Franco v. Reinhardt ( 2023 )

NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
28-FEB-2023
07:53 AM
Dkt. 160 MO
NO. CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI#I
KAWIKA FRANCO, Individually and as Personal Representative for
the Estate of TIARE FRANCO; PEACHES KONG AND APPLES ELABAN, as
Next Friends of LOVELY FRANCO (Minor); TAUA GLEASON, as Next
Friend of KOLOMANA KONG KANIAUPIO GLEASON AND KAULANA KONG
KANIAUPIO GLEASON (Minors); and CHERYL RUSSELL, as Next Friend of
JEANNE RUSSELL (minor), Plaintiffs-Appellants,
v.
SABIO REINHARDT, Defendant/Cross-Claim Plaintiff/Appellee,
and
JOSIAH OKUDARA, Defendant/Cross-Claim Defendant/Appellee,
and
JOHN DOES 2-10; JANE DOES 1-10; DOE CORPORATIONS 1-10; DOE
PARTNERSHIPS 1-10; DOE "NON-PROFIT" CORPORATIONS 1-10; and DOE
GOVERNMENTAL ENTITIES 1-10, Defendants
APPEAL FROM THE CIRCUIT COURT OF THE SECOND CIRCUIT
(CIVIL NO. 12-1-0458(1))
MEMORANDUM OPINION
(By: Ginoza, Chief Judge, Nakasone and McCullen, JJ.)
This case arises from a motor vehicle accident in which
Defendant-Appellee Sabio Reinhardt (Reinhardt) was allegedly
driving a 2005 Dodge Ram pickup truck (Truck) owned by his
girlfriend, Reinette Kama (Kama). On May 14, 2011, Reinhardt was
allegedly driving the Truck with Tiare Franco (Franco) as a
passenger when Reinhardt crashed and Franco died at the scene.
National Interstate Insurance Company, Inc. (NIIC) issued an
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automobile insurance policy (Policy) for the Truck.1 Following
Franco's death in 2011, her estate, spouse, and four minor
children (collectively, Plaintiffs)2 initiated a wrongful death
action against Reinhardt.
This appeal concerns whether counsel retained by NIIC
to defend Reinhardt (Retained Counsel) could withdraw from
representing Reinhardt, then re-represent Reinhardt and file
motions on his behalf without re-establishing contact or
obtaining Reinhardt's consent.3
Plaintiffs appeal from the: (1) "Order Granting
[Reinhardt's] Motion to Set Aside Final Judgment Filed on May 18,
2016 and Order Granting Plaintiffs' Motion for Taxation of Costs
and Pre-Judgment Interest Filed on July 28, 2016 and for New
Trial" (Order Granting Motion to Set Aside); and (2) "Order
Denying Plaintiffs' Motion to Disqualify Counsel" (Order Denying
Motion to Disqualify), both entered on September 6, 2017 by the
Circuit Court of the Second Circuit (Circuit Court).4
On appeal, Plaintiffs contend that the Circuit Court
erred in: (1) granting the Motion to Set Aside because there were
no exceptional circumstances to justify relief under Hawai#i
Rules of Civil Procedure (HRCP) Rule 60(b); (2) granting a new
1
NIIC issued the Policy to Kama's ex-husband, William A. Cornelio, Jr.
2
Plaintiffs include Kawika Franco, Individually and as Personal
Representative for the Estate of Tiare Franco; Peaches Kong and Apples Elaban,
as Next Friends of Lovely Franco (Minor); Taua Gleason, as Next Friend of
Kolomana Kong Kaniaupio Gleason and Kaulana Kong Kaniaupio Gleason (Minors);
and Cheryl Russell, as Next Friend of Jeanne Russell (Minor).
3
This case is currently before us on remand from the Hawai#i Supreme
Court after this court dismissed the Plaintiffs' appeal for lack of
jurisdiction because the Circuit Court had set aside the final judgment and
granted a new trial, which we deemed was an unappealable interlocutory and
non-final order. Franco v. Reinhardt, SCWC-XX-XXXXXXX, 2018 WL 1392334, at *1
(Haw. March 20, 2018). The Hawai#i Supreme Court held that the post-judgment
Order Granting Motion to Set Aside and Order Denying Motion to Disqualify are
appealable for purposes of appellate jurisdiction. Id. Accordingly, the
supreme court vacated our dismissal order and remanded the case to this court
for disposition. Id. Thus, in light of the Hawai#i Supreme Court's order, we
address Plaintiffs' appeal on the merits.
4
The Honorable Rhonda I.L. Loo presided.
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trial and a second bite at the apple where NIIC decided not to
defend Reinhardt while the issue of NIIC's duty to defend was not
fully resolved; and (3) denying Plaintiffs' Motion to Disqualify
because Reinhardt's Retained Counsel had voluntarily withdrawn
from representing Reinhardt and failed to newly obtain
Reinhardt's consent to representation pursuant to Hawai#i Rules
of Professional Conduct (HRPC) and Hawai#i law.
For the reasons discussed below, we conclude that
Retained Counsel did not have the authority or Reinhardt's
consent to file motions on behalf of Reinhardt and the Circuit
Court erred in denying the Motion to Disqualify and granting the
Motion to Set Aside. Thus, we vacate the Order Granting Motion
to Set Aside and the Order Denying Motion to Disqualify.
I. Procedural Background
A. Reinhardt's Representation in the Instant Case
On May 3, 2012, Plaintiffs filed a Complaint against
Reinhardt alleging, inter alia, that Reinhardt operated the Truck
in a "negligent, grossly negligent, reckless or wanton and
willful manner, which action or omission was the legal and
substantial cause of and/or a substantial factor in causing
[Franco's] wrongful death[.]" On June 11, 2012, NIIC informed
Reinhardt that it had retained the Law Offices of Cary T. Tanaka
to defend him under a reservation of rights.
On March 20, 2013, NIIC filed a separate action in the
Circuit Court for declaratory judgment (DJ Action) to determine
whether NIIC owed a duty to defend and indemnify Reinhardt.5 In
the DJ Action, the Circuit Court granted NIIC's motion for
summary judgment, concluding there was no possibility of
insurance coverage for Reinhardt under the Policy. Plaintiffs
appealed in National Interstate Insurance Company, Inc. v.
Reinhardt, No. CAAP-XX-XXXXXXX, 2017 WL 1210101 (Haw. App. March
31, 2017) (Mem. Op.), as corrected (May 15, 2017) (DJ Appeal).
5
The Honorable Rhonda I.L. Loo also presided over the DJ Action.
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On July 29, 2014, following the Circuit Court's grant
of summary judgment in favor of NIIC in the DJ Action, Retained
Counsel filed a "Motion to Withdraw as Counsel for [Reinhardt]"
(Motion to Withdraw) in this case citing, inter alia, HRPC Rule
1.16.6 In support of the Motion to Withdraw, Retained Counsel
attested to the following:
5. On June 11, 2012, NIIC informed [Reinhardt] that it had
retained our office to defend him in the subject lawsuit
under a reservation of rights.
. . . .
7. During such representation, our office's attorneys' fees
and costs have been billed to and paid for by NIIC and not
[Reinhardt].
. . . .
9. On November 21, 2013, this Court granted NIIC's Motion
for Summary Judgment . . . finding that there was no
possibility of coverage for [Reinhardt].
. . . .
11. On July 30, 2014, our office received a copy of a
letter from Gregory K. Markham, Esq., attorney for NIIC, to
6
In 2014, HRPC Rule 1.16 (2014) provided in pertinent part:
Rule 1.16. DECLINING OR TERMINATING REPRESENTATION.
(a) Except as stated in paragraph (c), a lawyer shall not
represent a client or, where representation has commenced,
shall withdraw from the representation of a client if:
. . .
(3) the lawyer is discharged.
(b) Except as stated in paragraph (c), a lawyer may withdraw
from representing a client if:
. . .
(6) the representation will result in an unreasonable
financial burden on the lawyer or has been rendered
unreasonably difficult by the client[.]
. . . .
(c) A lawyer must comply with applicable law requiring
notice to or permission of a tribunal when terminating a
representation. When ordered to do so by a tribunal, a
lawyer shall continue representation notwithstanding good
cause for terminating the representation.
(d) Upon termination of representation, a lawyer shall take
steps to the extent reasonably practicable to protect a
client's interests, such as giving reasonable notice to the
client, allowing time for employment of other counsel,
surrendering papers and property to which the client is
entitled and refunding any advance payment of fee or expense
that has not been earned or incurred.
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[Reinhardt], wherein NIIC notified [Reinhardt] that NIIC
"hereby withdraws coverage of your defense effective
immediately." ....
12. Subsequent to this letter, I contacted the NIIC
insurance adjuster, Walter Tani, assigned to this matter and
confirmed that our office would no longer be retained to
defend [Reinhardt].
13. I informed Mr. Tani that I would be required to file
this Motion to Withdraw.
14. On July 22, 2014, I informed [Reinhardt], who is
currently incarcerated on [sic] at the Maui Correctional
Facility, that our office was no longer retained by NIIC to
defend him in this case, and that we would be filing this
Motion to Withdraw.
15. [Reinhardt] indicated that he understood that our Firm
would be withdrawing from representation and agreed with
such withdrawal. He requested that we copy and transmit all
documents and materials in the litigation to him, which we
are in the process of doing. He further acknowledged that he
has no source of income to pay our office to continue to
defend him.
On March 11, 2015, the Circuit Court granted Retained
Counsel's Motion to Withdraw. Thereafter, Reinhardt proceeded to
defend this case pro se. Approximately one month before the
trial date, the Plaintiffs and the Circuit Court lost contact
with Reinhardt who had been released from prison.7 A jury trial
took place during the week of April 25, 2016, without Reinhardt's
presence. The jury returned a verdict in favor of Plaintiffs and
the Circuit Court entered Final Judgment on May 18, 2016.
B. Post-DJ Appeal
On March 31, 2017, after the Circuit Court entered
Final Judgement in the instant case, this court in the DJ Appeal
vacated the Circuit Court's judgment in favor of NIIC. In the DJ
Appeal, we held that the Circuit Court erred in granting summary
judgment because there were "genuine issues of material fact
regarding whether Reinhardt reasonably believed he was entitled
7
During a hearing on April 21, 2016, the Circuit Court stated that the
court clerk was unable to contact Reinhardt and that the court contacted
Reinhardt's last criminal attorney who was unable to provide Reinhardt's e-
mail or mailing address, or a telephone number. At the hearing, Plaintiffs'
counsel also stated that she had no contact with Reinhardt, had tried to
contact Reinhardt's criminal attorney, and had been mailing everything to the
prison.
5
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to operate the Truck at the time of the fatal accident." 2017 WL
1210101, at *7-8. Following the DJ Appeal, NIIC again retained
the same law firm and attorney to represent Reinhardt under a
reservation of rights.8
In this case, on May 16, 2017, nearly a year after the
Final Judgement was entered, Retained Counsel filed the Motion to
Set Aside, seeking relief pursuant to HRCP Rule 60(b)(5)9 and
60(b)(6). The Motion to Set Aside stated that "[t]o date,
counsel for [Reinhardt] has still not been able to make contact
with him." On June 15, 2017, Plaintiffs filed the Motion to
Disqualify, arguing that Retained Counsel failed to obtain
Reinhardt's informed consent and waiver of any potential
conflicts of interest, and that Reinhardt had no idea he was
being represented in this action or that a Motion to Set Aside
had been filed on his behalf.
During the hearing on August 24, 2017, for the Motion
to Set Aside and the Motion to Disqualify (8/24/17 Hearing), the
Circuit Court orally granted the Motion to Set Aside and denied
the Motion to Disqualify. The written orders were entered on
September 6, 2017.
II. Discussion
We address Plaintiffs' third point of error because our
resolution of this point is dispositive of the issues on appeal.
Plaintiffs contend the Circuit Court erred in denying the Motion
to Disqualify because, inter alia, HRPC Rules and Hawai#i law
8
On remand in the DJ Action, it does not appear the Circuit Court has
made any determination as to whether NIIC owes a duty to defend and/or
indemnify Reinhardt.
9
Plaintiffs contend that the Motion to Set Aside was based on HRCP
Rule 60(b)(1) and (6). In the memorandum in support of the Motion to Set
Aside, Retained Counsel provided a block quote of HRCP Rule 60(b) which quoted
subsections (1) and (6). However, the memorandum in support of the motion
stated "Defendant REINHARDT's position is that this motion is brought under
numbers (5) and (6) above which allows for the reasonable filing for
relief[.]" Further, during the hearing on the Motion to Set Aside, Retained
Counsel asserted that the motion was made pursuant to HRCP Rule 60(b)(5) and
(6).
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required Reinhardt's knowledge and consent to Retained Counsel's
representation.
Appellate courts apply the abuse of discretion standard
for reviewing a lower court's denial of a motion for
disqualification. Hussey v. Say, 139 Hawai#i 181, 185, 384 P.3d
1282, 1286 (2016). "Under the abuse of discretion standard, the
trial court may not be reversed by an appellate court unless the
trial court clearly exceeded the bounds of reason or disregarded
rules or principles of law or practice to the substantial
detriment of a party litigant." Id. at 185-86, 384 P.3d at 1286-
87 (citation omitted).
During the 8/24/17 Hearing, Retained Counsel argued:
[Retained Counsel]: Yeah, the position is well, you don't
have authority. We tried, your Honor. There was a letter
that was sent to Mr. Reinhardt that appears to have been
signed by him via certified mail from National saying please
contact [Retained Counsel] and his office because they were
now retained to represent you and they need to file this
motion to set aside.
In addition to that, we hired a private investigator who was
able to go to his house -- he wasn't there -- but to get a phone
number, and I personally have left several messages with him
asking him to call me. At the point when his number no longer
worked, I sent the investigator out to go back once again to try
to get another number. He was unsuccessful.
We then hired a second set of investigators to see if
they had -- they would have better success. They went out
there twice. They weren't able to find him a second time.
They delivered a letter from me informing him about the
hearing today and our representation. So to say we haven't
done everything we could to try to contact him, I think, is
just not the case.
We did do our best to try to contact him which then
puts me in a weird position because what do I do? Sit on my
hands and allow the one-year time period to lapse or do I do
something and I file the motion? Well, I'm not going to sit
on my hands. I'm going to do my best to try to defend him
properly, and that's why we filed this motion, your Honor,
and that's why we're here today.
After the Circuit Court had already granted the Motion to Set
Aside, the Circuit Court denied the Motion to Disqualify stating:
[The Court]: The second motion regarding the disqualifying
counsel, additionally, the Court also finds in light of the
unusual facts surrounding this case, it would not be
equitable to disqualify [Retained Counsel] as counsel. The
Court does recognize plaintiff's concerns regarding the
rules of professional conduct; however, the Court feels
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confident, as defense counsel assured in its brief, that
defense counsel is making every effort – significant efforts
to locate Mr. Reinhardt to receive his consent, and that any
error in denying this motion can be quickly and harmlessly
remedied if Defendant Reinhardt is finally located and
contacted and expressed a desire, perhaps, not to retain
[Retained Counsel] as counsel at that time.
Accordingly, the Court is denying plaintiff's motion
to disqualify counsel.
(Emphases added.)
"An attorney-client relationship is contractual and
consensual, and such a relationship can be formed only with the
consent of the attorney and the individual seeking
representation. The consent of the parties must be personal and
must flow between the particular individuals." Office of
Disciplinary Counsel v. Cusmano, 93 Hawai#i 411, 415, 4 P.3d
1109, 1113 (2000) (brackets, ellipsis and citation omitted).
Here, the parties do not dispute that following the
Circuit Court's grant of Retained Counsel's Motion to Withdraw on
March 11, 2015, Retained Counsel withdrew from representing
Reinhardt in this case. Accordingly, the attorney-client
relationship between Retained Counsel and Reinhardt was
terminated and Retained Counsel was required to newly obtain
Reinhardt's consent to representation. However, as explained
above, despite Retained Counsel's multiple attempts to contact
Reinhardt, Retained Counsel was unable to establish any means of
contacting Reinhardt before filing the Motion to Set Aside.
Although NIIC again hired Retained Counsel for
Reinhardt after the DJ Appeal, NIIC's retention of counsel does
not change the requirement for Reinhardt's consent to the
representation and Reinhardt has the right to refuse
representation under a reservation of rights. In this regard,
Plaintiffs cite, inter alia, HRPC Rule 1.8(f) (2014), which
provides:
Rule 1.8. CONFLICT OF INTEREST: PROHIBITED TRANSACTIONS.
. . . .
(f) A lawyer shall not accept compensation for
representing a client from one other than the client unless:
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(1) the client consents after consultation;
(2) there is no interference with the lawyer's
independence of professional judgment or with the
client-lawyer relationship; and
(3) information relating to representation of a
client is protected as required by Rule 1.6.
In Finley v. Home Ins. Co., 90 Hawai#i 25, 975 P.2d
1145 (1998), the Hawai#i Supreme Court considered the application
of the HRPC rules, including HRPC Rule 1.8(f), to the
relationship between the insured, insurer, and the insurer's
retained counsel for the insured. With regard to representation
under a reservation of rights, the supreme court stated,
"[a]lthough we acknowledge the contractual right of an insurer to
select counsel for the insured in the tender of a defense under a
reservation of rights, it is well settled that the insured must
have the right to reject this tender." Id. at 35, 975 P.2d at
1155 (emphasis added) (citation omitted).
Moreover, the right to refuse an insurer's tender of a
defense under a reservation of rights is mandated by the
HRPC. See HRPC Rule 1.8(f), stating that "a lawyer shall not
accept compensation for representing a client from one other
than the client unless: (1) the client consents after
consultation." The requirement of client consent necessarily
implies the right not to consent. Therefore, if the client
does not desire the representation under the terms offered
by the insurer, the insurer must either choose to defend
unqualifiedly or allow the insured to conduct its own
defense of the action.
Id. (emphases added) (brackets omitted).
Therefore, without obtaining Reinhardt's consent to
representation under a reservation of rights, Retained Counsel
did not establish an attorney-client relationship and was not
authorized to file motions on Reinhardt's behalf. See HRPC Rule
1.2(a) (2015) ("a lawyer shall abide by a client's decisions
concerning the objectives of representation, and, as required by
Rule 1.4, shall consult with the client as to the means by which
the objectives are to be pursued. A lawyer may take such action
on behalf of the client as is impliedly authorized to carry out
the representation."). It follows that without Reinhardt's
consent, Retained Counsel also did not have the right to appear
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in this case on Reinhardt's behalf. See Cusmano, 93 Hawai#i at
415, 4 P.3d at 1113; see also HRS § 605-8(a) (2016) ("The
practitioners shall have the right to practice in all the courts
of the State, and to appear therein as attorneys in behalf of
persons who may choose to retain them, for the prosecution or
defense of actions.").
Retained Counsel does not argue that consent to
representation was not required or that it should otherwise be
excused in this case. Rather, the answering brief's arguments
related to Plaintiffs' third point of error address Plaintiffs'
contention that Retained Counsel was required to obtain
Reinhardt's waiver of any potential conflicts of interest under
the HRPC Rules.10 Retained Counsel also argues that given the
one-year limitation in HRCP Rule 60(b), counsel "had to file the
Motion to Set Aside before the one-year period for the Final
Judgment expired on May 18, 2017[.]" However, Retained Counsel
does not argue or provide authority that the time limitation in
HRCP Rule 60(b) would allow an attorney to file a motion to set
aside without consent of the client.
Therefore, because Retained Counsel did not have the
authority to file the Motion to Set Aside or appear in court on
Reinhardt's behalf, the Circuit Court erred in granting the
Motion to Set Aside and denying the Motion to Disqualify.
Resolution of this issue is dispositive, and thus we do not reach
whether the Circuit Court erred in granting the Motion to Set
Aside on the merits.
III. Conclusion
For the reasons set forth above, we vacate the Circuit
Court's (1) "Order Granting [Reinhardt's] Motion to Set Aside
Final Judgment Filed on May 18, 2016 and Order Granting
Plaintiffs' Motion for Taxation of Costs and Pre-Judgment
Interest Filed on July 28, 2016 and for New Trial"; and (2)
10
Plaintiffs argue that Retained Counsel was required to obtain
Reinhardt's waiver of any potential conflicts of interest under HRPC Rules 1.7
and 1.8(h) because of potential bad faith claims against NIIC.
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"Order Denying Plaintiffs' Motion to Disqualify Counsel" both
entered on September 6, 2017. The case is remanded to the
Circuit Court for further proceedings consistent with this
memorandum opinion.
DATED: Honolulu, Hawai#i, February 28, 2023.
On the briefs: /s/ Lisa M. Ginoza
Chief Judge
Rebecca A. Copeland,
(Law Office of Rebecca A. /s/ Karen T. Nakasone
Copeland, LLC) Associate Judge
and
Sue V. Hansen, /s/ Sonja M.P. McCullen
(Law Office of Sue Vo Hansen) Associate Judge
for Plaintiffs-Appellants
Cary T. Tanaka,
Alana B. Rask,
(Law Office of Cary T. Tanaka),
and
Greg H. Takase,
(Of Counsel)
for Defendant-Appellee
11