United States District Court, D. Hawaii
YOUNG MEN'S CHRISTIAN ASSOCIATION OF HONOLULU, a Hawaii Nonprofit Corporation, Petitioner,
ALOHA KAI DEVELOPMENT, LLC, a Hawaii Limited Liability Company, Respondent.
ORDER GRANTING PETITIONER'S MOTION FOR ORDER
CONFIRMING ARBITRATION AWARD AND DENYING RESPONDENT'S
COUNTERMOTION TO VACATE OR CORRECT THE ARBITRATION
C. Kay Sr. United States District Judge.
reasons discussed below, the Court GRANTS Petitioner's
Motion for Order Confirming Arbitration Award and DENIES
Respondent's Countermotion to Vacate or Correct the
October 13, 2014, Petitioner Young Men's Christian
Association of Honolulu (“YMCA”) and Respondent
Aloha Kai Development, LLC (“AKD”) entered into an
Amended and Restated Purchase and Sale Agreement (the
“Amended PSA”) to develop the property located at
401 Atkinson Drive, Honolulu, Hawaii 96814 (the
“Property”). Declaration of Nickolas A. Kacprowski
(“Kacprowski Decl.”) Exhibit A, Findings of Fact,
Conclusions of Law, and Order (the “Findings”)
¶ 3, ECF No. 1-2. The development was to include a new
YMCA facility, the subdivision and sale of a portion of the
Property, and construction of a high rise condominium
project. Id. at 1.
Amended PSA set a closing date of sixty days after AKD
obtained certain entitlements for the project. Id.
¶ 7. If a party became unable to perform its obligations
on the closing date due to reasons beyond its control, that
party had the right to extend the closing date for an
additional period not to exceed thirty days. Id.
parties executed a First Amendment To Amended And Restated
Purchase And Sale Agreement (the “First PSA
Amendment”) in early 2016. Id. ¶ 9; YMCA
Reply, Kacprowski Decl., Ex. D ¶ 3. Under the First PSA
Amendment, the closing date was extended to April 30, 2016.
Findings ¶ 9a. Among other provisions, the First PSA
Amendment also directed that “[t]here shall be no
further extensions of the Closing Date except as mutually
agreed upon by the Parties in a signed written
agreement.” Id. ¶ 9b. The First PSA
Amendment further stated that “EIGHT HUNDRED THOUSAND
AND NO/100 ($800, 000.00) of the Developer's Initial
Deposit [of $1, 000, 000.00] deposited in to the Escrow
Account has already been released by Escrow Holder to the
YMCA, and that this amount is nonrefundable in all events,
but shall be applied against the Purchase Price on the
Closing Date.” Id. ¶ 9c; see also
YMCA Reply, Kacprowski Decl., Ex. D ¶ 3.
April 28, 2016, AKD emailed a letter to YMCA. Findings ¶
11. The letter requested, among other things, that YMCA agree
to various closing date extensions in exchange for the
release of certain amounts from the original deposit held in
escrow. Id. ¶ 11e. On April 29, 2016, YMCA
emailed a letter response to AKD. Id. ¶ 12.
YMCA's letter stated that it was willing to grant
AKD's requested extension on two conditions: (1) the
extensions were for the sole purpose of allowing more time
for AKD to effect the transaction as set forth in an attached
summary; and (2) AKD and YMCA would sign an amendment to the
PSA documenting such extensions and providing for a mutual
termination and release to become effective if AKD were
unable to close on the extended closing date. Id.
¶ 12a. YMCA's letter further directed that, if its
conditions were agreeable to AKD, AKD was to notify YMCA,
which in turn would draft a Second PSA Amendment for the
parties to execute. Id. ¶ 12b.
same day that AKD received YMCA's letter, it forwarded
YMCA a Demand for Mediation, pursuant to section 18.1 of the
Amended PSA. Id. ¶ 13. Further, AKD and YMCA
never executed a written agreement extending the closing date
beyond the April 30, 2016 closing date specified in the First
PSA Amendment. Id. ¶ 14. The transaction did
not close by April 30, 2016, and despite ongoing discussions
between the parties regarding potential modifications to the
Amended PSA, the parties never came to a written agreement to
extend the closing date. Id. ¶¶ 15-16. On
June 6, 2016, YMCA issued a Notice of Default on the Amended
PSA. Id. ¶ 17.
that month, the parties' principals met. Id.
¶ 18. AKD asserted at the eventual arbitration in this
matter that the meeting of principals produced an agreement
“on essential terms that both sides found
agreeable” to close the transaction by August 15, 2016
“on what was essentially the current PSA.”
Id. ¶ 18 (quoting YMCA Reply Ex. L at 22, ECF
result of the June meeting of principals, YMCA transmitted on
July 6, 2016, a draft Second Amendment to the Amended PSA
(the “Second PSA Amendment Draft”) for AKD's
review. Id. ¶ 19. The Second PSA Amendment
Draft provided, among other things, that: (1) closing had to
occur by August 15, 2016; and (2) upon execution of a final
version of the Second PSA Amendment Draft, the parties would
concurrently sign and deliver into escrow a Termination and
Release Agreement and Joint Escrow Instructions, and AKD
would sign and deliver into escrow a Bill of Sale for the
project documents for the new YMCA facility. Id.
¶¶ 19a, 19b. The Second PSA Amendment Draft further
required that the final version and other documents should be
signed and delivered to escrow by July 13, 2016. Id.
12, 2016, AKD provided its response to YMCA's Second PSA
Amendment Draft. Id. ¶ 20. In its response, AKD
made several requests for modifications or deletions of terms
that YMCA had proposed in its draft. Id.
responded by letter from its counsel on July 15, 2016, which
forwarded a revised Second PSA Amendment Draft. Id.
¶ 21. The cover letter YMCA's counsel sent to AKD
explained that “YMCA [management] ha[d] not yet
reviewed these drafts. . . . [and counsel was] sending these
drafts to [AKD] and the YMCA for simultaneous review and
comment and, therefore, reserve[d] the right to make changes
upon the YMCA's review of the same.” Id.
¶ 21b (certain alterations in original). AKD responded
to YMCA's revised Second PSA Amendment Draft on July 26,
2016, with further requests for changes. E.g.,
28, 2016, YMCA served AKD with a Notice of Termination,
pursuant to section 11.1(d) of the Amended PSA. Id.
¶ 23. The Notice of Termination stated YMCA's view
that the parties never agreed on a final version of the
Second PSA Amendment Draft, and demanded at least $1 million
in liquidated damages. Id. ¶¶ 23a-b.
responded to YMCA by letter on August 11, 2016. Id.
¶ 24. AKD's letter stated that: (1) all required
documents and funds had been deposited into escrow; (2) a
copy of the Second PSA Amendment Draft YMCA's counsel
sent on July 15, 2016- signed only by AKD-was enclosed; (3)
AKD had “fulfilled all requirements to close the
transaction by August 15, 2016, except for the documents that
are in the control and must be signed by YMCA”; and (4)
YMCA should take action to affect the August 15, 2016
closing. Id. ¶¶ 24a-e. No. evidence was
submitted in the arbitration in this matter that YMCA ever
signed the version of the Second PSA Amendment Draft that AKD
signed and submitted in its letter. Id. ¶ 26.
November 30, 2016, YMCA filed its Arbitration Demand.
Id. ¶ 1. AKD filed its Answer to Arbitration
Demand and Counterclaim on December 22, 2016. Id.
¶ 2. Neither party claimed that the arbitrator lacked
jurisdiction over the matter or that the governing
arbitration clause located in article XVIII of the Amended
PSA was invalid. Kacprowski Decl. ¶ 6. Significantly,
the arbitration clause states: “The Award rendered by
the Arbitrator shall be final, and judgment may be entered
upon it in accordance with [Hawaii's Uniform Arbitration
Act (“HUAA”), HRS Chapter 658A].”
Id. Ex C. at § 18.2(d).
December 4 to December 12, 2017, following wide-ranging
discovery and motions practice, the parties participated in
the arbitration. E.g., id. ¶¶
7-10; Pet'r's Mot. for Order Confirming Arbitration
Award (“YMCA Motion”) at 4-6. On January 31,
2018, the arbitrator issued the Findings, which ruled in
favor of YMCA and against AKD, and against AKD on its
counterclaim. Findings at 23-24.
Findings, the arbitrator found that the Amended PSA and First
Amended PSA were valid and binding agreements between the
parties. Id. ¶ 30. The arbitrator then found
that YMCA properly terminated the Amended PSA and First
Amended PSA, and AKD had no right to acquire the Property.
Id. ¶¶ 32-34, 36, 40. The arbitrator
further ruled that YMCA was entitled to damages of $1, 000,
000 and would receive the $200, 000 remaining in the
project's escrow account as partial payment. Id.
Significantly, the arbitrator determined that the $800, 000
of AKD's initial deposit that had been released to YMCA
as memorialized in the First PSA Amendment was
“payment/ consideration for the extension of the
Closing Date, and [was] not [meant] as any offset to any
future liquidated damages that might be awarded pursuant to
Section 15.1 of the Amended PSA.” Id. ¶
46c. The arbitrator opined that AKD confirmed this
understanding in its closing brief during the arbitration.
Id. ¶ 46d (citing YMCA Reply Ex. L at 57, ECF
No. 10-11). Finally, the arbitrator ruled that YMCA was
entitled to recover reasonable attorneys' fees, expenses,
and costs, and instructed YMCA to file an affidavit and
supporting documentation to substantiate its request for
attorneys' fees, expenses, and costs. Id. at 24.
the issuance of the Findings, on March 2, 2018, the
arbitrator issued a Ruling on YMCA's Request for Fees and
Costs, which incorporated the Findings by reference, and
entered a Final Decision and Arbitration Award in favor of
the YMCA in the amount of $1, 946, 579.17. Kacprowski Decl.
Ex. B (the “Fee Award”) at 17.
March 7, 2018, YMCA filed its Motion for Order Confirming
Arbitration Award with this Court. ECF No. 1. On May 1, 2018,
AKD filed its opposition and countermotion to vacate or
correct the arbitration award (“Opp.”), ECF No.
7, to which YMCA filed a reply and memorandum in opposition
(“YMCA Reply”) on May 16, 2018, ECF No. 10. On
May 23, 2018, AKD filed a reply memorandum in support of its
countermotion (“AKD Reply”). ECF No. 12. The
Court held a hearing on YMCA's motion and AKD's
countermotion on May 30, 2018.
states, and AKD does not challenge, that the Amended PSA
makes Hawaii Revised Statutes (“HRS”) chapter
658A the applicable law in this matter. E.g., YMCA
Motion at 7. Its argument relies on the language of the
Amended PSA, which directs that “[a]ll arbitration
proceedings shall be administered . . . in accordance with
Hawaii's Uniform Arbitration Act (Hawaii Revised Statutes
Chapter 658(A) (the ‘HUAA').” Amended PSA
§ 18.2(a). But this provision alone- which by its terms
applies only to all “arbitration proceedings”-may
be insufficient to nullify the Ninth Circuit's
“strong default presumption that the [Federal
Arbitration Act (the “FAA”)], not state law,
supplies the rules” for confirmation of arbitration
awards. Johnson v. Gruma Corp., 614 F.3d 1062,
1066-67 (9th Cir. 2010) (ellipsis and internal quotation
marks omitted) (quoting Fid. Fed. Bank, FSB v. Durga Ma
Corp., 386 F.3d 1306, 1311 (9th Cir. 2004)). As this
Court has explained, that “presumption only can be
overcome by clear intent to incorporate state law rules for
arbitration” into the confirmation of arbitration
awards. Metzler Contracting Co. LLC v. Stephens, 774
F.Supp.2d 1073, 1077 (D. Haw. 2011) (internal quotation marks
omitted), aff'd, 479 Fed.Appx. 783 (9th Cir.
another provision, indeed, the Amended PSA appears to specify
that state law governs the confirmation of arbitration
awards. Specifically, section 18.2(d) of the Amended PSA
states: “[t]he award rendered by the Arbitrator shall
be final, and judgment may be entered upon it in
accordance with the HUAA.” (Emphasis added). The
Amended PSA thus contains the type of express limitation
stating that the arbitration award may be confirmed under
state law that this Court found lacking in Metzler
Contracting Co. LLC, 774 F.Supp.2d at 1077. And, as YMCA
points out, courts in this district sitting in diversity have
previously applied state law to the confirmation of an
arbitration award. E.g., Valrose Maui, Inc. v.
Maclyn Morris, Inc., 105 F.Supp.2d 1118, 1122 &
nn.5-6 (D. Haw. 2000). Under these circumstances, the Court
finds that the HUAA governs the confirmation of YMCA's
the HUAA, and given “the legislative policy to
encourage arbitration and thereby discourage litigation,
judicial review of an arbitration award is confined to
‘the strictest possible limits.'”
Ventress v. Japan Airlines, 603 F.3d 676, 679 (9th
Cir. 2010) (citing Gadd v. Kelley, 66 Haw. 431, 667
P.2d 251, 258 (Haw. 1983)). Accordingly, HRS § 658A
requires courts to confirm arbitration awards unless an award
is modified or corrected pursuant to § 658A-24, or
vacated under limited circumstances pursuant to §
658A-23. Matter of Hawai'i State Teachers
Ass'n, 140 Haw. 381, 391, 400 P.3d 582, 592 (Haw.
2017); In re Grievance Arbitration Between State Org. of
Police Officers, 135 Haw. 456, 462, 353 P.3d 998, 1004
(Haw. 2015). One permissible ground for a court to vacate an
award under the HUAA, for example, is where “[a]n
arbitrator exceeded the arbitrator's powers.” HRS
§ 658A-23(a)(4). A permissible ground for an arbitration
award to be modified or corrected is where “there was
an evident mathematical miscalculation or an evident mistake
in the description of the person, thing, or property referred
to in the award.” Id. § 658A-24(a).
“the scope of an arbitrator's authority is
determined by the agreement of the parties, ” and an
arbitrator is imbued with broad discretion in resolving a
dispute. Kona Village Realty, Inc. v. Sunstone Realty
Partners, XIV, LCC, 123 Haw. 476, 477, 236 P.3d 456, 457
(Haw. 2016). “[P]arties who arbitrate a dispute assume
all the hazards of the arbitration process including the risk
that the arbitrators may make mistakes in the application of
law and in their findings of fact, ” thus
“[w]here arbitration is made in good faith, parties are
not permitted to prove that an arbitrators [sic] erred as to
the law or the facts of the case.” Tatibouet v.
Ellsworth, 99 Haw. 226, 233, 54 P.3d 397, 404 (Haw.
2002) (quoting Wayland Lum Constr. Inc. v.
Kaneshige, 90 Haw. 417, 422, 978 P.2d 855, 860 (Haw.
1999)). Moreover, a “court's job is not
to second-guess the arbitrator's contract interpretation,
but only to ensure that he is, in fact, interpreting the
contract.” Ass'n of Flight Attendants, AFL-CIO
v. Aloha Airlines, Inc., 158 F.Supp.2d 1200, 1205 (D.
Haw. 2001) (citing Hawaii Teamsters and Allied
Worker's Union, Local 996 v. United Parcel Service,
241 F.3d 1177 (9th Cir. 2001)). To that end, the Supreme
Court of Hawaii has stated that “vacatur is not a
proper remedy for an arbitrators' imperfect understanding
of law.” Tatibouet, 99 Haw. at 236, 54 P.3d at
arbitrator found that the Amended PSA and First PSA Amendment
were valid and binding contracts between YMCA and AKD,
Findings ¶ 30, but that the Second PSA Amendment was
not, id. ¶ 32. Because AKD did not close by the
date specified in the First PSA Amendment, April 30, 2016,
the arbitrator found that YMCA had the right to terminate the
Amended PSA. Id. ¶ 36. Neither party disputes
these findings, e.g., Opp. at 3, and the Court
making these findings, the arbitrator awarded YMCA $1, 946,
579.17-an amount which includes liquidated damages and
reasonable attorneys' fees and costs. Fee Award at 17.
YMCA now moves for an order confirming the award under HRS
§ 658A-22, which 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.
opposes the confirmation, arguing that the award should be
vacated, modified, or corrected because the arbitrator: (1)
exceeded his powers by “rewriting” the damages
cap in the Amended PSA; and (2) awarded YMCA attorneys'
fees in violation of the Amended PSA, the HUAA, and
applicable law. E.g., Opp. at 1-2. The Court
addresses these arguments in turn.
contends that the arbitrator exceeded his powers when he
failed to limit YMCA's damages to the “the
Deposit” as the Amended PSA requires. Opp. at 13; AKD
Reply at 4-8. AKD accordingly requests that the Court either
vacate or correct the arbitrator's award of $1, 000, 000
in liquidated damages to AKD. E.g., Opp. at 16.
Amended PSA provisions govern the amount of damages to which
YMCA is entitled upon AKD's default. First, section 15.1
of the Amended PSA provides YMCA's remedies upon default
Notwithstanding any other provision contained in this
Agreement, if the sale of the Tower Site is not consummated
by reason of any default by the Developer under this
Agreement, and provided that all conditions precedent to the
Developer's obligations hereunder have been fully
satisfied or waived in writing or are capable of being
satisfied in conjunction with the Closing; and provided,
further, that the YMCA is not in default hereunder, then the
YMCA shall, as its sole and exclusive remedy, be entitled
to retain the entire Deposit as the ...