Condo Media - May 2014 - (Page 28)

by David M. Rogers, Esq. OPERATIONS A Team Effort An Unconventional Strategy Produced a Hefty Construction Defect Settlement T he recent $12.25 million settlement of a construction defect lawsuit filed by One Charles Condominium provides a noteworthy example of how a dedicated board and a committed team of professionals can effectively manage and successfully resolve even the most complex and challenging litigation matters. The One Charles Condominium is a luxury condominium building located on Charles Street in downtown Boston. The project was developed by MDA Park LLC, a single-purpose entity related to and affiliated with Millennium Partners. In 2007, the condominium association sued MDA alleging, among other defects, that the heating, ventilation, and air conditioning (HVAC) system was negligently designed. The condominium association amended its complaint two years later to add claims directly against the company that designed the building's HVAC system. The association's primary claim was that because of design flaws, the amount of air the building mechanically exhausted significantly exceeded the amount that was mechanically supplied. Compounding that problem, the association claimed, the air mechanically supplied by rooftop air handling units was effectively trapped in the common corridors of the building. This created a significant imbalance in the air pressure inside the units and outside of them that drew excessive amounts of untempered and unconditioned outside air into the units directly through the building envelope, resulting in 28 Condo Media * May 2014 high interior humidity at certain times and under certain conditions. Flawed Design Although no certainties exist in any litigation, counsel was confident that expert witness could support the opinion that the flawed design of the the engineering firm was primarily responsible for the problem. MDA had already asserted claims for contribution and contractual indemnification against the engineering firm. This suggested that if MDA was found to have liability to the association, it would expect reimbursement from A dedicated board and a committed team of professionals can effectively manage and successfully resolve even the most complex and challenging litigation matters. HVAC system was responsible for the air quality, high humidity, and other problems the community had been experiencing. The engineering analysis together with anecdotal and empirical evidence was believed to demonstrate sufficient liability risk for the defendants and sufficient likelihood of a damage award against them to bring them to the settlement table. So it was puzzling when that was not the case. As the pre-trial process continued, it became apparent that the engineering firm responsible for the design was expecting the developer (MDA Park LLC), who had the deepest pockets and ostensibly the most at risk, to handle the defense and pay the lion's share of any damages the association was awarded. However, there were no apparent circumstance in which MDA would willingly absorb the loss resulting from a settlement, when the association's evidence suggested that the engineering for any damages the company (MDA) had to pay. Because MDA could reasonably expect to recover the engineer's contribution at trial, the company clearly would have little motivation to pay a significant portion of any settlement. That explained why the settlement process had bogged down and suggested a solution to the problem. The problem: Everyone involved - the developer, the engineering firm, and the contractors - was assuming that someone else would be on the hook for any loss, so no one was interested in settling. The solution: A "divide-andconquer" strategy to change the riskreward calculation and make settling a more appealing option. The board decided to break the logjam by making MDA an offer it couldn't - and didn't - refuse: A settlement amount significantly lower than even the limited share of the damages the company would probably have been willing

Table of Contents for the Digital Edition of Condo Media - May 2014

Condo Media - May 2014
From the CED’s Desk
Editorial Board
CAI News
CAI Regional News
Asked & Answered
Homeowner’s Corner
And the Winners Are ...
Vendor Spotlight
Industry Perspective
Volunteer Spotlight
CAI-NE Legal Directory
Classifi ed Service Directory
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Condo Media - May 2014