Bruser v. Bank of Haw., CIV. NO. 14-00387 LEK-WRP

• Decision Date: 29 January 2020
• Docket Number: CIV. NO. 14-00387 LEK-WRP
• Parties: MICHAEL DAVID BRUSER, TRUSTEES UNDER THAT CERTAIN UNRECORDED REVOCABLE LIVING TRUST AGREEMENT DATED JULY 11, 1988, AS AMENDED, DOING BUSINESS AS DISCOVERY BAY CENTER; AND LYNN BRUSER, TRUSTEES UNDER THAT CERTAIN UNRECORDED REVOCABLE LIVING TRUST AGREEMENT DATED JULY 11, 1988, AS AMENDED, DOING BUSINESS AS DISCOVERY BAY CENTER; Plaintiffs, v. BANK OF HAWAII, A HAWAII CORPORATION, AS TRUSTEE, AS SUCCESSOR BY MERGER WITH HAWAIIAN TRUST COMPANY, LIMITED, A FORMER HAWAII CORPORATION AND AS SUCCESSOR TRUSTEE UNDER THAT CERTAIN TRUST AGREEMENT DATED JUNE 6, 1974; Defendant. v. JULIE G. HENDERSON, as Trustee of the Julie G. Henderson Irrevocable Trust, and as Trustee of the Jean K. Gowans Irrevocable Trust, and as Trustee of the Louis L. Gowans, Jr. Irrevocable Trust; RICHARD L. GOWANS, as Trustee of the Richard L. Gowans Irrevocable Trust; KEVIN I. YOKOHAMA; ASSOCIATION OF APARTMENT OWNERS DISCOVERY BAY; SUSAN SHEETZ; and PATRICIA SHEETZ BOW, Intervening Defendants. BANK OF HAWAII, a Hawaii corporation, as Trustee, as successor by merger with Hawaiian Trust Company, Limited, a former Hawaii corporation and as successor Trustee under that certain Trust Agreement dated June 6, 1974, Counterclaim Plaintiff, v. MICHAEL DAVID BRUSER and LYNN BRUSER, Trustees under that certain unrecorded Revocable Living Trust Agreement dated July 11, 1988, as amended, doing business as Discovery Bay Center, Counterclaim Defendants.
• Court: U.S. District Court — District of Hawaii

MICHAEL DAVID BRUSER, TRUSTEES UNDER THAT CERTAIN UNRECORDED

REVOCABLE LIVING TRUST AGREEMENT DATED JULY 11, 1988,

AS AMENDED, DOING BUSINESS AS DISCOVERY BAY CENTER;

AND LYNN BRUSER, TRUSTEES UNDER THAT CERTAIN

UNRECORDED REVOCABLE LIVING TRUST AGREEMENT DATED JULY 11, 1988,AS AMENDED, DOING BUSINESS AS DISCOVERY BAY CENTER; Plaintiffs, v. BANK OF HAWAII, A HAWAII CORPORATION, AS TRUSTEE,AS SUCCESSOR BY MERGER WITH HAWAIIAN TRUST COMPANY, LIMITED,A FORMER HAWAII CORPORATION AND AS SUCCESSOR TRUSTEEUNDER THAT CERTAIN TRUST AGREEMENT DATED JUNE 6, 1974; Defendant. v. JULIE G. HENDERSON, as Trustee of the Julie G. Henderson Irrevocable Trust,

and as Trustee of the Jean K. Gowans Irrevocable Trust,

and as Trustee of the Louis L. Gowans, Jr. Irrevocable Trust;

RICHARD L. GOWANS, as Trustee of the Richard L. Gowans Irrevocable Trust;

KEVIN I. YOKOHAMA; ASSOCIATION OF APARTMENT OWNERS DISCOVERY BAY;

SUSAN SHEETZ; and PATRICIA SHEETZ BOW, Intervening Defendants.

BANK OF HAWAII, a Hawaii corporation, as Trustee,as successor by merger with Hawaiian Trust Company, Limited,a former Hawaii corporation and as successor Trusteeunder that certain Trust Agreement dated June 6, 1974, Counterclaim Plaintiff, v. MICHAEL DAVID BRUSER and LYNN BRUSER,

Trustees under that certain unrecorded Revocable

Living Trust Agreement dated July 11, 1988,

as amended, doing business as Discovery Bay Center, Counterclaim Defendants.

CIV. NO. 14-00387 LEK-WRP

UNITED STATES DISTRICT COURT DISTRICT OF HAWAII

January 29, 2020

ORDER REGARDING PLAINTIFFS/COUNTERCLAIM DEFENDANTS' RESPONSE TO ORDER TO SHOW CAUSE

On August 8, 2019, this Court issued its Order Denying Plaintiffs' Objections and Adopting the Magistrate Judge's Findings and Recommendation to Grant Defendant's Motion for Order to Show Cause and to Deny Plaintiffs' Counter Motion. ("OSC"). [Dkt. no. 259.¹] On August 28, 2019,Plaintiffs/Counterclaim Defendants Michael David Bruser and Lynn Bruser, Trustees under that certain unrecorded Revocable Living Trust Agreement dated July 11, 1988, as amended, doing business as Discovery Bay Center ("the Brusers"), filed their response to the OSC ("Response"). [Dkt. no. 260.] On September 4, 2019, a hearing was held on the OSC, and continued to September 20, 2019, at which this Court held the Brusers in contempt, directed Defendant/Counterclaim Plaintiff Bank of Hawaii, as Trustee ("BOH"), to file two declarations for attorney's fees, and gave the Brusers time to object to both declarations. [Minutes, filed 9/4/19 (dkt. no. 261); Minutes, filed 9/20/19 (dkt. no. 264).]

On October 4, 2019, BOH filed its Declaration of Counsel in Support of Award of Attorney's Fees and Costs ("BOH's First Declaration"), and, on October 18, 2019, its Declaration of Counsel in Support of Further Award of Attorney's Fees and Costs ("BOH's Second Declaration").² [Dkt. nos. 267, 271.] On October 10, 2019, the Brusers filed their objection to BOH's First Declaration ("Brusers' First Objection"), and on October 25, 2019, their objection to BOH's Second Declaration ("Brusers' Second Objection"). [Dkt. nos. 269, 276.] OnOctober 25, 2019 and November 8, 2019, BOH filed its replies to the Brusers' objections. [Dkt. nos. 275, 278.] For the reasons set forth below, the Brusers are held in civil contempt and sanctioned in the amount of $9,767.85, representing BOH's reasonable attorney's fees and costs.

BACKGROUND

The factual and procedural background of this matter is summarized in the OSC, and the May 2, 2019 Findings and Recommendation to Grant Defendant's Motion for Order to Show Cause and to Deny Plaintiffs' Counter Motion ("F&R"). [Dkt. no. 253.³] Therefore, only relevant facts will be discussed here.

I. The Brusers' Response to the Order to Show Cause

In their Response, the Brusers argue they did not intentionally violate this Court's February 13, 2019 Order ("Receivership Order"), [dkt. no. 243,⁴] which required them toturn over books and records to the temporary receiver. [Response at 3.] Instead, they argue their good faith attempts to do so failed due to the actions of the receiver. See id. at 5 (stating Michael Bruser would testify that the receiver "ignored Mr. Bruser's invitation to meet with him and receive the books and records").

II. Post-Hearing Filings

BOH's First Declaration, submitted in accordance with this Court's instructions, requests $4,621.00 in attorney's fees, plus Hawai`i General Excise Tax ("GET"). [BOH's First Decl. at ¶ 9, Exh. A (billing log).] In response, the Brusers argue: 1) this Court misinterpreted a decision of the state probate court; [Brusers' First Objection at 4-5;] 2) the monetary award is $137,434.00, representing the trustee's fees for a limited period of time, and no amount has been awarded for any trustee's fees outside that limited period of time; [id. at 5-6;] 3) BOH refused to accept payment or security in satisfaction of the Brusers' obligation; [id. at 6-7;] 4) on September 23, 2019, the Brusers paid BOH $308,203.65, renderingthe appointment of the receiver moot; [id. at 7-8;] 5) this Court's finding of contempt is contrary to the Court's previous rulings; [id. at 8;] and 6) BOH's fee declaration was substantively and procedurally flawed, [id. at 8-9].⁵

BOH's Second Declaration, submitted in accordance with this Court's instructions, requests an additional $4,690 in attorney's fees, plus GET, and $91.41 in costs. [BOH's Second Decl. at ¶ 10; id., Exhs. A (billing log), B (invoice supporting request for costs).] In response, the Brusers object to the format and procedure followed by BOH, and to a number of billing items, including, inter alia, alleged clerical work and block billing entries. [Brusers' Second Objection at 3-5.] The Brusers also argue the Hawai`i Supreme Court recently held that the probate court did not find the Brusers to be liable for the trustee's fees. [Id. at 7.]

STANDARD

Civil contempt sanctions are driven by two independent purposes: "to coerce the defendant into compliance with the court's order, and to compensate the complainant for losses sustained." Whittaker Corp. v. Execuair Corp., 953 F.2d 510, 517 (9th Cir. 1992) (some citations omitted) (citing UnitedStates v. United Mine Workers of Am., 330 U.S. 258, 303-04, 67 S. Ct. 677, 701-02 (1947)). This district court has stated:

The party claiming civil contempt must demonstrate a violation of the court's order by clear and convincing evidence. [In re Dual-Deck Video Cassette Recorder Antitrust Litig., 10 F.3d 693, 695 (9th Cir. 1993).] Accordingly, the moving party must establish that "(1) that [the alleged contemnor] violated the court order, (2) beyond substantial compliance, (3) not based on a good faith and reasonable interpretation of the order, (4) by clear and convincing evidence." United States v. Bright, 596 F.3d 683, 694 (9th Cir. 2010) (quoting Labor/Cmty. Strategy Ctr. v. L.A. County Metro. Trans. Auth., 564 F.3d 1115, 1123 (9th Cir. 2009)); see alsoF.T.C. v. Affordable Media, 179 F.3d 1228, 1239 (9th Cir. 1999) ("The standard for finding a party in civil contempt is well settled: The moving party has the burden of showing by clear and convincing evidence that the contemnors violated a specific and definite order of the court.").

If the moving party meets this initial four-part test, the burden then shifts to the alleged contemnor to demonstrate why it was unable to comply. Affordable Media, LLC, 179 F.3d at 1239; Stone v. City & Cnty. of San Francisco, 968 F.2d 850, 856 n. 9 (9th Cir. 1992). In other words, the accused party must "show [that it] took every reasonable step to comply." Stone, 968 F.2d at 856 n.9 (citation omitted). To assess whether an alleged contemnor has taken "every reasonable step" to comply with the terms of a court order, the court can consider a variety of factors, including, for example, whether the contemnor has a history of noncompliance, and whether the contemnor failed to comply despite the pendency of a contempt motion. SeeStone, 968 F.2d at 857.

Frankl v. HTH Corp., 832 F. Supp. 2d 1179, 1186-87 (D. Hawai`i 2011) (some alterations in Frankl).

DISCUSSION

In the OSC, this Court affirmed and adopted the portions of the F&R wherein the magistrate judge found that: 1) The Brusers failed to comply with the Receivership Order; and 2) The Brusers had not demonstrated that they had taken reasonable steps to comply with the Receivership Order. OSC, 2019 WL 3754571, at *7. Therefore, the burden was shifted to the alleged contemnors, the Brusers. The only remaining question is whether the Brusers have shown that they have taken every reasonable step to comply with the Receivership Order during, but not limited to, the time period following entry of the OSC.

I. The Brusers' Contempt Objections

The Brusers assert the following objections to a finding of contempt.

A. Objections Regarding State Court Proceedings

The Brusers argue this Court "has erroneously assumed that the Brusers are contractually liable for the Trustee's Fee as determined in amount by the Hawaii Probate Court having jurisdiction over trusts also." [Brusers' First Objection at 4.] Similarly, in their second response, the Brusers also argue a recent Hawai`i Supreme Court decision - In re Trust Agreement Dated June 6, 1974, 145 Hawai`i 300, 302, 452 P.3d 297, 299 (2019), recon. denied, SCWC-15-0000632, 2019 WL 6040796(Nov. 14, 2019) - clarifies that the probate court did not hold the Brusers liable for the trustee's fees. [Brusers' Second Objection at 7.]

First, the jurisdictional distinction between the probate court and this district court has been previously explained and will not be repeated in full here. See order granting BOH's motion for partial summary judgment ("Partial Summary Judgment Order"), filed 7/21/15 (dkt. no. 88), at 12 n.15; id. at 16.⁶ Certain issues, including but not limited to the amount and reasonableness of the Trustee's Fees, were decided in probate court while the issue of the Brusers' liability was decided by this Court. See Tr. Agreement Dated June 6,...