Title: Office of Hawaiian Affairs v. State. S.Ct. Opinion, filed 09/09/2005 [pdf]. J. Acoba Concurring in the Result Only. S.Ct. Order Granting Motion for Reconsideration, filed 12/23/2005 [pdf], 109 Haw. 578. S.Ct. Order Correcting Reference to Civil Number Reflected in Case Caption of the Opinion of the Court, filed September 9. 2005, filed 04/13/2006 [pdf]. J. Acoba Concurring in the Result Only.

State: hawaii

Issuer: Hawaii Supreme Court

Document:

*** FOR PUBLICATION ***

 

IN THE SUPREME COURT OF THE STATE OF HAWAI'I
o-+ 000 -

 

 

OFFICE OF HAWATTAN AFFAIRS, TRUSTEES OP THE OFFICE
OF HAWAIIAN AFFAIRS, Plaintiffs-Appellante/

Cross-Appellees,

STATE OF HAWAI'I, Defendant -Appellee/ ==

vs. 2
3

Cross-Appellant. 8
=

 

No. 26635

APPEAL PROM THE FIRST CIRCUIT COURT
(CIV. NO. 03-1-1505-07 (GwBC))

 

MOON, C.J., LEVINSON, and NAKAYAMA, JJ., and
CIRCUIT JUDGE HARA, IN PLACE OF DUFFY, J., RECUSED;
ACOBA, J., CONCURRING IN RESULT ONLY

OPINION OF THE COURT BY MOON,
appellants the Office of Hawaiian Affaire

(the trustees)

c.g.

 

Plaineifé:

(OHA) and the Board of Trustees of OHA
(hereinafter, collectively, the plaintiffs] appeal from the

Circuit Court of the First Circuit's? May 19, 2008 final judgment
on

in favor of defendant-appellee State of Hawai'i (the state)

 

Pursuant to this court's grant of plaintiffs-appellante’ motion for
reconsideration on Decenber 23, 200s, the previous opinion of the court in

this case, filed on September 9, 2005, ie vacated
‘The Honorable Gary W.5. Cheng presided over the instant case.

 
*** FOR PUBLICATION ***
see

appeal, the plaintiffs contend that the circuit court erred in
(2) granting the State’s motion to dismiss their first amended
complaint [hereinafter, notion to dismiss]; (2) denying the
plaintiffe’ motion for leave to amend the first amended complaint
thereinafter, motion to amend]; and (3) denying the plaintiffs’
motion to bifurcate the justiciable and nonjusticiable issues
presented in this case [hereinafter, motion to bifurcate]. For
the following reasons, we affirm the circuit court’s final
judgment -
1. BACKGROUND

pue to the procedural posture of this case, the
material facts presented by the plaintiffs are accepted as true
and are relatively brief. The underlying contextual background,
however, is complex, arising out of nearly three decades of
effort to resolve longstanding issues regarding the State’s trust
obligations to native Hawaiians. Much of this historical

background was detailed in Trustees of Office of Hawaiian Affaire

vs Yamasaki (Yamasaki), 69 Haw. 154, 158-65, 737 P.2d 446, 449-
53, cert. denied, 484 U.S. 698 (1987), and Office of Hawaiian
Affairs v. State (OHA I), 96 Hawai'i 388, 390, 31 P.3d 902, 903

 

(2001). As the instant cage ie substantially related to and
intertwined with Yamasaki and QHA I, we trace the prior history
and decisions of this court, as well as provide additional

background of the federal legislative schene regarding airport

grants and revenues to properly address the issues raised herein.

 
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ee
A. ‘The Creation of OHA?

As this court detailed in Yamasaki and OHA 1, the state
holds ceded lands‘ in a public land trust for five purposes, one
of which is “for the betterment of the conditions of native
Hawaiians[.]" QHAZ, 96 Hawai'i at 390, 31 P.3d at 903 (citing
Admission Act § 5(£)) (emphasis omitted). In 1978, the people of
Hawai'i clarified the State's trust obligation to native
Hawaiians during a Constitutional Convention, as set forth in
various provieions of the Hawai'i Constitution, including article
XII, sections 4 through 6, see infra note 15, wherein OHA was
created and charged with managing proceeds derived from the ceded
lands and designated for the benefit of native Hawaiians. Id.
Additionally, article XVI, section 7 of the Hawai'i Constitution
requires the State to enact legislation regarding ite trust
obligations. id. (citing Haw. Const. art. XVI, § 7). Thus, in
1979, legislation was enacted that set forth the purposes of OHA
and described the powers and duties of the trustees. Id, at 391,
31 P.2d at 904 (citing 1979 Haw. Sess. L. Act 196, § 2 at 398-99,
$6 at 406 (codified at HRS chapter 10)). In 1980, the
legislature amended HRS chapter 10 by adding HRS § 10-13.5, which

+ A more detailed factual account of the historical circumstances
jeading up to the creation of OHA and the public land trust discussed herein
190;28 jcbnd sn GHA T, 9€ Hawat's at 290, 31 7.30 903, ané in Yamasaki, 69
Hav. at 58°65, 737 P-2d at 449-53.

+ the lands "ceded" by the Republic of Hawai'i to the United states at
nnexaticn are referred to in section §(b) of the Admission Act of March 18,
SSES"*SLET LM'nos sei ss, 72 Stat. 4 [hereinafter, Admission Act). See Oi
7756 Rawai't at 390, 32, P34 at 903. (citing Admission Act § 5(b)

Kopi xe, 303-150, 1993 8, J. nes. 19.

 

 

 

 
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provided that “[t]wenty per cent of all funds derived from the
public land trust . . . shall be expended by [OHA] for the
purposes of this chapter." 1d. (citing 1980 Haw. Sess. L. Act
273, § 2 at 525) (emphasis added) (brackets and ellipsis in
original). However, “[bletween 1980 and 1983, OHA became
increasingly dissatisfied with the state's lack of progress in
fulfilling its obligations." Id.
B. Yamasaki

In 1983, the trustees, due to their dissatisfaction,
initiated the action in Yanasaki against the State based on the
State's alleged failure to fulfill ite obligation to allocate
ctwenty per cent of all funds derived from the public land trust
to OHA as required by HRS § 10-13.5 [(2985)].* 69 Haw. at 165,
737 P.2d at 453. The dispute centered on a claim against the
attorney general, the Chairman of the Board of Land and Natural
Resources (BLNR), and the Director of Finance regarding illegal
sand-mining on ceded land at Papohaku Beach that resulted in
royalty payments to a private party and land conveyed to the

Id. at 166, 737 P.2d at 453. on

 

State in lieu of damage

interlocutory appeal, this court held that it was unable to

 

determine the parameters of HRS § 10-13.5 "because the seemingly
clear language of HRS § 10-13.5 actually provides no judicially
@iscoverable and manageable standards for resolving the disputes
and they cannot be decided without initial policy determinations

of a kind clearly for nonjudicial discretion." Id. at 173, 737

 
 

FOR PUBLICATION ***

P.2d at 457 (citation, brackets, and internal quotation marke
omitted). Stated differently, this court “concluded that the
construction of the term ‘funds’ [as used in HRS § 10-23.5]
constituted @ non-justiciable political question because the
legislature had not provided judicially manageable standards.*
QUAL, 96 Hawai'i at 393 n.6, 32 P.3d at 906 n.6 (citing
Yamasaki, 69 Haw. at 172-73, 737 F.2d at 457). This court held
that, due to the nonjusticiable nature of the issues, no ruling
could be made as to whether OHA was entitled to damages for the
illegal mining of sand or that a pro rata portion of the land
conveyed to the State should be turned over to CHR. Yamasaki, 69
Faw. at 174-74, 737 P.2d at 456.
ce. - i

In response to this court’s decision in Yamasaki, the
legislature enacted Act 304 as “the first step in the resolution
of @ series of complex questions about what constitutes the
extent of the trust holdings and the trust obligations of the

State to the native Hawaiians." Hee. Stand, Comm, Rep. No. 306-

 

90, in 1990 House Journal, at 960; gee also Sen. stand. Comm,
Rep. No. 2778, in 1990 Senate Journal, at 1150-51, Act 304,
inter alia, amended HRS § 10-13.5 to provide “a clear definition

of ‘public land trust’ and ‘revenues,’* in order to ‘resolve the

 

iesue for the future." Id. In doing so, the legislature
believed that the measure would “enable the State to fulfill its

jons to the Hawaiians and w[ould) signal a new era

 

trust oblig

 
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a

 

for the native Hawaiian community." 1d, Specifically, Act 30
provided that: “Iventy per cent of all xevenue("] derived from
che public land trust shall be expended by [OHA] for the
petternent of the conditions of native Hawaiians." HAL, 96
pawas'i at 391-92, 31 P.3d at 904-05 (citing 1990 Haw. Sess. L.
not 304, § 7 at 952 and HRS § 10-13.5 (1993) (emphasis and sone
prackets in original). Additionally, section 6 of Act 304
provided @ nechaniam whereby the State and OHA were to determine
the amounts owed to OHA for the period of June 16, 1980 through
une 30, 1991. Id, at 392, 31 P.3d at 905 (citing 1990 Hew

sess. b. Act 304, § 6 at 951). Thus, pursuant to section 6, the

 

jegislature appropriated funds for the payment of spproximately
130 million to OHA on April 16, 1993. Id, (citing 1999 Haw.
gees. L. Act 35, at 41). However, the $130 million appropriation
s{aia] not include several matters regarding revenue which OHA
thad) asserted [vas] due OHA and which [the State had] not

accepted and agreed to.” Id, (quotation marke onitted) .

+ the legislature defined “revenve™ in section 3 of Act 304 to include
a

charges, rents, of other incone derived from
Ciisty chet ie situated upon and results from the
bile land trust, but excluding any
eee, charges, oF other moneys cerived
‘Sf govereign functions and powers
feet) ng Li enumerated Geseriptions of sources of revenue
ine Srevexctudea fron the term "revenue" under the statute

 
 
    

| 96 Hawai'i at 282, 317.34 at 905 (citing 1990 Haw. Sees. L. Act 204,
GURL, $eatna ns 10-2) (ellipses and brackets omitted)

 

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D. OT

Circuit Court Proceedings

 

Based on the State’s refusal to appropriate funds for
“several matters regarding revenue which OHA (had) asserted [was]
Gue,* OHA initiated the action in QHAI on January 14, 1996,
alleging that the State had failed to pay OHA its full share of
srevenues” that the State had collected from ceded lands since

dune 16, 1980. Id. OHA sought an accounting, restitution or

 

Gamages, prejudgment interest, attorneys’ fees and costs, and

such other relief as the court deemed just and proper. Id.

on the following

 

The State moved to dismiss the «
grounds: (1) lack of justiciability; (2) sovereign immunity;
(3) statute of limitations; and (4) waiver/estoppel. Id, The
circuit court orally denied the State’s motion to dismiss and
ruled that OHA was entitled to revenues from each of the eleven
enunerated sources. Id. Thereafter, the State filed its notice
of appeal on Novenber 22, 1996. Id.

2. Federal Legislation Enacted While QHA I Was Pending
Appeal

During the pendency of the appeal in OHA I, an issue
arose between the Federal Aviation Administration (PAA) and the

of airport revenues to

 

State of Hawai'i regarding the state's wi
fulfill its obligations as trustee of the ceded lands. The FAA
viewed such use of airport revenues as contrary to the policies

led under the Airport Improvement

 

and conditions of grants pro’

Program (AIP) created under the Airport and Airway Improvenent

 
*** FOR PUBLICATION ***

a
ct of 1982, Pub. L, No. 97-248, § 5i1(a) (12), 96 Stat. 676,

(2962) (codified, as subsequently amended, at 49 U.S.C.
§ 47107(b) (2)), which requires airport revenues to be spent for

airport purposes only in order to promote the self-sufficiency of

airports, Under the AIP,

{als originally enacted in 2962, the revenve retention
assurance (onder 49 U.8:¢. § 47107(D). required airport
MASEITES dee sail revenue generated by the airport for the
Sestar‘cr eperating costs of the airport, the local airport
Skee, Sr cener local facilities which ere omed or
Gpersted by the owner or operator of the airport and
SErecely Paaced to the actual transportation of paseengers
Gr property." Tee plain purpose of section [49 U-S.C
TaFlevGer] wae to prevent. an airport owner or operator who
Si Nics reera seeistance from using sizport revenues fer
Sxpenditures unrelated to the aizport

policies and Procedures Concerning the Use of Airport Revenues,
61 Fed. Reg. 7134 (Feb. 26, 1996) (ellipses omitted). The

rationale for the revenue retention requirement

js that the Federal AIP Program can underwrite only, about
2be‘to sot of the total capital development needed by
Bhaitee’ Go ensure che saximum effectiveness of the AIP
Bi<Bfans airports should also epend ail of the money they
Beneraté to operate and develop the sirport. A federal
Grane shoulé not. furnieh an opportunity for an airport to
See Eederal funds to replace other airport generated funds
RES hen use the latter for general governmental purposes,
se Tele Es no net capital improvements for the federal
grant doilare expended.

 

du (citing H.R. Rep. No. 203-240, 103d Cong., Ist Sess. 14
(1993).

in 1995, the United States Department of Transportation
(usvot) conducted an audit of the State’s administration of its
Arp grante after a request by the Regional Audit Manager (RAM)
for an opinion as to whether the Hawai'i Department of
transportation (HDOT) was required by State statute to pay

airport revenues to OHA considering the federal AIP grant

 
*** FOR PUBLICATION ***

 

conditions. QHAI, 96 Hawai'i at 396, 31 P.2d at 908. The grant
conditions in 49 U.S.C. § 47107(b) (1) directed that

revenues generated by a public airport . . . be expended for

the capital or operating coste of =~

(a) ‘the airport;

(B) the local airport eystem: or

(C)Sther local facilities whieh are ovned or operated by

the airport ower or operator and directly and sunstantially
Felated to the sir transportation of passengers oF

property."
49 U.S.C. § 47107(b) (1). Congress further specified that the
suse of airport revenues for general economic development,
marketing, and promotional activities unrelated to airports or
airport systems" was prohibited under the Authorization Act of
1994. 49 U.S.C. § 47207(2) (2) (S) (quotation marks omitted) .

In @ 1996 report, the USDOT Inspector General
Inereinafter, the 16 Report) concluded that the State's payments
to OHA between 1992 and 1995 in the amount of $28.2 million "were
a diversion of airport revenue in violation of [the FAA
Authorization Act of 1994)" Because OHA provided no services for
the ¢28.2 million. OHA I, 96 Hawai‘i at 396, 32 P.3¢ at 909
(citing FAA Report No. R9-FA-6-05, Airport Improvement Program
Grants Provided to the Hawai'i Department of Transportation, at
22 (Sept. 19, 1996)). The IG Report recommended that the FAA
swithhold payments on current grants and approval of further

grants if the State does not recover the $28.2 million in airport

 

Ids (citation,

 

revenues paid to OHA for nonairport purpot
brackets, colon, and internal quotation marks omitted). In
response to the 1G report, the State attorney general opined that

wwe view the subject payment of $28.2 million in airport special

 
*** FOR PUBLICATION ***
oe

fund moneys to OHA pursuant to Act 304 as an operating cost of

the State's airporte within the meaning of 49 U.S.C

§ 47107(b) (2).* In addition, then-Governor Benjamin Cayetano

addressed the members of the State Senate, noting that:

Je is a serious enough matter that the use of the airport
Tevenve fond to mane che OHA. payments say violate federal
Jw and grant assurances. However, lenguage found in
tteion Te°Ge Act 206, Session Laws of Hawai'i 1990 [ (quoted
‘Sita note 7], appears te compound drastically the problem.
224 Mhouage nay. by operation of lex, repeal (inter alia.
Hes § 10-1308), aad turn them back into the ineffective ang
‘ieleing siete they were in when the Supreme Court decides
(amasaki}

Jo'be gure, the Inspector General's findings probebly will
weePbeva tina! determination on thie matter. For one thing,
Stvexpect that the state will be efforded an opportunity te
Berend ite use of airport funds. Nevertheless, 1 consider
tke rituation serious at this time to share with you my
eEecerne about the use of airport funds to make paynente to
GGR°tna'co alert you to the cloud that section 16 of Act 304
Speers to place over chapter 10, HRE

 

 

 

In early 1997, the State began to deposit aizport-
related payments owed to OHA in an escrow account pending
resolution of the 1G Report. On April 25, 1997, the FAA issued a
memorandum (hereinafter, the FAA Memorandum], stating its
concurrence with the IG Report's conclusion an recommendation.

on duly 22, 1997, U.S. Senate Report 105-55 regarding

the "Department of Transportation and Related Agencies

 

Appropriations Bill* state

. prohibite the diversion of
airport revenues for non-airport purposes. Recently, the
Sebehene of Transportation Inepecter Generel identitied
Pebioc0, 000° in pest paymente co the (OMA) as illegal
QWersicne of aisport revenues. The FAR agreed with the (16
Sepertl. “However, it in snelear whether a Federal court
wekiG agree with the [Inepector General] and the PAA.)
Ghoule their determination be challenged, Given the fact
hoe fhe Stace of dawaid ome the lands in crust for the
Eitterment of netive Hawaiians, it is conceivable that &
Fevieeing court could find that the payments of airport
Eevenves vere in the mature of rent, which is [a]
permissible use of aizport revenue

Federal aviation law.

      

 

 

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ee

ne en yal_provision
reps: noone 6 for eee in return

‘Sivetaione.
(emphasis added.) On August 19, 1997, the State attorney general
authored a newspaper article, in which she stated that the state
would not challenge the FAA’s position that the use of aizport
revenues to pay OHA was improper.

on dune 30, 1997, the Hawai'i Legislature enacted Act
4329, relating to the public land trust, in response to the
continued controversy regarding the proper definition of
srevenue" under HRS § 10-19.5. 1997 Haw. Sess. L. Act 329, § 2
at 956. Because of the concerns about the effect of the circuit
court's ruling and recognizing the potential invalidity of

section 16 of Act 304, see infra note 7, a new section was added

 

to HRS chapter 10 via Act 329, which provided:

notwithstanding the definition of revenue contained in this
Chapter end the provisions of section 2013.5, and
fotwithstanding any clained invalidity of Act 304, Session
Laue of Hawai 2930, the income and proceeds from the pro
Fate portion of the public land trust under article Ail,
fection € of the state constitution for expenditure by the
ffice of Hawaiian affaire for the bettersent of the
Conditions of native Hawaiians for each of fiscal year 1997-
$598 and fiscal year 1996-1999 shall be $15, 100,000,

 

 

HRS § 10-13.3 (Supp. 2005); gee algo 1997 Haw. 5

 

- L, Act 329,
$2 at 958. These interim monies were intended to ‘ensure that
adequate income and proceeds from a pro rata portion of the
public trust continue to be available to [OHA] . . . while the
contenplated process to address issues relating to the public

trust is underway." 1997 Haw, Sess. L. Act 329, § 1 at 958.

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eee
tn 1998, Congress enacted the "Department of
transportation and Related Agencies Appropriations Act," Pub. L.
No. 105-66, § 240, 221 Stat. 1425 (1998) [hereinafter, the
Forgiveness Act], which states in pertinent part:
(7) {clontrary to the prohibition against diverted airport

Eevenues tron airport purpotes under Section 47207 of title
G5, United States Code, carted 2

Haugligns, oF Alsekan natives based upon the elaine related
roland ceded to the United states.)

 

ib] TERMINATION OF REPAYMENT RESPONSIBILITY. --
Notwithstanding the provisions of 47107 of title 49, United

Of any ether provision of Is, sonles paid for

 

 

 

States Cod
revenues ceeive 2 By any entity
ForTheiietternent of Netive Americans, Native Hawaiians, or
Alaska Natives, shall_not be subiect to repavaent.
{c) BROHIBTTI0N ON FURTHER DIVERSION. -- There shall be no
3 Bt i“ Jet

Tghds, I'l wether characterized as operating expenses,

Senet Siotherwiee, and whether related co claine for
Eericds of tine prior to or after the date of the enactment

Of this Act

(a) cLARIPICATION |.) -- Mothina in thie Act shal be
construed to affect

 

any existing Federal statutes,

eaenentatct tiise abiigations created thereunder, or any

Stature of the several States that define che obligations of
Stats ve OF Alaska,

ha sframct-rovenuer my no-Be-aeea fe satiety such
CURL, 96 Hawai'i at 396-97, 21 F.2d at 909 (citing the
porgiveness Act § 240) (enphases, brackets, and ellipses in
original).

the following year, in 1999, the legielature submitted
senate sil) No. 1635 for approval by Governor Cayetano. senate

Bill No. 1635 carried the same purpose of facilitating resolution

 

« we note that Congress characterized the payments to OHA as based on
sclaine" Telaved ro lands ceded to the United stater. However, as the
iftceney general ané Congrese recognized in the Senate Report 105-55, the
State seus airport revenue payments ae fulfilling ite obligations under the

public land trust.

 

w12-
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of public Jané trust issues as Act 328, which had provided
interim payments to OHA only through fiscal year 1998-1999. The
bill provided a $26,060,000 appropriation for fiscal year 1999-
2000. However, the GHA trustees requested that Governor Cayetano

veto the bill, preferring to leave the matters in controversy for

 

thie court to decide in QHAT. Governor's Message, “Statement of
objections to Senate Bill No. 1635," in 1999 Senate Journal, at
803. During the time between the sunset of Act 329 (at the end
of fiscal year 1998-99) and the resolution of OHA (in Septenber
2001), the disposition of OHA’s pro rata portion of ceded lands
revenues under Act 304 resumed, except for the airport revenue

Act. During the interim

 

payments prohibited by the Forgivene
period, the legislature made no appropriations to OHA for the
airport systen’s use
3. Tis Court's Decision in OHA Z

This court in OHA I acknowledged that "Congress does
not have the power to instruct this state on how to expend its
own funds,” although “Congress does have the authority to
condition the use of federal funds.” 96 Hawai'i at 397, 31 P.3d
at 910 (emphases added). Assuming that the Forgiveness Act
represented a valid condition on the receipt of federal airport
funds, this court held that "Act 304, as applied to the airport
revenue sought in thie case, conflicts with the provisions of the

Forgiveness Act. As such, by its own terms, Act 304 is

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see
This court went on to

 

invalid.” Id. at 399, 21 P.3d at 91

hold that, inasmuch as “the invalidity of Act 304 reinstates the

immediately preceding version of HRS § . . . 10-13.5, which then
places this court precisely where it was at the time Yamasaki was

decided[,]* id. at 400, 21 P.3d at 913, “this court is again left
with no judicially manageable standards by which to discern what
specific funds OHA ie entitled to receive under chapter 10,
without making ‘an initial policy determination . . . of a kind
normally reserved for nonjudicial discretion./"* Id, at 401, 32
P.3d at 924 (citation omitted) (ellipsis in original).
Accordingly, thie court “dismies(ed the] case for lack of
justiciability.” Id. at 402, 32 P.3d at 916.
E. The Instant Case
1. The Plaintiffe’ Piret Amended Complaint and the State’s
Motion to Dismiss
the plaintiffs filed a complaint against the state on

July 21, 2003. On August 26, 2003, they filed a first amended

+ specifically, this court invaligsted Act 304 pursuant to section 16

of the Act, which stated:

 

‘the provisions of this Act shall be enforced to the extent
they’ are not held ee federal
ations. Tee provisions of this Act are net

Severable and if any provision of the Act, or the
Spplication theresf to any person or circumstance is held to
SBhtiict with any federal of state law, rules, oF
Fegulations, thie Act. in ite entirety, shall be invalid ané
Sektione 10-2, 16-3, 10-5) 20-33 and 10-13,8, Hawaii Revieed
Statutes, shail be veenacted in the form in which they read
on the Gay Before the approval of this Act.

 

 

1990 Maw. Sess. L. Act 304, § 16 at 953 [emphases added)

+ aggitionally, thie court held that the State was not obligated "to
pay ancunte “equivalent to’ the airport revenue due to OKA from other sources,
Euth ae che geveral fund. GHA Z, Se Hawal'd at 296, 21 P.3¢ at S11

w1a-
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Oo
complaint [hereinafter, first amended complaint or complaint].

therein, the plaintiffe alleged that “the Forgiveness Act would
pot have become law if the State had properly challenged the FAA
Memorandum and thus there would not have been a federal law in
conflict with Act 304{.]* The plaintiffs asserted that the State
preached its trust duties by refusing to challenge the FAA
Memorandum and that such breach was a “substantial factor{ ] that
resulted in the passing of the Forgiveness Act and the Hawai'i
supreme Court's opinion rendered in [QHA.I,]* which invalidated
Act 304, As a result of Act 304s invalidation, the plaintiffs
could no longer recover airport-related revenues from the state
Additionally, because the plaintiffs believe that Act 304
constituted a contract and settlement agreement between the state
and OHA, they alleged that the state “breached the Act 304
settlement” and ‘violated the Contract Clause of the United
States Constitution"? by allowing the Forgiveness Act to

invalidate Act 304, The first amended complaint set forth

 

plaintiffs’ claims and prayer for relief as follow

s the acts and
EERM enti *forth above including but not limited to: (2)
failing to challenge the positions set forth in the FAA
Nenorasdumy (2) resolving ies diepute with the FAA by
MEtelflng a forgiveness ef the prior $30 million payment in
Gihange for s promise not Co make future airport revenve

+ the Contract Clause of the United States Constitution provides thet
sinjo stave shall pave any. . - baw impairing the Obligation of
Centractels]" U.S. Const-, art. Z, 820, cl. 2

 

-1s-
*** FOR PUBLICATION ***

 

paymente to OHA and not to appeal the positions set forth in
The FAA Memorandum; (3) Breaching the trust duty of
impartiality by not challenging the positions set forth in
the FAA Mencrandum in order co use them ac a sword in (OBB
Zl end subsequent appeal; (4) failing to timely advive OW
That the state was not going co continue to challenge the
poritions set forth in the FAA Memorandum or IG Report, and
Ehat it vas planning to settle with the federal governnent,
in order to provide OHA with = fair opportunity to take
seasures to step into the State's position to oppose the
FAA; and, (5) feiling to obtein instructions from the Court
Gn how to proceed given its conflict position of defending
the state sgsinet OHA in QHAT and having a duty £0
Shallenge the positions set forth in the FAR Memorandum,

Be. the State's breaches, errors and omissions ao set
forth above were substantial factore that resulted in the
pateing cf the Forgiveness Act and the lavail Suprene
Eourt's opinion rendered in (OWA IJ. Accordingly, the state
Se"Tlabie to OMA for an accounting, restitution and/or
Ganages including but mot limited to: (1) relief alleged by
HA in [QlfA-2); and, (2) amounte payable under Act 308 that
ave not been paid, including but not limited to, airport
Janding fees

Je. OHA de entitled to a declaratory judgment that
(2) orders the State to Feinstate Act 30s on the grounds
that the Forgiveness Act would not have become law if the
State had properly challenged the PAA Mencrandum and thus
there would not have Deen a federal law in conflict with Act
50s; (2) orders the state to pay alzport-related income,
procesde, funde and/or revenues to OKA from sources ctner
Than airport revenuce) (3) appoines an independent trustee
to temporarily replace the State as trustes of the native
awassan public trust with respect to mattere relating to
Feinstatenent of Act 304 and the paysent of sirport-related
Fevenues to OHA from sources Other than airport. revenve:
and. (4) determines ubether disputed itens should be included
Ss incone, proceeds, funds and/or revenues owed to OHA.
35."Ghn is also entities to injunctive relief that bare the
Seite and ite agents, employees and official from opposing
steps to reinstate Act 304 and to pay airport-relatea
Income, proceeds, funds and/or revenues to OWA fron sources
other than airport revenues.

WHEREFORE, Plaine ffs pray for judgeent against the
state for: (2) sccounting, restitution and/or damages: (2)
declaratory relief set forth above; (3) injunctive relief
get forth above; (4) attorneys’ fees and costs; pre-judgent
nd post-judgnent interest; and (5) euch other relief ae
Geened fair and equitable to the [cleurt.

 

  

 

 

 

 

 

 

 

(pmphasie added.) In sum, the plaintiffs asserted claims for
(2) breach of fiduciary duties as trustee, flowing from
violations of HRS chapter 10, the Admission Act, and the Hawai'i

State Constitution, (2) breach of the Act 304 settlement

 

agreement, (3) viclation of the Contract Clause, and

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(4) misrepresentation and non-disclosure. The plaintiffs

 

requested relief in the form of (1) accounting, restitution,
and/or damages, (2) declaratory relief, (3) injunctive relief,
(4) attorneys’ fees and costs, (5) pre- and postjudgnent
interest, and (6) such other relief deemed fair and equitable to
the court

In response to the plaintiffs’ first amended complaint,
the State filed a notion to dismiss the complaint on Septenber
15, 2003. Therein, the State argued that the circuit court
lacked subject matter juriediction over the case ané that the
complaint failed to state a claim upon which relief could be
granted. specifically, the State maintained that the plaintiffs’
claims were barred by: (1) lack of justiciability; (2) sovereign
immunity; (3) statute of Limitations and various notice
requirenents; (4) ree judicata; and (5) collateral attack.

on October 13, 2003, the plaintiffs filed a memorandum

in opposition to the State’s motion to dismiss

 

‘Therein, the
plaintiffs alleged that the State waived its sovereign immunity

in HRS § 662-1(2) (1993)"" and HRS chapter 673, entitled "Native

RS § 661-1(2) provides in pertinent part

Jurisdiction. The several circuit courts of the state
shall, subject to appeal ae provided by law, have
Griginal jubisesction to hear and determine the following
fatters, and, unless otherwise provided by lav, ebsll
Getermine ali questions of fact involved without the
Sntervention of # jury.
Ta) All elaine against the State founded upon any
Statute of the State; oF upon any regulation of
executive department) oF upon any contract,
expressed of isplied, with the state, and ail
claims which may be referred to any guch court
(Gent ined...)

  

 

 

 

 

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ee
Hawaiian Trusts Judicial Relief act." The plaintiffs also

argued that their claims were not barred by the statute of
Limitations because the instant action was timely filed and that
the notice requirements alleged by the State were not applicable
in this case. Further, the plaintiffs contended that their
claine were not barred by res judicata and did not seek to
improperly collaterally attack QHA I. On October 17, 2003, the
state filed its reply menorandum, in which it reiterated
arguments advanced in the motion to dismiss.

on Novenber 10 and 12, 2003, the circuit court held
hearings on the State's motion to dismiss. At the hearings, the

parties reasserted arguments raised in their pleadings. After

%(.. scontinuea)
by the legistature; provided that no action
Shall be eaineained, aor shall any process issue
Sgainee the state, based on any contract or eny
mee OF any etate Officer whlch the officer se
Sot Suchorized to make or do by the laws of the
State, nor upon any other cause of action than

berein set forth

 

 

 

(Bold enphasie 1s original.)
1B WRE § €72-2 (2995) provides in pertinent parts

waiver of immunity. (a) The State waives ite
anmunity fer any Breach of trust or fiduciary duty resulting
Hon the acts of omissions of ite agents, officers and
Eployeer in the sanagement and disposition of trust funds
snd resources of

 

ici | the native Havaiian public trust under article
Hii, sections 4, S, and 6 of the constitution of
The‘ state of Hawai'i Smplenenting section 5(f
Of the Admission Act:
be fable in the same manner and to the sere
S‘privete individual nder like cizcunstance, but
be'liable for punitive danages.

 

(wold emphasis in original.)

w1e-
*** FOR PUBLICATION ***

 

 

indicating its inclination to grant the motion, the circuit court

stated:

this [clourt ie still of the mind that there has been no

Jegielstion since GHAI was handed dom, and in orger for

the plaintiffs) to successfully prosecute any claim (they)

may have ate for breach of fiduciary duty,

There hae fo be a measure of damages, and that’s where the

elourt i struggling, is to find the seasure of danases

T don't know how [the plaintiffs] can evecesetuily,

‘claim without relying on (Act 304], and so

 

 

 

 
 

P for the percentage to be taken cat and evarded co [the
plaincifte) still remaine unclear)"

 

 

Nevertheless, at the close of the Novenber 12, 2003

court “set a schedule for further briefing"

 

hearing, the circi
because it “needed to have further education on some of these
sesues(.1"

on Novenber 17, 2003 and in response to the court's
request for further briefing, the plaintiffs filed a supplenental
menorandum in opposition to the State’s motion to dismiss. In
addition to argunente they previously asserted, the plaintiffs
posited that, "even if the measurement of compensatory damages
presents a political question, dismissal of the case is not

warranted." Specifically, the plaintiffs argued that “(t]he

 

measurenent-of -damages-using-Act 304 [issue] does not
‘inextricably! require dismissal here because it is clear that
the liability issues are justiciable and the [clourt has the
power to formulate whatever appropriate renedies should flow from
a finding of wrongdoing[,]* such ae: (1) “nominal damages";

(2) ‘an accounting’; and (2) ‘attorneys’ fees.” The plaintiffe

 

further noted that, "regardless of whether the damag

o18-
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question, the [c]ourt can appropriately

 

presents @ political
resolve the liability issue and leave the remedy for the

legislature to enact.” In other words, the plaintiffs maintained

 

that the “lisbility iseues can be bifurcated in order that
Litigation may proceed.

on Wovenber 21, 2003, the State filed a supplemental
memorandum in support of its motion to dismiss. In adéition to
reiterating arguments it had previously made, the state, in
response to the plaintiffs’ suogestion of bifurcation, posited
that such a “suggestion{] constitute [s] 2 roadmap for vaste of

 

judicial resource:
on November 25, 2003, the circuit court held another
hearing on the State’s notion to dismiss. After the parties
presented cral argunent, the court noted that the state's
arguments regarding the statute of limitations, sovereign

1 of the

 

immunity, and res judicata did not warrant dismis
complaint. However, the circuit court ruled:

Turning finally to the question of justiciability and
the political question. That's where thiz.(cloure believes
fhe rux of the fight ie on thie matter. 1 Shink that there

sono question that the suprene Court in GHA? made
Gekermination that the disnute should co back to the

SE eritures revenue

der chapter 10. ané without Chet quigance the Teloure

‘could not addrent the question of danaaes or the iudicialiy
Ssheoeable etancsrd oy which HA'@ share can be deversined

[plereeating everything that has been ascerted
in connection with thie

‘the _case at bar. it sens to
always co back to the lesislature can ultinately provide the

Tiven {fat the legislature the (eic] OMA 4e faced with
the comment by the legislature that oh, you lost ‘the
Ease ar bar, it still cones down to 2 legislative
Seterminatién, and the [clourt simply could not get that cut
of ite mind, soteithetanding the quality of briefing that
GHA submitted.

 

 

 

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$0 the {clourt does conclude that we still have at the

awe ateack ne
ite
Teck! Ty ang

Samages -1

the axena in eb lace:
Be fer these and any other good causes shown in the record,
Ee ill ven 7 sf

(Bmphases added.) The circuit court entered a written order

dismissing the first amended complaint on December 26, 2003.

2. The Plaintiffs’ Motion to Amend

After the State moved to dismiss the first amended

complaint but prior to the court’s dismissal of the complaint,
the plaintiffs moved for leave to file a second amended complaint
on October 1, 2003. The proposed second amended complaint
[hereinafter, the original second amended complaint]: (2) added
va cause of action for breach of the covenant of good faith and
fair dealing implied in the Act 304 Settlement because upon
further reflection counsel for [the plaintiffs] believe[ ] that
the State's failure to oppose the FAA’s position not only
constitutes a breach of the Act 304 Settlement as a contract but
also the covenant of good faith and fair dealing implied in the
Act 304 Settlement"; (2) deleted the claims for misrepresentation
and non-dieclosure; (3) deleted “relief seeking to reinstate Act
304 because upon further reflection [the plaintiffs) believel ]
that this can only be accomplished by the legislative branch";
and (4) clarified that, ‘although [the plaintiffs] alleged
damages measured by the standards established under Act 304, the
fact that [QHA I) effectively repealed Act 304 is not relevant

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ee
because the State’s alleged wrongs caused the effective repeal of

Act 308."
on October 13, 2003, the State filed a memorandum in

opposition to the plaintiffs’ motion to amend, in which the State

argued that “the proposed amendments are futile’ and that the

plaintiffs "knew or should have known of the proposed amendments

 

when the initial complaint was filed.* In response to the

State's memorandum, the plaintiffs asserted that the proposed
amendments were not futile:

After the circuit court orally dismissed the first
amended complaint, the plaintiffs filed a supplemental motion in
support of their motion to amend on November 28, 2003. The
plaintiffs attached to the memorandum a revised second amended
complaint (hereinafter, the revised second amended complaint].
In addition to changes proposed in the original second amended
complaint, the revised second amended complaint requested the
following declaratory relief:

(The plaintifte are] entitied to a declaratory judgment that

declares chat the State breached fiduciary duties as trust

Sf the native Hewaiian public trust, breached the Act 308

Sectiement, breached the covenant of good faith and fair

Sealing inplied in the act 304 Settlement, violated H.R.S.

Ghapter 10 and/or violated Article X11, Sections 4-6 of the

Einbeitucion of the state of Hawali, and chat the stace’s

breaches, errore and omissions ae set forth above were

Gubstantial factors that resulted in the passing of the

Forgiveness Act and the Havaii Suprene Court's invalidation

of ace 300 dn (OHA ZI

on December 1, 2003, the State responded to the

 

 

  

 

  

plaintiffs’ supplemental memorandum and alleged that:
*** FOR PUBLICATION ***

 

To the extent that OHA seeks to engraft a “new cla:
for declaratory juagnent onto the old cisim for declaratory
jedgeent, that veguest ie fucile, The law is that
declaratory jedgrente may only issue in "cases of actual
controversy,” and “where an actual controversy existe
Between contending parties.”

suse thie court hag already ruled that OWA‘s claine
for monetary and injunctive relief are non-justiciable,
Geclaration that the state violated a fiduclary duty,
Breached # contract, ete., would be @ purely advisory,
Gbinig, Because ofA will not receive monetary oF
Pejunctive relief ae a result of any such declaration, it
would have no judicial consequences for OHA.

 

 

   

(emphases in original.) The State also asserted that, *(s]imply
20 a matter of procedure, there is no basis for [the plaintiffs’)
fsing.*

on December 19, 2003, without holding a hearing on the
matter, the circuit court entered an order denying the
plaintiffs’ motion to amend.

3, The Plaintiffs’ Motion to Bifurcate

After the circuit court had dismissed the first amended
complaint, but before denying their motion to amend, the
plaintiffs filed a motion to bifurcate on November 28, 2003.

ted that the “request for bifurcation is in part based

 

They ai
on [their] request to amend [their] declaratory relief prayer" in

the revised second amended complaint. Thus, the plaintiffs

 

lequested the circuit court to “rule on the [the motion to amend]
before ruling on thie motion because [the plaintiffe'] prayer for
declaratory Liability relief is an important part of this
motion." Specifically, the plaintiffs asked the circuit court to
sallow [them] to proceed with the Liability issues in this case

sneluding the pursuit of the declaratory liability relief sought

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and any other relief that is not based on Act 304 as a measure of
damages (e.g., nominal damages, attorneys’ fees and costs),
inasmuch as these issues are clearly justiciable.*”

on December 1, 2003, the State filed its memorandum in

opposition to the plaintiffs’ motion to bifurcate. The State

 

argued that

Bifurcation Je improper because: (1) (the plaintiffs]
ignore) the “expedition and economy requiresente of the
plese text of Hawaid Rule of Civil Procedure [(HRCP) Rule)
[oth (12003)"]; (a) (ebe plaintiffs’) position ie
{Hegical, ana the requested bifurcation can serve no legal
purpese;_and (2) there i¢ no case law supporting [the
Plaineiffe'] request for bifurcation

 

 

‘The State additionally assert:

 

ven more fundamentally, (the plaintitfe’] request i not
Feahy.e request ror *bifureation’ at all. Bifurcation
Typically involves separating two claims or iesues and then
Elneidering them sequentially. The purpose is to avoid
Scneceseariiy iitigsting the second claim or issue if the
fret ie resolved a certain way (egy, determining liability
fo that issues of dansges need not be considered
thd until the iret phase results ine finding of
lablivtyi. "in stark contrace, there indisputably will not
be a second phase in this case because thie court has
Diready ruled that there are no judicially manageable
Standarde to provide OWA a renedy. OHA does not actually
Seek sbifureation,* but, rather, seeks & one-step-only
Foling on Liability, with no judicial renedy step ever to

follow.

 

 

 

 

 

   
    

 

4 We note that the plaintiffa’ motion to bifurcate alternatively
requested sicave so conduct limited preservation discovery during the
Thdeterminate and potentially lengthy period of time that this case may be on
appesi{}" which the circuit court granted, However, thie issue is not raised

on appeal.

 

REP Rule 42(b) provider thet courte “may order a separate trial of
any clain er issues! always preserving inviolate the right of trial by
Suiyas given by the Conetitution or 2 statute of the state or the United

States”

 

 

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Rather than ‘bifureate’ so that resolving a dependent
senue (guae, remedy) might be avoided once a preceding issue
ig determined (g.g., 2 Fuling denying liability), OHA aeke
for the exact opposite: it ake this court to reach an i
that it hae slvesdy determined need not be reaches because
ho renedy can iseve even if 1iability were found, Thue,
Father than bifureating to preserve scarce judicial
resources, OHA asks for “bifurcation” to burden judicial
resources for no practical purpose.

 

 

(Emphasis in original.)

After a hearing on the matter, the circuit court
entered an order denying the plaintiffs request to bifurcate the
justiciable and nonjusticiable issues.

4. Judgment and Notice of Appeal

on May 19, 2004, the circuit court entered its final
judgment in favor of the State and against the plaintiffs “as to
all clains asserted against [the State] in plaintiffs’ first
amended conplaint.* The court also stated that “[t]here are no
remaining claims" and that, in any case, “[alny remaining clains
are dismissed without prejudice."

on June 8, 2004, the plaintiffs filed a timely notice

of appeal.

A trial court's diem
juriediction ds a question a
Moreover, we adopt the view of the Winth Cireust Court of

Appeals in Love v. U.g., 671 P.24 1488 (9th Cir
United Staten, 915 F.zo t2ez (sth cir.

Gur review lof s motion to dismiss for lack of
Subject satter jurisdiction) is baeed on the
Contente of the complaint, the allegations of
which we accept as true and construe in the
Tight most favorable to the plaintife.
Ziemiseal ie improper unless “it appears beyond
Goubt that the plaintifé can prove no eet of

 

      

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ee

facte in eupport of his claim which would

eneitie him to relief
4d, at 1492 (citations omitted)

Norris v. Hawaiian Airlines, Inc., 74 Haw. 235, 239-40, 842 P.2d
634, 637 (1992) (brackets in original) (some citations omitted) ,

 

affid, 512 U.S. 246, 266 (1994).
B. Motion for Leave to Amend Complaint

orders denying motions for leave to anend a complaint
are reviewed for an abuse of discretion. See Hirasa v. Burtner,
68 Haw. 22, 26, 702 P.24 772, 776 (1985)

‘the trie} court abuses its discretion if it bases ite ruling
Gh'an erroneous view of the law oF on @ clearly erroneous
Soecceneat of the evidence. Stated differently, an sbuse of
Bitcrecion cecure where the Erial court has clearly exceeded
fhe sounds of reseon of Sievegarded rules or principles of
fhe or practice to the gubstantial detriment of a party
iitigant

 

 

 

er Ins. Co, v. Hinshaw, 103 Hawai'i 26, 30, 79 P.3d 119, 123
(2003) (citation omitted) .

Irz. DISCUSSION
ether the Circuit Court Erred in Di he
Plaintiffs’ First Anended Complaint

 

As previously indicated, the circuit court dismissed
plaintiffs’ first amended complaint, essentially because the
plaintiffe’ damages, as requested in their complaint, presented a
political question that collaterally attacked QHA I inasmuch ae
the danages were sought pursuant to Act 304, which this court had
previously invalidated in QHA I.

The plaintiffs’ primary contention on appeal is that,
contrary to the circuit court’s conclusion that the requested
danages were nonjusticiable, the complaint did request

-26-
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Justicieble relief. The plaintiffs maintain that, in any
the court was not Limited to the relief pleaded in the complaint,
put *had the obligation to formate whatever appropriate
penedies should flow froma finding of Liabiliey, even if it Se
not the relief prayed for by [the plaintiffe]." Additionally,
the plaintiffs argue that the claims in the complaint were
justiciable ineemuch as determining whether the state breached
jee trust or contractual duties is “for the courts to decide.”

In response, the State first azgues that the complaint
wae properly @ismissed inasmuch as the plaintsffs failed to state
a claim upon which relief could be granted. Regarding the relief
sought in the complaint, the State agrees with the circuit court
and posite that, because the plaintiffs’ relief relied upon the
now-invalid Act 304, the complaint lacked justiciability.

tn considering the State’s moticn to dismies, the
cizeuit court, av previously stated, did not believe dismissal
was warranted based on the state's argunente regarding statute of
limitations, sovereign inmunity, and res judicata." Rather, the
3 was based on ite conclusion that the

circuit court's diam

   

plaintiffs’ requested damages were nonjusticiable and chat the

—_—
qe wove fully discussed infra, our effirnance of the circuit, court!

suageent 24 Favor of tye seate ie Based on faSlore to seaue 9 Claim, SOL
sugonent 22 Ef" TTaftation grounds. See Gobdv. Hartigan 6 Havel’ St. 109
ana states FF for aed m7, (ase8) (stating that “lala sppellate coors tay

ook? Fuagaent of [the trial] court on any ground in the record thas
2itiee t leeirmance’) Shue, although the parties presented growers fit
rupperte Sf ether grouide in support of their respective, Positions: 205
seepect 0 CSPOT Teed ee the argunente raised chat ere related, to, qisposicive
Gincussion if, {ie to state # claim upon which relief can be sranted nd
Starste of limitations.

 

   

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eee

complaint scught to collaterally attack QHA I. The court did not
determine whether the complaint stated a claim upon which relief
could be granted. Accordingly, as a threshold matter, we must
determine whether the plaintiffs’ complaint stated a claim upon
which any relief could be granted.
2. The Plaintiffs clains
As previously indicated, the plaintiffe’ complaint

stated their claims as follows

The State breached its fiduciary duties as trustee of the
Bative Hawaiian public trust, breached the Act 30s

Element, violated 4.2.5. Chapter 10, vaolsted article
XIZ, Sectitn 4-6 of the constitution of the stave ot
Hawaii, ("] violated the Contract. Clause of the United
States Constitution, Article 1, Section 10, clause 1, and ie
Liable for misrepregentation aid non-dieclovure(

 

We note that the basis of each claim raised in the complaint is
intertwined with the passage of the Forgiveness Act.

Eesentially, the plaintiffs allege that, had the State challenged
the FAA Mencrandum, Congress would not have passed the

Forgiveness Act. The plaintiffs also allege that, had the state

 

informed them of ite decision not to challenge the memorandum, it
would have afforded them the “fair opportunity to take measures
to step into the State’s position to oppose the FAA" and prevent

the enactment of the Forgiveness Act. We address the parties’

 ariefly stated, article x11, section 4 provides that the ceded lends
vehall be held by the State as public trust for native Hawailane ed cie
general public." Haw. Const. art. XII, § 4. Article XI1, section &
establishes OHA and states that “iolal shall hold titie to all the veal and
personal property now or hereafter set aside or conveyed to it uhich shat be
held in trust for native Hawaiians and Hawaiians.” New. Const. ere Sotog's
Article XIT, section @ details the powers of the OMA trustees, jaw. feage!
axe, XIL, $16. “Accordingly, by positing that the State vislaced the feregcing
sections of the Hewai"t Constitution, the plaintiffs argue that the Stace
breached ite duties ae trustee of the public land truce

 

 

   
  

   

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arguments and turn to whether each of the foregoing claims stated
a claim upon which relief could be granted
a aintiffe’ claim fo ment

As previously indicated, the plaintiffs claimed that
the State “breached the Act 304 Settlement” by failing to
challenge the FAA Memorandum. A claim alleging breach of
settlement requires that the plaintiffs establish that a
settlement agreement, or contract, existed between the parties
See Harris v, DeSoto, 80 Hawai'i 425, 432, 911 P.2d 60, 67 (1996)
("a settlement agreement is a contract"). Therefore, the
plaintiffs’ claim for breach of settlement requires that they
first establish that 2 contract or settlement agreement existed
between then and the State.

In the instant case, because the plaintiffs suggest
that legislation -- ice., Act 304 -- constituted a contract or
settlement agreement, this court must review the language of the
act and the circumstances surrounding its enactment. See Koster
uu. City of Davenport, Iowa, 183 F.3d 762, 766 (ath Cir. 1999)
(citations omitted). The United States Supreme Court provides
further explanation on the determination of whether legislation

contractually binds government :

  

maintained that sbsent_sone

For many decades, this court
flesr indication that the

fo 3 ‘ested righte
= Lares 2 pol = DLE rhe leais ature
fall ordain otherwise.” Dodge v. Board of Education, 302
b:8. 74, 75, 58S. Ce- 96, 100, @2 L. Bd. 57 (1937). See
also 28
fon, 300, 302, a¢ L. Ba, 602 (i861) (“Such an interpretation
Ie not to be favored"). Thie well-established presumption

 

-29-
 

** FOR PUBLICATION ***

 

Je grounded in the elenentary proposition that the principal
function of 2 legislature ie not to wake contracts, but te

snake lawe that

 

fe, 82 UB. 685 (1936). Policies, dnlike

ire inherently subject to revision and repeal,

Gna to construe laws ar contracts when the obligation ie not
Ty\and unequivocally expressed would be to limit

idelly the essential powers of a legislative body.

Sndeed, **(t}ne continued existence of « government would be

of no great value, if by implications and presumptions, it

‘tas disarmed of the powers hecessary to accomplich the ends

Of ite creation." Keefe v, Clark, 322 U.S. 393, 397, 64 5.

ge, Sora, dere, ee 10Bd. Tiae Ci9ie) (quoting Charlee River

Brigge vi aren Bridge, 12 Pet. 420, 5 Ba. 773
less) thos, the patty aageriina ihe creation of 2

sontract must overcome this well-founded presumption
supra, 302 U-S., at 75, s¢ 6. Ct-, at 100, ang we proceed
° -

& m7
‘Sontaure of amy_contractual oblication.
‘Tndetermining whether a particular statute cives rise
roa contratiual obligstion ‘it is of first importance to
-* podae v, Board of

‘suatine the langiage of the sxatute:
Eiucation, Gupra, at 76, 568. Ct., at 100.” See also
Indiana-ex rel, nderaof v,_ Brand.

 

 

   

 

 

 

supra, 303 0-6
Serer Ces, at 407 (chnere the claim is that the state's
policy enbodied in a statute ie to bind ite
Thetrumentalieies by contract, the cardinal inquiry {e as to
the terme of the statute cupposed to create such
contract"). “If it provides for the execution of @ written

contract on behalf of the state the case for an obligation

Binding upon che state if clear." 302 U.S., at 78, 6¢ 8.

Gers ae 200 emphasis supplied) | But absent “an adequate:
© of the state

1st U8. 395, 386"

‘Kinconsin @ Michigan X Cov. Powers.
Je, 24 €. Ce- 107, 108-209, 48 1. Be. 229 (1303), this

dcubtedly 2 scheme of public reaulation to be. ia,
addition, a private contract to which the State ie a party
Nat/]_R.R. Passenger Corp, v. Atchison Topeka & Santa Fe Ry, Co.,

451, 465-67 (1985) (sone emphases in original, sone

 

08

 

 

470 U.S.

added) (brackets in original); see also United states Trust Co.
of New York v. New Jersey, 431 U.S. 2, 18 1.34 (1977) (In

@ contract when the

 

general, a statute is itself treated

language and circumstances evince a legislative intent to create
private rights of a contractual nature enforceable against the

State."). Courts proceed cautiously in identifying those

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ee
statutes which contractually bind the government to ite terms
because:

Finding « public contractual obligation hes considerable

EHece “sE'means that # subsequent legislature is not free

EeSScacleanely inpelr that obligation for merely ration

[lasoas. Secsuse of this constraint on subsequent

TGELEeuress and ehue on subsequent decisions by those who

AeSlenene the public, there i. @ Bigher burden to

EEPESiich that's concractual obligation has been created.
are)la y | 173 F.3d 46, 60

(1st cir. 1999).

Based on the foregoing principles, this court must,
with regard to Act 304, firet “examine the language of the
statute" to determine whether it provides for “the execution of a
written contract on behalf of the state” or otherwise evinces

clear intent to bind the State to ite terms, Nat'l RR.

Passenger Corp., 470 U.S. at 466-67 (citations and enphasie
omitted). The plaintiffs fail -- as they did before the circuit
court -- to point to any language in Act 304 showing legislative

intent to enter into a contract. Indeed, nowhere in Act 304 does

jt provide for the execution of a written contract or utilize

 

janguage indicating an intent to create @ contract. Neverthele:
the plaintiffs urge this court to look to “the circumstances of
net 304"s passage, including the legislative history reflecting
ite characterization as a negotiated ‘settlement’ and

sconclusion’ or ‘resclution[.]'* Specifically, the plaintiffs

contended in their complaint that:

<31-
*** FOR PUBLICATION ***

 

‘The State executive and legislative branches and OHA entered
into negotiations to clarify OHA’s "incone and proceeds from
that pro rata portion of ehe trust referred to inv Article
XI, Section 4 ct the Consticution of the state of Hawaii
‘The settienent agrecnent they reached wae docunented ae Act
304 (1950), neveinateer referred to ae the "Act 30%
Settienent "in virtually every committee report or comment.
fon Act 304, the term “settlement” oF "Fesolution’ ie used £0
Characterize the agreement reached. rm aadition, the
legislative nistory surrounding Act 304 clearly demonstrates
2 legislative comitnent not te unilaterally repesl oF
Rodify act 30s,

 

 

 

   

 

(Sone brackets in original.)
We acknowledge that the legislative history behind act

304 utilizes the terms “settlement” and "resolution." However,

 

the stated purpose of the Act vas

 

to clarity the basis for determining the revenue due to
ona] for the betterment of the conditions of mative
Hawaiians under provisions of the state constitution and
Chapter 10," (HRS)

More’ specifically, this bill amends the definitions of
cpublic land’ erase’ and” * ty af

ake_up the public lend trust for native Hawaiians and the

Seneral public and which revenues derived from those lands

 

Site Used in'decernining the Income and proceeds to be
Eraneferred to [OHA] to be used for the betterment of native
Nawaiiane

Hee. Stand. Comm. Rep. No. 648-90, in 1990 House Journal, at 1082
(1950) (emphases added). Further, the legislative history
indicates that Act 304 was meant to be “the first step in the
resolution of a series of complex questions about what
constitutes the extent of the trust holdings and the trust
obligations of the State to the native Hawaiians,” Hse. Stand.
comm. Rep. No. 306-90, in 1890 House Journal, at 960 (emphasis
added), and “leaves open for future negotiations the question of
entitlenents for Hawaiians with less than fifty per cent Hawaiian
blood and the question of establishing a separate trust fund to

benefit 211 Hawaiians regardless of blood quantum." Hee. Conf.

-3a-
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Comm. Rep, No. 91, in 1990 House Journal, at 801 (emphasis
added); see algo Hee. Stand. Conm. Rep. No. 648-90, in 1990 House
Journal, at 1082; Sen. Stand. Conm. Rep. No. 3073, in 1990 Senate
Journal, at 1253. Therefore, we believe that the clear and
specific stated purpose of the Act reveals that the legislature
id not intend, as the plaintiffs urge, to enter into an
enforceable contract with the plaintiffs or restrict successive
legislatures from modifying or repealing any language therein.
Accordingly, absent the “clear and unambiguous" intent required
to contractually bind the State, we hold that Act 304 does not
constitute a valid and enforceable contract or settlement
agreement between the parties. We, therefore, conclude that the
plaintiffe’ claim for breach of settlement was properly dismissed
inasmich ae it failed to state a claim upon which any relief
could be granted.

b. the plaintiffe’ claim for breach of trust

With respect to the plaintiffs’ claim for breach of

trust, the plaintiffs argue on appeal that *[t}he state,

 

trustee of the ceded lands trust, may be held accountable under
standards applicable to trustees of private trusts.” They also
assert that ‘[t]he questions raised by [their] breach of trust
elain do not present a political question because (1) they are in
fact the ‘traditional fare’ of the judiciary, (2) there are

adequate judicially manageable standards for resolving them, and

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(3) they do not involve an initial policy determination of a kind

best left to the legislature.
In response, the State contends that the plaintiffs

have failed to state a claim for breach of trust because, inter

alia,

2) {elke state's fiduciary duty ie owed not only co
native Hawaiians, But also to the general public. OHA now
Felegates the geseral public to non-benefielaries. Even if
the state settled a claim against the State to benefit the

‘Of OWA--a proposition that is
There was no breach of trust.
the Aduieeion Act nor the Hawaii Constitution
Confers any preference or priority en the purpose of the
betterment of native Hawaiians... (and)

Te) whether or nota trustee has acted with the
requisite prodence is adjudged not hindsishttully by outcone
But solely by the circumstances exiating at the ting of the
Sct. in determining whether a trustee has acted prudently,
the court must look av the facta ae they existed,

 

 

    

 

 

Deepite paying lip service to the circumstances
existing at the time principle, OWA has erroneously premised
Ste breach of trust clair solely on the slleced cutcone that
the Forgiveness Act caused the denise of Act 304 and
therefore the decision in QHAZ.” OHA does not ana cannot
even allege that the state's decision to accept the
Forgiveness Act wae not prudent

(emphases in original.) The State correctly states that "the
court is not required to accept conclusory allegations on the
legal effect of the events alleged,” such as the allegation that
the State breached ite fiduciary duties to OHA." Likewise, this
court also need not accept the conclusion that “[the state did
not breach its trust duties." Rather, as previously stated, we
must first decide whether the plaintiffs stated a proper claim
for breach of trust.

in the instant case, the complaint alleges that the

State breached its trust duties by:

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FOR PUBLICATION ***

 

(2) failing to challenge the positions set forth in the FAR
Memorandum) (2) resolving ite dispute with the FAA by
obtaining « forgiveness of the prior $30 million payment in
‘exchange for a promise not to make future airport revenue
payments to ciA.and not to appeal the positions set forth in
Ehe FAA Menorandun; (3) breaching the trust duty of
impartiality by not challenging the positions sat forth in
the FAA Menorandum in order to use them as a sword in (OHR
ZI and subsequent appeal; (4) failing co timely advise OWA
That the State was not going to continue to challenge the
‘clone set forth in the PAA enorandun or IG Report, and
Ehat it was planning to settle wieh the federal government,
in order to provide OHA with = fair opportunity fo take
eseures to ptep into the State's porition to oppose the
Fax; and, (5) failing to obtain instructions from the Court
on how to proceed given ite conflict position of defending
the State against OHA in OHA T and having a duty to
Challenge the positions set orth in the FAA Memorandum

 

 

 

As stated previously, the State holde ceded lands in a
public trust for five purposes, one of which is for the benefit
of native Hawaiians. See Section I-A. Article XII, section 4 of

the Hawai‘ State Constitution, see supxa note 15, confirms that

 

lands granted to the State by the Admission Act “shall be held by
the State as a public trust for native Hawaiians and the general

public," thereby designating two groups of beneficiaries. Under

 

the Admission Act, the State assumed a fiduciary duty to hold the
Jand “together with the proceeds from the sale or othe:

@isposition of [ceded lands] and the income therefrom.”

 

Admiesion Act, § 5(f) (emphasie added). As this court held in
Pele Defense Fund v, Paty, 73 Haw. 578, 637 P.2d 1247 (2992)
[hereinatter, Bele Defense], “{a]rticle XII, § 4 imposes a

fiduciary duty on Hawaii’s officials to hold ceded lands in
accordance with the § 5(f) truet provisions. Id, at 605-06, 837

P.2d at 1264.

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ee
‘This court further noted that, in administering the

ceded lands, the State is subject to the standard of ‘high
fiduciary duties" recognized in Ahuna v. Department of Hawaiian
Home Lands, 64 Haw. 227, 338, 640 P.2d 1161, 1168 (1962), which
include “well-settled” principles laid out by the federal courts
in dealing with lands eet aside by Congress in trust for the
benefit of native Americans and Alaskans, noting that: (1) “the
conduct of the government as trustee is nessured by the same
etrict standards applicable to private trustees"; (2) one
epecific trust duty includes “the obligation to administer the
trust solely in the interest of the beneficiary"; and (3) "a
trustee must deal impartially when there is more than one
peneficiary.” Id, at 339-40, 640 P.2d at 1168-70 (emphasis
added)

‘The common law of truste also identifies two instance:

where a trustee is under a “duty to inform." Firet, a fiduciary

s bei
property.'* Eaireloth v, Lundy Packing Co., 91 F.3d 648, 656

(4th Cir, 1996) (quoting Restatement (Second) of Trusts § 173
(1959). Second, in limited circumstances, a trustee is required
to provide information to the beneficiary even when there has

been no specific request:

ordinarily the trustes is not under « duty to the
Deneficiaty to furnish information to hin in the absence of
S"requeet for such information... - [iowever,) he ig

3 benetiel

 

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Benefielss a ©
ths third pert to his interest.
Griggs v. E.I. DuPont de Nemours & Co., 237 F.3d 371, 380-81 (4th

cir. 2001) (emphasis added) (ellipsis and sone brackets in
original) (citation omitted)

In their complaint, the plaintiffs alleged that the
State violated, inter alia, the duty of impartiality and the duty
to inform them of ite decisions regarding actions in response to
the Federal government’e position en its grant conditions. They
further alleged that, due to the State's conduct, the trust

beneficiaries,

 

presented by the plaintiffs, lost the right to
receive any future income from airport revenues for the use of
ceded lande under the Admission Act, the Hawai'i state
constitution, HRS Chapter 10, and Act 304. Pursuant to HRS

§§ 10-13.5 and -16, OHA may bring suit in ite corporate name, act

trustee in carrying out ite obligations, and serve as a

 

receptacle for the public lands proceeds under the public trust.
Therefore, the plaintiffe are entitled to bring a claim for
breach of the public lands trust and states a proper claim upon
which relief could, under the proper circunstances, be granted.
consequently, we next examine the State's defenses of

(3) soveresgn immunity, (ii) notice, and (iii) statute of

Limitations.

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4. sovereign immunity

The State contends that sovereign immunity bars the
plaintiffs’ claim for breach of trust. The State focuses on HRS
chapter 673 (codifying the Native Hawaiian Trusts Judicial Relief
Act) as a specific statute regarding waiver of the State's
sovereign inmunity, Specifically, the State contends that the
waiver is unavailable under chapter 673 because it ‘applies only
to claims for ‘the management or disposition of trust funds and
resources of [the land trust,]'* whereas, here, the plaintiffs
have “not even alleged inproper management or disposition of
trust assets.” (Brackets in original.) (Citation and emphasis
omitted). Second, the State argues that HRS § 673-9 (1993),
quoted infra, which provides that the waiver is inapplicable to
suits brought by OHA involving ite proportionate share of ceded

ves the

 

and or apecial fund revenues, applies such that it re
issue of OHA’s proportionate share to the legislature. Third,

the State contends that the implied waiver of sovereign inmunity

under United States v. Mitchel), 463 U.S. 206 (1963), and United
States v. White Mountain Apache Tribe, 537 U.S. 465 (2003), are

irrelevant to this case [because] Hawaii has a specific statute
(chapter £73) and)... Lelhexe is no feéera} coun!
hapter 673." (Emphasis in original.)

The plaintiffs counter that (1) BRS § 675-1 does apply
to their case because their claims relate to the mismanagenent of

trust assets or resources and, (2) if this court is to read

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section 673-9 broadly to exclude all claims “involving” OHA‘s

proportionate share of ceded land and special fund revenues, then
“the exception would swallow the rule” as any claim for unpaid
revenues would necessarily “involve” OHA’s proportionate share of
revenues, The plaintiffs further contend that, even if chapter
673 does not apply, damages still may be sought here because,
under Mitchel] and White Mountain Apache Tribe, “sovereign
immunity 4e waived where a government undertakes statutory or
constitutional trust obligations.”

Generally, *[a] eovereign state is immune from suit for

 

money damages, except where there has been @ ‘clear
relinguishment’ of inmunity and the State has consented to be
sued.” Bush v. Watgon, 61 Hawai'i 474, 481, 918 P.2d 1130, 1137
(1996) (quoting Pele Defense, 73 Haw. at 605, 837 P.2d at 1264)
(internal quotation marke omitted). Although the United states
Supreme Court has held in Mitchell and White Mountain Apache
‘Tribe that, in specific circumstances, the federal government may
be held liable for money damages resulting from breaches of
trust, our courts have not yet determined whether claims based on

breaches of the public lands trust qualify for the same waiver.

In Pele Defense, which was decided a decade after Mitchell, this
court adopted the rule in Ex Parte Young, 209 U.S. 123 (1908),

that distinguished between allowable “prospective” relief and

Gisallowable “retrospective” relief, stating that:

39+
*** FOR PUBLICATION ***

 

If the relief sought ageinet 2 etate official is prospective
in nature, then the relief nay be allowed regardless of the
state's sovereign immunity. This ie true even though
Sccenpanied by a substantial ancillary effect on the state
Exessury. However, relief that 1 tantanount £0 an avard of

Sanages fora past violation of law, even though styled ©
Gonething else, is barred by sovereign immunity

 

73 Haw. at 60, 637 P.2d at 1266 (citations, internal quotation
marks, and ellipses omitted), Subsequently, in Bush, this court

noted that:

We decline to adopt the federal courte’ narrow view
fed on past illegal action is
oepective:" See Hap [v, Dep't of Qusticel,
G2s'F. Supp. (i4eo,) 240 [D. Haw. 19931], ated, a5 Pose
{a33), 338 Lith cir. 1995)]. Aw euggested by counsel for
the Agpellance during oral argument, such an interpretation
woule force potential clsinants to discern the potential
Tepact of proposed agency action, ascertain the threat of
injury, and acquire sn attorney to draft a complaint end
inetion® under [HRCP) mule 1) [-)

   

 

 

 

  

nan 2 sential
he Fell she for a peat violation
+ Gansges” or would

Bele iDefense, 73 Naw. at 609-10, 657 Pod at 1266 (citing
478 Us, 265, 278, 106 8, Cty 2932, 2940,

52 L- £a- 2a 209 (1985))

81 Hawai'i at 492 n.9, 918 P.2d at 1136 n.9 (emphasis added).
Given the principles in Pele Defense and Bush, it follows that
sovereign immunity may not be invoked by the State if the suit
seeks “prospective,” i.e., injunctive, relief and the state fails
to carry its burden of proving with specific facts that the
effect on the State treasury will be directly, substantially, and

quantifiably impacted. We, therefore, first examine the nature

 

4B We note that the requirenent that such impact be proven by specific
facts flovs from thie court's holding in Bush chat prospective” injunctive
Eeliet that barred the Departrent of Hawaiian Wonelande from honoring exieting
Inproper third-party sgreenente with non-beneficiaries and barring the
Deparenent fron creating new agreenents was permitted where 1t dig not have a
Pcbetantial cirect effect on the este treasury. #1 Hawaii at 482, 818 P28
at 1108, Fer further discussion, gee Eric K. Yananoto,

 

(continued...)

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* FOR PUBLICATION ***
Sse

of the relief being sought to determine if it is “prospective,”

jue., seeking an injunction against the State from violating

 

constitutional or statutory provisions, or “retrospective,”
seeking monetary or other danages, in nature.

The plaintiffs in this case essentially seek injunctive
and declaratory relief, as well as monetary damages, based on the
state's decision not to challenge the PAA regarding airport
revenue paynents and the State’s failure to inform the plaintiffs
of that decision. Inasmch ae all of the plaintiffs’ clains for
relief are based on past conduct, it would appear that the relief
being sought is retrospective in nature and that, therefore,
prospective or injunctive relief is not available, However, as
previously noted in Bush, this court has rejected “the federal
court’s narrow view that a claim for relief based on past illegal
action is necessarily ‘retrospective.'* Bush, 81 Hawai'i at 482
n.9, 916 P.2d at 1138 n.9 (citation omitted). If there is a
continuing violation of or ongoing breach resulting from a past
action, then prospective relief, ise., an injunction to stop the
continuing violation, ie available. Here, the plaintiffs seek
sinjunetive’ relief that is tantamount to an award of damages for
past actions inasmich ae the injunction relates to payments that
would be owed to CHA but for the passage of the Forgiveness Act

and the subsequent invalidation of Act 304. Unlike in Bush, see

 

 

   

Hishte-to-Sue, 16 U- Haw. L. Rev. 2 (1398)
Fetrospective distinction)

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supra note 16, the plaintiffs here do not seek an injunction to
stop @ continuing violation of law or breach of trust. Indeed,
there is no statute from which to enjoin the state from violating
inasmich as the invalidation of Act 304 has once again left this
court without judicially manageable standards to determine the
State's payment obligations to OHA under HRS chapter 10. As
such, the relief sought for the instant breach of trust clains is
sretrospective,” i.e, for declaratory relief and monetary
damages. We, therefore, examine whether the State has “clearly
relinguished’ its sovereign immunity with respect to
retrospective relief

In Taylor-Rice v. State, 105 Hawai'i 104, 94 P.3d 659
(2004), this court noted the following principles used by federal

courte when construing statutes regarding sovereign inmunit;

 

(2) va waiver of the Governnent’s sovereign inmunity will be
strictly construed, in terms of its scope, in favor of the
sovereign," Lane v. Bene, 528 U.S. 187, i92, 11e 8. ce
Seas, 138 L. Bd. 20-486 (3996) (citations omitted); (2) a
Ssiver of sovereign Semunity “must be uneguivecally
Sipreseed in statutory text,” id, (citation omitted) ; (3) ta
atuce's legislative history Cannot supply a vaiver that
Goes not appear clearly in any statutory text.” id; (4) cit
fe'not a court's right to extend the walver of sovereign

fed by the
495, 502, 60 8
Grrvess, e4 L- Be, 686 (1940); and (5) sovereign immunity
Sie not to be waived by policy argunente,- United states vy.
Huy. Raves Ieporting Co., 328 U.S. 654, 663, €7 8. Ct. 60i,

Stl. Bd. 577 (1587)

  

 

 

 

dd. at 110, 94 P.3d at 665 (brackets omitted).
HRS § 673-1 provides in relevant part that, “[t]he
State waives ite inminity for any breach of trust or fiduciary
duty resulting from the acts or omissions of its agents . . . in
the managenent and disposition of trust funde and resources of

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[the native Hawaiian public trust.J" A plain reading of HRS
§ 673-1 indicates that it unequivocally waives the State’s
sovereign immunity, and, inasmuch as BRS § 673-4(a) (1993)
provides for relief only in the form of “land or monetary damages
to restore the trust which has been depleted as a result of any
breach of trust duty," the waiver specifically applies to suits
for retrospective relief. Thus, as the State correctly argues,
we need not lock to the Mitchell line of cases to determine

whether there is an implied waiver of sovereign immunity; rathé

 

we examine whether HRS chapter 673 is applicable to the instant
claims.
The State contends that chapter 673 is inapplicable

because the plaintiffe “have not even alleged improper management

 

under section 673-1. We

 

or disposition of trust asset:
disagree. Ae the facts indicate and as discuesed previously, the
inetant breach of trust claina relate to the state’s handling of
its trust responsibilities with regard to a eignificant portion
of revenues paid and payable to OHA, i.e., airport special fund
revenues. Inasmuch as the revenues are derived from the ceded
lands trust, they are trust assets and were payable to OHA, as
provided at that time under Act 304. As such, the clains relate

to the states fulfillment of its fiduciary duties and its

management of trust assets.

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ee
‘The State next contends that, even if the claims fall

under HRS § 673-1, section 673-9 reserves the issue for the

legislature. HRS § 673-9 provides,

Inapplicability to share of office of Hawaiian affairs.
This chapter shall not apply to suite in equity or law
Brought by cr on behalf cf (OHA) in which the matters in
Controversy involve the proportionate share of ceded land or
Special fund revenues allocated to (OHA) by the legislature.

(gold emphasis in original.) We agree with the plaintiffs that
this suit does not involve the proportionate share of OHA's
revenues. At the time the conduct at issue occurred, OHA's
proportionate share of revenues was set at twenty percent under
Act 304. The instant breach of trust claims are for damages

resulting from the State’s breach of trust duties and do not

 

require a determination of OHA’s proportionate share of revenue!
unlike the suit in Yamasaki. Were we to hold otherwise, as the
plaintiffs contend, the “exception [under HRS § 673-9] would
swallow the rule." Accordingly, we hold that HRS chapter 673
applies to the instant claims, We now examine whether the
plaintiffs have complied with chapter 673's statutory
requirements with respect to notice under HRS § 673-3 (1993) and
statute of limitations under HRS § 673-10 (Supp. 2004), quoted
infxa.
Ai. Notice Under HRS § 673-3

in opposing the State’s motion to dismiss, the

plaintiffs contended that the written notice provision under HRS

§ 673-3 is inapplicable to their claims because that section is

<4a-
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entitled “Exhaustion of Administrative Renedies.* ERS § 673-3

states in pertinent part that,

(lefore an action may be filed in circuit court under thie
chapter, the party filing suit shall have exhausted a2
sdninistrative resedies available,

a oti fo-filing of el
‘Suit chat unlens appropriate remedial action ie taken suit
hall pe filed.

 

(emphases added.) Specifically, the plaintiffs maintain that,
inasmuch as there were no administrative remedies available, the
entire section is inapplicable, including the sixty-day-notice
requirenent. We disagree.

A plain reading of the statute indicates that
administrative renedies must be exhausted and written
notification of not leas than sixty days must be given. Thus,
notwithstanding the absence of administrative remedies, the
plaintiffs must still have complied with the sixty-day-notice
requirenent in order to meet the statutory prerequisites for
filing suit. Their failure to comply with the notice requirement
precludes us from reviewing any claims brought under chapter 673.
See Garcia v. Kaiser Found, Hosp,, 90 Hawai'i 425, 441, 978 P.2d
863, 879 (1999) (holding that “the circuit court did not err in
concluding that it had no subject matter jurisdiction as a result
of Plaintiff's failure to comply with the requirements of HRS
§ 673-12," which mandated that such claims be first filed with
the medical claim conciliation panel prior to filing suit); see
alec Hallstrom v. Tillamook County, 493 U.S. 20, 33 (1989)

(holding that (1) the sixty-day-notice requirement in the citizen

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OO
suit provision of the Resource Conservation and Recovery Act of

1976 (RCRA) was a mandatory precondition to suit and (2) the
plaintiffs’ failure to comply resulted in dismissal as the action
was barred by the ters of the statute). However, even assuming
arquendo that the statute does not apply, the claims are
nonetheless barred by the statute of limitations under HRS
§ 673-10, as discussed below.
44k, Statute of Limitations Under HRS § 673-10
The statute of limitation requirement under chapter 673

is found in HRS § 673-10, which provides:

 

Linttation on actions; native Hawaiians. Every clain
Aeing under thie chapter shall forever be barred unless
‘aetion 1s comenced within. 2 sit
action {iret accrues) provided that thin stature of
Sfnitations ahall be colled until July 1, 1990; provided
that the filing of the claim in an administrative proceeding
portuant co this chapter ehail toll any applicable statute
Ee finitations, and any euch statute of limitations shall)
Senain tolled until minety days after the date the decision
[i™endered in the administrative proceeding; provided:

  

 

 

 

ai S-shali forever be barred unles

 

 

added.)

 

(Bold emphasis in original.) (Underscored enph
‘The plaintiffs, however, argue that, because OHA is a

state agency, it is “immune from the statute of Limitations, *

pursuant to HRS § 657-1.5 (2983). The state contends that “HRS

2 Re €57-1.8 provides:

Limitation of actions not applicable to 5
sles actions provided for under thie or ai

 

Fre et 2 ae
SGplese the State is specifically designated in
SenhSotatute ae subject to the limieation period contained
therein. No defense co any acticn brought by the state or
(continued...)

   

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§ 657-1.5 does not exempt the plaintiffs from the statute of
limitations for thie lawsuit [because] OHA is a ‘separate entity
independent of the executive branch (HRS § 10-4 [(Supp.
2003)"*)), and OHA brought thie suit in its own corporate name
under § 10-16 [(1993)"], rather than as an agency of the state

on behalf of the people of the State." Me agree with the stat

 

Under HRS § 10-16, OHA “may sue . . . in ite corporate
name," and, pursuant to HRS § 10-4, the corporation is a
veeparate entity independent of the executive branch."
Therefore, OHA does not fall under HRS § 657-1.5 such that the
instant claime are immune from any applicable statutes of
Limitations.

The plaintiffs also contend that, because their clains
are based in equity, “the court is not bound by statutes of
Limitation[.]" In response, the State contends that “this court

cannot expand the legislature's limited waiver of immunity by

(continued)
‘any of ite agencies shall be predicated upon the lapse of
tines

(Bold emphasie in original.) (Underscored emphasis added.)

M BRS 5 10-4 states that ‘[tJhere shall be an office of Hawaiian
attaire constituted ae a body corporate which shall be a separate entity
Independent of the executive branca.”

RS § 10-16 provid

 

in pertinent part:

(a) [OHK) may eve and be sued in ite corporate name
‘The state shall not be lable for any acts or omissions of
the office, its officers, employees, and the nesbers of the
board of trustees, except as provided under subsection (b)

() In matters of tort, the office, ite officers and
employees, and the nenbers of the board shall be subject to
suit only in the manner provided for quite againet the state
under chapter 662 [relating co tor! liabiliey)-

 

47
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a

sequitable disregard’ of the conditions of the waiver." We agree
that we are held to the bounds of the applicable statutes of
limitation inasmuch as they set specific limits on the State's
waiver of sovereign immunity that we must "strictly construe” and
cannot extend under these circunstances. The application of
equitable tolling in thie jurisdiction has been, for the most
part, in the insurance context where a statute of limitations was
tolled from the time a claim for benefite was filed. See wrisht
ys State farm Mut, Auto, Ins, Co,, 86 Hawai'i 257, 362, 949 P.2d
397, 202 (App. 1997)

the federal courte generally agree that statutes of
limitations accompanying a waiver of sovereign inmunity should be
narrowly construed. irwin v. Dep't of Veterans Affaire, 496 U.S.

9, 94 (1990) (citation omitted). However, unless Congress has

 

provided otherwise, the federal courte generally apply @
rebuttable presumption that a statute of limitation is subject to
equitable tolling. id, at 94, In order to toll a statute of
limitations for a complaint filed after its expiration, a
plaintstf mst demonstrate *(1) that he . . . has been purauing

hie right diligently, and (2) that sone extraordinary

 

circumstance stood in his way." Belter v. Norton, 412 F. Supp. 26
sig, 126 (D.D.C. 2006) (citing Pace v, Diaualielmo, 544 U.S. 408,

| 25 6. Ce. 1807, 1614 (2005); Zerilli-Bdelalase v. N.Y, Citv
Transit auth, 232 F.3d 74, 80-81 (24 Cir, 2003)). Extraordinary

circumstances are circumstances that are beyond the control of

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the complainant and make it impossible to file a complaint within
the statute of limitations. Id, (citing United States v. Cicero,
214 F.3d 198, 203 (D.C. Cir. 2000)).

In the instant case, the plaintiffs do not allege any

facts or cite any legal authorities in support of their claim

 

that equitable tolling applies in this case. Moreover, we are
not aware of any facts in the record to indicate why the

plaintiffs could not have brought their breach of trust claims

 

within the two-year statute of limitations. The plaintiffs,
however, believe that the original complaint was filed within two
years of when they "knew or reasonably should have known that an

ert that, *(iJn

 

actionable wrong ha{d) been committed.” They
order for the statute of limitation period to commence, the
plaintiff! must have suffered, actual, rather than potential,
injury." (Smphasie in original.) The plaintiffs explain that,

before QHA1 vas decided, (the plaintiffs] at most knew of

the mere possibility that Act 304 might euffer denise by
Ret and the state's improper

But. [the plaintiffs] did not know,

     
 

 

| the danage to [the plaintiffs) wa
logs of the Fight to receive monies ~ from what
inder Act 304, which happened when Act 204 was r
jefore OHA I, ‘no court had ever “held” that Act 304
conflicted with any other law. Until OHA, the State
cfficis! revisor left Act 304 intact in the (HRS)

(Emphases in original.) The State, on the other hand, believes

 

   

 

 

that the plaintiffs are “wrong on both the facts and the law in
asserting that [their] claime against the State did not accrue

filed) .J* (Emphasis in

 

until September 2002 [(when QHA I wi

n49-
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SS
original.) Specifically, the State argues that “[t]he facts are

that, as of June 10, 1999[*], the plaintiffs knew that [they]

 

had lost all airport revenues." Thus, the State maintains that
the plaintiffs’ complaint, filed on July 21, 2003, was barred by
the statute of limitations.

In Bele Defense, this court held that the date the
cause of action accrued in that case was “when [plaintiffs]
discovered or should have discovered the breach of the [public
lands) trust (duties), the injury to its menbers, and the
connection between the breach and the injury,” 73 Haw. at 598,
837 P.2d at 1260 (emphasie added), comparing its holding to the
similar rule articulated in Yamaguchi v, Queen‘s Medical Center,
65 Haw. 64, 90, 648 P.24 689, 693-94 (1962), a medical

malpractice case.” In 90 holding, the court

 

plaintiffs
correctly note -- applied HRS § 657-7 (1993), the *general*
personal injury statute of limitations, to the plaintiffs’
section 1983 claims, pursuant to the United states Supreme

court’s direction that a state’s “‘residual or general personal

In dte answering brief, the State explain that, on June 10, 1999,
cthe Governor mace clear that the State would Ot pay OHA airport revenues in
Violation of federal law and would not pay equivalent anounte from other
fourses.” (Bxphasie in original.)

2 We have also previously held in the personal injury context that the
statute of Linitatione begine to run vhen at least sont danage is suffered and
fot when the full development of loccure oF the uitinste effect of the
Breach of duty ie known. Yoshizaki v. Hilo Hosp., £0 Haw. 1, 5, 427 7.24 645,
47 (1967)

  

 

2 uns § €57-7, entitled “Damages to persons or property,” provides
that *[aletione for the recovery of compensation for damages oF injury to
Eoftons cr property shall be ineeituted within two yeare after the cause of
ction accrues, and not after|.)*

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injury statute of limitations applies’* to all section 1983
clains brought in state courts. Pele Defense, 73 Haw. at 598,
837 P.2d at 1260 (quoting Owens v, Okure, 486 U.S. 235, 236

(2989).
We recognize that the instant claims are not based on

federal law, but on state law claims pursuant to chapter 673.

jed the accrual of a cause of

 

This court, however, hae not addre
action for breach of trust outeide the context of section 1983
claims, and, as stated previously, HRS § 673-10 ie ale untested.
Federal court cases involving breach of trust claims against a

government trustee provide guidance on the instant issue. In

Shoshone Indian Tribe of Wind River Reservation v, United states,
364 F.3d 1339 (Fed. Cir. 2008), the United states Court of

Appeals for the Federal Circuit (court of appeals) explained

that:

A.cauge of action for breach of trust traditionally accrues
hem the trustee “repudiates” the trust and the Beneficiary
has knowledge of that. repudiation,
[hlusne"y\ inacea'stacee” ses 7038 1893 (pea. cars To801;
(Second) of Truste § 219 (1992);
Norton, 260 P. Supp. 24 96, 105° (D.D.c. 2003)]; Manchester
. 363 F.Supp. 1230,
Seals 1973}1_ A trustee may repudiate the trust
by exprese words of by taking actions inconsistent with nis
responsibilities as trustee.
Fiza 1334, 1336 (Ped. cir. i986)
Dis. 181, 5 8. Ce. 1161, 29 L. Ba. 336 (1885) Th
beneficiary, of course, ‘may bring his action as
Jearne that the trustee has failed to fulfill hie
responsibilities. 3 Seott-on Trusts §§ 199.3, 205 (2002).

Id. at 1348. In the underlying suit in Jones v, United states,
§ Cl. Ct. 292 (Cl. Ct. 1985), aff'd, 801 F.2d 1334 (Fed. cir

1986), cert. denied, 481 U.S. 1013 (1987), the United states

 

 

 

Tsar

 

 

 

   

Claims Court (claims court) held, and the court of appeals

osi-
*** FOR PUBLICATION ***

ee
affirmed -- as plaintiffs assert here -- that the government's

failure to fulfill its fiduciary responsibility ‘constituted an
implicit repudiation of the trust relationship(.]* Id, at 296
(footnote omitted). The Jones court, however, went on to state
that the fiduciary’s implicit repudiation “should have put the
beneficiary on notice that she might suffer damages{,]" ids,

further noting the fact *[tJhat [the plaintiffs] may not have
fully appreciated the lecal consequences flowing from defendant’s

nonfeasance -- including the possibility that they might be

entitled to money damages -- does not toll the statute of
Limitations." Id. at 295 (emphases added) (citing Menonines

+ tn donee, Mattie Davie Rogers was allotted property in Nez Perce

i Mee D540 the sand wae held in trust by the United scates,
Evetiment refused her request for the title to the property
gad the eter ner perce County made two attempte to tax the property. In
{hie aécer the firet aseessnent, the United Se ‘erustee, cbtained &
RFE: SEPEE se decree voiding the assessment and enjoining future taxation
istrict vor, in i925, the County again levied taxes againat the property and
Has UTES ater never returned co the district court to enforce the 1918
HBS UOTE vie Rogers wae evicted in 1927, and the County conveyed the
soberty in 1937. Jd, in 1972, six years after Davis Rogers’ death,
eeoperebee in interest to Davie Rogers brought suit against Nez Perce County
seeereerestea states. Five years later, the United states was realigned as &
$00 OMS nintife to the action, and, in 1979, the district court ordered the
Party Pog che property. the Hinth Circuit Subsequently held that they were
TeCHTTed co damages from the illegal use of the property, but reduced the

crs duc to the United State's lack of diligence in

foreuing the clai ‘The successors cubsequently brought suit against the
REIEGA"Seatee for danagee resulting from the breach of trust, apparently
belted hed in the initial suit. dhereim, the claims court held that the
SEMEL G¢5" claim war barred by the statuce of Limitations, noting the

 

 

       

 

 

 

  

     

   

eatute of Limitations
‘should not pay.

Mntiffs the meney in guestion, or sone fraction thereof,
Feidoes mean chat the cbligatson, if there be one, cannot be
satisfied through Litigation in this court but must be
Frenented directly to congrese, which retained authority
Grer all claine against the United States thet ela
Suteide our Jurisdictional purview.

 

 

 

Ud at 296 (citation omitted).

“52+
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Tribe of Indians v. United states, 726 F.26 718 (Fed. Cir.
sea)) (other citations omitted). The clains court concluded

that the plaintiffs’ claims did not accrue when they learned of

the full extent of their damages, but rather they accrued -~ a=
in pele Defense -- when the plaintiffs had learned of: (2) the

conduct establishing the government's liability or breach?
(2) the injury to the trust beneficiaries and the Link between
tne injury and the conduct; and (3) sone danage to the trust.
ones, 9 Cl. Ct. at 296, We, therefore, address whether the
plaintiffs knew of the material facts of their claims, Lage, the
preach of duty, injury and causal connection, and sone damage to
the trust, within two years of July 21, 2003 -- the date they
filed the instant complaint.

with respect to the first element, i.e., the discovery
of the breach, several facts alleged in the first amended
conpiaint indicate that the plaintiffs discovered or should have
discovered the breach of trust as early as August 19, 1997. As
tne plaintiffs allege, on July 22, 1997, a U.S. Senate Report No-
jos-55 regarding the Departwent of Transportation and Related

agencies Appropriations Bill, 1996, stated:

 

} aviation law... . prohibits the diversion of
airport sevenuee for nonvalrport purposes. Recently. the
Department of 7 ea
aeeaeeeroo0 in past, peymente co (OHA 6, $21ege).

Tee ee ree veuenues. The FAA agreed with the (TG:
gf BiEpOrS *Slinciear whether @ Federal court would agree
wowever iUnepector General) and the FAA(,] should their
Wem ne rerbe chalienged. Given the fact that che state
ogteri net ora the lands in trust for the betterment of

oe et ethane, it ie conceivable that = reviewing court
eae eee eae ene payments of airport revenues were in the

 

    

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SS

nature of rent, which is (a) permiseible use of airport

 

he x
f rave obL
= = dive) st
‘foxa_clear conaressional statenent prohibiting aay future
aiverdions:

(emphasis added.) The plaintiffs stated in their complaint that
“[tJhis was the first notice OHA could have reasonably received?
that the State may have decided not to challenge the FAA decision
and to settle the issue. shortly thereafter, in a letter dated
August 7, 1997, from Senator Daniel Inouye, one of Hawaii's
Congressional menbers, to OHK, Senator Inouye stated:
1 she state's decision sot to aesl the wis

: thereby alloviig"it to
Ectene finals Tdclieve that the sest couwse’of action stuld
be to cleat the Gebt and ailow the state and Sanco eecee
£6 the negotiating table to work coward a miteaiiy aprecssle
SSoree cf action anst Se stane'

Sigpon sensing that Siete
the -cese. t immediately sncieaed an adilcionel prevision'to
feecion 355, ana an scConpanying floor statement, eo ennuss
that the Congressional intent was clear, Section $95" phait
not aftece he bligations to Native dayailass se ace foun
Tn'exiating etarstes

 

 

 

 

Further, on August 19, 1997, the Honolulu Advertiser, a local
daily newspaper of general circulation, published an article
written by then-attorney general Margery Bronater, entitled
“Don't Litigate on OHA,” wherein she stated that the State would
not contest the FAA’s position that using the State's airport
revenues violated federal grant conditions on the use such
revenues. As the plaintiffs stated in their complaint, senator
Inowye’s letter and Attorney General Bronster‘s article ‘were the
first notice that GHA received that the State had given up its
position." Thus, the facts alleged in the complaint denonstrate

that the plaintiffs were aware of the State's repudiation, i.e.,

 

540
+** FOR PUBLICATION ***

 

That an alleged breach of trust had occurred by the State's
decision not to challenge the FAA‘ position, as early ae August
19, 1997, And, alternatively, based on the discussion below, 98
lave as July 9, 1999.

ith respect to the discovery of the injury and causal
connection, the facts alleged in the first amended complaint ale
Genonetrate that the plaintiffs became aware of their initial
joss of both alport xevenve paysents as well as payments from
any other source on June 10, 2999, On that day, Governor
cayetanc issued a statement of objections to Senate B12} Nov
seas, which, in conjunction with Act 328, sought £0 provide an
anterative funding mechanism due to the uncertainty surrounding

Act 304 and which appropriated $16,060,000 to OHA. Thezeiny

 

Governor Cayetano state’

(qine_trust ave a: we ark

one SERRE Seed me carves ohae Bald

sezelenent SfS°5F thet the crustees prefer that the
wederetand etrueen the State and OHA presently pending
aitterences veel suprene Court in (QHA I). be decided by
the Court tect 3 S

governor's Message, "Statement of Objections to Senate Bi1} No
teas," in 1999 Senate Journal, at 603 (emphases added). Once the
governor gave notice to the legislature of his objections to
senate Bi11 No. 2635, the legislature had until July 9, 2999 ~~
forty-five days from the date of its adjournment on May 4, 2999

(excluding Saturdays, Sundays, and holidays) -- in which te

os8-
 

*** FOR PUBLICATION *

«s2.s

reconvene in special session to reconsider Senate Bill No. 1635.

Haw. Const. art. III, § 16. Inasmuch as the legislature did not

   

override the governor’s veto, the plaintiffe -- having themselve:

 

requested that Governor Cayetano veto Senate Bil] No. 1635
should have discovered their injury, i.e., the loss of payments
for the airport's use of ceded lands from the airport revenues or
from any other source, as early as July 9, 1999. Moreover, with
the veto of Senate Bill No. 1635 and the sunset of Act 329, the
plaintiffs knew or should have known that the only paymente that
would be made were Act 304 payments, less the airport revenues.
in other words, as Governor Cayetano made clear, his veto meant
that there would be ‘no non-aizport revenue appropriation to pay
for the airport systen’s use." Thus, the plaintiffs should have
been avare that some loss had elready occurred, even if the

ultimate effect, the repeal of Act 304, was not yet known

 

until this court’s decision in OHA I.
‘The plaintiffs’ citation to Mun Seek Pai v. First
Hawaiian Bank, 57 Haw. 429, 558 P.2d 479 (1977), for the
Proposition that the statute of limitations does not run until
the damage is “actual and permanent in character, as opposed to
merely potential or contingent,* has no effect on the instant
case. In Mun Seek Pai, this court held that, where a debtor nade
a new promise to pay 2 debt subject to a condition, the cause of
action on the promise does not accrue until the condition ie

performed, 57 Haw. at 435, 556 P.2d at 482, There, this court,

 

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a
quoting Seaelken v. Hawaiian Trust Co., 20 Haw. 225, 229 (1910),
noted that:

lien the payment of a claim or the liability of a party is
ynade Sepencent on the performance of any condition precedent
Or the happening of any contingency, a Tight of action doe!
fot accrue, or che statute begin to run, until the
performance of euch condition oF the happening of euch
contingency.

 

 

Mun Seek Pai, 57 Haw. at 435, 558 P.2d at 483 (other citations
and brackets omitted). In both Mun Seek Pai and Secelken,
however, there was a condition or contingency that had to occur
before the plaintiffe in those cases could bring suit in court.
In Segelken, for example, the plaintiffs’ right to money from a
trust fund came into existence only upon her death. Here, there
was no condition precedent or contingency such that the
plaintiffs could not have brought their breach of trust claims
within the statutory period. The plaintiffs’ breach of trust
claims cannot be said to have been contingent on QHA I as the
loss suffered by the plaintiffs occurred during the pendency of
QAI and not because of OHA I.

the plaintiffs in Jones made a similar argument
regarding the need to wait for a judicial determination of their
rights, stating that "their [breach of trust] claim did not
accrue, for statute of limitations purposes, until the district
court Litigation had been completed and they first learned that
they had suffered monetary damages because of defendant's breach
of trust." 9 Cl. Ct. at 294. There, the claims court held that

the statute of limitations was not tolled even where *(the

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a

plaintiffs] may not have fully appreciated the legal consequences
flowing from defendant‘s nonfeasance -- including the possibility
that they might be entitled to soney damages{.]* 1d. at 295.
similarly, although the plaintiffs here may not have appreciated
all the legal consequences flowing from the State's alleged
nonfeasance or the extent of their monetary damages, they knew of
the material facts of the instant breach of trust claims on or
before July $, 1999. The plaintiffs did not file their complaint
vntil guly 21, 2003, more than four years after the claims first
accrued, and over two years after the applicable statute of
limitations ended on duly 8, 2001. Accordingly, the circuit
court did not err in diemiesing the plaintiffe’ complaint. See
Romero v. Star Markets, Ltd., 62 Hawai'i 405, 416, 922 F.2d 1018,
1029 (App. 1996) (noting that ‘it is now conmon to allow an
affirmative defense to be asserted by a motion under [HRCP] Rule
32 (b) (6) when the validity of that defense is apparent fron the
face of the pleading") (citation omitted); see also Rivera vs
England, 360 F. Supp. 24 1104, 1112 (D. Haw, 2005) (holding that

[a] motion under [the analogous FRCP] Rule 12(b) (6) should also

 

be granted if an affirmative defense or other bar to relief is

 

apparent from the face of the Complaint, such as. . . the
statute of limitations") (citations omitted).

B. Whether drcuit m 2_in Der
fis’ a

The plaintiffs next contend that the circuit court

erred in denying their motion for leave to amend their first

“si

 
*** FOR PUBLICATION ***
ee

amended complaint. They contend that the revised second amended
complaint sought justiciable declaratory relief and thet,
therefore, they "should have been accorded a chance to pursue
justiciable relief{.]" Furthermore, although the plaintiffs
acknowledge that @ court may deny a motion for leave to amend a
complaint when the amendnents are futile, they argue that *[t]he
requested anendnents were not futile because [the plaintiffs’]
claims for declaratory relief and other non-danages relief was

not ‘frivolous’ or ‘legally insufficient on ite face. {')*

 

‘The state argue

‘there is no abuse of discretion in denying a notion for
Teave to snene when the proposed amendment would be futile:
Heres the proposed amendments could not begin to overcone
ithe plaintifte'] failure co

GF Conevact or breach of trust.
Che conpisine, the jurisdictional bare of sovereign immunity
Gnd the ceatuée of limitations, the constitutional
Stharation of powere that requires legislative rather than
JeBlcial action to fill the Act 304 void, and the legal
2iSkequences of the prior adjudication i GHA. The circuit
Court properly exercieed ita discretion in denying leave to

    

 

 

 

 

RCP Rule 15(a) (2000) governs the plaintiffs’ request to amend
their complaint and provides in pertinent part:

Asendzents. A party say amend the party's pleading once as
Suatter of couree at any time before a responsive pleading
Je"gerved or, if the plesding is one to which no respe
pleading ie permitted and the action has not been placed
Epon the triel calendar, the party may #0 anend it'at any
tine within 20 days after it is served. Otherwise a party
rites consen! 283 arty; ane leave eh
TT

   

    

 

(ttalicized emphasis in original.) (Underscored emphasis added.)
inasmuch as HRCP Rule 15(a) ie identical to FRCP Rule 15(a), this

court has looked to the general standard applied by federal

 

courts in interpreting thie rule. Gonsalves v, Nissan Motor

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in Hawai'i, Ltd., 100 Hawai'i 149, 160, $8 P.3d 1196, 1207
(2002) (noting that, “[i]n interpreting [HRCP Rule 15(a)], this
court has looked to the general standard applied by federal

courte"). For example,

tn [Bishop Trust co., ute. v. Kamckile Dev. comp., 57 Haw.
330, 855 P20 1193 (i76)] 7 we referred to the

 

following statement of the general standard employed under
Role i8\) by the federal courte
[tuscn ~~ such-ap undue delay, bad faith or
EfEotdry motive on the part of the sovent,
Fepeated failure to cure deficiencies by
anenénente previously allowed, undue prejudice
fo the opposing party by virtue of allowance of

the anendnent, ZULiLiby of amendment, ete

 

 

 

becstresiy sive.” (hotan V- Gavies 372 U.S
Bye, ae 185, 65'S, ct, 227, at 230, 9 L. Ba, 2d
223).

d. Home Loan Noi v. Teal . 89

Hawai'i 157, 162, 969 P.2d 1275, 1280 (1998) (citing Assoc

Eng’rs & Contractors v, State, 58 Haw. 187, 218-19, 567 P.2d 397,

eo

 

417 (1977)) (ellipses in original) (emphases added); see
Gonsalves, 100 Hawai'i at 160, 58 P.34 at 1207, Therefore, where
the proposed amendments to a complaint are, inter alia, futile, a
court may deny a notion for leave to file the amended complaint.
See, e.g., Lucente v. Int’] Business Machines Corp., 210 F.3d
243, 258 (2d Cir. 2002) (*One appropriate basis for denying leave
to amend is that the proposed anendment is futile." (Citations
omitted.)). Federal courts have further explained that “[aln
amendment to a pleading is futile if the proposed claim could not

lure to state a claim]

 

withstand @ motion to dismiss [for f
pursuant to (FRCP Rule] 12(b)(6)." Id. (citation omitted); see
alse Bradley v. Val-Mesias, 379 F.3d 892, 901 (10th Cir. 2004);

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2 son v. Racine Uniti | 272 F.3d 964, 974~

ng (7eh Cir. 2003), coxte denied, 537 U.S. 626 (2002); AMAR te
gumuki, 227 F-34107, 121 (3d Cir, 2000)

tn the instant case, the plaintiffs twice sought te
amend their first amended complaint -- once pricr to the ciFcuie
court's oral disnissal of the fixer anended complaint and once
thereafter. However, the clains presented in each proposed
amended complaint were identical. Specifically, both deieted the
claim for “misrepresentation and non-disclosure” and added &
claim alleging that the State "breached the covenant of 9008
faith and fai dealing implied in the Act 304 Setttenent(-)”
tnaemich as we have alzeaéy analyzed and concluded thar the
elaine in the fret amended complaint were properly Sisnissed, 4
vow exanine the sole new claim alleged in the proposed second
smenged conplainte to determine whether it could survive = motion

to dismil

 

 

the plaintsffe’ claim for breach of good faith and fair
eating is based on their belief that “the state's failure £0
eppose the FAA's position not only constitutes # Preach of the
ct 304 settlenent as a contract but also the covenant of good
faith and fair dealing inplied in the Act 304 Settlement (-]" 7
ocher vorde, the new claim is inextricably linked to the

plaintiffe’ allegation that Act 304 constituted a settlement

agreement or contract. However, as previously discussed, neith

 

che language nor cizcumstances surzounding Ret 304° enactment

-61-
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ee

evinces the clear and unambiguous legislative intent to
contractually bind the State to Act 304’s terms and, as such, it
cannot be said that Act 304 constituted a settlement agreement.
Inasmuch as the plaintiffs cannot establish that the state
entered into a valid, enforceable, and binding settlenent
agreement with the plaintiffs, we conclude that the plaintiffs
can prove no set of facts entitling them to relief based on thie
new claim. Therefore, the proposed claim of breach of good faith
and fair dealing, like the other clains in the second amended
complaints, fails to state a claim upon which relief could be
granted and would not have survived @ motion to disnics
Consequently, the proposed complaints are futile. Accordingly,
we hold that the circuit court did not abuse its discretion in
denying the plaintiffs’ motion to amend.

c. the it Court. ti

Inasmuch as the plaintiffs have failed to state any
claims upon which any relief could be granted, there were no
elaine for the circuit court to bifureate. As such, we hold that
the circuit court did not abuse its discretion in denying the
plaintiffs’ motion to bifurcate. See Masaki v. os
Somp., 71 Hawai'i 1, § n.2, 780 7.24 566, 570 n.1 (2989) (holding
trial court did not abuse its discretion in denying appellante’
motion to bifurcate where appellants failed to show prejudice,

at “[t]he decision to hold separate trials on the

 

stating th

issues of liability and danages is = matter within the sound

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Giecretion of the trial judge, and unless prejudice
yall not be reversed on appeal*) (citations omitted)
1. cONcLUSi
pased on the foregoing analysis, we affirm the circus
court's Nay 19, 2004 final judgment in favor of the State.
omever, av in HAZ, given our disposition of these cases end
tne context of their complexity, "we would do @ disservice co elt

involved if we did not acknowledge” the State’s

 

parti
continuing truet obligations to native Hawaiians, 96 Hawas's at
gor, 32 P.2d at 924, We have repeatedly stated that the

aegistative branch se vested with the authority to Gecermine Dow

jefies its constitutional trust obligations.

 

the state 6
nowever, we have also consistently recognized that the judiciary
ie vested with the responsibility to ensure that trustees,
nether public or private, uphold their fiduciary duties. We
acknowledge that, even though Act 304 was repealed, HRS § 0°23-5
continues to nandace that “[t]wenty per cent of ali funds derived
from the public land trust . . . shall be expended by -
Iona)" And, a Senator Inouye clarified during his fl00r
statement to the United State Senate,

‘the removal of the Aisport Revenue Pund for use by the State

tae re ae a source of compensating [OHA] for use of

orem sse upon which the airports sit, should not equate
ceded, anes aduction in the State's obligation to OHA under

Beate laws. =
His [ecole centimeter Sete ore of te 1
esate tcp life aispores et engulé also continue

il-igne of the unigue history of Hawai'i's ceded lands
{En 21GRS Qgatiene that flow fron these lands for the
te eee oe ofthe Native Hawaiian people, 1 believe that

 

 

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ee
‘this is more than a fiscal matter, this is a fiduciary
fer one ma tients]

Therefore, as we also stated in OHA I,

 

(Bmphases added

ie 4s incumbent upon the legislature to enact legislation
Ehat gives effect to the right of native Havaiiene te
benefit from the ceded lands trust. Seg Haw. Const art
xVr, $7 (and) we trust that the legislature will re-
ine the State's constitutional obligetion to native

ws and the purpose of HRS § 10-13-5 end enact
legislation that most effectively and recponeibly meets
those obligations

 

 

 

 

 

96 Hawai'i at 403, 31 P.3d at 914.

on the briefs:
Robert G, Klein (Nadine ¥. he ~
‘Ando and Christopher J. GE Bie oe
Cole, with him on the
briefe, of Necorriston
Miller’ Mukai MacKinnon) cease or eacsiroree
and William Meheula and
David F. Faei, with him See ur
on the briefe, of Winer
Meheula & Devens, for
Plaintiffe-appeliante/
Eross-appellees

Dorothy Sellers (Charleen M.
Aina, Girard D. Lau, and
William 3. Wynhoff, ‘with
her on the brief, Deputy
Attorneys General) for
defendant -appellee/
cross-appellant

CONCURRENCE BY ACORA, J.

3 concur in the result only.

——

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