Green v. Kanazawa

Filing 213

ORDER DENYING PLAINTIFFS' MOTION FOR RECONSIDERATION AND GRANTING CLARIFICATION re( 201 ) Motion for Reconsideration in case 1:16-cv-00054-LEK-KSC; re ( 179 ) Motion for Reconsideration in case 1:16-cv-00055-LEK-KSC. Signed by JUD GE LESLIE E. KOBAYASHI on 03/12/2018. Associated Cases: 1:16-cv-00054-LEK-KSC, 1:16-cv-00055-LEK-KSC(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
JEREMY GREEN and SHIZUKO
GREEN,
Plaintiffs,
vs.
SIDNEY K. KANAZAWA, ESQ.,
a resident of California,
MCGUIREWOODS, LLP, a Virginia
limited liability
partnership, and DOE
DEFENDANTS 1-50,
Defendants.
_____________________________
HYE JA KIM,
Plaintiff,
vs.
SIDNEY K. KANAZAWA, ESQ.,
a resident of California,
MCGUIREWOODS, LLP, a Virginia
limited liability
partnership, and DOE
DEFENDANTS 1-50,
Defendants.
_____________________________

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CIVIL 16-00054 LEK-KSC

CIVIL 16-00055 LEK-KSC

ORDER DENYING PLAINTIFFS’ MOTION FOR
RECONSIDERATION AND GRANTING CLARIFICATION
On November 30, 2017, this Court issued its Order:
Denying Defendants’ Motion for Summary Judgment on the Claims
Asserted by Plaintiff Hye Ja Kim; Denying Defendants’ Motion for
Summary Judgment on the Claims Asserted by Plaintiffs in Counts I
and II of the Complaint; and Granting in Part and Denying in Part

Defendants’ Motion for Summary Judgment for Lack of Actual
Damages, or Alternatively, for Partial Summary Judgment Regarding
Punitive Damages Arising out of the Acts or Omissions of Centex
Homes (“11/30/17 Order”).

[Dkt. no. 200.]

On December 14, 2017,

Plaintiffs Jeremy Green and Shizuko Green (“the Greens”) and Hye
Ja Kim (“Kim,” all collectively “Plaintiffs”) filed a motion
seeking reconsideration or clarification of the 11/30/17 Order
(“Motion for Reconsideration”).

[Dkt. no. 201.]

Defendants

Sidney K. Kanazawa, Esq. (“Kanazawa”), and McGuireWoods LLP
(collectively “Defendants”) filed their memorandum in opposition
on December 28, 2017, and Plaintiffs filed their reply on
January 11, 2018.

[Dkt. nos. 203, 205.]

The Court has

considered the Motion for Reconsideration as a non-hearing matter
pursuant to Rule LR7.2(e).

The Motion for Reconsideration is

hereby denied on all issues raised, and the Court clarifies that:
1) if Plaintiffs establish they could have prevailed on an unfair
or deceptive acts or practices (“UDAP”) claim against Centex by
proving Centex Homes (“Centex”) engaged in conduct that was
reckless or intentional, the nonrecourse clauses in their
contracts with Centex would not apply; 2) there are genuine
issues of material fact for trial as to whether Centex engaged in
intentional or reckless conduct that would support a UDAP claim;
3) the remedies Plaintiffs could have obtained if they prevailed
in UDAP claims against Centex are part of Plaintiffs’ damages in
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their claims against Defendants in this case; but 4) because
treble damages are similar in nature to punitive damages,
Plaintiffs cannot recover any treble damages they could have
recovered from Centex as damages in this case against Defendants.
BACKGROUND
The relevant factual and procedural background of this
case is set forth in the 11/30/17 Order, which ruled on
Defendants’: Motion for Summary Judgment on the Claims Asserted
by Plaintiff Hye Ja Kim (“Kim Motion”), filed on April 17, 2017;
Motion for Summary Judgment on the Claims Asserted by Plaintiffs
in Counts I and II of the Complaint (“Liability Motion”), filed
on April 19, 2017; and Motion for Summary Judgment for Lack of
Actual Damages, or Alternatively, for Partial Summary Judgment
Regarding Punitive Damages Arising Out of the Acts or Omissions
of Centex Homes (“Damages Motion”), also filed on April 19, 2017.
[Dkt. nos. 77, 82, 84.]
These consolidated cases arise from Defendants’
representation of residential unit owners in The Beach Villas at
Ko Olina (“Beach Villas”) in disputes with Centex Homes
(“Centex”), the developer of the Beach Villas.

Plaintiffs allege

that, because of Defendants’ sub-standard representation, they
lost valuable claims against Centex through a settlement
agreement in 2010 (“2010 Settlement Agreement”) and another in
2013 (“2013 Settlement Agreement”).
3

Plaintiffs therefore assert

a legal malpractice claim (“Count I”) and a breach of fiduciary
duty claim (“Count II”) against Defendants.

[11/30/17 Order at

4-6.]
The focus of the Motion for Reconsideration is the
rulings on the Damages Motion.

In particular, this Court ruled

Plaintiffs knowingly and willingly entered into the limitation of
liability provisions in their sales contracts with Centex (the
“Limitation Provisions” and the “Sales Contracts”), and the
Limitation Provisions were not unconscionable.1
47.]

[Id. at 39-40,

Thus, the Limitation Provisions are enforceable and would

have precluded Plaintiffs from seeking treble damages from Centex
in a UDAP claim.

The 11/30/17 Order granted the Damages Motion

as to the portion of Plaintiffs’ damages based on the losttreble-damages theory because Plaintiffs cannot prove Defendants’
actions or omissions caused Plaintiffs to lose the ability to
recover treble damages from Centex in UDAP claims related to the
2010 Settlement Agreement and the Lockout.2

[Id. at 47-48.]

As

1

The Limitation Provisions are: a provision limiting the
purchaser’s remedy to rescission (the “Sole Remedy Provision”);
and a provision setting forth the process to resolve certain
disputes between the parties and waiving the right to recover
punitive, exemplary, treble, or other multiple damages (the
“Knowing Release Provision”). [11/30/17 Order at 18-19 (quoting
the Sole Remedy Provision), 19-20 (quoting the Knowing Release
Provision), 22 (stating the two provisions are collectively
referred to as the Limitation Provisions).]
2

The Lockout and Plaintiffs’ claims related thereto are
(continued...)
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to Plaintiffs’ position that Defendants’ actions and omissions
caused Plaintiffs to lose the ability to recover punitive damages
from Centex in fraud claims, this Court ruled the Limitation
Provisions would not have precluded such recovery from Centex,
but attorneys cannot be held liable for lost punitive damages in
a legal malpractice claim.

[Id. at 39, 54.]

In the Motion for Reconsideration, Plaintiffs argue
reconsideration of the 11/30/17 Order is necessary because this
Court committed legal error in its unconscionability analysis.
Plaintiffs also seek clarification of the 11/30/17 Order because
they assert nothing in the order precludes them from recovering
lost treble damages against Defendants if they prove they would
have prevailed on their UDAP claims against Centex based on
Centex’s reckless behavior.
STANDARD
This Court has previously stated that a motion for
reconsideration
“must accomplish two goals. First, a motion for
reconsideration must demonstrate reasons why the
court should reconsider its prior decision.
Second, a motion for reconsideration must set
forth facts or law of a strongly convincing nature
to induce the court to reverse its prior
decision.” See Davis v. Abercrombie, Civil
No. 11-00144 LEK-BMK, 2014 WL 2468348, at *2 (D.
Hawaii June 2, 2014) (citation and internal

2

(...continued)
described in the 11/30/17 Order at pages 4-5.
5

quotation marks omitted). . . . “Mere disagreement
with a previous order is an insufficient basis for
reconsideration.” Davis, 2014 WL 2468348, at *3
n.4 (citations and internal quotation marks
omitted).
Riley v. Nat’l Ass’n of Marine Surveyors, Inc., Civil No. 1400135 LEK-RLP, 2014 WL 4794003, at *1 (D. Hawai`i Sept. 25,
2014).

Local Rule 60.1 states, in relevant part: “Motions for

reconsideration of interlocutory orders may be brought only upon
the following grounds: (a) Discovery of new material facts not
previously available; (b) Intervening change in law; [or]
(c) Manifest error of law or fact.”
DISCUSSION
I.

Unconscionability
Plaintiffs first argue this Court committed clear error

in conducting an unconscionability analysis of the Limitation
Provisions because unconscionability is a contract defense, and
Plaintiffs never asserted the Limitation Provisions in the Sales
Contracts were unconscionable.

Plaintiffs contend the contract

defense of unconscionability is irrelevant to the issue of
whether they would have prevailed against Centex on UDAP claims.
These arguments are misplaced.

The issue of whether the

Limitations Provisions were unconscionable was squarely presented
in the Damages Motion because Defendants argued the Limitations
Provisions are enforceable, and the issue of whether the
provisions are enforceable requires an analysis of whether they
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are unconscionable.

[Mem. in Supp. of Damages Motion at 24-29.]

Moreover, to the extent Plaintiffs contend an unconscionability
analysis was inappropriate because UDAP claims look at a
reasonable consumer, Plaintiffs conflate the issue of whether
they would have prevailed on their UDAP claims against Centex
with the issue of whether the available remedies for such claims
would have been governed by the Limitation Provisions.

The issue

of whether the Limitation Provisions were unconscionable requires
an analysis of Plaintiffs’ specific circumstances.

See, e.g.,

Narayan v. The Ritz-Carlton Dev. Co., 140 Hawai`i 343, 351, 400
P.3d 544, 552 (“Courts consider such factors as whether deceptive
or high-pressured tactics were employed, the use of fine print in
the contract, the experience and education of the party claiming
unconscionability, and whether there was disparity in bargaining
power between the parties.” (citation and internal quotation
marks omitted)), reconsideration denied, 140 Hawai`i 380, 400
P.3d 581 (2017), cert. denied sub nom., No. 17-694, 2018 WL
942462 (U.S. Feb. 20, 2018).

Plaintiffs’ argument that this

Court should not have conducted an unconscionability analysis is
therefore rejected.
Plaintiffs also contend this Court committed clear
error in: its procedural unconscionability analysis because this
Court failed to recognize Plaintiffs lacked meaningful choice in
the Limitation Provisions; and its substantive unconscionability
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analysis because this Court failed to recognize the Limitation
Provisions were unreasonably favorable to Centex.

As to

procedural unconscionability, Plaintiffs argue the Sales
Contracts were contracts of adhesion, giving them no meaningful
choice on the limitation of their available remedies from Centex.
Even if the Sales Contracts could be considered contracts of
adhesion, that fact alone does not render the Limitation
Provisions procedurally unconscionable.

In Narayan, the Hawai`i

Supreme Court recognized:
Procedural unconscionability often takes the
form of adhesion contracts, where a form contract
is created by the stronger of the contracting
parties, and the terms “unexpectedly or
unconscionably limit the obligations and liability
of the weaker party.” Nacino v. Koller, 101
Hawai`i 466, 473, 71 P.3d 417, 424 (2003) (quoting
Leong v. Kaiser Found. Hosp., 71 Haw. 240, 247,
788 P.2d 164, 168 (1990)). Although adhesion
contracts are not unconscionable per se, they are
defined by a lack of meaningful choice and, thus,
often satisfy the procedural element of
unconscionability.
Id. (emphases added).

The mere fact that a contract is a form

contract which could be characterized as a contract of adhesion
does not render it procedurally unconscionable.

This Court

considered the fact that the Sales Contracts were form contracts
in light of the circumstances of the Sales Contract execution as
a whole and concluded there was no procedural unconscionability.
Plaintiffs also argue the facts of Narayan are similar
to the instant case, and this Court should have concluded that
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there was procedural unconscionability, like the supreme court
did in Narayan.

Plaintiffs argue:

In Narayan (which, like here, specifically dealt
with Limitation Provisions in Sales Contracts for
luxury, high-end condominiums), the Hawai`i
Supreme Court found that because the developer
Ritz, i.e., “the party with the superior
bargaining strength” drafted the Limitation
Provision] (sic) found in the arbitration clauses
and because Plaintiffs (the homeowners) were
required to conform to the terms the arbitration
clause and those Limitation Provisions if they
wanted to purchase a Ritz Carlton condominium, the
arbitration clause and Limitation Provisions were
“adhesive in the sense that [were] ‘created by the
stronger of the contracting parties’ on a ‘takeit-or-leave-it’ basis.” Id. citing Nacino v.
Koller, 101 Hawai`i 466, 473, 71 P.3d 417, 424
(2003).
[Mem. in Supp. of Motion for Reconsideration at 10 (some
alterations Pltfs.’) (footnote omitted).]

However, Narayan and

the instant case have a critical factual difference.

In Narayan:

The purchase agreements contain two clauses
relating to dispute resolution: a jury waiver
clause and an attorneys’ fee clause. While these
clauses do not mention a binding agreement to
arbitrate, the purchase agreement references
another document, the Declaration of Condominium
Property Regime of Kapalua Bay Condominium
(declaration), which includes an arbitration
clause. The Defendants recorded the declaration
and the Association of Apartment Owners of Kapalua
Bay Condominium Bylaws (AOAO bylaws) in the State
of Hawai`i Bureau of Conveyances prior to the sale
of the individual condominium units to the
Homeowners. Additionally, the Defendants
registered the Condominium Public Report (public
report) with the Hawai`i Real Estate Commission.
All of these documents are incorporated by
reference through the purchase agreement.

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The arbitration clause is found towards the
end of the thirty-six page condominium
declaration . . . .
140 Hawai`i at 346-47, 400 P.3d at, 547-48.

In contrast, the

Limitations Provisions in the instant case were within
Plaintiffs’ Sales Contracts themselves – not another document
merely incorporated by reference in the Sales Contracts.
Further, Plaintiffs acknowledged each page of the Sales
Contracts, including the pages with the Limitation Provisions.
[11/30/17 Order at 18-21.]

Thus, Narayan does not require a

ruling that the Limitation Provisions in the instant case were
procedurally unconscionable.

Plaintiffs fail to establish that

this Court committed manifest error in the procedural
unconscionability analysis.
As to Plaintiffs’ substantive unconscionability
argument, this Court did consider whether the Limitations
Provisions were unreasonably favorable to Centex and concluded
the provisions were not unreasonably favorable because they
“provide[d] for a significant remedy – rescission, with interest
and reasonable attorneys’ fees and costs, less income from the
unit.”

[11/30/17 Order at 42.]

Plaintiffs merely disagree with

this Court’s conclusion, and their disagreement does not
constitute grounds for reconsideration of the 11/30/17 Order.
See Davis, 2014 WL 2468348, at *3 n.4.

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Plaintiffs fail to establish there was a manifest error
of law or fact in the 11/30/17 Order’s unconscionability
analysis.

The Motion for Reconsideration is therefore denied as

to that issue.
II.

Proof of Recklessness by Centex
Plaintiffs point out they pled reckless conduct by

Centex, and they presented evidence of Centex’s reckless conduct,
as well as Kanazawa’s knowledge of Centex’s reckless and
fraudulent conduct.
at 14.]

[Mem. in Supp. of Motion for Reconsideration

Plaintiffs argue
because the Court denied Defendants’ motion for
summary judgment on Plaintiffs’ UDAP claim,
Plaintiffs . . . request that this Court clarify
its order to make clear that, should Plaintiffs
prove their UDAP claim by demonstrating Centex’s
reckless (or worse) behavior, then they will be
entitled to an award of treble damages.
Plaintiffs see nothing in the Court’s [11/30/17]
Order precluding their award of treble damages
under UDAP in the event they prove such reckless
behavior, and thus they ask that the Court now
make that plain.

[Mem. in Supp. of Motion for Reconsideration at 3.]
First, it must be noted there is no UDAP claim against
the defendants in this case.

What is presented in this case is

Plaintiffs’ claim that, but for Defendants’ malpractice and/or
breach of fiduciary duty, Plaintiffs could have prevailed on UDAP
claims against Centex.

Second, the 11/30/17 Order ruled that,

because “a UDAP claim does not by definition require fraud or

11

other intentional or reckless conduct,” a valid nonrecourse
clause would protect a party from liability for UDAP claims.
[11/30/17 Order at 39 (emphasis in original).]

This Court ruled

the Limitations Provisions: were knowingly and willingly entered
into; were not procedurally unconscionable; were not prohibited
by Chapter 480; and were not substantively unconscionable.
at 40, 42, 47.]

[Id.

This Court therefore concluded, “under Laeroc

[Waikiki Parkside, LLC v. K.S.K. (Oahu) Ltd. P’ship, 115 Hawai`i
201, 224, 166 P.3d 961, 984 (2007)], the Limitation Provisions
would preclude Plaintiffs from seeking treble damages from Centex
in a UDAP claim.”

[Id. at 47.]

Thus, Plaintiffs’ statement that

nothing in the 11/30/17 Order precludes them from seeking lost
treble damages from Defendants in this case is flatly wrong.
What is pertinent is that the 11/30/17 Order recognizes
a nonrecourse provision is “valid to the extent it does not waive
liability in situations of intentional or reckless conduct.”
[11/30/17 Order at 38 (quoting Laeroc Waikiki Parkside, LLC v.
K.S.K. (Oahu) Ltd. P’ship, 115 Hawai`i 201, 224, 166 P.3d 961,
984 (2007)).]

While a plaintiff is not required to prove fraud

or other intentional or reckless conduct to prove a UDAP claim,
such conduct can be used to support a UDAP claim.

See id. at 39

(citing Lynch v. Fed. Nat’l Mortg. Ass’n, CIVIL NO. 16-00213
DKW-KSC, 2017 WL 3908663, at *10 (D. Hawai`i Sept. 6, 2017)
(listing the elements of a UDAP claim)).
12

Under Laeroc, the

Limitation Provisions do not waive Centex’s liability for
intentional or reckless conduct.

Thus, the Limitation Provisions

do not precluded recovery if Plaintiffs can establish that, but
for Defendants’ legal malpractice and/or breach of fiduciary
duty, Plaintiffs would have: 1) prevailed on UDAP claims against
Centex; and 2) proven those claims by establishing Centex engaged
in reckless or intentional conduct.

To the extent the 11/30/17

Order suggests otherwise, the Court provides clarification.
Further, to the extent the Damages Motion sought
summary judgment on the ground that Plaintiffs cannot establish
reckless or intentional conduct by Centex, the Court clarifies
that, for reasons similar to those discussed regarding
Plaintiffs’ evidence of actual damages, [id. at 32-37,] there are
genuine issues of material fact for trial as to whether Centex
engaged in reckless or intentional conduct that could have
supported Plaintiffs’ UDAP claim against it.
If Plaintiffs establish at trial that, but for
Defendants’ legal malpractice and/or breach of fiduciary duty,
Plaintiffs would have prevailed on UDAP claims against Centex and
Plaintiffs would have proven those UDAP claims with intentional
or reckless conduct by Centex, Plaintiffs will be able to recover
the lost UDAP remedies from Defendants.

Plaintiffs cannot

recover lost treble damages which they claim would have been
recovered against Centex.

Hawai`i courts have recognized that:
13

“Treble damages are a form of deterrence and hence serve a
purpose similar to punitive damages.

A legislative purpose of

HRS § 480-2 was the deterrence of fraudulent, unfair or deceptive
business practices.”

Davis v. Wholesale Motors, Inc., 86 Hawai`i

405, 421, 949 P.2d 1026, 1042 (Ct. App. 1997) (citation and
quotation marks omitted).
Hawai`i courts have not addressed the issue of whether
lost treble damages can be recovered as part of the plaintiff’s
compensatory damages in a legal malpractice claim.

For the same

reasons set forth in the analysis of whether lost punitive
damages are recoverable, [11/30/17 Order at 48-54,] this Court
predicts the Hawai`i Supreme Court would hold that an attorney
cannot be held liable for lost treble damages in a legal
malpractice claim.
Thus, insofar as the Motion for Reconsideration seeks a
ruling that Plaintiffs may seek treble damages that they could
have recovered from Centex as part of their compensatory damages
in their claims against Defendants, the Motion for
Reconsideration is denied.

Insofar as the Motion for

Reconsideration seeks a ruling that Plaintiffs may seek other
UDAP remedies they could have recovered from Centex as part of
their compensatory damages in their claims against Defendants,
the Court clarifies its prior order.

Plaintiffs’ damages in this

case will include lost UDAP remedies – except for treble damages,
14

if Plaintiffs prove they would have been able to establish their
UDAP claims against Centex by proving Centex engaged in reckless
or intentional actions or omissions.
CONCLUSION
On the basis of the foregoing, Plaintiffs’ Motion for
Reconsideration or, in the Alternative, for Clarification of a
Portion of Court’s Order: Denying Defendants’ Motion for Summary
Judgment on the Claims Asserted by Plaintiff Hye Ja Kim; Denying
Defendants’ Motion for Summary Judgment on the Claims Asserted by
Plaintiffs in Counts I and II of the Complaint; and Granting in
Part and Denying in Part Defendants’ Motion for Summary Judgment
for Lack of Actual Damages, or Alternatively, for Partial Summary
Judgment Regarding Punitive Damages Arising out of the Acts or
Omissions of Centex Homes, filed December 14, 2017, is HEREBY
DENIED.
The Motion for Clarification is GRANTED insofar as the
11/30/17 Order is clarified as follows: 1) if Plaintiffs
establish they could have prevailed on an UDAP claim against
Centex by proving Centex engaged in conduct that was reckless or
intentional, the nonrecourse clauses in their contracts with
Centex would not apply; 2) there are genuine issues of material
fact for trial as to whether Centex engaged in intentional or
reckless conduct that would support a UDAP claim; 3) the remedies
Plaintiffs could have obtained if they prevailed in UDAP claims
15

against Centex are part of Plaintiffs’ damages in their claims
against Defendants in this case; but 4) because treble damages
are similar in nature to punitive damages, Plaintiffs cannot
recover any treble damages they could have recovered from Centex
as damages in this case against Defendants.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, March 12, 2018.

/s/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge

JEREMY GREEN, ET AL. VS. SIDNEY K. KANAZAWA, ETC.; CIVIL NO. 1600054 LEK; HYE JA KIM VS. SIDNEY K. KANAZAWA, ETC.; CIVIL NO. 1600055 LEK; ORDER DENYING PLAINTIFFS’ MOTION FOR RECONSIDERATION
AND GRANTING CLARIFICATION

16