Appeals Court Upholds Decision Sending Lana`i Dispute Back to LUC

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Sprinklers water a lawn at one of Lana‘i Resort’s properties. Credit: NHLC

In 1991, the state Land Use Commission approved a boundary amendment petition that set the stage for development of luxury resorts on Lana`i. One of the conditions – Condition 10 – that it attached to the approval stated that the developer was not “to utilize the potable water from the high-level groundwater aquifer for golf course irrigation use, and shall instead develop and utilize only alternative non-potable sources of water … for golf course irrigation requirements.”

Exactly what was meant by that condition has been the subject of litigation ever since.

Most recently, on March 21, the Intermediate Court of Appeals issued a decision on the subject, upholding a lower court decision in 2012 that found the LUC had improperly decided an issue that had been remanded back to it after another series of court rulings. In that decision, issued in 2010 after a hearing launched in 2006, the LUC approved an order that essentially nullified Condition 10, giving developer Lana`i Resorts, LLC, the ability to draw irrigation water from the island’s high-level aquifer.

Lana`i Resorts appealed the lower court’s 2012 decision to the Intermediate Court of Appeals, while Lana`ians for Sensible Growth (LSG), the group that had originally asked the LUC to enforce Condition 10, opposed the appeal.

To strengthen its case Lana`i Resorts argued that LSG should not be allowed to intervene in the proceedings, since the original group – Lanaians for Sensible Growth – had dissolved and then reformed after a hiatus of several years. The ICA rejected that argument, noting that the leadership of both groups was much the same. In any case, while the new group had failed to “officially substitute itself as a party in this litigation,” under the law, its members who had been involved with the case could “continue their role in the proceedings despite LSG’s administrative dissolution.”

After dispensing with the matter of standing, the court turned its attention to the hearing that the LUC held in 2006, following a ruling of the Hawai`i Supreme Court that ordered the LUC to clarify whether Lana`i Resorts had violated Condition 10. Although the high court did not order it to hold a hearing on that question, the LUC decided to do so, and thus the hearings became subject to the statutory requirements of contested cases, the ICA found.

And when held against those contested-case hearing requirements, the LUC’s actions were found to be “unlawful,” the ICA determined.

As described in the appellate court’s decision, the hearing began with two days of testimony in June 2006 from Lana`i Resorts, Maui County, and the Office of Planning. LSG had witnesses prepared to testify, but before that could happen, the LUC decided to have a hearings officer to continue holding hearings and then make a recommendation to the LUC. “At this hearing, counsel for LSG reminded the LUC that it had heard all parties’ testimony at the June 2006 hearing, except for testimony from LSG,” the ICA noted. “I think we would be prejudiced if, in fact, the record stands as it is with everybody else’s testimony but not ours on these critical issues,” Native Hawaiian Legal Corporation attorney Alan Murakami said at the time. The NHLC has represented Lanaians for Sensible Growth throughout the long litigation over Condition 10.

When the LUC finally voted on the matter, in January 2010, it reversed its earlier, 1996, order and granted Lana`i Resorts motion to modify Condition 10 in a manner that would allow ongoing use of high-level aquifer water for golf course irrigation.

Because the LUC had effectively denied LSG the opportunity to offer testimony, the appellate court upheld the lower court finding:

“The LUC entered its 2010 order based on ‘having reviewed [the OP’s] Motion and Revised Motion, [Lana`i Resorts’] Motion, the various pleadings filed by the parties and the record in this proceeding, and having heard public testimony and arguments of counsel for [the OP], [Lana`i Resorts], Maui County, and counsel for LSG,’ noticeably leaving out public testimony for LSG.

“Therefore, we come to the same conclusion as the circuit court: ‘the further hearings LUC conducted … did not result in LSG being afforded a full and fair opportunity to have its evidence heard and considered… Such a process does not satisfy the appearance of justice.”

The LUC’s 2010 decision is thus vacated, with the ICA agreeing with the 1st Circuit Court that “the LUC’s decision was made upon unlawful procedure.”

— Patricia Tummons

Volume 26, Number 10 April 2016

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