 Aloha, and welcome to another edition of Condo Insider. Our show is all about association living in Hawaii, and as we've discussed before, more than 37% of our population lives in a condo association. Forgive me why I fix my ear, if I care. Anyway, we all know that in Kakaako, there's huge amounts of construction, if not huge amounts of construction across the islands, so I thought it might be helpful to our boards and owners to talk more about when problems occur, when there's potential litigation due to construction issues. So invited on our guest today, a well-known lawyer, D Hopper from Lynch Hopper and Smith, to talk to us about construction litigation issues. D, welcome to the show. Thank you for having me today, Richard. Tell us about yourself and about your firm. Well, basically, my firm does consumer protection law, and that's what I do. We've been doing this for over 20 years. We have an office in Nevada, and we have an office here in Hawaii. And so you're licensed in Hawaii to do litigation, then? Yes, we have attorneys that are licensed here in Hawaii to do litigation, yes, sir. Do you have active cases now here in Hawaii? Yes, we do. We do. We have active cases here in Hawaii. We have active cases on Oahu, in Maui. We've had some on the Big Island, so we're spread out. We hear about construction litigation. I almost believe, in some way, that I don't know a developer who hasn't been sued for construction litigation somewhere along the line. Kind of briefly sum for us, what is the law in Hawaii with regard to construction litigation? Are there statute limitations? Kind of generally, how does construction litigation, defect litigation work here in Hawaii? Well, there's a law here in Hawaii that basically lays out what you have to do if there's a construction defect case. The statute limitations that you refer to are basically between two and ten years in Hawaii. Essentially, it depends upon the circumstances as to whether you have two years or five, six, seven, eight, nine, ten years, up to that amount of time. Give us some examples of why one would be two or might be five or might be ten. For example, if you are living in your home or your condo and you see a crack develop in the condo, that is probably going to be about a two-year statute for the time you see it because you can see it. Let's say, for example, you have a plumbing issue that's inside your walls and you don't notice it for eight, nine years. You're going to probably be closer to the ten-year statute because it's something that you haven't seen. You weren't able to see because it was inside your walls. So in Hawaii, I've heard something about a builder's right to mediation if there's a right to cure or whatever it may be. It's kind of embraced or embedded in our statute. Can you talk a little more about that and how that works? Sure. There's two different things you reference. One is a right to repair and the other is a right to mediate. Under the statute, the way it starts is if there's a construction defect, we give a notice. We send a notice to the builder with a preliminary report that says, here's the problems. The builder then has the right to come out and inspect. After the builder inspects, the builder can then choose one of two options. The builder can decide he wants to repair and he has that right to do so or the builder can decide he wants to pay money for the repairs for the condo association. If neither one of those work out, then before a lawsuit is allowed to be filed, there must be a mediation, a mandatory mediation. So I see that boards and owners are late people. They're not going to know whether they really have a defect or a problem. So it seems to me in some ways what you're saying is when they suspect they have a problem, they have some kind of duty to investigate because it could be serious, it could be major damages. And they probably need to get professionals engaged very early in the process to go through a mediation or even agreement of right to repair without your own person validating the repair is correct. Could be a real problem for a board. I believe so. I think you hit the nail on the head with that as far as having a responsibility and duty by the board. We believe if they contact us, what we do is we send out a team of experts to look at the problems initially free of charge. And those experts report back to us. They will then talk, we will then talk to the board about what the problems that they may or may not have. At that point, if there are construction defects, we're able to assist them through the process, including the right to repair and up to the mandatory mediation process. And then anything past that that takes place. If there's not any defects, then the board has done their duty of investigation and they know that they're okay. Well, yeah, I can't have a side enough. I've been in this industry for a long time that sticking your head in this hand is not a good option. Once you identified as a problem, something that may look very simple on the surface might be quite extensive underneath. Yes. And so if you don't examine that issue, particularly within the statute of limitations, because if you waited past the 10 year, they guess you have to 10 years no matter what, you're out of luck. Pretty much that's the case. What we recommend to boards is that they contact us within the first couple of years of their existence, because that way, if there's any issues that are within the two year statute, then we can come out, investigate, and determine if there are any construction defects. And then after that time, especially as they get closer to the 10 year, we would recommend the same thing, that they have us come out and look. Again, we will send out our people to do so without any cost to them. So a lot of ways you're specializing, I know you said consumer protection, but construction defect is certainly consumer protection. So you're kind of specialized in that. That's the focus of our firm, it really is. Is there other types of consumer protection you do? Yeah, we've done other areas of consumer protection, including representing people with chemical contaminations, representing people with defective products, product liability issues. But our forte is construction defect litigation. That's what we've been doing for over 20 years. Do you ever get involved in the pre-construction with a board, to the extent when you're working on a major repair contract, for example? Maybe they have a construction litigation due to defect. Do you get involved in reviewing the warranties and helping them with the next scope of work so they don't have a problem again? In the sense that you have this issue they're suing, you get money and they probably get money, do you help them with the next step with respect to the repair? We can if they want to. Typically we don't. We want to make sure that they do so separately and impartially from us. We don't want it to appear as if we have some type of stake in that. So we usually let them. But if they need guidance, we're more than happy to provide it. So let's look at this from what I've heard. And you can correct me if I'm wrong. So they suspect they have a problem. They have to notify the contractor of the potential problem. And he has the right to either repair it or to give them money. Correct. And either way they have to fix the problem. That should be fairly obvious. So let's just say that doesn't work and you go to mediation that doesn't work. Kind of walk me through the steps when you get to the litigation fade. Kind of what the steps are on the litigation side once these other initial parts failed. Sure, that's easy. Basically what happens is if mediation fails then the statute allows for a lawsuit to be filed. The lawsuit is filed. It's then served, meaning it's given to the builder. After the service takes place then the standard step is discovery, what's called discovery. And that's where both sides produce documents. And eventually they take depositions. Discuss briefly the difference between production of documents and depositions. Sure. The production of documents is where both sides have all kinds of documents. For example, expert reports, plans, schematics, contracts, insurance documents, all of that. Both sides produce those documents typically to a depository is what it's called. And that allows for both sides to review each other's documents. Then once all those documents are reviewed then they'll sit down and schedule depositions of all the experts and all the parties in the lawsuit. For example, I would, as the representative of the homeowner, I would schedule the deposition of the builder and maybe the subcontractors and the builder's experts take their depositions where I'd sit down and ask them a series of questions about what took place. So production of documents in summary is you've asked for a whole lot of material. I guess if I have a private email server, you can get my email too. That would be correct. You know, that's a little bit of a joke though. Yes. I thought I'd throw it in anyway. Yes. But the reality is that from there you reviewed all that, then you do an oral investigation by quote a deposition among the parties. Right. And they have to show up, they're subpoenaed I guess to show up. Yes. And they're under oath so that that information then can be used to attack their testimony maybe in a trial. It's just like being in a trial, they're under oath. They take an oath right there with the court reporter who takes down all the information from the deposition. I would assume sometimes in that process of working with both sides that as they go through this and more information comes out because they themselves, the developer and or the general contractor may not know everything at that moment in time with the subcontractor did, for example. Is there any reason why they couldn't go back and then agree to mediation or arbitration? Oh, none whatsoever. Typically that takes place more than once in a case. A mediation is essentially where you just sit down with a mediator, the two parties sit down and try to come to some type of voluntary agreement. There's nothing binding about it. It's all voluntary. You don't have to do it after the mandatory mediation. But it's sound practice. I would never take a case to trial without trying to mediate it first. So what are the interesting things about mediation? You know, and it's a little related, but not exactly the same thing. Under Hawaii's condo statute with homeowner disputes, you have what they call facilitative mediation and then evaluative mediation. The difference between the two is in the facilitative mediation, the mediator can't take any position. He basically is using on much lower level cases that don't have the significance of construction defect litigation. They just get both sides to try to agree. Maybe they're fighting over a parking stall or something. Evaluative mediation, which is now in the statute for homeowner disputes, is what I've seen happen more times than not with the contract. And that is you get someone like a retired judge. And a retired judge can actually, in privacy, beat on each side to say, you know, if I was a judge in this case, they have pretty strong arguments here that where we see in mediation where condo board members may think it's more a wishy-washy, facilitative mediation, my experience on construction GTEC, it's more a valid mediation where they get like a retired judge or someone who's very skilled in that particular area of dispute who can really express their opinions and try to drive a solution. Is that right or wrong for my thinking? That's absolutely correct. We have retired judges all the time that serve as mediators. And that's exactly what they say. They come in and they say, well, if I was the judge in this, I would hammer you on this. Or if I were the judge in this, I would hammer them on this. And it holds a lot of weight. It really does. Even though the mediator doesn't make a decision, it holds a lot of weight to hear what they have to say. And when you have one of these adversarial proceedings, is it typical after you serve the complaint that usually there's some insurance defense that really insurance company shows up? Is that more common, less common, or? Very common. Typically, prior to the serving of the complaint, it's just us versus the builder. Once the complaint's served, the builder will forward the complaint to his insurance carrier. The insurance carrier will hire a lawyer. And then we end up dealing with that lawyer for the insurance defense carrier. So what is the typical types of insurance a developer might have? Basically, they'll have general coverage sometimes where it only covers themselves. They'll have wrap policies that cover the entire project by themselves. The subcontractors will have their own insurance as well. It really depends. And theoretically, the architect or the license professional would maybe have some kind of professional liability insurance for well. But in theory, you could have a sub or a contractor really do a good job. But the specs were wrong, and that the person who said this is what you should do might be wrong. Yes, that's a typical defect, too, design defects, where the specs were wrong, the drawings were wrong, something about them were wrong. Well, we're talking with Dee Hopper about construction litigation, which is a lot of construction in Hawaii right now. And what to do if you start to suspect that your association has some defect problems. So we're going to take a short break, and we'll be back in one minute. Hello, this is Martin Desping. I want to get you excited about my new show, which is called Humane Architecture for Hawaii and Beyond. And it's going to be on Think Tech Hawaii from downtown Honolulu on Tuesday afternoon's 5 PM. And we're going to talk about to make architecture more inclusive on the islands, which is one of the definitions of humane, which is being tolerant of many people, of nature, of many other influences. So we're going to have some great guests, like today's guest, for example, my collaborator, David Rockwood, who is the author of the awesome manifestation of humane architecture in the background. So see you on Tuesdays, 5 PM. I look forward to. Aloha, and welcome to Think Tech Hawaii. I am Inna Chang. I am the guest host for Small Business Hawaii with Reg Baker. Tune in every Thursday at 2 PM and watch us. Aloha. Welcome back to Condo Insider. We're sitting here with Dee Hopper talking about construction defect litigation and all the options that are available. And what I heard in the first half of the show is you need to get an expert right away on board so you can go through this in a very intelligent manner. We wrapped up our discussion. We were talking about mediation and ways to try to resolve dispute along the process after a complaint's been served, which is, again, after a certain rights under the Condo, not the Condo, but the construction defect current law. So all is failing. You still can't get them to agree. And I was suspect since they were represented by insurance companies that in some ways, they like, I hate to say, stall it out. They want to make sure all the facts are on the table and they use every effort to mitigate their loss, for lack of a better word. So if it has to go to trial or binding arbitration from the time you serve the complaint, I know there is no standard answer to this. What are the time frames to do this? Well, you mentioned arbitration. Arbitration in a lot of cases here, they have arbitration clauses that require arbitration instead of trial. Usually you can get to an arbitration sooner, but it's no guarantee. Typically to answer your question, how long does it take from the time you file the lawsuit until you get to arbitration or trial? It can be one, two years. We've had cases go up to five years. It really depends on the size of the case, the complexity of the case. We've had cases where it was a single home. We've had cases where it was thousands of homes in a class action. And it really depends on the size of the case. I had a case not related to construction defect litigation that we thought would move rather quickly, but it was a partnership of two people. As we proceeded down the road, one of the partners died. And that created a problem. They had then the probate court and the issues and the successor interests in the business. And so we moved that down the road and got through that, then the second partner died. And we were into that about five years into the, and so the estate then took over. So I guess my message in saying that is, there are things beyond the attorney's control and the party's control that can happen between anything from a hurricane to a change in the venue to people passing away to bankruptcy filings. There's all sorts of things that can affect the timing of this. But you're saying, quote, two to five years and based on a lot of different circumstances that really nobody can control because just the process of getting all the records, reviewing all those records, taking the depositions and then getting to the first meetings in, quote, mediation itself is a lengthy process. It's a very lengthy process. And something I actually left out was at the beginning is all the investigation and inspections that take place. When we start one of these cases, what we do is we have our experts go out and they could be experts in multiple fields. We have architects, we have structural engineers, civil engineers, mechanical engineers, geotechnical engineers. We have a whole battery of experts that have to go out and scour the properties for the defects and find out what they are and do inspections of them, photo document everything. In some cases, destructive testing where you actually have to open up a wall or a roof or a window and test it, all of that is just what our side does. We'll do that first with our experts. Then after we've done that, the other side gets to do the very same thing. That process right there adds to the time. Let me make up an example as a question. So you have a board of things that have serious plumbing problems. And it's evidenced by the factors leak in this black water, which is the sewage water leaking through the walls, which is an environmental catastrophe. The other side is saying, no, it's a maintenance issue. Does that prevent the board from fixing the problem? I mean, here we were talking about two to five years to maybe get this to an adjudication. Does that prevent the board from quote, mitigating us damages or doing something in the interim time to fix the problem? And if they were gonna do that, what process should they go through? No, absolutely not. That would be considered, what I would consider a life safety type issue where they would need to make the repairs to that. What we would essentially do is we would notify the builder that there was such an issue and that it was going to be mitigated. It was going to be repaired. We would document that whole process. In fact, we have one case where we're doing that right now where we document it all. And then after the fact, we go after the builder for that cost of repair. And it's very much in the board's interest to make that repair. Yeah, I think we talked about this maybe on point that the builder has the right to repair it himself. But my experience has been, most of them don't want to repair it themselves because it only exposes them. If that repair doesn't work, the further litigation, you know, is that a fair assumption or? No, absolutely. In fact, what is often the case is there's two issues I see. One is if the builder comes out and makes the repair, then they are on the hook for that repair and it starts the clock running again, the statute of limitations you referred to earlier. So now instead of it being eight years out, now it starts over at one. Secondly, if they come out and do the repair, that's on their dime. Typically if they settle for money damages, then that's insurance money. So if they come out and make the repair, that's money out of their own pockets and they don't want to make that repair. That makes a lot of sense. They're going to want the insurance company, and I don't know anything about insurance companies, but I would suspect that they wouldn't want their client exposing them, the insurance company again, to another potential claim by someone arguing over the work. It's a lot easier to say, we're going to give you the money, you go get your own builder and your own experts to design and repair the system and here's your pot of gold and don't hold us responsible for the future. It's a much cleaner break. Right. For a lot of... They're done with it. They're done with it then. But the one thing I heard you say that was two to five years, professionals, experts, it sounded like this is a very cheap process. It's cheap. This is going to be chump change to an association. That's not going to be much. Comment on what you think on a typical case. First of all, how do attorneys charge for this? And then what do you see for a standard significant construction litigation case if you were paying the traditional way for paying for it? What kind of costs can you see for this kind of a claim? Well, as far as how attorneys handle it, our office does it on a contingency fee basis. What that means is if a board hires us, they don't have to pay us anything until the end of the case. And that's only if we get them money or resolution. If that's the case, then we get a percentage of the resolution. However, if at the end of the case, if there is nothing for the board, they owe us nothing. That's how the contingency fee works. Secondly, as far as the costs are concerned, they can be tens of hundreds of thousands of dollars for those costs. Our firm advances those costs on the case so that the board doesn't have to come out of pocket any money. Oftentimes boards will, in these cases, will have to pay not only attorneys fees, but they'll have to pay the cost themselves. We take the risk so that they don't have to in these cases. And just expand on, quote, costs, because that's not just like the filing fee in the court. You're talking about I'm assuming expert witnesses, all sorts of other fees that may be related to this. Is that what you're talking about, you say the costs? Yes, when I was talking about the experts going out and doing their investigation, their inspections, their testing, all of that. If it's an architect, if it's a structural engineer, whoever it may be, they're out there doing all that work. And then after that, they have to make their report, they have to review the other side's documents, they have to go through deposition, all of that costs a lot of money. And we pay for that. Yes, from my experience, I've been doing this 25 plus years, and I'm not trying to compare with you to another firm, but my experience is there's a lot of firms that they expect, attorneys expect to be paid monthly on an hourly basis for the time they put in. They expect to be reimbursed for the expert witness fees or those types of fees and court costs in the next billing cycle. And these things could run hundreds of thousands, if not in some cases, a couple of million dollars. We've had cases over a million dollars in just in cost, yes. Because the experts, and I love experts because I happen to be one on certain parts of our industry, but I've served as an expert. The experts, they aren't inexpensive. What's an average expert fee for an hourly guesstimate? Oh, hourly, you know, 300, 500, 600 could be dependent upon the field, the level of the expert. We've had some pretty expensive experts, especially when it comes to deposition time and trial. It takes a lot of hours, a lot of hours and days to prepare for trial. So an expert might charge more for the time for deposition or trial versus the report time or the design. Correct, yes, sir. Well, you did teach me I'm not charging enough. No, right. Whatever it is, I'm not charging enough. My wife would say that, but either way, so you're saying that one of the benefits of your firm is that you're on a full contingency basis. You take a percentage and you advance all the costs, which include the expert fees, and it's based on success. And so the boards don't have to, I think maybe you can comment on this, but I think this board has actually had to borrow money and assess the owner's special assessments because they know they have to fix the problem and they have a claim, but they don't have enough money in their reserves or elsewhere, their regular operating account. They've actually had to get the money advanced by the owners, either by a special assessment or by borrowing the money. Have you seen that at all? We've seen that a lot. And that's one of the things that we believe we provide a substantial service for because it prevents the boards from having to do that. We take on that risk so that they don't have to do a special assessment. They don't have to go to the bank to borrow the money. We're able to do that and then help them with the litigation process and try to get that money back from the builder. So we get near the end of the show here. Comment on this, but what I'm hearing you say is when you suspect you have a problem, you need to get the professional involved earlier, like your firm and have them get the experts involved. So you really know the scope and extent of the problem and then you need to move it forward in your action as a fiduciary to protect the association. I mean, it almost seems like waiting would be a problem. That's absolutely correct. We believe you have a duty as a board member to investigate these types of problems. If you believe they have them, you need to do something about it. And the sooner, the better. Again, with the statutes being as short as two years out till 10 years, the sooner you do it, the better. I want to thank you for being on our show today, Dee Hopper, who does a specialty in construction defect litigation, which like I said is a good example of that here in Hawaii for sure, and thank you for your insight on this particular topic. I want to invite everybody to our show next Thursday at three o'clock. We have an exciting show next week. Jane Sugimura is going to be the host. As I've told everybody here in the studio, she has the toughest person she's going to talk to next week. And that's me about the common problems boards make. So anyway, a hui hou, and we'll see you next Thursday at three o'clock on Kondo Insider, aloha.