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Kawakami v. Kahala Hotel Investors, LLC

Supreme Court of Hawaii

June 29, 2018

JASON KAWAKAMI, Individually and on behalf of all others similarly situated, Petitioner/Plaintiff-Appellant/Cross-Appellee
v.
KAHALA HOTEL INVESTORS, LLC, dba KAHALA HOTEL AND RESORT Respondent/Defendant-Appellee/Cross-Appellant.

          CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-11-0000594; CIVIL NO. 08-1-2496)

          James J. Bickerton, John F. Perkin, Brandee J.K. Faria, Bridget G. Morgan, Kristina M. Hanson for petitioners

          David J. Minkin, Lisa W. Cataldo for respondent

          RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

          OPINION

          WILSON, J.

         This class action concerning Hawaii's hotel and restaurant service charge law returns to us for the second time. See Kawakami v. Kahala Hotel Inv'rs, LLC, 134 Hawai'i 352, 341 P.3d 558 (2014). Its return presents us once again with the task of interpreting Hawai'i Revised Statutes (HRS) § 481B-14 (2000).[1] For the reasons explained below, we vacate the Intermediate Court of Appeals' affirmance of the circuit court's grant of judgment as a matter of law (JMOL) and reinstate the circuit court's earlier grant of partial summary judgment to plaintiff Jason Kawakami as to the defendant Kahala Hotel and Resort's liability under HRS § 481B-14. We also reinstate the jury's special verdict in favor of Kawakami on legal causation and the amount of damages in the trial on damages that followed the grant of partial summary judgment. We remand to the circuit court for determination of additional damages and fees under Hawaii's statute governing unfair or deceptive acts or practices. HRS Chapter 480.

         I. Background

         Jason Kawakami (Kawakami)[2] held his wedding reception at the Kahala Hotel and Resort (the hotel) in July 2007.[3] The hotel collected a 19% service charge on the purchase of food and beverages for his reception, but the hotel failed to distribute 100% of the funds from the service charge directly to its service employees as tip income. Instead, the hotel retained 15% of those funds as what it termed "the management share," then reclassified those funds and used them to pay for the banquet employees' "wages." The "event agreement," a contract used by the hotel for large group events, contained no disclosure that a portion of the service charge would be diverted to the hotel, rather than directly distributed to the banquet employees as tip income. A section of the event agreement, titled "Service Charge and Tax," stated only that "[a]11 food and beverage prices are subject to a 19% service charge." No other disclosure was made to Kawakami that a portion of the service charge would not be directly distributed to the banquet employees as tips.

         Kawakami filed a lawsuit on behalf of himself and other customers who paid a service charge to the hotel in connection with the purchase of food or beverages. He claimed the hotel's conduct was an unfair or deceptive act or practice (UDAP) under HRS § 481B-14 and HRS § 480-2. Kawakami moved for summary judgment "on liability" because the undisputed facts established that the hotel violated HRS § 481B-14 and HRS § 480-2. The circuit court granted summary judgment as to liability only, not remedies or damages, ruling that under HRS § 481B-14 the hotel had "a duty to disclose" to Kawakami that a portion of the service charge would become the property of the hotel rather than paid to its employees as tip income.[4] A jury trial to determine damages followed. The jury found that the hotel was the legal cause of injury to the plaintiff class and awarded $269, 114.73 to the class, corresponding to the amount of the combined service charges retained by the hotel as "the management share."

         A little more than a month after the verdict, the hotel renewed its prior motions for JMOL, which had been denied by the circuit court. This time the circuit court granted the motion for JMOL on the theory there had been insufficient evidence the plaintiffs suffered injury as a result of the hotel's violation of HRS § 481B-14. The circuit court stated that it was "struggling to understand how the Management's Share . . . constitutes financial or economic loss or harm to Plaintiffs." The court focused on the apparent lack of an economic loss to the plaintiffs relating to the hotel's failure to distribute the funds from the service charge in the manner required by the statute. That failure, the court stated, "did not cause Plaintiffs to pay any additional sums over and above their contractual obligation to pay the service charge or any other additional compensation." Yet, the court observed, the "jury awarded as damages to Plaintiffs a sum that appears to be equal to the amount of the Management's Share of the service charge."

         On appeal the ICA vacated the circuit court's order granting Kawakami's motion for summary judgment and held instead that summary judgment should have been granted in favor of the hotel. The ICA reasoned that because the hotel ultimately distributed the management share of the service charge as wages, its actions were in compliance with the language of HRS § 481B-14 and no disclosure to Kawakami was required. Kawakami I, mem. op. at 4-5.

         On certiorari in Kawakami I, we rejected the ICA's reasoning. Instead, we recognized "the well-settled duty of hotels and restaurants" under the statute "to either distribute the entirety of the service charge directly to non-management banquet employees who served the consumers as 'tip income,' or to disclose its practice of withholding the service charge[.]" Kawakami I, 134 Hawai'i at 357, 341 P.3d at 563; id. (characterizing this statutory duty as assisting "a well-informed consumer" in choosing whether to leave a tip for the employees as a reward for their service). We held that under HRS § 481B-14,

a hotel or restaurant that applies a service charge for food or beverage services must either distribute the service charge directly as tip income to the non-management employees who provided the food or beverage services, or disclose to its customers that the service charges are not being distributed as tip income.

Kawakami I, 134 Hawai'i at 354, 341 P.3d at 560. Accordingly, we vacated the ICA's judgment on appeal and remanded to the ICA. We directed the ICA to address on remand Kawakami's argument that the circuit court erred when it granted JMOL to the hotel on the theory that Kawakami suffered no injury as a result of the hotel's actions. Id. at 360, 341 P.3d at 566.

         On remand from our decision in Kawakami I, the ICA affirmed the circuit court's grant of JMOL to the hotel because, in the ICA's view, Kawakami "failed to establish that he was injured, financially or otherwise, as a result of Kahala Hotel's deceptive trade practices[.]" Kawakami II, mem. op. at 1. The ICA acknowledged that a plaintiff alleging an unfair or deceptive act or practice need not show strictly "economic loss" in order to satisfy the consumer "injury" requirement of HRS § 480-13(b). Kawakami II, mem. op. at 3. The ICA nonetheless concluded that Kawakami failed to establish that he was injured even by the "less stringent standard" of non-economic injury. Id. With respect to Kawakami's alternative claim of a contract-based injury, the ICA rejected that claim largely on the grounds that "the required disclosure under HRS § 481B-14 need not take the form of a written provision in an event contract, nor must it necessarily occur before parties enter into the contract," and therefore there was no breach of contract. Kawakami II, mem. op. at 5. See also id., mem. op. at 4 (stating that "benefit-of-the-bargain damages are only available when there has been a breach of contract."). As a result, the ICA affirmed the circuit court's grant of JMOL.

         On certiorari, Kawakami argues that the ICA erred by holding that no contract-based or UDAP-based injury occurred. He also argues that the ICA erred in affirming the circuit court's order denying plaintiffs' motion in limine no. 1, which sought to preclude the admission of certain evidence.

         II. Standards of Review

         A. Motions for Judgment as a Matter of Law

         "It is well settled that a trial court's rulings on motions for judgment as a matter of law are reviewed de novo. When we review the granting of a motion for judgment as a matter of law, we apply the same standard as the trial court. A motion for judgment as a matter of law may be granted only when after disregarding conflicting evidence . . . and indulging every legitimate inference which may be drawn from the evidence in the non-moving party's favor, it can be said that there is no evidence to support a jury verdict in his or her favor." Miyamoto v. Lum, 104 Hawai'i 1, 6-7, 84 P.3d 509, 514-15 (2004) (internal citations and braces omitted).

         B. Motions in Limine

         Because "the granting or denying of a motion in limine is within the trial court's inherent power to exclude or admit evidence, we review the court's ruling for the abuse of discretion standard." State v. Kealoha, 95 Hawai'i 365, 379, 22 P.3d 1012, 1026 (App. 2000)(internal citations omitted). However, when the trial court's order granting a motion in limine is an evidentiary decision based upon relevance, the standard of review is the right/wrong standard. Ass'n of Apt. Owners of Wailea Elua v. Wailea Resort Co., Ltd., 100 Hawai'i 97, 110, 58 P.3d 608, 621 (2002).

         C. Statutory Interpretation

         Appellate courts review questions of statutory interpretation de novo. Bhakta v. Cty. of Maui, 109 Hawai'i 198, 208, 124 P.3d 943, 953 (2005). "When construing a statute, our foremost obligation is to ascertain and give effect to the intention of the legislature, which is to be obtained primarily from the language contained in the statute itself." Id. (internal citations omitted).

         III. Discussion

         We consider first the issue of Kawakami's contract-based damages, then the issue of Kawakami's UDAP-based damages, and finally the issue whether Kawakami's motion in ...


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