United States District Court, D. Hawaii
ORDER GRANTING DEFENDANT THE MALULANI GROUP
LIMITED'S MOTION FOR SUMMARY JUDGMENT ON ISSUE ON REMAND,
ECF NO. 197
Michael Seabright United States District Judge
March 19, 2013, Plaintiff Reading International, Inc.
(“Plaintiff” or “Reading”) filed this
action alleging that Defendant The Malulani Group, Limited
(“Defendant” or “TMG”) breached a
July 2, 2009 settlement agreement (the “Settlement
Agreement”) between the parties based on the alleged
failure: 1) to provide timely financial statements for
certain leased properties; 2) to provide access to financial
books and records; and 3) to timely certify compliance with
§ 5.2(b) of the Settlement Agreement.
separate Orders, this court granted summary judgment in favor
of TMG. See ECF Nos. 96, 164; Reading Int'l,
Inc. v. Malulani Grp., Ltd., 16 F.Supp.3d 1185 (D. Haw.
2014), Reading Int'l, Inc. v. Malulani Grp.,
Ltd., 40 F.Supp.3d 1312 (D. Haw. 2014). On appeal, the
Ninth Circuit affirmed in part, reversed in part, and
remanded for a determination of a single issue. Reading
Int'l, Inc. v. Malulani Grp., Ltd., 694 Fed.Appx.
571 (9th Cir. 2017). Now before the court is TMG's Motion
for Summary Judgment on that single remand issue - whether
TMG “materially breached the Settlement Agreement when
two individual Defendant Parties failed to timely certify
their compliance with § 5.2(b) of the Settlement
Agreement.” Id. at 572.
court concludes that the failure to timely certify compliance
with § 5.2(b) of the Settlement Agreement was not
material. TMG's Motion for Summary Judgment is thus
2006, Plaintiff purchased stock in TMG's subsidiary,
Malulani Investments Limited (“MIL”) for $1.8
million. See ECF No. 198, Def.'s Concise
Statement of Facts (“CSF”) ¶ 1.
Approximately six months later, Plaintiff and others
commenced litigation against MIL and its directors (Easton
Manson, John Dwyer, Jr., Kenwei Chong, and Philip Gray) in
Hawaii state court, after which TMG intervened. Id.
After mediation, the parties reached a settlement in July
2009. Id. ¶ 3. This overall settlement was
documented in five related agreements, including the
Settlement Agreement, a Note, a Mortgage, and two Pledge
documents. Id. ¶ 6.
Settlement Agreement, between Plaintiff, Magoon Acquisition
and Development, LLC, and James Cotter (collectively defined
as “Plaintiff Parties” in the Settlement
Agreement), and TMG, MIL, Easton Manson, John Dwyer, Jr.,
Philip Gray, and Kenwei Chong (collectively defined as
“Defendant Parties” in the Settlement Agreement),
includes monetary compensation in return for stock. ECF No.
200-4. Specifically, it provides that in exchange for
Plaintiff's surrender of all of Plaintiff's stock in
TMG companies and other consideration, Defendant Parties
shall make a $2.5 million payment to Plaintiff and issue a
Promissory Note in the amount of $6.75 million. Id.
These payments were made, and are not the subject of the
Settlement Agreement also includes a provision regarding the
confidentiality and destruction of an investigatory report
regarding James Cotter (the “Kroll Report”), and
an April 2, 2008 “Order Regarding Allegation of
Improper Purpose by Special Master Michael N. Tanoue”
(the “Tanoue Order”). Under §§ 5.2(a)
and (b), the Settlement Agreement requires the Defendant
Parties to destroy all copies of the Kroll/Tanoue Documents
in their possession or custody, and to use best efforts to
procure and destroy the Kroll/Tanoue Documents in the
possession of certain related persons/entities. Next, the
Settlement Agreement requires a certification that best
efforts were used by the Defendant Parties to comply with
§§ 5.2(a) and (b):
Within forty-five (45) days of the Closing Date, the
Defendant Parties (a) shall destroy all copies of the Kroll
Report and the Tanoue Order (as defined above) within their
possession or custody, (b) shall use their best efforts to
procure and destroy all copies of the Kroll Report and the
Tanoue Order in the possession or control of the Defendant
Parties' past or current affiliates, partners,
subsidiaries (including subsidiaries of subsidiaries),
parents, agents, principals, directors, officers, investors
(direct or indirect), owners (direct or indirect), employees,
attorneys, representatives, successors, predecessors, and
assigns, and (c) shall certify in writing to the
Plaintiff Parties that the Defendant Parties have used their
best efforts to comply with Subsections (a) and (b).
Id. § 5.2 (emphasis added).
Settlement Agreement further outlines confidentiality
restrictions on Defendant Parties regarding the Kroll/Tanoue
Documents, id. § 5.2(d)-(g), and states that
“this Section is material to this Agreement and has
been necessary to induce Plaintiff Parties to enter this
Agreement.” Id. § 5.2. Finally, the
Settlement Agreement elsewhere states that “[t]ime is
of the essence as to each and every provision of this
Agreement.” Id. § 8.18.
declaration, TMG President Easton Manson (also President and
Director of MIL) sets forth TMG's compliance with §
5.2. First, he states that all six of the Defendant Parties
“complied with Section 5.2(a) by destroying all copies
of the [Kroll/Tanoue Documents] in their possession within
the 45-Day Period.” Manson Decl. ¶ 13; ECF No.
198-1. As to § 5.2(b), on July 6, 2009, Manson sent a
letter of behalf of the Defendant Parties “to their
respective agents requesting that, in accordance with Section
5.2 of the Settlement Agreement, they each return or destroy
all copies of the [Kroll/Tanoue Documents] in their
possession.” Id. ¶ 14. All recipients of
that letter, including Chong and Gray's law firm,
confirmed that they had “searched for and destroyed or
deleted all copies of the [Kroll/Tanoue Documents] in their
possession with the 45-Day Period.” Id.
¶15; see also ECF No. 198-8. “Thus, all
six Defendant Parties, including Directors Chong and Gray,
also complied with Section 5.2(b) of the Settlement Agreement
by requesting and receiving confirmation from their agents
that their agents had destroyed all copies of the
[Kroll/Tanoue Documents] in their possession within the
45-Day Period.” Manson Decl. ¶ 16. The 45-day
period ended on August 16, 2009. Id. ¶ 10.
§ 5.2(c) certification of compliance with §§
5.2(a) and (b), however, was incomplete. As explained by
Manson, on August 14, 2009 (again, within the 45-day time
period) the six Defendant Parties submitted to Reading a
“Certification by Defendant Parties, ” signed by
all six. Id. ¶ 17; see also ECF No.
198-9 at 3. This document certified that all six Defendant
Parties complied with the requirements of § 5.2(a), but
only listed four of the Defendant Parties as certifying
compliance with § 5.2(b). That is, the certification
states that TMG, MIL, Manson, and Dwyer used their best
efforts to comply with § 5.2(b) of the Settlement
Agreement, but does not mention Chong or Gray. According to
Manson, the certification “inadvertently failed to note
similar compliance by Chong and Gray, even though that
compliance had occurred.” Id. ¶ 17; ECF
November 13 and December 4, 2009, Reading sent two notices of
default relating to TMG's financial reporting
obligations. Id. ¶ 18. Then, on December 16,
2009, for the first time Reading notified TMG that the August
14, 2009 certification was deficient because Chong and Gray
had failed to certify compliance with § 5.2(b).
Id. ¶ 19; see also ECF No. 198-12.
Five days later, on December 21, 2009, Chong and Gray each
executed a certification, stating that they had indeed used -
before the expiration of the 45-day period - “best
efforts to comply with Subsections (a) and (b) of Section 5.2
of the Settlement Agreement.” Manson Decl. ¶ 20;
see also ECF No. 198-13.
this background, TMG now moves for summary judgment on the
single question remanded by the Ninth Circuit - whether TMG
“materially breached the Settlement Agreement when
[Chong and Gray] failed timely to certify their compliance
with § 5.2(b) of the Settlement Agreement.”
Reading Int'l, 694 Fed.Appx. at 572.
on two of this court's previous summary judgment orders,
on July 26, 2017, the Ninth Circuit reversed in part,
affirmed in part, and remanded. On January 5, 2018, Defendant
filed its Motion for Summary Judgment on Issue on Remand. ECF
No. 197. Plaintiff filed an Opposition on March 12, 2018, ECF
No. 202, ...