After seven years of litigation, the state of Hawai\u02bbi has finally prevailed in the lawsuit brought by DW \u02bbAina Le\u02bba Deveopment, LLC \u2013 DW for short.<\/p>\n\n\n\n
The company, owner of about 1,000 acres of land in the Big Island district of South Kohala, claimed back in 2017 that the state owed it some $200 million as a result of a decision six years earlier by the Land Use Commission to place the land back into the Agricultural land use district. The LUC action followed decades in which a succession of owners had failed to build so much as a single inhabitable structure in an area where thousands of houses, schools, golf courses, and commercial enterprises were to have arisen from the lava.<\/p>\n\n\n\n
On February 12, U.S. District Judge Susan Oki Mollway issued an order granting two of the state\u2019s motions for summary judgment. In it, she strongly suggested that DW\u2019s own attorney stove in his client\u2019s boat.<\/p>\n\n\n\n
\u201cYears of litigation before the LUC, the Hawai\u02bbi trial court, the Hawai\u02bbi Supreme Court, the 9th<\/sup> Circuit, the Bankruptcy Court, and this court have resulted in rulings that provide the framework for the present summary judgment ruling,\u201d Mollway wrote, noting dryly that \u201cthis court, as it has noted in earlier rulings, does not write on a blank slate.\u201d<\/p>\n\n\n\n \u201cParticularly relevant is a recent DW statement \u2026 DW said emphatically and clearly that, if this court granted Hawai\u02bbi\u2019s motion in line No. 8 \u2026 DW would have no case,\u201d she continued.<\/p>\n\n\n\n Mollway must have been surprised by this admission, going on to note that at the February 6 court hearing on that motion in limine, \u201cDW said that if [it] were granted, summary judgment should be granted in favor of Hawai\u02bbi. With these statements, DW appeared to be acknowledging that DW was seeking damages belonging to a non-party, not to DW itself.\u201d<\/p>\n\n\n\n The state\u2019s motion, filed in January, argued that, notwithstanding DW\u2019s initial claim of damages amounting in the hundreds of millions of dollars, about the best it could come up with as litigation progressed was a claim that another, different organization — \u02bbAina Le\u02bba, Inc. (same parties, more or less, but two different businesses) \u2013 owed it $17 million, in the form of a note that called for payment after the sale of the part of the land where houses would be built.<\/p>\n\n\n\n The state\u2019s Motion in Limine asked Mollway to exclude any evidence or testimony about the existence of this claimed note. Although the claim had been sufficient to satisfy the 9th<\/sup> Circuit Court of Appeals that the case should be remanded back to the district court after Mollway had issued an order granting the state\u2019s motion for summary judgment back in 2022, no evidence of its existence had ever been brought forward by DW.<\/p>\n\n\n\n Earlier, Mollway had ruled that DW had no right to sue on the basis that it held rights to the land from the time the LUC issued a written order of reversion, in April 2011, to the time the 3rd<\/sup> Circuit Court effectively voided the reversion, in June 2012. Before the reversion, she held, DW had transferred its rights to a \u02bbAina Le\u02bba and thus had no claim. When DW appealed to the 9th<\/sup> Circuit, DW maintained that \u02bbAina Le\u02bba had given it an unsecured $17 million note, to be paid when \u02bbAina Le\u02bba began selling off houses. The 9th<\/sup> Circuit held that the note gave it standing to bring a takings claim, remanding the case back to Honolulu District Court.<\/p>\n\n\n\n The state had asked DW to produce documents supporting its takings claims back in 2022. No such note was produced at that time.<\/p>\n\n\n\n Then came the remand and the further hearings, including the December hearing, at which Mollway questioned DW\u2019s attorney, Sang J. Peter Sim, about the claimed note.<\/p>\n\n\n\n \u201cWhere in the case file [is it] that the 17 million is identified?\u201d she asked. \u201cI don\u2019t think I have the actual note, do I? \u2026 The 9th<\/sup> Circuit says DW holds an unsecured note\u2026 [I]f so, where is it in the record?\u201d<\/p>\n\n\n\n Sim replied: \u201cI do not believe that there\u2019s a physical note\u2026\u201d<\/p>\n\n\n\n Mollway: \u201cI see. So if I don\u2019t have a physical note, what is the source of the assertion \u2026 by DW, that it is entitled to the first $17 million that \u02bbAina Le\u02bba receives?\u201d<\/p>\n\n\n\n The sole reference to a $17 million obligation, Mollway noted in her order, \u201capparently arose from a January 2012 agreement through which DW assigned its rights to the residential property to \u02bbAina Le\u02bba. The parties to the agreement said that, if \u02bbAina Le\u02bba acquired the residential property, \u2018Aina Le\u02bba shall pay DW \u2026 the sum of $17,000,000, to be paid by \u02bbAina Le\u02bba issuing its unsecured note, which note shall then be paid from the proceeds of future parcel resales.\u201d <\/p>\n\n\n\n In fact, however, as she goes on to write, that obligation did not arise in the initial January 2012 agreement, but from a \u201cSecond Amendment\u201d to it. That amendment, she notes, \u201cbears a date of December 30, 2015, but was actually drafted in March 2022 to oppose the earlier summary judgment motion on standing in this case.<\/p>\n\n\n\n \u201cIt is this document that DW claims establishes that \u2018DW retained the right to collect the first $17 million following bankruptcy\u2019 with \u2018any amount over this $17 million \u2026 belong[ing] to \u02bbAina Le\u02bba Inc., pursuant to the bankruptcy disclosure.\u201d<\/p>\n\n\n\n (This same document, claiming to be the second amendment to the previous agreement, was purported to be signed in 2015, 18 months before<\/em> \u02bbAina Le\u02bba sought protection from its creditors by filing for bankruptcy. Nor is this the first time DW sought to have the court rely on a back-dated document. In early 2022, in response to the state arguing that DW had no standing since it had assigned all rights to litigation to \u02bbAina Le\u02bba, Inc., DW claimed that \u02bbAina Le\u02bba had, in fact, assigned the claims back to DW on January 29, 2021. DW presented an agreement purporting to show the assignment to the court. \u201cAt a hearing,\u201d Mollway wrote in a previous order of May 25, 2022 granting the state summary judgment, \u201cthis court questioned the authenticity of the document, which allegedly had not been produced in discovery. Eventually, DW admitted that the document \u2018was drafted \u2026 on March 7, 2022, and finalized on March 9, 2022.\u201d<\/p>\n\n\n\n (\u201cDW nevertheless contends that the parties had \u2018always agreed\u2019 that DW would prosecute this action on behalf of \u02bbAina Le\u02bba\u2026 No admissible evidence supports that assertion. This court notes that DW has frustrated this court\u2019s efforts to ascertain which entity had the right to sue at what time. DW\u2019s assertions sometimes lack support in documents in the record, and are sometimes actually contradicted by the very documents that DW cites.\u201d)<\/p>\n\n\n\n Mollway dutifully analyzes all the various ways in which DW may have been able to assert a takings claim \u2013 and disposes of all of them.<\/p>\n\n\n\n In short, \u201cDW\u2019s admission that it has no viable takings claim if it cannot introduce evidence of \u02bbAina Le\u02bba\u2019s damages demonstrates that DW is not attempting to enforce its own rights,\u201d Mollway writes. \u201cThis is particularly unexpected given the allegations in the complaint and DW\u2019s earlier arguments with respect to standing. DW, after all, prevailed before the 9th<\/sup> Circuit by arguing that DW itself had standing to proceed in this case. DW is either now relinquishing that victory or admitting that it was never pursuing its own damages\u2026 In any event, having granted Hawai\u02bbI\u2019s Motion in Limine No. 8 and thereby precluded evidence of Aina Le\u02bba\u2019s damages, and taking DW at its word that it has no claim if precluded from seeking \u02bbAina Le\u02bba\u2019s damages, the court grants summary judgment in favor of Hawai\u02bbi.\u201d<\/p>\n\n\n\n Meanwhile, in State Court<\/strong><\/p>\n\n\n\n The lawsuits brought against \u02bbAina Le\u02bba, Inc., by its creditors continue to work their way through state courts.<\/p>\n\n\n\n Last August, title to the 69-acre tract where work began more than a decade ago on the affordable housing portion of the overall development was finally transferred to a Canadian company, RIC (Lulana), LLC, successor to Romspen Investment Corporation. Completion of the foreclosure had been held up for more than a year by difficulties in obtaining a title report. A source at the County of Hawai\u02bbi Planning Department told Environment Hawai\u02bbi <\/em>that representatives of the new owner have not let the county know what plans, if any, it has for the stie.<\/p>\n\n\n\n In 3rd<\/sup> Circuit Court, SDCK I, which holds a second mortgage on the three remaining discrete tax-map parcels held by \u02bbAina Le\u02bba, was the winning bidder at a commissioner\u2019s auction held January 17 for title to two of the three lots, having a total area of around 1,011 acres. The title is still subject to a first mortgage on both properties held by Bridge \u02bbAina Le\u02bba. No bidders came forward to bid on the third parcel, consisting of 24 acres and subject to a first mortgage held by Libo Zhang, later transferred to Xinhui Wang.<\/p>\n\n\n\n A hearing is scheduled for March 24 before Judge Wendy DeWeese on SDCK\u2019s motion to approve the sale. SDCK bid $25,000 for the two lots, with the amount to be set off against the total amount owed by \u02bbAina Le\u02bba to SDCK. As of December 31, that amount came to $9.69 million.<\/p>\n\n\n\n Since then, and until the commissioner\u2019s sale is approved, \u02bbAina Le\u02bba is still being charged the following fees, according to a statement submitted to the court on behalf of SDCK: \u201c(a) monthly asset management fee of $5,000\u2026(b) interest at the daily rate of $2,465.75 \u2026 (c) late fee on unpaid interest payments at the rate of $7,500 per month \u2026 and (d) late fee on any unpaid monthly asset management fee \u2026 at the monthly rate of $500.\u201d <\/p>\n\n\n\n The delinquent loan was originally made to \u02bbAina Le\u02bba by Iron Horse Credit, LLC, a lender of last resort. The loan allowed \u02bbAina Le\u02bba to emerge from bankruptcy in 2019. Terms of the $5 million loan called for it to be repaid at 18 percent interest. As of December 31, the principal amount of the loan remained at $5 million. After suing for foreclosure, Iron Horse sold its note to SDCK, which, if DeWeese approves the commissioner\u2019s sale, will then own the bulk of what was to have been the Villages of \u02bbAina Le\u02bba.<\/p>\n\n\n\n The litigation will continue, even though following the court hearing next month, both Iron Horse\/SDCK and Romspen\/RIC (Lulana) will not be part of it.<\/p>\n\n\n\n \u02bbAina Le\u02bba and its affiliated companies \u2013 Lulana Gardens, LLC, Ho\u02bbolei Village, LLC, and B-1-A D-1-A, LLC \u2013 appealed the 2021 foreclosure action. Even though the original claims of Romspen and Iron Horse\/SDCK have been satisfied, the appeal lives on. Cross-claims from Bridge and Xinhui Wang still need to be settled. Also, Hawai\u02bbi County remains a party to the litigation, thanks to a lawsuit that \u02bbAina Le\u02bba brought against it, claiming that the county\u2019s delays were responsible for the company\u2019s failure to perform on its loans.<\/p>\n\n\n\n \u2014 Patricia Tummons<\/strong><\/p>\n\n\n\n For Further Reading<\/strong><\/p>\n\n\n\n Over the last quarter of a century, Environment Hawai\u02bbI<\/em> has followed the trials and tribulations of \u02bbAina Le\u02bba, through Land Use Commission proceedings, state circuit courts, state appellate court, state Supreme Court, federal district and appellate courts, and bankruptcy court.<\/p>\n\n\n\n All articles \u2013 nearly 50 of them \u2013 are available to download from our website, environment-hawaii.org. There is no charge. <\/p>\n","protected":false},"excerpt":{"rendered":" After seven years of litigation, the state of Hawaiʻi has finally prevailed in the lawsuit brought by DW ʻAina Leʻa Deveopment, LLC – DW for short. The company, owner of about 1,000 acres of land in the Big Island district … Continued<\/a><\/p>\n","protected":false},"author":1,"featured_media":7162,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[338,522],"tags":[7],"class_list":["post-15795","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-land-use","category-march-2024","tag-patricia-tummons"],"_links":{"self":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/15795","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15795"}],"version-history":[{"count":0,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/15795\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/media\/7162"}],"wp:attachment":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15795"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15795"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15795"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}