Kauai Beach Villas-Phase Ii, LLC v. Cnty. of Kauai

955 F.Supp.2d 1156

KAUAI BEACH VILLAS–PHASE II, LLC, Plaintiff,

v.COUNTY OF KAUAI, Kauai County Council, Kauai Planning Department and Doe Defendants 1–20, Defendants.

Civil No. 12–00483 LEK–RLP.

United States District Court, D. Hawai‘i.

June 28, 2013.

Gregory K. Markham, Kyle Jack Takuro Kagihara, Chee Markham & Feldman, Honolulu, HI, for Plaintiff.

Ian Jung, Lihue, HI, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT ON COUNTS II AND III OF THE COMPLAINT AND GRANTING IN PART AND DENYING IN PART DEFENDANTS' COUNTER MOTION FOR SUMMARY JUDGMENT ON COUNTS II AND III

LESLIE E. KOBAYASHI, District Judge.

On March 1, 2013, Plaintiff Kauai Beach Villas—Phase II, LLC (“KBV”) filed the instant Motion for Summary Judgment on Counts II and III of the Complaint (“KBV Motion”) and its Concise Statement of Material Facts in support of the KBV Motion (“KBV CSOF”). [Dkt. nos. 15, 16.] On May 6, 2013, Defendants County of Kaua'i (“the County”), Kaua'i County Council (“the Council”), and Kaua'i Planning Department (“the Planning Department”, all collectively “Defendants”) filed their Counter Motion for Summary Judgment on Counts II and III (“Counter Motion”) and their Concise Statement of Facts (“Defendants' CSOF”). [Dkt. nos. 18, 19.] KBV filed a joint reply in support of the KBV Motion and opposition to the Counter Motion (“Reply”) on May 14, 2013. [Dkt. no. 23.] Defendants filed a reply in support of the Counter Motion (“Counter Reply”) on May 21, 2013. [Dkt. no. 24.] These matters came on for hearing on May 28, 2013. Appearing on behalf of KBV was Gregory Markham, Esq., and appearing on behalf of Defendants was Ian Jung, Esq. After careful consideration of the motions, supporting and opposing memoranda, and the arguments of counsel, the KBV Motion and Defendants' Counter Motion are HEREBY GRANTED IN PART AND DENIED IN PART for the reasons set forth below.

BACKGROUND

KBV filed the instant action on August 12, 2012 to challenge: 1) a 2008 amendment to the County of Kaua'i Charter (“the Charter” or “the County Charter”) that was codified as Section 3.19; and 2) a 2011 ordinance adopted to implement Section 3.19 (“Ordinance No. 912”). Section 3.19 provides: ¹

Implementation of the General Plan

A. The power to process and to issue any zoning, use, subdivision, or variance permit for more than one transient accommodation unit shall be vested in and exercisable exclusively by the council. As used in this Section, “transient accommodation unit” shall mean an accommodation unit or a portion thereof in a hotel, timeshare facility, resort condominium, fractional ownership facility, vacation rental unit or other similarly-used dwelling that is rented or used by one or more persons for whom such accommodation unit is not the person's primary residence under the Internal Revenue Code.

B. Any applicant seeking the issuance of a zoning, use, subdivision or variance permit for more than one accommodation unit shall certify to the planning department whether any use of the units as a transient accommodation unit is projected by the applicant. Prior to granting any such permit for a transient accommodation unit, the council shall conduct a public hearing and make a finding that granting such permit would be consistent with the planning growth range of the general plan and in the best interest of the county and its people. Approval of any such application shall require a favorable vote of two thirds (2/3) of the entire membership of the council. Appeals of any decision by the council relating to such permits must be instituted in the circuit court within thirty (30) days after entrance of the final decision of the council.

C. The council may by ordinance authorize the planning commission to process and issue such permits, or certain of them, on terms and conditions as the council may deem advisable, only upon the council's enactment of a rate of growth ordinance that limits the rate of increase in the number of transient accommodation units in the county to no greater than one-and-one-half percent (1.5%) per annum on a multi-year average basis, or such growth rate that is within the planning growth range of a future general plan adopted pursuant to Section 14.08.

D. The council shall adopt such ordinances, laws, rules and regulations as are necessary to carry out the terms and intent of this amendment to the Charter.

E. If any provision of this amendment shall be held by a final order of a court of competent jurisdiction to be invalid, all of the other terms of the amendment shall remain in full force and effect. (Amended 2008)

(Emphases added.)

KBV owns real property on the Hanama'ulu coast on the island of Kaua'i (“the Property”). The Kaua'i General Plan (“the General Plan”) designates the Property for resort development, and this designation has been consistent since 1977. A portion of the Property is located in an urban land use district. [KBV CSOF Nos. 5–7.] Appendix C to the General Plan states that the Property is planned for resort use and is proposed for resort zoning with an allowable density of 680 multi-family units or 1,360 hotel units. [KBV CSOF No. 8.]

In 2008, a group called the Coalition for Responsible Government (“CRG”) drafted and circulated a Petition proposing to amend the Charter to designate various uses of land under the term “transient accommodation unit” (“TAU”) and to establish various requirements for applicants seeking permits for more than one TAU (“the Proposed Amendment”).² The Proposed Amendment was presented to the voters on the 2008 general election ballot, and the County also made the “2008 Charter Amendment Proposals: Ballot Questions, Proposed Text Amendments, & Pros/Cons” (“Election Guide”) available to voters. ³ [KBV CSOF Nos. 9–10, 12.] The Proposed Amendment was adopted in the 2008 general election and codified as Section 3.19. Section 3.19 is substantively identical to the amendment suggested in CRG's Petition. [KBV CSOF Nos. 14, 15; Defs.' CSOF, pg. 2, No. 14.]

Subsequently, the Council adopted Ordinance No. 912, the purpose of which was “to authorize the Planning Commission of the County of Kaua'i to process and issue zoning permits, use permits, subdivision approvals, and various permits for” TAUs pursuant to Section 3.19. [Markham Decl., Exh. J (Ordinance No. 912).] Ordinance No. 912 also establishes the growth rate. [KBV CSOF No. 19.]

In its Complaint, KBV states that it and its predecessors have spent substantial sums to “develop visitor accommodation units on the [P]roperty as part of a larger resort project.” [Complaint at ¶ 3.] KBV alleges that the purpose of Section 3.19—to enforce a “planning growth range” for visitor accommodation units—is inconsistent with the General Plan, which never intended to limit the number of visitor accommodation units. According to KBV, the Planning Department has acknowledged this inconsistency. The County, however, failed to explain this inconsistency to the public when it placed the Proposed Amendment on the ballot, and the County inaccurately described the amendment as implementing the General Plan. [ Id. at ¶¶ 4–6, 8.] KBV argues that Section 3.19 has a disproportionate effect on visitors to Kaua'i and on part-time residents of Kaua'i because it will substantially reduce the number of units available to them and make the available units substantially more expensive. [ Id. at ¶ 10.]

Ordinance No. 912 creates various exemptions to the TAU limit, but KBV's Property is not exempt. Between January 1, 2012 and December 31, 2016, the County may only approve 252 new, non-exempt TAUs. [ Id. at ¶¶ 13–15.] KBV argues that, even if it constructed all 252 new units, that number “is substantially less than the number of visitor accommodation units planned for the [P]roperty in the general plan and would be insufficient to support the development of the [P]roperty as part of the larger resort project.” [ Id. at ¶ 16.] Thus, KBV contends that Section 3.19 and Ordinance No. 912 prevent KBV from developing its Property as contemplated by the General Plan, and this has a substantial negative impact on the value and use of the Property. [ Id. at ¶¶ 17–18, 20.]

KBV argues that Defendants have not advanced a legitimate state interest in these actions, and therefore Section 3.19 and Ordinance No. 912 violate the Fourteenth Amendment. [ Id. at ¶¶ 20–21.] The Complaint also alleges that Section 3.19 and Ordinance No. 912 violate state law because the County did not follow the proper procedures in enacting them and because the County failed to properly describe the Proposed Amendment in the voter education materials. [ Id. at ¶¶ 22–23.]

The Complaint states that, on April 26, 2012, KBV applied to the Planning Department Director for a 400–unit exemption on the Property from the TAU cap and certification process. The Director denied the application, and KBV has appealed. KBV argues that the appeal is futile and that this Court should immediately decide KBV's facial challenges to Section 3.19 and Ordinance No. 912 without regard to the outcome of the appeal. [ Id. at ¶¶ 100–03.] The Complaint alleges that Section 3.19 and Ordinance No. 912 have injured KBV because they interfere with its reasonable investment expectations for the Property. KBV seeks declaratory relief that will end the controversy giving rise to this case. [ Id. at ¶¶ 105–13.]

The Complaint alleges the following claims: a 42 U.S.C. § 1983 claim for denial of substantive due process (“Count I”); violation of Haw.Rev.Stat. § 46–4, the Zoning Enabling Act (“Count II”); and violation of Charter § 22.07.D. (“Count III”). The Complaint seeks the following relief: a declaratory judgment that Section 3.19 and Ordinance No. 912 are unconstitutional and invalid on their face; an injunction against the enforcement of Section 3.19 and Ordinance No. 912; fees and costs; and any other appropriate relief.

I. KBV Motion

The KBV Motion seeks summary judgment on...