Court Opinion

ID: 9906063
Source: CourtListenerOpinion
Date Created: 2023-11-30 20:04:29.601318+00
Date Added: 2024-06-11T09:24:05.268299
License: Public Domain

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                                                         Electronically Filed
                                                         Supreme Court
                                                         SCWC-XX-XXXXXXX
                                                         30-NOV-2023
                                                         08:54 AM
                                                         Dkt. 23 OP

           IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

                              ---o0o---

KAWIKA FRANCO, Individually and as Personal Representative for
the Estate of TIARE FRANCO; PEACHES KONG and APPLES ELABAN, as
  Next Friends of LOVELY FRANCO (Minor); TAUA GLEASON, as Next
   Friend of KOLOMANA KONG KANIAUPIO GLEASON and KAULANA KONG
KANIAUPIO GLEASON (Minors); and CHERYL RUSSELL, as Next Friend
 of JEANNE RUSSELL (Minor), Respondents/Plaintiffs-Appellants,

                                 vs.

                         SABIO REINHARDT,
                  Petitioner/Defendant-Appellee,

                                 and

                          JOSIAH OKUDARA,
                  Respondent/Defendant-Appellee.

                          SCWC-XX-XXXXXXX

         CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
             (CAAP-XX-XXXXXXX; CASE NO. 2CC121000458)

                         NOVEMBER 30, 2023

          RECKTENWALD, C.J., McKENNA, AND EDDINS, JJ.,
        CIRCUIT JUDGE SOUZA AND CIRCUIT JUDGE KAWASHIMA,
                 ASSIGNED BY REASON OF VACANCIES

                OPINION OF THE COURT BY EDDINS, J.
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                                 I.

     In this wrongful death case, Tiare Franco’s family (the

Francos) appeal, again.    Last time they successfully appealed

the Circuit Court of the Second Circuit’s declaratory judgment

action ruling that National Interstate Insurance Company (NIIC)

had no duty to defend or indemnify Sabio Reinhardt.      The Francos

allege Reinhardt negligently crashed a truck, killing passenger

Tiare Franco.

     The Intermediate Court of Appeals (ICA) vacated the

declaratory judgment.    It concluded that there were “genuine

issues of material fact regarding whether Reinhardt reasonably

believed he was entitled to operate the Truck at the time of the

fatal accident.”    Nat’l Interstate Ins. Co., Inc. v. Reinhardt,

No. CAAP-XX-XXXXXXX, 2017 WL 1210101, at *2 (Haw. App. March 31,

2017) (mem. op.).

     However, before the ICA resolved the Franco’s declaratory

action appeal, the circuit court held a jury trial.      Neither

Reinhardt nor defense counsel participated.     The Francos won.

The jury returned a multi-million dollar verdict in their favor.

     After the ICA’s decision, NIIC again retained counsel for

Reinhardt.   It was the same attorney who had represented him

during the three-year period preceding the circuit court’s

declaratory action ruling.    Per Hawaiʻi Rules of Civil Procedure

(HRCP) 60(b), counsel moved to set aside the jury’s verdict.

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The Francos opposed the motion.    And they moved to disqualify

Reinhardt’s counsel.    They said counsel had a conflict and

violated the Hawaiʻi Rules of Professional Conduct (HRPC) by

acting without Reinhardt’s consent.

     The trial court denied the Francos’ motion to disqualify

counsel.   It granted Reinhardt’s motion to set aside the jury

verdict and judgment.    The Francos appealed.

     In a memorandum opinion, the ICA held that Reinhardt’s

counsel lacked authority to act as his lawyer.      Since Reinhardt

had not expressly consented to re-engage defense counsel, the

lawyer lacked consent to represent him and advance his

interests.    The lawyer violated the Hawaiʻi Rules of Professional

Conduct, the ICA ruled: “Retained Counsel did not have the

authority or Reinhardt’s consent to file motions on behalf of

Reinhardt.”    Since the lawyer had no authority to file it, the

ICA chose not to reach the merits of the HRCP Rule 60(b) motion.

The ICA reinstated the jury’s verdict and judgment.

     We disagree with the ICA’s view that counsel had no

authority to act on Reinhardt’s behalf.     Reinhardt implicitly

consented to the representation, did not invoke his right to

refuse counsel, and there was no conflict that barred the

representation.    We hold that the circuit court correctly denied

the Francos’ motion to disqualify counsel.     Counsel did not

violate the HRPC by moving to set the judgment aside.

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     We also hold that the circuit court did not abuse its

discretion by granting Reinhardt’s motion to set aside.

     We vacate the ICA’s Judgment, affirm the circuit court’s

orders, and remand the case to the circuit court for proceedings

consistent with this opinion.

                                  II.

     On June 20, 2011 Reinhardt allegedly crashed his

girlfriend’s 2005 Dodge Ram pickup.      Front passenger Tiare

Franco died.   Her family sued Reinhardt for wrongful death.

     NIIC, insurance carrier for the truck, retained counsel to

defend Reinhardt.    Separately, NIIC filed a declaratory action.

NIIC claimed it had no duty to defend and indemnify Reinhardt

under the policy.    Then it moved for summary judgment.    The

circuit court granted NIIC’s MSJ.       The insurance company had no

duty to defend Reinhardt.    His lawyer withdrew.

     In 2015, the Francos appealed the circuit court’s

declaratory judgment decision.    NIIC’s policy covered Reinhardt,

they argued.   Meanwhile, with the declaratory action appeal

pending, the circuit court scheduled a jury trial.      Plaintiffs

did not request a pause.    Though the appeal awaited resolution,

the trial started.

     Reinhardt did not show up.    Turns out, he left prison about

a month before jury selection.    He had resolved the criminal

case associated with the homicide.      Per a plea agreement, he

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pled no contest to negligent homicide in the third degree, a

misdemeanor, and received a one-year credit for time served

sentence.    After he left prison, no one knew where he was.

       No lawyer appeared for Reinhardt.   A jury listened to the

case.    On April 28, 2016, it found Reinhardt negligent and

awarded the Francos $3,562,000.    On May 18, 2016, the court

entered final judgment.

       Ten months later, the ICA ruled for the Francos in the

declaratory action appeal.    The circuit court should not have

granted NIIC’s summary judgment motion.     There were disputed

issues of material fact about NIIC’s duty to defend or indemnify

Reinhardt.

       NIIC retained the same attorney to represent Reinhardt.

But by this point, almost a year had passed since the judgment.

The time to file a notice of appeal had long lapsed, and the

HRCP Rule 60(b) motion to set aside deadline – one year or

“reasonable time” - loomed.

       NIIC reached Reinhardt by certified mail.    NIIC’s letter

informed Reinhardt about the ICA’s remand, that NIIC had

retained the same lawyer for him under a reservation of rights,

and that counsel would move to set aside the judgment against

him.    It included counsel’s contact information.    Reinhardt

signed for the letter.

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      Back on board, counsel hustled to find Reinhardt.          He sent

letters and left voicemails.      Investigators tried to locate

Reinhardt.   Soon the attorney felt compelled to act.         As he put

it:

          We did do our best to try to contact him which then puts me
          in a weird position because what do I do? Sit on my hands
          and allow the one-year time period to lapse or do I do
          something and I file the motion? Well, I’m not going to
          sit on my hands. I’m going to do my best to try to defend
          him properly, and that’s why we filed this motion, your
          Honor, and that’s why we’re here today.

On May 18, 2017, counsel moved under HRCP Rule 60(b)(5)

(judgment “no longer equitable”) and Rule 60(b)(6)

(“extraordinary circumstances”) to set aside the $3.56 million

final judgment.    Setting aside the judgment is equitable,

counsel insisted.    The one-sided, lawyer-less trial shouldn’t

have happened.    Reinhardt awaited an appellate decision about

whether NIIC had a duty to defend him at that trial.

      Plus, Reinhardt alleged several trial errors: (1) the

Francos’ attorney made improper statements during jury

selection; (2) inadmissible hearsay evidence came in; (3) a

police officer improperly testified about the identity of the

driver (Reinhardt); (4) DNA evidence lacked a proper chain of

custody; and (5) counsel made improper closing arguments,

including referencing other multi-million dollar jury verdicts,

like an ESPN sportscaster’s $55 million invasion of privacy

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case, and deriding Reinhardt’s invocation of his Fifth Amendment

right against self-incrimination.

     Not only did the Francos oppose the Rule 60(b) motion, they

moved to disqualify Reinhardt’s counsel.     They leveled ethical

accusations against him.    They said he broke several HRPC rules,

including failing to get Reinhardt’s consent to file the motion.

     Regarding the motion to set aside, the Francos argue there

were no exceptional circumstances to justify setting aside the

judgment.    Rather, NIIC just gambled – by not defending

Reinhardt at trial - and lost.

     The circuit court denied the Francos’ motion to disqualify

counsel.    It granted Reinhardt’s motion to set aside the final

judgment.

     The Francos appealed.

     The ICA issued a Memorandum Opinion on February 28, 2023.

The ICA only addressed one point of error: Did the trial court

err by denying the Francos’ motion to disqualify counsel?

     Yes, the ICA decided.    Counsel lacked authority to

represent Reinhardt when he filed the Rule 60(b) motion to set

aside.   Reinhardt had to expressly consent before counsel moved

to set aside the $3,562,000 judgment.     Otherwise, counsel defies

the Hawaiʻi Rules of Professional Conduct.     With counsel out of

the way, the ICA ruled, the Rule 60(b) motion to set-aside

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should never have happened.    The ICA vacated the order setting

aside the default judgment.

       Reinhardt applied for cert, and we accepted.

                                III.

       “The tripartite relationship between insurer, insured and

insurance defense counsel is unique.”     Finley v. Home Ins. Co.,

90 Hawaiʻi 25, 29, 975 P.2d 1145, 1149 (1998).     Counsel

represents the insured, but the insurance company pays their

fee.    This creates a potential conflict of interest.    When the

insurance company defends under a reservation of rights, “the

insurer may be more concerned with developing facts showing non-

coverage than facts defeating liability.”      Id. at 30, 975 P.2d

at 1150.    This relationship can trigger counsel’s ethical

obligations under the HRPC.

       The Hawaiʻi Rules of Professional Conduct are elastic, not

stiff.    “The Rules of Professional Conduct are rules of reason.

They should be interpreted with reference to the purposes of

legal representation and of the law itself.”      HRPC Scope (eff.

2014).    This is how we construe the rules.    Fragiao v. State, 95

Hawaiʻi 9, 18, 18 P.3d 871, 880 (2001).

       The HRPC and American Bar Association Model Rules of

Professional Conduct have another key goal: ensuring that the

legal industry’s regulations are conceived in the public

interest and improve access to the legal system.      HRPC Preamble

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cmts. 6, 12 (eff. 2014); Model Rules of Pro. Conduct, Preamble

cmts. 6, 12 (Am. Bar Ass’n 2023).     Interpreting and enforcing

the HRPC in a way that promotes access to our legal system,

rather than restricts it, fulfills a chief aim of professional

conduct rules.    That purpose informs our analysis.

     We address three issues: whether the circuit court abused

its discretion when it denied the Francos’ motion to disqualify

Reinhardt’s attorney; whether the attorney violated the HRPC

when he filed a Rule 60(b) motion to set aside the judgment; and

whether the circuit court abused its discretion when it set the

judgment aside.

     We hold that insurance defense counsel may obtain the

consent that the HRPC requires by communicating information

reasonably sufficient for the client to appreciate the

significance of the matter.    See HRPC Rule 1.0(c) (eff. 2014)

(defining “consult”).    We therefore conclude that Reinhardt’s

counsel obtained consent and did not violate the HRPC by moving

to set aside the verdict.

     We further hold that the trial court did not abuse its

discretion by granting Reinhardt’s HRCP Rule 60(b) motion to set

aside.   Equity principles guide 60(b).    JK v. DK, 153 Hawaiʻi

268, 274, 533 P.3d 1215, 1221 (2023).     We apply 60(b) liberally,

“favoring a merits-oriented outcome that bends the rule’s

finality interest to accomplish justice.”     Id.   Neither

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Reinhardt nor any defense counsel participated in the trial,

which contained several putative errors.     The circuit court

later found that the trial “was the embodiment of an unusual

case” justifying relief.   We agree.

                                  A.

     First, the motion to disqualify counsel.

     Because there was no ethical violation, the circuit court

correctly denied the Francos’ motion to disqualify.      The ICA

erred.

     Reinhardt’s counsel had no business representing him, the

ICA rules.   The client didn’t consent after consultation – not

to the attorney-client relationship and not to the filing of the

Rule 60(b) motion to set aside.    The lawyer was practicing law

without a client, the ICA suggests.

     To support its belief that counsel had no client, the ICA

looks to Finley and four Hawaiʻi Rules of Professional Conduct

rules: Rule 1.7 (eff. 2014) (not getting consent and a conflict

waiver before representing Reinhardt), Rule 1.8 (eff. 2014)

(accepting payment from NIIC without Reinhardt’s express

consent), Rule 1.2 (eff. 2015) (lawyer shall abide by

Reinhardt’s decisions), and Rule 1.4 (eff. 2014) (lawyer will

consult Reinhardt).   We take each in turn.

     Like the present case, Finley concerns an insurer who

retains counsel for an insured party.     It examines whether the

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insurer also has to pay for the insured’s personally retained

counsel.   Id. 90 Hawaiʻi at 27, 975 P.2d at 1147.

     The ICA relies on Finley’s discussion about the insured’s

“right to reject” - under a reservation of rights - the

insurer’s retained counsel.    See id. at 35, 975 P.2d at 1155.

The ICA concludes that Reinhardt’s lawyer could not establish an

attorney-client relationship without his affirmative consent.

     True, Reinhardt has a right to refuse NIIC’s retained

counsel.   But the ICA overlooks something - Reinhardt never

refused counsel’s help.

     The ICA misconstrues Finley to mean that unless an insured

expressly consents, counsel lacks the authority to act.       But

Finley stands for express rejection.     Thanks, but no thanks.

It’s the insured’s refusal to go with retained counsel that has

to be express.   See Finley, 90 Hawaiʻi at 35, 975 P.2d at 1155.

Not refusing may manifest implied consent.     See id. (the

defendants’ choice to retain their own counsel “did not operate

as an exercise of their right to reject the tender of the

defense under a reservation of rights”).

     Finley’s conclusion illustrates this point.      There, the

insured wanted the insurance company to pay both the lawyers it

provided and the lawyers the insured hired itself.      Id.   We held

that because the insured did not object to the insurance

company’s retained counsel, the insurance company only had to

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pay for the counsel it retained.      Id.   The determinative fact to

our analysis concerned whether the insured rejected retained

counsel.

     Nothing in the record shows that Reinhardt rejected NIIC’s

offer of counsel.   NIIC’s May 13, 2017 letter recaps the case

and reintroduces his previous attorney.       After recounting the

circumstances that led to counsel withdrawing, NIIC alerts

Reinhardt about its decision to retain counsel and to instruct

counsel to quickly file an HRCP Rule 60(b) motion.       The letter

provides counsel’s contact information, the filing deadline, and

NIIC’s reservation of rights.    Reinhardt signed an

acknowledgement that he received the certified letter.         Though

Reinhardt did not expressly consent to counsel, he also did not

expressly reject counsel.

     If Reinhardt thinks retained counsel has violated any

ethical rules, he is not out of luck.       He has remedies.    As we

said in Finley: “These remedies include: (1) an action against

the attorney for professional malpractice; (2) an action against

the insurer for bad faith conduct; and (3) estoppel of the

insurer to deny indemnification.”      90 Hawaiʻi at 35, 975 P.2d at

1155.   We found those remedies “adequate to deter unethical

conduct on the behalf of the insurer and retained counsel.”         Id.

     We believe the circuit court properly recognized that

denying the motion to disqualify would not hurt Reinhardt if he

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later decided he didn’t want that lawyer to represent him.       As

the court put it: “any error in denying this motion can be

quickly and harmlessly remedied if Defendant Reinhardt is

finally located and contacted and expressed a desire, perhaps,

not to retain [Retained Counsel] as counsel at that time.”

                                 B.

     We turn to the Hawaiʻi Rules of Professional Conduct.

     Divided loyalties inspire conflict of interest rules.

“Virtually all difficult ethical problems arise from conflict

between a lawyer’s responsibilities to clients, to the legal

system and to the lawyer’s own interest in remaining an ethical

person while earning a satisfactory living.”     HRPC Preamble 9.

     Rule 1.7 governs conflicts of interest.     A conflict exists

if the representations directly conflict or “there is a

significant risk that the representation of one or more clients

will be materially limited by the lawyer’s responsibilities

to . . . a third person” (emphasis added).     If a conflict

exists, the client must give their informed consent to enable

the representation.   HRPC Rule 1.7(b).

     Rule 1.7’s commentary explains that a material limitation

is a significant risk that the conflict will “materially

interfere with the lawyer’s independent professional judgment in

considering alternatives or foreclose courses of action that

reasonably should be pursued on behalf of the client.”      HRPC

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Rule 1.7(b) cmt. 8.   Comment 13 specifically addresses

situations where an insurer hires counsel for an insured.       It

requires that “the arrangement should assure the special

counsel’s professional independence.”

     Reinhardt’s retained counsel did not have a Rule 1.7

conflict.   There was no direct conflict.    The retained

attorney’s sole client is the insured.     Finley, 90 Hawaiʻi at 33,

975 P.2d at 1153.   NIIC and Reinhardt shared an interest in

contesting Reinhardt’s liability and setting aside the judgment.

And NIIC’s reservation of rights – where NIIC’s and Reinhardt’s

interests do conflict - was litigated in a separate declaratory

judgment action and is not at issue here.

     There was also no material limitation.     NIIC retained

counsel for Reinhardt.   Then it got out of the way.     NIIC did

not constrain Reinhardt’s lawyer from independently using his

professional judgment to advance Reinhardt’s interests.      There

was no limitation, much less a material limitation, to counsel’s

representation of Reinhardt.    In the absence of a material

limitation, Rule 1.7 is simply not pertinent.     Fragiao, 95

Hawaiʻi at 20, 18 P.3d 882.

     Rule 1.8(f)(1) disallows “compensation for representing a

client from one other than the client” unless “the client

consents after consultation” (emphasis added).      Rule 1.0(c)

defines “consultation” as “communication of information

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reasonably sufficient to permit the client to appreciate the

significance of the matter.”    Reasonably sufficient information

ordinarily includes “a disclosure of the facts and circumstances

giving rise to the situation, any explanation reasonably

necessary to inform the client or other person of the material

advantages and disadvantages of the proposed course of conduct,

and a discussion of the client’s or other person’s options and

alternatives.”    HRPC Rule 1.0 cmt. 2.   The needed communication

depends on the circumstances.    Id.

     Regarding Rule 1.8(f)(1), the ICA says that because NIIC

paid Reinhardt’s lawyer without his express consent, the lawyer

broke the rule.    We interpret the rule according to its purpose.

HRPC Scope.   Rule 1.8(f)’s commentary provides that the purpose

is to prevent conflicts “[b]ecause third-party payers frequently

have interests that differ from those of the client, including

interests in minimizing the amount spent on the representation

and in learning how the representation is progressing[.]”       HRPC

Rule 1.8(f) cmt. 11.    Commonly, this happens when an alleged

conspirator pays a co-conspirator’s legal bills.      See, e.g.,

United States v. Hodge & Zweig, 548 F.2d 1347, 1350 (9th Cir.

1977) (drug-smuggling conspiracy allegedly included funding co-

conspirators’ legal defense).

     We held in Fragiao that “the purpose of Rule 1.8(f) is to

mandate disclosure of the fact that the lawyer’s services are

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being paid for by a third party.”     95 Hawaiʻi at 21, 18 P.3d at

883 (cleaned up).   NIIC’s letter to Reinhardt provided that

disclosure.   The letter communicated that counsel would

represent Reinhardt in the Francos’ suit and NIIC was paying

under a reservation of rights.    This was enough for Reinhardt to

understand the representation.    The letter provided Reinhardt

with consultation, and his inaction, in the unique insurer-

insured context, manifested implicit consent.

     To further support counsel’s putative ethical lapse, the

ICA turns to HRPC Rule 1.2(a).    Per that rule, an attorney’s

legal decisions, the ICA says, require active consent from the

client.   The rule states: “a lawyer shall abide by a client’s

decisions concerning the objectives of representation, and, as

required by Rule 1.4, shall consult with the client as to the

means by which the objectives are to be pursued.      A lawyer may

take such action on behalf of the client as is impliedly

authorized to carry out the representation.”     HRPC Rule 1.2(a).

Rule 1.4(a)(2) requires counsel to “reasonably consult with the

client about the means by which the client’s objectives are to

be accomplished.”

     NIIC’s letter does the trick.     The letter alerted Reinhardt

that counsel’s representation had the same objective as years

earlier – to contest Reinhardt’s liability for the lethal crash.

The letter gave Reinhardt the opportunity to follow up: it

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provided counsel’s contact information and told him about

counsel’s imminent motion.    A one-way certified letter falls

short of our ideal standard for client communication, but

Reinhardt was a difficult client to find; it took two private

investigators to finally track him down.       We conclude that the

letter sufficed to reestablish representation under the

circumstances.

                                   C.

     Once Reinhardt’s attorney was back in the game, he had the

authority, and the obligation, to file the Rule 60(b) motion.

Counsel did not violate the HRPC.       He did the right thing.

     One of a lawyer’s foremost duties is to advocate diligently

for the client’s interests.    HRPC Rule 1.3 (eff. 2014).     The

Comments to Rule 1.3 state that the lawyer should “take whatever

lawful and ethical measures are required to vindicate a client’s

cause” and act “with commitment and dedication to the interests

of the client and with zeal in advocacy upon the client’s

behalf.”   HRPC Rule 1.3 cmt. 1.    Allowing an uncontested $3.56

million judgment to stand unchallenged skirts this duty.

     Strategic decisions are part of a lawyer’s job.       Not every

decision needs a sign-off.    The HRPC talks about the big things

- unilateral case-ending decisions, like settling a civil case

or taking a plea deal.   HRPC Rule 1.2(a).      On those issues, the

client has the ultimate authority.       The lawyer shall abide by

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their decision.    Id.; HRPC Rule 1.2 cmt. 1.   As to how to carry

out representation, the lawyer may take actions that are

impliedly authorized.    HRPC Rule 1.2(a).

     Here, filing the motion to set aside was implicitly

authorized.    Reinhardt knew about NIIC’s decision to re-retain

counsel for him.    And NIIC told him about the lawyer’s need to

quickly file the motion to set aside.     Nothing about the motion

compromised Reinhardt’s rights or ended the case.      Rather, the

motion preserved Reinhardt’s rights and prolonged the case so

that he could present a defense on the merits.      Counsel didn’t

need Reinhardt’s express consent to file the motion (which

plainly protected his client’s interests).

     Further, counsel was obligated by NIIC’s duty of good faith

to Reinhardt.    Hawaiʻi law endorses a stout duty to defend.    If

there’s the possibility of coverage under the policy, the

insurance company must defend.    St. Paul Fire & Marine Ins. Co.

v. Bodell Constr. Co., ___ Hawaiʻi ___, 2023 WL 7517083, at *2-3

(2023).   In turn, the insured is entitled to independent

representation.

     The three-headed relationship of insurer, insured, and

insurance defense counsel imposes special good faith duties on

the insurer.    Finley, 90 Hawaiʻi at 36, 975 P.2d at 1156.

Because there are inherent potential conflicts of interest, an

insurance company must meet an exacting and enhanced standard of

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good faith when it defends a case under a reservation of rights.

See id. at 35, 975 P.2d at 1155.

     We have described the insurer’s duty of good faith:

investigate the accident, retain competent defense counsel for

the insured, understand that the only client is the insured,

fully inform the insured about the defense and all relevant

developments to the policy and the lawsuit, and avoid

prioritizing the insurer’s financial interests over the

insured’s.    Id. at 36-37, 975 P.2d at 1156-57.

     Here, NIIC owes a duty of good faith to Reinhardt as an

alleged insured.    Nothing in the record shows that counsel acted

in anything but Reinhardt’s best interests by moving to set

aside the judgment against him.    Cf. Delmonte v. State Farm Fire

& Cas. Co., 90 Hawaiʻi 39, 51, 975 P.2d 1159, 1171 (1999)

(referring to retained counsel’s duty to look after “the best

interests of [the] client,” the insured party).      Counsel had a

duty “to provide competent, ethical representation to the

insured.”    Finley, 90 Hawaiʻi at 34, 975 P.2d at 1154.    Both NIIC

and counsel must act to protect Reinhardt’s rights.      Id.   Moving

to set aside the judgment against Reinhardt satisfied these

duties.   Not moving to set aside ignores these duties.     Even

without Reinhardt’s express consent to file the motion, counsel

fulfilled NIIC’s duty of good faith towards Reinhardt.

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     The duty of good faith also requires that insurance defense

counsel provide a defense which meets the HRPC’s ethical

standards.    Id. at 35, 975 P.2d at 1155.   As discussed above,

retained counsel’s representation, including filing the Rule

60(b) motion, complied with counsel’s professional obligations.

     Counsel did not violate the HRPC by moving to set aside an

uncontested $3.56 million judgment against his client.       The

attorney’s move was implicitly authorized by the representation,

required by NIIC’s duty of good faith, and crucial to protecting

Reinhardt’s interests.

                                 IV.

     Last, the circuit court correctly set aside the verdict.

     We review decisions on HRCP Rule 60(b) motions for abuse of

discretion.    JK, 153 Hawaiʻi at 278, 533 P.3d at 1225.    The

circuit court did not abuse its discretion – it did the right

thing.

     Equity principles guide Rule 60(b) motions.      Id. at 274,

533 P.3d at 1221.    We apply Rule 60(b) liberally, prioritizing a

merits-based outcome over the finality of judgments.       Id.

Generally, our justice system disfavors default, preferring

adjudication on the merits.    Id. at 278, 533 P.3d at 1225.

     Rule 60(b) provides several avenues to vacate a judgment.

Rule 60(b)(5) permits relief when “it is no longer equitable

that the judgment should have prospective application[.]”         The

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moving party must show “extraordinary circumstances justifying

relief.”    Matter of Hawaiian Elec. Co., Inc., 149 Hawaiʻi 343,

362, 489 P.3d 1255, 1274 (2021).

     Rule 60(b)(6) operates when “any other reason justif[ies]

relief.”    The moving party must demonstrate “extraordinary

circumstances” why it could not have sought earlier, more timely

relief.    James B. Nutter & Co. v. Namahoe, 153 Hawaiʻi 149, 169,

528 P.3d 222, 242 (2023).    Under both Rule 60(b)(5) and (b)(6),

the motion for relief must be made “within a reasonable time.”

     This case presents extraordinary circumstances.      The

circuit court held a jury trial while NIIC’s duty to defend was

pending before the ICA.    NIIC’s assigned defense counsel had

withdrawn.    Reinhardt had recently been released from prison and

no one – the court or plaintiff’s counsel – could contact him.

As a result, the trial happened without a defendant or defense

counsel sitting at the defense table.

     Not only was Reinhardt unrepresented and not present, but

several ostensible errors plagued the trial.     During jury

selection, the Francos’ counsel made extensive factual and legal

arguments to potential jurors.    This may be improper.    See,

e.g., State v. Altergott, 57 Haw. 492, 499, 559 P.2d 728, 734

(1977) (inappropriate to educate the jury panel on facts,

instruct them on law, or present argument).     The Francos’

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counsel also elicited seemingly inadmissible hearsay testimony

from the police officers who investigated the crash.

     In her closing argument, counsel disparaged Reinhardt for

invoking his Fifth Amendment right against self-incrimination:

“Why would you refuse to answer questions if you have nothing to

hide?” – which may violate Reinhardt’s rights under the Hawaiʻi

Constitution.   See Ramil v. Keller, 68 Haw. 608, 620-21, 726

P.2d 254, 262 (1986) (leaving open the question of whether the

Hawaiʻi Constitution right against self-incrimination applies to

civil cases).   Counsel also discussed a sportscaster’s $55

million jury verdict.   See Ching v. Dung, 148 Hawaiʻi 416, 433,

477 P.3d 856, 873 (2020) (“closing arguments should only refer

to evidence in the record”).

     The Francos counter that these objections were waived

because no one objected at trial (neither Reinhardt nor counsel

were in the courtroom).   The defense-less trial and its many

probable errors created extraordinary circumstances justifying

relief.

     The trial should not have been defense-less.      NIIC should

have defended Reinhardt pending a final resolution of coverage.

If there's a possibility of coverage - even a remote possibility

- the insurer has the duty to defend.     St. Paul, 2023 WL

7517083, at *2-3.   That duty continues until the obligation has

been conclusively eliminated.    Newhouse by Skow v. Citizens Sec.

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Mut. Ins. Co., 501 N.W.2d 1, 6 (Wis. 1993) (“An insurance

company breaches its duty to defend if a liability trial goes

forward during the time a no coverage determination is pending

on appeal and the insurance company does not defend its insured

at the liability trial.”); Commerce & Indus. Ins. Co. v. Bank of

Hawaii, 73 Haw. 322, 329, 832 P.2d 733, 737 (1992) (“The duty to

defend continues until the potential for liability is finally

resolved, which in this case would require [the insurer] to

remain obligated to defend until either HRCP Rule 54(b)

certification was granted and the appeal period had expired or a

final judgment had disposed of the entire case.”).

     Here, the Francos timely appealed the declaratory judgment,

keeping NIIC on the hook to defend Reinhardt.     During the

appellate process, NIIC was obligated to represent Reinhardt in

the underlying case.    Despite NIIC’s breach, this case still

presents extraordinary circumstances, including that the circuit

court did not stay the proceedings pending resolution of the

declaratory judgment, Reinhardt was missing, and there were many

alleged trial issues.

     Reinhardt’s counsel filed his motion to set aside within

the reasonable time that Rule 60(b) requires.     The ICA remanded

the issue of NIIC’s duty to defend or indemnify on March 31,

2017, nearly ten and a half months after the final judgment.

Once reengaged, counsel moved for relief within one month of

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being back on the case and within one year from the judgment –

well within a reasonable time.    Counsel could not have sought

earlier, more timely relief.

     The circuit court seems to realize it made a mistake by

forging ahead with trial.   It concluded “extraordinary

circumstances surrounding the trial” warranted HRCP Rule 60(b)

relief.   We agree.

                                 V.

     We hold that the circuit court properly denied the Francos’

motion to disqualify Reinhardt’s attorney.     We therefore

conclude that counsel’s motion to set aside the verdict against

Reinhardt did not violate the HRPC.     We also hold that

extraordinary circumstances supported setting aside the verdict.

     We vacate the ICA’s Judgment, affirm the circuit court’s

orders, and remand the case to the circuit court.

J. Patrick Gallagher and              /s/ Mark E. Recktenwald
Kamalolo K. Koanui-Kong
                                      /s/ Sabrina S. McKenna
for petitioner
                                      /s/ Todd W. Eddins
Sue V. Hansen
                                      /s/ Kevin A.K. Souza
for respondents
                                      /s/ James S. Kawashima

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