Saturday, July 31, 2010

Awards of fees and Costs in Otherwise moot Cases still Subject to Appellate Review

Queen Emma Foundation v. Tatibouet (ICA July 29, 2010)

Background. The Queen Emma Foundation leased hotel property in Waikiki to Tatibouet. The lease stated that if Tatibouet wanted to covert the property into a condominium, the Foundation would have to be somehow involved in the process. Tatibouet went ahead in the condominium process with Coral Reef Development as the developer. The Foundation learned about the selling of condominium units in the newspaper and soon brought an action for declaratory and injunctive relief based on the Foundation's interpretation of the lease. The circuit court interpreted the lease and ruled for the Foundation. The circuit court also found the Foundation to be a "prevailing party" and awarded $534,708.73 in attorney's fees and costs. Tatibouet appealed. During the appeal, Tatibouet filed for bankruptcy and lost his lease over the property and the Coral Reef Development was terminated. The Foundation filed before the ICA a motion to dismiss the appeal on the grounds that the appeal was moot.

Appeal on the Merits is Moot Because a Party lost all Interests in the Property. Courts do "not have jurisdiction to decide abstract propositions of law or moot cases." Lathrop v. Sakatani, 111 Hawai'i 307, 312, 141 P.3d 480, 485 (206). The "suit must remain alive throughout the course of litigation to the moment of final appellate disposition to escape the mootness bar." Kona Old Hawaiian Trails Group v. Lyman, 69 Haw. 81, 87, 734 P.2d 161, 165 (1987). The ICA held that this case was moot and granted the Foundation's motion. Tatibouet had no leasehold interest in the property and Coral Reef Development has been terminated. They have no "present adverse interest vis-à-vis [t]he Foundation with respect to the interpretation of the" lease. Any review of the circuit court's interpretation would, according to the ICA, be an advisory opinion on abstract propositions of law.

Attorneys' Fees Challenge does not Allow Appellate Review of the Merits. The ICA rejected Tatibouet's argument that his challenge to the fees and costs award allowed full review of the case. According to the ICA, there are no Hawai'i cases addressing the issue of whether a challenge to the award of fees and costs keeps an otherwise moot controversy alive. After reviewing decisions from primarily federal jurisdictions, the ICA held that an appeal from the award of attorney's fees and costs does not save the underlying controversy from becoming moot. Lewis v. Continental Bank Corp., 494 U.S. 472, 480 (1990); Center for Biological Diversity v. Marina Point Development Co., 566 F.3d 794, 805-806 (9th Cir. 2009); Ott v. Boston Edison Co., 602 N.E.2d 566, 568 (Mass. 1992); Dept. of Education v. Rodarte, 127 F.Supp.2d 1103, 1113-14 (D. Haw. 2000).

ICA had "Equitable Jurisdiction" to Review "Ancillary" Issue of Attorney's fees and Costs. The ICA adopted a federal approach. "Although a claim for attorney's fees does not preserve a case which has otherwise become moot on appeal, . . . the question of attorney's fees is ancillary to the underlying action and survives independently under the Court's equitable jurisdiction." United States v. Ford, 650 F.2d 1141, 1144 (9th Cir. 1981). According to the ICA, because the underlying matter is moot and cannot be disturbed to determine whether fees were warranted, the reviewing court must consider whether the recipient of the fees and costs award can be considered the prevailing party "without regard to whether we think the . . . court's decision on the underlying merits is correct." Bishop v. Committee on Professional Ethics and Conduct of the Iowa State Bar, 686 F.2d 1278, 1290 (8th Cir. 1982).

The ICA examined whether the Foundation was a "prevailing party" without inquiring into the correctness of the circuit court's ruling on the merits. A prevailing party "prevails on the disputed main issue, even though not to the extent of [the party's] original contention[.]" Food Pantry, Ltd. v. Waikiki Business Plaza, Inc., 58 Haw. 606, 620, 575 P.2d 869, 879 (1978); see also HRS §607-14. According to the ICA, the Foundation is the prevailing party. It sought a declaratory judgment to stop the condominiumizing of the Waikiki property. The circuit court adopted the Foundation's interpretation of the lease and got its declaratory and injunctive relief. Without reviewing the merits of the circuit court's ruling, it was obvious to the ICA that the Foundation was the prevailing party and the ICA affirmed the circuit court's award of fees and costs.

A new Standard of Review. When a case is moot, the appellate court has no jurisdiction. But even though a case is moot, the court has "equitable jurisdiction" to review a disputed award of fees and costs. That review appears to be limited to the issue of whether the recipient of the award was the prevailing party. In answering this question, it appears that the reviewing court must assume that the decision on the merits is correct. This case was a particularly easy one. But in the future it may not be so simple. There are a number of cases where the prevailing party is unclear.

Is the case Really moot? Is this Semantics? The ICA first held that the case was moot because Tatibouet and Coral Reef Developers have no interests left in the property. If the case is moot, then there is no active controversy and no jurisdiction to hear the case on appeal. Nothing is alive for litigation and one of the parties has absolutely no interest in the case. An award of attorney's fees, however, must be paid. That was Tatibouet's argument. He had a financial interest in the case because he still has half a million dollars in fees and costs to pay. Doesn't that mean that the case is still alive?

Well, sort of. The standard incorporated from the federal courts allows limited review of whether the award based on the appellate court's "equitable jurisdiction." It allows limited review of the only part of the case that is still viable. Perhaps this is a necessary distinction. It suggests that when a case is truly not moot, everything--including the award for fees and costs--is up for review. When the only thing that is still viable is the fees and costs itself, however, the court has no jurisdiction to hear the merits and has only "equitable jurisdiction" to examine the award.

Does "Equitable Jurisdiction" Allow Review of the Amount of the Award? The ICA affirmed the award without examining if the amount was reasonable. Fees must be reasonable. Blair v. Ing, 96 Hawai'i 327, 328, 31 P.3d 184, 185 (2001); HRS § 607-14. Does the court have the equitable jurisdiction to review the reasonableness of the amount? In other words, assuming that the circuit court's ruling on the merits is correct, is the half-million dollar award an unreasonable amount? Is it implicitly reasonable or is it not subject to review? That was never addressed here. Nonetheless, it would seem that if the appellate court can examine whether an award for an otherwise moot case should have been given at all, it can certainly examine whether that awarded amount was reasonable. That issue must be resolved for another day.

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