Opinion ID: 2585525
Heading Depth: 2
Heading Rank: 1

Heading: Liability for Litigation Misconduct Including Fraud

Text: As previously stated, the first certified question asks: Under Hawai`i Law, is a party immune from liability for civil damages based on that party's misconduct, including fraud, engaged in during prior litigation proceedings? Hawai`i courts have applied an absolute litigation privilege in defamation actions for words and writings that are material and pertinent to judicial proceedings. See Abastillas v. Kekona, 87 Hawai`i 446, 447, 958 P.2d 1136, 1137 (1998) (noting that the Intermediate Court of Appeals (ICA) affirmed the circuit court's dismissal of a libel action against an attorney based upon absolute immunity); Ferry v. Carlsmith, 23 Haw. 589, 591 (1917) (adopting an absolute privilege for communications made by attorneys in the conduct of judicial proceedings, discussed in greater detail infra ); Hall v. State, 7 Haw.App. 274, 285, 756 P.2d 1048, 1056 (1988) (holding that a deputy attorney general's alleged defamatory statements made in preparation of the defense of his clients were absolutely privileged); McCarthy v. Yempuku, 5 Haw.App. 45, 48, 678 P.2d 11, 14 (1984) (noting that the Hawai`i Supreme Court has adopted an absolute litigation privilege). DuPont urges this court to follow those jurisdictions that have expanded the protection of the litigation privilege to claims outside of defamation actions. [14] DuPont also argues that allowing subsequent suits based upon prior litigation misconduct: (1) runs contrary to the policy against derivative litigation; (2) ignores the interest in finality of judgments indicated by HRCP Rule 60(b); [15] and (3) threatens the fundamental public policy favoring the compromise of disputes. The Matsuuras maintain that: (1) this court should not expand the litigation privilege beyond defamation actions; (2) under authorities cited by DuPont, the misconduct alleged in the instant case is not protected by the privilege; [16] and (3) this court should not follow the decision of Judge Gold in Florida Evergreen I because it was based upon an erroneous interpretation of Florida law. The Matsuuras also address policy concerns, arguing that allowing a party to be held liable for litigation misconduct: (1) reinforces the integrity of the legal system; (2) encourages voluntary settlement of disputes; (3) does not encourage collateral litigation; (4) ensures just compensation for victims; and (5) discourages abusive litigation practices.
The scope of any privilege is based upon policy considerations. See generally Blair v. Ing, 95 Hawai`i 247, 263, 21 P.3d 452, 468 (2001); Abrams v. Cades, Schutte, Fleming & Wright, 88 Hawai`i 319, 325, 966 P.2d 631, 637 (1998). As noted by the authorities discussed infra, the interrelated policies associated with the litigation privilege include: (1) promoting the candid, objective, and undistorted disclosure of evidence; (2) placing the burden of testing the evidence upon the litigants during trial; (3) avoiding the chilling effect resulting from the threat of subsequent litigation; (4) reinforcing the finality of judgments; (5) limiting collateral attacks upon judgments; (6) promoting zealous advocacy; (7) discouraging abusive litigation practices; and (8) encouraging settlement. Therefore, in order to determine whether the litigation privilege should bar a subsequent collateral proceeding for civil damages based on litigation misconduct, including fraud, we must first address the policies associated with the privilege.
The United States Supreme Court (U.S. Supreme Court) has noted that underlying the litigation privilege is public policy which requires that the paths which lead to the ascertainment of truth should be left as free and unobstructed as possible. Briscoe v. LaHue, 460 U.S. 325, 333, 103 S.Ct. 1108, 75 L.Ed.2d 96 (1983) (citing Calkins v. Sumner, 13 Wis. 193, 197 (1860)). The Court explained: A witness's apprehension of subsequent damages liability might induce two forms of self-censorship. First, witnesses might be reluctant to come forward to testify. And[,] once a witness is on the stand, his testimony might be distorted by the fear of subsequent liability. Even within the constraints of the witness's oath[,] there may be various ways to give an account or to state an opinion. These alternatives may be more or less detailed and may differ in emphasis and certainty. A witness who knows that he might be forced to defend a subsequent lawsuit, and perhaps to pay damages, might be inclined to shade his testimony in favor of the potential plaintiff, to magnify uncertainties, and thus to deprive the finder of fact of candid, objective, and undistorted evidence. Briscoe, 460 U.S. at 333, 103 S.Ct. 1108 (citing Veder, Absolute Immunity in Defamation: Judicial Proceedings, 9 Colum. L.Rev. 463, 470 (1909)); see also Murphy v. A.A. Mathews, a Division of CRS Group Engineers, Inc., 841 S.W.2d 671, 674, reh'g overruled, 841 S.W.2d 671 (Mo.1992). Thus, the litigation privilege is based upon the assumption that exposing witnesses to liability may result in distorted evidence presented to the finder of fact. The litigation privilege's purpose of encouraging candid, objective, and undistorted evidence to better enable the finder of fact to uncover the truth is consistent with this court's statements regarding the function of the courts. We have described courts as forums for the discovery of truth, State v. Haanio, 94 Hawai`i 405, 415, 16 P.3d 246, 256 (2001) (quoting People v. Barton, 12 Cal.4th 186, 47 Cal.Rptr.2d 569, 906 P.2d 531, 536 (1995)), and have stated that courts perform two essential tasks: sifting through conflicting versions of the facts to discover where truth lies, and applying the correct legal principles to the facts as found. Office of Disciplinary Counsel v. Breiner, 89 Hawai`i 167, 173, 969 P.2d 1285, 1291 (1999) (quoting In re Vincenti, 92 N.J. 591, 458 A.2d 1268, 1275 (1983)). Thus, discouraging candid disclosure by witnesses reduces the amount and quality of evidence available to the finder of fact, thereby impairing the court's ability to sift through conflicting versions of the facts to discover the truth. Generally speaking, policy considerations favor limiting liability for litigation misconduct because the threat of liability might reduce the quantity and quality of evidence available to the finder of fact. However, in the present case, the defendants are alleged to have fraudulently distorted the evidence presented in a prior proceeding. Clearly, such misconduct is directly contrary to the policy of promoting the candid, objective, and undistorted disclosure of evidence. Accordingly, this policy does not favor limiting liability in a subsequent proceeding where there is an allegation of fraud committed in the prior proceeding.
The U.S. Supreme Court has stated that the truth-finding process is better served if the witness's testimony is submitted to `the crucible of the judicial process so that the factfinder may consider it, after cross-examination, together with the other evidence in the case to determine where the truth lies.' Briscoe, 460 U.S. at 334, 103 S.Ct. 1108. Stated another way, [I]n immunizing participants from liability for torts arising from communications made during judicial proceedings, the law places upon litigants the burden of exposing during trial the bias of witnesses and the falsity of evidence. Silberg, 266 Cal.Rptr. 638, 786 P.2d at 370. The litigation privilege helps ensure that the parties diligently investigate and test the evidence in a timely manner. Placing the burden of testing the evidence on the parties potentially limits subsequent claims of newly discovered evidence or fraud and is, therefore, also related to the policy of encouraging the finality of judgments, discussed infra. However, withholding and destroying evidence obviously frustrates the policy of placing the burden of testing the evidence upon the litigants. Clearly, parties cannot test what is willfully and wrongfully withheld from them. Therefore, such policy does not favor limiting liability in subsequent proceedings when fraud is uncovered after judgment has been rendered or the case has been settled and dismissed.
Courts serve an important role in resolving conflicts and defining rights. The U.S. Supreme Court has observed that, [o]ver the course of centuries, our society has settled upon civil litigation as a means for redressing grievances, resolving disputes, and vindicating rights when other means fail. Zauderer v. Office of Disciplinary Counsel of the Supreme Ct. of Ohio, 471 U.S. 626, 643, 105 S.Ct. 2265, 85 L.Ed.2d 652 (1985). The Court has also noted that it traditionally has held that the Due Process Clauses protect civil litigants who seek recourse in the courts, either as defendants hoping to protect their property or as plaintiffs attempting to redress grievances. Logan v. Zimmerman Brush Co., 455 U.S. 422, 429, 102 S.Ct. 1148, 71 L.Ed.2d 265 (1982). Consistent with the important role of the courts, we have recognized the importance of meaningful access to them. See Setala v. J.C. Penney Co., 97 Hawai`i 484, 491, 40 P.3d 886, 893 (2002). The litigation privilege's purpose of encouraging witnesses and parties to take part in judicial proceedings is based on the premise that the threat of subsequent liability discourages participation. See Briscoe, 460 U.S. at 333, 103 S.Ct. 1108. By protecting communications during judicial proceedings, the litigation privilege affords litigants and witnesses the utmost freedom of access to the courts without fear of being harassed subsequently by derivative tort actions. Silberg v. Anderson, 50 Cal.3d 205, 266 Cal. Rptr. 638, 786 P.2d 365, 369 (Cal.1990); see also Levin, Middlebrooks, Mabie, Thomas, Mayes, and Mitchell, P.A. v. United States Fire Ins. Co., 639 So.2d 606, 608 (Fla.1994) [hereinafter, Levin ]; Murphy, 841 S.W.2d at 674. Hawai`i courts have also recognized that the threat of subsequent litigation affects access to the courts. In the context of an action for malicious prosecution, the ICA noted: We do not wish to open the door to a second lawsuit being filed by the defendant every time the plaintiff loses a previous lawsuit, followed, we suppose, by a third lawsuit if the plaintiff in the second lawsuit loses that one and so on ad infinitium. We think that one of the things that distinguishes our society is the citizen's relative freedom of access to the courts. The preservation of that freedom lies behind the basic American rule against allowing attorney's fees to the successful party in litigation except where such is provided by agreement, statute, rule or precedent. To adopt [the policy urged] with respect to granting summary judgments in malicious prosecution suits would be to expose the plaintiffs in the original action to the harassment and expense of malicious prosecution suits without the person bringing the second action having any basis for his claim of malice. This would tend to discourage resort to the court where irreconcilable conflict exists. Brodie v. Hawaii Automotive Retail Gasoline Dealers Ass'n., Inc., 2 Haw.App. 316, 321, 631 P.2d 600, 604 (1981) (emphases added), rev'd on other grounds, 65 Haw. 598, 655 P.2d 863 (1982). [17] As the ICA has indicated, liability in subsequent proceedings tends to discourage parties from turning to the courts where an irreconcilable conflict exists. In this manner, the chilling effect resulting from the threat of subsequent litigation hinders access to the courts, which undermines the courts' role in resolving disputes and vindicating rights. Given the importance of access to the courts, the policy of avoiding the chilling effect resulting from the threat of subsequent litigation generally favors limiting liability in subsequent proceedings.
DuPont notes that allowing a party to be held liable for civil damages in a subsequent proceeding based on litigation misconduct conflicts with the policy of encouraging finality of judgments. Although this court has recognized a general policy favoring finality of judgments, see Shimabuku v. Montgomery Elevator Co., 79 Hawai`i 352, 358, 903 P.2d 48, 54 (1995), it has also stated that a judgment or final order should reflect the true merits of the case. Magoon v. Magoon, 70 Haw. 605, 616, 780 P.2d 80, 86 (1989). In Magoon, a party sought relief from a final property division, alleging that the final order was procured through fraud. Based on an interpretation of Hawai`i Family Court Rules (HFCR) Rule 60(a) and (b), this court held that the family court had jurisdiction to entertain the motion for relief from the final order. Magoon, 70 Haw. at 616, 780 P.2d at 86 (citations omitted). Although the HFCR is not applicable to the present case, this court's observation in Magoon is noteworthy: HFCR 60(b)(3), like its precursors, Rule 60(b)(3) of the Federal Rules of Civil Procedure and Rule 60(b)(3) of the Hawaii Rules of Civil Procedure, codifies a well-recognized exception to the finality principle; it has been formulated to permit relief in several of the situations in which the desire for truth is deemed to outweigh the value of finality. Magoon, 70 Haw. at 616 n. 4, 780 P.2d at 86 n. 4 (citations and brackets omitted). Thus, HRCP Rule 60(b)(3), see supra note 6, reflects this court's preference for judgments on the merits over the finality of judgments procured through fraud. Additionally, HRCP Rule 60(b) states, This rule does not limit the power of a court to entertain an independent action to relieve a party from a judgment, order, or proceeding, or to set aside a judgment for fraud upon the court. The Federal Rules of Civil Procedure (FRCP) contain a similar provision, which courts have interpreted to remove any fixed time limit to directly attack a judgment based on fraud upon the court. Rozier v. Ford Motor Co., 573 F.2d 1332, 1337-38 (5th Cir.), reh'g denied, 578 F.2d 871 (1978); Serzysko v. Chase Manhattan Bank, 461 F.2d 699, 701-02 (2d Cir.), cert. denied, 409 U.S. 883, 93 S.Ct. 173, 34 L.Ed.2d 139 (1972); Wilkin v. Sunbeam Corp., 405 F.2d 165, 166 (10th Cir.1968); Dausuel v. Dausuel, 195 F.2d 774, 775 (D.C.Cir.1952). Based upon the persuasive authority of federal interpretations of the FRCP, this court has indicated that the one-year limitation in HRCP Rule 60(b) is not applicable when fraud was committed upon the court. In re Genesys, 95 Hawai`i 33, 37 n. 4, 18 P.3d 895, 899 n. 4 (2001); but see Hayashi v. Hayashi, 4 Haw.App. 286, 292, 666 P.2d 171, 175-76 (1983) (noting that there is no relief in equity when the movant had an adequate remedy at law or could have opened, vacated, modified the decree or judgment, or obtained relief in the original action by exercising proper diligence, or where the situation from which relief is sought has been caused by movant's own fault, neglect, inadvertence or carelessness). Thus, the relief available under HRCP Rules 60(b) and 60(b)(3) reflect the preference for judgments on the merits over the finality of judgments, especially when such judgments are procured through fraud. Accordingly, when there is an allegation of fraud, the policy of reinforcing the finality of judgments does not favor limiting liability in a subsequent proceeding.
A collateral attack is an attempt to impeach a judgment or decree in a proceeding not instituted for the express purpose of annulling, correcting or modifying such judgment or decree. The word collateral, in this connection, is always used as the antithesis of direct, and it is therefore wide enough to embrace any independent proceeding. To constitute a direct attack upon a judgment, it is said, it is necessary that a proceeding be instituted for that very purpose. If an appeal is taken from a judgment, or a writ of error, or if a motion is made to vacate or set it aside on account of some alleged irregularity, the attack is obviously direct, the sole object of the proceeding being to deny and disprove the apparent validity of the judgment. But if that action or proceeding has an independent purpose and contemplates some other relief or result, although the overturning of the judgment may be important or even necessary to its success, then the attack upon the judgment is collateral and falls within the rule. Kapiolani Estate, Ltd. v. Atcherly, 14 Haw. 651, 661 (1902) (citations and some quotation marks omitted) (italics in original) (underscored added). As previously stated, the Matsuuras' present action includes claims of fraud, racketeering, abuse of process, infliction of emotional distress, interference with prospective economic advantage, spoliation of evidence, and punitive damages. Thus, the present action has a purpose independent of overturning the judgment of the third circuit court and contemplates relief other than that sought in the original action. Therefore, the present action is a collateral attack upon the stipulated dismissal granted on November 23, 1994. This court has stated that, as a general rule, a collateral attack may not be made upon a judgment or order rendered by a court of competent jurisdiction. If it is only a question of error or irregularity and not of jurisdiction, it cannot be raised on collateral attack. First Hawaiian Bank v. Weeks, 70 Haw. 392, 398 772 P.2d 1187, 1191 (1989) (brackets, citations, and internal quotation marks omitted); see also State v. Grindling, 96 Hawai`i 402, 31 P.3d 915 (2001); In re Genesys, 95 Hawai`i at 37 n. 4, 18 P.3d at 899 n. 4; Matson Navigation Co. v. Federal Deposit Ins. Corp., 81 Hawai`i 270, 916 P.2d 680 (1996); Cooper v. Smith, 70 Haw. 449, 776 P.2d 1178 (1989). However, HRCP Rule 60(b) specifically allows for collateral proceedings when there is an allegation of fraud upon the court, stating, This rule does not limit the power of a court to entertain an independent action to relieve a party from a judgment, order, or proceeding, or to set aside a judgment for fraud upon the court. (Emphasis added.) Thus, like the policy favoring the finality of judgments, the policy against collateral attacks on judgments is not absolute and does not favor limiting liability in a collateral proceeding when there is an allegation that fraud was committed in the prior proceeding.
The ICA has noted that one purpose of the litigation privilege is to force the parties to present their best arguments at trial, stating: The absolute privilege is grounded on the important public policy of securing to attorneys as officers of the court the utmost freedom in their efforts to secure justice for their clients. Restatement § 586 comment a. Thus, it not only protects attorneys in the pursuit of their profession, but also ensures the public's right to zealous legal representation. Counterbalancing this, however, is the equally important public policy of protecting individuals from defamatory statements which are unrelated to the judicial proceeding involved. McCarthy, 5 Haw.App. at 48, 678 P.2d at 14. Similarly, the California Supreme Court has stated that the litigation privilege promotes the effectiveness of judicial proceedings by encouraging attorneys to zealously protect their clients' interests. Silberg, 266 Cal. Rptr. 638, 786 P.2d at 370. Just as participants in litigation must be free to engage in unhindered communication, so too must those participants be free to use their best judgment in prosecuting or defending a lawsuit without fear of having to defend their actions in a subsequent civil action for misconduct. Levin, 639 So.2d at 608. This court has stated that zealous advocacy is a necessary component of our judicial system. Breiner, 89 Hawai`i at 171, 969 P.2d at 1289; see also In re Attorney's Fees of Mohr, 97 Hawai`i 1, 7, 32 P.3d 647, 653 (2001) (noting the policy of this court not to sanction court-appointed attorneys if their arguments on appeal reflect zealous advocacy on behalf of their clients). However, as the ICA has noted, there are limits to how far an attorney should go in representing a client; there is also a requirement that clients be zealously represented `within the bounds of the law.' Myers, 5 Haw.App. at 246, 687 P.2d at 16 (citing Giuliani v. Chuck, 1 Haw.App. 379, 384, 620 P.2d 733, 737 (1980)). Accordingly, even cases upholding the litigation privilege circumscribe its application. For example, the ICA has noted that the purpose of the litigation privilege was to allow attorneys freedom in their efforts to secure justice for their clients. McCarthy, 5 Haw.App. at 48, 678 P.2d at 14. Similarly, the Florida Supreme Court stated that the privilege was intended to allow parties the use of their best judgment in pursuing their claims. Levin, 639 So.2d at 608. Litigation misconduct that amounts to a fraud on the court directly conflicts with the pursuit of justice and never results from a reasonable advocate's best judgment. Thus, the policy of promoting zealous advocacy is counterbalanced by the need to adequately punish and discourage such misconduct. Consequently, the policy of promoting zealous advocacy does not favor limiting liability in subsequent collateral proceedings for fraud.
The Matsuuras argue that this court should allow the defendants to be held liable for fraud in a subsequent, collateral action to dissuade abusive litigation practices. Other jurisdictions have noted that other established remedies, including court sanctions, contempt proceedings, criminal prosecutions, and disciplinary actions against attorneys already serve to discourage litigation misconduct. See Florida Evergreen I, 135 F.Supp.2d at 1283 (citations omitted); Levin, 639 So.2d at 608; Silberg, 266 Cal.Rptr. 638, 786 P.2d at 370-71. Thus, we must examine the efficacy of established remedies for litigation misconduct and the benefits of allowing a subsequent, collateral proceeding for fraud. Criminal contempt, attorney discipline, and criminal prosecution deter the type of litigation misconduct alleged in the instant case. However, none of these remedies compensate the victims of such misconduct. Criminal contempt is used to punish past defiance of a court's judicial authority, thereby vindicating the court.  LeMay v. Leander, 92 Hawai`i 614, 621, 994 P.2d 546, 553 (2000) (emphasis added) (citation omitted). Regarding attorney discipline, this court has stated that disciplinary proceedings do not provide a means of redress for one complaining to have been personally wronged by an attorney. Akinaka v. Disciplinary Bd. of the Hawai`i Supreme Court, 91 Hawai`i 51, 59, 979 P.2d 1077, 1085 (1999) (citation and internal quotation marks omitted). Similarly, the principal goals of the penal system, as declared by our legislature in 1986, are deterrence and punishment. State v. Medeiros, 89 Hawai`i 361, 369, 973 P.2d 736, 744 (1999) (citing Sen. Conf. Comm. Rep. No. 51-86, in 1986 Senate Journal, at 748). Thus, although criminal contempt, attorney discipline, and criminal prosecution deter and punish the kind of misconduct alleged in the instant case, the primary goal of these procedures is not to compensate parties injured by such misconduct. On the other hand, procedures exist to compensate parties for litigation misconduct. A civil contempt proceeding allows parties to pursue compensation for litigation misconduct. As this court has noted, in a civil contempt proceeding, the sanction is wholly remedial, serves only the purposes of the complainant, and is not intended as a deterrent to offenses against the public. LeMay, 92 Hawai`i at 621, 994 P.2d at 553 (citation omitted). However, to maintain a successful claim of civil contempt, a movant must establish that: (1) the order with which the contemnor failed to comply is clear and unambiguous; (2) the proof of non-compliance is clear and convincing; and (3) the contemnor has not diligently attempted to comply in a reasonable manner. LeMay, 92 Hawai`i at 625, 994 P.2d at 557 (citation omitted). We note that, but for the fact that the circuit court entered specific discovery orders in this case, the principal allegations of fraudulent conduct could not have been addressed through a civil contempt proceeding. Thus, the requirement of a clear and unambiguous court order limits the utility of civil contempt as a means of compensating parties injured by fraud committed during prior litigation proceedings. The HRCP also provide a means to compensate parties for injuries suffered from litigation misconduct. A successful motion under HRCP Rule 60(b) allows parties to vacate a judgment procured through fraud and to pursue compensation that is consistent with the true value of their claims. Additionally, upon successfully reopening a case through an HRCP Rule 60(b) proceeding, aggrieved parties may pursue appropriate sanctions in the course of relitigating their claim. See Virgin Islands Hous. Auth. v. David, 823 F.2d 764, 767 (3d Cir.1987). Moreover, based upon the egregious nature of DuPont's fraud in the Kawamata Farms case, this court construed HRCP Rule 60(b)(3) to allow an award of attorneys' fees and costs as affirmative relief in addition to the relief afforded in the prior order or judgment. Kawamata Farms, 86 Hawai`i at 259, 948 P.2d at 1100 (Under the circumstances of this case, based on the egregious nature of DuPont's fraud, we construe the HRCP so as not to disallow a remedy under HRCP Rule 60(b)(3) when there is a post-judgment discovery of fraud supported by clear and convincing evidence.). Thus, the HRCP provide a means for parties to receive compensation resulting from litigation misconduct. Although both civil contempt and HRCP Rule 60(b) provide remedies to a party aggrieved by litigation misconduct, we believe that the existence of these remedies does not oblige us to limit victims of fraud solely to these established remedies, given the nature and effect of fraud.
DuPont argues that preventing a party from being held liable in a subsequent, collateral proceeding for litigation conduct, including fraud, encourages settlement. Quoting Amantiad v. Odum, 90 Hawai`i 152, 161-62, 977 P.2d 160, 169-71 (1999), in support of its argument, DuPont states: We acknowledge the well-settled rule that the law favors the resolution of controversies through compromise or settlement rather than by litigation. Such alternative to court litigation not only brings finality to the uncertainties of the parties, but is consistent with this court's policy to foster amicable, efficient, and inexpensive resolutions of disputes. In turn, it is advantageous to judicial administration and thus to government and its citizens as a whole. We agree with the policy and law of settlements which the Supreme Court of Arkansas succinctly sets forth in Ragland v. Davis, 301 Ark. 102, 106-107, 782 S.W.2d 560, 562 (1990) (citation omitted): Courts should, and do, so far as they can do so legally and properly, support agreements which have for their object the amicable settlements of doubtful rights by parties; the consideration for such agreements is not only valuable, but highly meritorious. Because they promote peace, voluntary settlements ... must stand and be enforced if intended by the parties to be final, notwithstanding the settlement made might not be that which the court would have decreed if the controversy had been brought before it for decision. Such agreements are binding without regard to which party gets the best of the bargain or whether all the gain is in fact on one side and all the sacrifice on the other.    The Washington Supreme Court said it even more tersely: The law favors settlements and consequently it must favor their finality. However, from within the excerpt cited, DuPont omits this court's highlighted statement: ` It is an elemental rule that the law favors compromise and settlement of disputes and generally, in the absence of bad faith or fraud, when parties enter into an agreement settling and adjusting a dispute, neither party is permitted to repudiate it. ' Amantiad, 90 Hawai`i at 162, 977 P.2d at 170 (italics in original) (underscored emphasis added) (quoting Matter of Estates of Thompson, 226 Kan. 437, 601 P.2d 1105, 1108 (1979)). Indeed, the portion of this court's opinion omitted by DuPont clearly articulates the law's disapproval of settlements obtained through fraud. Further, as the Ninth Circuit has noted: Insistence on the finality of settlements is based on the assumption that the parties have freely bargained to exchange the costs, risks and potential rewards of litigation for the certainty of a settlement that seems fair in light of facts known at the time. Settlements induced by fraud are set aside however, because the defrauded party has not freely bargained but has been induced to settle by affirmative misrepresentations by the other party. Enforcing such a settlement would undermine the policy of encouraging voluntary settlement of disputes: if litigants cannot assume the disclosures and representations of the opposing party are made in good faith, they will be reluctant to settle. Matsuura, 166 F.3d at 1012. Settlement is the voluntary relinquishment of the right to a determination by a court of law. Thus, encouraging parties to forego the protections associated with a trial requires adequate assurance that appropriate remedies exist for settlements reached through bad faith and misconduct. Accordingly, the policy of encouraging settlements does not favor limiting liability for fraud engaged in during prior litigation proceedings. In sum, of the eight policies underlying the litigation privilege, the policy of avoiding the chilling effect resulting from the threat of subsequent litigation clearly favors limiting liability in subsequent proceedings. However, the remaining policies of: promoting the candid, objective, and undistorted disclosure of evidence; placing the burden of testing the evidence upon the litigants during trial; reinforcing the finality of judgments; limiting collateral attacks on judgments; promoting zealous advocacy; discouraging abusive litigation practices; and encouraging settlement do not. With the aforementioned policies in mind, we now address the first certified question presented.
The first question by the district court asks whether a party can be held liable for civil damages based upon misconduct engaged in during prior litigation proceedings. Initially, as noted supra, existing remedies, such as a motion under HRCP Rule 60(b), contempt proceedings, and sanctions allow parties to be held liable for civil damages based upon litigation misconduct. However, the question by the district court requires this court to consider whether Hawai`i law allows a party to be held liable for litigation misconduct in a collateral proceeding such as the instant case. The history of the present case demonstrates how collateral proceedings burden court resources and protract litigation. However, given (1) the courts' objective of uncovering truth, (2) the injurious effect of fraud on the ability to test the evidence presented, (3) the preference for judgments on the merits, (4) this court's duty to discourage abusive litigation practices, and (5) the desire to encourage settlement, we conclude that the interests in (a) avoiding the chilling effect of collateral litigation, (b) reinforcing the finality of judgments, and (c) limiting collateral attacks on judgments are outweighed when fraud is alleged. Accordingly, based upon the foregoing discussion, we answer the first certified question as follows: Under Hawai`i law, a party is not immune from liability for civil damages based upon that party's fraud engaged in during prior litigation proceedings.