Court Opinion

ID: 9929934
Source: CourtListenerOpinion
Date Created: 2024-02-05 19:03:29.6488+00
Date Added: 2024-06-11T10:57:56.893280
License: Public Domain

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                                                         Electronically Filed
                                                         Supreme Court
                                                         SCRQ-XX-XXXXXXX
                                                         05-FEB-2024
                                                         08:17 AM
                                                         Dkt. 46 OP

           IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

                              ---o0o---

                     HYUN JU PARK, Plaintiff,

                                 and

  DONGBU INSURANCE CO., LTD., Plaintiff-Intervenor-Appellant,

                                 vs.

        CITY AND COUNTY OF HONOLULU, Defendant-Appellee,

                                 and

           STERLING NAKI and JOSHUA OMOSO, Defendants.

                          SCRQ-XX-XXXXXXX

             RESERVED QUESTION FROM THE CIRCUIT COURT
              OF THE FIRST CIRCUIT, STATE OF HAWAIʻI
                      (CASE NO. 1CC181001374)

                          FEBRUARY 5, 2024

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

                OPINION OF THE COURT BY EDDINS, J.
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                                   I.

     This court accepted the Circuit Court of the First

Circuit’s reserved question:

          Does a subrogee insurance company, which timely intervened
          pursuant to HRS § 386-8(b), have an independent right to
          continue to pursue claims and/or legal theories against a
          tortfeasor that were not asserted by the subrogor employee,
          after summary judgment has been granted against the
          subrogor employee, on the subrogor employee’s claims?

     We answer Yes.

     There are three main reasons.       First, an affirmative answer

protects subrogation, which in turn protects indemnity.           Second,

a Yes answer aligns with Hawaiʻi’s workers’ compensation

subrogation law, Hawaiʻi Revised Statutes (HRS) § 386-8 (2015 &

Supp. 2016).   Third, a No answer undermines employers’ and

insurers’ intervention rights.

     We also address a claim preclusion argument.          It does not

alter our answer.

                                   II.

     The subrogee insurance company is Plaintiff-Intervenor

Dongbu Insurance Co., Ltd. (Dongbu).       The subrogor employee is

Plaintiff Hyun Ju Park (Park).      The alleged third-party

tortfeasor is the City and County of Honolulu (the City).

     Park sued the City.     Dongbu intervened.      The City moved to

dismiss all of Park’s claims and some Dongbu claims.          The

circuit court granted the motions.       Two Dongbu claims remained.

The circuit court’s reserved question asks whether intervenor

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Dongbu may pursue its non-dismissed claims as a subrogee against

the City.

     We detail the factual backdrop and procedural history.

     Park worked as a bartender at Kings Sports Bar & Grill in

Honolulu.   In April 2015, three off-duty Honolulu Police

Department (HPD) officers went to that bar.     One officer had

several drinks and unholstered his HPD-authorized firearm.        He

tried to load it.    But he couldn’t – the gun was already loaded.

The other HPD officers watched but did nothing.      While Park

worked, the officer shot her.    She nearly died.

     Park sued the City and County of Honolulu and the officers

in the United States District Court for the District of Hawaiʻi.

Under 42 United States Code § 1983, Park alleged the City

violated her Fourth and Fourteenth Amendment rights.      She also

asserted state tort law claims.

     Dongbu was Kings Sports Bar & Grill’s workers’ compensation

insurance carrier.    Dongbu successfully moved to intervene in

the federal suit.    Later, the City moved to dismiss for failure

to state a claim.    In August 2018, the federal district court

agreed.   It dismissed Park’s federal claims with prejudice.

Park v. City & Cnty. of Honolulu, No. CV 17-00142 ACK-KSC, 2018

WL 3764084, at *16 (D. Haw. Aug. 8, 2018).     Park failed to

allege “intentional governmental action meant to interfere” with

her bodily integrity or that the officers “acted under color of

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state law.”    Id. at *9, *10.   The court declined to rule on the

state law claims.    Id. at *16.   Park appealed to the Ninth

Circuit Court of Appeals.

     The next month, September 2018, Park filed a complaint in

the Circuit Court of the First Circuit.      She alleged two claims,

negligence and negligent infliction of emotional distress.         Park

said the City was negligent in two ways: (1) An HPD policy in

her view directed officers to possess guns while drinking

alcohol, and (2) HPD lacked a whistleblowing policy requiring

officers to report misconduct.     The circuit court stayed the

proceedings until the court of appeals ruled.

     The Ninth Circuit affirmed the district court’s dismissal

of Park’s claims in March 2020.     Park v. City & Cnty. of

Honolulu, 952 F.3d 1136 (9th Cir. 2020).      Park failed to

plausibly argue that through its policies, “the County’s

inaction reflected deliberate indifference to her Fourteenth

Amendment right to bodily integrity.”      Id. at 1141-42.   The

court disagreed with Park that HPD policy could reasonably be

interpreted as requiring police officers to carry guns while

intoxicated.    Quite the opposite.    “[T]he policy’s explicit

purpose was to prohibit officers from carrying firearms while in

an impaired condition.”    Id. at 1142.    The Ninth Circuit did not

touch Park’s state law claims.

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     In March 2021, per HRS § 386-8, Dongbu intervened in the

circuit court proceeding.   Dongbu alleged four counts against

the City: (1) negligence, (2) respondeat superior, (3) negligent

supervision, and (4) subrogation.     Dongbu repeated Park’s

theories that the City was negligent for its possession-of-

firearms-while-intoxicated policy and not having a mandatory

misconduct reporting policy.

     On its own, Dongbu alleged more.     First, the City

negligently trained the shooting officer on the safe handling of

firearms.   Second, the City negligently failed to supervise the

officer and limit his access to weapons.

     Because it paid $1.1 million in workers’ compensation for

Park, Dongbu also claimed subrogation.     Dongbu maintained that

it has the right to recover workers’ compensation payments it

made for Park.

     In July 2021, the circuit court granted the City’s motion

for summary judgment against Park.     It also granted partial

dismissal or partial summary judgment against Dongbu.       The court

dismissed Dongbu’s first two claims: negligence and respondeat

superior.   But not Dongbu’s other claims, negligent supervision

and negligent training.

     In August 2021, the City answered Dongbu’s complaint.       The

next month it moved for summary judgment.     The City argued that

Dongbu’s negligent supervision claim failed to show the City had

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notice that the officer needed supervision.           Also, the City

briefly mentioned that because Park was no longer in the case

and Dongbu’s claims rested on the validity of her claims,

Dongbu’s subrogation claim failed.

     The City withdrew its motion in March 2022.            About a week

later, the City again moved for summary judgment.            The City

revamped its argument.      It relied on its subrogation theory.

That is, Dongbu’s claims failed because the court dismissed Park

from the case on the merits.

     In August 2022, the court denied the City’s MSJ against

Dongbu.

     In September 2022, the City moved per Hawaiʻi Rules of

Appellate Procedure Rule 15(a) to reserve a question to this

court.    It also moved to stay the proceedings.         Dongbu opposed

the City’s requests.      Park filed no response.       The circuit court

granted the motion, but denied the stay.

                                    III.

            Does a subrogee insurance company [Dongbu], which timely
            intervened pursuant to HRS § 386-8(b), have an independent
            right to continue to pursue claims and/or legal theories
            against a tortfeasor that were not asserted by the subrogor
            employee [Park], after summary judgment has been granted
            against [Park], on [Park]’s claims?

     Yes.    So Dongbu may continue to pursue its non-dismissed

claims.

     With subrogation, a subrogee (Dongbu) substitutes for a

subrogor (Park), the original holder of a right.            “[S]ubrogation

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involves ‘stepping into’ the shoes of another, when an insurer

brings an action against a tortfeasor based upon its subrogation

rights, the insurer’s rights flow from the insured’s rights.”

State Farm Fire & Cas. Co. v. Pac. Rent-All, Inc., 90 Hawaiʻi

315, 329, 978 P.2d 753, 767 (1999).

     The parties disagree on what stepping into another’s shoes

means.

     The City believes stepping into Park’s shoes means that the

dismissal of her claims dooms Dongbu’s case.     In its view,

Dongbu’s rights flow solely from Park’s lawsuit.      Because the

court dismissed Park’s suit, Dongbu cannot pursue its claims as

a subrogee.   The City urges a No answer.

     We answer Yes.    An employer or insurer, standing in an

employee’s shoes, may continue litigating its independent claim

if the employee could have raised that claim.

     First, answering Yes better protects subrogation, and by

extension indemnity.    Dongbu’s subrogation interest is not only

valid, it’s vital to Hawaiʻi’s workers’ compensation law.       “A

substantial part of the legislative purpose and intent of a

[workers’ compensation] statute is to provide for subrogation

and prevent double recovery.”    Moranz v. Harbor Mall, LLC, 150

Hawaiʻi 387, 400, 502 P.3d 488, 501 (2022) (citation omitted).

     Second, a Yes answer aligns with HRS § 386-8.      Under that

law, a subrogee insurance company like Dongbu has the ability to

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intervene to protect its lien interest against the tortfeasor.

See HRS § 386-8(b) (“The employer, at any time before trial on

the facts, may join as party plaintiff.”).

       Third, answering No would impair an employer or insurer’s

ability to intervene.    Its claims could only be as good as the

employee’s.    If an employee failed to survive a motion to

dismiss, a court would have to dismiss an employer’s complaint –

even a strong one.    This approach may dissuade employers from

intervening in employees’ lawsuits.         That outcome weakens HRS

§ 386-8’s right to intervene and seek reimbursement.          And it may

allow wrongdoers to elude liability.

                                 A.

       Subrogation aids indemnity.       State Farm, 90 Hawaiʻi at 328,

978 P.2d at 766.    It allows insurers to recover what they pay

when third parties injure their insureds.         Id.   It prevents an

insured from getting two recoveries: one from the insurer, one

from the tortfeasor.    Moranz, 150 Hawaiʻi at 400, 502 P.3d at

501.

       The insurer’s subrogation right balances the insured’s

recovery right.    The insurer, “who, in a fault sense, is

neutral, comes out even;” the tortfeasor “pays exactly the

damages it would ordinarily pay;” and the employee “gets a

fuller reimbursement for actual damages sustained than is

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possible under the compensation system alone.”      Id. (cleaned

up).

       Subrogation is an insurer’s remedy for torts against its

insureds.    It is “both a legal right and a legal action.”     State

Farm, 90 Hawaiʻi at 328, 978 P.2d at 766 (citation omitted).        It

is not automatic.    See id. at 333, 978 P.2d at 771.    But once

invoked, the subrogee “is put in all respects in the place of

the party to whose rights [it] is subrogated.”      Id. at 331, 978

P.2d at 769.    Here, Dongbu steps into Park’s shoes.    Its rights

flow from her rights.    Id. at 329, 978 P.2d at 767.

       An intervening insurer slides into comfortable shoes, not

shoddy shoes.    It’s not forced to wear a dismissed plaintiff’s

shoes.    It may walk within the limits of the employee’s

available rights.    And it does so at the outset of the

litigation.    A workers’ compensation insurer may raise and

litigate any claim an employee was entitled to raise at the

outset.

       Dongbu seeks redress for Park’s injury.   Payback for what

it paid out.    Dongbu may do more than piggyback on Park’s

claims.    It may enforce all rights available to Park.

       The City insists that State Farm supports its position.      An

insurer may “enforce only such rights as the insured . . . has

against the party whose wrong caused the loss.”      State Farm, 90

Hawaiʻi at 329, 978 P.2d at 767 (cleaned up).     Those rights, this

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court said, “flow from the insured’s rights” and “are

derivative” because they “rest upon the viability of the

insured’s claim against the tortfeasor.”     Id.    The City believes

this language means Dongbu’s claims are always tied to Park’s.

Once her claims are dismissed, Dongbu’s are too.       The City is

wrong.

     State Farm merely stressed that an insurer may only bring

claims the insured could bring.    Here, Dongbu’s claims “rest

upon the viability” of Park’s.    If Park cannot advance any

winning claims against the City, then neither can Dongbu.

     Dongbu’s pursuit of its claims does not harm Park.       As a

subrogee, an insurer is entitled to only what will make it

“come[] out even.”    Moranz, 150 Hawaiʻi at 400, 502 P.3d at 501.

If Dongbu prevails against the City, it pays Park “any excess”

that it recovers.    See HRS § 386-8(e), § 386-8(g) (setting

priority order for distribution of damages).

     No matter how the City’s liability gets litigated, the

distribution follows HRS § 386-8’s formula.        Park receives any

excess.   It doesn’t matter if she wins, Dongbu wins, or they

both win together.    See HRS § 386-8(e)-(g).   And even if Park

wins without Dongbu’s intervention, Dongbu is still entitled to

recover workers’ compensation payments from Park’s “judgment or

settlement proceeds.”    See HRS § 386-8(f).

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                                 B.

     HRS § 386-8 also supports a Yes answer.      The statute offers

the employer or workers’ compensation insurer the ability to

independently protect its subrogation interest. (HRS § 386-8

uses “employer” to refer to the employer or the employer’s

workers’ compensation insurance carrier, and we follow that

practice).

     “HRS § 386-8 provides the exclusive remedy for an employer

seeking reimbursement for workers’ compensation benefits from a

third-party tortfeasor.”    Hawaiian Dredging Constr. Co., Inc. v.

Fujikawa Assocs., Inc., 142 Hawaiʻi 429, 439, 420 P.3d 360, 370

(2018).   Because Dongbu paid for Park’s injuries through

workers’ compensation benefits, HRS § 386-8 authorizes it to

seek reimbursement.

     HRS § 386-8 empowers an employer to sue a third-party

tortfeasor.    Once an employee sues, the employer may “join as

[a] party plaintiff.”    HRS § 386-8(b).    Once joined, HRS § 386-8

does not bind the employer to the confines of the employee’s

complaint.    The employer has the same rights as a party.    Like

any plaintiff, it may advance claims.      Here, Dongbu joined “as

[a] party plaintiff” under HRS § 386-8(b) to protect its

interests in subrogation and reimbursement.      It may bring its

own claims.

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       HRS § 386-8 also allows an employer to sue without the

employee.    If Park had not filed suit “within nine months after

the date of the personal injury,” Dongbu could have sued on its

own.    HRS § 386-8(c).   Park, as the employee, could join that

suit, file her own action, or sit out the litigation.      Id.    If

the employee sits out, the employer may go it alone.      HRS § 386-

8(e) anticipates actions “prosecuted by the employer alone” and

details how judgments or settlements should be divided between

employer and employee.

       Thus, we do not think the legislature intended for an

employer to passively rely on an employee to propel litigation.

The legislature gave employers the right to bring their own

claims.    HRS § 386-8(e) says nothing about ending an employer’s

case when an employee’s case ends.

       Next, HRS § 386-8 protects employers’ subrogation interest

in settlement negotiations.     HRS § 386-8(d) reads: “No release

or settlement of any claim or action under this section is valid

without the written consent of both employer and employee.”        It

“ensures that both the employee and employer have an opportunity

to protect their interests.”     Hawaiian Dredging, 142 Hawaiʻi at

435, 420 P.3d at 366.

       We also believe the legislature did not intend to tie an

employer to an injured employee.       Rather, it gave the employer

its own opportunity to shape the outcome.      See Shimabuku v.

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Montgomery Elevator Co., 79 Hawaiʻi 352, 358, 903 P.2d 48, 53

(1995) (“[B]ecause the employer’s right to reimbursement is

often dependent on the injured employee’s actions, the

legislature imposed a provision requiring the written consent of

both employer and employee before any release or settlement is

valid”).

     Last, HRS § 386-8 understands that employers and employees

can pursue separate legal strategies.     They may bring either “a

single action or . . . consolidated actions,” and be

“represented by the same agreed attorney or by separate

attorneys.”   HRS § 386-8(g).   An employer is not just a

bystander.

     Nowhere does HRS § 386-8 indicate that an employer’s claims

must match an employee’s claims, or must be dismissed if an

employee is dismissed.   An intervening employer, as “party

plaintiff,” may pursue its own claims.

                                 C.

     The policies behind intervention inform our Yes answer.        A

No answer undermines intervention, weakens recovery, and

disincentivizes insurers from intervening.

     Dismissing Dongbu subverts intervention’s aims.      One HRS

§ 386-8 purpose is to facilitate a complete resolution of the

dispute.   First Ins. Co. of Hawaii, Ltd. v. A&B Props., Inc.,

126 Hawaiʻi 406, 418, 271 P.3d 1165, 1177 (2012).     An insurer’s

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intervention right is necessary to resolve the issue and provide

for subrogation.

        Intervention is governed by Hawaiʻi Rules of Civil Procedure

Rule 24.     Rule 24(a)(2) allows intervention when an applicant’s

interest is at risk and is not “adequately represented by

existing parties.”     Intervention sometimes comes when an insurer

mistrusts a plaintiff’s skill to litigate claims.         The insurer

doesn’t want to link its subrogation rights to a rinky-dink

legal strategy.     Something like Dongbu bemoans here: potentially

viable claims omitted from the complaint.

     Hawaiʻi law allows employers to pursue their subrogation

rights only through HRS § 386-8.         Hawaiian Dredging, 142 Hawaiʻi

at 435, 420 P.3d at 366.     Once the employee sues, as Park did,

the employer’s only option is to intervene in the employee’s

suit.     See HRS § 386-8(b)-(c).   That’s why Dongbu’s claims

survive: hitching its fate to Park barricades its only path to

relief.     A workers’ compensation insurer has another way –

around the plaintiff – to pursue its subrogation right.

     Answering No as the City wants disincentivizes employers

from joining cases where there is risk of dismissal.         This may

lead to lower recovery.     If an employer thinks that a

plaintiff’s case will get dismissed, it has little reason to

spend money and prepare its own case.         Employers lack motivation

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to strengthen a weak case by intervening.     The right to

intervene erodes.

     Disincentivizing intervention harms injured employees

unable to retain solid legal representation.     An employer’s

workers’ compensation lien cuts into the damages available to

pay a plaintiff’s attorney.    See HRS § 386-8(f).    Because an

employer’s complaint would only be as strong as the under-

represented employee, an employer – usually better funded – is

incentivized not to waste legal expenses by joining weaker

cases.

     In contrast, allowing an insurer to pursue its claims

benefits both insurer and insured.     See Moranz, 150 Hawaiʻi at

398, 502 P.3d at 499 (the legislature “recognizes that a third-

party action can result in recovery from a third person which

benefits both the employee and the insurer, even when the action

is prosecuted by the insurer or employee alone”) (cleaned up).

HRS § 386-8(e) entitles Park to “any excess” compensation Dongbu

receives, while Dongbu can claim reimbursement from Park’s

recovery.   See HRS § 386-8(f).   Dongbu’s intervention right

makes it more likely that third-party tortfeasors pay what

“[they] would ordinarily pay.”    Moranz, 150 Hawaiʻi at 400, 502

P.3d at 501 (cleaned up).

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                                 D.

       Last, the City argues that claim preclusion applies.      We

disagree.

       The court dismissed Park’s claims and two of Dongbu’s four

claims.    Dongbu’s negligent supervision and negligent training

claims remain.    The circuit court never decided these claims

because the City withdrew its motion to dismiss.      The City

refocused its revamped motion on its claim preclusion theory.

       Claim preclusion (res judicata) ensures that parties cannot

relitigate claims that were decided or could’ve been decided in

a final judgment.    Bremer v. Weeks, 104 Hawaiʻi 43, 53–54, 85

P.3d 150, 160–61 (2004).    Dongbu’s remaining claims though, are

new.    They were not litigated to final judgment.    The summary

judgment against Park does not glue Dongbu.

       The City gives no adequate reason why Park’s dismissal

should apply to Dongbu’s additional claims.     Res judicata

applies “where matters have already been tried and decided on

the merits.”    Kauhane v. Acutron Co., Inc., 71 Haw. 458, 463,

795 P.2d 276, 278–79 (1990).    Here, Dongbu’s negligent training

and supervision claims are not yet decided.     Though res judicata

forbids relitigation, it promotes access to justice.      It

“permits every litigant to have an opportunity to try [their]

case on the merits.”    Id. at 463, 795 P.2d at 279 (cleaned up).

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That’s all Dongbu wants – to litigate the negligent training and

supervision claim for the first time.

     The City had a chance to make Dongbu’s remaining claims go

away.   It filed a motion to dismiss those claims.     But it

withdrew that motion.     Then, it filed a new motion, seemingly

trying to leverage an offbeat legal theory to backdoor a

dismissal.

     The City acknowledged its unusual tactic.      Pitching the

City’s “claim” argument to the circuit court, counsel conceded,

“I understand, Your Honor, that in a normal case, we talk about

claims a little differently.”    Ordinarily parties can “move for

partial summary judgment or I’d move for partial judgment on the

pleadings and [the judge] would go claim by claim.”      Counsel

voiced the sound approach.    Our justice system prefers

adjudication on the merits.    JK v. DK, 153 Hawaiʻi 268, 278, 533

P.3d 1215, 1225 (2023).    In a case like this, we feel parties

should seek summary judgment for each cause of action, applying

the usual summary judgment standard.

                                  IV.

     An intervening workers’ compensation subrogee-insurer may

make any claim that a subrogor-plaintiff may make at the outset

of the case.   If the plaintiff’s claims are dismissed, the

insurer’s claims remain.

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     We answer Yes to the reserved question.

Saori P. Takahashi                    /s/ Mark E. Recktenwald
(Michele-Lynn E. Luke and
                                      /s/ Sabrina S. McKenna
Bradford Chun on the briefs)
for appellant                         /s/ Todd W. Eddins
                                      /s/ Kathleen N.A. Watanabe
Robert M. Kohn
(Richard D. Lewallen and              /s/ Robert D.S. Kim
Kalikolehuaopanaʻewa J.
Warrington on the briefs)
for appellee

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