Hawai`i Supreme Court Supports $4M Fine Against Pflueger Company

posted in: Development, DLNR, March 2014, Marine, Water | 0
It’s finally settled. James Pflueger’s company, Pila`a 400, LLC, must pay the state $4 million for damaging the reef at Pila`a Bay in North Kaua`i.
After heavy rains in November 2001, a massive wall of mud from Pila`a 400‘s mauka land, which had been excessively and illegally graded, smothered the beach and reef, as well as a home and car owned by kuleana tenants Amy and Richard Marvin.

After surveying the area in 2002 and finding the once-pristine reef had been extensively damaged, the state Department of Land and Natural Resources’ Office of Conservation and Coastal Lands recommended in August 2003 that the Board of Land and Natural Resources fine Pflueger, Pflueger Properties (the land’s previous owner), and Pila`a 400 $5,830,000 and assess $38,000 in administrative costs.

A contested case hearing involving only Pila`a 400 ensued. After hearing from experts on both sides about the value and extent of the damaged area and the causes of that damage, hearing officer Michael Gibson recommended in December 2004 a reduced fine of $2,315,000 and about $70,000 in administrative costs. What’s more, he recommended that the fine be used for remediation of Pila`a 400’s property, which at the time was estimated to cost somewhere between $4 million and $5 million.

In its June 2005 decision and order, the Land Board adopted Gibson’s recommendation regarding administrative costs, but imposed a much larger fine of $3,963,000 that it felt reflected the impact to the bay’s intrinsic and commodity values, as well as reef and beach restoration costs.

The board had also agreed with the deputy attorney general representing the DLNR, William Wynhoff, who had argued that allowing the fine to offset remediation costs would really result in no penalty at all. Wynhoff had argued, and the Land Board agreed, that Pila`a 400 should pay to fix its own property.

Pila`a 400 filed an appeal in 5th Circuit Court. The company argued that the Land Board was required by law to adopt rules establishing a methodology to calculate natural resource damages but that it had not done so. It also contended that because the illegal grading occurred in the Agriculture District and not the Conservation District, the Land Board did not have authority to find a violation. Finally, it argued that the DLNR failed to properly identify the scope of the contested case in the hearing notice. Specifically, Pila`a 400 argued that the DLNR should have stated upfront that it was pursuing the violation case under the rules prohibiting the placement of solid material on state land.

Attorneys for the DLNR and the Land Board responded that the Land Board has the discretion to calculate damages without rules. They also argued that the source of the mud is irrelevant; what matters is that Pila`a 400 placed mud or allowed it to be placed on state submerged lands without a permit. Finally, they argued that the contested case hearing notice clearly explained the scope of the hearing, and properly cited the appropriate chapters of Hawai`i Revised Statues involved. And if the notice wasn’t clear, Pila`a could have asked for a bill of particulars, which it didn’t.

The 5th Circuit Court upheld the Land Board’s decision, as did the Intermediate Court of Appeals in reviewing the lower court’s ruling. Undeterred, Pila`a 400 appealed to the state Supreme Court, which issued its opinion on February 14 siding with the two previous court decisions.

The high court agreed with the ICA that “imposing a single formulaic methodology for assessing [natural resource] penalties would be impracticable.”

Justice Richard Pollack, who wrote the decision, also pointed out that although the contested case hearing notice did not cite the specific rule regarding the placement of solid material on state lands, it did note that the hearing was being held to address natural resource damages “due to excessive sedimentation” of submerged lands.

Pollack further pointed out that even Pila`a 400’s own attorney stated during the contested case proceedings, “[E]veryone knew this was about mud going on the beach and into the nearshore reef.”

For Further Reading

For more background on this case, read the following articles available on our website, www.environment-hawaii.org

    • “New and Noteworthy: Mud Fine Upheld,” February 2013;
    • “Appeals Court Hears Arguments in 2001 Pila`a Reef Damage Case,” December 2012
    • “EPA Imposes Largest Fine Ever for Runoff Violations in North Kaua`i,” April 2006;
    • BOARD TALK: “Pila`a 400 Appeals Fine for Coral Reef Damage,” September 2005;
    • BOARD TALK: Pflueger Company Is Fined $4 Million For Reef Damages at Pila‘a Bay, Kaua‘i,” August 2005;
    • BOARD TALK: “$2.3 Million Fine Is Proposed For Reef Damage at Pila‘a Bay,” March 2005;
    • “Pflueger Contested Case Overshadows Additional Problems at Pila`a Sites,” November 2003;
    • BOARD TALK: “Contested Case to Resolve Pflueger Damages to Pila’a,” October 2003;
    • “At Pila`a, Kaua`i, A Reshaped Landscape Sparks Litigation,” August 2003;
  • BOARD TALK: “Honda Magnate Bulldozes Kaua`i Bluff, Causing Mud to Blanket Pila`a Bay,” September 2002.



Volume 24, Number 9 March 2014

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