RT Import, Inc. v. Torres. , 139 Haw. 445 ( 2017 )

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Electronically Filed
Supreme Court
SCWC-14-0000970
13-APR-2017
07:53 AM
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
---oOo---
____________________________________________________________
RT IMPORT, INC., Respondent/Plaintiff-Appellee,
vs.
JESUS TORRES and MILA TORRES dba HAWAIIAN QUILT WHOLESALE,
Petitioners/Defendants-Appellants,
and
WORLDWIDE FLIGHT SERVICES, INC., Defendant.
____________________________________________________________
SCWC-14-0000970
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-14-0000970; CIV. NO. 12-1-1890)
APRIL 13, 2017
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
OPINION OF THE COURT BY McKENNA, J.
I. Introduction
Jesus and Mila Torres dba Hawaiian Quilt Wholesale (“the
Torreses”) appeal an arbitration award between them and RT
Import, Inc. (“RT Import”), raising four questions, of which
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only the first, relating to the circuit court’s award of fees
and costs, has merit. We hold that the circuit court erred by
including in its judgment $4,738.74 that was not included in the
final arbitration award or otherwise allowed by law.
II. Background
A. Court Proceedings Prior to Arbitration
On May 24, 2012, RT Import filed a complaint in the
District Court of the First Circuit against both the Torreses
and Worldwide Flight Services (“WFS”) seeking $25,000 in damages
for merchandise allegedly misdelivered by WFS to the Torreses,
which was then converted by the Torreses. The Torreses answered
the complaint and filed a cross-claim against WFS, seeking
indemnification and/or contribution in the event they were found
liable to RT Import. The Torreses also filed a demand for jury
trial, and the case was then transferred to the circuit court.1
After discovery, RT Import filed a petition to approve a
confidential good faith settlement with WFS pursuant to Hawaii
Revised Statutes (“HRS”) § 663-15.5 (Supp. 2012). After the
Torreses withdrew their objection, the settlement between RT
Import and WFS was approved by the circuit court.
A few weeks before the scheduled trial date, after
additional pre-trial proceedings and discovery, RT Import and
1
The Honorable Edwin C. Nacino presided.
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the Torreses agreed to resolve their dispute through binding
arbitration under the auspices of Dispute Prevention and
Resolution, Inc. (“DPR”), and they filed a stipulation for
binding arbitration.
B. Arbitration Proceedings
The following facts were adduced in arbitration. Although
the Torreses were to receive forty boxes of merchandise, WFS
mistakenly delivered eighty-eight boxes. The mistaken delivery
contained eighteen boxes belonging to RT Import, thirty-six
belonging to the Torreses, and thirty-four boxes belonging to
another company. The Torreses returned the thirty-four boxes
belonging to the other company, but they never acknowledged
receiving merchandise belonging to RT Import.
The arbitrator ruled that although WFS’s misdelivery led to
the Torreses’ initial receipt and possession of RT Import’s
merchandise, the Torreses’ subsequent actions, including
removing RT Import’s box labels and selling the merchandise at
the Aloha Stadium Swap Meet, proved that they committed the
intentional tort of conversion. The Final Award of Arbitrator
(“final award”) awarded RT Import a total of $106,711.62, with
subtotals of $71,663.33 for special damages and $35,000.00 for
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general damages for emotional distress.2 The arbitrator
specifically found:
29. As the prevailing party, RT is entitled to the fair
market value of the chattel, in addition to any special
damages, including compensation for the time and money
properly expended in pursuit of the property, plus
emotional distress.
30. The undisputed evidence adduced establishes that
the fair market retail value of the merchandise [sic]
$62,047.00.
31. The undisputed evidence adduced from RT establishes
the following costs related to this converted
merchandise: freight charges of $2,777.53, customs entry
services of $1,128.80, airport fees of $35.00, business
related airline travel of $2,175.00, incidental travel
expenses of $3,500.00.3 All other claims of expenses are
denied.
32. RT is also entitled to an award of damages for
emotional distress.
33. RT is entitled to be awarded its arbitration costs and
expenses.
34. In light of the fact that the claims asserted by
RT are tort claims, RT is not entitled to an award of
attorney’s fees and costs.
The arbitrator also ordered:
The Respondents are responsible for 100% of the
arbitration fees and costs. The Claimant is therefore
awarded, and the Respondents shall reimburse to the
Claimant directly, all arbitration related fees and costs
paid by the Claimant to DPR, and shall pay said fees and
costs as directed by Dispute Prevention & Resolution, Inc.
2
RT Import is a corporation. We are unaware of any legal authority that
permits an award of emotional distress damages to a corporation. Numerous
reported cases preclude emotional distress damages in favor of corporations.
See, e.g., F.D.I.C. v. Hulsey, 22 F.3d 1472, 1489 (10th Cir. 1994)(applying
Oklahoma law); Interphase Garment Sol., LLC v. Fox Television Stations, Inc.,
566 F. Supp. 2d 460, 466 (D. Md. 2008)(applying Maryland law); Earth
Scientists (Petro Serv.) Ltd. v. U.S. Fidelity & Guar. Co., 619 F. Supp.
1465, 1474 (D. Kansas 1985)(applying Kansas law); Wilson v. Colonial Penn
Life Ins. Co., 454 F. Supp. 1208, 1212, n.9 (D. Minn. 1978)(applying
Minnesota law). The emotional distress award was not challenged or appealed,
but, in any event, parties who submit their claims to binding arbitration
assume all the hazards of the arbitration process, including the risk that
the arbitrators may make mistakes in the application of law and in their
findings of fact. Nordic PCL Constr., Inc. v. LPIHGC, LLC, 136 Hawaii 29,
41, 358 P.3d 1, 14 (2015).
3
The amounts in paragraphs 30 and 31 total $71,663.33 in special
damages.
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(Emphasis added.) Pursuant to this portion of the final award,
DPR sent RT Import a final invoice (“DPR invoice”), directing
the Torreses to immediately remit $3,616.75 to RT Import (via
their attorney) as reimbursement for arbitration fees. This
amount was to reimburse RT Import for its advance toward the
arbitrator’s fees.
Several weeks after DPR issued its invoice, however, RT
Import sent a letter directly to the Torreses stating, “As
agreed by the parties and ordered by the Arbitrator, below
please find for your review and payment, the fees and costs of
this Arbitration matter. All supporting invoices in regard to
costs are enclosed . . . $8,355.49.” (“RT Import invoice”) The
RT Import invoice listed the following costs:
DPR Order/letter: $3,616.75
Postage, Photocopying Costs: $2,278.29
Deposition transcript of J. Torres, M. Torres, C. Murata:
$2,244.75
Services of process regarding depositions: $215.70
These amounts total $8,355.49. When the $3,616.75 in
arbitration fees reflected in the DPR invoice is subtracted, the
difference is $4,738.74.
C. Further Circuit Court Proceedings
Although they had stipulated to submit this case to binding
arbitration, the Torreses filed a Notice of Appeal and Request
for Trial De Novo of the final award, citing Rule 22 of the
Hawai‘i Arbitration Rules. On the same day, the Torreses also
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filed a motion with DPR to set aside the final award. The
Torreses alleged that RT Import had been made whole through the
confidential settlement, rendering the case moot, and that the
arbitrator lacked subject matter and personal jurisdiction.
RT Import opposed this motion before DPR, arguing that the
jurisdictional arguments were meritless, that the parties had
stipulated to binding arbitration, and that RT Import had not
been made whole by its settlement with WFS. DPR responded that
it had no authority under HRS § 658A or DPR’s Arbitration Rules
to rule on the motion.
RT Import then filed a motion in the circuit court to
confirm the final award pursuant to HRS § 658A-22. RT Import
requested that judgment be entered in its favor in the amount of
$106,663.33, plus $8,355.49 in costs paid for postage,
photocopying, deposition transcripts, and service of process
costs related to the arbitration as well as $1,692.80 for
attorney’s fees incurred in bringing the motion. RT Import
included both the DPR invoice and RT Import invoice in its
motion to confirm.
The Torreses incorporated the arguments contained in their
motion with DPR in their opposition memorandum to RT Import’s
circuit court motion to confirm. The Torresses did not file a
motion to vacate or modify the award with the circuit court.
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The circuit court granted RT Import’s motion to confirm the
final award and entered a judgment awarding RT Import a total of
$116,759.91, comprised of $106,711.62 for damages, $8,355.49 for
“Plaintiff’s Arbitration attorney’s fees and costs,” and
$1,692.80 for “Plaintiff’s Costs of Motion for an Order to
Confirm Final Award of Arbitrator Dated April 2, 2014.”
D. Appeal to the Intermediate Court of Appeals (“ICA”)
On appeal to the ICA, the Torreses asserted that the
circuit court abused its discretion by: (1) concluding that they
were not entitled to a trial de novo on the grounds that this
case was not in the Court-Annexed Arbitration Program; (2)
awarding attorney’s fees and costs to RT Import despite the
arbitrator’s ruling that attorney’s fees were not available for
this tort matter; and (3) granting the motion to confirm the
final award without confirming whether the arbitrator had
subject matter and personal jurisdiction. The Torreses also
alleged that DPR’s arbitration administrator abused its
discretion by refusing to hear and decide their motion to set
aside the final award pursuant to the Hawaii Arbitration Rules.4
In a summary disposition order, the ICA determined that the
Torreses’ appeal was without merit. RT Imp., Inc. v. Torres,
No. CAAP-14-0000970, 2016 WL 6125676, at *1 (Haw. Ct. App. Oct.
4
DPR’s arbitration administrator, which is a court-annexed, non-binding
arbitration alternative dispute resolution process, has no connection to the
Hawaii Arbitration Rules.
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20, 2016). The ICA resolved the Torreses’ points on appeal as
follows:
(1) when the circuit court heard RT Import’s Motion to
Confirm Award, Appellants did not raise HRS chapter 658A as
a basis for challenging the arbitration award;
(2) the DPR case manager had no authority to consider or
rule on the Appellants' Motion to Set Aside under HRS
chapter 658A; and
(3) this case was never part of the Court–Annexed
Arbitration Program or subject to the rules of the program,
but instead was conducted pursuant to HRS chapter 658A.
The ICA therefore affirmed the circuit court’s confirmation of
the final arbitration award and judgment.
E. Application for Writ of Certiorari
The Torreses raise the following four questions on
certiorari:
1. Whether the ICA gravely erred in concluding that the
circuit court properly awarded attorney’s fees in an
arbitration case where the awarding of attorney’s fees was
precluded by the arbitrator pursuant to the American rule
and where no language in the arbitration agreement
permitted the awarding of attorney’s fees?
2. Whether the ICA gravely erred in concluding an
arbitration case may proceed to trial and a verdict may be
obtained, even where the facts show that prior to the
commencement of the arbitration trial, the injured party
was made whole prior to the commencement of that trial?
3. Whether the ICA gravely erred in affirming the award of
an arbitration award of $106,711.62, where Plaintiff only
sought $15,800 in damages?
4. Whether the ICA gravely erred in concluding that measure
of damages in case [sic] tort case involving the tort of
conversion is the value of the chattel at the time of the
judgment?
III. Standards of Review
A. Review of an arbitration award
Where a party challenges an arbitration award, the
following precepts are applicable. First, because of the
legislative policy to encourage arbitration and thereby
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discourage litigation, arbitrators have broad discretion in
resolving the dispute. Upon submission of an issue, the
arbitrator has authority to determine the entire question,
including the legal construction of terms of a contract or
lease, as well as the disputed facts. In fact, where the
parties agree to arbitrate, they thereby assume all the
hazards of the arbitration process, including the risk that
the arbitrators may make mistakes in the application of law
and in their findings of fact.
Second, correlatively, judicial review of an arbitration
award is confined to the strictest possible limits. An
arbitration award may be vacated only on the four grounds
specified in HRS § 658–9 and modified and corrected only on
the three grounds specified in HRS § 658–10. Moreover, the
courts have no business weighing the merits of the award.
Third, HRS §§ 658–9 and –10 also restrict the authority of
appellate courts to review judgments entered by circuit
courts confirming or vacating the arbitration awards.
. . . .
The promulgation of HRS chapter 658A has not materially
changed this standard of review. Judicial review of
arbitration awards remains limited to the statutory grounds
for confirmation, vacatur, modification, and correction.
Nordic PCL Constr., Inc., 136 Hawaii at 41-42, 358 P.3d at 13-
14.
B. Statutory interpretation
Statutory interpretation is a question of law reviewable de
novo. Our construction of statutes is guided by the
following rules:
First, the fundamental starting point for statutory-
interpretation is the language of the statute itself.
Second, where the statutory language is plain and
unambiguous, our sole duty is to give effect to its plain
and obvious meaning. Third, implicit in the task of
statutory construction is our foremost obligation to
ascertain and give effect to the intention of the
legislature, which is to be obtained primarily from the
language contained in the statute itself. Fourth, when
there is doubt, doubleness of meaning, or indistinctiveness
or uncertainty of an expression used in a statute, an
ambiguity exists.
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Panado v. Bd. of Trs., Emps.’ Ret. Sys., 134 Hawaii 1, 10-11,
332 P.3d 144, 153-54 (2014) (internal quotation marks and
citations removed).
IV. Discussion
A. The circuit court erred by including in its judgment
$4,738.74 not included in the arbitration award and not
allowable under HRS § 658A-25.
In their first question on certiorari, the Torreses
challenge the circuit court’s award of “attorney’s fees” as part
of the judgment, alleging that such fees were not authorized by
the arbitrator.
HRS § 658A-25 (Supp. 2012) “Judgment on award;
attorney's fees and litigation expenses” provides:
(a) Upon granting an order confirming, vacating without
directing a rehearing, modifying, or correcting an award, the
court shall enter a judgment in conformity therewith. The
judgment may be recorded, docketed, and enforced as any other
judgment in a civil action.
(b) A court may allow reasonable costs of the motion and
subsequent judicial proceedings.
(c) On application of a prevailing party to a contested judicial
proceeding under section 658A-22, 658A-23, or 658A-24, the court
may add reasonable attorney’s fees and other reasonable expenses
of litigation incurred in a judicial proceeding after the award
is made to a judgment confirming, vacating without directing a
rehearing, modifying, or correcting an award.
HRS § 658A-25. There were two amounts in the judgment
characterized as “attorney’s fees,” both of which have been
challenged by the Torreses in the circuit court and on appeal.
These amounts are the $1,692.80 award characterized by the
circuit court as “Plaintiff’s Costs of Motion” and the $8,355.49
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award characterized by the circuit court as “Plaintiff’s
Arbitration attorney’s fees and costs.”
1. The $1,692.80 award was properly included in the
circuit court judgment pursuant to HRS § 658-23(c).
The circuit court characterized the $1,692.80 in attorney’s
fees incurred by RT Import in the judicial proceedings to
confirm the final award as “Plaintiff’s Costs of Motion,” which
appear to correspond to amounts allowed under HRS § 658A-25(b)
(Supp. 2012). The amounts were for attorney’s fees in bringing
the motion to confirm the final award under HRS § 658A-22 (Supp.
2012). Pursuant to the language of the statute, the amounts are
therefore governed by HRS § 658A-25(c).
Although the $1,692.80 was mischaracterized, HRS § 658A-
25(c) allows a court to award attorney’s fees incurred in
judicial proceedings to confirm an arbitration award when a
motion to confirm award under HRS § 658A-22 is contested. See In
re Arbitration Between United Pub. Workers, AFSCME, Local 646,
AFL-CIO and City and Cty. of Honolulu, 119 Hawaii 201, 209, 194
P.3d 1163, 1171 (App. 2008) (noting that attorney’s fees on a
motion to confirm award are only allowable to a prevailing party
to a contested judicial proceeding under HRS §§ 658A-22, 658A-
23, or 658A-24).
In this case, the Torreses contested RT Import’s HRS §
658A-22 judicial proceedings to confirm the award.
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Therefore, the circuit court’s judgment properly included the
amount of $1,692.80, as it was awarded pursuant to HRS § 658A-
25(c) for attorney’s fees incurred in the judicial proceeding
regarding the contested award.
2. The circuit court was without authority to include in
its judgment $4,738.74 of the $8,355.49 award
characterized as arbitration attorneys’ fees and costs
because that amount was not included in the
arbitration award.
With respect to the $8,355.49 award characterized by the
circuit court as arbitration attorneys’ fees and costs, this
amount included the: (1) $3,616.75 for arbitrator’s fees in the
DPR invoice, and (2) additional amounts totalling $4,738.74 in
the RT Import invoice, which consisted of $2,278.29 in postage
and photocopying costs, $2,244.75 for deposition transcripts,
and $215.70 for service of process costs for depositions.
The arbitrator’s final award, however, stated as follows:
The Respondents are responsible for 100% of the arbitration
fees and costs. The Claimant is therefore awarded, and the
Respondents shall reimburse to the Claimant directly, all
arbitration related fees and costs paid by the Claimant to
DPR, and shall pay said fees and costs as directed by
Dispute Prevention & Resolution, Inc.
(Emphasis added.) The DPR invoice, issued pursuant to the final
award, directed the Torreses to pay $3,616.75 for the
arbitrator’s fees. Although the separate RT Import invoice
asserted that the parties had agreed to the additional amounts,
the Torreses object to these amounts characterized as
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arbitration attorney’s fees throughout these judicial
proceedings.
Whether the circuit court could include the extra $4,738.74
not “directed by DPR” to be paid by the Torreses to RT Import is
an issue of statutory interpretation. The plain language of HRS
§ 658A-22 authorizes the circuit court to confirm “the award.”5
The “award” includes the $3,616.75 as “directed by DPR,” but not
the additional $4,738.74 separately invoiced directly by RT
Import to the Torreses. Therefore, the circuit court erred by
including in its judgment the $4,738.74, which was not part of
the arbitration award.
B. Based on the deference given to arbitration awards, the
court did not err in confirming the remainder of the final
arbitration award in its entirety.
In the second, third, and fourth questions raised on
certiorari, the Torreses allege that the arbitrator erred by
awarding damages because RT Imports had been made whole by its
settlement with WFS, by awarding damages that exceeded the
$15,800 purportedly originally sought by RT Imports, and by
applying an incorrect measure of damages. In Section III(A)
5
HRS § 658A-22 provides:
Confirmation of award. After a party to an arbitration
proceeding receives notice of an award, the party may make
a motion to the court for an order confirming the award at
which time the court shall issue a confirming order unless
the award is modified or corrected pursuant to section
658A-20 or 658A-24 or is vacated pursuant to section 658A-
23.
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above, we outlined the standards governing judicial review of an
arbitration award, including:
because of the legislative policy to encourage arbitration
and thereby discourage litigation, arbitrators have broad
discretion in resolving the dispute. Upon submission of an
issue, the arbitrator has authority to determine the entire
question, including the legal construction of terms of a
contract or lease, as well as the disputed facts. In fact,
where the parties agree to arbitrate, they thereby assume
all the hazards of the arbitration process, including the
risk that the arbitrators may make mistakes in the
application of law and in their findings of fact.
Second, correlatively, judicial review of an arbitration
award is confined to the strictest possible limits. . . .
Moreover, the courts have no business weighing the merits
of the award.
Nordic PCL Constr., Inc., 136 Hawaii at 41, 358 P.3d at 13.
In addition, HRS § 658A-21(c)(Supp. 2012) specifically
provides in relevant part:
[A]n arbitrator may order such remedies as the arbitrator
considers just and appropriate under the circumstances of
the arbitration proceeding. The fact that such a remedy
could not or would not be granted by the court is not a
ground for refusing to confirm an award under section 658A-
22 . . . .
Accordingly, pursuant to the standards governing judicial
review of arbitration awards, the second, third, and fourth
questions on certiorari are outside the scope of permitted
judicial review.
V. Conclusion
In this case, the circuit court erred by including in the
judgment confirming the arbitration award $4,738.74 directly
billed by RT Import to the Torreses, which was not a part of the
final award. Accordingly, we otherwise affirm but vacate the
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ICA’s Judgment on Appeal and the circuit court’s Judgment as to
$4,738.74 of the $8,355.49 for “Plaintiff’s Arbitration
attorney’s fees and costs,” and remand this case to the circuit
court for further proceedings consistent with this opinion. In
all other respects, the ICA’s Judgment on Appeal is affirmed.
Barry L. Sooalo /s/ Mark E. Recktenwald
for petitioner
/s/ Paula A. Nakayama
Robert E. Badger
for respondent /s/ Sabrina S. McKenna
/s/ Richard W. Pollack
/s/ Michael D. Wilson
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