Kaanapali Tours, LLC v. State of Hawaii Department of Land And Natural Resources et al
Filing
40
AMENDED 33 ORDER DENYING 9 PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION. Signed by District JUDGE LESLIE E. KOBAYASHI on March 29, 2012. (bbb, )CERTIFICATE OF SERVICEParticipants registered to receive elec tronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
)
)
Plaintiff,
)
)
vs.
)
)
STATE OF HAWAII DEPARTMENT OF )
LAND AND NATURAL RESOURCES,
)
BOARD OF LAND AND NATURAL
)
RESOURCES, ET AL.,
)
)
Defendants.
)
_____________________________ )
KAANAPALI TOURS, LLC,,
CIVIL 11-00555 LEK-RLP
AMENDED ORDER DENYING PLAINTIFF’S
MOTION FOR PRELIMINARY INJUNCTION
Before the Court is Plaintiff Kaanapali Tours, LLC’s
(“Plaintiff”) Motion for Preliminary Injunction (“Motion”), filed
on September 30, 2011.
Defendants the State of Hawaii Department
of Land And Natural Resources (“DLNR”), the Board of Land and
Natural Resources (“the Board”), William J. Aila, Jr., in his
official capacity as Chairman of the Board, Edward R. Underwood,
in his individual and official capacity, and Nicholas Giaconi, in
his individual and official capacity (all collectively
“Defendants”) filed their memorandum in opposition on
December 13, 2011, and Plaintiff filed its reply on
December 20, 2011.
January 3, 2012.
This matter came on for hearing on
Appearing on behalf of Plaintiff were
Robert Frame, Esq., and Mark Hamilton, Esq., and appearing on
behalf of Defendants was Daniel Morris, Esq.
Janice Nolan and
Amy Sutherland, Plaintiff’s owners, were also present.
After
careful consideration of the Motion, supporting and opposing
memoranda, and the arguments of counsel, Plaintiff’s Motion is
HEREBY DENIED for the reasons set forth below.
BACKGROUND
On September 13, 2011, Plaintiff filed the instant
action against Defendants DLNR, the Board, William J. Aila, Jr.,
in his official capacity as Chairman of the Board (“Defendant
Aila”), Edward R. Underwood, in his individual and official
capacity (“Defendant Underwood”),and Nicholas Giaconi, in his
individual and official capacity (“Defendant Giaconi”).1
The
Complaint alleges, in pertinent part:
8.
On or about December 21, 2009, Defendant
DLNR re-instated boating commercial use permit No.
M-05 to Kaanapali Tours, LLC which at the time was
owned by Kyle Bebee. The vessel on the permit,
ALII NUI, was a catamaran. On or about March 31,
2010, Permit M-05 which belonged to Kaanapali
Tours, LLC, was transferred along with Kaanapali
Tours, LLC to Janice Nolan and Amy Sutherland. At
this time the permit was renewed and the ownership
of Plaintiff changed; both were authorized by DLNR
conditioned on payment of a $15,000 transfer fee,
which was paid. At that time, according to
Defendant DLNR, all permit terms remained as set
forth in the then-current permit, including the
ability of Plaintiff to utilize either a monohull
or multihull vessel and to carry up to 49
passengers.
1
According to the Complaint, Defendant Underwood is the
Administrator of DLNR’s Division of Boating and Ocean Recreation
(“DOBOR”), which regulates boating facilities and the
recreational use of the State’s waters. Defendant Giaconi is the
Maui District Manager of DOBOR. [Complaint at ¶¶ 2, 4-5.]
2
9.
Permit No. M-05 was renewed by Plaintiff
on or about March 31, 2011. Defendant Underwood
approved this renewal and Defendant DLNR accepted
payment of fees for the renewal. At all relevant
times Plaintiff properly paid monthly permit fees
to Defendant DLNR and Defendant DLNR accepted
payment of these monthly permit fees.
10. In reliance on Permit No. M-05,
Plaintiff commissioned a catamaran vessel, QUEEN’S
TREASURE, to be designed, manufactured and
delivered to Plaintiff’s place of business in
Kaanapali, Maui to be operated for commercial
purposes consistent with the terms of Permit No.
M-05. The cost of designing, manufacturing and
delivering this vessel exceeded $1,000,000.00.
Plaintiff took possession of the vessel on or
about May 27, 2011, and the vessel was delivered
to Plaintiff’s place of business on July 12, 2011.
Plaintiff is informed and believes the vessel
complies in all respects with the regulations
issued by DOBOR pertaining to commercial
catamarans.
11. In May 2011, Plaintiff learned Defendant
DLNR had concerns with the validity of Permit No.
M-05 when informed by Defendant Giaconi the Permit
was forged. On or about May 26, 2011 Plaintiff
learned Defendant DLNR intended to cancel Permit
No. M-05. The grounds for cancelling Plaintiff’s
permit were purportedly: (1) a failure to attain
minimum gross receipts, (2) a failure to submit
evidence regarding a failure to attain minimum
gross receipts and (3) a business transfer made
prior to minimum continuous commercial operation
of one year. . . .
[Complaint at pg. 3.]
Further, on or about August 3, 2011,
Plaintiff learned that DLNR/DOBOR was taking the position that
“M”-type permits were for monohulls only and that the use of a
catamaran, including the Queen’s Treasure, was not authorised on
an “M”-type permit.
[Id. at ¶ 12.]
Plaintiff alleges that, in spite of their prior
statements and actions, DLNR, Defendant Underwood, and Defendant
3
Giaconi have wrongfully refused to allow Plaintiff to operate the
Queen’s Treasure on Commercial Use Permit No. M-05 (“the
Permit”).
Plaintiff therefore has allegedly suffered and
continues to suffer substantial damages.
Plaintiff asserts that
it is on the brink of insolvency and that Defendant’s actions
threaten Plaintiff with irreparable harm.
[Id. at ¶¶ 13-14.]
The Complaint alleges the following claims: a claim
seeking preliminary and permanent injunctive relief preventing
Defendants from invalidating the Permit and requiring Defendants
to allow Plaintiff to operate the Queen’s Treasure under the
Permit (“Count I”); denial of due process (“Count II”); a claim
for declaratory relief stating that the Permit is valid and that
the Queen’s Treasure can be added to the inventory of vessels
that Plaintiff can operate under the Permit (“Count III”);
equitable estoppel (“Count IV”); denial of equal protection
(“Count V”); negligence (“Count VI”) and intentional interference
with prospective business advantage (“Count VII”).
In the instant Motion, Plaintiff contends that it meets
all of the requirements for a preliminary injunction.
Plaintiff
argues that it is likely to succeed on the merits of its due
process claim because it has a property interest in the Permit,
which Defendants have denied the use of without an opportunity to
be heard.
Plaintiff also argues that it is likely to prevail on
the merits of its state law claims.
4
In support of its Motion, Plaintiff submits, inter
alia: the Permit, renewed on December 21, 2009 with the Alii Nui
as the vessel of record (“December 2009 Permit”); the Permit,
dated March 31, 2010, with the Big Kahuna as the vessel of record
(“March 2010 Permit”); the Permit, renewed on or around
March 22, 2011 with the QT as the vessel of record (“March 2011
Permit”); a letter dated May 26, 2011 from Defendant Underwood
regarding Defendants’ intent to cancel the Permit based on the
minimum gross receipts and business transfer issues; and various
other correspondence setting forth other reasons for restricting
the Permit, including that the Permit should not have been issued
because the catamaran wait list had been jumped and there were
already ten permitted catamarans for the area.
[Motion, Aff. of
Robert G. Frame (“Frame Aff.”), Exhs. A, F, G, M, O (July 7, 2011
email exchange), P (July 13, 2011 email).]
The May 26, 2011
letter stated that DOBOR would be asking the Board to cancel the
Permit and that Plaintiff would be notified of the date and time
of the Board meeting at which the matter would be discussed.
[Id., Exh. M.]
Plaintiff, however, was never notified of any
Board meeting addressing the matter, and it has not had the
opportunity to contest the restriction of the Permit at either a
Board meeting, hearing, or proceeding before an administrative
law judge.
[Frame Aff. at ¶ 16.]
5
In their memorandum in opposition, Defendants emphasize
that there are only five monohull permits for vessels that engage
in commercial activities where passengers embark and disembark at
Kaanapali beach and only ten permits for catamarans conducting
commercial operations out of Kaanapali beach.
Further,
Plaintiff’s existing Permit is for a specific vessel, a sixteenfoot, inflatable zodiac named the QT.
According to Defendants,
Plaintiff sought to revise the Permit to substitute the Queen’s
Treasure, a sixty-four foot, thirty ton catamaran, for the QT.
Defendants argue that Plaintiff has no protected
property interest in switching the permitted vessel because:
there are four other persons on the Kaanapali catamaran wait list
before Ms. Nolan; [Mem. in Opp., Aff. of Daniel A. Morris
(“Morris Aff.”), Exh. C at 2;] Plaintiff was never told that it
could substitute the much larger Queen’s Treasure for the QT; the
substitution of the vessels identified in permits requires DLNR
authorization; and Plaintiff has not engaged in any commercial
activity for the past two years, in violation of Haw. Rev. Stat.
§ 200-10’s requirement of minimum revenues to maintain boating
permits.
Defendants point out that, dating back to the 1970s,
Kellam Bros., Inc. (“Kellam Bros.”) owned the Permit and used it
to operate monohull vessels until it failed to pay necessary fees
in 2009.
DLNR cancelled the Permit in 2009, but reinstated it in
6
favor of one of Kellam Bros.’ partners, Kyle Bebee, who sold his
interest in the Permit to Plaintiff.
[Morris Aff., Exhs. D & E.]
The reinstated Permit was issued to Plaintiff for the Alii Nui in
December 2009, but it was not signed by the DLNR administrator
with the authority to issue permits.
10.]
[Id., Exh. F, Exh. G at 8-
Instead, it was signed by a low-level planning officer.
Further, Defendants argue that the transfers from Mr. Bebee
ultimately to Plaintiff were completed without the proper notices
to and approval of DLNR.
Defendants note that in March 2010,
Plaintiff sought a revision of the Permit to replace the monohull
vessel, the Big Kahuna, as the permitted vessel, but DOBOR never
executed the revised Permit.
[Id., Exh. H.]
Defendants also
point out that Plaintiff never conducted commercial tours using
either the Alii Nui or the Big Kahuna, and Defendants argue that
it is not clear that Plaintiff ever owned either of those
vessels.
Defendants emphasize that the December 2009 Permit
expired and a new permit was issued in March 2010.
Defendants emphasize that Plaintiff’s Motion seeks a
mandatory injunction, and therefore a heightened showing is
required.
Defendants argue that Plaintiff is not likely to
prevail on the merits because: Plaintiff has no property interest
in substituting vessels on the Permit; its equal protection claim
is not viable; and the state law claims fail because the two
individual capacity defendants have qualified immunity.
7
In
addition, Defendants contend there is no irreparable injury
because Plaintiff has only suffered monetary losses and there is
no indication that Plaintiff cannot operate the Queen’s Treasure
elsewhere.
Finally, the public interest does not favor an
injunction because the public has an interest in the orderly
management of commercial boating in the area, and there have
already been complaints about Plaintiff trying to bypass the
catamaran waiting list.
In its reply, Plaintiff first notes that the memorandum
in opposition does not comply with the Local Rules.
Plaintiff
emphasizes that the Permit specifies the use of a
monohull/multihull vessel and is for the carriage of forty-nine
passengers, which the QT is not capable of.
Plaintiff therefore
contends that in granting the Permit, DLNR contemplated the use
of one or more vessels on the Permit, and the addition of vessels
to the Permit does not require DLNR approval.
Further, Plaintiff
alleges that DLNR knew Plaintiff was having the Queen’s Treasure
built.
Plaintiff also argues that DLNR has allowed changes to
the vessel on the Permit in the past, and the wait list is not
applicable because this was a renewal of a permit and not an
issuance of a new permit.
As to the minimum revenues standard,
Plaintiff notes that there is an alternative under Haw. Admin. R.
§ 13-231-61(a)(2)(D), which is applicable in this case.
As to
the argument that the person who signed the December 2009 Permit
8
did not have authority to do so, Plaintiff argues that the
person’s allegedly unauthorized actions were subsequently
ratified by DLNR.
Plaintiff argues that it is not seeking a mandatory
injunction because it is Defendants that want to change the
status quo by preventing Plaintiff from using the Permit as
Plaintiff is entitled to do.
Plaintiff reiterates that it has a
protectable property right in the Permit, and it argues that
Defendants did not properly address Plaintiff’s due process
argument.
Plaintiff clarifies that it does not seek the
preliminary injunction based on its equal protection claim.
As
to the qualified immunity argument, Plaintiff contends that it
has alleged sufficient facts to show that immunity does not apply
in this case.
Plaintiff emphasizes that irreparable harm is
presumed because Defendants deprived Plaintiff of its
constitutional rights.
Further, Plaintiff’s impending bankruptcy
is more than a financial loss; it involves a loss of hard work,
planning, goodwill, and the opportunity to make a lifelong dream
a reality.
Finally, as to the public interest, Plaintiff
contends that the public has an interest in transparency and
consistency in the permitting process and in preventing the
government from violating constitutional rights.
9
STANDARD
In Winter v. Natural Resources Defense Council, Inc.,
the United States Supreme Court explained that “[a] plaintiff
seeking a preliminary injunction must establish that he is likely
to succeed on the merits, that he is likely to suffer irreparable
harm in the absence of preliminary relief, that the balance of
equities tips in his favor, and that an injunction is in the
public interest.”
555 U.S. 7, 20 (2008) (citations omitted).
The Ninth Circuit has held that its serious questions test, under
which a district could issue a preliminary injunction “where the
likelihood of success is such that serious questions going to the
merits were raised and the balance of hardships tips sharply in
[plaintiff’s] favor[,]” survives Winter as long as courts
applying the test incorporate it into the four-part Winter
analysis.
Alliance for the Wild Rockies v. Cottrell, 632 F.3d
1127, 1131 (9th Cir. 2011) (citation and quotation marks omitted)
(some alterations in original).
“In other words, ‘serious
questions going to the merits’ and a hardship balance that tips
sharply toward the plaintiff can support issuance of an
injunction, assuming the other two elements of the Winter test
are also met.”
Id. at 1132.
10
DISCUSSION
I.
Likelihood of Success on the Merits
The Court first addresses Plaintiff’s likelihood of
success on the merits of its due process claim and state law
claims.2
A.
Due Process Claim
“To succeed on a substantive or procedural due process
claim, the plaintiffs must first establish that they were
deprived of an interest protected by the Due Process Clause.”
Johnson v. Rancho Santiago Cmty. Coll. Dist., 623 F.3d 1011, 1029
(9th Cir. 2010) (citing Shanks v. Dressel, 540 F.3d 1082, 1087
(9th Cir. 2008) (substantive due process); Kildare v. Saenz, 325
F.3d 1078, 1085 (9th Cir. 2003) (procedural due process)).
Protected property interests “are not created by
the Constitution[, but r]ather . . . they are
created and their dimensions are defined by
existing rules or understandings that stem from an
independent source such as state law.” [Bd. of
Regents v.] Roth, 408 U.S. [564,] 577 [(1972)].
State law creates a property interest protected by
the Due Process Clause where it creates a
“legitimate claim of entitlement” to a particular
benefit. Id. A legitimate claim of entitlement
“is determined largely by the language of the
statute and the extent to which the entitlement is
couched in mandatory terms.” Wedges/Ledges of
2
The Court notes that Plaintiff is not asserting a
likelihood of success on the merits of its equal protection
claim. [Reply at 10 (noting that Defendants “focused on
Plaintiff’s equal protection claim which Plaintiff did not raise
in Plaintiff’s Motion because of a belief that discovery will
uncover additional evidence of the acts and/or omissions of
Defendants that were discriminatory.”).]
11
Cal., Inc. v. Phoenix, 24 F.3d 56, 62 (9th Cir.
1994) (quoting Ass’n of Orange Co. Deputy Sheriffs
v. Gates, 716 F.2d 733, 734 (9th Cir. 1983)).
Id. at 1030.
Thus, it is possible to have a constitutionally
protected property interest in a government-issued license or
permit.
Gerhart v. Lake Cnty., Mont., 637 F.3d 1013, 1019 (9th
Cir. 2011) (citing Bd. of Regents of State Colls. v. Roth, 408
U.S. 564, 577, 92 S. Ct. 2701, 33 L. Ed. 2d 548 (1972); Groten v.
California, 251 F.3d 844, 850 (9th Cir. 2001) (holding that
plaintiff had a protected property right to a temporary
appraiser’s license)).
In order to have “a legitimate claim of
entitlement”, however, the person seeking the license or permit
cannot have just “an abstract need or desire” or “a unilateral
expectation of it.”
Roth, 408 U.S. at 577.
The Ninth Circuit
has held that
state law creates a “legitimate claim of
entitlement” when it “imposes significant
limitations on the discretion of the decision
maker.” Braswell [v. Shoreline Fire Dep’t], 622
F.3d [1099,] 1102 [(9th Cir. 2010)] (internal
quotation marks and alterations omitted). For
example, we have held that such an entitlement to
a government permit exists when a state law or
regulation requires that the permit be issued once
certain requirements are satisfied. See, e.g.,
Groten, 251 F.3d at 850 (holding that a protected
property right to a license existed where both
federal and state law entitled the applicant to a
license whenever certain statutory requirements
were met); Bateson v. Geisse, 857 F.2d 1300, 1303
(9th Cir. 1988) (holding that a builder had a
property interest in a building permit where city
12
regulations provided that once an applicant met
certain requirements, a permit must be issued).
Gerhart, 637 F.3d at 1019-20.
First, the Court emphasizes that the alleged property
interest at issue in this case is not Plaintiff’s right to renew
the Permit, but rather Plaintiff’s right to operate the Queen’s
Treasure under the Permit.
The “Primary Vessel” identified on
the March 2011 Permit is the “QT”.
[Morris Aff., Exh. A at 1.]
Plaintiff has not presented any evidence that Defendants have
prevented Plaintiff from operating the QT according to the terms
of the Permit or that Defendants have denied Plaintiff’s request
to renew the Permit to operate the QT.
What Plaintiff alleges is
that it has an entitlement to substitute the Queen’s Treasure for
the QT or add the Queen’s Treasure to the inventory of vessels on
the March 2011 Permit.
As evidence of this entitlement,
Plaintiff relies primarily on the language of the Permit and the
March 12, 2010 letter from DOBOR approving the transfer of the
ownership interest in Plaintiff to Janice Noland and
Amy Sutherland (“3/12/10 Letter”).
[Frame Aff., Exh. D.]
The 3/12/10 Letter states, in pertinent part:
All permit terms shall remain as attached
including but not limited to the ability of
Permittee to utilize either a Monohull or
Multihull vessel, as well as Passenger Carriage
for up to 115. It is understood that the vessel
“Alii Nui” Reg Doc 567359 will remain as the
vessel of record until which time Permittee will
change the vessel of record to the operating
13
vessel, such that this change of vessel shall take
place no later than 6 months after the closing.
[Frame Aff., Exh. D.]
Nothing in the 3/12/10 Letter, however,
indicates that Plaintiff had the right to freely change the
vessel of record on the Permit throughout the duration of the
Permit.
The letter merely evidences that DOBOR acknowledged that
there would be one change in the vessel of record, within six
months after Plaintiff’s transfer of interest.
The 3/12/10
Letter does not constitute evidence that Plaintiff had a
legitimate claim of entitlement to make the Queen’s Treasure the
vessel of record in 2011.
As to the terms of the Permit, the March 2011 Permit
authorizes Plaintiff “to conduct PASSENGER CARRIAGE (49 Pax,
Monohull/Multihull).”
[Morris Aff., Exh. A at 1.]
The terms
include that:
7.
The Permittee agrees to notify the Department
in writing of any changes concerning
ownership, address, vessel inventory or
operator(s) of a vessel(s) within 7 days of
the date of change.
. . . .
9.
The permit fee applies to the commercial
operation, activities, or uses specifically
allowed under this permit. Any operation,
activity, or use not specifically allowed
must be requested and approved separately.
[Id., Exh. G at 2.]
The December 2009 Permit and the March 2010
Permit include the same language.
1-2.]
[Id., Exh. A at 1-2, Exh. F at
The December 2009 Permit lists the Alii Nui as the Primary
Vessel; the March 2010 Permit lists the Big Kahuna as the Primary
14
Vessel; and the March 2011 Permit lists the QT as the Primary
Vessel.
1.]
[Id., Exh. A at 1, Exh. F at 1; Morris Aff., Exh. A at
The Alii Nui is a catamaran.
(“Nolan Decl.”), at ¶ 4.]
[Frame Aff., Exh. R at 1.]
monohull vessel.
[Motion, Decl. of Janice Nolan
The Big Kahuna is also catamaran.
The QT is a fourteen-foot inflatable
[Reply at 3.]
Plaintiff alleges that, in light of the history of the
vessel changes on the Permit and the fact that the two vessels of
record prior to the QT were catamarans, Plaintiff had the right
to substitute/add a catamaran - the Queen’s Treasure - to the
inventory of vessels covered by the Permit.
Further, Plaintiff
submits a July 27, 2011 letter to Defendant Underwood from
Plaintiff’s counsel stating, inter alia, that:
When DLNR issued permit number M-05 for the third
time on March 22, 2011 it did so knowing full well
the designated primary vessel QT [,]an
abbreviation for QUEEN’S TREASURE, a tender
vessel, was designated only until such time as
QUEEN’S TREASURE’s construction was complete and
she was sailed to Maui to be substituted on the
permit and commence commercial operations.
[Frame Aff., Exh. R at 1.]
These facts, however, do not
establish a legitimate claim of entitlement to the
substitution/addition of the Queen’s Treasure, such that the
applicable state laws and regulations required that Defendants
allow the substitution/addition.
There are many irregularities in the Permit and its
history.
These irregularities include, inter alia: DOBOR’s
15
regulations for the Kaanapali area, Haw. Admin. R. Title 13,
Chapter 251, do not provide for a registration permit for a
monohull/multihull vessel; the Permit was cancelled as of March
31, 2009, and the December 2009 Permit was a reinstated permit;
[Morris Aff., Exh. D (DLNR accounting records noting closure of
Kellam Bros. account), Exh. E (letter dated 9/30/09 from Kyle
Bebee noting cancellation of Kellam Bros.’ permit), Exh. F
(Permit No. M-05 dated 12/21/09);] and the March 2010 Permit
contains a blank signature line under the heading “ISSUED”.3
Defendants have also raised questions regarding: whether
Plaintiff actually owned the vessels listed in the December 2009
Permit and the March 2010 Permit; whether Plaintiff met the
requirements to maintain the Permit; and whether the transfer of
ownership of Plaintiff complied with the applicable regulations.
These issues suggest that at one or more points in its history,
3
The last page of the March 2010 Permits states:
ISSUED:
STATE OF HAWAII
DEPARTMENT OF LAND AND NATURAL
RESOURCES, DIVISION OF BOATING AND
OCEAN RECREATION
BY: _________________________________
Edward R. Underwood, Administrator
Division of Boating & Ocean Recreation
DATE: _______________________________
[Frame Aff., Exh. F at 4.]
2010 Permit.
These lines are blank on the March
16
the Permit was issued in error.
Haw. Admin. R. § 13-251-49(a)
states, inter alia:
(a) The department may suspend or revoke the
registration of a vessel, surfboard, sailboard, or
water sports equipment whenever:
(1) The department is satisfied that the
registration was fraudulently or
erroneously issued[.]
Thus, if Defendants determined that the Permit had been issued in
error, DOBOR’s regulations did not require Defendants to continue
the errors by honoring erroneous terms in the Permit.
Instead,
DLNR/DOBOR had the authority to suspend or revoke the Permit.
To
the extent that the terms of the Permit were inconsistent with
the procedures under the applicable law, Plaintiff was on notice
that it could not rely on those inconsistent terms as superceding
the applicable statutes or regulations.
The March 2011 Permit
stated:
16.
The Permittee understands and agrees that
nothing stated herein is intended to limit
the provisions of applicable federal, state,
or county laws, including but not limited to
rules and regulations, and understands and
agrees that all such laws apply to the
Permittee and this permit.
[Morris Aff., Exh. A at 3.]
same language.
The March 2010 Permit includes the
[Frame Aff., Exh. F at 3.]
The Court therefore FINDS that Plaintiff has not shown
that it had a legitimate claim of entitlement to substitute/add
the Queen’s Treasure to the inventory of vessels on the Permit.
17
Thus, Plaintiff has not established a likelihood of success on
the merits of its due process claim.
B.
State Law Claims
Plaintiff also argues that it is likely to succeed on
the merits of its state law claims, equitable estoppel,
negligence, and intentional interference with prospective
business advantage.
Defendants have raised the issue of
qualified immunity, but the Court need not address that issue,
because even if Plaintiff has named the proper Defendants in
these claims, Plaintiff has still failed to establish a
likelihood of success on the merits.
1.
Equitable Estoppel
The Hawai`i Supreme Court has stated that a plaintiff
bringing an equitable estoppel claim “must show that he or she
has detrimentally relied on the representation or conduct of the
person sought to be estopped, and that such reliance was
reasonable.
Such requirement, however, may be dispensed with in
order to prevent manifest injustice.”
Zane v. Liberty Mut. Fire
Ins. Co., 115 Hawai`i 60, 70, 165 P.3d 961, 971 (2007).
In the
present case, Plaintiff assumed that the substitution/addition of
the Queen’s Treasure would be allowed based on the history of the
Permit.
For the reasons stated in the analysis of Plaintiff’s
due process claim, supra Section I.A., nothing in the Permit’s
history or the language of the Permit established that Plaintiff
18
was entitled to freely substitute or add the Queen’s Treasure on
the Permit’s vessel inventory.
not reasonable.
Thus, Plaintiff’s reliance was
The Court therefore FINDS that Plaintiff has not
established a likelihood of success on the merits of its
equitable estoppel claim.
2.
Negligence
The elements of a negligence claim under Hawai`i law
are: “(1) duty; (2) breach of duty; (3) causation; and (4)
damages.”
Cho v. Hawai`i, 115 Hawai`i 373, 379 n.11, 168 P.3d
17, 23 n.11 (2007).
Hawai`i law recognizes a general duty
requiring government employees to carry out their official duties
as prescribed by the applicable laws and rules and in the
exercise of due care.
See, e.g., Upchurch v. State, 51 Haw. 150,
154, 454 P.2d 112, 115 (1969) (“[I]f the acts of negligence
alleged and proven were the failure of employees to carry out
their duties as prescribed by the rules, or their failure to
exercise due care in the performance of their duties, such acts
or omissions would . . . be actionable under the State Tort
Liability Act.”).
Defendants admit that there were
irregularities in the history of the Permit.
Plaintiff argues
that these irregularities caused it to incur damages by
commissioning the Queen’s Treasure, and Defendants are liable for
those damages because they have not permitted Plaintiff to
operate the Queen’s Treasure under the Permit.
19
However, for the
reasons stated in the discussion of Plaintiff’s alleged
protectable property interest, Plaintiff’s reliance on the
irregularities in the permitting process was not reasonable.
Plaintiff has not established a likelihood of proving the
causation element.
The Court therefore FINDS that Plaintiff has
not established a likelihood of success on the merits of its
negligence claim.
3.
Interference with Prospective Business Advantage
Based in part on Restatement (Second) of Torts § 766B,
the Hawai`i Supreme Court has identified the following elements
of the tort of intentional interference with prospective business
advantage:
(1) the existence of a valid business relationship
or a prospective advantage or expectancy
sufficiently definite, specific, and capable of
acceptance in the sense that there is a reasonable
probability of it maturing into a future economic
benefit to the plaintiff; (2) knowledge of the
relationship, advantage, or expectancy by the
defendant; (3) a purposeful intent to interfere
with the relationship, advantage, or expectancy;
(4) legal causation between the act of
interference and the impairment of the
relationship, advantage, or expectancy; and (5)
actual damages.
Hawaii Med. Ass’n v. Hawaii Med. Serv. Ass’n, Inc., 113 Hawai`i
77, 116 148 P.3d 1179, 1218 (2006) (citations omitted).
Plaintiff has not identified a valid business
relationship that it had and that Defendants allegedly interfered
with.
Plaintiff has merely stated that it “has lost an
20
opportunity to contract with another permit holder to handle
their passengers while their vessel is in drydock from October
14, 2011 to November 14, 2011.”
28 (citing Nolan Decl.).]
[Mem. in Supp. of Motion at 27-
Plaintiff alleges that it has a
prospective advantage or expectancy because “[a]s a new vessel,
it has an advantage over older vessels both in terms of
maintenance and cosmetic appeal.”
Decl.).]
[Id. at 21 (citing Nolan
Plaintiff’s assumption is not sufficiently definite,
specific, and capable of acceptance to support an intentional
interference with prospective business advantage claim.
Insofar
as Plaintiff has not shown that it can establish the first
element of its intentional interference with prospective business
advantage claim, the Court FINDS that Plaintiff has not
established a likelihood of success on the merits of Count VII.
II.
Irreparable Harm
Plaintiff relies first on the rule that irreparable
harm is presumed when a plaintiff alleging a civil rights
violation establishes a likelihood of success on the merits.
[Mem. in Supp. of Motion at 27 (citations omitted).]
It is true
that, “[u]nlike monetary injuries, constitutional violations
cannot be adequately remedied through damages and therefore
generally constitute irreparable harm.”
Nelson v. NASA, 530 F.3d
865, 882 (9th Cir. 2008), reversed on other grounds, 131 S. Ct.
746 (2011).
This Court, however, has recognized that, where a
21
plaintiff fails to establish a likelihood of success on the
merits of its civil rights claim, without more, the Court should
not presume irreparable harm.
Am. Promotional Events, Inc.--Nw.
v. City & Cnty. of Honolulu, 796 F. Supp. 2d 1261, 1283 (D.
Hawai`i 2011).
Plaintiff also argues that it is likely to suffer
irreparable harm in the absence of a preliminary injunction
because it has suffered, and continues to suffer, substantial
financial losses and it will soon be forced to go out of
business.
[Mem. in Supp. of Motion at 27 (citing Frame Aff.,
Exh. K (Pltf.’s Balance Sheet); Nolan Decl.).]
Typically,
monetary harm does not constitute irreparable harm.
Los Angeles
Mem’l Coliseum Comm’n v. Nat’l Football League, 634 F.2d 1197,
1202 (9th Cir. 1980).
This is so because “economic damages are
not traditionally considered irreparable because the injury can
later be remedied by a damage award.”
Cal. Pharmacists Ass’n v.
Maxwell–Jolly, 563 F.3d 847, 852 (9th Cir. 2009).
Injuries to
goodwill and business reputation, however, are generally
considered to be intangible and, as a result, irreparable.
See,
e.g., Rent–A–Center, Inc. v. Canyon Television & Appliance
Rental, Inc., 944 F.2d 597, 603 (9th Cir. 1991) (“[W]e have also
recognized that intangible injuries, such as damage to ongoing
recruitment efforts and goodwill, qualify as irreparable harm.”);
MySpace, Inc. v. Wallace, 498 F. Supp. 2d 1293, 1305 (C.D. Cal.
22
2007) (“Harm to business goodwill and reputation is
unquantifiable and considered irreparable.”).
Plaintiff,
however, has not been in active operation and therefore it
arguably does not have goodwill and reputation to lose if it is
forced to go out of business.
Further, Plaintiff has not
established that it would be unable either to operate the Queen’s
Treasure elsewhere or to avoid going out of business by selling
or leasing the Queen’s Treasure.
The Court therefore FINDS that Plaintiff has not
established it is likely to suffer irreparable harm in the
absence of a preliminary injunction.
III. Balance of the Equities
“To determine which way the balance of the hardships
tips, a court must identify the possible harm caused by the
preliminary injunction against the possibility of the harm caused
by not issuing it.”
Univ. of Hawai`i Prof’l Assembly v.
Cayetano, 183 F.3d 1096, 1108 (9th Cir. 1999).
As noted in the
analysis of the irreparable harm factor, the primary hardships
that Plaintiff would suffer if the Court denies the injunction
would be economic losses and potential insolvency.
certainly major and significant harms.
These are
Plaintiff itself
acknowledges that “Defendants have a legitimate interest in
managing and administering DLNR/DOBOR’s permit scheme[.]”
in Supp. of Motion at 28.]
[Mem.
Plaintiff, however, contends that
23
Defendants “will suffer no hardship or incur any substantial
costs if Plaintiff is allowed to operate QUEEN’S TREASURE under
Plaintiff’s Permit No. M-05.”
[Id.]
The Court disagrees.
Defendants have presented evidence that DOBOR has received
complaints about Plaintiff’s potential operation of the Queen’s
Treasure under the Permit because of the problems in the Permit’s
history and because allowing Plaintiff to operate the Queen’s
Treasure would be allowing Ms. Nolan to bypass those ahead of her
on the Kaanapali catamaran waiting list.
[Morris Aff., Exh. J
(letter dated 5/20/11 to Mr. William J. Aila, Jr., Chairperson,
DLNR/DOBOR from Dean H. Robb, Esq.), Exh. K (letter dated 12/2/11
to Mr. Edward R. Underwood from counsel for Kapalua Kai Sailing,
Inc. and its principals).]
Kapalua Kai Sailing, Inc., and its
principals, have a Kaanapali catamaran permit and are second in
line on the Kaanapali catamaran waiting list.
1.]
[Id., Exh. K at
They accuse DOBOR of holding “lawful permit holders to one
standard of conduct” and Plaintiff to another, and they state
that they “are committed and prepared to take legal as (sic)
necessary to ensure their rights are protected and DOBOR fulfills
its duty to the general public to implement, execute and enforce
the relevant administrative rules in a fair and impartial
manner.”
[Id. at 3-4.]
Thus, allowing Plaintiff to operate the
Queen’s Treasure under the Permit may subject Defendants to
further litigation by other persons and entities who claim a
24
superior entitlement to a Kaanapali catamaran permit than
Plaintiff’s as well as undermine the integrity and purpose of the
permit waiting list.
The Court therefore FINDS that the balance of the
equities is, at best, neutral.
It weighs neither in favor nor
against the issuance of a preliminary injunction.
IV.
Public Interest
This Court has recognized the following principles
relevant to the public interest inquiry:
The plaintiffs bear the initial burden
of showing that the injunction is in the
public interest. See Winter [v. Natural
Resources Defense Council, Inc.], [555 U.S.
7,] 129 S. Ct. [365,] 378 [(2008)]. However,
the district court need not consider public
consequences that are “highly speculative.”
In other words, the court should weigh the
public interest in light of the likely
consequences of the injunction. Such
consequences must not be too remote,
insubstantial, or speculative and must be
supported by evidence.
Finally, the district court should give
due weight to the serious consideration of
the public interest in this case that has
already been undertaken by the responsible
state officials . . . who unanimously passed
the rules that are the subject of this
appeal. See Golden Gate Rest. Ass’n [v. City
and County of San Francisco], 512 F.3d [1112]
at 1127 [(9th Cir. 2008)] (“The public
interest may be declared in the form of a
statute.” (internal quotation marks
omitted)); see also Burford v. Sun Oil Co.,
319 U.S. 315, 318, 63 S. Ct. 1098, 87 L. Ed.
1424 (1943) (“[I]t is in the public interest
that federal courts of equity should exercise
their discretionary power with proper regard
for the rightful independence of state
25
governments in carrying out their domestic
policy.” (internal quotation marks omitted)).
Stormans, Inc. v. Selecky, 586 F.3d 1109, 1139–40
(9th Cir. 2009) (some citations and quotation
marks omitted). The public interest inquiry
primarily addresses the impact on non-parties
rather than parties.
Am. Promotional Events, 796 F. Supp. 2d at 1284-85 (alterations
in Am. Promotional Events).
In the present case, Plaintiff argues that an
injunction is in the public interest because: Plaintiff’s
receipts from the operation of the Queen’s Treasure will generate
fee and tax revenue for the State; allowing Plaintiff to operate
the Queen’s Treasure will mitigate its damages and decrease the
damages Plaintiff may recover from Defendants; and allowing
Plaintiff to operate the Queen’s Treasure will foster “a healthy
business climate in a challenging economy and encourage public
investment in similar opportunities.”
at 29.]
[Mem. in Supp. of Motion
Plaintiff also emphasizes that the public has an
interest in ensuring that government officials do not violate the
due process rights of Plaintiff and of other members of the
public involved in the boating industry.
[Id. at 30.]
Plaintiff’s potential revenue and the reduction of
Defendants’ potential liability are effects on the parties, which
is not the Court’s primary concern in the public interest
inquiry.
While it is true that the public does have an interest
in ensuring that a state government does not violate its
26
citizens’ constitutional rights, the same could be said in every
case alleging constitutional violations against state defendants,
which is inconsistent with the fact that a preliminary injunction
is considered an extraordinary remedy.
24.
See Winter, 555 U.S. at
Moreover, this Court declines to consider that aspect of the
public interest because this Court has found that Plaintiff has
not established a likelihood of success on the merits of its due
process claim.
Finally, the Court disagrees with Plaintiff’s
argument that allowing Plaintiff to operate the Queen’s Treasure
under the Permit would promote the operation of, and investment
in, local businesses in general.
The parties recognize that
there were irregularities in the history of the Permit.
Plaintiff contends that, under constitutional theories and state
law theories, those irregularities entitle Plaintiff to operate
the Queen’s Treasure under the Permit.
The facts of this case
are unique and granting an injunction is not likely to encourage
business development and investment in general.
The Court therefore FINDS that Plaintiff has not
established that the issuance of a preliminary injunction would
be in the public interest.
V.
Summary of Factors
Having considered all of the relevant factors, this
Court CONCLUDES that, under either the Winter test alone or the
27
serious questions analysis within the Winter test, Plaintiff has
not established that it is entitled to a preliminary injunction.
CONCLUSION
On the basis of the foregoing, Plaintiff’s Motion for
Preliminary Injunction, filed September 30, 2011, is HEREBY
DENIED.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, March 29, 2012.
/S/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge
KAANAPALI TOURS, LLC V. STATE OF HAWAI`I DEPARTMENT OF LAND &
NATURAL RESOURCES, ET AL; CIVIL NO. 11-00555 LEK-RLP; AMENDED
ORDER DENYING PLAINTIFF’S MOTION FOR PRELIMINARY INJUNCTION
28
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?