After 15 years of litigation, Hawaii's top court draws a hard line on borrower lawsuits
Hawaii's Supreme Court just shut down a borrower's attempt to sue foreclosure attorneys, reinforcing crucial protections for lenders and their counsel.
In a decision handed down February 12, the state's highest court sided entirely with Dentons US LLP and its client Deutsche Bank National Trust Company, ending what judges described as a sprawling legal campaign by a Maui borrower who stopped paying his mortgage back in 2008.
The story starts during the financial crisis. Michael Greenspon had originally borrowed $650,000 from IndyMac Bank in 2003 to buy property in Maui, later modifying the loan to $800,000. When IndyMac collapsed in 2008 and federal regulators stepped in, Greenspon stopped making payments. He never made another one.
What followed was a nonjudicial foreclosure in 2010 that transferred the property to Deutsche Bank. But Greenspon challenged the foreclosure's validity in court, and in 2016 an appeals court agreed there were enough questions about the process to send the case back for another look.
Here's where things took a turn. In 2018, Deutsche Bank brought in Dentons to clean up the mess. The law firm filed a counterclaim asking the court to undo the nonjudicial foreclosure and do it right this time through a judicial foreclosure. They noted that Greenspon had been living in the property for a decade without paying a dime. Dentons filed the usual paperwork, including a notice of pending action and lien transfer documents.
Greenspon responded by suing not just the bank, but the lawyers themselves. His 58-page complaint threw everything at the wall: fraud, deceptive practices, wrongful foreclosure, emotional distress. He claimed the attorneys had perpetrated a fraud on the court itself through their filings.
The trial court dismissed every claim and went further, declaring Greenspon a vexatious litigant. The evidence was hard to ignore. Greenspon had filed more than a dozen lawsuits across Hawaii, Florida, and Delaware over the same foreclosure. Court records showed he routinely ignored discovery deadlines, violated court orders, arrived late to depositions, and sent threatening emails to opposing counsel about property inspections.
An intermediate appeals court mostly agreed but carved out an exception. The judges said Greenspon's fraud claim could survive if it alleged the lawyers had committed fraud on the court, relying on a recent case that held attorneys aren't completely immune when they deceive judges.
The Supreme Court said no. Writing for a unanimous panel, Acting Chief Justice Sabrina McKenna explained that fraud on the court requires meeting an extremely high bar. It's reserved for the most egregious misconduct, not garden-variety disputes about foreclosure paperwork.
The court pointed out that even assuming everything Greenspon alleged was true, there was no foreclosure here. He kept the property. The alleged errors involved technical questions about which entity held the note after IndyMac failed, not the kind of shocking deception that rises to fraud on the court.
The decision reinforces what foreclosure attorneys and mortgage servicers have long understood: litigation privilege exists for a reason. Lawyers representing lenders need protection to do their jobs without fear that every filing could trigger a lawsuit from the borrower.
The Supreme Court made clear that while attorneys can face liability for truly illegal conduct, standard foreclosure work doesn't come close to crossing that line. For servicers and their counsel navigating complex foreclosures, particularly those involving failed institutions and multiple transfers, that's welcome clarity.
