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Electronically Filed
Supreme Court
SCAP-12-0000764
25-FEB-2014
10:39 AM
IN THE SUPREME COURT OF THE STATE OF HAWAI#I
---o0o---
_________________________________________________________________
RAYMOND GURROBAT,
individually and on behalf of all others similarly situated,
Petitioner/Plaintiff-Appellee/Cross-Appellant,
vs.
HTH CORPORATION; PACIFIC BEACH CORPORATION,
Respondents/Defendants-Appellants/Cross-Appellees.
_________________________________________________________________
SCAP-12-0000764
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CAAP-12-0000764; CIV. NO. 08-1-2528-12)
FEBRUARY 25, 2014
RECKTENWALD, C.J., NAKAYAMA, AND McKENNA, JJ., WITH ACOBA, J.,
CONCURRING AND DISSENTING, WITH WHOM POLLACK, J., JOINS
OPINION OF THE COURT BY McKENNA, J.
I. Introduction
This case arises from a class action lawsuit filed
against HTH Corporation and Pacific Beach Corporation
(collectively, “Defendants”), in which Raymond Gurrobat
(“Gurrobat”), individually and on behalf of a class of similarly
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situated persons (“Plaintiff Class”), asserted claims of unlawful
withholding of wages under Hawai#i Revised Statutes (“HRS”) §§
388-6 and 388-10, and unfair methods of competition (“UMOC”)
under HRS §§ 480-2(e) and 480-13(a). Gurrobat’s claims were
based on alleged violations of Hawaii’s hotel or restaurant
service charge law, HRS § 481B-14 (2008). Pursuant to HRS
§ 602-58(b)(1) (Supp. 2011), we accepted a discretionary transfer
of this case from the Intermediate Court of Appeals.
Gurrobat alleged that Defendants charged service
charges to customers of the Pacific Beach Hotel and the Pagoda
Hotel, but failed to distribute the entirety of those service
charges to service employees and failed to disclose to customers
its practice of retaining a portion of those charges. The
Circuit Court of the First Circuit (“circuit court”)1 granted
summary judgment in favor of Gurrobat on the claim of unlawful
withholding of wages, but in favor of Defendants on the UMOC
claim.
On appeal, Defendants argued that the circuit court
erred in: (1) granting Gurrobat’s motion for class certification
because he never worked at the Pagoda Hotel and he failed to
establish that he would be an adequate representative of the
1
The Honorable Karl K. Sakamoto presided.
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class under Hawai#i Rules of Civil Procedure (“HRCP”) Rule 23;
(2) granting summary judgment in favor of Gurrobat on the claim
for unpaid wages under HRS § 388-6 because he failed to show that
Defendants withheld wages “earned” by class members; (3) granting
double damages and attorneys’ fees/costs, and in concluding that
the Plaintiff Class were entitled to those portions of the
service charge income Defendants had paid to management
employees; (4) imposing joint and several liability against
Defendants; (5) granting final judgment in favor of Gurrobat
because it was premised on a manifest error of fact concerning
Defendants’ status as an “employer”; and (6) denying Defendants’
motion for reconsideration on the basis of judicial and equitable
estoppel with regard to joint and several liability because
neither party requested the imposition of joint and several
liability and it was only first mentioned in the Final Judgment.
On cross-appeal, Gurrobat argued that the circuit court
erred in granting summary judgment to Defendants under HRS
§ 480-13(a) because: (1) it applied an erroneous legal standard
imposing requirements of proof not required under Davis v. Four
Seasons Hotel Ltd., 122 Hawai#i 423, 228 P.3d 303 (2010) or any
other Hawai#i law; (2) Defendants did not carry their burden of
showing that Gurrobat would be unable at trial to present
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evidence to establish the requisite injury under the applicable
standard; and (3) the record presented genuine issues of material
fact with respect to whether Gurrobat had the requisite injury
for a HRS § 480-13(a) claim.
We hold that the circuit court did not err with respect
to the issues of: class certification, Gurrobat’s claim for
unpaid wages under HRS Chapter 388, the award of double damages
and attorneys’ fees and costs, and Defendants’ status as an
“employer.” However, we hold that the circuit court erred in
imposing joint and several liability against the Defendants, and
also erred in denying Defendants’ motion for reconsideration on
the basis of judicial and equitable estoppel with respect to the
issue of joint and several liability.
Specifically, we hold the following on the issues
raised by the Defendants: (1) Gurrobat established that he could
fairly and adequately protect the interests of the class members;
(2) a service charge is compensation “earned” as tip income under
HRS Chapter 388; (3) the Plaintiff Class was entitled to the
portion of the service charges that Defendants paid to
“management employees,” and to double damages and attorneys’
fees/costs because there was no equitable justification for
Defendants’ service charge distribution practices; (4) HTH
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Corporation and Pacific Beach Corporation are not jointly and
severally liable; (5) HTH Corporation is an “employer”; and (6)
judicial and equitable estoppel did not apply to Defendants’
joint and several liability arguments in its motion for
reconsideration.
As to Gurrobat’s cross appeal, we hold that the circuit
court erred in granting Defendants’ motion for summary judgment
on Gurrobat’s UMOC claim because Gurrobat satisfied the “nature
of the competition” requirements set forth in Davis by alleging
and proving (1) how Defendants’ HRS § 481B-14 violation
negatively affected competition and (2) that the injury to his
property flowed from Defendants’ conduct that negatively affects
competition.
II. Background
A. Factual Background
The instant case involves a class action lawsuit,
alleging that Defendants withheld tip income from non-management
employees who provided food and beverage services at the Pacific
Beach Hotel and the Pagoda Hotel (sometimes collectively referred
to as “Hotels”). Defendants HTH Corporation and Pacific Beach
Corporation together operate the Pacific Beach Hotel on O#ahu,
Hawai#i; and Defendant HTH Corporation operates the Pagoda Hotel
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on O#ahu, Hawai#i. The certified Plaintiff Class consists of all
non-management employees of the Hotels who provided services in
connection with the sale of food and/or beverages on and after
December 8, 2004, for which a service charge or gratuity was
imposed by the Hotels, and not distributed one-hundred percent to
those service employees.
Gurrobat was an employee at the Pacific Beach Hotel
from February 1990 until December 2007. Between December 8, 2004
and December 2007, and at other times prior to that period,
Gurrobat worked as a food and beverage server at numerous
banquets and other functions at the Pacific Beach Hotel.
Gurrobat did not at any point work at the Pagoda Hotel; he
claimed, however, that “[s]imilar functions, served by other
members of the Class, took place at the Pagoda Hotel during the
Class Period.”
According to Defendants, the practice for distributing
service charges at the Pacific Beach Hotel was generally to
distribute eighty-five percent (85%) of service charges to
service employees and fifteen percent (15%) to managerial
employees (e.g., catering coordinator and pastry chef); the
practice at the Pagoda Hotel was generally to distribute
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eighty-two percent (82%) of service charges to service employees
and eighteen percent (18%) to managerial employees.
B. Circuit Court Proceedings
1. Gurrobat’s Complaint
On December 8, 2008, Gurrobat, individually and on
behalf of the Plaintiff Class, filed suit against Defendants.
Gurrobat alleged that, as operators of the Pacific Beach Hotel
and the Pagoda Hotel, Defendants charged customers at the Hotels
a “service charge” or “gratuity” that was calculated as a
percentage of the total cost of food and beverage (typically,
between seventeen and twenty percent), failed to distribute the
entirety of these service charges to non-managerial employees who
served the customers, and failed to clearly disclose to customers
that portions of the service charges were not distributed to
non-managerial employees. Gurrobat claimed that this practice
violated HRS § 481B-14, that any violation of Chapter 481B was
deemed to be an UMOC under HRS § 480-2; therefore, members of the
proposed class were entitled to treble damages under HRS
§ 480-13(a). Gurrobat sought (1) a declaratory judgment that
Defendants’ practice of retaining a portion of the service charge
without clearly disclosing so to customers was an UMOC, and (2)
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an injunction prohibiting Defendants from further engaging in
this practice.
On March 29, 2010, this court issued its decision in
Davis v. Four Seasons Hotel, holding in part, that the “nature of
the competition” must be sufficiently alleged in a complaint to
bring a claim for damages under HRS §§ 480-2(e) and 480-13(a) for
a violation of HRS § 481B-14. 122 Hawai#i at 425, 228 P.3d at
305.
Gurrobat then amended his complaint on May 24, 2010,
supplementing his claim for damages under HRS §§ 480-2(e) and
480-13(a) by adding the following allegations regarding the
“nature of the competition” affected by Defendants’ conduct:
18. The competition in which Defendants are engaged or
participating is the competition with other providers of
hotel, restaurant and banquet services. Defendants derive
an unfair advantage over their law-abiding competitors by
(a) lowering their overall costs through the means of
retaining tip income due under law to Plaintiff and other
Class members, (b) attracting customers by being able to
offer seemingly lower “base” prices than law-compliant
competitors through the retention of tip income, and (c)
misleading customers into believing that the service charge
will be paid as tip income and thereby obtaining the
business of customers through an unfair and illegal business
advantage over law-compliant hotels, restaurants and banquet
service providers.
19. These unfair competitive advantages were gained by
Defendants at the direct expense of Plaintiff and other
members of the Class, and Plaintiff and the Class members
were injured as a result of Defendants’ unfair method of
competition and the Defendants’ unfair competitive behavior
in the hotel food and beverage market.
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On July 15, 2013, this court issued its decision in
Villon v. Marriot Hotel Services, Inc., 130 Hawai#i 130, 306 P.3d
175, holding that when a hotel or restaurant applying a service
charge for the sale of food or beverage services violates HRS
§ 481B–14 by failing to: (1) distribute the full service charge
directly to its employees as “tip income” (in other words, as
“wages and tips of employees”), and (2) disclose this practice to
the purchaser of the services, an employee may bring an action
under HRS §§ 388–6 (1993), –10 (1993 & Supp. 1999), and –11 (1993
& Supp. 1999) to enforce employees’ rights and seek remedies.
130 Hawai#i at 132-33, 306 P.3d at 177-78.
Gurrobat then filed a Second Amended Complaint on
August 31, 2010, also asserting that based on Defendants’
violation of Hawaii’s wage and hour laws under HRS § 388-6 by
virtue of their violations of HRS § 481B-14, he was entitled to
double damages under HRS § 388-10.
Defendants filed their Answer to the Second Amended
Complaint on September 10, 2010 and asserted, inter alia, that
the complaint failed to state a claim upon which relief could be
granted and that Gurrobat lacked standing to bring some or all of
his claims. Defendants, however, admitted that they (1) charged
a service charge to customers at banquets and other functions
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held at the Hotels, (2) generally distributed eighty-five percent
(85%) of the service charge income to service employees, and (3)
generally distributed the remaining fifteen percent (15%) of said
service charge income to Defendants’ managerial employees.
2. Class Certification
On February 8, 2010, Gurrobat filed a motion for class
certification and for approval of class notice and dissemination
plan pursuant to HRCP Rule 23.2 He stated:
All four of the requirements of HRCP Rule 23 are satisfied
here. The Class consists of in excess of 157 employees and
is therefore presumptively too numerous to make joinder
practical. . . . Class counsel and Mr. Gurrobat will
adequately represent the class, who has no conflict and
understands his duties and responsibilities as a class
representative. . . . All of the Claims of the class arise
from a common nucleus of operative facts: the putative Class
consists of Defendants’ employees who served customers of
the Pacific Beach and Pagoda Hotel who were charged a
standardized “service charge” or “gratuity” as they
sometimes call it, on top of the total cost of food and
beverage, typically ranging between 17% and 20%. Rather
than distribute all of the service charge as mandated by HRS
2
HRCP Rule 23(a) and (b)(2) state in relevant part:
(a) Prerequisites to a class action. One or more
members of a class may sue or be sued as representative
parties on behalf of all only if (1) the class is so
numerous that joinder of all members is impracticable, (2)
there are questions of law or fact common to the class, (3)
the claims or defenses of the representative parties are
typical of the claims or defenses of the class, and (4) the
representative parties will fairly and adequately protect
the interests of the class.
(b) Class actions maintainable. An action may be
maintained as a class action if the prerequisites of
subdivision (a) are satisfied, and in addition:
. . . (2) the party opposing the class has acted
or refused to act on grounds generally applicable to
the class, thereby making appropriate final injunctive
relief or corresponding declaratory relief with
respect to the class as a whole . . . .
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§481B-14, the Defendant retained some of it without
providing any disclosure to the consumers.
Mr. Gurrobat’s claims are not only typical, they are exactly
the same as that of the entire class. The facts and law
here are not only universally common as to every class
member, they are identical, such that Plaintiffs anticipate
the Court will find by way of dispositive motion that the
Defendant (sic) violated HRS §481B-14 as a matter of law.
The only issue anticipated to remain for the jury will be
how much each employee should be compensated for the monies
improperly from them withheld over time. This is a
quintessential class action.
Accordingly, Gurrobat sought certification for the class of all
past and present non-management employees of the Pacific Beach
Hotel and the Pagoda Hotel who provided services in connection
with the sale of food and/or beverages on and after December 8,
2004, for which a service charge or gratuity charge was imposed
by the Hotels and not distributed one-hundred percent to said
non-management employees.
Defendants filed a memorandum in opposition to
Gurrobat’s motion for class certification on March 1, 2010. They
contended that Gurrobat’s proposed class incorrectly
distinguished between managerial employees and non-managerial
employees while the plain language of HRS § 481B-14 made no such
distinction, and that the court should make an initial
determination as to whether HRS § 481B-14 required service
charges to be distributed only to “non-management employees.” In
addition, Defendants argued that Gurrobat failed to meet the
requirements for class certification under HRCP Rule 23 because
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he provided no basis for his estimate of the class size or his
assertion that the amounts in dispute were not of sufficient
magnitude for employees to bring individual lawsuits. They also
argued that Gurrobat was not a proper class representative
because he was only employed as a food and beverage server at the
Pacific Beach Hotel for a portion of the relevant period, from
December 8, 2004 through December 2007.
In a reply memorandum dated March 4, 2010, Gurrobat
asserted that HRS § 481B-14 could not be construed to include
non-service managerial personnel because the legislative history
of the statute revealed an intent to protect those employees who
rendered the service for which customers believed they were
tipping and payment of “tip income” could not, therefore, extend
to salaried managers. In addition, he argued that he had
provided a good-faith estimate of the class size, and Defendants
failed to state a basis for believing that he would not
adequately represent the interests of the certified class.
After hearing arguments from the parties on March 9,
2010, the circuit court entered an order granting Gurrobat’s
motion for class certification and approving the class notice and
dissemination plan on March 25, 2010. The certified Plaintiff
Class consisted of:
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All past and present non-management employees of the Hotels
who, on and after December 8, 2004, provided services in
connection with the sales of food and/or beverage at the
Hotels for which a service charge or gratuity charge was (a)
imposed by the Hotels and (b) not distributed 100% to said
non-management employees.
3. Defendants’ Motion for Summary Judgment
Defendants filed a motion for summary judgment on
October 4, 2010. They argued, among other things, that
distributing a portion of the service charge to managerial
employees was not a violation of HRS § 481B-14, because those
employees were involved in providing banquet services, and the
plain language of HRS § 481B-14 did not preclude managerial
employees from receiving a portion of the service charge as tip
income. Defendants also argued that Gurrobat failed to provide
any evidence that Defendants’ service charge distribution
practices had a negative effect on competition, as required by
Davis, 122 Hawai#i 423, 228 P.3d 303.3 Finally, they argued that
3
Defendants asserted:
In this case, Plaintiff does not have any evidence to
support his allegation that the actions of HTH Defendants
negatively affected competition. . . . Indeed, Plaintiff’s
lack of evidence is a result of the simple fact that every
other hotel was doing the same thing that HTH Defendants
were doing. In fact, the eighty-five percent (85%)/fifteen
percent (15%) split used by [Pacific Beach Hotel] in
distributing service charges is a standard provision found
in many Unite Here! Local 5 Union contracts. The Waikiki
hotels that contain such a provision in their current union
contract that HTH Defendants are aware of include: (1)
Hilton Hawaiian Village; (2) Sheraton Waikiki Hotel; (3)
Sheraton Moana Surfrider Hotel; (4) Sheraton Princess
Kaiulani Hotel; (5) Queen Kapiolani Hotel; (6) Hale Koa
Hotel (75/25 split); (7) Hyatt Regency Waikiki Resort & Spa;
(continued...)
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the legislative history of HRS § 481B-14 precluded Gurrobat from
asserting a claim for unpaid wages because service charges were
not “tips or gratuities of any kind,” and Defendants had not
retained any compensation “earned” by members of the Plaintiff
Class.
Gurrobat filed a memorandum in opposition to
Defendants’ motion for summary judgment on October 20, 2010. He
argued that Defendants were not entitled to summary judgment
because it was undisputed that a portion of the service charge
was not distributed to either service employees or managers, as
required by HRS § 481B-14 and, in any event, managerial employees
were not entitled to share in the distribution of service
charges. Gurrobat also argued that, even if he could not
identify a law-compliant competitor who distributed the entire
service charge to its service employees, he had satisfied the
requirements of Davis, 122 Hawai#i 423, 228 P.3d 303, because his
expert witnesses could identify the “nature of the competition”
and the negative impact on competition caused by Defendants’
practice of retaining a portion of the service charge.4 Finally,
3
(...continued)
(8) Waikiki Beach Marriot Resort & Spa; (9) Kahala Hotel;
(10) Royal Hawaiian Hotel; and (11) Ala Moana Hotel.
4
Gurrobat explained:
Plaintiff has two expert witnesses who will identify the
(continued...)
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he argued that neither the language nor the legislative history
of HRS § 481B-14 precluded the use of HRS § 388-6 as a mechanism
to enforce employees’ right to receive tip income.
In a reply memorandum filed on October 25, 2010,
Defendants reiterated that Gurrobat was required to prove that
the Hotels’ service charge distribution practices had an anti-
competitive effect, that his expert witnesses were unaware of
whether the Hotels had gained a competitive advantage as a result
of these practices, and that these witnesses could not identify a
single hotel that distributed the entire service charge to its
service employees.
After hearing arguments on this motion on November 17,
2010, the court concluded that there were no genuine issues of
material fact, and that Gurrobat failed to present evidence of an
anticompetitive injury where the testimony of his two expert
witnesses were not sufficiently based on facts. It explained:
The Court agrees with defendant’s position here. The
standards are provided in Davis v. Four Seasons. Basically
4
(...continued)
“nature of the competition” and describe the impact on
competition of Defendants helping themselves to the tip
income that belongs to Plaintiff and the Class. Long-time
isle hotelier Andre Tatibouet and Bank of Hawaii‘s now-
retired chief economist Paul Brewbaker are serving as
Plaintiff’s experts and have provided the relevant opinions
that any hotel that complies with the law by distributing
the entire service charge has higher labor costs and pricing
structure than Defendants and is therefore at a competitive
disadvantage to Defendants.
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the plaintiff must still allege and prove antitrust injury
by alleging the nature of competition in order to ensure
that the injury results from a competitive-reducing aspect
or effect of defendant’s behavior.
It’s not that plaintiffs don’t have a basis or a cause of
action to raise. The Court is ruling basically on there
being no material issue of fact with regard to the evidence
that will be introduced to support the anticompetitive
injury aspect of the case.
And specifically foundationally the Court believes that the
expert or the plaintiff’s two experts had to have at least a
foundation in fact or evidence of one or the other of the
following:
One, that there was another hotel that either did not
require service charges or required service charges and then
distributed 1009 [sic] percent of them to its service
employees or disclosed the withholding to its customers.
And basically the two experts had no knowledge of an
existent market at all or the existence of any hotel that
could provide either one of those two.
On that basis, the opinions were not minimally based on
facts. And for that reason, the defendant’s motion is
granted.
On December 2, 2010, the court entered an order
granting summary judgment in favor of Defendants on Gurrobat’s
UMOC claim under HRS § 480-2, but denying summary judgment on the
claim for unpaid wages under HRS § 388-6.
4. Gurrobat’s Motion for Partial Summary Judgment
Gurrobat filed a motion for partial summary judgment as
to Defendants’ violation of HRS Chapter 388 on October 4, 2010.
He argued that he was entitled to judgment as a matter of law
where, according to Defendants’ own admissions, a portion of the
service charge income was not distributed directly to service
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employees as required by HRS § 480B-14, and this practice was not
clearly disclosed to customers paying the service charge.
Defendants filed a memorandum in opposition to
Gurrobat’s motion on October 20, 2010. They argued that HRS §
481B-14 provided the exclusive remedy for Gurrobat’s claims, and
that the legislative history revealed a decision not to permit
such claims under HRS § 388-6. Defendants also argued that the
service charge did not constitute “tips or gratuities of any
kind” under HRS § 388-6, and that they did not retain any
compensation “earned” by members of the Plaintiff Class.
Finally, they argued that, even if Defendants had inadvertently
withheld portions of the service charge, Gurrobat could not
assert a claim for those amounts intended to be distributed to
managerial employees rather than service employees.
In a reply memorandum filed on October 25, 2010,
Gurrobat argued that neither the language nor the legislative
history underlying HRS § 481B-14 precluded an independent claim
under HRS § 388-6. He asserted that the “tip income” required to
be paid to employees under HRS § 481B-14 constituted
“compensation” under HRS Chapter 388, the term “employees” in HRS
§ 481B-14 referred to those employees who rendered the service
for which the customers believed they were tipping, there was no
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genuine issue of material fact as to whether the service charge
income withheld by Defendants was “earned” by members of the
Plaintiff Class, and Defendants’ practice of withholding a
portion of this income for managerial employees violated HRS
§ 481B-14.
During the November 17, 2010 hearing on this motion,
the circuit court concluded that HRS § 481B-14 should be read in
pari materia with HRS § 388-6, that the legislative history of
this statute indicated an intent to protect service employees
rather than managerial employees, that service charges
constituted “compensation” under HRS § 388-6, and that Gurrobat
was entitled to partial summary judgment based on the undisputed
facts of this case.
On December 6, 2010, the court entered an order
granting Gurrobat’s motion for partial summary judgment as to the
claim for unpaid wages under HRS Chapter 388. In doing so, it
adopted the reasons set forth during its November 17, 2010
hearing.
5. Gurrobat’s Motion for Summary Judgment on Damages
On May 23, 2011, Gurrobat filed a motion for summary
judgment as to damages, arguing that based on Defendants’
admissions and the court’s ruling as to liability, there were no
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genuine issues of material fact regarding damages. He argued
that pursuant to HRS § 388-10, the Plaintiff Class was entitled
to double the service charges wrongfully withheld by Defendants
and interest at a rate of six percent per year from the date when
the service charges should have been paid, as well as reasonable
attorneys’ fees and costs.5
Defendants filed a memorandum in opposition to the
motion on July 26, 2011. They argued that both Gurrobat’s motion
and the accompanying report of Thomas A. Loudat should be
stricken as untimely, and also, that there were genuine issues of
material fact as to the amount of damages the Plaintiff Class was
entitled to recover. In addition, Defendants argued that they
had equitable justification for not distributing one-hundred
percent of service charge income to service employees. In
addition, Defendants argued that Plaintiffs were time-barred from
recovering damages for service charges paid before December 8,
2006 because pursuant to HRS § 378-5, claims for back pay were
subject to a two-year statute of limitations.
5
HRS § 388-11 provides in relevant part:
The court in any action brought under this section shall, in
addition to any judgment awarded to the plaintiff or
plaintiffs, allow interest of six per cent per year from the
date the wages were due, costs of action, including costs of
fees of any nature, and reasonable attorney's fees, to be
paid by the defendant.
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In a reply brief dated July 29, 2011, Gurrobat argued
that (1) the motion was timely filed more than 50 days before the
scheduled trial date, (2) there were no remaining issues of fact,
(3) Defendants could not claim equitable justification for
violating a statute of which they had full knowledge, and (4) his
claims were not limited to a two-year statute of limitations
because pursuant to HRS § 657-1(4) governing “Limitation of
Actions” for “Personal Actions,”6 a six-year statute of
limitations applied to Gurrobat’s claim for damages.
After hearing arguments on this motion, the court
entered an order on August 24, 2011, granting summary judgment as
to damages and awarding $1,678,783.00 in damages to the Plaintiff
Class.
6. The Court’s Amended Final Judgment
On January 18, 2012, the court entered an order
granting Gurrobat’s Motion for (1) “Approval of the Plaintiff
Class’ Counsels’ Fees and Costs to Be Paid by Defendant,” (2)
6
A “personal action,” for the purposes of HRS § 657-1(4) has been
defined as:
an action brought for the recovery of personal property, for
the enforcement of a contract or to recover for its breach,
or for the recovery of damages for the commission of an
injury to the person or property; an action for the recovery
of a debt, or damages from the breach of contract, or for a
specific personal chattel, or for the satisfaction in
damages for injury to the person or property.
Au v. Au, 63 Haw. 210, 217, 626 P.2d 173, 179 (1981) (citations omitted).
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“Approval of the Class Representative Stipend,” and (3) an “Entry
of Final Judgment.” The court then entered Final Judgment in
favor of Gurrobat and against Defendants in the amount of
$1,984,039.
7. Defendants’ Motion for Reconsideration
Defendants filed a motion for reconsideration on
January 31, 2012. They argued that Gurrobat was not entitled to
summary judgment on his claim under HRS Chapter 388, because
Defendants did not withhold wages “earned” by members of the
Plaintiff Class; he was not entitled to double damages or fees
and costs under HRS § 388-6 because Defendants were not liable
under HRS § 388-10; he failed to establish his right to hold
Defendants jointly and severally liable for the wages at both
hotels, and his ability to represent class members who had only
worked at the Pagoda Hotel; and he failed to prove that HTH
Corporation was the “employer” of class members.
The court summarily denied Defendants’ motion on
February 7, 2012. The court concluded that Defendants had waived
any arguments not previously raised insofar as they were “based
on facts that were known well in advance of the hearing for
summary judgment that disposed of this case.” The court also
concluded that, based on the totality of the circumstances,
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Defendants were equitably and judicially estopped from raising
new arguments regarding joint and several liability.7
On August 7, 2012, the court entered an Amended Final
Judgment,8 dismissing Gurrobat’s UMOC claim under HRS § 480-2,
and entering judgment against Defendants in the amount of
$1,984,039.40 on the claim for withheld wages under HRS § 388-6.9
C. Arguments on Appeal
1. Defendants’ Appeal Re: HRS Chapter 388
Defendants argue on appeal that the circuit court’s
Amended Final Judgment was flawed for several reasons. First,
they contend that the court erred in granting summary judgment on
the issue of liability because a violation of HRS § 481B-14
7
The court explained:
Throughout the entire course of this case, the Defendants
have acted as one. Defendants chose to be jointly
represented by the same legal counsel, filed all of their
motions and oppositions together, and even shared the same
representative during settlement conferences. Only after
summary judgment was granted did Defendants first make an
argument based on their separate and distinct identities.
Based on Defendants’ conduct, the Court finds that it was
reasonable for the Court to rely on such conduct in
concluding that judgment should be entered against
Defendants jointly. Accordingly, the Court finds that to
allow Defendants to raise a new argument based on their
separate legal identities would be inequitable.
8
It appears that the court entered an Amended Final Judgment
because its January 18, 2012 Final Judgment did not specifically resolve all
claims against all parties, as required by HRS § 641-1(a), HRCP Rule 58, and
Jenkins v. Cades Schutte Fleming & White, 76 Hawai #i 115, 869 P.2d 1334
(1994).
9
The Amended Final Judgment awarded $1,678,783.00 in damages, and
$305,256.40 in fees/costs, to the Plaintiff Class.
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cannot form the basis of a claim for unpaid wages under HRS §
388-6, which provides a remedy for the wrongful withholding of
compensation “earned” by any employee.10 Second, they argue that
the court erred in certifying the Plaintiff Class because
Gurrobat lacked standing to represent employees of the Pagoda
Hotel and he failed to meet the requirements of HRCP Rule 23.11
Third, Defendants argue that the court erred in imposing joint
and several liability on HTH Corporation and Pacific Beach
Corporation because there was no basis for holding Pacific Beach
10
Defendants assert that the court erred in equating “tip income”
under HRS § 481B-14 with “earned compensation” under HRS § 388-6. They state:
In fact, a worker never “earns” the service fees that are
above and beyond what he is contractually entitled to. Any
part of the service fees that an employee might claim as the
result (solely) of an employer’s failure to make full
disclosure was simply an unearned windfall.
11
Defendants explain that, because Gurrobat never worked at the
Pagoda Hotel, “it is insufficient to rely on unidentified Pagoda Hotel
employees who are purportedly similarly situated to obtain standing to assert
claims with respect to Pagoda Hotel.” They further elaborate:
For similar reasons, Gurrobat failed to establish that his
claims are typical of the claims of the class
members—especially those employed at Pagoda Hotel. Assuming
arguendo that Gurrobat may have a cause of action against
Pacific Beach Corporation, he still could not represent a
class with claims concerning Pagoda Hotel, which never
employed him. . . . Nor did Plaintiff proffer any evidence
supporting any exception to Rule 23’s typicality or adequate
class representative requirements. . . . Moreover, the
service charge distribution practices at the Pacific Beach
Hotel and the Pagoda Hotel differed. Not only were the
percentage breakdowns of the service charges different, the
hotels’ definition of “management employee” differed as
well. Thus, the Circuit Court should not have accepted
Gurrobat’s assertion that his claim was typical of those of
the class members, since many of the class members were
allegedly harmed by a different policy.
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Corporation liable for alleged violations at the Pagoda Hotel.12
Fourth, they argue that the court erred in granting summary
judgment as to damages because the measure of damages should have
taken into account the portion of service charge income
distributed to both service employees and managerial employees,
and the question of equitable justification involved a question
of fact. Fifth, Defendants argue that the court’s judgment was
premised on a manifest error of fact because Gurrobat failed to
present any evidence regarding HTH Corporation’s status as an
“employer” of class members who worked at the Pagoda Hotel.13
Finally, they argue that the court abused its discretion in
invoking judicial and equitable estoppel and denying Defendants’
motion for reconsideration without addressing manifest defects in
the final judgment.
12
Defendants contend that Pacific Beach Corporation should not be
held liable for any service charge income due to employees at the Pagoda Hotel
because the alleged violations at each hotel involved separate groups of
employees with different employers, Pacific Beach Corporation had no
managerial responsibility over employees at the Pagoda Hotel, and Gurrobat
failed to establish any nexus between the practices of the Pacific Beach
Corporation and the harm alleged at the Pagoda Hotel.
13
Defendants admit that HTH Corporation and Pacific Beach
Corporation collectively operate the Pacific Beach Hotel, and HTH Corporation
operates the Pagoda Hotel. They contend, however, that there was no evidence
that HTH Corporation qualified as an “employer” under HRS Chapter 388.
Instead, they maintain that Pacific Beach Corporation is the employer of all
individuals who work at the Pacific Beach Hotel, and Pagoda Hotel, Inc. is the
employer of all individuals who work at the Pagoda Hotel.
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In his Answering Brief, Gurrobat asserts that five of
Defendants’ six alleged points of errors were raised for the
first time in their January 31, 2012 motion for reconsideration,
and that the circuit court did not abuse its discretion in
addressing these alleged errors. He argues that the court did
not err in granting summary judgment on the issue of liability
because “tip income” under HRS § 481B-14 constituted compensation
“earned” under HRS § 388-6.14 Gurrobat also argues that the
court did not err in granting class certification because, by
Defendants’ own admissions, HTH Corporation “owned and operated”
both the Pacific Beach Hotel and the Pagoda Hotel, Pacific Beach
Corporation “operated” both Hotels, and Defendants were therefore
“employers” of Gurrobat and other members of the Plaintiff Class.
He argues that, even if he never worked at the Pagoda Hotel, this
fact would not preclude him from representing the Plaintiff Class
14
Gurrobat asserts that the “tip income” referred to in HRS
§ 481B-14 was “earned” compensation because the statute obligated Defendants
to pay such service charge income to members of the Plaintiff Class. He
elaborates:
Because the Hotel Defendants made no disclosure to consumers
about using a portion of the service charge for expenses
other than payments to service employees, the law obligated
them to pay all of the service charge to class members as
“tip income.” Hence, by the Hotel Defendants’ own
definition of “earned” (i.e., not “above and beyond” the
amount to which the contract entitled an employee), the law
obligated them to pay the Class members, and the tip income
compelled by Section 481B-14 was therefore “earned” by
laboring in a “disclosure-free” environment.
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because he had individual standing to bring his own claims
against both HTH Corporation and Pacific Beach Corporation, and
the requirements of HRCP Rule 23 were met so long as there was a
common defendant who injured all class members.15
In addition, Gurrobat contends that the court did not
err in awarding damages because managerial employees were not
entitled to service charge income under HRS § 481B-14, and
Defendants could provide no equitable justification for its
withholding of service charge income. Finally, he argues that
Defendants’ “joint and several” liability arose from their
contractual obligations to pay wages and tip income to employees;
however, even if Defendants’ liability arose in tort, the
practice of withholding service charge income in violation of HRS
15
Gurrobat explains that his non-employment at the Pagoda Hotel
would not affect his standing to bring suit against Defendants or his
appropriateness as a class representative. Because he had worked at the
Pacific Beach Hotel, which was operated by HTH Corporation and Pacific Beach
Corporation, he had standing to bring his own claim against both Defendants.
He further states that, because the Pacific Beach Hotel and the
Pagoda Hotel were both owned by HTH Corporation, and jointly operated by HTH
Corporation and Pacific Beach Corporation, there was no meaningful distinction
between the class segments at the two hotels. He elaborates:
The fact that some worked at one hotel and some worked at
another is a difference without a distinction because both
segments of the Class, the Pacific Beach Hotel workers and
the Pagoda Hotel workers, worked for a common owner and had
the same joint operators of their respective hotels. The
only differences were thus location and perhaps dollar
amounts. However, the Hotel Defendants have not shown that
such differences between the two segments of the Class make
Gurrobat inadequate or non-typical as a [HRCP] Rule 23
representative.
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§ 388-10 constituted an intentional tort for which joint and
several liability could be imposed.
Defendants reply that Gurrobat’s procedural arguments
for dismissing their appeal lack merit because they did not waive
any of the arguments they now raise. They contend that Gurrobat
misstates the record by asserting that Pacific Beach Corporation
operated the Pagoda Hotel,16 there was no evidence of a nexus
between Pacific Beach Corporation and the Pagoda Hotel, there was
no basis for joint and several liability, and there was no
connection between Gurrobat and the employment practices or
policies at the Pagoda Hotel. In addition, they reiterate their
argument that “service charges” under HRS § 481B-14 cannot be
construed to constitute “earned” compensation for purposes of
recovering unpaid wages under HRS § 388-6.
2. Gurrobat’s Cross-Appeal Re: HRS Chapter 480
Gurrobat argues on cross-appeal that the circuit court
erred in granting partial summary judgment in favor of Defendants
16
Defendants contend that Gurrobat relies on a settlement conference
statement, in which Pacific Beach Corporation and HTH Corporation stated that
they operated the Pagoda Hotel. They argue, however, that this statement did
not constitute an admission by Defendants because it was not admissible under
Hawai #i Rules of Evidence Rule 408 and it was a mistake that conflicted with
Defendants’ statements throughout the litigation. In support of this
position, they point out that Defendants objected to Gurrobat’s proposed Final
Judgment on the ground that Pacific Beach Corporation did not own or operate
the Pagoda Hotel and, therefore, should not be liable for the entire amount of
the judgment.
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on his UMOC claim. Specifically, he contends that the court
misunderstood and misapplied the requirements of Davis v. Four
Seasons Hotel Ltd., 122 Hawai#i 423, 228 P.3d 303. Accordingly,
he claims that he provided sufficient proof to allege an UMOC
claim under HRS Chapter 480.
Gurrobat argues, inter alia, that Defendants failed to
meet their burden of proof for summary judgment and that the
record presented genuine issues of material fact as to whether he
could establish the requisite injury for a claim under HRS
§ 480-13(a). Gurrobat asserts that he satisfied the “causation
requirement” for an UMOC claim by showing that Defendants’
conduct both negatively impacted “fair competition” and caused
injury to members of the Plaintiff Class.17 He explains that he
17
Gurrobat argues that, while Clayton Act and Sherman Act cases
require a resulting “antitrust injury,” an unfair method of competition claim
under HRS § 480-13(a) simply requires the plaintiff to show some type of
injury to “fair competition.” Accordingly, he contends:
In short, Gurrobat is merely required to show how Pacific
Beach’s acts unfairly affect competition, not that
Defendant’s acts constitute a Clayton or Sherman Act
violation and caused the type of price-increasing effect
that those federal statutes aim to prevent. The reports of
Mr. Tatibouet and Dr. Brewbaker plainly satisfy this
requirement. They show that by their improper acts, Pacific
Beach has gained a competitive advantage over any other law
compliant, non-disclosing hotel or restaurant that remits
the entire service charge to their food and beverage
servers. . . . Thus, Gurrobat has shown that Pacific Beach’s
unfair acts have a negative effect on fair competition that
was only made possible by Pacific Beach’s violation of HRS §
481B-14 (i.e., retaining portions of the service charge
without proper disclosure to customers) and by the injury to
Gurrobat (loss of tip income) which flowed from this
(continued...)
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identified Starwood Hotels as a law-compliant competitor that
retains fifteen percent of the service charge income but
discloses this practice to its customers; the fact that he could
not identify any hotels that distribute all of the service charge
income to its service employees does not preclude him from
showing that Defendants’ practices unfairly affected
competition.18 He maintains that requiring the injury to
employees to flow from the effect on competition, rather than
from the aspect of the conduct that affects competition, makes
little sense.
In addition, Gurrobat asserts that the court erred in
disregarding the testimony of his expert witnesses merely because
they lacked knowledge of particular law-compliant hotels.
Gurrobat argues that HRS Chapter 480 is the only statutory remedy
that provides a right of action for injunctive relief, and the
17
(...continued)
violation.
18
Gurrobat explains that the non-existence of a hotel that
distributes one-hundred percent of its service charge income to its service
employees, rather than disclosing its practice to customers, does not preclude
employees from asserting an UMOC claim. He elaborates:
The issue here is the effect on fair competition, not the
effect on other cheaters. The lower court apparently
assumed that there must first be a law-compliant hotel in
order for anyone to have a claim for unfair methods of
competition. However, in a market where everyone is engaged
in the same unfair method of competition, there will be no
“victims” other than consumers and workers.
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court’s failure to recognize a claim under this section would
deprive employees of adequate protection against violations of
HRS § 481B-14.
In their Answering Brief, Defendants contend that
pursuant to Davis, 122 Hawai#i 423, 228 P.3d 303, a claim brought
under HRS § 480-13(a) requires Gurrobat to show that he suffered
an “antitrust injury” (i.e., that he was injured as a result of
Defendants’ anti-competitive conduct).19 They argue that
Gurrobat presented no evidence that Defendants’ service charge
distribution practices had an anti-competitive effect, or that
members of the Plaintiff Class suffered injury as a result of an
anti-competitive aspect of Defendants’ conduct.20 Defendants
also argue that, although Gurrobat could petition the Attorney
General or the director of the Office of Consumer Protection to
19
Defendants argue that Gurrobat’s HRS § 480-13(a) claim was based
on theoretical injury to hypothetical competitors, his allegation that the
entire hotel industry engaged in the same service charge distribution
practices indicated that there was no harm to competition, and his arguments
for imposing liability under HRS § 480-13(a) were contrary to Davis, which
rejected the position that a per se violation of HRS § 481B-14 was sufficient
to allege an UMOC claim.
20
Defendants contend:
At best, Gurrobat had two experts who opined in the abstract
that, generally, hotels and banquet providers that do not
disclose service charge distribution policies hold a
“competitive advantage” over those who either make such a
disclosure or pay the entirety of the service charges to the
service employees. Neither expert offered any opinion as to
how such a competitive advantage harmed the plaintiffs in
this case.
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bring a claim for unfair or deceptive acts or practices under HRS
§ 480-2(d), he cannot assert an UMOC claim based on conduct that
does not cause the kind of injury that HRS § 480-13(a) is
intended to prevent.
In reply, Gurrobat repeats his argument that the
causation requirement for an UMOC claim is satisfied as long as
the plaintiff alleges and proves the “nature of the competition”
(i.e., the causal connection between the UMOC and the alleged
injury). He maintains, therefore, that HRS § 480-2 was intended
to protect against the “unfair” nature of a defendant’s conduct
and its impact on “fair competition,” rather than simply a
reduction in competition.
III. Standards of Review
A. Class Certification
“The question of whether a suit shall be allowed to
proceed as a class action is one of fact, to be determined by the
trial judge within his discretion.” Life of the Land v. Burns,
59 Haw. 244, 252, 580 P.2d 405, 410 (1978) (citations omitted).
“The party seeking class certification assumes the burden of
establishing the four prerequisites for class certification
delineated in [HRCP] Rule 23(a) as well as demonstrating the
presence of a suitable situation for the maintenance of a class
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action under HRCP Rule 23(b).” Kemp v. State of Hawai#i Child
Support Enforcement Agency, 111 Hawai#i 367, 385, 141 P.3d 1014,
1032 (2006) (citation and internal quotation marks omitted).
“As to the requirement of HRCP Rule 23(a)(3) that the
claims of the representative be typical of the claims of the
class as a whole, this court has equated typicality with the
absence of conflict of interest.” Kemp, 111 Hawai#i at 385, 141
P.3d at 1032 (citation and internal quotation marks omitted). “A
class representative must be part of the class and possess the
same interest and suffer the same injury as the class members.”
Id. (citations and internal quotation marks omitted).
B. Summary Judgment
A motion for summary judgment is reviewed de novo,
under the same standard applied by the trial court. State v.
Tradewinds Elec. Serv. & Contracting, 80 Hawai#i 218, 222, 908
P.2d 1204, 1208 (1995). See Hawai#i Rules of Civil Procedure
(“HRCP”) Rule 56. “Summary judgment is appropriate if the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law.”
Pac. Int’l Serv. Corp. v. Hurip, 76 Hawai#i 209, 213, 873 P.2d
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88, 92 (1994) (citation omitted). A fact is material if proof of
that fact would have the effect of establishing or refuting an
essential element of a cause of action asserted by one of the
parties. Guajardo v. AIG Hawai#i Ins. Co., 118 Hawai#i 196, 201,
187 P.3d 580, 585 (2008).
On a motion for summary judgment, the court must view
the evidence in the light most favorable to the non-moving party.
First Ins. Co. of Hawai#i v. Sariaslani, 80 Hawai#i 491, 494, 911
P.2d 126, 129 (1996). The burden lies upon the moving party to
show that no genuine issue of material fact exists with respect
to the essential elements of the claim and that, based on the
undisputed facts, he is entitled to judgment as a matter of law.
Id. at 493, 911 P.2d at 128. Only once the moving party has
satisfied its initial burden of production does the burden shift
to the non-moving party to show specific facts that present a
genuine issue for trial. Id.
IV. Discussion
A. Class Certification under HRCP Rule 23
Defendants argue that the circuit court erred in
granting class certification because Gurrobat never worked at the
Pagoda Hotel, he lacked standing to assert claims regarding that
hotel, and he failed to establish that he could adequately
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represent the Plaintiff Class under HRCP Rule 23. Gurrobat
argues that even if he was never employed at the Pagoda Hotel, he
had standing to bring his own claims against both HTH Corporation
and Pacific Beach Corporation because (1) HTH Corporation was a
common defendant who had injured all class members, (2) there was
no meaningful difference between class segments at the two
hotels, and (3) he could adequately represent class members under
HRCP Rule 23.
A party seeking to file suit as a representative member
of a class must establish his right to do so by establishing the
four prerequisites for class certification and demonstrating the
presence of a suitable situation for the maintenance of a class
action. Life of the Land v. Land Use Comm’n of State of Hawai#i,
63 Haw. 166, 180-81, 623 P.2d 431, 443-44 (1981). Class
certification is only appropriate where: (1) “the class is so
numerous that joinder of all members is impracticable”; (2)
“there are questions of law or fact common to the class”; (3)
“the claims or defenses of the representative parties are typical
of the claims or defenses of the class”; and (4) “the
representative parties will fairly and adequately protect the
interests of the class.” HRCP Rule 23(a).
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The first of these prerequisites focuses on “who are
the proposed class,” and requires members of that class to be
identifiable and their possible joinder impracticable. Life of
the Land, 63 Haw. at 181, 623 P.2d at 444. The second
prerequisite focuses on “what are the claims or defenses of the
class,” and requires the presence of common claims or defenses
extending throughout the class. Id. at 182, 623 P.2d at 444.
The third prerequisite focuses on “what is the individual claim
(or defense) of the class representative,” and requires that this
claim or defense be coextensive with the claims or defenses of
the class. Id. at 182, 623 P.2d at 444. Finally, the fourth
prerequisite focuses on “who is the representative,” and requires
that this individual be capable of fairly and adequately
representing the entire class. Id.
As this court has explained, the third requirement
(i.e., “typicality”) was designed to be read in conjunction with
the fourth requirement (i.e., “fair representation”). 63 Haw. at
183, 623 P.2d at 444-45. “Where claims or defenses are
coextensive, there is a probability of fair and adequate
representation; where they are potentially conflicting, absentees
are unlikely to be afforded representation consistent with
notions of fairness and justice.” Id. at 183, 623 P.2d at 445
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(citation omitted) (concluding that plaintiffs failed to sustain
their burden for class certification by showing an absence of
conflict between the interests of a particular defendant and
members of the putative defendant class).
Here, the claims asserted by Gurrobat are coextensive
with those asserted on behalf of the entire certified class
(i.e., all non-managerial service employees whose tip income was
unlawfully withheld by Defendants). The conduct giving rise to
those claims was Defendants’ practice of retaining a portion of
service charge income in violation of HRS § 481B-14. Although
phrased as an issue of standing, Defendants essentially challenge
Gurrobat’s ability to fairly and adequately represent class
members who were employed at a different location, by only one of
the two Defendants.21 Even if Gurrobat never worked at the
Pagoda Hotel, the legal and factual bases underlying his claims
are coextensive with those of all other class members.22
Further, employment at one but not another of the two hotels
21
Gurrobat had standing to bring claims against both HTH Corporation
and Pacific Beach Corporation because they operated the Pacific Beach Hotel,
at which Gurrobat was employed. The issue raised by Defendants, however, is
whether Gurrobat could adequately represent class members at the Pagoda Hotel,
which was only operated by HTH Corporation.
22
To the extent that any differences may exist between the
percentage of the service charge withheld or the entity responsible for
managing each hotel, such differences might affect the amount individual class
members are entitled to recover or the respective liability of each Defendant,
but not Defendants’ liability or the conduct giving rise to that liability.
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would not create a conflict of interest between Gurrobat and
other class members. Under the facts of this case, Gurrobat
established that he could fairly and adequately protect the
interests of class members, and the circuit court did not err in
certifying the proposed class.
B. Gurrobat’s Claim for Unpaid Wages
1. Liability under HRS Chapter 388
Defendants contend that Gurrobat was not entitled to
summary judgment on his claim for unpaid wages because “tip
income” distributed to employees pursuant to HRS § 481B-14 does
not constitute “earned compensation” under HRS § 388-6. Gurrobat
argues that, based on a plain reading of the statutes, “tip
income” from a service charge imposed on customers is earned by
service employees and is compensation due to them under law.
This court’s recent decision in Villon v. Marriott
Hotel Services, Inc. controls this issue. In Villon, we accepted
a certified question from the United States District Court for
the District of Hawai#i on whether service employees could bring
a claim against a hotel employer under HRS §§ 388-6, -10, and
-11, based on alleged violations of HRS § 481B-14. Villon, 130
Hawai#i at 132, 306 P.3d at 177. Answering this question in the
affirmative, this court held:
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[W]hen a hotel or restaurant applying a service charge for
the sale of food or beverage services allegedly violates HRS
§ 481B-14 (2008) (1) by not distributing the full service
charge directly to its employees as “tip income” (in other
words, as “wages and tips of employees”), and (2) by failing
to disclose this practice to the purchaser of the services,
the employees may bring an action under HRS §§ 388-6 (1993),
-10 (1993 & Supp. 1999), and -11 (1993 & Supp. 1999) to
enforce the employees’ rights and seek remedies.
Id. at 132-33, 306 P.3d at 177-78.
This court agreed with the plaintiffs’ contention that
HRS § 481B plainly and unambiguously provides that “undisclosed
and unpaid service charges are ‘tips,’ ‘wages,’ and
‘compensation.’” Id. at 134, 306 P.3d at 179. We held that
“when a hotel or restaurant distributes less than 100% of a
service charge directly to its employees without disclosing this
fact to the purchaser, the portion withheld constitutes ‘tip
income,’ synonymously phrased within HRS § 481B-14 as ‘wages and
tips of employees.’” 130 Hawai#i at 135, 306 P.3d at 180.
In addition, we concluded that the plain language of
HRS Chapter 388 on withholding of wages supported the plaintiffs’
contention that HRS § 481B-14 was enforceable through HRS Chapter
388. 130 Hawai#i at 135, 306 P.3d at 180. We further concluded
that the provisions related to the withholding of wages in
Chapter 388, sections 388-6, -10 and -11, applied to the
enforcement of HRS § 481B-14. Id. We explained that HRS § 388-1
defines “wages” as “compensation for labor or services rendered
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by an employee.” HRS § 388-1 also provides that “wages” include
“tips or gratuities of any kind.” Id. Therefore, we explained
that service charges are “compensation earned”•by the employee,
because they are levied upon the consumer based upon “labor or
services rendered by an employee,” usually in lieu of a
traditional tip. Id. at 135, 306 P.3d at 180. We further
explained that HRS § 388-6, titled “Withholding of wages,”
prohibits an employer from retaining any part or portion of any
compensation earned by the employee except where permitted by
law. Id. Thus, we held, “for the purpose of enforcement under
HRS § 388–6 . . . ‘wages’ includes service charges as ‘tips or
gratuities of any kind,’ because HRS § 481B–14 defines service
charges as ‘tip income’ and ‘wages and tips of employees.’” Id.
Accordingly, we held, “the plain language of HRS
§ 481B-14 and Chapter 388 indicates that a service charge is
‘compensation earned’ as ‘tip income’ or ‘wages and tips of
employees.’ Therefore, an alleged violation of HRS § 481B-14 is
enforceable through Chapter 388.” 130 Hawai#i at 136-37, 306
P.3d at 181-82.
It is undisputed in this case that Defendants imposed a
service charge at banquets and other functions held at the
Pacific Beach Hotel and the Pagoda Hotel, and retained a portion
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of the service charge income without disclosing that practice to
customers. Based on our decision in Villon, the circuit court
correctly held that “tip income” retained by Defendants in
violation of HRS § 481B-14 constitutes “compensation” earned by
service employees for purposes of bringing a claim under HRS
§§ 388-6, 388-10, and 388-11.
2. Summary Judgment on the Issue of Damages
Next, Defendants argue that the court erred in failing
to take into account the portion of service charge income that
Defendants distributed to managerial employees when it awarded
damages in favor of Gurrobat and other non-managerial service
members, and there was a question of fact as to whether
Defendants were equitably justified in failing to comply with HRS
§ 481B-14. Gurrobat, on the other hand, contends that tip income
distributed pursuant to HRS § 481B-14 is not intended to
supplement the income of managerial employees, and Defendants’
claimed misunderstanding of law did not qualify as equitable
justification for their unlawful withholding of tip income.
As we explained in Villon, the legislature’s findings
in enacting HRS § 481B-14 evinced a twofold concern: “first, that
patrons may not know that service charges may be ‘used to pay for
costs or expenses other than wages and tips of employees’; and
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second, that employees ‘may not be receiving tips or gratuities’
from these service charges.” 130 Hawai#i at 137, 306 P.3d at 182
(citing 2000 Haw. Sess. Laws Act 16, at 21-22). This dual focus
reflects the legislative evolution of the bill that eventually
gave rise to HRS § 481B-14. 130 Hawai#i at 137, 306 P.3d at 182.
When it was first introduced, the bill sought only to
“protect employees who receive or may receive tips or gratuities
during the course of their employment from having these amounts
withheld or credited to their employers.” Id. (citing H.B. 2123,
20th Leg., Reg. Sess. (2000)). As the bill evolved, it focused
on the problem of uninformed consumers, who may not leave
additional tips for the service employees, mistakenly thinking
that the service charge they paid were tips. 130 Hawai#i at 138,
306 P.3d at 183 (citing H. Stand. Comm. Rep. 479-00, in 2000
House Journal, at 1155).
We explained however, that toward the end of the bill’s
path to passage, the legislature recognized that “moneys
collected as service charges are not always distributed to the
employees as gratuities and are sometimes used to pay the
employer’s administrative costs.” 130 Hawai#i at 139, 306 P.3d
at 184 (citing S. Stand. Comm. Rep. No. 3077, in 2000 Senate
Journal, at 1286–87). The legislature noted that the employee,
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therefore, “does not receive the money intended as a gratuity by
the customer, and the customer is misled into believing that the
employee has been rewarded for providing good service.” Id.
Accordingly, we reasoned that throughout the bill’s
journey through the legislature, the concern for employees was
never abandoned, stating: “We have previously recognized that
‘the legislative history of H.B. 2123 indicates that the
legislature was concerned that when a hotel or restaurant
withholds a service charge without disclosing to consumers that
it is doing so, both employees and consumers can be negatively
impacted.’”• 130 Hawai#i at 139-40, 306 P.3d at 184-83 (citing
Davis, 122 Hawai#i at 434, 228 P.3d at 314 (emphasis added)).
Based on the legislative history of HRS § 481B-14 and
our analysis of the history in Villon, Defendants were not
entitled to retain a portion of service charges to supplement the
income of managerial employees, who are not otherwise entitled to
tip income. Such a practice is analogous to using the service
charge to pay the employer’s administrative costs. 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.
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Defendants’ only argument in defense of these practices
was that they had acted in a manner consistent with a broader
industry-wide trend among Hawai#i hotels. The fact that other
hotels unlawfully retained service charges does not provide
equitable justification for Defendants’ violations of HRS § 481B-
14. Cf. Arimizu v. Fin. Sec. Ins. Co., Inc., 5 Haw. App. 106,
112, 679 P.2d 627, 632 (1984) (rejecting defendant’s argument
that it had a “good faith” belief for withholding employee’s
wages based on a setoff claim, and holding that there was no
genuine issue of material fact regarding the existence of an
equitable justification).
As explained supra, the plain language of 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. Here,
Defendants failed to comply with either of these provisions or to
provide equitable justification for its violation of the statute.
For this reason, class members were entitled to an award of
double damages under HRS § 388-10.
C. Imposition of Joint and Several Liability
Defendants argue that the court erred in imposing joint
and several liability where the Pacific Beach Hotel and the
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Pagoda Hotel involved separate employers and employee
populations, and thus, there was no basis for holding Pacific
Beach Corporation liable for injuries suffered at the Pagoda
Hotel. Gurrobat, on the other hand, argues that joint and
several liability arose from Defendants’ contractual obligations
to pay wages and tip income to employees, but would also be
available if Defendants’ practice of withholding service charge
income constituted an intentional tort in violation of HRS §§
388-10 or 388-11.
Regarding contractual agreements, “joint and several
liability” is defined as “liability of copromisors of the same
performance when each of them, individually, has the duty of
fully performing the obligation[.]” Black’s Law Dictionary 837
(6th ed. 1990). Cf. HRS § 483-1 (defining “several obligors” as
“obligors severally bound for the same performance”). Imposition
of joint and several liability turns on whether the parties have
promised the same performance to a third party. Lee v. Yano, 93
Hawai#i 142, 147, 997 P.2d 68, 73 (App. 2000) (explaining that a
guarantor is not a co-obligor or joint and/or several obligor
with the principal debtor).
In the context of tortious conduct, joint and several
liability may be imposed, inter alia, “for the recovery of
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economic and noneconomic damages against joint tortfeasors in
actions involving: [] Intentional Torts[.]” HRS § 663-
10.9(2)(A). “Joint tortfeasors,” in turn, are defined as “two or
more persons jointly or severally liable in tort for the same
injury to person or property, whether or not judgment has been
recovered against all or some of them.” HRS § 663-11. In this
regard, a plaintiff can only recover jointly and/or severally
against two or more defendants if he can recover against each
defendant. Ozaki v. Ass’n of Apartment Owners of Discovery Bay,
87 Hawai#i 265, 270-71, 954 P.2d 644, 649-50 (1998) (explaining
that a tortfeasor cannot be jointly and/or severally liable with
another unless the person harmed can sue and recover against
both). See Doe Parents No. 1 v. Dep’t of Educ., 100 Hawai#i 34,
96, 58 P.3d 545, 607 (2002) (Acoba, J., concurring) (“Under joint
and several liability, each defendant is completely and fully
liable towards the injured person for the full amount of
damages.” (citation and internal quotation marks omitted)).
In determining whether HTH Corporation and Pacific
Beach Corporation may be held jointly and severally liable for
damages to the Plaintiff Class, we must consider the basis for
holding each defendant liable. While Defendants’ liability arose
from the same conduct (i.e., their practice of retaining service
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charge income from non-managerial service employees), the claims
against HTH Corporation stemmed from its operation of both the
Pacific Beach Hotel and the Pagoda Hotel, whereas the claims
against Pacific Beach Corporation stemmed from its operation of
only the Pacific Beach Hotel.23 In this regard, HTH Corporation
can be held liable for injuries to employees at both hotels;
however, there is no basis for holding Pacific Beach Corporation
liable for injuries to employees at the Pagoda Hotel.24
Therefore, the circuit court erred in failing to
apportion damages when it held Pacific Beach Corporation jointly
and severally liable for wages unlawfully withheld at the Pagoda
Hotel. We remand the case for a determination of the respective
liability of each Defendant.25
D. HTH Corporation's Status as an “Employer”
23
Gurrobat cites a September 20, 2010 settlement conference
statement in support of his contention that HTH Corporation and Pacific Beach
Corporation together operate the Pagoda Hotel. As Defendants argue on appeal,
however, this appears to be a mistake because it was inconsistent with
Defendants’ prior statements that Pacific Beach Corporation operated the
Pacific Beach Hotel but not the Pagoda Hotel.
24
We reach this conclusion regardless of whether liability is based
on Defendants’ contractual obligation to pay employees, or any tortious
conduct in intentionally withholding wages in violation of HRS Chapter 388.
25
Exhibit 9 to Gurrobat’s motion for summary judgment as to damages
summarized managers’ share of service charge income at each of the hotels per
year, and calculated a total of $1,678,783 based on an award of double damages
with 6% interest compounded annually. In order to determine Pacific Beach
Corporation’s joint and several liability as to wages withheld at the Pacific
Beach Hotel, the court would need to subtract that portion of damages arising
from conduct at the Pagoda Hotel.
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Defendants argue that the court’s judgment was premised
on a manifest error of fact because Gurrobat failed to prove that
HTH Corporation was an “employer” of any member of the Plaintiff
Class. Specifically, they contend that Pacific Beach Corporation
is responsible for hiring employees at the Pacific Beach Hotel
and is listed in the W-2 forms for that hotel, while Pagoda
Hotel, Inc. is responsible for hiring employees at the Pagoda
Hotel and is listed in the W-2 forms for that hotel. Gurrobat,
however, argues that Defendants were “employers” of class members
where, by their own admissions, HTH Corporation “owned and
operated” the Pacific Beach Hotel and the Pagoda Hotel, and
Pacific Beach Corporation “operated” both Hotels.
Under HRS Chapter 388, the term “employer” is defined
to include “any individual, partnership, association, joint-stock
company, trust, corporation, the personal representative of the
estate of a deceased individual or the receiver, trustee, or
successor of any of the same, employing any person, but shall not
include the State or any political subdivision thereof or the
United States.” HRS § 388-1. The term “employ,” in turn, is
defined to mean “permit or suffer to work.” Id.
The federal district court’s decision in Davis v. Four
Seasons Hotel Ltd. is instructive. In Davis, plaintiff employees
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brought a claim for unpaid wages against the entity responsible
for managing the resorts at which plaintiffs worked, Four Seasons
Hotel Ltd. (“Four Seasons”), and also, the entity that had an
ownership interest in the two resorts, MSD Capital, Inc. 810 F.
Supp. 2d 1145, 1149 (D. Hawai#i 2011). Four Seasons disputed,
among other things, that it was plaintiffs’ “employer” because
separate entities controlled the payroll of the subject hotels,
issued financial statements, and made human resources decisions.
Id. at 1158.
The District Court for the District of Hawai#i held
that Four Seasons was contractually responsible for managing the
resorts at which plaintiffs worked and had the authority to do so
because it “permit[ted] or suffer[ed]” plaintiffs to work and was
their “employer” under HRS § 388-1. 810 F. Supp. 2d at 1158. In
particular, the court noted that Four Seasons had power and
responsibility to control plaintiffs in their capacity as banquet
servers, had retained a portion of service charges, and was
plaintiffs’ employer “as a matter of economic reality.” Id. at
1158-59 (“The overarching concern is whether the alleged employer
possessed the power to control the worker in question.”
(Citation and internal quotation marks omitted)).
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In this case, Defendants admit that HTH Corporation
“operated” both the Pagoda Hotel and the Pacific Beach Hotel, and
Pacific Beach Hotel “operated” the Pacific Beach Hotel, but they
do not elaborate on what this means. Instead, they assert that
HTH Corporation was not an “employer” of class members because
other entities were responsible for hiring employees at each of
the hotels. As the federal district court recognized in Davis,
an employee may have more than one “employer.” Specifically,
separate entities may control payroll, issue financial
statements, make human resources decisions, etc. In addition, an
entity’s authority to manage the environment in which an employee
works or to effectuate policies that affect an employee can
constitute grounds for finding that it was an “employer” as a
matter of economic reality. Cf. Davis, 810 F. Supp. 2d at
1158-59.
By their own admissions, Defendants had authority over
the operation of the hotels at which Gurrobat and the Plaintiff
Class members were employed. Moreover, Defendants failed to
raise an argument regarding their status as “employers” until
after the court had entered its final judgment. Under these
facts, the circuit court did not err in concluding that HTH
Corporation was an “employer” under HRS Chapter 388.
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E. Judicial and Equitable Estoppel
Finally, Defendants argue that the court abused its
discretion in finding they were judicially and equitably estopped
from raising new arguments regarding joint and several liability,
and that the arguments in their motion for reconsideration were
waived as untimely. Gurrobat argues that Defendants failed to
raise all but one of their alleged points of error before the
circuit court made the relevant ruling, and those arguments must
therefore be reviewed under an abuse-of-discretion standard.
The doctrine of equitable estoppel, and specifically
judicial estoppel, precludes a party from assuming inconsistent
positions in the course of the same proceedings. Cf. Rosa v. CWJ
Contractors, Ltd., 4 Haw. App. 210, 218-20, 664 P.2d 745, 751-52
(1983) (holding that plaintiffs, who defeated defendant’s motion
to dismiss by arguing that defendant was a separate entity from
an alleged co-obligor against which plaintiffs obtained a prior
judgment, were estopped from taking an inconsistent position on
summary judgment and arguing that defendant was a wholly-owned
subsidiary of alleged co-obligor and was privy to co-obligor).
The court held:
This doctrine is not strictly one of estoppel but partakes
rather of positive rules of procedure based on manifest
justice and, to a greater or less [sic] degree, on
considerations of the orderliness, regularity, and
expedition of litigation. At stake is the integrity of the
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judicial process. A party is stopped from playing “fast and
loose” with the court or blowing “hot and cold” during the
course of litigation.
Rosa, 4 Haw. App. at 218-19, 664 P.2d at 751 (citations and
internal quotation marks omitted).
In this case, the circuit court estopped Defendants
from arguing against joint and several liability after they had
“acted as one” throughout the course of the case. The court
noted, in particular, “Defendants chose to be jointly represented
by the same legal counsel, filed all of their motions and
oppositions together, and even shared the same representative
during settlement conferences. Only after summary judgment was
granted did Defendants first make an argument based on their
separate and distinct identities.”
As Defendants point out, however, the issue of
Defendants’ separate identities did not become relevant until the
court issued its judgment holding HTH Corporation and Pacific
Beach Corporation jointly and severally liable for damages. The
Defendants have maintained throughout the case that they are
separate and distinct entities; HTH Corporation operates the
Pagoda Hotel and the Pacific Beach Hotel, while Pacific Beach
Corporation operates only the Pacific Beach Hotel. Without more,
Defendants’ joint representation by the same counsel and filing
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of motions together are not grounds for invoking judicial and/or
equitable estoppel in this case. Accordingly, the circuit court
abused its discretion in concluding that Defendants were estopped
from contesting joint and several liability.
F. The Unfair Methods of Competition Claim
1. The Circuit Court’s Ruling
The circuit court granted summary judgment on
Gurrobat’s UMOC claim based on an alleged lack of requisite
evidence to prove the “anticompetitive injury” aspect of his
case. The circuit court concluded that although two experts who
had opined that law-compliant hotels would be at a competitive
disadvantage, the two experts had to have at least a foundation
in fact or evidence of one or the other of the following to
overcome Defendants’ motion for summary judgment: (1) another
hotel that either did not require service charges or required
service charges and then distributed one-hundred percent of them
to its service employees or (2) disclosed the withholding to its
customers. The circuit court found that the “two experts had no
knowledge of an existent market at all or the existence of any
hotel that could provide either one of those two,” and granted
Defendants’ motion for summary judgment.
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We conclude that there is no requirement that
plaintiffs asserting a claim based on HRS § 481B-14 prove the
existence of law-compliant competitors who (1) distributed one
hundred percent of service charge income to service employees or
(2) disclosed to customers the practice of withholding a portion
of service charge income.
2. Davis and the “Nature of the Competition”
Gurrobat argues that the circuit court erred in its
interpretation of Davis, 122 Hawai#i 423, 228 P.3d 303. In
Davis, this court answered a question certified by the United
States District Court for the District of Hawai#i relating to
whether banquet server employees had standing to bring a claim
against hotel employers under HRS § 480-2(e), for violating HRS
§ 481B-14 by retaining a portion of service charge income without
disclosing to customers that they were doing so. 122 Hawai#i at
424-25, 228 P.3d at 304-305. As part of the certified question,
we addressed whether in order to have standing to bring an UMOC
claim, employees must plead the existence of competition or an
effect thereon, and also addressed the causation of injury
requirements of an UMOC claim.
Davis explained that in order to state a cause of
action and recover money damages under HRS § 480-2(e), a
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plaintiff must first satisfy the requirements of HRS § 480-13.
Davis, 122 Hawai#i at 434, 228 P.3d at 314 (citation omitted).
“HRS § 480-13(a) provides that, with limited exceptions, any
person who is injured in the person’s business or property by
reason of anything forbidden or declared unlawful by [chapter
480]: (1) [m]ay sue for damages ...; and (2) [m]ay bring
proceedings to enjoin the unlawful practices[.]” Id. Davis
noted, therefore, that a claim under HRS § 480-13 has three
elements essential to recovery: (1) a violation of HRS chapter
480; (2) which causes an injury to the plaintiff’s business or
property; and (3) proof of the amount of damages. Davis, 122
Hawai#i at 435, 228 P.3d at 315 (citations omitted). In the
instant case, the first and third elements are not at issue.
With respect to the second element, Davis explained
that this element includes two parts. First, a plaintiff is
required to allege an injury in fact to his or her “business or
property.” Like the plaintiffs in Davis, Gurrobat met the first
requirement, injury in fact to his or her ‘business or property,’
by alleging and later offering evidence that he did not receive
his entire share of service charges due to him.
Second, a plaintiff is required to allege the “nature
of the competition.” We explained that a plaintiff must allege
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the nature of the competition because, pursuant to HRS § 481B-4,
a violation of HRS § 481B-14 “shall be deemed” both an UMOC and
an unfair or deceptive act or practice in the conduct of any
trade or commerce (“UDAP”). Davis, 122 Hawai#i at 439, 228 P.3d
at 319. An employee, however, cannot pursue a claim for an UDAP
under HRS § 480-2(d); thus, in order to maintain the distinction
between claims of UMOC and UDAP, we held that a plaintiff was
required to allege the “nature of the competition.” Davis, 122
Hawai#i at 437, 228 P.3d at 317. We explained that this means
that the plaintiff must allege that “he or she was harmed as a
result of actions of the defendant that negatively affect
competition.” Davis, 122 Hawaii at 438, 228 P.3d at 318. The
plaintiff was further required to allege “how [Defendants]
conduct [would] negatively affect competition.” Davis, 122 Hawaii
at 437-38, 228 P.3d at 317-18.
a. How Defendants’ Conduct Negatively Affects
Competition
We held in Davis that “although Employees allege that
they have suffered an injury resulting from Four Seasons’
violation of § 481B–14, which is deemed to be an unfair method of
competition by § 481B–4, Employees are additionally required to
allege the ‘nature of the competition,’” specifically how the
Four Seasons’ conduct will negatively affect competition. Davis,
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122 Hawai#i at 443, 228 P.3d at 323. We concluded that the
employees in Davis had made no such allegation, and therefore had
not satisfied the requirements to pursue a claim under HRS § 480-
2(e). Id. at 437-38, 228 P.3d at 317-18.
Unlike the plaintiffs in Davis, Gurrobat alleged in his
second amended complaint and offered evidence on summary judgment
that Defendants’ practice of withholding a portion of the service
charge without disclosure to customers allowed them to charge
lower base prices than law-compliant competitors, thereby
reducing “fair competition” in the market for hotels,
restaurants, and banquet service providers. Moreover, Gurrobat
produced declarations from two experts, long-time isle hotelier
Andre Tatibouet, and Bank of Hawaii’s now-retired chief economist
Paul Brewbaker, who opined that any hotel that complies with the
law by distributing the entire service charge has higher labor
costs and pricing structure and is therefore, at a competitive
disadvantage than a hotel that does not comply. Gurrobat plainly
satisfied the test set forth in Davis.
The dissent argues that we relied on the reports of
Tatibouet and Brewbaker in concluding that Gurrobat demonstrated
harm to “fair competition.” Dissenting Opinion at 18. However,
proof of how a defendant’s conduct negatively affected
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competition does not necessarily require expert testimony, proof
that a defendant lowered their prices, or that a defendant’s
conduct injured other hotels. A plaintiff is only required to
prove that a defendant’s conduct is harmful to fair competition.
Additionally, we note that similar to HMA, plaintiffs
may prove how a defendant’s conduct negatively affects
competition by showing that defendant’s conduct enables the
defendant to create incentives for customers to purchase banquet
services from the defendant instead of competitors who did not
engage in the unlawful conduct. In Davis, we noted that we
specifically stated in HMA:
[I]f HMSA engages in acts or practices that impede or
interfere with physicians’ ability to provide effective
healthcare services to their patients and/or create
incentives for patients to look elsewhere for medical
services-that is, to other participating physicians who may
be reluctant to challenge HMSA or to non-participating
physicians-such acts or practices can, if proven, constitute
unfair methods of competition[.]
Davis, 122 Hawai#i at 436, 228 P.3d at 316 (citing HMA, 113
Hawai#i at 112-13, 148 P.3d at 1214-15) (emphasis added).
Thus, as stated supra, Gurrobat provided sufficient
evidence of how Defendants’ conduct negatively affected
competition, i.e., harmed fair competition, because Defendants’
unlawful conduct allows Defendants to lower their overall costs
through retaining the tip income, attract customers by being able
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to offer seemingly lower base prices, and mislead customers into
believing that the service charge will be paid as tip income.
Defendants’ unlawful conduct, therefore, enables Defendants to
obtain the business of customers through an unfair and illegal
business advantage over law-compliant hotels, restaurants and
banquet service providers. Therefore, Gurrobat sufficiently
proved that Defendants’ conduct negatively affects fair
competition.
b. Injury as a result of conduct that negatively
affects competition
Defendants argue that they were entitled to summary
judgment because Gurrobat failed to present evidence of the
anticompetitive effects of Defendants’ alleged conduct or that
his injury resulted from alleged anticompetitive conduct.
As discussed supra, a sufficient “nature of the
competition” allegation requires a plaintiff to allege how the
defendants’ conduct negatively affects competition. In addition,
pursuant to HRS § 480-13, a plaintiff is required to allege that
he or she was harmed as a result of the defendant’s violation of
HRS § 481B-14. A plaintiff need not allege and prove, however,
that his or her injury was a result of the anti-competitive
effect of the violation. Such a requirement would limit causes
of action under HRS § 480-13(a) to consumers and competitors of a
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defendant, and would thus, contravene this court’s holdings in
HMA and Davis that the plaintiff need not be a consumer, a
competitor of, or in competition with the defendant in order to
have standing under HRS § 480–13(a). See HMA, 113 Hawai#i at
110, 148 P.3d at 1212 (“[P]laintiffs need not be competitors of,
or in competition, with the defendants to sustain their claims of
unfair methods of competition”); Davis, 122 Hawai#i at 429, 228
P.3d at 309 (concluding that HRS § 480-13(a) states “any person”
may bring suit for an injury, and therefore, standing is not
limited to consumers, businesses, or competitors, and can in fact
extend to employees).
Accordingly, Davis does not stand for the proposition
that in order to recover for an UMOC claim for a violation of HRS
§ 481B-14, the plaintiff must prove that his or her injury
resulted from the negative effect on competition. Although a
plaintiff must allege and ultimately prove how a defendant’s
conduct negatively affected competition, the plaintiff need not
prove that his or her injury resulted from that negative effect
on competition. On the contrary, a plaintiff need only prove an
injury that flows from that which makes defendants’ acts
unlawful. Davis, 122 Hawai#i at 439, 228 P.3d at 319 (citing
Robert’s Hawai#i, 91 Hawai#i 224, 254 n.31, 982 P.2d 853, 883
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n.31). Gurrobat satisfied this requirement by alleging and
offering evidence of how (1) Defendants’ conduct negatively
affected competition, and (2) such unlawful conduct injured
plaintiffs in their business or property by depriving service
employees of tip income to which they were entitled.26
Thus, pursuant to Davis, a plaintiff may recover under
HRS §§ 480-2 and 480-13 for violations of HRS § 481B-14, if the
plaintiff alleges and proves: (1) a violation of HRS Chapter 480;
(2) an injury to the plaintiff’s business or property that flows
from the defendant’s conduct that negatively affects competition
or harms fair competition; and (3) proof of damages.
Elements (1) and (3) are not at issue in this case.
Gurrobat also presented sufficient evidence on element (2).
Therefore, we hold the circuit court erred in granting
Defendants’ motion for summary judgment.
III. CONCLUSION
We hold the following on Gurrobat’s claims for unpaid
wages under HRS § 388-6: the circuit court correctly concluded
that (1) Gurrobat established that he could fairly and adequately
26
Gurrobat asserted: “These unfair competitive advantages were
gained by Defendants at the direct expense of Plaintiff and other members of
the Class, and Plaintiff and the Class members were injured as a result of
Defendants’ unfair method of competition and the Defendants’ unfair
competitive behavior in the hotel food and beverage market.”
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protect the interests of the Plaintiff Class, (2) Gurrobat was
entitled to judgment as a matter of law on Gurrobat’s HRS § 388-6
claim, (3) Gurrobat was entitled to double damages and interest
as a matter of law under HRS § 388-10, and (4) HTH Corporation
was an “employer” pursuant to HRS § 388-1. However, we hold that
the circuit court erred in imposing joint and several liability
on Defendants.
Therefore, we (1) affirm the circuit court’s order
granting Gurrobat’s motion for class certification, (2) affirm
the circuit court’s order granting Gurrobat’s motion for partial
summary judgment as to the claims for unpaid wages under HRS
Chapter 388; and (3) affirm in part Gurrobat’s motion for summary
judgment as to damages for his HRS Chapter 388 claim. However,
we vacate the portion of the circuit court’s order granting
Gurrobat’s motion for summary judgment as to damages under HRS
Chapter 388 that imposed joint and several liability on the
Defendants, and remand for further proceedings to properly
apportion the damages between Defendants.
As to Gurrobat’s UMOC claim, we hold that the circuit
court erred in granting Defendants’ motion for summary judgment
because Gurrobat (1) satisfied the “nature of the competition”
requirements under Davis, and (2) presented sufficient evidence,
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there being no issues with respect to the first and third
elements, to satisfy the second element required for recovery
under HRS §§ 480-2 and 480-13 for violations of HRS § 481B-14.
Therefore, we vacate the circuit court’s order granting
Defendants’ motion for summary judgment on Gurrobat’s unfair
competition claim, and remand the claim to the circuit court for
further proceedings consistent with this opinion.
James J. Bickerton, /s/ Mark E. Recktenwald
John F. Perkin, and
Brandee J.K. Faria, /s/ Paula A. Nakayama
for petitioner
/s/ Sabrina S. McKenna
Paul Alston, Tina L. Colman
and John Rhee, for respondent
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