 Aloha and welcome again to another edition of Condo Insider. We're on Think Tech Hawaii each week on Thursday from 3 to 330, talking about many issues that affect associations in Hawaii. I've spent many times, statistics reveal, approximately 37% of our population lives in some type of association in the state of Hawaii. One thing we hear about all the time is boards getting sued. And today we have with us a very successful and prominent lawyer, Terrence Revere, who I think gave a seminar on Maui recently, How Not to Get Sued by Terry Revere, who has taken up the cause and champion of owners across the state on issues affecting their boards. So I want to welcome Terry to the show today. I've known him forever and I consider him a good friend even though he has some challenges today in condo management. And welcome to the show. And I'd like you to tell us a little bit about you, your background, and your firm. Thank you for having me on the show. I appreciate it as the black sheep of the condo industry for you inviting me. My firm is called Revere & Associates and we're located in Kailua. And we represent, we primarily represent homeowners in disputes with boards. We also represent some boards. And we do a lot of construction defect and other general civil litigation work. Now, I want to get this off my chest. Get it off your chest. All right. We talked about boards and there's all this strife in the condo. In your opinion, are all boards bad? All boards are not bad. Just the bad ones give, you know, a bad name to the 10% or so that are good. Now, there's more than 10% of the boards are fine, but there's a lot of very bad board members out there, for sure. And what do you think the primary mistake these board members make in managing their association? That was the subject of the whole seminar on Maui. I think the biggest problem is that the board members quickly realize once they get elected that they have all the money, all the power, the management company, the law firm, the parliamentarian, the gardener, the butcher, the baker and the candlestick maker at their beck and call. And that breeds a lot of arrogance and a lot of very dismissive attitude towards the concerns of their neighbors. I was talking to one of our legislators recently and I was saying, you know, and this particular senator echoed these same words, is that once you're elected to this job, you almost have a duty to hear and respect and treat everybody equally, even though they may not agree with your opinion. It's not supposed to be some monarchy or kingdom or fiefdom that you can treat people badly. I mean, wouldn't you say that's kind of what it's about in a way? Yeah, I wouldn't say that it's like they have a duty. They do have that duty. They are supposed to have open board meetings. They very frequently don't have real open board meetings. So I'd say it's not a kind of a duty. It's an absolute duty to hear and let owners actually meaningfully participate in what for most people is definitely the biggest investment they're going to make. Before we get into some of the cases you've handled, walk with me through a board meeting. For example, what do you see, generally speaking, some of the mistakes boards make? In the board meetings themselves? Yes. I think one of the biggest problems is that the concept is, and what I hear a lot of time from various people is like, well, gee, if your owner, your client has a problem with the board, why don't they just elect a new board? That's what democracy is all about. And my response is, yeah, democracy would be a good thing if it actually happened. Unfortunately, it doesn't happen. The reason it doesn't happen is I've been in many board meetings where owners are ignored. Owners are attacked for raising concerns. And the open session of the board meeting quite often is relatively meaningless. It might be about how big a tree should we get for the Christmas party or something like that that's not very meaningful. And then all the meaningful, important, controversial stuff, some boards wrongfully push that into executive session, even though it's supposed to be for very narrow purposes. So democracy can't function if you don't know what your leaders are doing. Is that an educational issue to think with some board members? Because to go into executive session has to be called from a regular meeting. They're supposed to announce what they're going to do in executive session. And to me, sufficient terms, you know what they're going to talk about. Maybe not the debate issues with their experts and their lawyers. And then they have to come out of the executive session and announce what they did. And I guess what you're saying, that doesn't happen. I think you've generally described how it's supposed to work. That's not what happens. No, I mean, and for example, there might be something about a particular contract, some term that does have to be talked about, or a response to a proposal that should be kept in executive session. However, often what happens is the owners are kicked out of the executive session. At that point, the board members go on and on. All the owners leave. The board comes out of executive session. A, nobody's there anymore because the board members have taken so long. And B, they never announced what they actually did and things just surface sometimes weeks, months or years down the line about the ramifications of a decision that nobody heard about. So that's a problem. I hope people watching will listen to you because I think it's really fair that we have transparency with owners. I would be the first to say at times there are some owners who are disrespectful as well to the board and the meetings. But the board under the statute can pass a resolution by the majority at that meeting and say, look, we're not taking any more owner testimony tonight. We have a business agenda. So the board has ways to deal with someone who wants to be disruptive beyond being fair and being heard to deal with it. So I'm not sure why boards, I say this to all the boards out there and all the directors. Part of your job is just to be transparent and let people be heard and be a part of the process. And then you vote in a democratic fashion and majority will dictate but it's got to be in the minutes and it's got to be publicly and certainly executive sessions have a purpose to deal with some significant parts of an issue. Yeah, I think and the other thing too is as we all know there's a lot of apathy and government in general, including the private governments of these condominiums. So if there is an owner, if you have 100 unit condo, let's say, and there are three owners that show up to the board meeting. It is certainly not going to kill a board to actually listen to the three people that bother to show up to offer their input on whatever the issue is. But I have been constantly surprised at the hostility that I see among board members against owners that just want to ask a question or make a comment on something that's obviously important to them. I don't know why they, well I have suspicions, but it's very disappointing that board members will not take a few minutes to take some input from owners. If I were to ask what the biggest problem was from my perspective as a former management company executive, I would say that boards don't understand that the current statute allows owners to speak at a board meeting. And that doesn't mean boards can establish a rule and say you can only speak at the forum. The statute to me is fairly clear, they can speak and deliberate on motions or discussions, agenda items before the board. And boards somehow try to say, well I don't have time for you, I'm not going to let you speak, or you can speak in the forum only. Which to me is contrary to the law and contrary to the spirit of what we're trying to accomplish at a board meeting of transparency. I think that's right, and a big issue that comes up quite frequently is they'll say, they'll do a little forum, say, find Mr. Emery, you've got your 60 seconds at the beginning of the meeting and you're there to talk about your dog or whatever the issue is. You talk about the dog, and then you find out that they're entering into a multi-million dollar contract with, whatever, the board president's brother-in-law. And you happen to know that fact like, hey, that's his brother-in-law. And then you get shouted down when you try to talk. They say, no, you've had your one minute at the beginning of the meeting and it's preposterous. Again, it does not, more participation and people talking to each other is almost always a good thing, not a bad thing. So I agree with you. I think the law is pretty clear that, again, within reason, owners ought to be allowed to comment. And usually, as we all know, there's very few owners showing up. So the ones that do show up ought to be able to have their say. Let's talk about some of the cases you've been notably involved in where boards and our owners made mistakes. Because you have a suits against boards, but you also have suits against owners sometimes. So we're going to talk about that, two different one, maybe three, and talk about those issues in general terms. But the one you spoke about a minute ago, just the example of they're going to pass a multi-million dollar contract and give a moving or painting contract to the guy's brother-in-law, which has the perception of conflict of interest. Well, you recently had a case on conflict of interest regarding furniture. I think it was in a timeshare association. Can you kind of summarize that in simple terms, which is very hard for lawyers to do, by the way, to summarize things in a short, simple term? Yeah, we're not known for our brevity. But yeah, basically this case involved a board member who was a stone cold crook. And what he did was he got himself elected to a timeshare board. Timeshares have their own challenges because the investment that each owner makes is so small, and there's so many owners. It's very difficult to correct something when it goes wrong. This guy was, when we started the case, I was being told by various sources, this guy was a criminal mastermind. He was more of a keystone cop of crooked board members. He wrote an email to his co-conspirator talking about how he was going to take advantage of the fact that some of his other board members were Japanese nationals, and so he could run this renovation project, quote, pretty much at will, end quote. And so he steered this renovation contract to a business that de facto he was the owner of without disclosing it. And it was only unearthed years later when a business card with his name on it for the very company that was awarded the contract surfaced. And to say the least, neither the judge nor the jury were amused by his misconduct. And so beside the nondisclosure issue and the conflict of interest issue, was the furniture any good? No, the furniture was horrible. The furniture was not delivered on time. When you would look, as one of the workers said, if you look wrong at these lamps, they fall apart. So the stuffing would come out of pillows immediately. The lamps would fall apart. The lamps, other furniture had phony tags on it, underwriters' lab tags that were falsified. You name it. Everything that could go wrong did go wrong with this furniture contract. And how much was that furniture contract? It was for millions, millions of dollars. And it was very unfortunate. And he now has a hefty judgment against him. Was the judgment against the association or him personally? No, the association, once they found out what was going on, I represented the association against the crooked board member. And so it was a personal judgment against him? Against him, yeah. That's right. His co-conspirator declared bankruptcy. But so the judgment was against him. That's right. So to me, if it's a conflict of interest, the law is fairly clear. You have to disclose it. So he should have disclosed, by the way, my company is making a bid on this. So everybody knew upfront. It doesn't take away from the quality of the furniture was poor, but at least the disclosure issue, if he had said, well, look, I own this company. I want a bid on a two and gone out and got three or four other bids. And let's just assume he was the low bidder and he disclosed it. Then you would get into a quality type issue, not so much the fraud or the misrepresentation or you're the lawyer, whatever the right word is. That's right. And obviously, if he said, look, this is abstain, obviously, would be a good thing to do, too. And it went actually beyond just a non-disclosure. This association and its management company were wise enough to have an affirmative form about, do you have any conflicts of interest to disclose? And he misrepresented it for years by checking off the box that said he had no conflicts to report when he clearly later admitted that he did. Now, I'm going to tell you just a quick story, that I had a 20-unit project that they needed to replace their roof for $25,000. And one of the owners and members of the board was a roofer. And they went out and they got four or five bids, which were like $50,000. He said, I live here. I know it's going to be an assessment to all the owners. I have a conflict, but I'll do it for you for my cost for $25,000. And they properly documented it in their minutes, their rationale in the minutes, and they allow that board member, which did not become a problem, by the way, he did a very good job. So I don't think, I think everybody in the audience ought to know that there are times or conflicts that if handled properly, it's OK. That's right. That's right. If it's handled properly, and from the example you gave, it sounds like that was handled properly. If it's fully disclosed, he doesn't vote. He explains there's other options. They get other bids, you know, than fine. But the problem is when you don't disclose, obviously. OK. We're going to take a quick short break and come back. And we're going to ask Terry about some other cases, which to me are quite interesting and fascinating. Aloha. I'm State Senator Russell Ruderman. I represent the Punit and Kau district on the Big Island. And the host of Ruderman Roundtable. We're here on Think Tech Hawaii every other Tuesday at 2 PM. You can join us at thinktechhawaii.com. You can find a link there to a page where you can see past episodes. And we talk here about good government, environmental issues, and issues of the day facing the state of Hawaii. I'm Russell Ruderman. Please join us for the Ruderman Roundtable. Mahalo. Aloha. I'm Kaui Lucas, host of Hawaii is my Mainland every Friday here on Think Tech Hawaii. I also have a blog of the same name at kauilukas.com where you can see all of my past shows. Join me this Friday and every Friday at 3 PM. Aloha. Well, we're back in on Kondo Insider talking to Terry Vier, a prominent lawyer who is known around the industry. He calls himself the Black Sheep. I think he does a very valuable service by providing a choice for owners who have a dispute with their association. I want to remind everybody, if they have a question, they can call our hotline at 415-871-2474. It will endeavor to give you an answer. A few moments ago, we were talking about a case where a board president failed to disclose his conflicts of interest and purchased poor quality furniture that the association sued that board member. And I think the board member ended up with a multimillion-dollar judgment against him. Sometimes owners also are subject of suit from boards. And I know there was a case you were involved in regarding a lanai that got to be really out of control for my words. Tell us a little about that case. Well, this was a case where an owner decided to enclose his lanai, well, her lanai. She was a board member. She did not get a majority of her cronies on the board to approve the lanai enclosure. She went forward with it anyway. She didn't get the approval of her neighbors or of the association, lots of other layers of approval. I represent the association on that one. We brought a motion for summary judgment, which means an immediate end to the lawsuit. Same judge looks, she didn't get the approval. She needed it. It's bothering her neighbors, et cetera. The judge agreed, grants our motion for summary judgment. While that was happening, they filed a counterclaim against the association. Since our part of the case was done, we basically handed the baton off to another law firm and the insurance company. These owners then, I think, filed as either 9, 10, or 11. I can't remember motions to reconsider the judge's order that were being handled by the other law firm. They lost all of them, but they dragged the case on for years. Eventually, the judge, I think on the 10th or 11th time, finally said, fine, I'm going to reconsider that thing that was granted years and years before. And so we wound up going to trial. They lost in front of the jury on the issues that actually went to trial. Most of them did not. And wound up costing themselves hundreds and hundreds of thousands of dollars in their own legal fees, plus the association's legal fees all over A-9 closure that probably cost them, I think, like $15,000. So why they decided to invest hundreds of thousands of dollars in that particular losing cause is a mystery to both me and the other law firm that was involved in the case. But it's something that they decided to do. But there again, that was a board member who thought that apparently she had rights that she obviously didn't have. And she thought she had an inside tract to getting something that the law said that she didn't have. In this case, it was the association and the other board members that filed suit against her. And I guess part of that was for to take the when I close her down, is that done? Yes, well, there's a court order requiring them to do it. They're currently appealing that, but that's the current status. They've got an order saying take it down. And they actually even bought out of this couple actually bought out a board member that they perceived as being against them actually bought his apartment. It was beyond crazy. They must have money. They do have money. That became very apparent that they definitely had a lot of money to spend on something that was not a great investment. In hindsight, me as the management company, if that owner had done the right thing, filed an application or request to the board, it went through the process. The board either said yes or no, or they had something in writing from the board. If the documents allowed them to approval and high enclosure, which is another issue because of structural engineering and a bunch of things that I don't want to go into that much detail. But if they'd gone through that process and respected the fact, they'd give up certain rights living in an association that they have an obligation to make a request to the board and make their argument and the board, if it's permitted in the governing documents, has a right to say maybe yes or no. This would have never become a multi-hundred thousand dollar problem. Yeah, well that and if these people could count, that would have helped too because they insisted they had an approval of the majority of the board. And I can't recall the exact numbers, but there were four people on the board, two voted in favor, one voted against, one abstained. They insisted that two was a majority of four. That's not great math skills. And that was their basis for saying it's all approved. And they also ignored the fact that they didn't get approval from directly affected owners or the association in general. So it was a lot of stubbornness and a lot of money down the drain. Well it's interesting that just to give a parallel educational example for our audience, I know of a case where a board of five went to a meeting and the vote was three to two against a particular issue. And so the president's saying there's no more beating left and another person left, leaving now two to one. No, three of them left. So there's only two people out of the five board members left, the two that wanted this particular event. And so the particular director opined that my recollection of Robert's rules, if you had a quorum at the beginning of the meeting, even though everybody else left, the quorum still existed. Two of us can change our vote and force this. So not only did they vote to reconsider and to change their prior board's decision, they also voted to remove all the officers and appoint themselves as officers. And that lasted about as long as you could get the motion for a temporary straining order before the judge. Yeah, that I have had a similar case where it was a three, three board, each faction wanted to elect their own guy. The three would all refer to as the good guy board members walked out and said, we are leaving now, we're walking out of the door at the same time, you have no quorum, don't try and appoint the seventh board member as soon as they left after like a nine hour board meeting the three that I would refer to, bad guy board members then decided to do just that, appoint the board member, even though they didn't have a quorum. It's almost a sign of arrogance, because they've been elected, they think they have more power than the law or their governing documents really give them. And they get so emotional about whatever they're trying to accomplish that they manipulate the rules to get, it's almost arrogant. Well, I think, yeah, I think it, well, as I, you know, we started off the show when you have access to the lawyer for free, the association's lawyer, the association's management company, all the employees, it does breed a ton of arrogance and it doesn't, and that all works great until you step outside of your little bubble of your condo and then you have to go justify yourself to a arbitrator or a judge or a jury who aren't under your thumb and don't have to agree that what you're doing is reasonable. And also I think another problem, especially these intra board fights is that with some people, it's like a divorce case. I mean, you lose all rationality because you're living with these people, they've been getting on your nerves for years, unlike with a divorce case, you can say, Richard, we're getting divorced, goodbye. And you go your separate ways. Well, you can't do that with your neighbor and you can't do that with your fellow board members. So have you seen situations where boards actually retaliate against an owner or? Yeah, lots, tons. Give me an example. There'll be so many, you know, I mean, half of my cases will involve selective enforcement where they'll suddenly decide to enforce rules against someone who speaks out against the board. They'll go after his pets while ignoring other peoples. There was a case where I remember sitting there in the back for some construction thing that I was there for. And they said that they were gonna initiate a lawsuit against one guy explicitly because the board, they didn't like him. And it was a $1,500 debt when I'm sitting there in the room knowing that a member of the board owed the association $11,000. And they weren't initiating a lawsuit against that guy because obviously he was an insider and this other guy was perceived as an enemy. So in collections, in rules, enforcement, it goes on and on and on, definitely. I mean, there was a case where my client, they didn't deal with her roof leaks. They decided a week before the arbitration to rip out her phone line, which went over like a lead balloon before the arbitrator. So there's retaliation against owners that speak up constantly, constantly. Well, that's, certainly to our audience, that's a general no-no. There's no purpose in the Aloha state for retaliation for people having a different opinion than ours. And there are processes within the government doctor to deal with disputes. Have you had any experience with the Act 187, that new evaluative mediation statute? Sure, yeah, a lot. What was your experience with it? It's okay. I'm not sure that it does everything, everything it's always gonna be. I mean, I think that when I first started my firm, there's been a huge perception of, again, this arrogance-based world view of many boards, I think view mediation as a means for the owner to negotiate the terms of their surrender and apology that is not happening in all of the mediation, certainly where I'm representing an owner I think has been wronged. So some of the mediators are very good. I think at letting you know, look, if this is gonna go forward, this is how I think it's gonna play out. And I'm very open to having my clients hear it from someone else's perspective. Some board members, I think it's been helpful. It's just like anything else. Some mediators are more skilled than others and sometimes it works, sometimes it doesn't. I think the industry felt Act 187 could be using primarily retired judges. You've kind of taken off the gloves of the mediator where they can speak their opinion. We might be able to at least address and resolve some cases without them having to go to litigation because under a value of mediation, other than the first hour's cost, it's paid through the real estate conduit education fund giving almost a balance to the owner having a right to be heard without it costing them a fortune with a lawyer. That's right. I think that's true. I think that is helpful. Well, I have a lot more questions but we're running out of time. So I'm gonna ask you. Time flies. It does. Would you be willing to come back again? Do you want to talk about this some more? Absolutely. So I want to thank Terry, we're here for being here today and telling us why boards get sued. You know, you learn from history and these types of mistakes are an opportunity for board members to learn what not to do with their association, to either prevent the association from getting sued or for an owner getting sued by just going out on their own based on some false premise. So I thank Terry for being here. I'm gonna bring him back again and thank you for watching Condo Insider. And we look forward to seeing you next Thursday at three o'clock. Aloha. Thank you.