Hawaii Supreme Court: Arbitration Denial Affirmed

NO. CAAP-24-0000158IN THE INTERMEDIATE COURT OF APPEALSOF THE STATE OF HAWAI#IHAWAII HORIZON PROPERTIES LLC, Plaintiff-Appellee, v.KD ACQUISITION, LLLP, Defendant-AppellantAPPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT(CASE NO. 3CCV-23-0000297)SUMMARY DISPOSITION ORDER(By: Hiraoka, Presiding Judge, McCullen and Guidry, JJ.)KD Acquisition, LLLP appeals from the Order Denying Defendant KD Acquisition, LLLP'S Motion to Compel Arbitrationentered by the Circuit Court of the Third Circuit on March 18,2024. We affirm the Order because the arbitration provision atissue, read as a whole and construed to not render any word,phrase, or term ineffective or meaningless, gave Hawaii Horizon Properties LLC the option to submit its claim to arbitration. Itdid not require Horizon to arbitrate.Horizon owns property in the Kaupulehu Lot 4-A plannedcommunity development on Hawai#i Island. KD is the developer andThe Honorable Robert D.S. Kim presided.Electronically FiledIntermediate Court of AppealsCAAP-24-000015817-MAR-202608:12 AMDkt. 67 SO

controls Kaupulehu's Design Review Committee. Horizon sued KDafter the Design Review Committee denied approval of Horizon'snew home design. The complaint alleged breach of duty of goodfaith and fair dealing; selective enforcement of governingdocuments; unfair and deceptive acts and practices; unfairmethods of competition; and tortious interference withprospective economic interest.KD moved to compel arbitration under Kaupulehu'sDeclaration of Covenants, Conditions and Restrictions. The Circuit Court denied the motion. This appeal followed. We havejurisdiction under Hawaii Revised Statutes § 658A-28(a)(1)(2016)."A motion to compel arbitration is reviewed de novo andbased on the same standard that applies to a summary judgmentruling." Frederick A. Nitta, M.D., Inc. v. Hawaii Med. Serv.Ass'n, 156 Hawai#i 457, 470, 575 P.3d 547, 560 (2025). "[W]henpresented with a motion to compel arbitration, the court islimited to answering two questions: (1) whether an arbitrationagreement exists between the parties; and (2) if so, whether thesubject matter of the dispute is arbitrable under such agreement. Id. at 472, 575 P.3d at 562.There is no dispute that the Declaration's Article XVI,titled Dispute Resolution and Limitation on Litigation, containsan arbitration agreement. The construction of, and legal effectgiven to, an arbitration agreement is a question of law reviewedde novo. Yamamoto v. Chee, 146 Hawai#i 527, 533, 463 P.3d 1184, 1190 (2020). An arbitration agreement is interpreted like acontract. County of Hawaii v. UNIDEV, LLC, 129 Hawai#i 378, 395,301 P.3d 588, 605 (2013). We "construe the language in acontract so as not to render any words, phrases, or termsineffective or meaningless[.]" Stanford Carr Dev. Corp. v. Unity

House, Inc., 111 Hawai#i 286, 297, 141 P.3d 459, 470 (2006).Article XVI of the Declaration applies to "any claim,grievance, or dispute arising out of or relating to . . . thedesign or construction of Improvements within the Community,other than matters of aesthetic judgment under Article V ["Construction and Design Standards"], which shall not be subjectto review[.]" The claims alleged in Horizon's complaint aresubject to Article XVI.Under Article XVI, Horizon must first give writtennotice to KD of its claim. Horizon and KD then "shall make every reasonable effortto meet in person and confer for the purpose of resolving theClaim by good faith negotiation."If the claim is not resolved through negotiation,Horizon "shall . . . submit the Claim to mediation. . . . If[Horizon] does not submit the Claim to mediation . . . [Horizon]shall be deemed to have waived the Claim, and [KD] shall berelieved of any and all liability to Horizon on account of such Claim."Article XVI, Section 16.2(e) then provides:Any parties that have failed to reach the settlement of aClaim through negotiation and mediation as provided by thisArticle may submit the Claim to arbitration. The party, orparties, that desire to submit a Claim to arbitration shallpromptly so notify the other party in writing. . . . Anyperson who is injured by reason of the fact that a dispute,subject to the terms of this arbitration provision, isresolved other than by arbitration, may recover as damagesthe cost and expense incurred by reason of the fact that thedispute was not submitted to arbitration for resolution. Any arbitration proceedings under this Section will be submitted to arbitration in Honolulu, Hawaii.(Emphasis added.)Section 16.2(e) gave Horizon the option to submit itsclaim to arbitration, in Honolulu, if it so desired. Horizon

chose to sue in circuit court in Kona instead. Under Section16.2(e), if KD is injured because Horizon chose litigation overarbitration, it may recover as damages from Horizon the cost andexpense incurred because the dispute was not submitted toarbitration. The penultimate sentence in Section 16.2(e) wouldbe rendered meaningless if arbitration was required, becausethere could be no instance where "a dispute, subject to the termsof this arbitration provision, is resolved other than byarbitration[.]"The March 18, 2024 Order Denying Defendant KD Acquisition, LLLP'S Motion to Compel Arbitration is affirmed. DATED: Honolulu, Hawai#i, March 17, 2026.On the briefs:/s/ Keith K. HiraokaMaile Osika, Presiding JudgeKristin Holland,for Defendant-Appellant /s/ Sonja M.P. McCullenKD Acquisition, LLLP. Associate JudgeJoachim P. Cox, /s/ Kimberly T. GuidryRandall C. Whattoff, Associate Judgefor Plaintiff-AppelleeHawaii Horizon PropertiesLLC.