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Kauai Springs, Inc. v. Planning Comm'n of Kaua'i

Supreme Court of Hawai'i

February 28, 2014

KAUAI SPRINGS, INC., Petitioner/Appellant-Appellee,
v.
PLANNING COMMISSION OF THE COUNTY OF KAUA'I, Respondent/Appellee-Appellant

As Corrected March 7, 2014.

As Corrected March 14, 2014.

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS. ICA NO. 29440; CIV. NO. 07-1-0042.

Robert H. Thomas and Mark M. Murakami, for petitioner.

Alfred B. Castillo, Jr., Mauna Kea Trask, David J. Minkin, and Dayna H. Kamimura-Ching, for respondent.

Issac Moriwake, on the brief for Amici Curiae, Mâ lama Kaua'i and Hawaii's Thousand Friends

Jon M. Van Dyke, Ernest M. Kimoto, on the brief for Amicus Curiae, Office of Hawaiian Affairs

NAKAYAMA, ACOBA, McKENNA, AND POLLACK, JJ., WITH RECKTENWALD, C.J., CONCURRING AND DISSENTING.

OPINION

Page 956

[133 Hawai'i 146] POLLACK, J.

This appeal arises out of a decision bye Respondent/Appellee-Appellant Planning Commission of the County of Kaua'i (Planning Commission) to deny Petitioner/Appellant-Appellee Kauai Springs, Inc.'s (Kauai Springs) application for three permits related to the continued operation of Kauai Springs' water bottling facility. The Circuit Court of the Fifth Circuit (circuit court) reversed in part and vacated in part the Planning Commission's decision and order, ordered that all three permits be issued, and entered final judgment in favor of Kauai Springs. The Intermediate Court of Appeals (ICA), pursuant to its published opinion of April 30, 2013, vacated the circuit court's final judgment and remanded the case to the Planning Commission for consideration of whether Kauai Springs can meet the requirements for the permits. Kauai Springs filed an application for writ of certiorari to this court (Application), seeking reversal of the ICA's May 30, 2013 Judgment on Appeal.

For the reasons set forth herein, we affirm the ICA Judgment to the extent that it vacated the Final Judgment entered by the circuit court and remand the case to the Planning Commission to clarify its findings of fact and conclusions of law.

I. BACKGROUND

Kauai Springs is a water bottling and distribution company owned by Jim and Denise Satterfield. Kauai Springs operates out of land located in Koloa, Kaua'i (the Property). The Property is leased from Makana Properties, LLC (Makana Properties). The majority of the Property is designated agricultural by the General Plan for the County of Kaua'i (Kaua'i General Plan), Chapter 7 of the Kaua'i County Code (KCC).

On April 17, 2003, the County of Kaua'i (County) issued Kauai Springs a Class IV Zoning Permit for the construction of a watershed on the Property. On September 17, 2003, the County issued a building permit to Kauai Springs for the construction of a 1,600 square-foot " bottled water processing facility" on the Property. On July 9, 2004, the State Department of Health issued a four-year permit approving Kauai Springs as a " bottled water manufacturer."

Kauai Springs subsequently began operating its water bottling facility. The water that Kauai Springs uses for its operations originates from an underground spring located several miles from the Property, 1,000 feet up Kahili Mountain.[1] Kauai Springs apparently " purchases" or " licenses" its water from EAK Knudsen Trust (Knudsen Trust), the owner of the land where the spring is located. The water is transmitted to the Property by a private, gravity-fed system dating back to the 1890s, which is owned by Knudsen Trust and operated by Grove Farm Company (Grove Farm).[2]

Grove Farm owns the private water tank servicing the Property. The water tank

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[133 Hawai'i 147] feeds several lines and services at least eleven other residences neighboring the Property. Kauai Springs has installed a tap into the water line connected to the tank, which feeds a meter and an underground line to the water bottling facility on the Property. Water overflows from the tank into a tributary to Waihohonu Stream. Kauai Springs purifies the water it extracts, bottles the water into five-gallon containers, and delivers the bottles to customers on Kaua'i.

On May 15, 2006, the County Planning Department (Planning Department) issued a cease and desist letter to Makana Properties. The letter provided that upon receiving a complaint, the Planning Department conducted a field inspection of the Property on April 27, 2005, and found violations of KCC Chapter 8, The Comprehensive Zoning Ordinance for the County of Kauai (CZO).[3] The Planning Department specified that 1) the " activity of processing and packaging without the proper permits" constitutes a violation of KCC § 8-19.1 [4]; and 2) the use of the Property " for Industrial processing and packaging purposes is not generally permitted within the Agriculture District," pursuant to KCC § 8-7.2.[5] Makana Properties was instructed to immediately " [c]ease and desist such use and relocate to an appropriate land use district."

On July 5, 2006, the Planning Department accepted Kauai Springs' completed application for three zoning permits: 1) a Use Permit under KCC Article 20 (Use Permit); 2) a Special Permit under Hawai'i Revised Statutes (HRS) § 205-6 (2005) (Special Permit); and 3) a Class IV Zoning Permit under KCC Article 19 (Class IV Zoning Permit). According to the Planning Department, a Use Permit and Special Permit were required because the proposed use was not generally permitted in the agricultural district. A Class IV Zoning Permit is a procedural requirement of a Use Permit in the agricultural district.

Kauai Springs' application provided that it was " requesting a permit for a water harvesting and bottling operation." The application stated that the " maximum current capacity for the Kauai Springs' operation is 1,000 [five-gallon] bottles per day during one 8 hour shift." Kauai Springs estimated that it " expect[ed] vehicle capacity to reach a maximum level of 8 trips per day by delivery and office personnel." Furthermore, Kauai Springs planned to expand its operation to include bottling water in smaller bottles for distribution throughout the State.

The Planning Commission held four public hearings on the application, on August 8, September 26, November 14, and November 28, 2006. The Commission also discussed the application at a regular meeting on January 23, 2007. Public oral testimony on the application was taken at each meeting. The minutes of the hearings indicate that Kauai Springs' application was identified at each hearing as follows: " Use Permit U-2007-1, Special Permit 2007-1 and Class IV Zoning Z-IV-2007-1 = Kaua'i Springs, Inc. (For a spring water bottling facility, Koloa, Tax Map Key 2-8-2:por. 5.)." There is no indication in the record that members of the public were restricted to testifying on any particular permit at any of the hearings. Many of those testifying commented generally on the application as a whole rather than on the permits individually.

Additionally, the Planning Department also requested input from various State and

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[133 Hawai'i 148] County agencies throughout its public hearings process.

Prior to the August 8 public hearing, the Planning Department prepared a staff report describing the application and providing a preliminary evaluation. The preliminary evaluation stated that while Kauai Springs' existing use is " relatively low impact," the expansion of operations " would intensify the use" :

The existing water bottling facility is relatively low impact . . . in its current function and capacity. However, expansion of the facility to include small bottle production at the site would involve increased production machinery, delivery frequency, generate more traffic, and generally would intensify the use, which may not be appropriate or compatible at this location.

At the August 8 hearing, Kauai Springs confirmed that it had been in business for two to three years at that point and the purpose of its application was to " increase . . . productivity." Kauai Springs stated that it was currently filling between 300 and 500 five-gallon bottles per week. Kauai Springs requested approval to expand to their maximum capacity of 1,000 five-gallon bottles per day at the existing facility, seven days a week (i.e., 35,000 gallons per week). At maximum capacity, Kauai Springs anticipated " 8 total vehicles" making daily round-trips.

Kauai Springs stated that " there is no limit" to how much water can be extracted from the private water system. Kauai Springs also informed the Planning Commission that it planned to produce smaller bottles at its existing facility once it had the capacity to do so. The Planning Commission members discussed whether they should base their decision on the permits upon Kauai Springs' current operations or upon the maximum capacity of the operations.

The Planning Commission also discussed the overflow from the water system. The Planning Department planner stated that it was her understanding that " [t]he overflow from the pipe and from the water tank . . . is overflowing into Waihohonu Stream." Commissioner Imai Aiu noted that if Kauai Springs reached its full potential, " then that is 1,000 gallons a day that is basically taken out of the Waihohonu Stream." In response to an individual who testified that the water " is being wasted" by not being bottled, Commissioner Aiu stated, " So I don't know how much currently flows through there and how much of an [effect] that would have but . . . it's not a waste when it's going through an actual river and riparian environment. That is a natural system that does deserve to be looked at."

The Trustee of the Knudsen Trust appeared at the August 8 meeting, in support of Kauai Springs' application. The trustee confirmed that the private water system was owned by Knudsen Trust, and the trust had a signed licensing agreement for Kauai Springs to take the water. The trustee did not think that the licensing agreement was received by the Water Commission.

The August 8 meeting was continued to September 26 to request clarification from the State Land Use Commission regarding the size of the land area under consideration for a Special Permit, and receive clarification from the Department of Land and Natural Resources Commission on Water Resource Management (Water Commission) regarding whether " the proposed quantity of water to be captured and bottled by the operation is of concern to them." Kauai Springs was also asked " to define what it wanted more clearly." Additionally, the Planning Department noted that " [a] question also arose as to whether the Public Utilities Commission (PUC) . . . had any jurisdiction over the water system or the sale of water to the Applicant."

In a letter dated September 26, 2006, the Water Commission responded to the Planning Department's request for input on the application. The Water Commission commented that " [t]here may be the potential for ground or surface water degradation/contamination," and therefore " recommend[ed] that approvals for this project be conditioned upon a review by the State Department of Health and the developer's acceptance of any resulting requirements related to water quality." [6] The Water Commission further commented

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[133 Hawai'i 149] that " [g]round-water withdrawals from this project may affect streamflows, which may require an instream flow standard amendment." Finally, the Water Commission stated that although a water use permit was not required because the island of Kaua'i was not a designated ground-water management area, other permits from the Water Commission may be required if the source of Kauai Springs' water was modified:

The Island of Kauai has not been designated as a groundwater management area; therefore a water use permit from the Commission is not required to use the existing source(s) or to change the type of water use. However, if the source needs to be modified in any way, a well modification permit from the Commission may be required. In addition, if a pump is to be installed to induce additional water flow, a pump installation permit from the Commission would be required. If the source is modified to induce additional water flow, and the modification results in impacts to surface waters, a petition to amend the interim instream flow standard for affected surface waters must be made and approved prior to use of the water.

(Emphases added).

At the September 26, 2006 public hearing, Kauai Springs clarified that it was requesting " approval to fill up to 1,000 5-gallon bottles of water per day, and up to 1,000 cases of bottled water per week at the existing facility." Kauai Springs further clarified that it was requesting ten vans " to be added to our existing facility to accommodate steady growth." The Planning Commission briefly discussed the Water Commission's letter with the applicant, but noted that the Water Commission would be sending additional comments. At the end of the hearing, the Planning Department planner commented that she did not know " whether water is coming out of the tunnel and going into a stream," or " how much water is in the system," although Kauai Springs had " represented that 275,000 gallons a day are the capabilities of this tunnel."

On October 26, 2006, the Planning Department staff conducted a site visit, accompanied by the applicants, to view the tunnel where the water system originates, the Kahili Mountain Park portion of the water system, the water bottling facility, and the adjacent Grove Farm water tank.[7] The staff described the water system as follows:

The tunnel entrance is located adjacent to a streambed with steep sides, where it enters the hillside horizontally. To prevent infiltration of surface water into the tunnel, a concrete stem wall was constructed at the bottom of the entrance to above the water level within the tunnel, and a steel panel was mounted over the tunnel entrance. Inside the tunnel, water enters the system through a water pipe installed at or below the water surface. Except for two places where the pipe crosses stream beds on piers, the pipe is buried underground from the tunnel to a water tank on TMK 2-7-01:03. Water is chlorinated at the tank, which serves the Kahili Mountain Park parcel, and feeds the line going to Koloa Town. A second tunnel and a Kuia Stream intake used to join this line in a junction house below the water tank; however, these two water sources have been bypassed due to Department of Health concerns for the influence of surface water. The sole water source is Tunnel #1. Overflow from the system on Kahili Mountain Park is returned to the adjacent stream.

In a letter dated November 6, 2006, the Planning Department requested clarification of the Water Commission's comments in its September 26 letter. The Planning Department summarized its understanding that, providing certain hypothetical conditions applied, no permit was required for Kauai Springs' use of water from the existing water system:

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[133 Hawai'i 150] II. The tunnel is not being changed, and the Applicant's use of the water is not affecting the source in any way (i.e. not inducing more water to come out of the source or tunnel)
III. The existing source has been registered and is basically grandfathered, and there is an agreement between the new user (Applicant) and the operator of the system.
IV. There is a closed line from the tunnel to the tank.

It was also the Planning Department's understanding that additional permits and a petition to amend the interim instream flow standard for affected surface waters may be required under the circumstances outlined in the Water Commission's letter.

At the November 14, 2006 hearing, counsel for Kauai Springs stated that the application request was to bottle a maximum of 1,000 gallons of water per day, and to use a maximum of two vans a day for the delivery of that water. Counsel agreed that " [t]his would represent an amendment to the previous request of 1,000 five-gallon bottles a day and one thousand cases of water in smaller bottles a week to be delivered in ten . . . vans per day and one 40-foot container per day."

A consultant for Grove Farm also appeared at the November 14 hearing. He confirmed that Grove Farm did not own the water tunnel, but managed the water system and sold the water. He stated that Grove Farm was not " involved . . . at all" in Kauai Springs' Use Permit request because the request did not involve Grove Farm property. The consultant stated that he had " no clue" if there were any applicable PUC requirements regarding Grove Farm selling the water to Kauai Springs. To his knowledge, Grove Farm had never communicated with the PUC. The Planning Department planner suggested that the PUC does not " grandfather at all so they just probably didn't know about [the Grove Farm system]. It wasn't something that came to anybody's attention because it was so small a system."

By letter dated November 20, 2006, the Water Commission responded to the Planning Department's request for clarification. The Water Commission stated, " We concur with your summary of our comments and confirm that no permits from the Commission are required for the proposed use of water under the three conditions outlined in your letter."

By letter dated November 22, 2006, the PUC responded to the Planning Department's November 6 inquiry " as to whether Grove Farm's water system and Kauai Springs, Inc.'s sale of water from the Grove Farm water system are regulated by the [PUC]." The PUC responded that based on " the limited information provided, there is a possibility that Grove Farm may be operating as a public utility[.]" [8] However, the PUC stated that an analysis of whether Grove Farm was operating as a public utility would include determining whether Grove Farm provides water service for the public's use and the amount of control its customers may exert over the water system. Accordingly, " [a]dditional information, including a review of all relevant facts and possibly testimony from all concerned parties, would be necessary before a determination could be made[.]" With respect to Kauai Springs, the PUC stated that " it does not appear that Kauai Springs would be a public utility subject to commission jurisdiction." The PUC explained:

Such operations may not rise to services of such a public character and of public consequence and concern that is to be regulated under HRS Chapter 269, as bottled water may be obtained from a number of competing sources and providers. The commission does not currently exercise jurisdiction over any water bottling facilities in the State.

The PUC cautioned that its letter constituted an " informal opinion" based on the information provided and was not binding on the PUC. The PUC concluded, " If you require a formal opinion on this matter, you may file a

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[133 Hawai'i 151] petition for declaratory relief pursuant to chapter 6-61, subchapter 16, Hawaii Administrative Rules."

At the November 28, 2006 public hearing, the Planning Commission discussed granting conditional permits, provided that Kauai Springs would agree to furnish status reports that would allow the Commission to monitor progress. Specifically in regard to the Use Permit, counsel for Kauai Springs informed the Planning Commission that Kauai Springs would be willing to accept restrictions on the permit, such that the permit would be exclusively for the use of Kauai Springs, it would not be transferable, and the Commission would have the right to review the permit if Kauai Springs sold its business.

The Planning Commission also discussed postponing its decision pending a declaratory ruling by the PUC or Water Commission, or conditioning approval of the permits on a declaratory ruling. However, the Planning Commission stated that it was required to act on the Special Permit by January 31, 2007 and that the rules of the Commission did not allow for an extension of time. The Commission members thus voted to close the public hearing.

By letter dated November 28, 2006, counsel for Kauai Springs wrote to the Planning Commission to " confirm, in writing, the Applicant's request." Counsel wrote, " In order to be capable of further growth, the Applicant, after careful consideration of the evidence presented at the public hearings and notwithstanding the testimony provided by myself to the contrary, has decided to maintain the request for approval as set forth in his original application." This request was for a maximum of 1,000 five-gallon bottles per day (or 5,000 gallons per day or 35,000 gallons per week), a maximum of ten van round-trips per day, a maximum of one 40-foot container round-trip per week, and a maximum of five employees at any one time. Counsel wrote that he regretted any confusion caused by his testimony at the November 14 hearing and " look[ed] forward to coming to agreeable terms that are acceptable to all parties involved."

In a letter dated November 30, 2006, the Office of Hawaiian Affairs (OHA) wrote that it was concerned with Kauai Springs' application " because it involves the use of an important public trust resource - fresh water - for personal financial gain," and it " appear[ed] to be the first attempt to bottle and sell Hawaii's surface water[.]" OHA stated that the Planning Commission had acted pursuant to its public trust duty " by requesting clarification on public trust issues from [the Water Commission] and the [PUC]." OHA wrote that it was not enough to require Kauai Springs to request a declaratory ruling from the Water Commission. Rather, the Water Commission should investigate whether " Hawai'i water law is already being violated." " For example, the off-stream flows may have already increased with Kauai Springs' use of the water, or there may be transport of water outside the watershed of origin." OHA requested that the Commission require these studies to be conducted prior to issuing any permits. OHA further requested that the Planning Commission resolve the " outstanding PUC issues" regarding whether Grove Farm and Kauai Springs were operating as public utilities. Given the January 27, 2007 deadline for a decision on the application, OHA argued that the Commission " uphold its public trust responsibilities by denying Kauai Springs' permit applications without prejudice, until the applicant can show, and the appropriate agencies can concur, that Kauai Springs' proposed use is reasonable-beneficial and will not interfere with public trust purposes." At a minimum, OHA contended that Kauai Springs should be required to obtain a declaratory ruling from the Water Commission " regarding the need for an instream flow standard amendment and a final decision from the PUC regarding the need to register as a public utility."

By letter dated December 1, 2006, counsel for Kauai Springs wrote to the Planning Commission, suggesting specific language regarding the " non-transferability" condition to the Use Permit that had been discussed at the prior public hearing.

At the January 23, 2007 regular meeting of the Planning Commission, the Commission considered the recommendation to deny the permits made by Planning Department planner Bryan Mamaclay, who had recently replaced the prior planner. Counsel for Kauai

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[133 Hawai'i 152] Springs stated that he " was really surprised" when he received Mr. Mamaclay's staff report recommending that the permits be denied. Counsel believed that Mr. Mamaclay " was put in a difficult position by inheriting this file at the last minute." Counsel explained that based on his last conversation with Mr. Mamaclay, his impression had been that Mr. Mamaclay " would like to have some more time to look at it but because of the rules we weren't afforded that opportunity. So instead of working with conditions . . . as you are enabled to do he chose to take the denial route."

Mr. Mamaclay explained that the comments received from the Water Commission, PUC, and OHA were " an issue because . . . we need some comfort level or some certainty that the applicant has the right or the authority to extract and draw the water on a commercial basis." Mr. Mamaclay noted that the Water Commission's letter included " caveats or some qualifying statements," which raised the question of whether Kauai Springs had gone " through a process to ensure that there is no violation of any [Water Commission] rules." Mr. Mamaclay further informed the Commission that the " absolute deadline" for the Special Permit was January 31, 2007.

After further discussion and public testimony, the Planning Commission voted 6-1 to deny the three permits. That same day, January 23, 2007, the Commission issued its Findings of Fact, Conclusions of Law, Decision and Order (Decision and Order) denying the application.

With respect to time constraints for acting on the application, the Planning Commission found that " [t]he absolute deadline for action on the application based on procedures for action on Special Permits is 210 days after the acceptance of the application or January 31, 2007." The Planning Commission found that " [t]he delay in reaching a decision . . . was attributed to staff's effort in obtaining additional information relating to the Applicant's authority and right to obtain and extract the water for commercial purposes."

The Planning Commission summarized the findings and comments submitted by the Water Commission and the PUC. In relation to the Water Commission's input, the Planning Commission found the Water Commission had qualified its comments by stating that permits may be required if certain modifications were made:

b. The Planning Department further acknowledges the qualifying remarks by [the Water Commission] that:
I. if the source needs to be modified in any way, a well modification permit from [the Water Commission] may be required;
II. if a pump is to be installed to induce additional water flow, a pump installation permit from [the Water Commission] would be required;
III. if the modification results in impacts to surface waters, a petition to amend the interim instream flow standard for affected surface waters must be made and approved prior to use of the water.

Relative to these comments, the Planning Commission found that the Planning Department's site visit to the tunnel where the private water line is located confirmed that a " concrete stem wall" and " steel panel" had been constructed at the tunnel entrance:

c. Relative to the foregoing, it is also acknowledged as confirmed during a site visit to Tunnel #1, that to prevent infiltration of surface water into the tunnel, a concrete stem wall was constructed at the bottom of the tunnel entrance to above water level within the tunnel and a steel panel was mounted over the tunnel entrance. Furthermore and as noted by the staff, inside the tunnel, water enters the system through a water pipe installed at or below the water surface. Thereafter, the water line is buried up to a water tank . . . where it is chlorinated before servicing Kahili Mountain Park and the 11 homes in Koloa Town.

(Emphasis added).

In relation to the PUC's comments, the Planning Commission found that " Kauai Springs would not be a public utility subject to commission jurisdiction since the commission does not currently exercise jurisdiction over any water bottling facility in the State." However, the Commission found that the " PUC further draws interest in its findings relating to Grove Farm as the seller of the water from its system to the Applicant and

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[133 Hawai'i 153] its status with the PUC." The Commission found in this regard that the PUC's letter stated " there is a possibility that Grove Farm may be operating as a public utility," and that the PUC qualified its response as an " informal opinion based on the limited information provided[.]" (Quotation marks omitted).

In light of the observations made during the site visit and the comments made by the PUC and the Water Commission, the Planning Commission found " there may be outstanding regulatory processes" that Kauai Springs must satisfy:

In view of the foregoing, there may be outstanding regulatory processes with [the Water Commission] that the Applicant must satisfy. Based on the comments provided by [the Water Commission] and staff observations during the field trip, it should be the Applicant's responsibility to confirm and determine the need for any permits that may be required for the construction of the concrete stem wall and the steel panel mounted over the tunnel entrance. The permit requirements administered by [the Water Commission] are cited in HRS Section 174C-71(3)(A), (Protection of Instream Uses) . . . and requires persons to obtain a permit from the Commission prior to undertaking stream channel alteration provided that routine streambed and drainage way maintenance activities and maintenance of existing facilities are exempt from obtaining a permit.
Comments received from the PUC also draws interest to the extent that as a purchaser of the water from Grove Farm, the operation may be subject to PUC regulation. The PUC in this regard encourages that a declaratory ruling be sought to allow more diligent review of the relevant facts and information associated with the proposed water bottling facility.
As evidenced by additional testimony provided by [OHA] and concerned parties, the Planning Commission is being requested to exercise caution and deny the Applicant's request in its role as decision maker in the land use permit process.

(Emphases added).

Based on the above findings, the Planning Commission concluded that Kauai Springs had failed to carry its burden of demonstrating that its proposed use did not violate all applicable requirements and regulatory processes relating to water rights, and that there was no substantive evidence that Kauai Springs had legal standing and authority for its proposed water use:

3. In view of the comments received from [the Water Commission] and PUC the land use permit process should insure that all applicable requirements and regulatory processes relating to water rights, usage, and sale are satisfactorily complied with prior to taking action on the subject permits. The Applicant, as a party to this proceeding should also carry the burden of proof that the proposed use and sale of the water does not violate any applicable law administered by [the Water Commission], the PUC or any other applicable regulatory agency.
4. There is no substantive evidence that the Applicant has any legal standing and authority to extract and sell the water on a commercial basis.

(Emphases added).

At the Planning Commission's February 13, 2007 regular meeting, the Commission considered Kauai Springs' request for reconsideration of the Decision and Order. At the hearing, counsel for Kauai Springs argued that the purpose of the motion for reconsideration was " to prevent hasty or ill advised action." Counsel stated that " after four months of lengthy public hearings the new planning staff person received the file just days before the purported deadline that we were told a decision had to be made[,] which was the 210 day deadline [for the Special Permit]." Counsel argued that it was a mistake for the Commission to deny the permits based on issues raised in OHA's letter, where OHA erroneously stated that the application involved a surface water system, and where every other administrative agency had " responded favorably to the applicant." Counsel requested that the Commission " vote to reconsider and then continue this matter to a time in the not to[o] distant future when we can all get our arms around any of the remaining issues including any issues raised by that OHA letter that came in just days before [the staff] report and that we can make a fully reasoned decision."

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[133 Hawai'i 154] In response to counsel's comments, Commissioner Randall Nishimura questioned whether granting reconsideration would place the Commission in violation of the " 210 day requirement for the Special Permit." The County Attorney responded that it was his impression that the Commission could not grant an extension of the deadline even if Kauai Springs requested it. Counsel for Kauai Springs stated that he had discussed this issue with a County Attorney and the Mayor, and it was his understanding that Kauai Springs could waive the 210 day requirement. The County Attorney informed the Commission that the Decision and Order had been issued on the 203rd day following acceptance of the application, which would leave the Commission with seven days to act upon reconsideration.

After further discussion, counsel for Kauai Springs stated that " [t]he applicant would certainly be willing to waive something to avoid a hasty decision[.]" Counsel continued:

I think we would have asked for that two weeks ago in my discussions with the planner had we known that we could and that was why I was somewhat heartened after our meeting a week and a half ago with the Mayor. But absolutely we would be willing to execute a document, I'm happy to work with the County Attorney, a waiver of our rights. We are not trying to have you open it today and then argue that that's an automatic approval we want to get this right. We believe there are important issues to be resolved. We are not trying to sneak anything by here.

(Emphasis added).

Following public oral testimony on the request for reconsideration, a formal motion to reconsider the Decision and Order was made. Several Commissioners stated that they could not support the motion due to their belief that the Commission was not in a position to resolve the " water rights issue." The Planning Commission voted 4-1 to deny the motion for reconsideration.

In a letter dated February 15, 2007, the Planning Department confirmed the Commission's vote to deny the motion for reconsideration and notified Kauai Springs that continued operation on the Property constituted a land use violation. On March 13, 2007, the Planning Department ordered Kauai Springs to shut down its operations on the Property. The Planning Department's Notice of Violation dated March 13, 2007 provided that the department inspected the Property on March 8, 2007, and found violations of the Kauai CZO based on the continued operation of the water bottling facility without the required permits. Kauai Springs was ordered to correct the violation(s) within fifteen days and to cease and desist the illegal activities.

II. Circuit Court Proceedings

On March 15, 2007, Kauai Springs appealed the Decision and Order to the circuit court. On May 15, 2007, the circuit court granted Kauai Springs' motion for a preliminary injunction and enjoined the Planning Department from enforcing the Decision and Order.

On September 17, 2008, the circuit court issued its order, reversing in part and vacating in part the Planning Commission's Decision and Order.

The circuit court concluded that pursuant to HRS § 91-13.5 (Supp. 2006) and the relevant county code provisions, and based upon the Planning Commission's acceptance of Kauai Springs' application on July 5, 2006, the Commission was required to act upon the three requested permits by the following dates: 1) October 18, 2006 for the Use Permit; 2) November 2, 2006 for the Class IV Zoning Permit; and 3) January 31, 2007 for the Special Permit.[9] The circuit court concluded

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[133 Hawai'i 155] that the Planning Commission's failure to act within the time frame for the Use and Class IV Zoning permits meant that " Kauai Springs had a legitimate claim of entitlement" to those permits and those permits were " deemed approved" as of the date of the deadlines.

The circuit court further concluded that Kauai Springs did not waive the deadlines or assent to extensions by appearing and participating in subsequent public hearings or by not demanding that its application be approved. The circuit court concluded that " [i]t was reasonable for Kauai Springs to await the Planning Commission's decision," and " [t]he failure to adhere to the time requirements was due solely to the actions of the Planning Commission."

In regard to the criteria applied by the Planning Commission in denying the permits, the circuit court concluded that the Planning Commission did not consider the proper criteria, although the " applicable standards" for the three permits were " clearly established."

Regarding the Use Permit, the circuit court concluded that the Kauai CZO provides that the purpose of the permit, to assure proper integration into the community of uses, was satisfied by Kauai Springs' proposed use:

42. The Kauai Zoning Code provides " the purpose of the 'use permit' is to assure the proper integration into the community of uses which may be suitable only in specific locations in a district . . . and to prohibit such uses if the proper integration cannot be assured."
43. Kauai Springs is properly integrated into the community of uses. It had been operating without issue and with all the state and county permits necessary including two County building permits. The Planning Department staffer remarked about Kauai Springs, " [t]he existing water bottling facility is relatively low impact at the subject location in its current function and capacity."
44. The Planning Department staffer also stated that the watershed on the Property looked " just like any other Ag. Building."
45. There is nothing in the Decision and Order or the Record to indicate that Kauai Springs' existing or proposed uses were not or will not be integrated.

(Citations omitted) (emphases added). The circuit court further concluded that KCC § 8-20.5 " sets forth the standards the Planning Commission should have applied when considering Kauai Springs' application for a Use Permit." The circuit court concluded that the Decision and Order did not state, and the record did not indicate, that Kauai Springs did not meet these standards.

In regard to the standards for the Special Permit, the circuit court similarly concluded that HRS § 205-6, county ordinances, and the Planning Commission Rules set forth the proper standard for issuing the permit and there was no indication in the Decision and Order or the record that Kauai Springs failed to meet these criteria. The circuit court reached a similar conclusion for the Class IV Zoning Permit.

The circuit court then addressed the Planning Commission's duties under the public trust. The circuit court first concluded that the County has duties under the public trust:

61. The State of Hawaii and its political subdivisions have duties under the public trust. Haw. Const. art. IX; Kelly v. 1250 Oceanside Partners, 111 Haw. 205, 140 P.3d 985 (2006).
62. " Political subdivisions" of the State include the County of Kauai. Kelly v. 1250 Oceanside Partners, 111 Haw. 205, 140 P.3d 985 (2006).

(Emphases added). The circuit court then concluded that the record was devoid of any evidence that Kauai Springs' proposed or

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[133 Hawai'i 156] existing use would affect public trust resources, and nothing to indicate that the Planning Commission did not fulfill its public trust duties:

63. Decisions on permit applications must be grounded in fact and the Record, not speculation, and the Record in this case is devoid of any evidence that Kauai Springs['] existing or proposed uses might affect water resources subject to the public trust.
64. In the Decision and Order, the Planning Commission concluded that Kauai Springs' applications could be denied because Kauai Springs should have pursued " outstanding regulatory processes." The only regulatory process asserted by the Planning Commission as being outstanding was that Kauai Springs had not " proactively sought a declaratory ruling" from either the Water Commission or the PUC.

With respect to the Water Commission and the PUC's input, the circuit court found that those agencies informed the Planning Commission that Kauai Springs was not within their " jurisdictions, interests, or concerns," and the Water Commission stated that no permits were required because of the circumstances of Kauai Springs' water use:

53. The Decision and Order stated the Planning Commission had sought and received the input of the . . . Water Commission and the PUC, both of which informed the Planning Commission that Kauai Springs was not within ...

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