Barnes v. Sea Hawaii Rafting, LLC et al

Filing 846

ORDER Granting in Part and Denying in Part Plaintiff Barnes's Motion for Sanctions [ECF NO. 836] - Signed by JUDGE ALAN C. KAY on 7/1/2021.The Motion for Sanctions, ECF No. 836 is GRANTED IN PART AND DENIED IN PART. The Motion is GRA NTED as follows: The Court ORDERS that Defendants Henry and AOE (1) pay a compensatory sanction in the amount of $1,000 to Plaintiff Barnes for his damages resulting from the four-month delay in payment and (2) pay Plaintiff Barnes's attorn ey's fees and costs stemming from the delay in payment and the filing of the Motion for Sanctions. The Motion is DENIED in all other respects.The compensatory sanction must be paid within 14 days issuance of this Order. Plaintiff Barnes is directed to submit evidence of his attorney's fees to Magistrate Judge Porter pursuant to the local rules within 20 days issuance of this Order. COURT'S CERTIFICATE of Service - Non-Registered CM/ECF Participants have been served by First Class Mail to the addresses of record listed on the Notice of Electronic Filing (NEF)(jni)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAI`I
CHAD BARRY BARNES,
Plaintiff,
v.
SEA HAWAI`I RAFTING, LLC,
et al.
Defendants.

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Civ. No. 13-00002 ACK-WRP

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF BARNES’S
MOTION FOR SANCTIONS [ECF NO. 836]
Before the Court is Plaintiff Chad Barnes’s First
Motion for Sanctions Against Defendants Kris Henry and Aloha
Ocean Excursions LLC, ECF No. 836 (the “Motion for Sanctions”).
For the reasons discussed below, the Court GRANTS IN PART AND
DENIES IN PART the Motion for Sanctions.

BACKGROUND
The Court recounts only the necessary and relevant
background and procedural history surrounding the assessment
sanctions and enhanced sanctions stemming from the wrongful
transfer of the commercial-use permit.
I.

Initial Sanctions & Enhanced Sanctions
For the past two years, the Court has been addressing

the matter of sanctions related to Defendant AOE and Defendant

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Henry’s wrongful transfer of the commercial-use permit from
Defendant Sea Hawaii Rafting Defendant AOE, and their subsequent
failure to have it reissued to Defendant SHR despite the Court’s
instructions to do so.

In August 2019, after being informed

that Defendant Henry had made misrepresentations to Hawaii’s
Division of Boating and Ocean Recreation (“DOBOR”) about the
nature of the transfer in ownership of the commercial-use
permit, the Court imposed a first set of sanctions to compensate
Plaintiff Chad Barnes for the resulting losses and ordered
Defendants to have the permit reissued to Defendant SHR.

See

ECF No. 608 (the “First Sanctions Order”).
When they did not comply and instead made the transfer
to Defendant AOE effective by making payment to DOBOR, the Court
imposed “enhanced sanctions” meant to compensate Plaintiff
Barnes from the resulting losses.
Sanctions Order”).

ECF No. 657 (the “Enhanced

The Court found that Plaintiff Barnes was

entitled to “an award of enhanced sanctions derived from the
monetary value of the commercial use permit, representing
Plaintiff Barnes’s actual loss arising from Defendant AOE’s and
Defendant Henry’s wrongful conduct,” as well as to recover
attorney’s fees and costs.

Id. at 31-34.

The Court ordered an

independent appraisal of both the value of the vessel and the
commercial use permit, considered extensive briefing from the
parties, and gave Plaintiff Barnes permission to conduct limited
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discovery as to Defendants’ use and profit gains resulting from
their ownership of the permit.

Id. at 33.

Both parties agreed

to the independent appraiser appointed by the Court and were
given the opportunity to engage their own appraisers to provide
their own valuations for the Court’s consideration.

Neither

party engaged its own appraiser.
On August 13, 2020, the Court issued two orders
regarding the calculation of the enhanced sanctions.
Nos. 739 & 740.

See ECF

First, the Court ordered Defendants to pay a

portion of prior-incurred custodial costs, as well as ongoing
custodial costs.

ECF No. 739.

And second, the Court indicated

that it would likely impose sanctions for the appraised value of
the permit, which was determined by the independent appraiser to
be $40,000.

ECF No. 740.

The Court allowed the parties to

submit briefing on the sufficiency of that valuation.

Id.

Plaintiff Barnes submitted a brief stating simply, “We think the
sanctions should not be tied to the appraisal value, and we
think the $40,000.00 is a little low under these circumstances.”
ECF No. 745 at 2.

He did not expand on his own proposed

calculation, nor did he move forward with the limited discovery
the Court had allowed in the Enhanced Sanctions Order.
Thereafter, on October 16, 2020, the Court issued an order
finding the proper value of permit-related enhanced sanctions to
be $40,000 (the appraised value of the permit) and directing
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Plaintiff Barnes to submit affidavits in support of his
attorney’s fees and costs to the Magistrate Judge pursuant to
the local rules.

ECF No. 776.

To summarize the many orders surrounding the initial
and enhanced sanctions calculation, Defendants were required to
pay as compensatory sanctions:
•

As outlined in the First Sanctions Order, $25,000;

•

As outlined in the Enhanced Sanctions Order and
subsequent orders regarding the calculation of the
enhanced sanctions:
o certain prior custodial costs in the amount of
$8,638.64;
o all ongoing custodial costs;
o attorney’s fees and costs stemming from the
sanctioned conduct (which totaled $16,410 in fees
and $540.02 in costs, and the repayment of which is
subject to other conditions, ECF No. 834); and
o the $40,000 value of the commercial-use permit.

II.

Payment Plan for Enhanced Sanctions
On November 11, 2020, Defendants filed a motion

seeking to pay the enhanced sanctions through an installment
plan.

ECF No. 794.

The Court directed Defendants to make an

initial payment of $10,000, which they ultimately did.
Nos. 800 & 807.

See
--- ECF

The Court then considered briefing of both
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parties and required Defendants to submit—for in camera review—
financial statements, income tax returns, gross receipts
pertaining to Defendant AOE’s earnings, and a monthly income and
expense statement, all to consider whether Defendants were being
truthful about their inability to pay the full amount at once.
See ECF Nos. 800, 807, & 815.

On December 28, 2020, the Court

issued an order allowing for an installment plan.
(the “Payment Plan Order”).

ECF No. 819

The Payment Plan Order required

Defendants to immediately pay the prior custodial costs
($8,638.64) but allowed them to pay the remaining balance of the
$40,000 amount with an installment plan:
Defendants shall, by this Court’s Order,
jointly and severally pay monthly installments
of $500, to be paid by the end of the third
week of each month and to commence in January
2021; then, commencing on November 1, 2021,
such installments shall be increased to $1,000
per month, to be paid by the end of the third
week of each month, but with the remaining
balance of the $40,000 in enhanced permit
sanctions to be paid in full, by no later than
October 31, 2022. The Court cautions that a
failure to timely make such installment
payments may result in the Court declaring the
entire balance accelerated and immediately
due. Defendants have the option to pay the
balance in full at any time without penalty.
Id. at 7-8.
III. Motion for Sanctions & Payment in Full
On May 28, 2021, Plaintiff Barnes filed a motion
seeking sanctions against Defendants AOE and Henry for their

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outstanding payments under the above installment plan.
836 (the “Motion for Sanctions”).

ECF no.

In a characteristically

snarky brief rife with disrespect toward this Court (which the
Court will take up at a later time), counsel for Plaintiff
Barnes represented that Defendant Henry had only made one $500
payment in February 2021, and the remaining four monthly
payments had not been made.

Id.

Defendants responded that the delay resulted from
their attempts to obtain financing to pay the full remaining
balance of the enhanced sanctions, and they indicated that they
had now issued full payment to Plaintiff Barnes through his
counsel.

ECF No. 81 ¶¶ 4-5.

Defendants asked the Court to, “in

light of their good faith in paying the full permit sanctions
early,” decline to impose further sanctions.

Id. ¶ 4.

Plaintiff Barnes filed a reply arguing that the Court should
impose extensive monetary and nonmonetary sanctions, including
in part:
Barnes requests Henry pay for Barnes taking
his deposition and the deposition of Henry’s
current and former employees back to the date
he illegally transferred the permit from Sea
Hawaii Rafting, LLC to Aloha Ocean Excursions,
LLC. Barnes requests the Court allow Barnes to
depose
Henry
and
his
employees
as
a
nonmonetary sanction and Henry should pay for
these depositions as a monetary sanction. He
should also be ordered to turn over certain
information to Barnes. Barnes next requests
this Court order Henry to pay for such
depositions and attorney’s fees as a form of
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monetary sanctions. Barnes makes this request
in addition to requesting whatever sanctions
the Court finds appropriate for Henry’s
repeated refusal to obey this Court’s orders.
ECF No. 842.

The Court held a hearing on June 22, 2021.

DISCUSSION
It is well established that federal district courts
have inherent power to levy sanctions for “willful disobedience
of a court order . . . or when the losing party has acted in bad
faith, vexatiously, wantonly, or for oppressive reasons. . . .”
Fink v. Gomez, 239 F.3d 989, 991 (9th Cir. 2001) (citing Roadway
Express, Inc. v. Piper, 447 U.S. 752, 766, 100 S. Ct. 2455, 65
L. Ed. 2d 88 (1980)); see also 18 U.S.C. § 401.

Courts may also

resort to their inherent power to impose attorney’s fees as a
sanction for bad-faith conduct or for “willful disobedience of a
court order.”

Chambers v. NASCO, Inc., 501 U.S. 32, 45-50, 111

S. Ct. 2123, 115 L. Ed. 2d 27 (1991).

The Court is mindful that

its inherent power to sanction must be exercised with “restraint
and discretion.”

B.K.B. v. Maui Police Dept., 276 F.3d 1091,

1108 (9th Cir. 2002) (quoting Chambers, 501 U.S. at 44-45, 4550, 111 S. Ct. 2123, 115 L. Ed. 2d 27).
As discussed above, the Court has been managing this
sanctions matter for almost two years.

Defendants Henry and AOE

have twice been sanctioned for their continuous wrongful conduct

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before the Court surrounding their apparent unwillingness to
comply with court directives—from wrongfully transferring the
permit in the first place, to disobeying the Court’s
instructions to have the permit reissued to Defendant SHR, to
finally failing to comply with the Court’s order requiring
monthly payments for the enhanced sanctions.
Defendants AOE and Henry are well aware of the Court’s
expectation that they comply with the Court’s directives.

The

Court went out of its way to fashion a reasonable payment plan
fair to both parties, which would ensure that Defendants were
able to feasibly pay the enhanced sanctions over time and that
Plaintiff Barnes was able to recover his losses relating to the
permit.

Yet Defendants made only one payment before stopping

altogether.

And only once the matter was brought to the Court’s

attention by Plaintiff Barnes did Defendants issue payment for
the full amount owed under the payment plan.
While it is true that Defendants ultimately made the
full payment for the appraised value of the permit, it is
undisputed that they knowingly violated the Court’s Payment Plan
Order in failing to timely make the required payments for four
months.

They did not request any payment extension from the

Court, nor did they even communicate with Plaintiff Barnes to
inform him that they were seeking to obtain the financing to pay
in full.

The voluminous record in this case is clear that
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Plaintiff Barnes is struggling financially, and he certainly was
relying on these monthly payments.
With those facts in mind, the Court finds that
Defendants Henry and AOE willfully disobeyed the Court’s Payment
Plan Order and acted wrongfully, tantamount to bad faith, by
failing—yet again—to comply with the Court’s order and by
failing to reasonably request an extension.

The Court finds

that $1,000 is an appropriate compensatory sanction to
compensate Plaintiff Barnes for the delay in payment, while also
considering the fact that payment in full was ultimately made
before the October 2022 deadline.1/
The Court also finds that Plaintiff Barnes is entitled
to recover his reasonable attorney’s fees and costs stemming
from the delay in payment and the filing of the Motion for
Sanctions.
All this said, the Court makes unequivocally clear
that the issue of sanctions and enhanced sanctions stemming from
the wrongful transfer of the commercial-use permit is now over.
The $25,000 initial sanctions have been paid in full; the prior

1/

The Court notes that, at the hearing, counsel for Plaintiff Barnes
suggested that the Court use its prior calculation of Plaintiff Barnes’s
daily maintenance award at $68 per day to repay the four months of expenses
without receiving payment. The Court declines to use that amount (which
would add up to over $10,000), to calculate sanctions given that even if
Defendants had timely made each of the four payments over the four months,
Plaintiff Barnes would only have received $2,000 during that period ($500 per
month x 4). And Plaintiff Barnes has not offered any other evidence or
explanation that the delay in payment caused him additional damages.

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custodial costs have been paid in full; the $40,000 value of the
permit has been paid in full; the ongoing custodial costs are
being paid and current; and the attorney’s fees have been
calculated and are subject to the repayment conditions outlined
in Judge Porter’s F&R regarding attorney’s fees, ECF No. 834.
Moreover, the parties both agreed over a year ago that asking
DOBOR to reissue the permit would risk voiding the permit
altogether.

See Enhanced Sanctions Order at 18, 32 n.15.

The Court rejects Plaintiff Barnes’s requests to
sanction Defendants by having them pay for additional
depositions or discovery to be conducted by Plaintiff Barnes.
Likewise, the Court declines to calculate additional sanction
amounts stemming from the permit transfer two years ago, which
led to the Court’s detailed Enhanced Sanctions Order and
subsequent orders calculating those sanction amounts aimed at
compensating Plaintiff Barnes for Defendants’ sanctionable
conduct.

Plaintiff Barnes has been given ample opportunity to

conduct discovery or provide other evidence relevant to
calculating the enhanced sanctions.2/

2/

The Court relied on the

Counsel for Plaintiff Barnes has complained repeatedly about his
inability to conduct discovery in this case, yet he is the one who has not
availed himself of the discovery mechanisms available in federal court.
Indeed, in May 2019 before the sanctions matters even arose, the Court issued
a minute order allowing Barnes to file a motion to reopen a previously
withdrawn motion to allow for additional discovery and to modify the Rule 16
scheduling order. Plaintiff Barnes never took the Court up on that offer.
Likewise, in April 2020, Magistrate Judge Porter issued an order denying
Plaintiff Barnes’s motion to compel, but he did so without prejudice to

(Continued . . . )
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parties’ evidence and briefing, as well as the independent
appraiser, to fairly calculate the compensatory sanctions.

In

the Court’s view, it has used its inherent power to compensate
the wronged party (Plaintiff Barnes) by imposing sanctions on
Defendants to pay for his actual physical loss (the value of the
permit, custodial fees, and attorney’s fees and costs) stemming
from the wrongful conduct (Defendants’ wrongful transfer of the
permit and subsequent refusal to reissue it and abide by the
payment plan).3/
The sanctions stemming from the transfer of the permit
are hereby put to rest, subject to Plaintiff Barnes pursuing his
claims in his Fourth Amended Complaint and any contrary rulings
by the Ninth Circuit in the pending appeals.

Additional

exceptions are the sanctions and attorney’s fees imposed by this
Order and the monitoring of compliance with payments of ongoing
custodial fees and attorney’s fees.4/

Plaintiff Barnes refiling a motion that complied with the rules. Plaintiff
Barnes never filed another motion. And finally, the Court in its Enhanced
Sanctions Order expressly allowed Plaintiff Barnes to conduct limited
discovery relevant to calculating the value of the permit. He never did so.
3/
This does not prevent Plaintiff Barnes from pursuing other discovery
not related to the matter of sanctions arising from the transfer of the
commercial-use permit, as permitted under any applicable federal and local
rules. If he wishes to pursue those avenues, he must—as the Court has
advised him countless times—take them up with the Magistrate Judge pursuant
to the local rules.
4/
The Court notes that the attorney’s fees are precatory and subject
to other repayment conditions outlined in Judge Porter’s F&R, ECF No. 834,
adopted as the opinion of this Court, ECF No. 835.

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CONCLUSION
The Motion for Sanctions, ECF No. 836 is GRANTED IN
PART AND DENIED IN PART.

The Motion is GRANTED as follows:

The

Court ORDERS that Defendants Henry and AOE (1) pay a
compensatory sanction in the amount of $1,000 to Plaintiff
Barnes for his damages resulting from the four-month delay in
payment and (2) pay Plaintiff Barnes’s attorney’s fees and costs
stemming from the delay in payment and the filing of the Motion
for Sanctions.

The Motion is DENIED in all other respects.

The compensatory sanction must be paid within 14 days
issuance of this Order.

Plaintiff Barnes is directed to submit

evidence of his attorney’s fees to Magistrate Judge Porter
pursuant to the local rules within 20 days issuance of this
Order.

IT IS SO ORDERED.
DATED:

Honolulu, Hawai`i, July 1, 2021.

________________________________
Alan C. Kay
Sr. United States District Judge

Barnes v. Sea Hawaii Rafting, LLC, Kris Henry, M/V Tehani, et al., Civ. No.
13-00002 ACK-RLP, Order Granting in Part and Denying in Part Plaintiff
Barnes’s Motion for Sanctions [ECF No. 836]

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