Combs v. CASE BIGELOW & LOMBARDI
Annotate this CaseN()'I` F(`)R PU.I*ZLI(§TA'I"I()NV IN WP§S'|"S I'IA\\/}\l'l !UC}'()R"I`S AN'I) l'.¢\(f.ll*"l(.` RIYP()R'TI`G`R w §§ NG. 28773 IN THE INTERMEDIATE COURT OF APPEALS OF THB STATE OF HAWAIY[ Civi1 No. O5»l-O166 " w GUY ST. CLAIR COMBS; MARION WILCOX COMBS; THE S@@TT "J MICHAEL ST. CLAIR COMBS IRREVOCABLE TRUST; THE GUY ST. CLAIR COMBS, 111 IRREVOCABLE TRUST; THE MARTHA COMBS TRUST; CATHERINE ANNE MOORE~AIRTH; CHARLES SLOGGETT; CARLA JORDAN; KRISTEN J. LA DOW; ROBERT B. JORDAN; MICHAEL P. JQRDAN; JONATHAN W. FISHER; ANTHONY H. FISHER; GALEN M. FISHER; TIMOTHY W. FISHER; RICHARD SLOGGETT, JR.; GERALD W. FISHER; THE CATHERINE ANNE MOORE~AIRTH REVGCABLE TRUST; THOMAS JOHNSTON; ANNE SLOGGETT HAMILTON; ARTHUR W. SLOGGETT; SUSAN CHAMBERLAIN; ERIK PETERSON; PATRICK FISHER; and SHERRI SLOGGETT-SHANKS, PlaintiffS-AppellantS/Cr0SS AppelleeS, v. CASE BIGELOW & LOMBARDI, a law c0rporati0n; DANIEL CASE; JAMES CRIBLEY; DENNIS LOMBARDI; TOD TANAKA, Defendants-AppelleeS/Cr0SS-AppellantS, and STEPHEN M. CASE; ALPS INVESTMENT LLC; ALPS ACQUISITION SUB, INC.; THE STEPHEN M. CASE REVOCABLE TRUST; KA PUE HANA, LLC; THE GROVE FARM COMPANY, INC.; HUGH M. KLEBAHN; DONN A CARSWELL; PAMELA W. DOHRMAN; ROBERT D. MULLINS; WILLIAM D. PRATT; RANDOLPH MOORE; JOHN DOES 1-lO; JANE DOES 1-10; DOE PARTNERSHIPS 1-lO; DOE CORPORATIONS 1-lO; DOE LIMITED LIABILITY COMPANIES 1-lO; ROE "NON-PROFIT" CORPORATIONS l~lO; and ROE GOVERNMENTAL ENTITIES 1-lO, DefendantS~AppelleeS and Civil N0. O6~l-Ol7O MICHAEL FISHER; SCOTT G. FISHER; PATRICK FISHER; BARBARA PERRY FISHER, INDIVIDUALLY AND AS TRUSTEE ON BEHALF OF THE CHARLES FISHER TRUST, PlaintiffS, v. STEPHEN M. CASE; ALPS INVESTMENT LLC; THE STEPHEN M. CASE REVOCABLE TRUST; KA MFE HANA, LLC; THE GROVE FARM COMPANY INC.; CASE BIGELOW & LOMBARDI, a law c0rpOrati0n; DANIEL CASE; JAMES CRIBLEY; DENNIS LOMBARDI; TOD TANAKA; JOHN DOES 1-lO; JANE DOES 1-lO; DOE PARTNERSHIPS 1-lO; DOE CORPORATIONS 1-10; DOE LIMITED LIABILITY COMPANIES 1-lO; DOE "NON-PROFIT" CORPORATIONS 1~lO; and DOE GOVERNMENTAL ENTITIES 1-lO, DefendantS I APPEAL FROM THE CIRCUIT COURT OF THE FIFTH CIRCUIT O'l` F()R PU Bl,l(T,zX'l`]()N IN' WES"I"S I"I.»\\\'A.l'l' REPOR'I`S ANI) I'¢XC.IF]C REIP()RTE'IR MEMORANDUM OPINl0N {Ey: Foley, ?reaiding J.; and Circuit JudgeS Del Rosario and Kim, in place of Nakamura, C.J., and Fujise and Leonard, JJ., all recuaed) PlaintiffS-AppellantS/CroSS~AppelleeS Guy St. Clair CombS; Marion wilcox Comhe; The Scott Michael St. Clair CombS irrevocable Truet; The Guy St. Clair Combe 111 Irrevocable TruSt; The Martha CombS TruSt; Catherine Anne Moore-Airth; CharleS Sloggett; Carla Jordan; KriSten J. La DoW; Robert B. Jordan; Michael P. Jordan; Jonathan W. FiSher; Anthony H. FiSher; Galen M. FiSher, Timothy W. Fieher, Richard Sloggett, Jr.; Gerald W. FiSher; The Catherine Ann Moore~Airth Revocable TruSt; ThomaS Johnston; Anne Sloggett Hamilton; Arthur W. Sloqgett; SuSan Chamberlain; Erik PeterSon; Patrick FiSher; and Sherri Sloggett~ Shanke (collectively, AppellantS) appeal from the "Stipulation and Order for Entry of Final Judgment PurSuant to Rule 54(b) of the Hawaii Rulee of Civil Procedure" (Final Judgment) filed on September 1l, 2007 in the Circuit Court of the Fifth Circuit (circuit court).3 The Final Judgment incorporated by reference the circuit court'S February 23, 2007 "Order Granting (l) Motion to DiSmiSS by Defendante CaSe Bigelow & Lombardi and JameS Cribley PurSuant to [Hawafi RuleS of Civil Procedure (HRCP) RuleS] 12(b)(6) and 9(b), or in the Alternative, Motion for a Stay as to these DefendantS; (2) DefendantS DenniS Lombardi and Tod Tanaka'S Motion to Dismiss PurSuant to HRCP [Rulee] l2(b)(6) and 9(b); and (3) Defendant Daniel H. CaSe'S Motion to DiSmiSs PurSuant to HRCP [RuleS] l2(b)(6) and 9(b), or in the Alternative Motion for a Stay as to Daniel H. CaSe, and Adopting Defendants CaSe Bigelow & Lombardi and JameS Cribley'S Memorandum in Support of Their Motion to DiSmiSS Filed on or About October 3, 2006" (Order Granting MotionS to DiSmieS). 1 The Honorable Kathleen N. A. Watanabe preSided. 2 N()T FOR PIJBI,,IC,`A'I`[ON' IN WES'!"S IlAV\"z-\fl°l R`ICPOR'I`S AN il) P¢AC`]'F`IC RI€P(`)'IF{"|`I'§`,R In accordance with the Order Granting Motions to Eismiss, the circuit court entered final judgment in favor of Defendants~Appellees/Cross~Appellants Case Bigelow & Lombardi {CB&L), James Cribley (Cribley), Dennis Lombardi (Lombardi), Tod Tanaka (Tanaka), (collectively, Attorney Appellees) and Daniel Case {Case) on Counts I (Legal Malpractice), ll (Negligence/Gross Negligence), III §Breach of Fiduciary Duty), VIll (Fraud), lX (Constructive Fraud), X (Negligent Misrepresentation), XI {lnnocent Misrepresentation},* XII (Conspiracy to Defraud), XIII {Securities Fraud ~- Title 26 H.R.S. § 485~25 (Securities Fraud)), XIV CInjurious Falsehood),3 XVl (Participation in Breach of Fiduciary Duty}, XVIII {Unjust Enrichment), and XIX (Punitive Damages) of Appellants' Second Amended Complaint, filed August 30, 2006. On appeal, Appellants contend the circuit court erred by (l) ruling that Appellants have no standing to sue Attorney Appellees and Case, (2) dismissing all claims against Attorney Appellees and Case despite material issues of fact regarding whether Attorney Appellees breached duties owed to Appellants, and (3) awarding costs to Case and the former Board of Directors" of The Grove Farm Company, Inc. (Grove Farm) in Tsukamoto et al. v. Grove Farm CompanV, Inc., Hawafi Supreme Court Nos. 28626 & 28722 (consolidated). 2 The circuit court dismissed this count with prejudice on June 2l, 2006, prior to the filing of the Second Amended Complaint. On appeal, Appellants do not dispute the dismissal of the count. " »The circuit court dismissed this count with prejudice on June 2l, 2006, prior to the filing of the Second Amended Complaint. On appeal, Appellants do not dispute the dismissal of the count. ° Appellants and the plaintiffs in Tsukamoto sued the following former members of the Board of Directors of Grcve Farm: Hugh W. Klebahn (Klebahn) (Chairman of the Board and Chief Executive Officer), Donn A. Carswell, Pamela W. Dohrman, Robert D. Mullins, william D. Pratt, and Randolph Moore {collectively, Former Directors). NO'I` F(`)R l"l,`liBLI(`.`i.='\'l`i(.i)N IN WlljS'l"S I»I.»X\"V.»Xl"l RIZ§MP()IR"I`S AND PACII"V!C REP()'RTER Gn cross~appeal, A"torney Appellees and Case argue that the circuit court erred by denying Cribley, Lombardi, Tanaka, and CB&L's Motion for Attorneys' Fees (Attorney Appellees' Motion for Attorneys' Fees) and Case's Motion for Attorneys' Fees. I. BACKGROUND This case concerns the sale of Appellants' shares in Grove Farm to Case's son, Stephen Case (Stephen) (the transaction). Case, an attorney at CB&L, represented Stephen in the sale. Cribley, Lombardi, and Tanaka, also attorneys at CB&L, represented Grove Farm. Neither Attorney Appellees nor Case represented Appellants directly. In their Second Amended Complaint, Appellants argued that by representing both the Grove Farm shareholders (alternatively, "Grove Farm Shareholders" and "the Shareholders"), including Appellants, and Stephen in the transaction, Attorney Appellees and Case had negligently breached their fiduciary duties to Appellants. Appellants also argued that Attorney Appellees and Case had fraudulently induced Appellants to sell their shares in Grove Farm to Stephen for less than fair market value by materially misrepresenting Grove Farm's financial condition and future prospects and Attorney Appellees and Case's relationship to the transaction to induce Appellants to accept Stephen's offer and, thereby, enrich themselves. On October 2, 2006, Attorney Appellees and Case filed the following motions to dismiss (collectively, Motions to 'Dismiss): (l) CB&L and Cribley's "Motion to Dismiss Pursuant to HRCP [Rules] l2(b)(6) and 9(b), or in the Alternative, Motion for a Stay as to These Defendants" (CB&L/Cribley's Motion to Dismiss); (2) Lombardi and Tanaka's "Motion to Dismiss Pursuant to HRC? [Rules] l2(b)(6) and 9(b)" (Lombardi/Tanaka's Motion to Dismiss) (the above motion and this motion collectively, Attorney Appellees' Motions to Dismiss); and N(.`)'I" l*-`(f)'[{ I'I_,`FIS.I.,!(,`.A\"I`I()N IN W}ZS'I"S I~Ii»\VV/\_l"l REP()I{'.I`S AND PACI]*`]C RI*I~'P(,)R'I`I*I!§{ {3) Case's "Motion to Dismiss Pursuant to HRCP {Rules} l2{b}(6) and §9>(h}, or in the Alternative Motion for a Stay as to Daniel H. Case and adopting Defendants Case Bigelow & Lombardi and James Cribley's Memorandum in Support of Their Motion to Dismiss Filed on or About 0ctober 3, 3006" (Case's Motion to Dismiss). fn the Motions to Dismiss, Attorney Appellees5 and Case argued6 the following: (l) Appellants lacked standing to assert their claims because they failed to show that Attorney Appellees or Case owed Appellants a duty; (2) Appellants' claims grounded in fraud ~~ Counts VllI (Fraud), IX (Constructive Fraud), X (Negligent Misrepresentation), XII (Conspiracy to Defraud), and XIII (Securities Fraud) -- should be dismissed because Appellants failed to make specific allegations, as required under HRCP Rule 9(b); and (3) Appellants' fraud and misrepresentation claims should fail because Attorney Appellees made no misrepresentation to Appellants and Appellants could not establish reliance on any such misrepresentations. 0n November 3, 2006, Appellants filed "Plaintiffs' Consolidated Opposition to (l) the Attorney Defendants' Motion to Dismiss or in the Alternative for a Stay as to Certain Defendants; (2) [Lombardi and Tanaka's] Motion to Dismiss; and {3) All Substantive Joinders to these Motions" (Opposition to the Motions to Dismiss). Appellants argued that Attorney Appellees and Case owed fiduciary, statutory and common law duties to Grove Farm and its constituent [S}hareholders as counsel to {Grove Farm], counsel to the directors and company Eoard, [and] counsel to Special Committee. At base, they helped a third~ 5 Lombardi/Tanaka's Motion to Dismiss provided that Lombardi and Tanaka joined in CB&L/Cribley's Motion to Dismiss. Case's Motion to Dismiss provided that Case "adopt[edl the arguments set forth in {CB&L/Cribley's Motion to Dismiss]." 5 N()'l` l' lt is unlawful for any person who receives any consideration from another person primarily for advising the other person as to the value of securities or their purchase or sale, whether through the issuance of analyses or reports or otherwise: (l) To employ any device, scheme, or artifice to defraud the other person; or (2) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the other person. (Emphasis added.) Because, as we have discussed, Appellants had no attorney~client relationship with Case or Attorney Appellees, neither Case nor attorney Appellees "receive[d] any consideration from" Appellants "for advising" Appellants. HRS § 485~25(b). Therefore, based on the plain language of HRS § 485-25(b), Appellants had no standing to assert a securities-fraud claim against Case or Attorney Appellees. (c) Fraud and Conspiracy to Defraud In Tsukamoto, we held that a fraud claim requires no fiduciary relationship between the party alleging fraud and the party against whom fraud is being alleged. 2009 WL 5ll7005, at *35. Hence, here, Appellants have standing to bring their fraud and conspiracy-to~defraud claims against Case and Attorney Appellees despite the absence of a fiduciary relationship between 15 :`~i()'l" }1`(')1{ Pl_i'l%LF(`UX"I`I(_)N l,§\' WI¥`,S'F'S H.A»\\/'/\I'I RI§`I"()R'I`S AN]) I'A.C_TH"IC, RIE.P()I{"I`I€JfI-l Appellants and Case or attorney Appellees, and the circuit court abused its discretion by dismissing those counts on the basis of Appellants' lack of standing. Nevertheless, the error was harmless because hppellants failed to state a claim upon which 'ef could be granted, pursuant to HRCP Rule l2(b)(6), with regard to those counts. T .¢, n the Second Amended Complaint, Appellants argued, in relevant part, the following: ill On September l5, l999, a letter" signed by Klebahn and reviewed and edited by Cribley was sent to Appellants. The letter misled Grove Farm Shareholders by implying there was no outside capital source available when actually Saxon»Ravenscraig Group (Saxon~Ravenscraig), an eager bona fide outside investor, was willing to act as source for the sort of capital infusion Klebahn said was needed. Cribley was aware of the letter, and 7 The letter stated, in relevant part, the following: The assets of [Grove Farm] are encumbered beyond a prudent level and the funds being generated from down sized [sic] operations are just barely sufficient to cover operating costs including current debt service. An engineering study regarding we Kukui Grove Shopping Center indicates that {Grove Farm] will have to spend approximately $l.5 million over the next two years to repair the Center. Interest by prospective tenants in the Center is minimal. The former JC Penny and Woolworth spaces (approximately 70,0GO square feet) remain vacant. Extensive contacts with prospective national tenants have proved negative. Prospects show interest, visit the property, and then reject any further consideration. ~k'k*k Grove Farm cannot save its way into prosperity; the economy must help. lt will take a large amount of new capital to realize Grove Farm's potential. These funds will have to come either from the sale of assets or from an outside source investor. lt is capital requirement that puts a lid on the value of [Grove Farm] stock today. 'ki
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