Pila'a 400, LLC v. Bd. of Land & Natural Res.
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After a contested case hearing, the Board of Land and Natural Resources (BLNR) entered an order imposing a financial assessment for damages to state conservation land against Pila’a 400, LLC. Specifically, the BLNR held Pila’a 400 responsible for remedial, restoration, and monitoring costs for despoilment of the state land, including near-pristine coral reef, resulting from unauthorized land use. The circuit court and intermediate court of appeals affirmed. The Supreme Court affirmed, holding (1) the BLNR was not required to engage in rule-making before imposing the financial assessment for damages to state land against Pila’a 400; (2) the BLNR had jurisdiction to institute the enforcement action; and (3) Pila’a 400 was afforded a full opportunity to be heard at the contested case hearing following reasonable notice.
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Electronically Filed
Supreme Court
SCWC-28358
14-FEB-2014
02:00 PM
IN THE SUPREME COURT OF THE STATE OF HAWAI#I
---o0o---
PILA#A 400, LLC,
Petitioners/Appellant-Appellant,
vs.
BOARD OF LAND AND NATURAL RESOURCES and
DEPARTMENT OF LAND AND NATURAL RESOURCES, STATE OF HAWAI#I,
Respondents/Appellees-Appellees.
SCWC-28358
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(ICA NO. 28358; CIV. NO. 05-1-0103)
February 14, 2014
ACOBA, McKENNA, AND POLLACK, JJ., WITH CIRCUIT JUDGE TRADER, IN
PLACE OF RECKTENWALD, C.J., RECUSED, WITH NAKAYAMA, J., ACTING
C.J., CONCURRING AND DISSENTING
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OPINION OF THE COURT BY POLLACK, J.
This case requires us to consider whether Pila#a 400,
LLC (Pila#a 400) was properly held responsible for remedial,
restoration, and monitoring costs assessed against it by the
Board of Land and Natural Resources (BLNR) for despoilment of
state conservation land resulting from unauthorized land use by
Pila#a 400, which included significant harm to a near-pristine
coral reef.
We hold that BLNR had jurisdiction to institute the
enforcement action, the BLNR was not required to engage in rulemaking before imposing a financial assessment for damages to
state land against Pila#a 400, and Pila#a 400 was afforded a full
opportunity to be heard at a contested case hearing following
reasonable notice.
Accordingly, we affirm the Judgment on Appeal
of the Intermediate Court of Appeals (ICA).
I.
A.
Pila#a 400 owns a 383-acre parcel of rural land
(Property), located on the north shore of Kaua#i.1
The Property
is a level to gently sloping plateau broken by four gulches
extending from Kuhio Highway and Koolau Road toward the
shoreline.
The plateau above and between the gulches naturally
1
Pila#a 400 obtained the Property from Pflueger Properties, LP by
warranty deed, executed on January 23, 2001, by James H. Pflueger.
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drains water and sediment along contours that form distinct
geographic drainage areas.
At the makai2 terminus of the Property is Pila#a Beach
and Pila#a Bay.
Pila#a Beach is a white sand beach approximately
fifty to one hundred feet wide, bisected by Pila#a Stream.
Pila#a
Bay contains a well-developed fringing reef, extending from
Ke#ilu Point on the west to Kepuhi Point on the east.
Wave
action over the reef flushes the inner reef area, creating a lush
environment for a wide variety of marine life.
Pila#a Bay’s
inner reef is one of only a few shallow reefs on the northeast
coast of Kaua#i protected from ocean swell by an outer reef.
Prior to November 26, 2001, Pila#a Bay was well-known for its
striking beauty and as an excellent site for swimming,
snorkeling, fishing, and gathering edible seaweed.
According to
the DLNR, the reef at Pila#a Bay was one of the “few remaining
high value coral reef flats in the state that had largely escaped
encroachment from development and stress from improper land
practices.”
The reef was “an extremely valuable resource” with a
wide range of reef habitats, abundant marine life, and almost
fourteen percent coral cover.
2
“Makai” means “toward the sea, in the direction of the sea.” State
v. Tagaolo, 93 Hawai#i 314, 318 n.6, 2 P.3d 718, 722 n.6 (App. 2000) (citing
M. Pukui and S. Ebert, Hawaiian Dictionary 225 (1979)).
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Pila#a Beach and Bay are public lands owned by the
State of Hawai#i, subject to several privately owned kuleana.3
The Department of Land and Natural Resources (DLNR) is
responsible for managing, administering, and exercising
control over all of the public land in the state, including
water and coastal areas.
The DLNR is “headed” by BLNR.
Revised Statutes (HRS) § 171-3(a) (2011).4
Hawai#i
The BLNR is
constitutionally mandated to conserve and protect Hawai#i’s
natural resources.5
3
A “kuleana” is “a small area of land such as were awarded in fee
by the Hawaiian monarch, about the year 1850, to all Hawaiians who made
application therefor.” Bremer v. Weeks, 104 Hawai#i 43, 45 n.5, 85 P.3d 150,
152 n.5 (2004) (quoting Palama v. Sheehan, 50 Haw. 298, 299 n.1, 440 P.2d 95,
96 n.1 (1968)).
4
HRS § 171-3(a) (2011) provides now, as it did at all times during
the events at issue:
(a) The department of land and natural resources shall be
headed by an executive board to be known as the board
of land and natural resources. The department shall
manage, administer, and exercise control over public
lands, the water resources, ocean waters, navigable
streams, coastal areas (excluding commercial harbor
areas), and minerals and all other interests therein
and exercise such powers of disposition thereof as may
be authorized by law. The department shall also manage
and administer the state parks, historical sites,
forests, forest reserves, aquatic life, aquatic life
sanctuaries, public fishing areas, boating, ocean
recreation, coastal programs, wildlife, wildlife
sanctuaries, game management areas, public hunting
areas, natural area reserves, and other functions
assigned by law.
HRS § 171-3(a).
5
The Hawai#i Constitution provides:
For the benefit of present and future generations, the State
and its political subdivisions shall conserve and protect
Hawaii's natural beauty and all natural resources, including
land, water, . . . .
(continued...)
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The BLNR defines “land” to include coastal areas and submerged
Hawai#i Administrative Rules (HAR) § 13-5-2 (1994).
land.
Pila#a Beach and Bay lie within a State Land Use
Conservation District (Conservation District) as a strip of land
ranging from 175 to 250 feet wide and running along the makai
edge of the Property.
two sections.
The Conservation District is divided in
The Conservation District land located mauka6
of the shoreline boundary is in the “limited” subzone,7
consisting of the white sand beach.
The Conservation District
land makai of the shoreline boundary consists of the near-shore
submerged lands and is in the “resource” subzone.8 Regulated
land use in a resource subzone includes the placement of fill on
5
(...continued)
Haw. Const. art. XI, § 1.
The legislature shall vest in one or more executive boards or
commissions powers for the management of natural resources owned
or controlled by the State, and such powers of disposition thereof
as may be provided by law . . . .
Haw. Const. art. XI, § 2.
6
“Mauka” means “inland.” Diamond v. Dobbin, No. 30573, 2014 WL
285388, at *2 n.8 (Haw. Jan. 27, 2014) (citing Mary Kawena Pukui & Samuel H.
Elbert, Hawaiian Dictionary at 242 (1986)).
7
The objective of the limited subzone is to “limit uses where
natural conditions suggest constraints on human activities . . . . Identified
land uses . . . are restricted to those listed in [HAR §] 13-5-23.” HAR § 135-12 (1994).
8
The objective of the resource subzone is “to ensure, with proper
management, the sustainable use of the natural resources of those areas. . . .
Identified land uses . . . are restricted to those listed in [HAR §] 13-524.” HAR § 13-5-13 (1994).
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submerged land.
HAR § 13-5-24.
Pila#a reef is a part of the
resource subzone.
Sometime prior to November 26, 2001, Pila#a 400 or its
predecessors conducted extensive grading, filling, and other work
on the Property.
None of the work was authorized by permit.
The
unauthorized land use included: (1) large-scale grading on the
plateau above the bay; (2) a vertical cut creating a cliff forty
to sixty feet in height within the Conservation District; (3)
construction of a road along the base of the vertical cut; and
(4) installation of a 30-inch pipe or culvert under the road that
drained water and mud directly from the Property onto Pila#a
Beach.
On November 26, 2001, the Property experienced heavy
rainfall typical of the area at that time of year.
The
consequent erosion of the recently graded and filled hillside on
the Property resulted in a massive mudflow into the Conservation
District.
Mud flowing from the Property poured into Pila#a Bay
and covered land within the Conservation District in several feet
of mud.
The November 26, 2001 mudflow severely damaged Pila#a
Bay and reef.
A scientific assessment begun in June 2002 by the
DLNR and continuing through September of that year noted several
indications of significant damage: (1) the shallow areas of the
bay suffered from chronic turbid conditions; (2) corals were
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bleached, dead, dying, and becoming overgrown by algae; and (3)
approximately 2,943 square meters of live coral were destroyed by
the November 26, 2001 mudflow and subsequent sedimentation.
The
assessment concluded that, although much of the sediment had been
cleansed from the beach due to natural wave action, sediment and
its negative impacts remained at Pila#a.
According to the
assessment’s conclusion, Pila#a might never be returned to its
pre-mudflow conditions.
B.
On January 28, 2002, pursuant to HRS Chapter 183C, the
DLNR issued a Notice and Order (First Notice and Order) to
Pflueger Properties, Limited Partnership (Pflueger Properties)
for “illegal work conducted within the Conservation District at
Pila#a[,] Kilauea, Kauai, Hawaii.”9
The First Notice and Order
included the DLNR’s initial assessment of potential unauthorized
land uses in violation of state law.
We have determined that:
(1) The subject property, identified as tax map key 5-1004:008 is in the Conservation District and is classified as
Limited Subzone;
(2) The following uses were conducted on the subject
premises: grading, grubbing, [10] cutting, and culvert
construction;
(3) These uses were not authorized by the Department of Land
and Natural Resources.
9
Pflueger Properties and James H. Pflueger were later dismissed
from the case, leaving Pila#a 400 as the sole responsible party. See note 19,
infra. Until the dismissal, DLNR and BLNR communications were directed either
to Pflueger Properties or James H. Pflueger.
10
“Grubbing” means the removal of vegetation by scraping,
dislodging, or uprooting vegetation that breaks the topsoil. HAR § 13-5-2.
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YOU ARE HEREBY ORDERED TO CEASE any further activity on the
subject premises. Should you fail to cease such illegal
activity immediately, you will be subject to fines up to
$2,000 per day pursuant to Chapter 13-5, [HAR], in addition
to administrative costs incurred by the Department and
damages to State land.
(Footnote added).
On June 20, 2002, following a June 13, 2002 site
inspection, the DLNR issued a second Notice and Order (Second
Notice and Order) to Pflueger Properties for "Illegal Activity in
the Conservation District.”
The Second Notice and Order required
Pflueger Properties to submit a remedial Best Management
Practices Plan for the affected conservation land and emphasized
that the natural environment at Pila#a Bay suffered “unauthorized
despoliation” due to “almost unimpeded” sedimentation resulting
from the illegal land uses conducted on the property.
[A] massive vertical bench was cut into the hillside and
remains unprotected from erosion. Evidently, this was done
to construct a new dirt road . . . . This road now serves
as a conduit for water and sediments, which end up in the
sea almost unimpeded. A s m a l l v a l l e y t h a t t e r m i n a t e s
near the beach was filled with large quantities of
e x c a v a t e d s o i l . T h i s a r e a r e m a i n s p a r t l y unvegetated.
This latter action resulted in the diversion of a small
stream, which originates from a spring several meters up
the valley.
This fill area is a serious source of
sediments transported to the nearshore waters during
periods of rainfall.
It was generally agreed that some immediate remedial
actions could be taken, such as implementation of Best
M a n a g e m e n t P r a c t i c e s ( B M P s ) , to help abate sedimentation
on nearshore waters.
. . . . [T]here is a need for immediate physical
intervention to slow down runoff and sediments.
(Emphases added).
The Second Notice and Order also memorialized future
remedial action the DLNR intended to take:
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The landowner is reminded that these interim remedial
actions in no way whatsoever, cures, exonerates or
pardons the unauthorized despoliation of conservation
v a l u e s a t P i l a #a b y t h e l a n d o w n e r .
The matter of the
u n a u t h o r i z e d w o r k a t P i l a #a B a y w i l l b e p r e s e n t e d t o t h e
BLNR at a future date, time and place to be announced.
In addition to fines and penalties for damages to State
land, the landowner should be made aware of the
possibility of the imposition of the requirement to
conduct complete land restoration and long term
monitoring to assess the recovery of the marine
environment.
(Emphasis added).
On August 22, 2002, the DLNR issued an order for the
implementation of emergency erosion and water pollution controls
(First Implementation Order) detailed by the plan submitted by
Pfleuger Properties.11
The First Implementation Order reiterated
that erosion and sedimentation resulting from the illegal uses
conducted on the Property continued to threaten Pila#a Bay.
On June 20, 2002, the DLNR issued you a second order,
directing you to submit a Remedial Best Management Practices
Plan to construct filter fences, plug a drainage culvert and
grass certain areas in order to reduce erosion and
sedimentation of waters within Pila#a Bay.
. . . .
These measures would include the construction of a large
rock berm within the eastern gulch, a series of smaller rock
dams, sedimentation ponds, hydro mulching, etc. . . .
[t]hese emergency measures would be implemented with the
sole intent of forestalling erosion and prevention of
further degradation of marine waters, which could occur this
rain season unless appropriate measures are undertaken
immediately.
. . . .
In addition to fines and penalties for damages to State land,
the landowner should be made aware of the possibility of
complete land restoration and long term monitoring to assess
the recovery of the marine environment.
11
The Best Management Practices Plan ordered by the DLNR’s June 20,
2002 letter does not appear in the record. DLNR’s August 22 letter addressed
to Pflueger Properties references this order and stated that it has “reviewed
the submitted plan” and “conditionally approves the emergency
measures . . . .”
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(Emphases added).
On November 20, 2002, the DLNR issued a second
implementation order (Second Implementation Order) to implement
erosion and water pollution control measures within the shoreline
area of Pila#a Bay.
The Second Implementation Order emphasized
that erosion continued to pose a threat to the immediate
shoreline area and the marine waters and echoed the language of
the previous order.
“These emergency measures would be
implemented with the sole intent of forestalling erosion and
prevention of further degradation of marine waters which could
occur this rainy season unless appropriate measures are
undertaken immediately.”
(Emphasis added).
Both the First and
Second Implementation orders reiterated the intention of the BLNR
to take future action.
The damage to the coral reef at Pila#a Bay was a
central and continuing concern of the DLNR.
On behalf of the
BLNR, Dr. Paul Jokiel completed a scientific study entitled “Reef
Coral Communities at Pila#a Reef in Relation to Environmental
Factors” on December 12, 2002 (the Jokiel Report).
The Jokiel
Report extensively examined the effects of the November 2001
mudflows on Pila#a reef and the surrounding area.
It concluded
that “the mudflow from the 26 November 2001 event entered the
reef [at a time of low wave energy] . . . so all of the sediment
was deposited and retained in the shallow reef system,” and “the
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shallow coral reef areas at Pila#a have undergone recent
degradation.”
The degradation was shown by the impact of the
sediment on the reef corals:
c. Hard substrate in impacted areas is covered with
mats of algae and terrigenous sediment 12 rather than
the pink crustose coralline algae that would be
expected. Sediments have combined with the fleshy
algae into a thick matrix on hard surfaces.
d. Presence of terrigenous mud has mixed with the
carbonate sands on the beaches, intertidal and
subtidal areas. The mixture bakes into a “hardpan”
layer on impacted beaches.
. . . .
3. Mudflows and increased rates of sediment input have
resulted from grading of steep slopes along the shoreline
with consequent accelerated erosion of soil onto the reef.
Increased mud input is the cause as shown by the pattern of
damage in relation to sediment sources and in shore ocean
patterns.
4. Recovery of the damaged areas cannot begin until
terrigenous input of sediment is curtailed.
(Emphases added).
The DLNR also conducted additional studies that
examined the effects of sedimentation on the reef at Pila#a Bay.
The “Report on Reconnaissance: Level Sedimentology Survey of
Pila#a Reef Beaches, Kauai, Hawaii, August 5, 2002” concluded
that “the reef and bay at Pila#a contain significant quantities
of terrigenous mud,” compared to a control beach which was
“pristine.”
At the time of the report, some eight months after
the November 26, 2001 mudflow, the report also noted:
12
In oceanography, terrigenous sediments are those derived from the
erosion of rocks on land and consist of sand and mud carried to sea by rivers.
Paul R. Pinet, Invitation to Oceanography 94 (2009)(available via Google
Scholar, p. 94 [as of Feb. 13, 2014]).
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A concentrated plume of mud was continuously observed during the
survey . . . . Presumably, this process has been ongoing since
the November 2001 and May 12, 2002 rain events and will continue
for months, perhaps even years into the future . . . .
A second report entitled “Initial Data Regarding Pila#a
Assessment,” also completed in August 2002, noted particular
concerns for the endangered Hawaiian green sea turtle.
The
report determined that there were significant long term impacts
and concerns relating to displacement of native plants and
animals by invasive species; enhancement of “fleshy algae” and
cyanobacteria; decreased larval and planktonic organism survival;
decreased fertilization success, sex reversal and deformities,
and impacts to non-coral cryptic systems, mobile reef systems,
and loss of three-dimensional substrate.
The report also
discussed economic values of the impact to the reef and possible
mitigation strategies.
Pila#a 400 also commissioned two of its own scientific
studies on sedimentation following the November 2001 mudflow and
its effects on the reef.
The first study, completed in February
2003 was entitled “Preliminary Sediment Runoff Analysis for
Pflueger Property Restoration.”
The purpose of the study was to
“estimate the potential annual historical sediment runoff from
the Pila#a property.”
The study determined that the sediment
run-off that occurred during the November 26, 2001 incident was
not extraordinary for the area.
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A second study, completed in March 2003 was entitled
“Ecology of the Reef Ecosystem of Pila#a, Kauai and Analysis of
Alleged Environmental Impacts Associated with Recent Sediment
Run-Off,” and was directed at determining the relationship
between the November 2001 mudflow and the alleged damage to the
According to this report, the low coral cover at Pila#a
reef.
was due to the naturally harsh ecological conditions.
In
addition, the study asserted that the sediment spill in November
2001 did not exceed the range of natural variability at Pila#a,
suggesting that Pila#a 400 should not be held responsible for the
damage.
C.
On August 22, 2003, a public meeting (Public Meeting)
was held before the BLNR, during which DLNR staff presented a
report (Staff Report) regarding “Alleged Unauthorized Grading,
Grubbing, Filling, Road Construction, Landscaping, Drainage,
Improvements, and Damages to State Land and Natural Resources Due
to Excessive Sedimentation at Pila#a.”
The Staff Report
enumerated four unauthorized uses within the Conservation
District.
[T]his report documents the unauthorized land uses within
the conservation district. The unauthorized uses include
[1] [a] . . . dirt road through gulch 2, and along the
shoreline, [2] [a] . . . vertical cut in the coastal bluff,
[3] . . . fill and grading at the seaward extent of gulch 2,
. . . [4] . . . storm drain construction adjacent to the
beach.
The report continued: “These unauthorized improvements resulted
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in extensive damages to the shoreline and marine resources at
Pila#a Bay, which was the focus of this report.”
(Emphases
added.)
The Staff Report concluded “there is a strong
evidentiary record . . . linking the unauthorized work of Mr.
Pflueger to coral reel damages at Pila#a Bay.
The area of
damages calculated . . . is 5,830 square meters. . . .
The
comprehensive survey of corals provide strong statistical proof
that the damages are a result of massive sedimentation events
caused by the abutting landowner.”
The Staff Report recommended, inter alia: (1) a penalty
of $12,000 for “failing to obtain the appropriate approvals for
road construction, grading, filling, and storm drain construction
in six (6) instances within the conservation district;” (2) an
assessment of $5,830,000 for “damaging state land and natural
resources stemming from the unauthorized lands [sic] uses;” and
(3) a fine of $38,000 for administrative costs.
Before the close of the Public Meeting, the Pflueger
Properties, James H. Pflueger (Pflueger) and Pila#a 400
(collectively, the “Pflueger Parties”) made an oral request for a
contested case hearing.
On September 2, 2003, the BLNR issued a
letter (September 2, 2003 Letter) to “James Pflueger, Pflueger
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Properties” that referred to the Public Meeting and acknowledged
the oral request for the contested case hearing.13
D.
The focus of the contested case hearing was framed by
the parties in pre-hearing statements.
The first statement was
an August 29, 2003 letter by the Pflueger Parties to the BLNR
supplementing their oral request for a contested case hearing
(Written Hearing Request).
In the Written Hearing Request, the
Pflueger Parties affirmed that the subject of the contested case
hearing would be damages to Pila#a Bay and reef resulting from
excess sedimentation caused by unauthorized grading activities in
the Conservation District:
The matter being considered by the [BLNR] concerns alleged
damage to the reef flat and near-shore marine environment
stemming from grading activities in the conservative [sic]
district which allegedly resulted in discharges of sediment
following a severe rainstorm on the night of November 26,
2001, December 2001, and early 2002.
(Emphasis added).
The Written Hearing Request also contested the
following facts and issues contained in the DLNR staff report
presented at the Public Meeting:
•
•
•
•
the statutory legal authority
the responsible parties
the scope and extent of the alleged damage to the reef flat
and near-shore marine environment at Pila#a
the amount of alleged damage that was directly caused by
the Petitioners’ grading activities as opposed to other
causal factors
13
The September 2, 2003 Letter ordered Pflueger to pay a fine of
$8,000 relating to four instances of unauthorized land use. In addition, the
BLNR assessed $38,500 for administrative costs related to unauthorized land
uses at Pila#a. At some time prior to February 17, 2004, the $8,000 fine and
$38,500 in administrative costs were paid.
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•
•
•
•
•
•
•
the specific dates(s) when the alleged damage occurred
evidence regarding assessment of the damages to the reef
flat and near-shore marine environment and the alleged
causes
the amount of penalties proposed by the DLNR staff
the statutory authority for and the method used by the DLNR
to calculate penalties for the alleged damage to the reef
flat and near-shore marine environment
all factual and legal issues addressed in the DLNR staff
report dated August 22, 2003
DLNR staff recommendation items nos. 2, 4, 5, 6, 7, 8 and
9 as described in the DLNR staff report and
any and all finds [sic] of fact and conclusions of law that
may arise during the course of the contested case
proceeding.
In its prehearing Statement on the Issues, dated
February 17, 2004, the DLNR framed the purpose of the contested
case hearing as follows:
The only issue in this contested case proceeding is the
determination of the amount of damages to be assessed
against the Pflueger Parties for damages to the beach, reef,
and marine environment . . . which were largely the result
of excessive sediment input dating from November 2001 and
thereafter.
(Emphasis added).
In its Responsive Statement of the Issues dated March
1, 2004, the Pflueger Parties presented an extensive list of
disputed facts and issues to be determined at the contested case
hearing that included sedimentation, damages, causation, and the
authority of the BLNR, both generally and specifically to assess
penalties and to require remediation.
The Pflueger Parties
contested that it violated the provisions of HRS § 183C and HAR
Chapter 13-5 “by damaging state land and natural resources
stemming from unauthorized land uses, for a penalty of
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$5,830,000.”
The statement disputed many of the findings of the
Staff Report presented at the Public Hearing, including the
sources and historic patterns of sedimentation into Pila#a Bay,
“causation as to the alleged damage to the beach, near-shore
marine environment, reef flat and/or deep water coral shelf at
Pila#a”; “the scope and extent of the alleged damage to the
beach, near shore marine environment, reef flat, and/or deep
water coral shelf at Pila#a;” and “the amount of alleged damage
that was directly caused by [the Pflueger Parties’] grading
activities as opposed to other causal factors.”
On October 3, 2003, the BLNR published a Notice of
Contested Case Hearing (Contested Case Hearing Notice).
It
provided:
The [BLNR] will conduct a contested case hearing on DLNR
File No. KA-04-02 regarding an enforcement action involving
the alleged damages to State land(s) and natural resources
due to excessive sedimentation at Pila#a, District of
Hanalei, Island of Kauai, seaward of TMK: 5-1-4:8 (por.).
The hearing will be held pursuant to Chapters 91 and 183C,
Hawaii Revised Statutes, and Chapters 13-1 and 13-5, Hawaii
Administrative Rules (HAR).
(Emphasis added).14
14
In its prehearing Statement on the Issues dated February 17, 2004,
the DLNR also stated that the damages dated from November 2001. Based on the
DLNR statement, the Pflueger Parties, which included Pila#a 400, moved to
dismiss Pflueger Properties and Pflueger from the case (the Dismissal Motion)
because Pflueger Properties had conveyed its ownership interest in the
Property to Pila#a 400 earlier that year. The Dismissal Motion acknowledged
that Pila#a 400 would remain the liable party.
[Pila#a 400] is the party liable for any penalty incurred as
a result of the wrongful acts of its manager. As a matter
of law, [Pila#a 400] is the sole party responsible in this
action[.]
Based on the foregoing representations, the DLNR did not oppose the
Dismissal Motion. Similarly, the hearing officer’s (Hearing Officer)
(continued...)
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The contested case hearing began on July 20, 2004, and
continued over 13 days through August 13, 2004.
The first
activity in the contested case was a site visit by the hearing
officer (Hearing Officer), who spent several hours exploring the
reef with mask and snorkel and examining the beach.
The Hearing
Officer heard testimony and received exhibits from experts in
marine science regarding damage to Pila#a Bay and reef.
Both
sides also presented multiple kama#aina15 witnesses who testified
as to the impact of the unauthorized land uses on fishing and
beach-related activities at Pila#a Bay.
DLNR presented six experts in marine science to
establish the damage to the Pila#a reef.
Those experts included
Dr. Paul Jokiel, an international expert on coral reefs and coral
reef monitoring; Dr. Charles Fletcher, an internationally
recognized expert on coastal sedimentary geology and carbonate
reefs; David Gulko, a senior aquatic biologist with the DLNR and
an expert in coral reef ecology; Dr. William Walsh, an aquatic
14
(...continued)
April 29, 2004 dismissal noted that “[Pila#a 400] [was] the landowner of
the [Property] at all relevant times.” Therefore, Pila#a 400 was
allowed to remain as the sole liable party. The BLNR’s June 30, 2005
Findings of Fact, Conclusions of Law, and Decision and Order concluded,
“As the owner of the Property . . . Pila#a 400 was responsible to the
State for the condition of the Property and for the consequences of any
illegal activity on the Property by its predecessors[.]” Pila#a 400 did
not contest that it was the responsible party in its application for
writ of certiorari to this court.
15
“Kama#aina” means native-born, acquainted, or familiar. Mary
Kawena Pukui & Samuel H. Elbert, New Pocket Hawaiian Dictionary at 50 (1992).
It can also mean “a person familiar from childhood with any locality.” In re
Boundaries of Pulehunui, 4 Haw. 239, 245 (1879).
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biologist and resource manager with the DLNR and an expert in
aquatic biology; Ryan Okano, a graduate student at the University
of Hawai#i and an expert in algae; and Dr. Robert Richmond, a
research professor at Kewalo Marine Laboratory and an expert in
coral reef biology and their valuation.
Pila#a 400 called five expert witnesses to address the
issues of excessive sedimentation and its effects on the reef at
Pila#a.
These experts included Dr. Richard Grigg, an expert in
coral reef ecology and oceanography, Dr. Eric H. De Carlo, an
expert in sedimentary geology, and Dr. Steve Dollar, an expert in
biological oceanography, all co-authors of the sedimentation
study submitted by Pila#a 400.
Pila#a’s 400’s other experts were
Paul Wallrabenstein, an author of a second sedimentation study
submitted by Pila#a 400, an expert in civil engineering, and Dr.
John Dixon, an expert in the field of environmental economics.
Following the contested case hearing, both parties
submitted proposed findings of fact, conclusions of law, and
decision and recommendations.
The Proposed Findings of Fact,
Conclusions of Law, Decision and Recommendation submitted by
Pila#a 400 (Pila#a 400 Proposal) included, inter alia, the
following arguments: (1) as the principal land use activities and
source of the mudflow was land outside the Conservation District,
the BLNR therefore lacked jurisdiction over those land use
violations, and (2) Pila#a 400 was denied due process by DLNR’s
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failure to engage in rule-making, as mandated by HRS § 183C-3(3),
before assessing the damage penalty.
The DNLR Proposed Recommended Findings of Fact,
Conclusions of Law, Decision and Order (DLNR Proposal) noted that
the Pflueger Parties did not contest the September 2, 2003
Letter’s findings of “violation[s] of the provisions of Chapter
183C HRS, and Chapter 13-5, HAR, by failing to obtain the
appropriate approvals for road construction, grading, filling,
and storm drain construction in four (4) instances within the
conservation district.”
The DLNR Proposal described the
unauthorized work on the Property and resultant mudflow, and
extensively detailed the impact to the Conservation District and
the damage to State land.
The DLNR Proposal stated the damage to
the reef and ecosystem were violations of HAR §§ 13-5-24, 30(b).
The DLNR Proposal recommended the following “Discussion and
Conclusions”:
18.
The November 26, 2001 mudflow and subsequent
sedimentation constitute placement of solid material
on land and the grading of land and are therefore a
regulated land use with the meaning of [HRS] § 183C2[].
19.
Pila#a 400 did not have a [DLNR] or [BLNR] permit
authorizing any land use in the [Conservation
District].
20.
The November 26, 2001 mudflow and subsequent
sedimentation constitute marine construction within
the meaning of HAR § 13-5-24.
21.
Pila#a 400 did not have a [DLNR] or [BLNR] permit
authorizing marine construction (including filling of
submerged land). Nor could a permit be obtained for
the filling of submerged land where protected marine
resources are destroyed. Chapter 13-5 does not
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provide otherwise that Pila#a 400 could undertake
marine construction.
22.
The November 26, 2001, mudflow and subsequent
sedimentation events constitute violation by Pila#a 400
of [HRS] chapter 183C and violation of rules adopted
in accordance with chapter 183C.
On December 22, 2004, the Hearing Officer entered
Proposed Findings of Fact, Conclusions of Law, and Recommendation
(Hearing Officer’s Proposal).
The Hearing Officer recommended
that the BLNR assess Pila#a 400 $2,315,000,16 representing the sum
of restoration costs, the value of coral destroyed, the intrinsic
value of Pila#a Bay, compensation for interim loss, and five
years of monitoring the Pila#a reef community.
The Hearing
Officer’s Proposal noted generally the provisions of HAR §§ 13-524 and 30(b), as well as other relevant sections of HAR Chapter
13-5.
In regards to HAR §§ 13-5-24 and 30(b), the Hearing
Officer’s Proposal adopted the Discussion and Conclusions No. 1822 from the DLNR Proposal.
16
In addition, the Hearing Officer
The Hearing Officer also made the following recommendation:
It is recommended that the $2,325,000 penalty be held in
trust and applied to implement the Conceptual Remediation
Plans whose estimated cost is three to five million dollars
and to monitor the Pila#a Bay reef for five years. This
will assure that the penalty is used to restore Pila#a Bay.
If the construction costs of the Conceptual Remediation
Plans exceed $2,000,000, [ Pila#a 400, LLC] should pay the
balance of the construction costs. If the construction and
monitoring costs are less than the balance of the penalty
not used to fund the Conceptual Remediation Plans and
monitor Pila#a Bay for five years, then the balance of the
penalty should be retained by the State of Hawaii.
The "Conceptual Remediation Plans" were approved by the DLNR and were
designed to ensure the Property was stable and no further runoff would occur.
It included removal of a trail in Gulch 2 and restoration of the stream to
its previous location and configuration, extensive landscaping in Gulch 2,
stabilization, filling and restoration of the shoreline cut, re-vegetation of
the shoreline, and removal of the rock berm in Gulch 2.
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recommended that the BLNR assess administrative costs in the
amount of $69,996.93.
Following the entering of the Hearing Officer’s
Proposal, both parties filed exceptions to the Hearing Officer’s
In its exceptions, Pila#a 400 raised an objection to
Proposal.
any findings based on HAR § 13-5-24 due to a lack of notice under
HRS § 91-9.
Pila#a 400 stated that it had “never received any
notice, oral or written, that the contested case hearing was
proceeding under the marine construction rules.
There is not a
single citation in the entire contested case record which even
references ‘marine construction.’”
(Emphasis removed).
On March 29, 2005, the BLNR heard closing arguments.
On June, 30, 2005, the BLNR issued its Findings of
Fact, Conclusions of Law, and Decision and Order (BLNR Order).
The BLNR Order ordered Pila#a 400 to pay $3,963,000 in
damages as well as $69,996.93 for DLNR’s administrative costs.17
In arriving at the monetary amount, the BLNR Order found that the
Hearing Officer’s recommendations did not reflect “the BLNR’s
duty to protect this valuable natural resource.”
17
The BLNR’s conclusions differed from the Hearing Officer’s
recommendations in the following respects: (1) Pila#a Bay had incurred
$3,333,000 in damages rather than $2,000,000; (2) monitoring should be
conducted for 10 years at a cost of $630,000 instead of 5 years; (3) the
damages award should be deposited in the special land and development fund
rather that used to offset the restoration costs because “an offset would not
compensate for the damages caused to Pila#a beach, bay, and reef.”
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The value of Pila#a beach, bay and reef includes use value,
option value, commodity value, existence value, bequest
value, cultural values, including value to indigenous
people, and intrinsic value. Economic and use (market)
values alone cannot and do not capture the full value of
Pila#a. Economic valuation alone understates the true
social loss from natural resource damage. The intrinsic
value of Pila#a is recognized by the Hawai#i constitution and
state laws, including section 183C-1, HRS. The BLNR holds
Pila#a and all state property in trust for the people of
Hawai#i and for future generations. 18
The BLNR determined that “[m]udflows from Pila#a 400’s
Property into the [Conservation District] occurred because Pila#a
400 . . . failed to obtain permits for the [unauthorized] work
and failed to implement adequate sediment and water pollution
controls.”19 The BLNR based Pila#a 400’s liability for the
damages on placement of dirt and sediment onto submerged lands.
2. The violation was placement of any solid material on
land in the form of dumping or allowing to be put on
18
In addition, the BLNR reasoned:
Given the elements of value discussed above and in
consideration of all the facts and evidence, including but
not limited to the range of values stated in scholarly
papers for reefs, the probable costs of restoration of
Pila#a Bay and reef and beach, the value of the coral
destroyed, and the intrinsic value of Pila#a Bay and reef,
and the costs of monitoring for 10 years beginning in 2005,
the BLNR rejects the Hearing Officer’s recommendation of
damages. Under the circumstances of this case, the Hearing
Officer’s recommendation as to the amount of damages is too
lenient to reflect the BLNR’s duty to protect this valuable
natural resource under constitutional and statutory law.
19
As to the four violations identified in the September 2, 2003
letter, the BLNR Order enumerates that Pila#a 400 had: (1) created “a massive
vertical cut ranging in elevation from 40 to 60 feet in height” within the
Conservation District, (2) constructed a road in the Conservation District,
and (3) constructed an unauthorized 30 inch pipe or culvert that ran onto
state property in the Conservation District. The fourth land use violation
identified in the September 2, 2003 Letter is not clearly identified in the
BLNR Order.
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conservation land (including submerged land) of a large
unknown amount of dirt and sediment. The illegal act that
was conducted on conservation land (including submerged
land) was dumping or allowing to be dumped a large unknown
quantity of dirt and mud without a permit as required by HAR
§§ 13-5-24 and 13-5-30(b).
3. As the owner of the Property on November 26, 2001,
thereafter, Pila#a 400 was responsible to assure that there
was no unpermitted dumping onto conservation land, including
submerged lands. As the owner of the Property on November
26, 2001, and thereafter, Pila#a 400 was responsible to the
State for the condition of the Property and for the
consequences of any illegal activity on the Property by its
predecessors that resulted in damage to State land
(including submerged land) after it acquired the Property
. . . .
5. Dumping soil onto conservation land falls within the
definition of “land use” in HRS § 183C-2.[ 20]
. . . .
8. The November 26, 2001, mudflow and subsequent
sedimentation events constitute placement of solid material
on land and the grading of land and are regulated land use
within the meaning of HRS § 183C-2.
. . . .
10. The November 26, 2001, mudflow and subsequent
sedimentation events constitute violation by Pila#a 400 of
HRS chapter 183C and violation of rules adopted in
accordance with chapter 183C.
(Emphasis and footnote added).
E.
On July 27, 2005, Pila#a 400 appealed the BLNR Order
to the Circuit Court of the Fifth Circuit (circuit court).
Pila#a 400 raised, inter alia, the following points of error on
appeal:
(1) The BLNR order violates Haw. Rev. Stat. § 91-3 and Haw.
Rev. Stat. § 183C-3(3) because the BLNR had no rules
20
HRS § 183C-2 (Supp. 2000), provided at the time of the violation,
as it does now, in pertinent part:
“Land Use” means:
(1) The placement or erection of any solid material on land;
(2) The grading, removing, harvesting, dredging, mining, or
extraction of any material or natural resource on land;
(3) The subdivision of land; or
(4) The construction, reconstruction, demolition, or alteration of
any structure, building, or facility on land.
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establishing a methodology for calculating damages to state
land;
(2) The BLNR lacks jurisdiction over grading activities
outside the conservation district;
(3) Appellant did not receive notice that the violation was
“placement of any solid material on land in the form of
dumping . . . without a permit as required by HAR § 13-5-24
and 13-5-30(b)”;
In the first point of error, Pila#a 400 argued that the
BLNR Order violated HRS § 91-3 and HRS § 183C-3(3) because it
failed to establish any written guidelines for the assessment of
environmental damages.
Citing Hawai#i Prince Hotel v. City and
County of Honolulu, 89 Hawai#i 381, 383, 974 P.2d 21, 23 (1999),
Pila#a 400 contended that “the methodology for imposing fines and
penalties must be clearly established by rule, otherwise the
public is unaware of factors critical to the agency’s penalty
process.”
Further, Pila#a 400 reasoned that “[a] penalty imposed
in the absence of Chapter 91 rule-making is invalid as arbitrary
and capricious.”
In response, the DLNR contended that the plain language
of HRS § 183C-7(b) authorizes the BLNR to regulate the use of
conservation district land and to impose fines for its misuse.
In addition, because state land could be damaged in an infinite
number of ways that includes any possible removal, diminishing,
destruction, or loss in the conservation values, the DLNR argued
that it is “impossible to the point of absurdity” to suppose that
the BLNR is required to prescribe by rule the exact amount of
damage that will be levied, citing Coney v. Lihue Plantation Co.,
39 Haw. 129 (1951).
The DLNR further explained that the
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appropriate standard for the assessment of the damage amount was
applied in this case.
In its second point of error, Pila#a 400 argued that
the BLNR did not have jurisdiction because the grading activities
took place outside the Conservation District.
Citing the BLNR’s
findings of fact, Pila#a 400 contended that the sedimentation
events resulted in mudflow from the Property into the
Conservation District and that the source of the sediment was
outside of the Conservation District.
Pila#a 400 argued that HRS
§ 183C limits the agency’s authority to land use activities on
Conservation District land.
In response, the DLNR argued that the dumping of mud
and dirt onto Conservation District land is a “land use” under
HRS § 183C and that the “source” of the mud was not relevant.
In
addition, the DLNR contended that whether the dumping was
intentional was not relevant to the statute.
In its third point of error, Pila#a 400 argued that the
Contested Case Hearing Notice did not provide adequate notice
that the alleged land use violation was “unpermitted marine
construction” under HAR § 13-5-24.
Pila#a 400 contended that HRS
§ 91-9(b) requires an agency to give notice of the “particular
sections of the statutes and rules involved” and that the absence
of specific notice of HAR § 13-5-24 denied Pila#a 400 due
process.
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In response, the DLNR argued that Pila#a 400 received
adequate notice in compliance with HRS § 91-9(b) because the
written notice referred to the statutes and rules involved by
chapter.
The DLNR emphasized that “[t]he notice references Haw.
Rev. Stat. chapter 183C and HAR § 13-5” and “nothing more was
required by section 91-9(b).”21
On December 4, 2006, the circuit court issued its
Findings of Fact, Conclusions of Law, and Order affirming the
BLNR Order.
The circuit court determined, in relevant part that:
FINDINGS OF FACT
. . . .
27. [Pila#a 400] did not challenge any of the BLNR’s
findings of fact.
. . .
CONCLUSIONS OF LAW
. . . .
6. The [Contested Case Hearing Notice] was adequate and
sufficient to satisfy the notice requirements of HRS Chapter
91. The notice refers to the statute and the rules involved
by chapter. Appellant was aware of the general issues.
. . .
7. Due Process is satisfied if the parties are sufficiently
apprised of the nature of the proceeding as set forth in
[HRS] § 91-9(b). [Pila#a 400] received such notice, so
there is no unfair surprise.
. . .
8. [Pila#a 400]’s argument that the administrative
proceeding is invalid because the notice does not refer to
“marine construction,” is without merit because the BLNR did
not base its Final Decision on “marine construction.”
. . .
21
On March 9, 2006, the Environmental Protection Agency and the
Hawai#i Department of Health filed a complaint in the United States District
Court for the District of Hawai#i against the Pflueger Parties, alleging
violations of state and federal law and seeking damages and injunctive relief.
On June 16, 2006, the U.S. District Court approved a consent decree resolving
the claims. As part of the consent decree, the Pflueger Parties paid civil
penalties and agreed to undertake remedial measures, but denied liability. On
July 24 and August 17, 2006, Pflueger Parties filed motions with the circuit
court seeking summary judgment and dismissal based on the consent decree. The
circuit court denied both motions on October 23, 2006.
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12. Because damages to state land, as well as the nature of
the state land itself, can vary, it would be impossible to
devise a single rule that prescribes the methodology for
quantifying damages. Therefore, determination of the
appropriate amount of damages must be on a case by case
basis and was properly determined through a quasi-judicial
process before the BLNR.
Accordingly, the circuit court affirmed the BLNR Order.
Final judgment was entered on December 26, 2006.
F.
On January 9, 2007, Pila#a 400 filed a timely appeal to
the ICA.
Pila#a 400 asserted that the circuit court erred in
affirming the BLNR order for the following reasons, inter alia:
(a) [the BLNR Order] exceeded the statutory authority and
jurisdiction of the agency under HRS § 183C-3(7) because the
subject grading activity occurred outside of the conservation
district;
(b) [the BLNR Order] violated HRS § 91-9(b), and [Pila#a 400]’s
due process rights insofar as [Pila#a 400] did not receive notice of
the nature of the land use violation;
(c) [the BLNR Order] violated HRS § 91- 3 and HRS § 183C-3(3),
as the DLNR and the [ BLNR] failed to adopt rules for
calculating and assessing environmental damages to state land;
Pila#a 400 LLC v. Bd. of Land & Natural Res., No. 28358 at *5
(App. Dec. 21, 2012)(mem.)(hereinafter “ICA Op.”).
As to the first point of error, Pila#a 400 maintained
that the BLNR lacked jurisdiction because the alleged land use
violations occurred outside of the conservation district.
Citing
to the BLNR’s findings of fact, Pila#a 400 contended that the
sedimentation events resulted in mudflow from the Property into
the Conservation District and that the source of the sediment was
outside of the Conservation District.
Pila#a 400 argued that HRS
§ 183C limits the agency’s authority to land use activities on
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Conservation District land, and therefore the land use activities
were outside the BLNR’s jurisdiction.
The ICA held that the BLNR properly exercised
jurisdiction for two reasons:
(1) at least some of the
unpermitted grading activity occurred within the Conservation
District, and (2) the unpermitted placement of solid material on
conservation land is itself a land use violation directly under
the BLNR’s jurisdiction.
ICA Op. at *6.
The ICA emphasized
that the origin of the fill material was irrelevant, and it was
the act of dumping that brought this action under the BLNR’s
jurisdiction.
Id.
The ICA also held that the BLNR was not barred by any
authority from considering additional land use violations beyond
the four land use violations that were identified in the
September 2, 2003 Letter.
Id.
The ICA reasoned:
[Pila#a 400] had reason to know that damage to the beach,
bay and reef caused by the mud flow from the Property was
unquestionably of concern and the reason for DLNR's
enforcement action. To the extent [Pila#a 400] argues that
it was unaware damage caused by soil runoff was at issue, we
conclude that argument is unsupported by the record.
Id. at *6-7.
Therefore, because Pila#a 400 had adequate notice
that damage to the reef and bay caused by the mudflow was a
central issue at the contested case hearing, Pila#a 400 could not
later argue that the BLNR was limited to the four land use
violations originally identified and lacked jurisdiction over the
mudflow and resultant damage.
Id.
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In its second point, Pila#a 400 argued the Contested
Case Hearing Notice provided by the BLNR was insufficient under
HRS § 91-9, and as a result of the insufficiency of the notice,
it had been denied due process.
Pila#a 400 alleged the Contested
Case Hearing Notice was deficient in that it did not include a
specific citation to HAR § 13-5-24 and did not contain an
explicit statement in plain language of the issues involved and
facts alleged.
The ICA concluded that the Contested Case Hearing
Notice provided by the BLNR was sufficient.
ICA Op. at *7.
First, the ICA concluded that Pila#a 400 had waived this
challenge on appeal because it did not raise the issue of
improper notice during the contested case hearing.
Id.
Second,
the ICA observed that, contrary to the assertion of Pila#a 400,
the Contested Case Hearing Notice did contain an explicit
statement of the essential issues, “the alleged damage to State
land(s) and natural resources due to excessive sedimentation from
Pila#a [400]’s land.”
Id.
The ICA reviewed the record and
concluded that it was “clear” that Pila#a 400 was “aware of the
general issue” and “sufficiently apprised of the nature of the
proceeding.”
Id. at *8.
The ICA found that as Pila#a 400
“itself identified the matters to be considered in the contested
case hearing as including the statutory basis for the assessment
of damage, it cannot claim to be surprised by a hearing that
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involved DLNR’s arguments regarding the basis for the
assessment.”
In regard to its third point, Pila#a 400 argued that
the BLNR failed to adopt rules that established a uniform
methodology for assessing environmental damages before imposing a
$3,963,000 penalty on Pila#a 400.
The ICA concluded that the BLNR and DLNR were not
required to engage in rule-making in this case.
ICA Op. at *8.
The ICA, citing Sec. & Exch. Comm’n v. Chenery Corp., 332 U.S.
194 (1947), reasoned that it would be impossible to create a
single formula that could be used to assess the damage to state
Conservation District land under all possible circumstances:
Due to the infinitely diverse nature of the lands and
resources, and the myriad of ways damage may occur on such
lands and resources, measuring value and value lost must be
on a case-by-case basis, especially when of the magnitude
under the circumstances presented here. Devising and
imposing a single formulaic methodology for assessing
penalties would be impracticable.
ICA Op. at *10.
The ICA held that the circuit court did not err
in affirming the BLNR’s order.22
ICA Op. at *18.
G.
In its application for writ of certiorari
(Application), Pila#a 400 presents the following questions for
review:
A. Did the ICA commit grave error when it found that neither
the [BLNR] nor the DLNR are required to engage in rulemaking, under HRS § 183C-3 and § 91-3, to adopt a
22
Judge Wilson wrote separately to emphasize that BLNR did not err
in including intrinsic value in its calculation of the damages to State land
at Pila#a Bay and reef.
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reasonable and just methodology for assessing damage to
natural resources?
B. Did the ICA commit grave error when it found that the
[BLNR] had jurisdiction, under HRS § 183C-3, to institute
an enforcement action for grading activities outside of
the Conservation District?
C. Did the ICA commit grave error when it found that [Pila#a
400] was afforded an opportunity for hearing after
reasonable notice, under HRS § 91-9, where the record is
undisputed that the DLNR failed to give [Pila#a 400]
notice of the particular sections of the statute and
rules involved in the enforcement action?
In the first question presented, Pila#a 400 contends
that the ICA’s determination that the BLNR and the DLNR were not
required to engage in rule-making is grave error.
Pila#a 400
argues first that the ICA’s conclusion ignores the plain language
of HRS § 183C-3(3), which states that the BLNR “shall” engage in
rule-making under the Hawaii Administrative Procedures Act (HAPA)
rule-making procedures.
Second, Pila#a 400 contends that where
quasi-judicial adjudication encompasses concerns that transcend
those of individual litigants and implicates matters of
administrative policy, rule-making procedures should be followed.
Third, citing to Hawai#i Prince Hotel v. City and County of
Honolulu, 89 Hawai#i 381, 974 P.2d 21 (1999), Pila#a 400 argues
that a methodology to determine value is a “rule” within the
meaning of HRS § 91-1(4) and requires HAPA rule-making
procedures.
Pila#a 400 concludes that in the absence of such
guiding rules, the DLNR’s assessment was arbitrary and
subjective.
In response, the DLNR argues that, under HRS § 183C7(b), the legislature specifically authorized and directed the
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BLNR to include damages to state land when assessing fines.
The
DLNR maintains that determining damages to Pila#a Bay and reef is
not an exact science and that there are no settled or infallible
rules or criteria by which to ascertain damages.
The DLNR argues
Pila#a 400 can only challenge its findings as provided for in HRS
§ 91-14(g),23 and because Pila#a 400 does not contend that the
BLNR’s findings are clearly erroneous or unsupported by
substantial evidence, Pila#a 400’s argument in regards to
required rule-making is without merit.
In its second question presented, Pila#a 400 argues
that the ICA committed grave error when it failed to articulate a
legal basis for the DLNR’s jurisdiction over the agency
enforcement action.
Specifically, Pila#a 400 argues that
although the enforcement action involved land use violations
within the Conservation District, the source of the sediment that
went into the ocean was from grading “outside” of the
Conservation District and therefore beyond the jurisdiction of
the BLNR.
In response, the DLNR observes that Pila#a 400 does not
dispute that the BLNR assessed a fine for damage to state owned
property in the Conservation District.
The DLNR contends that
Pila#a 400 is not relieved of liability simply because the
sediment that caused the damage was a result of activity outside
23
HRS § 91-14(g) sets forth the standard for judicial review of an
agency. HRS § 91-14(g)(5) sets out a “clearly erroneous” standard for
judicial review of administrative findings of fact and mixed questions of fact
and law. See section III, infra.
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of the Conservation District.
In addition, the DLNR argues that
Pila#a 400 was clearly informed throughout the contested case
hearing——including a site visit and 13 days of testimony——that
the proceedings related to damages to State land.
In the third point of error, Pila#a 400 argues that the
ICA committed grievous error when it held that the notice
requirements of HRS § 91-9(b) were satisfied.
Specifically,
Pila#a 400 contends that the notice it received pursuant to HRS §
91-9 was insufficient in that it failed to cite specifically to
HAR § 13-5-24, although the BLNR Order assessed damages based on
the placement of fill material on submerged land as prohibited by
that section.
In response, the DLNR argues that the requirements of
HRS § 91-9 were met because the statutes and rules involved were
referred to by chapter.
The DLNR contends that nothing more was
required, and if Pila#a 400 needed more information to
effectively prepare its case, the proper remedy was to ask for a
bill of particulars at that time rather than to raise the issue
Because Pila#a 400 failed to challenge the notice in
on appeal.
a timely manner, it cannot argue that notice was inadequate.
II.
The review of a circuit court’s decision regarding its
review of an administrative agency’s decision is a secondary
appeal.
Haw. Teamsters & Allied Workers, Local 966 v. Dep’t of
Labor & Indus. Relations, 110 Hawai#i 259, 265, 132 P.3d 368, 374
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(2006).
In a secondary appeal, “Hawai#i appellate courts apply
the same standard of review as that applied upon primary review
by the circuit court.”
AlohaCare v. Ito, 126 Hawai#i 326, 341,
271 P.3d 621, 636 (2012) (quoting Kaiser Found. Health Plan, Inc.
v. Dep’t of Labor & Indus. Relations, 70 Haw. 72, 80, 762 P.2d
796, 800-01 (1988)).
The applicable standard of review for administrative
appeals is set forth in HRS § 91-14(g), which provides:
Upon review of the record the court may affirm the decision
of the agency or remand the case with instructions for
further proceedings; or it may reverse or modify the
decision and order if the substantial rights of the
petitioners may have been prejudiced because the
administrative findings, conclusions, decisions, or orders
are:
(1) In violation of constitutional or statutory
provisions; or
(2) In excess of the statutory authority or
jurisdiction of the agency; or
(3) Made upon unlawful procedure; or
(4) Affected by other error of law; or
(5) Clearly erroneous in view of the reliable,
probative, and substantial evidence on the whole
record; or
(6) Arbitrary, or capricious, or characterized by
abuse of discretion or clearly unwarranted exercise of
discretion.
HRS § 91-14(g).
See Save Diamond Head Waters LLC. v. Hans
Hedemann Surf, Inc., 121 Hawai#i 16, 24, 211 P.3d 74, 82 (2009).
Conclusions of law are reviewed de novo, pursuant to
subsections (1), (2) and (4); questions regarding procedural
defects are reviewable under subsection (3); findings of fact are
reviewable under the clearly erroneous standard, pursuant to
subsection (5); and an agency’s exercise of discretion is
reviewed under the arbitrary and capricious standard, pursuant to
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subsection (6).
Id.
Mixed questions of law and fact are
“‘reviewed under the clearly erroneous standard because the
conclusion is dependent upon the facts and circumstances of the
particular case.’”
Id. at 25, 211 P.3d at 83 (quoting Del Monte
Fresh Produce (Hawaii), Inc. v. Int’l Longshore & Warehouse
Union, 112 Hawai#i 489, 499, 146 P.3d 1066, 1076 (2006)).
III.
A.
Pila#a 400 contends that because the BLNR and the DLNR
only have jurisdiction to “enforce land use regulations on
conservation district lands,” BLNR did not have jurisdiction over
Pila#a 400’s actions or the resultant damages.
Specifically,
Pila#a 400 maintains that the damage to Pila#a Bay resulted from
grading activities conducted outside of the Conservation
District, causing the flow of sediment from outside of the
Conservation District onto the beach and into the bay.
Consequently, Pila#a 400 concludes BLNR and DLNR have no
jurisdiction over Pila#a 400’s land use activities.
In general, the jurisdiction of an agency is created by
statute.
That jurisdiction is “limited by the terms of the
governing statute.”
Nihi Lewa, Inc. v. Dep’t of Budget & Fiscal
Servs., 103 Hawai#i 163, 170, 80 P.3d 984, 991 (2003)(Acoba, J.,
dissenting) (citing Ogle Cnty. Bd. v. Pollution Control Bd., 649
N.E. 2d 545, 551 (Ill. App. Ct. 1995)).
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The powers and duties of the BLNR and DLNR with respect
to Conservation District lands are set forth in HRS § 183C-3.
HRS § 183C-3 states, in relevant part, as follows:
The board and department shall:
. . . .
(3) Adopt rules, in compliance with chapter 91 which shall
have the force and effect of law;
. . . .
(7) Establish and enforce land use regulations on
conservation district lands including the collection of
fines for violations of land use and terms and conditions
issued by the department.
HRS § 183C-3 (2011).
In accordance with this directive, the BLNR
adopted HAR § 13-5-30(b), which specifies that “[u]nless provided
for in this chapter, land uses shall not be undertaken in the
conservation district.”
In this case, the BLNR’s enforcement action was based
on excessive sedimentation within the Conservation District.
The
Contested Case Hearing Notice clearly defined the proceedings as
“an enforcement action involving the alleged damages to State
land(s) and natural resources due to excessive sedimentation at
Pila#a.”
(Emphasis added).
The BLNR had jurisdiction in this case first because
the September 2, 2003 Letter identified land use violations “in
four (4) instances within the conservation district.”
added).
400.
(Emphasis
Those land use violations were not disputed by Pila#a
Therefore, the BLNR had proper jurisdiction in the
contested case hearing to adjudicate damages that resulted from
land use violations that occurred within the district.
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Second, the BLNR’s jurisdiction in the contested case
hearing was derived not only from the four land use violations
cited in the September 2, 2003 Letter, but also on the undisputed
fact that, on November 26, 2001, sediment from the Property
flowed into Pila#a Bay and onto the reef.
Pila#a Bay and reef are
conservation district lands, and the dumping of soil onto
conservation land falls within the definition of ‘land use’ in
HRS § 183C-2.
The BLNR determined that
[o]n November 26, 2001 . . . rain and erosion caused a
portion of the recently graded and filled hillside on the
Property to slump downhill from the Property, across Pila#a
Beach and into Pila#a Bay . . . Additional sedimentation
events occurred in December 2001 and early 2002, in each
case resulting in mudflow from the Property into the
conservation district.
(Emphases added).
Further, the BLNR found “[t]he ‘illegal
activity’ that was conducted on conservation land (including
submerged land) was dumping or allowing to be dumped a large
unknown quantity of dirt and mud without a permit as required by
HAR §§ 13-5-24 and 13-5-30(b).”
The circuit court similarly
found that “mud and sediment [] was placed onto state land
following the rainfall on November 26, 2001.”
findings were challenged by Pila#a 400.
None of these
Therefore, because mud
and sediment were placed on state conservation district land, the
BLNR had jurisdiction over any violations that arose out of that
placement.
Pila#a 400 argues that the BLNR did not have
jurisdiction because “the source of the sediment that went in the
ocean was from grading outside of the conservation district,
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beyond the jurisdictional reach of DLNR.”
However, the
definition of land use refers to the placement of “any solid
material” on land without regard to the source of the material.
HRS § 183C-2; HAR § 13-5-2.
As the ICA explained, “Nothing in
the plain language of HRS § 183C(2) or HAR § 13-5-2 requires that
the soil or other material placed on Conservation District land
originate from Conservation District land as well.”
ICA Op. at
*6.
Therefore, the ICA correctly determined that the BLNR
had jurisdiction, pursuant to HRS § 183C-3(7), to institute a
proceeding to “enforce land use regulations on conservation
district lands” in a case “involving the alleged damages to State
land(s) and natural resources due to excessive sedimentation at
Pila#a.”
HRS § 183C-3(7).
B.
Pila#a 400 contends that HRS § 183C-3 requires the BLNR
and the DLNR to engage in rule-making to adopt a standardized
methodology for the valuation of damages to natural resources.
Pila#a 400 contends that because the BLNR adopted a new
methodology to determine value, this methodology constitutes a
“rule” within the meaning of HRS § 91-1(4) (1993).
Although HRS § 183C-3 authorizes the BLNR and the DLNR
to adopt rules in accordance with Chapter 91, neither HRS § 183C3(3) nor HRS § 91-3 required the BLNR or the DLNR to engage in
rule-making.
As noted above, HRS § 183C-3 grants the BLNR and
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the DLNR the authority to “adopt rules” and “establish and
enforce land use regulations on conservation district lands.24
HRS § 183C-3(5),(7).
The legislature also granted the BLNR authority to
adjudicate on a case-to-case basis.
Under HRS § 183C-7, if the
BLNR finds misuse of conservation district land, the BLNR can
impose fines, set forth by the statute, or damages, not limited
by statute.25
Thus, HRS § 183C-3 contains only a general mandate that
the BLNR and the DLNR adopt rules regarding the regulation of
conservation district lands.26 The BLNR complied with this
mandate through the promulgation of HAR chapter 13-5.
There is
24
In the context of an agency, a rule is a “statement of general or
particular applicability and future effect that implements, interprets, or
prescribes law or policy or describes the organization, procedure or practice
requirements of any agency.” HRS § 91-1(4).
25
At the time of the November 26, 2001 mudslide, HRS § 183C-7
provided that:
Any person violating this chapter or any rule adopted in
accordance with this chapter shall be fined not more than
$2,000 in addition to administrative costs and damages to
state land.
HRS § 183C-7(b)(2001).
26
Pila#a 400’s reliance on Aluli v. Lewin, 73 Haw. 56, 828 P.2d 802
(1992), is therefore misplaced. In Aluli, this court held that the Department
of Health (DOH) erred in issuing air pollution permits when the agency had not
promulgated rules governing the issuance of such permits. Id. at 61, 828 P.2d
at 805. The decision was based on the provision of HRS § 342B-32 (Supp.
1991), which mandated that “‘[t]he director shall refuse to issue the permit
unless it . . . would be in compliance with the rules of the department and
the state ambient air quality standards.’” Id. at 57-58, 828 P.2d at 803
(quoting HRS § 342B-32). The Aluli court concluded that the DOH could not
issue a permit where the statute only authorizes the issuance of a permit in
accordance with rules, and the rules had yet to be propagated. Id. at 61, 828
P.2d at 805.
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no statutory requirement to enact rules regarding the valuation
of damage to reef or valuable marine resources.
Neither were the circumstances under which the BLNR
valued the damage to Pila#a Bay and reef circumstances that were
appropriate for rule-making.
The U.S. Supreme Court has
recognized the need for government agencies to proceed at times
by general rule and at other times by case-by-case adjudication.
In Securities & Exchanges Commission v. Chenery Corp., 332 U.S.
194 (1947), the Court reviewed a decision by the Securities and
Exchange Commission (SEC) that rejected amendments to a
registered corporation’s reorganization plan.
at 199.
Chenery, 332 U.S.
The registered corporation argued that without an
express standard prohibiting the amendments, the SEC could only
“outlaw such profits in future utility organizations; but such a
rule would have to be prospective in nature and have no
retroactive effect upon the instant situation.”
(emphasis added).
Id. at 199-200
The Court disagreed, holding that agencies are
permitted to adjudicate without resorting to rule-making in
appropriate situations:
Not every principle essential to the effective
administration of a statute can or should be cast
immediately into the mold of a general rule. Some
principles must await their own development, while others
must be adjusted to meet particular, unforeseeable
situations. In performing its important functions in these
respects, therefore, an administrative agency must be
equipped to act either by general rule or by individual
order. To insist upon one form of action to the exclusion
of the other is to exalt form over necessity.
Id. at 202 (emphasis added).
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This court has held that rule-making is inappropriate
where an agency lacks experience with a particular problem.
[P]roblems may arise in a case which the administrative
agency could not reasonably foresee, problems which must be
resolved despite the absence of a relevant general rule. Or
the agency may not have had sufficient experience with a
particular problem to warrant rigidifying its tentative
judgment into a hard and fast rule. Or the problem may be so
specialized and varying in nature as to be impossible of
capture within the boundaries of a general rule. In those
situations, the agency must retain the power to deal with
the problems on a case-to-case basis if the administrative
process is to be effective. There is thus a very definite
place for the case-by-case evolution of statutory standards.
Application of Hawaiian Elec. Co., 81 Hawai#i 459, 468, 918 P.2d
561, 570 (1996)(hereinafter In re HECO) (emphasis added) (quoting
Chenery, 332 U.S. at 202-03), accord In re Water Use Permit
Applications, 94 Hawai#i 97, 170, 9 P.3d 409, 482 (2000) (also
quoting Chenery, 332 U.S. at 203); see also NLRB v. Bell
Aerospace Co., 416 U.S. 267, 294 (1974) (agency judgment to
adjudicate on a case-by-case basis rather than create rules is
entitled to great weight where a “generalized standard would have
. . . marginal utility.”).
This court has also acknowledged a distinction between
the circumstances appropriate for rule-making versus adjudication
duties of an agency.
In the most general terms, the purpose of
rule-making is to govern the future conduct of groups and
individuals, not determining damages resulting from past conduct.
Rule-making is an agency action governing the future conduct
either of groups of persons or of a single individual; it is
essentially legislative in nature, not only because it
operates in the future but also because it is concerned
largely with considerations of policy. In rule-making,
disciplinary or accusatory elements are absent.
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In re HECO, 81 Hawai#i at 466, 918 P.2d at 568 (emphasis added)
(quoting Note, “Rule Making,” “Adjudication” and Exemptions Under
the Administrative Procedure Act, 95 U. Pa. L. Rev. 621 (194647)).
See also Coney v. Lihue Plantation Co., 39 Haw. 129, 138-
39 (1951) (holding that in a determination of damages, the finder
of fact has a right and a duty to draw reasonable and probable
inferences from the facts and circumstances in evidence, and in
reference to the amount of damages, “the law never insists upon a
higher degree of certainty as to the amount of damages than the
nature of the case admits, and that where . . . the fact of
damage is established, a more liberal rule is allowed in
determining the amount.”)
Setting a general standard in this situation would be
impracticable to define by general rule because the November 26,
2001 mudflow and damage to the reef was an “unforeseeable
situation” and “so specialized and varying in nature so as to be
impossible of capture within the boundaries of a general rule.”
Chenery, 332 U.S. at 202;
P.2d at 570.
In re HECO, 81 Hawai#i at 468, 918
Conservation district lands are unique in that they
“contain important natural resources essential to the
preservation of the State’s fragile natural ecosystems . . . . ”
HRS § 183C-1 (2011).
The DLNR is tasked with the duty of
“conserving, protecting, and preserving the important natural and
cultural resources of the State.”
HAR § 13-5-1. The elements of
fragile ecosystems, cultural resources and natural beauty combine
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to make an assessment of damage to State land in one conservation
district inapplicable in other conservation districts.
As the
ICA concluded:
Assessing damage to Conservation District lands, which
“contain important natural resources essential to the
preservation of the State’s fragile natural ecosystems and
the sustainability of the State’s water supply[,]” HRS §
183C–1 (2011), is a complex undertaking involving numerous
and variable components, often unique to a particular
situation. . . . Devising and imposing a single formulaic
methodology for assessing penalties would be impracticable.
ICA Op. at *10 (Emphases added).
Therefore, the BLNR was not
required to engage in rule-making to adopt a standardized
methodology for valuation of damages to conservation lands before
making a valuation of damage to land in the Conservation District
resulting from excessive sedimentation.
Pila#a 400 relies on Hawai#i Prince Hotel Waikiki Corp.
v. City and County Of Honolulu, 89 Hawai#i 381, 947 P.2d 21
(1999).
In Hawai#i Prince, a taxpayer appealed the City of
Honolulu’s tax assessment for the taxpayer’s golf course.
Hawai#i at 383, 974 P.2d at 23.
89
The taxpayer objected to the
city appraiser’s methodology for calculating imparted value based
on standards “in his head.”27 Id. at 391, 974 P.2d at 31.
The
court held that the city appraiser’s unwritten methodology led to
inequality in value assessments and “was clearly a ‘rule’ within
the meaning of HRS § 91-1(4)” such that rule-making was required.
Id. at 392-93, 974 P.2d at 32-33.
27
“Imparted value” is the effect of the value of a property on the
surrounding land, and is deducted from assessed value, reducing tax liability.
Hawai#i Prince, 89 Hawai#i at 386, 389-91, 974 P.2d at 26, 29-31.
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The calculation of imparted value in Hawai#i Prince
significantly differs from the calculation of damages in the
In Hawai#i Prince, the city appraiser routinely
present case.
calculated imparted value.
974 P.2d at 32.
See Hawai#i Prince, 89 Hawai#i at 391,
Consequently, the appraiser’s future use of the
imparted value methodology was clearly foreseeable.
Here, as
noted above, there is no routine assessment of an unforeseeable
event involving “numerous and variable components” resulting in
extensive environmental damage to an irreplaceable resource like
Pila#a’s Bay and reef.
Second, in Hawai#i Prince, the city appraiser used an
unwritten methodology in which he personally weighed multiple
factors that could predictably increase the value of property
surrounding a golf course.
Id. at 392-93, 974 P.2d at 32-33.
In
contrast, the BLNR’s calculation of damages was not the result of
an unwritten methodology dependent on the discretion of a single
individual.
Instead, the BLNR’s determination of damages was
based on the expert testimony of scientists and economists
presented by both Pila#a 400 and the DLNR.
The testimony of
these experts was supported by no less than six scientific
studies – four entered into evidence by the DLNR and two entered
into evidence by Pila#a 400 – that examined the unique and
irreplaceable value of Pila>a Bay and reef.
Finally, Pila#a 400’s reliance on Hawai#i Prince is
misplaced because assessment of the imparted value of a golf
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course cannot be compared to a unique resource like Pila#a reef.
“Natural beauty, the value of nature, is necessarily intrinsic.
It is not susceptible to valuation based on price in the
marketplace.
The value of Hawai#i’s forests is not the market
value of its board feet.
The value of Hawai#i’s coral reefs is
different than the value of its harvest.”
ICA Op. at *18
(Wilson, J., concurring).28
C.
On October 3, 2003, the BLNR published the Contested
Case Hearing Notice, in which it specifically stated:
The Board of Land and Natural Resources (BLNR), State of
Hawaii will conduct a contested case hearing on DLNR File
No. KA-04-02 regarding an enforcement action involving the
alleged damage to State land(s) and natural resources due to
excessive sedimentation at Pila#a, District of Hanalei,
Island of Kauai, seaward of TMK: 5-1-4:8 (por). The hearing
will be held pursuant to Chapters 91 and 183C Hawaii Revised
Statutes, and Chapters 13-1 and 13-5, Hawaii Administrative
Rules (HAR).
(Emphases added).
Pila#a 400 contends in its Application that the
Contested Case Hearing Notice was not compliant with HRS § 91-
28
We note that Pila#a 400 suggests that the damage award was
arbitrary, without directly arguing this point. However, the BLNR’s damage
assessment was supported by findings and conclusions that resulted from over
13 days of testimony by multiple experts. The BLNR made specific findings as
to the value of the damage. Therefore, the assessment of damages provided for
in the BLNR Order was not arbitrary or capricious.
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9(b) because the notice did not cite to HAR § 13-5-24.29 HRS
§ 91-9 provided, in relevant part, as follows:
(a) In any contested case, the parties shall be afforded an
opportunity for hearing after reasonable notice.
(b) The notice shall include a statement of:
. . . .
(3) The particular sections of the statutes and rules
involved;
(4)
An explicit statement in plain language of the
issues involved and the facts alleged by the agency
in support thereof; provided that if the agency is
unable to state such issues and facts in detail at
the time the notice is served, the initial notice
may be limited to a statement of the issues
involved, and thereafter upon application a bill of
particulars shall be furnished;
HRS § 91-9(1984).
Based on the asserted lack of notice to the particular
sections involved in the contested case hearing, Pila#a 400
further contends that:
Pila#a never received HRS § 91-9 notice that the contested
case sought damages based on alleged land use violations of
“placement or erection of any solid material” on submerged
land or unpermitted marine construction under “HAR § 13-524.”
Thus, Pila#a 400 claims it was unaware that the BLNR sought
damages based on alleged land use violations for placement of
solid material on submerged land and, consequently, its defense
at the contested case hearing “was based on the Notice and Order
that Pila#a 400 engaged in unpermitted ‘grading, grubbing,
cutting, and culvert construction’” within the conservation
The ICA also stated in its opinion that Pila #a 400 “failed to
preserve this challenge to [HRS § 91-9] notice,” because Pila#a 400 did not,
in its written supplement to its oral request for a contested case hearing,
state that “it did not know which specific provisions were being relied on.”
ICA Op. at *18. However, the written request was filed on August 29, 2003,
prior to the Contested Case Hearing Notice, issued on October 3, 2013.
29
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district.
Pila#a 400’s argument that it was unaware of the
general issues to be determined at the contested case hearing is
patently flawed, both procedurally and substantively.
It is
procedurally flawed because Pila#a 400 has repeatedly waived this
issue.
The circuit court specifically found that “[Pila#a 400]
was aware of the general issues,” and “[d]ue process is satisfied
if the parties are sufficiently apprised of the nature of the
proceeding. . . .
[Pila#a 400] received such notice.”
These
findings and conclusions were unchallenged on appeal.
Pila#a 400 made a similar argument before the ICA that
it was uninformed as to the issues that would be presented at the
contested case hearing.
The ICA held that Pila#a 400 did not
appeal the circuit court’s findings to the ICA.
*2, n.10.
See ICA Op. at
Additionally, the ICA reviewed the record and found
that “it is clear . . . that [Pila#a 400] was ‘aware of the
general issues’ and ‘sufficiently apprised of the nature of the
proceeding,’ as the circuit court concluded, well before the
contested case hearing.”
ICA Op. at 19.
In its application to
this court, Pila#a 400 did not contend that the ICA gravely erred
with respect to these findings.
As Pila#a 400 does not directly challenge these
findings in its Application, they are binding on this court.
Amfac, Inc. v. Waikiki Beachcomber Inv. Co., 74 Hawai#i 85, 125,
839 P.2d 10, 31 (1992) (citing Hawai#i Rules of Appellate
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Procedure Rule 28(b)(4)(C) (holding that a conclusion of law not
challenged on appeal is binding));
Okada Trucking Co., Ltd. v.
Bd. of Water Supply, 97 Hawai#i 450, 458, 40 P.3d 73, 81 (2002)
(unchallenged findings of fact are binding on the appellate
court).
Therefore, Pila#a 400 has conceded that it was “aware
of the general issues” to be determined at the contested case
hearing and it was “sufficiently apprised of the nature of the
proceeding” such that the BLNR sought damages based on placement
of solid material on submerged land.30 Nonetheless, we consider
Pila#a 400’s awareness of the issues involved in the contested
case hearing only insofar as it relates to Pila#a 400’s claim of
lack of notice to the “particular sections of the statutes and
rules involved” under HRS § 91-9.
i.
As the ICA and the circuit court concluded, it is clear
from the record that prior to the contested case hearing, Pila#a
400 was fully aware of the issues that would be addressed at that
hearing.
From the date of the Second Notice and Order on June
30
The Dissent characterizes this statement as “a patent
misrepresentation of the proceedings in this case[.]” Dissent at 13.
However, Pila#a 400 did not claim it was unaware of the general issues to the
circuit court, nor contest the circuit court’s conclusion in its appeal to the
ICA that Pila#a 400 was generally aware of the nature of the proceedings. In
its Application to this court, Pila#a 400 stated “[t]he ICA’s reference to
[Pila#a 400]’s awareness of the ‘general issues’ . . . suggests superficial
compliance with the HAPA notice statute meets due process protections[.]”
Pila#a 400 therefore contends that despite its general awareness, the notice
was insufficient for due process protections; not that it was unaware of the
general issues. In oral argument, counsel for Pila#a 400 also conceded its
awareness of the general issues. See Section III.C.i.
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20, 2002, Pila#a 400 had notice of the significant damage to the
reef that it was alleged to have caused and its potential
liability.
In the Second Notice and Order, the BLNR discussed
the damage to the bay and reef and informed Pflueger Properties
that: “The matter of unauthorized work at Pila#a Bay will be
presented to the [BLNR] . . . . the landowner should be made
aware of the possibility of the imposition of the requirement to
conduct complete land restoration and long term monitoring.”
The
same language was repeated in the First and Second Implementation
Order, dated August 22, 2002 and November 20, 2002, respectively.
Pila#a 400 was informed of its potential liability
resulting from BLNR’s allegations of damage to the reef and
commissioned multiple expert reports to refute those allegations.
The first study, completed in February 2003, was entitled
“Preliminary Sediment Runoff Analysis for Pflueger Property
Restoration.”
A second study, completed in March 2003, was
entitled “Ecology of the Reef Ecosystem of Pila#a, Kauai and
Analysis of Alleged Environmental Impacts Associated with Recent
Sediment Run-Off.”
It is clear that leading up to the Public Meeting,
DLNR’s allegations regarding the extensive damage to the reef
caused by sedimentation and Pila#a 400’s potential liability was
to be a central, if not the primary, issue at the Public Meeting.
At the August 22 Public Meeting, the DLNR submitted the Staff
Report, entitled, in part, “Damages to State Land and Natural
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Resources due to Excessive Sedimentation at Pila#a . . .
.”
The
contents of the Staff Report included a detailed analysis of the
damage to the marine environment, considered the long-term
remediation of the reef, and suggested fines for violations and
assessments for administrative costs.
The Staff Report also
recommended a significant $5,830,000 assessment for “damage[s] to
state land and natural resources stemming from the unauthorized
land uses.”
Indisputably, the proposed financial assessment
would have informed Pila#a 400 of its potential liability on the
issue of the significant damage to the reef.
In the Written Hearing Request, Pila#a 400 acknowledged
that the issue to be determined by the contested case hearing
directly concerned damage to the reef caused by sedimentation
from the November 26, 2001 mudflow.
The request stated: “The
matter being considered by the [BLNR] concerns alleged damage to
the reef flat and near-shore marine environment stemming from
grading activities in the conservative [sic] district which
allegedly resulted in discharges of sediment . . . .”
(Emphasis
added).
This characterization was echoed by the DLNR in its
Statement of the Issues of the contested case hearing: “The only
issue in this contested case proceeding is the determination of
the amount of damages to be assessed against the Pflueger Parties
for damages to the beach, reef, and marine environment . . .
which were largely the result of excessive sediment.”
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In its Responsive Statement of the Issues, Pila#a 400
again made it clear it understood the central issues to be
determined at the hearing were issues involving the damage to the
reef caused by excessive sedimentation.
In it, Pila#a 400
contested the damage to Pila#a Bay and reef, the sources and
historic patterns of sedimentation into Pila#a Bay, the causation
as to the alleged damage to the bay and reef, the scope and
extent of the alleged damage, and the amount of alleged damage
that was directly caused by Pila#a 400, as opposed to other
factors.
Based on the record, it is manifest that prior to the
contested case hearing Pila#a 400 was fully apprised that the
issues to be determined at the contested case hearing were the
nature of damages to the reef at Pila#a Bay, the extent of those
damages caused by mudflows resulting from Pila#a 400’s
unauthorized work, and the amount of the damage assessment.
During the 13-day hearing, both sides presented expert and
kama#aina testimony and exhibits regarding the impact of the mud
and sediment on the bay, reef, flora and fauna, and human
activities, as well as the potential economic value of that
impact.
In oral argument, the question of knowledge and notice
was addressed by counsel for Pila#a 400.
In response to a
question as to whether Pila#a 400 had filed a bill of
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particulars,31 counsel conceded that it had not and then stated
“[e]verybody knew this was about mud going on the beach and into
the nearshore reef.”32
(Emphasis added).
It is unequivocal that
Pila#a 400 was fully informed that the core issue to be
determined at the contested case hearing was the damage to the
reef caused by sedimentation.
ii.
The Contested Case Hearing Notice did not fail to
provide notice, under HRS § 91-9(b)(3), for lack of a citation to
HAR § 13-5-24.
The notice specifically informed Pila#a 400 that
(1) the BLNR would conduct a contested case hearing (2) regarding
an enforcement action involving the alleged damage to State
land(s) and natural resources (3) due to excessive sedimentation
at Pila#a Bay, (4) seaward of the Property, and (5) the hearing
would be held pursuant to HRS Chapters 91 and 183C and HAR
Chapters 13-1 and 13-5.33
31
The Contested Case Notice satisfied the
HRS § 91-9(b)(4) (1984) prescribes:
An explicit statement in plain language of the issues
involved and the facts alleged by the agency in support
thereof; provided that [I]f the agency is unable to state []
issues and facts in detail at the time the notice is served,
the initial notice may be limited to a statement of the
issues involved, and thereafter upon application a bill of
particulars shall be furnished.
(Emphasis added).
32
Oral Argument, Hawai#i Supreme Court, at 19:25 (Jun. 25, 2013)
available at http://www.courts.state.hi.us/ courts/oral_arguments/
archive/oasc28358.html.
33
The Dissent contends that the notice is “broad” and “vague,”
because the notice states the action would be “pursuant to all of the chapters
. . . regarding conservation district lands.” Dissent at 16. Chapter 13-5 is
(continued...)
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requirements of HRS § 91-9(b) for the following reasons.
First, HRS § 91-9(b)(3) provides that a contested case
hearing notice “shall include a statement of [t]he particular
sections of the statutes and rules involved[.]”
added).
(Emphases
The word “involved” has a broad and inclusive
definition, meaning “affected” or “implicated.”
New Int’l Dictionary 1191 (1993).
Webster’s Third
HRS § 91-9(b)(3) enumerates
the plural form of the words “sections,” “statutes,” and “rules”
with the word “involved,” indicating that a contested case
hearing notice may include references to multiple statutes and
rules implicated in or affected by the contested case hearing.
Of the forty-five individual sections that comprise HAR
Chapter 13-5, approximately twenty-three sections may fairly be
said to have been “involved” in the contested case hearing.34
HRS
§ 91-9 does not preclude the citation of an entire chapter when
many sections within a single chapter are “involved” in a given
matter, or indicate a specific format to use in referencing
33
(...continued)
the only chapter in HAR Title 13 regarding conservation lands, and 183C is the
only chapter in HRS regarding conservation lands.
34
The subject matter of these provisions was referenced either
directly or indirectly in the BLNR’s uncontested Findings of Facts (FOF) and
Conclusions of Law (COL). “Involved” sections include: HAR § 13-5-1 (general
purpose for regulating land use in the conservation district), §§ 2, 10, 12,
13 (defining terms); §§ 11, 14, 15 (defining subzones); § 6 (penalties
provided by HRS § 183C); § 16 (application for new subzone, rezone existing
subzone, or change subzone boundary or uses); § 17 (permit requirements); §§
22-25 (permit requirements and land uses in the General, Protected, Limited
and Resource subzones); §§ 30,33-35 (prohibiting unpermitted land use); § 38
(review and approval of site plans); § 39 (submission and approval of plans);
§ 40 (public hearings); and § 42 (provides that any land use permitted within
conservation district is subject to standard conditions).
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sections of the statutes or rules involved.
Significantly,
Pila#a 400’s argument is not that multiple sections in HAR § 13-5
were not “involved” in the contested case hearing; Pila#a 400’s
argument is instead that it was not given adequate notice of HAR
§ 13-5-24 because this section was not individually cited in the
BLNR’s published notice.
Under the circumstances of this case, a
citation to every section of HAR chapter 13-5 would have been
largely redundant, as the majority of the sections comprising the
chapter may be said to have been “involved” in the contested case
hearing.
Second, the BLNR did not base their findings on a
“violation” of HAR § 13-5-24 or on “marine construction,” as
Pila#a 400 maintains.35
The BLNR Order states: “The violation
was the placement of any solid material on land in the form of
dumping or allowing to be put on conservation land (including
submerged land) of a large unknown amount of dirt and sediment.”
The BLNR did not adopt the proposed finding of the DLNR and did
not define the mudflow as an unpermitted marine construction.
Nevertheless, Pila#a 400 seizes on the BLNR’s
conclusion that the placement of solid material on conservation
land was done “without a permit as required by HAR §§ 13-5-24 and
13-5-30(b),” to claim that it lacked notice of an alleged
violation for “unpermitted marine construction.”
However, HAR
§ 13-5-24 and 13-5-30(b) are provisions that prohibit land use in
35
The Dissent makes a similar error.
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Dissent at 3, 7, 12, 20, 22.
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the conservation district without a permit.
The placement of
solid material on the land constitutes a “land use” under HAR
§ 13-5-2.
Therefore, the BLNR’s reference to “without a permit”
was merely a way of stating that the November 26, 2001 mudflow
and subsequent sedimentation were land uses that were completely
unauthorized.
The BLNR did not identify the type of permit that
Pila#a 400 failed to obtain because there was no dispute that
Pila#a 400 did not have any permits for the mudflow.
Pila#a 400
has not challenged the BLNR’s finding that “Pila#a 400 did not
have any permit from the DLNR or the BLNR authorizing or allowing
it to discharge mud onto, build on, grade, fill, or in any way
use, alter, or affect land (including submerged land) in the
conservation district.”
(Emphasis added).
Furthermore, Pila#a
400 has not challenged the BLNR’s finding that “[n]o discharges
into the ocean were authorized by state or federal law.”
Consequently, no permit could have been obtained to allow the
excessive sediment to flow onto conservation lands.
Third, despite Pila#a 400’s contention, the Contested
Case Hearing Notice provides an implicit reference to § 13-5-24
because “excessive sedimentation” could only be a reference to
that section.
“Sedimentation” is the deposition or accumulation
of sediment.36 “Sediment” is the matter that settles to the
36
Sedimentation Definition, Dictionary.com,
http://dictionary.reference.com/sedimentation (last visited Jan. 13, 2014).
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bottom of a liquid, or mineral or organic matter deposited by
water.37
Therefore, sedimentation in its ordinary and common
meaning means the deposit or accumulation of solid material in
water.
In conjunction with the statement that the sedimentation
was “seaward,” the Contested Case Hearing Notice provides notice
that the “particular sections of the statutes and rules involved”
the filling or placement of solid material in the ocean within
Chapter 13-5.
There is only one section of HAR, Chapter 13-5, that
involves filling or placement of solid material in the ocean.
HAR § 13-5-24 addresses “dredging, filling, or construction on
submerged lands. . . .”
Placing solid material, or filling, on
submerged lands is not referred to in any other section of HAR
Chapter 13-5, and thus there was no other section to which
“excessive sedimentation” could have referred to.
Therefore, the
reference to “excessive sedimentation” together with the citation
to HAR § 13-5 was a “statement of . . . the particular sections
of . . . the rules involved.”
Fourth, this court and the ICA have found that in
determining the adequacy of notice of a contested case hearing,
the record of communications between the agency and the
interested person must be considered.
In Chang v. Planning
Commission of the County of Maui, 64 Haw. 431, 643 P.2d 55
(1982), the appellant argued that his constitutional right to due
37
Sediment Definition, Dictionary.com,
http://dictionary.reference.com/sediment (last visited Jan. 13, 2014).
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process was violated because the commission’s published notice
failed to comply with the requirements of HRS § 91-9(b)(5) and
inform him that any party could be represented by counsel at the
hearing.
Id. at 447-48, 643 P.2d at 58-59.
The Chang court found that the appellant had
“subsequently received ample notice of his right to
representation both informally and by notice sent by [the permit
applicant] in full compliance with the statute and rules” that
included the omitted information.
Id. at 454, 643 P.2d at 62.38
This court rejected the appellant’s due process claim because the
appellant was able to fully participate in the hearing.
454, 643 P.2d at 62.
Id. at
Thus, this court’s focus was whether notice
had actually been provided, which could be determined by looking
to other communications between the parties.
See also Munoz v.
Chandler, 98 Hawai#i 80, 94, 42 P.3d 657, 671 (App. 2002)
(rejecting a claim of insufficient notice of right to counsel at
a contested case hearing because the record reflected that
agency’s “various written notices” to the appellants “properly
informed them of their right to obtain legal representation”).
Therefore, the proceedings in this case demonstrate that adequate
notice had been provided by other communications between the
parties, and due process was afforded through a meaningful
38
Additionally, the court found that the “[a]ppellant’s charge that
his failure to produce witnesses and effectively present his case . . . was
due to his lack of notice . . . thus amounts to little more than an unfounded
attempt inspired by hindsight to attain a second opportunity to block the
permit application.” Id. at 454, 643 P.2d at 62.
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opportunity to be heard.
iii.
Pila#a 400 was not deprived of due process because it
had a meaningful opportunity to present arguments and evidence at
the contested case hearing.
“[D]ue process and HRS § 91-9
requires that parties be given an opportunity to be heard.
This
implies a right to submit evidence and argument on the issues.”
See Application of Haw. Elec. Light Co., 67 Haw. 425, 430, 690
P.2d 274, 278 (1984)[hereinafter HELCO]; see also Sandy Beach
Def. Fund v. City Council of City & Cnty. of Honolulu, 70 Haw.
361, 378, 773 P.2d 250, 261 (1989) (citing Matthews v. Eldridge,
424 U.S. 319, 333 (1976) (“The basic elements of procedural due
process of law require notice and an opportunity to be heard at a
meaningful time and in a meaningful manner before governmental
deprivation of a significant property interest.”).
In HELCO, the
issue concerned whether a public utility had been denied due
process when the Public Utility Commission (PUC) based its final
conclusion on grounds that had neither been presented to the PUC
by either side in a contested case hearing, nor stated in the
§ 91-9(b) notice.
This court concluded that the public utility
had received due process because it had a meaningful opportunity
to present evidence and arguments to the deciding body.
HELCO,
67 Haw. at 430-431, 690 P.2d at 278-279.
Therefore, as in HELCO, Pila#a 400 was able to
participate meaningfully in the contested case hearing, and was
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fully able to protect their rights and interests.
Pila#a 400
presented extensive evidence addressing “the placement of or
erection of any solid material on submerged land” at the
contested case hearing.
Pila#a 400 called four expert witnesses
and each testified, at least in part, on the issues of excessive
sedimentation and its effects on the impact area.39
Pila#a 400
submitted two scientific studies - a total of 426 pages of data,
pictures, and analysis pertaining to sedimentation and its
effects, including the Wallrabenstien and the Grigg Study, noted
above.
In addition, Pila#a 400 presented multiple lay witnesses
as to the condition of the reef and the witnesses’ fishing and
beach activities in the bay.
These reports and testimony, put forth by Pila#a 400,
clearly address the issue of whether the November 26, 2001
mudflow was the cause of damage to Pila#a Bay and reef or could
be attributed to natural conditions and the extent of the damage.
Pila#a 400 presented extensive evidence and argued that the
sediment flow was an act of nature for which it could not be held
liable.
39
Pila#a 400's expert witnesses specialized in the following fields:
civil engineering (Paul Wallrabenstein), geochemistry (Eric De Carlo), and
coral reef ecology and coastal oceanography (Richard Grigg and Steven Dollar).
The experts testified regarding the cause and effect of the November 2001
mudflow. For example, Grigg testified that it was his understanding that he
was “asked to study the reef at Pila#a and to determine whether or not there
had been impact caused by a sediment runoff event or a mudflow back in
November 2001.” Dollar testified that the harsh environment of Pila#a Bay
naturally inhibits coral growth and that “sediment is only one factor in this
harshness.” He further testified that “without sediment input, the conditions
of the reef would not change . . . .”
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Similarly, in Chang, this court rejected the
appellant’s due process claim despite finding that the published
notice failed to technically comply with all of the statutory
notice requirements.
This court found that the appellant had
subsequently received ample notice of his rights.
Id. at 454,
643 P.2d at 62; see also Sandy Beach Def. Fund, 70 Haw. at 378,
773 P.2d at 261 (citing Morrissey v. Brewer, 408 U.S. 471, 481
(1972) (“[D]ue process is flexible and calls for such procedural
protections as the particular situation demands.”)
Furthermore
the court determined that the appellant’s ability to participate
in the contested case hearing had not been compromised.
Id. at
453-55, 643 P.2d at 62-63.
Thus, it is not accurate to argue, as does the Dissent,
that Pila#a 400 was unable “to prepare or present a meaningful
and adequate defense to this violation during the contested case
hearing[,]” or that “Pila#a 400 received no notice that” “the
BLNR order[] . . . to pay more than 4 million dollars” “for the
damages to Pila#a Bay could or would stem from” “the unauthorized
deposit of sediment onto submerged land” “prior to the close of
the contest case hearing.”
Dissent at 22-23.
In fact, Pila#a
400 presented arguments on precisely those grounds.
iv.
The record in this case incontrovertibly demonstrates
that Pila#a 400 was fully apprised of all relevant issues that
were to be determined in the contested case hearing.
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was able to present a complete and vigorous defense to the
charges that excessive sedimentation as a result of unauthorized
work on the Property caused damage to Pila#a Bay and reef for
which DLNR staff had proposed an assessment of $5,830,000.
Pila#a 400 cannot complain of faulty notice under HRS § 91-9(b)
because the Contested Case Hearing Notice provided reasonable
notice in the form of an explicit statement in plain language of
the issues involved (“everyone knew this was about mud going on
the beach and into the nearshore reef”); by reference to HRS
Chapter 183C and HAR Chapter 13-5; and by reference to “excessive
sedimentation.”
Lastly, Pila#a 400 had a meaningful opportunity
to be heard and to contest the BLNR’s ultimate decision that the
“violation was placement of any solid material on land” without a
permit.
Accordingly, the Contested Case Hearing Notice satisfied
the requirements of due process and HRS § 91-9(b).
v.
The Dissent appears to agree that Pila#a 400 was on
notice that the contested case hearing would concern alleged
damages due to excessive sedimentation at Pila#a.
Dissent at 7.
However, the Dissent asserts that “[w]hile the [BLNR’s] notice
indicates that the alleged damages were ‘due to excessive
sedimentation at Pila#a,’ this is not evidence that Pila#a 400 was
on notice that the alleged violation was ‘excessive
sedimentation.’”
Id. at 8 (emphasis in original).
If Pila#a 400
was aware that damages would be assessed based on excessive
sedimentation, then Pila#a 400 would also be aware that the
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alleged violation, on which damages are assessed, was the
excessive sedimentation.
There is no substantive distinction
between being aware of the alleged basis for damages and the
alleged violation, where damages can only be imposed based on a
violation.
The cases cited by the Pila#a 400 and the Dissent are
not analogous.
The Dissent cites Silver v. Castle Memorial
Hospital, 53 Haw. 475, 497 P.2d 564 (1972) for its argument that
“in order to assure procedural due process during an
administrative hearing, a party ‘must have been apprised of the
particulars of the specific claims against him prior to the
hearing.’”
Dissent at 14 (quoting Silver, 53 Haw. at 486, 497
P.2d at 572).
Silver was decided based on facts that are widely
divergent from the facts of this case, and did not involve an
interpretation of HRS § 91-9.
The Silver court held that a private hospital was
required to afford procedural due process to a licensed doctor
before deciding to deny the doctor staff privileges.
Haw. at 479, 497 P.2d at 568.
Silver, 53
The hospital board based its
decision on an investigation into the doctor’s performance.
at 476, 497 P.2d at 566.
Id.
However, the doctor was not informed of
the allegations against him until he was granted a hearing, which
took place after his staff privileges had already been revoked.
Id.
It was in this context that the court held the doctor should
have been given timely notice prior to the hearing to enable him
to adequately prepare a defense, as well as a written statement
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of the charges against him.
Id. at 484-85, 497 P.2d at 571-72.
Similarly, Villanueva v. Board of Psychologist
Examiners, 27 P.3d 1100 (Or. Ct. App. 2001), is also factually
distinguishable because Pila#a 400 was fully of aware of the
issues facing it.
Villanueva involved a situation where the
Board of Psychologist Examiners reprimanded and fined the
petitioner for treating a minor child without the custodial
parent’s consent.
Id. at 1100.
The board “essentially imposed a
strict liability standard” based on a violation of one ethical
principle, although the notice of proposed disciplinary action
alleged that the petitioner had violated six other ethical
principles.
Id.
Moreover, “despite petitioner’s repeated
requests for clarification, the Board did not notify petitioner
until after the contested hearing had begun of the rule that he
allegedly violated.”
Id. at 1105 (footnote omitted).
In this
context, the court held that the notice was non-compliant.
Id.
at 1107.
In Hendricks v. Arizona Department of Economic
Security, 270 P.3d 874 (Ariz. Ct. App. 2012), the appellant
challenged a decision finding her liable for overpayment of cash
assistance benefits, on the basis that the department notified
her that the alleged overpayment was based on the improper
issuance of food stamps rather than cash assistance benefits.
Id. at 874-75.
The appellant was informed only when she appeared
for the hearing that the notice she had been sent regarding food
stamps was a “misprint” and the overpayment was actually for cash
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assistance benefits.
Id. at 875.
Despite appellant’s statement
that she was “unaware of the actual problem” and did not “know
the facts for [her] to have brought witnesses,” the department
proceeded with the hearing.
Id.
It was under these
circumstances that the court held that the notice was defective.
Id. at 877.
In contrast to each of the cases above, Pila#a 400 was
aware of the “actual problem,” and was able to provide witnesses
and evidence at the Contested Case Hearing.
As has been
established, Pila#a 400 was able to provide extensive evidence
and expert and kama#aina testimony at the contested case hearing.
Pila#a 400 was apprised of the particulars of the specific
allegations against it prior to the hearing and presented a
thorough defense on the very issue decided by the BLNR Order.
That is, as Pila#a 400 phrased it, “everyone knew this was about
mud going on the beach and into the nearshore reef.”40
40
Other cases cited by the Dissent are also factually
distinguishable: Matter of Alvarado v. State, 488 N.Y.S.2d 177 (N.Y. App. Div.
1985) (boxer who received a mailgram to appear before the New York State
Athletic Commission was given no notice of the specific charges as required by
the Commission’s own rules and therefore was unable to file an answer or
prepare for hearing); Ex parte Forest Manor, Inc., 739 So.2d 20 (Ala. 1998)
(nursing home applying for certificate of need for new beds from State Health
Planning and Development Agency was not provided opportunity at hearing to
cross-examine witnesses or present rebuttal evidence/argument, and legal
counsel was not present and no notice of such rights was provided as required
by state administrative rules); Liberty Mut. Ins. Co. v. Tenn. Dep’t of Labor
and Workforce Dev., No. M2010-02082-COA-R3-CV, 2012 WL 11739 (Tenn. Ct. App.
Jan. 3, 2012) (where department listed insurance company’s failure to file C20
forms as the basis for penalty assessment when failure to file C21 forms was
actual basis, court held that notice provided to opposing party must be
reasonably calculated under all the circumstances to apprise party of the
claims against it). Dissent at 16-17.
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IV.
For the reasons stated, the Judgment on Appeal, filed
December 21, 2012, of the ICA is affirmed.
Wesley H.H. Ching and
Kathleen M. Douglas
for petitioner
William J. Wynhoff
for respondent Department of
Land and Natural Resources
/s/ Simeon R. Acoba, Jr.
/s/ Sabrina S. McKenna
/s/ Richard W. Pollack
/s/ Rom A. Trader
Diane Erickson and
Russell A. Suzuki
for respondent Board of Land
and Natural Resources
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