Auld-Susott, et al. v. Galindo, et al.

UNITED STATES DISTRICT COURT
DISTRICT OF HAWAII
EVAN AULD-SUSOTT, as Trustee for
(1) IRREVOCABLE LIEF INSURANCE
TRUST OF JOHN L. SUSOTT AND
KATHRYN C. SUSOTT UAD 8/17/1988
AS RESTATED, EXEMPT TRUST FBO
DANIEL C. SUSOTT, and
(2) IRREVOCABLE LIFE INSURANCE
TRUST OF JOHN L. SUSOTT AND
KATHRYN C. SUSOTT UAD 8/17/1988
AS RESTATED, NON-EXEMPT TRUST
FBO DANIEL C. SUSOTT; and
JOHN L. SUSOTT,
Plaintiffs,
vs.
LAURYN GALINDO and DANIEL C.
SUSOTT,
Defendants.
CIVIL 20-00270 LEK-RT
ORDER DENYING DEFENDANTS’ OBJECTIONS AND ADOPTING, AS
MODIFIED, THE MAGISTRATE JUDGE’S FINDINGS AND
RECOMMENDATION TO GRANT PLAINTIFFS’ MOTION FOR TAXATION
OF ATTORNEYS’ FEES AND AWARD OF PREJUDGMENT INTEREST
On December 6, 2021, Plaintiffs Evan Auld-Susott, as
Trustee for (1) Irrevocable Life Insurance Trust of John L.
Susott and Kathryn C. Susott UAD 8/17/1988 as Restated, Exempt
Trust FBO Daniel C. Susott, and (2) Irrevocable Life Insurance
Trust of John L. Susott and Kathryn C. Susott UAD 8/17/1988 as
Restated, Non-Exempt Trust FBO Daniel C. Susott; and John L.
Susott (collectively “Plaintiffs”) filed their Motion for
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Taxation of Attorneys’ Fees and Award of Prejudgment Interest
(“Motion”). 	[Dkt. no. 116] 	On February 28, 2022, the
magistrate judge issued the Findings and Recommendation to Grant
Plaintiffs’ Motion for Taxation of Attorneys’ Fees and Award of
Prejudgment Interest (“F&R”). 	[Dkt. no. 125. 1 ] 	The magistrate
judge issued a supplement to the F&R on April 29, 2022. 	See
Supplement to Findings and Recommendation to Grant Plaintiffs’
Motion for Taxation of Attorneys’ Fees and Award of Prejudgment
Interest (“Supplemental F&R”), filed 4/29/22 (dkt. no. 128).
Defendants Lauryn Galindo and Daniel C. Susott
(collectively “Defendants”) filed their objections to the F&R on
May 18, 2022 (“Objections”). 	[Dkt. no. 132.] 	Some of the
arguments raised in Defendants’ Objections have been previously
considered and rejected by this Court. 	See Minute Order, filed
6/3/22 (dkt. no. 135) (“6/3/22 EO”). 	The only portion of
Defendants’ Objections that is currently before this Court is
the portion asserting that the magistrate judge’s prejudgment
interest analysis was clearly erroneous. 	See id. at
PageID.2015-16. 	On June 17, 2022, Plaintiffs filed their
memorandum in opposition to that portion of the Objections.
[Dkt. no. 136.] 	The Court has considered the remaining portion
1 The F&R is also available at 2022 WL 1570869. 	On
March 13, 2022, the defendants filed a motion for
reconsideration of the F&R, and the magistrate judge denied the
motion in an order issued on May 3, 2022. 	[Dkt. nos. 127, 129.]
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of the Objections as a non-hearing matter pursuant to
Rule LR7.1(d) of the Local Rules of Practice for the United
States District Court for the District of Hawaii (“Local
Rules”). 	The remaining portion of Defendants’ Objections is
hereby denied, and the F&R and the Supplemental F&R are adopted,
as modified by the analysis in this Order.
BACKGROUND
The parties and the Court are familiar with the
factual and procedural background of this case, and only the
events relevant to the Objections will be addressed.
Plaintiffs brought three claims in this case: a
fraudulent conveyance claim, pursuant to the Hawai`i Uniform
Fraudulent Transfer Act (“HUFTA”), Haw. Rev. Stat. Chapter 651C
(“Count I”); unjust enrichment (“Count II”); and constructive
trust (“Count III”). 	See Complaint, filed 6/12/20 (dkt. no. 1).
Summary judgment was granted in Plaintiffs’ favor as to Counts I
and III. 	See Order Granting Plaintiffs’ Motion for Summary
Judgment, filed 8/18/21 (dkt. no. 88) (“8/18/21 Order”), at 26;
see also Order: Clarifying the Order Granting Plaintiffs’ Motion
for Summary Judgment; and Denying Defendants’ Motion for
Reconsideration of the Order, filed 9/23/21 (dkt. no. 99)
(“9/23/21 Order”). 2 	Plaintiffs voluntarily dismissed Count II.
2 The 8/18/21 Order is also available at 2021 WL 3669307,
and the 9/23/21 Order is also available at 2021 WL 4342317.
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See Order Granting Plaintiffs’ Motion to Voluntarily Dismiss
Count II of the Complaint, Filed June 12, 2020 [Dkt. 1], Without
Prejudice, filed 10/21/21 (dkt. no. 110). 	Final judgment was
entered on November 22, 2021. 	See Judgment in a Civil Case,
filed 11/22/21 (dkt. no. 115). 	Defendants have appealed the
judgment. 	See Notice of Appeal from a Judgment or Order of a
United States District Court, filed 12/17/21 (dkt. no. 119).
Plaintiffs seek an award of $64,267.50 in attorney’s
fees, [Motion at PageID.1749,] and an award of prejudgment
interest of $122,472.43, representing ten percent per annum from
March 6, 2019 to November 22, 2021, [Supplemental Mem. in Supp.
of Plaintiffs’ Motion for Taxation of Attorneys’ Fees and Award
of Prejudgment Interest, filed 3/7/22 (dkt. no. 126) (“Motion
Suppl.”), at 2]. 	The magistrate judge has recommended that the
Motion be granted in part, insofar as: Plaintiffs should be
awarded attorney’s fees, but at the reduced amount of
$48,537.50; see F&R, 2022 WL 1570869, at *6; and Plaintiffs
should be awarded the revised request of $122,472.43 in
prejudgment interest, see Supplemental F&R at 2.
Defendants did not present specific arguments in the
Objections and merely “incorporate by reference Defendants’
Supporting Reconsideration Memorandum, Dkt 127-1, and their
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opposition, Dkt 118-1,[ 3 ] as the bases and support for their
objections to this Court.” 	[Appeal at 5.] 	In the 6/3/22 EO,
this Court denied: the portion of Defendants’ Objections
incorporating Defendants’ 12/14/21 Opposition; and the portion
of Defendants’ Objections incorporating the first section of
Defendants’ memorandum in support of their motion for
reconsideration of the F&R, filed on March 14, 2022 (“3/14/22
Motion for Reconsideration Memorandum”), [filed 3/14/22 (dkt.
no. 127-1)]. 	See 6/3/22 EO at PageID.2015.
The second section of the 3/14/22 Motion for
Reconsideration Memorandum is the only portion still pending.
See id. at PageID.2015-16. 	Defendants argue that the magistrate
judge committed clear error in ruling that Plaintiffs were
entitled to an award of prejudgment interest. 	[3/14/22 Motion
for Reconsideration Mem. at 21.] 	If this Court rejects
Defendants’ arguments and adopts the magistrate judge’s
recommendation that Plaintiffs be awarded prejudgment interest,
Defendants do not object to the amount of the award determined
by the magistrate judge in the Supplemental F&R. 	See Objections
at 4.
3 Docket number 118-1 is Defendants’ Memorandum in
Opposition to Plaintiffs’ Motion for Taxation of Attorneys’ Fees
and Award of Prejudgment Interest, filed on December 14, 2021
(“Defendants’ 12/14/21 Opposition”).
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STANDARD
When a party objects to a magistrate judge’s
findings or recommendations, the district court
must review de novo those portions to which the
objections are made and “may accept, reject, or
modify, in whole or in part, the findings or
recommendations made by the magistrate judge.”
28 U.S.C. § 636(b)(1); United States v. Reyna-
Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en
banc) (“[T]he district judge must review the
magistrate judge’s findings and recommendations
de novo if objection is made, but not
otherwise.”). 	Under a de novo standard, there is
no deference to the lower court’s ruling; rather,
the Court “freely consider[s] the matter anew, as
if no decision had been rendered below.” 	Dawson
v. Marshall, 561 F.3d 930, 933 (9th Cir. 2009)
(alteration in original) (quotations omitted);
Freeman v. DirecTV, Inc., 457 F.3d 1001, 1004
(9th Cir. 2006).
Bank of Hawaii v. Plimpton, CIVIL NO. 22-00220 JAO-WRP, 2022 WL
17039239, at *1 (D. Hawai`i Nov. 17, 2022) (alterations in Bank
of Hawaii).
DISCUSSION
I. 	Clarification of Prior Orders
Because Defendants did not file timely objections, the
Supplemental F&R was adopted on May 17, 2022, and the F&R was
adopted on May 18, 2022. 	See Order Adopting Supplement to
Magistrate Judge’s Findings and Recommendation, filed 5/17/22
(dkt. no. 130) (“5/17/22 Order”); Order Adopting Magistrate
Judge’s Findings and Recommendation, filed 5/18/22 (dkt.
no. 131) (“5/18/22 Order”). 	Defendants’ Objections were not
filed until after the 5/17/22 Order and the 5/18/22 Order were
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filed. 	However, Defendants filed a motion for an extension, and
this Court granted the extension in an entering order issued on
June 3, 2022 (“6/3/22 EO”) and stated it would consider the
Objections. 	See Defendants’ Motion for a One Day Extension of
Time to File Their Objections to the Magistrate Judge’s Findings
and Recommendation and to Set Aside this Court’s Order Adopting
those Findings and Recommendation or Alterantively [sic], to
Have that Order Revised, filed 6/1/22 (dkt. no. 133); 6/3/22 EO,
filed 6/3/22 (dkt. no. 135).
The 6/3/22 EO expressly withdrew the 5/18/22 Order “to
allow this Court to consider Defendants’ Objections.” 	[6/3/22
EO at PageID.2015.] 	This Court now clarifies that, for the
reasons set forth in the 6/3/22 EO, the 5/17/22 Order is also
withdrawn.
II. 	Remaining Portion of the Objections
Defendants argue the magistrate judge erred in
concluding that Plaintiffs were entitled to an award of
prejudgment interest because:
-the purpose of an award of prejudgment interest is to
compensate the prevailing party for the lost use of money,
and should not be ordered here where real property, not
money, was at issue; and
-Plaintiffs benefited from increase in the property’s value
during the period covered by the award of prejudgment
interest, and ordering an additional award of prejudgment
interest would result in a windfall for Plaintiffs.
[3/14/22 Motion for Reconsideration Mem. at 22-23.]
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A. 	Prejudgment Interest Principles
Jurisdiction in this case was based on diversity. 	See
Complaint at ¶ 6. 	“State law governs prejudgment interest in a
diversity action.” 	Westport Ins. Corp. v. Cal. Cas. Mgmt. Co.,
916 F.3d 769, 781 (9th Cir. 2019) (citation omitted). 	“Under
Hawaii law, the award of prejudgment interest is within the
discretion of the court.” 	Pac. Com. Servs., LLC v. LVI Env’t
Servs., Inc., Civ. No. 16-00245 JMS-KJM, 2018 WL 3826773, at *33
(D. Hawai`i Aug. 10, 2018) (citations omitted). 	This district
court has stated:
Hawaii law permits an award of prejudgment
interest in civil cases. 	See [Haw. Rev. Stat.]
§ 636-16. 	The decision to award prejudgment
interest rests within the court’s discretion.
See Tri-S Corp. v. W. World Ins. Co., 110 Haw.
473, 498, 135 P.3d 82, 107 (2006). 	In exercising
that discretion, a court must first consider
whether either party is at fault for any delays
leading to the final judgment. 	Id. 	If neither
party is at fault, “the trial court may still
award or deny prejudgment interest in its
discretion, depending on the circumstances of the
case.” 	Id. 	Generally, however, the
circumstances only justify an award of
prejudgment interest if “‘the issuance of
judgment [was] greatly delayed.’” 	Cty. of
Hawai`i v. C & J Coupe Family Ltd. P’ship
(Coupe I), 120 Haw. 400, 410, 208 P.3d 713,
723,(2009) (emphasis in original) (quoting Tri–S
Corp., 110 Haw. at 498, 135 P.3d at 107); see
also Cty. of Hawaii v. C & J Coupe Family Ltd.
P’ship (Coupe II), 124 Haw. 281, 312, 242 P.3d
1136, 1167 (2010)(“a trial court can award
prejudgment interest for any substantial delay in
the proceedings” (emphasis in original)
(quotation marks omitted)).
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Philadelphia Indem. Ins. Co. v. Ohana Control Sys., Inc., CIVIL
NO. 17-00435-SOM-RT, 2020 WL 2025351, at *7 (D. Hawai`i Apr. 27,
2020) (alteration and emphases in Philadelphia Indem.).
While the judgment in this case was entered less than
eighteen months after Plaintiffs filed the Complaint in this
case, this Court finds that there was a substantial delay in
Defendants’ return of the property at issue in this case to
Plaintiffs because Defendants engaged in a fraudulent transfer
of the property in an attempt to avoid the effect of the
previous rulings in Auld-Susott, et al. v. Galindo, CV 16-00450
LEK-WRP (“CV 16-450”). 	See generally 8/18/21 Order. 	Under the
circumstances of this case, Defendants were responsible for a
substantial delay in the return of the property to Plaintiffs,
and therefore an award of prejudgment interest is appropriate.
B. 	Lack of a Monetary Judgment
This Court rejects Defendants’ argument that
Plaintiffs should not be awarded prejudgment interest because
they did not obtain a monetary judgment. 	Defendants rely upon
this district court’s statement that “[t]he purpose of
prejudgment interest is neither to punish the defendant nor to
provide the plaintiff with a windfall. 	Rather, the purpose is
to render the plaintiff whole.” 	Towey v. Catling, 743 F. Supp.
738, 741 (D. Hawai`i 1990) (citing West Virginia v. United
States, 479 U.S. 305, 107 S. Ct. 702, 93 L. Ed. 2d 639 (1987));
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see also 3/14/22 Motion for Reconsideration Mem. at 23 (quoting
Towey). 	Defendants argue this Court is bound by Towey and this
Court should follow West Virginia. 	However, the decisions of
other district judges in this district are not binding on this
Court. 	See Camreta v. Greene, 563 U.S. 692, 709 n.7 (2011) (“A
decision of a federal district court judge is not binding
precedent in either a different judicial district, the same
judicial district, or even upon the same judge in a different
case.” (citation and quotation marks omitted)). 	Further, Towey
did not present the question of whether prejudgment interest is
inappropriate where there is no monetary judgment, see Towey,
743 F. Supp. at 740 (stating a monetary judgment, consisting of
special damages and general damages, was entered). 	Even if this
Court did follow the legal analysis in Towey, the principle from
West Virginia that is cited in Towey - that the purpose of an
award of prejudgment interest is to render the plaintiff whole -
applies in this case.
In West Virginia, the United States Supreme Court did
state that “[p]rejudgment interest serves to compensate for the
loss of use of money due as damages from the time the claim
accrues until judgment is entered, thereby achieving full
compensation for the injury those damages are intended to
redress.” 	479 U.S. at 310-11 n.2 (citation omitted). 	However,
West Virginia did not involve an award of prejudgment interest
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under Hawai`i law. 	Nothing in Haw. Rev. Stat. § 636-16 suggests
that prejudgment interest can only be awarded when the
prevailing party recovers a monetary judgment. 4 	Defendants’
Objections are therefore denied as to their argument regarding a
lack of a monetary judgment.
C. 	Windfall
Defendants also argue that, because the property has
increased in value during the period covered by the recommended
prejudgment interest award, Plaintiffs would receive a windfall
if they are awarded prejudgment interest. 	Defendants are
correct that, under Hawai`i law, an interest award to the
prevailing party must not result in a windfall. 	Cf. Larsen v.
Pacesetter Sys., Inc., 74 Haw. 1, 50, 837 P.2d 1273, 1297,
amended (Oct. 22, 1992), amended on reh’g in part, 74 Haw. 650,
843 P.2d 144 (1992) (“Postjudgment interest on prejudgment
interest is a windfall to plaintiff under [Haw. Rev. Stat.]
§ 478–3, and, as such, is more punitive than
compensatory . . . .”). 	The award of prejudgment interest in
this case, however, does not constitute a windfall because it
estimates the value of Plaintiffs’ lost use of the property
4 Haw. Rev. Stat. § 636-16 states, in pertinent part: “In
awarding interest in civil cases, the judge is authorized to
designate the commencement date to conform with the
circumstances of each case, provided that the earliest
commencement date in cases arising in tort, may be the date when
the injury first occurred . . . .”
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during the period reflected in the award. 	Defendants’
Objections are therefore denied as to their argument that an
award of prejudgment interest would result in a windfall for
Plaintiffs.
III. Ruling
In the 6/3/22 EO and the instant Order, this Court has
rejected all of the arguments in Defendants’ Objections. 	As
previously noted, Defendants have not raised any challenge to
the amount of the prejudgment interest award. 	Defendants’
Objections are therefore denied in their entirety, and the F&R
and the Supplemental F&R re adopted, as modified by the analysis
in this Order. 	Plaintiffs’ Motion, as modified by their Motion
Supplement, is granted in part and denied in part. 	The Motion
is granted, insofar as Plaintiffs are awarded $48,537.50 in
attorney’s fees, and the Motion is denied to the extent that
Plaintiffs requested a higher award. 	The Motion, as modified by
the Motion Supplement, is granted, insofar as Plaintiffs are
awarded $122,472.43 in prejudgment interest.
CONCLUSION
For the foregoing reasons, Defendants’ Objections to
the Magistrate Judge’s Findings and Recommendation to Grant
Plaintiffs’ Motion for Taxation of Attorneys’ Fees and Award
Prejudgment Interest, filed May 18, 2022, are HEREBY DENIED.
The magistrate judge’s Findings and Recommendation to Grant
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Plaintiffs’ Motion for Taxation of Attorneys’ Fees and Award
Prejudgment Interest, filed February 28, 2022, and the
magistrate judge’s Supplement to Findings and Recommendation to
Grant Plaintiffs’ Motion for Taxation of Attorneys’ Fees and
Award Prejudgment Interest, filed April 29, 2022, are ADOPTED,
AS MODIFIED by the analysis in this Order. 	Plaintiffs’ Motion
for Taxation of Attorneys’ Fees and Award of Prejudgment
Interest, filed December 6, 2021, as modified by their
Supplemental Memorandum in Support of Plaintiffs’ Motion for
Taxation of Attorneys’ Fees and Award of Prejudgment Interest,
filed March 7, 2022, is GRANTED IN PART AND DENIED IN PART.
Plaintiffs are HEREBY AWARDED $48,537.50 in attorney’s
fees and $122,472.43 in prejudgment interest, for a total award
of $171,045.93. 	Unless a timely motion for reconsideration of
this Order is filed, the Clerk’s Office is DIRECTED to enter an
amended final judgment that includes these amounts on
February 14, 2023, and Defendants are ORDERED to pay the award
to Plaintiffs, through Plaintiffs’ counsel, by March 1, 2023.
IT IS SO ORDERED.
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DATED AT HONOLULU, HAWAII, January 30, 2023.
EVAN AULD-SUSOTT, ETC., ET AL VS. LAURYN GALINDO, ET AL; CV 20-
00270 LEK-RT; ORDER DENYING DEFENDANTS’ OBJECTIONS AND ADOPTING,
AS MODIFIED, THE MAGISTRATE JUDGE’S FINDINGS AND RECOMMENDATION
TO GRANT PLAINTIFFS’ MOTION FOR TAXATION OF ATTORNEYS’ FEES AND
AWARD OF PREJUDGMENT INTEREST
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