Kikuchi v. Brown

• Decision Date: 27 February 2006
• Docket Number: No. 26090.,26090.
• Citation: 130 P.3d 1069
• Parties: Iris J. KIKUCHI, Plaintiff-Appellant, v. Cheri M. BROWN, and Chris K. Brown, Defendants-Appellees, and John Does 1-5; Jane Does 1-5; Doe Partnerships 1-5; Doe Corporations 1-5; Doe Entities 1-5; and Doe Governmental Entities 1-5, Defendants.
• Court: Hawaii Court of Appeals

Page 1069

130 P.3d 1069

Iris J. KIKUCHI, Plaintiff-Appellant, v. Cheri M. BROWN, and Chris K. Brown, Defendants-Appellees, and John Does 1-5; Jane Does 1-5; Doe Partnerships 1-5; Doe Corporations 1-5; Doe Entities 1-5; and Doe Governmental Entities 1-5, Defendants.

No. 26090.

Intermediate Court of Appeals of Hawai`i.

February 27, 2006.

As Corrected March 14, 2006.

COPYRIGHT MATERIAL OMITTED

Janice P. Kim, Honolulu, on the briefs, for Plaintiff-Appellant.

Harvey E. Henderson, J. Patrick Gallagher, and Greg H. Takase, (Henderson Gallagher & Kane), on the briefs, for Defendants-Appellees.

BURNS, C.J., WATANABE and FUJISE, JJ.

Opinion of the Court by FUJISE, J.

Plaintiff-Appellant Iris J. Kikuchi (Kikuchi) appeals from the Final Judgment filed on August 6, 2003, in the Circuit Court of the First Circuit (circuit court)¹ in favor of Defendants-Appellees Cheri M. Brown (Cheri) and Chris K. Brown (collectively, the Browns). On appeal, Kikuchi contends that the circuit court erred by awarding (1) all the costs requested by the Browns under Hawai`i Rules of Civil Procedure (HRCP) Rule 68 (Rule 68) and (2) ordinary costs to the Browns without "making factual findings as to their propriety." As we conclude the circuit court erred in awarding messenger fees as costs, we vacate that part of the judgment. In all other respects, we affirm.

I.

This case arose from a motor vehicle accident between Kikuchi and Cheri on June 5, 2000, at the Kapolei Shopping Center. Cheri was the driver and Chris Brown, her husband, was the registered owner of the vehicle. Liability was disputed. Kikuchi claimed Cheri backed her van into Kikuchi's car and Cheri claimed she had already reversed out of a parking stall when Kikuchi drove her car into Cheri's van.

On August 3, 2001, Kikuchi filed a complaint against the Browns and the parties went through the Court Annexed Arbitration Program. The arbitrator's award was in Kikuchi's favor in the amount of $21,326.00, including $480.11 for Kikuchi's costs. The Browns appealed from the arbitrator's award on July 15, 2002 and on the same day served Kikuchi with a Rule 68 offer of settlement in the amount of $2,500.00, inclusive of costs. Kikuchi failed to accept the offer within 10 days as required by Rule 68, and accordingly, the offer was deemed withdrawn and the case proceeded to trial. By way of a special verdict rendered on May 5, 2003, the jury found that Cheri was negligent, but that her negligence was not the legal cause of Kikuchi's injuries.

On May 28, 2003, the Browns filed a motion for costs under HRCP Rule 54, Rule 68 and Hawaii Arbitration Rules (HAR), Rule 25 and attached a documented list of their costs to the motion. After briefing by the parties and a hearing, the circuit court granted the Browns' motion in its entirety and filed a judgment² in the Browns' favor on August 6, 2003. Kikuchi timely appealed.

II.

Kikuchi contends the circuit court erred by awarding the Browns all of their requested costs under HRCP Rule 68.³ "When interpreting rules promulgated by the court, principles of statutory construction apply. Interpretation of a statute is a question of law which we review de novo." Gap v. Puna Geothermal Venture, 106 Hawai`i 325, 331, 104 P.3d 912, 918 (2004) (internal quotation marks and citation omitted). Costs under Rule 68 refer to "actual disbursements deemed reasonable by the court," Canalez v. Bob's Appliance Serv. Ctr., Inc., 89 Hawai`i 292, 306, 972 P.2d 295, 309 (1999), and the "trial court has the discretion of determining what is reasonable." Id. (quoting Geldert v. State, 3 Haw.App. 259, 268, 649 P.2d 1165, 1172 (1982)). An abuse of discretion occurs if 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." Amfac, Inc. v. Waikiki Beachcomber Inv. Co., 74 Haw. 85, 114, 839 P.2d 10, 26 (1992) (citation omitted).

It is undisputed that the Browns made an offer of settlement under Rule 68 on July 15, 2002, that Kikuchi failed to accept the offer, and that the jury trial resulted in a verdict in the Browns' favor. Thus, at first blush, the judgment entered was not "more favorable" to Kikuchi than the Browns' offer and, by operation of Rule 68, the Browns would be entitled to costs incurred after July 15, 2002, when the offer was made.

However, Kikuchi contends that the circuit court erred in awarding all of the Browns' requested costs under Rule 68 because (1) the jury did not render a verdict in favor of Kikuchi and the offer of settlement did not account for the "covered loss deductible" as provided in Hawaii Revised Statutes (HRS) § 431:10C-301.5 (Supp. 2004) and (2) the award of "other ordinary costs" to the Browns was improperly made, "without making factual findings as to their propriety[.]" We address each contention in turn.

A. HRCP Rule 68 Applies to a Favorable Defense Verdict.

Maintaining that Rule 68 does not apply, Kikuchi argues in her opening brief that "if the plaintiff does not win some sort of verdict against the defendant, an offer of judgment under Rule 68 is void, and cannot be used to gain an award of costs. This is black-letter law in Hawaii." Although the language of Rule 68, prior to amendment in 1999, was identical to Federal Rules of Civil Procedure (FRCP) Rule 68⁴ and federal precedent interpreting identical language in federal rules is "highly persuasive," Collins v. South Seas Jeep Eagle, 87 Hawai`i 86, 88, 952 P.2d 374, 376 (1997) (internal quotation marks and citations omitted), the Hawai`i Supreme Court has reserved the authority to interpret the Hawai`i rules differently. Id.

Consequently, the Hawai`i Supreme Court affirmed an award of post-offer costs under HRCP Rule 68 (1972)<sup>5</sup> to a defendant, whose offer was rejected by plaintiff, where the jury rendered a defense verdict. Canalez, 89 Hawai`i at 306-09, 972 P.2d at 309-12. While the court did not explicitly decide whether either version of HRCP Rule 68 applied where a defense verdict was rendered,⁶ this court had previously held, without discussion, in Richardson v. Lane, 6 Haw.App. 614, 623, 736 P.2d 63, 70 (1987), that "Rule 68's provision requiring the offeree to pay the offeror's costs and attorney's fees is not applicable in a case where judgment is rendered against the offeree."⁷ (Citation omitted.) At the time, HRCP Rule 68 was virtually identical to its federal counterpart and federal courts had so construed FRCP Rule 68.⁸ Delta Air Lines, Inc. v. August, 450 U.S. 346, 101 S.Ct. 1146, 67 L.Ed.2d 287 (1981).⁹

The federal rule and the pre-1999 version of HRCP Rule 68 were limited to "a party defending against a claim" and HRCP Rule 68 had been further limited to only those costs associated with the claim the party was defending against. Crown Props., Inc. v. Fin. Sec. Life Ins. Co., 6 Haw.App. 105, 113, 712 P.2d 504, 510 (1985). With the 1999 amendment to HRCP Rule 68, "any party may serve upon any adverse party an offer of settlement or an offer to allow judgment to be taken against either party." (Language added in 1999 underscored.)

The intent behind this amendment appears clear: To level the playing field by allowing offers of settlement by all parties to the litigation and to encourage the offeree to accept the offer or run the risk that he or she must pay the offeror's costs if the eventual judgment is not more favorable than the offer. The change to the language of the first sentence of the rule by necessity changed the meaning of the fourth: the offeror could be any party and the offeree could be any party who had received the offer. Consequently, because a defendant could now be an "offeree," a plaintiff could collect post-judgment costs where a judgment in defendant's favor was not more favorable than the plaintiff's offer. In short, the removal of the defendant-only limitation on offerors also removed the plaintiff-only limitation on judgments. Similarly, the amendment allowing an offer of judgment to be taken "against either party" would be rendered meaningless if the rule were still to be interpreted as applying only to judgments rendered in the offeror's favor.

Kikuchi counters by arguing that such an interpretation could lead to abuse of the rule as expressed by the court in Delta Air Lines, in that defendants could qualify for payment of their costs merely by making unreasonably low offers of settlement.¹⁰

Two answers immediately come to mind. First, there is a built-in deterrent against unreasonably low offers as such offers increase the likelihood that the offeree will do better by going to trial, rendering the offeror ineligible for costs. More importantly, to deny application of Rule 68 to defense verdicts creates an anomaly: A defendant who "loses small" because the judgment in plaintiff's favor was less than the offer would be awarded costs while the defendant who won outright would not. This anomaly is antithetical to the primary purpose of Rule 68 — to encourage settlement — as there would be no incentive for a defendant to make any offer whatsoever where the chance of winning was substantial.

We therefore hold that HRCP Rule 68 does apply where the judgment is in the defendant-offeror's favor as it too can represent a judgment that is not more favorable to the offeree than the offer.

B. A Valid HRCP Rule 68 Offer of Settlement Need Not Explicitly Account for the Covered Loss Deductible.

Relying on Ass'n of Apt. Owners of Wailea Elua v. Wailea Resort Co., Ltd., 100 Hawai`i 97, 58 P.3d 608 (2002) and Crown Props., supra, Kikuchi contends that the Browns' offer of settlement did not resolve all claims between the parties because it did not specify how the "covered loss deductible" provided in HRS § 431:10C-301.5¹¹ would affect the offer. Kikuchi contends that if she accepted the Browns' offer of $2,500.00, by operation of HRS § 431:10C-301.5, she would get nothing.

It is true that a valid Rule 68 offer must "fully and...