$10M construction defect verdict in Fire Code case
Daily Business Review
Celia Ampel
June 12, 2017
Florida attorneys from Becker & Poliakoff won a $10 million
construction defect verdict against a publicly traded developer and an
architectural company.
The firm represented a condominium association whose members said they
learned after buying units in a six-story New Jersey development that
the building was not code-compliant — and that the developer's parent
company, Hovnanian Enterprises, was aware of it.
"Hovnanian and their developer entity, they go right ahead with this
[construction] and they sell units in the building, and they don't
disclose the problem to the purchasers," said Becker & Poliakoff
managing shareholder John Cottle of Fort Walton Beach, part of the team
that won the June 1 judgment.
The relevant building codes provide for five types of buildings,
ranging from the most fire-resistant Type 1 — often a skyscraper — to
Type 5, which could be a wood-frame house, Cottle said.
The Grandview I building on the Hudson River was initially conceived as
a Type 2 building by the Hovnanian subsidiary, K. Hovnanian at Port
Imperial Urban Renewal II, and architect RTKL New Jersey Architects.
The architect warned the developer
"The problem was that the building was designed by the architect with
plywood subflooring, and they discovered halfway through the
construction that they had plywood subflooring in this Type 2
building," Cottle said. The architect warned the developer of the issue.
The plan was then to get the development reclassified as a Type 3,
which would have allowed plywood — but required masonry exterior walls
that the building did not have. New plans were submitted to the town of
West New York, but they were never approved, Cottle said.
The problem was first discovered in April 2015, and meeting minutes
from November of that year showed the developer knew the plans to
switch to Type 3 had not been approved, the attorney said. But, the
plaintiffs alleged, Hovnanian decided to try to ask the mayor's office
for a favor instead of working with the building department.
they were trying to use 'political capital'
"Email and the minutes of the meeting clearly indicate that they were
trying to use 'political capital,' as they say," Cottle said. "There's
also a suggestion in those minutes that they were going to resurface a
soccer field [for the city] … They can be read to suggest that that's
in exchange for approving this change in construction."
Defense attorneys did not respond to requests for comment by deadline.
At trial in New Jersey, the defense argued the building was safe. The
plywood flooring was not a life-safety issue, since fire alarms and
exits would allow all residents to safely vacate the building in the
event of a fire.
The condo association's attorneys agreed that there was no threat to residents' lives.
"The problem is to the property left behind, because the building
doesn't have the fire-resistance capability that the law requires it to
have," Cottle said. "The fire will spread faster and it will do more
damage than it would had it been built properly. Further, the building
is more dangerous to first responders who would have to go into it were
it to catch on fire, because if it had masonry walls, those masonry
walls are not subject to collapse in intense heat. Whereas the type of
walls that this building has … steel with a brick veneer, those can
collapse."
The Becker & Poliakoff team, which also included Matthew Meyers of
Morristown, New Jersey, Sanjay Kurian of Fort Myers and Perry Adair of
Coral Gables, also had to "pierce the corporate veil," showing
Hovnanian was responsible for its subsidiary's actions.
There were several tiers of companies between K. Hovnanian and its
publicly traded parent, Cottle said. K. Hovnanian was created just to
build the Hudson River development, and money was transferred out of
the company once the units were mostly sold.
The plaintiffs persuaded the jury that Hovnanian Enterprises dominated
and controlled the subsidiary and used it to perpetrate an injustice,
meaning the condo association can collect from the much more
deep-pocketed parent company.
The jury assigned $3 million in damages to Hovnanian, which was tripled
to $9 million, and an additional $1 million against the architect.
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