Court Opinion

ID: 3035077
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:52:03.04585+00
Date Added: 2024-06-11T07:37:50.647366
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

LIVING DESIGNS, INC. and PLANT           
EXCHANGE, INC., Hawai‘i
corporations,
                Plaintiff-Appellant,           No. 02-16947
                v.                              D.C. No.
                                             CV-99-00660-MLR
E.I. DUPONT DE NEMOURS AND
COMPANY, a Delaware corporation,
              Defendant-Appellee.
                                         

ANTHURIUM ACRES, a Hawai‘i               
general partnership, successor in
interest to Island Tropicals;
MUELLER HORTICULTURAL PARTNERS,
a Hawai‘i limited partnership,                 No. 02-16948
                Plaintiffs-Appellants,          D.C. No.
                  v.                         CV-00-00615-MLR
E.I. DUPONT DE NEMOURS AND
COMPANY, a Delaware corporation,
                 Defendant-Appellee.
                                         

MCCONNELL, INC., a California            
corporation,
               Plaintiff-Appellant,            No. 02-16951
               v.                               D.C. No.
E.I. DUPONT DE NEMOURS AND                   CV-00-00328-MLR
COMPANY, a Delaware corporation,
              Defendant-Appellee.
                                         
                             15635
15636      LIVING DESIGNS v. E.I. DUPONT DE NEMOURS

LIVING DESIGNS, INC. and PLANT           
EXCHANGE, INC., Hawai‘i
corporations; DAVID MATSUURA,
individually and dba Orchid Isle
Nursery; STEPHEN MATSUURA,
individually and dba Hawaiian
Dendrobium Farm; FUKU-BONSAI,                  No. 04-16354
INC.; DAVID W. FUKUMOTO; LIVING                  D.C. Nos.
DESIGNS, INC. and PLANT                      CV-96-01180-MLR
EXCHANGE, INC.; MCCONNELL, INC.,
a California corporation;                   CV-97-00716-MLR
                                             CV-99-00660-MLR
ANTHURIUM ACRES, a Hawai‘i                   CV-00-00328-MLR
general partnership, successor in            CV-00-00615-MLR
interest to Island Tropicals;
MUELLER HORTICULTURAL PARTNERS,                  OPINION
                Plaintiffs-Appellants,
                  v.
E.I. DUPONT DE NEMOURS AND
COMPANY, a Delaware corporation,
                 Defendant-Appellee.
                                         
        Appeal from the United States District Court
                 for the District of Hawai‘i
         Manuel L. Real, District Judge, Presiding

                    Argued and Submitted
          July 11, 2005—San Francisco, California

                   Filed December 5, 2005

    Before: Sidney R. Thomas, Barry G. Silverman, and
            Richard R. Clifton, Circuit Judges.

                  Opinion by Judge Thomas
15640     LIVING DESIGNS v. E.I. DUPONT DE NEMOURS

                        COUNSEL

Stephen T. Cox, Cox & Moyer, San Francisco, California, for
the plaintiffs-appellants.
           LIVING DESIGNS v. E.I. DUPONT DE NEMOURS        15641
C. Stephens Clay and James F. Bogan III, Kilpatrick Stockton
LLP, Atlanta, Georgia, for defendant-appellee.

                           OPINION

THOMAS, Circuit Judge:

   In these consolidated cases, Plaintiffs Living Designs,
McConnell, Inc., Anthurium Acres, Matsuura, and Fuku-
Bonsai allege that Defendant E.I. DuPont de Nemours and
Company (“DuPont”) fraudulently induced the settlement of
their prior products liability litigation. We reverse the district
court’s grant of judgment on the pleadings in favor of DuPont
on Plaintiffs’ claims under the Racketeer Influenced and Cor-
rupt Organizations Act, 18 U.S.C. §§ 1961-1968 (“RICO”),
and the district court’s grant of summary judgment in favor of
DuPont on Plaintiffs’ state tort claims.

                                I

                                A

   Outside of the agricultural community, plant disease-
causing fungi are rarely the subject of casual dinner conversa-
tion, much less contentious litigation. Yet to farmers world-
wide, the problems posed by white mold, virulent black leg,
foot rot, and scab are extremely serious matters. In the late
1950s and early 1960s, DuPont developed a systemic fungi-
cide to combat these problems, which it marketed under the
name of Benlate. At the zenith of its use, Benlate was one of
DuPont’s most successful commercial products.

   However, into every product’s life, a little rain must fall. In
the case of Benlate, the rain became a torrent of litigation
alleging that Benlate had become contaminated with the her-
bicide sulfonylureas (“SUs”) during the manufacturing pro-
cess, resulting in widespread crop damage.
15642       LIVING DESIGNS v. E.I. DUPONT DE NEMOURS
   In previous litigation filed in 1992 and 1993, Plaintiffs,
who are commercial nurserymen, separately sued DuPont
alleging that contaminated Benlate had killed their plants.
Matsuura v. Altson & Bird (Matsuura I), 166 F.3d 1006,
1007, amended by 179 F.3d 1131 (9th Cir. 1999).

      Many similar suits were filed by commercial grow-
      ers across the nation. In early trials, DuPont falsely
      represented that soil tests had produced no evidence
      of contamination. During consolidated discovery
      proceedings in Hawai‘i, which included the [Plain-
      tiffs’] suits, DuPont falsely denied withholding evi-
      dence of Benlate contamination, and improperly
      invoked work product protection to resist disclosure
      of testing data.

Id.

   Plaintiffs, represented by Florida attorney Kevin Malone,
settled their Benlate product liability cases against DuPont in
April of 1994.1 Plaintiffs did not dismiss their claims with
prejudice until October and November of 1994. Matsuura v.
E.I. du Pont de Nemours & Co. (Matsuura III), 330 F. Supp.
2d 1101, 1120 (D. Haw. 2004). After Plaintiffs settled their
product liability claims against DuPont, it became clear that
DuPont had not revealed to Plaintiffs during discovery dam-
aging test results that indicated that Benlate was indeed con-
taminated with SUs. There are three different categories of
tests concealed, withheld, and lied about by DuPont in the
course of litigating Benlate cases across the country.

      1.   Alta Test Results. The results of tests conducted
  1
   Plaintiff Fuku-Bonsai signed a settlement agreement with DuPont on
April 22, 1994. The month prior, on March 6, 1994, Fuku-Bonsai had
been forced to file for bankruptcy under Chapter 11. The settlement
between Fuku-Bonsai and DuPont was approved by the bankruptcy court
on May 16, 1994.
             LIVING DESIGNS v. E.I. DUPONT DE NEMOURS                15643
      by Alta Analytical Laboratories (“Alta”) showed that
      farms where Benlate had been used were contami-
      nated with SUs. “Alta laboratories was one of the
      few laboratories, if not the only one, capable of per-
      forming the sophisticated soil and water analysis to
      determine if Benlate was contaminated with [SUs].”
      Matsuura v. E.I. du Pont de Nemours & Co. (Matsu-
      ura II), 73 P.3d 687, 689 n.5 (Haw. 2003).

      2. Costa Rica field tests. DuPont conducted field
      tests of Benlate in Monte Vista, Costa Rica in 1992.
      During the Costa Rica field tests, the plants treated
      with Benlate died, demonstrating that Benlate was
      harmful to plants. DuPont destroyed the plants sub-
      jected to these field tests and withheld evidence of
      the field test results. Productora de Semillas, S.A. v.
      E.I. du Pont de Nemours, & Co., No. 97-12186 CA
      23 (Fla. Cir. Ct. June 30, 2001) (order on Plaintiff’s
      motion to strike defendant DuPont’s pleadings and
      on Plaintiff’s motion for sanctions against DuPont
      for the destruction of the Monte Vista Benlate test).

      3. BAM results. These tests were performed on
      behalf of DuPont by A&L Midwest laboratories and
      by DuPont’s in-house testing facilities. These tests
      also showed that Benlate was contaminated with
      SUs. Kawamata Farms, Inc. v. United Agri Prod-
      ucts, 948 P.2d 1055, 1065 (Haw. 1997) (referring to
      the Keeler documents).

  DuPont first produced Alta test results showing Benlate
contamination in May 1994 to Benlate plaintiffs who had not
yet settled their cases, such as to plaintiffs in the Kawamata/
Tomono case,2 over which Judge Ibarra presided in the Third
  2
    See Kawamata Farms, 948 P.2d at 1065. In Kawamata Farms, the
plaintiffs, sellers and distributors of agricultural products in Hawai‘i,
alleged that their plants, soil, and farm structures had been damaged by
Benlate. In January 1995, a jury issued a verdict in favor of the plaintiffs
on their negligence and products liability claims, awarding $1,180,000 in
compensatory damages and $1,770,000 in punitive damages.
15644       LIVING DESIGNS v. E.I. DUPONT DE NEMOURS
Circuit Court in Hawai‘i. Matsuura II, 73 P.3d at 689.3

      Contrary to DuPont’s prior representations, the tests
      confirmed that Benlate was contaminated. Addi-
      tional evidence of Benlate contamination was pro-
      duced in other Benlate litigation. Two district courts
      held that DuPont had intentionally engaged in fraud-
      ulent conduct by withholding this evidence. See
      Kawamata Farms v. United Agri Prods., 86 Hawaii
      214, 948 P.2d 1055, 1083, 1087-88 (1996) (impos-
      ing $1.5 million punitive sanction for discovery
      abuse), aff’d, 86 Hawaii 214, 948 P.2d 1055 (Haw.
      1997); Bush Ranch v. E.I. DuPont de Nemours &
      Co. (In re DuPont) (“Bush Ranch”), 918 F. Supp.
      1524, 1556-58 (M.D. Ga. 1995) (imposing sanctions
      potentially totaling $115 million), rev’d on other
      grounds, 99 F.3d 363 (11th Cir. 1996). Although the
      Eleventh Circuit reversed the Georgia court on the
      ground that the sanctions were punitive and the court
      had not followed applicable criminal procedure, the
      court noted the “serious nature of the allegations”
      and stated that it assumed the U.S. Attorney would
      conduct an investigation, In re E.I. DuPont, 99 F.3d
      at 369 n. 7. On remand, the district court asked the
      United States Attorney to “investigate and prose-
      cute” DuPont for criminal contempt, In re E.I. du
      Pont, No. 4:95-CV-36 (HL) (M.D. Ga. Nov. 4,
      1998) (order referring matter to U.S. Attorney), but
      the court ultimately approved a civil settlement
      resolving the matter, which required DuPont and
      Alston & Bird to make payments totaling $11.25
  3
    The Hawai‘i Supreme Court in Kawamata Farms, describes in detail
the discovery disputes and Plaintiffs’ gradual discovery of withheld evi-
dence in this case. 948 P.2d at 1065-66. Although Plaintiffs in this case
state that the Alta test results were produced on May 17, 1994, it should
be noted that production of the test results demonstrating the Benlate con-
tamination and DuPont’s knowledge of the contamination occurred bit by
bit from May through December of 1994.
            LIVING DESIGNS v. E.I. DUPONT DE NEMOURS                15645
      million, see In re E.I. du Pont, No. 4:95-CV-36 (HL)
      (M.D. Ga. Dec. 31, 1998) (consent order and final
      judgment).

Matsuura I, 166 F.3d at 1007-08.

   DuPont was first sanctioned by Judge Elliot, who presided
over the Bush Ranch litigation in the United States District
Court for the Middle District of Georgia, on August 21, 1995
for (1) intentionally withholding evidence of the SU contami-
nation of Benlate that was in its possession and which it was
ordered to produce and (2) for falsely representing to the court
and to plaintiffs that the Alta documents it withheld contained
no evidence of SU contamination. Bush Ranch, 918 F. Supp.
at 1555-1558.

                                    B

   After learning that DuPont fraudulently withheld evidence
of Benlate’s contamination, Plaintiffs filed the instant actions
in the United States District Court for the District of Hawai‘i,
asserting claims under RICO and state common law claims of
fraud, conspiracy, misrepresentation, abuse of process, inflic-
tion of emotional distress, interference with prospective eco-
nomic advantage, negligence, and spoliation of evidence. In
sum, Plaintiffs alleged that DuPont fraudulently withheld evi-
dence of Benlate’s contamination to induce Plaintiffs to settle
their underlying Benlate litigation. Plaintiffs allege they were
harmed by DuPont’s fraudulent conduct “because they would
have requested more money or refused to settle had they
known about the concealed data.” Matsuura II, 73 P.3d at
691.

  The district court4 granted DuPont’s judgment on the plead-
ings, ruling the suit was barred by releases signed by Plain-
  4
   The presiding judge at this stage of the litigation was Hon. David Ezra,
Chief Judge of the District of Hawai‘i.
15646       LIVING DESIGNS v. E.I. DUPONT DE NEMOURS
tiffs as part of their settlement agreements with DuPont.
Matsuura I, 166 F.3d at 1008. Furthermore, “the court held
[Plaintiffs] could have rescinded the settlement agreements
because of DuPont’s fraud, but forfeited that remedy by fail-
ing promptly to tender the settlement proceeds.” Id.

   Plaintiffs appealed. We reversed, holding that Delaware
law controlled and that the Delaware Supreme Court would
likely interpret the releases as not barring a claim for fraudu-
lent inducement. Id. at 1011. We also held that, under Dela-
ware law, plaintiffs alleging that they were fraudulently
induced to settle their claims have a choice of remedies: they
may either (1) rescind the settlement agreement or (2) affirm
their settlement agreements and sue for fraud. Id. at 1012.5

  Proceedings continued on remand in federal court. As sum-
marized by the Hawai‘i Supreme Court:

      On March 1, 2001, the [Plaintiffs] filed a “Motion
      for Collateral Estoppel to Preclude Defendant from
      Re-Litigating Previously Adjudicated Findings of
      Fraud, Discovery Abuse, and Intentional Withhold-
      ing of Evidence in the Kawamata Farms case”
      (motion for collateral estoppel). Therein, the [Plain-
      tiffs] seek to preclude DuPont from “re-litigating”
      the following issues: (1) that DuPont fraudulently
      and intentionally withheld the Alta test results from
      Benlate litigants; (2) that DuPont intentionally with-
      held the Keeler documents from Benlate litigants;
      and (3) that the Alta test results included analytical
      findings, which some experts would construe as evi-
      dence that Benlate was contaminated with SUs. The
      [Plaintiffs] claim that issues (1) and (2) have already
      been decided in Kawamata Farms and that issue (3)
  5
   Our interpretation of Delaware law was confirmed as correct in E.I. du
Pont de Nemours & Co. v. Florida Evergreen Foliage, 744 A.2d 457 (Del.
1999).
           LIVING DESIGNS v. E.I. DUPONT DE NEMOURS       15647
    was decided by the Eleventh Circuit in Bush Ranch
    II.

Matsuura II, 73 P.3d at 691. In response, DuPont filed two
“related or counter motions.” Id. First, DuPont filed a “Mo-
tion for Judgment on the Pleadings as to All Plaintiffs’ Claims
Based on Litigation Conduct,” asserting that Plaintiffs’ claims
were barred by the doctrine of litigation immunity and that
Hawai‘i has not recognized a separate tort of spoliation of evi-
dence. Id. Second, DuPont filed a “Motion for Summary
Judgment Based on Plaintiffs’ Inability as a Matter of Law to
Establish Reasonable Reliance,” asserting that reasonable reli-
ance is an element of a fraudulent inducement claim and that
Plaintiffs were unable, as a matter of law, to establish that
they reasonably relied on DuPont’s representations made dur-
ing litigation. Id.

   On May 10, 2001, less than one week before the hearing on
the substantive motions, DuPont filed a motion to certify
questions of Hawai‘i state law to the Hawai‘i Supreme Court.
Judge Ezra agreed and certified three questions to the court.
Matsuura II, 73 P.3d at 692. The Hawai‘i Supreme Court
responded on July 29, 2003. The questions and the Hawai‘i
Supreme Court’s answers are as follows.

    The first question certified asked: “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?” Id. at 688. The Hawai‘i Supreme
Court submitted the following answer: “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 pro-
ceedings.” Id. at 700.

   The second certified question asked: “Where plaintiffs’
attorneys and others have accused the defendant of fraud and
dishonesty during the course of prior, related litigation, are
plaintiffs thereafter precluded as a matter of law from bring-
15648      LIVING DESIGNS v. E.I. DUPONT DE NEMOURS
ing a cause of action for fraudulent inducement to settle
because they should not have relied on the Defendant’s repre-
sentations? Id. at 688-89. The Hawai‘i Supreme Court submit-
ted the following answer: “In an action for fraudulent
inducement where plaintiffs’ attorneys and others have
accused the defendant of fraud and dishonesty during the
course of prior dealings, plaintiffs are not precluded as a mat-
ter of law from establishing that their reliance on the defen-
dant’s representations was reasonable.” Id. at 704.

   The third and final certified question asked: “Does Hawai‘i
law recognize a civil cause of action for damages for inten-
tional and/or negligent spoliation of evidence?” Id. at 689.
The Hawai‘i Supreme Court responded:

    Because the facts alleged cannot support their spolia-
    tion claim, this court need not resolve whether
    Hawai‘i law would recognize a tort of spoliation of
    evidence. Therefore, insofar as the third certified
    question does not appear to be “determinative of the
    cause,” it was inappropriate for certification under
    HRAP Rule 13. Accordingly, we decline to answer
    it.

Id. at 706 (citations omitted).

   Prior to the Hawai‘i Supreme Court’s response to the certi-
fied questions, visiting Judge Manuel Real of Los Angeles,
who replaced Chief Judge Ezra as the judge assigned to this
case, denied DuPont’s motion for continuance of the trial date
and for limited stay of discovery pending the Hawai‘i
Supreme Court’s ruling and invited DuPont to refile its
motions for judgment on the pleadings and for summary judg-
ment. DuPont refiled its motions. On September 4, 2002,
prior to the Hawai‘i Supreme Court’s ruling on the certified
questions, the district court granted DuPont’s motions for
summary judgment as to Plaintiffs’ fraud claim on the
           LIVING DESIGNS v. E.I. DUPONT DE NEMOURS        15649
grounds that Plaintiffs could not establish reasonable reliance
as a matter of law.

   After the Hawai‘i Supreme Court ruled on the certified
questions, Plaintiffs moved to vacate the district court’s grant
of summary judgment. DuPont filed a counter-motion on July
16, 2003, asking the district court to re-affirm its earlier rul-
ing.

   On February 25, 2004, the district court heard these
motions and other motions filed by DuPont, which included:
(1) a motion for summary judgment on the speculative nature
of Plaintiffs’ alleged damages; (2) a motion for summary
judgment on Plaintiffs’ “Alta fraud” claims; (3) a motion for
summary judgment on Plaintiffs’ “non-fraud” claims; (4) a
motion for judgment on the pleadings as to Plaintiffs’ RICO
claims; and (5) a motion for judgment on the pleadings on
Hawai‘i’s litigation privilege. The district court granted
DuPont’s motions for summary judgment and for judgment
on the pleadings. Matsuura III, 330 F. Supp. 2d at 1101. The
district court instructed DuPont to draft a proposed order,
which the district court adopted almost verbatim and then
published. Plaintiffs timely appealed.

                               II

   We review a dismissal on the pleadings pursuant to Federal
Rule of Civil Procedure 12(c) de novo. Turner v. Cook, 362
F.3d 1219, 1225 (9th Cir. 2004). Judgment on the pleadings
is proper when, taking all the allegations in the pleadings as
true and construed in the light most favorable to the nonmov-
ing party, the moving party is entitled to judgment as a matter
of law. See id. We review a district court’s grant of summary
judgment de novo. Yakutat, Inc. v. Gutierrez, 407 F.3d 1054,
1066 (9th Cir. 2005). “We must determine, viewing the evi-
dence in the light most favorable to the nonmoving party,
whether there are any genuine issues of material fact and
whether the district court correctly applied the relevant sub-
15650      LIVING DESIGNS v. E.I. DUPONT DE NEMOURS
stantive law.” KP Permanent Make-Up, Inc. v. Lasting
Impression I, Inc., 408 F.3d 596, 602 (9th Cir. 2005). We
review the district court’s exclusion of evidence in a summary
judgment motion for an abuse of discretion. Orr v. Bank of
America, 285 F.3d 764, 773 (9th Cir. 2002).

                               III

  The district court erred in granting judgment on the plead-
ings as to the Plaintiffs’ RICO claims.

                               A

   [1] The district court erred in granting judgment on the
pleadings as to the RICO claims asserted by Fuku-Bonsai and
Matsuura. The elements of a civil RICO claim are as follows:
“(1) conduct (2) of an enterprise (3) through a pattern (4) of
racketeering activity (known as ‘predicate acts’) (5) causing
injury to plaintiff’s ‘business or property.’ ” Grimmet v.
Brown, 75 F.3d 506, 510 (9th Cir. 1996) (citing 18 U.S.C.
§§ 1964(c), 1962(c)).

                               1

  [2] The district court held that Fuku-Bonsai and Matsuura
had failed to allege a distinct enterprise. Matsuura III, 330 F.
Supp. 2d at 1129-31. 18 U.S.C. § 1962(c) provides:

    It shall be unlawful for any person employed by or
    associated with any enterprise engaged in, or the
    activities of which affect, interstate or foreign com-
    merce, to conduct or participate, directly or indi-
    rectly, in the conduct of such enterprise’s affairs
    through a pattern of racketeering activity or collec-
    tion of unlawful debt.

“[T]o establish liability under § 1962(c) one must allege and
prove the existence of two distinct entities: (1) a ‘person’; and
           LIVING DESIGNS v. E.I. DUPONT DE NEMOURS         15651
(2) an ‘enterprise’ that is not simply the same ‘person’
referred to by a different name.” Cedric Kushner Promotions,
Ltd. v. King, 533 U.S. 158, 161 (2001); see also Rae v. Union
Bank, 725 F.2d 478, 481 (9th Cir. 1984). The term “enter-
prise” is defined in 18 U.S.C. § 1961(4) as “any individual,
partnership, corporation, association, or other legal entity, and
any union or group of individuals associated in fact although
not a legal entity.”

   [3] Perhaps taking a page out of a John Grisham novel,6
Fuku-Bonsai and Matsuura have alleged that the “person” was
DuPont and the “enterprise” consisted of DuPont, the law
firms employed by DuPont, and expert witnesses retained by
the law firms. To be sure, if the “enterprise” consisted only
of DuPont and its employees, the pleading would fail for lack
of distinctiveness. See Cedric Kushner, 533 U.S. at 164. How-
ever, there is no question that law firms retained by DuPont
are distinctive entities. See United States v. Blinder, 10 F.3d
1468, 1473-74 (9th Cir. 1993). And there is no question that
DuPont and the law firms together can constitute an “associ-
ated in fact” RICO enterprise. Id. at 1473 ((Holding that “a
group or union consisting solely of corporations or other legal
entities can constitute an ‘association in fact’ enterprise”).

   [4] The more difficult question is whether the enterprise
formed by the group of DuPont, the law firms it employed,
and the expert witnesses that the law firms retained is separate
and distinct from DuPont, the RICO “person” alleged in
Plaintiffs’ complaint. We conclude that they are. The associ-
ated in fact enterprise formed by this union is “a being differ-
ent from, not the same as or part of, the person whose
behavior [RICO] was designed to prohibit.” Rae, 725 F.2d at
481. This is not a situation where the enterprise cannot be
either formally or practically separable from the person. See
  6
   In his novel The Firm, author John Grisham describes a law firm
owned by an organized crime family. JOHN GRISHAM, THE FIRM (Double-
day 1991).
15652      LIVING DESIGNS v. E.I. DUPONT DE NEMOURS
United States v. Benny, 786 F.2d 1410, 1416 (9th Cir. 1986).
DuPont — a company that offers products and services for
markets including agriculture, nutrition, electronics, commu-
nications, safety and protection, home and construction, trans-
portation, and apparel — retained law firms for the purpose
of defending DuPont in Plaintiffs’ lawsuits. These law firms
are required to conform to ethical rules and thus are not
merely at the beck and call of their clients. As we recently
observed:

    Membership in the bar is a privilege burdened with
    conditions. An attorney is received into that ancient
    fellowship for something more than private gain. He
    becomes an officer of the court, and, like the court
    itself, an instrument or agency to advance the ends
    of justice.

Gadda v. Ashcroft, 377 F.3d 934, 942-43 (9th Cir. 2004)
(citations and quotations omitted).

   [5] Just as a corporate officer can be a person distinct from
the corporate enterprise, DuPont is separate from its legal
defense team. See Sever v. Alaska Pulp Corp., 978 F.2d 1529,
1534 (9th Cir. 1992); Benny, 786 F.2d at 1415-16. Indeed, the
rules of professional conduct require law firms to be distinct
entities and to maintain their professional independence.
Model Rules of Prof’l Conduct R. 5.4. In addition, even in the
context of the attorney-client relationship, attorneys retain
control over important functions; for example, in litigation,
the attorney retains control over tactical and strategic deci-
sions. New York v. Hill, 528 U.S. 110, 114-15 (2000); Model
Rules of Prof’l Conduct R. 1.2 cmt. 1. Thus, the litigation
“enterprise” necessarily must be distinct from the client
retaining legal assistance. In sum, given the allegations of the
complaint, the district court erred in concluding that Plaintiffs
failed to allege a distinct RICO enterprise.
             LIVING DESIGNS v. E.I. DUPONT DE NEMOURS                15653
                                     2

   The district court also concluded that the predicate acts
alleged by Plaintiffs did not support a RICO claim because (a)
the mail and wire fraud predicate acts failed due to Plaintiffs’
inability to establish reasonable reliance; and (b) the obstruc-
tion of justice predicate acts failed to meet the RICO require-
ments of direct injury and continuity.7 Matsuura III, 330 F.
Supp. 2d at 1128-29.

   [6] The district court concluded, without analysis, that
Plaintiffs were required to prove that they reasonably relied
on DuPont’s fraudulent misrepresentations to state a meritori-
ous civil RICO case predicated on mail and wire fraud. Id. at
1128-29. Under 18 U.S.C. § 1964(c), civil RICO plaintiffs
must demonstrate causation, specifically that they were
injured “by reason of” the alleged racketeering activity of the
defendant. 18 U.S.C. § 1964(c). “It is well settled that, to
maintain a civil RICO claim predicated on mail [or wire]
fraud, a plaintiff must show that the defendants’ alleged mis-
conduct proximately caused the injury.” Poulos v. Caesars
World, Inc., 379 F.3d 654, 664 (9th Cir. 2004) (citing Holmes
v. Sec. Investor Prot. Corp., 503 U.S. 258, 268 (1992)).
Although, in some cases, “reliance may be a milepost on the
road to causation,” id. (quoting Blackie v. Barrack, 524 F.2d
891, 906 n.22 (9th Cir. 1975))., we have in the past declined
to announce a black-letter rule that reliance is the only way
plaintiffs can establish causation in a civil RICO claim predi-
cated on mail or wire fraud. Id. at 666. We need not address
  7
    We hold that the district court did not err in concluding that Plaintiffs
failed to allege a direct relationship between the injury and the alleged
wrongdoing. Plaintiffs alleged that the predicate act consisted of DuPont’s
obstruction of justice in the Bush Ranch case. “[P]laintiff[s] who com-
plain[ ] of harm flowing merely from the misfortunes visited upon a third
person by the defendant’s acts [are] generally said to stand at too remote
a distance to recover.” Oregon Laborers-Employers Health & Welfare
Trust Fund v. Philip Morris, Inc., 185 F.3d 957, 963 (9th Cir. 1999) (quot-
ing Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268-69 (1992)).
15654        LIVING DESIGNS v. E.I. DUPONT DE NEMOURS
whether this is a case where Plaintiffs can establish causation
only by demonstrating that they reasonably relied on
DuPont’s fraud,8 because Plaintiffs adequately pleaded rea-
sonable reliance in their amended complaint. Plaintiffs alleged
in their complaint that they “reasonably relied on [DuPont] to
obey statutes, court orders, court rules, rules of evidence,
written agreements, representations to the court by officers of
the court, and representations made under oath to the court by
[DuPont]’s officers and agents.” First Am. Compl. ¶ 165.
Regardless of whether Plaintiffs were required to plead rea-
sonable reliance to satisfy the causation element of their
RICO claims, they did, and thus the district court erred in
granting judgment on the pleadings on this question.

   Although the district court styled its order as one granting
judgment on the pleadings, it appeared to be considering this
issue on the record. Matsuura III, 330 F. Supp. 2d at 1128-29
(“As discussed above, Plaintiffs cannot prove that they rea-
sonably relied on DuPont’s alleged fraud.”). Therefore, we
assume that the district court converted the Rule 12(c) motion
into a motion for summary judgment.9 If so, then the district
court erred, because there were genuine issues of material fact
that precluded the grant of summary judgment on this ques-
tion. The district court held that the Plaintiffs’ attorney,
Malone, knew or had knowledge of many of the alleged facts
indicating fraudulent conduct. However, this is a disputed
issue. Plaintiffs tendered evidence that Malone did not know
  8
     Indeed, it would be premature for us to do so, as the Supreme Court
recently granted a petition for a writ of certiorari to address the following
question: “Did the Court of Appeal for the Second Circuit err when it held
that civil RICO plaintiffs alleging mail and wire fraud as predicate acts
must establish ‘reasonable reliance’ under 18 U.S.C. § 1964(c)?” Bank of
China, New York Branch v. NBM L.L.C., 125 S. Ct. 2956 (2005).
   9
     If the district court considers matters outside the pleadings, the district
court treats the Rule 12(c) motion as one for summary judgment and must
give all parties a “reasonable opportunity to present all material made per-
tinent to such a motion by Rule 56.” Fed. R. Civ. P. 12(c). Plaintiffs do
not dispute that they received such an opportunity.
           LIVING DESIGNS v. E.I. DUPONT DE NEMOURS        15655
the substance of the evidence that DuPont was withholding at
the time of settlement. Therefore, there exists a triable factual
issue as to reasonable reliance.

   In sum, the district court improperly granted judgment on
the pleadings on the question of reasonable reliance and, to
the extent that the district court converted the Rule 12(c)
motion into a Rule 56 motion for summary judgment, it also
erred because there were genuine issues of material fact on
the question.

                                3

   The district court determined that Plaintiffs did not assert
that they had suffered an injury to their business or property,
as required under 18 U.S.C. § 1964(c). Matsuura III, 330 F.
Supp. 2d at 1131. Rather, the district court determined that
because Plaintiffs’ injury consisted of “a tainted litigation pro-
cess that diminished their settlements,” Plaintiffs suffered “the
type of personal injury or injury to an intangible interest not
remediable by RICO’s civil provisions.” Id.; see also id. at
1132 (holding that Plaintiffs’ allegations “fail to allege a cog-
nizable RICO injury and therefore fail as a matter of law”).
Plaintiffs argue that they:

    settled product liability claims, accepted deflated set-
    tlements, and dismissed those causes of action, only
    to find out later that they had been defrauded. [Plain-
    tiffs’] underlying claims were specifically focused
    on injury to their nursery businesses and their prop-
    erty (including damaged plant inventory) caused by
    defective Benlate, and DuPont’s fraud and racketeer-
    ing activities further damages those business and
    property interests when they were duped into accept-
    ing low settlements.

Brief for Appellants at 75.
15656      LIVING DESIGNS v. E.I. DUPONT DE NEMOURS
   [7] This court “typically look[s] to state law to determine
‘whether a particular interest amounts to property.’ ” Diaz v.
Gates, 420 F.3d 897, 899 (9th Cir. 2005) (en banc) (per
curiam) (quoting Doe v. Roe, 958 F.2d 763, 768 (7th Cir.
1992)). “Without harm to a specific business or property
interest—a categorical inquiry typically determined by refer-
ence to state law—there is no injury to business or property
within the meaning of RICO.” Id. at *3. Financial losses, in
and of themselves, are insufficient to confer standing under
RICO. Id. at *3 n.1.

   [8] Plaintiffs allege that they suffered both a harm to a spe-
cific property interest and a financial loss. The harm Plaintiffs
allege is fraudulent inducement, which is actionable under
Hawai‘i law. Matsuura II, 73 P.3d at 700-01. The financial
loss Plaintiffs claim is that they settled their claims for a smal-
ler percentage of their alleged damages than they could have
received absent DuPont’s fraudulent inducement. See Matsu-
ura III, 330 F. Supp. 2d at 1131. Therefore, the district court
erred in determining that Plaintiffs’ “allegations . . . fail to
allege a cognizable RICO injury and therefore fail as a matter
of law,” Matsuura III, 330 F. Supp. 2d at 1132.

                                4

    The district court determined that Plaintiffs’ RICO claims
fail as a matter of law because they are based on immune liti-
gation conduct. Matsuura III, 330 F. Supp. 2d at 1133. The
district court reasoned that (1) Plaintiffs’ “RICO claims are
based on DuPont’s conduct in Benlate litigation;” (2) “federal
litigation immunity . . . bars subsequent civil litigation based
on a party’s litigation conduct;” and (3) “there is no stated or
clear Congressional intent to abrogate litigation immunity.”
Id. at 1132-33.

  [9] Common law immunizes witnesses in judicial proceed-
ings from subsequent litigation based on their testimony. See
Briscoe v. LaHue, 460 U.S. 325, 330-31 (1983); Franklin v.
            LIVING DESIGNS v. E.I. DUPONT DE NEMOURS                15657
Terr, 201 F.3d 1098, 1101 (9th Cir. 2000); Holt v. Castaneda,
832 F.2d 123, 124 (9th Cir. 1987). Plaintiffs allege that
DuPont’s RICO liability is predicated on its falsification,
destruction, and misrepresentation of evidence. DuPont has
not cited any federal case which holds that a party’s litigation
conduct in a prior case is entitled to absolute immunity and
cannot form the basis of a subsequent federal civil RICO
claim. See Florida Evergreen Foliage v. E.I. DuPont de
Nemours & Co., 336 F. Supp. 2d 1239, 1267 (S.D. Fla. 2004).10
In fact, the RICO statute, itself, provides that conduct relating
to prior litigation may constitute racketeering activity. 18
U.S.C. § 1961(1)(B) (defining racketeering activity as includ-
ing an act indictable under 18 U.S.C. § 1512, which relates to
tampering with a witness, victim, or informant). Therefore,
the district court erroneously determined that Plaintiffs’
“RICO claims, which are based on immune litigation conduct,
fail as a matter of law.” Matsuura III, 330 F. Supp. 2d at
1133.

                                    B

   The district court erred in holding that the statute of limita-
tions precluded relief as to Plaintiffs Living Designs, McCon-
nell, Inc., and Anthurium Acres. Living Designs, McConnell,
Inc., and Anthurium Acres did not file their complaints assert-
   10
      The two cases cited by DuPont — United States v. Pendergraft, 297
F.3d 1198 (11th Cir. 2002), and Raney v. Allstate Ins. Co., 370 F.3d 1086
(11th Cir. 2004) — are inapposite, as they deal with whether certain con-
duct is wrongful within the meaning of the Hobbs Act, 18 U.S.C. § 1951,
which criminalizes interfering with commerce through the use of threats
or violence. In Pendergraft, the Eleventh Circuit held that defendants’
“threat to file litigation against Marion County, even if made in bad faith
and supported by false affidavits, was not ‘wrongful’ within the meaning
of the Hobbs Act.” 297 F.3d at 1208. In Raney, the Eleventh Circuit, rely-
ing on Pendergraft, affirmed the dismissal of plaintiff’s RICO claim
because conspiracy to extort money through the filing of malicious law-
suits is not wrongful within the meaning of the Hobbs Act, 18 U.S.C.
§ 1951, and therefore plaintiff failed to allege a predicate act cognizable
under RICO. 370 F.3d at 1088.
15658      LIVING DESIGNS v. E.I. DUPONT DE NEMOURS
ing their RICO claims until, respectively, September 24,
1999, May 5, 2000, and September 21, 2000. The district
court determined that Plaintiffs had constructive notice of
DuPont’s fraud no later than August 21, 1995, the date that
DuPont was sanctioned for fraud by Judge Elliott in the Bush
Ranch case. Living Designs, Inc. v. E.I. du Pont de Nemours
& Co., No. 99-00660 MLR/LER (D. Haw. Sep. 5, 2002)
(order granting DuPont’s motion for summary judgment as to
plaintiffs’ RICO claims based on the statute of limitations).
Therefore, the district court concluded that Plaintiffs’ RICO
claims were barred by the four year statute of limitations. Id.

   [10] The limitations period for civil RICO actions begins to
run when a plaintiff knows or should know of the injury
which is the basis for the action. Id. at 1109. Thus, Plaintiffs’
RICO claims accrued when Plaintiffs had actual or construc-
tive knowledge of DuPont’s fraud. “Ordinarily, [this court]
leave[s] the question of whether a plaintiff knew or should
have become aware of a fraud to the jury.” Beneficial Stan-
dard Life Ins. Co. v. Madariaga, 851 F.2d 271, 275 (9th Cir.
1988). “The plaintiff is deemed to have had constructive
knowledge if it had enough information to warrant an investi-
gation which, if reasonably diligent, would have led to dis-
covery of the fraud.” Pincay, 238 F.3d at 1110 (quoting
Beneficial Standard Life, 851 F.2d at 275) (internal quotation
marks omitted).

   [11] Plaintiffs have tendered sufficient evidence to raise a
genuine issue of material fact as to when they knew of or
should have discovered the fraud. The district court relied
solely on the entry of Judge Elliot’s sanction order. However,
the district court erred in determining that, as a matter of law,
the attention received by Judge Elliott’s ruling could be
imputed to the Plaintiffs. O’Connor v. Boeing North Ameri-
can, Inc., 311 F.3d 1139, 1152-53 (9th Cir. 2002) (“The dis-
trict court erred in concluding as a matter of law that
newspaper reports concerning the Defendants’ facilities were
sufficiently ‘numerous and notorious’ to impute knowledge of
           LIVING DESIGNS v. E.I. DUPONT DE NEMOURS       15659
them to Plaintiffs. The district court held that a ‘reasonable,
prudent subscriber’ of newspapers in the area, and a ‘reason-
ably diligent person living in the area for a substantial period
of time between’ 1989 and 1991 would have become aware
of the release of contaminants from SSFL. This evaluation of
the awareness in Plaintiffs’ various communities of a specific
fact or event was uniquely an issue for the jury to resolve.”).
Further, Plaintiffs tendered evidence that their attorney did
not realize the import of the order until much later. This,
along with other evidence in the record, is sufficient to create
a triable factual issue as to whether these parties should have
known about the alleged fraud when Judge Elliot’s sanction
order was issued.

                               C

   [12] For these reasons, the district court erred in granting
judgment on the pleadings as to the RICO claims. We express
no opinion on the merits of the claims, but simply conclude
that DuPont is not entitled to judgment on the pleadings for
the reasons given by the district court.

                              IV

   The district court erred in holding that DuPont was entitled
to summary judgment under Hawai‘i law because of Plain-
tiffs’ “inability to prove either the fact or amount of damages
with reasonable certainty.” Matsuura III, 330 F. Supp. 2d at
1125.

   [13] Under Hawai‘i law, in order to maintain a claim for
relief grounded in fraud, “the plaintiff must have suffered sub-
stantial actual damage, not nominal or speculative.” Zanakis-
Pico v. Cutter Dodge, Inc., 47 P.3d 1222, 1233 (Haw. 2002)
(quoting Prosser, Law of Torts at 648 (3d ed. 1964)) (empha-
sis omitted). “[P]laintiffs suing in fraud are required to show
both that they suffered actual pecuniary loss and that such
damages are definite and ascertainable, rather than specula-
15660      LIVING DESIGNS v. E.I. DUPONT DE NEMOURS
tive.” Id. The aim of compensation is to place the plaintiffs in
the same position they would have occupied had they not
been defrauded. Id. In the context of a breach of contract case,
the Hawai‘i Supreme Court stated regarding the amount of
proof needed to establish the fact and amount of damages:

    [A] distinction is made in the law between the
    amount of proof required to establish the fact that the
    injured party has sustained some damage and the
    measure of proof necessary to enable the jury to
    determine the amount of damage. It is now generally
    held that the uncertainty which prevents a recovery
    is uncertainty as to the fact of damage and not as to
    its amount. However, the rule that uncertainty as to
    the amount does not necessarily prevent recovery is
    not to be interpreted as requiring no proof of the
    amount of damage. The extent of plaintiff’s loss must
    be shown with reasonable certainty and that
    excludes any showing or conclusion founded upon
    mere speculation or guess.

Chung v. Kaonohi Ctr. Co., 618 P.2d 283, 290-91 (Haw.
1980) (emphasis added), abrogated on other grounds by
Francis v. Lee Enters., Inc., 971 P.2d 707 (Haw. 1999) (quot-
ing Ferreira v. Honolulu Star-Bulletin, 356 P.2d 651, 656
(Haw. 1969).

   Regarding the requirement that the amount of damages be
shown with reasonable certainty, the Hawai‘i Supreme Court
has recognized that “[t]he problem of how to measure dam-
ages, and how to establish them in fraud cases, is always a
difficult one since the person defrauded has, because of the
fraud, not pursued alternative courses of action, and the
results of those untaken courses therefore remain specula-
tive.” Leibert v. Finance Factors, Ltd., 788 P.2d 833, 837
(Haw. 1990). Thus, the Hawai‘i Supreme Court has stated that
the evidence necessary to show damages with reasonable cer-
tainty depends on the circumstances of each individual case.
             LIVING DESIGNS v. E.I. DUPONT DE NEMOURS                15661
Chung, 618 P.2d at 291 (rejecting other jurisdictions’ per se
rule that the absence of prior income and expense experience
of a new or unestablished business renders the loss of antici-
pated profits too speculative to be proven with reasonable cer-
tainty and holding that “where a plaintiff can show future
profits in a new or unestablished business with reasonable
certainty, damages for loss of such profits may be awarded”).
Where the fact of damage is established, Hawai‘i law will not
insist upon a higher degree of certainty as to the amount of
damages than the nature of the case admits, particularly where
the uncertainty was caused by the defendant’s own wrongful
acts. Coney v. Lihue Plantation Co., 39 Haw. 129, 1951 WL
7080, at * 5 (1951); see also Chung, 618 P.2d at 291. Thus,
the Hawai‘i Supreme Court has stated that “[d]amages which
cannot be accurately measured should not for that reason be
denied, but the amount should be left to the jury.” Id. at *4
(quoting Ah Quai v. Puuki, 11 Haw. 158 (1897)).

   [14] Although the Hawai‘i state courts have not articulated
what must be proven in order to bring a meritorious settle-
ment fraud claim, the district court, relying on a 1911 New
York case, determined that “a ‘settlement fraud’ plaintiff must
prove . . . that the settled claim had merit.” Matsuura III, 330
F. Supp. 2d at 1123.11 That plaintiffs must demonstrate that
their settled claim had merit is inconsistent with the aim of
compensation in fraud cases, which is to restore plaintiffs to
the position they would be in absent the fraud and to provide
plaintiffs with the benefit of the bargain, see Leibert, 788 P.2d
at 836-37, particularly as a party’s decision to settle is often
made as a result of a cost-benefit analysis rather than an
assessment of the claim’s merits.

   In DiSabatino v. United States Fidelity & Guaranty Co.,
  11
    The other case cited by the district court to support this assertion is a
1944 case decided by the Indiana Supreme Court, Automobile Underwrit-
ers, Inc. v. Rich, 53 N.E.2d 775, 777 (Ind. 1944). Matsuura III, 330 F.
Supp. 2d at 1123 n.19.
15662        LIVING DESIGNS v. E.I. DUPONT DE NEMOURS
635 F. Supp. 350, 355 (D. Del. 1986),12 the United States Dis-
trict Court for the District of Delaware explained why the
court does not require plaintiffs alleging that the settlement of
their tort claim was procured by fraud to prove that they had
a good cause of action against the tortfeasor at the time of the
fraud:

       Whether a good cause of action existed at the time
       of the settlement was a material fact that the parties
       already considered in reaching a settlement. Requir-
       ing a plaintiff to prove in a court of law the existence
       of a good cause of action for a tort would be incon-
       sistent with affirmance of a settlement agreement.
       Evidence of the legal and factual strength of the
       claim merely goes to the value of the claim that was
       compromised in determining damages from the
       fraud.

   [15] The sound approach is one in which the trier of fact
determines “the probable amount of settlement in absence of
fraud after considering all known or foreseeable facts and cir-
cumstances affecting the value of the claim on the date of set-
tlement . . .” Id. at 355; see also Matsuura I, 166 F.3d at 1008
n.4 (citing DiSabatino, 635 F. Supp. at 354-55 for the asser-
tion that “damages for fraud are conceptually different from
damages for the underlying tort claims and are not too specu-
lative to calculate”). To put it another way, the relative
strength of the claim in the absence of fraud should be used
by the trier of fact to determine the amount of the defrauded
party’s damages. Whether the defrauded party could have
won its case if it proceeded to trial is irrelevant to this calcula-
  12
   We favorably cited DiSabatino the first time this case was before us.
Matsuura I, 166 F.3d at 1008 n.4.
  The district court in DiSabatino expressed its disapproval of Automobile
Underwriters, supra at n.3, to the extent that it required a plaintiff in an
action based on settlement fraud to prove that he or she had a good cause
of action against the tortfeasor at the time of settlement.
             LIVING DESIGNS v. E.I. DUPONT DE NEMOURS                15663
tion. The critical consideration is the settlement value of the
case on the date settlement was reached. Such a determination
is not beyond the power of a jury to determine. The use of
probability analysis, for example, in calculating settlement
values is not uncommon.

   [16] Here, the district court erroneously required Plaintiffs
to present admissible evidence regarding the merits of their
underlying product liability claims. Matsuura III, 330 F.
Supp. 2d at 1124 (“Plaintiffs had made no effort, however, to
prove either the merits of their underlying product liability
claims or what those claims would have been worth had their
[sic] been no fraud by DuPont.”). DuPont is also wrong in
suggesting that Plaintiffs were required to provide such evi-
dence.

   Therefore, the question becomes whether there is a genuine
issue of fact regarding whether Plaintiffs suffered damages as
a result of DuPont’s fraud. Plaintiffs have tendered evidence
that knowledge of the withheld evidence on the date of settle-
ment would have increased the settlement value of the case
substantially. They cite comparable settlements of much
larger amounts13 and expert testimony.14 This evidence is suf-
   13
      DuPont argues that evidence of these settlements and verdicts is inad-
missable under FED. R. EVID. 408. However, DuPont did not raise this
issue before the district court and the district court did not rule on the
admissibility of this evidence. Therefore, DuPont has waived this argu-
ment for the purposes of this appeal. Doi v. Halekulani Corp., 276 F.3d
1131, 1140 (9th Cir. 2002). However, DuPont is not precluded from
asserting the argument on remand, and we express no opinion on the mer-
its of the question.
   14
      Assuming that the district court concluded that the testimony of J.
Anderson Berly, III — a trial attorney retained by Plaintiffs to render
expert opinions about the materiality and impact of DuPont’s withholding
of evidence — was inadmissible under FED. R. EVID. 702, see Matsuura
III, 330 F. Supp. 2d at 1124, 1124 n.21, such constituted an abuse of dis-
cretion.
   “Rule 702 allows admission of ‘scientific, technical, or other special-
ized knowledge’ by a qualified expert if it will ‘assist the trier of fact to
15664        LIVING DESIGNS v. E.I. DUPONT DE NEMOURS
ficient to create a triable issue of fact and is not so speculative
that damages are incapable of calculation.

   [17] DuPont argues that attorney Malone settled the cases
with the belief that he would have won at trial. That Malone
believed he could win against DuPont before DuPont’s fraud
was exposed is not particularly relevant to the issue of how
much more Malone could have settled Plaintiffs’ cases for if
he, at the time of settlement, had the test data that DuPont had
fraudulently withheld. Malone also testified that he believed
the Plaintiffs received “full value” for their cases. This is cer-
tainly relevant evidence, but it does not establish full settle-
ment value as a matter of law. Malone also testified that if the

understand the evidence or to determine a fact in issue.’ ” Daubert v. Mer-
rell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Kumho Tire
Co., Ltd. v. Carmichael, 526 U.S. 137 (1999), require the district court to
perform its gatekeeping role to determine the admissibility of all forms of
expert testimony, even the non-scientific testimony at issue here. Han-
garter v. Provident Life & Acc. Ins. Co., 373 F.3d 998, 1017 (9th Cir.
2004). The Supreme Court has emphasized that “[t]he inquiry envisioned
by Rule 702 is . . . a flexible one,” Daubert, 509 U.S. at 594, and must
be “tied to the facts of a particular case,” Kumho Tire, 526 U.S. at 150
(quotation marks omitted). “Concerning the reliability of non-scientific
testimony such as [Berly’s], the ‘Daubert factors (peer review, publica-
tion, potential error rate, etc.) simply are not applicable to this kind of tes-
timony, whose reliability depends heavily on the knowledge and
experience of the expert, rather than the methodology or theory behind
it.’ ” Hangarter, 373 F.3d at 1017 (quoting Mukhtar v. California State
Univ., 299 F.3d 1053, 1169 (9th Cir. 2002)) (emphasis in original).
   There is no indication that the district court weighed Berly’s knowledge
and experience in reaching its decision as to whether the testimony was
admissible. The district court applied an incorrect legal analysis in assess-
ing the reliability of Berly’s testimony in accordance with Rule 702, and
thus abused its discretion in excluding Berly’s testimony. For the same
reason, we conclude that the district court also abused its discretion in
excluding the report of Plaintiffs’ expert James F. Ventura. We remand to
the district court to allow it to determine whether Ventura’s and Berly’s
expert testimony is admissible in the first instance, applying the correct
legal framework. See Sullivan v. U.S. Dept. of Navy, 365 F.3d 827, 834
(9th Cir. 2002). We express no opinion as to the merits of that inquiry.
             LIVING DESIGNS v. E.I. DUPONT DE NEMOURS                15665
Alta data that DuPont had fraudulently withheld had been
revealed to Plaintiffs at the time of settlement, Plaintiffs’
cases would have been stronger and their settlement value
would have been higher.15 Indeed, the import of Malone’s tes-
timony is the subject of vigorous debate between the parties,
and the record can support inferences for each position. It is
not our task to weigh the evidence. Rather, at this stage of the
proceedings, we are required to view the evidence in the light
most favorable to the Plaintiffs. Doing so, we conclude there
is a genuine issue of material fact regarding whether Plaintiffs
suffered damages as a result of DuPont’s fraud. The district
court erroneously granted summary judgment for DuPont
based on its determination that Plaintiffs failed to prove the
fact of damages with reasonable certainty.

                                    V

   The district court erred in granting summary judgment on
the common law fraud claim on the basis that the Plaintiffs
could not establish that the alleged fraud was material or that
the Plaintiffs reasonably relied upon DuPont’s representations
to their detriment.
  15
    Although some of Malone’s testimony concerns how the threat of
punitive damages would have affected the settlement value of Plaintiffs’
cases, most of Malone’s testimony concerns how the evidence withheld by
DuPont would have weakened DuPont’s defenses, particularly its argu-
ments that no SUs had ever been found in their field testing or analytical
chemical testing of Benlate and that Plaintiffs were comparatively negli-
gent, and thus would have increased the settlement value of Plaintiffs’
cases. Thus, the district court erroneously characterized Malone’s testi-
mony as suggesting only “that DuPont’s alleged wrongdoing, if known,
would have provided [Malone] with the opportunities to seek punitive
sanctions and punitive damages against DuPont” and therefore “would
have provided him with enhanced bargaining power in the settlement
negotiations.” Matsuura III, 330 F. Supp. 2d at 1124. Likewise, DuPont’s
assertion that Plaintiffs seek only the enhanced sanctions value of having
discovered the fraud, rather than the honest settlement value in the absence
of fraud, is erroneous.
15666      LIVING DESIGNS v. E.I. DUPONT DE NEMOURS
                                A

   “The materiality of undisclosed information . . . cannot be
determined in a vacuum.” TSA Int’l Ltd. v. Shimizu Corp., 990
P.2d 713, 728 (Haw. 1999) (internal quotation marks omit-
ted). “An omitted fact is material if there is a substantial like-
lihood that, under all the circumstances, the omitted fact
would have assumed actual significance in the deliberations
of the reasonable [claimant].” Id. (internal quotations omit-
ted). Here, the Plaintiffs have tendered sufficient evidence to
create a triable issue of fact on materiality. As we have dis-
cussed, Plaintiffs tendered evidence that the settlement value
of their cases would have increased substantially had the
withheld information been produced on the date of settlement.
DuPont argues that the information was available elsewhere,
that Plaintiffs’ attorney had access to the information, and that
the Plaintiffs deliberately chose to settle without obtaining the
information, but these defenses are fact questions to be
resolved by a jury.

                                B

   Under Hawai‘i law, Plaintiffs’ reliance on DuPont’s mis-
representation must be reasonable. Matsuura II, 73 P.3d at
701. “As a general principle . . . the question of whether one
has acted reasonably under the circumstances is for the trier
of fact to determine.” Id. (quoting Richardson v. Sport Shinko,
880 P.2d 169, 178 (Haw. 1994)). “[W]here reasonable minds
might differ as to the reasonableness of plaintiff’s conduct,
the question is for the jury.” Id. (quoting Young v. Price, 388
P.2d 203, 208 n.10 (Haw 1963)) (internal quotation marks
omitted).

   The Hawai‘i Supreme Court, answering the certified ques-
tion posed to it by the district court of whether Plaintiffs were
unable as a matter of law to establish that their reliance on
DuPont’s representations was reasonable, stated that “we are
persuaded that reasonable minds could differ as to the reason-
           LIVING DESIGNS v. E.I. DUPONT DE NEMOURS        15667
ableness of the [Plaintiffs’] reliance on DuPont’s representa-
tions.” Id. at 704. Although the record has been developed
more fully since the Hawai‘i Supreme Court considered this
matter, our analysis is the same. Although DuPont has raised
serious questions about the reasonableness of the reliance and
about whether Plaintiffs actually relied upon DuPont’s repre-
sentations, these are factual questions to be resolved by a jury.

                               VI

   The district court also erred in granting summary judgment
on Plaintiffs’ non-fraud common law claims other than the
claims of negligence and spoliation.

                               A

   [18] The settlement agreement does not preclude Plaintiffs’
non-fraud causes of action. Delaware laws governs the con-
struction and effect of Plaintiffs’ settlement contracts with
DuPont. Matsuura I, 166 F.3d at 1008 n.3. The district court
determined that E.I. DuPont de Nemours & Co. v. Florida
Evergreen Foliage, 744 A.2d 457 (Del. 1999), in which the
Delaware Supreme Court determined that the general release
in the settlement agreement between DuPont and a similarly
situated plaintiff did not bar plaintiff’s subsequent action
against DuPont for fraud in the inducement of the release, did
not control the question of whether Plaintiffs’ non-fraud
claims were barred by the terms of the settlement agreements
between DuPont and Plaintiffs. Matsuura III, 330 F. Supp. 2d
at 1126-27. The district court reasoned that (1) Plaintiffs’
“non-fraud do not satisfy the ‘fraud exception’ articulated by
the Delaware Supreme Court,” and (2) the covenants not to
sue that are contained in the settlement agreements and which
are broader than the general release clauses bar any claims
related to the settled claims and therefore Plaintiffs’ non-fraud
claims. Id. at 1126-27.

  DuPont’s argument that the decisions of this court in Mat-
suura I and the Delaware Supreme Court in Florida Ever-
15668     LIVING DESIGNS v. E.I. DUPONT DE NEMOURS
green “unambiguously were limited to the scope of the
release clause, and nowhere mentioned the separate covenant
not to sue in the parties’ settlement agreements” is erroneous.
Although the covenant not to sue is not quoted in our decision
in Matsuura I, DuPont argued that the covenant not to sue
barred Matsuura’s fraud claims in its brief to the Matsuura I
court. 1997 WL 33547005 (arguing in its brief that “[t]he
Matsuuras further agreed not to commence any action against
DuPont ‘based upon or in any way related to any causes of
action, claims, demands, actions, obligations, damages, or lia-
bilities which are the subject of this Release,’ ” and that
“Plaintiffs agreed not to commence or participate in any
action based upon or ‘in any way related to’ a released claim
against DuPont in the future.”). We rejected DuPont’s argu-
ment. Thus, the covenant not to sue does not bar Plaintiffs’
non-fraud claims.

   In addition, although the Delaware Supreme Court does in
some instances refer to a “fraud exception,” Florida Ever-
green, 744 A.2d at 461, the court’s reasoning for creating the
fraud exception applies to non-fraud claims arising out of
fraudulent conduct. As stated by the Delaware Supreme
Court:

    There is some merit to the contention that parties
    entering into a general release are chargeable with
    notice that any uncertainty with respect to the con-
    tours of the dispute which led to the litigation,
    including that which is provable and that which is
    not, is resolved through the release. See Hob Tea
    Room v. Miller, Del. Supr., 89 A.2d 851, 856 (1952)
    (construing the effect of a general release that the
    Court characterized as “unmistakably lucid”). It is
    quite another thing, however, to conclude that a per-
    son is deemed to have released a claim of which he
    has no knowledge, when the ignorance of such a
    claim is attributable to fraudulent conduct by the
    released party. 66 Am. Jur.2d Release § 30 (1973).
           LIVING DESIGNS v. E.I. DUPONT DE NEMOURS       15669
    At a minimum, if one party is to be held to release
    a claim for fraud in the execution of the release
    itself, the release should include a specific statement
    of exculpatory language referencing the fraud.

Florida Evergreen, 744 A.2d at 460-61. In addition, just as
DuPont’s fraudulent inducement of settlement “subsists sepa-
rate from, and necessarily occurred after, any conduct DuPont
may have engaged in with respect to its manufacture or distri-
bution of Benlate,” id. at 462, so do other claims stemming
from the same fraudulent conduct. Also similar to a claim for
fraudulent inducement, other tort claims stemming from the
same fraudulent conduct are not ones that ordinarily would be
knowingly released. Matsuura I, 166 F.3d at 1011.

   [19] In sum, it appears probable that, under Delaware law,
the settlement contracts do not bar Plaintiffs’ non-fraud
claims.

                               B

  [20] The district court did not err in dismissing Plaintiffs’
negligence claims, stating “[t]here is no basis for allowing
derivative litigation over claims that an opponent’s prior liti-
gation conduct in another case amounted to negligence.” Mat-
suura III, 330 F. Supp. 2d at 1128. In a footnote, Plaintiffs
argue only that “Hawai‘i common law creates a duty not to
make negligent misrepresentations, and a breach of such a
duty is actionable.” Brief for Appellants at 79 n.47 (citing
Zanakis-Pico v. Cutter Dodge, Inc., 47 P.3d 1222, 1234
(Haw. 2002)).

   [21] Because “litigation conduct is governed by statute,
rules of procedure, and ethical rules,” Matsuura III, 330 F.
Supp. 2d at 1127, the statutes and rules themselves, must
impose a duty of care on parties or their legislative history
must manifest an intent on the part of the legislature to do so.
Lee v. Corregedore, 925 P.2d 324, 342-43 (Haw. 1996); Huls-
15670      LIVING DESIGNS v. E.I. DUPONT DE NEMOURS
man v. Hemmeter Dev. Corp., 647 P.2d 713, 719-20 (Haw.
1982). Plaintiffs have not argued or demonstrated that the pro-
cedural rules create a duty of care or that their legislative his-
tory manifest an intent to do so. As the district court’s
judgment lays out, the Federal Rules of Civil Procedure do
not create duties on which an opposing party may base a neg-
ligence claim. Matsuura III, 330 F. Supp. 2d at 1127-28 (cit-
ing 28 U.S.C. § 2702(b)). A violation of Hawai‘i Rules of
Civil Procedure, which appear to be modeled on the Federal
Rules of Civil Procedure, Swink v. Cooper, 881 P.2d 1277,
1282 (Haw. 1994) (noting that HRCP 26(e) is modeled on
FRCP 26(e)), likewise appears not to create a separate cause
of action.

                                C

    The district court also erroneously dismissed Plaintiffs’
non-fraud claims on the grounds of the litigation privilege.
Matsuura III, 330 F. Supp. 2d at 1128. In Matsuura II, the
Hawai‘i Supreme Court stated that “Hawai‘i courts have
applied an absolute litigation privilege in defamation actions
for words and writings that are material and pertinent to judi-
cial proceedings.” 73 P.3d at 692. The court examined the
policy considerations behind the privilege and decided not to
expand the protection of the privilege to claims outside of def-
amation actions, holding that “[u]nder 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.”
Id. at 700, 706. The court appears to emphasize that many of
the policies weighing against the application of the privilege
do so only when fraud was committed in the prior proceed-
ings. Id. at 693-99. In accordance with the Hawai‘i Supreme
Court’s analysis, so long as a cause of action for fraud is
asserted, the litigation privilege does not protect subsequent
litigation asserting other causes of action stemming from the
fraud allegedly committed in prior proceedings. Thus, we
hold that Plaintiffs’ non-fraud claims are not barred by the lit-
igation privilege under Hawai‘i law.
           LIVING DESIGNS v. E.I. DUPONT DE NEMOURS        15671
                                D

   In their opening brief, Plaintiffs do not raise the issue that
the district court erroneously dismissed Plaintiffs’ spoliation
claims, and only briefly assail the district court’s ruling in its
reply brief. As such, Plaintiffs have waived this claim.

                               VII

  Plaintiffs request that this court exercise its supervisory
power under 28 U.S.C. § 2106 to reassign this case to a differ-
ent district court judge on remand. In the ordinary course,

    Absent allegations of bias, the factors this court con-
    siders in deciding whether “unusual circumstances”
    exist and remand to a different judge is appropriate
    are: (1) whether the original judge would reasonably
    be expected upon remand to have substantial diffi-
    culty in putting out of his or her mind previously-
    expressed views or findings determined to be errone-
    ous or based on evidence that must be rejected, (2)
    whether reassignment is advisable to preserve the
    appearance of justice, and (3) whether reassignment
    would entail waste and duplication out of proportion
    to any gain in preserving the appearance of fairness.

United States v. Atondo-Santos, 385 F.3d 1199, 1201 (9th Cir.
2004) (quoting United States v. Working, 287 F.3d 801, 809
(9th Cir. 2002)). A finding of either the first or second factor
supports remanding to a different district court judge. Id.

   Although we do not question the impartiality of the visiting
district judge, there are some unusual factors that indicate to
us that a reassignment is advisable to preserve the appearance
of justice. The visiting district judge adopted the 64 page pro-
posed summary judgment order tendered by DuPont with only
a few minor changes. Those changes consisted of additional
language complaining about the volume of material involved.
15672      LIVING DESIGNS v. E.I. DUPONT DE NEMOURS
The judge then directed that the ghost-written order be pub-
lished. Although adopting findings or an order drafted by the
parties is not prohibited, we have criticized district courts that
“engaged in the ‘regrettable practice’ of adopting the findings
drafted by the prevailing party wholesale.” Maljack Produc-
tions, Inc. v. GoodTimes Home Video Corp., 81 F.3d 881, 890
(9th Cir. 1996) (quoting Sealy, Inc. v. Easy Living, Inc., 743
F.2d 1378, 1385 n.3 (9th Cir. 1984)).

   In addition, the visiting district judge took the highly
unusual step of reversing sub silento the thoughtful certifica-
tion order previously entered by the district court. In its
lengthy order, the district court analyzed the pending disposi-
tive motions in detail and concluded that case involved novel
issues of state law. It therefore certified the questions to the
Hawai‘i Supreme Court and stayed further proceedings, find-
ing in its order that “[t]he viability of the state causes of
action in this case turns on the answers to these questions.”

   When the case was reassigned to the visiting judge, the
judge reversed course. Rather than waiting for the Hawai‘i
Supreme Court to respond to the questions propounded by the
district court, the visiting district judge decided that the litiga-
tion should proceed. The visiting district judge then denied
motions to stay the proceedings pending the certification
response by the Hawai‘i Supreme Court, invited DuPont to
renew its summary judgment motion, and then acted without
waiting for the Hawai‘i Supreme Court to issue its decision.
After the Hawai‘i Supreme Court issued its lengthy opinion
responding to the certification request, the visiting district
judge declined to take the Hawai‘i Supreme Court’s opinion
into consideration, observing that “I’m not a trial court of the
Hawai‘i courts of appeal.” Transcript of Proceedings Before
Manuel L. Real, February 25, 2004 at 24. The district court
took this action even though the previous judge had certified
to the Hawai‘i Supreme Court that the viability of the state
causes of actions depended on the Hawai‘i Supreme Court’s
response.
          LIVING DESIGNS v. E.I. DUPONT DE NEMOURS       15673
   [21] Considering these actions in the aggregate, we con-
clude that the appearance of justice requires reassignment on
remand. We are also mindful of the expense involved in uti-
lizing visiting judges. Therefore, we remand this case to the
Chief Judge of the District of Hawai‘i to determine the assign-
ment of the case on remand.

   Given the resolution of this case, we need not reach any of
the other questions urged by the parties. We need not, and do
not, reach the merits of any of the issues remanded to the dis-
trict court.

  REVERSED AND REMANDED.