Management Specialists Company lawsuit

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Document ID: 1570816_2_JSM
KOBAYASHI SUGITA & GODA, LLP
FIRST CIRCUIT COURT
STATE OF HfWfdf
FILf:t~
BERT T. KOBAYASHI, JR. 6
8
w(01 (Q)tPVJONATHANS.MOORE ,~ ~
2Rl8 APR 20 PM 3: 16
CAYCIE K. GUSMAN 10056
NICHOLAS P. SMITH 10613
JONATHAN A. KOBAYASHI 6501
First Hawaiian Center
999 Bishop Street, Suite 2600
Honolulu, Hawaii 96813
Telephone: (808) 535-5700
Facsimile: (808) 535-5799
Email: btk@ksglaw.com; jsm@ksglaw.com; ckg@ksglaw.com;
nps@ksglaw.com; jak@ksglaw.com
Attorneys for Plaintiffs
THE COURTYARDS AT MILILANI
MAUKA, LLC; KAPOLEI PACIFIC
LIMITED PARTNERSHIP; PACIFIC
HOUSING OAHU CORPORATION
KAPOLEI RESIDENCE; THE COURTS,
LLC; SENIOR RESIDENCE AT KAPOLEI
2, INC.; MALU'OHAI PACIFIC LIMITED
PARTNERSHIP; PACIFIC HOUSING
,c,<OAHU CORPORATION ELDERLY
. , RESIDENCE; KANEOHE ELDERLY
HOUSING PROJECT LP; SENIOR
RESIDENCE AT IWILEI LIMITED
PARTNERSHIP
IN THE CIRCUIT COURT OF THE FIRST CIRCUIT
STATE OF HAWAII
.l 8 - 1- 0 6 2 1 • 0 4· /jM f
THE COURTYARDS AT MILILANI ) CIVIL NO._____ 11'1
MAUKA, LLC; KAPOLEI PACIFIC ) (Other Civil Action)
LIMITED PARTNERSHIP; PACIFIC )
HOUSING OAHU CORPORATION )
KAPOLEI RESIDENCE; THE COURTS, )
LLC; SENIOR RESIDENCE AT KAPOLEI)
2, INC.; MALU'OHAI PACIFIC LIMITED )
PARTNERSHIP; PACIFIC HOUSING )
(Caption Continued on Next Page)
)
)
)
)
PLAINTIFFS THE COURTYARDS AT
MILILANI MAUKA, LLC; KAPOLEI
PACIFIC LIMITED PARTNERSHIP;
PACIFIC HOUSING OAHU CORPORATION
KAPOLEI RESIDENCE; THE COURTS,
LLC; SENIOR RESIDENCE AT KAPOLEI 2,
INC.; MALU'OHAI PACIFIC LIMITED
PARTNERSHIP; PACIFIC HOUSING OAHU
CORPORATION ELDERLY RESIDENCE;
SUMMONS
DENIED
LECAL OQI;UMF.:..: I~· -

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OAHU CORPORATION ELDERLY
RESIDENCE; KANEOHE ELDERLY
HOUSING PROJECT LP; SENIOR
RESIDENCE AT IWILEI LIMITED
PARTNERSHIP;
Plaintiffs,
vs.
)
)
)
)
)
)
)
)
)
)
REALTY SPECIALISTS CORPORATION,)
dba MANAGEMENT SPECIALIST )
COMPANY; JOHN DOES 1-5; JANE )
DOES 1-5; DOE PARTNERSHIPS 1-5; )
DOE CORPORATIONS 1-5; DOE )
ASSOCIATIONS 1-5; DOE TRUSTS 1-5; )
and DOE ENTITIES 1-5, )
Defendants.
)
)
)
KANEOHE ELDERLY HOUSING PROJECT
LP; SENIOR RESIDENCE AT IWILEI
LIMITED PARTNERSHIP'S VERIFIED
COMPLAINT FOR BREACH OF
CONTRACT AND IMMEDIATE
POSSESSION OF PERSONAL PROPERTY;
AFFIDAVIT OF MARVIN B. AWAYA;
AFFIDAVIT OF CONNIE YU-
pAMPALONE; EXHIBITS "A" THROUGH
"Q"; DEMAND FOR JURY TRIAL;
SUMMONS
THE COURTYARDS AT MILILANI MAUKA, LLC; KAPOLEI PACIFIC LIMITED
PARTNERSHIP; PACIFIC HOUSING OAHU CORPORATION KAPOLEI
RESIDENCE; THE COURTS, LLC; SENIOR RESIDENCE AT KAPOLEI 2, INC.;
MALU'OHAI PACIFIC LIMITED PARTNERSHIP; PACIFIC HOUSING OAHU
CORPORATION ELDERLY RESIDENCE; KANEOHE ELDERLY HOUSING
PROJECT LP; SENIOR RESIDENCE AT IWILEI LIMITED PARTNERSHIP'S
VERIFIED COMPLAINT FOR BREACH OF CONTRACT AND
IMMEDIATE POSSESSION OF PERSONAL PROPERTY
Plaintiffs THE COURTYARDS AT MILILANI MAUKA, LLC; KAPOLEI PACIFIC
LIMITED PARTNERSHIP; PACIFIC HOUSING OAHU CORPORATION KAPOLEI
RESIDENCE; THE COURTS, .LLC; SENIOR RESIDENCE AT KAPOLEI 2, INC.;
MALU'OHAI PACIFIC LIMITED PARTNERSHIP; PACIFIC HOUSING OAHU
CORPORATION ELDERLY RESIDENCE; KANEOHE ELDERLY HOUSING PROJECT LP;
SENIOR RESIDENCE AT IWILEI LIMITED PARTNERSHIP ("Collectively Plaintiffs") by
and through their attorneys Kobayashi Sugita & Goda, LLP, for a Complaint for Breach of
Contract and Immediate Possession of Personal Property pursuant to HRS Chapter 654 against
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REALTY SPECIALISTS CORPORATION, dba MANAGEMENT SPECIALIST COMPANY;
RODNEYY Y. S. CHAI; SCOTT CHAI and JOHN DOES 1-5; JANE DOES 1-5; DOE
PARTNERSHIPS 1-5; DOE CORPORATIONS 1-5; DOE ASSOCIATIONS 1-5; DOE
TRUSTS 1-5; and DOE ENTITIES 1-5 allege and aver as follows:
PARTIES
1. Pacific Housing Assistance Corporation ("PHAC") is a Hawaii non-profit
corporation in the business of providing housing to low-income residents of Hawaii through state
and federal housing assistance programs.
2. Each of the Plaintiffs is a single purpose entity. PHAC is not a party to this Complaint,
however, unless otherwise noted below, PHAC exercises direct or indirect control over each of the
Plaintiffs as either a managing member or general partner, or as the managing member or general partner
of a Plaintiff-entity's managing member or general partner, or "sponsor" as such term is defmed in the
Supportive Housing for the Elderly program described in Section 202 of the Housing Act of 1959, as
amended ("HUD Sec. 202 Program"). Accordingly, each of the Plaintiffs set forth below is part of a
PHAC "family" of entities dedicated to serving the public by providing access to low income
housing.
3. Plaintiff The Courtyards at Mililani Mauka, LLC is a Hawaii limited liability
company, which owns The Courtyards at Mililani, a low income housing development located at
95-1015 Koolani Drive, Mililani, HI 96789.
4. Plaintiff Kapolei Pacific Limited Partnership is a Hawaii limited partnership,
which owns the Villas at Aeloa Project, a low income housing development located at 91-1118
Namahoe Street, Kapolei, HI 96707.
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5. Plaintiff The Courts, LLC is a Hawaii limited liability company which owns The
Courts, a low income housing development located at 1119 Lanai Avenue, Lanai City, HI,
96763.
6. Pacific Housing Oahu Corporation Kapolei Residence is a Hawaii non-profit
corporation which owns the Senior Residence at Kapolei, a low-income housing development
located at 91-1034 Namahoe Street, Kapolei, HI 96707. Pursuant to the HUD Sec. 202 Program
requirements, the directorships of Pacific Housing Oahu Corporation Kapolei Residence and
PHAC are identical.
7. Plaintiff Senior Residence at Kapolei 2, Inc. is a Hawaii non-profit corporation
which owns the Senior Residence at Kapolei 2, a low-income housing development located at
91-1098 Namahoe Street, Kapolei, HI 96707. Pursuant to the HUD Sec. 202 Program
requirements, the directorships of Pacific Housing Oahu Corporation Kapolei Residence and
PHAC are identical.
8. Plaintiff Malu'ohai Pacific Limited Partnership is a Hawaii limited partnership
which owns The Villas at Malu'ohai, a low income housing development located at 91-1025
Kaiau Avenue, Kapolei, HI 96707.
9. Plaintiff Pacific Housing Oahu Corporation Elderly Residence is a Hawaii non-
profit corporation which owns Senior Residence at Kaneohe A, a low income housing
development located at 45-705 Kamehameha Highway, Kaneohe, HI 96744. Pursuant to the
HUD Sec. 202 Program requirements, the directorships of Pacific Housing Oahu Corporation
Elderly Residence and PHAC are identical.
10. Plaintiff The Kaneohe Elderly Housing Project Limited Partnership is a Hawaii
limited Partnership with Pacific Housing Oahu Corporation as its general partner. It owns the
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Senior Residence at Kaneohe B, a low income housing development located at 45-705
Kamehameha Highway, Kaneohe, HI 96744.
11. Plaintiff Senior Residence at Iwilei Limited Partnership is a Hawaii limited
partnership which owns the Senior Residence at Iwilei, a low income housing development
located at 888 Iwilei Road, Honolulu, HI 96817.
12. Upon information and belief, Defendant Realty Specialists Corporation, dba
Management Specialist Company ("RSC") is, and at all times relevant herein a Hawaii for-profit
corporation.
13. Defendants JOHN DOES 1-5; JANE DOES 1-5; DOE PARTNERSHIPS 1-5;
DOE CORPORATIONS 1-5; DOE ORGANIZATIONS 1-5; DOE TRUSTS 1-5; and DOE
ENTITIES 1-5 (collectively referred to herein as "Doe Defendants") are persons, partnerships,
corporations, associations, trusts, and entities whose names, identities, capacities, activities
and/or responsibilities are presently unknown to Plaintiffs and its attorneys despite diligent and
good-faith efforts to ascertain their true names, identities and capacities, who may be, or are,
responsible and/or liable to Plaintiffs (individually or collectively) for the acts set forth herein
and the damages sustained by Plaintiffs.
JURISDICTION AND VENUE
14. This is an action for breach of contract and for immediate possession of personal
property pursuant to HRS Chapter 654. All of the parties to this lawsuit reside within the First
Circuit and all ofthe contracts described herein were formed within the First Circuit.
THE PARTIES' CONTRACTUAL RELATIONSHIPS
15. RSC is in the business ofproviding real property management services.
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16. Each of the Plaintiffs entered into property management contracts with RSC,
under which RSC was obligated to provide property management services including, but not
limited to, (1) processing rental applications and selecting renters for units in projects owned by
the Plaintiffs; (2) maintaining books and records; (3) setting and collecting rent; and (4)
complying with all applicable state and federal laws governing assisted housing.
17. Exhibits A - I to this Complaint are the applicable property management
agreements between the Plaintiffs and RSC ("Property Management Contracts"); see also
Affidavit ofMarvin B. Awaya.
18. Upon information and belief, RSC routinely violated the terms of the Property
Management Contracts and violated both state and federal laws by:
a. Maintaining multiple waitlists for a single property and prioritizing friends or
family members of employees by placing them on a secret waitlist;
b. Accepting cash payments to jump rental applicants to the front ofwaitlists;
c. Improper rate approval for tenants;
d. Improperly coaching rental applicants to provide false information;
e. Maintaining inconsistent tenant information; and
f. Improperly screening tenants and allowing tenants not qualified for assisted
housing to reside on properties owned by the Plaintiffs including, but not limited,
to tenants whose incomes exceeded allowable thresholds.
g. Destroying records owned by the Plaintiffs.
19. The above-described breaches of the Property Management Contracts caused the
Plaintiffs damages in the form of lost rent, administrative expenses, professional and accounting
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expenses, legal fees, exposure to potential state and federal legal liability and other general and
special damages to be proven at trial.
TERMINATION OF THE CONTRACTS
20. Upon discovering that RSC was in serious breach of the Property Management
Contracts, the Plaintiffs sent proper and timely termination notices to RSC. See Exhibits J- Q.
21. Upon termination of the Property Management Contracts, RSC was contractually
obligated to immediately turnover to the Plaintiffs the records of each property subject to a
Property Management Contract, including but not limited to balance sheets, income statements,
budget comparison cash flows, rent rolls, delinquent payments, check registers, expense
distributions, and copies of the written approvals for items paid for replacement reserve (the
"Records").
22. The Plaintiffs, through PHAC and/or their authorized agents, made demands upon
RSC for the return ofthe Records. See Affidavit of Connie Yu-Pampalone.
23. Upon termination of the Property Management Contracts, the Records of each
subject project became the property ofthe Plaintiffs.
24. RSC turned over partial and incomplete records. Id.
25. Furthermore, the Records that were turned over by RSC were not done so at a
secure location or at RSC's office as required by law (see HAR § 16-99-4(t)); instead on
September 1, 2017, RSC insisted on turning over the Records from an open carport at the private
residence located at 1469 Oili Loop, Honolulu, Hawaii 96816.
26. During this Record exchange, it was discovered that Records for a number of the
Plaintiffs properties were being kept unattended and unsecured in the garage found at 1469 Oili
Loop. In other words, the Records containing the tenants' confidential information could have
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been viewed by anyone walking down the street and happened to open one of the cardboard
boxes found in the carport.
27. At this unsecured carport at a personal residence, RSC further failed to provide
any transmittal as to what Records were being produced.
28. On information and belief, RSC has destroyed records subject to the record
retention requirements ofthe Property Management Contracts.
29. On information and belief, RSC deleted the hard drives of computers situated at
properties subject to the Property Management Contracts, which computers held records
belonging to the Plaintiffs. Id.
FIRST CAUSE OF ACTION
(BREACH OF CONTRACT)
30. Plaintiffs incorporate the foregoing paragraphs as iffully set forth herein.
31. RSC was contractually obligated to adhere to state and federal laws in managing
the low-income housing developments subject to the Property Management Contracts, and
breached this obligation through its above-described actions.
32. RSC was contractually obligated to turn over Records of each low-income
housing development subject to the Property Management Contracts, and breached this
obligation.
trial.
33. RSC's breaches have caused the Plaintiffs damaged in an amount to be proved at
SECOND CAUSE OF ACTION
UMMEDIATE POSSESSION)
34. Plaintiffs incorporate the foregoing paragraphs as if fully set forth herein.
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35. Upon the termination of the Property Management Contracts, the Records of each
property subject to the Property Management Contracts became the property ofthe Plaintiffs.
36. Plaintiffs are entitled, under HRS Chapter 654, to immediate possession of the
Records, which are their personal property.
WHEREFORE, Plaintiffs pray that judgment be entered in their favor against Defendant
as follows:
A. For damages in an amount to be proven at trial,
B. For their attorneys' fees, and costs,
C. For the immediate possession ofthe Records; and
D. For such other relief as this Court deems appropriate and which justice requires.
DATED: Honolulu, Hawaii, April 10 , 2018.
AYASHI,JR.
S.MOORE
CAYCIE K. USMAN
NICHOLAS P. SMITH
JONATHAN A. KOBAYASHI
Attorneys for Plaintiffs
THE COURTYARDS AT MILILANI MAUKA,
LLC; KAPOLEI PACIFIC LIMITED
PARTNERSHIP; PACIFIC HOUSING OAHU
CORPORATION KAPOLEI RESIDENCE; THE
COURTS, LLC; SENIOR RESIDENCE AT
KAPOLEI 2, INC.; MALU'OHAI PACIFIC
LIMITED PARTNERSHIP; PACIFIC HOUSING
OAHU CORPORATION ELDERLY
RESIDENCE; KANEOHE ELDERLY HOUSING
PROJECT LP; SENIOR RESIDENCE AT IWILEI
LIMITED PARTNERSHIP
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