Opinion ID: 2514060
Heading Depth: 2
Heading Rank: 1

Heading: Entitlement to Fees

Text: Ordinarily, attorneys' fees cannot be awarded as damages or costs unless so provided by statute, stipulation, or agreement. Shanghai Inv. Co. v. Alteka Co., Ltd., 92 Hawai`i 482, 501, 993 P.2d 516, 535 (2000) (citations omitted). Thayer seeks fees pursuant to HRS § 607-14, which provides that reasonable fees, as determined by the court, shall be taxed against the losing party in all actions in the nature of assumpsit. HRS § 607-14 authorizes this court to award attorneys' fees to the prevailing party on appeal as well. See Leslie v. Estate of Tavares, 93 Hawai`i 1, 4-5, 994 P.2d 1047, 1050-51 (2000).
Plaintiffs argue that Thayer is not entitled to fees as the prevailing party because Plaintiffs' claim against Thayer was dismissed, and, thus, there was no judgment on the merits. In support of their contention, Plaintiffs cite, inter alia, Yoshida v. Nobrega, 39 Haw. 254 (1952), for the proposition that attorneys' fees are taxable in an action in the nature of assumpsit only where a judgment on the merits is reached. Thayer, citing case law to the contrary, argues that the judgment in his favor was a judgment on the merits, [2] and, even if it was not, [t]here is no requirement that the judgment in favor of the prevailing party be a ruling on the merits of the claim. Wong v. Takeuchi, 88 Hawai`i 46, 49, 961 P.2d 611, 614, reconsideration denied, 88 Hawai`i 46, 961 P.2d 611 (1998). Accordingly, we must determine whether a judgment on the merits was required, and, if so, whether Thayer prevailed on the merits. In Yoshida, a plaintiff filed suit in assumpsit, and the court granted defendant's demurrer [3] without leave to amend. Interpreting an earlier version of HRS § 607-14, [4] the Supreme Court of the Territory of Hawai`i held that, in an action in assumpsit, attorney's fees are taxable only where a judgment is upon the merits. Yoshida, 39 Haw. at 256. The court reasoned that a demurrer is not a judgment on the merits because, [w]hile the judgment disposes of the particular suit, it does not determine the rights of the parties on the merits nor prevent the institution of a new suit involving the same claim. Id. at 257 (relying on Lowrie v. Baldwin, 19 Haw. 258, 261 (1908) (holding that defendants' attorneys' fees not taxable in an action in assumpsit that was dismissed for failure to comply with an order to give security for costs); Scott v. Kona Dev. Co., 21 Haw. 408, 409 (1913) (Defendant's attorneys' fees ... [were] not taxable in an action of assumpsit in which judgment of nonsuit [was] entered for failure of proof.)); see also Ahoy v. Scott, 12 Haw. 348, 348-49 (1900) (defendant was not entitled to attorneys' fees in an action of assumpsit because summons or service was quashed on motion, and, thus, there was no action, and defendant did not obtain judgment within the meaning of a statute). In 1993, the Intermediate Court of Appeals (ICA) relied upon Yoshida in construing HRS § 607-17. [5] See Schubert v. Saluni, 9 Haw.App. 591, 855 P.2d 858 (1993). In Schubert, a summary possession action was dismissed for lack of subject matter jurisdiction. The defendants sought and were denied attorneys' fees. On appeal, the ICA affirmed the denial of fees reasoning that, under Yoshida, the defendants were not successful parties because they had not won on the merits of the case. Id. at 597, 855 P.2d at 861. More recently, however, this court espoused the contrary view with respect to fees under HRS § 607-14: Usually the litigant in whose favor judgment was rendered is the prevailing party.... Thus, a dismissal of the action, whether on the merits or not, generally means that defendant is the prevailing party. Wright, Miller & Kane, Federal Practice and Procedure: Civil 2d § 2667 (1983). There is no requirement that the judgment in favor of the prevailing party be a ruling on the merits of the claim. Wong, 88 Hawai`i at 49, 961 P.2d at 614 (denying defendant's motion for fees, not because the defendant was not the prevailing party, but because the maximum amount allowable had already been awarded). In stating the foregoing, this court did not acknowledge or overrule Yoshida, Schubert, or any other precedent holding to the contrary. Given the conflicting authority on this issue, we take this opportunity to clarify whether a judgment on the merits is a prerequisite to the award of fees under HRS § 607-14. The attorneys' fees statute at issue, HRS § 607-14, provides as follows: Attorneys' fees in actions in the nature of assumpsit, etc. In all the courts, in all actions in the nature of assumpsit and in all actions on a promissory note or other contract in writing that provides for an attorney's fee, there shall be taxed as attorneys' fees, to be paid by the losing party and to be included in the sum for which execution may issue, a fee that the court determines to be reasonable; provided that the attorney representing the prevailing party shall submit to the court an affidavit stating the amount of time the attorney spent on the action and the amount of time the attorney is likely to spend to obtain a final written judgment, or, if the fee is not based on an hourly rate, the amount of the agreed upon fee. The court shall then tax attorneys' fees, which the court determines to be reasonable, to be paid by the losing party; provided that this amount shall not exceed twenty-five per cent of the judgment. .... The above fees provided for by this section shall be assessed on the amount of the judgment exclusive of costs and all attorneys' fees obtained by the plaintiff, and upon the amount sued for if the defendant obtains judgment. HRS § 607-14 (bold emphasis in original). Nowhere in the foregoing statute is a judgment on the merits required. Moreover, requiring a defendant, who would otherwise prevail on a motion to dismiss, to litigate a claim through trial in order to prevail on the merits would frustrate the modern goals of judicial economy and the just, speedy, and inexpensive determination of every action. See HRCP Rule 1 (2000). Furthermore, as the ICA noted in Survivors of Iida v. Oriental Imports, Inc., 84 Hawai`i 390, 935 P.2d 105 (App.1997), a number of jurisdictions have concluded that the defendant is the prevailing party and thus entitled to fees [ even] in cases where the plaintiff files and later withdraws the claim.  Id. at 404, 935 P.2d at 119 (emphasis added) (citing Fraser v. ETA Ass'n, Inc., 41 Conn.Supp. 417, 580 A.2d 94 (1990); Hatch v. Dance, 464 So.2d 713 (Fla.Dist.Ct.App.1985)). In Fraser, the relevant statute provided for the recovery of attorneys' fees in actions based upon contract. In holding that defendants were entitled to fees as the prevailing party in a case where the plaintiffs withdrew after taking depositions, but before trial, the Connecticut Superior Court stated: [C]ourts are following a general legislative mandate of rewarding successful litigants while discouraging frivolous suits.... There are decided benefits to interpreting the statute so that defendants in cases withdrawn by plaintiffs can recover their legal expenses. Not only will this discourage frivolous suits, but it will place the burden where it belongs-on the party with the poorly thought out complaint or the hastily conceived writ. It will also discourage vexatious litigation and the use of pretrial discovery and depositions to harass defendants. Fraser, 580 A.2d at 96 (citation omitted). Other jurisdictions, interpreting analogous statutory provisions, are in accord. See, e.g., DSI v. Natare Corp., 742 N.E.2d 15, 22 (Ind.Ct.App.2000) (stating the proposition that prevailing party in the context of an attorneys' fees statute denotes a party who successfully prosecutes his or her claim or asserts his or her defense), reh'g denied, 742 N.E.2d 15 (Ind.Ct.App.2001); Pfeifer v. City of Silverton, 146 Or.App. 191, 931 P.2d 833, 835 (1997) (holding that a party can be considered the prevailing party and, thus, awarded attorneys' fees, even though the case was dismissed before the issuance of a final decision on the merits); Allahyari v. Carter Subaru, 78 Wash.App. 518, 897 P.2d 413, 413-14 (1995) (holding that award of attorneys' fees to defendant is proper following plaintiff's voluntary dismissal of its action); but see Burnette v. Perkins & Assoc., 343 Ark. 237, 33 S.W.3d 145, 149-50 (2000) (holding that a dismissal without prejudice does not sufficiently conclude the matter such that a determination of the prevailing party as basis for statutory attorneys' fees award in a contract action can be stated with certainty). Based on the foregoing, we affirm the rule stated in Wong and hold that a defendant who succeeds in obtaining a judgment of dismissal is a prevailing party for the purpose of fees under HRS § 607-14. See Wong, 88 Hawai`i at 49, 961 P.2d 611; see also Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 887 (9th Cir.2000) (stating that, [u]nder Hawai`i law, a party may be deemed the `prevailing party' entitled to an award of statutory attorneys' fees under [HRS] § 607-14 without successfully litigating the merits of the party's claim). To the extent that Yoshida, Schubert, or any other case holds to the contrary, they are hereby overruled. [6] In this case, Thayer successfully defended Plaintiffs' lawsuit by obtaining a dismissal based on Plaintiffs' failure to state a claim. Thayer then successfully defended that judgment on appeal. Accordingly, Plaintiffs in this case were the losing party for purposes of attorneys' fees under HRS § 607-14.
Plaintiffs also argue that this malpractice suit sounded in tort, rather than assumpsit. Alternatively, Plaintiffs argue that any attorneys' fees awarded must be limited to those incurred in assumpsit claims and not malpractice claims. In analyzing whether a claim is in the nature of assumpsit under HRS § 607-14, this court has said: [A]ssumpsit is a common law form of action which allows for the recovery of damages for non-performance of a contract, either express or implied, written or verbal, as well as quasi contractual obligations. Schulz v. Honsador, 67 Haw. 433, 435, 690 P.2d 279, 281 (1984) (emphasis added). In deciding whether to award fees under HRS § 607-14, the court must determine the nature of the lawsuit where both assumpsit and non-assumpsit claims are asserted in an action. Id. at 436, 690 P.2d at 282 (citation omitted). TSA Int'l Ltd. v. Shimizu Corp., 92 Hawai`i 243, 264, 990 P.2d 713, 734 (1999) [hereinafter, TSA ]. [I]n ascertaining the nature of the proceeding on appeal, this court has looked to the essential character of the underlying action in the trial court. Leslie, 93 Hawai`i at 5, 994 P.2d at 1051. The character of the action should be determined from the facts and issues raised in the complaint, the nature of the entire grievance, and the relief sought. Helfand v. Gerson, 105 F.3d 530, 537 (9th Cir.1997) (citing Schulz, 67 Haw. at 436, 690 P.2d at 282). [7] Where there is doubt as to whether an action is in assumpsit or in tort, there is a presumption that the suit is in assumpsit. See Leslie, 93 Hawai`i at 6, 994 P.2d at 1052 (quoting Helfand, 105 F.3d at 537 (citing Healy-Tibbitts Const. Co. v. Independent Refinery, Inc., 673 F.2d 284, 286 (9th Cir.1982))); see also Braham v. Honolulu Amusement Co., 21 Haw. 583, 584 (1913). Additionally, this court recently stated, for the first time, that, in awarding attorneys' fees in a case involving both assumpsit and non-assumpsit claims, a court must base its award of fees, if practicable, on an apportionment of the fees claimed between assumpsit and non-assumpsit claims. See TSA, 92 Hawai`i at 264, 990 P.2d at 734 (citing Selvage v. J.J. Johnson & Assocs., 910 P.2d 1252, 1266 (Utah Ct.App.1996)). In this case, two claims for relief were alleged against Thayer in the complaint: (1) breach of implied contract and (2) negligence. Both claims were premised on the allegation that Thayer, in providing tax return preparation services, failed to take advantage of certain estate planning techniques that resulted in the loss of savings in excess of $200,000. Thus, even the Plaintiffs' negligence claim arises out of the alleged implied contract between Mrs. Hughes and Thayer. Without the implied contract, which could create a cognizable duty, Plaintiffs would have no negligence claim. See Helfand, 105 F.3d at 538 (stating in an analogous Ninth Circuit case that, without a contract between the defendant-attorney and his client, which creates the lawyer's duty, the third-party plaintiffs would have no legal malpractice claim). Further, the damages alleged were more closely akin to contract damages than to tort damages because they were economic damages arising out of the alleged frustrated expectation that Thayer would take advantage of certain tax-saving devices. See id. Thus, based on the complaint in this case, the essential character of the action against Thayer was in the nature of assumpsit, as provided under HRS § 607-14. Because the negligence claim in this case was derived from the alleged implied contract and was inextricably linked to the implied contract claim by virtue of the malpractice suit, we hold that it is impracticable, if not impossible, to apportion the fees between the assumpsit and non-assumpsit claims. Accordingly, because Thayer prevailed in the action that was in the nature of assumpsit, he is entitled to reasonable attorneys' fees, as determined by this court, to be taxed against Plaintiffs, the losing party. We now proceed to determine whether the fees requested are reasonable.