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Electronically Filed Supreme Court SCWC-XX-XXXXXXX 30-NOV-2023 08:54 AM Dkt. 23 OP
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
---o0o---
KAWIKA FRANCO, Individually and as Personal Representative for the Estate of TIARE FRANCO; PEACHES KONG and APPLES ELABAN, as Next Friends of LOVELY FRANCO (Minor); TAUA GLEASON, as Next Friend of KOLOMANA KONG KANIAUPIO GLEASON and KAULANA KONG KANIAUPIO GLEASON (Minors); and CHERYL RUSSELL, as Next Friend of JEANNE RUSSELL (Minor), Respondents/Plaintiffs-Appellants,
vs.
SABIO REINHARDT, Petitioner/Defendant-Appellee,
and
JOSIAH OKUDARA, Respondent/Defendant-Appellee.
SCWC-XX-XXXXXXX
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-XX-XXXXXXX; CASE NO. 2CC121000458)
NOVEMBER 30, 2023
RECKTENWALD, C.J., McKENNA, AND EDDINS, JJ., CIRCUIT JUDGE SOUZA AND CIRCUIT JUDGE KAWASHIMA, ASSIGNED BY REASON OF VACANCIES
OPINION OF THE COURT BY EDDINS, J. *** FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER ***
I.
In this wrongful death case, Tiare Franco’s family (the
Francos) appeal, again. Last time they successfully appealed
the Circuit Court of the Second Circuit’s declaratory judgment
action ruling that National Interstate Insurance Company (NIIC)
had no duty to defend or indemnify Sabio Reinhardt. The Francos
allege Reinhardt negligently crashed a truck, killing passenger
Tiare Franco.
The Intermediate Court of Appeals (ICA) vacated the
declaratory judgment. It concluded that there were “genuine
issues of material fact regarding whether Reinhardt reasonably
believed he was entitled to operate the Truck at the time of the
fatal accident.” Nat’l Interstate Ins. Co., Inc. v. Reinhardt,
No. CAAP-XX-XXXXXXX, 2017 WL 1210101, at *2 (Haw. App. March 31,
2017) (mem. op.).
However, before the ICA resolved the Franco’s declaratory
action appeal, the circuit court held a jury trial. Neither
Reinhardt nor defense counsel participated. The Francos won.
The jury returned a multi-million dollar verdict in their favor.
After the ICA’s decision, NIIC again retained counsel for
Reinhardt. It was the same attorney who had represented him
during the three-year period preceding the circuit court’s
declaratory action ruling. Per Hawaiʻi Rules of Civil Procedure
(HRCP) 60(b), counsel moved to set aside the jury’s verdict.
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The Francos opposed the motion. And they moved to disqualify
Reinhardt’s counsel. They said counsel had a conflict and
violated the Hawaiʻi Rules of Professional Conduct (HRPC) by
acting without Reinhardt’s consent.
The trial court denied the Francos’ motion to disqualify
counsel. It granted Reinhardt’s motion to set aside the jury
verdict and judgment. The Francos appealed.
In a memorandum opinion, the ICA held that Reinhardt’s
counsel lacked authority to act as his lawyer. Since Reinhardt
had not expressly consented to re-engage defense counsel, the
lawyer lacked consent to represent him and advance his
interests. The lawyer violated the Hawaiʻi Rules of Professional
Conduct, the ICA ruled: “Retained Counsel did not have the
authority or Reinhardt’s consent to file motions on behalf of
Reinhardt.” Since the lawyer had no authority to file it, the
ICA chose not to reach the merits of the HRCP Rule 60(b) motion.
The ICA reinstated the jury’s verdict and judgment.
We disagree with the ICA’s view that counsel had no
authority to act on Reinhardt’s behalf. Reinhardt implicitly
consented to the representation, did not invoke his right to
refuse counsel, and there was no conflict that barred the
representation. We hold that the circuit court correctly denied
the Francos’ motion to disqualify counsel. Counsel did not
violate the HRPC by moving to set the judgment aside.
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We also hold that the circuit court did not abuse its
discretion by granting Reinhardt’s motion to set aside.
We vacate the ICA’s Judgment, affirm the circuit court’s
orders, and remand the case to the circuit court for proceedings
consistent with this opinion.
II.
On June 20, 2011 Reinhardt allegedly crashed his
girlfriend’s 2005 Dodge Ram pickup. Front passenger Tiare
Franco died. Her family sued Reinhardt for wrongful death.
NIIC, insurance carrier for the truck, retained counsel to
defend Reinhardt. Separately, NIIC filed a declaratory action.
NIIC claimed it had no duty to defend and indemnify Reinhardt
under the policy. Then it moved for summary judgment. The
circuit court granted NIIC’s MSJ. The insurance company had no
duty to defend Reinhardt. His lawyer withdrew.
In 2015, the Francos appealed the circuit court’s
declaratory judgment decision. NIIC’s policy covered Reinhardt,
they argued. Meanwhile, with the declaratory action appeal
pending, the circuit court scheduled a jury trial. Plaintiffs
did not request a pause. Though the appeal awaited resolution,
the trial started.
Reinhardt did not show up. Turns out, he left prison about
a month before jury selection. He had resolved the criminal
case associated with the homicide. Per a plea agreement, he
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pled no contest to negligent homicide in the third degree, a
misdemeanor, and received a one-year credit for time served
sentence. After he left prison, no one knew where he was.
No lawyer appeared for Reinhardt. A jury listened to the
case. On April 28, 2016, it found Reinhardt negligent and
awarded the Francos $3,562,000. On May 18, 2016, the court
entered final judgment.
Ten months later, the ICA ruled for the Francos in the
declaratory action appeal. The circuit court should not have
granted NIIC’s summary judgment motion. There were disputed
issues of material fact about NIIC’s duty to defend or indemnify
Reinhardt.
NIIC retained the same attorney to represent Reinhardt.
But by this point, almost a year had passed since the judgment.
The time to file a notice of appeal had long lapsed, and the
HRCP Rule 60(b) motion to set aside deadline – one year or
“reasonable time” - loomed.
NIIC reached Reinhardt by certified mail. NIIC’s letter
informed Reinhardt about the ICA’s remand, that NIIC had
retained the same lawyer for him under a reservation of rights,
and that counsel would move to set aside the judgment against
him. It included counsel’s contact information. Reinhardt
signed for the letter.
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Back on board, counsel hustled to find Reinhardt. He sent
letters and left voicemails. Investigators tried to locate
Reinhardt. Soon the attorney felt compelled to act. As he put
it:
We did do our best to try to contact him which then puts me in a weird position because what do I do? Sit on my hands and allow the one-year time period to lapse or do I do something and I file the motion? Well, I’m not going to sit on my hands. I’m going to do my best to try to defend him properly, and that’s why we filed this motion, your Honor, and that’s why we’re here today.
On May 18, 2017, counsel moved under HRCP Rule 60(b)(5)
(judgment “no longer equitable”) and Rule 60(b)(6)
(“extraordinary circumstances”) to set aside the $3.56 million
final judgment. Setting aside the judgment is equitable,
counsel insisted. The one-sided, lawyer-less trial shouldn’t
have happened. Reinhardt awaited an appellate decision about
whether NIIC had a duty to defend him at that trial.
Plus, Reinhardt alleged several trial errors: (1) the
Francos’ attorney made improper statements during jury
selection; (2) inadmissible hearsay evidence came in; (3) a
police officer improperly testified about the identity of the
driver (Reinhardt); (4) DNA evidence lacked a proper chain of
custody; and (5) counsel made improper closing arguments,
including referencing other multi-million dollar jury verdicts,
like an ESPN sportscaster’s $55 million invasion of privacy
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case, and deriding Reinhardt’s invocation of his Fifth Amendment
right against self-incrimination.
Not only did the Francos oppose the Rule 60(b) motion, they
moved to disqualify Reinhardt’s counsel. They leveled ethical
accusations against him. They said he broke several HRPC rules,
including failing to get Reinhardt’s consent to file the motion.
Regarding the motion to set aside, the Francos argue there
were no exceptional circumstances to justify setting aside the
judgment. Rather, NIIC just gambled – by not defending
Reinhardt at trial - and lost.
The circuit court denied the Francos’ motion to disqualify
counsel. It granted Reinhardt’s motion to set aside the final
judgment.
The Francos appealed.
The ICA issued a Memorandum Opinion on February 28, 2023.
The ICA only addressed one point of error: Did the trial court
err by denying the Francos’ motion to disqualify counsel?
Yes, the ICA decided. Counsel lacked authority to
represent Reinhardt when he filed the Rule 60(b) motion to set
aside. Reinhardt had to expressly consent before counsel moved
to set aside the $3,562,000 judgment. Otherwise, counsel defies
the Hawaiʻi Rules of Professional Conduct. With counsel out of
the way, the ICA ruled, the Rule 60(b) motion to set-aside
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should never have happened. The ICA vacated the order setting
aside the default judgment.
Reinhardt applied for cert, and we accepted.
III.
“The tripartite relationship between insurer, insured and
insurance defense counsel is unique.” Finley v. Home Ins. Co.,
90 Hawaiʻi 25, 29, 975 P.2d 1145, 1149 (1998). Counsel
represents the insured, but the insurance company pays their
fee. This creates a potential conflict of interest. When the
insurance company defends under a reservation of rights, “the
insurer may be more concerned with developing facts showing non-
coverage than facts defeating liability.” Id. at 30, 975 P.2d
at 1150. This relationship can trigger counsel’s ethical
obligations under the HRPC.
The Hawaiʻi Rules of Professional Conduct are elastic, not
stiff. “The Rules of Professional Conduct are rules of reason.
They should be interpreted with reference to the purposes of
legal representation and of the law itself.” HRPC Scope (eff.
2014). This is how we construe the rules. Fragiao v. State, 95
Hawaiʻi 9, 18, 18 P.3d 871, 880 (2001).
The HRPC and American Bar Association Model Rules of
Professional Conduct have another key goal: ensuring that the
legal industry’s regulations are conceived in the public
interest and improve access to the legal system. HRPC Preamble
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cmts. 6, 12 (eff. 2014); Model Rules of Pro. Conduct, Preamble
cmts. 6, 12 (Am. Bar Ass’n 2023). Interpreting and enforcing
the HRPC in a way that promotes access to our legal system,
rather than restricts it, fulfills a chief aim of professional
conduct rules. That purpose informs our analysis.
We address three issues: whether the circuit court abused
its discretion when it denied the Francos’ motion to disqualify
Reinhardt’s attorney; whether the attorney violated the HRPC
when he filed a Rule 60(b) motion to set aside the judgment; and
whether the circuit court abused its discretion when it set the
judgment aside.
We hold that insurance defense counsel may obtain the
consent that the HRPC requires by communicating information
reasonably sufficient for the client to appreciate the
significance of the matter. See HRPC Rule 1.0(c) (eff. 2014)
(defining “consult”). We therefore conclude that Reinhardt’s
counsel obtained consent and did not violate the HRPC by moving
to set aside the verdict.
We further hold that the trial court did not abuse its
discretion by granting Reinhardt’s HRCP Rule 60(b) motion to set
aside. Equity principles guide 60(b). JK v. DK, 153 Hawaiʻi
268, 274, 533 P.3d 1215, 1221 (2023). We apply 60(b) liberally,
“favoring a merits-oriented outcome that bends the rule’s
finality interest to accomplish justice.” Id. Neither
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Reinhardt nor any defense counsel participated in the trial,
which contained several putative errors. The circuit court
later found that the trial “was the embodiment of an unusual
case” justifying relief. We agree.
A.
First, the motion to disqualify counsel.
Because there was no ethical violation, the circuit court
correctly denied the Francos’ motion to disqualify. The ICA
erred.
Reinhardt’s counsel had no business representing him, the
ICA rules. The client didn’t consent after consultation – not
to the attorney-client relationship and not to the filing of the
Rule 60(b) motion to set aside. The lawyer was practicing law
without a client, the ICA suggests.
To support its belief that counsel had no client, the ICA
looks to Finley and four Hawaiʻi Rules of Professional Conduct
rules: Rule 1.7 (eff. 2014) (not getting consent and a conflict
waiver before representing Reinhardt), Rule 1.8 (eff. 2014)
(accepting payment from NIIC without Reinhardt’s express
consent), Rule 1.2 (eff. 2015) (lawyer shall abide by
Reinhardt’s decisions), and Rule 1.4 (eff. 2014) (lawyer will
consult Reinhardt). We take each in turn.
Like the present case, Finley concerns an insurer who
retains counsel for an insured party. It examines whether the
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insurer also has to pay for the insured’s personally retained
counsel. Id. 90 Hawaiʻi at 27, 975 P.2d at 1147.
The ICA relies on Finley’s discussion about the insured’s
“right to reject” - under a reservation of rights - the
insurer’s retained counsel. See id. at 35, 975 P.2d at 1155.
The ICA concludes that Reinhardt’s lawyer could not establish an
attorney-client relationship without his affirmative consent.
True, Reinhardt has a right to refuse NIIC’s retained
counsel. But the ICA overlooks something - Reinhardt never
refused counsel’s help.
The ICA misconstrues Finley to mean that unless an insured
expressly consents, counsel lacks the authority to act. But
Finley stands for express rejection. Thanks, but no thanks.
It’s the insured’s refusal to go with retained counsel that has
to be express. See Finley, 90 Hawaiʻi at 35, 975 P.2d at 1155.
Not refusing may manifest implied consent. See id. (the
defendants’ choice to retain their own counsel “did not operate
as an exercise of their right to reject the tender of the
defense under a reservation of rights”).
Finley’s conclusion illustrates this point. There, the
insured wanted the insurance company to pay both the lawyers it
provided and the lawyers the insured hired itself. Id. We held
that because the insured did not object to the insurance
company’s retained counsel, the insurance company only had to
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pay for the counsel it retained. Id. The determinative fact to
our analysis concerned whether the insured rejected retained
counsel.
Nothing in the record shows that Reinhardt rejected NIIC’s
offer of counsel. NIIC’s May 13, 2017 letter recaps the case
and reintroduces his previous attorney. After recounting the
circumstances that led to counsel withdrawing, NIIC alerts
Reinhardt about its decision to retain counsel and to instruct
counsel to quickly file an HRCP Rule 60(b) motion. The letter
provides counsel’s contact information, the filing deadline, and
NIIC’s reservation of rights. Reinhardt signed an
acknowledgement that he received the certified letter. Though
Reinhardt did not expressly consent to counsel, he also did not
expressly reject counsel.
If Reinhardt thinks retained counsel has violated any
ethical rules, he is not out of luck. He has remedies. As we
said in Finley: “These remedies include: (1) an action against
the attorney for professional malpractice; (2) an action against
the insurer for bad faith conduct; and (3) estoppel of the
insurer to deny indemnification.” 90 Hawaiʻi at 35, 975 P.2d at
1155. We found those remedies “adequate to deter unethical
conduct on the behalf of the insurer and retained counsel.” Id.
We believe the circuit court properly recognized that
denying the motion to disqualify would not hurt Reinhardt if he
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later decided he didn’t want that lawyer to represent him. As
the court put it: “any error in denying this motion can be
quickly and harmlessly remedied if Defendant Reinhardt is
finally located and contacted and expressed a desire, perhaps,
not to retain [Retained Counsel] as counsel at that time.”
B.
We turn to the Hawaiʻi Rules of Professional Conduct.
Divided loyalties inspire conflict of interest rules.
“Virtually all difficult ethical problems arise from conflict
between a lawyer’s responsibilities to clients, to the legal
system and to the lawyer’s own interest in remaining an ethical
person while earning a satisfactory living.” HRPC Preamble 9.
Rule 1.7 governs conflicts of interest. A conflict exists
if the representations directly conflict or “there is a
significant risk that the representation of one or more clients
will be materially limited by the lawyer’s responsibilities
to . . . a third person” (emphasis added). If a conflict
exists, the client must give their informed consent to enable
the representation. HRPC Rule 1.7(b).
Rule 1.7’s commentary explains that a material limitation
is a significant risk that the conflict will “materially
interfere with the lawyer’s independent professional judgment in
considering alternatives or foreclose courses of action that
reasonably should be pursued on behalf of the client.” HRPC
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Rule 1.7(b) cmt. 8. Comment 13 specifically addresses
situations where an insurer hires counsel for an insured. It
requires that “the arrangement should assure the special
counsel’s professional independence.”
Reinhardt’s retained counsel did not have a Rule 1.7
conflict. There was no direct conflict. The retained
attorney’s sole client is the insured. Finley, 90 Hawaiʻi at 33,
975 P.2d at 1153. NIIC and Reinhardt shared an interest in
contesting Reinhardt’s liability and setting aside the judgment.
And NIIC’s reservation of rights – where NIIC’s and Reinhardt’s
interests do conflict - was litigated in a separate declaratory
judgment action and is not at issue here.
There was also no material limitation. NIIC retained
counsel for Reinhardt. Then it got out of the way. NIIC did
not constrain Reinhardt’s lawyer from independently using his
professional judgment to advance Reinhardt’s interests. There
was no limitation, much less a material limitation, to counsel’s
representation of Reinhardt. In the absence of a material
limitation, Rule 1.7 is simply not pertinent. Fragiao, 95
Hawaiʻi at 20, 18 P.3d 882.
Rule 1.8(f)(1) disallows “compensation for representing a
client from one other than the client” unless “the client
consents after consultation” (emphasis added). Rule 1.0(c)
defines “consultation” as “communication of information
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reasonably sufficient to permit the client to appreciate the
significance of the matter.” Reasonably sufficient information
ordinarily includes “a disclosure of the facts and circumstances
giving rise to the situation, any explanation reasonably
necessary to inform the client or other person of the material
advantages and disadvantages of the proposed course of conduct,
and a discussion of the client’s or other person’s options and
alternatives.” HRPC Rule 1.0 cmt. 2. The needed communication
depends on the circumstances. Id.
Regarding Rule 1.8(f)(1), the ICA says that because NIIC
paid Reinhardt’s lawyer without his express consent, the lawyer
broke the rule. We interpret the rule according to its purpose.
HRPC Scope. Rule 1.8(f)’s commentary provides that the purpose
is to prevent conflicts “[b]ecause third-party payers frequently
have interests that differ from those of the client, including
interests in minimizing the amount spent on the representation
and in learning how the representation is progressing[.]” HRPC
Rule 1.8(f) cmt. 11. Commonly, this happens when an alleged
conspirator pays a co-conspirator’s legal bills. See, e.g.,
United States v. Hodge & Zweig, 548 F.2d 1347, 1350 (9th Cir.
1977) (drug-smuggling conspiracy allegedly included funding co-
conspirators’ legal defense).
We held in Fragiao that “the purpose of Rule 1.8(f) is to
mandate disclosure of the fact that the lawyer’s services are
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being paid for by a third party.” 95 Hawaiʻi at 21, 18 P.3d at
883 (cleaned up). NIIC’s letter to Reinhardt provided that
disclosure. The letter communicated that counsel would
represent Reinhardt in the Francos’ suit and NIIC was paying
under a reservation of rights. This was enough for Reinhardt to
understand the representation. The letter provided Reinhardt
with consultation, and his inaction, in the unique insurer-
insured context, manifested implicit consent.
To further support counsel’s putative ethical lapse, the
ICA turns to HRPC Rule 1.2(a). Per that rule, an attorney’s
legal decisions, the ICA says, require active consent from the
client. The rule states: “a lawyer shall abide by a client’s
decisions concerning the objectives of representation, and, as
required by Rule 1.4, shall consult with the client as to the
means by which the objectives are to be pursued. A lawyer may
take such action on behalf of the client as is impliedly
authorized to carry out the representation.” HRPC Rule 1.2(a).
Rule 1.4(a)(2) requires counsel to “reasonably consult with the
client about the means by which the client’s objectives are to
be accomplished.”
NIIC’s letter does the trick. The letter alerted Reinhardt
that counsel’s representation had the same objective as years
earlier – to contest Reinhardt’s liability for the lethal crash.
The letter gave Reinhardt the opportunity to follow up: it
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provided counsel’s contact information and told him about
counsel’s imminent motion. A one-way certified letter falls
short of our ideal standard for client communication, but
Reinhardt was a difficult client to find; it took two private
investigators to finally track him down. We conclude that the
letter sufficed to reestablish representation under the
circumstances.
C.
Once Reinhardt’s attorney was back in the game, he had the
authority, and the obligation, to file the Rule 60(b) motion.
Counsel did not violate the HRPC. He did the right thing.
One of a lawyer’s foremost duties is to advocate diligently
for the client’s interests. HRPC Rule 1.3 (eff. 2014). The
Comments to Rule 1.3 state that the lawyer should “take whatever
lawful and ethical measures are required to vindicate a client’s
cause” and act “with commitment and dedication to the interests
of the client and with zeal in advocacy upon the client’s
behalf.” HRPC Rule 1.3 cmt. 1. Allowing an uncontested $3.56
million judgment to stand unchallenged skirts this duty.
Strategic decisions are part of a lawyer’s job. Not every
decision needs a sign-off. The HRPC talks about the big things
- unilateral case-ending decisions, like settling a civil case
or taking a plea deal. HRPC Rule 1.2(a). On those issues, the
client has the ultimate authority. The lawyer shall abide by
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their decision. Id.; HRPC Rule 1.2 cmt. 1. As to how to carry
out representation, the lawyer may take actions that are
impliedly authorized. HRPC Rule 1.2(a).
Here, filing the motion to set aside was implicitly
authorized. Reinhardt knew about NIIC’s decision to re-retain
counsel for him. And NIIC told him about the lawyer’s need to
quickly file the motion to set aside. Nothing about the motion
compromised Reinhardt’s rights or ended the case. Rather, the
motion preserved Reinhardt’s rights and prolonged the case so
that he could present a defense on the merits. Counsel didn’t
need Reinhardt’s express consent to file the motion (which
plainly protected his client’s interests).
Further, counsel was obligated by NIIC’s duty of good faith
to Reinhardt. Hawaiʻi law endorses a stout duty to defend. If
there’s the possibility of coverage under the policy, the
insurance company must defend. St. Paul Fire & Marine Ins. Co.
v. Bodell Constr. Co., ___ Hawaiʻi ___, 2023 WL 7517083, at *2-3
(2023). In turn, the insured is entitled to independent
representation.
The three-headed relationship of insurer, insured, and
insurance defense counsel imposes special good faith duties on
the insurer. Finley, 90 Hawaiʻi at 36, 975 P.2d at 1156.
Because there are inherent potential conflicts of interest, an
insurance company must meet an exacting and enhanced standard of
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good faith when it defends a case under a reservation of rights.
See id. at 35, 975 P.2d at 1155.
We have described the insurer’s duty of good faith:
investigate the accident, retain competent defense counsel for
the insured, understand that the only client is the insured,
fully inform the insured about the defense and all relevant
developments to the policy and the lawsuit, and avoid
prioritizing the insurer’s financial interests over the
insured’s. Id. at 36-37, 975 P.2d at 1156-57.
Here, NIIC owes a duty of good faith to Reinhardt as an
alleged insured. Nothing in the record shows that counsel acted
in anything but Reinhardt’s best interests by moving to set
aside the judgment against him. Cf. Delmonte v. State Farm Fire
& Cas. Co., 90 Hawaiʻi 39, 51, 975 P.2d 1159, 1171 (1999)
(referring to retained counsel’s duty to look after “the best
interests of [the] client,” the insured party). Counsel had a
duty “to provide competent, ethical representation to the
insured.” Finley, 90 Hawaiʻi at 34, 975 P.2d at 1154. Both NIIC
and counsel must act to protect Reinhardt’s rights. Id. Moving
to set aside the judgment against Reinhardt satisfied these
duties. Not moving to set aside ignores these duties. Even
without Reinhardt’s express consent to file the motion, counsel
fulfilled NIIC’s duty of good faith towards Reinhardt.
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The duty of good faith also requires that insurance defense
counsel provide a defense which meets the HRPC’s ethical
standards. Id. at 35, 975 P.2d at 1155. As discussed above,
retained counsel’s representation, including filing the Rule
60(b) motion, complied with counsel’s professional obligations.
Counsel did not violate the HRPC by moving to set aside an
uncontested $3.56 million judgment against his client. The
attorney’s move was implicitly authorized by the representation,
required by NIIC’s duty of good faith, and crucial to protecting
Reinhardt’s interests.
IV.
Last, the circuit court correctly set aside the verdict.
We review decisions on HRCP Rule 60(b) motions for abuse of
discretion. JK, 153 Hawaiʻi at 278, 533 P.3d at 1225. The
circuit court did not abuse its discretion – it did the right
thing.
Equity principles guide Rule 60(b) motions. Id. at 274,
533 P.3d at 1221. We apply Rule 60(b) liberally, prioritizing a
merits-based outcome over the finality of judgments. Id.
Generally, our justice system disfavors default, preferring
adjudication on the merits. Id. at 278, 533 P.3d at 1225.
Rule 60(b) provides several avenues to vacate a judgment.
Rule 60(b)(5) permits relief when “it is no longer equitable
that the judgment should have prospective application[.]” The
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moving party must show “extraordinary circumstances justifying
relief.” Matter of Hawaiian Elec. Co., Inc., 149 Hawaiʻi 343,
362, 489 P.3d 1255, 1274 (2021).
Rule 60(b)(6) operates when “any other reason justif[ies]
relief.” The moving party must demonstrate “extraordinary
circumstances” why it could not have sought earlier, more timely
relief. James B. Nutter & Co. v. Namahoe, 153 Hawaiʻi 149, 169,
528 P.3d 222, 242 (2023). Under both Rule 60(b)(5) and (b)(6),
the motion for relief must be made “within a reasonable time.”
This case presents extraordinary circumstances. The
circuit court held a jury trial while NIIC’s duty to defend was
pending before the ICA. NIIC’s assigned defense counsel had
withdrawn. Reinhardt had recently been released from prison and
no one – the court or plaintiff’s counsel – could contact him.
As a result, the trial happened without a defendant or defense
counsel sitting at the defense table.
Not only was Reinhardt unrepresented and not present, but
several ostensible errors plagued the trial. During jury
selection, the Francos’ counsel made extensive factual and legal
arguments to potential jurors. This may be improper. See,
e.g., State v. Altergott, 57 Haw. 492, 499, 559 P.2d 728, 734
(1977) (inappropriate to educate the jury panel on facts,
instruct them on law, or present argument). The Francos’
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counsel also elicited seemingly inadmissible hearsay testimony
from the police officers who investigated the crash.
In her closing argument, counsel disparaged Reinhardt for
invoking his Fifth Amendment right against self-incrimination:
“Why would you refuse to answer questions if you have nothing to
hide?” – which may violate Reinhardt’s rights under the Hawaiʻi
Constitution. See Ramil v. Keller, 68 Haw. 608, 620-21, 726
P.2d 254, 262 (1986) (leaving open the question of whether the
Hawaiʻi Constitution right against self-incrimination applies to
civil cases). Counsel also discussed a sportscaster’s $55
million jury verdict. See Ching v. Dung, 148 Hawaiʻi 416, 433,
477 P.3d 856, 873 (2020) (“closing arguments should only refer
to evidence in the record”).
The Francos counter that these objections were waived
because no one objected at trial (neither Reinhardt nor counsel
were in the courtroom). The defense-less trial and its many
probable errors created extraordinary circumstances justifying
relief.
The trial should not have been defense-less. NIIC should
have defended Reinhardt pending a final resolution of coverage.
If there's a possibility of coverage - even a remote possibility
- the insurer has the duty to defend. St. Paul, 2023 WL
7517083, at *2-3. That duty continues until the obligation has
been conclusively eliminated. Newhouse by Skow v. Citizens Sec.
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Mut. Ins. Co., 501 N.W.2d 1, 6 (Wis. 1993) (“An insurance
company breaches its duty to defend if a liability trial goes
forward during the time a no coverage determination is pending
on appeal and the insurance company does not defend its insured
at the liability trial.”); Commerce & Indus. Ins. Co. v. Bank of
Hawaii, 73 Haw. 322, 329, 832 P.2d 733, 737 (1992) (“The duty to
defend continues until the potential for liability is finally
resolved, which in this case would require [the insurer] to
remain obligated to defend until either HRCP Rule 54(b)
certification was granted and the appeal period had expired or a
final judgment had disposed of the entire case.”).
Here, the Francos timely appealed the declaratory judgment,
keeping NIIC on the hook to defend Reinhardt. During the
appellate process, NIIC was obligated to represent Reinhardt in
the underlying case. Despite NIIC’s breach, this case still
presents extraordinary circumstances, including that the circuit
court did not stay the proceedings pending resolution of the
declaratory judgment, Reinhardt was missing, and there were many
alleged trial issues.
Reinhardt’s counsel filed his motion to set aside within
the reasonable time that Rule 60(b) requires. The ICA remanded
the issue of NIIC’s duty to defend or indemnify on March 31,
2017, nearly ten and a half months after the final judgment.
Once reengaged, counsel moved for relief within one month of
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being back on the case and within one year from the judgment –
well within a reasonable time. Counsel could not have sought
earlier, more timely relief.
The circuit court seems to realize it made a mistake by
forging ahead with trial. It concluded “extraordinary
circumstances surrounding the trial” warranted HRCP Rule 60(b)
relief. We agree.
V.
We hold that the circuit court properly denied the Francos’
motion to disqualify Reinhardt’s attorney. We therefore
conclude that counsel’s motion to set aside the verdict against
Reinhardt did not violate the HRPC. We also hold that
extraordinary circumstances supported setting aside the verdict.
orders, and remand the case to the circuit court.
J. Patrick Gallagher and /s/ Mark E. Recktenwald Kamalolo K. Koanui-Kong /s/ Sabrina S. McKenna for petitioner /s/ Todd W. Eddins Sue V. Hansen /s/ Kevin A.K. Souza for respondents /s/ James S. Kawashima