Chang v. Buffington

***FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER***

Electronically Filed
Supreme Court
30259
13-JUL-2011
08:59 AM
IN THE SUPREME COURT OF THE STATE OF HAWAI#I

---o0o---

WALTER Y.C. CHANG, Individually and as Trustee under that
certain unrecorded Trust Agreement of Walter Yin Choy Chang
dated August 3, 1982, and SYLVIA S.W. CHANG, Individually
and as Trustee under that certain unrecorded Trust
Agreement of Sylvia Seu Way Chang, dated August 3, 1982,
Respondents/Plaintiffs-Appellees,

vs.

EADEAN MICHIE BUFFINGTON,
Petitioner/Defendant-Appellant,

and

STEVE MONTGOMERY CROUCH, NAOMI HOKULANI CROUCH, HOKULANI SQUARE,
INC., INVESTORS FUNDING CORPORATION,
Respondents/Defendants-Appellees,

and

INTEGRITY ESCROW AND TITLE COMPANY, INC., fka First
Financial Title and Escrow Agency of Hawaii, Inc.,
nka Hawaii Escrow & Title, Inc.,
Petitioner/Third-Party Defendant-Appellant.

NO. 30259

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CIV NO. 05-1-1708)

JULY 13, 2011

RECKTENWALD, C.J., CIRCUIT JUDGE SAKAMOTO,
IN PLACE OF DUFFY, J., RECUSED, AND CIRCUIT
JUDGE AHN, ASSIGNED BY REASON OF VACANCY;
WITH NAKAYAMA, J., DISSENTING, WITH WHOM CIRCUIT
JUDGE TRADER, IN PLACE OF ACOBA, J., RECUSED, JOINS
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OPINION OF THE COURT BY RECKTENWALD, C.J.

In this appeal, we consider whether the Intermediate

Court of Appeals had jurisdiction to review a good faith

settlement determination, which was made by a federal bankruptcy

court prior to the case being remanded to state court.

Eadean Michie Buffington seeks review of the

Intermediate Court of Appeals’ June 4, 2010 order dismissing

Buffington and Integrity Escrow and Title Company, Inc.’s1 appeal

for lack of appellate jurisdiction. Buffington and Integrity

appealed pursuant to Hawai#i Revised Statutes § 663-15.5(e)

(Supp. 2009), quoted infra, from an order entered by the federal

bankruptcy court determining that a settlement of tort claims was

made in good faith. They filed their notices of appeal in the

circuit court, after the case had been remanded to that court.

The Intermediate Court of Appeals dismissed the appeal for lack

of appellate jurisdiction for three reasons: (1) one of the

defendants in the tort action was in bankruptcy; (2) the

bankruptcy court’s good faith settlement order was not in the

record on appeal; and (3) Hawai#i Revised Statutes §§ 602-57 and

663-15.5(e) do not authorize an appeal to a Hawai#i appellate

1
During the pendency of this case, Integrity Escrow and Title
Company, Inc., formerly known as First Financial Title and Escrow Agency of
Hawaii, Inc., merged into Hawaii Escrow & Title, Inc. and is now identified as
“Hawaii Escrow & Title, Inc., formerly known as Integrity Escrow and Title
Company, Inc., formerly known as First Financial Title and Escrow Agency of
Hawaii, Inc.” However, for ease of reference, the company will be identified
here as Integrity. As discussed further infra, Integrity is no longer a party
to this appeal.

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court from a good faith settlement determination made by a

federal court.

For the reasons set forth below, we hold that the

Intermediate Court of Appeals had jurisdiction. Accordingly, we

vacate the Intermediate Court of Appeals’ dismissal order and

remand to the Intermediate Court of Appeals for further

proceedings consistent with this opinion.

I. Background

A. Factual and procedural background

The following facts are taken from the record on appeal

(ROA), which includes all documents filed in the Circuit Court of

the First Circuit (circuit court) before the case was removed to

the United States Bankruptcy Court for the District of Hawai#i

(bankruptcy court), including the third amended complaint, and

documents filed in circuit court after the case was remanded,

discussed further infra.2

On September 23, 2005, the Walter Y.C. Chang Trust,

Walter Y.C. Chang, and Sylvia S.W. Chang (collectively the

Changs) filed a Complaint for Foreclosure and Other Relief in

Civil No. 05-1-1708 (the foreclosure action) in circuit court.

2
The record on appeal does not contain all of the documents filed
in the bankruptcy court. For example, the record on appeal only contains the
complaint and the first, second, and third amended complaints. However, the
appellate record includes a motion to modify the record on appeal, attached to
which was a fifth amended complaint that appears to have been filed in the
bankruptcy court while the case was removed. That motion was denied as moot
by the Intermediate Court of Appeals on June 8, 2010. Nevertheless, the
record on appeal contains sufficient information for this court to review the
jurisdictional question presented on appeal.

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The Changs filed their first, second, and third amended

complaints in the circuit court. According to the third amended

complaint, the subject of the foreclosure action was a Middle

Street apartment building that the Changs sold in 2003 to Steve

Crouch and Naomi Crouch (the Crouches). The sale was by way of a

purchase money mortgage executed by Hokulani Square, Inc., a

corporation of which the Crouches were the only directors,

officers, and shareholders. Hokulani Square subsequently

mortgaged the Middle Street building to secure a $1.9 million

loan from Investors Funding Corporation (Investors Funding) and

purchased commercial property on School Street. Investors

Funding’s mortgage on the Middle Street property was elevated

over the Changs’ purchase money mortgage on the property via a

subordination agreement that the Crouches allegedly secured from

the Changs.

The Changs’ third amended complaint alleged, inter

alia, that the Crouches and Hokulani Square were in default of

the purchase money mortgage. The third amended complaint further

alleged that the sale of the Middle Street building and the

execution of the subordination agreement were the result of undue

influence and/or fraud, and a breach of fiduciary duty by the

Changs’ attorney, Eadean Buffington (Buffington). The complaint

sought, inter alia, prioritizing of the Changs’ claims to the

Middle Street and School Street properties, an equitable lien on

the Middle and School Street properties, and damages against the

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Crouches, Hokulani Square, and Buffington.

On May 10, 2007, Hokulani Square filed a petition for

bankruptcy in bankruptcy court. On October 11, 2007, Hokulani

Square removed the Changs’ circuit court action to the bankruptcy

court as an adversary proceeding.3 In the adversary proceeding,

Integrity was added as a third party defendant.

B. The good faith settlement determination

On July 21, 2009, in the adversary proceeding, the

Changs filed a notice of settlement with Investors Funding, among

other parties, and petitioned the bankruptcy court for a

determination, pursuant to Hawai#i Revised Statutes (HRS)

§ 663—15.5(b),4 that the settlement was made in good faith. The

3
“The adversary proceeding is the bankruptcy analog of the civil
action. It is a separate and distinct litigation connected with the
bankruptcy case and has a separate docket number on the adversary proceeding
docket.” John Silas (“Si”) Hopkins, III, Adversary Proceedings in Bankruptcy,
39 No. 6 Prac. Law. 8, 55 (Sept. 1993).

4
HRS § 663-15.5 (Supp. 2009) provides, in relevant part:

Release; joint tortfeasors; co-obligors; good faith
settlement

(a) A release, dismissal with or without prejudice, or
a covenant not to sue or not to enforce a judgment
that is given in good faith under subsection (b) to
one or more joint tortfeasors, or to one or more
co-obligors who are mutually subject to contribution
rights, shall:

(1) Not discharge any other joint tortfeasor or
co-obligor not released from liability unless
its terms so provide;

(2) Reduce the claims against the other joint
tortfeasor or co-obligor not released in the
amount stipulated by the release, dismissal, or
covenant, or in the amount of the consideration
paid for it, whichever is greater; and

(continued...)

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bankruptcy court issued an order on December 2, 2009 granting the

Changs’ petition pursuant to HRS § 663-15.5.5 The order stated

in relevant part:
This order does not decide whether the Uniform
Contribution among Tortfeasors Act [HRS] § 663-11-
663.17 [sic]) applies to any of the claims in this
case. This order does decide, however, that the
settlement was made in good faith within the meaning
of [HRS] § 663-15.5.

C. Appeal and remand to circuit court

On December 10, 2009, pursuant to HRS § 663-15.5(e),6

4
(...continued)
(3) Discharge the party to whom it is given from
all liability for any contribution to any other
joint tortfeasor or co-obligor.

This subsection shall not apply to co-obligors who
have expressly agreed in writing to an apportionment
of liability for losses or claims among themselves.

(b) For purposes of subsection (a), any party shall
petition the court for a hearing on the issue of good
faith of a settlement entered into by the plaintiff or
other claimant and one or more alleged tortfeasors or
co-obligors, serving notice to all other known joint
tortfeasors or co-obligors. Upon a showing of good
cause, the court may shorten the time for giving the
required notice to permit the determination of the
issue before the commencement of the trial of the
action, or before the verdict or judgment if
settlement is made after the trial has commenced.

5
HRS § 663-15.5(c) (Supp. 2009) provides:

The court may determine the issue of good faith
for purposes of subsection (a) on the basis of
affidavits or declarations served with the petition
under subsection (a), and any affidavits or
declarations filed in response. In the alternative,
the court, in its discretion, may receive other
evidence at a hearing.

6
HRS § 663-15.5(e) (Supp. 2009) provides:

A party aggrieved by a court determination on
the issue of good faith may appeal the determination.
The appeal shall be filed within twenty days after
service of written notice of the determination, or
within any additional time not exceeding twenty days
(continued...)

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Buffington and Integrity appealed the bankruptcy court’s

December 2, 2009 good faith settlement determination in the

adversary proceeding. Buffington and Integrity also filed

statements electing to have their appeals heard by the United

States District Court for the District of Hawai#i (district

court).7

On December 16, 2009, while the appeal to the district

court was pending, the bankruptcy court filed its Order Remanding

Adversary Proceeding to State Court. The bankruptcy court’s

order remanding the adversary proceeding provided:
On October 11, 2007, Debtor Hokulani Square,
Inc., removed this action, Civil No. 05-1-1708-09,
from the Circuit Court of the First Circuit, State of
Hawaii, pursuant to 28 U.S.C. § 1452(a). [8] On
April 13, 2009, the court entered an Order Regarding
Remand of This Adversary Proceeding, setting a
deadline of May 15, 2009, for a party to file a motion
to withdraw reference of this matter to the district
court in order to conduct a jury trial. The order
further provided for remand of the action to the state
court absent the filing of such a motion. The
original deadline was most recently extended to
December 15, 2009. No timely motion to withdraw
reference has been filed.

6
(...continued)
as the court may allow.

7
28 U.S.C. § 158 (2005) authorizes appeals from judgments, orders,
or decrees of a bankruptcy court to: (1) a district court, (2) a bankruptcy
appellate panel, or (3) a court of appeals.

8
28 U.S.C. § 1452(a) (1990) provides:

A party may remove any claim or cause of action
in a civil action other than a proceeding before the
United States Tax Court or a civil action by a
governmental unit to enforce such governmental unit's
police or regulatory power, to the district court for
the district where such civil action is pending, if
such district court has jurisdiction of such claim or
cause of action under section 1334 of this title.

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NOW, THEREFORE, IT IS HEREBY ORDERED that this
adversary proceeding is remanded to the Circuit Court
of the First Circuit, State of Hawaii, pursuant to 28
U.S.C. § 1452(b). [9] The clerk shall forthwith
transmit a certified copy of this order together with
a copy of the docket sheet of this adversary
proceeding to the clerk of the Circuit Court of the
First Circuit. The parties shall be responsible for
providing copies of any process and pleadings to the
state court.

This order does not determine the effect of the
remand on the pending appeals of the Order Granting
Plaintiffs’ Petition for Determination of Good Faith
Settlement Pursuant to [HRS] § 663-15.5 Filed on July
21, 2009 (“Good Faith Order”), entered December 2,
2009. Notwithstanding the remand, the clerk shall
accept for filing in this adversary proceeding
documents necessary to perfect the appeals, such as a
designation of items to be included in the record on
appeal and a statement of issues to be presented.[ 10]

On December 22, 2009, Buffington and Integrity each

filed, in the circuit court, notices of appeal to the

Intermediate Court of Appeals (ICA), pursuant to HRS § 663-

15.5(e), from the bankruptcy court’s December 2, 2009 good faith

settlement determination.

On December 31, 2009, the bankruptcy court sent the

following four documents to the circuit court: (1) a certified

copy of the bankruptcy court’s December 16, 2009 remand order;

9
28 U.S.C. § 1452(b) (1990) provides:

The court to which such claim or cause of action
is removed may remand such claim or cause of action on
any equitable ground. An order entered under this
subsection remanding a claim or cause of action, or a
decision to not remand, is not reviewable by appeal or
otherwise by the court of appeals under section
158(d), 1291, or 1292 of this title or by the Supreme
Court of the United States under section 1254 of this
title.

10
As discussed further infra in note 17, federal cases indicate that
the district court did not retain jurisdiction to consider Buffington’s and
Integrity’s appeals.

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(2) a Notice of Remand advising the circuit court that the

bankruptcy court “maintains the official record of its cases and

proceedings in electronic format[]” and “[t]herefore, no case

file with paper documents is available for transmission with this

notice[,]” but that “[a] complete set of the documents in this

action may be accessed through the Federal Judiciary’s

centralized electronic records center on the Internet, Public

Access to Court Electronic Records (PACER) at

http://pacer.psc.uscourts.gov[;]” (3) a copy of the docket sheet

of the adversary proceeding; and (4) a certified copy of the

December 2, 2009 good faith settlement determination. The

circuit court filed these four documents in the record of the

foreclosure action (i.e., Civil No. 05-1-1708) on December 31,

2009.

On February 22, 2010, the circuit court record from the

foreclosure action, including the four documents transmitted from

bankruptcy court, was transmitted to the ICA as the ROA.

On April 21, 2010, Buffington and Integrity moved the

ICA to “modify” the ROA to include paper copies of 35 documents

filed in the adversary proceeding, including the December 2, 2009

good faith settlement determination.11 The Changs filed a

Statement of No Opposition to the motion.

11
As noted above, the bankruptcy court maintained the official
record of the adversary proceeding in electronic format and did not transmit
paper copies to the circuit court on December 31, 2009. However, the
bankruptcy court’s December 31, 2009 letter did include a paper copy of the
good faith settlement determination.

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D. The ICA’s decision

In its June 4, 2010 Order Dismissing Appeal, the ICA

dismissed Buffington and Integrity’s appeal for lack of appellate

jurisdiction. First, the ICA – upon noting that Hokulani

Square’s bankruptcy case was still pending in the bankruptcy

court – ruled that “[u]nder the Hawai#i Rules of Appellate

Procedure (HRAP) [Rule 54(c)], when a debtor in a bankruptcy

proceeding is also a party in a state court case, ‘the appellate

court shall not consider motions or requests for relief during

the pendency of the bankruptcy.’” (Internal brackets omitted).

Second, the ICA found that “the record on appeal . . . does not

contain either the original copy or a certified photocopy of the

December 2, 2009 United States Bankruptcy Court[‘s good faith

settlement] order.” Third, the ICA held that even if the

December 2, 2009 good faith settlement determination was in the

record on appeal, the order was not appealable to the ICA

because: (1) 28 U.S.C. § 158 authorizes appeals from a bankruptcy

court order to a federal district court, a federal bankruptcy

appellate panel, or a federal court of appeals and does not

authorize an appeal to a state appellate court; and (2) “it is

reasonable to infer from the plain language of HRS § 602-57[12]

12
HRS § 602-57 (Supp. 2009) provides, in relevant part:

Notwithstanding any other law to the contrary,
the intermediate appellate court shall have
jurisdiction, subject to transfer as provided in
section 602-58 or review on application for a writ of
certiorari as provided in section 602-59:
(continued...)

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and HRS § 663-15.5(e) that the word ‘court’ refers to only

Hawai#i state courts, and does not refer to a United States

Bankruptcy Court.”

On June 8, 2010, the ICA denied Buffington and

Integrity’s April 21, 2010 Joint Motion to Modify the Record on

Appeal as moot.

E. Motion for reconsideration of the ICA’s decision

On June 14, 2010, Buffington and Integrity moved for

reconsideration of the ICA’s dismissal order because the order

was “based on an incorrect assumption regarding the status of the

case in regards to bankruptcy proceedings, and [] was incorrect

regarding the [c]ourt’s jurisdiction.” Buffington and Integrity

also noted that the ICA “did not have a complete record to review

[because t]he record in this case does not yet contain any of the

substantive filings made in the [a]dversary [p]roceeding in

relation to the appeal issues.” (Footnote omitted). Regarding

the pendency of Hokulani’s bankruptcy case, Buffington and

Integrity asserted that “all cross-claims against Hokulani were

obviated” through a separate settlement agreement, which was

determined to be in good faith. Accordingly, Buffington and

Integrity argued that “Hokulani has nothing to gain or lose in

12
(...continued)
(1) To hear and determine appeals from
any court or agency when appeals are allowed by
law[.]

(Emphasis added).

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this action[,]” and “[Hokulani’s] pending bankruptcy should not

impede Buffington and Integrity’s appeals.” Regarding the ICA’s

interpretation of HRS § 663-15.5, Buffington and Integrity argued

that “it is not reasonable to infer that the word ‘court’ in [HRS

§] 663-15.5(e) refers only to Hawaii state courts [because s]uch

an inference would effectively deprive Integrity and Buffington

of their legislatively mandated appeal rights.” They also argued

that because the adversary proceeding had been remanded, “the

[b]ankruptcy [c]ourt no longer has jurisdiction over this case

and has no power to reconsider the Good Faith Settlement Order.

It is the Hawaii state courts that now have jurisdiction over the

case.”

The ICA denied the motion for reconsideration on

June 21, 2010.

F. The application for writ of certiorari

On September 2, 2010, Buffington and Integrity timely

filed a joint application for a writ of certiorari to review the

ICA’s June 4, 2010 dismissal order, June 8, 2010 order denying

the motion to modify the record, and the June 21, 2010 order

denying the motion for reconsideration. The Changs did not file

a response to the application. This court issued an order

accepting the application for certiorari on October 20, 2010. On

April 27, 2011, Integrity filed a stipulation to dismiss its

appeal. This court issued an order approving the dismissal on

May 5, 2011. The stipulation provided that the dismissal of

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Integrity did not affect Buffington’s appeal.

II. Standard of Review

“The existence of jurisdiction is a question of law

that [the appellate court reviews] de novo under the right/wrong

standard.” Captain Andy’s Sailing, Inc., v. Dep’t of Land &

Natural Res., 113 Hawai#i 184, 192, 150 P.3d 833, 841 (2006)

(internal quotation marks and citation omitted).

III. Discussion

Buffington challenges the three bases for the ICA’s

dismissal of her appeal for lack of appellate jurisdiction. For

the reasons set forth below, we conclude that the ICA erred on

each of these grounds and that the ICA had jurisdiction over the

appeal.

A. HRAP Rule 54(c) did not deprive the ICA of jurisdiction

Buffington argues that the ICA incorrectly applied HRAP

Rule 54(c) to the instant appeal. HRAP Rule 54(c) states that

“[t]he appellate court shall not consider motions or requests for

relief during the pendency of [a] bankruptcy [stay].” Based on

Rule 54(c), the ICA concluded that it could not consider the

appeal while Hokulani Square was in bankruptcy. That conclusion

is not supported by HRAP Rule 54(c), nor is it supported by the

automatic stay provision of the Bankruptcy Code. Hawai#i courts

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have looked to 11 U.S.C. § 362 (2006)13 to determine the limits

of bankruptcy stays for purposes of HRAP Rule 54. See, e.g.,

Onaka v. Onaka, 112 Hawai#i 374, 379-80, 146 P.3d 89, 94-95

(2006). 11 U.S.C. § 362(a)(1) stays the “commencement or

continuation . . . of a judicial . . . proceeding against the

[bankruptcy] debtor” during the pendency of the bankruptcy case.

(Emphasis added). It is well established that the automatic stay

is limited to proceedings against debtors and does not apply to

non-bankrupt codefendants. See Maritime Elec. Co. v. United

Jersey Bank, 959 F.2d 1194, 1203-06 (3d Cir. 1991) (“Within a

single case, some actions may be stayed, others not. Multiple

claim and multiple party litigation must be disaggregated so that

particular claims, counterclaims, crossclaims and third-party

claims are treated independently when determining which of their

respective proceedings are subject to the bankruptcy stay.”);

Ingersoll-Rand Fin. Corp. v. Miller Mining Co., 817 F.2d 1424,

1427 (9th Cir. 1987) (“[S]tays pursuant to section 362(a) are

limited to debtors and do not include non-bankrupt

co-defendants.”); Wedgeworth v. Fibreboard Corp., 706 F.2d 541,

544 (5th Cir. 1983); In re Advanced Ribbons & Office Prods.,

Inc., 125 B.R. 259, 263 (B.A.P. 9th Cir. 1991); 3 Collier on

Bankruptcy § 362.03[3][d] (Alan N. Resnick & Henry J. Sommer

13
11 U.S.C. § 362 has been amended in ways that do not materially
affect the relevant portion of the statute. Bankruptcy Technical Corrections
Act of 2010, Pub. L. No. 111-327, § 2(a)(12), 124 Stat. 3557, at 3558-59
(2010).

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eds., 16th ed.). In the instant case, the automatic stay is

limited to proceedings against debtor Hokulani Square and does

not apply to the other non-bankrupt parties. See id. Therefore,

the ICA erred in concluding that it lacked jurisdiction over

Buffington and Integrity’s appeal because Hokulani Square is in

bankruptcy.

B. The December 2, 2009 good faith settlement determination was
included in the record on appeal

The ICA concluded that it could not review the good

faith settlement determination made by the bankruptcy court

because the determination was not in the record on appeal.

Contrary to the ICA’s assertion, the good faith settlement

determination was transmitted from the bankruptcy court to the

circuit court on December 31, 2009, and was integrated into the

circuit court’s record. Accordingly, the good faith settlement

determination was part of the ROA when the record was transmitted

to the ICA on February 22, 2010. Therefore, the ICA erred in

concluding that it lacked jurisdiction over Buffington and

Integrity’s appeal because the December 2, 2009 good faith

settlement order was not in the record on appeal.

C. The ICA had appellate jurisdiction pursuant to HRS §§ 602-57
and 663-15.5(e)

The ICA also held that it did not have appellate

jurisdiction pursuant to HRS §§ 602-57 and 663-15.5(e).

HRS § 602-57 provides, in relevant part:
Notwithstanding any other law to the contrary,

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the intermediate appellate court shall have
jurisdiction, subject to transfer as provided in
section 602-58 or review on application for a writ of
certiorari as provided in section 602-59:

(1) To hear and determine appeals from
any court or agency when appeals are allowed by
law[.]

(Emphasis added).

HRS § 663-15.5(e) provides:
A party aggrieved by a court determination on
the issue of good faith may appeal the determination.
The appeal shall be filed within twenty days after
service of written notice of the determination, or
within any additional time not exceeding twenty days
as the court may allow.

(Emphasis added).

Buffington argues that the ICA erred when it concluded

that “it is reasonable to infer from the plain language of HRS

§ 602-57 and HRS § 663-15.5(e) that the word ‘court’ refers to

only Hawai#i state courts, and does not refer to a United States

Bankruptcy Court.” Regarding HRS § 602-57(1), Buffington asserts

that “if ‘plain language’ truly governs the meaning of ‘any

court,’ then that unrestricted term includes all courts, both

state and federal.” Buffington also contends that “[c]onversely,

if the Legislature plainly meant to limit appellate jurisdiction

to state courts, then it plainly would have written Section 602-

57(1) to say so.”

Regarding HRS § 663-15.5(e), Buffington asserts that

“federal courts can, and have, decided good faith petitions made

under [HRS] Chapter 663[]” and “[u]nder the ICA’s reasoning, such

determinations are immune from appellate review, because they

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would not be made by a ‘state’ court.” Buffington further

asserts that “the ICA’s interpretation of Section 663-15.5 and

Section 602-57 [] defeat[s Buffington’s] right to appeal [the

bankruptcy court’s] good faith determination” because “once a

remand occurs, the federal courts have no power over the matter.”

“[T]he fundamental starting point for statutory

interpretation is the language of the statute itself.” Estate of

Roxas v. Marcos, 121 Hawai#i 59, 66, 214 P.3d 598, 605 (2009)

(citations omitted). “[W]here the statutory language is plain

and unambiguous, [the appellate court’s] sole duty is to give

effect to its plain and obvious meaning.” Id.

HRS § 602-57(1) confers on the ICA jurisdiction “[t]o

hear and determine appeals from any court or agency when appeals

are allowed by law[.]” (Emphasis added). This statute requires

that the appeal be “from any court or agency” and that it be

“allowed by law[.]” Both requirements were met here. At the

time the notices of appeal were filed, this case had been

remanded to the circuit court of the first circuit, and the

notices of appeal were filed in that court. Thus, the

requirement that the appeal be from “any court” was satisfied

since the circuit court is clearly a “court” within the meaning

of the statute.

Moreover, the appeal was “allowed by” HRS § 663-

15.5(e), which provides that “[a] party aggrieved by a court

determination on the issue of good faith may appeal [that]

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determination.” The plain language of that statute does not

limit its application to orders entered by state courts.14

Moreover, even if we were to interpret it as being limited to

state court orders, as we set forth below, although the order was

entered by the bankruptcy court, it did not become a nullity when

the case was remanded to the circuit court. 16 James Wm. Moore

et al., Moore’s Federal Practice § 107 App. 113[2][b], at 200-01

(3d. ed. 2010) (“Orders entered by the district court prior to a

remand order are not nullities.”) To the contrary, unless it was

modified or set aside by the circuit court (neither of which

occurred here), it continued in effect even after the remand.

See id. Thus, regardless of the fact that it was originally

entered by the bankruptcy court, it was an order of the circuit

court at the time the notices of appeal were filed.

This result is consistent with well-established

principles of jurisdiction regarding remanded claims. One

prominent commentator has noted that underlying orders made by

the federal court remain in effect in the remanded state court

action until the state court takes action to modify or set them

aside:
Orders entered by the district court prior to a
remand order are not nullities. Insofar as they are

14
Indeed, as noted by the dissent, HRS § 663-15.5(e) has been
applied by the Hawai#i federal courts, and provides a basis for an appeal in
the federal system from good faith settlement determinations made by those
courts. Dissenting opinion at 3, 3 n.2 (citing White v. Sabatino, 526 F.
Supp. 2d 1135 (D. Haw. 2007) and Whirlpool Corporation v. CIT Group/Business
Credit, Inc., 293 F. Supp. 2d 1144 (D. Haw. 2003)). Such a result is possible
only if “a court” is interpreted as including federal courts.

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interlocutory and are included within the action or
the part of the action remanded, they would ordinarily
remain in effect, following the remand, until the
state court took appropriate action to modify or set
them aside.

16 Moore’s Federal Practice at 200-01 (3d. ed. 2010) (footnotes

omitted).

This principle has been recognized by both federal and

state courts. In Powers v. Southland Corp., 4 F.3d 223, 224 (3d

Cir. 1993), the Third Circuit considered whether the federal

courts retained jurisdiction to review an order granting a

relation back amendment that added a new party after the

expiration of the statute of limitations. The addition of the

new party destroyed diversity jurisdiction requiring remand of

the underlying action to state court. Id. The Third Circuit

ultimately concluded that the decision on the relation back

amendment was not final and that the federal appellate court

lacked jurisdiction to review it. Id. at 237.

The Third Circuit also considered whether the federal

court’s decision regarding the validity of the relation back

amendment would be reviewable in state appellate court. Id. at

225. The Third Circuit found that it was “aware of no doctrine

that would bar state courts from reviewing the district court’s

decision, and hence that decision will both have no preclusive

effect on the parties and may be effectively reviewed by the

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state appellate courts.”15 Id.; see also In re C & M Props.,

L.L.C., 563 F.3d 1156, 1166 (10th Cir. 2009) (noting that state

courts are “free to revisit any issue decided by the federal

court in a remanded claim prior to remand, and [are] ‘perfectly

free to reject the remanding court’s reasoning’”) (citation

omitted).

Similarly, in Southern Leasing Corp. v. Tufts, 804 P.2d

1321, 1322-23 (Ariz. Ct. App. 1991), the Court of Appeals of

Arizona held that a state court could properly make its own

findings regarding service of process, which was an issue that

had formed the basis for the federal court’s order of remand.

The state court reasoned that because the federal court had

remanded the entire case to state court and the remand was

unreviewable in federal court, “there is no issue preclusion and

[the defendant] is free to litigate the issue [of service of

process] in state court.” Id. at 1323.

The foregoing cases illustrate that state courts have

jurisdiction to review pre-remand orders entered by federal

courts in cases that are remanded back to a state court. In the

instant case, on December 16, 2009, the bankruptcy court remanded

the entirety of the adversary proceeding to the circuit court.

Six days after the remand, Buffington and Integrity filed notices

15
The Third Circuit in Powers also noted that the law of the case
doctrine sets “limitation[s] on the state trial court’s reconsideration of
issues decided by the federal trial court . . . [but does] not limit the state
appellate court’s power to review the decision.” 4 F.3d at 234 (emphasis in
original).

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of appeal in the circuit court, appealing the good faith

determination to the ICA pursuant to HRS § 663-15.5(e). At that

time, the good faith determination had not been modified or set

aside by the circuit court, and thus remained in effect. Since

HRS § 601-57 gives the ICA jurisdiction over appeals from the

circuit court that are “allowed by law,” and HRS § 663-15.5(e)

authorized an appeal from the good faith determination, the ICA

had jurisdiction over the appeal.

We respectfully disagree with the dissent’s suggestion

that the above-cited authorities are distinguishable because they

involved “non-final interlocutory decision[s] that [were] not

appealable in the federal system.” Dissenting Opinion at 5-6.

First, the bankruptcy court’s good faith settlement determination

is not a final, appealable order within the meaning of HRS § 641-

1(a), since it does not completely resolve all claims against all

parties in the underlying action.16 Jenkins v. Cades Shutte

Fleming & Wright, 76 Hawai#i 115, 119, 869 P.2d 1334, 1338 (1994)

(“an appeal from any judgment will be dismissed as premature if

the judgment does not, on its face, either resolve all claims

against all parties or contain the finding necessary for

certification under HRCP 54(b)”); see also White v. Sabatino,

16
Accordingly, we respectfully disagree with the dissent’s
suggestion that a circuit court’s good faith settlement determination is
appealable to the ICA pursuant to HRS § 641-1(a). Dissenting opinion at 3.
Although HRS § 641-1(a) allows for appeals from final judgments, it is not the
only statute to specifically authorize an appeal from a circuit court order.
See, e.g., HRS § 667-51(a) (specifying orders entered in a foreclosure case
that “shall be final and appealable,” despite lack of conformity with HRS
§ 641-1). Here, appeal is specifically authorized by HRS § 663-15.5.

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Civ. Nos. 04-00500 ACK/LEK, 05-00025 ACK/LEK, 2007 WL 2462634, at

*4 (D. Haw. 2007) (concluding that an order granting a good faith

settlement determination was “an interlocutory order because

final judgment has not been entered in the case nor has final

judgment been directed as to fewer than all of the claims of

parties pursuant to Rule 54(b) of the Federal Rules of Civil

Procedure.”).

Moreover, Powers and the other authorities cited above

focused on the question of whether the order at issue was

appealable in federal court only insofar as it related to whether

the state court might be barred by principles of issue preclusion

from modifying or rescinding the order on remand. Powers, 4 F.3d

at 234 (noting that, because the order “was interlocutory in

nature, there was no opportunity for the decision to have been

reviewed in the federal courts, and, as such, the decision has no

preclusive effect on state courts”) (emphasis added); C & M

Props., 563 F.3d at 1166 (noting that issue preclusion does not

attach in remanded claims because the parties could not have

obtained review of the judgment in the initial action as a matter

of law); S. Leasing, 804 P.2d at 1323 (noting that there was no

issue preclusion where the party could not have the federal

district court’s remand order reviewed in the federal system).

However, in the instant case the filing of the bankruptcy court’s

remand order divested the district court of jurisdiction before

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it could rule on the appeal.17 Since Buffington and Integrity

could not have their appeal resolved in the district court, the

bankruptcy court’s good faith determination could not have any

issue preclusive effect when the case was returned to state

court. See Bremer v. Weeks, 104 Hawai#i 43, 54, 85 P.3d 150, 161

(2004) (requiring, inter alia, a final judgment on the merits

before issue preclusion may be applied); see also Restatement

(Second) of Judgments § 28, at 273 (1980) (stating that even if

an issue is “litigated and determined to be a valid and final

judgment, and the determination is essential to the judgment,

relitigation of the issue in a subsequent action between the

parties is not precluded . . . [if t]he party against whom

preclusion is sought could not, as a matter of law, have obtained

review of the judgment in the initial action ”) (emphasis

17
Federal cases indicate that the district court here did not retain
jurisdiction over the appeal to the district court because the bankruptcy
court divested the federal courts of jurisdiction by remanding the entire case
to state court. See, e.g., C & M Props., 563 F.3d at 1159-62 (“It is long-
settled that a remand order renders the district court without jurisdiction
over remanded claims, such that any continued litigation over those claims
becomes a futile thing.”) (internal quotation marks omitted); see also
Mathewson v. Aloha Airlines, Inc., 82 Hawai#i 57, 70-74, 919 P.2d 969, 982-86
(1996) (discussing how federal district courts are divested of jurisdiction
after remand and state circuit courts’ jurisdiction is restored). As such, it
appears that once the bankruptcy court in the instant case remanded the
adversary proceeding to state court, the bankruptcy court and the district
court lacked jurisdiction to adjudicate the merits of the good faith
settlement.
As noted by the dissent, Buffington and Integrity’s inability to
obtain appellate review from the federal courts is not, standing alone,
sufficient to establish a right of appeal in state court. Dissenting opinion
at 4 n.3 (quoting Chambers v. Levy, 60 Haw. 52, 57, 587 P.2d 807, 810 (1978)).
Nevertheless, permitting an appeal in the instant case effectuates the policy,
set forth in HRS § 663-15.5(e), of allowing prompt appeals of good faith
settlement determinations.

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added)18; Clusiau v. Clusiau Enterprises, Inc., 225 Ariz. 247,

251, 236 P.3d 1194, 1198 (Ariz. Ct. App. 2010) (declining to

apply issue preclusion to a small claims court judgment, in part,

because it was not appealable as a matter of law); Algonquin

Power Income Fund v. Christine Falls of New York, Inc., 362 Fed.

Appx. 151, 155 (2d Cir. 2010) (holding that collateral estoppel

did not apply because appellant could not have appealed as a

matter of right). The good faith settlement order was therefore

interlocutory upon remand to the circuit court, and the

principles set forth by Professor Moore and in cases such as

Powers are fully applicable.

Finally, we address the ICA’s holding that it does not

have jurisdiction after remand to review an order entered by a

bankruptcy court based on the proposition that bankruptcy courts

have original and exclusive jurisdiction over bankruptcy cases

and, accordingly, that “bankruptcy court orders are not subject

to collateral attack in other courts.” (Quoting Gruntz v. Cnty.

of Los Angeles, 202 F.3d 1074, 1082 (9th Cir. 2000)). In support

of this proposition, the ICA relies on Gruntz and McGhan v. Rutz,

18
This court has explicitly adopted the reasoning of portions of the
Restatement (Second) of Judgments § 28 with regard to exceptions to issue
preclusion. See Marsland v. Int’l Soc’y for Krishna Consciousness, 66 Haw.
119, 124-25, 657 P.2d 1035, 1038-39 (1983) (recognizing the Restatement
exception to issue preclusion when “[t]he issue is one of law and . . . a new
determination is warranted . . . to avoid inequitable administration of the
laws”); Kaho#ohanohano v. Dep’t of Human Servs., 117 Hawai#i 262, 303-05, 178
P.3d 538, 579-81 (2008) (determining that the Restatement exception regarding
a “potential adverse impact of the determination on the public interest[,]” or
“because the party sought to be precluded . . . did not have an adequate
opportunity or incentive to obtain full and fair adjudication in the initial
action” did not apply to the facts of the case).

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288 F.3d 1172, 1179 (9th Cir. 2002). Both cases are

distinguishable because neither case considered state court

jurisdiction after remand to state court but instead considered

jurisdiction to entertain a collateral attack on bankruptcy court

orders in separate proceedings. See Gruntz, 202 F.3d at 1087-88

(discussing the interaction of federal bankruptcy court

proceedings and state court criminal proceedings and holding,

inter alia, that the bankruptcy court automatic stay does not

void state criminal judgments and that state trial courts need

not seek bankruptcy court approval before commencing criminal

proceedings); McGhan, 288 F.3d at 1175 (holding that a state

court lacked authority to modify a bankruptcy court’s earlier

determination discharging a claim and permanently enjoining a

creditor from collecting on a debt in a separate state court

action). In the instant case, Buffington is not mounting a

collateral attack on a bankruptcy court order in a separate state

court proceeding. Instead, Buffington is challenging, in a

remanded state court case, an order previously entered in the

bankruptcy court.

The ICA further relies on Noghrey v. Town of

Brookhaven, 305 A.D.2d 474-75 (N.Y. App. Div. 2003) in support of

its conclusion that HRS § 663-15.5(e) does not authorize an

appeal in state court from a federal bankruptcy court order.

Noghrey also is distinguishable. In Noghrey, the plaintiff

attempted to appeal a bankruptcy court’s summary judgment order

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to a state appellate court under a New York statute generally

granting appellate jurisdiction to the New York Appellate

Division. 305 A.D.2d at 474-75. At the time the appeal was

filed, the case was pending in federal bankruptcy court and had

not been remanded. Id. In contrast, in the instant case, the

bankruptcy court, after entering its good faith determination,

remanded the entire adversary proceeding to state court, vesting

the state courts with jurisdiction over all interlocutory orders.

See C & M Props., 563 F.3d at 1162; Mathewson, 82 Hawai#i at 70-

74, 919 P.2d at 982-86.

Accordingly, the good faith settlement order entered by

the bankruptcy court prior to remand is properly appealable in

the state court system pursuant to HRS §§ 602-57(1) and 663-15.5.

Once the case was remanded to the circuit court, the good faith

settlement determination “remain[ed] in effect” until “modif[ied]

or set [] aside” by the circuit court. See 16 Moore’s Federal

Practice, at 200-01. HRS § 663-15.5 authorized an appeal from

the determination, and HRS §§ 602-57(1) provided the ICA with

appellate jurisdiction since the appeal was allowed by law, and

was filed in the circuit court.

D. The Joint Motion to Modify the Record is not moot

The ICA denied Buffington and Integrity’s Joint Motion

to Modify the Record on the ground that it was moot, apparently

because the ICA had already dismissed Buffington and Integrity’s

appeal for lack of appellate jurisdiction. Because we conclude

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that the ICA erred in dismissing the appeal, the Joint Motion to

Modify the Record is not moot.

IV. Conclusion

For the foregoing reasons, we vacate the ICA’s

dismissal order and its order denying the Motion to Modify the

Record, and remand to the ICA for further proceedings consistent

with this opinion.

Carl H. Osaki on the /s/ Mark E. Recktenwald
application for
petitioner/defendant- /s/ Karl K. Sakamoto
appellant
/s/ Karen S. S. Ahn

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