Tuesday, May 19, 2020

Hawaii Supreme Court Defines "Potable" and "Brackish" Water -- Resort Allowed to Water its Golf Course

The Hawaii Supreme Court has been creating new real estate and land use law over recent months, e.g., HawaiiUSA Fed. Credit Union v. Monalim, No. SCWC-16-0000807 (Apr. 30, 2020) (changing foreclosure math; concurring and dissenting opinion by Nakayama, J. in which Recktenwald, C.J., joins); and Haynes v. Haas, No. SCWC-16-0000570 (May 5, 2020) (expanding public nuisance damage awards).

The latest is Lana’ians for Sensible Growth v. Land Use Comm’n, No. SCOT-17-0000526 (Haw. May 15, 2020) (concurring in the judgment and dissenting by Recktenwald, C.J., in which Nakayama, J., joins).  In this case, the central issue is what the state land use commission ("LUC") meant by its 1991 condition of approval in a district boundary amendment issued by the LUC to Lanai Resorts, LLC, which allowed it to build a golf course.  

Specifically, Condition 10 provides:

10. [The Resort] shall not utilize the potable water from the high-level groundwater aquifer for golf course irrigation use, and shall instead develop and utilize only alternative non-potable sources of water (e.g., brackish water, reclaimed sewage effluent) for golf course irrigation requirements.

Several challenges by Lana’ians for Sensible Growth ("LSG") ensued on various aspects of Condition 10.  The question before the court in the instant case is whether the LUC erred in its follow up 2017 order concluding that the Resort did not violate Condition 10 based on the quality of water the Resort was using. 

The court disagreed with how the LUC defined “potable” and “brackish” water.  The court, at length, opined on what it considered the plain meaning of those terms.  Ultimately, the court concluded that its definition of these terms resulted in the same conclusion the LUC arrived at in its 2017 order.  In other words: No harm, no foul.  

The minority disagreed with the court's departure from the record:

The LUC’s conclusions are supported by the record and correctly apply the law. The Resort’s use of brackish water from Wells 1 and 9 did not violate Condition 10, nor does such a reading of the Condition violate the public trust doctrine.

[ . . . ]

The majority, however, defines potable in reference to “county water quality standards.” This reading ignores the terms of the Condition, for “county water quality standards” appears nowhere in it. Because the majority creates a standard contrary to the text of the Condition, deprives the Resort of fair warning of its ongoing obligations under the LUC’s Order, and provides little useful guidance to the Resort for future water use, I respectfully dissent.

In the end, the same conclusion is reached by the majority and minority:  The LUC’s June 1, 2017 LUC order is affirmed.  

The challenge going forward for drafters is that courts may go beyond the four corners of an administrative order to find meaning even though, as the minority points out in this case, the terms at issue are defined in the order.

Sunday, May 3, 2020

Hawaii Supreme Court Changes Longtime Method of Calculating Foreclosure Deficiency Judgments

In a 3-2 decision, decided on April 30, 2020, in Hawaiiusa Federal Credit Union v. Monalim, the Hawaii Supreme Court took the opportunity to rewrite foreclosure law from the bench. 

The Concurring and Dissenting Opinion (Nakayama and Recktenwald) summarizes the issue:

The Majority adopts a new rule that will change Hawai‘i’s traditional method of calculating deficiency judgments. Under the new rule, mortgagors are entitled to a hearing to determine the “fair market value” of a property at the time of a foreclosure sale. The circuit court will be required to calculate the amount of the deficiency judgment based on a new formula in which the greater of the “fair market value” or the court-confirmed sale price will be deducted from the outstanding debt.

The Dissent opines that the facts of this case do not support the adoption of the Majority’s new rule:

First, I believe that by rationalizing the adoption of this new method based on the possibility that the deficiency amount in other foreclosure cases could be inequitable, the Majority oversteps the authority entrusted to this court to determine, in each case, if the law was applied correctly to a specific set of facts. The Majority should exercise judicial self-restraint in this case and leave the decision of whether or not to enact this new rule to the Legislature. Second, the new rule will require the court to select from the fair market value estimations of competing experts. The additional time and expense of this process will unnecessarily burden both the parties to foreclosure actions and the courts. Finally, the new rule will not, as the Majority avers, protect both parties to the mortgage.

Noting that the “vast majority of jurisdictions which have chosen to adopt the new rule have done so by legislative action,” the Dissent concludes:

Given courts’ relative lack of expertise on these policy considerations, the new rule should not be adopted through judicial activism. It should be left to the Legislature to determine whether enacting the new rule will truly serve the State’s best interests.

In practical terms, this new judicial rule will be good for debtors, bad for lenders, and bad for new Hawaii homeowners.  First, compared to other states, Hawaii residents seek larger mortgages for purchasing homes in Hawaii’s high-priced market.  As lenders apply more stringent requirements in response to the cost of recovering defaults based on the above decision, scrutiny on loan applicants will increase making it more difficult for borrowers to qualify.  Second, in addition to the Dissent's points, one might also question whether this change by the court was required now, rather than by the legislature, since Hawaii ranks in the middle of pack (2019) when it comes to the rate of foreclosures among states.  Third, this new rule will not improve Hawaii's record among states as the longest average time to foreclose.  Under the new rule, the question of fair market value becomes a fact issue that will take more of the court's time and increase costs and fees to resolve.

Thursday, April 23, 2020

How will the U.S. Supreme Court's Expansion of the Federal Clean Water Act Impact Hawai'i?

In the County of Maui, Hawaii v. Hawaii Wildlife Fund, decided by the U.S. Supreme Court on April 23, 2020, the Court weighed in on a long-simmering issue: What test should apply to determine whether a permit is required under the federal Clean Water Act (CWA)?

Essentially, "[t]he Clean Water Act forbids the 'addition' of any pollutant from a 'point source' to 'navigable waters' without the appropriate permit from the Environmental Protection Agency (EPA)."

Picture of Beach in Ka'anapaliIn this case, "the County of Maui, operates a wastewater reclamation facility on the island of Maui, Hawaii. The facility collects sewage from the surrounding area, partially treats it, and pumps the treated water through four wells hundreds of feet underground. This effluent, amounting to about 4 million gallons each day, then travels a further half mile or so, through groundwater, to the ocean."
Maui argued that the CWA permit requirement does not apply, because "at least one nonpoint source (e.g., unconfined rainwater runoff or groundwater) lies between the point source and the navigable water."  The Court disagreed.  Justice Bryer, writing for the majority, opined that this logic would "exclude a pipe that hangs out over the water and adds pollutants to the air, through which the pollutants fall to navigable waters. The absurdity of such an interpretation is obvious enough."  Congress did not intend such a loophole when passing the CWA.  

After a riveting discussion on Congressional intent and the meaning of words like "to" and "from," the Court held that "a permit is required when there is a discharge from a point source directly into navigable waters or when there is the functional equivalent of a direct discharge."  However, Justice Bryer admits that the functional equivalent test is far from perfect:

The difficulty with this approach, we recognize, is that it does not, on its own, clearly explain how to deal with middle instances. But there are too many potentially relevant factors applicable to factually different cases for this Court now to use more specific language. Consider, for example, just some of the factors that may prove relevant (depending upon the circumstances of a particular case): (1) transit time, (2) distance traveled, (3) the nature of the material through which the pollutant travels, (4) the extent to which the pollutant is diluted or chemically changed as it travels, (5) the amount of pollutant entering the navigable waters relative to the amount of the pollutant that leaves the point source, (6) the manner by or area in which the pollutant enters the navigable waters, (7) the degree to which the pollution (at that point) has maintained its specific identity. Time and distance will be the most important factors in most cases, but not necessarily every case.

           At the same time, courts can provide guidance through decisions in individual cases. The Circuits have tried to do so, often using general language somewhat similar to the language we have used. And the traditional common-law method, making decisions that provide examples that in turn lead to ever more refined principles, is sometimes useful, even in an era of statutes.

             The underlying statutory objectives also provide guidance. Decisions should not create serious risks either of undermining state regulation of groundwater or of creating loopholes that undermine the statute's basic federal regulatory objectives.

             EPA, too, can provide administrative guidance (within statutory boundaries) in numerous ways, including through, for example, grants of individual permits, promulgation of general permits, or the development of general rules. Indeed, over the years, EPA and the States have often considered the Act's application to discharges through groundwater.

             Both Maui and the Government object that to subject discharges to navigable waters through groundwater to the statute's permitting requirements, as our interpretation will sometimes do, would vastly expand the scope of the statute, perhaps requiring permits for each of the 650,000 wells like petitioner's or for each of the over 20 million septic systems used in many Americans' homes.

In other words, the crystal ball foretells a lot of litigation in the future.  

In the near-term, Maui can expect to face significant compliance costs.  Take for example the City and County of Honolulu consent decree imposed by the EPA that includes a little over $5 billion in required sewer improvements and fines.  The Maui County Council will face a tough road ahead.  Imposing increased sewer fees and real property taxes will be hard on residents given the current state of Maui's economy, which lost the last of its agriculture industry a few years ago and is suffering the double whammy of COVID-19 and a recession impacting tourism.

In addition, all injection wells are now suspect under the new rule, including planned and existing residential subdivisions that use septic systems and leach fields.  This will impact housing costs in a state with a high cost of living and a critical shortage of housing.

It will be interesting to see how our state and counties adjust to the new, new reality.

Thursday, June 13, 2019

Hawaii's New EIS Rules become Effective in August 2019, Here's What You Need to Know

The Office of Environmental Quality Control ("OEQC") and State Environmental Council ("Council") submitted the final proposed rules to the Governor’s Office in April 2019.  Governor Ige announced that he plans to sign the rules on July 30, 2019, and the rules will take effect on August 9, 2019.

The new rules will repeal the existing Hawai‘i Administrative Rules (HAR) Chapter 11-200, and adopt a new chapter, HAR Chapter 11-200.1.  OEQC provides a Rationale for Final Proposed HAR Chapter 11-200.1.

Here are some things to consider when the new rules take effect:
  • These rules do not amend or change the requirements of HRS chapter 343.
  • The following terms have not changed:
    • EA: environmental assessment
    • EIS: environmental impact statement
    • EISPN: environmental impact statement preparation notice
    • FONSI: finding of no significant impact
    • NEPA: National Environmental Policy Act
  • Save the trees.  
    • Materials must be submitted electronically to the OEQC for publication in The Environmental Notice
    • Agencies must provide Exemption Notices electronically
    • No longer required to mail individual responses to commenters—it will be posted online as part of the HEPA document
    • Some EA and EIS documents must be made available in paper, for example:
      • EA to the library in the area most affected by the action
      • Draft and final EA filed with the State Library’s Hawaii Documents Center
  • Clearer guidance for programmatic documents.  
    • A programmatic (as distinguished from a project-based) environmental review should be "enough to make an informed choice among program-level alternatives and broad mitigation strategies"
  • Supplemental documents.  
    • To determine whether an agency is eligible to prepare a supplemental EIS, apply the following criteria:
      • Whether the proposed action was a component of, or is substantially similar to, an action that received an exemption, FONSI, or an accepted EIS;
      • Whether the proposed action is anticipated to have direct, indirect, and cumulative effects similar to those analyzed in a prior exemption, final EA, or accepted EIS; and
      • In the case of a final EA or an accepted EIS, whether the proposed action was analyzed within the range of alternatives.
      • If the answer is “yes” or “no”, the agency may publish the determination with the OEQC for publication in the periodic bulletin.
  • New exemptions process.
    • Agencies would have seven years to reorganize and update their exemption lists to comply with the rules
  • Climate change added to significance criteria.
    • Adaptation.  Agencies must consider whether a proposed action is likely to have a substantial adverse effect on or is likely to suffer damage by being located in a sensitive area such as the sea level rise exposure area; SLR maps should be included in EAs and EISs to demonstrate the potential vulnerability
    • Greenhouse gas reduction.  Agencies must consider whether a proposed project will emit substantial greenhouse gases at any stage or may emit substantial greenhouse gases as an indirect or cumulative impact.
  • No EISPN required, but...
    • May skip an EISPN and prepare an EIS when there is clear potential for a significant impact
    • BUT, a public scoping meeting is required as well as incorporation of public feedback from the scoping meeting into the draft EIS
  • Public comment periods may be extended with notice.
    • Thirty days for draft EA and EISPN documents
    • Forty-five days for draft EIS documents
    • Comments received between publication periods do not have legal standing because they are not submitted during a legal window
  • Public comments—less paper.
    • A written response to be physically mailed to each commenter is no longer required.
    • Agencies and applicants may respond to comments based on the “grouping” model allowed under NEPA
    • List commenters whose comments are being addressed under each topic heading or section
    • All comment letters containing substantive comments must be appended to the final EIS or EA
    • Form letters may be responded to in a single response appended to the HEPA document if not using the grouping approach
    • Form letters that have additional substantive points be appended in full to the document, and receive a response
  • EIS scoping meeting are required on each island affected by a proposed action, but...
    • No need to transcribe and respond
    • Oral comments may be recorded and a summary provided in the draft EIS
  • NEPA-HEPA joint documents.
    • A single document and single comment period that satisfies both federal and state requirements can be used to satisfy both NEPA and HEPA
    • The agency must make an independent determination, pursuant to chapter 343, HRS, of the necessary level of environmental review
  • Do the new rules apply to my proposed action?
    • For EAs, if the draft EA was published by the office prior to the adoption of this chapter and has not received a determination within a period of five years from the implementation of this chapter, then the proposing agency or applicant must comply with the requirements of this chapter
    • For EISs, if the EISPN was published by the office prior to the adoption of this chapter and the final EIS has not been accepted within five years from the implementation of this chapter, then the proposing agency or applicant must comply with the requirements of this chapter
    • Exemption lists that have received concurrence under chapter 11-200 may be used for a period of seven years after the adoption of this chapter