Posted on: Sunday, July 6, 2003

Hilton Kalia Tower mold lawsuit grows in complexity

By Andrew Gomes
Advertiser Staff Writer

The effort to sort out responsibility for a $55 million mold problem at Waikiki's Kalia Tower has expanded, with eight additional defendants named in a construction defect lawsuit filed in April by tower owner Hilton Hotels Corp.

The new defendants were recently named in cross claims filed by several of the 18 original defendants sued by Hilton. The company is seeking damages related to mold and other alleged construction defects in the 453-room hotel completed in May 2001.

As the expensive legal battle grows, most of Kalia's guest rooms are scheduled to reopen in the first half of September, after being shuttered last July, with rooms on six floors of the 25-story tower remaining closed for longer as they are converted to time-share units.

Addressing liability for the damage, however, is expected to take much longer than the 14 months it's taking to fix the building's physical problems.

The legal case is one of the biggest and most complex mold-liability actions in the country, and the cross claims between defendants and claims against others, including Hilton, were expected by parties trying to minimize potential damages and fault.

"It's pretty typical to see counterclaims flying back and forth, as well as bringing in new parties," said Bryan Garrie, an attorney who handles mold-related construction litigation at California-based McGregor & Garrie, and is not involved in the Kalia case.

So far in the Kalia suit, 14 original defendants have denied responsibility for Hilton's alleged damages, and filed cross claims against each other, trying to transfer blame and at least disperse liability. The other four original defendants have yet to answer Hilton's complaint.

Of the 14, five targeted project construction manager Construction Management & Development Inc. as a third-party defendant, arguing that the company's work, which included quality control on behalf of Hilton, resulted in damages being alleged by Hilton. Honolulu-based CM&D, which Hilton did not sue, declined to comment.

A few defendants filed cross claims against other companies also not named by Hilton, including: Center Glass Co. of California; Acutron Co. Inc., a Hawai'i company that works with insulation; Hawaii Instrumentation & Controls Inc., which works on energy management; Alerton, another local energy management firm; ProSet Systems Inc., a Georgia-based maker of fire-stopping systems; Intertek Testing Services NA Inc., a New York-based fire-stopping tester; and Inder Mirchandani, a local mechanical engineering consultant.

Kalia architect Wimberly Allison Tong & Goo countersued Hilton for allegedly not fully paying for the company's work. Hilton, in its complaint, said it paid the Honolulu-based design firm more than $6 million for Kalia work, and claims the money should be returned.

A Wimberly attorney declined to comment on the claims.

Aside from Wimberly's complaint, the cross claims by Hilton defendants are not specific, and generally allege fault without identifying materials or work that could be the basis of the claims.

Garrie said the vague cross claims, along with general defenses, are typical in cases where little information is known about the cause of mold.

Hilton has kept the situation inside Kalia largely to itself, insisting that mold investigation and correction experts sign confidentiality agreements. Hilton said it will not comment on its lawsuit or on work inside the tower.

In its complaint, Hilton said there were defects in roughly 35 elements of construction, including the building's exterior finish, air intake and exhaust systems, door framing, fireproofing, linen chutes, drywall joints, insulation, lana'i doors — even the orientation of the building toward prevailing winds.

Hilton also included many nonmold-related alleged defects in its complaint, but was generally vague about alleged defects, often citing "improper design, construction, supervision, installation, and/or selection" of various items.

Experts said it could be two or three years before it is determined who is responsible for damages that are likely to exceed Hilton's projected $55 million cleanup cost, given the lost business at Kalia, which was positioned as the flagship of Hilton Hawaiian Village.

Just the production and examination of documents and depositions of people involved is expected to take a couple of years as an army of lawyers argues over the relevance of documents and witness testimony.

Already, costs are mounting, with roughly a foot of legal papers filed in the case. Garrie said legal fees and expert witness expenses can exceed $1 million per party in cases as complex and big as Kalia.

Industry observers said the case will almost certainly be settled before trial — as are more than 90 percent of such cases — though much more legal wrangling is ahead.