AOAO Maalaea Yacht Marina v. Dep't of Planning For The Cnty. of Maui
| Docket Number | CIVIL 22-000162 JAO-RT |
| Decision Date | 30 June 2023 |
| Parties | AOAO MAALAEA YACHT MARINA, Plaintiff, v. DEPARTMENT OF PLANNING FOR THE COUNTY OF MAUI, Defendant. |
| Court | U.S. District Court — District of Hawaii |
ORDER GRANTING DEFENDANT'S MOTION FOR JUDGMENT ON THE PLEADINGS, ABSTAINING UNDER THE PULLMAN DOCTRINE, AND STAYING PROCEEDINGS
Plaintiff AOAO Maalaea Yacht Marina, a nonprofit corporation with the purpose of managing and maintaining the Maalaea Yacht Marina Condominium (“the Condo” or “MYM”) sued the Maui County Department of Planning (“the County”) on behalf its unit owners (“Owners”). Plaintiff challenges the 2020 amendment to Maui County Code (“MCC”) section 19.24.020 (“the Amendment”), which excludes short-term rental homes and transient vacation rentals (“TVRs”) within Maui County's M-1 light industrial district (“M-1 light district”). The Condo is located in the M-1 light district. Plaintiff alleges that the County's enforcement of the Amendment as to the Condo violates both Hawai'i state and federal laws because the Owners' use of the Condo as TVRs constitutes a non-conforming use and the Owners have a vested right in continuing to operate their units as TVRs. Plaintiff later filed a motion for preliminary injunction (“PI Motion”), asking the Court to enjoin the County's attempt to prohibit TVR use at the Condo to maintain the status quo until a decision on the merits. The County filed a motion for judgment on the pleadings (“the Motion”) and also opposes Plaintiff's PI Motion.
For the reasons discussed in this Order, the Court GRANTS the County's Motion, ABSTAINS from exercising jurisdiction over the federal claim, DISMISSES the remaining state claims and STAYS the case, including the resolution of the PI Motion, until a state court renders a decision on the state claims.
The Condo was built in 1979, is located in the M-1 light district of Wailuku, Hawai‘i, and sits oceanfront on Maalaea Bay. ECF No. 1 at 4 ¶ 9. The Condo owners have continuously operated its units as TVRs since the Condo's construction. Id. at 6 ¶ 19. In 1989, the Maui County Council (“the Council”) passed Ordinance No. 1979 (“O1979”) to restrict TVRs as a permitted use in the apartment district. Id. at 7 ¶ 25. To clarify O1979, then-Deputy Corporation Counsel Richard Minatoya issued a legal opinion (“Minatoya Opinion”) aiming to elucidate certain exceptions that allowed for continued TVR use in the apartment district. Id. at 7 ¶ 26.[1] The Minatoya Opinion addressed only exemptions from O1979 in the apartment district. See ECF No. 32-21 (“This is in response to your request dated July 27, 2001 for a legal opinion on which apartment units are excluded from the prohibition on [TVRs] in the Apartment District. ”) (emphasis added)).
The County subsequently assembled the “Minatoya List,” specifying each property that was effectively “grandfathered” into legal TVR use in the apartment district (“the List”). ECF No. 1 at 8 ¶ 28. The List included properties outside the apartment district, like MYM, and was made publicly available on the County's main website. Id. at 8 ¶¶ 28-30. Although disputed, Plaintiff alleges that the List has included the Condo since 2001. Compare id. at 8 ¶ 30 with ECF No. 39 at 9 and ECF No. 39-9 at 2. But the parties agree that sometime in 2019, the Condo was removed from the List. Id. at 9 ¶ 33; ECF No. 39-1 at 3.
Prior to 2020, MCC section 19.24.020 (“the Pre-Amendment Statute”) provided that all permitted uses in business districts B-1 to B-3 were allowed within M-1 zoned properties, except for hotels and motels. ECF No. 1 at 4-5 ¶ 12. B-1 properties were permitted to operate “short-term rental homes” and B-3 properties were permitted to operate TVRs. Id. at 5 ¶¶ 13-14. As such, Plaintiff alleges there was no express prohibition against operating short-term rental homes or TVRs in the M-1 light district under the Pre-Amendment Statute. Id.
But in 2020, the Council passed the Amendment, which expressly excluded the use of short-term rentals homes and TVRs within the M-1 light district. Id. at 5-6 ¶ 16; see MCC § 19.24.020 (2020). Plaintiff allege that the Pre-Amendment Statute had not expressly prohibited TVR use in the M-1 district and that the List had also expressly included the Condo as a property allowed to be used for TVRs since 2001. ECF No. 1 at 8 ¶ 30. So, Condo owners have purchased and sold their units in reliance on the List. Id. at 8 ¶ 31. The Owners also pay higher property taxes, General Excise Tax, and Transient Accommodation Tax based on the TVR use. Id. at 8 ¶ 32.
Since October 18, 2021, the County has sent several notices of warnings to numerous Owners demanding that all short-term rental operations cease by February 1, 2022. Id. at 9 ¶ 35. The warning notices threaten severe civil fines against owners who fail to comply with the deadline. Id. at 9 ¶ 36. More than half of the Owners use their apartments as TVRs with rental reservations already booked well into 2022. Id. at 10 ¶ 37.
Plaintiff filed its Complaint on April 11, 2022, alleging four counts: (1) Count I-Nonconforming Use (“NCU Claim”); (2) Count II-Vested Rights (“VR Claim”); (3) Count Ill-Just Compensation Under the Fifth Amendment of the Federal and State of Hawai'i Constitutions (“Takings Claim”); and (4) Count IV-Denial of Due Process Under the Federal and State of Hawai'i Constitutions (“Due Process Claim”). See ECF No. 1. Plaintiff asks the Court to assert supplemental jurisdiction over its state claims-its NCU Claim and VR Claim.
The County filed its Motion on February 29, 2023. ECF No. 29. Plaintiff opposed the Motion on March 17, 2023, ECF No. 37, and Defendant replied on March 21, 2023, ECF No. 38.
Plaintiff filed its PI Motion on March 8, 2023, ECF No. 32, and Defendant opposed the motion on April 24, 2023, ECF No. 39. Defendant replied on May 1, 2023. ECF No. 40.
The Court held a hearing on the Motion and PI Motion on May 19, 2023. ECF No. 41. After the hearing, the Court directed the parties to review its decision in Tran v. Department of Planning for County of Maui, 2020 WL 3146584 (D. Haw. June 12, 2020) and to file supplemental briefing on whether the Pullman abstention doctrine applied in this case. ECF No. 42. The parties timely filed their briefs on May 26, 2023. See ECF Nos. 43-44.
A party may move for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). “Judgment on the pleadings is properly granted when there is no issue of material fact in dispute, and the moving party is entitled to judgment as a matter of law.” Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009) (footnote omitted) (citation omitted). “For purposes of the motion, the allegations of the non-moving party must be accepted as true, while the allegations of the moving party which have been denied are assumed to be false.” Hal Roach Studios, Inc. v. RichardFeiner & Co., 896 F.2d 1542, 1550 (9th Cir. 1989) (citations omitted). A district court may not go “beyond the pleadings to resolve an issue; such a proceeding must properly be treated as a motion for summary judgment.” Id. (citing Fed.R.Civ.P. 12(c) (other citations omitted)). “Judgment on the pleadings is proper when the moving party clearly establishes on the face of the pleadings that no material issue of fact remains to be resolved and that it is entitled to judgment as a matter of law.” Id. (citation omitted).
The County asserts that the Court lacks subject matter jurisdiction over Plaintiff's claims as presently pled. ECF No. 29-1 at 1. In particular, the County argues that Plaintiff lacks standing to raise a claim for damages on behalf of its members. See id. at 3-8. The County contends that Plaintiff's Takings Claim must therefore be dismissed with prejudice because it cannot be cured by amendment and that its NCU Claim, VR Claim, and Due Process Claim must be limited to declaratory or injunctive relief. The Court agrees.
Additionally, the Court, after reviewing the parties' supplemental briefs, exercises its discretion under the Pullman abstention doctrine and stays the remainder of this case pending the outcome of future state court proceedings. As further explained in section C below, the central issues in this case easily fall within the ambit of questions that should be decided by state, not federal courts, and the federal claims here rely on the answers to those questions.
“Federal courts are courts of limited jurisdiction” and “possess only that power authorized by Constitution and statute[.]” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). The Constitution “endows the federal courts with ‘the judicial Power of the United States,' Art. III, § 1,” which “extends only to ‘Cases' and ‘Controversies,' Art. III, § 2.” Spokeo, Inc. v. Robins, 578 U.S. 330, 337 (2016), as revised (May 24, 2016) (internal brackets omitted). “Standing to sue is a doctrine rooted in the traditional understanding of a case or controversy,” and “limits the category of litigants empowered to maintain a lawsuit in federal court to seek redress for a legal wrong.” Id. at 338.
“Hawai'i state courts, on the other hand, are not subject to a jurisdictional limitation Tax Found. of Hawai‘i v. State, 144 Hawai'i, 175, 190, 439 P.3d 127, 142 (2019) (quoting Haw. Const. art. VI, § 1). So, “[i]n Hawai‘i courts, standing is solely an issue of justiciability, arising out of prudential concerns of...
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