Flores v. Board of Land and Natural Resources. , 424 P.3d 469 ( 2018 )

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Electronically Filed
Supreme Court
SCAP-XX-XXXXXXX
08-AUG-2018
08:01 AM
IN THE SUPREME COURT OF THE STATE OF HAWAI#I
---o0o---
E. KALANI FLORES,
Appellant-Appellee,
vs.
BOARD OF LAND AND NATURAL RESOURCES; DEPARTMENT OF LAND AND
NATURAL RESOURCES; SUZANNE D. CASE, in her official capacity as
Chairperson of the Board of Land and Natural Resources,
STATE OF HAWAI#I,
Appellees-Appellants/Cross-Appellees,
and
UNIVERSITY OF HAWAI#I,
Appellee-Appellee/Cross-Appellant.
SCAP-XX-XXXXXXX
APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT
ENVIRONMENTAL COURT
(CAAP-XX-XXXXXXX; CIV. NO. 14-1-324)
AUGUST 8, 2018
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
OPINION OF THE COURT BY NAKAYAMA, J.
In May 2014, Appellee-Appellee/Cross-Appellant
University of Hawai#i (the University) requested that Appellee-
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Appellant/Cross-Appellee Board of Land and Natural Resources
(BLNR) consent to a sublease that the University intended to
enter into with TMT International Observatory LLC (TIO) for the
construction of the Thirty Meter Telescope (TMT) on the Mauna Kea
Science Reserve (Sublease). BLNR subsequently addressed the
University’s request for its consent to the Sublease at two
separate public meetings. At both meetings, Appellant-Appellee
E. Kalani Flores (Flores) orally requested that BLNR hold a
contested case hearing prior to making a decision on the matter.
Following the second meeting, Flores filed a written petition for
a contested case hearing. BLNR denied Flores’s request and
consented to the Sublease.
Flores appealed BLNR’s denial of his request for a
contested case hearing to the Environmental Court of the Third
Circuit (environmental court). The environmental court ruled
that based upon this court’s opinion in Mauna Kea Anaina Hou v.
Board of Land and Natural Resources, 136 Hawai#i 376, 363 P.3d
224 (2015), BLNR infringed upon Flores’s constitutional rights by
rejecting his request for a contested case hearing.
On secondary appeal, BLNR and the University argue that
the environmental court erred in ruling that Flores was entitled
to a contested case hearing because: (1) BLNR’s consent to the
Sublease did not fall within the purview of Hawai#i Revised
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Statutes (HRS) Chapter 91, as BLNR was acting as a landlord
engaged in the custodial management of public property; and (2) a
contested case hearing was not required by law because it was not
mandated by statute, administrative rule, or due process.
For the reasons stated below, we reject BLNR’s and the
University’s argument that HRS Chapter 91 does not apply in this
case. However, we agree with BLNR and the University that BLNR
was not required to hold a contested case hearing prior to
consenting to the Sublease because such a hearing was not
required by statute, administrative rule, or due process under
the circumstances of this case. Consequently, we hold that the
environmental court erred in ruling that BLNR violated Flores’s
constitutional rights when it denied his request for a contested
case hearing in this case.
Accordingly, we reverse the environmental court’s
January 6, 2017 Final Judgment and “Order Granting in Part and
Denying in Part Appellees State of Hawai#i, Board of Land and
Natural Resources, Department of Land and Natural Resources, and
Chairperson Suzanne D. Case’s Motion for Stay of Proceedings, or
in the Alternative for the Court to Issue its Decision on Appeal,
Filed October 25, 2016; Vacating Consent to Sublease and Non-
Exclusive Easement Agreement Between TMT International
Observatory LLC and the University of Hawaii Under General Lease
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No. S-4191; and Remanding Matter to the Board of Land and Natural
Resources” (Order).
I. BACKGROUND
On June 21, 1968, BLNR leased the land within the Mauna
Kea Science Reserve to the University for a term of sixty-five
years (Master Lease). The Master Lease is set to expire on
December 31, 2033, and permits the University to use the leased
premises “as a scientific complex, including without limitation
thereof an observatory, and as a scientific reserve being more
specifically a buffer zone to prevent the intrusion of activities
inimical to said scientific complex.” Pursuant to paragraph five
of the Master Lease, the University “shall not sublease . . . any
rights thereunder without the prior written approval of [BLNR].”
On May 22, 2014, Donald O. Straney (Straney), the
Chancellor of the University of Hawai#i at Hilo, sent BLNR a
written request for BLNR’s approval and consent to the Sublease.
Straney stated that the University intended to sublease an 8.7-
acre portion of the Mauna Kea Science Reserve, which was covered
by the Master Lease, to TIO for the construction and operation of
the TMT.
The Sublease is set to expire on December 31, 2033, the
same date that the Master Lease is set to terminate. With
respect to the use of the subleased premises, the Sublease
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provides, in relevant part:
Sublessee shall use the Subleased Premises solely to
construct and operate the TMT Facilities in accordance
with this Sublease and the Scientific Cooperation
Agreement. The construction and operation of the
Subleased Premises shall be conducted in strict
compliance with the terms and conditions of
Conservation District Use Permit HA-3568 approved by
the Lessor on April 12, 2013 (the “TMT CDUP”),
including performance of all mitigation conditions set
forth therein, and any amended or subsequent
Conservation District Use Permit. Sublessee shall not
at any time during the term of this Sublease
construct, place, maintain, or install on the
Subleased Premises any other building, structure, or
improvement without the prior written approval of
Sublessor and Lessor and upon such conditions as
Sublessor or Lessor may impose. For purposes of the
foregoing sentence, any other “improvement” means
improvements that are not specified in or contemplated
by the TMT CDUP and not contained within the building
envelop of TMT observatory plans approved in
accordance with Section 37 below.
Concerning the rights of Native Hawaiians with respect
to the subleased premises, the Sublease provides:
The Constitution of the State of Hawaii mandates the
protection of recognized customary and traditional
native Hawaiian rights subject to State regulation.
This Sublease shall be subject to the right of Native
Hawaiians to exercise protected traditional and
customary practices as provided in the [Comprehensive
Management Plan] and consistent with the laws of the
State of Hawaii.
A. BLNR Administrative Proceedings
On June 13, 2014, BLNR held a public meeting
addressing, inter alia, the University’s request for BLNR’s
consent to the Sublease (first public meeting). At the first
public meeting, Flores provided oral and written testimony on the
numerous reasons underlying his position that BLNR should not
consent to the Sublease, and orally requested that BLNR hold a
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contested case hearing before rendering a decision on the
University’s request. No action was taken on Flores’s request
for a contested case hearing at the first public meeting.
Ultimately, BLNR did not rule on the University’s
request for BLNR’s consent to the Sublease at the first public
meeting. Instead, BLNR deferred the issue for consideration at a
later date to allow the University to address the questions and
issues raised during the public testimony on the matter.
BLNR revisited the University’s request for BLNR’s
consent to the Sublease at a public meeting held on June 27, 2014
(second public meeting). At the second public meeting, Flores
provided further oral testimony and submitted additional written
testimony explaining the reasons why, in his view, BLNR should
not consent to the Sublease. Flores also orally renewed his
request for a contested case hearing and submitted a written
petition for a contested case hearing.
Following the completion of public testimony at the
second public meeting, BLNR approved the University’s request for
its consent to the Sublease. However, BLNR provided that the
effect of its consent was “stayed . . . until administrative
proceedings on any contested case requests are concluded.” No
action was taken regarding Flores’s request for a contested case
hearing at the second public meeting.
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On July 3, 2014, Flores filed his written petition for
a contested case hearing. Flores stated that his interest in
BLNR’s consent to the Sublease, which entitled him to a contested
case hearing, stemmed from, inter alia, his interest in
participating in “traditional and customary practices” on the
subleased premises.
Following the receipt of Flores’s request, the Acting
Administrator of BLNR completed a staff report recommending that
Flores’s request be denied. According to the staff report, no
statute or administrative rule required BLNR to hold a contested
case hearing prior to consenting to a sublease of public lands.
The staff report also concluded that the due process clause of
the Hawai#i Constitution did not mandate BLNR to hold a contested
case hearing, as Flores did not demonstrate that he had a
property interest in BLNR’s consent to the Sublease. Lastly, the
staff report stated that BLNR was not required to hold a
contested case hearing before consenting to the Sublease because
such action “is a matter of internal land management, and not
subject to a contested case.”
BLNR addressed Flores’s request for a contested case
hearing at a public meeting held on July 25, 2014 (third public
meeting). At the third public meeting, Flores orally testified
that BLNR’s approval of the Sublease at the second public meeting
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was invalid, and submitted further written testimony on the
matter. After hearing all of the public testimony on the matter,
BLNR approved the staff report’s recommendation, and denied
Flores’s request for a contested case hearing.
BLNR issued its formal written consent to the Sublease
on April, 9, 2015 (Consent).
B. Appellate Proceedings at the Environmental Court
On August 25, 2014, Flores appealed the denial of his
request for a contested case hearing to the Circuit Court of the
Third Circuit. The case was transferred to the environmental
court on October 2, 2015.1
In his pro se opening brief, Flores argued, inter
alia,2 that BLNR erred in denying his request for a contested
case hearing because, among other reasons, Flores “is a
traditional and customary practitioner whose rights this Court
should acknowledge by allowing his participation in the requested
contested case hearing.” Additionally, Flores argued that BLNR
1
The case remained with the same presiding judge, as the Honorable
Greg K. Nakamura sits as a circuit court judge and an environmental court
judge.
2
Flores also argued that BLNR should not have consented to the Sublease
for numerous other unrelated reasons. However, because he does not raise or
renew these arguments in his answering brief on secondary appeal, we do not
address them. See Hawai#i Rules of Appellate Procedure (HRAP) Rules 28(b)(7)
(“Points not argued [in the opening brief] many be deemed waived”) and 28(c)
(providing that the answering brief “shall be of like character as that
required for an opening brief”).
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infringed upon his constitutional right to due process by
consenting to the Sublease before resolving his request for a
contested case hearing.
In their answering briefs, BLNR and the University
countered that BLNR properly denied Flores’s request for a
contested case hearing because his request was not supported by
statute or any administrative rules, and because Flores did not
have a due process right to a contested case hearing insofar as
he did not demonstrate that he had a constitutionally cognizable
property interest in the Sublease. Further, BLNR and the
University argued that Flores was not entitled to a contested
case hearing because BLNR’s consent to the Sublease was a matter
of internal agency management, and fell outside the purview of
HRS Chapter 91.
After the answering briefs were filed, this court
issued its opinion in Mauna Kea Anaina Hou. At issue in Mauna
Kea Anaina Hou was whether BLNR violated the appellants’ due
process rights by issuing a Conservation District Use Permit
(CDUP) authorizing the TMT’s construction before holding a
contested case hearing on the matter. 136 Hawai#i at 380, 363
P.3d at 228. This court first held that the appellants were
entitled to a contested case hearing, reasoning:
Given the substantial interests of Native
Hawaiians in pursuing their cultural practices on
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Mauna Kea, the risk of an erroneous deprivation absent
the protections provided by a contested case hearing,
and the lack of undue burden on the government in
affording Appellants a contested case hearing, a
contested case hearing was “required by law”
regardless of whether BLNR had voted to approve one on
its own motion at the February 25, 2011 meeting.
Id. at 390, 363 P.3d at 238 (quoting Sandy Beach Def. Fund v.
City & Cty. of Honolulu, 70 Haw. 361, 378, 773 P.2d 250, 261
(1989)). The Mauna Kea Anaina Hou court then concluded:
In sum, BLNR put the cart before the horse when
it approved the permit before the contested case
hearing was held. Once the permit was granted,
Appellants were denied the most basic element of
procedural due process--an opportunity to be heard at
a meaningful time and in a meaningful manner. Our
Constitution demands more.
Id. at 391, 363 P.3d at 239. Accordingly, this court vacated the
circuit court’s decision affirming BLNR’s order granting a CDUP
for the TMT project. Id. at 399, 363 P.3d at 247. The case was
remanded to the circuit court to further remand the case to BLNR,
so that another contested case hearing could be conducted before
BLNR or a new hearing officer. Id.
On January 13, 2016, Flores filed his reply brief.
Flores requested that the environmental court take judicial
notice of this court’s decision in Mauna Kea Anaina Hou, which,
he argued, further supported that BLNR should have held a
contested case hearing before consenting to the Sublease.
At the oral argument regarding Flores’s appeal, the
environmental court took judicial notice of this court’s opinion
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in Mauna Kea Anaina Hou and the order of remand that was filed in
that case. Subsequently, the environmental court orally ordered
that the case be remanded to BLNR so that BLNR may consider the
opinion and the order.
On April 5, 2016, the environmental court filed an
order remanding the case to BLNR pursuant to HRS § 91-14(e).3
The environmental court ruled that the fact that the CDUP had
been vacated was “material because the Sublease and Consent are
premised upon the existence of the TMT CDUP,” and noted that
“[t]his fact could not have been presented to [BLNR] when it
considered the application for the consent to the Sublease
because the fact did not exist at that time.” Therefore, the
environmental court remanded the case to BLNR to reconsider its
decision to consent to the Sublease in light of Mauna Kea Anaina
Hou.
On October 25, 2016, BLNR filed a motion to stay the
3
HRS § 91-14(e) (2012) provides:
If, before the date set for hearing, application is
made to the court for leave to present additional
evidence material to the issue in the case, and it is
shown to the satisfaction of the court that the
additional evidence is material and that there were
good reasons for failure to present it in the
proceeding before the agency, the court may order that
the additional evidence be taken before the agency
upon such conditions as the court deems proper. The
agency may modify its findings, decision, and order by
reason of the additional evidence and shall file with
the reviewing court, to become a part of the record,
the additional evidence, together with any
modifications or new findings or decision.
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proceedings in Flores’s appeal until, pursuant to this court’s
mandate in Mauna Kea Anaina Hou, BLNR determined whether to issue
the CDUP after holding another contested case hearing on the
matter. Alternatively, BLNR requested that the environmental
court “issue its decision on appeal at this time.”
Flores, now represented by counsel, objected to BLNR’s
request for a stay, but joined in BLNR’s request for an immediate
decision. Flores argued that “[a]s there is no just reason to
delay a decision at this time, this Court should go ahead and
rule” on whether Flores “has a right to a contested case hearing”
and “whether [BLNR’s] Consent to [the] sublease entered into
between [the University] and [TIO] is valid.”
In reply, BLNR asserted that if the environmental court
issued a ruling on the appeal, the ruling should be limited to
whether Flores was entitled to a contested case hearing because
“[t]he sole issue in this administrative appeal is whether a
contested case should have been held. The merits of the consent
are not at issue.”
On January 6, 2017, the environmental court filed the
Order. The Order denied BLNR’s request for a stay of
proceedings, but granted BLNR’s alternative request for a
decision on appeal. In rendering its decision, the environmental
court took judicial notice of Mauna Kea Anaina Hou, and concluded
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that “Flores was denied the right to a contested case hearing on
the subject Consent to Sublease in violation of his
constitutional right to a hearing under Article 12, Section 7 of
the Hawai#i Constitution and Mauna Kea Anaina Hou, and
specifically section IV of the concurring opinion therein.”
Accordingly, the Order vacated the environmental
court’s April 5, 2016 order remanding the case to BLNR, vacated
the Consent, and remanded the case to BLNR for further
proceedings consistent with the Order. Final judgment was
entered on January 6, 2017.
C. Secondary Appeal and Transfer to this Court
On February 3, 2017, BLNR timely appealed the
environmental court’s final judgment and Order. The University
filed its cross-appeal from the environmental court’s final
judgment and Order on February 21, 2017. The case was
transferred to this court on June 5, 2017.
D. Subsequent Administrative Proceedings
While Flores’s case on secondary appeal was pending, a
second contested case hearing was held on whether BLNR should
issue the CDUP that would authorize the construction of the TMT
project. The parties do not appear to dispute that Flores
participated in this contested case hearing by presenting
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evidence, including a copy of the Sublease,4 and arguments
regarding how the TMT’s construction would affect Flores’s
interest in participating in traditional Native Hawaiian cultural
practices on Mauna Kea.
III. STANDARDS OF REVIEW
A. Administrative Agency Decisions - Secondary Appeals
Review of a decision made by the circuit court
upon its review of an agency’s decision is a secondary
appeal. The standard of review is one in which this
court must determine whether the circuit court was
right or wrong in its decision, applying the standards
set forth in HRS § 91-14(g) [1993] to the agency’s
decision.
Paul’s Elec. Serv., Inc. v. Befitel, 104 Hawai#i 412, 416, 91
P.3d 494, 498 (2004) (brackets in original) (quoting Korean
Buddhist Dae Won Sa Temple of Hawaii v. Sullivan, 87 Hawai#i 217,
229, 953 P.2d 1315, 1327 (1998)).
HRS § 91-14(g) (2012) provides:
(g) Upon review of the record the court may affirm the
decision of the agency or remand the case with
instructions for further proceedings; or it may
reverse or modify the decision and order if the
substantial rights of the petitioners may have been
prejudiced because the administrative findings,
conclusions, decisions, or orders are:
(1) In violation of constitutional or
statutory provisions; or
(2) In excess of the statutory authority or
jurisdiction of the agency; or
(3) Made upon unlawful procedure; or
(4) Affected by other error of law; or
(5) Clearly erroneous in view of the reliable,
4
At oral argument, Flores acknowledged that he submitted a copy of the
Sublease as an exhibit at this contested case hearing. Oral Argument at
27:34-27:39, Flores v. Bd. of Land & Nat. Res., SCAP-XX-XXXXXXX,
http://oaoa.hawaii.gov/jud/oa/18/SCOA_031518_SCAP_17_59.mp3.
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probative, and substantial evidence on the
whole record; or
(6) Arbitrary, or capricious, or characterized
by abuse of discretion or clearly
unwarranted exercise of discretion.
“[U]nder HRS § 91-14(g), conclusions of law are reviewable under
subsections (1), (2), and (4); questions regarding procedural
defects under subsection (3); findings of fact under subsection
(5); and an agency’s exercise of discretion under subsection
(6).” Paul’s Elec. Serv., Inc., 104 Hawai#i at 416, 91 P.3d at
498 (brackets in original) (quoting In re Hawaiian Elec. Co., 81
Hawai#i 459, 465, 918 P.2d 561, 567 (1996)).
IV. DISCUSSION
BLNR and the University contend that the environmental
court erred in ruling that Flores was entitled to a contested
case hearing concerning BLNR’s consent to the Sublease. In
support of this position, they advance two arguments: (1) HRS
Chapter 91 does not apply in this case pursuant to this court’s
decisions in Sharma v. State, 66 Haw. 632, 673 P.2d 1030 (1983),
and Big Island Small Ranchers Association v. State, 60 Haw. 228,
588 P.2d 430 (1978); and (2) assuming that HRS Chapter 91
applies, Flores has not demonstrated that a contested case
hearing was required by law.
We address each argument separately and in turn below.
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A. Sharma and Big Island Small Ranchers do not render HRS
Chapter 91 inapplicable in the present case.
Relying on Sharma and Big Island Small Ranchers, BLNR
and the University contend that when BLNR takes action in
relation to a lease as a landlord, BLNR is engaged in the
custodial management of public property, which is a matter of
internal agency management. Hence, BLNR and the University
assert that because this court has recognized that agencies do
not need to comply with HRS Chapter 91 when dealing with matters
of internal agency management, BLNR was not required to hold a
contested case hearing within the meaning of HRS § 91-15 before
consenting to the Sublease.
Flores counters that BLNR and the University read
Sharma and Big Island Small Ranchers too broadly. Flores
contends that in these cases, this court did not “hold that
whenever the BLNR makes a decision that affects the
administration and control of public lands that no one has the
right to a contested case hearing.”
We agree with Flores that BLNR and the University read
5
HRS § 91-1(5) (2012) defines a “contested case” as “a proceeding in
which the legal rights, duties, or privileges of specific parties are required
by law to be determined after an opportunity for agency hearing.” Under HRS §
91-1(6) (2012), an “agency hearing” is a “hearing held by an agency
immediately prior to judicial review of a contested case as provided in
section 91-14.” HRS §§ 91-9 through 91-12 delineate the procedural
requirements that apply in the context of a contested case hearing held by an
administrative agency.
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Sharma and Big Island Small Ranchers too broadly. In neither
case did this court announce the principle that whenever BLNR
acts in relation to a lease as a landlord pursuant to HRS Chapter
171, BLNR’s actions per se constitute the custodial management of
public property and relate to matters of internal agency
management, such that HRS Chapter 91 does not apply.
In Sharma, BLNR leased a tract of government land to
Sharma for a term of twenty-nine years. 66 Haw. at 634, 673 P.2d
at 1032. Under the lease, Sharma was required to, inter alia,
obtain and maintain a comprehensive public liability insurance
policy, and to post an appropriate performance bond. Id. While
Sharma obtained a sufficient insurance policy, Sharma did not
post the performance bond required under the lease. Id.
BLNR overlooked the issue until Sharma sought BLNR’s
approval to subdivide and sublease a portion of the land. Id.
In reviewing Sharma’s lease while processing his request, BLNR
discovered that his insurance policy had lapsed, and that Sharma
still had not posted the bond required under the lease. Id.
Approximately sixty days after Sharma was served notice of his
default on the lease, but failed to take corrective action, BLNR
terminated Sharma’s lease. Id. at 634-35, 673 P.2d at 1032. The
land was repossessed and the lease was resold by way of public
auction. Id., 673 P.2d at 1033.
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Sharma brought suit against BLNR, arguing, inter alia,
that he had been denied due process because BLNR did not hold a
contested case hearing prior to terminating his lease. Id. at
635-36, 673 P.2d at 1033. The trial court granted summary
judgment in favor of BLNR, determining that BLNR’s cancellation
of Sharma’s lease was valid. Id. at 636, 673 P.2d at 1033.
On appeal, this court considered whether HRS Chapter 91
applied when BLNR “acts to cancel a lease agreement covering a
tract of public land.” Id. The Sharma court first observed that
HRS Chapter 91 “does not bind an agency in all of its actions or
functions.” Id. This court explained that while HRS Chapter
91’s procedures attach when administrative agencies engage in
rulemaking or adjudication, administrative agencies also perform
other actions that are not subject to the panoply of procedures
outlined in HRS Chapter 91. Id. at 637, 673 P.2d at 1033-34.
To illustrate this principle, this court discussed how it has
previously acknowledged that agencies must also “deal with
matters related to its internal management,” id., 673 P.2d at
1034, which “necessarily includes the custodial management of
public property entrusted to the agency,” id. at 638, 673 P.2d at
1034 (quoting Holdman v. Olim, 59 Haw. 346, 355, 581 P.2d 1164,
1170 (1978)), and that “where no ‘private rights of or procedures
available to the public’ are affected, decisions on these matters
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are not subject to [HRS Chapter 91’s] restraints on the agency’s
rulemaking power.” Id. at 637, 673 P.2d at 1034 (quoting HRS §
91-1(4) (1976)).
After establishing that a contested case hearing is not
required whenever an individual is adversely affected by an
agency action, this court concluded that BLNR was not required to
hold a contested case hearing before terminating Sharma’s lease
because, on the facts before it, a contested case hearing was not
required by law. Id. at 639-41, 673 P.2d at 1035-36. The Sharma
court first looked to “the statutory provisions governing the
leasing of public land, HRS Chapter 171, to determine whether the
Board was obligated thereunder to afford Sharma an opportunity
for agency hearing before cancelling his lease.” Id. at 639, 673
P.2d at 1035. On this point, this court concluded that a
contested case hearing was not required under statute because HRS
§ 171-39 expressly empowered BLNR to “‘terminate the lease or
tenancy and take possession of the leased land, without demand or
previous entry and without legal process’ after the notice of a
breach is delivered,” id. at 640, 673 P.2d at 1035 (quoting HRS §
171-39), and did not suggest “that a hearing must be conducted”
before BLNR may terminate a lease of public land. Id.
Next, the Sharma court held that a contested case
hearing was not required by constitutional due process. Id. at
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641, 673 P.2d at 1036. This court noted that the lease was valid
and binding upon Sharma, and that Sharma “was afforded ample
opportunity to demonstrate to the trial court that he was not
actually in default or that the State had breached the
agreement.” Id. Therefore, this court held that “[n]o due
process violation appears in the record.” Id.
Put succinctly, the Sharma court’s analysis proceeded
in three steps. First, this court reaffirmed that HRS Chapter 91
procedures are not universally required in all circumstances
where an individual is negatively impacted by an agency action.
Sharma, 66 Haw. at 636, 673 P.2d at 1033. The Sharma court
referred to previous decisions demonstrating that this principle
has been recognized and applied in the past, in cases where this
court held that an agency is not required to follow HRS Chapter
91’s rulemaking procedures when engaged in internal management
matters by way of the custodial management of public property.
Id. at 637-38, 673 P.2d at 1033-34. Second, this court
determined that BLNR was not required to hold a contested case
hearing before terminating Sharma’s lease because HRS § 171-39
did not require BLNR to do so. Id. at 639-640, 673 P.2d at 1035-
36. Lastly, the Sharma court held that a contested case hearing
was not required by due process because the lease was valid and
enforceable, and because Sharma had received sufficient notice
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and was afforded an adequate opportunity to be heard on whether
he had complied with the lease. Id. at 641, 673 P.2d at 1036.
The foregoing illustrates that BLNR and the
University’s arguments premised upon Sharma are without merit for
two reasons. First, this court did not, as BLNR and the
University contend, announce a general rule providing that
whenever BLNR acts in relation to a lease as a landlord, such
actions fall outside the purview of HRS Chapter 91 because they
constitute the custodial management of public property and relate
to matters of internal agency management. Second, the University
and BLNR incorrectly assert that this court held that Sharma was
not entitled to a contested case hearing because BLNR engaged in
the custodial management of public property by terminating his
lease. Rather, the Sharma court held that BLNR did not have to
hold a contested case before terminating Sharma’s lease because
such a hearing was not required by statute or due process.
Likewise, Big Island Small Ranchers does not support
BLNR’s and the University’s contention that HRS Chapter 91 does
not apply in this case. In that case, BLNR decided to auction
leases of certain parcels and lots of public land to qualified
bidders. Big Island Small Ranchers, 60 Haw. at 229, 588 P.2d at
433. Before the auction was held, the appellants filed a lawsuit
against BLNR, arguing, inter alia, that BLNR’s authorization of
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the public auction was null and void because BLNR engaged in
“rulemaking” when it took such action, but failed to comply with
the formal rulemaking procedures prescribed in HRS Chapter 91.
Id. at 230, 588 P.2d at 433. BLNR filed a motion to dismiss the
complaint or, alternatively, for summary judgment. Id. at 231-
32, 588 P.2d at 434. The circuit court dismissed the complaint
and entered judgment in favor of BLNR. Id. at 233-34, 588 P.2d
at 435. On appeal, this court affirmed, holding that BLNR was
not required to comply with the rulemaking requirements in HRS
Chapter 91 because “the conduct of the State in this case comes
within the ‘custodial management of . . . property’ exception to
Chapter 91.” Id. at 239, 588 P.2d at 438 (alteration in
original) (quoting HRS § 91-1(4)).
BLNR and the University’s reliance upon Big Island
Small Ranchers is misplaced for two reasons. First, Big Island
Small Ranchers is distinguishable from the present case insofar
as there, the appellants specifically argued that BLNR, in
deciding to auction the leases for the parcels of public land,
had improperly engaged in rulemaking without complying with the
requisite procedures under HRS Chapter 91. By contrast, here,
Flores does not argue that BLNR engaged in rulemaking when it
consented to the Sublease, such that BLNR was required to comply
with the procedures related to rulemaking in HRS Chapter 91.
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Second, BLNR and the University construe the holding in
Big Island Small Ranchers too broadly. In that case, this court
did not hold that whenever BLNR acts as a landlord in matters
relating to leases of public lands, such actions categorically
qualify as the custodial management of public property, and
therefore, constitute matters of internal agency management,
which fall outside the scope of HRS Chapter 91. Rather, this
court rejected the appellants’ argument that BLNR had engaged in
rulemaking and was thus required to comply with HRS Chapter 91’s
rulemaking procedures, based on its conclusion that BLNR’s
auctioning of leases for public lands amounted to the custodial
management of public property.
Therefore, we conclude BLNR and the University’s
arguments based upon Sharma and Big Island Small Ranchers are
unavailing. These cases do not establish that BLNR’s actions in
this case fall outside the scope of HRS Chapter 91. Accordingly,
we consider whether BLNR was required to hold a contested case
hearing under HRS Chapter 91 before consenting to the Sublease.
B. A contested case hearing was not required by law.
An administrative agency must hold a contested case
hearing when such a hearing is required by law. See HRS § 91-
1(5) (2012); In re Maui Elec. Co., 141 Hawai#i 249, 258, 408 P.3d
1, 10 (2017). A contested case hearing is required by law when
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it is required by: (1) statute; (2) administrative rule; or (3)
constitutional due process. Mauna Kea Anaina Hou, 136 Hawai#i at
390, 363 P.3d at 238.
1. A contested case hearing was not required by statute.
BLNR and the University argue that a contested case
hearing was not required by statute because HRS § 171-36(a)(6),
which governs BLNR’s authority to consent to a sublease, does not
require such a hearing. HRS § 171-36(a)(6) (2011) establishes
the restrictions that apply to subleases of public lands, and
states:
(6) The lessee shall not sublet the whole or any
part of the demised premises except with the
approval of the board; provided that prior to
the approval, the board shall have the right to
review and approve the rent to be charged to the
sublessee; provided further that in the case
where the lessee is required to pay rent based
on a percentage of its gross receipts, the
receipts of the sublessee shall be included as
part of the lessee’s gross receipts; provided
further that the board shall have the right to
review and, if necessary, revise the rent of the
demised premises based upon the rental rate
charged to the sublessee including the
percentage rent, if applicable, and provided
that the rent may not be revised downward[.]
In other words, HRS § 171-36(a)(6) provides that a
sublease of public lands is not valid unless BLNR approves of it.
In deciding whether to consent to a sublease, BLNR may review and
approve the rent that will be charged under the sublease, and may
review and raise the rent on the primary lease based upon the
rent to be charged under the sublease. HRS § 171-36(a)(6).
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However, HRS § 171-36(a)(6) does not contain any
language that states or otherwise suggests that BLNR must hold a
contested case hearing before consenting to a sublease. See HRS
§ 171-36(a)(6). Thus, we hold that a contested case hearing was
not mandated by statute in this case. See In re #Îao Ground
Water Mgmt. Area High-Level Source Water Use Permit Applications,
128 Hawai#i 228, 239, 287 P.3d 129, 140 (2012) [hereinafter In re
#Îao] (determining that a hearing was not required before the
Commission on Water Resource Management could establish an
Interim Instream Flow Standard (IIFS) because “nothing in [the
governing statute, HRS § 174C-71,] requires the Commission to
hold a hearing before establishing or amending an IIFS”).
2. A contested case hearing was not required by
administrative rule.
Although BLNR does not advance any arguments on this
point, the University argues that a contested case hearing was
not required by administrative rule. The University asserts that
“there is nothing in the [Department of Land and Natural
Resources (DLNR)] Rules, [Hawai#i Administrative Rules (HAR)]
Title 13, that requires a public hearing for a consent to a
sublease.” The University also notes that while several
provisions of HAR Title 13 require BLNR to hold a hearing before
taking other actions, “[t]here is no similar requirement for a
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hearing in relation to the BLNR’s consent to a sublease.” Thus,
the University concludes that there was no rule-based mandate
requiring BLNR to hold a contested case hearing before consenting
to the Sublease.
HAR Title 13 “governs practice and procedure before the
board of land and natural resources of the State of Hawaii under
chapter 91, Hawaii Revised Statutes (HRS), the public land laws
of the State and such other related acts as may now or hereafter
be administered by the board.” HAR § 13-1-1 (2009). The
University correctly observes that a few subsections in HAR Title
13 expressly require BLNR to hold a contested case hearing in
specific circumstances. For example, HAR § 13-184-11(1) requires
BLNR to conduct a contested case hearing in matters concerning
geothermal developmental activities within a geothermal resource
subzone. HAR § 13-184-11(1) (2009) states:
(1) The use of an area for geothermal development
activities within a geothermal resource subzone shall
be governed by the board, if such activities lie
within a conservation use district. If geothermal
development activities are proposed within a
conservation district, then, after receipt of a
properly filed and completed application, the board
shall conduct a public hearing and, upon appropriate
request, a contested case hearing pursuant to chapter
91, Hawaii Revised Statutes, to determine whether,
pursuant to board regulations, a conservation district
use permit shall be granted to authorize the
geothermal development activities described in the
application.
(Emphasis added.) Similarly, HAR § 13-300-38, which governs
determinations regarding the appropriate treatment of a
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previously identified Native Hawaiian burial site, provides that
when a determination is made, BLNR must notify the applicant in
writing “[t]hat an applicant who disagrees with the determination
has the option to request reconsideration or appeal the decision
as a contested case[.]” HAR § 13-300-38(b)(2).
Thus, HAR §§ 13-184-11(1) and 13-300-38 illustrate that
some subsections of HAR Title 13 contain language that explicitly
requires BLNR to hold a contested case in certain circumstances,
or entitles an aggrieved individual to a contested case hearing
upon appropriate request. However, HAR Title 13 does not contain
any provisions relating to BLNR’s authority to consent to a
sublease of public lands, or the matter of whether BLNR is
required to conduct a contested case hearing prior to consenting
to a sublease. Therefore, we conclude “there is no rule-based
requirement to hold a [contested case] hearing” in the case at
bar. In re #Îao, 128 Hawai#i at 239, 287 P.3d at 140.
3. A contested case hearing was not required by
constitutional due process.
This court has set forth a two-step analysis for
determining whether a person has a constitutional right to a
hearing. Sandy Beach Def. Fund, 70 Hawai#i at 376, 773 P.2d at
260. First, this court considers whether “the particular
interest which claimant seeks to protect by a hearing [is]
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‘property’ within the meaning of the due process clauses of the
federal and state constitutions.” Id. Second, if this court
concludes that the interest is “property,” this court analyzes
“what specific procedures are required to protect it.” Id.
Therefore, in order to determine whether Flores was
entitled to a contested case hearing by constitutional due
process, the following issues must be resolved: (1) whether
Flores sought to protect an interest which qualifies as
“property” in a constitutional sense, and (2) if so, whether a
contested case hearing was required to protect such an interest.
a. Constitutionally Cognizable Property Interest
“To have a property interest in a benefit, a person
clearly must have more than an abstract need or desire for it.
He must have more than a unilateral expectation of it. He must,
instead, have a legitimate claim of entitlement to it.” Sandy
Beach Def. Fund, 70 Haw. at 377, 773 P.2d at 260 (quoting Bd. of
Regents of State Colleges v. Roth, 408 U.S. 564, 577 (1972)).
Additionally, this court has explained that:
The legitimate claims of entitlement that
constitute property interests are not created by the
due process clause itself. Instead, “they are created
and their dimensions are defined by existing rules or
understanding[s] that stem from an independent source
such as state law--rules or understanding[s] that
secure certain benefits and that support claims of
entitlement to those benefits.”
In re Maui Elec. Co., 141 Hawai#i at 260, 408 P.3d at 12 (quoting
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In re #Îao, 128 Hawai#i at 241, 287 P.3d at 142).
On secondary appeal, Flores primarily argues that he
has a property interest in engaging in traditional Native
Hawaiian cultural practices on Mauna Kea, which is expressly
protected by article XII, section 7 of the Hawai#i Constitution.
Article XII, section 7 provides:
The State reaffirms and shall protect all rights,
customarily and traditionally exercised for
subsistence, cultural and religious purposes and
possessed by ahupua#a tenants who are descendants of
native Hawaiians who inhabited the Hawaiian Islands
prior to 1778, subject to the right of the State to
regulate such rights.
In Mauna Kea Anaina Hou, this court effectively
recognized that the interest of Native Hawaiians in pursing their
traditional and customary cultural practices on Mauna Kea
constitutes a property interest for the purposes of triggering
due process protections. At issue in Mauna Kea Anaina Hou was
whether BLNR violated the appellants’ due process rights by
issuing a CDUP authorizing the TMT’s construction before holding
a contested case hearing on the matter. 136 Hawai#i at 390, 363
P.3d at 238.
This court first held that “a contested case hearing
was required as a matter of constitutional due process.” Id.
The Mauna Kea Anaina Hou court acknowledged that “[t]he right to
exercise Native Hawaiian customs and traditions is explicitly
protected by article XII, section 7 of the Hawai#i Constitution,”
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and that the appellants argued that the TMT project would
significantly impair their ability to engage in Native Hawaiian
cultural practices on Mauna Kea. Id. Based on the foregoing,
this court held:
Given the substantial interests of Native
Hawaiians in pursuing their cultural practices on
Mauna Kea, the risk of an erroneous deprivation absent
the protections provided by a contested case hearing,
and the lack of undue burden on the government in
affording Appellants a contested case hearing, a
contested case hearing was “required by law”
regardless of whether BLNR had voted to approve one on
its own motion at the February 25, 2011 meeting.
Id. (quoting Sandy Beach Def. Fund, 70 Haw. at 378, 773 P.2d at
261). Having determined that a contested case hearing was
mandated by due process, the Mauna Kea Anaina Hou court
ultimately concluded that BLNR violated the appellants’ right to
due process by granting the CDUP prior to holding a contested
case hearing. Id. at 239, 363 P.3d at 239.
Put differently, in Mauna Kea Anaina Hou, this court
applied the two-step framework articulated in Sandy Beach Defense
Fund to ascertain whether BLNR was required to hold a contested
case hearing before granting the CDUP. This court first analyzed
whether the appellants sought to protect an interest that rose to
the level of “property,” and then considered whether a contested
case hearing was required to adequately protect that interest.
See Mauna Kea Anaina Hou, 136 Hawai#i at 390, 363 P.3d at 238;
Sandy Beach Def. Fund, 70 Haw. at 376-78, 773 P.2d at 260-61. In
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engaging in the foregoing analysis, this court effectively
determined that the appellants’ interest in engaging in Native
Hawaiian cultural practices on Mauna Kea qualified as “property”
in the constitutional sense, due to the fact that the right to
engage in such practices is expressly guaranteed by article XII,
section 7 of the Hawai#i Constitution. See Mauna Kea Anaina Hou,
136 Hawai#i at 390, 363 P.3d at 238.
Akin to the appellants in Mauna Kea Anaina Hou, here,
Flores seeks to protect his interest in engaging in traditional
Native Hawaiian cultural practices on Mauna Kea. Consequently,
pursuant to article XII, section 7 of the Hawai#i Constitution,
as interpreted by this court in Mauna Kea Anaina Hou, we conclude
that Flores has shown that he seeks to protect a constitutionally
cognizable property interest in this case.
b. Whether a Contested Case Hearing was Required
Having determined that Flores has a property interest
in engaging in traditional Native Hawaiian cultural practices on
Mauna Kea, we consider whether a contested case hearing was
required to protect this interest. When determining the specific
procedures required to comply with constitutional due process, we
consider and balance three factors: “(1) the private interest
which will be affected; (2) the risk of an erroneous deprivation
of such interest through the procedures actually used, and the
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probable value, if any, of additional or alternative procedural
safeguards; and (3) the governmental interest, including the
burden that additional procedural safeguards would entail.”
Sandy Beach Def. Fund, 70 Haw. at 378, 773 P.2d at 261.
Regarding the first factor, Flores asserts that the
private interest that is affected by the Consent and the Sublease
is his interest in engaging in traditional Native Hawaiian
cultural practices on Mauna Kea. See section IV.B.3.a, supra.
This court has previously recognized that this interest is
“substantial,” as it is guaranteed by article XII, section 7 of
the Hawai#i Constitution. Mauna Kea Anaina Hou, 136 Hawai#i at
390, 363 P.3d at 238.
With respect to the second factor, we acknowledge that,
as an initial matter, the parties largely dispute the extent to
which the Sublease and the Consent adversely affected Flores’s
interest in engaging in Native Hawaiian cultural practices on
Mauna Kea, and whether there was a risk of erroneous deprivation
on the basis that the Sublease and the Consent had no bearing
upon this interest. However, assuming arguendo that the Sublease
and the Consent had an impact on Flores’s interest under the
specific circumstances of this case, we believe that there is no
risk of erroneous deprivation, because Flores has already been
afforded a full opportunity to participate in a contested case
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hearing and express his views and concerns on the matter, and he
has not persuaded us that the provision of an additional
contested case hearing is necessary to adequately safeguard
against erroneous deprivation in this case.
The parties do not dispute that Flores participated
extensively in the separate contested case hearing on the
issuance of the CDUP that would authorize the TMT’s construction
by presenting evidence, including a copy of the Sublease,6 and
arguments concerning the effect that the TMT’s construction will
have on his right to participate in traditional Native Hawaiian
cultural practices on Mauna Kea. In this case, it appears that
Flores seeks a distinct contested case hearing on the Consent in
order to express the same concerns, and to vindicate the same
interests, that he previously raised in the contested case
hearing on the CDUP. Moreover, Flores does not clarify the
extent to which, if BLNR held a contested case hearing on the
Consent, he would put forth evidence and arguments materially
different from that which he already proffered at the CDUP
contested case hearing.7 On this particular record, we are not
6
See note 4, supra.
7
Additionally, because the Sublease provides that TIO “shall use the
Subleased Premises solely to construct and operate the TMT Facilities” and
specifies that “[t]he construction and operation of the Subleased Premises
shall be conducted in strict compliance with the terms and conditions of [the
CDUP] . . . and any amended or subsequent [CDUP],” the potential impact of the
(continued...)
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convinced that an additional contested case hearing would offer
any probable value in protecting against the erroneous
deprivation of his interest in engaging in traditional Native
Hawaiian cultural practices on Mauna Kea.
Considering the third Sandy Beach factor in light of
the foregoing, it appears that BLNR has a strong interest in not
having to hold a separate contested case hearing in this case.
Put simply, to mandate BLNR to hold a full contested case hearing
on whether it should consent to the Sublease would require BLNR
to bear the duplicative administrative burden of providing
procedural protections that would be of no additional value in
safeguarding Flores’s interest in engaging in traditional Native
Hawaiian cultural practices on Mauna Kea. See Briggs v.
Sullivan, 954 F.2d 534, 539-40 (9th Cir. 1992) (determining that,
in applying the federal equivalent of the Sandy Beach Defense
Fund balancing test, plaintiffs were not entitled to more
detailed, thorough procedures because the government had a
significant interest in not having to bear the substantial fiscal
and administrative burdens of administering the enhanced
procedures when such procedures would not substantially improve
the risk of erroneous deprivation).
7
(...continued)
Sublease on Flores’s asserted interests would appear to overlap entirely with
the potential impact of the CDUP.
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In sum, Flores seeks to protect an interest that this
court has previously recognized as substantial--his interest in
participating in traditional Native Hawaiian cultural practices
on Mauna Kea. Even assuming arguendo that the Sublease and
Consent would impact this interest under the specific
circumstances of this case, we believe that there is no risk of
its erroneous deprivation absent an additional contested case
hearing, because the record demonstrates that Flores has already
participated in the separate contested case hearing on the CDUP,
and was thereby afforded a full and fair opportunity to express
his views and concerns as to the effect that the Sublease, the
Consent, and the TMT’s construction would have on his interest in
engaging in traditional Native Hawaiian cultural practices on
Mauna Kea. To require BLNR to hold another contested case
hearing in such circumstances would require BLNR to shoulder
duplicative administrative burdens and comply with additional
procedural requirements that would offer no further protective
value. Based upon the foregoing consideration of the three Sandy
Beach Defense Fund factors and the record currently before us, we
hold that BLNR did not violate Flores’s constitutional right to
due process by denying his request for a contested case hearing
in the present case.
To conclude, we hold that Flores was not entitled to a
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contested case hearing regarding whether BLNR should consent to
the Sublease because, on the record in this case, such a hearing
was not required by statute, administrative rule, or due process.
Accordingly, the environmental court erred in ruling that “Flores
was denied the right to a contested case hearing on the subject
Consent to Sublease in violation of his constitutional right to a
hearing under Article 12, Section 7 of the Hawai#i State
Constitution and Mauna Kea Anaina Hou, and specifically section
IV of the concurring opinion therein.”
V. CONCLUSION
For the reasons stated above, we reverse the
environmental court’s January 6, 2017 Final Judgment and “Order
Granting In Part and Denying In Part Appellees State of Hawai#i,
Board of Land and Natural Resources, Department of Land and
Natural Resources, and Chairperson Suzanne D. Case’s Motion for
Stay of Proceedings, or in the Alternative for the Court to Issue
its Decision on Appeal, Filed October 25, 2016; Vacating Consent
to Sublease and Non-Exclusive Easement Agreement Between TMT
International Observatory LLC and the University of Hawaii Under
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General Lease No. S-4191; and Remanding Matter to the Board of
Land and Natural Resources.”
Clyde J. Wadsworth and /s/ Mark E. Recktenwald
Kaliko#onalani D. Fernandes,
(Kimberly Tsumoto Guidry, /s/ Paula A. Nakayama
William. J. Wynhoff, Julie
China and David D. Day, with /s/ Sabrina S. McKenna
them on the briefs) for
Appellees-Appellants/Cross- /s/ Richard W. Pollack
Appellees State of Hawai#i,
Board of Land and Natural /s/ Michael D. Wilson
Resources, Department of Land
and Natural Resources, and
Chairperson Suzanne D. Case
David Kauila Kopper and
Camille Kaimâlie Kalama for
Appellant-Appellee E. Kalani
Flores
John P. Manaut and Ian L.
Sandison (Arsima A. Muller
with them on the briefs) for
Appellee-Appellee/Cross-
Appellant University of
Hawai#i
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