The end may be near for a decade-old case involving the largest fine ever levied by the state Board of Land and Natural Resources.<\/p>\n
After five years in stasis, the Intermediate Court of Appeals finally heard oral arguments on October 10 on the appeal of Pila`a 400, LLC, of a 5th Circuit Court ruling. That ruling upheld a 2005 Land Board decision to fine the company $4 million for damages to the reef at Pila`a Bay on Kaua`i\u2019s North Shore resulting from grading and other activities on 400 acres owned by the company.<\/p>\n
Judging by the court\u2019s questioning of Pila`a 400 attorney Wesley Ching, Ching\u2019s arguments –nearly identical to those he made before the Circuit Court and during the Land Board\u2019s contested case hearing — may again be falling flat.<\/p>\n
The state already has a lien on Pila`a 400\u2019s land. Whether it remains depends on the ICA, or possibly, the state Supreme Court. Given that Pila`a 400 manager James Pflueger has already paid more in federal fines and restoration costs than the $6.7 million he paid for the property in 1997, an appeal to the Supreme Court (should the ICA uphold the Circuit Court\u2019s decision) would be no surprise.<\/p>\n
After the Flood<\/i><\/b><\/p>\n
Heavy rains in November 2001 washed tons of mud from Pila`a 400 property onto the beach and across the reef, nearly smothering the home of kuleana landowners Rick and Amy Marvin along the way.<\/p>\n
A plateau on Pila`a 400\u2019s property had been extensively and illegally graded by the land\u2019s previous owner, Pflueger Properties. Both companies are owned and operated by Pflueger. (Pila`a 400 is no longer a company in good standing, according to the state Department of Commerce and Consumer Affairs.)<\/p>\n
In August 2003, the Land Board fined Pflueger and his two companies $8,000 for unpermitted work in the Conservation District. In addition, the board imposed damages, to the tune of $1,000 per square foot of damaged coral at Pila\u2018a. The total fine came to nearly $6 million.<\/p>\n
During the ensuing contested case hearing over the damages portion of the fine, Pflueger and Pflueger Properties were dropped from the enforcement action — at Pila`a 400\u2019s request — since Pila\u2018a 400 was the owner of the property at the time of the mudslide.<\/p>\n
In late 2004, contested case hearing officer Mike Gibson recommended a fine of $2.3 million to be held in trust and used to remediate the company\u2019s property. Gibson noted in his recommendation that Pila`a 400 was going to have to spend several million dollars remediating its property to resolve a separate enforcement action for Clean Water Act violations. (That case involved the state Department of Health and Attorney General\u2019s office, the federal Environmental Protection Agency, Kaua`i County, the Limu Coalition, and the Kilauea Neighborhood Board Association. It culminated in a consent decree filed in U.S. District Court in June 2006.)<\/p>\n
On behalf of the Department of Land and Natural Resources, deputy attorney general William Wynhoff vehemently opposed Gibson\u2019s recommendation. Allowing the fine to offset remediation costs would be tantamount to mooting any penalty, he argued, and Pila`a 400 should be required to fix its own property at its own expense. The Land Board agreed.<\/p>\n
The board ultimately fined Pila`a 400 just over $4 million, to be paid to the DLNR: $3.333 million in damages to the Conservation District and $700,000 in monitoring and administrative costs.<\/p>\n
\u201cEconomic and use (market) values alone cannot and do not capture the full value of Pila\u2018a,\u201d the Land Board\u2019s decision and order stated. \u201cEconomic valuation alone understates the true social loss from natural resource damage.\u201d<\/p>\n
In calculating the amount of damages, the board considered the impact to the intrinsic and commodity values of the bay, as well as reef restoration and beach cleanup costs, among other things.<\/p>\n
On July 27, 2005, Pila`a 400 appealed the decision to the 5th Circuit Court. In December 2006, Judge Kathleen Watanabe ruled that the Land Board\u2019s fines were reasonable and that no procedural errors had occurred during the contested case.<\/p>\n
The Arguments<\/i><\/b><\/p>\n
In its appeal to the ICA, Pila`a 400 regurgitated many of the same arguments it presented to Watanabe:<\/p>\n
Because the mud that flowed into the ocean came from Pila`a 400\u2019s property in the Agriculture District, the DLNR lacked jurisdiction to seek damages under Conservation District statutes and rules.<\/p>\n
The DLNR did not reveal until the end of the contested case hearing — just before final arguments — that it was intending to seek damages under an administrative rule prohibiting the dumping of solid material in the Conservation District without a permit (HAR 13-5-24). Therefore, Ching argued, the department violated Pila`a 400\u2018s due process rights. Mud is not a solid material, he told the court.<\/p>\n
The DLNR lacked administrative rules to levy fines for damages to state land.<\/p>\n
The Land Board lacked the authority to penalize Pila`a 400 for land use violations that occurred before the company owned the property.<\/p>\n
The Land Board\u2019s fine amount was not supported by the record in the contested case.<\/p>\n
Ching also argued that Watanabe should have vacated the Land Board\u2019s decision because the matter was resolved in June 2006, when the U.S. District Court approved the consent decree regarding the Clean Water Act violations.<\/p>\n
To this, deputy attorney general Russell Suzuki pointed out in a brief to the ICA that the consent decree was entered nearly a year after the Land Board issued its final decision. (Suzuki represents the Land Board in this case. Deputy attorney general Wynhoff represents the DLNR.)<\/p>\n
What\u2019s more, Suzuki added, the state Department of Health and the DLNR are separate departments. \u201cNeither department is authorized to enforce the other department\u2019s laws,\u201d he wrote.<\/p>\n
With regard to Ching\u2019s complaints that Pila`a 400 failed to receive adequate notice, Suzuki observed that the contested case hearing notice stated that the hearing would deal with \u201can enforcement action involving the alleged damage to state lands and natural resources due to excessive sedimentation at Pila`a.\u201d<\/p>\n
The notice also stated that the hearing would be held pursuant to chapters 91 (regarding contested case hearings) and 183C (regarding the Conservation District) of Hawai`i Revised Statutes, and chapters 13-1 (DLNR practices and procedures) and 13-5 (Conservation District) of Hawai`i Administrative Rules.<\/p>\n
The notice did not specifically refer to HAR 13-5-24. Even so, the notice satisfied requirements of HRS Chapter 91, Suzuki wrote.<\/p>\n
\u201cThe notice refers to the statute and rules involved by chapter. Nothing more is required,\u201d he wrote. He added that if Pila`a 400 wanted more information, it could have asked for a more detailed statement of charges (a \u2018bill of particulars\u2019) \u2013 and \u201cnot wait three years and claim, on appeal, that it needed more information.\u201d<\/p>\n
\u201cIf appellant somehow felt it was in the dark (which of course it did not), its remedy was to apply for a bill of particulars. Having failed to do so, it cannot now argue that the notice was inadequate,\u201d he wrote.<\/p>\n
\u201cThe idea they didn\u2019t realize the issue was about destroying the reef struck me as being rather disingenuous,\u201d Wynhoff told the ICA.<\/p>\n
Both Wynhoff and Suzuki argued that it does not matter what land use district the mud came from.<\/p>\n
\u201cI fail to see how it makes a difference that [the mud] came from the Ag District. … What if they dug it from the Ag District and dumped it on the reef? Would that make a difference?\u201d Wynhoff asked the ICA. \u201cThe fact of the matter is, dumping intentionally or causing it to slide into the Conservation District is a land use.\u201d<\/p>\n
Regarding Ching\u2019s argument that the Land Board cannot issue a fine for damages absent administrative rules, Suzuki argued in his brief that because of the myriad ways state land can be damaged, it would be impossible to devise a single rule prescribing a methodology for quantifying damages. Determining damages must be made on a case-by-case basis, he wrote.<\/p>\n
Finally, Wynhoff ridiculed Pila`a 400\u2018s attempt to shirk its liability in the case. The company\u2019s claim that \u201cit is not liable because Plflueger Properties did it shows the quality of their arguments,\u201d he told the court. \u201cLiability for physical harms is with the possessor of land,\u201d he said. Pila`a 400 itself had argued that point successfully in the contested case.<\/p>\n
\u201cTo now come back and continue to argue that Pila`a 400 is the wrong person is wrong,\u201d Wynhoff said.<\/p>\n
Probing Questions<\/i><\/b><\/p>\n
Coincidentally, one of the three appellate judges assigned to review the case was former DLNR director and Land Board chair Mike Wilson. (Alexa Fujise and Randal Lee were the others.) During oral arguments, Wilson asked most of the questions and, at times, almost seemed to be arguing the case on the state\u2019s behalf.<\/p>\n
Wilson asked Suzuki what legal authority allows the Land Board to make a damages determination on something as intangible as cultural value.<\/p>\n
\u201cThat\u2019s a tough question. … I would say that the board is required to exercise their responsibilities to make a determination and the reviewing standard that you would apply would be, was their decision an abuse of their discretion?\u201d Suzuki replied.<\/p>\n
When Wilson pressed him about whether the Land Board included damages to intrinsic (i.e., cultural and recreational) values in its fine, Suzuki said, \u201cI didn\u2019t really look at that particularly. … I think they were looking at restorative cost to rehabilitate the reef. I think that was the standard that applied.\u201d<\/p>\n
Wilson then directed similar questions to Ching. For example, is intrinsic value something susceptible to determination by the Land Board?<\/p>\n
Ching replied that Pila`a 400\u2019s expert economist, John Dixon, had addressed intrinsic value during the contested case hearing, stating that intrinsic value is hard to measure. And if it could be measured, \u201cit\u2019s very small,\u201d Ching said.<\/p>\n
\u201cSo, he did consider that in his valuation. That\u2019s why I wanted to get your viewpoint on the appropriate, if you will, decision-maker for intrinsic value,\u201d Wilson said.<\/p>\n
Wilson then referred to a case from the 1950s where a fisherman sued Lihu`e Plantation over runoff damages. A jury decided that case. In the Pila`a case, it was the Land Board determining damages, acting as a sort of konohiki or group of elders, Wilson said.<\/p>\n
\u201cTheoretically, they\u2019re the spokespeople for the community on certain issues and, in this case, I guess we would concede, intrinsic value. Certainly, Mr. Dixon was in a position where he was conceding there should be intrinsic value,\u201d Wilson said.<\/p>\n
\u201cSo that brings me to the issue about valuation being susceptible to rule making. How is it you would anticipate the Land Board members would make a decision on intrinsic value? And wouldn\u2019t it seem that they would be a more appropriate group to do so, perhaps, than a jury that hasn\u2019t been selected through the Constitution, through the intent of the Legislature to have certain groups speak on behalf of natural resources and enforce the law in order to protect the resource?\u201d he asked Ching.<\/p>\n
The Land Board could have adopted Dixon\u2019s damages calculation or one of the figures offered by the state\u2019s expert, which reached into the tens of millions of dollars. Instead, Wilson continued, the Land Board members made a determination based on the record and on consultation amongst themselves.<\/p>\n
\u201cI\u2019m interested in your thoughts as to whether that was a legally appropriate process to follow,\u201d Wilson asked Ching.<\/p>\n
\u201cThat goes back to our lack of rule making,\u201d Ching replied. When he tried to explain what factors \u2013 in addition to intrinsic value \u2013 the Land Board should have taken into account, Judge Lee interrupted.<\/p>\n
\u201cAre you suggesting that the board didn\u2019t consider multiple factors when they rendered their decision?\u201d Lee asked.<\/p>\n
\u201cWhat we\u2019re saying is they didn\u2019t articulate those factors,\u201d Ching said, adding that the board certainly didn\u2019t take into account the remediation Pila`a 400 was doing to its property.<\/p>\n
\u201cWouldn\u2019t you fairly conclude that the board … took the effort to listen to all of the experts, and looked at the extent of the damage, and that you could reasonably conclude from their award that they did consider these factors?\u201d Lee asked.<\/p>\n
Again, Ching stated that the Land Board did not articulate what factors it took into account.<\/p>\n
The ICA had not issued a decision in the matter by press time.<\/p>\n
For Further Reading<\/i><\/b><\/p>\n
For more background on this case, read the following articles available on our website, www.environment-hawaii.org<\/b><\/a><\/p>\n \u201cEPA Imposes Largest Fine Ever for Runoff Violations in North Kaua`i,\u201d April 2006;<\/p>\n BOARD TALK: \u201cPila`a 400 Appeals Fine for Coral Reef Damage,\u201d September 2005;<\/p>\n BOARD TALK: Pflueger Company Is Fined $4 Million For Reef Damages at Pila\u2018a Bay, Kaua\u2018i,\u201d August 2005;<\/p>\n BOARD TALK: \u201c$2.3 Million Fine Is Proposed For Reef Damage at Pila\u2018a Bay,\u201d March 2005;<\/p>\n \u201cPflueger Contested Case Overshadows Additional Problems at Pila`a Sites,\u201d November 2003;<\/p>\n BOARD TALK: \u201cContested Case to Resolve Pflueger Damages to Pila’a,\u201d October 2003;<\/p>\n \u201cAt Pila`a, Kaua`i, A Reshaped Landscape Sparks Litigation,\u201d August 2003;<\/p>\n BOARD TALK: \u201cHonda Magnate Bulldozes Kaua`i Bluff, Causing Mud to Blanket Pila`a Bay,\u201d September 2002.<\/p>\n Teresa Dawson<\/b><\/p>\n Volume 23, Number 6 — December 2012<\/p>\n environment hawaii james pflueger pilaa bay kauai rick amy marvin board land natural resources intermediate court appeals william wynhoff wesley ching russell suzuki<\/p>\n","protected":false},"excerpt":{"rendered":" The end may be near for a decade-old case involving the largest fine ever levied by the state Board of Land and Natural Resources. After five years in stasis, the Intermediate Court of Appeals finally heard oral arguments on October … Continued<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[45],"tags":[],"class_list":["post-467","post","type-post","status-publish","format-standard","hentry","category-december-2012"],"_links":{"self":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/467","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=467"}],"version-history":[{"count":0,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/467\/revisions"}],"wp:attachment":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=467"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=467"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=467"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}