"They haven't even been given formal notice that what happens in this courtroom may affect their interests," August said during a court hearing Tuesday.

"Here, if the court grants the kind of declaratory relief that the plaintiffs want, it could severely affect the use of potentially hundreds of people out there who own property in all of Maui Lani."

About two dozen longtime homeowners who live near the Fairways and New Sand Hills developments are suing Maui County and the subdivision developers and contractors over building heights in the subdivisions.

A county law that took effect in 1991 limits residential building heights to 30 feet from the natural or finished grade – whichever is lower. But former Mayor Alan Arakawa made an "administrative decision" to allow the two subdivisions to proceed under the prior law that measured building heights from the finished grade.

Arakawa has defended his decision, saying the Maui Lani development obtained Phase II project district approval in 1990 when the old law was in effect.

In the 14-acre Fairways subdivision in Kahului, thousands of tons of dirt were trucked in to fill a gully, raising elevations so older houses along Palama Drive now are backed against a mound of dirt towering above rooftops.

The lawsuit seeks to enforce current building height limits, which would restrict any buildings to rise no more than 30 feet above the original grade.

Residents also are seeking compensation for the loss of views and for damages to their homes from the vibrations caused by compacting and other construction work in the two subdivisions.

On Tuesday, August granted a request by developers VP & PK LLC and New Sand Hills LLC and its contractors to be dismissed from the portion of the lawsuit seeking to enforce current building height limits. Maui County remains a defendant in that portion of the lawsuit.

"It's the county that enforces the height restriction, it's not the developers," August said. "The developers are not building the homes. Individual homeowners are building the homes."

According to documents filed in the case, 98 of 108 lots in the New Sand Hills subdivision in Wailuku have been sold, with houses built on some lots and building permits issued for other lots.

Attorney Bert Kobayashi said Tuesday that the lawsuit has jeopardized the sale of lots in the Fairways subdivision. He said the developers' work to install electrical lines and other infrastructure is "almost entirely complete."

Deputy Corporation Counsel Madelyn D'Enbeau said construction work by the developers was done under grading permits, not building permits.

"There's nothing wrong with the grading that was done," she said.

But attorney Brian Duus, representing residents, argued that the height of the fill in the Fairways subdivision would make any building illegal.

"We're only asking for construction that violates the law to be stopped," he said. "It's going higher than 30 feet with just the dirt."

Kobayashi said no retaining wall in the subdivision is higher than 15 feet. He called claims about 30- to 40-foot-high walls "baloney."

August set a 120-day deadline for the plaintiffs to notify lot owners about the lawsuit and their rights to intervene.

"If you can't comply with this and these people don't get proper notice, there is a distinct possibility that this matter may be dismissed," August told the plaintiffs' attorneys.

He said owners of unimproved lots in Maui Lani subdivisions other than Fairways and New Sand Hills could also be affected by the result of the lawsuit.

"At this point, nobody sitting here is in a position of protecting any of these lot owners – no one, and that's a huge concern to the court," August said.

While attorneys said they didn't know how many lot owners would need to be given notice, documents filed in court say there are 1,163 house lots in the Maui Lani project district.

"The likelihood of the court ordering that somebody tear down a home which has been constructed or even partially constructed at the time the lawsuit was filed is slim to none," August said. "If you're asking that people tear down their homes, that's just not going to happen. The court is not prepared to order that kind of relief."

Duus said residents weren't asking for that either.

"All my plaintiffs are asking for is the damage to their houses be fixed and their view plane be preserved," he said.

Duus said residents now face having to "knock on every door" in Maui Lani to comply with the court order. "The burden has been shifted on them tremendously when there's been this law on the books since 1991," Duus said.

Attorney Lance Collins, also representing residents, said the lawsuit was focused only on the two Maui Lani subdivisions.

"The ultimate resolution of this complaint is specific to the plaintiffs and where they live," he said. "On Palama Drive, they want this determination made based on the subdivision that is trying to spring up behind their house."

A hearing in the case is scheduled to continue May 29.