Liliha Professional Building, LLC v. Nada, Ono, Ka?anhe, Solomon & Hayashi LLP ( 2022 )

NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER
Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
29-SEP-2022
09:41 AM
Dkt. 123 SO
NO. CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI#I
LILIHA PROFESSIONAL BUILDING, LLC, a Hawaii limited
liability corporation, Plaintiff-Appellant/Cross-Appellee,
v.
NADA, ONO, KA#ANEHE, SOLOMON & HAYASHI LLP;
LEILANI KA#ANEHE, AARON K. NADA, and DAVID ONO,
Defendants-Appellees/Cross-Appellants,
and
DELPHINE WONG AND DEBORAH KOBAYASHI,
CO-TRUSTEES OF THE WILLIE & DELPHINE WONG TRUST,
Intervenors-Appellees/Cross-Appellees
APPEAL FROM THE DISTRICT COURT OF THE FIRST CIRCUIT
HONOLULU DIVISION
(CIVIL NO. 1RC18-1-1966)
SUMMARY DISPOSITION ORDER
(By: Ginoza, C.J., and Wadsworth and Nakasone, JJ.)
Defendants-Appellees/Cross-Appellants Nada, Ono,
Ka#anehe, Solomon & Hayashi LLP (Nada Ono LLP), Leilani Ka#anehe,
Aaron K. Nada, and David Ono (collectively, Defendants)
cross-appeal from the August 30, 2018 "Order Regarding Award of
Attorneys' Fees and Costs and Distribution of Monies Held in the
Rent Trust Fund" (Order Regarding Fees), entered in the District
Court of the First Circuit, Honolulu Division (District Court).1/
Plaintiff-Appellant/Cross-Appellee Liliha Professional Building,
LLC (LPB) initially appealed from the District Court's July 13,
2018 order granting Intervenors-Appellees/Cross-Appellees
Delphine Wong and Deborah Kobayashi, Co-Trustees of the Willie &
1/
The Honorable Hilary Benson Gangnes presided.
NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER
Delphine Wong Trust's (collectively, Trustees) motion to dismiss
LPB's complaint (Dismissal Order). However, on June 12, 2019,
this court entered an order approving the parties' stipulation to
dismiss LPB's appeal, leaving only Defendants' cross-appeal
pending before this court.
The District Court dismissed LPB's complaint without
prejudice due to lack of subject matter jurisdiction, after
Trustees intervened and raised a title issue regarding the real
property that Nada Ono LLP had leased from LPB. See Hawaii
Revised Statutes (HRS) § 604-5(d) (2016). Following the
dismissal, Defendants filed a motion for attorneys' fees and
costs and for an order distributing funds from a court-ordered
rental trust fund. Defendants sought an award of attorneys' fees
under HRS § 607-142/ and an award of costs under HRS § 607-93/ and
Hawai#i District Court Rules of Civil Procedure (DCRCP) Rule
54(d),4/ as prevailing parties in the case. In the Order
2/
HRS § 607-14 (2016) provides in relevant part:
In all the courts, in all actions in the nature of assumpsit
and in all actions on a promissory note or other contract in
writing that provides for an attorney's fee, there shall be
taxed as attorneys' fees, to be paid by the losing party and
to be included in the sum for which execution may issue, a
fee that the court determines to be reasonable; provided
that the attorney representing the prevailing party shall
submit to the court an affidavit stating the amount of time
the attorney spent on the action and the amount of time the
attorney is likely to spend to obtain a final written
judgment, or, if the fee is not based on an hourly rate, the
amount of the agreed upon fee. The court shall then tax
attorneys' fees, which the court determines to be
reasonable, to be paid by the losing party; provided that
this amount shall not exceed twenty-five per cent of the
judgment.
. . . .
The above fees provided for by this section shall be
assessed on the amount of the judgment exclusive of costs
and all attorneys' fees obtained by the plaintiff, and upon
the amount sued for if the defendant obtains judgment.
3/
HRS § 607-9 (2016) provides in relevant part: "All actual
disbursements, . . . sworn to by an attorney or a party, and deemed reasonable
by the court, may be allowed in taxation of costs. In determining whether and
what costs should be taxed, the court may consider the equities of the
situation."
4/
DCRCP Rule 54(d) states in relevant part: "Except when express
provision therefor is made either in a statute or in these rules, costs shall
(continued...)
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NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER
Regarding Fees, the District Court denied Defendants' motion for
attorneys' fees and costs, concluding, among other things, that
the court lacked jurisdiction to award such fees and costs and,
further, that neither Defendants nor Trustees were prevailing
parties.
On cross-appeal, Defendants raise two points of error,
contending that: (1) the District Court abused its discretion in
failing to award attorneys' fees and costs to Nada Ono LLP after
wrongly concluding that the court lacked jurisdiction to do so;
and (2) the District Court erred in concluding that Nada Ono LLP
was not a prevailing party.
After reviewing the record on appeal and the relevant
legal authorities, and giving due consideration to the issues
raised and the arguments advanced by the parties, we resolve
Defendants' contentions as follows.
(1) Defendants contend that the District Court wrongly
concluded that it lacked jurisdiction to award attorneys' fees
and costs to Nada Ono LLP.
"The existence of jurisdiction is a question of law
that we review de novo under the right/wrong standard." Lingle
v. Hawai#i Gov't Employees Ass'n, AFSCME, Local 152, AFL-CIO, 107
Hawai#i 178, 182, 111 P.3d 587, 591 (2005).
In the Order Regarding Fees, the District Court stated
in part:
The court dismissed the case without prejudice because the
court found it lacked subject matter jurisdiction. . . .
. . . .
. . . [LPB] argues that . . . the court has no
jurisdiction to award attorney's fees because it lacked
subject matter jurisdiction at the outset of the case,
relying on Skanning v. Sorensen, 679 F. Supp. 2d 1220(2010). . . . In the present case, [Trustees'] Motion to
Dismiss was based on the court's lack of subject matter
jurisdiction, because title is alleged to be at issue. By
granting [Trustees'] motion and dismissing the case without
prejudice, this court agreed that it lacks jurisdiction over
the case, and thus also lacks the power to award attorney's
fees related to this case.
4/
(...continued)
be allowed as of course to the prevailing party unless the court otherwise
directs[.]"
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NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER
Defendants argue that the District Court's reliance on
federal case law is misplaced, and that under Hawai#i law, the
District's Court's dismissal of the complaint for lack of subject
matter jurisdiction did not deprive the court of jurisdiction to
award attorneys' fees and costs.
In Sheehan v. Grove Farm Co., Inc., 114 Hawai#i 376,
395, 163 P.3d 179, 198 (App. 2005), this court affirmed the
circuit court's award of costs to the defendants under Hawai#i
Rules of Civil Procedure Rule 54(d) where the court had dismissed
the case based on a lack of subject matter jurisdiction. We
relied on the supreme court's ruling in Wong v. Takeuchi, 88
Hawai#i 46, 961 P.2d 611 (1998), that "a dismissal of the action,
whether on the merits or not, generally means that defendant is
the prevailing party[,]" and noted that this ruling had been
reaffirmed in Blair v. Ing, 96 Hawai#i 327, 331, 31 P.3d 184, 188
(2001), and Ranger Ins. Co. v. Hinshaw, 103 Hawai#i 26, 31-32, 79
P.3d 119, 124-25 (2003). Sheehan, 114 Hawai#i at 395, 163 P.3d
at 198. We expressly rejected the argument that the circuit
court's dismissal of the Sheehan complaint based on lack of
subject matter jurisdiction rendered Wong and Blair
distinguishable. Id. We reasoned: "The holding of Wong is
clear on its face: any dismissal, regardless of basis, generally
renders the defendant the prevailing party for purposes of
awarding costs (and attorneys' fees)."5/ Id.LPB's reliance on Hawaii Mgmt. All. Ass'n v. Ins.
Comm'r, 106 Hawai#i 21, 100 P.3d 952 (2004) (HMAA), is misplaced.
There, the supreme court vacated a circuit court judgment and
orders of the Insurance Commissioner awarding an insurance
claimant attorneys' fees and costs against HMAA pursuant to HRS
§ 432E-6(e), a provision of Hawaii's external review statute
5/
In Oahu Publications, Inc. v. Abercrombie, 134 Hawai #i 16, 22, 332
P.3d 159, 165 (2014), the supreme court subsequently ruled that an appellee
was not the prevailing party on appeal for the purpose of awarding attorneys'
fees where an initial appeal to this court was dismissed for lack of appellate
jurisdiction because of a defect in the judgment. We discuss Oahu
Publications below, in addressing the prevailing-party issue raised in the
second point of error. We note, however, for purposes of our jurisdictional
analysis that Oahu Publications is silent on whether this court retained
jurisdiction to award fees after dismissing the initial appeal for lack of
appellate jurisdiction.
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authorizing the commissioner to award attorneys' fees and costs
incurred in connection with the external review procedure. Id.
at 23, 25, 100 P.3d at 954, 956. The supreme court ruled that
HRS § 432E-6 was preempted by the Employee Retirement Income
Security Act of 1974, and the Insurance Commissioner thus lacked
jurisdiction to consider the claimant's claim and to award him
attorneys' fees and costs. Id. at 23, 34-36, 100 P.3d at 954,
965-67. That ruling does not apply here, where neither LPB nor
the District Court have asserted that HRS § 607-14 or DCRCP Rule
54(d) are preempted by a federal statute.
Based on this Court's ruling in Sheehan, the District
Court's dismissal of the complaint without prejudice for lack of
subject matter jurisdiction did not divest the court of
jurisdiction to award attorneys' fees and costs under applicable
Hawai#i law. The District Court's contrary conclusion was error.
(2) Defendants also contend that the District Court
erroneously concluded that Nada Ono LLP was not a prevailing
party for purposes of awarding attorneys' fees under HRS § 607-14
and costs under DCRCP Rule 54(d).
This court reviews the denial or grant of attorney's
fees and costs under the abuse of discretion standard. See
Deutsche Bank Nat'l Trust Co. v. Kozma, 140 Hawai#i 494, 497-98,
403 P.3d 271, 274-75 (2017); Oahu Publications, 134 Hawai#i at
22, 332 P.3d at 165. "An abuse of discretion occurs where the
trial court has clearly exceeded the bounds of reason or
disregarded rules or principles of law or practice to the
substantial detriment of a party litigant." Oahu Publications,
134 Hawai#i at 22, 332 P.3d at 165 (brackets omitted) (quoting
Ranger Ins. Co., 103 Hawai#i at 30, 79 P.3d at 123).
In the Order Regarding Fees, the District Court stated
in part:
Neither [the Trustees] nor Defendants are prevailing
parties in this case. . . . [T]he court dismissed the case
without prejudice when [Trustees] raised title as an issue
and deprived the court of jurisdiction. The merits of the
parties' claims can and may be further litigated in an
appropriate court. No final judgment has been or will be
entered by this court.
. . . .
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. . . Since the claims in this case can be further
litigated and the court lacks subject matter jurisdiction,
neither Defendants nor [Trustees] are prevailing parties.
Therefore, the court declines to award fees or costs to any
party.
Defendants argue that the supreme court in Blair, and
this court in Sheehan, rejected the same reasoning employed by
the District Court here, i.e., that no party was the prevailing
party because the court did not reach a decision on the merits.
LPB, on the other hand, argues that Sheehan and its predecessors
must be read in light of the supreme court's subsequent decision
in Oahu Publications, 134 Hawai#i at 16, 332 P.3d at 159. We
conclude that, to the extent Sheehan and Oahu Publications
conflict on the issue of "prevailing party," we must apply the
supreme court's ruling and analysis in Oahu Publications.
In Oahu Publications, the supreme court analyzed prior
Hawai#i case law addressing prevailing-party issues in various
attorney-fee contexts, as well as analogous federal law. See id.
at 24-26, 332 P.3d at 167-69. The court concluded that an
appellee was not a "prevailing party" on appeal where the appeal
was dismissed without prejudice to the appellant filing another
appeal after a flaw in the judgment was corrected. Id. at 25-26,
332 P.3d at 168-69. The court recognized that "[i]n general, the
litigant in whose favor judgment is rendered is the prevailing
party[,]" and "[t]here is no requirement that the judgment in
favor of the prevailing party be a ruling on the merits." Id. at
24, 332 P.3d at 167 (internal quotation marks omitted) (quoting
Wong, 88 Hawai#i at 49, 961 P.2d at 614). On the facts before
it, however, the court reasoned that the appellee was not a
prevailing party because "the ICA's dismissal of the first appeal
did not finally resolve the . . . case," and "[t]he [appellant]
was free to file a second appeal once the circuit court corrected
the judgment[.]" Id. at 25, 332 P.3d at 168. The court
distinguished Wong and Ranger Ins. Co. as involving dismissals
that finally resolved those cases.6/ See id.
6/
The court also distinguished Blair, observing that the defendant
in that case affirmatively moved to dismiss the complaint, whereas Oahu
Publications had not sought dismissal of the first appeal. See Oahu
Publications, 134 Hawai#i at 25, 332 P.3d at 168; see also Blair, 96 Hawai #i at
(continued...)
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The Oahu Publications court also relied on a line of
federal cases concluding that a "material alteration of the legal
relationship of the parties is necessary to permit an award of
attorney's fees." Id. at 26, 332 P.3d at 169 (brackets omitted)
(quoting Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of
Health & Human Res., 532 U.S. 598, 604 (2001)). As relevant
here, the supreme court further noted that "[c]ourts have . . .
concluded that a dismissal without prejudice does not alter the
legal relationship of the parties 'because the defendant remains
subject to risk of re-filing.'" Id. (quoting Oscar v. Alaska
Dep't. of Educ. & Early Dev., 541 F.3d 978, 981 (9th Cir. 2008)).
The supreme court stated that "[t]hese cases therefore also
support our conclusion that [the appellee] had not prevailed upon
dismissal of the first appeal because there was no 'material
alteration of the legal relationship of the parties,' and it
remained at risk that [the appellant] would file another appeal
. . . ." Id.The supreme court's reasoning in Oahu Publications
applies here in analyzing the effect of the Dismissal Order. The
District Court dismissed LPB's complaint without prejudice, and
LPB was free to re-file substantially similar claims in the
circuit court, and depending on the outcome of such litigation,
another summary possession claim in the District Court.7/ The
Dismissal Order did not "ultimately" or "finally" resolve any
issue, other than the jurisdictional issue that arose after
Trustees intervened and asserted a title claim. See id. at 25-
26, 332 P.3d at 168-69. As in Oahu Publications, there was "no
material alteration of the legal relationship of the parties"
6/
(...continued)
328, 31 P.3d at 185 (noting that the supreme court had upheld dismissal of the
complaint because the defendant "owed Plaintiffs no duty" as a matter of law).
7/
The complaint asserted claims for summary possession and damages,
based on allegations that Defendants had failed to pay rent for certain office
space owned by LPB. Trustees intervened, alleging an ownership interest in
LPB and an impending transfer of the subject property to the Trust.
Defendants point out in their reply brief that following the Dismissal Order,
the summary possession claim could not be asserted in another court.
Defendants acknowledge, however, that LPB could again assert a summary
possession claim in the District Court after resolving the dispute between
LPB's members for control and ownership of LPB in another court. Defendants
further acknowledge that LPB's "monetary claims," e.g., damages for unpaid
rent, could be "further litigated in another court."
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where Defendants remained at risk that LPB would file another
suit. Id. at 26, 332 P.3d at 169.
The District Court did not cite Oahu Publications in
determining that Defendants were not prevailing parties for
purposes of awarding attorneys' fees and costs. However, the
District Court's analysis of the Dismissal Order, as not finally
resolving the parties' claims, was consistent with the principles
stated in Oahu Publications. In these circumstances, we cannot
say that the District Court clearly exceeded the bounds of reason
or disregarded rules or principles of law or practice to the
substantial detriment of a party litigant in concluding that
Defendants were not prevailing parties for purposes of awarding
attorneys' fees and costs. Accordingly, the District Court did
not abuse its discretion in declining to award attorneys' fees
and costs to Nada Ono LLP on that basis.
For the reasons discussed above, we vacate that part of
the District Court's August 30, 2018 "Order Regarding Award of
Attorneys' Fees and Costs and Distribution of Monies Held in the
Rent Trust Fund" that concluded the court lacked jurisdiction or
power to award attorneys' fees and costs in this case; we affirm
the same August 30, 2018 order in all other respects.
DATED: Honolulu, Hawai#i, September 29, 2022.
On the briefs:
Philip J. Leas, Kirk M. Neste, Lisa M. Ginoza
and Darene K. Matsuoka Chief Judge
(Cades Schutte, A Limited
Liability Law Partnership)
for Defendants-Appellees/ Clyde J. Wadsworth
Cross-Appellants. Associate Judge
Robert H. Thomas and
Veronica A. Nordyke Karen T. Nakasone
(Damon Key Leong Kupchak Associate Judge
Hastert)
for Plaintiff-Appellant/
Cross-Appellee.
Michael C. Carroll and
James G. Diehl
(Bays Lung Rose & Holma)
for Intervenors-Appellees/
Cross-Appellees.
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