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Adon Construction Inc. v. Renesola America Inc.

United States District Court, D. Hawaii

September 26, 2019

ADON CONSTRUCTION INC., ET. AL. Plaintiffs,
v.
RENESOLA AMERICA INC., ET. AL. Defendants.

          FINDINGS AND RECOMMENDATION TO GRANT IN PART AND DENY IN PART DEFENDANT RENSOLA AMERICA, INC.'S MOTION FOR AN AWARD OF ATTORNEYS' FEES AND NON-TAXABLE COSTS

          Wes Reber Porter United States Magistrate Judge

         Before the Court is Defendant Rensola America, Inc.'s (Defendant) Motion for an Award of Attorneys' Fees, filed June 10, 2019 (Motion). See ECF No. 188. Defendant requests an award of attorneys' fees of $296, 784.40, plus general excise tax of $13, 978.55, non-taxable costs of $62, 760.01, and post-judgment interest. See ECF No. 188-1 at 9. On June 26, 2019, Plaintiffs Adon Construction, Inc. and Green Visions, LLC filed their Opposition to the Motion. See ECF No. 192. Defendant filed its Reply on July 10, 2019. See ECF No. 199. The Court found this matter suitable for disposition without a hearing pursuant to Rule 54.3(f) of the Local Rules of Practice for the United States District Court for the District of Hawaii (Local Rules).[1]

         After reviewing the parties' submissions and the relevant case law, the Court FINDS and RECOMMENDS that the Motion be GRANTED IN PART and DENIED IN PART for the reasons set forth below.[2]

         BACKGROUND

         The Court and the parties are familiar with the history of the case. Accordingly, the Court only recites those facts relevant to the present Motion. Plaintiffs are contractors who install photovoltaic (PV) solar panels on residential and commercial properties in Hawaii. See ECF No. 183 at 2. Defendant is a solar panel supplier. Id. Between 2013 and 2014, Plaintiffs purchased solar panels from Defendant and installed them on both residential and commercial properties. Id. Purchase invoices dated April 17, 2013, and April 25, 2013 provide a warranty for “10 years for product, 10 years for 90% power output and 25 years for 80% power output.” Id. A Framework Sales Contract was drafted between the parties in 2014 and 2015. Id.

         Plaintiffs allege that Defendant represented their solar panels as free from defects, micro-cracks, and snail trails.[3] Id. at 3. Plaintiffs further allege that, in 2015, Plaintiffs' customers began complaining about snail trails on Defendant's solar panels. Id. Both Plaintiffs and Defendant submitted expert reports about the cause of the snail trails. Id. Plaintiffs' expert opined that micro-cracking and the resulting snail trails were the fault of the manufacturer and, in contrast, Defendant's expert provided evidence that micro-cracks can be created during the installation process. Id.

         Plaintiffs initiated the underlying action on September 15, 2016 in the State of Hawaii's Circuit Court of the First Circuit. See ECF No. 1 at 2. Plaintiffs brought the following ten claims related to the snail trails and micro-cracks on the solar panels and sought damages at common law and under applicable statutes of the Hawaii Revised Statutes (HRS):

• Count I: fraudulent, intentional, reckless, negligent misrepresentation;
• Count II: tortious fraud in the inducement;
• Count III: Unfair or Deceptive Acts and Practices under HRS §480-2;
• Count IV: Deceptive Trade Practices under HRS § 481A;
• Count V: business defamation and disparagement;
• Count VI: unjust enrichment;
• Count VII: detrimental reliance;
• Count VIII: breach of contract;
• Count IX: breach of express warranty; and
• Count X: breach of duty to mitigate damages.

See ECF No. 1-1.

         On November 20, 2018, Defendant moved for judgment on the pleadings as to Counts I, III, V, VI, and X and moved for summary judgment on all claims. See ECF No. 117; ECF No. 121. On May 23, 2019, the district court granted in part and denied in part Defendant's Motion for Judgment on the Pleadings and granted Defendant's Motion for Summary Judgment as to all remaining claims. See ECF No. 183. Defendant then filed the present Motion pursuant to Rule 54 of the Federal Rules of Civil Procedure and Section 607-14 of the Hawaii Revised Statutes.

         DISCUSSION

         Defendant seeks an award of fees under HRS Section 607-14. Section 607-14 is a statutory exception to the American Rule and mandates the recovery of fees in an action on a promissory note or contract that provides for fees or an action in the nature of assumpsit. See Haw. Rev. Stat. § 607-14. To award attorneys' fees under Section 607-14, the court must determine whether: (A) Defendant is entitled to attorneys' fees as the prevailing party; (B) the action is in the nature of assumpsit; (C) the fees requested are reasonable; and (D) the fees do not exceed twenty-five percent of the amount sued for. Defendant also seeks an award of non-taxable costs and post-judgment interest.

         A federal court sitting in diversity must apply the law of the forum state including the award of attorneys' fees. See Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 883 (9th Cir. 2000). Accordingly, the Court will apply Hawaii law here to determine whether Defendant is entitled to attorneys' fees. Under Hawaii law, “[o]rdinarily, attorneys' fees cannot be awarded as damages or costs unless so provided by statute, stipulation, or agreement.” Stanford Carr Dev. Corp. v. Unity House, Inc., 141 P.3d 459, 478 (Haw. 2006) (citation and quotation marks omitted). “Generally, under the ‘American Rule,' each party is responsible for paying his or her own litigation expenses. A notable exception to the ‘American Rule,' however, is the rule that attorneys' fees may be awarded to the prevailing party where such an award is provided for by statute, stipulation, or agreement.” TSA Int'l, Ltd. v. Shimizu Corp., 990 P.2d 713, 733 (Haw. 1999).

         A. As the Prevailing Party, Defendant is Entitled to Attorneys' Fees

         “[A] party ‘prevails' for purposes of attorneys' fees if ‘they succeed on any significant issue in litigation which achieves some of the benefit the parties sought in bringing suit.'” See Eggs ‘N Things Int'l v. ENT Holdings LLC, Civil No. 10-00298 JMS/LEK, 2011 WL 676226, at *9 (D. Haw.) (quoting Hensley v. Eckerhart, 461 U.S. 424, 433 (1983)). Hawaii courts have noted that “[i]n general, a party in whose favor judgment is rendered by the district court is the prevailing party in that court[.]” MFD Partners v. Murphy, 850 P.2d 713, 716 (Haw. Ct. App. 1992) (citations omitted). A judgment of dismissal in its favor similarly supports a finding that a party prevailed. See Ranger Ins. Co. v. Hinshaw, 79 P.3d 119, 124 (Haw. 2003) (citations omitted); Blair v. Ing, 31 P.3d 184, 189 (Haw. 2001) (finding that “a defendant who succeeds in obtaining a judgment of dismissal is a prevailing party for the purpose of [attorneys'] fees under HRS § 607-14”).

         Here, Plaintiffs do not dispute that Defendant is the prevailing party. See ECF No. 192. Of the ten claims asserted against Defendant, the Court entered judgment on the pleadings for one count, granted summary judgment for seven counts, and dismissed the remaining two counts. See ECF No. 183. The Court finds that that Defendant has obtained final judgment in its favor on all claims at issue and is the prevailing party in this action.

         B. The Action is in the Nature of Assumpsit

         Defendant next argues that, as the prevailing party, it is entitled to an award of reasonable attorneys' fees pursuant to HRS Section 607-14. See ECF No. 188-1 at 8. Section 607-14 provides a legal basis for the recovery of fees in actions that are “in the nature of assumpsit.” Haw. Rev. Stat. § 607-14. “[I]n all actions in the nature of assumpsit ... or other contract in writing that provides for an attorney's fee, 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.” Id. Assumpsit is a common law cause of action which provides for “damages for non-performance of a contract, either express or implied, written or verbal, as well as quasi contractual obligations.” 808 Dev., LLC v. Murakami, 141 P.3d 996, 1013 (Haw. 2006) (citation and emphases omitted).

         “Under Hawaii case law, an action in the nature of assumpsit includes ‘all possible contract claims.'” Helfand v. Gerson, 105 F.3d 530, 537 (9th Cir. 1997). For an action to be in the nature of assumpsit, “the plaintiff's primary objective must be to obtain monetary relief for breach of the contract.” Kahala Royal Corp. v. Goodsill Anderson Quinn & Stifel, 151 P.3d 732, 761 (Haw. 2007). To determine whether the action is in the nature of assumpsit, the court should examine “the substance of the entire pleading, the nature of the grievance, and the relief sought.” S. Utsunomiya Enters., Inc. v. Moomuku Cnty. Club, 879 P.2d 501, 505 (Haw. 1994).

         The Court must “determine whether each individual claim alleged in a complaint sounds in assumpsit or tort.” Kona Enters, 229 F.3d at 885. Depending on an analysis of the nature of Plaintiffs' individual claims, the Court may need to apportion the request for attorneys' fees between the claims in the nature of assumpsit and those claims.

         1. Individual Claims

         Of the ten claims against Defendant, Plaintiffs argue that the misrepresentation and tortious fraud in the inducement claims sound in tort because the allegations are based upon misrepresentations Defendant made prior to the sales contract. See ECF No. 192 at 5. Plaintiffs also contend that statutory claims for “unfair or deceptive acts and practices” and “deceptive trade practices” under HRS Sections 480-2 and 481A are expressly excluded as actions in the nature of assumpsit. Id. Defendant argues that these contested claims “are based solely on Plaintiffs' contention that Defendant breached an express warranty or contractual language, specifically, that the panels were free of defects and that Defendant failed to honor its contractual warranties once the alleged defects were present.” See ECF No. 199 at 3.

         As discussed in greater detail below, the Court finds that, of the ten claims asserted against Defendant, four are in the nature of assumpsit for purposes of Section 607-14.

         a. Count I - Fraudulent, Intentional, Reckless, or Negligent Misrepresentation

         Misrepresentation claims typically sound in tort, even if related to a contract. See TSA, 990 P.2d at 734 (holding that fraud claims related to a contract still sound in tort); see also Kohala Agric. v. Deloitte & Touche, 949 P.2d 141, 144 (Haw. Ct. App. 1997).

         Defendant argues that the fraudulent, intentional, reckless or negligent misrepresentation claim is both contractual and tort-based. See ECF No. 1-1 ¶ 69. However, Defendant's alleged misrepresentations about the quality of the solar panels were made prior to the entering into the contract. See id. ¶ 66. Even the alleged misrepresentations about replacing damaged or defective panels were oral representations made prior to entering into the contract. Id. Accordingly, the Court finds that the misrepresentation claim in Count I sounds more in tort and is not in the nature of assumpsit for purposes of Section 607-14.

         b. Count II - Tortious Fraud in the Inducement

         Fraud claims related to a contract similarly sound in tort. See TSA, 990 P.2d at 734; see also Jou v. Adalian, No. CV 15-00155 JMS-KJM, 2018 WL 5289496, at *6 (D. Haw. Aug. 30, 2018) (finding that a claim flowing from reliance on alleged false representations made to induce a party into entering in a contract sounds in tort). Again, the Court must evaluate each individual claim including “the relief sought.” S. Utsunomiya Enters., Inc., 879 P.2d at 505.

         As to this fraud claim in Count II, Defendant does not allege monetary damages flowing from the non-performance of a contractual or quasi-contractual obligation. See ECF No. 1-1 ¶ 76. Instead, Plaintiffs' relief sought relates to their alleged reliance on Defendant's misrepresentations made to induce Plaintiffs to enter into the contract and purchase solar panels in the first place. Id. Accordingly, based on the facts alleged and the relief sought, the Court finds that the fraud in the inducement claim sounds in tort and are not in assumpsit.

         c. Counts III and IV - Claims under Hawaii Revised Statutes

         Statutory claims brought under Hawaii Revised Statutes are not in the nature of assumpsit. This Court has held that deceptive practices claims under HRS Section 480 are not in the nature of assumpsit. See Au v. Republic State Mortg. Co., No. CIV. 11-00251 JMS, 2014 WL 770291, at *4 (D. Haw.). Here, the Court finds that Plaintiffs' unfair or deceptive acts and practices claims in Counts III and IV are statutory claims brought under HRS Sections 480 and 481 and therefore not in the nature of assumpsit for purposes of Section 607-14.

         d. Count V - Business Defamation and Disparagement

         Claims of business defamation and disparagement sounds in tort. See Hawaiian Ins. & Guar. Co. v. Blair, Ltd., 726 P.2d 1310, 1315 n.9 (Haw. Ct. App. 1986) (citing Restatement (Second) of Torts §§ 623A, et seq. (1977) and W. Prosser & W. Keeton, The Law of Torts § 128 (5th ed. 1984)) (“Trade libel or disparagement falls in the category of torts designated as “injurious falsehood” rather than “defamation.”). Accordingly, the Court finds that Count V is not in the nature of assumpsit for purposes of Section 607-14.

         e. Count VI - Unjust Enrichment

         An unjust enrichment claim is quasi-contractual and is in the nature of assumpsit. See Hong v. Kong, 683 P.2d 833, 841 (Haw. Ct. App. 1984) (citations omitted). “From its inception as a form of action for breach of simple contract, assumpsit also evolved as ‘a vehicle for recovery in quasi contract,' basically ‘to deprive the defendant of an unjust enrichment.' Indeed, ‘assumpsit will lie upon a promise implied by law, which arises to prevent one man from being inequitably enriched at another's expense.'” Id. Here, Plaintiffs' unjust enrichment claim in Count VI is based on Defendant's retention of Plaintiffs' payments for solar panels without Defendant honoring the warranty ...


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