Pila‘a 400, LLC v. Board of Land and Natural Resources.Â

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Electronically Filed
Supreme Court
SCWC-28358
14-FEB-2014
02:00 PM

IN THE SUPREME COURT OF THE STATE OF HAWAI#I

---o0o---

PILA#A 400, LLC,
Petitioners/Appellant-Appellant,

vs.

BOARD OF LAND AND NATURAL RESOURCES and
DEPARTMENT OF LAND AND NATURAL RESOURCES, STATE OF HAWAI#I,
Respondents/Appellees-Appellees.

SCWC-28358

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(ICA NO. 28358; CIV. NO. 05-1-0103)

February 14, 2014

ACOBA, McKENNA, AND POLLACK, JJ., WITH CIRCUIT JUDGE TRADER, IN
PLACE OF RECKTENWALD, C.J., RECUSED, WITH NAKAYAMA, J., ACTING
C.J., CONCURRING AND DISSENTING
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OPINION OF THE COURT BY POLLACK, J.

This case requires us to consider whether Pila#a 400,

LLC (Pila#a 400) was properly held responsible for remedial,

restoration, and monitoring costs assessed against it by the

Board of Land and Natural Resources (BLNR) for despoilment of

state conservation land resulting from unauthorized land use by

Pila#a 400, which included significant harm to a near-pristine

coral reef.

We hold that BLNR had jurisdiction to institute the

enforcement action, the BLNR was not required to engage in rule-

making before imposing a financial assessment for damages to

state land against Pila#a 400, and Pila#a 400 was afforded a full

opportunity to be heard at a contested case hearing following

reasonable notice. Accordingly, we affirm the Judgment on Appeal

of the Intermediate Court of Appeals (ICA).

I.

A.

Pila#a 400 owns a 383-acre parcel of rural land

(Property), located on the north shore of Kaua#i.1 The Property

is a level to gently sloping plateau broken by four gulches

extending from Kuhio Highway and Koolau Road toward the

shoreline. The plateau above and between the gulches naturally

1
Pila#a 400 obtained the Property from Pflueger Properties, LP by
warranty deed, executed on January 23, 2001, by James H. Pflueger.

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drains water and sediment along contours that form distinct

geographic drainage areas.

At the makai2 terminus of the Property is Pila#a Beach

and Pila#a Bay. Pila#a Beach is a white sand beach approximately

fifty to one hundred feet wide, bisected by Pila#a Stream. Pila#a

Bay contains a well-developed fringing reef, extending from

Ke#ilu Point on the west to Kepuhi Point on the east. Wave

action over the reef flushes the inner reef area, creating a lush

environment for a wide variety of marine life. Pila#a Bay’s

inner reef is one of only a few shallow reefs on the northeast

coast of Kaua#i protected from ocean swell by an outer reef.

Prior to November 26, 2001, Pila#a Bay was well-known for its

striking beauty and as an excellent site for swimming,

snorkeling, fishing, and gathering edible seaweed. According to

the DLNR, the reef at Pila#a Bay was one of the “few remaining

high value coral reef flats in the state that had largely escaped

encroachment from development and stress from improper land

practices.” The reef was “an extremely valuable resource” with a

wide range of reef habitats, abundant marine life, and almost

fourteen percent coral cover.

2
“Makai” means “toward the sea, in the direction of the sea.” State
v. Tagaolo, 93 Hawai#i 314, 318 n.6, 2 P.3d 718, 722 n.6 (App. 2000) (citing
M. Pukui and S. Ebert, Hawaiian Dictionary 225 (1979)).

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Pila#a Beach and Bay are public lands owned by the

State of Hawai#i, subject to several privately owned kuleana.3

The Department of Land and Natural Resources (DLNR) is

responsible for managing, administering, and exercising

control over all of the public land in the state, including

water and coastal areas. The DLNR is “headed” by BLNR. Hawai#i

Revised Statutes (HRS) § 171-3(a) (2011).4 The BLNR is

constitutionally mandated to conserve and protect Hawai#i’s

natural resources.5

3
A “kuleana” is “a small area of land such as were awarded in fee
by the Hawaiian monarch, about the year 1850, to all Hawaiians who made
application therefor.” Bremer v. Weeks, 104 Hawai#i 43, 45 n.5, 85 P.3d 150,
152 n.5 (2004) (quoting Palama v. Sheehan, 50 Haw. 298, 299 n.1, 440 P.2d 95,
96 n.1 (1968)).

4
HRS § 171-3(a) (2011) provides now, as it did at all times during
the events at issue:

(a) The department of land and natural resources shall be
headed by an executive board to be known as the board
of land and natural resources. The department shall
manage, administer, and exercise control over public
lands, the water resources, ocean waters, navigable
streams, coastal areas (excluding commercial harbor
areas), and minerals and all other interests therein
and exercise such powers of disposition thereof as may
be authorized by law. The department shall also manage
and administer the state parks, historical sites,
forests, forest reserves, aquatic life, aquatic life
sanctuaries, public fishing areas, boating, ocean
recreation, coastal programs, wildlife, wildlife
sanctuaries, game management areas, public hunting
areas, natural area reserves, and other functions
assigned by law.

HRS § 171-3(a).

5
The Hawai#i Constitution provides:

For the benefit of present and future generations, the State
and its political subdivisions shall conserve and protect
Hawaii's natural beauty and all natural resources, including
land, water, . . . .
(continued...)

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The BLNR defines “land” to include coastal areas and submerged

land. Hawai#i Administrative Rules (HAR) § 13-5-2 (1994).

Pila#a Beach and Bay lie within a State Land Use

Conservation District (Conservation District) as a strip of land

ranging from 175 to 250 feet wide and running along the makai

edge of the Property. The Conservation District is divided in

two sections. The Conservation District land located mauka6

of the shoreline boundary is in the “limited” subzone,7

consisting of the white sand beach. The Conservation District

land makai of the shoreline boundary consists of the near-shore

submerged lands and is in the “resource” subzone.8 Regulated

land use in a resource subzone includes the placement of fill on

5
(...continued)

Haw. Const. art. XI, § 1.

The legislature shall vest in one or more executive boards or
commissions powers for the management of natural resources owned
or controlled by the State, and such powers of disposition thereof
as may be provided by law . . . .

Haw. Const. art. XI, § 2.

6
“Mauka” means “inland.” Diamond v. Dobbin, No. 30573, 2014 WL
285388, at *2 n.8 (Haw. Jan. 27, 2014) (citing Mary Kawena Pukui & Samuel H.
Elbert, Hawaiian Dictionary at 242 (1986)).

7
The objective of the limited subzone is to “limit uses where
natural conditions suggest constraints on human activities . . . . Identified
land uses . . . are restricted to those listed in [HAR §] 13-5-23.” HAR § 13-
5-12 (1994).

8
The objective of the resource subzone is “to ensure, with proper
management, the sustainable use of the natural resources of those areas. . . .
Identified land uses . . . are restricted to those listed in [HAR §] 13-5-
24.” HAR § 13-5-13 (1994).

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submerged land. HAR § 13-5-24. Pila#a reef is a part of the

resource subzone.

Sometime prior to November 26, 2001, Pila#a 400 or its

predecessors conducted extensive grading, filling, and other work

on the Property. None of the work was authorized by permit. The

unauthorized land use included: (1) large-scale grading on the

plateau above the bay; (2) a vertical cut creating a cliff forty

to sixty feet in height within the Conservation District; (3)

construction of a road along the base of the vertical cut; and

(4) installation of a 30-inch pipe or culvert under the road that

drained water and mud directly from the Property onto Pila#a

Beach.

On November 26, 2001, the Property experienced heavy

rainfall typical of the area at that time of year. The

consequent erosion of the recently graded and filled hillside on

the Property resulted in a massive mudflow into the Conservation

District. Mud flowing from the Property poured into Pila#a Bay

and covered land within the Conservation District in several feet

of mud.

The November 26, 2001 mudflow severely damaged Pila#a

Bay and reef. A scientific assessment begun in June 2002 by the

DLNR and continuing through September of that year noted several

indications of significant damage: (1) the shallow areas of the

bay suffered from chronic turbid conditions; (2) corals were

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bleached, dead, dying, and becoming overgrown by algae; and (3)

approximately 2,943 square meters of live coral were destroyed by

the November 26, 2001 mudflow and subsequent sedimentation. The

assessment concluded that, although much of the sediment had been

cleansed from the beach due to natural wave action, sediment and

its negative impacts remained at Pila#a. According to the

assessment’s conclusion, Pila#a might never be returned to its

pre-mudflow conditions.

B.

On January 28, 2002, pursuant to HRS Chapter 183C, the

DLNR issued a Notice and Order (First Notice and Order) to

Pflueger Properties, Limited Partnership (Pflueger Properties)

for “illegal work conducted within the Conservation District at

Pila#a[,] Kilauea, Kauai, Hawaii.”9 The First Notice and Order

included the DLNR’s initial assessment of potential unauthorized

land uses in violation of state law.

We have determined that:
(1) The subject property, identified as tax map key 5-1-
004:008 is in the Conservation District and is classified as
Limited Subzone;
(2) The following uses were conducted on the subject
premises: grading, grubbing, [10] cutting, and culvert
construction;
(3) These uses were not authorized by the Department of Land
and Natural Resources.

9
Pflueger Properties and James H. Pflueger were later dismissed
from the case, leaving Pila#a 400 as the sole responsible party. See note 19,
infra. Until the dismissal, DLNR and BLNR communications were directed either
to Pflueger Properties or James H. Pflueger.

10
“Grubbing” means the removal of vegetation by scraping,
dislodging, or uprooting vegetation that breaks the topsoil. HAR § 13-5-2.

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YOU ARE HEREBY ORDERED TO CEASE any further activity on the
subject premises. Should you fail to cease such illegal
activity immediately, you will be subject to fines up to
$2,000 per day pursuant to Chapter 13-5, [HAR], in addition
to administrative costs incurred by the Department and
damages to State land.

(Footnote added).

On June 20, 2002, following a June 13, 2002 site

inspection, the DLNR issued a second Notice and Order (Second

Notice and Order) to Pflueger Properties for "Illegal Activity in

the Conservation District.” The Second Notice and Order required

Pflueger Properties to submit a remedial Best Management

Practices Plan for the affected conservation land and emphasized

that the natural environment at Pila#a Bay suffered “unauthorized

despoliation” due to “almost unimpeded” sedimentation resulting

from the illegal land uses conducted on the property.

[A] massive vertical bench was cut into the hillside and
remains unprotected from erosion. Evidently, this was done
to construct a new dirt road . . . . This road now serves
as a conduit for water and sediments, which end up in the
sea almost unimpeded. A s m a l l v a l l e y t h a t t e r m i n a t e s
near the beach was filled with large quantities of
e x c a v a t e d s o i l . T h i s a r e a r e m a i n s p a r t l y unvegetated.
This latter action resulted in the diversion of a small
stream, which originates from a spring several meters up
the valley. This fill area is a serious source of
sediments transported to the nearshore waters during
periods of rainfall.
It was generally agreed that some immediate remedial
actions could be taken, such as implementation of Best
M a n a g e m e n t P r a c t i c e s ( B M P s ) , to help abate sedimentation
on nearshore waters.
. . . . [T]here is a need for immediate physical
intervention to slow down runoff and sediments.

(Emphases added).

The Second Notice and Order also memorialized future

remedial action the DLNR intended to take:

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The landowner is reminded that these interim remedial
actions in no way whatsoever, cures, exonerates or
pardons the unauthorized despoliation of conservation
v a l u e s a t P i l a #a b y t h e l a n d o w n e r . The matter of the
u n a u t h o r i z e d w o r k a t P i l a #a B a y w i l l b e p r e s e n t e d t o t h e
BLNR at a future date, time and place to be announced.
In addition to fines and penalties for damages to State
land, the landowner should be made aware of the
possibility of the imposition of the requirement to
conduct complete land restoration and long term
monitoring to assess the recovery of the marine
environment.

(Emphasis added).

On August 22, 2002, the DLNR issued an order for the

implementation of emergency erosion and water pollution controls

(First Implementation Order) detailed by the plan submitted by

Pfleuger Properties.11 The First Implementation Order reiterated

that erosion and sedimentation resulting from the illegal uses

conducted on the Property continued to threaten Pila#a Bay.

On June 20, 2002, the DLNR issued you a second order,
directing you to submit a Remedial Best Management Practices
Plan to construct filter fences, plug a drainage culvert and
grass certain areas in order to reduce erosion and
sedimentation of waters within Pila#a Bay.
. . . .
These measures would include the construction of a large
rock berm within the eastern gulch, a series of smaller rock
dams, sedimentation ponds, hydro mulching, etc. . . .
[t]hese emergency measures would be implemented with the
sole intent of forestalling erosion and prevention of
further degradation of marine waters, which could occur this
rain season unless appropriate measures are undertaken
immediately.
. . . .
In addition to fines and penalties for damages to State land,
the landowner should be made aware of the possibility of
complete land restoration and long term monitoring to assess
the recovery of the marine environment.

11
The Best Management Practices Plan ordered by the DLNR’s June 20,
2002 letter does not appear in the record. DLNR’s August 22 letter addressed
to Pflueger Properties references this order and stated that it has “reviewed
the submitted plan” and “conditionally approves the emergency
measures . . . .”

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(Emphases added).

On November 20, 2002, the DLNR issued a second

implementation order (Second Implementation Order) to implement

erosion and water pollution control measures within the shoreline

area of Pila#a Bay. The Second Implementation Order emphasized

that erosion continued to pose a threat to the immediate

shoreline area and the marine waters and echoed the language of

the previous order. “These emergency measures would be

implemented with the sole intent of forestalling erosion and

prevention of further degradation of marine waters which could

occur this rainy season unless appropriate measures are

undertaken immediately.” (Emphasis added). Both the First and

Second Implementation orders reiterated the intention of the BLNR

to take future action.

The damage to the coral reef at Pila#a Bay was a

central and continuing concern of the DLNR. On behalf of the

BLNR, Dr. Paul Jokiel completed a scientific study entitled “Reef

Coral Communities at Pila#a Reef in Relation to Environmental

Factors” on December 12, 2002 (the Jokiel Report). The Jokiel

Report extensively examined the effects of the November 2001

mudflows on Pila#a reef and the surrounding area. It concluded

that “the mudflow from the 26 November 2001 event entered the

reef [at a time of low wave energy] . . . so all of the sediment

was deposited and retained in the shallow reef system,” and “the

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shallow coral reef areas at Pila#a have undergone recent

degradation.” The degradation was shown by the impact of the

sediment on the reef corals:

c. Hard substrate in impacted areas is covered with
mats of algae and terrigenous sediment 12 rather than
the pink crustose coralline algae that would be
expected. Sediments have combined with the fleshy
algae into a thick matrix on hard surfaces.

d. Presence of terrigenous mud has mixed with the
carbonate sands on the beaches, intertidal and
subtidal areas. The mixture bakes into a “hardpan”
layer on impacted beaches.
. . . .
3. Mudflows and increased rates of sediment input have
resulted from grading of steep slopes along the shoreline
with consequent accelerated erosion of soil onto the reef.
Increased mud input is the cause as shown by the pattern of
damage in relation to sediment sources and in shore ocean
patterns.

4. Recovery of the damaged areas cannot begin until
terrigenous input of sediment is curtailed.

(Emphases added).

The DLNR also conducted additional studies that

examined the effects of sedimentation on the reef at Pila#a Bay.

The “Report on Reconnaissance: Level Sedimentology Survey of

Pila#a Reef Beaches, Kauai, Hawaii, August 5, 2002” concluded

that “the reef and bay at Pila#a contain significant quantities

of terrigenous mud,” compared to a control beach which was

“pristine.” At the time of the report, some eight months after

the November 26, 2001 mudflow, the report also noted:

12
In oceanography, terrigenous sediments are those derived from the
erosion of rocks on land and consist of sand and mud carried to sea by rivers.
Paul R. Pinet, Invitation to Oceanography 94 (2009)(available via Google
Scholar, p. 94 [as of Feb. 13, 2014]).

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A concentrated plume of mud was continuously observed during the
survey . . . . Presumably, this process has been ongoing since
the November 2001 and May 12, 2002 rain events and will continue
for months, perhaps even years into the future . . . .

A second report entitled “Initial Data Regarding Pila#a

Assessment,” also completed in August 2002, noted particular

concerns for the endangered Hawaiian green sea turtle. The

report determined that there were significant long term impacts

and concerns relating to displacement of native plants and

animals by invasive species; enhancement of “fleshy algae” and

cyanobacteria; decreased larval and planktonic organism survival;

decreased fertilization success, sex reversal and deformities,

and impacts to non-coral cryptic systems, mobile reef systems,

and loss of three-dimensional substrate. The report also

discussed economic values of the impact to the reef and possible

mitigation strategies.

Pila#a 400 also commissioned two of its own scientific

studies on sedimentation following the November 2001 mudflow and

its effects on the reef. The first study, completed in February

2003 was entitled “Preliminary Sediment Runoff Analysis for

Pflueger Property Restoration.” The purpose of the study was to

“estimate the potential annual historical sediment runoff from

the Pila#a property.” The study determined that the sediment

run-off that occurred during the November 26, 2001 incident was

not extraordinary for the area.

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A second study, completed in March 2003 was entitled

“Ecology of the Reef Ecosystem of Pila#a, Kauai and Analysis of

Alleged Environmental Impacts Associated with Recent Sediment

Run-Off,” and was directed at determining the relationship

between the November 2001 mudflow and the alleged damage to the

reef. According to this report, the low coral cover at Pila#a

was due to the naturally harsh ecological conditions. In

addition, the study asserted that the sediment spill in November

2001 did not exceed the range of natural variability at Pila#a,

suggesting that Pila#a 400 should not be held responsible for the

damage.

C.

On August 22, 2003, a public meeting (Public Meeting)

was held before the BLNR, during which DLNR staff presented a

report (Staff Report) regarding “Alleged Unauthorized Grading,

Grubbing, Filling, Road Construction, Landscaping, Drainage,

Improvements, and Damages to State Land and Natural Resources Due

to Excessive Sedimentation at Pila#a.” The Staff Report

enumerated four unauthorized uses within the Conservation

District.

[T]his report documents the unauthorized land uses within
the conservation district. The unauthorized uses include
[1] [a] . . . dirt road through gulch 2, and along the
shoreline, [2] [a] . . . vertical cut in the coastal bluff,
[3] . . . fill and grading at the seaward extent of gulch 2,
. . . [4] . . . storm drain construction adjacent to the
beach.

The report continued: “These unauthorized improvements resulted

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in extensive damages to the shoreline and marine resources at

Pila#a Bay, which was the focus of this report.” (Emphases

added.)

The Staff Report concluded “there is a strong

evidentiary record . . . linking the unauthorized work of Mr.

Pflueger to coral reel damages at Pila#a Bay. The area of

damages calculated . . . is 5,830 square meters. . . . The

comprehensive survey of corals provide strong statistical proof

that the damages are a result of massive sedimentation events

caused by the abutting landowner.”

The Staff Report recommended, inter alia: (1) a penalty

of $12,000 for “failing to obtain the appropriate approvals for

road construction, grading, filling, and storm drain construction

in six (6) instances within the conservation district;” (2) an

assessment of $5,830,000 for “damaging state land and natural

resources stemming from the unauthorized lands [sic] uses;” and

(3) a fine of $38,000 for administrative costs.

Before the close of the Public Meeting, the Pflueger

Properties, James H. Pflueger (Pflueger) and Pila#a 400

(collectively, the “Pflueger Parties”) made an oral request for a

contested case hearing. On September 2, 2003, the BLNR issued a

letter (September 2, 2003 Letter) to “James Pflueger, Pflueger

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Properties” that referred to the Public Meeting and acknowledged

the oral request for the contested case hearing.13

D.

The focus of the contested case hearing was framed by

the parties in pre-hearing statements. The first statement was

an August 29, 2003 letter by the Pflueger Parties to the BLNR

supplementing their oral request for a contested case hearing

(Written Hearing Request). In the Written Hearing Request, the

Pflueger Parties affirmed that the subject of the contested case

hearing would be damages to Pila#a Bay and reef resulting from

excess sedimentation caused by unauthorized grading activities in

the Conservation District:

The matter being considered by the [BLNR] concerns alleged
damage to the reef flat and near-shore marine environment
stemming from grading activities in the conservative [sic]
district which allegedly resulted in discharges of sediment
following a severe rainstorm on the night of November 26,
2001, December 2001, and early 2002.

(Emphasis added). The Written Hearing Request also contested the

following facts and issues contained in the DLNR staff report

presented at the Public Meeting:

• the statutory legal authority
• the responsible parties
• the scope and extent of the alleged damage to the reef flat
and near-shore marine environment at Pila#a
• the amount of alleged damage that was directly caused by
the Petitioners’ grading activities as opposed to other
causal factors

13
The September 2, 2003 Letter ordered Pflueger to pay a fine of
$8,000 relating to four instances of unauthorized land use. In addition, the
BLNR assessed $38,500 for administrative costs related to unauthorized land
uses at Pila#a. At some time prior to February 17, 2004, the $8,000 fine and
$38,500 in administrative costs were paid.

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• the specific dates(s) when the alleged damage occurred
• evidence regarding assessment of the damages to the reef
flat and near-shore marine environment and the alleged
causes
• the amount of penalties proposed by the DLNR staff
• the statutory authority for and the method used by the DLNR
to calculate penalties for the alleged damage to the reef
flat and near-shore marine environment
• all factual and legal issues addressed in the DLNR staff
report dated August 22, 2003
• DLNR staff recommendation items nos. 2, 4, 5, 6, 7, 8 and
9 as described in the DLNR staff report and
• any and all finds [sic] of fact and conclusions of law that
may arise during the course of the contested case
proceeding.

In its prehearing Statement on the Issues, dated

February 17, 2004, the DLNR framed the purpose of the contested

case hearing as follows:

The only issue in this contested case proceeding is the
determination of the amount of damages to be assessed
against the Pflueger Parties for damages to the beach, reef,
and marine environment . . . which were largely the result
of excessive sediment input dating from November 2001 and
thereafter.

(Emphasis added).

In its Responsive Statement of the Issues dated March

1, 2004, the Pflueger Parties presented an extensive list of

disputed facts and issues to be determined at the contested case

hearing that included sedimentation, damages, causation, and the

authority of the BLNR, both generally and specifically to assess

penalties and to require remediation. The Pflueger Parties

contested that it violated the provisions of HRS § 183C and HAR

Chapter 13-5 “by damaging state land and natural resources

stemming from unauthorized land uses, for a penalty of

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$5,830,000.” The statement disputed many of the findings of the

Staff Report presented at the Public Hearing, including the

sources and historic patterns of sedimentation into Pila#a Bay,

“causation as to the alleged damage to the beach, near-shore

marine environment, reef flat and/or deep water coral shelf at

Pila#a”; “the scope and extent of the alleged damage to the

beach, near shore marine environment, reef flat, and/or deep

water coral shelf at Pila#a;” and “the amount of alleged damage

that was directly caused by [the Pflueger Parties’] grading

activities as opposed to other causal factors.”

On October 3, 2003, the BLNR published a Notice of

Contested Case Hearing (Contested Case Hearing Notice). It

provided:

The [BLNR] will conduct a contested case hearing on DLNR
File No. KA-04-02 regarding an enforcement action involving
the alleged damages to State land(s) and natural resources
due to excessive sedimentation at Pila#a, District of
Hanalei, Island of Kauai, seaward of TMK: 5-1-4:8 (por.).
The hearing will be held pursuant to Chapters 91 and 183C,
Hawaii Revised Statutes, and Chapters 13-1 and 13-5, Hawaii
Administrative Rules (HAR).

(Emphasis added).14
14
In its prehearing Statement on the Issues dated February 17, 2004,
the DLNR also stated that the damages dated from November 2001. Based on the
DLNR statement, the Pflueger Parties, which included Pila#a 400, moved to
dismiss Pflueger Properties and Pflueger from the case (the Dismissal Motion)
because Pflueger Properties had conveyed its ownership interest in the
Property to Pila#a 400 earlier that year. The Dismissal Motion acknowledged
that Pila#a 400 would remain the liable party.

[Pila#a 400] is the party liable for any penalty incurred as
a result of the wrongful acts of its manager. As a matter
of law, [Pila#a 400] is the sole party responsible in this
action[.]

Based on the foregoing representations, the DLNR did not oppose the
Dismissal Motion. Similarly, the hearing officer’s (Hearing Officer)
(continued...)

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The contested case hearing began on July 20, 2004, and

continued over 13 days through August 13, 2004. The first

activity in the contested case was a site visit by the hearing

officer (Hearing Officer), who spent several hours exploring the

reef with mask and snorkel and examining the beach. The Hearing

Officer heard testimony and received exhibits from experts in

marine science regarding damage to Pila#a Bay and reef. Both

sides also presented multiple kama#aina15 witnesses who testified

as to the impact of the unauthorized land uses on fishing and

beach-related activities at Pila#a Bay.

DLNR presented six experts in marine science to

establish the damage to the Pila#a reef. Those experts included

Dr. Paul Jokiel, an international expert on coral reefs and coral

reef monitoring; Dr. Charles Fletcher, an internationally

recognized expert on coastal sedimentary geology and carbonate

reefs; David Gulko, a senior aquatic biologist with the DLNR and

an expert in coral reef ecology; Dr. William Walsh, an aquatic

14
(...continued)
April 29, 2004 dismissal noted that “[Pila#a 400] [was] the landowner of
the [Property] at all relevant times.” Therefore, Pila#a 400 was
allowed to remain as the sole liable party. The BLNR’s June 30, 2005
Findings of Fact, Conclusions of Law, and Decision and Order concluded,
“As the owner of the Property . . . Pila#a 400 was responsible to the
State for the condition of the Property and for the consequences of any
illegal activity on the Property by its predecessors[.]” Pila#a 400 did
not contest that it was the responsible party in its application for
writ of certiorari to this court.

15
“Kama#aina” means native-born, acquainted, or familiar. Mary
Kawena Pukui & Samuel H. Elbert, New Pocket Hawaiian Dictionary at 50 (1992).
It can also mean “a person familiar from childhood with any locality.” In re
Boundaries of Pulehunui, 4 Haw. 239, 245 (1879).

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biologist and resource manager with the DLNR and an expert in

aquatic biology; Ryan Okano, a graduate student at the University

of Hawai#i and an expert in algae; and Dr. Robert Richmond, a

research professor at Kewalo Marine Laboratory and an expert in

coral reef biology and their valuation.

Pila#a 400 called five expert witnesses to address the

issues of excessive sedimentation and its effects on the reef at

Pila#a. These experts included Dr. Richard Grigg, an expert in

coral reef ecology and oceanography, Dr. Eric H. De Carlo, an

expert in sedimentary geology, and Dr. Steve Dollar, an expert in

biological oceanography, all co-authors of the sedimentation

study submitted by Pila#a 400. Pila#a’s 400’s other experts were

Paul Wallrabenstein, an author of a second sedimentation study

submitted by Pila#a 400, an expert in civil engineering, and Dr.

John Dixon, an expert in the field of environmental economics.

Following the contested case hearing, both parties

submitted proposed findings of fact, conclusions of law, and

decision and recommendations. The Proposed Findings of Fact,

Conclusions of Law, Decision and Recommendation submitted by

Pila#a 400 (Pila#a 400 Proposal) included, inter alia, the

following arguments: (1) as the principal land use activities and

source of the mudflow was land outside the Conservation District,

the BLNR therefore lacked jurisdiction over those land use

violations, and (2) Pila#a 400 was denied due process by DLNR’s

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failure to engage in rule-making, as mandated by HRS § 183C-3(3),

before assessing the damage penalty.

The DNLR Proposed Recommended Findings of Fact,

Conclusions of Law, Decision and Order (DLNR Proposal) noted that

the Pflueger Parties did not contest the September 2, 2003

Letter’s findings of “violation[s] of the provisions of Chapter

183C HRS, and Chapter 13-5, HAR, by failing to obtain the

appropriate approvals for road construction, grading, filling,

and storm drain construction in four (4) instances within the

conservation district.” The DLNR Proposal described the

unauthorized work on the Property and resultant mudflow, and

extensively detailed the impact to the Conservation District and

the damage to State land. The DLNR Proposal stated the damage to

the reef and ecosystem were violations of HAR §§ 13-5-24, 30(b).

The DLNR Proposal recommended the following “Discussion and

Conclusions”:

18. The November 26, 2001 mudflow and subsequent
sedimentation constitute placement of solid material
on land and the grading of land and are therefore a
regulated land use with the meaning of [HRS] § 183C-
2[].

19. Pila#a 400 did not have a [DLNR] or [BLNR] permit
authorizing any land use in the [Conservation
District].

20. The November 26, 2001 mudflow and subsequent
sedimentation constitute marine construction within
the meaning of HAR § 13-5-24.

21. Pila#a 400 did not have a [DLNR] or [BLNR] permit
authorizing marine construction (including filling of
submerged land). Nor could a permit be obtained for
the filling of submerged land where protected marine
resources are destroyed. Chapter 13-5 does not

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provide otherwise that Pila#a 400 could undertake
marine construction.

22. The November 26, 2001, mudflow and subsequent
sedimentation events constitute violation by Pila#a 400
of [HRS] chapter 183C and violation of rules adopted
in accordance with chapter 183C.

On December 22, 2004, the Hearing Officer entered

Proposed Findings of Fact, Conclusions of Law, and Recommendation

(Hearing Officer’s Proposal). The Hearing Officer recommended

that the BLNR assess Pila#a 400 $2,315,000,16 representing the sum

of restoration costs, the value of coral destroyed, the intrinsic

value of Pila#a Bay, compensation for interim loss, and five

years of monitoring the Pila#a reef community. The Hearing

Officer’s Proposal noted generally the provisions of HAR §§ 13-5-

24 and 30(b), as well as other relevant sections of HAR Chapter

13-5. In regards to HAR §§ 13-5-24 and 30(b), the Hearing

Officer’s Proposal adopted the Discussion and Conclusions No. 18-

22 from the DLNR Proposal. In addition, the Hearing Officer

16
The Hearing Officer also made the following recommendation:

It is recommended that the $2,325,000 penalty be held in
trust and applied to implement the Conceptual Remediation
Plans whose estimated cost is three to five million dollars
and to monitor the Pila#a Bay reef for five years. This
will assure that the penalty is used to restore Pila#a Bay.
If the construction costs of the Conceptual Remediation
Plans exceed $2,000,000, [ Pila#a 400, LLC] should pay the
balance of the construction costs. If the construction and
monitoring costs are less than the balance of the penalty
not used to fund the Conceptual Remediation Plans and
monitor Pila#a Bay for five years, then the balance of the
penalty should be retained by the State of Hawaii.

The "Conceptual Remediation Plans" were approved by the DLNR and were
designed to ensure the Property was stable and no further runoff would occur.
It included removal of a trail in Gulch 2 and restoration of the stream to
its previous location and configuration, extensive landscaping in Gulch 2,
stabilization, filling and restoration of the shoreline cut, re-vegetation of
the shoreline, and removal of the rock berm in Gulch 2.

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recommended that the BLNR assess administrative costs in the

amount of $69,996.93.

Following the entering of the Hearing Officer’s

Proposal, both parties filed exceptions to the Hearing Officer’s

Proposal. In its exceptions, Pila#a 400 raised an objection to

any findings based on HAR § 13-5-24 due to a lack of notice under

HRS § 91-9. Pila#a 400 stated that it had “never received any

notice, oral or written, that the contested case hearing was

proceeding under the marine construction rules. There is not a

single citation in the entire contested case record which even

references ‘marine construction.’” (Emphasis removed).

On March 29, 2005, the BLNR heard closing arguments.

On June, 30, 2005, the BLNR issued its Findings of

Fact, Conclusions of Law, and Decision and Order (BLNR Order).

The BLNR Order ordered Pila#a 400 to pay $3,963,000 in

damages as well as $69,996.93 for DLNR’s administrative costs.17

In arriving at the monetary amount, the BLNR Order found that the

Hearing Officer’s recommendations did not reflect “the BLNR’s

duty to protect this valuable natural resource.”

17
The BLNR’s conclusions differed from the Hearing Officer’s
recommendations in the following respects: (1) Pila#a Bay had incurred
$3,333,000 in damages rather than $2,000,000; (2) monitoring should be
conducted for 10 years at a cost of $630,000 instead of 5 years; (3) the
damages award should be deposited in the special land and development fund
rather that used to offset the restoration costs because “an offset would not
compensate for the damages caused to Pila#a beach, bay, and reef.”

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The value of Pila#a beach, bay and reef includes use value,
option value, commodity value, existence value, bequest
value, cultural values, including value to indigenous
people, and intrinsic value. Economic and use (market)
values alone cannot and do not capture the full value of
Pila#a. Economic valuation alone understates the true
social loss from natural resource damage. The intrinsic
value of Pila#a is recognized by the Hawai#i constitution and
state laws, including section 183C-1, HRS. The BLNR holds
Pila#a and all state property in trust for the people of
Hawai#i and for future generations. 18

The BLNR determined that “[m]udflows from Pila#a 400’s

Property into the [Conservation District] occurred because Pila#a

400 . . . failed to obtain permits for the [unauthorized] work

and failed to implement adequate sediment and water pollution

controls.”19 The BLNR based Pila#a 400’s liability for the

damages on placement of dirt and sediment onto submerged lands.

2. The violation was placement of any solid material on
land in the form of dumping or allowing to be put on
18
In addition, the BLNR reasoned:

Given the elements of value discussed above and in
consideration of all the facts and evidence, including but
not limited to the range of values stated in scholarly
papers for reefs, the probable costs of restoration of
Pila#a Bay and reef and beach, the value of the coral
destroyed, and the intrinsic value of Pila#a Bay and reef,
and the costs of monitoring for 10 years beginning in 2005,
the BLNR rejects the Hearing Officer’s recommendation of
damages. Under the circumstances of this case, the Hearing
Officer’s recommendation as to the amount of damages is too
lenient to reflect the BLNR’s duty to protect this valuable
natural resource under constitutional and statutory law.

19
As to the four violations identified in the September 2, 2003
letter, the BLNR Order enumerates that Pila#a 400 had: (1) created “a massive
vertical cut ranging in elevation from 40 to 60 feet in height” within the
Conservation District, (2) constructed a road in the Conservation District,
and (3) constructed an unauthorized 30 inch pipe or culvert that ran onto
state property in the Conservation District. The fourth land use violation
identified in the September 2, 2003 Letter is not clearly identified in the
BLNR Order.

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conservation land (including submerged land) of a large
unknown amount of dirt and sediment. The illegal act that
was conducted on conservation land (including submerged
land) was dumping or allowing to be dumped a large unknown
quantity of dirt and mud without a permit as required by HAR
§§ 13-5-24 and 13-5-30(b).

3. As the owner of the Property on November 26, 2001,
thereafter, Pila#a 400 was responsible to assure that there
was no unpermitted dumping onto conservation land, including
submerged lands. As the owner of the Property on November
26, 2001, and thereafter, Pila#a 400 was responsible to the
State for the condition of the Property and for the
consequences of any illegal activity on the Property by its
predecessors that resulted in damage to State land
(including submerged land) after it acquired the Property
. . . .
5. Dumping soil onto conservation land falls within the
definition of “land use” in HRS § 183C-2.[ 20]
. . . .
8. The November 26, 2001, mudflow and subsequent
sedimentation events constitute placement of solid material
on land and the grading of land and are regulated land use
within the meaning of HRS § 183C-2.
. . . .
10. The November 26, 2001, mudflow and subsequent
sedimentation events constitute violation by Pila#a 400 of
HRS chapter 183C and violation of rules adopted in
accordance with chapter 183C.

(Emphasis and footnote added).

E.

On July 27, 2005, Pila#a 400 appealed the BLNR Order

to the Circuit Court of the Fifth Circuit (circuit court).

Pila#a 400 raised, inter alia, the following points of error on

appeal:

(1) The BLNR order violates Haw. Rev. Stat. § 91-3 and Haw.
Rev. Stat. § 183C-3(3) because the BLNR had no rules

20
HRS § 183C-2 (Supp. 2000), provided at the time of the violation,
as it does now, in pertinent part:

“Land Use” means:
(1) The placement or erection of any solid material on land;
(2) The grading, removing, harvesting, dredging, mining, or
extraction of any material or natural resource on land;
(3) The subdivision of land; or
(4) The construction, reconstruction, demolition, or alteration of
any structure, building, or facility on land.

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establishing a methodology for calculating damages to state
land;
(2) The BLNR lacks jurisdiction over grading activities
outside the conservation district;
(3) Appellant did not receive notice that the violation was
“placement of any solid material on land in the form of
dumping . . . without a permit as required by HAR § 13-5-24
and 13-5-30(b)”;

In the first point of error, Pila#a 400 argued that the

BLNR Order violated HRS § 91-3 and HRS § 183C-3(3) because it

failed to establish any written guidelines for the assessment of

environmental damages. Citing Hawai#i Prince Hotel v. City and

County of Honolulu, 89 Hawai#i 381, 383, 974 P.2d 21, 23 (1999),

Pila#a 400 contended that “the methodology for imposing fines and

penalties must be clearly established by rule, otherwise the

public is unaware of factors critical to the agency’s penalty

process.” Further, Pila#a 400 reasoned that “[a] penalty imposed

in the absence of Chapter 91 rule-making is invalid as arbitrary

and capricious.”

In response, the DLNR contended that the plain language

of HRS § 183C-7(b) authorizes the BLNR to regulate the use of

conservation district land and to impose fines for its misuse.

In addition, because state land could be damaged in an infinite

number of ways that includes any possible removal, diminishing,

destruction, or loss in the conservation values, the DLNR argued

that it is “impossible to the point of absurdity” to suppose that

the BLNR is required to prescribe by rule the exact amount of

damage that will be levied, citing Coney v. Lihue Plantation Co.,

39 Haw. 129 (1951). The DLNR further explained that the

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appropriate standard for the assessment of the damage amount was

applied in this case.

In its second point of error, Pila#a 400 argued that

the BLNR did not have jurisdiction because the grading activities

took place outside the Conservation District. Citing the BLNR’s

findings of fact, Pila#a 400 contended that the sedimentation

events resulted in mudflow from the Property into the

Conservation District and that the source of the sediment was

outside of the Conservation District. Pila#a 400 argued that HRS

§ 183C limits the agency’s authority to land use activities on

Conservation District land.

In response, the DLNR argued that the dumping of mud

and dirt onto Conservation District land is a “land use” under

HRS § 183C and that the “source” of the mud was not relevant. In

addition, the DLNR contended that whether the dumping was

intentional was not relevant to the statute.

In its third point of error, Pila#a 400 argued that the

Contested Case Hearing Notice did not provide adequate notice

that the alleged land use violation was “unpermitted marine

construction” under HAR § 13-5-24. Pila#a 400 contended that HRS

§ 91-9(b) requires an agency to give notice of the “particular

sections of the statutes and rules involved” and that the absence

of specific notice of HAR § 13-5-24 denied Pila#a 400 due

process.

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In response, the DLNR argued that Pila#a 400 received

adequate notice in compliance with HRS § 91-9(b) because the

written notice referred to the statutes and rules involved by

chapter. The DLNR emphasized that “[t]he notice references Haw.

Rev. Stat. chapter 183C and HAR § 13-5” and “nothing more was

required by section 91-9(b).”21

On December 4, 2006, the circuit court issued its

Findings of Fact, Conclusions of Law, and Order affirming the

BLNR Order. The circuit court determined, in relevant part that:

FINDINGS OF FACT
. . . .
27. [Pila#a 400] did not challenge any of the BLNR’s
findings of fact.
. . .
CONCLUSIONS OF LAW
. . . .
6. The [Contested Case Hearing Notice] was adequate and
sufficient to satisfy the notice requirements of HRS Chapter
91. The notice refers to the statute and the rules involved
by chapter. Appellant was aware of the general issues.
. . .
7. Due Process is satisfied if the parties are sufficiently
apprised of the nature of the proceeding as set forth in
[HRS] § 91-9(b). [Pila#a 400] received such notice, so
there is no unfair surprise.
. . .
8. [Pila#a 400]’s argument that the administrative
proceeding is invalid because the notice does not refer to
“marine construction,” is without merit because the BLNR did
not base its Final Decision on “marine construction.”
. . .

21
On March 9, 2006, the Environmental Protection Agency and the
Hawai#i Department of Health filed a complaint in the United States District
Court for the District of Hawai#i against the Pflueger Parties, alleging
violations of state and federal law and seeking damages and injunctive relief.
On June 16, 2006, the U.S. District Court approved a consent decree resolving
the claims. As part of the consent decree, the Pflueger Parties paid civil
penalties and agreed to undertake remedial measures, but denied liability. On
July 24 and August 17, 2006, Pflueger Parties filed motions with the circuit
court seeking summary judgment and dismissal based on the consent decree. The
circuit court denied both motions on October 23, 2006.

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12. Because damages to state land, as well as the nature of
the state land itself, can vary, it would be impossible to
devise a single rule that prescribes the methodology for
quantifying damages. Therefore, determination of the
appropriate amount of damages must be on a case by case
basis and was properly determined through a quasi-judicial
process before the BLNR.

Accordingly, the circuit court affirmed the BLNR Order.

Final judgment was entered on December 26, 2006.

F.

On January 9, 2007, Pila#a 400 filed a timely appeal to

the ICA. Pila#a 400 asserted that the circuit court erred in

affirming the BLNR order for the following reasons, inter alia:

(a) [the BLNR Order] exceeded the statutory authority and
jurisdiction of the agency under HRS § 183C-3(7) because the
subject grading activity occurred outside of the conservation
district;
(b) [the BLNR Order] violated HRS § 91-9(b), and [Pila#a 400]’s
due process rights insofar as [Pila#a 400] did not receive notice of
the nature of the land use violation;
(c) [the BLNR Order] violated HRS § 91- 3 and HRS § 183C-3(3),
as the DLNR and the [ BLNR] failed to adopt rules for
calculating and assessing environmental damages to state land;

Pila#a 400 LLC v. Bd. of Land & Natural Res., No. 28358 at *5

(App. Dec. 21, 2012)(mem.)(hereinafter “ICA Op.”).

As to the first point of error, Pila#a 400 maintained

that the BLNR lacked jurisdiction because the alleged land use

violations occurred outside of the conservation district. Citing

to the BLNR’s findings of fact, Pila#a 400 contended that the

sedimentation events resulted in mudflow from the Property into

the Conservation District and that the source of the sediment was

outside of the Conservation District. Pila#a 400 argued that HRS

§ 183C limits the agency’s authority to land use activities on

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Conservation District land, and therefore the land use activities

were outside the BLNR’s jurisdiction.

The ICA held that the BLNR properly exercised

jurisdiction for two reasons: (1) at least some of the

unpermitted grading activity occurred within the Conservation

District, and (2) the unpermitted placement of solid material on

conservation land is itself a land use violation directly under

the BLNR’s jurisdiction. ICA Op. at *6. The ICA emphasized

that the origin of the fill material was irrelevant, and it was

the act of dumping that brought this action under the BLNR’s

jurisdiction. Id.

The ICA also held that the BLNR was not barred by any

authority from considering additional land use violations beyond

the four land use violations that were identified in the

September 2, 2003 Letter. Id. The ICA reasoned:
[Pila#a 400] had reason to know that damage to the beach,
bay and reef caused by the mud flow from the Property was
unquestionably of concern and the reason for DLNR's
enforcement action. To the extent [Pila#a 400] argues that
it was unaware damage caused by soil runoff was at issue, we
conclude that argument is unsupported by the record.

Id. at *6-7. Therefore, because Pila#a 400 had adequate notice

that damage to the reef and bay caused by the mudflow was a

central issue at the contested case hearing, Pila#a 400 could not

later argue that the BLNR was limited to the four land use

violations originally identified and lacked jurisdiction over the

mudflow and resultant damage. Id.

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In its second point, Pila#a 400 argued the Contested

Case Hearing Notice provided by the BLNR was insufficient under

HRS § 91-9, and as a result of the insufficiency of the notice,

it had been denied due process. Pila#a 400 alleged the Contested

Case Hearing Notice was deficient in that it did not include a

specific citation to HAR § 13-5-24 and did not contain an

explicit statement in plain language of the issues involved and

facts alleged.

The ICA concluded that the Contested Case Hearing

Notice provided by the BLNR was sufficient. ICA Op. at *7.

First, the ICA concluded that Pila#a 400 had waived this

challenge on appeal because it did not raise the issue of

improper notice during the contested case hearing. Id. Second,

the ICA observed that, contrary to the assertion of Pila#a 400,

the Contested Case Hearing Notice did contain an explicit

statement of the essential issues, “the alleged damage to State

land(s) and natural resources due to excessive sedimentation from

Pila#a [400]’s land.” Id. The ICA reviewed the record and

concluded that it was “clear” that Pila#a 400 was “aware of the

general issue” and “sufficiently apprised of the nature of the

proceeding.” Id. at *8. The ICA found that as Pila#a 400

“itself identified the matters to be considered in the contested

case hearing as including the statutory basis for the assessment

of damage, it cannot claim to be surprised by a hearing that

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involved DLNR’s arguments regarding the basis for the

assessment.”

In regard to its third point, Pila#a 400 argued that

the BLNR failed to adopt rules that established a uniform

methodology for assessing environmental damages before imposing a

$3,963,000 penalty on Pila#a 400.

The ICA concluded that the BLNR and DLNR were not

required to engage in rule-making in this case. ICA Op. at *8.

The ICA, citing Sec. & Exch. Comm’n v. Chenery Corp., 332 U.S.

194 (1947), reasoned that it would be impossible to create a

single formula that could be used to assess the damage to state

Conservation District land under all possible circumstances:

Due to the infinitely diverse nature of the lands and
resources, and the myriad of ways damage may occur on such
lands and resources, measuring value and value lost must be
on a case-by-case basis, especially when of the magnitude
under the circumstances presented here. Devising and
imposing a single formulaic methodology for assessing
penalties would be impracticable.
ICA Op. at *10. The ICA held that the circuit court did not err

in affirming the BLNR’s order.22 ICA Op. at *18.

G.

In its application for writ of certiorari

(Application), Pila#a 400 presents the following questions for

review:

A. Did the ICA commit grave error when it found that neither
the [BLNR] nor the DLNR are required to engage in rule-
making, under HRS § 183C-3 and § 91-3, to adopt a

22
Judge Wilson wrote separately to emphasize that BLNR did not err
in including intrinsic value in its calculation of the damages to State land
at Pila#a Bay and reef.

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reasonable and just methodology for assessing damage to
natural resources?

B. Did the ICA commit grave error when it found that the
[BLNR] had jurisdiction, under HRS § 183C-3, to institute
an enforcement action for grading activities outside of
the Conservation District?

C. Did the ICA commit grave error when it found that [Pila#a
400] was afforded an opportunity for hearing after
reasonable notice, under HRS § 91-9, where the record is
undisputed that the DLNR failed to give [Pila#a 400]
notice of the particular sections of the statute and
rules involved in the enforcement action?

In the first question presented, Pila#a 400 contends

that the ICA’s determination that the BLNR and the DLNR were not

required to engage in rule-making is grave error. Pila#a 400

argues first that the ICA’s conclusion ignores the plain language

of HRS § 183C-3(3), which states that the BLNR “shall” engage in

rule-making under the Hawaii Administrative Procedures Act (HAPA)

rule-making procedures. Second, Pila#a 400 contends that where

quasi-judicial adjudication encompasses concerns that transcend

those of individual litigants and implicates matters of

administrative policy, rule-making procedures should be followed.

Third, citing to Hawai#i Prince Hotel v. City and County of

Honolulu, 89 Hawai#i 381, 974 P.2d 21 (1999), Pila#a 400 argues

that a methodology to determine value is a “rule” within the

meaning of HRS § 91-1(4) and requires HAPA rule-making

procedures. Pila#a 400 concludes that in the absence of such

guiding rules, the DLNR’s assessment was arbitrary and

subjective.

In response, the DLNR argues that, under HRS § 183C-

7(b), the legislature specifically authorized and directed the

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BLNR to include damages to state land when assessing fines. The

DLNR maintains that determining damages to Pila#a Bay and reef is

not an exact science and that there are no settled or infallible

rules or criteria by which to ascertain damages. The DLNR argues

Pila#a 400 can only challenge its findings as provided for in HRS

§ 91-14(g),23 and because Pila#a 400 does not contend that the

BLNR’s findings are clearly erroneous or unsupported by

substantial evidence, Pila#a 400’s argument in regards to

required rule-making is without merit.

In its second question presented, Pila#a 400 argues

that the ICA committed grave error when it failed to articulate a

legal basis for the DLNR’s jurisdiction over the agency

enforcement action. Specifically, Pila#a 400 argues that

although the enforcement action involved land use violations

within the Conservation District, the source of the sediment that

went into the ocean was from grading “outside” of the

Conservation District and therefore beyond the jurisdiction of

the BLNR.

In response, the DLNR observes that Pila#a 400 does not

dispute that the BLNR assessed a fine for damage to state owned

property in the Conservation District. The DLNR contends that

Pila#a 400 is not relieved of liability simply because the

sediment that caused the damage was a result of activity outside
23
HRS § 91-14(g) sets forth the standard for judicial review of an
agency. HRS § 91-14(g)(5) sets out a “clearly erroneous” standard for
judicial review of administrative findings of fact and mixed questions of fact
and law. See section III, infra.

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of the Conservation District. In addition, the DLNR argues that

Pila#a 400 was clearly informed throughout the contested case

hearing——including a site visit and 13 days of testimony——that

the proceedings related to damages to State land.

In the third point of error, Pila#a 400 argues that the

ICA committed grievous error when it held that the notice

requirements of HRS § 91-9(b) were satisfied. Specifically,

Pila#a 400 contends that the notice it received pursuant to HRS §

91-9 was insufficient in that it failed to cite specifically to

HAR § 13-5-24, although the BLNR Order assessed damages based on

the placement of fill material on submerged land as prohibited by

that section.

In response, the DLNR argues that the requirements of

HRS § 91-9 were met because the statutes and rules involved were

referred to by chapter. The DLNR contends that nothing more was

required, and if Pila#a 400 needed more information to

effectively prepare its case, the proper remedy was to ask for a

bill of particulars at that time rather than to raise the issue

on appeal. Because Pila#a 400 failed to challenge the notice in

a timely manner, it cannot argue that notice was inadequate.

II.

The review of a circuit court’s decision regarding its

review of an administrative agency’s decision is a secondary

appeal. Haw. Teamsters & Allied Workers, Local 966 v. Dep’t of

Labor & Indus. Relations, 110 Hawai#i 259, 265, 132 P.3d 368, 374

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(2006). In a secondary appeal, “Hawai#i appellate courts apply

the same standard of review as that applied upon primary review

by the circuit court.” AlohaCare v. Ito, 126 Hawai#i 326, 341,

271 P.3d 621, 636 (2012) (quoting Kaiser Found. Health Plan, Inc.

v. Dep’t of Labor & Indus. Relations, 70 Haw. 72, 80, 762 P.2d

796, 800-01 (1988)).

The applicable standard of review for administrative

appeals is set forth in HRS § 91-14(g), which provides:

Upon review of the record the court may affirm the decision
of the agency or remand the case with instructions for
further proceedings; or it may reverse or modify the
decision and order if the substantial rights of the
petitioners may have been prejudiced because the
administrative findings, conclusions, decisions, or orders
are:
(1) In violation of constitutional or statutory
provisions; or
(2) In excess of the statutory authority or
jurisdiction of the agency; or
(3) Made upon unlawful procedure; or
(4) Affected by other error of law; or
(5) Clearly erroneous in view of the reliable,
probative, and substantial evidence on the whole
record; or
(6) Arbitrary, or capricious, or characterized by
abuse of discretion or clearly unwarranted exercise of
discretion.

HRS § 91-14(g). See Save Diamond Head Waters LLC. v. Hans

Hedemann Surf, Inc., 121 Hawai#i 16, 24, 211 P.3d 74, 82 (2009).

Conclusions of law are reviewed de novo, pursuant to

subsections (1), (2) and (4); questions regarding procedural

defects are reviewable under subsection (3); findings of fact are

reviewable under the clearly erroneous standard, pursuant to

subsection (5); and an agency’s exercise of discretion is

reviewed under the arbitrary and capricious standard, pursuant to

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subsection (6). Id. Mixed questions of law and fact are

“‘reviewed under the clearly erroneous standard because the

conclusion is dependent upon the facts and circumstances of the

particular case.’” Id. at 25, 211 P.3d at 83 (quoting Del Monte

Fresh Produce (Hawaii), Inc. v. Int’l Longshore & Warehouse

Union, 112 Hawai#i 489, 499, 146 P.3d 1066, 1076 (2006)).

III.

A.

Pila#a 400 contends that because the BLNR and the DLNR

only have jurisdiction to “enforce land use regulations on

conservation district lands,” BLNR did not have jurisdiction over

Pila#a 400’s actions or the resultant damages. Specifically,

Pila#a 400 maintains that the damage to Pila#a Bay resulted from

grading activities conducted outside of the Conservation

District, causing the flow of sediment from outside of the

Conservation District onto the beach and into the bay.

Consequently, Pila#a 400 concludes BLNR and DLNR have no

jurisdiction over Pila#a 400’s land use activities.

In general, the jurisdiction of an agency is created by

statute. That jurisdiction is “limited by the terms of the

governing statute.” Nihi Lewa, Inc. v. Dep’t of Budget & Fiscal

Servs., 103 Hawai#i 163, 170, 80 P.3d 984, 991 (2003)(Acoba, J.,

dissenting) (citing Ogle Cnty. Bd. v. Pollution Control Bd., 649

N.E. 2d 545, 551 (Ill. App. Ct. 1995)).

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The powers and duties of the BLNR and DLNR with respect

to Conservation District lands are set forth in HRS § 183C-3.

HRS § 183C-3 states, in relevant part, as follows:

The board and department shall:
. . . .
(3) Adopt rules, in compliance with chapter 91 which shall
have the force and effect of law;
. . . .
(7) Establish and enforce land use regulations on
conservation district lands including the collection of
fines for violations of land use and terms and conditions
issued by the department.

HRS § 183C-3 (2011). In accordance with this directive, the BLNR

adopted HAR § 13-5-30(b), which specifies that “[u]nless provided

for in this chapter, land uses shall not be undertaken in the

conservation district.”

In this case, the BLNR’s enforcement action was based

on excessive sedimentation within the Conservation District. The

Contested Case Hearing Notice clearly defined the proceedings as

“an enforcement action involving the alleged damages to State

land(s) and natural resources due to excessive sedimentation at

Pila#a.” (Emphasis added).

The BLNR had jurisdiction in this case first because

the September 2, 2003 Letter identified land use violations “in

four (4) instances within the conservation district.” (Emphasis

added). Those land use violations were not disputed by Pila#a

400. Therefore, the BLNR had proper jurisdiction in the

contested case hearing to adjudicate damages that resulted from

land use violations that occurred within the district.

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Second, the BLNR’s jurisdiction in the contested case

hearing was derived not only from the four land use violations

cited in the September 2, 2003 Letter, but also on the undisputed

fact that, on November 26, 2001, sediment from the Property

flowed into Pila#a Bay and onto the reef. Pila#a Bay and reef are

conservation district lands, and the dumping of soil onto

conservation land falls within the definition of ‘land use’ in

HRS § 183C-2. The BLNR determined that

[o]n November 26, 2001 . . . rain and erosion caused a
portion of the recently graded and filled hillside on the
Property to slump downhill from the Property, across Pila#a
Beach and into Pila#a Bay . . . Additional sedimentation
events occurred in December 2001 and early 2002, in each
case resulting in mudflow from the Property into the
conservation district.

(Emphases added). Further, the BLNR found “[t]he ‘illegal

activity’ that was conducted on conservation land (including

submerged land) was dumping or allowing to be dumped a large

unknown quantity of dirt and mud without a permit as required by

HAR §§ 13-5-24 and 13-5-30(b).” The circuit court similarly

found that “mud and sediment [] was placed onto state land

following the rainfall on November 26, 2001.” None of these

findings were challenged by Pila#a 400. Therefore, because mud

and sediment were placed on state conservation district land, the

BLNR had jurisdiction over any violations that arose out of that

placement.

Pila#a 400 argues that the BLNR did not have

jurisdiction because “the source of the sediment that went in the

ocean was from grading outside of the conservation district,

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beyond the jurisdictional reach of DLNR.” However, the

definition of land use refers to the placement of “any solid

material” on land without regard to the source of the material.

HRS § 183C-2; HAR § 13-5-2. As the ICA explained, “Nothing in

the plain language of HRS § 183C(2) or HAR § 13-5-2 requires that

the soil or other material placed on Conservation District land

originate from Conservation District land as well.” ICA Op. at

*6.

Therefore, the ICA correctly determined that the BLNR

had jurisdiction, pursuant to HRS § 183C-3(7), to institute a

proceeding to “enforce land use regulations on conservation

district lands” in a case “involving the alleged damages to State

land(s) and natural resources due to excessive sedimentation at

Pila#a.” HRS § 183C-3(7).

B.

Pila#a 400 contends that HRS § 183C-3 requires the BLNR

and the DLNR to engage in rule-making to adopt a standardized

methodology for the valuation of damages to natural resources.

Pila#a 400 contends that because the BLNR adopted a new

methodology to determine value, this methodology constitutes a

“rule” within the meaning of HRS § 91-1(4) (1993).

Although HRS § 183C-3 authorizes the BLNR and the DLNR

to adopt rules in accordance with Chapter 91, neither HRS § 183C-

3(3) nor HRS § 91-3 required the BLNR or the DLNR to engage in

rule-making. As noted above, HRS § 183C-3 grants the BLNR and

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the DLNR the authority to “adopt rules” and “establish and

enforce land use regulations on conservation district lands.24

HRS § 183C-3(5),(7).

The legislature also granted the BLNR authority to

adjudicate on a case-to-case basis. Under HRS § 183C-7, if the

BLNR finds misuse of conservation district land, the BLNR can

impose fines, set forth by the statute, or damages, not limited

by statute.25

Thus, HRS § 183C-3 contains only a general mandate that

the BLNR and the DLNR adopt rules regarding the regulation of

conservation district lands.26 The BLNR complied with this

mandate through the promulgation of HAR chapter 13-5. There is

24
In the context of an agency, a rule is a “statement of general or
particular applicability and future effect that implements, interprets, or
prescribes law or policy or describes the organization, procedure or practice
requirements of any agency.” HRS § 91-1(4).

25
At the time of the November 26, 2001 mudslide, HRS § 183C-7
provided that:

Any person violating this chapter or any rule adopted in
accordance with this chapter shall be fined not more than
$2,000 in addition to administrative costs and damages to
state land.

HRS § 183C-7(b)(2001).

26
Pila#a 400’s reliance on Aluli v. Lewin, 73 Haw. 56, 828 P.2d 802
(1992), is therefore misplaced. In Aluli, this court held that the Department
of Health (DOH) erred in issuing air pollution permits when the agency had not
promulgated rules governing the issuance of such permits. Id. at 61, 828 P.2d
at 805. The decision was based on the provision of HRS § 342B-32 (Supp.
1991), which mandated that “‘[t]he director shall refuse to issue the permit
unless it . . . would be in compliance with the rules of the department and
the state ambient air quality standards.’” Id. at 57-58, 828 P.2d at 803
(quoting HRS § 342B-32). The Aluli court concluded that the DOH could not
issue a permit where the statute only authorizes the issuance of a permit in
accordance with rules, and the rules had yet to be propagated. Id. at 61, 828
P.2d at 805.

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no statutory requirement to enact rules regarding the valuation

of damage to reef or valuable marine resources.

Neither were the circumstances under which the BLNR

valued the damage to Pila#a Bay and reef circumstances that were

appropriate for rule-making. The U.S. Supreme Court has

recognized the need for government agencies to proceed at times

by general rule and at other times by case-by-case adjudication.

In Securities & Exchanges Commission v. Chenery Corp., 332 U.S.

194 (1947), the Court reviewed a decision by the Securities and

Exchange Commission (SEC) that rejected amendments to a

registered corporation’s reorganization plan. Chenery, 332 U.S.

at 199. The registered corporation argued that without an

express standard prohibiting the amendments, the SEC could only

“outlaw such profits in future utility organizations; but such a

rule would have to be prospective in nature and have no

retroactive effect upon the instant situation.” Id. at 199-200

(emphasis added). The Court disagreed, holding that agencies are

permitted to adjudicate without resorting to rule-making in

appropriate situations:

Not every principle essential to the effective
administration of a statute can or should be cast
immediately into the mold of a general rule. Some
principles must await their own development, while others
must be adjusted to meet particular, unforeseeable
situations. In performing its important functions in these
respects, therefore, an administrative agency must be
equipped to act either by general rule or by individual
order. To insist upon one form of action to the exclusion
of the other is to exalt form over necessity.

Id. at 202 (emphasis added).

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This court has held that rule-making is inappropriate

where an agency lacks experience with a particular problem.

[P]roblems may arise in a case which the administrative
agency could not reasonably foresee, problems which must be
resolved despite the absence of a relevant general rule. Or
the agency may not have had sufficient experience with a
particular problem to warrant rigidifying its tentative
judgment into a hard and fast rule. Or the problem may be so
specialized and varying in nature as to be impossible of
capture within the boundaries of a general rule. In those
situations, the agency must retain the power to deal with
the problems on a case-to-case basis if the administrative
process is to be effective. There is thus a very definite
place for the case-by-case evolution of statutory standards.

Application of Hawaiian Elec. Co., 81 Hawai#i 459, 468, 918 P.2d

561, 570 (1996)(hereinafter In re HECO) (emphasis added) (quoting

Chenery, 332 U.S. at 202-03), accord In re Water Use Permit

Applications, 94 Hawai#i 97, 170, 9 P.3d 409, 482 (2000) (also

quoting Chenery, 332 U.S. at 203); see also NLRB v. Bell

Aerospace Co., 416 U.S. 267, 294 (1974) (agency judgment to

adjudicate on a case-by-case basis rather than create rules is

entitled to great weight where a “generalized standard would have

. . . marginal utility.”).

This court has also acknowledged a distinction between

the circumstances appropriate for rule-making versus adjudication

duties of an agency. In the most general terms, the purpose of

rule-making is to govern the future conduct of groups and

individuals, not determining damages resulting from past conduct.

Rule-making is an agency action governing the future conduct
either of groups of persons or of a single individual; it is
essentially legislative in nature, not only because it
operates in the future but also because it is concerned
largely with considerations of policy. In rule-making,
disciplinary or accusatory elements are absent.

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In re HECO, 81 Hawai#i at 466, 918 P.2d at 568 (emphasis added)

(quoting Note, “Rule Making,” “Adjudication” and Exemptions Under

the Administrative Procedure Act, 95 U. Pa. L. Rev. 621 (1946-

47)). See also Coney v. Lihue Plantation Co., 39 Haw. 129, 138-

39 (1951) (holding that in a determination of damages, the finder

of fact has a right and a duty to draw reasonable and probable

inferences from the facts and circumstances in evidence, and in

reference to the amount of damages, “the law never insists upon a

higher degree of certainty as to the amount of damages than the

nature of the case admits, and that where . . . the fact of

damage is established, a more liberal rule is allowed in

determining the amount.”)

Setting a general standard in this situation would be

impracticable to define by general rule because the November 26,

2001 mudflow and damage to the reef was an “unforeseeable

situation” and “so specialized and varying in nature so as to be

impossible of capture within the boundaries of a general rule.”

Chenery, 332 U.S. at 202; In re HECO, 81 Hawai#i at 468, 918

P.2d at 570. Conservation district lands are unique in that they

“contain important natural resources essential to the

preservation of the State’s fragile natural ecosystems . . . . ”

HRS § 183C-1 (2011). The DLNR is tasked with the duty of

“conserving, protecting, and preserving the important natural and

cultural resources of the State.” HAR § 13-5-1. The elements of

fragile ecosystems, cultural resources and natural beauty combine

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to make an assessment of damage to State land in one conservation

district inapplicable in other conservation districts. As the

ICA concluded:

Assessing damage to Conservation District lands, which
“contain important natural resources essential to the
preservation of the State’s fragile natural ecosystems and
the sustainability of the State’s water supply[,]” HRS §
183C–1 (2011), is a complex undertaking involving numerous
and variable components, often unique to a particular
situation. . . . Devising and imposing a single formulaic
methodology for assessing penalties would be impracticable.

ICA Op. at *10 (Emphases added). Therefore, the BLNR was not

required to engage in rule-making to adopt a standardized

methodology for valuation of damages to conservation lands before

making a valuation of damage to land in the Conservation District

resulting from excessive sedimentation.

Pila#a 400 relies on Hawai#i Prince Hotel Waikiki Corp.

v. City and County Of Honolulu, 89 Hawai#i 381, 947 P.2d 21

(1999). In Hawai#i Prince, a taxpayer appealed the City of

Honolulu’s tax assessment for the taxpayer’s golf course. 89

Hawai#i at 383, 974 P.2d at 23. The taxpayer objected to the

city appraiser’s methodology for calculating imparted value based

on standards “in his head.”27 Id. at 391, 974 P.2d at 31. The

court held that the city appraiser’s unwritten methodology led to

inequality in value assessments and “was clearly a ‘rule’ within

the meaning of HRS § 91-1(4)” such that rule-making was required.

Id. at 392-93, 974 P.2d at 32-33.

27
“Imparted value” is the effect of the value of a property on the
surrounding land, and is deducted from assessed value, reducing tax liability.
Hawai#i Prince, 89 Hawai#i at 386, 389-91, 974 P.2d at 26, 29-31.

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The calculation of imparted value in Hawai#i Prince

significantly differs from the calculation of damages in the

present case. In Hawai#i Prince, the city appraiser routinely

calculated imparted value. See Hawai#i Prince, 89 Hawai#i at 391,

974 P.2d at 32. Consequently, the appraiser’s future use of the

imparted value methodology was clearly foreseeable. Here, as

noted above, there is no routine assessment of an unforeseeable

event involving “numerous and variable components” resulting in

extensive environmental damage to an irreplaceable resource like

Pila#a’s Bay and reef.

Second, in Hawai#i Prince, the city appraiser used an

unwritten methodology in which he personally weighed multiple

factors that could predictably increase the value of property

surrounding a golf course. Id. at 392-93, 974 P.2d at 32-33. In

contrast, the BLNR’s calculation of damages was not the result of

an unwritten methodology dependent on the discretion of a single

individual. Instead, the BLNR’s determination of damages was

based on the expert testimony of scientists and economists

presented by both Pila#a 400 and the DLNR. The testimony of

these experts was supported by no less than six scientific

studies – four entered into evidence by the DLNR and two entered

into evidence by Pila#a 400 – that examined the unique and

irreplaceable value of Pila>a Bay and reef.

Finally, Pila#a 400’s reliance on Hawai#i Prince is

misplaced because assessment of the imparted value of a golf

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course cannot be compared to a unique resource like Pila#a reef.

“Natural beauty, the value of nature, is necessarily intrinsic.

It is not susceptible to valuation based on price in the

marketplace. The value of Hawai#i’s forests is not the market

value of its board feet. The value of Hawai#i’s coral reefs is

different than the value of its harvest.” ICA Op. at *18

(Wilson, J., concurring).28

C.

On October 3, 2003, the BLNR published the Contested

Case Hearing Notice, in which it specifically stated:

The Board of Land and Natural Resources (BLNR), State of
Hawaii will conduct a contested case hearing on DLNR File
No. KA-04-02 regarding an enforcement action involving the
alleged damage to State land(s) and natural resources due to
excessive sedimentation at Pila#a, District of Hanalei,
Island of Kauai, seaward of TMK: 5-1-4:8 (por). The hearing
will be held pursuant to Chapters 91 and 183C Hawaii Revised
Statutes, and Chapters 13-1 and 13-5, Hawaii Administrative
Rules (HAR).

(Emphases added).

Pila#a 400 contends in its Application that the

Contested Case Hearing Notice was not compliant with HRS § 91-

28
We note that Pila#a 400 suggests that the damage award was
arbitrary, without directly arguing this point. However, the BLNR’s damage
assessment was supported by findings and conclusions that resulted from over
13 days of testimony by multiple experts. The BLNR made specific findings as
to the value of the damage. Therefore, the assessment of damages provided for
in the BLNR Order was not arbitrary or capricious.

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9(b) because the notice did not cite to HAR § 13-5-24.29 HRS

§ 91-9 provided, in relevant part, as follows:

(a) In any contested case, the parties shall be afforded an
opportunity for hearing after reasonable notice.

(b) The notice shall include a statement of:
. . . .
(3) The particular sections of the statutes and rules
involved;

(4) An explicit statement in plain language of the
issues involved and the facts alleged by the agency
in support thereof; provided that if the agency is
unable to state such issues and facts in detail at
the time the notice is served, the initial notice
may be limited to a statement of the issues
involved, and thereafter upon application a bill of
particulars shall be furnished;

HRS § 91-9(1984).

Based on the asserted lack of notice to the particular

sections involved in the contested case hearing, Pila#a 400

further contends that:

Pila#a never received HRS § 91-9 notice that the contested
case sought damages based on alleged land use violations of
“placement or erection of any solid material” on submerged
land or unpermitted marine construction under “HAR § 13-5-
24.”

Thus, Pila#a 400 claims it was unaware that the BLNR sought

damages based on alleged land use violations for placement of

solid material on submerged land and, consequently, its defense

at the contested case hearing “was based on the Notice and Order

that Pila#a 400 engaged in unpermitted ‘grading, grubbing,

cutting, and culvert construction’” within the conservation

29
The ICA also stated in its opinion that Pila #a 400 “failed to
preserve this challenge to [HRS § 91-9] notice,” because Pila#a 400 did not,
in its written supplement to its oral request for a contested case hearing,
state that “it did not know which specific provisions were being relied on.”
ICA Op. at *18. However, the written request was filed on August 29, 2003,
prior to the Contested Case Hearing Notice, issued on October 3, 2013.

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district.

Pila#a 400’s argument that it was unaware of the

general issues to be determined at the contested case hearing is

patently flawed, both procedurally and substantively. It is

procedurally flawed because Pila#a 400 has repeatedly waived this

issue. The circuit court specifically found that “[Pila#a 400]

was aware of the general issues,” and “[d]ue process is satisfied

if the parties are sufficiently apprised of the nature of the

proceeding. . . . [Pila#a 400] received such notice.” These

findings and conclusions were unchallenged on appeal.

Pila#a 400 made a similar argument before the ICA that

it was uninformed as to the issues that would be presented at the

contested case hearing. The ICA held that Pila#a 400 did not

appeal the circuit court’s findings to the ICA. See ICA Op. at

*2, n.10. Additionally, the ICA reviewed the record and found

that “it is clear . . . that [Pila#a 400] was ‘aware of the

general issues’ and ‘sufficiently apprised of the nature of the

proceeding,’ as the circuit court concluded, well before the

contested case hearing.” ICA Op. at 19. In its application to

this court, Pila#a 400 did not contend that the ICA gravely erred

with respect to these findings.

As Pila#a 400 does not directly challenge these

findings in its Application, they are binding on this court.

Amfac, Inc. v. Waikiki Beachcomber Inv. Co., 74 Hawai#i 85, 125,

839 P.2d 10, 31 (1992) (citing Hawai#i Rules of Appellate

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Procedure Rule 28(b)(4)(C) (holding that a conclusion of law not

challenged on appeal is binding)); Okada Trucking Co., Ltd. v.

Bd. of Water Supply, 97 Hawai#i 450, 458, 40 P.3d 73, 81 (2002)

(unchallenged findings of fact are binding on the appellate

court).

Therefore, Pila#a 400 has conceded that it was “aware

of the general issues” to be determined at the contested case

hearing and it was “sufficiently apprised of the nature of the

proceeding” such that the BLNR sought damages based on placement

of solid material on submerged land.30 Nonetheless, we consider

Pila#a 400’s awareness of the issues involved in the contested

case hearing only insofar as it relates to Pila#a 400’s claim of

lack of notice to the “particular sections of the statutes and

rules involved” under HRS § 91-9.

i.

As the ICA and the circuit court concluded, it is clear

from the record that prior to the contested case hearing, Pila#a

400 was fully aware of the issues that would be addressed at that

hearing. From the date of the Second Notice and Order on June
30
The Dissent characterizes this statement as “a patent
misrepresentation of the proceedings in this case[.]” Dissent at 13.
However, Pila#a 400 did not claim it was unaware of the general issues to the
circuit court, nor contest the circuit court’s conclusion in its appeal to the
ICA that Pila#a 400 was generally aware of the nature of the proceedings. In
its Application to this court, Pila#a 400 stated “[t]he ICA’s reference to
[Pila#a 400]’s awareness of the ‘general issues’ . . . suggests superficial
compliance with the HAPA notice statute meets due process protections[.]”
Pila#a 400 therefore contends that despite its general awareness, the notice
was insufficient for due process protections; not that it was unaware of the
general issues. In oral argument, counsel for Pila#a 400 also conceded its
awareness of the general issues. See Section III.C.i.

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20, 2002, Pila#a 400 had notice of the significant damage to the

reef that it was alleged to have caused and its potential

liability. In the Second Notice and Order, the BLNR discussed

the damage to the bay and reef and informed Pflueger Properties

that: “The matter of unauthorized work at Pila#a Bay will be

presented to the [BLNR] . . . . the landowner should be made

aware of the possibility of the imposition of the requirement to

conduct complete land restoration and long term monitoring.” The

same language was repeated in the First and Second Implementation

Order, dated August 22, 2002 and November 20, 2002, respectively.

Pila#a 400 was informed of its potential liability

resulting from BLNR’s allegations of damage to the reef and

commissioned multiple expert reports to refute those allegations.

The first study, completed in February 2003, was entitled

“Preliminary Sediment Runoff Analysis for Pflueger Property

Restoration.” A second study, completed in March 2003, was

entitled “Ecology of the Reef Ecosystem of Pila#a, Kauai and

Analysis of Alleged Environmental Impacts Associated with Recent

Sediment Run-Off.”

It is clear that leading up to the Public Meeting,

DLNR’s allegations regarding the extensive damage to the reef

caused by sedimentation and Pila#a 400’s potential liability was

to be a central, if not the primary, issue at the Public Meeting.

At the August 22 Public Meeting, the DLNR submitted the Staff

Report, entitled, in part, “Damages to State Land and Natural

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Resources due to Excessive Sedimentation at Pila#a . . . .” The

contents of the Staff Report included a detailed analysis of the

damage to the marine environment, considered the long-term

remediation of the reef, and suggested fines for violations and

assessments for administrative costs. The Staff Report also

recommended a significant $5,830,000 assessment for “damage[s] to

state land and natural resources stemming from the unauthorized

land uses.” Indisputably, the proposed financial assessment

would have informed Pila#a 400 of its potential liability on the

issue of the significant damage to the reef.

In the Written Hearing Request, Pila#a 400 acknowledged

that the issue to be determined by the contested case hearing

directly concerned damage to the reef caused by sedimentation

from the November 26, 2001 mudflow. The request stated: “The

matter being considered by the [BLNR] concerns alleged damage to

the reef flat and near-shore marine environment stemming from

grading activities in the conservative [sic] district which

allegedly resulted in discharges of sediment . . . .” (Emphasis

added).

This characterization was echoed by the DLNR in its

Statement of the Issues of the contested case hearing: “The only

issue in this contested case proceeding is the determination of

the amount of damages to be assessed against the Pflueger Parties

for damages to the beach, reef, and marine environment . . .

which were largely the result of excessive sediment.”

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In its Responsive Statement of the Issues, Pila#a 400

again made it clear it understood the central issues to be

determined at the hearing were issues involving the damage to the

reef caused by excessive sedimentation. In it, Pila#a 400

contested the damage to Pila#a Bay and reef, the sources and

historic patterns of sedimentation into Pila#a Bay, the causation

as to the alleged damage to the bay and reef, the scope and

extent of the alleged damage, and the amount of alleged damage

that was directly caused by Pila#a 400, as opposed to other

factors.

Based on the record, it is manifest that prior to the

contested case hearing Pila#a 400 was fully apprised that the

issues to be determined at the contested case hearing were the

nature of damages to the reef at Pila#a Bay, the extent of those

damages caused by mudflows resulting from Pila#a 400’s

unauthorized work, and the amount of the damage assessment.

During the 13-day hearing, both sides presented expert and

kama#aina testimony and exhibits regarding the impact of the mud

and sediment on the bay, reef, flora and fauna, and human

activities, as well as the potential economic value of that

impact.

In oral argument, the question of knowledge and notice

was addressed by counsel for Pila#a 400. In response to a

question as to whether Pila#a 400 had filed a bill of

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particulars,31 counsel conceded that it had not and then stated

“[e]verybody knew this was about mud going on the beach and into

the nearshore reef.”32 (Emphasis added). It is unequivocal that

Pila#a 400 was fully informed that the core issue to be

determined at the contested case hearing was the damage to the

reef caused by sedimentation.

ii.

The Contested Case Hearing Notice did not fail to

provide notice, under HRS § 91-9(b)(3), for lack of a citation to

HAR § 13-5-24. The notice specifically informed Pila#a 400 that

(1) the BLNR would conduct a contested case hearing (2) regarding

an enforcement action involving the alleged damage to State

land(s) and natural resources (3) due to excessive sedimentation

at Pila#a Bay, (4) seaward of the Property, and (5) the hearing

would be held pursuant to HRS Chapters 91 and 183C and HAR

Chapters 13-1 and 13-5.33 The Contested Case Notice satisfied the

31
HRS § 91-9(b)(4) (1984) prescribes:

An explicit statement in plain language of the issues
involved and the facts alleged by the agency in support
thereof; provided that [I]f the agency is unable to state []
issues and facts in detail at the time the notice is served,
the initial notice may be limited to a statement of the
issues involved, and thereafter upon application a bill of
particulars shall be furnished.

(Emphasis added).
32
Oral Argument, Hawai#i Supreme Court, at 19:25 (Jun. 25, 2013)
available at http://www.courts.state.hi.us/ courts/oral_arguments/
archive/oasc28358.html.
33
The Dissent contends that the notice is “broad” and “vague,”
because the notice states the action would be “pursuant to all of the chapters
. . . regarding conservation district lands.” Dissent at 16. Chapter 13-5 is
(continued...)

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requirements of HRS § 91-9(b) for the following reasons.

First, HRS § 91-9(b)(3) provides that a contested case

hearing notice “shall include a statement of [t]he particular

sections of the statutes and rules involved[.]” (Emphases

added). The word “involved” has a broad and inclusive

definition, meaning “affected” or “implicated.” Webster’s Third

New Int’l Dictionary 1191 (1993). HRS § 91-9(b)(3) enumerates

the plural form of the words “sections,” “statutes,” and “rules”

with the word “involved,” indicating that a contested case

hearing notice may include references to multiple statutes and

rules implicated in or affected by the contested case hearing.

Of the forty-five individual sections that comprise HAR

Chapter 13-5, approximately twenty-three sections may fairly be

said to have been “involved” in the contested case hearing.34 HRS

§ 91-9 does not preclude the citation of an entire chapter when

many sections within a single chapter are “involved” in a given

matter, or indicate a specific format to use in referencing
33
(...continued)
the only chapter in HAR Title 13 regarding conservation lands, and 183C is the
only chapter in HRS regarding conservation lands.

34
The subject matter of these provisions was referenced either
directly or indirectly in the BLNR’s uncontested Findings of Facts (FOF) and
Conclusions of Law (COL). “Involved” sections include: HAR § 13-5-1 (general
purpose for regulating land use in the conservation district), §§ 2, 10, 12,
13 (defining terms); §§ 11, 14, 15 (defining subzones); § 6 (penalties
provided by HRS § 183C); § 16 (application for new subzone, rezone existing
subzone, or change subzone boundary or uses); § 17 (permit requirements); §§
22-25 (permit requirements and land uses in the General, Protected, Limited
and Resource subzones); §§ 30,33-35 (prohibiting unpermitted land use); § 38
(review and approval of site plans); § 39 (submission and approval of plans);
§ 40 (public hearings); and § 42 (provides that any land use permitted within
conservation district is subject to standard conditions).

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sections of the statutes or rules involved. Significantly,

Pila#a 400’s argument is not that multiple sections in HAR § 13-5

were not “involved” in the contested case hearing; Pila#a 400’s

argument is instead that it was not given adequate notice of HAR

§ 13-5-24 because this section was not individually cited in the

BLNR’s published notice. Under the circumstances of this case, a

citation to every section of HAR chapter 13-5 would have been

largely redundant, as the majority of the sections comprising the

chapter may be said to have been “involved” in the contested case

hearing.

Second, the BLNR did not base their findings on a

“violation” of HAR § 13-5-24 or on “marine construction,” as

Pila#a 400 maintains.35 The BLNR Order states: “The violation

was the placement of any solid material on land in the form of

dumping or allowing to be put on conservation land (including

submerged land) of a large unknown amount of dirt and sediment.”

The BLNR did not adopt the proposed finding of the DLNR and did

not define the mudflow as an unpermitted marine construction.

Nevertheless, Pila#a 400 seizes on the BLNR’s

conclusion that the placement of solid material on conservation

land was done “without a permit as required by HAR §§ 13-5-24 and

13-5-30(b),” to claim that it lacked notice of an alleged

violation for “unpermitted marine construction.” However, HAR

§ 13-5-24 and 13-5-30(b) are provisions that prohibit land use in

35
The Dissent makes a similar error. Dissent at 3, 7, 12, 20, 22.

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the conservation district without a permit. The placement of

solid material on the land constitutes a “land use” under HAR

§ 13-5-2. Therefore, the BLNR’s reference to “without a permit”

was merely a way of stating that the November 26, 2001 mudflow

and subsequent sedimentation were land uses that were completely

unauthorized.

The BLNR did not identify the type of permit that

Pila#a 400 failed to obtain because there was no dispute that

Pila#a 400 did not have any permits for the mudflow. Pila#a 400

has not challenged the BLNR’s finding that “Pila#a 400 did not

have any permit from the DLNR or the BLNR authorizing or allowing

it to discharge mud onto, build on, grade, fill, or in any way

use, alter, or affect land (including submerged land) in the

conservation district.” (Emphasis added). Furthermore, Pila#a

400 has not challenged the BLNR’s finding that “[n]o discharges

into the ocean were authorized by state or federal law.”

Consequently, no permit could have been obtained to allow the

excessive sediment to flow onto conservation lands.

Third, despite Pila#a 400’s contention, the Contested

Case Hearing Notice provides an implicit reference to § 13-5-24

because “excessive sedimentation” could only be a reference to

that section. “Sedimentation” is the deposition or accumulation

of sediment.36 “Sediment” is the matter that settles to the

36
Sedimentation Definition, Dictionary.com,
http://dictionary.reference.com/sedimentation (last visited Jan. 13, 2014).

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bottom of a liquid, or mineral or organic matter deposited by

water.37 Therefore, sedimentation in its ordinary and common

meaning means the deposit or accumulation of solid material in

water. In conjunction with the statement that the sedimentation

was “seaward,” the Contested Case Hearing Notice provides notice

that the “particular sections of the statutes and rules involved”

the filling or placement of solid material in the ocean within

Chapter 13-5.

There is only one section of HAR, Chapter 13-5, that

involves filling or placement of solid material in the ocean.

HAR § 13-5-24 addresses “dredging, filling, or construction on

submerged lands. . . .” Placing solid material, or filling, on

submerged lands is not referred to in any other section of HAR

Chapter 13-5, and thus there was no other section to which

“excessive sedimentation” could have referred to. Therefore, the

reference to “excessive sedimentation” together with the citation

to HAR § 13-5 was a “statement of . . . the particular sections

of . . . the rules involved.”

Fourth, this court and the ICA have found that in

determining the adequacy of notice of a contested case hearing,

the record of communications between the agency and the

interested person must be considered. In Chang v. Planning

Commission of the County of Maui, 64 Haw. 431, 643 P.2d 55

(1982), the appellant argued that his constitutional right to due

37
Sediment Definition, Dictionary.com,
http://dictionary.reference.com/sediment (last visited Jan. 13, 2014).

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process was violated because the commission’s published notice

failed to comply with the requirements of HRS § 91-9(b)(5) and

inform him that any party could be represented by counsel at the

hearing. Id. at 447-48, 643 P.2d at 58-59.

The Chang court found that the appellant had

“subsequently received ample notice of his right to

representation both informally and by notice sent by [the permit

applicant] in full compliance with the statute and rules” that

included the omitted information. Id. at 454, 643 P.2d at 62.38

This court rejected the appellant’s due process claim because the

appellant was able to fully participate in the hearing. Id. at

454, 643 P.2d at 62. Thus, this court’s focus was whether notice

had actually been provided, which could be determined by looking

to other communications between the parties. See also Munoz v.

Chandler, 98 Hawai#i 80, 94, 42 P.3d 657, 671 (App. 2002)

(rejecting a claim of insufficient notice of right to counsel at

a contested case hearing because the record reflected that

agency’s “various written notices” to the appellants “properly

informed them of their right to obtain legal representation”).

Therefore, the proceedings in this case demonstrate that adequate

notice had been provided by other communications between the

parties, and due process was afforded through a meaningful

38
Additionally, the court found that the “[a]ppellant’s charge that
his failure to produce witnesses and effectively present his case . . . was
due to his lack of notice . . . thus amounts to little more than an unfounded
attempt inspired by hindsight to attain a second opportunity to block the
permit application.” Id. at 454, 643 P.2d at 62.

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opportunity to be heard.

iii.

Pila#a 400 was not deprived of due process because it

had a meaningful opportunity to present arguments and evidence at

the contested case hearing. “[D]ue process and HRS § 91-9

requires that parties be given an opportunity to be heard. This

implies a right to submit evidence and argument on the issues.”

See Application of Haw. Elec. Light Co., 67 Haw. 425, 430, 690

P.2d 274, 278 (1984)[hereinafter HELCO]; see also Sandy Beach

Def. Fund v. City Council of City & Cnty. of Honolulu, 70 Haw.

361, 378, 773 P.2d 250, 261 (1989) (citing Matthews v. Eldridge,

424 U.S. 319, 333 (1976) (“The basic elements of procedural due

process of law require notice and an opportunity to be heard at a

meaningful time and in a meaningful manner before governmental

deprivation of a significant property interest.”). In HELCO, the

issue concerned whether a public utility had been denied due

process when the Public Utility Commission (PUC) based its final

conclusion on grounds that had neither been presented to the PUC

by either side in a contested case hearing, nor stated in the

§ 91-9(b) notice. This court concluded that the public utility

had received due process because it had a meaningful opportunity

to present evidence and arguments to the deciding body. HELCO,

67 Haw. at 430-431, 690 P.2d at 278-279.

Therefore, as in HELCO, Pila#a 400 was able to

participate meaningfully in the contested case hearing, and was

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fully able to protect their rights and interests. Pila#a 400

presented extensive evidence addressing “the placement of or

erection of any solid material on submerged land” at the

contested case hearing. Pila#a 400 called four expert witnesses

and each testified, at least in part, on the issues of excessive

sedimentation and its effects on the impact area.39 Pila#a 400

submitted two scientific studies - a total of 426 pages of data,

pictures, and analysis pertaining to sedimentation and its

effects, including the Wallrabenstien and the Grigg Study, noted

above. In addition, Pila#a 400 presented multiple lay witnesses

as to the condition of the reef and the witnesses’ fishing and

beach activities in the bay.

These reports and testimony, put forth by Pila#a 400,

clearly address the issue of whether the November 26, 2001

mudflow was the cause of damage to Pila#a Bay and reef or could

be attributed to natural conditions and the extent of the damage.

Pila#a 400 presented extensive evidence and argued that the

sediment flow was an act of nature for which it could not be held

liable.

39
Pila#a 400's expert witnesses specialized in the following fields:
civil engineering (Paul Wallrabenstein), geochemistry (Eric De Carlo), and
coral reef ecology and coastal oceanography (Richard Grigg and Steven Dollar).
The experts testified regarding the cause and effect of the November 2001
mudflow. For example, Grigg testified that it was his understanding that he
was “asked to study the reef at Pila#a and to determine whether or not there
had been impact caused by a sediment runoff event or a mudflow back in
November 2001.” Dollar testified that the harsh environment of Pila#a Bay
naturally inhibits coral growth and that “sediment is only one factor in this
harshness.” He further testified that “without sediment input, the conditions
of the reef would not change . . . .”

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Similarly, in Chang, this court rejected the

appellant’s due process claim despite finding that the published

notice failed to technically comply with all of the statutory

notice requirements. This court found that the appellant had

subsequently received ample notice of his rights. Id. at 454,

643 P.2d at 62; see also Sandy Beach Def. Fund, 70 Haw. at 378,

773 P.2d at 261 (citing Morrissey v. Brewer, 408 U.S. 471, 481

(1972) (“[D]ue process is flexible and calls for such procedural

protections as the particular situation demands.”) Furthermore

the court determined that the appellant’s ability to participate

in the contested case hearing had not been compromised. Id. at

453-55, 643 P.2d at 62-63.

Thus, it is not accurate to argue, as does the Dissent,

that Pila#a 400 was unable “to prepare or present a meaningful

and adequate defense to this violation during the contested case

hearing[,]” or that “Pila#a 400 received no notice that” “the

BLNR order[] . . . to pay more than 4 million dollars” “for the

damages to Pila#a Bay could or would stem from” “the unauthorized

deposit of sediment onto submerged land” “prior to the close of

the contest case hearing.” Dissent at 22-23. In fact, Pila#a

400 presented arguments on precisely those grounds.

iv.

The record in this case incontrovertibly demonstrates

that Pila#a 400 was fully apprised of all relevant issues that

were to be determined in the contested case hearing. Pila#a 400

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was able to present a complete and vigorous defense to the

charges that excessive sedimentation as a result of unauthorized

work on the Property caused damage to Pila#a Bay and reef for

which DLNR staff had proposed an assessment of $5,830,000.

Pila#a 400 cannot complain of faulty notice under HRS § 91-9(b)

because the Contested Case Hearing Notice provided reasonable

notice in the form of an explicit statement in plain language of

the issues involved (“everyone knew this was about mud going on

the beach and into the nearshore reef”); by reference to HRS

Chapter 183C and HAR Chapter 13-5; and by reference to “excessive

sedimentation.” Lastly, Pila#a 400 had a meaningful opportunity

to be heard and to contest the BLNR’s ultimate decision that the

“violation was placement of any solid material on land” without a

permit. Accordingly, the Contested Case Hearing Notice satisfied

the requirements of due process and HRS § 91-9(b).

v.

The Dissent appears to agree that Pila#a 400 was on

notice that the contested case hearing would concern alleged

damages due to excessive sedimentation at Pila#a. Dissent at 7.

However, the Dissent asserts that “[w]hile the [BLNR’s] notice

indicates that the alleged damages were ‘due to excessive

sedimentation at Pila#a,’ this is not evidence that Pila#a 400 was

on notice that the alleged violation was ‘excessive

sedimentation.’” Id. at 8 (emphasis in original). If Pila#a 400

was aware that damages would be assessed based on excessive

sedimentation, then Pila#a 400 would also be aware that the

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alleged violation, on which damages are assessed, was the

excessive sedimentation. There is no substantive distinction

between being aware of the alleged basis for damages and the

alleged violation, where damages can only be imposed based on a

violation.

The cases cited by the Pila#a 400 and the Dissent are

not analogous. The Dissent cites Silver v. Castle Memorial

Hospital, 53 Haw. 475, 497 P.2d 564 (1972) for its argument that

“in order to assure procedural due process during an

administrative hearing, a party ‘must have been apprised of the

particulars of the specific claims against him prior to the

hearing.’” Dissent at 14 (quoting Silver, 53 Haw. at 486, 497

P.2d at 572). Silver was decided based on facts that are widely

divergent from the facts of this case, and did not involve an

interpretation of HRS § 91-9.

The Silver court held that a private hospital was

required to afford procedural due process to a licensed doctor

before deciding to deny the doctor staff privileges. Silver, 53

Haw. at 479, 497 P.2d at 568. The hospital board based its

decision on an investigation into the doctor’s performance. Id.

at 476, 497 P.2d at 566. However, the doctor was not informed of

the allegations against him until he was granted a hearing, which

took place after his staff privileges had already been revoked.

Id. It was in this context that the court held the doctor should

have been given timely notice prior to the hearing to enable him

to adequately prepare a defense, as well as a written statement

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of the charges against him. Id. at 484-85, 497 P.2d at 571-72.

Similarly, Villanueva v. Board of Psychologist

Examiners, 27 P.3d 1100 (Or. Ct. App. 2001), is also factually

distinguishable because Pila#a 400 was fully of aware of the

issues facing it. Villanueva involved a situation where the

Board of Psychologist Examiners reprimanded and fined the

petitioner for treating a minor child without the custodial

parent’s consent. Id. at 1100. The board “essentially imposed a

strict liability standard” based on a violation of one ethical

principle, although the notice of proposed disciplinary action

alleged that the petitioner had violated six other ethical

principles. Id. Moreover, “despite petitioner’s repeated

requests for clarification, the Board did not notify petitioner

until after the contested hearing had begun of the rule that he

allegedly violated.” Id. at 1105 (footnote omitted). In this

context, the court held that the notice was non-compliant. Id.

at 1107.

In Hendricks v. Arizona Department of Economic

Security, 270 P.3d 874 (Ariz. Ct. App. 2012), the appellant

challenged a decision finding her liable for overpayment of cash

assistance benefits, on the basis that the department notified

her that the alleged overpayment was based on the improper

issuance of food stamps rather than cash assistance benefits.

Id. at 874-75. The appellant was informed only when she appeared

for the hearing that the notice she had been sent regarding food

stamps was a “misprint” and the overpayment was actually for cash

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assistance benefits. Id. at 875. Despite appellant’s statement

that she was “unaware of the actual problem” and did not “know

the facts for [her] to have brought witnesses,” the department

proceeded with the hearing. Id. It was under these

circumstances that the court held that the notice was defective.

Id. at 877.

In contrast to each of the cases above, Pila#a 400 was

aware of the “actual problem,” and was able to provide witnesses

and evidence at the Contested Case Hearing. As has been

established, Pila#a 400 was able to provide extensive evidence

and expert and kama#aina testimony at the contested case hearing.

Pila#a 400 was apprised of the particulars of the specific

allegations against it prior to the hearing and presented a

thorough defense on the very issue decided by the BLNR Order.

That is, as Pila#a 400 phrased it, “everyone knew this was about

mud going on the beach and into the nearshore reef.”40

40
Other cases cited by the Dissent are also factually
distinguishable: Matter of Alvarado v. State, 488 N.Y.S.2d 177 (N.Y. App. Div.
1985) (boxer who received a mailgram to appear before the New York State
Athletic Commission was given no notice of the specific charges as required by
the Commission’s own rules and therefore was unable to file an answer or
prepare for hearing); Ex parte Forest Manor, Inc., 739 So.2d 20 (Ala. 1998)
(nursing home applying for certificate of need for new beds from State Health
Planning and Development Agency was not provided opportunity at hearing to
cross-examine witnesses or present rebuttal evidence/argument, and legal
counsel was not present and no notice of such rights was provided as required
by state administrative rules); Liberty Mut. Ins. Co. v. Tenn. Dep’t of Labor
and Workforce Dev., No. M2010-02082-COA-R3-CV, 2012 WL 11739 (Tenn. Ct. App.
Jan. 3, 2012) (where department listed insurance company’s failure to file C20
forms as the basis for penalty assessment when failure to file C21 forms was
actual basis, court held that notice provided to opposing party must be
reasonably calculated under all the circumstances to apprise party of the
claims against it). Dissent at 16-17.

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IV.

For the reasons stated, the Judgment on Appeal, filed

December 21, 2012, of the ICA is affirmed.

Wesley H.H. Ching and /s/ Simeon R. Acoba, Jr.
Kathleen M. Douglas
for petitioner /s/ Sabrina S. McKenna
/s/ Richard W. Pollack
William J. Wynhoff
for respondent Department of /s/ Rom A. Trader
Land and Natural Resources

Diane Erickson and
Russell A. Suzuki
for respondent Board of Land
and Natural Resources

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