Hawaii Attorney Legal Blog

We are occasionally asked whether an unlicensed contractor is entitled to collect compensation for work provided to a contracting party. A corollary of this issue is whether the monies already paid to the contractor must be refunded to the contracting party.

HRS 444-9 requires that no person shall "act or assume to act, or advertise" as a contractor (under the definition contained in HRS 444-1) without a license previously obtained by the licensing board. Further, HRS chapter 444 imposes penalties for violation of this statute, including but not limited to HRS 444-22. HRS 444-22 provides that:

The failure of any person to comply with any provision of this chapter shall prevent such person from recovering for work done, or materials or supplies furnished, or both on a contract or on the basis of reasonable value thereof, in a civil action, if such person failed to obtain a license under this chapter prior to contracting for such work.

HRS 444-22 prohibits unlicensed contractors from recovering for work performed, materials and/or supplies furnished. There is a strong public policy behind this rule. The Hawaii Supreme Court has explained this policy:

HRS chapter 444, providing for the licensing of contractors, expresses a very strong public policy that contractors in this state should apply for, and retrieve licenses, and the provisions of HRS 444-22, which are sweeping in their terms, are obviously intended to produce harsh results in furtherance of this policy.

Butler v Obayashi, 71 Haw. 174, 177 (1990).

It has been contended that parties contracting with unlicensed contractors should be barred from bringing suit since they too are parties to the illegal contract. However, the Hawaii Intermediate Court of Appeals ("ICA") in Jones v Phillipson found this argument unpersuasive. Jones v Phillipson, 92 Haw 117, 124-126 (1999). The ICA held that "a contract with an unlicensed contractor is not void ab initio, and this section [HRS 444-22] does not bar a member of the public, who is party to such a contract, from bringing suit to recover breach of contract damages from an unlicensed contractor". Id at 126. The ICA determined that any other result "would defeat the purpose of protecting the public by providing a shield from litigation for an unlicensed builder." Id; citing Domach v Spencer, 101 Cal.App.3d 308, 311 (1980) (In Jones the Hawaii Supreme Court cited Domach, a California case, because it recognized that the California statue was similar to the Hawaii statute).

Similarly, in Butler the Hawaii Supreme Court decided that, regardless of whether a contracting party knew that the contractor was unlicensed, an unlicensed contractor is still prohibited from recovering for work pursuant to HRS 444-22. Butler at 177. These two Hawaii cases, Butler and Jones, clearly establish that a party contracting with an unlicensed contractor may bring suit against the contractor regardless of whether they knew that the contractor was unlicensed.

In an analogous case, Domach v Spencer, the homeowners filed a claim against the contractor for breach of contract for failing to provide "workmanlike construction". Domach at 308. In that case, the contractor demanded greater compensation than was originally contracted for to complete the home. Id. at 310. Although the homeowners paid the contractor the agreed amount, at trial the homeowners demanded that all the monies be returned since the contractor was not licensed. The Domach court found in favor of the homeowners and awarded an amount necessary to pay for reparation of any "unworkmanlike" construction. Id. at 314. Regrettably, the Domach opinion does not explain the extent to which damages were awarded (including whether the homeowners were allowed to recover the money paid to the contractor or simply money paid for repair of the defective construction).

Labels: Hawaii Real Estate Litigation

There are certain things that I tell witnesses to remember when testifying in a deposition.

1. The Witness's testimony is under oath. Therefore, the Witness is subject to the penalty of perjury if she is untruthful. An example that most witnesses understand is when I remind them that former President Clinton's impeachment was not for his sexual improprieties, but for his untruthfulness in his testimony under oath about those improprieties.

2. The deposition will be used to preserve trial testimony. In Hawaii, the deposition testimony of a party may be admitted into evidence even if the party appears at trial. Thus, the deposition transcript may be used in two ways. First, to cross-examine the Witness during her trial testimony. Second, to read segments of the transcript into the trial record even after the Witness testifies. Thus, it is imperative that the Witness is as accurate as possible during the deposition and that she realize that her testimony at the deposition is as important as if she were testifying at trial.

3. The Witness should remember several guidelines when testifying. The first is to speak slowly and clearly. By reacting slowly to the question and formulating a response in a careful manner, the Witness can make sure that she answers only the pending question. Often in conversation, we not only answer the question that is asked, but we add additional unrequested information in our response. In a deposition, the best way to respond to a question is to answer only the question that has been asked.

4. I repeat- answer only the question that has been asked. I cannot stress this point enough. When a witness is deposed, she is in a defensive posture. It is not your job to educate your opponent. You are simply there to answer questions. The easiest way to accomplish this objective is to answer only the question that has been asked. The Witness should listen clearly to the question and answer only that question. The Witness should offer no additional information.

5. The Witness must not speculate. When answering only the question that is asked, the Witness should only give information about which she has personal knowledge. The opposing counsel may ask the Witness to speculate or guess about certain occurrences. If the Witness has no personal first hand knowledge, the Witness should simply say that she does not know. She should not guess.

6. The Witness should be emotionally and physically prepared for an eight-hour deposition. It may not last that long. Prepare for the worst, hope for the best. Although she will be sitting and answering questions, it is an exhausting procedure. She should wear comfortable clothing and be prepared to sit for an extended period of time. Defense counsel should insist on taking breaks every fifty-five minutes even if the Witness claims that she feels fine. The deposition is a marathon, not a sprint.

7. If the Witness does not understand a question, she should ask the examiner to rephrase it. If a witness does not understand a word used by opposing counsel, she should not guess as to its meaning. The Witness should simply ask opposing counsel to ask the question in a different way.

8. During the deposition if the Witness's attorney objects, the Witness should remain quiet until her attorney has completed his objection. Thereafter, the Witness should not speak until her attorney indicates that it is acceptable for her to answer the question. In a deposition, if the witness speaks immediately after her lawyer objects, and answers despite the objection, the answer will stand. It is therefore imperative that the Witness understand that if her attorney objects to a question, the Witness should refrain from speaking until her attorney indicates that she may answer.

9. The Witness must remember that the opposing lawyer is not your friend (no matter how courteous he may be).

10. Upon completion of the deposition, the Witness will be asked to review the transcript. If she wants to make changes to any answer at that time, she can. Therefore, once the Witness is given a deposition transcript it is imperative that the Witness and her counsel review it for its accuracy.

Labels: Civil Procedure and Trial Practice

In general, an employer may be held liable for the conduct of an employee acting within the scope of his or her employment. US v Hilton Hotels Corp., 467 F.2d 1000, 1004-1007 (C.A.9, 1972) See also Lucas v Liggett & Meyers Tobacco Co., 50 Hawaii 506, 480 (Hawaii, 1968)(A principal who puts a servant or other agent is a position which enables the agent, while apparently acting within his authority, to commit a fraud upon third persons is subject to liability to such third persons for the fraud.) Indeed, in certain cases a corporation may even be held responsible even if the acts of its employee or agent were done contrary to the corporation's policy or employer's instruction so long as it was within the scope of his or her "apparent authority". Id. It is not determinative if the employee or agent is acting in his or her own interest when committing the act, it will not relieve the employer of liability. See Lucas v Liggett & Meyers Tobacco Co., 50 Hawaii at 483.

In the alternative, if a Court deems that the employee's actions were outside the scope of employment, an employee may still be liable if "the conduct violated a non-delegable duty of the [employer], or... the [employee] purported to act…on behalf of the employer and there was reliance upon apparent authority, or [the employee] was aided in accomplishing the tort by the existence of the agency relationships". Hardwicke v Boychoir School, 902 A.2d 900, 919-920 (N.J., 2006) citing Restatement 2nd of Agency sec. 219(2)(c) to (d)(1958). Restatement 2nd of Agency sec. 219(2) specifically provides that:

(2) A master is not subject to liability for the torts of his servants acting outside the scope of their employment, unless:
(a) the master intended the conduct or the consequences, or
(b) the master was negligent or reckless, or
(c) the conduct violated a non-delegable duty of the master, or
(d) the servant purported to act or to speak on behalf of the principal and there was reliance upon apparent authority, or he was aided in accomplishing the tort by the existence of the agency relation.

Restatement 2nd of Agency sec. 219(2) (Emphasis added).

In Hardwicke v American Boychoir School, the plaintiff, a former student of the American Boychoir School, was sexually abused by school employees and brought an action against the school. Hardwicke v Boychoir School, 902 A.2d at 902. Relying on these principals, the New Jersey Supreme Court held that the boarding school, as employer, could be held vicariously liable for common-law claims for the child abuse committed by its employees. Hardwicke v Boychoir School, 902 A.2d at 920. In particular, the court in interpreting Restatement 2nd of Agency sec. 219(2)(d), held that when an employer delegates authority to an employee to "control the work environment" and the employee abuses that delegated authority, than the employer may be held vicariously liable. Id.

Additionally, in certain circumstances the employer may even be held liable for failing to detect and stop an employee's wrongdoing. US v Demauro, 581 F.2d 50, (2d Cir., 1978). See also Doe Parents v State, 100 Hawaii 34, 68 (Hawaii, 2002)(...if the State knew, or reasonably should have anticipated, that one of its employees would commit an intentional tort against a person to whom the State owed a duty of care, the State is liable for the negligence of those employees who were in a position to take reasonable precautions against the anticipated harm.). This claim of action is based on the negligence of the employer and/or employer's supervisors. Id.

Labels: Personal Injury

A lawyer owes his client basic duties and obligations. Although there are literally volumes written on this subject, there are certain Hawaii rules which are most basic. These include the duties (i) to keep the client informed, and (ii) of loyalty.

More specifically, Rule 1.4 of the Hawaii Rules of Professional Conduct ("HRPC") provides as follows:

(a) A lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information. A lawyer who receives a written offer of settlement in a civil controversy or a proffered plea bargain in a criminal case shall promptly inform the client of its substance unless prior discussions with the client have left it clear that the proposal will be unacceptable.

(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.

HRPC Rule 1.4.

With regards to an attorney's duty of loyalty, pursuant to the HRPC Rule 1.7(2)(b), lawyers may not represent multiple clients without full and adequate disclosure. More specifically, the Rule states as follows:

A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests unless:

(1) the lawyer reasonably believes the representation will not be adversely affected; and

(2) the client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.

HRPC Rule 1.7(2)(b)(emphasis added).

In addition, HRPC Rule 1.8(g) states,

A lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims of or against the clients, or in a criminal case an aggregated agreement as to guilty or nolo contendere pleas, unless each client consents after consultation, including disclosure of the existence and nature of all the claims or pleas involved and of the participation of each person in the settlement.

HRPC Rule 1.8(g) (emphasis added).

Finally, HRPC Rule 1.13(e) provides as follows:

A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or other constituents, subject to the provisions of Rule 1.7. If the organization's consent to the dual representation is required by Rule 1.7, the consent shall be given by an appropriate official of the organization other than the individual who is to be represented, or by the shareholders.

Rule 1.13(e)

A Note to HRPC Rule 1.7 establishes that if a conflict of interest arises, then the lawyer should withdraw. Further, the Note to HRPC Rule 1.13 provides that, if a lawyer represents an organization and any of its constituents, a conflict arises when,

...the organization's interest may be or become adverse to those of one or more of its constituents. In such circumstances the lawyer should advise any constituent whose interest the lawyer finds adverse to that of the organization of the conflict or potential conflict of interest, that the lawyer cannot represent such constituent, and that such person may wish to obtain independent representation. Care must be taken to assure that the individual understands that, when there is such adversity of interest, the lawyer for the organization cannot provide legal representation for that constituent individual, and that discussions between the lawyer for the organization and the individual may not be privileged.

HRPC Rule 1.13 Note [8].

It is clear from the rules that an attorney must disclose if there is a conflict of interest in his representation of a client. This includes an explanation of the risks and consequences related to dual or multiple representations of parties arising by either, (i) when the attorney represents two or more clients (ie. co-defendants) in the matter, or (ii) when the attorney represents an organization along with a constituent(s). In particular, if an attorney represents dual parties, the participation and consent of each party concerning settlement offers is essential.

Labels: The Legal Profession

Depositions are an essential aspect of civil litigation. Hawaii rules provide for many devices to obtain discovery. Depositions are one of the most effective. Specifically, H.R.S. Rule 26(a)- General Provisions Governing Discovery provides as follows:

(a) Discovery Methods. Parties may obtain discovery by one or more of the following methods: depositions upon oral examination or written questions; written interrogatories; production of documents or things or permission to enter upon land or other property, for inspection and other purposes; physical and mental examinations; and requests for admission.

H.R.S. Rule 26(a)

A deposition allows one party to question another party or witness under oath. Depositions are recorded by court reporter and/or videotape. I personally believe that depositions are particularly useful discovery tools since they "may be used by any party for the purpose of contradicting or impeaching the testimony of deponent as a witness" at "the trial or upon the hearing of a motion or an interlocutory proceeding." H.R.S. Rule 32(a). In other words, deposition testimony is almost as important as trial testimony.

The Hawaii Rules provide that "any party may take the testimony of any person, including a party, by deposition . . ." H.R.S. Rule 30(a). However, "a party desiring to take the deposition of any person shall give reasonable notice in writing to every other party to the action." H.R.S Rule 30(b). The other parties to the action may also cross-examine the witness. H.R.S. Rule 30(c).

If a witness is served with a deposition subpoena, it should be taken seriously. The sanctions for failing to appear can be harsh. The party who noticed the deposition may file a motion requesting that the Court impose the following orders:

(A) An order that the matters regarding which the order was made or any other designated facts shall be taken to be established for the purposes of the action in accordance with the claim of the party obtaining the order;

(B) An order refusing to allow the disobedient party to support or oppose designated claims or defenses, or prohibiting him or her from introducing designated matters in evidence;

(C) An order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party.

H.R.S. Rule 37(b)(2).

An order dismissing the action against the party who fails to appear for his or her deposition is a particularly drastic remedy. However, these sanctions are necessary to ensure that witnesses appear for depositions and participate in the discovery process. The easiest way to avoid this outcome is to ensure that the witness appears for his deposition.

Labels: Civil Procedure and Trial Practice