Hawaii Appeals Court Holds for the State, while Hawaii Supreme Court Holds for the Sierra Club in Maui Water Cases

In an administrative setting, a contested case is often described as a quasijudicial proceeding. It allows parties to present and cross-examine witnesses, offer evidence, submit motions, and participate in developing the final order issued by the agency. It is like a minitrial. One significant difference is that the rules of evidence do not apply, and there is no jury or judge. The decision-maker is usually a panel of volunteer members of a board or commission appointed by the governor and confirmed by the state senate. Parties may appeal the final findings of fact, conclusions of law, and decision and order approved by the board to the judiciary.

Alexander & Baldwin, Inc. (A&B) is a private landowner on Maui that, until recently, oversaw the commercial agricultural production and processing (primarily sugar cane) of tens of thousands of acres of land on the island. A&B has diversified to include various land uses, including residential and commercial development.

In 2000, the Hawaii Board of Land and Natural Resources (BLNR) issued four revocable permits (Permits) to A&B and its subsidiary, East Maui Irrigation Company, LLC (EMI).

The Permits let A&B and EMI divert water from streams in East Maui to Central and Upcountry Maui. Each permit was valid for one year. BLNR has continued the Permits annually, while a contested case on A&B and EMI's application for a 30-year water lease is pending.

BLNR considered renewing the Permits for 2021 during a public meeting on November 13, 2020. The Sierra Club requested a contested case hearing. BLNR denied the request and voted to continue the Permits. Sierra Club appealed.

On appeal to the trial court (Environmental Court of the First Circuit, Judge Crabtree presiding), Crabtree ordered BLNR to hold a contested case hearing and reserved jurisdiction to modify the Permits. Crabtree revised the Permits by reducing the amount of water A&B and EMI could divert and awarded Sierra Club attorneys' fees and costs. BLNR appealed.

In Sierra Club v. Board of Land and Natural Resources, Docket Nos. CAAP-22-0000516 & CAAP-22-0000519, April 12, 2024, the Intermediate Court of Appeal (ICA) reversed the Environmental Court as follows:

1. "On this record, we hold that BLNR's rules and procedures for its November 13, 2020 meeting, Sierra Club's participation in the 2020 trial of the 2019 Sierra Club Lawsuit, and the short duration of the Permit continuations provided reasonable protection from the risk of an erroneous deprivation of Sierra Club's members' protected interest in a clean and healthful environment."
2. "[W]e hold that Sierra Club was not denied constitutional due process by BLNR's denial of its request for a contested case hearing."
3. "[W]e hold that a circuit court's authority under HRS § 91-14(g) to modify an agency's decision and order in a contested case is limited to correcting conclusions of law that were wrong, either because the findings of fact upon which the conclusions were based were clearly erroneous, the wrong law was applied, or the right law was applied incorrectly. The circuit court is not authorized to make its own findings of fact. Nor is it authorized to substitute its judgment about the application of public policy to the facts for that of the agency, which is constitutionally delegated that power."
4. "[W]e hold a contested case was not required before BLNR decided whether to continue the Permits for 2021, and the Environmental Court did not have jurisdiction to modify the conditions BLNR imposed upon the continuations. Sierra Club did not vindicate any important public policy. It was not entitled to an award of attorneys fees or costs under the private attorney general doctrine."

Acting Chief Judge Leonard and?Associate Judge Hiraoka issued the majority opinion.??

Associate Judge Nakasone issued a dissent, writing that she would have held:

1. The "Environmental Court did not err in concluding that a contested case hearing was required by due process under the specific circumstances of this case."
2. The Environmental Court "had jurisdiction over Sierra Club's appeal of BLNR's decision to grant the continuation of the Permits and to modify the Permits."
3. Consequently, Sierra Club could recover "attorney's fees and costs under the private attorney general doctrine."

Sierra Club will likely appeal the ICA's opinion to the Hawaii Supreme Court.

After the ICA option was issued, the Hawaii Supreme Court issued an opinion in favor of the Sierra Club arising from a writ submitted to the Hawaii Supreme Court by BLNR. BLNR submitted its writ after the Environmental Court modified the Permit. The writ sought to enjoin Judge Crabtree from modifying the Permit conditions, including the cap amount of water permitted to be diverted. It also sought an immediate stay of the Judge’s order. In BLNR v. Crabtree, SCPW-23-0000471, April 18, 2024, the Hawaii Supreme Court denied BLNR's writ as follows:

1. "We hold that the statements made in the BLNR’s petition were so 'manifestly and palpably without merit, so as to indicate bad faith.'"
2. "We hold that the state waives its sovereign immunity when it initiates an original action. Thus, if the state initiates an original action and makes frivolous claims, then it is subject to reasonable attorney fees."

(Internal citations omitted.)

Writing for a unanimous court, Justice Eddins wrote, "the BLNR offered no evidence to back its aggressive position that the [environmental] court’s orders regarding water permits in East Maui caused a shortage of water available to fight the wildfires." And, BLNR "presented nothing to show that 'there [was] not enough fire reserve water in Central Maui' because of the 'Respondent Judge’s uninformed notions of hydrology,'" as alleged by BLNR in its writ.