Baclaan, et al v. Benedict, et al
ORDER GRANTING PLAINTIFFS' MOTIONS TO REMAND AND/OR ABSTAIN AND FOR LEAVE TO ADD DEFENDANT re 91 Motion to Remand. Signed by JUDGE LESLIE E. KOBAYASHI on 10/31/2016. -- This Court therefore REMANDS Baclaan , CV 03-00325, Toro, CV 03-00326, and Hopkins, CV 03-00401, pursuant to § 1452(b). This Court ORDERS the Clerk's Office to effectuate the remand on November 21, 2016, unless a motion for reconsideration of this Order is filed by November 17 , 2016. -- CIVIL 03-00325 LEK-KSC; CIVIL 03-00326 LEK-KSC; CIVIL 03-00401 LEK-KSC (eps, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF).
FILED IN THE
UNITED STATES DISTRICT COURT
DISTRICT OF HAWAII
IN THE UNITED STATES DISTRICT COURT
Oct 31, 2016
SUE BEITIA, CLERK
FOR THE DISTRICT OF HAWAII
COMBUSTION ENGINEERING, ET
GEORGE H. TORO and VIVIAN
TORO, ET AL.,
COMBUSTION ENGINEERING, ET
THEODORE K. HOPKINS and RUBY )
COMBUSTION ENGINEERING, ET
LORENZO BACLAAN and NAOMI
CIVIL 03-00325 LEK-KSC
CIVIL 03-00326 LEK-KSC
CIVIL 03-00401 LEK-KSC
ORDER GRANTING PLAINTIFFS’ MOTIONS TO REMAND
AND/OR ABSTAIN AND FOR LEAVE TO ADD DEFENDANT
On July 5, 2016, Plaintiffs Lorenzo Baclaan;
Naomi Baclaan; Eleanor C. Benedict, individually, and as Special
Administrator of the Estate of Francis Benedict, deceased;
Peter M.Y. Kim; and Lida Mae Kim (collectively “the Baclaan
Plaintiffs”) filed their Motion to Remand and/or Abstain and
Motion for Leave to Name New Party Defendant (“Baclaan Motion”).
[CV 03-00325, dkt. no. 91.]
Plaintiffs George H. Toro;
Vivian Toro; Zeke H. Sakurai; Masae Sakurai; Lolita F. Apo,
individually and as Special Administrator of the Estate of
John K. Apo, deceased; and Violet Maii, individually and as
Special Administrator of the Estate of Samuel K. Maii, deceased
(collectively “the Toro Plaintiffs”), and Plaintiffs Theodore K.
Hopkins and Ruby Hopkins, et al. (collectively “the Hopkins
Plaintiffs”) filed similar motions in their respective cases
(“Toro Motion” and “Hopkins Motion,” respectively).
CV 03-00326, dkt. no. 83; Hopkins, CV 03-00401, dkt. no. 65.1]
Defendant Arter & Hadden LLP (“A&H”) filed a joint
memorandum in opposition to all three motions (collectively
“Motions”) on August 29, 2016.
[Dkt. no. 98.]
Plaintiffs, the Toro Plaintiffs, and the Hopkins Plaintiffs (all
collectively “Plaintiffs”) filed a joint reply on September 5,
[Dkt. no. 102.]
September 19, 2016.
These matters came on for hearing on
After careful consideration of the Motions,
supporting and opposing memoranda, the arguments of counsel, and
the relevant legal authority, the Motions are HEREBY GRANTED and
Unless otherwise specified, all further docket citations
refer to documents filed in Baclaan, CV 03-00325.
the cases are HEREBY REMANDED to the state court, for the reasons
set forth below.
The Baclaan Plaintiffs and the Toro Plaintiffs filed
their respective complaints (“Baclaan Complaint” and “Toro
Complaint”) in state court on December 10, 2002.
See Mem. in
Opp., Decl. of April A. Otterberg (“Otterberg Decl.”), Exhs. 1,
The Baclaan Plaintiffs describe their case as “a class action
of asbestos disease personal injury or wrongful death plaintiffs
who entered into settlements with Combustion Engineering, Inc.
(‘CE’) from approximately 1982 to 2000 in the Hawaii Asbestos
[Mem. in Supp. of Baclaan Motion at 3-4.]
Baclaan Plaintiffs allege that they entered into the settlements
in reliance on false answers to interrogatories in the Hawai`i
According to the Baclaan Plaintiffs, the answers
to interrogatories falsely stated that: CE did not sell any
products containing asbestos in Hawai`i; and CE had no knowledge
that its asbestos products were used in Hawai`i.
Plaintiffs assert that they discovered the answers to
interrogatories were false in 2001, and they point out that a
state court judge ordered ten documents de-privileged under the
crime-fraud exception to the attorney-client privilege.
those and other non-privileged documents, the Baclaan Plaintiffs
determined that Defendants The Travelers Insurance Company and
The Travelers Indemnity Company (“Travelers Defendants”) designed
a scheme that their attorneys implemented to withhold information
to induce the plaintiffs to accept nuisance value settlements.
The Travelers Defendants’ attorneys were A&H, as national
counsel, and Char, Hamilton, Campbell & Thom, Attorneys at Law, a
Law Corporation (“Char Hamilton”), as local counsel.
Plaintiffs argue that, because they entered into settlements
based on fraudulent discovery, they can sue those responsible for
that fraud to recover the difference between the settlement
amounts and what the fair value of the settlements would have
been without the fraud.
The Toro Complaint and the Hopkins
Complaint are based on the same allegations.
Baclaan and Toro are class actions, and Hopkins has
[Baclaan Complaint at ¶ 1; Toro Complaint
at ¶ 1; Hopkins Complaint at ¶¶ 1-21.]
Each of the three
complaints alleged seven causes of action.
Relevant to the
instant Motions, the complaints alleged:
FIRST CAUSE OF ACTION:
Plaintiffs are entitled to damages for
depressed settlement values (i.e., the difference
between what they would have settled for had they
not been deceived by the fraudulent discovery
answers of CE and what they did settle for)
against all Defendants since all Defendants joined
this conspiracy and are liable for the actions of
their co-conspirator even if performed before they
joined this conspiracy.
. . . .
FOURTH CAUSE OF ACTION:
Peter C.P. Char is liable for this fraud
since he negligently failed to ascertain the
falsity of CE’s interrogatory answers in the
Hawaii asbestos litigation and allowed CE and the
other conspirator Defendants to use his prestige
as a well-respected member of the Hawaii bar to
promote the false answers of CE to induce deflated
FIFTH CAUSE OF ACTION:
Travelers Indemnity Company and Travelers
Insurance Company and Arter & Hadden are liable to
Plaintiffs for fraud and conspiracy to commit
fraud for creating, implementing and fostering
this scheme to falsely [sic] answers to
interrogatories in Hawaii and throughout the
mainland to deny asbestos sales to Hawaii to
induce low settlement agreements.
E.g., Baclaan Complaint at pgs. 15-16.
The First Amended
Complaint alleges the same claims against A&H, and it alleges the
claims alleged in the original Complaint against Char against
E.g., Baclaan First Amended Complaint at pgs. 20-
The Travelers Defendants removed Baclaan to this
district court based on: diversity jurisdiction, pursuant to 28
U.S.C. § 1332; “related-to” bankruptcy jurisdiction, pursuant to
28 U.S.C. § 1334; and supplemental jurisdiction, pursuant to 28
U.S.C. § 1367.
[Notice of Removal, filed 6/26/03 (dkt. no. 1).]
The Baclaan Plaintiffs filed their First Amended Complaint on
July 7, 2003.2
[Dkt. no. 5.]
On July 10, 2003, the Baclaan
Plaintiffs filed a motion to remand and/or abstain, and for leave
to add a new defendant (“Old Motion”).
[Dkt. no. 6.]
was assigned to United States District Judge Robert E. Jones of
the District of Oregon.
[Order, filed 7/23/03 (dkt. no. 9).]
The same events occurred in Toro.
5, 6, 9.
See CV 03-00326, dkt. nos. 1,
The Complaint in Hopkins (“Hopkins Complaint”) was
filed on December 10, 2002 in state court.
Defendants removed the case to the District of Hawai`i bankruptcy
court on June 26, 2003.3
Because the removal was to the
bankruptcy court, the Travelers Defendants did not include
diversity jurisdiction as one of the bases for removal.
Motion in Hopkins was filed in the bankruptcy court.
On July 25,
2003, the Travelers Defendants filed a motion to withdraw the
reference to the bankruptcy court, and Judge Jones issued a
written order granting the motion on September 15, 2003.
[Hopkins, CV 03-00401, dkt. nos. 1, 8.]
In Baclaan, A&H and Defendant Robert
(“Preston”) filed their answer to the First
September 2, 2003, and an amended answer on
[Dkt. nos. 17, 20.] However, they withdrew
on October 3, 2003. [Dkt. no. 27.]
Amended Complaint on
September 10, 2003.
their amended answer
The Travelers Defendants’ Notice of Removal in Hopkins,
including the Hopkins Complaint, is attached to the Hopkins
Motion as Exhibit B to the Declaration of Counsel. [Hopkins,
CV 03-00401, dkt. no. 65-4.] According to the docket sheet for
the bankruptcy adversary proceeding A.P. No. 03-90031, the
Hopkins Plaintiffs did not file an amended complaint in 2003 like
the Baclaan Plaintiffs and the Toro Plaintiffs did.
The Travelers Defendants opposed the Old Motion in each
See, e.g., Baclaan, CV 03-00325, dkt. no. 13.
Old Motion was pending, A&H filed a notice of bankruptcy.
In November 2003, Judge Jones held a hearing on the Old
[Dkt. no. 37.]
Judge Jones was apparently asked to
defer ruling on the Old Motion because of a purportedly imminent
settlement between Plaintiffs and the Travelers Defendants.
[Mem. in Supp. of Baclaan Motion at 2.]
On February 10, 2006, the Baclaan Plaintiffs filed a
motion seeking leave to enter into a stipulation with the trustee
in A&H’s Chapter 7 bankruptcy proceedings which would allow them
to proceed against A&H’s insurance policy covering punitive
damages and “innocent partner” liability for fraud.
Judge Jones granted the motion and approved the stipulation
on January 16, 2007.
[Dkt. nos. 51, 52.]
Problems with Plaintiffs’ settlements with the
Travelers Defendants arose.
On September 21, 2007, Judge Jones
issued a minute order administratively closing Baclaan, “with the
understanding that if the settlement in the case became viable
again, these cases will be immediately reopened.”
[Dkt. no. 54.]
In 2014, the Second Circuit Court of Appeals ruled on a case
addressing the enforceability of Travelers settlements in various
See In re Johns-Manville, 759 F.3d 206 (2d
In the instant case, the Travelers Defendants
withdrew their opposition to the Old Motion on May 8, 2015.
[Dkt. no. 59.]
On July 8, 2015, the case was reassigned to this Court.
[Dkt. no. 66.]
Subsequently, the parties agreed to mediation,
but it was unsuccessful.
See Minutes, filed 10/26/15 (dkt. no.
71); Minutes, filed 4/22/16 (dkt. no. 76).
On May 6, 2016, this
Court issued an entering order terminating the Old Motion and
giving the Baclaan Plaintiffs leave to file a new motion within
[Dkt. no. 79.]
The instant Motions followed.
The Baclaan Plaintiffs argue that diversity
jurisdiction did not exist at the time of removal because Peter
C.-P. Char (“Char”) – who was a defendant in the original
Complaint – was a Hawai`i resident.
They also argue that Char’s
death after the filing of the Baclaan Complaint did not
extinguish their claims against him.
However, even if their
claims against Char were extinguished, they contend that the
addition of Char Hamilton as a defendant is appropriate, breaking
complete diversity and requiring remand.
The Baclaan Plaintiffs
also argue that “related-to” jurisdiction did not exist at the
time of removal because there was not enough of a connection
between their claims and CE’s bankruptcy proceeding.
even if this Court would be inclined to conclude that there was
related-to jurisdiction, it should decline to exercise
jurisdiction on equitable grounds, pursuant to 28 U.S.C.
Finally, the Baclaan Plaintiffs argue that, because
neither diversity jurisdiction nor related-to jurisdiction
existed, there was no basis for supplemental jurisdiction over
the state law claims.
The Toro Plaintiffs and the Hopkins
Plaintiffs raise the same arguments, except that the Hopkins
Plaintiffs do not raise diversity arguments because diversity
jurisdiction was not one of the bases for removal in Hopkins.
The Hopkins Plaintiffs also seek leave to add Char Hamilton as a
As a general rule, the existence of removal
jurisdiction is determined at the time the removal petition is
filed, irrespective of subsequent events.
See, e.g., Allen v.
F.D.I.C., 710 F.3d 978, 984 (9th Cir. 2013).
This district court
“Removal and subject matter jurisdiction statutes
are ‘strictly construed,’ and a ‘defendant seeking
removal has the burden to establish that removal
is proper and any doubt is resolved against
removability.’” Hawaii ex rel. Louie v. HSBC Bank
Nev., N.A., 761 F.3d 1027, 1034 (9th Cir. 2014)
(quoting Luther v. Countrywide Home Loans
Servicing LP, 533 F.3d 1031, 1034 (9th Cir.
2008)). Thus, “‘[i]t is to be presumed that a
cause lies outside [the] limited jurisdiction [of
the federal courts] and the burden of establishing
the contrary rests upon the party asserting
jurisdiction.’” Hunter v. Philip Morris USA, 582
F.3d 1039, 1042 (9th Cir. 2009) (quoting Abrego
Abrego v. Dow Chem. Co., 443 F.3d 676, 684 (9th
Cir. 2006)) (alterations in original). This
“‘strong presumption against removal jurisdiction
means that the defendant always has the burden of
establishing that removal is proper,’ and that the
court resolves all ambiguity in favor of remand to
state court.” Id. (quoting Gaus v. Miles, Inc.,
980 F.2d 564, 566 (9th Cir. 1992) (per curiam)).
U.S. Bank, Nat’l Ass’n v. Mizukami, CIVIL NO. 15-00523 JMS-BMK,
2016 WL 632195, at *2 (D. Hawai`i Feb. 17, 2016) (alterations in
Federal courts may preside over state law claims
pursuant to their diversity jurisdiction under 28 U.S.C. § 1332.
Under 28 U.S.C. § 1332(a)(1) (2003), the district courts had
original jurisdiction over actions between citizens of different
states “where the matter in controversy exceeds the sum or value
of $75,000, exclusive of interest and costs.”
At the time of
removal, “[s]ection 1332 require[d] complete diversity of
citizenship; each of the plaintiffs must be a citizen of a
different state than each of the defendants.”
Morris v. Princess
Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001) (citing
Caterpillar Inc. v. Lewis, 519 U.S. 61, 68, 117 S. Ct. 467, 136
L. Ed. 2d 437 (1996)).
In Baclaan and Toro, the amount in controversy
requirement is not in dispute.
The issues presented in the
Baclaan Motion and the Toro Motion are: 1) whether this Court
must disregard Char’s citizenship because of his death prior to
removal; and 2) if Char’s citizenship is disregarded, whether
this Court should grant Plaintiffs leave to add Char Hamilton as
a defendant – which would destroy diversity – pursuant to 28
U.S.C. § 1447(e).
Char was originally named as a defendant in all three
He died on January 12, 2003.
[Otterberg Decl., Exh. 9
(The Honolulu Advertiser article dated 1/14/03).]
served the Travelers Defendants on May 28, 2003.
[Mem. in Opp.
On June 26, 2003, the Travelers Defendants removed
Baclaan and Toro to this district court, based in part on
diversity jurisdiction because Char was the only non-diverse
The Travelers Defendants took the position that
Char’s citizenship had to be disregarded in light of his death.
Based on the state court’s docket sheets, no action was
taken prior to removal – either by the parties or the state court
– regarding Char’s death.
Haw. Rev. Stat. § 634-61 states:
The death of a plaintiff or defendant . . . shall
not cause an action to abate, but it may be
continued upon substitution of the proper parties
as provided by the rules of court, or if the claim
is one which survives to or against the surviving
parties the action shall proceed in favor of or
against the surviving parties as provided by the
rules of court.
In determining whether a plaintiff’s claim survives after the
death of a defendant, Hawai`i courts analyze whether the claim
would survive if the plaintiff died.
In Mitsuba Publishing. Co.
v. State, the Hawai`i Intermediate Court of Appeals (“ICA”)
dismissed the appeal against a defendant who had died while the
appeal was pending, holding that the defamation action did not
survive the defendant’s death.
(1980) (per curiam).
1 Haw. App. 517, 620 P.2d 771
The ICA stated:
Appellants argue that s 634-61, HRS, which
provides that the death of a plaintiff or
defendant does not cause an action to abate but
that it may be continued upon substitution of
proper parties saves their case. That statute,
however, is derived from Act 34 of the Laws of
1876. It was long ago stated:
The Act of 1876 provides the method to be
pursued in proceeding with an action after
the death of the plaintiff or defendant. But
it seems to me from the language and intent
of the Act that this procedure is only
applicable to such actions as survive to the
personal representatives of the deceased,
that is, such actions as might originally be
maintained by the executor or administrator.
Bishop v. Lokana, 6 Haw. 556, 557 (1885). The
same result was reached in Alameda v. Spenser, 34
Haw. 667 (1938). Obviously, at common law, an
action for defamation could not be commenced by a
personal representative of a defamed decedent.
1 Haw. App. at 517, 620 P.2d at 772 (citation omitted).
noted that the general rule in Hawai`i was that, “[a]t common
law, personal actions died with the person.”
Id. (citing City &
County of Honolulu v. Sherretz, 42 Haw. 177 (1957)).
Sherretz, the Supreme Court of the Territory of Hawai`i stated,
“[t]his is particularly true where the damages sustained are
personal in nature and do not affect property rights or
42 Haw. at 180 (citing 1 R. C. L., § 22, p. 28).
This Court concludes that, under Hawai`i law, the
Baclaan Plaintiffs’ and the Toro Plaintiffs’ claims against Char
were personal actions that they could not pursue after his
This Court therefore CONCLUDES that, at the time of
removal, there was complete diversity amongst the parties, and
that diversity jurisdiction existed.
Defendant Char Hamilton
After removal, the Baclaan Plaintiffs and the Toro
Plaintiffs attempted to join Char Hamilton by filing a First
Amended Complaint and seeking leave to do so in the Old Motions.
Plaintiffs allege that Char Hamilton is a Hawai`i corporation
that was doing business in Hawai`i at all relevant times.
[Baclaan First Amended Complaint at ¶ 6.]
This Court terminated
the Old Motions and gave Plaintiffs leave to file the instant
28 U.S.C. § 1447(e) states: “If after removal the
plaintiff seeks to join additional defendants whose joinder would
destroy subject matter jurisdiction, the court may deny joinder,
or permit joinder and remand the action to the State court.”
This district court has stated:
Haw. Rev. Stat. § 663-5 does allow a plaintiff to pursue
claims “for damages for physical injury or death” against a
deceased defendant’s legal representative or estate, but the
claims at issue here do not arise out of physical injury or
death. Further, there is no comparable statute that would apply
to the Baclaan Plaintiffs’ and the Toro Plaintiffs’ claims
Courts look to the following factors in
considering whether to allow the addition of a
non-diverse defendant under Section 1447(e):
(1) whether the new defendants should be
joined under Federal Rule of Civil Procedure
19(a) as “needed for just adjudication”;
(2) whether the statute of limitations would
preclude an original action against the new
defendants in state court; (3) whether there
has been unexplained delay in requesting
joinder; (4) whether joinder is intended
solely to defeat federal jurisdiction;
(5) whether the claims against the new
defendant appear valid; and (6) whether
denial of joinder will prejudice the
Palestini v. Gen. Dynamics Corp., 193 F.R.D. 654,
658 (S.D. Cal. 2000).
Ansagay v. Dow Agrosciences LLC, CIVIL NO. 15-00184 SOM-RLP, 2015
WL 9412856, at *2–3 (D. Hawai`i Dec. 3, 2015), report and
recommendation adopted, 2015 WL 9412112 (D. Hawai`i Dec. 22,
This Court concludes that the majority of these factors
weigh in favor of allowing the Baclaan Plaintiffs and the Toro
Plaintiffs to add Char Hamilton as a defendant.
Whether Joinder is Necessary
Fed. R. Civ. P. 19(a)(1) states:
A person who is subject to service of process and
whose joinder will not deprive the court of
subject-matter jurisdiction must be joined as a
(A) in that person’s absence, the court
cannot accord complete relief among existing
(B) that person claims an interest relating
to the subject of the action and is so
situated that disposing of the action in the
person’s absence may:
(i) as a practical matter impair or
impede the person’s ability to protect
the interest; or
(ii) leave an existing party subject to
a substantial risk of incurring double,
multiple, or otherwise inconsistent
obligations because of the interest.
This Court finds that complete relief can be accorded among the
existing parties, even without Char Hamilton.
To the extent that the Baclaan Plaintiffs and the Toro
Plaintiffs have claims against Char Hamilton, they are able to
pursue them in pending state court actions: Baclaan, et al. v.
Preston, et al., Civil No. 04-1-2348-12 EEH, and Toro, et al. v.
Preston, et al., Civil No. 04-1-2347-12 EEH (collectively “State
See Baclaan Motion, Decl. of Counsel, Exh. B
(Complaint in Baclaan v. Preston), Exh. C (Complaint in Toro v.
The State Fraud Actions are purported class actions,
and the defendants named in the original complaints were: Robert
B. Preston, an A&H partner; Frank Christenson, a former CE
employee; and Char Hamilton.
¶¶ 1, 15.]
[Baclaan v. Preston Complaint at
The State Fraud Actions allege the following clams:
fraud against all of the defendants; a claim that Char Hamilton
either “recklessly or negligently failed to ascertain the falsity
of CE’s interrogatory answers in the Hawaii asbestos litigation
(or knew of the falsity)” or “intentionally entered into this
plan to defraud Hawaii asbestos claimants;” and an additional
fraud/conspiracy to commit fraud against Preston.
[Id. at pgs.
Preston died after the filing of the State Fraud
Actions, and Preston’s estate was substituted as a defendant in
The state court later granted the estate’s motions
The plaintiffs attempted to amend their complaints
to add A&H as a defendant, but the state court denied those
See Otterberg Decl., Exh. 5 (docket sheet for Baclaan
v. Preston), Exh. 6 (docket sheet for Toro v. Preston).
In light of Preston’s death and the denial of the
motions to add A&H as a defendant in the State Fraud Actions,
this Court finds that the failure to join Char Hamilton in the
instant case would not leave A&H subject to a substantial risk of
See Rule 19(a)(1)(B)(ii).
also finds that, under the circumstances, Rule 19(a)(1)(B)(i)
does not apply.
This Court therefore concludes that Char
Hamilton is not required to be joined as a defendant pursuant to
Thus, the first Palestini factor weighs against
Statute of Limitations
Plaintiffs apparently seek to assert two claims against
Char Hamilton, a conspiracy to commit fraud claim and a
See, e.g., Baclaan First Amended Complaint at
In general, negligence claims are subject to a two-
year statute of limitations pursuant to Haw. Rev. Stat.
See, e.g., Carroll v. Cty. of Maui, Civil No. 13-
00066 DKW-KSC, 2015 WL 1470732, at *6 (D. Hawai`i Mar. 31, 2015)
(concluding that the plaintiffs’ negligence claim, inter alia,
was subject to a two-year statute of limitations).
Plaintiffs argue that the six-year statute of limitations period
in Haw. Rev. Stat. § 657-20 applies to their negligence claim
because Char Hamilton fraudulently concealed the existence of
Plaintiffs’ cause of action.6
Plaintiffs’ conspiracy claim
sounds in fraud and is subject to the six-year statute of
limitations in Haw. Rev. Stat. § 657-1(4).
See Jou v. Adalian,
Section 657-7 states: “Actions for the recovery of
compensation for damage or injury to persons or property shall be
instituted within two years after the cause of action accrued,
and not after, except as provided in section 657-13.” The
exceptions listed in § 657-13 do not apply in the instant case.
Section 657-20 states:
If any person who is liable to any of the actions
mentioned in this part or section 663-3,
fraudulently conceals the existence of the cause
of action or the identity of any person who is
liable for the claim from the knowledge of the
person entitled to bring the action, the action
may be commenced at any time within six years
after the person who is entitled to bring the same
discovers or should have discovered, the existence
of the cause of action or the identity of the
person who is liable for the claim, although the
action would otherwise be barred by the period of
CIV. NO. 15-00155 JMS-KJM, 2016 WL 4582042, at *19 (D. Hawai`i
Sept. 1, 2016).
Plaintiffs apparently discovered the alleged fraud
regarding the answers to interrogatories at some point during
See, e.g., Baclaan Complaint at ¶ 32.
Thus, they argue
that the original filing of the First Amended Complaints in
Baclaan and Toro in July 2003 were timely.
A&H argues that allowing Plaintiffs to add Char
Hamilton at this stage of the case would be futile because the
claims are now time-barred.
A&H asserts that the filing of the
First Amended Complaints did not toll the statute of limitations
because Plaintiffs failed to serve Char Hamilton.
however, rely upon Haw. Rev. Stat. § 657-22, which states: “Upon
any such matter being established, or upon its appearance in any
other way that any process was issued without any intent that it
should be served, the process shall not be deemed the
commencement of an action within the meaning of this part or
In Heiser v. Association of
Apartment Owners of Polo Beach Club, this district court noted
that there was no Hawai`i case law interpreting § 657-22 and that
no other state had a similar statute.
(D. Hawai`i 1993).
848 F. Supp. 1482, 1484
The district court concluded:
§ 657–22 does not require a plaintiff to actually
serve the defendant or to exercise due diligence.
Instead, the threshold inquiry is a determination
of the plaintiff’s intent at the time “any process
was issued.” The legislature, by limiting the
inquiry to the time of issuance of process,
apparently recognized the possibility that the
intent of a plaintiff to serve process may change
after process is issued but that under some
circumstances there may still be justification for
tolling the statute of limitations.
While a due diligence requirement might be
logical and even desirable, one has not been
divined from the statute; no court has even
interpreted the statute and the legislative
history of the statute provides nothing of value.
Accordingly, there is no state authority which
would allow this Court to import such an
interpretation into Hawaii limitations law.
Id. at 1485.
The Hawai`i Supreme Court discussed Heiser
extensively in Eto v. Muranaka, 99 Hawai`i 488, 500-02, 57 P.3d
413, 425-27 (2002).
Although the supreme court held that the
facts of Eto were distinguishable from the facts in Heiser, it
did not invalidate the Heiser analysis.
Further, neither the
Hawai`i Supreme Court nor the ICA has rejected Heiser in any
This district court has not addressed § 657-22 since
This Court agrees with Plaintiffs that § 657-22
applies, and it agrees with the district court in Heiser that
§ 657-22 cannot be interpreted as imposing an actual service or
due diligence requirement.
Based on the factual and procedural
history of this case, this Court cannot find that, at the time
the Baclaan Plaintiffs and the Toro Plaintiffs filed their First
Amended Complaints, they were “without any intent that it should
This Court therefore concludes that, if it allows
joinder pursuant to § 1447(e), the Baclaan Plaintiffs’ claims and
the Toro Plaintiffs’ claims against Char Hamilton would be
Thus, the second Palestini factor weighs in favor of
Char died after a brief illness in January 2003.
Otterberg Decl., Exhs. 8-9 (news articles regarding Char’s
The Travelers Defendants removed Baclaan and Toro on
June 26, 2003, and the Baclaan Plaintiffs and the Toro Plaintiffs
filed the First Amended Complaints on July 7, 2003 and the Old
Motions on July 10, 2003.
[Dkt. nos. 1, 5, 6.]
For the reasons
discussed supra, the Old Motions remained pending until this
Court terminated them and gave Plaintiffs leave to file new
motions for remand.
[EO: Court Order Regarding Plaintiffs’
Pending Motion to Remand, filed 5/6/16 (dkt. no. 79).]
Court finds that, under the circumstances of this case, there was
no unexplained delay in the request to join Char Hamilton.
the third Palestini factor weighs in favor of allowing joinder.
The issue of whether the intent behind the joinder of
Char Hamilton was to defeat diversity jurisdiction is a close
Plaintiffs clearly could have named Char Hamilton as a
defendant in their original complaints.
See Baclaan Complaint at
¶ 3 (“On January 7, 1985, the Char law firm (recklessly
indifferent to the fact that these answers were false and CE did
sell asbestos to Hawaii entities) forwarded CE’s Responses to
Plaintiffs’ Amended Master Set of Interrogatories in both Hawaii
state and federal court litigation . . . .”).
In hindsight, it
may have been wiser to name the firm from the outset.
on the other hand, the desire to limit the number of Hawai`i
attorneys named as defendants in these cases was understandable
because this is a small legal community, and this Court also
notes that Char’s death was unforeseen.
This Court therefore
cannot find that, under the circumstances of this case, the
joinder of Char Hamilton is intended solely to defeat federal
Thus, the fourth Palestini factor weighs in favor
of allowing joinder.
Validity of Claims
The crux of Plaintiffs’ claims against Char Hamilton is
that the law firm was part of a conspiracy to induce Plaintiffs
to accept artificially low settlement amounts in the Hawai`i
asbestos cases based on fraudulent discovery responses.
Hawai`i Supreme Court has recognized that: “Unlike a claim for
negligence, an attorney can be held liable for fraudulent
Buscher v. Boning, 114 Hawai`i 202, 220
n.13, 159 P.3d 814, 832 n.13 (2007) (citing Kahala Royal Corp. v.
Goodsill Anderson Quinn & Stifel, 113 Hawai`i 251, 268–69, 151
P.3d 732, 749–50 (2007) (citing caselaw from other jurisdictions
stating that it is well settled that an attorney can be sued by
an adverse party for fraud); Matsuura v. E.I. du Pont, 102
Hawai`i 149, 162, 73 P.3d 687, 700 (2003) (“Under Hawai`i law, a
party is not immune from liability for civil damages based upon
that party’s fraud engaged in during prior litigation
proceedings.”); Giuliani v. Chuck, 1 Haw. App. 379, 383–84, 620
P.2d 733, 736–37 (1980) (“The rule of law that an attorney
representing a client may be held personally liable to an adverse
party or a third person who sustains injury as a result of an
attorney’s intentional tortious acts is well settled.” (citations
In such cases, the litigation privilege does not
A&H argues that Plaintiffs’ claims against Char
Hamilton are futile because they sound in negligence and
therefore the rule allowing a party in a prior litigation to sue
“‘Hawai`i courts have applied an absolute litigation
privilege in defamation actions for words and writings that are
material and pertinent to judicial proceedings.’” Isobe v.
Sakatani, 127 Hawai`i 368, 382–83, 279 P.3d 33, 47–48 (Ct. App.
2012) (emphasis omitted) (quoting Matsuura, 102 Hawai`i at 154,
73 P.3d at 692 (citations omitted)). The ICA held that the
litigation privilege extended to claims for slander of title.
Id. at 383, 279 P.3d at 48. The ICA also noted that the Hawai`i
Supreme Court had previously extended the litigation privilege to
“claims of intentional interference with contractual relations
(IICR) and intentional interference with prospective economic
advantage (IIPEA) against attorneys who had represented parties
adverse to the plaintiff in prior . . . proceedings.” Id. at
384, 279 P.3d at 49 (citing Kahala Royal, 113 Hawai`i at 266–73,
151 P.3d at 747–54). In Isobe, the ICA held that the litigation
privilege did not apply to the abuse of process and malicious
prosecution claims in that case. Id. at 385, 279 P.3d at 50.
an adverse attorney for fraud does not apply.
A&H argues that:
Char Hamilton owed no duty to Plaintiffs in the Hawai`i asbestos
cases; and the litigation privilege bars Plaintiffs’ claims
against Char Hamilton.8
Plaintiffs deny that their claims
against Char Hamilton are negligence claims, but they assert
that, to the extent their claims could be interpreted as such,
they could amend their complaints to allege more specific
allegations regarding scienter.
See, e.g., Mem. in Supp. of
Baclaan Motion at 20.
It is clear that at least one of Plaintiffs’ claims
against Char Hamilton asserts fraud, and that certain types of
claims against an adverse attorney for fraud in a prior
litigation are cognizable under Hawai`i law.
recognizes that it is A&H’s position that, based on the precise
nature of Plaintiffs’ claims against Char Hamilton, the
litigation privilege still applies and would bar Plaintiffs’
However, A&H’s argument asks this Court to address the
merits of Char Hamilton’s potential defense.
The § 1447(e)
analysis merely asks whether the new claims “appear valid,”
which is a lower threshold than whether the claims would survive
a motion to dismiss.
This Court CONCLUDES, for purposes of the
A&H also argues that Plaintiffs’ claims against it fail as
a matter of law for the same reasons, and A&H states that it
intends to file motions to dismiss. This Order expresses no
opinion regarding the merits of Plaintiffs’ claims against A&H.
§ 1447(e) analysis, that at least one of the Baclaan Plaintiffs’
and one of the Toro Plaintiffs’ claims against Char Hamilton
Thus, the fifth Palestini factor weighs in favor
of allowing joinder.
In light of the pending State Fraud Actions, this Court
FINDS that the Baclaan Plaintiffs and the Toro Plaintiffs would
not be prejudiced if this Court denied joinder.
Thus, the sixth
Palestini factor weighs against allowing joinder.
Balancing of Factors
This Court has found that four out of the six Palestini
factors weigh in favor of joinder.
Further, this Court concludes
that the four factors favoring joinder – particularly the
potential merit of the claims and the lack of improper motive –
are more persuasive than the two factors weighing against
Therefore, this Court, in the exercise of its
discretion, CONCLUDES that the joinder of Char Hamilton in
Baclaan and Toro is in the interests of justice, and GRANTS the
Baclaan Plaintiffs’ and the Toro Plaintiffs’ requests to join
Char Hamilton as a defendant.
This Court acknowledges that the issue of diversity
jurisdiction is not present in Hopkins, and therefore the
analysis of the Palestini factors was not necessary for that
However, for similar reasons as those discussed in the
analysis of the Palestini factors for Baclaan and Toro, this
Court also GRANTS the Hopkins Plaintiffs’ request to join Char
In light of the joinder of Char Hamilton in Baclaan and
Toro, this Court further CONCLUDES that diversity jurisdiction no
longer exists because Char Hamilton is a Hawai`i resident, and
there is no longer complete diversity.
This Court now turns to
the issue of whether it has “related-to” jurisdiction over all
All three cases were removed based on “related-to”
bankruptcy jurisdiction, pursuant to 28 U.S.C. §§ 1334(b) and
Section § 1334(b) states:
Except as provided in subsection (e)(2), and
notwithstanding any Act of Congress that confers
exclusive jurisdiction on a court or courts other
than the district courts, the district courts
shall have original but not exclusive jurisdiction
of all civil proceedings arising under title 11,
or arising in or related to cases under title 11.
Section 1452(a) states:
A party may remove any claim or cause of action in
a civil action other than a proceeding before the
United States Tax Court or a civil action by a
governmental unit to enforce such governmental
unit’s police or regulatory power, to the district
court for the district where such civil action is
pending, if such district court has jurisdiction
of such claim or cause of action under section
1334 of this title.
“A bankruptcy court’s ‘related to’ jurisdiction is very broad,
including nearly every matter directly or indirectly related to
In re Wilshire Courtyard, 729 F.3d 1279, 1287
(9th Cir. 2013) (citation and some internal quotation marks
However, related-to jurisdiction is not limitless.
Celotex Corp. v. Edwards, 514 U.S. 300, 308 (1995); Kaonohi
Ohana, Ltd. v. Sutherland, 873 F.2d 1302, 1307 n.6 (9th Cir.
The Ninth Circuit has adopted the Third Circuit’s
definition of “related-to” bankruptcy jurisdiction in Pacor, Inc.
v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984).9
F.2d 455, 457 (9th Cir. 1988).
In re Fietz, 852
In Fietz, the Ninth Circuit
Various circuits have developed slightly
different definitions of what constitutes a
“related” case under section 1471(b) and its
identical successor, section 1334(b). The Third
Circuit articulated what has become the dominant
The usual articulation of the test for
determining whether a civil proceeding is
related to bankruptcy is whether the outcome
of the proceeding could conceivably have any
effect on the estate being administered in
bankruptcy. . . . Thus, the proceeding need
not necessarily be against the debtor or
against the debtor’s property. An action is
related to bankruptcy if the outcome could
alter the debtor’s rights, liabilities,
options, or freedom of action (either
Pacor was overruled on other grounds by Things Remembered,
Inc. v. Petrarca, 516 U.S. 124 (1995).
positively or negatively) and which in any
way impacts upon the handling and
administration of the bankrupt estate.
Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.
1984) (emphasis in original). . . .
. . . .
We conclude that the Pacor definition best
represents Congress’s intent to reduce
substantially the time-consuming and expensive
litigation regarding a bankruptcy court’s
jurisdiction over a particular proceeding. See H.
Rep. No. 595, 95th Cong., 2d Sess., 43-48,
reprinted in 1978 U.S. Code Cong. & Admin. News,
5787, 5963, 6004-08. The Pacor definition
promotes another congressionally-endorsed
objective: the efficient and expeditious
resolution of all matters connected to the
bankruptcy estate. See id. We therefore adopt
the Pacor definition quoted above. . . .
Id. at 457 (underline emphasis added).
In the Ninth Circuit,
related-to jurisdiction has even been held to “extend to actions
against bankrupt entities’ subsidiaries.”
Fed. Home Loan Bank of
Seattle v. Barclays Capital, Inc., No. C10–0139 RSM, 2010 WL
3662345, at *6 (W.D. Wash. Sept. 1, 2010) (citing In re American
Hardwoods, 885 F.2d 621, 623–24 (9th Cir. 1989); Kaonohi Ohana
Ltd. v. Sutherland, 873 F.2d 1302, 1307 (9th Cir. 1989)).
District courts within the Ninth Circuit have also
concluded that, under Fietz, related-to jurisdiction existed:
where the non-party debtor was contractually obligated to
indemnify a defendant; see, e.g., In re Enron Corp., 296 B.R.
505, 508 (C.D. Cal. 2003); and even where the defendants did “not
have direct indemnification rights against any bankruptcy
debtors, but only secondary or tertiary indemnity claims”;
F.D.I.C. v. Banc of Am. Sec. LLC, No. 2:12–CV–532 JCM (RJJ), 2012
WL 2904310, at *4 (D. Nev. July 16, 2012).
Based on these broad
interpretations of related-to jurisdiction in Ninth Circuit
caselaw and the district court cases applying such caselaw, this
Court FINDS that, at the time of removal, the outcome of this
case could conceivably have had an effect on the administration
of CE’s pending bankruptcy proceedings.
Thus, this Court
CONCLUDES that related-to jurisdiction existed at the time of
However, even where related-to jurisdiction exists, a
district court may order remand based on equitable factors.
28 U.S.C. § 1452(b) (stating that the court to which a case is
removed based on related-to jurisdiction may order remand “on any
“Section 1452(b) gives courts an unusually broad
grant of authority in determining whether remand
is equitable.” Charles Schwab Corp. v. Banc of
America Securities, No. 10–CV–03489–LHK, 2011 WL
864978 at *7 (N.D. Cal. Mar. 11, 2011) (internal
quotation marks and citations omitted). District
courts in this circuit “have typically identified
seven factors governing the decision to remand:
(1) the effect of the action on the administration
of the bankruptcy estate; (2) the extent to which
issues of state law predominate; (3) the
difficulty of applicable state law; (4) comity;
(5) the relatedness of the action to the
bankruptcy case; (6) any jury trial right; and
(7) prejudice to plaintiffs from removal.” Parke
v. Cardsystems Solutions, No. C 06–04857 WHA, 2006
WL 2917604, at *4 (N.D. Cal. Oct. 11, 2006)
(quoting Hopkins v. Plant Insulation Co., 349 B.R.
805, 813 (N.D. Cal. 2006)).
Tran v. Select Portfolio Servicing, Inc., Case No. 14-cv-05404HSG, 2015 WL 1802445, at *2 (N.D. Cal. Apr. 20, 2015).
As to the first factor, at the present time, the only
defendants involved in the case are A&H and – based on the
instant Order – Char Hamilton.
There is no indication that the
resolution of Plaintiffs’ claims against A&H and Char Hamilton
will affect CE’s bankruptcy estate.
Thus, this Court FINDS that
the first factor weighs in favor of remand.
Plaintiffs’ claims against A&H and Char Hamilton are
state law claims, sounding in fraud and negligence.
of state law predominate, and there are no issues of bankruptcy
This Court FINDS that the second and fifth factors weigh in
favor of remand.
However, because the state law issues are not
particularly difficult and do not require the state court’s
unique expertise in the interpretation of Hawai`i law, this Court
FINDS that the third and fourth factors are neutral.
This Court also FINDS that the sixth factor is neutral
because a jury trial would be available either in this district
court or in the state court on remand.
As to the seventh factor, Plaintiffs would have some
prejudice if this Court denies remand because they would be
denied their choice of forum.
They also state that they believe
the cases will be transferred to the District of Delaware if this
Court retains jurisdiction, and the burden on Plaintiffs to
prosecute these cases in that court would be great.
Plaintiffs assert that, if this Court orders remand, the cases
would be assigned to the dedicated asbestos docket judge in the
Hawai`i state courts.
Plaintiffs’ argument regarding the future
transfer of this case is speculative at this stage of the case.
Further, it is unclear whether the instant cases would be
assigned to the asbestos docket judge if this Court ordered
remand because the claims now at issue assert attorney fraud and
negligence, not liability directly related to asbestos products.
This Court therefore FINDS that the seventh factor is neutral.
Although only three of the seven factors weigh in favor
of removal, no factor weighs against removal.
Court finds that the first factor is the most persuasive.
is particularly so because, if the issue before this Court was
whether related-to jurisdiction exists at the present time, the
test to determine whether jurisdiction exists would be far more
One district court has described that analysis as
Once a bankruptcy plan has been confirmed,
the Ninth Circuit has curtailed the reach of
“related to” jurisdiction to ensure that
bankruptcy jurisdiction does not continue
indefinitely. See In re Pegasus Gold Corp., 394
F.3d 1189, 1194 (9th Cir. 2005) (adopting the
Third Circuit’s post-confirmation approach as
articulated in In re Resorts Int’l, Inc., 372 F.3d
154, 166–67 (3d Cir. 2004)). In In re Resorts
Int’l, Inc., the Third Circuit explained that
“bankruptcy court jurisdiction must be confined
within appropriate limits and does not extend
indefinitely, particularly after the confirmation
of a plan and the closing of a case.” 372 F.3d at
165. Thus, when a bankruptcy plan has been
confirmed, the Ninth Circuit applies a more
stringent “close nexus” test. Under the “close
nexus” test, the question is “‘whether there is a
close nexus to the bankruptcy plan or proceeding
sufficient to uphold bankruptcy court jurisdiction
over the matter.’” In re Pegasus Gold Corp., 394
F.3d at 1194 (quoting In re Resorts Int’l, Inc.,
372 F.3d at 166–67). Matters that qualify as
having a sufficiently close nexus typically
include those that affect “the interpretation,
implementation, consummation, execution, or
administration of the confirmed plan.” Id.
Fed. Home Loan Bank of Chicago v. Banc of Am. Sec. LLC, 448 B.R.
517, 524 (C.D. Cal. 2011).
This Court would not be inclined to
find that Plaintiffs’ claims against A&H and Char Hamilton have a
“close nexus” to CE’s bankruptcy proceedings or plan.
Court gives the greatest weight to the first factor in the
equitable remand analysis.
Having considered all of the equitable remand factors,
in particular, the fact that these cases would not have an effect
on the administration of CE’s bankruptcy estate, this Court FINDS
that equitable remand pursuant to § 1452(b) is appropriate in
III. Supplemental Jurisdiction
In each of the three cases, the Travelers Defendants’
Notice of Removal asserted that there was related-to jurisdiction
over Plaintiffs’ claims against CE and supplemental jurisdiction
pursuant to 28 U.S.C. § 1367 over Plaintiffs’ other claims.
However, because this Court has concluded that equitable remand
is appropriate pursuant to § 1452(b), this Court – in the
exercise of its discretion – DECLINES to exercise supplemental
jurisdiction in these three cases.
See 28 U.S.C. § 1367(c).10
On the basis of the foregoing, the Motion to Remand
and/or Abstain and Motion for Leave to Name New Party Defendant,
filed July 5, 2016 in Baclaan, CV 03-00325; the Motion to Remand
and/or Abstain and Motion for Leave to Name New Party Defendant,
filed July 5, 2016 in Toro, CV 03-00326; and the Motion to Remand
and/or Abstain and Motion for Leave to Name New Party Defendant,
filed July 6, 2016 in Hopkins, CV 03-00401 are HEREBY GRANTED.
Section 1367(c) states:
The district courts may decline to exercise
supplemental jurisdiction over a claim under
subsection (a) if–
(1) the claim raises a novel or complex
issue of State law,
(2) the claim substantially predominates
over the claim or claims over which the
district court has original jurisdiction,
(3) the district court has dismissed all
claims over which it has original
(4) in exceptional circumstances, there are
other compelling reasons for declining
Specifically, the Motions are GRANTED insofar as:
-the Baclaan Plaintiffs, the Toro Plaintiffs, and the Hopkins
Plaintiffs are GRANTED leave to add Char, Hamilton, Campbell
& Thom, Attorneys at Law, a Law Corporation, as a defendant;
-the addition of Char Hamilton in Baclaan and Toro destroys
complete diversity of citizenship, and this Court CONCLUDES
that diversity jurisdiction no longer exists;
-although this Court CONCLUDES that related-to bankruptcy
jurisdiction existed over Plaintiffs’ claims against
Defendant Combustion Engineering, Inc. at the time of
removal in all three cases, this Court CONCLUDES that
equitable remand pursuant to 28 U.S.C. § 1452(b) is
appropriate in each case; and
-this Court DECLINES to exercise supplemental jurisdiction over
the claims over which related-to jurisdiction did not exist
at the time of removal.
This Court therefore REMANDS Baclaan, CV 03-00325, Toro, CV 0300326, and Hopkins, CV 03-00401, pursuant to § 1452(b).
Court ORDERS the Clerk’s Office to effectuate the remand on
November 21, 2016, unless a motion for reconsideration of this
Order is filed by November 17, 2016.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, October 31, 2016.
/s/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge
LORENZO BACLAAN, ET AL. VS. COMBUSTION ENGINEERING, ET AL; CV 0300325 LEK-KSC; GEORGE H. TORO, ET AL. VS. COMBUSTION ENGINEERING,
ET AL; CV 03-000326 LEK-KSC; THEODORE K. HOPKINS, ET AL. VS.
COMBUSTION ENGINEERING, ET AL; CV 03-00401 LEK-KSC; ORDER
GRANTING PLAINTIFFS’ MOTION TO REMAND AND/OR ABSTAIN AND FOR
LEAVE TO ADD DEFENDANT
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