Office of Hawaiian Affairs v. State, No. 26615 (HI 9/9/2005)

Decision Date09 September 2005
Docket NumberNo. 26615,26615
PartiesOFFICE OF HAWAIIAN AFFAIRS, TRUSTEES OF THE OFFICE OF HAWAIIAN AFFAIRS, Plaintiffs-Appellants/Cross-Appellees, v. STATE OF HAWAI`I, Defendant-Appellee/Cross-Appellant.
CourtHawaii Supreme Court

APPEAL FROM THE FIRST CIRCUIT COURT (CIV. NO. 03-1-0505-07 (GWBC)).

Robert G. Klein (Nadine Y. Ando and Christopher J. Cole, with him on the briefs, of McCorriston Miller Mukai MacKinnon) and William Meheula and David F. Fasi, with him on the briefs, of Winer Meheula & Devens, for plaintiffs-appellants/cross-appellees.

Dorothy Sellers (Charleen M. Aina, Girard D. Lau, and William J. Wynhoff, with her on the brief, Deputy Attorneys General) for defendant-appellee/cross-appellant.

MOON, C.J., LEVINSON, and NAKAYAMA, JJ., and CIRCUIT JUDGE HARA, IN PLACE OF DUFFY, J., RECUSED; ACOBA, J., CONCURRING IN RESULT ONLY.

OPINION OF THE COURT BY MOON, C.J.

Plaintiffs-appellants the Office of Hawaiian Affairs (OHA) and the Board of Trustees of OHA (the trustees) [hereinafter, collectively, the plaintiffs] appeal from the Circuit Court of the First Circuit's1 May 19, 2004 final judgment in favor of defendant-appellee State of Hawai`i (the State). On appeal, the plaintiffs contend that the circuit court erred in: (1) granting the State's motion to dismiss their first amended complaint [hereinafter, motion to dismiss]; (2) denying the plaintiffs' motion for leave to amend the first amended complaint [hereinafter, motion to amend]; and (3) denying the plaintiffs' motion to bifurcate the justiciable and nonjusticiable issues presented in this case [hereinafter, motion to bifurcate]. For the following reasons, we affirm the circuit court's final judgment.

I. BACKGROUND
A. The Creation of OHA2

As this court detailed in OHA I, 96 Hawai`i at 390, 31 P.3d at 903 and Yamasaki, 69 Haw. at 158-65, 737 P.2d at 449-53, the State holds ceded lands3 in a public land trust for five purposes, one of which is "for the betterment of the conditions of native Hawaiians[.]" OHA I, 96 Hawai`i at 390, 31 P.3d at 903 (citing Admission Act § 5(f)) (emphasis omitted). The State's trust obligation to native Hawaiians is set forth in various provisions of the Hawaii Constitution, including article XII, sections 4-6,4 wherein OHA was created and charged with managing proceeds derived from the ceded lands and designated for the benefit of native Hawaiians. Additionally, article XVI, section 7 of the Hawai`i Constitution5 requires the State to enact legislation regarding its trust obligations. Id. (citing Haw. Const. art. XVI, § 7) (emphases added). Thus, in 1979, legislation was enacted that set forth the purposes of OHA and described the powers and duties of the trustees. Id.at 391, 31 P.3d at 904 (citing 1979 Haw. Sess. L. Act 196, § 2 at 398-99, § 8 at 406 (codified at HRS chapter 10)). In 1980, the legislature amended HRS chapter 10 by adding HRS § 10-13.5, which provided that "[t]wenty per cent of all funds derived from the public land trust . . . shall be expended by [OHA] for the purposes of this chapter." Id. (citing 1980 Haw. Sess. L. Act 273, § 1 at 525) (emphasis added).

B. Yamasaki

In 1983, the trustees initiated the action in Yamasaki against the State based on the State's alleged failure to fulfill its obligation to allocate "twenty per cent of all funds derived from the public land trust to OHA" as required by HRS § 10-13.5. Id. (citing Yamasaki, 69 Haw. at 165, 737 P.2d at 453). On interlocutory appeal, this court held that it was unable to determine the parameters of HRS § 10-13.5 "because the seemingly clear language of HRS § 10-13.5 actually provided no `judicially discoverable and manageable standards' for resolving the disputed issues in the case." Id. (citing Yamasaki, 69 Haw. at 173, 737 P.2d at 457) (brackets omitted). Stated differently, this court "concluded that the construction of the term `funds' [as used in HRS § 10-13.5] . . . constituted a non-justiciable political question because the legislature had not provided judicially manageable standards." Id. at 393 n.6, 31 P.3d at 906 n.6 (citing Yamasaki, 69 Haw. at 172-73, 737 P.2d at 457).

C. Post-YamasakiLegislation

In response to this court's decision in Yamasaki, the legislature enacted Act 304, which inter alia, amended HRS § 10-13.5 to provide: "Twenty per cent of all revenue6 derived from the public land trust shall be expended by [OHA] for the betterment of the conditions of native Hawaiians." Id. at 391-92, 31 P.3d at 904-05 (citing 1990 Haw. Sess. L. Act 304, § 7 at 951; HRS § 10-13.5 (1993)) (emphasis in original). Additionally, section 8 of Act 304 provided a mechanism whereby the State and OHA were to determine the amounts owed to OHA for the period of June 16, 1980 through June 30, 1991. Id. at 392, 31 P.3d at 905 (citing 1990 Haw. Sess. L. Act 304, § 8 at 951). Thus, pursuant to section 8, the legislature appropriated funds for the payment of approximately $ 130 million to OHA on April 16, 1993. Id. (citing 1993 Haw. Sess. L. Act 35, at 41). However, the $130 million appropriation "[did] not include several matters regarding revenue which OHA [had] asserted [was] due OHA and which [the State had] not accepted and agreed to." Id. (quotation marks omitted) (brackets added).

D. OHA I
1. Circuit Court Proceedings

Based on the State's refusal to appropriate funds for "several matters regarding revenue which OHA has asserted [was] due," OHA initiated the action in OHA I on January 14, 1994, alleging that the State had failed to pay OHA its full share of "revenues" that the State had collected from the ceded lands since June 16, 1980. Id. OHA sought an accounting, restitution or damages, pre-judgment interest, attorneys' fees and costs, and such other relief as the court deemed just and proper. Id.

The State moved to dismiss the case on the following grounds: (1) lack of justiciability; (2) sovereign immunity; (3) statute of limitations; and (4) and waiver/estoppel. Id. The circuit court orally denied the State's motion to dismiss and ruled that OHA was entitled to revenues from each enumerated source. Id. Thereafter, the State filed its notice of appeal on November 22, 1996. Id.

2. Federal Legislation Enacted While OHA I Was Pending Appeal

During the pendency of the appeal in OHA I, the United States Department of Transportation (USDOT), in 1995, conducted an investigation into the propriety of the State's payments to OHA from airport revenues. Id. at 396, 31 P.3d at 909. This investigation was sought pursuant to: (1) the Airport and Airway Improvement Act of 1982, Pub. L. No. 97-248, § 511(a)(12), 96 Stat. 671, 687 (1982) (codified, as subsequently amended, at 49 U.S.C. § 47107(b)(1)), which directed airport owners to use "all revenues generated by the airport . . . for the capital or operating costs of the airport, the local airport system, or other local facilities which are owned or operated by the owner or operator of the airport and directly related to the actual transportation of passengers or property"; and (2) the Federal Aviation Administration (FAA) Authorization Act of 1994, Pub. L. No. 103-305, § 112(a)(2)(B), 108 Stat. 1569, 1574-75 (1994) (codified at 49 U.S.C. § 47107(l)(2)(b)), which prohibited the "use of airport revenues for general economic development, marketing, and promotional activities unrelated to airports or airport systems[.]" Id. (ellipses points in original) (quotation marks omitted).

In a 1996 report, the USDOT Inspector General concluded that the State's payments to OHA between 1992 and 1995 in the amount of $28.2 million "were a diversion of airport revenue in violation of 49 § U.S.C. 47107(b)" because "OHA provided no services for the $28.2 million" [hereinafter, the USDOT Inspector General's report will be referred to as the IG Report]. Id. (citing FAA Report No. R9-FA-6-015, Airport Improvement Program Grants Provided to the Hawai`i Department of Transportation (HDOT), at 11 (Sept. 19, 1996)). The IG Report recommended that the FAA "withhold payments on current grants and approval of further grants if the State does not: recover the $28.2 million in airport revenues paid to OHA for nonairport purposes." Id. (citation and brackets omitted). In response to the IG Report, the State attorney general opined that "we view the subject payment of $28.2 million in airport special fund moneys to OHA pursuant to Act 304 as an operating cost of the State's airports within the meaning of 49 U.S.C.A. § 47107(b)(1)."

In early 1997, the State began to escrow airport-related payments owed to OHA pending resolution of the IG Report. On April 25, 1997, the FAA issued a memorandum [hereinafter, the FAA Memorandum], stating its concurrence with the IG Report's conclusion and recommendation. Id. (citing Memorandum from FAA Acting Administrator to Acting Inspector General of 4/25/97, at 1).

On July 22, 1997, U.S. Senate Report 105-55 regarding the Department of Transportation and Related Agencies Appropriations Bill, 1998, stated:

Federal aviation law . . . prohibits the diversion of airport revenues for non-airport purposes. Recently, the Department of Transportation Inspector General identified $30,000,000 in past payments to the Office of Hawaiian Affairs as illegal diversions of airport revenues. The FAA agreed with the [IG Report]. However, it is unclear whether a Federal court would agree with the [Inspector General] and the FAA[,] should their determination be challenged. Given the fact that the State of Hawaii owns the lands in trust for the betterment of native Hawaiians, it is conceivable that a reviewing court could find that the payments of airport revenues were in the nature of rent, which is permissible use of airport revenue.

To put the issue to rest, the general provision provides that the State of Hawaii is forgiven any obligation to repay past amounts diverted for trust purposes, in return for a clear congressional statement prohibiting any future diversions.

(Emphasis added.) On ...

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