Court Opinion

ID: 4679490
Source: CourtListenerOpinion
Date Created: 2021-04-21 19:04:00.49192+00
Date Added: 2024-06-11T08:03:50.278847
License: Public Domain

NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

                                                      Electronically Filed
                                                      Intermediate Court of Appeals
                                                      CAAP-XX-XXXXXXX
                                                      21-APR-2021
                                                      07:58 AM
                                                      Dkt. 123 SO

                             NO. CAAP-XX-XXXXXXX

                  IN THE INTERMEDIATE COURT OF APPEALS
                          OF THE STATE OF HAWAI#I

                 BRIAN E. BENNETT and DEBRA S. BENNETT,
                 Plaintiffs-Appellees/Cross-Appellants,
                                    v.
           SAMUEL JONG HOON CHUNG and LINDA HYUNGKONG CHUNG,
                 Defendants-Appellants/Cross-Appellees,
                                   and
                    DOES 1-10 and DOE ENTITIES 1-10,
                               Defendants

          APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
                         (CIVIL NO. 11-1-0882)

                       SUMMARY DISPOSITION ORDER
         (By: Ginoza, Chief Judge, Hiraoka and Wadsworth, JJ.)

          This appeal and cross-appeal arise from the arbitration
of a real estate dispute. Defendants-Appellants/Cross-Appellees
Samuel Jong Hoon Chung and Linda Hyunkong Chung (the Chungs)
appeal from the "Amended Judgment" in favor of Plaintiffs-
Appellees/Cross-Appellants Brian E. Bennett and Debra S. Bennett
(the Bennetts), and the "Amended Order Denying Defendants' Motion
to Vacate Arbitration Award Filed May 13, 2015" (Amended Order
Denying Motion to Vacate) both entered on October 25, 2016, by
the Circuit Court of the First Circuit (Circuit Court).1
          The Bennetts cross-appealed and challenge the "Order
Granting Defendants Samuel Jong Hoon Chung and Linda Hyunkong

     1
          The Honorable Karen T. Nakasone presided.
  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

Chung's Motion to Enter Amended Judgment" (Order for Amended
Judgment) filed on September 26, 2016, the "Amended Order Denying
Defendants' Motion to Vacate Arbitration Award Filed May 13,
2015," filed on October 25, 2016, and the "Amended Judgment"
filed on October 25, 2016.
          The Chungs' sole contention on appeal is that the trial
court erred in denying their motion to vacate the arbitration
award (Motion to Vacate) because of the evident partiality of the
arbitrator.
          In their cross-appeal, the Bennetts contend that the
trial court committed reversible error in entering (1) the Order
for Amended Judgment, (2) the Amended Order Denying Motion to
Vacate, and (3) the Amended Judgment.
          This court previously dismissed the Chungs' appeal for
lack of appellate jurisdiction. The Hawai#i Supreme Court
granted the Chungs' petition for a writ of certiorari, vacated
our dismissal order, and held that this court has appellate
jurisdiction to address the merits of the Chungs' appeal.
Bennett v. Chung, 143 Hawai#i 266, 428 P.3d 778 (2018). As part
of its opinion, the Hawai#i Supreme Court also held that the
Circuit Court had properly amended the order denying the Chungs'
Motion to Vacate and the judgment, and had properly reconfirmed
the arbitration award to allow the Chungs to appeal. Id. at 268,
428 P.3d at 780. The Bennetts' cross-appeal is thus moot.
Pursuant to the Hawai#i Supreme Court's opinion, the case was
remanded to our court "to resolve the Chungs' appeal on the
merits." Id. at 280, 428 P.3d at 792.
          We conclude the Chungs' point of error on appeal lacks
merit and we thus affirm the Circuit Court's Amended Judgment,
which denied the Chungs' Motion to Vacate and confirmed the
Arbitration Award.
          The Chungs contend that Arbitrator Keith Hunter (Hunter
or Arbitrator) failed to disclose that he had made a
recommendation to the Chungs after a one-day mediation that they
retain two expert witnesses (the Recommendation). The Chungs

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claim this failure to disclose constituted evident partiality
such that the Arbitration Award must be vacated.2
          We conclude, under the circumstances of this case, that
the Chungs failed to establish a reasonable impression of
partiality based on the alleged non-disclosure of the
Recommendation made to them during mediation. Moreover, even
assuming the Recommendation should have been disclosed in these
circumstances, the Chungs waived any objection thereto.
          Judicial review of arbitration awards is "confined to
the strictest possible limits" based on the statutory grounds for
confirmation, vacatur, modification, and correction. Nordic PCL
Const., Inc. v. LPIHGC, LLC, 136 Hawai#i 29, 41–42, 358 P.3d 1,
13–14 (2015). When reviewing a circuit court's ruling on a
motion to vacate for evident partiality,
            an appellate court is not reviewing an arbitrator's
            factual findings and application of law, which it is
            powerless to address, but the findings of fact and
            conclusions of law of the circuit court as to whether
            a duty of disclosure exists, which is a question of
            law; whether it has been breached, which is a question
            of fact; and whether any breach has been waived, which
            is also a question of fact. As indicated in [Daiichi
            Hawaii Real Est. Corp. v. Lichter, 103 Hawai #i 325, 82
            P.3d 411 (2003)], issues of law are reviewed de novo
            but factual issues, if any, are addressed under a
            "clearly erroneous" standard.

Id. at 42, 358 P.3d at 14.        We review a circuit court's rulings
on a motion to vacate for evident partiality under the clearly
erroneous standard where the circuit court's challenged
conclusion was based on a mixed question of law and fact.
Narayan v. Ass'n of Apartment Owners of Kapalua Bay Condo, 140
Hawai#i 75, 83, 398 P.3d 664, 672 (2017) (citing Noel Madamba
Contracting LLC v. Romero, 137 Hawai#i 1, 9, 364 P.3d 518, 526
(2015) (quotation marks omitted).
          Prior to accepting appointment and after making a
reasonable inquiry, an arbitrator must "disclose to all parties .
. . any known facts that a reasonable person would consider
likely to affect the impartiality of the arbitrator in the

      2
         In the Arbitration Award, the Bennetts were awarded $373,000, plus
$93,250 in attorneys' fees and $28,187.67 in costs.

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arbitration proceeding."       Hawaii Revised Statutes (HRS)
§ 658A–12(a).3 If an arbitrator does not disclose a fact
required to be disclosed under HRS § 658A–12(a) or (b), "upon
timely objection by a party, the court under section
658A–23(a)(2) may vacate an award." HRS § 658A–12(d). In turn,
HRS § 658A–23(a)(2)4 provides that the court "shall vacate an

     3
         HRS § 658A-12 (2016) provides, in part:
                   §658A-12 Disclosure by arbitrator. (a) Before
            accepting appointment, an individual who is requested to
            serve as an arbitrator, after making a reasonable inquiry,
            shall disclose to all parties to the agreement to arbitrate
            and arbitration proceeding and to any other arbitrators any
            known facts that a reasonable person would consider likely
            to affect the impartiality of the arbitrator in the
            arbitration proceeding, including:
                   (1)   A financial or personal interest in the outcome
                         of the arbitration proceeding; and
                   (2)   An existing or past relationship with any of the
                         parties to the agreement to arbitrate or the
                         arbitration proceeding, their counsel or
                         representatives, a witness, or another
                         arbitrator.
                   (b) An arbitrator has a continuing obligation to
            disclose to all parties to the agreement to arbitrate and
            arbitration proceeding and to any other arbitrators any
            facts that the arbitrator learns after accepting appointment
            which a reasonable person would consider likely to affect
            the impartiality of the arbitrator.
                   (c) If an arbitrator discloses a fact required by
            subsection (a) or (b) to be disclosed and a party timely
            objects to the appointment or continued service of the
            arbitrator based upon the fact disclosed, the objection may
            be a ground under section 658A-23(a)(2) for vacating an
            award made by the arbitrator.
                   (d) If the arbitrator did not disclose a fact as
            required by subsection (a) or (b), upon timely objection by
            a party, the court under section 658A-23(a)(2) may vacate an
            award.
                   (e) An arbitrator appointed as a neutral arbitrator
            who does not disclose a known, direct, and material interest
            in the outcome of the arbitration proceeding or a known,
            existing, and substantial relationship with a party is
            presumed to act with evident partiality under section
            658A-23(a)(2).

         (Emphasis added).
     4
         HRS § 658A–23 (2016) provides, in relevant part:

                  §658A-23 Vacating award. (a) Upon motion to the
            court by a party to an arbitration proceeding, the court
            shall vacate an award made in the arbitration proceeding if:
                  (1)   The award was procured by corruption, fraud, or
                        other undue means;
                                                                (continued...)

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award made in the arbitration proceeding" upon a motion by a
party to the proceeding if, inter alia, there was "[e]vident
partiality by an arbitrator appointed as a neutral arbitrator[.]"
HRS § 658A–23(a)(2); see also Madamba, 137 Hawai#i at 9, 364 P.3d
at 526. "[T]he burden of proving facts which would establish a
reasonable impression of partiality rests squarely on the party
challenging the award." Nordic, 136 Hawai#i at 51, 358 P.3d at
23 (quoting Daiichi Hawaii Real Est. Corp. v. Lichter, 103
Hawai#i 325, 339, 82 P.3d 411, 425 (2003)).5
           Here, Hunter mediated the case on November 5, 2013,
after which, according to an affidavit submitted by the Chungs'
counsel in support of the Motion to Vacate, Hunter purportedly
made the Recommendation to the Chungs to retain architect David
Knox (Knox) and geotechnical engineer James Kwong (Kwong) as
expert witnesses.
          Subsequently, during a settlement conference before the
Circuit Court on January 15, 2014, the parties reached an
agreement to arbitrate the disputes in the action in lieu of a
jury trial. The parties entered a stipulation to stay the action
in favor of arbitration (Stipulation), agreeing, among other
things, "to appoint Keith Hunter as the arbitrator; and to waive
any and all conflicts arising from Mr. Hunter's role as a

(...continued)

                  (2)   There was:
                        (A)   Evident partiality by an arbitrator
                              appointed as a neutral arbitrator;
                        (B)   Corruption by an arbitrator; or
                        (C)   Misconduct by an arbitrator prejudicing
                              the rights of a party to the arbitration
                              proceeding;
                  . . . .
            (Emphasis added).
      5
         The Bennetts argue that retroactive application of Nordic and
Madamba, which were decided after the Circuit Court ruled on the Motion to
Vacate, would be prejudicial because both parties relied upon earlier cases
that Nordic and Madamba partially overruled. See, e.g., Daiichi, 103 Hawai #i
at 339-40, 82 P.3d at 425-26 (citing Salud v. Fin. Sec. Ins. Co., 7 Haw. App.
329, 333, 763 P.2d 9, 11-12 (1988) ("when an arbitrator has a personal,
professional, or business relationship with a party, its counsel, principal,
or agent, a conflict of interest may arise sufficient to justify vacating that
arbitration award.") However, we reject the Bennetts' argument and decide the
merits of this appeal based on the current state of the law.

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mediator[.]"    On July 29, 2014, the Arbitrator disclosed, inter
alia:
                   4.   I have been involved in numerous mediation
            and arbitration proceedings in which the following
            persons were witnesses or submitted written expert
            reports: Brandon W. Erickson, Masa Fujioka, David
            Knox, Wendell F. Brooks, Jr., Larry Shinsato and Gary
            Chock.

                  5.    As counsel and the parties are aware, I
            have served as a Mediator in this matter prior to
            being appointed as Arbitrator. The parties have
            waived any objection to the undersigned serving as
            both Mediator and Arbitrator.
            . . . .
                  Please file any written comments/objections to
            the above-referenced disclosure with DPR within seven
            (7) days herefrom.

(Emphases added). The Chungs did not object to the Arbitrator's
disclosures.
          On February 11, 2015, the final Arbitration Award was
issued. Only thereafter, on May 13, 2015, in the Motion to
Vacate, did the Chungs assert for the first time that the
Arbitrator failed to disclose the Recommendation, arguing that
this lack of disclosure constituted evident partiality requiring
that the Arbitration Award be vacated.
          In denying the Motion to Vacate, the Circuit Court
acknowledged that its "role is not to second-guess the
arbitrator's award" and ruled that the Recommendation did not
create a reasonable impression of partiality, stating:6
            [T]he arbitrator's nondisclosure or alleged nondisclosure of
            a referral to the party who received the referral is not
            evident partiality, and this is undisputed that this -- this
            particular nondisclosure complained about by the movants was
            in the context of mediation.
            The objections to this nondisclosure as well as the
            nondisclosure after the award, I think the Court's
            conclusion is that these objections are untimely and they
            are waived, waived via stipulation, and the stipulation was
            attached in the opposition papers.

      6
         The Circuit Court did not enter written findings of fact or
conclusions of law in the Order Denying Motion to Vacate; notwithstanding, so
long as the court's reasoning is clearly stated on the record, we can address
the court's determination whether the disclosure standards were met. Nordic,
136 Hawai#i at 54, 358 P.3d at 26.

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(Emphases added). First, the Circuit Court is clearly correct
that the Chungs' claim is based on their allegation that Hunter
failed to disclose that he made expert recommendations to them.
Even if we accept these allegations as true, based on our review
of HRS § 658A-12(a) and applying the standards for disclosure in
this case, we conclude that these circumstances -- where the
Chungs were fully aware of the alleged undisclosed facts -- do
not establish evident partiality entitling them to vacate the
Arbitration Award. See Nordic, 136 Hawai#i at 46, 358 P.3d at 18
(noting the legislature adopted Section 12 of the Uniform
Arbitration Act (UAA) in its entirety, which is HRS § 658A-12,
and the Commentary to UAA section 12(a) provides, inter alia,
that disclosure requirements "assure that parties should have
access to all information that might reasonably affect the
potential arbitrator's neutrality.") (bracket omitted). The
Chungs have not met their burden of establishing evident
partiality warranting that the Arbitration Award be vacated.
           Second, it is undisputed in this case that the Chungs
stipulated to appoint Hunter as the Arbitrator and waived "any
and all conflicts arising from Mr. Hunter's role as a mediator."
It is also undisputed that the Chungs entered the Stipulation at
a time when they necessarily would have known of the facts that
they allege Hunter should have disclosed. Thus, the Chungs
knowingly waived their claims of evident partiality. They only
complained of non-disclosure after the Arbitration Award was
issued.
           "A respectable number of federal jurisdictions have
invoked the waiver principle under circumstances in which the
complaining party knew or should have known of the potential
partiality of an arbitrator but failed to raise an objection to
the arbitrator's appointment prior to the arbitration decision."
Nordic, 136 Hawai#i at 53, 358 P.3d at 25 (quoting Daiichi, 103
Hawai#i at 346, 82 P.3d at 432 (citing cases from the 1st, 2nd,
3rd, and 8th circuits)).
           "[W]aiver has been defined as consisting of knowledge,
actual or constructive, in the complaining party of the tainted

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relationship or interest of the arbitrator and the failure to act
on that knowledge." Daiichi, 103 Hawai#i at 346, 82 P.3d at 432
(citation and quotation marks omitted); see also Nordic, 136
Hawai#i at 52, 358 P.3d at 24. Here, the Chungs admittedly did
not object based on the Arbitrator's alleged non-disclosure of
the Recommendation to them until after issuance of the
Arbitration Award. The Chungs' objections based on Hunter's
alleged non-disclosure and evident partiality have thus been
waived.
           Therefore, IT IS HEREBY ORDERED that the "Amended Order
Denying Defendants' Motion to Vacate Arbitration Award Filed May
13, 2015," and the "Amended Judgment," both entered on October
25, 2016, by the Circuit Court of the First Circuit, are
affirmed.
           DATED: Honolulu, Hawai#i, April 21, 2021.

On the briefs:                        /s/ Lisa M. Ginoza
                                      Chief Judge
Carl H. Osaki,
for Defendants-Appellants/            /s/ Keith K. Hiraoka
Cross-Appellees.                      Associate Judge

Robert E. Badger,                     /s/ Clyde J. Wadsworth
for Plaintiffs-Appellees/             Associate Judge
Cross-Appellants.

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