Cnty. of Hawai‘i v. UniDev, LLC

• Decision Date: 22 May 2013
• Docket Number: No. SCWC–10–0000188.,SCWC–10–0000188.
• Parties: COUNTY OF HAWAI‘I, a municipal corporation of the State of Hawai‘i, Respondent/Plaintiff–Appellee, v. UNIDEV, LLC, a Delaware limited liability company, Petitioner/Defendant and Counterclaimant–Appellant, v. County of Hawai‘i, a municipal corporation of the State of Hawai‘i, Hawaii Island Housing Trust, a Hawai‘i corporation; and Waikoloa Workforce Housing, LLC, a Hawai‘i limited liability company, Respondents/Counterclaim Defendants–Appellees. (Civil No. 09–1–264K) County of Hawai‘i, a municipal corporation of the State of Hawai‘i, Respondent/Plaintiff–Appellant, v. UNIDEV, LLC, a Delaware limited liability company, and UNIDEV Hawaii, LLC, a Delaware limited liability company, Petitioners/Defendants–Appellees. (Civil No. 10–1–427K)
• Court: Hawaii Supreme Court

129 Hawai'i 378

301 P.3d 588

COUNTY OF HAWAI‘I, a municipal corporation of the State of Hawai‘i, Respondent/Plaintiff–Appellee,

v.UNIDEV, LLC, a Delaware limited liability company, Petitioner/Defendant and Counterclaimant–Appellant,

v.County of Hawai‘i, a municipal corporation of the State of Hawai‘i, Hawaii Island Housing Trust, a Hawai‘i corporation; and Waikoloa Workforce Housing, LLC, a Hawai‘i limited liability company, Respondents/Counterclaim Defendants–Appellees. (Civil No. 09–1–264K)

County of Hawai‘i, a municipal corporation of the State of Hawai‘i, Respondent/Plaintiff–Appellant,

v.UNIDEV, LLC, a Delaware limited liability company, and UNIDEV Hawaii, LLC, a Delaware limited liability company, Petitioners/Defendants–Appellees. (Civil No. 10–1–427K)

No. SCWC–10–0000188.

Supreme Court of Hawai‘i.

May 22, 2013.

Paul Alston, Maren L. Calvert, and Claire Wong Black, Honolulu, for petitioner.

Katherine A. Garson, Laureen L. Martin, Wailuku, and Joseph K. Kamelamela, for respondent.

RECKTENWALD, C.J., NAKAYAMA, ACOBA, McKENNA, and POLLACK, JJ.

Opinion of the Court by ACOBA, J.

We hold first, that, Hawai‘i Revised Statutes (HRS) § 658A–28(a) (Supp.2005),² which enumerates the appeals that "may" be taken from a court order concerning an arbitration proceeding, does not represent an exclusive list of appealable orders. Thus, although not listed in HRS § 658A–28(a), the order compelling arbitration in the instant case, is sufficiently "final" under our collateral order doctrine to be appealable under the general civil matters appeal statute, HRS § 641–1 (Supp.2005).³ We therefore affirm the similar conclusion in the October 17, 2011 Order of the Intermediate Court of Appeals (ICA) Denying [the] September 19, 2011 Motion to Dismiss Appeal for Lack of Jurisdiction filed by Petitioners/Defendants–Appellees UniDev, LLC (UniDev) and UniDev Hawai‘i, LLC (UniDev Hawai‘i) (collectively, Petitioners). Second, we hold that under the circumstances of this case, the scope of the arbitration clause contained in the "Development Services Agreement" (DSA) between Respondent/Plaintiff–Appellant County of Hawai‘i (Respondent) and UniDev encompassed all claims of Respondent and the counterclaims of Petitioners. To the extent that the ICA held otherwise, the ICA's August 31, 2012 opinion and October 18, 2012 judgment on appeal are vacated. The December 17, 2010 Order Granting Counterclaimant [UniDev's] Motion to Compel Alternative Dispute Resolution and to Stay Proceedings, and the January 3, 2011 Amended Order Granting Counterclaimant [UniDev's] Motion to Compel Alternative Dispute Resolution and to Stay Proceedings of the Circuit Court of the Third Circuit⁴ (the court) are affirmed. This case is remanded to the court for further proceedings consistent with this opinion.

I.

A.

In April 2005, Respondent awarded UniDev a contract to develop an affordable housing development project (the Project) in Waikoloa Village on the island of Hawai‘i.⁵ On March 2, 2006, the parties entered into the DSA. Under the DSA, UniDev agreed to construct "approximately 800 to 1,200" housing units in the Waikoloa area. Respondent initially owned the 288 acres of land that UniDev agreed to develop. However, pursuant to the DSA, Respondent would "transfer title to the [Property] to a to-be-formed non-profit entity," and Respondent would "assign all of its rights and obligations in and under [the DSA] to [that nonprofit entity]."

The DSA also contained a provision regarding alternative dispute resolution. The parties agreed that if mediation of a dispute was not successful, the parties would proceed to arbitration under state law:

Any dispute arising under the terms of this Agreement that is not resolved within a reasonable period of time by authorized representatives of [UniDev] and [Respondent] shall be brought to the attention of the Chief Executive Officer of [UniDev] and the Executive Director of [Respondent] for joint resolution. Thereafter, if the matter in dispute is still unresolved, then the parties shall in good faith mutually appoint a mediator to mediate the dispute, provided that if the parties cannot agree to a mediator, then either party may petition a court of competent jurisdiction to appoint a mediator. If the matter in dispute is still not resolved by mediation, then the parties shall submit the matter to arbitration as provided in the "Uniform Arbitration Act" under State law.

(Emphases added.)

As anticipated under the DSA, Respondent transferred title to the Property to Hawai‘i Island Housing Trust (HIHT), which subsequently leased the Property to Waikoloa Workforce Housing, LLC (WWH). Respondent, HIHT, and WWH signed a "Development Agreement," which provided, in part, that HIHT and WWH would develop the Project according to Respondent's requirements. Failure to do so would result in reversion of the Property to Respondent. Respondent then entered into an "Assignment and Assumption Agreement" (Assignment Agreement) with WWH, which stated in relevant part that Respondent "assigns unto [WWH] all right, title, and interest of [Respondent] in ... [the DSA]."

On February 21, 2008, UniDev and WWH entered into an "Amended and Restated Development Services Agreement" (ADSA). UniDev and WWH "wish[ed] to amend the DSA to reflect certain changes in facts and circumstances that [had] occurred since the DSA was first executed by [UniDev] and [Respondent]." Although the ADSA altered some aspects of the original agreement such as UniDev's compensation, the provision relating to alternative dispute resolution remained largely unchanged.

On April 19, 2009, WWH instructed UniDev to cease all work on the project. The Property was subsequently returned to Respondent.

B.

Following UniDev's termination from the Project, Respondent filed a Complaint on July 1, 2009 with the court. The case initiated by the Complaint was designated Civil No. 09–01–264K. The Complaint asserted five causes of action, including (1) false claims, in violation of HRS § 46–171 (Supp.2001),⁶ (2) intentional misrepresentation, (3) fraudulent inducement, (4) negligent misrepresentation, and (5) negligence.

On March 29, 2010, Petitioners answered Respondent's Complaint and filed a counterclaim against Respondent, HIHT, and WWH. Petitioners' counterclaim asserted four counts, including (1) breach of contract (against Respondent and WWH), (2) quantum meruit (against Respondent and WWH), (3) intentional interference with contract (against Respondent), and (4) fraudulent transfer (against HIHT and Respondent).

On November 23, 2010, Respondent filed a second Complaint, initiating a second action against Petitioners, Civil No. 10–1–0427K. Respondent reiterated four of the five causes of action included in its original Complaint. Respondent again alleged causes of action for false claims pursuant to HRS § 46–171 (Count I), intentional misrepresentation (Count III), fraudulent inducement (Count IV), and negligent misrepresentation (Count V). Regarding all four causes of action, the second Complaint identified particular circumstances that constituted the bases of Respondent's allegations. Respondent also alleged a new cause of action for unfair and deceptive practices (Count II), declaring that Petitioners violated HRS §§ 480–2 (1993)⁷ and 481A–3 (1993) by engaging in several acts.⁸ On December 16, 2010, the parties stipulated to consolidate Civil No. 09–01–264K with Civil No. 10–1–0427K.⁹

C.

On July 30, 2010, Petitioners filed their arbitration motion. On December 17, 2010, the court issued an Order granting the motion. The Order stated in relevant part as follows:

1. [Petitioners] ha[ve] established the existence of a written agreement that requires [Respondent] and [Petitioners] to resolve disputes by means of alternative dispute resolution. Specifically, Section 13 of Rider A of the [DSA] and Section 13 of Rider A of the [ADSA] both require the parties to resolve "any dispute arising under the terms of this Agreement" through the alternative dispute resolution process described therein. [Respondent] concedes that it validly executed the DSA, and as to the alternative dispute resolution provisions, the ADSA simply restates the DSA.

2. [Respondent's] claims fall within the scope of the alternative dispute resolution clause.... Alternative dispute resolution clauses must be broadly construed, and those covering claims "arising out of" the agreement have been held to require alternative dispute resolution of fraud-based claims concerning the subject matter of the agreement, as do [Respondent's] claims.

3. [Petitioners'] counterclaims against [Respondent] are also subject to the alternative dispute resolution provisions of the DSA and the ADSA, as [Petitioners] stated at the hearing. Some of the counterclaims are expressly based on the DSA and the ADSA, and others touch matters concerning the DSA and ADSA or arise out of the relationship between the parties created by those contracts.

(Emphases added.)

II.

A.

Respondent appealed to the ICA. After the parties had filed briefs on the merits, Petitioners filed a Motion to Dismiss on September 19, 2011, arguing that the ICA lacked subject matter jurisdiction because the " appeal of an interlocutory order compelling arbitration is forbidden by the [Federal Arbitration Act (FAA) ]." Petitioners acknowledged that "Hawai‘i law allows appeals from interlocutory orders compelling arbitration under the collateral order doctrine when the issue of arbitrability is separable from and collateral to the claims asserted in the underlying case." (Citing Sher v. Cella, 114 Hawai‘i 263, 266–67, 160 P.3d 1250, 1253–54 (App.2007).) However, according to Petitioners, "in disputes covered by the FAA—such as this one—that rule cannot apply."

In opposition, Respondent cited Volt Info. Scis., Inc. v. Bd. of Trs., 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989), for the proposition that "where, as here, the parties have agreed to abide by state rules of arbitration, enforcing those...