Archive for the ‘BTH litigation’ Category

In California, 10,000,000 win while 60 lose rights

Thursday, September 28th, 2017

Two battles

I have been involved in 2 long-running battles to win some basic democratic rights for myself—and for 10 million other Californians. Recently both of these conflicts came to opposite ends.

Battle #1 was fought in the courts. It ran for 5.5 years, from early 2012 until late 2017, and involved 2 lawsuits, with a total of almost 700 legal papers filed in court.

Battle #2 was fought in the legislature. It ran for 4 years, from 2013 to 2017, and involved attempts to persuade the Senate and Assembly to adopt 2 proposed bills.

In both struggles, my allies and I were trying to win rights for members of what California calls “common interest developments”. If you are a California homeowner or tenant in a condominium association, housing cooperative, planned development, or community apartment project, then you are one of the 10 million Californians—a quarter of the population—living in common interest developments (CIDs).

The rights I was fighting for include:

  • Freedom of speech
  • Freedom of assembly
  • Freedom of association
  • Freedom of the press
  • Right to vote
  • Right to be a candidate for elective office
  • Due process
  • Right to witness meetings of governing bodies
  • Freedom of information (right to inspect records)

In essence, here is the problem: CIDs are private associations with somewhat governmental powers, such as the power to tax, to punish, and to deport. These powers come with nonpolitical names (such as “assess”, “discipline”, and “evict”), but courts have pointed out the similarities and, on that basis, recognized the state’s power to protect CID residents from the abusive exercise of those powers. The state has enacted protections for CID residents, mainly in two places: the Corporations Code and the Civil Code. But the protections are sloppily formulated, and questions often arise as to what they mean. On occasion, courts intervene to interpret them, or the legislature and governor amend those codes to resolve such questions.

Even to summarize the arguments for and against the claims about these rights would try the patience of almost any reader. You can find those in pleadings in the above-cited litigation.

Back, then, to the news.

Battle #1

The litigation came to an end in October 2016 with the court’s final approval of a settlement between Berkeley Town House Cooperative Corporation (BTHCC) and me. BTHCC is a housing cooperative in Berkeley, with 60 units (membership limited to seniors). The settlement, as I interpret it, was a compromise between my claims and BTHCC’s defenses, and it was so vaguely formulated as to invite post-settlement conflict. It secured a few rights for the 60 members, but only a fraction of what I had claimed the members were entitled to.

As could be expected, after the settlement BTHCC and I promptly began to disagree about whether BTHCC was complying with its settlement obligations. Most crucial was a dispute over BTHCC’s required disclosure of financial records. The settlement required BTHCC to disclose to me (so that I, in turn, could scrutinize them and further disclose them to the other BTHCC members) the “general ledgers” of BTHCC from 2010 to 2016. I argued that BTHCC’s disclosure had to include every income and expense transaction, with the payer or payee identified. But BTHCC claimed that it had the right to keep the income transactions secret, and, if it did disclose any, it could lump them together and conceal the identities of the payers. BTHCC makes about 30 payments a month, but takes in about 60 payments (of assessments by members) a month. So BTHCC claimed it could let me see about a third of all the transactions and that would count as total disclosure. I brought BTHCC back to court to enforce its disclosure obligation. BTHCC resisted. Lengthy pleadings set forth my arguments, and those of BTHCC, in detail.

Finally, the court issued an order on 22 August, giving a 100% victory to BTHCC in the disclosure dispute. Since it was not certified for publication (as some appellate decisions are), it cannot be cited as precedent in similar lawsuits, but it resoundingly denied to the 60 members of BTHCC the right to see who has been paying and who has not been paying to BTHCC the required monthly assessments. Has the Board of Directors been allowing itself and its friends to pay late? Has the Board been lax in enforcing members’ obligations to pay? Has money fallen through the cracks? BTHCC was preventing its members from answering such questions, and, thanks to this court decision, it will be able in the future, too, to keep the sources and amounts of its income secret.

Battle #2

Meanwhile, a legislative battle began in early 2013 with a failed effort by me to get the Civil Code amended. The proposed amendment would state, for the first time, that constitutionally guaranteed civil liberties apply inside CIDs. Any rule violating Article 1 of the California Constitution, where basic civil liberties are set forth, would be invalid. The procedure under which I made this proposal required unanimity among stakeholders, and there was no such unanimity. Attorneys who represent CIDs in disputes with their members argued, as they typically do, that CID members enjoy civil liberties outside the walls of the CIDs, but not inside. So my proposal gathered some opposition, and the committee considering it refused to endorse it for lack of unanimity.

Two years later I was a member of a group proposing a somewhat similar bill. This time it had a senatorial sponsor and did not require unanimity. This bill, SB-407, was less comprehensive but more explicit. It protected members’ freedoms of speech, assembly, and press in various contexts. For the first time, CID members could gather and discuss public and CID issues in a CID’s common areas without needing to get advance permission, pay fees, or buy insurance coverage. If a CID denied any of these rights, members could go to small-claims court to get an order and collect a $500 penalty.

Experience led me to expect vocal opposition to such an expansion of CID member rights. Amazingly, however, the initial opposition evaporated during negotiations over SB-407. It was amended during the legislative deliberations in such a way as to satisfy all the major stakeholders. In the end, it was adopted by both houses with near-unanimous votes. Two weeks ago, on 11 September, the governor signed it into law. So, as of 1 January 2018, all 10 million CID residents in California will be explicitly entitled to a new set of democratic rights.

Why did we have a relatively easy time getting this bill adopted? The sponsorship of Senator Bob Wieckowski and the indefatigable advocacy of the Center for California Homeowner Association Law were, by all appearances, crucial. The bill also got support from the American Civil Liberties Union of California, the California Alliance for Retired Americans, the California School Employees Association, the Community Associations Institute–California Legislative Action Committee, the Golden State Manufactured-Home Owners League, and the Non-Profit Housing Association of Northern California. There was no organized opposition.

Ironically, BTHCC, too, played a significant part in this bill’s adoption. Back in early 2013, during the litigation between BTHCC and me, I arranged a meeting in a BTHCC common area with invited expert guests to discuss—of all things—civil liberties in CIDs. The BTHCC Board of Directors (then composed of Almalee Henderson, Margaret Tuggle, Judith Wehlau, Lydia Gans, and Raymond Dirodis) hired an attorney, Stephanie J. Hayes, to threaten me and any visitors to the meeting with arrest for “trespass” if I did not cancel the meeting and disinvite the visitors. This threat was consistent with a position, then taken by the Board and since then never officially rescinded, that it had the sole power to decide who may meet in the BTHCC common areas and what topics may be discussed there. The Board has further claimed that it can require members to seek permission for any gathering at least 2 weeks in advance, and anybody who meets in a common area without such permission can be fined. (The Board has prohibited other meetings because of content, for example refusing to let a group discuss affordable housing. And it also prohibited interviews of BTHCC members by makers of a documentary on housing cooperatives.)

Three years after this threat of arrest, it backfired. The advocates of SB-407 gave the legislature a copy of the threat letter from the BTHCC attorney, and used it as the main item of evidence that some CIDs “stifle free expression”.

Morals of the story

“You win some and you lose some”. I lost the battle for complete disclosure of BTHCC’s finances to its 60 members. But, three months later, my allies and I won a battle to get specific freedoms of speech, assembly, and press guaranteed by statute for the first time to the 10,000,000 residents of CIDs in California. Yes, BTHCC defeated my efforts to secure disclosure. But its heavy-handed plan to bring police to bear on people for discussing civil liberties inadvertently helped convince the legislature and governor to write new protections into the law.

On the basis of these experiences, what can you do if you are one of the millions of CID members and you want full financial disclosure? After exhausting your in-house remedies, should you take your CID to court, try to get the legislature to make the law more explicit, run for a position on the board of directors, or just give up?

My choice was to take BTHCC to Superior Court, with attorney representation. This was due to special factors that would probably not apply to you. I was pursuing other claims, too. They resulted in BTHCC recovering over $200,000 from two contractors, BTHCC being forced to stop concealing seismic risks in its building from prospective members, and my own recovery of over $300,000 to pay for attorney fees.

If you faced a refusal to disclose CID records, you would have judicial options that I did not have. Starting in 2014, after I filed my first lawsuit, the legislature made it possible to sue for disclosure of records in small-claims court. So now, if you want to see records and your CID denies them to you, you can file a small-claims complaint at nearly no expense and pursue it without an attorney. Of course, your small-claims judge might rule the same way as the judge in my case, but there is no assurance of that. And you can ask for a $500 penalty as well.

You could also try to follow the legislative route, asking for a Civil Code amendment that would erase the ambiguity as to whether a CID must let its members see, in full detail, the records of all transactions on both sides of the ledger, income as well as expenses.

Then there is the political option: becoming a candidate in the next election for directors of your CID. Once you are a director, you have more unlimited rights to see records, and you are likely to be granted access to all the details. You can even propose a board resolution publishing the entire general ledgers of all income and expense accounts for access by all members.

If my experience is a guide, such activism, whether judicial, legislative, or political, is likely to interfere with your social life. You may be branded a traitor and face ostracism. You may be harassed. (I had blue cheese smeared on my apartment door, water poured onto my head, and posters posted calling me a “creep” and a “scorpion”.) Why? After all, you would be fighting for your fellow members’ rights. Paradoxically, most of them despise the right to full financial disclosure. Most want to be kept in the dark about whether their fellow members are paying what they owe. (Like my grandma, who said “If you ever start dating a non-Jewish girl, don’t tell me.”) They have the legal right to enforce your obligation to pay your monthly assessments, but they want to be denied the information that would make such enforcement possible.

For the same reason, I consider all of these approaches to be long shots. Your opponents in court will likely try to make your personality the issue, rather than their secret-keeping. Representatives in the Senate and Assembly will likely fear the wrath of numerous constituents. And a candidate for a directorship who seeks to open the books will have a hard time getting elected, unless the position is uncontested.

You do, however, have another option: to give up, by either ignoring the problem or moving out. Given the odds, this is tempting. Why not let only the directors know whether they are mismanaging the funds? Just trust them. Trust, clearly, is the easiest approach.

Berkeley Town House 2012–2016 litigation: documents

Friday, February 24th, 2017

I have made available here public records of two related lawsuits involving Berkeley Town House Cooperative Corporation (“BTH”). This litigation began in March 2012 and ended in October 2016.

The first suit was “Jonathan Pool vs. Berkeley Town House Cooperative Cooperation, Almalee Henderson, Judith Wehlau, Charles Tuggle, Katherine Miles, Nancy Epanchin, Raymond Dirodis, Rita Zwerdling, Cheryl L. Samson” (case RG12620088). It was filed on 6 March 2012 in Alameda County Superior Court, California.

The second suit was “Jonathan Pool vs. Almalee Henderson, Judith Wehlau, Charles Tuggle, Katherine Miles, Nancy Epanchin, Raymond Dirodis, Rita Zwerdling” (case RG15779830). It was filed on 29 July 2015 in Alameda County Superior Court, California.

To see the records, you can visit:

To search within either collection, you can enter a search term and click on “Search”.

Both cases were classified as “complex” and assigned to Department 17 of the court.

The public court records in these collections are available also from the Superior Court itself, too, at its website, but they are not topically indexed, not searchable for words and phrases, and (in most cases) not free unless you inspect them at the court.

There are also some other entries in this blog about BTH litigation.

Berkeley co-op lawsuits end

Wednesday, November 2nd, 2016

On 27 October 2016 Judge George C. Hernandez, Jr., of the Alameda County Superior Court signed an order approving a June 2016 settlement of two lawsuits, originating 4½ years ago, involving the governance of Berkeley senior housing cooperative Berkeley Town House (“BTH”). Plaintiff Jonathan Pool and BTH had jointly submitted the order to the court after the court had considered the arguments for and against approving the settlement.

The court’s order made 27 October 2016 the “Effective Date” of the settlement, starting the clock on various actions that Pool and BTH agreed they would perform in implementing the settlement.

A day before the court’s final approval, BTH kicked its own implementation of the settlement into high year by establishing a committee and a process for a 5-month review of its 34 governing documents, which date back to 1989.

On the same day as Hernandez signed the order, he also ordered the parties in one of the lawsuits to appear in court on 9 February 2017 for a hearing to monitor the parties’ compliance with the settlement.

Berkeley co-op lawsuit to end; what next?

Thursday, October 20th, 2016

Lawsuit news

On 18 October 2016 Judge George C. Hernandez, Jr., of the Alameda County Superior Court issued an order granting a motion asking the court to approve a settlement of two lawsuits, originating 4 years ago, involving the governance of Berkeley senior housing cooperative Berkeley Town House (“BTH”).

Hernandez ordered plaintiff Jonathan Pool to file a proposed order within a week for Hernandez to sign, approving the settlement.

Next steps

Once Hernandez signs the order, the settlement will require BTH and Pool to perform various services, with deadlines mostly measured in days after the day when the judge signs the approval:

  • Within 10 days after the approval date, BTH is required to give Pool:
    • A final financial statement for the fiscal year 2010–2011.
    • The general ledger of each BTH account from April 2010 until the approval date.
    • A disclosure of matters discussed during 9 closed meetings of the Board of Directors in 2010.
  • Pool is allowed 20 days after receiving these documents to request any supplementary documentation of transactions in the general ledger.
  • Within 20 days after such a request from Pool, BTH is required to provide the requested supplementary documentation.
  • Within 60 days after the approval date, BTH is required to conduct a general meeting of its members at which the recreational use of the BTH building’s roof is discussed.
  • Within 90 days after the approval date, BTH is required to change its rules to allow any 3 BTH members to have topics placed on the agenda of the Board of Directors.
  • Within a “reasonable” time after the approval date, Pool is required to organize a meeting for BTH members with an expert about a report on the seismic condition of the BTH building and related issues.
  • Within 60 days after the meeting organized by Pool, BTH is required to hold a meeting of its Board of Directors on seismic issues.
  • By 31 March 2017, BTH is required to have its governing documents reviewed to ensure that they comply with the California Civil Code provisions on housing communities.

This order follows a hearing on 4 October and an opportunity for BTH members to submit comments to the court about the proposed settlement. The comments submitted in writing are part of the record of the litigation.

Litigated issues

Pool filed the first lawsuit in March 2012, claiming legal violations by 7 directors and former directors and a former manager of BTH. Pool complained that they had wasted over $200,000 in illegal payments for botched construction by an unlicensed contractor, neglected credible warnings of possible seismic defects in the BTH building, failed to exercise required financial oversight, and violated numerous rights of BTH members. Several attempts were made to settle the litigation over 4 years. One of those attempts resulted in a dispute over a settlement offer, producing further litigation, in which the Court of Appeal ruled that the defendants had fraudulently accepted Pool’s offer while intending to violate its terms. This ruling led to a second lawsuit filed by Pool in July 2015.

Lessons learned?

Has this litigation taught lessons for dealing with future disputes? Acutely aware of conflict as a problem in housing communities, as the litigation was nearing its end a group of six BTH members and residents hosted a meeting of East Bay housing co-ops on the management, resolution, and prevention of conflict. Three local experts gave advice and answered questions from members of East Bay co-ops in the packed BTH dining room. Key points:

  • Senior-only housing communities suffer from more conflict than average, casting doubt on the idea that conflict-prevention skills become stronger with age.
  • To minimize the risk of conflict over the rules of a housing community, permit the membership to participate effectively in the formation of the rules.
  • The more effective your institutions for internal dispute resolution are, the less likely are disputes to escalate into litigation.
  • Resolutions of disputes do not finish the disputes. As time passes and conditions change, revisit the issues and adjust your responses to keep peace robust.
  • When you resolve a dispute, don’t trust your memory: Put the agreement in writing.

Berkeley co-op: peace at last, or more litigation?

Wednesday, October 5th, 2016

Why we fight

Berkeley senior housing co-op Berkeley Town House (a.k.a. “BTH”) has been immersed in civil litigation for more than 4½ years. If you want to know what it’s all about, and who the participants are, be my guest. The short version: It’s about life and death, money, power, and promise-keeping; and I, being the plaintiff, am the one who’s generally credited with starting it all (which, of course, I dispute).

We gather in court

On 4 October, 2016, there was a court hearing in Oakland, possibly the final hearing in this litigation. Its purpose was to let the court evaluate a proposed settlement. BTH and I, with the participation of seven lawyers and two mediators over four years, had reached agreement on it in June, one day before the first of two trials was scheduled to begin. Now the question before the court was: Is the settlement OK? More specifically, is it fair to BTH and those of its 60 shareholders who have not been participating in the litigation?

Arguments for a “yes” answer to this question had already been filed by my attorney and by BTH’s attorney. Numerous written comments had been submitted to the court, for and against the settlement, by current and former BTH residents. My attorney had filed a reply to the comments. But, conspicuously, the attorney representing seven of the individual defendants had filed nothing.

Five of the attorneys, seven BTH residents, and BTH’s office manager showed up for the hearing at 2:30 p.m. There were eleven cases on the calendar. From 3 to 4:15 p.m., the court dealt with ours. A court reporter took down every word (enough to fill 50 pages, she said). Here’s a synopsis of what transpired. If you don’t care what anybody said, but only what the judge decided, you can skip to the end.

Judge: Is this a proper settlement?

First, Alameda County Superior Court Judge George C. Hernandez, Jr., summarized the purpose of the hearing. He stated that this litigation is “derivative”, a subtype of a “representative”, lawsuit, in which a plaintiff files suit for the benefit of an entity or a class of persons. He said that, in such lawsuits, the court must ensure that any settlement is appropriate and conforms to the court’s standards. For this purpose, he said, all the parties to the litigation could proceed to explain their positions, and after that others could tell the court whatever they wanted to say.

This procedure differed from the one that had been announced, possibly disadvantaging some would-be commenters, but, after a brief discussion, the attorneys agreed to let the hearing continue.

My lawyer: Yes, it passes all the legal tests

David H. Schwartz, one of my attorneys, began. He pointed out that the law gives the court the power to approve or disapprove (but not to modify) a derivative settlement, and confers considerable discretion on the court, but requires that the decision be based on specific criteria:

  • Arms-length negotiation. While numerous persons had written to the court disagreeing with the settlement terms, none of them, Schwartz said, had suggested that BTH and I had engaged in any collusion.
  • Sufficient investigation and discovery. Schwartz said that I had many related documents in my possession and had obtained testimony in depositions from most of the defendants and from several experts. These, he said, provided a satisfactory factual basis for my evaluation of settlement terms.
  • Experienced counsel. Schwartz said he had litigated seven or eight derivative actions before taking on this one.
  • Amount of opposition to the settlement among affected persons. Schwartz said that those opposing the settlement terms were fewer than one-third of the BTH membership. While some expressed discontent with the extent of BTH’s consessions to me, the objections were based on enmity between groups of members and not on the merits of the settlement. Finally, said Schwartz, not even one of the written comments proposed taking these cases to trial.

Schwartz then argued that persons opposing the settlement had insufficient information to base their opinions on. They had no access to the facts obtained during the discovery process, nor to the advice of attorneys.

Schwartz proceeded to summarize the issues in the litigation and its history. Early in the litigation, he said, there was a successful struggle to get attorney Fred M. Feller disqualified as an attorney representing both BTH and seven of the persons accused of harming BTH. Feller’s disqualification, he said, led to the appointment of Dennis F. Moriarty as BTH’s attorney, and only then did it become possible to reach a settlement, namely one entered into by BTH and me alone, without the individual defendants being involved.

Schwartz’s next argument was that the settlement was a good deal for BTH.

  • First, he said, it secures for BTH a money payment of $224,415, obtained from two contractors, who otherwise would have paid nothing back to BTH. True, it wasn’t the $400,000 that redoing the contractors’ work had been estimated to cost, but it was a full return of what BTH had paid and was paid to BTH without any deduction for litigation costs, he said. But why not go to trial and try to win the whole $400,000? Schwartz said that would be risky. It would require proving that the defendants who hired the contractors had committed “gross negligence”. In a business corporation, he said, that could probably be proven, but these defendants were elderly and unpaid volunteers, without business education, and there is reason to worry about whether a jury or judge would find their negligence to have been gross. Schwartz noted that any money judgment won in a trial would be against the individual defendants, and pursuing such a judgment would prolong the anxiety naturally felt by such defendants about whether they would be found liable and, if so, whether their liability would be covered by insurance. This anxiety would be contagious, affecting the tranquality of the whole housing community.
  • Second, Schwartz described the settlement as overcoming the chronic denial at BTH of the risk of catastrophic structural failure of its building in a large earthquake. He said government agencies and engineers had warned BTH repeatedly of the building’s vulnerability to seismic risks and the need to investigate this issue. He said the issue was not whether to perform remedial measures, since neither I nor anybody else had enough information to know whether they were necessary, prudent, and affordable, but rather what investigation to do. He argued that BTH’s directors have a duty to do something in response to the warnings, given the potential impact of an earthquake on life, physical safety, and what for many members are their life savings. Under the settlement, he said, all BTH members received a report on the building by a highly qualified seismic engineer and there will be a process for a decision on what to do.
  • Third, Schwartz described what he called three significant improvements in BTH governance brought about by the settlement. One was that Board will hire counsel to review the BTH governing documents to make them comply with California’s Davis-Stirling Common Interest Development Act, thereby dealing with numerous violations of that act that I had claimed the defendants had committed. Another improvement was that the President will no longer have a monopoly on agenda formation, but instead any three members of BTH will have the right to submit a matter and have it added to the agenda of the next meeting of the Board of Directors. Finally, BTH members, including me, had been asking fruitlessly to see BTH financial data, and under the settlement BTH will provide such data to me. (Schwartz had already explained, on page 18 of the motion to approve the settlement that he had filed in July, how this will enable all BTH members to get the same records.)

Schwartz concluded by addressing criticisms contained in some of the comments submitted to the court. Some comments opposed the settlement’s reimbursement of my attorney fees and costs. Schwartz described that opposition as legally untenable, because he had shown that the rates charged me and the amount of time spent were reasonable. Moreover, he said, the reimbursement is limited to $310,000, while my actual fee obligation will be $110,000 more than that. He said I am not happy with being less than fully reimbursed, but accept that compromise. Conversely, what if the settlement were rejected and there were a trial? Then, Schwartz said, I might get all of my fees and costs reimbursed, and who would pay them? Would the insurer agree to pay them? Could it be forced to pay them? This, Schwartz said, is uncertain, and eliminating the risk to BTH of a much larger uninsured liability is a reason why the approval of the settlement would benefit BTH. Even the harshest critics say they want the case settled, said Schwartz, and the fastest way to end the case is to approve the settlement.

BTH’s lawyer: Yes, and BTH needs this

Representing BTH, Moriarty said he agreed with some but not all of the argument that Schwartz had made. Still, he said, BTH wants the case settled. $224,000 has been received. A seismic rehabilitation of the building is not required by the settlement, just as it is not required by any existing law, but it will be considered, he said. He described the governance concessions made by BTH as acceptable. He reminded the court that BTH is a senior residence and said the litigation had made this a tumultuous time for the community. Ending the litigation would, he said, make it possible to restore peace for those living at BTH. Moriarty said that some BTH members were attending the hearing, and he called to their attention that there had been three full days of mediation, plus tireless work by the Board of Directors and its Litigation Committee, particularly by Sharon Shen, to reach a settlement.

Defendants’ lawyer: No, but it’s OK, but not really

Feller followed by confessing that he was in a “strange position” and said he was debating with himself whether to say anything, since up to now in this litigation whenever he had advocated anything the court had done the exact opposite. The settlement would, he said, take his seven clients “off the hook”, and this absolution from personal liability was the condition they had imposed on their consent to a settlement. And yet, despite their complete release under the settlement, three of his clients had signed comments opposing the settlement. This might, he said, create a conflict of interest for him. What should he do? First, he said, he wanted to reassure the court that he was not opposing the settlement at all. However, the settlement was obviously encountering massive opposition, with, he said, only one person submitting a comment favoring it, and twenty against. Moreover, he noted, the $224,415 claimed as a benefit of the settlement had already been received by BTH and could not be taken away again even if the settlement were rejected.

Creative nonfiction begins

Feller at this point was starting to ramble and create his own reality. His claim that only one commenter had favored the settlement was just plain wrong: There were four commenters advocating approval of the settlement, and one more advocating that it be further strengthened in favor of my positions. In addition, he was correct about the $224,415 being safe, but not really, because under the settlement the BTH insurer agrees not to demand any deduction from that amount for its or my legal costs in getting that payment; without the settlement, the insurance policy says the insurer could charge BTH for those costs.

Feller’s meandering continued with a resentful account of the disqualification dispute that Schwartz had discussed. According to Feller, the previous judge in this litigation, Steven A. Brick, had ordered a “vote of members” to decide whether Feller would be allowed to continue representing BTH in addition to his individual clients, and Feller had “won” that vote, but Schwartz had managed to get the court to invalidate the result.

This was another falsehood: Brick had never ordered a vote. He had issued a ruling finding that Feller’s joint representation did, indeed, create a conflict of interest, and permitting Feller and BTH’s house counsel, Stephanie J. Hayes, to obtain, if they could, valid waivers of that conflict from a majority of the disinterested members of BTH in accord with applicable law. Brick had told Feller that he and Hayes would know what that law is and how to comply with it. Feller and Hayes had then disregarded applicable law by conducting a vote, without giving any of the required disclosures to those voting. The court had ruled this maneuver illegal and had disqualified Feller.

A new (but really old) idea

Feller finally swerved into the opposite lane and crashed. He resurrected a refrain that he had been singing for the past four years: my lack of standing to make derivative claims against his clients. He had promised repeatedly to bring a motion asking the court to disqualify me, but had never done so. Now he made one more attempt, by proposing that the court now schedule a hearing on that issue. If I won, he said, the settlement should be approved. If I lost, however, my complaints should simply be dismissed.

Judge to lawyer: Stop this

Judge Hernandez stopped Feller here. Several times, Hernandez told Feller that the court had no power to act on his proposal. The court was facing a simple choice: to approve or disapprove the settlement. Feller, said the judge, had been able to file an opposition to my motion to approve the settlement, giving his argument against my standing as a basis for disapproval. Feller, earlier, could have moved for my disqualification. Had he done so, the other parties in the litigation would undoubtedly have had something to say in response. But Feller had filed nothing, and now he was springing a surprise proposal that wasn’t on the court’s agenda.

Feller persisted. No, he said, in a derivative action the court always has the power to disaqualify the plaintiff. You could do this on your own motion, he told Judge Hernandez. Hernandez was not persuaded.

Lawyers to lawyer: You are wrong

Then Moriarty responded to Feller on this point. He said counsel for BTH had, indeed, considered, and done research on, the question of my standing as a derivative plaintiff, and had decided, as a result, not to challenge me on that issue.

Schwartz continued the response to Feller, claiming that the first case had been filed in 2012 and that, since then, no new facts had become known. Schwartz said, if there had been a basis for challenging my standing, BTH or the individual defendants could have done so, but there was no such basis. What the law requires, said Schwartz, is that I have been a member of BTH when the alleged acts took place and remain a member until the end of the litigation, something that has indeed been true. He said the law entitles me to object to ultra vires acts by persons governing the corporation, whether or not my positions are popular among other members. It has been known “since day one”, he said, that my lawsuits are unpopular at BTH, but that doesn’t deprive me of my legal rights.

Schwartz then commented on the practicality of Feller’s proposal, even if it were legal. What if it were adopted? Then there would be more briefing and another hearing, costing more money. Would the insurer agree to reimburse me for that additional expense? Presumably not. What would I then do? With more than a 50% probability, said Schwartz, I would refuse to cooperate with this plan and, instead, opt to take the cases to trial. In conclusion, a rejection of the settlement by the court, in pursuit of Feller’s idea or for any other reason, would probably doom the settlement.

This ended the attorneys’ arguments, and Judge Hernandez then asked whether anybody else in the room wanted to be heard.

BTH residents rise up in disunison

Resident 1: BTH did a fine job

Sharon Shen, current President of BTH, was recognized. She told the court that she is not only on the Board of Directors but also on the Litigation Committee, and said that some commenters had called the committee unqualified. She rebutted that accusation, saying that she had been a contracting officer with many years of experience; the other committee member, Raj Chabra, is an experienced attorney in private practice; and the committee has its own counsel, Joe Hoffman, a highly qualified attorney. Shen said that the Board and Litigation Committee had negotiated intensively for months and, in the end, daily.

Shen also argued for the merits of the settlement itself. She said it obligated BTH to consider issues but not take particular actions. She acknowledged that it required BTH to provide records. She called the issues complex. Why, then, she asked, the outpouring of anger and criticism? Her answer: It is hard for persons outside BTH to understand how painful five years of this litigation has been. The defendants, she said, were threatened with financial ruin. She said she understood the deep emotions of anger, animosity, and fear experienced by some in BTH. However, she said, that cannot be undone. This settlement, she argued, would permit BTH to return to peace and harmony.

Resident 2: We’re mad as hell

After Shen, Paula Pehl, a non-member resident of BTH, who had already submitted a 13-page comment (7 pages of single-spaced narrative and 6 pages of addenda), was recognized. In her oral testimony, Pehl repeated some of her written condemnations of my ulterior motives, evil designs, threats, defamations, and illegal acts, while adding some, but in a surprise reversal reached the opposite conclusion. While her written comment had urged the court to award me only $1.00 in legal fees and costs, rather than $310,000, and to modify numerous terms in the settlement, now she told the court that BTH needs to have this litigation ended and she was not opposing the approval of the settlement. She said she was speaking only for the purpose of ensuring that the court knows what a horrible injustice has been done here (thus implying that the court had not read and would not read her written comment).

Pehl then turned her attention to Feller and scolded him for failing to challenge (until it was too late) my standing as a plaintiff bringing derivative claims (thus implying that Feller was right and Moriarty was wrong about the probability of winning such a challenge). She said I had been damaging BTH in the guise of representing its interests ever since moving there. She added that my falsification of meeting minutes and my violation of fiduciary duties had led to my recall from the Board of Directors, the only such recall in the five decades of BTH’s history. She said the people of BTH were angry because they have never had a voice.

Resident 3: Get your facts straight, lawyer

Finally, Susan Colowick, another non-member resident of BTH, was recognized. Colowick informed the court that Feller had been wrong in his arithmetic, because not one, but three or four, members had submitted written comments in favor of the settlement. Colowick also said that several of those whom Feller counted as opponents of the settlement were not BTH members, and some of them did not even live at BTH any longer.

Judge: Tell me what you want

Judge Hernandez concluded the hearing by announcing that he would make a decision to approve or disapprove the settlement after he receives a proposed order from the parties in the litigation. Schwartz and Moriarty replied that they would provide such an order to the court.

 

BTH Litigation Settlement

Tuesday, July 12th, 2016

On 16 June 2016, Berkeley Town House Cooperative Corporation and I agreed to settle two lawsuits, which I had filed in 2012 and 2015.

A notice of the settlement, including the settlement agreement itself, was mailed on 11 July 2016 to the members of BTHCC.

I wrote a letter about the settlement to BTHCC members on 12 July 2016.

Court postpones trial in Berkeley co-op lawsuit after settlement reported

Friday, June 17th, 2016

Attorneys for a Berkeley senior housing cooperative and one of its members involved in a four-year-old lawsuit and a more recent related case appeared in court on the scheduled trial date today and reported that they had achieved a signed settlement agreement ending both lawsuits.

Alameda County Superior Court Judge George C. Hernandez, Jr., approved a proposal by David H. Schwartz, representing plaintiff Jonathan Pool, and Margaret Lesniak, representing Berkeley Town House Cooperative Corporation, to proceed with the necessary steps for making the settlement official. Hernandez and the attorneys agreed that the settlement would require the court’s approval of its fairness to the co-op and, before the court made its decision, all members of the co-op would be permitted to make comments on the proposed settlement terms. Hernandez stated that he would permit each member to comment either in writing, in advance of the approval hearing, or orally in person, at the approval hearing, but not both. Margaret J. Allen, representing seven of the eight defendants in the older suit, voiced her agreement with the arrangement.

Under the announced settlement procedure, the settlement terms will be confidential until 11 July 2016. On that date, Schwartz will file a motion asking the court to approve the settlement and the settlement agreement itself will be transmitted to the court and to all members of the co-op, with instructions on how members can comment. Members who elect to comment in writing will be required to submit their comments by 1 August 2016. The approval hearing will be set for a date after 1 August.

Hernandez asked the attorneys whether they wanted the trial removed from the court’s calendar or postponed in case the court rejects the settlement terms or the settlement otherwise fails to remain intact. Allen recommended a postponement, and Hernandez agreed. He set a new trial date of 4 November 2016.

Court pressures parties to settle Berkeley senior co-op case

Wednesday, April 6th, 2016

Attorneys for a Berkeley senior housing cooperative and seven of its former directors involved in a four-year-old lawsuit and a more recent related case switched their position in court on 5 April from “Give us more time to settle this case” to “Please pressure us to settle this case fast”, and the judge applied even more pressure than they asked for.

Alameda County Superior Court Judge George C. Hernandez, Jr., heard Dennis F. Moriarty and Huge A. Donohoe, representing Berkeley Town House Cooperative Corporation, which owns a sixty-unit apartment building near the University of California campus, and David L. Jordan, representing seven former directors of the the co-op, take a position opposite to the one they had taken a week earlier. In a statement filed on 30 March, signed by them and by Moji Saniefar, representing co-op member Jonathan Pool, who had initiated the litigation in 2012, the attorneys had agreed that a voluntary settlement of both cases was “imminent”. They had argued that the court should continue its ban on discovery long enough to let the parties work out the details instead of collecting evidence to get ready for a trial. The statement disclosed that Pool had given the co-op a settlement offer valid until 31 May, permitting time for a new co-op board of directors, to be seated on 23 May, to review the terms.

On 25 February, Hernandez had ordered “the discovery stay be extended until the next hearing” and had scheduled that hearing for 24 March. On 24 March he scheduled another hearing for 5 April and ordered the parties to give him a statement “limited to whether the stay on discovery should remain”.

At the court session, however, the co-op’s attorneys asked the court to continue the stay for only two weeks, so as to pressure the parties to settle. William E. Joost, Jr., representing the same seven ex-directors in the original lawsuit, asked the court to apply even more pressure by letting the parties immediately resume their discovery activities. Saniefar told the court that two weeks would be insufficient and the parties should be given at least four more weeks to complete a settlement before being permitted to resume discovery.

After hearing the conflicting requests about how long to leave the stay on discovery in place, Hernandez told the attorneys that the stay on discovery that they had been arguing about did not exist. He asserted that any suspension of discovery was a private agreement among the parties, not something imposed by the court.

In an order issued after the hearing on 5 April, Hernandez wrote that the trial date of 13 May would be “maintained” and declared that “discovery was not stayed by the Court”. In a separate order in the related case, he ordered the parties to appear on 13 May so he could set a date for that case’s trial.