Lawsuits Over Building Collapse

South condo collapse. Joining me is David Prager, a managing director on the head of the US restructuring advisory practice at Kroll David lawsuits have been filed against a host of defendants, including the condominium association, the engineering firm that inspected the building, the architects who designed it, the city of Surf Side, and building officials. Is this just an attempt to cover anyone, any person or entity who might be responsible for the building collapse. Well, that's that's a

great question. I think there's a number of factors going on here. One is your right. This is a fishing expedition to try to figure out who knew what and when and can you impute that knowledge onto other people. But at the same time, I think it's also a race to figure out where the deep pockets and to make sure you're trying to hit at those deep pockets as soon as possible. You know, people who unfortunately have

lost everything. The obvious place to go for recoveries here would be to go to the buildings in the building association. That's where the insurance was supposed to be held. That's about the approximate cause of failure. But there's not much left there. As you look at the insurance proceeds, they're really minimal. I think there's fifteen million dollars in property insurance in another eight or so. Reliability insurance really was designed to cover minor incidents relative to this, so you

have to look somewhere else. You can't look really to the board than those pockets aren't gonna be terribly deep relative to the hundreds of affective lives here. So then you are going to those further steps. The engineering firms the city anywhere you can to try to find money, and appears the plants are just trying to raise to

get to that money as quickly as possible. The engineering firm released a statement saying it's report detailed significant cracks and breaks in the concrete which required repairs to ensure the safety of the residents and the public, and there was a letter written by the president of the condo association asking residents to fund more than fifteen million dollars

in repairs. How does that play into liability here? Well, a lot of this goes, I think to the question of what is standard in practice, who is responsible for reviewing those reports, and who is responsible for understanding exactly what is in there? And frankly, was the board and the management company well equipped to understand the level of

disclosure that was being made by the engineering firm. If you look through the two report, the notices that have been in the popular press here and are blazoned all over the lawsuits are somewhat buried in the reports. You have to read down, I think on stage six or seven, and you know at the end of the section and says it's somewhere is it written in big blazing letters warning there's an eminent threat to life here? So who

was responsible for understanding that? I think certainly if the board was responsible for taking upon them selves to understand that, I would think that the engineer would have also been responsible.

But the engineer isn't really a fiduciary to the building residents or to the building owners, and so then you'd have to look at what their contractual liabilities are and does this amount to a gross negligence claim or willfulness conduct claim or is there some other claim and torque that connects this engineer back to having a legal obligation.

Certainly in retrospect, it seems that the moral obligation there was a shortcoming all along the way, and that seems to them the most recent board seems to have been trying to clear that up and to clear up their legal obligations just a little bit too late, and as you're going to look back, too little too late was tragic here, but probably leads to some level of culpability.

We do this all the time at Krolom, were in a station as an expert, being in a financial matter or otherwise, you look at the known or noable standards. Was there fraud being committed based on what was known at the time or knowable based on information that was available in the public record or in your private records. And as we're now going through these reports, you're seeing that it was available to the board, it was available to the management, and should have been available to the

condo owners had they made do inquiry. And there's going to be I think, unfortunately for for those effected. There may be some level of apportionment of blame here to go back and say, you know, these condo owners really pushed back. They didn't take the actions that are required for self help by doing things like paying assessments or borrowing to pay those assessments and exercising to care immediately. That's going to be weighed against the boards for do

you share responsibilities? Because the board is the one that most informed, The board is the one with professionals, and the boarders the one who has volunteered in this case to take it upon themselves to take responsibility for everyone around them, and that can't be aggregated by making a

blanket statement to your stakeholders. There were about a hundred and sixty thou condominium buildings in the US, and right about now condo boards may be asking what they should do to prevent anything like this from happening to their buildings. I think the first step for board is to look around themselves and to say, are we positioning ourselves to assess risk fully and completely? Is there enough diversity on

my board? And while we talk about diversity oftentimes in the sense that demographic retroversity and that certainly is important in making sure you receive all all sides of views, but also professional diversity and skill set diversity. And that's really what you need when you're putting together a board for something like a condo or even a corporation. And when we work with boards, we're always saying to them, Okay, let's make sure if you're enough financial restructuring, which is

a lot of what I deal with that corral. Uh. We we say to them, you know, hey, let's make sure we have the right financial professionals um on the on the board. And at the same time we say, okay, if you're dealing with a building, make sure you have engineering professionals or architectural professionals. Think you also want to make sure you're using your outside experts in the way that they're intended. And that doesn't mean receiving a blank email with an attachment and letting that go to your

end box. Means opening it up and reading it with care, and since sitting down with your professional thing, Okay, what does this really mean? How bad are things really? It'd be nice to have all those people on the board, but a lot of times it's hard to find anybody to be on a board. They just don't want to do it, to take the time involved. So you may

not have the ability to do that. Well, certainly it's a thankless job, particularly a volunteer board, and particularly when you're living amongst your neighbors and going to have to make unpopular decisions. Those are exactly the people you need to step up, people who have the courage and the integrity and the fort toe to make those hard decisions.

Let's also look around them and say, you know what, I want to be on this board, but I don't want to sit on a board with four people just likely, so either I should take a step back and let you know, someone else with with a better set of qualifications to come forward, or I should say nominating committee or exist board who's acting a nominating committee. Why don't we get some more diversity around us. Let's recruit people. Let's not wait for the person who raises their hands.

Sometimes that's the person you need. Oftentimes that's just an echo chamber of the members who are already there. So let's be aggressive in recruitment. But also you're right, you can you may not be able to recruit, particularly a smaller building, or particularly in a building with with more animosity amongst its residents, it might be hard to recruit members. That's when you're professional advisors can come into place. That's when you're your law firm, your financial advisor, your counter,

your professional engineer, et cetera. You want to bring them to the table. But it's also still important to figure out who amongst the board members will take responsibility, take ownership of the relationship with that professional. You know, I oftentimes when I'm advising a board, we'll figure out, Okay, this is the board member or two whose most act

and the ones that are attentive to my issues. It may not be the chairman who's dealing with overarching business um issues when I'm dealing with a balance sheet restructuring, so I might deal with I don't know that the chairman of the audit committee or something like that. Similarly, if you're an engineer, you want to figure out who on that board. If you're the professional retained engineer, figure out who on the board is your most direct line,

the one who's most concerned. And as a professional, it's also very hard you want to actually find the board member who's going to challenge you the most, because that's how you as a professional and the board and its fiduciary duties are going to do the best work to have a challenging but professional interfaith where you can say, as a professional, this is a problem and board you need to address it or the board can stay to you professionally, you need to give me more complete and

more directed by and so there's a push pull there between the um, the board leadership and the professional leadership. They need to work together and they need to supplement each other, but very critically have to have an open line of communication. So now in Florida there is a forty year requirement. Tell us about the requirement in Florida and what the board should do if the city doesn't

have that. It's interesting this borda requirement which I gather is every four building over forty years and then every ten years thereafter has to reinspect itself. But that should just be a baseline. Anytime you have a regulation would do this this. Oftentimes, this is where you've seen a company like Lehman Brothers get into trouble or an end around get into trouble if they were going to follow

the strict rules of our regulations. Use an accounting regulation or building regulation will follow the strict rules and if it's not required, we won't do it. Regulations should be a starting point, not an ending point. You think it's You often feel like it's burdensome to have to comply. So that's what you don't understand the reasons why regulations were put into place. And so in this case, I'm sure there were many buildings who said, oh, it's the

forty year per inspection, No big deal. We know our building, we know it's in good shape. We know we have builded elevator banks and shining floors. Everything must be great, and so we're going to skimp on our on our reinspections. That's exactly the opposite approach of what you need. You need to be using this to remind you that, oh, what do your buildings have to be looking out for this? Well, I'm twenty five years I'm fifteen years before that. Let

me start thinking at it a dance. Let me remember that there's this product, you know called consulting engineers that are out there, and let me be talking to them all of the time. Let me make sure that I'm

ahead of the game. Because the other thing that happened here is they waited too long to start the process of the repairs and it ended up a problem that was seems to have been four decades in the making, came to be a very large bill at the very end, and then you ended up with protests over how can you possibly assessed me the market value of my unit?

And support? Have been proactive, have been thinking about these things all along, had not been differring maintenance and deferred maintenance is a liability and should be recognized as such. So the boards need to be active in advance and to go above and beyond the regulation as we've seen now. Unfortunately, we're dealing with lives here, whether it's dealing with lives or livelihoods where you often see in the financial context.

In either event, the stakes are extremely high, So why would you try to save a penny here and there? Thanks for being on the Bloomberg Land Show, David. That's David Prager, a managing director and head of the US restructuring Advisory practice at Kroll. This is Bloomberg Law with June Brussel from Bloomberg Radio. The Biden administration is moving to allow migrants crossing the US border to make their cases for asylum before Department of Homeland Security officials rather

than judges. This applies to people who claim they have a credible fear of persecution at home. The new approach would represent a wholesale change to the way asylum claims are treated and would mark an about face from former President Donald Trump's efforts to tighten asylum requirements. Joining me is Leon Fresco, a partner at Holland and Knight. Tell us what happens now when someone arrives at the border requesting asylum. So it's de pays as we speak, because

there are multiple layers of this. But first of all, if you arrive at the border seeking asylum as one human being without any family members, what's the ever At the moment, you're currently blocked from seeking asylum because of something called Title forty two of the Public Health Code, which the which the Trump administration first activated and the Biden administration has kept, which says, because of COVID, we

are excluding people and not allowing them into the country. Now, assuming that that is removed at some point, or assuming you're coming with a family, which is you know, there's an adult and there's a child, those individuals are being allowed into the United States, and when that happens, they have to at the moment satisfy a immigration official that they have a credible fear of persecution in their home country, meaning they will be persecuted on the basis of their race,

their religion, their national origin, their political opinion, or their social group. And so you have to show that. If you can't show that, then you can do one appeal to an immigration judge to try to show that. But if you can't show that in neither of those two phases, you are excluded from the United States under something called

expedited removal. But if you can show that, then you're allowed into the United States, whereby you can wait and make your claim, your full asylum case before an immigration court. And the criticism is that that process has taken many years and that a lot of people don't then show up the courts when it's their time to finally show up the court. What would this change by the Biden

administration do. So, the change the Biden administration would do is it would try to adjudicate a lot of these asylum planes up front before ever waiting the many many

years to go to the immigration court. They would actually take officers from U S c I S the U S ship an immigration service and see if they can at least get the meritorious planes out of the bunch and adjudicate them up front, so we can see who actually can win right up front and not make them have to wait many years, and then take the rest of the pile who then don't have the meritorious planes, and you can move them through a much more expedited

immigration court pocket that would be dedicated to their cases that would not take four years to resolve. So that would be the idea would sort of creates an initial layer of reviews that could say, we're not going to have a group that fails because their case takes four years, and they don't drop the court in the meantime. If they have a meritorious case, let's get their asylum claim

adjudicated immediately. And if we don't think they have a meritorious case, let's move them into an immigration court proceeding that's more rapid, and let's try to get them through this system quickly so that we don't have an incentive for people to come in just so that they can wait here for many years while the case is pending. Solely on what kind of proof can they offer. So it depends on the type of asylum claim you're making. But let's take the two asylum claims that are typical

for Central America. So Central America, there's two typical cases you see, and both of these are right at the gray area of immigration law. But the Trump of illustration had issued some decisions saying neither of these were asylum cases. And the Biden administration has already canceled those decisions, but they haven't supplemented it with exactly what you have to show. And so the case, so the cases are as followed.

For men who seek asylum, it usually takes the path of I was approached by gang members to join the gang. I was told if I didn't join this gang, I would be murdered. I went to the police for help. The police did not help me, and so I come back.

The gang will murder me. And so in those situations, if you can show hospital records that show you were attacked, if you could provide affidavit from witnesses who saw things about you being attacked in those countries, if you can provide any kind of, you know, evidence of a police report that you filed in that country those things. The more of that sort of circumstantial evidence that you can provide,

the stronger it makes your asylum case. And then on the on the female front, typically what you see is a case where someone is alleging domestic violence, that they went to the police and the police wouldn't do anything about the domestic violence since some of they returned home they were likely to be killed, that they were fleeing

domestic violence. And so again here, if you had hospital records, if you had a police report, those would be persuasive pieces of evidence that you could provide for these plans to be blunt. Does anyone ever arrive at the order and say, you know, I'm here to improve my life.

I want better economic opportunities. So some people believe it or not do Even at the height of the Obama administration, where we had the biggest ways of people coming through, you still have ten percent of people who would literally say just past and subject themselves to expedite and removal. They literally said that. But you did have people saying that they had some fear of persecution. Both you never had zero, like you said, but it's very it's very rare.

So at the height of how many people were getting expedited, remove on how many people were getting credible fear. During the Obama administration, it was in that situation. So yes, people were saying persecution based playing and the law is very generous at the upfront stage. What the law says is you have to have a significant possibility of being able to assert a favorable asylum claim. And so basically that is considered something less than a ten percent chance

of winning. But if you have lessons, if you can show that you have something like a little less than ten percent chance of winning your claim, they're supposed to let you say in the United States, so that you can make this claim. And it's only if your claim has completely no credibility or you're not saying that you have this fear that you don't get to stay in this situation. So, now is there any downside for immigrants

to have this new rule? Well, so the idea is this The criticism that it's been getting in the press is that if you don't articulate a new standard by which people with the domestic violence or gang based claim can make their plane, or if you don't provide them counsel to a system to get the evidence that they need to make these planes. That all this will do is have them lose, and so you don't want them losing faster because you didn't change the standard or because

you didn't provide legal existence to do it. So that's the concern that the immigrants rights community is setting forth is, Hey, this could be a very very positive change if people have some assistance to work through the system, or if

the standard can articulate a clear and articulable basis. But that's what they're waiting for the language to see on how someone with a domestic violence based claim or a gang based plane can actually gain or pylom And so that's the issue, and so they want to they want their waiting for the regulatory language, the specific word for word language to figure out does this regulation lay out

how you win one of these planes? And if it does and it seems fair and it provides access to some legal assistance to do it, then they would say they're satisfied with that regulation. So that will be what everyone looked up for to determine whether the immigrants rights community at least is satisfied with it. But but rid large, this is an improvement because For most people, this just gives them an extra chance of winning. While it does

expedite the potential of laws for some people. It does that in a way which is fair, which is, at the end of the day, you've been given now a second bite at the apple that you wouldn't have had originally win. So if you have any time, you get an extra byte at the apple to win your case. Rid large, it is a benefit for the people going

through the system. The Biding administration previously said they're going to advance this through a fast track process, and now they're going to do it through I guess the regular rule process. Is there a reason for that change, Yes, because when you expedite a process, the problem is, first of all, number one, you make it much more subject to lawsuits, and so they've been getting suited by lots of states government and they don't want to have it

subject to that. But I think number two, if we're being practical about it, I think that they're going to be keeping with the delta variants. This title forty to authority in place for at least two months three more months, and because of that, there's no need to do an emergency order because you can actually get the new changes in place before you end up lifting this title forty

two exclusion authorities. So I think that the need for the speed is not as high if they're not going to lift the title forty two authority because of the delta varreas and just explain the title forty two authority. The title forty two authorities. What I've spoken about a little earlier, which is this public health law that allows the administration to simply say, we're not even gonna consider don't even talk to us. You're trying to come in

a country your banned because of public health reasons. And so you never even get to this discussion about whether someone has a credible fear or not because they can never make that discussion because the band has been put in place for public health reasons. So, now, how much is the Biden administration doing to change Trump policies. There's a new policy that they won't detain or arrest people who are pregnant or nursing. Well, I think there's been a lot of changes. There's a lot of changes in

the population of who's being detained. You're seeing no one who's being detained essentially in our defension facilities from the interior of the United States, meaning someone who's actually been in the country and now they're being placed in removal proceedings.

The ICE removal facilities are basically composed entirely of people who have shown up at the border and they're not from Mexico or Central America such that they can be removed very quickly back across instead of these people from Ecuador or Brazil or places all around the world that Mexico won't allow us to just place these individuals back into Mexico because they're not Mexican and they're not from anywhere near Mexico, And so for those individuals, we're having

to detain them in order to remove them back to their specific nation. But that's it. Those are the only people who you're seeing for the most part in ICE facilities, And so it is a dramatic change. You're seeing much more usage of prosecutorial description. And now is this regulation You're gonna see an articulation that is much more generous in terms of these domestic violence and gang related asylum based claims and you had seen in the prior administration.

So how is that transformed into numbers? Are there more immigrants being allowed in, so the numbers are higher in terms of people presenting themselves into the border, the numbers are you know, we're seeing total around a hundred thousand individuals a month trying to cross the southern border, and so you know that's over and you or do that over the course of a year, you're seeing like one point two million people apprehended, which is higher than it's

been in the recent path. And so the question is once this Title forty two authority is removed and so that anybody who claims asylum and has a credible fear will be permitted inside, the question is will not open an exponential increase in the number of people getting into the United States or will it just continue with the one point two million per year, which is still higher

than it's been. It's not higher than it used to be in the nineties and the early two thousands, but for the range of I would say between two thousand and eight and two thousand twenty, it would be in the high range. And so the question is is that rage, which Republican view is unacceptably high, gonna get higher if

some of these changes are made. And that's theming needs to be something that we will see, and I think it will depend a great deal on how quickly the system actually works to remove people who don't have valid plais in the United States. If that system works quickly, then I think you will see eventually the numbers participate. But if the system does that work quickly, then most likely you will see a higher demand for access to

the States. Is there an inconsistent message from the Biden administration and that you know, they're trying to rebuild the asylum process here and provide a legal path for undocumented immigrants, but they're pushing for border enforcement southward, and they're enlisting the Mexican, the Guatemalan, and the Honduran authorities to try to militarize their southern borders. And Vice President Harris has focused on diplomacy to improve conditions in the region. So

is there a mixed message or are they just trying everything? Well, I think it's complicated, because I do think they're trying and we will see if they can succeed to have a framework where if you're from Central America, you could actually make this claim for asylum in your home country, whether it be in Savado or Guatemala or under it and then if you win, you would just a visa that you can then use a refugee visa to enter

into the United States. And we will have to see in the regulations if they do that and if they actually formalize the process that allows that, in which case, if you don't follow that process, you would reach a militarized response in whatever border you were trying to crawl. So I think if you had both of those things in place, then they are consistent and they can work together,

and that is ideal. But it's to the extent that you don't have a cohesive system in place, that's when it's odd because then you can't tell someone who's a legitimate refugee don't come, because that's not something you would say to a legitimate refugee and be that's not something that would deter a legitimate refugee. Anyone who fears for their life is going to come, regardless of whether a

politician is saying don't come. But if it's an economic migraine, then that response is actually appropriate and then you can actually say don't comment. You can have a militarized border, but you would only know that if you had an interaction with someone that would allow you to determine that. And so the question is cando's interactions be made closer to where people are than at our southern border, and

so that's the question of conduct. Coherent policy be built so that that's permitted and that people can make these claims closer to where they are than at our southern border. Thanks. That's Leon Fresco of Hollanden Knight. And that's it for this edition of the Bloomberg Law Show. I'm June Grasso, and you're listening to Bloomberg