Thursday, December 1 2022

A Honolulu law firm may have to pay a condo owner nearly half a million dollars after a federal jury finds the firm violated debt collection laws when it sought damages. legal fees totaling nearly $50,000 in a dispute involving the condo owner’s dog.

The jury found Porter McGuire Kiakona’s firm also improperly violated the privacy of condo owner, Navy doctor Jeremy Warta, when the firm released Warta’s confidential medical records in court filings. in a separate lawsuit. The jury found that Porter McGuire acted “intentionally, willfully, wantonly, oppressively, maliciously or grossly negligently”, when he made Warta’s records public.

U.S. District Court Judge Leslie Kobayashi last week issued a 60-day stay of entry to the jury’s sentence, which totals $75,000 in actual damages and $400,000 in damages punitive. The judge ordered the parties to meet Thursday to discuss a settlement that could settle Porter McGuire’s case without appeal.

Although the current case involves Porter McGuire, the underlying dispute involves Warta and his association of co-owners, the Apartment Owners Association of Plumeria Hale, a condo tower on Kapiolani Boulevard.

The charity had agreed to let Warta keep her service dog, a German Shepherd named Oliver, at the property despite a no-pets policy. But the condo association later said Warta breached the terms of the agreement, among other things, by not keeping Oliver muzzled and on a short leash in common areas.

Law firm Porter McGuire Kiakona faces nearly half a million dollars in jury compensation after being found guilty of violating federal collections laws while working for the association of Plumeria Hale condos. Cory Lum/Civil Beat/2022

The association’s governing documents require the condo owner being sued to pay the legal fees of the attorneys suing the owner, the court documents say. So when Porter McGuire sued Warta in state court in 2016 and racked up more than $14,000 in legal fees, the company turned to Warta for collection.

As the complaint against Porter McGuire describes, the company’s debt collection attempts eventually took on a life of their own, as the company racked up even more charges against Warta related to collections.

“It became a matter of attorney fees,” Warta’s attorney, Justin Brackett, said in an interview.

The dispute took an intense turn in April 2019, when Porter McGuire placed a $29,000 lien on Warta’s property in the association’s name. The original fine against Warta, Brackett said, was $150.

Porter McGuire partner Kapono Kiakona, who testified on the firm’s behalf, and firm attorney Bennett Chin did not respond to calls for comment.

$400,000 award focused on medical records

At the center of the Warta case is a federal law designed to protect people from abusive debt collectors. Called the Fair Debt Collection Practices Act, the law notably prohibits a debt collector from using “any false, misleading or misleading representation or means in connection with the collection of any debt”.

In their complaint, attorneys for Warta alleged that Porter McGuire used such prohibited communications during a years-long campaign that involved sending Warta a stream of letters containing misleading and confusing information about the bills he owed the company.

“Not only were these claims confusing to Mr. Warta, but they would be confusing to the reasonable consumer, and certainly to the less knowledgeable consumer,” his lawyers argued. “Defendant has a pattern or habit of engaging in such conduct to residents of Hawaii.”

The jury ultimately agreed that the company violated the law, resulting in actual damages of $50,000.

Filing Warta’s medical records in publicly available court documents led to a greater reward.

“This violates the Hawaii State Constitution and the right to privacy,” Brackett said.

The jury awarded Warta $25,000 in actual damages and $400,000 in punitive damages for breach of privacy.

Condo owners are “cash cows” for condominium law firms

The case offers a window into how law firms can make big bucks by suing condo owners and then charging the owners themselves for the cost of litigation.

Condo corporation bylaws typically charge condo owners with legal fees in the event of a dispute, said Dan O’Meara, a Honolulu attorney who handles condo corporation litigation as a general counsel for the Legal Aid Society of Hawaii’s Housing and Consumer Unit.

When unpaid legal fees reach a certain point, he said, it’s common for the association’s law firm to put a lien on the owner’s property.

“It’s one of the tools they use,” said O’Meara, who is not involved in the Warta litigation. “It’s one of their collection mechanisms.”

That means the longer the condo owner pushes back against the association, the more the bills go up, said Jim Wright, a Honolulu attorney who has represented condo owners as well as associations.

“In a case where the owner is wrong, that’s appropriate,” Wright said. “But it encourages owners not to raise credible concerns until there is a conflagration.”

Meanwhile, the ability of associations to place liens on a condo owner’s property to cover costs still tips the scales against owners.

“Some associations are extremely predatory,” Wright said.

O’Meara called the set-up “a cash cow for AOAO business.”

And, he said, the fight over fees may end up becoming more important than the dispute that led the lawyers to get involved.

“It’s kind of like the legal fees gobble up the initial legal issues,” O’Meara said.

In Warta’s case, for example, Porter McGuire continued to rack up bills to collect fees for two years after Warta got rid of the offending dog, Warta’s attorneys said.

2630, boul.  Kapiolani Plumeria Hale.
U.S. District Court Judge Leslie Kobayashi called on the parties to hold a settlement conference while she stays the seizure of final judgment – ​​a sign that the judge may want both parties to put the case to rest and that Porter McGuire is waiving an appeal. Cory Lum/Civil Beat/2022

Although the jury determined that Porter McGuire violated federal debt collection law, there is another potential problem. The Hawaii Rules of Professional Conduct serve as the code of ethics that attorneys are expected to follow. Under the code, fees must be reasonable. Lawyers cannot “enter into an agreement for, charge or collect an unreasonable fee or an unreasonable amount for expenses,” the code says.

Factors to consider in determining the reasonableness of fees include “the novelty and difficulty of the issues involved” and “the amount involved and the results achieved”.

With a lawsuit involving basic issues and a trivial amount of money at stake, Warta’s lawyers argued that the fees were off limits.

“Given the straightforward nature of the lawsuit, the amounts sought were grossly unfair and misleading,” Warta’s complaint said.

But whether the fees violated ethical rules is another matter.

The Hawaii Office of Disciplinary Counsel investigates complaints against Hawaii attorneys under a regulatory program overseen by the Hawaii Supreme Court.

Bradley Tamm, the bureau’s chief disciplinary adviser, said the bureau could open an investigation into whether Porter McGuire violated rules governing fees if someone files a complaint. But he said whether the company did anything wrong was “totally dependent on the circumstances”.

Finally, the case raises a question about jury trials: Why is Kobayashi asking the parties to discuss a settlement when the jury has already decided?

“When you look at it initially, it almost seems like the judge doesn’t want the jury’s verdict to stand,” said Ken Lawson, a former litigator who teaches legal ethics at William S. Richardson Law School. from the University of Hawaii.

But Lawson said there was probably something else going on.

“In a way, the jury award is like a hammer” that shows Porter McGuire the risks he faces if he appeals and loses, Lawson said.

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