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The Honolulu Advertiser
Posted on: Saturday, January 28, 2006

High court's intent to revisit decision revives OHA's hopes

By Ken Kobayashi
Advertiser Courts Writer


The state Supreme Court will reconsider its decision last year dismissing a lawsuit by the state Office of Hawaiian Affairs seeking money damages.

The high court's options include affirming the dismissal, but on different grounds, or reinstating the suit. The court did not indicate when it will rule.

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As a result of a unanimous decision by the Hawai'i Supreme Court last year, the state Office of Hawaiian Affairs' legal claims against the state for hundreds of millions of dollars in revenues related to ceded lands appeared to be dead.

The state has long acknowledged that it is obligated under the state Constitution to pay OHA money from ceded land revenues, but OHA contended that the state defined the sources of ceded land revenues too narrowly and maintained it is due the additional money. On Sept. 9, the high court affirmed Circuit Judge Gary Chang's dismissal of the OHA lawsuit.

But in a highly unusual move and at the request of OHA, the five-member high court issued a one-sentence ruling last month agreeing to reconsider its decision, essentially breathing life into OHA's hopes that its legal claims will be revived.

"We're heartened by the fact that (the state Supreme Court) agreed to take another look at the rationale for the decision," said Robert Klein, OHA's lawyer and a former Hawai'i Supreme Court justice.

The court has yet to issue a ruling on whether to affirm its earlier ruling, modify it or reinstate the suit.

The proposed partial settlement announced Thursday covers only the ceded land revenues that the state has recognized it owes OHA. The negotiations dealt with the amount. The settlement would allocate $15 million a year to OHA and pay a one-time sum of $17.5 million.

OHA, in recent years, has been receiving about $10 million annually as its prorated share of revenues derived from the public land trust. That amount would be increased to $15.1 million under the proposed partial settlement. Also, the agency would receive $17.5 million as back payment for the period from July 1, 2001, to June 30, 2005, reflecting additional receipts from the use of the lands.

The proposed agreement, negotiated by OHA and the Lingle administration, still must be approved by the OHA board of trustees, which is expected to vote on it Thursday, and by the Legislature. The state House Hawaiian Affairs Committee has scheduled a hearing for 9 a.m. Wednesday at the Capitol to discuss the matter.

Not covered by the proposed partial settlement are the legal claims over the disputed revenue sources.

Attorney General Mark Bennett, opposed the reconsideration. He said there is no way to predict what the court will do, but he maintains OHA's legal claims did not play any role in reaching the proposed settlement.

Bennett said that if the high court reinstates the suit and sends the case to a state judge for a trial, his office is prepared to vigorously contest the legal claims. "I do not believe this lawsuit factually or legally has merit," he said.

The history of the OHA lawsuit is a long and tortuous one.

OHA was established in 1978 by a state constitutional amendment to assist Native Hawaiians with a portion of the revenues from 1.4 million acres of former crown or public lands that were ceded to the Republic of Hawai'i after the overthrow of the monarchy in 1893. These lands are now held in trust by the state. The state paid OHA a portion of the revenue, but OHA claimed that the state wasn't taking into account some lucrative revenue sources related to the land.

In 1996, then-Circuit Judge Dan Heely agreed with OHA's interpretation of the revenue.

The state, for example, contended that because the Duty Free Shoppers Waikiki operation did not sit on ceded land, the store's revenues to the state shouldn't be included in the amount OHA should receive. OHA, however, maintained that it should be counted because the Waikiki location was an extension of the Duty Free Shoppers main location at the headquarters at Honolulu International Airport, which does lie on ceded lands.

Heely ruled that the state also should pay a share of revenue from Hilo Hospital cafeteria sales and patient fees, as well as rent from the Hawai'i Housing Authority and Housing Finance Development Corp.

But before the case could go to to trial to calculate the amount the state should pay, the state appealed Heely's decision to the state Supreme Court. Estimates of the amount the state would have to pay ran as high as $1.2 billion, although the figure is now thought to be closer to several hundred million dollars.

In 2001, the high court overturned Heely's ruling. The court also held that the state law setting up payments to OHA conflicted with the 1998 federal Forgiveness Act, which bars the state from using money from an airport to pay for future ceded land claims.

OHA returned to court in 2003, this time alleging that the state breached its fiduciary duty to protect the interests of OHA by not doing enough to oppose the federal law. Chang threw out the lawsuit, leading to the current Hawai'i Supreme Court case.

Klein said that if the suit is reinstated and OHA prevails, the amount of damages from the state would equal what OHA did not get from the disputed revenue sources.

"All we asked (of the state Supreme Court) is our day in court so we can be given the opportunity to prove the claims," he said.

But aside from the lawsuit claims for damages, OHA still wants to collect from the disputed revenue sources and work out a deal with the state. A ruling by the high court reinstating the lawsuit could give OHA some leverage in the negotiations.

"I still think the Legislature has to do the right thing (about the disputed revenue sources)," Klein said.

Bennett said there's no connection between the suit and the proposed partial settlement, which he emphasized was not a global resolution of all OHA claims to revenues related to ceded lands. He anticipates more negotiations, but said it wouldn't be related to the lawsuit's claim that state officials at the time failed to carry out their duties to OHA.

"We do not believe that either Gov. Cayetano or Attorney General Margery Bronster or anyone else from the state did anything remotely wrong," he said.

In 2001, then-Gov. Ben Cayetano stopped all payments to OHA tied to "undisputed" ceded lands, after the state Supreme Court decision threw out the formula used to calculate how much the state agency should receive. Gov. Linda Lingle resumed those payments in 2003, shortly after she took office.

Advertiser staff writer Karen Blakeman contributed to this report.

Reach Ken Kobayashi at kkobayashi@honoluluadvertiser.com.

Correction: Deputy attorney general Dorothy Sellers argued for the state in a hearing before the Hawai'i Supreme Court last year on a lawsuit by the Office of Hawaiian Affairs seeking to collect damages related to ceded lands. An earlier version of this story incorrectly said another state lawyer handled the case.