Laches Unhinged: Equity Punishes Those Who Slumber

Timothy Irons

The Hawai`i Supreme Court recently held that laches is a defense to any civil action, legal or equitable, and can bar a legal claim for damages, even if brought within the applicable statute of limitations period.[1]  This was the unhappy position in which the Royal Aloha condominium association found itself.  See Ass’n of Apt. Owners of Royal Aloha v. Certified Mgmt., 139 Haw. 229, 386 P.3d 866 (Dec. 2016).

In order to allocate electricity costs, Royal Aloha installed sub-meters to monitor and bill unit owners based on individual usage.  Between 1998 and 2010, Royal Aloha (through its managing agents) under-billed certain commercial unit owners.  In 2012, after realizing the error, Royal Aloha sued its managing agents and the commercial tenants for recovery of hundreds of thousands of dollars.  Even though the under-billing continued to occur less than 6 years prior to Royal Aloha’s suit (the applicable limitations period), the Circuit Court ruled against Royal Aloha on all claims based on the doctrine of laches, which was affirmed by the Hawai`i Supreme Court.

In its unanimous decision, the Hawai`i Supreme Court summarized the doctrine of laches in Hawai’i as a means to “promote claimant diligence, discourage delay and prevent the enforcement of stale claims.”  Two elements must be met: (1) unreasonable delay on the part of the plaintiff in bringing the claim and (2) prejudice to the defendant, for example, loss of evidence due to death of a material witness.  The Court reasoned that courts of law and equity have merged into “one action” and the modern trend is to apply laches to all claims.  Therefore, laches can be used to bar timely legal claims such as Royal Aloha’s breach of contract and damages claims.

It is true that the modern trend is to apply equitable doctrines to actions at law.  There is little authority, however, supporting the specific holding: that laches can bar an action at law for damages filed within the applicable limitations period.  Indeed, the U.S. Supreme Court’s most recent pronouncements on this issue go the other way; albeit in the context of federal patent and copyright infringement law.  See SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, 197 L.Ed. 2d 292, 294, 137 S. Ct. 954 (U.S. Mar. 21, 2017); Petrella v. MGM, 188 L. Ed. 2d 979, 993, 134 S. Ct. 1962, 1973 (U.S. 2014).  The U.S. Supreme Court’s decisions do not preclude the use of the laches doctrine to shape the relief granted but clearly caution against applying laches to bar timely actions at law.

While there is no clear nationwide trend on the application of laches to bar timely legal claims, it is clear that in Hawai`i, equity will punish those who slumber on their rights.  Unless a delay is justified (e.g., negotiating a compromise with the other side), filing a claim diligently is a must lest a stale claim becomes no claim at all.

[1]           Traditionally, laches (an unreasonable delay in bringing a claim) has been used as a defense to an equitable claim where there is no applicable statute of limitations.

_______________________________________________________

Timothy Irons is Of Counsel with the firm.  His practice focuses on land use entitlement proceedings, natural resource law and real estate litigation.