The directors of a landmark Honolulu condominium have agreed to pay $600,000 to settle a lawsuit brought by a fellow director who alleged he faced retaliation for raising concerns about the condo board.

The litigation involving Hokua at 1288 Ala Moana had been closely watched by advocates for condo owners as the first major test of a 2017 law designed to prevent condominium boards from retaliating against owners, board members and managers who raise questions about potential violations of Hawaii condo law or association bylaws.

The settlement provides more than token relief for Mark Brown, a retired Army colonel and former member of the board that oversees Hokua. Joining Brown as a plaintiff was Harvey Hampton, a fellow condo owner.

Defendants included prominent members of Hawaii’s real estate and development community who served alongside Brown as directors of the Association of Apartment Owners of Hokua at 1288 Ala Moana. Developed by the Kobayashi Group, MacNaughton and Alexander & Baldwin, Hokua was among the first in a wave of luxury condo towers built in a part of Kakaako now known as Ward Village.

Named in the suit were Alana Kobayashi Pakkala, an executive vice president and managing partner of the Kobayashi Group; MacNaughton employee Todd Hedrick; Scott MacKinnon, a lawyer for Hokua’s developers; Vernon Inoshita, a prominent architect whose firm designed Hokua’s Alii Penthouse; and Walter Guild, a colleague of Kobayashi Pakkala’s husband at a real estate company that has served as a broker for Hokua and other Kobayashi-MacNaughton condo projects. Also named were Duane Komine, Hokua’s building manager, and Hawaiiana Management Co. Ltd.

Brown’s lawyer, Terry Revere, declined to comment; the defendants’ lawyer, Matt Shannon, also declined to comment.

Suit Alleged Conflicts Of Interest

The lawsuit’s overarching allegation was that the board members used their positions to help themselves and each other without disclosing conflicts of interest as required by association bylaws. When Brown began investigating and raising questions about the purported misdeeds, the suit says, other board members retaliated by removing him from key board positions.

For example, one allegation centered on a no-bid interior decorating contract awarded to Philpotts Interiors, which is owned by Guild’s aunt. Brown said the board voted to hire Philpotts based on Kobayashi Pakkala’s claim that the work would cost about $8,500. Brown later discovered a contract for up to $22,500 plus any costs for additional services.

After Brown informed Guild, Kobayashi and other board members of the disparity between the estimate and actual cost, the suit claimed, Guild improperly retaliated by removing Brown from the renovations committee. 

Although the case went to trial before state court Jude Dean Ochiai, the parties settled in late May, before the jury had the chance to issue a verdict. Terms of the settlement were not disclosed; however, Civil Beat obtained a copy of the document showing how much the defendants agreed to pay.

Lila Mower is president of the Kokua Council and an advocate for expanding rights of condominium owners. She expressed disappointment that the court never had the opportunity to rule on the matter and thereby clarify the contours of the state condo law’s anti-retaliation provision.

“What does the court want to see in order for us to prove that retaliation exists?” Mower said.

Brown’s case, she said, reflects a situation that’s all too common: a board member or condo owner discovers and reports suspected misconduct — then faces retaliation for speaking up. In addition, she said, the individual board members will face no penalties, as the settlement will likely be paid by a firm providing liability insurance for directors and officers.

“Owners are going to have to pay for increased D&O coverage,” she said. “I always find that part unfair.”