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Cox v. Cox

Supreme Court of Hawaii

August 16, 2016

BRUCE EDWARD COX, Petitioner/Plaintiff-Appellant,
v.
CARLYN DAVIDSON COX, Respondent/Defendant-Appellee

         CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-12-0000762; FC-DIVORCE NO. 06-1-0096)

          R. Steven Geshell for petitioner

          Carlyn Davidson Cox respondent pro se

          McKENNA, POLLACK, AND WILSON, JJ., AND RECKTENWALD, C.J., DISSENTING, WITH WHOM NAKAYAMA, J., JOINS

          OPINION

          POLLACK, J.

         The 2006 and 2015 versions of Hawai'i Family Court Rules (HFCR) Rule 68 mandate an award of costs, including reasonable attorney's fees, to a party who offers to settle certain classes of family court cases in the amount or upon the terms specified in the offer, if the offer is refused by the offeree and "the judgment in its entirety finally obtained by the offeree is patently not more favorable than the offer, unless the court shall specifically determine that such would be inequitable."

         The issue that we resolve in this case is whether Bruce Edward Cox (Husband) is entitled to appellate attorney's fees pursuant to HFCR Rule 68. We hold that both the 2006 and 2015 versions of HFCR Rule 68[1] do not apply to family court cases governed by Hawai'i Revised Statutes (HRS) § 580-47 (Supp. 2011) for the following reasons: (1) the rule contravenes HRS § 580-47; (2) it is analytically problematic with respect to cases subject to HRS § 580-47; (3) its application may be unsuited to principles of equity and justice inherent in matters commonly resolved in family court proceedings governed by HRS § 580-47; and (4) it may improperly coerce settlements. Hence, HRS § 580-47 exclusively governs the determination of whether to award attorney's fees in all cases to which HRS § 580-47 applies. Husband is therefore not entitled to appellate attorney's fees under HFCR Rule 68.

         I. BACKGROUND

         This case stems from the divorce action by Bruce Edward Cox (Husband) against Carlyn Davidson Cox (Wife). While the divorce action was pending in the Family Court of the First Circuit (family court), Husband, through counsel, tendered a settlement offer to Wife, agreeing to pay Wife a property equalization in the amount of $9, 000.[2] Wife did not agree to the offer, the case was tried, and the family court ultimately issued a divorce decree that divided the parties' property, retirement funds, insurance policies, securities, bank accounts, debts, and unpaid taxes. The divorce decree provided a final property equalization payment against Wife in the amount of $22, 223.46. Thereafter, following an unsuccessful appeal by wife, [3] Husband moved in the family court for an award of post- offer attorney's fees and costs, totaling $38, 163.39, pursuant to HFCR Rule 68 (2006). Husband predicated his request on the fact that the family court's decree that Wife pay Husband an equalization payment of $22, 223.46 was patently not more favorable than Husband's offer to pay Wife an equalization payment of $9, 000. Husband did not address whether his request for post-offer fees and costs comported with equity and fairness.

         The family court granted the motion as to Husband's post-offer trial fees and costs totaling $18, 051.12 and denied the motion as to Husband's appellate fees and costs (August 6, 2012 family court order).[4] The family court concluded that because Husband's offer included an equalization payment to Wife but the divorce decree instead ordered Wife to pay Husband an equalization payment, "Husband clearly prevailed at trial" and "is entitled to an award of fees." The family court declined to award Husband his appellate costs because "[n]o Rule 68 offer was presented to Family Court regarding the appeal." The family court also opined that "even if Husband contends the appellate costs are automatically included in the Rule 69 [sic] offer, " the court would decline to award such costs and advised Husband "to consider applying to the appellate court for the award of his appellate fees and costs." Nothing in the August 6, 2012 family court order indicated that the award of post-offer trial fees and costs was consistent with equity or was made after due consideration of equitable factors and the totality of the circumstances pursuant to HRS § 580-47.

         Husband then appealed from the August 6, 2012 family court order, contending that the family court erred in denying his motion as to the appellate fees and costs related to Wife's appeal. The Intermediate Court of Appeals (ICA) vacated the August 6, 2012 family court order, concluding that appellate fees are recoverable under HFCR Rule 68 (2006) and remanding the case to the family court for a determination of whether an award of appellate fees to Husband would be inequitable pursuant to the provisions of HRS § 580-47.[5] Husband challenges on certiorari the ICA's remand to the family court. He contends that he is entitled to appellate fees as a matter of law, that the equitable factors were already considered by the family court in awarding post-offer attorney's fees for the trial proceedings, and that the family court's denial of his request for appellate costs and fees deprived him of his constitutional rights to due process and equal protection.

         II. DISCUSSION

         The question presented on certiorari is whether Husband is entitled to appellate fees as a matter of law pursuant to HFCR Rule 68 (2006) because appellate fees, pursuant to the terms of 2006 version of HFCR Rule 68, are "incurred after the making of the offer."[6] The ICA, relying upon Nelson v. University of Hawai'i, 99 Hawai'i 262, 265, 54 P.3d 433, 436 (2002), and Nakasone v. Nakasone, 102 Hawai'i 177, 178, 73 P.3d 715, 716 (2003), held that "appellate fees and costs . . . are necessarily incurred after the making of the Rule 68 offer and thus are included within the time frame set forth in the rule." Cox v. Cox, 134 Hawai'i 475, 344 P.3d 359 (App. 2015), cert. granted, No. SCWC-12-0000762, 2015 WL 3539785 (Haw. June 3, 2015) (emphasis omitted).[7] We therefore consider the application of HFCR Rule 68 in family court proceedings in light of the existence of statutory law dealing with the same subject matter and the effect of this rule on the method by which issues subject to this rule are determined.

         A. HFCR Rule 68 Does Not Apply to Cases Governed by HRS § 580-47 1. HFCR Rule 68 Contravenes HRS § 580-47

         Nothing in HRS § 580-47 mandates the family court to award attorney's fees to a party in a divorce action.[8] Indeed, an award of attorney's fees is discretionary, with the significant caveat that such an award "shall appear just and equitable." HRS § 580-47(a); see Owens v. Owens, 104 Hawai'i 292, 307, 88 P.3d 664, 679 (App. 2004) ("The award of attorney's fees under HRS § 580-47 is discretionary."). Additionally, HRS § 580-47 instructs the family court, in awarding attorney's fees, to consider the following:

the respective merits of the parties, the relative abilities of the parties, the condition in which each party will be left by the divorce, the burdens imposed upon either party for the benefit of the children of the parties, the concealment of or failure to disclose income or an asset, or violation of a restraining order issued under section 580-10(a) or (b), if any, by either party, and all other circumstances of the case.

HRS § 580-47(a).

         In contrast, HFCR Rule 68 mandates the award of attorney's fees to a party who tenders a settlement offer that the other party refuses to accept "[i]f the judgment in its entirety finally obtained by the offeree is patently not more favorable than the offer . . . unless the court shall specifically determine that such would be inequitable." HFCR Rule 68. Absent such a specific finding, the offeree must pay the "reasonable attorney's fees incurred after the making of the offer." HFCR Rule 68.

         Hence, the framework of the rule appears to be in conflict with the statute because, while the statute vests the family court with discretion to determine, as shall appear just and equitable, whether attorney's fees should be awarded to a party, see HRS § 580-47(a) (stating that "the court may make . . . orders as shall appear just and equitable . . . allocating . . . the attorney's fees" (emphasis added)), the rule reformulates the family court's statutory-based discretion and instead requires the family court to award attorney's fees to a party-offeror so long as the judgment in its entirety is patently not more favorable than the offer, see HFCR Rule 68 (specifying that "the offeree must pay the costs, including reasonable attorney's fees" (emphasis added)), which can be avoided only after a court's specific finding that payment of costs would be inequitable.

         Thus, while HRS § 580-47(a) requires the family court to consider a host of factors and the totality of the circumstances to determine whether it is just and equitable to award a party attorney's fees, consideration of presumably the same or similar equitable factors under HFCR Rule 68 are relegated to a mere afterthought, see HFCR Rule 68 (mandating an award of attorney's fees "unless the court shall specifically determine that such would be inequitable in accordance with the provisions of HRS section 580-47 or other applicable statutes"). The 2015 version of HFCR Rule 68 is even more problematic than the 2006 version because it omits the phrase "in accordance with the provisions of HRS section 580-47 or other applicable statutes, as amended." By deleting the reference to HRS § 580-47, HFCR Rule 68 now appears to have been decoupled from the statute. Thus, the current form of HFCR Rule 68 does not provide any guidance or standard for its mandate that reasonable post-offer attorney's fees should not be awarded if "such would be inequitable, " making it susceptible of subjective and differing applications.

          As stated, HRS § 580-47 directs the family court to determine the equity and justice of awarding attorney's fees based on a multifactor analysis in the course of deciding whether to award such fees. HFCR Rule 68, on the other hand, treats the award of attorney's fees to a party-offeror as presumptively mandatory--a presumption absent from the statute--and to be overridden only if the family court specifically finds such an award to be inequitable. Viewed another way, while HRS § 580-47 places the burden on the offeror to demonstrate that an award of attorney's fees is just and equitable, HFCR Rule 68 inherently places the burden on the offeree to show the opposite. Hence, as a practical matter, under HFCR Rule 68, the offeror need only show to the family court the terms of the offer and illustrate how the judgment obtained is patently not more favorable than the terms of the offer. Once the offeror makes this showing, the presumption that the offeror is entitled to attorney's fees attaches, and it becomes incumbent upon the offeree to demonstrate that an award of post-offer attorney's fees to the offeror would be inequitable under HRS § 580-47 or another statute. The rule creates, in essence, a presumption of fairness and equity upon a finding that the judgment is patently not more favorable than the offer, whereas the statute requires an affirmative showing of fairness and equity. In design and effect, the test under the rule is different from the test under the statute.

         The inconsistency of HFCR Rule 68's mandate to that of HRS § 580-47 is clearly demonstrated in this case. After Husband moved for post-offer attorney's fees and costs, the family court determined that he is "entitled to an award of fees pursuant to [HFCR] Rule 68" because Wife was ordered "to pay Husband the sum of $22, 222.36 as an equalization payment" while "Husband's Rule 68 offer to Wife was for Husband to pay Wife the sum of $9, 000.00 as an equalization payment." Thus, the family court applied the presumptive mandate of HFCR Rule 68 to award Husband his post-offer trial fees and costs because, in the family court's view, Wife obtained a judgment not patently more favorable than Husband's offer. Nothing in the family court's determination indicates that the award of attorney's fees was consistent with principles of fairness and equity and that the award was made in consideration of the totality of the circumstances. This is to be expected, since the language of HFCR Rule 68--"unless the court shall specifically determine that such would be inequitable"--signifies that consideration of equitable factors under "HRS § 580-47 or other applicable statutes" is subsidiary to the threshold determination of whether post-offer fees and costs should be awarded based on the "patently not more favorable" test; an assessment of the statutory criteria is merely a secondary inquiry meant to potentially override the rule's presumptive mandate to award a party-offeror's post-offer fees and costs when the "patently not more favorable" test has been met.

         On the other hand, had Husband requested attorney's fees pursuant to HRS § 580-47, the cardinal consideration of the family court would have been whether such an award appears just and equitable, not whether the judgment as a whole is patently not more favorable than the settlement offer. In such an instance, the family court's order in this case would not have sufficed because it is silent as to how the attorney fee award to Husband is just and equitable in light of the HRS § 580-47 factors and the totality of the circumstances.

         2. HFCR Rule 68 Abridges Substantive Rights

         The Hawai'i Constitution accords this court the "power to promulgate rules and regulations in all civil and criminal cases for all courts relating to process, practice, procedure and appeals, which shall have the force and effect of law." Haw. Const. art. VI, § 7. "However, pursuant to HRS § 602-11 (1985), '[s]uch rules shall not abridge, enlarge, or modify the substantive rights of any litigant, nor the jurisdiction of any of the courts, nor affect any statute of limitations.'" In re Doe, 77 Hawai'i 109, 113, 883 P.2d 30, 34 (1994) (alteration in original) (emphasis added). Where a court-made rule affecting litigants' substantive rights contravenes the dictates of a parallel statute, the rule must give way. See In re Doe Children, 94 Hawai'i 485, 487, 17 P.3d 217, 219 (2001) (holding that HRAP Rule 4(a)(3) cannot be construed "in such a way as to modify the requisite deadline for filing an HRS § 571-54 motion for reconsideration and the subsequent notice of appeal, " and thus, "HRAP Rule 4(a)(3) is inapplicable to family court cases governed by HRS § 571-54").

         Here, HFCR Rule 68 abridges the substantive rights of parties in family court proceedings because, as discussed, it modifies the standard by which the family court should decide whether to award post-offer attorney's fees to the party-offeror. Cf. Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 407 (2010) ("What matters is what the rule itself regulates: If it governs only 'the manner and the means' by which the litigants' rights are 'enforced, ' it is valid; if it alters 'the rules of decision by which [the] court will adjudicate [those] rights, ' it is not." (quoting Miss. Publ'g Corp. v. Murphree, 326 U.S. 438, 446 (1946))). That HFCR Rule 68 modifies the governing standard for awarding post-offer attorney's fees is even more apparent in the 2015 version of the rule, which explicitly decoupled the analytical framework from that prescribed by HRS § 580-47. By conferring on a party to a family court proceeding a presumptive entitlement to post-offer attorney's fees, HFCR Rule 68 creates a decisional framework that is inconsistent with the legislature's manifest directive in HRS § 580-47 that attorney's fees may be discretionarily awarded to a party only if such an award "shall appear just and equitable" after considering the factors outlined in the statute and the totality of the circumstances. See Bank of Haw. v. Shinn, 120 Hawai'i 1, 8, 200 P.3d 370, 377 (2008) ("Allowing a party, through reliance on HRCP Rule 5(a), to avoid giving notice to a party in default prior to extension of a judgment would eviscerate the legislature's unmistakable mandate in HRS ยง 657-5 that '[n]o extension shall be granted without ...


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