Wednesday, June 1, 2011

Attorney wants to put the lid on Hanks case

Judicial confirmation would give legal teeth to arbitration ruling


By TERRY SMITH
Express Staff Writer

Attorney Miles Stanislaw is all smiles after winning an arbitration case for his client, Storey Construction. Photo by Mountain Express

Attorney Miles Stanislaw didn't waste any time in seeking judicial confirmation for his client, Storey Construction, after a panel of arbitrators issued a decision on May 21 favoring the company over actor Tom Hanks in a longstanding home construction dispute.

Stanislaw, who was in Florida working on another case, received a copy of the decision on May 23 and immediately attached it to a motion for judicial confirmation that he sent by overnight express to the Blaine County court clerk's office. The clerks received the document on May 24 and duly entered it into the case file, thus making the arbitrators' ruling a public document, available to anyone who cares to read it or pay to have a copy made.

Such is not always the case with documents filed or generated in arbitration proceedings, which are typically held in private and are immune to the public disclosure requirements of the courts. Arbitration is a quasi-judicial process that is often required in construction contracts as a way of settling disputes outside of the court system.

But in Idaho, as in many other states, arbitration rulings have no legal teeth. Getting a court to confirm them gives them the force of law.

"In Idaho, an arbitration order is just a piece of paper until it gets confirmation from the court," said Stanislaw, who lives in Ketchum but is usually elsewhere in the United States representing construction contractors in multimillion-dollar lawsuits. Stanislaw is a partner in Seattle-based law firm of Watt, Tieder, Hoffar & Fitzgerald.

"This way, there's a judgment that says Gary owes them zero dollars," Stanislaw said, referring to Storey Construction owner Gary Storey.

The decision favored Storey Construction over Hanks and his wife, Rita Wilson, who filed an arbitration case in 2007 alleging that latent construction defects had been discovered at their vacation home north of Ketchum and seeking $3 million in damages. Completed in 2002, the home, composed of a main house and three surrounding guest cottages, cost Hanks and Wilson about $12 million.

Stanislaw has worked on the Hanks-Storey dispute off and on since 2003. After the home was finished, Hanks and Wilson stopped making payments, so Storey filed a claim with the American Arbitration Association and Hanks and Wilson filed a counterclaim alleging that their home had been built with construction defects.

After a hearing, arbitrators in 2004 ruled in Storey's favor and awarded him about $2 million in unpaid balance, interest and attorney's fees.

But that wasn't the end of it.

Hanks and Wilson filed a new claim with the Arbitration Association in 2007 alleging that new defects had been found.

The arbitration findings describe the home problems as "leaks and excessive snow accumulation on the roofs including ice dam and sliding snow conditions, drainage concerns, fireplaces that did not properly vent smoke, an air-conditioning system that did not reach the desired levels of coolness, and possible seismic inadequacies."

In response to the second arbitration claim, Stanislaw filed a lawsuit in Blaine County 5th District Court seeking to block new arbitration and relying primarily on the judicial principle of "res judicata," which basically means that the case has already been settled.

Judge Robert J. Elgee agreed with Stanislaw, but the Idaho Supreme Court didn't. Those courtroom procedures lasted from 2008 through 2009. The case didn't come up for an arbitration hearing until April of this year, when a panel composed of arbitrators R. David DiJulio, John Paige Carpenter and Ron T. Blewett heard testimony and considered evidence for 10 days before issuing a decision.

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Final award

Stanislaw said the arbitrators' decision, officially titled a "final award," vindicates Storey Construction. However, the final award also somewhat vindicates Hanks and Wilson, who Stanislaw has accused in the past of bringing the case out of revenge and seeking money from Storey simply to pay for a remodeling job.

Instead, the arbitrators determined there were real problems with the home, but ruled that Hanks and Wilson had failed to prove that the fault was with Storey Construction. Instead, arbitrators laid the blame on Lake Flato, the Texas-based architectural firm hired by Hanks and Wilson to design the home and provide construction oversight.

Hanks and Wilson settled with Lake Flato in November 2010, receiving $900,000 in compensation. In the settlement, Lake Flato did not admit fault. The company has recently publicly stated that it disagrees with the arbitrators' findings.

Nonetheless, in their final award, the arbitrators found that Storey Construction and Hanks and Wilson were "both victims of this long-lasting perfect storm of poor design and bad architectural and engineering advice."

"All the evidence indicated that neither the Texas-based architects nor their Texas-based structural engineers possessed the requisite local cold-weather or snow experience, resulting in a cold roof that was so poorly designed that it was subsequently labeled unworkable," the arbitrators found.

The arbitrators further determined that the situation was compounded by numerous design changes once construction had started and by the fact that the unnamed architect assigned to the project failed to provide proper oversight and "visited the site only once or twice a month for a day or two at a time."

The final award describes Storey Construction as "an experienced and conscientious local Sun Valley builder of luxury homes," but does not find the company entire blameless, stating that Storey Construction did not do everything "perfectly."

The arbitrators concluded that it's difficult to determine if Storey built the home according to design because many of the design changes made after construction started were not properly documented.

"The evidence indicated that notwithstanding the incomplete and unworkable plans, the respondent [Storey Construction] built a good house with a better but ultimately inadequate cold roof," the arbitrators concluded.

The arbitrators found that Hanks and Wilson had failed to prove their case against Storey, and also concluded that all but one of the issues raised by the couple in the second arbitration had already been settled in the first, thus resurrecting the principal of res judicata.

"The arbitrators' ruling vindicated Judge Elgee's ruling that threw the case out in 2008," Stanislaw said.

The only construction issue not settled earlier, the arbitrators determined, had to do with "alleged improper structural connections," which could not have been viewed until repairs were undertaken on the Hanks and Wilson home in 2007 and 2008.

However, the arbitrators determined, evidence collection regarding the connections and other problems was botched by the home caretaker who was initially assigned the task of collecting evidence and later by the couple's law firm.

The arbitrators concluded that caretaker Don Jackson's evidence collection was "at best amateurish and untrustworthy."

"More inexplicably," the arbitrators concluded, was that evidence collected by the Hanks and Wilson legal team failed to follow industry-recognized protocols or terms of the contract with Storey Construction.

The arbitrators further found that Hanks and Wilson had violated the contract with Storey Construction by not giving the company the opportunity to address concerns and instead hired repair work out to different contractors.

That's a wrap—maybe

Hanks and Wilson were represented in the arbitration hearing by the Los Angeles-based attorney firm of Peckar and Abramson.

Stanislaw said the couple had three attorneys and six paralegals on the case, while Storey Construction had only himself and attorney Christopher A. Wright.

"I've handled major construction cases all over the United States, and never have I see as many lawyers as the Hankses had that were trying to destroy the reputation of Gary Storey," Stanislaw said. "This was a case with bitter people with very deep pockets trying to destroy the little guy."

No court hearing has yet been scheduled on Stanislaw's motion for judicial confirmation. Stanislaw said there won't likely even be a hearing, unless Hanks and Wilson oppose the motion.

Stanislaw is hoping they won't.

"I think this is kind of the end of it," he said

Terry Smith: tsmith@mtexpress.com




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