYNDA JANE ALLRED; MICHAEL GENE JORDAN AS
LEGAL REPRESENTATIVE OF THE MICHAEL GENE JORDAN TRUST DATED
FEBRUARY 4, 2014; ALOHA MOANA LLC BY ITS MANAGER LUCINDA BIGEH; AND
RALPH RICCIARDI AND MADELINE RICCIARDI AS CO-TRUSTEES OF THE
RICCIARDI TRUST Derivatively on Behalf of THE ASSOCIATION OF
APARTMENT OWNERS OF THE WHALER ON KAANAPALI BEACH, Plaintiffs, vs.
DAVID A. SENIOR; PAT DONAHUE; JAMES MELSA; CHRISTINE KLINE; ROBERT
STEINEBEL; JAMIE BROWN; DESTINATION MAUI, INC.; JOHN DOES 1-100;
JANE DOES 1-100; DOE CORPORATIONS 1-100; AND DOE PARTNERSHIPS
1-100, Defendants. _____________________________________
))))) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
CIVIL NO. 2CCV-20-0000209 (Other Civil Action) DECLARATION OF
BRIAN M. MULLIN
DECLARATION OF BRIAN M. MULLIN
I, BRIAN M. MULLIN, state that:
1. I am an associate attorney with the law firm of Bays Lung
Rose & Voss,
attorneys for Defendants Pat Donahue, James Melsa, Christine
Kline, Robert Steinebel, and
Jamie Brown (collectively, “Defendants”) in the above-captioned
matter.
2. I am competent to testify as to the matters set forth herein
and make this
declaration based upon my personal knowledge and information,
and submit the same in support
-
2 925496.1
of Defendants’ Motion to Dismiss Verified First Amended
Complaint, Filed October 5, 2020
(“Motion”).
3. Attached hereto as Exhibit A is a true and correct copy of
Defendants’
Motion to Dismiss Verified First Amended Complaint, Filed
October 5, 2020.
4. Attached hereto as Exhibit B is a true and correct copy of
the First
Amended Complaint, filed in the Second Circuit Court of the
State of Hawaii, as William J.
Allred, et. al. v. The Association of Apartment Owners of the
Whaler on Kaanapali Beach, et. al.;
Civ. 17-0251 (1).
5. Attached hereto as Exhibit C is a true and correct copy of
the Declaration,
as amended, of the Association of Apartment Owners of The Whaler
On Kaanapali Beach.
6. Attached hereto as Exhibit D is a true and correct copy of
the Final Award
of Arbitrator, filed October 17, 2019.
I, BRIAN M. MULLIN, declare under penalty of law that the
foregoing is true
and correct.
DATED: Honolulu, Hawaii, November 30, 2020. /s/ Brian M. Mullin
BRIAN M. MULLIN
-
REVERE & ASSOCIATES A Limited Liability Law Company
TERRANCE M. REVERE 5857 Pali Palms Plaza 970 North Kalaheo
Street, Suite A301 Kailua, Hawaii 96734 Telephone No.: (808)
791-9550 Facsimile No.: (808) 791-9551
[email protected]
Attorney for Plaintiffs William J. Allred, Lynda Jane Allred,
Michael Gene Jordan as legal representative of the Michael Gene
Jordan Trust Dated February 4, 2014, Aloha Moana LLC by its Manager
Lucinda Bigeh, and Ralph Ricciardi and Madeline Ricciardi as
Co-trustees of the Ricciardi Trust
IN THE CIRCUIT COURT OF THE SECOND CIRCUIT
STATE OF HAWAII
WILLIAM J. ALLRED; LYNDA JANE ALLRED; MICHAEL GENE JORDAN AS
LEGAL REPRESENTATIVE OF THE MICHAEL GENE JORDAN TRUST DATED
FEBRUARY 4, 2014; ALOHA MOANA LLC, BY ITS MANAGER LUCINDA BIGEH;
AND RALPH RICCIARDI AND MADELINE RICCIARDI, AS CO-TRUSTEES OF THE
RICCIARDI TRUST; Derivatively on Behalf of THE ASSOCIATION OF
APARTMENT OWNERS OF THE WHALER ON KAANAPALI BEACH,
Plaintiffs,
CIVIL NO.: 2CCV-20-0000209 (Other Civil Action)
VERIFIED FIRST AMENDED COMPLAINT; VERIFICATIONS OF FIRST AMENDED
COMPLAINT; DEMAND FOR JURY TRIAL; SUMMONS
vs.
DAVID A. SENIOR; PAT DONAHUE; JAMES MELSA; CHRISTINE KLINE;
ROBERT STEINEBEL; JAMIE BROWN; DESTINATION MAUI, INC.; JOHN DOES
1-
Electronically FiledSECOND
CIRCUIT2CCV-20-000020905-OCT-202005:36 PM
I do hereby certify that the foregoing is a full, true and
correct copy of the official court record of the Courts of the
State of Hawai`i.
Dated at: Wailuku, Hawai`i 06-OCT-2020, /s/ Sandy S. Kozaki,
Clerk of the Second Judicial Circuit, State of Hawai`i
EXHIBIT A
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100; JANE DOES 1-100; DOE CORPORATIONS 1-10; DOE ENTITIES 1-10;
and PARTNERSHIPS 1-10,
Defendants.
VERIFIED FIRST AMENDED COMPLAINT
COME NOW Plaintiffs, William J. Allred, Lynda Jane Allred,
Michael Gene Jordan as
legal representative of the Michael Gene Jordan Trust Dated
February 4, 2014, Aloha Moana LLC
by its Manager Lucinda Bigeh, and Ralph Ricciardi and Madeline
Ricciardi as Co-trustees of the
Ricciardi Trust, by and through their undersigned attorney,
allege the following allegations and
claims against Defendants:
PARTIES
1. Plaintiffs William J. Allred, Lynda Jane Allred, are
residents of the State of Oregon
and TIO owner at the Whaler condominium project located in
Kaanapali, Maui, Hawaii. William
Allred is a member of the Board of Directors of said condominium
project.
2. Michael Gene Jordan is a resident of Lisle, State of Illinois
and is the legal
representative of the Michael Gene Jordan trust dated February
4, 2014 which owns Apartments
1151 and 1257 at the Whaler condominium project located in
Kaanapali, Maui, Hawaii.
3. Aloha Moana LLC is a Hawaii Limited Liability Company
registered in the State
of Hawaii which owns Apartment 202 at the Whaler condominium
project located in Kaanapali,
Maui Hawaii. This action is brought on its behalf by Lucinda
Bigeh, its manager, who is a resident
of the State of Oregon.
4. Ralph and Madeline Ricciardi are residents of San Rafael,
California and are the
co-trustees of the Ricciardi Trust which owns Apartment 1057 at
the Whaler condominium project
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located in Kaanapali, Maui, Hawaii. Ralph Ricciardi is a member
of the Board of Directors of said
condominium project.
5. Plaintiffs are and were, at all relevant times herein,
members of the Apartment
Owners of the Whaler on Kaanapali Beach.
6. The Association of Apartment Owners of the Whaler on
Kaanapali Beach is a
nonprofit corporation created under HRS 415B-34 organized and
existing pursuant to Hawaii
Revised Statutes Chapter 514B, its Articles of Incorporation,
the Declaration of Condominium
Property Regime, and the By-Laws attached thereto. To the extent
permissible by law, Plaintiffs
seek derivatively to enforce and protect the Association’s and
its members’ rights regarding issues
raised in this First Amended Complaint as the defendants are
refusing to do so.
7. Defendant David A. Senior (“Defendant Senior” and “Senior”)
is a resident of the
State of Hawaii and, at all times mentioned herein, was a member
of the Board of Directors of the
aforesaid Association and served as its president and is the
apartment owner and TIO owner at the
Whaler condominium.
8. Defendant Pat Donahue is a resident of Rancho Mirange,
California and, at all times
mentioned herein, was a member of the Board of Directors of
Association and its President.
9. Defendant James Melsa is a resident of Naperville, Illinois
and, at all times
mentioned herein, was a member of the Board of Directors of
Association and is currently the
Treasurer.
10. Defendant Christine Kline is a resident of Delta, British
Columbia, Canada and, at
all times mentioned herein, was a member of the Board of
Directors of Association and is currently
the Assistant Treasurer and chair of the budget committee.
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11. Defendant Robert Steinebel is a California resident and is
currently a member of
the Board of Directors of Association and its President.
12. Defendant Jamie Brown is a resident of the State of Hawaii
and, at all times
mentioned herein, was a member of the Board of Directors.
13. Defendant Destination Maui, Inc. is a property management
company with its
principal place of business on Maui, Hawaii.
14. Plaintiffs have reviewed records that were made available to
them as a unit owner
of the Condominium in order to ascertain the true and full names
and identities of all defendants
in this action, but no further knowledge or information
regarding the parties responsible is
available at this time and Plaintiffs are unable to ascertain
the identity of the defendants in this
action designated as John Does 1 through 100, Jane Does 1
through 100, Doe Partnerships 1
through 100 and Doe Corporations 1 through 100 (“Doe
Defendants”); said Defendants are sued
herein under fictitious names for the reason that their true
names and identities are unknown to
Plaintiffs except that they may be connected in some manner with
defendants and may be agents,
attorneys, servants, employees, employers, representatives,
co-ventures, co-conspirators,
associates, or independent contractors of Defendants and/or were
in some manner responsible for
the injuries or damages to Plaintiffs and their true names,
identities, capacities, activities, and/or
responsibilities are presently unknown to Plaintiffs or their
attorneys.
15. Plaintiffs have commenced this action on behalf of the
Association Of Apartment
Owners Of The Whaler On Kaanapali Beach (the “AOAO”) and other
similarly situated unit
owners against Individual Defendants David A. Senior, Pat
Donahue, James Melsa, Christine
Kline, Robert Steinebel and Jamie Brown and DMI, the property
management company to redress
the Defendants’ violations of their fiduciary duties, breaches
of the Hawaii Revised Statutes,
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breaches of the Declaration and Bylaws of the AOAO, breaches of
the written Policies and
Procedures of the AOAO and other violations of law discussed
herein. Plaintiffs will fairly and
adequately represent the interests of the members of the AOAO
similarly situated to Plaintiffs.
Plaintiffs have no interest adverse to those other owners and
members.
16. Objections and demands for action were made to the Board of
Directors, however,
the demands and objections were futile because the actions
complained of were deliberately taken
by and/or ratified by the Board and the demands otherwise were
ignored.
17. It would be futile and fruitless to further ask the current
Board of Directors to take
action against themselves, or to reconsider or reverse the
actions it has previously taken, because
this Board has consistently refused to take such actions when
asked to do so.
JURISDICTION AND VENUE
18. Plaintiffs’ action against Defendants arises from acts
performed by Defendants in
the County of Maui, State of Hawaii.
19. Pursuant to Hawaii Revised Statutes (“HRS”) §§
603-21.5(a)(3) and 632-1, this
Court has subject matter jurisdiction for this action.
20. Pursuant to HRS §§ 634-35(a)(1) and 634-35(a)(3), this Court
has personal
jurisdiction over Defendants.
21. Pursuant to HRS § 603-36(5), the Circuit Court of the Second
Circuit for the State
of Hawaii is the proper venue.
FACTUAL ALLEGATIONS
22. This is a homeowners derivative action brought for the
benefit of The Association
Of Apartment Owners Of The Whaler On Kaanapali Beach (the
“AOAO”) against those certain
members of the AOAO’s Board of Directors (the “Board” or the
“Individual Defendants”) seeking
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to remedy their violations of law and the governing documents
and breaches of fiduciary duty
during the period beginning in 2014 through the present (the
“Relevant Period”) .
23. Plaintiffs, the homeowners, were, at all relevant times
herein, members of the
AOAO. Plaintiffs made a demand in May 2017 via counsel for
Defendants requesting the Door
Project be put on hold until the door ownership issue was
determined. Association counsel
responded by letter dated May 24, 2017 claiming the contemplated
project with the 3-week
evictions would proceed, but indicated Plaintiffs would not have
to participate in door
replacements if they notified the General Manager by June 23,
2017. Plaintiffs’ counsel responded
by email on May 24, 2017 again requesting the project be
suspended to which there has been no
substantive response. The demand and objections to misspending
of the funds by Defendants was
futile.
24. The Whaler condominium project (the “Whaler” or “Project”)
is a condominium
project located in Kaanapali, Maui, Hawai'i. There are
approximately 359 apartments in the
Whaler condominium project. Each unit in the Project is a
separate parcel of real estate to which
an owner is entitled independent ownership and possession as set
forth in the governing
documents.
25. The Whaler was created through a Declaration dated November
1, 1974, filed on
November 4, 1974, in the Office of the Assistant Registrar of
the Land Court of the State of Hawaii
as document number 700661 which Declaration provided for the
establishment of Association
(“Declaration”). The original Bylaws of said Association (the
“By-Laws”) were recorded under
the same document number on the same date. Subsequently, the
Bylaws and Declaration were
amended by various instruments (collectively the “governing
documents”).
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26. The Amended and Restated Declaration of Condominium Property
Regime (the
“Declaration”) and the Amended and Restated Bylaws (the
“Bylaws”), both dated March 6, 2007,
are the operative Declaration and Bylaws of the Condominium and
the AOAO.
27. The AOAO is a non-profit association comprised of the owners
of the
condominium units. The purpose of the AOAO is to maintain the
condominium property.
28. It was created under the provisions of HRS 514A-1 et. seq.
Later, the Association
elected to make the project subject to HRS 514B et. seq.
29. Under the current Bylaws of the Association, the President
is the chief executive
officer of the Association, but his exercise of general
supervision and direction over the
management and conduct of the business and affairs of the
Association is subject to the control of
the Board of Directors. (Article III. Section 4.) The Board has
all powers necessary for the
administration of the affairs of the Association and Board
members owe a fiduciary duty to the
Association. (Article II. Section 2.)
30. On September 17, 2011, the Board approved the Policies and
Procedures Manual
entitled, “The Association of Apartment Owners of the Whaler on
Kaanapali Beach Accounting,
Financial and Fiscal Operations Policies and Procedures Manual”
(“Policies and Procedures
Manual”), as the official policy of the Association with respect
to the purchase of goods and
services by the Whaler, which was revised on January 2013 and
again on January 2015.
31. In or around 2014, the Board of Directors of the AOAO formed
the Door, Lock,
and Thermostat Committee (the "DLT Committee") to study
upgrading the thermostats, unit entry
doors, and locks of the Whaler (the “Door Project”). According
to the DLT Committee's charter
document, the purpose of the committee was to Develop a detailed
proposal for the board of
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directors that outlines the Options, Cost and Benefits of
Replacing the Doors, Locks, and
Thermostats.
32. In the Declaration creating the Whaler condominium project,
the unit entry doors
of each apartment, including all portions of the doors (locks,
thresholds, hinges, peepholes, jambs,
moldings, doorknobs, frames,) are part of each apartment and
owned by the owners of said
apartment.
33. The Declaration provides in pertinent part: “Each apartment
shall be deemed to
include…. any doors, windows or panels along the
perimeters….”
34. Further pursuant to Article V. Section 2 of the Bylaws of
the Association, the
Owner is responsible for the maintenance, repair and replacement
of the lanai door.
35. In the agreement prepared for the Association in 2010, the
Association
acknowledged the lanai doors, including their locks, thresholds,
jambs, moldings, handles, and
frames were a fixture located on a partition wall of the
apartment and, therefore, included in the
apartment pursuant to paragraph 4 of the Declaration. The
agreement stated that the Association
was not required to replace the lanai door because that was the
responsibility of the Owner. This
position was acknowledged by the Board when Jerry Romain, acting
as the authorized agent of the
Association, stated in an email dated November 16, 2010: “Having
said all this, the door decision
is up to the homeowner and you are free to explore other
options. It is too bad that all doors could
not be replaced at the Whaler but it is clear that the owners
own the doors and are their
responsibility. Note also that all costs are being borne by
anyone who does put in a new door
system, no AOAO funding.”
36. In March 2015, the Board decided to delay the Door Project
due to unavailable
funds and because there was “no urgency to complete the doors
project at this time.” The
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construction costs of the project were estimated to be
approximately $3.4 million. The Board voted
to delay the project until the fiscal year 2018.
37. In late 2015 or early 2016, David Senior, who was the
President of the Board of
Directors and is a California practicing attorney, took over the
door replacement project from the
former chair of the DLT Committee, Lewis Scarpace. Defendant
Senior contacted Jeffrey
Bettendorf of MWA about the door project, and in April 2016,
Bettendorf prepared an updated
budgetary estimate for the door project, which estimated the
replacement costs to be approximately
$4.7 million.
38. On August 22, 2016, Mila Salvador, Whaler General Manager,
sent an email to
Senior stating that she was told by the AOAO’s former IT
consultant that the software that operates
the locks of the unit entry doors (the “Timelox system”) was
outdated and should be replaced.
39. At a board meeting on August 30, 2016, Defendant Senior
advised the board that
the Door Project should be moved up and commenced in 2017 even
though the project had not
been placed in the AOAO’s budget. Around this period, Defendant
Senior stated the potential lock
failure constituted an emergency and justified the project being
moved to 2017 and evicting owners
to complete the project.
40. Defendant Senior convinced the board to pass a resolution
approving the Door
Project to go forward to replace the unit entry doors and locks
with related hallway improvements
for an amount not to exceed $4.7 million. To secure that
approval, Defendant Senior falsely
represented that the unit entry doors needed to be replaced
because they were “full of asbestos”
and because no modern drop-in lock would fit the existing
hallway doors.
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41. Plaintiffs discovered and alerted Defendants to the fact
that the doors did not need
to be replaced as there was no asbestos in the doors and because
there were drop-in locks available
that would fit in the door without the need for replacing the
entire door.
42. The board meeting held on August 30, 2016 was a farce.
Defendant Senior did not
provide details about how the $4.7 million was computed. When
questioned by Plaintiff William
Allred, Senior replied that the budget was a work-in-progress
and that he would present the specific
budget numbers to the board once they were firmed up, but he
never did. No bids were obtained
either, in direct violation of the Board’s own policies and
procedures manual, and contrary to
common AOAO business practice and common sense when millions of
dollars of the Owner’s
money were on the line.
43. Defendant Senior moved ahead with the Door Project, he
entered into contracts and
spent Association funds without consulting the Board, without
getting at least three bids per the
Policies and Procedures Manual, and without providing updates or
detailed information to Board
members Allred and Ricciardi.
44. On August 30, 2016, the Board passed a motion approving the
project to go forward
to replace the doors and locks with related hallway improvements
for an amount not to exceed
$4.7 million; however, the Board never authorized nor approved
the hiring of project management
firms, contractors, the signing of contracts, the scheduling of
the work, or the disbursement of
funds for the project in violation of the Whaler’s governing
documents.
45. The Motion identified an urgent condition, citing problems
with the locks’
software. The potential problems with the software led to the
Board seeking the replacement of
the doors and locks to begin no later than August 2017 and was
distributed to the owners in a form
of notice with a voting ballot enclosed to it.
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46. The Notice and the Ballot presented to the homeowners on
October 17, 2016 was
based on misleading information that the Association owned the
doors and locks of The Whaler,
instead of the homeowners.
47. The Notice set forth to the unit owners the following:
“a. Whereas the current interior doors and related locks have
been identified as needing replacement. b. And, whereas it would
appear prudent to address all related hall carpet, wall covering,
etc., at the same time. c. And Whereas the Board of Directors has
recently learned of potential problems with the software that
operates the current lock system which requires urgency in
addressing the door and lock project. d. And Whereas the AOAO does
not have the funds available to begin this project until mid May
2019. e. Therefore, be it resolved, to approve a project to replace
all interior doors and locks with related hall improvements for an
amount not to exceed $4.7 MM to begin no later than August 2017. f.
And be it further resolved, to seek approval from the ownership to
borrow to $2.5MM for this project with a payback not to exceed two
(2) years. g. And, be it further resolved that if the ownership
does not approve the authority to obtain a loan, then a special
assessment of $2.5 MM be approved assessment to be due no later
than August 2017.”
48. The enclosed Ballot distributed to the owners sought a vote
based on the following
statement:
“I (we) support the project of replacing the interior door
locks, interior doors, and certain hallway improvements for a total
cost of $4.7 million that will include a not to exceed loan of $2.5
million.”
49. On or about January 18, 2017, the Association was informed
that a new lock set
(Flex lock with drop-in replacements) could fit into the old
doors without modification and without
the need for replacing the entire door. Near that period,
Defendant Senior believed that by simply
replacing the locks, the project may have saved approximately $2
million and cut the project time
in half. Defendant Senior even wrote to MWA acknowledging that
the replacement locks were
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available and that it would save $2M and 50% construction time
while performing all state of the
art functions.
50. In the email dated April 27, 2017, Mila Salvador, General
Manager of The Whaler,
indicated the “the door itself is part of the unit and owned by
the individual unit Owner.”
51. Senior published to the Association a document titled,
“Rights and Obligations
Regarding Whaler Hallways-Doors-Locks Renovation Project,
August-November, 2017, which
reads in pertinent part: Under Hawaii law, doors that allow
access to a unit are common elements,
unless the condominium declaration provides otherwise.”
52. In the email dated May 3, 2017, David Senior admitted that
“[t]he doors are NOT
common element. They are the owners property.”
53. Following the receipt of the letter and ballot, Plaintiff
Allred requested a special
board meeting to be held May 6, 2017 and pointed out that,
pursuant to the Declaration, the unit
doors were not common elements, but rather were owned by the
homeowners.
54. Plaintiff Allred also informed the Board that instead of
proceeding with the
replacement of the doors, the Board would save the homeowners
millions of dollars by using the
Flex-locks drop-in locks. Plaintiff Allred motioned the board to
cancel the plans to loan money
and to delay the Door Project pending the homeowners’ input on
the drop-in locks. Defendants
overruled Plaintiff Allred’s motion with majority vote.
55. The Individual Defendants, the board majority, chose to move
ahead with the Door
Project despite availability of less costly “Flex-locks” –
drop-in locks. Senior opted not to buy
“Flex-locks” for the unit entry doors, but DID elect to use them
in the basement.
56. The Door Project was conducted from August to November
2017.
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57. The Defendants' decision to carry out a Door Project
effectively evicted Plaintiffs
and other similarly situated Owners from their properties and
prohibited them from using or
renting their properties for three weeks. The eviction of
Plaintiffs and other similarly situated
Owners during the Door Project, completely denied any personal,
or business use or rental of
property and deprived Plaintiffs and other similarly situated
Owners’ of their property investment.
The rescheduling of the Door Project would have shortened or
eliminated the 3-week eviction of
Plaintiffs and other similarly situated Owners from their
units.
58. Defendants were aware the doors were not filled with
asbestos and that there was
no other emergency warranting the Door Project to proceed
between August to November 2017
rather than in 2019 as originally planned.
59. Defendants were aware of the availability of less costly,
more financially prudent
options like “Flex-locks” drop-in locks, they also had hardware
backups and sufficient replacement
locks from secondary source in Waikiki, but Defendants
imprudently proceeded with the most
expensive option.
60. Defendants moved forward with the Door Project without board
resolutions
authorizing signing the multi-million-dollar contracts with
Viking Construction or any other
contracts relating to the Door Project. There was no fair bid
process. The designer was selected
without a bid. The project manager was selected without a bid.
The general contractor was selected
without a bid.
61. Defendants ignored the Policies and Procedures Manual in
rushing the Door Project
down the throats of the owners. The Board failed to follow the
following procedures:
Purchases of $10,000.01 to $25,000.00 in the aggregate shall be
based on the receipt of a minimum of two written quotes, a
recommended vendor, and require a purchase order approved by the GM
and authorization from the BoD. Authorization from the BoD
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shall be by specific resolution unless it has already been
approved within the annual budget. Where a specific BoD resolution
is required, the GM shall submit the purchase order, copies of the
quotations and the recommended vendor