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IN THE SUPREME COURT OF THE STATE OF HAWAI#I

---o0o--_________________________________________________________________ JAMES FUJIMOTO, VIRGINIO LISTA, DUANE OWAN, MITCHELL OWAN, MICHAEL MCDONLAD, JAMES TAKAMIYA, and GARY HASHIMOTO, Plaintiffs/Counterclaim Defendants-Appellants and Appellees, vs. GORDON AU, Defendant/Cross-Claim Defendant/Cross-Claim Plaintiff/Counterclaimant Appellee, BRUCE SUTHERLAND, NANCY SUTHERLAND, LARRY SKY, BON JA SKY, Defendants/Cross-Claim Plaintiffs/Cross-Claim Defendants-Appellees, RICHARD JORGENSEN, Defendant/Cross-Claim Defendant-Appellee and Cross-Appellant, MICKEY HEWITT, B. J. KIM, Defendants/Cross-Claim Defendants-Appellees, WILLIAM G. WEIMER, SANDRA WEIMER, ROSS KAAA, KAILUA PARTNERS, Defendants/Cross-Claim Defendants-Appellees, TOM PESCE, KAILUA ESTATES PARTNERS, Defendants/ Cross-Claim Defendants, JOHN DOES 1-10, JANE DOES 1-10, DOE PARTNERSHIPS 1-10, DOE CORPORATIONS 1-10, DOE ENTITIES 1-10, and DOE GOVERNMENTAL UNITS 1-10, Defendants. _________________________________________________________________ NO. 22406

APPEAL FROM THE SECOND CIRCUIT COURT (CIV. NO. 96-0462(3)) FEBRUARY 22, 2001 LEVINSON, ACTING C.J., NAKAYAMA, RAMIL, JJ., and CIRCUIT COURT JUDGE MARKS, IN PLACE OF MOON, C.J., RECUSED, and CIRCUIT COURT JUDGE KOCHI, ASSIGNED BY REASON OF VACANCY

OPINION OF THE COURT BY LEVINSON, J. The plaintiffs/counterclaim defendants-appellants and appellees James Fujimoto, Virginio Lista, Duane Owan, Mitchell Owan, Michael McDonald, James Takamiya, and Gary Hashimoto (collectively, "the plaintiffs") appeal from: (1) the judgment,

filed on April 19, 1999, in favor of the defendant/ cross-claim defendant/cross-claim plaintiff/counterclaimant-appellee Gordon Au and against the plaintiffs on all claims asserted in the plaintiffs' complaint, pursuant to summary judgment orders, and awarding Au $42,515.10 in attorneys' fees and costs; (2) the judgment, filed on April 19, 1999, in favor of the defendant/cross-claim defendant-appellee Mickey Hewitt and against the plaintiffs on all claims asserted in the plaintiffs' complaint, pursuant to summary judgment orders, and awarding Hewitt $11,463.27 in attorneys' fees and costs; and (3) the "judgment," filed on April 20, 1999, in favor of the defendant/cross-claim defendant-appellee and appellant Richard Jorgensen and against the plaintiffs, awarding Jorgensen $34,310.05 in attorneys' fees and costs. The plaintiffs'

counsel, Joy Yanagida, appeals (1) the order, filed on February 24, 1999, awarding attorneys' fees and costs to Au in the sum of $3,698.30 and to Jorgensen in the sum of $7,591.48, all to be paid personally by Yanagida and (2) the final judgment, filed on April 20, 1999, in favor of Jorgensen and against Yanagida, awarding Jorgensen $7,591.48 in attorneys' fees and costs. Jorgensen cross-appeals the "judgment," filed on April 20, 1999, in favor of Jorgensen and against the plaintiffs, awarding Jorgensen $34,310.05 in attorneys' fees and costs. On appeal, the plaintiffs argue that the circuit court erred in: (1) dismissing the plaintiffs' derivative claims

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pursuant to Hawai#i Rules of Civil Procedure (HRCP) Rule 23.1 (1996);1 (2) sanctioning the plaintiffs, pursuant to HRCP Rule 11 (1996),2 for HRCP Rule 23.1 violations in filing their derivative claims; (3) granting summary judgment in favor of Jorgensen and

HRCP Rule 23.1 (1996), entitled "Derivative Actions by Shareholders," provided: In a derivative action brought by one or more shareholders or members to enforce a right of a corporation or of an unincorporated association, the corporation or association having failed to enforce a right which may properly be asserted by it, the complaint shall be verified and shall allege that the plaintiff was a shareholder or member at the time of the transaction of which he complains or that his share or membership thereafter devolved on him by operation of law. The complaint shall also allege with particularity the efforts made by the plaintiff to obtain the action he desires from the directors or comparable authority and from the shareholders or members, and the reasons for his failure to obtain the action or for not making the effort. The derivative action may not be maintained if it appears that the plaintiff does not fairly and adequately represent the interests of the shareholders or members similarly situated in enforcing the right of the corporation or association. The action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to shareholders or members in such manner as the court directs.
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HRCP Rule 11 (1996) provided in relevant part: Every pleading, motion, and other paper of a party represented by an attorney shall be signed by at least one attorney of record in his individual name, whose address shall be stated. . . . The signature of an attorney or party constitutes a certificate by him that he has read the pleading, motion, or other paper; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. . . . If a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee.

HRCP Rule 11 was substantially revised in 1999, see infra note 21.

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Au with respect to all of Fujimoto's claims on the grounds of lack of standing and denying Fujimoto an opportunity to obtain ratification, joinder, or substitution of the proper party pursuant to HRCP Rule 17(a) (2000);3 (4) granting Jorgensen's and Au's motions for summary judgment with respect to all of the plaintiff's claims (a) without considering the testimony of the plaintiffs' experts, (b) by relying on the representations of Au's counsel, and (c) by relying on depositions during which the plaintiffs were not allowed to cross-examine the deponents; (5) concluding that Au and Jorgensen were entitled to summary judgment as a matter of law; (6) awarding attorneys' fees jointly and severally against the plaintiffs without statutory authority; and (7) awarding costs jointly and severally against the plaintiffs without statutory authority. Yanagida, in turn, argues on appeal that the circuit court erred in: (1) sanctioning her (a) without affording her an

opportunity to be heard, (b) even though she did not violate any order of the court, and sanctioning her on the basis of HRCP Rule 11, see supra note 2, when no violation of the pleading rules was involved; and (2) requiring her to pay an unreasonable sum as a sanction.

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HRCP Rule 17(a) provides: (a) Real Party in Interest. Every action shall be prosecuted in the name of the real party in interest. An executor, administrator, guardian, bailee, trustee of an express trust, a party with whom or in whose name a contract has been made for the benefit of another, or a party authorized by statute may sue in his own name without joining with him the party for whose benefit the action is brought. No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest; and such ratification, joinder, or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest.

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Jorgensen argues on appeal that the circuit court erred in: (1) limiting the amount of costs recoverable by Jorgensen,

pursuant to Hawai#i Revised Statutes (HRS)

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