SCHMIDT v. DUBIN (2024)

This appeal arises from claims asserted by Petitioner/Plaintiff-Appellant Thomas F. Schmidt (Schmidt) against his former attorney, Respondents/Defendants-Appellees Gary V. Dubin and the Dubin Law Offices (collectively, Dubin). Schmidt brought suit in the Circuit Court of the First Circuit (Circuit Court)¹ alleging Dubin breached contractual and other duties to represent Schmidt in a separate lawsuit (Ruthruff Lawsuit) and improperly kept a $100,000 retainer that Schmidt claims he paid to Dubin for future legal work in the Ruthruff Lawsuit.

The Circuit Court entered two orders granting partial summary judgment for Dubin and also awarded Dubin attorneys’ fees and costs as the prevailing party. The award for attorneys’ fees was based on Hawai‘i Revised Statutes (HRS) § 607-14 (2016). The award for costs was based on HRS § 607-9 (2016) and Hawai‘i Rules of Civil Procedure (HRCP) Rule 54(d)(1) (eff. 2000). The Circuit Court entered judgment in favor of Dubin and against Schmidt, including on the attorneys’ fees and costs.

Schmidt appealed to the Intermediate Court of Appeals (ICA), challenging the Circuit Court's first summary judgment ruling, regarding his claim that Dubin improperly kept $100,000 and breached contractual duties. The ICA held that summary judgment on these claims was improper, vacated the Circuit Court's judgment as to these claims, but affirmed the judgment in all other respects. Schmidt filed a motion for reconsideration, asserting the ICA should also vacate the attorneys’ fees and costs award, which the ICA denied.

Schmidt's application for certiorari to this court contends the ICA erred in affirming the portion of the Circuit Court's judgment that awarded attorneys’ fees and costs to Dubin, and in denying Schmidt's motion for reconsideration on this issue. Schmidt argues the ICA erred because, although it vacated summary judgment for Dubin on Schmidt's breach of contract claims, the ICA simultaneously affirmed the award of attorneys’ fees and costs when Dubin was no longer the prevailing party on the breach of contract claims for purposes of HRS §§ 607-14 and 607-9 and HRCP Rule 54(d)(1).

We hold that after vacating the judgment on the breach of contract claims, the ICA erred by affirming the judgment “in all other respects,” which included judgment in favor of Dubin for attorneys’ fees and costs as the prevailing party. See Ass'n of Owners of Kalele Kai v. Yoshikawa, 149 Hawai‘i 417, 418, 493 P.3d 939, 940 (2021) (“[W]hen a judgment upon which attorneys’ fees and costs were based has been vacated, attorneys’ fees and costs arising out of that judgment should also be vacated[.]”). We further hold that the ICA erred by denying Schmidt's motion for reconsideration, which expressly asserted that the attorneys’ fees and costs order should be vacated.

I. Background

Given the allegations in Schmidt's complaint, Dubin filed two motions for partial summary judgment: one on all claims based on the alleged $100,000 debt, including Schmidt's breach of contract claims (MPSJ #1); and one related to claims based on HRS Chapter 480 and the Hawai‘i Rules of Professional Conduct (MPSJ #2).

The Circuit Court granted partial summary judgment in favor of Dubin on MPSJ #1, concluding that Schmidt's claims based on the alleged debt were time-barred by HRS § 657-1(1) (2016) (MPSJ Order #1). The Circuit Court also separately granted partial summary judgment in favor of Dubin on MPSJ #2 (MPSJ Order #2).²

Subsequently, pursuant to HRS §§ 607-14 and 607-9, and HRCP Rule 54(d)(1), the Circuit Court awarded $25,000 for attorneys’ fees (25% of the $100,000 sought in the Complaint) and $1,468.88 for costs to Dubin as the prevailing party, for a total amount of $26,468.88 (Fees/Costs Order).

On April 2, 2018, Schmidt filed a Notice of Appeal in the ICA, stating he sought review of the MPSJ Order #1 and the Fees/Costs Order. At the time Schmidt appealed, the Circuit Court had not entered a final appealable judgment. The ICA temporarily remanded the case to the Circuit Court for entry of a final appealable judgment, which was entered on November 8, 2018, and which included judgment against Schmidt and in favor of Dubin in the amount of $26,468.88 for attorneys’ fees and costs (Final Judgment).

In his opening brief to the ICA, Schmidt argued the Circuit Court erred in granting MPSJ Order #1 and improperly dealt with statute of limitations issues. Schmidt requested that MPSJ Order #1 be vacated, the case be remanded with instructions related to the statute of limitations, and for further consistent proceedings. Schmidt did not argue the award of attorneys’ fees and costs should also be vacated.

On March 28, 2024, the ICA issued a Summary Disposition Order (SDO) concluding the Circuit Court erred in holding that Schmidt's breach of contract claims against Dubin were time-barred because genuine issues of material fact exist as to when an alleged breach of contract action accrued. Schmidt v. Dubin, No. CAAP-18-0000291, 2024 WL 1329361 (Haw. App. Mar. 28, 2024) (SDO). The SDO concluded by stating:

For these reasons, the Circuit Court's November 8, 2018 Judgment is affirmed in part and vacated in part. The Judgment is vacated with respect to the Circuit Court's granting of summary judgment on Schmidt's breach of contract claim(s) against Dubin on the grounds that they were time-barred. The Judgment is affirmed in all other respects. This case is remanded to the Circuit Court for further proceedings consistent with this Summary Disposition Order.

Id. at *3 (emphasis added).

On March 28, 2024, Schmidt timely filed a motion for reconsideration requesting that the ICA reconsider the portion of its SDO affirming the Circuit Court's judgment “in all other respects.” Schmidt argued that the Fees/Costs Order should be vacated because the ICA vacated MPSJ Order #1 and Dubin is not the prevailing party on the assumpsit (breach of contract) claims. The ICA denied Schmidt's motion for reconsideration.

The ICA then entered its Judgment on Appeal stating that the Circuit Court's Final Judgment is “affirmed in part and vacated in part” and “[t]his case is remanded to the Circuit Court for further proceedings consistent with the Summary Disposition Order.” (Emphasis added.)

II. Discussion

The Circuit Court's Fees/Costs Order and Final Judgment awarded attorneys’ fees and costs to Dubin in the amount of $26,468.88, based on Dubin being the prevailing party. The Circuit Court's Fees/Costs Order provided that the fees and costs were awarded to Dubin pursuant to HRS §§ 607-14 and 607-9, and HRCP Rule 54(d)(1). The Final Judgment, entering judgment of $26,468.88 against Schmidt and in favor of Dubin, provided that it was based inter alia on: MPSJ Order #1, MPSJ Order #2, and the Fees/Costs Order.

HRS § 607-14 provides, in relevant part, that for all actions in the nature of assumpsit, “there shall be taxed as attorneys’ fees, to be paid by the losing party ․ a fee that the court determines to be reasonable[.]” (Emphasis added); see Deutsche Bank Nat'l Tr. Co. v. Kozma, 140 Hawai‘i 494, 498, 403 P.3d 271, 275 (2017) (“A prevailing party is entitled to attorney's fees pursuant to HRS § 607-14[.]”).

Regarding the amount of attorneys’ fees to be awarded under HRS § 607-14, the statute states: “The above fees provided for by this section shall be assessed on the amount of the judgment exclusive of costs and all attorneys’ fees obtained by the plaintiff, and upon the amount sued for if the defendant obtains judgment.” (Emphasis added); see also Stanford Carr Dev. Corp. v. Unity House, Inc., 111 Hawai‘i 286, 307, 141 P.3d 459, 480 (2006) (holding that attorneys’ fees awarded in the amount of $707,309.98 was within the statutory limits of HRS § 607-14, where the losing party had sought damages of over $7 million and thus the prevailing party was entitled to no more than twenty-five percent of that amount).

Here, Dubin was defending against Schmidt's breach of contract claims and prevailed in the Circuit Court. Schmidt's Complaint asserted he was entitled to recover a $100,000 retainer he had paid to Dubin. After the Circuit Court granted summary judgment for Dubin on Schmidt's contract claims, the Circuit Court awarded Dubin attorneys’ fees in the amount of $25,000 ($100,000 x .25) under HRS § 607-14.

As for costs, the Circuit Court awarded Dubin $1,468.88 “incurred by [Dubin's] counsel in defense of this action[.]” (Emphasis added.) HRS § 607-9 sets out the types of costs that can be awarded. HRCP Rule 54(d)(1) provides in relevant part that: “Except when express provision therefor is made either in a statute or in these rules, costs shall be allowed as of course to the prevailing party unless the court otherwise directs[.]” (Emphasis added.)

Given the statutory and rule authority relied upon by the Circuit Court, its award of attorneys’ fees and costs to Dubin was grounded on Dubin being the prevailing party. Once the ICA vacated the Circuit Court's MPSJ Order #1, which addressed Schmidt's breach of contract claims, Dubin was no longer the prevailing party as to the assumpsit claims and no longer entitled to attorneys’ fees under HRS § 607-14.

It appears the costs awarded by the Circuit Court were based on Dubin prevailing in MPSJ Order #1 (as to the breach of contract claims) as well as MPSJ Order #2 (as to the HRS Chapter 480 and malpractice claims). To the extent the Circuit Court awarded costs to Dubin as the prevailing party on MPSJ Order #1, that basis no longer existed once the ICA vacated MPSJ Order #1. However, to the extent the costs award was based on MPSJ Order #2, that basis remained because Schmidt did not appeal that part of the Circuit Court's rulings.³

Given these circumstances, after vacating MPSJ Order #1 on Schmidt's breach of contract claims, the ICA erred by then stating in the SDO that the Circuit Court's Final Judgment “is affirmed in all other respects.” The ICA affirmed the Final Judgment on the attorneys’ fees and costs award to Dubin when it had just vacated the primary grounds on which Dubin had been the prevailing party in the Circuit Court.

In Yoshikawa, this court held that “when a judgment upon which attorneys’ fees and costs were based has been vacated, attorneys’ fees and costs arising out of that judgment should also be vacated[.]” 149 Hawai‘i at 418, 493 P.3d at 940. Yoshikawa applies here. In that case, the ICA “vacated the summary judgment but affirmed the related attorneys’ fees and costs awards because [the appellant,] Yoshikawa[,] had not specifically addressed them in his appellate briefs.” 149 Hawai‘i at 418, 493 P.3d at 940. This court vacated the ICA's judgment on appeal to the extent it affirmed the circuit court's grant of attorneys’ fees and costs which arose from the vacated summary judgment. Id.

Here, like in Yoshikawa, Schmidt did not directly challenge the award of attorneys’ fees and costs to Dubin in his briefing to the ICA. However, he challenged the primary underlying basis that had made Dubin the prevailing party in the Circuit Court for purposes of the fees and costs award. The ICA vacated the Final Judgment to the extent summary judgment was granted for Dubin on the breach of contract claims, but then affirmed the Circuit Court's judgment “in all other respects,” which effectively affirmed the attorneys’ fees and costs award to Dubin.

Moreover, on the same day the SDO was filed, Schmidt filed a motion for reconsideration with the ICA, pointing out the inconsistent result due to the SDO language affirming the Final Judgment “in all other respects.” Schmidt asserted the attorneys’ fees and costs awarded to Dubin should also be vacated because the ICA vacated MPSJ Order #1 and Dubin was no longer the prevailing party. The ICA denied the motion for reconsideration, which is a further signal to the Circuit Court on remand that the ICA intended to affirm the award of attorneys’ fees and costs to Dubin.⁴

Then, in the ICA's Judgment on Appeal, it stated that the Circuit Court's Final Judgment was “affirmed in part and vacated in part[,]” and that the case was “remanded to the Circuit Court for further proceedings consistent with the Summary Disposition Order.” The ICA's Judgment on Appeal does not contain the same language affirming the Circuit Court's Final Judgment “in all other respects,” but it does indicate that the Final Judgment is “affirmed in part” and then requires on remand that the Circuit Court's further proceedings be consistent with the SDO.

We conclude the ICA's SDO and Judgment on Appeal are inconsistent with Yoshikawa and would improperly preclude the Circuit Court from further addressing the $26,468.88 fees and costs award to Dubin. It is well established that on remand, circuit courts are required “to comply strictly with the mandate of the appellate court according to its true intent and meaning, as determined by the directions given by the reviewing court[.]” Chun v. Bd. of Trs. of Emp.s’ Ret. Sys. of State of Hawai‘i, 106 Hawai‘i 416, 439, 106 P.3d 339, 362 (2005) (citation omitted); see also In re Hawai‘i Elec. Light Co., 149 Hawai‘i 239, 241, 487 P.3d 708, 710 (2021).

Here, given the language of the ICA's SDO, the ICA's denial of Schmidt's motion for reconsideration, and its Judgment on Appeal, the Circuit Court would be required “to comply strictly with the mandate” of the ICA on remand, which indicates that the attorneys’ fees and costs award to Dubin was affirmed by the ICA. See Chun, 106 Hawai‘i at 439, 106 P.3d at 362. This result would be inconsistent with the ICA's vacating of MPSJ Order #1, and contrary to Yoshikawa.

III. Conclusion

Based on the foregoing, we vacate in part the ICA's Judgment on Appeal to the extent it affirmed the Circuit Court's Final Judgment awarding $26,468.88 in attorneys’ fees and costs to Dubin. We also vacate the Circuit Court's Final Judgment to the extent it awarded Dubin the $26,468.88 in attorneys’ fees and costs; and the Circuit Court's Fees/Costs Order.

This case is remanded to the Circuit Court for further proceedings consistent with this opinion.

I.

I respectfully dissent.

In my view, the ICA's SDO and judgment on appeal do not stop the circuit court from revisiting attorney fees and costs on remand. A common-sense, contextual reading of the ICA's decision requires the circuit court to vacate its attorney fee award, because a non-prevailing party doesn't get attorney fees per Hawai‘i Revised Statutes (HRS) § 607-14 (2016).

To reach its conclusion, the majority relies on Chun and Yoshikawa. It quotes Chun’s statement that, on remand, circuit courts must “comply strictly with the mandate of the appellate court according to its true intent and meaning, as determined by the directions given by the reviewing court.” Chun v. Bd. of Trs. of Emps.’ Ret. Sys. State of Hawai‘i, 106 Hawai‘i 416, 439, 106 P.3d 339, 362 (2005). The majority's reasoning places much weight on strict compliance with a literal reading of the ICA's words – “[t]he Judgment is affirmed in all other respects.” Yet the majority blows by the ICA decision's “true intent and meaning.”

As this court has directed, “[o]n remand, a trial court must closely adhere to the true intent and meaning of the appellate court's mandate.” Matter of Hawai‘i Elec. Light Co., Inc., 149 Hawai‘i 239, 241, 487 P.3d 708, 710 (2021) (HELCO II). “The ‘true intent and meaning’ of a reviewing court's mandate is not to be found in a solitary word or decontextualized phrase, but rather in the opinion, as a whole, read in conjunction with the judgment and interpreted in light of the case's procedural history and context.” Id. (emphasis added). HELCO II rejected an interpretation of a remand instruction that “only works if everything else in the HELCO I opinion and the language of the judgment is ignored.” Id. Such a blinkered approach is unreasonable. Id. A remand's scope is determined “not by formula, but by inference from the opinion as a whole.” Id.

For instance, HELCO II interpreted HELCO I’s remand instruction in light of the whole opinion. It ruled that a phrase in the remand instruction vacating a Public Utilities Commission order should be understood as a “synecdoche” (a figure of speech using a broad phrase to represent a component part). Id. at 242, 487 P.3d at 711. In this context, the remand instruction's meaning was clear. Id.

Here, as in HELCO II, the ICA's “affirmed in all other respects” language referred to the other issues the ICA decided, not the attorney fee and cost issue (something undecided in its SDO).

Schmidt raised four issues to the ICA: (1) the circuit court should have denied MPSJ #1; (2) the court should have let Schmidt testify to when his claims accrued; (3) the court should have determined when Schmidt knew he had a claim against Dubin; and (4) on remand, the court should determine when Schmidt's claims accrued. The ICA vacated the judgment “with respect to the Circuit Court's granting of summary judgment on Schmidt's breach of contract claim(s) against Dubin on the grounds that they were time-barred” (appellate issues 1, 3, and 4). It also ruled that Schmidt waived a legal malpractice claim against Dubin and appellate issue (2), his “I couldn't testify” point. So, when the SDO “affirmed in all other respects” it meant it affirmed on appellate issue 2 and the malpractice claim. The other issues it actually decided.

In this context, a circuit court judge would understand that the ICA's “affirmed in all other respects” phrase referred to these ancillary issues. Not to the attorney fees and costs.

But what about Yoshikawa? True, Yoshikawa said, “when a judgment upon which attorneys’ fees and costs were based has been vacated, attorneys’ fees and costs arising out of that judgment should also be vacated.” Ass'n of Owners of Kalele Kai v. Yoshikawa, 149 Hawai‘i 417, 418, 493 P.3d 939, 940 (2021).

But Yoshikawa also addressed what happens next when an appellate court does not vacate attorney fees and costs. It said, “[e]ven if the ICA had not vacated attorneys’ fees and costs related to the vacated summary judgment, on remand, Yoshikawa could have filed a Hawai‘i Rules of Civil Procedure (‘HRCP’) Rule 60(b)(5) (2006) motion to vacate fees and costs awarded pursuant to the improper grant of summary judgment.” Id. at 421-22, 493 P.3d at 943-44. Rule 60(b)(5) provides that a court may rescind a judgment when the judgment is based on an earlier ruling that has been reversed or vacated, or when maintaining the judgment is no longer equitable. Thus, the prevailing party can speak up for itself on remand, even if the appellate court didn't speak on the issue.

Yoshikawa’s procedural history also differs from this case. That case's ICA opinion explicitly ruled that attorney fees were “not subject to litigation on remand.” Id. at 420, 493 P.3d at 942. Here, the ICA's SDO and judgment on appeal didn't mention attorney fees and costs. And, the ICA rejected Schmidt's reconsideration motion on attorney fees without giving a reason. In Yoshikawa, this court had to step in to correct the ICA's error. Here, I believe nothing prevents the circuit court from vacating the attorney fee and cost award on remand.

Because the ICA denied Schmidt's fee recon motion, the majority thinks that the ICA precluded the circuit court from re-examining fees. Not so. Schmidt's recon informed the ICA that its decision vacating Dubin's victory also impliedly vacates the fee award based on Dubin's prevailing party status. The majority seems to believe that the ICA overlooked this argument and affirmed an incorrect fee award. Rather, I trust the ICA understood Schmidt's simple argument, but rejected the recon because it already understood “affirmed in all other respects” to mean the other issues it decided, not including the fee award.

A circuit court judge gets it. The ICA's judgment on appeal remanded “for further proceedings consistent with” the SDO. This instruction requires the circuit court to reconsider its attorney fee award. In a contract case (like this one), the prevailing party may win attorney fees. HRS § 607-14. A prevailing party may also recoup its costs, per HRCP Rule 54(d)(1).

If an appellate court rules that a formerly-prevailing party no longer prevails, then that party doesn't get attorney fees and costs under these provisions. If a lower court, on remand, lets a now non-prevailing party recover fees and costs, it defies the appellate court's “true intent and meaning.” HELCO II, 149 Hawai‘i at 241, 487 P.3d at 710. That court acts inconsistently with the appellate court's mandate.

Here, the only outcome “consistent with” the ICA's holding vacating summary judgment is to also vacate the award of attorney fees and costs predicated on that judgment. To do otherwise would ignore the opinion. See id. Further proceedings “consistent with” Dubin losing summary judgment mean that Schmidt doesn't have to pay attorney fees.

For sure, a lower court must “comply strictly” with an appellate court's mandate. Chun, 106 Hawai‘i at 439, 106 P.3d at 362. It must comply with a mandate's meaning, not with an overly literal reading of its language. HELCO II, 149 Hawai‘i at 241, 487 P.3d at 710.

Thus, there's no need to require every appellate decision to explicitly vacate attorney fees and costs for a no-longer-prevailing party. This court trusts lower courts to understand the meaning and logical operation of an opinion.

Because the circuit court will put on its thinking cap and figure out the remand instruction, I would simply affirm the ICA's summary disposition order.

FOOTNOTES

1.   The Honorable Karl K. Sakamoto presided from March 17, 2015, until the case was reassigned on January 5, 2017 to the Honorable Bert I. Ayabe.

2.   MPSJ Order #2 was not based on statute of limitations grounds.

3.   On remand, although we vacate the Fees/Costs Order, the Circuit Court may consider among other things, its costs award based on its MPSJ Order #2.

4.   The denial of the reconsideration motion undercuts the Dissent's suggestion that the Circuit Court would feel free to vacate the award of attorneys’ fees and costs. On remand, Dubin would undoubtedly argue that the ICA considered and precluded that very course of action when it denied the reconsideration motion. The ICA's rulings as a whole, including its denial of the reconsideration motion, clearly indicate it affirmed the fees and costs award.

OPINION OF THE COURT BY GINOZA, J.