More than ten years ago, the state Land Use Commission ordered Bridge ‘Aina Le‘a to explain why it had not begun work to develop more than 1,000 acres of land in South Kohala that had been put into the Urban land use district back more than two decades earlier, in January 1989.
That order-to-show-cause (OSC) vote launched a series of events that has yet to reach its conclusion. A case before the 9th U.S. Circuit Court of Appeals almost certainly will not move the process toward development of the land any further down that road, but, however it is decided, it will mark an important milestone in the seemingly interminable history of litigation and legal issues surrounding efforts to build out a town of more than 2,000 homes with a commercial center, school, golf course, and other amenities.
Bridge ‘Aina Le‘a sued the state over that vote and the subsequent decision of the LUC, in 2011, to revert the Urban land back to the Ag district. The company alleged the votes had violated its constitutional rights to due process and equal protection and claimed that the action amounted to an unconstitutional taking of its property. That lawsuit eventually reached the Hawai‘i Supreme Court, which, in November 2014, found that the LUC had not complied with its own rules when it voted in 2011 to revert the land to the state Agricultural district. It did not, however, uphold Bridge’s claim that its constitutional rights had been violated.
As the state case made its way up to the Hawai‘i Supreme Court, Bridge was also seeking to recover the economic damages it claimed the LUC vote had caused it. That case was being heard in federal court. During the pendency of the state litigation, the federal case was on hold.
After the Hawai‘i Supreme Court made its ruling, the federal case was taken up once more, with Bridge ‘Aina Le‘a seeking around $50 million in damages from the state.
Settlement talks proved productive. In mid-2016, the state attorney general’s office and lawyers for Bridge reaching an agreement that provided for the state to pay Bridge $1 million and the case being dropped. By this time, Bridge had sold or had an option to sell most of the Urban district land to another company, DW ‘Aina Le‘a, LLC, that ultimately would take over development plans.
While the settlement amount fell short of what Bridge was demanding, Bridge still was suffering no loss on the real estate deals it had made. In 1999, it had purchased 3,000 acres (the parcel with 1,060 acres in Urban and 30 in Ag, and another 1,900 acres in Ag that surrounded the mostly Urban land on three sides) for just $5.2 million, after several previous owners had been unable to move forward with the urban development proposed to the LUC back in 1987. In March 2009, it sold off a 61-acre parcel of Urban land to DW ‘Aina Le‘a, Inc., for $5 million and gave DW ‘Aina Le‘a an option to purchase the remainder of the Urban land.
From 2009 to 2015, Bridge sold off all but a 27-acre lot of the Urban land, zoned Commercial, to ‘Aina Le‘a, for total purchase price of around $32 million.
In its brief to the appeals court of January 30, the state takes note of the gains made by Bridge: “Bridge bought the entire 3,000 acres for $5.2 million and received from DW for the sale of the property $18 million in cash and a secured $14 million note, much of which was received after the reversion. There can be little doubt that, even taking into account the approximately $3 million Bridge spent working on the property, Bridge made a profit.”
A $1 Award
Ignoring the advice of the state attorney general, the 2017 Legislature did not approve the settlement and litigation resumed in federal district court in Honolulu.
By the time the jury heard the case, in March 2018, several pretrial motions had been heard to limit the scope of testimony and evidence that could be presented.
Critically to Bridge ‘Aina Le‘a’s case, the presiding judge, Susan Oki Mollway, had granted the state’s motion to dismiss the report of Bridge ‘Aina Le‘a’s accountant. The accountant, David Burger, stated that in the five-year period that the reversion was being litigated, Bridge had earned an average of 10.12 percent a year on its capital investments. Separately, Bridge’s appraiser, Steven Chee, reported that the LUC’s vote in 2009 to revert the property reduced its value by $34 million. By multiplying the $34 million by the return on investment and the period – 5.68 years – that the devaluation lasted, Bridge’s experts calculated the company’s losses as a result of LUC action at $19,543,744.
The state objected to the Burger and Chee statements. Burger’s statement did not meet the court’s standards for expert testimony. And without Burger’s report, Chee’s lacked any effect.
Bridge attempted to supplement Burger’s statement with additional information, but the time for submission of evidence had passed.
The jury heard the case, but was not able to hear any evidence supporting Bridge’s claim of damages. When the verdict was returned, the jury had found that Bridge had suffered damages, but Judge Mollway had not allowed them to determine just what those damages should be. Instead, having disallowed Bridge’s reports supporting its damage claims, Mollway granted nominal damages of $1.
By not allowing the jury to hear the damage evidence, Bridge says, “the district usurped the role of the jury which – having found that a taking occurred – should have been permitted to determine which expert’s testimony to credit and which rate of return to apply.”
Appeals
In its October 31, 2018, brief to the 9th Circuit, Bridge says that the Mollway’s ruling to exclude evidence of the company’s losses “form the centerpiece of this appeal.”
“The district court placed more importance on the ‘teeth’ that the federal rule [on evidence] than on Bridge’s right, mandated by the U.S. and Hawai‘i constitutions, to receive an adequate award of just compensation,” the brief from Bridge attorneys Bruce D. Voss, Matthew C. Shannon, and John D. Ferry III states.
What’s more, Bridge also is asking the appellate court to overturn the decision of Mollway to grant immunity to the individual commissioners on the LUC who voted in favor of the reversion. And it appeals the lower court’s decision to dismiss its claim that its constitutional rights to equal protection were violated, for which it also sought damages.
The state has also appealed the lower court decision to deny several of its motions having to do with assessing damages.
The appeals court has not yet set a date for hearing arguments on the case.
—Patricia Tummons
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