Certain groups, including Save Diamond Head Waters, LLC (collectively, "SDHW"), challenged the use of Shop #7 for the Surf School. In 2004, the Director of planning for the City determined that the school operates in compliance with the regulations of the zoning ordinance for nonconformities, subject to certain conditions. SDHW appealed the Director's decision to the zoning board of appeals, which affirmed the Director's Ruling. SDHW appealed to the circuit court, which vacated the ZBA's decision "insofar as it allows the operation of a commercial surf school at [the Hotel]." The Surf School appealed to the ICA. The ICA reversed the circuit court's judgement, concluding that the Director had discretion to grant the impact-ameliorating conditions and did not abuse his discretion in finding that the Surf School's use of Shop # 7 constituted a valid change in nonconforming use of Shop # 7, because the "ruling was reasonably based on the evidence before the Director and constituted a reasonable application of the applicable zoning ordinance and the [planning department's] previous interpretation of that ordinance."
In 2009, the Hawaii Supreme Court accepted SDHW's Application for Writ of Certiorari. The Hawaii Supreme Court (1) vacated the ICA's Opinion and (2) affirmed the circuit court's amended final judgment on the grounds that the Director's mixed finding of fact and conclusion of law that the Surf School use of the Shop #7 was a permissible change in nonconforming use was clearly erroneous as it is not supported in the record. See Save Diamond Head Waters, LLC v. Hans Hedemann Surf Inc., S.Ct. No. 27804, July 13, 2009. With this ruling, the Surf School is effectively shut down.
The question before the Court, was "whether the Surf School's use of Shop # 7 of the Hotel's premises was a permissible change in nonconforming use (from hotel to office) under the LUO." In reaching it's holding, the Court opined the following:
The Director erred when he compared the Surf School's impact to that of "an accessory use of the hotel," because the Director could only weigh the Surf School's impact against a legally established prior nonconforming use. Here, the Surf School's use of Shop # 7 cannot be compared to "an accessory use of the Hotel" because the Surf School did not meet its burden to prove that there was a legally established prior nonconforming accessory use of Shop # 7. In other words, the Surf School did not establish (1) that there was a valid accessory use of Shop # 7 by the Hotel before the 1969 Comprehensive Zoning Code changed the Hotel's zoning from Hotel and Apartment District "L" to A-4 Apartment District; or (2) there was a valid accessory use of Shop # 7 before the LUO changed the Hotel's zoning from A-4 Apartment District to its current A-2 Medium Density Apartment District designation.This decision does not create new law for determining nonconforming uses under the City's land use ordinance. Instead, the case merely provides that the record did not support the Director's conclusion.