Green Aloha Ltd. v. Welborn ( 2021 )

NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
09-DEC-2021
07:49 AM
Dkt. 69 SO
NO. CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI#I
GREEN ALOHA LTD., a Hawaii Corporation,
Plaintiff-Appellant,
v.
WINSTON WELBORN; Defendant-Appellee,
and
JOHN DOES 1-10, JANE DOES 1-10, DOE PARTNERSHIPS 1-10; DOE
CORPORATIONS 1-10; DOE ENTITIES 1-10, Defendants
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CASE NO. 1CC171000160)
SUMMARY DISPOSITION ORDER
(By: Ginoza, Chief Judge, Hiraoka and Nakasone, JJ.)
Plaintiff-Appellant Green Aloha Ltd. appeals from the
Final Judgment in favor of Defendant-Appellee Winston Welborn
entered by the Circuit Court of the First Circuit on June 8,
2018.1 For the reasons explained below, we affirm the Judgment.
The Wasabi Lawsuit
This case arose from another lawsuit, Wasabi Design,
Inc. v. Britt, Civ. No. 16-1-0019, Fifth Circuit, Hawai#i (Wasabi
Lawsuit). Welborn was a plaintiff in the Wasabi Lawsuit. That
lawsuit was filed on February 5, 2016. The complaint made the
following allegations: Welborn and Justin Britt were the
1
The Honorable James H. Ashford presided.
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shareholders of Wasabi Design, Inc.; in August 2015, Wasabi
received money from the settlement of another lawsuit it had
filed; and Britt took more than his share of the settlement
funds. The complaint alleged conversion, fraud, unjust
enrichment, breach of fiduciary duty, unlawful distribution,
declaratory judgment, and receivership and dissolution of Wasabi.
The Wasabi Lawsuit complaint was amended on
February 26, 2016. Green Aloha was added as a defendant. The
amended complaint alleged that: Britt formed Green Aloha in 2015
to apply for a Hawai#i medical marijuana dispensary license;
applicants were required to meet certain financial requirements;
Britt took more than his share of Wasabi's settlement and used
the funds to meet the financial requirements of Green Aloha's
license application. The amended complaint sought a constructive
trust over Green Aloha's assets.
By order entered on July 29, 2016, the Fifth Circuit
Court dismissed Wasabi's and Welborn's claim for unjust
enrichment. On August 2, 2016, Wasabi and Welborn filed a second
amended complaint. The second amended complaint made additional
factual allegations and added a count for breach of contract
against Britt.
By order entered on March 15, 2017, the Fifth Circuit
Court dismissed Wasabi's and Welborn's remaining claims against
Green Aloha. By separate order, also entered on March 15, 2017,
the Fifth Circuit Court denied Green Aloha's motion for
attorney's fees and costs without prejudice. The Wasabi Lawsuit
remains pending before the Fifth Circuit Court.2
2
We take judicial notice, pursuant to Rule 201 of the Hawai#i Rules
of Evidence, that as of December 6, 2021, the last document filed in the
Wasabi Lawsuit was a stipulation to continue the hearing on a motion for
appointment of counsel/receiver for Wasabi Design, Inc. until moved on, filed
on November 4, 2019. The remaining claims appear to be Wasabi's and Welborn's
claims against Britt for breach of contract, unlawful distribution, and
receivership and dissolution.
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This Lawsuit
Green Aloha filed this lawsuit against Welborn on
January 27, 2017, in First Circuit Court. Green Aloha's
complaint alleged two counts: (1) abuse of process; and
(2) malicious prosecution.
Welborn responded to Green Aloha's complaint by filing
a motion to dismiss. The motion was heard on June 20, 2017. By
order entered on July 5, 2017, the circuit court dismissed the
malicious prosecution claim but denied the motion as to the abuse
of process claim.3 The July 5, 2017 order is not at issue in
this appeal.
Welborn answered Green Aloha's complaint. On
February 12, 2018, Welborn filed a motion for judgment on the
pleadings or, in the alternative, for summary judgment on Green
Aloha's remaining claim. The motion was heard on April 25, 2018.
The circuit court requested supplemental briefing. The hearing
was continued on May 18, 2018. On June 8, 2018, the circuit
court entered an order denying judgment on the pleadings, but
granting summary judgment. The Judgment was entered on the same
day. This appeal followed.
Green Aloha's single point of error contends that the
circuit erred by granting summary judgment for Welborn on Green
Aloha's claim for abuse of process. We review a grant of summary
judgment de novo using the same standard applied by the trial
court. Nozawa v. Operating Engineers Local Union No. 3, 142
Hawai#i 331, 338, 418 P.3d 1187, 1194 (2018). Summary judgment
is appropriate if the evidence presented shows that there is no
genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law. Id. at 342, 418
P.3d at 1198. A fact is material if proof of that fact would
have the effect of establishing or refuting one of the essential
elements of a cause of action or defense asserted by the parties.
Id.
3
The Honorable Rhonda A. Nishimura entered the order.
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"[T]here are two essential elements in a claim for
abuse of process: (1) an ulterior purpose and (2) a wilful act in
the use of the process which is not proper in the regular conduct
of the proceeding." Young v. Allstate Ins. Co., 119 Hawai#i 403,
412, 198 P.3d 666, 675 (2008) (cleaned up). The term "process"
broadly encompasses "the entire range of procedures incident to
litigation." Id. (citation omitted). The second element is
material to this appeal because even if Green Aloha can show that
Welborn utilized process for an improper ulterior purpose, Green
Aloha must still show "a 'willful act' distinct from the use of
process per se." Id. at 416, 198 P.3d at 679 (emphasis added).
Green Aloha contends that a letter from Welborn to
Britt dated January 19, 2016 (18 days before the Wasabi Lawsuit
was filed) satisfied the "wilful act" element. The letter
stated:
Dear Justin,
I wanted to include this personal note with the final
settlement offer from my attorney, Katherine Caswell.
The settlement offer comes with good intentions. It's an
opportunity for closure — for my own benefit, and for yours.
A few trusted friends (especially Andy Evans) urged me to
pursue this route as a last resort. I know that you are
going through a lot right now. I care about you more than
you think. Consider the emotional and financial costs of a
lawsuit. Think about your family, your time, your new
business venture, and your money.
I know why you took the money. You're willing to take big
risks in pursuit of your new business venture. If you would
have asked, I probably would have helped.
My offer contains options for fair resolution — one in which
you pay less, and another where you get more time to pay.
You have 7 days to accept. If you do not accept, then I
will file a lawsuit, we'll go to court, spend a lot more
money, and I will get fully compensated for money due to me,
to Wasabi, plus penalties, damages and fees. It may also
put your dispensary application in jeopardy.
Think seriously about this Justin. This is a chance to move
on.
Sincerely,
Winston
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(Emphasis added.) Green Aloha argues:
Defendant Welborn's January 19, 2016 correspondence
was a threat — you, Britt, don't settle and I will take
action against [Green Aloha]. And that is precisely what
[Welborn] did. And the threat alone, e.g., threating to sue
[Green Aloha] in order to derail its dispensary license in
the unrelated proceeding (having nothing to do with the
Wasabi lawsuit) is sufficient to meet the second prong of
Young.
Green Aloha's argument is without merit for a number of reasons.
First, Welborn's letter to Britt was not "process,"
even under the broad definition of Young, 119 Hawai#i at 412, 198
P.3d at 675 (defining "process" as "the entire range of
procedures incident to litigation") (emphasis omitted). The
letter was sent 18 days before the Wasabi Lawsuit was filed. At
most, Welborn's letter could be evidence of ulterior motive: that
Welborn filed the Wasabi Lawsuit to put Green Aloha's marijuana
dispensary license application in jeopardy. But that would
satisfy only the first element (ulterior purpose) of a claim for
abuse of process. This was acknowledged by Green Aloha's counsel
during the May 18, 2018 hearing:
THE COURT: So how can an action that is taken before
process exists be an abuse of that nonexistent process?
[COUNSEL]: Well, I mean, I don't think you can look
at the timeframe just in a vacuum. He's telegraphing you
don't settle this with me, then I'm going to put your
medical marijuana license in jeopardy. The fact of him
sending a letter obviously, Your Honor, that's right, that's
not process. But that goes to his intent.
. . . .
. . . Of course the letter because it's not process,
it's not an abuse of process.
THE COURT: Well, it's not abuse of process.
[COUNSEL]: Yeah, and it's not a process at all, it's
a letter. Letters aren't process.
(Emphasis added.)
Second, as noted by the federal court for the District
of Hawai#i:
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Young does not address what would constitute a wilful
act sufficient to support an abuse of process claim, and the
court could find no other Hawaii cases addressing the
circumstances under which a plaintiff has sufficiently
alleged a wilful act. Prosser and Keeton, upon which Young
relied, however, describes that
[t]he improper purpose usually takes the form of
coercion to obtain a collateral advantage, not
properly involved in the proceeding itself, such as
the surrender of property or the payment of money, by
the use of the process as a threat or a club. There
is, in other words, a form of extortion, and it is
what is done in the course of negotiation, rather than
the issuance or any formal use of the process itself,
which constitutes the tort.
Prosser and Keeton, at 898.
Ancier v. Egan, Civil No. 14-00294, 2014 WL 6872977 at *6 (D.Haw.
Dec. 4, 2014). But see Young, 119 Hawai#i at 414, 198 P.3d at
677 ("Offers to settle the claims at issue in a case are proper,
if not encouraged, in the regular conduct of proceedings. A
contrary rule would have a devastating effect on the settlement
process, because parties would be wary of making settlement
offers if such offers could provide the essential ingredient to
subject them to a second lawsuit for abuse of process.") (cleaned
up). In this case the settlement offer at issue — Welborn's
January 19, 2016 letter to Britt — was sent 18 days before the
Wasabi Lawsuit was filed (against Britt, not against Green
Aloha). Welborn's offer did not condition settlement of Wasabi's
claim against Britt upon Green Aloha withdrawing its marijuana
dispensary license application.
Third, Green Aloha cites its interrogatory answers and
argues:
[T]he May 3, 2016 letter and attachments . . . from David
Tongg, HK Medicinal's attorney to Virginia Pressler of the
DOH supports the allegations. Basically, HK Medicinal tried
to use the Wasabi complaint with the frivolous claims
against Green Aloha as a way to get the dispensary license
revoked so that HK Medicinal would get the license.
The May 3, 2016 letter is not in the record. There is no
evidence that Welborn — who admittedly was an investor in HK
Medicinal LLC, a company competing with Green Aloha to secure the
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single marijuana dispensary license available for the island of
Kaua#i — had any involvement in writing HK Medicinal's letter or
sending it to the Department of Health. Nor is there any
evidence Welborn actually used the Wasabi Lawsuit to jeopardize
Green Aloha's license application.
Welborn sustained his burden of production under
Rule 56 of the Hawai#i Rules of Civil Procedure by filing a
declaration denying any involvement with the alleged use of the
Wasabi Lawsuit to jeopardize Green Aloha's medical marijuana
dispensary license application. See Nozawa, 142 Hawai#i at 342,
418 P.3d at 1198 (noting that "[t]he burden is on the moving
party to establish that summary judgment is proper"). The record
contains no evidence of any wilful act by Welborn distinct from
prosecuting the Wasabi Lawsuit that may have jeopardized Green
Aloha's dispensary application, or was otherwise "antithetical to
the legitimate conduct of" the Wasabi Lawsuit. See Young, 119
Hawai#i at 416, 198 P.3d at 679.
For the foregoing reasons, the Judgment entered by the
circuit court on June 8, 2018, is affirmed.
DATED: Honolulu, Hawai#i, December 9, 2021.
On the briefs:
/s/ Lisa M. Ginoza
Richard E. Wilson, Chief Judge
for Plaintiff-Appellant.
/s/ Keith K. Hiraoka
A. Bernard Bays, Associate Judge
Michael C. Carroll,
Brian M. Mullin, /s/ Karen T. Nakasone
for Defendant-Appellee. Associate Judge
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