Kane et al v. PaCap Aviation Finance, LLC et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
ELIZABETH A. KANE, Bankruptcy
Trustee, et al.,
Plaintiffs,
vs.
PACAP AVIATION FINANCE, LLC,
et al.,
Defendants.
CIV. NO. 19-00574 JAO-RT
U.S. Bankruptcy Court – Hawaii
Case No. 17-01078 (Chapter 7)
Adversary Proceeding No. 19-90027
In re
HAWAII ISLAND AIR, INC.,
Debtor.
CIV. NO. 20-00246 JAO-RT
( CONSOLIDATED CASE )
U.S. Bankruptcy Court – Hawaii
Case No. 17-01078 (Chapter 7)
ELIZABETH A. KANE, Bankruptcy
Trustee,
Plaintiffs,
vs.
PACAP AVIATION FINANCE, LLC,
et al.,
Defendants.
Adversary Proceeding No. 19-90049
FINDINGS AND
RECOMMENDATION TO
GRANT DEFENDANT
CHRISTOPHER GOSSERT’S
MOTION FOR APPROVAL OF
GOOD FAITH SETTLEMENT
PURSUANT TO HRS § 663-15.5
FINDINGS AND RECOMMENDATION TO GRANT DEFENDANT
CHRISTOPHER GOSSERT’S MOTION FOR APPROVAL OF GOOD
FAITH SETTLEMENT PURSUANT TO HRS § 663-15.5
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On September 14, 2023, Defendant Christopher Gossert (“Defendant
Gossert”) filed a Motion for Approval of Good Faith Settlement Pursuant to HRS §
663-15.5 (“Motion”) and requested that the court issue an order determining that
the Settlement Agreement and Mutual Release (ECF No. 423 at PageID.20299)
(“Settlement”) between Plaintiffs Elizabeth A. Kane, Bankruptcy Trustee, Air Line
Pilots Association, International, Hawaii Teamsters and Allied Workers, Local 996
(collectively “Plaintiffs”) and Defendant Gossert was made “in good faith and is a
fair and reasonable settlement within the meaning of Hawaii Revised Statutes
[(“Haw. Rev. Stat.”)] § 663-15.” ECF No. 423 at PageID.20280-20281.
The Motion came on for a telephonic hearing on December 7, 2023 before
the Honorable Rom Trader. Attorney Nickolas A. Kacprowski appeared on behalf
of the Plaintiffs; attorney David Farmer appeared on behalf of Defendant Gossert;
attorney Alan Van Etten also appeared on behalf of Defendant Gossert; attorney
Christopher J. Muzzi appeared on behalf of Defendants Lawrence Investments,
LLC, Lawrence J. Ellison Revocable Trust, Ohana Airline Holdings, LLC,
Carbonview Limited, LLC, Paul Marinelli, and Lawrence J. Ellison; attorneys
Peter W. Ito and Nenad Krek appeared on behalf of Defendants PaCap Aviation
Finance, LLC, PacificCap Investment Management, LLC, Malama Investments,
LLC, Snowbiz Ventures, LLC, PaCap Management Solutions, LLC, PaCap
Advisors, LLC, Jeffrey Au, Jack Tsui, and Jack Chuck She Tsui Trust; and
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attorney Scott Kubota appeared on behalf of Third Party Defendant David
Uchiyama.
After careful consideration of the Motion, parties’ submissions, records in
this case and applicable law, the Court FINDS that based upon the totality of
circumstances, the Settlement was made in good faith under Haw. Rev. Stat. § 663-
15.5 and RECOMMENDS that the Motion be GRANTED.
BACKGROUND
Defendant Gossert was briefly the Director of Finance of Hawaii Island Air,
Inc. (“Island Air”) from approximately May 2017 until November 2017, and
served as a member of the board of directors for approximately two months before
Island Air’s shutdown. ECF No. 423 at PageID.20284 & 20299. Plaintiffs
initiated this action in the United States Bankruptcy Court for the District of
Hawaii, and this case was later withdrawn to the United States District Court for
the District of Hawaii. Id. at 20299. Other defendants have filed cross-claims
against Defendant Gossert. Id.
Plaintiffs and Defendant Gossert entered into a Settlement and agreed that
Defendant Gossert would pay Plaintiffs a total of $50,000 and “a promise to seek
to recover . . . $1,102,644.30, of the interpleaded proceeds of an insurance policy
issued by QBE Specialty Insurance Company (“QBE”), and then to pay that
amount to [Plaintiffs].” ECF No. 423 at PageID.20300-20301; ECF No. 655 at
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PageID.28294-28295. This payment is contingent on Defendant Gossert obtaining
this amount from the interpleader funds through litigation or settlement. Id. at
PageID.20300-20301. Pursuant to the Settlement, Defendant Gossert may not
enter into a settlement regarding the interpleader action (Adversary Proceeding No.
22-90006; Civ. No. 22-00450 SOM-KJM) without Plaintiffs’ written consent. ECF
No. 423 at PageID.20301. Any settlement amount from the interpleader shall be
reduced by Defendant Gossert’s attorneys’ fees and costs, with a cap of $120,000,
incurred in the litigation of pursuing the interpleader action. Id. at 20301-20302.
After the Settlement, the remaining claims by and against Defendant Gossert
are his cross-claims and cross-claims filed by his co-defendants: Ohana Airline
Holdings, LLC, Lawrence J. Ellison, The Lawrence J. Ellison Revocable Trust,
Lawrence Investments, LLC, Carbonview Limited, LLC, and Paul Marinelli
(collectively “Ellison Defendants”); PaCap Aviation Finance, LLC, PaCap
Management Holdings, LLC, PacifiCap Investment Management, LLC, Malama
Investments, LLC, SnowBiz Ventures, LLC, PaCap Management Solutions, LLC,
PaCap Advisors, LLC, PacifiCap Management, Inc., Jeffrey Au, Jack Cheuk She
Tsui Revocable Living Trust, and Jack Tsui (collectively “PaCap Defendants”);
and Defendant David Uchiyama. ECF No. 423 at PageID.20284.
On September 14, 2023, Defendant Gossert filed the instant Motion seeking
a determination that the Settlement was entered into in good faith. On November
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9, 2023, the Ellison Defendants filed a Memorandum in Opposition to Defendant
Christopher Gossert’s Motion for Approval of Good Faith Settlement Pursuant to
HRS § 663-15.5 (“Opposition”), arguing that the Motion is premature and even if
the Motion is considered, under the totality of the circumstances, the Court should
not find that the Settlement was made in good faith. ECF No. 655. On November
16, 2023, Defendant Gossert filed a Memorandum in Reply to the [Opposition]
(“Reply”). ECF No. 663. No other party filed a response or opposition to the
Motion.
DISCUSSION
Defendant Gossert requests the Court enter an order determining that the
Settlement between Plaintiffs and Defendant Gossert:
was made in good faith, negotiated at arm’s length, and is a fair and
reasonable settlement for the claims asserted in the underlying
Complaint . . . That the settlement bars all joint tortfeasors and/or joint
obligors, present and future, from asserting any claims against [Defendant]
Gossert for contribution, indemnity based on comparative fault, common
law indemnity, implied indemnity and/or joint obligation and/or subrogation
arising out of the allegations set forth in Plaintiffs’ Complaint.
ECF No. 423 at PageID.20281 (emphasis added). The parties agree that the
governing law is Haw. Rev. Stat. § 663-15.5. This statute provides for “the effect
of a settlement on non-settling joint tortfeasors in the context of multi-party
litigation” Troyer v. Adams, 102 Hawaiʽi 399, 403, 77 P.3d 83, 87 (2003). A
finding of good faith:
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(1) discharges the settling party from liability for contribution to other joint
tortfeasors, (2) reduces a plaintiff’s claims against joint tortfeasors by the
amount stipulated to in the release or in the amount of the consideration paid
for it, whichever is greater, (3) bars other joint tortfeasors from further
claims against the settling joint tortfeasor, except where there is a written
indemnity agreement, and (4) results in dismissal of all crossclaims against
the settling joint tortfeasor, except where there is a written indemnity
agreement.
Cruz v. Kaumana Drive Partners, LLC, Civ. No. 19-00255 JMS-KJM, 2021 WL
5132553, at *2 (D. Haw. Oct. 15, 2021), report and recommendation adopted, Civ.
No. 19-00255 JMS-KJM, 2021 WL 5122162 (D. Haw. Nov. 3, 2021) (citing Haw.
Rev. Stat. § 663-15.5).
The Court must consider the “totality of circumstances” when determining
whether a settlement was entered into in good faith under Haw. Rev. Stat. § 663-
15.5. Troyer, 102 Hawaiʽi at 425, 77 P.3d at 109. “The determination of good
faith is left to the discretion of the trial court . . . and is not disturbed in the absence
of an abuse [of discretion].” Id., 102 Hawaiʽi at 422-23, 77. P.3d at 106-107
(citation omitted). The Court considers the following factors (“Troyer factors”) in
reaching a good faith settlement determination:
(1) the type of case and difficulty of proof at trial, e.g., rear-end motor
vehicle collision, medical malpractice, product liability, etc.; (2) the realistic
approximation of total damages that the plaintiff seeks; (3) the strength of
the plaintiff’s claim and the realistic likelihood of his or her success at trial;
(4) the predicted expense of litigation; (5) the relative degree of fault of the
settling tortfeasors; (6) the amount of consideration paid to settle the claims;
(7) the insurance policy limits and solvency of the joint tortfeasors; (8) the
relationship among the parties and whether it is conducive to collusion or
wrongful conduct; and (9) any other evidence that the settlement is aimed at
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injuring the interests of a non-settling tortfeasor or motivated by other
wrongful purpose.
Id., 102 Hawaiʽi at 427, 77 P.3d at 111. This approach is based on the rationale
that Haw. Rev. Stat. § 663-15.5 is intended to encourage settlements and the good
faith provision is meant “to provide the court with an opportunity to prevent
collusive settlements aimed at injuring the interests of a non-settling joint
tortfeasor.” Id., 102 Hawaiʽi at 426, 77 P.3d at 110. The Troyer factors are not the
only factors the court may consider. Id. “[T]he Court may consider any other
factor that is relevant to whether a settlement has been given in good faith.” Id.
The Hawaii legislature, in adopting Haw. Rev. Stat. § 663-15.5, was “more
interested in encouraging settlements than ensuring the equitable apportionment of
liability.” Id. The legislature intended to “simplify the procedures and reduce the
costs associated with claims involving joint tortfeasors.” Id. (citation omitted).
The party opposing the good faith settlement determination bears the burden of
proving that the settlement was not in good faith. Haw. Rev. Stat. § 663-15.5(b).
A. 	The Ellison Defendants Failed to Establish that the Motion is
Premature
The Ellison Defendants oppose the Motion and thus have the burden to
prove that the Settlement was not made in good faith. As Defendant Gossert notes,
it is unclear why the Ellison Defendants are opposing the Motion because in light
of the jury verdict, their cross-claims against Defendant Gossert are moot and any
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setoff resulting from the Settlement should not affect them. ECF No. 657 at
PageID.28356; ECF No. 663 at PageID.28477. The parties that are affected by the
Settlement, including the Plaintiffs, do not oppose the Motion. Nevertheless, the
Ellison Defendants oppose the good faith determination based on two theories: (1)
the Motion is premature and (2) under the totality of circumstances, the Court
cannot find that the Settlement was entered into in good faith. ECF No. 655 at
PageID.28295-28296.
In arguing that the Motion is premature, the Ellison Defendants cite
California cases for the proposition that because the setoff amount is unknown, it
cannot be determined how much Plaintiff’s damages claims should be reduced. Id.
at 28300. Notably, the California courts follow the standard set forth in Tech-Bilt,
Inc. v. Woodward-Clyde & Assocs., 38 Cal. 3d 488, 489, 698 P.2d 159 (1985)
(“Tech-Bilt”), where the court considers “whether the amount of the settlement is
within the reasonable range of the settling tortfeasor’s proportional share of
comparative liability for the plaintiff’s injuries.” See also, Abbott Ford, Inc. v.
Superior Ct., 43 Cal. 3d 858, 863, 741 P.2d 124 (1987) & Brehm Communities v.
Superior Ct., 88 Cal. App. 4th 730, 734, 105 Cal. Rptr. 2d 918, 921 (2001), as
modified (May 22, 2001) (adopting the good faith standard set forth in Tech-Bilt).
However, as Defendant Gossert indicates, “we are not in California.” ECF No.
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663 at PageID.28480. The Supreme Court of Hawaii expressly rejected the Tech-
Bilt standard:
[T]he legislative purpose “to simplify the procedures and reduce the costs
associated with claims involving joint tortfeasors.” This legislative purpose
would be difficult to accomplish if we were to adopt the Tech-Bilt standard
of good faith and require that trial courts conduct “mini-trials” in order to
determine the parties’ likely proportionate liability. “It [would] clog our
trial courts with unnecessary hearings, discourage the settlement of
legitimate claims, and severely strain the resources of the parties and the trial
and appellate courts of this state.” . . . We do not believe that our legislature
intended that the Hawaiʽi courts adopt the California courts’ definition of
“good faith.”
Troyer, 102 Hawaiʽi at 426-427, 77 P.3d at 110-111 (internal citations omitted).
Accordingly, the Court does not find the Ellison Defendants’ arguments persuasive
as the settlement amount includes both a sum certain amount of $50,000 as well as
a separate contingent amount in excess of $1,000,000. Moreover, the Ellison
Defendants’ arguments based upon the more restrictive standard in Tech-Bilt must
fail based upon well-established Hawaii law. The Court thus turns to whether the
Settlement was made in good faith under Haw. Rev. Stat. § 663-15.5.
B. Under the Totality of Circumstances, the Settlement was Made in Good
Faith
The Court finds that based on its consideration of the factors listed in
Troyer, the totality of the circumstances weigh in favor of finding that the
Settlement was made in good faith. Under the first factor, this case is indeed
complex with multiple parties and various cross-claims among the defendants.
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The amount of damages sought by Plaintiffs, while uncertain, clearly was in excess
of $30 million. ECF No. 655 at PageID.28297; ECF No. 663 at PageID.28483. In
addition, Defendant Gossert’s fees to date and those anticipated through trial were
not only substantial sums, but also were not being paid by QBE. ECF No. 663 at
PageID.28483. Accordingly, this factor weighs in favor of finding good faith.
As to the second and sixth factors, the Ellison Defendants’ position is simply
that the exact value of Plaintiff’s damages is not known or that there is no
reasonable relationship between the Settlement amount and Plaintiffs’ damages.
ECF No. 655 at PageID.28300-28301. However, the Ellison Defendants have not
provided any argument explaining why the Settlement amount tends to show that
the Settlement may be collusive or injurious to the interest of a non-settling joint
tortfeasor. Plaintiffs explain that because Defendant Gossert’s “involvement in the
allegations at issue were extremely limited in time and scope compared to the non-
settling defendants[,]” the second factor should weigh in favor of finding that the
Settlement was made in good faith. ECF No. 663 at PageID.28483. This Court
agrees. The Settlement amount of $50,000 with a promise to pursue recovery of
$1,102,644.30 does not tend to show that there is some sort of collusion or that the
Settlement was not made with wrongful purpose. That Plaintiffs made the
calculated choice to settle their claims against Defendant Gossert for substantially
less than they may have sought individually against Defendant Gossert or
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collectively from the other defendants at trial is entirely their prerogative.
Accordingly, the Court finds that the second and sixth factors weigh in favor of
finding good faith.
The third and fourth factors also weigh in favor of finding good faith. As
Defendant Gossert notes, Plaintiffs were vigorously pursuing their claims and thus
the parties were unable to reach settlement before trial. It is apparent that
Defendant Gossert’s cost of litigation would be significant given Plaintiffs’ claims
and the existing cross-claims. Further, as Defendant Gossert notes, the Ellison
Defendants have stated in their Statement Regarding Written Closing Arguments
on Cross-Claims: “[p]ursuant to the Court’s directed verdict rulings and the jury’s
verdict, the Ellison Defendants were found not to be liable on any of the claims
asserted by the Plaintiffs. As such, the Ellison Defendants’ cross-claims for
indemnity/contribution are currently moot.” ECF No. 657 at PageID.28356; ECF
No. 663 at PageID.28477. Based on these facts, the Court cannot find that the
Settlement may have been made with some improper purpose or is collusive.
Under the fifth and eighth factors, the Ellison Defendants do not argue that
Defendant Gossert’s degree of fault is larger than the degree of fault of other
tortfeasors or that there is some sort of relationship among the parties conducive to
wrongful conduct or collusion in entering the Settlement. On the other hand,
Defendant Gossert argues that according to the Complaint, his involvement is to a
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lesser extent than his co-defendants and that his position “can reasonably be
viewed as an afterthought compared to the Trustee’s focus on Au and Marinelli.”
ECF No. 663 at PageID.28485. Indeed, the Court agrees that Defendant Gossert’s
degree of fault has not been shown to be greater than others such that the Court
would question the Settlement amount or find it patently unfair. There is also no
evidence of any relationship between any of the parties which would suggest that
Defendant Gossert was colluding with any other party, including Plaintiffs.
Accordingly, the Court cannot find that the fifth and eighth factors weigh against
the finding of good faith.
The ninth factor provides the Court with discretion to include other evidence
provided by the parties that may weigh against the finding of good faith. The
Ellison Defendants have suggested that the Court consider the fact that the amount
of Plaintiffs’ damages is not known and because of this, the setoff amount cannot
be determined and thus, the Court cannot find that the Settlement is made in good
faith. ECF No. 655 at PageID.28300. The Ellison Defendants urged this Court to
follow the courts in California in adopting the proportionate liability standard
under Tech-Bilt. See Troyer, 102 Hawaiʻi at 415-416, 77 P.3d at 99-100.
However, precedent is clear that the proportionate liability standard was not
adopted by the Hawaii Supreme Court because doing so would “clog our trial
courts with unnecessary hearings, discourage the settlement of legitimate claims,
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and severely strain the resources of the parties and the trial and appellate courts[.]”
Id., 102 Hawaiʽi at 427, 77 P.3d at 111. While the Court may consider the fact that
a setoff amount cannot be determined, this consideration alone cannot and does not
outweigh the other factors under the totality of circumstances standard. Moreover,
the Ellison Defendants have not offered any evidence, specific or otherwise, which
suggests that the settling parties were acting in bad faith in reaching the settlement.
Accordingly, under the totality of the circumstances, the Court finds that the
Settlement was entered in good faith pursuant to Haw. Rev. Stat. § 663-15.5.
CONCLUSION
The Court FINDS that based on the totality of circumstances, the Plaintiffs
and Defendant Gossert entered into the Settlement in good faith pursuant to Haw.
Rev. Stat. § 663-15.5. The Court thus RECOMMENDS that the district court:
1. GRANT the Motion in that the Settlement was made in good faith pursuant
to Haw. Rev. Stat. § 663-15.5; and
2. Find that the Settlement bars all joint tortfeasors and/or joint obligors,
present and future, from asserting any claims against Defendant Gossert for
contribution, indemnity based on comparative fault, common law indemnity,
implied indemnity and/or joint obligation and/or subrogation arising out of
the allegations set forth in Plaintiffs’ Complaint.
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IT IS SO FOUND AND RECOMMENDED.
DATED: Honolulu, Hawaii, December 19, 2023.
Civ. No. 19-00574 JAO-RT; Elizabeth A. Kane, Bankruptcy Trustee vs. Pacap
Aviation Finance, LLC; Findings and Recommendation to Grant Defendant
Christopher Gossert’s Motion for Approval of Good Faith Settlement Pursuant to
HRS § 663-15.5
Rom A. Trader
United States Magistrate Judge
Andrade
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