Saturday, May 29, 2010

State can tax Boat's Business (but not the Boat)

In re Tax Appeal of Reel Hooker Sportfishing (ICA May 28, 2010)

Background. Reel Hooker Sportfishing, Exact Game Fishing, Inc., and Finest Kind, Inc. are corporations that run charter boats around Maui, Lanai, and Molokai. They had federal permits allowing them to travel through the navigable waters between the islands. They are in the charter fishing business and allow passengers to seek pelagic game fish like marlin, ono, ahi, and mahimahi. Their source of earnings come from the fares charged to passengers. These fares include the state's general excise tax, the GET. The boat companies filed complaints against the State in the Tax Appeal Court alleging that the GET tax was preempted by federal law. The Tax Appeal Court granted the State's motion for summary judgment. The boat companies appealed.

The Three Faces of Federal Preemption. The ICA addressed a single issue, whether the federal statute, 33 U.S.C. § 5(b) preempts Hawai'i's GET tax, HRS § 237-13(6)(A). Party benefitting from the preemption has "the considerable burden of overcoming the starting presumption that Congress does not intend to supplant state law." De Buono v. NYSA-ILA Med. And Clinical Serv. Fund, 520 U.S. 806, 814 (1997). The ICA discussed three types of preemption. First, there is express preemption, when the federal statute explicitly preempts state action in a particular area. English v. Gen. Elec. Co., 496 U.S. 72, 79 (1990); Wardair Canada, Inc. v. Florida Dep't of Revenue, 477 U.S. 1, 6 (1986). When the preemption clause is ambiguous, courts usually disfavor preemption. Bates v. Dow Agrosciences, LLC, 544 U.S. 431, 449 (2005). There are also two kinds of implied preemption: conflict preemption, which arises when it is impossible to comply with both federal and state regulations. Gade v. Nat'l Solid Waste Mgmt. Ass'n, 505 U.S. 88, 98 (1992), and field preemption, where the federal legislative scheme is so pervasive that it "occupies the field" leaving no room for states to supplement the federal law. Id. at 98, 115. Interestingly, the ICA did not quote these U.S. Supreme Court cases and provided no examples of these preemptions in action.

State Taxes Versus Federal Regulation. The GET tax is levied upon "every person engaging or continuing within the State in any service business or calling including professional services not otherwise specifically taxed." HRS § 237-13(6)(A). The GET tax "is a privilege tax." Tax Appeal of Baker & Taylor, Inc. v. Kawafuchi, 103 Hawai'i 359, 365, 82 P.3d 804, 810 (2004). A privilege tax is "based on the fact that the party chose to engage in [a] business activity within the State. Such a tax is justified on the ground that companies conducting business enjoy the protections and benefits given by the state." Id. The boat companies, however, argued that 33 U.S.C. § 5(b), preempted the GET tax. The federal statute stated that "No taxes . . . shall be levied upon or collected from any vessel . . . or from its passengers or crew. . . by any non-Federal interest, if the vessel . . . is operating on any navigable waters subject to the authority of the United States[.]"

No Express Preemption Because the Federal Statute is Limited to Things, not the Business Revenues. According to the ICA, the federal statute prohibits anyone other than the federal government "from taxing a vessel, its passengers or crew, while that vessel is operating on navigable waters." But the GET is a tax on businesses for the privilege of doing business in Hawai'i. The GET, reasoned the ICA, taxes the revenues and gross receipts of the business, not the individual vessels, passengers, or crew. In other words, the federal statute prohibits taxes on individual vessels, passengers, and crew members. It does not expressly preempt the GET tax on the business operating the vessels, employing the crews, and holding passengers. The ICA specifically rejected the notion that a tax on the business' gross receipts was a tax on the vessel and passenger. Because of the strong presumption against preemption, the ICA refused to construe the word "vessel" to include the income derived from the use of the vessel.

So what Taxes Would be Prohibited? The ICA's construction of the federal law seems to indicate that any "tax" on any particular vessel, crewmember, or passenger would be preempted. So taxes on vessels--kind of like motor-vehicle taxes--would be preempted. Counties often tax individual vessels. This could spell trouble for counties.

No Conflict with Federal Law Because Practice of Forcing Customers to pay for the GET does not Alter Fact that the tax is still a tax on Revenues. The boat companies argued that state tax laws are violated if they refuse to pay; but if they do pay it, "they violate federal law by collecting it on behalf of the state." The argument is based on the widely-used practice of collecting the GET tax from customers and passengers. The ICA called this argument "a faulty premise." Just because companies "fund their payment of the GET through a pass-through charge to their customers/passengers does not change the nature of the GET from a tax on their businesses to a tax on their passengers." The ICA went on to note that the federal legislation was not intended to broadly prohibit state and local taxes on maritime businesses. According to the ICA, the federal prohibition was meant to "prohibit fees and taxes on a vessel simply because that vessel sails through a given jurisdiction" and it did not mean to "affect whether sales or income taxes are applicable with respect to vessels." H. R. Rep. No. 108-334 at 180 (2002).

Feds don't Occupy this Particular Field. Finally, the ICA--without citing any authority--flatly rejected the contention that the federal government occupied the field. According to the ICA, the federal government may loom large in "the broad scope of federal maritime legislation." But imposing the GET tax on the gross receipts of a charter fishing business hardly interferes with the federal regulation of maritime commerce.

Okay, so you can't Regulate when the Field has been Occupied. But how big is the Field? At first blush, it seems to make sense. The ICA's preemption analysis did not allow the boat companies to designate a field broadly. The ICA wanted something more specific. But how specific? The field could be nothing more than the regulation of gross receipts and revenues of fishing businesses. Is that too narrow? Is there anything in the middle--something between the "gross receipts of a charter fishing business" and "marine commerce"? The regulation of commercial fishing perhaps. No one knows. The ICA did not cite any authority on this issue and offered no guidance as to how courts are supposed to limit or even determine the field that may or may not be occupied.

In fact, the HSC approved of this formulation:

[I]n the absence of express pre-emptive language, Congress' intent to preempt all state law in a particular area may be inferred where the scheme of federal regulation is sufficiently comprehensive to make reasonable the inference that Congress left no room for supplementary state regulation. Pre-emption of a whole field also will be inferred where the field is one in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject.

Casumpang v. ILWU, Local 142, 94 Hawai'i 330, 339 n. 12, 13 P.3d 1235, 1244 n. 12 (2000). So it may be that, under Hawai'i's formulation of this preemption, there are further distinctions: the federal legislative scheme and the federal interest. But that was not part of the ICA's analysis.

And Another Thing . . . This opinion is also noteworthy because the ICA did not cite a single Hawai'i case in its discussion on preemption. Hawai'i appellate courts have discussed preemption several times over the decades. The HSC has discussed preemption as recently as Williams v. Aona, 121 Hawai'i 1, 210 P.3d 501 (2009), and there are discussions on preemption under Hawai'i law going as far back as the early days of statehood. In re Island Airlines, Inc., 44 Haw. 634, 361 P.2d 390 (1961). Hawai'i courts have applied the principles and doctrines of federal preemption to a host of federal legislation including the Airport and Airway Improvement Act, Office of Hawaiian Affairs v. State, 96 Hawai'i 388, 31 P.3d 901 (2001), the Labor Management Relations Act, Casumpang, supra, ERISA, Garcia v. Kaiser Foundation Hospitals, 90 Hawai'i 425, 978 P.2d 863 (1999), the Federal Insecticide, Fungicide, and Rodenticide Act, Kawamata Farms, Inc. v. United Agri Products, 86 Hawai'i 214, 948 P.2d 1055 (1997), and the Poultry Products Inspection Act, Pacific Meat Co. v. Otagaki, 47 Haw. 652, 394 P.2d 618 (1964).

Then again, these Hawai'i cases themselves rely heavily on federal authorities (just not exclusively) and, as the HSC once stated, when it comes to federal preemption, "there is no unerring test[.]" Gouveia v. Napili-Kai, Ltd., 65 Haw. 189, 192, 649 P.2d 1119, 1122 (1982). So does it matter if the ICA didn't rely on any Hawai'i cases? Perhaps not. It's just odd.

Wednesday, May 26, 2010

Prosecutor's Comments on Defendant's Presence in Courtroom Cost State the Conviction

AFFIRMED BY HSC.

State v. Walsh (ICA May 26, 2010)

Background. Walsh was charged with assault in the second degree. HRS § 707-711(1)(b). Walsh was arguing with his sister outside Ocean's Bar and Grill in Kihei, Maui at around 1:30 in the morning, when a group of four or five men interrupted. The men yelled at Walsh and started fighting with him. They kicked, pushed, and punched Walsh in the parking lot until he was down on the ground. Walsh crawled away from them and stumbled as he stood up. At his trial, Walsh testified that he swung blindly upon standing up and punched Kapena Kramer in the face. The manager at Oceans, however, testified that Walsh was cool and collected when he punched Kramer. The punch fractured Kramer's jaw in two places and knocked him unconscious.

At closing argument, the prosecutor argued that before he testified, Walsh

benefitted from seeing all these witnesses, heard what they were going to say. What's important about that is not only that, he heard the voir-dire [sic] your questions, which some of you had mentioned, I believe you said, well, you know, if they looked me in the eye. Okay, so he gets up here and looks each one of you in the eye. See how sincere I am? Does that mean you're sincere?

Walsh did not object. The jury found Walsh guilty as charged.

Good Timing on the Confrontation Clause Issue. Walsh argued that the prosecutor's accusation that Walsh was tailoring his testimony at closing violated his rights under the Confrontation Clause in the Hawai'i Constitution. At the time the briefs were filed, the arguments relied on a United States Supreme Court case called Portuondo v. Agard, 529 U.S. 61 (2000), in which Justice Ginsberg dissented. The ICA observed that while the case was pending, the HSC in State v. Mattson, 122 Hawai'i 312, 226 P.3d 482 (2010), adopted Justice Ginsberg's reasoning and held that under the Hawai'i confrontation clause, "generic accusations of tailoring during closing argument that are based only on a defendant's presence throughout the trial burden the defendant's constitutional right to be present at trial and could discourage a defendant from exercising his constitutional right to testify on his own behalf." Id. at 326, 226 P.3d at 496. That, according to the ICA, became the issue.

Generic Comments Standing Alone Violate Confrontation Clause. In Mattson itself, the HSC held that the prosecutor's comments did not arise to a "generic accusation of tailoring" because the prosecutor alluded to evidence at trial that directly contradicted the defendant's testimony. That, according to the ICA, did not happen here. The ICA, in applying the Mattson standard, found that the prosecutor here made only generic accusations and did not refer to any of the evidence adduced at trial. According to the ICA, "the statement addressed only the possible nefarious consequences associated with Walsh exercising his constitutionally [-]protected rights."

Not Objecting is not a Problem . . . at Least here. When defense counsel fails to object to improper remarks by the prosecutor at closing, the court must "determine whether the statements were improper and, if so, whether they constituted plain error that affected [Defendant's] substantial rights." State v. Suan, 121 Hawai'i 169, 174, 214 P.3d 1159, 1164 (App. 2009). The ICA noted that the generic accusations were indeed improper. The ICA also concluded that the evidence against Walsh was not overwhelming and that "the pivotal issue was the credibility of the witnesses." The ICA, thus, recognized plain error and remanded the case for a new trial. See State v. Marsh, 68 Haw. 659, 661, 728 P.2d 1301, 1302 (1986).

Voir dire not the Issue, so Nevermind the Transcript. In a footnote, the ICA rejected the State's claim that this issue of prosecutorial misconduct was not properly before the court. A transcript of the voir dire was not part of the record. That didn't matter, according to the ICA, because the issue pertained to what the prosecutor said at closing, not what happened during voir dire.

Editor's Note. This is the first published opinion authored by Judge Lawrence Reifurth.

Judge Fujise's Concurrence. Judge Fujise divided the prosecutor's comments into two parts. In the first part, the prosecutor said that Walsh "benefited from seeing all these witnesses. Before he got up on that stand, he saw each and every one of the witnesses, heard what they were going to say." That first part, according to Judge Fujise, did not pass the Mattson test because it was not based on any of the evidence supporting the inference that Walsh tailored his testimony. The second part, believed Judge Fujise, made a second point. According to Judge Fujise, the prosecutor commented that during voir dire jurors stated that they find those who make eye contact more believable so it is only natural for Walsh to take that cue and look the jurors in the eye during his testimony. This second part for Judge Fujise did not arise to a violation of Confrontation Clause. It was not a "generic accusation" but was based on Walsh's conduct after he heard voir dire.

A Healthy Intermediate Court. Mattson may have given us the standard--prosecutors cannot make "generic accusations" that the defendant tailored his or her testimony after seeing all of the evidence--but the HSC did not find a violation of the Confrontation Clause. This is the first application of the Mattson test, and it is important to see a different outcome. It suggests that a rigorous application of the test is a fair and durable standard. This case also shows the classic role of an intermediary appellate court in a certorari system, like ours. Leave the announcing of standards to the HSC, but leave application of those standards to the ICA.

Update: The Maui News revealed the prosecutor.

Tuesday, May 25, 2010

Prostitution Requires a Sexual Favor, a fee, and a Nexus Between the fee and the Favor.

State v. Xiao (HSC May 25, 2010)

Background. Xiao was charged with prostitution, i.e. sexual conduct with another for a fee. HRS § 712-1200(1). At her trial, Officer Wagner testified. He was undercover and went to Club Sara Lee, a bar in HNL. There he saw Xiao as he did on previous occasions. He was in a karaoke room with others. Xiao approached him and asked him for a drink. Officer Wagner asked her if there was anything other than the $20.00 drinks. She said, yes, there were $40.00 drinks. Officer Wagner told her to buy herself one and gave her $40. When she came back, she put the drink down and they started dancing. They were dancing slow and close. According to Officer Wagner, Xiao rubbed her pelvis against his erect penis. When they were done dancing they sat together. She rubbed his thigh while they made "small talk." He bought her another $40 drink. She came back and they danced again in the same way, but for a longer period of time. At one point, she "squatted and rubbed her breasts" against Officer Wagner's penis. All in all, there were two dances, and Officer Wagner bought her more than two $40 drinks. The State rested and Xiao's motion to acquit was denied. Xiao remained silent and the district court found her guilty as charged. Xiao appealed and the ICA affirmed.

"Fee" is more than Money. A person engages in prostitution when the person "engages in, or agrees or offers to engage in, sexual conduct with another person for a fee." HRS § 712-1200(1). "Sexual conduct" includes "sexual contact," which means "any touching . . . of sexual or other intimate parts of a person not married to the actor" or the sexual or intimate parts of the actor by the other person. HRS §§ 712-1200(2) and 707-700. According to the HSC, Xiao's dancing clearly constituted "sexual conduct." The only question was whether the dance was "for a fee." The HSC noted that the term "fee" was undefined. Undefined terms allow the court to resort to legal dictionaries or other well-accepted sources in order to ascertain their meaning. State v. Chen, 77 Hawai'i 329, 337, 884 P.2d 392, 400 (App. 1994). According to the HSC, the prostitution statute was similar to the solicitation statute at issue in Muse v. United States, 522 A.2d 888 (D.C. 1987). There, the D.C. appellate court held that the word "fee" means a "payment in return for professional services." Id. at 890. The D.C. court also held that "fee" includes money or any other "material gain." Id. at 890-91. The HSC adopted this definition and held that a "fee" under the prostitution statute constitutes "money or a 'material gain' for sexual conduct." So, concluded the HSC, the forty-dollar drink can be considered a "fee."

No Evidence of the Transaction Proved Fatal to Prostitution Conviction. The prostitution statute "is triggered by a sale of sexual services." State v. Tookes, 67 Haw. 608, 614, 699 P.2d 983, 987 (1985). To "sell" is "to persuade or induce someone to buy[.]" Webster's Encyclopedic Unabridged Dictionary of the English Language (1989) at 1262. According to the HSC, to affirm Xiao's conviction, there had to be "evidence of an understanding on the part of Xiao that the forty-dollar drink (i.e. the 'fee') paid for by Officer Wagner was to buy sexual favors from her." There wasn't. The HSC rejected the State's argument that there was circumstantial evidence of Xiao's understanding that drinks were related to her dancing. True, the drinks were followed by dances, but the HSC noted that she did not ask Officer Wagner to dance after he bought more drinks. Officer Wagner also admitted to buying more than just two drinks. Under these circumstances, the HSC held that there was insufficient evidence to convict Xiao and reversed the district court.

What's so Funny about Peace, Love, and "Understanding"? It appears that the HSC's formulation of the prostitution statute requires proof of a fee, sexual conduct, and an understanding by the defendant that the fee was in exchange for the sexual conduct. In this case, there was no direct evidence of such an understanding, and there seldom is. A person's mental state is almost always proven with circumstantial evidence. See State v. Gomes, 117 Hawai'i 218, 227, 177 P.3d 928, 937 (2008) ("although a defendant's state of mind can rarely be proven by direct evidence, proof by circumstantial evidence and reasonable inferences arising from circumstances surrounding the defendant's conduct is sufficient"). But even here, there was still not enough evidence given the erratic pattern between the drinks and the dances. Drawing that line will be harder in the future. What would be adequate evidence of the defendant's understanding that the "fee" was for the sexual conduct? We can't be sure.

Justice Acoba's Concurrence and Dissent. Justice Acoba took issue with the HSC's interpretation of the word "fee." Justice Acoba called for a strict construction of the ambiguous and undefined word "fee" based on the rule of lenity. State v. Bayly, 118 Hawai'i 1, 15, 185 P.3d 186, 200 (2008); State v. Aiwohi, 109 Hawai'i 115, 129, 123 P.3d 1210, 1224 (2005). Justice Acoba also noted that a statute "must give a person of ordinary intelligence a reasonable opportunity to know what conduct is prohibited so that he or she may choose between lawful and unlawful conduct." State v. Gaylord, 78 Hawai'i 127, 138, 890 P.2d 1167, 1178 (1995). Finally, words must be read based on their common meaning. HRS § 1-14. Relying on these authorities, Justice Acoba believed that a "fee" should be limited to money or property, and nothing more. The majority, wrote Justice Acoba, offered no guidance for the phrase "material gain," which is problematic. "[W]here we are called upon to define an already ambiguous term, we should refrain from interpretations that serve only to produce another layer of ambiguity." For Justice Acoba, a drink is neither money nor property. And so Justice Acoba agreed that the conviction should be reversed--not for insufficient evidence of an understanding--but for no evidence of a "fee."

Wednesday, May 19, 2010

Breach-of-Contract Claims not Covered by Commercial General Liability Insurance Contracts (but we don't know why).

Group Builders, Inc. v. Admiral Ins. Co. (ICA May 19, 2010)

Background. Group Builders installed exterior insulation finishing system and sealant, fireproofing, and other exterior finishing on the hotel tower at the Hilton Hawaiian Village in Waikiki. Group's insurance carrier for commercial general liability was Admiral. After the tower was finished and opened to the public, mold and other structural defects were found. The Hilton sued alleging breach of contract, negligence, breach of warranty, and negligent misrepresentation. Admiral refused to defend or otherwise provide insurance for Group Builders. Group Builders sued Admiral for its refusal. The circuit court dismissed the claims for lack of jurisdiction. Group Builders appealed.

The Issue: Interpreting the Insurance Policy. Under the insurance policy, Admiral must pay for sums that Group Builders "becomes legally obligated to pay as damages because of 'bodily injury' and 'property damage.'" Bodily injury and property damage hinge on an "occurrence," which is defined as "an accident including continuous or repeated exposure to substantially the same general harmful conditions." The material defects formed the basis of the Hilton's complaint against Group Builders. The ICA characterized the issue as whether these material defects and shoddy construction work underlying the breach-of-contract complaints were insured.

Federal Courts Interpreting Hawai'i law Reject Coverage for Breach-of-Contract Claims. The ICA turned to federal courts that have interpreted Hawai'i law. First, there is WDC Venture v. Hartford Accident & Indemnity Co., 938 F. Supp. 671, 677 (D. Haw. 1996), in which the United States District Court held that breach of contract claims were not covered as a matter of public policy. "A breach of contract is an uninsurable activity, as to hold otherwise would invite such misbehavior." Id. at 679. Then there is Burlington Insurance Co. v. Oceanic Design & Construction, Inc., 383 F.3d 940, 948 (9th Cir. 2004), in which the Ninth Circuit rejected the argument that claims of "negligent breaches of contract" were covered by a commercial general liability policy. Finally, there is Burlington Ins. Co. v. United Coatings Manuf. Co., 518 F.Supp. 2d 1241, 1249 (D. Haw. 2007), where the USDC held that "under Hawai'i law, 'contract and contract-based tort claims are not within the scope of [commercial general liability] policies."

ICA Sides with Majority Jurisdictions on the Split in Authority for Coverage of Defective Construction Claims. The ICA also indicated that the courts are split on the issue of whether construction defects are covered under the commercial general liability policies. The line of federal cases interpreting Hawai'i law are in step with the majority of jurisdictions that omit coverage. See Gen. Sec. Indem. Co. v. Mountain States Mut. Cas. Co., 205 P.3d 529, 535 (Colo. Ct. App. 2007). Plaintiffs, according to the ICA, urged the minority position that characterize faulty workmanship as an accident, which is a covered occurrence. Id.

The ICA--without offering an explanation of its own--held that "under Hawai'i law, construction defect claims do not constitute an 'occurrence' under a CGL policy." That meant that breach-of-contract claims and torts based on the breached contract are not covered by the policy.

Federal Interpretations of Hawai'i law aren't Really Binding. The ICA did not explain why it sided with the majority of jurisdictions. Perhaps the reasons are obvious. The federal courts have interpreted Hawai'i law in that manner so it would seem to make sense that the ICA would follow the feds. But even then, the ICA was not required. The ICA has more authority to determine Hawai'i law than any federal court. Technically speaking, the federal courts--when they interpret state law--are just guessing, which is why, when the matter calls for it, they sometimes submit certified questions to the HSC. So implicit in today's holding is the ICA's approval of the reasons given by federal courts.

So what were the ICA's Reasons for Siding with the Majority of Jurisdictions? We just don't know. The ICA did not have to side with federal courts and the majority of jurisdictions. It just did. The ICA did not give its reasons. That is particularly troubling since the minority position has some appeal. Insurance policies "should be interpreted according to their plain, ordinary, and accepted sense in common speech unless it appears from the policy that a different meaning is intended." Dairy Rd. Partners v. Island Ins. Co., 92 Hawai'i 398, 411-12, 992 P.2d 93, 106-07 (2002). Furthermore, policies are construed against the insurer. Allstate Ins. Co. v. Pruett, 118 Hawai'i 174, 179, 186 P.3d 609, 614 (2008). Here, under the policy, an "occurrence" is "an accident." An accident--in its plain and ordinary sense--would include unintentional and shoddy work performance. That interpretation points to the minority of jurisdictions that would include these claims under the policy.

But then again, the counter argument is that an interpretation--even one true to the plain language of the contract--cannot violate public policy. Guajardo v. AIG Hawai'i Ins. Co., Inc., 118 Hawai'i 196, 201-202, 187 P.3d 580, 585-586 (2008) ("insurers have the same rights as individuals to limit their liability and to impose whatever conditions they please on their obligation, provided they are not in contravention of statutory inhibitions or public policy."). And a violation of public policy is one of the reasons why the federal courts refused to include these claims under the commercial general liability clauses. See WDC Venture v. Hartford Accident & Indemnity Co., 938 F. Supp. 671, 677 (D. Haw. 1996). Whatever the ICA's reasons may have been, it simply didn't tell us. We can only speculate.

Tuesday, May 18, 2010

HSC Strikes down Concept of Perpetual EIS

Unite Here! v. City and County of Honolulu (HSC April 8, 2010)

Background. In the 1980s Kuilima proposed to expand its 487-room hotel and 18-hole golf course by constructing three additional hotels, renovating the existing golf course, building another golf course, erecting a condominium unit, a commercial complex, clubhouse, tennis courts, and equestrian center on the North Shore of Oahu. The project called for a new wastewater treatment plant, water wells, reservoirs, water lines, highway improvements, a wildlife preserve, and public and private parks. In 1985, Kuilima prepared and filed an environmental impact statement with the Office of Environmental Quality Center. After public commentary and revisions, the 1985 EIS studied changes and projections going up to the year 2000. No major construction for the project occurred for more than 20 years. In 2005, Kuilima applied at the City and County's Department of Planning and Permitting for a subdivision of 744 acres of the 804-acre property. The DPP took the position that because the initial EIS had no expiration date, any supplemental EIS was unnecessary and approved the application without requiring a supplemental EIS. Various plaintiffs filed lawsuits based on DPP's failure to order a supplemental EIS. The circuit court granted Kuilima's motion for summary judgment on the grounds that there was no evidence of changed circumstances based on the timing of the project. In doing so, the circuit court declined to rule on other motions for summary judgment based on the statute of limitations. The plaintiffs appealed and the ICA affirmed the circuit court. Then-Judge Nakamura dissented.

Administrative Rules Within Scope of Agency's Rulemaking Authority. The HSC took on the threshold issue of whether, in promulgating the rules related to supplemental EISs, the agency--the Environmental Council--exceeded its rulemaking authority. The HSC held that it did not. The State and counties have a duty to conserve and protect "Hawaii's natural beauty and all natural resources" as well as promote the use of these resources in an environmentally responsible way. Haw. Const. Art. XI, section 1. The Hawai'i Environmental Protection Act (HEPA) was enacted to further this constitutional mandate. HRS § 343-1. The legislature then delegated to the Environmental Council the authority to promulgate rules to further the purposes of the HEPA. HRS § 343-6. Nine enumerated categories are authorized by HRS § 343-6, many of which relate to EISs. However, the Environmental Council is "not limited to" these nine categories. Id.

[A]n administrative agency can only wield powers expressly or implicitly granted to it by statute. However, it is well established that an administrative agency's authority includes those implied powers that are reasonably necessary to carry out the powers expressly granted. The reason for implied powers is that, as a practical matter, the legislature cannot foresee all the problems incidental to carrying out the duties and responsibilities of the agency.

Haole v. State, 111 Hawai'i 144, 152, 140 P.3d 377, 385 (2006). The HSC noted that the rule-making statue expressly grants the Environmental Council the power to promulgate rules regarding an EIS. According to the HSC, "to further purpose and intent of the HEPA, the Council . . . clearly contemplated the possibility of changes to the original project that may dictate the need for a further environmental impact assessment, i.e., a SEIS." The HSC, thus, held that the power to require supplemental EISs are within those implied powers that are reasonably necessary to carry out expressly granted powers.

Power to Require a Supplemental EIS Incidental to Rules Regulating the EIS? The Environmental Council is an interesting agency. It has the implicit power to require an additional EIS all together. This power appears to be "incidental to carrying out the duties and responsibilities of the agency." It may be because the Environmental Council is charged with carrying out the lofty purposes of the HEPA and the Hawai'i Constitution. It would then seem that other agencies who may not have such lofty purposes would not enjoy such implicit powers.

Timeliness of the Claims Hinge on the EIS Statute. The HSC also rejected Kuilima's arguments that the plaintiffs' lawsuits were untimely. According to the HSC, the statute of limitations for a regular EIS also applies to supplementals. See HAR §§ 11-200-28 and 11-200-29. Claims related to the agency's determination that an EIS is not required "shall be initiated within thirty days after the public has been informed of such determination pursuant to [HRS §] 343-3." HRS § 343-7(b). HRS § 343-3(b) requires the OEQC to inform the public of notices by the agencies like the DPP that an EIS is not required. To facilitate that, the agency is required to "file such notice with the [OEQC] as early as possible after the determination has been made[.]" HAR § 11-200-11.1. According to the HSC, the DPP failed to file with the OEQC a notice of its determination that a supplemental EIS was not necessary. Its failure to file the notice meant that no statute of limitations was triggered.

The other argument, according to the HSC, was absurd. When the agency determines that a proposed action doers not require an EIS, the complaint must be filed within 120 days after the proposed action is started. HRS § 343-7(a). The HSC held that because it was addressing a supplemental EIS, the action is the 2005 subdivision application, not the proposal for the entire expansion originating in the 1980s. According to the HSC, any other interpretation would be absurd. The complaint was brought well within the 120-day period.

Time is on the Plaintiffs' Side (yes it is). Once an EIS is accepted, no additional one is usually necessary:

[N]o other statement for that proposed action shall be required, to the extent that the action has not changed substantively in size, scope, intensity, use, location, or timing, among other things. If there is any change in any of these characteristics which may have a significant effect, the original statement that was changed shall no longer be valid because an essentially different action would be under consideration and a supplemental statement shall be prepared . . . . As long as there is not a change in a proposed action resulting in individual or cumulative impacts not originally disclosed, the statement associated with that action shall be deemed to comply with this chapter.

HAR § 11-200-26. The HSC held that every EIS is inherently limited to a particular time frame. Here, the 1985 EIS was based on projected data going onto the year 2000. The HSC held that because twenty years passed since the approval of the EIS; the evidence shows that the environmental impacts were examined only through the year 2000; and because the project is not finished, the project has evolved into "essentially a different action" and a supplemental EIS may be required if the change in timing "may have a significant effect." The phrase "may have a significant effect" means "whether the proposed action 'will likely' have a significant effect on the environment." Kapo'o v. Kane, 106 Hawai'i 270, 289, 103 P.3d 939, 958 (2005). According to the HSC, the plaintiffs presented evidence that was not considered when the 1985 EIS was made; particularly evidence showing that the beaches are currently a favorite spot of the endangered Hawaiian Monk Seal and green sea turtles as well as new traffic conditions. Allowing the 1985 EIS to stand in perpetuity would be absurd and would thwart the overarching purposes of the HEPA in HRS § 343-1.

The Agency's Review of the Application wasn't much of a "hard look." The HSC also took up the plaintiffs' argument that the DPP did not adequately review Kuilima's subdivision application. "[T]he court must ensure that the agency has taken a 'hard look' at environmental factors. If the agency has followed the proper procedures, its action will only be set aside if the court finds the action to be 'arbitrary and capricious,' given the known environmental factors." Price v. Obayashi Hawaii Corp., 81 Hawai'i 171, 182 n. 12, 914 P.2d 1364, 1375 n. 12 (1996). In determining that a supplemental EIS was unnecessary, the DPP concluded that the timing or phasing of the project was irrelevant. However, according to the HSC, there was evidence that a change in timing morphed the project into an "essentially different action" and the DPP ignored the most obvious fact that the 1985 EIS was operating on information as current of the mid-1980s. So "[g]iven the unreasonable and seemingly cursory consideration of whether a SEIS was warranted, we hold that the DPP's decision that one was not required was 'arbitrary and capricious.'" The HSC also adopted the standard of review in assessing the sufficiency of an EIS (the "rule of reason" standard) as the standard in assessing the sufficiency of supplemental EISs. See Price, 81 Hawai'i at 182, 914 P.2d at 1375.

Justice Acoba's Concurrence. Justice Acoba agreed that the ICA's decision should be vacated. Justice Acoba also believed that summary judgment should be granted to the plaintiffs and that Kuilima should be required to undergo a supplemental EIS. He wrote separately to point out that any other construction of the rules and statutes would undermine the very purpose of the HEPA. Justice Acoba's concurrence is more or less harmonious with the majority. However, he alone wrote that the DPP "had a duty to make an independent determination as to whether the EIS contained sufficient information" to decide on the 2005 subdivision application. The failure to acquire new information and to passively base its decision on decades-old "previously accepted" data is insufficient. Justice Acoba also agreed with the majority's adoption of the "rule of reason" for supplemental EISs, but wrote separately to point out that this standard is analogous to the abuse-of-discretion standard. See Williams v. Aona, 121 Hawai'i 1, 7, 210 P.3d 501, 507 (2009).

Friday, May 14, 2010

Former Clients and Phantom Jury Instructions

State v. Mark (HSC May 12, 2010)

Background. Mark, with others present, met with Paikai and Piko in a parking lot. There was a dispute over a camera. Paikai had a box which supposedly had the camera. At that point, Mark produced a gun and fired shots above Piko's head. Mark also fired a shot at Paikai and hit her in the leg. Mark later testified that he intended on shooting her in the leg and did not aim for her head or body. About a month later, two plain-clothes officers responded to a tip that Mark was at a Baskin Robbins in Kapolei. Officers Gaspar and Sung were going to arrest Mark pursuant to a warrant. When they got there, Mark was there with his girlfriend and his daughter; he struggled with the officers and Mark fired three shots. Officer Gaspar died from the gunshot wounds. Two indictments came down against Mark. They were consolidated for trial.

Mark raised self-defense and defense of others in both cases. A defense-of-others instruction was given for the Baskin Robbins case. The jury was hung on the murder charge related to Piko and found Mark guilty of attempted assault in the 2d with regard to Paikai. The jury also found Mark guilty of murder in the first for the death of Officer Gaspar, but hung on attempted murder in the 1st with regard to Officer Sung. The hung verdicts were set for retrial. In the middle of the 2d trial, it became apparent to Mark's lawyer--a public defender--that Piko was in custody for a probation revocation and resentencing. At that probation revocation, Piko was represented by a public defender. Fearing a violation of the rules of professional conduct, Mark's attorney moved for a mistrial because she believed that she could not cross-examine Piko, who had been represented at the probation revocation hearing. The motion was denied. The trial resumed. The jury was still hung. At sentencing, the circuit court granted the State's motion for extended sentences with regard murder in the 1st. Mark was sentenced to life in prison without the possibility of parole. The ICA affirmed his conviction.

Without an Objection at Trial, Jury Instructions Reviewed for Plain Error. Mark challenged the defense-of-others instruction given at his trial relating to the police officers. "Erroneous instructions are presumptively harmful and are a ground for reversal unless it affirmatively appears from the record as a whole that the error was not prejudicial." State v. Gomes, 97 Hawai'i 299, 302, 36 P.3d 1269, 1272 (2001). When there is no objection, instructions "will be reviewed only for plain error." State v. Sawyer, 88 Hawai'i 325, 330, 966 P.2d 637, 642 (1998). There was no objection to it at trial. The HSC stated that it reviewed Marks' challenges for plain error.

Defense-of-Others Instruction Fine on one Point . . . Use of force is a defense when the actor (1) "[u]nder the circumstances as the actor believes them to be, the person whom the actor seeks to protect would be justified in using such protective force" and (2) the actor believes the force is "necessary for the protection of the other person." HRS § 703-305(1). The circuit court's instruction was almost identical to the pattern jury instruction, HAWJIC 7.02. Mark contended that the instruction erroneously told the jury that even if the actor mistakenly believed the third party was in danger, it did not matter if the third party could not have reasonably believed that force was necessary to protect himself or herself. The HSC rejected this argument. In another paragraph of the instruction, the circuit court stated that the use of force is justified when viewed "[u]nder the circumstances as the Defendant reasonably believed them to be, the third person would have been justified in using such force[.]"

. . . But Erroneously Mixed Self-Defense with Protection of Others. The other objection came from this instruction, which is again identical to HAWJIC 7.02:

The use of deadly force is not justifiable if the Defendant, with the intent of causing death or serious bodily injury, provoked the use of force against himself in the same encounter, or if the Defendant knows that he can avoid the necessity of using such force with complete safety by retreating.

The HSC noted that this language comes directly from HRS § 703-304(5), which pertains only to self-defense, not defense of others. This is problematic. Under the defense-of-others statute, the defendant is not required to retreat in this way. "When the actor would be obliged under section 703-304 to retreat, . . . the actor is not obliged to do so before using force for the protection of another person[.]" HRS § 703-302(2)(a). There is no explanation in the comments on the pattern jury instructions as to why this mixing of defenses takes place. According to the HSC, this mixing is an erroneous statement on the law and it was error to give it to the jury (even if it was from the pattern instructions).

And it was not Harmless . . . The HSC held that in the first trial--relating to the parking lot-- the erroneous instruction was harmless. There was no evidence, according to the HSC, suggesting that Mark provoked the use of force or that he knew he could have retreated. However, in the 2d trial relating to Baskin Robbins, there was evidence that suggested a jury could have found that Mark provoked the use of force against the officers. Thus, the jury's conclusion would have been, as the HSC put it, "legally infirm."

. . . But it Should not have even been Given the in First Place. The HSC went further, however, and held that the defense-of-others instruction should have never been given in the first place for the Baskin-Robbins trial. According to the HSC, there was no evidence of any force being directed toward Mark's girlfriend or daughter; let alone anything that would justify deadly force. Mark himself testified that he did not notice the officers until they grabbed him and that he thought they were going to take him and kill him--rather than his family. Thus, according to the HSC, even though the instruction was erroneous and even though it was not harmless, it still did not prejudice Mark because it should not have been given.

Preserving the Standard: Defense Instruction Calls only for a Rational Basis. The HSC here took pains to note that the standard for giving an instruction hasn't changed. A "defendant is entitled to an instruction on every defense or theory of defense having any support in the evidence." State v. Cabrera, 90 Hawai'i 359, 370, 978 P.2d 797, 808 (1999). Here, however, the HSC held that there was simply "no rational basis on which the jury could conclude that [Mark] was justified in using force for the protection of others." See State v. Kupihea, 98 Hawai'i 196, 206, 46 P.3d 498, 508 (2002).

But what About Nichols? Mark did not object to the protection-of-others instruction. In State v. Nichols, 111 Hawai'i 327, 335, 141 P.3d 974, 982 (2006), the HSC held that the plain error and harmless error standards merged when it came to jury instructions. The standard is the same: "once instructional error is demonstrated, we will vacate, without regard to whether timely objection was made, if there is a reasonable possibility that the error contributed to the defendant's conviction[.]" Id. That said, it seems strange that HSC stated it reviewed the decision for plain error. Does that put Nichols in question? Probably not. When you step back, it appears that the HSC reviewed the challenged instructions for some kind of "instructional error" (i.e. prejudice). Having found defects in the instruction, but defects that did not contribute to Mark's conviction, it did not reverse. That is consistent with Nichols. So why did it insist on saying that it was reviewing the record for plain error?

A moot Point? The analysis by the HSC here is interesting. It takes up the challenges raised by Mark. First it holds that there was no error with one part of the instruction, then holds there was error with the other part and that error was not harmless beyond a reasonable doubt. However, in the end, it holds that the instruction should not have been given in the first place. If that is the case, then was it necessary to examine the instruction at all? Are the earlier portions, then, dicta?

Concurrent Representation Problem. A conflict of interest arises to ineffective assistance of counsel when the attorney-client relationship gives rise to a conflict and either there is an adverse effect on counsel's performance or no consent was obtained. State v. Richie, 88 Hawai'i 19, 44, 960 P.2d 1227, 1252 (1998). There are different standards depending on the kind of attorney-client relationship. Fragiao v. State, 95 Hawai'i 9, 18, 18 P.3d 871, 880 (2001). Under Hawai'i Rules of Professional Conduct (HRPC) Rule 1.7, clients that are defendants and the prosecution's witness would arise to concurrent representation and are simply impermissible. However, if the witness is a former client, HRPC Rule 1.9 would apply and it would be permitted so long as they are not in "the same or a substantially related matter" and the lawyer does not "use information relating to representation to the disadvantage of the former client[.]" HRPC Rule 1.9.

According to the HSC, Piko was a former client of the public defender's office and that HRPC Rule 1.9 applied. By the time Mark went to his 2d trial, the probation revocation and resentencing of Piko was over and the public defender's office considered the case "closed." Thus, under HRPC Rule 1.9, there was no conflict. However, the HSC did correct the ICA's conclusion that there was no showing of an adverse effect on counsel's performance. According to the HSC, there is no need to show prejudice. Richie departs from federal standards of ineffective assistance of counsel. See Strickland v. Washington, 466 U.S. 668 (1984). When there is no consent given and there is a conflict, no prejudice need be shown.

The Other Issues. The HSC rejected Mark's other contentions relating to trial publicity, a tainted jury, and prosecutorial misconduct.

The Sentencing Issue. Mark and the State agreed the extended term was unconstitutional in light of State v. Maugaotega, 115 Hawai'i 432, 434, 168 P.3d 562, 564 (2007). Mark argued that upon remanded, there should be no extended-term sentence because it was pending appeal when Maugaotega came down. The HSC disagreed. The special legislation from Act 1 of the 2007 legislature allows sentencing courts to empanel a jury to make the necessary findings for extended term sentencing. See also State v. Jess, 117 Hawai'i 381, 413 P.3d 133 (2008). Upon remand, the State is free to file for extended terms and the circuit court may empanel a sentencing jury.