Legal fight over mold responsibility spreads

[Guest guest]

http://southflorida.bizjournals.com/southflorida/stories/2003/06/16/story2.html

Legal fight over mold responsibility spreads

by is Muellner

At Harbour House South in Bal Harbour, mold is rolling downhill.

Building owner Archstone- (NYSE: ASN), one of the nation's largest apartment REITs, has filed a $30 million lawsuit in Miami-Dade County Circuit Court blaming mold and mildew problems on Miami-based architect Bernard Zyscovich, Orlando-based engineering firm Tilden, Lobnitz & and Penn Refrigeration & Air Conditioning in Pompano Beach. The companies' response: Archstone was too cheap to pay for a temporary cooling system during renovations.

Because of the problems, Archstone has been the focus of two class-action lawsuits and numerous personal injury and property damage claims.

Archstone spent $11.3 million in the second half of 2002 to clean up mold and water damage in the 452-unit Harbour House South. It has spent at least $1.7 million more in legal costs, according to documents filed with the SEC.

It also faces remediation challenges and mold infestation in at least four South Florida properties it bought just a few years ago, according to a source familiar with the properties.

Now the nation's largest apartment owner is fighting back, looking to steamroll those it believes are responsible for its growing mold problem.

In a 33-page complaint, Archstone alleges that a renovation plan designed by the contractors failed to provide for dehumidification during an extensive air conditioning system redesign, leaving the occupied building vulnerable to excessive amounts of outside summertime air. That caused already present mold and mildew to spread wildly throughout the building.

But contractors suggested that Archstone knew mold existed in the structure long before they got involved; ignored suggestions for a temporary air conditioning system during renovation because it didn't want to spend the money; and is maliciously going after subcontractors as a scapegoat even though at least one of those firms, Penn Refrigeration, is still doing work for the company.

"Anything that wasn't done was something that the owner didn't want to do and when they got hit with the class action, they had to do something and went about putting people in space suits and had to clean everything up and spend a chunk of change," said Penn President ph Joyce. "Now they are sending a bunch of attorneys to shake down the contractors to offset costs."

A reliance on local expertise

As a relative outsider, based in the Denver suburb of Englewood, Archstone- said in the lawsuit it relied on the local contractors more familiar with the semi-tropical climate: "Plaintiff, who is unfamiliar with South Florida humidity and the construction of an HVAC system in South Florida, relied upon the "acts, recommendations and advice" of Zyscovich, TLC and Penn.

The trio was responsible for planning and designing the HVAC system, which included a decision to use one high-powered rooftop air handling unit (AHU) instead of replacing each of the 13 existing individual AHUs located on each of the apartment building's floors, the complaint said.

Those 13 units provided positive pressurization of the air that flowed through the corridors and into the individual apartment units and dried out and circulated the air throughout the entire building, floor by floor, the suit alleges.

"The AHU unit as designed was sized to deliver outdoor air supply which significantly exceeded the outdoor air supply necessary for the building," Archstone's lawyers said. They say TLC recommended that Archstone build a sheet metal shaft big enough to accommodate the capacity of the new rooftop unit.

The shaft idea involved extensive demolition and pulling out the existing individual air handlers, floor by floor. That work happened months before the installation of the new air handler.

The lawsuit contends TLC was responsible for the sequence of events - all critical to the outcome: extensive mold and water damage.

"TLC failed to design an HVAC system which replaced the role of the existing individual AHUs," the complaint said.

The suit contends there was no "temporary provisions in its HVAC design for dehumidification and ventilation of air throughout the building during construction of the HVAC system."

It says removal of the 13 existing units left Harbour House South without a dehumidification system, sufficient ventilation and positive pressurization during construction. Excessive humidity led to water damage and mold growth all over the building, in units, and on people's clothing, paintings and pianos, said Glen Waldman, the Miami lawyer representing Archstone in this complaint.

"It was TLC's position in writing that those units do more harm than good," he said. "But after ripping them out, all of the sudden, there are hundreds of complaints within 60 days and a substantial majority of the units had problems where they never had them before."

Archstone retained Fort Worth Texas-based BMS Catastrophe to bring in temporary climate control by providing dehumidified air in hallways via temporary plastic ducts.

Archstone said it hired industrial hygienists and technicians, "dozens of remediation specialists," mechanical engineers, generator and refrigeration specialists, and an allergist/immunologist.

Angry tenants filed a class action and individual claims, complaints and litigation in August 2002.

In a written summary of the case, Judge Amy Dean said it wasn't until two weeks after Archstone was sued that it brought in a team of 40 engineers, cleanup workers and other specialists. Dean also said the building owner wasn't notifying prospective tenants about the mold problem and issued an injunction Jan. 9 ordering the disclosure. It required a letter be provided to would-be renters listing health problems the Environmental Protection Agency says mold can cause: itchy eyes, runny noses, burning of the skin and lungs, athlete's foot and yeast infections. Tenants in the class have complained of kidney problems, memory loss and coughing up blood.

But in its May 27 suit, Archstone says it wasn't at fault.

"By the time excessive humidity, along with the water damage and subsequent mold growth and resulting property damage, were fully discovered, the demolition and construction had reached the point, that Plaintiff could not abandon or postpone the HVAC renovation," the complaint said.

Advice given on time

Contractors and the design team tell a different story.

Zyscovich's Coral Gables lawyer s said as early as 1997, a report from Archstone's own Consolidated Engineering Services cited mold and mildew in the ductwork. Three years later, Zyscovich was hired for design work and brought in TLC for engineering work. The firms were given the Consolidated Engineering report, he said.

Discussions with Zyscovich, TLC and Archstone found common ground on the presence of the mold, and that it was happening due to negative pressure in the building for many years, according to documents in the project files, s said. "Each floor had one unit operating in a manner that caused complete 100 percent use of fresh, as opposed to reconditioned, air."

The existing equipment was outdated, there were holes in the walls and outside air was allowed in, he said. "You had all these things working against you, with mold and mildew problems there for who knows how long."

Contractors and the architect were brought on to redo the entire system, including, s said, temporary additional air conditioning for the project during the construction, project documents dated June 2000 show.

The owner asked Penn to price out a temporary system to be done in the winter of 2001. By August 2001, that was still the plan.

"Permit plans for temporary air conditioning were never released because [Archstone's high-rise subsidiary] E. dropped that portion because it didn't want to spend money on temp work and then tear it down," s said. "The letters are so clear and obvious, I can't believe they filed a complaint saying what they said. It's unbelievable."

The fact is, they had to get ductwork into the building, s said.

"A temporary fix was getting a large air handler and cooling tower and installing it on the ground to condition the space and then boost the conditioner in place on the roof and put the building under positive pressure," he said. "They just didn't want to spend the money to do step A and step B. They wanted to do step B."

As for Zyscovich, who has had a 25-year career in architecture and urban planning, a lawsuit of this size and breadth is a new experience in damage control. A check of court records shows no other professional litigation against him.

"When all the facts are reviewed in this case, we will be seen to have done the right thing in terms of the advice we gave and the solution we proposed," he said. "Unfor-tunately, the timing was such that our proposed solutions were not taken into account in a way that could have solved the problem.

"What we did is give them the appropriate advice at the appropriate time. We can't manage the client's decisions or means and methods of construction. We can only give advice."

TLC's Orlando-based COO Winston W. Gardner declined to comment.

But Penn President Joyce said Archstone-'s opted to take the floor units out. "We did what was in the contract documents," he said. "The owners never wanted to spend the money for any temporary system and we brought that up to them.

"That's in the job meeting minutes: Washington [headquarters for the E. subsidiary] 'ain't gonna pay for it,'" he said.

"Archstone shut down the chiller and Archstone put itself in this position long before they ever called in the repairs," said Ana Barnett, an attorney with Miami firm Stearns Weaver Weissler Alhadeff & Sitterson representing the class-action plaintiffs.

The existing system dated back to 1964, co-counsel Joy Spillis Lundeen said.

"There were two cooling units at the top of the roof well past their useful life," she said. "Archstone was involved in a decision to delay the renovation and then chose instead to refurbish [the property] as a primary purpose instead of going in and doing the things that tenants don't see and feel. Instead they chose to make it all pretty."

Archstone- is facing another mold problem in South Florida: At least one tenant at its Ocean View complex in Sunny Isles Beach has filed suit over mold damage.

Meanwhile, despite a much drier building and nearly completed renovations, tenants still complain at Harbour House South.

"We keep monitoring it and get hundreds of calls from folks who aren't happy," Lundeen said.

E-mail managing editor is Muellner at amuellner@....© 2003 American City Business Journals Inc.