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U.S. Bank Trust, N.A. v. Fonoti

United States District Court, D. Hawaii

May 8, 2018

U.S. BANK TRUST, N.A., AS TRUSTEE FOR LSF8 MASTER PARTICIPATION TRUST, Plaintiff,
v.
TALA RAYMOND FONOTI; et al., Defendants.

         FINDINGS AND RECOMMENDATION TO GRANT: (1) STATE OF HAWAI‘I OFFICE OF CONSUMER PROTECTION'S MOTION FOR ORDER REMANDING ACTION TO STATE COURT; AND (2) PLAINTIFF U.S. BANK TRUST, N.A.'S SUBSTANTIVE JOINDER TO STATE OF HAWAI‘I OFFICE OF CONSUMER PROTECTION'S MOTION FOR ORDER REMANDING ACTION TO STATE COURT FILED APRIL 5, 2018

          KENNETH J. MANSFIELD UNITED STATES MAGISTRATE JUDGE.

         Respondent David Keanu Sai (“Sai”) removed the instant action on March 27, 2018. See ECF No. 1. The State of Hawai‘i Office of Consumer Protection (“State of Hawai‘i”) filed its Motion for Order Remanding Action to State Court on April 5, 2018 (“Motion to Remand”). See ECF No. 7. On April 12, 2018, U.S. Bank Trust, N.A., as Trustee for LSF8 Master Participation Trust (“U.S. Bank Trust”) filed “Plaintiff's Substantive Joinder to State Of Hawaii Office of Consumer Protection's Motion for Order Remanding Action to State Court Filed April 5, 2018” (“Joinder”). See ECF No. 13. On April 27, 2018, Sai and Dexter Kaiama (“Kaiama”) (collectively, “Respondents”) filed “Respondents Sai and Kaiama's Memorandum in Opposition to Motion for Order Remanding Action to State Court Filed April 5, 2018” (“Opposition”). See ECF No. 33.

         The Court elected to decide the Motion to Remand without a hearing pursuant to Rule 7.2(d) of the Local Rules of Practice for the United States District Court for the District of Hawaii. The Court has carefully reviewed the State of Hawaii's Motion to Remand, U.S. Bank Trust's Joinder, and Respondents' Opposition. Based on the memoranda, the record in this case, and applicable case law, the Court FINDS and RECOMMENDS that the district court remand this action.

         BACKGROUND

         On January 23, 2018, the State of Hawai‘i filed a motion seeking leave to intervene in a foreclosure action (“Motion to Intervene”) in the Circuit Court of the First Circuit State of Hawai‘i (“State Court”) initiated by U.S. Bank Trust against Tala Raymond Fonoti and Willadean Lehuanani Grace (collectively, “Defendant homeowners”). See ECF No. 1-1 at 5. The State of Hawai‘i also sought leave to add Rose Dradi (“Dradi”) and Respondents as parties to the foregoing foreclosure action in State Court (“Foreclosure Action”). Id. at 6. The State of Hawai‘i alleged in its Motion to Intervene that the purpose of petitioning the State Court for leave in the Foreclosure Action was to seek relief for “the unlawful and deceptive conduct, including but not limited to engaging in mortgage resuce [sic] fraud, of said new parties done in connection with the instant foreclosure action to the detriment of the Defendant homeowners.” Id.

         The State of Hawai‘i also filed an Ex Parte Motion for Issuance of an Order Directing Respondents Rose Dradi, David Keanu Sai, and Dexter Kaiama to Appear and Show Cause Why They Should Not Be Found to Have Violated Applicable Consumer Protection Laws on January 23, 2018 (“Motion to Issue Show Cause Order”). See ECF No. 7-2. The State Court granted the State of Hawaii's Motion to Intervene and Motion to Issue Show Cause Order on January 25, 2018. See ECF No. 1-1 at 20-21; ECF No. 7-3 at 37. On that same day, the State Court issued its “Order Directing Respondents Rose Dradi, David Keanu Sai, and Dexter Kalama to Appear and Show Cause Why They Should Not Be Found to Have Violated Applicable Consumer Protection Laws and Notice of Hearing” (“Order to Show Cause”). See ECF No. 7-3 at 37.

         The State of Hawai‘i served Kaiama the Motion to Intervene, the Motion to Issue Show Cause Order, and the Order to Show Cause on February 1, 2018. The State of Hawai‘i served Sai the same documents on February 6, 2018. See ECF Nos. 7-4 to 7-5. The State of Hawai‘i contends that the State Court granted the State of Hawai‘i authority to serve Dradi by publication because, despite its efforts, the State of Hawai‘i has been unable to personally serve Dradi. ECF No. 7-1 at 10.

         On February 21, 2018, Kaiama filed a “Motion to Dismiss for Lack of Subject Matter Jurisdiction, Pursuant to HRCP Rule 12(B)(1)” in State Court (“Motion to Dismiss”). See ECF No. 1-1 at 23. On March 5, 2018, Sai filed a Memorandum in Support of Kaiama's Motion to Dismiss (“Memo in Support”). See id. at 71. Sai subsequently filed a “Supplemental Memorandum to Deny Joinder and in Support of Motion to Dismiss for Lack of Subject Matter Jurisdiction, Pursuant to HRCP Rule 12(B)(1)” on March 27, 2018 (“Supplemental Memo”). See ECF No. 1-1 at 147.

         Later on March 27, 2018, Sai removed the action to this district court. See ECF No. 1. Sai contends that the district court has federal jurisdiction over this action under 28 U.S.C. § 1331 “because the State of Hawai‘i seeks remedies involving Sai who [is] a foreign diplomat.” Id. at 3. Sai asserts that his status as a foreign diplomat is established by a treaty between the Hawaiian Kingdom and the United States:

There is a treaty created by exchange of notes verbales between Sai, who served as Minister of the Interior and Agent for the Hawaiian Kingdom and the United States Department of State in March of 2000, creating a treaty whereby the United States afforded de facto recognition of the Hawaiian Kingdom Government in regards to an international arbitration proceeding held under the auspices of the Permanent Court of Arbitration in Lance Larsen v. Hawaiian Kingdom, case no. 1999-01.

Id. (emphasis in original).

         Sai contends that because his Memo in Support and Supplemental Memo raise federal questions pursuant to § 1331, this action is subject to removal pursuant to 28 U.S.C. § 1441(c). Id. Sai also contends that pursuant to 28 U.S.C § 1446(b), the Notice of Removal is timely filed within thirty days from the date of service of the Memo in Support, “which raised for the first time the federal questions.” Id. at 4.

         The State of Hawai‘i filed its Motion to Remand on April 5, 2018. U.S. Bank Trust subsequently ...


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