Bruser v. Bank of Hawaii
Filing
220
ORDER DENYING BANK OF HAWAII AND THE ASSOCIATION OF APARTMENT OWNERS OF DISCOVERY BAY'S OBJECTIONS TO THE FINDINGS AND RECOMMENDATION TO (1) GRANT IN PART AND DENY IN PART BANK OF HAWAII'S MOTION FOR ATTORNEYS' FEES AND COSTS; AND (2) GRANT IN PART AND DENY IN PART ASSOCIATION OF APARTMENT OWNERS OF DISCOVERY BAY'S MOTION FOR ATTORNEYS' FEES AND COSTS re 212 Findings and Recommendations.. Signed by JUDGE LESLIE E. KOBAYASHI on 04/27/2017. (eps, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF).
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
MICHAEL DAVID BRUSER and LYNN
BRUSER, Trustees under that
certain unrecorded Revocable
Living Trust Agreement dated
July 11, 1988, as amended,
doing business as Discovery
Bay Center,
Plaintiffs,
vs.
BANK OF HAWAII, a Hawaii
corporation, as Trustee, as
successor by merger with
Hawaiian Trust Company,
Limited, a former Hawaii
corporation and as successor
Trustee under that certain
Trust Agreement dated June 6,
1974,
Defendant,
_____________________________
vs.
JULIE G. HENDERSON, as
Trustee of the Julie G.
Henderson Irrevocable Trust,
and as Trustee of the Jean K.
Gowans Irrevocable Trust, and
as Trustee of the Louis L.
Gowans, Jr. Irrevocable
Trust; RICHARD L. GOWANS, as
Trustee of the Richard L.
Gowans Irrevocable Trust;
KEVIN I. YOKOHAMA;
ASSOCIATION OF APARTMENT
OWNERS OF DISCOVERY BAY;
SUSAN SHEETZ; and PATRICIA
SHEETZ BOW,
Intervening Defendants.
_____________________________
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CIVIL NO. 14-00387 LEK-RLP
BANK OF HAWAII, a Hawaii
corporation, as Trustee, as
successor by merger with
Hawaiian Trust Company,
Limited, a former Hawaii
corporation and as successor
Trustee under that certain
Trust Agreement dated June 6,
1974.
)
)
)
)
)
)
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)
)
)
Counterclaim Plaintiff, )
)
)
vs.
)
MICHAEL DAVID BRUSER and LYNN )
)
BRUSER, Trustees under that
certain unrecorded Revocable )
Living Trust Agreement dated )
)
July 11, 1988, as amended,
)
doing business as Discovery
)
Bay Center,
)
Counterclaim Defendants. )
_____________________________ )
ORDER DENYING BANK OF HAWAII AND THE ASSOCIATION OF APARTMENT
OWNERS OF DISCOVERY BAY’S OBJECTIONS TO THE FINDINGS AND
RECOMMENDATION TO (1) GRANT IN PART AND DENY IN PART BANK OF
HAWAII’S MOTION FOR ATTORNEYS’ FEES AND COSTS; AND (2) GRANT IN
PART AND DENY IN PART ASSOCIATION OF APARTMENT OWNERS OF
DISCOVERY BAY’S MOTION FOR ATTORNEYS’ FEES AND COSTS
On October 31, 2016, the magistrate judge filed his
Findings and Recommendation to (1) Grant in Part and Deny in Part
Bank of Hawaii’s Motion for Attorneys’ Fees and Costs; and
(2) Grant in Part and Deny in Part Association of Apartment
Owners of Discovery Bay’s Motion for Attorneys’ Fees and Costs
(“F&R”).
[Dkt. no. 212.]
On November 14, 2016, Intervenor
Defendant/Counterclaim Plaintiff Association of Apartment Owners
of Discovery Bay (“AOAO”) filed its objections to the F&R
(“AOAO’s Objections”).
[Dkt. no. 213.]
The same day,
Defendant/Counterclaim Plaintiff Bank of Hawai`i, as Trustee
(“BOH”), filed its objections to the F&R (“BOH’s Objections”).
[Dkt. no. 214.]
On November 28, 2016, Plaintiffs/Counterclaim
Defendants Michael David Bruser and Lynn Bruser (“the Brusers”)
filed a combined memorandum in opposition to AOAO’s Objections
and BOH’s Objections (“Brusers’ Memorandum”).
[Dkt. no. 215.]
AOAO and BOH filed their respective replies on November 29, 2016.
[Dkt. nos. 216, 217.]
Finally, on November 29, 2016, the Brusers
filed a supplemental response to the replies (“Brusers’
Supplemental Memorandum”).
[Dkt. no. 218.]
The Court finds
these matters suitable for disposition without a hearing pursuant
to Rule LR7.2(e) of the Local Rules of Practice of the United
States District Court for the District of Hawai`i (“Local
Rules”).
After careful consideration of the objections,
supporting and opposing memoranda, and the relevant legal
authority, AOAO’s Objections and BOH’s Objections are HEREBY
DENIED and the F&R is HEREBY ADOPTED, for the reasons set forth
below.
BACKGROUND
A detailed history of this case is set forth in this
Court’s June 28, 2016 Findings of Fact and Conclusions of Law and
3
Order (“6/28/16 Order”).
[Dkt. no. 192.1]
The Court will
include only those facts relevant to the instant matter.
This
case arose out of a dispute regarding liability for payment of
trustee fees.
On August 29, 2014, the Brusers filed their
Complaint for Declaratory Judgment against BOH (“Complaint”).
[Dkt. no. 1.]
BOH filed its counterclaims against the Brusers on
January 28, 2015 (“BOH Counterclaim”).
[Dkt. no. 34.]
While the Brusers’ Complaint was filed against a single
defendant (that is, BOH), several parties sought permission to
intervene as defendants and, upon being granted intervention,
they filed their own respective counterclaims, including AOAO.2
See Order Granting Proposed Intervenor Association of Apartment
Owners of Discovery Bay’s Motion to Intervene Filed December 30,
2014, filed 3/27/15 (dkt. no. 45).
The Complaint sought declaratory judgment that the
1
The 6/28/16 Order is also available at 2016 WL 3580612.
2
A number of other parties were also permitted to
intervene, including: Defendants/Counterclaim Plaintiffs Julie
G. Henderson, Trustee of the Julie G. Henderson Irrevocable
Trust, Julie G. Henderson, Trustee of the Jean K. Gowans
Irrevocable Trust, Julie G. Henderson, Trustee of the Louis L.
Gowans, Jr., Irrevocable Trust, and Richard L. Gowans, Trustee of
the Richard L. Gowans Irrevocable Trust (collectively
“Henderson/Gowans”); [dkt. no. 41 (order permitting
Henderson/Gowans to intervene);] Defendants/Counterclaim
Plaintiffs Kevin I. Yokoyama, Trustee of the Kevin I. Yokoyama
Trust and the Irvine K. Yokoyama, Jr. Trust (collectively
“Yokoyama”); [dkt. no. 43 (order permitting Yokoyama to
intervene);] and Defendants/Counterclaim Plaintiffs Susan Sheetz
and Patricia Sheetz Bow (collectively “Sheetz Bow”) [dkt. no. 44
(allowing Sheetz Bow to intervene)].
4
Brusers were, inter alia:
not liable for the payment of the
trustee fees (“Trustee Fee”) under the Trust Agreement dated
June 6, 1974 (“Trust Agreement”); or, in the alternative, only
liable for the actual percentage of their undivided interest or
only reasonable fees as determined at trial.
¶¶ 23(a)-(b).]
[Complaint at
In addition, they sought additional relief such
as an accounting, and reasonable attorneys’ fees and costs.
[Id.
at ¶¶ E-F.]
The BOH Counterclaim had five claims:
(1) a claim for
a declaratory judgment that, pursuant to the Condominium
Conveyance Document, dated December 1, 1976 (“CCD”), the Brusers
were obligated to pay the Trustee Fee as determined under the
Trust Agreement; (2) breach of contract under the CCD; (3) breach
of contract under the Trust Agreement; (4) breach of the covenant
of good faith and fair dealing; and (5) recovery of attorneys’
fees and costs incurred as a result of enforcing the CCD pursuant
to the terms of the Trust Agreement.
The AOAO Counterclaim contained four claims:
(1) a
claim for declaratory judgement that the Brusers were obligated
to pay the Trustee Fee as determined under the Trust Agreement
and/or the CCD; (2) breach of contract under the CCD; (3) breach
of contract under the Trust Agreement; and (4) breach of the
covenant of good faith and fair dealing.
On April 16, 2015, BOH filed its Motion for Partial
5
Summary Judgment as to its First Counterclaim Against
Plaintiffs/Counterclaim Defendants.
[Dkt. no. 50.]
On July 21,
2015, this Court issued its Order Granting Defendant/Counterclaim
Plaintiff Bank of Hawaii’s Motion for Partial Summary Judgment as
to its First Counterclaim Against Plaintiffs/Counterclaim
Defendants, and Joinder of Intervenor Defendant Association of
Apartment Owners of Discovery Bay; and Denying the Other Joinders
Thereto (“7/21/15 Order”).
[Dkt. no. 88.3]
The 7/21/15 Order
stated that “the plain language of the CCD requires payment of
fees under the Trust Agreement, which includes the Trustee Fee.”
2015 WL 4469850, at *4.
On January 20, 2016, the Brusers filed a Notice of
Withdrawal of Jury Trial Demand.
[Dkt. no. 150.]
The same day,
Henderson/Gowans, AOAO, Yokoyama, BOH, and Sheetz Bow all filed
statements of no opposition.
[Dkt. nos. 145-49.]
In an Entering
Order filed on January 25, 2016, and pursuant to Federal Rules of
Civil Procedure 38(d) and 39(a)(1), the Court withdrew the
Brusers’ jury demand.
[Dkt. no. 152.]
Finally, in a stipulation
filed on February 2, 2016 (“Stipulation”):
BOH stipulated to
dismiss its third and fourth counterclaims without prejudice;
AOAO stipulated to dismiss its second, third, and fourth
counterclaims without prejudice; and Henderson/Gowans, Yokoyama,
and Sheetz Bow stipulated to dismiss their claims for declaratory
3
The 7/21/15 Order is also available at 2015 WL 4469850.
6
relief that the Brusers breached the Trust Agreement without
prejudice.
[Dkt. no. 179.]
The only remaining claims were
therefore:
BOH’s second counterclaim for breach of contract
under the CCD; and Henderson/Gowans, AOAO, Yokoyama, and Sheetz
Bow’s claim for declaratory relief that, by failing to pay the
Trustee Fee, the Brusers breached the CCD.
The Court held a bench trial on February 2, 2016.
[Minutes, filed 2/2/16 (dkt. no. 177).]
On February 19, 2016,
the Court issued its Court’s Decision, and instructed BOH to
prepare a proposed Findings of Fact and Conclusions of Law
(“FOF/COL”).
[Dkt. no. 182.]
March 22, 2016.
BOH submitted its FOF/COL on
[Dkt. no. 184.]
The 6/28/16 Order followed, and
concluded:
(1) The Court finds in favor of BOH on their
second counterclaim for breach of contract under
the CCD.
(2) The Court finds in favor of the
Henderson/Gowans, AOAO, Yokoyama, and Sheetz Bow
on their claims for declaratory relief and finds
that, under the CCD, the Brusers are liable for
the total amount of the unpaid Trustee Fee.
(3) The Court awards $137,434.50 to BOH, which
consists of the difference between what the
Brusers owed and what they paid between October
2014 and December 2015, including the applicable
[General Excise Tax (“GET”)].
. . . .
(5) Pursuant to the CCD, the Court awards
attorneys’ fees and costs to BOH. BOH, and any
other party that believes it is entitled to
7
attorneys’ fees and costs must submit the
appropriate motion within fourteen days of entry
of judgment. Thereafter, the Court will refer the
matter to the magistrate judge for determination
of the amount of the award.
2016 WL 3580612, at *7-8.
June 28, 2016.4
The Clerk’s Office entered Judgment on
[Dkt. no. 193.]
On July 12, 2016, AOAO filed its Motion for Award of
Attorneys’ Fees and Costs (“AOAO’s Attorneys’ Fees Motion”), and
BOH also filed its Motion for Award of Attorneys’ Fees and Costs
(“BOH’s Attorneys’ Fees Motion” and collectively “Attorneys’ Fees
Motions”).5
[Dkt. nos. 194, 195.]
The Brusers filed a motion to
strike the Attorneys’ Fees Motions on August 8, 2016 (“Motion to
Strike”),6 and the magistrate judge denied the Motion to Strike
in an Entering Order on August 9, 2016 (“8/9/16 EO”).
203 (Motion to Strike), 204 (8/9/16 EO).]
[Dkt. nos.
The 8/9/16 EO granted
the Brusers additional time to respond to the Attorneys’ Fees
Motions.
[8/9/16 EO.]
The Brusers did not appeal the magistrate
judge’s order on the Motion to Strike to this Court.
However,
4
The Brusers filed an appeal on July 28, 2016, which is
currently pending before the Ninth Circuit. [Dkt. no. 200.]
5
On July 13, 2016, BOH filed a Supplemental Motion for
Award of Attorneys’ Fees and Costs (“BOH’s Supplemental Motion”)
seeking recovery of the GET that would be charged on the
requested attorneys’ fees. [Dkt. no. 197.] Henderson/Gowans,
Yokoyama, and Sheetz Bow did not file motions for attorneys’
fees.
6
Alternatively, the Motion to Strike requested additional
time to respond to the Attorneys’ Fees Motions. [Mem. in Supp.
of Motion to Strike at 12.]
8
the Brusers did file two additional motions for extensions of
time to respond to the Attorneys’ Fees Motions.
See dkt. nos.
206-07 (the Brusers’ second request for additional time and the
magistrate judge’s Entering Order granting it), 208-09 (the
Brusers’ third request for additional time and the magistrate
judge’s Entering Order granting it).
Even after three
extensions, the Brusers did not file any response to the
Attorneys’ Fees Motions.
STANDARD
This Court reviews a magistrate judge’s findings and
recommendations under the following standard:
When a party objects to a magistrate judge’s
findings or recommendations, the district court
must review de novo those portions to which the
objections are made and “may accept, reject, or
modify, in whole or in part, the findings or
recommendations made by the magistrate judge.” 28
U.S.C. § 636(b)(1); see also United States v.
Raddatz, 447 U.S. 667, 673 (1980); United States
v. Reyna–Tapia, 328 F.3d 1114, 1121 (9th Cir.
2003) (en banc) (“[T]he district judge must review
the magistrate judge’s findings and
recommendations de novo if objection is made, but
not otherwise.”).
Under a de novo standard, this Court reviews
“the matter anew, the same as if it had not been
heard before, and as if no decision previously had
been rendered.” Freeman v. DirecTV, Inc., 457
F.3d 1001, 1004 (9th Cir. 2006); United States v.
Silverman, 861 F.2d 571, 576 (9th Cir. 1988). The
district court need not hold a de novo hearing;
however, it is the court’s obligation to arrive at
its own independent conclusion about those
portions of the magistrate judge’s findings or
recommendation to which a party objects. United
States v. Remsing, 874 F.2d 614, 616 (9th Cir.
9
1989).
PJY Enters., LLC v. Kaneshiro, Civil No. 12–00577 LEK–KSC, 2014
WL 3778554, at *2 (D. Hawai`i July 31, 2014) (alteration in PJY)
(citation omitted).
DISCUSSION
I.
The Brusers’ Submissions and Scope of Review
Fed. R. Civ. P. 54(d)(2)(D) provides, in part, that
“[b]y local rule, the court may establish special procedures to
resolve fee-related issues without extensive evidentiary
hearings,” and that it “may refer a motion for attorney’s fees to
a magistrate judge under [Fed. R. Civ. P.] 72(b) as if it were a
dispositive pretrial matter.”
Rule 72(b)(2) states, in relevant
part, that “[w]ithin 14 days after being served with a copy of
the recommended disposition, a party may serve and file specific
written objections to the proposed findings and recommendations.
A party may respond to another party’s objections within 14 days
after being served with a copy.”
It is clear to the Court that
the Brusers’ Memorandum is their response to BOH’s and AOAO’s
objections.
However, the Brusers’ Supplemental Memorandum is
provided for in neither the Federal Rules nor the Local Rules,
and the Brusers did not seek leave to file additional briefing.
Accordingly, the Court HEREBY STRIKES it from the record and will
not consider it for purposes of this Order.
Further, the Brusers did not file any objections to the
10
F&R.
Still, the Brusers’ Memorandum argues that “the Brusers
still believe that upon de novo review neither the AOAO nor BOH
should be awarded any fees and costs whatsoever.”
Memorandum at 9.]
[Brusers’
This issue was not raised by BOH’s Objections
nor AOAO’s Objections, and, as the Court has already noted, the
Brusers’ did not file any objections.
Accordingly, the Court
will not consider this argument.7
II.
The Objections
Both BOH and AOAO raise the same four objections to the
F&R, and the Court will consider each of these in turn.
A.
Haw. Rev. Stat. § 607-14
Haw. Rev. Stat. 607-14 states, in pertinent part:
In all courts, in all actions in the nature of
assumpsit and in all actions on a promissory note
or other contract in writing that provides for an
attorney’s fee, there shall be taxed as attorneys’
fees, to be paid by the losing party and to be
included in the sum for which execution may issue,
a fee that the court determines to be reasonable;
provided that the attorney representing the
prevailing party shall submit to the court an
affidavit stating the amount of time the attorney
spent on the action and the amount of time the
attorney is likely to spend to obtain a final
written judgment, or, if the fee is not based on
an hourly rate, the amount of the agreed upon fee.
The court shall then tax attorneys’ fees, which
the court determines to be reasonable, to be paid
by the losing party; provided that this amount
7
The Court also notes that the Brusers’ counsel is an
experienced attorney who is very familiar with the Federal Rules
and the Local Rules. The Court therefore trusts that any
decision not to file objections was strategic, and not simply an
oversight.
11
shall not exceed twenty-five percent of the
judgment.
BOH first argues that it is entitled to attorneys’ fees
under the Declaratory Judgment Act, 28 U.S.C. § 2202.
Objections at 3-4.]
[BOH’s
Second, BOH argues that § 607-14’s cap on
attorneys’ fees “does not apply when non-monetary damages are
sought or when monetary value is not ascertained.”
[Id. at 4.]
“Since BOH prevailed on the Brusers’ claim for declaratory
judgment regarding the CCD in the Complaint and on its own
Counterclaim against the Brusers for declaratory judgment, an
award of attorneys’ fees to BOH is proper and the twenty-five
percent (25%) cap should not apply here.”
[Id.]
AOAO shares BOH’s position that the cap does not apply
here, and that, because the Bruser’s only claim was for
declaratory relief and AOAO’s primary claim was for declaratory
relief, the bar should not apply.
[AOAO’s Objections at 5-6.]
The F&R states that,
For the purposes of awarding attorneys’ fees,
“the litigant in whose favor judgment is rendered
is the prevailing party.” Sheehan [v. Centex
Homes], 853 F. Supp. 2d [1031,] 1039 [(D. Hawai`i
2011)] (quoting Wong v. Takeuchi, 961 P.2d 611,
614 (Haw. 1998)). BOH was awarded judgment on its
claim for declaratory judgment that Plaintiffs
owed trustee fees, as well as its breach of
contract claim that Plaintiffs breached the CCD.
The Court awarded BOH $137,434.50 in damages.
AOAO was awarded judgment on its claim for
declaratory judgment that Plaintiffs breached the
CCD. Plaintiffs did not prevail on any of their
claims. BOH and AOAO are the prevailing parties
and are entitled to recover attorneys’ fees from
12
Plaintiffs.
See Haw. Rev. Stat. § 607-14.
[F&R at 5 (some citations omitted).]
In addition, the magistrate
judge explained that, “when a party seeks an adjudication of
rights as well as a monetary judgment, the statutory ceiling on
attorneys’ fees applies and is calculated as twenty-five percent
of [the] monetary judgment.”
[F&R at 21-22 (citing Smothers v.
Renander, 633 P.2d 556, 562 (Haw. Ct. App. 1981)).]
Moreover,
the F&R states that “[t]he cap is excused only when a case
involves ‘only an adjudication of rights in which no monetary
liability is at issue.’”
[Id. at 22 (emphasis in F&R) (quoting
Food Pantry, Ltd. v. Waikiki Bus. Plaza, 575 P.2d 869, 880 (Haw.
1978)).]
It is well established that “[a]n action that seeks
only a declaration as to a party’s rights or responsibilities,
even if factually implicating a contract, is not in the nature of
assumpsit.”
Chock v. Gov’t Emps. Ins. Co., 103 Hawai`i 263, 268,
81 P.3d 1178, 1183 (2003) (internal quotation marks omitted).
This district court has explained,
“Assumpsit is a common law form of action
which allows for the recovery of damages for nonperformance of a contract, either express or
implied, written or verbal, as well as quasi
contractual obligations.” Au v. Funding Group,
Inc., 933 F. Supp. 2d 1264, 1271 (D. Haw. Mar. 21,
2013). Reasonable attorneys’ fees are generally
based on the traditional “lodestar” calculation,
which multiplies (1) the number of hours
reasonably expended by (2) a reasonable hourly
rate. Hensley v. Eckerhart, 461 U.S. 424, 433
(1983); Fischer v. SJB-P.D., Inc., 214 F.3d 1115,
13
1119 (9th Cir. 2000). The lodestar amount may
also be adjusted based on an evaluation of the
factors articulated in Kerr v. Screen Extras
Guild, Inc., 526 F.2d 67, 70 (9th Cir. 1975),
which have not been subsumed in the lodestar
calculation. See Fischer, 214 F.3d at 1119
(citation omitted).
Where an action involves tort claims as well
as a claim for breach of contract, the Court must
apportion the award of attorneys’ fees between the
claims. Id. However, if apportionment would be
impracticable because the various claims are
inextricably linked to the breach of contract,
then the Court may decline to apportion attorneys’
fees between the claims. Id. Here, Plaintiffs
assert both breach of contract and tort claims.
Plaintiffs’ breach of contract and tort claims
focus on the same allegations of Defendant’s
wrongful conduct. The Court finds that
apportionment is not practicable because
Plaintiffs’ tort claims are inextricably linked to
their contract claims.
Leff v. Bertozzi Felice Di Giovanni Rovai & C. Srl, CIVIL NO. 1500176 HG-RLP, 2015 WL 9918660, at *8-9 (D. Hawai`i Dec. 30, 2015)
(some citations omitted).
Moreover, the Hawai`i Supreme Court
has considered the history of § 607-14:
HRS § 607-17 provided for a maximum award of
attorney’s fees of twenty-five percent of a
contract or note “to the successful party, whether
plaintiff or defendant[.]” In 1993, HRS § 607-17
was repealed and its provisions incorporated into
HRS § 607-14. See 1993 Haw. Sess. L. Act 200,
§§ 1-2 at 305-06; Hse. Conf. Comm. Rep. No. 127,
in 1993 House Journal, at 932 (“Your Committee
. . . finds that § 607-17, Hawaii Revised
Statutes, should be eliminated, and its provisions
incorporated within § 607-14.”).
In construing HRS § 607-17, this court ruled
in Food Pantry, Ltd. v. Waikiki Business Plaza,
Inc., 58 Haw. 606, 621, 575 P.2d 869, 879-80
(1978), that
14
[s]uccessful defendants are not denied, by
HRS § 607-17, the benefits of a contractual
provision allowing an attorney’s fee. By
providing for an award to a successful
defendant in an action on a promissory note,
the legislature made it plain that an
attorney’s fee may be awarded although the
defendant is not otherwise entitled to a
money judgment against the plaintiff. We
believe that it is equally clear that this
statute was not intended to render
inoperative a contract governing the
allocation of expenses and attorney’s fees in
litigation which involves only an
adjudication of rights and in which no
monetary liability is in issue.
(Emphasis added.) . . . . [T]his court held that
the twenty-five percent cap on attorney’s fees, as
set forth in HRS § 607-17, did not apply and
remanded the case for determination of the amount
of attorney’s fees, instructing the trial court to
award all fees that were “reasonably and
necessarily incurred.” Id. See also Amfac, Inc.
v. Waikiki Beachcomber Inv. Co., 74 Haw. 85, 13235, 839 P.2d 10, 34-35 (holding that, where the
plaintiff was seeking a declaration that it had
performed its obligations under an indemnification
agreement, HRS § 607-17’s twenty-five percent cap
on attorney’s fees did not apply), reconsideration
denied, 74 Haw. 650, 843 P.2d 144 (1992).
Thus, this court’s precedent makes clear that
HRS § 607-17 and, by implication, its successor
statute, HRS § 607-14, do not arbitrarily deny an
award of attorney’s fees to a defendant merely
because the circumstances of the lawsuit provide
no “legally cognizable basis upon which to make
the mandatory 25% calculation.” On the contrary,
where it is impossible to determine what the
judgment would or might have been had the
plaintiff prevailed (e.g., in declaratory judgment
actions), the defendant may be awarded all of his
or her reasonable attorney’s fees.
However, it is clear that, in enacting HRS
§ 607-17 (and in amending HRS § 607-14 to
15
incorporate the provisions of HRS § 607-17), the
legislature’s purpose was to place some limit on
the amount of attorney’s fees that a prevailing
party could reasonably recover.
Piedvache v. Knabusch, 88 Hawai`i 115, 118-120, 962 P.2d 374,
377-379 (1998) (some alterations and all emphases in Piedvache).8
Here, the damages award was not only ascertainable, but was
ascertained in a specific amount.
Moreover, the magistrate judge
correctly concluded that BOH’s claims and AOAO’s claims are
inextricably intertwined with the contract claims at issue in
this case.
See F&R at 22-23 (“AOAO’s claims were interwoven with
BOH’s, rested on the same facts, and arose under the same
contracts.
The matters were handled in a single bench trial and
disposed of by the same Findings of Fact and Conclusions of Law
and Order.”).
The Court therefore DENIES BOH’s and AOAO’s
objections to the application of the statutory cap on attorneys’
fees.
B.
Calculation of the Statutory Cap
Next, BOH and AOAO object to how the magistrate judge
calculated the cap on attorneys’ fees.
AOAO asserts that,
because the state probate court determined that the Trustee Fee
at issue here was applicable for five years, and because AOAO and
8
The Piedvache court also stated that “the Food Pantry rule
. . . was not meant to undermine the legislative goal of
circumscribing attorney’s fee awards where the amount of the
potential judgment is ascertainable.” 88 Hawai`i at 120, 962
P.2d at 379.
16
BOH were granted declaratory judgment in their favor that, under
the CCD, the Brusers must pay the Trustee Fee, the cap should be
based upon the full amount of trustee fees that the Brusers will
pay over the five-year period.
[AOAO’s Objections at 8.]
Similarly, BOH contends that, “[b]ecause BOH and the AOAO
obtained a declaratory judgment that the Brusers are obligated to
pay $591,000 over the five-year term, any cap applied should be
based on that total amount.”
[BOH’s Objections at 5.]
Neither BOH nor AOAO cite any case law to support their
position on calculating damages.
The F&R states that “[t]his
case has a clear basis on which to calculate the cap – BOH’s
damages award of $137,434.50.”
[F&R at 22.]
The plain language
of § 607-14, which states that the attorneys’ fees “to be paid by
the losing party” cannot “exceed twenty-five per cent of the
judgment” clearly supports the magistrate judge’s finding.
The
magistrate judge based the attorneys’ fees calculations on the
damages awarded in the 6/28/16 Order, pursuant to § 607-14.
Accordingly, the Court DENIES BOH and AOAO’s objections to the
calculation of attorneys’ fees.
C.
Apportionment of the Fees and Costs
BOH and AOAO also object to the magistrate judge’s
apportionment of the fees and costs because nothing in § 607-14
provides for this type of division.
BOH’s Objections at 5-6.]
[AOAO’s Objections at 9;
The F&R explained that the statutory
17
cap amounted to $34,358.62, and that, “[i]n the absence of clear
authority on the issue, the Court finds it reasonable to
apportion fees in a ratio that reflects the ratio of the
reasonable fees.
In this case, BOH’s and AOAO’s reasonable fees
were a ratio of 1.61 to 1.00, respectively.”
[F&R at 24.]
As previously noted, the magistrate judge found that
the issues in this case were inextricably intertwined, and that
the § 607-14 bar applied.
In Wong, the Hawai`i Supreme Court
considered the maximum amount of attorneys’ fees that could be
awarded under an earlier version of § 607-14:
Holding that the statutory cap is a maximum
total amount that may be awarded in an action is
consistent with the plain language of the statute.
“Our foremost obligation when interpreting a
statute is to ascertain and give effect to the
intention of the legislature, which is obtained
primarily from the language contained in the
statute itself.” Mendes v. Hawai`i Ins. Guar.
Ass’n, 87 Hawai`i 14, 17, 950 P.2d 1214, 1217
(1998) (citation and internal brackets omitted).
Under the plain language of the statute, the
attorneys’ fee awarded “shall not exceed the
amount obtainable under the following schedule[.]”
We hold that this language indicates that the
total amount awarded to all parties may not exceed
the maximum amount allowable under the statutory
schedule.
88 Hawai`i at 51, 961 P.2d at 616 (alteration in Wong); see also
Ass’n of Apartment Owners of the Cliffs at Princeville v. Premier
Resorts Int’l, Inc., No. 27558, 2008 WL 4408118, at *1 n.6
(Hawai`i Sept. 29, 2008) (“Hawai`i’s courts have strictly
interpreted HRS § 607-14’s twenty-five per cent cap on attorneys’
18
fees.” (citations omitted)).
The current version of § 607-14
includes the same restrictive language:
“provided this amount
shall not exceed twenty-five per cent of the judgment.”
BOH asserts that § 607-14 does not provide for “any
division of capped fees between prevailing parties” and that the
F&R failed to “provide any legal or factual basis” for the ratio
used.
[BOH’s Objections at 6.]
Similarly, AOAO states that
“[s]uch an apportionment reflects neither the contributions of
the prevailing parties to the result obtained, nor their stake in
the outcome.”
[AOAO’s Objections at 9.]
The magistrate judge
found that BOH had $150,373.76 in reasonable attorneys’ fees and
that AOAO had $93,190.49 in reasonable attorneys’ fees.
11-12, 20-21.]
[F&R at
Neither party objected to these calculations.
Using these numbers, the magistrate judge found that the
reasonable attorneys’ fees owed to BOH and AOAO equaled a ratio
of 1.61 to 1.0, and he divided the maximum amount recoverable
under § 607-14, $34,358.62, accordingly.
[Id. at 24.]
Given the
statutory maximum available in attorneys’ fees under § 607-14,
this was an entirely reasonable way to apportion fees.
Further,
neither BOH nor AOAO provide an alternative method for
apportioning attorneys’ fees to multiple prevailing parties when
the total reasonable attorneys’ fees exceed the statutory cap.
BOH’s Objections and AOAO’s Objections are therefore DENIED with
regard to the apportionment of attorneys’ fees.
19
D.
Frivolous Claims and Haw. Rev. Stat. § 607-14.5
Finally, BOH and AOAO argue that they are entitled to
all of their attorneys’ fees because the Brusers’ Complaint was
frivolous.
[BOH’s Objections at 6; AOAO’s Objections at 9-10.]
Haw. Rev. Stat. § 607-14.5 states, in relevant part:
(a) In any civil action in this State where a
party seeks money damages or injunctive relief, or
both, against another party, and the case is
subsequently decided, the court may, as it deems
just, assess against either party, whether or not
the party was a prevailing party, and enter as
part of its order, for which execution may issue,
a reasonable sum for attorneys’ fees and costs, in
an amount to be determined by the court upon a
specific finding that all or a portion of the
party’s claim or defense was frivolous as provided
in subsection (b).
(b) In determining the award of attorneys’ fees
and costs and the amounts to be awarded, the court
must find in writing that all or a portion of the
claims or defenses made by the party are frivolous
and are not reasonably supported by the facts and
the law in the civil action. In determining
whether claims or defenses are frivolous, the
court may consider whether the party alleging that
the claims or defenses are frivolous had submitted
to the party asserting the claims or defenses a
request for their withdrawal as provided in
subsection (c). If the court determines that only
a portion of the claims or defenses made by the
party are frivolous, the court shall determine a
reasonable sum for attorneys’ fees and costs in
relation to the frivolous claims or defenses.
“A frivolous claim is a claim so manifestly and palpably without
merit, so as to indicate bad faith on the [pleader’s] part such
that argument to the court was not required.”
Tagupa v. VIPDesk,
135 Hawai`i 468, 479, 353 P.3d 1010, 1021 (2015) (alterations in
20
Tagupa) (citation and internal quotation marks omitted).
Moreover, “[a] finding of frivolousness is a high bar; it is not
enough that a claim be without merit, there must be a showing of
bad faith.”
Id. (citations omitted).
Neither BOH nor AOAO
allege that the Brusers’ claim was brought in bad faith.
Considering § 607-14.5’s high bar, and the fact that this case
proceeded to trial, albeit a very short one, the Court cannot
conclude that the Complaint was “manifestly and palpably without
merit.”
See id.
BOH’s Objections and AOAO’s Objections are
therefore DENIED as to attorneys’ fees under § 607-14.5
CONCLUSION
On the basis of the foregoing, BOH’s Objections and
AOAO’s Objections to the magistrate judge’s Findings and
Recommendation to (1) Grant in Part and Deny in Part Bank of
Hawaii’s Motion for Attorneys’ Fees and Costs; and (2) Grant in
Part and Deny in Part Association of Apartment Owners of
Discovery Bay’s Motion for Attorneys’ Fees and Costs, filed on
October 31, 2016, are HEREBY DENIED, and the magistrate judge’s
F&R is HEREBY ADOPTED.
The Attorneys’ Fees Motions are therefore GRANTED IN
PART AND DENIED IN PART.
AOAO’s Attorneys’ Fees Motion is
GRANTED insofar as the Court AWARDS AOAO $13,164.22 in attorneys’
fees and $214.83 in costs.
It is DENIED in all other respects.
BOH’s Attorneys’ Fees Motion is GRANTED insofar as the Court
21
AWARDS BOH $21,194.40 in attorneys’ fees and $145.67 in costs.
It is DENIED in all other respects.
The Court ORDERS the Brusers
to pay the award to BOH and AOAO, through their respective
counsel, by no later than May 31, 2017.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, April 27, 2017.
/s/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge
MICHAEL DAVID BRUSER, ET AL. VS. BANK OF HAWAII, ET AL.; CIVIL
14-00387 LEK-RLP; ORDER DENYING BANK OF HAWAII AND THE
ASSOCIATION OF APARTMENT OWNERS OF DISCOVERY BAY’S OBJECTIONS TO
THE FINDINGS AND RECOMMENDATION TO (1) GRANT IN PART AND DENY IN
PART BANK OF HAWAII’S MOTION FOR ATTORNEYS’ FEES AND COSTS; AND
(2) GRANT IN PART AND DENY IN PART ASSOCIATION OF APARTMENT
OWNERS OF DISCOVERY BAY’S MOTION FOR ATTORNEYS’ FEES AND COSTS
22
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