Hawaii Attorney Legal Blog

Hawaii attorney Philip R. Brown has been selected by his peers to be included in the 2010 edition of The Best Lawyers in America. Obviously, he is delighted to have received this great honor.

"For over a quarter of a century, Best Lawyers has been regarded- by both the profession and the public-as the definitive guide to legal excellence in the United States. Selection to Best Lawyers is based on exhaustive and rigorous peer-review survey ... by the top attorneys in the country."

Admittedly, legal professionals may disagree as to the "definitive guide to legal excellence in the United States". Best Lawyers, Martindale Hubbell , The Bar Register of Preemenient Lawyers and the American Trial Lawyers Association can all make solid claims to be the definitive guide to legal excellence. Philip Brown has now received the highest rating from each of those legal guides.

Philip Brown is listed in The Best Lawyers in America under Commercial Litigation. Mr. Brown has the highest ethical/legal rating (AV) from Martindale Hubbell. Mr. Brown is also listed by the American Trial Lawyers Association in the Top 100 Trial Lawyers. Finally, Philip Brown is listed in the Bar Register of Preeminent Lawyers under Civil Trial Practice, Commercial Litigation, and Personal Injury.

Labels: Civil Procedure and Trial Practice, Commercial Litigation, Office News, The Legal Profession

A contracting party who fails to give proper notice and opportunity to cure any alleged breach, default, or defect (as expressly required in the contract) is in breach of the contract. See Kalaus v Prime Care Physician, 20 A.D. 3d 452, 454 (N.Y.A.D. 2 Dept., 2005)(Defendants breached the contract with plaintiff for failure to give plaintiff 30 days to cure plaintiff's breach as expressly provided in the contract. Plaintiff was awarded summary judgment on the issue of liability). The party who is held in breach for failing to give proper notice and opportunity to cure also loses any of its claims or defenses related to the other party's alleged breaches. Id. ("Based on the conclusion that that defendants breached the termination for cause provision of the employment agreement [for failing to give plaintiff notice of his breach and opportunity to cure], it is irrelevant whether the defendants did, in fact, have the requisite cause to terminate the plaintiff's employment.")(brackets added). See also The American Outdoorsman, Inc. v Pella Products, Inc., 144 P.3d 81, *8 (Kan.App., 2006)("[E]ven if American Outdoorsman's network change could be considered a material breach, Pella should not be allowed to assert this breach as a defense when it failed to give American Outdoorsman the opportunity to correct such breach.") Likewise, "an injured party that acts precipitously and terminates before it is entitled to do so loses its defense as well as the possibility of claiming damages for total breach, and will itself be liable for damages for total breach." Farnsworth on Contract section 8.18 (3d.ed., 2004).

Admittedly, the party breaching the contract could argue that (i) there was a mutual rescission of the agreement or (ii) it was orally modified. However, "to establish rescission by mutual consent, the contracting parties' acts and declarations must be inconsistent with the continued existence of the previous contract." AAA Uniform and Linen Supply, Inc. v. Barefoot, Inc., 17 S.W. 3d 627,629 (Mo.App. W.D. 2000) (emphasis added). Moreover, proof of these "acts and declarations" of "rescission must be clear, positive, unequivocal and decisive, and it must manifest the parties' actual intent to abandon contract rights." Id.

The second option, "a written contract can subsequently be orally modified if all of the requisites of a valid or enforceable agreement are met." Honolulu Federal Sav. And Loan Ass'n v. Murphy 7 Haw.App 196, 205 (Haw.App.1988). "A requisite is that the modification must be supported by new consideration." Id.

For a discussion of our Commercial Litigation Practice click
here .

Labels: Commercial Litigation

The Truth in Lending Act (TILA) found in 15 U.S.C.A. section 1601, et. seq. was enacted to "protect consumers and promote the 'informed use of credit.'" Washington v Americquest Mortgage.Co., 2006 WL 1980201, *6 (N.D.Ill., 2006). As such, TILA requires creditors to conspiciously disclose certain terms and costs information prior to a credit transaction. Id. This information includes, but is not limited to, the annual percentage rate and "finance charge," order of disclosures, and use of different terminology. 15 U.S.C.A. section 1632(a).

The Statute of Limitation on a TILA action is one year for closed ended credit cases pursuant to 15 U.S.C.A. section 1640. The exception to the one year statute of limitation is when the remedy sought is to enforce the right of rescission under 15 U.S.C.A. section 1635. 15 U.S.C section 1635 provides that in any consumer credit transaction in which a security interest is retained or acquired in any real property which is used as the residence of the person to whom credit is extended, the obligor has the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the disclosures required by the Truth in Lending Act, whichever is later, by notifying the creditor of his intention to rescind. 15 U.S.C section 1635. 15 U.S.C section 1635 applies to loans on unimproved lots that are intended for recreational or residential use. Charnita, Inc. v. F. T. C., 479 F.2d 684, 686-87, (C.A.3, 1973).

For a link to commercial litigation areas regularly practiced by this office please click here.

Labels: Commercial Litigation, Hawaii Real Estate Litigation

The tort of intentional interference with prospective economic advantage was examined by the Hawaii Supreme Court in Robert's Hawaii School Bus, Inc. v Laupahoehoe Transp. Co., Inc.

The primary objective of the tort of interference with prospective business advantage or opportunity is the protection of legitimate and identifiable business expectancies... Weighing against social and individual interests in protection of business expectancies and efforts to acquire property are the interests in legitimate business competition. That is, much of the common law is premised on the theory that competitors should have an opportunity to compete for business until such time as it is cemented by contract or agreement. Public and individual interests in free competition become particularly acute where a plaintiff anticipates, but is not yet assured, that a contractual or firm business relationship will materialize. Where the plaintiff's contractual relations are merely contemplated or potential, the public interest is best served by allowing any competitor the opportunity to divert those prospects to itself, so long as the means used are not themselves improper. Any contrary rule may tend to establish and perpetuate trade monopolies. As the "expectancy" becomes more remote or less firmly established, the interest in free competition among business persons becomes more compelling.

Robert's Hawaii School Bus, Inc. v Laupahoehoe Transp. Co., Inc., 91 Hawaii 224, 258-59 (Hawaii, 1999)(superseded by statute as stated by Hawaii Medical Ass'n v. Hawaii Medical Service Ass'n, Inc., 113 Hawai'i 77 (Hawai'i, 2006) on unrelated grounds)(citing 2 Joseph D. Zamore, Business Torts 12.01[2], at 12-5 to 12-6 (1999) (footnotes omitted) (emphasis added).

Further, the Hawaii Supreme Court provided that,

[T]he following elements have evolved into the tort of intentional or tortious interference with prospective business advantage: (1) the existence of a valid business relationship or a prospective advantage or expectancy sufficiently definite, specific, and capable of acceptance in the sense that there is a reasonable probability of it maturing into a future economic benefit to the plaintiff; (2) knowledge of the relationship, advantage, or expectancy by the defendant; (3) a purposeful intent to interfere with the relationship, advantage, or expectancy; (4) legal causation between the act of interference and the impairment of the relationship, advantage, or expectancy; and (5) actual damages.

Id. (emphasis added).

In Robert's Hawaii School Bus, Inc. v Laupahoehoe Transp. Co., Inc., the Hawaii Supreme Court used the above factors and upheld the trial court conclusion that plaintiff's claim for intentional interference with prospective economic advantage failed since "there was insufficient evidence to show that: (1) such conduct was designed to disrupt appellants' relationship with DAGS; (2) the relationship had the probability of ripening into a future economic benefit for STI; (3) STI would have been awarded the Big Island routes; and/or (4) STI was injured and suffered damages."

In many cases, the tort of intentional interference with prospective economic advantage comes down to whether "absent the interference, the [prospective business] relations were reasonably likely to develop." Looney v M-Squared, Inc., 586 S.E.2d 44, 49 (Ga.App., 2003). In Looney v M-Squared, Inc., the Court of Appeals of Georgia held that even with defendants' interference, plaintiff corporation failed to show that plaintiff would have formed the alleged relationship. Looney v M-Squared, Inc., 586 S.E.2d at 49. Instead, the evidence showed that the corporation "decided not to pursue" that relationship. Id.

As noted, causation is also an element that must be established. "In order to be liable, a defendant's interference must cause the loss or, in other words, a defendant's conduct must not only qualify as improper interference, it must also actually induce the third party to terminate its relationship with the plaintiff." The Film and Tape Works, Inc. v Junetwenty Films, Inc., 856 N.E.2d 612, 620-21 (Ill.App. 1 Dist., 2006) See also Gruber v. Victor, No. 95 CIV. 2285, 1996 WL 492991 at *21 (S.D.N.Y., August 28, 1996). "[T]o maintain an action for intentional interference with prospective economic advantage there must be some certainty that plaintiff would have gotten the contract but for the defendant's interference." (citing Mandleblatt v Devon Stores, Inc., 521 N.Y.S.2d 672, 677 (1st Dept., 1987)(internal quotation omitted).

In The Film and Tape Works, Inc. v Junetwenty Films, Inc., defendants produced evidence that the third party corporation would have done business with defendants regardless if defendants worked for plaintiff corporation or for themselves. Id. Basically, the third party would have done business with defendant regardless of the presence of plaintiff corporation. Id. As such, the Appellate Court of Illinois held that defendants' action did not cause any damages to plaintiff. Id.

Labels: Commercial Litigation

In certain specific cases, a Plaintiff may bring a claim if someone has interfered with a prospective business advantage. The Hawaii Supreme Court has addressed the required elements of this tort in Hawaii as:

[T]he following elements have evolved into the tort of intentional or tortious interference with prospective business advantage: (1) the existence of a valid business relationship or a prospective advantage or expectancy sufficiently definite, specific, and capable of acceptance in the sense that there is a reasonable probability of it maturing into a future economic benefit to the plaintiff; (2) knowledge of the relationship, advantage, or expectancy by the defendant; (3) a purposeful intent to interfere with the relationship, advantage, or expectancy; (4) legal causation between the act of interference and the impairment of the relationship, advantage, or expectancy; and (5) actual damages.

Robert's Hawaii School Bus, Inc. v Laupahoehoe Transp. Co., Inc., 91 Hawaii 224, 258-59 (Hawaii, 1999).

With regards to determining whether there is a "valid business relationship or a prospective advantage or expectancy," the law is well settled that a "unilateral belief and hope that a contract would result" is "inadequate to sustain a cause of action" for tortious interference with prospective business expectancy. Gore v Shepard, 50 P.3d 705, 710-11 (Wyo., 2002) "A reasonable probability of a contract [ie. business advantage] is shown if there is a reasonable assurance of a contract in view of all of the circumstances." Id. (brackets added); See also, Sea-Pac Co., Inc. v United Food and Commercial Workers Local Union 44, 699 P.2d 217, 220 (Wash., 1985)("the plaintiff must show that the future opportunities and profits are a reasonable expectation and not based on merely wishful thinking.").

Moreover, the Defendant must have actually caused Plaintiff to lose a prospective business advantage. Proof of causation comes down to whether "absent the interference, the [prospective business] relations were reasonably likely to develop". Looney v M-Squared, Inc., 586 S.E.2d 44, 49 (Ga.App., 2003). Therefore, "in order to be liable, a defendant’s interference must cause the loss or, in other words, a defendant's conduct must not only qualify as improper interference, it must also actually induce the third party to terminate its relationship with the plaintiff." The Film and Tape Works, Inc. v Junetwenty Films, Inc., 856 N.E.2d 612, 620-21 (Ill.App. 1 Dist., 2006) See also Gruber v. Victor, No. 95 CIV. 2285, 1996 WL 492991 at *21 (S.D.N.Y., August 28, 1996). "[T]o maintain an action for intentional interference with prospective economic advantage there must be some certainty that plaintiff would have gotten the contract but for the defendant's interference." (citing Mandleblatt v Devon Stores, Inc., 521 N.Y.S.2d 672, 677 (1st Dept., 1987)(internal quotation omitted).

Labels: Commercial Litigation

We have represented clients alleged to have been involved in a "theft of a corporate opportunity." As most people know, "a corporate officer or director is under a fiduciary duty of individual loyalty, good faith and fair dealing in conducting corporate business." Racine v Weisflog, 477 N.W.2d 326, 329 (Wis App., 1991). One of the primary duties is that a corporate officer cannot divert assets of the corporation and use them for the officer's personal advantage.

In Hawaii, the "corporate opportunity" doctrine has been explained as follows:

If there is presented to a corporate officer or director a business opportunity which the corporation is financially able to undertake, is, from it nature, in the line of the corporation's business and is of practical advantage to it, is one in which the corporation has an interest or a reasonable expectancy, and, by embracing the opportunity, the self-interest of the officer or director will be brought into conflict with that of his corporation, the law will not permit him to seize the opportunity for himself.

Lussier v Mau-Van Development, Inc., 4 Haw.App. 359, 368 (Hawaii App., 1983)(Citing Guth v Loft, Inc., 5 A.2d 503, 511 (Del.Ch., 1939).

If an officer or director diverts a "corporate opportunity" for his or her own personal gain, then such action may constitute a breach of the officer or director's fiduciary duty to the corporation (ie. the duty of loyalty). The damages for such breach may include, (i) recovery of any profits earned (usually with the imposition of a constructive trust on the property taken), (ii) compensatory damages, and/or (iii) injunctive relief.

Labels: Commercial Litigation

Today we had a hearing concerning diversity jurisdiction. In general, federal courts only have jurisdiction over two types of cases; (i) cases concerning a federal question (meaning that the case is based on federal law), and (ii) diversity cases. § 28 U.S.C. , § 28 U.S.C. .

For the federal court to have diversity jurisdiction over a case there must be two elements met; (i) the controversy must "exceed the sum of $75,000, exclusive of interests and costs" and (ii) be between "citizens of different states" or "citizens of a State and citizens or subjects of a foreign state" § 28 U.S.C. . Diversity of the parties requires that the plaintiffs and the defendants are from different states or countries. None of the plaintiffs can be "domiciled" in the same state or country of any of the defendants. Therefore, the threshold question in many cases become how do you determine a person's "domicile."

There are two things that are required in determining a person's domicile, (i) where the person is residing and (ii) whether the person intends to live there. Many factors can come into play like "current residence, voting registration and voting practices, location of personal and real property, location of brokerage and bank accounts, location of spouse and family, membership in unions and other organizations, place of employment or business, driver's license and automobile registration, and payment of taxes." Lew v Moss, 797 F2d 747, 749-750 (C.A.9., 1986). If the facts show that a person lives in a state or country and intends to stay there by meeting some of the factors mentioned above then that person will be deemed to be a domicile of that place for the purposes of determining diversity jurisdiction. If you are a plaintiff and your "domicile" state is not the same as any of the defendants (and your claim meets the jurisdictional minimum of $75,000), then the federal court likely has jurisdiction to hear your case.

Labels: Civil Procedure and Trial Practice, Commercial Litigation, Hawaii Real Estate Litigation, Personal Injury

Choosing the right Hawaii personal injury lawyer is one of the most important decisions a client will make when seeking compensation for injuries.
If you are searching for a personal injury lawyer in Hawaii, there are certain factors you should look for to make sure that you choose the personal injury lawyer that is right for you:

Select an attorney that is experienced with personal injury cases. By choosing a lawyer that is experienced in personal injury claims, you can be sure that he or she they will know how to handle your case. Not all attorneys are familiar with the nuances associated with civil litigation and personal injuries.

Select a lawyer with an effective track record. Make sure your attorney is capable of taking your case to trial. Not all personal injury attorneys are trial attorneys. I believe that the best way to obtain compensation for your injuries is to prepare your case for trial. If the defense attorney does not respect your counsel (and understand that you are ready and willing to go to trial), they will likely not negotiate in good faith.

Your personal injury lawyer should have many years of experience handling a wide variety of cases.

Select a personal injury lawyer that is in good standing with the Hawaii bar. You can visit the Hawaii State Bar Association (www.hsba.org) to confirm that the attorney you are considering is in good standing.

Make sure your attorney has malpractice insurance. It is your right to know whether your attorney has adequate malpractice insurance. If you ask your potential attorney whether he has this insurance, and he refuses to respond, simply hire another attorney.

Make sure that your personal injury attorney will take control of your compensation requests. Accident victims need time to heal. They should not be distracted by the "red tape" generated by the medical insurance industry. Your personal injury attorney should be ready and willing to assist you with these issues or you should hire a different attorney.

Finally, you should trust your attorney. The attorney client relationship is the same as any other personal relationship in the sense that there must be complete candor if it is to succeed. Tell your attorney what you are seeking and ask him or her if that is a realistic goal. And be skeptical of attorneys who are willing to promise you extraordinary results in your first meeting. Ask tough questions and listen to the responses. If your potential attorney is the right person for the job, he or she should certainly be able to respond clearly and honestly to your questions.

Good luck.

Labels: Civil Procedure and Trial Practice, Commercial Litigation, Hawaii Real Estate Litigation, Personal Injury, The Legal Profession

Occassionally, individual defendants try to hide assets by placing them in a corporation. In such cases, the attorney is forced to attempt to "pierce the corporate veil". The rule at common law was that, "officers, directors or shareholders of a corporation are not personally liable for the tortious conduct of the corporation or its other agents, unless there can be found some active or passive participation in such wrongful conduct by such persons." Cahill v. Hawaiian Paradise Park Corp., 56 Haw. 522, 526 (1975). However, in 1973, the Hawaii Supreme Court held that a "corporate entity should be disregarded because of circumstances that reveal that the shareholders treated and regarded the corporation as their alter ego." Kahili, Inc. v. Yamamoto, 54 Haw. 267, 271 (1973). This exception has since been called the "piercing the corporate veil" doctrine because it permits officers, directors, or shareholder to be found personally liable for their actions regardless of the general rule at common law.

There are two overarching elements required by most jurisdictions (including Hawai'i) to pierce the corporate veil. Id. First, there must be evidence that an individual in a corporation "treated and regarded the corporation" as his/her "alter ego", and "using the corporation as an agency or instrumentality or a conduit through which they were conducted his/her personal business." Kahili, Inc. at 271. Second, the circumstances must indicate that "recognition of the fictional corporation" would sanction a fraud or promote "injustice and inequity". Id.

There are many factors to consider in determining whether "the separate personalities of the corporation and the individual no longer exist" thus satisfying the first element of piercing the corporate veil. Associated Vendors, Inc. v. Oakland Meat Co., Inc., 26 Cal.Rptr. 806, 813-815 (Cal., 1962) cited by Murdock v. Ventures Trident II (Not Reported in Cal.Rptr.2d) 2003 WL 21246596. Generally, courts in Hawai'i have allowed for piercing of the corporate veil when there are enough factors satisfied to show that there were no separate identities between the corporation and an individual. For example, the Hawaii Supreme Court allowed for the "piercing of the corporate veil" when; (1) two shareholders owned all stock, (2) corporation was undercapitalized, and (3) shareholders' behavior in lease negotiations suggested they were acting for their behalf rather than for the corporation. Kahili, Inc. at 269-272.

As mentioned, it is important to also provide evidence that will convince the court that if it does not pierce the corporate veil, inequity and injustice or fraud will prevail. For example, if there is evidence that an individual was "manipulating the corporation" to "foster" her individual interests to the disadvantage of other members of her corporation, then it is only fair that she be found liable (personally) for her actions rather than the corporation. Riddle at 112. Furthermore, the Hawaii Supreme Court held that evidence that an individual used the corporation to commit fraud or another illegal act constitutes promoting inequity and injustice therefore justifies piercing of the corporate veil. Chung v Animal Clinic Inc., 63 Haw. 642, 646-647 (1981). Finally, actual fraud does not need to be shown, just that by "piercing of the corporate veil" the Court will prevent fraud or injustice. Associated Vendors, Inc. at 813.

Labels: Civil Procedure and Trial Practice, Commercial Litigation, Hawaii Real Estate Litigation, Personal Injury

Last month we received an arbitration award and judgment in excess of Six Million Dollars, against a mainland contractor on behalf of a mainland couple victimized while building their dream home on the island of Kauai. We persuaded the Arbitrator to award our clients treble damages pursuant to H.R.S. 480-2, the Hawaii Unfair and Deceptive Trade Practices Act. In awarding treble damages, the Arbitrator found that the contractor committed several Unfair and Deceptive Acts including the following:

a. At the time of the creation of the Agreement, the Contractors represented that they were licensed contractors. They were not.

b. Contractors collected $434,702.40 in unsubstantiated payments. The action of requesting payment for work that was not performed is both "unfair" and "deceptive."

c. Contractors represented to the homebuilders that they would retain qualified subcontractors and staff the project with craftsmen qualified to construct a residence of this size and magnitude. Contractors did not.

d. Representing that the Kauai House would be built like a specific Scottsdale, Arizona Home that had been viewed by our clients, and that materials and craftsmen used on the Scottsdale Home would be used on the Kauai House. They were not.

e. Contractors did not disclose all information required under H.R.S. § 444-25.5 (Supp.2000) which is a per se violation of H.R.S. § 480-2.

In addition, the Arbitrator found that since an individual contractor acted in his personal capacity, he was "jointly and severally liable with the corporation."

Obviously, we are very proud of the work that we performed to obtain this award for our clients.

Labels: Civil Procedure and Trial Practice, Commercial Litigation, Hawaii Real Estate Litigation

Over the past few weeks, I have addressed the sale of goods in Hawaii under the Uniform Commercial Code. Article Two of the Uniform Commercial Code has been adopted in every state (except Louisiana) and governs contracts for the sale of goods. Hawaii has adopted the Uniform Commercial Code. Obviously, the express terms of a contract for the sale of goods will control the manner in which the sale is to be carried out. If the seller tenders goods that are not timely rejected by the buyer, the buyer is obligated to make payment pursuant to the terms of the sales contract. What constitutes effective "rejection" by the buyer is discussed in my entry of April 23, 2007. This blog entry concerns the rights of a seller to cure any defects alleged by a buyer.

A seller has the right under the UCC to cure a buyer's rejection of nonconforming goods if; (1) "the time for performance has not expired" or, (2) there were "reasonable grounds to believe" the imperfect tender "would be acceptable" as suitable substitution. HRS § 490:2-508. The seller must also "seasonably notify the buyer of his intention to cure." HRS § 490:2-508. "Curing" by the seller basically entails repairing and/or replacing the good to make it conforming and free of defect(s). This ensures that a buyer gets what he bargained for in the contract and allows seller to "avoid injustice...by reason of a surprise rejection by the buyer." Comments to HRS § 490:2-508.

If a seller seasonably notifies the buyer of its intention to cure an alleged defect, the buyer must not interfere. If a seller attempts to cure the nonconformity but is frustrated by the buyer in his attempts (ie. is prevented from picking up the good) then the buyer may be deemed to have accepted the nonconforming goods and waives his right to have the good cured. See Contours, Inc. v Lee, 10 Haw.App. 368 (1994). Moreover, if the buyer has used or modified the allegedly defective good before it could be cured, in some circumstances, Courts have determined that the buyer has waived its right to seek compensation.

Sellers and buyers should document all of their communication concerning efforts to cure (if you are the seller) or efforts to obtain a cure (if you are the buyer). Too often business persons hold written documents in disdain (as mere formalities) and, therefore, fail to protect themselves by documenting their reasonable efforts to solve a problem. It is wise for a businessperson to solve their own problems, and being reasonable is always the best course of action. But it may not do you any good to be the most reasonable party to a transaction, if you cannot prove that you were the most reasonable party. Any good trial lawyer will tell you that the outcome of a case is not always determined by what actually happened, but what the attorneys can prove through admissible evidence. The easiest way to ensure that you will be able prove that you were the most reasonable party to a transaction is to put all your communications in writing (and save your emails). And, of course, be the most reasonable party in all of your transactions.

Labels: Commercial Litigation

Under the Uniform Commercial Code ("UCC"), a breach of a sales contract may occur when a seller delivers non-conforming goods to the buyer. It is the buyer's burden of proof to establish this breach once goods are accepted. H.R.S. § 490:2-601. Upon delivery and acceptance of goods, the buyer is obligated to pay the contract price to the seller. H.R.S. § 490:2-401. Specifically, tender of delivery requires that the seller place and hold conforming goods at the buyer's disposition and give the buyer any notification reasonably necessary to enable him to take delivery. H.R.S. § 490:2-503

Upon delivery of a non-conforming good by the seller, the buyer has three options; 1) reject the goods, 2) accept the goods, or 3) accept any commercial unit and reject the rest. H.R.S. § 490:2-601. For a buyer to adequately reject the goods, the goods must be truly non-conforming or the rejection will be considered wrongful and may give the seller "immediate remedies for breach." H.R.S. § 490:2-602 including comments.

A buyer may reject goods if they "fail in any respect to conform to the contract." (H.R.S § 490:2-601) But that rejection "must be within a reasonable time after their delivery or tender", and the buyer must "seasonably notif[y] the seller." H.R.S. § 490:02-602. The importance of this provision cannot be overemphasized. A buyers failure to timely reject nonconforming goods has been found to constitute a waiver of the right of rejection. Also to be effective, a rejection requires a "clear and unequivocal act," and not merely a request for cure. Matrix v Jolie, 2005 WL 1074774 at 6 (N.Y.City Civ.Ct., 2005), citing Hooper Handling, Inc. v. Jonmark Corp., 267 A.D.2d 1075, 1076 (N.Y.A.D. 4th Dept., 1999); Sears Roebuck & Co. v. Galloway, 195 A.D.2d 825, 827 (N.Y.A.D. 3d Dep., 1993).

The notice of rejection must be "clear and unequivocal". A buyer's "mere complaints" about the goods were not sufficient notice of rejection. If the buyer does not reject the goods pursuant to H.R.S. § 490:2-602, then the buyer is deemed to have accepted the goods. H.R.S. § 490:2-602. Moreover, the buyer's use of the goods and failure to return the goods regardless of his "mere complaints" constituted acceptance. Maggio Importato, Inc. v Cimitron, Inc. 189 A.D.2d at 664. Mere complaints also are ineffective in revocation of acceptance. Swift Spinning Mills v. B&H Apparel, 2003 WL 942610 at 2 (S.D.N.Y., 2003) ("Although [buyer] may have informed [seller] that the denim streaked, there is no evidence that it revoked its prior acceptance. All denim has defects, and if a buyer wants to revoke acceptance of a fabric, it has to involve more than merely complaining of those defects.").

This rule is also supported by H.R.S. § 490:2-605 which requires a buyer to "state in connection with rejection, a particular defect" or risk waiving his objection to acceptance.

The UCC is a road map for buyers and sellers to follow in the event they have a dispute involving a contract for the sale of goods. A buyer or seller should state their objections to a transaction clearly, unequivocally and in writing. If it is cost efficient, consult with your attorney before proceeding. Retain copies of everything. These days, copies of email communication can be as valuable as any other writing. If you have any doubt whether it should be saved, print it out and show it to your lawyer.

Labels: Commercial Litigation

The Uniform Commercial Code (UCC), Article 2, governs all contracts for the sale of goods in Hawaii under Title 27, Chapter 490, Article 2 of the Hawaii Revised Statutes ("HRS"). The purposes of the UCC are:

(1) To simplify, clarify, and modernize the law governing commercial transactions;(2) To permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and (3) To make uniform the law among the various jurisdictions. HRS § 490:1-103.

Prior to the creation of the UCC, each state had its own (and sometimes conflicting) laws concerning the sale of goods. The UCC brought ease and consistency to the sale of goods throughout the United States regardless of where the buyer and seller are located. The UCC has been broadly interpreted and amended in order to adapt to changing times. Indeed, 49 of the 50 states have adopted Article 2 of the UCC (sales). Louisiana is the only state that has not fully passed Article 2 of the UCC.

How does a buyer or seller know if the UCC governs its transaction? There must be a valid contract for the sale of goods.

What is a contract? A valid contract requires an offer, acceptance, and consideration. An offer is a commitment communicated to an identified person containing definite terms. Acceptance is agreement to the terms of the offer by a person to whom the offer was made. Consideration is an exchange of the bargain (i.e. goods) for a benefit (ie. money).

What is a sale? The answer to this question and many other are found in the UCC. "A 'sale' consists in the passing of title from the seller to the buyer for a price." HRS § 490:2-106.

What is a good? "Goods means all things (including specially manufactures goods) which are movable at the time of identification to a contract for sale. The term includes the unborn young of animals, and growing crops, and other identified things attached to realty." HRS § 490:2-105.

As a commercial litigation attorney for over twenty years, I have had many cases involving the UCC. Over the next few weeks, I will address certain UCC issues commonly encountered in Hawaii.

Labels: Commercial Litigation

In a lawsuit, the first document filed with the Court is usually the Complaint which contains, among other things, information on the parties involved and a concise statement of the facts of the case. The Complaint is accompanied by a Summons which is signed by a clerk of the Court. The next step involves service of the Complaint on the Defendant. According to Rule 4(1)-(8)of the Hawaii Rules of Civil Procedure, service of the Complaint can be made various ways depending on the type of defendant. These methods are listed in Rule 4 of the Hawaii Rules of Civil Procedure as follows:

(1) Upon an individual other than an infant or an incompetent person, (A) by delivering a copy of the summons and of the complaint to the individual personally or in case the individual cannot be found by leaving copies thereof at the individual's dwelling house or usual place of abode with some person of suitable age and discretion then residing therein or (B) by delivering a copy of the summons and of the complaint to an agent authorized by appointment or by law to receive service of process.

(2) Upon an infant, by delivering a copy of the summons and of the complaint personally (A) to the guardian of the infant's property or if there is no guardian of the infant's property or service cannot be made upon such guardian then as provided by order of the court and (B) if the infant be of the age of 16 years or over, also to the infant; and upon an incompetent person, by delivering a copy of the summons and of the complaint personally (A) to the guardian of the incompetent's property, or if the incompetent is living in an institution then to the director or chief executive officer of the institution, or if service cannot be made upon either of them, then as provided by order of the court, and (B) unless the court otherwise orders, also to the incompetent person.

(3) Upon a domestic or foreign corporation or upon a partnership or other unincorporated association which is subject to suit under a common name, by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process and, if the agent is one authorized by statute to receive service and the statute so requires, by also mailing a copy to the defendant.

(4) Upon the State by delivering a copy of the summons and of the complaint to the attorney general of the State or to the assistant attorney general or to any deputy attorney general who has been appointed by the attorney general.

(5) Upon an officer or agency of the State by serving the State and by delivering a copy of the summons and of the complaint to such officer or agency. If the agency is a corporation, the copies shall be delivered as provided in paragraph (3) of this subdivision of this rule.

(6) Upon a county, as provided by statute or the county charter, or by delivering a copy of the summons and of the complaint to the corporation counsel or county attorney or any of his or her deputies.

(7) Upon an officer or agency of a county, by serving the county and by delivering a copy of the summons and of the complaint to such officer or agency. If the agency is a corporation the copies shall be delivered as provided in paragraph (3) of this subdivision of this rule.

(8) Upon a defendant of any class referred to in paragraph (1) or (3) of this subdivision of this rule, it is also sufficient if the summons and complaint are served in the manner prescribed by any statute.

H.R.C.P. 4(1) - (8)

Labels: Civil Procedure and Trial Practice, Commercial Litigation, Hawaii Real Estate Litigation, The Legal Profession

Under the American Rule, each litigant pays its own attorneys fees. I have been practicing civil litigation for over twenty years, and nothing seems to anger clients more about the American legal system than when they are forced to pay thousands of dollars in attorneys fees and costs simply to prove that they didn't do anything wrong. Fortunately, under Hawaii law, in certain commercial cases, the prevailing party may recover some or all of its attorneys fees from the losing party. HRS § 607-14, states as follows:

§ 607-14 Attorneys' fees in actions in the nature of assumpsit, etc. In all the courts, in all actions in the nature of assumpsit . . . 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 . . . . 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.
* * * *

The above fees provided for by this section shall be assessed on the amount of the judgment exclusive of costs and all attorneys' fees obtained by the plaintiff, and upon the amount sued for if the defendant obtains judgment.

Haw. Rev. Stat. § 607-14 (emphasis added).

There are certain key points regarding this statute about which each client should be made aware, including the following:

1. Plaintiff's recovery of attorneys fees is capped at twenty five percent (25%) of the judgment awarded. Thus, for example, if the plaintiff is awarded a judgment of $100,000, the plaintiff's recovery is capped at 25% of $100,000 or $25,000.

2. The defendant's recovery is capped at 25% of the damages unsuccessfully sought by plaintiff. Thus, for example, if the plaintiff seeks $100,000, the defendant's potential award is capped at $25,000.

3. If the plaintiff doesn't specify the amount that he is seeking and it is impossible for the Court to determine the damages sought by the plaintiff, the prevailing defendant may be awarded all of its reasonable attorneys fees. Thus, the plaintiff is highly encouraged to specify early in the case the damages that plaintiff is seeking to ensure that if the plaintiff is unsuccessful, the attorneys fees award is capped.

4. The Hawaii Supreme Court has held that the attorneys fees award under HRS § 607-14 is not discretionary. The Court must award attorneys fees to the prevailing party.

5. The statute only applies to cases concerning "assumpsit" damages. The Hawaii Supreme court has defined an "assumpsit" case as a claim "for the recovery of damages for the non performance of a contract . . . as well as quasi contractual obligations." Schulz v. Honsador, Inc. 67 Haw. 433 (1984). Although this law only applies to matters of "assumpsit," it has been applied to various types of litigation including breach of contract, breach of fiduciary duty, and legal malpractice so long as they concern (i) an attempt to recover damages and (ii) a contractual arrangement.

Unfortunately, Hawaii does not have a similar attorneys fee provision in personal injury cases. Moreover, although HRS § 607-14 is not the only Hawaii law that allows for the recovery of attorneys fees. Therefore, when analyzing a case, a Hawaii attorney should also explore other theories that may allow the recovery of attorneys fees. Those theories will be discussed in subsequent entries of this blog.

Labels: Civil Procedure and Trial Practice, Commercial Litigation

In certain cases, clients can prevail in a case by filing a Motion for Summary Judgment.

Under Rule 56(c) of the Hawaii Rules of Civil Procedure, summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Summary judgment can be defeated if a party shows that a genuine and material issue of fact is in dispute, State v. Midkiff, 49 Haw. 456, 421 P.2d 550 (1966).

[S]ummary judgment is only appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. See Hawaii Rules of Civil Procedure ( HRCP) Rule 56(c) (1990). "A fact is material if proof of that fact would have the effect of establishing or refuting one of the essential elements of a cause of action or defense asserted by the parties." Hulsman v. Hemmeter Dev. Corp., 65 Haw. 58, 61, 647 P.2d 713, 716 (1982) (citations omitted). Konno v. County of Hawaii, 85 Hawaii, 61, 70, 937 P.2d 397, 406 (1997) (quoting Dunlea v. Dappen, 83 Hawaii 28, 36, 924 P.2d 196, 204 (1996)).

"The evidence must be viewed in the light most favorable to the non-moving party." State ex rel. Bronster v. Yoshina, 84 Hawaii 179, 186, 932 P.2d 316, 323 (1997) (citing Maguire v. Hilton Hotels Corp., 79 Hawai'i 110, 112, 899 P.2d 393, 395 (1995)). "[W]e must view all of the evidence and the inferences drawn therefrom in the light most favorable to [the party opposing the motion]." Maguire, 79 Hawaii at 112, 899 P.2d at 395 (citation omitted). State Farm Mutual Automobile Insurance Co. v. Murata, 88 Hawaii 284, 287-88, 965 P.2d 1284, 1287-88 (1998) (citation omitted) (brackets in original); See also United States Steel Corp., 82 Hawaii at 38-39, 919 P.2d at 300-01.

"The moving party bears the ultimate burden of persuasion. This burden always remains with the moving party and requires the moving party to convince the court that no genuine issue of material fact exists and that the moving party is entitled to summary judgment as a matter of law." Pioneer Mill Co., Ltd. v. Dow, 1999 WL 174460, 6 (Haw. 1999). "The moving party's burden of proof is a stringent one, since the inferences to be drawn from the underlying facts alleged in the relevant materials considered by the court in deciding the motion must be viewed in the light most favorable to the non-moving party." Id. at 7. "Summary judgment is a drastic remedy. To avoid improperly depriving a party to a lawsuit of the right to a trial on disputed factual issues, summary judgment must be "cautiously invoked." Id. at 6.

Although Courts grant summary judgment in only the strongest cases, for obvious reasons, its an outcome that we are always trying to achieve.

Labels: Civil Procedure and Trial Practice, Commercial Litigation, Hawaii Real Estate Litigation, The Legal Profession

Hawaii Revised Statutes § 480-2 provides a powerful tool to protect investors or consumers who have been injured by misleading or deceptive advertising. The Hawaii Supreme Court has concluded that if advertising has a "capacity to mislead" it may violate the Hawaii Unfair and Deceptive Trade Practices Act.

The reason this tool is so helpful to investors or consumers is two-fold. First, it is much easier to prove a violation of H.R.S. § 480-2 than it is to prove a claim of fraud. Unlike a fraud claim, to prevail in a H.R.S. § 480-2 case, the victim does not have to demonstrate that the advertiser intended to mislead the consumer. Indeed, the consumer must only demonstrate that the advertising has a "capacity to mislead." A far easier standard of proof.

The second reason H.R.S. § 480-2 is so important in the protection of Hawaii consumers is the damages that are recoverable. An investor or consumer injured under H.R.S. § 480-2 may recover actual damages trebled (multiplied by three), attorneys fees and costs. Obviously, when faced with the prospect of paying treble damages and attorneys fees, a company in Hawaii should be highly motivated to truthfully advertise its products. As such, H.R.S. § 480-2 is a vital weapon in the fight for truth in advertising.

Labels: Civil Procedure and Trial Practice, Commercial Litigation, Hawaii Real Estate Litigation, The Legal Profession