In Re: Hawaiian Electric Industries Inc and Hawaiian Electric Company Inc…

Background

Patrick Kallaus filed a shareholder derivative complaint on December 26, 2023. Michael Cole and Alexander Tai later filed derivative actions asserting substantially similar claims. The three actions were consolidated, and the plaintiffs filed an amended complaint.

Nominal defendant Hawaiian Electric Industries, Inc. (HEI) moved to dismiss or stay the action. Shareholders who had filed similar derivative actions in Hawaii federal and state courts also sought to intervene. After the motions were fully briefed, the parties participated in mediation on January 22, 2025. Two days later, the plaintiffs filed a notice of voluntary dismissal.

Court’s Analysis

The plaintiffs’ notice fell within Federal Rule of Civil Procedure 41(a)(1)(A)(i), which generally allows a plaintiff to dismiss an action without a court order when the notice is filed before a defendant answers or moves for summary judgment. Because this was a shareholder derivative action, however, Federal Rule of Civil Procedure 23.1 also applied. That rule requires court approval for a derivative action’s voluntary dismissal and allows the court to order notice to shareholders.

HEI argued that the plaintiffs’ request was procedurally improper because it was not filed as a noticed motion. The court agreed that Rule 23.1 required court approval and that the Northern District of California’s local rules generally required a written request for a court order to be presented as a noticed motion. But HEI had filed a detailed opposition, the plaintiffs had replied, and the court had heard oral argument. The court therefore treated the dismissal request as ready for decision.

HEI also argued that dismissal would result from improper forum shopping. The court rejected that argument. It found that pursuing the derivative claims in Hawaii made sense because HEI was headquartered there, the alleged misconduct and the fire underlying the allegations occurred there, and dismissal would avoid piecemeal litigation by placing the derivative actions in a Hawaii court rather than a California federal court. The court also found that HEI would not be prejudiced, noting that HEI had sought a stay of this action and that the Hawaii actions were already stayed.

The court distinguished the cases cited by HEI because those cases involved circumstances not present here, including an allegedly baseless consolidation intended to avoid an adverse ruling or a dismissal request made after a magistrate judge had issued a report and recommendation on a summary-judgment motion.

Ruling

The court approved the plaintiffs’ request to voluntarily dismiss the action without prejudice. It also ruled that notice to HEI’s shareholders was not required. The Clerk was directed to terminate the case, and the order disposed of Docket No. 62.