Matsuura v. EI Du Pont de Nemours and Co., No. 24355.

• Court: Supreme Court of Hawai'i
• Writing for the Court: MOON, C.J., LEVINSON, NAKAYAMA, and RAMIL, JJ., ACOBA, J., concurring and dissenting, separately.
• Citation: 102 Haw. 149,73 P.3d 687
• Decision Date: 29 July 2003
• Docket Number: No. 24355.
• Parties: David MATSUURA, Individually and dba Orchid Isle Nursery, and Stephen Matsuura, Individually and dba Hawaiian Dendrobium Farm, Plaintiffs-Appellees, v. E.I. DU PONT DE NEMOURS AND COMPANY, Defendant-Appellant.

73 P.3d 687
102 Haw. 149

David MATSUURA, Individually and dba Orchid Isle Nursery, and Stephen Matsuura, Individually and dba Hawaiian Dendrobium Farm, Plaintiffs-Appellees,
v.
E.I. DU PONT DE NEMOURS AND COMPANY, Defendant-Appellant

No. 24355.

Supreme Court of Hawai`i.

July 29, 2003.

73 P.3d 688

Warren Price, III (Kenneth T. Okamoto, Terence S. Yamamoto, Robert A. Marks, with him on the briefs), of Price Okamoto Himeno & Lum, Honolulu; and A. Stephens Clay, James F. Bogan, III, and C. Allen Garrett, Jr. (also on the briefs), of Kilpatrick Stockton LLP, Atlanta, GA, pro hac vice, for defendant-appellant E.I. duPont de Nemours and Company

Stephen T. Cox (San Francisco, CA), pro hac vice; (Carl H. Osaki; Kris A. LaGuire; and A. Camden Lewis (Columbia, SC), with him on the brief), for plaintiffs-appellants David and Stephen Matsuura.

MOON, C.J., LEVINSON, NAKAYAMA, and RAMIL,¹ JJ., ACOBA, J., concurring and dissenting, separately.

Opinion of the Court by MOON, C.J.

The United States District Court for the District of Hawai`i (U.S. district court), the Honorable David Alan Ezra presiding, certified the following questions of Hawai`i law to this court, pursuant to Hawai`i Rules of Appellate Procedure (HRAP) Rule 13 (2001):²

1. Under Hawai`i law, is a party immune from liability for civil damages based on that party's misconduct, including fraud, engaged in during prior litigation proceedings?

2. Where plaintiffs' attorneys and others have accused the defendant of fraud and dishonesty during the course of prior, related litigation, are plaintiffs thereafter precluded as a matter of law

73 P.3d 689

from bringing a cause of action for fraudulent inducement to settle because they should not have relied on the Defendant's representations

3. Does Hawai`i law recognize a civil cause of action for damages for intentional and/or negligent spoliation of evidence?

I. BACKGROUND³

A. Benlate Litigation in Hawai`i

On November 4, 1992, plaintiffs David and Steven Matsuura (collectively, the Matsuuras), commercial nurserymen, filed suit against defendant E.I. du Pont de Nemours & Company (DuPont) in two separate actions in the Circuit Court of the Third Circuit.⁴ Both actions alleged damages arising out of the use of Benlate, an agricultural fungicide produced by DuPont, that was contaminated with herbicides, which resulted in damage to plants and soil. The Matsuuras were represented by attorney Kevin Malone, who additionally represented over 200 similarly situated plaintiffs in Hawai`i and Florida and in other cases filed across the country.

In July 1993, the first trial involving Benlate [hereinafter, the Bush Ranch case] commenced in federal court in Columbus, Georgia. Mr. Malone monitored this litigation for reference in his Benlate cases. According to the Matsuuras, DuPont, during the Bush Ranch case: (1) misrepresented critical test results performed by Alta Laboratories⁵ (Alta test results) that demonstrated that Benlate was contaminated with herbicides; (2) withheld evidence of widespread contamination of Benlate; and (3) withheld field tests demonstrating that Benlate was harmful to plants. On August 16, 1993, while the jury in the Bush Ranch case was deliberating, the Bush Ranch parties settled.

On September 14, 1993, the Matsuuras' cases were consolidated for discovery purposes with seventy other Hawai`i cases involving Benlate. On November 15, 1993, the Honorable Ronald Ibarra conducted a hearing on the plaintiffs' motion seeking the Alta test results, which were not previously produced by DuPont. DuPont asserted that this data was protected by the attorney work product privilege. The plaintiffs alleged that the Alta test results, along with certain other documents, were "smoking gun" evidence that Benlate contained herbicides. The evidence was the subject of various discovery motions throughout 1993 and 1994 in Hawai`i cases as well as in other Benlate cases around the country.

By May 1994, DuPont had finally produced the Alta test results to those plaintiffs who had not settled their cases. One such case was the Kawamata Farms case, which went to trial in June 1994 before Judge Ibarra. Trial was completed in January 1995. During trial, the Kawamata Farms plaintiffs utilized the test results that had been withheld during the Bush Ranch case, i.e., the Alta test results as well as evidence from the so-called "Keeler documents," released in June 1994, which also showed that Benlate may have been contaminated with toxins. Ultimately, the Kawamata Farms plaintiffs prevailed and were awarded nearly $10 million in compensatory damages and more than $14 million in punitive damages. Kawamata Farms v. United Agri Products, 86 Hawai`i 214, 948 P.2d 1055 (1997). In addition, Judge Ibarra found that DuPont had engaged in serious discovery violations with respect to the disclosure of information and imposed sanctions of $1.5 million payable to the State of Hawai`i. Id. Moreover, after the verdict was entered, the Kawamata Farms plaintiffs learned of additional discovery violations, which they brought to the court's attention in

73 P.3d 690

August and September 1995 via motion pursuant to Hawai`i Rules of Civil Procedure (HRCP) Rule 60(b)(3) (1995).⁶ Id. Judge Ibarra then further sanctioned DuPont by, inter alia, awarding the Kawamata Farms plaintiffs their attorneys' fees and costs. Id.

DuPont appealed from the judgment in the Kawamata Farms case, and this court affirmed the jury's verdict, the $1.5 million sanction, and the sanctions awarded pursuant to HRCP Rule 60(b)(3). Id. In affirming the trial court, this court held that "DuPont committed discovery fraud upon the circuit court and the other parties." Kawamata Farms, 86 Hawai`i at 257, 948 P.2d at 1097. We further characterized the nature of DuPont's fraud as "egregious" and an "unusual, unique example of unprecedented discovery fraud perpetrated against the court." Kawamata Farms, 86 Hawai`i at 258, 948 P.2d at 1098.⁷

The disclosure of the Alta test results in the Kawamata Farms trial was the first time many of these results were made public. See In re: E.I. du Pont de Nemours & Co.— Benlate Litigation, 918 F.Supp. 1524, 1538-39 (M.D.Ga.1995) [hereinafter, Bush Ranch I]. Based on the disclosure of this information, plaintiffs in the Bush Ranch case petitioned the United States District Court for the Middle District of Georgia [hereinafter, Georgia district court] for sanctions against DuPont. Finding, among other things, "DuPont's conduct to be the most serious abuse" the court had ever seen and "the most serious abuse in legal precedents," the Georgia district court imposed sanctions and contempt penalties totaling $115 million; however, the award was later overturned on procedural grounds. Bush Ranch I, 918 F.Supp. at 1557.⁸

B. The Matsuuras' Settlements and Subsequent Litigation

On April 26, 1994, the Matsuuras executed settlement agreements with DuPont, in which David Matsuura received $1 million, and Stephen Matsuura received $500,000. As previously indicated, the Alta test results were disclosed in May 1994, and the Keeler documents were released in June 1994. On November 23, 1994, the Matsuuras' suits were dismissed with prejudice by stipulation. In other words, the settlement agreements were executed before the Alta test results and Keeler documents were released, but the stipulated dismissal was not filed until after the evidence was finally disclosed in the Kawamata Farms trial.

On December 10, 1996,⁹ approximately two years after the dismissal of their claims and fifteen months after the Kawamata Farms plaintiffs filed their motion for relief under HRCP Rule 60(b)(3) based on discovery fraud, the Matsuuras filed a complaint in the U.S. district court against DuPont, alleging fraud, racketeering, abuse of process, infliction of emotional distress, interference with prospective economic advantage, spoliation of

73 P.3d 691

evidence, and punitive damages based on DuPont's alleged fraud in the discovery and settlement processes. Essentially, the Matsuuras claimed that they were harmed by DuPont's alleged fraudulent conduct because they would have requested more money or refused to settle had they known about the concealed data. DuPont filed a counterclaim, requesting damages pursuant to the clause in the settlement agreement that indemnified DuPont from any future litigation by the Matsuuras. The U.S. district court granted judgment on the pleadings in favor of DuPont, ruling that the Matsuuras' claims were barred by the terms of the settlement agreement

On appeal, the United States Court of Appeals for the Ninth Circuit [hereinafter, Ninth Circuit] reversed. Matsuura, 166 F.3d at 1012.¹⁰ The Ninth Circuit held that, under Delaware law (which governed the terms of the settlement agreement), the release provision in the settlement agreement did not bar the Matsuuras' fraud and other claims. The case was remanded to the U.S. district court, and the parties filed a series of motions.

On March 1, 2001, the Matsuuras filed a "Motion for Collateral Estoppel to Preclude Defendant from Re-Litigating Previously Adjudicated Findings of Fraud, Discovery Abuse, and Intentional Withholding of Evidence in the Kawamata Farms case" (motion for collateral estoppel). Therein, the Matsuuras seek to preclude DuPont from "re-litigating" the following issues: (1) that DuPont fraudulently and intentionally withheld the Alta test results from Benlate litigants; (2) that DuPont intentionally withheld the Keeler documents from Benlate litigants; and (3) that the Alta test results included analytical findings, which some experts would construe as evidence that Benlate was contaminated with SUs. The Matsuuras claim that issues (1) and (2) have already been decided in Kawamata Farms and that issue (3) was decided by the Eleventh Circuit in Bush Ranch II.¹¹

On April 19, 2001, DuPont responded by filing two "related or counter motions": (1) a "Motion for...