The Tale of Two Towers: Damon Key Wins Important Hawaii Supreme Court Land Use Case

By Loren A. Seehase
las@hawaiilawyer.com

It was the best of times, it was the worst of times,” is how Damon Key attorney
Greg Kugle started off his winning oral argument before the Hawaii Supreme Court.
While the quote was from Charles Dickens’ A Tale of Two Cities, this case is the
tale of two towers. Two new Ritz Carlton towers on Kuhio Avenue in Waikiki to be
precise.

The two towers of the Ritz Carlton Residences have been the subject of several lawsuits since conception, for a number of reasons. Foremost being the improper segmentation of a two-tower project into two phases. The developer presented one tower as if it was the total project, but then once approved the developer came back and sought approval for a second tower. Both towers were each presented as hotels, but the ownership of the individual units was subject to a condominium property regime.

Waikiki is designated as a special district subject to heightened permitting requirements, and either a major or minor Waikiki Special District permit (WSD) is required prior to beginning construction. Under the Land Use Ordinances (LUO), how a building is used determines certain requirements, one of which is off-street parking accommodations. For example, if a building with dwelling units is used for transient accommodations, such as a hotel, then the developer is only required to provide one parking spot for every four dwelling units. But, if that same building uses the dwelling units for residential use then the developer is required to provide one parking spot for every single dwelling unit. A determination of how a building is going to be used prior to construction is imperative for the Department of Planning and Permitting (DPP) to ensure adequate off-street parking is provided, especially in the already scarce parking of Waikiki.

This tale began in 2013 when the developer was granted a WSD permit for the first tower, at 2121 Kuhio Avenue (First WSD). The First WSD issued by the DPP included a number of conditions. One of which was placing a restrictive covenant on the title to all the units requiring each unit be used for transient accommodations, and if the owner ever decided to convert the use to residential then they would have to notify the DPP and provide proof of a dedicated off-street parking spot.

During the processing of the First WSD, Unite Here! Local 5, Hawaii’s hotel workers union, (Local 5) actively participated in the permit’s public hearings, provided the DPP comments, and advocated for a restrictive covenant condition. About a year later, the developer submitted, and the DPP approved, a WSD permit for a second tower at 2139 Kuhio Avenue, directly adjacent, and connected, to the First WSD (Second WSD). The Second WSD was being built by the same developer, managed by the same company, physically joined together, and would operate as one building. But, inexplicably the Second WSD did not contain the same restrictive covenant condition as the First WSD.

Well unbeknownst to Local 5, and the public, the developer behind closed doors had negotiated with the DPP to secretly remove the restrictive covenant condition from the First WSD. Here is where the case began.

Faced with two WSD permits for the same building, but with very different conditions, Local 5, represented by Damon Key, contested the Second WSD, arguing that it was textbook arbitrary and capricious for the DPP to treat two nearly identical permits differently. The appeal was filed with the Zoning Board of Appeals (ZBA). It was during the ZBA appeal that Local 5 first learned of the developer’s secret deal with the DPP to remove the restrictive covenant condition on the First WSD. There the developer argued, and the ZBA agreed, that it was not arbitrary and capricious because the two WSD’s were not actually different since the First WSD no longer had a restrictive covenant condition. Local 5 then argued that the removal of the condition from the First WSD was improper because the developer failed to go through the major or minor WSD modification process as required under the LUO. The ZBA disregarded that argument on the grounds that the First WSD was not the subject of the appeal, so it lacked jurisdiction to render an opinion on the First WSD.

Local 5 appealed to the Circuit Court arguing that the DPP’s secret modification of the First WSD was improper without adherence to the major or minor permit modification process. And, that the failure to notify both Local 5 and the public about the modification of the First WSD was a constitutional violation of Local 5’s due process rights, and the Circuit Court has jurisdiction to decide constitutional questions. The Circuit Court disagreed.

Local 5 appealed the decision to the Intermediate Court of Appeals. Then through a procedural mechanism Local 5 submitted an application for transfer of the case to the Hawaii Supreme Court, which the Court granted.

In December of 2019, after six years of litigation and with both towers fully constructed, Damon Key’s litigation and appellate team – Greg Kugle, Loren Seehase, and Joanna Zeigler – secured another Hawaii Supreme Court victory. The Hawaii Supreme Court in a unanimous published decision agreed with Local 5. Unite Here! Local 5 v. Dep’t of Planning & Permitting/Zoning Bd. of Appeals, 145 Haw. 453, 454 P.3d 394, (Haw. 2019). When the DPP secretly removed the conditions from the First WSD without notice to Local 5, it violated Local 5’s due process right.

As such, the State’s highest court ordered the case to be remanded to the ZBA to allow Local 5 to challenge the removal of the conditions on the First WSD. The Court vacated the ZBA’s decision to approve the Second WSD and remanded back to the ZBA to determine whether the DPP’s decision to approve the Second WSD without the restrictive covenant condition was an abuse of discretion.

For more information, contact Greg at gwk@hawaiilawyer.com or Loren at las@hawaiilawyer.com.

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