Court Opinion

ID: 2751063
Source: CourtListenerOpinion
Date Created: 2014-11-13 19:03:27.334291+00
Date Added: 2024-06-11T11:25:59.168330
License: Public Domain

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                                                               Electronically Filed
                                                               Supreme Court
                                                               SCWC-11-0000151
                                                               13-NOV-2014
                                                               07:51 AM

            IN THE SUPREME COURT OF THE STATE OF HAWAII

                            ---oOo---
________________________________________________________________

         ASSOCIATION OF APARTMENT OWNERS OF DISCOVERY BAY,
                   Respondent/Plaintiff-Appellee,

                                     vs.

        RALPH MITCHELL, Petitioner/Defendant-Appellant.
________________________________________________________________

                             SCWC-11-0000151

          CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
              (CAAP-11-0000151; CIV. NO. 10-1-1871-08)

                            NOVEMBER 13, 2014

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

                 OPINION OF THE COURT BY McKENNA, J.

I.    Introduction

      We have accepted certiorari in this case to vacate the

ICA’s judgment on appeal and to remand an award of attorneys’

fees and costs to the Circuit Court of the First Circuit

(“circuit court”).     We hold that, on remand, the circuit court

shall determine whether Hawaii Revised Statutes (“HRS”)

§ 514B-161(a) (Supp. 2009) applies in this case.            Further, if
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the statute applies, the circuit court should make a finding, on

the record, as to whether the Association of Apartment Owners of

Discovery Bay (“AOAO”) refused to mediate this dispute, and if

so, the circuit court should take into consideration such

refusal in determining whether to award attorneys’ fees and

costs.    We also hold that, on remand, the circuit court shall

determine whether four time entries were correctly billed to the

instant matter.

II.   Background

      On August 30, 2010, the AOAO filed a complaint against

Ralph Mitchell, a condominium owner in the AOAO, for declaratory

and injunctive relief.       The Complaint alleged that on August 11,

2010, Mitchell submitted a petition to the AOAO to conduct a

special meeting of the AOAO to remove one or more of the AOAO

Board members.      The AOAO alleged that the petition did not

contain at least 25% of the owners’ signatures, contrary to the

requirements of HRS § 514B-121(b) (Supp. 2008).             According to

the AOAO, Mitchell insisted that he intended to hold a special

meeting anyway.      Therefore, the AOAO prayed for declaratory

relief in the form of an order finding that because Mitchell did

not have the requisite percentage of owner signatures on his

petition, there was no basis for conducting a special meeting.

The AOAO also alleged that Mitchell was obtaining signatures via

misrepresentation, so the AOAO also sought to enjoin this

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conduct.     After Mitchell failed to answer the Complaint, the

circuit court1 entered a default against him.

      The AOAO then filed a Motion for Summary Judgment (“MSJ”).

Attached to the motion was a spreadsheet prepared by the AOAO’s

property manager showing that, when the names of non-owners were

removed from Mitchell’s petition, he had only 24.1029% of the

owners’ signatures on the petition.           The AOAO also attached an

updated spreadsheet showing that even fewer owners (23.7619%)

were interested in holding a special meeting, as many owners had

withdrawn their names from Mitchell’s petition.              Therefore, the

AOAO argued that no genuine issue of material fact existed

regarding whether Mitchell had the requisite 25% of owners’

signatures on his petition, and the AOAO was entitled to

judgment as a matter of law.         The AOAO also reserved its right

to file a motion seeking attorney’s fees and costs for having to

file the MSJ.      The circuit court granted the AOAO’s MSJ.

      Mitchell then submitted his Motion for Reconsideration of

the circuit court’s order granting the AOAO’s MSJ.              Mitchell

asserted that he obtained 34.2969% of owners’ signatures on his

petition, attaching his list of owners and their ownership

percentages.      Mitchell also stated he sought to mediate the

dispute in September 2010, but the AOAO did not respond to his

request and, instead, “plowed ahead with this litigation.”

      1
             The Honorable Patrick W. Border presided.

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Mitchell requested that the circuit court set aside its order

granting the AOAO’s MSJ and stay the case to allow the parties

to mediate the dispute.     The circuit court denied the motion.

      The AOAO then filed a motion seeking $14,332.42 in fees and

costs under HRS § 514B-157(a) and (b) (2006), which provide, in

relevant part, the following (with emphases added):

          Attorneys’ fees, delinquent assessments, and expenses of
          enforcement. (a) All costs and expenses, including
          reasonable attorneys’ fees, incurred by or on behalf of the
          association for: . . . .
                (3) Enforcing any provision of the declaration,
                bylaws, house rules, and this chapter, or the rules
                of the real estate commission;
          against an owner, occupant, tenant, employee of an owner,
          or any other person who may in any manner use the property,
          shall be promptly paid on demand to the association by such
          person or persons; provided that if the claims upon which
          the association takes any action are not substantiated, all
          costs and expenses, including reasonable attorneys’ fees,
          incurred by any such person or persons as a result of the
          action of the association, shall be promptly paid on demand
          to such person or persons by the association.
               (b) . . . If any claim by an owner is not
          substantiated in any court action against an association,
          any of its officers or directors, or its board to enforce
          any provision of the declaration, bylaws, house rules, or
          this chapter, then all reasonable and necessary expenses,
          costs, and attorneys’ fees incurred by an association shall
          be awarded to the association, unless before filing the
          action in court the owner has first submitted the claim to
          mediation, or to arbitration under subpart D, and made a
          good faith effort to resolve the dispute under any of those
          procedures.

      Mitchell filed an Opposition to the AOAO’s fees and costs

motion.   Mitchell argued that the AOAO “should be estopped from

seeking fees and costs, for they violated HRS § 514B-161 by

refusing to respond to Mitchell’s request to mediate the issues

raised in this case.”     At the time this litigation commenced,

HRS § 514B-161(a) provided the following:

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             If a unit owner or the board of directors requests
             mediation of a dispute involving the interpretation or
             enforcement of the association’s declaration, bylaws or
             house rules, or a matter involving part VI, the other party
             in the dispute shall be required to participate in
             mediation. Each party shall be wholly responsible for its
             own costs of participating in mediation, unless at the end
             of the mediation process, both parties agree that one party
             shall pay all or a specified portion of the mediation
             costs. If a unit owner or the board of directors refuses
             to participate in the mediation of a particular dispute, a
             court may take this refusal into consideration when
             awarding expenses, costs, and attorneys’ fees.

(Emphasis added.)         According to Mitchell, he requested mediation

in early September 2010, which meant that “any prospect of his

calling a special meeting on his own[] was off the table.”                 To

support his statement, he appended a communication from the

Mediation Center of the Pacific, Inc., which had scheduled

mediation for September 27, 2010.          He thus blamed the AOAO for

deciding to litigate, and sought to have the AOAO bear its own

fees and costs for its decision.

      Mitchell also objected to the following four time entries

as “hav[ing] absolutely no bearing on this case”:

9/22/2010          TMR         Review and respond to emails re scam of
                   Japanese tourists at Discovery Bay        0.20 hrs
9/23/2010          TMR         Review and respond to emails re discovery
                   matter                                    0.30 hrs

11/01/2010         CPM         Tele conf with Turman re subpoena in Itagaki
                   case                                      0.20 hrs

11/18/2010         MHB         Review and organize facts re drug arrest,
                   hiding of assets, asset seizure and forfeiture, federal
                   indictment                                0.40 hrs

      The AOAO’s Reply did not address the four time entries

Mitchell challenged.        The AOAO did, however, point out that HRS

§ 514B-161(a) allows a court to “take [a refusal to participate

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in the mediation of a particular dispute] into consideration

when awarding fees and costs,” but does not preclude an award of

fees altogether.

      At a hearing on the motion, the circuit court granted the

AOAO’s motion for attorney’s fees and costs in the reduced

amount of $10,730.92, after determining that a reasonable

attorney billing rate was $150.00 per hour (versus the range of

$185-250 requested by the AOAO), and after cutting hours billed

for tasks that the circuit court did not consider to be complex.

The circuit court explained its reasoning as follows:

          THE COURT: Mr. Perez-Mesa, I looked at the –- I looked at
          the bill and there’s several things that I noted from it.
          The temporary restraining order if I look at the cost bill
          is said to have undergone several revisions and to have
          taken 11.1 hours to prepare. That amount of time seems
          excessive in light of the fact that the particular type of
          work that’s involved is fairly mainstream and not a very
          exotic form, so I would allow 5 hours of billing to prepare
          the document.
                There were in e-mails a total of 5.2 hours of
          examining e-mails, which if billed at the top rate would be
          for $1,300. The e-mails would seem to be for the most part
          unnecessary, particularly in light of the fact that there
          were significant billings, in fact, 7.3 hours for the time
          spent with John Morris. And I know that he has some input
          because he advises the board on their procedural matters
          and so some contact with Mr. Morris would be appropriate,
          but I would ask that you adjust the bill by taking into
          account that the total number of hours for the bill would
          be –- that would be allowable would be 5 hours for the
          preparation of the TRO paperwork; that the bill would not
          include the time spent on the e-mails; and that the total
          amount of time that would be allowable for Mr. Morris in
          consultation with him would be 3 hours.
                The –- because I take a look at the complexity, the
          relative complexity of the work and I don’t doubt that on
          certain types of work that the things that are perhaps at
          the cutting edge of litigation, but the top billing rate
          for both you and Mr. Revere would be somewhat higher. I
          think the amounts that I would allow, which is $150 per
          hour, is appropriate to the type of work that is involved
          here. So would you please adjust the bill. When it is

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            submitted I will sign it and the motion for –- and also the
            incidental expenses are okay.

            MR. PEREZ-MESA: Your Honor, if we can summarize just so
            I’m clear, so 5 hours is okay for the TRO, the meeting with
            John Morris —-

            THE COURT: Three hours for live meeting with John Morris
            at that billing rate. Please remove the e-mails. I just
            think those are probably –- I recognize there’s a certain
            amount of getting up to speed on it. I wouldn’t bill him
            for the learning curve if you follow what I’m getting at.

The circuit court did not address the four time entries Mitchell

challenged.    The circuit court also did not address Mitchell’s

argument that the AOAO should be estopped pursuant to HRS

§ 514B-161 from seeking fees and costs for refusing to respond

to his request to mediate the issues in the case.            The circuit

court entered Final Judgment, and Mitchell timely appealed.

      B.   The ICA Appeal

      On appeal, Mitchell again argued that the AOAO’s refusal to

mediate the dispute precluded it from an entitlement of any fees

and costs under HRS § 514B-161(a).         Mitchell again challenged

the four time entries.      The AOAO did not address Mitchell’s

argument that its refusal to mediate precluded an award of fees

and costs under HRS § 514B-161, nor did it address the four time

entries.

      While Mitchell’s appeal was pending before the ICA, he sold

his Discovery Bay condominium unit.         Although the issue of

whether Mitchell obtained the requisite twenty-five percent of

owners’ signature for the special meeting thus became moot, the

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ICA went on to determine the question of attorneys’ fees and

costs, which is “ancillary to the underlying action and survives

independently under the Court’s equitable jurisdiction.”            Ass’n

of Apartment Owners of Discovery Bay v. Mitchell, CAAP-11-

0000151 (App. Feb. 24, 2014) (SDO) at 2-3 (citing Queen Emma

Found. v. Tatibouet, 123 Hawaiʻi 500, 508, 510, 236 P.3d 1236,

1244, 1246 (App. 2010)).      The ICA then determined that the AOAO

was the prevailing party in the underlying action, “without

regard to whether [the ICA thought] the trial court’s decision

on the underlying merits [was] correct,” because the AOAO had

been granted its MSJ.     Mitchell, SDO at 4 (citing Tatibouet, 123

Hawaiʻi at 510, 236 P.3d at 1246).

      As to Mitchell’s contention that the AOAO’s refusal to

mediate should have precluded it from an award of attorney’s

fees and costs under HRS § 514B-161(a), the ICA stated that

“such refusal may be taken into consideration in the award of

attorneys fees and costs, but [the statute] does not mandate

that it be considered.”     Mitchell, SDO at 7.       As to Mitchell’s

challenge to the four time entries, the ICA concluded, “It is

clear from the discussion the Circuit Court had with counsel

that the Circuit Court carefully examined the invoices before

adjusting the fee award.”      Mitchell, SDO at 6.      Therefore, the

ICA affirmed the circuit court’s judgment.         Mitchell, SDO at 7.

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It subsequently denied Mitchell’s Motion for Reconsideration,

which once again challenged the four time entries.

III.    Standard of Review

       “The trial court’s grant or denial of attorney’s fees and

costs is reviewed under the abuse of discretion standard.”

Sierra Club v. Dep’t of Transp., 120 Hawaiʻi 181, 197, 202 P.3d

1226, 1242 (2009) (citations and brackets omitted).            “The trial

court abuses its discretion if it bases its ruling on an

erroneous view of the law or on a clearly erroneous assessment

of the evidence.     In other words, an abuse of discretion occurs

where the trial court has clearly exceeded the bounds of reason

or disregarded rules or principles of law or practice to the

substantial detriment of a party litigant.”           Maui Tomorrow v.

Bd. of Land & Natural Res., 110 Hawaiʻi 234, 242, 131 P.3d 517,

525 (2006) (internal quotation marks, citations, and brackets

omitted).

IV.    Discussion

       On certiorari, Mitchell challenges the ICA’s affirmance of

the fees and costs award as a matter of law, arguing that the

AOAO’s refusal to participate in mediation precluded it from

receiving an award of fees and costs under HRS § 514B-161(a).

HRS § 514B-161(a) contemplates a party’s refusal to participate

in mediation, and such refusal may impact a fees and costs

award, but it does not preclude the same:          “If a party refuses

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to participate in the mediation of a particular dispute, a court

may take this refusal into consideration when awarding expenses,

costs, and attorneys’ fees.”         While HRS § 514B-161(a) allows a

court the discretion to take a party’s refusal to mediate into

consideration in awarding fees and costs, we cannot assume that

the circuit court in this case exercised such discretion simply

by virtue of having reduced the AOAO’s fee award, because the

hearing transcript is silent on the matter.             Mitchell expressly

raised the applicability of the statute (albeit as a basis for

precluding a fee award altogether).           Given the legislature’s

intent to encourage mediation of condominium disputes,2 the

circuit court should have addressed whether HRS § 514B-161(a)

applied.     In doing so on remand, the circuit court should

determine whether the AOAO refused to participate in mediation,

and if so, the circuit court should consider, on the record,

      2
            From our review of the record on appeal, we assume (but do not
decide) that Chapter 514B applies in this case. In 2004, the legislature
enacted Chapter 514B as a recodification of the Condominium Property Regime
chapter (HRS Chapter 514A). 2004 Haw. Sess. Laws Act 164, at 755. The 2004
legislature referred to the Hawaii Real Estate Commission’s December 31, 2003
Final Report to the Legislature as an “aid in understanding and interpreting”
the Act that became Chapter 514B. 2004 Haw. Sess. Laws Act 164, at 755.
That report, in turn, stressed the need for improved alternative dispute
resolution in condominium communities, because “the ‘mandatory’ mediation
provisions [of Chapter 514A] are essentially voluntary (with boards refusing
to mediate or going through the motions to avoid the appearance of non-
cooperation). . . .” Hawaii Real Estate Commission, “Final Report to the
Legislature, Recodification of Chapter 514A, Hawaii Revised Statutes
(Condominium Property Regimes), in Response to Act 213, Section 4 (SLH
2000),” at 34. In the instant case, Mitchell contends that the AOAO refused
to mediate. In passing HRS § 514B-161(a), the legislature encouraged the
courts to take into consideration a refusal to participate in the mediation
of a dispute when awarding attorneys’ fees and costs.

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such refusal in determining whether to award attorneys’ fees and

costs.

      On certiorari, Mitchell also continues to challenge the

four time entries as belonging to a different matter.              From what

we are able to glean from the record on appeal, it is unclear

how the four time entries are connected to the instant

litigation.     Although Mitchell objected to the time entries

before the circuit court, the AOAO’s counsel never explained the

four time entries in its reply in support of its motion for fees

and costs, or at the hearing on that motion.            The circuit court,

for its part, did not inquire about the four time entries at the

hearing on the motion for fees and costs.           The ICA, for its

part, assumed that the circuit court “carefully examined” the

fee request, although the record seems to show otherwise, with

respect to these four time entries.          Mitchell, SDO at 7.      It

would appear that no court has yet to scrutinize the propriety

of these four time entries.        We therefore remand this case to

the circuit court to determine whether these four time entries

were correctly included in the Mitchell matter.

V.    Conclusion

      We therefore vacate the ICA’s judgment on appeal and remand

this case to the circuit court.         On remand, the circuit court

shall determine whether HRS § 514B-161(a) applies in this case.

If it does, the circuit court should determine whether the AOAO

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refused to participate in mediation, and if so, the circuit

court should consider, on the record, such refusal in

determining whether to award attorneys’ fees and costs.           On

remand, the circuit court shall also determine whether four time

entries were correctly billed to the instant matter.

Lila Barbara Kanae               /s/ Mark E. Recktenwald
for petitioner
                                 /s/ Paula A. Nakayama
Terrance M. Revere and
Malia R. Nickison-Beazley        /s/ Sabrina S. McKenna
for respondent
                                 /s/ Richard W. Pollack

                                 /s/ Michael D. Wilson

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