DW Aina Le‘a Dev., LLC v. Hawai'i Land Use Comm'n

• Decision Date: 17 December 2020
• Docket Number: SCCQ-19-0000156
• Citation: 477 P.3d 836
• Parties: DW AINA LE‘A DEVELOPMENT, LLC, Plaintiff-Appellant, v. STATE of Hawai‘i LAND USE COMMISSION; State of Hawai‘i, Defendants-Appellees.
• Court: Hawaii Supreme Court

477 P.3d 836

DW AINA LE‘A DEVELOPMENT, LLC, Plaintiff-Appellant,

v.STATE of Hawai‘i LAND USE COMMISSION; State of Hawai‘i, Defendants-Appellees.

SCCQ-19-0000156

Supreme Court of Hawai‘i.

DECEMBER 17, 2020

OPINION OF THE COURT BY RECKTENWALD, C.J.

I. INTRODUCTION

The United States Court of Appeals for the Ninth Circuit has asked us to determine the statute of limitations for a takings claim brought under the Hawai‘i Constitution. In response, we hold that the statute of limitations for a regulatory taking is six years, pursuant to the catch-all statute of limitations in Hawai‘i Revised Statutes (HRS) § 657-1(4).

II. BACKGROUND

On March 11, 2019, the United States Court of Appeals for the Ninth Circuit certified a question of Hawai‘i law to this court pursuant to HRS § 602-5(a)(2) (Supp. 2016) and Hawai‘i Rules of Appellate Procedure (HRAP) Rule 13, asking us to resolve the following question:

What is the applicable statute of limitations for a claim against the State of Hawai‘i alleging an unlawful taking of "[p]rivate property ... for public use without just compensation," Haw. Const. art. 1, § 20 ?¹

Parties and amicus curiae advocate three different positions on this question: the State of Hawai‘i Land Use Commission and other defendants (collectively LUC) argue that the limitations period is two years;² DW Aina Le‘a Development, LLC (DW) six years;³ and amicus curiae Owners’ Counsel of America (OCA) twenty years.⁴

The following facts are taken from the Ninth Circuit's Order Certifying Question. The underlying dispute arises from the LUC's reclassification of 1,060 acres of land in South Kohala on Hawai‘i Island. The LUC classified this land as "agricultural" until 1989, when it reclassified the land as "urban." In exchange for reclassification to allow for development, the LUC required that a percentage of the residential units constructed be "affordable," along with other conditions. In 2008, believing that the then-landowner, Bridge Aina Le‘a LLC (Bridge), had failed "to perform according to the conditions imposed and to the representations and commitments made to the [LUC] in obtaining reclassification," the LUC issued an order requiring Bridge to show cause why the land should not be reclassified back to agricultural use. In February 2009, Bridge told the LUC that DW had agreed to purchase the property along with the right to develop it for residential use.

Notwithstanding DW's purchase and its representation that it had invested more than $28 million into the development, the LUC voted to reclassify the land as agricultural in April 2009 — finalized in a written order on April 25, 2011. This court eventually vacated that order because the LUC had not complied with HRS § 205-4 (2007) when it reclassified the land. DW Aina Le‘a Dev., LLC v. Bridge Aina Le‘a, LLC, 134 Hawai‘i 187, 213, 339 P.3d 685, 711 (2014). On February 23, 2017, DW filed the complaint currently at issue in the Circuit Court of the First Circuit. DW alleged that the 2011 reclassification was an unconstitutional taking under the federal and state constitutions because the LUC failed to compensate DW for damages resulting from the land's reclassification. Specifically, DW alleged that the LUC's reclassification caused substantial delay in finalizing the purchase, resulting in an increased purchase price of a portion of the land compared to the original contract price. In addition, DW alleged that the reclassification resulted in "interest costs, loss of business opportunities, substantial increases in land acquisition costs, inability to obtain financing as well as damages to its general business name and reputation." The takings claim is styled as an "inverse condemnation" action - an action that allows a landowner to enforce the Takings Clause against the government where a regulatory action eliminates or severely diminishes the land's economic value. Leone v. Cty. of Maui, 141 Hawai‘i 68, 81, 404 P.3d 1257, 1270 (2017) (citing Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1015, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992) ; Palazzolo v. Rhode Island, 533 U.S. 606, 617, 121 S.Ct. 2448, 150 L.Ed.2d 592 (2001) ).

A. Federal Court Proceedings

The LUC removed the case to the United States District Court for the District of Hawai‘i (district court)⁵ and then filed a motion to dismiss, arguing that the statute of limitations on DW's takings claim had expired. The district court agreed, applying the two-year statute of limitations found in HRS § 657-7 (1972).

The district court determined the statute of limitations for the state constitutional claim by reference to the statute of limitations for the federal constitutional claim. First, with respect to DW's federal takings claim, the district court found that although DW did not bring its claim via 42 U.S.C. § 1983 (1996), the two-year statute of limitations for such a claim should apply.⁶ The court reasoned that "there is no substantive distinction between a federal regulatory takings claim brought ... under § 1983 and a federal regulatory takings claim that might be brought ... directly under the federal Constitution." DW Aina Le‘a Dev., LLC v. State of Hawai‘i Land Use Comm'n, No. 17-00113 SOM-RLP, 2017 WL 2563226, at *7 (D. Haw. Jun. 13, 2017). The district court further held that because HRS § 657-7 and the Takings Clause of the Hawai‘i Constitution both use the term "compensation," HRS § 657-7 ought to apply to the state constitutional claims. Id. at *11.

Second, the district court found that even if the limitation in HRS § 657-7 did not apply, the two-year limitation in HRS § 661-5 barred both state and federal takings claims. Id. at *9. HRS § 661-5 covers "[e]very claim against the State, cognizable under this part[.]" "[T]his part" gives state courts jurisdiction over "[a]ll claims against the State founded upon any statute of the State; upon any rule of an executive department; or upon any contract, express or implied, with the State, and all claims which may be referred to any such court by the legislature[.]" HRS § 661-1(1). Although the text of the statute does not extend its application to cases arising under the Hawai‘i Constitution, the district court relied on the Intermediate Court of Appeals’ (ICA) decision in Maunalua Bay Beach Ohana 28 v. State, 122 Hawai‘i 34, 222 P.3d 441 (App. 2009), to conclude that the limitations period applies nonetheless to disputes arising under the state constitution. 2017 WL 2563226, at *9. The Ninth Circuit Court of Appeals indicated, however, that this court's decision in Kaho‘ohanohano v. State, 114 Hawai‘i 302, 162 P.3d 696 (2007), appeared to contradict the district court's conclusion. In Kaho‘ohanohano, this court found that the limitations period in HRS § 661-5 did not apply to the plaintiffs’ constitutional claims because those claims were not "cognizable under HRS chapter 661." 114 Hawai‘i at 338, 162 P.3d at 732 (alterations omitted).

DW unsuccessfully urged the district court to rule that the "catch-all" six-year statute of limitations applied to the action. It now raises the same argument on appeal to the Ninth Circuit. Faced with this dispute on appeal, the Ninth Circuit Court of Appeals seeks this court's determination of the statute of limitations for a takings claim under the Hawai‘i Constitution.⁷

B. Supreme Court Proceedings

1. DW's Opening Brief

DW first argues that HRS § 661-5 only applies to claims brought pursuant to Chapter 661. It continues to argue that HRS § 657-1(4) is the appropriate statute of limitations, "since there are no other specific limitations periods that would be applicable."

In accordance with Kaho‘ohanohano, DW argues that no claim can fall under the two-year statute of limitations in HRS § 661-5 unless it is a type of claim cognizable under that chapter.⁸ In DW's view, its claims are not founded upon a statute because "claims based on the constitution are not founded upon any statute of the State[.]" It also contends the claims are also not based upon an implied contract between the State and DW because "the right to be compensated for a taking of property does not arise upon a contract, but rests primarily upon a vested constitutional right." (Citing Hiji v. City of Garnett, 248 Kan. 1, 804 P.2d 950 (1991).)

Further, DW argues that its claims are not based on an executive department regulation, but instead, on an "improper reversion of land classifications, from urban to agricultural[.]" Thus, according to DW, because "DW's claims are not founded upon a statute, upon any regulation of an executive department or upon any contract and the claims were not referred to the court by the legislature, but brought pursuant to the [Hawai‘i] Constitution itself," the Chapter 661 two-year statute of limitations does not apply.

DW recognizes that the ICA applied the two-year statute of limitations in HRS § 661-5 to a takings claim under the Hawai‘i Constitution in Maunalua Bay, but argues that Kaho‘ohanohano overruled Maunalua Bay by implication.

DW further asserts that takings claims are not properly treated as personal injury actions, which would subject the claims to the two-year statute of limitations in HRS § 657-7, because a takings cause of action arises from the text of the Hawai‘i Constitution. Citing Au v. Au, 63 Haw. 210, 626 P.2d 173 (1981), DW argues that this court "prioritizes the type of wrong over the end result" when determining which statute of limitations applies. Thus, it maintains that because "the true nature of DW's takings claims is not the damages incurred to its property interests, but rather the unconstitutional takings of its property interests without just compensation," the personal injury statute of limitations does not apply. DW argues that the federal district court was incorrect to apply the personal injury statute of limitations because the personal injury limitations period does not apply to all constitutional claims, only those federal constitutional claims brought pursuant to 41 U.S.C. §...