Goran Pleho, LLC v. Lacy. ICA mem.op., filed 07/29/2016. Motion for Partial Reconsideration of Memorandum Opinion, filed 08/08/2016. ( 2019 )

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Electronically Filed
Supreme Court
SCWC-XX-XXXXXXX
10-APR-2019
09:39 AM
IN THE SUPREME COURT OF THE STATE OF HAWAII
---o0o---
GORAN PLEHO, LLC, a Hawaii Limited Liability Company (dba
Resorts Limousine Services), GORAN PLEHO and ANA MARIA PLEHO,
Petitioners/Plaintiffs-Appellants/Cross-Appellees,
vs.
DAVID W. LACY, LACY AND JACKSON, LLLC,
a Hawaii Limited Liability Law Company,
Respondents/Defendants-Appellees/Cross-Appellants,
and
DRAGAN RNIC, Respondent/Defendant-Appellee.
SCWC-XX-XXXXXXX
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-XX-XXXXXXX; CIVIL NO. 06-1-101K)
APRIL 10, 2019
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
DISSENTING OPINION BY RECKTENWALD, C.J.,
IN WHICH NAKAYAMA, J., JOINS
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I. INTRODUCTION
Each state has enacted consumer protection
legislation.1 Many of these statutes are modeled after the
Federal Trade Commission Act (FTCA) and are thus referred to as
“little FTC Acts.”2 Hawaii’s corollary to FTCA § 5, HRS § 480-
2,3 was “constructed in broad language in order to constitute a
flexible tool to stop and prevent fraudulent, unfair or deceptive
practices for the protection of both consumers and honest
businessmen.” Kukui Nuts of Hawaii, Inc. v. R. Baird & Co., 7
Haw. App. 598, 610, 789 P.2d 501, 510 (1990) (quoting Ai v. Frank
Huff Agency, Ltd., 61 Haw. 607, 616, 607 P.2d 1304, 1311 (1980)).
Much like FTCA § 5(a)(1) and similar provisions in little FTC
acts from several other states,4 it outlaws “[u]nfair methods of
competition and unfair or deceptive acts or practices in the
1
See Randall Scott Hetrick, Unfair Trade Practices Acts Applied to
Attorney Conduct: A National Review, 18 J. Legal Prof. 329, 330 n.7 (1993)
(listing consumer protection legislation from all 50 states).
2
Section 5(a)(1) of the Federal Trade Commission Act is codified as
15 U.S.C. § 45(a)(1).
3
Chapter 481A of the Hawaii Revised Statutes, entitled the Uniform
Deceptive Trade Practice Act, is often referred to as Hawaii’s little FTC
act. See, e.g., Reauthorization of the Federal Trade Commission, 1982
Hearings on S. 1984 Before the Senate Comm. on Commerce, Science, and
Transportation, 97th Cong., 2d Sess., 46, n.9 (listing HRS § 481A as Hawaii’s
little FTC act). HRS § 480-2, however, is Hawaii’s version of Section 5 of
the FTCA. Chapter 481A codifies common law concepts of unfair competition
which fall within the purview of Section 5 of the FTCA and HRS § 480-2.
4
See ALASKA STAT. § 45.50.471(a); CONN. GEN. STAT. § 42-110b; FLA. STAT.
§ 501.204(1); GA. CODE § 10-1-393; KY. REV. STAT. § 367.170; ME. REV. STAT. tit. 5,
§ 207; MONT. CODE § 30-14-103; NEB. REV. STAT. § 59-1602; N.H. REV. STAT. § 358-A:2;
N.C. GEN. STAT. § 75-1.1(a); 73 PA. STAT. § 201-3; 6 R.I. GEN. LAWS § 6-13.1-2; S.C.
CODE § 39-5-20(a); VT. STAT. TIT. 9, § 2453; WASH. REV. CODE § 19.86.020; W. VA. CODE
§ 46A-6-104.
2
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conduct of any trade or commerce.” HRS § 480-2(a).
Whether a client may bring a UDAP action against his or
her lawyer under HRS § 480-2 is a question of first impression
before this court.5 As set forth below, I conclude that under
HRS § 480-2, UDAP liability does not apply to the actual practice
of law. I further conclude that Lacy’s alleged misconduct falls
within the actual practice of law, rather than the business or
entrepreneurial aspects of the legal profession. Therefore, I
respectfully dissent from the Majority’s ruling vacating the
circuit court’s grant of summary judgment on Goran and Maria’s
UDAP claim and remanding the claim for further proceedings.
II. DISCUSSION
A UDAP Liability Does Not Apply to The Actual Practice of Law
Under HRS § 480-2
In applying HRS § 480-2, courts are directed to “give
due consideration to the rules, regulations, and decisions of the
Federal Trade Commission (FTC) and the federal courts”
interpreting FTCA § 5(a)(1). HRS § 480-2(b). Due consideration,
however, implies reasoned judgment appropriate to the
circumstances.
As the House Committee on Housing and Consumer
Protection explained, HRS § 480-2 “provides that the courts, in
5
It appears Hungate v. Law Office of David B. Rosen, 139 Hawaii
394, 391 P.3d 1 (2017), is the only Hawaii case involving a UDAP claim
brought against an attorney. In Hungate, this court declined to recognize a
UDAP claim brought against an attorney by an opposing party. 139 Hawaii at
412-13, 391 P.3d at 19-20.
3
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construing its terms, will be guided by the interpretations given
by the Federal Trade Commission and the Federal courts to the
appropriate sections of the Federal Trade Commission Act. In
each case, however, the courts of Hawaii must also necessarily
give due regard to the problems peculiar or pertinent to the
State of Hawaii.” H. Stand. Comm. Rep. No. 55, in 1965 House
Journal, at 539 (emphasis added). In determining whether HRS §
480-2 applies to the actual practice of law, we should look not
only to federal case law and FTC guidance, but also to relevant
case law from other states, this court’s interpretations of HRS
§ 480-2, and considerations specific to the State of Hawaii. As
set forth below, the imposition of UDAP liability upon the actual
practice of law is contrary to this court’s interpretations of
HRS § 480-2, unsupported by federal guidance and case law from
other states, unnecessary and duplicative, and against public
policy. I therefore conclude that UDAP liability does not apply
to the actual practice of law under HRS § 480-2.
1. No Published Federal Case Applies UDAP Liability to the
Actual Practice of Law
It is well-settled that lawyers may be subject to
antitrust liability under FTCA § 5(a)(1). The United States
Supreme Court has held that “[t]he nature of an occupation,
standing alone, does not provide sanctuary from the Sherman Act”
and a lawyer who violates section 1 of the Sherman Act by
engaging in anticompetitive practices also violates FTCA
4
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§ 5(a)(1). Goldfarb v. Virginia State Bar, 421 U.S. 773, 787
(1975); Fed. Trade Comm’n v. Superior Court Trial Lawyers Ass’n,
493 U.S. 411, 422 (1990).
The fact that lawyers may be subject to liability under
FTCA § 5(a)(1) for engaging in anticompetitive business practices
does not, however, mean lawyers are also exposed to UDAP
liability when engaged in the actual practice of law. Following
the Supreme Court’s acknowledgment that “[i]t would be
unrealistic to view the practice of professions as
interchangeable with other business activities,” federal courts
have long recognized a distinction between the business or
entrepreneurial aspects of the legal profession and the actual
practice of law. Goldfarb, 421 U.S. at 788, 788 n.17; Gadson v.
Newman, 807 F.Supp. 1412, 1416-17 (C.D. Ill. 1992) (discussing
Goldfarb in the context of the “business aspects of the legal and
medical professions”); Kessler v. Loftus, 994 F.Supp. 240, 242
(D. Vt. 1997) (stating “many jurisdictions differentiate between
the commercial, entrepreneurial aspects of law and the legal,
advisory, analytical aspects of law,” and providing examples).
UDAP liability imposed upon attorneys by federal courts
has been limited to the business or entrepreneurial aspects of
the legal profession. The Majority misconstrues federal case law
as “clear precedent” that the practice of law is subject to UDAP
liability under the FTCA. However, it does not appear any
federal court has applied UDAP liability to the actual practice
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of law under FTCA § 5(a)(1). Each federal case cited by the
Majority is distinguishable on the grounds that it: i) does not
involve claims brought under the FTCA; ii) fails to find a
violation; iii) imposes liability upon the business or
entrepreneurial aspects of the legal profession; or iv) is an
unpublished decision that may have persuasive value, but does not
constitute binding precedent.6 Thus, federal courts provide
minimal guidance on the question at issue.
2. FTC Guidance Makes Clear That This Court is Not Bound
by Federal Interpretations of the FTCA
Turning to relevant FTC guidance, the Majority relies
on Heslin v. Connecticut Law Clinic of Trantolo & Trantolo, 461
A.2d 938 (Conn. 1983), to demonstrate that the FTC “has
maintained that state-regulated professions, including the
6
Goldfarb v. Va. State Bar, 421 U.S. 773 (1975) (finding a minimum-
fee schedule published by a county bar association and enforced by the state
bar violated section 1 of the Sherman Act); Bates v. State Bar of Ariz., 433
U.S. 350 (1977) (holding that attorneys cannot be subjected to a blanket ban
on advertising, as the “belief that lawyers are somehow above ‘trade’ is an
anachronism,” and publicly eschewing advertising may actually be detrimental
to the legal profession); Fed. Trade Comm’n v. Super. Ct. Trial Lawyers Ass’n,
493 U.S. 411 (1990) (finding a group of lawyers appointed to represent
indigent criminal defendants violated FTC section 5(a)(1) by conspiring to fix
prices and refusing to accept new assignments); Fed. Trade Comm’n v. Lanier
Law, LLC, 194 F.Supp.3d 1238 (M.D. Fla. 2016) (finding attorneys violated FTCA
§ 5(a)(1), but noting “the [c]ourt is exceedingly skeptical that the
superficial work given to these attorneys constitutes the ‘practice of law’ by
any definition”); Fed. Trade Comm’n v. Lucas, No. 10-56985, 2012 WL 4358009(9th Cir. Sept. 25 2012) (unpublished dispositions and orders of the Ninth
Circuit are not precedent, pursuant to Ninth Circuit Rule 36-3(a); Consumer
Fin. Prot. Bureau v. Frederick J. Hanna & Assocs., P.C., 114 F.Supp.3d 1342(N.D. Ga. 2015) (addressing claims brought under the Fair Debt Collection
Practices Act and the Consumer Financial Protection Act, rather than the
FTCA); McDevitt v. Guenther, 522 F.Supp.2d 1272 (D. Haw. 2007) (disposing of a
480-2 claim because, as threshold matters, the applicable statute of
limitations had run and the damages alleged were speculative).
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practice of law, are not and should not be exempted from coverage
of the FTCA.” Majority at 19, n.13 (internal quotations
omitted). While the FTC may have taken this position with regard
to the application of the FTCA, the FTC has also conceded that
the extent to which states follow federal interpretations of FTCA
§ 5 in applying their respective state consumer protection laws
“would have to be resolved by the state courts.”7
In fact, just prior to the Heslin decision, then-
chairman of the FTC, James C. Miller III appeared before the
Senate Committee on Commerce, Science, and Transportation. He
stated, “we have not found any decisions holding that
interpretations of [FTCA] Section 5 are binding on state
administrative agencies and courts. On the contrary, several
courts have held that although federal court decisions provide
useful guidance, they are not controlling.” Reauthorization of
the Federal Trade Commission, 1982 Hearings on S. 1984 Before the
Senate Comm. on Commerce, Science, and Transportation, 97th
Cong., 2d Sess., 45 (citations omitted) (emphasis added).
Furthermore, it is imperative to note that despite its
recognition of the FTC’s position in Heslin, the Connecticut
7
The Heslin Court cited a letter written by the FTC’s then-
chairman, James C. Miller III, in preparation for a Senate Committee hearing.
Heslin, 461 A.2d at 943. During the same hearing, however, Miller
acknowledged that federal guidance is not binding on states’ interpretations
of their respective consumer protection statutes. Reauthorization of the
Federal Trade Commission, 1982 Hearings on S. 1984 Before the Senate Comm. on
Commerce, Science, and Transportation, 97th Cong., 2d Sess., 45 (citations
omitted).
7
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Supreme Court has determined that Connecticut’s UDAP statute –
which is almost identical to HRS § 480-2(a) - does not apply to
the actual practice of law.8 See Heslin, 461 A.2d at 943 (“[W]e
need only conclude that CUTPA’s regulation . . . does not totally
exclude all conduct of the profession of law.”); Beverly Hills
Concepts, Inc. v. Schatz & Schatz, Ribicoff & Kotkin, 717 A.2d
724, 740 (Conn. 1998) (“only the entrepreneurial aspects of the
practice of law are covered by [Connecticut’s consumer protection
statute]”).
Therefore, not only does federal case law fail to
clearly address the application of UDAP liability to the actual
practice of law under FTCA § 5(a)(1), FTC guidance makes clear
that this court is not bound by federal interpretations of the
FTCA in determining whether the actual practice of law may be
subject to UDAP liability under HRS § 480-2. With regard to the
application of UDAP liability to the practice of law, this
court’s first concern is interpreting HRS § 480-2, even if doing
so means diverging from federal interpretations of the FTCA.
3. States Overwhelmingly Exclude the Actual Practice of
Law From UDAP Liability
Where federal courts do not provide dispositive
guidance, “insofar as many, if not most, of the several states’
8
Compare CONN. GEN. STAT. § 42-110b(a) (“No person shall engage in
unfair methods of competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce.”) with HRS § 480-2(a) (“Unfair methods of
competition and unfair or deceptive acts or practices in the conduct of any
trade or commerce are unlawful.”).
8
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consumer protection statutes, including Hawaii’s, have a common
genesis in the federal antitrust statutes, we look to other
jurisdictions for guidance.” Cieri v. Leticia Query Realty,
Inc., 80 Hawaii 54, 62–63, 905 P.2d 29, 37–38 (1995). Other
than Massachusetts, each state that has specifically addressed
the application of its consumer protection statute to attorneys
has determined that the actual practice of law falls outside the
scope of UDAP liability. See Cripe v. Leiter, 703 N.E.2d 100,
105 (Ill. 1998) (“there appears to be little dispute among the
decisions addressing this issue that consumer protection statutes
do not apply to claims arising out of the ‘actual practice of
law.’”); Beyers v. Richmond, 937 A.2d 1082, 1086-87 (Pa. 2007)
(discussing cases); see also 17 Am. Jur. 2d Consumer Protection §
288 (2018) (“State consumer protection or deceptive trade
practices statutes generally apply only to the business aspects
of the practice of law, excluding coverage of lawyers engaged in
the practice of law.”).
Some states statutorily address the application of
their respective consumer protection statutes to attorneys. Each
one exempts the actual practice of law from the purview of UDAP
liability.9 In the remaining states, including Hawaii, the
9
MD. CODE ANN., COM. LAW § 13-104 (the Consumer Protection Act of
Maryland does not apply to “[t]he professional services of a . . . lawyer”);
N.C. Gen. Stat. Ann. § 75-1.1(b) (exempting professional services rendered by
a member of a learned profession from liability under North Carolina’s UDAP
statute); Reid v. Ayers, 531 S.E.2d 231, 236 (N.C. Ct. App. 2000) (the
(continued...)
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courts are tasked with determining whether the actual practice of
law is subject to UDAP liability.
Courts in New Jersey, New Hampshire, and Pennsylvania
have categorically excluded all attorney conduct - both the
business aspects of the legal profession and the actual practice
of law - from UDAP liability to avoid interference with the
regulation of the legal profession by their respective supreme
courts. See, e.g., Vort v. Hollander, 607 A.2d 1339, 1342 (N.J.
Super. Ct. App. Div. 1992) (“[T]he practice of law in the State
of New Jersey is in the first instance, if not exclusively,
regulated by the New Jersey Supreme Court. Had the legislature
intended to enter the area of attorney regulation it surely would
have stated with specificity that attorneys were covered under
the Consumer Fraud Act”) (internal citations omitted); Averill v.
Cox, 761 A.2d 1083, 1088 (N.H. 2000) (the Supreme Court of New
Hampshire’s “comprehensive” regulation of the practice of law
(...continued)
statutory “learned profession” exemption to North Carolina’s UDAP statute
applies when an attorney is acting within the scope of the traditional
attorney-client role, but not when the attorney is engaged in the
entrepreneurial aspects of legal practice); OHIO REV. CODE ANN. § 1345.01 (for
purposes of Ohio’s UDAP legislation, “‘Consumer transaction’ does not include
. . . transactions between attorneys . . . and their clients”); Tex. Bus. &
Com. Code Ann. § 17.49(c) (Texas’s Deceptive Trade Practices-Consumer
Protection Act does not “apply to a claim for damages based on the rendering
of a professional service, the essence of which is the providing of advice,
judgment, opinion, or similar professional skill.”); Streber v. Hunter, 221
F.3d 701 (5th Cir. 2000) (the Texas Deceptive Trade Practices Act applies to
lawyers, but expressly excludes from liability anything that can be
characterized as advice, judgment, or opinion); D.C. Code Ann. §
28-3903(c)(2)(C) (Washington D.C.’s UDAP statute does not apply to
“professional services of clergymen, lawyers, and Christian Science
practitioners engaging in their respective professional endeavors”).
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“protects consumers from the same fraud and unfair practices” as
the state consumer protection act); Beyers, 937 A.2d at 1089-92
(Pennsylvania’s consumer protection law does not apply to a
dispute over the disbursement of settlement funds because the
Supreme Court of Pennsylvania has “exclusive authority” over the
regulation of attorney conduct).
Courts in other states have extended UDAP liability to
the business or entrepreneurial aspects of the legal profession,
while excluding the actual practice of law from the scope of
liability.10 See, e.g., Short v. Demopolis, 691 P.2d 163, 168
(Wash. 1984) (certain entrepreneurial aspects of the practice of
law may fall within the ‘trade or commerce’ definition of
Washington’s consumer protection act, but claims that concern the
actual practice of law are exempt from the CPA); Beverly Hills
Concepts, 717 A.2d at 740 (“only the entrepreneurial aspects of
the practice of law are covered by [Connecticut’s consumer
protection statute]”); Cripe, 703 N.E.2d at 107 (“where
allegations of misconduct arise from a defendant’s conduct in his
or her capacity as an attorney representing a client, the
Consumer Fraud Act [of Illinois] does not apply.”); Kessler, 994
10
The Majority opinion asserts that these state court decisions are
“directly contrary to this court’s own precedent and the federal sources the
statute expressly instructs us to consider.” Majority at 23-24, n.16.
However, the cases cannot be “directly contrary to this court’s own
precedent,” as the applicability of UDAP liability to the practice of law is a
question of first impression before this court. Additionally, as noted in
Justice Pearson’s concurrence in Short and discussed infra, federal case law
does not support the application of UDAP liability to the practice of law.
Short v. Demopolis, 691 P.2d 163 (Wash. 1984) (Pearson, J., concurring).
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F.Supp. at 243 (Vermont’s Consumer Fraud Act applies to the
commercial, entrepreneurial aspects of the practice of law, but
not the legal, advisory, analytical aspects of law). The
business or entrepreneurial aspects of the legal profession
include, for example, “how the price of legal services is
determined, billed, and collected and the way a law firm obtains,
retains, and dismisses clients,” but not “the actual practice of
law.” Short, 691 P.2d at 168.
It appears Massachusetts is the only state to apply
UDAP liability to the actual practice of law. See Brown v.
Gerstein, 460 N.E.2d 1043 (Mass. App. Ct. 1984) (citing Guenard
v. Burke, 443 N.E.2d 892 (Mass. 1982) (a couple’s UDAP claim
against their attorney for allegedly misrepresenting that a
foreclosure sale of the clients’ property would not take place
should have been considered on its merits because “the practice
of law constitutes ‘trade or commerce’ for purposes of liability
under [Massachusetts’ UDAP statute]”). Thus, states that have
addressed the issue almost unanimously reject the application of
UDAP liability to the actual practice of law.
a. It is Most Appropriate for This Court to Look to
Washington Case Law for Guidance
The Majority relies heavily on Cieri, 80 Hawaii 54,
905 P.2d 29 (1995), for the proposition that Hawaii courts have
already endorsed, and should continue to follow, Massachusetts’
framework for analyzing the applicability of UDAP liability. I
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respectfully disagree.
First, as discussed above, Massachusetts is unique in
its application of UDAP liability. Although the Cieri court
found Massachusetts case law to be instructive in the specific
context of a real estate broker facilitating a real estate
transaction, the court did not adopt the entire body of
Massachusetts case law regarding the application UDAP liability,
nor did it hold that, in the absence of Hawaii precedent,
Massachusetts is the only jurisdiction Hawaii courts should look
to for guidance. Id. at 63-65, 905 P.2d at 38-40.
The Cieri court indicated that this court should
consult case law from other states in determining how HRS § 480-
2(a) should be applied. It stated, “insofar as many, if not
most, of the several states’ consumer protection statutes,
including Hawaii’s, have a common genesis in the federal
antitrust statutes, we look to other jurisdictions for guidance.”
Id. at 62-63, 905 P.2d at 37-38. Massachusetts is just one such
jurisdiction.
It is most appropriate for this court to consider
Washington case law regarding the application of UDAP liability.
First, our Legislature specifically considered Washington’s
consumer protection statute in enacting HRS § 480-2. The House
Committee on Housing and Consumer Protection introduced the
proposal to enact HRS § 480-2 by stating, “[a] law similar in
effect to the Federal law was enacted by the State of Washington
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in 1961. Your committee is informed that the Washington law,
like the Federal law, has been most effective in dealing with
unfair and deceptive business practices.” H. Stand. Comm. Rep.
No. 55, in 1965 House Journal, at 538. It further explained,
“[y]our Committee concludes that a law similar in effect to the
federal law dealing with unfair and deceptive business practices
is essential to a State-sponsored fair business program in
Hawaii.” H. Stand. Comm. Rep. No. 267, in 1965 House Journal,
at 600.
Soon thereafter, the Legislature enacted HRS § 480-
2(a), which is almost identical to Washington’s UDAP provision.
Compare HRS § 480-2(a) (“Unfair methods of competition and unfair
or deceptive acts or practices in the conduct of any trade or
commerce are unlawful.”) with Wash. Rev. Code Ann. § 19.86.020(“Unfair methods of competition and unfair or deceptive acts or
practices in the conduct of any trade or commerce are hereby
declared unlawful.”).
Second, this court has, in fact, looked to Washington’s
case law for guidance regarding the application of HRS § 480-2.
In Hungate, this court declined to recognize a UDAP claim brought
against an attorney by an opposing party. As discussed in more
detail infra, the Hungate court explained the public policy
underlying its holding by adopting reasoning from Justice
Pearson’s concurring opinion in Short v. Demopolis, a Washington
Supreme Court case. See Hungate v. Law Office of David B. Rosen,
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139 Hawaii 394, 413, 391 P.3d 1, 20 (2017) (citing Short v.
Demopolis, 691 P.2d 163, 172 (Wash. 1984) (Pearson, J.,
concurring)); see also Field, Trustee of Estate of Aloha Sports
Inc. v. National Collegiate Athletic Association, 143 Hawaii
362, 431 P.3d 735 (2018).
b. Washington Courts Exclude the Actual Practice of
Law from UDAP Liability
In Short, the Washington Supreme Court held that
“certain entrepreneurial aspects of the practice of law may fall
within the trade or commerce definition of [Washington’s Consumer
Protection Act],” but excluded the actual practice of law from
UDAP liability. Short, 691 P.2d at 168 (internal quotations
omitted). The court stated:
[D]efendant’s counterclaims primarily challenge the
entrepreneurial aspects of legal practice . . . .
These business aspects of the legal profession are
legitimate concerns of the public which are properly
subject to the CPA.
However, a few of defendant’s claims as a matter of
law are outside the purview of the CPA and were
properly dismissed by the trial court. Defendant
alleges . . . claims [that] are not chiefly concerned
with the entrepreneurial aspects of legal practice;
rather, they concern the actual practice of law.
Since these claims are directed to the competence of
and strategy employed by plaintiff’s lawyers, they
amount to allegations of negligence or malpractice and
are exempt from the CPA.
Id. (emphases added) (internal citations omitted).
An en banc panel of the Washington Supreme Court
affirmed Short in Eriks v. Denver, 824 P.2d 1207 (Wash. 1992) (en
banc). The Eriks court reiterated that “[t]he CPA only applies
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to acts occurring in trade or commerce [and t]he provision of
legal services does not generally fall within the definition of
trade or commerce, except as those services relate to the
entrepreneurial aspects of the practice of law.” Id. at 1214
(internal quotations omitted).
Justice Pearson’s concurrence in Short, whick this
court relied on in Hungate and cited approvingly in Field,
further explained that the application of UDAP liability to the
actual practice of law would be contrary to federal interpreta-
tions of the FTCA and public policy. Short, 691 P.2d at 171
(Pearson, J., concurring); Hungate, 139 Hawaii at 413, 391 P.3d
at 20; Field, 143 Hawaii at 378, 431 P.3d at 751. Justice
Pearson highlighted the fact that federal UDAP case law only
applies liability to the business or entrepreneurial aspects of
the legal profession, rather than the actual practice of law, as
follows:
The question of whether professional activities of
attorneys, as members of a “learned profession”, can
constitute “trade or commerce” was answered in the
affirmative in [Goldfarb]. . . .
It is of critical importance to note, however, that
Goldfarb dealt only with the “business aspect” of the
law profession. The same is true of other federal
cases imposing liability upon lawyers under the
Sherman Act. . . . These cases dealt with price
fixing agreements and other anticompetitive devices,
rather than the actual practice of law. To fail to
make this distinction would be to equate the actual
practice of law with ordinary commercial enterprise,
something which the Court in Goldfarb expressly
refused to do. . . .
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This commercial-noncommercial distinction was sharply
drawn in [Marjorie Webster], where the court . . .
stated that the “proscriptions of the Sherman Act were
‘tailored . . . for the business world,’ not for the
noncommercial aspects of the . . . learned
professions.” The rationale of Marjorie Webster . . .
together with the narrowness of the Court’s opinion in
Goldfarb, mandate a conclusion that the direction of
the law is toward validating judicial exemptions for
noncommercial aspects of the professions. . . .
Short, 691 P.2d 171-72 (Pearson, J., concurring) (citations
omitted) (citing Goldfarb, 421 U.S. at 787-88 and Marjorie
Webster Junior College, Inc. v. Middle States Ass’n of Colleges
and Secondary Schs., Inc., 432 F.2d 650, 654 (D.C. Cir.), cert.
denied, 400 U.S. 965 (1970)).
Justice Pearson then articulated that the application
of UDAP liability to the actual practice of law would be contrary
to public policy. Justice Pearson explained:
There are sound reasons of public policy . . .
supporting the commercial-noncommercial distinction we
adopt in this case. Our state’s Consumer Protection
Act has no general requirement of fault. . . . Thus,
if the act complained of was in fact deceptive,
although done with the best of intentions, liability
could result under the CPA regardless of the care
taken in providing the service. Such a state of
affairs would make it virtually impossible for an
attorney to effectively perform the traditional role
of legal counselor. The law is often vague and
unsettled; several legal opinions are often possible,
especially in borderline cases. Liability should be
imposed only where an attorney has failed to use due
care to serve a client. Imposition of liability under
the CPA, however, would require an attorney to
guarantee much more than just the care used in forming
his opinions. Since even a carefully rendered opinion
could, if incorrect, have the capacity to deceive, the
attorney would have to insure the correctness of his
opinions and strategies. I sincerely doubt that the
CPA was intended to so radically alter the standard of
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care owed by lawyers and other professionals.
Short, 691 P.2d 163, 172 (Pearson, J., concurring) (emphases
added).
This court adopted Justice Pearson’s reasoning in
Hungate. We recognized that “[i]n a UDAP action, an attorney
would be especially vulnerable to suit” because, like
Washington’s UDAP statute, under HRS § 480-2, “actual deception
need not be shown; the capacity to deceive is sufficient.”
Hungate, 139 Hawaii at 413, 391 P.3d at 20 (citing Hawaii Cmty.
Fed. Credit Union v. Keka, 94 Hawaii 213, 228, 11 P.3d 1, 16
(2000) and Short, 691 P.2d 163, 172); Field, 143 Hawaii at 378,
431 P.3d at 751; McRae v. Bolstad, 676 P.2d 496, 500 (Wash. 1984)
(en banc) (“Under the Consumer Protection Act, . . . proof of
intent to deceive or defraud is not necessary if the action ‘has
the capacity to deceive a substantial portion of the purchasing
public.’”). As such, applying UDAP liability to the actual
practice of law, “[g]iven that UDAP lacks a more rigorous or
precise state of mind requirement” would render it “virtually
impossible for an attorney to effectively perform the traditional
role of legal counselor.”11 Hungate, 139 Hawaii at 413, 391 P.3d
at 20 (citations omitted).
11
Though the Hungate court specifically addressed a UDAP claim
brought against an attorney by an opposing party, rather than a client, the
policy concerns discussed in Hungate apply equally here. Short, 691 P.2d 163,
172 (Pearson, J., concurring).
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4. Considerations Specific to the State of Hawaii and HRS
§ 480-2 Weigh Against The Imposition of UDAP Liability
on The Actual Practice of Law
In addition to relevant guidance from other
jurisdictions, it is of paramount importance for this court to
examine considerations specific to the State of Hawaii and HRS
§ 480-2 when determining whether UDAP liability applies to the
actual practice of law.
a. Hawaii Case Law is Inconsistent With Applying
UDAP Liability to The Actual Practice of Law
The Majority contends that Lacy is subject to UDAP
liability under Cieri because he actively facilitated a business
transaction. Majority at 7-12. However, Cieri does not control
as it is clearly distinguishable from the instant case.
The plaintiffs in Cieri brought a UDAP claim against a
licensed real estate broker who failed to disclose that the house
plaintiffs purchased from the broker’s client had a long history
of plumbing problems, a fact which was known to the broker.
Cieri, 80 Hawaii at 56-57, 905 P.2d at 31-32. The Cieri court
held that “as a matter of law . . . a [real estate] broker or
sales person actively involved in a real estate transaction
invariably engages in conduct in any trade or commerce,” namely
“the systematic sale or brokering of interests in real property,”
and is thus subject to liability under HRS § 480-2. Id. at 65,
905 P.2d at 40.
The Cieri court confined its discussion to the context
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of real estate transactions and further narrowed its holding by
specifically distinguishing real estate brokers and salespersons
from other actors.12 The court acknowledged that where the
defendant is not a real estate broker or salesperson, whether a
real estate sale involving the defendant implicates the
applicability of HRS chapter 480 “must be determined on a case-
by-case basis by an analysis of the transaction.” Id. Cieri is
thus distinguishable from the instant case as Lacy is not a
licensed real estate broker, did not facilitate a real estate
transaction, and did not engage in the trade or commerce of the
systematic sale or brokering of interests in real property.
Lacy was introduced to Goran and Maria as “the best
attorney on the island.” He entered into an attorney-client
relationship with Goran and Maria and, unlike the real estate
broker in Cieri, Lacy engaged in the actual practice of law in
his representation of Goran and Maria. Leading up to, and
including, the completion of the sale of RLS, Lacy reviewed
hundreds of documents with Goran, referred Goran to a CPA to
obtain an appraisal, and recommended that Goran form a limited
liability company. He drafted GPLLC’s incorporation documents,
the Sale Agreement, the promissory note, the Management Services
12
As noted in Cieri, in the context of real estate transactions, the
Massachusetts Supreme Court similarly declined to apply UDAP liability
“regardless of the fact the transaction is not in pursuit of the [defendant’s]
ordinary course of business,” holding such liability applies to licensed real
estate brokers, but not private sellers. Lantner v. Carson, 373 N.E.2d 970,
977 (1978).
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Agreement, and a limited power of attorney. Following completion
of the sale, Lacy met with Goran several times and advised him to
wait for transfer of the PUC license before taking any legal
action against Rnic.
In doing so, Lacy engaged in legal research,
contracting, strategy, and advising. These services cannot be
provided by a non-attorney real estate broker. As such, Lacy’s
representation of Goran and Maria was not, as the Majority
asserts, analogous to the role played by the real estate broker
in Cieri. Majority at 11.
In direct contradiction to the language in Cieri, the
Majority broadens Cieri’s holding to apply not just to any real
estate broker or salesperson actively involved in a real estate
transaction, but to anyone who “utilize[s] the specialized
professional services with which he makes his living . . . to
facilitate a commercial transaction of a type with which he
purported to have professional expertise,” including attorneys
engaged in the actual practice of law. Majority at 10. The
Majority asserts that because “Lacy is alleged to have engaged in
actions during the sale of RLS analogous to those of the property
manager in Cieri,” Lacy’s alleged conduct is “necessarily”
subject to UDAP liability. Majority at 11-12. The Cieri court
did not, however, intend for its holding to apply so broadly.
Rather, the court expressly limited its holding to real estate
brokers and salespersons actively involved in real estate
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transactions. Cieri, 80 Hawaii at 65, 905 P.2d at 40.
First, it is important to note that the defendant in
Cieri was not simply a property manager helping to sell a house;
she was a licensed real estate broker engaged in the ‘trade or
commerce’ of facilitating real estate sales.13 Cieri, 80 Hawaii
at 56, 65, 905 P.2d at 31, 40. Only real estate brokers and
salespersons who are actively involved in real estate
transactions are per se subject to UDAP liability under Cieri.
Outside of that narrow context, however, “whether a transaction
occurs within a business context, thus implicating the
applicability of HRS chapter 480 . . ., must be determined on a
case-by-case basis by an analysis of the transaction.” Id. at
65, 905 P.2d at 40. Thus, the Cieri defendant was subject to
UDAP liability due to the fact that she was a licensed real
estate broker. Had she just been a property manager, the result
may have been different.14
Second, by eliminating any distinction between
13
Pursuant to HRS § 467-7, “[n]o person . . . shall act as [a] real
estate broker or real estate salesperson . . . without a license previously
obtained under and in compliance with [HRS Chapter 467] and the rules and
regulations of the real estate commission.”
14
The Majority cites Cieri for the assertion that “there is little
dispute that, had Lacy simply been a consultant or a similar business
professional, many of the services he provided would clearly amount to conduct
in trade or commerce under our precedent.” Majority at 12. Respectfully,
this misconstrues Cieri. Under Cieri, had Lacy been a real estate broker or
salesperson actively involved in a real estate transaction, his actions would
have clearly amounted to conduct in trade or commerce. Had he been a
consultant or a similar business professional, however, whether the services
he provided were subject to UDAP liability would have to be determined on a
case-by-case analysis of the transaction. Cieri, 80 Hawaii at 65, 905 P.2d
at 40.
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attorneys and real estate professionals with regard to the
application of UDAP liability, the Majority now adopts the very
argument that we unanimously rejected in Hungate. The plaintiff
in Hungate cited Cieri for the proposition that a real estate
agent or broker can be subject to UDAP liability under HRS § 480-
2. He argued that, like the defendant in Cieri, the defendant
attorney acted as an agent in conducting a foreclosure, and thus
should have been held liable under the UDAP statute. Hungate,
139 Hawaii at 412, 391 P.3d at 19. This court rejected the
plaintiff’s argument and expressly distinguished between real
estate brokers and attorneys with regard to UDAP liability under
HRS § 480-2.15 We stated:
[T]he unique nature of the attorney-client
relationship warrants distinguishing the role of
broker and attorney for purposes of this case.
Sellers and purchasers of real estate often “utilize
and rely on brokers for their expertise and resources,
including access to data in locating properties as
well as determining pricing of ‘comparables’ as a
basis for negotiations.” Cieri, 80 Hawaii at 65, 905
P.2d at 40. Hence, the role of a broker is to provide
clients with expertise and resources in real estate
transactions.
In contrast, the role of an attorney involves
representing a client’s interests against those of an
opposing party within an adversary system. Attorneys
15
As in Hungate, the Cieri plaintiff was not the defendant’s client,
but was the other party to the transaction at issue. Cieri, 80 Hawaii at 57,
905 P.2d at 32. Despite this fact, the Cieri court determined the defendant
was properly subject to UDAP liability pursuant to HRS § 480-2. Id. at 65,
905 P.2d at 40. However, in Hungate, this court declined to apply UDAP
liability to the defendant attorney. Hungate, 139 Hawaii at 413, 391 P.3d at
20. Thus, it is clear that our holding in Hungate turned on the defendant’s
unique role as an attorney, not the fact that he was being sued by an opposing
party.
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bear a duty to zealously represent clients “within the
bounds of the law.” Giuliani v. Chuck, 1 Haw. App.
379, 384, 620 P.2d 733, 737 (1980); see also Hawaii
Rules of Professional Conduct, “Preamble,” ¶ 2; ¶ 8; ¶
9. . . .
Consequently, based on the allegations against Rosen,
we decline to recognize a UDAP claim against him by
Hungate under § 480-2 in the instant foreclosure
action.
Hungate, 139 Hawaii at 412-13, 391 P.3d 19-20.
The Majority’s position in the instant case is
therefore contrary to this court’s precedent. As we recognized
in Hungate, there are unique policy reasons attendant to the
practice of law that militate against the imposition of UDAP
liability. Thus, to the extent that this court has touched upon
the issue, it has declined to apply UDAP liability to the actual
practice of law.
b. The Application of UDAP Liability to the Actual
Practice of Law May Interfere with this Court’s
Exclusive Regulation of the Legal Profession
Article VI, section 7 of the Hawaii Constitution
provides, “[t]he supreme court shall have power to promulgate
rules and regulations in all civil and criminal cases for all
courts relating to process, practice, procedure and appeals,
which shall have the force and effect of law.”16 This provision
places full rule-making power “where it belongs - in the Supreme
16
Article VI, section 7 is identical to article V, section 6 of the
1959 Hawaii Constitution (“The supreme court shall have power to promulgate
rules and regulations in all civil and criminal cases for all courts relating
to process, practice, procedure and appeals, which shall have the force and
effect of law.”). HAW. CONST. of 1959, art. V, § 6.
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Court, [to] make for an efficient and orderly dispatch of the
business of the courts.” Stand. Comm. Rep. No. 37 in 1
Proceedings of the Constitutional Convention of Hawaii of 1950,
at 174-75 (1960).
Pursuant to this authority, this court has the
“ultimate responsibility to regulate the practice of law in this
state and to ensure that the integrity of the profession is
maintained by disciplining attorneys who indulge in practices
inconsistent with the high ethical standards demanded of all
members of the bar.” Office of Disciplinary Counsel v. Gould,
119 Hawaii 265, 273-74, 195 P.3d 1197, 1205-06 (2008)(internal
quotation marks and citation omitted); In re Disciplinary Bd. of
Hawaii Supreme Court, 91 Hawaii 363, 368, 984 P.2d 688, 693
(1999) (citing HAW. CONST. art. VI, § 7) (“The Office of
Disciplinary Counsel and the Disciplinary Board are creatures of
this court, created pursuant to the court’s inherent and
constitutional authority to regulate the practice of law”);
Disciplinary Bd. of Hawaii Supreme Court v. Bergan, 60 Haw. 546,
553, 592 P.2d 814, 818 (1979) (“It is the solemn duty of this
court to regulate the practice of law in this state . . . .”).
This rule-making power has been consistently recognized
in our case law and exercised through our promulgation of the
Hawaii Rules of Professional Conduct. In re Ellis, 53 Haw. 23,
23 n.1, 487 P.2d 286, 287 n.1 (1971) (“This court has inherent
power to regulate matters before it regarding the practice of
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law.”); Office of Disciplinary Counsel v. Lau, 79 Hawaii 201,
204, 900 P.2d 777, 780 (1995) (the Hawaii Supreme Court is “the
ultimate trier of both fact and law in cases involving the
discipline of attorneys”); Rules of the Supreme Court of the
State of Hawaii Rule 2.1 (“Any attorney admitted to practice law
in this state . . . is subject to the exclusive disciplinary
jurisdiction of the supreme court . . . .”) (emphasis added).
“Although other professions also have been granted powers of
self-government, the legal profession is unique in this respect
because of the close relationship between the profession and the
processes of government and law enforcement . . . manifested in
the fact that ultimate authority over the legal profession is
vested largely in the courts.” Hawaii Rules of Professional
Conduct, “Preamble,” ¶ 10 (emphases added).
The Majority argues that the legislature did not intend
to exclude lawyers from UDAP liability under HRS § 480-2.
Majority at 24-28. However, this court’s exclusive
constitutional authority to regulate the practice of law had been
long-established by the time the legislature enacted HRS § 480-
2.17 Further, the legislature entrusted the courts to exercise
discretion in defining the scope of liability under HRS § 480-2.
17
What is now article VI, section 7 of the Hawaii Constitution was
drafted by the delegates to the Constitutional Convention of 1950. It was
approved by the legislature and a plebiscite vote later that year, and became
effective in 1959 upon Hawaii’s admission to the Union. HAROLD S. ROBERTS,
PROCEEDINGS OF THE CONSTITUTIONAL CONVENTION OF HAWAII OF 1950, VOLUME I JOURNAL AND
DOCUMENTS, Preface at xi (1960). HRS § 480-2 was not enacted until 1965. 1965
Sess. Laws Act 129, at 176-77.
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Stand. Comm. Rep. No. 55, in 1965 House Journal, at 539 (stating,
“the courts of Hawaii must also necessarily give due regard to
problems peculiar or pertinent to the State of Hawaii”). If the
legislature intended to limit this discretion and encroach on
this court’s constitutional authority by exposing attorneys to
UDAP liability under HRS § 480-2, it would have done so
expressly. Yet, the plain language and legislative history of
HRS § 480-2 reveal no indication of such intent.18
Although the Majority asserts that the legislature
intended for HRS § 480-2 to apply to attorneys just as it does to
real estate brokers, carpenters, bakers, travel agents, and shoe
salespersons, there is a fundamental distinction between those
occupations and the practice of law: regulation of the practice
of law is entrusted by the Hawaii Constitution to the Supreme
18
The legislature first added § 480-2’s prohibition on “[u]nfair
methods of competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce” to the Hawaii Antitrust Act in 1965. 1965
Haw. Sess. Laws Act 129, at 176-77. The consumer protection statute has been
amended over the years; however, none of the amendments addressed the practice
of law. For example in 1987, the legislature defined class actions and made
several changes to chapter 480. 1987 Haw. Sess. Laws Act 274, at 837-840; H.
Stand. Comm. Rep. Nos. 457 and 575, in 1987 House Journal, at 1315, 1371; S.
Conf. Comm. Rep. No. 105, in 1987 Senate Journal, at 872-73; S. Stand. Comm.
Rep. No. 1056, in 1987 Senate Journal, at 1344-45. In 1988, the legislature
amended HRS § 480-2 to specify that Hawaii courts must “give due
consideration” to the Federal Trade Commission decisions and federal courts
interpreting a comparable federal consumer protection statute. See H. Stand.
Comm. Rep. No. 483-88, in 1988 House Journal, at 1024; S. Stand. Comm. Rep.
Nos. 2329 and 2635, in 1988 Senate Journal, at 993-94, 1118. In 2002, the
legislature amended the consumer protection statute to permit both private
actions for unfair methods of competition and private indirect purchaser
antitrust class actions. 2002 Haw. Sess. Laws Act 229, at 915-918; H. Stand.
Comm. Rep. No. 1118, in 2002 House Journal, at 1665-66; S. Stand. Comm. Rep.
Nos. 448 and 931, in 2002 Senate Journal, at 1116-17, 1295. The legislative
history therefore provides no indication that the legislature intended for
UDAP liability to extend to the practice of law.
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Court. Majority at 26; HAW. CONST. art. VI, § 7. Given this
grant of regulatory authority to a co-equal branch of
government,19 it is fair to presume that the legislature would
make its intent to encroach on that authority through § 480-2
explicit.20
In sum, I share the concern expressed by other state
courts that subjecting the actual practice of law to UDAP
liability under HRS § 480-2 may interfere with this court’s
regulation of the practice of law, and is inappropriate absent
clearly expressed legislative intent. See, e.g., Beyers, 937
A.2d at 1091-92 (because the Pennsylvania legislature “has no
19
The Constitutional Convention’s Committee on the Judiciary
explained the significance of the judiciary’s role in our constitutional
system:
Your Committee on [the] Judiciary . . . recognizes
that it is dealing with a coordinate branch of
government. It is the branch to which is entrusted
the safe guarding of our civil liberties. Without a
strong Judiciary, democratic processes would speedily
disintegrate and the rights of the individual might be
swallowed up in an all powerful state.
Stand. Comm. Rep. No. 37 in 1 Proceedings of the Constitutional Convention of
Hawaii of 1950, at 173 (1960).
20
Additionally, in Hungate, this court recognized that “the unique
nature of the attorney-client relationship warrants distinguishing the role of
[real estate] broker and attorney for purposes of [UDAP liability under HRS
§ 480-2].” Hungate, 139 Hawaii at 413, 391 P.3d at 19 (emphasis added). The
legislature is presumed to know of this court’s interpretations of statutory
language, and legislative bodies commonly “enact laws to circumvent judicial
constructions deemed . . . contrary to the true meaning of the statute
construed.” State v. Casugay-Badiang, 130 Hawaii 21, 27, 305 P.3d 437, 443
(2013) (citations omitted); Terr. v. Ota, 36 Haw. 80, 98-99 (1942). However,
the legislature has not amended HRS § 480-2 or indicated any dissatisfaction
with this court’s interpretation of the statute. As such, this court’s
determination that UDAP liability does not apply to attorneys as it does to
real estate brokers has the tacit approval of the legislature. Cf. State v.
Hussein, 122 Hawaii 495, 529, 229 P.3d 313, 348 (2010).
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authority under the Pennsylvania constitution to regulate the
conduct of lawyers in the practice of law,” any application of
the Unfair Trade Practices and Consumer Protection Law to
attorney misconduct “would purport to regulate the conduct of
attorneys and would be an impermissible encroachment upon the
power of this Court.”). In suggesting otherwise, the Majority
introduces significant uncertainty in the regulation of the legal
profession.
c. The Application of UDAP Liability to the Actual
Practice of Law is Duplicative and Unnecessary
In addition to the oversight and professional
discipline provided by this court, attorneys in the State of
Hawaii are subject to civil actions sounding in tort and
contract, as well as criminal prosecution.21 In the instant
case, for example, Goran and Maria brought claims against Lacy
for legal malpractice, conspiracy to commit fraud, IIED, and
NIED. GPLLC brought additional claims against Lacy for legal
malpractice, fraud, and punitive damages. The existing sources
of civil liability, in addition to criminal prosecution,
21
HRPC Rule 8.4 (“It is professional misconduct for a lawyer to:
. . . commit a criminal act that reflects adversely on the lawyer’s honesty,
trustworthiness, or fitness as a lawyer in other respects; . . . engage in
conduct involving dishonesty, fraud, deceit or misrepresentation . . .”);
Hungate, 139 Hawaii at 413 n.22, 319 P.3d at 20 n.22 (an opposing party
cannot recover against an attorney under HRS § 480-2, but attorneys may still
be held liable for patently illegal activities conducted on behalf of the
attorney’s client); Guiliani, 1 Haw. App. at 383-84, 620 P.2d at 736-37 (“that
an attorney representing a client may be held personally liable to an adverse
party or a third person who sustains injury as a result of an attorney’s
intentional tortious acts is well settled.”); Higa v. Mirikitani, 55 Haw. 167,
517 P.2d 1 (1973) (legal malpractice suits are hybrids of tort and contract).
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adequately deter and punish attorney misconduct, while
appropriately compensating aggrieved clients.
In Hungate, we distinguished between attorneys and real
estate professionals for purposes of UDAP liability due to the
“unique nature of the attorney-client relationship” and public
policy considerations. Hungate, 139 Hawaii at 412-13, 391 P.3d
at 19-20. Accordingly, we declined to recognize a UDAP claim
brought against an attorney by the opposing party to a
foreclosure action. Id. at 413, 391 P.3d at 20. We made clear,
however, that although we declined to subject attorneys to
additional liability in the form of UDAP claims, we were not
shielding attorneys from existing sources of liability to which
they were already subject. Id. at 413, n.22, 391 P.3d at 20,
n.22. These sources of liability, as well as the legal remedies
available to aggrieved clients under the existing state of the
law, are similarly left undisturbed by this dissenting position.
As noted by the Majority, we stated, “[o]ur desire to
avoid creating unacceptable conflicts of interest in this
context, to protect attorney-client counsel and advice from the
intrusion of competing concerns, and to allow adequate room for
zealous advocacy, does not encompass, for example, allowing
attorneys to conduct patently illegal activities on behalf of
clients.” Id. at 413 n.22, 319 P.3d at 20 n.22. The Majority
characterizes this footnote as a “pronouncement that particularly
egregious misconduct may subject an opposing counsel to HRS
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§ 480-2(a) liability.” Majority at 22, n.14. However, this
interpretation is unsupported by Hungate as a whole.
Many of the policy concerns fundamental to our holding
in Hungate apply equally to UDAP claims brought against
attorneys, regardless of whether they are brought by clients or
opposing parties. As discussed above, we acknowledged the unique
nature of the attorney-client relationship and attorneys’
heightened vulnerability to UDAP liability, given that HRS § 480-
2 lacks “a more rigorous or precise state of mind requirement.”
Id. at 413, 391 P.3d at 20. Citing to Short, which involved a
UDAP claim brought against the plaintiff’s own attorney, we
agreed that the imposition of UDAP liability on the actual
practice of law would require an attorney to insure the
correctness of his or her opinions and strategies, rendering it
virtually impossible for an attorney to effectively perform the
traditional role of legal counselor. Id., 139 Hawaii at 413,
391 P.3d at 20 (citations, internal quotations, and brackets
omitted).
The Majority notes that there is no exception for the
practice of law in the application of criminal statutes.22
22
The Majority attempts to analogize UDAP liability to criminal
liability in order to show that the imposition of UDAP liability upon the
actual practice of law, like criminal prosecution, “does not interfere with
this court’s regulation of the practice of law.” Majority at 31.
The defendant in Short similarly argued that if application of the
CPA to lawyers violates the court’s regulatory power, criminal laws could not
be applied to attorneys. Short, 691 P.2d at 170. However, the Washington
(continued...)
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Majority at 21, 31. This point serves to highlight the several
layers of existing liability that the actual practice of law is
already subject to. Even in the absence of UDAP liability,
attorneys are not “allowed” to engage in patently illegal
activities on behalf of clients. Such conduct would subject an
attorney to professional discipline under the Hawaii Rules of
Professional Conduct, civil liability in the form of legal
malpractice and tort actions, and criminal prosecution. HRPC
Preamble 5 (“A lawyer’s conduct should conform to the
requirements of the law.”); HRPC Rule 8.4 (It is professional
misconduct for a lawyer to commit a criminal act that reflects
adversely on the lawyer’s honesty, trustworthiness, or fitness as
a lawyer); Guiliani, 1 Haw. App. at 383-84, 620 P.2d at 736-37(“[T]hat an attorney representing a client may be held personally
liable to an adverse party or a third person who sustains injury
as a result of an attorney’s intentional tortious acts is well
(...continued)
Supreme Court rejected this argument as to the actual practice of law, holding
that UDAP liability applies only to the entrepreneurial aspects of law under
Washington’s CPA. Id. at 170-71.
I agree. Unlike the imposition of UDAP liability on the actual
practice of law, criminal prosecution is not duplicative or unnecessary.
While this court may discipline an attorney professionally for the commission
of a crime, it does not have authority to prosecute and sentence the attorney
for that crime. No other framework exists to hold attorneys personally
responsible for crimes they may commit. In contrast, this court’s close
regulation of the practice of law, as well as the imposition of civil
liability, adequately deter non-criminal attorney misconduct and impose
appropriate professional discipline upon attorneys, hold attorneys personally
liable for their misconduct, and provide aggrieved clients with sufficient
legal recourse.
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settled.”). Thus, the application of UDAP liability to the
actual practice of law is duplicative and unnecessary.
d. Applying UDAP Liability to the Practice of Law is
Against Public Policy
In Hungate, this court recognized the chilling effect
that applying UDAP liability to the actual practice of law could
have on the legal profession. Hungate, 139 Hawaii at 412-13,
391 P.3d at 19-20. This chilling effect is especially concerning
in light of the broad scope of liability adopted by the Majority,
and the treble damages awarded to UDAP plaintiffs under Hawaii
law. Compare Wash. Rev. Code Ann. § 19.86.090 (generally
awarding successful UDAP plaintiffs actual damages, but allowing
courts to increase the award of damages up to an amount equal to
treble damages) with HRS § 480-13(b) (awarding successful UDAP
plaintiffs the greater of $1,000 or treble damages).
Despite its determination that Lacy’s conduct is
subject to UDAP liability regardless of whether it constituted
the practice of law, the Majority states that “[i]n other
instances, whether the challenged conduct occurred during the
provision of legal services may be a factor to be considered in
the case-by-case analysis of the transaction to determine whether
it occurred in the business context.” Majority at 13, n.9
(internal quotation marks and ellipsis omitted). I find no
comfort in this limitation, however, given the Majority’s holding
that “it is no defense that [a defendant’s] actions constituted
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or were intermingled with legal services.” Majority at 12-13.
In fact, the Majority declines to determine whether Lacy’s
conduct amounted to the practice of law, deeming it to be
irrelevant to the UDAP analysis. The Majority’s statement that
HRS § 480-2 “places within its ambit virtually all activity
occurring in the business context,” followed by examples of
statutes with broad application, further demonstrates that its
approach will impose UDAP liability upon all aspects of the
practice of law.23 Majority at 24.
The increased exposure to liability imposed upon
attorneys by the Majority’s holding could make the procurement
and maintenance of legal malpractice insurance prohibitively
expensive.
B. Lacy’s Alleged Misconduct Falls Within the Actual Practice
of Law
In the instant case, Goran and Maria’s UDAP claim
concerns the actual practice of law. As discussed above, Lacy
entered into an attorney-client relationship with Goran and Maria
and engaged in legal research, contracting, strategy, and
advising on their behalf. These services clearly constitute the
actual practice of law, rather than the business or
entrepreneurial aspects of the legal profession. See, e.g.,
23
As noted in Cieri, even Massachusetts’ UDAP statute is not “broad
enough to reach any type of commercial exchange, regardless of the nature of
the transaction or the character of the parties involved.” Cieri, 80 Hawaii
at 63, 905 P.2d at 38 (citing Lantner, 373 N.E.2d at 977).
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Kessler, 994 F.Supp. at 243 (the legal, advisory, analytical
aspects of law constitute the actual practice of law); Short, 691
P.2d at 168 (the actual practice of law includes the performance
of legal advice and services).
Further evidencing the fact that Lacy’s conduct
constituted the actual practice of law, Pleho Parties argued that
“Lacy used his position of trust and confidence as [their]
attorney to fraudulently induce them into purchasing [RLS] for
$1,500,000.” Because Goran and Maria’s UDAP claim is directed to
Lacy’s competence and the strategy he employed, it amounts to an
allegation of legal malpractice. In fact, Pleho Parties actually
alleged Lacy’s conduct constituted legal malpractice. Lacy’s
conduct should thus be exempt from UDAP liability under HRS
§ 480-2. Short, 691 P.2d at 168.
III. CONCLUSION
For the foregoing reasons, I respectfully dissent. I
conclude that the actual practice of law is not subject to UDAP
liability under HRS § 480-2. Lacy’s purported misconduct
constitutes the actual practice of law, and thus does not subject
him to UDAP liability under HRS § 480-2. Therefore, the ICA did
not err in affirming the circuit court’s grant of summary
judgment in Lacy Parties’ favor as to Goran and Maria’s UDAP
claim.
/s/ Mark E. Recktenwald
/s/ Paula A. Nakayama
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