Board Talk

Kaua‘i Coffee Apologizes, Accepts Fine
For Massive Work in Conservation District

In the summer of 2001, Kaua‘i Coffee was faced with a crisis. Portions of the tunnel that carried water from its 810-million-gallon reservoir to its of coffee fields had collapsed. With water flow hampered by the broken tunnel, the Alexander Reservoir above Kalaheo town threatened to overflow, and the coffee trees began showing signs of stress.

Irrigation ditch experts from sister com pany East Maui Irrigation flew to Kaua‘i to investigate. After five weeks, they determined that the tunnel was too unstable to repair. Instead, they decided to refurbish an old abandoned bypass ditch discovered on the property, located in the Lihu‘e-Koloa Forest Reserve.

“We proceeded to clean out this old ditch and to cut a road adjacent to the ditch for maintenance purposes. This work took 28 days to complete… [U]nder the circum stances, we think that our actions were rea sonable and appropriate,” wrote Kaua`i Cof fee operations manager Richard Loero, in a May 6, 2003, letter to the Department of Land and Natural Resources’ Land Division.

Loero wrote the letter in response to a DLNR investigation into Kaua‘i Coffee’s ac tivities, prompted by a complaint on Feb ruary 11, 2003 about the work. DLNR’s Office of Conservation and Coastal Lands (formerly the Land Division’s Planning Branch) and the Division of Conservation and Resources Enforcement later found that Kaua‘i Coffee had:

1) graded and grubbed about three acres;
2) excavated 33,000 cubic yards of soil;
3) rehabilitated a ditch three-quarters of a mile long;
4) constructed a road about seven-tenths of a mile long; and
5) cut trees.

All this work had been done in the state-regulated Conservation District without the required Conservation District Use Permit. In addition, portions of the restored – and re routed – ditch strayed onto state land.

For the five Conservation District viola tions, OCCL staff recommended last March that the Land Board fine Kaua‘i Coffee the maximum penalty of $2,000 for each of the five violations and $2,225 in administrative costs, for a total of $12,225. The OCCL also recommended that Kaua‘i Coffee apply for an after-the-fact CDUP for the unauthorized land uses within nine months of Land Board action.

“Given the scale of work, it’s a fair pen alty,” OCCL administrator Sam Lemmo told the Land Board at its March 11 meeting.

Meredith Ching, vice president of parent company Alexander & Baldwin, told the Land Board, “We deeply regret this and take full responsibility,” adding that the company had developed a training class for employees to teach them about various legal require ments. In Kaua‘i Coffee’s defense, she noted that the crew believed their work was exempt from permits since it amounted to rehabilitat ing existing facilities. (Crews deepened and widened the original ditch, and, according to Loero’s letter to the DLNR, they also rerouted the ditch in certain areas to avoid cutting koa trees. Those realigned areas were where the ditch strayed onto state land, states an OCCL report.)

Ching said Kaua‘i Coffee would seek an access agreement with the state for the land where the realigned ditch had been dug, and would apply for county grading permits and a Conservation District permit. OCCL staff had originally proposed requiring the CDUP application to be filed within 60 days, but the company asked that it be given nine months to file it.

When Land Board member Kathryn Inouye asked why Kaua‘i Coffee needed so long to complete its permit application, Ching said it was because they wanted to do an environmental assessment, to make sure the application was done right.

Because the work was done years ago, Lemmo said there was no need for immediate remediation.

Two years after Steve’s Ag Services, Ltd., and Contract Milling, LLC, requested a contested case hearing on their $1.5 million fine for logging state land without a license, the hearing officer assigned to the case has recommended that the Land Board dismiss the case without prejudice, “until the appro priate authority has determined the question of legal ownership of the subject parcel.”

The Land Board has yet to decide on hearing officer Benjamin Matsubara’s recommendation, which he issued on January 27. Staff with the DLNR’s Office of Conser vation and Coastal Lands, which is managing the case for the Land Division, says oral arguments have not yet been scheduled.

In the summer of 2001, Natural Area Reserves System staff working in and around the Kipahoehoe NAR discovered that some one had logged koa on what appeared to be Conservation District land. Follow-up inves tigations found that Steve’s Ag Services and Contract Milling had taken koa from land in the Conservation District, owned at the time by Damon Estate, as well as from what was thought to be unencumbered state land in the state Agricultural District.

Under a 1992 contract, Damon Estate gave Steve’s Ag permission to log dead or diseased trees that had been flagged on the estate’s Kahuku Ranch property in south Kona. In April 2003, the Land Board fined Damon Estate nearly half a million dollars for Conservation District violations stemming from the logging. The Land Board found that the Steve’s Ag and Contract Milling had, without permits, cut 712 trees from Damon’s Conservation District land (now a part of Hawai‘i Volcanoes National Park).

The board fined the estate $480,335 (in cluding $13,535 in administrative costs) for the illegal tree cutting and for road construction, but gave it the option of restoring the land, in lieu of paying that portion of the fine not associated with administrative costs.

Two months later, the Land Board fined Steve’s Ag owner Steve Baczkiewicz, and Contract Milling owners Wesley and Raymond McGee $1,500,614 for clearing 1.3 acres and cutting about 200 koa trees on unencumbered state land in the Agricultural District. At that meeting, attorney William Chikasuye, representing Baczkiewicz and the McGees, requested a contested case hearing.

But before the case could be vetted, the state had to prove it owned the 169 acres abutting Kahuku Ranch. Pre-hearing state ments by Chikasuye included expert testi mony disputing the state’s claim to the prop erty. Testimony by the DLNR’s expert witness, surveyor Randall Hashimoto, indicates that the state parcel was created by surveying mistakes made a century ago.

“The significance of this is that the bound aries of [surveyed parcels] did not match,” wrote Matsubara in his January recommen dations. Surveys done in 1902 “set the eastern boundaries of Alika Homesteads and Papa 1 further west than they should have been,” leaving a gap approximately 1000 feet wide between the borders of these two properties and the ahupua‘a of Kahuku. “The land in that gap is the state property at issue here,” he wrote.

Both parties agree that there are no title documents reflecting the parcel’s existence or ownership, he continued. They also agree that when the western boundary of Kahuku and the eastern boundaries of Alika Home steads and Papa 1 were established, “the inten tion was that the boundaries would abut each other, there was no conscious intent to create a gap between the boundaries of the two properties, and therefore no intent to leave a remainder parcel owned by the government,” Mastubara wrote.

The petitioners argue that because no recorded title documents establish state own ership, the parcel was “more likely than not” part of the ahupua`a of Kahuku, which even tually came to be owned by Damon Estate. The state, however, argues that the parcel was established by “operation of law,” and be­came a “Government Remainder,” via a sur vey map, No. 2468, made in 1908.

Based on this testimony, Matsubara found “there is a genuine dispute as to the existence and legal ownership of the subject parcel.” Because he lacks authority to rule on an ownership dispute (something that must be resolved in state Circuit Court), Matsubara recommended that the case be dismissed without prejudice until the ownership issue is settled.

Damon Sues Loggers
One month after Mastubara issued his rec ommendation, Damon Estate trustees David Haig, Fred Weyand, Paul Mullin Ganley, and Walter Dods, Jr., filed a complaint in Third Circuit Court against Steve’s Ag, Con tract Milling and their owners, alleging breach of contract, negligence, wrongful misconduct, and equitable indemnity.

The suit seeks to recover costs Damon Estate incurred as a result of the Land Board’s April 2003 action. The trustees argue that the 1992 contract between Baczkiewicz and Damon Estate, as well as subsequent agree ments in 1993 and 1995, placed the responsibility of obtaining all required permits with Steve’s Ag Services. The company was also obliged to obey all laws governing its activi ties, the complaint states.

When the Land Board fined Damon Es tate, members had little information about the extent of the estate’s knowledge regarding the loggers’ illegal actions. Since the board traditionally fines landowners for violations on their properties (leaving it up to the land owner to pursue damages from the respon sible party) it chose to fine the estate, not the loggers. According to the February com plaint, Damon Estate opted to restore the land instead of paying the fine and has spent $254,250 on a forest restoration plan.

The complaint accuses Steve’s Ag and its partner Contract Milling of breaching the agreements with Damon when they commit ted the violations, and seeks reimbursement for the fines paid, restoration plan costs, attorney fees, and “expenses under the theory of implied contractual indemnity.” The trust also seeks damages for the loggers’ negligence and wrongful misconduct.

Will the Land Board fine Pila‘a 400, LLC $2,000, $2 million, $5 million, or noth ing at all for damages to Pila‘a Bay caused by a runoff from the company’s illegally and excessively bulldozed property?

On March 29, during final arguments in the contested case hearing on the state’s effort to seek damages for the destruction of por tions of the bay’s reef, Land Board members asked attorneys for both the state and Pila‘a 400 to justify how the fine, if any, should be calculated.

In August 2003, the DLNR recommended that the Land Board fine Pila‘a 400 nearly $6 million ($1,000 per square meter) for dam ages to the reef, a figure based on a Florida statute for coral reef damage.

Last December, after considering a variety of factors, contested case hearing officer Mike Gibson recommended a fine of $2.3 million, which he believed should be held in trust and applied to remediation of Pila‘a 400’s prop erty.

State Senate majority leader Colleen Hanabusa, one of the attorneys representing Pila‘a 400, argued on March 29 that the DLNR lacked the authority to impose any fine for damages because it has no rules for calculating them.

“This is not an action in tort,” she told the board. “You are not able to assess fines and do
whatever you want to do.”

But in case filings and before the Land Board, deputy attorney general Bill Wynhoff, representing the DLNR in this case, argued that while there may not be a definitive method of assigning a dollar amount to Pila‘a’s natural resources, there is also no such method of attaching value to a child killed by a negligent driver.

Wynhoff cited the 1951 case of a konohiki fisherman on Kaua‘i who sued Lihu‘e Planta tion company for releasing wastewater in the ocean fishery waters, “polluting and discolor ing them, and rendering them opaque.” The fisherman was awarded damages, despite plantation’s claim that the amount was not the supported by the evidence.

“The Hawai‘i Supreme Court admitted that there was no exact way to measure damages. But, it asked, ‘Has then the plain tiff no redress for the defendant’s wrong merely because the nature and circumstances of the case prevent him from establishing with accuracy the precise amount of dam ages actually suffered?’ No! the court answered: ‘Justice itself demands that such a question be answered in the negative where, as here, it is apparent that the plaintiff was substantially injured as to his legal rights at the instance of the defendant,’” he wrote in his response to Pila‘a 400’s exceptions to Gibson’s recommendations.

Without rules, Gibson had come up with a fine based on possible restoration costs, the value of the destroyed coral, the intrinsic value of the bay, monitoring costs, and a range of reef values stated in scholarly papers, among other things.

“It’s up to you,” to decide how the fine should be calculated, Wynhoff told the Land Board on March 29, adding that the fine originally proposed by the DLNR was appro priate and justified by the evidence. He then urged the board to dismiss Gibson’s recom mendation that the fine be held in trust for landside rehabilitation since Pila‘a 400 is al ready being required by state, county and federal agencies to remediate its property.

“If they want to go out there and not do their work…that’s their kuleana. The money should not be used to fix their property,” it should be used to fix Pila‘a Bay, he said.

— Teresa Dawson

Volume 15, Number 11 May 2005