NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS APR 13 2023 MOLLY C. DWYER, CLERK FOR THE NINTH CIRCUIT U.S. COURT OF APPEALS
EVAN AULD-SUSOTT, as Trustee for No. 21-17078 (1) Irrevocable Life Insurance Trust of John L. Susott & Kathryn C. Susott UAD D.C. No. 1:20-cv-00270-LEK-RT 8/17/1988 as Restated, Exempt Trust fbo Daniel C. Susott, & (2) Irrevocable Life MEMORANDUM* Insurance Trust of John L. Susott & Kathryn C. Susott UAD 8/17/1988 as Restated,Non- Exempt Trust FBO Daniel C. Susott; JOHN L. SUSOTT, Plaintiffs-Appellees, v. LAURYN GALINDO; DANIEL C. SUSOTT, Defendants-Appellants.
Appeal from the United States District Court for the District of Hawaii Leslie E. Kobayashi, District Judge, Presiding Argued and Submitted February 17, 2023 Honolulu, Hawaii
Before: BEA, COLLINS, and LEE, Circuit Judges.
Plaintiffs Evan Auld-Susott and John Susott (“Plaintiffs”) successfully
obtained substantial judgments in California state court against Defendant Daniel
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Susott (“Daniel”). Contending that the judgments remain unsatisfied even after the
recording of judgment liens against one of Daniel’s properties, Plaintiffs have
sought to impose a constructive trust on a condominium in Honolulu that Daniel
first transferred to Defendant Lauryn Galindo (“Galindo”) in 2010, before
Plaintiffs’ California state lawsuits were filed. Plaintiffs had filed an earlier federal
action in 2016 against Galindo only, and in that suit they succeeded in obtaining a
ruling in 2019 that voided the 2010 transfer as a fraudulent conveyance, thereby
returning title to the condominium to Daniel. However, the district court declined
to impose a constructive trust on the property in its 2019 ruling, because it
concluded that a return of the property to Daniel would be a sufficient remedy that
would make the condominium available for enforcement of the judgments. But
within days of the ruling undoing the transfer to Galindo, Daniel simply deeded the
property back to Galindo. Plaintiffs thereupon brought this action against both
Galindo and Daniel in 2020. The district court ultimately granted summary
judgment to Plaintiffs, voided the 2019 deed from Daniel to Galindo, imposed a
constructive trust on the condominium, and appointed a trustee. This appeal
followed.
1. The district court erred in finding that collateral estoppel barred Daniel
from relitigating matters decided in the 2016 lawsuit against Galindo.
Because the 2016 federal lawsuit rested on diversity jurisdiction, and there is
2 no sense in which Hawaii prelusion law is “incompatible with federal interests,”
Hawaii law governs the preclusive effect of the 2019 judgment rendered in that
case. Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508–09 (2001).
Under Hawaii law, a person is bound by a prior judgment only if that person was a
party to the prior suit or is in privity with such a party. Dorrance v. Lee, 976 P.2d
904, 910 (Haw. 1999); cf. Taylor v. Sturgell, 553 U.S. 880, 892–93 (2008)
(applying a similar rule in federal preclusion law). In finding that Daniel was in
privity with Galindo as a matter of law, the district court relied on the premise that
their interests with respect to the prior 2016 action against Galindo “were identical;
each wanted the transfer of property found valid.” This was error.
A mere commonality of interests is insufficient to establish privity under
Hawaii law. Rather, there must be a sufficient showing “that the relationship
between the one who is a party of record and another is close enough to include
that other within the res adjudicata.” In re Herbert M. Dowsett Tr., 791 P.2d 398,
402 (Haw. Ct. App. 1990) (citations and internal quotation marks omitted).
Plaintiffs bore the burden of establishing such a relationship between Daniel and
Galindo. See id. at 402–03. They failed to carry that burden.
There has been no showing that Daniel “had the same opportunity” as
Galindo “to control the [prior] proceedings,” nor has it been shown that Galindo
was “appointed” to represent Daniel’s “interests by any valid procedure.” Lingle v.
3 Haw. Gov’t Emps. Ass’n, 111 P.3d 587, 596 (Haw. 2005); see also Bush v. Watson,
918 P.2d 1130, 1136–37 (Haw. 1996) (holding that even a person’s participation as
an amicus curiae in a suit was insufficient to establish privity absent a showing that
“the nonparty and party had the same practical opportunity to control the course of
the proceedings”). Although the district court’s 2019 ruling noted the close,
almost familial relationship between Galindo and Daniel, a “close family
relationship, without more, ‘is not enough to bind a nonparty to a judgment.’” In
re Dowsett Tr., 791 P.2d at 403 (citation omitted). And, finally, this is not a
situation in which Daniel—the original owner—can be characterized as a
successive property owner whose rights to the property derive from a grant from
the losing litigant. Cf. Tibbetts v. Damon, 17 Haw. 203, 205 (1905) (“So far as
estoppel by former judgment is concerned, a grantee is in privity with his grantor,
but the converse is not true that a grantor is in privity with his grantee.”). The prior
litigation simply voided Galindo’s interests in the property, leaving in place
Daniel’s pre-existing rights. In short, Plaintiffs failed to establish that, as a matter
of law, Galindo “adequately represented the interests and properly protected the
rights” of Daniel in the prior litigation. In re Dowsett Tr., 791 P.2d at 402–03
(identifying these factors as “major considerations in privity analysis”).1
1 If we were to apply federal preclusion principles, we would, for similar reasons, reach the same conclusion that Susott is not bound by Galindo’s loss in the prior litigation. See Taylor, 553 U.S. at 893–98, 904.
4 2. The district court did not abuse its discretion in denying Defendants’
motions to disqualify Judge Kobayashi under 28 U.S.C. § 455(a). Defendants have
not alleged that the judge was biased due to an “extrajudicial source,” but instead
rely only on her rulings and comments during the course of the entire litigation.
To prevail on such a theory, Defendants had to show that the judge’s rulings and
comments “display a deep-seated favoritism or antagonism that would make fair
judgment impossible.” Liteky v. United States, 510 U.S. 540, 555 (1994). The
district court properly concluded that this high standard had not been met. The
district court obviously did not view Defendants’ conduct with favor, but that is
not enough to warrant recusal. Cf. id. at 550–51 (stating that a judge is not
“recusable for bias” merely because, after hearing the evidence of the defendant’s
Free access — add to your briefcase to read the full text and ask questions with AI
NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS APR 13 2023 MOLLY C. DWYER, CLERK FOR THE NINTH CIRCUIT U.S. COURT OF APPEALS
EVAN AULD-SUSOTT, as Trustee for No. 21-17078 (1) Irrevocable Life Insurance Trust of John L. Susott & Kathryn C. Susott UAD D.C. No. 1:20-cv-00270-LEK-RT 8/17/1988 as Restated, Exempt Trust fbo Daniel C. Susott, & (2) Irrevocable Life MEMORANDUM* Insurance Trust of John L. Susott & Kathryn C. Susott UAD 8/17/1988 as Restated,Non- Exempt Trust FBO Daniel C. Susott; JOHN L. SUSOTT, Plaintiffs-Appellees, v. LAURYN GALINDO; DANIEL C. SUSOTT, Defendants-Appellants.
Appeal from the United States District Court for the District of Hawaii Leslie E. Kobayashi, District Judge, Presiding Argued and Submitted February 17, 2023 Honolulu, Hawaii
Before: BEA, COLLINS, and LEE, Circuit Judges.
Plaintiffs Evan Auld-Susott and John Susott (“Plaintiffs”) successfully
obtained substantial judgments in California state court against Defendant Daniel
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Susott (“Daniel”). Contending that the judgments remain unsatisfied even after the
recording of judgment liens against one of Daniel’s properties, Plaintiffs have
sought to impose a constructive trust on a condominium in Honolulu that Daniel
first transferred to Defendant Lauryn Galindo (“Galindo”) in 2010, before
Plaintiffs’ California state lawsuits were filed. Plaintiffs had filed an earlier federal
action in 2016 against Galindo only, and in that suit they succeeded in obtaining a
ruling in 2019 that voided the 2010 transfer as a fraudulent conveyance, thereby
returning title to the condominium to Daniel. However, the district court declined
to impose a constructive trust on the property in its 2019 ruling, because it
concluded that a return of the property to Daniel would be a sufficient remedy that
would make the condominium available for enforcement of the judgments. But
within days of the ruling undoing the transfer to Galindo, Daniel simply deeded the
property back to Galindo. Plaintiffs thereupon brought this action against both
Galindo and Daniel in 2020. The district court ultimately granted summary
judgment to Plaintiffs, voided the 2019 deed from Daniel to Galindo, imposed a
constructive trust on the condominium, and appointed a trustee. This appeal
followed.
1. The district court erred in finding that collateral estoppel barred Daniel
from relitigating matters decided in the 2016 lawsuit against Galindo.
Because the 2016 federal lawsuit rested on diversity jurisdiction, and there is
2 no sense in which Hawaii prelusion law is “incompatible with federal interests,”
Hawaii law governs the preclusive effect of the 2019 judgment rendered in that
case. Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508–09 (2001).
Under Hawaii law, a person is bound by a prior judgment only if that person was a
party to the prior suit or is in privity with such a party. Dorrance v. Lee, 976 P.2d
904, 910 (Haw. 1999); cf. Taylor v. Sturgell, 553 U.S. 880, 892–93 (2008)
(applying a similar rule in federal preclusion law). In finding that Daniel was in
privity with Galindo as a matter of law, the district court relied on the premise that
their interests with respect to the prior 2016 action against Galindo “were identical;
each wanted the transfer of property found valid.” This was error.
A mere commonality of interests is insufficient to establish privity under
Hawaii law. Rather, there must be a sufficient showing “that the relationship
between the one who is a party of record and another is close enough to include
that other within the res adjudicata.” In re Herbert M. Dowsett Tr., 791 P.2d 398,
402 (Haw. Ct. App. 1990) (citations and internal quotation marks omitted).
Plaintiffs bore the burden of establishing such a relationship between Daniel and
Galindo. See id. at 402–03. They failed to carry that burden.
There has been no showing that Daniel “had the same opportunity” as
Galindo “to control the [prior] proceedings,” nor has it been shown that Galindo
was “appointed” to represent Daniel’s “interests by any valid procedure.” Lingle v.
3 Haw. Gov’t Emps. Ass’n, 111 P.3d 587, 596 (Haw. 2005); see also Bush v. Watson,
918 P.2d 1130, 1136–37 (Haw. 1996) (holding that even a person’s participation as
an amicus curiae in a suit was insufficient to establish privity absent a showing that
“the nonparty and party had the same practical opportunity to control the course of
the proceedings”). Although the district court’s 2019 ruling noted the close,
almost familial relationship between Galindo and Daniel, a “close family
relationship, without more, ‘is not enough to bind a nonparty to a judgment.’” In
re Dowsett Tr., 791 P.2d at 403 (citation omitted). And, finally, this is not a
situation in which Daniel—the original owner—can be characterized as a
successive property owner whose rights to the property derive from a grant from
the losing litigant. Cf. Tibbetts v. Damon, 17 Haw. 203, 205 (1905) (“So far as
estoppel by former judgment is concerned, a grantee is in privity with his grantor,
but the converse is not true that a grantor is in privity with his grantee.”). The prior
litigation simply voided Galindo’s interests in the property, leaving in place
Daniel’s pre-existing rights. In short, Plaintiffs failed to establish that, as a matter
of law, Galindo “adequately represented the interests and properly protected the
rights” of Daniel in the prior litigation. In re Dowsett Tr., 791 P.2d at 402–03
(identifying these factors as “major considerations in privity analysis”).1
1 If we were to apply federal preclusion principles, we would, for similar reasons, reach the same conclusion that Susott is not bound by Galindo’s loss in the prior litigation. See Taylor, 553 U.S. at 893–98, 904.
4 2. The district court did not abuse its discretion in denying Defendants’
motions to disqualify Judge Kobayashi under 28 U.S.C. § 455(a). Defendants have
not alleged that the judge was biased due to an “extrajudicial source,” but instead
rely only on her rulings and comments during the course of the entire litigation.
To prevail on such a theory, Defendants had to show that the judge’s rulings and
comments “display a deep-seated favoritism or antagonism that would make fair
judgment impossible.” Liteky v. United States, 510 U.S. 540, 555 (1994). The
district court properly concluded that this high standard had not been met. The
district court obviously did not view Defendants’ conduct with favor, but that is
not enough to warrant recusal. Cf. id. at 550–51 (stating that a judge is not
“recusable for bias” merely because, after hearing the evidence of the defendant’s
behavior at trial, the judge is “exceedingly ill disposed towards the defendant, who
has been shown to be a thoroughly reprehensible person”). While the judge’s
criticisms here were often pointed, it was not an abuse of discretion to conclude
that they were not “so extreme as to display clear inability to render fair
judgment.” Id. at 551.
3. Because the district court’s summary judgment ruling placed critical
reliance on its application of preclusion principles, we must vacate that summary
judgment as to Daniel. Galindo, however, is bound by the findings made in
connection with the 2019 judgment. Nonetheless, because the district court’s
5 ultimate conclusions and remedy were predicated on its across-the-board
application of preclusion principles, we vacate the district court’s summary
judgment in its entirety, leaving it to that court on remand to reexamine in the first
instance the extent to which summary judgment may be warranted given that
preclusion principles apply only as against Galindo.2
VACATED AND REMANDED.3
2 Our vacatur of the summary judgment, which takes effect upon the issuance of this court’s mandate, necessarily vitiates the grounds on which the existing constructive trust rests. Nothing in our decision, however, should be construed as expressing a view as to whether or not, in light of our decision, the district court on remand could properly provide interim relief with respect to the property at issue pending further proceedings. Any such matter would appropriately be raised in the district court in the first instance. 3 Defendants’ motion to supplement the record on appeal is denied as moot.