In Re: Paniolo Cable Company, LLC
Filing
44
ORDER DENYING MOTION TO DISMISS AND AFFIRMING ORDERS OF THE BANKRUPTCY COURT in case 1:22-cv-00426-JAO-KJM; denying (6) Motion to Dismiss in case 1:22-cv-00428-JAO-KJM - Signed by JUDGE JILL A. OTAKE on 9/29/2023. Excerpt of Order Re: Consolidation: Now that the Court has the benefit of the (hundreds of pages of) briefing and already held, effectively, a consolidated Oral Argument, it is apparent that consolidation will promote judicial effici ency and lessen the chance for confusion. The parties, and particularly Appellants, often make similar arguments, or wholly incorporate each other's arguments. Issuing a single order in these now consolidated appeals will allow the Court to a ddress similar arguments together without requiring it to repeat its reasoning across six orders or write six orders with potentially confusing cross references. This consolidated action will now be referenced by the lowest-numbered case, Sandwich Isles Communications, Inc. v. Hawaiian Telcom, Inc., CV No. 22-00426 JAO-KJM, and to the extent any future filings are necessary, they should be made in that case only. Conclusion: For the reasons st ated above, the Court DENIES Hawaiian Telcom's motion to dismiss Clearcom's appeal of the Contempt Order, CV No. 22-428, ECF No. 6. The Court AFFIRMS the Bankruptcy Courts Final Enforcement Order, Reconsideration Order, and Contempt Order in the Main Bankruptcy Appeals. The Court also AFFIRMS the dismissal of the FAC and the denial of the motion to remand as moot in the Adversary Proceeding Appeals. Associated Cases: 1:22-cv-00426-JAO-KJM et al. (eta)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
SANDWICH ISLES
COMMUNICATIONS, INC.
Appellant,
CIV. NO. 22-00426 JAO-KJM
BANKR. NO. 18-01319
vs.
HAWAIIAN TELCOM, INC.,
Appellee.
WAIMANA ENTERPRISES, INC.,
Appellant,
CIV. NO. 22-00427 JAO-KJM
BANKR. NO. 18-01319
vs.
HAWAIIAN TELCOM, INC.,
Appellee.
CLEARCOM, INC.,
Appellant,
vs.
HAWAIIAN TELCOM, INC.,
Appellee.
CIV. NO. 22-00428 JAO-KJM
BANKR. NO. 18-01319
WAIMANA ENTERPRISES, INC.,
ET AL.,
CIV. NO. 22-00434 JAO-KJM
BANKR. NO. 18-01319
ADV. NO. 22-90008
Appellants,
vs.
HAWAIIAN TELCOM, INC.,
Appellee.
WAIMANA ENTERPRISES, INC.,
ET AL.,
CIV. NO. 22-00435 JAO-KJM
BANKR. NO. 18-01319
ADV. NO. 22-90008
Appellants,
vs.
HAWAIIAN TELCOM, INC.,
Appellee.
WAIMANA ENTERPRISES, INC.,
ET AL.,
CIV. NO. 22-00441 JAO-KJM
BANKR. NO. 18-01319
ADV. NO. 22-90008
Appellants,
vs.
ORDER DENYING MOTION TO
DISMISS AND AFFIRMING
ORDERS OF THE BANKRUPTCY
COURT
HAWAIIAN TELCOM, INC.,
Appellee.
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ORDER DENYING MOTION TO DISMISS AND AFFIRMING ORDERS
OF THE BANKRUPTCY COURT
Before the Court are six appeals stemming from the involuntary bankruptcy
of Paniolo Cable Company, LLC (“Paniolo”).1 Paniolo owned a network of
submarine cables used to provide telecommunications services to Hawaiian Home
Lands (“HHL”). Despite the complex issues the Bankruptcy Court had to address
below, including concerns about the continued provision of those critical services
to HHL, the central question in most of these appeals—none of which involve the
debtor, Paniolo—is simple: did the Bankruptcy Court correctly determine that a
specific asset was part of Paniolo’s estate and then sold “free and clear” to
Hawaiian Telcom, Inc. pursuant to 11 U.S.C. § 363? Because the answer is “yes,”
the Court affirms.
Specifically, the Court affirms each appeal taken in the main bankruptcy
case because the conclusion that Hawaiian Telcom acquired that asset—an interest
in a license authorizing it to construct, operate, and maintain telecommunications
The six appeals are: (1) Sandwich Isles Commc’ns, Inc. v. Hawaiian Telcom,
Inc., CV No. 22-00426 JAO-KJM; (2) Waimana Enterprises, Inc. v. Hawaiian
Telcom, Inc., CV No. 22-00427 JAO-KJM; (3) ClearCom, Inc. v. Hawaiian
Telcom, Inc., CV No. 22-00428 JAO-KJM; (4) Waimana Enterprises, Inc., et al. v.
Hawaiian Telcom, Inc., CV No. 22-00434 JAO-KJM; (5) Waimana Enterprises,
Inc., et al. v. Hawaiian Telcom, Inc., CV No. 22-00435 JAO-KJM; and (6)
Waimana Enterprises, Inc., et al. v. Hawaiian Telcom, Inc., CV No. 22-00441
JAO-KJM.
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equipment and facilities on HHL—is dispositive. See Sandwich Isles
Communications, Inc. v. Hawaiian Telcom, Inc., CV No. 22-00426 JAO-KJM;
Waimana Enterprises, Inc. v. Hawaiian Telcom, Inc., CV No. 22-00427 JAOKJM; ClearCom, Inc. v. Hawaiian Telcom, Inc., CV No. 22-00428 JAO-KJM
(collectively, the “Main Bankruptcy Appeals”). And largely because it affirms the
Main Bankruptcy Appeals, the Court also affirms the appeals in a separate
adversary proceeding where the Bankruptcy Court concluded that its prior orders
addressing that and other assets precluded the claims in that adversary proceeding.
See Waimana Enterprises, Inc., et al. v. Hawaiian Telcom, Inc., CV No. 22-00434
JAO-KJM; Waimana Enterprises, Inc., et al. v. Hawaiian Telcom, Inc., CV No.
22-00435 JAO-KJM; Waimana Enterprises, Inc., et al. v. Hawaiian Telcom, Inc.,
CV No. 22-00441 JAO-KJM (collectively, the “Adversary Proceeding Appeals”).
Explaining how the Court has reached these answers is not brief. This is in
large part because Appellants have taken a “spaghetti approach” to briefing, i.e.,
“heav[ing] the entire contents of a pot against the wall in the hopes that something
would stick.” Indep. Towers of Washington v. Washington, 350 F.3d 925, 929 (9th
Cir. 2003). The Court will begin with an overview of what led to the present
disputes before addressing the issues raised in these appeals.
Yet, even before doing that, the Court finds it necessary to consolidate these
appeals pursuant to Federal Rule of Civil Procedure 42(a). See Inv. Res. Co. v.
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U.S. Dist. Ct. for the Cent. Dist. of Cal., 877 F.2d 777, 777 (9th Cir. 1989).
Although the Appellee in each appeal, Hawaiian Telcom, sought to consolidate the
six appeals from the outset, CV No. 22-426, ECF No. 5, 2 one Appellant, Sandwich
Isles Communications, Inc. (“SIC”), opposed that request, see id., ECF No. 18, and
ultimately they were not consolidated for purposes of briefing, see id., ECF No. 19.
Now that the Court has the benefit of the (hundreds of pages of) briefing and
already held, effectively, a consolidated Oral Argument, it is apparent that
consolidation will promote judicial efficiency and lessen the chance for confusion.
The parties, and particularly Appellants, often make similar arguments, or wholly
incorporate each other’s arguments. Issuing a single order in these now
consolidated appeals will allow the Court to address similar arguments together
without requiring it to repeat its reasoning across six orders or write six orders with
potentially confusing cross references. This consolidated action will now be
referenced by the lowest-numbered case, Sandwich Isles Communications, Inc. v.
Hawaiian Telcom, Inc., CV No. 22-00426 JAO-KJM, and to the extent any future
filings are necessary, they should be made in that case only. With that in mind, the
Court turns to the factual and procedural history.
Going forward, the Court will cite docket entries from each of the six appeals
before it with an identifying prefix, e.g., “CV No. 22-426, ECF No. 1” to refer to
the first docket entry in Sandwich Isles Communications, Inc. v. Hawaiian Telcom,
Inc., CV No. 22-00426 JAO-KJM.
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I.
A.
BACKGROUND
Factual History
1.
Relevant Players
Paniolo, the debtor in this involuntary chapter 11 bankruptcy case, owned a
network of inter-island submarine cables and related equipment that connected to
SIC’s land-based system, which in turn provided telecommunications services to
subscribers residing on HHL. Bk. ECF No. 537 at 2; Bk. ECF No. 271 at 4–5. 3 So
Paniolo was the “middle-mile” provider, carrying transmissions to and from points
where its network connected to “last-mile” carriers, like SIC, who provide the
services that physically reach the people residing on HHL. See CV No. 22-435,
ECF No. 20-3 at 20–21.
HHL consist of about 200,000 acres of land across Hawai‘i administered by
the Department of Hawaiian Home Lands (“DHHL”) and set aside for the benefit
of native Hawaiians pursuant to the Hawaiian Homes Commission Act (“HHCA”).
See generally Nelson v. Hawaiian Homes Comm’n, 127 Hawai‘i 185, 188–89, 277
P.3d 279, 282–83 (2012); Arakaki v. Lingle, 477 F.3d 1048, 1053–56 (9th Cir.
2007). More context is provided on the HHCA below. For now, it is relevant that,
pursuant to the HHCA, DHHL could “grant licenses as easements for railroads,
The Court will refer to filings in the main bankruptcy case, In re Paniolo Cable
Company, LLC, Bk. No. 18-01319, with the prefix “Bk.”
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telephone lines, electric power and light lines, gas mains, and the like.” HHCA §
207(c)(1).
In 1995, and pursuant to that authority, DHHL issued “License Agreement
No. 372” (“License 372”) to Waimana Enterprises, Inc. (“Waimana”). Bk. ECF
No. 639-1. In it, DHHL states that License 372 is “essential in order to provide
broad band telecommunication services of all types . . . to [HHL] in a timely
manner[.]” Bk. ECF No. 639-1 at 2. HHL “are primarily located in rural or more
remote areas, and because of the remote and non-contiguous nature of the [HHL]
the cost to provide infrastructure to these areas is very high.” United States v.
Sandwich Isles Commc’ns, Inc., 398 F. Supp. 3d 757, 763 (D. Haw. 2019)
(citation, alteration, and internal quotation marks omitted). License 372 therefore
granted Waimana the
right and privilege to build, construct, repair, maintain and
operate a broad band telecommunications network . . . over,
across, under and throughout all lands under [DHHL’s]
administration and jurisdiction . . . including . . . the right of entry
upon the easement area and adjoining land of [DHHL] for the
construction, maintenance, operation and removal of
LICENSEE’s line and appurtenances over, across and under the
LICENSE area.
Bk. ECF No. 639-1 at 3. License 372 provides that “[a]ll buildings or structures or
other major improvements of whatever kind that LICENSEE constructs or erects
on the premises shall remain the property of LICENSEE,” where “premises”
means “the lands described above and improvements whenever and wherever
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erected or placed thereon.” Bk. ECF No. 639-1 at 6, 7. License 372 also imposed
certain obligations, e.g., that “LICENSEE agrees to offer employment
opportunities to qualified beneficiaries of LICENSOR,” and to spend a certain
percentage of its net profit on training or educational opportunities “for
beneficiaries of LICENSOR each year.” Bk. ECF No. 639-1 at 4–5.
In 1996, Waimana assigned part of License 372 to SIC, specifically “those
certain rights, title and interest necessary to provide IntraLata and Instrastate
telecommunication services.” Bk. ECF No. 639-2 at 3. SIC’s interest in License
372 is at the heart of these appeals.
In 2011, Waimana also assigned part of License 372 to Pa Makani LLC (“Pa
Makani”),4 specifically “those certain rights, title and interest necessary to provide
wireless communications services of all types, including but not limited to the
construction and operation of all necessary wireless communications
infrastructure.” Bk. ECF No. 639-3 at 2. And in 2014, Waimana assigned part of
License 372 to Clearcom, Inc. (“Clearcom”), specifically “those certain rights, title
and interest necessary to provide broadband services of all types, including but not
limited to the construction and operation of all necessary broadband
infrastructure.” Bk. ECF No. 639-4 at 2.
In the briefing, counsel for Pa Makani refers to that entity as “Pa Makana.” See,
e.g., CV No. 22-434, ECF No. 20. At Oral Arguments, counsel confirmed that was
an error.
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According to Appellants, Waimana owns SIC, Clearcom, and Pa Makani,
and Waimana is itself owned by a native Hawaiian. See, e.g., CV No. 22-435,
ECF No. 20 at 2. For more context on the relationships among these parties with
interests in License 372, all of whom are Appellants here, it is worth noting that:
Albert S.N. Hee (“Hee”) has been Sandwich Isles’ president and
secretary, and one of its directors. . . . Sandwich Isles is a whollyowned subsidiary of [] Waimana Enterprises, Inc. (“Waimana”),
which is a Hawaii corporation. Before December 2012, Hee was
the sole owner of Waimana. After December 2012, Hee owned
10% of Waimana, with the other 90% owned by trusts benefitting
Hee’s children. The directors of Waimana . . . have been Hee,
his wife, and their children. In addition to Sandwich Isles,
Waimana wholly owns as subsidiaries [] ClearCom, Inc. and
Ho‘opa‘a Insurance Corp. [] Paniolo Cable Company, LLC and
Pa Makani LLC are owned indirectly by trusts benefitting Hee’s
children.
Sandwich Isles Commc’ns, Inc., 398 F. Supp. at 763–64 (citations omitted).
After Paniolo’s creditors filed an involuntary chapter 11 petition against
it in November 2018, the Bankruptcy Court entered an order for relief and directed
the appointment of a trustee, Michael Katzenstein (“Trustee”). Bk. ECF Nos. 1,
48, 49, 66.
Not surprisingly, considering the telecommunications issues at stake, the
federal government was involved in the bankruptcy proceedings. For the purposes
of these appeals, it is sufficient to say there will be brief references to the Rural
Utilities Service (“RUS”), an agency that helps provide telephone services to rural
communities. Bk. ECF No. 673 at 5. Because SIC had defaulted on certain loans
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from RUS, some of its personal property was subject to a lien, so the United States
participated, among other reasons, to protect its interest in RUS’s lien. See, e.g.,
Bk. ECF No. 673.
This is, necessarily, an abridged discussion of the relevant parties and their
interests in these proceedings. More background will be provided as necessary to
discuss the Bankruptcy Court’s orders relevant to these appeals.
2.
The Marshal Sale Order
Turning to the first such order requires moving from the main bankruptcy
case to an adversary proceeding the Trustee filed in June 2019 against SIC because
SIC owed Paniolo a significant amount of money. Katzenstein v. Sandwich Isles
Commc’ns, Inc., Adv. Pro. 19-90002, ECF No. 1. 5 In December 2019, the
Bankruptcy Court entered a judgment against SIC for over $256 million. Trustee
AP, ECF No. 28. To satisfy this judgment, the U.S. Marshal for the District of
Hawaii (“Marshal”) executed and levied on some of SIC’s assets. Trustee AP,
ECF No. 37. An exhibit to the Marshal’s Certificate of Execution identifies what
assets those were, including real property located in Mililani and the “Schedule
A.2 Assets.” Trustee AP, ECF No. 37. The Schedule A.2 Assets are detailed in a
ten-page list of tangible assets, e.g., structures, central offices and terminal
Going forward, the Court will refer to the filings in that adversary proceeding as,
e.g., “Trustee AP, ECF No. 1.”
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buildings (as well as the keys to access those buildings and any fences around
them, and “access rights to the land” on which those buildings and offices reside),
equipment, fiber cables, and the like—all organized by island. Trustee AP, ECF
No. 37. Relevant here, it also lists, under “Licenses”:
All licenses necessary to build, construct, repair, maintain and
operate the Schedule A.2 assets, including without limitation
SIC’s interest in License Agreement No. 372 issued by the State
of Hawaii Department of Hawaiian Home Lands.
All existing and pending entitlements (including without
limitation, SIC’s interests in memoranda of agreement,
easements, leases, license agreements, letters of approval, special
area management permits, rights of way or rights of interest,
necessary to build, construct, repair, maintain and operate the
Schedule A.2 assets.
Id. at 15 (emphasis added). SIC tried, unsuccessfully, to quash the Writ of
Execution on various grounds. Trustee AP, ECF Nos. 33, 45. Waimana,
Clearcom, Pa Makani, and another entity filed a letter saying they owned certain
equipment in the buildings listed, but did not formally move for any relief. Trustee
AP, ECF No. 52. So on March 6, 2020, the Marshal sold SIC’s assets at a public
sale where the Trustee was the highest bidder. Trustee AP, ECF No. 57-6. The
Bankruptcy Court then approved and confirmed the sale of SIC’s assets to the
Trustee (“Marshal Sale Order”) on March 16, 2020. Trustee AP, ECF No. 65.
The Marshal Sale Order states that SIC and anyone else claiming any
interest in the assets sold at the Marshal Sale by or through SIC, are “forever
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barred and foreclosed of and from all right, title and interest, and claims at law or
in equity in and to the Property [which included the “A.2. Assets”] and every part
thereof,” and that “[a]ny and all other encumbrances affecting the Property, or any
part thereof [were] perpetually barred of and from any and all right, title and
interest, and claims at law or in equity, in the Property or any part thereof.”
Trustee AP, ECF No. 65 at 2, 4.
No part of the Trustee Adversary Proceeding was appealed.
3.
Settlement Agreement and the Master Relationship Agreement
The Trustee entered a settlement agreement with, among others, SIC,
Waimana, Clearcom, and Pa Makani (the “Settlement Agreement”). Bk. ECF No.
271 at 4–5. The Settlement Agreement states it is effective March 6, 2020 (i.e., the
same day as the public sale), although the Bankruptcy Court did not approve it
until June 2020 (i.e., over two months after the Marshal Sale Order). Bk. ECF No.
271 at 1, 4.
The Settlement Agreement put in place a Master Relationship Agreement
(“MRA”). Bk. ECF No. 271 at 5-7. The MRA “restructured the relationship
between Paniolo and SIC and facilitated an orderly disposition of Paniolo’s
assets.” Bk. ECF No. 537 at 3. The Settlement Agreement states that any
purchaser would “be bound by the terms of the [MRA].” Bk. ECF No. 271 at 9.
And the MRA mentions License 372, specifically that it would “not be assigned by
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SIC to Paniolo.” CV No. 22-426, ECF No. 39 at 29. Appellants contend this
language in the MRA proves the Trustee never acquired any interest in License
372, but the Court will take up this issue later.
4.
363 Sale Order
In December 2020, the Bankruptcy Court entered an order approving the
sale of some of Paniolo’s assets to Hawaiian Telcom pursuant to 11 U.S.C. § 363
(“363 Sale Order”). Bk. ECF No. 366. The 363 Sale Order, and the Asset
Purchase Agreement (“APA”) attached to it, lay out what assets Hawaiian Telcom
was purchasing from the Trustee (the “Transferred Assets”), which included both
Paniolo’s own assets and those it had acquired from SIC pursuant to the Marshal
Sale Order, and in general covered the assets necessary for Hawaiian Telcom to
continue the operations of Paniolo’s cable network. Bk. ECF No. 366 at 3-4, 14.
The 363 Sale Order found, among other things, that Hawaiian Telcom was a
good-faith purchaser, that any objections or responses to the 363 Sale were
overruled, and that any party who did not object was deemed to have consented to
the 363 Sale under the terms of the Bankruptcy Code. Bk. ECF No. 366 at 18-19,
23, 27–28. SIC had filed a Statement of Concerns regarding the 363 Sale and the
APA, Bk. ECF No. 328, but pursuant to the Settlement Agreement, Appellants
could not object to or appeal the 363 Sale Order, Bk. ECF No. 271 at 9.
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The 363 Sale Order confirmed that the assets sold to the Trustee in the
Marshal Sale were “free and clear of any continuing right, title, lien or
encumbrance on the part of SIC or anyone claiming by and through SIC.” Bk.
ECF No. 366 at 2. And the 363 Sale Order further confirmed that Paniolo owned
“all right, title, and interest in the Transferred Assets” and declared that the
Transferred Assets would be transferred “free and clear of all Interests or Claims . .
. that existed prior to the Closing.” Bk. ECF No. 366 at 26, 30.
The 363 Sale Order also imposes certain obligations on SIC. SIC was not a
party to the APA, but the 363 Sale Order provides that it and the APA are binding
on SIC. Bk. ECF No. 366 at 29. And it states that anyone in possession of
Transferred Assets, including “SIC and SIC’s affiliates or any person or entity
claiming by or through SIC or SIC’s Affiliates” were “directed to surrender
possession of the Transferred Assets” to Hawaiian Telcom upon closing. Bk. ECF
No. 366 at 4. The 363 Sale closed on August 31, 2021.
No party appealed the 363 Sale Order.
5.
Enforcement, Contempt, and Dismissal Orders
After closing, Hawaiian Telcom attempted to use the assets it purchased,
including buildings and premises necessary to operate the “Paniolo Network,” i.e.,
“a submerged marine fiber and terrestrial fiber telecommunications
14
cable network.” Bk. ECF No. 637-1 at 11 n.5. According to Hawaiian Telcom,
this was met with resistance from Appellants, whose employees and agents
replaced locks and destroyed property, among other things. See, e.g., Bk. ECF No.
637-1. Thus began a battle on at least three fronts: in the main bankruptcy case
and in two separate adversary proceedings.
On the first front, in the main bankruptcy case, Hawaiian Telcom filed
motions asking the Bankruptcy Court to enforce its 363 Sale Order, which resulted
in three enforcement orders from the Bankruptcy Court.
In the First Enforcement Order (entered in November 2021), the Bankruptcy
Court had to address whether, pursuant to the terms of its 363 Sale Order,
Hawaiian Telcom was entitled to (i) certain information from SIC; (ii) the removal
of SIC’s property from certain buildings and premises; and (iii) certain spare parts
corresponding to or used for the Paniolo network. Bk. ECF No. 537 at 5–6. The
Bankruptcy Court concluded the 363 Sale Order did not provide a definitive
answer as to who owned the information or if Hawaiian Telcom had the exclusive
right to occupy certain premises that it acquired where SIC’s property was located.
Bk. ECF No. 537 at 5–10. The Bankruptcy Court did grant the request as to the
spare parts (which SIC had not opposed), stating these were undoubtedly
“Transferred Assets” under the 363 Sale Order. Bk. ECF No. 537 at 11.
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In determining that it was unclear whether Hawaiian Telcom had acquired
the exclusive right to occupy certain premises, the Bankruptcy Court pointed to the
fact that Hawaiian Telcom decided not to acquire the MRA, yet SIC was claiming
the Trustee was required to sell Paniolo’s assets subject to the MRA. Bk. ECF No.
537 at 10. This reference was a nod to the second front: SIC’s adversary
proceeding against the Trustee and Hawaiian Telcom, filed about a month before
the Initial Enforcement Order was entered, and based on allegations that the
Trustee breached the Settlement Agreement by permitting Hawaiian Telcom not to
assume the Settlement Agreement and the MRA. See Sandwich Isles Commc’ns,
Inc. v. Katzenstein, et al., Adv. Pro. 21-90017, ECF No. 1. 6 This dispute was
resolved quickly; within about four months, the Bankruptcy Court ruled, on
summary judgment, that the Trustee’s breach of the Settlement Agreement was
excused by SIC’s earlier, material breaches and that the Settlement Agreement
could not be enforced against Hawaiian Telcom. Settlement AP, ECF Nos. 57, 58,
59. So by February 2022, that adversary proceeding was closed. Nothing from it
was appealed.
About a month later, in March 2022, the third front was opened: SIC and
Waimana filed another action against Hawaiian Telcom, this time in state court,
Going forward, the Court will denote filings from this proceeding as, e.g.,
“Settlement AP, ECF No. 1.”
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bringing state law claims for trespass, willful damage of property, and unfair
methods of competition. Waimana Enterprises, Inc., et al. v. Hawaiian Telcom
Inc., Adv. Pro. 22-90008, ECF No. 1.7 The complaint was essentially premised on
their belief that Hawaiian Telcom had not acquired any interest in License 372 in
the 363 Sale Order. See id.
Jumping back to the first front, in the main bankruptcy proceeding, at the
end of March 2022, Hawaiian Telcom filed a motion for contempt because SIC
still had not turned over certain spare reels (as ordered in the Initial Enforcement
Order) and also filed its second motion to enforce related to the 363 Sale Order
(what it terms the “Main Motion to Enforce”). Bk. ECF Nos. 634, 637.
In response, the Bankruptcy Court entered an order on April 22, 2022
(“Contempt Order”), finding SIC in contempt for failing to turn over the spare
reels, ordering the turnover of those spare reels, and threatening sanctions for
failing to comply by a certain date. Bk. ECF No. 700. In doing so, it rejected a
new argument, raised by Clearcom, that it (not SIC) owned certain spare reels. Bk.
ECF No. 708 at 9–10, 25–26. A few days later, Clearcom filed a notice indicating
it had complied with the Contempt Order. Bk. ECF No. 705.
Going forward, the Court will cite filings from this proceeding as, e.g.,
“Waimana AP, ECF No. 1.”
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Also on April 22, 2022, and also in the main bankruptcy case, the
Bankruptcy Court issued its next enforcement order (the “Interim Order”) in
response to the Main Motion to Enforce. Bk. ECF No. 696. The Interim Order
compelled SIC (as well as Waimana, Pa Makani, Clearcom, and others) to stop
interfering with Hawaiian Telcom’s security at or impeding Hawaiian Telcom’s
access to the “Paniolo Buildings” and “Paniolo Premises,” and to stop making false
police reports that Hawaiian Telcom was trespassing on the Paniolo Buildings and
Paniolo Premises. Bk. ECF No. 696 at 3–4. The “Paniolo Buildings” were
essentially defined as the central offices and terminal buildings (either already
owned by Paniolo or acquired by the Trustee in the Marshal Sale, and sold to
Hawaiian Telcom), including the structures and associated systems and
infrastructure and fences around the buildings, with the “Paniolo Premises” defined
as the easement areas surrounding those buildings. Bk. ECF No. 637 at 4–5; Bk.
ECF No. 637-1 at 6 & n.3, 43–44 & n.20. But again, this was interim relief; the
Bankruptcy Court set a final hearing on the relief Hawaiian Telcom was requesting
in the Main Motion to Enforce. Bk. ECF No. 696 at 5.
SIC, Waimana, and Clearcom all objected to the Main Motion to Enforce.
Bk. ECF Nos. 668, 698, 699, 712, 715, 720. After a hearing, the Bankruptcy Court
issued the Final Enforcement Order, concluding that final relief was necessary to
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ensure compliance with the 363 Sale Order and related prior orders. Bk. ECF Nos.
729, 739. Relevant to the dispute here, it concluded:
F. Through the Marshal Sale [] and the 363 Sale [], [Hawaiian
Telcom, or “HTI”] has properly acquired the entirety of the
Paniolo Buildings [], and thus now holds exclusive control and
ownership over, as well as rights of access to, the entirety of the
Paniolo Buildings.
G. Through the Marshal Sale and the 363 Sale, HTI has properly
acquired the assets that permit operation of the Paniolo Network
[], including, without limitation, full rights of access to the
Paniolo Premises, including those certain portions of the 372
License [] pertaining to the Paniolo Network and/or the Paniolo
Premises that were formerly held by SIC. SIC, Waimana
Enterprises, Inc., Pa Makani LLC, Clearcom, Inc., all affiliates
thereof, as well as all members of the Hee family and all other
individuals who have authority or de facto control over any of
these entities (collectively, the “SIC Parties”) are thus prohibited
from charging HTI any fees for accessing or using any assets that
permit operation of the Paniolo Network, including, without
limitation, the Paniolo Buildings and Paniolo Premises, and HTI
is not required to pay any such fees.
H. Through the Marshal Sale and the 363 Sale, including HTI’s
acquisition of the perimeter fences surrounding the Paniolo
Premises and its the acquisition of all keys relating to the Paniolo
Buildings and Paniolo Premises, HTI has acquired the exclusive
ability to control and maintain security for and over the entirety
of the Paniolo Network, the Paniolo Buildings, and the Paniolo
Premises.
Bk. ECF No. 729 at 3–4.
The Final Enforcement Order therefore ordered final relief in line with the
interim relief ordered above, e.g., ordering SIC (as well as Waimana, Pa Makani,
Clearcom, and others) to stop interfering with Hawaiian Telcom’s security at or
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impeding Hawaiian Telcom’s access to the Paniolo Buildings and Paniolo
Premises, and to stop making false police reports that Hawaiian Telcom was
trespassing on the Paniolo Buildings and Paniolo Premises. Bk. ECF No. 729 at 6–
7.
The Bankruptcy Court entered the Final Enforcement Order in May 2022.
Bk. ECF No. 729. Waimana timely sought reconsideration, Bk. ECF No. 740,
which the Bankruptcy Court denied after a hearing in August 2022
(“Reconsideration Order”), Bk ECF Nos. 782, 784.
While all that was happening in the main bankruptcy case, the state court
action against Hawaiian Telcom (i.e., the third front) marched forward. Hawaiian
Telcom had removed that action to the Bankruptcy Court in April 2022 and
successfully moved to dismiss the initial complaint based on the argument that the
Bankruptcy Court’s rulings in the Final Enforcement Order, related to what assets
Hawaiian Telcom had acquired, foreclosed those state law claims. Waimana AP,
ECF Nos. 1, 6, 30. The Bankruptcy Court permitted leave to amend, and deferred
ruling on Waimana’s motion to remand the action to state court. Waimana AP,
ECF Nos. 10, 30. The First Amended Complaint (“FAC”), brought by Waimana,
Clearcom, and Pa Makani (but no longer SIC) alleged claims for trespass,
conversion, unfair competition, intentional interference of contract, and declaratory
relief. Waimana AP, ECF No. 28. Upon Hawaiian Telcom’s motion, the
20
Bankruptcy Court dismissed the FAC based on issue preclusion, concluding issues
resolved in the Final Enforcement Order precluded all the claims in the FAC, and
therefore denied the motion to remand as moot. Waimana AP, ECF Nos. 65, 67,
70.
These appeals followed.
B.
Procedural History
In August 2022, SIC, Waimana, and Clearcom timely appealed the Final
Enforcement Order and Reconsideration Order. Bk. ECF Nos. 790, 801, 803.
Clearcom also appealed the Contempt Order, but there is a dispute as to whether
that appeal is timely. Bk. ECF No. 803. Hawaiian Telcom’s motion to dismiss
that portion of Clearcom’s appeal is addressed below. Together, these appeals
comprise the Main Bankruptcy Appeals. Appellants’ central contention in the
Main Bankruptcy Appeals is that the Final Enforcement Order was incorrect to
conclude that Hawaiian Telcom acquired SIC’s interest in License 372 because:
that asset was not properly levied under Hawai‘i law, meaning the Trustee never
acquired it in the Marshal Sale; that asset could not have been sold to an entity like
Hawaiian Telcom in the 363 Sale, in any event, because it is not owned or operated
by a native Hawaiian; or, even setting aside those issues, because other orders and
filings make clear the Trustee did not acquire it, and so could not have sold it.
21
Waimana, Pa Makani, and Clearcom timely appealed the orders dismissing
the FAC in the adversary proceeding and denying remand, as well as the judgment
in that adversary proceeding. These appeals comprise the Adversary Proceeding
Appeals, where the central focus is whether the Final Enforcement Order
precluded these new state law claims against Hawaiian Telcom.
Initially only SIC’s Main Bankruptcy Appeal was assigned to the
undersigned; eventually, the other five appeals were as well. As mentioned above,
Hawaiian Telcom’s request to consolidate these appeals was initially denied, but is
now granted.
On August 25, 2023, the Court held a combined oral argument on all six
appeals. After argument, the Court requested supplemental briefing on issues
raised in the Adversary Proceeding Appeals.
II.
A.
STANDARDS OF REVIEW
Main Bankruptcy Appeals
The parties disagree about what standards of review apply to the issues
raised in the Main Bankruptcy Appeals. SIC claims the issues presented are
questions of law reviewed de novo. CV No. 22-426, ECF No. 32 at 7. Waimana
agrees that de novo review applies because the issues are questions of law and
because the Final Enforcement Order is akin to an order on a motion for summary
judgment, which is reviewed de novo. CV No. 22-427, ECF No. 22 at 25–26.
22
Clearcom cites only the general standard that findings of fact are reviewed for clear
error and questions of law are reviewed de novo, without offering how these
standards apply to the orders on appeal. CV No. 22-428, ECF No. 28 at 10.
In contrast, Hawaiian Telcom posits that the Court must review the Final
Enforcement Order for abuse of discretion because it amounts to the Bankruptcy
Court’s interpretation of its own prior orders, and also review the Reconsideration
Order for abuse of discretion. See, e.g., CV No. 22-426, ECF No. 35-3 at 12. The
Court tends to agree with Hawaiian Telcom.
Taking the easier standard first, a bankruptcy court’s denial of a motion for
reconsideration is reviewed for abuse of discretion. In re Weiner, 161 F.3d 1216,
1217 (9th Cir. 1998). A bankruptcy court abuses its discretion if it applies an
incorrect legal rule or makes factual findings that are illogical, implausible, or not
supported by the record. United States v. Hinkson, 585 F.3d 1247, 1261–62 (9th
Cir. 2009) (en banc).
The Final Enforcement Order, and particularly its conclusion regarding the
central issue here—License 372—was plainly based on an interpretation of the
Marshal Sale Order and the 363 Sale Order (together, the “Sale Orders”). See Bk.
ECF No. 729 at 2–4. Persuasive authority in this Circuit states that a reviewing
court should give substantial deference to the bankruptcy court’s interpretation of
its own orders. In re Calkins, 2020 WL 3057803, at *5 n.6 (B.A.P. 9th Cir. June 4,
23
2020); In re Wallace, 490 B.R. 898, 906 (B.A.P. 9th Cir. 2013). This includes §
363 sale orders. See In re Zuercher Tr. of 1999, 2017 WL 1089488, at *6 (B.A.P.
9th Cir. Mar. 22, 2017).
It is likely the Ninth Circuit would conclude the same given it affords
substantial deference to a district court’s interpretation of its own orders—even
when that interpretation is technically reviewed de novo. See, e.g., Nehmer v. U.S.
Dep’t of Veterans Affs., 494 F.3d 846, 855 (9th Cir. 2007) (noting review of a
district court’s interpretation of a consent decree is de novo but that it will “give
deference to the district court’s interpretation based on the court’s extensive
oversight of the decree from the commencement of the litigation [and] uphold a
district court’s reasonable interpretation”) (citation and internal quotation marks
omitted); cf. Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151 n.4 (2009)
(“Numerous Courts of Appeals have held that a bankruptcy court’s interpretation
of its own confirmation order is entitled to substantial deference.” (citations
omitted)). Regardless, the Court would reach the same result here on de novo
review with no deference afforded to the Bankruptcy Court.
Waimana has argued separately that the Bankruptcy Court erred by not
holding an evidentiary hearing or permitting discovery. A bankruptcy court’s
decision whether or not to hold an evidentiary hearing is reviewed for abuse of
discretion. In re Int’l Fibercom, Inc., 503 F.3d 933, 939–40 (9th Cir. 2007). And
24
the Court “review[s] the bankruptcy court’s refusal to grant a continuance to
permit additional discovery for an abuse of discretion.” In re Slatkin, 525 F.3d
805, 810 (9th Cir. 2008).
Finally, Clearcom also appeals the Contempt Order. To the extent the
Contempt Order similarly rests on the Bankruptcy Court’s interpretation of its prior
orders, the reasoning above applies. Because Clearcom has also disputed factual
findings within the Contempt Order, those are reviewed for clear error, reversing
only if left with the definite and firm conviction that a mistake has been made. See
In re Marshall, 600 F.3d 1037, 1049 (9th Cir. 2010).
B.
Adversary Proceeding Appeals
At issue in the Adversary Proceeding Appeals are an order granting a motion
to dismiss based on issue preclusion and the subsequent denial of a motion to
remand as moot. Whether issue preclusion applies is a legal conclusion reviewed
de novo. See id. “A bankruptcy court’s denial of a motion to remand under 28
U.S.C. § 1452(b) is reviewed for abuse of discretion.” In re Skyline Ridge, LLC,
2022 WL 884724, at *4 (B.A.P. 9th Cir. Mar. 23, 2022).
25
III.
A.
DISCUSSION
Main Bankruptcy Appeals
1.
Belated Attempts to Collaterally Attack the Sale Orders
Hawaiian Telcom’s first response to the Main Bankruptcy Appeals is that
each claim of error is an impermissible collateral attack on the Marshal Sale Order
or the 363 Sale Order, neither of which were timely appealed. See CV No. 22-426,
ECF No. 35-3 at 13–15. For support, it cites examples where federal courts have
rejected a party’s belated attempt to object to the terms of a bankruptcy court’s sale
order other than by appealing that order. See In re Grantham Bros., 922 F.2d
1438, 1442 (9th Cir. 1991) (“The failure of the debtors to seek any review,
reconsideration, or stay of the bankruptcy court’s order precluded the collateral
attack[.]”) (citing Lindsey v. Ipock, 732 F.2d 619, 622 (8th Cir. 1984) (“[O]nce [he]
was apprised of the bankruptcy court’s sale order and failed to timely appeal, he
was obligated to obey these orders even if they were in error.”) (emphasis
added))); see also In re Besset, 2012 WL 6554706, at *4 (B.A.P. 9th Cir. Dec. 14,
2012); In re TE Holdcorp, LLC, 2022 WL 951553, at *6 (D. Del. Mar. 30, 2022),
aff’d sub nom. In re TE Holdcorp LLC, 2023 WL 418059 (3d Cir. Jan. 26, 2023);
In re Colarusso, 280 B.R. 548, 557–58 (Bankr. D. Mass. 2002), aff’d, 295 B.R.
166 (B.A.P. 1st Cir. 2003), aff’d, 382 F.3d 51 (1st Cir. 2004); In re Lehman Bros.
26
Holdings Inc., 526 B.R. 481, 494–95 (S.D.N.Y. 2014), as corrected (Dec. 29,
2014).
This argument echoes the Bankruptcy Court’s own statements at the hearing
on the Final Enforcement Order:
Much of the arguments made by [Appellants] are really attacks
on the prior orders, the sale order in particular. And that order is
final. It was not appealed. It is no longer appealable and there’s
no basis on which to change or modify it. So I’m not going to
consider any arguments that would say that the Court essentially
shouldn’t have approved the sale or didn’t have the power to
approve the sale in the first place, because that is a done deal, to
put it in the vernacular.
Bk. ECF No. 739 at 15. The Bankruptcy Court reiterated these sentiments in the
hearing on the Reconsideration Order:
[T]he underlying argument is that there is an inconsistency,
basically, between one set of orders in the main case, being the
Rule 9019 settlement order approving the settlement between the
Trustee and the SIC affiliates on the one hand, and the Marshal
Sale order the preceded that, and on the other hand, the order
approving the sale under Section 363 to Hawaiian Tel. I believe
those arguments should have been made when the 363 sale was
approved and before that order was entered.
And if a party didn’t like the way I addressed those arguments
and thought my sale order was an error, that was the appropriate
time to take an appeal, but no appeal was taken.
Bk. ECF No. 782 at 13–14.
No Appellant offers a particularly convincing response to this argument.
Some offered no response at all. See, e.g., CV No. 22-426, ECF No. 37. In
27
general, the Court agrees that the attacks on the Final Enforcement Order and
Reconsideration Order attempt to undermine the Sale Orders, meaning the
Bankruptcy Court was correct to reject them and focus only on the plain terms of
the Sale Orders.
“[C]ollateral attacks on the judgments, orders, decrees or decisions of
federal courts are improper.” Mullis v. U.S. Bankr. Court for Dist. of Nevada, 828
F.2d 1385, 1393 (9th Cir. 1987) (footnote and citations omitted). The collateral
attack doctrine bars consideration of an issue when a court must “re-examine and
decide a question which has been finally determined by a court of competent
jurisdiction in earlier litigation between the parties.” City of Tacoma v. Taxpayers
of Tacoma, 357 U.S. 320, 334 (1958). To apply, the prior judgment or order must
actually address the specific issue and decide that issue. See Rein v. Providian Fin.
Corp., 270 F.3d 895, 902 (9th Cir. 2001). In other words, a party presents an
improper collateral attack where they can prevail “only by proving that the [prior
decision] was improper,” and a court assesses if that is the case by asking if the
“pivotal issue has already been litigated and decided against” the party. Gilbert v.
Ben-Asher, 900 F.2d 1407, 1411 (9th Cir. 1990); see also Pub. Util. Dist. No. 1 of
Grays Harbor Cnty. Wash. v. IDACORP Inc., 379 F.3d 641, 652 n.12 (9th Cir.
2004) (concluding doctrine did not apply, even though issue was argued in the
28
other proceeding, because the finding requested would not “contradict” or “call
into question” any finding from that prior proceeding).
Where, as here, the order being called into question is a sale order issued by
a bankruptcy court, the need for finality is underscored for the benefit of a thirdparty purchaser like Hawaiian Telcom. See, e.g., In re Colarusso, 382 F.3d at 61–
62 (“Under 11 U.S.C. § 363(m), a sale to a third-party purchaser acting in good
faith may not be reversed on appeal unless the aggrieved party obtains a stay of the
sale. Without the stay, this court has no power to fashion a remedy because we
cannot undo the sale, even if we were to find that the authorization was erroneous.”
(citations and footnotes omitted)).
If the Court were to accept Appellants’ arguments—that SIC’s interest in
License 372 was not properly levied or improperly transferred under Hawai‘i law
or that the Trustee never acquired it in the first place—this would contradict the
plain terms of the Sale Orders that, as the Court will discuss in more detail below,
state that SIC’s interest in License 372 was an asset acquired by the Trustee
pursuant to the Marshal Sale Order and then transferred to Hawaiian Telcom
pursuant to the 363 Sale Order.
While Appellants note that they agreed not to object to or appeal the Sale
Orders pursuant to the Settlement Agreement, they cite no authority that this
permits them to raise arguments here that would have the effect of contradicting
29
those orders. Cf. In re TE Holdcorp LLC, 2023 WL 418059, at *3 (“Spitfire’s
decision to bind itself to filing no further pleadings or documents in accordance
with the Stipulation did not relieve it of its obligation to object to the Sale Order’s
free-and-clear sale of Templar’s assets.”).
Nor is the Court convinced by the Appellant’s scattered arguments about
unforeseeable events that occurred after the Sale Orders, specifically: Hawaiian
Telcom not assuming the MRA; the Bankruptcy Court determining that the
Trustee’s breach and termination of the Settlement Agreement was excused; and its
ruling that the Settlement Agreement could not be enforced against Hawaiian
Telcom. For one, no one has appealed those rulings. Regardless, the Court agrees
with Hawaiian Telcom’s argument that, if assumption of the MRA or Settlement
Agreement was crucial to Appellants preserving their rights, that could have been
reflected in the Settlement Agreement. In other words, beyond just saying that
“[a]ny purchaser or assignee approved by the Court shall be bound by the terms of
the Master Relationship Agreement,” Bk. ECF No. 271 at 9—language held to
have no effect—they could have retained the right to object or appeal in the event
the purchaser did not assume the MRA. Cf. In re TE Holdcorp LLC, 2023 WL
418059, at *3 (noting that a certain stipulation required a party to refrain from
objecting to a sale order only if the successful bidder designated a particular
contract for assumption, but that the party was not similarly bound if the successful
30
bidder designated that contract for rejection); see also Bk. ECF No. 366 at 27–28
(noting that any party who did not object or withdrew its objection “is deemed to
have consented to the Sale under the terms of the APA pursuant to section
363(f)(2) or section 365 of the Bankruptcy Code”).
In sum, Appellants have not pointed to any convincing legal authority saying
the Bankruptcy Court was wrong to conclude that their arguments were too late.
Still, even if they were timely, the Court is not convinced that reversal is
warranted. The Court therefore sets out to address the merits of Appellant’s
arguments—beginning first with the plain terms of the Sale Orders, before turning
to Appellants’ arguments that, in large part, ask the Court to ignore those plain
terms.
2.
Interpreting the Sale Orders
The plain terms of the Bankruptcy Court’s Sale Orders provide that SIC’s
interest in License 372 was first acquired by the Trustee and then sold to Hawaiian
Telcom.
The Certificate of Execution lists which of SIC’s real and personal property
the U.S. Marshal executed upon. Trustee AP ECF No. 37. As noted above, listed
under the “Schedule A.2 Assets” are:
All licenses necessary to build, construct, repair, maintain and
operate the Schedule A.2 assets, including without limitation
SIC’s interest in License Agreement No. 372 issued by the State
of Hawaii Department of Hawaiian Home Lands.
31
Id. at 15 (emphasis added). The Trustee’s motion to confirm the Marshal Sale then
states that the Trustee acquired certain of SIC’s personal property, identified as the
“A.2. Assets,” and again lists, under the A.2 Assets, SIC’s interest in License 372
as part of the property sold to the Trustee. Trustee AP ECF No. 57 at 2–3; id. ECF
No. 57-3 at 12. Finally, the Marshal Sale Order confirms that “certain personal
property assets of [SIC] (‘the A.2. Assets’)” were sold to the Trustee. Trustee AP
ECF No. 65 at 2–3.
Pausing here for a moment, then, the plain terms of the Marshal Sale Order
clearly state that the Trustee acquired SIC’s interest in License 372. Appellants
ask the Court to conclude otherwise, and those arguments will be addressed below.
But as far as the language of the Marshal Sale Order is concerned, it plainly says
the Trustee acquired SIC’s interest in License 372.
SIC’s interest in License 372 is also mentioned explicitly as an asset
Hawaiian Telcom acquired in the 363 Sale Order—albeit in a more roundabout
way. Regardless, it is evident that License 372 was included in the sale from the
Trustee to Hawaiian Telcom because it was included in the Marshal Sale Order.
To explain this conclusion, the Court begins by looking at the terminology the 363
Sale Order uses to summarize what the Trustee first acquired from SIC, for
purposes of understanding what he then sold to Hawaiian Telcom.
32
The 363 Sale Order notes that, in connection with the Trustee Adversary
Proceeding,
certain assets and rights of the Transferred Equipment and
Property Rights were marshalled, sold and otherwise transferred
from [SIC] to [the Trustee], free and clear of any continuing
right, title, lien or encumbrance on the part of SIC or anyone
claiming by and through SIC (the “US Marshal Sale”) . . . which
US Marshal Sale was confirmed by this Court on March 16,
2020.
Bk. ECF No. 366 at 2.
“Transferred Equipment and Property Rights” is a defined term, and the
APA attached to the 363 Sale Order points to the Settlement Agreement for its
definition. See Bk. ECF No. 366-1 at 238. The Settlement Agreement provides:
“Transferred Equipment and Property Rights” means the
equipment and property rights, including those described in
Schedule A.2 to Exhibit A attached hereto and those described in
the Schedule A.2 Assets IRU, and the Mililani Property, to
transferred [sic] by SIC in conjunction with the US Marshal
Sale, in partial consideration for entering into the Master
Relationship Agreement, and generally consisting of all assets
spanning from and including the points of presence (central
offices) to the subsea cable connections (cable stations), which
for the avoidance of doubt includes but is not limited to all
buildings currently performing as cable landing stations, central
offices, real estate (including easements, rights of way, licenses,
the Licenses and Entitlements and the like, as are required for
ingress, egress and access) conduits, manholes, handholes, rights
of way, easements, fiber optic and telecommunication cables,
fiber optic transmission, multiplexing, circuit switching, circuit
transport equipment, IP routing & switching equipment, and
related supporting assets such as towers, test equipment, power
systems, cooling systems, security systems, network
management systems, cross connects and cross connect panels,
33
vehicles, trailers and tools, including all relevant manuals,
maintenance records, warranties and the like, as to be further
specified by the Paniolo Trustee for a stand-alone commercial
operation and use of the Paniolo Cable System.
Bk. ECF No. 271 at 8 (emphasis added). While that lengthy definition includes
various clarifications “for the avoidance of doubt,” at bottom it includes the
equipment and property rights “transferred by SIC in conjunction with the US
Marshal Sale.” Id. As excerpted above, the 363 Sale Order defines “US Marshal
Sale” by incorporating the defined term of “Transferred Equipment and Property
Rights” from the Settlement Agreement.8 But the Settlement Agreement itself
provides a definition of “US Marshal Sale” as follows:
the sale of the Transferred Equipment and Property Rights,
including such other SIC assets as may be deemed appropriate
by the Paniolo Trustee, under that certain Writ of Execution and
related writs issued in enforcement of the Judgment.
Bk. ECF No. 271 at 8. As discussed above, SIC’s interest in License 372 was
listed in the Certificate of Execution as personal property executed upon pursuant
8
For ease of reference, that excerpt from the 363 Sale Order again states:
certain assets and rights of the Transferred Equipment and Property
Rights were marshalled, sold and otherwise transferred from [SIC] to
[the Trustee], free and clear of any continuing right, title, lien or
encumbrance on the part of SIC or anyone claiming by and through SIC
(the “US Marshal Sale”) . . . which US Marshal Sale was confirmed by
this Court on March 16, 2020.
Bk. ECF No. 366 at 2.
34
to the Writ of Execution, and then listed as an interest transferred to the Trustee
pursuant to the Marshal Sale. Trustee AP ECF Nos. 37, 57, 65. So broadly
speaking, the 363 Sale Order defines the assets the Trustee acquired, i.e., the
“Transferred Equipment and Property Rights,” as including everything acquired
pursuant to the Marshal Sale Order, and therefore (per the discussion above) SIC’s
interest in License 372.
Looking at the more specific clauses in the definition of “Transferred
Equipment and Property Rights” underscores this conclusion. That definition also
includes the “equipment and property rights . . . described in the Schedule A.2
Assets IRU.” Bk. ECF No. 271 at 8. In the context of defining the MRA, the
Settlement Agreement defines the “Schedule A.2 Assets IRU” as:
granting an Indefeasible Right of Use (IRU) of SIC equipment
and property rights (including the Schedule A.2 assets) to the
Paniolo Trustee or his designee (and their successors) (the
“Schedule A.2 Assets IRU”)
Bk. ECF No. 271 at 6. Attached to the MRA as “Exhibit A IRU Assets” is a list of
assets titled “Schedule A.2 Assets,” CV No. 22-426, ECF No. 39 at 33, which
again lists:
All licenses necessary to build, construct, repair, maintain and
operate the Schedule A.2 assets, including without limitation
SIC’s interest in License Agreement No. 372 issued by the State
of Hawaii Department of Hawaiian Home Lands.
Id. at 43 (emphasis added).
35
The definition of “Transferred Equipment and Property Rights” also
explicitly includes “those described in Schedule A.2 to Exhibit A attached hereto.”
Bk. ECF No. 271 at 8. At Oral Argument, Hawaiian Telcom clarified that clause
refers to the Schedule A.2 Assets attached to the Certificate of Execution, which
again lists SIC’s interest in License 372. See Trustee AP, ECF No. 37.9
Based on all of this, the plain language supports that the 363 Sale Order
reaffirmed that SIC’s interest in License 372 was among the assets the Trustee had
acquired and could sell to Hawaiian Telcom.
Turning to what was sold to Hawaiian Telcom, the 363 Sale Order defines
the “Transferred Assets” as
the Schedule A.1 Assets, Schedule A.2 Assets, Assigned Claims,
Assigned Contracts (each as defined in the APA and,
collectively, the “Purchased Assets”) and the transfer of the
Incidental Rights, including the Assigned Rights and Assigned
Permits (each as defined in the APA, and together with the
Purchased Assets, the “Transferred Assets”) . . .
Bk. ECF No. 366 at 3. The APA attached to the 363 Sale Order then lists, under
Schedule 2.1(a) Debtor Assets, “[t]he following assets and rights obtained by the
Trustee from SIC in the Marshal Sale held March 6, 2020, free and clear of the
At Oral Argument, while counsel for Waimana challenged how the Settlement
Agreement may have changed the nature of the assets listed in that document, he
did not challenge what document this clause was referring to.
9
36
claims and liens of any other person (‘Schedule A.2’).” Bk. ECF No. 366-1 at 238.
Immediately below that it states:
1. The Transferred Equipment and Property Rights (as defined
in the Settlement Agreement) transferred by SIC in conjunction
with the US Marshal Sale, and generally consisting of all assets
spanning from and including the points of presence (central
offices) to the subsea cable connections (cable stations), which
for the avoidance of doubt includes but is not limited to all
buildings currently performing as cable landing stations, central
offices, real estate (including easements, rights of way, licenses,
the Licenses and Entitlements and the like, as are required for
ingress, egress and access) conduits, manholes, handholes,
rights of way, easements, fiber optic and telecommunication
cables, fiber optic transmission, multiplexing, circuit switching,
circuit transport equipment, IP routing & switching equipment,
and related supporting assets such as towers, test equipment,
power systems, cooling systems, security systems, network
management systems, cross connects and cross connect panels,
vehicles, trailers and tools, including all relevant manuals,
maintenance records, warranties and the like, but for the
avoidance of doubt, excluding the Mililani Property (as defined
in the Settlement Agreement) for a stand-alone commercial
operation and use of the Paniolo Cable System.
Id. (emphases added). And so again, based on all the cross-referenced definitions
discussed above (in addressing what “Transferred Equipment and Property Rights”
includes), it is plain that Hawaiian Telcom acquired SIC’s interest in License 372.
The Court therefore finds no error in the Bankruptcy Court’s conclusion
across the Final Enforcement Order and the Reconsideration Order that Hawaiian
Telcom acquired “those certain portions of the 372 License [] pertaining to the
Paniolo Network and/or the Paniolo Premises that were formerly held by SIC.”
37
Bk. ECF No. 729 at 4; see also Travelers Indem. Co., 557 U.S. at 150–51 (“If it is
black-letter law that the terms of an unambiguous private contract must be
enforced irrespective of the parties’ subjective intent, it is all the clearer that a
court should enforce a court order, a public governmental act, according to its
unambiguous terms.” (citation and footnote omitted)). 10
Appellants’ arguments ask the Court to ignore this plain language for
various reasons. But even assuming now is an appropriate time to address them,
none justify reversal. The Court will address them in turn, endeavoring to group
together similar arguments raised across the Main Bankruptcy Appeals for
efficiency.
3.
Failure to Levy Property under Hawai‘i Law
SIC and Clearcom argue the Bankruptcy Court erred because the Trustee
never acquired SIC’s interest in License 372 pursuant to the Marshal Sale Order
given that the procedures for levying and executing on real property interests were
not followed under Hawai‘i law. See CV No. 22-426, ECF No. 32 at 14–15; CV
No. 22-428 at 29–31. But SIC’s interest in License 372 was identified as “personal
property” in the Certificate of Execution and the Marshal Sale Order—not real
property. See Trustee AP ECF No. 37 at 6, 15; Trustee AP ECF No. 65 at 2–3.
Based on this conclusion, the Bankruptcy Court acted within its jurisdiction
because it “plainly had jurisdiction to interpret and enforce its own prior orders.”
Travelers Indem. Co., 557 U.S. at 151 (citation omitted).
10
38
And as detailed above, there can be no doubt that SIC’s interest in License 372 was
“executed upon” by the U.S. Marshal and sold to the Trustee pursuant to the plain
terms of the Marshal Sale Order. See Trustee AP ECF No. 37 at 2, 15; Trustee AP
ECF No. 65 at 2–3. The Marshal Sale Order also made clear that SIC could no
longer claim any interest in the property executed on and sold, i.e., its interest in
License 372. Trustee AP ECF No. 65 at 2, 4. Even though SIC filed a motion
seeking to quash the Writ of Execution, and in doing so claimed to hold a “real
estate interest granted by [DHHL]” that was “either not transferrable at all” or “at
best” could “only be transferred to a qualified beneficiary of the Hawaiian Homes
Trust,” Trustee AP ECF No. 33 at 35, and later argued, as it does here, that SIC’s
interest in License 372 had not been levied upon in accordance with Hawai‘i law,
id. ECF No. 42 at 3–4, the Bankruptcy Court denied that motion, Trustee AP ECF
No. 45, and SIC did not appeal that denial. Nor, as discussed above, did SIC
appeal the Marshal Sale Order. To accept SIC and Clearcom’s arguments on this
front—that the Trustee never acquired an interest in License 372 based on these
alleged defects under state law—would plainly contradict the Marshal Sale Order.
On the merits, neither SIC nor Clearcom has cited a single case to support
their claim that, under Hawai‘i law, SIC’s interest in License 372 was real property
subject to those levying procedures. And neither respond to the authority
Hawaiian Telcom cited in arguing that the levy here complied with Hawai‘i law.
39
See CV No. 22-426, ECF No. 35-3 at 17 n.7 (citing Murphy v. Hitchcock, 22 Haw.
665, 669 (1915), which discusses how a leasehold interest is akin to a chattel and
to levy it, the officer need not take actual possession of the property leased).
Hawaiian Telcom’s position finds support in a decision from a state court
action that Waimana, SIC, Pa Makani, and Clearcom filed against DHHL, among
other defendants. See Waimana Enterprises Inc., et al. v. Department of Hawaiian
Home Lands, et al., CIVIL NO. 1CCV-22-0000617, ECF No. 75 (Nov. 3, 2022)
(“DHHL Action”). In the DHHL Action, the state court concluded, in dismissing
that complaint, that although “License 372 grants the Plaintiffs the right to use
Hawaiian home lands to build, construct, repair, maintain, and operate a
telecommunications infrastructure” it “does not grant Plaintiffs any possessory or
ownership rights over any portions of Hawaiian home lands, much less the right to
exclude others from said lands.” Id. at 5 (¶¶ 7–8); see also id. at 6 (¶¶ 15–16)
(concluding Appellants failed to sufficiently allege that “they hold any possessory
right to any of the real property claimed” in their pleading or “that they hold a
conveyance of real property”) (emphasis added).
For all these reasons, reversal is not justified on this basis.
40
4.
Section 2.3 of the MRA
SIC, Waimana, and Clearcom next point to language in the MRA as proof
that the Trustee did not acquire SIC’s interest in License 372. That portion of the
MRA, in Schedule 2, states:
2.3 Entitlements. The Parties acknowledge and agree that: (that
certain Department of Hawaiian Home Lands License
Agreement No. 372 (“DHHL License”), together with (b) the
easements, leases, license agreements, letters of approval, special
area management permits, rights of way or rights of entry granted
to SIC or an SIC Affiliate and identified on Exhibit B hereto (the
“Entitlements”) are necessary for the operation and maintenance
of the Paniolo Network (or were necessary for the operation and
maintenance of the Paniolo Network). SIC hereby agrees to
assign, transfer, or convey to Paniolo all Entitlements (other than
the DHHL License) that may be their terms be so assigned or
transferred and to the extent such assignment, transfer, or
conveyance would not, in Paniolo’s reasonable judgment,
adversely affect service in the Hawaiian Home Lands. To the
extent any Entitlement may not, by its terms, be so assigned or
transferred, SIC shall (i) sublease or sublicense (as applicable)
the Entitlements to Paniolo; or (ii) grant to Paniolo the broadest
possible right to use the Entitlement. For the avoidance of doubt,
the Parties acknowledge and agree that DHHL License will not
be assigned by SIC to Paniolo, but that SIC shall, and hereby
does, grant to Paniolo the full benefit and use of the DHHL
License for the IRU Term.
CV No. 22-426, ECF No. 39 at 29 (hereinafter “Section 2.3”) (emphasis added).
According to Appellants, the Trustee never acquired an interest in License 372
because he said as much in Section 2.3 the MRA. And if he never had it, their
logic goes, he could not have transferred it to Hawaiian Telcom.
41
The Court is not persuaded this language supports that contention. For one,
none of the Appellants have persuasively explained how, as a matter of law, this
statement in an agreement between Appellants and the Trustee—which Hawaiian
Telcom did not assume 11—alters the Marshal Sale Order that plainly included
SIC’s interest in License 372 or the 363 Sale Order which plainly sold that interest
to Hawaiian Telcom, particularly when the Marshal Sale Order makes clear that
SIC could no longer claim an interest in that asset.
While the 363 Sale Order does refer to the Settlement Agreement and the
MRA, and incorporates some of the Settlement Agreement’s definitions related to
the assets Hawaiian Telcom was acquiring, there is no plain provision in the 363
Sale Order adopting this language from the MRA as a limit on what was sold to the
Trustee or eventually to Hawaiian Telcom. The Court therefore disagrees with
Waimana’s argument that all of the MRA was essentially incorporated into the 363
Sale Order or that the 363 Sale Order was “expressly subject to” the MRA—
meaning the Bankruptcy Court was required to look at all of the MRA in issuing
the Final Enforcement Order. CV No. 22-427, ECF No. 22 at 22 n.17, 25. The
363 Sale Order acknowledges that the MRA exists. See Bk. ECF No. 366 at 3 (“In
Again, by the time the Bankruptcy Court issued the Final Enforcement Order, it
had also concluded that Hawaiian Telcom was not bound by the MRA and that the
Trustee’s breach and termination of the Settlement Agreement was excused by
SIC’s earlier material breaches. See Settlement AP ECF Nos. 57, 59, 63, 67. And
again, those decisions were not appealed.
11
42
connection with the Settlement Agreement, Debtor and SIC entered into [the
MRA] pursuant to which the Debtor and SIC rearranged their business affairs
among themselves.”). But that says nothing about Hawaiian Telcom’s role in the
MRA—nor how the terms of the MRA might alter the Sale Orders. Instead, as
discussed in detail above, in defining what assets were part of both the Marshal
Sale Order and then the 363 Sale Order, the 363 Sale Order and the APA
incorporated a specific portion of the MRA that delineated SIC’s interest in
License 372 as going first to the Trustee and then to Hawaiian Telcom. Both SIC
and Waimana ignore this fact. Clearcom acknowledges it, but only to say, without
citation or further explanation, that SIC’s interest in License 372 was “erroneously
listed in Schedule A-2 of the MRA.” CV No. 22-428, ECF No. 28 at 26; see also
id. at 27 (“The Trustee’s acknowledgement came in the form of Section 2, section
2.3 of the MRA, in spite of the wording noted in Schedule A-2, which purports to
transfer License 372.”).
Waimana also points to this provision of the 363 Sale Order to argue it was
“based on” the MRA:
All persons or entities that are currently in possession of some or
all of the Transferred Assets in contravention of the US Marshal
Sale, the Settlement Agreement or MRA, including for the
avoidance of doubt, SIC and SIC’s Affiliates or any person or
entity claiming by or through SIC or SIC’s Affiliates, are hereby
directed to surrender possession of the Transferred Assets except
as Debtor and Buyer may otherwise agree.
43
CV No. 22-427, ECF No. 25 at 5 (quoting Bk. ECF No. 366 at 44). Waimana
contends that is essentially incorporating the portion of the Settlement Agreement
saying that “[t]he SIC Parties expressly agree and covenant to provide all access to
the Transferred Assets and Equipment[.]” Id. (quoting Bk. ECF No. 271 at 9). But
again, “Transferred Assets and Equipment” is a defined term that plainly includes
SIC’s interest in License 372.12
Appellants’ theory also makes little sense when considering the timing of
everything. The Marshal Sale Order makes no mention of the MRA. This mostly
makes sense. The Marshal executed upon the assets on February 4, 2020; the
public sale occurred on March 6, 2020; and the Marshal Sale Order was entered on
March 16, 2020. Trustee’s AP ECF No. 37; id. ECF No. 57-1 at 4–5; id. ECF No.
65. The Settlement Agreement may have been finalized sometime during all that
(it is dated effective March 6, 2020), but it was not presented for approval until
after all that, in April 2020, and not approved until June 2020. Bk. ECF Nos. 252,
271. So there seems no way around the fact that SIC’s interest in License 372 was
executed upon and sold to the Trustee (assuming the Court rejects Appellants’
arguments regarding the invalidity of any transfer under Hawai‘i law).
Moreover, and as already discussed, “Transferred Assets” is a defined term in
the 363 Sale Order that also plainly includes SIC’s interest in License 372.
12
44
But Appellants’ theory is not that the Trustee somehow transferred it back to
SIC pursuant to the Settlement Agreement and MRA, and specifically Section 2.3.
And that’s also not what the language of Section 2.3 suggests (why would SIC say
it is not assigning something it no longer owned). Instead, Waimana, for example,
contends that the Trustee never acquired it in the first place, and the proof of that is
Section 2.3. See, e.g., CV No. 22-427, ECF No. 22 at 6–7, 10 & n.4, 14 n.7 (“Not
assuming the Rule 9019 Settlement Agreement and the MRA does not address the
fact that the Trustee cannot transfer what he does not have, and the Trustee agreed
and acknowledged in the MRA that he did not acquire License 372 from the
Marshal Sale.”); see also, e.g., CV No. 22-426, ECF No. 32 at 15 (SIC arguing
“[t]he Trustee expressly confirmed in MRA that he never acquired SIC’s license”).
This Court will not say the Bankruptcy Court erred because it did not accept the
Trustee’s interpretation of what it acquired from the Marshal Sale when that
interpretation contradicts the record and the plain language of its own orders based
on that record. And it especially will not say that when, by the time the
Bankruptcy Court was interpreting those orders for purposes of enforcing them, the
MRA was effectively inapplicable to Hawaiian Telcom and the Trustee.
Hawaiian Telcom offers an interpretation of this provision that would avoid
any potential inconsistency, namely: that the “the DHHL License” refers to the
entirety of License 372, which SIC could not assign, and so does not necessarily
45
negate that SIC did relinquish what interest it had in License 372. See CV No. 22427, ECF No. 35-3 at 19. But even assuming an irreconcilable inconsistency
between the Sale Orders and the MRA, Appellants have not explained why the
Bankruptcy Court was required to look outside the Sale Orders—and specifically
to Section 2.3 of the MRA—to create this inconsistency when those Sale Orders
were now final and did not contain a clear incorporation of Section 2.3. Cf.
Church Joint Venture, L.P. v. Blasingame (In re Blasingame), 585 B.R. 850, 861
(B.A.P. 6th Cir. 2018) (noting that “extrinsic evidence (which, when appropriate,
may be used to interpret an ambiguous contract) has no clear application” when a
bankruptcy court is interpreting its own prior sale order).
In sum, the Court is not convinced that the language in Section 2.3 of the
MRA justifies reversal.
5.
Waimana’s Additional Arguments Regarding Section 2.3
Related to the language in Section 2.3 of the MRA, and raised only by
Waimana, is the argument that the Bankruptcy Court also erred because it should
have permitted discovery and held an evidentiary hearing to resolve the
inconsistency allegedly created by Section 2.3.13
Frankly, the Court found it difficult to pin down Waimana’s arguments. The
argument section of its opening brief and nearly all of its reply brief merely
summarize the bankruptcy proceedings, with a few, mostly undeveloped arguments
scattered throughout. Nonetheless, the Court will attempt to address the issues
Waimana appears to raise.
13
46
Taking the first issue first, “[a] bankruptcy court abuses its discretion in
denying discovery only if the movant diligently pursued its previous discovery
opportunities, and can demonstrate that allowing additional discovery would have
precluded [the previous ruling].” In re Thorpe Insulation Co., 671 F.3d 1011,
1024 (9th Cir. 2012) (internal quotation marks and citation omitted). Waimana
fails to get this argument off the ground, though, because it has not pointed the
Court to anywhere in the record where the Bankruptcy Court denied a specific
request for discovery. Nor was the apparent denial of discovery even included in
Waimana’s issues on appeal. Bk. ECF No. 818; CV No. 22-427, ECF No. 22 at 6–
7. Based on this, the Court cannot conclude the Bankruptcy Court abused its
discretion as to any issues related to discovery.
As to an evidentiary hearing, again, a bankruptcy court’s decision whether or
not to hold an evidentiary hearing is reviewed for abuse of discretion. In re Int’l
Fibercom, Inc., 503 F.3d at 939–40. Where a party fails to request an evidentiary
hearing below, they waive the right to object to the lack of one on appeal. See In
re Consol. Nevada Corp., 2017 WL 6553394, at *8 (B.A.P. 9th Cir. Dec. 21,
2017). In response to Hawaiian Telcom’s argument that Waimana has thus waived
this issue here, Waimana contends that SIC requested an evidentiary hearing in
briefing related to Hawaiian Telcom’s prior motion to enforce. See CV No. 22427, ECF No. 25 at 6 (citing Bk. ECF No. 480). But Waimana fails to explain why
47
that suffices to preserve the issue on its behalf for purposes of challenging the
Final Enforcement Order issued in response to a later motion to enforce. See, e.g.,
In re LLS Am., LLC, 2012 WL 2042503, at *9 (B.A.P. 9th Cir. June 5, 2012)
(noting appellant “waived its right to complain about the lack of an evidentiary
hearing” and could not “step into the shoes” of others who had requested one); In
re Livdahl, 2019 WL 1615282, at *7 n. 4 (B.A.P. 9th Cir. Apr. 15, 2019)
(suggesting that requesting an evidentiary hearing in one proceeding does not carry
over into another proceeding). No special circumstances justify excusing the
waiver here. See In re Mercury Interactive Corp. Sec. Litig., 618 F.3d 988, 992
(9th Cir. 2010). And requesting an evidentiary hearing after the fact, on a motion
for reconsideration, is not sufficient to preserve the issue. See In re Reg'l Care
Servs. Corp., 2017 WL 2871751, at *9 (B.A.P. 9th Cir. July 5, 2017). Although
here, Waimana does not even appear to contend that it requested an evidentiary
hearing in moving for reconsideration. 14
In its reply, Waimana cites certain parts of its motion for reconsideration where
it referenced questions of fact or the need for a trial. CV No. 22-427, ECF No. 25
at 8–9. But Waimana does not clearly argue that this suffices to request an
evidentiary hearing. See ECF No. 25 at 13 (arguing failure to request an
evidentiary hearing “is not fatal to the appeal”). Nor does it respond to Hawaiian
Telcom’s argument that such “generic comments” are insufficient to request a
hearing and thus preserve the issue for appeal. See CV No. 22-427, ECF No. 23-3
at 9 (citing Reg’l Care Servs. Corp., 2017 WL 2871751, at *9; In re Oasis at Wild
Horse Ranch, LLC, 2011 WL 4502102, at *7 (B.A.P. 9th Cir. Aug. 26, 2011)).
14
48
Nor would the Court be inclined to conclude that a failure to hold an
evidentiary hearing amounts to an abuse of discretion. As far as the Court can
discern, Waimana argues an evidentiary hearing was necessary to resolve an
ambiguity between the Sale Orders and the Settlement Agreement/MRA, arguing
“an evidentiary hearing is required where the order or an agreement referenced in
the order is based on an agreement that is ambiguous on the intent of the parties.”
ECF No. 22 at 26. But based on the discussion above, the Court agrees with the
Bankruptcy Court’s reliance on the plain language of the Sale Orders. And, as also
discussed above, Waimana does not convincingly argue that the Bankruptcy Court
was required to look outside those Sale Orders to Section 2.3 of the MRA to create
an ambiguity within them and then accept evidence to resolve that ambiguity.
Importantly, Waimana does not even articulate the evidence it would have
presented at any such evidentiary hearing. And, in any event, the Bankruptcy
Court based its rulings on the fact that the Sale Orders were not appealed and so
were final—something no evidentiary hearing could change. To support its claim
that an evidentiary hearing was warranted, Waimana relies on the fact that the
Bankruptcy Court did not grant Hawaiian Telcom all the relief it requested in its
Initial Enforcement Order because of “gaps in the existing record,” including the
unresolved issues created by Hawaiian Telcom choosing not to acquire the MRA,
and SIC claiming the Trustee was required to sell the assets subject to that
49
agreement. See Bk. ECF No. 537 at 9–10. But the issue before the Bankruptcy
Court at that time was not narrowed to the one the parties focus on here—whether
Hawaiian Telcom acquired SIC’s interest in License 372. And again, at that time,
the Bankruptcy Court had not yet resolved (i.e., rejected) Appellants’ argument
that the Trustee and Hawaiian Telcom were bound by the Settlement Agreement.
In sum, even assuming an evidentiary hearing had been properly requested, the
Court would conclude the Bankruptcy Court had an adequate basis to issue the
Final Enforcement Order and deny reconsideration without the need to hold any
evidentiary hearing based on the record before it at that time. See Int’l Fibercom,
503 F.3d at 946.
Finally, with regard to the Reconsideration Order specifically, Waimana
contends reconsideration was warranted to correct a clear error in law or fact, or
prevent manifest injustice. CV No. 22-427, ECF No. 22 at 24; see also Hansen v.
Moore (In re Hansen), 368 B.R. 868, 878 (B.A.P. 9th Cir. 2007) (“Reconsideration
under FRCP 59(e) . . . is appropriate only if the moving party demonstrates (1)
manifest error of fact; (2) manifest error of law; or (3) newly discovered evidence.”
(citation omitted)). But Waimana concedes its argument regarding the language in
the MRA had already been raised and rejected in connection with the Final
Enforcement Order. CV No. 22-427, ECF No. 22 at 24. Reconsideration is not
warranted based on mere disagreement with the Bankruptcy Court’s prior ruling.
50
Waimana also faults the Bankruptcy Court for denying the motion for
reconsideration when the Final Enforcement Order did not say anything explicitly
about the effect of the MRA or Settlement Agreement on the Sale Orders. See CV
No. 22-427, ECF No. 22 at 24. But the record is clear that the Bankruptcy Court
viewed that argument as a belated attack on the Sale Orders and thus based the
Final Enforcement Order on its interpretation of the Sale Orders as entered. Bk.
ECF No. 739 at 15; Bk. ECF No. 782 at 13–14. Waimana appears to argue that a
failure to appeal the 363 Sale Order should be excused because it bargained away
its ability to object based on its understanding of how the MRA altered the plain
terms of the Sale Orders. See CV No. 22-427, ECF No. 22 at 25. But as discussed
above, an agreement not to object cannot justify a failure to appeal and therefore
permit what amounts to an untimely collateral attack.
For these reasons, the Court rejects Waimana’s claim that any of these issues
warrant reversal.
6.
Conduct Inconsistent with Acquisition
To support their argument that neither the Trustee nor Hawaiian Telcom
ever acquired an interest in License 372, Appellants also look to other parties’
conduct—both in and outside of bankruptcy court proceedings. But as noted
above, the Appellants have not cited convincing authority that such extrinsic
evidence—even further afield than the MRA—is relevant when a court is
51
interpreting its own orders (and then another court is, in turn, reviewing that
interpretation). And accepting each argument, e.g., that Hawaiian Telcom did not
acquire this asset because someone else said so in a filing, would plainly call into
question the terms of the Bankruptcy Court’s Sale Orders. Regardless, none of the
evidence cited is particularly convincing.
SIC and Clearcom point to DHHL’s statement in a filing related to the 363
Sale Order that the eventual buyer would need to acquire a new license for the use
of HHL. Bk. ECF No. 341 at 2, 4–5. But they do not respond to Hawaiian
Telcom’s argument that DHHL’s statement was based on its position that License
372 was in default—i.e., this was not a position on what was included in the sale,
especially since in that same filing DHHL also said that the Marshal executed on
SIC’s assets, including “SIC’s interest in License Agreement No. 372 issued by
DHHL to build, construct, repair and maintain a telecommunications network on
Hawaiian Home Lands.” Id. at 4. And Appellants also fail to explain why the
Bankruptcy Court should have relied only at DHHL’s statement in that filing, and
ignored later filings where the DHHL clearly stated that the Trustee had acquired
SIC’s interest in License 372. See, e.g., Bk. ECF No. 669 at 9–10 (“The Marshal
Sale also expressly divested SIC of ‘Other Related Assets’ that were detailed on
Schedule A.2 including, ‘SIC’s interest in License Agreement No. 372.’”).
52
Waimana points to License 372’s limitation requiring DHHL to consent to
any assignment in explaining why Section 2.3 of the MRA existed. CV No. 22427, ECF No. 22 at 11. Hawaiian Telcom notes that there is no evidence DHHL
has not consented to the assignment; still, it does concede that DHHL may still
enforce the terms of License 372 absent such consent. CV No. 22-427, ECF No.
23-3 at 21. But Waimana fails to explain why that is a concern for the Court at this
time.
SIC also points to Hawaiian Telcom’s act of obtaining a Righty of Entry
from DHHL to HHL they would have otherwise been able to access if they had
actually acquired SIC’s interest in License 372. See CV No. 22-426, ECF No. 32
at 16. But SIC does not respond to Hawaiian Telcom’s argument that its Right of
Entry covered more regions than SIC’s interest in License 372. ECF No. 35-3 at
20 & n.9 (citing Bk. ECF No. 639-24).
Waimana claims a statement in a filing from the United States on behalf of
the RUS lends support to its arguments. See CV No. 22-427, ECF No. 22 at 17
(citing RUS’s statement that “any personal property of [SIC] not sold to [Hawaiian
Telcom], including its rights under the 372 License, remains subject to RUS’s
lien”). Hawaiian Telcom argues the Court cannot consider that filing because it
was not designated as part of the appellate record. See CV No. 22-427, ECF No.
23-3 at 22 n.14. Waimana does not respond to this contention, and makes no
53
further mention of this argument in its reply. But again it is unclear why RUS’s
statement—which did not cite to anything—should override the plain terms of the
Sale Orders. In any event, that statement could be entirely consistent with the Sale
Orders. For example, in a filing related to the Final Enforcement Order, DHHL
acknowledged both that the Marshal Sale Order divested SIC of its interest in
License 372 with regard to the “A.2 Assets” but that “SIC’s interest in License 372
for assets and premises other than those at issue in this matter remains intact,
though it is entirely encumbered by RUS’s prior execution and SIC has no equity
therein.” Bk. ECF No. 669 at 9 & n.2 (emphasis added).
Overall, while these points may indicate a lack of clarity regarding the status
of License 372 among the parties at various points during the bankruptcy
proceedings, the Court has not been provided any authority that this confusion
(going both ways) should override the plain language of the Sale Orders, and the
Bankruptcy Court’s reasonable interpretation of the language within them.
7.
Violation of the Hawaiian Homes Commission Act
In another point of error tied to Hawai‘i law, SIC and Clearcom argue the
Marshal could not have levied on SIC’s interest in License 372 and the Bankruptcy
Court could not then have transferred it to Hawaiian Telcom without violating the
HHCA. An admittedly abridged background of the HHCA places this argument in
context:
54
Shortly after the establishment of the Territory [of Hawai‘i],
Congress “became concerned with the condition of the native
Hawaiian people.” Rice v. Cayetano, 528 U.S. 495, 507 (2000).
Declaring its intent to “[e]stablish[ ] a permanent land base for
the beneficial use of native Hawaiians,” Congress enacted the
Hawaiian Homes Commission Act, 1920. Act of July 9, 1921,
ch. 42, § 101(b)(1), 42 Stat. 108 (“HHCA”). The HHCA set
aside 200,000 acres of lands previously ceded to the United
States for the creation of loans and leases to benefit native
Hawaiians. These lands were to be leased exclusively, including
by transfer, to native Hawaiians for a term of 99 years at a
nominal rate of one dollar per year. Id. § 208(1), (2) & (5). The
HHCA defines “native Hawaiian” as “any descendant of not less
than one-half part of the blood of the races inhabiting the
Hawaiian Islands previous to 1778.” Id. § 201(a)(7).
In 1959, Hawaii became the 50th State in the union. Under the
Hawaii Statehood Admission Act, Congress required Hawaii to
incorporate the HHCA into its state Constitution, with the United
States retaining authority to approve any changes to the
eligibility requirements for the HHCA leases. Act of March 18,
1959, Pub.L. No. 86–3, § 4, 73 Stat. 5 (“Admission Act”). See
HAW. CONST. art. XII, §§ 1–3. In return, the United States
granted Hawaii title to all public lands within the state, save a
small portion reserved for use of the Federal Government. Id. §
5(b)-(d), 73 Stat. 5. The Admission Act further declared that the
lands, “together with the proceeds from the sale or other
disposition of any such lands and the income therefrom, shall be
held by [the State] as a public trust for the support of the public
schools, ... the conditions of native Hawaiians” and other
purposes. Id. § 5(f), 73 Stat. 6. The land granted to Hawaii
included the 200,000 acres previously set aside under the HHCA
and an additional 1.2 million acres.
The Hawaii Constitution expressly adopted the HHCA and
declared that “the spirit of the [HHCA] looking to the
continuance of the Hawaiian homes projects for the further
rehabilitation of the Hawaiian race shall be faithfully carried
out.” HAW. CONST. art. XII, § 2[.]
55
The HHCA established a Department of Hawaiian Home Lands
(“DHHL”), to be headed by an executive board known as the
Hawaiian Homes Commission (“HHC”). Act of July 9, 1921,
ch. 42, § 202(a), 42 Stat. 108. By statute Hawaii created both the
[DHHL] and the Hawaiian Homes Commission. Together,
DHHL/HHC administer the 200,000 acres set aside by the
HHCA, and DHHL/HHC’s beneficiaries are limited to “native
Hawaiians,” as defined in the Act.
Arakaki, 477 F.3d at 1054–55.
As already discussed above, SIC unsuccessfully raised this argument based
on the HHCA in seeking to quash the Writ of Execution. See Trustee AP ECF No.
33 at 35 (arguing that “SIC’s license can only be transferred to a qualified
beneficiary of the Hawaiian Homes Trust”). And, as noted, SIC failed to appeal
the denial of that motion or the Marshal Sale Order.
To say that an interest in License 372 could not be levied upon and could
only be transferred to a beneficiary of the HHCA would again call into question
the Sale Orders, which permitted that interest to be levied upon and then
transferred it to a non-beneficiary. Through this argument, then, SIC and
Clearcom can only be asking the Court to declare the portion of the Sale Orders
transferring the interest in License 372 void ab initio based on the HHCA—
something it cannot do based on the actual orders appealed. See Bush v. Watson,
81 Hawai‘i 474, 487, 918 P.2d 1130, 1143 (1996) (voiding agreements between
lessees and non-beneficiaries because they violated Section 208(5) of the HHCA).
56
Even considering the merits, the Court disagrees that the Sale Orders violate
the HHCA. In interpreting the HHCA, the Court’s “foremost obligation is to
ascertain and give effect to the intention of the legislature, which is to be obtained
primarily from the language contained in the statute itself. And where the
language of the statute is plain and unambiguous, [its] only duty is to give effect to
its plain and obvious meaning.” Bush, 81 Hawai‘i at 478, 918 P.2d at 1134
(interpreting the HHCA) (citation omitted). Appellants’ argument relies in large
part on SIC’s interest in License 372 being considered a “lease” under the HHCA;
however, they fail to demonstrate that is the case.
Appellants point to Section 207 of the HHCA, which sets forth (under
subsections (a) and (b)) certain conditions on “leas[ing] to native Hawaiians the
right to the use and occupancy of a tract or tracts of Hawaiian home lands,” and
then separately provides (under subsection (c)) that DHHL may grant certain
licenses. HHCA § 207 (emphasis added). Specifically, Appellants cite the
following provisions under subsection (c):
(c)(1) The department is authorized to grant licenses as
easements for railroads, telephone lines, electric power and light
lines, gas mains, and the like. The department is also authorized
to grant licenses for lots within a district in which lands are leased
under the provisions of this section, for:
...
(B) Theaters, garages, service stations, markets, stores,
and other mercantile establishments (all of which shall be
57
owned by native Hawaiians or by organizations formed
and controlled by native Hawaiians).
(2) The department is also authorized to grant licenses to the
United States for reservations, roads, and other rights-of-way,
water storage and distribution facilities, and practice target
ranges.
Id. Appellants then rely on Section 208 of the HHCA, entitled “Conditions of
leases,” which makes no mention of “licenses,” but instead states:
Each lease made under the authority granted the department by
section 207 of this Act, and the tract in respect to which the lease
is made, shall be deemed subject to the following conditions,
whether or not stipulated in the lease: . . .
HHCA § 208 (emphasis added). Relevant here, the conditions that follow limit
transfer of any interest in a tract of land to other native Hawaiians and provide that
“[s]uch interest [in the tract] shall not . . . be subject to attachment, levy, or sale
upon court process.” HHCA § 208(5).
Appellants contend that such limits on a lease in Section 208 should be
interpreted to apply equally to a license issued pursuant to Section 207, making
Hawaiian Telcom’s acquisition of an interest in License 372 a violation of the
HHCA both because it was levied on and sold through court process, and
transferred to an entity that is not native Hawaiian owned or controlled. To
support this interpretation, Appellants point to other portions of the HHCA.
First, they point to Section 212, which references leasing HHL to public
utilities, in connection with stating that a nominal rent may be charged for such
58
leases when DHHL returns control of certain HHL not leased pursuant to Section
207 to the Board of Land and Natural Resources (BLNR), and the BLNR then
leases the land “to a public utility or other governmental agency, where such use
directly benefits [DHHL] or the homestead lessees.” HHCA § 212.
Next, they point to some of the “principal purposes” of the HHCA set forth
in Section 101(b):
(1) Establishing a permanent land base for the benefit and use of
native Hawaiians, upon which they may live, farm, ranch, and
otherwise engage in commercial or industrial or any other
activities as authorized in this Act;
(2) Placing native Hawaiians on the lands set aside under this
Act in a prompt and efficient manner and assuring long-term
tenancy to beneficiaries of this Act and their successors;
(3) Preventing alienation of the fee title to the lands set aside
under this Act so that these lands will always be held in trust for
continued use by native Hawaiians in perpetuity[.]
HHCA § 101(b).
Finally, SIC makes passing reference to Section 204(2), which states that
DHHL may give preferential treatment in the “disposition” of HHL to “a native
Hawaiian, or organization or association owned or controlled by native Hawaiians,
for commercial, industrial, or other business purposes[.]” HHCA § 204(2).
The Court agrees with Hawaiian Telcom that Appellants’ arguments do not
find support in the text of the HHCA or other authority interpreting it. First, the
59
Court notes that, when presented with an issue of state law,15 a federal court’s task
is to follow the decisions of the state’s highest court and, if none exist, to predict
how the state supreme court would decide the issue, guided by other authority,
including lower state court decisions. See Ariz. Elec. Power Co-op. v. Berkeley, 59
F.3d 988, 991 (9th Cir. 1995); see also Gen. Motors Corp. v. Doupnik, 1 F.3d 862,
865 n.4 (9th Cir. 1993) (“Lower state court decisions may provide guidance as to
the direction of the State Supreme Court’s probable decisionmaking.” (citation
omitted)).
To the extent Appellants concede that License 372 is, in fact, merely a
license,16 their argument seems implicitly foreclosed by the Hawai‘i Supreme
Court’s decision in Bush v. Watson, 81 Hawai‘i 474, 918 P.2d 1130 (1996). Bush,
which was briefly cited above, addressed third-party agreements between
beneficiary lessees and non-beneficiaries that “provide[d] a right of entry []
allowing non-Hawaiian third parties to cultivate crops and raise livestock on
homestead lands.” Id. at 487, 918 P.2d at 1143 (footnote omitted). The Hawai‘i
Supreme Court rejected the argument that these agreements were “‘mere licenses,’
See Han v. U.S. Dep’t of Just., 45 F.3d 333, 339 (9th Cir. 1995) (“Claims under
the [HHCA], which has been expressly incorporated in the Hawaii Constitution,
arise exclusively under state law.” (citation omitted))
15
See CV No. 22-426, ECF No. 32 at 18 (“The use of the word ‘lease’ in Section
208 was not intended to exclude licenses.”); CV No. 22-428, ECF No. 28 at 28
(same).
16
60
which d[id] not create property interests in the land.” Id. at 482–83, 918 P.2d at
1138–39 (footnotes omitted). Bush distinguished between leases and licenses
under the law, generally. See id. at 482–87 & n.11, 918 P.2d at 1138–43 & n.11.
It went on to analyze the third-party agreements at issue, citing authority that a
court should look beyond the name the parties give to determine its true nature.
See id. (citing authority that a right to occupy a distinct part of the premises may
constitute a sublease despite the parties naming it a license and authority that a
right to use land for a definite term for a specific purpose creates an interest in the
land rather than a revocable license). Bush noted that the agreements “address[ed]
specific parcels of property”; were “arguably for fixed terms because they
require[d] fixed notification periods for revocation” and, “[a]lthough they
purport[ed] to be terminable at will and preserve[d] concurrent use by the lessees
and the third parties, . . . transfer[red] at least a portion of the lessees’ extant
interests in their homesteads.” Id. at 487, 918 P.2d at 1143 (footnote omitted).
These agreements thus “provide[d] a right of entry . . . repugnant to HHCA §
208(5)” and its limitations on transfer to non-beneficiaries. Id. (footnote omitted).
Implicit in Bush, then, is the notion that a mere license would not be subject to the
limitations in Section 208(5) of the HHCA.
Even if Appellants are arguing that License 372 is akin to a lease, though,
such that Section 208(5) would apply, there is persuasive authority to the contrary.
61
A state trial court has concluded—in an action Appellants brought against DHHL
(identified above as the “DHHL Action”)—that License 372 is not a lease under
Hawai‘i law in the context of claims related to “the nature of License 372 and
whether said license grants [Appellants] a possessory interest in ‘premises’ as
defined and used in License 372.” DHHL Action, ECF No. 75 at 5. Although a
federal court is not bound by an unreported state trial court decision, it “may rely
on it to the extent its reasoning is persuasive.” Spinner Corp. v. Princeville Dev.
Corp., 849 F.2d 388, 390 n.2 (9th Cir. 1988) (citation omitted). Appellants offer
no reason why the Court should not look to the decision in the DHHL Action as
persuasive authority here.
The Court finds that decision’s reasoning to be persuasive. In seeking to
categorize what License 372 was, and ultimately deciding it was not a “lease,” the
state court in the DHHL Action recounted the “general factors for determining
whether an instrument is a lease” under Hawai‘i law: “(1) whether the grantee has
the right to occupy a definite parcel; (2) whether the grantee’s right to possession is
assignable; and (3) whether the agreement is for a fixed term.” DHHL Action,
ECF No. 75 at 5–6 (citing Kiehm v. Adams, 109 Hawai‘i 296, 303, 126 P.3d 339,
346 (2005), as corrected (Feb. 3, 2006)). Applying those factors, it concluded
“License 372 is neither a conveyance of a fee simple interest nor a lease” because:
62
License 372 does not grant possessory rights over definite
parcels or “premises” as defined in License 372. 17
[] License 372 is not for a fixed term, but rather, an indefinite
period that is dependent on the nature of the licensee’s use of
Hawaiian home lands.
[And] DHHL is not authorized to encumber its lands with a lease
in perpetuity and may not sell or dispose of Hawaiian home lands
except as authorized under HHCA § 205.
Id. at 5–6. This analysis follows Hawai‘i Supreme Court authority regarding how
to determine whether an agreement is a lease or a license, see, e.g., Kiehm, 109
Hawai‘i at 302–03 & n.16, 126 P.3d at 345–46 & n.16, including when the
agreement relates specifically to use of HHL, see Bush, 81 Hawai‘i at 487, 918
P.2d at 1143.18
Even aside from this authority, the Court agrees the HHCA plainly
delineates between leases and licenses, undercutting Appellants’ argument that the
reference to “lease” in Section 208 should be read to also mean “license.” That
SIC can point to Section 212, referencing leases granted to public utilities, is
At Oral Argument, counsel for SIC pointed to the addenda to License 372,
which sets out certain easements to specific property identified, e.g., in metes and
bounds and by Tax Map Keys. See, e.g., Bk. ECF No. 639-8. But those addenda
still recognize that License 372 granted rights and privileges “throughout all lands
under the administration and jurisdiction of [DHHL] . . in perpetuity[.]” Id. at 2–3.
17
This discussion alone underscores that these attacks are too late, as the
Bankruptcy Court reiterated it only had jurisdiction to interpret its own orders for
the purpose of enforcing them, i.e., it did not have jurisdiction to interpret License
372. See Bk. ECF No. 708 at 8; Bk. ECF No. 739 at 16.
18
63
irrelevant. Simply pointing to one section of the HHCA that envisions land being
leased to a public utility in circumstances not at issue here does not undercut the
plain terms of Section 207, under which License 372 was issued here, which
distinguishes between leases and licenses. See also Bk. ECF 639-1 (License 372,
referencing HHCA § 207(c)(1)(A) and Hawai‘i Administrative Rules (“HAR”) §§
10-4-21 and 10-4-22); see also HAR § 10-4-22 (addressing general provisions for
issuance of licenses on HHL, with no mention of leases); HAR § 10-4-22
(providing for “[l]icenses as easements” on HHL, including for, e.g., “telephone
lines,” with no mention of leases). The Court is thus not persuaded that Section
212 supports reading Section 208(5), forbidding levy and execution on leases or
limiting the transfer of leases, as applicable to the license at issue here.
With regard to limitations on licenses, the Court is similarly not persuaded
that the HHCA forbids Hawaiian Telcom from acquiring an interest in License
372. The HHCA does provide that certain licenses must be owned by native
Hawaiians or organizations formed and controlled by native Hawaiians (e.g.,
service stations, markets, stores). HHCA § 207(c)(1)(B). But those types of
licenses are addressed separately from licenses granted to public utilities like
License 372, which do not have these same limitations, and pursuant to which
License 372 was actually issued. See HHCA § 207(c)(1)(A); HAR § 10-4-22.
64
Finally, the Court is not convinced that Section 204(2), the stated purpose of
the HHCA, or the legislative history discussing that purpose warrant reversal.
Appellants have not convincingly demonstrated how permitting Hawaiian Telcom
to have a utility license for the purpose of providing telecommunication services is
contrary to the purposes detailed above emphasizing long term tenancy by native
Hawaiians, anti-alienation of HHL, and the advancement of native Hawaiianowned businesses. SIC relies on language from License 372 itself—that DHHL
“believes and intends that the issuance of this Exclusive ‘Benefit’ LICENSE will
also fulfill the purpose of advancing the rehabilitation and welfare of native
Hawaiians,” CV No. 22-426, ECF No. 32 at 17 (quoting Bk. ECF No. 639-1 at 3).
But SIC fails to explain how that language necessarily amounts to proof that the
Bankruptcy Court erred here, i.e., SIC does not explain why that language could
not be interpreted as advancing native Hawaiian interests based on the
telecommunications services to be provided, regardless of what entity is the
provider. And SIC’s commentary that DHHL’s position in the bankruptcy
proceedings amounts to a breach of fiduciary duty provides the Court with no
assistance in the task at hand, i.e., determining if the Bankruptcy Court was wrong
to conclude its orders already made clear Hawaiian Telcom acquired SIC’s interest
in License 372.
65
Based on the foregoing, the Court cannot conclude that reversal is warranted
based on the HHCA.19
8.
Remaining Arguments Regarding License 372
This section addresses the various arguments that appear to challenge the
effect of the Bankruptcy Court’s conclusion regarding who acquired SIC’s interest
in License 372. In other words, Appellants seem to take issue with the practical
reality left in place by the Bankruptcy Court’s Final Enforcement Order.
Admittedly, the Court feels a bit “at sea” with regard to these arguments because
they raise fact-dependent issues related to telecommunications infrastructure that
have neither been clearly explained nor well developed in the briefing.
Take, for example, SIC’s argument that it is left with the “burdens” of
License 372. See CV No. 22-426, ECF No. 37 at 15. The Court is left to guess at
the basis for this contention or, more importantly, why this Court—tasked only
with reviewing the Bankruptcy Court’s orders—is an appropriate place to litigate
what DHHL may or may not enforce as to Hawaiian Telcom (or anyone else) with
For the first time in its reply brief, SIC asks the Court to certify this issue to the
Hawai‘i Supreme Court. See CIV No. 22-426, ECF No. 37 at 16. Based on the
foregoing, the Court would not exercise its discretion to do so, even if it had been
timely requested. See Riordan v. State Farm Mut. Auto. Ins. Co., 589 F.3d 999,
1009 (9th Cir. 2009); Haw. R. App. P. 13(a).
19
66
regard to any burdens associated with the interests acquired in License 372. As the
Bankruptcy Court itself noted,
As far as slicing up and dicing License 372, I think paragraph G
at page 4 of the proposed order explains that about as well as it
can be explained and that is that HTI has acquired those portions
of the 372 license pertaining to the Paniolo Network or the
Paniolo premises that were formerly held by SIC.
So Sandwich Isles had a right granted by its affiliates to use at
least portions of the property covered by the 372 license and the
portions of those portions that the Trustee sold to Hawaiian Tel
are further described in Exhibit A-2 or in Schedule A-2, I think
it is, to the sale order, and that is the identified central offices and
the access rights to those.
Now I have no doubt that there will be more disputes about what
exactly that means and how it is to be sliced and diced. All I’m
doing -- all I’m prepared to do -- I think all I have jurisdiction to
do is to simply interpret and enforce my order. If collateral
problems arise from my order, which is final and can’t be
changed, then those problems likely have to be resolved in other
proceedings and perhaps in other forums. Maybe State Court,
maybe Federal District Court, I don’t know. But I’m not
prepared to go any further than simply interpreting and applying
my order based on what it says.
Bk. ECF No. 739 at 15–16.
Potentially related, Waimana also claims that an issue on appeal is whether
“SIC’s interest in License 372 [is] only applicable to telephone communications,
and not to wireless or broadband, as set forth in Waimana’s assignments to SIC, Pa
Makan[i] and Clearcom[.]” CV No. 22-427, ECF No. 22 at 7. The Court
addresses this argument more below, in relation to the Adversary Proceeding
67
Appeals. For now, the Court notes that the Final Enforcement Order says only that
Hawaiian Telcom acquired “those certain portions of the 372 License . . .
pertaining to the Paniolo Network and/or the Paniolo Premises that were formerly
held by SIC.” Bk. ECF No. 729 at 4. And Hawaiian Telcom states that it “has
never taken the position that it purchased the entirety of License 372.” CV No. 22426, ECF No. 35-3 at 17.
In what appears to be a related argument, Clearcom seems to contend the
Final Enforcement Order and Reconsideration Order amount to an unconstitutional
taking with respect to License 372. 20 In its opening brief, Clearcom argues those
orders “allow [Hawaiian Telcom] to use the acquired property for all types of
services [which] constitutes an unjust taking of Clearcom’s license and property
rights for data.” CV No. 22-428, ECF No. 28 at 25. On reply, though, Clearcom
appears to abandon that portion of its takings argument, claiming only that “giving
SIC’s property to [Hawaiian Telcom] ‘free and clear of encumbrances’” was a
taking and that Clearcom suffered a taking only with regard to the spare reels issue.
CV No. 22-428, ECF No. 33 at 7–9. Even if it had not abandoned it, the Court
reiterates that it does not interpret either the Final Enforcement Order or the
The argument regarding an unconstitutional taking as to Clearcom and the
“spare reels” is discussed below.
20
68
Reconsideration Order as confirming the conveyance of anything other than SIC’s
interest in License 372.
Clearcom’s claim that an issue on appeal is whether Waimana, Pa Makani,
and Clearcom’s commitments in the Settlement Agreement could be enforced by
Hawaiian Telcom seems equally misplaced here. See CV No. 22-428, ECF No. 28
at 31–33. According to Hawaiian Telcom, it “has never sought to enforce any
commitments in the Settlement Agreement against the SIC Parties”—and so this
may not even be an actual collateral problem. See CV No. 22-428, ECF No. 31-3
at 24–25. But even if it were, the Court agrees that the continued application of
any portions of the Settlement Agreement is not before the Court here.
In its reply brief, SIC appears to argue that the Bankruptcy Court erred in the
Final Enforcement Order by reading the Marshal Sale Order impermissibly
broadly. See CV No. 22-426, ECF No. 37 at 7–9. So while the Marshal Sale
Order specifically delineated that only rights in License 372 related to the “A2
Assets,” i.e., those acquired from SIC, were being transferred, the Final
Enforcement Order purported to award Hawaiian Telcom rights in License 372
related to the “A1 Assets,” i.e., Paniolo’s pre-bankruptcy assets. In short, even if
Hawaiian Telcom acquired SIC’s interest in License 372 and could maintain SIC’s
former assets (the A.2 Assets) on HHL, it still had no right to maintain any of
Paniolo’s former assets (the A.1 Assets) on HHL. Because this appears to be a
69
new argument, and thus one that is wholly undeveloped, the Court will disregard it.
See In re Rains, 428 F.3d 893, 902 (9th Cir. 2005).
In sum, as far as the Court can understand any of these arguments, none
justify reversal.
9.
Contempt Order and Spare Reels
Among the Main Bankruptcy Appeals, Clearcom’s is the only one seeking
review of the Contempt Order. See CV No. 22-428, ECF No. 28. Hawaiian
Telcom initially moved to dismiss this portion of the appeal for lack of jurisdiction.
CV No. 22-428, ECF No. 6. 21 The parties dispute whether the Contempt Order,
issued on April 22, 2022, was a final appealable order such that Clearcom’s appeal
of it, filed on August 31, 2022, must be dismissed as untimely because it was not
filed “within 14 days after entry of the judgment, order, or decree being appealed.”
Fed. R. Bankr. P. 8002(a)(1); see also In re Ozenne, 841 F.3d 810, 814 (9th Cir.
2016) (noting the deadline to file an appeal is mandatory and jurisdictional).
Because this question of finality arises in the context of bankruptcy proceedings,
the answer was not clear to the Court based on the parties’ initial briefing on that
In that motion, Hawaiian Telcom also objected that Clearcom’s notice of appeal
violates Local Bankruptcy Rule 8001-1(a), which requires “a separate notice of
appeal for each judgment or order being appealed.” CIV No. 22-428, ECF No. 6 at
4. Because it is clear which orders Clearcom has challenged, and Hawaiian
Telcom has not been prejudiced by any violation of this rule, the Court excuses any
violation.
21
70
motion, and so it directed the parties to provide supplemental briefing on the issue,
and to brief the merits of the appeal in the event the Court did have jurisdiction to
review the Contempt Order. CV No. 22-428, ECF No. 23. Upon review of that
briefing, the answer is still not entirely clear to the Court. Ultimately, the Court
concludes the Contempt Order was not final, that the appeal therefore was timely,
and affirms.
a.
Finality
Generally, a civil contempt order issued against a party during the course of
a proceeding is not a final, appealable order. See, e.g., Hughes v. Sharp, 476 F.2d
975, 975 (9th Cir. 1973); Oliner v. Kontrabecki, 305 B.R. 510, 521 (N.D. Cal.
2004) (citing cases); see also 15B Fed. Prac. & Proc. Juris. § 3917 (2d ed.) (“The
rule that a party must await final judgment to appeal an adjudication of civil
contempt made in the course of a continuing proceeding remains well
entrenched.”). There is no dispute that the order at issue here was a civil contempt
order issued during the course of the bankruptcy proceedings and that SIC and
Clearcom would be considered parties to the proceeding. See CV No. 22-428,
ECF No. 18 at 11 n.4.
Also generally speaking, a contempt order is not final prior to the imposition
of sanctions. See, e.g., Blalock Eddy Ranch v. MCI Telecommunications Corp.,
982 F.2d 371, 374 (9th Cir. 1992); Weyerhaeuser Co. v. Int'l Longshoremen’s &
71
Warehousemen's Union, Loc. 21, 733 F.2d 645, 645–46 (9th Cir. 1984). While the
Contempt Order here found SIC in contempt and indicated that daily monetary
sanctions for a certain amount would be imposed if SIC did not comply with the
First Enforcement Order, it also stated that “[t]he award of any monetary sanction
is subject to further order of the Court.” Bk. ECF No. 700 at 5 (emphasis added).
Without any actual imposition of sanctions, then, the Contempt Order was
arguably not final—even if it did threaten the imposition of sanctions in the event
of continued non-compliance. See Donovan v. Mazzola, 761 F.2d 1411, 1416–17
(9th Cir. 1985); see also Munson v. Gradient Res., Inc., 2014 WL 2041819, at *3
(D. Or. Apr. 29, 2014) (“That future sanctions were threatened is not enough to
render the finding of contempt . . . final and appealable.”) (citing Hoffman v. Beer
Drivers & Salesmen’s Loc. Union No. 888, Int’l Bhd. of Teamsters, Chauffeurs,
Warehousemen & Helpers of Am., 536 F.2d 1268, 1272, 1273 (9th Cir. 1976)); In
re Wicheff, 215 B.R. 839, 843 (B.A.P. 6th Cir. 1998). This is underscored by the
fact that the Contempt Order states that the bankruptcy court was retaining
jurisdiction “to award [Hawaiian Telcom] all further appropriate legal and
equitable relief in connection with enforcement of this Contempt Order [and] with
respect to all matters arising from or related to the implementation and/or
interpretation of this Contempt Order.” Bk. ECF No. 700 at 5.
72
Still, notwithstanding these general rules regarding the finality of a civil
contempt order, Hawaiian Telcom correctly notes that the concept of finality is
more flexible in bankruptcy proceedings—i.e., finality in this context need not
always follow the rigid rules that apply in ordinary civil proceedings or under 28
U.S.C. § 1291. See Bullard v. Blue Hills Bank, 575 U.S. 496, 501 (2015). As
summarized by the Supreme Court in Bullard:
The rules are different in bankruptcy. A bankruptcy case
involves an aggregation of individual controversies, many of
which would exist as stand-alone lawsuits but for the bankrupt
status of the debtor. Accordingly, Congress has long provided
that orders in bankruptcy cases may be immediately appealed if
they finally dispose of discrete disputes within the larger case.
The current bankruptcy appeals statute reflects this approach: It
authorizes appeals as of right not only from final judgments in
cases but from “final judgments, orders, and decrees . . . in cases
and proceedings.”
Id. at 501–02 (internal quotation marks and citations omitted). In Bullard, for
example, the Supreme Court concluded that an order ending a proceeding in a
bankruptcy case is immediately appealable if the order “alters the status quo and
fixes the rights and obligations of the parties,” or “alters the legal relationships
among the parties.” Id. at 502, 506. The Supreme Court has reiterated this flexible
finality rule more recently in Ritzen Group, Inc. v. Jackson Masonry, LLC, 140 S.
Ct. 582, 586–87 (2020), noting that it is “common for bankruptcy courts to resolve
discrete controversies definitively while the umbrella bankruptcy case remains
pending,” identifying the “judicial unit for analyzing finality . . . in bankruptcy [as]
73
often the proceeding,” and therefore underscoring the importance of the “[c]orrect
delineation of the dimensions of a bankruptcy ‘proceeding.’” Id. at 586–87
(citation and alteration omitted) (concluding, under that framework, that an order
denying relief from the automatic stay was a final order).
In line with Bullard, the Ninth Circuit has recognized that technically
interlocutory orders may nonetheless be considered final and appealable. See In re
Gugliuzza, 852 F.3d 884, 894 (9th Cir. 2017). When a district court affirms or
reverses a decision of the bankruptcy court, the Ninth Circuit assesses finality
based on “whether the bankruptcy court’s decision: 1) resolves and seriously
affects substantive rights and 2) finally determines the discrete issue to which it is
addressed.” Id. (citation and internal quotation marks omitted). When a district
court instead remands the case for further proceedings in the bankruptcy court, the
Ninth Circuit applies a different four-factor test to assess finality: “(1) the need to
avoid piecemeal litigation; (2) judicial efficiency; (3) the systemic interest in
preserving the bankruptcy court’s role as the finder of fact; and (4) whether
delaying review would cause either party irreparable harm.” Id. (citation omitted).
Hawaiian Telcom argues that the former test—regarding resolving
substantive rights and finally determining the discrete issue to which it is addressed
—applies to the Court’s assessment of finality here. See CV No. 22-428, ECF No.
6 at 12. Hawaiian Telcom further argues that, because the Contempt Order wholly
74
determined the question of ownership and transfer of the spare reels, that test for
finality is met, such that Clearcom’s appeal is untimely. See id. at 12–13.
Clearcom’s initial response—in opposing the motion to dismiss—did not engage
with this Ninth Circuit authority, citing instead to Second Circuit authority that
largely relies on the general rules, stated above, regarding civil contempt orders
and their lack of finality. See CV No. 22-428, ECF No. 17 at 4–6. In reply,
Hawaiian Telcom offered more authority that it claims supports the contention
that, notwithstanding those general rules, a bankruptcy court’s civil contempt order
is treated as a final, appealable order in the Ninth Circuit if the above test for
finality is met. See CV No. 22-428, ECF No. 18 at 12–13.
For example, Hawaiian Telcom cites In re Stasz, 387 B.R. 271, 274–76
(B.A.P. 9th Cir. 2008), where the Bankruptcy Appellate Panel (“BAP”) concluded
that the bankruptcy court’s order finding a debtor in contempt of a prior order to
appear at an examination and imposing sanctions was a final, appealable order.
There, though, the BAP did not apply the test for finality that Hawaiian Telcom
asks the Court to apply here. See id. Instead, the BAP noted the general rule that
civil contempt orders entered during the course of a pending civil action are not
appealable, but relied on two Ninth Circuit non-bankruptcy cases that “allowed
immediate appeals of sanctions orders that dispose of the only issue before the
court,” both of which involved orders of contempt post-judgment. See id. at 275
75
(citing Shuffler v. Heritage Bank, 720 F.2d 1141, 1145 (9th Cir. 1983) and Hilao v.
Estate of Marcos, 103 F.3d 762, 764 (9th Cir. 1996)). Because “the contested
matter alleging [the debtor’s] contempt was the only matter before the
[bankruptcy] court,” the BAP in Stasz thus determined the “award of sanctions was
a final order that ended the particular contested matter” and “[b]ecause the
sanctions order stands alone and requires no further action by the bankruptcy
court,” it was a final order. Id. at 275–76.
The Court is not persuaded that Stasz provides a clear answer here. For one,
sanctions were actually imposed in Stasz; they were not here and the Contempt
Order itself indicated that further action was required by the Bankruptcy Court.
And second, Stasz appears to stand for the proposition that, where contempt
proceedings are the only matter before the bankruptcy court, a departure from the
general rule regarding civil contempt orders is warranted. See also In re Mack,
2007 WL 7545163, at *3 (B.A.P. 9th Cir. Mar. 28, 2007) (noting that a contempt
motion in the main bankruptcy case pertaining to a violation of the confirmation
order was a “self-contained and self-standing contested matter” and that the order
denying the motion was final because it “ended the only pending litigation between
the parties on the merits and left nothing for the court to do”). Granted, here the
plan had been confirmed a few months prior to the Contempt Order; still, Hawaiian
76
Telcom’s request to enforce other aspects of the 363 Sale Order—aside from the
spare reels—remained ongoing, see Bk. ECF Nos. 696, 729.
On the first point, regarding the issue that a contempt order is only final once
sanctions have been imposed (not merely threatened), courts reviewing bankruptcy
court decisions have declined to find contempt orders final when no sanction was
imposed, even after Stasz. See Munson, 2014 WL 2041819, at *2–3 (citing U.S.
Abatement Corp. v. Mobil Exploration & Producing U.S., Inc., 39 F.3d 563 (5th
Cir. 1994)); In re H Granados Commc’ns, Inc., 503 B.R. 726, 731, 732 (B.A.P. 9th
Cir. 2013) (“The Contempt Order was an interlocutory order that became final and
appealable once the bankruptcy court awarded sanctions.”); In re Marciano, 2013
WL 180057, at *2–3 (C.D. Cal. Jan. 17, 2013) (“This court has jurisdiction to
review a bankruptcy court contempt order only if it results in a sanction.”) (citing
Stasz, 387 B.R. at 274) (emphasis added); see also In re Szanto, 2021 WL
5991785, at *1–2 (D. Or. Feb. 24, 2021) (distinguishing Munson because the
bankruptcy court’s contempt order did impose sanctions, and did not require any
further order from the bankruptcy court, making it a final appealable order).
Now, the Court is aware that more recent Ninth Circuit authority might cast
doubt on the suggestion that a lack of sanctions negates finality. See In re Perl,
811 F.3d 1120, 1125–27 (9th Cir. 2016). In Perl, the Ninth Circuit determined that
a bankruptcy court order finding that a creditor had violated the automatic stay was
77
final, even though the bankruptcy court deferred ruling on damages. See id.
Because the BAP affirmed the bankruptcy court’s ruling, the Ninth Circuit applied
the two-part test for finality stated above—asking whether the bankruptcy court’s
decision (1) resolved and seriously affected substantive rights; and (2) finally
determined the discrete issue to which it was addressed. See id. at 1126. The
Ninth Circuit determined those factors were met, even though no penalty or
sanction had yet been assessed against the creditor, because the determination that
the creditor violated the stay was “a substantive ruling with real effects, including
money damages that could be sought by [the debtor] indefinitely.” Id. at 1126–27
(citation omitted). In Perl, the case was dismissed after the contempt order
because the debtor failed to appear; however, the creditor was still subject to
damages that could be sought by the debtor indefinitely despite the dismissal. See
id. at 1125–27. In determining that finality existed, then, the Ninth Circuit focused
not only on the indefinite risk of future damages, but also the fact that the violation
of the stay was “the only issue litigated in the bankruptcy proceedings and before
the BAP” and “[a]s a practical matter, resolution of the [stay violation] issue
resolved the entire case[.]” Id. at 1127 (citation omitted). Based on that
procedural posture, the Court cannot find that Perl provides a clear answer here—
where there was no similar indefinite risk of future sanctions (because
SIC/Clearcom complied) and where the Contempt Order was not the only issue
78
litigated in the bankruptcy proceeding and did not resolve the entire case. See In re
Heartwise, Inc., 2022 WL 18213523, at *8 (C.D. Cal. Dec. 5, 2022)
(distinguishing Perl on similar grounds).
Nor is the Court persuaded that other authority Hawaiian Telcom cites,
which relied on both Perl and Stasz, mandates a determination that the Contempt
Order was final here. See CV No. 22-429, ECF No. 18 at 12–13 (citing In re
SoCal Sleep Centers, LLC, 2016 WL 4198534 (B.A.P. 9th Cir. Aug. 8, 2016)). In
SoCal Sleep Centers, the BAP determined that the bankruptcy court’s order
sanctioning a debtor’s attorney for misrepresentations pursuant to its inherent
power was a final order, which meant the appeal of that order was untimely. See
2016 WL 4198534, at *7–8. Unlike the Contempt Order here, the bankruptcy
court in SoCal Sleep Centers determined both liability for sanctions and the
amount of sanctions. See id. And although SoCal Sleep Centers seems to take a
more expansive approach than Perl and Stasz—because it does not appear that the
sanctions issue was the only matter before the bankruptcy court or all that remained
before the bankruptcy court—it did still emphasize that “[i]t ended the litigation
regarding private sanctions against [the attorney] and left the court with nothing to
do but execute the order,” meaning “there was no further litigation that would
preclude finality” of that order. Id. at *8.
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Hawaiian Telcom certainly attempts to argue that cases like SoCal Sleep
Centers, Perl, and Stasz control here because there was no further litigation
regarding the spare parts or Hawaiian Telcom’s rights to them. But this argument,
at least to some extent, fails to take into account how the spare parts issue is
connected to other issues that remained unresolved before the Bankruptcy Court.
As summarized above, Hawaiian Telcom’s motion to enforce the 363 Sale Order
resulted in the First Enforcement Order, where the bankruptcy court resolved
certain disputes, but deferred resolution of other issues. Bk. ECF No. 537. As
Hawaiian Telcom concedes, underlying the Contempt Order was the Bankruptcy
Court’s determination “that the Spare Reels had belonged to SIC, and not
Clearcom” and “confirm[ation] that the Spare Reels constituted Transferred Assets
under the 363 Sale.” CV No. 22-428, ECF No. 31-3 at 11. The Court has just
spent many pages addressing issues related to what “constituted Transferred Assets
under the 363 Sale.” Granted, that discussion relates to a separate asset—the
interest in License 372. And further proceedings regarding “Transferred Assets,”
i.e., the Final Enforcement Order and Reconsideration Order, ultimately did not
affect the scope of the Contempt Order. Still, this Court sees the value in having
these related issues make a single “climb up the appellate ladder.” Bullard, 575
U.S. at 504; cf. In re SK Foods, L.P., 676 F.3d 798, 802 (9th Cir. 2012)
(concluding order permitting continued possession of documents already in the
80
possession of the trustee was not final because “[r]eviewing the order on appeal
now would not finally determine the issue whether the trustee could use the
documents, because the issue of possession and use of the records could arise again
in further proceedings”).
The Court agrees with Hawaiian Telcom that the Contempt Order altered the
status quo and fixed the rights and obligations of the parties with regard to the
rightful owner of the spare reels pursuant to the 363 Sale Order. And thus that it
did resolve and seriously affect substantive rights and finally determine the discrete
issue to which it is addressed—again at least as to ownership of the spare reels
under the 363 Sale Order. Nor is that determination akin to a dispute “over minor
details about how a bankruptcy case will unfold.” Ritzen, 140 S. Ct. at 590. And
all of this points to a conclusion that the Contempt Order may have been final.
Yet, when considering the entire context of the issues before it now, the
Court has concerns that deeming the Contempt Order final risks slicing the case
too thin, see id., if only because efficiency does not seem to be served by
permitting multiple appeals related to the Bankruptcy Court’s interpretation of the
363 Sale Order—even if related to different assets transferred pursuant to that
order. See In re Gugliuzza, 852 F.3d at 899 (“Efficiency is best served by our
review of the district court’s resolution of the dispute between the parties as a
whole . . . not our review of the individual elements of a dispute.”). When
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combined with the authority above suggesting that the lack of imposition of
sanctions is material for purposes of finality, even in the bankruptcy context, the
Court is inclined to conclude that the appropriate procedural unit is, at the least,
the entirety of the contempt proceeding including the imposition of sanctions
(although potentially even beyond that to include the culmination of all the
enforcement proceedings).
The Court appreciates Hawaiian Telcom’s argument that, if sanctions are
never imposed because compliance occurs first (as was the case here), there should
be some meaningful limit on the time to appeal, especially when considering the
“distinctive character of bankruptcy litigation.” Ritzen, 140 S. Ct. at 586. But
permitting appeal absent sanctions undoubtedly risks “delays and inefficiencies.”
Id. at 591 (quoting Bullard, 575 U.S. at 504). And starting the clock on the date of
a contempt order alone seems equally prone to uncertainty, especially for a party
like SIC/Clearcom who may wish to appeal but does not know if sanctions may be
imposed because they are arguably outside of its control. See In re Tech. Knockout
Graphics, Inc., 833 F.2d 797, 800 (9th Cir. 1987) (noting that order is not final if
“further proceedings in the bankruptcy court will affect the scope of the order”)
(citation omitted); cf. Amara v. CIGNA Corp., 53 F.4th 241, 252 (2d Cir. 2022) (“If
we considered the contempt finding alone, any sanction imposed could then be
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challenged on appeal as an abuse of discretion.” (citation and internal quotation
marks omitted)).
Based on this, the Court concludes that the Contempt Order was not final,
that it therefore has jurisdiction to review it, and that Hawaiian Telcom’s motion to
dismiss based on lack of jurisdiction must be denied.
b.
Mootness
Before turning to the merits, though, the Court must address one final
jurisdictional issue. In its answering brief, Hawaiian Telcom also now appears to
challenge the Court’s jurisdiction to hear an appeal of the Contempt Order based
on mootness, citing the general rule that no live case or controversy remains once a
civil contempt order has been purged, and arguing that rule applies here given
SIC/Clearcom turned over the Spare Reels and no sanctions were issued. See CV
No. 22-428, ECF No. 31-3 at 13. But that “doctrine stems from the fact that in
most instances the court has no remedy to afford the party contesting the now
purged contempt.” Thomassen v. United States, 835 F.2d 727, 731 (9th Cir. 1987).
Where the party appealing seeks the return of property he was forced to part with
in order to comply with a contempt order, the court is “presented with a live
controversy which is inextricably intertwined with the contempt issue and [it is]
capable of providing relief.” Id. at 731–32 (citation omitted); see also Davies v.
Grossmont Union High School Dist., 930 F.2d 1390, 1394 (9th Cir. 1991). Here,
83
Clearcom seeks the return of spare reels it claims to own and that it contends SIC
was wrongly required to turn over to Hawaiian Telcom. So the Court is not
convinced this matter is moot.
c.
Merits
Concluding the Court has jurisdiction to review the Contempt Order,22 it
affirms. The Bankruptcy Court did not exceed its authority because it ordered
SIC—not Clearcom—to turn over the spare reels. Bk. ECF No. 700 at 2. Notably,
Clearcom does not claim the Bankruptcy Court erred when it stated, in the First
Enforcement Order, that
SIC did not respond to Hawaiian Tel[com]’s request for turnover
of spare parts and equipment associated with the submarine
system. These items are undoubtedly “Transferred Assets”
under the Sale Order. Accordingly, I will grant that portion of
Hawaiian Tel[com]’s request.
Bk. ECF No. 537 at 11. Determining that the spare reels were part of the
“Transferred Assets,” i.e., conveyed to Hawaiian Telcom in the 363 Sale Order,
see Bk. ECF No. 366 at 3, confirms the Bankruptcy Court acted within its powers
to enforce that order through contempt, see, e.g., In re Franklin, 802 F.2d 324, 326
(9th Cir. 1986) (“Simply put, bankruptcy courts must retain jurisdiction to construe
Comparing the lengthy jurisdictional analysis to the short discussion on the
merits might make one lament the demise of “hypothetical jurisdiction.” See Steel
Co. v. Citizens for a Better Env't, 523 U.S. 83, 101–02 (1998).
22
84
their own orders if they are to be capable of monitoring whether those orders are
ultimately executed in the intended manner.”)
And in response to the new argument, raised in the context of that request
for contempt, that Clearcom owned certain spare reels, the Bankruptcy Court did
not err when noting that it could not consider a declaration that was not signed
under penalty of perjury. Bk. ECF No. 708 at 25–26; Bk. ECF No. 671-1 at 5
(relevant declaration signed only “based on my knowledge and to the best of my
belief”); see also 28 U.S.C. § 1746(2) (requiring declarations in federal
proceedings to be made under penalty of perjury). And there was no clear error in
the Bankruptcy Court’s finding, based on evidence such as a shipping record
listing SIC under the “Bill To,” “Sold To,” and “Ship To” fields, that they were
indeed owned by SIC. See Bk. ECF No. 708 at 25–26; Bk. ECF No. 679 at 13 –
14. Clearcom’s argument that the Bankruptcy Court effected an unconstitutional
taking with regard to the Spare Reels is thus without merit.
In conclusion, and based on the discussion above regarding the issues raised
in the Main Bankruptcy Appeals, the Court AFFIRMS the Final Enforcement
Order, the Reconsideration Order, and the Contempt Order.
B.
Adversary Proceeding Appeals
Finally, the Court turns to the next three appeals, which contend the
Bankruptcy Court erred by dismissing Appellants’ FAC with prejudice and
85
denying a request to remand that action to state court.23 As previewed above,
Waimana, Pa Makani, and Clearcom brought state law claims for trespass (Count
I); conversion (Count II); unfair competition (Count III); intentional interference of
contract (Count IV); and seeking declaratory relief (Count V) based in large part
on the contention—now discussed ad nauseum—that Hawaiian Telcom did not
acquire SIC’s interest in License 372. Waimana AP, ECF No. 28. The
Bankruptcy Court dismissed the FAC with prejudice based on issue preclusion, in
reliance on the Final Enforcement Order, and therefore denied the motion to
remand as moot. Waimana AP, ECF No. 65 at 20–21.
1.
Dismissal of FAC
“The preclusive effect of a federal-court judgment is determined by federal
common law.” Taylor v. Sturgell, 553 U.S. 880, 891 (2008) (citation omitted).
Issue preclusion applies when “(1) the issue necessarily decided at the previous
proceeding is identical to the one which is sought to be relitigated; (2) the first
proceeding ended with a final judgment on the merits; and (3) the party against
whom issue preclusion is asserted was a party or in privity with a party at the first
proceeding.” Paulo v. Holder, 669 F.3d 911, 917 (9th Cir. 2011) (citation and
Appellants Waimana, Pa Makani, and Clearcom have appealed the dismissal
order (CV No. 22-435) and the order denying remand (CV No. 22-441). While
they have also separately appealed the judgment (CV No. 22-434), that briefing
basically says nothing of substance, merely incorporating the arguments from the
other appeals.
23
86
alteration omitted). Appellants concede that, if the Court affirms the Final
Enforcement and Reconsideration Orders, i.e., agreeing that Hawaiian Telcom
acquired SIC’s interest in License 372, then the Bankruptcy Court correctly
concluded that Counts I (trespass), II (conversion), III (unfair competition), and
paragraph 66 of Count V were precluded. CV No. 22-435, ECF No. 23 at 4.24
Based on the conclusions above, the Court therefore AFFIRMS the dismissal of
those claims. So all that remain are Count IV (intentional interference of contract)
and paragraphs 67 and 68 of Count V (seeking declaratory relief).
As to those claims, Appellants contend dismissal based on issue preclusion
was improper because each is premised on their rights and obligations associated
with License 372 pursuant to Waimana’s separate assignments to them.25 For
example, Count IV, alleging interference with a contract, rests on the following
allegations:
The elements of tortious interference with contractual relations
include: 1) a contract between the plaintiff and a third party; 2)
the defendant’s knowledge of the contract; 3) the defendant’s
intentional inducement of the third party to breach the contract;
4) the absence of justification on the defendant’s part ; 5) the
subsequent breach of the contract by the third party; and 6)
damages to the plaintiff. []
In doing so, Appellants necessarily concede the privity element is met.
Although they also conceded as much by not objecting to Hawaiian Telcom’s
argument that privity was satisfied. See CV No. 22-435, ECF No. 21-3 at 13.
24
The Court requested more briefing on this issue, ECF No. 26, and both
Hawaiian Telcom and Appellants filed supplemental briefs, ECF Nos. 27, 30.
25
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Here, 1) Plaintiffs have License 372 agreements with DHHL; 2)
HTI knew of them; 3) HTI intentionally enticed, encouraged and
induced DHHL to breach these agreements with Plaintiffs; 4) For
numerous reasons HTI had no justification for doing so,
including but not limited to rejecting the MRA and 9019
Settlement Agreement and over reaching by using Plaintiffs’
License 372 rights that clearly were never transferred to HTI,
particularly for data (non-voice) telecommunications; 5)
encouraged and induced DHHL to breach its obligations to
Plaintiffs under License 372 by entering into the Limited Rightof Entry, making filings in this Court and potentially negotiating
a new license with HTI that violate Plaintiffs rights under
License 372 and Partial Assignments to Pa Makani and
Clearcom; and 6) which damaged Plaintiffs’ business on HHL.
Waimana AP, ECF No. 28 ¶¶ 63–64 (citation omitted). The relevant portions of
Count V, seeking declaratory relief, allege that
67. Plaintiffs are entitled to a declaratory relief determination that
the SIC Partial Assignment only provided SIC with the right to
provide voice only service on HHL and no other
telecommunications services throughout Hawaii, including
wireless that was assigned to Pa Makani and broadband that was
assigned to Clearcom.
68. Plaintiffs are entitled to a declaratory relief determination that
the SIC Partial Assignment did not include Plaintiffs’ License
372 Easement areas.
Id. ¶¶ 67–68.
Appellants’ concession that Counts I , II, III, and paragraph 66 of Count V
were properly dismissed would appear to concede that the remainder of the
claims—similarly dependent on Appellants’ alleged exclusive rights to certain
easements and to carry non-voice telecommunications—were also properly
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dismissed. See, e.g., id. ¶¶ 49–51 (basing Count I for trespass on Hawaiian Telcom
preventing Appellants’ “exclusive unimpeded use and occupancy of their License
372 Easement areas”); see also id. ¶¶ 53–54 (basing Count II for conversion on
Hawaiian Telcom using Appellants’ “License 372 Easement areas” and their rights
for “all telecommunications services on HHL except voice only services”). But
even if the Court were to consider the specific portions of the FAC that Appellants
have not explicitly conceded were properly dismissed, none would warrant
reversal.
As to the claimed “voice only” limitation in paragraph 67, the Bankruptcy
Court correctly concluded its prior orders precluded the Appellants from
attempting to limit the Paniolo Network to “voice only” services. The record is
clear that this claimed “voice only” limitation was an issue frequently raised in the
bankruptcy proceedings, but never successfully. See, e.g., Trustee AP, ECF No. 33
at 35 & n.2 (claiming, in moving to quash the Writ of Execution, that SIC’s
interest in License 372, “which is the only basis for any Paniolo asset to be on
[HHL], allows only voice communications”); see also Bk. ECF No. 215 at 10
(SIC objecting to the bid and auction procedures, arguing that SIC’s interest in
License 372 “which is the only basis for any Paniolo asset to be on [HHL] allows
only voice communications.”). And although it was again raised in the context of
the Main Motion to Enforce, see, e.g., Bk. ECF No. 680 at 13–15 (Hawaiian
89
Telcom responding to this argument); tellingly, it was not raised as a formal
objection to the 363 Sale Order. This was so even though the record indicates that
all parties involved seemed to agree that the Paniolo Network was able to function
as it did on HHL—i.e., as a middle-mile provider of telecommunication
transmissions—because of SIC’s interest in License 372. See Trustee AP, ECF
No. 33 at 35 & n.2; Bk. ECF No. 215 at 10; CV No. 22-435, ECF No. 27 at 4 &
nn. 8–11. In the Court’s view, the renewed “voice only” argument in the FAC is
incompatible with what occurred during the bankruptcy proceedings—when there
was a proper time to assert such limitations—and incompatible with how SIC itself
treated its rights in License 372. The Bankruptcy Court recognized as much and
confirmed, in the Final Enforcement Order, that Hawaiian Telcom had “acquired
the assets that permit operation of the Paniolo Network . . . , including those certain
portions of the 372 License . . . pertaining to the Paniolo Network and/or the
Paniolo Premises that were formerly held by SIC.” Bk. ECF No. 729 at 4; see also
Bk. ECF No. 708 at 26–27 (noting the prior orders clearly provided for the transfer
of SIC’s interests to Hawaiian Telcom and that it was for DHHL to address
whether that caused any problem under the license); Bk. ECF No. 739 at 9–10
(indicating it was for DHHL to address breach of any license). The Court thus
finds no error in the conclusion that this aspect of Count V was precluded.
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The Court similarly agrees that the assertions in paragraph 68, regarding
Appellants’ “License 372 Easement areas,” were precluded by the Final
Enforcement Order. Again, that order confirmed that, through the Sale Orders,
Hawaiian Telcom acquired “exclusive control and ownership over, as well as
rights of access to, the entirety of the Paniolo Buildings,” and as noted above, “the
assets that permit operation of the Paniolo Network, including, without limitation,
full rights of access to the Paniolo Premises, including those certain portions of
the 372 License pertaining to the Paniolo Network and/or the Paniolo Premises
that were formerly held by SIC.” Bk. ECF No. 729 at 3–4 (emphases added).
Again, the “Paniolo Premises” were defined as the “easement areas surrounding
the Paniolo Buildings,” and include physical metes-and-bounds easements granted
from DHHL to SIC as addenda to SIC’s interest in License 372. See, e.g., Bk. ECF
No. 637 at 5; Bk. ECF No. 637-1 at 6 n.3, 43–44 n.20; Bk. ECF No. 637-5; Bk.
ECF No. 637-6. So again, the time to raise a claim to exclusive possession of
License 372 Easement areas and contend Hawaiian Telcom would be liable if it
used certain property and premises, see, e.g., Waimana AP, ECF No. 28 ¶¶ 45, 47,
was before the Sale Orders. See, e.g., Bk. ECF No. 366-1 at 238 (APA’s broad
definition of all assets acquired pursuant to the 363 Sale, including an interest in
License 372 specifically and easement rights more generally “for a stand-alone
commercial operation and use of the Paniolo Cable System”). This issue was
91
therefore resolved against Appellants in the Final Enforcement Order. See, e.g.,
Bk. ECF No. 729 at 4 (“HTI has acquired the exclusive ability to control and
maintain security for and over the entirety of the Paniolo Network, the Paniolo
Buildings, and the Paniolo Premises”). In other words, because the Bankruptcy
Court concluded Hawaiian Telcom had a right to use and access the property and
premises it was using in the Final Enforcement Order, and enjoined Appellants
from impeding Hawaiian Telcom’s access to those buildings and premises, see Bk.
ECF No. 729 at 6, it correctly concluded this portion of Count V was also
precluded. Compare, e.g., Waimana AP, ECF No. 28 ¶ 46 (alleging that “HTI is
using [Appellants]’ License 372 Easement and non-exclusive post FCC Order
License 372 Service Right for non-voice only telecommunications services on
HHL without authorization or paying for such use”); with Bk. ECF No. 729 at 4
(prohibiting Appellants “from charging HTI any fees for accessing or using any
assets that permit operation of the Paniolo Network, including, without limitation,
the Paniolo Buildings and Paniolo Premises, and HTI is not required to pay any
such fees”).
Based on these conclusions, the Court agrees that Count IV (alleging
interference with Appellants’ License 372 agreements with DHHL) was also
properly dismissed, given it alleged in part that Hawaiian Telcom’s conduct was
not justified because it was not limited to “voice only” telecommunications. See
92
Waimana AP, ECF No. 28 ¶ 64. Appellants’ other theory for why Hawaiian
Telcom’s conduct was not justified—regarding its conduct in not assuming the
Settlement Agreement/MRA—had similarly already been resolved against
Appellants, with any belated attempts to undermine those orders being rejected by
the Bankruptcy Court in issuing the Final Enforcement Order and denying
reconsideration.
In sum, the Bankruptcy Court correctly recognized it had already resolved
the issues central to Appellants’ theories of liability in Hawaiian Telcom’s favor
when it resolved the enforcement dispute about where Hawaiian Telcom had a
right to go and what it had a right to do pursuant to the assets it acquired “free and
clear” in the Sale Orders for the purpose of maintaining and operating the Paniolo
Network. For these reasons, the Court AFFIRMS the dismissal of the FAC.
2.
Denial of Remand
In light of this, the Court also AFFIRMS the denial of remand. Appellants
do not seem to be arguing that the Bankruptcy Court erred by considering the
motion to dismiss first and then, after granting that motion, denying the motion to
remand as moot. See, e.g., CV 22-441, ECF No. 23 at 4; cf. In re Skyline Ridge,
LLC, 2022 WL 884724, at *4 (concluding no abuse of discretion in implicit denial
of motion to remand where events mooted claims in removed action and there was
thus “no case or controversy to remand”). Nor do they appear to argue that the
93
Bankruptcy Court lacked jurisdiction over the adversary proceeding. Even if they
had, the Court would reject that argument given Appellants concede most of the
claims turned on whether the Bankruptcy Court’s own orders conveyed SIC’s
interest in License 372 to Hawaiian Telcom. See, e.g., Travelers Indem. Co., 557
U.S. at 151; In re McGhan, 288 F.3d 1172, 1182 (9th Cir. 2002) (noting the
bankruptcy court was required to reopen a proceeding to “protect its exclusive
jurisdiction over the enforcement of its own orders.”); Bk. ECF No. 729 at 8 (“This
Court retains jurisdiction to enforce, implement, and interpret the 363 Sale Order
and this Final [Enforcement] Order.”). In sum, the Court finds no error in the
Bankruptcy Court determining the motion to remand the adversary proceeding was
moot because it dismissed that action.
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IV.
CONCLUSION
For the reasons stated above, the Court DENIES Hawaiian Telcom’s motion
to dismiss Clearcom’s appeal of the Contempt Order, CV No. 22-428, ECF No. 6.
The Court AFFIRMS the Bankruptcy Court’s Final Enforcement Order,
Reconsideration Order, and Contempt Order in the Main Bankruptcy Appeals. The
Court also AFFIRMS the dismissal of the FAC and the denial of the motion to
remand as moot in the Adversary Proceeding Appeals.
IT IS SO ORDERED.
DATED:
Honolulu, Hawai‘i, September 29, 2023.
Jill A. Otake
United States District Judge
CIV. NO. 22-00426 JAO-KJM, Sandwich Isles Communications, Inc. v. Hawaiian Telcom, Inc.; ORDER
DENYING MOTION TO DISMISS AND AFFIRMING ORDERS OF THE BANKRUPTCY COURT
95
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