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Electronically Filed
Supreme Court
SCWC-10-0000188
22-MAY-2013
09:19 AM
IN THE SUPREME COURT OF THE STATE OF HAWAI#I
---o0o---
COUNTY OF HAWAI#I, a municipal
corporation of the State of Hawai#i,
Respondent/Plaintiff-Appellee,
vs.
UNIDEV, LLC, a Delaware limited liability company,
Petitioner/Defendant and Counterclaimant-Appellant,
vs.
COUNTY OF HAWAI#I, a municipal corporation of the State of
Hawai#i, HAWAII ISLAND HOUSING TRUST, a Hawai#i corporation; and
WAIKOLOA WORKFORCE HOUSING, LLC, a Hawai#i limited liability
company, Respondents/Counterclaim Defendants-Appellees,
(CIVIL NO. 09-1-264K)
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COUNTY OF HAWAI#I, a municipal
corporation of the State of Hawai#i,
Respondent/Plaintiff-Appellant,
vs.
UNIDEV, LLC, a Delaware limited liability company,
and UNIDEV HAWAII, LLC, a Delaware limited
liability company, Petitioners/Defendants-Appellees.
(CIVIL NO. 10-1-427K)
SCWC-10-0000188
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-10-0000188;1 CIVIL NOS. 09-1-264K and 10-1-427K)
May 22, 2013
RECKTENWALD, C.J., NAKAYAMA, ACOBA, MCKENNA, AND POLLACK, JJ.
OPINION OF THE COURT BY ACOBA, J.
We hold first, that, Hawai#i Revised Statutes (HRS) §
658A-28(a) (Supp. 2005),2 which enumerates the appeals that “may”
1
CAAP-11-0000019 was consolidated with CAAP-10-0000188 on November
23, 2011.
2
HRS § 658A-28 provides as follows:
§ 658A-28 Appeals.
(a) An appeal may be taken from:
(1) An order denying a motion to compel arbitration;
(2) An order granting a motion to stay arbitration;
(3) An order confirming or denying confirmation of an
award;
(4) An order modifying or correcting an award;
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be taken from a court order concerning an arbitration proceeding,
does not represent an exclusive list of appealable orders. Thus,
although not listed in HRS § 658A-28(a), the order compelling
arbitration in the instant case, is sufficiently “final” under
our collateral order doctrine to be appealable under the general
civil matters appeal statute, HRS § 641-1 (Supp. 2005).3 We
therefore affirm the similar conclusion in the October 17, 2011
Order of the Intermediate Court of Appeals (ICA) Denying [the]
September 19, 2011 Motion to Dismiss Appeal for Lack of
Jurisdiction filed by Petitioners/Defendants-Appellees UniDev,
LLC (UniDev) and UniDev Hawai#i, LLC (UniDev Hawai#i)
(collectively, Petitioners). Second, we hold that under the
circumstances of this case, the scope of the arbitration clause
contained in the “Development Services Agreement” (DSA) between
Respondent/Plaintiff-Appellant County of Hawai#i (Respondent) and
UniDev encompassed all claims of Respondent and the counterclaims
of Petitioners. To the extent that the ICA held otherwise, the
ICA’s August 31, 2012 opinion and October 18, 2012 judgment on
(5) An order vacating an award without directing a
rehearing; or
(6) A final judgment entered pursuant to this chapter.
(b) An appeal under this section shall be taken as
from an order or a judgment in a civil action.
(Emphases added.)
3
HRS § 641-1 provides in relevant part as follows:
(a) Appeals shall be allowed in civil matters from all final
judgments, orders, or decrees of circuit and district courts and
the land court to the intermediate appellate court, subject to
chapter 602.
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appeal are vacated. The December 17, 2010 Order Granting
Counterclaimant [UniDev’s] Motion to Compel Alternative Dispute
Resolution and to Stay Proceedings, and the January 3, 2011
Amended Order Granting Counterclaimant [UniDev’s] Motion to
Compel Alternative Dispute Resolution and to Stay Proceedings of
the Circuit Court of the Third Circuit4 (the court) are affirmed.
This case is remanded to the court for further proceedings
consistent with this opinion.
I.
A.
In April 2005, Respondent awarded UniDev a contract to
develop an affordable housing development project (the Project)
in Waikoloa Village on the island of Hawai#i.5 On March 2, 2006,
the parties entered into the DSA. Under the DSA, UniDev agreed
to construct “approximately 800 to 1,200” housing units in the
Waikoloa area. Respondent initially owned the 288 acres of land
that UniDev agreed to develop. However, pursuant to the DSA,
Respondent would “transfer title to the [Property] to a to-be-
formed non-profit entity,” and Respondent would “assign all of
its rights and obligations in and under [the DSA] to [that non-
profit entity].”
The DSA also contained a provision regarding
alternative dispute resolution. The parties agreed that if
4
The Honorable Elizabeth A. Strance presided.
5
The ICA’s decision in this case consolidated two cases, CAAP-10-
0000188 and CAAP-11-0000019.
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mediation of a dispute was not successful, the parties would
proceed to arbitration under state law:
Any dispute arising under the terms of this Agreement that
is not resolved within a reasonable period of time by
authorized representatives of [UniDev] and [Respondent]
shall be brought to the attention of the Chief Executive
Officer of [UniDev] and the Executive Director of
[Respondent] for joint resolution. Thereafter, if the
matter in dispute is still unresolved, then the parties
shall in good faith mutually appoint a mediator to mediate
the dispute, provided that if the parties cannot agree to a
mediator, then either party may petition a court of
competent jurisdiction to appoint a mediator. If the matter
in dispute is still not resolved by mediation, then the
parties shall submit the matter to arbitration as provided
in the “Uniform Arbitration Act” under State law.
(Emphases added.)
As anticipated under the DSA, Respondent transferred
title to the Property to Hawai#i Island Housing Trust (HIHT),
which subsequently leased the Property to Waikoloa Workforce
Housing, LLC (WWH). Respondent, HIHT, and WWH signed a
“Development Agreement,” which provided, in part, that HIHT and
WWH would develop the Project according to Respondent’s
requirements. Failure to do so would result in reversion of the
Property to Respondent. Respondent then entered into an
“Assignment and Assumption Agreement” (Assignment Agreement) with
WWH, which stated in relevant part that Respondent “assigns unto
[WWH] all right, title, and interest of [Respondent] in . . .
[the DSA].”
On February 21, 2008, UniDev and WWH entered into an
“Amended and Restated Development Services Agreement” (ADSA).
UniDev and WWH “wish[ed] to amend the DSA to reflect certain
changes in facts and circumstances that [had] occurred since the
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DSA was first executed by [UniDev] and [Respondent].” Although
the ADSA altered some aspects of the original agreement such as
UniDev’s compensation, the provision relating to alternative
dispute resolution remained largely unchanged.
On April 19, 2009, WWH instructed UniDev to cease all
work on the project. The Property was subsequently returned to
Respondent.
B.
Following UniDev’s termination from the Project,
Respondent filed a Complaint on July 1, 2009 with the court. The
case initiated by the Complaint was designated Civil No. 09-01-
264K. The Complaint asserted five causes of action, including
(1) false claims, in violation of HRS § 46-171 (Supp. 2001),6
(2) intentional misrepresentation, (3) fraudulent inducement,
(4) negligent misrepresentation, and (5) negligence.
On March 29, 2010, Petitioners answered Respondent’s
Complaint and filed a counterclaim against Respondent, HIHT, and
WWH. Petitioners’ counterclaim asserted four counts, including
(1) breach of contract (against Respondent and WWH), (2) quantum
6
HRS § 46-171 provides, in relevant part as follows:
§ 46-171 Actions for false claims to the
counties; qui tam actions.
(a) Any person who:
(1) Knowingly presents, or causes to be
presented, a false or fraudulent claim for
payment or approval;
. . . .
shall be liable to the county for a civil penalty of not
less than $5,500 and not more than $11,000, plus three times
the amount of damages that the county sustains due to the
act of that person.
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meruit (against Respondent and WWH), (3) intentional interference
with contract (against Respondent), and (4) fraudulent transfer
(against HIHT and Respondent).
On November 23, 2010, Respondent filed a second
Complaint, initiating a second action against Petitioners, Civil
No. 10-1-0427K. Respondent reiterated four of the five causes of
action included in its original Complaint. Respondent again
alleged causes of action for false claims pursuant to HRS § 46-
171 (Count I), intentional misrepresentation (Count III),
fraudulent inducement (Count IV), and negligent misrepresentation
(Count V). Regarding all four causes of action, the second
Complaint identified particular circumstances that constituted
the bases of Respondent’s allegations. Respondent also alleged a
new cause of action for unfair and deceptive practices (Count
II), declaring that Petitioners violated HRS §§ 480-2 (1993)7 and
481A-3 (1993) by engaging in several acts.8 On December 16,
7
HRS § 480-2 provides in relevant part as follows:
§ 480-2 Unfair competition, practices, declared unlawful.
(a) Unfair methods of competition and unfair or deceptive
acts or practices in the conduct of any trade or commerce
are unlawful.
8
HRS § 481A-3 provides in relevant part as follows:
§ 481A-3 Deceptive trade practices.
(a) A person engages in a deceptive trade practice when, in
the course of the person’s business, vocation, or
occupation, the person:
(1) Passes off goods or services as those of
another;
(2) Causes likelihood of confusion or of
misunderstanding as to the source, sponsorship,
approval, or certification of goods or services;
. . .
(12) Engages in any other conduct which
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2010, the parties stipulated to consolidate Civil No. 09-01-264K
with Civil No. 10-1-0427K.9
C.
On July 30, 2010, Petitioners filed their arbitration
motion. On December 17, 2010, the court issued an Order granting
the motion. The Order stated in relevant part as follows:
1. [Petitioners] ha[ve] established the existence of a
written agreement that requires [Respondent] and
[Petitioners] to resolve disputes by means of
alternative dispute resolution. Specifically, Section
13 of Rider A of the [DSA] and Section 13 of Rider A
of the [ADSA] both require the parties to resolve “any
dispute arising under the terms of this Agreement”
through the alternative dispute resolution process
described therein. [Respondent] concedes that it
validly executed the DSA, and as to the alternative
dispute resolution provisions, the ADSA simply
restates the DSA.
2. [Respondent’s] claims fall within the scope of the
alternative dispute resolution clause. . . .
Alternative dispute resolution clauses must be broadly
construed, and those covering claims “arising out of”
the agreement have been held to require alternative
dispute resolution of fraud-based claims concerning
the subject matter of the agreement, as do
[Respondent’s] claims.
3. [Petitioners’] counterclaims against [Respondent] are
also subject to the alternative dispute resolution
provisions of the DSA and the ADSA, as [Petitioners]
stated at the hearing. Some of the counterclaims are
expressly based on the DSA and the ADSA, and others
touch matters concerning the DSA and ADSA or arise out
of the relationship between the parties created by
those contracts.
(Emphases added.)
similarly creates a likelihood of
confusion or of misunderstanding.
9
Petitioners did not file an answer or counterclaims to the second
complaint, apparently because the court’s December 17, 2010 Order granting
Petitioner’s Motion to Compel Alternative Dispute Resolution (arbitration
motion) stayed “all proceedings in this court.”
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II.
A.
Respondent appealed to the ICA. After the parties had
filed briefs on the merits, Petitioners filed a Motion to Dismiss
on September 19, 2011, arguing that the ICA lacked subject matter
jurisdiction because the “appeal of an interlocutory order
compelling arbitration is forbidden by the [Federal Arbitration
Act (FAA)].” Petitioners acknowledged that “Hawai#i law allows
appeals from interlocutory orders compelling arbitration under
the collateral order doctrine when the issue of arbitrability is
separable from and collateral to the claims asserted in the
underlying case.” (Citing Sher v. Cella, 114 Hawai#i 263, 266-
67, 160 P.3d 1250, 1253-54 (App. 2007).) However, according to
Petitioners, “in disputes covered by the FAA -- such as this one
-- that rule cannot apply.”
In opposition, Respondent cited Volt Info. Scis., Inc.
v. Bd. of Trs., 489 U.S. 468, 479 (1989), for the proposition
that “where, as here, the parties have agreed to abide by state
rules of arbitration, enforcing those rules according to the
terms of the agreement is fully consistent with the goals of the
FAA, even if the result is that arbitration is stayed where the
act would otherwise permit it to go forward.” (Emphasis in
original.) Respondent noted that the arbitration clauses in both
the DSA and ADSA explicitly stated that Hawai#i law applied;
that, as Petitioners stated in their Answering Brief, “an
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immediate appeal of the order compelling arbitration is permitted
under Hawai#i law;” and therefore, that the ICA had jurisdiction
to hear the appeal.
On October 17, 2011, the ICA denied Petitioners’ Motion
to Dismiss. County of Hawai#i v. Unidev LLC, No. CAAP-11-
0000019, 2011 WL 4998491, at *1 (App. Oct. 17, 2011) (Unidev I).
The ICA related that under the FAA, “the courts and arbitrators
must give effect to the contractual rights of the parties, that
the parties’ intentions control, that the parties may limit the
issues that they choose to arbitrate, and that ‘parties may agree
on rules under which any arbitration will proceed.’” Id. at *3
(quoting Stolt-Nielsen, S.A. v. Animalfeeds Int’l Corp., 559 U.S.
662, 130 S. Ct. 1758, 1774 (2010)) (emphasis in original).
“Under Hawai#i state law, an order compelling arbitration is
appealable under HRS § 641-1(a) [(Supp. 2004)] and the collateral
order doctrine.” Id. at *4 (citing Sher, 114 Hawai#i at 266-67,
160 P.3d at 1253-54; Association of Owners of Kukui Plaza v.
Swinerton & Walberg Co., 68 Haw. 98, 107, 705 P.2d 28, 35 (1985);
Luke v. Gentry Realty, Ltd., 105 Hawai#i 241, 246 n. 10, 96 P.3d
261, 266 n.10 (2004); Douglass v. Pflueger Hawai#i Inc., 110
Hawai#i 520, 522 n.1, 135 P.3d 129, 131 n.1 (2006)).
Consequently, the ICA decided that it “ha[d] jurisdiction over
[Respondent’s] appeal from the December 17, 2010 order compelling
alternative dispute resolution and the January 3, 2011 amended
order compelling alternative dispute resolution.” Id.
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B.
On May 25, 2011, Respondent filed its Opening Brief
(OB) with the ICA. In pertinent part, Respondent argued (1) that
it was not “required to arbitrate pursuant to the DSA [or] the
ASDA,” and (2) that its claims were not subject to arbitration.10
Petitioners filed an Answering Brief (AB) on August 4, 2011.
Respondent filed a Reply Brief on August 24, 2011.
1.
As to its first argument, Respondent contended that
“the assignment of the DSA to WWH constituted a novation;” “the
ADSA [thus] replaced the DSA” and as a result, “the DSA was
discharged and [Petitioners could] not enforce the arbitration
provision of the DSA against [Respondent].” Also, Respondent
asserted that Respondent was not a party to the ADSA, and
moreover WWH was not its agent when WWH entered into the ADSA
because WWH possessed neither actual authority nor apparent
authority to enter into the ADSA on its behalf.
Petitioners responded in their Answering Brief that the
Assignment Agreement was an assignment, and not a novation, and
as such, did not relieve Respondent from its duties under the
DSA;11 the ADSA did not constitute a substituted contract because
10
Respondent also argued that Petitioners waived their right to
request arbitration. The ICA held that Petitioners did not waive their
arbitration rights, and neither party has challenged that holding. County of
Hawai#i v. Unidev LLC, 128 Hawai#i 378, 405, 289 P.3d 1014, 1041 (App. 2012)
(Unidev II).
11
As noted by the ICA, for the Assignment Agreement to have been a
novation, rather than an assignment, “Unidev must have agreed to the discharge
of [Respondent’s] duties under the DSA.” Unidev II, 128 Hawai#i at 396, 289
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the DSA itself contemplated amendment in that it stated “this
Agreement shall remain in force with the inclusion of any such
amendment”; and Respondent was bound under the ADSA’s arbitration
clause, despite not signing the ADSA, because Respondent
“affirmed WWH’s conduct and ratified the ADSA,” and because
Respondent “originally empowered WWH to act on its behalf.”
2.
As to its second argument, Respondent pointed out that
the arbitration clauses in the DSA and ADSA required arbitration
for “any dispute arising under the terms of this Agreement,” and
that “[c]ourts in the Ninth Circuit and Hawai#i have held [that]
similar language is ‘relatively narrow,’ and only mandates
arbitration of claims which related to the interpretation of the
contract and matters of performance.” (Citing Cape Flattery Ltd.
v. Titan Maritime LLC, 607 F. Supp 2d 1179 (D. Haw. 2009);
Mediterranean Enterprises, Inc. v. Ssangyong Corp., 708 F.2d 1458
(9th Cir. 1983); Tracer Research Corp. v. National Envtl. Servs.
Co., 42 F.3d 1292, 1295 (9th Cir. 1994).)
Next, Respondent asserted that its claims were not
based on Petitioners breaching either the DSA or ADSA, but
instead, on Petitioners making fraudulent misrepresentations.
Thus, its claims were “clearly actionable regardless of the
existence of the DSA or ADSA,” inasmuch as “the claims asserted
P.3d at 1032 (emphasis in original); see also Hawai#i Builders Supply Co. v.
Kaneta, 42 Haw. 111, 112 (Haw. Terr. 1957) (“[A] discharge of a previous
contractual duty is one of the essential elements of a novation.”).
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by [Respondent] are clearly tort claims, and, as a result, d[id]
not arise under the DSA or ADSA . . . .” Finally, Respondent
declared that Petitioners’ counterclaims were not subject to
arbitration, because those “claims necessarily rely upon
[Respondent] not being a party to the DSA or ADSA” and,
therefore, none of Petitioners’ four counterclaims “arose under
the terms of the Agreement.”
In their Answering Brief, Petitioners responded that
Respondent’s claims fell within the scope of both arbitration
clauses; for clauses that require the party to arbitrate “any
dispute arising under the terms of this Agreement” have been
consistently construed as “broad.” Thus, Petitioners asserted
that the arbitration clauses in the DSA and ADSA covered any
claims that “touch matters covered by the parties’ contract” or
that “have their roots in the relationship created by the
contract.” (Citing PRM Energy Sys., Inc., v. Primenergy, L.L.C.,
592 F.3d 830, 836-37 (8th Cir. 2010); Int’l Asset Mgmt., Inc. v.
Holt, 487 F. Supp. 2d 1274, 1288 (N.D. Okla. 2007).) According
to Petitioners, the cases cited by Respondent represented “‘a
distinct minority analysis,’” (quoting EFund Capital Partners v.
Pless, 59 Cal. Rptr. 3d 340, 341 (Cal. App. 2007)), that the
“majority of federal courts have ‘declined to follow.’” (Quoting
Battaglia v. McKendry, 233 F.3d 720, 727 (3d Cir. 2000).)
Additionally, Petitioners maintained that Respondent’s
causes of action fell within the arbitration clauses because
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either they “require[d] interpretation of [] the DSA and [ADSA]”
or because the claims would not have occurred “unless the DSA and
[ADSA] existed.” Regarding Petitioners’ counterclaims,
Petitioners claimed that their “relationship with [Respondent]
arises out of[,] and would not have existed without the DSA.”
“Thus,” Petitioners urged, “any claims related to that
relationship arise out of and are related to the DSA.”
III.
A.
The ICA held, regarding Respondent’s first argument,
that Respondent was bound by the DSA, but not the ADSA. As to
the DSA, the ICA ruled that because neither the Assignment
Agreement nor the ADSA was a novation with regard to the DSA,
Petitioners did not agree to the discharge of Respondent’s duties
under the DSA in either document. Unidev II, 128 Hawai#i at 396,
289 P.3d at 1032. Therefore, the ICA concluded that Respondent
was bound by the DSA’s arbitration provision. Id.
However, with respect to the ADSA, the ICA decided that
Respondent “was not a signatory” and Respondent neither gave WWH
the authority to bind it to the ADSA nor ratified the ADSA. Id.
at 397-98, 289 P.3d at 1033-34. Therefore, the ICA concluded
that the court “erred in determining that the ADSA arbitration
agreement applies to [Respondent].” Id.
B.
Regarding Respondent’s second argument, the ICA
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analyzed each cause of action alleged in the complaints and the
counterclaims. The ICA observed that a split in authority
existed as to whether clauses that mandated arbitration for
disputes “arising under” or “arising out of” an agreement were
broad or narrow. Id. at 399, 289 P.3d at 1035. However, the ICA
did “not decide that particular issue because the arbitration
provision ha[d] further limiting language,” specifically that
arbitration was mandatory for disputes “arising under the terms
of the agreement.” Id. (emphasis in original). According to the
ICA, “[e]ven though public policy strongly favors arbitration,
the scope of arbitration ultimately depends on the wording of the
contract.” Id. (citing Hawai#i Med. Ass’n v. Hawai#i Med. Serv.
Ass’n, 113 Hawai#i 77, 92, 148 P.3d 1179, 1194 (2006)).
The ICA explained that “[b]y choosing the specific and
clear language in the DSA arbitration provision, the parties
indicated their intent to require arbitration when a dispute
implicates or involves the terms of the DSA.” Id. (emphasis
added). Hence, “arbitration [was] required for claims that
involve construction or interpretation of the DSA’s terms, or
that require a determination of the parties’ rights and/or
obligations under the terms of the DSA.” Id. Applying its
interpretation of the DSA’s arbitration clause, the ICA held that
Respondent’s negligence claim in its first complaint was subject
to the arbitration clause, as was Petitioners’ counterclaim for
breach of contract “to the extent [that it alleged] that
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[Respondent] breached the DSA.” Id. However, the remainder of
Respondent’s claims and Petitioners’ counterclaims did not
“involve the terms of the DSA,” and therefore were not within the
scope of the DSA’s arbitration clause. Id.
IV.
In their Application, Petitioners ask (1) whether this
court’s decision in Swinerton was “nullified by the adoption of
the [Revised Uniform Arbitration Act (RUAA)], (2) whether the ICA
erred by “adopting the minority view regarding [the] ‘arising
under’ language” in the arbitration provisions and “drastically
narrow[ing] the scope of the parties’ arbitrable claims,” and (3)
whether it was grave error to exclude Respondent’s claims and
Petitioners’ counterclaims from arbitration. Respondent filed a
Response on December 31, 2012. Petitioners filed a Reply on
January 7, 2012.
V.
As an initial matter, neither party challenges the
ICA’s conclusion that Respondent is bound by the arbitration
clause of the DSA. Unidev II, 128 Hawai#i at 396, 289 P.3d at
1032. Therefore, Respondent is bound by the arbitration clause
in the DSA.12
12
Respondent did object to the ICA’s holding regarding the DSA at
oral argument. However, Respondent did not cross-appeal the holding of the
ICA or raise this issue in its Response. Thus, it has been waived. See
Hawai#i Rules of Appellate Procedure (HRAP) Rule 40.1. In any event, it
appears that the ICA correctly rejected Respondent’s arguments that neither
the Assignment Agreement nor the ADSA effected a novation and discharged
Respondent’s obligations under the DSA. As the ICA recognized, Petitioners’
assent to the discharge of Respondent’s duties under the DSA was required to
effectuate a novation. Restatement (Second) of Contracts § 280 cmt. d (“For a
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Petitioners argue that the ICA erred by holding that
Respondent was not bound by the arbitration provision in the
ADSA, because the ICA allowed “[Respondent] to use the ADSA as
both a sword and shield.”13 Respondent is “bound to arbitrate,”
Petitioners urge, because its claims “allege breaches under the
ADSA and therefore arise under . . . the ADSA.”14 This argument,
however, is unrelated to any of the questions presented for
decision by Petitioners. The first question presented, regarding
the ICA’s jurisdiction, does not address the ADSA at all. The
second and third questions presented, regarding the ICA’s
interpretation of the scope of the arbitration agreement, also
apparently do not address the ADSA, because the ICA held that
novation to take place, the obligee must assent to the discharge of the
obligor’s duty in consideration for the promise of the third party to
undertake that duty.”) (emphasis added); see also Hawai#i Builders Supply Co.
v. Kaneta, 42 Haw. 111 (Haw. Terr. 1957) (“[D]ischarge of a previous
contractual duty is one of the essential elements of a novation.”). The ICA
observed nothing in the record that indicated Petitioners agreed to discharge
Respondent from its duties under the DSA.
13
Petitioners’ Application does not explain why the question of
whether or not Respondent is bound by the ADSA is relevant to the ultimate
disposition of the case. Whether Petitioners are bound by the arbitration
clause in the ADSA may have been relevant under the ICA’s holding that
arbitration clauses in the DSA and ADSA extend only to claims requiring
“construction or interpretation” of the terms of those agreements. Unidev II,
127 Hawai#i at 399, 289 P.3d at 1035. Presumably, some of Respondent’s claims
and Petitioners’ counterclaims may have implicated the terms of the ADSA, but
not the DSA. Therefore, under the ICA’s interpretation of the scope of the
arbitration clauses in the DSA and ADSA, some claims may have been subject to
arbitration only if the Respondent was subject to the ADSA. However, as
discussed infra, the ICA erred regarding the scope of the arbitration clauses
in the DSA and ADSA.
14
Petitioners point to Count 1 of Respondent’s first complaint,
which alleged that Petitioners submitted to Respondent invoices that
Respondent was not contractually obligated to pay, and even if Respondent was
obligated to pay, those invoices “request payment for amounts that even under
the ADSA . . . would not be due to [Petitioners].” (Emphasis added.)
Petitioners claim that this citation to the ADSA “requires interpretation of
the ADSA’s payment provisions.”
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only the DSA applied to Respondent, and therefore the ICA did not
address the ADSA’s scope at all. See Unidev II, 128 Hawai#i at
398, 289 P.3d at 1034 (“We now consider whether the scope of the
DSA’s arbitration provision covers the claims and counterclaims
asserted by the parties.”) (emphasis added). Pursuant to HRAP
Rule 40.1 (d)(1), “[t]he application for a writ of certiorari
shall contain . . . a short and concise statement of the
questions presented for decision,” and “[q]uestions not presented
according to this paragraph will be disregarded.” Petitioners’
argument regarding the applicability of the ADSA is unrelated to
any of the questions presented. Hence, under Rule 40.1(d)(1)
Petitioners’ arguments are disregarded. The ICA’s holding that
Respondent is not bound by the ADSA is affirmed.
Further, Petitioners did not argue below that
Respondent was bound by the arbitration clause in the ADSA. At
oral argument, Petitioners contended that they “raised the
ratification argument” at every stage of the proceedings. To the
contrary, before the court and before the ICA, Petitioners argued
that by asserting claims under the ADSA, Respondent ratified
WWH’s signing of the ADSA as a part of an agency theory. All of
the cases cited by Petitioner related to agency status.15 The
15
See, e.g., Hawai#i County v. Purdy, 22 Haw. 272, 283 (Haw. Terr.
1914) (“A municipal corporation may ratify the unauthorized acts of its agents
or officers . . . .”) (emphasis added); Ass’n of Apartment Owners of Maalaea
Kai, Inc. v. Stillson, 108 Hawai#i 2, 30, 116 P.3d 644, 672 (2005)
(“Ratification rests on principles of agency.”).
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ICA rejected Petitioners’ ratification argument because
Petitioners could not demonstrate “that WWH entered into the ADSA
on behalf of Respondent.” Unidev II, 128 Hawai#i at 397, 289
P.3d at 1034; see also Stillson, 108 Hawai#i at 30, 116 P.3d at
672 (noting that ratification is defined as “the affirmance by a
person of a prior act which did not bind him but which was done
or professedly done on his account”) (emphasis added).
Before this court, Petitioners did not challenge the
ICA’s determination that Petitioners could not prove that WWH was
acting on behalf of Respondent. Instead, Petitioners cited cases
that suggested Respondent was bound by the ADSA’s arbitration
clause solely because Respondent asserted claims under the ADSA.
The analysis in the cases cited does not utilize an agency
theory, but instead one of estoppel.16 Thus, Petitioners raise
their estoppel theory for the first time before this court. It
is axiomatic that where a party fails to raise an argument before
the courts below, that argument may be deemed waived for purposes
of appeal. State v. Moses, 102 Hawai#i 449, 456, 77 P.3d 940,
947 (2003). Hence, we consider Petitioners’ estoppel argument
waived.
16
See, e.g., Boucher v. Alliance Title Company, Inc., 127 Cal. Rptr.
3d 440, 44 (Ct. App. 2005) (“Here, defendant relies only on equitable estoppel
principles.”)(emphasis added); Int’l Ins. Agency Services, LLC v. Revios
Reins. U.S., Inc., 2007 WL 951943 (N.D. Ill. Mar. 27, 2007) (“Because it
proves to be dispositive, the court considers only the estoppel theory.”)
(emphasis added). Estoppel and agency are two different theories which may
be used to bind a non-signatory to an arbitration agreement. See Thomson-CSF,
S.A. v. American Arbitration Ass’n, 64 F.3d 773, 776 (2d Cir. 1195).
19
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VI.
A.
As to the first Application question, Petitioners
contend, contrary to their position before the ICA, that Hawai#i
law does not permit interlocutory appeals from orders compelling
arbitration. According to Petitioners, this court’s decision in
Swinerton, 68 Haw. at 107, 705 P.2d at 34, which allowed
interlocutory appeals from orders denying and compelling
arbitration, is no longer applicable in light of the adoption of
the RUAA.
Petitioners maintain that at the time Swinerton was
decided, Hawai#i’s arbitration statute was “silent with regard to
appeals of orders concerning arbitration.” Thus, “the Swinerton
decision properly turned upon general principles of
appealability.” Petitioners read Swinerton as holding that under
the “collateral order doctrine,”17 the Hawai#i general appeals
statute, HRS § 641-1(a) (1993)18, allowed “interlocutory appeals
17
The collateral order doctrine allows appeals from orders “falling
in that small class which finally determine claims of right separable from,
and collateral to, rights asserted in the action, too important to be denied
review and too independent of the cause itself to require that appellate
consideration be deferred until the whole case is adjudicated.” Swinerton, 68
Haw. at 105, 705 P.2d at 35 (citations omitted).
18
At the time of Swinerton, HRS § 641-1(a) (1985 Repl.) provided as
follows:
(a) Appeals shall be allowed in civil matters from all
final judgments, orders, or decrees of circuit and district
courts and the land court, to the supreme court or to the
intermediate appellate court, except as otherwise provided
by law and subject to the authority of the intermediate
appellate court to certify reassignment of a matter directly
to the supreme court and subject to the authority of the
supreme court to reassign a matter to itself from the
20
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from orders denying arbitration as well as orders compelling
arbitration.” (Citing Swinerton, 68 Haw. at 107, 705 P.2d at
35.)
Petitioners state, however, that “fifteen years after
Swinerton, the Hawai#i legislature adopted the RUAA,” and under
the RUAA, “HRS § 658A-[2]8 permits appeals of orders denying
arbitration,” but “does not authorize appeals challenging orders
compelling arbitration.”19 (Emphases in original.) That
“omission is significant,” according to Petitioners, “for ‘this
court has consistently applied the rule of expressio unius est
exclusio alterius -- the express inclusion of a provision in a
statute implies the exclusion of another -- in interpreting
statutes.’” (Quoting Fought & Co. v. Steel Eng’g, 87 Hawai#i 37,
55, 951 P.3d 487, 505 (1998).) (Brackets omitted.) Therefore “it
would be contrary to the canons of interpretation to read the
grant of appellate jurisdiction in one instance but not the other
intermediate appellate court.
(Emphasis added.)
HRS § 641-1(a) was subsequently amended to require that appeals be
heard by the ICA. To reiterate, HRS § 641-1(a) now provides as follows:
(a) Appeals shall be allowed in civil matters from all
final judgments, orders, or decrees of circuit and district
courts and the land court to the intermediate appellate
court, subject to chapter 602.
(Emphasis added.)
19
Petitioners acknowledge that twice since the adoption of the RUAA,
this court has restated its holding in Swinerton that appeals are allowable
under the collateral order doctrine. (Citing Luke, 105 Hawai#i at 246, 96
P.3d at 266 n.10; Douglass, 110 Hawai#i at 522, 135 P.3d at 131 n.1 (2006).)
However, Petitioners explain that the RUAA, which applies only to contracts
made “on or after July 1, 2002,” HRS § 658A-3 (Supp. 2011), did not govern
those cases because the contracts at issue were entered into prior to 2002.
21
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as granting appellate jurisdiction in both.” Additionally,
Petitioners declare that “upholding Swinerton would [] contravene
the legislature’s intent since it is presumed to have known of
[this c]ourt’s decision in Swinerton when it decided to grant
appellate jurisdiction only as to orders denying arbitration.”
(Citing State v. Reis, 115 Hawai#i 79, 97, 165 P.3d 980, 998
(2007).) (Emphases in original.)
Also, Petitioners assert that the majority of
jurisdictions adopting the RUAA do not allow appeals from orders
compelling arbitration. Hence, this court must “interpret and
construe the RUAA as to effectuate [the RUAA’s] general purpose
to make uniform the laws of the states and territories which
enacted [it].” (Citing HRS § 1-24 (Repl. 2003).)20 Finally,
Petitioners maintain that allowing appeals from orders compelling
arbitration will “encourage[] delays, add[] costs, and wast[e]
judicial resources and the parties resources.”
B.
1.
Respondent responds first, that Petitioners have waived
the argument that Hawai#i law forbids appealing orders that
compel arbitration, by not raising that issue before the ICA.
“It is well established,” Respondent maintains, “that an issue
20
HRS § 1-24 provides as follows:
§ 1-24 Interpretation of uniform acts.
All provisions of uniform acts adopted by the State shall be
so interpreted and construed as to effectuate their general
purpose to make uniform the laws of the states and
territories which enact them.
22
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raised for the first time on appeal will not be considered by the
reviewing court.” (Citing State v. Schnabel, 127 Hawai#i 432,
478-79, 279 P.3d 1237, 1283-84 (2012); State v. Wallace, 80
Hawai#i 382, 410, 910 P.2d 695, 723 (1996).) According to
Respondent, because Petitioners asserted before the ICA that
Hawai#i law did permit an appeal, “[Petitioners] argued the
opposite of what [they] now argue.” Thus, inasmuch as HRS § 602-
5921 only allows this court to review “clearly wrong” decisions
by the ICA, and “the ICA never decided this issue . . . there is
nothing for this [c]ourt to correct.” Further, Respondent
declares that if it must proceed through arbitration and
subsequently appeal the court’s ruling compelling arbitration,
“[t]he ICA would then render the same decision” regarding the
merits of the claims, resulting in “meaningless duplication and
wasteful actions.”
2.
In answer to Petitioners’ position that the RUAA
supplants this court’s decision in Swinerton, Respondent posits
that “HRS § 641-1(a) provides additional authority for appeals.”
Respondent cites the ICA’s decision in Picardy v. Sky River
21
HRS § 602-59 provides in relevant part as follows:
(b) The application for writ of certiorari shall tersely
state its grounds, which shall include:
(1) Grave errors of law or of fact; or
(2) Obvious inconsistencies in the decision of the
intermediate appellate court with that of the supreme court,
federal decisions, or its own decision, and the magnitude of
those errors or inconsistencies dictating the need for
further appeal.
23
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Mgmt., LLC., No. 29824, 2009 WL 4988294 (App. Dec. 21, 2009)
(order),22 in which the defendant moved to dismiss an appeal from
an order compelling arbitration, arguing that “HRS § 658A-28 did
not permit an appeal [from such] an order. . . .” The ICA,
however, ruled that “HRS § 641-1(a) provides additional authority
for appeals and authorizes appeals from judgments, orders, or
decrees.” (Citing Picardy, 2009 WL 4988294 at *1.) (Emphasis
added.) Applying this court’s decision in Swinerton, the ICA
held that “orders granting stays of arbitration are appealable
final orders.” (Citing Picardy, 2009 WL 4988294 at *2.)
Relying on Picardy, Respondent contends that “several
other jurisdictions [] have noted [that] similar statutes . . .
do not represent an exclusive list of appealable orders.”23
Those jurisdictions recognize that “permitting appeals of orders
compelling arbitration is logical and just since ‘these claims
cannot be effectively vindicated after the party has been
compell[ed] to do that which it claims it is not required to
do.’” (Citing Kremer v. Rural Comm. Ins. Co., 788 N.W.2d 538,
549 (Neb. 2010).) Respondent explains that “delaying the appeal
until after arbitration requires the parties to engage in a
useless arbitration proceeding if the order compelling
22
Respondent argues that Picardy is a decision of this court.
Westlaw has published the opinion as from the “Supreme Court of Hawai#i.”
Picardy, 2009 WL 4988294. However, Picardy is an ICA decision.
23
Respondent cites Kremer, 788 N.W.2d at 547-48; Wein v. Morris, 944
A.2d 642, 651 (N.J. 2008); Gilliland v. Chronic Pain Assocs., Inc., 904 P.2d
73, 77 (Okla. 1995); and Collier v. Pennington, 69 P.3d 238, 240 (N.M. App.
2003).
24
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arbitration was improper.” (Citing Evansville-Vanderburg Sch.
Corp. v. Evansville Teacher’s Ass’n, 494 N.E. 2d 321, 322-23
(Ind. App. 1986).)24
VII.
As an initial matter, Respondent’s contention that
Petitioners have waived their argument that Hawai#i law does not
permit appeals from an order compelling arbitration is incorrect.
“If a court lacks jurisdiction over the subject matter of a
proceeding, any judgment rendered in that proceeding is invalid.”
Bush v. Hawaiian Homes Comm’n, 76 Hawai#i 128, 133, 870 P.2d
1272, 1277 (1994). Therefore, “such a question is valid at any
stage of the case.” Id. (emphasis added). In other words,
“[t]he lack of jurisdiction over the subject matter cannot be
waived by the parties.” In re Rice, 68 Haw. 334, 335, 713 P.3d
426, 427 (1986). Hence, Petitioners cannot have waived their
argument that the ICA lacked jurisdiction to hear an appeal.
Respondent also argues that “the ICA never decided” the
issue of whether the ICA had jurisdiction under Hawai#i law and
therefore, “there is nothing to correct.” However, as discussed
supra, a jurisdictional question can be raised at any point in
24
In Reply, Petitioners argue that they cannot have waived their
jurisdictional argument because “[t]he ICA’s improper exercise of appellate
jurisdiction is a grave error of law that may be raised at any time.” (Citing
Hous. Fin. & Dev. Corp. v. Castle, 79 Hawai#i 64, 76, 898 P.2d 576, 588
(1995).) Also, Petitioners reiterate that “[a]llowing only interlocutory
appeals of orders denying arbitration . . . allow[s] arbitration to proceed []
without unnecessary delay.” (Citing Gepaya v. State Farm Mut. Auto. Ins. Co.,
94 Hawai#i 362, 365, 14 P.3d 1043, 1046 (2000).)
25
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the proceedings. Therefore, whether or not the ICA’s opinion
contained error is not controlling; the lack of jurisdiction can
be raised for the first time before this court. Additionally,
Respondent’s assertion that the ICA “never decided th[e] issue”
is wrong. The ICA held that “[u]nder Hawai#i state law, an order
compelling arbitration is appealable under HRS § 641–1(a) and the
collateral order doctrine.” Unidev I, 2011 WL 4998491 at *4.
Finally, if a court lacks jurisdiction, “any judgment rendered in
that proceeding is invalid,” Bush, 76 Hawai#i at 133, and any
opinion in the case “is a nullity.” State by Kanbara v. Hilo
Metals Co., 53 Haw. 642, 644, 500 P.2d 743, 745 (1972) (“[T]he
district court lacked jurisdiction . . . and the district court's
judgment . . . is a nullity.”). Hence, Respondent’s claim that
the ICA’s opinion renders the issue of the ICA’s jurisdiction to
hear the case moot lacks merit, because if the ICA lacked
jurisdiction to hear the case, that opinion “is a nullity.” Id.
VIII.
A.
In HRS § 658A-28, which adopted the RUAA appeals
provision, the legislature expressly enumerated six circumstances
in which an interlocutory appeal may be taken from proceedings
related to arbitration. Although the statute specifically allows
for appeals from “[a]n order denying a motion to compel
arbitration,” it is silent as to the appealibility of orders
26
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granting a motion to compel arbitration. HRS § 658A-28 (emphasis
added). Under the canon of expressio unius est exclusio
alterius, “the mention of one thing implies the exclusion of
another.” Int’l Sav. and Loan Ass’n v. Wiig, 82 Hawai#i 197,
201, 921 P.2d 117, 212 (1996). However, this canon applies “only
where in the natural association of ideas the contrast between a
specific subject matter which is expressed and one which is not
mentioned leads to an inference that the latter was not intended
to be included within the statute.” Id.
There is a “natural association of ideas” between an
order denying a motion to compel arbitration and an order
granting a motion to compel arbitration, because both involve the
circuit court’s decision regarding a motion to compel
arbitration. Hence, the failure to include an order granting a
motion to compel arbitration in the list of appealable orders in
HRS § 658A-28 may suggest that the legislature did not intend to
allow such appeals. See, e.g., Chem-Ash, Inc. v. Arkansas Power
and Light Co., 751 S.W.2d 353, 354 (Ark. 1988) (interpreting an
identical statute and holding that “[c]learly, if the legislature
had intended to deny or delay arbitration by permitting an appeal
from an order compelling arbitration, it would have said so. The
act only states that an appeal can be taken from an order denying
an application to compel arbitration.”); Clark Cnty. v. Empire
Elec., Inc., 604 P.2d 352, 353 (Nev. 1980) (interpreting an
identical statute and holding that “the fact that the Legislature
27
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saw fit to specify in one code section the different orders and
judgment from which appeals may be taken clearly indicates, in
our opinion, an intention to restrict the appeals in such
proceeding to orders and judgment therein specified”).
However, HRS § 658A-28 and HRS § 641-1 are both
statutes regarding the courts’ jurisdiction to hear appeals. It
is well settled that “where there is a plainly irreconcilable
conflict between a general and a specific statute concerning the
same subject matter, the specific will be favored.” State v.
Hussein, 122 Hawai#i 495, 525, 229 P.3d 313, 343 (2010). If,
however, “the statutes simply overlap in their application,
effect will be given to both if possible, as repeal by
implication is disfavored.” Id. Clearly, HRS § 658A-28, which
addresses appealability in the limited context of arbitration, is
the specific statute, and HRS § 641-1, which addresses
appealability generally, is the general statute. Thus, should
the two statutes conflict, HRS § 658A-28 would control over HRS §
641-1.
Two statutes conflict where “it is not possible to give
effect to both.” Schnabel, 127 Hawai#i at 448, 279 P.3d at 1253
(2012). Under Swinerton, HRS § 641-1 permits appeals from orders
compelling arbitration, while, as discussed supra, HRS § 658A-28
may not. Thus, the two statutes may conflict if HRS § 658A-28
provides an exclusive enumeration of the issues related to
arbitration that may be appealed.
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B.
But nothing in the text of HRS § 658A-28 indicates that
its list of appealable orders is exclusive. To the contrary, the
plain meaning of the text demonstrates that HRS § 658A-28 may be
read in conjunction with the general appeals statute, HRS § 641-
1. See State v. Ribbel, 111 Hawai#i 426, 431, 142 P.3d 290, 296
(2006) (“Where the statutory language is plain and unambiguous,
our sole duty is to give effect to its plain and obvious
meaning.”). HRS § 658A-28 states that “an appeal may be taken
from” six different types of orders. HRS § 658A-28 (emphasis
added.) The word “may” is defined as “(1) to have the ability
to; (2) to have permission to; (3) to be free to.” Merriam
Webster’s Collegiate Dictionary 718-19 (10th ed. 1993). By
declaring that an appeal “may” be taken from the enumerated
statutes, then, the statute indicates that litigants “have
permission to,” inter alia, appeal the orders listed in HRS §
658A-28. There is no indication in the statutory language, then,
that the “permission” to appeal certain orders such as an order
denying a motion to compel arbitration precludes the appeal of an
order granting a motion to compel arbitration pursuant to HRS §
641-1. Therefore, “effect can be given to both” HRS § 658A-28
and HRS § 641-1. In other words, HRS § 658A-28 poses “no hurdle”
to an appeal under HRS § 641-1. See Gilliland, 904 P.2d at 78
(“[W]e view [the Uniform Arbitration Act (UAA) appeals provision]
29
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as no hurdle to [an appeal under the state’s final judgment
statute.”).25
C.
This interpretation of HRS § 658A-28 is consistent with
the approach followed in the majority of cases cited by
Petitioners and Respondent. As Respondent notes, several other
jurisdictions that have enacted either
the UAA or the RUAA permit appeals from orders compelling
arbitration. They view appeals statutes based on either the
UAA26 or the RUAA27 as non-exclusive, because those statutes
25
The ICA reached the same conclusion in Picardy, holding that “HRS
§ 641-1 provides additional authority for appeals, authorizing appeals to the
[ICA] from final judgments, orders, or decrees.” 2009 WL 4988294 at *1.
26
The UAA appeals section is virtually identical to the RUAA appeals
section. The UAA section governing appeals provides as follows:
§ 19 Appeals.
(a) An appeal may be taken from:
(1) An order denying a motion to compel
arbitration made under Section 2;
(2) An order granting a [motion] to stay
arbitration made under Section 2(b);
(3) An order confirming or denying confirmation
of an award;
(4) An order modifying or correcting an award;
(5) An order vacating an award without directing
a rehearing; or
(6) A judgment or decree entered pursuant to the
provisions of this act.
(b) An appeal under this section shall be taken as
from an order or a judgment in a civil action.
27
HRS § 658A-28 is adopted verbatim from the RUAA. The RUAA section
governing appeals provides as follows:
§ 28 Appeals.
(a) An appeal may be taken from:
30
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“lay[] no textual pretense to exclusivity in [their] application
to arbitration related appeals.” Gilliland, 904 P.2d at 77-78.
Rather, those courts treat the RUAA appeals provision as “no more
than a litany of orders -- all typically occurring in litigation
over arbitration -- which in addition to more mainstream rulings,
are to be treated as appealable.” Id. at 78 (emphasis added).28
Such jurisdictions also recognize that it would be fundamentally
unfair to “require a party who has not agreed to arbitrate a
particular dispute . . . to arbitrate it.” Kremer, 788 N.W. 2d
at 549.
Even in the majority of the decisions cited by
Petitioners, courts do not conclude that statutes based on the
UAA or RUAA are exclusive. Instead, those decisions conclude
(1) An order denying a [motion] to compel
arbitration;
(2) An order granting a [motion] to stay
arbitration;
(3) An order confirming or denying confirmation
of an award;
(4) An order modifying or correcting an award;
(5) An order vacating an award without directing
a rehearing; or
(6) A final judgment entered pursuant to this
[Act].
(b) An appeal under this section shall be taken as
from an order or a judgment in a civil action.
28
Other jurisdictions that permit appeals from orders compelling
arbitration based on an interpretation of similar provisions as being non-
exclusive are Kremer, 788 N.W.2d at 547-48; Wein v. Morris, 944 A.2d 642, 651
(N.J. 2008); and Collier v. Pennington, 69 P.3d 238, 240 (N.M. App. 2003).
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that (1) orders compelling arbitration are not listed under the
RUAA appeals provision, and (2) that the appealability of orders
compelling arbitration “must also be examined” under that
jurisdiction’s general appeals statute. Chem-Ash, 751 S.W.2d at
85 (holding that “[c]learly, if the legislature had intended to
deny or delay arbitration by permitting an appeal from an order
compelling arbitration, it would have said so,” but also holding
that “[e]ven so, the trial court's order must also be examined in
light of Rule 2(a) of the Arkansas Rules of Appellate Procedure,
which governs the appealability of lower court orders.” (emphasis
added)).29 Consequently, even the states that hold orders
29
Other cases cited by Petitioners that address both the appeals
provision in the UAA or RUAA and that jurisdiction’s general appeals statute
before holding that orders compelling arbitration are not appealable are
Powell v. Cannon, 179 P.3d 799, 803, 805-806 (Utah 2008) (holding that orders
granting arbitration could not be appealed under the RUAA’s appeals provision
only after holding that “an order compelling arbitration and staying
litigation is not final” under Utah’s final judgment statute); Harris v. State
Farm Mut. Auto. Ins. Co., 283 So.2d 147, 148-49 (Fla. App. 1973) (holding that
an “order granting a motion or application to compel arbitration is
non-appealable,” because it is not listed in the UAA arbitration provision and
because “it is not a final order”); Fayette Cnty. Farm Bureau Fed’n v. Martin,
758 S.W.2d 713 (Ky. App. 1988) (holding that an order compelling arbitration
is not appealable because it is not listed in the UAA statute and because it
is not final); Maleski v. Mutual Fire, Marine, and Inland Ins. Co., 534 A.2d
1143, 1145-46) (1993) (holding that an order compelling arbitration is not
immediately appealable because it is not final and because it is not listed in
the UAA appeals provision); T.R. Mills Contractors, Inc. v. WRH Enterprises,
LLC, 93 S.W. 3d 861, 864-65 (2002) (holding that the UAA appeals statute is a
“limited exception” to Tennessee’s general appeals statute); cf. Ginsburg v.
Pritchard, 2012 WL 4078421 (N.C. App. Sept. 18, 2012) (unpublished) (“[O]ur
Court has consistently held that ‘an order compelling the parties to arbitrate
is an interlocutory order.’”); Teufel Const. Co. v. American Aribtration
Ass’n, 472 P.2d 572, 573 (Wash. App. 1970) (holding that orders compelling
arbitration are not appealable not because of the UAA appeals provision, but
because “[i]t has been definitely settled by the Supreme Court of this state
that an order compelling arbitration is not final and therefore is not
appealable.”).
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compelling arbitration are not appealable recognize that the
RUAA’s appeals provision is non-exclusive.30
Therefore, in consonance with the decisions of the
majority of jurisdictions that have adopted either the UAA or
RUAA’s appeals provision, HRS § 658A-28 represents a non-
exclusive list of appealable orders. In that regard, HRS § 641-
1, Hawai#i’s final judgment statute, allows appeals from “all
30
At oral argument, Petitioners stated that “forty-nine”
jurisdictions have adopted the UAA or RUAA, and of those jurisdictions “about
forty-one” do not allow appeals from orders compelling arbitration.
Petitioner cited as authority the American Law Reports annotation on orders
compelling arbitration. See Annotation, Appealability of State Court’s Order
or Decree Compelling or Refusing to Compel Arbitration, 6 A.L.R.4th 652
(Originally published in 1981). Petitioner apparently was citing the
Prefatory Note to the RUAA, which stated that “forty-nine jurisdictions have
arbitration statutes, 35 of those have adopted the UAA and 14 have adopted
substantially similar legislation.” Prefatory Note to the RUAA.
But, confusion apparently exists as to which jurisdictions have
not adopted the UAA. Compare Birmingham News Co. v. Horn, 901 So.2d 27, 45
(“Presumably Alabama is the excluded 50th jurisdiction, it being self-evident
that the [Alabama Arbitration Act] is in no wise [sic] ‘substantially similar’
to the UAA”) with Committee on Arbitration, Association of the Bar of the City
of New York, et al. Report on the Revised Uniform Arbitration Act (“New York
is the one state that did not formally adopt the UAA.”); see also Stephen
Wills Murphy, Note, Judicial Review of Arbitration Awards Under State Law, 96
Va. L. Rev. 887, 891 n.15 (stating that Alabama, New Hampshire, and West
Virginia “have adopted arbitration statutes whose systems of judicial review
are not based on the Federal or Uniform Acts”). Moreover, even the
jurisdictions with “substantially similar legislation” often utilize differing
appeals provisions. For example, nine states have “adopted arbitration
statutes based on the [FAA].” Murphy, Judicial Review of Arbitration Awards
Under State Law, 96 Va. L. Rev. at 891. The FAA’s appeals provision contains
explicit language regarding orders compelling arbitration. Consequently,
Petitioner’s statement does not clarify how many states have adopted statutes
similar to HRS § 658A-28.
Second, in the ALR article identified by Petitioner, decisions
from twenty UAA or RUAA states (Arizona, Arkansas, Colorado, Florida,
Kentucky, Maine, Massachusetts, Maryland, Minnesota, Missouri, Nevada, North
Carolina, Oregon, Pennsylvania, South Carolina, Texas, Utah, Virginia,
Washington, and Wyoming) are cited as refusing to allow appeals from orders
compelling arbitration. 6 A.L.R.4th at § 3[b]-3[c]. Of those twenty states,
decisions from nineteen states (all but Nevada) are cited as “based in whole
or in part upon the consideration that the particular order lacked such
finality as to fall within the purview of a statute or rule of practice
authorizing appeals from final orders or judgments.” Id. at § 3[b] (emphasis
added). Hence, even under the authority cited by Petitioner, the clear
majority of states do not consider the UAA or RUAA appeals provision to be
exclusive.
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final judgments, orders or decrees.” To reiterate, under the
collateral order doctrine, “orders . . . compelling arbitration
are appealable final orders.” Swinerton, 68 Haw. at 107, 705
P.2d at 35 (emphasis added). In sum, after Hawai#i’s adoption of
HRS § 658A-28, orders compelling arbitration remain appealable
under Hawai#i’s final judgment statute, HRS § 641-1. Gilliland,
904 P.2d at 78. Thus, the ICA’s holding that it had jurisdiction
to hear Respondent’s appeal was not in error.
D.
The Commentary to the RUAA does not address the RUAA
section on appeals. The Prefatory Note to the RUAA does state
that the RUAA “revis[ed] the original [UAA] in light of the
increasing use of arbitration, the greater complexity of many
disputes resolved by arbitration, and the developments of the law
in this area.” Prefatory Note to the RUAA. In other words, the
RUAA is a “revision of the UAA.” Id. The Prefatory Note to the
original UAA explained that “[t]he section on Appeals is intended
to remove doubts as to what orders are appealable and to limit
appeals prior to judgment as to those instances where the element
of finality is present.” Prefatory Note to the UAA.31
It had been held that in order to ensure that the
appeals section of the UAA has the intended effect of “remov[ing]
doubts as to what orders are appealable,” that section must be
read as an exclusive list of appealable orders. See S.
31
Neither the UAA nor RUAA establishes the weight to be given to
either the Commentary or the Prefatory Note in interpreting those acts.
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California Edison Co. v. Peabody Western Coal Co., 977 P.2d 769,
774 (Ariz. 1999) (holding that the Prefatory Note indicates that
the intent of the UAA drafters was that “interlocutory orders,
including those compelling arbitration are not appealable.”).
If orders related to arbitration could also be appealed via a
general appeals statute, such as HRS § 641-1, then “doubts” would
remain as to the appealability of all orders not explicitly
identified in the RUAA.
As discussed supra, however, the plain language of HRS
§ 658A-28, i.e. “may,” indicates that the statute’s list of
appealable orders was not exclusive. “Departure from the plain
and unambiguous language of the statute cannot be justified
without a clear showing that the legislature intended some other
meaning would be given [to] the language.” Singleton v. Liquor
Comm’n, Cnty. of Hawai#i, 111 Hawai#i 234, 244, 140 P.3d 1014,
1024 (2006). The language in the Prefatory Note to the UAA was
not included in either the model RUAA or Hawai#i’s adoption of
the RUAA. There is no indication that the legislature either
considered the Prefatory Note to the UAA while adopting HRS §
658A-28 or intended it to control the interpretation of HRS §
658A-28 under the RUAA. Therefore, the Prefatory Note to the UAA
does not constitute a “clear showing” that the legislature
intended to depart from the plain meaning of HRS § 658A-28.
Moreover, this court’s decision in Swinerton is not
inconsistent with the Prefatory Note to the UAA, inasmuch as the
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Note emphasized that the purpose of the appeals provision was to
“limit appeals prior to judgment as to those instances where the
element of finality is present.” (Emphasis added.) Swinerton
explained that “what determines the finality of an order . . . is
the nature and effect of the order.” 68 Haw at 105, 705 P.3d at
33. Regarding orders compelling arbitration, Swinerton observed
that “whether [] alleged contractual violations should be
presented to an arbitrator . . . is a matter wholly separate from
the merits of plaintiff’s cause.” Id. at 106, 705 P.3d at 34
(internal quotation marks and punctuation omitted). Hence, a
ruling on an motion to compel arbitration “is a final disposition
of the claimed right.” Id. (emphasis added). This court
therefore determined that “orders . . . compelling arbitration
are [immediately] appealable,” i.e., that under HRS § 641-1, the
“nature and effect” of orders compelling arbitration demonstrated
their finality. Id. Thus, an “element of finality is present,”
Prefatory Note to the UAA, in orders compelling arbitration.
E.
Finally, Petitioners argue pursuant to HRS § 1-24, that
this court should interpret HRS § 658A-28 in a manner that is
uniform with the other states adopting RUAA. (Internal quotation
marks and brackets omitted). First, as discussed supra, the
majority of UAA or RUAA states to address this issue apparently
recognize that the appeals provision of both model statutes are
not exclusive. Hence, interpreting HRS § 658A-28 as a non-
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exclusive list is consistent with the practices of other
jurisdictions. Second, other UAA or RUAA states are not uniform
in disallowing appeals from orders compelling arbitration.
Decisions from several UAA or RUAA states, including Nebraska,
New Jersey, Oklahoma, and New Mexico permit appeals from orders
compelling arbitration. Given conflicting interpretations of the
UAA or RUAA appeals provision in other states, HRS § 658A-28 is
not being interpreted in a non-uniform manner.
VIII.
A.
Regarding the second Application question, Petitioners
first contend that the ICA erred in relying on In re Kinoshita,
287 F.2d 951, 952-53 (2d Cir. 1961), because “the majority of the
federal circuits have [] rejected Kinoshita’s reasoning” that the
phrase “arising under” should be interpreted narrowly. In its
Response, Respondent maintains that, the ICA “noted the lack of
consistency by the [federal c]ourts” on this issue, and the ICA
“did not adopt the minority position” because it “expressly
stated that it was not deciding that issue.” (Emphasis in
original.)
The language in the DSA states that “any dispute
arising under the terms of the agreement” is subject to
arbitration. Acknowledging the split in federal authority
interpreting “arising under,” the ICA stated that “[w]e need not
decide that particular issue.” Unidev II, 128 Hawai#i at 399,
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289 P.3d at 1035. The ICA determined that because the provision
also contained the phrase “the terms of the agreement,” “the
parties indicated their intent to require arbitration when a
dispute implicates or involves the terms of the DSA.” Id.
(emphasis in original). The ICA opinion thus focused on the
words “the terms of this agreement” and not the phrase “arising
under.” Id. Hence, the ICA did not decide whether the phrase
“arising under” should be construed narrowly or broadly.
B.
As to their second argument regarding the second
question, Petitioners contend that “[c]ourts that examine nearly
identical arbitration clauses [to the arbitration clause at issue
in this case] refuse to characterize the controlling language as
being narrow.” Petitioners assert that in Goldberg v. Focus
Affiliates, Inc., 152 F. Supp. 2d 978, 980-82 (N.D. Ill. 2001),
“the court held that a clause requiring arbitration for claims
‘arising under the terms of this Agreement’ was broad enough to
encompass fraudulent inducement and negligent and fraudulent
misrepresentation claims –- the same claims [Respondent] asserts
against [Petitioners].” (Emphasis added.) Petitioners also cite
Gregory v. Electro-Mech. Corp., 83 F.3d 382, 385 (11th Cir.
1996), and Campos v. Campos Family Farms, LLC, 2012 WL 2090303
(E.D. Cal. June 8, 2012), as supporting arbitration in this case.
According to Petitioners, in Gregory, the “Eleventh
Circuit held that fraudulent inducement claims were within the
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scope of an agreement requiring arbitration of ‘any dispute . . .
which may arise hereunder.’” Further, Petitioners contend that
in Campos, which dealt with an agreement “requiring arbitration
for ‘any and all disputes over the terms and implementation of
this Agreement,’” the court characterized the arbitration
agreement as “broad in scope.” (Emphasis added.) Consequently,
Petitioners argue that the DSA’s arbitration provision should be
construed “broadly.”
In response, Respondent reiterates that under Cape
Flattery Ltd., Mediterranean Enterprises, and Tracer Research,
the arbitration agreement at issue in this case is “relatively
narrow.” Respondent also cites Hamada v. Westcott, 102 Hawai#i
210, 215, 74 P.3d 33, 38 (2003) as holding that an “agreement to
arbitrate which contained ‘arising under’ language did not permit
[the] arbitrator to rule on attorney[’s] fees and costs.”32
C.
Under Hawai#i law, “any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration.”
Lee v. Heftel, 81 Hawai#i 1, 4, 911 P.2d 721, 724 (1996).
32
In Hamada, 102 Hawai#i at 215, 74 P.3d at 38, this court held that
an “agreement to arbitrate which contained ‘arising under’ language did not
permit [an] arbitrator to rule on attorney[’s] fees and costs.” Hamada
excluded the issue of attorney’s fees and costs from the scope of an
arbitration agreement because in another contractual provision related to
early termination, the parties explicitly stated that the terminating party
would be liable for the payment of attorney’s fees. Hamada, 102 Hawai#i at
212, 74 P.3d at 35. This court therefore concluded that attorney’s fees were
not within the scope of the arbitration agreement because “[w]here the parties
intended to provide for attorney’s fees and costs in the purchase agreement,
they said so.” Id. at 215, 74 P.3d at 38. Hamada is not applicable to the
instant case, where no provisions in the DSA beyond the arbitration agreement
itself are relevant to the breadth of the arbitration agreement.
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However, “the mere existence of an arbitration agreement does not
mean that the parties must submit to an arbitrator disputes which
are outside the scope of the arbitration agreement.” Hawai#i
Med. Ass’n, 113 Hawai#i at 92, 148 P.3d at 1194 (citation
omitted). “What issues, if any, are beyond the scope of a
contractual agreement to arbitrate depends on the wording of the
contractual agreement to arbitrate.” Id. (citations omitted)
(emphasis in original). An arbitration agreement is interpreted
like a contract, and “as with any contract, the parties
intentions control.” Heftel, 81 Hawai#i at 4, 911 P.2d at 724.
Further, “we have long expressed our disapproval of interpreting
a contract such that any provision be rendered meaningless.”
Stanford Carr Dev. Corp. v. Unity House, 111 Hawai#i 286, 297,
141 P.3d 459, 470 (2006).
Those courts deciding that the phrase “arising under”
should be interpreted narrowly emphasize that the choice to use
“arising under” instead of language such as “arising out of or in
relation to” must be meaningful. See Mediterranean Enterprises,
708 F.2d at 1464. For example, in construing the phrase “arising
under” as narrow, the Ninth Circuit stated that “[t]he standard
phrase suggested in the U.S.-Korean Commercial Arbitration
Agreement contains the phrase “out of or in relation to or in
connection with the contract, or for the breach thereof.” Id.
Because the agreement before that court excluded much of that
language, and referred only to “any disputes arising hereunder,”
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the court reasoned that “[w]e have no difficulty finding that
‘arising hereunder’ is intended to cover a much narrower scope of
disputes, i.e., only those relating to interpretation and
performance of the contract.” Id.; see also Kinoshita, 287 F.2d
at 953 (holding that the parties choice to require arbitration
for disputes which “arise under” a contract, when the standard
language was “arising out of or relating to” demonstrated that
the parties intended the agreement to be narrow).
In contrast, the majority of federal courts conclude
that the policy favoring arbitration requires arbitration
provisions containing “general language,” such as the language at
issue in the instant case, be construed broadly. Sweet Dreams
Unlimited, Inc. v. Dial-A-Mattress Int’l, Ltd., 1 F.3d 639, 642-
43 (7th Cir. 1993). In Sweet Dreams Unlimited, the arbitration
clause at issue provided that “any disputes arising out of the
agreement” shall be settled through arbitration. The Seventh
Circuit ruled that “arising out of” and “arising under” both
constituted “general language” authorizing arbitration.
Therefore, should parties wish to exempt specific issues from
arbitration, they should use “specific language to identify the
types of disputes that are not subject to arbitration, thereby
limiting the reach of phrases such as ‘arising out of’ or
‘arising under.’” Id. at 643 (emphasis in original). Because
the parties in Sweet Dreams Unlimited had “not taken any steps to
narrow the reach of the [] arbitration clause,” the Seventh
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Circuit interpreted the clause’s scope broadly, and held that it
covered allegations that the contract was void due to illegality
and allegations of fraud or misrepresentation that occurred
“after the agreement expired.” Id.
Several other courts have also interpreted arbitration
provisions containing “arising under” language as “general”
arbitration clauses whose scope is broad. For example, in PRM
Energy Systems, the arbitration clause at issue “cover[ed] ‘all
disputes arising under’ the agreement.” 592 F.3d at 836. The
Eighth Circuit explained that this arbitration clause “includes
no limiting language and is generally broad in scope.” Id. at
837. It was concluded the “arising under” arbitration clause
thus applied to tort claims including fraud, misappropriation of
trade secrets, unfair competition, and tortious interference.
Id. at 832, 837; cf. Heftel, 81 Hawai#i at 2, 4, 911 P.2d at 722,
724 (concluding that an arbitration clause covering “any dispute
. . . [that] arises out of this [contract]” was a “broad
arbitration clause”).
Under the circumstances of this case, the reasoning of
the federal courts in construing similar arbitration clauses
broadly is persuasive. Respectfully, the ICA’s interpretation of
the arbitration provision’s scope, i.e., that the clause only
mandates arbitration for claims that involve “construction or
interpretation of the DSA’s terms,” appears unnecessarily narrow.
We conclude that the arbitration clause in the instant case
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constitutes a “general” arbitration clause. As discussed infra,
this application of the arbitration clause in the DSA covers the
claims and counterclaims raised by the parties in the instant
case.
Moreover, as in Sweet Dreams Unlimted and PRM Energy,
the general arbitration clause contained “no limiting language”
that could have narrowed its scope. PRM Energy, 592 F.3d at 837.
“[W]e [] look to the language of the arbitration clause to
determine whether [an] underlying dispute . . . is arbitrable.”
Koolau Radiology, Inc. v. Queen’s Medical Center, 73 Haw. 433,
447, 834 P.2d 1924, 1301 (1992); see also Rainbow Chevrolet, Inc.
v. Asahi Jyuken (USA), Inc., 78 Hawai#i 107, 113, 890 P.2d 694,
700 (App. 1995), superseded by statute as stated in, Ueoka v.
Szymanski, 107 Hawai#i 386, 114 P.3d 892 (2005) (“What issues, if
any, are beyond the scope of a contractual agreement to arbitrate
depends on the wording of the contractual agreement to
arbitrate.”). In this case, the arbitration clause employed
general language. Thus, it may be inferred from the clause that
the parties did not intend to restrict the reach of the
arbitration clause simply to claims involving construction or
arbitration of the terms of the agreement. Had the parties
intended to restrict arbitration to issues related to
interpretation of the DSA’s terms only, as the ICA suggests, it
would have been a simple matter to draft unambiguous language to
effectuate that intent. For example, the parties could have
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provided that arbitration was limited to disputes regarding
construction or interpretation of the DSA. The failure of the
parties to unambiguously limit the arbitrability of disputes
suggests that they intended a longer reach for the arbitration
clauses. Sweet Dreams Unlimited, 1 F.3d at 643. Thus,
respectfully, the ICA erred in concluding that the scope of the
arbitration agreement was limited to “claims that involve
construction or interpretation of the DSA’s terms.” Unidev II,
128 Hawai#i at 399, 289 P.3d at 1035.
IX.
A.
As to the third question raised in the Application,
Petitioners argue that all of Respondent’s claims and
Petitioners’ counterclaims are subject to arbitration. Whether a
claim falls within the scope of an arbitration agreement turns on
the factual allegations in the complaint. See Heftel, 81 Hawai#i
at 4, 911 P.2d at 724 (examining the plaintiff’s “general
allegations” to determine if a claim was arbitrable). There are
five factual bases alleged for Respondent’s claims of false
claims, unfair and deceptive practices, fraudulent inducement,
intentional misrepresentation, and negligent misrepresentation.
They are that (1) Petitioners submitted invoices that demanded
payment for services for which Petitioner had already received
payment, (2) Petitioners submitted invoices which misrepresented
that funds would be used to pay contractors, (3) Petitioners
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submitted invoices that Respondent was not required to pay, (4)
Petitioners made misrepresentations to induce Respondent to
provide funding to the Project, and (5) Petitioners made
misrepresentations to induce Respondent to award the Project to
Petitioners.
As to (1), (2), and (3), the invoices that Respondent
objects to all requested payment for work allegedly performed on
behalf of the project. Thus, the invoices that Respondent
alleges are fraudulent are covered by the general language
referring to disputes arising under the DSA inasmuch as the
payments involved Petitioners’ obligation to develop the Project
for Respondent.
Similarly, as to (4), Respondents allege that the
purpose of Petitioners’ misrepresentations was to obtain further
funding for the Project. Because the contractual relationship
created by the DSA between Petitioners and Respondent initiated
the development of the Project, these allegations also arose
under the DSA.
As to (5), Petitioner claims that the contract itself
was fraudulently induced. In Heftel, this court concluded that
“a broad arbitration clause will be held to encompass arbitration
of the claim that the contract itself was induced by fraud.” 81
Hawai#i at 4, 911 P.2d at 724. However, this court limited its
holding to cases “where no claim is made that fraud was directed
to the arbitration clause itself.” Heftel, 81 Hawai#i at 4, 911
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P.2d at 724. In the instant case, as in Heftel, Respondent’s
“general allegations were based on fraud in the inducement of the
contract as a whole, rather than fraud in the inducement of the
arbitration clause.” Id. Hence, the factual allegations that
Petitioners’ made misrepresentations to induce Respondent to
award them the Project also fall within the scope of the
arbitration agreement.
Finally, for its negligence claim in its first
complaint, Respondent alleged that Petitioners failed to abide by
the terms of the DSA, which required Petitioners to obtain prior
approval for certain consultant contracts and their expenses. In
other words, Respondent alleges that Petitioners did not meet the
contractual obligations set forth in the DSA. Thus, as the ICA
recognized, this allegation arose under the DSA.
As to Petitioners’ counterclaims, Petitioners allege
that (1) WWH breached the DSA and ADSA, (2) Respondent and WWH
were unjustly enriched because they did not pay Petitioners for
the benefits of their services, (3) Respondent interfered with
the contract between WWH and Petitioners, and (4) WWH
fraudulently transferred land to Respondent to avoid paying
Petitioners what they were owed under the ADSA. All four claims
relate to the relationship between WWH and Petitioners. The DSA
foresaw that Respondent would transfer the Property to WWH, and
that WWH would work with Petitioners to complete the Project. As
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the court recognized, then, Petitioners’ counterclaims “arise out
of the relationship between the parties” created by the DSA.
X.
Thus, Respondent’s claims and Petitioners’
counterclaims fall within the scope of the DSA arbitration
provision, and are subject to arbitration. To the extent that
the ICA held otherwise, respectfully, the ICA erred. Based on
the foregoing, the ICA’s October 17, 2011, Order Denying
September 19, 2011 Motion to Dismiss Appeal for Lack of
Jurisdiction is affirmed. In light of the reasons stated herein,
the ICA’s August 31, 2012 opinion and October 18, 2012 judgment
on appeal are vacated in part and affirmed in part. The case is
remanded to the court for further proceedings consistent with
this opinion.
Paul Alston, /s/ Mark E. Recktenwald
Maren L. Calvert,
and Claire Wong Black, /s/ Paula A. Nakayama
for petitioner
/s/ Simeon R. Acoba, Jr.
Katherine A. Garson,
Laureen L. Martin, /s/ Sabrina S. McKenna
and Joseph K. Kamelamela,
for respondent /s/ Richard W. Pollack
47
County of Hawaii v. UNIDEV, LLC.Â
Court: Hawaii Supreme Court
Date filed: 2013-05-22
Citations: 129 Haw. 378, 301 P.3d 588
Copy CitationsCombined Opinion