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Court finds BOH “free from blame” in funds dispute

The federal court in Honolulu last Friday granted BoH’s motion and instructed the bank to deposit disputed funds in the Marisco vs ASG case into the federal court’s non-interest bearing account by a certain date. It also found that the Bank of Hawai’i “is free from blame in causing the controversy over the entitlement to the disputed funds.”

This is one of the findings by US District Judge Leslie E. Kobayashi in her 25-page decision released last Friday in response to BoH’s interpleader motion filed last month, asking the federal court to among other things, deposit the more than $800,000 garnished in an ASG account following a federal court writ of execution order based on a request by Marisco to freeze this amount owed by ASG from a federal litigation of the case between ASG and Marisco. 

BoH moved for interpleader after it was stuck in the middle of the federal court writ, or disbursement order, and the High Court of American Samoa’s order to release the money frozen in the ASG account. BoH contends it was an innocent party with the different orders by the federal court and the High Court.

Kobayashi has granted BoH’s motion and instructed the bank to deposit the amount of $824,071.15 in the federal court’s non-interesting bearing account by Oct. 22 and if BoH files a written request to deposit the interpleader funds in an interest bearing account, BoH must do so before depositing the funds with the federal court.

In her ruling Kobayashi says allowing the bank to interplead the funds garnished from ASG’s account would not materially alter the status of the case during ASG’s appeal of the lower court’s ruling now pending in federal Ninth Circuit of Appeal’s court in San Francisco.

“Granting the interpleader would preserve the status quo because it would prevent either Marisco or ASG from utilizing the funds to the other party’s detriment during the pendency of the appeal of the Disbursement Order,” she said.

ASG had argued that the lower court no longer has jurisdiction over the case after the appeal was filed, but Kobayashi said the lower court still has jurisdiction to consider the instant interpleader motion.

She also points out that the purpose of the interpleader is to preserve the funds while the appellate court, or courts determine the issue of who is entitled to the funds.

She cited ASG arguments that the interpleader does not meet the requirements of federal Rule 22 because “[n]othing in the… case law authorizes an interpleader based on conflicting court orders.”

“ASG, however, does not cite any authority for its proposition that a conflict between  orders of two different courts renders a disputed fund ineligible for interpleader,” said Kobayashi. The [federal] Court therefore rejects ASG’s argument that the dispute between the Disbursement Order [by the federal court] and the High Court’s orders renders the disputed funds ineligible for interpleader.”

ASG also argued among other things that BoH has unclean hands and is forum shopping because BoH is actually advocating Marisco’s position, and neither Marisco nor BoH has sought to resolve this dispute in the American Samoa courts.

ASG asserts that because the funds at issue are domiciled in American Samoa, either Marisco should have sought to enforce the judgment in the instant case through the American Samoa courts or BoH should have filed its interpleader in the American Samoa courts.

“ASG’s arguments are misplaced,” said Kobayashi, and notes the Disbursement Order, issued by the federal court, in which ASG explicitly agreed both to arbitrate the underlying dispute with Marisco and to submit itself to the jurisdiction of this federal court to confirm and enforce the arbitration award.

“In addition, ASG did not appeal the judgment entered after this Court confirmed the award. Thus, this Court had jurisdiction over the instant case before the commencement of ASG v. BOH. [in the High Court],” said Kobayashi.

She went on to say that BoH did not create the controversy at issue in the interpleader by aligning itself with Marisco. Instead BoH complied with the Writ of Execution, which the Disbursement Order ruled Marisco effectively served on BOH.

“BoH seeks to interplead the funds at issue; it does not seek to disburse the funds to Marisco. In fact, ASG argues that BOH could have moved to quash the Writ of Execution, but in doing so, BoH would have aligned itself with ASG,” she said.

“Interpleader will preserve the funds during the appellate courts’ resolution of the controversy regarding the service of the Writ of Execution,” she said, adding that even if the Appellate court reverses the Disbursement Order on appeal, that would merely require Marisco to seek other means of enforcing the judgment.

“The arbitration award in favor of Marisco and this Court’s confirmation of the award are not at issue in the appeal. The reversal of the Disbursement Order therefore would not extinguish the judgment against ASG,” she said.

As to ASG's argument that BoH is forum shopping because BoH could have filed an interpleader action in the American Samoa courts, Kobayashi said it was reasonable for BoH to file the Motion in the instant case because this district court issued the Writ of Execution, Marisco served the writ on BOH in this district, and both of the parties that claim entitlement to the disputed funds are parties in the instant case.

“This Court therefore finds that, under the circumstances of this case, BoH is free from blame in causing the controversy over the entitlement to the disputed funds,” she said. “The Court also finds that there is no evidence that BoH has engaged in forum shopping. The Court therefore cannot conclude that BoH has unclean hands.”

Kobayashi, however, “denied without prejudice” BoH’s request for an injunction against further proceedings regarding the interpleader funds. Further, Marisco’s request to increase the amount of the interpleader to include interest and attorneys’ fees and costs is “denied.”