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Sciotto v. Association of Apartment Owners of Hanalei Bay Resort

United States District Court, D. Hawaii

December 31, 2019

DENNIS R. SCIOTTO et al., Plaintiffs,
v.
ASSOCIATION OF APARTMENT OWNERS OF HANALEI BAY RESORT, Defendant.

          ORDER (1) GRANTING DEFENDANT'S MOTION TO DISMISS, AND (2) DISMISSING THE COMPLAINT WITHOUT LEAVE TO AMEND

          DERRICK K WATSON UNITED STATES DISTRICT JUDGE

         This is a dispute about available parking spaces in a shared parking lot. Defendant has moved pursuant to Fed.R.Civ.P. 12(b)(1) to dismiss this action for lack of subject matter jurisdiction, contending that: (1) Plaintiffs claims must be resolved in arbitration; and (2) the Court has neither diversity nor federal question jurisdiction over this case. Dkt. No. 10. Although Plaintiffs have indicated a willingness to engage in arbitration, they contend nothing requires that they do so, much less that this Court must dismiss this action to allow for arbitration to take place. See Dkt. No. 14-2 at 12-19.

         The Court need not decide whether arbitration is required because this Court lacks jurisdiction under either 28 U.S.C. Section 1331 or 1332. Accordingly, Defendant's motion is GRANTED, and this case is DISMISSED WITHOUT PREJUDICE.

         FACTUAL & PROCEDURAL BACKGROUND

         A. The Parties

         Plaintiffs Dennis R. Sciotto and Carol Ann Sciotto are the Trustees of the Dennis R. Sciotto and Carol Ann Sciotto Community Property Trust and residents and citizens of the State of California. Dkt. No. 1, ¶ 8. Plaintiffs Edward E. Colson, III and Karen Jeanne Colson are Trustees of the Colson Family Trust and are residents and citizens of the State of California. Id. at ¶ 9. The Sciottos and Colsons are joint owners of Commercial Unit 16A at the Hanalei Bay Resort (the Resort), a condominium project located in Princeville, Hawaii. See Id. at ¶¶ 8-10. The tenants in Unit 16A are the Bali Hai Restaurant (Bali Hai) and Happy Talk Lounge (Happy Talk). See Id. at ¶ 12. Defendant Association of Apartment Owners of Hanalei Bay Resort (AOAO) is an association of apartment owners, acting by and through its Board of Directors. Id. at ¶ 10.

         B. The Underlying State Court Action and Arbitration

         In September of 2016, the Sciottos, the Colsons, and HBR Enterprises, LLC d/b/a Bali Hai and Happy Talk (HBR) jointly filed suit in Hawaii state court. Dkt. No. 10-7. In the complaint, Plaintiffs and HBR alleged that the AOAO had “illegally” permitted residential units at the Resort to be split into two or three separate units, referred to as “lockouts, ” and as a result, there was a higher demand for parking than the Resort was designed to accommodate. See Dkt. No. 10-7, ¶¶ 15-19. Following a July 1, 2011 fire at the Resort, which severely damaged the Bali Hai and Happy Talk, the AOAO Board decided to install a parking gate system and implement valet parking at certain times. See Dkt. No. 1, ¶¶ 13-14; Dkt. No. 10-7, ¶¶ 20-21, 29-30. According to Plaintiffs and HBR, the parking gate prevented patrons and employees of Unit 16A from accessing a large number of the common element parking spaces at the Resort, and the AOAO required Unit 16A to cover at least some of the valet parking costs. Dkt. No. 1, ¶ 14; see Dkt. No. 10-7, ¶¶ 14-15; Dkt. No. 10-4 at 26-27.

         Due to the AOAO's parking measures, Plaintiffs and HBR sought declaratory, injunctive, and monetary relief and asserted the following seven claims: (1) Breach of Contract, Breach of Governing Documents and Protective Covenants, Conditions and Restrictions; (2) Breach of Fiduciary Duty and other Common law Duties; (3) Violation of Haw. Rev. Stat. Sections 514A, 514B; (4) Negligence; (5) Gross Negligence; (6) Organized Crime and Racketeering in Violation of Haw. Rev. Stat. Section 842-2; and (7) Unfair Competition in Violation of Haw. Rev. Stat. Section 480. Dkt. No. 10-7 at 7-10. The parties ultimately stipulated to dismiss all claims without prejudice and participate in arbitration. Dkt. Nos. 10-10, 10-11.

         The arbitrator, now-Judge Mark Bennett of the Ninth Circuit Court of Appeals, issued a Final Arbitration Order on March 30, 2018. Dkt. No. 10-4 at 72. The arbitrator, in relevant part, ruled as follows:

(1) “[T]he parking plan, ” i.e., the gate and valet measures, is “unreasonable and inconsistent with and/or not allowed by the governing documents of the Resort” because the plan “unfairly, unreasonably, and inappropriately disadvantaged commercial Unit 16A” by restricting common element parking available for Unit 16A patrons. Dkt. No. 10-4 at 5, 9, 11, 13-14.
(2) An injunction was issued in favor of the “the owners of Unit 16A, ” prohibiting the AOAO from using the “current parking gate system, ” but the AOAO Board “may, however, establish a valet parking system, as long as all valet parking charges are charged strictly as common area maintenance to all owners, according to their . . . common area maintenance/common interest percentage.” Id. at 5-6, 17-20.
(3) The Sciottos and the Colsons were awarded damages for the valet charges they paid. Id. at 6, 28. The other damages claimed by Plaintiffs and HBR were “speculative, unproven, or unavailable, and rejected.” Id. at 6; see Id. at 28-32.
(4) The AOAO's “lien” for the unpaid valet parking costs and interest imposed on the owners of Unit 16A “is unenforceable and void.” Id. at 27. The other fines or assessments imposed on Unit 16A for a sign opposing the parking situation, awning(s), a construction container, and Christmas lights are “unreasonable and unenforceable” and the AOAO was ordered to expunge the associated liens. Dkt. No. 10-4 at 7, 37-45, 47-48.
(5) The unpaid assessments imposed on Unit 16A for landscaping and insurance premiums were valid and the AOAO was awarded damages in the form of a setoff against the amounts awarded to the Sciottos and the Colsons. Id. at 7, 45-46, 48-49.
(6) By instituting the parking policy, the AOAO “breached a fiduciary duty” owed to the owners of Unit 16A, but no additional damages were awarded. Id. at 60.
(7) Plaintiffs and HBR failed to establish that they were “entitled to any relief with regard to the lockouts.” Id. at 6, 34-36.
(8) The AOAO is not required to “provide for or build additional parking.” Id. at 7, 51-53.
(9) Plaintiffs' and HBR's claims for negligence, gross negligence, organized crime/racketeering, and unfair competition, failed because there was either no legal basis for the claim or the claim was unsupported by the facts. Id. at 7, 61-62.

         Although each party prevailed on some issues, the arbitrator found that “on balance” the Sciottos and the Colsons (the owners of Unit 16A) were the prevailing parties, and thus, the arbitrator required the AOAO to pay the attorneys' fees for the Sciottos and the Colsons. Dkt. No. 10-4 at 8, 70-71.

         The parties then jointly requested an order confirming the Final Arbitration Award in state court, Dkt. No. 10-13, and subsequently filed a notice acknowledging complete satisfaction of the monetary amount awarded by the arbitrator. Dkt. No. 10-14. On September 20, 2018, the state court entered judgment. Dkt. No. 10-15. No. appeal was filed.

         C. The ...


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