Arbitration in Hawaii

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Hawaii courts favor arbitration. Arbitration is a device in which the litigants agree to hire a private, independent third party to decide their case. It is generally accepted that parties will reduce litigation costs by arbitrating a matter, since the process will be streamlined. It is quite common for parties to agree to arbitrate in a contract, although any case may be resolved through arbitration (so long as all parties agree to do so).

If there is an arbitration clause in an agreement, courts are obligated to enforce it so long as the court determines that the dispute is subject to the clause in the agreement. H.R.S. section 658A-6, H.R.S. section 658A-7. Moreover, if (i) a party to the contract files a motion to compel arbitration or (ii) the court orders arbitration, then the court shall stay any proceeding that involves the same claim(s). H.R.S. section 658A-7.

Hawaii Revised Statutes (“H.R.S”) section 658A-6 states the following:

(a) An agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract.

(b) The court shall decide whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate.

(c) An arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled and whether a contract containing a valid agreement to arbitrate is enforceable.

(d) If a party to a judicial proceeding challenges the existence of, or claims that a controversy is not subject to, an agreement to arbitrate, the arbitration proceeding may continue pending final resolution of the issue by the court, unless the court otherwise orders.

Further, H.R.S. section 658A-7 provides,

(a) On motion of a person showing an agreement to arbitrate and alleging another person’s refusal to arbitrate pursuant to the agreement:

(1) If the refusing party does not appear or does not oppose the motion, the court shall order the parties to arbitrate; and

(2) If the refusing party opposes the motion, the court shall proceed summarily to decide the issue and order the parties to arbitrate unless it finds that there is no enforceable agreement to arbitrate.

(b) On motion of a person alleging that an arbitration proceeding has been initiated or threatened but that there is no agreement to arbitrate, the court shall proceed summarily to decide the issue. If the court finds that there is an enforceable agreement to arbitrate, it shall order the parties to arbitrate.

(c) If the court finds that there is no enforceable agreement, it shall not, pursuant to subsection (a) or (b), order the parties to arbitrate.

(d) The court shall not refuse to order arbitration because the claim subject to arbitration lacks merit or grounds for the claim have not been established.

(e) If a proceeding involving a claim referable to arbitration under an alleged agreement to arbitrate is pending in court, a motion under this section shall be made in that court. Otherwise a motion under this section shall be made in any court as provided in section 658A-27.

(f) If a party makes a motion to the court to order arbitration, the court on just terms shall stay any judicial proceeding that involves a claim alleged to be subject to the arbitration until the court renders a final decision under this section.

(g) If the court orders arbitration, the court on just terms shall stay any judicial proceeding that involves a claim subject to the arbitration. If a claim subject to the arbitration is severable, the court may limit the stay to that claim.

Arbitrations are heavily favored by Hawaii Courts. The Hawaii Supreme Court in Lee v Heftel explained the rationale behind this policy:

. . .[We] emphasize the importance of utilizing alternative methods of dispute resolution in an effort to reduce the growing number of cases that crowd our courts each year. This court has long recognized the strong public policy supporting Hawaii’s arbitration statutes as codified in HRS Chapter 658. We have stated that the proclaimed policy . . . is to encourage arbitration as a means of settling differences and thereby avoiding litigation. Any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration. As with any contract, the parties’ intentions control, but those intentions are generously construed as to issues of arbitrability. The preeminent concern of Congress in passing the [Federal Arbitration] Act was to enforce private agreements into which parties had entered, [a concern which] requires that we rigorously enforce agreements to arbitrate.

Lee v. Heftel, 81 Hawaii 1,4 (1996)(no citations or brackets included).

For a discussion of our Arbitration and Mediation Practice, please click here.