DFS GROUP LP v. Paiea Properties, 25662
| Decision Date | 03 April 2006 |
| Docket Number | No. 25662,25662 |
| Parties | DFS GROUP L.P., a Delaware limited partnership, dba Hawaiian King Candies, Plaintff-Appellee v. PAIEA PROPERTIES, a Hawai`i limited partnership, Defendant-Appellant. |
| Court | Hawaii Supreme Court |
Paul Alston and Peter Knapman of Alston Hunt Floyd & Ing for plaintiff-appellee, on the request for fees.
William C. McCorriston, David J. Minkin, and Becky T. Chestnut of McCorriston Miller, Mukai MacKinnon, LLP, for defendant-appellant, in opposition.
MOON, C.J., LEVINSON, NAKAYAMA, AND ACOBA, JJ. AND CIRCUIT JUDGE POLLACK, ASSIGNED BY REASON OF VACANCY, MOON, C.J., CONCURRING SEPARATELY, WITH WHOM LEVINSON, J., JOINS.
Plaintiff-appellee DFS Group L.P., dba Hawaiian King Candies [hereinafter "DFS"], requests that this court award attorneys' fees in the amount of $133,555.88 and excise taxes in the amount of $5,565.28, for a total of $139,121.16, as reasonably and necessarily incurred on appeal.1
For the following reasons, we grant in part and deny in part DFS' request for attorneys' fees. Furthermore, based upon the circumstances of this case, the matter is referred to the Office of Disciplinary Counsel [hereinafter "ODC"] for an investigation as to whether the Hawai`i Rules of Professional Conduct [hereinafter "HRPC"] were violated.
The underlying appeal is the result of a dispute as to the terms of a November 18, 1996 commercial lease of warehouse space [hereinafter "the lease"] executed by Paiea Properties [hereinafter "Paiea"], as lessor, and DFS, as lessee.
Pursuant to Exhibit E, section 1(a) of the lease, DFS retained an option to renew the lease for one additional five-year term. In order to determine the "prevailing rent" for the five-year period, the lease incorporated an appraisal procedure authorizing the appointment of a certified appraiser to select either DFS' or Paiea's determination of the "prevailing rent," based upon whichever determination was closer to the appraiser's independent conclusion. The lease specifically provided that "[t]he appraiser's decision shall be final, conclusive and binding on Landlord and Tenant."
In a letter dated February 25, 2002, DFS purported to exercise its option under the lease and proposed the selection of Robert C. Hastings [hereinafter "Hastings"] as the appraiser responsible for determining the "prevailing rent." Paiea ultimately agreed to DFS' selection of Hastings. Thereafter, in a June 25, 2002 appraisal report, Hastings concluded that DFS' offer was closest to the market rent for the subject property. In a June 30, 2002 letter addressed to DFS and Hastings, Paiea rejected the appraisal report stating that it was not prepared in a manner consistent with the terms of the lease. Paiea specifically contended that Hastings' determination improperly included a reduction that accommodated DFS for the costs incurred in constructing permanent improvements. Paiea asserted that, pursuant to the terms of the lease, permanent improvements are owned by and for the benefit of Paiea, and therefore Hastings should not have deducted such costs from his calculation of the market rent. DFS and Hastings did not respond to Paiea's letter. Instead, on August 23, 2002, DFS filed a "Complaint for Declaratory Relief or in the Alternative for Confirmation of Arbitration Award and Entry of Final Judgment"2 in the first circuit court. Paiea filed its answer on September 24, 2002.
On October 18, 2002, DFS filed a motion for summary judgment, requesting that the court confirm Hastings' appraisal report. DFS argued that there was no genuine issue of material fact inasmuch as: (1) Paiea unconditionally agreed to the selection of Hastings; (2) Paiea had a procedural mechanism available if it disputed the selection of the appraiser, and Paiea failed to make use of such mechanism; (3) Paiea unconditionally agreed, pursuant to the terms of the lease, that the appraiser's conclusion would be "final, conclusive, and binding" on the parties; and (4) Paiea only accused Hastings of being impartial, biased and corrupt after Hastings' appraisal report produced an adverse result. Paiea filed a memorandum in opposition on November 6, 2002. Subsequently, on January 27, 2003, the circuit court, the Honorable Eden Elizabeth Hifo presiding, granted DFS' motion for summary judgment.
Paiea thereafter filed a timely notice of appeal on February 28, 2003. On appeal, Paiea argued that: (1) the circuit court erred by confirming the appraisal report inasmuch as it lacked the degree of certainty and definiteness required by law, such that the decision could lead to future litigation; (2) the circuit court erred by confirming the appraisal report because Hastings exceeded the authority conferred upon him by the terms of the lease; and (3) the circuit court erred in confirming the appraisal report in light of Hastings' evident bias and partiality. DFS filed its answering brief on August 12, 2003. On April 19, 2005, this court filed a summary disposition order stating that: (1) Paiea is not entitled to a vacation of the appraisal report inasmuch as Paiea neither moved the circuit court to vacate the report nor provided notice to DFS of its intent to vacate the report pursuant to Hawaii Revised Statutes [hereinafter "HRS"] § 658-11 (1993), repealed by 2001 Haw. Sess. L. Act 265, §§ 5, 8 at 811-813; (2) the appraisal report did not lack the degree of certainty and definiteness required by law inasmuch as the report clearly and definitely proposed a "prevailing rent" of $0.90 per square foot per month; and (3) the appraisal report required no clarification.
On May 16, 2005, DFS filed the present request for attorneys' fees incurred in connection with the underlying appeal.
In TSA International, Ltd. v. Shimizu Corp., 92 Hawai`i 243, 263, 990 P.2d 713, 733 (1999) (citations omitted) (emphasis added), we set forth the following general principles related to the recovery of attorneys' fees:
Generally, under the `American Rule,' each party is responsible for paying his or her own litigation expenses. A notable exception to the `American Rule,' however, is the rule that attorneys' fees may be awarded to the prevailing party where such an award is provided for by statute, stipulation, or agreement.
In the present case, the statutory exception to the "American Rule" is HRS § 607-14 (Supp. 1997) (emphasis added),3 which provides that:
[i]n all 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.
Therefore, inasmuch as the lease constitutes a "contract in writing that provides for an attorney's fee," the determinative issue is whether the language of the lease authorizes the recovery of attorneys' fees in the present case. We conclude that it does.
The lease provides, in relevant part, that:
[i]n the event of any action or proceeding brought by either party against the other based upon or arising out of any breach of the terms and conditions [thereof], the prevailing party shall be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other.
Invoking the foregoing provision, DFS asserts that it is entitled to recover attorneys' fees inasmuch as: (1) the lease provided specific procedures for an arbitration proceeding to resolve disputes over the determination of the "prevailing rent"; (2) Paiea refused to abide by the arbitrator's award; and (3) this court affirmed the circuit court's order granting summary judgment in favor of DFS on all claims, thereby establishing DFS as the prevailing party.
To the contrary, Paiea contends that the language of the lease authorizes the recovery of attorneys' fees only in actions brought for a breach of contract. Paiea thus appears to argue that because the complaint did not delineate a specific breach of contract cause of action, the clause authorizing the recovery of attorneys' fees was not triggered.
However, Paiea's interpretation construes the language of the lease too narrowly. The plain language of the lease authorizes the recovery of attorneys' fees by the prevailing party in "any action or proceeding" so long as the claim is "based upon or arising out of any breach of the terms and conditions [of the lease]." (Emphasis added.) In the present case, DFS alleged that the genesis of the dispute was Paiea's rejection of Hastings' determination of the "prevailing rent," despite Exhibit E, section (1)(f), in the lease, which states that "[t]he appraiser's decision shall be final, conclusive, and binding." Accordingly, the present action is clearly based upon or arising out of a breach of the terms and conditions of the lease,4 and DFS is authorized to recover reasonable attorneys' fees incurred in the underlying appeal, pursuant to section 19.06 of the lease.
As previously mentioned, HRS § 607-14 authorizes an award of costs and fees "[i]n 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." However, HRS § 607-14 also provides that an award of costs and fees "shall not exceed twenty-five per cent of the judgment."
DFS acknowledges the foregoing statutory limitation, but contends that the limitation is inapplicable where, as here, the party requesting fees did not seek a monetary judgment in the underlying appeal. DFS also contends, in the alternative, that even if the statutory limitation applies, such limitation does not preclude it from...
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