Archive for October, 2013

Community conflict in Kensington

Sunday, October 20th, 2013

I have come across a newsletter published by four ”Concerned Citizens” of the community of Kensington, California, north of Berkeley, attacking Kensington’s Police Protection and Community Service District Board for some of its decisions and claiming that the board has needlessly embroiled itself in expensive litigation.

I can’t evaluate the claims made in the newsletter, but they fit a pattern of lawless and reckless governance that one observes in many places. For those who may wish to examine it, I am making it accessible at this site.

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Judge disqualifies law firm in Berkeley co-op case

Friday, October 11th, 2013

A Berkeley law firm was barred on Monday (7 October 2013) from representing a corporation whose directors it also represents. Judge George C. Hernandez, Jr., of the Alameda County, California, Superior Court ruled that Berkeley Town House Cooperative Corporation could no longer be represented by attorney Fred M. Feller of the firm Buresh, Kaplan, Feller & Chang. Feller also represents 7 current and former directors of that corporation, who are being sued for waste of corporate assets and other misconduct allegedly damaging to the corporation.

The court had held that this dual representation created a conflict of interest. Feller had responded by submitting evidence that a large majority of the corporation’s shareholders had consented to his dual role, despite the conflict.

But Hernandez ruled that the consents were invalid, because Feller had not advised the shareholders beforehand as required by California law. In particular, the ruling said that Feller’s presentation at a meeting attended by some sharholders “does not appear to have been complete or objective” and that shareholders “were not permitted to freely engage Mr. Feller in discussion of the pros and cons of waiving the conflict, and thus were deprived of a full and fair disclosure.” Moreover, the ruling held that a written disclosure was required but Feller had provided only oral advice.

At a case management conference on the same day, Hernandez set a trial in the case for 4 April 2014. He and Feller both expressed doubt about the prospect of a voluntary settlement, because, as Hernandez put it, if retired Judge Richard Hodge, who had twice tried to mediate in the case, failed to settle it then it probably couldn’t be settled. Still, Feller said that settlement discussions had taken place with attorneys for Garry Secrest and Esteban Cardiel, contractors involved in the case, and expressed some hope that a settlement might be reached with them.

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“Courtesy defense” of a common interest development: legal?

Tuesday, October 8th, 2013

When can an attorney represent a common interest development (or “CID”, a condominium association, housing cooperative, or other homeowner association), while also representing individuals who are being sued for damaging it?

In recent rulings, judges of the Alameda County, California, Superior Court barred an attempt by an insurer-appointed attorney to represent both classes of defendants at once. One shareholder of the CID’s corporation had sued several current and former directors and an ex-employee, claiming they had damaged the corporation and asking that they reimburse it. In this “derivative” action, the corporation, too, was “nominally” a defendant, sued because it had failed to take action against the defendant individuals.

Travelers Property Casualty Company of America insured the corporation and its directors, officers, and employees, and appointed Fred M. Feller of Berkeley as their attorney for this case. Feller represented both the corporation and the individual defendants until the plaintiff’s attorney, David H. Schwartz of San Francisco, moved to disqualify him from representing the corporation, on the basis of conflicts of interest. Feller opposed the motion, arguing that there was no conflict of interest and that Travelers was offering a “courtesy defense” of the corporation along with the primary defendants, an arrangement which, Feller claimed, was common and accepted by courts in similar cases.

Judge Steven A. Brick ruled that there were in fact conflicts in this dual representation and disqualified Feller from representing the corporation, but offered the corporation and its attorney, Stephanie J. Hayes of Walnut Creek, time to waive the right to a conflict-free attorney. Because the defendants controlled the corporation, Brick ruled that its board of directors could not waive the conflicts. But a majority of the corporation’s 60 shareholders, minus those who were parties in the case, could do so.

Feller later submitted evidence of a waiver of conflicts by a large majority of the shareholders and asked the court to vacate his disqualification. Schwartz opposed the motion, arguing that the shareholders consenting to a waiver had not received the disclosures required by the Code of Professional Conduct (Rule 3-310). Feller replied that whatever disclosures he had made to the shareholders were protected by attorney-client privilege and that he had given the shareholders opportunities to ask him questions in a meeting and in individual interviews. In the hearing on this motion, Feller further argued that the shareholders weren’t “clients” to whom Rule 3-310 was meant to apply, since the corporation was the client. Finally, Feller argued in the hearing that blocking the courtesy defense would have disastrous consequences for the corporation. Schwartz argued against these claims.

Judge George C. Hernandez, Jr., ruled that compliance with Rule 3-310 was mandatory in this solicitation of conflict waivers from shareholders of the corporation and that Feller had not complied with it. He denied the motion and made the disqualification final.

The court’s rulings appear to say: If shareholders of a corporation have the capacity to waive conflicts to allow  a single attorney to represent both the corporation and adverse parties, then the shareholders must be treated as the client for the purpose of compliance with pre-waiver disclosure requirements.

Copies of the records referred to above are available at http://stulta.com/forumo/archives/949.

 

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Warning to whistleblowers

Sunday, October 6th, 2013

Whistleblowers (such as Snowden, Manning, and Assange) are in the news these days, because of the evils they have revealed, the laws they have broken in doing so, and the persecution they suffer as a consequence.

But there are many obscure whistleblowers who break no laws and still reap revenge. I’m one of them.

In 2010 I began to blow the whistle on wrongdoing within a small corporation that owns a Berkeley, California, apartment building, commonly known as “BTH”. Almost immediately I began to feel the heat of defamation from the corporation’s miscreant officials and their allies. By attributing my claims to an alleged personality disorder, they tried to deflect attention from the damage they had inflicted on the corporation and its 60 shareholders.

What damage had they done? In short, about a quarter-million dollars of illegal expenditures that turned out to be wasted, equivalent to an entire year’s operating budget. Also, failure to respond to expert warnings that the corporation’s apartment building (less than a mile from the Hayward Fault) had apparent seismic vulnerabilities putting its occupants’ lives at risk. And, in addition, pervasive financial mismanagement, illegal secrecy, and violations of civil liberties and participatory rights.

My repeated attempts to get internal review and correction of these conditions were met with a mixture of vague denial and personal name-calling. The shareholders who sympathized with my efforts were almost completely intimidated into silence. I finally initiated a lawsuit over these abuses in March 2012, seeking to stop the violations and to collect damages for the corporation from the officials who were responsible. The verbal attacks on me continued.

Shareholder Andrey Feuerverger, for example, circulated a two-page letter in March 2012 calling me  “intransigent” and “self-centered” and stating that I had “single-handedly usurped the entire agenda”. According to Feuerverger, I had “endlessly been agitating” with an intent “to bludgeon the Board and the … membership into [my] servitude”. I was trying, he said, to impose my “frequently absurd preferences” on all the shareholders.

17 months after the suit was filed, an anonymous person reprinted and redistributed Feuerverger’s letter.

Meanwhile, two of the officials whom the lawsuit seeks to hold accountable have joined the fray. In a rambling message to shareholders on 6 August 2013, former corporation president Charles Tuggle wrote:

Mr. Pool is suing BTH. That  means( one party-Mr. Pool) versus (one party-all of us). Mr.Pool thrives on meetings,debates, conversations,etc, these are his drugs of choice. The choice for the restof us is to sit through another long meeting orchestrated by Mr. Pool or to get on with our lives without more personal involvementin this nightmare frustration created by him in the first place. Remembering this is a lawsuit not 60 minutes …

And on 3 October 2013 one of the current director defendants, Judith Wehlau, circulated a memo to BTH members saying “We can defeat this creep ….”

The recriminations by Feurverger, Tuggle, and others have always avoided even mentioning the abuses revealed by the legal complaint, including these:

  • Tuggle and the other defendants signed $224,000 in checks to an unlicensed and uninsured contractor for illegal (and incompetent) construction. It was done without the required city building permit. The corporation got no warranty on the work. Tuggle et al. paid $207,000 of this money without getting the required prior approval of the board of directors, and more than half the money was paid with invalid signatures on the checks. Nobody ever signed a contract for the work. Moreover, Tuggle et al. wrote the checks to the contractor under five different business names (five out of the ten names under which he did business!). This last fact isn’t illegal but would make any reasonable person suspicious. Just redoing the job right is estimated to cost $400,000.
  • Tuggle and his successor Almalee Henderson have routinely spent (and misspent) corporate money without asking the board to OK the expenditures.
  • Tuggle rejected spending even a penny investigating expert warnings of earthquake risks in the corporation’s building, and he admitted that he wanted to remain ignorant of the risks so he wouldn’t need to disclose them to a buyer of his stake in the corporation. In other words, he put his personal profit above the lives and property of dozens of his fellow shareholder residents.
  • Tuggle conspired with the corporation’s manager to keep secrets from shareholders that they were legally entitled to know. He gave excuses such as “the manager is too busy” while really planning to postpone disclosures indefinitely. And Tuggle presided over illegal secret meetings of the board. These practices continue until today, making it impossible for the shareholders to hold their officials accountable.
  • Tuggle and his fellow directors practiced illegal censorship over the conversations of the shareholders and other residents in the building. Decreeing that conversations in the shared common area could be prohibited for any reason at all, or for no reason, Tuggle et al. banned discussions about public issues that made them feel uncomfortable.

Tuggle, Feuerverger, and their allies do more than circulate vituperation. Some of their allies also accost shareholders who have been caught conversing with me. These shareholders are scolded for this breach of solidarity and are called members of my “gang”. And, of course, they accost me, too. Directors Lydia Gans and Judith Wehlau (cited above) are the worst offenders: When they see me sitting in the library or lounge quietly doing my work, Gans tells me that it’s “creepy” to see me there, and Wehlau calls me a “spy” or a “troll”. Gans on 4 October 2013 said “I wish you would’t sit in our community room so we wouldn’t have to look at you”, and “We detest you”. She returned shortly thereafter to photograph me in the act (the act of sitting in the lounge):

Lydia Gans photographing Jonathan Pool

Lydia Gans photographing me

The pattern at BTH is clear: If you blow the whistle, expect to be attacked as a deviant monster and traitor. Your assailants will make baseless accusations about your motives, will intimidate others into ostracizing you, and will demean you face-to-face. As predicted by Waytz, Dungan, and Young, they will appeal to loyalty as a supreme value, ignoring the concern for fairness (or truth) that motivated your act. The one thing they will never do is answer the claims of misconduct that you have made. Until, that is, you force them to in court. But they seem to be betting that they can cow you into submission before a trial date, thereby escaping judicial scrutiny and achieving impunity.

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