Tatibouet v. Ellsworth
Decision Date | 12 September 2002 |
Docket Number | No. 22551, No. 22552. |
Citation | 54 P.3d 397,99 Haw. 226 |
Parties | Andre S. TATIBOUET, Petitioner-Appellant, v. J.W. ELLSWORTH, Respondent-Appellee. In the Matter of the Arbitration Between J.W. Ellsworth, Claimant-Appellee, v. Andre S. Tatibouet, Individually and as President of Hotel Corporation of the Pacific, Inc., Respondent-Appellant. |
Court | Hawaii Supreme Court |
Michael K. Livingston and Mark S. Davis, Honolulu, of Davis Levin Livingston Grande and Peter W. Craigie and D. Austin Lewis of Craigie, McCarthy & Clow, for appellant.
Steven M. Egesdal, Honolulu, and Daniel A. Bent of Carlsmith Ball, for appellee.
Respondent-appellant Andre Tatibouet appeals from the first circuit court's order, the Honorable Gail Nakatani presiding, granting petitioner-appellee J.W. Ellsworth's motion to confirm his final arbitration award and denying Tatibouet's motion to vacate the arbitration award. On appeal, Tatibouet argues that the circuit court erred when it confirmed the award because the arbitration panel exceeded its authority when it: (1) failed to follow Hawai`i law by (a) incorrectly dismissing the ready, willing, and able requirement for breach of contract claims, (b) incorrectly awarding damages to Ellsworth under an unjust enrichment theory, which he expressly waived in the underlying contract, and (c) incorrectly ruled that Ellsworth had an exclusive right to purchase the Mark Twain Hotel; (2) failed to enforce the fully integrated Settlement Agreement; (3) awarded legally inconsistent remedies; and (4) refused to hear evidence on how the award would unjustly enrich Ellsworth. Tatibouet asks this court to review the merits of the arbitration award.
We hold that judicial review of arbitration awards pursuant to Hawai`i Revised Statutes (HRS) § 658-9(4) does not encompass the effects of choice-of-law restrictions in the underlying contract on arbitral authority unless so delineated in the arbitration clause. To uphold public policy and secure the finality of arbitration awards, reviewing courts must not review de novo an arbitration award unless one of the four grounds prescribed by HRS § 658-9 or one of the two judicially recognized exceptions has been alleged and violated. This holding does not extend to cases that prove the arbitrators wilfully and deliberately failed to apply a selected law. Accordingly, we affirm the circuit court's order confirming the arbitration award.
In July 1979, Ellsworth began his employment with Hotel Corporation of the Pacific, Inc., a Hawai`i corporation doing business as "Aston Hotels and Resorts" (Aston). Tatibouet was the Chief Executive Officer (CEO) and majority shareholder of Aston. Ellsworth assisted Tatibouet in purchasing two hotels in the San Francisco area, the Mark Twain and the Pickwick Hotels.
In May 1993, Aston terminated Ellsworth from his position. Thereafter, Ellsworth brought claims against Aston and Tatibouet for deferred compensation and other post-termination benefits. In December 1993, Tatibouet and Ellsworth entered into a Settlement Agreement, in which each party released all claims arising out of Ellsworth's employment with Aston, and included resolution of Ellsworth's claims of interest in the Pickwick and Mark Twain Hotels. As consideration for promises outlined in the Settlement Agreement, Ellsworth would have received a defined percentage of the sale proceeds for both hotels, if they were sold before October 1, 1995. If the hotels were not sold by October 1, 1995, Ellsworth would have the option of purchasing the hotels at their appraised value as of October 1, 1995. As to the Pickwick Hotel, the Settlement Agreement expressly provided:
With regard to the Mark Twain Hotel, the Settlement Agreement provided a similar option to purchase clause, which provided:
5.4.2 Ellsworth shall have the right to purchase the hotel, so long as it has not been sold or is not subject to a sales agreement, for cash at its appraised value as determined under Subsection 5.4, above, less the amount that would otherwise be payable to him under Subsection 5.4.3, below; subject, however, to any applicable offset provisions contained in Section 6 below. The closing shall take place no later than one hundred thirty five [sic] (135) days subsequent to Ellsworth's giving notice of the exercise of his option to purchase the hotel hereunder.
Under a section entitled, "Miscellaneous," the Settlement Agreement also contained a choice-of-law provision [hereinafter "choice-of-law provision"]: The Settlement Agreement also included a Mandatory Arbitration clause [hereinafter "arbitration clause"], which provided that arbitration was required if a dispute arose between the parties regarding the terms of the Settlement Agreement:
9.6 Mandatory Arbitration. If, at any time during the term hereof or after termination hereof, any dispute, difference or question shall arise among or between the parties hereto with respect to the provisions, construction, meaning or effect of this Agreement or anything herein contained or the rights or obligations of the parties hereunder, and if the parties are unable in good faith to resolve such dispute, difference or questions, then every such dispute, difference or questions shall, at the desire of any party, be submitted and determined by . . . a panel of three arbitrators . . . . [T]he arbitrators so appointed shall thereupon proceed to determine the matter in dispute, difference or question, and the decision of any two of them shall be final, conclusive and binding upon all parties, all as provided in Chapter 658, Hawai`i Revised Statutes [(HRS)] as the same may be amended, and judgment may be entered upon any such decision by such Circuit Court as provided in such statute. . . . Any arbitration proceeding conducted pursuant to this paragraph . . . shall be governed by the Commercial Rules of the American Arbitration Association.
By October 1, 1995, the hotels had not been sold. Although the Settlement Agreement required Tatibouet to provide and deliver appraisals of the hotels no later than October 1, 1995, thereby allowing Ellsworth to exercise his purchase options, Tatibouet failed to fulfill his obligations. Instead, Tatibouet sold the Pickwick Hotel to a third party on November 26, 1996 for $14.48 million.
On March 6, 1997, Ellsworth made a demand for arbitration as allowed by the arbitration clause of the Settlement Agreement. Edward King, Douglas Young, and James Ventura were selected as members of the arbitration panel [hereinafter "the arbitration panel"] in accordance with the terms of the Settlement Agreement. Ellsworth asked the panel to determine whether he: (1) had an option to purchase the Pickwick or Mark Twain Hotels, which was frustrated by Tatibouet; (2) was entitled to pursue the option; and (3) was entitled to damages for being prevented from exercising the option, and, if so, in what amount.
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