Reading International, Inc. v. The Malulani Group, Limited

Filing 96

ORDER (1) GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT, OR, IN THE ALTERNATIVE, MOTION FOR PARTIAL SUMMARY JUDGMENT, DOC. NO. 39 ; AND (2) DENYING PLAINTIFF'S COUNTER-MOTION FOR SUMMARY JUDGMENT, DOC. NO. [5 8]. Signed by JUDGE J. MICHAEL SEABRIGHT on 4/22/2014. [Order follows hearing held 4/15/2014. Minutes of hearing: doc no. 92 ] (afc)CERTIFICATE OF SERVICEParticipants registered to recei ve electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII

READING INTERNATIONAL, a
Nevada corporation,

)
)
)
Plaintiff,
)
)
vs.
)
)
THE MALULANI GROUP,
)
LIMITED, a Hawaii corporation,
)
)
Defendant.
)
_____________________________ )

CIV. NO. 13-00133 JMS-KSC
ORDER (1) GRANTING IN PART
AND DENYING IN PART
DEFENDANT’S MOTION FOR
SUMMARY JUDGMENT, OR, IN THE
ALTERNATIVE, MOTION FOR
PARTIAL SUMMARY JUDGMENT,
DOC. NO. 39; AND (2) DENYING
PLAINTIFF’S COUNTER-MOTION
FOR SUMMARY JUDGMENT, DOC.
NO. 58

ORDER (1) GRANTING IN PART AND DENYING IN PART
DEFENDANT’S MOTION FOR SUMMARY JUDGMENT, OR, IN THE
ALTERNATIVE, MOTION FOR PARTIAL SUMMARY JUDGMENT,
DOC. NO. 39; AND (2) DENYING PLAINTIFF’S COUNTER-MOTION
FOR SUMMARY JUDGMENT, DOC. NO. 58
I. INTRODUCTION
On March 19, 2013, Plaintiff Reading International (“Plaintiff” or
“Reading”) filed this action alleging that Defendant The Malulani Group, Limited
(“Defendant” or “TMG”) breached a settlement between the parties by failing to
provide timely financial statements for certain leased properties, provide access to
financial books and records, and certify that Defendant used its best efforts to
destroy certain materials from a prior litigation.

Currently before the court is Defendant’s Motion for Summary
Judgment, and Plaintiff’s Counter-Motion for Summary Judgment, in which the
parties dispute whether Defendant breached the parties’ agreement, whether any
breaches are curable, and whether Defendant cured the breaches. Based on the
following, the court finds that the undisputed facts establish that the breaches at
issue were subject to cure but that factual questions remain as to whether
Defendant did indeed cure some of those breaches. The court therefore GRANTS
in part and DENIES in part Defendant’s Motion for Summary Judgment, and
DENIES Plaintiff’s Counter-Motion for Summary Judgment.
II. BACKGROUND
A.

Factual Background
In 2006, Plaintiff purchased stock in Defendant’s subsidiary, Malulani

Investments Limited (“MIL”) for $1.8 million. See Doc. No. 40, Def.’s Concise
Statement of Facts (“CSF”) ¶ 1.1 Six months later, Plaintiff commenced litigation
against MIL and its directors in Hawaii state court (the “Hawaii Action”), after
which time Defendant intervened. Id. Plaintiff, a minority shareholder in MIL,
brought the Hawaii Action alleging that MIL refused to provide shareholder

1

Where the parties do not dispute a particular fact (or a portion of a fact) contained in a
CSF, the court cites directed to that party’s CSF.
2

information and blocked efforts by the minority-appointed director, James Cotter,
to participate in the management and direction of MIL. See Doc. No. 59, Pl.’s CSF
¶ 1. From June 2008 to February 2009, Plaintiff and Defendant mediated their
dispute, resulting in a July 2009 settlement. Doc. No. 40, Def.’s CSF ¶ 2.
Pursuant to the July 2009 settlement, Defendant repurchased its stock
from Plaintiff, and Plaintiff received $2.5 million in cash and a three-year interestbearing note for $6.75 million. Id. ¶ 3. This overall agreement was documented in
the following five interrelated agreements (“Settlement Documents”):
1.

Settlement Agreement dated July 2, 2009
(“Settlement Agreement”), Doc. No. 40-3, Def.’s
Ex. 2;

2.

Secured Promissory Note (“Promissory Note”),
Doc No. 40-4, Def.’s Ex. 3;

3.

Mortgage, Assignment of Leases and Rents,
Security Agreement, Financing Statement and
Fixture Filing dated July 2, 2009, encumbering
Defendant’s right, title, and interest in real
property referred to as the Kokua Market Property
(“Mortgage”), Doc. No. 40-5, Def.’s Ex. 4;

4.

Shareholder Pledge Agreement dated July 2, 2009,
in which Defendant granted a security interest in
and pledged to Plaintiff all of its right, title, and
interest in the shares of MBL Maryland, Inc.,
whose sole asset is a property known as the West
Maui Center (“MBL Pledge Agreement”), Doc.
No. 40-6, Def.’s Ex. 5; and
3

5.

Collateral Assignment of Membership Interests
dated July 2, 2009, in which Defendant granted a
security interest and pledged to Plaintiff all of its
right, title, and interest in its membership in
Lahaina C, LLC, whose sole asset is a property
known as the Kaiser Property (“Lahaina Pledge
Agreement”), Doc. No., 40-7, Def.’s Ex. 6.

See also Doc. No. 40, Def.’s CSF ¶ 3.
The court outlines the relevant provisions of these documents and the
facts regarding Defendant’s alleged breaches as follows:
1.

The Settlement Agreement
The Settlement Agreement is between Plaintiff, Magoon Acquisition

and Development, LLC, and James Cotter on the one hand (defined as “Plaintiff
Parties” in the Settlement Agreement), and Defendant, MIL, Easton Manson, John
Dwyer, Jr., Philip Gray, and Kenwei Chong on the other hand (defined as
“Defendant Parties” in the Settlement Agreement).
The Settlement Agreement provides that in exchange for Plaintiff’s
surrender of all of Plaintiff’s stock in Defendant companies and other
consideration, Defendant Parties shall (1) deliver a cashier’s check to Plaintiff for
$2.5 million; (2) issue the Promissory Note in the amount of $6.75 million; and

4

(3) secure the Promissory Note by providing the Mortgage on the Kokua Market
Property, the MBL Pledge Agreement, and the Lahaina Pledge Agreement. See
Doc. No. 40-3, Def.’s Ex. 2 § 2.2.
The Settlement Agreement also includes a provision regarding the
confidentiality and destruction of an investigatory report regarding James Cotter
(the “Kroll Report”), and an April 2, 2008 “Order Regarding Allegation of
Improper Purpose by Special Master Michael N. Tanoue” (the “Tanoue Order”).
The Settlement Agreement allows Defendant Parties forty-five days to procure and
destroy all copies of these documents that are either in their possession (§ 5.2(a) of
the Settlement Agreement) or in the possession of any related entities (§ 5.2(b) of
the Settlement Agreement), and to certify in writing that their best efforts were
used to comply with these obligations. Id. § 5.2(c). The Settlement Agreement
further outlines restrictions on Defendant Parties’ obligations to keep these
documents confidential going forward. Id. § 5.2(d)-(g). The Settlement
Agreement states that “this Section is material to this Agreement and has been
necessary to induce Plaintiff Parties to enter this agreement.” Id. § 5.2.
Finally, the Settlement Agreement provides that “time is of the
essence as to each and every provision of this Agreement.” Id. § 8.18. The
Settlement Agreement also includes an integration clause, stating that “[t]his
5

Agreement (including the exhibits hereto which are an integral part hereof and the
documents and instruments whose execution and delivery are contemplated herein)
contains the final and entire agreement and understanding of the Parties regarding
the subject matter hereof.” Id. § 8.13.2
2.

The Promissory Note
The Promissory Note states that Defendant promises to pay Plaintiff

$6.75 million, plus interest at the rate of 6.25 percent per annum starting on the
date of the Note. Doc. No. 40-4, Def.’s Ex. 3. These payments are due on a
quarterly basis starting January 1, 2010. Id.
The Promissory Note further includes the following default provision:
3.

Event of Default; Default Interest; Late Charge.
(a) Upon the occurrence of an Event of Default
(as hereinbelow defined), the Indebtedness shall become
immediately due and payable at the option of Holder. If
Maker fails to pay any sums due under this Note or any
instrument securing this Note on the date when the same
is due, Maker shall pay to Holder upon demand a late
charge on such sum in an amount equal to the lesser of (i)
five percent (5%) of such unpaid amount, and (ii) the
maximum late charge permitted to be charged under the
laws of the State of Hawaii (a “Late Charge”). Maker
will also pay to Holder, after an Event of Default occurs,
in addition to the amount due and any Late Charges, all
reasonable costs in collecting, securing, or attempting to

2

The “documents and instruments whose execution and delivery are contemplated
herein” include the Mortgage, the MBL Pledge Agreement, and the Lahaina Pledge Agreement.
See Doc. No. 40-3, Def.’s Ex. 2 § 2.2.
6

collect or secure this Note or any instrument securing this
Note, including, without limitation, court costs and
reasonable attorneys’ fees (including reasonable
attorneys’ fees on any appeal by either Maker or Holder
and in any bankruptcy proceedings).
(b) As used herein, the term “Event of Default”
shall mean the occurrence of one or more of the
following: (i) if Maker fails to make any scheduled
payment of principal or interest on the date such payment
is due, (ii) if Maker fails to pay any other amount payable
pursuant to the Loan Documents (excluding principal due
on the Maturity Date) within five (5) days after written
notice from Holder, (iii) if Maker fails to pay the
outstanding Indebtedness on the Maturity Date; or (iv)
upon the occurrence of an “Event of Default” as such
term is defined in the Mortgage or an other Loan
Document.
Id. § 3.
3.
The Mortgage, MBL Pledge Agreement, and Lahaina Pledge
Agreement
The Promissory Note was secured by the (1) Mortgage on the Kokua
Market Property, (2) the MBL Pledge Agreement pledging TMG’s interests in
MBL Maryland Inc., whose sole asset was the West Maui Center, and (3) the
Lahaina Pledge Agreement pledging TMG’s interests in Lahaina C, LLC, whose
sole asset was the Kaiser Property. See Doc. No. 40-3, Def.’s Ex. 2 § 2.2.3; Doc.
No. 40-4, Def.’s Ex. 3 § 6. The court collectively refers to the Kokua Market
Property, the West Maui Center, and the Kaiser Property as the “Collateral
Properties.”
7

The Mortgage, MBL Pledge Agreement, and Lahaina Pledge
Agreement all include similar language requiring Defendant to provide Plaintiff
“(i) annually within forty (40) days following the end of each calendar year, and
(ii) within twenty (20) days following the end of each calendar quarter a true,
complete, correct and accurate copy of [the Defendant company-at-issue’s]
unaudited financial statement” for the period, “including a statement of operations
(profit and loss), a statement of cash flows, a calculation of net operating income, a
balance sheet, an aged accounts receivable report and such other information or
reports as shall be requested by [Plaintiff].” Doc. No. 40-5, Def.’s Ex. 4 § 2.5(b);
Doc. No. 40-6, Def.’s Ex. 5 § 15.3(b); Doc. No. 40-7, Def.’s Ex. 6 § 15.3(b). The
Mortgage further requires that Defendant provide for the Kokua Market Property
“within twenty (20) days following the end of each calendar quarter a true,
complete, correct and accurate rent roll and occupancy report for such period and
such other occupancy and rate statistics” as Plaintiff shall request in its discretion.
Doc. No. 40-5, Def.’s Ex. 4 § 2.5(c).
The Mortgage, MBL Pledge Agreement, and Lahaina Pledge
Agreement also include similar provisions defining an “Event of Default” and
outlining the timing for an opportunity to cure. For example, the Mortgage
provides:
8

Section 7.11
Event of Default defined. The
occurrence of one or more of the following events shall
be an “Event of Default” hereunder:
(i)
the occurrence of the events identified elsewhere in
the Note, this Mortgage, or the other Loan Documents as
constituting an “Event of Default” hereunder or
thereunder;
(ii) any breach by the “Defendant Party” (as such term
is defined in the Settlement Agreement) of an obligation
of such party under the Settlement Agreement or any
other Settlement Agreement;
...
(vi) if Mortgagor shall fail to deliver to the Mortgagor
[sic] any of the Financial Statements as required pursuant
to Section 2.5 hereof;
...
(x) if a default shall be continuing under any of the
other obligations, agreements, undertakings, terms,
covenants, provisions or conditions of this Mortgage or
any other Loan Document not otherwise referred to in
this Section for ten (10) days after notice to the
Mortgagor, in the case of any default which can be cured
by the payment of a sum of money or for thirty (30) days
after written notice, in the case of any other default
(unless otherwise provided herein or in such other Loan
Document); provided, however, that if such nonmonetary default under this clause (i) is susceptible of
cure but cannot reasonably be cured within such default
within such thirty (30) day period and thereafter
diligently and expeditiously proceeds to cure the same,
such thirty (30) day period and thereafter shall be
extended for such time as is reasonably necessary for
Mortgagor in the exercise of due diligence to cure such
default, but in no event shall such period exceed ninety
(90) days after the original date.

9

Doc. No. 40-5, Def.’s Ex. 4 § 7.11. The Mortgage further defines “Loan
Document” to include “the Note, this Mortgage or any other instrument securing
the Note.” Id. at “GRANT.”
The MBL Pledge Agreement and the Lahaina Pledge Agreement
include similar clauses. For example, the MBL Pledge Agreement provides:
7.1. Definition of Events of Default. Any of the
following specified events shall constitute an “Event of
Default” under this Agreement:
(a) the occurrence of the events identified elsewhere in
this Agreement or the Loan Documents as constituting an
“Event of Default” hereunder or thereunder;
(b) subject to subparagraph 7.1(i) below, any breach
by a “Defendant Party” (as such term is defined in the
Settlement Agreement) of an obligation of such party
under the Settlement Agreement or any other Settlement
Agreement;
...
(g) if [Defendant] shall fail to deliver to [Plainitff] any
of the Financial Statements required pursuant to Section
15.3 hereof;
...
(i)
if a default shall be continuing under any of the
other obligations, agreements, undertakings, terms,
covenants, provisions or conditions of this Agreement,
the Lahaina Pledge, Mortgage, Note or any other Loan
Document not otherwise referred to in this Section for ten
(10) days after notice to [Defendant], in the case of any
default which can be cured by the payment of a sum of
money or for thirty (30) days after written notice, in the
case of any other default (unless otherwise provided
herein or in such other Loan Document); provided,
however, that if such non-monetary default under this
clause (i) is susceptible of cure but cannot reasonably be
10

cured within such default within such thirty (30) day
period and provided further that [Defendant] shall have
commenced to cure such default within such thirty (30)
day period and thereafter diligently and expeditiously
proceeds to cure the same, such thirty (30) day period
and thereafter shall be extended for such time as is
reasonably necessary for [Defendant] in the exercise of
due diligence to cure such default, but in no event shall
such period exceed ninety (90) days after the original
notice.
Doc. No. 40-6, Def.’s Ex. 5 § 7.1. In comparison to the Mortgage defining “Loan
Documents” to include “the Note, this Mortgage or any other instrument securing
the Note,” Doc. No. 40-5, Def.’s Ex. 4 at “GRANT,” the MBL Pledge Agreement
defines “Loan Documents” as “the Note, this Agreement, the Mortgage or any of
the other instruments referenced in the foregoing documents.” Doc. No. 40-6,
Def.’s Ex. 5 § 1.2. The language of Lahaina Pledge Agreement -- in outlining the
opportunity to cure and definition of “Loan Documents” -- is substantially similar
to the MBL Pledge Agreement. See Doc. No. 40-7, Def.’s Ex. 6 § 7.1.
Like the Settlement Agreement, the Mortgage, Lahaina Pledge
Agreement, and MBL Pledge Agreement also include provisions stating that time
is of the essence with respect to the performance the obligations under these
documents. Doc. No. 40-5, Def.’s Ex. 4 § 8.9; Doc. No. 40-6, Def.’s Ex. 5 § 23(f);
Doc. No. 40-7, Def.’s Ex. 6 § 23(f).

11

4.

Plaintiff’s Allegations of Defaults by Defendant
Defendant did not provide Plaintiff quarterly financial information

within twenty days after the close of third quarter of 2009. As a result, Plaintiff
sent Defendant a November 13, 2009 notice asserting that this failure to provide
this information was an event of default under the Mortgage, MBL Pledge
Agreement, and Lahaina Pledge Agreement. Doc. No. 40-10, Def.’s Ex. 9, at 2-3.
Plaintiff demanded full payment of the principal of the Note, and further elected,
among other things, to inspect the books and records of MBL Maryland and
Lahaina C. Id. at 5.
Defendant responded on November 16, 2009, stating its understanding
that the obligation to make payments under the Promissory Note and provide
financial information did not begin until the end of the first full quarter, which
would be December 31, 2009. Doc. No. 40-11, Def.’s Ex. 10. Defendant
nonetheless provided profit and loss statements, cash flow statements, and balance
sheets for the Collateral Properties. Id.
On November 19, 2009, Plaintiff notified Defendant that (1) it
disagreed with Defendant’s interpretation of when the financial reporting
obligations began, (2) the events of default were not curable, and (3) Plaintiff
wished to proceed with mediation. Doc. No. 40-12, Def.’s Ex. 11. On December
12

4, 2009, Plaintiff reiterated its request to inspect and copy the books for MBL and
Lahaina C, and asserted that such refusal was an additional event of default. Doc.
No. 40-15, Def.’s Ex. 14.
On December 16, 2009, Plaintiff notified Defendant that another
default occurred when Defendant failed to provide a complete certification
regarding the Kroll Document and the Tanoue Order as required by § 5.2 of the
Settlement Agreement. Doc. No. 40-17, Def.’s Ex. 16. On August 14, 2009,
Defendant had provided Plaintiff two “Certification[s] by Defendant Parties” -- the
first signed by all Defendant Parties stating that they used their best efforts to
comply with § 5.2(a) of the Settlement Agreement requiring them to destroy all
copies of this documents, and the second signed by all Defendant Parties except
Philip Gray and Kenwei Chong that they used their best efforts to comply with
§ 5.2(b) of the Settlement Agreement requiring them to destroy all copies of these
documents in the possession or control of their related entities. Doc. No. 40-9,
Def.’s Ex. 8. According to Plaintiff, Philip Gray’s and Kenwei Chong’s failure to
certify compliance with § 5.2(b) constituted a default. See Doc. No. 40-17, Def.’s
Ex. 16. On December 21, 2009, TMG provided amended certifications under
§ 5.2 of the Settlement Agreement for Philip Gray and Kenwei Chong. Doc. No.
40, Def.’s CSF ¶ 8; Doc. No. 40-18, Def.’s Ex. 17.
13

On December 30, 2009, the parties began mediation. See Doc. No.
40-14, Def.’s Ex. 13; Doc. No. 40-25, Def.’s Ex. 24. During this process, the
parties agreed for Plaintiff to perform its inspection of records on February 23,
2010, see Doc. No. 40-25, Def.’s Ex. 24, and Plaintiff conducted an inspection on
this date. Doc. No. 57, Pl.’s Resp. to Def.’s CSF ¶ 19. On October 26, 2010,
Plaintiff terminated mediation. Doc. No. 40-37, Def.’s Ex. 36.
5.

The California Action
In May 2011, Defendant notified Plaintiff that it intended to prepay

the balance on the Promissory Note, see Doc. No. 40-40, Def.’s Ex. 39, and on
June 7, 2011, Defendant made such payment. Doc. No. 40-43, Def.’s Ex. 42. As a
result of this prepayment, the Mortgage, MBL Pledge Agreement, and Lahaina
Pledge Agreement were terminated. Doc. No. 40, Def.’s CSF ¶ 25.
In the meantime, on May 12, 2011, Plaintiff filed a complaint in
California state court asserting that Defendant breached the parties’ agreements
(the same alleged breaches as in this action) (the “California Action”). See Doc.
No. 40-54, Def.’s Ex. 51. On December 15, 2011, the California Action was
dismissed for lack of personal jurisdiction, Doc. No. 40-55, Def.’s Ex. 52, and on
February 17, 2012, Defendant was awarded its attorneys’ fees. Doc. No. 40-56,

14

Def.’s Ex. 53. These determinations were affirmed on appeal. Doc. No. 40-57,
Def.’s Ex. 54.
B.

Procedural History
On March 19, 2013, Plaintiff filed this action alleging claims against

Defendant titled (1) Breach of Secured Promissory Note; (2) Breach of Contract;
and (3) Declaratory Relief. Plaintiff’s claim for damages in this action includes not
only the payment of default penalties as outlined in the parties’ agreements, but
also the attorneys’ fees and costs incurred in connection with the California Action.
See Doc. No. 40, Def.’s CSF ¶ 30.
On January 22, 2014, Defendant filed its Motion for Summary
Judgment. Doc. No. 30. Plaintiff filed an Opposition and Counter-Motion on
March 3, 2014, Doc. No. 58, Defendant filed a Reply and Opposition to the
Counter-Motion on March 10, 2014, Doc. No. 62, and Plaintiff filed a Reply in
///
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15

support of its Counter-Motion on March 17, 2014. Doc. No. 71.3 A hearing was
held on April 14, 2014.
III. STANDARD OF REVIEW
Summary judgment is proper where there is no genuine issue of
material fact and the moving party is entitled to judgment as a matter of law. Fed.
R. Civ. P. 56(a). Rule 56(a) mandates summary judgment “against a party who
fails to make a showing sufficient to establish the existence of an element essential
to the party’s case, and on which that party will bear the burden of proof at trial.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also Broussard v. Univ. of
Cal. at Berkeley, 192 F.3d 1252, 1258 (9th Cir. 1999).
“A party seeking summary judgment bears the initial burden of
informing the court of the basis for its motion and of identifying those portions of
the pleadings and discovery responses that demonstrate the absence of a genuine
issue of material fact.” Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th
Cir. 2007) (citing Celotex, 477 U.S. at 323); see also Jespersen v. Harrah’s

3

Defendant also filed Objections to the Declarations of Rex Y. Fujichaku and S. Craig
Tompkins, Doc. No. 63, and Plaintiff filed a response. Doc. No. 72. These Declarations are
largely unhelpful as they merely restate the language any of the Settlement Documents or
otherwise purport to offer Plaintiff’s subjective intent as to certain provisions. As described
below, neither party asserts that the agreements are ambiguous and the court likewise sees no
ambiguity that would permit consideration of extrinsic evidence to interpret the Settlement
Documents.
16

Operating Co., 392 F.3d 1076, 1079 (9th Cir. 2004). “When the moving party has
carried its burden under Rule 56[(a)], its opponent must do more than simply show
that there is some metaphysical doubt as to the material facts [and] come forward
with specific facts showing that there is a genuine issue for trial.” Matsushita
Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586-87 (1986) (citation and internal
quotation signals omitted); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
247-48 (1986) (stating that a party cannot “rest upon the mere allegations or
denials of his pleading” in opposing summary judgment).
“An issue is ‘genuine’ only if there is a sufficient evidentiary basis on
which a reasonable fact finder could find for the nonmoving party, and a dispute is
‘material’ only if it could affect the outcome of the suit under the governing law.”
In re Barboza, 545 F.3d 702, 707 (9th Cir. 2008) (citing Anderson, 477 U.S. at
248). When considering the evidence on a motion for summary judgment, the
court must draw all reasonable inferences on behalf of the nonmoving party.
Matsushita Elec. Indus. Co., 475 U.S. at 587; see also Posey v. Lake Pend Oreille
Sch. Dist. No. 84, 546 F.3d 1121, 1126 (9th Cir. 2008) (stating that “the evidence
of [the nonmovant] is to be believed, and all justifiable inferences are to be drawn
in his favor.” (citations omitted)).

17

IV. ANALYSIS
The parties raise opposing summary judgment arguments regarding
whether Defendant breached the Settlement Documents, whether those breaches
were subject to the cure provisions provided in some of the Settlement Documents,
and if so, whether Defendant timely cured any alleged breach.4 The court first
outlines contract interpretation principles applicable to the Settlement Documents,
and then addresses each alleged breach in turn.
A.

Contract Interpretation Principles Relevant to the Settlement
Documents
“[A]s a general rule, the construction and legal effect to be given a

contract is a question of law.” Found. Int’l, Inc. v. E.T. Ige Const., Inc., 102 Haw.
487, 494-95, 78 P.3d 23, 30-31 (2003) (citation and quotations omitted).5 “Absent
an ambiguity, contract terms should be interpreted according to their plain,
ordinary, and accepted sense in common speech.” Id. at 495, 78 P.3d at 31
(citation and quotations omitted); see also Amfac, Inc. v. Waikiki Beachcomber Inv.
Co., 74 Haw. 85, 108, 839 P.2d 10, 24 (1992) (providing that “[t]erms of a contract

4

Defendant also argued that Plaintiff is not entitled to its attorneys’ fees from the
California Action. Doc. No. 39, Def.’s Mot. at 2. At the April 14, 2014 hearing, Defendant
clarified that it was not asking the court to rule on this issue at this time.
5

Each of the Settlement Documents provides that Hawaii law applies, and the parties do
not dispute that Hawaii law applies.
18

should be interpreted according to their plain, ordinary and accepted use in
common speech, unless the contract indicates a different meaning”). Context
matters -- “a contract should be construed as a whole and its meaning determined
from the entire context and not from any particular word, phrase, or clause.” Haw.
Med. Ass’n v. Haw. Med. Serv. Ass’n, Inc., 113 Haw. 77, 92, 148 P.3d 1179, 1194
(2006) (citations and quotations omitted). The court looks “no further than the
four corners of the contract to determine whether an ambiguity exists,” and “the
parties’ disagreement as to the meaning of a contract or its terms does not render
clear language ambiguous.” Stanford Carr Dev. Corp. v. Unity House, Inc., 111
Haw. 286, 298, 141 P.3d 459, 471 (2006) (citations and quotations omitted). An
“ambiguity is found to exist . . . only when the contract, taken as a whole, is
reasonably subject to differing interpretation.” Sturla, Inc. v. Fireman’s Fund Ins.
Co., 67 Haw. 203, 209-10, 684 P.2d 960, 964 (1984).
In this action, the parties’ agreement is not encompassed by a single
document. Rather, the Settlement Documents, taken together, comprise the overall
agreement between the parties -- the Settlement Documents reference one another
and they were executed as part and parcel to settle the Hawaii Action. Indeed, the
Settlement Agreement, the only Settlement Document to include an integration
provision, provides that the parties’ agreement is encompassed by all of the
19

Settlement Documents as a whole -- it provides that “[t]his Agreement (including
the exhibits hereto which are an integral part hereof and the documents and
instruments whose execution and delivery are contemplated herein) contains the
final and entire agreement and understanding of the Parties regarding the subject
matter hereof.” Doc. No. 40-3, Def.’s Ex. 2 § 8.13. Thus, the court interprets each
of the provisions at issue by considering not only the particular Settlement
Document in which the provision appears, but also in context of all the Settlement
Documents as a whole.
B.

Failure to Comply with § 5.2 of the Settlement Agreement
The Complaint asserts that Defendant breached the Settlement

Agreement by failing to timely certify compliance with § 5.2 regarding the
destruction of the Kroll Report and the Tanoue Order. See Doc. No. 1, Compl.
¶ 36. The undisputed evidence establishes that while all “Defendant Parties”
timely certified compliance with § 5.2(a) of the Settlement Agreement that they
had destroyed these documents, Philip Gray and Kenwei Chong failed to certify
pursuant to § 5.2(b) that they had used their best efforts to procure and destroy all
copies of these documents in possession of related entities. See Doc. No. 40-9,
Def.’s Ex. 8. Once Plaintiff notified Defendant of this deficiency, Defendant

20

provided a certification as to Section 5.2(b) signed by Philip Gray and Kenwei
Chong. Doc. No. 40-18, Def.’s Ex. 17.
The Settlement Agreement does not include a cure provision, and as a
result, the the parties dispute, among other things, whether a breach of the
Settlement Agreement takes benefit of the cure provisions provided in the other
Settlement Documents, and whether a violation of § 5.2 is susceptible to cure.6
1.

Whether a Breach of the Settlement Agreement Is Subject to Cure
Although the Settlement Agreement does not itself contain a cure

provision, as explained above, the Settlement Documents together comprise the
parties’ entire agreement. The question is therefore whether the cure provisions
contained in either the Mortgage, Lahaina Pledge Agreement, or MBL Pledge
Agreement are limited to each of those agreements or whether they apply to
breaches of the Settlement Agreement as well. Although the parties present
opposing interpretations of the cure provisions, neither party argues that they are
ambiguous. The court agrees there is no ambiguity, and construing the contract
terms “according to their plain, ordinary, and accepted sense in common speech,”

6

The parties also dispute (1) whether a breach occurred, and (2) whether such breach
was material. Because the court finds that Defendant was permitted to cure a breach of
§ 5.2 and in fact cured any purported breach, the court need not address these additional
arguments.
21

finds that the cure provision in the MBL Pledge Agreement applies to breaches of
the Settlement Agreement. See Found. Int’l, Inc., 102 Haw. at 495, 78 P.3d at 31.
The cure provision of the MBL Pledge Agreement7 includes (1) a
subsection outlining what events constitute an “event of default,” and (2) a
subsection providing the deadlines by which a party has the opportunity to cure.
Doc. No. 40-6, Def.’s Ex. 5 § 7.1. The first subsection outlines that an “event of
default” includes, among other things, “subject to subparagraph 7.1(i) below, any
breach by a Defendant Party . . . of an obligation of such party under the Settlement
Agreement or any other Settlement Document.” Id. § 7.1(b) (emphasis added).
Thus, a breach of the Settlement Agreement is “subject to subparagraph 7.1(i).” In
turn, § 7.1(i), the notice and cure subsection, provides:
(i)
if a default shall be continuing under any of the
other obligations, agreements, undertakings, terms,
covenants, provisions or conditions of this Agreement,
the MBL Pledge, Mortgage, Note or any other Loan
Document not otherwise referred to in this Section . . .
for thirty (30) days after written notice, in the case of any
[nonmonetary] default (unless otherwise provided herein
or in such other Loan Document); . . .
Although the notice and cure subsection does not expressly state that
it applies to breaches of the Settlement Agreement, there is ample language in the
7

The language in the Lahaina Pledge Agreement mirrors the language in the MBL
Pledge Agreement. See Doc. No. 40-7, Def.’s Ex. 6 § 7.1. For ease of reference, the court refers
only to the MBL Pledge Agreement.
22

MBL Pledge Agreement establishing that it does. The opportunity to cure applies
to defaults of “this Agreement, the MBL Pledge, Mortgage, Note or any other Loan
Document not otherwise referred to in this Section.” Id. And this language
includes the Settlement Agreement -- the MBL Pledge Agreement defines the term
“Loan Documents” to include “the Note, this Agreement, the Mortgage or any of
the other instruments referenced in the foregoing documents,” id. § 1.2 (emphasis
added), and the Settlement Agreement is plainly an “instrument referenced” in the
Note, the Mortgage, and the MBL Pledge Agreement.
That a breach of the Settlement Agreement is subject to cure is
confirmed by § 7.1(b), which provides that an “event of default” includes, “subject
to subparagraph 7.1(i) below,” any breach of the Settlement Agreement. In other
words, a breach of the Settlement Agreement is “subject to” the cure provisions
outlined in subsection 7.1(i). To construe the cure provision to not apply to
breaches of the Settlement Agreement would render this “subject to” language
meaningless. See Stanford Carr Dev. Corp., 111 Haw. at 297-98, 141 P.3d at 47071 (“We have long expressed our disapproval of interpreting a contract such that
any provision be rendered meaningless.”); see also Restatement (Second)
Contracts, § 203(a) (1981) (“[A]n interpretation which gives a reasonable, lawful,
and effective meaning to all the terms is preferred to an interpretation which leaves
23

a part unreasonable, unlawful, or of no effect.”) and cmt b (“Since an agreement is
interpreted as a whole, it is assumed in the first instance that no part of it is
superfluous.”).
Additional support for this construction is found in § 7.1(i)’s recital
that the opportunity to cure applies to defaults of “this Agreement, the MBL
Pledge, Mortgage, Note or any other Loan Document not otherwise referred to in
this Section.” (emphasis added). If “Loan Documents” was limited to all
Settlement Documents except the Settlement Agreement, the “or any other Loan
Document not otherwise referred to in this Section” would be superfluous where
the sentence already expressly references each of the other Settlement Documents.
See Stanford Carr Dev. Corp., 111 Haw. at 297-98, 141 P.3d at 470-71.
In opposition, Plaintiff relies entirely on the cure provision in the
Mortgage to argue that a breach of the Settlement Agreement is an “Event of
Default” under the Mortgage, and that the cure provision of the Mortgage does not
apply to such breaches. At the April 14, 2014 hearing, Plaintiff’s counsel further
clarified its argument, asserting that regardless of whether the MBL Pledge
Agreement and Lahaina Pledge Agreement allowed Defendant to cure breaches of
the Settlement Agreement, the cure provision of the Mortgage does not allow such

24

cure. Plaintiff therefore reasons that Defendant’s breach of the Settlement
Agreement was a non-curable breach of the Mortgage.
The court recognizes that the cure provision of the Mortgage differs in
several minor respects from that of the MBL Pledge Agreement and Lahaina
Pledge Agreement. In particular, the Mortgage defines “Loan Document” in a
more limited fashion than the MBL Pledge Agreement -- the Mortgage defines
“Loan Document” to include “the Note, this Mortgage or any other instrument
securing the Note,” Doc. No. 40-5, Def.’s Ex. 4 at “GRANT,” while the MBL
Pledge Agreement defines “Loan Documents” as “the Note, this Agreement, the
Mortgage or any of the other instruments referenced in the foregoing documents.”
Doc. No. 40-6, Def.’s Ex. 5 § 1.2. The Mortgage also excludes the “subject to
subparagraph 7.1(i) below” phrase in defining that a breach of the Settlement
Agreement is an “event of default.” Doc. No. 40-5, Def.’s Ex. 4 § 7.11.
The court rejects, however, that these minor differences suggest that
Defendant was not permitted to cure breaches of the Settlement Agreement where
the plain language of the MBL Pledge Agreement and Lahaina Pledge Agreement
suggest otherwise. The parties entered into each of these agreements as a part of
an overall, integrated settlement, the agreements all relate to one another, and the
cure provisions of the agreements are substantially similar. Given these facts, it
25

would be absurd to interpret the agreements separately such that a breach of the
Settlement Agreement on the one hand was subject to cure under the Lahaina
Pledge Agreement and MBL Pledge Agreement, but not subject to cure under the
Mortgage. The court instead determines the parties’ intent by construing the cure
provisions in context of the Settlement Documents as a whole. See Haw. Med.
Ass’n, 113 Haw. at 92, 148 P.3d at 1194.
In sum, the court finds that the agreements grant Defendant the right
to cure breaches of the Settlement Agreement.
2.

Whether a Failure to Provide Complete Certifications as Required
by § 5.2(c) of the Settlement Agreement Is Curable
There is no language in § 7.1(i) of the MBL Pledge Agreement

excluding any particular breaches from the opportunity to cure. Rather, § 7.1(i)
outlines that (1) “any default which can be cured by the payment of a sum of
money” must be cured within ten days of written notice, and (2) “any other
default” must be cured within thirty days of written notice, “provided, however,
that if such non-monetary default under this clause . . . is susceptible of cure but
cannot be cured within such thirty (30) day period,” the time for cure shall be
extended for a period of time reasonably necessary to cure, so long as that period
does not exceed ninety days after the original notice. Doc. No. 40-6, Def.’s Ex. 5

26

§ 7.1(i). Thus, § 7(i) suggests that there are two types of non-monetary defaults -those that are susceptible to cure (whether within thirty or ninety days of notice),
and those that are not susceptible to cure. And the plain language of § 7.1(i)
provides that “any” non-monetary default is provided the opportunity for cure.
Although the phrase “susceptible to cure” is not defined in any of the
agreements, its meaning is clear enough on its face, i.e., capable of being cured.8
Defendant’s failure to provide a certification for all “Defendant Parties” that they
complied with § 5.2(b) of the Settlement Agreement appears capable of cure -Defendant could cure this purported breach by providing a certification for Philip
Gray and Kenwei Chong. And there is no language in any of the agreements
excluding from cure breaches of § 5.2 of the Settlement Agreement (much less any
other obligation under the Settlement Documents). Rather, § 7.1(i) allows a party
to cure “any” non-monetary default, and that is exactly what Defendant did.
In opposition, Plaintiff points to the fact that the Settlement
Agreement provides that § 5.2 “is material to this Agreement and has been

8

Based on the list of “events of defaults” enumerated in § 7.1, it appears that some
defaults are not capable of being cured. For example, an “event of default” includes “the
occurrence of a Transfer that is not a Permitted Transfer,” Doc. No. 40-6, Def.’s Ex. 5 § 7.1(c),
with “Transfer” being defined as including, among other things, the transfer of any real property
or beneficial interest in the company at issue. Id. § 15.1. If Defendant made a non-Permitted
Transfer, Defendant may not be able to cure the default -- the property transferred would be in
the hands of the third party and not within Defendant’s control.
27

necessary to induce Plaintiff Parties to enter this agreement,” Doc. No. 40-3, Def.’s
Ex. 2 § 5.2, to argue that Defendant’s failure to comply with § 5.2 was a “vital”
and/or “material” breach that cannot be cured. Doc. No. 71, Pl.’s Reply at 3.
Stringing together caselaw applying contract principles from other states, Plaintiff
argues that where Defendant materially breaches the parties’ agreement, Defendant
is not permitted to cure. The court rejects this argument.
Plaintiff relies on L.K. Comstock & Co. v. United Engineers &
Constructors Inc., 880 F.2d 219 (9th Cir. 1989), which held under Arizona law that
a party need not provide the contract’s forty-eight hours notice before canceling a
contract where the defaulting party would be unable to cure the default in that
amount of time. Id. at 231-32. L.K. Comstock reasoned that this breach was
“vital,” as opposed to “curable,” and the notice provision should be interpreted to
apply to only those breaches that could in fact be cured. Id. at 232. In reaching
this conclusion, L.K. Comstock relied on Olin Corp. v. Central Indus., 576 F.2d
642 (5th Cir. 1978), which as L.K. Comstock explains, determined that a party may
rescind a contract without giving notice where the other party commits a vital

28

breach that frustrates the purpose of the contract. Id. at 232 (citing commentary on
Olin by 2 Corbin on Contracts § 1266, p. 442 (C. Kaufman supp. 1984)).9
This caselaw stands for the unremarkable proposition that where a
party commits a non-curable breach, the non-breaching party may terminate the
contract without providing the notice outlined in the parties’ agreement. This
caselaw does not apply here -- Defendant’s failure to comply fully with § 5.2 was
curable, and in fact cured, within thirty days after Plaintiff’s notice.
The court further rejects Plaintiff’s suggestion that a party may not
cure a material breach as contrary to 4000 Old Pali Road Partners v. Lone Star of
Kauai, Inc., 10 Haw. App. 162, 163, 862 P.2d 282, 283 (1993), which confirms the
common sense notion that material breaches are subject to the notice and cure
provisions provided in a contract. Specifically, 4000 Old Pali Road Partners held
under Hawaii law that even where a lessee materially breached a percentage lease
by failing to record its sales figures, such breach was subject to the notice and
opportunity to cure provided in the lease. Id. at 184, 862 P.2d at 292.
In sum, the court finds that a breach of § 5.2 of the Settlement
Agreement is subject to the cure provision provided in the MBL Pledge

9

Plaintiff also cites to a number of Hawaii cases in defining when a breach is material.
See Doc. No. 58, Pl.’s Opp’n at 19-23. These cases, however, do not address when a material
breach is curable, and are therefore unhelpful to the court’s analysis.
29

Agreement. Because it is undisputed that Defendant submitted a certification as to
§ 5.2(b) by Philip Gray and Kenwei Chong within thirty days of Plaintiff’s notice
of default, the court GRANTS Defendant’s Motion for Summary Judgment and
DENIES Plaintiff’s Motion for Summary Judgment on Plaintiff’s claims to the
extent based on Defendant’s failure to comply with § 5.2 of the Settlement
Agreement.
C.

Failure to Provide Financial Documents
The Complaint asserts that Defendant breached the Mortgage, MBL

Pledge Agreement, and Lahaina Pledge Agreement by failing to provide quarterly
financial information within twenty days following the end of the third quarter of
2009 (i.e., by October 20, 2009). Doc. No. 1, Compl. ¶¶ 38-49. The parties
dispute, among other things, whether any breach was curable, and whether
Defendant in fact cured such breach.10 Based on the following, the court finds no
genuine issue of material fact that any breach was subject to cure and in fact cured.
1.

Whether a Breach Is Subject to Cure
There is no language in any of the agreements suggesting that

Defendant’s obligation to provide financial information was excluded from the

10

Because the court finds that the breach was curable and in fact cured, the court need
not reach Defendant’s argument that it had no obligation to provide financial information for the
third quarter of 2009.
30

cure provisions provided in the agreements. Rather, the agreements expressly
define that an “event of default” includes the failure “to deliver to the Mortgagor
any of the Financial Statements” (in the case of the Mortgage), Doc. No. 40-5,
Def.’s Ex. 4, and/or a “default in the performance of [Defendant’s] obligations
under this Agreement” (in the case of the Lahaina Pledge Agreement), Doc. No.
40-7, Def.’s Ex. 6, and/or “if Pledgor shall fail to deliver to the Lender any of the
Financial Statements” (in the case of the MBL Pledge Agreement). Doc. No. 40-6,
Def.’s Ex. 5. Further, failure to provide financial information is capable of being
cured by Defendant providing the information. See also 4000 Old Pali Rd.
Partners, 10 Haw. App. at 186, 862 P.2d at 292.
In opposition, Plaintiff reiterates its argument that material breaches
are not curable, and that Defendant’s provision of quarterly financial information
was a material term of the parties’ agreement. As explained above, however, the
court finds that the cure provisions apply to both material and non-material
breaches. Thus, the court finds that Defendant was entitled to cure any failure to
provide quarterly financial information.
2.

Whether Defendant Cured the Breach
It is undisputed that on November 16, 2009 -- within thirty days of

Plaintiff’s notice of default -- Defendant provided Plaintiff a Profit and Loss
31

Statement, Cash Flow Statement, and Balance Sheet, together with the rent rolls
and occupancy reports for the Collateral Properties. Doc. No. 40-11, Def.’s Ex. 10.
Plaintiff argues, however, that Defendant’s efforts failed to cure the breach because
(1) “the certifications to the financial statements provided by [Defendant] failed to
state whether GAAP or other sound accounting principles were applied;” (2) the
statements did not include an aged accounts receivable report; and (3) the
statements did not include a balance sheet for the Kokua Market Property. Doc.
No. 58, Pl.’s Opp’n at 30-31. Viewed in a light most favorable to Plaintiff, the
evidence fails to support Plaintiff’s arguments.
As to Plaintiff’s first argument, none of the agreements requires
Defendant to attest that any particular accounting principles were applied. Rather,
the Mortgage provides:
All financial statements and other documents to be
delivered pursuant to this Mortgage shall (A) be in form
and substance acceptable to Mortgagee in Mortgagee’s
reasonable discretion, (B) be prepared in accordance with
sound accounting principles consistently applied, and (C)
be certified by Mortgagor as being true, correct, complete
and accurate in all material respects fairly reflecting the
results of operations and financial condition of
Mortgagor for the relevant period, if applicable.
Doc. No. 40-5, Def.’s Ex. 4 § 2.5. The Lahaina Pledge Agreement and MBL
Pledge Agreement contain substantially similar language. Doc. No. 40-6, Def.’s
32

Ex. 5 § 15.3(e); Doc. No. 40-7, Def.’s Ex. 6 § 15.3(e). Based on this language, the
agreements require only that Defendant prepare its financials using sound
accounting principles; they do not require Defendant to certify that it did so.11 The
court therefore finds no genuine issue of material fact supporting that Defendant
breached such obligation.12
As to the aged accounts receivable report, Defendant explains that it
had no information to report because, as stated in the balance sheets, Defendant
received all rent payments for 2009. See Doc. No. 62, Def.’s Reply at 16; Doc. No.
40-11, Def.’s Ex. 10 at TMG000247. In other words, Defendant provided Plaintiff
the relevant information -- that there were no aged accounts receivable to report.
As a result, the court finds no genuine issue of material fact that Defendant
complied with its obligation to provide an aged accounts receivable report.
Finally, as to Plaintiff’s assertion that Defendant failed to include a
balance sheet for the Kokua Market Property, Plaintiff provided a balance sheet
providing information for the Kokua Market Property, the West Maui Center, and

11

Defendant complied with the certification requirement -- Defendant certified that the
financial statements provided “are true, correct, complete and accurate in all material respects
and fairly represent the results of operations and financial condition of the respective companies
. . . .” Doc. No. 40-11, Def.’s Ex. 10.
12

Plaintiff presented no evidence that the financial statements were not prepared with
sound accounting principles, whether by expert or otherwise.
33

the Kaiser Property. This balance sheet included a column for each of these
properties, and provided within each of these columns the assets and liabilities for
these properies. See Doc. No. 40-11, Def.’s Ex. 10. While the columns for the
West Maui Center and Kaiser Property were filled in with financial figures, the
column for the Kokua Market Property included dashes (e.g., for “total assets” the
column provides “-”), apparently denoting that it had no information to provide.
Id. And Defendant explains that this balance sheet is blank because “[t]he Kokua
property has a $0 basis and $0 note liability. All rent received is transferred to
[Defendant] and offset by a contra-asset which is eliminated during consolidation.”
See Doc. No. 62, Def.’s Reply at 16. Thus, Defendant provided Plaintiff a balance
sheet -- which in fact was accurate -- and Plaintiff comes forward with no evidence
showing that the balance sheet was inaccurate. Indeed, consistent with its
obligation of good faith and fair dealing, Plaintiff could have asked for more
information from Defendant. That Plaintiff chose not to seek an explanation is no
basis for breach on Defendant’s part. The court therefore GRANTS Defendant’s
Motion for Summary Judgment on Plaintiff’s claims that Defendant breached the
agreements by failing to provide quarterly financial information for 2009.
///
///
34

D.

Inspection of Records
The Complaint alleges that Defendant breached its obligation to allow

Plaintiff to inspect the property and books, records, and accounts of MBL
Maryland, Inc. and Lahaina C, LLC. Doc. No. 1, Compl. ¶¶ 57-60. It is
undisputed that both the Lahaina Pledge Agreement and MBL Pledge Agreement
provide Plaintiff the right to inspect the “books, records and accounts of [the
Defendant company] and to make such copies and extracts thereof as [Plaintiff]
shall desire, in each case at such reasonable times as may be requested by Lender.”
See Doc. No. 40-6, Def.’s Ex. 5 § 15.2; Doc. No. 40-7, Def.’s Ex. 6 § 15.2. It is
also undisputed that Plaintiff first notified Defendant in a November 13, 2009 letter
that it wished to inspect the books during the week of November 30, 2009, and
demanded Defendant’s confirmation by November 16, 2009. Doc. No. 40-10,
Def.’s Ex. 9 at 5. In its November 16, 2009 response, Defendant did not reference
Plaintiff’s request for inspection, Doc. No. 40-11, Def.’s Ex. 10, and Plaintiff did
not reiterate this request in its November 19, 2009 letter requesting mediation.
Doc. No. 40-12, Def.’s Ex. 11. Rather, Plaintiff asserted in a December 4, 2009
letter that Defendant’s refusal to allow inspection was an event of default under the
agreements. Doc. No. 40-15, Def.’s Ex. 14. After this December 4, 2009 letter,
the record reveals no discussions between the parties regarding curing this alleged
35

default until the December 30, 2009 mediation. See Doc. No. 40-23, Def.’s Ex. 22
(discussing events of mediation). The parties ultimately agreed to hold the
inspection on February 23, 2010. Doc. No. 40-25, Def.’s Ex. 24. The February 23,
2010 inspection is more thirty days after, but within ninety days, of Plaintiff’s
December 4, 2009 assertion that Defendant had defaulted.
Defendant argues that it is entitled to summary judgment because the
parties mutually agreed to the February 23, 2010 inspection date such that Plaintiff
cannot now assert that a breach occurred. Doc. No. 39-1, Def.’s Mot. at 23-24.
Defendant further argues that even though February 23, 2010 is more than thirty
days after Plaintiff’s notice of default, Defendant was entitled to the ninety-day
period provided in the cure provision. Id. In contrast, Plaintiff argues, among
other things, that Defendant “refused for months” to allow Plaintiff to inspect the
records such that Defendant is not entitled to any extension of the initial thirty-day
cure period, and that the cure period ended December 13, 2009.13

13

Plaintiff also argues that Defendant did not make available all records of MBL
Maryland, Inc. and Lahaina C, LLC given that Plaintiff received only a “handful” of financial
information. See Doc. No. 58, Pl.’s Opp’n at 32; Doc. No. 56-2, Pl.’s Ex. C. In support of this
argument, Plaintiff relies on the Declarations of Rex Fujichaku and S. Craig Tomkins, neither of
whom performed the inspection. As a result, Defendant objects that these Declarations lack
personal knowledge and foundation. See Doc. No. 63. Even if the court accepted this evidence
(an issue the court need not resolve), it would only raise the fact issue as to whether the
inspection was sufficient. In light of the other factual questions, the court need not resolve this
evidentiary dispute at this time.
36

These arguments all raise fact questions that cannot be resolved on
summary judgment. In particular, it is question of fact whether Defendant
defaulted on its obligation to allow inspection where it did not immediately
respond to Plaintiff’s request. It is also a question of fact whether the parties’
conduct extended the cure period to ninety days where it appears that Defendant
did not respond to Plaintiff’s December 4, 2009 assertion that Defendant was in
default until the December 30, 2009 mediation. The court therefore DENIES both
Defendant’s and Plaintiff’s Motion for Summary Judgment on Plaintiff’s claim that
Defendant breached the Settlement Documents by failing to allow inspection of the
records.
E.

Additional Alleged Breaches Raised by Plaintiff
Plaintiff raises two additional alleged breaches of the Settlement

Documents. First, Plaintiff argues that Defendant committed a new breach of
§ 5.2 of the Settlement Agreement by including in its Motion information
contained in the Tanoue Order. See Doc. No. 58, Pl.’s Opp’n at 22.14 Second, at
the April 14, 2014 hearing, Plaintiff argued that Defendant breached the Settlement
14

To the extent the Tanoue Order is a public document, it appears that Defendant would
have no obligation to keep it confidential. See Doc. No. 40-3, Def.’s Ex. 2 § 5.2 (providing that
Defendant Parties must keep the Tanoue Order strictly confidential “except to the extent that
such information (i) has already been made public, including the inclusion of the same in
pleadings or other materials filed in the [Hawaii Litigation]”). This issue, however, is not
properly before the court.
37

Documents by failing to provide financial information for the second quarter of
2009. Neither of these alleged breaches is pled in the Complaint (and it even
appears that Plaintiff had never previously raised with Defendant entitlement to
2009 second quarter information). Because these alleged breaches are not part of
Plaintiff’s Complaint, they are not part of this action.
V. CONCLUSION
For the foregoing reasons, the court GRANTS in part and DENIES in
part Defendant’s Motion for Summary Judgment, and DENIES Plaintiff’s Motion
for Summary Judgment. Remaining are Plaintiff’s claims based on Defendant’s
alleged failures to allow full inspection of the records for Lahaina C, LLC and
MBL Maryland, Inc.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, April 22, 2014.

/s/ J. Michael Seabright
J. Michael Seabright
United States District Judge

Reading Int’l, Inc. v. The Malulani Grp., Civ. No. 13-00133 JMS-KSC, Order (1) Granting in
Part and Denying in Part Defendant’s Motion for Summary Judgment, or, in the Alternative,
Motion for Partial Summary Judgment, Doc. No. 39; and (2) Denying Plaintiff’s Counter-Motion
for Summary Judgment, Doc. No. 58
38