Schmidt v. Pacific Benefit Services, Inc.

• Decision Date: 31 May 2006
• Docket Number: No. 25755.,25755.
• Parties: J.P. SCHMIDT, in his capacity as Liquidator and Trustee of the Pacific Group Medical Association Liquidating Trust, Plaintiff-Appellee, v. PACIFIC BENEFIT SERVICES, INC., Defendant-Appellant, and Henry Akiu, Jr.; Randolph Ko; Bryon Graves, Jr.; Edwin Ramos; William A. Williams (also known as William O. Williams or Billy Williams); Richard Stiles; Mark Hopkins; Harold Y. Kuwahara; Juan Martin Gonzales; Mike Cleare; Watson Wyatt & Company; Wikoff Combs & Co., CPA's; Four Winds RSK, Inc.; Auli`i, Inc.; Toral-Vahey & Associates; Bridgeport Benefits, Inc., a foreign corporation; Nevada Equity & Growth Management, a foreign corporation; PGMA, Inc., a Hawaii corporation; Wayne Blasman; Doug Rolefson; Terry Conlan; Lee Ann Kim; Donald Wakeman; James R. Lindsey; John Does 1-50; Jane Does 1-50; Doe Corporations 1-50; Doe Partnerships 1-50, and Doe Entities 1-50, Defendants. and Henry Akiu, Jr. and Edwin Ramos, Third-Party Plaintiffs, v. Pacific Benefits Services, Inc., a Hawai`i corporation, Third-Party Defendant-Appellant, and Peter Po Sing Wong; Susan Wong; Ling Fong Wong; George Mingo; Brenda Mingo; Pacific Equity Growth & Management, Inc., a Hawai`i corporation; Pacific Equity Factors, Inc., a Hawai`i corporation; Pacific Employee Leasing, Inc., a Hawai`i corporation; Hawai`i Dental Plan, Inc., a Hawai`i corporation; P.S. Wong, Ltd., a Hawai`i corporation; Po Sang Corp., a foreign corporation; Nishihama & Kishida, CPA'S, Inc., a Hawai`i corporation; John J. D'Amato; D'Amato & Maloney, a Hawai`i law partnership; John Does 1-10; Jane Does 1-10; and Doe Corporations 1-10, Third-Party Defendants. J.P. Schmidt, in his capacity as Liquidator and Trustee of the Pacific Group Medical Association Liquidating Trust, Plaintiff-Appellee, v. Pacific Benefit Services, Inc., Defendant-Appellant, and Peter Po Sing Wong; Watson Wyatt Worldwide; Watson Wyatt & Company; The Wyatt Company; Wikoff Combs & Co. CPA's, Inc.; Nishihama & Kishida, CPA's, Inc., a Hawai`i corporation; Pacific Equity Growth & Management, Inc., a Hawai`i corporation; Po Sang Corp., a foreign corporation; Hawaii Dental Health Plan, Inc. (also known as Hawai`i Dental Plan, Inc.), a Hawai`i corporation; Four Winds Rsk, Inc., a Hawai`i corporation; Toral-Vahey & Associates; Wayne Blasman; Doug Rolefson; Bridgeport Benefits, Inc., a foreign corporation; Nevada Equity & Growth Management, a foreign corporation; Susan Wong; Ling Fong Wong; P.S. Wong, Ltd., a Hawai`i corporation; Pacific Employee Leasing, Inc., a Hawai`i corporation; Pacific Equity Factors, Inc., a Hawai`i corporation; PGMA, Inc., a Hawai`i corporation; PGMA Dental, a Hawai`i corporation; Terry Conlan; Lee Ann Kim; Donald Wakeman; James R. Lindsey; John Does 1-50; Jane Does 1-50; Doe Corporations 1-50; Doe Partnerships 1-50, and Doe Entities 1-50, Defendants.
• Court: Hawaii Supreme Court

Page 810

150 P.3d 810

J.P. SCHMIDT, in his capacity as Liquidator and Trustee of the Pacific Group Medical Association Liquidating Trust, Plaintiff-Appellee, v. PACIFIC BENEFIT SERVICES, INC., Defendant-Appellant, and Henry Akiu, Jr.; Randolph Ko; Bryon Graves, Jr.; Edwin Ramos; William A. Williams (also known as William O. Williams or Billy Williams); Richard Stiles; Mark Hopkins; Harold Y. Kuwahara; Juan Martin Gonzales; Mike Cleare; Watson Wyatt & Company; Wikoff Combs & Co., CPA's; Four Winds RSK, Inc.; Auli`i, Inc.; Toral-Vahey & Associates; Bridgeport Benefits, Inc., a foreign corporation; Nevada Equity & Growth Management, a foreign corporation; PGMA, Inc., a Hawaii corporation; Wayne Blasman; Doug Rolefson; Terry Conlan; Lee Ann Kim; Donald Wakeman; James R. Lindsey; John Does 1-50; Jane Does 1-50; Doe Corporations 1-50; Doe Partnerships 1-50, and Doe Entities 1-50, Defendants. and Henry Akiu, Jr. and Edwin Ramos, Third-Party Plaintiffs, v. Pacific Benefits Services, Inc., a Hawai`i corporation, Third-Party Defendant-Appellant, and Peter Po Sing Wong; Susan Wong; Ling Fong Wong; George Mingo; Brenda Mingo; Pacific Equity Growth & Management, Inc., a Hawai`i corporation; Pacific Equity Factors, Inc., a Hawai`i corporation; Pacific Employee Leasing, Inc., a Hawai`i corporation; Hawai`i Dental Plan, Inc., a Hawai`i corporation; P.S. Wong, Ltd., a Hawai`i corporation; Po Sang Corp., a foreign corporation; Nishihama & Kishida, CPA'S, Inc., a Hawai`i corporation; John J. D'Amato; D'Amato & Maloney, a Hawai`i law partnership; John Does 1-10; Jane Does 1-10; and Doe Corporations 1-10, Third-Party Defendants.

J.P. Schmidt, in his capacity as Liquidator and Trustee of the Pacific Group Medical Association Liquidating Trust, Plaintiff-Appellee, v. Pacific Benefit Services, Inc., Defendant-Appellant, and Peter Po Sing Wong; Watson Wyatt Worldwide; Watson Wyatt & Company; The Wyatt Company; Wikoff Combs & Co. CPA's, Inc.; Nishihama & Kishida, CPA's, Inc., a Hawai`i corporation; Pacific Equity Growth & Management, Inc., a Hawai`i corporation; Po Sang Corp., a foreign corporation; Hawaii Dental Health Plan, Inc. (also known as Hawai`i Dental Plan, Inc.), a Hawai`i corporation; Four Winds Rsk, Inc., a Hawai`i corporation; Toral-Vahey & Associates; Wayne Blasman; Doug Rolefson; Bridgeport Benefits, Inc., a foreign corporation; Nevada Equity & Growth Management, a foreign corporation; Susan Wong; Ling Fong Wong; P.S. Wong, Ltd., a Hawai`i corporation; Pacific Employee Leasing, Inc., a Hawai`i corporation; Pacific Equity Factors, Inc., a Hawai`i corporation; PGMA, Inc., a Hawai`i corporation; PGMA Dental, a Hawai`i corporation; Terry Conlan; Lee Ann Kim; Donald Wakeman; James R. Lindsey; John Does 1-50; Jane Does 1-50; Doe Corporations 1-50; Doe Partnerships 1-50, and Doe Entities 1-50, Defendants.

No. 25755.

Supreme Court of Hawai`i.

May 31, 2006.

Reconsideration Denied July 6, 2006.

As Corrected July 6, 2006.

COPYRIGHT MATERIAL OMITTED

Charles S. Lotsof, Honolulu, on the briefs, for defendant-appellant Pacific Benefit Services, Inc.

Clifford K. Higa, Wendell J. Fuji, Lanson K. Kupau, and Duane C. Seabolt, Honolulu, (of Kobayashi, Sugita & Goda), on the briefs, for plaintiff-appellee J.P. Schmidt, in his capacity as Liquidator and Trustee of the PGMA Liquidating Trust.

MOON, C.J., LEVINSON, NAKAYAMA, AND ACOBA, JJ.; CIRCUIT JUDGE AUGUST, ASSIGNED BY REASON OF VACANCY.

Opinion of the Court by MOON, C.J.

The instant appeal involves an arbitration award issued on November 25, 2002 (Award) in favor of plaintiff-appellee J.P. Schmidt, in his capacity as Liquidator and Trustee of the Pacific Group Medical Association Liquidating Trust¹ [hereinafter, Schmidt] and against defendant-appellant Pacific Benefit Services (PBS). PBS appeals from the Circuit Court of the First Circuit's² combined order, filed on March 10, 2003, (1) denying PBS's Motion to Vacate Arbitration Award (motion to vacate), (2) granting Schmidt's Motion for Order Confirming Arbitration Decision and Award (motion to confirm), and (3) dismissing Schmidt's Motion to Strike PBS's Motion to Vacate Arbitration Award (motion to strike).

On appeal, PBS asserts that the circuit court erroneously concluded that its motion to vacate was untimely and, therefore, erred in confirming the Award in total disregard of the merits of its motion to vacate. Specifically, PBS contends that the Award did not conform to the statutory requirements under HRS § 658-8 (1993), quoted infra. Based on the following, we affirm the circuit court's March 10, 2003 order confirming the Award.

I. BACKGROUND

On June 8, 2001, Metcalf, in his capacity as then-Liquidator and trustee of the PGMA Trust [hereinafter, Schmidt, see supra note 1] filed his Second Amended Complaint against, inter alia, PBS.³ Schmidt and PBS reached a settlement in which they agreed to submit Schmidt's claims against PBS, as alleged in the second amended complaint, to binding arbitration to be conducted by James F. Ventura, Esq. The parties agreed that the sum of one hundred thousand dollars ($100,000), less the arbitrator's fees, was to be awarded to the prevailing party.⁴ The arbitration hearing took place on November 6 2002. On November 25, 2002, the arbitrator issued his decision as set forth in the Award. In a letter accompanying the Award, the arbitrator stated in pertinent part:

Enclosed is my decision and award in this matter. I have not declared before a notary that this is my decision. I understand that this is no longer required. If you need a notary, please advise. My bill for this arbitration is $6,000.00 plus tax of $240.00 or a total of $6,240.00.

In the Award, the arbitrator stated in pertinent part that:

I have reviewed all briefs submitted between the parties, listened to the live testimony and reviewed all of the exhibits submitted. Based on all of the above[,] the following is my decision and award.... I hereby find that [Schmidt] is entitled to the sum of $100,000 minus my arbitration fees. I therefore award to the Liquidator the $100,000 minus my arbitration fee.

On December 10, 2002, Schmidt filed his motion to confirm the Award. The Award, as well as the arbitrator's accompanying letter, was attached as Exhibit "B" to the motion to confirm. The declaration of Schmidt's counsel stated that, "[a]ttached hereto as Exhibit `B' is a true and correct copy of the Arbitrator's Decision And Award. The Arbitrator's Decision and Award was served on [Schmidt] on November 26, 2002." On January 15, 2003, PBS submitted a memorandum opposing the confirmation of the Award, asserting that the Award failed to conform to the formal requirements of HRS § 658-8, which provides in pertinent part:

The award shall be in writing and acknowledged or proved in like manner as a deed for the conveyance of real estate, and delivered to one of the parties or the party's attorney . . . . At any time within one year after the award is made and served, any party to the arbitration may apply ... for an order confirming the award. Thereupon the court shall grant such an order, unless the award is vacated, modified, or corrected, as prescribed in sections 658-9 and 658-10....

(Emphases added.) Specifically, PBS contended that,

[Schmidt's motion to confirm] is predicated on an unverified writing ... [and, u]nder the statute in effect and governing the arbitration in this instance, an award absolutely must be acknowledged or proved "in like manner as a deed for the conveyance of real estate." [HRS] § 658-8.

PBS further contended that the requirement that the Award be acknowledged "goes to the heart of what went terribly wrong with the proceedings conducted by the arbitrator." In its memorandum, PBS criticized the arbitrator for not taking his duties seriously and for dismissing PBS's contention that one of Schmidt's witnesses had presented misleading testimony.

On January 17, 2003, in response to PBS's opposition, the arbitrator notarized a copy of the Award. Later that same day, Schmidt filed a reply memorandum in support of his motion to confirm, stating that "[t]he Award issued by the [a]rbitrator has been acknowledged and is no longer in technical violation of HRS [§ ] 658-8." According to Schmidt's reply memorandum, PBS's "sole argument" was rendered moot by the notarization. Schmidt also argued that PBS's arguments regarding misconduct were barred by HRS §§ 658-9, -10, and -11 (1993), quoted infra, because PBS did not file a motion to vacate, modify, or correct the Award within 10 days after it was "made and served."

On January 22, 2003, PBS filed its motion to vacate, pursuant to HRS § 658-9, arguing that the decision "exceeded the authority of the arbitrator, which was limited to claims against PBS in the Second Amended Complaint, and/or as having been procured by corruption, fraud, and/or undue means." On the same day, Schmidt moved to strike PBS's motion to vacate.

As previously indicated, on March 10, 2003, the circuit court entered its order (1) denying PBS's motion to vacate, (2) granting Schmidt's motion to confirm, and (3) dismissing Schmidt's motion to strike as moot. Therein, the circuit court stated that:

Here, the ten days [allowing for a motion to vacate] began running upon the date counsel for PBS received the award that had been forwarded to him with Mr. Ventura's letter of November 25, 2002. As the court has stated, there is nothing before the court to indicate that counsel for PBS did not receive this letter in the time frame of normal delivery. [Schmidt's] counsel indicates that he received the letter on November 26, 2002. In light of the fact that there is no contrary evidence before the court, the court will assume counsel for PBS received the award on or about the same date as [Schmidt's] counsel. Accordingly, the motion to vacate was required to be filed before December 9, 2002 at the latest. Instead the motion was not filed until January 22, 2003.

For the foregoing reasons, the...