ke kumu - Spring/Summer 2021

SPRING/SUMMER

2021

ke ku mu

A P U B L I C A T I O N F O R T H E F R I E N D S , F A M I LY, A N D C L I E N T S O F C A D E S S C H U T T E L L P

(POTENTIAL) NEW ESTATE TAX LAWS | IS DEVELOPMENT DESECRATION? | CORONAVIRUS RESPONSE TEAM

Cades Schutte LLP

Team News

Cades Schutte is proud to announce the election of

Amanda M. Jones to its Management Committee, effective April 1, 2021

Introducing our 2021 Partner Class

Trisha H.S.T. Akagi

Partner, Litigation Honolulu

Michi Momose

Partner, Litigation Honolulu

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Lisa K. Swartzfager

Partner, Litigation Honolulu

Mauna Kea Trask

Daniel C. Vermillion

Partner, Litigation, Partner, Estate Planning, Real Estate, and Land Use Trust Administration, and Līhuʻe Probate Honolulu

Contents 4

Welcome!

Ho‘omau, Pōhai Nu‘uhiwa Campbell

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Contributors Learn about our authors’ practices and how to contact them

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A New Year, New Leadership, and (Potential) New Estate Tax Laws Summer G. Shelverton and Caitlin M. Moon

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21

Do Commercial Building Owners Have Duties to Investigate and Disclose Asbestos?

Patricia J. McHenry and Lindsay N. McAneeley

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Is Development Desecration?

Mauna Kea Trask

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Advocating for Freedom of Information for Hawai‘i’s Education John P. Duchemin and Jeffrey S. Portnoy

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Cades Schutte in the Community

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Updates from Cades Schutte’s Coronavirus Response Team Chris S. Mashiba, Lisa K. Swartzfager, Theodore D.C. Young, and Ryan M. Hamaguchi

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ke kumu

A P U B L I C A T I O N F O R T H E F R I E N D S , F A M I LY, A N D C L I E N T S O F C A D E S S C H U T T E L L P

Workplace Safety Defense Thwarted by Company’s Own Policy Amanda M. Jones

© 2021 Cades Schutte LLP. All Rights Reserved.

SPRING/SUMMER

2020

Management Committee: Amanda M. Jones Nathan T. Okubo Ryan M. Wilson Cades Schutte Building 1000 Bishop Street, Suite 1200 Honolulu, Hawai‘i 96813 The contents of this newsletter should not be construed as legal advice on any specific fact or circumstance. Its content was prepared by Cades Schutte LLP. It was designed for general information purposes only. Your receipt of such information neither creates an attorneyclient relationship with any Cades Schutte LLP attorney, nor a business relationship with any of its administrators. You should not act or rely on any of the information contained herein without seeking professional legal counsel. Prior results or outcomes referred to in these materials do not in any way suggest or guarantee a similar result in other matters.

The comments and opinions expressed in this publication do not necessarily represent those of Cades Schutte LLP or the attorneys or staff of Cades Schutte LLP. A CADES SCHUTTE PUBLICATION | KE KUMU

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WELCOME!

HO‘OMAU

A

s‌ we continue to endure the COVID-19 pandemic, we remain optimistic and hopeful that there are better days to soon come. Never has the concept of ho‘omau been more important -- to remain steady, constant, and unceasing, even as our professional and personal lives continue to evolve almost daily.

On the Cover A deep dive into recent legal issues in Hawai‘i.

At Cades Schutte, we remain steadfast in our commitment to support our clients and community so that we will be able to persevere and weather this storm together. In this issue of ke kumu, we share insight on new and updated legislation, discuss issues and considerations that may raise new questions for you, and also highlight how Cades Schutte has supported our community through its charitable giving this past year.

Mahalo nui loa Daniel H. Devaney was instrumental in the creation of this newsletter, acting as lead proofreader and editor. Pōhai Nu‘uhiwa Campbell, our resident polyglot, assisted with drafting the forward of this issue.

Feedback?

If you have questions, or would like to see an article on a particular area of law, please let us know!

Submit feedback via email to: feedback@cades. com.

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CONTRIBUTORS

A COMMUNITY EFFORT We invite you to take a moment and learn about the team who contributed to this issue.

John P. Duchemin Partner

Amanda M. Jones Partner

Chris S. Mashiba Partner

Jeffrey S. Portnoy Partner

John is an experienced litigator with a previous career as an investigative reporter. He has represented a diverse range of clients in areas of law including real estate and condominium disputes; media, Internet, and privacy issues; residential construction issues; and insurance liability and coverage.

As a litigation partner, Amanda strives to blend practical advice with vigorous advocacy. She regularly advises and represents employers in labor and employment matters as part of her broader commercial litigation practice. She is a member of the firm’s Management Committee.

Chris is Chair of the Tax Department. His practice is concentrated in the areas of federal and state tax planning for businesses and individuals and resolving federal and state tax audits.

He is the past chair of the Tax Committee of the Hawaii Society of CPAs and past chair of the Tax Section of the Hawaii State Bar Association.

Jeff has almost 50 years of litigation and alternative dispute resolution experience, and is one of Hawai’i’s leading First Amendment attorneys. He previously served as Chair of the firm’s Litigation Department and has practiced law as a civil litigator at the firm since 1972.

(808) 521-9315 jduchemin@cades.com

(808) 521-9232 ajones@cades.com

(808) 521-9215 cmashiba@cades.com

(808) 521-9221 jportnoy@cades.com

Summer G. Shelverton Partner

Lisa K. Swartzfager Partner

Mauna Kea Trask Partner

Theodore D.C. Young Partner

Summer enjoys creating and implementing estate planning strategies to accomplish a client’s goals.

Summer concentrates her practice in the areas of estate planning, probate and trust administration, conser vatorship and guardianship proceedings, and trust and estate disputes.

Lisa has extensive experience in complex civil litigation matters at the trial and appellate level. Lisa has represented clients in matters involving ERISA litigation, pharmaceutical pricing disputes, and claims under consumer protection laws, the False Claims Act, and antitrust laws.

Mauna Kea is a partner in the firm’s Līhu‘e office.

He practices in the areas of Environmental Law and Litigation, Land Use, Zoning, and Entitlements.

He has years of experience in governmental regulatory processes and has extensive civil litigation experience in both administrative and state and federal venues.

Ted is a partner in the Litigation Department of Cades Schutte, and he is the Chair of the firm’s Creditors’ Rights and Bankruptcy Practice Group. His practice focuses on bankruptcy and creditors’ rights, commercial litigation, real estate litigation, and securities litigation.

(808) 521-9236 sshelverton@cades.com

(808) 521-9205 lswartzfager@cades.com

(808) 521-9297 mtrask@cades.com

(808) 544-3876 tyoung@cades.com

A CADES SCHUTTE PUBLICATION | KE KUMU

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LOCATIONS To support our clients, we operate five offices across four Hawaiian islands.

Honolulu Office 1000 Bishop Street Suite 1200 Honolulu, HI 96813 Phone: (808) 521-9200 Fax: (808) 521-9210

Kona Office

Patricia J. McHenry Senior Counsel

Lindsay N. McAneeley Of Counsel

Pat is senior counsel in the Litigation Department, and is the Chair of the Environmental Law Practice Group. Her practice concentrates on environmental law, lender liability, and commercial litigation.

Lindsay is a member of the Litigation Department and Environmental Law Practice Group. Lindsay represents clients in all aspects of litigation across a wide array of areas, and also assists clients with developing strategies for legal compliance, risk mitigation, and dispute avoidance.

(808) 521-9261 pmchenry@cades.com

(808) 521-9343 lmcaneeley@cades.com

75-170 Hualalai Road Suite B-303 Kailua-Kona, HI 96740 Phone: (808) 329-5811 Fax: (808) 326-1175

Waimea Office

65-1291 Kawaihae Road Suite 205 Kamuela, HI 96743 Phone: (808) 885-5973 Fax: (808) 326-1175

Kahului Office

444 Hana Highway Suite 204 Kahului, HI 96732 Phone: (808) 871-6016 Fax: (808) 871-6017

Līhu‘e Office

3135 Akahi Street Suite A Līhu‘e, HI 96766 Phone: (808) 245-1922 Fax: (808) 540-5015

Ryan M. Hamaguchi Associate

Caitlin M. Moon Associate

Ryan applies his diverse experience both as a transactional attorney and as a litigator to assist clients in multiple facets of the law, and help them find creative solutions to achieve their business objectives.

Caitlin is an associate in the Trusts and Estates Department. Caitlin obtained her Bachelor’s degree in Business Administration from University of San Diego and her M.B.A. from Shidler College of Business, University of Hawai‘i at Manoa.

(808) 521-9211 rhamaguchi@cades.com

(808) 521-9320 cmoon@cades.com

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TRUSTS AND ESTATES

A NEW YEAR, NEW LEADERSHIP, AND (POTENTIAL) NEW ESTATE TAX LAWS By: Summer G. Shelverton _________________ sshelverton@cades.com

By: Caitlin M. Moon _________________ cmoon@cades.com

A CADES SCHUTTE PUBLICATION | KE KUMU

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With a new presidential administration at the helm of our federal government, as well as a new majority in the U.S. Senate, changes to the estate tax laws may be on the horizon on the federal level.

On the state level, the state estate tax exemption will remain at its current level of $5.49 million per person, at least for now.

President Biden’s proposed tax plan includes provisions to expand the estate and gift tax by restoring the rate and exemption to 2009 levels--$3.5 million for the estate tax exemption and $1 million for the lifetime gift tax exemption, with an increased maximum tax rate of 45%. And even if such provisions are not passed, the current $11.7 million federal estate tax exemption per person is set to decrease significantly at the end of 2025 to $5 million, adjusted for inflation, unless congress acts to make the current exemption permanent. Biden’s proposed tax plan also includes the elimination of the “step-up in basis at death” provisions for inherited assets, meaning that a beneficiary would either assume the decedent’s cost basis in the asset or the unrealized appreciation could be taxable at the decedent’s death.

On the state level, proposals to lower the current Hawai‘i State estate tax exemption to $1 million were introduced this year, but ultimately did not pass. Accordingly, the current level of $5.49 million per person remains in effect until the topic is revisited by the Hawai‘i Legislature in the future.

Although there remains uncertainty at the federal level as to further estate and gift tax law changes, now is a good time to reevaluate your estate plan to make sure you have the basics in place. Below are some items to consider: •

•

Review your beneficiary designations on items such as retirement accounts and life insurance policies, especially if you have experienced a major life event (such as marriage, divorce, or the birth or adoption of a child). Remember, creating a will or a trust does not override beneficiary designations on assets like IRAs, 401Ks, annuities, and pension/profit sharing plans.

Verifying your beneficiary designations are up-to-date can save your loved ones a lot of headaches down the road.

If you have a trust as part of your estate plan, verify that the trust is properly funded with, for example, your real property, brokerage accounts, and other assets.

Failure to title assets in the name of your trust may trigger probate at your death, defeating a significant

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benefit of creating a trust in the first place. This may also be a good time to ensure that your trust is drafted with as much flexibility as possible to address possible changes in the tax law in the future.

•

Organize your digital assets. While you do not have to catalog every file on your computer, do make a list of the major items, such as cloud or local storage of your digital photos, videos, and documents, as well as email, social media, and financial accounts (including Venmo and PayPal). You also want to make sure you have included provisions in your trust or will to allow your agent access to such assets. The easiest and safest way to make sure your agent, executor, or such other trusted individual can access your accounts is via a password manager.

•

To the extent you have significant assets (i.e., approaching or greater than the current federal exemption amounts), consider the gifting or transfer of assets. Now is a unique “use it or lose it” opportunity to move assets to the next generation by taking advantage of the current unprecedented exemption amounts still available.

If you have any questions about your tax-related options, or nontax planning updates to your estate plan, please contact a trusts and estates attorney to discuss further. We at Cades Schutte would like to express our gratitude for the opportunity to continue to serve and support our Hawai‘i community through these challenging and unprecedented times. Please continue to stay healthy and mālama pono.

Summer G. Shelverton (Partner) is a member of the Trusts & Estates Department. She enjoys creating and implementing estate planning strategies to accomplish a client’s goals.

Caitlin M. Moon (Associate) practices in the areas of estate planning, probate and trust administration, conservatorship and guardianship proceedings, and trust and estate disputes.

ENVIRONMENTAL LAW

Do Commercial Building Owners Have Duties to Investigate and Disclose A s bestos?

It is widely known that the federal Occupational Safety and Health Administration (OSHA) regulations establish standards and requirements to ensure the health and safety of working men and women.1 It is also widely known that most of Hawai‘i’s private sector employers, and some of its public sector employers, must comply with OSHA with respect to their employees. But what many may not know is that, when it comes to asbestos, owners of commercial buildings may have affirmative investigation and notice obligations under OSHA, not just to their employees, but to third-parties, including contractors and even tenants.

Patricia J. McHenry _________________ pmchenry@cades.com

Lindsay N. McAneeley _________________ lmcaneeley@cades.com

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OSHA’s Safety and Health Regulations for Construction 2 recognize that “[m]ost asbestos-related construction activities involve previously installed building materials” and that “[b]uilding owners often are the only and/or best sources of information concerning them.” 3 As a result, OSHA imposes specific duties on building and facility owners to know of, and to notify potentially impacted parties about, the existence of asbestos-containing material (ACM) and presumed asbestos-containing material (PACM).

More specifically, before any construction, alteration, or repair work (including painting and decorating) 4 is undertaken, “building and facility owners shall determine the presence, location and quantity of ACM and/or PACM at the work site . . .” 5 Building and facility owners are then required to provide that information to their employees, prospective employers whose employees may work in or near areas containing those materials—i.e. contractors—and tenants who will occupy areas containing those materials.6 The OSHA regulations define “building/facility owner” as “the legal entity, including a lessee, which exercises control over management and record keeping functions related to a building and/or facility” in which construction activities may take place.7 Under this definition, an entity that manages a building or that has the “records” for it may also be considered an owner and share in the investigation and notice duties with respect to asbestos. Although the regulations do not specify what the term “records” means in this section, given the underlying purpose and rationale of these regulations, logically it must be construed to refer to records with information on the presence, location, and quantity of asbestos, such as construction plans and specifications (including for any renovations or repairs) inspection or sampling reports, and documents confirming any asbestos removal.

Investigation Obligations By requiring building and facility owners to “determine” the presence, location, and quantity of ACM and PACM, the OSHA regulations establish that building owners cannot discharge their duties simply by disclosing what they do know, or by issuing a broad warning that asbestos may exist on the premises. Instead, they must affirmatively determine whether, where, and to what extent asbestos exists in their commercial buildings.

Under these regulations, ACM is defined as any material containing more than 1% asbestos, and PACM means thermal system insulation, and surfacing material found in buildings constructed no later than 1980, including sprayed or troweled on surfacing materials and asphalt and vinyl flooring. 8 PACM must be treated as though it is asbestos-containing unless proven otherwise.

While PACM may be “easily recognizable” through a visual inspection, other ACM are not. Asbestos fibers are microscopic and they cannot be seen, felt, smelled, or tasted. Although asbestos use declined after 1980, it did not cease altogether, and can still be used today. Therefore, it cannot be assumed that a building constructed after 1980 necessarily is free of ACM. Although the regulations do not expressly state that building owners must perform sampling and analysis to identify ACM, because the presence, location, and quantity of ACM cannot be ascertained visually, absent documents establishing that no asbestos exists, it must be that such sampling and analysis are required.

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Notice Obligations The language of the regulations does not limit a building owner’s obligation to notify employees, contractors, and tenants of asbestos to only those circumstances when the building or facility owner knows that construction work that may disturb ACM or PACM will be performed. The regulations require notice before any construction, alteration, or repair work begins, without any mention of the building owner’s knowledge of planned construction.

In the case of tenants, there is a significant risk that work that may expose and disturb ACM could be taken without the building owner’s knowledge. For example, even relatively minor remodeling, such as installing a new ceiling light fixture, could disturb ACM. Therefore, the only way to ensure that building owners have met their notice obligation to tenants is by advising the tenants of asbestos at the commencement of the tenant leases.

Avoiding Penalties and Liability OSHA regulations have several levels of violations. OSHA has in the past designated the failure of a building owner to notify of the presence of asbestos as a “serious” violation. In addition, a building owner’s failure to discharge its asbestos investigation and disclosure duties can give rise to lawsuits and substantial liability should anyone be exposed to and harmed by ACM as a result of that failure. Therefore, building owners should consider undertaking a review of their files to ensure they have complied with these OSHA regulations; and, if necessary, developing a strategy for achieving compliance, including conducting asbestos surveys and providing the required notice of the presence, location, and quantity of ACM and PACM to their employees, contractors, and tenants.

FOOTNOTES 1 OSHA’s state counterpart in Hawai‘i—the State of Hawai‘i Occupational Safety and Health rules—are identical with respect to the provisions discussed in this article; and, therefore, for simplicity, will not be separately addressed here.

2 29 C.F.R. Part 1926.

3 29 C.F.R. § 1926.1101(k)(1)(i).

4 29 C.F.R. § 1926.1101(a), citing 29 C.F.R. § 1910.12(b).

5 29 C.F.R. § 1926.1101(k)(2)(i).

6 29 C.F.R. § 1926.1101(k)(2)(ii).

7 29 C.F.R. § 1926.1101(b).

8 29 C.F.R. § 1926.1101(b); §1926.1101(k)(1)(i).

Patricia J. McHenry (Senior Counsel) is Chair of the Environmental Law Practice Group. Her practice concentrates on environmental law, lender liability, and commercial litigation.

Lindsay N. McAneeley (Of Counsel) is a member of the Litigation Department and Environmental Law Practice Group. She represents clients in a wide array of legal matters, including environmental law and commercial litigation.

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HISTORIC PRESERVATION & NATIVE HAWAIIAN RIGHTS

Is Development Desecration?

By: Mauna Kea Trask _________________ mtrask@cades.com

In 2007, the skeletal remains of at least 60 Native Hawaiians were found during development of Hawai‘i’s flagship Whole Foods Market in Kaka‘ako.

Beginning in 2009, during construction of a multipurpose center, Kawaiha‘o Church discovered what would amount to more than 600 Native Hawaiian burials. The County of Kaua‘i faced numerous accusations that construction of a public coastal pedestrian/bike path would result in desecration of Native Hawaiian burial sites, although studies showed that no burials would be present and no burials were ever found.

In the cases of Whole Foods and Kawaiha‘o Church, the landowners had all necessary permits at the time the burials were discovered. However, despite the permits the landowners were attacked in the press, developments were delayed for years, numerous administrative and judicial actions were filed, and millions of dollars were spent defending the development against accusations of “desecration” of Native Hawaiian burial sites. But what is desecration?

Is it a legal question, a cultural question, or both?

The purpose of this article is not to correct or even comment on the sincerely held beliefs of many 12 KE KUMU | A CADES SCHUTTE PUBLICATION

people in the community regarding desecration of burial sites. This article simply provides the reader with insight into the authentic customs and traditions of Native Hawaiians concerning Native Hawaiian burial sites as described by Native and non-Native Hawaiian scholars, whose credibility and authority on the matter are beyond reproach. *** It is illegal in Hawai‘i to knowingly take, appropriate, excavate, injure, destroy, or alter any burial site or the contents thereof during the course of land development or land alteration activities which may affect a burial site, without obtaining the required governmental approvals. In addition to administrative fines, the criminal penalty for violating this law is up to one year in jail and a fine not to exceed $25,000 for each day such violation continues to occur (HI Rev Stat § 6E-71). I think that such acts would appropriately be called desecration.

But what about developing while having all the requisite permits? What if an excavator inadvertently discovers bones during the development process?

What if the State Historic Preservation Division

(SHPD) approves the relocation of the remains with the support of the burial council, which is comprised of native Hawaiians and land owners who determine the appropriate treatment of previously discovered burial sites, and the Office of Hawaiian Affairs, as in the Whole Foods case? Put simply, is legal development itself desecration? This is question with cultural and legal aspects.

The Hawai‘i State Constitution requires the State, among other things, to protect all rights, customarily and traditionally exercised by Native Hawaiians for cultural and religious purposes, subject to the right of the State to regulate such rights. This is the backdrop for the protection of all Native Hawaiian traditional and customary rights in Hawai‘i. So what are the customary and traditional practices with regard to Native Hawaiian burials and do these customs and traditions consider as “desecration” a development that has obtained requisite governmental approvals and otherwise has complied with the law?

Generally speaking, Hawaiian custom and tradition disassociated the ‘uhane (spirit) from the kino (body). During life the ‘uhane could wander from the body, although such a habit was dangerous because a disassociated spirit could be trapped and prevented from returning to the body, which would be dead or inert without it. Even after death the lapu (visible form of the deceased) inhabited its bones and could leave them, taking on a human shape and speaking in the same voice as in life.

Hawaiian culture considered corpses unclean and a strict kapu (prohibition) was placed on all dead bodies. The kapu of an Ali‘i (nobility) was for ten days or longer, the kapu for a commoner was about three days, and the kapu for a person of low class would only be for a day or two. During the kapu period only blood relatives were allowed to be near the body, all others were strictly forbidden to come into contact with the dead or to interact with the relatives of the dead, as they were also considered to be defiled.

During this time the corpse was prepared for burial by the ‘ohana (family) of the deceased.

It is illegal in Hawai‘i to knowingly take, appropriate, excavate, injure, destroy, or alter any burial site or the contents thereof during the course of land development or land alteration activities which may affect a burial site, without obtaining the required governmental approvals It is my sincere hope that, by understanding how Native Hawaiians traditionally and customarily treated burial sites, we, as a multi-cultural island community, can authentically and respectfully address this issue.

After the corpse was physically prepared for burial, it was buried at night in a secret place to protect its bones from being discovered. A corpse buried in this manner was said to be huna kele. This was the favorite way of dealing with the bones of a chief of very high status, hiding them in caves and secret places never to be discovered again.

The tradition of hiding the bones of the deceased is believed to have begun as a means to protect against desecration. Specifically, Hawaiians feared that the bones of their loved ones would be dug up and used as arrows for rat shooting and material for fishhooks or other items. This makes sense as the natural materials of Hawai‘i at that time were limited to wood, stone, and whatever bones could be found.

In order to protect them from such desecration, the families of the dead sought out secret places to hide the bones, well hidden from the eyes of men and unknown to the “wizards” of the night (ku pua o ka po) who might reveal them. In this regard, venerated Native Hawaiian scholar Samuel Kamakau wrote in his seminal work Ka Po‘e Kahiko, “since the main thing was to hide the bones, they were buried under new houses, in roadways, in banks of taro patches, or any place where they would be concealed.”

Mary Kawena Pukui, in Nana I Ke Kumu, vol. I, later synthesized over one hundred years of scholarship and described the five levels of desecration in ascending order: 1) speaking of the bones; 2) physically uncovering or exposing the bones to the sunlight; 3) using the bones for material or practical purposes (arrows, needles, fish hooks); 4) using the bones as a means to control the lapu for malevolent purposes and spiritual warfare; and 5) burning and completely destroying the bones. In order to avoid such desecration, the bones of chiefs and loved ones were frequently unearthed and relocated to avoid disturbance or discovery. However, development is never mentioned or considered to be desecration.

In fact, Kamakau’s description of the protection of burials included hiding bones under development, which Hawaiians believed would prevent their disturbance.

So what does this all mean? Is lawful development with all requisite permits desecration? Based on my understanding of Native Hawaiian custom and tradition, I don’t think a permitted development that has gone through all appropriate legal review processes would be considered desecration by my ancestors. In fact, some of my kupuna (elderly relatives) may have seen a proposed development as an opportunity and a means to protect the remains of their loved ones, while others may have desired to have the remains removed and reinterred in a secret location in the mountains or an underwater cave.

However, there does not appear to be a traditional and customary foundation to support the concept that using the presence of burials was an appropriate method to stop development. In short, the answer is that the question is not so simple as saying it is desecration.

Mauna Kea Trask (Partner) practices in the areas of Environmental Law and Litigation, Land Use, Zoning, and Entitlements. He is a partner in the firm’s Līhu‘e office.

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PRO BONO

Advocating for Freedom of Information for Hawai‘i’s Education John P. Duchemin _________________ jduchemin@cades.com

Jeffrey S. Portnoy _________________ jportnoy@cades.com

When the state Department of Education refused to share its public financial records with an education reform group, two Cades Schutte attorneys championed the group’s successful effort to obtain the information and protect the public’s legal right to a transparent government.

Jeffrey S. Portnoy and John P. Duchemin have a history of teaming up to guard the public’s right to access government information. Mr. Portnoy, one of the state’s preeminent advocates for open government, and Mr. Duchemin, a former business and government reporter for the Honolulu Advertiser and Pacific Business News, previously have obtained landmark Hawai‘i Supreme Court rulings affirming and expanding the public’s constitutional right to open court proceedings and records. They frequently represent individuals and entities seeking to obtain government records under the state’s open-records law, the Uniform Information Practices Act (or UIPA).

So when non-profit educational reform organization the Education Institute of Hawaii (EIH) asked Messrs. Portnoy and Duchemin for help in obtaining financial records from a reluctant Hawai‘i State Department of Education (DOE), the attorneys were happy to accept. Messrs. Portnoy and Duchemin, working pro bono, without charge, brought a civil suit in state court seeking to compel the DOE to produce the records. Their efforts to date have been successful: as the lawsuit proceeded, the DOE finally dropped its objections, and agreed to produce the records more than two years after EIH’s initial request.

EIH is a Hawai‘i nonprofit organization whose mission is to improve the quality of public education in Hawai‘i. In March 2018, EIH submitted a formal UIPA request to the DOE for detailed budgetary line-item information from the 2016-17 school year. The goal of EIH’s request was to obtain data allowing for itself and other organizations to perform timely, independent financial analyses of recent public education expenditures.

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From the outset, the DOE resisted EIH’s request for information. In response to EIH’s request, the DOE stalled for several months, then refused to produce nearly all of the requested budgetary information. The DOE claimed that the records were “not readily retrievable.” After EIH in early 2019 mounted a public information campaign to push for greater fiscal transparency at the DOE, DOE Superintendent Christina Kishimoto sent a letter to EIH warning the organization not to pursue its information request further and claiming that it was “not productive” for EIH to mount a public campaign for more information.

Facing apparent stonewalling by the DOE (and Kishimoto’s warning), EIH retained Cades Schutte to file suit on EIH’s behalf against the DOE, also naming Kishimoto in her capacity as DOE superintendent. The lawsuit, filed in Hawai‘i State Circuit Court in late 2019 and prosecuted by Messrs. Portnoy and Duchemin through much of 2020, alleged that the DOE violated UIPA by failing and refusing to timely produce the requested documents, and sought to have the Court compel production of the documents.

Under the pressure of litigation, the DOE finally produced the requested records in the fall of 2020. The DOE also produced evidence that effectively conceded that the requested records could have been timely produced with little staff effort.

(For instance, DOE records indicate the department deliberately pared back its retrieval efforts in 2018, and also that the ultimate production in the fall of 2020 took less than 30 minutes to retrieve).

Cades Schutte then filed a motion on EIH’s behalf seeking partial summary judgment, seeking to conclusively establish the DOE’s liability for violating UIPA due to the delayed production. On March 25, 2021, the Court sided with EIH, granted EIH’s motion, and issued an order requiring the DOE to pay EIH its reasonable attorney’s fees and costs as a sanction for the DOE’s misconduct. The Court said the fee order is intended to deter the DOE from similar delays in the future when EIH, or other members of the public, seek financial information on Hawai‘i’s public school system.

The budgetary records that EIH requested are especially pertinent at this time, as the Hawai‘i educational system faces budget cuts resulting from the COVID-19 pandemic. As other organizations make similar requests for information from the government to battle the consequences faced by COVID-19, financial or otherwise, they must be able to gather this information promptly. We are proud to have assisted EIH in successfully retrieving the sought information, and hope that the outcome of our efforts sends a message to other government agencies in Hawai‘i and deters them from refusing to provide complete responses and violating UIPA.

John P. Duchemin (Partner) is an experienced litigator with a previous career as an investigative reporter.

Jeffrey S. Portnoy (Partner) is one of Hawai’i’s leading First Amendment attorneys. He previously served as Chair of the firm’s Litigation Department and has practiced law as a civil litigator at the firm since 1972.

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COMMUNITY

e t t IN u h c S s e d Ca

THE COMMUNITY Concluding 2020 with Kōkua

From Līhuʻe to Kailua-Kona, attorneys and staff across our offices worked together to make a positive impact in the community throughout 2020. Below is a summary of some highlights from Q4 of last year.

Year-End Donations across the Islands In honor of our clients and friends, Cades Schutte made year-end donations to several nonprofits and charities across the islands that have continued to support our community, especially last year when help was most needed.

These organizations include: Aloha Harvest Aloha United Way Child & Family Service Domestic Violence Action Center Family Programs Hawaii Hawaiʻi Children’s Action Network Hawaiʻi Food Basket Hawaii Foodbank Kaua‘i Independent Food Bank Mālama Kauaʻi Mental Health America of Hawai‘i Project Hawaiʻi Inc. Salvation Army The Institute for Human Services (IHS) The Maui Farm The Maui Food Bank Women Helping Women Women in Need (Kauaʻi) Zonta Club Christmas Fund

HAWAII FOODBANK & IHS

Pictured above are Rhonda L. Griswold and Ryan M. Hamaguchi presenting gifts of over $38,000 to the Hawaii Foodbank and $30,000 to IHS during Q4 of 2020. We are grateful for everything these organizations continue to do for the community, and proud to support them.

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Family Programs Hawaii Holiday Party The Cades Foundation donated to Family Programs Hawaii’s annual holiday party, and Cades Schutte LLP attorneys and staff including Marc E. Rousseau, Michele S. Loudermilk (Family Programs Hawaii Board Member), Grace Nihei Kido, Joyce Darny, and Erika Galarneau volunteered at the drive-through celebration for foster children and their adoptive families by handing out gifts.

Family Programs Hawaii

Annual Aloha United Way Campaign Through the firm’s annual fundraising campaign, and a generous donation from the Cades Foundation, we raised over $24,000 for Aloha United Way (AUW) and their many non-profit partner organizations. Pictured below are Michi Momose and Lisa K. Swartzfager with representatives from AUW. AUW

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CORONAVIRUS RESPONSE

UPDATES FROM CADES SCHUTTE’S

CORONAVIRUS RESPONSE TEAM 18 KE KEKUMU KUMU || AACADES CADESSCHUTTE SCHUTTEPUBLICATION PUBLICATION

More than one year into the pandemic, with reopenings and vaccine rollouts moving forward, it appears that we are seeing the light at the end of the tunnel.

The anticipated changes on the horizon may create even more legal questions. Cades Schutte’s Coronavirus Response Team, which was established to quickly and efficiently address the effects of COVID-19 on businesses and individuals, continues to provide support in many areas, including Bankruptcy and Creditors’ Rights, Corporate and Business Law, Education and School Law, Employment Law and Labor Relations, Estate Planning, Trust Administration, and Probate, Health Care, Litigation, Real Estate and Finance, and Tax. The following is a summary of some of the legal issues select Coronavirus Response Team members anticipate in the coming months.

Tax Keep a look out for the Biden tax proposal legislation in 2021, which includes: (a) imposing the 12.4% social security tax (split between employer and employee) on income earned in excess of $400,000/year, (b) increasing the top individual tax rate from 37% to 39.6%, (c) increasing the tax rate on long term capital gains and qualified dividends from 20% to the ordinary income tax rate of 39.6% for taxpayers making more than $1 million/year, (d) disallowing the 20% qualified business income deduction for owners of S corporations, LLC, and partnership and sole proprietors making more than $400,000/year regardless of the type of business, (e) increasing the C corporation flat tax rate from 21% to 28%, (f) eliminating the real estate like-kind exchange tax deferral technique for taxpayers with income in excess of $400,000, and (g) reducing the estate and gift tax exemption from $11.7 million per person to $3.5 million per person, and increasing the top rate for the estate tax from 40% to 45%. With a blue sweep in the House and Senate, many of these tax proposals have a good shot at passing this year.

Chris S. Mashiba Litigation

Chair of the Tax Department cmashiba@cades.com

The effects of COVID-19 on litigation will likely be felt for years to come. In addition to the continued increase in remote technology for court hearings, depositions, and mediations, it is likely jury trials will continue to be delayed. We expect 2021 to be a busy year on the litigation front, with lawsuits over failed business transactions, force majeure clauses in contracts, business interruption insurance coverage, commercial lease issues, and alleged fraud related to government relief programs.

Lisa K. Swartzfager Partner, Litigation lswartzfager@cades.com

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Bankruptcy / Restructuring In view of the economic turmoil created by the COVID-19 pandemic, 2021 should continue to present challenging issues in the areas of bankruptcy and restructuring. Certain sectors such as retail, restaurant, hospitality, and travel may also see an increase in bankruptcy filings, loan defaults, and lease defaults. In response to the crisis, Congress, as part of the Consolidated Appropriations Act of 2021, temporarily modified certain rules under the Bankruptcy Code. For example, Congress temporarily modified the law relating to a tenant’s rent payments and the time period for assumption and rejection of commercial leases. This new law allows a commercial tenant experiencing “material financial hardship” due to COVID-19 to forebear its rent payment obligations until the earlier of 60 days after the filing of the bankruptcy case or the time within which a commercial lease is assumed or rejected under the Bankruptcy Code (extended from 120 days to 210 days). Congress has also enacted new rules governing preferential transfers under the Bankruptcy Code to assist commercial landlords. These new rules allow a commercial landlord to recover amounts due under its non-residential leases and negotiate related modifications without fear of having those funds “clawed-back” in the event its tenant files a bankruptcy petition within 90 days of that payment or modification (or within one year if the creditor is an insider or affiliate of the debtor). These new rules apply to payments or agreement modifications made after March 13, 2020 and will expire on December 27, 2022. However, it applies to bankruptcy cases filed before that date.

Theodore D.C. Young Real Estate

Chair of the Bankruptcy and Creditors’ Rights Practice tyoung@cades.com

While the economy is reopening and people and businesses are adjusting to the “new normal,” the impacts of the COVID-19 pandemic continue to be felt throughout the real estate sector. Sales transactions involving businesses and real estate remain active, however, the interpretation of force majeure clauses in contracts and leases, or what happens if an agreement has no such clause, remain hot topics and will require careful attention as clients prepare and protect themselves from future economic disruptions.

Continuing uncertainty about the recovery of business revenue and jobs as well as state and federal relief programs presents additional variables to consider and model. We are diligently monitoring evolving federal and state laws, while tracking government relief programs including Paycheck Protection Program loans, rent relief assistance programs, CARES Act Provider Relief Fund, and the $1.9 trillion American Rescue Plan Act enacted recently to help clients navigate this complex environment.

Ryan M. Hamaguchi Associate, Finance and Real Estate rhamaguchi@cades.com

For more about Cades Schutte’s Coronavirus Response Team, visit https://www.cades.com/coronavirus-response-team/ 20 KE KUMU | A CADES SCHUTTE PUBLICATION

EMPLOYMENT LAW AND LABOR RELATIONS

WORKPLACE SAFETY DEFENSE THWARTED BY COMPANY’S OWN POLICY Amanda M. Jones _________________ ajones@cades.com

A Hawai‘i appellate court recently affirmed a decision upholding a citation for a “serious” violation issued by the Hawai‘i Occupational Safety and Health Division (HIOSH), rejecting a key defense because the employer didn’t follow its own unnecessarily strict safety policy.

Citation issued for lack of personal fall arrest system In December 2012, HIOSH inspectors observed three employees installing a photovoltaic system on an 18-foot roof without being properly secured in a fall protection system. The company had a “foreman” or “leadman” at the site responsible for safety compliance, but he apparently failed to ensure the workers were properly secured.

The company also had a fall protection policy that required employees to tie off to a full arrest system every time they were on a roof more than six feet above ground. Importantly, the policy reportedly imposed severe consequences, stating violations “will result in immediate suspension or termination of employment.”

To avoid liability under the employee misconduct defense, the employer must prove: (1) It has established work rules designed to prevent the violation; (2) It has adequately communicated the rules to its employees; (3) It has taken steps to detect and correct violations, especially if there were incidents of prior noncompliance; and (4) It has effectively enforced the rules when violations have been discovered.

‘Serious’ violation results in no suspensions or terminations HIOSH issued the company a citation for a “serious” violation as a result of findings during the inspection.

At the hearing to contest the citation, the company argued it shouldn’t have received the citation because the violation was due to employee misconduct.

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The Hawai‘i Labor Relations Board (HLRB) ruled the company failed to establish the fourth requirement of the employee misconduct defense, among other problems. The board reasoned the company hadn’t followed its fall protection policy because none of the employees involved was suspended or terminated, although they were all reportedly given corrective counseling.

The company argued to the appellate court this ruling was wrong because employers have the discretion to enforce their own policies as they determine to be appropriate under the circumstances.

Unnecessarily strict policy foils ‘employee misconduct’ defense The appellate court rejected the employer’s argument.

It first explained that adequate enforcement of company safety rules is a “critical element” of the employee misconduct defense. In this case, the company didn’t follow its strict policy that violations “will result in immediate suspension or termination of employment.”

The court explained the company’s “decision to not follow its policy and exercise discretion instead, foreclosed it from establishing the employee 22 KE KUMU | A CADES SCHUTTE PUBLICATION

misconduct defense.” Therefore, even though there was no legal requirement that employees be suspended or terminated for violating the safety rule at issue, the company’s policy of mandating those consequences undermined its ability to establish a defense to liability.

The company could request that the Hawai‘i Supreme Court review the matter further. IES Residential, Inc. v.

Director, Dep’t of Labor & Industrial Relations, CAAP-16826 (Haw. App., Jan. 6, 2021).

Bottom line When drafting policies, you should be careful not to box yourselves into specific disciplinary consequences that might not be warranted in all circumstances. Had the policy stated “violations could result in disciplinary action up to and including termination, as appropriate under the circumstances,” or something similar, the employer may have had a better shot at establishing the fourth element of the employee misconduct defense.

Amanda M. Jones (Partner) regularly advises and represents employers in labor and employment matters as part of her broader commercial litigation practice.

FOOTNOTE

On the Board Stacey F. Gray was selected to be a part of the Blue Planet Ambassador Board.

Blue Planet is a nonprofit community organization that is changing the conversation about clean energy. By creating sustainable models in Hawai‘i, they are fueling the global transformation from fossil fuels to renewable solutions.

John R. Love was selected as an American College of Mortgage Attorneys (ACMA) Fellow. ACMA Fellows are considered to be the best of the best in the mortgage law industry, and they make a point of giving back to the industry. To maintain this high-level of excellence, fellowship in the Association is by nomination only.

Grace Nihei Kido is also a long-time ACMA Fellow.

Mallory T. Martin has joined the Chamber of Commerce Hawaii Young Professionals as one of its newest members. Caitlin M. Moon is also a member.

Imran Naeemullah was recently appointed as a Director for the Hawai‘i Chapter of the CCIM Institute. The CCIM (Certified Commercial Investment Member) Institute serves as a focal point for quality education, networking and market services for the commercial investment real estate specialist.

Maui Hub IRS Approval as Non-profit Trever K. Asam represented Maui Hub, an organization providing fresh Maui-grown affordable produce to low income residents, food banks, and community kitchens established in April 2020 in response to the pandemic, in receiving IRS approval as a 501(c)(3) nonprofit charitable organization.

Probate Court Victory Our Litigation and Trusts & Estates team represented a small liberal arts university in Los Angeles, California, in receiving a ground-breaking favorable ruling in probate court. The dispute was regarding a $1 million pledge made by a university alumnus and Hawai‘i real estate developer who had prematurely terminated in 2011 without paying $900,000 in installment payments, despite the university naming a campus building after the donor and relying on his pledge to raise other funds. The Cades Schutte team included litigation attorney John P. Duchemin and trusts and estates attorneys Summer G. Shelverton, Pōhai Nu‘uhiwa Campbell, and Caitlin M. Moon.

Motion to Dismiss in First Circuit Court A Cades Schutte team, led by Jeffrey S. Portnoy successfully defended multi-national law firm Orrick, Herrington & Sutcliffe LLP in a multimillion-dollar lawsuit filed by a former client in the First Circuit Court. Judge Gary W.B. Chang has granted Orrick’s Motion to Dismiss based on forum non conveniens and has stayed the Hawai‘i action to permit the plaintiff to refile in California.

MEET OUR NEWEST TEAM MEMBER AT CADES SCHUTTE

Hawai‘i Community Foundation 2020 Outstanding Professional Advisor in Philanthropy Trever K. Asam was named a 2020 Outstanding Professional Advisor in Philanthropy by Hawai‘i Community Foundation. The Professional Advisor in Philanthropy Award recognizes professional advisors in the community who have demonstrated a personal and professional commitment to philanthropy.

Sale of Parcel Adjacent to Middle Street Transit Center We represented Yee Hop Realty, Ltd. in the sale of a 1.9 acre parcel that is adjacent to the City and County of Honolulu’s Middle Street Transit Center in Kalihi-Kai. The sale closed on December 4, 2020 for a purchase price of $20.6 million. Michele S. Loudermilk led the transaction, with the assistance of Gail M. Tamashiro.

Lindsay N. McAneeley

Of Counsel | Litigation | Environmental Law (808) 521-9343 lmcaneeley@cades.com

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