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NO. 2884O
IN THE SUPREME COURT OF THE STATE OF HAWAIT
KONA VILLAGE REALTY, INC.; BRENDA TSCHIDA; AND
ROBERT TSCHIDA, Respondents/Plaintiffs-Appellees§
VS.
SUNSTONE REALTY PARTNERS, XIV, LLC; and SUNSTONE
REALTY PARTNERS, IX, LLC, Petitioners/Defendants-Appellants,
and `5 is
SUNSTONE REALTY PARTNERS, LLC; SUNSTONE REALTY, LLC;
CURTIS D. DEWEESE, an indiVidual; MICHELLE MATUSEK, an
individual; RICK WILSON, an individual, Respondents/
Defendants-Appellees.
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CIV. NO. 05-l-88K))
ORDER AFFIRMING THE JUDGMENT OF THE INTERMEDIATE
COURT OF APPEALS, FILED JANUARY 25, 20lO
(By: Moon, C.J., Nakayama and Duffy, JJ.;
Acoba, J., dissenting, with whom Circuit Judge Crandall,
in place of Recktenwald, J., recused, joins)
Petitioners/defendants-appellants Sunstone Realty
Partners, XIV, LLC and Sunstone Realty Partners, IX, LLC
[hereinafter, collectively, Sunstone] petitioned this court to
review the Intermediate Court of Appeals' (ICA) January 25, 20l0
judgment on appeal, entered pursuant to its June 29, 2009
published opinion. Therein, the ICA affirmed the Circuit Court
of the Third Circuit's October 8, 2007 order granting
respondents/plaintiffs-appellees Kona village Realty, Inc.,
Brenda Tschida, and Robert Tschida [hereinafter, collectively,
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Kona Village]'s motion to confirm arbitration award and denying
Sunstone's motion to vacate or correct the arbitration award.
Upon careful review of the record and the papers
submitted by the parties and having given due consideration to
the arguments advanced and the issues raised,
IT IS HEREBY ORDERED that the ICA'S January 25, 2010
judgment on appeal is affirmed based on the plain language of
HawaFi Revised Statutes (HRS) § 658A~2l(b) (Supp. 2006) and
public policy, as discussed in§;§.
HRS § 658A-2l(b) provides that “[a]n arbitrator may
award reasonable attorney's fees and other reasonable expenses of
arbitration if such an award is authorized by law in a civil
action involving the same claim or by the agreement of the
parties to the arbitration proceeding.” (Emphases added.) The
use of the disjunctive “or” clearly presents two alternatives
under which an arbitrator is authorized to award attorneys' fees
in a Chapter 658A arbitration proceeding, i4e4, (l) under the law
applicable in a civil action involving the same claim Q;
(2) pursuant to an agreement of the parties. Thus, the plain
language of the statute dictates that an examination of both
possibilities is required.
In the case at bar, an award of attorneys' fees is
authorized under bQ;h (l) the law applicable in a civil action of
the same claim and (2) the agreement of the parties. Indeed, the
law applicable here, i;§4, HRS § 607~l4 (Supp. 2009), authorizes
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an award of attorneys' fees in actions based on assumpsit, but
limits the amount of the fees to 25% of the judgment, and the
existing party-agreement authorizes the arbitrator to award
attorneys' fees “in such amounts as the majority of the
arbitrators shall determine at the time of the award.” Based on
the specific authorization in the parties’ agreement, the award
of attorneys' fees was valid and proper, notwithstanding the 25%
fee limitation set forth in HRS § 607-l4, and is supported by
express public policy associated with arbitration proceedings.
This court has repeatedly recognized the policy that
arbitration is meant to be “more expeditious and inexpensive”
than traditional court processes. See, e.g., Mars Constructors,
lnc. v. Tropical Enterprises, Ltd., 51 Haw. 332. 334, 460 P.2d
3l7, 3l8 (l969) (“It is generally considered that parties resort
to arbitration to settle disputes more expeditiously and
inexpensively than by a court action[.]”). However, this court
has also recognized: (l) the freedom and autonomy of parties to
enter into an agreement for arbitration; (2) their right to
provide the scope of the arbitrators' authority within such
agreements; and (3) the broad discretion afforded to, and the
limited judicial review of, the arbitrator in rendering awards.
In other words, “the scope of an arbitrators' authority is
determined by agreement of the parties.” Tatibouet v. Ellsworth,
99 HawaiH_226, 235, 54 P.3d 397, 406 (2002); see also, Clawson
v. Habilitat, InC., 7l Haw. 76, 78, 783 P.2d l230, l23l (l989).
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In reviewing arbitration awards, this court has stated:
[B]ecause of the legislative policy to encourage arbitration
and thereby discourage litigation, arbitrators have broad
discretion in resolving the dispute. Upon submission of an
issue, the arbitrator has authority to determine the entire
question, including the legal construction of terms of a
contract or lease, as well as the disputed facts. In fact,
where the parties agree to arbitrate, they thereby assume
all the hazards of the arbitration process, including the
risk that the arbitrators may make mistakes in the
application of law and in their findings of fact,
Schmidt v. Pacific Benefit Srvs., Inc., ll3 Hawaid.l6l, l65-66,
l50 P.3d 8l0, 8l4-l5 (2006) (citing Daiichi Hawafi Real Estate
Corp. v. Lichter, 103 HawaiH.325, 336, 82 P.3d 4ll, 422 (2003))
(emphases added). Here, the parties specifically agreed that the
arbitrators were authorized to award attorneys' fees “in such
amounts as the majority of the arbitrators shall determine at the
time of the award.” In so doing, the parties assumed the
“hazards” of the arbitration process, including an award of
attorneys' fees greater than that provided by statute.
HRS Chapter 658A is based upon the Uniform Arbitration
Act (UAA) and was examined by the ICA in In re Arbitration
Between United Public Workers, AFSCME, Local 646, ll9 HawaiH
20l, l94 P.3d ll63 (App, 2008). Therein, the ICA recognized in
part that:
First, arbitration is a consensual process in which autonomy
of the parties who enter into arbitration agreements should
be given primary consideration, so long as their agreements
conform to notions of fundamental fairness. Second, the
underlying reason many parties choose arbitration is the
relative speed, lower cost, and greater efficiency of the
process. The law should take these factors, where
applicable, into account. Finally, in most cases[,] parties
intend the decisions of arbitrators to be final with minimal
court involvement unless there is clear unfairness or a
denial of justice. This contractual nature of arbitration
means that the provision to vacate awards in Section 23 fof
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the UAA] is limited. This is so even where an arbitrator
may award attorneys' fees, punitive damages or other
exemplary relief under Section 21 [of the UAA].
;d; at 210, 194 P.3d at 1172 (citing Prefatory Note, 7 U.L.A.
2-3) (emphases added) (ellipses omitted). The recognized
autonomy of parties to enter into an arbitration agreement (which
can include a provision regarding attorneys' fees) is directly
correlated to and stems from the constitutionally protected right
of freedom to contract. In recognizing such a right, this court
has stated:
In general, parties may contract as they wish, and courts
will enforce their agreements without passing on their
substance. The principle of freedom of contract is itself
rooted in the notion that it is in the public interest to
recognize that individuals have broad powers to order their
own affairs by making legally enforceable promises.
City Exp., Inc. v. Express Partners, 87 HawaiH_466, 470, 959
P.2d 836, 840 (l998) (citing Restatement of Contracts (Second)
Introductory Note to Chapter 8 (1979)); see also Ass'n of
Apartment Owners of Newtown Meadows ex rel. its Bd. of Dirs. v.
venture 15, Inc., 115 HawaiH_232, 167 P.3d 225 (2007)
(recognizing the freedom to contract in the context of
recoverable damages for negligence and expressing that
“[c]ontracting parties are free to adjust their respective
obligations to satisfy their mutual expectations”) (citation
omitted)). By its plain and express language that an award of
attorneys' fees can be authorized by agreement of the parties,
HRS § 658A-21(b) clearly embodies the policy that parties are
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free to enter into arbitration agreements and, in general, govern
the applicable terms.
Furthermore, the UAA's commentary to Section 21(b) -- a
provision identical to HRS § 658A-21(b) -- states:
(l) “Section 21(b) authorizes arbitrators to award
reasonable attorneys' fees and other reasonable expenses of
'arbitration where such would be allowed by law in a civil
action” and (2) “in addition, parties may provide for the
remedy of attorneys' fees and other expenses in their
agreement even if not otherwise authorized by law.”
Such commentary -- specifically, the provision that attorneys'
fees may be agreed upon “even if not otherwise authorized by law”
-- confirms that parties can permissibly contract for attorneys'
fees that are outside the purview of applicable law. The
commentary additionally confirms that attorneys' fees need not be
authorized by law to be provided for in a party agreement. As
such, Section 21(b) of the UAA -- like HRS § 658A-21(b) -- also
embodies the principle that parties have the freedom to contract,
i;§4, they have the right to set forth or provide for fees in an
arbitration agreement “even if” such remedy is not “otherwise
authorized” by a provision of law.
Finally, the existence of statutory language in HRS
§ 607-14 that limits the award of attorneys' fees in court
actions for assumpsit draws attention to the fact that the
legislature could have injected similar language into Chapter 658
generally, or HRS § 658A-21(b) specifically, but declined to do
so. In other words, the fact that HRS § 607-14 specifically
limits awards to 25% of the judgment in assumpsit actions and
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that no such language is included in HRS § 658A-21(b)
demonstrates that the legislature did not intend a similar
limitation on arbitration awards. At the very least, the
legislature has not evinced an intent one way or the other with
respect to arbitration proceedings that decide actions in
assumpsit, As stated by the ICA on direct appeal, “it is not the
role of this court to establish a new rule of law mandating a cap
on attorneys' fees awarded in arbitrations. This is a matter for
legislative action or the parties’ own agreements.” See Kona
Village, 121 Hawaid.110, 116, 214 P.3d 1100, 1106 (App. 2009).
Consequently, this court is left with the plain language of the
statute and its related commentary from the UAA itself, which, as
indicated §up;a, establish that awards of attorneys' fees can be
valid and authorized based on a party agreement, even if the
resulting award exceeds the “25% of the judgment” limitation
included in HRS § 607-14.
DATED= Honolulu, Hawai‘i, August 12, 2010_
Michael L. Lam and Margaret E.
Parks (of Case Lombardi &
Pettit), for petitioners/ § h
defendants-appellants tindall Eh`?\M4QH¢1LLfWW
Francis L. Jung (of Jung & Q@W;£_£w&H'%V
Vassar), for respondents/
plaintiffs-appellees