Oral Argument Before the Hawaii Supreme Court

No. SCWC-12-0000819, Thursday, April 3, 2014, 8:45 a.m.

KRISHNA NARAYAN; SHERRIE NARAYAN; VIRENDRA NATH; NANCY MAKOWSKI; KEITH MACDONALD, as Co-Trustee for the DKM Trust Dated October 7, 2011; SIMON YOO; SUMIYO SAKAGUCHI; SUSAN RENTON, as Trustee for the Renton Family Trust Dated 12/3/09; STEPHEN XIANG PANG; FAYE WU LIU; MASSY MEHDIPOUR, as Trustee for Massy Mehdipour Trust Dated June 21, 2006, G. NICHOLAS SMITH; TRISTINE SMITH; RITZ 1303 RE, LLC, a Colorado Limited Liability Company; and BRADLEY CHAFFEE, as Trustee of the Charles V. Chaffee BRC Stock Trust Dated 12/1/99 and the Clifford W. Chaffee BRC Stock Trust dated 1/4/98, Petitioners/Plaintiffs-Appellees, vs. THE RITZ-CARLTON DEVELOPMENT COMPANY, INC.; THE RITZ-CARLTON MANAGEMENT COMPANY, LLC; JOHN ALBERT; EDGAR GUM, Respondents/Defendants-Appellants, and MARRIOTT INTERNATIONAL INC.; MAUI LAND & PINEAPPLE CO., INC.; EXCLUSIVE RESORTS, LLC; KAPALUA BAY LLC; ASSOCIATION OF APARTMENT OWNERS OF KAPALUA BAY CONDOMINIUM; CAROLINE PETERS BELSOM; CATHY ROSS; ROBERT PARSONS; RYAN CHURCHILL; THE RITZ-CARLTON HOTEL COMPANY, LLC; MARRIOTT VACATIONS WORLDWIDE, CORPORATION; MARRIOTT OWNERSHIP RESORTS, INC.; MARRIOTT TWO FLAGS, LP; MH KAPALUA VENTURE LLC; MLP KB PARTNER LLC; KAPALUA BAY HOLDINGS, LLC; ER KAPALUA INVESTORS FUND, LLC; ER KAPALUA INVESTORS FUND HOLDINGS, LLC; EXCLUSIVE RESORTS DEVELOPMENT COMPANY, LLC; and EXCLUSIVE RESORTS CLUB I HOLDINGS, LLC, Respondents/Defendants.

The above-captioned case was set for argument on the merits at:
Supreme Court Courtroom
Ali`iolani Hale, 2nd Floor
417 South King Street
Honolulu, HI 96813

Attorneys for Petitioners/Plaintiffs-Appellees:

Terrence J. O’Toole, Judith Ann Pavey, and Andrew J. Lautenbach of Starn O’Toole Marcus & Fisher

Attorneys for Respondents/Defendants-Appellants:

Bert T. Kobayashi, Jr., Lex R. Smith, Joseph A. Stewart, and Maria Y. Wang of Kobayashi Sugita & Goda

NOTE: Certificate of Recusal, by Associate Justice Simeon R. Acoba, Jr., filed 12/30/13.

NOTE: Order assigning Circuit Court Judge Karen T. Nakasone in place of Acoba, J., recused, filed 01/13/14.

NOTE: Order accepting Application for Writ of Certiorari, filed 01/30/14.

COURT: MER, CJ; PAN, SSM, & RWP, JJ; Circuit Court Judge Nakasone, in place of Acoba, J., recused.

[ Listen to the entire audio recording in mp3 format ]

Brief Description:

Petitioner/Plaintiff-Appellee Krishna Narayan, along with several other condominium owners (collectively the Homeowners), timely applied for a writ of certiorari from the Intermediate Court of Appeals’s (ICA) October 28, 2013 Judgment on Appeal filed pursuant to its August 23, 2013 Memorandum Opinion (opinion). The opinion vacated the Circuit Court of the Second Circuit’s (circuit court) order denying the Ritz-Carlton Development Company, Inc., the Ritz-Carlton Management Company, L.L.C., John Albert, and Edgar Gum’s motion to compel arbitration.

This case arises from the financial breakdown of a hotel condominium project whereby the developers of the project allegedly stopped providing the liquidity required to keep the project operational. Individual condominium owners joined together and sued in the circuit court. On application for writ of certiorari, the Homeowners request that we reverse the ICA’s decision to grant the Defendants’ motion to compel arbitration, which was initially denied by the circuit court. The Homeowners’ application for writ of certiorari raises the following six questions:

A. Did the ICA gravely err in determining that a developer’s mere placement of an arbitration clause in a Chapter 514A condominium declaration creates a mutually-assented to arbitration agreement, enforceable by parties that are neither privy to nor third-party beneficiaries of the declaration?

B. Did the ICA gravely err in holding that provisions for judicial enforcement contained in condominium Bylaws and purchase agreements were extinguished by the Chapter 514A Declaration’s arbitration clause, thereby resolving ambiguity as to the existence of an agreement to arbitrate in favor of the drafter, and against Homeowners?

C. Did the ICA gravely err in interpreting the reach of the Chapter 514A Declaration’s arbitration clause extraordinarily broadly, and resolving ambiguity as to scope in favor of the drafter, and against Homeowners?

D. Did the ICA gravely err in interpreting the phrase calling for arbitration of disputes “arising out of or related to the Declaration” to compel arbitration of all disputes between all entities whose relationship derived, however remotely, from the Project’s creation?

E. Did the ICA gravely err in holding the Chapter 514A Declaration, offered to Homeowners on a take-it-or-leave-it basis, is not a contract of adhesion so long as the Homeowners could have elected not to purchase their condominium units?

F. Did the ICA gravely err in failing to even consider whether all or some of the Chapter 514A Declaration’s arbitration clause is substantively unconscionable?

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