Court Opinion

ID: 4160348
Source: CourtListenerOpinion
Date Created: 2017-04-13 21:05:43.900648+00
Date Added: 2024-06-11T07:46:46.294682
License: Public Domain

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                                                              Electronically Filed
                                                              Supreme Court
                                                              SCWC-14-0000970
                                                              13-APR-2017
                                                              07:53 AM

           IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

                            ---oOo---
  ____________________________________________________________

          RT IMPORT, INC., Respondent/Plaintiff-Appellee,

                                    vs.

   JESUS TORRES and MILA TORRES dba HAWAIIAN QUILT WHOLESALE,
               Petitioners/Defendants-Appellants,

                                    and

          WORLDWIDE FLIGHT SERVICES, INC., Defendant.
  ____________________________________________________________

                             SCWC-14-0000970

          CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
               (CAAP-14-0000970; CIV. NO. 12-1-1890)

                             APRIL 13, 2017

 RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

                 OPINION OF THE COURT BY McKENNA, J.

                            I.    Introduction

     Jesus and Mila Torres dba Hawaiian Quilt Wholesale (“the

Torreses”) appeal an arbitration award between them and RT

Import, Inc. (“RT Import”), raising four questions, of which
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only the first, relating to the circuit court’s award of fees

and costs, has merit.      We hold that the circuit court erred by

including in its judgment $4,738.74 that was not included in the

final arbitration award or otherwise allowed by law.

                                 II.   Background

A.    Court Proceedings Prior to Arbitration

      On May 24, 2012, RT Import filed a complaint in the

District Court of the First Circuit against both the Torreses

and Worldwide Flight Services (“WFS”) seeking $25,000 in damages

for merchandise allegedly misdelivered by WFS to the Torreses,

which was then converted by the Torreses.           The Torreses answered

the complaint and filed a cross-claim against WFS, seeking

indemnification and/or contribution in the event they were found

liable to RT Import.      The Torreses also filed a demand for jury

trial, and the case was then transferred to the circuit court.1

      After discovery, RT Import filed a petition to approve a

confidential good faith settlement with WFS pursuant to Hawaii

Revised Statutes (“HRS”) § 663-15.5 (Supp. 2012).            After the

Torreses withdrew their objection, the settlement between RT

Import and WFS was approved by the circuit court.

      A few weeks before the scheduled trial date, after

additional pre-trial proceedings and discovery, RT Import and

1
      The Honorable Edwin C. Nacino presided.

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the Torreses agreed to resolve their dispute through binding

arbitration under the auspices of Dispute Prevention and

Resolution, Inc. (“DPR”), and they filed a stipulation for

binding arbitration.

B.    Arbitration Proceedings

      The following facts were adduced in arbitration.            Although

the Torreses were to receive forty boxes of merchandise, WFS

mistakenly delivered eighty-eight boxes.           The mistaken delivery

contained eighteen boxes belonging to RT Import, thirty-six

belonging to the Torreses, and thirty-four boxes belonging to

another company.     The Torreses returned the thirty-four boxes

belonging to the other company, but they never acknowledged

receiving merchandise belonging to RT Import.

      The arbitrator ruled that although WFS’s misdelivery led to

the Torreses’ initial receipt and possession of RT Import’s

merchandise, the Torreses’ subsequent actions, including

removing RT Import’s box labels and selling the merchandise at

the Aloha Stadium Swap Meet, proved that they committed the

intentional tort of conversion.           The Final Award of Arbitrator

(“final award”) awarded RT Import a total of $106,711.62, with

subtotals of $71,663.33 for special damages and $35,000.00 for

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general damages for emotional distress.2         The arbitrator

specifically found:

            29. As the prevailing party, RT is entitled to the fair
            market value of the chattel, in addition to any special
            damages, including compensation for the time and money
            properly expended in pursuit of the property, plus
            emotional distress.
            30. The undisputed evidence adduced establishes that
            the fair market retail value of the merchandise [sic]
            $62,047.00.
            31. The undisputed evidence adduced from RT establishes
            the following costs related to this converted
            merchandise: freight charges of $2,777.53, customs entry
            services of $1,128.80, airport fees of $35.00, business
            related airline travel of $2,175.00, incidental travel
            expenses of $3,500.00.3 All other claims of expenses are
            denied.
            32. RT is also entitled to an award of damages for
            emotional distress.
            33. RT is entitled to be awarded its arbitration costs and
            expenses.
            34. In light of the fact that the claims asserted by
            RT are tort claims, RT is not entitled to an award of
            attorney’s fees and costs.

     The arbitrator also ordered:

                  The Respondents are responsible for 100% of the
            arbitration fees and costs. The Claimant is therefore
            awarded, and the Respondents shall reimburse to the
            Claimant directly, all arbitration related fees and costs
            paid by the Claimant to DPR, and shall pay said fees and
            costs as directed by Dispute Prevention & Resolution, Inc.

2
      RT Import is a corporation. We are unaware of any legal authority that
permits an award of emotional distress damages to a corporation. Numerous
reported cases preclude emotional distress damages in favor of corporations.
See, e.g., F.D.I.C. v. Hulsey, 22 F.3d 1472, 1489 (10th Cir. 1994)(applying
Oklahoma law); Interphase Garment Sol., LLC v. Fox Television Stations, Inc.,
566 F. Supp. 2d 460, 466 (D. Md. 2008)(applying Maryland law); Earth
Scientists (Petro Serv.) Ltd. v. U.S. Fidelity & Guar. Co., 619 F. Supp.
1465, 1474 (D. Kansas 1985)(applying Kansas law); Wilson v. Colonial Penn
Life Ins. Co., 454 F. Supp. 1208, 1212, n.9 (D. Minn. 1978)(applying
Minnesota law). The emotional distress award was not challenged or appealed,
but, in any event, parties who submit their claims to binding arbitration
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. Nordic PCL Constr., Inc. v. LPIHGC, LLC, 136 Hawaii 29,
41, 358 P.3d 1, 14 (2015).
3
      The amounts in paragraphs 30 and 31 total $71,663.33 in special
damages.

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(Emphasis added.)      Pursuant to this portion of the final award,

DPR sent RT Import a final invoice (“DPR invoice”), directing

the Torreses to immediately remit $3,616.75 to RT Import (via

their attorney) as reimbursement for arbitration fees.             This

amount was to reimburse RT Import for its advance toward the

arbitrator’s fees.

      Several weeks after DPR issued its invoice, however, RT

Import sent a letter directly to the Torreses stating, “As

agreed by the parties and ordered by the Arbitrator, below

please find for your review and payment, the fees and costs of

this Arbitration matter.       All supporting invoices in regard to

costs are enclosed . . . $8,355.49.”          (“RT Import invoice”)         The

RT Import invoice listed the following costs:

            DPR Order/letter: $3,616.75
            Postage, Photocopying Costs: $2,278.29
            Deposition transcript of J. Torres, M. Torres, C. Murata:
            $2,244.75
            Services of process regarding depositions: $215.70

These amounts total $8,355.49.        When the $3,616.75 in

arbitration fees reflected in the DPR invoice is subtracted, the

difference is $4,738.74.

C.    Further Circuit Court Proceedings

      Although they had stipulated to submit this case to binding

arbitration, the Torreses filed a Notice of Appeal and Request

for Trial De Novo of the final award, citing Rule 22 of the

Hawai‘i Arbitration Rules.       On the same day, the Torreses also

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filed a motion with DPR to set aside the final award.            The

Torreses alleged that RT Import had been made whole through the

confidential settlement, rendering the case moot, and that the

arbitrator lacked subject matter and personal jurisdiction.

     RT Import opposed this motion before DPR, arguing that the

jurisdictional arguments were meritless, that the parties had

stipulated to binding arbitration, and that RT Import had not

been made whole by its settlement with WFS.          DPR responded that

it had no authority under HRS § 658A or DPR’s Arbitration Rules

to rule on the motion.

     RT Import then filed a motion in the circuit court to

confirm the final award pursuant to HRS § 658A-22.           RT Import

requested that judgment be entered in its favor in the amount of

$106,663.33, plus $8,355.49 in costs paid for postage,

photocopying, deposition transcripts, and service of process

costs related to the arbitration as well as $1,692.80 for

attorney’s fees incurred in bringing the motion.           RT Import

included both the DPR invoice and RT Import invoice in its

motion to confirm.

     The Torreses incorporated the arguments contained in their

motion with DPR in their opposition memorandum to RT Import’s

circuit court motion to confirm.         The Torresses did not file a

motion to vacate or modify the award with the circuit court.

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      The circuit court granted RT Import’s motion to confirm the

final award and entered a judgment awarding RT Import a total of

$116,759.91, comprised of $106,711.62 for damages, $8,355.49 for

“Plaintiff’s Arbitration attorney’s fees and costs,” and

$1,692.80 for “Plaintiff’s Costs of Motion for an Order to

Confirm Final Award of Arbitrator Dated April 2, 2014.”

D.    Appeal to the Intermediate Court of Appeals (“ICA”)

      On appeal to the ICA, the Torreses asserted that the

circuit court abused its discretion by: (1) concluding that they

were not entitled to a trial de novo on the grounds that this

case was not in the Court-Annexed Arbitration Program; (2)

awarding attorney’s fees and costs to RT Import despite the

arbitrator’s ruling that attorney’s fees were not available for

this tort matter; and (3) granting the motion to confirm the

final award without confirming whether the arbitrator had

subject matter and personal jurisdiction.           The Torreses also

alleged that DPR’s arbitration administrator abused its

discretion by refusing to hear and decide their motion to set

aside the final award pursuant to the Hawaii Arbitration Rules.4

      In a summary disposition order, the ICA determined that the

Torreses’ appeal was without merit.         RT Imp., Inc. v. Torres,

No. CAAP-14-0000970, 2016 WL 6125676, at *1 (Haw. Ct. App. Oct.
4
       DPR’s arbitration administrator, which is a court-annexed, non-binding
arbitration alternative dispute resolution process, has no connection to the
Hawaii Arbitration Rules.

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20, 2016).    The ICA resolved the Torreses’ points on appeal as

follows:

            (1) when the circuit court heard RT Import’s Motion to
            Confirm Award, Appellants did not raise HRS chapter 658A as
            a basis for challenging the arbitration award;
            (2) the DPR case manager had no authority to consider or
            rule on the Appellants' Motion to Set Aside under HRS
            chapter 658A; and
            (3) this case was never part of the Court–Annexed
            Arbitration Program or subject to the rules of the program,
            but instead was conducted pursuant to HRS chapter 658A.

The ICA therefore affirmed the circuit court’s confirmation of

the final arbitration award and judgment.

E.    Application for Writ of Certiorari

      The Torreses raise the following four questions on

certiorari:

            1. Whether the ICA gravely erred in concluding that the
            circuit court properly awarded attorney’s fees in an
            arbitration case where the awarding of attorney’s fees was
            precluded by the arbitrator pursuant to the American rule
            and where no language in the arbitration agreement
            permitted the awarding of attorney’s fees?

            2. Whether the ICA gravely erred in concluding an
            arbitration case may proceed to trial and a verdict may be
            obtained, even where the facts show that prior to the
            commencement of the arbitration trial, the injured party
            was made whole prior to the commencement of that trial?

            3. Whether the ICA gravely erred in affirming the award of
            an arbitration award of $106,711.62, where Plaintiff only
            sought $15,800 in damages?

            4. Whether the ICA gravely erred in concluding that measure
            of damages in case [sic] tort case involving the tort of
            conversion is the value of the chattel at the time of the
            judgment?

                        III. Standards of Review

A.    Review of an arbitration award

                  Where a party challenges an arbitration award, the
            following precepts are applicable. First, because of the
            legislative policy to encourage arbitration and thereby

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             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.

             Second, correlatively, judicial review of an arbitration
             award is confined to the strictest possible limits. An
             arbitration award may be vacated only on the four grounds
             specified in HRS § 658–9 and modified and corrected only on
             the three grounds specified in HRS § 658–10. Moreover, the
             courts have no business weighing the merits of the award.

             Third, HRS §§ 658–9 and –10 also restrict the authority of
             appellate courts to review judgments entered by circuit
             courts confirming or vacating the arbitration awards.

             . . . .

             The promulgation of HRS chapter 658A has not materially
             changed this standard of review. Judicial review of
             arbitration awards remains limited to the statutory grounds
             for confirmation, vacatur, modification, and correction.

Nordic PCL Constr., Inc., 136 Hawaii at 41-42, 358 P.3d at 13-

14.

B.     Statutory interpretation

             Statutory interpretation is a question of law reviewable de
             novo. Our construction of statutes is guided by the
             following rules:

             First, the fundamental starting point for statutory-
             interpretation is the language of the statute itself.
             Second, where the statutory language is plain and
             unambiguous, our sole duty is to give effect to its plain
             and obvious meaning. Third, implicit in the task of
             statutory construction is our foremost obligation to
             ascertain and give effect to the intention of the
             legislature, which is to be obtained primarily from the
             language contained in the statute itself. Fourth, when
             there is doubt, doubleness of meaning, or indistinctiveness
             or uncertainty of an expression used in a statute, an
             ambiguity exists.

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Panado v. Bd. of Trs., Emps.’ Ret. Sys., 134 Hawaii 1, 10-11,

332 P.3d 144, 153-54 (2014) (internal quotation marks and

citations removed).

                              IV. Discussion

A.    The circuit court erred by including in its judgment
      $4,738.74 not included in the arbitration award and not
      allowable under HRS § 658A-25.

      In their first question on certiorari, the Torreses

challenge the circuit court’s award of “attorney’s fees” as part

of the judgment, alleging that such fees were not authorized by

the arbitrator.

      HRS § 658A-25 (Supp. 2012) “Judgment on award;

attorney's fees and litigation expenses” provides:

            (a) Upon granting an order confirming, vacating without
            directing a rehearing, modifying, or correcting an award, the
            court shall enter a judgment in conformity therewith. The
            judgment may be recorded, docketed, and enforced as any other
            judgment in a civil action.

            (b) A court may allow reasonable costs of the motion and
            subsequent judicial proceedings.

            (c) On application of a prevailing party to a contested judicial
            proceeding under section 658A-22, 658A-23, or 658A-24, the court
            may add reasonable attorney’s fees and other reasonable expenses
            of litigation incurred in a judicial proceeding after the award
            is made to a judgment confirming, vacating without directing a
            rehearing, modifying, or correcting an award.

HRS § 658A-25.     There were two amounts in the judgment

characterized as “attorney’s fees,” both of which have been

challenged by the Torreses in the circuit court and on appeal.

These amounts are the $1,692.80 award characterized by the

circuit court as “Plaintiff’s Costs of Motion” and the $8,355.49

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award characterized by the circuit court as “Plaintiff’s

Arbitration attorney’s fees and costs.”

     1.     The $1,692.80 award was properly included in the
            circuit court judgment pursuant to HRS § 658-23(c).

     The circuit court characterized the $1,692.80 in attorney’s

fees incurred by RT Import in the judicial proceedings to

confirm the final award as “Plaintiff’s Costs of Motion,” which

appear to correspond to amounts allowed under HRS § 658A-25(b)

(Supp. 2012).     The amounts were for attorney’s fees in bringing

the motion to confirm the final award under HRS § 658A-22 (Supp.

2012).    Pursuant to the language of the statute, the amounts are

therefore governed by HRS § 658A-25(c).

     Although the $1,692.80 was mischaracterized, HRS § 658A-

25(c) allows a court to award attorney’s fees incurred in

judicial proceedings to confirm an arbitration award when a

motion to confirm award under HRS § 658A-22 is contested. See In

re Arbitration Between United Pub. Workers, AFSCME, Local 646,

AFL-CIO and City and Cty. of Honolulu, 119 Hawaii 201, 209, 194
P.3d 1163, 1171 (App. 2008) (noting that attorney’s fees on a

motion to confirm award are only allowable to a prevailing party

to a contested judicial proceeding under HRS §§ 658A-22, 658A-

23, or 658A-24).

     In this case, the Torreses contested RT Import’s HRS §

658A-22 judicial proceedings to confirm the award.

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Therefore, the circuit court’s judgment properly included the

amount of $1,692.80, as it was awarded pursuant to HRS § 658A-

25(c) for attorney’s fees incurred in the judicial proceeding

regarding the contested award.

     2.    The circuit court was without authority         to include in
           its judgment $4,738.74 of the $8,355.49         award
           characterized as arbitration attorneys’         fees and costs
           because that amount was not included in         the
           arbitration award.

     With respect to the $8,355.49 award characterized by the

circuit court as arbitration attorneys’ fees and costs, this

amount included the: (1) $3,616.75 for arbitrator’s fees in the

DPR invoice, and (2) additional amounts totalling $4,738.74 in

the RT Import invoice, which consisted of $2,278.29 in postage

and photocopying costs, $2,244.75 for deposition transcripts,

and $215.70 for service of process costs for depositions.

     The arbitrator’s final award, however, stated as follows:

           The Respondents are responsible for 100% of the arbitration
           fees and costs. The Claimant is therefore awarded, and the
           Respondents shall reimburse to the Claimant directly, all
           arbitration related fees and costs paid by the Claimant to
           DPR, and shall pay said fees and costs as directed by
           Dispute Prevention & Resolution, Inc.

(Emphasis added.)     The DPR invoice, issued pursuant to the final

award, directed the Torreses to pay $3,616.75 for the

arbitrator’s fees.     Although the separate RT Import invoice

asserted that the parties had agreed to the additional amounts,

the Torreses object to these amounts characterized as

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arbitration attorney’s fees throughout these judicial

proceedings.

      Whether the circuit court could include the extra $4,738.74

not “directed by DPR” to be paid by the Torreses to RT Import is

an issue of statutory interpretation.          The plain language of HRS

§ 658A-22 authorizes the circuit court to confirm “the award.”5

The “award” includes the $3,616.75 as “directed by DPR,” but not

the additional $4,738.74 separately invoiced directly by RT

Import to the Torreses.         Therefore, the circuit court erred by

including in its judgment the $4,738.74, which was not part of

the arbitration award.

B.    Based on the deference given to arbitration awards, the
      court did not err in confirming the remainder of the final
      arbitration award in its entirety.

      In the second, third, and fourth questions raised on

certiorari, the Torreses allege that the arbitrator erred by

awarding damages because RT Imports had been made whole by its

settlement with WFS, by awarding damages that exceeded the

$15,800 purportedly originally sought by RT Imports, and by

applying an incorrect measure of damages.           In Section III(A)

5
      HRS § 658A-22 provides:

            Confirmation of award. After a party to an arbitration
            proceeding receives notice of an award, the party may make
            a motion to the court for an order confirming the award at
            which time the court shall issue a confirming order unless
            the award is modified or corrected pursuant to section
            658A-20 or 658A-24 or is vacated pursuant to section 658A-
            23.

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above, we outlined the standards governing judicial review of an

arbitration award, including:

           because 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.

           Second, correlatively, judicial review of an arbitration
           award is confined to the strictest possible limits. . . .
           Moreover, the courts have no business weighing the merits
           of the award.

Nordic PCL Constr., Inc., 136 Hawaii at 41, 358 P.3d at 13.

     In addition, HRS § 658A-21(c)(Supp. 2012) specifically

provides in relevant part:

           [A]n arbitrator may order such remedies as the arbitrator
           considers just and appropriate under the circumstances of
           the arbitration proceeding. The fact that such a remedy
           could not or would not be granted by the court is not a
           ground for refusing to confirm an award under section 658A-
           22 . . . .

     Accordingly, pursuant to the standards governing judicial

review of arbitration awards, the second, third, and fourth

questions on certiorari are outside the scope of permitted

judicial review.

                              V. Conclusion

     In this case, the circuit court erred by including in the

judgment confirming the arbitration award $4,738.74 directly

billed by RT Import to the Torreses, which was not a part of the

final award.   Accordingly, we otherwise affirm but vacate the

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ICA’s Judgment on Appeal and the circuit court’s Judgment as to

$4,738.74 of the $8,355.49 for “Plaintiff’s Arbitration

attorney’s fees and costs,” and remand this case to the circuit

court for further proceedings consistent with this opinion.                In

all other respects, the ICA’s Judgment on Appeal is affirmed.

Barry L. Sooalo                    /s/ Mark E. Recktenwald
for petitioner
                                   /s/ Paula A. Nakayama
Robert E. Badger
for respondent                     /s/ Sabrina S. McKenna

                                   /s/ Richard W. Pollack

                                   /s/ Michael D. Wilson

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