Simon v. Andrews ( 2021 )

NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
09-FEB-2021
07:54 AM
Dkt. 101 MO
NO. CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI#I
MICAL SIMON, SHAWN SIMON, and THATCHER TROMBLEY,
Petitioners-Appellees,
v.
RANDY ANDREWS and ELISA ANDREWS; BIG ISLAND ECO-ADVENTURES, LLC,
a Hawai#i Limited Liability Company,
Respondents-Appellants
APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT
(S.P. NO. 13-1-031K)
MEMORANDUM OPINION
(By: Ginoza, Chief Judge, Leonard and Nakasone, JJ.)
Respondents-Appellants Randy Andrews and Elisa Andrews
(the Andrews) appeal from the "Order Granting Petitioners Mical
Simon, Shawn Simon and Thatcher Trombley's Motion to Confirm
Arbitrator's Findings of Fact and Conclusions of Law and Award
Dated July 9, 2013" (Order Granting Motion to Confirm Arbitration
Award) and Judgment, both entered on August 27, 2013, by the
Circuit Court of the Third Circuit (circuit court).1
On appeal, the Andrews contend the circuit court erred
in confirming an arbitration award because the arbitrator
exceeded his authority and the Arbitration Award violated public
policy. For the reasons discussed below, we affirm.
I. Background
A. Bankruptcy Stay In This Appeal
This appeal was delayed due to a bankruptcy petition
filed by the Andrews and, subsequently, the failure of the
1
The Honorable Elizabeth A. Strance presided.
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parties to notify the court that the bankruptcy case had been
terminated. After the parties had completed the filing of
appellate briefs on April 30, 2014, Respondents-Appellees Mical
Simon and Shawn Simon (the Simons) and Thatcher Trombley
(Trombley) filed a notice on May 29, 2014, advising the court
that the Andrews had filed a bankruptcy petition on May 2, 2014,
in the United States Bankruptcy Court for the District of Hawaii.
This appeal was therefore stayed.
Subsequently, none of the parties advised the court
about the status of the bankruptcy proceeding, as required by
Hawai#i Rules of Appellate Procedure (HRAP) Rule 54(b) and (c).
On November 15, 2017, the court issued an Order And Order To Show
Cause (Order to Show Cause) requiring the parties to notify the
court regarding the status of the bankruptcy case and to show
cause why the appeal should not be dismissed for lack of
prosecution.
On November 20, 2017, Ted Hong (Hong), counsel for the
Andrews, responded to the Order to Show Cause and advised the
court, inter alia, that he had not been aware of his clients'
bankruptcy filing, the bankruptcy case was dismissed on June 12,
20142 due to the Andrews' failure to file required documents, Hong
was not notified of the dismissal of the bankruptcy case, and
that in September 2014, the circuit court had granted Hong's
motion to withdraw filed in that court. Notwithstanding the
above, Hong had never filed any motion in this court seeking to
withdraw as counsel in this appeal. Hong's response further
requested that, because all briefs had been submitted in the
appeal, a decision be rendered.
On May 17, 2018, this court issued an order recognizing
that the bankruptcy stay had been lifted and ordering the case to
be made ready.
B. Relevant Facts
This case arises from a business dispute related to a
zip line adventure tour business, Big Island Eco-Adventures, LLC
(BIEA), located near Hâwî in North Kohala. On March 11, 2011,
2
The bankruptcy case was actually dismissed on June 10, 2014.
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the Simons and Trombley, who helped develop the business with the
Andrews, demanded arbitration, which took place from April 8-12,
2013. On July 9, 2013, the arbitrator entered findings of fact,
conclusions of law, and awarded $1,255,615.67 in favor of the
Simons and Trombley, and against the Andrews and BIEA
(Arbitration Award).
1. This Proceeding on Motion to Confirm: S.P. No. 13-1-31K
and CAAP-XX-XXXXXXX
On July 16, 2013, the Simons and Trombley filed a
motion in circuit court, in S.P. No. 13-1-31K, seeking to confirm
the Arbitration Award pursuant to Hawaii Revised Statutes (HRS)
§§ 658A-22 and 658A-25 (Supp. 2011)3 (Motion to Confirm
Arbitration Award). In opposition, the Andrews essentially
asserted grounds for vacatur under HRS § 658A-23 (Supp. 2011).4
3
HRS § 658A-22 provides:
Confirmation of award. After a party to an
arbitration proceeding receives notice of an award,
the party may make a motion to the court for an order
confirming the award at which time the court shall
issue a confirming order unless the award is modified
or corrected pursuant to section 658A-20 or 658A-24 or
is vacated pursuant to section 658A-23.
HRS § 658A-25 provides:
Judgment on award; attorney's fees and
litigation expenses. (a) Upon granting an order
confirming, vacating without directing a rehearing,
modifying, or correcting an award, the court shall
enter a judgment in conformity therewith. The
judgment may be recorded, docketed, and enforced as
any other judgment in a civil action.
(b) A court may allow reasonable costs of the
motion and subsequent judicial proceedings.
(c) On application of a prevailing party to a
contested judicial proceeding under section 658A-22,
658A-23, or 658A-24, the court may add reasonable
attorney's fees and other reasonable expenses of
litigation incurred in a judicial proceeding after the
award is made to a judgment confirming, vacating
without directing a rehearing, modifying, or
correcting an award.
4
HRS § 658A-23 provides, in pertinent part:
Vacating award. (a) Upon motion to the court by
a party to an arbitration proceeding, the court shall
vacate an award made in the arbitration proceeding if:
(1) The award was procured by corruption,
fraud, or other undue means;
(2) There was:
(continued...)
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Specifically, the Andrews argued that: the arbitrator exhibited
evident partiality towards counsel for the Simons and Trombley,
see HRS § 658A-23(a)(2)(A); there was misconduct by the
arbitrator prejudicing the rights of the Andrews, see HRS § 658A-
23(a)(2)(C); the arbitrator refused to postpone the hearing for a
reasonable period of time, see HRS § 658A-23(a)(3); the
arbitrator exceeded his powers by forcing the Andrews to defend
themselves as individuals based on a business entity (BIEA) that
was ordered by the arbitrator and stipulated by the parties to be
dissolved, see HRS § 658A-23(a)(4); and there was no agreement
for the Andrews, individually, to arbitrate the matter, see HRS
§ 658A-23(a)(5). In addition, the Andrews argued that the
Arbitration Award violated public policy.
On August 27, 2013, after a hearing, the circuit court
entered the Order Granting Motion to Confirm Arbitration Award
and Judgment.
The Andrews appealed, resulting in this appeal, CAAP-
XX-XXXXXXX.
4
(...continued)
(A) Evident partiality by an arbitrator
appointed as a neutral arbitrator;
(B) Corruption by an arbitrator; or
(C) Misconduct by an arbitrator
prejudicing the rights of a party to
the arbitration proceeding;
(3) An arbitrator refused to postpone the
hearing upon showing of sufficient cause
for postponement, refused to consider
evidence material to the controversy, or
otherwise conducted the hearing contrary
to section 658A-15, so as to prejudice
substantially the rights of a party to the
arbitration proceeding;
(4) An arbitrator exceeded the arbitrator's
powers;
(5) There was no agreement to arbitrate,
unless the person participated in the
arbitration proceeding without raising the
objection under section 658A-15(c) not
later than the beginning of the
arbitration hearing; or
(6) The arbitration was conducted without
proper notice of the initiation of an
arbitration as required in section 658A-9
so as to prejudice substantially the
rights of a party to the arbitration
proceeding.
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2. Separate Proceeding on Motion to Vacate: S.P. 13-1-033K
and CAAP-XX-XXXXXXX
On July 23, 2013, in a separate circuit court
proceeding, S.P. No. 13-1-033K, the Andrews filed an application
to vacate the Arbitration Award (Motion to Vacate), asserting
grounds similar to those asserted in opposition to the Motion to
Confirm Arbitration Award. The separate actions to confirm and
to vacate the Arbitration Award were never consolidated.
On February 28, 2014, the circuit court issued an order
denying the Andrews' Motion to Vacate on grounds that the court
lacked jurisdiction (Order Denying Motion to Vacate).5
On March 20, 2014, the Andrews appealed the Order
Denying Motion to Vacate, which became CAAP-XX-XXXXXXX. On May
29, 2014, before any appellate briefs were filed in CAAP-14-
0000579, the Simons and Trombley filed a notice that the Andrews
had filed for bankruptcy. On November 15, 2017, we issued an
order in that appeal for the parties to notify this court about
the status of the Andrews' bankruptcy case and an order to show
cause why that appeal should not be dismissed for failure to
prosecute. In a response dated November 17, 2017, Hong
represented that he had not been informed of the Andrews'
bankruptcy matter or its dismissal and that he had not been in
communication with the Andrews. Hong requested that CAAP-14-
0000579 be dismissed, as there was no just reason to support
continuing the appeal.
On February 14, 2018, we entered an order in CAAP-14-
0000579 requiring Hong, inter alia, to: file certified copies of
the appropriate bankruptcy court documents; notify the Andrews
that this court will dismiss the appeal for failure to prosecute
without a showing of good cause why the appeal should not be
5
The Honorable Ronald Ibarra presided at the January 21, 2014
continued hearing on the Motion to Vacate and the corresponding order denying
the Motion to Vacate. We take judicial notice of the court records in
Andrews, et al. v. Simon, et al., No. CAAP-XX-XXXXXXX, which include the
records in S.P. 13-1-033K. See Uyeda v. Schermer, 144 Hawai #i 163, 172, 439
P.3d 115, 124 (2019), reconsideration denied, No. SCWC-XX-XXXXXXX, 2019 WL
1500014 (Apr. 4, 2019) (citation omitted) (recognizing the "validated practice
of taking judicial notice of a court's own records in an interrelated
proceeding where the parties are the same[.]").
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dismissed; and submit a declaration indicating the Andrews'
position on the question of whether the appeal should be
dismissed for failure to prosecute.
On March 2, 2018, Mark Van Pernis (Van Pernis), counsel
of record for the Simons and Trombley, responded to the February
14, 2018 order and informed this court that he "believed this
matter to have been pau many, many years ago" and that he had not
been in communication with the Simons and Trombley for the same
amount of time.
On March 16, 2018, Hong responded to the February 14,
2018 order, attaching the requested certified documents and
advising this court that despite multiple attempts to communicate
with the Andrews, they had not contacted Hong's office and he is
unable to provide this court with their position on the question
of whether the appeal should be dismissed for failure to
prosecute.
On May 15, 2018, based on Van Pernis and Hong's
responses, we dismissed CAAP-XX-XXXXXXX due to the Andrews'
failure to prosecute.
II. Discussion
A. Any Arguments Under HRS § 658A-23 to Vacate the Award Are
Waived
The Andrews raise a variety of arguments on appeal
asserting that the arbitrator exceeded his authority and thus the
circuit court erred in entering the Order Confirming Arbitration
Award.6 These arguments are subject to HRS § 658A-23 and were
properly brought as part of the Andrews' Motion to Vacate.
However, the proceedings related to the Motion to Vacate have
been terminated, with the Andrews' appeal from the Order Denying
Motion to Vacate having been dismissed in CAAP-XX-XXXXXXX.
6
The Andrews argue the arbitrator lacked authority to hold the Andrews
individually liable when there was no agreement to (1) hold individual members
liable, (2) arbitrate the terms and conditions of a Novation Agreement that
did not contain any arbitration requirement or establish any legal duty,
and/or (3) arbitrate a "conflict of interest" claim when any conflicts of
interest were expressly waived in the corporate documents and by law.
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The plain language of HRS § 658A-22 provides:
After a party to an arbitration proceeding receives notice
of an award, the party may make a motion to the court for an
order confirming the award at which time the court shall
issue a confirming order unless the award is modified or
corrected pursuant to section 658A-20 or 658A-24 or is
vacated pursuant to section 658A-23.
(Emphases added). Given HRS § 658A-22, as well as the Hawai#i
Supreme Court's interpretation of predecessor analogous
provisions in HRS Chapter 658, unless a party properly seeks to
modify, correct or vacate an arbitration award as allowed under
HRS §§ 658A-20, 658A-24 or 658A-23, the party waives the right to
challenge confirmation of the award on those grounds. See
Excelsior Lodge No. One, Indep. Order of Odd Fellows v. Eyecor,
Ltd., 74 Haw. 210, 222–23, 847 P.2d 652, 658 (1992) (holding
that, under analogous predecessor statutes in HRS Chapter 658, a
party who failed to challenge an arbitration award under statutes
allowing motions to vacate, modify or correct an award, was
foreclosed from challenging an order confirming the award);
Mathewson v. Aloha Airlines, Inc., 82 Hawai#i 57, 82, 919 P.2d
969, 994 (1996); Tatibouet v. Ellsworth, 99 Hawai#i 226, 233, 54
P.3d 397, 404 (2002) ("HRS §658–8 contemplates a judicial
confirmation of the award issued by the arbitrator, unless the
award is vacated, modified, or corrected in accord with HRS
§§ 658–9 and 658–10.") (citations and internal quotation marks
omitted); Hawai#i Elec. Light Co., Inc. v. Tawhiri Power LLC, No.
CAAP–11–0000163, 132 Hawai#i 183, 320 P.3d 417, 2014 WL 812938, at
*1-2 (App. Feb. 28, 2014) (SDO) ("the court must confirm the
award 'unless the award is modified or corrected pursuant to
section 658A-20 or 658A-24 or is vacated pursuant to section
658A-23.'") (emphases in original); Blau v. AIG Hawaii Ins. Co.,
No. CAAP–11–0000713, 133 Hawai#i 449, 329 P.3d 354, 2014 WL
2949437, at *1-2 (App. June 30, 2014) (SDO) (quoting same).
The Hawai#i Supreme Court in Excelsior expressly held
that:
a party who seeks to change an arbitration award, but
fails to follow the specific statutory provisions for
challenging the award by timely bringing a motion
under either §§ 658–9 or 658–10, is foreclosed from
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subsequently appealing a § 658–8 confirmation order
under HRS § 658–15.
74 Haw. at 227, 847 P.2d at 660 (footnote omitted).
Here, in S.P. No. 13-1-033K, the Andrews did not seek to
modify or correct the arbitration award under HRS § 658A-24, but
did seek to vacate the award under HRS § 658A-23. The circuit
court denied their Motion to Vacate. Subsequently, the Andrews
appealed that decision in CAAP-XX-XXXXXXX, but ultimately that
appeal was dismissed due to their failure to prosecute the appeal.
Given these circumstances, the proceeding by which the Andrews
sought to vacate the arbitration award under HRS § 658A-23 has
terminated, and the Andrews have waived their appeal of the
circuit court's decision in S.P. No. 13-1-33K denying the Motion
to Vacate.
Therefore, the Andrews may not assert in this appeal any
bases to vacate or change the arbitration award under either HRS
§ 658A-23 (vacating an award) or HRS § 658A-24 (modification or
correction of an award). See Schmidt v. Pac. Benefit Servs.,
Inc., 113 Hawai#i 161, 161, 150 P.3d 810, 810 (2006), as corrected
(July 6, 2006) (concluding appeal from confirmation of award is
restricted to grounds set forth in timely motion to vacate).
B. The Circuit Court Properly Concluded That the Arbitration
Award Did Not Violate Public Policy
In their second point of error, the Andrews contend that
the Arbitration Award violated public policy by (1) holding the
Andrews liable for failing to preserve and sell the business as a
"going concern" when the arbitrator and all parties previously
agreed to dissolve the business, (2) unlawfully intruding into the
Andrews' personal lives by restricting their right to conduct
personal financial transactions, and (3) communicating ex parte
with opposing counsel. Even though at this juncture the Andrews
only challenge the Order Granting Motion to Confirm Arbitration
Award, and the proceeding as to the Motion to Vacate is concluded,
the Andrews may still challenge the Arbitration Award on public
policy grounds because the public policy exception "does not fit
within the literal definition of vacating, modifying
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or correcting an award under the express provisions of HRS chapter
658." United Pub. Workers, AFSCME, Local 646, AFL-CIO v. Hawai#i-
Holiday Pay (2003-022B), 125 Hawai#i 476, 490-91, 264 P.3d 655,
669-70 (App. 2011) (quoting Inlandboatmen's Union of the Pac.,
Hawai#i Regio, Marine Div. of Int'l Longshoremens & Warehousemen's
Union v. Sause Bros., Inc., 77 Hawai#i 187, 193, 881 P.2d 1255,
1261 (App. 1994) (Sause Bros.)). Further, the Andrews raised
their public policy arguments in the circuit court.
"Hawai#i case law recognizes 'that there is a limited
public policy exception to the general deference given arbitration
awards.'" In re Grievance Arbitration Between State Org. of
Police Officers, 135 Hawai#i 456, 465, 353 P.3d 998, 1007 (2015)
(SHOPO) (quoting Sause Bros., 77 Hawai#i at 194, 881 P.2d at
1262). This public policy exception is based on the exception
recognized by the United States Supreme Court in United
Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29 (1987). Id.(citing Sause Bros., 77 Hawai#i at 194, 881 P.2d at 1262)
(adopting the public policy exception of Misco and directing that
the exception should be applied under the guidelines set forth in
Misco)."
A court's refusal to enforce an arbitrator's award . .
. because it is contrary to public policy is a specific
application of the more general doctrine, rooted in the
common law, that a court may refuse to enforce
contracts that violate law or public policy. [The
'public policy' exception] derives from the basic
notion that no court will lend its aid to one who
founds a cause of action upon an immoral or illegal
act, and is further justified by the observation that
the public's interests in confining the scope of
private agreements to which it is not a party will go
unrepresented unless the judiciary takes account of
those interests when it considers whether to enforce
such agreements.
Matter of Hawai#i State Teachers Ass'n, 140 Hawai#i 381, 400, 400
P.3d 582, 601 (2017) (brackets and ellipsis in original) (quoting
Sause Bros., 77 Hawai#i at 193, 881 P.2d at 1261 (quoting Misco,
484 U.S. at 42))). Accordingly, under Misco:
First, the court must determine whether there is an
explicit, well defined, and dominant public policy that
is ascertained by reference to the laws and legal
precedents and not from general considerations of
supposed public interests. Second, the court must
determine whether the arbitration award itself is
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clearly shown to be "contrary" to the "explicit,
well-defined, and dominant public policy."
SHOPO, 135 Hawai#i at 465, 353 P.3d at 1007 (internal quotation
marks and citations omitted) (emphases added). "[A] refusal to
enforce an [arbitration] award must rest on more than speculation
or assumption." Sause Bros., 77 Hawai#i at 194, 881 P.2d at 1262(quoting Misco, 484 U.S. at 44).
The Andrews assert that the Arbitrator's Award
improperly rejected the business judgment rule under HRS
§ 428-404(b)(1) (2004) ("In a manager-managed limited liability
company: . . . The manager or managers have the exclusive
authority to manage and conduct the company's business"). The
Andrews cite Lussier v. Mau-Van Dev., Inc., 4 Haw. App. 359, 376,
667 P.2d 804, 817 (1983), which holds that:
the business judgment rule requires a shareholder who
challenges a nonself-dealing transaction to prove that the
corporate director or officer in authorizing the transaction
(1) failed to act in good faith, (2) failed to act in a
manner he reasonably believed to be in the best interest of
the corporation, or (3) failed to exercise such care as an
ordinarily prudent person in a like position would use in
similar circumstances.
(citation and footnote omitted); see also Fujimoto v. Au, 95
Hawai#i 116, 148-49, 19 P.3d 699, 731-32 (2001) (stating that
conduct meets the business judgment rule when, "in making a
business decision, the directors have acted on an informed basis,
in good faith, and in the honest belief that the action taken was
in the best interests of the company").
Even if we assume the business judgment rule is an
"explicit, well-defined, and dominant public policy," SHOPO, 135
Hawai#i at 465, 353 P.3d at 1007, the Andrews fail to clearly
demonstrate that the arbitration award is contrary to the business
judgment rule. The Andrews argue that the arbitrator improperly
determined that the business judgment rule was inapplicable to
their decision not to sell BIEA as a "going concern," which they
contend was contrary to the arbitrator's prior rulings and the
parties' stipulation to dissolve BIEA. However, an agreement to
dissolve is not inconsistent with selling a company as a going
concern. Here, the arbitrator found that, at the time the Andrews
made the decision to "take down BIEA and its operating plant and
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distribute its assets on a piecemeal basis[,]" it "was a highly
successful business making a substantial profit," but "the Andrews
had a personal interest in BIEA not continuing as an operating
business in close proximity to their new second zip line
business[,]" and "the Andrews made no effort to explore the
possibility of selling BIEA as an ongoing concern." The
arbitrator concluded that:
15. The "business judgment rule" does not
apply to the decision by the ANDREWS to take down BIEA
and to destroy its operating plant and to sell its
assets on a piecemeal basis because at the time the
ANDREWS made that decision they had a conflict of
interest.
This determination does not clearly show that the Arbitration
Award is contrary to public policy.
As for the Andrews' claim of evident partiality and
misconduct, this does not fall within the public policy exception,
but is a basis for vacatur, which the Andrews have waived by
abandoning their appeal in CAAP-XX-XXXXXXX.
The Andrews have failed to demonstrate that the
Arbitration Award is clearly contrary to an explicit, well-
defined, and dominant public policy that would warrant a refusal
to enforce the Arbitration Award.
III. Conclusion
Based on the foregoing, we affirm the "Order Granting
Petitioners Mical Simon, Shawn Simon and Thatcher Trombley's
Motion to Confirm Arbitrator's Findings of Fact and Conclusions of
Law and Award Dated July 9, 2013" and the Judgment, both entered
on August 27, 2013, by the Circuit Court of the Third Circuit.
DATED: Honolulu, Hawai#i, February 9, 2021.
On the briefs: /s/ Lisa M. Ginoza
Chief Judge
Ted H.S. Hong,
for Respondents-Appellants. /s/ Katherine G. Leonard
Associate Judge
Mark Van Pernis,
Gary W. Vancil, /s/ Karen T. Nakasone
for Petitioners-Appellees. Associate Judge
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