Kawakami v. Kahala Hotel Investors, LLC.

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Electronically Filed
Supreme Court
SCWC-XX-XXXXXXX
29-JUN-2018
07:58 AM
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
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________________________________________________________________
JASON KAWAKAMI,
Individually and on behalf of all others similarly situated,
Petitioner/Plaintiff-Appellant/Cross-Appellee
vs.
KAHALA HOTEL INVESTORS, LLC, dba KAHALA HOTEL AND RESORT
Respondent/Defendant-Appellee/Cross-Appellant.
________________________________________________________________
SCWC-XX-XXXXXXX
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-XX-XXXXXXX; CIVIL NO. 08-1-2496)
JUNE 29, 2018
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
OPINION OF THE COURT BY WILSON, J.
This class action concerning Hawaii’s hotel and
restaurant service charge law returns to us for the second time.
See Kawakami v. Kahala Hotel Inv’rs, LLC, 134 Hawaiʻi 352, 341
P.3d 558 (2014). Its return presents us once again with the
task of interpreting Hawaiʻi Revised Statutes (HRS) § 481B-14
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(2000).1 For the reasons explained below, we vacate the
Intermediate Court of Appeals’ affirmance of the circuit court’s
grant of judgment as a matter of law (JMOL) and reinstate the
circuit court’s earlier grant of partial summary judgment to
plaintiff Jason Kawakami as to the defendant Kahala Hotel and
Resort’s liability under HRS § 481B-14. We also reinstate the
jury’s special verdict in favor of Kawakami on legal causation
and the amount of damages in the trial on damages that followed
the grant of partial summary judgment. We remand to the circuit
court for determination of additional damages and fees under
Hawaii’s statute governing unfair or deceptive acts or
practices. HRS Chapter 480.
I. Background
Jason Kawakami (Kawakami)2 held his wedding reception
at the Kahala Hotel and Resort (the hotel) in July 2007.3 The
1
In 2007, the statute required that any hotel or restaurant “that
applies a service charge for the sale of food or beverage services . . .
shall distribute the service charge directly to its employees as tip income
or clearly disclose to the purchaser of the services that the service charge
is being used to pay for costs or expenses other than wages and tips of
employees.” HRS § 481B-14. The statute’s requirements were later extended
to hotels that apply a service charge for porterage services. HRS § 481B-14
(2015).
2
Kawakami is the class representative. Except where the context
requires, when we refer to him, we refer also to the class.
3
For more extended recitations of the facts, see our prior
opinion, Kawakami, 134 Hawaiʻi at 354–56, 341 P.3d at 560–62, and the two
unpublished opinions of the Intermediate Court of Appeals (ICA). Kawakami v.
Kahala Hotel Inv’rs, LLC (Kawakami I), CAAP-XX-XXXXXXX, 133 Hawaiʻi 451, 330
P.3d 389 (App. March 25, 2014) (mem.), vacated, 134 Hawaiʻi 352, 341 P.3d 558
(continued . . .)
2
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hotel collected a 19% service charge on the purchase of food and
beverages for his reception, but the hotel failed to distribute
100% of the funds from the service charge directly to its
service employees as tip income. Instead, the hotel retained
15% of those funds as what it termed “the management share,”
then reclassified those funds and used them to pay for the
banquet employees’ “wages.” The “event agreement,” a contract
used by the hotel for large group events, contained no
disclosure that a portion of the service charge would be
diverted to the hotel, rather than directly distributed to the
banquet employees as tip income. A section of the event
agreement, titled “Service Charge and Tax,” stated only that
“[a]ll food and beverage prices are subject to a 19% service
charge.” No other disclosure was made to Kawakami that a
portion of the service charge would not be directly distributed
to the banquet employees as tips.
Kawakami filed a lawsuit on behalf of himself and
other customers who paid a service charge to the hotel in
connection with the purchase of food or beverages. He claimed
the hotel’s conduct was an unfair or deceptive act or practice
(UDAP) under HRS § 481B-14 and HRS § 480-2. Kawakami moved for
summary judgment “on liability” because the undisputed facts
(. . . continued)
(2014); Kawakami v. Kahala Hotel Inv’rs, LLC (Kawakami II), CAAP XX-XXXXXXX,
136 Hawaiʻi 543, 364 P.3d 251 (App. Dec. 23, 2015)(mem.)
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established that the hotel violated HRS § 481B-14 and HRS § 480-
2. The circuit court granted summary judgment as to liability
only, not remedies or damages, ruling that under HRS § 481B-14
the hotel had “a duty to disclose” to Kawakami that a portion of
the service charge would become the property of the hotel rather
than paid to its employees as tip income.4 A jury trial to
determine damages followed. The jury found that the hotel was
the legal cause of injury to the plaintiff class and awarded
$269,114.73 to the class, corresponding to the amount of the
combined service charges retained by the hotel as “the
management share.”
A little more than a month after the verdict, the
hotel renewed its prior motions for JMOL, which had been denied
by the circuit court. This time the circuit court granted the
motion for JMOL on the theory there had been insufficient
evidence the plaintiffs suffered injury as a result of the
hotel’s violation of HRS § 481B-14. The circuit court stated
that it was “struggling to understand how the Management’s Share
. . . constitutes financial or economic loss or harm to
Plaintiffs.” The court focused on the apparent lack of an
economic loss to the plaintiffs relating to the hotel’s failure
to distribute the funds from the service charge in the manner
4
The Honorable Gary W.B. Chang presided over the circuit court
proceedings.
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required by the statute. That failure, the court stated, “did
not cause Plaintiffs to pay any additional sums over and above
their contractual obligation to pay the service charge or any
other additional compensation.” Yet, the court observed, the
“jury awarded as damages to Plaintiffs a sum that appears to be
equal to the amount of the Management’s Share of the service
charge.”
On appeal the ICA vacated the circuit court’s order
granting Kawakami’s motion for summary judgment and held instead
that summary judgment should have been granted in favor of the
hotel. The ICA reasoned that because the hotel ultimately
distributed the management share of the service charge as wages,
its actions were in compliance with the language of HRS § 481B-
14 and no disclosure to Kawakami was required. Kawakami I, mem.
op. at 4-5.
On certiorari in Kawakami I, we rejected the ICA’s
reasoning. Instead, we recognized “the well-settled duty of
hotels and restaurants” under the statute “to either distribute
the entirety of the service charge directly to non-management
banquet employees who served the consumers as ‘tip income,’ or
to disclose its practice of withholding the service charge[.]”
Kawakami I, 134 Hawaiʻi at 357, 341 P.3d at 563; id.
(characterizing this statutory duty as assisting “a well-
informed consumer” in choosing whether to leave a tip for the
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employees as a reward for their service). We held that under
HRS § 481B-14,
a hotel or restaurant that applies a service charge for food or
beverage services must either distribute the service charge
directly as tip income to the non-management employees who
provided the food or beverage services, or disclose to its
customers that the service charges are not being distributed as
tip income.
Kawakami I, 134 Hawaiʻi at 354, 341 P.3d at 560. Accordingly, we
vacated the ICA’s judgment on appeal and remanded to the ICA.
We directed the ICA to address on remand Kawakami’s argument
that the circuit court erred when it granted JMOL to the hotel
on the theory that Kawakami suffered no injury as a result of
the hotel’s actions. Id. at 360, 341 P.3d at 566.
On remand from our decision in Kawakami I, the ICA
affirmed the circuit court’s grant of JMOL to the hotel because,
in the ICA’s view, Kawakami “failed to establish that he was
injured, financially or otherwise, as a result of Kahala Hotel’s
deceptive trade practices[.]” Kawakami II, mem. op. at 1. The
ICA acknowledged that a plaintiff alleging an unfair or
deceptive act or practice need not show strictly “economic loss”
in order to satisfy the consumer “injury” requirement of HRS §
480-13(b). Kawakami II, mem. op. at 3. The ICA nonetheless
concluded that Kawakami failed to establish that he was injured
even by the “less stringent standard” of non-economic injury.
Id. With respect to Kawakami’s alternative claim of a contract-
based injury, the ICA rejected that claim largely on the grounds
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that “the required disclosure under HRS § 481B–14 need not take
the form of a written provision in an event contract, nor must
it necessarily occur before parties enter into the contract,”
and therefore there was no breach of contract. Kawakami II,
mem. op. at 5. See also id., mem. op. at 4 (stating that
“benefit-of-the-bargain damages are only available when there
has been a breach of contract.”). As a result, the ICA affirmed
the circuit court’s grant of JMOL.
On certiorari, Kawakami argues that the ICA erred by
holding that no contract-based or UDAP-based injury occurred.
He also argues that the ICA erred in affirming the circuit
court’s order denying plaintiffs’ motion in limine no. 1, which
sought to preclude the admission of certain evidence.
II. Standards of Review
A. Motions for Judgment as a Matter of Law
“It is well settled that a trial court’s rulings on
motions for judgment as a matter of law are reviewed de novo.
When we review the granting of a motion for judgment as a matter
of law, we apply the same standard as the trial court. A motion
for judgment as a matter of law may be granted only when after
disregarding conflicting evidence . . . and indulging every
legitimate inference which may be drawn from the evidence in the
non-moving party’s favor, it can be said that there is no
evidence to support a jury verdict in his or her favor.”
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Miyamoto v. Lum, 104 Hawaiʻi 1, 6-7, 84 P.3d 509, 514-15 (2004)
(internal citations and braces omitted).
B. Motions in Limine
Because “the granting or denying of a motion in limine
is within the trial court’s inherent power to exclude or admit
evidence, we review the court’s ruling for the abuse of
discretion standard.” State v. Kealoha, 95 Hawaiʻi 365, 379, 22
P.3d 1012, 1026 (App. 2000)(internal citations omitted).
However, when the trial court’s order granting a motion in
limine is an evidentiary decision based upon relevance, the
standard of review is the right/wrong standard. Ass’n of Apt.
Owners of Wailea Elua v. Wailea Resort Co., Ltd., 100 Hawaiʻi 97,
110, 58 P.3d 608, 621 (2002).
C. Statutory Interpretation
Appellate courts review questions of statutory
interpretation de novo. Bhakta v. Cty. of Maui, 109 Hawaiʻi 198,
208, 124 P.3d 943, 953 (2005). “When construing a statute, our
foremost obligation is 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.” Id.
(internal citations omitted).
III. Discussion
We consider first the issue of Kawakami’s contract-
based damages, then the issue of Kawakami’s UDAP-based damages,
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and finally the issue whether Kawakami’s motion in limine no. 1
was properly denied by the circuit court.
A. Kawakami and the Class Sustained Contract-based Damages
“Contract law is designed to enforce the expectancy
interests created by agreement between the parties[.]” Ass’n of
Apartment Owners of Newtown Meadows ex rel. its Bd. of Directors
v. Venture 15, Inc., 115 Hawaiʻi 232, 291, 167 P.3d 225, 284
(2007)(citation omitted); Restatement (Second) of Contracts §
347 (Am. Law Inst. 1981) cmt. a (stating that contract-based
damages ordinarily center on “the injured party’s expectation
interest”). See also Joseph M. Perillo, Calamari and Perillo on
Contracts § 14-4 (6th ed. 2009)(“Our legal system starts with
the premise that the expectation interest (perhaps better called
‘the performance interest’) of contracting parties is the
primary interest deserving protection.”); Daniel Friedmann, The
Performance Interest in Contract Damages, 111 Law Q. Rev. 628,
629 (1995)(“The essence of contract is performance. Contracts
are made in order to be performed.”).5
Once a court concludes a breach of contract has
occurred, the court ordinarily “enforces the broken promise by
5
The expectation interest is one of three interests generally
recognized in the law of contracts; the other two are the reliance interest
and the restitution interest. Restatement (Second) of Contracts § 344
(explaining that judicial remedies under the Restatement “serve to protect
one or more” of three interests of a promisee, the “expectation interest,”
the “reliance interest,” and the “restitution interest”); id. (explaining the
distinctions between the three interests). See also Restatement (Third) of
Restitution and Unjust Enrichment (Am. Law Inst. 2011).
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protecting the expectation that the injured party had when he
made the contract.” Restatement (Second) of Contracts § 344
cmt. a. Thus, contract damages generally attempt to give the
injured party “the benefit of the bargain” by awarding a sum of
money that will, to the extent possible, put the injured party
“in as good a position as he [or she] would have been in had the
contract been performed.” Restatement (Second) of Contracts §
347 cmt. a; id. at § 344(a). Because contract damages are
primarily based on the injured party’s expectation interest
(also called performance interest) and give the injured party
the benefit of the bargain embodied in the contract, the amount
of damages will depend on the nature of the bargain. Cf.
Restatement (Second) of Torts § 549 cmt. 1 (Am. Law Inst.
1977)(“The damages necessary to give the plaintiff the benefit
of the bargain that he has made with the defendant will depend,
first of all, upon the nature of the bargain.”).
1. The statutory requirements of Hawaii’s hotel and
restaurant service charge law are incorporated as
implied terms into the event agreement or other contract
between the purchaser and the hotel or restaurant, and
those requirements set the purchasers’ expectation
interest in the contracts
When a hotel or restaurant applies a service charge
for the sale of food or beverage services, the requirements of
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HRS § 481B–146 govern and are incorporated as implied terms into
the contracts between the hotel or restaurant and the purchasers
of the food and beverage services. That is because a “contract
is presumed to include all applicable statutes and settled law
relating to its subject matter.” Gabriel v. Island Pac. Acad.,
Inc., 140 Hawaiʻi 325, 336, 400 P.3d 526, 537, cert. dismissed,
138 S. Ct. 499 (2017). See also id. (explaining that
“[c]ontracting parties are presumed to contract in reference to
the existing law, and to have in mind all the existing laws
relating to the contract, or to the subject matter thereof.”
(citation omitted)).
The requirements of HRS § 481B–14 are, then, implied
terms in the relevant contracts. Id. (“All existing applicable
or relevant statutes . . . at the time a contract is made become
a part of it and must be read into it just as if an express
provision to that effect were inserted therein, except where the
contract discloses a contrary intention.” (quoting 17A Am. Jur.
2d Contracts § 363)); Quedding v. Arisumi Bros., 66 Haw. 335,
338, 661 P.2d 706, 709 (1983)(stating that “it is a general rule
that the existing law is part of a contract where there is no
6
For the period relevant to this class action, the statute
required that any hotel or restaurant “that applies a service charge for the
sale of food or beverage services . . . shall distribute the service charge
directly to its employees as tip income or clearly disclose to the purchaser
of the services that the service charge is being used to pay for costs or
expenses other than wages and tips of employees.” HRS § 481B-14.
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stipulation to the contrary.” (citation and internal quotation
marks omitted)); 11 Williston on Contracts § 30:19 (4th
ed.)(Supp. 2017)(the provisions of existing law “are regarded as
implied terms of the contract, regardless of whether the
agreement refers to the governing law.”).
HRS § 481B–14’s requirements set the expectancy or
performance interest for the purchasers of food or beverage
services to which a hotel or restaurant applies a service
charge. Under the statute, those purchasers are entitled to
expect that the service charge will be distributed directly and
entirely to service employees as tip income. That expectancy
interest can be overcome or negated only if the hotel or
restaurant clearly discloses to those purchasers that the hotel
or restaurant follows a pattern of distributing the proceeds of
a service charge in a way that diverges from the distribution
pattern specified by the statute. Id.; Kawakami I, 134 Hawaiʻi
at 360, 341 P.3d at 566 (explaining that “absent disclosure,
consumers are misled into believing the service charges are
being used as a gratuity to employees who provide the services
for which customers believe they are tipping.”).
Here, it is undisputed that the hotel neither
distributed the proceeds from the service charges directly and
entirely to the service employees as tip income, nor clearly
disclosed that it failed to do so. See HRS § 481B–14.
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2. A hotel or restaurant’s violation of the implied terms
imposed by HRS § 481B–14 is a breach of contract
The requirements and expectations imposed by the
implied terms incorporated into contracts from HRS § 481B–14 are
clear. In Kawakami I, we held that under HRS § 481B-14,
a hotel or restaurant that applies a service charge for food or
beverage services must either [a] distribute the service charge
directly as tip income to the non-management employees who
provided the food or beverage services, or [b] disclose to its
customers that the service charges are not being distributed as
tip income.
Kawakami I, 134 Hawaiʻi at 354, 341 P.3d at 560 (emphasis and
material in braces added); see also Gurrobat v. HTH Corp., 133
Hawaiʻi 1, 18, 323 P.3d 792, 809 (2014)(stating in a related
context that “HRS § 481B–14 required Defendants to either
distribute one-hundred percent of the service charge to
employees as ‘tip income’ or disclose their retention of a
portion of the service charge to customers.” (emphasis added));
id. at 17, 323 P.3d 792, 808 (“Defendants were required to
distribute one-hundred percent of service charge income to non-
management service employees who provided the services for which
customers believed they were tipping.” (emphasis in original)).
In essence, HRS § 481B–14 gives legal force and form
to the ordinary consumer expectation that service charges are to
be distributed in their entirety to service personnel and not
diverted to other uses by the hotel or restaurant. HRS § 481B–
14 authorizes a departure from the distribution pattern based on
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the ordinary consumer expectation only where the hotel or
restaurant “clearly disclose[s]” that its pattern of
distributing service charges diverges from the pattern specified
by the statute. Id. As noted, those two “either/or”
alternatives, incorporated into contracts governed by HRS §
481B–14 as implied terms, set the expectancy interest of
purchasers of the relevant services. As we stated in Kawakami
I, in enacting HRS § 481B–14, the legislature:
specifically sought to meet consumer expectations ‘that service
charges applied to the sale of food and beverages by hotels and
restaurants are levied in lieu of voluntary gratuity, and are
distributed to the employees providing the service’; an
expectation that resulted in ‘most consumers not tipping for
services over and above the amounts they pay as a service
charge.’
Kawakami I, 134 Hawaiʻi at 358, 341 P.3d at 564 (quoting S.
Stand. Comm. Rep. No. 3077, in 2000 Senate Journal, at 1287
(emphasis added, braces omitted)). By enacting HRS § 481B–14,
the legislature intended to require hotels and restaurants ‘to
meet consumer expectations’ that the service charge will be
distributed to service personnel in lieu of a voluntary
gratuity, not dedicated to some other purpose or diverted to
some other party. Thus, the statute aims to structure the
relevant transactions such that a hotel or restaurant’s pattern
of distributing proceeds from service charges to its service
employees will accord with normal consumer expectations. The
statute accomplishes that aim by setting up a baseline
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distribution pattern for service charges, together with a means
by which a hotel or restaurant can escape being bound by that
baseline by clearly disclosing to the purchaser that it does not
follow the baseline distribution pattern. Id.; see also
Kawakami I, 134 Hawaiʻi at 354, 341 P.3d at 560; Gurrobat, 133
Hawaiʻi at 18, 323 P.3d at 809.
If a hotel or restaurant neither follows the specified
service charge distribution pattern nor clearly discloses that
it does not, it violates the contract’s implied terms, thereby
breaching the contract, and the purchaser “receives something
substantially less or different from that for which he or she
bargained.” Williston on Contracts § 63:3 (4th ed.)(discussing
material breach of a contract). The benefit of the bargain for
a purchaser such as Kawakami is that 100% of the service charge
paid by the purchaser to the hotel as a service charge goes
directly to the service personnel as tip income in lieu of a
voluntary gratuity.
Here, the hotel failed to perform its contractual
obligation, mandated by the implied terms, to follow the
baseline distribution pattern.7 Nor did the hotel opt out of the
7
Thus, we agree with Kawakami’s argument that the statute-based
implied terms of the contract were breached resulting in a violation of
Kawakami’s expectation interest. By the same token, we reject Kawakami’s
alternative damages theory that the contract itself was a void or illegal
agreement. The contract itself was not illegal; it was simply a valid
(continued . . .)
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implied terms requiring the baseline distribution pattern by
following the statutorily-required route of clearly disclosing
to Kawakami or the members of the class the fact that the hotel
follows a different distribution pattern.8 Instead, the hotel
retained for itself a percentage of the service charge, an
amount that, had the purchaser been given the benefit of his
bargain, would have been distributed entirely to the service
personnel who assisted at his wedding reception.
3. Giving Kawakami the benefit of the bargain requires the
hotel to pay in damages the portion of the service
charge that was retained by the hotel rather than
distributed to the service employees
A party “who sustains a loss by the breach of another
is entitled to compensation that will ‘actually or as precisely
as possible compensate the injured party.’” Hi Kai Inv., Ltd.
v. Aloha Futons Beds & Waterbeds, Inc., 84 Hawaiʻi 75, 80–81, 929
P.2d 88, 93–94 (1996)(citation omitted). The nature of the
(. . . continued)
contract whose implied terms were breached by the hotel resulting in damages
to Kawakami.
8
The hotel admits it never disclosed to purchasers that its
practice was to retain a portion of the proceeds from the service charge
rather than “distribute the service charge directly to its employees as tip
income[.]” HRS § 481B–14. The ICA was therefore mistaken in rejecting
Kawakami’s breach of contract argument on the basis that “the required
disclosure under HRS § 481B–14 need not take the form of a written provision
in an event contract, nor must it necessarily occur before parties enter into
the contract[.]” Kawakami II, mem. op. at 5. The issue of the exact form or
timing the disclosure must take under HRS § 481B–14 was not before the ICA,
since the hotel failed to make the required disclosure in any form or at any
time.
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“loss” and the measure of the damages will depend in part on the
party’s expectation or performance interest and the nature of
the bargain. 3 E. Allen Farnsworth, Farnsworth on Contracts §
12.20 (3rd ed. 2004)(“It is a principle of the law of contracts
that damages should be based on the injured party’s lost
expectation.”); cf. Restatement (Second) of Torts § 549 cmt. l
(“Benefit of the bargain. The damages necessary to give the
plaintiff the benefit of the bargain that he has made with the
defendant will depend, first of all, upon the nature of the
bargain.”). However, the interests on which the law of
contracts rests, including the expectation interest, “are not
inflexible limits on relief[.]” Restatement (Second) of
Contracts § 344 cmt. a. Where justice requires, a court may
fashion relief for the injured party even if the relief does not
“correspond precisely” to the interest at issue. Id.
Here, Kawakami had a statutory and contractual right
to expect that the service charge he paid to the hotel would be
distributed directly and entirely to the service personnel as
tip income and not retained in part by the hotel. HRS § 481B-
14. The extent to which the hotel failed to deliver 100% of the
proceeds from the service charge to the service employees in the
manner required by the statute and the implied terms represents
the extent of the breach. See Zanakis-Pico v. Cutter Dodge,
Inc., 98 Hawaiʻi 309, 319, 47 P.3d 1222, 1232 (2002)(“‘benefit-
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of-the-bargain’ damages . . . are preconditioned on the breach
of a contract.”); Restatement (Second) of Contracts §
235(2)(“When performance of a duty under a contract is due any
non-performance is a breach.”); id., § 236 cmt. a (“Every breach
gives rise to a claim for damages . . . ”). The extent to which
the hotel failed to deliver all the proceeds from the service
charge in the manner required by the statute and the implied
terms is also the measure of damages. Restatement (Second) of
Contracts § 347(a)(explaining that “the injured party has a
right to damages based on his expectation interest as measured
by . . . the loss in the value to him of the other party’s
performance caused by its failure or deficiency[.]” (emphasis
added)).
The hotel’s retention of 15% of the proceeds from the
19% service charge violated HRS § 481B-14, the implied terms of
contracts subject to the statute, and Kawakami’s expectancy (or
performance) interest. It is true, as the circuit court
observed in granting the JMOL, that Kawakami and the class did
not appear to suffer any additional out-of-pocket loss as a
result of the hotel’s failure to distribute 100% of the service
charge proceeds directly to the service personnel as tip income.
That failure, the court noted, “did not cause Plaintiffs to pay
any additional sums over and above their contractual obligation
to pay the service charge or any other additional compensation.”
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As the court explained, it was “struggling to understand how the
Management’s Share of the service charge constitutes financial
or economic loss or harm to the Plaintiffs.” The court was
puzzled by the fact that the “jury awarded as damages to
Plaintiffs a sum that appears to be equal to the amount of the
Management’s Share of the service charge.” However, viewed in
light of the class’s expectancy or performance interest, the
jury award reflects the fact that “the injured party has a right
to damages based on his expectation interest as measured by . .
. the loss in the value to him of the other party’s performance
caused by its failure or deficiency[.]” Restatement (Second) of
Contracts § 347(a) (emphasis added).
The hotel contends that Kawakami’s complaint does not,
in fact, challenge the event contracts themselves. However,
Kawakami specifically alleged that he paid the hotel a 19%
service charge, and that “the final bill” for his reception
banquet services failed to disclose that the service charge was
not distributed in its entirety to service employees. He
attached a copy of the final bill as an exhibit to the
complaint. He alleged that the hotel “did not distribute all of
the service charge to the employees who provided that service”
but instead retained a portion of Kawakami’s service charge for
itself, and that the hotel had “a policy and practice of
retaining for itself a portion of those service charges.” In
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addition, Kawakami alleged that the hotel’s actions “are in
direct violation of Hawaiʻi Revised Statutes § 481B-14.” He
alleged as well that the hotel’s conduct constituted unfair or
deceptive acts or practices in violation of HRS § 480-2.
To satisfy Hawaiʻi Rule of Civil Procedure (HRCP)
8(a)(1),9 “the complaint must contain either direct allegations
on every material point necessary to sustain a recovery on any
legal theory, even though it may not be the theory suggested or
intended by the pleader, or contain allegations from which an
inference fairly may be drawn that evidence on these material
points will be introduced at trial.” Marsland v. Pang, 5 Haw.
App. 463, 475, 701 P.2d 175, 186 (1985)(emphasis added, citation
omitted); In re Genesys Data Technologies, Inc., 95 Hawaiʻi 33,
41, 18 P.3d 895, 903 (2001)(“Hawaii’s rules of notice pleading
require that a complaint set forth a short and plain statement
of the claim that provides defendant with fair notice of what
the plaintiff's claim is and the grounds upon which the claim
rests.”).
Kawakami’s complaint put the hotel on notice that
Kawakami alleged the hotel repeatedly violated the requirements
of HRS § 481B-14, that the violations constituted unfair or
9
“Claims for relief. A pleading which sets forth a claim for
relief, whether an original claim, counterclaim, cross-claim, or third-party
claim, shall contain (1) a short and plain statement of the claim showing
that the pleader is entitled to relief, and (2) a demand for judgment for the
relief the pleader seeks.” HRCP 8(a).
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deceptive acts or practices, that the final bill contained
evidence of the violations, and that Kawakami suffered damages
as a result. In addition, as the attorneys for the class
asserted in the motion for class certification, “Defendant
entered into form contracts with the class members for banquets,
events, meetings, room service and other events in which
Defendant added a pre-set ‘service charge’ to customers’ bills
for food and beverage provided by the hotel and/or its
restaurants.” “In this case, the same contract forms were used
for all members.” “There are also common questions of fact
relating to the service charge charged to Plaintiff and the
putative Class members, in terms of the Hotel’s policy of
distribution and the content of the Hotel’s contract form.”
Accordingly, we hold that the allegations in the
plaintiffs’ complaint gave the hotel fair notice that the
hotel’s pattern and practice of violating HRS § 481B-14 was at
issue “on any legal theory.” Marsland, 5 Haw. App. at 475, 701
P.2d at 186; see also Yap v. Wah Yen Ki Tuk Tsen Nin Hue of
Honolulu, 43 Haw. 37, 39 (Haw. Terr. 1958)(“Under our rules, a
complaint is good if it contains a short and plain statement of
the claim showing that the pleader is entitled to relief.
(H.R.C.P., Rule 8 [a][1].) The rules do not require a statement
of a cause of action.” (emphasis added)); Hall v. Kim, 53 Haw.
215, 221, 491 P.2d 541, 545 (1971)(explaining that it “is not
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necessary to plead under what particular law the recovery is
sought” and emphasizing “the principle that the purpose of
pleading is to facilitate a proper decision on the merits.”
(citations omitted)). See also Laeroc Waikiki Parkside, LLC v.
K.S.K. (Oahu) Ltd. P’ship, 115 Hawaiʻi 201, 216 n.17, 166 P.3d
961, 976 n.17 (2007)(stating that appellant failed to directly
raise the cause of action of fraudulent inducement, but noting
that pleadings are liberally construed, and a “liberal reading
of Appellant’s misrepresentation and nondisclosure claims shows
that Appellees should have been on notice of Appellant’s
fraudulent inducement claims and ‘the grounds upon which the
claim rests.’” (citation omitted)).
4. Disposition of the judgments below in light of
Kawakami’s contract-based damages
We now apply the principles of contract law explained
above to the various judgments entered below, beginning with the
JMOL. We review de novo a trial court’s rulings on motions for
judgment as a matter of law. Miyamoto, 104 Hawaiʻi at 6, 84 P.3d
at 514. Given that Kawakami suffered a legally-cognizable
injury through the hotel’s breach of contract, we vacate the
circuit court’s grant of JMOL (as well as the ICA’s affirmance
of it), as that grant and its affirmance were predicated on the
courts’ mistaken view that Kawakami had not shown any evidence
of a cognizable injury.
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The circuit court granted partial summary judgment to
Kawakami on the liability issue prior to the damages trial.
Subsequent to the jury’s award of damages, the circuit court
reversed its prior denials of the hotel’s motions for JMOL and
granted JMOL to the hotel, ruling that Kawakami failed to
establish the hotel’s liability. Because we hold the JMOL was
improperly granted and accordingly vacate it, we now consider
the validity of the prior grant of partial summary judgment to
Kawakami on the liability issue. “This court may affirm a grant
of summary judgment on any ground appearing in the record, even
if the circuit court did not rely on it.” Reyes v. Kuboyama, 76
Hawaiʻi 137, 140, 870 P.2d 1281, 1284 (1994). The circuit
court’s grant of summary judgment to Kawakami as to liability
was predicated on the court’s conclusion that HRS § 481B-14
imposes on hotels and restaurants a statutory “duty to disclose”
to purchasers if the hotel or restaurant fails to follow the
distribution pattern specified in the statute. See Kawakami I,
134 Hawaiʻi at 357, 341 P.3d at 563 (recognizing “the well-
settled duty of hotels and restaurants to either distribute the
entirety of the service charge directly to non-management
banquet employees who served the consumers as ‘tip income,’ or
to disclose its practice of withholding the service charge so
that a well-informed consumer may choose to leave a tip for the
employees as a reward for their service.”). However, our
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analysis of the principles of contract law, articulated above,
shows that the statutory duty was also a contractual duty whose
breach by the hotel rendered it liable for contract-based
damages. For that reason we affirm (on different though related
grounds) the circuit court’s grant of partial summary judgment
as to the hotel’s liability to Kawakami.
Finally, we reinstate the jury’s findings on legal
causation and the amount of damages. The special verdict asked
two questions. The first was, “Did the defendant’s failure to
disclose to plaintiffs that not all of the service charge was to
be distributed directly to its employees as tip income legally
cause injury to plaintiffs?” The jury’s answer was “yes.” As a
matter of law and undisputed fact, that answer is correct.
Under the implied terms of those contracts, a hotel or
restaurant is contractually required either to follow the tip
distribution pattern specified by the statute or to clearly
disclose to the purchasers of food or beverage services that it
does not. Here, it is undisputed that the hotel did neither,
and that failure caused injury to the class.
The special verdict also asked, “What are the total
damages for the entire plaintiff class?” The jury’s answer was
“$269,114.73.” The total service charges collected by the hotel
for the relevant period amounted to $1,697,884.73. The amount
actually distributed to service employees as tip income was
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$1,428,770.00. The total of the “management’s share” was
$269,114.73.10 In other words, the jury awarded for damages a
sum exactly equal to the “management’s share” of the combined
service charges; that is, the jury awarded to Kawakami and the
class that portion of the total service charges collected that
the hotel diverted to its own use rather than distributing
directly as tip income.
Our analysis of the relevant principles of contract
law above led us to hold that Kawakami’s damages for breach of
contract based on his expectation interest are properly measured
by the 15% of the total 19% service charge which the hotel
retained for itself rather than directly distributing as tip
income to service employees. The jury in the damages trial
considered the factual evidence regarding the total service
charges collected over the relevant period. The jury awarded
$269,114.73 to the class, corresponding to the amount of the
combined service charges retained by the hotel as “the
management share.” That amount is 15% of the total 19% service
charge and corresponds to the amount retained by the hotel. The
jury’s award is supported by substantial evidence. Mehau v.
10
The total distributed as tip income to service employees, added
to the total of the “management’s share,” equals the total service charges
collected by the hotel. However, the total “management’s share” is not
precisely equal to 15% of the combined total service charges collected
because for some events the hotel imposed a 20% service charge as opposed to
the usual 19% service charge.
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Reed, 76 Hawaiʻi 101, 112–13, 869 P.2d 1320, 1331–32 (1994)(“The
jury’s verdict need only be supported by substantial evidence,
more than a scintilla, to be sustained by an appellate court.”)
Having vacated the circuit court’s grant of JMOL to the hotel
subsequent to trial, we reinstate the damages awarded at trial,
in the amount awarded, albeit on the ground that the amount
equals Kawakami’s damages for the hotel’s breach of contract.
We turn now to the question of whether Kawakami and the class
also sustained damages under the Hawaiʻi statute forbidding
unfair or deceptive practices (UDAP), HRS Chapter 480.
B. Kawakami and the Class Sustained Damages under the Unfair or
Deceptive Acts or Practices (UDAP) Statute.
To recover damages for a violation of the UDAP
statute’s prohibition on unfair or deceptive acts or practices,
a consumer must prove (1) either that the defendant violated the
UDAP statute (or that its actions are deemed to violate the UDAP
statute by another statute), (2) that the consumer was injured
as a result of the violation, and (3) the amount of damages
sustained as a result of the UDAP violation. HRS § 480-2(d)
(Supp. 2006);11 HRS § 480-13(b)12 (Supp. 2006); Compton v.
11
HRS § 480-2(d) provides that “[n]o person other than a consumer,
the attorney general or the director of the office of consumer protection may
bring an action based upon unfair or deceptive acts or practices [UDAP]
declared unlawful by this section.” Here, it is undisputed that Kawakami and
the class were “consumers” within the meaning of HRS chapter 480. In
(continued . . .)
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Countrywide Fin. Corp, 761 F.3d 1046, 1053 (9th Cir.
2014)(citing Davis v. Wholesale Motors, Inc., 86 Hawaiʻi 405,
417, 949 P.2d 1026, 1038 (App. 1997)).
The first element for a UDAP claim is established if
the act or practice in question is either proven to be a
violation of HRS § 480–2 or deemed to be a violation (“declared
unlawful”) under HRS § 480–2. HRS § 480–13(a)(noting that any
consumer injured by an unfair or deceptive act or practice that
is “forbidden or declared unlawful by section 480-2” may “sue
for damages sustained by the consumer[.]”). Here, the UDAP
statute declares that violations of Hawaii’s hotel and
restaurant service charge law are deemed unlawful under HRS §
480–2. HRS § 481B-4 (“Any person who violates this chapter
shall be deemed to have engaged in an . . . unfair or deceptive
act or practice in the conduct of any trade or commerce within
(. . . continued)
addition, there is no dispute that the hotel’s acts or practices occurred in
trade or commerce. HRS § 480-2(a).
12
HRS § 480-13(b) allows a consumer to sue for damages based on any
violation of HRS § 480-2 and provides for treble damages and attorney’s fees.
It provides in relevant part:
(a) Any consumer who is injured by any unfair or deceptive
act or practice forbidden or declared unlawful by
section 480-2:
(1) May sue for damages sustained by the consumer, and, if
the judgment is for the plaintiff, the plaintiff shall
be awarded a sum not less than $1,000 or threefold
damages by the plaintiff sustained, whichever sum is the
greater, and reasonable attorney’s fees together with
the costs of suit . . .
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the meaning of section 480-2.” (emphases added)); HRS § 481B-14
(containing Hawaii’s hotel and restaurant service charge law).
See also Davis v. Four Seasons Hotel Ltd., 122 Hawaiʻi 423, 427,
228 P.3d 303, 307 (2010)(“Pursuant to HRS § 481B–4, any person
who violates chapter 481B, including § 481B–14, ‘shall be deemed
to have engaged in an unfair method of competition and unfair or
deceptive act or practice in the conduct of any trade or
commerce within the meaning of section 480–2.’” (emphasis
added)).
The second element of a UDAP violation requires injury
to the consumer caused by such a violation. See HRS § 480-
13(b). The UDAP statute does not expressly define the term
“injury.” See Zanakis–Pico v. Cutter Dodge, Inc., 98 Hawaiʻi
309, 316, 47 P.3d 1222, 1229 (2002) (“HRS chapter 480 defines
neither ‘injury’ nor ‘damages[.]’”). However, we construe the
UDAP injury requirement broadly. Davis, 122 Hawaiʻi at 430, 228
P.3d at 310 (explaining that “as a remedial statute, chapter 480
must be construed liberally.”). “As a general matter, ‘injury’
means a ‘judicially-cognizable injury, that is, a harm to some
legally-protected interest.’” Flores v. Rawlings Co., LLC, 117
Hawaiʻi 153, 167, 177 P.3d 341, 355 (2008) (construing the injury
requirement for a UDAP claim under HRS § 480–13(b)). Here, the
second UDAP element is satisfied because the hotel caused harm
to Kawakami’s legally-protected expectation or performance
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interest, which was a term implied in the contract from the
statute. Because the requirements of HRS § 481B–14 were
incorporated as an implied term in the event agreement (or other
relevant contract) between the hotel and the purchasers, a
violation of the statute is also a breach of the implied term,
and that breach caused harm to Kawakami’s legally-protected
interest.
The third element of a UDAP violation is proof of the
amount of damages. Here, the requisite proof of the amount of
damages was supplied by proof at the trial on damages of the
“management’s share” of 15% of the combined service charges –-
found by the jury to amount to $269,114.73 -- which was diverted
by the hotel to its own use rather than distributed directly and
entirely to the service employees as tip income. Because the
hotel did not clearly disclose that its distribution pattern
differed from the baseline set by the statute, the hotel
violated both HRS § 481B-14 and the implied terms of its
contract with Kawakami, causing damage in an amount that was
proved at trial.
A violation of Hawaii’s hotel and restaurant service
charge law, HRS § 481B-14, is deemed to also be an “unfair or
deceptive act or practice in the conduct of any trade or
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commerce within the meaning of [HRS] section 480-2”;13 the injury
to Kawakami’s legally-protected interest was caused by the
hotel’s breach of contract; and the amount of damages was proved
at trial. Because Kawakami has met the elements for a UDAP
claim, we remand to the circuit court for an award of treble
damages and attorney’s fees. HRS § 480-13(b)(1).
C. The Circuit Court Properly Denied Kawakami’s Motion in
Limine No. 1.
Less than two weeks before the trial on damages,
Kawakami moved in limine for an order barring the admission of
any evidence of damages other than the sums representing the
full 19% paid by consumers for their service charge. He
contended that any other evidence concerning damages would be
irrelevant, immaterial, and unnecessarily confusing, including
any evidence that the hotel diverted 15% of the proceeds to
itself. Kawakami’s theory was that the entire service charge
was “illegal,” not just the 15% diverted by the hotel to its own
13
HRS § 481B-4 (“Any person who violates this chapter shall be
deemed to have engaged in an . . . unfair or deceptive act or practice in the
conduct of any trade or commerce within the meaning of section 480-2.”
(emphases added)). When a statute deems a violation of the statute to also
be a violation of HRS § 480-2, the “deeming” satisfies the first element of a
UDAP claim (conduct) but not the second element (requiring injury to the
consumer caused by the conduct). Cf. Davis, 122 Hawaiʻi at 439, 228 P.3d at
319 (explaining in the context of a claim for unfair method of competition
(UMOC) that “although the deeming language of HRS § 481B–4 eliminates the
requirement that a plaintiff prove that a defendant’s conduct that violates
chapter 481B (including HRS § 481B–14) constitutes an unfair method of
competition, it does not purport to modify the causation requirement of HRS §
480–13.”); Gurrobat, 133 Hawaiʻi at 23, 323 P.3d at 814 (interpreting the
causation element for a UMOC claim based on a violation of HRS § 481B–4, and
stating that “a plaintiff need only prove an injury that flows from that
which makes defendants’ acts unlawful.” (citations omitted)).
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use. Kawakami anticipated that the hotel would argue that the
damages were limited to the 15% of the service charge “based on
their [sic] theory that this is the proper measure of damages.”
Kawakami argued that any evidence regarding the 15% was
irrelevant. The trial court denied Kawakami’s motion. The ICA
affirmed the trial court’s ruling. Kawakami II, mem. op. at 6.
We review an evidentiary decision based upon relevance
under the right/wrong standard. Ass’n of Apt. Owners of Wailea
Elua, 100 Hawaiʻi at 110, 58 P.3d at 621. “‘Relevant evidence’
means evidence having any tendency to make the existence of any
fact that is of consequence to the determination of the action
more probable or less probable than it would be without the
evidence.” Hawaiʻi Rule of Evidence Rule (HRE) 401 (emphasis
added); State v. Kupihea, 80 Hawaiʻi 307, 314, 909 P.2d 1122,
1129 (1996)(“evidence is relevant if it possesses a legitimate
tendency to establish a controverted fact” (internal quotation
marks omitted)).
The hotel was entitled to present evidence relevant to
its theory that Kawakami’s economic injury was limited to the
15% of the total service charge not paid to those employees who
were servers at his event. The fact that the hotel retained 15%
of the total service charges tended to make the hotel’s theory
of damages more likely and was therefore relevant.
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Moreover, Kawakami’s motion in limine no. 1 is akin to
a motion for partial summary judgment regarding damages. In
general, such a motion must be served and filed no less than 50
days before the date of the trial. HRCP Rule 56(a). The
practice of framing a motion for partial summary judgment as a
motion in limine in order to avoid the time limitation of HRCP
Rule 56 has been rightly rejected. “The use of motions in
limine to summarily dismiss a portion of a claim has been
condemned, and the trial courts are cautioned not to allow
motions in limine to be used as unwritten and unnoticed motions
for summary judgment or motions to dismiss.” 75 Am. Jur. 2d
Trial § 44 (2018). Id. (explaining that motions in limine
should not be used “as a sweeping means of testing issues of
law.”). As we have stressed, a circuit court may properly deny
a motion in limine where the motion is “akin to a motion for
summary judgment or other dispositive motion.” O’Grady v.
State, 140 Hawaiʻi 36, 53 n.16, 398 P.3d 625, 642 n.16 (2017);
see also Kuroda v. Kuroda, 87 Hawaiʻi 419, 427, 958 P.2d 541, 549
(App. 1998)(stating that “a motion in limine is not an
authorized method for presenting issues involving genuine issues
of fact (in contrast to stipulated facts, questions of law, and
matters of discretion) to the court for decision.”). We hold
the circuit court did not err in denying Kawakami’s motion in
limine no. 1.
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IV. Conclusion
For the foregoing reasons, we vacate the circuit
court’s grant of judgment as a matter of law (JMOL) and the
Intermediate Court of Appeals’ affirmance of the JMOL. Having
vacated the JMOL, we reinstate the circuit court’s earlier grant
of partial summary judgment to Kawakami (as to liability). We
also reinstate the jury’s special verdict on legal causation and
the amount of damages in the trial on damages that followed the
grant of partial summary judgment, as the special verdict is
supported by substantial evidence. We remand to the circuit
court for determination of treble damages and reasonable
attorney’s fees and costs under Hawaii’s statute governing
unfair or deceptive acts or practices. HRS § 480-13(b)(1).
James J. Bickerton /s/ Mark E. Recktenwald
John F. Perkin
Brandee J.K. Faria /s/ Paula A. Nakayama
Bridget G. Morgan
Kristina M. Hanson /s/ Sabrina S. McKenna
for petitioners
/s/ Richard W. Pollack
David J. Minkin /s/ Michael D. Wilson
Lisa W. Cataldo
for respondent
33