Sheehan v. Homes

• Decision Date: 23 August 2011
• Docket Number: No. CV 10–00695 SOM–RLP.,CV 10–00695 SOM–RLP.
• Citation: 853 F.Supp.2d 1031
• Parties: John J. SHEEHAN; Margaret Sheehan, Plaintiffs, v. CENTEX HOMES, a Nevada general partnership; Centex Real Estate, a Nevada corporation; Nomas Corp., a Nevada corporation; John Does 1–50; Jane Does 1–50; Doe Affiliates 1–50; Doe Entities 1–50, Defendants.
• Court: U.S. District Court — District of Hawaii

853 F.Supp.2d 1031

John J. SHEEHAN; Margaret Sheehan, Plaintiffs,

v.CENTEX HOMES, a Nevada general partnership; Centex Real Estate, a Nevada corporation; Nomas Corp., a Nevada corporation; John Does 1–50; Jane Does 1–50; Doe Affiliates 1–50; Doe Entities 1–50, Defendants.

No. CV 10–00695 SOM–RLP.

United States District Court, D. Hawai‘i.

Aug. 23, 2011.

Steven M. Egesdal, William Matsujiro Harstad, Carlsmith Ball LLP, Honolulu, HI, for Plaintiffs.

Christopher A. Santos, Jonathan Strother Moore, Kobayashi Sugita & Goda, Honolulu, HI, for Defendants.

ORDER ADOPTING MAGISTRATE JUDGE'S FINDINGS AND RECOMMENDATION

SUSAN OKI MOLLWAY, Chief Judge.

Findings and Recommendation having been filed and served on all parties on July 27, 2011, and the parties stating that they have no objections,

IT IS HEREBY ORDERED AND ADJUDGED that, pursuant to Title 28, United States Code, Section 636(b)(1)(C) and Local Rule 74.2, the Findings and Recommendation are adopted as the opinion and order of this Court.

APPROVED AND SO ORDERED.

FINDINGS AND RECOMMENDATION TO GRANT IN PART AND DENY IN PART DEFENDANTS' MOTION FOR ATTORNEYS' FEES AND RELATED NON–TAXABLE COSTS¹

RICHARD L. PUGLISI, United States Magistrate Judge.

Before the Court, pursuant to a designation by Chief United States District Judge Susan Oki Mollway, is Defendants Centex Homes, Centex Real Estate, and Nomas Corporation's (collectively “Defendants”) Motion for Attorneys' Fees and Related Non–Taxable Costs (“Motion”), filed herein on March 24, 2011. Defendants request an award of $40,268.57 in attorneys' fees and $428.78 in non-taxable costs as the “prevailing party” pursuant to the Court's Order Granting Defendant's Motion to Compel Arbitration and to Dismiss, filed on March 21, 2011, 2011 WL 1100031 (“Arbitration Order”). See ECF No. 24. Plaintiffs John J. Sheehan and Margaret Sheehan (collectively “Plaintiffs”) filed their Memorandum in Opposition to Defendants' Motion on April 20, 2011, and Defendants filed their Reply to Plaintiffs' Memorandum in Opposition to Defendants' Motion on May 4, 2011.

On April 5, 2011, the Court found this matter suitable for disposition without a hearing pursuant to LR 7.2(d) of the Local Rules of Practice for the United States District Court for the District of Hawaii. See ECF No. 29. Based on the following, and after careful consideration of the Motion, the supporting and opposing memoranda, declarations, and exhibits attached thereto, and the record established in this action, the Court FINDS AND RECOMMENDS that Defendants' Motion be GRANTED IN PART AND DENIED IN PART. The Court RECOMMENDS that the District Judge AWARD Defendants $17,165.65 in attorneys' fees and $2.32 in costs, for a total award of $17,167.97.

BACKGROUND

The parties and the Court are familiar with the factual and procedural background of this case, which are discussed in detail in the Court's Arbitration Order. The Court will therefore only address herein the background that is relevant to the instant Motion.

On July 14, 2006, Plaintiff Margaret Sheehan entered into a sales contract with Defendant Centex Homes to purchase a two-bedroom condominium unit in the Beach Villas development at Ko Olina on the island of Oahu. See Compl. ¶ 1; Compl. Ex. 1. On October 10, 2007, Mrs. Sheehan amended the sales contract to instead purchase a three-bedroom condominium unit (Unit O–302) in the Beach Villas. See Compl. ¶ 12; Compl. Exh. 2. On March 6, 2008, the transaction in the amended sales contract closed. See Compl. ¶ 13. Mrs. Sheehan delivered $1,268,000 to Centex Homes for Unit O–302 and took possession of the unit. See Compl. ¶¶ 13–14. This dispute arose because Centex Homes allegedly knew that certain amenities that were a material reason for Mrs. Sheehan's purchase of Unit O–302 would not be part of the Beach Villas. See Compl. ¶¶ 19–22, 28.

The sales contract contains a section with the title “Alternative Dispute Resolution Notification and Procedures; Waivers” (“ADR Provision”), which is at issue in the present case. See Compl. Ex. 1, at 24–30. The ADR Provision runs from page 24 to page 30 of the sales contract, and Mrs. Sheehan initialed each of those pages. Id. On page 30, both Mrs. Sheehan, as the purchaser, and Centex Homes, as the seller, signed the ADR Provision. Id. at 30. Section 37(g) of the ADR Provision provides in relevant part:

NO JUDICIAL INTERVENTION. THE PARTY BRINGING ANY LITIGATION NOT PERMITTED UNDER THESE PROCEDURES SHALL BE RESPONSIBLE FOR ALL REASONABLE EXPENSES AND FEES (INCLUDING THOSE OF ATTORNEYS, EXPERTS, AND OTHER PROFESSIONALS) INCURRED BY THE OTHER PARTY AS A RESULT OF SUCH PROHIBITED LITIGATION.

Id. at 29 (upper case, underline, and bold in original).

On November 23, 2010, Plaintiffs ² filed their Complaint, asserting two claims. In Count I, Plaintiffs allege a violation of § 514B–94 of the Hawaii Revised Statutes (“HRS”). See Compl. ¶¶ 35–43. HRS § 514B–94 makes it illegal to publish any false statement concerning any project for sale, or to issue any marketing material that contains a false statement or is misleading due to an omission of a material fact. Haw.Rev.Stat. § 514B–94(a)(2). In Count II, Plaintiffs assert a common law fraud claim and allege that Centex Homes fraudulently induced them to enter into the sales contract as a whole. See Compl. ¶¶ 44–49. Plaintiffs sought, inter alia, an order rescinding the sales contract and requiring Defendants to return the full purchase price of $1,268,000, plus interest at 6% dating from March 6, 2008. See Compl. 10.

On December 23, 2010, Defendants filed a Motion to Stay or Dismiss Plaintiffs' Complaint and to Compel Mediation/Arbitration and for Attorneys' Fees and Costs (“Arbitration Motion”). See ECF No. 7. On March 21, 2011, the Court issued its Arbitration Order, which concluded that this matter is subject to arbitration, as the ADR Provision is valid and encompasses Plaintiffs' claims. See ECF No. 24, at 2. As a result, on the same date, the Clerk of the Court filed a Judgment in a Civil Case, and the case was dismissed. See ECF No. 25. The instant Motion followed.³

ANALYSIS

A. Entitlement to Attorneys' Fees

The district court has jurisdiction over this case pursuant to 28 U.S.C. § 1332. See Compl. ¶ 8. A federal court sitting in diversity must apply state law in determining whether the prevailing party is entitled to attorneys' fees. Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 883 (9th Cir.2000). Under Hawaii law, “[o]rdinarily, attorneys' fees cannot be awarded as damages or costs unless so provided by statute, stipulation, or agreement.” Stanford Carr Dev. Corp. v. Unity House, Inc., 111 Hawai'i 286, 305, 141 P.3d 459, 478 (2006) (citing Weinberg v. Mauch, 78 Hawai'i 40, 53, 890 P.2d 277, 290 (1995)). In the instant case, Defendants seek an award of fees pursuant to HRS § 607–14 and the ADR Provision of its sales contract with Mrs. Sheehan.

HRS § 607–14 states, in pertinent part:

In 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, 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; provided that the attorney representing the prevailing party shall submit to the court an affidavit stating the amount of time the attorney spent on the action and the amount of time the attorney is likely to spend to obtain a final written judgment, or, if the fee is not based on an hourly rate, the amount of the agreed upon fee. The court shall then tax attorneys' fees, which the court determines to be reasonable, to be paid by the losing party; provided that this amount shall not exceed twenty-five per cent of the judgment.

Haw. Rev. Stat. § 607–14 (emphases added). In order to award reasonable attorneys' fees under this statute, the court must determine whether: (1) the action is in the nature of assumpsit or an action on a promissory note or other contract in writing that provides for an attorney's fee; (2) the moving party is the prevailing party; (3) the fees requested are reasonable; and (4) the fees do not exceed twenty-five percent of the judgment. The Court will address each requirement in turn.

1. Contractual Basis for Attorneys' Fees

Plaintiffs contend that, for HRS § 607–14 to apply, the underlying action must be in the nature of assumpsit or premised upon money damages for breach of contract in writing. See Pls.' Mem. Opp. to Defs.' Mot. 6 (citing Leslie v. Estate of Tavares, 93 Hawai'i 1, 5, 994 P.2d 1047, 1051 (2000)). In Plaintiffs' view, because Defendants sought specific performance of the ADR Provision to compel arbitration, the instant action is not in the nature of assumpsit. Id. (citing Chock v. Gov't Emps. Ins. Co., 103 Hawai'i 263, 269, 81 P.3d 1178, 1183 (2003)). In addition, Plaintiffs assert that their Complaint does not allege a breach of contract claim, but rather their HRS § 514B–94 and common law fraud claims sound in tort, not contract.

Contrary to Plaintiffs' argument, Hawaii courts have declined to construe HRS § 607–14 so narrowly. Indeed, the Hawaii Supreme Court has expressly stated that, under HRS § 607–14, attorneys' fees may be awarded in three types of cases: (1) actions in the nature of assumpsit, (2) actions on a promissory note, and (3) contracts in writing that provide for an attorney's fee. Eastman v. McGowan, 86 Hawai'i 21, 31, 946 P.2d 1317, 1327 (1997). See also Forbes v. Haw. Culinary Corp., 85 Hawai'i 501, 507, 946 P.2d 609, 615 (App.1997) (stating that, as opposed to the “assumpsit prong,” the “contract prong” “may provide in writing for attorneys' fees to be awarded to the prevailing party in any litigation between the parties”); United States v. Guerette, Civ. No. 09–00133 ACK–KSC, 2011 WL 809192, at *1 (D.Haw. Mar. 1, 2011) (holding that HRS § 607–14 applies to a note and mortgage because...