421 P.3d 1277
Haw.2018Background
- Plaintiff Jason Kawakami paid a 19% service charge for a 2007 wedding reception at the Kahala Hotel; the hotel retained 15% as a “management share” and recharacterized it as wages rather than distributing 100% to service employees as tip income.
- The hotel’s standard event agreement only stated that prices were subject to a 19% service charge and did not disclose retention of any portion by the hotel.
- Kawakami sued as a class action alleging violations of HRS § 481B-14 (service-charge law) and HRS Chapter 480 (UDAP), and sought damages.
- The circuit court granted Kawakami partial summary judgment on liability (statutory duty to distribute or disclose), and a subsequent damages trial produced a jury award equal to the hotel’s retained “management share” ($269,114.73).
- After the verdict the circuit court granted the hotel’s renewed JMOL, finding no legally cognizable injury; the ICA affirmed. The Hawai‘i Supreme Court granted certiorari, vacated the JMOL and ICA decision, reinstated liability summary judgment and the jury’s damages verdict, and remanded for UDAP remedies (treble damages and fees).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HRS § 481B-14’s distribution/disclosure requirement is an implied term of contracts for food/beverage service charges | Kawakami: statute is incorporated into event contracts as implied terms, creating purchaser expectancy that service charges go entirely to service employees unless clearly disclosed otherwise | Hotel: no contractual breach because retained funds were paid as wages; disclosure form/timing need not be in the written contract | Held: Statutory requirements are implied contract terms; failure to distribute or clearly disclose breaches the contract. |
| Whether plaintiffs suffered legally-cognizable injury and appropriate measure of contract damages | Kawakami: breach injured the class’s expectancy interest; damages equal to the portion retained by hotel (the management share) | Hotel: no economic injury because plaintiffs did not pay more than the contract amount; damages improperly measured | Held: Injury exists as loss of expectation; damages measured by the amount the hotel retained (management share). |
| Whether violation of § 481B-14 supports a UDAP claim and available remedies | Kawakami: violation is deemed a UDAP under HRS § 481B-4; class proved causation and damages and hence is entitled to treble damages and fees under HRS § 480-13(b) | Hotel: argued lack of cognizable injury undermines UDAP recovery | Held: Violation of § 481B-14 is deemed UDAP; injury and damages were proven; case remanded to award treble damages and attorney’s fees. |
| Whether the trial court erred in denying motion in limine to exclude evidence limiting damages to the management share | Kawakami: whole 19% was “illegal” so evidence about the 15% management share was irrelevant and prejudicial | Hotel: entitled to present evidence that economic injury is limited to the 15% retained | Held: Denial of motion in limine was proper; evidence of the 15% management share was relevant to damages and motion in limine could not substitute for untimely summary relief. |
Key Cases Cited
- Kawakami v. Kahala Hotel Inv’rs, LLC, 134 Hawai‘i 352, 341 P.3d 558 (Haw. 2014) (statute requires distribution of service charge to employees or clear disclosure)
- Gurrobat v. HTH Corp., 133 Hawai‘i 1, 323 P.3d 792 (Haw. 2014) (§ 481B–14 requires either 100% distribution to non-management service employees or disclosure of retention)
- Davis v. Four Seasons Hotel Ltd., 122 Hawai‘i 423, 228 P.3d 303 (Haw. 2010) (chapter 480 remedial construction; causation requirement for UDAP claims)
- Zanakis-Pico v. Cutter Dodge, Inc., 98 Hawai‘i 309, 47 P.3d 1222 (Haw. 2002) (benefit-of-the-bargain damages are preconditioned on breach of contract)