ke kumu Spring/Summer 2024

ke kumu

Congratulations to Our New Partners

Sachi E. Hiatt

Finance, Real Estate, and Corporate

Sachi’s practice focuses on real estate sales and acquisitions, condominiums and other planned developments, and land use review.

Nathan C. Yang

Finance, Real Estate, and Corporate

Nate focuses his practice on commercial finance, affordable housing, and business transactions.

4 Welcome!

‘Ike Pono, Pōhai Nu‘uhiwa Campbell

5 Contributors

Learn about our authors’ practices and how to contact them

6 AI’s Impact on the Legal Field in Hawai‘i and Other Jurisdictions

Martin E. Hsia

9 Administrative Hearings on Hawai‘i Bid Protests: Are They Dead or Just Sleeping?

Jeffrey M. Osterkamp and Bryce M. Nakamura

11 Exploring Issues with Land Passed Across Generations in Hawai‘i

Sachi E. Hiatt

15 Maui’s Shifting Shoreline and SMA Rules

Calvert G. Chipchase, Keola R. Whittaker, and Ellen R. Ashford

‘IKE PONO

Change is inevitable. From legal and business landscapes, to our personal lives, life is always full of new developments. A primary purpose of ke kumu is to address these new developments and provide insight into the ever-changing landscapes that are important to you. ‘Ike Pono means to “see clearly” or “know definitely,” and in this issue, we tackle and clarify relevant topics, including artificial intelligence in the legal space, changes to shoreline laws (particularly on Maui), as well as updates on procurement laws in Hawai‘i. We also explore considerations for families who own real property for multiple generations and the challenges that may arise over a significant period of time. We hope the insights in this issue will provide clarity to your understanding and assist you with navigating change.

On the Cover

Scaling through legal complexities with agility.

Mahalo nui loa

Patricia J. McHenry was instrumental in the creation of this newsletter, acting as lead proofreader and editor.

Pōhai Nu’uhiwa Campbell 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: communications@cades.com.

A COMMUNITY EFFORT

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

Cal is the Chair of the Real Estate Disputes Group and advises clients on real estate and land use controversies, challenges to land use approvals and environmental review, and disputes with governmental agencies.

Sachi is a partner in the Finance, Real Estate, and Corporate Department. Her practice focuses on real estate sales and acquisitions, condominiums and other planned developments, and land use reviews.

(808) 521-9220

cchipchase@cades.com

(808) 521-9250

shiatt@cades.com

Keola is a member of the firm’s Finance, Real Estate, and Corporate Department based out of the firm’s Kahului office on Maui. He leverages over fifteen years of transactional and litigation experience in Hawai‘i, California, and New York.

(808) 521-9292

kwhittaker@cades.com

As a member of the Finance and Real Estate team, Ellen’s practice includes real estate development and land use review, commercial ground and space leasing, purchase and sale transactions, and financing.

Martin is a registered patent attorney, one of the few patent attorneys in Hawai‘i. He practices patent, trademark, copyright, trade secret, right of publicity, computer, licensing, internet, and entertainment law, and has obtained patents relating to machine learning and cyber security.

(808) 544-3835

mhsia@cades.com

Jeff is a partner in the Litigation Department of Cades Schutte. His practice is concentrated in construction litigation, government procurement disputes, commercial litigation, and media law.

(808) 521-9352

eashford@cades.com

Pōhai is an associate in Trusts & Estates Department. She focuses her practice in the areas of estate planning, probate and trust administration, and trusts and estate disputes.

(808) 521-9239

josterkamp@cades.com

Bryce is an associate in the Litigation Department. His practice focuses on construction, real estate, and business litigation.

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.

(808) 521-9261

pmchenry@cades.com

(808) 521-9302

pcampbell@cades.com

(808) 521-9323

bnakamura@cades.com

Martin E. Hsia Partner

Jeffrey M. Osterkamp Partner

Keola R. Whittaker Of Counsel

Patricia J. McHenry Senior Counsel

Ellen R. Ashford Associate

Pōhai Nu‘uhiwa Campbell Associate

Sachi E. Hiatt Partner

Bryce M. Nakamura Associate

Calvert G. Chipchase Partner

AI’s Impact on the Legal Field in Hawai‘i and Other Jurisdictions

Martin E. Hsia mhsia@cades.com

The Hawai‘i Rules of Professional Conduct Rule

1.1, comment 6 states: “Tomaintaintherequisite knowledge and skill, a lawyer should engage in continuingstudyandeducationandkeepabreast ofchangesinthelawanditspractice,includingthebenefits and risks associated with relevant technology” (emphasis added).

The practice of law is gathering, organizing, and communicating information so developments in information technology and communications technology inherently affect legal practice. Some of the issues raised by past technological developments were predictable, but many were not, and several of these same concerns will arise again with the expanded use of artificial intelligence (“AI”). It is important for both legal practitioners as well as those across a multitude of industries to at least be aware of the current landscape, dangers, and possible uses of this new technology.

Technical Background on Machine Learning and AI

Machine learning uses a mathematical algorithm having multiple tunable parameters to generate multiple mathematical “models” (through using various values for the tunable parameters) that can discriminate between multiple categories of “training” data. The models are all then applied to “test” data that supposedly contains the same categories as the “training” data. The model that best discriminates between the categories in the “test” data is selected as the “trained” model.

AI (technically, generative AI) uses machine learning to generate natural language responses to natural language prompts from a human user, based on the data on which the model was trained.

This is done by using machine learning to analyze text in a user’s prompt to predict what text would best respond to the prompt and wording that text in the most persuasive manner, based on statistical analyses from the data on which the AI was trained.

In November 2022, San Francisco-based OpenAI publicly released its chatbot ChatGPT, making AI widely accessible and available to the masses. Since its launch, ChatGPT was followed by similar products from tech companies including Google and Microsoft, as well as applications and tools that utilize generative AI. There is now widespread use across multiple industries, including the legal field.

Referring to ChatGPT, in a March 21, 2023, blog post entitled “The Age of AI has Begun”, Bill Gates said, “As computing power gets cheaper, GPT’s ability to express ideas will increasingly be like having a white-collar worker available to help you with various tasks.” While there are numerous benefits, there are also many risk factors that must be addressed.

Legal Issues with AI, and Legal Responses

One major potential issue that has resulted from the use of AI in legal practice is “hallucinations”*, in which AI

* The term “hallucinations” may be a misnomer that should be clarified because AI lacks sensory perceptions and “hallucinations” may be stigmatizing with respect to mental illness. Maleki, et al, “AI Hallucinations: A Misnomer Worth Clarifying” (January 9, 2024).

cites non-existent judicial opinions with fake quotes and citations. Mata v Avianca, Inc., No. 22-cv-1461-PKC, --- F. Supp. 3d ---, 2023 WL 4114965 (S.D.N.Y. 2023). Indeed, Donald Trump’s former attorney and fixer, Michael Cohen, used Google’s Bard to perform legal research, which resulted in three nonexistent cases being cited in a legal memo he provided to his attorneys. See Order to Show Cause, U.S. v. Michael Cohen, 2023 WL 8635521 (December 12, 2023). The problem of hallucinations in the preparation of legal papers has even been recognized by the U.S. Supreme Court.

Generative AI, which generates natural language responses to user-provided prompts, is viewed to be of such great importance in so many industries that on October 30, 2023, President Biden issued Executive Order 14110 entitled “Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence”.

On June 2, 2023, MIT formed a Task Force on Responsible Use of Generative AI for Law and released version 0.2, expressing seven principles, including duties of confidentiality and competence.

Orders Relating to AI in the Practice of Law in Hawai‘i

Here in Hawai‘i, Judge Leslie Kobayashi of the U.S. District Court for the District of Hawai‘i issued an order requiring disclosure of the use of AI in drafting any documents, and on November 14, 2023, the four judges of the same court issued General Order 23-1, requiring that any counsel or pro se party that submits any filing or submission generated by an AI platform or persons compensated to produce materials not tailored to specific cases (collectively, “unverified sources”), to concurrently file a declaration captioned “Reliance on Unverified Source” that discloses the reliance on unverified sources, and verifies that any such material is not fictitious. However, this order “does not affect the use of basic research tools such as Westlaw, Lexis, or Bloomberg, and no declaration is required if all sources can be located on such well-accepted basic research tools.”

Guidance and Orders in Other States

On November 16, 2023, the Committee on Professional Responsibility and Conduct of the State Bar of California issued “Practical Guidance for the Use of Generative Artificial Intelligence in the Practice of Law.”

The State Bar of California’s Practical Guidance identified several problems with AI, including the following:

1. Confidentiality – the AI being used may retain information in prompts to be used for subsequent

training, and then disclose that same information in response to later prompts by others. Also, AI sites have already been hacked and data has already been taken;

2. Hallucinations – the AI creates false citations and information;

3. Duty to Comply with the Law – AI and its use raise many issues under existing laws, including under laws relating to privacy, technical data export restrictions, intellectual property, and cybersecurity;

4. Bias – the AI may have been trained on biased “training” data and therefore fail in properly classifying data;

5. Duty to Supervise – attorneys have the duty to supervise AI, just as they have the duty to supervise associates and assistants;

6. Duty to Disclose – attorneys may have the duty to disclose to clients the use of AI, and the associated benefits and risks;

7. Attorneys’ Fees – fee agreements should explain the basis for all fees and costs, including the use of AI, and attorneys who charge fees based on time spent cannot charge hourly fees based on time saved by using AI;

8. Candor to the Tribunal – attorneys may have a duty to disclose the use of AI to the tribunal; and

9. Unlawful Discrimination – attorneys should be aware of possible biases in AI and risks that biases may present.

On January 19, 2024, the Florida Bar issued Ethics Opinion 24-1 relating to the use of AI. This opinion discussed concerns over AI relating to confidentiality of information, oversight to verify accuracy and sufficiency, legal fees, and costs (informing a client of intent to charge for the use of AI, and ensuring charges are reasonable and not duplicative), and lawyer advertising (informing prospective clients they are communicating with an AI program and not a lawyer, and not saying their generative AI is superior to other firms’ generative AI, unless objectively verifiable).

On January 24, 2024, the New Jersey Supreme Court issued a Notice to the Bar entitled “Legal Practice: Preliminary Guidelines on the Use of Artificial Intelligence by New Jersey Lawyers”. This guidance stated that AI does not change lawyers’ duties, and that “Because AI can generate false information, a lawyer has an ethical duty to check and verify all information generated by AI to ensure that it is accurate.” The guidelines also said “A lawyer is responsible to ensure the security of an AI system before entering any nonpublic client information”, and that a lawyer’s responsibility for overseeing other lawyers and nonlawyer staff, as well as law students and interns, “extends to ensuring the ethical use of AI by other lawyers and nonlawyer staff.”

Some judges and at least one magistrate in federal district courts have already issued orders requiring disclosure of the use of AI in drafting briefs, including Judge Brantley

Starr of the U.S. District Court for the Northern District of Texas, Judge Michael Baylson of the U.S. District Court for the Eastern District of Pennsylvania and Judge Gabriel A. Fuentes of the Northern District of Illinois. Similarly, on June 8, 2023, Judge Stephen Alexander Vaden of the U.S. Court of International Trade issued an order requiring disclosure of the use of AI.

On February 22, 2024, Judge Paul Engelmayer of the U.S. District Court for the Southern District of New York issued an order in J.G.v.NewYorkCityDepartmentofEducation, 23 Civ. 959 (PAE) stating that a law firm’s “invocation of ChatGPT as support for its aggressive fee bid is utterly and unusually unpersuasive.”

Guidance Issued by U.S. Copyright Office

The U.S. Copyright Office issued copyright regulations on March 16, 2023, indicating that applicants have a duty to disclose the inclusion of AI-generated content in a work and to provide a brief explanation of the author’s contributions to the work because copyright rights only apply to works with human authorship. The U.S. District Court for the District of Columbia decided on August 18, 2023, that an AI-generated work is not eligible for copyright, Thaler v. Perlmutter --- F.Supp.3d ---, 2023 WL 5333236 (August 18, 2023), presently being appealed.

Guidance Issued by U.S. Patent and Trademark Office

The Director of the U.S. Patent and Trademark Office (“USPTO”) issued a February 6, 2024, Memorandum indicating that existing regulations will apply to the use of AI and promised new guidance is to come. Tellingly, this memorandum stated “Simply assuming the accuracy of an AI tool is not a reasonable inquiry”, citing Mata v Avianca, Inc., No. 22-cv-1461-PKC, --- F. Supp. 3d ---, 2023 WL 4114965 at *15-16 (S.D.N.Y. June 22, 2023).

instructive now with respect to AI. The author was in eighth grade when the first four-function handheld electronic calculators became commercially available. Prior to that time, arithmetic calculations were performed manually (mentally, on paper, or using slide rules), or on adding machines (or on abacuses in China). The same kinds of issues were discussed – whether students should be allowed to use calculators, whether calculators were dependable, whether calculators would make people “dumber,” etc. The principle that was adopted then was to perform the desired calculation mentally first, to gain an approximate expectation of the correct value, and then to have the calculator perform the calculation, to see whether the result was within the range of the expected correct value. This was possible because slide rules had been in use for decades, so approximating multiplication, division, squares, square roots, cubes, and cube roots was easy.

The author believes that, in applications where truth and objective facts matter, a similar principle should be used with respect to AI: gain an approximate expectation of the correct result and then check to see whether the AI provides an answer that is within the range of the correct result. However, because there is no analog for slide rules in the practice of law, this means that an attorney using AI must know what the approximately correct result should be, and then evaluate the result provided by AI. For the practice of law and other applications where truth and facts matter, unsupervised use of AI, or use of AI by an attorney who does not already know the approximately correct result, may lead to disaster, because of the inability to detect when the AI cites non-existent references, or drafts provisions that are not legally enforceable

On February 13, 2024, the USPTO issued guidance on inventorship for AI-assisted inventions. 89 FR 10043, 2024 WL 553179 (F.R.). This guidance indicated that AIassisted inventions are not categorically unpatentable, and patent protection may be sought for inventions for which a natural person provided a “significant contribution” to the invention.

Finding a Way Forward Based on Prior Experiences with Machines Performing Mental Labor

Humankind previously experienced the technological development of widely distributed personal machines to perform human mental labor, and the lessons then are

Thus, AI can be used by experienced practitioners to create first drafts of documents with consequent gains in efficiency, but the work product of AI cannot be used unquestioningly.

Most importantly, attorneys must keep in mind that generative AI only provides responses based on the data on which it was trained. In many legal situations, the best response may not be within the scope of the training data. In the profession of practicing law, this limitation to only what was within the training data would be a major shortcoming if a solution for a client is beyond the scope of the training data.

Martin E. Hsia (Partner) is a registered patent attorney, one of the few patent attorneys in Hawai‘i. He practices patents, trademarks, copyrights, trade secrets, right of publicity, computer, licensing, internet, and entertainment law.

Administrative Hearings on Hawai‘i Bid Protests: Are They Dead or Just Sleeping?

Jeffrey M. Osterkamp josterkamp@cades.com

Bryce M. Nakamura bnakamura@cades.com

Hawai‘i contractors once felt free—some have argued too free—to contest unfavorable decisions made by State and County agencies in construction and other procurement matters. But Hawai‘i now imposes one of the costliest bond requirements in the country for the right to a hearing on an agency procurement decision. The result: Hawai‘i contractors have, for 1½ years, effectively stopped requesting procurement “appeals” before Hawai‘i’s Office of Administrative Hearings (“OAH”). And without first participating in an administrative hearing, a contractor generally cannot contest the matter in court.

History of Bonds for Hearings on Hawai‘i Bid Protests

From mid-1994 to mid-2021, OAH heard an average of approximately eight procurement matters per year according to its website. Throughout that time, Hawai‘i required either no bond at all, or a bond capped at $10,000, for a bidder to request an administrative hearing in a procurement matter.

But since July 6, 2021, the effective date of an amendment to Section 103D-709, Hawai‘i Revised Statutes (“HRS”), bidders wishing to contest an agency decision on a bid protest have been forced to furnish a cash or protest bond in the amount of 1% of the estimated value of the contract. Most significantly, the $10,000 ceiling was eliminated altogether, meaning that a contractor could

be required to post a bond in the hundreds of thousands, or even millions of dollars. If the contractor loses before OAH, and does not obtain a reversal in court, the bond is forfeited to the State general fund.

Notably, in February 2020, Hawaiʻi’s State Procurement Office (“SPO”) issued findings that only six states required bonds

to contest agency procurement decisions (including only three states that required bonds in all instances), and that bid protest bonds were not required for federal contracting. Further, the SPO could not identify any substantive data showing that bonds discouraged frivolous protests. In fact, the 2021 amendment clearly has had a substantial impact. Although at least 10 requests for hearing were filed in the second half of 2021 and the first half of 2022, the OAH website lists no decisions in which the hearing was requested after June 2022.

Further, one of the decisions issued after the amendment indicates that the Legislature and OAH may share a belief that disappointed bidders were simply filing too many actions. In Mira Image Construction, LLC v. State of Hawaiʻi, Dept. of Transportation, PDH-2021-014 and PDH-2021015 (Jan. 20, 2022), the Hearings Officer posited that the “bond requirement was instituted to prevent parties from filing appeals

as a ‘knee-jerk’ reaction to losing a government contract.” Thus, the “increase in the bond amount instituted in 2021 is even further evidence of the legislature’s intent to limit procurement appeals.” Id. The Hearings Officer emphasized that point both by deciding that she lacked jurisdiction over the matter (due to a defect in the bond) and by ordering the forfeiture of the bond amount of over $300,000. A court later vacated the bond forfeiture on the basis that if the Hearings Officer lacked jurisdiction to hear the appeal, she also lacked jurisdiction to retain the bond but the Hearings Officer’s point was made.

Challenges to the 2021 Amendment

At least one aggrieved party has filed an action challenging the constitutionality of the amendment. In Robert’s Hawaii School Bus, Inc. v. State of Hawaiʻi, et al., Civil No. 1CCV-23-0000754, Robert’s Hawaii sued the State, seeking a determination that the HRS § 103D-709 bond requirement is an excessive fine and is a violation of the right to petition, equal protection, and/or due process

under either the Hawaiʻi or U.S. constitutions. There, Robert’s Hawaii filed a motion for summary judgment on its complaint and argued that in order for it to obtain a review of its bid protest, it would be required, unconstitutionally, to furnish a bond of over $3 million. The Robert’s suit did not work. A judge for the Circuit Court of the First Circuit concluded that the bond provision did not violate the right to petition, equal protection, or due process, and that it was not a “fine” under the meaning of the excessive fines clauses of either the Hawaiʻi or U.S. constitutions.

Conclusion

But not everyone in government is convinced that the new bond requirement is constructive. A bill pending before the State House of Representatives would, if passed, require a bond’s return (minus double the amount of OAH’s administrative costs) even if the initiating party loses the administrative proceeding so long as the appeal was not frivolous or made in bad faith. If passed, House Bill No. 2670 might help create a middle ground between competing visions of the bond requirement—and once again allow Hawaiʻi contractors to seek procurement appeals without the enormous financial risks that they now face.

Jeffrey M. Osterkamp (Partner) is in the Litigation Department of Cades Schutte. His practice is concentrated in construction litigation, government procurement disputes, commercial litigation, and media law.

Bryce M. Nakamura (Associate) is in the Litigation Department. His practice focuses on construction, real estate, and business litigation.

Exploring Issues with Land Passed Across Generations in Hawai‘i Exploring Issues with Land Passed Across Generations in Hawai‘i

Sachi E. Hiatt shiatt@cades.com

Hawaiʻi presents a unique set of challenges when it comes to property ownership. Particular issues may arise in connection with generational or family land, meaning land that has been passed down through multiple generations. With a limited amount of real property available and a high degree of interest from out-of-state buyers, it can be difficult for succeeding generations to hold on to or otherwise manage the properties that have been passed down to them.

As a financial matter, it may be challenging for present-day family members to retain land given the rising cost of real property taxes, which are primarily based on property values and tend to increase year after year as sales prices rise. The income potential for many properties in recent years has also been significantly limited by new laws and regulations restricting short-term vacation rentals, with that trend expected to continue. Costs of maintenance and upkeep as properties age are also an ongoing concern. Particularly for families who hold most of their assets in real estate rather than capital (sometimes referred to as a “land rich, cash poor” scenario), the financial burdens of property ownership can be difficult to sustain.

From a logistical perspective, current generations may also face issues in managing the property. With each new generation typically being larger than the last, ownership interests in the property may be divided among numerous parties. This can lead to questions and disputes with respect to who is entitled to use or occupy the property, who makes decisions

concerning the property, and who is responsible for maintaining the condition of the property.

Changing land use laws present further challenges. Over time, properties can become nonconforming with current zoning ordinances and building codes, limiting the development options that are available to owners or otherwise requiring significant investment to bring the property into compliance with current regulations.

However, there are mechanisms that families can use to help address these issues. For certain properties, a viable option may be to subdivide the land into separate parcels, enabling multiple owners to hold their own individual piece of real estate and thus alleviating some of the issues described above. Another possibility to explore is the submission of land to a condominium property regime, which is a form

less than all units. Each unit in a condominium may be transferred or sold separately from other units in the project. The subdivision and condominium options above provide owners with flexibility in terms of sale or financing ability and have the added benefit of creating a smaller, more manageable piece of real estate for maintenance and real property tax expenses.

For properties that cannot be subdivided or condominiumized, owners can consider negotiating and entering into a tenancy in common agreement to clearly document agreed-upon rights of use, decision-making, and management responsibilities among family members, thereby reducing the likelihood of disputes. Owners

“Over time, properties can become nonconforming with current zoning ordinances and building codes, limiting the development options that are available”

of property ownership whereby multiple units can be created on a single lot. The owners in a condominium project have exclusive ownership of their respective unit or units and an undivided ownership interest in the common elements of the project, which is held in common with all other unit owners in the condominium. Common elements are those portions of the condominium project that are available for use by all of the unit owners, as opposed to the portions of a project that are included within the individual units themselves or reserved for the exclusive use of

can also consider forming a limited liability company (LLC) or trust to hold the property. With the use of an LLC, family members benefit from limited liability protections and hold membership interests in the entity that holds the property, rather than a fractional interest in the property itself. Those membership interests may then be transferred among the extended family members of the LLC, allowing some members to easily liquidate their interests if desired. Placing a property into trust similarly provides flexibility in dealing with multiple family members who may have varying

claims to the property as the trust document can dictate the terms for how trust assets are allocated. Trust documents and LLC agreements can also be advantageous in establishing management responsibilities and use rights for a property and may be amended as needed to account for changes in family dynamics or other considerations.

Any party who is interested in buying or selling generational land is encouraged to seek assistance from competent real estate professionals, accountants, and attorneys. On the buyer side, potential purchasers should consult with such professionals to ensure that thorough due diligence is performed and that buyers are aware of any issues with the property before closing on the purchase, particularly with respect to any title

concerns or rights of other parties to use the property. On the seller side, owners should endeavor to compile relevant documents in advance and anticipate any issues with the property before they list. Land held over generations often tends to have unpermitted improvements or setback issues, and sellers may want to consider including an “as-is” addendum in the purchase contract. As many of these properties are in valuable and highly regulated areas, sellers should also consider having an attorney review the listing agreement and any proposed purchase contracts before signing. Sellers may also wish to investigate the potential for a tax free exchange

by talking with an accountant or tax attorney.

When it comes to dealing with generational land matters, there is no one-size-fits-all approach. Determining the mechanism that best serves a family’s needs will be highly dependent on the property itself, as well as the family’s goals and objectives, and consulting with a legal professional may be key to understanding the pros and cons of each alternative. Property owners who are facing any of the issues described above, as well as any potential purchasers of generational land, are encouraged to reach out to our team of attorneys for guidance.

Sachi E. Hiatt (Partner) is a partner in the Finance, Real Estate, and Corporate Department. Her practice focuses on real estate sales and acquisitions, condominiums and other planned developments, and land use review.

MAUI’S SHIFTING SHORELINE AND SMA RULES

THE LANDSCAPE

This article summarizes key changes to shoreline policy and regulation implemented in the amended Shoreline Rules and Special Management Area (“SMA”) Rules that were approved by the Maui Planning Commission (the “Commission”) in November 2023 and, as of the date of publication, are pending adoption by the Mayor.

Keola R. Whittaker kwhittaker@cades.com

Ellen R. Ashford eashford@cades.com

Calvert G. Chipchase cchipchase@cades.com

Hawai‘i’s Unique History of Shoreline Protection and Regulation

The first task for regulating and protecting the shoreline involves defining its boundaries. This task is challenging because of the shoreline’s inherently transient character under normal weather conditions and its mercurial nature during storms and seismic events. In the 1960s and 1970s, the Hawai‘i Supreme Court issued a number of decisions regarding the location of the shoreline boundary that took into consideration Hawaiian traditions and evidence from kamaʻāina (local residents). Recognizing the long-standing practice in Hawai‘i of allowing evidence from kamaʻāina testimony, the court established the shoreline according to ancient tradition, custom and usage “along the upper reaches of the waves as represented by the edge of vegetation or the

Two-Tiered Framework

In the 1970s, Hawai‘i adopted a state coastal management program consistent with the federal Coastal Zone Management Act. Hawai‘i’s Coastal Zone Management Act is codified as Hawai‘i Revised Statutes (“HRS”) chapter 205A (“CZMA”). As the CZMA explains, the SMA was established to further “the state policy to preserve, protect, and where possible, to restore the natural resources of the coastal zone of Hawai‘i.” The SMA generally contains the land extending inland from the shoreline to a certain point as

line of debris.” Other jurisdictions rely on the mean high tide to define the shoreline.

With the shoreline defined by the high wash of the waves, the next task is to locate the shoreline on individual properties and balance the sometimes conflicting goals of safeguarding public access to the shoreline, protecting property rights, and preserving the shoreline. This balance was at the heart of the development of the amended Shoreline and SMA Rules that were approved by the Commission in November of 2023—nearly two years after the draft amended Rules were published by the Maui Planning Department (the “Department”) and more than four years after the Department hosted its first public presentations on the Rules.

mapped on each the island. “Development,” as broadly defined under the CZMA, within the SMA is subject to special permitting requirements established under the CZMA and further refined by rules enacted at the county level.

Consistent with the Hawai‘i Supreme Court’s decisions, the CZMA defines the shoreline as the “upper reaches of the wash of the waves, other than storm and seismic waves, at high tide during the season of the year in which the highest wash of the waves occurs, usually evidenced by the edge of vegetation growth, or the upper limit

of debris left by the wash of the waves.” CZMA also defines the shoreline area and provides for shoreline setback lines not less than 40 feet inland from the shoreline.

Within these and other fixed points in the CZMA, the counties have considerable discretion to regulate and control development as long as the policies, ordinances, and rules adopted at the county level are consistent with state law and do not exceed an express grant of authority to enact. Importantly, the CZMA expressly authorizes the counties to establish shoreline setbacks consistent with the CZMA and other applicable state law. Maui County has delegated its authority to establish rules for the shoreline area and SMA under the CZMA to the Maui Planning Commission, Moloka‘i Planning Commission, and Lāna‘i Planning Commission for each respective island and area.

The Commission’s SMA and Shoreline Rules are codified in Title 12, chapters 202 and 203 of the Maui County Administrative Rules.

THE NEW RULES

Rule Amendments Approved by the Commission in November 2023

On January 11, 2021, the Department published proposed amended Shoreline Rules for the Island of Maui. The initial version of the proposed Shoreline and SMA Rules proposed a substantial overhaul of the existing rules and garnered widespread attention from the public. Years of public presentations, hearings, and discourse followed before amendments were approved by the Commission on November 14, 2023.

Key Changes to the Shoreline Rules

Erosion Hazard Line

The most significant change in the Shoreline Rules is the adoption of the “Erosion Hazard Line” to calculate the shoreline setback and determine the area that is subject to the Shoreline Rules. The

prior Shoreline Rules determined the shoreline setback using erosion rates based on historical data and empirical evidence of the upper reaches of the waves. The amended Shoreline Rules establish the shoreline setback using the Erosion Hazard Line (“EHL”), which is based on sea-level rise modeling adopted by the Hawai‘i Climate Change Mitigation and Adaptation Commission as part of the 2017 Hawai‘i Sea Level Rise Vulnerability and Adaptation Report. The EHL will be mapped by the Department and adopted together with the Shoreline Rules. In basic terms, the EHL modeling applies historical erosion rates and—assuming erosion will continue at the same rate through the year 2100 as it has for the past 80 years—overlays the historical data with a formula to estimate the magnitude of retreat of an all-sand shoreline in response to projected sea level rise.

Authors’ Note: Readers may be familiar with the Hawai‘i Sea Level Rise Viewer that depicts the EHL. The Viewer is frequently used in connection with the recent update to the Mandatory Seller Disclosures in Real Estate Transactions Law in 2021, codified by HRS section 508D-15, that requires real estate transactions within the State to disclose the risk of sea level rise to the property.

Where the EHL is mapped, the EHL is the default shoreline setback line. An applicant may apply to use an alternate shoreline setback line by obtaining a shoreline certification pursuant to state law in which case the setback line would be established by applying the distance used to map the EHL from the shoreline to the certified shoreline or, if the Planning Director determines the shoreline is accreting or known geologic information indicates the lot is erosion resistant, the shoreline setback line may be established using the method for lots where the EHL has not been mapped.

Where the EHL has not been mapped, the shoreline setback line will generally be two hundred feet from the shoreline, subject to different calculations for lots with minimum

lot depths, irregularly shaped lots, and lots where topographic features inhibit the safe conduct of a certified shoreline survey. Since the Department’s mapping of the EHL is not publicly available as of the date of this article, it is unclear how much of the shoreline will be mapped prior to the adoption of the amended Shoreline Rules. The amended Rules allow the Department to make non-substantive digital mapping alignment adjustments after the maps are adopted together with the Rules.

The amended Shoreline Rules provide a procedure for an applicant to request an amendment to a shoreline setback line established by the EHL or the approximate shoreline mapped by the Department. Obtaining an amendment requires the Planning Director to find based on clear and convincing evidence that the actual setback for the parcel differs from the setback established by the EHL.

New Exceptions to Approval and Defined Allowable Activities Within the Shoreline Area

Assessment and Determination by the Planning Director. All structures and activities located or proposed to be located within the shoreline area are subject to the Planning Director’s assessment and determination that the proposed structure or activity is permitted under the rules. The Shoreline Rules provide limited exceptions for proposed activities and structures that are exempt from assessment and determination by the Planning Director.

Notable Exceptions. The amended Shoreline Rules identify exceptions for activities and structures within the shoreline area that do not require approval by the Planning Director but do require implementation of relevant best management practices published by the Department. Certain exceptions further require the applicant to submit a declaration to the Department on forms provided by the Department that “may establish action-specific Best Management Practices and other appropriate restrictions”. As of the date of this article, sample declaration forms have not been made available. The Commission approved exceptions for routine uses of land within the shoreline area that do not impair shoreline access or are subject to compliance with best management practices, including transfer of land title and rights (e.g., easements, covenants), normal and customary agricultural activities, testing related to the State Historic Preservation Division, and traditional native Hawaiian cultural practices. Other notable exceptions approved by the Commission include:

• During the applicable timeframe of a Governor’s or Mayor’s disaster or emergency declaration or proclamation, with necessary work permits and use of best management practices to protect natural and cultural resources, the removal and disposal of disaster debris, emergency repairs to roofs and windows, and emergency installation of temporary, protective measures to secure habitable structures that do not harden the shoreline;

• Nonstructural interior maintenance, repairs, and renovations to existing, lawfully established structures that do not involve expansion and ground disturbance, and do not increase the density or intensity of use (e.g., paint, floors, carpets, cabinets, interior walls and doors), limited to a cumulative valuation of less than $500,000 in any 24-month period for a single ownership on a single lot or set of lots composing a unified building site;

• Nonstructural exterior maintenance, repairs, and renovations to existing, lawfully established structures that do not involve ground disturbance (e.g., doors, windows, shutters, siding, and roof repairs or replacement), limited to a cumulative valuation of less than $500,000 in any 24-month period for a single ownership on a single lot or set of lots composing a unified building site;

• Emergency protection of water, wastewater, or stormwater infrastructure managed by the Department of Water Supply, Department of Environmental Management, or Department of Public Works when the infrastructure is at imminent risk of failure that would substantially affect public health or safety, including significant water loss or contamination of surface water, land, or water supply; and

• Patching, repairs, and resurfacing of existing driveways and parking lots less than 1,000 square feet.

Notable Allowable Structures and Activities. Upon approval by the Planning Director, enumerated structures and activities are allowable within the shoreline area. The Commission approved new allowable activities and structures, including the following:

• Structural and nonstructural repairs (excluding those caused by coastal hazards),

renovations, and improvements to a lawful nonconforming structure that are less than 50 percent of the current replacement cost of the structure over a ten-year period or authorized by SMA use permit, do not enlarge or expand the structure or intensify the use, and are otherwise permitted;

Authors’ Note: For repairs in excess of these thresholds, applicants may seek an SMA use permit to allow the repairs.

• Structural and nonstructural repairs to, and restoration of, a lawful nonconforming structure in response to damage by fire, insects, wind, named hurricanes, or tsunamis with disaster declaration, accidental means, or other calamity excluding all other coastal hazards, provided that the repairs or restoration are proportionate to the damage, do not enlarge or expand the structure or intensify the use and are otherwise permitted;

• Structural and nonstructural repairs to a lawful nonconforming structure that are proportional and directly related to damage by coastal hazards that are chronic or recurring (including water, storm surges, high tide, flooding, erosion, sea level rise, subsidence, or point and non-point source pollution), provided that the repairs are limited to 10 percent of the current replacement cost of the structure over a cumulative tenyear period, are in the same location or are relocated mauka or in an area less vulnerable to coastal hazards, do not enlarge or expand the structure or intensify the use, and are otherwise permitted; an applicant seeking approval from the Planning Director for this type of use or structure must agree to defend, indemnify, and hold the County of Maui harmless for loss, liability, claim or demand arising out of damage to the structure or activities from coastal natural hazards and coastal erosion;

Authors’ Note: For repairs in excess of these thresholds, applicants may seek a variance to permit the repairs.

• Repair and maintenance of a lawfully constructed shoreline hardening structure that protects a habitable structure or public structure or infrastructure may be repaired or maintained with like-for-like materials up to 50 percent of the shoreline hardening structure’s replacement value over a cumulative ten-year period; an applicant seeking approval from the Planning Director for this type of repair or maintenance must provide a coastal hazard mitigation plan, which contains an avoidance alternative, as part of the application; and

• Adaptation of existing lawful or lawful nonconforming structures including relocating a structure mauka of the shoreline setback line, reducing the size of a structure, and elevating a structure within the existing footprint.

Key Changes to the SMA Rules

Categorical Exemptions

Any proposed action within the SMA is subject to an assessment and determination by the Planning Director as to whether it is a development that requires a special management area use permit or minor permit or is an exempt action. The Commission approved amendments to the SMA Rules that create categorical exemptions, called “no needs” by the Department, for actions that are deemed to not have a cumulative impact or a significant environmental ecological effect on

the SMA because of the minimal nature of these actions. Proposed actions within the SMA that fall within a categorical exemption are not subject to an assessment by the Planning Director but may be subject to the implementation of relevant best management practices published by the Department. Certain categorical exemptions also require the submission of a declaration form provided by the Department, which may impose action-specific best management practices and other appropriate restrictions. As of the date of this article, sample declaration forms have not been made available.

The Commission approved categorical exemptions for routine uses of land within the SMA that do not have a cumulative impact or a significant environmental or ecological effect on the SMA including transfer of land title and rights (e.g., easements, covenants), normal and customary agricultural activities, testing related to the State Historic Preservation Division, and traditional native Hawaiian cultural practices. Notable categorical exemptions approved by the Commission include:

• Nonstructural interior maintenance, repairs, and renovations to existing, lawfully established structures that do not involve expansion or ground disturbance and do not increase the density or intensity of use (e.g., paint, floors, carpets, cabinets, and interior walls and doors) limited to a cumulative valuation of less than $500,000 in any 24-month period for a single ownership on a single lot or set of lots composing a unified building site;

• Driveway and parking lot pavement patching, resurfacing, resealing, restriping, and repairs, and pavement reconstruction not over 1,000 square feet;

• Exterior installation on and maintenance, repairs, and renovations to existing, lawfully established structures that do not involve ground disturbance and are nonstructural (e.g., signage, wireless antennae and other transmission equipment, satellite dishes, and roof mounted equipment such as photovoltaic and solar panels);

• Site improvements, except in coastal dunes, involving limited ground disturbance (minor surface grading and grubbing, installation of turf, shallow landscaping, and irrigation and installation of asphalt or concrete slabs and driveways, up to six inches deep, up to 1,000 feet), and no more than once in a 24-month period;

• Site improvements, except in coastal dunes, involving limited ground disturbance more than six inches deep and up to sixteen square feet no more than once in a 24-month period for holes and trenching (e.g., installation, removal or maintenance of trees and shrubs, utility pedestals, lines and poles, ground signs, walls and fences up to four feet in height, mailbox posts, and solar panels), and excluding new wireless telecommunications towers, windmills and wind turbines;

• Nonstructural exterior maintenance, repairs and renovations to existing, lawfully established structures that do not involve ground disturbance (e.g., doors, windows, shutters, siding, or roofs) limited to a cumulative valuation of less than $500,000 in any 24-month period for a single ownership on a single lot or set of lots composing a unified building site;

• Emergency protection of water, wastewater, or stormwater infrastructure managed by the Department of Water Supply, Department of Environmental Management, or Department of Public Works if such infrastructure is at imminent risk of failure that would substantially affect public health or safety, including significant water loss, or contamination of surface water, land, or water supply; and

• During the applicable timeframe of a Governor’s or Mayor’s disaster or emergency declaration or proclamation, with necessary work permits and use of best management practices to protect natural and cultural resources, the removal and disposal of disaster debris, emergency repairs to roofs and windows, and emergency installation of temporary, protective measures to secure habitable structures.

Effect of an Unresolved Enforcement Action in a Condominium Project

Under the amended SMA Rules, an application is automatically incomplete at any stage during the application process if it relates to land use within a condominium property regime that is subject to an unresolved enforcement action by the Department.

Signage for a Public Hearing

For applications where a public hearing is required, the amended SMA Rules require the applicant to prepare for the Department’s review a notice of application with a legible location map using a form provided by the Department and to post a nine square-foot project notice sign describing the proposed action, name of applicants and parcel owners, contact information for the applicants or their representatives, among other requirements, along the main access road for the property.

Emergency Permit Procedures

The amended SMA Rules establish new special management area emergency permit procedures. A temporary measure may be allowed for no more than 180 days, for which the Planning Director may approve a time extension upon the Planning Director’s determination that the permit holder is making adequate progress toward completing a permanent measure and cannot reasonably do so within the time of the emergency permit.

WHAT’S NEXT?

Next Steps for Adoption

The Department will complete the task of mapping the EHL along the Maui shoreline. To

become effective, the amended Shoreline and SMA Rules will need to be signed by the Mayor and approved as to form by the Corporation Counsel.

These Rules Are Legislative in Nature, Subject to Change

The shoreline and coastal areas are special resources serving cultural, ecological, recreational, economic, and aesthetic functions to the people. Upon adoption, the Shoreline and SMA Rules will remain susceptible to amendment of any scale as is the nature of legislation. Baked into the definition of the EHL is the Commissioners’ expectation that the Rules will be reviewed as the scientific model it is based upon changes:

“. . . The EHL must reflect the best available science as published in peer reviewed literature such as the Hawai‘i Climate Change Mitigation and Adaptation Commission’s 2017 Hawai‘i Sea Level Rise Vulnerability and Adaptation Report, as accessible within the Hawai‘i Sea Level Rise Viewer hosted by the Pacific Islands Ocean Observing System. The EHL and resulting setback mapped by the Department may need to be updated to reflect future updates and reports based on best available science, with such updates being subject to review by the commission within 12 months.”

(Proposed) MAUI CNTY. CODE § 12-203-4. Science and the Commission’s determination of the “best available science”, too, will remain susceptible to change.

Calvert G. Chipchase (Partner) has widely recognized expertise in litigation and land use. His approach balances practical considerations and zealous advocacy.

Keola R. Whittaker (Of Counsel) leverages over fifteen years of transactional and litigation experience practicing in Hawai‘i, California, and New York.

Ellen R. Ashford (Associate) has a practice including real estate development and land use review, commercial ground and space leasing, purchase and sale transactions, and financing.

Recent Wins

Top 50 Hawai‘i Law Firms

Cades Schutte was ranked first again in Pacific Business News’ annual Top 50 Law Firms list for 2024.

2023 Outstanding Pro Bono Service Award

Troy Young received the 2023 Outstanding Pro Bono Service Award at the Hawai‘i Access to Justice Commission’s 2023 Pro Bono Celebration. The celebration recognizes attorneys who provide volunteer legal services to support Hawai‘i’s non-profit legal services providers, indigent parties, and individuals who do not have a lawyer. Troy was a volunteer of the Hawai‘i Appellate Pro Bono Program, which represents people who have no legal counsel for cases they have before the Hawai‘i Intermediate Court of Appeals or Supreme Court.

John R. Love

Partner | Finance, Real Estate, and Corporate Department Chair

(808) 521-9244

jlove@cades.com

Cades Schutte proudly announces that John R. Love was elected to Chair of its Finance, Real Estate, and Corporate Department effective as of March 25, 2024. John’s practice focuses on real estate acquisitions and dispositions, commercial lending transactions, the development of residential, resort, and commercial projects (including condominium and mixed-use project development), state and federal subdivision registrations, and commercial ground and space leasing. He is recognized in this area by Chambers and Partners and The Best Lawyers in America®. He was also appointed to the Hawai‘i Real Estate Commission by Governor Ige, for which he is currently serving his second term. We express our gratitude to Rick Kiefer, the Department’s Past Chair who is stepping down, for leading the Department as Chair for over five years, including during difficult times of the COVID pandemic.

On the Board

Rick Kiefer is currently serving as President of the Board of Trustees for the Historic Hawai‘i Foundation (HHF). The HHF is a statewide nonprofit organization that encourages the preservation of historic buildings, sites, and communities relating to the history of Hawai‘i. Rick has served on the Board of Trustees since 2019.

Summer G. Shelverton has been elected as a Fellow of the American College of Trust and Estate Counsel (ACTEC). ACTEC is a group of peer-elected trust and estate attorneys across the U.S. and abroad.

Daniel C. Vermillion was appointed 2024 Vice President and Pōhai Nu‘uhiwa Campbell was appointed to the Board of Directors for Hawai‘i Estate Planning Council (HEPC). The HEPC is a professional association of attorneys, certified financial planners, certified public accountants, chartered financial analysts, chartered financial consultants, chartered life underwriters, and trust officers. Its mission is to enhance professional growth and development for its members and promote high professional standards and ethical practices through ongoing educational opportunities while facilitating a team approach to estate planning.

Giving Report

Cades Schutte LLP continued its annual Aloha United Way (AUW) pledge campaign and raised $17,284, a combination of gifts from the firm’s attorneys and staff, and a donation from The Cades Foundation. Pictured are attorneys from the firm’s various practices including Cades Schutte partner Martin E. Hsia, Shelly Cooper of The Cades Foundation, and Emmaly Calibraro and Sarah Leatherby of AUW.

The Cades Foundation donated $10,000 to Family Programs Hawaii (FPH) for the 25th Anniversary of its Holiday Party. Pictured from left to right are Michele S. Loudermilk (Partner of Cades Schutte LLP and Vice President/Secretary of the Cades Foundation), Keith Kuboyama (President and CEO of FPH), and Tina Scotty (Director of Development of FPH).

Cultivating