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: dmajor@legalhawaii.com bmullin@legalhawaii.com 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

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

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

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

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.

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);

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.

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

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

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.

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).

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.

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.

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

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

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).

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

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 terry@revereandassociates.com

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

2

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

3

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.

4

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