Flores v. Board of Land and Natural Resources.

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Electronically Filed
Supreme Court
SCAP-XX-XXXXXXX
08-AUG-2018
08:01 AM

IN THE SUPREME COURT OF THE STATE OF HAWAI#I

---o0o---

E. KALANI FLORES,
Appellant-Appellee,

vs.

BOARD OF LAND AND NATURAL RESOURCES; DEPARTMENT OF LAND AND
NATURAL RESOURCES; SUZANNE D. CASE, in her official capacity as
Chairperson of the Board of Land and Natural Resources,
STATE OF HAWAI#I,
Appellees-Appellants/Cross-Appellees,

and

UNIVERSITY OF HAWAI#I,
Appellee-Appellee/Cross-Appellant.

SCAP-XX-XXXXXXX

APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT
ENVIRONMENTAL COURT
(CAAP-XX-XXXXXXX; CIV. NO. 14-1-324)

AUGUST 8, 2018

RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

OPINION OF THE COURT BY NAKAYAMA, J.

In May 2014, Appellee-Appellee/Cross-Appellant

University of Hawai#i (the University) requested that Appellee-
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Appellant/Cross-Appellee Board of Land and Natural Resources

(BLNR) consent to a sublease that the University intended to

enter into with TMT International Observatory LLC (TIO) for the

construction of the Thirty Meter Telescope (TMT) on the Mauna Kea

Science Reserve (Sublease). BLNR subsequently addressed the

University’s request for its consent to the Sublease at two

separate public meetings. At both meetings, Appellant-Appellee

E. Kalani Flores (Flores) orally requested that BLNR hold a

contested case hearing prior to making a decision on the matter.

Following the second meeting, Flores filed a written petition for

a contested case hearing. BLNR denied Flores’s request and

consented to the Sublease.

Flores appealed BLNR’s denial of his request for a

contested case hearing to the Environmental Court of the Third

Circuit (environmental court). The environmental court ruled

that based upon this court’s opinion in Mauna Kea Anaina Hou v.

Board of Land and Natural Resources, 136 Hawai#i 376, 363 P.3d

224 (2015), BLNR infringed upon Flores’s constitutional rights by

rejecting his request for a contested case hearing.

On secondary appeal, BLNR and the University argue that

the environmental court erred in ruling that Flores was entitled

to a contested case hearing because: (1) BLNR’s consent to the

Sublease did not fall within the purview of Hawai#i Revised

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Statutes (HRS) Chapter 91, as BLNR was acting as a landlord

engaged in the custodial management of public property; and (2) a

contested case hearing was not required by law because it was not

mandated by statute, administrative rule, or due process.

For the reasons stated below, we reject BLNR’s and the

University’s argument that HRS Chapter 91 does not apply in this

case. However, we agree with BLNR and the University that BLNR

was not required to hold a contested case hearing prior to

consenting to the Sublease because such a hearing was not

required by statute, administrative rule, or due process under

the circumstances of this case. Consequently, we hold that the

environmental court erred in ruling that BLNR violated Flores’s

constitutional rights when it denied his request for a contested

case hearing in this case.

Accordingly, we reverse the environmental court’s

January 6, 2017 Final Judgment and “Order Granting in Part and

Denying in Part Appellees State of Hawai#i, Board of Land and

Natural Resources, Department of Land and Natural Resources, and

Chairperson Suzanne D. Case’s Motion for Stay of Proceedings, or

in the Alternative for the Court to Issue its Decision on Appeal,

Filed October 25, 2016; Vacating Consent to Sublease and Non-

Exclusive Easement Agreement Between TMT International

Observatory LLC and the University of Hawaii Under General Lease

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No. S-4191; and Remanding Matter to the Board of Land and Natural

Resources” (Order).

I. BACKGROUND

On June 21, 1968, BLNR leased the land within the Mauna

Kea Science Reserve to the University for a term of sixty-five

years (Master Lease). The Master Lease is set to expire on

December 31, 2033, and permits the University to use the leased

premises “as a scientific complex, including without limitation

thereof an observatory, and as a scientific reserve being more

specifically a buffer zone to prevent the intrusion of activities

inimical to said scientific complex.” Pursuant to paragraph five

of the Master Lease, the University “shall not sublease . . . any

rights thereunder without the prior written approval of [BLNR].”

On May 22, 2014, Donald O. Straney (Straney), the

Chancellor of the University of Hawai#i at Hilo, sent BLNR a

written request for BLNR’s approval and consent to the Sublease.

Straney stated that the University intended to sublease an 8.7-

acre portion of the Mauna Kea Science Reserve, which was covered

by the Master Lease, to TIO for the construction and operation of

the TMT.

The Sublease is set to expire on December 31, 2033, the

same date that the Master Lease is set to terminate. With

respect to the use of the subleased premises, the Sublease

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provides, in relevant part:
Sublessee shall use the Subleased Premises solely to
construct and operate the TMT Facilities in accordance
with this Sublease and the Scientific Cooperation
Agreement. The construction and operation of the
Subleased Premises shall be conducted in strict
compliance with the terms and conditions of
Conservation District Use Permit HA-3568 approved by
the Lessor on April 12, 2013 (the “TMT CDUP”),
including performance of all mitigation conditions set
forth therein, and any amended or subsequent
Conservation District Use Permit. Sublessee shall not
at any time during the term of this Sublease
construct, place, maintain, or install on the
Subleased Premises any other building, structure, or
improvement without the prior written approval of
Sublessor and Lessor and upon such conditions as
Sublessor or Lessor may impose. For purposes of the
foregoing sentence, any other “improvement” means
improvements that are not specified in or contemplated
by the TMT CDUP and not contained within the building
envelop of TMT observatory plans approved in
accordance with Section 37 below.

Concerning the rights of Native Hawaiians with respect

to the subleased premises, the Sublease provides:
The Constitution of the State of Hawaii mandates the
protection of recognized customary and traditional
native Hawaiian rights subject to State regulation.
This Sublease shall be subject to the right of Native
Hawaiians to exercise protected traditional and
customary practices as provided in the [Comprehensive
Management Plan] and consistent with the laws of the
State of Hawaii.

A. BLNR Administrative Proceedings

On June 13, 2014, BLNR held a public meeting

addressing, inter alia, the University’s request for BLNR’s

consent to the Sublease (first public meeting). At the first

public meeting, Flores provided oral and written testimony on the

numerous reasons underlying his position that BLNR should not

consent to the Sublease, and orally requested that BLNR hold a

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contested case hearing before rendering a decision on the

University’s request. No action was taken on Flores’s request

for a contested case hearing at the first public meeting.

Ultimately, BLNR did not rule on the University’s

request for BLNR’s consent to the Sublease at the first public

meeting. Instead, BLNR deferred the issue for consideration at a

later date to allow the University to address the questions and

issues raised during the public testimony on the matter.

BLNR revisited the University’s request for BLNR’s

consent to the Sublease at a public meeting held on June 27, 2014

(second public meeting). At the second public meeting, Flores

provided further oral testimony and submitted additional written

testimony explaining the reasons why, in his view, BLNR should

not consent to the Sublease. Flores also orally renewed his

request for a contested case hearing and submitted a written

petition for a contested case hearing.

Following the completion of public testimony at the

second public meeting, BLNR approved the University’s request for

its consent to the Sublease. However, BLNR provided that the

effect of its consent was “stayed . . . until administrative

proceedings on any contested case requests are concluded.” No

action was taken regarding Flores’s request for a contested case

hearing at the second public meeting.

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On July 3, 2014, Flores filed his written petition for

a contested case hearing. Flores stated that his interest in

BLNR’s consent to the Sublease, which entitled him to a contested

case hearing, stemmed from, inter alia, his interest in

participating in “traditional and customary practices” on the

subleased premises.

Following the receipt of Flores’s request, the Acting

Administrator of BLNR completed a staff report recommending that

Flores’s request be denied. According to the staff report, no

statute or administrative rule required BLNR to hold a contested

case hearing prior to consenting to a sublease of public lands.

The staff report also concluded that the due process clause of

the Hawai#i Constitution did not mandate BLNR to hold a contested

case hearing, as Flores did not demonstrate that he had a

property interest in BLNR’s consent to the Sublease. Lastly, the

staff report stated that BLNR was not required to hold a

contested case hearing before consenting to the Sublease because

such action “is a matter of internal land management, and not

subject to a contested case.”

BLNR addressed Flores’s request for a contested case

hearing at a public meeting held on July 25, 2014 (third public

meeting). At the third public meeting, Flores orally testified

that BLNR’s approval of the Sublease at the second public meeting

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was invalid, and submitted further written testimony on the

matter. After hearing all of the public testimony on the matter,

BLNR approved the staff report’s recommendation, and denied

Flores’s request for a contested case hearing.

BLNR issued its formal written consent to the Sublease

on April, 9, 2015 (Consent).

B. Appellate Proceedings at the Environmental Court

On August 25, 2014, Flores appealed the denial of his

request for a contested case hearing to the Circuit Court of the

Third Circuit. The case was transferred to the environmental

court on October 2, 2015.1

In his pro se opening brief, Flores argued, inter

alia,2 that BLNR erred in denying his request for a contested

case hearing because, among other reasons, Flores “is a

traditional and customary practitioner whose rights this Court

should acknowledge by allowing his participation in the requested

contested case hearing.” Additionally, Flores argued that BLNR

1
The case remained with the same presiding judge, as the Honorable
Greg K. Nakamura sits as a circuit court judge and an environmental court
judge.

2
Flores also argued that BLNR should not have consented to the Sublease
for numerous other unrelated reasons. However, because he does not raise or
renew these arguments in his answering brief on secondary appeal, we do not
address them. See Hawai#i Rules of Appellate Procedure (HRAP) Rules 28(b)(7)
(“Points not argued [in the opening brief] many be deemed waived”) and 28(c)
(providing that the answering brief “shall be of like character as that
required for an opening brief”).

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infringed upon his constitutional right to due process by

consenting to the Sublease before resolving his request for a

contested case hearing.

In their answering briefs, BLNR and the University

countered that BLNR properly denied Flores’s request for a

contested case hearing because his request was not supported by

statute or any administrative rules, and because Flores did not

have a due process right to a contested case hearing insofar as

he did not demonstrate that he had a constitutionally cognizable

property interest in the Sublease. Further, BLNR and the

University argued that Flores was not entitled to a contested

case hearing because BLNR’s consent to the Sublease was a matter

of internal agency management, and fell outside the purview of

HRS Chapter 91.

After the answering briefs were filed, this court

issued its opinion in Mauna Kea Anaina Hou. At issue in Mauna

Kea Anaina Hou was whether BLNR violated the appellants’ due

process rights by issuing a Conservation District Use Permit

(CDUP) authorizing the TMT’s construction before holding a

contested case hearing on the matter. 136 Hawai#i at 380, 363

P.3d at 228. This court first held that the appellants were

entitled to a contested case hearing, reasoning:
Given the substantial interests of Native
Hawaiians in pursuing their cultural practices on

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Mauna Kea, the risk of an erroneous deprivation absent
the protections provided by a contested case hearing,
and the lack of undue burden on the government in
affording Appellants a contested case hearing, a
contested case hearing was “required by law”
regardless of whether BLNR had voted to approve one on
its own motion at the February 25, 2011 meeting.

Id. at 390, 363 P.3d at 238 (quoting Sandy Beach Def. Fund v.

City & Cty. of Honolulu, 70 Haw. 361, 378, 773 P.2d 250, 261

(1989)). The Mauna Kea Anaina Hou court then concluded:
In sum, BLNR put the cart before the horse when
it approved the permit before the contested case
hearing was held. Once the permit was granted,
Appellants were denied the most basic element of
procedural due process--an opportunity to be heard at
a meaningful time and in a meaningful manner. Our
Constitution demands more.

Id. at 391, 363 P.3d at 239. Accordingly, this court vacated the

circuit court’s decision affirming BLNR’s order granting a CDUP

for the TMT project. Id. at 399, 363 P.3d at 247. The case was

remanded to the circuit court to further remand the case to BLNR,

so that another contested case hearing could be conducted before

BLNR or a new hearing officer. Id.

On January 13, 2016, Flores filed his reply brief.

Flores requested that the environmental court take judicial

notice of this court’s decision in Mauna Kea Anaina Hou, which,

he argued, further supported that BLNR should have held a

contested case hearing before consenting to the Sublease.

At the oral argument regarding Flores’s appeal, the

environmental court took judicial notice of this court’s opinion

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in Mauna Kea Anaina Hou and the order of remand that was filed in

that case. Subsequently, the environmental court orally ordered

that the case be remanded to BLNR so that BLNR may consider the

opinion and the order.

On April 5, 2016, the environmental court filed an

order remanding the case to BLNR pursuant to HRS § 91-14(e).3

The environmental court ruled that the fact that the CDUP had

been vacated was “material because the Sublease and Consent are

premised upon the existence of the TMT CDUP,” and noted that

“[t]his fact could not have been presented to [BLNR] when it

considered the application for the consent to the Sublease

because the fact did not exist at that time.” Therefore, the

environmental court remanded the case to BLNR to reconsider its

decision to consent to the Sublease in light of Mauna Kea Anaina

Hou.

On October 25, 2016, BLNR filed a motion to stay the

3
HRS § 91-14(e) (2012) provides:

If, before the date set for hearing, application is
made to the court for leave to present additional
evidence material to the issue in the case, and it is
shown to the satisfaction of the court that the
additional evidence is material and that there were
good reasons for failure to present it in the
proceeding before the agency, the court may order that
the additional evidence be taken before the agency
upon such conditions as the court deems proper. The
agency may modify its findings, decision, and order by
reason of the additional evidence and shall file with
the reviewing court, to become a part of the record,
the additional evidence, together with any
modifications or new findings or decision.

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proceedings in Flores’s appeal until, pursuant to this court’s

mandate in Mauna Kea Anaina Hou, BLNR determined whether to issue

the CDUP after holding another contested case hearing on the

matter. Alternatively, BLNR requested that the environmental

court “issue its decision on appeal at this time.”

Flores, now represented by counsel, objected to BLNR’s

request for a stay, but joined in BLNR’s request for an immediate

decision. Flores argued that “[a]s there is no just reason to

delay a decision at this time, this Court should go ahead and

rule” on whether Flores “has a right to a contested case hearing”

and “whether [BLNR’s] Consent to [the] sublease entered into

between [the University] and [TIO] is valid.”

In reply, BLNR asserted that if the environmental court

issued a ruling on the appeal, the ruling should be limited to

whether Flores was entitled to a contested case hearing because

“[t]he sole issue in this administrative appeal is whether a

contested case should have been held. The merits of the consent

are not at issue.”

On January 6, 2017, the environmental court filed the

Order. The Order denied BLNR’s request for a stay of

proceedings, but granted BLNR’s alternative request for a

decision on appeal. In rendering its decision, the environmental

court took judicial notice of Mauna Kea Anaina Hou, and concluded

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that “Flores was denied the right to a contested case hearing on

the subject Consent to Sublease in violation of his

constitutional right to a hearing under Article 12, Section 7 of

the Hawai#i Constitution and Mauna Kea Anaina Hou, and

specifically section IV of the concurring opinion therein.”

Accordingly, the Order vacated the environmental

court’s April 5, 2016 order remanding the case to BLNR, vacated

the Consent, and remanded the case to BLNR for further

proceedings consistent with the Order. Final judgment was

entered on January 6, 2017.

C. Secondary Appeal and Transfer to this Court

On February 3, 2017, BLNR timely appealed the

environmental court’s final judgment and Order. The University

filed its cross-appeal from the environmental court’s final

judgment and Order on February 21, 2017. The case was

transferred to this court on June 5, 2017.

D. Subsequent Administrative Proceedings

While Flores’s case on secondary appeal was pending, a

second contested case hearing was held on whether BLNR should

issue the CDUP that would authorize the construction of the TMT

project. The parties do not appear to dispute that Flores

participated in this contested case hearing by presenting

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evidence, including a copy of the Sublease,4 and arguments

regarding how the TMT’s construction would affect Flores’s

interest in participating in traditional Native Hawaiian cultural

practices on Mauna Kea.

III. STANDARDS OF REVIEW

A. Administrative Agency Decisions - Secondary Appeals

Review of a decision made by the circuit court
upon its review of an agency’s decision is a secondary
appeal. The standard of review is one in which this
court must determine whether the circuit court was
right or wrong in its decision, applying the standards
set forth in HRS § 91-14(g) [1993] to the agency’s
decision.

Paul’s Elec. Serv., Inc. v. Befitel, 104 Hawai#i 412, 416, 91

P.3d 494, 498 (2004) (brackets in original) (quoting Korean

Buddhist Dae Won Sa Temple of Hawaii v. Sullivan, 87 Hawai#i 217,

229, 953 P.2d 1315, 1327 (1998)).

HRS § 91-14(g) (2012) provides:
(g) 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,

4
At oral argument, Flores acknowledged that he submitted a copy of the
Sublease as an exhibit at this contested case hearing. Oral Argument at
27:34-27:39, Flores v. Bd. of Land & Nat. Res., SCAP-XX-XXXXXXX,
http://oaoa.hawaii.gov/jud/oa/18/SCOA_031518_SCAP_17_59.mp3.

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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.

“[U]nder HRS § 91-14(g), conclusions of law are reviewable under

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

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

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

(6).” Paul’s Elec. Serv., Inc., 104 Hawai#i at 416, 91 P.3d at

498 (brackets in original) (quoting In re Hawaiian Elec. Co., 81

Hawai#i 459, 465, 918 P.2d 561, 567 (1996)).

IV. DISCUSSION

BLNR and the University contend that the environmental

court erred in ruling that Flores was entitled to a contested

case hearing concerning BLNR’s consent to the Sublease. In

support of this position, they advance two arguments: (1) HRS

Chapter 91 does not apply in this case pursuant to this court’s

decisions in Sharma v. State, 66 Haw. 632, 673 P.2d 1030 (1983),

and Big Island Small Ranchers Association v. State, 60 Haw. 228,

588 P.2d 430 (1978); and (2) assuming that HRS Chapter 91

applies, Flores has not demonstrated that a contested case

hearing was required by law.

We address each argument separately and in turn below.

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A. Sharma and Big Island Small Ranchers do not render HRS
Chapter 91 inapplicable in the present case.

Relying on Sharma and Big Island Small Ranchers, BLNR

and the University contend that when BLNR takes action in

relation to a lease as a landlord, BLNR is engaged in the

custodial management of public property, which is a matter of

internal agency management. Hence, BLNR and the University

assert that because this court has recognized that agencies do

not need to comply with HRS Chapter 91 when dealing with matters

of internal agency management, BLNR was not required to hold a

contested case hearing within the meaning of HRS § 91-15 before

consenting to the Sublease.

Flores counters that BLNR and the University read

Sharma and Big Island Small Ranchers too broadly. Flores

contends that in these cases, this court did not “hold that

whenever the BLNR makes a decision that affects the

administration and control of public lands that no one has the

right to a contested case hearing.”

We agree with Flores that BLNR and the University read

5
HRS § 91-1(5) (2012) defines a “contested case” as “a proceeding in
which the legal rights, duties, or privileges of specific parties are required
by law to be determined after an opportunity for agency hearing.” Under HRS §
91-1(6) (2012), an “agency hearing” is a “hearing held by an agency
immediately prior to judicial review of a contested case as provided in
section 91-14.” HRS §§ 91-9 through 91-12 delineate the procedural
requirements that apply in the context of a contested case hearing held by an
administrative agency.

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Sharma and Big Island Small Ranchers too broadly. In neither

case did this court announce the principle that whenever BLNR

acts in relation to a lease as a landlord pursuant to HRS Chapter

171, BLNR’s actions per se constitute the custodial management of

public property and relate to matters of internal agency

management, such that HRS Chapter 91 does not apply.

In Sharma, BLNR leased a tract of government land to

Sharma for a term of twenty-nine years. 66 Haw. at 634, 673 P.2d

at 1032. Under the lease, Sharma was required to, inter alia,

obtain and maintain a comprehensive public liability insurance

policy, and to post an appropriate performance bond. Id. While

Sharma obtained a sufficient insurance policy, Sharma did not

post the performance bond required under the lease. Id.

BLNR overlooked the issue until Sharma sought BLNR’s

approval to subdivide and sublease a portion of the land. Id.

In reviewing Sharma’s lease while processing his request, BLNR

discovered that his insurance policy had lapsed, and that Sharma

still had not posted the bond required under the lease. Id.

Approximately sixty days after Sharma was served notice of his

default on the lease, but failed to take corrective action, BLNR

terminated Sharma’s lease. Id. at 634-35, 673 P.2d at 1032. The

land was repossessed and the lease was resold by way of public

auction. Id., 673 P.2d at 1033.

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Sharma brought suit against BLNR, arguing, inter alia,

that he had been denied due process because BLNR did not hold a

contested case hearing prior to terminating his lease. Id. at

635-36, 673 P.2d at 1033. The trial court granted summary

judgment in favor of BLNR, determining that BLNR’s cancellation

of Sharma’s lease was valid. Id. at 636, 673 P.2d at 1033.

On appeal, this court considered whether HRS Chapter 91

applied when BLNR “acts to cancel a lease agreement covering a

tract of public land.” Id. The Sharma court first observed that

HRS Chapter 91 “does not bind an agency in all of its actions or

functions.” Id. This court explained that while HRS Chapter

91’s procedures attach when administrative agencies engage in

rulemaking or adjudication, administrative agencies also perform

other actions that are not subject to the panoply of procedures

outlined in HRS Chapter 91. Id. at 637, 673 P.2d at 1033-34.

To illustrate this principle, this court discussed how it has

previously acknowledged that agencies must also “deal with

matters related to its internal management,” id., 673 P.2d at

1034, which “necessarily includes the custodial management of

public property entrusted to the agency,” id. at 638, 673 P.2d at

1034 (quoting Holdman v. Olim, 59 Haw. 346, 355, 581 P.2d 1164,

1170 (1978)), and that “where no ‘private rights of or procedures

available to the public’ are affected, decisions on these matters

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are not subject to [HRS Chapter 91’s] restraints on the agency’s

rulemaking power.” Id. at 637, 673 P.2d at 1034 (quoting HRS §

91-1(4) (1976)).

After establishing that a contested case hearing is not

required whenever an individual is adversely affected by an

agency action, this court concluded that BLNR was not required to

hold a contested case hearing before terminating Sharma’s lease

because, on the facts before it, a contested case hearing was not

required by law. Id. at 639-41, 673 P.2d at 1035-36. The Sharma

court first looked to “the statutory provisions governing the

leasing of public land, HRS Chapter 171, to determine whether the

Board was obligated thereunder to afford Sharma an opportunity

for agency hearing before cancelling his lease.” Id. at 639, 673

P.2d at 1035. On this point, this court concluded that a

contested case hearing was not required under statute because HRS

§ 171-39 expressly empowered BLNR to “‘terminate the lease or

tenancy and take possession of the leased land, without demand or

previous entry and without legal process’ after the notice of a

breach is delivered,” id. at 640, 673 P.2d at 1035 (quoting HRS §

171-39), and did not suggest “that a hearing must be conducted”

before BLNR may terminate a lease of public land. Id.

Next, the Sharma court held that a contested case

hearing was not required by constitutional due process. Id. at

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641, 673 P.2d at 1036. This court noted that the lease was valid

and binding upon Sharma, and that Sharma “was afforded ample

opportunity to demonstrate to the trial court that he was not

actually in default or that the State had breached the

agreement.” Id. Therefore, this court held that “[n]o due

process violation appears in the record.” Id.

Put succinctly, the Sharma court’s analysis proceeded

in three steps. First, this court reaffirmed that HRS Chapter 91

procedures are not universally required in all circumstances

where an individual is negatively impacted by an agency action.

Sharma, 66 Haw. at 636, 673 P.2d at 1033. The Sharma court

referred to previous decisions demonstrating that this principle

has been recognized and applied in the past, in cases where this

court held that an agency is not required to follow HRS Chapter

91’s rulemaking procedures when engaged in internal management

matters by way of the custodial management of public property.

Id. at 637-38, 673 P.2d at 1033-34. Second, this court

determined that BLNR was not required to hold a contested case

hearing before terminating Sharma’s lease because HRS § 171-39

did not require BLNR to do so. Id. at 639-640, 673 P.2d at 1035-

36. Lastly, the Sharma court held that a contested case hearing

was not required by due process because the lease was valid and

enforceable, and because Sharma had received sufficient notice

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and was afforded an adequate opportunity to be heard on whether

he had complied with the lease. Id. at 641, 673 P.2d at 1036.

The foregoing illustrates that BLNR and the

University’s arguments premised upon Sharma are without merit for

two reasons. First, this court did not, as BLNR and the

University contend, announce a general rule providing that

whenever BLNR acts in relation to a lease as a landlord, such

actions fall outside the purview of HRS Chapter 91 because they

constitute the custodial management of public property and relate

to matters of internal agency management. Second, the University

and BLNR incorrectly assert that this court held that Sharma was

not entitled to a contested case hearing because BLNR engaged in

the custodial management of public property by terminating his

lease. Rather, the Sharma court held that BLNR did not have to

hold a contested case before terminating Sharma’s lease because

such a hearing was not required by statute or due process.

Likewise, Big Island Small Ranchers does not support

BLNR’s and the University’s contention that HRS Chapter 91 does

not apply in this case. In that case, BLNR decided to auction

leases of certain parcels and lots of public land to qualified

bidders. Big Island Small Ranchers, 60 Haw. at 229, 588 P.2d at

433. Before the auction was held, the appellants filed a lawsuit

against BLNR, arguing, inter alia, that BLNR’s authorization of

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the public auction was null and void because BLNR engaged in

“rulemaking” when it took such action, but failed to comply with

the formal rulemaking procedures prescribed in HRS Chapter 91.

Id. at 230, 588 P.2d at 433. BLNR filed a motion to dismiss the

complaint or, alternatively, for summary judgment. Id. at 231-

32, 588 P.2d at 434. The circuit court dismissed the complaint

and entered judgment in favor of BLNR. Id. at 233-34, 588 P.2d

at 435. On appeal, this court affirmed, holding that BLNR was

not required to comply with the rulemaking requirements in HRS

Chapter 91 because “the conduct of the State in this case comes

within the ‘custodial management of . . . property’ exception to

Chapter 91.” Id. at 239, 588 P.2d at 438 (alteration in

original) (quoting HRS § 91-1(4)).

BLNR and the University’s reliance upon Big Island

Small Ranchers is misplaced for two reasons. First, Big Island

Small Ranchers is distinguishable from the present case insofar

as there, the appellants specifically argued that BLNR, in

deciding to auction the leases for the parcels of public land,

had improperly engaged in rulemaking without complying with the

requisite procedures under HRS Chapter 91. By contrast, here,

Flores does not argue that BLNR engaged in rulemaking when it

consented to the Sublease, such that BLNR was required to comply

with the procedures related to rulemaking in HRS Chapter 91.

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Second, BLNR and the University construe the holding in

Big Island Small Ranchers too broadly. In that case, this court

did not hold that whenever BLNR acts as a landlord in matters

relating to leases of public lands, such actions categorically

qualify as the custodial management of public property, and

therefore, constitute matters of internal agency management,

which fall outside the scope of HRS Chapter 91. Rather, this

court rejected the appellants’ argument that BLNR had engaged in

rulemaking and was thus required to comply with HRS Chapter 91’s

rulemaking procedures, based on its conclusion that BLNR’s

auctioning of leases for public lands amounted to the custodial

management of public property.

Therefore, we conclude BLNR and the University’s

arguments based upon Sharma and Big Island Small Ranchers are

unavailing. These cases do not establish that BLNR’s actions in

this case fall outside the scope of HRS Chapter 91. Accordingly,

we consider whether BLNR was required to hold a contested case

hearing under HRS Chapter 91 before consenting to the Sublease.

B. A contested case hearing was not required by law.

An administrative agency must hold a contested case

hearing when such a hearing is required by law. See HRS § 91-

1(5) (2012); In re Maui Elec. Co., 141 Hawai#i 249, 258, 408 P.3d

1, 10 (2017). A contested case hearing is required by law when

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it is required by: (1) statute; (2) administrative rule; or (3)

constitutional due process. Mauna Kea Anaina Hou, 136 Hawai#i at

390, 363 P.3d at 238.

1. A contested case hearing was not required by statute.

BLNR and the University argue that a contested case

hearing was not required by statute because HRS § 171-36(a)(6),

which governs BLNR’s authority to consent to a sublease, does not

require such a hearing. HRS § 171-36(a)(6) (2011) establishes

the restrictions that apply to subleases of public lands, and

states:
(6) The lessee shall not sublet the whole or any
part of the demised premises except with the
approval of the board; provided that prior to
the approval, the board shall have the right to
review and approve the rent to be charged to the
sublessee; provided further that in the case
where the lessee is required to pay rent based
on a percentage of its gross receipts, the
receipts of the sublessee shall be included as
part of the lessee’s gross receipts; provided
further that the board shall have the right to
review and, if necessary, revise the rent of the
demised premises based upon the rental rate
charged to the sublessee including the
percentage rent, if applicable, and provided
that the rent may not be revised downward[.]

In other words, HRS § 171-36(a)(6) provides that a

sublease of public lands is not valid unless BLNR approves of it.

In deciding whether to consent to a sublease, BLNR may review and

approve the rent that will be charged under the sublease, and may

review and raise the rent on the primary lease based upon the

rent to be charged under the sublease. HRS § 171-36(a)(6).

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However, HRS § 171-36(a)(6) does not contain any

language that states or otherwise suggests that BLNR must hold a

contested case hearing before consenting to a sublease. See HRS

§ 171-36(a)(6). Thus, we hold that a contested case hearing was

not mandated by statute in this case. See In re #Îao Ground

Water Mgmt. Area High-Level Source Water Use Permit Applications,

128 Hawai#i 228, 239, 287 P.3d 129, 140 (2012) [hereinafter In re

#Îao] (determining that a hearing was not required before the

Commission on Water Resource Management could establish an

Interim Instream Flow Standard (IIFS) because “nothing in [the

governing statute, HRS § 174C-71,] requires the Commission to

hold a hearing before establishing or amending an IIFS”).

2. A contested case hearing was not required by
administrative rule.

Although BLNR does not advance any arguments on this

point, the University argues that a contested case hearing was

not required by administrative rule. The University asserts that

“there is nothing in the [Department of Land and Natural

Resources (DLNR)] Rules, [Hawai#i Administrative Rules (HAR)]

Title 13, that requires a public hearing for a consent to a

sublease.” The University also notes that while several

provisions of HAR Title 13 require BLNR to hold a hearing before

taking other actions, “[t]here is no similar requirement for a

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hearing in relation to the BLNR’s consent to a sublease.” Thus,

the University concludes that there was no rule-based mandate

requiring BLNR to hold a contested case hearing before consenting

to the Sublease.

HAR Title 13 “governs practice and procedure before the

board of land and natural resources of the State of Hawaii under

chapter 91, Hawaii Revised Statutes (HRS), the public land laws

of the State and such other related acts as may now or hereafter

be administered by the board.” HAR § 13-1-1 (2009). The

University correctly observes that a few subsections in HAR Title

13 expressly require BLNR to hold a contested case hearing in

specific circumstances. For example, HAR § 13-184-11(1) requires

BLNR to conduct a contested case hearing in matters concerning

geothermal developmental activities within a geothermal resource

subzone. HAR § 13-184-11(1) (2009) states:
(1) The use of an area for geothermal development
activities within a geothermal resource subzone shall
be governed by the board, if such activities lie
within a conservation use district. If geothermal
development activities are proposed within a
conservation district, then, after receipt of a
properly filed and completed application, the board
shall conduct a public hearing and, upon appropriate
request, a contested case hearing pursuant to chapter
91, Hawaii Revised Statutes, to determine whether,
pursuant to board regulations, a conservation district
use permit shall be granted to authorize the
geothermal development activities described in the
application.

(Emphasis added.) Similarly, HAR § 13-300-38, which governs

determinations regarding the appropriate treatment of a

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previously identified Native Hawaiian burial site, provides that

when a determination is made, BLNR must notify the applicant in

writing “[t]hat an applicant who disagrees with the determination

has the option to request reconsideration or appeal the decision

as a contested case[.]” HAR § 13-300-38(b)(2).

Thus, HAR §§ 13-184-11(1) and 13-300-38 illustrate that

some subsections of HAR Title 13 contain language that explicitly

requires BLNR to hold a contested case in certain circumstances,

or entitles an aggrieved individual to a contested case hearing

upon appropriate request. However, HAR Title 13 does not contain

any provisions relating to BLNR’s authority to consent to a

sublease of public lands, or the matter of whether BLNR is

required to conduct a contested case hearing prior to consenting

to a sublease. Therefore, we conclude “there is no rule-based

requirement to hold a [contested case] hearing” in the case at

bar. In re #Îao, 128 Hawai#i at 239, 287 P.3d at 140.

3. A contested case hearing was not required by
constitutional due process.

This court has set forth a two-step analysis for

determining whether a person has a constitutional right to a

hearing. Sandy Beach Def. Fund, 70 Hawai#i at 376, 773 P.2d at

260. First, this court considers whether “the particular

interest which claimant seeks to protect by a hearing [is]

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‘property’ within the meaning of the due process clauses of the

federal and state constitutions.” Id. Second, if this court

concludes that the interest is “property,” this court analyzes

“what specific procedures are required to protect it.” Id.

Therefore, in order to determine whether Flores was

entitled to a contested case hearing by constitutional due

process, the following issues must be resolved: (1) whether

Flores sought to protect an interest which qualifies as

“property” in a constitutional sense, and (2) if so, whether a

contested case hearing was required to protect such an interest.

a. Constitutionally Cognizable Property Interest

“To have a property interest in a benefit, a person

clearly must have more than an abstract need or desire for it.

He must have more than a unilateral expectation of it. He must,

instead, have a legitimate claim of entitlement to it.” Sandy

Beach Def. Fund, 70 Haw. at 377, 773 P.2d at 260 (quoting Bd. of

Regents of State Colleges v. Roth, 408 U.S. 564, 577 (1972)).

Additionally, this court has explained that:
The legitimate claims of entitlement that
constitute property interests are not created by the
due process clause itself. Instead, “they are created
and their dimensions are defined by existing rules or
understanding[s] that stem from an independent source
such as state law--rules or understanding[s] that
secure certain benefits and that support claims of
entitlement to those benefits.”

In re Maui Elec. Co., 141 Hawai#i at 260, 408 P.3d at 12 (quoting

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In re #Îao, 128 Hawai#i at 241, 287 P.3d at 142).

On secondary appeal, Flores primarily argues that he

has a property interest in engaging in traditional Native

Hawaiian cultural practices on Mauna Kea, which is expressly

protected by article XII, section 7 of the Hawai#i Constitution.

Article XII, section 7 provides:
The State reaffirms and shall protect all rights,
customarily and traditionally exercised for
subsistence, cultural and religious purposes and
possessed by ahupua#a tenants who are descendants of
native Hawaiians who inhabited the Hawaiian Islands
prior to 1778, subject to the right of the State to
regulate such rights.

In Mauna Kea Anaina Hou, this court effectively

recognized that the interest of Native Hawaiians in pursing their

traditional and customary cultural practices on Mauna Kea

constitutes a property interest for the purposes of triggering

due process protections. At issue in Mauna Kea Anaina Hou was

whether BLNR violated the appellants’ due process rights by

issuing a CDUP authorizing the TMT’s construction before holding

a contested case hearing on the matter. 136 Hawai#i at 390, 363

P.3d at 238.

This court first held that “a contested case hearing

was required as a matter of constitutional due process.” Id.

The Mauna Kea Anaina Hou court acknowledged that “[t]he right to

exercise Native Hawaiian customs and traditions is explicitly

protected by article XII, section 7 of the Hawai#i Constitution,”

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and that the appellants argued that the TMT project would

significantly impair their ability to engage in Native Hawaiian

cultural practices on Mauna Kea. Id. Based on the foregoing,

this court held:
Given the substantial interests of Native
Hawaiians in pursuing their cultural practices on
Mauna Kea, the risk of an erroneous deprivation absent
the protections provided by a contested case hearing,
and the lack of undue burden on the government in
affording Appellants a contested case hearing, a
contested case hearing was “required by law”
regardless of whether BLNR had voted to approve one on
its own motion at the February 25, 2011 meeting.

Id. (quoting Sandy Beach Def. Fund, 70 Haw. at 378, 773 P.2d at

261). Having determined that a contested case hearing was

mandated by due process, the Mauna Kea Anaina Hou court

ultimately concluded that BLNR violated the appellants’ right to

due process by granting the CDUP prior to holding a contested

case hearing. Id. at 239, 363 P.3d at 239.

Put differently, in Mauna Kea Anaina Hou, this court

applied the two-step framework articulated in Sandy Beach Defense

Fund to ascertain whether BLNR was required to hold a contested

case hearing before granting the CDUP. This court first analyzed

whether the appellants sought to protect an interest that rose to

the level of “property,” and then considered whether a contested

case hearing was required to adequately protect that interest.

See Mauna Kea Anaina Hou, 136 Hawai#i at 390, 363 P.3d at 238;

Sandy Beach Def. Fund, 70 Haw. at 376-78, 773 P.2d at 260-61. In

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engaging in the foregoing analysis, this court effectively

determined that the appellants’ interest in engaging in Native

Hawaiian cultural practices on Mauna Kea qualified as “property”

in the constitutional sense, due to the fact that the right to

engage in such practices is expressly guaranteed by article XII,

section 7 of the Hawai#i Constitution. See Mauna Kea Anaina Hou,

136 Hawai#i at 390, 363 P.3d at 238.

Akin to the appellants in Mauna Kea Anaina Hou, here,

Flores seeks to protect his interest in engaging in traditional

Native Hawaiian cultural practices on Mauna Kea. Consequently,

pursuant to article XII, section 7 of the Hawai#i Constitution,

as interpreted by this court in Mauna Kea Anaina Hou, we conclude

that Flores has shown that he seeks to protect a constitutionally

cognizable property interest in this case.

b. Whether a Contested Case Hearing was Required

Having determined that Flores has a property interest

in engaging in traditional Native Hawaiian cultural practices on

Mauna Kea, we consider whether a contested case hearing was

required to protect this interest. When determining the specific

procedures required to comply with constitutional due process, we

consider and balance three factors: “(1) the private interest

which will be affected; (2) the risk of an erroneous deprivation

of such interest through the procedures actually used, and the

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probable value, if any, of additional or alternative procedural

safeguards; and (3) the governmental interest, including the

burden that additional procedural safeguards would entail.”

Sandy Beach Def. Fund, 70 Haw. at 378, 773 P.2d at 261.

Regarding the first factor, Flores asserts that the

private interest that is affected by the Consent and the Sublease

is his interest in engaging in traditional Native Hawaiian

cultural practices on Mauna Kea. See section IV.B.3.a, supra.

This court has previously recognized that this interest is

“substantial,” as it is guaranteed by article XII, section 7 of

the Hawai#i Constitution. Mauna Kea Anaina Hou, 136 Hawai#i at

390, 363 P.3d at 238.

With respect to the second factor, we acknowledge that,

as an initial matter, the parties largely dispute the extent to

which the Sublease and the Consent adversely affected Flores’s

interest in engaging in Native Hawaiian cultural practices on

Mauna Kea, and whether there was a risk of erroneous deprivation

on the basis that the Sublease and the Consent had no bearing

upon this interest. However, assuming arguendo that the Sublease

and the Consent had an impact on Flores’s interest under the

specific circumstances of this case, we believe that there is no

risk of erroneous deprivation, because Flores has already been

afforded a full opportunity to participate in a contested case

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hearing and express his views and concerns on the matter, and he

has not persuaded us that the provision of an additional

contested case hearing is necessary to adequately safeguard

against erroneous deprivation in this case.

The parties do not dispute that Flores participated

extensively in the separate contested case hearing on the

issuance of the CDUP that would authorize the TMT’s construction

by presenting evidence, including a copy of the Sublease,6 and

arguments concerning the effect that the TMT’s construction will

have on his right to participate in traditional Native Hawaiian

cultural practices on Mauna Kea. In this case, it appears that

Flores seeks a distinct contested case hearing on the Consent in

order to express the same concerns, and to vindicate the same

interests, that he previously raised in the contested case

hearing on the CDUP. Moreover, Flores does not clarify the

extent to which, if BLNR held a contested case hearing on the

Consent, he would put forth evidence and arguments materially

different from that which he already proffered at the CDUP

contested case hearing.7 On this particular record, we are not

6
See note 4, supra.

7
Additionally, because the Sublease provides that TIO “shall use the
Subleased Premises solely to construct and operate the TMT Facilities” and
specifies that “[t]he construction and operation of the Subleased Premises
shall be conducted in strict compliance with the terms and conditions of [the
CDUP] . . . and any amended or subsequent [CDUP],” the potential impact of the
(continued...)

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convinced that an additional contested case hearing would offer

any probable value in protecting against the erroneous

deprivation of his interest in engaging in traditional Native

Hawaiian cultural practices on Mauna Kea.

Considering the third Sandy Beach factor in light of

the foregoing, it appears that BLNR has a strong interest in not

having to hold a separate contested case hearing in this case.

Put simply, to mandate BLNR to hold a full contested case hearing

on whether it should consent to the Sublease would require BLNR

to bear the duplicative administrative burden of providing

procedural protections that would be of no additional value in

safeguarding Flores’s interest in engaging in traditional Native

Hawaiian cultural practices on Mauna Kea. See Briggs v.

Sullivan, 954 F.2d 534, 539-40 (9th Cir. 1992) (determining that,

in applying the federal equivalent of the Sandy Beach Defense

Fund balancing test, plaintiffs were not entitled to more

detailed, thorough procedures because the government had a

significant interest in not having to bear the substantial fiscal

and administrative burdens of administering the enhanced

procedures when such procedures would not substantially improve

the risk of erroneous deprivation).

7
(...continued)
Sublease on Flores’s asserted interests would appear to overlap entirely with
the potential impact of the CDUP.

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In sum, Flores seeks to protect an interest that this

court has previously recognized as substantial--his interest in

participating in traditional Native Hawaiian cultural practices

on Mauna Kea. Even assuming arguendo that the Sublease and

Consent would impact this interest under the specific

circumstances of this case, we believe that there is no risk of

its erroneous deprivation absent an additional contested case

hearing, because the record demonstrates that Flores has already

participated in the separate contested case hearing on the CDUP,

and was thereby afforded a full and fair opportunity to express

his views and concerns as to the effect that the Sublease, the

Consent, and the TMT’s construction would have on his interest in

engaging in traditional Native Hawaiian cultural practices on

Mauna Kea. To require BLNR to hold another contested case

hearing in such circumstances would require BLNR to shoulder

duplicative administrative burdens and comply with additional

procedural requirements that would offer no further protective

value. Based upon the foregoing consideration of the three Sandy

Beach Defense Fund factors and the record currently before us, we

hold that BLNR did not violate Flores’s constitutional right to

due process by denying his request for a contested case hearing

in the present case.

To conclude, we hold that Flores was not entitled to a

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contested case hearing regarding whether BLNR should consent to

the Sublease because, on the record in this case, such a hearing

was not required by statute, administrative rule, or due process.

Accordingly, the environmental court erred in ruling that “Flores

was denied the right to a contested case hearing on the subject

Consent to Sublease in violation of his constitutional right to a

hearing under Article 12, Section 7 of the Hawai#i State

Constitution and Mauna Kea Anaina Hou, and specifically section

IV of the concurring opinion therein.”

V. CONCLUSION

For the reasons stated above, we reverse the

environmental court’s January 6, 2017 Final Judgment and “Order

Granting In Part and Denying In Part Appellees State of Hawai#i,

Board of Land and Natural Resources, Department of Land and

Natural Resources, and Chairperson Suzanne D. Case’s Motion for

Stay of Proceedings, or in the Alternative for the Court to Issue

its Decision on Appeal, Filed October 25, 2016; Vacating Consent

to Sublease and Non-Exclusive Easement Agreement Between TMT

International Observatory LLC and the University of Hawaii Under

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General Lease No. S-4191; and Remanding Matter to the Board of

Land and Natural Resources.”

Clyde J. Wadsworth and /s/ Mark E. Recktenwald
Kaliko#onalani D. Fernandes,
(Kimberly Tsumoto Guidry, /s/ Paula A. Nakayama
William. J. Wynhoff, Julie
China and David D. Day, with /s/ Sabrina S. McKenna
them on the briefs) for
Appellees-Appellants/Cross- /s/ Richard W. Pollack
Appellees State of Hawai#i,
Board of Land and Natural /s/ Michael D. Wilson
Resources, Department of Land
and Natural Resources, and
Chairperson Suzanne D. Case

David Kauila Kopper and
Camille Kaimâlie Kalama for
Appellant-Appellee E. Kalani
Flores

John P. Manaut and Ian L.
Sandison (Arsima A. Muller
with them on the briefs) for
Appellee-Appellee/Cross-
Appellant University of
Hawai#i

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