Moana Nursery Litigation Ratification

Courtesy of

Somersett residents recently received a letter from the SOA’s attorney which contained a ballot on whether or not to ratify the SOA Board’s decision to continue litigation (i.e., through the filing of a lawsuit) against Moana Nursery.  This action being required because negotiations with Moana Nursery to resolve defect claims associated with installation of the common area main line irrigation system have not been successful.  The letter further stated Association expenses to date (defect corrections and fees) are over $400,000 and do not include any unknown future costs.

 It is SU’s opinion that Somersett residents should vote “Yes” to ratify the decision to continue the litigation against Moana Nursery.  This seems like the logical path given the situation as stated in the attorney letter.

What the letter did not address is the Somersett Developers liability with regard to this issue.  The “Tolling Agreement” signed between the SOA Board and the Somersett Development Company (SDC) in early 2010 states that: “Each party agrees to jointly pursue and cooperate in pursuit of a claim against Moana Nursery and Hansen Landscape Architects …” and “…each of them shall bear their own attorneys fees…”.  The attorney letter implies that the $400,000 in corrective work, the $8,000 in expert fees, the $40,000 in attorney fees and an estimated $10,000 in future attorney fees are an Association expense.

It is SU’s opinion that none of the above should have been or should be an Association expense.  The irrigation system installation was not performed via a SOA contract, but rather by the Developer and/or its subcontractors.  Therefore, the corrective work and all claims against Moana Nursery and Hansen Landscape Architects should have been the sole responsibility of the SDC.  Given this, it is hard to understand the reason behind the “Tolling Agreement” to proceed jointly.  Fortunately the Agreement also states: “In making this cooperative Agreement, Somersett Owners’ Association does not relinquish any rights or claims it has or may have against Somersett Development Company, LLC in the future”.  Hopefully the new all homeowner SOA Board to be elected in November will recognize where the liability for defect corrections really lie and proceed accordingly against SDC for any unrecovered SOA costs.

5 thoughts on “Moana Nursery Litigation Ratification

  1. The following supplemental information pertaining to the Moana Litigation Letter was obtained from the SOA Board at the July 23 Finance Committee Meeting:

    • Of the $480K in defect correction costs, attorney fees and expert fees incurred to date by the SOA, $300K was previously recovered via the Hansen Landscape settlement. Leaving an unrecovered cost of approximately $148K.
    • The $400K for defect correction was advanced to the SOA by the Developer (SDC), but is being repaid to SDC via a Subsidy Repayment Agreement
    • There has been no expense estimate put forward by the SOA Board regarding the future corrective work implied in the Letter.
    • Whatever the final results are, if the SOA comes out on the short end (i.e., expenses exceed cost recovery) we have no agreement in place wherein the Developer is responsible for the shortfall and our only recourse to make ourselves whole would be to “sue” the SDC.
    • An opinion was expressed by a Board member that once the common area was turned over to and accepted by the SOA, the Developer was free from correcting defects at his own expense and this becomes the responsibility of the SOA.
    • It is not currently disclosed on how much expense the SDC has incurred with regard to this litigation; even though the “Tolling Agreement” states that the SOA and SDC will jointly pursue and pay each other’s attorneys fees with regard to defect claims.

    I n the final analysis, the SOA should not bear the burden of any costs associated with correcting infrastructure defects resulting from either inadequate design or construction of the Somersett Community. This burden should fall solely on the SDC and/or its subcontractors. Hence continued litigation is warranted.

    1. I am a relatively new homeowner to Somersett, but upon becoming aware of this ongoing litigation, I contacted Moana Nursery and had them forward me the following response. These are very reputable people that enjoy an excellent reputation in the Reno business community. It would seem to me and based on this response that if we are to pursue this litigation further (which I would seriously question), the we should look elsewhere for a remedy.

      Why we are surprised and upset to be the recipient of a Construction Defect Claim and then a possible lawsuit by Somersett Homeowners and their lawyer:
      • As the sub-contractor, we installed the irrigation system to the specifications of the developer/general contractor and their landscape architect. Everything done was at their direction, starting with plans, then change orders, scheduling/sequencing, and finally inspection and approval of work.
      • We completed the last of our work for Somersett Development and our maintenance contract with the HOA in 2006; until this claim was filed, we have not been notified of any warranty issues, received a single complaint, notification of problems or request for repair in 5 years.
      • At a minimum two separate landscape maintenance companies, National and Groundskeeper, have been working and done extensive work on the irrigation system in Somersett over the last 5 years. Other contractors including the golf course staff have also done work on the irrigation system since 2005 and well before. This includes repairs to the irrigation system caused by construction traffic and projects, vandalism, civilian vehicles, the use of the irrigation system by other contractors/developers to supply irrigation water to for the rapid development of additional subdivisions throughout Somersett.
      • Since we completed work, over 2000 earthquakes have been recorded in this north Reno location. Some substantial enough to cause significant structural damage to homes and civil projects throughout the Somersett community.
      • The Nevada State Contractors Board has similarly not been notified of any problems and their investigative process was not utilized.
      • We have a documented paper trail demonstrating significant value engineering to reduce cost for the developers. We were not allowed to dig trenches (Q&D at the direction of the General/Developer) or use sand as the base of the trenches in Phase 3A & 3B.
      • The project, all invoices with line item pricing and scope of work detail, were approved by, inspected and signed off by the General contractor/developer, their landscape architect and further inspected by the City of Reno.
      • Specific details, pictures, and the expert witness report of supposed problems are not accurate to our knowledge, not our work, or installed exactly to specifications. In many cases the Expert Witness identifies issues that he admits are within the specifications but notes them only to fill his report with additional words.
      This is the general basis of our defense.

      1. Steven,

        I wouldn’t expect any defendant in a litigation case to publically admit any liability. Therefore, I would take what they say with a grain of salt. Completing work and passing inspections do not preclude the possibility of latent defects. See Ray Lee’s excellent comment and let the courts decide.

    2. I am not a regular reader of this blog, but it was pointed out to me that there was a home owner’s posting with Moana’s general basis of defense and was asked if I wanted to respond. I am the current SOA home owner elected board member. A blog / message board is not the place to hold a trial. The parties involved have been attempting to reach a satisfactory resolution through mediation. The latest mediation session was held early in 2012 with both parties ending far apart. As a member of the SOA board, I voted with the developer board members to proceed forward with litigation against Moana because I believe there is merit to our claim and that we should push forward to resolution. In addition, our attorney’s estimated that their further cost would not exceed $10,000. I will not respond to each of the Moana’s basis for defense. However, I will tell you that in my opinion some their statements are misleading and/or incorrect. For example, Moana, the irrigation installation company and Hansen, the irrigation design company, were notified of the irrigation issues in a letter from our attorneys in Feb. 2008; the swarm of earthquakes occurred in April 2008 after notice was provided of the problems; we have ~1,000 photographs of leaking pipes after digging them up to look at the problems most of which are from 2007 documenting what experts believe to be improper installation and have stored the defective parts replaced as evidence, etc. Most the irrigation issues date back to prior to when we became home owners in Sierra Canyon / Somersett, but again I believe there is sufficient merit to move forward with this next step towards litigation. The progress, or lack of progress, in the irrigation systems issues has been discussed at each board meeting that I have been a part of over the past 2 years. If anyone would like to see the letter to Moana from Feb. 2008, the pictures documenting the issues, or if you have any questions regarding this claim, we ask that you contact the SOA’s Community Manager, Melissa Ramsey, at 787-4500. Please remember that the ballots must be submitted by August 8th and can be dropped off at the Club at Town Center or mailed to Maddox & Associates. Thank you.

  2. If you haven’t heard, “around” 800 ballots were received. They were not opened as not nearly enough. Board extended deadline for ballots to be received till noon on September 24 and will do a second mailing to owners. In order for the Association/Board to continue with the lawsuit 1,207 Owners need to vote “Should continue.” A lot more ballots than than that need to be received as some “Dismiss” ballots will be cast.

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