315 P.3d 213
Haw.2013Background
- Kealoha, Day, Hoohuli, and Kahawaiolaa sue OHA trustees over trust fund expenditures allegedly contrary to the native Hawaiian public trust under HHCA and Admission Act provisions.
- Plaintiffs claim expenditures aimed to benefit Hawaiians, not limited to blood-quantum native Hawaiians, breached fiduciary duties under HRS 10-3(1) and Article XII of the Hawaii Constitution.
- U.S. District Court Day II held expenditures were proper under federal trust law and failed to enforce state-law considerations; Ninth Circuit affirmed that expenditures could be justified under 5(f) purposes.
- Circuit Court of the First Circuit dismissed the state-law complaint for failure to state a claim under HRCP Rule 12(b)(6), and denied leave to amend.
- Plaintiffs appealed, asserting dismissal was erroneous and raising res judicata/collateral estoppel defenses.
- The Hawaii Supreme Court affirmed, holding the circuit court did not err in dismissing the complaint.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the circuit court properly dismissed for failure to state a claim | Kealoha contends HRS 10-3(1) and 10-16(c) require trust funds to be used solely for native Hawaiians and that expenditures without regard to blood quantum breach fiduciary duties | Machado argues trustees have broad discretion, and expenditures fall within permitted trust purposes if reasonably connected to bettering native Hawaiians | Yes; dismissal affirmed |
| Whether res judicata/collateral estoppel bars the state-law claims | Kealoha urged Day II/Ninth Circuit findings preclude state-law breach claims | OHA Trustees rely on preclusion principles to bar state-law claims | Not reached (issues reserved/not necessary to decision) |
Key Cases Cited
- Office of Hawaiian Affairs v. State, 96 Hawai'i 388 (Haw. 2001) (public trust interpretation and native Hawaiian affairs; federal/state interplay)
- Day v. Apoliona (Day II), 616 F.3d 918 (9th Cir. 2010) (expenditure challenges under federal trust law; trustees’ discretion upheld)
- Cort v. Ash, 422 U.S. 66 (U.S. 1975) (private right of action inquiry factors for implied remedies)
- Baptiste v. Kaua'i, 115 Haw. 15, 165 P.3d 916 (Haw. 2007) (standard for reviewing dismissal and pleading failure in Hawai'i courts)
- Dowsett v. Hawaiian Trust Co., 47 Haw. 577, 393 P.2d 89 (Haw. 1964) (trustee discretion review; abuse of discretion standard)