Tuesday, July 22, 2008

ICA puts law on Orders in Order

Peters v. Aipa (ICA July 14, 2008)

Background. Peters was one of the five trustees for the Bishop Estate. Aipa was the estate's general counsel and chief legal advisor for the trust. In 1998, the Attorney General brought various claims and prayed for the removal of all five trustees. The trustees settled and executed a Settlement Agreement that released, waived, and settled the claims. The probate court approved of the Agreement. The Agreement included the AG, the trustees, and "their respective Representatives," which expressly included attorneys. After the settlement, Aipa was called by the AG in a grand jury proceeding. Aipa testified against Peters. The grand jury indicted Peters of theft in the first degree and criminal conspiracy arising from a real estate transaction. Aipa never notified Peters before he testified and Peters did not waive the attorney-client privilege. The circuit court later dismissed the indictment based in part on the AG's conduct.

Peters sued Aipa for breach of various duties and breach of the attorney-client privilege in the grand jury proceedings. Aipa filed a motion for summary judgment or, in the alternative, a motion to compel arbitration. Both motions were based on the Settlement Agreement. The circuit court denied both motions and Aipa appealed.

Appellate Jurisdiction: the Final-Judgment Rule and its Exceptions. The ICA first considered whether the order denying both motions was subject to appellate review. Generally, a party can only appeal from a final judgment, order, or decree. HRS § 641-1(a); Cisela v. Reddish, 78 Hawai'i 18, 20, 889 P.2d 702, 704 (1995). A judgment or order is not "final" until "all claims of the parties have been terminated." Id. The ICA pointed to two exceptions to this general rule. An interlocutory order is subject to appellate review even though it is not yet final. Abrams v. Cades, Schutte, Fleming & Wright, 88 Hawai'i 319, 321, 966 P.2d 631, 633 (1998). The other exception is even narrower. When the court denies a party's request for arbitration, the order denying the request is subject to appellate review. Ass'n of Owners of Kukui Plaza v. Swinerton & Walburg Co., 68 Haw. 98, 106, 705 P.2d 28, 35 (1985); HRS chapter 658A. This "small class" of orders warrants quicker appellate review because the rights under an arbitration agreement would be lost if the aggrieved party had to wait for final judgment. Ass'n of Owners of Kukui Plaza at 106, 705 P.2d at 34.

Aipa is the Defendant. The denial of his motion for summary judgment does not terminate Peters' claims. Under the general rule, the ICA has no jurisdiction to hear Aipa's arguments for that part of the order. As for the denial of the motion to compel arbitration, however, the ICA concluded that it was among that "small class" of orders that warrant appellate review. Furthermore, Peters, as the appellee, argued that the circuit court correctly denied Aipa's motion to compel arbitration. Thus, the ICA held that it had appellate jurisdiction to consider whether the circuit court erred in denying Aipa's motion to compel arbitration.

The Scope of the Agreement Covers the Claims. This particular Agreement is part of modern Hawaiian history. It was already examined by the Hawai'i Supreme Court when another trustee, Richard Wong, sued Governor Cayetano and other government officials for malicious prosecution. The HSC held that the Agreement precluded Wong's claims. Wong v. Cayetano, 111 Hawai'i 462, 481-82, 143 P.3d 1, 20-21 (2006). The ICA held that the Peters' claims against Aipa were also barred by the same Agreement, and, therefore, vacated that part in the circuit court's order denying Aipa's motion to compel arbitration.

A Partially-Appealable Order? The ICA confronted an odd situation. Aipa appealed from a single order that denied two motions. One part of the order--the denial of the summary judgment--was not yet final and no exception applied. The ICA, in dicta, pointed out that this would not have been a problem had the circuit court certified the order pursuant to Hawai'i Rules of Civil Procedure (HRCP) Rule 54(b) (circuit court may certify that a single claim arising from a multiple-claim lawsuit is "final"). For that part, the ICA had no jurisdiction and there was no review. The other part of the same order was the denial of the motion to compel arbitration. This met one of the exceptions to the final-judgment rule and the ICA reviewed, vacated, and remanded that denial. In other words, the ICA held that "a single order is not appealable in its entirety just because a portion of that order is appealable."

So what Happens now? The ICA rejected Aipa's argument to hear the denial of the summary judgment on the grounds that it would save a lot of time. The ICA was not persuaded. Aipa has to wait for the circuit court to reduce the entire case to a final judgment. But can the lawsuit proceed with a compelled arbitration? If Peters wins at arbitration, then he may want to drop the lawsuit and the dismissal order would then terminate the claim and become final. At that point, Aipa could appeal from the denial of the summary judgment. On the other hand, if Aipa wins at arbitration, Peters would want to proceed with the lawsuit (even if its viability is dubious). In any case, the circuit court proceeding will be reduced to a final judgment, order, or decree that would terminate Peters' claims. Aipa would still be able to appeal.

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