Title: DFS Group L.P. v. Paiea Properties. Concurring Opinion by C.J. Moon, with whom J. Levinson joins [pdf]. S.Ct. Order Dismissing “Real Party in Interest Alston Hunt Floyd & Ings Motion for Partial Reconsideration of Concurring Opinion of Chief Justice Moon, filed April 3, 2006, filed 05/03/2006 [pdf], 110 Haw. 386. Statement of Position [pdf]. S.Ct. Order Denying Motion for Depublication, filed 06/21/2006 [pdf].

State: hawaii

Issuer: Hawaii Supreme Court

Document:

LAW LIBRARY

 

** FOR PUBLICATION.

IN THE SUPREME COURT OF THE STATE OF HAWAI'I

 

00:

ee

DFS GROUP L.P., a Delaware limited partnership, dba Hawaiian King
‘Candies, Plaintff-Appellee

 

PAIEA PROPERTIES, a Hawai'i Limited partnership,
Defendant-Appellant

~ aif 9002

No, 25662

 

aa

REQUEST FOR ATTORNEYS’ FEES ON APPEAL
(CIV. NO, 02-1-2012) Z

22eny

 

APRIL 3, 2006
MOON, C.J., LEVINSON, NAKAYAMA, AND ACOBA, JJ.

AND CIRCUIT JUDGE POLLACK, ASSIGNED BY REASON OF VACANCY,
Moow, C.J.» CONCURRING SEPARATELY, WITH WHOM LEVINSON, J., JOINS
OPINION OF THE COURT BY NAKAYAMA, J.

Plaintiff-appellee DFS Group L.P., dba Hawaiian King

candies {hereinafter “DFS"], requests that this court award
in the amount of $133,555.88 and excise taxes in

 

attorneys’ fe
the amount of $5,565.28, for a total of $139,121.16, as

reasonably and necessarily incurred on appeal.’ For the
following reasons, we grant in part and deny in part DFS’ request

for attorneys’ fees. Furthermore, based upon the circumstances

of this case, the matter is referred to the Office of

2 Although DFS originally sought $141,761.79 in fees and $:
n excise tanesy DFS concedes a reduction of 7.8 hours in its reply
cere Secoraingy, $2,535-00 should be deducted fron the amount of fees

TEluesved and the requested taxes should be reduced by $105.63.

5, 670.31

 

 

 
#** FOR PUBLICATION ***
Disciplinary Counsel [hereinafter “ODC”] for an investigation as
to whether the Hawai'i Rules of Professional Conduct [hereinafter
“HREC”) were violated.
I. BACKGROUND

‘The underlying appeal is the result of a dispute as to
the terms of a November 18, 1996 commercial lease of warehouse
space [hereinafter “the lease”) executed by Paiea Properties

(hereinafter “Paiea”], as lessor, and DFS, as lesse

 

Pursuant to Exhibit £, section 1(a) of the lease, DFS
retained an option to renew the lease for one additional five-
year term, In order to determine the “prevailing rent” for the
five-year period, the lease incorporated an appraisal procedure
authorizing the appointment of a certified appraiser to select
either DFS’ or Paiea’s determination of the “prevailing rent,”
based upon whichever determination was closer to the appraiser's
independent conclusion, The lease specifically provided that
[eine appraiser’s decision shall be final, conclusive and
binding on Landlord and Tenant.”

In a letter dated February 25, 2002, DFS purported to
exercise its option under the lease and proposed the selection of
Robert C. Hastings [hereinafter “Hastings”] as the appraiser
responsible for determining the “prevailing rent.” Paiea
ultimately agreed to DFS’ selection of Hastings. Thereafter, in
‘a June 25, 2002 appraisal report, Hastings concluded that DFS’
offer was closest to the market rent for the subject property.

In @ June 30, 2002 letter addressed to DFS and

Hastings, Paiea rejected the appraisal report stating that it was

2
#*% FOR PUBLICATION ***

not prepared in a manner consistent with the terms of the lease.
Paiea specifically contended that Hastings’ determination
improperly included a reduction that acconmodated DFS for the
costs incurred in constructing permanent improvements. Paiea
asserted that, pursuant to the terms of the lease, permanent
improvements are owned by and for the benefit of Paiea, and
therefore Hastings should not have deducted such costs from his
calculation of the market rent. DFS and Hastings did not respond
to Paiea’s letter. Instead, on August 23, 2002, DFS filed a
“complaint for Declaratory Relief or in the Alternative for
confirmation of Arbitration Award and Entry of Final Judgment”?
in the first circuit court. Paiea filed its answer on
september 24, 2002.

on October 18, 2002, DFS filed a motion for summary
judgment, requesting that the court confirm Hastings’ appraisal
report. DPS argued that there was no genuine issue of material
fact inasmuch as: (1) Paiea unconditionally agreed to the
selection of Hastings; (2) Paiea had a procedural mechanism
available if it disputed the selection of the appraiser, and
Paiea failed to make use of such mechanism; (3) Paiea
unconditionally agreed, pursuant to the terms of the lease, that
the appraiser's conclusion would be “final, conclusive, and
binding” on the parties; and (4) Paiea only accused Hastings of
being impartial, biased and corrupt after Hastings’ appraisal
report produced an adverse result. Paiea filed a memorandum in

2 the circuit court construed the appraisal procedure es an
arbitration.
 

#** FOR PUBLICATION *™
opposition on November 6, 2002. Subsequently, on January 27,
2003, the circuit court, the Honorable Eden Elizabeth Hifo
presiding, granted DFS’ motion for summary judgment.
Paiea thereafter filed a timely notice of appeal on
February 28, 2003. On appeal, Paiea argued that: (1) the
circuit court erred by confirming the appraisal report inasmuch

as it lacked the degree of certainty and definiteness required by

 

law, such that the decision could lead to future litigation; (2)
the circuit court erred by confirming the appraisal report
because Hastings exceeded the authority conferred upon him by the
terms of the lease; and (3) the circuit court erred in confirming
the appraisal report in light of Hastings’ evident bies and
partiality. DFS filed its answering brief on August 12, 2003.
on April 19, 2005, this court filed a summary disposition order
stating that: (1) Palea is not entitled to a vacation of the
appraisal report inasmuch as Paiea neither moved the circuit
court to vacate the report nor provided notice to DFS of its
intent to vacate the report pursuant to Hawaii Revised Statutes
[hereinafter “HRS”] § 658-11 (1993), repealed by 2001 Haw. Sess.
L. Act 265, §§ 5, 8 at 811-813; (2) the appraisal report did not
lack the degree of certainty and definiteness required by law
inasmuch as the report clearly and definitely proposed @
wprevailing rent” of $0.90 per square foot per months and (3) the
appraisal report required no clarification.

on May 16, 2005, DFS filed the present request for

attorneys’ fees incurred in connection with the underlying

appeal.
*" FOR PUBLICATION ***

FOR PUBLICATION P78
II, DISCUSSION
A. The Lease Agreement Provides Authority for the Recovery of
DPS! Attorneys’ Fees Incurred on Appeal.
In TSA International, Ltd. v. Shimizu Corp., 92 Hawai‘
243, 263, 990 P.2d 713, 733 (1999) (citations omitted) (emphasis
added), we set forth the following general principles related to
the recovery of attorneys’ fees:
Generatiy, under the ‘Anerican Rule,’ each party is
responsible for paying his or her ovn Litigation expenses. A
EEiEble exception to the ‘Americen Rule," however, is the rule
cEeateSEneys' fees may be awarded to the prevailing party where

TREE th‘susra ie provided for by statute, stipulation, oF
sgreenent

 

In the present case, the statutory exception to the “Anerican

Rule” is HRS § 607-14 (Supp. 1997) (emphasis added),” which

 

provides that:
[sjn ali courts, in all actions in the nature of assumpsit and in.
Hi? ztless sn promissory note gr other contract in writing that
belSGS Gar dn “etterney's fee, there shell be taxed os attorneys’
Foon. te be paid by the losing party and to be included in the sum
{Se'snienexteution nay issue, a fee that the court determines to
be reasonable.
Therefore, inasmuch as the lease constitutes a “contract in
writing that provides for an attorney's fee,” the determinative
issue is whether the language of the lease authorizes the
recovery of attorneys’ fees in the present case. We conclude
that it does.
The lease provides, in relevant part, that:

[in the event of any action of proceeding brought by either party
Against the ether based upon or arising cut of any breach of the

2 uaS € 607-14 was subsequently amended in 2004, however the
amendment does net have any sabstantive impact en the present analysis. See
gRS § 607-14 (Supp. 2004)

 

 
 

#** FOR PUBLICATION

SSETEL Sa" Semdsior* (Phreaetnanie®cbetss including cesconable

Sttomeys! fees, from the other
Invoking the foregoing provision, DFS asserts that it is entitled
to recover attorneys’ fees inasmuch as: (1) the lease provided
specific procedures for an arbitration proceeding to resolve
disputes over the determination of the “prevailing rent"; (2)
Paiea refused to abide by the arbitrator's award; and (3) this
court affirmed the circuit court’s order granting summary
Judgment in favor of DFS on all claims, thereby establishing DFS

8 the prevailing party.

‘To the contrary, Paiea contends that the language of
the lease authorizes the recovery of attorneys’ fees only in
actions brought for a breach of contract. Paiea thus appears to
argue that because the complaint did not delineate 2 specific
breach of contract cause of action, the clause authorizing the
recovery of attorneys’ fees was not triggered.

However, Pasea’s interpretation construes the language
of the lease too narrowly. The plain language of the lease
authorizes the recovery of attorneys’ fees by the prevailing
party in “any action or proceeding” so long as the claim is
“based upon or arising out of any breach of the terms and
conditions (of the lease].” (Emphasis added.) In the present
case, DFS alleged that the genesis of the dispute was Paiea’s
rejection of Hastings’ determination of the “prevailing rent,"
despite Exhibit £, section (1)(f), in the lease, which states
that “(t]he appraiser’s decision shall be final, conclusive, and

 

binding." Accordingly, the present action is clearly based upon

6
 

* FOR PUBLICATION
or arising out of a breach of the terms and conditions of the
lease,‘ and DFS is authorized to recover reasonable attorneys’
fees incurred in the underlying appeal, pursuant to section 19.06
of the lease.

B. DFS’ Recovery of Attorneys’ Fees is Not Limited to Twenty~
Five Per Cent of the Judgment.

hs previously mentioned, HRS § 607-14 authorizes an
auard of costs and fees “(iJ all the courts, in all actions én
the nature of assumpsit and in all actions on a promissory note
or other contract in writing that provides for an attorney's

fee." However, HRS § 607-14 also provides that an award of costs

 

and fees “shall not exceed twenty-five per cent of the judgment.
DFS acknowledges the foregoing statutory limitation,
but contends that the Limitation is inapplicable where, as here,
the party requesting fees did not seek a monetary judgment in the
underlying appeal. DFS also contends, in the alternative, that
even if the statutory limitation applies, such limitation does
not preclude it from recovering the full $139,121.16 requested.
DFS contends that the monetary sum attributable to the judgment
is approximately $777,000.00 inasmuch as: (1) DFS offered an
annual rent of $437,335.00; (2) Paiea demanded an annual rent of

«ie have previously referred to Black's Law Dictionary for a
cation of the term "breach of contract.” In Via
ee Gavel" 441, 427 m16,, 935 B-2d 992, 1002 2,16 (1897), we, noted that

i ian Di 21 185, #17 (eth ed. 1990) defines the term “breach of
Backs iaeDsifaiiure, without legal excuse to perform any promise which
forms the whole or pert of a contract." Accordingly, inasmuch = we nave

Semed the circuit court's order granting summary judgment in favor

SESH! Sc‘have elveady Geterained that Psics had no legal excuse for refusing
£6 Sbide by Hasting's determination of the “prevailing rent,” and therefore
Pelee breached the terms and conditions of the Le

 

 

 

 

 

7
 

**% FOR PUBLICATION ***
592,768.00; (3) the difference was $155,413.00 per year; and (4)
the rental term was for five years. Thus, applying the twenty-
five per cent cap to the sum of $777,000.00, DFS asserts that the
applicable limit is $194,266.25, which exceeds the amount of fees
requested.

Paiea, on the other hand, argues that the statutory
Limitation clearly applies, and subsequently disputes DFS’
calculation of the twenty-five per cent cap. Paiea argues that
DFS made representations to the circuit court that the rent due
in years two through five were still subject to negotiation, and
that the arbitration agreenent addressed only the first year of
the lease. Paies asserts that the circuit court relied on DFS’
representations when it granted DFS’ motion for summary judgment,
and that therefore DFS should be judicially estopped from arguing

otherwise in its present request for fees. Therefore, using DFS’

 

own calculations, Paiea asserts that the difference w

9155, 413,00, and that any award of attorneys’ f

 

2 is limited to

 

twenty-five per cent of that sum, or $36,859.25.
Based upon the following, we agree with DFS’ initial
contention that the statutory limitation set forth in HRS § €07-
14 does not apply in the present case, and we therefore need not
address DFS’ and Paiea’s contentions as to the appropriate method
of calculating the twenty-five per cent cap.
Although the language of HRS § 607-14 appears to
8 to twenty-five

 

unequivocally limit an award of attorneys’ f
per cent of the judgment, we have previously concluded that the

twenty-five per cent limit does not apply in cases that involve

8
s** FOR PUBLICATION ***
“only an adjudication of rights in which no monetary liability is
in issue.” Food Pantry, Ltd, v. Waikiki Bus. Plaza, Inc., 5@
Haw. 606, 621, 575 P.2d 869, 880 (1978). Furthermore, in
Hiedvache v. Knabusch, 88 Hawai'i 115, 119, 962 8.24 374, 378
(1998) (emphasis added), we recognized that ‘where it is
Ampossible to determine what the judgment would or might have
been. . . (@.a., in declaratory judgment actions), the
[prevailing party) may be avarded all of his or her reasonable
." See also Amfac, Inc. v. Waikiki Beachcomber
Inv. Cou, 74 Haw. 85, 132-133, 839 P.2d 10, 34-35 (1992) (*(1]E

attorney's fe

 

no money damages are sought or awarded, as in 2 complaint for
declaratory judgment, there is no monetary amount on the basis of

which to calevlate the twenty-five percent statutory ceiling for
attorneys’ fees”) (emphasis added). In the present case, DFS
sought either a declaratory judgment that Hastings’ determination
of the “prevailing rent” was binding on the parties, or a
confirmation of Hasting’s determination as an arbitration award.
consequently, the underlying appeal involved an adjudication of
Hights in which no monetary liability was in issue, and thus, in
accordance with the foregoing precedent, we conclude that the
twenty-five per cent Limitation is inapplicable in the case at
bar.’

+ we note that Patea's axgunent can be construed so as to imply that
ry Liability was in issue naamuch as cur affirmation of the circuit
Tvonder granting sunnary judgment essentially reduces DFS" monthly
SEE“ celigaelons Furthermore, both DES and Paiea appear to agree that the
Uifierence Eetween their two determinations of the “prevailing rent” serves as
CHeterS’ pram which the monetary value of the judgment nay be calculated.
EB R2E ne Tenguage of HRS § 607-14 plainly requires that the judgment serve
continued. ++)

 

9
s** FOR PUBLICATION ***

C. DFS is Entitled to $23,515.70 in Attorneys’ Fees.

Having established that DFS is entitled to its
reasonable and necessary attorneys’ fees and that such an award
of attorneys’ fees is not limited to twenty-five per cent of the
judgment, we now consider which attorneys’ fees were shown to
have been reasonably and necessarily incurred.

As previously mentioned, DFS requests an award of
attorneys’ fees in the amount of $133,555.98, in addition to
excise taxes in the amount of $5,565.28, for a total of
$139,121.16. For support, DFS attached an invoice from
Stubenberg & Durrett, Attorneys at Law (hereinafter “the
Stubenberg firm] describing each charge, as well as @
declaration by Attorney Stubenberg stating, inter alia, that:

(2) the attorneys’ fees actually and reasonably incurred in
connection with the Stubenberg firm's appellate representation of

DFS amounted to $132,232.50; (2) DFS incurred computer

 

isted

research charges in the amount of $3,858.38; and (3) the hourly

 

rates attributed to Attorney Stubenberg, Attorney Zahaby, and
Attorney Lam were $325.00 per hour, $125.00 per hour, and $185.00

 

per hour respectively.
Paiea, on the other hand, contends that the fees
charged by the Stubenberg firm were excessive and unreasonable,

citing the following charges as examples: (1) $33,112.50 (135.3

 

cont snved
fas the basis for calculating the twenty-five per cent cap. Both OFS" and
Paiea's calculations as to the twenty-five per cent cap are inapposite
Thastuch az. it is net the judgment, but rather an economic incident of the
Stdgnent, that serves ae the basis for their calculations. Such methodoloay
2E°EEside tne scope of the Language of HRS § 607-14.

10

 
‘#* FOR PUBLICATION ***
billed hours) spent on a motion to dismiss the appeals (2) 325-4
billed hours for a sixteen-page answering brief; (3) 3.8 billed
hours to review supreme court schedules and oral argunent
scenarios; and (4) four billed hours to prepare an oral argument
outline. In addition, Paiee contends that awarding DPS $3,058.38
for computer-assisted research is improper inasmuch as such
expenses are @ component of @ law firm's overhead and are
therefore already reflected in attorneys’ fees. Accordingly,
pales argues that any award of attorneys’ fees should not exceed
$38,853.25.

1. » “

‘The United States Supreme Court has previously
addressed the question of what constitutes a reasonable fee, in
the context of the Civil Rights Attorney's Fees Awards Act of
1976, 42 U.S.C. § 1988 (West 1976), stating that:

{ejhe most useful starting point for determining the amount of @

eetonable fet is the numer ceotabie pearly eave, mie

Leeson oaMbrovides. an objective Besis on which to make an

Geel estakace of the velue of # lawyer's services. The party

s2ekitg tn auard of feex should submit evidence supporting the
fours worked and rates claimed,

 

Hensley vs Eckerhart, 461 U.S. 424, 433 (2983). Tn Montalvo w.
Chang, 64 Haw. 345, 358-259, 641 P.2d 1921, 1331 (1962)

(citations omitted), overruled on other grounds by Chun v. Bd. of
stees of the foes’ Retirement Sys, of the Stal

Hawai'i, 92 Hawai'i 432, 992 P.2d 127 (2000),* we endorsed &

 

«— Rithough Montalue was overruled by Chun, 92 Hawai'i at 445, 992

24 at 140, "20 the entent that. it mandated an application of the “lodestar”

Ecthod' when calcclating attorneys’ fees in connon fund cases, we expressly
(continued...)

ua
 

+* FOR PUBLICATION ***

virtually identical method of calculation in the context of a
class action litigation where the recovery resulted in @ common

fund from which the attorneys’ fees were to be drawn:

jn essence, the initiel inquiry {9 “how many hours were spent in
hat mannet by which attorneys.” The determination of tine spent
ye petforming services “within appropriately specific categories,”
32 Followed by en estimate of ite worth. “The velue of an
Attorney's tine generally 4a reflected in his normal Billing
fete.” But it my be “necessary to use several different rates
Tor ihe different ateorneys” and the reasonable rate of
‘Sipunsation nay differ stor different activicies."" And when the
Scuriy rate reached through the foregoing analysis is applied to
Che atcual hours worked, 2 “reasonably objective Basis for valuing
Snattersey's services” {s derived. The inquiry, Rowever, does
Sot ena nefer for other factors must be considered. The product
Cfthe sizet and second

Slodestar® of the ultima

 

 

 

 

 

fe first of the factors to be considered for possible adjustnent
Biche “lodestar determination is "the contingent nature of
Saccese,“a factor which say be of specia! significance where “the
Sttorney has no peivate agreement that guarantees payrent even if
fo recovery ie obtained.” The second additicnal factor to be
Ceamined "Ls the extent, if any, to woich the quality of an
SEtoehtyes ork mandstes increasing or decreasing” the "lodestar"
figure.’ Ifthe court decides an adjustment ie justified on this
Ealisr it ‘should set forth as specifically a3 possible the facts
that support -+- (its) conelusien.”

 

The foregoing algorithm is conmonly referred to as the “lodestar”
method. Id.7 gee also Chun, 92 Hawai'i at 434, 992 P.2d at 129
("In Mentalve, we adopted the ‘lodestar’ method of awarding
attorney's fees to plaintiffs’ counsel in class action litigation
where the recovery has resulted in the creation of a common fund
from which the attorneys’ fees are drawn”) (emphasis added).
Accordingly, we apply the “lodestar” method in the case at bar.
our initial task is to determine how many hours were

shown to have been reasonably expended. See Sharp v. Hui Wahine,

*(.,.continued)
stated that swe continue to adhere to Hontalwa’s explication of the mechanics
SF'the lodestar nethod.” Ia

12
 

* FOR PUBLICATION ***

49 Haw, 241, 246, 413 P.2d 242, 247 (1966) (the party requesting
fees has the burden to prove that the requested fees were
reasonably and necessarily incurred). To that end, after
thorough examination of, the submissions of DFS end Faiea as well
as a careful review of the record before us, we conclude that DFS
has demonstrated that it expended 105 reasonable and necessary
hours on the underlying appeal.”

our subsequent task ie to determine a reasonable hourly
rate, We note that four different attorneys, with four different
hourly rates, worked on varying aspects of the underlying appeal.
accordingly, we conclude that the average of the four different
rates constitutes a reasonable rate in the case at bar. The

hourly rates for Attorneys Stubenberg, Durrett, Lam, and Zahaby

‘the following hours were shown to have been reasonably expended:
quenty-four Hours of work relating to the motion te dismiss the apes, fifty~
Te"Mute oe work in connection, with the answering brief, and twenty-five
sox Bours Gfi"Senaining merk- ‘the concurring opinion, relying upon Brice vw
) te'Heweits 106, 111 p.34 1 (2005) contends thet this court 2s
BIG nes foe. covide an explonaticn of the reasons underlying @ substantial
seetten CePthe requcetes fees. See concurring opinion, slip op. at 2-3.
iS" (happosive euthority for the following reasons. First, in Erica, we
Feiee Sfed) ell succes to specity the grounds for awards of attorneys’ fees
and the snounts awarded with respect to each ground.” 113, 211 Psd at
SRE IMOUGNGer “tor euard of fees refers to che legal basis for the clains
Riche afsunpsit or tort. Jd, Te does not require e court to give an item
Evcleen explenation of the requested fees allowed where, as here, the record
eyriSte a'readily apparent rationale =~ to wit, the docunentation
PECtapanying the fee request does not support the ancunt requested.
ni $0 wawel't 25, 5, $78 P-20 1145, 1159 (1998),
RUSE ther Tal detailed explanation of the rationale underlying the
SERIECIZa‘tn attorneys’ fees anarded 1s not necessary"); Banger Ins, Co. vs
EIRSMS 103 Ronei't 26, 53, 79°F-3¢ 119, 126 (2003) ("The reasonableness of
Hinshas fore of attorneys’ fees 1s 8 matter within the discretion of the
Slesue court. sland, thus, 2) detailed explanation of the rationale
Ghbcrlying the reduction in attorneys’ fees avarded is not necessary.
Roterel, he dena! sr reduction of attorneys’ fees must have support in the
iotera.2). "second, ss we explained in Bxicg, the purpose of requiring 2 lower
ESGEEM cc eapiain the legal basis for the fee award and the amount awarded w
io'ohabie us to “effectively review" the fee award. Id. In the case at bar,
Se are not reviewing @ lower court's fee award.

 

 

 

 

 

 

 

 

   

 

 

   

   

13
** FOR PUBLICATION ***

are $325/nour, $225/hour, $185/nour, and $125/hour, respectively.
Thus, the average rate is $215/nour.

Finally, the lodestar method instructs us to multiply
the reasonable rate by the sum of reasonable hours expended. See.
Montalvo, 64 Haw. at 350-359, 641 2.2d at 1331; Hensley, 461 U.S.
at 433. Accordingly, applying a rate of $215/hour to a sun of
108 hours, we conclude that DFS has shown that it has incurred
$22,575.00 in reasonable and necessary attorneys’ fees, and
$940.70 in taxes. We therefore award DFS $23,515.70 in
attorneys’ fees.

 

DFS also requests $3,858.38 for computer-assisted
research charges “as an element of its attorneys’ fee recovery.”
Paiea, on the other hand, contends that the inclusion of

computer-assisted research charges in any award of attorneys’

 

fees is improper inasmuch as computer-assisted research charges
are already incorporated into a law firm's overhead and are thus
already reflected in the attorneys’ fees charged.

Although we have not previously had occasion to pass
upon the foregoing issue, the Intermediate Court of Appeals
[hereinafter “ICRY), in Biornen v. State Farm Fire and Casualty
Gos, @1 Hawai'i 105, 912 P24 602 (App. 1996), squarely addressed
2 request for an award of computer-assisted research costs." The

+ ie have, nowever, impliedly endorsed the ICA's ruling in Biarnen,
in our subsequent opinion in'push vy. Matson, 61 Haw. 474, 478 n.6, 918 P.2d
ii30, 1138 n-€ (1996). In Bush, one of the appelices argued that “the circuit
Court dig not abuse ite discretion in awarding costs for computer assistea
Segal research (CALR) chazges.” id,” Although our holding in Bush rendered
‘continued,

 

 

 

14
 

»** FOR PUBLICATION

FOR PUBLICATION 9°

Ich initially noted that several treatises regarded the costs
related to conputer-assisted research as subsumed within an
attorney's fee and therefore such costs may not be awarded in
addition to attorneys’ fees.’ Id. at 107, 912 P.2d at 604. The
ICA subsequently conducted a survey of the federal jurisdictions,

stating that:

[e)he majority of federal courts subscribe to the view that costs
UP Seareter Legal researen “are properly reflected as part of the
Saw firm's overhead end, a6 such, are a factor to be included in
ihe Letting of attorneys fees as opposed to ordinazy costs.” In
Ye FoR.De 41, 07
ee USTs gas Walle t-Holte, 870 F.Supp. 626, 028
[D.3.c.1983} (WESTLAW charges are Incidental to attorneys"
Services and, therefore, are not considered to be valid costs);
Prisclancer v. Nine, $83 F-Supp. 1087, 1086-89 (N.0.Ge.1964)
SeeaiT ‘conputerized legal research are properly considered =
Gabenent of sttcrney fees and are not recoverable a8 costs) .

 

 

 

 

    

Id. at 108-109, 912 P.2d at 604-60. Accordingly, the ICA ruled

 

that “disbursements for computerized legal research . . . are a
component of attorney fees and are not taxable costs.” Id. at
+4. .continued)

 

any consideration of the appellee's argument unnecessary, we opted to provide
SELENE SEEEach as “the Tosue of costs may arise in subsequent proceedings.”
Fe Stordingly,. we observes that “che [ICR] recently rejected CALR a8 2

Ha onent of coves. (pioenen, €1 Haw. at 107-109, 912 F.2d at 604-606.1" Ide

 

 

+ gpecitically, the TCA stated that:

 

69. Moore, Moore's Federal Practice, 154.77{6) (2d ed. 1986)
Seates thet “Soupater research if generaliy treated as a lawyer's
Gost and not taxable as ordinary costs(.]” (Footnote omitted) .
Sintiariy, 20 Am.our.2d Coste § 61 (1998) states that “[t)he
Expense of computer-aided researen is also a component of
Storney's fees, and like any other legal research such expen:
Snnet. be taxed ae item of cost in addition to the attorney's £
Guard.” (Footnote omitted). These conclusions are confirmed by

 

 

 

 

 

the hanotation on the Aecoverebility of cost of Computerized Legal
Eiitirocedura, 60 A.c.Rrec. 168 (2380).
Blornen, #1 Haw. at 107, 912 P.2¢ at 604 (brackets An original).

15.
   

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FOR PUBLICATION 87°

108, 912 P.2d at 606.! Inasmuch as we agree with the ICA's
ruling, we are also compelled to conclude that the computer-
assisted research charges in the present case are not recoverable
as separately billed attorneys’ fees.

Although it appears that sone federal jurisdictions
might accept DFS’ argument," our endorsenent of Biornen

 

Wie note that there renaine sone degree of disagreement among the
federal jurisdictions regarding the trestaent of costs related to computer~
iStisted research, See gobinson v, Ariveshi, 703 F.Supp. 1412, 1436-1437 (0.
Haw. 1989), zau'd-on other grounds, 953 F.2d 761 (9th Cir. 1991).
Nevertheless: a signiticent amount of feserel Jurisdictions, not mentioned in
the ich's opinion, are in accord with the ICA's conclusion.” See, sag, United
Rakes ws Mersite Mesidien constr, Cou, 95 F.3d 53, 172 (and Chr. 1936) We
SSHESGint conpoter research is merely a substitute for an attorney's tine
thee is compensable under an application for attorneys’ fees and is not
Separately taxable cost”); Standley v. Chilhowee S-LV School Dist., 5 F.3¢
S05, 395 n.7 (etn Cir. 1993) (etating that “time spent doung the computer
basée research is compensable as part of counsels’ billable hours. it is the

 

 

  

 

Sctusl cost to the attorneys for their on-line computer time that... is a
ZGnponent of attorney fees and cannot be recovered in addition to the f
Guero")? o°231 F.3d 399, 409 (7th Cir. 2000)

Thecapucel teceessh charges are considered o form of attorneys’ fees. The
ides is that conputer-assisted legal research essentially raises an sttorney’s
average hourly rate a2 it reduces (at least in theory) the number of hours
ikSt Gust be Gilied. Ase form of attorneys! fees, the charges sssociated

 

ith such research are not separately recoverable expenses”) (citations
Omitted)
Yay Haroco, tne, va Anerécan Nat‘) Bank and trust Co. of Chicsas,

36 F.3d 1423, 14e0-1041 (7th Cir. 199] (emphasis added), the United states
Court of Appeals of the Seventh Circuit [hereinafter “seventh circuit"),
stated that
(t]he added cost of computerized research is normally matched with
2 Lofresponding reduction in the amount of tine an attorney must
Spend rerearching. Therefore, ue gee no difference between a
sitcsclon where a0 attorney researches manually and Bills ebiy the

 

  

 

and 0 the 7
Eath cases the cotal costs are attorney's Fees and nay not be
Also, in Inge Cone'd Gib, Seo, Litse, wv. Cont’) 111. corp., 962 F.26 566, 570
(ith chr. 1992) (aeme emphasis Tn original, some enphasis added) (citations
guitted), the seventa circuit stated the following:
‘Woe [trial] judge refused to allow the lawyers to bill any of
their out-of-pocket expenses of using a computerized Legal
Fesearch services . ss Me thought those expenses should be part
(continued. +.)

 

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* FOR PUBLICATION
precludes us from traversing a similar analytical path. Where a
law firm passes its computer-assisted research charges to a
client, allowing that client to recover those charges as an award
of attorneys’ fees debases the rule stated in Biornen inasmuch as
computer-assisted research charges would henceforth be

recoverable so long as the party seeking recovery classifies the

 

charges as separately billed ‘attorneys’ fees” rather than
“taxable costs.” We thus decline to render Biornen susceptible
to such “form over substance” argunents and take the present
opportunity to expressly state what the rule in Biornen logically

that conputer-assisted research charges ere subsumed

 

implies ~
within a lew firm's overhead and therefore the client may not
recover such costs by classifying them as separately billed
attorneys’ fees:

Accordingly, we deny DFS’ request to recover $3,858.38

in computer-assisted research charges.

0. continued)
Sf the lawyers’ overhead. This was another clearexrer. If
Sinpoterized research expense were customarily treates in this
Geshicns lawyers’ hourly rates would be even higher than they are,
Fequiring an adjustment in the lodestar. But the more important
feint ie chat the market--the paying, arms’ length market
[euyers’ LERIS and WESTLAW expenses, just as it
thelr parelegal expenses, rather than requiring thet
Uhebe itens be folded into overhesd. Markets know market values
so wath,
fearchs if reimbursement at market rates is
Hrelignes, the effect will be to induce lawyers to substicute
their own, more expensive tine for that of the paralegal or the
computer,
consequently, although the seventh circuit appears to agree with the ICA that
seressertaavistes research charges are not recoverable as taxable costs, there
SE"ESSe evidence te soggest that it might nevertheless award such computer
iE.f00SoTFestarch charges as e separately billed component of attorneys’ fees,

 

 

      

 

 

 

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D. Referral

Also, considering the particular circumstances of the
present case, we refer this matter to ODC for investigation. In
doing so, we do not express any opinion as to whether violations
of the HREC have occurred.

Although the concurring opinion takes issue with our
decision to refer the matter to ODC without further explanation,
see concurring opinion, slip op. at 9-15, our approach is no
different than that taken in Lee vs Aiu, 65 Hawai'i 19, 35, 936
P.2d 655, 671 (1997). In Lee, we referred the record to onc for

 

its review without an explanation of specific misconduct, other
than noting that counsel may have engaged in conduct that did not
comport with the HREC. Ide

Additionally, contrazy to the concurring opinion’ s
assertion, we have not “overlook(ed) the fact that this court, in
se, provided a detailed description of the actions of the
defendant-attorney in torticusly interfering with the contractual
relations between the plaintiff and the co-defendant in that
case(.]” Concurring opinion, slip op. at 13 (brackets added).
lie recognize that, in Lee, this court explicated in detail the
actions of the defendant-attorneys which led to a referral to
00. See Lee, 85 Hawai'i at 32, 936 P.2d at 668 ("Based upon our
examination of the record, we believe that there is substantial
evidence to support the jury's findings that the [defendant-
attorneys] were cognizant of the settlement agreement between Lee
and Aiu and that they intentionally proceeded to encourage Aiu to

breach that agreement by convincing him to enter into a new

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OR PUBLICATION °°?

contract with them. The evidence further supports the finding

 

that the [defendant-attorneys] were without justification, that
is, that they were motivated only by their own personal gain.
this is particularly so in light of: (1) [the defendant-
attorney's} advice to Aiu that $25,000 for Aiu’s putative
interest in the Keha Place property was a ridiculous sun of money
and that Aiu would be ill-advised to honor ity and (2) the
[defendent-attorneys’] subsequent acquisition of Aiu’s putative
interest for that same ‘ridiculous’ sum.) (brackets added) .
However, it is obvious that our description of the specific
actions of the defendant-attorneys was in the context of
analyzing the tortious interference with contractual relations
claim. Notably, in the section of the opinion entitled,
vpeferral to the ODC,” we did not summarize those actions nor
refer to then with any degree of specificity. See Lee, 65
Hawai'i at 35, 936 P.2d at 671. Rather, we merely stated that
“ie appears from the record in this case that [the defendant-
attorney) engaged in conduct that may not comport with the HRFC.”
Idk (brackets added). Accordingly, Le does not properly stand
for the proposition that we may abrogate the general rule, set
forth in State vs Mata, 71 Haw. 319, 324, 789 P.2d 1122, 1128
(1990), which plainly states that “{wle cannot pass in these
proceedings on whether or not the matters referred to [0DC]
involved unprofessional conduct.” Id, The distinction lies in
the fact that in Lee, this court was required to set forth the
actions of the attorneys in order to affirm the trial court's

finding of Liability with respect to the tortious interference

19
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with contractual relations claim filed against the attorneys as
party-defendants.'? In the present case, we are simply faced
with a request for attorneys fees, and, inasmuch as there was no
independent claim filed against the attorneys as party-
defendants, we perceive no reason to risk unduly influencing any
forthcoming ODC investigation by extrapolating further.”

Given the circumstances of the present case, it is
inappropriate for this court to express any opinion at this point
in time as to whether the matters referred to ODC involve
unprofessional conduct." See Mata, 71 Haw. at 324, 789 P.2d at
1125. The explanation proffered by the concurring opinion
contravenes this well settled principle by repeatedly expressing
an opinion as to the unreasonableness of the fees that were
incurred in this case, Such expressions manifestly articulate

violations of the HREC.* We therefore decline to selectively

 

% we nove further that as party-defendants, the attorneys in Lee.
were provided with a full ang fair opportunity te Justify their actions, =
Fight"net availeble co the attorneys in the present case,

the concurring opinion also asserts that our failure to provide an
explanation for the referral will prevent ODC from conducting 2 thorough
Investigation. See concurring opinion, slip op. at 8. However, in light of
the fact thet ODOC Will have access to all records before this court and other
State courte, as well as any documents that it may request, DC will clearly
have the ability to conduct # full and complete investigation.

M expository explanations say have the unavoldeble effect of the
court directly or indirectly expressing ite views of the conduct in question
prior to its investigation by ODC. Such problematic explanations are replete
Ehroughout the concurring opinion. gee concurring opinicn, s13p op. at 4-6

 

0 BREC Rule 1,5 requires that “(a] lawyer's fees shall be
reasonable.” HRFC Rule 8.4 provides that [i]t is unprofessional misconduct
Fors lawyer to violate of attenpt to violate the rules of professional
Conduct.” Characterizing fees as unreasonable sets forth 2 violation of the
nee.

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discuss specific fee request items in our referral.
IIT. CONCLUSION

Based on the foregoing, we grant in part and deny in
part DPS’ request for attorneys’ fees incurred in connection with
‘the underlying appeal by awarding DFS $22,575.00 in fees, $940.70
in taxes, for @ total of $23,515.70. Furthermore, we refer the
record of this matter to 00C for investigation. Accordingly, we
direct the Clerk of the Supreme Court to transmit a certified
copy of this order to DC. We additionally direct ail clerks of
the several courts of thie state to make available any records
and provide certified copies, at no additional cost, of any

documents requested by ODC in connection with its investigation.

Paul Alston and
Peter Knapman of Alston
Hunt Floyd & Ing for
plaintiff-appelle.

David J. Minkin, and Pe
Recofeiseon witier hi.

Meal Neckinnon, LLP, for Neko ©. bar
se Gpeosteien

 

a