Whirlpool Corp. v. Cit Group/Business Credit, Inc.

• Decision Date: 31 October 2003
• Docket Number: No. CV 01-00187 DAE-BMK.,CV 01-00187 DAE-BMK.
• Citation: 293 F.Supp.2d 1144
• Parties: WHIRLPOOL CORPORATION, a Delaware corporation, Plaintiff, v. CIT GROUP/BUSINESS CREDIT, INC., a New York corporation; CGBN, Inc., a Hawai`i corporation; Michael Clifford; Edwin Bowling; Frances Haller-Bowling; Raymond Iwamoto; Kurt Glassman; Does Individuals 1-50; Doe Partnerships, Corporations or Other Entities 1-20, Defendants, and CG Development, Inc., F & J Movers, and Renee K. Costa, Additional Crossclaim Defendants.
• Court: U.S. District Court — District of Hawaii

293 F.Supp.2d 1144

WHIRLPOOL CORPORATION, a Delaware corporation, Plaintiff, v. CIT GROUP/BUSINESS CREDIT, INC., a New York corporation; CGBN, Inc., a Hawai`i corporation; Michael Clifford; Edwin Bowling; Frances Haller-Bowling; Raymond Iwamoto; Kurt Glassman; Does Individuals 1-50; Doe Partnerships, Corporations or Other Entities 1-20, Defendants, and CG Development, Inc., F & J Movers, and Renee K. Costa, Additional Crossclaim Defendants.

No. CV 01-00187 DAE-BMK.

United States District Court, D. Hawai`i.

October 31, 2003.

Timothy J. Hogan, Lynch Ichida Thompson Kim & Hirota, Honolulu, HI, for Whirlpool Corporation, a Delaware corporation, plaintiff.

Paul Alston, Louise K.Y. Ing, Lea O. Hong, Alston Hunt Floyd & Ing, Honolulu, HI, Robert E. Badger, Jr., Honolulu, HI, for CIT Group/Business Credit, Inc.

Ted N. Pettit, Roger S. Moseley, Christopher J. Muzzi, Case Bigelow & Lombardi, Honolulu, HI, Robert E. Badger, Jr., Honolulu, HI, for GCBN, Inc.

Margery S. Bronster, Office of the Attorney General-Hawaii, Honolulu, HI, Ted N. Pettit, Roger S. Moseley, Christopher J. Muzzi, Case Bigelow & Lombardi, Honolulu, HI, Robert E. Badger, Jr., Honolulu, HI, for Michael Clifford.

Margery S. Bronster, Hilary Benson Gangnes, Jeannette E. Holmes, Bronster Crabtree & Hoshibata, Honolulu, HI, Robert

E. Badger, Jr., Honolulu, HI, for Edwin Bowling, Frances Haller-Bowling.

Calvin E. Young, John S. Nishimoto, Steven L. Goto, Ayabe Chong Nishimoto Sia & Nakamura, Honolulu, HI, Robert E. Badger, Jr., Honolulu, HI, for Raymond Iwamoto.

Robert E. Badger, Jr., Honolulu, HI, for Doe Individuals 1-50, Doe Partnerships, Corporations and/or other Entities 1-20.

Robert E. Badger, Jr., Honolulu, HI, Eric J. Glassman, Mennemeir Glassman & Stroud LLP, Sacramento, CA, for Kurt Glassman.

ORDER AFFIRMING MAGISTRATE ORDER GRANTING PLAINTIFF WHIRLPOOL CORPORATION'S MOTION FOR DETERMINATION OF GOOD FAITH SETTLEMENT

DAVID ALAN EZRA, Chief Judge.

Pursuant to Local Rule 7.2(d), the court finds this matter suitable for disposition without a hearing. After reviewing Defendant/Cross-Claimant THE CIT GROUP/BUSINESS CREDIT, INC.'s ("CIT's") Appeal and the supporting and opposing memoranda, the court AFFIRMS the Magistrate Order Granting Plaintiff Whirlpool Corporation's Motion for Determination of Good Faith Settlement, filed August 12, 2003 ("Order").

BACKGROUND

This case arises from the alleged bustout and bankruptcy of MidPac Lumber Co., Ltd. Plaintiff Whirlpool Corporation ("Whirlpool") alleges Defendants ordered over $2.5 million in appliances with no intention of making payments. In a settlement agreement, Plaintiff Whirlpool released Defendants Edwin Bowling and Frances Haller-Bowling ("Bowlings") from all pending or future claims in connection with the allegations of fraud, fraud conspiracy, conversion, and any other claims asserted by Whirlpool, in exchange for $150,000.

In the August 1, 2003 Order, the Magistrate Judge granted Whirlpool's Motion for Determination of Good Faith Settlement ("Magistrate Order"). The Magistrate Judge found that the settlement was in good faith, and that a "significant question of solvency and collectibility" made the settlement fall "within the reasonable range of the Bowling's proportional share of the comparative liability for the plaintiff's injuries." See, Magistrate Order at 2, 3.¹

Defendant CIT appeals the Magistrate Order on the grounds that "the settling parties fail[ed] to meet key indicia of a good faith settlement." Defendant CIT's Statement of Appeal from the Magistrate Order, filed August 12, 2003 ("Appeal"), at 2. CIT argues that the Magistrate Judge "erred in basing his good faith determination on the key factor of lack of collectibility when the record bore no evidence of the Bowlings' poverty." Id. at 3.

The Bowlings filed a Response to Defendant CIT's Statement of Appeal from August 1, 2003 Magistrate Order ("Bowlings' Response") on August 22, 2003. On the same day, Whirlpool filed a Reply to CIT's Statement of Appeal from the Magistrate Order Granting Plaintiff Whirlpool's Motion for Determination of Good Faith Settlement ("Whirlpool Reply"). CIT filed an Amended Reply Memorandum in Support of Appeal ("CIT Reply") on September 15, 2003. On October 6, 2003, the court granted the Bowlings' Ex Parte Motion for Leave to Supplement Response to Defendant CIT's Statement of Appeal ("Bowlings' Supplemental Response"). Finally on October 14, 2003, CIT filed an Ex Parte Motion for Leave to Supplement Record In Response to the Bowlings' Ex Parte Motion for Leave to Supplement Response.

STANDARD OF REVIEW

Pursuant to Local Rule 74.1, the district court may only set aside a magistrate judge's order of non-dispositive matters on appeal if it finds the order to be "clearly erroneous or contrary to law." 28 U.S.C. § 636(b)(1)(A); Fed.R.Civ.P. 72(a); LR 74.1. Thus, the district judge must affirm the magistrate judge unless the district judge is left with the "definite and firm conviction that a mistake has been committed." Burdick v. Commissioner, 979 F.2d 1369, 1370 (9th Cir.1992). The reviewing court may not simply substitute its judgment for that of the deciding court, as it may under a de novo standard. See Grimes v. City & County of San Francisco, 951 F.2d 236, 241 (9th Cir.1991).

A district court only reviews under a de novo standard those magistrate orders, findings, or recommendations that are "case dispositive." LR74.2. CIT claims the standard for reviewing this appeal should be de novo because the Magistrate Order "has the immediate effect of barring all contribution and indemnity claims by CIT against the Bowlings."² As set forth below, claims of contribution and indemnity among joint intentional tortfeasors are unavailable to CIT under Hawai`i law. Therefore, the Magistrate Order is not dispositive of any claims, and a "clearly erroneous" standard is appropriate. 28 U.S.C. § 636(b)(1)(A); LR 74.1.

I. Contribution Among Joint Intentional Tortfeasors

CIT argues that since a judicial determination of a good faith settlement precludes claims for contribution and indemnity, effecting a "functional equivalent" to an involuntary dismissal, this court should review the Magistrate Order de novo, pursuant to 28 U.S.C. § 636(b)(1)(A). Defendant CIT's Memorandum in Support of Appeal ("Appeal Memo") at 5. The Magistrate Order would be the "functional equivalent" of an involuntary dismissal of the contribution and indemnity claims of any co-defendant, if such claims had been available prior to the Magistrate Judge's determination that Whirlpool and the Bowlings settled in good faith. However, as set forth below, CIT does not have contribution or indemnity claims against the Bowlings because all of Whirlpool's remaining claims are for intentional torts or violations of the Racketeer Influenced and Corrupt Practices Act, 18 U.S.C.1961 et seq. ("RICO"). See Whirlpool Reply at 12. Although Hawai`i law does not specifically speak to this particular issue, the general rule, found in the Restatement (Second) of Torts ("Second Restatement"), is that contribution and indemnity are not allowed among joint intentional tortfeasors. Restatement (Second) Torts § 886A(3).

In light of the Hawai`i legislature's treatment of other sections of the Second Restatement, this court determines that had the legislature wished to alter the general rule relating to contribution among intentional tortfeasors by statute, it would have done so. Further, the absence of any mention of the general rule in Hawai`i case law is not informative either way because the court cannot assume that the mere absence of an opportunity for Hawai`i courts to rule on the subject is evidence of an intent to follow the Second Restatement rule. However, Hawai`i's consistent acceptance of the Second Restatement, as well as the tendency of Hawai`i courts to look to California law when the precedent is silent, leads this court to believe that the state court would follow the Second Restatement in the instant situation. See, e.g., Hac v. Univ. of Hawai`i, 102 Hawai`i 92, 106-7, 73 P.3d 46, 60-1 (2003) (adopting the elements of intentional infliction of emotional distress set forth in the Second Restatement).

The Second Restatement states that "there is no right of contribution in favor of any tortfeasor who has intentionally caused the harm." Restatement (Second) Torts § 886A(3); see also, 18 Am.Jur.2d Contribution § 41 (stating that "there is no right of contribution in favor of any tortfeasor who has intentionally caused or contributed to the injury ... out of which liability has arisen"). Traditionally, the rules governing contribution extend to the equitable principle of indemnity; as between "intentional joint wrongdoers ... neither the law nor equity will enforce contribution." See 18 Am.Jur.2d Contribution § 41 (May 2002). The rationale behind this policy is that "no one should be permitted to found a cause of action on his own wrong." Herrero v. Atkinson, 227 Cal.App.2d 69, 74, 38 Cal.Rptr. 490 (1964).

Although the case law in Hawai`i is silent on the issue of contribution among intentional joint tortfeasors, contribution and indemnity are discussed in the areas of contract, insurance, employment, and negligence law.<sup>3</sup> Similarly, Hawai`i courts apply the Second Restatement, in whole or in part, in many situations.⁴ Other cases discuss a particular legislative intent to derogate from particular general or Second Restatement rules.⁵ However, nowhere in the Hawai`i precedential landscape is the right of an intentional tortfeasor to contribution or indemnity clearly established.

1. Applicability of the Restatement (Third) of Torts

The new Restatement (Third) Torts reflects a new approach taken in some jurisdictions: "[a] person who can otherwise recover contribution is not precluded from receiving contribution by the fact that he is liable for an intentional tort." Restatement (Third) Torts: Apportionment of Liability, § 23, Comment...