Hawaii Bar Journal - February 2022

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BAR JOURNAL A N O FFICIAL P UBLICATION

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H AWAII S TATE BAR A SSOCIATION F EBRUARY 2022 $5.00

TABLE O F C ON TE NTS VO LUM E 26 , N U M B E R 2

ARTICLES

EDITOR IN CHIEF Carol K. Muranaka BOARD OF EDITORS Christine Daleiden Susan Gochros Ryan Hamaguchi Cynthia Johiro Edward Kemper Laurel Loo Melvin M.M. Masuda Eaton O'Neill Lennes Omuro Brett Tobin

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17 19

New Circuit Court Civil Rules Q&As

24 24

Attorneys and Firms Honored for Support of Civil Pro Bono Panel

HSBA OFFICERS

Treasurer Alika Piper YLD OFFICERS President Jasmine Wong Vice President/President-Elect Lisa Yang Secretary Nelisa Asato Treasurer Kelcie Nagata

by The Honorable Leslie E. Kobayashi and Steven K. Uejio

OF NOTE

President Shannon Sheldon President-Elect Rhonda Griswold Vice President Jesse Souki Secretary Lanson Kupau

A Look at The Revised Uniform Limited Liability Company Act

by Joseph A. Dane

16

Court Briefs

22

HSBA Happenings

27

Discipline Notice

29 20

Case Notes

31 22

Classifieds

28 30 31

EXECUTIVE DIRECTOR Patricia Mau-Shimizu GRASS SHACK PRODUCTIONS Publisher Brett Pruitt Art Direction Debra Castro Production Beryl Bloom

Hawaii Bar Journal is published monthly with an additional issue in the fourth quarter of each year for the Hawaii State Bar Association by Grass Shack Productions, 1111 Nuuanu Ave., Suite 212, Honolulu, Hawaii 96817. Annual subscription rate is $50.

Periodical postage paid at Honolulu, Hawaii and additional mailing offices. POSTMASTER: Send address changes to the Hawaii Bar Journal (ISSN 1063-1585), 1100 Alakea St., Ste. 1000, Honolulu, Hawaii 96813.

Advertising inquiries should be directed to: Grass Shack Productions (808)521-1929 FAX: (808)521-6931 brett@grassshack.net

On the Cover: Where the wind blows by George Davis. Davis was an illustrator and graphic designer for 20 years in Honolulu and is currently owner and massage therapist at The Pain Relief Center. His paintings can be seen on Instagram @georgedavisart.

Notices and articles should be sent to Edward C. Kemper at edracers@aol.com, Cynthia M. Johiro at cynthia.m.johiro@hawaii.gov, or Carol K. Muranaka at carol.k.muranaka@gmail.com. All submitted articles should be of significance to and of interest or concern to members of the Hawaii legal community. The Hawaii Bar Journal reserves the right to edit or not publish submitted material. Statements or expressions of opinion appearing herein are those of the authors and not necessarily the views of the publisher, editorial staff, or officials of the Hawaii State Bar Association. Publication of advertising herein does not imply endorsement of any product, service, or opinion advertised. The HSBA and the publisher disclaim any liability arising from reliance upon information contained herein. This publication is designed to provide general information only, with regard to the subject matter covered. It is not a substitute for legal, accounting, or other professional services or advice. This publication is intended for educational and informational purposes only. Nothing contained in this publication is to be considered as the rendering of legal advice.

A L O O K AT

The Revised Uniform Limited Liability Company Act

by Joseph A. Dane In 1996, with the adoption of what became Chapter 428 of the Hawaii Revised Statutes, the limited liability company was added to the menu of business entity options under Hawaii law1. Hawaii’s1996 law was based on the Uniform Limited Liability Company Act (the “Original ULLCA”) drafted by the Uniform Laws Commission (“ULC”), promulgated in 1994.2 The Original ULLCA was not widely adopted by state legislatures, perhaps because by 1994 most states had already adopted limited liability company statutes, either “home grown” or based on the Prototype Limited Liability Company Act developed by the American Bar Association. 3 Also in 1996, and just two years after the Original ULLCA, the ULC issued a revised model limited liability company statute (“ULLCA (1996)”) which took account of the so-called “checkthe-box” regulations that had been recently proposed by the IRS.4 These regulations allowed certain eligible entities, including limited liability companies, to elect whether to be treated for tax purposes as a partnership, in which taxable income “flows through” to the company’s owners, or as a corporation subject to tax separately from its owners. Before the promulgation of the check-the-box regulations, adoption of the limited liability company form was hampered by the uncertainty of the appropriate tax treatment of the entity. Once this uncertainty was eliminated by the check-thebox regulations, the limited liability company form exploded in popularity. By 2004, a commentator noted, the LLC had become the dominant form for new business in a majority of states.5 Hawaii has amended its LLC statute on a number of occasions since its original adoption, but the statute remains largely based on the ULLCA (1996).

In 2006, the ULC adopted the Revised Uniform Limited Liability Company Act. This model act was subsequently renamed to drop “Revised” from its title. The current version is known as the “Uniform Limited Liability Company Act (2006) (Last Amended 2013)”, which this article will refer to simply as the “Revised Model Act.” The Revised Model Act was seen by its drafters as an opportunity to “identify the best elements of the myriad ‘first generation’ LLC statutes and to infuse those elements into a new, ‘second generation’ uniform act.”6 The Revised Model Act also reflects the more recent goal of the ULC to

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“harmonize” all of the various business organization statutes, a topic that will not be addressed in this article.

The purpose of this article is to describe a few of the more substantial differences between, on the one hand, Hawaii’s current LLC statute and the Original ULLCA on which it is based, and, on the other hand, the Revised Model Act. This article is not a comprehensive review of the Revised Model Act or a section-by-section comparison of the Revised Model Act with the current Hawaii LLC Act. Nor does this article take a position on whether Hawaii should revise its LLC statute, either to adopt the Revised Model Act or in some other way, an undertaking that would require the sort of comprehensive review just mentioned. But bearing in mind that the LLC as a form of business organization is, after all, still a relatively recent invention, it may be worthwhile for practitioners to be aware of some of the areas about which the drafters of the model law upon which our statute is based apparently changed their minds.

Chapter 428, H.R.S., as currently enacted, is referred to as the “Current Act.” The term “company” is used here to mean a limited liability company organized either under the Current Act or some other law, as context requires.

I. Preliminary Note – The Role of the Statute as the Provider of “Default Rules”

Hiatt & Hiatt It goes almost without saying that business people frequently choose to carry out their activities in the form of one or more “artificial” entities – corporations, various flavors of partnerships, limited liability companies, etc. They do so for a number of reasons. Perhaps the most significant reason for conducting a business under the auspices of a separate legal entity, and often the reason foremost on the minds of the business people involved, is that doing so may provide the owners and managers of the business with some degree of protection from personal liability arising from the conduct of the business.

Another reason to carry on a business by way of an entity is to take advantage of an established legal framework delineating the rights and obligations of the various participants in the entity and those with whom the entity does business. For example, Chapter 414 of the Hawaii Revised Statutes, which governs Hawaii corporations, provides fairly detailed rules regarding such things as the management of the corporation (by a board of directors elected by the shareholders), the rights of holders of a particular class of shares, the entitlement of shareholders to “dissent” from certain major corporate transactions, the rights of shareholders to access the corporation’s books and records, and many other rules setting forth substantive rights and procedures for exercising those rights.7 A corporation’s articles or bylaws may in some cases vary the effect of a given statutory provision, but to a large extent the statutory framework governing the relationships among the corporation’s constituents is mandatory.

Where corporate law is largely a matter of statute, a limited liability company is a “creature of contract”, in which the promoters, investors and others who will become the company’s members and/or managers may adopt an operating agreement “to regulate the affairs of the company and the conduct of its business, and to govern relations among the members, managers, and company.”8 The owners of

Jerry M. Hiatt is very pleased to announce that the Hon. Mahilani E.K. Hiatt (Ret.) has rejoined the firm as a partner and that the firm shall again be known as Hiatt & Hiatt.

Judge Hiatt will be concentrating on neutral work and is willing to serve as a mediator, or arbitrator in both civil and family law matters, and as a best interest fact finder in child custody matters. She is also available for court appointment in appropriate matters, including as a discovery master. Her background and experience is comprehensive in both civil and family law matters and is available for review at Hiattlaw.com.

For direct appointment by the parties, or the courts, Judge Hiatt may be reached at meh@hiattlaw.com. Judge Hiatt has also been added to the panel of neutrals for Dispute Prevention and Resolution. For all other ADR work, either for Judge Hiatt, or for Jerry Hiatt, please contact Kelly Bryant at:

Dispute Prevention & Resolution (808) 523-1234; dprhawaii.com For employment investigations, please contact jh@hiattlaw.com or at (808) 937-4179. Resume and references at www.hiattlaw.com.

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February 2022

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a limited liability company (that is, in the parlance of the statute, the company’s “members”) are given very broad latitude to arrange their affairs in respect of the company in whatever manner they choose. Only a very few provisions of the statute are considered important enough to be “nonwaivable.”9 Accordingly, the function of the Current Act provisions that address the internal affairs of the company and the relations among the company and its members and managers (i.e., the provisions that are within the scope of matters that can be addressed in an operating agreement at all) is to provide “default rules” that come into play if and only if the company’s operating agreement is silent on a particular point.10 These default rules are meant to reflect a set of assumptions as to how business people would choose to arrange the governance of the company, had they stopped to consider and put their choices in writing.

Many of the changes in the Revised Model Act deal with matters that could be addressed in the operating agreement, and are therefore changes only in the applicable default rules. Persons forming a company would, under the Revised Model Act, still be able to contract around the revised statutory language. Accordingly, these changes in the Revised Model Act reflect changes in how the drafters of the Model Act view the assumptions underlying the default rules. In this regard, the most significant changes in the Revised Model Act may be the changes to the default rules requiring a company to purchase the interest of a dissociating member (described in Section II.A below), and the description of the default fiduciary duties owed among members and managers (described in Section II.C below).

II. Summary of Notable Differences Between the Current Act and the Revised Model Act As noted above, what follows here is a

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list of some, but by no means all, of the more notable differences between the Current Act and the Revised Model Act. A. Elimination of “At Will” Companies and Mandatory Membership Interest Repurchase upon Member Dissociation Under the Current Act, a company is either a “term company” or an “at will” company. The choice is required to be set forth in the company’s articles of organization, which are filed with the State Department of Commerce and Consumer Affairs (the “DCCA”) to form the company. A term company is one that specifies that the duration of the company is for a specified period of time.11 If no term is specified, the company is an “at will” company.12 The concept of an “at will” company is a carryover from the realm of partnership law, under which the withdrawal of any partner resulted in the dissolution of the partnership.13 Under the original Uniform Partnership Act, upon the dissolution of a partnership for any reason each partner was entitled to have the partnership use its assets to discharge all liabilities against the partnership, liquidate its assets, and pay to each partner the partner’s pro rata share of the partnership’s assets, in cash.14 This right of a withdrawing partner to force a cash purchase of the partner’s interest carried over into the Current Act, which provides that in the case of an “at will” company, unless otherwise agreed in the operating agreement, the company is required to repurchase the interest of a dissociated member for the “fair value” of the interest.15 If the parties are not able to agree on a price for the dissociated member’s interest in the company within certain statutorily prescribed time limits, the statute provides for a judicial determination of the price. In effect, every member in an at will company is vested with the right to “put” his or her interest to the company at market value at any time, unless the operating agreement clearly

eliminates this right. In the case of a term company, the requirement to repurchase the dissociated member’s interest still exists but does not arise until the end of the term in effect on the date of the member’s dissociation. Furthermore, under the Current Act any creditor of a member of an at will company that obtains a charging order (essentially a judicially imposed lien on a member’s interest in a company) can also seek judicial dissolution of the company if it is “equitable” to do so.16 The interests to be balanced when a member wants to leave a limited liability company are, on the one hand, the withdrawing member’s understandable desire not to be tied indefinitely to a stake in the company (i.e., would much prefer to liquidate his or her interest and sever ties with the company altogether) and, on the other hand, the ability of the company to finance that liquidation. An investment in a limited liability company needn’t be perpetual, and company operating agreements frequently provide for events triggering the right of a member to be bought out. Aside from these more or less well defined events, most company operating agreements eliminate the default rule, which seems to reflect a view that a member should not have the power to force a buy-back of the member’s interest at any time.17 The Reporters of the Revised Model Act apparently came to the same conclusion, noting that “the notion of an at-will LLC never took hold,” and that most LLC statutes provide for perpetual duration for an LLC unless the owners provide otherwise.18 Accordingly, the Revised Model Act does away with the concept of an “at will” company. Under the Revised Model Act, all companies have perpetual duration.19 The Revised Model Act also eliminates the “put right” in favor of a dissociating member and the right of a creditor in possession of a charging order to seek a judicial decree of dissolution of the company.

B. Management Structure Changes in the rules governing

management structure make up some of the most significant practical changes in the Revised Model Act. 1. Public Disclosure of Management Structure Under the Current Act, a company is either “member managed” or “manager managed”. The choice between these two approaches is required to be set forth in the articles of organization that are filed at the DCCA and are thereafter open to public review. Indeed, the information provided in a company’s articles or organization, and in the annual reports required to be filed by all Hawaii entities, is easily found through a search of the DCCA’s online database of entities formed or registered in Hawaii. This is not a “default rule” that can be varied under the company’s operating agreement. Every Hawaii LLC is required to declare itself publicly as either member- or managermanaged, and to disclose the identities of the persons or entities serving in the “management role” for the company. If the company is member-managed, the names and addresses of all initial members must be reported in the company’s articles and updated annually by way of the company’s annual report.20 The Revised Model Act maintains the distinction between member-management and manager-management, but removes the requirement that a company disclose its choice of management structure and the identity of its managers (or members, in the case of a member-managed company) in its publicly-filed articles and annual reports. The Revised Model Act would, however, still require the identification of at least one manager (or member in a member-managed company) in the annual reports filed by the company.21 2. Elimination of “Statutory Apparent Authority” Because the Current Act requires the disclosure of the names of the people

responsible for the management of a company (i.e., the managers in a managermanaged company, or the members in a member-managed company), it is a common practice for persons doing business with a company to use information from the DCCA’s searchable web database to determine, or at least to provide evidence of, the authority of a given person to act on behalf of the company. In this way, the DCCA’s public filings become a source of “apparent authority” of the managers (if a manager-managed company) or members (if not) of a company. Because the reporting and disclosure of this information is required by statute, the concept is sometimes referred to as “statutory apparent authority.”

The Current Act also provides that all managers in a manager-managed company and all members in a membermanaged company have equal rights to manage the affairs of the company.22 This, however, is a default rule that can be and frequently is varied by the operating agreement. Indeed, flexibility of management structure is one of the most frequently touted benefits of the LLC form.

Accordingly, there can be a conflict between the scope of the “statutory apparent authority” conferred on company management and the actual authority conferred by the operating agreement.

From the point of view of the company, the company is bound by the act of a manager/member that is within the ordinary course of the company’s business, unless the manager/member had no actual authority to act and the person with whom the manager/member was dealing knew or had notice of the lack of authority.23 Thus the company could find itself bound by the act of a “rogue” manager whose acts exceed his or her actual authority. Well advised third parties may request copies of a company’s operating agreement to confirm actual authority rather than relying on the apparent authority of a publicly disclosed manager, but not all people doing business with an

LLC have the time or sophistication to perform this sort of due diligence. In any event, the disconnect can be a source of inefficiency.

The Revised Model Act makes several significant changes to this structure, and essentially does away with “statutory apparent authority”. The ULC’s Drafting Committee contrasted LLCs with the general or limited partnership form, in which management authority is built into the structure of the company (vested in all partners in a general partnership, and in the general partners in a limited partnership). The situation is different with LLCs: “In the Drafting Committee’s evolving view, the modern LLC should not be conceptualized as merely a general or limited partnership with a liability shield. Instead, the Committee views the LLC as a very flexible vehicle, whose internal management structure may be almost infinitely varied.

Moreover, corporate law provides no apparent authority by position for shareholders or for individual directors.”

Accordingly, Section 301 of the Revised Model Act states flatly that “a member is not an agent of a limited liability company solely by reason of being a member.” Nothing whatsoever is said in the statute about the authority of a manager of a company. If a company desires to make a public declaration of authority, the Revised Model Act allows a company to file one or more “statements of authority” setting forth the authority, or limitations on the authority, of any specific person or position that exists within the company.24 C. Changes to Default Fiduciary Duties To brutally simplify matters, one could say that before, say, the 1980s, business ventures were carried on in one of three forms: as a sole proprietorships (unified ownership and management), as partnerships (shared ownership and

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management), or as corporations (ownership separated from management). In the cases of partnerships and corporations (i.e., the forms involving more than a single person), the question immediately arises as to how the individuals involved in the venture are expected to act toward each other. The details of the development of the duties owed among individuals involved together in a commercial venture are beyond the scope of this article. It is however safe to say that the courts long ago rejected an “every man for himself ” approach, and it is generally understood that at least some of the individual participants in a given enterprise will owe duties to other participants, the nature of which depend on both the type of entity involved (e.g., a partnership or a corporation) and the role held by the individuals in question (e.g., a general partner in a partnership, or a shareholder in a corporation). In some circumstances, those duties may rise to the level expected of fiduciaries, i.e., one who “has a duty . . . to act primarily for another’s benefit.”25 For purposes of this article, the essential point is that there is a fairly well-developed body of caselaw that can be mined by co-venturers and their attorneys to identify the nature of the duties owed in a particular set of circumstances.

For example, in the case of general partnerships, it has long been understood that every partner is a fiduciary for the partnership and the other partners.26 This, however, is only a general rule applicable in the absence of an agreement among the partners establishing a different, and often more limited, understanding of the duties owed among partners.

This power to limit or more expressly define the nature and extent of partners’ duties flows from the understanding that partnerships are first and foremost contractual arrangements, and the belief that people should be free to contract for whatever arrangement they like. Thus, for example, the Uniform Partnership Act expressly allows partners to agree that

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they may engage in types or categories of activities that would, absent that agreement, constitute a violation of the duty of loyalty.27 In a Delaware limited liability company, the duty of loyalty can be eliminated altogether.28 A detailed description of the nature of the duties owed among the various constituents of a corporation (e.g., directors, officers, and shareholders) is beyond the scope of this article.

Suffice it to say that, while the directors of a corporation are held to standards of conduct that may or may not be characterized specifically as “fiduciary duties,”29 it has been generally recognized that a director’s relation to the corporation for which he or she serves is that of a fiduciary.30 And unlike in the partnership context, the duties owed by a director generally cannot be modified by agreement.

A limited liability company being something of a hybrid, in some ways similar to a partnership and in others to a corporation, one of the fundamental questions facing the drafters of the early LLC statutes was the nature and scope of the duties owed by members of an LLC to each other and to the company, and the extent to which those duties could be varied by agreement among the members.

The Current Act provides that “the only fiduciary duties a member owes to a member-managed limited liability company and its other members are the duty of loyalty and the duty of care.”31 The statute also provides that the scope of the duties of loyalty and care are “limited” (the word used in the statute) as set forth in sections 409(b) and (c), respectively. The operating agreement may vary the scope of fiduciary duties, either expanding or narrowing the scope, except that the duty of loyalty may not be entirely eliminated, and the duty of care may not be “unreasonably reduced.”32 In short, the language used in the Current Act is intended to limit, or “cabin in” the default fiduciary duties among the constituents of a limited liability company.

The Revised Model Act changes the default rule regarding fiduciary duties in a subtle, but arguably wide-reaching, way.

Indeed, this change is among the “noteworthy” revisions made in the set of amendments adopted by the ULC in 2006.33 The Revised Model Act continues to identify the duties of loyalty and care as being applicable in LLCs, but differs from the Original Act in that it does not purport to limit the applicable fiduciary duties to only those of loyalty and care. Furthermore, in describing the duty of loyalty the Revised Model Act contains no “limiting” language at all.34 Fiduciary duties can still be limited by agreement, but here too the scope for limitation has

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narrowed, insofar as the operating agreement may not “alter or eliminate” the duties of loyalty or care except in a manner consistent with certain limits set by the statute.35 These revisions, which apparently engendered a vigorous debate among the drafters of the Revised Model Act and other commenters, has been referred to as the “uncabining” of default fiduciary duties.

The Prefatory Notes to the Revised Model Act indicate that the earlier approach to “cabin in” the scope of fiduciary duties “creates more problems than it solves”, by among other things relying too heavily on the concept of good faith and fair dealing.

As a result of these changes, a carefully crafted operating agreement subject to the Revised Model Act could define the scope of fiduciary duties of members and managers in much the same way as would be possible under the Current Act, but in the absence of such specific language in the operating agreement (i.e., in the “default” case) the scope of fiduciary duties among members and managers in a company formed under the Revised Model Act is probably broader than would be the case in a company formed under the Current Act. D. Operating Agreement The Revised Model Act reflects a number of changes concerning a company’s operating agreement. Among the changes are: 1. Under the Revised Model Act, a person who becomes a member of an LLC is deemed to have assented to the operating agreement.36 Business people vary in the degree of formality in which they approach their relationships with the companies in which they are involved. The Revised Model Act would prevent a person who was concededly a member of a company from

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arguing that he or she was not bound by the company’s operating agreement because the person hadn’t signed the operating agreement. From the point of view of the member, it becomes even more important to have reviewed and approved the company’s operating agreement, since the member will be bound whether or not a signed joinder to the operating agreement exists.

2. Many operating agreements impose obligations between the members and the company itself. If the company itself does not sign the operating agreement, is the company nevertheless bound by the operating agreement? Does the company have standing to enforce provisions of an operating agreement it has not executed? Courts have provided various answers to these questions.37 The Revised Model Act makes it clear that the company is bound by and has the right to enforce its operating agreement, whether or not the company has signed the operating agreement.38

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3. Under the Current Act, an LLC comes into existence when its articles of organization are filed with the DCCA.39 The articles of a member-managed company must contain the names of the initial members, while the articles of a managermanaged company must contain the names of the initial managers and the number of initial members. There is no mechanism under the Current Act to file articles of organization until the identity of the initial members or managers have been established.

The Revised Model Act permits articles of organization to be filed before the members and/or managers have been identified. The company comes into existence when the articles have been filed and at least one person has become a member. No public filing is required when the initial member (or any subsequent member) becomes a member of the company, and indeed the comments to the

Revised Model Act represent that by requiring only the most “bare bones” of disclosure, it thereby follows the “modern trend.”40 E. Charging Orders The Current Act allows a judgment creditor of a member of a company, or a transferee of a member’s interest, to obtain a court order “charging” the distributional interest of the member.41 The charging order itself constitutes a lien on the judgment debtor’s distributional interest, which can be foreclosed at any time by the judgment creditor. Upon foreclosure, the purchaser of the interest has the rights of a transferee of the member’s interest.

becomes the sole member of the company, and the debtor is dissociated as a member.43 The Revised Model Act also eliminates the reference in the Current Act to “redeeming” the company interest subject to the charging order, which the comments to Section 503 refers to as “confusing.” The Revised Model Act instead authorizes the company or its members to pay the judgment creditor in full, thereby succeeding to the rights of the judgment creditor.44 The comments point out that this remedy can be enforced without the consent of the judgment creditor, and provides a mechanism to prevent a creditor of a member from “doing mischief ” to the company.

presumably a relic from the time before the adoption of the check-the-box regulations, is an egregious legal bear trap, lying in wait for the unwary organizer to step on. The Revised Model Act eliminates the requirement of such a statement.

III. Conclusion This article has attempted to describe a few of the differences between the Hawaii LLC Act and what might be called the current “recommended practice,” at least insofar as a promulgation of the Uniform Laws Commission can be seen as a recommendation. It is not obvious that Hawaii would benefit by a wholesale adoption of the Revised Model Act, but certain of its changes – in particular the elimination of term companies, of “statutory apparent authority,” and of the baffling mandatory choice between keeping and foregoing the LLC’s liability shield – seem worthy of careful study.

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The Revised Model Act makes several revisions in connection with charging orders. It makes clear that immediately upon entry of a charging order, the company is required to pay over to the judgment creditor any amounts that would otherwise be distributed to the judgment debtor.42 Also, under the Revised Model Act when a charging order against the sole member of a single-member LLC is foreclosed, the purchaser at the foreclosure sale obtains the member’s entire interest, and not merely a distributional interest. As a result, the purchaser

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F. Member liability for debts of the F company.

The Current Act requires the articles of organization of all Hawaii LLCs to include a statement as to whether the members of the company are to be liable for the company’s debts and obligations.45 In compliance with this requirement, the form articles of organization provided by the DCCA include a checkbox which, if incorrectly filled out, would eliminate the liability shield that is one of the main reasons for forming an LLC in the first place.46 The presence of this checkbox,

1996 Haw. Sess. Laws Act 92. Hawaii was apparently the last state to adopt an LLC statute.

See Allan W. Vestal & Thomas E. Rutledge, Disappointing Diogenes: The LLC Debate that Never Was, 51 St. Louis U. L. J. 53, at 60 (Fall 2006).

2 See S. Stand. Comm. Rep. No 1853, in 1996 Senate Journal, at 917 (noting that the law was based on the 1994 model law).

3 See Rutherford B. Campbell, Jr., The “New” Fiduciary Standards Under the Revised Uniform Limited Liability Company Act: More Bottom Bumping From NCCUSL (original LLC Act “had some difficulty in getting traction”).

4 See Simplification of Entity Classification Rules, 61 Fed. Reg. 21,989 (May 13, 1996).

5 Howard M. Friedman, The Silent LLC Revolution – The Social Cost of Academic Neglect, 38 Creighton L. Rev. 35 (Dec. 2004).

6 Unif. Ltd. Liab. Co. Act (2006), Prefatory Note (hereinafter, “Prefatory Note”).

7 See Haw. Rev. Stat. § 414-191 (management by a board of directors); § 414-71, -72 (rights of shareholders); § 414-342 (dissenters’ rights); § 414470 (access to books and records).

8 Haw. Rev. Stat. § 428-103.

9 See Haw. Rev. Stat. § 428-103(b).

10 There is a difficulty here not often remarked upon, which is that it is not always clear whether a particular provision in an operating agreement was intended to vary or replace a particular

statutory default rule. For example, in a recent unreported case from California, Hillsborough Development Co., LLC v. Annen, 2019 WL 3758948 (Cal. Ct. App., Aug. 9, 2019), a provision in an operating agreement requiring the consent of all members to approve “all matters in which a vote, approval, or consent of the Members is required” was held not to apply to the removal of the manager. Instead, the court in that case looked to the statutory default rule for removal of a manager, which required only a simple majority approval.

11 Haw. Rev. Stat. § 428-203(a)(4).

12 Haw. Rev. Stat. § 428-203(d).

13 Unif. P’ship Act (“UPA”) § 29 (1914).

14 UPA § 38. Any partner wrongfully causing a dissolution would be subject to damages, but would still be entitled to payment of the value of the partner’s interest in the partnership, less damages.

15 Haw. Rev. Stat. 428-701(a).

16 Haw. Rev. Stat. 428-801(5).

17 For a different view, see Donald J. Weidner, LLC Default Rules Are Hazardous to Member Liquidity, 76 Bus. Law. 151 (Winter 2021) (hereafter, “Weidner”).

18 Briefing Memo from the Reporters, Drafting Committee on Amendments to the Uniform Limited Liability Company Act, at 2 (2003), available at https://www.uniformlaws.org/viewdocument/committee-archive-63?CommunityKey=bb ea059c-6853-4f45-b69b-7ca2e49cf740&tab=librarydocuments. A possible alternate explanation for the elimination of the default “put right” – that the elimination makes possible certain valuation discounts of interests for estate and gift tax purposes – is given in Weidner, supra, at 164.

19 Revised Act 108(c). “Perpetual” is an obvious overstatement – the company would exist until dissolved. Also, see Revised Act 211(b)(2)(C), implying that articles may set a definite term.

20 The 1996 Model Act required the disclosure only of the names and addresses of the managers of a manager-managed company. The additional disclosure of member managers appears to be a Hawaii modification.

21 Revised Model Act § 212(a)(4), (5).

22 Haw. Rev. Stat. § 428-404(a), (b).

23 Haw. Rev. Stat. § 428-301(a), (b). An exception applies to conveyances of real estate, authority over which can be limited by a suitable statement in the company’s articles of organization.

24 Revised Model Act § 302(a).

25 Black’s Law Dictionary 563 (5th Ed. 1979).

26 See TSA Int’l Ltd. v. Shimizu Corp., 92 Haw. 243, 257, 990 P.2d 713, 727 (1999), as amended on denial of reconsideration (Dec. 30, 1999) (“every partner owes fiduciary duties to the partnership that he or she is a part of ”). See also Haw. Rev. Stat. § 425-123(a) (characterizing the duties of loyalty and care owed by a partner to the partnership and its other partners as “fiduciary duties”).

27

See Haw. Rev. Stat. § 425-103(b)(3)(A) (based on the Uniform Partnership Act). The power to limit the duty of loyalty is itself limited insofar as the limitation not be “manifestly unreasonable.”

28 Del. Code Ann. tit. 6, § 18-1101(c).

29 The Hawaii Business Corporation Act does not use the term “fiduciary duty” at all.

30 See Lussier v. Mau-Van Dev., Inc., 4 Haw. App. 359, 381, 667 P.2d 804, 819–20 (1983) (“As a fiduciary, [a director’s] duties to the corporation include undivided, unselfish and unqualified loyalty, unceasing effort never to profit personally at corporate expense, and unbending disavowal of any opportunity which would permit the director’s private interests to clash with those of [the] corporation.”).

31 Haw. Rev. Stat. § 428-409(a) (emphasis added).

32 Haw. Rev. Stat. § 428-103(b)(2), (3). Note that the Delaware LLC act goes even further, allowing the total elimination of fiduciary duties, but not the implied contractual covenant of good faith and fair dealing, which cannot be waived. See supra, n. 28.

33 See Prefatory Note to ULLCA (2006), at 2.

34 See Revised Model Act § 409(b) (noting that the duty of loyalty “includes” certain specific duties) (emphasis added).

35 Revised Model Act § 105(c)(5), (d).

36 Revised Model Act § 106(b).

37 Compare Elf Atochem North America, Inc. v. Jaffari, 727 A.2d 286 (Del. 1999) (company bound by operating agreement whether or not executed by the company) with Trover v. 419 OCR, Inc., 397 Ill. App. 3d 403, 404, 921 N.E.2d 1249, 1251 (2010) (company not bound).

38 Revised Model Act § 106(a).

39 Haw. Rev. Stat. § 428-202(b).

40 Comment to Section 202(b), Revised Model Act. The Revised Model Act requires disclosure of only the name of the company and the address of its principal office, and the name and address of the company’s agent for service of process.

41 Haw. Rev. Stat. § 428-504(a).

42 Revised Model Act § 503(a).

43 Revised Model Act § 503(f).

44 Revised Model Act § 503(e).

45 Haw. Rev. Stat. § 428-203(a)(6).

46 See DCCA Form LLC-1.

Judge Daniel R. Foley (ret.)

Mediation Arbitration Moot court Mock trial

Dispute Prevention and Resolution 1003 Bishop Street Suite 1155 Honolulu, HI 96813

Phone:

808.523-1234

judgefoley2000@hotmail.com

www.dprhawaii.com

Joseph A. Dane is counsel at Goodsill Anderson Quinn & Stifel. He has advised business and non-profit organizations on tax matters, including representation in federal and state tax audits and on corporate law questions of internal governance and structure.

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COURT B RIEF S Kauai Self-Help Center’s 10th Anniversary

“From that modest beginning, amazing things happened.

Since then, Self Help Centers or Access to Justice Rooms have been opened on Oahu, Maui, and the Big Island; more than 250 attorneys have volunteered each year; and they have helped more than 31,000 people at almost no cost to the public. More than 4,000 of those people were here on Kauai. It’s no exaggeration to say that those centers have become the signature achievement of our state’s Access to Justice movement. In a recent survey of all fifty states as well as the territories, Hawaii ranked sixth for our efforts to provide access to justice.”

Seventeenth Courts in the Community Front, left: Katherine Caswell, District Court Judge Trudy K. Senda (ret.), Andrew Michaels, Mark Bradbury, Hugo Cabrera, and Supreme Court Chief Justice Mark E. Recktenwald. Second row: Emiko Meyers, Per Diem Judge Sara Silverman, Adam Roversi. Third row: Laura Barzilai, Aaron Larrimore, and Jay Mason. Fourth row: Jenna Tatsey, Charles Foster, and Per Diem Judge Laurel Loo. Fifth row: Chief Judge Randal G.B. Valenciano Judge Kathleen N.A. Watanabe, Deputy Chief Judge Michael K. Soong, and Sean Hartlieb.

Participants in the Kauai Self-Help Center’s 10th Anniversary event on December 15, included Katherine Caswell, District Court Judge Trudy K. Senda (ret.), Andrew Michaels, Mark Bradbury, Hugo Cabrera and Supreme Court Chief Justice Mark E. Recktenwald, Emiko Meyers, Per Diem Judge Sara Silverman, Adam Roversi, Laura Barzilai, Aaron Larrimore, Jay Mason, Jenna Tatsey, Charles Foster, Per Diem Judge Laurel Loo, Chief Judge Randal G.B. Valenciano Judge Kathleen N.A. Watanabe, Deputy Chief Judge Michael K. Soong, and Sean Hartlieb.

The Kauai Bar Association hosted this special event to commemorate Hawaii’s signature initiative to improve access to justice for all.

“I am deeply grateful to all the hard-working attorneys who have volunteered their time and expertise over the past decade to support the Kauai Self-Help Center in its mission to provide assistance to those who need it most,” said Chief Justice Recktenwald.

“To its credit, Kauai, with the Kauai Bar Association, Judges Trudy Senda and Randal Valenciano, and Emiko Meyers of the Legal Aid Society of Hawaii (LASH) leading the charge, opened the first center with volunteer attorneys offering their time and expertise. We also had the strong support of the Hawaii State Bar Association and the LASH.

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The Hawaii Supreme Court convened December 1, by Zoom, as more than 150 students on two islands watched the oral argument as part of the Courts in the Community program. Participating schools on Oahu were Aiea and Moanalua high schools and Molokai High.

Attorneys from the Maui County Bar Association and Hawaii State Bar Association volunteered their time and facilitated a moot court activity where students had an opportunity to argue the case (State vs. John K. Jardine) themselves.

“The students, teachers, volunteer attorneys, school and court administrators, and so many others contributed to the success of the second virtual Courts in the Community program,” said HSBA President Levi Hookano. “The role of the judiciary and the rule of law is an important part of civics education, and the Hawaii State Bar Association is proud to be a part of this process. The virtual format gave students from different island communities a unique opportunity to engage with each other and share their thoughts with the attorneys arguing the case and learn of the law directly from our supreme court justices.”

New Circuit Court Civil Rules The following questions and answers were raised at the Virtual Civil Town Hall Meetings held on November 4 and 5, 2021. Some of the answers have been revised for clarity and to provide more specific references to the rules, where necessary.

The two free events, jointly sponsored by the Judiciary and the HSBA, provided attorneys and legal support staff an opportunity to address and discuss with judges and court employees the new civil rules, which will be implemented in the state circuit courts, effective January 1, 2022.

If you missed the presentations, the videos may be accessed at the HSBA website at https://hsba.org/TownHallMeetings.

1. When will the Hawaii Rules of Civil Procedure (HRCP) and Rules of Circuit Courts of Hawaii (RCCH) changes take effect?

The rule changes to HRCP and RCCH took effect on January 1, 2022 and apply to new civil cases filed after that date. The new rule amendments do not apply to civil cases filed before the effective date unless the parties agree or the court orders that the new rule amendments apply.

2. Even if all parties stipulate to apply the new rules retroactively in their case, do the parties still need court approval?

Even if the parties agree that the new rules will apply retroactively in their case, the parties should prepare a written stipulation signed by all the parties. The stipulation and proposed order approving the stipulation should be filed.

3. There is a 14-day deadline to request a scheduling conference

&As

Q

that starts upon service of the first defendant. What happens in a case with multiple defendants?

The plaintiff has 14 days to request a scheduling conference from the date any defendant is served with the complaint or appears in the case, whichever is earlier. If there are multiple defendants, a plaintiff should request the scheduling conference after the first defendant is served or appears.

4. Who needs to attend the scheduling conference?

The lead attorneys and any self-represented parties.

5. In relation to the scheduling conference, what about parties that have not yet been served?

A plaintiff must make diligent efforts to serve a defendant or defendants with a complaint. In cases with more than one defendant, if it appears likely that not all defendants will be served with the complaint prior to the scheduling conference, the rules allow a plaintiff to request to reschedule the scheduling conference to

allow additional time for service of the complaint on the remaining defendants. It is important to note that a plaintiff must demonstrate “ diligent efforts” to serve all defendants with the complaint when a request is made to postpone or continue the scheduling conference. If all defendants have not been served and there is no continuance of the scheduling conference, then the plaintiff (either through counsel or pro se) should be prepared to discuss and explain the status of service upon the remaining parties at the scheduling conference.

6. How will a scheduling conference be scheduled?

The plaintiff must file a Notice of Request for Scheduling Conference and Proposed Order Setting Scheduling Conference within 14 days after any defendant is first served with the complaint or first appears in the case, whichever is earlier. The division assigned to the case will schedule the conference and file the Order Setting Scheduling Conference.

By rule, the plaintiff is required to serve the Order Setting Scheduling Conference on any defendant who has been served with the complaint, but has not yet appeared in the case, upon any party who is served with the complaint after the court sets the Scheduling Conference, and upon any unrepresented party who is not a JEFS User.

7. Regarding the Notice Requesting Scheduling Conference and proposed Order, is the notice filed as the lead document and the proposed order filed as the supporting document? Also is the proposed order being filed with the notice requesting the scheduling conference left blank and the court will subsequently file the February 2022

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order with the blanks filled in and that is what needs to be served on defendants?

You can file the Notice Requesting Scheduling Conference and the Proposed Order as a single document or with the Notice as the lead document and the proposed order filed as a separate supporting document. The date and time of the conference, as well as whether the conference will be held remotely or in person, should be left blank for court staff to complete. A judge will review and sign the Order Setting the Scheduling Conference, which will be filed by the court. Once the Order is filed, the Plaintiff is required to serve the other party(ies) and file a Certificate of Service reflecting the manner of service upon all parties. To reiterate, if a defendant has been served with the complaint, but has not appeared in the action, if a defendant is served with the complaint after the court sets the Scheduling Conference, or if a party is not represented by an attorney and is not a JEFS User and has not consented to electronic service, the plaintiff must be sure that there is proper service of the Order Setting Scheduling Conference upon those defendants.

8. Why was one of the new forms titled “Notice of ” instead of “Request for Scheduling Conference?

The title of the new form reflects the specific language of HRCP 16(b)(4) which refers to a “Notice” to request the scheduling conference.

9. Are the notice of request for scheduling conference, proposed order setting scheduling conference, and certificate of service for the proposed order at the same time?

The certificate of service for the Order Setting Scheduling Conference must be filed after the Order is filed by the court and after service of the order upon the parties. A plaintiff must first

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file the request for the scheduling conference, along with the proposed order (either as a single document or as a lead document with the proposed order as a supporting document). The Court will file the order setting the scheduling conference thereafter, and subsequently, the plaintiff will file the certificate of service for the order upon service of the parties.

10. If the scheduling conference needs to be rescheduled to allow additional time for service, what is the preferred method for such request, a filed letter, or a call to chambers?

It depends on the individual judge.

In the First Circuit, sometimes divisions may request a letter or confirming letter.

It may be different for other judges on the neighbor islands where a telephone call may be sufficient. Guidance may be sought from the respective division.

11. What are the consequences if the attorneys or parties fail to: (1) have their pre-scheduling conference meeting to discuss Circuit Court Rule 12(a)(6); or (2) file their scheduling conference statement pursuant to Circuit Court Rule 12(a)(7)?

In the first place, if there is no notice filed by the plaintiff to request the scheduling conference, then the court rules permit the judge to enter an order of dismissal for want of prosecution under RCCH 12(i). If the parties are not conferring on discovery matters as required by the rules, are not complying with the new filing requirements to jointly report on their discovery planning, and/or do not file their scheduling conference statements, the courts could impose sanctions upon a party or the party’s attorney, unless good cause is shown. RCCH 12(l) allows the court to impose sanctions if a party or a party’s attorney fails to comply with any section of RCCH 12.

The circuit court judges expect that

attorneys will read and familiarize themselves with the rules and act in good faith to comply with the new requirements. It is understandable that there will be a learning curve for attorneys and judges alike when it comes to the new rules.

However, this does not mean that the rules can be disregarded. Counsel should make every effort to comply and must be aware that under the court rules, sanctions could be imposed for non-compliance.

12. Will there be any exceptions for pro se inmates? Meet and confers will often be a problem.

The federal court exempts pro se inmate cases from the meet and confer requirements.

Pro se inmates are subject to the new rules. If one is unable to confer with a party as required by the new rules, then that party should explain the efforts made or attempts to confer and explain why the efforts were unsuccessful. These explanations should be reported to the court on discovery planning and in the scheduling conference statement. As for court hearings in civil cases, inmates may participate in these hearings by Zoom or by telephone if they are not allowed to be transported to the courthouse. The court may issue an order directing the Department of Public Safety to allow the defendant or plaintiff to appear by Zoom and to set it up.

13. Does a separate “discovery plan” document need to be filed or is that considered part of the Joint Report of the Parties?

It is considered part of the Joint Report of the Parties. A separate discovery plan does not need to be filed.

14. Does the court require courtesy copies after filing of the Joint Report of Parties and Scheduling Conference Statement?

Circuit Court Rule 7.2(g)(6) requires

courtesy copies of a motion, responses to a motion, or other document pertaining to a motion to be delivered to the chambers of the assigned judge.

15. If the parties use the streamlined discovery dispute process with letter briefs and there is a “ruling,” are they then precluded from filing a motion on that same dispute?

First, the rules do not expressly address it or forbid it. Second, since an order will be generated once the judge rules on the letter briefs, it is the court’s order even if there was informality that preceded the issuance the order. If a party wishes to file a motion in response to or based on the court’s ruling, they may, but it largely depends on the relief requested, as there could be law of the case issues.

16. Are letter briefs e-filed in JEFS? Pursuant to Rule 15.1, the letter briefs must be delivered to the assigned judge’s chambers and served on all parties. When the judge decides on the discovery dispute, then the prevailing party prepares the order and e-files the order and attaches the letter briefs so that the letter briefs are also made a part of the record.

17. May the letter briefs be submitted by email to chambers?

The new rules do not provide for such email submission. Therefore, the division assigned to the particular case should be consulted.

18. When can a party request an early settlement conference?

A party can always request an early settlement conference. The rules do not specifically address early settlement conferences, however, so this would be at the discretion of each individual judge and the judge’s availability whether the

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settlement conference can be calendared early.

19. In the settlement negotiations required before a settlement conference: (1) why is the plaintiff required to go first? (2) Can the first offer be the amount set forth in prior demands or as set forth in the complaint?

(1) The new rule for settlement conferences requires the plaintiff to make the initial offer before a defendant’s offer.

The custom and practice has always been that the party making the claim should make the first overture towards settlement. Also, for cases in which a defendant is insured, staggering the exchange of settlement offers affords defense counsel time to take the offer to the insurer for evaluation and then respond to the plaintiff ’s offer. There is also a provision in the rules for simultaneous exchange of settlement offers. If a

party believes the settlement conference would be more productive with a simultaneous exchange of offers, then the party can bring that up to the judge at the scheduling conference and explain why the case would benefit from a simultaneous exchange of settlement offers.

(2) As for the offer made by a plaintiff, generally speaking, the offer could be the same as the amount prayed for in the complaint as long as that is the plaintiff ’s evaluation. The critical portion of the rule provides that a bona fide and reasonable demand is made.

It should be noted that the new rule eliminates the settlement conference statement filing, and a confidential settlement conference letter to the court using the JEFS system should not be filed. A document filed under seal is accessible to the opposing party. The in-camera feature of the e-filing system should not be used either because it will be bounced at some point. Either place the document

in the mail, of if you receive permission from the court to send it by email, then a submission may be done by email.

20. If the parties agree to enter into the expedited process, but later decide that it is not best for the case for whatever reason are the parties allowed to return to a normal process?

A motion may be filed, and the court will consider and approve taking a case out of the expedited trial track if there is a bona fide reason for it. HRCP 16.1 states that any party may, based upon a showing of good cause, request that a case originally assigned to the expedited track be removed from it.

Whether the parties stipulate, or one party moves to take the case out of the expedited trial track, a showing of good cause is required. A stipulation must set forth all the reasons why the case should be removed from the expedited trial track.

21. Since there is currently a backlog of cases set for trial, how will an expedited trial be held?

The short answer is that the court will double and triple set trials each week.

This has been the practice prior to COVID. It is common for circuit court judges to schedule more than one trial per week. This is particularly true for neighbor island judges who preside over criminal and civil cases in circuit court.

It is also common for civil trial cases to be taken off a court’s trial schedule each week because of a settlement, a motion to continue trial, or a dispositive motion in the case. An expedited case will be assigned a trial week as required by the rules, and the parties should plan that the trial will occur during that week. If there are two trials set and ready to start that week, then the assigned judge will need to resolve that conflicting schedule in the same manner as normally done.

22. If a case is already in CAAP (Court Annexed Arbitration

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Program), will the new rules apply to that case?

Cases that are already in CAAP or will be in CAAP after January 1, 2022, when the new rules take effect are exempt from the new scheduling requirements and initial disclosure requirements.

When a case comes out of CAAP, either by way of a decision and a request for a trial de novo or if a case is removed from CAAP, there is a process for scheduling a CAAP case on the assigned judge’s trial calendar. The process is set forth in Rule 12(b)(2) of the Rules of the Circuit Court, which requires the plaintiff to ask for a trial setting conference after there is a disposition in CAAP. 23. For exempt cases such as foreclosures, can extensions be requested for the notice requesting trial setting conference required under RCCH Rule 12(b)(2)?

Not much is expected to change in the area of foreclosures in terms of process. Generally speaking, cases like foreclosures are disposed of, not by way of a trial or settlement, but by a dispositive motion for summary judgment and the like.

24. Do any of the new requirements apply to “exempted” cases or will the old rules continue to govern those cases?

There would be some instances where the new rules would apply to exempt cases. One example is streamlined discovery assistance under RCCH 15.1.

Also, the new rule RCCH 12.1 Pre-Trial Statement, would apply to exempt cases .

25. Where can I get the five new fillable PDF forms that were created?

They can be downloaded from the

“Court Forms” section of the Judiciary website at www.courts.state.hi.us.

26. The Document Category and Type information on the bottom right of the new forms is very helpful. Is there anywhere such filing information is available for all documents? Is there a list of all Categories and Types for reference for JEFS filings?

That information is available on the “Civil JEFS Info” section on the Judiciary’s website at www.courts.state.hi.us.

This article was prepared by Deputy Chief Judge Jeannette Castagnetti and Mark Santoki, Court Operations Specialist.

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H SBA HAP PE NIN GS Board Actions The HSBA Board took the following actions at its meeting in November: • Voted to make an additional payment of $30,000 on its mortgage loan to further reduce its balance; and • Voted to approve the recommendation of the HSBA Nominating Committee and HSBF Board to reappoint/newly appoint the following individuals to the Hawaii State Bar Foundation Board for terms beginning January 1, 2022 and expiring as indicated below: Nelisa Asato (new appointment) 12/31/2022 Diane Ono (reappointment) 12/31/2023 Bobby Senaha (reappointment) 12/31/2023 Craig Wagnild (reappointment) 12/31/2022 Ilana Waxman (reappointment) 12/31/2024

Board Vacancies on LASH Board The Legal Aid Society of Hawaii will have four vacancies on its Board, each with a three-year term beginning July 1, 2022. Qualifications include being knowledgeable about and supportive of delivery of quality legal services to the poor; willing and able to devote time to perform necessary duties; conscientious, studious, thorough, and diligent in learning methods and problems of the organization.

Duties include governing the Legal Aid Society of Hawaii, whose primary purpose is to secure justice for and protect the rights of the needy and promote measures for their assistance.

Anyone interested in serving in this

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capacity should submit the following by February 28, 2022 to the HSBA Nominating Committee at nominations@hsba.org: a resume, reason for wanting to serve, and area of law practice concentration. Please note that these positions are uncompensated, and that applicants need to disclose all public disciplinary sanctions. If there have been none, then state that such is the case. Appointment will be made at the HSBA Board meeting in May or June 2022.

HSBA Board Welcomes Comment on Judicial Nominees There are currently seven judicial vacancies that will be announced and filled during 2022. The HSBA Board welcomes all members who wish to offer confidential comments on judicial nominees to email membercomments@hsba.org or write to the Board immediately after the name of the nominee becomes public by the appointing authority. Since the legislative process does not provide for an extended comment period, it is incumbent upon Bar members to submit their comments in a timely manner so that it may be considered in the Board’s deliberations.

Member Benefits Spotlight FLORAL ARRANGEMENTS Watanabe Floral Watanabe Floral, Inc., recognized as “Hawaii’s Best” Florist every year since 2003, celebrates its 75th year of floral service to Hawaii. What started as a “mom and pop” business by Ernest and Shizue Watanabe in 1946 has transformed into a multi-tiered company with 70 team members focused on sharing the spirit of aloha and keeping people first. Watanabe Floral is Hawaii’s

largest retail florist with two showrooms on Oahu. With over 100 years of experience, the designers specialize in weddings, sympathy, prom, conventions, and all other important occasions. Present your HSBA card at your time of purchase in the store to receive your 5% discount on any product or service. For more information, please visit their website at https://watanabefloral.com/.

COMMUNICATIONS SERVICES Hawaii Business Magazine The Hawaii Business Magazine has been serving the Hawaii business community for over 65 years and is offering HSBA members a free two-year digital magazine subscription (valued at $49.98). Take advantage of this HSBA exclusive offer by visiting https://bit.ly/3dDjE16.

T-Mobile HSBA members are eligible for a T-Mobile for Business offer. Join America’s largest 5G network and get your activation fees waived and one month free. Terms and conditions apply. For more information on this special offer, please contact local T-Mobile Account Executive, David Do, at (808) 429-2600 or david.do56@t-mobile.com (offer not available in retail stores).

ENTERTAINMENT Regal and Consolidated Movie Tickets Movie tickets are available for purchase from Regal Cinemas at $9.25 per ticket or from Consolidated Theatres at $8.25 per ticket. Have your JD number ready for verification of HSBA membership. Check or cash are the only accepted forms of payment. There is no limit to the number you can purchase.

Regal Cinema tickets are accepted at the following locations: • Dole Cannery • Kapolei Commons • Pearl Highlands Center • Windward Mall • Maui Mall • Regal Prince Kuhio in Hilo Consolidated Theatres tickets are accepted at the following locations: • Ward (Open daily) • Pearlridge (Open Friday through Sunday) • Mililani (Open Friday through Sunday) • Olino (Open Friday through Sunday) • Kaahumanu Mall on Maui (Open Friday through Sunday) Regal Cinema and Consolidated Theatres are committed to the safety of their patrons and employees and is taking steps to keep you cinema-safe.

Please refer to https://bit.ly/3rtoQNe and https://bit.ly/3EG0FPl for more information. Call the HSBA at (808) 5371868 if you have any questions. Note that, because there are limitations to special screenings and premiering movies, be sure to read the terms and conditions behind the ticket.

FOOD & BEVERAGE Bubbly & Bleu HSBA Members receive 10% off their exquisitely curated cheese and charcuterie. Delicious for every occasion and the perfect corporate gift.

Order online at https://www.bubblyandbleu.com or contact Cheryl or (808) 888-5555.

Cosmo Sweets Cosmo Sweets’ tasty, beautiful, and unique assortment of baked goods will

help you celebrate any occasion. Customize your cake order, cupcakes, macaroons, and sugar cookies. Business logos and special messages may be incorporated in baked goods. Cosmo Sweets is perfect for gifts to clients, family, and special friends.

All HSBA members will receive a 10% discount with a minimum order of $50. This discount is not included in delivery fees. Members must state that they are an HSBA member in the ‘Other Notes’ category when submitting an order form. Visit us on Instagram @cosmosweets and at https://cosmoswe et sh aw aii.com for more information.

and event services. Owned by a Certified Sommelier, they can assist you with your alcohol and non-alcoholic needs.

They can help set up, staff, supply, and break down your special event bar in any location; provide private sommelier services; conduct wine education seminars; and create the most memorably beautiful wine gift baskets on the island.

HSBA members receive 10% off on their stunning gift baskets when you show your HSBA membership card.

Contact them at www.speakeasyproductionshawaii.com or call Liane at (808) 721-1688.

Visit https://hsba.org/memberbenefits for more information on the more than 70 member benefits available.

Speakeasy Productions This locally-owned business provides a unique range of beverage gift

DEPUTY PROSECUTING ATTORNEY AND LAW CLERK VACANCIES

The Department of the Prosecuting Attorney, City and County of Honolulu, is looking to fill vacant deputy prosecuting attorney positions at all experience levels. Applicants must be licensed to practice law in the State of Hawaii and in good standing before the Hawaii Supreme Court at the time of hire. Those waiting for bar exam results are encouraged to apply. The ideal applicant should have strong analytical skills, be comfortable with both oral and written communications, exhibit high ethical standards, and show a commitment to public safety. Salaries start at $75,588. Great benefits package including pension, health coverage, and defined-contribution plans.

The Department is also recruiting law clerks who intend to take the bar exam in February 2022. Law clerks would be in excellent position to be hired as deputy prosecuting attorneys upon passage of the bar exam. Salary is $50,880.

Position comes with full benefits.

To apply, please visit our website at: https://www.honoluluprosecutor.org/employment-opportunities.

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Attorneys and Firms of Civil Pro Bono Panel

by The Honorable Leslie E. Kobayashi and Steven K. Uejio Chief District Judge J. Michael Seabright, District Judge Leslie Kobayashi, and Magistrate Judge Kenneth Mansfield honored dozens of attorneys and law firms for their support of the Civil Pro Bono Panel during a recognition ceremony at the federal courthouse in late November. Five attorneys were singled out for their extraordinary efforts.

Stephanie Thompson (pictured right) and Maile Miller (pictured left) of Starn O’Toole Marcus & Fisher received the Outstanding Pro Bono Service Award for their work on behalf of Scott Lee Gordon. Patricia McHenry of Cades Schutte, Jordon Kimura of McCorriston Miller Mukai MacKinnon LLP, and Linda Farm of Farm Benedict Sugihara LLLP received the Pro Bono Service Coordinator Award for their efforts in support of the Panel.

Many other attorneys and law firms were also recognized for their work. Judge Seabright said during the ceremony that the pro bono program has been a great tool to help young lawyers gain experience in federal court and thanked those who have been so willing to provide their time and effort on behalf of the court.

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Civil Pro Bono Panel In general, there is no right to appointed counsel in a civil case. In certain circumstances, however, the district court may request that an attorney represent a litigant who is unable to afford counsel. In response to the growing number of cases involving pro se parties, the district court established the Civil Pro Bono Panel in 2017, to help match indigent litigants with counsel when appropriate.

The Panel includes attorneys and law firms who have agreed to accept pro bono appointments to represent indigent, self-represented litigants. Appointments may be limited to specific issues or specific tasks—for example, filing an opposition to a single motion. Although Panel members must be willing to serve without compensation, they may seek fees from an opposing party in certain circumstances.

Panel members may also seek reimbursement for certain litigation costs and expenses.

Panel appointments provide attorneys opportunities to develop oral and written advocacy and trial advocacy skills.

In fact, when an attorney or law firm accepts an appointment, judges in this district have agreed to hold a court

proceeding in the case. Panel appointments also help to ensure access to justice for indigent litigants in civil cases. It is a winning situation for everyone involved.

Scott Lee Gordon’s Case Within the span of fourteen days in 2016, Gordon was brutally assaulted on two occasions by two prison gang leaders and their associates in a Hawaii state prison. During the first assault, two gang leaders beat Gordon so severely that metal plates and screws were required to repair fractures in his jaw bones. Gordon asked to be separated from the two gang leaders who attacked him and their associates. Despite his request, Gordon was moved into a unit housing associates of one of the gang leaders. These gang members promptly confronted Gordon, violently attacked him with blows to his head and body, and threatened him with further harm if he told anyone about the source of his injuries. A second surgery was necessary to repair the damage caused to Gordon’s jaw bones during the second assault while fractures were still healing from the first assault.

Based on these events, Gordon filed a complaint without the assistance of counsel alleging that various prison officials violated his civil rights and were negligent. Although Gordon identified several colorable claims, his case appeared to be in peril by the spring of 2019. By that point, Gordon, who was still unrepresented, had already moved to qualify an expert witness, for a preliminary injunction and protective order, and to compel discovery. These motions were all denied. The defendants moved for summary judgment, and Gordon’s case seemed to be in jeopardy. Thompson and Miller changed all of that.

Game Changers In the spring of 2019, the court referred Gordon’s case to the Panel for the limited purpose of responding to the motion for summary judgment. Patricia McHenry, the Panel’s Pro Bono Coordinator, got right to work. Just as she does with every matter referred to the Panel, McHenry reviewed the docket in Gordon’s case, compiled all the key filings, and wrote a detailed summary of the case. McHenry provided copies of the key filings and her summary to the Panel’s Pro Bono Liaison. The Pro Bono Liaison works to secure an attorney from the Panel to represent the litigant, taking into consideration the experiences and preferences of the attorneys. Jordon Kimura and Linda Farm currently share this role.

While she was an associate, Maile Miller learned about the Panel as a participant in the Hawaii Federal Trial Academy. Miller then approached Stephanie Thompson, a director at Starn O’Toole, about supporting the Panel. Thompson enthusiastically agreed. Thompson and Miller then stepped up

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to represent Gordon. As Magistrate Judge Mansfield highlighted during the recognition ceremony, Thompson and Miller’s involvement in Gordon’s case was “game changing.”

They immediately recognized that Gordon’s story was compelling. Because of this, Thompson and Miller felt strongly that they should see Gordon’s case through to the end. They agreed to represent Gordon up to and including trial and any post-trial motions. Because of Thompson and Miller’s efforts, the case never made it that far.

Judge Mansfield observed that Thompson and Miller explored both the possibility of settlement and further litigation “full bore.” Over the course of a year, they pushed for discovery, opposed summary judgment, and simultaneously explored settlement. To their credit, Judge Mansfield noted, Thompson and Miller brought the same level of skill, diligence, and compassion on behalf of Gordon as they would have for any of their other clients. At the end of the day, the court denied the motion for summary judgment and the case settled. By then, Thompson and Miller had dedicated hundreds of hours to Gordon’s case.

Gordon was extremely grateful and relieved by the resolution of his case. Gordon’s appreciation was not solely based on the settlement award, however. According to Miller, the fact that Gordon “had someone in his corner was a huge moment for him, and he was so appreciative.” For Thompson, working on Gordon’s case was one of the most memorable experiences of her career. The Panel is “an amazing program that does great things for people who cannot do for themselves,” she said.

How to be Involved Attorneys and law firms interested in joining the Panel may fill out and send in the form letter provided in the Rules for Civil Pro Bono Panel for the United States District Court of the District of Hawai‘i (which are located at www.hid.uscourts.gov under the “Court Resources” tab”).

Honorees Outstanding Pro Bono Service Award Maile Miller, Starn O’Toole Marcus & Fisher Stephanie Thompson, Starn O’Toole Marcus & Fisher Pro Bono Service Coordinator Award Linda Farm, Farm Benedict Sugihara LLLP Jordon Kimura, McCorriston Miller Mukai MacKinnon LLP Patricia McHenry, Cades Schutte LLP

Pro Bono Service Recognition Nathan Dang John Dubiel Tred Eyerly Bob Fricke Summer Kaiawe Salina Kanai Wendy Hanakahi Abigail Holden Shannon Lau Greg Markham Emily Marr Mallory Martin Glenn Melchinger John-Anderson Meyer Casey Miyashiro Shanlyn Park Miyoko Pettit-Toledo Ofir Raviv Blaine Rodgers Ross Shinyama Christine Terada Jaime Tokioka Lisa Yang Pro Bono Panel Service Law Firm Recognition Cades Schutte LLP Chee Markham Kato & Kim, AAL Cox Fricke LLP Damon Key Leong Kupchak & Hastert Davis Levin Livingston Dentons US LLP Farm Benedict Sugihara LLLP Gallagher Kane Amai Hawaiian Electric Co. Inc Maximum Legal Services Corp.

McCorriston Miller Mukai & MacKinnon LLP Salina Kanai Althof, Attorney at Law Starn O’Toole Marcus & Fisher Square One Legal LLLC University of Hawaii Watanabe Ing LLP Yamamoto Caliboso

DISCIPLINARY NOTICE On December 22, 2021, the Hawai‘i Supreme Court entered an order suspending Hawai‘i lawyer Thomas Domenico Sands from the practice of law in Hawaii for a period of 90 days, with the suspension to be effective January 21, 2022.

This suspension is based on the January 29, 2021, action of the federal Bankruptcy Court for the Central District of California (Los Angeles) that suspended Sands for two years in its courts after it determined that Sands had misrepresented the truth, under oath, during a Chapter 11 bankruptcy court proceeding, and subsequently refused to explain his conduct despite being given multiple opportunities to do so.

Following the federal bankruptcy court

discipline, the Supreme Court of California reciprocally disciplined Sands for that misconduct by imposing a two-year suspension of his California license to practice law, with all but 90 days stayed, and a three-year probationary period with additional disciplinary requirements, including completion of relevant CLE classes and the successful passing of the Multistate Professional Responsibility Examination, as well as the submission of regular reports to the California disciplinary authorities.

The Hawai‘i disciplinary authorities then sought to impose reciprocal discipline under Hawai‘i law, as required by the Rules of the Hawai‘i Supreme Court. In mitigation, the Hawai‘i Supreme Court found that Sands willingly admitted his misconduct and has a

FUKUNAGA MATAYOSHI CHING & KON-HERRERA Attorneys at Law Is proud to announce that STEVEN J.T. CHOW joined the firm on January 1, 2022 as a Partner.

Mr. Chow will continue his practice in civil, commercial and personal injury litigation defense, construction law, real rstate disputes, mediation and arbitration.

And DARA S. NAKAGAWA joined the firm as an Associate.

Ms. Nakagawa will concentrate in the firm’s civil litigation practice including product liability defense, toxic torts, insurance coverage and defense, professional liability, commercial and construction litigation, and appellate law.

Fukunaga Matayoshi Ching & Kon-Herrera Davies Pacific Center, Suite 1200, 841 Bishop Street Honolulu, Hawaii 96813 Telephone: 808-533-4300 Website: www.fmhc-law.com

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disputes

Resolving equitably

Experienced in mediating and deciding complex family law, wills, trusts and probate cases including family business disputes. Also experienced in commercial, corporate, personal injury, HR and business mediations and arbitrations.

Michael A. Town Circuit Court Judge (Retired) Trial judge from 1979 to 2010 in Family and Circuit Court. Graduate of Stanford University (A.B), Hastings Law (J.D.) and Yale School of Law (LL.M).

523-1234 • 285-2408 Dispute Prevention and Resolution 1003 Bishop St., Suite 1155 • Honolulu, HI 96813

“Let justice be done though heavens may fall” 28 February 2022

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previously clean disciplinary record in both Hawai‘i and California. The Hawai‘i Supreme Court then found that the misconduct, if committed in Hawaii, would constitute a violation of Rule 8.4(c) of the Hawai‘i Rules of Professional Conduct (2014) (“... conduct involving dishonesty, fraud, deceit or misrepresentation”), and would warrant period of suspension.

As a result, the Hawai‘i Supreme Court suspended Sands from the practice of law in Hawaii a period of 90 days, effective 30 days from the entry date of the December 22, 2021, order.

Further, as a prerequisite to reinstatement in Hawai‘i, Sands must submit proof of his completion of the probation terms imposed by the California supreme court. Other administrative conditions of discipline were also imposed.

Upon entry of the December 22, 2021, suspension order, Sands shall not accept any new retainer or engage as an attorney for another in any new case or legal matter of any nature. However, between December 22, 2021, and January 21, 2022, he may wind up and complete, on behalf of any client, all matters that were pending on December 22, 2021. During that time, he is required to promptly notify all his clients and any attorneys for any adverse party in any pending litigation of his suspension and consequent inability to act as an attorney. By January 21, 2022, Sands shall surrender to all clients all papers and property to which the clients are entitled and refund any advance payments of fees that have not been earned.

Sands, age 36, was admitted to the Hawai‘i bar in 2012 and is a graduate of Loyola Law School, Loyola Marymount University, Los Angeles, California.

(Case information: ODC v. Thomas Domenico Sands, SCAD-21-0000582.)

CAS E NOTES Supreme Court

Appeal Pointer

Criminal Alm v. Eleven (11) Products Direct Sweepstakes Machines, No. SCWC-150000848, December 20, 2021, (Wilson, J.). This case addressed whether the Honolulu Police Department’s (“HPD”) seizure of seventy-seven Product Direct Sweepstakes (“PDS”) machines and the Office of the Prosecuting Attorney’s subsequent petition for administrative forfeiture comported with Hawaii’s civil forfeiture statute, Hawaii Revised Statutes Chapter 712A. In September 2012, HPD began seizing PDS machines from six Winner’z Zone locations because it deemed the machines to be in violation of Hawaii’s gambling statutes.

The machines remained in police custody for nearly two years. During that time, HPD did not initiate forfeiture proceedings pursuant to Haw. Rev. Stat. § 712A-7(3) (1991), did not give notice of the seizure of forfeiture to all parties known to have an interest in the property and did not provide the prosecutors a written request for forfeiture as required by Haw. Rev. Stat. § 712A-7(4) (1991). Instead, in September 2014, HPD “re-seized” the machines for forfeiture and began forfeiture proceedings.

Forfeiture proceedings were initiated on September 22, 2014, by the prosecutor’s office. The Hawaii Supreme Court held that a seizing agency’s failure to commence forfeiture proceedings according to the specific timing requirements set forth in Haw. Rev. Stat. §§ 712A-7 and 712A-97 (1991) required the agency to return the seized property.

HRAP Rule 32(b), which governs quality and style of print for documents filed with the appellate court, provides that the print must be standard 12 point pica or equivalent and yield no more than14 characters per inch. No attempt shall be made to reduce or condense the print in a manner that would increase the content of the document.

State v. Agdinaoay, No. SCWC-180000765, November 30, 2021, (Eddins, J. with Recktenwald, C.J., dissenting with

whom Nakayama, J. joins). The family court sentenced Artemio Agdinaoay to 181 days of imprisonment after he pled no contest to violating a temporary restraining order. It also ordered Agdinaoay to complete a domestic violence intervention program (DVI). Agdinaoay challenged the court’s sentence, which the ICA affirmed. He argued the family court erred by sentencing him to both serve 181 days and complete DVI. Imposing DVI without probation, Agdinaoay argued, violates Haw. Rev. Stat. § 706-624(2)(a) (Supp. 2017). The Hawaii Supreme Court held that courts cannot impose imprisonment exceeding the statutory threshold for a probationary sentence and also conditions of probation. Because a misdemeanor defendant sentenced to imprisonment exceeding 180 days cannot also receive a probationary sentence - and DVI cannot be imposed except as a condition of probation - Agdinoay’s sentence was unlawful.

Recktenwald, C.J., joined by Nakayama, J., dissented. Recktenwald, C.J. concluded that Agdinaoay pled no contest to Violation of a Temporary Restraining Order, a misdemeanor. The family court sentenced Agdinaoay to prison, and ordered him to undergo

DVI. The Majority concluded that sentence was illegal, because in its view, DVI could only be ordered as a condition of probation. However, the plain language of the restraining order statute provides that the defendant “shall” undergo DVI as ordered by the court.

Haw. Rev. Stat. § 586-4 (Supp. 2020).

Nowhere does the statute suggest that DVI can be ordered only if the court imposes a sentence of probation. To the contrary, the statute explicitly provides that in addition to the requirement of DVI, the family court can impose any of the sanctions available in sentencing a defendant for a misdemeanor – which include imprisonment for up to a year. Haw. Rev. Stat. §§ 586-4(e) and 706-663. The Majority’s statutory arguments to the contrary are unavailing and its concerns about the efficacy of DVI that is not part of a probationary sentence are, respectfully, misplaced.

State v. Thompson, SCWC-170000381, December 10, 2021, (Nakayama, J.). Pursuant to Haw. Rev. Stat. § 805-1, the State must ensure that a criminal complaint is supported by either (1) the complainant’s signature or (2) a declaration submitted in lieu of an affidavit. Respondent/Plaintiff-Appellant State charged Petitioner/Defendant-Appellee Corey Thompson by complaint with the offense of abuse of a household or family member. Critically, the complaint was neither signed by a complainant nor supported by a declaration. The State consequently did not comply with its statutory obligation to perfect the complaint. In turn, the family court erred in issuing a penal summons.

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State v. Willis, SCAP-21-0000291, December 2, 2021, (Eddins, J.). Ordinarily police officers must get a warrant before entering a home without permission. But when exigent circumstances arise, and the police have probable cause to arrest or search, state and federal constitutions allow warrantless home entries.

The State invoked this “exigent circumstances” exception to justify a warrantless home entry into Erik Willis’s residence. It advanced an expansive view on what creates an “exigency”: it argued a crime’s random and violent nature alone can pose exigent circumstances validating a warrantless home intrusion. The Hawaii Supreme Court held that the gravity of the crime, by itself, did not establish an exigency empowering law enforcement officers to bypass the warrant requirement. To support a warrantless home intrusion under the exigency exception, the State must articulate objective facts showing an immediate law enforcement need for the entry. Those facts must be independent of the underlying offense’s grave nature. And they must be present when the police enter the home.

Family In the Interest of AA, No. SCWC-190000711, December 15, 2021, (Nakayama, J.). This case arose from a proceeding in the family court under the Hawaii Child Protective Act, Haw. Rev. Stat. Chapter 587A (“CPA proceeding”).

Petitioner-Appellant Father appealed from the ICA’s judgment affirming the family court’s determination that (1) Father was properly served with summons to appear in the CPA proceeding by publication; (2) Father’s Motion to Set Aside Default should have been denied pursuant to Hawaii Family Court Rules Rules 55(c) and 60(b); and (3) Father was required to set aside both his default for

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failure to appear in the CPA proceeding after proper service by publication (default) and the termination of his parental rights, which was entered while he was defaulted (default judgment), before he could move to intervene. Both Father’s default and default judgment were entered while the identity of Child’s natural father was unknown. On certiorari, Father and Respondent-Appellee Department of Human Services argued that Father was not required to set aside the default and default judgment before proceeding with his Motion to Intervene pursuant to Haw. Family Ct. Rules Rules 24(a)(2) and (b)(1). Based on the plain and unambiguous language of Haw. Family Ct. Rules Rule 24, the Hawaii Supreme Court agreed that Father was not required to set aside the default and default judgment before proceeding with his Motion to Intervene. However, Father’s remaining arguments lacked merit.

Land The Community Assocs. of Hualalai, Inc. v. Leeward Planning Comm’n, No. SCAT16-0000690, December 2, 2021, (Wilson, J.). Hualalai presented five points of error: (1) “The Appellee [LPC] erred when it failed to rule on the Appellant’s Petition to Intervene in the Contested Case”; (2) “The Appellee [LPC] erred when it failed to render a decision on [Special Permit Application No. SPP-16188] itself ”; (3) “The Appellee Planning Director erred in exercising the Appellee [LPC]’s adjudicatory powers when he ‘withdrew’ the Application”; (4) “The Appellee [LPC] erred when it allowed the Appellee Planning Director to act for the Commission”; and (5) “The Appellee Planning Director erred when he concluded that the county grading permit (issued in 2015 after Special Permit 1047 had expired in 2010) ‘controlled’ and that the flood channelization project is a

permitted use in the State Agriculture Land Use District.” Hualalai contends this court has jurisdiction to consider its appeal under Haw. Rev. Stat. § 205-19, which governs appeals of contested cases arising before the land use commission and applies the provisions in Haw. Rev. Stat. chapter 91 to such appeals. Appellees argued that this court lacks jurisdiction over the LPC’s “non-action,” that the issue became moot when Special Permit Application No. SPP-16-188 was withdrawn, and that Hualalai lacked standing. Appellees argued that the Hawaii Supreme Court also lacked jurisdiction because Hualalai should appeal the Planning Director’s decision to the Board of Appeals. Finally, Appellees’ channelization project is a permitted use in the State Agriculture Land Use District.” and that the LPC did not abuse its discretion by ending proceedings on Special Permit Application No. SPP-16188 once it was voluntarily withdrawn

by Bolton. Throughout its brief, Appellees emphasize that Hualalai “got exactly what it wanted from the LPC” because Special Permit Application No. SPP-16-188 “was never approved.” Appellees’ aforementioned actions in this case-the Planning Director’s extensive ex parte communication with Bolton that culminated in his decision to withdraw Special Permit Application No. SPP-16188, and the LPC’s failure to issue a decision on Hualalai’s petition and its decision to treat the proceeding for Special Permit Application No. SPP-16-188 as a closed matter—were made upon unlawful procedure in violation of Haw. Rev. Stat. § 91-14(g)(3) and constituted abuses of discretion in violation of Haw. Rev. Stat. § 91-14(g)(3)(6).

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