Bridge Aina Le‘a, LLC v. Haw. Land Use Comm'n

Decision Date19 February 2020
Docket NumberNos. 18-15738,18-15817,s. 18-15738
Citation950 F.3d 610
Parties BRIDGE AINA LE‘A, LLC, Plaintiff-Appellant/Cross-Appellee, v. State of Hawaii LAND USE COMMISSION; Vladimir P. Devens, in his individual and official capacity ; Kyle Chock, in his individual and official capacity ; Normand Robert Lezy, in his individual and official capacity ; Duane Kanuha, in his official capacity ; Charles Jencks, in his official capacity ; Lisa M. Judge, in her individual and official capacity ; Nicholas W. Teves, Jr., in his individual and official capacity ; Ronald I. Heller, in his individual and official capacity, Defendants-Appellees/Cross-Appellants.
CourtU.S. Court of Appeals — Ninth Circuit

Bruce D. Voss (argued), Matthew C. Shannon, and John D. Ferry III, Bays Lung Rose & Holma, Honolulu, Hawaii, for Plaintiff-Appellant/Cross-Appellee.

Ewan C. Rayner (argued), Deputy Solicitor General; David D. Day, Deputy Attorney General; William J. Wynhoff, Supervising Deputy Attorney General; Clyde J. Wadsworth, Solicitor General; Department of the Attorney General, Honolulu, Hawaii; for Defendants-Appellees/Cross-Appellants.

Before: SUSAN P. GRABER, MILAN D. SMITH, JR., and PAUL J. WATFORD, Circuit Judges.

M. SMITH, Circuit Judge:

This case stems from the reversion of the land use classification of 1,060 acres of largely vacant and barren, rocky lava flow land in South Kohala, on the island of Hawaii. In 2011, Defendant-Appellee and Cross-Appellant the State of Hawaii Land Use Commission (the Commission) ordered the land’s reversion from its conditional urban use classification to its prior agricultural use classification. This reversion followed some twenty-two years during which various landowners made unfulfilled development representations to the Commission to obtain and maintain the land’s urban use classification. Plaintiff-Appellant and Cross-Appellee Bridge Aina Le‘a, LLC (Bridge), one of the landowners at the time of the reversion, challenged the reversion’s legality and constitutionality in a state agency appeal, and in this case.

The cross-appeals here come to us following a final judgment in a jury trial with a verdict for Bridge and the district court’s denial of a post-judgment motion for judgment as a matter of law (JMOL). Although the parties raise several issues, we need decide only two. First, we must decide whether the State1 was entitled to JMOL on Bridge’s claims that the reversion was a regulatory taking in violation of the Fifth Amendment. After an eight-day jury trial, the jury found that the reversion was such a taking. The State urges us to reverse on the ground that Bridge’s evidence did not establish a taking. Second, we must decide whether the Hawaii Supreme Court’s adjudication of Bridge’s equal protection challenge in the state agency appeal barred the same issue Bridge alleged here. See DW Aina Le‘a Dev., LLC v. Bridge Aina Le‘a, LLC, 134 Hawai'i 187, 339 P.3d 685 (2014). Bridge contends that the Hawaii Supreme Court neither decided the same equal protection issue Bridge raised in this lawsuit, nor issued a final judgment on the merits in which Bridge had a full and fair opportunity to litigate the issue.

We reverse the denial of the State’s renewed JMOL motion because, as a matter of law, the evidence did not establish an unconstitutional regulatory taking. We vacate the judgment and remand. We affirm the district court’s dismissal of Bridge’s equal protection claim.

I. The Reclassification History of the 1,060 Acres
A. The Conditional Urban Reclassification

For over forty years before the reclassification, the 1,060 acres at issue were vacant and part of a larger 3,000 acre-parcel zoned for agricultural use. This classification generally restricted the landowner to certain statutorily specified uses. See Haw. Rev. Stat. § 205-2(d)(1)(16) (setting forth the general uses for agricultural land); see also id . § 205-4.5 (elaborating on permissible uses of agricultural land depending on soil ratings). The landowner also could petition to obtain a permit for "certain unusual and reasonable uses." Id. § 205-6(a).

In 1987, non-party Signal Puako Corporation (Signal), the then-landowner, decided that it would seek to develop a mixed residential community on the 1,060 acres as the first phase of a development project on the entire 3,000 acres. To do so, Signal petitioned the Commission to reclassify 1,060 acres as urban pursuant to Hawaii’s land use reclassification procedure. See Haw. Rev. Stat. § 205-4(a). If the land were zoned for urban use, Signal could pursue "activities or uses as provided by ordinances or regulations of the county within which the urban district is situated." Id. § 205-2(b).

The Commission approved the petition in a January 1989 order (the 1989 Order). In doing so, the Commission exercised its authority to "modify the petition by imposing conditions necessary ... to assure substantial compliance with representations made by the petitioner in seeking a boundary change." Id . § 205-4(g). In relevant part, Condition One required Signal to make 60% of the proposed 2,760 residential units affordable, for a total of 1,656 affordable housing units. Condition Nine required Signal to develop the land in substantial compliance with representations made to obtain reclassification. The 1989 Order did not specify any deadlines, nor did the order specify any penalties for noncompliance. Nevertheless, the conditions the Commission imposed ran with the title to the land. Id .

At some point, non-party Puako Hawaii Properties (Puako), an entity in which Signal was a partner, took title to the 3,000 acres. Puako proposed a mixed residential community which would have fewer total housing units than Signal’s proposal and for which construction would end by 1999. Puako therefore petitioned to modify the 1989 Order.

The Commission approved Puako’s petition in a July 1991 order (the 1991 Order) with conditions. Like the 1989 Order, the 1991 Order required Puako to make 60% of the residential units affordable housing. But the 1991 Order reduced the required affordable housing units to 1,000 units given the reduction to the proposed development’s total number of units. The 1991 Order again imposed a condition requiring Puako to develop the land in substantial compliance with its representations. This time, the Commission specified that "[f]ailure to so develop the Property may result in reversion of the Property to its former classification or change to a more appropriate classification."2

Notwithstanding Puako’s representations, the 1,060 acres remained undeveloped by 1999. Bridge acquired the entire 3,000 acres at this time—inclusive of the 1,060 acres of conditionally reclassified urban land—for $5.2 million plus closing costs under its then-name Bridge Puako, LLC.

B. The Post-Acquisition Amendments to the Conditions

In September 2005, nearly six years after acquiring the land, Bridge moved to amend the 1991 Order in part. Like the prior landowners, Bridge proposed a mixed residential community. Bridge, however, argued that the cost of complying with the 1991 Order’s affordable housing condition was too high. According to Bridge, it would be economically infeasible to develop the property without a lower level of required affordable housing units. Bridge contended that an appropriate benchmark would be the 20% level set by a then-recent County of Hawaii affordable housing ordinance.

The Commission amended the affordable housing condition in a November 2005 order (the 2005 Order). Condition One set the affordable housing unit requirement at 20%, requiring Bridge to build a minimum of 385 units. For the first time, the Commission set a deadline for the condition. Specifically, Bridge had to provide occupancy certificates for all affordable housing units by November 17, 2010. The Commission affirmed all other conditions of the 1989 Order, as amended by the 1991 Order.

Throughout 2006 and 2007, Bridge appeared before the Commission to assure the Commission of its compliance with the conditions, including through the apparent construction of wells, roads, and other infrastructure. According to Bridge, however, further progress "was hampered somewhat" by the requirement that Bridge prepare an environmental impact statement for the project in accordance with Sierra Club v. Department of Transportation, 115 Hawai'i 299, 167 P.3d 292 (2007).

C. The Order to Show Cause (OSC)

As early as September 2008, several commissioners expressed concerns that Bridge’s status reports "showed ‘no activity’ with respect to the conditions imposed by the 1991 decision and order, as amended in 2005." DW Aina Le‘a Dev ., 339 P.3d at 693. In December 2008, the Commission ordered Bridge to show cause why the land should not revert to its prior agricultural use classification. The Commission explained that it had reason to believe that Bridge and its predecessors had failed to satisfy multiple reclassification conditions and had not fulfilled various representations.

The Commission held the first OSC hearing in January 2009. Notwithstanding the potential impact ongoing OSC proceedings might have on the use of the land, Bridge agreed to sell the 1,060 acres to non-party DW Aina Le‘a Development, LLC (DW). Pursuant to a February 2009 written agreement, Bridge was to convey the land in three phases in exchange for a total of $40.7 million.3 Bridge and DW would enter into a joint agreement, in which Bridge would develop the nearly 2,000 agricultural use acres remaining in its possession. Bridge would retain the right to plan for the overall 3,000 acres, including the placement of a sewage treatment plant, school, and park on the agricultural land.

On April 30, 2009, the Commission reconvened to discuss the OSC. Bridge represented to the Commission that it was in the process of transferring the 1,060 acres to DW, which would assume the responsibility of constructing...

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