BERKELEY -- Segue Construction's troubled legal history over water infiltration on its balconies and throughout its properties has cost millions of dollars in settlements already, but now it could get the Pleasanton builder charged with manslaughter.
In trying to build a nearly unprecedented criminal case against the company and potentially its employees, Alameda County prosecutors will likely use the builder's $28.5 million in settlements involving water damage to show potential criminal negligence, legal experts told this newspaper.
Last week, District Attorney Nancy O'Malley announced that her office would pursue a criminal probe over the June 16 fatal Berkeley balcony collapse. Six people died and seven were seriously injured, most of them Irish college students working in the country for the summer on a visa, when the fifth-story balcony supported by rotted wood beams gave way. O'Malley said possible charges could include involuntary manslaughter.
In at least three Bay Area residential buildings where Segue Construction was the general contractor, suits were filed alleging that water seeped into wooden structures, including balconies.
"The fact they were on notice for previous incidents would definitely be relevant," said Andrea Roth, a UC Berkeley assistant law professor who is an expert in criminal law and procedure. "Here, the issue would be the reasonable person standard. Would a reasonable person have known of a substantial risk of death or grave injury if they failed to do something?"
Tom Miller says yes. The San Francisco attorney won a $3.5 million settlement over a 109-unit Millbrae condominium complex built by Segue Construction where water reportedly infiltrated wooden support beams of dozens of balconies. Although Segue was not named as a defendant in the lawsuit, its insurance company paid the settlement, Miller said.
"It was the same general type of waterproofing failure," Miller said of the Millbrae and Berkeley issues. "The water got through the waterproofing system and it rotted out the wooden support systems. And once the water was trapped in there, there was no ventilation."
The lawsuit was settled in 2013, two years before the Berkeley tragedy.
"(Segue) could have put the (Berkeley) building owner on notice that there may be gaps in the waterproofing system in the building," Miller said of Segue. "They could've done their own inspections on buildings, too. It comes down to corporate responsibility and actions."
Onne Broek, an engineer who consulted in the Millbrae case, said his analysis of those balconies found deficient installation of "critical deck waterproofing and ventilation/insulation components within the deck assemblies," which led to water intruding into the wooden substructure and rotting the support system.
"I would say that it would be a good practice to make changes once one learns of prior mistakes," Broek said. No one was injured in the Millbrae case, but Miller said the damaged balconies were a safety hazard and tenants were prohibited from using many of them.
As early as 2006, water was found to have intruded in a Sunnyvale apartment complex where Segue was the general contractor, according to a lawsuit.
In Sunnyvale, where the company agreed in 1999 to build a 300-unit apartment complex on El Camino Real, "water penetration causing tangible property damage" was found seven years later, according to court records. The Irvine Corp., the project's developer, sued Segue and several subcontractors in 2009 in Santa Clara County Superior Court.
The suit alleged "defects in the waterproofing at and around the breezeways, private balconies and stairwells" of the project. The suit was settled for $11 million in 2013, court records state.
In San Jose, Segue built the 477-unit North Park Apartments for Irvine. The developer sued twice in 2010, also alleging water intrusion based on construction defects that caused damage to private balconies, breezeways and stairwells. Segue eventually settled both suits for a combined $14 million, according to court records.
Last week, days after O'Malley announced her criminal probe, Segue released a statement distancing itself from the $3.5 million Millbrae settlement.
"While Segue was the general contractor on the project, Segue was never a party to the lawsuit and never admitted any liability," the company said. "Segue understands that $3.5 million was eventually paid to resolve the lawsuit, none of which was paid by Segue Construction."
Court documents show Segue was released from the final settlement after the plaintiffs received payment. Miller said it was not necessary to name Segue as a defendant because it shared the same insurance company with the developer and others named in the suit.
"They're just trying to draw too fine a line," Miller said. "There never is any admission of liability, but you can read between the lines that a $3.5 million payment is pretty big exposure."
Segue declined to comment further on the other lawsuits, including whether it recouped any money from its subcontractors, or the criminal investigation. The company has said that in its 23-year history, it has constructed more than 6,000 apartments and "has never had an incident where a member of the public was injured after a project was completed as a result of defects in the construction of the project."
In the industry, general contractors oversee work, but much of the labor is done by subcontractors. It is not clear which companies were responsible for the Berkeley balcony work, or whether Segue used the same subcontractors that it had in other projects where suits were filed.
Stanford law professor Robert Weisberg, co-director of the Stanford Criminal Justice Center, said O'Malley's investigators will certainly look into these civil claims to try to establish an "egregious failure of due care." While the hefty settlement dollars from civil suits are not permissible, Weisberg said, the "underlying facts" can be used to show that the company knew there was a balcony water-intrusion issue before the Berkeley collapse, yet did nothing.
Roth, the UC Berkeley assistant law professor, said corporations are rarely charged criminally in a homicide.
"I think in general in this country, you don't see the homicide law used against corporations in the past because we don't want to chill commerce," Roth said. "It's looked at as something that is part of the risk of living and doing business. ... That's always the balance the law tries to find."
Weisberg said prosecutors could bring charges against Segue but also subcontractors, the developer, property owner, management company and city of Berkeley, including individuals from each entity.
"If they can be sued civilly, they could be charged criminally," Weisberg said. If a company were to be charged, he said, the punishment would likely result in a fine; however, individuals charged could face jail time.
And while the civil past of targeted parties would play a role in a criminal probe, the forensic results of how the balcony collapsed, and whether corners were cut, designs ignored and other potential negligence, could provide a smoking gun, Weisberg said.
The Alameda County District Attorney's Office declined to comment for this story.
In 1996, in what experts call the only criminal case resulting from a balcony collapse in recent memory, San Francisco District Attorney Terence Hallinan charged the property owner of a Victorian home where a deck collapsed, killing one woman and injuring a dozen people.
Randall Nathan, coincidentally a Berkeley resident at the time, had code violations on many of his buildings and had met with city officials before the collapse. Hallinan charged Nathan with two felony counts of involuntary manslaughter and two misdemeanors, saying the landlord showed "blatant disregard" for building codes.
In 1997, a jury deadlocked on the manslaughter charges and convicted him of the two building code violations. He received a $1,000 fine and 200 hours of community service.
Hallinan declined to refile the involuntary manslaughter charges because he said at the time it would be too difficult to get a conviction.
Nathan's defense attorney, William Osterhoudt, said in an interview with this newspaper his client was charged for political reasons.
"Randy was prosecuted because he had been tilting windmills with the city building inspectors," Osterhoudt said. "We thought it was politically motivated at the time; the DA was looking for votes."
In fact, Hallinan, a career criminal defense attorney who had just been elected to office, tried the case himself, the first one he ever prosecuted. The case hinged, Osterhoudt said, on testimony from a carpenter who said he moved a support beam on the deck to an area of the balcony that had dry rot without Nathan's knowledge.
The defense attorney said such cases are rare because they are hard to prove.
"You have to show that mental element. They must know enough that they're creating a dangerous situation and then leave it alone," Osterhoudt said.
"The best case for the district attorney would be an accident before and, specifically, if they were warned before where it was dangerous to human life and they didn't fix it," he said.
While Nathan largely walked in the criminal case, a civil jury awarded $12.3 million in damages to the victims, with the landlord liable for 45 percent and Centerstone Realty, the property manager, on the hook for the rest.
Contact Matthias Gafni at 925-952-5026. Follow him at Twitter.com/mgafni.