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

The jury found the firm of Porter McGuire Kiakona also improperly invaded the privacy of the condo owner, Navy medic Jeremy Warta, when the firm made public Warta’s confidential medical records in court papers filed as part of a separate lawsuit. The jury found Porter McGuire had acted “intentionally, willfully, wantonly, oppressively, maliciously or in a grossly negligent manner,” when it made Warta’s records public.

U.S. District Court Judge Leslie Kobayashi last week issued a 60-day stay on entering the jury’s award, which totals $75,000 in actual damages and $400,000 in punitive damages. The judge has ordered the parties to meet on Thursday to discuss a settlement that could put the matter to rest without an appeal by Porter McGuire.

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

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

The association’s governing documents require the condo owner being sued to pay the legal bills of the lawyers suing the owner, court documents indicate. So when Porter McGuire sued Warta in state court in 2016, and racked up more than $14,000 in legal fees, the firm turned to Warta to collect.

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

“It became about attorney’s 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 on behalf of the association. The original fine against Warta, Brackett said, was $150.

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

$400,000 Award Focused On Medical Records

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

In their complaint, Warta’s lawyers alleged Porter McGuire used such prohibited communications during a years-long campaign that involved sending Warta a stream of letters containing false and confusing information about the bills he owed the firm.

“Not only were these demands confusing to Mr. Warta, but they would be confusing to the reasonable consumer, and certainly to the least sophisticated consumer,” his lawyers argued. “Defendant has a pattern or practice of doing such conduct to Hawaii residents.”

The jury ultimately agreed the firm violated the law, which resulted in $50,000 in actual damages.

Filing Warta’s medical records in publicly available court documents led to a bigger award.

“That violates the Hawaii State Constitution and one’s right to privacy,” Brackett said.

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

Condo Owners Are ‘Cash Cows’ For Condo Law Firms

The matter provides a window into how law firms can rake in big bucks by suing condo owners, then charging the owners themselves for the cost of the litigation.

Condo association bylaws generally put the condo owners on the hook for legal fees if a dispute arises, said Dan O’Meara, a Honolulu lawyer who deals with condo association disputes as managing attorney 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.

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

This means the more the condo owner pushes back against the association, the more the bills increase, said Jim Wright, a Honolulu lawyer who has represented condo owners as well as associations.

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

Meanwhile, the ability of the associations to place liens on a condo owner’s property to cover fees tips the scale even further against the owners.

“Some associations are extremely predatory,” Wright said.

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

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

“It’s sort of like the legal fees swallow up the original legal issues,” O’Meara said.

In Warta’s case, for instance, Porter McGuire kept running up bills to collect fees for two years after Warta had gotten rid of the offending dog, Warta’s lawyers said.

While the jury determined Porter McGuire violated federal debt collection law, there’s another potential issue. The Hawaii Rules of Professional Conduct serve as a code of ethics lawyers are supposed to follow. Under the code, fees must be reasonable. Lawyers can’t make “an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses,” the code says.

Factors to be considered in determining a fee’s reasonableness include “the novelty and difficulty of the questions involved” and “the amount involved and the results obtained.”

With a lawsuit involving basic issues and a trifling amount of money at stake, Warta’s lawyers argued the fees were out of bounds.

“Given the simple nature of the suit, the amounts requested were grossly unfair and deceptive,” Warta’s complaint said.

But whether the fees violated the Rules of Professional Conduct is another question.

The Hawaii Office of Disciplinary Counsel investigates complaints against Hawaii lawyers as part of a regulatory scheme overseen by the Hawaii Supreme Court.

Bradley Tamm, chief disciplinary counsel for the office, said the office could open an investigation of whether Porter McGuire violated rules governing fees if someone files a complaint. But he said whether the firm did anything wrong is “totally dependent on the circumstances.”

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

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

But Lawson said there’s probably something else going on.

“In a way, the jury’s award is kind of a hammer” that shows Porter McGuire the risks it faces if it appeals and loses, Lawson said.