Memo In Support of Motion to Intervene

NO. 20281
IN THE SUPREME COURT OF THE STATE OF HAWAII

MEMORANDUM IN SUPPORT

OF MOTION TO INTERVENE

This memorandum will show that the movants are entitled to intervene as a matter of right and that the court may and should allow them to do so.

Introduction.

On February 23, 2000, the United States Supreme Court held in Rice v. Cayetano, ___ U.S. ___, 120 S.Ct. 1044 (Feb. 23, 2000) that the State of Hawai'i law (Haw. Const. Art. XII, sec. 5 and Haw. Rev. Stat. secs. 13D-1 and 13D-3(b)(1)) restricting the franchise in elections for Office of Hawaiian Affairs (OHA) trustees to "Hawaiians" as defined in Haw. Rev. Stat. 10-2 violated the Fifteenth Amendment by denying plaintiff Rice the right to vote on grounds of race. In so deciding, the court expressly held that the definition of "Hawaiian" in OHA's organic statute was "racial", and its discussion of the point shows that the definition of "native Hawaiian" is racial as well. Rice v. Cayetano, 120 S.Ct. at 1055-57. The Court further made clear that "OHA is a state agency, established by the State Constitution, responsible for the administration of state laws and obligations. . . . Foremost among the obligations entrusted to this agency is the administration of a share of the revenues and proceeds from public lands, granted to Hawaii to 'be held by said State as a public trust.'" Id. at 1059.

While the court in Rice reserved the issue of the constitutionality of OHA's administrative structure and trusts, its discussion of the Fifteenth Amendment issues leads unavoidably to the conclusion that the constitutionality of OHA, its purposes and its actions as well as the status of the trustees through whom it appears before this court must be tested for equal protection compliance under the standard of strict scrutiny as expounded in Adarand Constructors v. Federico Pena, 515 U. S. 200 (1995). This issue was, perhaps understandably, not addressed by the trial court in the instant case, but the Rice decision bears directly on the constitutionality and legitimacy of the plaintiff OHA and its entitlement to receive and expend State funds and it should not be ignored. To do so would not only promote future litigation but would also increase and extend the damages sustained by movants as taxpayers and beneficiaries of the ceded lands trust.

Movants' interests cannot fairly be represented by the State Attorney General. That office represented OHA throughout the proceedings on the Rice case in the Federal courts. That representation continues today; the case is in the process of being returned to the U. S. District for the District of Hawai'i for further proceedings, which presumably will include a decision on Rice's prayer for an order declaring the most recent OHA trustees' election invalid. Thus the Attorney General faces an unavoidable conflict of interest should it attempt to defend OHA and its trustees in the U. S. District Court and at the same time seek to challenge OHA's constitutionality or the authority of its trustees in this court.

1. Rule 24(a) H.R.Civ.P. provides,

(a) Intervention of Right. Upon timely application anyone shall be permitted to intervene in an action: (1) when a statute confers an unconditional right to intervene; or (2) when the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest, unless the applicant's interest is adequately represented by existing parties.

2. Movants' "interest relating to the property or transaction which is the subject matter of the action."

In 1993 the State of Hawaii ("State") paid the Office of Hawaiian Affairs ("OHA") approximately $130 million purportedly to settle OHA's claimed share of ceded lands revenues for the years 1980 - 1991. This payment was funded by the issuance of State bonds. Since then, movants, as taxpayers have had imposed on them, and have paid, an additional tax burden each year to repay those bonds. Movants' additional tax burden will continue for 20 or more years into the future until the bonds are fully repaid. In addition to the 1993 bond repayments, movants have also been subjected to additional tax burdens to support the additional amounts appropriated to pay OHA for later years both as the prorata share of the ceded lands income and as general fund appropriations.

According to OHA's financial report as of January 31, 2000, it held cash and investments of over $365 million. (Exhibit I to the Declaration of H. William Burgess). Those accounts are made up substantially or entirely of moneys paid to OHA by the State plus earnings and appreciation on the investment of those State moneys. Movants' taxes paid and are continuing to pay interest and or principal on the money the State borrowed to make the payments to OHA which are the source of that fund.

Movants face the threat that, either by settlement or final judgment in this case, their tax burden to support the payments to OHA will be significantly escalated or, if public lands are transferred to OHA, that their (movants') tax burden will be increased to make up for the State's loss of income from and the value of the lands given to OHA.

3. Disposition of this action may as a practical matter impair or impede movants' ability to protect that interest.

If this action is resolved without adjudicating the federal constitutional question, either by settlement or final judgment, in any way that requires or allows further payments of money or transfers of public lands to OHA, movants' ability to protect themselves and their heirs from the resulting additional State taxes, will as a practical matter be impaired or impeded.

Movants' efforts to obtain relief from the executive and legislative branches have been for naught. They do not even appear to recognize that a federal constitutional question exists, much less have the will to do anything about it. (See Exhibits A, B, C, D, E, F, G, H and J of the Declaration of H. William Burgess in Support.)

If denied intervention here, movants' only available recourse will then be to file a new action at the trial court level, seeking injunctive relief, and pursue the long and expensive process of pleadings, temporary restraining order, preliminary injunction, discovery, motions, trial and appeal before the constitutional question can again be presented to this court or a federal court for adjudication. That would pose a substantial hardship on movants' time, energy and financial resources.

4. Movants' interest is not being adequately represented by existing parties.

The State Attorney General's office has a conflict of interest and is disqualified from representing the interests of movants or even the State in this case because that office represents the interests of the adverse party, OHA, in Rice v. Cayetano.

Under Rule 1.7 (a) and (b) of the Hawai'i Rules of Professional Conduct a lawyer shall not represent a client "if the representation of that client will be directly adverse to another client" or "if the representation of that client may be materially limited by the lawyer's responsibilities to another client".

The comment to Rule 1.7 points out that a client may consent to representation notwithstanding a conflict, "However ... when a disinterested lawyer would conclude that the client should not agree to the representation under the circumstances, the lawyer involved cannot properly ask for such agreement or provide representation on the basis of the client's consent."

Here, a disinterested lawyer would unquestionably conclude that any party being sued by OHA should not agree to be represented by the lawyer who represents the interests of OHA in another action. That is particularly so here where the position advocated by the A.G. on behalf of OHA could cost the State and its taxpayers (including the moving parties)hundreds of millions whereas a competent lawyer advocating that OHA is unconstitutional might prevent any further liability to OHA and even achieve recovery of hundreds of millions from OHA.

Moreover, the State of Hawaii is the trustee of the public land trust which was established in 1898 "solely for the benefit of the inhabitants of the Hawaiian Islands for educational and other public purposes". Annexation Act, 30 Stat. 750 (1898). Such a special trust was recognized in 1899 by the Attorney General of the United States in 22 Op. Atty. Gen. 574 (1899); also by the Hawaii Supreme Court, "Excepting lands set aside for federal purposes, the equitable ownership of the subject parcel and other public land in Hawaii has always been in its people. Upon admission, trusteeship to such lands was transferred to the State, and the subject land has remained in the public trust since that time." State v. Zimring, 58 Hawaii 106, 124, 125 (1977); also by the State Attorney General, Opinion July 7, 1995 to Governor Benjamin J. Cayetano from Margery S. Bronster, Attorney General, "Section 5 [Admission Act] essentially continues the trust which was first established by the Newlands Resolution in 1898, and continued by the Organic Act in 1900."

In 1898 about 30% of the inhabitants of Hawaii were of Hawaiian ancestry and the remaining 70% were of other ancestry. Robert C. Schmitt, Demographic Statistics of Hawaii: 1778-1965.

Thus, the State is trustee for all the inhabitants of Hawaii, not just those of Hawaiian ancestry.

As trustee of the public land trust, the State owes high fiduciary duties to the trust beneficiaries. In Pele Defense Fund v. Paty, 73 Haw. 578, 603, 837 P.2d 1247, 1263 (1992) this court described common law trust principles applicable when a state holds land in trust, citing its earlier decisions in Kapiolani Park Preservation Society v. City & County of Honolulu, 69 Haw. 569, 751 P.2d 1022 (1988) and Ahuna v.Department of Hawaiian Home Lands, 64 Haw. 327, 640 P.2d 1161 (1982).

In Pele Defense Fund, this court said, at 73 Haw. 604, "Although the case before us involves the ceded lands trust, rather than a charitable trust, the parallels are unmistakable." referring in the footnote to Ahuna's holding that "the conduct of the government as trustee is measured by the same strict standards applicable to private trustees" and that "a trustee must deal impartially when there is more than one beneficiary." and concluding the footnote on page 605, "The State owes this same high standard to the beneficiaries of the ceded lands trust and, as stated in the text, the beneficiaries of this trust should not be left powerless to prevent the State from allegedly neglecting its obligations."

The fiduciary duty of a trustee includes the duty to the beneficiaries to defend actions which may result in loss to the trust estate (Restatement of Trusts, Second §178) and, as noted in Ahuna, when there are two or more beneficiaries, the duty to deal impartially with them (Restatement of Trusts, Second §183). The duty of impartiality is described in 76 AmJur2d, Trusts §389 Loyalty to plural beneficiaries and plural trusts, as follows:

When there is more than one beneficiary under a trust, the trustee's duty is to deal impartially with the several beneficiaries in administering that trust, doing his or her best for the entire trust as a whole. In other words, it is the duty of the trustee to treat all beneficiaries equally

In this case, OHA, an agency representing a small group of the beneficiaries (an estimated 20,000 to 50,000 inhabitants, less than 5% of the population, distinguished from other beneficiaries only by racial criteria, i.e., because they have "not less than one-half part of the blood of the races inhabiting the Hawaiian Islands previous to 1778") claims that it is entitled, on behalf of that small group, to a share of the trust income greater than the proportionate share the members of that group would be entitled to merely because they are inhabitants. This may result in a loss to the trust estate, estimated in the media as between $300 million and $1.2 billion.

If OHA's claim is valid it would diminish the share of the other 95% of the beneficiaries. (Indeed, the OHA laws as worded by the legislature and interpreted by State officials and the trial court, appear to award the entire net income of the public land trust to OHA and leave none of the net income after expenses for the other 95%. See the Aloha for All web page at http://aloha4all.org).

However, if OHA's creation and its claims for preferential treatment violate the U.S. Constitution, the result is simply that all of the beneficiaries are entitled to equal treatment. The State's fiduciary duty and loyalty to over 95% of the trust beneficiaries requires that it present this issue to this court for determination.

Despite movants' demands (See Exhibits G, H and J to the Declaration of H. William Burgess), the State has not carried out that fiduciary duty to over 95% of the trust beneficiaries (including movants) by raising the federal constitutional issue. Rather the Attorney General, as parens patriae, repeated its failing in Kapiolani Park by "abandoning the defense of the possible rights of the public", See Pele Defense Fund, 73 Haw. at 604.

Thus, the three elements of intervention of right (interest in the action, disposition may impair or impede protection of that interest, and inadequate representation by existing parties) are all present. The remaining question is whether it is timely.

5. The most important consideration in deciding whether a motion for intervention is untimely is whether the delay in moving for intervention will prejudice the existing parties. Wright & Miller, Federal Practice and Procedure §1916, page 435.

One of the cases cited in footnote 12 of Wright & Miller, Federal Practice and Procedure §1916, page 435 is McDonald v. E.J. Lavino Co., 430 F.2d 1065, 1073 (5^th Cir. 1970) where the court said, "In fact, this may well be the only significant consideration when the proposed intervenor seeks intervention of right."

Also cited in that footnote 12 under §1916 of Wright & Miller is Su Duk Kim v. H.V. Corporation, 688 P.2d 1158, 1161 (Hawaii App. 1984) which held that the question of timeliness of intervention is generally regarded as a flexible concept and held that the court therein had abused its discretion by not allowing intervention.

Also under the same footnote is Jones v. Blinziner, 536 F.Supp 1181 (D.C.Ind. 1982) holding that disposition of that issue would avoid a multiplicity of suits without prejudicing the parties.

After noting that intervention after judgment is ordinarily denied, Wright & Miller beginning on page 450 under §1916, quotes one court which stated,

"The rationale which seems to underlie this general principle, however, is the assumption that allowing intervention after judgment will either (1) prejudice the rights of the existing parties to the litigation or (2) substantially interfere with the orderly processes of the court.

If neither of these results would occur the mere fact that judgment already has been entered should not by itself require an application for intervention to be denied. Thus, although the cases "tend to involve unique situations" and to require "a close examination of all the circumstances of the case", in a significant number of cases intervention has been allowed even after judgment."

On page 456 of the same volume, still under §1916, Wright & Miller notes that there is even more reason to deny an application to intervene made while an appeal is pending or after judgment has been affirmed on appeal. Even this is not an absolute bar, however, and there are a few cases in which intervention has been allowed at this late stage.

A police lieutenant's motion to intervene in an action against the city challenging racial and gender discrimination in hiring and promotion practices of the police department was timely, though the lieutenant filed the motion approximately 16 years after the complaint was filed and ten years after the district court first approved the consent decree. Officers for Justice v. Civil Service Commission of City & County of San Francisco, 934 F2d 1092 (9^th Cir. 1991).

State v. Jackson, 188 Wis.2d 537, 525 NW2d 165 (1994 App.) held that constitutional issues may be considered for the first time on appeal if it is in the best interest of justice, parties have had opportunity to brief the issue and the facts are undisputed.

In this case, intervention will not unduly delay or prejudice the adjudication of the rights of the original parties. Some of the present moving parties first sought intervention on April 29, 1999. The passage of almost 11 months since that motion was denied indicates that allowing intervention then would not have caused any delay or prejudice at all.

It still will not.

The rights of OHA and the State of Hawaii at issue in this case can not be finally adjudicated until an attorney free of conflict and zealously asserting his client's position under the rules of the adversary system (as required by the Hawai'i Rules of Professional Conduct, Preamble, (2)) is allowed to participate. Filing an amicus brief is not sufficient. To zealously assert movants' position (that the State owes nothing to OHA because OHA and the laws implementing it violate the Constitution of the United States), movants must be parties with the full rights of parties under the rules of the adversary system. Those rights include the right to petition for certiorari to the Supreme Court of the United States if the judgment here is affirmed and, if this case is reversed and remanded, to participate in any further proceedings in the Circuit Court.

6. Conclusion

For all the above reasons, because Rice v. Cayetano bears directly on the constitutionality and legitimacy of OHA, because the State Attorney General has a conflict of interest that prevents him from fairly representing the interests of movants, because the requirements for intervention of right are satisfied, because the issue may be decisive, because the issue is of overriding significance to the economic and social well-being of the entire State population, Hawaiian and non-Hawaiian alike, because the facts are undisputed, to avoid multiplicity of actions, for judicial economy, and to serve the best interests of justice, intervention should be allowed.

Dated at Honolulu, Hawaii March 28, 2000.

H. William Burgess

Attorney for Movants

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There are several documents on this website all related to the ceded lands case OHA vs. State of Hawai'i. You have just finished reading one of them. There was an amicus brief filed May 27, 1999.

Amicus Brief filed May 27, 1999 in Hawaii Supreme Court in OHA vs. State (OHA lawsuit seeking 20% of revenues from Hilo Hospital, Waikiki Duty Free Shoppers, public housing and other revenues). Amicus brief points out that OHA laws violate Constitution of United States.

Also, on March 28, 2000 a multi-racial group of 23 citizens of Hawaii MOVED TO INTERVENE in OHA v. State in the Hawaii Supreme Court. Their MEMO IN SUPPORT charges the State Attorney General has a conflict of interest because he represents the interests of OHA in the Rice case. Their PROPOSED BRIEF challenges the validity of OHA itself based on the RICE DECISION.

If you are finished with the materials related to the ceded lands case OHA v State of Hawai'i, then you may

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