Opinion ID: 6494319
Heading Depth: 2
Heading Rank: 3

Heading: UHH’s and BLNR’s arguments in defense of issuing the 2011 permit before the contested case hearing was held are unpersuasive

Text: UHH and BLNR make several arguments in defense of BLNR issuing the permit before a contested case hearing. However, none of those arguments are persuasive. Rather, the circumstances of this case give rise to the reality and appearance of impropriety, and thereby violate the Due Process Clause of article I, section 5 of the Hawai'i Constitution. UHH begins by distinguishing this case from Kilakila ‘O Haleakala v. Bd. of Land & Natural Res., 131 Hawai'i 193, 317 P.3d 27 (2013). UHH characterizes Kilakila as a case of “whether, where a formal contested case has been requested, an agency may nonetheless make a rights-determinative ‘final decision’ before ruling on the contested case request.” UHH argues that because BLNR’s 2011 decision was not “final,” i.e., not “final agency action,” Kilakila does not apply to this case. UHH also suggests that because in the instant case BLNR “simultaneously” granted a motion to hold a contested case hearing and issued the permit, this case is distinguishable from Kilakila, where BLNR did not make a decision on requests for a contested case hearing until its approval of the CDUA had been appealed two months later. As explained above, sequence matters. Here, BLNR issued an operative permit despite pending requests for a contested case hearing and a right to such a hearing under the applicable rules and the Hawai'i Constitution, and only then decided to hold such a hearing. This sequence— whether events were separated by two minutes or two months—plainly gives rise to the appearance of prejudgment, and denied Appellants the opportunity to be heard at a meaningful time and in a meaningful manner. UHH next argues that because Condition 21 stayed construction on TMT, this case was unlike Kilakila, where BLNR approved the CDUA without staying construction. As explained above, it does not matter whether or not the permit was stayed. BLNR should not have issued the permit prior to holding a contested ease hearing. Moreover, construe-tíon was stayed due to a number of conditions, and the 2011 permit authorized some aspects of TMT to commence immediately. A stay on construction did not render the 2011 permit anything less than an operative permit that was issued on the merits. UHH next argues that Appellant Clarence Kukauakahi Ching “agreed that BLNR could properly vote and issue a permit” before a contested case hearing so long as the permit was conditioned upon construction not proceeding before a contested case hearing was resolved in favor of UHH and BLNR took a final vote also in favor of UHH. (Emphasis in original). But this statement by a private citizen at a public meeting did not authorize BLNR to act inconsistently with the Hawaii Constitution, particularly with regard to the other Appellants. Relatedly, UHH highlights Appellants’ assertions that BLNR’s procedural error of issuing the permit before a contested case hearing “could and should be addressed by the Hearing Officer in the contested case the BLNR ordered.” (Citing Ex. A-320 to the contested case hearing, at 11, 21, 31, 42) (Emphasis omitted). UHH appears to suggest that these assertions constitute Appellants’ concession that BLNR’s procedural error could be remedied after-the-fact. But these statements by Appellants in letters on March 7, 2011, after BLNR had issued the permit, did not retroactively authorize BLNR to violate Appellants’ due process rights under the Hawaii Constitution ten days earlier. UHH also argues that because Appellants made these statements and participated in the contested case hearing, Appellants “got what they requested.” This argument misstates the facts. As described, multiple Appellants strenuously objected at every opportunity to BLNR issuing the permit before a contested case hearing because they believed that such sequence would not allow for adequate and impartial consideration of the merits. 'When BLNR did otherwise and issued the permit at the February 2011 meeting, Appellants continued to challenge that procedure with letters in March 2011, and in addition, participated in the contested case hearing on the merits and made legal arguments to the hearing officer. BLNR’s February 2011 decision effectively forced Appellants to take this approach after BLNR issued the permit. Accordingly, Appellants’ participation in the contested case hearing does not constitute consent to suffer the consequences of BLNR’s improper decision in February 2011, or a waiver of their ability to challenge it later. UHH next refers to HRS § 91-14 in support of its argument that the February 2011 decision was merely preliminary. 12 This statute concerns the scope of courts’ jurisdiction for appellate review of specific types of agency rulings. UHH makes two mistaken characterizations in support of its argument: first, characterizing the 2011 permit as “preliminary” as used in this statute, and second, characterizing Appellants’ position as a direct challenge of the 2011 permit. Specifically, UHH argues that if the 2011 permit was as prejudicial as Appellants contend, then it was at least a “preliminary ruling of the nature that deferral of review ... would deprive appellant of adequate relief,” under HRS § 91-14, so the judicial review that Appellants seek has been waived because it was not sought “within thirty days after the preliminary ruling.” See HRS § 91-14(a), (b). However, UHH’s reliance on this statute is flawed at the outset because UHH conflates two distinct concepts: the availability of judicial review at a particular time, and the question of whether the procedures followed by BLNR comported with due process. Essentially, UHH attempts to utilize its substantive argument as to due process—that the 2011 permit was only tentative or “preliminary”—to make a procedural argument regarding the type of preliminary ruling for which a court has jurisdiction to review BLNR’s actions. These are distinct concepts, and the way in which UHH relies on HRS § 91-14 is inapposite to the issue before this court. UHH’s argument is also flawed because Appellants are not seeking to set aside the 2011 permit, rather, they are seeking to set aside BLNR’s FOFs/COLs/D&O in 2013 based on the process that led to its adoption. UHH’s position would effectively require a party to a contested case hearing to appeal whenever a decisionmaker appears to engage in prejudgment of the matter at issue. Thus, for example, it would appear to require an immediate appeal where a decisionmaker makes arguably improper extrajudicial statements about the merits of a case. See, e.g., Cinderella, 425 F.2d at 584. Requiring a party to appeal (or lose the right to do so) based on such indefinite circumstances would encourage piecemeal appeals, inconsistent with well established law. See Mitchell v. State Dep't of Educ., 77 Hawai'i 305, 308, 884 P.2d 368, 371 (1994) (stating that an end served by the requirement of a requisite degree of finality of agency decisions before appellate review is the avoidance of piecemeal litigation). Here, it was not until after the contested ease hearing did not lead to adequate relief that judicial review was appropriate. Moreover, UHH’s argument is not supported by a plain reading of this statute. HRS § 91-14(b) provides that a party wishing to appeal shall appeal “within thirty days after the preliminary ruling or within thirty days after service of the certified copy of the final decision and order of the agency[.]” (Emphasis added). Accordingly, even if the 2011 permit is characterized as a “preliminary ruling” under this statute, Appellants’ appeal shortly after the “final decision and order of the agency” was appropriate. Appellants did not waive a due process challenge by not immediately appealing after BLNR issued the 2011 permit. UHH next defends the procedure here by generally arguing that it is analogous to other procedures that have been found to pass muster under due process in Hawai'i and elsewhere. However, as set forth below, UHH refers to no federal or state case—and this court finds none—similar to this case, where a decisionmaker ruled on the merits before hearing the evidence. UHH contends that Cinderella, 425 F.2d 583, which prohibits appearance of the deci-sionmaker’s “prejudgment in some measure,” sets a standard that is “obsolete and generally rejected.” In support, UHH refers this court to Amerada Hess Pipeline Corp. v. Regulatory Comm’n of Alaska, 176 P.3d 667 (Alaska 2008), for the proposition that Cinderella is generally rejected, and NEC Corp. v. United States, 151 F.3d 1361 (Fed.Cir.1998), for the proposition that the appearance of “prejudgment in some measure” is permissible so long as the decisionmaker does not have an “irrevocably closed mind.” In so arguing, UHH mischaracterizes Cinderella ’s continued broad acceptance across the country under appropriate circumstances and ignores well established principles throughout Hawai'i case law. In Cinderella, a member of the Federal Trade Commission made a public statement on a pending adjudicative matter before the Commission rendered a decision. The United States Court of Appeals for the District of Columbia held that where prejudgment is alleged, the test for disqualification is “whether a disinterested observer may conclude that (the agency) has in some measure adjudged the facts as well as the law of a particular case in advance of hearing it.” 425 F.2d at 591 (internal quotation marks omitted). The court added that “an administrative hearing must be attended, not only with every element of fairness but with the very appearance of complete fairness[.]” Id. (internal quotation marks omitted). Before and after Cinderella, the commitment to an objective “appearance of fairness” test is consistent throughout Hawai'i judicial decisions. For instance, in Sifagaloa, 74 Haw. 181, 840 P.2d 367, this court considered whether an employee’s due process rights were violated. The employee applied for disability retirement benefits as a member of the State Employees’ Retirement System (ERS). The ERS Board of Trustees, upon reviewing a decision submitted by the Medical Board, denied Sifagaloa’s request for disability retirement benefits. Id. at 186-87, 840 P.2d at 370. The same Board of Tras-tees adjudicated his appeal from the Medical Board’s decision and affirmed the denial. Id. at 187—88, 840 P.2d at 370. On appeal, the employee asserted that he was denied due process because the Board of Trastees had conflicting interests to award retirement benefits and to preserve the retirement fund, and this conflict gave rise to an appearance of impropriety whereby the Board of Tras-tees’ impartiality might reasonably be questioned. Id. at 188, 840 P.2d at 370-71. This court observed that the Supreme Court in Withrow determined that the fundamentals of just procedure require impartiality of “administrative agencies which adjudicate as well as courts!,]” and concluded that there is “no reason why an administrative adjudicator should be allowed to sit with impunity in a case where the circumstances fairly give rise to an appearance of impropriety and reasonably cast suspicion on his impartiality.” Id. at 189-90, 840 P.2d at 371 (quoting Brown, 70 Haw. at 467 n. 3, 776 P.2d at 1188 n. 3). Ultimately, this court concluded that: “[flairly read, neither the facts ... nor the generalized assertions made here about [the Trustees’] ‘inconsistent’ responsibilities prove an interest on [their] part in the outcome of the determinations made [on Sifagaloa’s claim] sufficient ... to overcome the ‘presumption of honesty and integrity’ that attaches by virtue of [them] office.” Sifagaloa, 74 Haw. at 193, 840 P.2d at 372 (alterations and ellipses in original). Many other Hawaii cases take this approach. See, e.g., In re Sawyer, 41 Haw. 270, 283 (Haw.Terr.1956) (“A judge owes a duty not to withdraw from a case—however much his personal feelings may incline him to do so—where he is not legally disqualified, yet there may be circumstances that cast suspicion on the fairness of the judge proceeding in the case so that it may be advisable for a judge not technically disqualified to withdraw sua sponte.”); Peters, 48 Haw. at 262-63, 397 P.2d at 585; Honolulu Roofing Co. v. Felix, 49 Haw. 578, 617, 426 P.2d 298, 323 (1967) (quoting Sawyer); Brown, 70 Haw. at 462-63, 776 P.2d at 1185; Sussel, 71 Haw. at 106, 784 P.2d at 869 (describing Honolulu Roofing 's reference to Sawyer as “urgfing] the circuit court to apply ‘an appearance of impropriety’ test in the situation at hand and disqualify the commissioners”); State v. Ross, 89 Hawai'i 371, 377, 974 P.2d 11, 17 (1998) (relying on Brown); In re Estate of Damon, 119 Hawai'i 500, 508, 199 P.3d 89, 97 (2008) (relying on, inter alia, Sussel, Brown, Offutt, Murchison, Withrow, and the Revised Code of Judicial Conduct in discussing the prohibition of even the appearance of impropriety). The Cinderella standard also remains in use across the country. See, e.g., Fogo De Chao (Holdings) Inc. v. United States Dep’t of Homeland Sec., 769 F.3d 1127, 1149 (D.C.Cir.2014); McClure v. Indep. Sch. Dist. No. 16, 228 F.3d 1205, 1216 n. 8 (10th Cir.2000); Stivers v. Pierce, 71 F.3d 732, 741, 747 (9th Cir.1995). Nevertheless, UHH refers this court to Amerada, where the Alaska Supreme Court explained its view that the Cinderella standard “most squarely stands”—notably in the present tense—“for the proposition that intemperate public remarks by a decisionmaker create a constitutionally impermissible appearance of outcome-determinative prejudgment.” Amerada, 176 P.3d at 674, 676. It characterized Cinderella as a “public-foot-in-mouth case,” and noted that “public intemperance [was] so central” to the decision that, it “can best be viewed as [a] response[] to egregious official obnoxiousness which gratuitously undermines public trust.” Id. at 674, 676. According to Amerada, Cinderella did not set an “across-the-board standards for all agency prejudgments of arguably adjudicative facts.” Id. at 676. Amerada involved allegations that a commission’s decision concerning the Trans Alaska Pipeline was tainted because one of the commission’s staff persons previously wrote a master’s thesis regarding that pipeline system. Id. at 672. The Amerada court was critical of the Cinderella test, calling it vague, “unduly abstract and impractical,” and inconsistent with a presumption of regulatory propriety, and referred to federal cases in support of its critique. Id. at 675-76. Ultimately, though, the Amerada court applied the Cinderella standard in evaluating the due process claim under the United States Constitution: “This situation does not approach that zone of egregiousness where federal courts discern a procedural due process violation based on prejudgment bias relegating adjudication to ‘predestined grooves.’” Id. at 676 (quoting Cinderella, 425 F.2d at 590). Although the Alaska Supreme Court and some other jurisdictions have been critical of Cinderella, Hawai'i courts continue to embrace the dual requirements of the reality and the appearance of justice. Accordingly, UHH’s argument that the Cinderella standard is generally rejected is both incorrect and inconsistent with Hawai'i case law. See, e.g., Sawyer, 41 Haw. at 270; Honolulu Roofing, 49 Haw. at 617, 426 P.2d at 323; Sussel, 71 Haw. at 106, 784 P.2d at 869; Sifagaloa, 74 Haw. at 191, 840 P.2d at 372. UHH next argues that rehearing of a matter by the same tribunal is a regular occurrence and does not violate due process. (Citing FTC v. Cement Inst., 333 U.S. 683, 68 S.Ct. 793, 92 L.Ed. 1010 (1948)). In Cement Institute, a party alleged, one year after testimony had been concluded but “while ... proceedings were still pending,” prejudgment by members of the Federal Trade Commission who investigated the parties, submitted reports on the matters at issue to Congress and the President in accordance with law, testified before congressional committees in hearings related to their reports, and whose reports and testimonies indicated their opinions that were shaped while preparing the reports. Id. at 700, 68 S.Ct. 793. The Court concluded that the commission was not necessarily disqualified from the matter before it because (1) the party could still present evidence and argument before the Commission rendered its decision, id. at 701, 68 S.Ct. 793, (2) “the fact that the Commission had entertained such views as the result of its prior ex parte investigations did not necessarily mean that the minds of its members were irrevocably closed on the [issues],” id. at 701, 68 S.Ct. 793, (3) congressional purposes would be frustrated if commission members could not have testified or reported, id. at 701-02, 68 S.Ct. 793, and (4) “judges frequently try the same case more than once and decide identical issues each time[,]” id. at 703, 68 S.Ct. 793. Cement Institute is different from this case. Unlike the party in Cement Institute, Appellants were not afforded an opportunity to present evidence before BLNR rendered its decision on the merits. As discussed, an “irrevocably closed” mind is not the applicable standard under Hawai'i law. Rather, Hawai'i law is consistent with the Cinderella standard. Unlike Cement Institute, no act of Congress, statute, or even administrative rule would have been frustrated by BLNR holding a contested ease hearing before deciding whether to issue the permit. UHH refers to Cement Institute apparently in support of the notion that BLNR could “vote again” on the application after voting on it in 2011. But Cement Institute does not provide any guidance on the issue of whether BLNR’s issuance of the permit before a contested case hearing gave rise to the appearance of impropriety. UHH next refers to Nat’l Labor Relations Bd. v. Donnelly Garment Co., 330 U.S. 219, 67 S.Ct. 756, 91 L.Ed. 854 (1947), for the proposition that an administrative decision-maker should not be excluded for prejudgment from rehearing a case merely because the decisionmaker previously excluded evidence that was later found to have been erroneously excluded. UHH also refers to Morgan v. Planning Dep't, Cnty. of Kauai, 104 Hawai'i 173, 86 P.3d 982 (2004), for the related proposition that agencies have “inherent authority to reconsider [their] own decisions.” (Quoting id. at 185, 86 P.3d at 994). But the issue here is not BLNR rehearing or reconsidering anything. UHH next refers to MacKay v. McAlexander, 268 F.2d 35 (9th Cir.1959), and Pangburn v. Civil Aeronautics Bd., 311 F.2d 349 (1st Cir.1962), for the propositions that an agency administrator who presides over a proceeding similar to and related to a prior proceeding, or who has had contact in a prior hearing with facts at issue in the hearing at bar, or who has taken a public position on facts, does not inherently violate due process under the United States Constitution. Simply put, those propositions refer to different factual circumstances and do not guide disposition of this case. The due process issue under the Hawai'i Constitution here concerns the propriety of BLNR issuing the permit at the outset in 2011, not what it did afterward. In sum, although UHH defends the procedure here by generally arguing that it is analogous to other procedures that have been found to pass muster, no case put forth by UHH is analogous to the circumstances here. UHH also defends the position that the hearing officer and BLNR adopted in response to Appellants’ argument that the sequence of issuing the permit before a contested ease hearing was improper. The hearing officer and BLNR, in them respective findings, conclusions, and orders in 2012 and 2013 stated that this sequence was authorized by HAR § 13-l-28(b) (2009). This rule provides: “The contested case hearing shall be held after any public hearing which by law is required to be held on the same subject matter.” HAR § 13-l~28(b). Here, the contested case hearing was indeed held after public hearings. Critically, however, and contrary to Lemmo’s response to BLNR member Pacheco’s question on the issue, this rule did not authorize BLNR to decide the merits and issue the permit before the contested case hearing, or before the request for a contested case hearing had been resolved. In any event, due process would prohibit such a procedure. It might be argued that the high level of detail over 126 pages of BLNR’s FOPs/COLs/D&O demonstrates transparency that mitigates, albeit belatedly, an appearance of prejudgment. Indeed, one benefit of a transparent articulation of the bases for decisions is the impression that the “processes were in fact meaningful to the outcome.” Redish & Marshall, Adjudicatory Indeperudence, 95 Yale L.J. at 486 (internal quotation omitted, emphasis omitted). That said, the similarity between the 2011 permit and the 2013 decision give the exact opposite impression, because this similarity exists despite what BLNR received in between: thousands of pages of written testimonies, exhibits, and factual and legal arguments, and dozens of hours of verbal testimonies and more legal arguments. As a result, the virtually indistinguishable documents of 2011 and 2013 give the impression that none of the testimonies, arguments, or evidence submitted to BLNR between the two were seriously considered. BLNR should not have issued the permit before the request for a contested ease hearing had been resolved. The appearance of prejudgment continues. UHH next argues that the remedy Appellants seek—remand to a new hearing officer for a new contested case hearing— reveals a flaw in Appellants’ position. Specifically, UHH contends that even if a new hearing officer holds a new contested case hearing, the matter would again be presented to BLNR for a final vote, as it was in 2013, and thus would not resolve Appellants’ challenge to BLNR’s prejudgment. This argument is mistaken because Appellants do not challenge BLNR’s ability to be fair and impartial (i.e., Appellants are not seeking recusal of any or all members of BLNR). Rather, Appellants contend and this court agrees that BLNR erred in the way it proceeded in 2011, which is not necessarily indicative of how it may proceed upon remand with a clean slate. 13 BLNR argues that when it approved the CDUA and issued the CDUP at the February 25, 2011 meeting, a request for a contested case hearing was not perfected, so BLNR did not ignore a procedurally-compliant request. In support, BLNR refers to HAR § 13-1-29 (2009), which generally states that in addition to a request for a contested ease hearing before the close of a board meeting, a written petition must also be filed soon after the board meeting. BLNR generally reads this rule correctly, but the absence of a perfected request for a contested case hearing did not authorize BLNR to issue a permit before such contested case hearing might be granted or occur. This is particularly so because there was no doubt that a contested ease hearing would in fact be held, given (1) that Appellants were entitled to a contested case hearing under the applicable administrative rules and the Hawai'i Constitution; (2) numerous requests for a contested case hearing as early as the public hearings in December 2010 and leading up to the February 25, 2011 meeting; (3) repeated requests during the February 25, 2011 meeting for a contested ease hearing and specific requests to not issue a permit before such hearing; (4) Lemmo’s apparent conclusion and recommendation that a contested case hearing should be held; and (5) BLNR’s apparent agreement with Lemmo by deciding on its own motion that a contested ease hearing should be held. BLNR also argues that Appellants have not overcome the presumption that administrative adjudicators perform their duties with honesty and integrity. 14 See Withrow, 421 U.S. at 47, 95 S.Ct. 1456. Under the factual circumstances of this case as described above—most notably, the appearance of impropriety created by the process employed by BLNR—this presumption does not warrant judgment in favor of BLNR. See Murchison, 349 U.S. at 136, 75 S.Ct. 623 (stating that the requirement that proceedings must appear fair “may sometimes bar trial by judges who have no actual bias and who would do their very best to weigh the scales of justice equally between contending parties”). In short, BLNR acted improperly when it issued the permit prior to holding a contested case hearing. No case or argument put forth by UHH or BLNR persuades otherwise.