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

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Electronically Filed
Supreme Court
SCWC-XX-XXXXXXX
10-APR-2019
09:32 AM
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
---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; CIV. NO. 06-1-101K)
APRIL 10, 2019
McKENNA, POLLACK, and WILSON, JJ., WITH RECKTENWALD, C.J.,
DISSENTING, WITH WHOM NAKAYAMA, J., JOINS
OPINION OF THE COURT BY POLLACK, J.
We are called upon to determine whether Hawai‘i’s
unfair or deceptive acts or practices statute, which on its face
applies to the conduct of any trade or commerce, nevertheless
excludes from its reach a lawyer who actively facilitated the
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sale of one company to another because of the lawyer’s status as
a legal professional. Our caselaw indicates that this conduct
is in fact the type of participation in a business transaction
that the law was intended to address, and the lawyer’s conduct
cannot be shielded from liability merely because it amounted to
or was comingled with legal services. Further, the statute
itself directs this court when construing the law to consider
the interpretation of analogous federal statutes by federal
courts and agencies. This guidance from federal decisions is
consistent with the plain language and legislative history of
the statute, and any concern that applying the statute in this
context would invade this court’s inherent authority to regulate
the legal profession is unfounded. We accordingly conclude that
the alleged conduct in this case, which may or may not have
involved the actual practice of law, properly states a claim for
relief under our unfair or deceptive acts or practices statute.
I. Background and Procedural History
In 2005, David W. Lacy, Esq., of the firm Lacy &
Jackson LLLC, represented Goran and Ana Maria Pleho (the Plehos)
and their company, Goran Pleho LLC (GPLLC) (collectively, the
Pleho Parties), in a transaction to purchase Dragan Rnic’s
company, Resorts Limousine Services (RLS). Several months
later, the Pleho parties initiated the present action in the
Circuit Court of the Third Circuit (circuit court) alleging a
2
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number of claims against Rnic, Lacy, and Lacy & Jackson LLLC in
connection with the transaction.
In a second amended complaint, the Pleho parties
alleged that Lacy and Lacy & Jackson LLLC (collectively, the
Lacy parties) did not fully disclose the extent of their
contemporaneous attorney-client relationship with Rnic at the
time of the sale. The complaint alleged that, although Lacy was
aware Rnic had previously agreed to sell RLS to a third party
for only $800,000, Lacy had advised the Pleho parties to
purchase the company for $1,500,000. The Pleho parties further
claimed that Lacy had falsely informed them that an independent
appraisal of RLS was not possible because of the company’s
unique nature and that the agreed-upon purchase price was well
below RLS’s true fair market value of $2,000,000. The complaint
stated that, after the Plehos entered into the purchase
agreement as Lacy had advised, they learned that Rnic had
misrepresented various factors related to the value of the
company. The Pleho parties then obtained an independent
appraisal, the complaint continued, which concluded RLS’s fair
market value at the time of the sale was only $128,000.
The Pleho parties alleged that the Lacy parties’
conduct in connection with the transaction constituted, inter
alia, “unfair and deceptive trade practices” in violation of
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Hawaii Revised Statutes (HRS) Chapters 480 and 481A.1 Before
trial, the Lacy parties moved for partial summary judgment on
the Plehos’ HRS Chapters 480 claims, arguing that the conduct
alleged in the complaint amounted to the “actual practice of
law,” which was beyond the scope of the consumer protection
statutes.2 The circuit court granted the motion without written
explanation.3 After trial, the parties filed cross-appeals to
the Intermediate Court of Appeals (ICA) from the circuit court’s
final judgment.
Among other issues raised on appeal to the ICA, the
Pleho parties challenged the circuit court’s grant of partial
1
The Plehos’ Second Amended Complaint alleged as follows:
Count VII (UNFAIR AND DECEPTIVE TRADE PRACTICES)
. . .
54. The acts and omissions of Defendants DAVID LACY, LACY &
JACKSONS, LLLC, and DRAGAN RNIC described herein and such
other conduct as may be established at trial constitute one
or more counts of unfair and deceptive trade practices
under Hawaii Revised Statutes Chapters 480 and 481A.
Insofar as HRS Chapter 481A serves primarily to clarify the prohibition on
deceptive trade practices contained in HRS Chapter 480, we address the
statutes together, and all references to the Pleho parties’ HRS Chapter 480
claims encompass their claims under both statutes.
2
The circuit court had previously dismissed GPLLC’s claims based
on HRS Chapters 480 and 481A, reasoning that the company was not a “consumer”
authorized to bring suit under the statutes because the law limits the term
to only “natural persons.” (Citing HRS §§ 480-1 and 480-2(d).)
3
Although the circuit court’s order did not explain the court’s
reasoning for granting the Lacy parties’ motion, the transcript from the
hearing on the motion indicates that the court was primarily concerned with
whether HRS Chapter 480 applied to the practice of law.
4
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summary judgment on their HRS Chapters 480 claims in favor of
the Lacy parties. The Pleho parties argued that a lawyer who
deceives a client about the value of a company the client wishes
to purchase commits both malpractice and deceptive trade
practices.
In an amended memorandum opinion, the ICA stated that
the Plehos’ argument on appeal raised for the first time the
allegation that “Lacy engaged in unfair or deceptive trade
practices within the context of the practice of law” as opposed
to “within the context of his role in the commercial purchase
and sale of the business.”4 The ICA stated that it therefore
need not address the issue. Nevertheless, the ICA proceeded to
reject the Pleho parties’ argument that HRS Chapter 480 applied
to Lacy’s conduct in his capacity as a practicing attorney,
citing case law from other jurisdictions supporting the
proposition that the regulation of attorneys does not fall
within the parameters of consumer protection laws.5
The Pleho parties assert on certiorari, inter alia,
that nothing new was added to their HRS Chapter 480 claim on
appeal, that the ICA did not cite Hawaii case law, and that the
4
The ICA’s amended memorandum opinion can be found at Goran Pleho,
LLC v. Lacy, No. CAAP-XX-XXXXXXX, 2016 WL 4082346 (Haw. App. Aug. 26, 2016).
5
The ICA also affirmed the circuit court’s dismissal of GPLLC’s
HRS Chapter 480 claim on the grounds that the company was not a “consumer”
entitled to recover under the statute.
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cases the ICA did cite do not support barring their claims under
HRS Chapter 480 merely because Lacy was their lawyer. Thus, the
Pleho parties argue that the ICA should have reinstated their
HRS Chapter 480 claims.
II. Standard of Review
“The interpretation of a statute is a question of law
which this court reviews de novo.” Sierra Club v. Dep’t of
Transp. of Hawai‘i, 120 Hawai‘i 181, 197, 202 P.3d 1226, 1242
(2009) (quoting Liberty Mut. Fire Ins. Co. v. Dennison, 108
Hawai‘i 380, 384, 120 P.3d 1115, 1119 (2005)).
III. Discussion
A. Lacy’s Alleged Conduct Occurred in the “Business Context”
Hawai‘i’s unfair or deceptive acts or practices
statute, HRS § 480-2(a) (2008),6 prohibits the utilization of
6
HRS § 480-2 provides in relevant part as follows:
(a) Unfair methods of competition and unfair or deceptive
acts or practices in the conduct of any trade or commerce
are unlawful.
(b) In construing this section, the courts and the office
of consumer protection shall give due consideration to the
rules, regulations, and decisions of the Federal Trade
Commission and the federal courts interpreting section
5(a)(1) of the Federal Trade Commission Act (15 U.S.C.
45(a)(1)), as from time to time amended.
. . . .
(d) No 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 declared unlawful by this section.
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“unfair or deceptive acts or practices in the conduct of any
trade or commerce.” The Lacy parties contend that the conduct
that the Plehos7 allege Lacy engaged in did not occur within
“trade or commerce” and that it thus falls outside the scope of
the prohibition.
This court articulated the standard for identifying
conduct in “trade or commerce” within the meaning of HRS § 480-
2(a) in the seminal case of Cieri v. Leticia Query Realty, Inc.,
80 Hawai‘i 54, 65, 905 P.2d 29, 40 (1995). In Cieri, two
property owners utilized the services of their former property
manager, who was also a licensed real estate broker, to sell a
residence the owners had previously rented out to third-party
tenants. Id. at 56-57, 905 P.2d at 31-32. Although the
property manager had been responsible for maintenance of the
property and was thus aware that the outgoing tenants had
experienced frequent leaks, flooding, and issues related to
plumbing, she indicated in a seller disclosure statement that
7
To the extent the Pleho parties challenge the circuit court’s
dismissal of GPLLC’s unfair or deceptive acts or practices claim, we hold
that the ICA correctly determined that, under HRS § 480-2(d), only a
consumer, the attorney general, or the director of the office of consumer
protection may bring such a claim. Because HRS § 480-1 (2008) specifies that
only a “natural person” may be considered a “consumer” for purposes of HRS
Chapter 480, a business organization like GPLLC is not permitted to bring an
unfair or deceptive acts or practices claim under the statute. By contrast,
the Plehos’ status as consumers in their personal capacities has not been
challenged at any stage of these proceedings. Our discussion therefore
pertains to only the Plehos’ claims against the Lacy parties and not those of
GPLLC.
7
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there had never been any leaks repaired or problems with the
plumbing at the residence. Id. at 57, 905 P.2d at 32. Upon
discovering the falsehood, the buyers brought suit against the
property manager, alleging inter alia that she had committed an
unfair and deceptive trade practice in violation of HRS § 480-
2(a). Id. at 57-58, 905 P.2d at 32-33. At trial, a jury found
that the property manager had indeed violated the statute and
awarded damages. On appeal, the property manager challenged the
plaintiff’s status as consumers entitled to bring suit under the
law. Id. at 58-59, 905 P.2d at 33-34.
Prior to reaching the merits of the argument, this
court took the “opportunity to discuss the scope of the
applicability of HRS § 480–2, which proscribes ‘unfair or
deceptive acts or practices in the conduct of any trade or
commerce,’ as it pertains to the transaction and the defendants
at issue in this case.” Id. at 59, 905 P.2d at 34(parenthetical omitted). We traced the development of the
statute, noting that the law was modeled after section 5 of the
Federal Trade Commission Act, and concluded that “the paramount
purpose of both statutes” has always been “to prevent deceptive
practices by businesses that are injurious to other businesses
and consumers.” Id. at 61, 905 P.2d at 36 (quoting Beerman v.
Toro Mfg. Corp., 1 Haw. App. 111, 118, 615 P.2d 749, 754
(1980)).
8
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This court observed that Massachusetts courts
interpreting their consumer protection statute had distinguished
between purely private transactions and transactions between a
consumer and a professional or business organization engaging in
the commercial field in which the party specializes. Id. at 63-
65, 905 P.2d 38-40 (citing Lantner v. Carson, 373 N.E.2d 973(Mass. 1978); Begelfer v. Najarian, 409 N.E.2d 167 (Mass. 1980);
Lynn v. Nashawaty, 423 N.E.2d 1052 (Mass. Ct. App. 1981); Nei v.
Burley, 446 N.E.2d 674 (Mass. 1983)). We reasoned that the
Massachusetts consumer protection statute shared “a common
genesis in the federal antitrust statutes” with our own and was
thus motivated by a similar impetus. Id. at 63, 905 P.2d at 38.
This court therefore adopted the Massachusetts courts’ test for
identifying conduct in “trade or commerce,” holding that the key
inquiry in determining whether a particular claim falls within
the scope of HRS Chapter 480 is whether the conduct at issue
occurs within what Massachusetts courts call the “business
context.” Id. at 65, 905 P.2d at 40. We stated that this
generally “must be determined on a case-by-case basis by an
analysis of the transaction.”8 Id. When addressing the specific
8
The court approvingly cited Begelfer v. Najarian, in which the
Massachusetts court set forth relevant factors to be evaluated in determining
whether a particular transaction occurred in the “business context.” Cieri,
80 Hawai‘i at 63, 905 P.2d at 38 (citing 409 N.E.2d 167 (Mass. 1980)). “[T]he
question whether a transaction took place in a ‘business context’ . . .
require[s] assessment of factors such as: (1) the nature of the transaction;
(continued . . .)
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facts of the case, however, the Cieri court determined that it
was unnecessary to examine the details of the property manager’s
conduct because a “broker’s or salesperson’s role in
facilitating every real estate transaction in which he or she
participates necessarily involves ‘conduct in any trade or
commerce,’ namely, the systematic sale or brokering of interests
in real property.” Id. We therefore held that the property
manager’s conduct in relation to the transaction in which she
had actively participated was subject to the requirements of HRS
Chapter 480. Id.As in Cieri, the Plehos and Rnic allegedly retained
Lacy specifically to utilize the specialized skills with which
he makes his living--that is, to facilitate a commercial
transaction of a type with which he purported to have
professional expertise. Lacy is alleged to have actively and
directly participated in the transaction, offering what was
ostensibly his professional appraisal of the value of RLS as
well as his opinion as to the profitability of the exchange in
order to induce the Pleho parties to consummate the deal. Cf.
(. . . continued)
(2) the character of the parties involved; (3) the activities engaged in by
the parties; (4) whether similar transactions had been undertaken in the
past; (5) whether the transaction was motivated by business or for personal
reasons (as in the sale of a home); and (6) whether the participant played an
active part in the transaction.” Id.10
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Begelfer, 409 N.E.2d at 176 (holding private investor’s loan was
not made in the business context where “the record indicate[d]
that the defendants’ participation in the real estate
transaction underlying the loan was minimal,” “[t]he defendants
had no voice in negotiating the terms of the loan,” “[t]he
payments were made to an agent and not directly to” the
defendants, and the defendants “were solicited by other
investors to participate in the loan, and were not active in the
management of the loan”). And as in Cieri, Lacy is alleged to
have made intentional misrepresentations in order to induce the
buyer to complete the exchange.
In Cieri, we held “as a matter of law that a broker or
salesperson actively involved in a real estate transaction
invariably engages in ‘conduct in any trade or commerce,’”
making it “unnecessary to engage in a case-by-case analysis” to
determine whether the transaction occurred in the business
context. 80 Hawai‘i at 65, 905 P.2d at 40. That the defendant
in this case allegedly facilitated the sale of a business
interest rather than an interest in real property is a
distinction without a difference. Lacy is alleged to have
engaged in actions during the sale of RLS analogous to those of
the property manager in Cieri. Accordingly, Lacy’s alleged
conduct “necessarily” qualifies as conduct in “trade or
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commerce” within the meaning of HRS § 480-2(a), and it is
therefore subject to the constraints of HRS Chapter 480. Id.
B. No Exception to HRS Chapter 480 for the Practice of Law
Applies in this Case
Rather than disputing that Lacy’s alleged conduct
occurred in the “business context,” the Lacy parties appear to
argue that the practice of law is never conduct in “trade or
commerce” within the meaning of HRS § 480-2(a) and is thus
categorically exempt from its operation. As an initial matter,
the Plehos dispute that the unfair or deceptive act or practice
they allege Lacy committed involves the practice of law because
their claim is based on Lacy’s participation in the allegedly
fraudulent sale and not any deficient legal advice he provided.
Indeed, 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. See Cieri v. Leticia Query
Realty, Inc., 80 Hawai‘i 54, 65, 905 P.2d 29, 40 (1995).
We ultimately need not decide whether Lacy’s conduct
amounted to the practice of law, however, because we hold that
when a defendant engages in the sort of actions we have held
“necessarily involve ‘conduct in any trade or commerce’” within
the meaning of HRS § 480-2(a), it is no defense that those
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actions constituted or were intermingled with legal services.9
Such a reading is supported by the federal precedents the
statute specifically instructs us to consider in interpreting
the law, as well as our own precedents and the statute’s
language and legislative history. Further, any concerns that
HRS § 480-2(a)’s application to the practice of law in this
context would impinge upon this court’s authority to regulate
the legal profession are unjustified. Accordingly, we hold that
the circuit court erred in granting partial summary judgment
against the Plehos on their unfair or deceptive acts or
practices claim.
1. Both the Federal Precedent that We Must Consider and Our Own
Caselaw Indicate that Unfair or Deceptive Acts or Practices
Liability Applies to Aspects of the Practice of Law.
Our legislature provided significant guidance as to
whether HRS § 480-2(a) was intended to encompass aspects of the
practice of law by specifically stating twice in the relevant
statutory text that courts should consider federal
9
In 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. Cieri, 80 Hawai‘i at 65, 905 P.2d at 40.
Additionally, simply establishing that activity occurs in the
conduct of trade or commerce is of course not sufficient to establish an HRS
§ 480-2(a) violation. Liability is further limited by the requirement that a
plaintiff be a consumer or other party entitled to bring an HRS § 480-13
action under HRS § 480-2(d) or (e). Cieri, 80 Hawai‘i at 65, 905 P.2d at 40.
And the plaintiff must also demonstrate that the complained of actions
amounted to an unfair method of competition or an unfair or deceptive act or
practice that caused the plaintiff’s injury in order to prevail. Kawakami v.
Kahala Hotel Inv’rs, LLC, 142 Hawai‘i 507, 519, 421 P.3d 1277, 1289 (2018).
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interpretations of analogous statutes when applying the law.
HRS § 480-2(b) states that, in interpreting the HRS § 480-2
prohibition on unfair competition and unfair or deceptive acts
and practices, “the courts . . . shall give due consideration to
the rules, regulations, and decisions of the Federal Trade
Commission and the federal courts interpreting section 5(a)(1)
of the Federal Trade Commission Act (15 U.S.C. [§] 45(a)(1)[10]),
as from time to time amended.” (Emphases added.) Additionally,
HRS § 480-3 (2016) provides that HRS Chapter 480 “shall be
construed in accordance with judicial interpretations of similar
federal antitrust statutes.”11
10
15 U.S.C. § 45(a)(1) (2012) provides in full as follows: “(1)
Unfair methods of competition in or affecting commerce, and unfair or
deceptive acts or practices in or affecting commerce, are hereby declared
unlawful.”
11
The dissent seeks to minimize these clear statutory directives by
observing that “[d]ue consideration . . . implies reasoned judgment
appropriate to the circumstances.” Dissent at 3. It further attempts to
justify departing from federal precedents applying the FTCA to aspects of the
practice of law by misconstruing a generalized observation made in a single
1965 House committee report in the legislative history of HRS Chapter 480,
which stated that “courts of Hawai‘i must also necessarily give due regard to
the problems peculiar or pertinent to the State of Hawai‘i.” Dissent at 4
(quoting H. Stand. Comm. Rep. No. 55, in 1965 House Journal, at 539).
Seemingly relying on this statement, the dissent summarily asserts that in
“Hawai‘i, the courts are tasked with determining whether the actual practice
of law is subject to [HRS § 480-2(a)] liability.” Dissent at 9-10. As
discussed infra, however, the plain language the legislature employed in
enacting HRS Chapter 480 encompasses the business of lawyering on its face,
and attorneys are not included in any of the specifically enumerated
exceptions the legislature chose to codify. A court’s personal policy
judgment regarding local needs is not grounds for reading an exception into a
statute that the legislature did not see fit to include anywhere in its text,
and even assuming the dissent’s cited excerpt is inconsistent with the law’s
clear directives--including HRS §§ 480-2(b)’s and 480-3’s instructions that
courts “shall” look to federal precedent to guide their interpretation--it is
inoperative. See State v. Akina, 73 Haw. 75, 78, 828 P.2d 269, 271 (1992)
(continued . . .)
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Federal courts have long interpreted section 5(a)(1)
of the Federal Trade Commission Act (FTCA) and analogous
antitrust statutes to apply to the practice of law. The Supreme
Court of the United States considered whether the Sherman Anti-
Trust Act (Sherman Act) applied to the practice of law in the
seminal case of Goldfarb v. Virginia State Bar, 421 U.S. 773(1975). In Goldfarb, clients seeking legal services argued that
a minimum fee schedule released by a county bar association and
endorsed by the state bar association violated section 1 of
Sherman Act, 15 U.S.C. § 1, as an agreement in restraint of
trade or commerce. Id. at 776. The bar associations contended
that, because the practice of law is a “learned profession” that
provided necessary services to the community, it did not fall
within the intended meaning of “trade or commerce” under the
Sherman Act. Id. at 786. The Supreme Court disagreed, holding
that neither the learned nature of the profession nor the
community service aspects of the practice of law were
determinative. Id. at 787.
The Court reasoned that--much like the language of HRS
§ 480-2(a)--the Sherman Act’s reference to “trade or commerce”
(. . . continued)
(“This court derives legislative intent primarily from the language of
statute and follows the general rule that in the absence of clear legislative
intent to the contrary, the plain meaning of the statute will be given
effect.” (quoting State v. Briones, 71 Haw. 86, 92, 784 P.2d 860, 863
(1989))).
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was broad by design and meant to sweep in virtually all
commercial activity. Id.; see also State by Bronster v. U.S.
Steel Corp., 82 Hawai‘i 32, 51, 919 P.2d 294, 313 (1996) (“HRS §
480-2, as its federal counterpart in the FTC Act, was
constructed in broad language in order to constitute a flexible
tool to stop and prevent fraudulent, unfair or deceptive
business practices for the protection of both consumers and
honest business[persons].” (quoting E. Star, Inc. v. Union Bldg.
Materials Corp., 6 Haw. App. 125, 132, 712 P.2d 1148, 1154
(1985)) (alteration in original)). The United States Supreme
Court held that attorneys fell within the plain meaning of
“trade or commerce” and declined to find an implicit exception
for their practice that was not articulated in the statute.
Goldfarb, 421 U.S. at 787-88. “It is no disparagement of the
practice of law as a profession to acknowledge that it has this
business aspect,” the Court opined before concluding that “[i]n
the modern world it cannot be denied that the activities of
lawyers play an important part in commercial intercourse.” Id.
at 788; see also Bates v. State Bar of Arizona, 433 U.S. 350,
371–72 (1977) (stating that “the belief that lawyers are somehow
above ‘trade’ has become an anachronism” because “[i]n this day,
we do not belittle the person who earns his living by the
strength of his arm or the force of his mind”). Subsequent
cases clarified that, by violating section 1 of the Sherman Act,
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lawyers who engage in anticompetitive practices also violate the
prohibition against unfair methods of competition in section
5(a)(1) of the FTCA. F.T.C. v. Superior Court Trial Lawyers
Ass’n, 493 U.S. 411, 422 (1990).
The dissent attempts to distinguish the clear
precedents applying section 5(a)(1) of the FTCA to aspects of
the practice of law, arguing that the cases in which federal
courts have considered the regulation of the legal profession
primarily concern unfair methods of competition, not unfair or
deceptive acts or practices like those alleged in the present
case. Dissent at 4-6. But the dissent fails to give due
consideration to a number of federal decisions that have stated
both directly and by implication that various activities
classified as “the practice of law” violate section 5(a)(1) of
the FTCA as unfair or deceptive practices. See, e.g., F.T.C. v.
Lanier Law, LLC, 194 F.Supp.3d 1238, 1273-85 (M.D. Fla. 2016)
(finding that, notwithstanding their characterization as the
practice of law, a law firm and its lawyers’ practices directly
violated section 5(a)(1) of the FTCA as unfair or deceptive acts
or practices and violated administrative rules for which a
failure to comply “constitutes an unfair or deceptive act or
practice in violation of § 5(a) of the FTC Act”); F.T.C. v.
Lucas, No. 10–56985, 2012 WL 4358009 (9th Cir. Sept. 25, 2012)
(holding that a lawyer’s conduct was an unfair or deceptive
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practice in violation of section 5(a)(1) of the FTCA); C.F.P.B.
v. Frederick J. Hanna & Assocs., P.C., 114 F.Supp.3d 1342, 1369–
70 (N.D. Ga. 2015) (finding that a law firm committed an
“unfair, deceptive, or abusive act or practice” in violation of
the Consumer Financial Protection Act, 12 U.S.C. §
5536(a)(1)(B), the standard for which “is the same as the
standard under § 5(a) of Federal Trade Commission Act.”).12
Even if this were not the case, however, the dissent
offers no meaningful analysis as to why we should distinguish
between the unfair methods of competition portion and the unfair
or deceptive acts or practices portion of FTCA section 5(a)(1)
with respect to what constitutes commercial activity within the
scope of the provision. FTCA section 5(a)(1) prohibits both
“[u]nfair methods of competition in or affecting commerce, and
unfair or deceptive acts or practices in or affecting commerce.”
The dissent’s position would require us to conclude that federal
courts ascribe two different meanings to the phrase “in or
affecting commerce” when it occurs twice in the same sentence,
12
The dissent attempts to distinguish these cases on several
additional grounds, including by arguing that they “impose[d] liability upon
the business or entrepreneurial aspects of the legal profession” rather than
the actual practice of law. Dissent at 5-6 & n.6. The federal courts did
not rely on such a distinction, however, and in at least one instance
explicitly stated that a “practice of law exclusion . . . is not present in
the FTC Act.” Lanier Law, 194 F.Supp.3d at 1282. And all of these cases are
validly citable for their persuasive value. See Federal Rules of Appellate
Procedure Rule 32.1 (providing that federal courts’ local rules “may not
prohibit or restrict” the citation of unpublished opinions issued after
January 1, 2007).
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with only one of those instances encompassing aspects of the
practice of law.13
The flaw in this reasoning is even more apparent when
we consider our own statute. Unlike FTCA section 5(a)(1), HRS §
480-2(a) does not repeat the phrase qualifying the activities to
which it applies; the provision prohibits “[u]nfair methods of
competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce.” HRS § 480-2(a) (emphasis
added). The dissent’s interpretation essentially amounts to a
claim that the Hawai‘i legislature intended the phrase “in the
conduct of any trade or commerce” to have two different meanings
depending on whether it is applied to the first or second
subject of the sentence in which it occurs, with only one of
those meanings encompassing the practice of law.
Consistent with federal decisions applying FTCA
section 5(a)(1) to the conduct of attorneys are a state and
federal case that have considered HRS § 480-2 with regard to the
13
HRS § 480-2(b) instructs us to consider not only federal courts’
interpretation of section 5(a)(1), but also that of the Federal Trade
Commission. The Federal Trade Commission has long used its enforcement
authority to pursue administrative remedies against lawyers for unfair and
deceptive trade practices and has maintained that “state-regulated
professions, including the practice of law, are not and should not be
exempted from coverage of the” FTCA. See Heslin v. Conn. Law Clinic of
Trantolo & Trantolo, 461 A.2d 938, 942-43 (Conn. 1983) (citing In re Wilson
Chemical Co., 64 F.T.C. 168, 186–87, 190 (1964); Reauthorization of the
Federal Trade Commission, 1982 Hearings on S. 1984 Before the Senate Comm. on
Commerce, Science, and Transportation, 97th Cong., 2d Sess., 32–36 (letter,
by direction of the Federal Trade Commission, of James C. Miller III,
Chairman)).
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practice of law. In Hungate v. Law Office of David B. Rosen,
the plaintiff brought suit under HRS § 480-2 against the counsel
for his mortgage holder, arguing that the attorney had engaged
in an unfair or deceptive trade act or practice by conducting a
wrongful foreclosure on behalf of the mortgage holder. 139
Hawai‘i 394, 400, 391 P.3d 1, 7 (2017).
While we distinguished the role that the attorney had
played in the “the instant foreclosure action” from the broker
role that the property manager had played in Cieri, we did not
hold that the practice of law was categorically exempt from HRS
§ 480-2 liability. Id. at 413, 391 P.3d at 20. We specifically
examined the adversarial nature of the proceeding and declined
to find the attorney liable “under the circumstances” of that
case because subjecting opposing counsel to HRS § 480-2
liability could have a chilling effect on an attorney’s ability
to zealously advocate for one’s own client by imposing a
competing duty to party opponents. We explicitly stated,
however, that our solicitude would “not encompass, for example,
allowing attorneys to conduct patently illegal activities on
behalf of clients.” Id. at 413 n.22, 391 P.3d at 20 n.22. And
we reserved judgment as to whether a then-recent amendment to
the Hawai‘i foreclosure statute, which made a duly authorized
agent of a wrongfully foreclosing mortgagee liable under HRS §
480-2(a) in certain circumstances, could be applied to an
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attorney. Id. at 413 n.23, 391 P.3d at 20 n.23. This court
thus indicated that HRS § 480-2(a) could indeed be applied to
the practice of law, albeit under a higher standard than in
other trades in some instances.
The dissent now attempts to revise the plain meaning
of our statement in Hungate that our holding would not reach a
lawyer’s “patently illegal activities,” arguing that it was
merely an acknowledgment that lawyers may be subject to
professional discipline and civil and criminal liability from
sources other than HRS § 480-2(a). Dissent at 29-31. But to
construe this pronouncement as only an affirmation that the
practice of law is not immune from all other civil and criminal
regulation is to reduce our words to a maxim obvious beyond any
need for comment. See Buscher v. Boning, 114 Hawai‘i 202, 220
n.13, 159 P.3d 814, 832 n.13 (2007) (“The rule of law 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.” (quoting Giuliani v. Chuck, 1 Haw. App. 379, 383–84,
620 P.2d 733, 736–37 (1980))). No party in Hungate questioned
the application of other statutory and common law claims to the
legal profession. Rather, this court indicated that we were
addressing the extent of “[o]ur desire to avoid creating
unacceptable conflicts of interest in this context”--that is, in
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the application of HRS § 480-2 to attorney conduct, as was at
issue in the case. Hungate, 139 Hawai‘i at 413 n.22, 391 P.3d at
20 n.22 (emphasis added). The dissent’s interpretation would
thus appear to amount to a sub silentio overruling of the
standard this court articulated in Hungate.14
Hungate concerned an unfair or deceptive acts or
practices claim against an opposing counsel rather than a
party’s own attorney. That the present case involves a suit
against a party’s own attorney presents an even stronger
argument that HRS § 480-2 should be applicable because counsel’s
duties to act fairly and without deception and to zealously
advocate in favor of a client are in alignment rather than in
contention.15 It would follow that Hungate’s heightened standard
of HRS § 480-2(a) liability would not apply.
14
Indeed, the dissent’s illogical interpretation of the language
this court employed in Hungate may be prompted to avoid the incongruities
created by its position. If its stance that the practice of law is exempt
from the operation of HRS § 480-2 would not overrule Hungate’s pronouncement
that particularly egregious misconduct may subject an opposing counsel to HRS
§ 480-2(a) liability, then it appears that it would establish not only an
exception to HRS § 480-2(a), but also an exception to the exception, neither
of which has any expressed basis in the statute’s text or legislative
history.
15
The dissent argues that in Hungate this court “expressly
distinguished between real estate brokers and attorneys with regard to” HRS
480-2(a) liability, citing language in which we noted that, unlike a broker,
“the role of an attorney involves representing a client’s interests against
those of an opposing party within an adversary system.” Dissent at 23
(quoting 139 Hawai‘i 413, 391 P.3d 20). Yet this analysis by the dissent
evinces a one-sized view of legal practice and neglects to consider the role
attorneys like Lacy may play in commercial transactions in a business
context. In Hungate, we observed that real estate brokers are subject to HRS
§ 480-2(a) liability because “[s]ellers and purchasers of real estate often
(continued . . .)
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Additionally, at least one federal court interpreting
Hawai‘i law has suggested that HRS § 480-2(a) can be applied to
the conduct of attorneys. In McDevitt v. Guenther, the U.S.
District Court for the District of Hawai‘i implicitly
acknowledged that HRS § 480-2(a) can be applied to the practice
of law by ruling that a plaintiff’s claim against an attorney
was barred by the statute of limitations--and not any failure to
state a claim upon which relief could be granted. 522 F.Supp.2d
1272, 1289 (D. Haw. 2007).
In short, a range of relevant federal precedents exist
applying analogous federal statutes to the practice of law,
which HRS § 480-2 explicitly states must guide our
interpretation of its provisions.16 Further, our own caselaw
(. . . continued)
utilize and rely on brokers for their expertise and resources, including . .
. determining pricing of ‘comparables’ as a basis for negotiations”--in
short, “the role of a broker is to provide clients with expertise and
resources in real estate transactions.” 139 Hawai‘i at 412-13, 391 P.3d 19-20
(some quotations omitted). Here, Lacy was retained for the specific purpose
of providing expertise and resources in a commercial transaction, including
by providing his opinion regarding the pricing of RLS as compared to
comparable businesses. The alleged conduct by Lacy that the Plehos now
challenge is analogous to the acts that this court held in Cieri
“necessarily” constitute conduct in trade or commerce, and it is unlike that
of an opposing counsel conducting a foreclosure.
16
The dissent makes much of decisions by state courts in other
jurisdictions holding that their consumer protection statutes contain an
implicit exception for “the actual practice of law.” Dissent at 8-12. To be
sure, we have in the past turned to interpretations of other states’ consumer
protection statutes for guidance in interpreting our own based on their
“common genesis in the federal antitrust statutes.” Cieri, 80 Hawai‘i at 63,
905 P.2d 38. But we have done so only when the decisions are not directly
contrary to this court’s own precedent and the federal sources the statute
(continued . . .)
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indicates that HRS § 480-2 can be applied to aspects of the
practice of law. Such a result is unsurprising given the plain
language and legislative history of the statute.
2. The Plain Text and Legislative History of HRS Chapter 480
Make Clear It Was Intended to Encompass Aspects of the Practice
of Law When the Conduct Occurs Within Trade or Commerce.
As stated, HRS § 480-2 provides that, “Unfair methods
of competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce are unlawful.” The statute
expressly encompasses acts or practices in “the conduct of any
trade or commerce,” which by its plain meaning places within its
ambit virtually all activity occurring in the business context.
HRS § 480-2(a) (emphasis added); Bronster, 82 Hawai‘i at 51, 919
P.2d at 313 (stating that the legislature “constructed [HRS §
480-2] in broad language in order to constitute a flexible tool
to stop and prevent fraudulent, unfair or deceptive business
practices for the protection of both consumers and honest
business[persons].” (quoting E. Star, 6 Haw. App. at 132, 712
P.2d at 1154) (alteration in original)); cf. Kalaeloa Ventures,
(. . . continued)
expressly instructs us to consider. Further, even were we to turn to other
state decisions to guide our analysis, the state statute that we have
expressly held to be analogous to our own--indeed, the statute from which we
derived our test regarding the specific issue at the heart of this case, see
id. at 63-65, 905 P.2d 38-40--is Section 2 of Massachusetts’s consumer
protection statute, which the dissent acknowledges is interpreted by
Massachusetts courts to apply to the practice of law. Dissent at 12 (citing
Brown v. Gerstein, 460 N.E.2d 1043 (Mass. App. Ct. 1984)). The dissent’s
reliance on the decisions of other states’ courts is thus unavailing.
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LLC v. City & Cty. of Honolulu, 143 Hawai‘i 103, 108, 424 P.3d
458, 463 (2018) (HRS §§ 1-29 and 1-32 by their plain language of
“any act” encompass all possible acts appointed by law to be
done on a particular day); Allstate Ins. Co. v. Pruett, 118
Hawai‘i 174, 181, 186 P.3d 609, 616 (2008) (“[B]y itself, the
term ‘any person,’ ‘encompass[es] every possible individual . .
. .’” (second alteration in original) (citation omitted)).
Regardless of whether it is characterized as the practice of
law, facilitating the sale of one business to another falls
within the plain meaning of conducting trade or commerce under
even the strictest application of the terms.17
Notwithstanding HRS § 480-2(a)’s unequivocal language,
the dissent concludes that “the plain language . . . of HRS §
480-2 reveal[s] no indication” that the legislature intended the
statute to apply to attorney conduct. Dissent at 27. The
dissent goes on to argue that the legislative history of HRS §
480-2 also does not support extending it to the practice of law
17
The dissent attempts to bolster its position by incorrectly
claiming that our holding will “impose [HRS § 480-2] liability upon all
aspects of the practice of law,” and then speculates that such an
interpretation will render malpractice insurance prohibitively expensive.
Dissent at 34. The question of whether other aspects of the practice of law
occur in the business context is not before us, and we need not now decide
the extent of lawyer conduct that is subject to HRS Chapter 480. Yet, as the
dissent itself recognizes, Massachusetts’s consumer protection statute, which
has been held to apply to attorney conduct, is not “broad enough to reach any
type of commercial exchange.” Dissent at 34 n. 23. The dissent’s misgivings
about the potential reach of our decision are thus unfounded.
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because the legislature has had ample opportunity to amend the
law to explicitly include lawyers and has not done so. Dissent
at 27 n.18.
But this is the opposite of the analysis called for by
standard principles of statutory construction. The law also
does not expressly state that it applies to carpenters, bakers,
travel agents, or shoe salespersons--notwithstanding the ample
opportunity the legislature has had to add explicit mention of
each. Yet, like lawyers, these professions are covered by HRS §
480-2 because they fall within the plain meaning of “any trade
or commerce.” “[W]here the statutory language is plain and
unambiguous, our sole duty is to give effect to its plain and
obvious meaning.” State v. Wheeler, 121 Hawai‘i 383, 390, 219
P.3d 1170, 1177 (2009) (quoting Citizens Against Reckless Dev.
v. Zoning Bd. of Appeals of City & Cty. of Honolulu, 114 Hawai‘i
184, 193, 159 P.3d 143, 152 (2007)). “[W]e are not at liberty
to look beyond that language for a different meaning.” Alvarez
v. Liberty House, Inc., 85 Hawai‘i 275, 278, 942 P.2d 539, 542
(1997) (quoting Ross v. Stouffer Hotel Co. (Hawai‘i) Ltd., 76
Hawai‘i 454, 461, 879 P.2d 1037, 1044–45 (1994)).
Further, that it was the legislature’s intention that
HRS Chapter 480 apply to lawyers is evidenced by the
legislature’s failure to explicitly exclude attorneys, as it has
done with labor organizations, HRS § 480-10; fishery,
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agricultural, or consumer cooperative organizations, HRS § 480-
11(a); and social service providers, HRS § 480-11(d). The
dissent would have us infer a similar exception for attorneys
from the legislature’s inaction. Dissent at 27 n.18. But
legislative inaction is a notoriously poor barometer of
legislative intent--even when we can assume the legislature is
aware a statute is being misinterpreted. See Zuber v. Allen,
396 U.S. 168, 185 n.21 (1969) (stating that, legislative
inaction cannot be used to justify an agency’s invalid statutory
interpretation because it may reflect “unawareness,
preoccupation, or paralysis” rather than intention). The flaw
in this approach is even more pronounced here, when the
legislature had no reason to believe Hawai‘i courts would not
interpret HRS § 480-2(a) to encompass lawyers in accordance with
the plain text of the statute. In other words, the dissent
would have us conclude that the legislature assumed courts would
infer an implicit exception to HRS Chapter 480 that does not
appear in the statute, and that the legislature ratified this
interpretation in advance by not acting to correct such a ruling
before it occurred.
But it is well settled that the principle of expressio
unius est exclusio alterius “applies equally to a statutory list
of exceptions.” Adams v. CDM Media USA, Inc., 135 Hawai‘i 1, 18–
19, 346 P.3d 70, 87–88 (2015). “The ‘proper inference’ from a
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list of exceptions to a statute is that the legislature
‘considered the issue of exceptions and, in the end, limited the
statute to the ones set forth.’” Id. (quoting United States v.
Johnson, 529 U.S. 53, 58 (2000)); see also Goldfarb v. Virginia
State Bar, 421 U.S. 773, 787 (1975) (“[O]ur cases have
repeatedly established that there is a heavy presumption against
implicit exemptions.” (citing United States v. Phila. Nat’l
Bank, 374 U.S. 321, 350—351 (1963); California v. Fed. Power
Comm’n, 369 U.S. 482, 485 (1962)). This court may not take it
upon itself to add an additional exception that the legislature
has declined to adopt.18
3. Applying HRS Chapter 480 in this Context Does Not Threaten
this Court’s Authority to Regulate the Legal Profession.
Significantly informing and underlying the ICA’s
interpretation of HRS § 480-2(a) were concerns that applying the
unfair or deceptive acts or practices prohibition to attorneys
would undermine this court’s longstanding role in regulating
attorney misconduct, which the dissent now similarly asserts.
Dissent at 24-29. To be sure, concerns for the separation of
powers might arise if the legislature attempted to directly
18
It bears repeating that in interpreting the language of HRS §
480-2(a), HRS § 480-2(b) directs us to “give due consideration to the rules,
regulations, and decisions of the Federal Trade Commission and the federal
courts interpreting section 5(a)(1) of the [FTCA], as from time to time
amended.” Federal courts have not inserted a practice of law exception into
the FTCA that is not contained in the plain text of the statute.
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interfere with this court’s regulation of the practice of law
by, for example, overriding the promulgated professional rules
or depriving this court of its ultimate disciplinary authority
for professional misconduct. See Office of Disciplinary Counsel
v. Kagawa, 63 Haw. 150, 155, 622 P.2d 115, 119 (1981) (“In
deciding whether disciplinary sanctions would be appropriate
against an attorney, we emphasize that . . . the Hawaii Supreme
Court is the ultimate trier of fact as well as the law.”). HRS
§ 480-2 is not such a law, however.
The law’s prohibition on unfair or deceptive acts is
wholly consistent with our professional rules. See Hawai‘i Rules
of Professional Conduct (HRPC) Rule 8.4(c) (prohibiting “conduct
involving dishonesty, fraud, deceit or misrepresentation”).
Further, HRS § 480-2(a) serves additional purposes wholly
separate from the regulation of professional conduct. Our
professional rules are designed to protect the integrity of the
legal profession and the dignity of the courts. See Office of
Disciplinary Counsel v. Lau, 79 Hawai‘i 201, 207, 900 P.2d 777,
783 (1995). By contrast, the unfair or deceptive acts or
practices statute by its own terms applies to “unfair or
deceptive acts or practices in the conduct of any trade or
commerce.” HRS § 480-2(a) (emphasis added). It regulates
commercial activity generally, protecting the integrity of
Hawai‘i’s economic environment as a whole and not targeting
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specific professions.19 And by creating civil liability, the law
provides a mechanism for offering full redress to the victims of
unfair and deceptive business acts--an objective our
professional rules were not designed to achieve. See Cieri, 80
Hawai‘i at 60, 905 P.2d at 35 (noting statements by the
legislature indicating the statute was enacted to “enjoin unfair
and deceptive business practices by which consumers are
defrauded and the economy of the State is harmed” (quoting H.
Stand. Comm. Rep. No. 55, in 1965 House Journal, at 538)); Short
v. Demopolis, 691 P.2d 163, 168 (Wash. 1984) (“The injured
client can take little comfort from the fact that the wrongdoer
has been reprimanded or suspended or stripped of the right to
practice his profession.” (quoting Comment, The Washington
Consumer Protection Act vs. The Learned Professional, 10 Gonz.
L. Rev. 435, 436 (1975))). The dissent is therefore mistaken in
labeling the application of HRS § 480-2(a) liability in this
context as “duplicative and unnecessary.” Dissent at 33.
19
Because the unfair or deceptive acts or practices statute is a
regulation of general applicability, we need not decide in this case whether
directly regulating the legal profession is an exclusive power of the
judicial branch. But see, e.g., HRS § 605-1(c)-(d) (2016) (setting forth
qualifications for admission to the bar in addition to those prescribed by
this court); HRS § 605-7 (2016) (requiring written authorization from a
client for an attorney to compromise, arbitrate, or settle a claim); Heslin
v. Connecticut Law Clinic of Trantolo & Trantolo, 461 A.2d 938, 945 (Conn.
1983) (concluding that the regulation of attorney conduct is in at least some
respects a shared power of the judicial and legislative branches).
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Indeed, taking the dissent’s position that subjecting
lawyers to HRS § 480-2(a) would interfere with this court’s
regulation of the practice of law to its logical conclusion
would lead to illogical results. For example, the rendering of
legal advice clearly amounts to “the practice of law” under our
precedents. See Fought & Co. v. Steel Eng’g & Erection, Inc.,
87 Hawai‘i 37, 45, 951 P.2d 487, 495 (1998) (citing Sen. Stand.
Comm. Rep. No. 700, in 1955 Senate Journal, at 661). Yet few
would argue that a lawyer who advises a client as to how to
conceal a crime and evade capture does not commit a crime in the
lawyer’s own right. No implicit exception for the practice of
law exists in the criminal statutes prescribing accomplice
liability or prohibiting the hindrance of prosecution. See HRS
§ 702-221(c); HRS § 710-1029. Advising a client as to how to
commit or conceal a crime would undoubtedly subject the attorney
to professional discipline. See HRPC Rule 1.2(d). But such
advice would also give rise to criminal liability, and this
separate and distinct liability does not interfere with this
court’s regulation of the practice of law.
HRS § 480-2(a) is no different. A lawyer who engages
in unfair or deceptive practices towards a client may be subject
to professional discipline under the HRPC. See HRPC Rule
8.4(c). And that same conduct can give rise to separate and
distinct civil liability under the HRS § 480-2 without
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interfering with this court’s disciplinary authority or
regulation of the legal profession. See In re Disciplinary Bd.
of Hawai‘i Supreme Court, 91 Hawai‘i 363, 370, 984 P.2d 688, 695
(1999) (“Evidence underlying a violation of a disciplinary rule
might also be evidence that would support civil or criminal
liability, but determinations about civil or criminal liability
are the province of the trial courts, not the [Office of
Disciplinary Counsel] or the Disciplinary Board.”).
In sum, the dissent theorizes that HRS § 480-2(a)’s
application to the practice of law would invade this court’s
inherent authority to regulate the legal profession. But
allowing the legislature to provide a mechanism for protecting
the integrity of Hawai‘i’s economy and compensating consumers
that are harmed by a lawyer’s unfair or deceptive business acts
serves a separate purpose from our regulation of professional
conduct, and it does not undermine or conflict with our
professional rules. Accordingly, there is no reason to infer an
implicit exception that has no basis in the text or legislative
history of the statute, nor in the federal case law that the
legislature has specifically stated should guide our
interpretation.
IV. Conclusion
The facts in this case indicate that Lacy’s alleged
conduct occurred in the conduct of trade or commerce, and Lacy’s
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status as an attorney offers no shield to HRS Chapter 480
liability merely because the alleged conduct constituted or was
comingled with legal services. Accordingly, we vacate that
portion of the ICA’s judgment on appeal that affirms the circuit
court’s grant of partial summary judgment on the Plehos’ unfair
and deceptive acts or practices claim, vacate the circuit
court’s grant of partial summary judgment on this claim, and
remand the claim to the circuit court for a determination of
whether Lacy’s alleged conduct and the Plehos’ resulting loss
satisfies the elements necessary for recovery under HRS Chapter
480.
/s/ Sabrina S. McKenna
/s/ Richard W. Pollack
/s/ Michael D. Wilson
33