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Jou v. Adalian

United States District Court, D. Hawaii

April 25, 2018

EMERSON M.F. JOU, M.D., Plaintiff,


          J. Michael Seabright Chief United States District Judge.


         This is the latest chapter in a contentious and procedurally complex legal saga spanning nearly ten years, encompassing two federal diversity suits and intervening bankruptcy proceedings, between Plaintiff Emerson Jou (“Plaintiff” or “Jou”) and Defendant Gregory Adalian (“Defendant” or “Adalian”) regarding promissory notes and an “SCV Limited Partnership” of which Adalian was the general partner and Jou was a limited partner.

         The present Motion involves conflict-of-law principles. Adalian moves for judgment on the pleadings, arguing that (1) California law applies to Jou's last remaining claim, which alleges intentional spoliation of evidence regarding the SCV Limited Partnership, and (2) if California law applies, then the claim fails because California does not recognize such a tort as pled in the Second Amended Complaint (“SAC”). ECF No. 194. Based on the following, the court agrees with Adalian and GRANTS the Motion.


         As before, it is not necessary to reiterate the protracted history of this dispute. It is detailed in three of the court's many previous orders in this and the related prior suit, Jou v. Adalian, Civ. No. 09-00226 JMS-BMK (D. Haw.) (“Jou I”). The court references those Orders for the full background - in particular, the court relies on:

• A February 5, 2015 Order in Jou I that denied Plaintiff's motion seeking an order to arrest Defendant for repeated failures to pay an outstanding judgment after entering into a July 6, 2010 settlement agreement that purported to settle Jou I (the “July 2010 Settlement Agreement”), see Jou I, 2015 WL 477268 (D. Haw. Feb. 5, 2015) (“the February 5, 2015 Order”);
• A September 1, 2016 Order in the present suit (Jou v. Adalian, Civ. No. 15-00155 JMS-KJM (“Jou II”)) that granted Defendant's motion for judgment on the pleadings, with leave to amend granted as to one count, see Jou II, 2016 WL 4582042 (D. Haw. Sept. 1, 2016) (“the September 1, 2016 Order”), ECF No. 67; and
• A July 13, 2017 Order in Jou II that denied Plaintiff's attempt to obtain affirmative relief on the SAC at a summary judgment stage, see Jou II, 2017 WL 2990280 (D. Haw. July 13, 2017) (“the July 13, 2017 Order”), ECF No. 171.

         Given those Orders, the court explains some of the relevant history to put the current Motion into proper context.

         Two types of claims were at issue in Jou I and Jou II: (1) those “with regard to the Notes” between Jou and Adalian, and (2) those “arising out of the SCV Limited Partnership or its affairs.” Jou II, 2017 WL 2990280 at *1 (citing Jou II, 2016 WL 4582042, at *2 n.3). The September 1, 2016, Order dismissed with prejudice, on res judicata grounds, the three Counts of Jou's First Amended Complaint (“FAC”) in Jou II that were “with regard to the Notes.” Those three Counts - sounding in allegations of settlement fraud arising out of the July 2010 Settlement Agreement between Jou and Adalian that was analyzed in the February 5, 2015 Order - were or could have been litigated in Jou I.[1] See Jou II, 2016 WL 4582042 at *17. But the September 1, 2016 Order granted Jou leave to amend the FAC's Count Three, which was his vaguely pled and potentially time-barred claim for intentional spoliation of evidence. Id. at *20. The court concluded that such a claim (assuming Hawaii law applied, and Hawaii would recognize such a tort) plausibly could have “arisen out of the SCV Limited Partnership or its affairs” and thus would not be barred by res judicata. Id. Specifically, the court “grant[ed] Jou leave to amend to file a [SAC] to attempt to allege a claim for ‘intentional spoliation of evidence' that is not time-barred (and that otherwise clearly fits within the Settlement Agreement's [carved out] exception for claims ‘with regard to' the SCV Limited Partnership).” Id.[2]

         In accordance with the leave he was granted, Jou filed his SAC on September 22, 2016, alleging a single count for intentional spoliation of evidence. ECF No. 68. The SAC contends, among other assertions, that Jou did not know that Adalian had spoliated SCV records until August 9, 2011 and September 7, 2011 (within a six-year limitations period for fraud under Hawaii law, and when Adalian knew of a potential lawsuit against him regarding the SCV Limited Partnership).[3] SAC ¶ 9.C. Specifically, the SAC alleges that Adalian “intentionally destroyed, concealed, or otherwise spoliated evidence designed to disrupt or defeat Plaintiff's potential lawsuit, ” id. ¶ 10, and that Jou only discovered such spoliation in August and September of 2011, during Adalian's bankruptcy proceedings in the Bankruptcy Court for the Middle District of Pennsylvania. Id. ¶¶ 10.B, 10.C. The SAC also alleges in some detail that “[t]here was a causal relationship between the acts of spoliation and the inability to prove the . . . claims in a lawsuit[, ]” id. ¶ 17, and that Jou suffered damages as a result of the alleged spoliation, id. ¶ 18.

         As previous Orders identified, a critical and unresolved question in this case is whether intentional spoliation of evidence - again, the only claim remaining in this action - is even actionable in tort. The September 1, 2016 Order explained that the Hawaii Supreme Court explicitly declined to answer a certified question from a judge of this court asking whether Hawaii law recognizes a civil cause of action for spoliation of evidence. See Jou II, 2016 WL 4582042, at *18 (discussing Matsuura v. E.I. du Pont de Nemours & Co., 102 Haw. 149, 73 P.3d 687 (2003), which set forth the elements of intentional spoliation of evidence as found in “[t]he few jurisdictions that recognize [such] a cause of action, ” but which did not resolve whether Hawaii recognized the tort because the plaintiff could not meet those elements even if applicable). The September 1, 2016 Order analyzed the FAC by likewise assuming the elements of the tort discussed in Matsuura. Similarly, the July 13, 2017 Order addressed (and denied) Plaintiff's attempt to obtain affirmative relief at a summary-judgment stage, applying the basic elements of a tort of intentional spoliation of evidence from other jurisdictions, and assuming that the tort exists in Hawaii law. See Jou II, 2017 WL 2990280, at *3.

         Because of this uncertainty, the court and the parties in this litigation have always contemplated the possibility of the court again certifying to the Hawaii Supreme Court the question whether Hawaii recognizes the tort.[4] For example, the September 1, 2016 Order mentioned the possibility. See 2016 WL 4582042, at *19 (“This court -- like Matsuura -- also need not decide (at this stage) whether Jou II is an appropriate case to address whether Hawaii would recognize the tort (or to certify again the question to the Hawaii Supreme Court.)”). Indeed, on October 7, 2016, soon after filing the SAC, Plaintiff filed a “Motion for Certification of Questions to the Hawaii Supreme Court.” See ECF No. 71. He sought to certify, among other questions, whether Hawaii recognizes a tort of intentional spoliation of evidence, and if so, what statute of limitations applies. Id.

         The court denied that certification motion without prejudice to the issue being raised later, reasoning in an Entering Order that,

Under Hawaii Rule of Appellate Procedure 13, certification of a question of Hawaii law by a federal court is only appropriate - among other factors - when a question is “determinative of the cause.” Haw. R. App. P. 13(a). It is premature in this action to decide whether any of the questions Plaintiff seeks to have certified are “determinative of the cause.”
. . . .
. . . In short - even if the court might otherwise be inclined to certify an open question of Hawaii law - there are many procedural scenarios where the question would not be “determinative of the cause.”

ECF No. 73.

         And after the July 13, 2017 Order (when the procedural posture became more appropriate to consider certification) the court held a status conference on August 1, 2017, discussing the certification possibility with counsel. ECF No. 183. During that conference, Adalian's counsel raised for the first time the possibility - apparently discovered while assessing whether certifying questions would be “determinative of the cause” under HRAP 13(a) - that California (not Hawaii) law might apply to the spoliation allegations because the SCV Limited Partnership document had specifically chosen California law. See SAC at Ex. A.50, ECF No. 68-2 (“Governing Law. The provisions of this Agreement shall be construed and enforced in accordance with the law of the State of California.”). The court thus granted Adalian leave to file an appropriate motion raising the choice-of-law issue. See ECF No. 183 (minutes providing that “Defendant may file a Motion re: choice of law.”); ECF No. 248 (Transcript of status conference).

         Given that the court explicitly gave Adalian leave to file such a motion, the court rejects Jou's arguments here that the present Motion for Judgment on the Pleadings is improper because it was filed after the then-dispositive motions cut-off date, or was an improper amendment to the then-applicable Rule 16 Scheduling Order.[5] If California law applies, whether Hawaii law recognizes an independent tort of intentional spoliation of evidence would not be “determinative of the cause.” The Hawaii Supreme Court would be deciding a hypothetical question. It was in that context that Adalian's counsel raised the choice-of-law question.

         Accordingly, Adalian filed the present Motion for Judgment on the Pleadings on August 17, 2017. ECF No. 194. Jou filed an Opposition on September 1, 2017, ECF No. 199, and Adalian filed a Reply on September 11, 2017. ECF No. 203. The matter was originally set for hearing on December 18, 2017, ECF No. 207, but the hearing was vacated at Jou's counsel's request, ECF No. 212, and the Motion was heard on February 12, 2018. ECF No. 235.


         Although the issue may be raised at other stages, a party may properly raise a choice-of-law question by a motion for judgment on the pleadings. See, e.g., Sutter Home Winery, Inc. v. Vintage Selections, Ltd., 971 F.2d 401, 405-08 (9th Cir. 1992) (addressing choice-of-law questions brought by a motion for judgment on the pleadings); cf. Hamby v. Ohio Nat'l Life Assur. Corp., 2012 WL 2568149, at *2 (D. Haw. June 29, 2012) (“[C]ourts need not wait for discovery before conducting choice of law analyses where the pleadings, construed in the plaintiff's favor, contain all necessary facts.”) (citations omitted) (deciding choice-of-law issue on motion to dismiss).

         A party may make a motion for judgment on the pleadings at any time after the pleadings are closed, but within such time as to not delay the trial. Fed.R.Civ.P. 12(c). Because the issue presented by a Rule 12(c) motion is substantially the same as that posed in a 12(b)(6) motion - whether the factual allegations of the complaint, together with all reasonable inferences, state a plausible claim for relief - the same standard applies to both. See Cafasso v. Gen. Dynamics C4 Sys., 637 F.3d 1047, 1054 & 1054 n.4 (9th Cir. 2011); see also Dworkin v. Hustler Magazine Inc., 867 F.2d 1188, 1192 (9th Cir. 1989) (holding that ...

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