Sanctioning Attorney's Fees/Costs Requires Bad Faith
Kaina v. Gellman (ICA December 11, 2008)
Background. Kaina's son was injured in a motorcycle accident in East Maui. He was treated by Dr. Gellman at the Hana Community Health Center, of which Vasconcellos was the executive director. The day after Dr. Gellman's treatment, Kaina's son died. Kaina sued Dr. Gellman, Vasconcellos, and the Health Center for negligence and the negligent hiring of Dr. Gellman. Although they did not raise it in a motion, the defendants brought up the issue of a bifurcated trial in a reply memorandum regarding their motion for summary judgment. Ten days before trial, the circuit court, Judge August, bifurcated Kaina's claims over Kaina's objection. Judge August, upon Kaina's request, recused himself and the case was transferred to Judge Joseph Cardoza. After the recusal, Judge August issued the orders pertaining to the summary judgment and the bifurcation.
Before Judge Cardoza, Kaina filed a motion to consolidate back into a single trial. Judge Cardoza characterized the motion as a request for reconsideration of Judge August's order and denied the motion. Kaina tried to get an interlocutory appeal, but the Hawai'i Supreme Court denied the request. Kaina then brought a "Renewed Motion for Consolidation." The circuit court denied the motion and awarded attorney's fees and costs of $6,805.37 to the defendants, as requested. Kaina appealed.
Abuse of Discretion Doesn't Necessarily mean Deference. The decision to sanction is reviewed for an abuse of discretion. Gap v. Puna Geothermal Venture, 106 Hawai'i 325, 331, 104 P.3d 912, 918 (2004). An abuse of discretion arises when the lower court "bases its ruling on an erroneous view of the law or a clearly erroneous assessment of the evidence." Id. It also arises when the lower court "clearly exceeded the bounds of reason or disregarded rules or principles of law or practice to the substantial detriment of a party litigant." AOAO of Kai Nui Court v. City and County of Honolulu, 118 Hawai'i 119, 121, 185 P.3d 867, 869 (App. 2008). The ICA stated two formulations for an abuse of discretion. Both of these formulations do not require the appellate court to defer to the decision below. How exactly is review for an "erroneous view of the law" or the disregard of "rules or principles of law" different from a decision reviewed de novo? That remains to be seen.
Rule 11 Sanctions: for Lawyers only. The ICA characterized the award of attorney's fees and costs as "sanctions" against Kaina. The ICA first examined whether the sanctions by the circuit court were permitted under Hawai'i Rules of Civil Procedure (HRCP) Rule 11. HRCP Rule 11(b) states that by signing a pleading or other paper filed before the court, the paper is not frivolous, not made for improper purposes, and is supported by some kind of evidence. Violations of Rule 11(b) may result in sanctions from the court, which specifically includes "reasonable attorneys' fees and other expenses." HRCP Rule 11(c). Rule 11 sanctions are initiated either (1) by separate motion filed by a party, or (2) by the court upon an order directing the party to show cause why it had not violated subsection(b). Neither circumstance arose here. Furthermore, Rule 11 sanctions "may be imposed only upon the person who signed the pleading, motion, or other paper." The sanctions here, however, went against the party, and not the party's attorney. Thus, the sanctions imposed against Kaina could not have been pursuant to HRCP Rule 11.
The Inherent Power of the Court to Sanction Requires Finding of bad Faith for Attorneys and Their Clients. HRCP Rule 11 is not the only way to get sanctioned. Hawai'i courts have the "inherent power . . . to control the litigation process before them and curb abuses and promote fair process including, for example, the power to impose sanctions for abusive litigation practices." Bank of Hawai'i v. Kunimoto, 91 Hawai'i 372, 387,984 P.2d 1198, 1213 (1999). This inherent power is codified (but not superseded by) in HRS § 603-21.9(6). Kukui Nuts of Haw., Inc. v. R. Baird & Co., Inc., 6 Haw.App. 431, 436, 726 P.2d 268, 272 (1986). But before imposing sanctions against the attorney pursuant to this inherent power, the court must first find that the attorney acted in bad faith. Bank of Hawai'i, 91 Hawai'i at 389, 984 P.2d at 1215; Enos v. Pac. Transfer & Warehouse, Inc., 79 Hawai'i 452, 458, 903 P.2d 1273, 1279 (1995) ("a particularized showing of bad faith is required to justify the use of the court's inherent power").
The ICA held that the same bad-faith finding is required for sanctions against the represented party. Moreover, the court's order must inform the party of "the authority pursuant to which he or she is to be sanctioned." Here, the ICA held that the circuit court made no finding that Kaina acted in bad faith. Moreover, according to the ICA, the renewed motion for consolidation did not exhibit any evidence of bad faith on the part of Kaina or her attorney. The award of attorneys' fees was not the correction of abusive litigation, but rather the mere shifting of the burden of attorneys' fees and costs to Kaina.
So can a Sanction EVER be an Award of fees/costs? This is not a case of an award of attorneys' fees and costs. This is all about sanctions. The ICA limited this appeal to a single issue: "whether the circuit court erred when [it] sanctioned Appellant Kaina by ordering [her] to pay Appellees' attorneys' fees and costs[.]" Here, the ICA concluded it was error and reversed. But does this mean that a court cannot award fees/costs to one party by sanctioning another? Not necessarily. After all, HRCP Rule 11(c) expressly provides for such a possibility. Furthermore, the court could also impose a sanction equal to the attorneys' fees and costs pursuant to its inherent power as long as it finds some "particularized showing of bad faith" and informs the party of its inherent authority.
Background. Kaina's son was injured in a motorcycle accident in East Maui. He was treated by Dr. Gellman at the Hana Community Health Center, of which Vasconcellos was the executive director. The day after Dr. Gellman's treatment, Kaina's son died. Kaina sued Dr. Gellman, Vasconcellos, and the Health Center for negligence and the negligent hiring of Dr. Gellman. Although they did not raise it in a motion, the defendants brought up the issue of a bifurcated trial in a reply memorandum regarding their motion for summary judgment. Ten days before trial, the circuit court, Judge August, bifurcated Kaina's claims over Kaina's objection. Judge August, upon Kaina's request, recused himself and the case was transferred to Judge Joseph Cardoza. After the recusal, Judge August issued the orders pertaining to the summary judgment and the bifurcation.
Before Judge Cardoza, Kaina filed a motion to consolidate back into a single trial. Judge Cardoza characterized the motion as a request for reconsideration of Judge August's order and denied the motion. Kaina tried to get an interlocutory appeal, but the Hawai'i Supreme Court denied the request. Kaina then brought a "Renewed Motion for Consolidation." The circuit court denied the motion and awarded attorney's fees and costs of $6,805.37 to the defendants, as requested. Kaina appealed.
Abuse of Discretion Doesn't Necessarily mean Deference. The decision to sanction is reviewed for an abuse of discretion. Gap v. Puna Geothermal Venture, 106 Hawai'i 325, 331, 104 P.3d 912, 918 (2004). An abuse of discretion arises when the lower court "bases its ruling on an erroneous view of the law or a clearly erroneous assessment of the evidence." Id. It also arises when the lower court "clearly exceeded the bounds of reason or disregarded rules or principles of law or practice to the substantial detriment of a party litigant." AOAO of Kai Nui Court v. City and County of Honolulu, 118 Hawai'i 119, 121, 185 P.3d 867, 869 (App. 2008). The ICA stated two formulations for an abuse of discretion. Both of these formulations do not require the appellate court to defer to the decision below. How exactly is review for an "erroneous view of the law" or the disregard of "rules or principles of law" different from a decision reviewed de novo? That remains to be seen.
Rule 11 Sanctions: for Lawyers only. The ICA characterized the award of attorney's fees and costs as "sanctions" against Kaina. The ICA first examined whether the sanctions by the circuit court were permitted under Hawai'i Rules of Civil Procedure (HRCP) Rule 11. HRCP Rule 11(b) states that by signing a pleading or other paper filed before the court, the paper is not frivolous, not made for improper purposes, and is supported by some kind of evidence. Violations of Rule 11(b) may result in sanctions from the court, which specifically includes "reasonable attorneys' fees and other expenses." HRCP Rule 11(c). Rule 11 sanctions are initiated either (1) by separate motion filed by a party, or (2) by the court upon an order directing the party to show cause why it had not violated subsection(b). Neither circumstance arose here. Furthermore, Rule 11 sanctions "may be imposed only upon the person who signed the pleading, motion, or other paper." The sanctions here, however, went against the party, and not the party's attorney. Thus, the sanctions imposed against Kaina could not have been pursuant to HRCP Rule 11.
The Inherent Power of the Court to Sanction Requires Finding of bad Faith for Attorneys and Their Clients. HRCP Rule 11 is not the only way to get sanctioned. Hawai'i courts have the "inherent power . . . to control the litigation process before them and curb abuses and promote fair process including, for example, the power to impose sanctions for abusive litigation practices." Bank of Hawai'i v. Kunimoto, 91 Hawai'i 372, 387,984 P.2d 1198, 1213 (1999). This inherent power is codified (but not superseded by) in HRS § 603-21.9(6). Kukui Nuts of Haw., Inc. v. R. Baird & Co., Inc., 6 Haw.App. 431, 436, 726 P.2d 268, 272 (1986). But before imposing sanctions against the attorney pursuant to this inherent power, the court must first find that the attorney acted in bad faith. Bank of Hawai'i, 91 Hawai'i at 389, 984 P.2d at 1215; Enos v. Pac. Transfer & Warehouse, Inc., 79 Hawai'i 452, 458, 903 P.2d 1273, 1279 (1995) ("a particularized showing of bad faith is required to justify the use of the court's inherent power").
The ICA held that the same bad-faith finding is required for sanctions against the represented party. Moreover, the court's order must inform the party of "the authority pursuant to which he or she is to be sanctioned." Here, the ICA held that the circuit court made no finding that Kaina acted in bad faith. Moreover, according to the ICA, the renewed motion for consolidation did not exhibit any evidence of bad faith on the part of Kaina or her attorney. The award of attorneys' fees was not the correction of abusive litigation, but rather the mere shifting of the burden of attorneys' fees and costs to Kaina.
So can a Sanction EVER be an Award of fees/costs? This is not a case of an award of attorneys' fees and costs. This is all about sanctions. The ICA limited this appeal to a single issue: "whether the circuit court erred when [it] sanctioned Appellant Kaina by ordering [her] to pay Appellees' attorneys' fees and costs[.]" Here, the ICA concluded it was error and reversed. But does this mean that a court cannot award fees/costs to one party by sanctioning another? Not necessarily. After all, HRCP Rule 11(c) expressly provides for such a possibility. Furthermore, the court could also impose a sanction equal to the attorneys' fees and costs pursuant to its inherent power as long as it finds some "particularized showing of bad faith" and informs the party of its inherent authority.
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