Prominent Honolulu Condo Board Members Are On Trial For Alleged Retaliation. Here’s Why
The lawsuits claims the Hokua board members used their positions to help themselves and each other without disclosing conflicts of interest.
Testing a Hawaii law prohibiting retaliation by condominium boards, a trial began on Monday pitting a retired Army officer against several prominent members of Hawaii鈥檚 real estate and development community who served alongside the retired officer as directors of one of Honolulu鈥檚 landmark luxury condominiums.
Mark Brown, a former member of the board that oversees Hokua at 1288 Ala Moana, alleges that other board members unlawfully retaliated against Brown after the retired colonel raised concerns about purported improprieties committed by other board members.
Developed by the Kobayashi Group, MacNaughton and Alexander & Baldwin, Hokua was among the first in a wave of luxury condo towers built in a part of Kakaako now known as Ward Village.
The suit centers on against owners, board members, managers or other insiders who raise questions about potential violations of state condo law or association bylaws.
According to the law, retaliation means taking action 鈥渢hat is not made in good faith and is unsupported by the association’s governing documents or applicable law and that is intended to, or has the effect of, being prejudicial in the exercise or enjoyment of any person’s substantial rights鈥 under the state condo law and the association鈥檚 governing documents.
Named as defendants are several Hokua board members with ties to the developers. They include , an executive vice president and managing partner of the Kobayashi Group; , a MacNaughton employee; , a lawyer for Hokua鈥檚 developers; , a prominent architect whose firm designed Hokua鈥檚 Alii Penthouse, , a colleague of Kobayashi Pakkala鈥檚 husband at a real estate company that has served as a broker for Hokua and other Kobayashi-MacNaughton condo projects.
The lawsuit鈥檚 overarching assertion is that the board members used their positions to help themselves and each other — in some cases at the expense of the condo owners in general — without disclosing conflicts of interest as required by association bylaws.
When Brown began investigating and raising questions about the purported misdeeds, the suit alleges, other board members retaliated by removing him from his position as board vice president and from the association鈥檚 committees on renovations and budget and finance. It also alleges the board disseminated defamatory information about Brown to other owners to discourage the owners from using Brown as their proxy in condo matters.
Brown鈥檚 lawyer, Terrance Revere, declined to comment.
Matthew Shannon, an attorney for the board, also declined to comment. However, in a statement of the case filed with the court, the defense lawyers said any actions taken against Brown were appropriate.
“After his election as a board member, Brown, a self-touted Army comptroller, unilaterally appointed himself as an auditor of the Board and its actions, conducted a personal investigation into the association鈥檚 resident manager, and inserted himself into a Board election process,” the statement says.
“He solicited proxies from association members, while publicly arguing a prejudicial and unsupported narrative of conspiracy, conflicts of interest, and concealment. The Board responded to these narratives with corrective narratives and fact-checking,” it says.
Suit Says Board Steered Inflated No-Bid Contract To Member’s Aunt
The trial provides a rare glimpse into how leaders of Honolulu鈥檚 real estate development industry manage their own condo association. It also stands for something bigger, said Lila Mower, who advocates for Hawaii condo owners as president of the Kokua Council.
It鈥檚 unusual for an owner to fight retaliation by filing a lawsuit, Mower said, even though retaliation is common and the law forbids it. Even more unusual, she said, is for such a suit to go to trial.
鈥淢ost people don鈥檛 have the wherewithal, whether it鈥檚 money or courage, to proceed,鈥 she said. 鈥淎nd so they bite the bullet.鈥
Typical of the allegations in Brown鈥檚 complaint is one involving a no-bid interior decorating contract awarded to Guild鈥檚 aunt. According to the suit, in May 2018, the board voted to hire Philpotts Interiors based on Kobayashi Pakkala鈥檚 claim that the work would cost about $8,500. After the vote, the suit alleges, Guild instructed that the draft proposed contract with Philpotts not be circulated, and accordingly, Kobayashi Pakkala refused to let Brown see it, even though Brown was a board member with fiduciary duties to the other owners.
Regardless, in July, Brown obtained copy of the draft Philpotts contract and discovered that it committed Hokua owners to pay up to $22,500 plus any costs for additional services, instead of the $8,500 Kobayashi Pakkala had said.
After Brown informed Guild, Kobayashi and other board members of the disparity between the estimate and actual cost, the suit says, Guild improperly retaliated by removing Brown from the renovations committee.
Although Guild鈥檚 aunt is a principal owner of Philpotts, Guild voted in favor of the contract without disclosing the conflict, the suit alleges.
The trial is expected to continue on Tuesday as the attorneys call their witnesses.
