A state judge has ordered the developer of Ocean Pointe and Hoakalei Resort to pay homeowners $20 million for the company’s decision to change the main feature of the Ewa community from a marina to a lagoon.
Circuit Judge Karen Nakasone issued the ruling Monday, more than two years after another state judge nullified a $27 million jury award in the same case affecting about 3,000 homeowners.
The new decision reduces the monetary damages but concurs with the earlier ruling that Haseko (Hawaii) Inc. and its affiliates misled homebuyers.
Haseko, which has a parent company based in Japan, took on the project covering 1,100 acres in 1988, and from the early 1990s through late 2011 touted a boat marina as the community’s main attraction and central selling point while it collected more than $1 billion from home sales.
Haseko had argued that it disclosed to prospective homebuyers that all planned features for the community are not guaranteed, but Nakasone said in her order that the disclaimers were insufficient, especially given the weight of much advertising and promotional efforts that touted the marina but included no disclaimers.
Specifically in one document that homebuyers signed, a disclaimer said features that are planned may not become part of the community or may not be developed as currently conceived. Nakasone noted that the marina was not only planned, it was under construction at the time, and the developer didn’t suggest that this central piece of the community might not be finished.
“Saying that a feature then-being-constructed may not ‘be developed as currently conceived’ is materially different from stating that the feature then-being-constructed may not be developed or completed at all,” the order said. “This was misleading.”
Tom Sagawa, Haseko president, said in a statement that the company is extremely disappointed with the judge’s ruling.
“We still believe it was the right decision to change development plans from a marina to a recreational lagoon, based on the fact that it could be completed much sooner and would be of greater benefit to the broader community,” he said.
Haseko officials added that the company intends to appeal, which could add more years to litigation that began five years ago.
Nine homeowners in Haseko’s project filed a class-action lawsuit in 2013 over the marina-lagoon switch that the developer announced in late 2011.
In a 2015 jury decision, homeowners were awarded $7 million in loss-related damages and $20 million in punitive damages.
But a month later Circuit Judge Gary W.B. Chang set aside the jury award on grounds that state law governing unfair and deceptive trade acts or practices doesn’t permit punitive damages. Chang also said there wasn’t enough evidence showing that homeowners sustained damages from Haseko’s change.
Nakasone, after a trial last year, ruled on two different aspects of the case not decided by Chang, including whether Haseko unjustly enriched itself. On this count, Nakasone said Haseko made the marina-lagoon switch to save money after selling more than $1 billion worth of homes.
Haseko argued that its lagoon would cost more — $87 million compared with $80 million for the marina — and that it made the switch to complete the community quicker and add a better amenity given that demand for boat slips had waned in recent decades.
Nakasone said in her ruling that Haseko improperly omitted $20 million in boat ramp construction costs and that the developer expected to earn more from lagoon operations than a marina.
“The weight of the evidence shows that the switch from the marina to the lagoon was an economic decision by Haseko to save money on the unprofitable marina and make more money on the more profitable lagoon,” the order said.
The $20 million award to homeowners reflects the savings Haseko is deemed to have reaped from its switch. Plaintiff’s attorneys had sought $130 million.
As part of the ruling, homeowners can decide to share in the $20 million or void their home purchase and get a refund of what they paid plus interest, taxes and attorneys’ fees.
