1 UNITED STATES BANKRUPTCY COURT DISTRICT OF HAWAII In

UNITED STATES BANKRUPTCY COURT

DISTRICT OF HAWAII

In re:

PANIOLO CABLE COMPANY,

LLC,

Debtors.

Case No. 18-01319

Chapter 11

MICHAEL KATZENSTEIN as

Chapter 11 Trustee,

Plaintiff,

vs.

CLEARCOM, INC.,

Defendant.

Adv. Pro. No. 21-90004

Dkt. 103

Date Signed:

January 16, 2024

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MEMORANDUM OF DECISION ON MOTION FOR PARTIAL

SUMMARY JUDGMENT

Plaintiff David Farmer, Plan Agent under the confirmed chapter 11

plan and successor in interest to chapter 11 Trustee Michael Katzenstein

(“the Trustee”), seeks partial summary judgment on two counts of his

complaint against Clearcom, Inc. (“Clearcom”). Under count I, the Trustee

contends he is entitled to $6,443,036.78 in breach of contract damages. Under

count II, the Trustee asserts that Clearcom was unjustly enriched by

$1,273,203, and Clearcom should pay that amount in restitution to the

Trustee. In total, the Trustee is seeking $7,716,239.78 in damages. In the

alternative to count I, the Trustee is seeking $6,234,925.33 in restitution for

unjust enrichment.

The court held a hearing on the motion on November 3, 2023. Jonathan

Bolton and Matthew Ezer represented the Trustee, and Addison Bonner

represented Clearcom.

For the reasons set out below, I will grant the Trustee’s second motion

for partial summary judgment and award the Trustee $7,716,239.78 in

damages.

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I. BACKGROUND

a. The Hee Companies and License 372

This case involves a group of affiliated companies. Albert Hee and

trusts benefitting his family own Waimana Enterprises, Inc. (“Waimana”).

Waimana owns Sandwich Island Communications, Inc. (“SIC”), Pa Makani

LLC (“Pa Makani”), Clearcom, Inc. (“Clearcom”), and Paniolo Cable

Company (“Paniolo”). Case No. 18-01319, ECF 855 at 9.

The State of Hawai’i

Department of Hawaiian Home Lands (“DHHL”) administers about 200,000

acres of land across the island of Hawai’i for the benefit of native Hawaiians.

Id. at 6..

As of 2019, about 36,500 people lived on the Hawaiian Home Lands.

State of Hawaii Data Book 2020 at table 1.17. In 1995, DHHL granted License

372 to Waimana. Case No. 18-01319, ECF 855 at 7. License 372 gave Waimana

the exclusive right to “build, construct, repair, maintain, and operate a

broadband telecommunications network . . . over, across, under and

Dkt. 855 filed in the main bankruptcy case is an opinion of the district court affirming certain orders of

this court. The opinion is also found at Sandwich Isles Commc’ns, Inc. v. Hawaiian Telcom, Inc., Civil No. 22-

00426 JAO-KJM, 2023 WL 6378626 (D. Haw. Sept. 29, 2023).

See generally Arakaki v. Lingle, 477 F.3d 1048, 1054-55 (9th Cir. 2007) (discussing history of the Hawaiian

Home Lands).

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throughout all lands under [DHHL’s] administration and jurisdiction . . . .”

Id. at 7-8; Case No. 18-01319, ECF 639-1 at 3.

Waimana split the rights under License 372 with three of its affiliates.

In 1996, Waimana assigned to SIC “those certain rights, title, and interest

necessary to provide Intralata and Intrastate telecommunications services .

. . .” Case No. 18-01319, ECF 639-2 at 3. In 2011, Waimana assigned to Pa

Makani the rights necessary to “provide wireless communications services

of all types . . . .” Case No. 18-01319, ECF 639-3 at 2. Finally, in 2014, Waimana

assigned to Clearcom the right to “provide broadband services of all

types . . . .” Case No. 18-01319, ECF 639-4 at 2.

In the meantime, SIC built the infrastructure necessary to fulfill

License 372. From 1997 to 2001, SIC borrowed more than $160 million from

an agency of the federal government to fund the construction. Case No. 18-

01319, ECF 673 at 5 (describing the government’s loans); Case No. 18-01319,

ECF 347-2 at 2 (describing the assets).

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Paniolo built a submarine cable system (“the Paniolo Assets”) that

carried telecommunication services between islands.

Case No. 19-90022,

ECF 22-1, at 4-5. Deutsche Bank (“Deutsche”) lent Paniolo about $150 million

to finance the construction. Case No. 18-01319, ECF 1 at 3.

In 2007, Paniolo and SIC entered into two agreements that allowed

them to connect SIC’s terrestrial system with Paniolo’s submarine system

and direct traffic between their systems. The first agreement was a Joint Use

Agreement (“JUA”). Case No. 19-90022, ECF 22-1, at 5-6, which allowed

Paniolo to connect to SIC’s terrestrial assets. Case No. 18-01319, ECF 347-4 at

2. The second agreement was the Paniolo Cable Network Lease (“SIC

Lease”). No. 18-01319, ECF 18-1 at 383. Under the SIC Lease, SIC would make

payments to Paniolo in exchange for access to the Paniolo Assets. Case No.

18-01319, ECF 18-1 at 385.

b. The FCC Funding Changes

Because only a small number of people lived on the Hawaiian Home

Lands, SIC could not generate enough income from customer charges to pay

Paniolo engaged Clearcom to build the Paniolo Assets. Case No. 18-01319, ECF 349-4 at 1.

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its operating expenses, including its lease payments to Paniolo, and service

its massive debt.

To cover the shortfall, SIC relied on large subsidies from

the Federal Communication Commission’s (“FCC”) Universal Service Fund

(“USF”). See Case No. 19-90022, ECF 22-1, at 4. SIC expected to receive

$14,000 per line per year from the USF. Id. These subsidies were also crucial

to Paniolo, because SIC used this money to pay its obligations under the SIC

Lease. Id. SIC’s lease payments comprised Paniolo’s only source of income

to pay the obligations on its secured loans. Id. at 6-7.

In 2011, the FCC dramatically altered the way it administered the

entire USF. United States v. Sandwich Isles Commc’ns, Inc., 398 F. Supp. 3d 757,

766 (D. Haw. 2019). Beginning in July 2014, it reduced SIC’s yearly payments

from $14,000 to $250 per line. Id. In 2013, SIC applied for a waiver to continue

receiving the higher compensation rates from the USF, but the FCC denied

this request in May 2013. Id. As a result, SIC reduced its debt payments to

the United States and made only irregular payments to Paniolo. Id. at 767.

To recapitulate, SIC and Paniolo spent about $310 million combined to build systems that served only

about 36,500 customers.

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By December 2014, SIC had completely stopped paying Paniolo. Case No.

18-01319, ECF 17, at 6. Consequently, Paniolo stopped paying its debt to

Deutsche. Id.

c. Paniolo’s Bankruptcy

In late 2018, successors in interest to Deutsche (“Paniolo Creditors”)

filed an involuntary petition for relief under chapter 11 of the Bankruptcy

Code against Paniolo. Id. Although Paniolo initially resisted the bankruptcy,

the Paniolo Creditors and Paniolo agreed to the entry of a chapter 11 order

for relief and the appointment of a chapter 11 Trustee. Case No. 18-01319,

ECF 48.

d. The Trustee’s Settlement

In 2020, the bankruptcy court approved a settlement (“2020

Settlement”) between the Paniolo Creditors, the Trustee, Waimana, SIC,

Clearcom, and other entities controlled by Waimana.

ECF 47-6 at 2.

One

This group includes HSBC Securities (USA) Inc., Sunrise Partnership Limited Partnership, and Deutsche

Bank Trust Company Americas.

The Waimana-controlled entities, including Clearcom, Pa Makani LLC, and Ho’Opa’a Insurance Corp.,

are sometimes referred to below in reference to the Settlement as the “SIC Parties.” ECF 47-6 at 2.

All ECF references from this point forward are to Case No. 21-90004 unless otherwise stated.

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purpose of the 2020 Settlement was to clarify the relationship of all parties

to the Paniolo Assets. To this end, the Trustee and SIC terminated the JUA

and SIC Lease and replaced them with the Master Relationship Agreement

(“MRA”). ECF 47-6 at 2. Under the 2020 Settlement and the MRA, only SIC

(and not any of its affiliates) had the right of access to the Paniolo Assets,

and SIC’s access was limited to two fiber pairs to provide service only to

customers on the Hawaiian Home Lands. ECF 82-2 at 3-4. The purpose of

these limitations was to make it easier for the Trustee to sell the Paniolo

Assets. Armed with a court-approved settlement, a buyer could ascertain the

capacity of the system in excess of SIC’s use rights. Id.; see also ECF 47=3 at

3-4; ECF 86 at. Confirming this purpose, SIC, Waimana, and Clearcom

warranted that:

Except as set forth in Exhibit 2 hereto, the SIC Parties hereby represent

and warrant to the other parties that there are no agreements of any

nature (including without limitation, grants of Indefeasible Rights of

Use (IRUs), wholesale contracts, or commercial agreements)

permitting persons or entities other than SIC to use capacity on the

[Paniolo Assets] other than the two pairs of fiber reserved to SIC for

the purposes stated herein.

ECF 47-6 at 7-8 (emphasis added). The 2020 Settlement also states:

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SIC shall have no right to assign or sublease any of its interest in the

Initially Leased Fiber except to the Ownership

and only for the

purposes of providing retail services to end users on Hawaiian Home

Lands.

ECF 47-6 at 3 (emphasis added).

e. The 2021 Adversary Proceeding

In February 2021, the Trustee filed an adversary proceeding against

Clearcom. ECF 1. The Trustee brought three counts against Clearcom: Breach

of contract, unjust enrichment, and turnover. Id. at 6-8. In the first count, the

Trustee alleged that Clearcom breached the 2020 Settlement by allowing

Time Warner Entertainment Co. L.P. and its affiliates (“Charter”) to use

capacity on the Paniolo Assets. Id. at 6-7. In the second count, the Trustee

argued that Clearcom was unjustly enriched from the alleged contracts

existing between Clearcom and the third parties. Id. at 6. The third count

claimed that all money Clearcom received under these wrongful contracts

should be turned over to Paniolo’s bankruptcy estate. Id. at 7-8. Clearcom

denied the Trustee’s allegations. ECF 4.

According to the 2020 Settlement, “Ownership” is defined as Waimana, SIC, Clearcom, Pa Makani LLC,

and Ho’Opa’a Insurance Corp.

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f. The Trustee’s First Motion for Partial Summary Judgment

In February 2023, the Trustee moved for partial summary judgment on

the issue of liability for counts I and II. ECF 47. Two agreements formed the

basis for the Trustee’s first motion for partial summary judgment.

First, the Trustee claimed Clearcom breached the warranties in the

2020 Settlement because it had made an agreement with Charter in late 2019

that permitted Charter to use capacity on the Paniolo Assets (“2019

Agreement). ECF 47-1 at 5-6. The Trustee offered an email exchange between

Al Hee, Wendy Hee, and Tim Davis as evidence of the purported agreement.

ECF 47-7. On October 28, 2019, Charter experienced an outage that cut off

their service to Kauai. Id. at 4. and Mr. Davis emailed Ms. Hee to ask if there

were any opportunities to “bring up connectivity quickly on the Paniolo

assets.” Four hours later, Mr. Davis added Mr. Hee to the email chain and

asked if there were “options on the Paniolo route.” Id. at 3. Around the close

of business that day, Mr. Davis stated that he wanted to “purchase 8x10G on

a month-to-month term.” Id. at 2. The next day, Mr. Davis thanked the Hees

for helping Charter restore service to its customers so quickly. Id. The

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Trustee also provided a service order signed by Wendy Hee on October 31,

2019. ECF 47-8. The service order listed Charter as the customer for “8 – 10G

circuits” for a term of 30 days for $120,000. Id. The listed addresses on the

service order were “SIC Nanakuli CO, Oahu, HI” and “SIC Kekaha CO,

Kauai, HI.” Id. The Trustee also presented a February 2022 invoice from

Clearcom billing Charter for Intrastate provider charges in the amount of

$120,000. ECF 47-9.

Second, the Trustee claimed that Clearcom breached the 2020

Settlement by allowing Charter to use the Paniolo Assets in 2021 through an

“Internet and Video Service Rights and Data Purchase Agreement” (“2021

Agreement”). ECF 47-1 at 6. The only parties to this agreement are Charter

and Clearcom. ECF 47-11 at 1. In the recitals, the parties stated that Charter

has been leasing “Licensed Infrastructure” from SIC under a 2006

agreement.

Id. The parties stated that the bankruptcy court is garnishing SIC

and they desire a new arrangement going forward to furnish data services

The 2021 Agreement refers to this agreement as the Cable Services Agreement II. Clearcom stated in its

interrogatories that Cable Services Agreement II related to the use of the Paniolo Assets. ECF 47-12 at 8.

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to customers residing in the HHL. Id. The Trustee then pointed out that

Clearcom stated in discovery that the 2021 Agreement “relat[ed] to, refer[ed]

to, the use of, or access to, the Paniolo [Assets].”

ECF 47-12 at 3.

Clearcom denied breaching the 2020 Settlement. ECF 52 at 5. Clearcom

argued that its role was “simply to allow Charter to use Clearcom’s License

to provide data across the [HHL].” Id. Clearcom stated that it performed this

action at the request of SIC and did not utilize the Paniolo Assets. Id.

Clearcom also argued that SIC allowed Clearcom to “use facilities accessible

to SIC on an emergency basis to facilitate Charter’s restoration of services to

Kauai in October 2019.” Id. According to Clearcom, the 2020 Settlement was

never breached because “Clearcom’s role did not involve granting Charter

access to the Paniolo [Assets].” Id. Clearcom also disputed the unjust

enrichment claim on the basis that it had remitted all money received from

Charter to SIC. Id. 5-6. Because Clearcom had not retained any funds,

Clearcom could not have been unjustly enriched. Id. at 6. Clearcom also

argued that it was not subject to the bankruptcy court’s jurisdiction. Id. at 3.

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This court held a hearing on the Trustee’s first motion for partial

summary judgment on March 6, 2023. ECF 58. The bankruptcy court made

an oral ruling in favor of the Trustee and made three decisions: the

bankruptcy court had subject matter jurisdiction and personal jurisdiction

over Clearcom; Clearcom breached the 2020 Settlement by allowing Charter

to use the Paniolo Assets; and Clearcom was unjustly enriched even if it

remitted to SIC all the funds it received from Charter. ECF 59. Clearcom filed

a motion for leave to appeal, which the BAP denied. ECF 80 at 1.

g. The Trustee’s Second Motion for Partial Summary Judgment

The Trustee filed a second motion for partial summary judgment on

two issues. ECF 82 at 3. First, the Trustee asked the court to rule that an

additional agreement between Clearcom and Charter, the Master Services

Agreement (“MSA”), violated Section 8 of the 2020 Settlement. ECF 82-1 at

7-8. Second, the Trustee asked the court to find that Clearcom is liable for

$9,197,554.23 in damages. Id. at 8.

The Trustee asserted that the MSA was Clearcom and Charter’s

overarching agreement concerning the Paniolo Assets. Id. at 14. The Trustee

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claims that under the MSA, Charter could rent capacity on the Paniolo Assets

by submitting Access Service Requests (“ASRs”). Id. at 13. The Trustee

alleges Clearcom confirmed ASRs with Firm Order Confirmations (“FOCs”).

Id. The Trustee argued the MSA is still currently in operation and offered the

deposition testimony of a Charter officer as evidence. ECF 82-4 at 3. He

stated that the MSA was in effect as of September 2023. Id. at 4. He also stated

that the 2019 Agreement was part of the MSA. Id. The Trustee offered

spreadsheets obtained from Charter, corroborated by a Charter officer’s

deposition testimony, showing amounts Charter paid Clearcom under the

MSA, the 2019 Agreement, and the 2021 Agreement. ECF 82-7; ECF 82-4 at

5-8.

The Trustee asserted that Clearcom is liable for $9,197,554.23 in total

damages. ECF 82-1 at 17. The Trustee contended that Clearcom received

$1,481,314.45 prior to 2020 Settlement under the MSA and 2019 Agreement.

Id. at 23. The Trustee alleged Clearcom received $6,443,036.78 from Charter

after the 2020 Settlement. Id. The Trustee claimed $7,924,351.23 total for

breach of contract under count I. Id. The Trustee asserted $1,273,203 in count

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II’s unjust enrichment claim for money received under the 2021 Agreement.

Id. at 26-27.

Clearcom continued to deny liability for breaching the 2020

Settlement. ECF 85. Clearcom argued that it “did not have any capacity of its

own on the Paniolo Network to lease to anyone.” Id. at 7. According to

Clearcom, it acted as an intermediary between SIC and Charter: SIC “agreed

to provide a portion of its capacity to Clearcom in exchange for the amount

of the fee Charter paid to Clearcom for such access, provided Charter also

provided capacity to SIC to bypass [a] break.” Id. at 7-8. Clearcom asserted

that “SIC had apparent authority to use the Paniolo Cable Network, and to

permit Clearcom to use that access to assist SIC in fulfilling its obligation to

operate and maintain the Paniolo network.” Id. at 8. According to Clearcom,

it “did not have any capacity on the Paniolo Network to lease and could not

have done so without SIC.” Id.

Clearcom also renewed its defense that it was not unjustly enriched

because it was only a conduit for payments from Charter to SIC. Id. at 9.

Clearcom also claimed that it was “not compensated for its efforts or use of

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its license and paid taxes for receipt of the funds before transferring the

pretax amounts to SIC.” Id. Clearcom contended that it was made “poorer,”

and therefore could not have been unjustly enriched. Id. at 9.

Clearcom also argued that it had other agreements with Charter, and

Clearcom receives money from those agreements as well. Id. at 10. Although

Clearcom receives some money from Charter for accessing SIC’s capacity on

the Paniolo assets, Clearcom asserted that the Trustee did not adequately

demonstrate that all the money Clearcom received from Charter was related

to the Paniolo Assets. Id.

Clearcom continued to dispute the bankruptcy court’s jurisdiction on

several different grounds. Id. at 10-11.

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h. The Errata and Surreply

Prior to the hearing on the second motion for partial summary

judgment, counsel for the Trustee filed errata to previous filings. ECF 89. The

errata stated that the Trustee’s alleged damages were incorrect due to a

double-counting error. Id. at 2. Consequently, the Trustee amended all filings

to reduce the total claimed damages from $9,197,554.23 to $7,716,239.78. ECF

89 at 2; see also ECF 90-93. The Trustee revised Count I’s breach of contract

damages from $7,924,351.23 to $6,443,036.78. ECF 91 at 22. The Trustee

continued to claim $1,273,203 under Count II’s unjust enrichment theory.

ECF 91 at 26-27.

At the hearing, Clearcom asked the court for a continuance and leave

to file a surreply addressing the new damage calculation. ECF 94. The court

granted leave to file a surreply limited to addressing the altered damage

calculations. ECF 96.

Contrary to the court’s direction, Clearcom’s surreply reargued

previous factual contentions and raised new arguments. For the first time,

Clearcom argued that the MSA expired when Clearcom agreed to the 2020

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Settlement, that the 2019 Agreement only lasted for a month, and that the

2021 agreement did not involve the Paniolo Assets. ECF 100. Clearcom

concluded that the Trustee’s damages calculations were indeed wrong, not

because the Trustee made a counting error, but because Clearcom did not

breach the 2020 Settlement at all. Id. at 3-5. Clearcom also took the position

that unjust enrichment was the incorrect remedy because any relief should

be obtained through a claim for breach of the 2020 Settlement. Id. at 6-7.

II. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate when the movant “shows that there

is no genuine dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a); see also Celotex Corp. v.

Catrett, 477 U.S. 317, 322-23 (1986). In considering a motion for summary

judgment, the court must “draw all reasonable inferences from the

evidence” in favor of the nonmovant. O’Connor v. Boeing N. Am., Inc., 311

F.3d 1139, 1150 9th Cir. 2002). The movant bears the initial responsibility of

presenting the basis for its motion and identifying those portion of the

record . . . that it believes demonstrate the absence of a genuine issue of

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material fact. Celotex, 477 U.S. at 323. If the movant meets its initial

responsibility, the burden shifts to the nonmovant to demonstrate the

existence of a factual dispute and to show (1) the fact in contention is

material, i.e., a fact “that might affect the outcome of the suit under the

governing law[,]” and (2) that the dispute is genuine, i.e., the evidence is

such that a reasonable jury could return a verdict for the nonmovant.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-250 (1986). While the court

may not weigh the credibility of witnesses, “[w]hen opposing parties tell two

different stories, one of which is blatantly contradicted by the record, so that

no reasonable jury could believe it, a court should not adopt that version of

the facts for purposes of ruling on a motion for summary judgment.” Scott v.

Harris, 550 U.S. 372, 380 (2007).

A party may not create a “genuine” issue of fact by filing a declaration

that contradicts the witness’ prior deposition testimony. Radobenko v.

Automated Equip. Corp., 520 F.2d 540, 544 (9th Cir. 1975). Allowing later

declarations to contradict initial evidence would “diminish the utility of

summary judgment as a procedure for screening out sham issues of fact.” Id.

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(quoting Perma Research & Development Co. v. Singer Co., 410 F.2d 572, 578 (2d

Cir. 1969)).

III. Discussion

a. This Court has Personal and Subject Matter Jurisdiction Over

Clearcom.

Clearcom denies that it is subject to this court’s jurisdiction. See ECF 52

at 3; ECF 85 at 10-11. Clearcom is wrong.

1. Personal Jurisdiction

Clearcom has waived its right to contest personal jurisdiction. The

failure to timely object to personal jurisdiction constitutes a waiver of that

objection. Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694,

705 (1982). Clearcom did not deny personal jurisdiction of this court in its

answer under FRCP 12(b)(2) or by any or appropriate motion under FRCP

12(h)(1). See ECF 4. Both as a matter of law, and by admission, Clearcom is

subject to this court’s personal jurisdiction.

2. Subject Matter Jurisdiction

This court has subject matter jurisdiction over Clearcom. Subject

matter jurisdiction is the court’s statutory authority to adjudicate a case. Steel

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Co. v. Citizens for a Better Env't, 523 U.S. 83, 89 (1998). Objections to subject

matter jurisdiction cannot be waived or forfeited and can be raised at any

point in the litigation. Gonzalez v. Thaler, 565 U.S. 134, 141 (2012).

Congress has authorized bankruptcy courts to (among other things)

adjudicate civil proceedings “related to cases under [the Bankruptcy Code].”

28 U.S.C. § 1334(b). The bankruptcy court’s “related to” jurisdiction reaches

post-confirmation matters that impact the execution of the plan. In re Pegasus

Gold Corp., 394 F.3d 1189, 1194 (9th Cir. 2005). In Pegasus, a mining company

in bankruptcy reached an agreement with the State of Montana regarding

certain reclamation issues impacting the mining company’s financial

responsibilities. Id. at 1192. The bankruptcy court later confirmed the mining

company’s plan. Id. Prior to confirmation, the bankruptcy court approved a

settlement agreement between the parties. Id. Montana terminated the

agreement a short time later after a series of billing disputes. Id. The mining

company brought state law contract claims and an unjust enrichment claim

for breaching the “Master Agreement,” signed after confirmation. Id.

Although these were state law claims raised post-confirmation, the Ninth

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Circuit held that they had a “sufficiently ‘close nexus’ to the bankruptcy

proceeding.” Id. The Ninth Circuit reached this conclusion in part because

the claim and remedies sought would impact the “implementation and

execution of the Plan itself[.]”

Pegasus illustrates that this court has subject matter jurisdiction over

the Trustee’s claims. The Court approved the 2020 Settlement two years

before it confirmed the plan in Paniolo’s bankruptcy case. See Case No. 18-

01319, ECF 271 (order approving the 2020 Settlement) and ECF 606 (order

confirming the plan). Clearcom admits that the 2020 Settlement was

intended to ensure that the Paniolo Assets’ eventual purchaser would have

exclusive control of those assets. ECF 86 at 2. The Trustee alleges that

Clearcom has earned money from the use of the Paniolo Assets in violation

of the 2020 Settlement. ECF 1 at 6-8. Like the agreement in Pegasus,

Clearcom’s alleged violations have an exceedingly close nexus with

Paniolo’s bankruptcy. The 2020 Settlement, forged in the midst of the

bankruptcy process with an eye towards liquidation, is crucial to

implementing the plan. Interpreting and enforcing the MRA is related to

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Paniolo’s bankruptcy, and this court has subject matter jurisdiction over the

Trustee’s claims.

Clearcom’s jurisdictional grievances are not persuasive. See ECF 85 at

11. Clearcom provides a litany of “questions and issues” that “must be

answered before the Plaintiff can assert jurisdiction of the bankruptcy

court.” ECF 85 at 11. Among these “questions and issues,” Clearcom states

that “Clearcom does not have a contractual relationship to Paniolo,” “the

reorganization plan did not include the [MRA],” and “Clearcom’s

involvement in assisting Charter and SIC ended prior to the confirmation

and the reorganization plan.” Clearcom has a contractual duty to Paniolo’s

bankruptcy estate under the 2020 Settlement. Case No. 21-90004, ECF 47-6 at

7-8. Clearcom’s obligations to Paniolo exist even though the plan did not

specifically state those obligations. Finally, based on the Charter officer’s

uncontradicted deposition testimony, Charter and Clearcom have been

contractually involved through at least September 2023, a year after the plan

was confirmed. Clearcom’s subject matter jurisdiction claims are not

grounded in law or fact.

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In summary, this court has personal jurisdiction and subject matter

jurisdiction.

b. Clearcom Breached the 2020 Settlement Agreement.

To establish a breach of contract claim, a plaintiff must demonstrate:

“(1) a contract (2) the plaintiff’s performance or excuse for nonperformance,

(3) the defendant’s breach, and (4) the resulting damages to plaintiff.” Hawaii

State Fed. Credit Union v. Kahapea, 497 P.3d 1103 at *3 n.7 (Haw. Ct. App.

2021).

There is no dispute about the first two elements. Clearcom does not

dispute that the 2020 Settlement exists and that Clearcom is a party to it.

Clearcom does not contend that the Trustee breached the 2020 Settlement.

Clearcom denies that it breached the agreement, but it is wrong.

Section 8 of the 2020 Settlement provides that “…[Clearcom] hereby

represent[s] and warrant[s]…that there are no agreements of any

nature…permitting persons or entities other than SIC to use capacity on the

The 2020 Settlement states that it is governed by New York Law. ECF 47-6 at 10. But the parties have

cited only Hawai’i law. This means either that they have waived the choice of law provision, or they

implicitly agree that New York and Hawai’i law on this topic are identical. See C.N.R. Atkin v. Smith, 137

F.3d 1169, 1170 (9th Cir. 1998).

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[Paniolo Assets]. ECF 47-6 at 7-8. Additionally, “SIC shall have no right to

assign or sublease any of its interest in the [Paniolo Assets] except to the

Ownership and only for the purposes of providing retail services to end

users on Hawaiian Home Lands.” ECF 47-6 at 4. The Trustee correctly argues

that Clearcom entered into three agreements with Charter that on their face

violated these provisions.

Clearcom’s attempt to avoid responsibility for its breach makes no

sense. It seems to claim that it did not breach the 2020 Settlement because,

when it entered into the agreements with Charter, it was merely acting on

behalf of its affiliate, SIC. According to Clearcom, its role was “simply to

allow Charter to use Clearcom’s License to provide data across the [HHL]”

by “us[ing] facilities accessible to SIC on an emergency basis to facilitate

Charter’s restoration of services to Kauai in October 2019” but “did not

involve granting Charter access to the Paniolo [Assets].” ECF 52 at 5. The

facts remain, however, that (1) Clearcom represented that it did not have,

and it agreed that it would not make, any agreements allowing anyone to

use the Paniolo Assets (with very limited exceptions that are not applicable

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to Charter), (2) nevertheless Clearcom made agreements with Charter that

allowed Charter to use the Paniolo Assets, and (3) Charter collected money

from Charter under those agreements. Clearcom’s excuses do not add up.

Clearcom relies on declarations from members of the Hee family. Those

declarations are inconsistent with contemporaneous communications

between Charter and Clearcom, as well as Clearcom’s earlier documents

produced under oath. No reasonable jury could accept those declarations

and rule in favor of Clearcom.

1. The MSA

Clearcom offered two reasons why the MSA did not breach the 2020

Settlement. First, Clearcom argued that the MSA was not active when

Clearcom entered into the Settlement. Second, Clearcom contends that the

Trustee offered no proof that the MSA related to the Paniolo Assets.

Clearcom says that it has other agreements with Charter, and the Trustee has

not shown that the payments cited by the Trustee relate to the use of the

Paniolo Assets. ECF 85 at 10. These contentions do not create a genuine issue

of fact.

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First, Clearcom admitted in its responses to the Trustee’s discovery

requests that the MSA relates to the Paniolo Assets. ECF 47-12 at 3. The

Trustee asked Clearcom to disclose all agreements that relate to the Paniolo

Assets. Clearcom stated that the MSA relates to the use of access of the

Paniolo Assets.

Second, Charter admitted that the MSA was in effect through late 2023.

ECF 82-4 at 7. Charter’s officer testified at his deposition that as of September

11, 2023, the MSA was still in effect and that Charter was still making

payments to Clearcom under the MSA. ECF 82-4 at 4, 7. The officer also

stated that the 2019 Agreement was part of the MSA. ECF 82-4 at 4. Emails

between Mr. Davis, Mr. Hee, and Ms. Hee in the run up to the 2019

Agreement state explicitly that the Paniolo Assets are the assets Charter

wanted to use. ECF 47-7 at 4. The service order even states that Charter is

using SIC’s assets from Kekaha, Kauai, to Nanakuli, Oahu. ECF 47-8. It

would be impossible to connect these two points without submarine cable

because they are located on two different islands, and only Paniolo had a

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submarine cable system. No reasonable jury would accept Clearcom’s

argument that some of the payments did not relate to the Paniolo Assets.

2. The 2019 Agreement

Clearcom argued that the 2019 Agreement lasted one month and had

expired by the time Clearcom entered into the 2020 Settlement. ECF 100 at 4.

No reasonable jury would agree. Charter’s officer testified that the 2019

Agreement was part of the MSA. ECF 82-4 at 4. Charter’s records reflect

monthly payments to Clearcom of $120,000 from October 2019 through

March 2022. See generally ECF 82-7; see also ECF 82-4 at 6-7. Clearcom received

payments under the 2019 Agreement for approximately two years after it

agreed in the 2020 Settlement that no third parties had access to the Paniolo

Assets.

3. The 2021 Agreement

Clearcom argued again that this Agreement does not relate to the

Paniolo Assets, so this agreement could not have breached the 2020

Settlement. ECF 100 at 4. Again, Clearcom’s position contradicts its own

prior admissions. Clearcom admitted in its responses to its interrogatories

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that the 2021 Agreement relates to the use of the Paniolo Assets. ECF 47-12

at 3. The recitals in the 2021 Agreement also state that Charter was paying

Clearcom to use the Paniolo Assets.

SIC and Charter had a previous agreement for “Licensed

Infrastructure” in 2006, the Cable Services II Agreement, but that agreement

expired in 2007. ECF 47-11 at 2. By Clearcom’s own admission in the

interrogatory responses, the Cable Services II Agreement related to use of

the Paniolo Assets. ECF 47-12 at 3. Thus, the 2021 Agreement is an extension

of a 2006 agreement between Charter and Clearcom to license capacity on

the Paniolo Assets.

Clearcom states in the 2021 Agreement that it holds

exclusive rights to use capacity on the Licensed Infrastructure through the

entire term of the agreement. ECF 47-11 at 2.

Clearcom is liable for breaching the 2020 Settlement because of its

participation in the MSA, the 2019 Agreement, and the 2021 Agreement.

The 2021 Agreement was intended to circumvent the garnishment order this court issued to Charter.

The recitals state that Charter has been paying SIC for use of the Licensed Infrastructure since 2007, but

Charter is subject to a garnishment order and Clearcom and Charter desire a “new, go-forward only

arrangement.” Charter recited that it will comply with the garnishment order, but the Agreement only

purports to require it to pay Clearcom for using the Paniolo Assets. See generally ECF 47-11.

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c. Clearcom is liable to the Trustee for $7,716,239.78.

The Trustee claims $6,443,036.78 in damages for breach of contract and

$1,273,203 for unjust enrichment. ECF 91 at 22. Clearcom denies that it has

any liability to the Trustee but does not challenge the Trustee’s damages

calculation.

The court agrees with the amount of damages that the Trustee

seeks, although not necessarily with the Trustee’s theory of damages.

Clearcom represented that it had no contracts with anyone, and would not

make any contracts with anyone, for use of the Paniolo Assets. Nevertheless,

Clearcom made contracts with Charter under which Charter used the

Paniolo Assets, and Clearcom collected money from Charter under those

contracts. It would be unjust to allow Clearcom to retain payments it

received for the use of assets that the Trustee, and not Clearcom, owned.

Therefore, the Trustee is entitled, under principles of unjust enrichment and

restitution, to recover all money that Charter paid to Clearcom, because the

Trustee’s right to that money is superior to Clearcom’s. In re Cuzco Dev.

U.S.A., LLC, 592 B.R. 352, 367 (Bankr. D. Haw. 2018) (holding that, under

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principles of restitution, wrongdoers should not benefit from their

wrongdoing); Lumford v. Yoshio Ota, 434 P.3d 1215, 22 (Haw. Ct. App. 2018))

(holding that, to prevail on an unjust enrichment claim, the plaintiff need

only demonstrate that the plaintiff has a superior claim to the property

relative to the defendant.).

IV. Conclusion

Based upon the foregoing, the Trustee’s second motion for partial

summary judgment for damages based on breach of contract and unjust

enrichment in the amount of $7,716,239.78 is GRANTED.

This ruling disposes of counts I and II but does not dispose of count

III. The court will hold a status conference at 10:00 a.m. on March 1, 2024, to

discuss the disposition of the remainder of this case.

END OF MEMORANDUM OF DECISION

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