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Burmeister v. County of Kaua`i

United States District Court, D. Hawaii

May 2, 2018

COUNTY OF KAUA`I, and DOES 1-50, Defendants,



         On October 3, 2017, Defendant County of Kaua`i (“Defendant” or the “County”) filed its Motion for Summary Judgment on All Counts (“Motion”). [Dkt. no. 37.] Plaintiffs Klaus H. Burmeister and Ulrike Burmeister, as Trustees of the Burmeister Family Trust Dated January 21, 1994 (“Plaintiffs” or (“Trustees”), filed their memorandum in opposition on November 20, 2017, and the County filed its reply on November 27, 2017. [Dkt. nos. 48, 51.] This matter came on for hearing on December 11, 2017. On December 18, 2017, an entering order was issued ruling on the Motion. [Dkt. no. 56.] The instant Order supersedes that ruling. Defendant's Motion is hereby granted as to Counts II, a portion of Count III, and Counts IV-XI; and denied as to Count I and the portion of Count III based solely on the May 11, 2016 incident, for the reasons set forth below.


         Plaintiffs filed their Complaint on July 25, 2016, and assert diversity jurisdiction. [Dkt. no. 1 at ¶ 4.] Plaintiffs own certain real property, identified as Kaua`i Tax Map Key 5-8-8-34 (“Property”), which contains four single-family residences, used as Transient Vacation Rentals (“TVRs”). [Id. at ¶¶ 7-10.] Plaintiffs contend the County's subsequent enforcement actions against the Property were wrongful in light of an Enforcement and Settlement Agreement, executed on January 7, 2008 (“Settlement Agreement”).[1] Plaintiffs assert eleven claims: breach of contract (“Count I”); breach of the implied covenant of good faith and fair dealing (“Count II”); trespass to land (“Count III”); nuisance (“Count IV”); harassment (“Count V”); equal protection (“Count VI”); tortious interference with contract (“Count VII”); interference with prospective economic advantage (“Count VIII”); prima facie tort (“Count IX”); declaratory relief (“Count X”); injunctive relief (“Count XI”).

         Plaintiffs pray for: a permanent injunction to enjoin the County from continuing its allegedly wrongful conduct; damages of at least $1, 000, 000; attorney's fees and costs; and declaratory relief. Specifically, Plaintiffs seek a declaration that “(a) the Settlement Agreement is valid and enforceable; (b) the Trustees are not required to obtain a building permit for Residence 4; and (c) the Trustees are not required to remove Residence 4 except as set forth in the Settlement Agreement.” [Complaint, Prayer at ¶ 4.]

         The following facts are undisputed. In 2002, Plaintiffs purchased the Property, which contained a laundry building and four residences, all operated as TVRs. The four residences were initially constructed in 1969. The parties agree the former owner remediated damage to Residence #4 in 1994, but disagree as to the whether it was repaired or rebuilt. [Def.'s CSOF at ¶¶ 1-3 (rebuilt); Pltfs.' CSOF at ¶¶ 1-3 (repaired).]

         On June 24, 2004, the County Planning Department (“Planning”) first took enforcement action against Plaintiffs when it issued a Zoning Compliance Notice (“ZCN” generally, and specifically “June 2004 ZCN”) for use of nonconforming structures as dwelling units. Compliance issues continued, and the County continued to issue enforcement notices. [Def.'s CSOF at ¶¶ 4-8; Pltfs.' CSOF at ¶¶ 4-8.] On January 7, 2008 (“Effective Date”), the parties entered into the Settlement Agreement to “resolve all outstanding issues” regarding the Property. [Def.'s CSOF at ¶ 9; Pltfs.' CSOF at ¶ 9.]

         The Settlement Agreement provides, inter alia, that: “Residence #4 shall be permitted to remain in its present location until the crest of the active beach berm fronting Residence #4 reaches any portion of Residence #4, at which time” the owners shall remove or relocate it at their expense; [Settlement Agreement, Terms of Agreement at ¶ 3;] “the Owners shall not be required to obtain any other permits from the County for all existing structures”; [id. at ¶ 6;] compliance with the Settlement Agreement “shall cure any and all outstanding building or zoning violations at this time as to any and all structures currently existing”; [id. at ¶ 7;] and in the event of a dispute, “the prevailing party shall be able to collect from the losing party” its “reasonable expenses and costs, including without limitation . . . reasonable attorney's fees and costs”; [id. at ¶ 10].

         The parties agree the Settlement Agreement's resolution of the “outstanding issues” at least included whether: 1) the Property violated the maximum allowable density of three structures; 2) the laundry building violated side-yard setback requirements; 3) the fence and gate unlawfully block vehicle access; and 4) whether Residence #4 violated shoreline setback requirements. [Def.'s CSOF at ¶ 10 (characterizing this list as complete); Pltfs.' CSOF at ¶ 10 (characterizing this list as incomplete).]

         The parties agree resolution of the “outstanding issues” at least included: 1) issuance of zoning and Special Management Area (“SMA”) permits for the fence and Residences #1, #2, and #3; 2) an agreement to alter the laundry building to provide proper setback; and 3) allowing Residence #4 to remain in its current location as a nonconforming structure, which must be removed later “at such time the crest of the active beach berm reaches” Residence #4, and until such time, agreeing Residence #4 will not be enlarged or reconfigured. [Def.'s CSOF at ¶ 11 (characterizing this list as complete); Pltfs.' CSOF at ¶ 11 (characterizing list as omitting a central aspect of the Settlement Agreement's resolution).]

         The Federal Emergency Management Agency (“FEMA”) monitors compliance with the National Flood Insurance Program (“NFIP”). In August 2009, FEMA conducted a floodplain tour of the Kaua`i North Shore. Afterwards, FEMA requested the County respond to apparent NFIP violations at twenty one properties, including Plaintiffs' Property. [Def.'s CSOF at ¶¶ 15-21; Pltfs.' CSOF at ¶¶ 15-21.]

         On July 10, 2015, the Department of Public Works (“DPW”) issued a Notice of Apparent Violation (“NOAV” generally, and specifically “July 2015 NOAV”) relating to Residence #4's noncompliance with flood zone requirements, and demanded that Plaintiffs submit a plan for compliance. Plaintiffs did not submit a plan for compliance. [Def.'s CSOF at ¶¶ 21-22; Pltfs.' CSOF at ¶¶ 21-22.]

         On June 21, 2016, Planning issued an SMA Notice of Violation (“NOV” generally, and specifically “June 2016 NOV”), and withheld renewal of the annual TVR permit for Residence #4. The June 2016 NOV stated that it was issued because “Structure #4 has yet to comply with DPW, Building or DPW, Flood Compliance requirements as required in Building Permit Application BP #06-0783.” [Milnes Decl., Exh. 9 (June 2016 NOV) at 1.] The June 2016 NOV further stated:

Remedial action requires the applicant to either complete the building permit process or remove the structure. Further failure to engage and complete the building permit process gives the Director cause to withhold renewal of the issued TVNC certificate for this structure.
. . . you are herein levied a fine of $5, 000.00 for the above noted SMA violation(s). Should the required remedial actions not be initiated within 60 days from the date of this notice, an additional fine of $1, 000.00 for each day in which such violation persists shall be levied.

[Id. at 2 (emphases in original).]

         On July 18, 2016, Planning issued a letter requiring Plaintiffs cease and desist TVR operations in Residence #4. Plaintiffs have not ceased TVR operations in Residence #4. On July 27, 2016, Planning issued a letter rescinding the June 2016 NOV (“7/27/16 Letter”). [Def.'s CSOF at ¶¶ 25-28; Pltfs.' CSOF at ¶¶ 25-28.] The 7/26/16 Letter further: stated Planning was withholding the TVR renewal application for Residence #4 because DPW's July 2015 NOAV “relative to the floodplain management issues” remained unresolved; warned any TVR use of Residence #4 after August 1, 2016, may result in fines up to $10, 000 per day; and advised, “Any claims DPW's violation notice contradicts [Planning's] Settlement Agreement with you should be taken up with them. . . . You are responsible for providing us evidence of [] clearance [from DPW].” [Milnes Decl., Exh. 10 (7/26/16 Letter).]

         On August 3, 2016, the County received a copy of the Complaint. In September 2016, the County resumed negotiations with FEMA regarding Residence #4. [Def.'s CSOF at ¶¶ 29-30; Pltfs.' CSOF at ¶¶ 29-30.] On September 23, 2016, DPW issued a letter to FEMA (“9/23/16 Letter”), which explained the County Attorney's conclusion that the Settlement Agreement resolved the apparent NFIP violation by “ensur[ing] that Building #4 may not be improved and will ultimately be removed from its current location.” [Def.'s CSOF, Decl. Stanford Iwamoto (“Iwamoto Decl.”), Exh. 18 (9/23/16 Letter) at 2.] DPW requested FEMA determine whether it agrees the Settlement Agreement “fulfill[s] the intent and purpose of the [NFIP] by ensuring compliance with NFIP standards to the ‘maximum extent possible.'” [Id.]

         On October 7, 2016, FEMA issued a letter to DPW (“10/7/16 Letter”) stating the Settlement Agreement was “one way to remedy a[n NFIP] violation to the maximum extent possible” and therefore “[n]o further action” was required as to Plaintiffs' Property. [Iwamoto Decl, Exh. 19 (10/7/16 Letter) at 1.] On October 13, 2016, DPW rescinded the July 2015 NOAV. Also on October 13, 2016, Planning renewed Plaintiffs' TVR certificate for Residence #4. As of October 2016, no County enforcement actions were pending with regard to Plaintiffs' Property. [Def.'s CSOF at ¶¶ 31-34; Pltfs.' CSOF at ¶¶ 31-34.]


         This Court has stated:

[A]s a general rule, the construction and legal effect to be given a contract is a question of law.” Found. Int'l, Inc. v. E.T. Ige Const., Inc., 78 P.3d 23, 30-31 (Haw. 2003). The parol evidence rule only applies if an agreement is integrated - if so, “[a]bsent an ambiguity, [the] contract terms should be interpreted according to their plain, ordinary, and accepted sense in common speech.” Id., at 31 (citation and quotations omitted). Thus, “a prerequisite to the application of the [parol evidence rule] is that there must first be a finding by the trial court that the writing was intended to be the final and, therefore, integrated expression of the parties' agreement.” Matter of O.W. Ltd. P'ship, 668 P.2d 56, 60 (Haw. App. 1983) (citing Restatement (Second) of Contracts §§ 209 comment c, 210 comment b, 213 comment b (1981)) (additional citations omitted). The court may use all available evidence in determining whether a contract is integrated. Seascape Development v. Fairway Capital, 737 F.Supp.2d 1207, 1215 (D. Haw. 2010).
“A contract is ambiguous when the terms of the contract are reasonably susceptible to more than one meaning.” Airgo, Inc. v. Horizon Cargo Transp., Inc., 66 Haw. 590, 594, 670 P.2d 1277, 1280 (1983) (citing Hennigan v. Chargers Football Co., 431 F.2d 308, 314 (5th Cir. 19[7]0)). “The court should look no further than the four corners of the document to determine whether an ambiguity exists.” Williams v. Aona, 210 P.3d 501, 515 (Haw. 2009) (quoting United Pub. Workers, AFSCME, Local 646, AFL-CIO v. Dawson Int'l, Inc., 149 P.3d 495, 508 (Haw. 2006)). “‘[T]he parties' disagreement as to the meaning of a contract or its terms does not render clear language ambiguous.'” Found. Int'l, Inc., 78 P.3d at 33 (citing State Farm Mut. Auto. Ins. Co. v. Fermahin, 836 P.2d 1074, 1077 (Haw. 1992); Hawaiian Ins. & Guar. Co. v. Chief Clerk of the First Circuit Court, 713 P.2d 427, 431 (Haw. 1986)). . . . Therefore, “courts should not draw inferences from a contract regarding the parties' intent when the contract is definite and unambiguous.” United Pub. Workers, 149 P.3d at 508 (quoting State Farm Fire and Cas. Co. v. Pac. Rent-All, Inc., 978 P.2d 753, 762 (Haw. 1999)). . . .

Carson v. Kanazawa, CIVIL 14-00544 LEK-KSC, CIVIL 16-00053 LEK-KSC, 2017 WL 3444764, at *12 (D. Hawai`i Apr. 30, 2017) (citation omitted) (emphases omitted).


         I. Count I - Breach of Contract

         A. Breach of the Settlement Agreement

         Plaintiffs allege the County breached the Settlement Agreement by, inter alia: “ordering the Trustees to obtain a building permit for, or remove, Residence 4; ordering the Trustees to pay a fine for ‘failure to complete the building permit process;' withholding approval of the [TVR] Renewal Application; and threatening criminal prosecution.” [Complaint at ¶ 43.]

         The County argues DPW's July 2015 NOAV, Planning's June 2016 NOV, and Planning's 7/26/16 Letter (collectively “Enforcement Notices”) were not contemplated by the parties and are outside the scope of the Settlement Agreement. The Enforcement Notices all relate to Residence #4's compliance with flood zone standards, but before the Effective Date, the County had not asserted Plaintiffs violated flood zone standards. The County argues “compliance with federally mandated flood zone building standards” was outside the contemplation of the parties because, “at the time of the Agreement, the parties believed that Building #4 was constructed prior to 1980, and therefore, was not required to comply with the standards.” [Mem. in Supp. of Motion at 15.] The County further argues that, because the County had not yet enacted an ordinance addressing TVRs, issues relating to the renewal of Plaintiffs' TVR certificate were outside the contemplation of the parties. Therefore, the County argues, enforcement actions relating to flood zone standards and non-renewal of the TVR certificate did not breach the Settlement Agreement.

         The Court concludes the Settlement Agreement is ambiguous. Its provision exempting Plaintiffs from “obtain[ing] any other permits from the County, ” [Settlement Agreement at ¶ 6, ] is contradicted by Plaintiffs' conduct in applying for TVR licenses. Under the Settlement Agreement, Plaintiffs are granted some relief from having to “obtain any other permits from the County, ” but which “permits” and “outstanding issues” the parties intended the Settlement Agreement to reach cannot be determined from within its four corners. [Id. at ¶¶ 6-7.] Resort to parol evidence is therefore appropriate to determine the construction the parties intended.

         The parties advance two different interpretations of the scope of the Settlement Agreement, both of which are permissible constructions of the agreement's ambiguous text. Under the County's favored construction, the permitting and code violations reached are only those which had been explicitly discussed, such as in negotiations or in prior enforcement notices. Under Plaintiffs' favored construction, the permitting and code violations reached include all possible ...

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